APEL FULL CASE

DELEGATION OF POWER

1. Eastern Shipping Lines, inc vs. POEA, 160 SCRA 533

TOPIC: Undue delegation of legislative authority

G.R. No. 76633 October 18, 1988

EASTERN SHIPPING LINES, INC., petitioner,

vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR
AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D.
SACO, respondents.

Jimenea, Dala & Zaragoza Law Office for petitioner.

The Solicitor General for public respondent.

Dizon Law Office for respondent Kathleen D. Saco.

CRUZ, J.:

The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas Employment Administration (POEA)
for the death of her husband. The decision is challenged by the petitioner on the principal ground that the POEA had no jurisdiction over the
case as the husband was not an overseas worker.

Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in
Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and
Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the
complaint was cognizable not by the POEA but by the Social Security System and should have been
filed against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after
considering the position papers of the parties ruled in favor of the complainant. The award consisted
of P180,000.00 as death benefits and P12,000.00 for burial expenses.

The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal
on the ground of non-exhaustion of administrative remedies.

Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations
Commission, on the theory inter alia that the agency should be given an opportunity to correct the
errors, if any, of its subordinates. This case comes under one of the exceptions, however, as the
questions the petitioner is raising are essentially questions of law.   Moreover, the private respondent
1
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himself has not objected to the petitioner's direct resort to this Court, observing that the usual
procedure would delay the disposition of the case to her prejudice.

The Philippine Overseas Employment Administration was created under Executive Order No. 797,
promulgated on May 1, 1982, to promote and monitor the overseas employment of Filipinos and to
protect their rights. It replaced the National Seamen Board created earlier under Article 20 of the
Labor Code in 1974. Under Section 4(a) of the said executive order, the POEA is vested with
"original and exclusive jurisdiction over all cases, including money claims, involving employee-
employer relations arising out of or by virtue of any law or contract involving Filipino contract
workers, including seamen." These cases, according to the 1985 Rules and Regulations on
Overseas Employment issued by the POEA, include "claims for death, disability and other benefits"
arising out of such employment.  2

The petitioner does not contend that Saco was not its employee or that the claim of his widow is not
compensable. What it does urge is that he was not an overseas worker but a 'domestic employee
and consequently his widow's claim should have been filed with Social Security System, subject to
appeal to the Employees Compensation Commission.

We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas
employee of the petitioner at the time he met with the fatal accident in Japan in 1985.

Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined
as "employment of a worker outside the Philippines, including employment on board vessels plying
international waters, covered by a valid contract.   A contract worker is described as "any person
3

working or who has worked overseas under a valid employment contract and shall include
seamen"   or "any person working overseas or who has been employed by another which may be a
4

local employer, foreign employer, principal or partner under a valid employment contract and shall
include seamen."   These definitions clearly apply to Vitaliano Saco for it is not disputed that he died
5

while under a contract of employment with the petitioner and alongside the petitioner's vessel, the
M/V Eastern Polaris, while berthed in a foreign country.  6

It is worth observing that the petitioner performed at least two acts which constitute implied or tacit
recognition of the nature of Saco's employment at the time of his death in 1985. The first is its
submission of its shipping articles to the POEA for processing, formalization and approval in the
exercise of its regulatory power over overseas employment under Executive Order NO. 797.   The 7

second is its payment   of the contributions mandated by law and regulations to the Welfare Fund for
8

Overseas Workers, which was created by P.D. No. 1694 "for the purpose of providing social and
welfare services to Filipino overseas workers."

Significantly, the office administering this fund, in the receipt it prepared for the private respondent's
signature, described the subject of the burial benefits as "overseas contract worker Vitaliano
Saco."   While this receipt is certainly not controlling, it does indicate, in the light of the petitioner's
9

own previous acts, that the petitioner and the Fund to which it had made contributions considered
Saco to be an overseas employee.

The petitioner argues that the deceased employee should be likened to the employees of the
Philippine Air Lines who, although working abroad in its international flights, are not considered
overseas workers. If this be so, the petitioner should not have found it necessary to submit its
shipping articles to the POEA for processing, formalization and approval or to contribute to the
Welfare Fund which is available only to overseas workers. Moreover, the analogy is hardly
appropriate as the employees of the PAL cannot under the definitions given be considered seamen
nor are their appointments coursed through the POEA.
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The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the
POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984.
This circular prescribed a standard contract to be adopted by both foreign and domestic shipping
companies in the hiring of Filipino seamen for overseas employment. A similar contract had earlier
been required by the National Seamen Board and had been sustained in a number of cases by this
Court.   The petitioner claims that it had never entered into such a contract with the deceased Saco,
10

but that is hardly a serious argument. In the first place, it should have done so as required by the
circular, which specifically declared that "all parties to the employment of any Filipino seamen on
board any ocean-going vessel are advised to adopt and use this employment contract effective 01
February 1984 and to desist from using any other format of employment contract effective that date."
In the second place, even if it had not done so, the provisions of the said circular are nevertheless
deemed written into the contract with Saco as a postulate of the police power of the State.  11

But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the
principle of non-delegation of legislative power. It contends that no authority had been given the
POEA to promulgate the said regulation; and even with such authorization, the regulation represents
an exercise of legislative discretion which, under the principle, is not subject to delegation.

The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No.
797, reading as follows:

... The governing Board of the Administration (POEA), as hereunder provided shall
promulgate the necessary rules and regulations to govern the exercise of the
adjudicatory functions of the Administration (POEA).

Similar authorization had been granted the National Seamen Board, which, as earlier observed, had
itself prescribed a standard shipping contract substantially the same as the format adopted by the
POEA.

The second challenge is more serious as it is true that legislative discretion as to the substantive
contents of the law cannot be delegated. What can be delegated is the discretion to
determine how the law may be enforced, not what the law shall be. The ascertainment of the latter
subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by
the legislature to the delegate. Thus, in Ynot v. Intermediate Apellate Court   which annulled
12

Executive Order No. 626, this Court held:

We also mark, on top of all this, the questionable manner of the disposition of the
confiscated property as prescribed in the questioned executive order. It is there
authorized that the seized property shall be distributed to charitable institutions and
other similar institutions as the Chairman of the National Meat Inspection
Commission may see fit, in the case of carabaos.' (Italics supplied.) The phrase
"may see fit" is an extremely generous and dangerous condition, if condition it is. It is
laden with perilous opportunities for partiality and abuse, and even corruption. One
searches in vain for the usual standard and the reasonable guidelines, or better still,
the limitations that the officers must observe when they make their distribution. There
is none. Their options are apparently boundless. Who shall be the fortunate
beneficiaries of their generosity and by what criteria shall they be chosen? Only the
officers named can supply the answer, they and they alone may choose the grantee
as they see fit, and in their own exclusive discretion. Definitely, there is here a 'roving
commission a wide and sweeping authority that is not canalized within banks that
keep it from overflowing,' in short a clearly profligate and therefore invalid delegation
of legislative powers.
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There are two accepted tests to determine whether or not there is a valid delegation of legislative
power, viz, the completeness test and the sufficient standard test. Under the first test, the law must
be complete in all its terms and conditions when it leaves the legislature such that when it reaches
the delegate the only thing he will have to do is enforce it.   Under the sufficient standard test, there
13

must be adequate guidelines or stations in the law to map out the boundaries of the delegate's
authority and prevent the delegation from running riot.  14

Both tests are intended to prevent a total transference of legislative authority to the delegate, who is
not allowed to step into the shoes of the legislature and exercise a power essentially legislative.

The principle of non-delegation of powers is applicable to all the three major powers of the
Government but is especially important in the case of the legislative power because of the many
instances when its delegation is permitted. The occasions are rare when executive or judicial powers
have to be delegated by the authorities to which they legally certain. In the case of the legislative
power, however, such occasions have become more and more frequent, if not necessary. This had
led to the observation that the delegation of legislative power has become the rule and its non-
delegation the exception.

The reason is the increasing complexity of the task of government and the growing inability of the
legislature to cope directly with the myriad problems demanding its attention. The growth of society
has ramified its activities and created peculiar and sophisticated problems that the legislature cannot
be expected reasonably to comprehend. Specialization even in legislation has become necessary.
To many of the problems attendant upon present-day undertakings, the legislature may not have the
competence to provide the required direct and efficacious, not to say, specific solutions. These
solutions may, however, be expected from its delegates, who are supposed to be experts in the
particular fields assigned to them.

The reasons given above for the delegation of legislative powers in general are particularly
applicable to administrative bodies. With the proliferation of specialized activities and their attendant
peculiar problems, the national legislature has found it more and more necessary to entrust to
administrative agencies the authority to issue rules to carry out the general provisions of the statute.
This is called the "power of subordinate legislation."

With this power, administrative bodies may implement the broad policies laid down in a statute by
"filling in' the details which the Congress may not have the opportunity or competence to provide.
This is effected by their promulgation of what are known as supplementary regulations, such as the
implementing rules issued by the Department of Labor on the new Labor Code. These regulations
have the force and effect of law.

Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed
thereby has been applied in a significant number of the cases without challenge by the employer.
The power of the POEA (and before it the National Seamen Board) in requiring the model contract is
not unlimited as there is a sufficient standard guiding the delegate in the exercise of the said
authority. That standard is discoverable in the executive order itself which, in creating the Philippine
Overseas Employment Administration, mandated it to protect the rights of overseas Filipino workers
to "fair and equitable employment practices."

Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public interest"
in People v. Rosenthal   "justice and equity" in Antamok Gold Fields v. CIR   "public convenience
15 16

and welfare" in Calalang v. Williams   and "simplicity, economy and efficiency" in Cervantes v.
17

Auditor General,   to mention only a few cases. In the United States, the "sense and experience of
18
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men" was accepted in Mutual Film Corp. v. Industrial Commission,   and "national security"
19

in Hirabayashi v. United States.  20

It is not denied that the private respondent has been receiving a monthly death benefit pension of
P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social
Security System. In addition, as already observed, she also received a P5,000.00 burial gratuity from
the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private
respondent's claim against the petitioner because it is specifically reserved in the standard contract
of employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984, that—

Section C. Compensation and Benefits.—

1. In case of death of the seamen during the term of his Contract, the employer shall
pay his beneficiaries the amount of:

a. P220,000.00 for master and chief engineers

b. P180,000.00 for other officers, including radio operators and

master electrician

c. P 130,000.00 for ratings.

2. It is understood and agreed that the benefits mentioned above shall be separate
and distinct from, and will be in addition to whatever benefits which the seaman is
entitled to under Philippine laws. ...

3. ...

c. If the remains of the seaman is buried in the Philippines, the

owners shall pay the beneficiaries of the seaman an amount not
exceeding P18,000.00 for burial expenses.

The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the
National Seamen Board on July 12,1976, providing an follows:

Income Benefits under this Rule Shall be Considered Additional Benefits.—

All compensation benefits under Title II, Book Four of the Labor Code of the
Philippines (Employees Compensation and State Insurance Fund) shall be granted,
in addition to whatever benefits, gratuities or allowances that the seaman or his
beneficiaries may be entitled to under the employment contract approved by the
NSB. If applicable, all benefits under the Social Security Law and the Philippine
Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance
with such laws.

The above provisions are manifestations of the concern of the State for the working class,
consistently with the social justice policy and the specific provisions in the Constitution for the
protection of the working class and the promotion of its interest.

One last challenge of the petitioner must be dealt with to close t case. Its argument that it has been
denied due process because the same POEA that issued Memorandum Circular No. 2 has also
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sustained and applied it is an uninformed criticism of administrative law itself. Administrative

agencies are vested with two basic powers, the quasi-legislative and the quasi-judicial. The first
enables them to promulgate implementing rules and regulations, and the second enables them to
interpret and apply such regulations. Examples abound: the Bureau of Internal Revenue adjudicates
on its own revenue regulations, the Central Bank on its own circulars, the Securities and Exchange
Commission on its own rules, as so too do the Philippine Patent Office and the Videogram
Regulatory Board and the Civil Aeronautics Administration and the Department of Natural Resources
and so on ad infinitum on their respective administrative regulations. Such an arrangement has been
accepted as a fact of life of modern governments and cannot be considered violative of due process
as long as the cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay v. Court
of Industrial Relations   are observed.
21

Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor
of the private respondent, in line with the express mandate of the Labor Code and the principle that
those with less in life should have more in law.

When the conflicting interests of labor and capital are weighed on the scales of social justice, the
heavier influence of the latter must be counter-balanced by the sympathy and compassion the law
must accord the underprivileged worker. This is only fair if he is to be given the opportunity and the
right to assert and defend his cause not as a subordinate but as a peer of management, with which
he can negotiate on even plane. Labor is not a mere employee of capital but its active and equal
partner.

WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary
restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered.

2. Tatad vs. Secretary of Dept. of Energy (G.R. No. 124360, Nov. 5, 1997)

G.R. No. 124360 November 5, 1997

FRANCISCO S. TATAD, petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY OF THE
DEPARTMENT OF FINANCE, respondents.

G.R. No. 127867 November 5, 1997

EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO TANADA, FLAG

HUMAN RIGHTS FOUNDATION, INC., FREEDOM FROM DEBT COALITION (FDC),
SANLAKAS, petitioners,
vs.
HON. RUBEN TORRES in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY,
in his capacity as the Secretary of Energy, CALTEX Philippines, Inc., PETRON Corporation
and PILIPINAS SHELL Corporation, respondents.
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PUNO, J.:

The petitions at bar challenge the constitutionality of Republic Act No. 8180 entitled "An Act
Deregulating the Downstream Oil Industry and For Other Purposes".  R.A. No. 8180 ends twenty six
1

(26) years of government regulation of the downstream oil industry. Few cases carry a surpassing
importance on the life of every Filipino as these petitions for the upswing and downswing of our
economy materially depend on the oscillation of oil.

First, the facts without the fat. Prior to 1971, there was no government agency regulating the oil
industry other than those dealing with ordinary commodities. Oil companies were free to enter and
exit the market without any government interference. There were four (4) refining companies (Shell,
Caltex, Bataan Refining Company and Filoil Refining) and six (6) petroleum marketing companies
(Esso, Filoil, Caltex, Getty, Mobil and Shell), then operating in the country.
2

In 1971, the country was driven to its knees by a crippling oil crisis. The government, realizing that
petroleum and its products are vital to national security and that their continued supply at reasonable
prices is essential to the general welfare, enacted the Oil Industry Commission Act.  It created
3

the Oil Industry Commission (OIC) to regulate the business of importing, exporting, re-exporting,

shipping, transporting, processing, refining, storing, distributing, marketing and selling crude oil,
gasoline, kerosene, gas and other refined petroleum products. The OIC was vested with the power
to fix the market prices of petroleum products, to regulate the capacities of refineries, to license new
refineries and to regulate the operations and trade practices of the industry. 4

In addition to the creation of the OIC, the government saw the imperious need for a more active role
of Filipinos in the oil industry. Until the early seventies, the downstream oil industry was controlled by
multinational companies. All the oil refineries and marketing companies were owned
by foreigners whose economic interests did not always coincide with the interest of the Filipino.
Crude oil was transported to the country by foreign-controlled tankers. Crude processing was done
locally by foreign-owned refineries and petroleum products were marketed through foreign-owned
retail outlets. On November 9, 1973, President Ferdinand E. Marcos boldly created the Philippine
National Oil Corporation (PNOC) to break the control by foreigners of our oil industry.  PNOC 5

engaged in the business of refining, marketing, shipping, transporting, and storing petroleum. It
acquired ownership of ESSO Philippines and Filoil to serve as its marketing arm. It bought the
controlling shares of Bataan Refining Corporation, the largest refinery in the country.  PNOC later put
6

up its own marketing subsidiary — Petrophil. PNOC operated under the business name PETRON
Corporation. For the first time, there was a Filipino presence in the Philippine oil market.

In 1984, President Marcos through Section 8 of Presidential Decree No. 1956, created the Oil Price
Stabilization Fund (OPSF) to cushion the effects of frequent changes in the price of oil caused by
exchange rate adjustments or increase in the world market prices of crude oil and imported
petroleum products. The fund is used (1) to reimburse the oil companies for cost increases in crude
oil and imported petroleum products resulting from exchange rate adjustment and/or increase in
world market prices of crude oil, and (2) to reimburse oil companies for cost underrecovery incurred
as a result of the reduction of domestic prices of petroleum products. Under the law, the OPSF may
be sourced from:

1. any increase in the tax collection from ad valorem tax or customs duty imposed on
petroleum products subject to tax under P.D. No. 1956 arising from exchange rate
adjustment,
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2. any increase in the tax collection as a result of the lifting of tax exemptions of
government corporations, as may be determined by the Minister of Finance in
consultation with the Board of Energy,

3. any additional amount to be imposed on petroleum products to augment the

resources of the fund through an appropriate order that may be issued by the Board
of Energy requiring payment of persons or companies engaged in the business of
importing, manufacturing and/or marketing petroleum products, or

4. any resulting peso costs differentials in case the actual peso costs paid by oil
companies in the importation of crude oil and petroleum products is less than the
peso costs computed using the reference foreign exchange rate as fixed by the
Board of Energy. 7

By 1985, only three (3) oil companies were operating in the country — Caltex, Shell and the
government-owned PNOC.

In May, 1987, President Corazon C. Aquino signed Executive Order No. 172 creating the Energy
Regulatory Board to regulate the business of importing, exporting, re-exporting, shipping,
transporting, processing, refining, marketing and distributing energy resources "when warranted and
only when public necessity requires." The Board had the following powers and functions:

1. Fix and regulate the prices of petroleum products;

2. Fix and regulate the rate schedule or prices of piped gas to

be charged by duly franchised gas companies which
distribute gas by means of underground pipe system;

3. Fix and regulate the rates of pipeline concessionaries

under the provisions of R.A. No. 387, as amended . . . ;

4. Regulate the capacities of new refineries or additional

capacities of existing refineries and license refineries that
may be organized after the issuance of (E.O. No. 172) under
such terms and conditions as are consistent with the national
interest; and

5. Whenever the Board has determined that there is a

shortage of any petroleum product, or when public interest so
requires, it may take such steps as it may consider
necessary, including the temporary adjustment of the levels of
prices of petroleum products and the payment to the Oil Price
Stabilization Fund . . . by persons or entities engaged in the
petroleum industry of such amounts as may be determined by
the Board, which may enable the importer to recover its cost
of importation. 8

On December 9, 1992, Congress enacted R.A. No. 7638 which created the Department of Energy to
prepare, integrate, coordinate, supervise and control all plans, programs, projects, and activities of
the government in relation to energy exploration, development, utilization, distribution and
conservation.  The thrust of the Philippine energy program under the law was toward privatization of
9
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government agencies related to energy, deregulation of the power and energy industry and
reduction of dependency on oil-fired plants.  The law also aimed to encourage free and active
10

participation and investment by the private sector in all energy activities. Section 5(e) of the law
states that "at the end of four (4) years from the effectivity of this Act, the Department shall, upon
approval of the President, institute the programs and timetable of deregulation of appropriate energy
projects and activities of the energy industry."

Pursuant to the policies enunciated in R.A. No. 7638, the government approved the privatization of
Petron Corporation in 1993. On December 16, 1993, PNOC sold 40% of its equity in Petron
Corporation to the Aramco Overseas Company.

In March 1996, Congress took the audacious step of deregulating the downstream oil industry. It
enacted R.A. No. 8180, entitled the "Downstream Oil Industry Deregulation Act of 1996." Under the
deregulated environment, "any person or entity may import or purchase any quantity of crude oil and
petroleum products from a foreign or domestic source, lease or own and operate refineries and other
downstream oil facilities and market such crude oil or use the same for his own requirement," subject
only to monitoring by the Department of
Energy. 11

The deregulation process has two phases: the transition phase and the full deregulation phase.
During the transition phase, controls of the non-pricing aspects of the oil industry were to be lifted.
The following were to be accomplished: (1) liberalization of oil importation, exportation,
manufacturing, marketing and distribution, (2) implementation of an automatic pricing mechanism,
(3) implementation of an automatic formula to set margins of dealers and rates of haulers, water
transport operators and pipeline concessionaires, and (4) restructuring of oil taxes. Upon full
deregulation, controls on the price of oil and the foreign exchange cover were to be lifted and the
OPSF was to be abolished.

The first phase of deregulation commenced on August 12, 1996.

On February 8, 1997, the President implemented the full deregulation of the Downstream Oil
Industry through E.O. No. 372.

The petitions at bar assail the constitutionality of various provisions of R.A No. 8180 and E.O. No.
372.

In G.R. No. 124360, petitioner Francisco S. Tatad seeks the annulment of section 5(b) of R.A. No.
8180. Section 5(b) provides:

b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff
duty shall be imposed and collected on imported crude oil at the rate of three percent (3%)
and imported refined petroleum products at the rate of seven percent (7%), except fuel oil
and LPG, the rate for which shall be the same as that for imported crude oil: Provided, That
beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum
products shall be the same: Provided, further, That this provision may be amended only by
an Act of Congress.

The petition is anchored on three arguments:

First, that the imposition of different tariff rates on imported crude oil and imported refined petroleum
products violates the equal protection clause. Petitioner contends that the 3%-7% tariff differential
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unduly favors the three existing oil refineries and discriminates against prospective investors in the
downstream oil industry who do not have their own refineries and will have to source refined
petroleum products from abroad.

Second, that the imposition of different tariff rates does not deregulate the downstream oil industry
but instead controls the oil industry, contrary to the avowed policy of the law. Petitioner avers that
the tariff differential between imported crude oil and imported refined petroleum products bars the
entry of other players in the oil industry because it effectively protects the interest of oil companies
with existing refineries. Thus, it runs counter to the objective of the law "to foster a truly competitive
market."

Third, that the inclusion of the tariff provision in section 5(b) of R.A. No. 8180 violates Section 26(1)
Article VI of the Constitution requiring every law to have only one subject which shall be expressed
in its title. Petitioner contends that the imposition of tariff rates in section 5(b) of R.A. No. 8180 is
foreign to the subject of the law which is the deregulation of the downstream oil industry.

In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique Garcia, Wigberto

Tanada, Flag Human Rights Foundation, Inc., Freedom from Debt Coalition (FDC) and Sanlakas
contest the constitutionality of section 15 of R.A. No. 8180 and E.O. No. 392. Section 15 provides:

Sec. 15. Implementation of Full Deregulation. — Pursuant to Section 5(e) of Republic Act
No. 7638, the DOE shall, upon approval of the President, implement the full deregulation of
the downstream oil industry not later than March 1997. As far as practicable, the DOE shall
time the full deregulation when the prices of crude oil and petroleum products in the world
market are declining and when the exchange rate of the peso in relation to the US dollar is
stable. Upon the implementation of the full deregulation as provided herein, the transition
phase is deemed terminated and the following laws are deemed repealed:

x x x           x x x          x x x

E.O. No. 372 states in full, viz.:

WHEREAS, Republic Act No. 7638, otherwise known as the "Department of Energy Act of
1992," provides that, at the end of four years from its effectivity last December 1992, "the
Department (of Energy) shall, upon approval of the President, institute the programs and
time table of deregulation of appropriate energy projects and activities of the energy sector;"

WHEREAS, Section 15 of Republic Act No. 8180, otherwise known as the "Downstream Oil
Industry Deregulation Act of 1996," provides that "the DOE shall, upon approval of the
President, implement full deregulation of the downstream oil industry not later than March,
1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude
oil and petroleum products in the world market are declining and when the exchange rate of
the peso in relation to the US dollar is stable;"

WHEREAS, pursuant to the recommendation of the Department of Energy, there is an

imperative need to implement the full deregulation of the downstream oil industry because of
the following recent developments: (i) depletion of the buffer fund on or about 7 February
1997 pursuant to the Energy Regulatory Board's Order dated 16 January 1997; (ii) the prices
of crude oil had been stable at $21-$23 per barrel since October 1996 while prices of
petroleum products in the world market had been stable since mid-December of last year.
Moreover, crude oil prices are beginning to soften for the last few days while prices of some
petroleum products had already declined; and (iii) the exchange rate of the peso in relation
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to the US dollar has been stable for the past twelve (12) months, averaging at around
P26.20 to one US dollar;

WHEREAS, Executive Order No. 377 dated 31 October 1996 provides for an institutional
framework for the administration of the deregulated industry by defining the functions and
responsibilities of various government agencies;

WHEREAS, pursuant to Republic Act No. 8180, the deregulation of the industry will foster a
truly competitive market which can better achieve the social policy objectives of fair prices
and adequate, continuous supply of environmentally-clean and high quality petroleum
products;

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by

the powers vested in me by law, do hereby declare the full deregulation of the downstream
oil industry.

In assailing section 15 of R.A. No. 8180 and E.O. No. 392, petitioners offer the following
submissions:

First, section 15 of R.A. No. 8180 constitutes an undue delegation of legislative power to the
President and the Secretary of Energy because it does not provide a determinate or determinable
standard to guide the Executive Branch in determining when to implement the full deregulation of the
downstream oil industry. Petitioners contend that the law does not define when it is practicable for
the Secretary of Energy to recommend to the President the full deregulation of the downstream oil
industry or when the President may consider it practicable to declare full deregulation. Also, the law
does not provide any specific standard to determine when the prices of crude oil in the world market
are considered to be declining nor when the exchange rate of the peso to the US dollar is
considered stable.

Second, petitioners aver that E.O. No. 392 implementing the full deregulation of the downstream oil
industry is arbitrary and unreasonable because it was enacted due to the alleged depletion of the
OPSF fund — a condition not found in R.A. No. 8180.

Third, section 15 of R.A. No. 8180 and E.O. No. 392 allow the formation of a de facto cartel among
the three existing oil companies — Petron, Caltex and Shell — in violation of the constitutional
prohibition against monopolies, combinations in restraint of trade and unfair competition.

Respondents, on the other hand, fervently defend the constitutionality of R.A. No. 8180 and E.O. No.
392. In addition, respondents contend that the issues raised by the petitions are not justiciable as
they pertain to the wisdom of the law. Respondents further aver that petitioners have no locus
standi as they did not sustain nor will they sustain direct injury as a result of the implementation of
R.A. No. 8180.

The petitions were heard by the Court on September 30, 1997. On October 7, 1997, the Court
ordered the private respondents oil companies "to maintain the status quo and to cease and desist
from increasing the prices of gasoline and other petroleum fuel products for a period of thirty (30)
days . . . subject to further orders as conditions may warrant."

We shall now resolve the petitions on the merit. The petitions raise procedural and substantive
issues bearing on the constitutionality of R.A. No. 8180 and E.O. No. 392. The procedural
issues are: (1) whether or not the petitions raise a justiciable controversy, and (2) whether or not the
APEL FULL CASE

petitioners have the standing to assail the validity of the subject law and executive order.
The substantive issues are: (1) whether or not section 5 (b) violates the one title — one subject
requirement of the Constitution; (2) whether or not the same section violates the equal protection
clause of the Constitution; (3) whether or not section 15 violates the constitutional prohibition on
undue delegation of power; (4) whether or not E.O. No. 392 is arbitrary and unreasonable; and (5)
whether or not R.A. No. 8180 violates the constitutional prohibition against monopolies,
combinations in restraint of trade and unfair competition.

We shall first tackle the procedural issues. Respondents claim that the avalanche of arguments of
the petitioners assail the wisdom of R.A. No. 8180. They aver that deregulation of the downstream
oil industry is a policy decision made by Congress and it cannot be reviewed, much less be reversed
by this Court. In constitutional parlance, respondents contend that the petitions failed to raise a
justiciable controversy.

Respondents' joint stance is unnoteworthy. Judicial power includes not only the duty of the courts to
settle actual controversies involving rights which are legally demandable and enforceable, but also
the duty to determine whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the government.  The courts, as
12

guardians of the Constitution, have the inherent authority to determine whether a statute enacted by
the legislature transcends the limit imposed by the fundamental law. Where a statute violates the
Constitution, it is not only the right but the duty of the judiciary to declare such act as unconstitutional
and void.  We held in the recent case of Tanada v. Angara:
13 14

xxx xxx xxx

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of the
legislative branch is seriously alleged to have infringed the Constitution, it becomes not only
the right but in fact the duty of the judiciary to settle the dispute. The question thus posed is
judicial rather than political. The duty to adjudicate remains to assure that the supremacy of
the Constitution is upheld. Once a controversy as to the application or interpretation of a
constitutional provision is raised before this Court, it becomes a legal issue which the Court
is bound by constitutional mandate to decide.

Even a sideglance at the petitions will reveal that petitioners have raised constitutional issues which
deserve the resolution of this Court in view of their seriousness and their value as precedents. Our
statement of facts and definition of issues clearly show that petitioners are assailing R.A. No. 8180
because its provisions infringe the Constitution and not because the law lacks wisdom. The principle
of separation of power mandates that challenges on the constitutionality of a law should be resolved
in our courts of justice while doubts on the wisdom of a law should be debated in the halls of
Congress. Every now and then, a law may be denounced in court both as bereft of wisdom and
constitutionally infirmed. Such denunciation will not deny this Court of its jurisdiction to resolve the
constitutionality of the said law while prudentially refusing to pass on its wisdom.

The effort of respondents to question the locus standi of petitioners must also fall on barren ground.
In language too lucid to be misunderstood, this Court has brightlined its liberal stance on a
petitioner's locus standi where the petitioner is able to craft an issue of transcendental significance to
the people.  In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan,  we
15 16

stressed:

xxx xxx xxx

APEL FULL CASE

Objections to taxpayers' suit for lack of sufficient personality, standing or interest are,
however, in the main procedural matters. Considering the importance to the public of the
cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine
whether or not the other branches of government have kept themselves within the limits of
the Constitution and the laws and that they have not abused the discretion given to them, the
Court has brushed aside technicalities of procedure and has taken cognizance of these
petitions.

There is not a dot of disagreement between the petitioners and the respondents on the far reaching
importance of the validity of RA No. 8180 deregulating our downstream oil industry. Thus, there is no
good sense in being hypertechnical on the standing of petitioners for they pose issues which are
significant to our people and which deserve our forthright resolution.

We shall now track down the substantive issues. In G.R. No. 124360 where petitioner is Senator
Tatad, it is contended that section 5(b) of R.A. No. 8180 on tariff differential violates the provision  of
17

the Constitution requiring every law to have only one subject which should be expressed in its title.
We do not concur with this contention. As a policy, this Court has adopted a liberal construction of
the one title — one subject rule. We have consistently ruled  that the title need not mirror, fully index
18

or catalogue all contents and minute details of a law. A law having a single general subject indicated
in the title may contain any number of provisions, no matter how diverse they may be, so long as
they are not inconsistent with or foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method and means of carrying out the general
subject.  We hold that section 5(b) providing for tariff differential is germane to the subject of R.A.
19

No. 8180 which is the deregulation of the downstream oil industry. The section is supposed to sway
prospective investors to put up refineries in our country and make them rely less on imported
petroleum.  We shall, however, return to the validity of this provision when we examine its blocking
20

effect on new entrants to the oil market.

We shall now slide to the substantive issues in G.R. No. 127867. Petitioners assail section 15 of
R.A. No. 8180 which fixes the time frame for the full deregulation of the downstream oil industry. We
restate its pertinent portion for emphasis, viz.:

Sec. 15. Implementation of Full Deregulation — Pursuant to section 5(e) of Republic Act No.
7638, the DOE shall, upon approval of the President, implement the full deregulation of the
downstream oil industry not later than March 1997. As far as practicable, the DOE shall time
the full deregulation when the prices of crude oil and petroleum products in the world market
are declining and when the exchange rate of the peso in relation to the US dollar
is stable . . .

Petitioners urge that the phrases "as far as practicable," "decline of crude oil prices in the world
market" and "stability of the peso exchange rate to the US dollar" are ambivalent, unclear and
inconcrete in meaning. They submit that they do not provide the "determinate or determinable
standards" which can guide the President in his decision to fully deregulate the downstream oil
industry. In addition, they contend that E.O. No. 392 which advanced the date of full deregulation is
void for it illegally considered the depletion of the OPSF fund as a factor.

The power of Congress to delegate the execution of laws has long been settled by this Court. As
early as 1916 in Compania General de Tabacos de Filipinas vs. The Board of Public Utility
Commissioners,  this Court thru, Mr. Justice Moreland, held that "the true distinction is between the
21

delegation of power to make the law, which necessarily involves a discretion as to what it shall be,
and conferring authority or discretion as to its execution, to be exercised under and in pursuance of
the law. The first cannot be done; to the latter no valid objection can be made." Over the years, as
APEL FULL CASE

the legal engineering of men's relationship became more difficult, Congress has to rely more on the
practice of delegating the execution of laws to the executive and other administrative agencies. Two
tests have been developed to determine whether the delegation of the power to execute laws does
not involve the abdication of the power to make law itself. We delineated the metes and bounds of
these tests in Eastern Shipping Lines, Inc. VS. POEA,  thus:
22

There are two accepted tests to determine whether or not there is a valid delegation of
legislative power, viz: the completeness test and the sufficient standard test. Under the first
test, the law must be complete in all its terms and conditions when it leaves the legislative
such that when it reaches the delegate the only thing he will have to do is to enforce it.
Under the sufficient standard test, there must be adequate guidelines or limitations in the law
to map out the boundaries of the delegate's authority and prevent the delegation from
running riot. Both tests are intended to prevent a total transference of legislative authority to
the delegate, who is not allowed to step into the shoes of the legislature and exercise a
power essentially legislative.

The validity of delegating legislative power is now a quiet area in our constitutional landscape. As
sagely observed, delegation of legislative power has become an inevitability in light of the increasing
complexity of the task of government. Thus, courts bend as far back as possible to sustain the
constitutionality of laws which are assailed as unduly delegating legislative powers.
Citing Hirabayashi v. United States  as authority, Mr. Justice Isagani A. Cruz states "that even if the
23

law does not expressly pinpoint the standard, the courts will bend over backward to locate the same
elsewhere in order to spare the statute, if it can, from constitutional infirmity."
24

Given the groove of the Court's rulings, the attempt of petitioners to strike down section 15 on the
ground of undue delegation of legislative power cannot prosper. Section 15 can hurdle both the
completeness test and the sufficient standard test. It will be noted that Congress expressly provided
in R.A. No. 8180 that full deregulation will start at the end of March 1997, regardless of the
occurrence of any event. Full deregulation at the end of March 1997 is mandatory and the Executive
has no discretion to postpone it for any purported reason. Thus, the law is complete on the question
of the final date of full deregulation. The discretion given to the President is to advance the date of
full deregulation before the end of March 1997. Section 15 lays down the standard to guide the
judgment of the President — he is to time it as far as practicable when the prices of crude oil and
petroleum products in the world market are declining and when the exchange rate of the peso in
relation to the US dollar is stable.

Petitioners contend that the words "as far as practicable," "declining" and "stable" should have been
defined in R.A. No. 8180 as they do not set determinate or determinable standards. The stubborn
submission deserves scant consideration. The dictionary meanings of these words are well settled
and cannot confuse men of reasonable intelligence. Webster defines "practicable" as meaning
possible to practice or perform, "decline" as meaning to take a downward direction, and "stable" as
meaning firmly established.  The fear of petitioners that these words will result in the exercise of
25

executive discretion that will run riot is thus groundless. To be sure, the Court has sustained the
validity of similar, if not more general standards in other cases.
26

It ought to follow that the argument that E.O. No. 392 is null and void as it was based on
indeterminate standards set by R.A. 8180 must likewise fail. If that were all to the attack against the
validity of E.O. No. 392, the issue need not further detain our discourse. But petitioners further posit
the thesis that the Executive misapplied R.A. No. 8180 when it considered the depletion of the OPSF
fund as a factor in fully deregulating the downstream oil industry in February 1997. A perusal of
section 15 of R.A. No. 8180 will readily reveal that it only enumerated two factors to be considered
by the Department of Energy and the Office of the President, viz.: (1) the time when the prices of
APEL FULL CASE

crude oil and petroleum products in the world market are declining, and (2) the time when the
exchange rate of the peso in relation to the US dollar is stable. Section 15 did not mention the
depletion of the OPSF fund as a factor to be given weight by the Executive before ordering full
deregulation. On the contrary, the debates in Congress will show that some of our legislators wanted
to impose as a pre-condition to deregulation a showing that the OPSF fund must not be in
deficit.  We therefore hold that the Executive department failed to follow faithfully the standards set
27

by R.A. No. 8180 when it considered the extraneous factor of depletion of the OPSF fund. The
misappreciation of this extra factor cannot be justified on the ground that the Executive department
considered anyway the stability of the prices of crude oil in the world market and the stability of the
exchange rate of the peso to the dollar. By considering another factor to hasten full deregulation, the
Executive department rewrote the standards set forth in R.A. 8180. The Executive is bereft of any
right to alter either by subtraction or addition the standards set in R.A. No. 8180 for it has no power
to make laws. To cede to the Executive the power to make law is to invite tyranny, indeed, to
transgress the principle of separation of powers. The exercise of delegated power is given a strict
scrutiny by courts for the delegate is a mere agent whose action cannot infringe the terms of agency.
In the cases at bar, the Executive co-mingled the factor of depletion of the OPSF fund with the
factors of decline of the price of crude oil in the world market and the stability of the peso to the US
dollar. On the basis of the text of E.O. No. 392, it is impossible to determine the weight given by the
Executive department to the depletion of the OPSF fund. It could well be the principal consideration
for the early deregulation. It could have been accorded an equal significance. Or its importance
could be nil. In light of this uncertainty, we rule that the early deregulation under E.O. No. 392
constitutes a misapplication of R.A. No. 8180.

We now come to grips with the contention that some provisions of R.A. No. 8180 violate section 19
of Article XII of the 1987 Constitution. These provisions are:

(1) Section 5 (b) which states — "Any law to the contrary notwithstanding and starting with
the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at
the rate of three percent (3%) and imported refined petroleum products at the rate of seven
percent (7%) except fuel oil and LPG, the rate for which shall be the same as that for
imported crude oil. Provided, that beginning on January 1, 2004 the tariff rate on imported
crude oil and refined petroleum products shall be the same. Provided, further, that this
provision may be amended only by an Act of Congress."

(2) Section 6 which states — "To ensure the security and continuity of petroleum crude and
products supply, the DOE shall require the refiners and importers to maintain a minimum
inventory equivalent to ten percent (10%) of their respective annual sales volume or forty
(40) days of supply, whichever is lower," and

(3) Section 9 (b) which states — "To ensure fair competition and prevent cartels and
monopolies in the downstream oil industry, the following acts shall be prohibited:

x x x           x x x          x x x

(b) Predatory pricing which means selling or offering to sell any product at a
price unreasonably below the industry average cost so as to attract
customers to the detriment of competitors.

On the other hand, section 19 of Article XII of the Constitution allegedly violated by the aforestated
provisions of R.A. No. 8180 mandates: "The State shall regulate or prohibit monopolies when the
public interest so requires. No combinations in restraint of trade or unfair competition shall be
allowed."
APEL FULL CASE

A monopoly is a privilege or peculiar advantage vested in one or more persons or companies,

consisting in the exclusive right or power to carry on a particular business or trade, manufacture a
particular article, or control the sale or the whole supply of a particular commodity. It is a form of
market structure in which one or only a few firms dominate the total sales of a product or
service.  On the other hand, a combination in restraint of trade is an agreement or understanding
28

between two or more persons, in the form of a contract, trust, pool, holding company, or other form
of association, for the purpose of unduly restricting competition, monopolizing trade and commerce
in a certain commodity, controlling its, production, distribution and price, or otherwise interfering with
freedom of trade without statutory authority.  Combination in restraint of trade refers to the means
29

while monopoly refers to the end. 30

Article 186 of the Revised Penal Code and Article 28 of the New Civil Code breathe life to this
constitutional policy. Article 186 of the Revised Penal Code penalizes monopolization and creation of
combinations in restraint of
trade,   while Article 28 of the New Civil Code makes any person who shall engage in unfair
31

competition liable for damages. 32

Respondents aver that sections 5(b), 6 and 9(b) implement the policies and objectives of R.A. No.
8180. They explain that the 4% tariff differential is designed to encourage new entrants to invest in
refineries. They stress that the inventory requirement is meant to guaranty continuous domestic
supply of petroleum and to discourage fly-by-night operators. They also submit that the prohibition
against predatory pricing is intended to protect prospective entrants. Respondents manifested to the
Court that new players have entered the Philippines after deregulation and have now captured 3%
— 5% of the oil market.

The validity of the assailed provisions of R.A. No. 8180 has to be decided in light of the letter and
spirit of our Constitution, especially section 19, Article XII. Beyond doubt, the Constitution committed
us to the free enterprise system but it is a system impressed with its own distinctness. Thus, while
the Constitution embraced free enterprise as an economic creed, it did not prohibit per se the
operation of monopolies which can, however, be regulated in the public interest.  Thus too, our free
33

enterprise system is not based on a market of pure and unadulterated competition where the State
pursues a strict hands-off policy and follows the let-the-devil devour the hindmost rule. Combinations
in restraint of trade and unfair competitions are absolutely proscribed and the proscription is directed
both against the State as well as the private sector.  This distinct free enterprise system is dictated
34

by the need to achieve the goals of our national economy as defined by section 1, Article XII of the
Constitution which are: more equitable distribution of opportunities, income and wealth; a sustained
increase in the amount of goods and services produced by the nation for the benefit of the people;
and an expanding productivity as the key to raising the quality of life for all, especially the
underprivileged. It also calls for the State to protect Filipino enterprises against unfair competition
and trade practices.

Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition.
The desirability of competition is the reason for the prohibition against restraint of trade, the reason
for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies.
Competition is thus the underlying principle of section 19, Article XII of our Constitution which cannot
be violated by R.A. No. 8180. We subscribe to the observation of Prof. Gellhorn that the objective of
anti-trust law is "to assure a competitive economy, based upon the belief that through competition
producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the fewest
resources. Competition among producers allows consumers to bid for goods and services, and thus
matches their desires with society's opportunity costs."  He adds with appropriateness that there is a
35

reliance upon "the operation of the 'market' system (free enterprise) to decide what shall be
produced, how resources shall be allocated in the production process, and to whom the various
APEL FULL CASE

products will be distributed. The market system relies on the consumer to decide what and how
much shall be produced, and on competition, among producers to determine who will manufacture
it."

Again, we underline in scarlet that the fundamental principle espoused by section 19, Article XII of
the Constitution is competition for it alone can release the creative forces of the market. But the
competition that can unleash these creative forces is competition that is fighting yet is fair. Ideally,
this kind of competition requires the presence of not one, not just a few but several players. A market
controlled by one player (monopoly) or dominated by a handful of players (oligopoly) is hardly the
market where honest-to-goodness competition will prevail. Monopolistic or oligopolistic markets
deserve our careful scrutiny and laws which barricade the entry points of new players in the market
should be viewed with suspicion.

Prescinding from these baseline propositions, we shall proceed to examine whether the provisions of
R.A. No. 8180 on tariff differential, inventory reserves, and predatory prices imposed substantial
barriers to the entry and exit of new players in our downstream oil industry. If they do, they have to
be struck down for they will necessarily inhibit the formation of a truly competitive market.
Contrariwise, if they are insignificant impediments, they need not be stricken down.

In the cases at bar, it cannot be denied that our downstream oil industry is operated and controlled
by an oligopoly, a foreign oligopoly at that. Petron, Shell and Caltex stand as the only major league
players in the oil market. All other players belong to the lilliputian league. As the dominant players,
Petron, Shell and Caltex boast of existing refineries of various capacities. The tariff differential of 4%
therefore works to their immense benefit. Yet, this is only one edge of the tariff differential. The other
edge cuts and cuts deep in the heart of their competitors. It erects a high barrier to the entry of new
players. New players that intend to equalize the market power of Petron, Shell and Caltex by
building refineries of their own will have to spend billions of pesos. Those who will not build refineries
but compete with them will suffer the huge disadvantage of increasing their product cost by 4%.
They will be competing on an uneven field. The argument that the 4% tariff differential is desirable
because it will induce prospective players to invest in refineries puts the cart before the horse. The
first need is to attract new players and they cannot be attracted by burdening them with heavy
disincentives. Without new players belonging to the league of Petron, Shell and Caltex, competition
in our downstream oil industry is an idle dream.

The provision on inventory widens the balance of advantage of Petron, Shell and Caltex against
prospective new players. Petron, Shell and Caltex can easily comply with the inventory requirement
of R.A. No. 8180 in view of their existing storage facilities. Prospective competitors again will find
compliance with this requirement difficult as it will entail a prohibitive cost. The construction cost of
storage facilities and the cost of inventory can thus scare prospective players. Their net effect is to
further occlude the entry points of new players, dampen competition and enhance the control of the
market by the three (3) existing oil companies.

Finally, we come to the provision on predatory pricing which is defined as ". . . selling or offering to
sell any product at a price unreasonably below the industry average cost so as to attract customers
to the detriment of competitors." Respondents contend that this provision works against Petron,
Shell and Caltex and protects new entrants. The ban on predatory pricing cannot be analyzed in
isolation. Its validity is interlocked with the barriers imposed by R.A. No. 8180 on the entry of new
players. The inquiry should be to determine whether predatory pricing on the part of the dominant oil
companies is encouraged by the provisions in the law blocking the entry of new players. Text-writer
Hovenkamp,  gives the authoritative answer and we quote:
36

xxx xxx xxx

APEL FULL CASE

The rationale for predatory pricing is the sustaining of losses today that will give a firm
monopoly profits in the future. The monopoly profits will never materialize, however, if the
market is flooded with new entrants as soon as the successful predator attempts to raise its
price. Predatory pricing will be profitable only if the market contains significant barriers to
new entry.

As aforediscsussed, the 4% tariff differential and the inventory requirement are significant barriers
which discourage new players to enter the market. Considering these significant barriers established
by R.A. No. 8180 and the lack of players with the comparable clout of PETRON, SHELL and
CALTEX, the temptation for a dominant player to engage in predatory pricing and succeed is a
chilling reality. Petitioners' charge that this provision on predatory pricing is anti-competitive is not
without reason.

Respondents belittle these barriers with the allegation that new players have entered the market
since deregulation. A scrutiny of the list of the alleged new players will, however, reveal that not one
belongs to the class and category of PETRON, SHELL and CALTEX. Indeed, there is no showing
that any of these new players intends to install any refinery and effectively compete with these
dominant oil companies. In any event, it cannot be gainsaid that the new players could have been
more in number and more impressive in might if the illegal entry barriers in R.A. No. 8180 were not
erected.

We come to the final point. We now resolve the total effect of the untimely deregulation, the
imposition of 4% tariff differential on imported crude oil and refined petroleum products, the
requirement of inventory and the prohibition on predatory pricing on the constitutionality of R.A. No.
8180. The question is whether these offending provisions can be individually struck down without
invalidating the entire R.A. No. 8180. The ruling case law is well stated by author Agpalo,  viz.:
37

xxx xxx xxx

The general rule is that where part of a statute is void as repugnant to the Constitution, while
another part is valid, the valid portion, if separable from the invalid, may stand and be
enforced. The presence of a separability clause in a statute creates the presumption that the
legislature intended separability, rather than complete nullity of the statute. To justify this
result, the valid portion must be so far independent of the invalid portion that it is fair to
presume that the legislature would have enacted it by itself if it had supposed that it could
not constitutionally enact the other. Enough must remain to make a complete, intelligible and
valid statute, which carries out the legislative intent. . . .

The exception to the general rule is that when the parts of a statute are so mutually
dependent and connected, as conditions, considerations, inducements, or compensations for
each other, as to warrant a belief that the legislature intended them as a whole, the nullity of
one part will vitiate the rest. In making the parts of the statute dependent, conditional, or
connected with one another, the legislature intended the statute to be carried out as a whole
and would not have enacted it if one part is void, in which case if some parts are
unconstitutional, all the other provisions thus dependent, conditional, or connected must fall
with them.

R.A. No. 8180 contains a separability clause. Section 23 provides that "if for any reason, any section
or provision of this Act is declared unconstitutional or invalid, such parts not affected thereby shall
remain in full force and effect." This separability clause notwithstanding, we hold that the offending
provisions of R.A. No. 8180 so permeate its essence that the entire law has to be struck down. The
provisions on tariff differential, inventory and predatory pricing are among the principal props of R.A.
APEL FULL CASE

No. 8180. Congress could not have deregulated the downstream oil industry without these
provisions. Unfortunately, contrary to their intent, these provisions on tariff differential, inventory and
predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free
interaction of market forces. R.A. No. 8180 needs provisions to vouchsafe free and fair competition.
The need for these vouchsafing provisions cannot be overstated. Before deregulation, PETRON,
SHELL and CALTEX had no real competitors but did not have a free run of the market because
government controls both the pricing and non-pricing aspects of the oil industry. After deregulation,
PETRON, SHELL and CALTEX remain unthreatened by real competition yet are no longer subject to
control by government with respect to their pricing and non-pricing decisions. The aftermath of R.A.
No. 8180 is a deregulated market where competition can be corrupted and where market forces can
be manipulated by oligopolies.

The fall out effects of the defects of R.A. No. 8180 on our people have not escaped Congress. A lot
of our leading legislators have come out openly with bills seeking the repeal of these odious and
offensive provisions in R.A. No. 8180. In the Senate, Senator Freddie Webb has filed S.B. No. 2133
which is the result of the hearings conducted by the Senate Committee on Energy. The hearings
revealed that (1) there was a need to level the playing field for the new entrants in the downstream
oil industry, and (2) there was no law punishing a person for selling petroleum products at
unreasonable prices. Senator Alberto G. Romulo also filed S.B. No. 2209 abolishing the tariff
differential beginning January 1, 1998. He declared that the amendment ". . . would mean that
instead of just three (3) big oil companies there will be other major oil companies to provide more
competitive prices for the market and the consuming public." Senator Heherson T . Alvarez, one of
the principal proponents of R.A. No. 8180, also filed S.B. No. 2290 increasing the penalty for
violation of its section 9. It is his opinion as expressed in the explanatory note of the bill that the
present oil companies are engaged in cartelization despite R.A. No. 8180, viz,:

xxx xxx xxx

Since the downstream oil industry was fully deregulated in February 1997, there have been
eight (8) fuel price adjustments made by the three oil majors, namely: Caltex Philippines,
Inc.; Petron Corporation; and Pilipinas Shell Petroleum Corporation. Very noticeable in the
price adjustments made, however, is the uniformity in the pump prices of practically all
petroleum products of the three oil companies. This, despite the fact, that their selling rates
should be determined by a combination of any of the following factors: the prevailing peso-
dollar exchange rate at the time payment is made for crude purchases, sources of crude,
and inventory levels of both crude and refined petroleum products. The abovestated factors
should have resulted in different, rather than identical prices.

The fact that the three (3) oil companies' petroleum products are uniformly priced suggests
collusion, amounting to cartelization, among Caltex Philippines, Inc., Petron Corporation and
Pilipinas Shell Petroleum Corporation to fix the prices of petroleum products in violation of
paragraph (a), Section 9 of R.A. No. 8180.

To deter this pernicious practice and to assure that present and prospective players in the
downstream oil industry conduct their business with conscience and propriety, cartel-like
activities ought to be severely penalized.

Senator Francisco S. Tatad also filed S.B. No. 2307 providing for a uniform tariff rate on imported
crude oil and refined petroleum products. In the explanatory note of the bill, he declared in no
uncertain terms that ". . . the present set-up has raised serious public concern over the way the three
oil companies have uniformly adjusted the prices of oil in the country, an indication of a possible
existence of a cartel or a cartel-like situation within the downstream oil industry. This situation is
APEL FULL CASE

mostly attributed to the foregoing provision on tariff differential, which has effectively discouraged
the entry of new players in the downstream oil industry."

In the House of Representatives, the moves to rehabilitate R.A. No. 8180 are equally
feverish. Representative Leopoldo E. San Buenaventura has filed H.B. No. 9826 removing the tariff
differential for imported crude oil and imported refined petroleum products. In the explanatory note of
the bill, Rep. Buenaventura explained:

xxx xxx xxx

As we now experience, this difference in tariff rates between imported crude oil and imported
refined petroleum products, unwittingly provided a built-in-advantage for the three existing oil
refineries in the country and eliminating competition which is a must in a free enterprise
economy. Moreover, it created a disincentive for other players to engage even initially in the
importation and distribution of refined petroleum products and ultimately in the putting up of
refineries. This tariff differential virtually created a monopoly of the downstream oil industry
by the existing three oil companies as shown by their uniform and capricious pricing of their
products since this law took effect, to the great disadvantage of the consuming public.

Thus, instead of achieving the desired effects of deregulation, that of free enterprise and a
level playing field in the downstream oil industry, R.A. 8180 has created an environment
conducive to cartelization, unfavorable, increased, unrealistic prices of petroleum products in
the country by the three existing refineries.

Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to prevent collusion among the present
oil companies by strengthening the oversight function of the government, particularly its ability to
subject to a review any adjustment in the prices of gasoline and other petroleum products. In the
explanatory note of the bill, Rep. Punzalan, Jr., said:

xxx xxx xxx

To avoid this, the proposed bill seeks to strengthen the oversight function of government,
particularly its ability to review the prices set for gasoline and other petroleum products. It
grants the Energy Regulatory Board (ERB) the authority to review prices of oil and other
petroleum products, as may be petitioned by a person, group or any entity, and to
subsequently compel any entity in the industry to submit any and all documents relevant to
the imposition of new prices. In cases where the Board determines that there exist collusion,
economic conspiracy, unfair trade practice, profiteering and/or overpricing, it may take any
step necessary to protect the public, including the readjustment of the prices of petroleum
products. Further, the Board may also impose the fine and penalty of imprisonment, as
prescribed in Section 9 of R.A. 8180, on any person or entity from the oil industry who is
found guilty of such prohibited acts.

By doing all of the above, the measure will effectively provide Filipino consumers with a
venue where their grievances can be heard and immediately acted upon by government.

Thus, this bill stands to benefit the Filipino consumer by making the price-setting process
more transparent and making it easier to prosecute those who perpetrate such prohibited
acts as collusion, overpricing, economic conspiracy and unfair trade.
APEL FULL CASE

Representative Sergio A.F . Apostol filed H.B. No. 10039 to remedy an omission in R.A. No. 8180
where there is no agency in government that determines what is "reasonable" increase in the prices
of oil products. Representative Dente O. Tinga, one of the principal sponsors of R.A. No. 8180, filed
H.B. No. 10057 to strengthen its anti-trust provisions. He elucidated in its explanatory note:

xxx xxx xxx

The definition of predatory pricing, however, needs to be tightened up particularly with

respect to the definitive benchmark price and the specific anti-competitive intent. The
definition in the bill at hand which was taken from the Areeda-Turner test in the United States
on predatory pricing resolves the questions. The definition reads, "Predatory pricing means
selling or offering to sell any oil product at a price below the average variable cost for the
purpose of destroying competition, eliminating a competitor or discouraging a competitor
from entering the market."

The appropriate actions which may be resorted to under the Rules of Court in conjunction
with the oil deregulation law are adequate. But to stress their availability and dynamism, it is
a good move to incorporate all the remedies in the law itself. Thus, the present bill formalizes
the concept of government intervention and private suits to address the problem of antitrust
violations. Specifically, the government may file an action to prevent or restrain any act of
cartelization or predatory pricing, and if it has suffered any loss or damage by reason of the
antitrust violation it may recover damages. Likewise, a private person or entity may sue to
prevent or restrain any such violation which will result in damage to his business or property,
and if he has already suffered damage he shall recover treble damages. A class suit may
also be allowed.

To make the DOE Secretary more effective in the enforcement of the law, he shall be given
additional powers to gather information and to require reports.

Representative Erasmo B. Damasing filed H.B. No. 7885 and has a more unforgiving view of R.A.
No. 8180. He wants it completely repealed. He explained:

xxx xxx xxx

Contrary to the projections at the time the bill on the Downstream Oil Industry Deregulation
was discussed and debated upon in the plenary session prior to its approval into law, there
aren't any new players or investors in the oil industry. Thus, resulting in practically a cartel or
monopoly in the oil industry by the three (3) big oil companies, Caltex, Shell and Petron. So
much so, that with the deregulation now being partially implemented, the said oil companies
have succeeded in increasing the prices of most of their petroleum products with little or no
interference at all from the government. In the month of August, there was an increase of
Fifty centavos (50¢) per liter by subsidizing the same with the OPSF, this is only temporary
as in March 1997, or a few months from now, there will be full deregulation (Phase II)
whereby the increase in the prices of petroleum products will be fully absorbed by the
consumers since OPSF will already be abolished by then. Certainly, this would make the
lives of our people, especially the unemployed ones, doubly difficult and unbearable.

The much ballyhooed coming in of new players in the oil industry is quite remote considering
that these prospective investors cannot fight the existing and well established oil companies
in the country today, namely, Caltex, Shell and Petron. Even if these new players will come
in, they will still have no chance to compete with the said three (3) existing big oil companies
considering that there is an imposition of oil tariff differential of 4% between importation of
APEL FULL CASE

crude oil by the said oil refineries paying only 3% tariff rate for the said importation and 7%
tariff rate to be paid by businessmen who have no oil refineries in the Philippines but will
import finished petroleum/oil products which is being taxed with 7% tariff rates.

So, if only to help the many who are poor from further suffering as a result of unmitigated
increase in oil products due to deregulation, it is a must that the Downstream Oil Industry
Deregulation Act of 1996, or R.A. 8180 be repealed completely.

Various resolutions have also been filed in the Senate calling for an immediate and comprehensive
review of R.A. No. 8180 to prevent the downpour of its ill effects on the people. Thus, S. Res. No.
574 was filed by Senator Gloria M. Macapagal entitled Resolution "Directing the Committee on
Energy to Inquire Into The Proper Implementation of the Deregulation of the Downstream Oil
Industry and Oil Tax Restructuring As Mandated Under R.A. Nos. 8180 and 8184, In Order to Make
The Necessary Corrections In the Apparent Misinterpretation Of The Intent And Provision Of The
Laws And Curb The Rising Tide Of Disenchantment Among The Filipino Consumers And Bring
About The Real Intentions And Benefits Of The Said Law." Senator Blas P. Ople filed S. Res. No.
664 entitled resolution "Directing the Committee on Energy To Conduct An Inquiry In Aid Of
Legislation To Review The Government's Oil Deregulation Policy In Light Of The Successive
Increases In Transportation, Electricity And Power Rates, As well As Of Food And Other Prime
Commodities And Recommend Appropriate Amendments To Protect The Consuming Public."
Senator Ople observed:

xxx xxx xxx

WHEREAS, since the passage of R.A. No. 8180, the Energy Regulatory Board (ERB) has
imposed successive increases in oil prices which has triggered increases in electricity and
power rates, transportation fares, as well as in prices of food and other prime commodities to
the detriment of our people, particularly the poor;

WHEREAS, the new players that were expected to compete with the oil cartel-Shell, Caltex
and Petron-have not come in;

WHEREAS, it is imperative that a review of the oil deregulation policy be made to consider
appropriate amendments to the existing law such as an extension of the transition phase
before full deregulation in order to give the competitive market enough time to develop;

WHEREAS, the review can include the advisability of providing some incentives in order to
attract the entry of new oil companies to effect a dynamic competitive market;

WHEREAS, it may also be necessary to defer the setting up of the institutional framework for
full deregulation of the oil industry as mandated under Executive Order No. 377 issued by
President Ramos last October 31, 1996 . . .

Senator Alberto G. Romulo filed S. Res. No. 769 entitled resolution "Directing the Committees on
Energy and Public Services In Aid Of Legislation To Assess The Immediate Medium And Long Term
Impact of Oil Deregulation On Oil Prices And The Economy." Among the reasons for the resolution is
the finding that "the requirement of a 40-day stock inventory effectively limits the entry of other oil
firms in the market with the consequence that instead of going down oil prices will rise."

Parallel resolutions have been filed in the House of Representatives. Representative Dante

O. Tinga filed H. Res. No. 1311 "Directing The Committee on Energy To Conduct An Inquiry, In Aid
APEL FULL CASE

of Legislation, Into The Pricing Policies And Decisions Of The Oil Companies Since The
Implementation of Full Deregulation Under the Oil Deregulation Act (R.A. No. 8180) For the Purpose
of Determining In the Context Of The Oversight Functions Of Congress Whether The Conduct Of
The Oil Companies, Whether Singly Or Collectively, Constitutes Cartelization Which Is A Prohibited
Act Under R.A. No. 8180, And What Measures Should Be Taken To Help Ensure The Successful
Implementation Of The Law In Accordance With Its Letter And Spirit, Including Recommending
Criminal Prosecution Of the Officers Concerned Of the Oil Companies If Warranted By The
Evidence, And For Other Purposes." Representatives Marcial C. Punzalan, Jr. Dante O. Tinga and
Antonio E. Bengzon III filed H.R. No. 894 directing the House Committee on Energy to inquire into
the proper implementation of the deregulation of the downstream oil industry. House Resolution No.
1013 was also filed by Representatives Edcel C. Lagman, Enrique T . Garcia, Jr. and Joker
P. Arroyo urging the President to immediately suspend the implementation of E.O. No. 392.

In recent memory there is no law enacted by the legislature afflicted with so much constitutional
deformities as R.A. No. 8180. Yet, R.A. No. 8180 deals with oil, a commodity whose supply and
price affect the ebb and flow of the lifeblood of the nation. Its shortage of supply or a slight, upward
spiral in its price shakes our economic foundation. Studies show that the areas most impacted by the
movement of oil are food manufacture, land transport, trade, electricity and water.  At a time when
38

our economy is in a dangerous downspin, the perpetuation of R.A. No. 8180 threatens to multiply

the number of our people with bent backs and begging bowls. R.A. No. 8180 with its anti-
competition provisions cannot be allowed by this Court to stand even while Congress is working to
remedy its defects.

The Court, however, takes note of the plea of PETRON, SHELL and CALTEX to lift our restraining
order to enable them to adjust upward the price of petroleum and petroleum products in view of the
plummeting value of the peso. Their plea, however, will now have to be addressed to the Energy
Regulatory Board as the effect of the declaration of unconstitutionality of R.A. No. 8180 is to revive
the former laws it repealed.  The length of our return to the regime of regulation depends on
39

Congress which can fasttrack the writing of a new law on oil deregulation in accord with the
Constitution.

With this Decision, some circles will chide the Court for interfering with an economic decision of
Congress. Such criticism is charmless for the Court is annulling R.A. No. 8180 not because it
disagrees with deregulation as an economic policy but because as cobbled by Congress in its
present form, the law violates the Constitution. The right call therefor should be for Congress to write
a new oil deregulation law that conforms with the Constitution and not for this Court to shirk its duty
of striking down a law that offends the Constitution. Striking down R.A. No. 8180 may cost losses in
quantifiable terms to the oil oligopolists. But the loss in tolerating the tampering of our Constitution is
not quantifiable in pesos and centavos. More worthy of protection than the supra-normal profits of
private corporations is the sanctity of the fundamental principles of the Constitution. Indeed when
confronted by a law violating the Constitution, the Court has no option but to strike it down dead.
Lest it is missed, the Constitution is a covenant that grants and guarantees both the political
and economic rights of the people. The Constitution mandates this Court to be the guardian not only
of the people's political rights but their economic rights as well. The protection of the economic rights
of the poor and the powerless is of greater importance to them for they are concerned more with the
exoterics of living and less with the esoterics of liberty. Hence, for as long as the Constitution reigns
supreme so long will this Court be vigilant in upholding the economic rights of our people especially
from the onslaught of the powerful. Our defense of the people's economic rights may appear
heartless because it cannot be half-hearted.

IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared unconstitutional and E.O.
No. 372 void.
APEL FULL CASE

SO ORDERED.

3. Pelaez vs. The Auditor General, G.R. No. L-23825, December 24, 1965

TOPIC: Sufficiency of standards

G.R. No. L-23825      December 24, 1965

EMMANUEL PELAEZ, petitioner,
vs.
THE AUDITOR GENERAL, respondent.

Zulueta, Gonzales, Paculdo and Associates for petitioner.

Office of the Solicitor General for respondent.

CONCEPCION, J.:

During the period from September 4 to October 29, 1964 the President of the Philippines, purporting
to act pursuant to Section 68 of the Revised Administrative Code, issued Executive Orders Nos. 93
to 121, 124 and 126 to 129; creating thirty-three (33) municipalities enumerated in the margin. 1 Soon
after the date last mentioned, or on November 10, 1964 petitioner Emmanuel Pelaez, as Vice
President of the Philippines and as taxpayer, instituted the present special civil action, for a writ of
prohibition with preliminary injunction, against the Auditor General, to restrain him, as well as his
representatives and agents, from passing in audit any expenditure of public funds in implementation
of said executive orders and/or any disbursement by said municipalities.

Petitioner alleges that said executive orders are null and void, upon the ground that said Section 68
has been impliedly repealed by Republic Act No. 2370 and constitutes an undue delegation of
legislative power. Respondent maintains the contrary view and avers that the present action is
premature and that not all proper parties — referring to the officials of the new political subdivisions
in question — have been impleaded. Subsequently, the mayors of several municipalities adversely
affected by the aforementioned executive orders — because the latter have taken away from the
former the barrios composing the new political subdivisions — intervened in the case. Moreover,
Attorneys Enrique M. Fernando and Emma Quisumbing-Fernando were allowed to and did appear
as amici curiae.

The third paragraph of Section 3 of Republic Act No. 2370, reads:

Barrios shall not be created or their boundaries altered nor their names changed except
under the provisions of this Act or by Act of Congress.

Pursuant to the first two (2) paragraphs of the same Section 3:

All barrios existing at the time of the passage of this Act shall come under the provisions
hereof.
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Upon petition of a majority of the voters in the areas affected, a new barrio may be created or
the name of an existing one may be changed by the provincial board of the province, upon
recommendation of the council of the municipality or municipalities in which the proposed
barrio is stipulated. The recommendation of the municipal council shall be embodied in a
resolution approved by at least two-thirds of the entire membership of the said council:
Provided, however, That no new barrio may be created if its population is less than five
hundred persons.

Hence, since January 1, 1960, when Republic Act No. 2370 became effective, barrios may "not be
created or their boundaries altered nor their names changed" except by Act of Congress or of the
corresponding provincial board "upon petition of a majority of the voters in the areas affected" and
the "recommendation of the council of the municipality or municipalities in which the proposed barrio
is situated." Petitioner argues, accordingly: "If the President, under this new law, cannot even create
a barrio, can he create a municipality which is composed of several barrios, since barrios are units of
municipalities?"

Respondent answers in the affirmative, upon the theory that a new municipality can be created
without creating new barrios, such as, by placing old barrios under the jurisdiction of the new
municipality. This theory overlooks, however, the main import of the petitioner's argument, which is
that the statutory denial of the presidential authority to create a new barrio implies a negation of the
bigger power to create municipalities, each of which consists of several barrios. The cogency and
force of this argument is too obvious to be denied or even questioned. Founded upon logic and
experience, it cannot be offset except by a clear manifestation of the intent of Congress to the
contrary, and no such manifestation, subsequent to the passage of Republic Act No. 2379, has been
brought to our attention.

Moreover, section 68 of the Revised Administrative Code, upon which the disputed executive orders
are based, provides:

The (Governor-General) President of the Philippines may by executive order define the
boundary, or boundaries, of any province, subprovince, municipality, [township] municipal
district, or other political subdivision, and increase or diminish the territory comprised therein,
may divide any province into one or more subprovinces, separate any political division other
than a province, into such portions as may be required, merge any of such subdivisions or
portions with another, name any new subdivision so created, and may change the seat of
government within any subdivision to such place therein as the public welfare may require:
Provided, That the authorization of the (Philippine Legislature) Congress of the Philippines
shall first be obtained whenever the boundary of any province or subprovince is to be
defined or any province is to be divided into one or more subprovinces. When action by the
(Governor-General) President of the Philippines in accordance herewith makes necessary a
change of the territory under the jurisdiction of any administrative officer or any judicial
officer, the (Governor-General) President of the Philippines, with the recommendation and
advice of the head of the Department having executive control of such officer, shall redistrict
the territory of the several officers affected and assign such officers to the new districts so
formed.

Upon the changing of the limits of political divisions in pursuance of the foregoing authority,
an equitable distribution of the funds and obligations of the divisions thereby affected shall
be made in such manner as may be recommended by the (Insular Auditor) Auditor General
and approved by the (Governor-General) President of the Philippines.
APEL FULL CASE

Respondent alleges that the power of the President to create municipalities under this section does
not amount to an undue delegation of legislative power, relying upon Municipality of Cardona vs.
Municipality of Binañgonan (36 Phil. 547), which, he claims, has settled it. Such claim is untenable,
for said case involved, not the creation of a new municipality, but a mere transfer of territory — from
an already existing municipality (Cardona) to another municipality (Binañgonan), likewise, existing at
the time of and prior to said transfer (See Gov't of the P.I. ex rel. Municipality of Cardona vs.
Municipality, of Binañgonan [34 Phil. 518, 519-5201) — in consequence of the fixing and definition,
pursuant to Act No. 1748, of the common boundaries of two municipalities.

It is obvious, however, that, whereas the power to fix such common boundary, in order to avoid or
settle conflicts of jurisdiction between adjoining municipalities, may partake of
an administrative nature — involving, as it does, the adoption of means and ways to carry into
effect the law creating said municipalities — the authority to create municipal corporations is
essentially legislative in nature. In the language of other courts, it is "strictly a legislative function"
(State ex rel. Higgins vs. Aicklen, 119 S. 425, January 2, 1959) or "solely and exclusively the
exercise of legislative power" (Udall vs. Severn, May 29, 1938, 79 P. 2d 347-349). As the Supreme
Court of Washington has put it (Territory ex rel. Kelly vs. Stewart, February 13, 1890, 23 Pac. 405,
409), "municipal corporations are purely the creatures of statutes."

Although1a Congress may delegate to another branch of the Government the power to fill in the
details in the execution, enforcement or administration of a law, it is essential, to forestall a violation
of the principle of separation of powers, that said law: (a) be complete in itself — it must set forth
therein the policy to be executed, carried out or implemented by the delegate 2 — and (b) fix a
standard — the limits of which are sufficiently determinate or determinable — to which the delegate
must conform in the performance of his functions.2a Indeed, without a statutory declaration of policy,
the delegate would in effect, make or formulate such policy, which is the essence of every law; and,
without the aforementioned standard, there would be no means to determine, with reasonable
certainty, whether the delegate has acted within or beyond the scope of his authority. 2b Hence, he
could thereby arrogate upon himself the power, not only to make the law, but, also — and this is
worse — to unmake it, by adopting measures inconsistent with the end sought to be attained by the
Act of Congress, thus nullifying the principle of separation of powers and the system of checks and
balances, and, consequently, undermining the very foundation of our Republican system.

Section 68 of the Revised Administrative Code does not meet these well settled requirements for a
valid delegation of the power to fix the details in the enforcement of a law. It does not enunciate any
policy to be carried out or implemented by the President. Neither does it give a standard sufficiently
precise to avoid the evil effects above referred to. In this connection, we do not overlook the fact
that, under the last clause of the first sentence of Section 68, the President:

... may change the seat of the government within any subdivision to such place therein as
the public welfare may require.

It is apparent, however, from the language of this clause, that the phrase "as the public welfare may
require" qualified, not the clauses preceding the one just quoted, but only the place to which the seat
of the government may be transferred. This fact becomes more apparent when we consider that said
Section 68 was originally Section 1 of Act No. 1748, 3 which provided that, "whenever in the judgment
of the Governor-General the public welfare requires, he may, by executive order," effect the changes
enumerated therein (as in said section 68), including the change of the seat of the government "to
such place ... as the public interest requires." The opening statement of said Section 1 of Act No.
1748 — which was not included in Section 68 of the Revised Administrative Code — governed the
time at which, or the conditions under which, the powers therein conferred could be exercised;
APEL FULL CASE

whereas the last part of the first sentence of said section referred exclusively to the place to which
the seat of the government was to be transferred.

At any rate, the conclusion would be the same, insofar as the case at bar is concerned, even if we
assumed that the phrase "as the public welfare may require," in said Section 68, qualifies all other
clauses thereof. It is true that in Calalang vs. Williams (70 Phil. 726) and People vs. Rosenthal (68
Phil. 328), this Court had upheld "public welfare" and "public interest," respectively, as sufficient
standards for a valid delegation of the authority to execute the law. But, the doctrine laid down in
these cases — as all judicial pronouncements — must be construed in relation to the specific facts
and issues involved therein, outside of which they do not constitute precedents and have no binding
effect.4 The law construed in the Calalang case conferred upon the Director of Public Works, with the
approval of the Secretary of Public Works and Communications, the power to issue rules and
regulations to promote safe transit upon national roads and streets. Upon the other hand, the
Rosenthal case referred to the authority of the Insular Treasurer, under Act No. 2581, to issue and
cancel certificates or permits for the sale of speculative securities. Both cases involved grants
to administrative officers of powers related to the exercise of their administrative functions, calling for
the determination of questions of fact.

Such is not the nature of the powers dealt with in section 68. As above indicated, the creation of
municipalities, is not an administrative function, but one which is essentially and eminently
legislative in character. The question of whether or not "public interest" demands the exercise of
such power is not one of fact. it is "purely a legislative question "(Carolina-Virginia Coastal Highway
vs. Coastal Turnpike Authority, 74 S.E. 2d. 310-313, 315-318), or a political question (Udall vs.
Severn, 79 P. 2d. 347-349). As the Supreme Court of Wisconsin has aptly characterized it, "the
question as to whether incorporation is for the best interest of the community in any case is
emphatically a question of public policy and statecraft" (In re Village of North Milwaukee, 67 N.W.
1033, 1035-1037).

For this reason, courts of justice have annulled, as constituting undue delegation of legislative
powers, state laws granting the judicial department, the power to determine whether certain
territories should be annexed to a particular municipality (Udall vs. Severn, supra, 258-359); or
vesting in a Commission the right to determine the plan and frame of government of proposed
villages and what functions shall be exercised by the same, although the powers and functions of the
village are specifically limited by statute (In re Municipal Charters, 86 Atl. 307-308); or conferring
upon courts the authority to declare a given town or village incorporated, and designate its metes
and bounds, upon petition of a majority of the taxable inhabitants thereof, setting forth the area
desired to be included in such village (Territory ex rel Kelly vs. Stewart, 23 Pac. 405-409); or
authorizing the territory of a town, containing a given area and population, to be incorporated as a
town, on certain steps being taken by the inhabitants thereof and on certain determination by a court
and subsequent vote of the inhabitants in favor thereof, insofar as the court is allowed to determine
whether the lands embraced in the petition "ought justly" to be included in the village, and whether
the interest of the inhabitants will be promoted by such incorporation, and to enlarge and diminish
the boundaries of the proposed village "as justice may require" (In re Villages of North Milwaukee,
67 N.W. 1035-1037); or creating a Municipal Board of Control which shall determine whether or not
the laying out, construction or operation of a toll road is in the "public interest" and whether the
requirements of the law had been complied with, in which case the board shall enter an order
creating a municipal corporation and fixing the name of the same (Carolina-Virginia Coastal Highway
vs. Coastal Turnpike Authority, 74 S.E. 2d. 310).

Insofar as the validity of a delegation of power by Congress to the President is concerned, the case
of Schechter Poultry Corporation vs. U.S. (79 L. Ed. 1570) is quite relevant to the one at bar. The
Schechter case involved the constitutionality of Section 3 of the National Industrial Recovery Act
APEL FULL CASE

authorizing the President of the United States to approve "codes of fair competition" submitted to
him by one or more trade or industrial associations or corporations which "impose no inequitable
restrictions on admission to membership therein and are truly representative," provided that such
codes are not designed "to promote monopolies or to eliminate or oppress small enterprises and will
not operate to discriminate against them, and will tend to effectuate the policy" of said Act. The
Federal Supreme Court held:

To summarize and conclude upon this point: Sec. 3 of the Recovery Act is without
precedent. It supplies no standards for any trade, industry or activity. It does not undertake to
prescribe rules of conduct to be applied to particular states of fact determined by appropriate
administrative procedure. Instead of prescribing rules of conduct, it authorizes the making of
codes to prescribe them. For that legislative undertaking, Sec. 3 sets up no standards, aside
from the statement of the general aims of rehabilitation, correction and expansion described
in Sec. 1. In view of the scope of that broad declaration, and of the nature of the few
restrictions that are imposed, the discretion of the President in approving or prescribing
codes, and thus enacting laws for the government of trade and industry throughout the
country, is virtually unfettered. We think that the code making authority thus conferred is an
unconstitutional delegation of legislative power.

If the term "unfair competition" is so broad as to vest in the President a discretion that is "virtually
unfettered." and, consequently, tantamount to a delegation of legislative power, it is obvious that
"public welfare," which has even a broader connotation, leads to the same result. In fact, if the
validity of the delegation of powers made in Section 68 were upheld, there would no longer be any
legal impediment to a statutory grant of authority to the President to do anything which, in his
opinion, may be required by public welfare or public interest. Such grant of authority would be a
virtual abdication of the powers of Congress in favor of the Executive, and would bring about a total
collapse of the democratic system established by our Constitution, which it is the special duty and
privilege of this Court to uphold.

It may not be amiss to note that the executive orders in question were issued after the legislative
bills for the creation of the municipalities involved in this case had failed to pass Congress. A better
proof of the fact that the issuance of said executive orders entails the exercise of purely legislative
functions can hardly be given.

Again, Section 10 (1) of Article VII of our fundamental law ordains:

The President shall have control of all the executive departments, bureaus, or offices,
exercise general supervision over all local governments as may be provided by law, and take
care that the laws be faithfully executed.

The power of control under this provision implies the right of the President to interfere in the exercise
of such discretion as may be vested by law in the officers of the executive departments, bureaus, or
offices of the national government, as well as to act in lieu of such officers. This power is denied by
the Constitution to the Executive, insofar as local governments are concerned. With respect to the
latter, the fundamental law permits him to wield no more authority than that of checking whether said
local governments or the officers thereof perform their duties as provided by statutory enactments.
Hence, the President cannot interfere with local governments, so long as the same or its officers act
Within the scope of their authority. He may not enact an ordinance which the municipal council has
failed or refused to pass, even if it had thereby violated a duty imposed thereto by law, although he
may see to it that the corresponding provincial officials take appropriate disciplinary action therefor.
Neither may he vote, set aside or annul an ordinance passed by said council within the scope of its
jurisdiction, no matter how patently unwise it may be. He may not even suspend an elective official
APEL FULL CASE

of a regular municipality or take any disciplinary action against him, except on appeal from a
decision of the corresponding provincial board.5

Upon the other hand if the President could create a municipality, he could, in effect, remove any of
its officials, by creating a new municipality and including therein the barrio in which the official
concerned resides, for his office would thereby become vacant. 6 Thus, by merely brandishing the
power to create a new municipality (if he had it), without actually creating it, he could compel local
officials to submit to his dictation, thereby, in effect, exercising over them the power of control denied
to him by the Constitution.

Then, also, the power of control of the President over executive departments, bureaus or offices
implies no more than the authority to assume directly the functions thereof or to interfere in the
exercise of discretion by its officials. Manifestly, such control does not include the authority either to
abolish an executive department or bureau, or to create a new one. As a consequence, the alleged
power of the President to create municipal corporations would necessarily connote the exercise by
him of an authority even greater than that of control which he has over the executive departments,
bureaus or offices. In other words, Section 68 of the Revised Administrative Code does not merely
fail to comply with the constitutional mandate above quoted. Instead of giving the President less
power over local governments than that vested in him over the executive departments, bureaus or
offices, it reverses the process and does the exact opposite, by conferring upon him more power
over municipal corporations than that which he has over said executive departments, bureaus or
offices.

In short, even if it did entail an undue delegation of legislative powers, as it certainly does, said
Section 68, as part of the Revised Administrative Code, approved on March 10, 1917, must be
deemed repealed by the subsequent adoption of the Constitution, in 1935, which is utterly
incompatible and inconsistent with said statutory enactment. 7

There are only two (2) other points left for consideration, namely, respondent's claim (a) that "not all
the proper parties" — referring to the officers of the newly created municipalities — "have been
impleaded in this case," and (b) that "the present petition is premature."

As regards the first point, suffice it to say that the records do not show, and the parties do not claim,
that the officers of any of said municipalities have been appointed or elected and assumed office. At
any rate, the Solicitor General, who has appeared on behalf of respondent Auditor General, is the
officer authorized by law "to act and represent the Government of the Philippines, its offices and
agents, in any official investigation, proceeding or matter requiring the services of a lawyer" (Section
1661, Revised Administrative Code), and, in connection with the creation of the aforementioned
municipalities, which involves a political, not proprietary, function, said local officials, if any, are mere
agents or representatives of the national government. Their interest in the case at bar has,
accordingly, been, in effect, duly represented. 8

With respect to the second point, respondent alleges that he has not as yet acted on any of the
executive order & in question and has not intimated how he would act in connection therewith. It is,
however, a matter of common, public knowledge, subject to judicial cognizance, that the President
has, for many years, issued executive orders creating municipal corporations and that the same
have been organized and in actual operation, thus indicating, without peradventure of doubt, that the
expenditures incidental thereto have been sanctioned, approved or passed in audit by the General
Auditing Office and its officials. There is no reason to believe, therefore, that respondent would adopt
a different policy as regards the new municipalities involved in this case, in the absence of an
allegation to such effect, and none has been made by him.
APEL FULL CASE

WHEREFORE, the Executive Orders in question are hereby declared null and void ab initio and the
respondent permanently restrained from passing in audit any expenditure of public funds in
implementation of said Executive Orders or any disbursement by the municipalities above referred
to. It is so ordered.

QUASI-LEGISLATIVE POWER OR RULE-MAKING POWER

1.Abella, Jr. v. Civil Service Commission, 442 SCRA 507

G.R. No. 152574             November 17, 2004

FRANCISCO ABELLA JR., petitioner,

vs.
CIVIL SERVICE COMMISSION, respondent.

DECISION

PANGANIBAN, J.:

Both the appointing authority and the appointee are the real parties in interest, and both have legal
standing, in a suit assailing a Civil Service Commission (CSC) order disapproving an appointment.
Despite having legal interest and standing, herein petitioner unsuccessfully challenges the
constitutionality of the CSC circular that classifies certain positions in the career service of the
government. In sum, petitioner was appointed to a Career Executive Service (CES) position, but did
not have the corresponding eligibility for it; hence, the CSC correctly disapproved his appointment.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, challenging the November
1 

16, 2001 Decision and the March 8, 2002 Resolution of the Court of Appeals (CA) in CA-GR SP No.
2  3 

58987. The Assailed Decision disposed as follows:

"WHEREFORE, the petition for review is DENIED for lack of merit." 4

APEL FULL CASE

The challenged Resolution denied petitioner's Motion for Reconsideration.

The Facts

The CA narrates the factual antecedents in this wise:

"Petitioner Francisco A. Abella, Jr., a lawyer, retired from the Export Processing Zone
Authority (EPZA), now the Philippine Economic Zone Authority (PEZA), on July 1, 1996 as
Department Manager of the Legal Services Department. He held a civil service eligibility for
the position of Department Manager, having completed the training program for Executive
Leadership and Management in 1982 under the Civil Service Academy, pursuant to CSC
Resolution No. 850 dated April 16, 1979, which was then the required eligibility for said
position.

"It appears, however, that on May 31, 1994, the Civil Service Commission issued
Memorandum Circular No. 21, series of 1994, the pertinent provisions of which read:

'1. Positions Covered by the Career Executive Service

xxx    xxx    xxx

(b) In addition to the above identified positions and other positions of the same category
which had been previously classified and included in the CES, all other third level positions
of equivalent category in all branches and instrumentalities of the national government,
including government owned and controlled corporations with original charters are embraced
within the Career Executive Service provided that they meet the following criteria:

'1. the position is a career position;

'2. the position is above division chief level

'3. the duties and responsibilities of the position require the performance of executive
or managerial functions.

'4. Status of Appointment of Incumbents of Positions Included Under the Coverage of

the CES. Incumbents of positions which are declared to be Career Executive Service
positions for the first time pursuant to this Resolution who hold permanent
appointments thereto shall remain under permanent status in their respective
positions. However, upon promotion or transfer to other Career Executive Service
(CES) positions, these incumbents shall be under temporary status in said other CES
positions until they qualify.'

"Two years after his retirement, petitioner was hired by the Subic Bay Metropolitan Authority
(SBMA) on a contractual basis. On January 1, 1999, petitioner was issued by SBMA a
permanent employment as Department Manager III, Labor and Employment Center.
However, when said appointment was submitted to respondent Civil Service Commission
Regional Office No. III, it was disapproved on the ground that petitioner's eligibility was not
appropriate. Petitioner was advised by SBMA of the disapproval of his appointment. In view
thereof, petitioner was issued a temporary appointment as Department Manager III, Labor
and Employment Center, SBMA on July 9, 1999.
APEL FULL CASE

"Petitioner appealed the disapproval of his permanent appointment by respondent to the Civil
Service Commission, which issued Resolution No. 000059, dated January 10, 2000,
affirming the action taken by respondent. Petitioner's motion for reconsideration thereof was
denied by the CSC in Resolution No. 001143 dated May 11, 2000."

"x x x         x x x         x x x

"Undaunted, petitioner filed with [the CA] a petition for review seeking the reversal of the
CSC Resolutions dated January 10, 2000 and May 11, 2000 on the ground that CSC
Memorandum Circular No. 21, s. 1994 is unconstitutional as it rendered his earned civil
service eligibility ineffective or inappropriate for the position of Department Manager [III]" 5

Ruling of the Court of Appeals

The CA shunned the issue of constitutionality, arguing that a constitutional question should not be
passed upon if there are other grounds upon which the case may be decided. Citing CSC 6 

Memorandum Circular 40, s. 1998 and Mathay v. Civil Service Commission, the appellate court
7 

ruled that only the appointing officer may request reconsideration of the action taken by the CSC on
appointments. Thus, it held that petitioner did not have legal standing to question the disapproval of
his appointment. 8

On reconsideration, the CA added that petitioner was not the real party in interest, as his
appointment was dependent on the CSC's approval. Accordingly, he had no vested right in the
office, since his appointment was disapproved. 9

Unsatisfied, petitioner brought this recourse to this Court. 10

The Issues

Petitioner raises the following issues for our consideration:

"A. Whether or not Respondent Court committed grave abuse of discretion amounting to lack
of jurisdiction in ruling that petitioner lacks the personality to question the disapproval by
respondent office of petitioner's appointment as Department Manager III, Labor and
Employment Center, SBMA.

"B. Whether or not Respondent Court committed grave abuse of discretion amounting to lack
of jurisdiction in ruling that petitioner is not the real party in interest to question the
disapproval by respondent office of petitioner's appointment as Department Manager III,
Labor and Employment Center, SBMA.

"C. Whether or not Respondent Court committed grave abuse of discretion amounting to lack
of jurisdiction, in dismissing petitioner's appeal on a mere technicality considering that
petitioner is questioning the constitutionality of respondent office' issuance of Section 4 of
CSC Memorandum Circular No. 21, s. 1994, which deprived petitioner his property right
without due process of law." 11

The Court's Ruling

The Petition is partly meritorious.

APEL FULL CASE

First Issue:

Who May File Reconsideration or Appeal

Preliminary Observation

Petitioner imputes to the CA "grave abuse of discretion amounting to lack of jurisdiction" for ruling
that he had no legal standing to contest the disapproval of his appointment. Grave abuse of
12 

discretion is a ground for a petition for certiorari under Rule 65 of the Rules of Court. Nevertheless,
this Court resolved to grant due course to the Petition and to treat it appropriately as a petition for
review on certiorari under Rule 45 of the Rules of Court. The grounds shall be deemed "reversible
errors," not "grave abuse of discretion."

Approval Required for

Permanent Appointment

A permanent appointment in the career service is issued to a person who has met the requirements
of the position to which the appointment is made in accordance with the provisions of law, the rules
and the standards promulgated pursuant thereto. It implies the civil service eligibility of the
13 

appointee. Thus, while the appointing authority has the discretion to choose whom to appoint, the
14 

choice is subject to the caveat that the appointee possesses the required qualifications. 15

To make it fully effective, an appointment to a civil service position must comply with all legal
requirements. Thus, the law requires the appointment to be submitted to the CSC which will
16 

ascertain, in the main, whether the proposed appointee is qualified to hold the position and whether
the rules pertinent to the process of appointment were observed. The applicable provision of the
17 

Civil Service Law reads:

"SECTION 9. Powers and Functions of the Commission. — The Commission shall

administer the Civil Service and shall have the following powers and functions:

"x x x         x x x         x x x

"(h) Approve all appointments, whether original or promotional, to positions in the civil
service, except those of presidential appointees, members of the Armed Forces of the
Philippines, police forces, firemen, and jailguards, and disapprove those where the
appointees do not possess the appropriate eligibility or required qualifications. An
appointment shall take effect immediately upon issue by the appointing authority if the
appointee assumes his duties immediately and shall remain effective until it is disapproved
by the Commission, if this should take place, without prejudice to the liability of the
appointing authority for appointments issued in violation of existing laws or rules: Provided,
finally, That the Commission shall keep a record of appointments of all officers and
employees in the civil service. All appointments requiring the approval of the Commission as
herein provided, shall be submitted to it by the appointing authority within thirty days from
issuance, otherwise, the appointment becomes ineffective thirty days thereafter." 18

The appointing officer and the CSC acting together, though not concurrently but consecutively, make
an appointment complete. In acting on the appointment, the CSC determines whether the appointee
19 

possesses the appropriate civil service eligibility or the required qualifications. If the appointee does,
the appointment must be approved; if not, it should be disapproved. According to the appellate
20 

court, only the appointing authority had the right to challenge the CSC's disapproval. It relied on
APEL FULL CASE

Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 (Omnibus Rules on Appointment and
Other Personal Actions), which provides:

"Section 2. Request for Reconsideration of, or appeal from, the disapproval of an

appointment may be made by the appointing authority and submitted to the Commission
within fifteen (15) calendar days from receipt of the disapproved appointment."

Appointing Authority's Right to

Challenge CSC Disapproval

While petitioner does not challenge the legality of this provision, he now claims that it is merely a
technicality, which does not prevent him from requesting reconsideration.

We clarify. The power of appointment necessarily entails the exercise of judgment and
discretion. Luego v. Civil Service Commission declared:
21  22 

"Appointment is an essentially discretionary power and must be performed by the officer in

which it is vested according to his best lights, the only condition being that the appointee
should possess the qualifications required by law. If he does, then the appointment cannot
be faulted on the ground that there are others better qualified who should have been
preferred. This is a political question involving considerations of wisdom which only the
appointing authority can decide." 23

Significantly, "the selection of the appointee -- taking into account the totality of his qualifications,
including those abstract qualities that define his personality -- is the prerogative of the appointing
authority." No tribunal, not even this Court, may compel the exercise of an appointment for a
24  25 

favored person. 26

The CSC's disapproval of an appointment is a challenge to the exercise of the appointing authority's
discretion. The appointing authority must have the right to contest the disapproval. Thus, Section 2
of Rule VI of CSC Memorandum Circular 40, s. 1998 is justified insofar as it allows the appointing
authority to request reconsideration or appeal.

In Central Bank v. Civil Service Commission, this Court has affirmed that the appointing authority
27 

stands to be adversely affected when the CSC disapproves an appointment. Thus, the said authority
can "defend its appointment since it knows the reasons for the same." It is also the act of the
28 

appointing authority that is being questioned when an appointment is disapproved. 29

Appointee's Legal Standing to

Challenge the CSC Disapproval

While there is justification to allow the appointing authority to challenge the CSC disapproval, there
is none to preclude the appointee from taking the same course of action. Aggrieved parties,
including the Civil Service Commission, should be given the right to file motions for reconsideration
or to appeal. On this point, the concepts of "legal standing" and "real party in interest" become
30 

relevant.

Although commonly directed towards ensuring that only certain parties can maintain an action, "legal
standing" and "real party in interest" are different concepts. Kilosbayan v. Morato explained:
31 
APEL FULL CASE

"The difference between the rule on standing and real party-in-interest has been noted by
authorities thus: 'It is important to note . . . that standing because of its constitutional and
public policy underpinnings, is very different from questions relating to whether a particular
plaintiff is the real party-in-interest or has capacity to sue. Although all three requirements
are directed towards ensuring that only certain parties can maintain an action, standing
restrictions require a partial consideration of the merits, as well as broader policy concerns
relating to the proper role of the judiciary in certain areas. (FRIEDENTHAL, KANE AND
MILLER, CIVIL PROCEDURE 328 [1985])

"Standing is a special concern in constitutional law because in some cases suits are brought
not by parties who have been personally injured by the operation of a law or by official action
taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest.
Hence the question in standing is whether such parties have 'alleged such a personal stake
in the outcome of the controversy to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for illumination of difficult
constitutional questions.' (Baker v. Carr, 369 U.S. 186, 7 L. Ed. 2d 633 (1962))

"x x x         x x x         x x x

"On the other hand, the question as to 'real party-in-interest' is whether he is 'the party who
would be [benefited] or injured by the judgment, or the 'party entitled to the avails of the suit.'
(Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125, 131 [1951])" 32

If legal standing is granted to challenge the constitutionality or validity of a law or governmental act
despite the lack of personal injury on the challenger's part, then more so should petitioner be allowed
to contest the CSC Order disapproving his appointment. Clearly, he was prejudiced by the
disapproval, since he could not continue his office.

Although petitioner had no vested right to the position, it was his eligibility that was being
33 

questioned. Corollary to this point, he should be granted the opportunity to prove his eligibility. He
had a personal stake in the outcome of the case, which justifies his challenge to the CSC act that
denied his permanent appointment.

The Appointee a Real

Party in Interest

A real party in interest is one who would be benefited or injured by the judgment, or one entitled to
the avails of the suit. "Interest" within the meaning of the rule means material interest or an interest
34 

in issue and to be affected by the decree, as distinguished from mere interest in the question
involved or a mere incidental interest. Otherwise stated, the rule refers to a real or present
35 

substantial interest as distinguished from a mere expectancy; or from a future, contingent,

subordinate, or consequential interest. As a general rule, one who has no right or interest to protect
36 

cannot invoke the jurisdiction of the court as a party-plaintiff in an action. 37

Although the earlier discussion demonstrates that the appointing authority is adversely affected by
the CSC's Order and is a real party in interest, the appointee is rightly a real party in interest too. He
is also injured by the CSC disapproval, because he is prevented from assuming the office in a
permanent capacity. Moreover, he would necessarily benefit if a favorable judgment is obtained, as
an approved appointment would confer on him all the rights and privileges of a permanent
appointee.
APEL FULL CASE

Appointee Allowed
Procedural Relief

Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 should not be interpreted to restrict
solely to the appointing authority the right to move for a reconsideration of, or to appeal, the
disapproval of an appointment. PD 807 and EO 292, from which the CSC derives the authority to
promulgate its rules and regulations, are silent on whether appointees have a similar right to file
motions for reconsideration of, or appeals from, unfavorable decisions involving appointments.
Indeed, there is no legislative intent to bar appointees from challenging the CSC's disapproval.

The view that only the appointing authority may request reconsideration or appeal is too narrow. The
appointee should have the same right. Parenthetically, CSC Resolution 99-1936 recognizes the
38 

right of the adversely affected party to appeal to the CSC Regional Offices prior to elevating a matter
to the CSC Central Office. The adversely affected party necessarily includes the appointee.
39 

This judicial pronouncement does not override Mathay v. Civil Service Commission, which the CA
40 

relied on. The Court merely noted in passing -- by way of obiter -- that based on a similar
provision, only the appointing officer could request reconsideration of actions taken by the CSC on
41 

appointments.

In that case, Quezon City Mayor Ismael A. Mathay Jr. sought the nullification of CSC Resolutions
that recalled his appointment of a city government officer. He filed a Petition assailing the CA
Decision, which had previously denied his Petition for Certiorari for being the wrong remedy and for
being filed out of time. We observed then that the CSC Resolutions were already final and could no
longer be elevated to the CA. Furthermore, Mathay's Petition for Certiorari filed with the CA was
42 

improper, because there was an available remedy of appeal. And the CSC could not have acted
without jurisdiction, considering that it was empowered to recall an appointment initially approved.43

The right of the appointee to seek reconsideration or appeal was not the main issue in Mathay. At
any rate, the present case is being decided en banc, and the ruling may reverse previous doctrines
laid down by this Court.44

Second Issue:

Constitutionality of Section 4, CSC Memorandum Circular 21, Series of 1994

Alleging that his civil service eligibility was rendered ineffective and that he was consequently
deprived of a property right without due process, petitioner challenges the constitutionality of CSC
45 

Memorandum Circular 21, s. 1994. The pertinent part of this Circular reads:
46 

"1. Positions Covered by the Career Executive Service.

"(a) The Career Executive Service includes the positions of Undersecretary,

Assistant Secretary, Bureau Director, Assistant Bureau Director, Regional Director
(department-wide and bureau-wide), Assistant Regional Director (department-wide
and bureau-wide) and Chief of Department Service[.]

"(b) In addition to the above identified positions and other positions of the same
category which had been previously classified and included in the CES, all other third
level positions in all branches and instrumentalities of the national government,
including government-owned or controlled corporations with original charters are
APEL FULL CASE

embraced within the Career Executive Service provided that they meet the following
criteria:

"1. the position is a career position;

"2. the position is above division chief level;

"3. the duties and responsibilities of the position require the performance of
executive or managerial functions."

xxx    xxx    xxx

"4. Status of Appointment of Incumbents of Positions Under the Coverage of the CES.
Incumbents of positions which are declared to be Career Executive Service positions for the
first time pursuant to this Resolution who hold permanent appointments thereto shall remain
under permanent status in their respective positions. However, upon promotion or transfer to
other Career Executive Service (CES) positions, these incumbents shall be under temporary
status in said other CES positions until they qualify."

Petitioner argues that his eligibility, through the Executive Leadership and Management (ELM)
training program, could no longer be affected by a new eligibility requirement. He claims that he was
eligible for his previous position as department manager of the Legal Services Department, PEZA;
hence, he should retain his eligibility for the position of department manager III, Labor and
Employment Center, SBMA, notwithstanding the classification of the latter as a CES position.

CSC Authorized to Issue

Rules and Regulations

The Constitution mandates that, as "the central personnel agency of the government," the CSC47 

should "establish a career service and adopt measures to promote the morale, efficiency, integrity,
responsiveness, progressiveness, and courtesy in the Civil Service." It further requires that
48 

appointments in the civil service be made only through merit and fitness to be determined by
competitive examination. Civil Service laws have expressly empowered the CSC to issue and
49 

enforce rules and regulations to carry out its mandate.

In the exercise of its authority, the CSC deemed it appropriate to clearly define and identify positions
covered by the Career Executive Service. Logically, the CSC had to issue guidelines to meet this
50 

objective, specifically through the issuance of the challenged Circular.

Career Service
Classified by Levels

Positions in the career service, for which appointments require examinations, are grouped into three
major levels:

"(a) The first level shall include clerical, trades, crafts, and custodial service positions which
involve non-professional or sub[-]professional work in a non-supervisory or supervisory
capacity requiring less than four years of collegiate studies;
APEL FULL CASE

"(b) The second level shall include professional, technical, and scientific positions which
involve professional, technical, or scientific work in a non-supervisory or supervisory capacity
requiring at least four years of college work up to Division Chief level; and

"(c) The third level shall cover positions in the Career Executive Service." 51

Entrance to the different levels requires the corresponding civil service eligibility. Those in the third
level (CES positions) require Career Service Executive Eligibility (CSEE) as a requirement for
permanent appointment. 52

The challenged Circular did not revoke petitioner's ELM eligibility. He was appointed to a CES
position; however, his eligibility was inadequate. Eligibility must necessarily conform to the
requirements of the position, which in petitioner's case was a CSEE.

Rights Protected

The challenged Circular protects the rights of incumbents as long as they remain in the positions to
which they were previously appointed. They are allowed to retain their positions in a permanent
capacity, notwithstanding the lack of CSEE. Clearly, the Circular recognizes the rule of prospectivity
of regulations; hence, there is no basis to argue that it is an ex post facto law or a bill of
53  54 

attainder. These terms, which have settled meanings in criminal jurisprudence, are clearly
55 

inapplicable here.

The government service of petitioner ended when he retired in 1996; thus, his right to remain in a
CES position, notwithstanding his lack of eligibility, also ceased. Upon his reemployment years later
56 

as department manager III at SBMA in 2001, it was necessary for him to comply with the eligibility
prescribed at the time for that position.

Security of Tenure
Not Impaired

The argument of petitioner that his security of tenure is impaired is unconvincing. First, security of
tenure in the Career Executive Service -- except in the case of first and second level employees in
the civil service -- pertains only to rank, not to the position to which the employee may be
appointed. Second, petitioner had neither rank nor position prior to his reemployment. One cannot
57 

claim security of tenure if one held no tenure prior to appointment.

Due Process
Not Violated

Petitioner contends that his due process rights, as enunciated in Ang Tibay v. Court of
Appeals, were violated. We are not convinced. He points in particular to the CSC's alleged failure to
58  59 

notify him of a hearing relating to the issuance of the challenged Circular.

The classification of positions in career service was a quasi-legislative, not a quasi-judicial, issuance.
This distinction determines whether prior notice and hearing are necessary.

In exercising its quasi-judicial function, an administrative body adjudicates the rights of persons
before it, in accordance with the standards laid down by the law. The determination of facts and the
60 

applicable law, as basis for official action and the exercise of judicial discretion, are essential for the
performance of this function. On these considerations, it is elementary that due process
61 
APEL FULL CASE

requirements, as enumerated in Ang Tibay, must be observed. These requirements include prior
notice and hearing.62

On the other hand, quasi-legislative power is exercised by administrative agencies through the
promulgation of rules and regulations within the confines of the granting statute and the doctrine of
non-delegation of certain powers flowing from the separation of the great branches of the
government. Prior notice to and hearing of every affected party, as elements of due process, are not
63 

required since there is no determination of past events or facts that have to be established or
ascertained. As a general rule, prior notice and hearing are not essential to the validity of rules or
regulations promulgated to govern future conduct. 64

Significantly, the challenged Circular was an internal matter addressed to heads of departments,
bureaus and agencies. It needed no prior publication, since it had been issued as an incident of the
administrative body's power to issue guidelines for government officials to follow in performing their
duties.
65

Final Issue:

Disapproval of Appointment

Since petitioner had no CES eligibility, the CSC correctly denied his permanent appointment. The
appointee need not have been previously heard, because the nature of the action did not involve the
imposition of an administrative disciplinary measure. The CSC, in approving or disapproving an
66 

appointment, merely examines the conformity of the appointment with the law and the appointee's
possession of all the minimum qualifications and none of the disqualification.67

In sum, while petitioner was able to demonstrate his standing to appeal the CSC Resolutions to the
courts, he failed to prove his eligibility to the position he was appointed to.

WHEREFORE, the Petition is GRANTED insofar as it seeks legal standing for petitioner, but
DENIED insofar as it prays for the reversal of the CSC Resolutions disapproving his appointment as
department manager III of the Labor and Employment Center, Subic Bay Metropolitan Authority.
Costs against petitioner.

SO ORDERED.

2. Smart Communication v. NTC 408 SCRA 678

TOPIC: Quasi-legislative and quasi-judicial powers distinguished

G.R. No. 151908            August 12, 2003

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION

(PILTEL), petitioners,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent.
APEL FULL CASE

x---------------------------------------------------------x

G.R. No. 152063 August 12, 2003

GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC.

(ISLACOM), petitioners,
vs.
COURT OF APPEALS (The Former 6th Division) and the NATIONAL TELECOMMUNICATIONS
COMMISSION, respondents.

YNARES-SANTIAGO, J.:

Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission
(NTC) issued on June 16, 2000 Memorandum Circular No. 13-6-2000, promulgating rules and
regulations on the billing of telecommunications services. Among its pertinent provisions are the
following:

(1) The billing statements shall be received by the subscriber of the telephone service not
later than 30 days from the end of each billing cycle. In case the statement is received
beyond this period, the subscriber shall have a specified grace period within which to pay the
bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the
service within the grace period.

(2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt,
recorded message or similar facility excluding the customer's own equipment.

(3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards.
Prepaid call cards and SIM cards shall be valid for at least 2 years from the date of first use.
Holders of prepaid SIM cards shall be given 45 days from the date the prepaid SIM card is
fully consumed but not beyond 2 years and 45 days from date of first use to replenish the
SIM card, otherwise the SIM card shall be rendered invalid. The validity of an invalid SIM
card, however, shall be installed upon request of the customer at no additional charge
except the presentation of a valid prepaid call card.

(4) Subscribers shall be updated of the remaining value of their cards before the start of
every call using the cards.

(5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid
shall be reduced from 1 minute per pulse to 6 seconds per pulse. The authorized rates per
minute shall thus be divided by 10.1

The Memorandum Circular provided that it shall take effect 15 days after its publication in a
newspaper of general circulation and three certified true copies thereof furnished the UP Law
Center. It was published in the newspaper, The Philippine Star, on June 22, 2000. 2 Meanwhile, the
provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit
of billing for cellular mobile telephone service took effect 90 days from the effectivity of the
Memorandum Circular.

On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service
(CMTS) operators which contained measures to minimize if not totally eliminate the incidence of
stealing of cellular phone units. The Memorandum directed CMTS operators to:
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a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and
verification of the identity and addresses of prepaid SIM card customers;

b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC
13-6-2000;

c. deny acceptance to your respective networks prepaid and/or postpaid customers using
stolen cellphone units or cellphone units registered to somebody other than the applicant
when properly informed of all information relative to the stolen cellphone units;

d. share all necessary information of stolen cellphone units to all other CMTS operators in
order to prevent the use of stolen cellphone units; and

e. require all your existing prepaid SIM card customers to register and present valid
identification cards.3

This was followed by another Memorandum dated October 6, 2000 addressed to all public
telecommunications entities, which reads:

This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and
beyond shall be valid for at least two (2) years from date of first use pursuant to MC 13-6-
2000.

In addition, all CMTS operators are reminded that all SIM packs used by subscribers of
prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years
from date of first use. Also, the billing unit shall be on a six (6) seconds pulse effective 07
October 2000.

For strict compliance.4

On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation
filed against the National Telecommunications Commission, Commissioner Joseph A. Santiago,
Deputy Commissioner Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for
declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing Circular) and the NTC
Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction
and temporary restraining order. The complaint was docketed as Civil Case No. Q-00-42221 at the
Regional Trial Court of Quezon City, Branch 77.5

Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale
of consumer goods such as the prepaid call cards since such jurisdiction belongs to the Department
of Trade and Industry under the Consumer Act of the Philippines; that the Billing Circular is
oppressive, confiscatory and violative of the constitutional prohibition against deprivation of property
without due process of law; that the Circular will result in the impairment of the viability of the prepaid
cellular service by unduly prolonging the validity and expiration of the prepaid SIM and call cards;
and that the requirements of identification of prepaid card buyers and call balance announcement
are unreasonable. Hence, they prayed that the Billing Circular be declared null and void ab initio.

Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion
for Leave to Intervene and to Admit Complaint-in-Intervention. 6 This was granted by the trial court.
APEL FULL CASE

On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from
implementing Memorandum Circular No. 13-6-2000 and the Memorandum dated October 6, 2000. 7

In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the
ground of petitioners' failure to exhaust administrative remedies.

Subsequently, after hearing petitioners' application for preliminary injunction as well as respondent's
motion to dismiss, the trial court issued on November 20, 2000 an Order, the dispositive portion of
which reads:

WHEREFORE, premises considered, the defendants' motion to dismiss is hereby denied for
lack of merit. The plaintiffs' application for the issuance of a writ of preliminary injunction is
hereby granted. Accordingly, the defendants are hereby enjoined from implementing NTC
Memorandum Circular 13-6-2000 and the NTC Memorandum, dated October 6, 2000,
pending the issuance and finality of the decision in this case. The plaintiffs and intervenors
are, however, required to file a bond in the sum of FIVE HUNDRED THOUSAND PESOS
(P500,000.00), Philippine currency.

SO ORDERED.8

Defendants filed a motion for reconsideration, which was denied in an Order dated February 1,
2001.9

Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of
Appeals, which was docketed as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was
rendered, the decretal portion of which reads:

WHEREFORE, premises considered, the instant petition for certiorari and prohibition is
GRANTED, in that, the order of the court a quo denying the petitioner's motion to dismiss as
well as the order of the court a quo granting the private respondents' prayer for a writ of
preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby
ANNULLED and SET ASIDE. The private respondents' complaint and complaint-in-
intervention below are hereby DISMISSED, without prejudice to the referral of the private
respondents' grievances and disputes on the assailed issuances of the NTC with the said
agency.

SO ORDERED.10

Petitioners' motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack
of merit.11

Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No.
151908, anchored on the following grounds:

A.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE

NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE REGULAR
COURTS HAS JURISDICTION OVER THE CASE.

B.
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THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT

THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE
REMEDY.

C.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING
CIRCULAR ISSUED BY THE RESPONDENT NTC IS UNCONSTITUTIONAL AND
CONTRARY TO LAW AND PUBLIC POLICY.

D.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE

RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION.12

Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the
following errors:

1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE

DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE
REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR LEGAL NULLIFICATION
(BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY
ADMINISTRATIVE REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE
OF ITS RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW.

2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE

DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY
WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS.

3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE

DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY
WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE, WHEN
THERE IS NO OTHER REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE
AND IRREPARABLE INJURY.

4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE

PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE REMEDIES AVAILABLE TO
THEM.

5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS

QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR
RIGHT TO AN INJUNCTION.13

The two petitions were consolidated in a Resolution dated February 17, 2003. 14

On March 24, 2003, the petitions were given due course and the parties were required to submit
their respective memoranda.15

We find merit in the petitions.

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Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or

administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make
rules and regulations which results in delegated legislation that is within the confines of the granting
statute and the doctrine of non-delegability and separability of powers. 16

The rules and regulations that administrative agencies promulgate, which are the product of a
delegated legislative power to create new and additional legal provisions that have the effect of law,
should be within the scope of the statutory authority granted by the legislature to the administrative
agency. It is required that the regulation be germane to the objects and purposes of the law, and be
not in contradiction to, but in conformity with, the standards prescribed by law. 17 They must conform
to and be consistent with the provisions of the enabling statute in order for such rule or regulation to
be valid. Constitutional and statutory provisions control with respect to what rules and regulations
may be promulgated by an administrative body, as well as with respect to what fields are subject to
regulation by it. It may not make rules and regulations which are inconsistent with the provisions of
the Constitution or a statute, particularly the statute it is administering or which created it, or which
are in derogation of, or defeat, the purpose of a statute. In case of conflict between a statute and an
administrative order, the former must prevail.18

Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its
quasi-judicial or administrative adjudicatory power. This is the power to hear and determine
questions of fact to which the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the same law. The administrative
body exercises its quasi-judicial power when it performs in a judicial manner an act which is
essentially of an executive or administrative nature, where the power to act in such manner is
incidental to or reasonably necessary for the performance of the executive or administrative duty
entrusted to it. In carrying out their quasi-judicial functions, the administrative officers or bodies are
required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and
draw conclusions from them as basis for their official action and exercise of discretion in a judicial
nature.19

In questioning the validity or constitutionality of a rule or regulation issued by an administrative

agency, a party need not exhaust administrative remedies before going to court. This principle
applies only where the act of the administrative agency concerned was performed pursuant to its
quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative
power. In Association of Philippine Coconut Dessicators v. Philippine Coconut Authority,20 it was
held:

The rule of requiring exhaustion of administrative remedies before a party may seek judicial review,
so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application
here. The resolution in question was issued by the PCA in the exercise of its rule- making or
legislative power. However, only judicial review of decisions of administrative agencies made in the
exercise of their quasi-judicial function is subject to the exhaustion doctrine.

Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this
case, the records reveal that petitioners sufficiently complied with this requirement. Even during the
drafting and deliberation stages leading to the issuance of Memorandum Circular No. 13-6-2000,
petitioners were able to register their protests to the proposed billing guidelines. They submitted their
respective position papers setting forth their objections and submitting proposed schemes for the
billing circular.21 After the same was issued, petitioners wrote successive letters dated July 3,
200022 and July 5, 2000,23 asking for the suspension and reconsideration of the so-called Billing
Circular. These letters were not acted upon until October 6, 2000, when respondent NTC issued the
second assailed Memorandum implementing certain provisions of the Billing Circular. This was
APEL FULL CASE

taken by petitioners as a clear denial of the requests contained in their previous letters, thus
prompting them to seek judicial relief.

In like manner, the doctrine of primary jurisdiction applies only where the administrative agency
exercises its quasi-judicial or adjudicatory function. Thus, in cases involving specialized disputes, the
practice has been to refer the same to an administrative agency of special competence pursuant to
the doctrine of primary jurisdiction. The courts will not determine a controversy involving a question
which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by
the administrative tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience and services of the administrative tribunal to
determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with
the premises of the regulatory statute administered. The objective of the doctrine of primary
jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction
until after an administrative agency has determined some question or some aspect of some question
arising in the proceeding before the court. It applies where the 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, has 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.24

However, where what is assailed is the validity or constitutionality of a rule or regulation issued by
the administrative agency in the performance of its quasi-legislative function, the regular courts have
jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules
issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of
the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare
a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance,
or regulation in the courts, including the regional trial courts.25 This is within the scope of judicial
power, which includes the authority of the courts to determine in an appropriate action the validity of
the acts of the political departments. 26 Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government. 27

In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its
Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-making power. As
such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the
constitutionality and validity of the said issuances. In Drilon v. Lim,28 it was held:

We stress at the outset that the lower court had jurisdiction to consider the constitutionality of
Section 187, this authority being embraced in the general definition of the judicial power to
determine what are the valid and binding laws by the criterion of their conformity to the
fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all
civil cases in which the subject of the litigation is incapable of pecuniary estimation, even as
the accused in a criminal action has the right to question in his defense the constitutionality
of a law he is charged with violating and of the proceedings taken against him, particularly as
they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests
in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in
all cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or
regulation is in question.29
APEL FULL CASE

In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened
Civil Code provisions on sales and violated the constitutional prohibition against the deprivation of
property without due process of law. These are within the competence of the trial judge. Contrary to
the finding of the Court of Appeals, the issues raised in the complaint do not entail highly technical
matters. Rather, what is required of the judge who will resolve this issue is a basic familiarity with the
workings of the cellular telephone service, including prepaid SIM and call cards – and this is
judicially known to be within the knowledge of a good percentage of our population – and expertise
in fundamental principles of civil law and the Constitution.

Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-00-42221. The
Court of Appeals erred in setting aside the orders of the trial court and in dismissing the case.

WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of
the Court of Appeals in CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution dated
January 10, 2002 are REVERSED and SET ASIDE. The Order dated November 20, 2000 of the
Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This
case is REMANDED to the court a quo for continuation of the proceedings.

SO ORDERED.

3. Eastern Shipping Lines, Inc. vs. CA G.R. No. 116356 June 29, 1998

TOPIC: Nature of quasi-legislative power

G.R. No. 116356. June 29, 1998

EASTERN SHIPPING LINES, INC., Petitioner, vs.  COURT OF

APPEALS and DAVAO PILOTS ASSOCIATION, Respondents.

DECISION

PANGANIBAN, J.

In Philippine Interisland Shipping Association of the

Philippines vs. Court of Appeals,1 the Court, en banc, ruled
that Executive Order 10882 was not unconstitutional. We
adhere to said ruling in this case.
The Case

This is a petition for certiorari under Rule 45, assailing the

Decision3 of the Court of Appeals4 in CA-GR CV No. 34487
APEL FULL CASE

promulgated on July 18, 1994, the dispositive portion of

which reads:

WHEREFORE, finding no reversible error in the decision

appealed from, the same is hereby AFFIRMED in toto.
With costs against defendant-appellant.

The Decision affirmed by Respondent Court disposed as

follows:

WHEREFORE, judgment is rendered directing the defendant:

1. To pay plaintiff the sum of P602,710.04 with

legal rate of interest commencing from the
filing of the complaint representing unpaid
pilotage fees;
2. To pay attorneys fees in the sum of P50,000.00;
3. And costs.
SO ORDERED.

Hence, this appeal.5

The Facts

As found by the trial court, these are the undisputed facts:

On September 25, 1989, plaintiff [herein private

respondent] elevated a complaint against defendant
[herein petitioner] for sum of money and attorneys
fees alleging that plaintiff had rendered pilotage
services to defendant between January 14, 1987 to
July 22, 1989 with total unpaid fees of P703,290.18.
Despite repeated demands, defendant failed to pay and
prays that the latter be directed to pay P703,290.18
with legal rate of interest from the filing of the
complaint; attorneys fees equivalent to 25% of the
principal obligation and such other relief.
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On November 18, 1989 defendant answered vigorously

disputing the claims of plaintiff. It assailed the
constitutionality of the Executive Order 1088 upon
which plaintiff bases its claims; alleged that there is a
pending case before the Court of Appeals elevated by
the United Harbor Pilots Association of the Philippines
of which plaintiff is a member[;] whereas defendant is
a member of the Chamber of Maritime Industries of the
Philippine[s] which is an Intervenor in CA-G.R. SP No.
18072; that there therefore is lis pendens by Section 1
(e), Rule 16 of the Rules; that the subject of the
complaint falls within the scope and authority of the
Philippine Ports Authority by virtue of PD No. 857
dated December 23, 1975; that Executive Order No.
1088 is an unwarranted repeal or modification of the
Philippine Ports Authority Charter; that the fees
charged by plaintiff are arbitrary and confiscatory; and
the basis of the Executive Order 1088 is offensive,
sourced from Amendment No. 6 of the 1973
Constitution and rendered inoperative by the Freedom
Constitution of March 25, 1986 and the present
Constitution; and that the only agency vested by law to
prescribe such rates, charges or fees for services
rendered by any private organization like the plaintiff
within a Port District is governed by Section 20 of PD
857. As regular patron of plaintiff, defendant has never
been remiss in paying plaintiffs claim for pilotage fees
and the present complaint under the foregoing
circumstances is without legal foundation. Defendant
prays that plaintiff be advised to await the final
outcome of the identical issues already elevated to and
pending before the Court of Appeals as CA-G.R. SP No.
18072. Defendant prays for an award of damages,
attorneys fees, litigation expense and costs.
At the Pre-Trial Conference, the only issue raised by
plaintiff is whether the defendant is liable to the
plaintiff for the money claims alleged in the complaint.

The defendant on the other hand raised the following issues:

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1. Whether or not Executive Order 1088 is

constitutional;
2. Whether or not Executive Order 1088 is illegal;
3. Whether or not the plaintiff may motu
proprio and independently of the Public
Estates Authority enforce Executive Order
1088 and collect the pilotage fees prescribed
thereunder;
4. Assuming Executive Order 1088 is
constitutional, valid and self-executory,
whether or not the defendant is liable; and if
so, to what extent and for what particular
items; and
5. Whether or not the plaintiff is liable under the
counterclaims (p. 102, Expediente).
On September 5, 1990, plaintiff presented witness
Capt. Felix N. Galope, in the course of which testimony
identified among others EXHIBITS B to E-2 and J to to
I-2 consisting of documents related to the collection of
the unpaid pilotage fees; basis for such computations;
Statement of Accounts; demand letter and official
recipients of payment made.
On September 6, 1990, Simplicio Barao, plaintiffs
Billing Clerk testified among others on the records of
plaintiffs Captains Certificate/Pilotage Chits and
Bills/Statements of Accounts on the claims against
defendant (EXHIBITS G to H-48-A) and the details of
the outstanding accounts in favor of plaintiff. The
records show defendant raised no objection thereto
and by virtue of which all of plaintiffs documentary
exhibits were admitted. (Order dated January 14,
1991, p. 277 Expediente).
On March 14, 1991, defendant presented Celso
Occidental, employee of defendant shipping company,
in the course of which testimony submitted EXHIBITS
1 to 1-D which is plaintiffs Billing Rate, both old and
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new with a payment of P79,585.64; and 2 to 2-G

representing plane ticket paid for by defendant for
transportation expenses of its counsel and cost of
stenographic transcripts.
Defendants last witness, Capt. Jose Dubouzet, Jr. and a
Harbor Pilot was briefly presented.6 cräläwvirtualibräry

After due trial, the trial court rendered its ruling, viz.:

Plaintiffs evidence as to the unpaid pilotage services due from

defendant duly supported by voluminous documentary
exhibits has not been refuted nor rebutted by defendant. On
the contrary, when plaintiffs documentary exhibits were
formally offered, defendant did not raise any objection
thereby leaving the documents unchallenged and undisputed.
Upon the other hand, while the records show that defendant
raised no less than five (5) issues the evidence fails to show
any proof to sustain defendants posture. On the contrary,
neither of defendants two witnesses appear to have even
grazed the outer peripheries of what could have been
interesting issues with far-reaching consequences if
resolved.7cräläwvirtualibräry

The factual antecedents of the controversy are simple. Petitioner

insists on paying pilotage fees prescribed under PPA circulars.
Because EO 1088 sets a higher rate, petitioner now assails its
constitutionality.
Public Respondents Ruling

As stated earlier, Respondent Court of Appeals affirmed the trial

courts decision. Respondent Court pointed out that petitioner,
during the pre-trial, limited the issues to whether: (1) EO 1088 is
unconstitutional; (2) EO 1088 is illegal; (3) private respondent itself
may enforce and collect fees under EO 1088; and (4) petitioner is
liable and, if EO 1088 is legal, to what extent. It then affirmed the
factual findings and conclusion of the trial court that petitioner
fail[ed] to show any proof to support its position. Parenthetically,
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Respondent Court also noted two other cases decided by the Court
of Appeals, upholding the constitutionality of EO 1088.8
The Issue

In sum, petitioner raises this main issue: whether Executive Order

1088 is unconstitutional.9
The Courts Ruling

The petition is unmeritorious.

EO 1088 Is Valid

Petitioner contends that EO 108810 is unconstitutional, because (1)

its interpretation and application are left to private respondent, a
private person,11 and (2) it constitutes an undue delegation of
powers. Petitioner insists that it should pay pilotage fees in
accordance with and on the basis of the memorandum circulars
issued by the PPA, the administrative body vested under PD
85712 with the power to regulate and prescribe pilotage fees. In
assailing the constitutionality of EO 1088, the petitioner repeatedly
asks: Is the private respondent vested with power to interpret
Executive Order No. 1088?13 cräläwvirtualibräry

The Court is not persuaded. The pertinent provisions of EO 1088

read:

SECTION 1. The following shall be the rate of pilotage fees or

charges based on tonnage for services rendered to both
foreign and coastwise vessels:
For Foreign Vessels Rate in US$ &/or its

Peso Equivalent

Less than 500GT $ 30.00

500GT to 2,500GT 43.33
2,500GT to 5,000GT 71.33
5,000GT to 10,000GT 133.67
10,000GT to 15,000GT 181.67
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15,000GT to 20,000GT 247.00

20,000GT to 30,000GT 300.00
30,000GT to 40,000GT 416.67
40,000GT to 60,000GT 483.33
60,000GT to 80,000GT 550.00
80,000GT to 100,000GT 616.67
100,000GT to 120,000GT 666.67
120,000GT to 130,000GT 716.67

130,000GT to 140,000GT 766.67

Over 140,000 gross tonnage $0.05 or its peso equivalent

every excess tonnage. Rate for docking and undocking
anchorage, conduction and shifting other related special
services is equal to 100%. Pilotage services shall be
compulsory in government and private wharves or piers.

For Coastwise Vessels Regular

100 and under 500 gross tons P 41.70

500 and under 600 gross tons 55.60
600 and under 1,000 gross tons 69.60
1,000 and under 3,000 gross tons 139.20
3,000 and under 5,000 gross tons 300.00
5,000 and over gross tons
SEC. 2. With respect to foreign vessels, payment of pilotage
services shall be made in dollars or in pesos at the prevailing
exchange rate.
SEC. 3. All orders, letters of instructions, rules, regulations
and other issuances inconsistent with this Executive Order
are hereby repealed or amended accordingly.
SEC. 4. This Executive Order shall take effect immediately.

In Philippine Interisland Shipping Association of the Philippines vs.

Court of Appeals,14 the Supreme Court, through Mr. Justice Vicente
V. Mendoza, upheld the validity and constitutionality of Executive
Order 1088 in no uncertain terms. We aptly iterate our
pronouncement in said case, viz.:
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It is not an answer to say that E.O. No. 1088 should not be

considered a statute because that would imply the withdrawal
of power from the PPA. What determines whether an act is a
law or an administrative issuance is not its form but its
nature. Here as we have already said, the power to fix the
rates of charges for services, including pilotage service, has
always been regarded as legislative in character.
xxx
It is worthy to note that E.O. NO. 1088 provides for adjusted
pilotage service rates without withdrawing the power of the
PPA to impose, prescribe, increase or decrease rates, charges
or fees. The reason is because E.O. No. 1088 is not meant
simply to fix new pilotage rates. Its legislative purpose is the
rationalization of pilotage service charges, through the
imposition of uniform and adjusted rates for foreign and
coastwise vessels in all Philippine ports.
xxx
We conclude that E.O. No. 1088 is a valid statute and that
the PPA is duty bound to comply with its provisions. The PPA
may increase the rates but it may not decrease them below
those mandated by E.O. No. 1088. x x x.15 cräläwvirtualibräry

We see no reason to depart from this ruling. The Courts holding

clearly debunks petitioners insistence on paying its pilotage fees
based on memorandum circulars issued by the PPA.16 Because the
PPA circulars are inconsistent with EO 1088, they are void and
ineffective. Administrative or executive acts, orders and regulations
shall be valid only when they are not contrary to the laws or the
Constitution.17 As stated by this Court in Land Bank of the
Philippines vs. Court of Appeals,18 [t]he conclusive effect of
administrative construction is not absolute. Action of an
administrative agency may be disturbed or set aside by the judicial
department if there is an error of law, a grave abuse of power or
lack of jurisdiction, or grave abuse of discretion clearly conflicting
with either the letter or spirit of the law.19 It is axiomatic that an
administrative agency, like the PPA, has no discretion whether to
implement the law or not. Its duty is to enforce it. Unarguably,
APEL FULL CASE

therefore, if there is any conflict between the PPA circular and a law,
such as EO 1088, the latter prevails.20 cräläwvirtualibräry

Based on the foregoing, petitioner has no legal basis to refuse

payment of pilotage fees to private respondent, as computed
according to the rates set by EO 1088. Private respondent cannot be
faulted for relying on the clear and unmistakable provisions of EO
1088. In fact, EO 1088 leaves no room for interpretation, thereby
unmistakably showing the duplicity of petitioners query: Is the
private respondent vested with power to interpret Executive Order
No. 1088?

WHEREFORE, the petition is hereby DENIED  and the assailed

Decision of the Court of Appeals is AFFIRMED. Costs against
petitioner.

SO ORDERED.

4. Araneta vs. Gatmaitan, 101 Phil 328

TOPIC: Administrative regulation must be reasonable

G.R. Nos. L-8895 and L-9191             April 30, 1957

SALVADOR A. ARANETA, ETC., ET AL., petitioners,

vs.
THE HON. MAGNO S. GATMAITAN, ETC., ET AL., respondents.

EXEQUIEL SORIANO, ET AL., petitioners-appellees,

vs.
SALVADOR ARANETA, ETC., ET AL., respondents-appellants.

Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista and
Solicitor Troadio T. Quiazon for petitioners.
San Juan, Africa and Benedicto for respondents.

FELIX, J.:

San Miguel Bay, located between the provinces of Camarines Norte and Camarines Sur, a part of
the National waters of the Philippines with an extension of about 250 square miles and an average
depth of approximately 6 fathoms (Otter trawl explorations in Philippine waters p. 21, Exh. B), is
considered as the most important fishing area in the Pacific side of the Bicol region. Sometime in
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1950, trawl1 operators from Malabon, Navotas and other places migrated to this region most of them
settling at Sabang, Calabanga, Camarines Sur, for the purpose of using this particular method of
fishing in said bay. On account of the belief of sustenance fishermen that the operation of this kind of
gear caused the depletion of the marine resources of that area, there arose a general clamor among
the majority of the inhabitants of coastal towns to prohibit the operation of trawls in San Miguel Bay.
This move was manifested in the resolution of December 18, 1953 (Exh. F), passed by the Municipal
Mayors' League condemning the operation of trawls as the cause of the wanton destruction of the
shrimp specie and resolving to petition the President of the Philippines to regulate fishing in San
Miguel Bay by declaring it closed for trawl fishing at a certain period of the year. In another resolution
dated March 27, 1954, the same League of Municipal Mayor, prayed the President to protect them
and the fish resources of San Miguel Bay by banning the operation of trawls therein (Exh. 4). The
Provincial Governor also made proper presentations to this effect and petitions in behalf of the non-
trawl fishermen were likewise presented to the President by social and civic organizations as the
NAMFREL (National Movement for Free Elections) and the COMPADRE (Committee for Philippine
Action in Development, Reconstruction and Education), recommending the cancellation of the
licenses of trawl operators after investigation, if such inquiry would substantiate the charges that the
operation of said fishing method was detrimental to the welfare of the majority of the inhabitants
(Exh. 2).

In response to these pleas, the President issued on April 5, 1954, Executive Order No. 22 (50 Off.
Gaz., 1421) prohibiting the use of trawls in San Miguel Bay, but said executive order was amended
by Executive Order No. 66, issued on September 23, 1954 (50 Off. Gaz., 4037), apparently in
answer to a resolution of the Provincial Board of Camarines Sur recommending the allowance of
trawl fishing during the typhoon season only. On November 2, 1954, however, Executive Order No.
80 (50 Off. Gaz., 5198) was issued reviving Executive Order No. 22, to take effect after December
31, 1954.

A group of Otter trawl operators took the matter to the court by filing a complaint for injunction and/or
declaratory relief with preliminary injunction with the Court of First Instance of Manila, docketed as
Civil Case No. 24867, praying that a writ of preliminary injunction be issued to restrain the Secretary
of Agriculture and Natural Resources and the Director of Fisheries from enforcing said executive
order; to declare the same null and void, and for such other relief as may be just and equitable in the
premises.

The Secretary of Agriculture and Natural Resources and the Director of Fisheries, represented by
the Legal Adviser of said Department and a Special Attorney of the Office of the Solicitor General,
answered the complaint alleging, among other things, that of the 18 plaintiff (Exequiel Soriano,
Teodora Donato, Felipe Concepcion, Venancio Correa, Santo Gaviana, Alfredo General, Constancio
Gutierrez, Arsenio de Guzman, Pedro Lazaro, Porfirio Lazaro, Deljie de Leon, Jose Nepomuceno,
Bayani Pingol, Claudio Salgado, Porfirio, San Juan, Luis Sioco, Casimiro Villar and Enrique
Voluntad), only 11 were issued license to operate fishing boats for the year 1954 (Annex B, petition
— L-8895); that the executive orders in question were issued accordance with law; that the
encouragement by the Bureau of Fisheries of the use of Otter trawls should not be construed to
mean that the general welfare of the public could be disregarded, and set up the defenses that since
plaintiffs question the validity of the executive orders issued by the President, then the Secretary of
Agriculture and Natural Resources and the Director of Fisheries were not the real parties in interest;
that said executive orders do not constitute a deprivation of property without due process of law, and
therefore prayed that the complaint be dismissed (Exh. B, petition, L-8895).

During the trial of the case, the Governor of Camarines Sur appearing for the municipalities of
Siruma, Tinambac, Calabanga, Cabusao and Sipocot, in said province, called the attention of the
Court that the Solicitor General had not been notified of the proceeding. To this manifestation, the
APEL FULL CASE

Court ruled that in view of the circumstances of the case, and as the Solicitor General would only be
interested in maintaining the legality of the executive orders sought to be impugned, section 4 of
Rule 66 could be interpreted to mean that the trial could go on and the Solicitor General could be
notified before judgement is entered.

After the evidence for both parties was submitted and the Solicitor General was allowed to file his
memorandum, the Court rendered decision on February 2, 1955, the last part of which reads as
follows:

The power to close any definite area of the Philippine waters, from the fact that Congress
has seen fit to define under what conditions it may be done by the enactment of the sections
cited, in the mind of Congress must be of transcendental significance. It is primarily within
the fields of legislation not of execution: for it goes far and says who can and who can not
fish in definite territorial waters. The court can not accept that Congress had intended to
abdicate its inherent right to legislate on this matter of national importance. To accept
respondents' view would be to sanction the exercise of legislative power by executive
decrees. If it is San Miguel Bay now, it may be Davao Gulf tomorrow, and so on. That may
be done only by Congress. This being the conclusion, there is hardly need to go any further.
Until the trawler is outlawed by legislative enactment, it cannot be banned from San Miguel
Bay by executive proclamation. The remedy for respondents and population of the coastal
towns of Camarines Sur is to go to the Legislature. The result will be to issue the writ prayed
for, even though this be to strike at public clamor and to annul the orders of the President
issued in response therefor. This is a task unwelcome and unpleasant; unfortunately, courts
of justice use only one measure for both the rich and poor, and are not bound by the more
popular cause when they give judgments.

IN VIEW WHEREOF, granted; Executive Order Nos. 22, 66 and 80 are declared invalid; the
injunction prayed for is ordered to issue; no pronouncement as to costs.

Petitioners immediately filed an ex-parte motion for the issuance of a writ of injunction which was
opposed by the Solicitor General and after the parties had filed their respective memoranda, the
Court issued an order dated February 19, 1955, denying respondents' motion to set aside judgement
and ordering them to file a bond in the sum of P30,000 on or before March 1, 1955, as a condition
for the non-issuance of the injunction prayed for by petitioners pending appeal. The Solicitor General
filed a motion for reconsideration which was denied for lack of merit, and the Court, acting upon the
motion for new trial filed by respondents, issued another order on March 3, 1965, denying said
motion and granting the injunction prayed for by petitioners upon the latter's filing a bond for P30,000
unless respondents could secure a writ of preliminary injunction from the Supreme Court on or
before March 15, 1955. Respondents, therefore, brought the matter to this Court in a petition for
prohibition and certiorari with preliminary injunction, docketed as G.R. No. L-8895, and on the same
day filed a notice to appeal from the order of the lower court dated February 2, 1955, which appeal
was docketed in this Court as G.R. No. L-9191.

In the petition for prohibition and certiorari, petitioners (respondents therein) contended among other
things, that the order of, the respondent Judge requiring petitioners Secretary of Agriculture and
Natural Resources and the Director of Fisheries to post a bond in the sum of P30,000 on or before
March 1, 1955, had been issued without jurisdiction or in excess thereof, or at the very least with
grave abuse of discretion, because by requiring the bond, the Republic of the Philippines was in
effect made a party defendant and therefore transformed the suit into one against the Government
which is beyond the jurisdiction of the respondent Judge to entertain; that the failure to give the
Solicitor General the opportunity to defend the validity of the challenged executive orders resulted in
the receipt of objectionable matters at the hearing; that Rule 66 of the Rules of Court does not
APEL FULL CASE

empower a court of law to pass upon the validity of an executive order in a declaratory relief
proceeding; that the respondent Judge did not have the power to grant the injunction as Section 4 of
Rule 39 does not apply to declaratory relief proceedings but only to injunction, receivership and
patent accounting proceedings; and prayed that a writ of preliminary injunction be issued to enjoin
the respondent Judge from enforcing its order of March 3, 1955, and for such other relief as may be
deem just and equitable in the premises. This petition was given due course and the hearing on the
merits was set by this Court for April 12, 1955, but no writ of preliminary injunction was issued.

Meanwhile, the appeal (G.R. No. L-9191) was heard on October 3, 1956, wherein respondents-
appellants ascribed to the lower court the commission of the following errors:

1. In ruling that the President has no authority to issue Executive Orders Nos. 22, 66 and 80
banning the operation of trawls in San Miguel Bay;

2. In holding that the power to declare a closed area for fishing purposes has not been
delegated to the President of the Philippines under the Fisheries Act;

3. In not considering Executive Orders Nos. 22, 66 and 80 as declaring a closed season
pursuant to Section 7, Act 4003, as amended, otherwise known as the Fisheries Act;

4. In holding that to uphold the validity of Executive Orders Nos. 22 and 80 would be to
sanction the exercise of legislative power by executive decrees;

5. In its suggestion that the only remedy for respondents and the people of the coastal towns
of Camarines Sur and Camarines Norte is to go to the Legislature; and

6. In declaring Executive Orders Nos. 22, 66 and 80 invalid and in ordering the injunction
prayed for to issue.

As Our decision in the prohibition and certiorari case (G.R. No. L-8895) would depend, in the last
analysis, on Our ruling in the appeal of the respondents in case G.R. No. L-9191, We shall first
proceed to dispose of the latter case.

It is indisputable that the President issued Executive Orders Nos. 22, 66 and 80 in response to the
clamor of the inhabitants of the municipalities along the coastline of San Miguel Bay. They read as
follows:

EXECUTIVE ORDER No. 22

PROHIBITING THE USE OF TRAWLS IN SAN MIGUEL BAY

In order to effectively protect the municipal fisheries of San Miguel Bay, Camarines Norte
and Camarines Sur, and to conserve fish and other aquatic resources of the area, I, RAMON
MAGSAYSAY, President of the Philippines, by virtue of the powers vested in me by law, do
hereby order that:

1. Fishing by means of trawls (utase, otter and/or perenzella) of any kind, in the waters
comprised within San Miguel Bay, is hereby prohibited.
APEL FULL CASE

2. Trawl shall mean, for the purpose of this Order, a fishing net made in the form of a bag
with the mouth kept open by a device, the whole affair being towed, dragged, trailed or
trawled on the bottom of the sea to capture demersal, ground or bottom species.

3. Violation of the provisions of this Order shall subject the offender to the penalty provided
under Section 83 of Act 4993, or more than six months, or both, in the discretion of the
Court.

Done in the City of Manila, this 5th day of April, nineteen hundred and fifty-four and of the
Independence of the Philippines, the eighth. (50 Off. Gaz. 1421)

EXECUTIVE ORDER No. 66

AMENDING EXECUTIVE ORDER No. 22, DATED APRIL 5, 1954, ENTITLED

"PROHIBITING THE USE OF TRAWLS IN SAN MIGUEL BAY"

By virtue of the powers voted in me by law, I, RAMON MAGSAYSAY, President of the

Philippines, do hereby amend Executive Order No. 22, dated April 5, 1954, so as to allow
fishing by means of trawls, as defined in said Executive Order, within that portion of San
Miguel Bay north of a straight line drawn from Tacubtacuban Hill in the Municipality of
Tinambac, Province of Camarines Sur. Fishing by means of trawls south of said line shall still
be absolutely prohibited.

Done in the City of Manila, this 23rd day of September, in the year of our Lord, nineteen
hundred and fifty-four, and of the Independence of the Philippines, the ninth." (50 Off. Gaz.
4037).

EXECUTIVE ORDER No. 80.

FURTHER AMENDING EXECUTIVE ORDER No. 22, DATED APRIL 5, 1954, AS

AMENDED BY EXECUTIVE ORDER No. 66, DATED SEPTEMBER 23, 1954.

By virtue of the powers vested in me by law, I, RAMON MAGSAYSAY, President of the

Philippines, do hereby amend Executive Order No. 66 dated September 23, 1954, so as to
allow fishing by means of trawls, as defined in Executive Order No. 22, dated April 5, 1954,
within the portion of San Miguel Bay North of a straight line drawn from Tacubtacuban Hill in
the Municipality of Mercedes, Province of Camarines Norte to Balocbaloc Point in the
Municipality of Tinambac, Province of Camarines Sur, until December 31, 1954, only.

Thereafter, the provisions of said Executive Order No. 22 absolutely prohibiting fishing by
means of trawls in all the waters comprised within the San Miguel Bay shall be revived and
given full force and effect as originally provided therein.

Done in the City of Manila, this 2nd day of November, in the year of Our Lord, nineteen
hundred and fifty-four and of the Independence of the Philippines, the ninth. (50 Off. Gaz.
5198)

It is likewise admitted that petitioners assailed the validity of said executive orders in their petition for
a writ of injunction and/or declaratory relief filed with the Court of First Instance of Manila, and that
the lower court, upon declaring Executive Orders Nos. 22, 66 and 80 invalid, issued an order
requiring the Secretary of Agriculture and Natural Resources and the Director of Fisheries to post a
APEL FULL CASE

bond for P30,000 if the writ of injunction restraining them from enforcing the executive orders in
question must be stayed.

The Solicitor General avers that the constitutionality of an executive order cannot be ventilated in a
declaratory relief proceeding. We find this untenable, for this Court taking cognizance of an appeal
from the decision of the lower court in the case of Hilado vs. De la Costa, et al., 83 Phil., 471, which
involves the constitutionality of another executive order presented in an action for declaratory relief,
in effect accepted the propriety of such action.

This question being eliminated, the main issues left for Our determination with respect to defendants'
appeal (G.R. No. L-9191), are:

(1) Whether the Secretary of an Executive Department and the Director of a Bureau, acting in their
capacities as such Government officials, could lawfully be required to post a bond in an action
against them;

(2) Whether the President of the Philippines has authority to issue Executive Orders Nos. 22, 66 and
80, banning the operation of trawls in San Miguel Bay, or, said in other words, whether said
Executive Orders Nos. 22, 66 and 80 were issued in accordance with law; and.

(3) Whether Executive Orders Nos. 22, 66 and 80 were valid, for the issuance thereof was not in the
exercise of legislative powers unduly delegated to the President.

Counsel for both parties presented commendable exhaustive defenses in support of their respective
stands. Certainly, these cases deserve such efforts, not only because the constitutionality of an act
of a coordinate branch in our tripartite system of Government is in issue, but also because of the
number of inhabitants, admittedly classified as "subsistence fishermen", that may be affected by any
ruling that We may promulgate herein.

I. As to the first proposition, it is an elementary rule of procedure that an appeal stays the execution
of a judgment. An exception is offered by section 4 of Rule 39 of the Rules of Court which provides
that:

SEC. 4. INJUNCTION, RECEIVERSHIP AND PATENT ACCOUNTING, NOT STAYED. —

Unless otherwise ordered by the court, a judgment in an action for injunction or in a
receivership action, or a judgment or order directing an accounting in an action for
infringement of letter patent, shall not be stayed after its rendition and before an appeal is
taken or during the pendency of an appeal. The trial court, however, in its discretion, when
an appeal is taken from a judgement granting, dissolving or denying an injunction, may make
an order suspending, modifying, restoring, or granting such injunction during the pendency of
an appeal, upon such terms as to bond or otherwise as it may consider proper for the
security of the rights of the adverse party.

This provision was the basis of the order of the lower court dated February 19, 1955, requiring the
filing by the respondents of a bond for P30,000 as a condition for the non-issuance of the injunction
prayed for by plaintiffs therein, and which the Solicitor General charged to have been issued in
excess of jurisdiction. The State's counsel, however, alleges that while judgment could be stayed in
injunction, receivership and patent accounting cases and although the complaint was styled
"Injunction, and/or Declaratory Relief with Preliminary Injunction", the case is necessarily one for
declaratory relief, there being no allegation sufficient to convince the Court that the plaintiffs intended
it to be one for injunction. But aside from the title of the complaint, We find that plaintiffs pray for the
declaration of the nullity of Executive Order Nos. 22, 66 and 80; the issuance of a writ of preliminary
APEL FULL CASE

injunction, and for such other relief as may be deemed just and equitable. This Court has already
held that there are only two requisites to be satisfied if an injunction is to issue, namely, the
existence of the right sought to be protected, and that the acts against which the injunction is to be
directed are violative of said right (North Negros Sugar Co., Inc. vs. Serafin Hidalgo, 63 Phil., 664).
There is no question that at least 11 of the complaining trawl operators were duly licensed to operate
in any of the national waters of the Philippines, and it is undeniable that the executive enactment's
sought to be annulled are detrimental to their interests. And considering further that the granting or
refusal of an injunction, whether temporary or permanent, rests in the sound discretion of the Court,
taking into account the circumstances and the facts of the particular case (Rodulfa vs. Alfonso, 76
Phil,, 225, 42 Off. Gaz., 2439), We find no abuse of discretion when the trial Court treated the
complaint as one for injunction and declaratory relief and executed the judgment pursuant to the
provisions of section 4 of Rule 39 of the Rules of Court.

On the other hand, it shall be remembered that the party defendants in Civil Case No. 24867 of the
Court of First Instance of Manila are Salvador Araneta, as Secretary of Agriculture and Natural
Resources, and, Deogracias Villadolid, as Director of Fisheries, and were sued in such capacities
because they were the officers charged with duty of carrying out the statutes, orders and regulations
on fishing and fisheries. In its order of February 19, 1955, the trial court denied defendants' motion to
set aside judgment and they were required to file a bond for P30,000 to answer for damages that
plaintiffs were allegedly suffering at that time, as otherwise the injunction prayed for by the latter
would be issued.

Because of these facts, We agree with the Solicitor General when he says that the action, being one
against herein petitioners as such Government officials, is essentially one against the Government,
and to require these officials to file a bond would be indirectly a requirement against the Government
for as regards bonds or damages that may be proved, if any, the real party in interest would be the
Republic of the Philippines (L. S. Moon and Co. vs. Harrison, 43 Phi., 39; Salgado vs. Ramos, 64
Phil., 724-727, and others). The reason for this pronouncement is understandable; the State
undoubtedly is always solvent (Tolentino vs. Carlos 66 Phil., 140; Government of the P. I. vs. Judge
of the Court of First Instance of Iloilo, 34 Phil., 167, cited in Joaquin Gutierrez et al. vs. Camus et al.
* G.R. No. L-6725, promulgated October 30, 1954). However, as the records show that herein
petitioners failed to put up the bond required by the lower court, allegedly due to difficulties
encountered with the Auditor General's Office (giving the impression that they were willing to put up
said bond but failed to do so for reasons beyond their control), and that the orders subjects of the
prohibition and certiorari proceedings in G.R. No. L-8895, were enforced, if at all, 2 in accordance with
section 4 of Rule 39, which We hold to be applicable to the case at bar, the issue as to the regularity
or adequacy of requiring herein petitioners to post a bond, becomes moot and academic.

II. Passing upon the question involved in the second proposition, the trial judge extending the
controversy to the determination of which between the Legislative, and Executive Departments of
the Government had "the power to close any definite area of the Philippine waters" instead of limiting
the same to the real issue raised by the enactment of Executive Orders No. 22, 26 and 80,
especially the first and the last "absolutely prohibiting fishing by means trawls in all the waters
comprised within the San Miguel Bay", ruled in favor of Congress had not intended to abdicate its
power to legislate on the matter, he maintained as stated before, that "until the trawler is outlawed by
legislative enactment, it cannot be banned from San Miguel Bay by executive proclamation", and
that "the remedy for respondents and population of the coastal towns of Camarines Sur is to go to
Legislature," and thus declared said Executive Orders Nos. 22, 66 and 80 invalid".

The Solicitor General, on the contrary, asserts that the President is empowered by law to issue the
executive enactment's in question.
APEL FULL CASE

Sections 6, 13 and 75 of Act No. 4003, known as the Fisheries Law, the latter two sections as
amended by section 1 of Commonwealth Act No. 471, read as follows:

SEC. 6. WORDS AND PHRASES DEFINED. —Words and terms used in this Act shall be
construed as follows:

xxx     xxx     xxx

TAKE or TAKING includes pursuing, shooting, killing, capturing, trapping, snaring, and
netting fish and other aquatic animals, and all lesser acts, such as disturbing, wounding,
stupefying; or placing, setting, drawing, or using any net or other device commonly used to
take or collect fish and other aquatic animals, whether they result in taking or not, and
includes every attempt to take and every act of assistance to every other person in taking or
attempting to take or collect fish and other aquatic animals: PROVIDED, That whenever
taking is allowed by law, reference is had to taking by lawful means and in lawful manner.

xxx     xxx     xxx

SEC. 13. PROTECTION OF FRY OR FISH EGGS. — Except for scientific or educational
purpose or for propagation, it shall be unlawful to take or catch fry or fish eggs and the small
fish, not more than three (3) centimeters long, known as siliniasi, in the territorial waters of
the Philippines. Towards this end, the Secretary of Agriculture and Commerce shall be
authorized to provide by regulations such restrictions as may be deemed necessary to be
imposed on THE USE OF ANY FISHING NET OR FISHING DEVICE FOR THE
PROTECTION OF FRY OR FISH EGGS; Provided, however, That the Secretary of
Agriculture and Commerce shall permit the taking of young of certain species of fish known
as hipon under such restrictions as may be deemed necessary.

SEC. 75. FISH REFUGEES AND SANCTUARIES. — Upon the recommendation of the
officer or chief of the bureau, office or service concerned, the Secretary of Agriculture and
Commerce may set aside and establish fishery reservation or fish refuges and sanctuaries to
be administered in the manner to be prescribed by him. All streams, ponds and waters within
the game refuge, birds, sanctuaries, national parks, botanical gardens, communal forest and
communal pastures are hereby declared fishing refuges and sanctuaries. It shall be unlawful
for any person, to take, destroy or kill in any of the places aforementioned, or in any manner
disturb or drive away or take therefrom, any fish fry or fish eggs.

Act No. 4003 further provides as follows:

SEC. 83. OTHER VIOLATIONS. — Any other violation of the provisions of this Act or any
rules and regulations promulgated thereunder shall subject the offender to a fine of not more
than two hundred pesos, or imprisonment for not more than six months, or both, in the
discretion of the Court.

As may be seen from the just quoted provisions, the law declares unlawful and fixes the penalty for
the taking (except for scientific or educational purposes or for propagation), destroying or killing of
any fish fry or fish eggs, and the Secretary of Agriculture and Commerce (now the Secretary of
Agriculture and Natural Resources) is authorized to promulgate regulations restricting the use of any
fish net or fishing device (which includes the net used by trawl fishermen) for the protection of fry or
fish eggs, as well as to set aside and establish fishery reservations or fish refuges and sanctuaries to
be administered in the manner prescribed by him, from which no person could lawfully take, destroy
or kill in any of the places aforementioned, or in any manner disturb or drive away or take therefrom
APEL FULL CASE

any small or immature fish, fry or fish eggs. It is true that said section 75 mentions certain streams,
ponds and waters within the game refuges, . . . communal forest, etc., which the law itself declares
fish refuges and sanctuaries, but this enumeration of places does not curtail the general and
unlimited power of the Secretary of Agriculture and Natural Resources in the first part of section 75,
to set aside and establish fishery reservations or fish refuges and sanctuaries, which naturally
include seas or bays, like the San Miguel Bay in Camarines.

From the resolution passed at the Conference of Municipal Mayors held at Tinambac, Camarines
Sur, on December 18, 1953 (Exh. F), the following manifestation is made:

WHEREAS, the continuous operation of said trawls even during the close season as
specified in said Executive Order No. 20 caused the wanton destruction of the mother
shrimps laying their eggs and the millions of eggs laid and the inevitable extermination of the
shrimps specie; in order to save the shrimps specie from eventual extermination and in order
to conserve the shrimps specie for posterity;

In the brief submitted by the NAMFREL and addressed to the President of the Philippines (Exh. 2),
in support of the petition of San Miguel Bay fishermen (allegedly 6, 175 in number), praying that
trawlers be banned from operating in San Miguel Bay, it is stated that:

The trawls ram and destroy the fish corrals. The heavy trawl nets dig deep into the ocean
bed. They destroy the fish foods which lies below the ocean floor. Their daytime catches net
millions of shrimps scooped up from the mud. In their nets they bring up the life of the sea:
algea, shell fish and star fish . . .

The absence of some species or the apparent decline in the catch of some fishermen
operating in the bay may be due to several factors, namely: the indiscriminate catching of fry
and immature sizes of fishes, the wide-spread use of explosives inside as well as at the
mouth and approaches of the bay, and the extensive operation of the trawls. (p.9, Report of
Santos B. Rasalan, Exh. A)

Extensive Operation of Trawls: — The strenuous effect of the operations of the 17 TRAWLS
of the demersal fisheries of San Miguel Bay is better appreciated when we consider the fact
that out of its about 850 square kilometers area, only about 350 square kilometers of 5
fathoms up could be trawled. With their continuous operation, is greatly strained. This is
shown by the fact that in view of the non-observance of the close season from May to
October, each year, majority of their catch are immature. If their operation would continue
unrestricted, the supply would be greatly depleted. (p. 11), Report of Santos B. Rasalan,
Exh. A)

San Miguel Bay — can sustain 3 to 4 small trawlers (Otter Trawl Explorations in Philippine
Waters, Research Report 25 of the Fish and Wildlife Service, United States Department of
the Interior, p. 9 Exhibit B).

According to Annex A of the complaint filed in the lower court in Civil Case No. 24867 — G.R. No. L-
9191 (Exh. D, p. 53 of the folder of Exhibits), the 18 plaintiffs-appellees operate 29 trawling boats,
and their operation must be in a big scale considering the investments plaintiffs have made
therefore, amounting to P387,000 (Record on Appeal, p. 16-17).

In virtue of the aforementioned provisions of law and the manifestation just copied, We are of the
opinion that with or without said Executive Orders, the restriction and banning of trawl fishing from all
Philippine waters come, under the law, within the powers of the Secretary of Agriculture and Natural
APEL FULL CASE

Resources, who in compliance with his duties may even cause the criminal prosecution of those who
in violation of his instructions, regulations or orders are caught fishing with trawls in the Philippine
waters.

Now, if under the law the Secretary of Agriculture and Natural Resources has authority to regulate or
ban the fishing by trawl which, it is claimed, obnoxious for it carries away fish eggs and fry's which
should be preserved, can the President of the Philippines exercise that same power and authority?
Section 10(1), Article VII of the Constitution of the Philippines prescribes:

SEC. 10 (1). The President shall have control of all the executive departments, bureaus or
offices, exercises general supervision over all local governments as may be provided by law,
and take care that the laws be faithfully executed.

Section 63 of the Revised Administrative Code reads as follows:

SEC. 63. EXECUTIVE ORDERS AND EXECUTIVE PROCLAMATION. — Administrative

acts and commands of the President of the Philippines touching the organization or mode of
operation of the Government or rearranging or readjusting any of the district, divisions, parts
or ports of the Philippines, and all acts and commands governing the general performance of
duties by public employees or disposing of issues of general concern shall be made in
executive orders.

xxx     xxx     xxx

Regarding department organization Section 74 of the Revised Administrative Code also provides
that:

All executive functions of the government of the Republic of the Philippines shall be directly
under the Executive Departments subject to the supervision and control of the President of
the Philippines in matters of general policy. The Departments are established for the proper
distribution of the work of the Executive, for the performance of the functions expressly
assigned to them by law, and in order that each branch of the administration may have a
chief responsible for its direction and policy. Each Department Secretary shall assume the
burden of, and responsibility for, all activities of the Government under his control and
supervision.

For administrative purposes the President of the Philippines shall be considered the
Department Head of the Executive Office.

One of the executive departments is that of Agriculture and Natural Resources which by law is
placed under the direction and control of the Secretary, who exercises its functions subject to the
general supervision and control of the President of the Philippines (Sec. 75, R. A. C.). Moreover,
"executive orders, regulations, decrees and proclamations relative to matters under the supervision
or jurisdiction of a Department, the promulgation whereof is expressly assigned by law to the
President of the Philippines, shall as a general rule, be issued upon proposition and
recommendation of the respective Department" (Sec. 79-A, R.A.C.), and there can be no doubt that
the promulgation of the questioned Executive Orders was upon the proposition and recommendation
of the Secretary of Agriculture and Natural Resources and that is why said Secretary, who was and
is called upon to enforce said executive Orders, was made a party defendant in one of the cases at
bar (G.R. No. L-9191).
APEL FULL CASE

For the foregoing reasons We do hesitate to declare that Executive Orders Nos. 22, 66 and 80,
series of 1954, of the President, are valid and issued by authority of law.

III. But does the exercise of such authority by the President constitute and undue delegation of the
powers of Congress?

As already held by this Court, the true distinction between delegation of the power to legislate and
the conferring of authority or discretion as to the execution of law consists in that the former
necessary involves a discretion as to what the law shall be, wile in the latter the authority or
discretion as to its execution has to be exercised under and in pursuance of the law. The first cannot
be done; to the latter no valid objection can be made (Cruz vs. Youngberg, 56 Phil., 234, 239. See
also Rubi, et al. vs. The Provincial Board of Mindoro, 39 Phil., 660).

In the case of U. S. vs. Ang Tang Ho, 43 Phil. 1, We also held:

THE POWER TO DELEGATE. — The Legislature cannot delegate legislative power to enact
any law. If Act No. 2868 is a law unto itself, and it does nothing more than to authorize the
Governor-General to make rules and regulations to carry it into effect, then the Legislature
created the law. There is no delegation of power and it is valid. On the other hand, if the act
within itself does not define a crime and is not complete, and some legislative act remains to
be done to make it a law or a crime, the doing of which is vested in the Governor-General,
the act is delegation of legislative power, is unconstitutional and void.

From the provisions of Act No. 4003 of the Legislature, as amended by Commonwealth Act No. 471,
which have been aforequoted, We find that Congress (a) declared it unlawful "to take or catch fry or
fish eggs in the territorial waters of the Philippines; (b) towards this end, it authorized the Secretary
of Agriculture and Natural Resources to provide by the regulations such restrictions as may be
deemed necessary to be imposed on the use of any fishing net or fishing device for the protection of
fish fry or fish eggs (Sec. 13); (c) it authorized the Secretary of Agriculture and Natural Resources to
set aside and establish fishery reservations or fish refuges and sanctuaries to be administered in the
manner to be prescribed by him and declared it unlawful for any person to take, destroy or kill in any
of said places, or, in any manner disturb or drive away or take therefrom, any fish fry or fish
eggs (See. 75); and (d) it penalizes the execution of such acts declared unlawful and in violation of
this Act (No. 4003) or of any rules and regulations promulgated thereunder, making the offender
subject to a fine of not more than P200, or imprisonment for not more than 6 months, or both, in the
discretion of the court (Sec. 83).

From the foregoing it may be seen that in so far as the protection of fish fry or fish egg is concerned,
the Fisheries Act is complete in itself, leaving to the Secretary of Agriculture and Natural Resources
the promulgation of rules and regulations to carry into effect the legislative intent. It also appears
from the exhibits on record in these cases that fishing with trawls causes "a wanton destruction of
the mother shrimps laying their eggs and the millions of eggs laid and the inevitable extermination of
the shrimps specie" (Exh. F), and that, "the trawls ram and destroy the fish corrals. The heavy trawl
nets dig deep into the ocean bed. They destroy the fish food which lies below the ocean floor. Their
daytime catches net millions of shrimps scooped up from the mud. In their nets they bring up the life
of the sea" (Exh- 2).

In the light of these facts it is clear to Our mind that for the protection of fry or fish eggs and small
and immature fishes, Congress intended with the promulgation of Act No. 4003, to prohibit the use of
any fish net or fishing device like trawl nets that could endanger and deplete our supply of sea food,
and to that end authorized the Secretary of Agriculture and Natural Resources to provide by
regulations such restrictions as he deemed necessary in order to preserve the aquatic resources of
APEL FULL CASE

the land. Consequently, when the President, in response to the clamor of the people and authorities
of Camarines Sur issued Executive Order No. 80 absolutely prohibiting fishing by means of trawls in
all waters comprised within the San Miguel Bay, he did nothing but show an anxious regard for the
welfare of the inhabitants of said coastal province and dispose of issues of general concern (Sec.
63, R.A.C.) which were in consonance and strict conformity with the law.

Wherefore, and on the strength of the foregoing considerations We render judgement, as follows:

(a) Declaring that the issues involved in case G.R. No. L-8895 have become moot, as no writ of
preliminary injunction has been issued by this Court the respondent Judge of the Court of First
Instance of Manila Branch XIV, from enforcing his order of March 3, 1955; and

(b) Reversing the decision appealed from in case G. R. No. L-9191; dissolving the writ of injunction
prayed for in the lower court by plaintiffs, if any has been actually issued by the court a quo; and
declaring Executive Orders Nos. 22, 66 and 80, series of 1954, valid for having been issued by
authority of the Constitution, the Revised Administrative Code and the Fisheries Act.

Without pronouncement as to costs. It is so ordered.

5. Tayug Rural Bank vs. Central Bank of the Phils. 146 SCRA 120

TOPIC: Administrative rule with penal sanction

G.R. No. L-46158 November 28, 1986

TAYUG RURAL BANK, plaintiff-appellee,

vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

Bengzon, Bengzon, Villaroman & De Vera Law Office for plaintiff-appellee.

Evangelista, Bautista & Valdehuesa Law Office for defendant-appellant.

PARAS, J.:p

Submitted on May 20, 1977 for decision by this Court is this appeal from the decision dated
January 6, 1971 rendered by the Court of First Instance of Manila, Branch III in Civil Case No.
76920, the decretal portion of which states as follows:

WHEREFORE, judgment is rendered for the plaintiff on the complaint and the
defendant is ordered to further credit the plaintiff the amounts collected as
10% penalty in the sum of P19,335.88 or up to July 15, 1969 and to refrain from
APEL FULL CASE

collecting the said 10% penalty on the remaining past due loans of plaintiff
with the defendant.

With respect to defendant's counterclaim, judgment is hereby rendered against

the plaintiff and the defendant is ordered to pay the Central Bank of the
Philippines the outstanding balance of its past overdue accounts in the sum of
P444,809,45 plus accrued interest at the rate of 1/2 of 1 % per annum with
respect to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and
2-1/2% per annum with respect to the promissory notes (Annexes 1-f to 1-i of
the Answer). From this amount shall be deducted the sum of P19,335.88
collected as 10% penalty.

The facts of the case based on the parties' stipulation of facts (Record on Appeal p. 67), are
as follows:

Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan.

During the period from December 28, 1962 to July 30, 1963, it obtained thirteen (13) loans
from Defendant-Appellant, Central Bank of the Philippines, by way of rediscounting, at the
rate of 1/2 of 1% per annum from 1962 to March 28, 1963 and thereafter at the rate of 2-1/2%
per anum. The loans, amounting to P813,000.00 as of July 30, 1963, were all covered by
corresponding promissory notes prescribing the terms and conditions of the aforesaid loans
(Record on Appea, pp. 15-53). As of July 15, 1969, the outstanding balance was P 444,809.45
(Record on Appeal, p. 56).

On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit,
issued Memorandum Circular No. DLC-8, informing all rural banks that an additional penalty
interest rate of ten per cent (10%) per annum would be assessed on all past due loans
beginning January 4, 1965. Said Memorandum Circular was actually enforced on all rural
banks effective July 4, 1965.

On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of
Manila, Branch III, to recover the 10% penalty imposed by Appellant amounting to P16,874.97,
as of September 27, 1968 and to restrain Appellant from continuing the imposition of the
penalty. Appellant filed a counterclaim for the outstanding balance and overdue accounts of
Appellee in the total amount of P444,809.45 plus accrued interest and penalty at 10% per
annum on the outstanding balance until full payment. (Record on Appeal, p. 13). Appellant
justified the imposition of the penalty by way of affirmative and special defenses, stating that
it was legally imposed under the provisions of Section 147 and 148 of the Rules and
Regulations Governing Rural Banks promulgated by the Monetary Board on September 5,
1958, under authority of Section 3 of Republic Act No. 720, as amended (Record on Appeal, p.
8, Affirmative and Special Defenses Nos. 2 and 3).

In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim,
denying Appellant's allegations stating that if Appellee has any unpaid obligations with
Appellant, it was due to the latter's fault on account of its flexible and double standard policy
in the granting of rediscounting privileges to Appellee and its subsequent arbitrary and
illegal imposition of the 10% penalty (Record on Appeal, p. 57). In its Memorandum filed on
November 11, 1970, Appellee also asserts that Appellant had no basis to impose the penalty
interest inasmuch as the promissory notes covering the loans executed by Appellee in favor
of Appellants do not provide for penalty interest rate of 10% per annum on just due loans
beginning January 4, 1965 (Record on Appeal p. 96).
APEL FULL CASE

The lower court, in its Order dated March 3, 1970, stated that "only a legal question has been
raised in the pleadings" and upholding the stand of plaintiff Rural Bank, decided the case in
its favor. (Rollo, p. 34).

Appellant appealed the decision of the trial court to the Court of Appeals, for determination of
questions of facts and of law. However, in its decision promulgated April 13, 1977, the Court
of Appeals, finding no controverted facts and taking note of the statement of the lower court
in its pre-trial Order dated March 3, 1970 that only a legal question has been raised in the
pleadings, (Record on Appeal, p. 61), ruled that the resolution of the appeal will solely
depend on the legal issue of whether or not the Monetary Board had authority to authorize
Appellant Central Bank to impose a penalty rate of 10% per annum on past due loans of rural
banks which had failed to pay their accounts on time and ordered the certification of this
case to this Court for proper determination (Rollo, pp. 34-35).

On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p. 36). In
the resolution of May 20, 1977, the First Division of this Court, ordered the case docketed and
as already stated declared the same submitted for decision (Rollo, p. 38).

In its Brief, Appellant assigns the following errors:

I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND

THE REACH OF THE MONETARY BOARD TO METE OUT
PENALTIES ON PAST DUE LOANS OF RURAL BANKS
ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED
IN THE PROMISSORY NOTES.

II. THE LOWER COURT ERRED IN HOLDING THAT THE

IMPOSITION OF THE PENALTY IS AN IMPAIRMENT OF THE
OBLIGATION OF CONTRACT WITHOUT DUE PROCESS.

III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT

AGAINST PLAINTIFF FOR 10% COST OF COLLECTION OF THE
PROMISSORY NOTE AS PROVIDED THEREIN.

It is undisputed that no penal clause has been included in the promissory notes. For this
reason, the trial court is of the view that Memorandum Circular DLC-8 issued on December
23, 1964 prescribing retroactive effect on all past due loans, impairs the obligation of contract
and deprives the plaintiff of its property without due process of law. (Record on Appel, p. 40).

On the other hand appellant without opposing appellee's right against impairment of
contracts, contends that when the promissory notes were signed by appellee, it was
chargeable with knowledge of Sections 147 and 148 of the rules and regulations authorizing
the Central Bank to impose additional reasonable penalties, which became part of the
agreement. (ibid).

Accordingly, the issue is reduced to the sole question as to whether or not the Central Bank
can validly impose the 10% penalty on Appellee's past overdue loans beginning July 4, 1965,
by virtue of Memorandum Circular No. DLC-8 dated December 23, 1964.

The answer is in the negative.

APEL FULL CASE

Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of Loans
and Credit on December 23, 1964, reads as follows:

Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964,
and in consonance with Section 147 and 148 of the Rules and Regulations
Governing Rural Banks concerning the responsibility of a rural bank to remit
immediately to the Central Bank payments received on papers rediscounted
with the latter including the loan value of rediscounted papers as they mature,
and to liquidate fully its maturing loan obligations with the Central Bank,
personal checks, for purposes of repayment, shall considered only after such
personal checks shall have been honored at clearing.

In addition, rural banks which shall default in their loan obligations, thus
incurring past due accounts with the Central Bank, shall be assessed an
additional penalty interest rate of ten per cent (10%) per annum on such past
due accounts with the Central Bank over and above the customary interest
rate(s) at which such loans were originally secured from the Central Bank.
(Record on Appeal, p. 135).

The above-quoted Memorandum Circular was issued on the basis of Sections 147 and 148 of
the Rules and Regulations Governing Rural Banks of the Philippines approved on September
5, 1958, which provide:

Section 147. Duty of Rural Bank to turn over payment received for papers
discounted or used for collateral. — A Rural Bank receiving any payment on
account of papers discounted or used for collateral must turn the same over to
the creditor bank before the close of the banking day next following the receipt
of payment, as long as the aggregate discounting on loan amount is not fully
paid, unless the Rural Bank substitutes the same with another eligible paper
with at least the same or earlier maturity and the same or greater value.

A Rural Bank failing to comply with the provisions of the preceding paragraph
shall ipso facto lose its right to the rediscounting or loan period, without
prejudice to the Central Bank imposing additional reasonable penalties,
including curtailment or withdrawal of financial assistance.

Sec. 148. Default and other violations of obligation by Rural Bank, effect. — A

Rural Bank becomes in default upon the expiration of the maturity period of its
note, or that of the papers discounted or used as collateral, without the
necessity of demand.

A Rural Bank incurring default, or in any other manner, violating any of the
stipulations in its note, shall suffer the consequences provided in the second
paragraph of the preceding section. (Record on Appeal, p. 136.)

The "Rules and Regulations Governing Rural Banks" was published in the Official Gazette, 55
O.G., on June 13, 1959, pp. 5186-5289. It is by virtue of these same Rules that Rural Banks re-
discount their loan papers with the Central Bank at 2-1/2% interest per annum and in turn
lend the money to the public at 12% interest per annum (Defendant's Reply to Plaintiff's
Memorandum, Record on Appeal, p. 130).
APEL FULL CASE

Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that the
Monetary Board has adopted the set of Rules and Regulations Governing Rural Banks. It
reads:

SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of
the Philippines shall formulate the necessary rules and regulations governing
the establishment and operatives of Rural Banks for the purpose of providing
adequate credit facilities to small farmers and merchants, or to cooperatives of
such farmers or merchants and to supervise the operation of such banks.

The specific provision under the law claimed as basis for Sections 147 and 148 of the Rules
and Regulations Governing Rural Banks, that is, on Appellant's authority to extend loans to
Rural Banks by way of rediscounting is Section 13 of R.A. 720, as amended, which provides:

SEC. 13. In an emergency or when a financial crisis is imminent the Central

Bank may give a loan to any Rural Bank against assets of the Rural Bank
which may be considered acceptable by a concurrent vote of at least, five
members of the Monetary Board.

In normal times, the Central Bank may re-discount against papers evidencing a
loan granted by a Rural Bank to any of its customers which can be liquefied
within a period of two hundred and seventy days: PROVIDED, HOWEVER, That
for the purpose of implementing a nationwide program of agricultural and
industrial development, Rural Banks are hereby authorized under such terms
and conditions as the Central Bank shall prescribe to borrow on a medium or
long term basis, funds that the Central Bank or any other government
financing institutions shall borrow from the International Bank for
Reconstruction and Development or other international or foreign lending
institutions for the specific purpose of financing the above stated agricultural
and industrial program. Repayment of loans obtained by the Central Bank of
the Philippines or any other government financing institution from said foreign
lending institutions under this section shall be guaranteed by the Republic of
the Philippines.

As to the supervising authority of the Monetary Board of the Central Bank over Rural Banks,
the same is spelled-out under Section 10 of R.A. 720, as follows:

SEC. 10. The power to supervise the operation of any Rural Bank by the
Monetary Board of the Central Bank as herein indicated, shall consist in
placing limits to the maximum credit allowed any individual borrower; in
prescribing the interest rate; in determining the loan period and loan
procedure; in indicating the manner in which technical assistance shall be
extended to Rural Banks; in imposing a uniform accounting system and
manner of keeping the accounts and records of the Rural Banks; in
undertaking regular credit examination of the Rural Banks: in instituting
periodic surveys of loan and lending procedures, audits, test check of cash
and other transactions of the Rural Banks; in conducting training courses for
personnel of Rural Banks; and, in general in supervising the business
operation of the Rural Banks.

Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other
provision of R.A. 720 for that matter, is the monetary Board authorized to mete out on rural
APEL FULL CASE

banks an additional penalty rate on their past due accounts with Appellant. As correctly
stated by the trial court, while the Monetary Board possesses broad supervisory powers,
nonetheless, the retroactive imposition of administrative penalties cannot be taken as a
measure supervisory in character. (Record on Appeal, p. 141).

Administrative rules and regulations have the force and effect of law (Valerio v. Hon.
Secretary of Agriculture and Natural Resources, 7 SCRA 719; Commissioner of Civil Service
v. Cruz, 15 SCRA 638; R.B. Industrial Development Company, Ltd. v. Enage, 24 SCRA 365;
Director of Forestry v. Munoz, 23 SCRA 1183; Gonzalo Sy v. Central Bank of the Philippines,
70 SCRA 570).

There are, however, limitations to the rule-making power of administrative agencies. A rule
shaped out by jurisprudence is that when Congress authorizes promulgation of
administrative rules and regulations to implement given legislation, all that is required is that
the regulation be not in contradiction with it, but conform to the standards that the law
prescribes (Director of Forestry v. Munoz, 23 SCRA 1183). The rule delineating the extent of
the binding force to be given to administrative rules and regulations was explained by the
Court in Teoxon v. Member of the Board of Administrators (33 SCRA 588), thus: "The
recognition of the power of administrative officials to promulgate rules in the implementation
of the statute, as necessarily limited to what is provided for in the legislative enactment, may
be found as early as 1908 in the case of United States v. Barrias (11 Phil. 327) in 1914 U.S. v.
Tupasi Molina (29 Phil. 119), in 1936 People v. Santos (63 Phil. 300), in 1951 Chinese Flour
Importers Ass. v. Price Stabilization Board (89 Phil. 439), and in 1962 Victorias Milling Co.,
Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that "A
rule is binding on the courts so long as the procedure fixed for its promulgation is followed
and its scope is within the statute granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom ...." On the other hand,
"administrative interpretation of the law is at best merely advisory, for it is the courts that
finally determine what the law means." Indeed, it cannot be otherwise as the Constitution
limits the authority of the President, in whom all executive power resides, to take care that
the laws be faithfully executed. No lesser administrative, executive office, or agency then
can, contrary to the express language of the Constitution, assert for itself a more extensive
prerogative. Necessarily, it is bound to observe the constitutional mandate. There must be
strict compliance with the legislative enactment. The rule has prevailed over the years, the
latest restatement of which was made by the Court in the case of Bautista v. Junio (L-50908,
January 31, 1984, 127 SCRA 342).

In case of discrepancy between the basic law and a rule or regulation issued to implement
said law, the basic law prevails because said rule or regulation cannot go beyond the terms
and provisions of the basic law (People v. Lim, 108 Phil. 1091). Rules that subvert the statute
cannot be sanctioned (University of St. Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar
v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials who can
trace their competence to act to the fundamental law itself, a public official must locate in the
statute relied upon a grant of power before he can exercise it. Department zeal may not be
permitted to outrun the authority conferred by statute (Radio Communications of the
Philippines, Inc. v. Santiago, L-29236, August 21, 1974, 58 SCRA 493).

When promulgated in pursuance of the procedure or authority conferred upon the

administrative agency by law, the rules and regulations partake of the nature of a statute, and
compliance therewith may be enforced by a penal sanction provided in the law (Victorias
Milling Co., Inc. v. Social Security Commission, 114 Phil. 555; People v. Maceren, L-32166,
October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276, September 28, 1984, 132 SCRA
APEL FULL CASE

267). Conversely, the rule is likewise clear. Hence an administrative agency cannot impose a
penalty not so provided in the law authorizing the promulgation of the rules and regulations,
much less one that is applied retroactively.

The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised December 23,
1964 to include the penal clause, as follows:

In the event that this note becomes past due, the undersigned shall pay a
penalty at the rate of _____ per cent ( ) per annum on such past due account
over and above the interest rate at which such loan was originally secured
from the Central Bank.

Such clause was not a part of the promissory notes executed by Appellee to secure its loans.
Appellant inserted the clause in the revised DLC Form No. 11 to make it a part of the
contractual obligation of rural banks securing loans from the Central Bank, after December
23, 1964. Thus, while there is now a basis for the imposition of the 10% penalty rate on
overdue accounts of rural banks, there was none during the period that Appellee contracted
its loans from Appellant, the last of which loan was on July 30, 1963. Surely, the rule cannot
be given retroactive effect.

Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1,
1970, revoked its Resolution No. 1813, dated December 18, 1964 imposing the questioned
10% per annum penalty rate on past due loans of rural banks and amended sub-paragraph
(a), Section 10 of the existing guidelines governing rural banks' applications for a loan or
rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As stated by the trial court, this
move on the part of the Monetary Board clearly shows an admission that it has no power to
impose the 10% penalty interest through its rules and regulations but only through the terms
and conditions of the promissory notes executed by the borrowing rural banks. Appellant
evidently hoped that the defect could be adequately accomplished by the revision of DLC
Form No. 11.

The contention that Appellant is entitled to the 10% cost of collection in case of suit and
should therefore, have been awarded the same by the court below, is well taken. It is
provided in all the promissory notes signed by Appellee that in case of suit for the collection
of the amount of the note or any unpaid balance thereof, the Appellee Rural Bank shall pay
the Central Bank of the Philippines a sum equivalent to ten (10%) per cent of the amount
unpaid not in any case less than five hundred (P500.00) pesos as attorney's fees and costs of
suit and collection. Thus, Appellee cannot be allowed to come to Court seeking redress for
an wrong done against it and then be allowed to renege on its corresponding obligations.

PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with
modification that Appellee Rural Bank is ordered to pay a sum equivalent to 10% of the
outstanding balance of its past overdue accounts, but not in any case less than P500.00 as
attorney's fees and costs of suit and collection.

SO ORDERED.

QUASI-JUDICIAL POWER
APEL FULL CASE

1. Dole Philippines Inc. v. Esteva, 509 SCRA 332, 369-370.

TOPIC: Nature of quasi-judicial power

FIRST DIVISION

[G.R. NO. 161115 : November 30, 2006]

DOLE PHILIPPINES, INC., Petitioner, v. MEDEL ESTEVA, HENRY

SILVA, GILBERT CABILAO, LORENZO GAQUIT, DANIEL
PABLO, EDWIN CAMILO, BENJAMIN SAKILAN, RICHARD
PENUELA, ARMANDO PORRAS, EDUARDO FALDAS, NILO
DONDOYANO, MIGUEL DIAZ, ROMEL BAJO, ARTEMIO
TENERIFE, EDDIE LINAO, JERRY LIGTAS, SAMUEL RAVAL,
WILFREDO BLANDO, LORENZO MONTERO, JR., JAIME
TESIPAO, GEORGE DERAL, ERNESTO ISRAEL, JR., AGAPITO
ESTOLOGA, JOVITO DAGUIO, ARSENIO LEONCIO, MARLON
BLANDO, JOSE OTELO CASPILLO, ARNOLD LIZADA, JERRY
DEYPALUBOS, STEVEN MADULA, ROGELIO CABULAO, JR.,
ALVIN COMPOC, EUGENIO BRITANA, RONNIE GUELOS,
EMMANUEL JIMENA, GERMAN JAVA, JESUS MEJICA, JOEL
INVENTADO, DOMINGO JABULGO, RAMIL ENAD, RAYMUNDO
YAMON, RITCHIE MELENDRES, JACQUEL ORGE, RAMON
BARCELONA, ERWIN ESPIA, NESTOR DELIDELI, JR., ALLAN
GANE, ROMEO PORRAS, RITCHIE BOCOG, JOSELITO ACEBES,
DANNY TORRES, JIMMY NAVARRO, RALPH PEREZ, SONNY
SESE, RONALD RODRIQUES, ROBERTO ALLANEC, ERNIE
GIGANTANA, NELSON SAMSON, REDANTE DAVILA, EDDIE
BUSLIG, ALLAN PINEDA, JESUS BELGERA, VICENTE LABISTE,
CARMENCITA FELISILDA, GEORGE DERLA, RUBEN TORMON,
NEIL TAJALE, ORLANDO ESPENILLA, RITCHEL MANEJAR,
JOEL QUINTANA, ERWIN ALDE, JOEL CATALAN, ELMER
TIZON, ALLAN ESPADA, EUGENE BRETANA, RAMIL ENAD,
RENE INGALLA, STEVEN MADULLA, RANDY REBUTAZO, NEIL
BAGATILLA, ARSENIO LEONCIO, ROLANDO VILLEGAS and
APEL FULL CASE

JUSLIUS TESIPAO, herein represented by MEDEL ESTEVA,

Authorized Representative, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45

of the revised Rules of Civil Procedure seeking the reversal of the
Decision,1 dated 20 May 2002, and the Amended Decision,2 dated
27 November 2003, both rendered by the Court of Appeals in CA-
G.R. SP No. 63405, which declared herein petitioner Dole
Philippines, Inc. as the employer of herein respondents, Medel
Esteva and 86 others; found petitioner guilty of illegal dismissal;
and ordered petitioner to reinstate respondents to their former
positions and to pay the latter backwages.

The antecedent facts of the case are recounted as follows:

Petitioner is a corporation duly organized and existing in accordance

with Philippine laws, engaged principally in the production and
processing of pineapple for the export market.3 Its plantation is
located in Polomolok, South Cotabato.4

Respondents are members of the Cannery Multi-Purpose

Cooperative (CAMPCO). CAMPCO was organized in accordance with
Republic Act No. 6938, otherwise known as the Cooperative Code of
the Philippines, and duly-registered with the Cooperative
Development Authority (CDA) on 6 January 1993.5 Members of
CAMPCO live in communities surrounding petitioner's plantation and
are relatives of petitioner's employees.

On 17 August 1993, petitioner and CAMPCO entered into a Service

Contract.6 The Service Contract referred to petitioner as "the
Company," while CAMPCO was "the Contractor." Relevant portions
thereof read as follows '

1. That the amount of this contract shall be or shall not exceed TWO
HUNDRED TWENTY THOUSAND ONLY (P220,000.00) PESOS, terms
and conditions of payment shall be on a per job basis as specified in
APEL FULL CASE

the attached schedule of rates; the CONTRACTOR shall perform the

following services for the COMPANY;

1.1 Assist the COMPANY in its daily operations;

1.2 Perform odd jobs as may be assigned.

2. That both parties shall observe the following terms and conditions
as stipulated, to wit:

2.1 CONTRACTOR must carry on an independent legitimate

business, and must comply with all the pertinent laws of the
government both local and national;

2.2 CONTRACTOR must provide all hand tools and equipment

necessary in the performance of their work.

However, the COMPANY may allow the use of its fixed equipment as
a casual facility in the performance of the contract;

2.3 CONTRACTOR must comply with the attached scope of work,

specifications, and GMP and safety practices of the company;

2.4 CONTRACTOR must undertake the contract work under the

following manner:

A. on his own account;

b. under his own responsibility;

c. according to his manner and method, free from the control and
direction of the company in all matters connected with the
performance of the work except as to the result thereof;

3. CONTRACTOR must pay the prescribed minimum wage, remit

SSS/MEDICARE premiums to proper government agencies, and
submit copies of payroll and proof of SSS/MEDICARE remittances to
the COMPANY;

4. This contract shall be for a specific period of Six (6) months from
July 1 to December 31, 1993; x x x.
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Pursuant to the foregoing Service Contract, CAMPCO members

rendered services to petitioner. The number of CAMPCO members
that report for work and the type of service they performed
depended on the needs of petitioner at any given time. Although the
Service Contract specifically stated that it shall only be for a period
of six months, i.e., from 1 July to 31 December 1993, the parties
had apparently extended or renewed the same for the succeeding
years without executing another written contract. It was under
these circumstances that respondents came to work for petitioner.

Investigation by DOLE

Concomitantly, the Sangguniang Bayan of Polomolok, South

Cotabato, passed Resolution No. 64, on 5 May 1993, addressed to
then Secretary Ma. Nieves R. Confessor of the Department of Labor
and Employment (DOLE), calling her attention to the worsening
working conditions of the petitioner's workers and the organization
of contractual workers into several cooperatives to replace the
individual labor-only contractors that used to supply workers to the
petitioner. Acting on the said Resolution, the DOLE Regional Office
No. XI in Davao City organized a Task Force that conducted an
investigation into the alleged labor-only contracting activities of the
cooperatives in Polomolok.7

On 24 May 1993, the Senior Legal Officer of petitioner wrote a letter

addressed to Director Henry M. Parel of DOLE Regional Office No.
XI, supposedly to correct the misinformation that petitioner was
involved in labor-only contracting, whether with a cooperative or
any private contractor. He further stated in the letter that petitioner
was not hiring cooperative members to replace the regular workers
who were separated from service due to redundancy; that the
cooperatives were formed by the immediate dependents and
relatives of the permanent workers of petitioner; that these
cooperatives were registered with the CDA; and that these
cooperatives were authorized by their respective constitutions and
by-laws to engage in the job contracting business.8

The Task Force submitted a report on 3 June 1993 identifying six

cooperatives that were engaged in labor-only contracting, one of
which was CAMPCO. The DOLE Regional Office No. XI held a
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conference on 18 August 1993 wherein the representatives of the

cooperatives named by the Task Force were given the opportunity
to explain the nature of their activities in relation to petitioner.
Subsequently, the cooperatives were required to submit their
position papers and other supporting documents, which they did on
30 August 1993. Petitioner likewise submitted its position paper on
15 September 1993.9

On 19 October 1993, Director Parel of DOLE Regional Office No. XI

issued an Order10 in which he made the following findings'

Records submitted to this Office show that the six (6)

aforementioned cooperatives are all duly registered with the
Cooperative Development Authority (CDA). These cooperatives were
also found engaging in different activities with DOLE PHILIPPINES,
INC. a company engaged in the production of pineapple and export
of pineapple products. Incidentally, some of these cooperatives
were also found engaging in activities which are directly related to
the principal business or operations of the company. This is true in
the case of the THREE (3) Cooperatives, namely; Adventurer's Multi
Purpose Cooperative, Human Resource Multi Purpose Cooperative
and Cannery Multi Purpose Cooperative.

From the foregoing findings and evaluation of the activities of

Adventurer's Multi Purpose Cooperative, Human Resource Multi
Purpose Cooperative and Cannery Multi Purpose Cooperative, this
Office finds and so holds that they are engaging in Labor Only
Contracting Activities as defined under Section 9, Rule VIII, Book III
of the rules implementing the Labor Code of the Philippines, as
amended which we quote:

"Section 9 Labor Only Contracting - a) Any person who undertakes

to supply workers to an employer shall be deemed to be engaged in
labor-only contracting where such person:

1) Does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other materials;
andcralawlibrary
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2) The workers recruited and placed by such person are performing

activities which are directly related to the principal business or
operation of the employer to which workers are habitually
employed.

b) Labor-only contracting as defined herein is hereby prohibited and

the person acting as contractor shall be considered merely as an
agent or intermediary of the employer who shall be responsible to
the workers in the same manner and extent as if the latter were
directly employed by him."

WHEREFORE, premises considered, ADVENTURER'S MULTI PURPOSE

COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE COOPERATIVE
and CANNERY MULTI PURPOSE COOPERATIVE are hereby declared
to be engaged in labor only contracting which is a prohibited
activity. The same cooperatives are therefore ordered to cease and
desist from further engaging in such activities.

The three (3) other cooperatives, namely Polomolok Skilled Workers

Multi Purpose Cooperative, Unified Engineering and Manpower
Service Multi Purpose Cooperative and Tibud sa Katibawasan Multi
Purpose Cooperative whose activities may not be directly related to
the principal business of DOLE Philippines, Inc. are also advised not
to engage in labor only contracting with the company.

All the six cooperatives involved appealed the afore-quoted Order to

the Office of the DOLE Secretary, raising the sole issue that DOLE
Regional Director Director Parel committed serious error of law in
directing the cooperatives to cease and desist from engaging in
labor-only contracting. On 15 September 1994, DOLE
Undersecretary Cresencio B. Trajano, by the authority of the DOLE
Secretary, issued an Order11 dismissing the appeal on the basis of
the following ratiocination'

The appeal is devoid of merit.

The Regional Director has jurisdiction to issue a cease and desist

order as provided by Art. 106 of the Labor Code, as amended, to
wit:
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"Art. 106. Contractor or subcontractor. x x x

xxx

The Secretary of Labor may, by appropriate regulations, restrict or

prohibit the contracting out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor only contracting and
job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code (Emphasis
supplied)cralawlibrary

There is "labor-only" contracting where the person supplying

workers to an employer does not have substantial capital or
investment in the forms of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to
the principal business of the employer. In such cases, the person or
the intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him."

in relation to Article 128(b) of the Labor Code, as amended by

Republic Act No. 7730, which reads:

"Art. 128. Visitorial and Enforcement Power.

b) Notwithstanding the provisions of Articles 129 and 217 of this

Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based
on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their
orders, except in cases where the employer contests the findings of
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the labor employment and enforcement officer and raises issues

supported by documentary proof which were not considered in the
course of inspection.

An order issued by the duly authorized representative of the

Secretary of Labor and Employment under this article may be
appealed to the latter. In case said order involves a monetary
award, an appeal by the employer may be perfected only upon the
posting of a cash bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order appealed from."

The records reveal that in the course of the inspection of the

premises of Dolefil, it was found out that the activities of the
members of the [cooperatives] are necessary and desirable in the
principal business of the former; and that they do not have the
necessary investment in the form of tools and equipments. It is
worthy to note that the cooperatives did not deny that they do not
have enough capital in the form of tools and equipment. Under the
circumstances, it could not be denied that the [cooperatives] are
considered as labor-only contractors in relation to the business
operation of DOLEFIL, INC.

Thus, Section 9, Rule VIII, Book III of the Omnibus Rules

Implementing the Labor Code, provides that:

"Sec. 9. Labor-only contracting. - (a) Any person who undertakes to

supply workers to an employer shall be deemed to be engaged in
labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other materials;
andcralawlibrary

(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually
employed.
APEL FULL CASE

(b) Labor-only contracting as defined herein is hereby prohibited

and the person acting as a contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were
directly employed by him.

x x x x"

Violation of the afore-quoted provision is considered a labor

standards violation and thus, within the visitorial and enforcement
powers of the Secretary of Labor and Employment (Art. 128).

The Regional Director's authority to issue a cease and desist order

emanates from Rule I, Section 3 of the Rules on Disposition of Labor
Standard Cases in the Regional Offices, to wit:

"Section 3. Authorized representative of the Secretary of Labor and

Employment. - The Regional Directors shall be the duly authorized
representatives of the Secretary of Labor and Employment in the
administration and enforcement of the labor standards within their
respective territorial jurisdiction."

The power granted under Article 106 of the Labor Code to the
Secretary of Labor and Employment to restrict or prohibit the
contracting out of labor to protect the rights of workers established
under the Code is delegated to the Regional Directors by virtue of
the above-quoted provision.

The reason why "labor-only" contracting is prohibited under the

Labor Code is that it encourages circumvention of the provisions of
the Labor Code on the workers' right to security of tenure and to
self-organization.

WHEREFORE, the respondents' Appeal is hereby DISMISSED for lack

of merit. The Order of the Regional Director, Regional Office No. XI,
Davao City, is AFFIRMED.

After the motion for reconsideration of the foregoing Order was

denied, no further motion was filed by the parties, and the Order,
dated 15 September 1994, of DOLE Undersecretary Trajano became
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final and executory. A Writ of Execution12 was issued by DOLE

Regional Office No. XI only on 27 July 1999, years after the
issuance of the order subject of the writ. The DOLE Regional Office
No. XI was informed that CAMPCO and two other cooperatives
"continued to operate at DOLE Philippines, Inc. despite the cease
and desist Order" it had issued. It therefore commanded the Sheriff
to proceed to the premises of CAMPCO and the two other
cooperatives and implement its Order dated 19 October 1993.

Respondent's Complaint before the NLRC

Respondents started working for petitioner at various times in the

years 1993 and 1994, by virtue of the Service Contract executed
between CAMPCO and petitioner. All of the respondents had already
rendered more than one year of service to petitioner. While some of
the respondents were still working for petitioner, others were put on
"stay home status" on varying dates in the years 1994, 1995, and
1996 and were no longer furnished with work thereafter. Together,
respondents filed a Complaint,13 on 19 December 1996, with the
National Labor Relations Commission (NLRC), for illegal dismissal,
regularization, wage differentials, damages and attorney's fees.

In their Position Paper,14 respondents reiterated and expounded on

the allegations they previously made in their Complaint'

Sometime in 1993 and 1994, [herein petitioner] Dolefil engaged the

services of the [herein respondents] through Cannery Multi-purpose
Cooperative. A cooperative which was organized through the
initiative of Dolefil in order to fill in the vacuum created as a result
of the dismissal of the regular employees of Dolefil sometime in
1990 to 1993.

The [respondents] were assigned at the Industrial Department of

respondent Dolefil. All tools, implements and machineries used in
performing their task such as: can processing attendant, feeder
of canned pineapple at pineapple processing, nata de coco
processing attendant, fruit cocktail processing attendant,
and etc. were provided by Dolefil. The cooperative does not have
substantial capital and does not provide the [respondents] with the
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necessary tools to effectively perform their assigned task as the

same are being provided by Dolefil.

The training and instructions received by the [respondents] were

provided by Dolefil. Before any of the [respondents] will be allowed
to work, he has to undergo and pass the training prescribed by
Dolefil. As a matter of fact, the trainers are employees of Dolefil.

The [respondents] perform their assigned task inside the premises

of Dolefil. At the job site, they were given specific task and
assignment by Dolefil's supervisors assigned to supervise the works
and efficiency of the complainants. Just like the regular employees
of Dolefil, [respondents] were subjected to the same rules and
regulations observe [sic] inside company premises and to some
extent the rules applied to the [respondents] by the company
through its officers are even stricter.

The functions performed by the [respondents] are the same

functions discharged by the regular employees of Dolefil. In fact, at
the job site, the [respondents] were mixed with the regular workers
of Dolefil. There is no difference in so far as the job performed by
the regular workers of Dolefil and that of the [respondents].

Some of the [respondents] were deprived of their employment

under the scheme of "stay home status" where they were advised to
literally stay home and wait for further instruction to report anew
for work. However, they remained in this condition for more than
six months. Hence, they were constructively or illegally dismissed.

Respondents thus argued that they should be considered regular

employees of petitioner given that: (1) they were performing jobs
that were usually necessary and desirable in the usual business of
petitioner; (2) petitioner exercised control over respondents, not
only as to the results, but also as to the manner by which they
performed their assigned tasks; and (3) CAMPCO, a labor-only
contractor, was merely a conduit of petitioner. As regular employees
of petitioner, respondents asserted that they were entitled to
security of tenure and those placed on "stay home status" for more
than six months had been constructively and illegally dismissed.
APEL FULL CASE

Respondents further claimed entitlement to wage differential, moral

damages, and attorney's fees.

In their Supplemental Position Paper,15 respondents presented, in

support of their Complaint, the Orders of DOLE Regional Director
Parel, dated 19 October 1993, and DOLE Undersecretary Trajano,
dated 15 September 1994, finding that CAMPCO was a labor-only
contractor and directing CAMPCO to cease and desist from any
further labor-only contracting activities.

Petitioner, in its Position Paper16 filed before the NLRC, denied that

respondents were its employees.

Petitioner explained that it found the need to engage external

services to augment its regular workforce, which was affected by
peaks in operation, work backlogs, absenteeism, and excessive
leaves. It used to engage the services of individual workers for
definite periods specified in their employment contracts and never
exceeding one year. However, such an arrangement became the
subject of a labor case,17 in which petitioner was accused of
preventing the regularization of such workers. The Labor Arbiter
who heard the case, rendered his Decision18 on 24 June 1994
declaring that these workers fell squarely within the concept of
seasonal workers as envisaged by Article 280 of the Labor Code, as
amended, who were hired by petitioner in good faith and in
consonance with sound business practice; and consequently,
dismissing the complaint against petitioner. The NLRC, in its
Resolution,19 dated 14 March 1995, affirmed in toto the Labor
Arbiter's Decision and further found that the workers were validly
and legally engaged by petitioner for "term employment," wherein
the parties agreed to a fixed period of employment, knowingly and
voluntarily, without any force, duress or improper pressure being
brought to bear upon the employees and absent any other
circumstance vitiating their consent. The said NLRC Resolution
became final and executory on 18 June 1996. Despite the favorable
ruling of both the Labor Arbiter and the NLRC, petitioner decided to
discontinue such employment arrangement. Yet, the problem of
petitioner as to shortage of workforce due to the peaks in operation,
work backlogs, absenteeism, and excessive leaves, persisted.
APEL FULL CASE

Petitioner then found a solution in the engagement of cooperatives

such as CAMPCO to provide the necessary additional services.

Petitioner contended that respondents were owners-members of

CAMPCO; that CAMPCO was a duly-organized and registered
cooperative which had already grown into a multi-million enterprise;
that CAMPCO was engaged in legitimate job-contracting with its own
owners-members rendering the contract work; that under the
express terms and conditions of the Service Contract executed
between petitioner (the principal) and CAMPCO (the contractor), the
latter shall undertake the contract work on its own account, under
its own responsibility, and according to its own manner and method
free from the control and direction of the petitioner in all matters
connected with the performance of the work, except as to the result
thereof; and since CAMPCO held itself out to petitioner as a
legitimate job contractor, respondents, as owners-members of
CAMPCO, were estopped from denying or refuting the same.

Petitioner further averred that Department Order No. 10, amending

the rules implementing Books III and VI of the Labor Code, as
amended, promulgated by the DOLE on 30 May 1997, explicitly
recognized the arrangement between petitioner and CAMPCO as
permissible contracting and subcontracting, to wit'

Section 6. Permissible contracting and subcontracting. - Subject to

the conditions set forth in Section 3(d) and (e) and Section 5
hereof, the principal may engage the services of a contractor or
subcontractor for the performance of any of the following;

(a) Works or services temporarily or occasionally needed to meet

abnormal increase in the demand of products or services, provided
that the normal production capacity or regular workforce of the
principal cannot reasonably cope with such demands;

(b) Works or services temporarily or occasionally needed by the

principal for undertakings requiring expert or highly technical
personnel to improve the management or operations of an
enterprise;
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(c) Services temporarily needed for the introduction or promotion of

new products, only for the duration of the introductory or
promotional period;

(d) Works or services not directly related or not integral to the main
business or operation of the principal, including casual work,
janitorial, security, landscaping, and messengerial services, and
work not related to manufacturing processes in manufacturing
establishments;

(e) Services involving the public display of manufacturer's products

which does not involve the act of selling or issuance of receipts or
invoices;

(f) Specialized works involving the use of some particular, unusual,

or peculiar skills, expertise, tools or equipment the performance of
which is beyond the competence of the regular workforce or
production capacity of the principal; andcralawlibrary

(g) Unless a reliever system is in place among the regular

workforce, substitute services for absent regular employees,
provided that the period of service shall be coextensive with the
period of absence and the same is made clear to the substitute
employee at the time of engagement. The phrase "absent regular
employees" includes those who are serving suspensions or other
disciplinary measures not amounting to termination of employment
meted out by the principal, but excludes those on strike where all
the formal requisites for the legality of the strike have been prima
facie complied with based on the records filed with the National
Conciliation and Mediation Board.

According to petitioner, the services rendered by CAMPCO

constituted permissible job contracting under the afore-quoted
paragraphs (a), (c), and (g), Section 6 of DOLE Department Order
No. 10, series of 1997.

After the parties had submitted their respective Position Papers, the
Labor Arbiter promulgated its Decision20 on 11 June 1999, ruling
entirely in favor of petitioner, ratiocinating thus'
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After judicious review of the facts, narrated and supporting

documents adduced by both parties, the undersigned finds [and]
holds that CAMPCO is not engaged in labor-only contracting.

Had it not been for the issuance of Department Order No. 10 that
took effect on June 22, 1997 which in the contemplation of Law is
much later compared to the Order promulgated by the
Undersecretary Cresencio Trajano of Department of [L]abor and
Employment, the undersigned could safely declared [sic] otherwise.
However, owing to the principle observed and followed in legal
practice that the later law or jurisprudence controls, the reliance to
Secretary Trajano's order is overturned.

Labor-only contracting as amended by Department [O]rder No. 10

is defined in this wise:

"Labor-only contracting is prohibited under this Rule is an

arrangement where the contractor or subcontractor merely recruits,
supplied [sic] or places workers to perform a job, work or service
for a principal, and the following elements are present:

i) The contractor or sub-contractor does not have substantial capital

or investment to actually perform the job, work, or service under its
own account & responsibility, and

ii) The employees recruited, supplied or placed by such contractor

or subcontractor are performing activities which are directly related
to the main business of the principal."

Verification of the records reveals that per Annexes "J" and "K" of
[herein petitioner DolePhil's] position paper, which are the yearly
audited Financial Statement and Balance Sheet of CAMPCO shows
[sic] that it has more than substantial capital or investment in order
to qualify as a legitimate job contractor.

We likewise recognize the validity of the contract entered into and

between CAMPCO and [petitioner] for the former to assists [sic] the
latter in its operations and in the performance of odd jobs - such as
the augmentation of regular manning particularly during peaks in
operation, work back logs, absenteeism and excessive leave
APEL FULL CASE

availment of respondent's regular employees. The rule is well-

settled that labor laws discourage interference with an employer's
judgment in the conduct of his business. Even as the law is
solicitors [sic] of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own
business affairs to achieve its purpose cannot be denied (Yuco
Chemical Industries v. Ministry of [L]abor, GR No. 75656, May 28,
1990).

CAMPCO being engaged in legitimate contracting, cannot therefore

declared [sic] as guilty of labor-only contracting which [herein
respondents] want us to believe.

The second issue is likewise answered in the negative. The reason is

plain and simple[,] section 12 of Department [O]rder No. 10 states:

"Section 12. Employee-employer relationship. Except in cases

provided for in Section 13, 14, 15 & 17, the contractor or
subcontractor shall be considered the employer of the contractual
employee for purposes of enforcing the provisions of the Code."

The Resolution of NLRC 5th division, promulgated on March 14, 1

1995 [sic] categorically declares:

"Judging from the very nature of the terms and conditions of their
hiring, the Commission finds the complainants to have
been engaged to perform work, although necessary or desirable to
the business of respondent company, for a definite period or what is
community called TERM EMPLOYMENT. It is clear from the evidence
and record that the nature of the business and operation of
respondent company has its peaks and valleys and therefore, it is
not difficult to discern, inclement weather, or high availment by
regular workers of earned leave credits, additional workers
categorized as casuals, or temporary, are needed to meet the
exigencies." (Underlining in the original)

The validity of fixed-period employment has been consistently

upheld by the Supreme [C]ourt in a long line of cases, the leading
case of which is Brent School, Inc. v. Zamora & Alegre, GR No.
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48494, February 5, 1990. Thus at the end of the contract the

employer-employee relationship is terminated. It behooves upon us
to rule that herein complainants cannot be declared regular rank
and file employees of the [petitioner] company.

Anent the third issue, [respondents] dismally failed to provide us

the exact figures needed for the computation of their wage
differentials. To simply alleged [sic] that one is underpaid of his
wages is not enough. No bill of particulars was submitted. Moreover,
the Order of RTWPB Region XI, Davao City dated February 21, 1996
exempts [petitioner] company from complying Wage Order No. 04
[sic] in so far as such exemption applies only to workers who are
not covered by the Collective Bargaining Agreement, for the period
January 1 to December 31, 1995,. [sic] In so far as [respondents]
were not privies to the CBA, they were the workers referred to by
RTWPB's Order. [H]ence, [respondents'] claims for wage
differentials are hereby dismissed for lack of factual basis.

We find no further necessity in delving into the issues raised by

[respondents] regarding moral damages and attorney's fees for
being moot and academic because of the findings that CAMPCO
does not engaged [sic] in labor-only contracting and that
[respondents] cannot be declared as regular employees of
[petitioner].

WHEREFORE, premises considered, judgment is hereby rendered

in the above-entitled case, dismissing the complaint for lack of
merit.

Respondents appealed the Labor Arbiter's Decision to the NLRC,

reiterating their position that they should be recognized as regular
employees of the petitioner since CAMPCO was a mere labor-only
contractor, as already declared in the previous Orders of DOLE
Regional Director Parel, dated 19 October 1993, and DOLE
Undersecretary Trajano, dated 15 September 1994, which already
became final and executory. The NLRC, in its Resolution,21 dated 29
February 2000, dismissed the appeal and affirmed the Labor
Arbiter's Decision, reasoning as follows'

We find no merit in the appeal.

APEL FULL CASE

The concept of conclusiveness of judgment under the principle of

"res judicata" means that where between the first case wherein
judgment is rendered and the second case wherein such judgment
is invoked, there is identity of parties, but there is no identity of
cause of action, the judgment is conclusive in the second case, only
as to those matters actually and directly controverted and
determined and not as to matters merely involved therein (Viray,
etc. v. Marinas, et al., 49 SCRA 44). There is no denying that the
order of the Department of Labor and Employment, Regional Office
No. XI in case No. RI100-9310-RI-355, which the complainants
perceive to have sealed the status of CAMPCO as labor-only
contractor, proceeded from the visitorial and enforcement power of
the Department Secretary under Article 128 of the Labor Code.
Acting on reports that the cooperatives, including CAMPCO, that
operated and offered services at [herein petitioner] company were
engaging in labor-only contracting activities, that Office conducted a
routinary inspection over the records of said cooperatives and
consequently, found the latter to be engaging in labor-only
contracting activities. This being so, [petitioner] company was not a
real party-in-interest in said case, but the cooperatives concerned.
Therefore, there is no identity of parties between said case and the
present case which means that the afore-said ruling of the DOLE is
not binding and conclusive upon [petitioner] company.

It is not correct, however, to say, as the Labor Arbiter did, that the
afore-said ruling of the Department of Labor and Employment has
been overturned by Department Order No. 10. It is a basic principle
that "once a judgment becomes final it cannot be disturbed, except
for clerical errors or when supervening events render its execution
impossible or unjust" (Sampaguita Garmens  [sic]  Corp. v. NLRC,
G. R. No. 102406, June 7, 1994). Verily, the subsequent issuance of
Department Order No. 10 cannot be construed as supervening event
that would render the execution of said judgment impossible or
unjust. Department Order No. 10 refers to the ramification of some
provisions of the Rules Implementing Articles 106 and 109 of the
Labor Code, without substantially changing the definition of "labor-
only" or "job' contracting.
APEL FULL CASE

Well-settled is the rule that to qualify as an independent job

contractor, one has either substantial capital "or" investment in the
form of tools, equipment and machineries necessary to carry out his
business (see Virginia Neri, et al. v. NLRC, et al., G.R. NOS.
97008-89, July 23, 1993). CAMPCO has admittedly a paid-up capital
of P4,562,470.25 and this is more than enough to qualify it as an
independent job contractor, as aptly held by the Labor Arbiter.

WHEREFORE, the appeal is DISMISSED for lack of merit and the

appealed decision is AFFIRMED.

Petition for  Certiorari  with the Court of Appeals

Refusing to concede defeat, respondents filed with the Court of

Appeals a Petition for Certiorari  under Rule 65 of the revised Rules
of Civil Procedure, asserting that the NLRC acted without or in
excess of its jurisdiction and with grave abuse of discretion
amounting to lack of jurisdiction when, in its Resolution, dated 29
February 2000, it (1) ruled that CAMPCO was a bona fide
independent job contractor with substantial capital, notwithstanding
the fact that at the time of its organization and registration with
CDA, it only had a paid-up capital of P6,600.00; and (2) refused to
apply the doctrine of res judicata against petitioner. The Court of
Appeals, in its Decision,22 dated 20 May 2002, granted due course to
respondents' Petition, and set aside the assailed NLRC Decision.
Pertinent portions of the Court of Appeals Decision are reproduced
below'

In the case at bench, it was established during the proceedings

before the [NLRC] that CAMPCO has a substantial capital. However,
having a substantial capital does not per se qualify CAMPCO as a job
contractor. In order to be considered an independent contractor it is
not enough to show substantial capitalization or investment in the
form of tools, equipment, machinery and work premises. The
conjunction "and," in defining what a job contractor is, means that
aside from having a substantial capital or investment in the form of
tools, equipment, machineries, work premise, and other materials
which are necessary in the conduct of his business, the contractor
must be able to prove that it also carries on an independent
business and undertakes the contract work on his own account
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under his own responsibility according to his own manner and

method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work
except as to the results thereof. [Herein petitioner DolePhil] has
failed to prove, except for the substantial capital requirement, that
CAMPCO has met the other requirements. It was not established
that CAMPCO is engaged or carries on an independent business. In
the performance of the respective tasks of workers deployed by
CAMPCO with [petitioner], it was not established that CAMPCO
undertook the contract of work it entered with [petitioner] under its
own account and its own responsibility. It is [petitioner] who
provides the procedures to be followed by the workers in the
performance of their assigned work. The workers deployed by
CAMPCO to [petitioner] performed activities which are directly
related to the principal business or operations of the employer in
which workers are habitually employed since [petitioner] admitted
that these workers were engaged to perform the job of other
regular employees who cannot report for work.

Moreover, [NLRC] likewise gravely erred in not giving weight to the

Order dated 19 October 1993 issued by the Office of the Secretary
of the Department of Labor and Employment, through
Undersecretary Cresencio Trajano, which affirmed the findings of
the Department of Labor and Employment Regional Office, Region
XI, Davao City that Cannery Multi-Purpose Cooperative is one of the
cooperatives engaged in labor-only contracting activities.

In the exercise of the visitorial and enforcement power of the

Department of Labor and Employment, an investigation was
conducted among the cooperatives organized and existing in
Polomolok, South Cotabato, relative to labor-only contracting
activities. One of the cooperatives investigated was Cannery Multi-
Purpose Cooperative. After the investigation, the Department of
Labor and Employment, Regional Office No. XI, Davao City, through
its Regional Director, issued the Order dated 19 October 1993,
stating:

"WHEREFORE, premises considered, ADVENTURER'S MULTI

PURPOSE COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE
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SKILLED COOPERATIVE and CANNERY MULTI PURPOSE

COOPERATIVE are hereby declared to be engaged in labor only
contracting which is a prohibited activity. The same cooperatives are
therefore ordered to cease and desist from further engaging in such
activities.

xxxx

SO ORDERED."

Cannery Multi Purpose Cooperative, together with the other

cooperatives declared as engaged in labor-only contracting activity,
appeal the above-findings to the Secretary of the Department of
Labor and Employment. Their appeal was dismissed for lack of merit
as follows:: [sic]

xxx

[NLRC] held that CAMPCO, being not a real party-in interest in the
above-case, the said ruling is not binding and conclusive upon
[petitioner]. This Court, however, finds the contrary.

CAMPCO was one of the cooperatives investigated by the

Department of Labor and Employment, Regional Office No. XI,
Davao City, pursuant to Article 128 of the Labor Code. It was one of
the appellants before the Secretary of the Department of Labor
questioning the decision of the Regional Director of DOLE, Regional
Office No. XI, Davao City. This Court noted that in the proceedings
therein, and as mentioned in the decision rendered by
Undersecretary Cresencio B. Trajano of the Department of Labor
and Employment, Manila, regarding the cooperatives' appeal
thereto, the parties therein, including Cannery Multi-Purpose
Cooperative, submitted to the said office their position papers and
Articles of Cooperatives and Certification of Registrations [sic] on 30
August 1993. This is a clear indicia that CAMPCO participated in the
proceedings therein. [NLRC], therefore, committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it held
that CAMPCO was never a party to the said case.
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[Petitioner] invokes Section 6 of Department Order No. 10, series of

1997, issued by the Department of Labor and Employment which
took effect on 22 June 1997. The said section identified the
circumstances which are permissible job contracting, to wit:

xxx

[Petitioner's] main contention is based on the decisions rendered by

the labor arbiter and [NLRC] which are both anchored on
Department Order No. 10 issued by the Department of Labor and
Employment. The said department order provided for several
flexible working relations between a principal, a contractor or
subcontractor and the workers recruited by the latter and deployed
to the former. In the case at bench, [petitioner] posits that the
engagement of [petitioner] of the workers deployed by CAMPCO
was pursuant to D.O. No. 10, Series of 1997.

However, on 8 May 2001, the Department of Labor and Employment

issued Department Order No. 3, series of 2001, revoking
Department Order No. 10, series of 1997. The said department
order took effect on 29 May 2001.

xxx

Under Department Order No. 3, series of 2001, some contracting

and outsourcing arrangements are no longer legitimate modes of
employment relation. Having revoked Department Order No. 10,
series of 1997, [petitioner] can no longer support its argument by
relying on the revoked department order.

Considering that [CAMPCO] is not a job contractor, but one engaged

in labor-only contracting, CAMPCO serves only as an agent of
[petitioner] pursuant to par. (b) of Sec. 9, Rule VIII, Book III of the
Implementing Rules and Regulations of the Labor Code, stating,

xxx

However, the Court cannot declare that [herein respondents] are

regular employees of [petitioner]. x x x
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xxx

In the case at bench, although [respondents] were engaged to

perform activities which are usually necessary or desirable in the
usual business or trade of private respondent, it is apparent,
however, that their services were engaged by [petitioner] only for a
definite period. [Petitioner's] nature of business and operation has
its peaks. In order to meet the demands during peak seasons they
necessarily have to engage the services of workers to work only for
a particular season. In the case of [respondents], when they were
deployed by CAMPCO with [petitioner] and were assigned by the
latter at its cannery department, they were aware that they will be
working only for a certain duration, and this was made known to
them at the time they were employed, and they agreed to the
same.

xxx

The non-rehiring of some of the petitioners who were allegedly put

on a "floating status' is an indication that their services were no
longer needed. They attained their "floating status" only after they
have finished their contract of employment, or after the duration of
the season that they were employed. The decision of [petitioner] in
not rehiring them means that their services were no longer needed
due to the end of the season for which they were hired. And this
Court reiterates that at the time they were deployed to
[petitioner's] cannery division, they knew that the services they
have to render or the work they will perform are seasonal in nature
and consequently their employment is only for the duration of the
season.

ACCORDINGLY, in view of the foregoing, the instant petition

for certiorari is hereby GRANTED DUE COURSE. The decision dated
29 February 2000 and Resolution dated 19 December 2000
rendered by [NLRC] are hereby SET ASIDE. In place thereof, it is
hereby rendered that:

1. Cannery Multi-Purpose Cooperative is a labor-only contractor as

defined under the Labor Code of the Philippines and its
implementing rules and regulations; and that
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2. DOLE Philippines Incorporated is merely an agent or intermediary

of Cannery Multi-Purpose Cooperative.

All other claims of [respondents] are hereby DENIED for lack of

basis.

Both petitioner and respondents filed their respective Motions for

Reconsideration of the foregoing Decision, dated 20 May 2002,
prompting the Court of Appeals to promulgate an Amended Decision
on 27 November 2003, in which it ruled in this wise:

This court examined again the documentary evidence submitted by

the [herein petitioner] and we rule not to disturb our findings in our
Decision dated May 20, 2002. It is our opinion that there was no
competent evidence submitted that would show that CAMPCO is
engaged to perform a specific and special job or service which is
one of the strong indicators that an entity is an independent
contractor. The articles of cooperation and by-laws of CAMPCO do
not show that it is engaged in performing a specific and special job
or service. What is clear is that it is a multi-purpose cooperative
organized under RA No. 6938, nothing more, nothing less.

As can be gleaned from the contract that CAMPCO entered into with
the [petitioner], the undertaking of CAMPCO is to provide
[petitioner] with workforce by assisting the company in its daily
operations and perform odd jobs as may be assigned. It is our
opinion that CAMPCO merely acted as recruitment agency for
[petitioner]. CAMPCO by supplying manpower only, clearly
conducted itself as 'labor-only" contractor. As can be gleaned from
the service contract, the work performed by the [herein
respondents] are directly related to the main business of the
[petitioner]. Clearly, the requisites of "labor-only" contracting are
present in the case at bench.

In view of the above ruling, we find it unnecessary to discuss

whether the Order of Undersecretary Trajano finding that CAMPCO
is a "labor-only" contractor is a determining factor or constitutes res
judicata in the case at bench. Our findings that CAMPCO is a "labor-
only" contractor is based on the evidence presented vis - à-vis  the
rulings of the Supreme Court on the matter.
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Since, the argument that the [petitioner] is the real employer of the
[respondents], the next question that must be answered is - what is
the nature of the employment of the petitioners?

xxx

The afore-quoted [Article 280 of the Labor Code, as amended]

provides for two kinds of employment, namely: (1) regular (2)
casual. In our Decision, we ruled that the [respondents] while
performing work necessary and desirable to the business of the
[petitioner] are seasonal employees as their services were engaged
by the [petitioner] for a definite period or only during peak season.

In the most recent case of Hacienda Fatima v. National

Federation of Sugarcane Workers Food and General Trade,
the Supreme Court ruled that for employees to be excluded from
those classified as regular employees, it is not enough that they
perform work or services that are seasonal in nature. They must
have also been employed only for the duration of one season. It is
undisputed that the [respondents'] services were engaged by the
[petitioner] since 1993 and 1994. The instant complaint was filed in
1996 when the [respondents] were placed on floating status.
Evidently, [petitioner] employed the [respondents] for more than
one season. Therefore, the general rule on regular employment is
applicable. The herein petitioners who performed their jobs in the
workplace of the [petitioner] every season for several years, are
considered the latter's regular employees for having performed
works necessary and desirable to the business of the [petitioner].
The [petitioner's] eventual refusal to use their services'even if they
were ready, able and willing to perform their usual duties whenever
these were available and hiring other workers to perform the tasks
originally assigned to [respondents] amounted to illegal dismissal of
the latter. We thus, correct our earlier ruling that the herein
petitioners are seasonal workers. They are regular employees within
the contemplation of Article 280 of the Labor Code and thus cannot
be dismissed except for just or authorized cause. The Labor Code
provides that when there is a finding of illegal dismissal, the effect
is that the employee dismissed shall be reinstated to his former
APEL FULL CASE

position without loss of seniority rights with backwages from the

date of his dismissal up to his actual reinstatement.

This court however, finds no basis for the award of damages and
attorney's fees in favor of the petitioners.

WHEREFORE, the Decision dated May 20, 2002 rendered by this

Court is hereby AMENDED as follows:

1) [Petitioner] DOLE PHILIPPINES is hereby declared the employer

of the [respondents].

2) [Petitioner] DOLE PHILIPPINES is hereby declared guilty of illegal

dismissal and ordered to immediately reinstate the [respondents] to
their former position without loss of seniority rights and other
benefits, and to pay each of the [respondents] backwages from the
date of the filing of illegal dismissal on December 19, 1996 up to
actual reinstatement, the same to be computed by the labor arbiter.

3) The claims for damages and attorney's fees are hereby denied for
lack of merit.

No costs.23

The Petition at Bar

Aggrieved by the Decision, dated 20 May 2002, and the Amended

Decision, dated 27 November 2003, of the Court of Appeals,
petitioner filed the instant Petition for Review on Certiorari under
Rule 45 of the revised Rules of Civil Procedure, in which it made the
following assignment of errors '

I.

THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE

OF JUDCIAL PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL
FINDINGS AND DISREGARDED THE UNIFORM AND CONSISTENT
FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC,
WHICH MUST BE ACCORDED GREAT WEIGHT, RESPECT AND EVEN
FINALITY. IN SO DOING, THE COURT OF APPEALS EXCEEDED ITS
APEL FULL CASE

AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE RULES OF

COURT.

II.

THE COURT OF APPEALS HAS DECIDED A QUESTION OF

SUBSTANCE IN A WAY NOT IN ACCORD WITH THE CONSTITUTION,
LAW, APPLICABLE RULES AND REGULATIONS AND DECISIONS OF
THE SUPREME COURT IN NOT HOLDING THAT DEPARTMENT ORDER
NO. 10, SERIES OF 1997  IS THE APPLICABLE REGULATION IN THIS
CASE. IN GIVING RETROACTIVE APPLICATION TO DEPARTMENT
ORDER NO. 3, SERIES OF 2001,  THE COURT OF APPEALS VIOLATED
THE CONSTITUTIONAL PROVISION AGAINST IMPAIRMENT OF
CONTRACTS AND DEPRIVED PETITIONER OF THE DUE PROCESS OF
THE LAW.

III.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
GIVING WEIGHT TO THE ORDER DATED 19 OCTOBER 1993 ISSUED
BY THE OFFICE OF SECRETARY OF LABOR, WHICH AFFIRMED THE
FINDINGS OF THE DOLE REGIONAL OFFICE (REGION XI, DAVAO
CITY) THAT CAMPCO IS ONE OF THE COOPERATIVES ENGAGED IN
LABOR-ONLY CONTRACTING ACTIVITIES.

IV.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN NOT RULING THAT RESPONDENTS, BY ACTIVELY REPRESENTING
THEMSELVES AND WARRANTING THAT THEY ARE ENGAGED IN
LEGITIMATE JOB CONTRACTING, ARE BARRED BY THE EQUITABLE
PRINCIPLE OF ESTOPPEL FROM ASSERTING THAT THEY ARE
REGULAR EMPLOYEES OF PETITIONER.

V.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
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RULING THAT CAMPCO IS ENGAGED IN THE PROHIBITED ACT

OF "LABOR-ONLY CONTRACTING" DESPITE THERE BEING
SUBSTANTIAL EVIDENCE TO THE CONTRARY.

VI.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
RULING THAT PETITIONER IS THE EMPLOYER OF RESPONDENTS
AND THAT PETITIONER IS GUILTY OF ILLEGAL DISMISSAL.24

This Court's Ruling

Anent the first assignment of error, petitioner argues that judicial

review under Rule 65 of the revised Rules of Civil Procedure is
limited only to issues concerning want or excess or jurisdiction or
grave abuse of discretion. The special civil action for certiorari is a
remedy designed to correct errors of jurisdiction and not mere
errors of judgment. It is the contention of petitioner that the NLRC
properly assumed jurisdiction over the parties and subject matter of
the instant case. The errors assigned by the respondents in their
Petition for Certiorari before the Court of Appeals do not pertain to
the jurisdiction of the NLRC; they are rather errors of judgment
supposedly committed by the the NLRC, in its Resolution, dated 29
February 2000, and are thus not the proper subject of a Petition
for Certiorari. Petitioner also posits that the Petition
for Certiorari filed by respondents with the Court of Appeals raised
questions of fact that would necessitate a review by the appellate
court of the evidence presented by the parties before the Labor
Arbiter and the NLRC, and that questions of fact are not a fit subject
for a special civil action for certiorari.

It has long been settled in the landmark case of St. Martin Funeral
Home v. NLRC,25 that the mode for judicial review over decisions of
the NLRC is by a Petition for Certiorari under Rule 65 of the revised
Rules of Civil Procedure. The different modes of appeal, namely,
writ of error (Rule 41), Petition for Review (Rules 42 and 43), and
Petition for Review on Certiorari (Rule 45), cannot be availed of
APEL FULL CASE

because there is no provision on appellate review of NLRC decisions

in the Labor Code, as amended.26 Although the same case
recognizes that both the Court of Appeals and the Supreme Court
have original jurisdiction over such petitions, it has chosen to
impose the strict observance of the hierarchy of courts. Hence, a
Petition for Certiorari of a decision or resolution of the NLRC should
first be filed with the Court of Appeals; direct resort to the Supreme
Court shall not be allowed unless the redress desired cannot be
obtained in the appropriate courts or where exceptional and
compelling circumstances justify an availment of a remedy within
and calling for the exercise by the Supreme Court of its primary
jurisdiction.

The extent of judicial review by certiorari of decisions or resolutions

of the NLRC, as exercised previously by the Supreme Court and,
now, by the Court of Appeals, is described in Zarate v.
Olegario,27 thus'

The rule is settled that the original and exclusive jurisdiction of this
Court to review a decision of respondent NLRC (or Executive Labor
Arbiter as in this case) in a Petition for Certiorari under Rule 65 does
not normally include an inquiry into the correctness of its evaluation
of the evidence. Errors of judgment, as distinguished from errors of
jurisdiction, are not within the province of a special civil action
for certiorari, which is merely confined to issues of jurisdiction or
grave abuse of discretion. It is thus incumbent upon petitioner to
satisfactorily establish that respondent Commission or executive
labor arbiter acted capriciously and whimsically in total disregard of
evidence material to or even decisive of the controversy, in order
that the extraordinary writ of certiorari will lie. By grave abuse of
discretion is meant such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, and it must be
shown that the discretion was exercised arbitrarily or despotically.
For certiorari to lie, there must be capricious, arbitrary and
whimsical exercise of power, the very antithesis of the judicial
prerogative in accordance with centuries of both civil law and
common law traditions.
APEL FULL CASE

The Court of Appeals, therefore, can grant the Petition

for Certiorari if it finds that the NLRC, in its assailed decision or
resolution, committed grave abuse of discretion by capriciously,
whimsically, or arbitrarily disregarding evidence which is material or
decisive of the controversy; and the Court of Appeals can not make
this determination without looking into the evidence presented by
the parties. Necessarily, the appellate court can only evaluate the
materiality or significance of the evidence, which is alleged to have
been capriciously, whimsically, or arbitrarily disregarded by the
NLRC, in relation to all other evidence on record.

As this Court elucidated in Garcia v. National Labor Relations

Commission28 - -

[I]n Ong v. People, we ruled that certiorari can be properly resorted

to where the factual findings complained of are not supported by
the evidence on record. Earlier, in Gutib v. Court of Appeals, we
emphasized thus:

[I]t has been said that a wide breadth of discretion is granted a

court of justice in certiorari proceedings. The cases in
which certiorari will issue cannot be defined, because to do so would
be to destroy its comprehensiveness and usefulness. So wide is the
discretion of the court that authority is not wanting to show
that certiorari is more discretionary than either prohibition
or mandamus . In the exercise of our superintending control over
inferior courts, we are to be guided by all the circumstances of each
particular case "as the ends of justice may require." So it is that the
writ will be granted where necessary to prevent a substantial wrong
or to do substantial justice.

And in another case of recent vintage, we further held:

In the review of an NLRC decision through a special civil action

for certiorari, resolution is confined only to issues of jurisdiction and
grave abuse of discretion on the part of the labor tribunal. Hence,
the Court refrains from reviewing factual assessments of lower
courts and agencies exercising adjudicative functions, such as the
NLRC. Occasionally, however, the Court is constrained to delve into
APEL FULL CASE

factual matters where, as in the instant case, the findings of the

NLRC contradict those of the Labor Arbiter.

In this instance, the Court in the exercise of its equity jurisdiction

may look into the records of the case and re-examine the
questioned findings. As a corollary, this Court is clothed with ample
authority to review matters, even if they are not assigned as errors
in their appeal, if it finds that their consideration is necessary to
arrive at a just decision of the case. The same principles are now
necessarily adhered to and are applied by the Court of Appeals in its
expanded jurisdiction over labor cases elevated through a petition
for certiorari; thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis reversed the
ruling of the NLRC.

II

The second assignment of error delves into the significance and

application to the case at bar of the two department orders issued
by DOLE. Department Order No. 10, series of 1997, amended the
implementing rules of Books III and VI of the Labor Code, as
amended. Under this particular DOLE department order, the
arrangement between petitioner and CAMPCO would qualify as
permissible contracting. Department Order No. 3, series of 2001,
revoked Department Order No. 10, series of 1997, and reiterated
the prohibition on labor-only contracting.

Attention is called to the fact that the acts complained of by the

respondents occurred well before the issuance of the two DOLE
department orders in 1997 and 2001. The Service Contract between
DOLE and CAMPCO was executed on 17 August 1993. Respondents
started working for petitioner sometime in 1993 and 1994. While
some of them continued to work for petitioner, at least until the
filing of the Complaint, others were put on "stay home status" at
various times in 1994, 1995, and 1996. Respondents filed their
Complaint with the NLRC on 19 December 1996.

A basic rule observed in this jurisdiction is that no statute, decree,

ordinance, rule or regulation shall be given retrospective effect
unless explicitly stated.29 Since there is no provision at all in the
APEL FULL CASE

DOLE department orders that expressly allowed their retroactive

application, then the general rule should be followed, and the said
orders should be applied only prospectively.

Which now brings this Court to the question as to what was the
prevailing rule on labor-only contracting from 1993 to 1996, the
period when the occurrences subject of the Complaint before the
NLRC took place.

Article 106 of the Labor Code, as amended, permits legitimate job

contracting, but prohibits labor-only contracting. The said provision
reads'

ART. 106. Contractor or subcontractor. - Whenever an employer

enters into a contract with another person for the performance of
the former's work, the employees of the contractor and of the
latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.

In the event that the contractor or subcontractor fails to pay the

wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that
he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or

prohibit the contracting out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and
job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying

workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to
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the principal business of such employer. In such cases, the person

or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

To implement the foregoing provision of the Labor Code, as

amended, Sections 8 and 9, Rule VIII, Book III of the implementing
rules, in force since 1976 and prior to their amendment by DOLE
Department Order No. 10, series of 1997, provided as follows'

Sec. 8. Job contracting. - There is job contracting permissible under

the Code if the following conditions are met;

(1) The contractor carries on an independent business and

undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results
thereof; and cralawlibrary

(2) The contractor has substantial capital or investment in the form

of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.

Sec. 9. Labor-only contracting. - (a) Any person who undertakes to

supply workers to an employer shall be deemed to be engaged in
labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other materials;
andcralawlibrary

(2) The workers recruited and placed by such persons are

performing activities which are directly related to the principal
business or operations of the employer in which workers are
habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited

and the person acting as contractor shall be considered merely as
an agent or intermediary of the employer who shall be responsible
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to the workers in the same manner and extent as if the latter were
directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor
shall determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure the
protection and welfare of the workers.

Since these statutory and regulatory provisions were the ones in

force during the years in question, then it was in consideration of
the same that DOLE Regional Director Parel and DOLE
Undesrsecretary Trajano issued their Orders on 19 September 1993
and 15 September 1994, respectively, both finding that CAMPCO
was engaged in labor-only contracting. Petitioner, in its third
assignment of error, questions the weight that the Court of Appeals
gave these orders in its Decision, dated 20 May 2002, and Amended
Decision, dated 27 November 2003.

III

The Orders of DOLE Regional Director Parel, dated 19 September

1993, and of DOLE Undersecretary Trajano, dated 15 September
1994, were issued pursuant to the visitorial and enforcement power
conferred by the Labor Code, as amended, on the DOLE Secretary
and his duly authorized representatives, to wit'

ART. 128. Visitorial and enforcement power. - (a) The Secretary of

Labor or his duly authorized representatives, including labor
regulation officers, shall have access to employer's records and
premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question
any employee and investigate any fact, condition or matter which
may be necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law, wage order or rules
and regulations pursuant thereto.
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(b) Notwithstanding the provisions of Articles 129 and 217 of this

Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based
on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their
orders, except in cases where the employer contests the findings of
the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the
course of inspection.

An order issued by the duly authorized representative of the

Secretary of Labor and Employment under this article may be
appealed to the latter. In case said order involves a monetary
award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Secretary of Labor and Employment
in the amount equivalent to the monetary award in the order
appealed from. (Emphasis supplied.)

Before Regional Director Parel issued his Order, dated 19

September 1993, a Task Force investigated the operations of
cooperatives in Polomolok, South Cotabato, and submitted a report
identifying six cooperatives that were engaged in labor-only
contracting, one of which was CAMPCO. In a conference before the
DOLE Regional Office, the cooperatives named by the Task Force
were given the opportunity to explain the nature of their activities in
relation to petitioner; and, the cooperatives, as well as petitioner,
submitted to the DOLE Regional Office their position papers and
other supporting documents to refute the findings of the Task Force.
It was only after these procedural steps did Regional Director Parel
issued his Order finding that three cooperatives, including CAMPCO,
were indeed engaged in labor-only contracting and were directed to
cease and desist from further engaging in such activities. On
appeal, DOLE Undersecretary Trajano, by authority of the DOLE
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Secretary, affirmed Regional Director Parel's Order. Upon denial of

the Motion for Reconsideration filed by the cooperatives, and no
further appeal taken therefrom, the Order of DOLE Undersecretary
Trajano, dated 15 September 1994, became final and executory.

Petitioner avers that the foregoing Orders of the authorized

representatives of the DOLE Secretary do not constitute res
judicata in the case filed before the NLRC. This Court, however,
believes otherwise and finds that the final and executory Orders of
the DOLE Secretary or his authorized representatives should bind
the NLRC.

It is obvious that the visitorial and enforcement power granted to

the DOLE Secretary is in the nature of a quasi-judicial power. Quasi-
judicial power has been described by this Court in the following
manner'

Quasi-judicial or administrative adjudicatory power on the other

hand is the power of the administrative agency to adjudicate the
rights of persons before it. It is the power to hear and
determine questions of fact to which the legislative policy is
to apply and to decide in accordance with the standards laid
down by the law itself in enforcing and administering the
same law. The administrative body exercises its quasi-judicial
power when it performs in a judicial manner an act which is
essentially of an executive or administrative nature, where the
power to act in such manner is incidental to or reasonably
necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their quasi-
judicial functions the administrative officers or bodies are required
to investigate facts or ascertain the existence of facts, hold
hearings, weigh evidence, and draw conclusions from them
as basis for their official action and exercise of discretion in
a judicial nature. Since rights of specific persons are affected it is
elementary that in the proper exercise of quasi-judicial power due
process must be observed in the conduct of the
proceedings.30 (Emphasis supplied.)

The DOLE Secretary, under Article 106 of the Labor Code, as

amended, exercise quasi-judicial power, at least, to the extent
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necessary to determine violations of labor standards provisions of

the Code and other labor legislation. He can issue compliance orders
and writs of execution for the enforcement of his orders. As
evidence of the importance and binding effect of the compliance
orders of the DOLE Secretary, Article 128 of the Labor Code, as
amended, further provides'

ART. 128. Visitorial and enforcement power.'

xxx

(d) It shall be unlawful for any person or entity to obstruct, impede,

delay or otherwise render ineffective the orders of the Secretary of
Labor or his duly authorized representatives issued pursuant to the
authority granted under this article, and no inferior court or entity
shall issue temporary or permanent injunction or restraining order
or otherwise assume jurisdiction over any case involving the
enforcement orders issued in accordance with this article.

The Orders of DOLE Regional Director Parel, dated 19 September

1993, and of DOLE Undersecretary Trajano, dated 15 September
1994, consistently found that CAMPCO was engaging in labor-only
contracting. Such finding constitutes res judicata in the case filed by
the respondents with the NLRC.

It is well-established in this jurisdiction that the decisions and

orders of administrative agencies, rendered pursuant to their quasi-
judicial authority, have upon their finality, the force and binding
effect of a final judgment within the purview of the doctrine of res
judicata. The rule of res judicata, which forbids the reopening of a
matter once judicially determined by competent authority, applies
as well to the judicial and quasi-judicial acts of public, executive or
administrative officers and boards acting within their jurisdiction as
to the judgments of courts having general judicial powers. The
orderly administration of justice requires that the judgments or
resolutions of a court or quasi-judicial body must reach a point of
finality set by the law, rules and regulations, so as to write finis to
disputes once and for all. This is a fundamental principle in the
Philippine justice system, without which there would be no end to
litigations.31
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Res judicata has dual aspects, "bar by prior judgment" and

"conclusiveness of judgment." This Court has previously clarified the
difference between the two'

Section 49, Rule 39 of the Revised Rules of Court lays down the
dual aspects of res judicata in actions in personam. to wit:

"Effect of judgment. - The effect of a judgment or final order

rendered by a court or judge of the Philippines, having jurisdiction
to pronounce the judgment or order, may be as follows:

xxx

(b) In other cases the judgment or order is, with respect to the
matter directly adjudged or as to any other matter that could have
been raised in relation thereto, conclusive between the parties and
their successors in interest by title subsequent to the
commencement of the action or special proceeding, litigating for the
same thing and under the same title and in the same capacity;

(c) In any other litigation between the same parties or their

successors in interest, that only is deemed to have been adjudged
in a former judgment which appears upon its face to have been so
adjudged, or which was actually and necessarily included therein or
necessary thereto."

Section 49(b) enunciates the first concept of res judicata known as

"bar by prior judgment," whereas, Section 49(c) is referred to as
"conclusiveness of judgment."

There is "bar by former judgment" when, between the first case

where the judgment was rendered, and the second case where such
judgment is invoked, there is identity of parties, subject matter and
cause of action. When the three identities are present, the judgment
on the merits rendered in the first constitutes an absolute bar to the
subsequent action. But where between the first case wherein
Judgment is rendered and the second case wherein such judgment
is invoked, there is only identity of parties but there is no identity of
cause of action, the judgment is conclusive in the second case, only
as to those matters actually and directly controverted and
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determined, and not as to matters merely involved therein. This is

what is termed "conclusiveness of judgment."

The second concept of res judicata, conclusiveness of judgment, is

the one applicable to the case at bar.

The same parties who participated in the proceedings before the

DOLE Regional Office are the same parties involved in the case filed
before the NLRC. CAMPCO, on behalf of its members, attended the
conference before the DOLE Regional Office; submitted its position
paper; filed an appeal with the DOLE Secretary of the Order of
DOLE Regional Director Parel; and moved for reconsideration of the
subsequent Order of DOLE Undersecretary Trajano. Petitioner,
although not expressly named as a respondent in the DOLE
investigation, was a necessary party thereto, considering that
CAMPCO was rendering services to petitioner solely. Moreover,
petitioner participated in the proceedings before the DOLE Regional
Office, intervening in the matter through a letter sent by its Senior
Legal Officer, dated 24 May 1993, and submitting its own position
paper.

While the causes of action in the proceedings before the DOLE and
the NLRC differ, they are, in fact, very closely related. The DOLE
Regional Office conducted an investigation to determine whether
CAMPCO was violating labor laws, particularly, those on labor-only
contracting. Subsequently, it ruled that CAMPCO was indeed
engaging in labor-only contracting activities, and thereafter ordered
to cease and desist from doing so. Respondents came before the
NLRC alleging illegal dismissal by the petitioner of those
respondents who were put on "stay home status," and seeking
regularization of respondents who were still working for petitioner.
The basis of their claims against petitioner rests on the argument
that CAMPCO was a labor-only contractor and, thus, merely an
agent or intermediary of petitioner, who should be considered as
respondents' real employer. The matter of whether CAMPCO was a
labor-only contractor was already settled and determined in the
DOLE proceedings, which should be conclusive and binding upon the
NLRC. What were left for the determination of the NLRC were the
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issues on whether there was illegal dismissal and whether

respondents should be regularized.

This Court also notes that CAMPCO and DOLE still continued with
their Service Contract despite the explicit cease and desist orders
rendered by authorized DOLE officials. There is no other way to look
at it except that CAMPCO and DOLE acted in complete defiance and
disregard of the visitorial and enforcement power of the DOLE
Secretary and his authorized representatives under Article 128 of
the Labor Code, as amended. For the NLRC to ignore the findings of
DOLE Regional Director Parel and DOLE Undersecretary Trajano is
an unmistakable and serious undermining of the DOLE officials'
authority.

IV

In petitioner's fourth assignment of error, it points out that the

Court of Appeals erred in not holding respondents estopped from
asserting that they were regular employees of petitioner since
respondents, as owners-members of CAMPCO, actively represented
themselves and warranted that they were engaged in legitimate job
contracting.

This Court cannot sustain petitioner's argument.

It is true that CAMPCO is a cooperative composed of its members,

including respondents. Nonetheless, it cannot be denied that a
cooperative, as soon as it is registered with the CDA, attains a
juridical personality of its own,32 separate and distinct from its
members; much in the same way that a corporation has a juridical
personality separate and distinct from its stockholders, known as
the doctrine of corporate fiction. The protection afforded by this
doctrine is not absolute, but the exception thereto which
necessitates the piercing of the corporate veil can only be made
under specified circumstances. In Traders Royal Bank v. Court of
Appeals,33 this Court ruled that -

Petitioner cannot put up the excuse of piercing the veil of corporate

entity, as this is merely an equitable remedy, and maybe awarded
only in cases when the corporate fiction is used to defeat public
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convenience, justify wrong, protect fraud or defend crime or where

a corporation is a mere alter ego or business conduit of a person.

Piercing the veil of corporate entity requires the court to see

through the protective shroud which exempts its stockholders from
liabilities that ordinarily, they could be subject to, or distinguishes
one corporation from a seemingly separate one, were it not for the
existing corporate fiction. But to do this, the court must be sure that
the corporate fiction was misused, to such an extent that injustice,
fraud, or crime was committed upon another, disregarding, thus,
his, her, or its rights. It is the corporate entity which the law aims
to protect by this doctrine.

Using the above-mentioned guidelines, is petitioner entitled to a

piercing of the "cooperative identity" of CAMPCO? This Court thinks
not.

It bears to emphasize that the piercing of the corporate veil is an

equitable remedy, and among the maxims of equity are: (1) he who
seeks equity must do equity, and (2) he who comes into equity
must come with clean hands. Hence, a litigant may be denied relief
by a court of equity on the ground that his conduct has been
inequitable, unfair, dishonest, fraudulent, or deceitful as to the
controversy in issue.34

Petitioner does not come before this Court with clean hands. It is
not an innocent party in this controversy.

Petitioner itself admitted that it encouraged and even helped the

establishment of CAMPCO and the other cooperatives in Polomolok,
South Cotabato. These cooperatives were established precisely to
render services to petitioner. It is highly implausible that the
petitioner was lured into entering into the Service Contract with
CAMPCO in 1993 on the latter's misrepresentation and false
warranty that it was an independent job contractor. Even if it is
conceded that petitioner was indeed defrauded into believing that
CAMPCO was an independent contractor, then the DOLE
proceedings should have placed it on guard. Remember that
petitioner participated in the proceedings before the DOLE Regional
Office, it cannot now claim ignorance thereof. Furthermore, even
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after the issuance of the cease and desist order on CAMPCO,

petitioner still continued with its prohibited service arrangement
with the said cooperative. If petitioner was truly defrauded by
CAMPCO and its members into believing that the cooperative was an
independent job contractor, the more logical recourse of petitioner
was to have the Service Contract voided in the light of the explicit
findings of the DOLE officials that CAMPCO was engaging in labor-
only contracting. Instead, petitioner still carried on its Service
Contract with CAMPCO for several more years thereafter.

As previously discussed, the finding of the duly authorized

representatives of the DOLE Secretary that CAMPCO was a labor-
only contractor is already conclusive. This Court cannot deviate
from said finding.

This Court, though, still notes that even an independent review of

the evidence on record, in consideration of the proper labor statutes
and regulations, would result in the same conclusion: that CAMPCO
was engaged in prohibited activities of labor-only contracting.

The existence of an independent and permissible contractor

relationship is generally established by the following criteria:
whether or not the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the
term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and
supervision of the work to another; the employer's power with
respect to the hiring, firing and payment of the contractor's
workers; the control of the premises; the duty to supply the
premises tools, appliances, materials and labor; and the mode,
manner and terms of payment.35

While there is present in the relationship of petitioner and CAMPCO

some factors suggestive of an independent contractor relationship
(i.e., CAMPCO chose who among its members should be sent to
work for petitioner; petitioner paid CAMPCO the wages of the
members, plus a percentage thereof as administrative charge;
CAMPCO paid the wages of the members who rendered service to
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petitioner), many other factors are present which would indicate a

labor-only contracting arrangement between petitioner and
CAMPCO.36

First, although petitioner touts the multi-million pesos assets of

CAMPCO, it does well to remember that such were amassed in the
years following its establishment. In 1993, when CAMPCO was
established and the Service Contract between petitioner and
CAMPCO was entered into, CAMPCO only had P6,600.00 paid-up
capital, which could hardly be considered substantial.37 It only
managed to increase its capitalization and assets in the succeeding
years by continually and defiantly engaging in what had been
declared by authorized DOLE officials as labor-only contracting.

Second, CAMPCO did not carry out an independent business from

petitioner. It was precisely established to render services to
petitioner to augment its workforce during peak seasons. Petitioner
was its only client. Even as CAMPCO had its own office and office
equipment, these were mainly used for administrative purposes; the
tools, machineries, and equipment actually used by CAMPCO
members when rendering services to the petitioner belonged to the
latter.

Third, petitioner exercised control over the CAMPCO members,

including respondents. Petitioner attempts to refute control by
alleging the presence of a CAMPCO supervisor in the work premises.
Yet, the mere presence within the premises of a supervisor from the
cooperative did not necessarily mean that CAMPCO had control over
its members. Section 8(1), Rule VIII, Book III of the implementing
rules of the Labor Code, as amended, required for permissible job
contracting that the contractor undertakes the contract work on his
account, under his own responsibility, according to his own manner
and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work
except as to the results thereof. As alleged by the respondents, and
unrebutted by petitioner, CAMPCO members, before working for the
petitioner, had to undergo instructions and pass the training
provided by petitioner's personnel. It was petitioner who determined
and prepared the work assignments of the CAMPCO members.
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CAMPCO members worked within petitioner's plantation and

processing plants alongside regular employees performing identical
jobs, a circumstance recognized as an indicium of a labor-only
contractorship.38

Fourth, CAMPCO was not engaged to perform a specific and special

job or service. In the Service Contract of 1993, CAMPCO agreed to
assist petitioner in its daily operations, and perform odd jobs as
may be assigned. CAMPCO complied with this venture by assigning
members to petitioner. Apart from that, no other particular job,
work or service was required from CAMPCO, and it is apparent, with
such an arrangement, that CAMPCO merely acted as a recruitment
agency for petitioner. Since the undertaking of CAMPCO did not
involve the performance of a specific job, but rather the supply of
manpower only, CAMPCO clearly conducted itself as a labor-only
contractor.39

Lastly, CAMPCO members, including respondents, performed

activities directly related to the principal business of petitioner. They
worked as can processing attendant, feeder of canned pineapple
and pineapple processing, nata de coco processing attendant, fruit
cocktail processing attendant, and etc., functions which were, not
only directly related, but were very vital to petitioner's business of
production and processing of pineapple products for export.

The findings enumerated in the preceding paragraphs only support

what DOLE Regional Director Parel and DOLE Undersecretary
Trajano had long before conclusively established, that CAMPCO was
a mere labor-only contractor.

VI

The declaration that CAMPCO is indeed engaged in the prohibited

activities of labor-only contracting, then consequently, an employer-
employee relationship is deemed to exist between petitioner and
respondents, since CAMPCO shall be considered as a mere agent or
intermediary of petitioner.

Since respondents are now recognized as employees of petitioner,

this Court is tasked to determine the nature of their employment. In
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consideration of all the attendant circumstances in this case, this

Court concludes that respondents are regular employees of
petitioner.

Article 280 of the Labor Code, as amended, reads'

ART. 280. Regular and Casual Employment. - The provisions of

written agreement to the contrary notwithstanding and regardless
of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to
perform activities which are usually necessary and desirable in the
usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time
of engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the
duration of the season.

An employment shall be deemed to be casual if its is not covered by

the preceding paragraph: Provided, That, any employee who has
rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such activity exists.

This Court expounded on the afore-quoted provision, thus'

The primary standard, therefore, of determining a regular

employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual business
or trade of the employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of the
employer. The connection can be determined by considering the
nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has
been performing the job for at least one year, even if her
performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of the
activity to the business. Hence, the employment is also considered
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regular, but only with respect to such activity and while such
activity exists.40

In the instant Petition, petitioner is engaged in the manufacture and

production of pineapple products for export. ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

Respondents rendered services as processing attendant, feeder of

canned pineapple and pineapple processing, nata de coco
processing attendant, fruit cocktail processing attendant, and etc.,
functions they performed alongside regular employees of the
petitioner. There is no doubt that the activities performed by
respondents are necessary or desirable to the usual business of
petitioner.

Petitioner likewise want this Court to believe that respondents'

employment was dependent on the peaks in operation, work
backlogs, absenteeism, and excessive leaves. However, bearing in
mind that respondents all claimed to have worked for petitioner for
over a year, a claim which petitioner failed to rebut, then
respondent's continued employment clearly demonstrates the
continuing necessity and indispensability of respondents'
employment to the business of petitioner.

Neither can this Court apply herein the ruling of the NLRC in the
previous case involving petitioner and the individual workers they
used to hire before the advent of the cooperatives, to the effect that
the employment of these individual workers were not regular, but
rather, were valid "term employments," wherein the employer and
employee knowingly and voluntarily agreed to employment for only
a limited or specified period of time. The difference between that
case and the one presently before this Court is that the members of
CAMPCO, including respondents, were not informed, at the time of
their engagement, that their employment shall only be for a limited
or specified period of time. There is absence of proof that the
respondents were aware and had knowingly and voluntarily agreed
to such term employment. Petitioner did not enter into individual
contracts with the CAMPCO members, but executed a Service
Contract with CAMPCO alone. Although the Service Contract of 1993
stated that it shall be for a specific period, from 1 July to 31
December 1993, petitioner and CAMPCO continued the service
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arrangement beyond 1993. Since there was no written renewal of

the Service Contract,41 there was no further indication that the
engagement by petitioner of the services of CAMPCO members was
for another definite or specified period only.

Respondents, as regular employees of petitioner, are entitled to

security of tenure. They could only be removed based on just and
authorized causes as provided for in the Labor Code, as amended,
and after they are accorded procedural due process. Therefore,
petitioner's acts of placing some of the respondents on "stay home
status" and not giving them work assignments for more than six
months were already tantamount to constructive and illegal
dismissal.42

In summary, this Court finds that CAMPCO was a labor-only

contractor and, thus, petitioner is the real employer of the
respondents, with CAMPCO acting only as the agent or intermediary
of petitioner. Due to the nature of their work and length of their
service, respondents should be considered as regular employees of
petitioner. Petitioner constructively dismissed a number of the
respondents by placing them on "stay home status" for over six
months, and was therefore guilty of illegal dismissal. Petitioner must
accord respondents the status of regular employees, and reinstate
the respondents who it constructively and illegally dismissed, to
their previous positions, without loss of seniority rights and other
benefits, and pay these respondents' backwages from the date of
filing of the Complaint with the NLRC on 19 December 1996 up to
actual reinstatement.

WHEREFORE, in view of the foregoing, the instant Petition is

DENIED and the Amended Decision, dated 27 November 2003,
rendered by the Court of Appeals in CA-G.R. SP No. 63405
is AFFIRMED.

Costs against the petitioner.

SO ORDERED.
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2. Ang Tibay v. CIR, 69 Phil 635

TOPIC: Cardinal primary requirements of procedural due process

G.R. No. L-46496             February 27, 1940

ANG TIBAY, represented by TORIBIO TEODORO, manager and propietor, and

NATIONAL WORKERS BROTHERHOOD, petitioners,
vs.
THE COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION, INC., respondents.

Office of the Solicitor-General Ozaeta and Assistant Attorney Barcelona for the Court of Industrial
Relations.
Antonio D. Paguia for National Labor Unon.
Claro M. Recto for petitioner "Ang Tibay".
Jose M. Casal for National Workers' Brotherhood.

LAUREL, J.:

The Solicitor-General in behalf of the respondent Court of Industrial Relations in the above-entitled
case has filed a motion for reconsideration and moves that, for the reasons stated in his motion, we
reconsider the following legal conclusions of the majority opinion of this Court:

1. Que un contrato de trabajo, asi individual como colectivo, sin termino fijo de duracion o
que no sea para una determinada, termina o bien por voluntad de cualquiera de las partes o
cada vez que ilega el plazo fijado para el pago de los salarios segun costumbre en la
localidad o cunado se termine la obra;

2. Que los obreros de una empresa fabril, que han celebrado contrato, ya individual ya
colectivamente, con ell, sin tiempo fijo, y que se han visto obligados a cesar en sus tarbajos
por haberse declarando paro forzoso en la fabrica en la cual tarbajan, dejan de ser
empleados u obreros de la misma;

3. Que un patrono o sociedad que ha celebrado un contrato colectivo de trabajo con sus
osbreros sin tiempo fijo de duracion y sin ser para una obra determiminada y que se niega a
readmitir a dichos obreros que cesaron como consecuencia de un paro forzoso, no es
culpable de practica injusta in incurre en la sancion penal del articulo 5 de la Ley No. 213 del
Commonwealth, aunque su negativa a readmitir se deba a que dichos obreros pertenecen a
un determinado organismo obrero, puesto que tales ya han dejado deser empleados suyos
por terminacion del contrato en virtud del paro.

The respondent National Labor Union, Inc., on the other hand, prays for the vacation of the
judgement rendered by the majority of this Court and the remanding of the case to the Court of
Industrial Relations for a new trial, and avers:

1. That Toribio Teodoro's claim that on September 26, 1938, there was shortage of leather
soles in ANG TIBAY making it necessary for him to temporarily lay off the members of the
National Labor Union Inc., is entirely false and unsupported by the records of the Bureau of
Customs and the Books of Accounts of native dealers in leather.
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2. That the supposed lack of leather materials claimed by Toribio Teodoro was but a scheme
to systematically prevent the forfeiture of this bond despite the breach of his CONTRACT
with the Philippine Army.

3. That Toribio Teodoro's letter to the Philippine Army dated September 29, 1938, (re
supposed delay of leather soles from the States) was but a scheme to systematically prevent
the forfeiture of this bond despite the breach of his CONTRACT with the Philippine Army.

4. That the National Worker's Brotherhood of ANG TIBAY is a company or employer union
dominated by Toribio Teodoro, the existence and functions of which are illegal. (281 U.S.,
548, petitioner's printed memorandum, p. 25.)

5. That in the exercise by the laborers of their rights to collective bargaining, majority rule
and elective representation are highly essential and indispensable. (Sections 2 and 5,
Commonwealth Act No. 213.)

6. That the century provisions of the Civil Code which had been (the) principal source of
dissensions and continuous civil war in Spain cannot and should not be made applicable in
interpreting and applying the salutary provisions of a modern labor legislation of American
origin where the industrial peace has always been the rule.

7. That the employer Toribio Teodoro was guilty of unfair labor practice for discriminating
against the National Labor Union, Inc., and unjustly favoring the National Workers'
Brotherhood.

8. That the exhibits hereto attached are so inaccessible to the respondents that even with
the exercise of due diligence they could not be expected to have obtained them and offered
as evidence in the Court of Industrial Relations.

9. That the attached documents and exhibits are of such far-reaching importance and effect
that their admission would necessarily mean the modification and reversal of the judgment
rendered herein.

The petitioner, Ang Tibay, has filed an opposition both to the motion for reconsideration of the
respondent National Labor Union, Inc.

In view of the conclusion reached by us and to be herein after stead with reference to the motion for
a new trial of the respondent National Labor Union, Inc., we are of the opinion that it is not necessary
to pass upon the motion for reconsideration of the Solicitor-General. We shall proceed to dispose of
the motion for new trial of the respondent labor union. Before doing this, however, we deem it
necessary, in the interest of orderly procedure in cases of this nature, in interest of orderly procedure
in cases of this nature, to make several observations regarding the nature of the powers of the Court
of Industrial Relations and emphasize certain guiding principles which should be observed in the trial
of cases brought before it. We have re-examined the entire record of the proceedings had before the
Court of Industrial Relations in this case, and we have found no substantial evidence that the
exclusion of the 89 laborers here was due to their union affiliation or activity. The whole transcript
taken contains what transpired during the hearing and is more of a record of contradictory and
conflicting statements of opposing counsel, with sporadic conclusion drawn to suit their own views. It
is evident that these statements and expressions of views of counsel have no evidentiary value.
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The Court of Industrial Relations is a special court whose functions are specifically stated in the law
of its creation (Commonwealth Act No. 103). It is more an administrative than a part of the integrated
judicial system of the nation. It is not intended to be a mere receptive organ of the Government.
Unlike a court of justice which is essentially passive, acting only when its jurisdiction is invoked and
deciding only cases that are presented to it by the parties litigant, the function of the Court of
Industrial Relations, as will appear from perusal of its organic law, is more active, affirmative and
dynamic. It not only exercises judicial or quasi-judicial functions in the determination of disputes
between employers and employees but its functions in the determination of disputes between
employers and employees but its functions are far more comprehensive and expensive. It has
jurisdiction over the entire Philippines, to consider, investigate, decide, and settle any question,
matter controversy or dispute arising between, and/or affecting employers and employees or
laborers, and regulate the relations between them, subject to, and in accordance with, the provisions
of Commonwealth Act No. 103 (section 1). It shall take cognizance or purposes of prevention,
arbitration, decision and settlement, of any industrial or agricultural dispute causing or likely to cause
a strike or lockout, arising from differences as regards wages, shares or compensation, hours of
labor or conditions of tenancy or employment, between landlords and tenants or farm-laborers,
provided that the number of employees, laborers or tenants of farm-laborers involved exceeds thirty,
and such industrial or agricultural dispute is submitted to the Court by the Secretary of Labor or by
any or both of the parties to the controversy and certified by the Secretary of labor as existing and
proper to be by the Secretary of Labor as existing and proper to be dealth with by the Court for the
sake of public interest. (Section 4, ibid.) It shall, before hearing the dispute and in the course of such
hearing, endeavor to reconcile the parties and induce them to settle the dispute by amicable
agreement. (Paragraph 2, section 4, ibid.) When directed by the President of the Philippines, it shall
investigate and study all industries established in a designated locality, with a view to determinating
the necessity and fairness of fixing and adopting for such industry or locality a minimum wage or
share of laborers or tenants, or a maximum "canon" or rental to be paid by the "inquilinos" or tenants
or less to landowners. (Section 5, ibid.) In fine, it may appeal to voluntary arbitration in the settlement
of industrial disputes; may employ mediation or conciliation for that purpose, or recur to the more
effective system of official investigation and compulsory arbitration in order to determine specific
controversies between labor and capital industry and in agriculture. There is in reality here a
mingling of executive and judicial functions, which is a departure from the rigid doctrine of the
separation of governmental powers.

In the case of Goseco vs. Court of Industrial Relations et al., G.R. No. 46673, promulgated
September 13, 1939, we had occasion to joint out that the Court of Industrial Relations et al., G. R.
No. 46673, promulgated September 13, 1939, we had occasion to point out that the Court of
Industrial Relations is not narrowly constrained by technical rules of procedure, and the Act requires
it to "act according to justice and equity and substantial merits of the case, without regard to
technicalities or legal forms and shall not be bound by any technicalities or legal forms and shall not
be bound by any technical rules of legal evidence but may inform its mind in such manner as it may
deem just and equitable." (Section 20, Commonwealth Act No. 103.) It shall not be restricted to the
specific relief claimed or demands made by the parties to the industrial or agricultural dispute, but
may include in the award, order or decision any matter or determination which may be deemed
necessary or expedient for the purpose of settling the dispute or of preventing further industrial or
agricultural disputes. (section 13, ibid.) And in the light of this legislative policy, appeals to this Court
have been especially regulated by the rules recently promulgated by the rules recently promulgated
by this Court to carry into the effect the avowed legislative purpose. The fact, however, that the
Court of Industrial Relations may be said to be free from the rigidity of certain procedural
requirements does not mean that it can, in justifiable cases before it, entirely ignore or disregard the
fundamental and essential requirements of due process in trials and investigations of an
administrative character. There are primary rights which must be respected even in proceedings of
this character:
APEL FULL CASE

(1) The first of these rights is the right to a hearing, which includes the right of the party
interested or affected to present his own case and submit evidence in support thereof. In the
language of Chief Hughes, in Morgan v. U.S., 304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed.
1129, "the liberty and property of the citizen shall be protected by the rudimentary
requirements of fair play.

(2) Not only must the party be given an opportunity to present his case and to adduce
evidence tending to establish the rights which he asserts but the tribunal must consider the
evidence presented. (Chief Justice Hughes in Morgan v. U.S. 298 U.S. 468, 56 S. Ct. 906,
80 law. ed. 1288.) In the language of this court in Edwards vs. McCoy, 22 Phil., 598, "the
right to adduce evidence, without the corresponding duty on the part of the board to consider
it, is vain. Such right is conspicuously futile if the person or persons to whom the evidence is
presented can thrust it aside without notice or consideration."

(3) "While the duty to deliberate does not impose the obligation to decide right, it does imply
a necessity which cannot be disregarded, namely, that of having something to support it is a
nullity, a place when directly attached." (Edwards vs. McCoy, supra.) This principle
emanates from the more fundamental is contrary to the vesting of unlimited power anywhere.
Law is both a grant and a limitation upon power.

(4) Not only must there be some evidence to support a finding or conclusion (City of Manila
vs. Agustin, G.R. No. 45844, promulgated November 29, 1937, XXXVI O. G. 1335), but the
evidence must be "substantial." (Washington, Virginia and Maryland Coach Co. v. national
labor Relations Board, 301 U.S. 142, 147, 57 S. Ct. 648, 650, 81 Law. ed. 965.) It means
such relevant evidence as a reasonable mind accept as adequate to support a conclusion."
(Appalachian Electric Power v. National Labor Relations Board, 4 Cir., 93 F. 2d 985, 989;
National Labor Relations Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston-
Stillwater Knitting Co. v. National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) . . . The
statute provides that "the rules of evidence prevailing in courts of law and equity shall not be
controlling.' The obvious purpose of this and similar provisions is to free administrative
boards from the compulsion of technical rules so that the mere admission of matter which
would be deemed incompetent inn judicial proceedings would not invalidate the
administrative order. (Interstate Commerce Commission v. Baird, 194 U.S. 25, 44, 24 S. Ct.
563, 568, 48 Law. ed. 860; Interstate Commerce Commission v. Louisville and Nashville R.
Co., 227 U.S. 88, 93 33 S. Ct. 185, 187, 57 Law. ed. 431; United States v. Abilene and
Southern Ry. Co. S. Ct. 220, 225, 74 Law. ed. 624.) But this assurance of a desirable
flexibility in administrative procedure does not go far as to justify orders without a basis in
evidence having rational probative force. Mere uncorroborated hearsay or rumor does not
constitute substantial evidence. (Consolidated Edison Co. v. National Labor Relations Board,
59 S. Ct. 206, 83 Law. ed. No. 4, Adv. Op., p. 131.)"

(5) The decision must be rendered on the evidence presented at the hearing, or at least
contained in the record and disclosed to the parties affected. (Interstate Commence
Commission vs. L. & N. R. Co., 227 U.S. 88, 33 S. Ct. 185, 57 Law. ed. 431.) Only by
confining the administrative tribunal to the evidence disclosed to the parties, can the latter be
protected in their right to know and meet the case against them. It should not, however,
detract from their duty actively to see that the law is enforced, and for that purpose, to use
the authorized legal methods of securing evidence and informing itself of facts material and
relevant to the controversy. Boards of inquiry may be appointed for the purpose of
investigating and determining the facts in any given case, but their report and decision are
only advisory. (Section 9, Commonwealth Act No. 103.) The Court of Industrial Relations
may refer any industrial or agricultural dispute or any matter under its consideration or
APEL FULL CASE

advisement to a local board of inquiry, a provincial fiscal. a justice of the peace or any public
official in any part of the Philippines for investigation, report and recommendation, and may
delegate to such board or public official such powers and functions as the said Court of
Industrial Relations may deem necessary, but such delegation shall not affect the exercise of
the Court itself of any of its powers. (Section 10, ibid.)

(6) The Court of Industrial Relations or any of its judges, therefore, must act on its or his own
independent consideration of the law and facts of the controversy, and not simply accept the
views of a subordinate in arriving at a decision. It may be that the volume of work is such that
it is literally Relations personally to decide all controversies coming before them. In the
United States the difficulty is solved with the enactment of statutory authority authorizing
examiners or other subordinates to render final decision, with the right to appeal to board or
commission, but in our case there is no such statutory authority.

(7) The Court of Industrial Relations should, in all controversial questions, render its decision
in such a manner that the parties to the proceeding can know the various issues involved,
and the reasons for the decision rendered. The performance of this duty is inseparable from
the authority conferred upon it.

In the right of the foregoing fundamental principles, it is sufficient to observe here that, except as to
the alleged agreement between the Ang Tibay and the National Worker's Brotherhood (appendix A),
the record is barren and does not satisfy the thirst for a factual basis upon which to predicate, in a
national way, a conclusion of law.

This result, however, does not now preclude the concession of a new trial prayed for the by
respondent National Labor Union, Inc., it is alleged that "the supposed lack of material claimed by
Toribio Teodoro was but a scheme adopted to systematically discharged all the members of the
National Labor Union Inc., from work" and this avernment is desired to be proved by the petitioner
with the "records of the Bureau of Customs and the Books of Accounts of native dealers in leather";
that "the National Workers Brotherhood Union of Ang Tibay is a company or employer union
dominated by Toribio Teodoro, the existence and functions of which are illegal." Petitioner further
alleges under oath that the exhibits attached to the petition to prove his substantial avernments" are
so inaccessible to the respondents that even within the exercise of due diligence they could not be
expected to have obtained them and offered as evidence in the Court of Industrial Relations", and
that the documents attached to the petition "are of such far reaching importance and effect that their
admission would necessarily mean the modification and reversal of the judgment rendered herein."
We have considered the reply of Ang Tibay and its arguments against the petition. By and large,
after considerable discussions, we have come to the conclusion that the interest of justice would be
better served if the movant is given opportunity to present at the hearing the documents referred to
in his motion and such other evidence as may be relevant to the main issue involved. The legislation
which created the Court of Industrial Relations and under which it acts is new. The failure to grasp
the fundamental issue involved is not entirely attributable to the parties adversely affected by the
result. Accordingly, the motion for a new trial should be and the same is hereby granted, and the
entire record of this case shall be remanded to the Court of Industrial Relations, with instruction that
it reopen the case, receive all such evidence as may be relevant and otherwise proceed in
accordance with the requirements set forth hereinabove. So ordered.

3. Scenarios, Inc. vs. Vinluan, G.R. No. 173283 September 17, 2008
APEL FULL CASE

TOPIC: Technical rules not applicable

SECOND DIVISION

[G.R. NO. 173283 : September 17, 2008]

SCENARIOS, INC. AND/OR RHOTZIV BAGO, Petitioners, v. JELLY

VINLUAN, Respondent.

DECISION

TINGA, J.:

The instant petition assails the Decision1 and Resolution2 of the Court of Appeals dated
25 October 2005 and 21 June 2006, respectively, in CA-G.R. SP No. 85387 reinstating
the decision of the labor arbiter which ordered the reinstatement of respondent Jelly
Vinluan without loss of seniority rights, full backwages and payment of other money
claims.

On 8 August 2000, respondent, a former setman of Scenarios, Inc., filed a complaint

for illegal dismissal, underpayment of salaries and nonpayment of benefits against
petitioners Scenarios, Inc. and Rhotziv Bago and a certain Jess Jimenez.3 Summons
were issued and sent by registered mail to "Mr. Jess Jimenez" with address at
"Scenario, Inc./GMA Complex, EDSA, corner Timog Avenue, Diliman, Quezon City
1104"4 However, the summons envelope bore the mark "RETURN TO SENDER" and
"UNCLAIMED"5 Notices of hearing were also sent by registered mail separately to
Rhotziv Bago and/or Jess Jimenez, both addressed at "Scenarios, Inc., GMA Complex,
EDSA, corner Timog Avenue, Diliman, Quezon City 1104"6 Petitioners failed to appear
during the scheduled hearings. As a result, their right to file their position paper was
deemed waived by the labor arbiter. 7 On 17 November 2000, respondent filed his
position paper.

In his Decision8 dated 26 April 2001, Labor Arbiter Salimathar Nambi ordered the
reinstatement of respondent to his former position without loss of seniority rights and
with full backwages from the time of dismissal up to the time of actual reinstatement,
or, if not feasible, the payment of separation pay of one (1) month salary per year of
service.9 Subsequently, a writ of execution10 dated 6 July 2001 was served on
Scenarios, Inc. Claiming that it was the only time that they became aware of the
proceedings before the labor arbiter, petitioners filed a Notice and Memorandum of
Appeal11 with the National Labor Relations Commission (NLRC).

On 20 August 2003, after finding no proof that petitioners received the summons, the
notices of hearing and the notice of the decision, the NLRC issued an order remanding
the case to the labor arbiter for proper service of summons and appropriate
proceedings.12 Respondent sought reconsideration of the order but his motion was
denied by the NLRC.13
APEL FULL CASE

Respondent then filed a petition for certiorari before the Court of Appeals assailing the
aforesaid orders of the NLRC. The Court of Appeals granted the petition and ruled that
petitioners failed to overcome the presumption that the notices and summons had been
regularly sent and received in the ordinary course of events.14 Relying on the
certification of the Quezon City Central Post Office that petitioners had received a copy
of the labor arbiter's decision on 5 June 2001, the Court of Appeals ruled that
petitioners' appeal with the NLRC was belatedly filed on 2 August 2001.15 As a result of
these findings the Court of Appeals reinstated the decision of the labor arbiter, but
deleted the name "Tess Jimenez" from the dispositive portion since said person was not
impleaded in the petition.16

Petitioners posit that they were denied due process when the labor arbiter decided the
case even in the absence of sufficient proof that the summons and notices were
delivered to them.17 They maintain that there was no proof that the notices were sent
to the addressees, neither was there a certification from the postmaster that notices
were delivered and received by them. Moreover, they argue that there was no valid
service of summons on Scenarios, Inc., considering that no proof that summons were
received by persons authorized to receive them, since Jess Jimenez, the person named
in the summons, is a complete stranger to Scenarios, Inc.18

The petition has no merit.

Service of notices and resolutions, including summons, in cases filed before the labor
arbiters is governed by Sections 5 and 6 of Rule III of the New NLRC Rules of
Procedure.19 The said provisions read:
Section 5. Service of Notices and Resolutions.–(a) Notices or summons and copies of
orders, resolutions or decisions shall be served on the parties to the case personally by
the bailiff or duly authorized public officer within three (3) days from receipt thereof or
by registered mail; Provided that in special circumstances, service of summons maybe
effected in accordance with the pertinent provisions of the Rules of Court, Provided
further that in cases of decisions and final awards, copies thereof shall be served on
both parties and their counsel by registered mail, provided further that in cases where a
party to a case or his counsel on record personally seeks service of the decision upon
inquiry thereon, service to said party shall be deemed effected upon actual receipt
thereof; provided finally, that in case where the parties are so numerous, service shall
be made on counsel and upon such number of complainants as may be practicable,
which shall be considered substantial compliance with Article 224(a) of the Labor Code,
as amended. (Emphasis supplied)

x x x.

Section 6. Proof and completeness of service.–The return is prima facie proof of the
facts indicated therein. Service by registered mail is complete upon receipt by the
addressee or his agent; but if the addressee 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 after such time. (Emphasis supplied)
Following the explicit language of the above-quoted Section 5, it has been held that
service by registered mail is complete after five (5) days from the date of first notice of
the postmaster in the event that the addressee fails to claim his registered mail from
the post office.20 Moreover, it is a fundamental rule that unless the contrary is proven,
APEL FULL CASE

official duty is presumed to have been performed regularly and judicial proceedings
regularly conducted. This presumption of the regularity of the quasi-judicial proceedings
before the NLRC includes the presumption of regularity of service of summons and
other notices.21 It is therefore incumbent upon herein petitioners to rebut that legal
presumption with competent and proper evidence, for the return of the registered mail
as "unclaimed" is prima facie proof of the facts indicated therein.

From the records, we see that the envelope containing the summons addressed to Jess
Jimenez, Scenarios, Inc./GMA Complex, EDSA, corner Timog Avenue, Diliman, Quezon
City 1104, is marked "RETURN TO SENDER" and "UNCLAIMED" and has the notations
"SECOND NOTICE DATE 8/14" and "LAST NOTICE DATE 9/6"22 There is also an
unsigned Registry Return Receipt attached to the said envelope.23 It appears that Jess
Jimenez has been notified at least twice.24 At the very least, petitioners had five (5)
days from the 14 August 2000 notice within which to claim the summons. As petitioners
failed to do so, the service was deemed complete at the end of the said five-day period.

However, petitioners allege that Jess Jimenez, the person named in the summons, is a
complete stranger to Scenarios, Inc., and thus no valid service of summons was made
on Scenarios, Inc. This is a factual matter which the Court is not in a position to
resolve. Besides, the name of respondent Scenarios, Inc. itself is mentioned on the face
of the letter envelope. In any case, when the summons was sent, the labor arbiter
could only rely on the name and address indicated by respondent in the complaint.
There was no way to determine, at that point, whether Jess Jimenez is an employee or
an officer of Scenarios, Inc.

Petitioners likewise maintain that there was no valid service of the notices of hearing
and that they did not receive the said notices. They also add that they did not receive a
copy of the labor arbiter's decision. The records tell us a different story.

Scrutinizing the records, we find that excluding the mandatory conference scheduled on
25 August 2000, five (5) dates were set by the labor arbiter for the hearing of the case:
25 August 2000, 5 September 2000, 2 October 2000, 17 October 2000, and 17
November 2000.25 Per the handwritten notation in the notices, they had all been sent
by registered mail to either Jess Jimenez and/or Rhotziv P. Bago and to respondent.
While no registry return receipts were attached to the notices sent to petitioners, we
note that certifications from Quezon City Central Post Office indicate that at least two
(2) of the notices were delivered at the address indicated therein, one received on 17
October 2000 and another on 25 October 2000.26 Both were received by a certain Mr.
M. Sulit.

The records furthermore indicate that petitioners had been furnished a copy of the
decision of the labor arbiter. As indicated in the certification issued by the Quezon City
Central Post Office, a notice of judgment/decision was served by registered mail on
petitioners, delivered on 5 June 2001 and received by a certain S/G Cuevas.27

Turning to another point, there is enough evidence showing that petitioners had been
duly notified of the hearings and of the decision. The postal office certifications
are prima facie  proof that the said processes had been delivered to and received by
petitioners. The presumption of regularity in the performance of official duty stands. It
is incumbent upon petitioners to prove otherwise, a task which they failed to do.
APEL FULL CASE

Moreover, despite petitioners' assertion that the summons and notices had not been
served on any of the authorized officers or agents of the corporation, they do not
however deny that the same had been properly sent to their business address. In fact,
even the writ of execution was served at the very same address written on the
summons, notices and decision. Technical rules of procedure are not strictly applied in
quasi-judicial proceedings; only substantial compliance is required. The constitutional
requirement of due process exacts that the service be such as may reasonably be
expected to give the notice desired.28 Petitioners' bare assertion that the notices had
not been received requires substantiation by competent evidence, as mere allegation is
neither equivalent to proof nor evidence.29 Besides, the registry return receipt states
that "a registered article must not be delivered to anyone but the addressee, or upon
the addressee's written order." Thus, the persons who received the notice are
presumably able to present a written authorization to receive the same and we can
assume that the notices are duly received in the ordinary course of events. It is a legal
presumption, born of wisdom and experience, that official duty has been regularly
performed; that the proceedings of a judicial tribunal are regular and valid, and that
judicial acts and duties have been and will be duly and properly performed.30 Whether
or not petitioners deliberately ignored the summons and notices or whether those who
actually received the same failed to show petitioners the summons and notices due to
lack of instruction or out of negligence is no longer important to us. The registry return
receipt for the summons marked "UNCLAIMED" and the certifications from the Quezon
City Central Post Office that two of the notices and a copy of the decision had been
delivered to and received in the premises of petitioners' office are, under the prevailing
rules, enough to convince us that service of said processes and decision was completed.

WHEREFORE, the Decision and Resolution of the Court of Appeals dated 25 October
2005 and 21 June 2006, respectively, in CA-G.R. SP No. 85387 are AFFIRMED.

Costs against petitioners.

SO ORDERED.

4.Pison-Arceo Agricultural and Development Corporation vs. NLRC, 344 Phil. 723, 736

TOPIC: Procedural rules governing service of summons are not strictly construed

THIRD DIVISION

[G.R. No. 117890. September 18, 1997]

PISON-ARCEO AGRICULTURAL and DEVELOPMENT

CORPORATION, Petitioner, vs.  NATIONAL LABOR RELATIONS
COMMISSION and NATIONAL FEDERATION OF SUGAR WORKERS-
FOOD and GENERAL TRADE (NFSW-FGT)/ JESUS PASCO, MARTIN
APEL FULL CASE

BONARES, EVANGELINE PASCO, TERESITA NAVA, FELIXBERTO

NAVA, JOHNNY GARRIDO, EDUARDO NUEZ and DELMA
NUEZ, Respondents.

DECISION

PANGANIBAN, J.:

In the proceedings before the labor arbiter, only the unregistered

trade name of the employer-corporation and its
administrator/manager were impleaded and subsequently held liable
for illegal dismissal, backwages and separation pay. On appeal,
however, the National Labor Relations Commission motu
proprio  included the corporate name of the employer as jointly and
severally liable for the workers claims. Because of such inclusion,
the corporation now raises issues of due process and jurisdiction
before this Court.

The Case

Assailed in this petition for certiorari under Rule 65 of the Rules of

Court is the Decision1 of Public Respondent National Labor Relations
Commission2 in NLRC Case No. V-0334-923 promulgated on
September 27, 1993 and its Resolution4 promulgated on September
12, 1994 denying reconsideration. Affirming the decision5 dated
September 2, 1992 of Executive Labor Arbiter Oscar S. Uy, the
impugned NLRC Decision disposed thus:6 chanroblesvirtuallawlibrary

WHEREFORE, judgment is hereby rendered affirming the decision of

Executive Labor Arbiter Oscar S. Uy, dated September 2, 1992,
subject to the amendments and modification stated above and
ordering the respondent-appellant, Jose Edmundo Pison and the
respondent Pison-Arceo Agricultural and Development Corporation
to pay jointly and severally the claims for backwages and separation
pay of the complainant-appellees in the above-entitled case, except
the claims of Danny Felix and Helen Felix, in the amount specified
below:

Name Backwages Separation Pay Total

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1. Jesus Pasco P14,729.00 P12,818.06 P27,547.06

2. Evangeline 14,729.00 12,874.81 27,603.81

Pasco

3. Martin Bonares 14,729.00 9,035.06 23,764.06

4. Mariolita Bonares 14,729.00 8,455.00 23,184.00

5. Felixberto Nava 14,729.00 13,505.31 28,234.31

6. Teresita NAva 14,729.00 3,417.31 18,146.31

7. Johnny Garrido 8,489.00 4,463.94 12,952.94

8. Eduardo Nuez 8,489.00 11,399.44 19,888.44

9. Delma Nuez 8,489.00 9,507.94 17,996.94

In addition, the respondent-appellant and the respondent

corporation are ordered to pay attorneys fees equivalent to ten
(10%) percent of the total award.

The dispositive portion of the assailed Resolution, on the other

hand, reads:7chanroblesvirtuallawlibrary

WHEREFORE, the decision in question is hereby modified in the

sense that the monetary award of Mariolita Bonares be [sic]
deleted. Except for such modification, the rest of the decision
stands.

Arguing that the National Labor Relations Commission did not have
jurisdiction over it because it was not a party before the labor
arbiter, petitioner elevated this matter before this Court via a
petition for certiorari under Rule 65.

Acting on petitioners prayer8, this Court (First Division) issued on

January 18, 1995 a temporary restraining order enjoining the
respondents from executing the assailed Decision and Resolution.
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The Facts

As gathered from the complaint9 and other submissions of the

parties filed with Executive Labor Arbiter Oscar S. Uy, the facts of
the case are as follows:

Together with Complainants Danny and Helen Felix, private

respondents -- Jesus Pasco, Evangeline Pasco, Martin Bonares,
Teresita Nava, Felixberto Nava, Johnny Garrido, Eduardo Nuez and
Delma Nuez, all represented by Private Respondent National
Federation of Sugar Workers-Food and General Trade (NSFW-FGT)
-- filed on June 13, 1988 a complaint for illegal dismissal,
reinstatement, payment of backwages and attorneys fees against
Hacienda Lanutan/Jose Edmundo Pison. Complainants alleged that
they were previously employed as regular sugar farm workers of
Hacienda Lanutan in Talisay, Negros Occidental. On the other hand,
Jose Edmundo Pison claimed that he was merely the administrator
of Hacienda Lanutan which was owned by Pison-Arceo Agricultural
and Development Corporation.

As earlier stated, the executive labor arbiter rendered on September

2, 1992 a decision in favor of the workers-complainants, the
dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered

ordering respondent Jose Edmundo Pison/Hda. Lanutan, Talisay,
Negros Occidental, to PAY the following complainants their
backwages (one year) plus separation pay in the following amounts,
to wit:

BACKWAGES SEPARATION PAY TOTAL

1. J. Pasco -P14,729.00 P12,818.06 P27,547.06

2. E. Pasco - 14,729.00 12,784.81 27,603,81

3. Bonares - 14,729.00 8,404.56 23,133.56

4. F. Nava - 14,729.00 13,505.31 28,234.31

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5. T. Nava - 14,729.00 3,427.31 18,146.31

6. J. Garido - 8,489.00 4,463.94 12,952.94

7. E. Nuez - 8,489.00 11,399.44 19,888.44

8. D. Nuez - 8,489.00 9,507.94 17,996.94

plus ten percent (10%) of the total award as attorneys fees in the
amount of P17,550.34 or in the total amount of ONE HUNDRED
NINETY THREE THOUSAND FIFTY THREE AND 71/100
(P193,053.71), all these amounts to be deposited with this Office
within ten (10) days from receipt of this decision. The claim of
complainants Danny and Helen Felix are hereby DENIED for lack of
merit.

In affirming the decision of the executive labor arbiter, public

respondent ordered respondent-appellant, Jose Edmundo Pison and
the respondent Pison-Arceo Agricultural and Development
Corporation to pay jointly and severally the claims for backwages
and separation pay of private respondents. The motion for
reconsideration dated October 14, 1993 was apparently filed by
Jose Edmundo Pison for and on his own behalf only. However, Pison
did not elevate his case before this Court. The sole petitioner now
before us is Pison-Arceo Agricultural and Development Corporation,
the owner of Hacienda Lanutan.

The Issue

Petitioner submits only one issue for our resolution:10

chanroblesvirtuallawlibrary

Public Respondent NLRC acted without or in excess of jurisdiction or

with grave abuse of discretion when it included motu
proprio petitioner corporation as a party respondent and ordered
said corporation liable to pay jointly and severally, with Jose
Edmundo Pison the claims of private respondents.

In essence, petitioner alleges deprivation of due process.

The Courts Ruling

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The petition lacks merit.

Petitioner contends that it was never served any summons; hence,

public respondent did not acquire jurisdiction over it. It argues that
from the time the complaint was filed before the Regional
Arbitration Branch No. VI up to the time the said case was appealed
by Jose Edmundo Pison to the NLRC, Cebu, petitioner Corporation
was never impleaded as one of the parties x x x. It was only in the
public respondents assailed Decision of September 27, 1993 that
petitioner Corporation was wrongly included as party respondent
without its knowledge. Copies of the assailed Decision and
Resolution were not sent to petitioner but only to Jose Edmundo
Pison, on the theory that the two were one and the same. Petitioner
avers that Jose Edmundo Pison is only a minority stockholder of
Hacienda Lanutan, which in turn is one of the businesses of
petitioner.11 Petitioner further argues that it did not voluntarily
appear before said tribunal and that it was not given (any)
opportunity to be heard;12 thus, the assailed Decision and
Resolution in this case are void for having been issued without
jurisdiction.13
chanroblesvirtuallawlibrary

In its memorandum, petitioner adds that Eden vs. Ministry of Labor

and Employment,14 cited by public respondent, does not apply to
this case. In Eden, petitioners were duly served with notices of
hearings, while in the instant case, the petitioner was never
summoned nor was served with notice of hearings as a respondent
in the case.15
chanroblesvirtuallawlibrary

At the outset, we must stress that in quasi-judicial proceedings,

procedural rules governing service of summons are not strictly
construed. Substantial compliance thereof is sufficient.16 Also, in
labor cases, punctilious adherence to stringent technical rules may
be relaxed in the interest of the working man; it should not defeat
the complete and equitable resolution of the rights and obligations
of the parties. This Court is ever mindful of the underlying spirit and
intention of the Labor Code to ascertain the facts of each case
speedily and objectively without regard to technical rules of law and
procedure, all in the interest of due process.17 Furthermore, the
Labor Code itself, as amended by RA 6715,18 provides for the
APEL FULL CASE

specific power of the Commission to correct, amend, or waive any

error, defect or irregularity whether in the substance or in the form
of the proceedings before it19 under Article 218 (c) as follows:

(c) To conduct investigation for the determination of a question,

matter or controversy within its jurisdiction, proceed to hear and
determine the disputes in the absence of any party thereto who has
been summoned or served with notice to appear, conduct its
proceedings or any part thereof in public or in private, adjourn its
hearings to any time and place, refer technical matters or accounts
to an expert and to accept his report as evidence after hearing of
the parties upon due notice, direct parties to be joined in or
excluded from the proceedings, correct, amend, or waive any error,
defect or irregularity whether in substance or in form, give all such
directions as it may deem necessary or expedient in the
determination of the dispute before it, and dismiss any matter or
refrain from further hearing or from determining the dispute or part
thereof, where it is trivial or where further proceedings by the
Commission are not necessary or desirable; xxx (Underscoring
supplied.)

In this case, there are legal and factual reasons to hold petitioner
jointly and severally liable with Jose Edmundo Pison.

Jurisdiction Acquired over Petitioner

Consistent with the foregoing principles applicable to labor cases,

we find that jurisdiction was acquired over the petitioner. There is
no dispute that Hacienda Lanutan, which was owned SOLELY by
petitioner, was impleaded and was heard. If at all, the non-inclusion
of the corporate name of petitioner in the case before the executive
labor arbiter was a mere procedural error which did not at all affect
the jurisdiction of the labor tribunals.20 Petitioner was adequately
represented in the proceedings conducted at the regional arbitration
branch by no less than Hacienda Lanutans administrator, Jose
Edmundo Pison, who verified and signed his/Hacienda Lanutans
position paper and other pleadings submitted before the labor
arbiter. It can thus be said that petitioner, acting through its
corporate officer Jose Edmundo Pison, traversed private
respondents complaint and controverted their claims. Further
APEL FULL CASE

unrebutted by petitioner are the following findings of public

respondent:21 chanroblesvirtuallawlibrary

It should further be noted that two responsible employees of the

said corporation, namely, Teresita Dangcasil, the secretary of the
administrator/manager, and Fernando Gallego, the hacienda
overseer, had submitted their affidavits, both dated July 20, 1988,
as part of the evidence for the respondent, and that, as shown by
the records, the lawyer who appeared as the legal counsel of the
respondent-appellant, specifically, Atty. Jose Ma. Torres, of the
Torres and Valencia Law Office in Bacolod City, (Rollo, p. 17) was
also the legal counsel of the said corporation. (Rollo, p. 23)

Also, it is undisputed that summons and all notices of hearing were

duly served upon Jose Edmundo Pison. Since Pison is the
administrator and representative of petitioner in its property
(Hacienda Lanutan) and recognized as such by the workers therein,
we deem the service of summons upon him as sufficient and
substantial compliance with the requirements for service of
summons and other notices in respect of petitioner corporation.
Insofar as the complainants are concerned, Jose Edmundo Pison
was their employer and/or their employers representative. In view
of the peculiar circumstances of this case, we rule that Jose Pisons
knowledge of the labor case and effort to resist it can be deemed
knowledge and action of the corporation. Indeed, to apply the
normal precepts on corporate fiction and the technical rules on
service of summons would be to overturn the bias of the
Constitution and the laws in favor of labor.

Hence, it is fair to state that petitioner, through its administrator

and manager, Jose Edmundo Pison, was duly notified of the labor
case against it and was actually afforded an opportunity to be
heard. That it refused to take advantage of such opportunity and
opted to hide behind its corporate veil will not shield it from the
encompassing application of labor laws. As we held in Bautista vs.
Secretary of Labor and Employment:22 chanroblesvirtuallawlibrary

Moreover, since the proceeding was not judicial but merely

administrative, the rigid requirements of procedural laws were not
strictly enforceable. It is settled that --
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While the administrative tribunals exercising quasi-judicial powers

are free from the rigidity of certain procedural requirements they
are bound by law and practice to observe the fundamental and
essential requirements of due process in justiciable cases presented
before them. However, the standard of due process that must be
met in administrative tribunals allows a certain latitude as long as
the element of fairness is not ignored. (fn: Adamson & Adamson,
Inc. vs. Amores, 152 SCRA 237).

xxx

It is of course also sound and settled rule that administrative

agencies performing quasi-judicial functions are unfettered by the
rigid technicalities of procedure observed in the courts of law, and
this is so that disputes brought before such bodies may be resolved
in the most expeditious and inexpensive manner possible. (fn: Rizal
Workers Union vs. Ferrer-Calleja, 186 SCRA 431).

Given all these circumstances, we feel that the lack of summons

upon the petitioners is not sufficient justification for annulling the
acts of the public respondents.

Contrary to petitioners contention, the principles laid down

in Eden are relevant to this case. In that case, a religious
organization, SCAFI,23 denied responsibility for the monetary claims
of several employees, as these were filed against SCAPS24 and its
officer in charge -- the employees believed that SCAPS was their
employer. In rejecting such defense, this Court ruled:25 chanroblesvirtuallawlibrary

With regard to the contention that SCAPS and SCAFI are two
different entities, this lacks merit. The change from SCAPS to SCAFI
was a mere modification, if not rectification of the caption as to
respondent in the MOLE case, when it was pointed out in the
complainants position paper that SCAPS belongs to or is integral
with SCAFI as gleaned from the brochure, Annex A of said position
paper, which is already part of the records of the case and
incorporated in the Comment by way of reference. The brochure
stated that SCAPS is the implementing and service arm of SCAFI,
with Bishop Gaviola as National Director of SCAPS and Board
Chairman of SCAFI, both their address: 2655 F.B. Harrison, St.,
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Pasay City. Thus, the real party in interest is SCAFI, more so

because it has the juridical personality that can sue and be sued.
The change in caption from SCAPS to SCAFI however does not
absolve SCAPS from liability, for SCAFI includes SCAPS, SCAPS --
the arm, SCAFI, -- the organism to which the arm is an integral part
of the rise and fall of SCAPS, and vice-versa. Thus, SCAFI has never
been a stranger to the case. Jurisprudence is to the effect that:

An action may be entertained, notwithstanding the failure to include

an indispensable party where it appears that the naming of the
party would be a formality. (Baguio vs. Rodriguez, L-11078, May
27, 1959)

Comparable to Eden, Hacienda Lanutan is an arm of petitioner, the

organism of which it is an integral part. Ineluctably, the real party in
interest in this case is petitioner, not Hacienda Lanutan which is
merely its non-juridical arm. In dealing with private respondents,
petitioner represented itself to be Hacienda Lanutan. Hacienda
Lanutan is roughly equivalent to its trade name or even nickname or
alias. The names may have been different, but the IDENTITY of the
petitioner is not in dispute. Thus, it may be sued under the name by
which it made itself known to the workers.

Liability of Jose Edmundo Pison

Jose Edmundo Pison did not appeal from the Decision of public
respondent. It thus follows that he is bound by the said judgment. A
party who has not appealed an adverse decision cannot obtain from
the appellate court any affirmative relief other than those granted, if
there is any, in the decision of the lower court or administrative
body.26chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the petition is

hereby DISMISSED,  for its failure to show grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the
National Labor Relations Commission. The assailed Decision and
Resolution are AFFIRMED. The temporary restraining order issued
on January 19, 1995 is hereby LIFTED. Costs against petitioner.

SO ORDERED.
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5. Pascual vs Board of Medical Examiners 28SCRA345

TOPIC: Right against self-incrimination

G.R. No. L-25018               May 26, 1969

ARSENIO PASCUAL, JR., petitioner-appellee,

vs.
BOARD OF MEDICAL EXAMINERS, respondent-appellant, SALVADOR GATBONTON and
ENRIQUETA GATBONTON, intervenors-appellants.

Conrado B. Enriquez for petitioner-appellee.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio A. Torres and
Solicitor Pedro A. Ramirez for respondent-appellant.
Bausa, Ampil and Suarez for intervenors-appellants.

FERNANDO, J.:

The broad, all-embracing sweep of the self-incrimination clause, 1 whenever appropriately invoked,
has been accorded due recognition by this Court ever since the adoption of the
Constitution.2 Bermudez v. Castillo,3 decided in 1937, was quite categorical. As we there stated:
"This Court is of the opinion that in order that the constitutional provision under consideration may
prove to be a real protection and not a dead letter, it must be given a liberal and broad interpretation
favorable to the person invoking it." As phrased by Justice Laurel in his concurring opinion: "The
provision, as doubtless it was designed, would be construed with the utmost liberality in favor of the
right of the individual intended to be served." 4

Even more relevant, considering the precise point at issue, is the recent case of Cabal v.
Kapunan,5where it was held that a respondent in an administrative proceeding under the Anti-Graft
Law 6 cannot be required to take the witness stand at the instance of the complainant. So it must be
in this case, where petitioner was sustained by the lower court in his plea that he could not be
compelled to be the first witness of the complainants, he being the party proceeded against in an
administrative charge for malpractice. That was a correct decision; we affirm it on appeal.

Arsenio Pascual, Jr., petitioner-appellee, filed on February 1, 1965 with the Court of First Instance of
Manila an action for prohibition with prayer for preliminary injunction against the Board of Medical
Examiners, now respondent-appellant. It was alleged therein that at the initial hearing of an
administrative case7 for alleged immorality, counsel for complainants announced that he would
present as his first witness herein petitioner-appellee, who was the respondent in such malpractice
charge. Thereupon, petitioner-appellee, through counsel, made of record his objection, relying on
the constitutional right to be exempt from being a witness against himself. Respondent-appellant, the
Board of Examiners, took note of such a plea, at the same time stating that at the next scheduled
hearing, on February 12, 1965, petitioner-appellee would be called upon to testify as such witness,
unless in the meantime he could secure a restraining order from a competent authority.
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Petitioner-appellee then alleged that in thus ruling to compel him to take the witness stand, the
Board of Examiners was guilty, at the very least, of grave abuse of discretion for failure to respect
the constitutional right against self-incrimination, the administrative proceeding against him, which
could result in forfeiture or loss of a privilege, being quasi-criminal in character. With his assertion
that he was entitled to the relief demanded consisting of perpetually restraining the respondent
Board from compelling him to testify as witness for his adversary and his readiness or his willingness
to put a bond, he prayed for a writ of preliminary injunction and after a hearing or trial, for a writ of
prohibition.

On February 9, 1965, the lower court ordered that a writ of preliminary injunction issue against the
respondent Board commanding it to refrain from hearing or further proceeding with such an
administrative case, to await the judicial disposition of the matter upon petitioner-appellee posting a
bond in the amount of P500.00.

The answer of respondent Board, while admitting the facts stressed that it could call petitioner-
appellee to the witness stand and interrogate him, the right against self-incrimination being available
only when a question calling for an incriminating answer is asked of a witness. It further elaborated
the matter in the affirmative defenses interposed, stating that petitioner-appellee's remedy is to
object once he is in the witness stand, for respondent "a plain, speedy and adequate remedy in the
ordinary course of law," precluding the issuance of the relief sought. Respondent Board, therefore,
denied that it acted with grave abuse of discretion.

There was a motion for intervention by Salvador Gatbonton and Enriqueta Gatbonton, the
complainants in the administrative case for malpractice against petitioner-appellee, asking that they
be allowed to file an answer as intervenors. Such a motion was granted and an answer in
intervention was duly filed by them on March 23, 1965 sustaining the power of respondent Board,
which for them is limited to compelling the witness to take the stand, to be distinguished, in their
opinion, from the power to compel a witness to incriminate himself. They likewise alleged that the
right against self-incrimination cannot be availed of in an administrative hearing.

A decision was rendered by the lower court on August 2, 1965, finding the claim of petitioner-
appellee to be well-founded and prohibiting respondent Board "from compelling the petitioner to act
and testify as a witness for the complainant in said investigation without his consent and against
himself." Hence this appeal both by respondent Board and intervenors, the Gatbontons. As noted at
the outset, we find for the petitioner-appellee.

1. We affirm the lower court decision on appeal as it does manifest fealty to the principle announced
by us in Cabal v. Kapunan. 8 In that proceeding for certiorari and prohibition to annul an order of
Judge Kapunan, it appeared that an administrative charge for unexplained wealth having been filed
against petitioner under the Anti-Graft Act,9the complainant requested the investigating committee
that petitioner be ordered to take the witness stand, which request was granted. Upon petitioner's
refusal to be sworn as such witness, a charge for contempt was filed against him in the sala of
respondent Judge. He filed a motion to quash and upon its denial, he initiated this proceeding. We
found for the petitioner in accordance with the well-settled principle that "the accused in a criminal
case may refuse, not only to answer incriminatory questions, but, also, to take the witness stand."

It was noted in the opinion penned by the present Chief Justice that while the matter referred to an a
administrative charge of unexplained wealth, with the Anti-Graft Act authorizing the forfeiture of
whatever property a public officer or employee may acquire, manifestly out proportion to his salary
and his other lawful income, there is clearly the imposition of a penalty. The proceeding for forfeiture
while administrative in character thus possesses a criminal or penal aspect. The case before us is
not dissimilar; petitioner would be similarly disadvantaged. He could suffer not the forfeiture of
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property but the revocation of his license as a medical practitioner, for some an even greater
deprivation.

To the argument that Cabal v. Kapunan could thus distinguished, it suffices to refer to an American

Supreme Court opinion highly persuasive in character. 10 In the language of Justice Douglas: "We
conclude ... that the Self-Incrimination Clause of the Fifth Amendment has been absorbed in the
Fourteenth, that it extends its protection to lawyers as well as to other individuals, and that it should
not be watered down by imposing the dishonor of disbarment and the deprivation of a livelihood as a
price for asserting it." We reiterate that such a principle is equally applicable to a proceeding that
could possibly result in the loss of the privilege to practice the medical profession.

2. The appeal apparently proceeds on the mistaken assumption by respondent Board and
intervenors-appellants that the constitutional guarantee against self-incrimination should be limited to
allowing a witness to object to questions the answers to which could lead to a penal liability being
subsequently incurred. It is true that one aspect of such a right, to follow the language of another
American decision, 11 is the protection against "any disclosures which the witness may reasonably
apprehend could be used in a criminal prosecution or which could lead to other evidence that might
be so used." If that were all there is then it becomes diluted.
lawphi1 .ñet

The constitutional guarantee protects as well the right to silence. As far back as 1905, we had
occasion to declare: "The accused has a perfect right to remain silent and his silence cannot be
used as a presumption of his guilt." 12 Only last year, in Chavez v. Court of Appeals, 13 speaking
through Justice Sanchez, we reaffirmed the doctrine anew that it is the right of a defendant "to
forego testimony, to remain silent, unless he chooses to take the witness stand — with undiluted,
unfettered exercise of his own free genuine will."

Why it should be thus is not difficult to discern. The constitutional guarantee, along with other rights
granted an accused, stands for a belief that while crime should not go unpunished and that the truth
must be revealed, such desirable objectives should not be accomplished according to means or
methods offensive to the high sense of respect accorded the human personality. More and more in
line with the democratic creed, the deference accorded an individual even those suspected of the
most heinous crimes is given due weight. To quote from Chief Justice Warren, "the constitutional
foundation underlying the privilege is the respect a government ... must accord to the dignity and
integrity of its citizens." 14

It is likewise of interest to note that while earlier decisions stressed the principle of humanity on
which this right is predicated, precluding as it does all resort to force or compulsion, whether physical
or mental, current judicial opinion places equal emphasis on its identification with the right to privacy.
Thus according to Justice Douglas: "The Fifth Amendment in its Self-Incrimination clause enables
the citizen to create a zone of privacy which government may not force to surrender to his
detriment." 15 So also with the observation of the late Judge Frank who spoke of "a right to a private
enclave where he may lead a private life. That right is the hallmark of our democracy." 16 In the light
of the above, it could thus clearly appear that no possible objection could be legitimately raised
against the correctness of the decision now on appeal. We hold that in an administrative hearing
against a medical practitioner for alleged malpractice, respondent Board of Medical Examiners
cannot, consistently with the self-incrimination clause, compel the person proceeded against to take
the witness stand without his consent.

WHEREFORE, the decision of the lower court of August 2, 1965 is affirmed. Without pronouncement
as to costs.
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6. United Pepsi-Cola supervisory Union vs. Laguesma 288 SCRA 15

EN BANC

G.R. No. 122226 March 25, 1998

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), Petitioner, vs. HON. BIENVENIDO E.

LAGUESMA and PEPSI-COLA PRODUCTS, PHILIPPINES, INC. respondents.

MENDOZA, J.:

Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the union filed a
petition for certification election on behalf of the route managers at Pepsi-Cola Products Philippines,
Inc. However, its petition was denied by the med-arbiter and, on appeal, by the Secretary of Labor
and Employment, on the ground that the route managers are managerial employees and, therefore,
ineligible for union membership under the first sentence of Art. 245 of the Labor Code, which
provides:

Ineligibility of managerial employees to join any labor organization; right of supervisory employees. -

Managerial employees are not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of the rank-and-file employees
but may join, assist or form separate labor organizations of their own.

Petitioner brought this suit challenging the validity of the order dated August 31, 1995, as reiterated
in the order dated September 22, 1995, of the Secretary of Labor and Employment. Its petition was
dismissed by the Third Division for lack of showing that respondent committed grave abuse of
discretion. But petitioner filed a motion for reconsideration, pressing for resolution its contention that
the first sentence of Art. 245 of the Labor Code, so far as it declares managerial employees to be
ineligible to form, assist or join unions, contravenes Art. III, 8 of the Constitution which provides:

The right of the people, including those employed in the public and private sectors, to form unions,
associations, or societies for purposes not contrary to law shall not be abridged.

For this reason, the petition was referred to the Court en banc.

The Issues in this Case

Two questions are presented by the petition: (1) whether the route managers at Pepsi-Cola Products
Philippines, Inc. are managerial employees and (2) whether Art. 245, insofar as it prohibits managerial
employees from forming, joining or assisting labor unions, violates Art. III, 8 of the Constitution.

In resolving these issues it would be useful to begin by defining who are "managerial employees" and
considering the types of "managerial employees."

Types of Managerial Employees

The term "manager" generally refers to "anyone who is responsible for subordinates and other
organizational resources." 1 As a class, managers constitute three levels of a pyramid:
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Top management

--------

Middle

Management

----------

First-Line

Management

(also called

Supervisor)

====================

Operatives

or

Operating

Employees

FIRST-LINE MANAGERS - The lowest level in an organization at which individuals are responsible for
the work of others is called  first-line or first-level management. First-line managers direct operating
employees only; they do not supervise other managers. Examples of first-line managers are the
"foreman" or production supervisor in a manufacturing plant, the technical supervisor in a research
department, and the clerical supervisor in a large office. First-level managers are often called
supervisors.

MIDDLE MANAGERS - The term middle management can refer to more than one level in an
organization. Middle managers direct the activities of other managers and sometimes also those of
operating employees. Middle managers' principal responsibilities are to direct the activities that
implement their organizations' policies and to balance the demands of their superiors with the
capacities of their subordinates. A plant manager in an electronics firm is an example of a middle
manager.

TOP MANAGERS - Composed of a comparatively small group of executives, top management is

responsible for the overall management of the organization. It establishes operating policies and
guides the organization's interactions with its environment. Typical titles of top managers are "chief
executive officer," "president," and  "senior vice-president." Actual titles vary from one organization to
another and are not always a reliable guide to membership in the highest management classification. 2

As can be seen from this description, a distinction exists between those who have the authority to
devise, implement and control strategic and operational policies (top and middle managers) and those
whose task is simply to ensure that such policies are carried out by the rank-and-file employees of an
organization (first-level managers/supervisors). What distinguishes them from the rank-and-file
employees is that they act in the interest of the employer in supervising such rank-and-file
employees.
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"Managerial employees" may therefore be said to fall into two distinct categories: the "managers"  per
se, who compose the former group described above, and the "supervisors" who form the latter group.
Whether they belong to the first or the second category, managers, vis-a-vis employers, are, likewise,
employees. 3

The first question is whether route managers are managerial employees or supervisors.

Previous Administrative Determinations of

the Question Whether Route Managers
are Managerial Employees

It appears that this question was the subject of two previous determinations by the Secretary of Labor
and Employment, in accordance with which this case was decided by the med-arbiter.

In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade Union (WATU) v. Pepsi-Cola Products
Philippines, Inc., decided on November 13, 1991, the Secretary of Labor found:

We examined carefully the pertinent job descriptions of the subject employees and other documentary
evidence on record vis-a-vis paragraph (m), Article 212 of the Labor Code, as amended, and we find
that only those employees occupying the position of route manager and accounting manager are
managerial employees. The rest i.e. quality control manager, yard/transport manager and warehouse
operations manager are supervisory employees.

To qualify as managerial employee, there must be a clear showing of the exercise of managerial
attributes under paragraph (m), Article 212 of the Labor Code as amended. Designations or titles of
positions are not controlling. In the instant case, nothing on record will support the claim that the
quality control manager, yard/transport manager and warehouse operations manager are vested with
said attributes. The warehouse operations manager, for example, merely assists the plant finance
manager in planning, organizing, directing and controlling all activities relative to development and
implementation of an effective management control information system at the sale offices. The
exercise of authority of the quality control manager, on the other hand, needs the concurrence of the
manufacturing manager.

As to the route managers and accounting manager, we are convinced that they are managerial
employees. Their job descriptions clearly reveal so.

On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92. entitled In Re: Petition for
Direct Certification and/or Certification Election-Route Managers/Supervisory Employees of Pepsi-Cola
Products Phils. Inc., as follows:

The issue brought before us is not of first impression. At one time, we had the occasion to rule upon
the status of route manager in the same company  vis a vis the issue as to whether or not it is
supervisory employee or a managerial employee. In the case of Workers Alliance Trade Unions
(WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-91 ), 15 November 1991, we ruled that
a route manager is a managerial employee within the context of the definition of the law, and hence,
ineligible to join, form or assist a union. We have once more passed upon the logic of our Decision
aforecited in the light of the issues raised in the instant appeal, as well as the available documentary
evidence on hand, and have come to the view that there is no cogent reason to depart from our
earlier holding. Route Managers are, by the very nature of their functions and the authority they wield
over their subordinates, managerial employees. The prescription found in Art. 245 of the Labor Code,
as amended therefore, clearly applies to them. 4

Citing our ruling in Nasipit Lumber Co.  v. National Labor Relations Commission, 5 however, petitioner
argues that these previous administrative determinations do not have the effect of res judicata in this
case, because "labor relations proceedings" are "non-litigious and summary in nature without regard
to legal technicalities." 6 Nasipit Lumber Co. involved a clearance to dismiss an employee issued by the
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Department of Labor. The question was whether in a subsequent proceeding for illegal dismissal, the
clearance was res judicata. In holding it was not, this Court made it clear that it was referring to labor
relations proceedings of a non-adversary character, thus:

The requirement of a clearance to terminate employment was a creation of the Department of labor to
carry out the Labor Code provisions on security of tenure and termination of employment. The
proceeding subsequent to the filing of an application for clearance to terminate employment was
outlined in Book V, Rule XIV of the Rules and Regulations Implementing the Labor Code. The fact that
said rule allowed a procedure for the approval of the clearance with or without the opposition of the
employee concerned (Secs. 7 & 8), demonstrates the non-litigious and summary nature of the
proceeding. The clearance requirement was therefore necessary only as an expeditious shield against
arbitrary dismissal without the knowledge and supervision of the Department of Labor. Hence, a duly
approved clearance implied that the dismissal was legal or for cause (Sec. 2). 7

But the doctrine of res judicata certainly applies to adversary administrative proceedings. As early as
1956, in Brillantes v. Castro, 8 we sustained the dismissal of an action by a trial court on the basis of a
prior administrative determination of the same case by the Wage Administration Service, applying the
principle of res judicata. Recently, in Abad v.  NLRC 9 we applied the related doctrine of stare decisis in
holding that the prior determination that certain jobs at the Atlantic Gulf and Pacific Co., were project
employments was binding in another case involving another group of employees of the same
company. Indeed, in Nasipit Lumber Co., this Court clarified toward the end of its opinion that "the
doctrine of res judicata applies . . . to judicial or quasi judicial  proceedings and not to the exercise of
administrative powers." 10 Now proceedings for certification election, such as those involved in Case
No. OS-M-A-10-318-91 and Case No. OS-A-3-71-92, are quasi judicial in nature and, therefore,
decisions rendered in such proceedings can attain finality. 11

Thus, we have in this case an expert's view that the employees concerned are managerial employees
within the purview of Art. 212 which provides:

(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer, effectively
recommend such managerial actions if the exercise of such authority is not merely routinary or clerical
in nature but requires the use of independent judgment. All employees not falling within any of the
above definitions are considered rank-and-file employees for purposes of this Book.

At the very least, the principle of finality of administrative determination compels respect for the
finding of the Secretary of Labor that route managers are managerial employees as defined by law in
the absence of anything to show that such determination is without substantial evidence to support it.
Nonetheless, the Court, concerned that employees who are otherwise supervisors may wittingly or
unwittingly be classified as managerial personnel and thus denied the right of self-organization, has
decided to review the record of this case.

DOLE's Finding that Route Managers are

Managerial Employees Supported by
Substantial Evidence in the Record

The Court now finds that the job evaluation made by the Secretary of Labor is indeed supported by
substantial evidence. The nature of the job of route managers is given in a four-page pamphlet,
prepared by the company, called "Route Manager Position Description," the pertinent parts of which
read:

A. BASIC PURPOSE

A Manager achieves objectives through others.

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As a Route Manager, your purpose is to meet the sales plan; and you achieve this objective through
the skillful MANAGEMENT OF YOUR JOB AND THE MANAGEMENT OF YOUR PEOPLE.

These then are your functions as Pepsi-Cola Route Manager. Within these functions - managing your
job and managing your people - you are accountable to your District Manager for the execution and
completion of various tasks and activities which will make it possible for you to achieve your sales
objectives.

B. PRINCIPAL ACCOUNTABILITIES

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT

1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account objectives.

1.1.3 Develop new business opportunities thru personal contacts with dealers.

1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved in all outlets.

1.1.5 maintain and improve productivity of all cooling equipment and kiosks.

1.1.6 Execute and control all authorized promotions.

1.1.7 Develop and maintain dealer goodwill.

1.1.8 Ensure all accounts comply with company suggested retail pricing.

1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to
maximize utilization of resources.

1.2 Administration

1.2.1 Ensure the proper loading of route trucks before check-out and the proper sorting of bottles
before check-in.

1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required on
an accurate and timely basis.

1.2.3 Ensure proper implementation of the various company policies and procedures incl. but not
limited to shakedown; route shortage; progressive discipline; sorting; spoilages; credit/collection;
accident; attendance.

1.2.4 Ensure collection of receivables and delinquent accounts.

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:

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2.1 Route Sales Team Development

2.1.2 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at
least 3 days a week, to be supported by required route ride documents/reports & back check/spot
check at least 2 days a week to be supported by required documents/reports.

2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of
effective sales and merchandizing [sic] techniques of the salesmen and helpers. Conduct group
training at least 1 hour each week on a designated day and of specific topic.

2.2 Code of Conduct

2.2.1 Maintain the company's reputation through strict adherence to PCPPI's code of conduct and the
universal standards of unquestioned business
ethics. 12

Earlier in this opinion, reference was made to the distinction between managers per se (top managers
and middle managers) and supervisors (first-line managers). That distinction is evident in the work of
the route managers which sets them apart from supervisors in general. Unlike supervisors who
basically merely direct operating employees in line with set tasks assigned to them, route managers
are responsible for the success of the company's main line of business through management of their
respective sales teams. Such management necessarily involves the planning, direction, operation and
evaluation of their individual teams and areas which the work of supervisors does not entail.

The route managers cannot thus possibly be classified as mere supervisors because their work does
not only involve, but goes far beyond, the simple direction or supervision of operating employees to
accomplish objectives set by those above them. They are not mere functionaries with simple oversight
functions but business administrators in their own right. An idea of the role of route managers as
managers per se can be gotten from a memo sent by the director of metro sales operations of
respondent company to one of the route managers. It reads: 13

03 April 1995

To : CESAR T .  REOLADA

From : REGGIE M.  SANTOS

Subj : SALARY INCREASE

Effective 01 April 1995, your basic monthly salary of P11,710 will be increased to P12,881 or an
increase of 10%. This represents the added managerial responsibilities you will assume due to the
recent restructuring and streamlining of Metro Sales Operations brought about by the continuous
losses for the last nine (9) months.

Let me remind you that for our operations to be profitable, we have to sustain the intensity and
momentum that your group and yourself have shown last March. You just have to deliver the desired
volume targets, better negotiated concessions, rationalized sustaining deals, eliminate or reduced
overdues, improved collections, more cash accounts, controlled operating expenses, etc. Also, based
on the agreed set targets, your monthly performance will be closely monitored.

You have proven in the past that your capable of achieving your targets thru better planning,
managing your group as a fighting team, and thru aggressive selling.  I am looking forward to your
success and I expect that you just have to exert your doubly best in turning around our operations
from a losing to a profitable one!
APEL FULL CASE

Happy Selling!!

(Sgd.) R.M.  SANTOS

The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug, although
entitled "RM's Job Description," is only a summary of performance standards. It does not show
whether route managers are managers per se or supervisors. Obviously, these performance standards
have to be related to the specific tasks given to route managers in the four-page "Route Manager
Position Description," and, when this is done, the managerial nature of their jobs is fully revealed.
Indeed, if any, the card indicates the great latitude and discretion given to route managers - from
servicing and enhancing company goodwill to supervising and auditing accounts, from trade (new
business) development to the discipline, training and monitoring of performance of their respective
sales teams, and so forth, - if they are to fulfill the company's expectations in the "key result areas."

Article 212(m) says that "supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment." Thus, their only power is
to recommend. Certainly, the route managers in this case more than merely recommend effective
management action. They perform operational, human resource, financial and marketing functions for
the company, all of which involve the laying down of operating policies for themselves and their
teams. For example, with respect to marketing, route managers, in accordance with B.1.1.1 to B.1.1.9
of the Route Managers Job Description, are charged, among other things, with expanding the
dealership base of their respective sales areas, maintaining the goodwill of current dealers, and
distributing the company's various promotional items as they see fit. It is difficult to see how
supervisors can be given such responsibility when this involves not just the routine supervision of
operating employees but the protection and expansion of the company's business vis-a-vis its
competitors.

While route managers do not appear to have the power to hire and fire people (the evidence shows
that they only "recommended" or "endorsed" the taking of disciplinary action against certain
employees), this is because this
is a function of the Human Resources or Personnel Department of the company. 14 And neither should
it be presumed that just because they are given set benchmarks to observe, they are ipso
facto supervisors. Adequate control methods (as embodied in such concepts as "Management by
Objectives [MBO]" and "performance appraisals") which require a delineation of the functions and
responsibilities of managers by means of ready reference cards as here, have long been recognized in
management as effective tools for keeping businesses competitive.

This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code,
prohibiting managerial employees from forming, assisting or joining any labor organization, is
constitutional in light of Art. III, 8 of the Constitution which provides:

The right of the people, including those employed in the public and private sectors, to form unions,
associations, or societies for purposes not contrary to law shall not be abridged.

As already stated, whether they belong to the first category (managers per se) or the second category
(supervisors), managers are employees. Nonetheless, in the United States, as Justice Puno's separate
opinion notes, supervisors have no right to form unions. They are excluded from the definition of the
term "employee" in 2(3) of the Labor-Management Relations Act of 1947. 15 In the Philippines, the
question whether managerial employees have a right of self-organization has arisen with respect to
first-level managers or supervisors, as shown by a review of the course of labor legislation in this
country.

Right of Self-Organization of Managerial

Employees under Pre-Labor Code Laws
APEL FULL CASE

Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by the
Industrial Peace Act (R.A. No. 875).

In accordance with the general definition above, this law defined "supervisor" as follows:

Sec. 2. . . .

(k) "Supervisor" means any person having authority in the interest of an employer, to hire, transfer,
suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or responsibly
to direct them, and to adjust their grievances, or effectively to recommend such acts, if, in connection
with the foregoing, the exercise of such authority is not of a merely routinary or clerical nature but
requires the use of independent judgment. 16

The right of supervisors to form their own organizations was affirmed:

Sec. 3. Employees' Right to Self-Organization. - Employees shall have the right to self-organization
and to form, join or assist labor organizations of their own choosing for the purpose of collective
bargaining through representatives of their own choosing and to engage in concerted activities for the
purpose of collective bargaining and other mutual aid and protection. Individuals employed as
supervisors shall not be eligible for membership in a labor organization of employees under their
supervision but may form separate organizations of their own. 17

For its part, the Supreme Court upheld in several of its decisions the right of supervisors to organize
for purposes of labor relations. 18

Although it had a definition of the term "supervisor," the Industrial Peace Act did not define the term
"manager." But, using the commonly-understood concept of "manager," as above stated, it is
apparent that the law used the term "supervisors" to refer to the sub-group of "managerial
employees" known as front-line managers. The other sub-group of "managerial employees," known as
managers per se, was not covered.

However, in Caltex Filipino Managers and Supervisors Association v.  Court of Industrial
Relations, 19 the right of all managerial employees to self-organization was upheld as a general
proposition, thus:

It would be going too far to dismiss summarily the point raised by respondent Company - that of the
alleged identity of interest between the managerial staff and the employing firm. That should
ordinarily be the case, especially so where the dispute is between management and the rank and file.
It does not necessarily follow though that what binds the managerial staff to the corporation
forecloses the possibility of conflict between them. There could be a real difference between what the
welfare of such group requires and the concessions the firm is willing to grant. Their needs might not
be attended to then in the absence of any organization of their own. Nor is this to indulge in empty
theorizing. The record of respondent Company, even the very case cited by it, is proof enough of their
uneasy and troubled relationship. Certainly the impression is difficult to erase that an alien firm failed
to manifest sympathy for the claims of its Filipino executives. To predicate under such circumstances
that agreement inevitably marks their relationship, ignoring that discord would not be unusual, is to
fly in the face of reality.

. . . The basic question is whether the managerial personnel can organize. What respondent Company
failed to take into account is that the right to self-organization is not merely a statutory creation. It is
fortified by our Constitution. All are free to exercise such right unless their purpose is contrary to law.
Certainly it would be to attach unorthodoxy to, not to say an emasculation of, the concept of law if
managers as such were precluded from organizing. Having done so and having been duly registered,
as did occur in this case, their union is entitled to all the rights under Republic Act No. 875.
Considering what is denominated as unfair labor practice under Section 4 of such Act and the facts set
forth in our decision, there can be only one answer to the objection raised that no unfair labor practice
APEL FULL CASE

could be committed by respondent Company insofar as managerial personnel is concerned. It is, as is

quite obvious, in the negative. 20

Actually, the case involved front-line managers or supervisors only, as the plantilla of employees,
quoted in the main opinion, 21 clearly indicates:

CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized by the
Company

Payroll Position Title

Assistant to Mgr. - National Acct. Sales

Jr. Sales Engineer

Retail Development Asst.

Staff Asst. - 0 Marketing

Sales Supervisor

Supervisory Assistant

Jr. Supervisory Assistant

Credit Assistant

Lab. Supvr. - Pandacan

Jr. Sales Engineer B

Operations Assistant B

Field Engineer

Sr. Opers. Supvr. - MIA A/S

Purchasing Assistant

Jr. Construction Engineer

Sr. Sales Supervisor

Deport Supervisor A

Terminal Accountant B

Merchandiser

Dist. Sales Prom. Supvr.

Instr. - Merchandising
APEL FULL CASE

Asst. Dist. Accountant B

Sr. Opers. Supervisor

Jr. Sales Engineer A

Asst. Bulk Ter. Supt.

Sr. Opers. Supvr.

Credit Supervisor A

Asst. Stores Supvr. A

Ref. Supervisory Draftsman

Refinery Shift Supvr. B

Asst. Supvr. A - Operations (Refinery)

Refinery Shift Supvr. B

Asst. Lab. Supvr. A (Refinery)

St. Process Engineer B (Refinery)

Asst. Supvr. A - Maintenance (Refinery)

Asst. Supvr. B - Maintenance (Refinery)

Supervisory Accountant (Refinery)

Communications Supervisor (Refinery)

Finally, also deemed included are all other employees excluded from the rank and file unions but not
classified as managerial or otherwise excludable by law or applicable judicial precedents.

Right of Self-Organization of Managerial

Employees under the Labor Code

Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top and
middle managers by assimilating them with the supervisory group under the broad phrase
"managerial personnel," provided the lynchpin for later laws denying the right of self-organization not
only to top and middle management employees but to front line managers or supervisors as well.
Following the Caltex case, the Labor Code, promulgated in 1974 under martial law, dropped the
distinction between the first and second sub-groups of managerial employees. Instead of treating the
terms "supervisor" and "manager" separately, the law lumped them together and called them
"managerial employees," as follows:

Art. 212. Definitions . . . .

(k) "Managerial Employee" is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline
APEL FULL CASE

employees, or to effectively recommend such managerial actions. All employees not falling within this
definition are considered rank and file employees for purposes of this Book. 22

The definition shows that it is actually a combination of the commonly understood definitions of both
groups of managerial employees, grammatically joined by the phrase "and/or."

This general definition was perhaps legally necessary at that time for two reasons. First, the 1974
Code denied supervisors their right to self-organize as theretofore guaranteed to them by the
Industrial Peace Act. Second, it stood the dictum in the Caltex case on its head by prohibiting all types
of managers from forming unions. The explicit general prohibition was contained in the then Art. 246
of the Labor Code.

The practical effect of this synthesis of legal concepts was made apparent in the Omnibus Rules
Implementing the Labor Code which the Department of Labor promulgated on January 19, 1975. Book
V, Rule II, 11 of the Rules provided:

Supervisory unions and unions of security guards to cease operation. - All existing supervisory unions
and unions of security guards shall, upon the effectivity of the Code, cease to operate as such and
their registration certificates shall be deemed automatically canceled. However, existing collective
agreements with such unions, the life of which extends beyond the date of effectivity of the Code,
shall be respected until their expiry date insofar as the economic benefits granted therein are
concerned.

Members of supervisory unions who do not fall within the definition of managerial employees shall
become eligible to join or assist the rank and file labor organization, and if none exists, to form or
assist in the forming of such rank and file organization. The determination of who are managerial
employees and who are not shall be the subject of negotiation between representatives of the
supervisory union and the employer. If no agreement is reached between the parties, either or both of
them may bring the issue to the nearest Regional Office for determination.

The Department of Labor continued to use the term "supervisory unions" despite the demise of the
legal definition of "supervisor" apparently because these were the unions of front line managers which
were then allowed as a result of the statutory grant of the right of self-organization under the
Industrial Peace Act. Had the Department of Labor seen fit to similarly ban unions of top and middle
managers which may have been formed following the dictum in Caltex, it obviously would have done
so. Yet it did not, apparently because no such unions of top and middle managers really then existed.

Real Intent of the 1986 Constitutional Commission

This was the law as it stood at the time the Constitutional Commission considered the draft of Art. III,
8. Commissioner Lerum sought to amend the draft of what was later to become Art. III, 8 of the
present Constitution:

MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert between the words
"people" and "to" the following: WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS.
In other words, the section will now read as follows: "The right of the people WHETHER EMPLOYED BY
THE STATE OR PRIVATE ESTABLISHMENTS to form associations, unions, or societies for purposes not
contrary to law shall not be abridged." 23

Explaining his proposed amendment, he stated:

MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all persons
whether or not they are employed in the government. Under that provision, we allow unions in the
government, in government-owned and controlled corporations and in other industries in the private
sector, such as the Philippine Government Employees' Association, unions in the GSIS, the SSS, the
DBP and other government-owned and controlled corporations. Also, we have unions of supervisory
APEL FULL CASE

employees and of security guards. But what is tragic about this is that after the 1973 Constitution was
approved and in spite of an express recognition of the right to organize in P.D. No. 442, known as the
Labor Code, the right of government workers, supervisory employees and security guards to form
unions was abolished.

And we have been fighting against this abolition. In every tripartite conference attended by the
government, management and workers, we have always been insisting on the return of these rights.
However, both the government and employers opposed our proposal, so nothing came out of this until
this week when we approved a provision which states:

Notwithstanding any provision of this article, the right to self-organization shall not be denied to
government employees.

We are afraid that without any corresponding provision covering the private sector, the security
guards, the supervisory employees or majority employees [sic] will still be excluded, and that is the
purpose of this amendment.

I will be very glad to accept any kind of wording as long as it will amount to absolute recognition of
private sector employees, without exception, to organize.

THE PRESIDENT. What does the Committee say?

FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner Rodrigo is
well-taken. Perhaps, we can lengthen this a little bit more to read: "The right of the people WHETHER
UNEMPLOYED OR EMPLOYED BY STATE OR PRIVATE ESTABLISHMENTS.

I want to avoid also the possibility of having this interpreted as applicable only to the employed.

MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam President?

MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the private sector
is recognized. 24

Lerum thus anchored his proposal on the fact that (1) government employees, supervisory employees,
and security guards, who had the right to organize under the Industrial Peace Act, had been denied
this right by the Labor Code, and (2) there was a need to reinstate the right of these employees. In
consonance with his objective to reinstate the right of government, security, and supervisory
employees to organize, Lerum then made his proposal:

MR. LERUM. Mr. Presiding Officer, after a consultation with several Members of this Commission, my
amendment will now read as follows: "The right of the people INCLUDING THOSE EMPLOYED IN THE
PUBLIC AND PRIVATE SECTORS to form associations, unions, or societies for purposes not contrary to
law shall not be abridged. In proposing that amendment I ask to make of record that I want the
following provisions of the Labor Code to be automatically abolished, which read:

Art. 245. Security guards and other personnel employed for the protection and security of the person,
properties and premises of the employers shall not be eligible for membership in a labor organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization.

THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?

FR. BERNAS. The Committee accepts.

APEL FULL CASE

THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the amendment, as amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is approved. 25

The question is what Commissioner Lerum meant in seeking to "automatically abolish" the then Art.
246 of the Labor Code. Did he simply want "any kind of wording as long as it will amount to absolute
recognition of private sector employees, without exception, to organize"? 26 Or, did he instead intend
to have his words taken in the context of the cause which moved him to propose the amendment in
the first place, namely, the denial of the right of supervisory employees to organize, because he said,
"We are afraid that without any corresponding provision covering the private sector, security guards,
supervisory employees or majority [of] employees will still be excluded, and that is the purpose of this
amendment"? 27

It would seem that Commissioner Lerum simply meant to restore the right of supervisory employees
to organize. For even though he spoke of the need to "abolish" Art. 246 of the Labor Code which, as
already stated, prohibited "managerial employees" in general from forming unions, the fact was that
in explaining his proposal, he repeatedly referred to "supervisory employees" whose right under the
Industrial Peace Act to organize had been taken away by Art. 246. It is noteworthy that Commissioner
Lerum never referred to the then definition of "managerial employees" in Art. 212(m) of the Labor
Code which put together, under the broad phrase "managerial employees," top and middle managers
and supervisors. Instead, his repeated use of the term "supervisory employees," when such term then
was no longer in the statute books, suggests a frame of mind that remained grounded in the language
of the Industrial Peace Act.

Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial employees to
organize, despite the fact that the Industrial Peace Act did not expressly provide for the right of top
and middle managers to organize. If Lerum was aware of the Caltex dictum, then his insistence on the
use of the term "supervisory employees" could only mean that he was excluding other managerial
employees from his proposal. If, on the other hand, he was not aware of the Caltex statement
sustaining the right to organize to top and middle managers, then the more should his repeated use of
the term "supervisory employees" be taken at face value, as it had been defined in the then Industrial
Peace Act.

At all events, that the rest of the Commissioners understood his proposal to refer solely to supervisors
and not to other managerial employees is clear from the following account of Commissioner Joaquin G.
Bernas, who writes:

In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum explained
that the modification included three categories of workers: (1) government employees, (2)
supervisory employees, and (3) security guards. Lerum made of record the explicit intent to repeal
provisions of P.D. 442, the Labor Code. The provisions referred to were:

Art. 245. Security guards and other personnel employed for the protection and security of the person,
properties and premises of the employers shall not be eligible for membership in a labor organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization. 28

Implications of the Lerum Proposal

In sum, Lerum's proposal to amend Art. III, 8 of the draft Constitution by including labor unions in the
guarantee of organizational right should be taken in the context of statements that his aim was the
removal of the statutory ban against security guards and supervisory employees joining labor
organizations. The approval by the Constitutional Commission of his proposal can only mean,
therefore, that the Commission intended the absolute right to organize of government workers,
supervisory employees, and security guards to be constitutionally guaranteed. By implication, no
similar absolute constitutional right to organize for labor purposes should be deemed to have been
APEL FULL CASE

granted to top-level and middle managers. As to them the right of self-organization may be regulated
and even abridged conformably to Art. III, 8.

Constitutionality of Art. 245

Finally, the question is whether the present ban against managerial employees, as embodied in Art.
245 (which superseded Art. 246) of the Labor Code, is valid. This provision reads:

Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory

employees. - Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor organizations of their own. 29

This provision is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715, otherwise
known as the Herrera-Veloso Law. Unlike the Industrial Peace Act or the provisions of the Labor Code
which it superseded, R.A. No. 6715 provides separate definitions of the terms "managerial" and
"supervisory employees," as follows:

Art. 212. Definitions. . . .

(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire transfer, suspend, lay off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer, effectively
recommend such managerial actions if the exercise of such authority is not merely routinary or clerical
in nature but requires the use of independent judgment. All employees not falling within any of the
above definitions are considered rank-and-file employees for purposes of this Book.

Although the definition of "supervisory employees" seems to have been unduly restricted to the last
phrase of the definition in the Industrial Peace Act, the legal significance given to the phrase
"effectively recommends" remains the same. In fact, the distinction between top and middle
managers, who set management policy, and front-line supervisors, who are merely responsible for
ensuring that such policies are carried out by the rank and file, is articulated in the present
definition. 30 When read in relation to this definition in Art. 212(m), it will be seen that Art. 245
faithfully carries out the intent of the Constitutional Commission in framing Art. III, 8 of the
fundamental law.

Nor is the guarantee of organizational right in Art. III, 8 infringed by a ban against managerial
employees forming a union. The right guaranteed in Art. III, 8 is subject to the condition that its
exercise should be for purposes "not contrary to law." In the case of Art. 245, there is a rational basis
for prohibiting managerial employees from forming or joining labor organizations. As Justice Davide,
Jr., himself a constitutional commissioner, said in his ponencia  in Philips Industrial Development,
Inc.  v. NLRC: 31

In the first place, all these employees, with the exception of the service engineers and the sales force
personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-
FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as confidential
employees. By the very nature of their functions, they assist and act in a confidential capacity to, or
have access to confidential matters of, persons who exercise managerial functions in the field of labor
relations. As such, the rationale behind the ineligibility of managerial employees to form, assist or
joint a labor union equally applies to them.

In Bulletin Publishing Co., Inc. v. Hon.  Augusto Sanchez, this Court elaborated on this rationale, thus:

. . . The rationale for this inhibition has been stated to be, because if these managerial employees
would belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the
APEL FULL CASE

Union in view of evident conflict of interests. The Union can also become company-dominated with the
presence of managerial employees in Union membership. 32

To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to
organize. But the same reason for denying them the right to organize justifies even more the ban on
managerial employees from forming unions. After all, those who qualify as top or middle managers
are executives who receive from their employers information that not only is confidential but also is
not generally available to the public, or to their competitors, or to other employees. It is hardly
necessary to point out that to say that the first sentence of Art. 245 is unconstitutional would be to
contradict the decision in that case.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

7. Delfin vs. Inciong 192 SCRA 151

TOPIC: . Res Judicata

FIRST DIVISION

[G.R. No. 50661. December 10, 1990.]

RUBEN DELFIN, BENITO DOLOSA, CORNELIO AGUILAR, ANASTACIO GORDOLA,

CESAR PANALIGAN, LUIS VIESCA, VICENTE GUADAMOR, JUAN CAGATIN,
SIMEON CHICA, REYNALDO CINCO, WILFREDO IPAS, SIMEON TAGAYONA,
FLORENCIO SINAMBAN, FERMINIO DIEGO, POLICARPIO DILE, EDDIE DE
CASTRO, AQUILINO CABILITASAN, CRISOGONO CANTERO, GUALBERTO
REBUSTER, RODOLFO GATCHALIAN, ANGELITO DOMINGO, FERNANDO JOVER,
RAFAEL SALCEDO, SIMON DIANA, BENJAMIN GONZALES, JR., BENIGNO ROJA,
DEMETRIO SIMEON, JOSE TELAN, HILARIO VILLANUEVA, NICK FRANCISCO,
PACIFICO DALIPE, EUPEMIO DALITE, ARTEMIO DE CASTRO, ISABELO
RASTICA, ANECITO RASTICA, LAMBERTO NIETO, ESMERALDO TATEL, PASCUAL
BATOCTOY, ESMENIO PATRICIO, ARMANDO DE GUZMAN, JESUS MALLARI,
JOSE MALLARI, SULPICIO MALLARI, GENEROSO COS, AGAPITO ESPINOSA,
VIRGILIO SEVAÑES, RICARDO MANZAN, OSCAR BENSOL, PABLO DIAGSAY,
EMILIO DIAGSAY, PAULINO COMETA, MATERO COREA, BENJAMIN LACANARIA,
GAUDY TIU, JOVENCIO AGUILAR, ROMULO POSADA, RICARDO POSIC,
ALFONSO SALGADO, RICARDO TAGANAP, ARMANDO RAMIREZ, FELIPE
RAMIRES, EDELBERTO BERNARDO, PONCIANO MONTILLA, JUAN MONTILLA,
IGNACIO PANCHITO, JEORGE SERRAN, VICTOR IGNIS, LUCAS IGAT,
BARTOLOME MAGDAEL, AUGUSTO ROSALINAS, RAFAEL SOCITO, JORGE CO,
LUCINO WAGAN, CELSO BARADA, WINSTON DIENZO, PAULINO SANCHEZ,
ELESEO SANCHES, CONRADO SANCHES, GENEROSO ANTONIO, AGUSTIN
LOPEZ, RUDY SOCITO, SEGUNDO SOCITO, JOAQUIN PARAS, DOMINADOR
BUTAHON, GERMOGENES GINGCO, HONORIO DETOITO, ELIGIO MENDOZA,
APEL FULL CASE

RUBEN QUITORIANO, LEON DELA CRUZ, PACITO SALES, ANTONIO CEMANES,

IRENEO LUBUGIN, FORTUNATO MATO, ROMEO MERIC, ALBERTO GALLO,
MELCHOR SALGADO, SIMEON QUIJANO, ANTONIO CARAAN, CARLITO GUZMAN,
ALBERTO SALMON, FELIMON TAN, FERNANDO FAUSTINO, CONRADO DAVID,
REYNALDO NOLASCO, ANTONIO NIETO, JAIME CAMACHO, ALBERTO PANGLAO,
ROSAURO GANAC, ALFREDO ARCABIO, PEDRO MANASALA, VICENTE
BELARMINO, ROMULO SIOCO, SEVERINO ATIENZA, JR., RUFO ABALOS, JESUS
POSADA, ALBINO BACARRO, ERNESTO DAJAY, WILFREDO VILLALON,
CELESTINO BACARRO, MANUEL TOLENTINO, ERNESTO ANTONIO, OSCAR
ABUNDIO, ZOSIMO IJARES, RUBEN ARISTORENAS, GAUDENCIO CASTILLO,
DOMINGO DELA TORRE, DANILO RONCADA, RAFEL PUPA, ALFONSO
SAPINORO, LUISITO JACRIQUE, MARCELINO BESA, ANSELMO DATELES,
ALBERTO PALCULAN, BIENVENIDO FUENSALIDA AND JOSE ORZAL, Petitioners,
v. THE HON. AMADO G. INCIONG in his capacity as Deputy Minister of Labor;
NLRC Commissioners DIEGO ATIENZA, CLETO VILLATUYA and GERONIMO
QUADRA; ATLANTIC CONTAINER CORPORATION; INLAND INDUSTRIES, INC.,
LAZARO ARRIOLA, BIENVENIDO KATALBAS, AURORA JEREZA, GOSHI DE YULO
AND PAZ YULO AND ROBERTO JACINTO, Respondents.

Armando V. Ampil, for Petitioners.

Romeo G. Carlos for Inland Ind., Inc.

DECISION

MEDIALDEA, J.:

This petition seeks the reversal of the decision of then Deputy Minister of Labor Amado
Inciong which affirmed the decision of the National Labor Relations Commission in NLRC
Case No. LR-4320. The said decision of the NLRC reversed the decision of Labor Arbiter
Jose T. Collado, Jr., which ordered the reinstatement of complainants (herein
petitioners) to their former positions without loss of seniority and other personnel
privileges.

The facts of the case, as succinctly stated by the Solicitor General, are as follows: jgc:chanrobles.com.ph

"The 136 petitioners herein are former employees of private respondent Atlantic
Container Corporation (hereinafter called Atlantic for brevity). Petitioners organized
themselves into the Atlantic Container Employees Organization and affiliated with the
Federation of Democratic Labor Unions (hereinafter called FEDLU for brevity). (petition,
pp. 1-4).

"On February 11, 1964, Atlantic and FEDLU executed a Collective Bargaining Agreement
which was amended on August 31, 1964. Claiming that Atlantic and its General
Manager, private respondent Roberto Jacinto, refused to implement the Collective
Bargaining Agreement and its amendment, petitioners and FEDLU struck on February
16, 1966. Thereafter, the Atlantic Container Employees Organization and FEDLU filed
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Case No. 5195-ULP in the Court of Industrial Relations (hereinafter called CIR for
brevity) charging Atlantic, Roberto Jacinto and one Hedy F. Jacinto as follows:.

‘Through the verified complaint filed by the Prosecutor of the Court, complainants
charge the respondents of unfair labor practice within the meaning of Section 4(a),
subsections 1, 2, and 6 in relation to Section 13 of Republic Act No. 875. It is
specifically alleged that on February 11, 1964 and August 31, 1964, the company and
complainants entered into a collective bargaining agreement and a supplemental
agreement respectively, which provide, among others, for union shop, grievance
procedure, check-off of union dues and increase of salary; that respondents, in bad
faith refused to implement said provisions of the agreements notwithstanding
complainants’ repeated demands; that soon thereafter, respondents rotated the
permanent employees who are active members of the union; that on account of said
acts of respondents, the union filed a notice of strike on February 9, 1966 and on
February 16, 1966 it actually declared a strike; and that during the strike, respondents
told Benito Dolosa that he would be reinstated if he resigned as president of the union
and dissolved the same.’ (Petition, ANNEX A, pp. 1-2). chanrobles virtual lawlibrary

"On November 16, 1972, a Decision was rendered by the CIR in Case No. 5195-ULP
(Petition, ANNEX "A"), dismissing the case with respect to Hedy F. Jacinto, but finding:
virtual 1aw library
chanrob1es

‘. . . Atlantic Container Corporation and Roberto Jacinto, . . . guilty of unfair labor

practice (and ordering them) to cease and desist from further committing the same; to
reinstate complainants striking members Benito Dolosa, Anastacio Gordola, Antonio
Moreno, Jose Orzal, Cornelio Aguilar, Ernesto Hausan and Mauro Wagan, with back
wages from February 16, 1966 up to a period of three years, without loss of seniority
and to make good the benefits herein found to have been denied them.’

"On November 27, 1972 and December 6, 1972, the Atlantic Container Employees
Organization and FEDLU filed motions to reconsider aforesaid Decision, presumably for
the reinstatement of all the petitioners herein, but the CIR denied the motions for being
pro forma and for having been filed out of time (Petition, ANNEX "B").

"Because Atlantic allegedly stopped operating prior to the rendition of the Decision in
Case No. 5195-ULP, which stoppage of operation petitioners claim they actually learned
in 1973 after an investigation, the 136 petitioners herein filed Charge No. 5701-ULP
(Petition, ANNEX "C") in the CIR on February 12, 1974, alleging in part as follows: chanrob1es virtual 1aw library

‘3. The complainants, members of the Atlantic Container Employees Organization, or

ACEO affiliated with the Federation of Democratic Labor Unions (FEDLU) are employees
of the Atlantic Container Corporation with whom it had a subsisting collective
bargaining agreement that Atlantic wastesly (sic) traversed directly and to the extent
that, in protest of the latter’s unfair labor practices, complainants staged a strike which
subsequently was filed before, and decided by the Court of Industrial Relations on
November 16, 1972, in Case No. 5195-ULP, copy of which decision is made as integral
part hereof as Annex "A" the judgment became final and executory.`

‘4. To defeat the law, the judgment, supra, and the herein complainants, Inland
Industries Inc. was concocted and subsequently registered as a corporate entity by
Lazaro Arriola, Bienvenido Katalbas, Aurora Jereza, Goshi de Yulo and Paz Yulo, alter
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egos and conduits of Atlantic Container, to engage, as it indeed engaged in the identical
business as Atlantic Container absorbing, as it did all the assets including but not
limited to the facilities and machineries of the latter. (vide: Sec. 2(c), RA 875).

‘The judgment in Case No. 5195 became inutile, because Atlantic Container supposedly
ceased operations to effect the lock-out-of the complainants accomplished by setting
the respondent Inland Industries, Inc., which thereafter continued to do the business of
Atlantic Container.’ (Petition, ANNEX "C", pp. 3-4)

"Named respondents in the above case were Atlantic, Roberto Jacinto, Inland
Industries, Inc., Lazaro Arriola, Bienvenido Katalbas, Aurora Jereza, Goshi de Yulo, and
Paz Yulo, as incorporators thereof, were impleaded on the claim that they were the
alter ego of Atlantic, Inland Industries having allegedly been organized." . . to engage,
as it indeed engaged in the identical business as Atlantic Container, absorbing, as it did,
all the assets including but not limited to the facilities and machineries of the latter."
(Petition, p. 6; ANNEX "C")

"When the CIR was abolished, Charge No. 5701-ULP was transferred to the NLRC where
the case was docketed as Case No. LR-4320 (Petition, p. 6; ANNEXES "D" AND "D-1").
On December 29, 1975, NLRC Arbiter Jose T. Collado rendered a Decision (Petition,
ANNEX "E") the dispositive portion of which is: chanrob1es virtual 1aw library

‘IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, respondents Roberto Jacinto,

Atlantic Container Corporation, Inland Industries, Inc., Lazaro Arriola, Bienvenido
Katalbas, Paz Yulo, Goshi de Yulo and Aurora Jereza are hereby ordered, in their joint
and several capacities, to reinstate complainants to their former positions without loss
of seniority and other personnel privileges and to pay back wages of three (3) years
without any deduction from earnings elsewhere. chanrobles.com.ph : virtual law library

‘Considering, however, that not all complainants evinced their desire to prosecute the
case, the award is extended only to those who testified and/or presented their
respective manifestation of prosecuting their causes of action . . .’

"Only 86 out of the 136 Petitioners in Case No. LR-4320 (Charge No. 5701-ULP) were
ordered so reinstated.

"Respondents in Case No. LR-4320 (Charge No. 5701-UL P) appealed to the NLRC
(Petition, p. 7). On September 15, 1976, the NLRC, acting through public respondents
Commissioners Diego P. Atienza, Geronimo Q. Quadra and Cleto Villatuya, set aside the
Decision of Arbiter Collado and dismissed petitioners’ complaint for unfair labor practice
(Petition, ANNEX "F"). The dismissal was based on three (3) grounds, viz: (a) res
judicata, in that Case No. LR-4320 (Charge No. 5701-ULP) was barred by the prior
judgment in Case No. 5195; (b) that petitioners’ cause of action had prescribed; and
(c) that Atlantic and Inland Industries, Inc., were distinct and separate entities. chanrobles virtual lawlibrary

"Petitioners appealed to the Secretary (Now Minister) of Labor who on December 28,
1978, through respondent Deputy Minister Inciong, rendered a Decision affirming the
Decision of the NLRC (Petition, ANNEX "H"). Petitioners moved to reconsider the
Decision dated December 28, 1978, but their motion was denied by respondent Deputy
Minister in an Order dated May 11, 1979 (Petition, ANNEX "I" AND "J"). (pp. 148-153,
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Rollo)

On July 3, 1989, petitioners filed the instant petition charging public respondents NLRC
and Deputy Minister Amado Inciong with grave abuse of discretion in annulling the
decision of the Labor Arbiter and ordering the dismissal of the complaint for unfair labor
practice in Case No. LR-4320 (originally Charge No. 5701 before the CIR was abolished
and hereinafter referred to as the second case). On July 9, 1979, We required the
respondents to file their comments to the petition, (p. 101, Rollo).

Respondents, Inland Industries, Inc., Lazaro Arriola, Buenvenido Katalbas, Aurora

Jereza, Goshi de Yulo and Paz Yu filed their Comment on August 30, 1979 (pp. 120-
131, Rollo) raising the same arguments raised before the Labor Arbiter, to wit: 1) that
the charge subject of the petition is barred by res judicata; 2) that petitioners’ cause of
action had prescribed and that the same is now barred by laches; and 3) that the
corporate and distinct personality of respondent Inland was not successfully pierced.

Respondents Atlantic Container Corporation and Roberto Jacinto filed their Comments
(pp. 136-141, Rollo) on September 10, 1979 raising the same arguments as
respondents Inland, Et. Al.

The Solicitor General, on the other hand, filed his Comment (pp. 148-161, Rollo) dated
October 10, 1979. His stand was different from that taken by public respondents NLRC
and Deputy Minister Inciong, and he joined the petitioners in their arguments.

Petitioners argue that public respondents NLRC and then Deputy Minister of Labor
Amado Inciong committed grave abuse of discretion when it ordered the dismissal of
their complaint on the following grounds: a) their cause of action is barred by the
principle of res judicata; b) their cause of action is barred by prescription; and c)
private respondents Atlantic Container Corporation and Inland Industries, Inc. were
separate and distinct entities.

According to the petitioners, Case No. 5195 (hereinafter referred to as the first case),
brought before the Court of Industrial Relations was singularly initiated and prosecuted
by FEDLU, the labor union. It did not enumerate any one of the 136 strikers who were
the complainants in the second case, subject of this petition. Petitioners further contend
that the respondents in the first case were Atlantic, Roberto Jacinto and Hedy F. Jacinto
while in the second case, the respondents were Atlantic, Roberto Jacinto, Inland
Industries, Inc., Lazaro Arriola, Bienvenido Katalbas, Paz Yulo, Goshi de Yulo and
Aurora Jereza. Moreover, the petitioners, adopting the view of the Solicitor General in
his Comment, contend that the second case is based on two causes of action namely,
(1) one predicated on fraud . . ., and (2) the other based on private respondent’s
violation of the CBA which culminated in a strike. In the first case, however, the cause
of action is violation of the CBA only. Hence, the second case is not barred by the prior
judgment in the first complaint.cralawnad

The resolution of this petition rests primarily on the issue of whether or not the second
case (Case No. LR-4320) is barred by the prior judgment in the first case (Case No.
5195) and if not, whether or not petitioners’ cause of action had prescribed.

For a prior judgment to constitute a bar to a subsequent case, the following requisites
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must concur: a) it must be a final judgment or order; (b) the court rendering the same
must have jurisdiction over the subject matter and over the parties; (c) it must be a
judgment or order on the merits, and (d) there must be between the two cases identity
of parties, subject matter and cause of action (Ibabao v. IAC, No. 74848, May 20,
1987,150 SCRA 76).

There is no question that the first three (3) requisites are present in this case. First, the
decision in the first complaint had already become final and executory. The motion for
reconsideration filed by the union in that case was denied by the CIR and no petition
questioning the denial was brought to this court. The fact of its finality was admitted by
the petitioners in their second complaint [Par. 3, Charge (Complaint), ULP-5701, pp.
42-46, Rollo]. Second, the Court of Industrial Relations (CIR) which rendered the
decision had jurisdiction over the subject matter and over the parties. Third, the
judgment rendered therein was a judgment on the merits of the case after the parties
presented their evidence, oral and documentary.

Going now to the fourth requisite, private respondents NLRC and then Deputy Minister
Inciong did not commit any grave abuse of discretion amounting to lack of jurisdiction
when they ruled that there is, between the first and the second complaints, identity of
causes of action, subject matter and parties.

The Solicitor General, contends that there are two (2) causes of action in the charge
subject of this petition, namely: (1) the unfair labor practices committed by Atlantic;
and 2) the alleged fraudulent closure of Atlantic and the birth of Inland which were
actually one and the same corporation, with the purpose of evading its obligations to
Atlantic’s employees. We do not agree. There is an identity of cause of action in the two
cases, that is, the unfair labor practices committed by Atlantic against its employees
during its existence. The obligations of Atlantic arising from the acts of unfair labor
practices committed against its employees during the former’s existence were already
settled in the first case. It is clear that whatever cause of action individual petitioners
had against Atlantic for violations of the CBA constituting an unfair labor practice act
had already been heard in the first case. The union presented its evidence, oral and
documentary although only those who testified were ordered reinstated. The allegation
regarding the fraudulent closure of Atlantic and the establishment of Inland for the
purpose of evading its obligations to the former’s employees for unfair labor practice
comes to play only in the execution or enforcement of the final and executory decision
in the first case. It cannot, when joined with the unfair labor charges already settled in
the first case, make out a different cause of action.

While it is true that the complainants in the first charge was the union, in reality it had
no material interest in the outcome of the case. The real party who stands to be
benefited or defeated by a case brought in the name of the union are the union
members themselves. Since the judgment therein had become final and executory, the
subsequent filing of another ULP charge against Atlantic for the same violations
committed during its existence, is barred by res judicata. The bringing of the same
action in the name of the individual members of the union will not take out the case
from the ambit of the principle of res judicata. Neither will the bringing in of new
respondents in the name of the new corporation Inland, its incorporators and private
respondent Roberto Jacinto, who is also its General Manager, help petitioners’ cause. chanrobles law library
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It should be noted that in the decision of the first complaint, only seven (7) of the
members of the union were ordered reinstated "inasmuch as complainants and/or their
witnesses failed to present any evidence, oral or documentary, as to who were those
other union members who joined the strike." In the second complaint, Labor Arbiter
Jose T. Collado ordered the reinstatement of only eighty-six (86) of the 136 petitioners-
members of the union "considering, . . ., that not all complainants evinced their desire
to prosecute the case," and "the award (was) extended only to those who testified
and/or presented their respective manifestation of prosecuting their causes of
action . . ." If We were to allow the second complaint to prosper for the eighty-six (86)
(out of 136) petitioners-members union after only seven (7) were ordered reinstated in
the first complaint, nothing would deter the other members of the union who were not
yet ordered to be reinstated from bringing a third complaint and there would be no end
to the litigation until all of the members of the union are ordered reinstated.

We have already held that when a labor union accuses an employer of acts of unfair
labor practice allegedly committed during a given period of time, the charges should
include all acts of unfair labor practice committed against any and all members of the
union during that period. The union should not, upon dismissal of the charges first
preferred, be allowed to split its cause of action and harass the employer with
subsequent charges based upon acts committed during the same period of time
(Dionela, Et. Al. v. CIR, No. L-19334, August 31, 1963, 8 SCRA 832 at 837). The
underlying philosophy of the doctrine of res judicata is that parties ought not to be
permitted to litigate the same issue more than once; that when a right or fact has been
judicially tried and determined by a court of competent jurisdiction, or an opportunity
for such a trial has been given, the judgment of the court, so long as it remains
unreversed, should be conclusive upon the parties and those in privity with them in law
or estate, (Marapao v. Mendoza, 119 SCRA 97, Sy Cao v. CA, 132 SCRA 302). It is to
the interest of the public that there should be an end to litigation by the same parties
and their privies over a subject once fully and fairly adjudicated. Interest republicae ut
sit finis litium. (Valera v. Banez, supra; Masagana Telamart, Inc. v. CA, 135 SCRA 694,
cited in Ibabao v. IAC, No. 74848, May 20, 1987, 150 SCRA 76).

The issue of whether or not the second ULP charge had prescribed need not be resolved
by Us in view of Our finding that res judicata had set in.

We agree however, with the Labor Arbiter’s finding that the closure of Atlantic and the
establishment of Inland for the purpose of avoiding any obligation which may be
adjudged against the former in favor of its employees was substantially proven. As
observed by Labor Arbiter Jose T. Collado: jgc:chanrobles.com.ph

"On the connection of Inland Industries, Inc. to Atlantic Container Corporation, neither
respondents presented evidence to negate complainants’ exhibits. Inland merely
submitted a supposed mortgage executed by Roberto A. Jacinto and his wife of
Atlantic’s machineries/assets to the Development Bank of the Philippines and its
incorporation papers. Conversely, it should be noted that the respondents did not
question the validity of Atlantic Container Corporation and Roberto A. Jacinto’s
culpability for unfair labor practices having adopted as evidence, as heretofore stated,
the CIR judgment.

"Also, unrebutted are the documental proofs that Lazaro Arriola and Bienvenido
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Katalbas were co-employees of the complainants (reflected in the SSS records);

Roberto A. Jacinto, Atlantic Container Corporation’s General manager, who wrote the
SSS on August 9, 1967 informing it of Atlantic’s closure ‘as of May, 1966’ due to labor
strike since February, 1966." (Exh. "D"), reappeared later as Inland’s General Manager
in his letter to the SSS (Exh. "F"), and Inland’s official birth on July 29, 1966
immediately after Roberto A. Jacinto declared Atlantic as non-existent. chanrobles.com:cralaw:red

"On the basis of the foregoing, it can be safely concluded that Inland Industries, Inc.
was conceived with the specific end of rendering moot and academic any relief
emanating, from Atlantic Container Corporation’s unfair labor practices. This is very
apparent from the records of this case as a whole.

"Under the circumstances, piercing the corporate veil is permissible, especially so when
a second entity is born and generated to subvert the law and the purpose of its creation
and Inland Industries, Inc. was precisely registered by Roberto A. Jacinto to defeat the
legitimate claims and aspirations of the herein complainants. In that act, Roberto A.
Jacinto, clearly the owner of Atlantic Container Corporation and Inland Industries, Inc.,
resorted to the corporate fiction of Inland’s distinctness of personality to defeat public
convenience, justify wrongdoing, protect fraud and perpetrate deception, and
primordial of them all, to escape liability for his unfair labor practice acts." (pp. 52-53,
Rollo).

This is a sufficient reason, for the purpose of enforcing the judgment in the first case,
for applying the rule that when a second entity is born or generated to subvert the law,
resort to corporate fiction of distinctness of personality is prevented.

ACCORDINGLY, judgment is hereby rendered: a) AFFIRMING the dismissal of the

complaint in NLRC Case No. LR-4320; and b) REVERSING the findings of public
respondents with regard to the distinctness of personality of Atlantic and Inland for
purposes of compliance with their obligations to the former’s employees as adjudged in
Case No. 5195-ULP.

SO ORDERED.

ADMINISTRATIVE APPEAL AND REVIEW

1. Suyat Jr. vs. Torres 441 SCRA 265

Topic: Appeal to the president

G.R. No. 133530             October 25, 2004

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DONATO S. SUYAT, JR., petitioner,

vs.
HON. RUBEN D. TORRES, in his capacity as Executive Secretary, respondent.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals in CA-G.R. SP
No. 42820 dismissing the petition for certiorari of the petitioner and affirming Administrative Order
(AO) No. 95 of the President of the Philippines, effectively dismissing petitioner Donato S. Suyat, Jr.,
as 2nd Assistant Provincial Prosecutor of Rizal, for grave misconduct.

As culled by the Court of Appeals (CA) from the records, this case stemmed from the following
antecedents:

It appears that on May 23, 1993, a robbery incident took place at the residential house of
Atty. Reynaldo V. Bautista located at Block 25, Lot 25, Phase 80, Sardony Street, Pasig
Greenpark Village, Barangay San Isidro, Cainta, Rizal, and allegedly committed by Randy
Torres, Nelson Torres, Marlon Bonson, and Bernardo Bautista (Rollo, pp. 70, 90, 121).

After the timely arrest of the above suspects, Cainta Police authorities filed before Inquest
Prosecutor Nestor V. Gapusan a criminal complaint for robbery with force upon things
against Randy Torres, Nelson Torres, Marlon Bonson, and Bernardo Bautista. At the inquest
proper, Bernardo Bautista admitted the sole responsibility for the commission of the
aforesaid crime and exonerated his co-other suspects. But despite this admission by
Bernardo Bautista, the preliminary investigation was still conducted upon recommendation of
the said inquest prosecutor, and considering the waiver of detention signed by the suspects,
they were detained in the provincial jail pending the termination of the preliminary
investigation (Rollo, pp. 25, 90).

Not satisfied with the above detention, Imelda Torres, mother of suspects Randy and Nelson
Torres, and also the aunt of suspect Marlon Bonson, followed up the case on June 8, 1993
with the Prosecutor’s Office of Rizal. In the process, Imelda Torres was able to know that
Prosecutor Donato S. Suyat, Jr. was the reviewing prosecutor of all inquest cases, so she
talked to Prosecutor Suyat, Jr. who, initially, demanded Imelda Torres the sum of ₱20,000.00
for the dismissal of the case against the latter’s two (2) sons and nephew. Realizing,
however, that this amount is much lower than what was required of Imelda Torres in the
payment of cash bond for every suspect, she decided to bargain the amount until Prosecutor
Suyat, Jr. finally agreed to the sum of ₱15,000.00 to be given in his office the following day
on June 9, 1993 at 3:00 p.m. in the afternoon (sic) (Rollo, pp. 25-26, 50-51, 202).

Upon consultation with her lawyer Atty. Mariano Santiago, Imelda Torres was referred by
said counsel to the Anti-Organized Crime Division of the National Bureau of Investigation for
immediate assistance. Thus, the Anti-Organized Crime Division thru its Chief, Atty. Artemio
Sacaguing, ordered Special Agent Mar Panganiban to form a team for the purpose of
entrapping Prosecutor Suyat, Jr. (id., pp. 26, 51, 72, 202).

On June 9, 1993, at about 3:00 in the afternoon, Imelda Torres, with her daughter Mildred
Torres, went to the office of Prosecutor Suyat, Jr. Since the dismissal papers were still being
typed at that time, Imelda Torres and her daughter Mildred waited until 5:00 in the afternoon
on which occasion Prosecutor Suyat, Jr. handed over to the former the resolution (Annex "9;"
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id., p. 124) dismissing the robbery case in favor of Imelda’s two (2) sons and nephew.
However, despite suggestion of Imelda’s daughter, Mildred Torres, that the ₱15,000.00
would be given instead on the following day of June 10, 1993 because of Prosecutor Suyat,
Jr.’s promise to give on the same day the release papers of Randy and Nelson Torres and
Marlon Bonson from their detention, such arrangement was to no avail as Prosecutor Suyat,
Jr. vehemently refused and countered that he needed the money that time very badly so he
had already prepared the dismissal papers for the said three suspects. Hence, Imelda Torres
handed to Prosecutor Suyat, Jr. the envelope containing the ₱15,000.00, all in one thousand
denomination (id., pp. 83-86), and, thereafter, Imelda Torres and her daughter Mildred left
the office with her (Imelda) bag under her armpit (Rollo, pp. 51, 203).

As the foregoing was considered the pre-arranged signal to the NBI agents, the team of NBI
Agent Mar Panganiban immediately entered the office of Prosecutor Suyat, Jr. who, at that
time, was with a male companion who turned out to be his son Junior. From the introduction
of the NBI agents, Prosecutor Suyat, Jr. put down the envelope he was holding and kept his
hand on his pocket. When Prosecutor Suyat, Jr. was asked to count the money in the
envelope, he refused until the time he was forced to count the said money by himself. Since
there was only ₱9,000.00 in the envelope, the NBI agents decided to search Prosecutor
Suyat, Jr.’s son Junior and they found the folded ₱6,000.00 from Junior’s pocket. To relieve
his son from any liability, Prosecutor Suyat, Jr. told NBI Agent Panganiban to spare his son
from any involvement in this entrapment since the money came from him anyway.
Accordingly, Prosecutor Suyat, Jr. was brought to the NBI for forensic chemistry examination
under which he was found positive, and despite the additional evidence produced by the NBI
in relation to the entrapment activity, Prosecutor Suyat, Jr. still opted to remain silent (Rollo,
pp. 27, 204).

In view of the foregoing, Rosalina A. Espina, in her capacity as Supervising Agent of the
National Bureau of Investigation, filed with the Department of Justice an unnumbered
administrative complaint accusing Prosecutor Suyat, Jr. of the Office of the Provincial
Prosecutor of Rizal of grave misconduct and receiving for personal use of a fee, gift or other
valuable thing in the course of official duties in violation of Anti-Graft laws and Section 46,
paragraphs b(4) and b(9) of Executive Order No. 292 of the Administrative Code of 1987. By
way of relief, Rosalina A. Espina prayed for the dismissal of Prosecutor Suyat, Jr. from the
government service after due hearing of the case (id., pp. 70-71).

Finding that there was prima facie case of grave misconduct and receiving for personal use
of a fee, gift or any valuable thing in the course of official duties against Prosecutor Suyat,
Jr., Secretary Franklin M. Drilon of the Department of Justice issued a formal charge against
Prosecutor Suyat, Jr. for the said administrative charge (Rollo, p. 93) as well as
memorandum placing him under preventive suspension for ninety (90) days effective from
receipt thereof and while the case was under formal investigation of State Prosecutor Leah
T. Armamento (id., p. 94).

From the several hearings of the case, and in the light of the contending parties’ evidences
as well as counter-affidavit and memorandum submitted by Prosecutor Suyat, Jr. (id., pp. 4,
95-111, 162-191), Secretary Franklin M. Drilon of the Department of Justice recommended
to the then Executive Secretary Teofisto T. Guingona, Jr. of the Office of the President the
immediate dismissal of Prosecutor Suyat, Jr. from the government service with forfeiture of
all benefits under the law (Rollo, pp. 50-54).

In response, then Executive Secretary Teofisto T. Guingona, Jr. issued a memorandum

stating his concurrence with the recommendation of Secretary Franklin M. Drilon, and
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recommended to President Fidel V. Ramos the approval of the proposed Administrative

Order dismissing Prosecutor Suyat, Jr. from the government service with forfeiture of all
benefits under the law (id., pp. 55-56).

On November 26, 1993, the Office of the President of the Philippines thru then Executive
Secretary Teofisto T. Guingona, Jr. issued the first questioned order dismissing Prosecutor
Suyat, Jr. from the government service with forfeiture of all benefits under the law as earlier
adverted to.

Prosecutor Suyat, Jr. filed his first motion for reconsideration (Rollo, pp. 34-49) which was
denied, this time, by new Executive Secretary Ruben D. Torres in his second questioned
order dated February 16, 1996 (id., p. 31). Not contended (sic), Prosecutor Suyat, Jr. still
filed his second motion for reconsideration (id., pp. 65-69), but the same was, likewise, finally
denied by Executive Secretary Ruben D. Torres in his third questioned order dated
November 7, 1996 (id., p. 32).

Hence, the instant petition interposed by Prosecutor Suyat, Jr. alleging that the Office of the
President thru Executive Secretary Ruben D. Torres committed grave abuse of discretion in
issuing the assailed orders because (a) the first questioned order is not supported by the
evidence on record and is tainted with gross error of law and irregularities prejudicial to the
interest of Prosecutor Suyat, Jr.; and (b) the second and third questioned orders violates
(sic) the prevailing doctrine concerning pro forma motions for reconsideration.2

As stated earlier, the appellate court dismissed the petition for review of the petitioner holding, inter
alia, as follows:

Firstly, the instant petition should be dismissed outright inasmuch as petitioner adopted an
erroneous remedy in pursuing his cause in the instant administrative case before this Court.
It is explicitly provided under Section 1 of Revised Administrative Circular No. 1-95 which
took effect on June 1, 1995 that a final order by any quasi-judicial agency shall be
appealable to this Court by way of petition for review. This provision is now even
substantially incorporated under Section 1, Rule 43 of the present 1997 Rules of Civil
Procedure effective last July 1, 1997. It is unrebutted on record that petitioner Suyat, Jr.
received the third questioned order on December 2, 1996 so he had still up to December 17,
1996 to elevate his administrative case before this Court by way of petition for review.
Instead, petitioner filed the instant petition for certiorari to this Court on December 17, 1996,
specifically within the reglementary period of appeal, despite the availability of the said
procedural remedy under the aforesaid rules.

The impropriety of the instant petition for certiorari is also evident considering that the
assigned issues by petitioner involve factual issues and/or evidentiary matters which are not
reviewable by the extraordinary remedy of certiorari. Petitioner must realize that the petition
for certiorari is intended to correct defects of jurisdiction solely and cannot legally be used for
any other purpose (GSIS vs. Court of Appeals, 169 SCRA 244, 253; Garcia, Jr. vs. Ranada,
Jr., 166 SCRA 9, 16-17; Philippine Rabbit Bus Lines, Incorporated vs. Galuaran and Pilares
Construction Co., 118 SCRA 664, 667-668, among the cases).

Secondly, even if this Court were to consider the instant petition as the proper petition for
review in the interest of justice, the same must still fail because petitioner was undisputably
liable for grave misconduct given the clear evidence imputed against him. 3

…
APEL FULL CASE

Finally, We find the petitioner’s invocation of the constitutional provision on the right to remain silent
immaterial given the apparent quantum of proof established for the administrative liability of
petitioner for grave misconduct. We concur with the valid observation of the Solicitor General on this
matter which We believe are in keeping with the law and jurisprudence, thus:

"Pertinently, petitioner assailed as erroneous the finding that his silence and refusal to give
any statement during the NBI investigation pointed to the conclusion that his defense was a
mere afterthought, arguing that it was well within his right to remain silent.

This is untenable.

The right of a person under custodial investigation to remain silent is primarily intended to pr
otect said person from being forced to make a confession or to give incriminating statements 
against himself. Undoubtedly, however, there is nothing incriminating in petitioner’s claim tha
t he was framed up: on the contrary, it is favorable to petitioner as it tends to exonerate him. I
n other words, instead of choosing to remain silent and refusing to give any statement, petitio
ner should have seized the NBI investigation as an opportunity to denounce the alleged fram
e up incident. But he did not, although as a public prosecutor, he knew very well that such pr
ompt action would have made his defense more sound and convincing. Petitioner only has hi
mself to blame if his belated claim or defense was found implausible.

Evidently, petitioner cannot validly invoke the right to remain silent to justify what, under the c
ircumstances, constitutes an invalid and incredible defense." (Emphasis supplied)

(Comment of the Solicitor General, pp. 14-16; Rollo, pp. 213-215) 4

The petitioner now assails the decision of the CA, contending that:

1. The findings of fact and the Decision are erroneous because they are not supported by
the evidence on record, an issue of law;

2. The Decision would render useless counter-affidavits filed by respondents in

administrative and criminal cases;

3. The Decision would compel persons under custodial investigation by the National Bureau
of Investigation or other police agencies not to remain silent;

4. The Decision ignored petitioner’s allegations regarding irregularities which attended the
issuance of Administrative Order No. 95, Series of 1993. 5

The petition is denied.

Administrative Order No. 95 of the President Had Become Final and Executory When the
Petitioner Filed His Petition For Certiorari in the Court of Appeals.

In his petition at bar, the petitioner did not assail the ruling of the CA that his petition for certiorari in
the said court was an inappropriate remedy. The petitioner is, thus, bound by the ruling of the CA.

The records show that the petitioner received a copy of AO No. 95 dismissing him from the
government service on December 14, 1993. He had fifteen days from the said date within which to
file a motion for reconsideration of the order. The petitioner filed a timely motion for reconsideration
APEL FULL CASE

of the order which the President denied in an Order dated February 16, 1996. The petitioner
received a copy of the same on February 28, 1996. Instead of filing a petition for review of the said
orders with the CA, the petitioner filed a second motion for reconsideration which the President
denied in an Order dated November 7, 1996. Cited therein was Section 7 of AO No. 18, Series of
1987, which prohibits the filing of a second motion for reconsideration of the final order or decision of
the Office of the President of the Philippines. 6 Thus, the filing by the petitioner of a second motion for
reconsideration of AO No. 95, being a prohibited pleading, did not suspend the period to appeal the
February 28, 1996 Order to the CA via a petition for review. Indubitably then, when the petitioner
filed his petition for certiorari with the CA after the President denied his second motion for
reconsideration, AO No. 95 of the President had become final and executory, beyond the jurisdiction
of the CA to alter, modify, or reverse.7

The Petition for Certiorari Filed in the Court of Appeals Not A Substitute for the Lost Remedy
of Appeal

We are convinced that the petitioner filed a petition for certiorari under Rule 65 of the Rules of Court
instead of a petition for review under Rule 43 of the said Rules because he realized that the period
within which to file the said petition for review had lapsed, and that AO No. 95 of the President had
become final and executory. By filing a petition for certiorari under Rule 65 of the Rules of Court, the
petitioner sought to nullify the said order via an independent action, in lieu of his lost right of appeal.
But case law is that the existence and the availability of the right to appeal are antithetical to the
remedy of the special civil action of certiorari. These two remedies are mutually exclusive. 8

The Errors Ascribed to the Office of the President Are Errors of Judgment and Not Errors of
Jurisdiction

In a petition for certiorari, the jurisdiction of the court is narrow in scope. It is limited to resolving only
errors of jurisdiction. It is not to stray at will and resolve questions or issues beyond its competence
such as errors of judgment. Errors of judgment of the trial court are to be resolved by the appellate
court in the appeal by and of error or via a petition for review on certiorari in this Court under Rule 45
of the Rules of Court. Certiorari will issue only to correct errors of jurisdiction. It is not a remedy to
correct errors of judgment.9 An error of judgment is one in which the court may commit in the
exercise of its jurisdiction, and which error is reversible only by an appeal. Error of jurisdiction is one
where the act complained of was issued by the court without or in excess of jurisdiction and which
error is correctible only by the extraordinary writ of certiorari. 10 Certiorari will not be issued to cure
errors by the trial court or quasi-judicial body in its appreciation of the evidence of the parties, and its
conclusions anchored on the said findings, and its conclusions of law. 11 As long as the court acts
within its jurisdiction, any alleged errors committed in the exercise of its discretion will amount to
nothing more than mere errors of judgment, correctible by an appeal or a petition for review under
Rule 43 of the Rules of Court.12

In this case, the petitioner alleged in his petition for certiorari that AO No. 95 of the President was not
supported by the evidence on record; that the National Bureau of Investigation (NBI) conducted its
operations with undue interest and enthusiasm; and that the Office of the President failed to
appreciate the defenses he invoked, such as the violation by the NBI of his right to remain silent and
the right against self-incrimination. The petitioner complained that the President even used his
invocation of his constitutional rights as evidence against him. However, these errors ascribed by the
petitioner to the CA and the President of the Philippines are mere errors of judgment and not of
jurisdiction.

The Issues Raised in the Petition At Bar Are Factual

APEL FULL CASE

Under Rule 45 of the Rules of Court, only questions of law may be raised in a petition for review on
certiorari, the reason being that the Court is not a trier of facts. It is not the function of the Court to
calibrate the evidence of the parties. For a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by the litigants or any of
them.13 Moreover, findings of facts of questions of law, in addition to questions of facts of quasi-
judicial bodies or agencies of the government, if based on substantial evidence and particularly
when affirmed by the CA, are conclusive on the Court unless grave abuse is shown amounting to
lack or excess of jurisdiction. 14 The petitioner failed to preponderantly establish such abuse on the
part of the CA. The records show that the Secretary of Justice calibrated the evidence on record and
ruled against the petitioner. The President of the Philippines reviewed the records and the evidence
anew, and affirmed the findings and rulings of the Secretary of Justice. The CA again reviewed the
records and the evidence, and affirmed the rulings of the Secretary of Justice and the President of
the Philippines. Even if the Secretary of Justice, the Office of the President of the Philippines, and
the CA erred in appreciating against the petitioner the results of the Forensic Chemistry examination
conducted by the NBI, there is more than ample evidence on record to support the finding that the
petitioner is guilty of grave misconduct.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. No costs.

SO ORDERED.

2. Tan vs. Director of Forestry 125 SCRA 302

TOPIC: Appeal to the president

G.R. No. L- 24548 October 27, 1983

WENCESLAO VlNZONS TAN, THE DIRECTOR OF FORESTRY, APOLONIO THE SECRETARY

OF AGRICULTURE AND NATURAL RESOURCES JOSE Y. FELICIANO, respondents-appelllees,
vs.
THE DIRECTOR OF FORESTRY, APOLONIO RIVERA, THE SECRETARY OF AGRICULTURE
AND N ATURAL RESOURCES JOSE Y. FELICIANO, respon dents-appellees,RAVAGO
COMMERCIAL CO., JORGE LAO HAPPICK and ATANACIO MALLARI, intervenors,

Camito V Pelianco Jr. for petitioner-appellant.

Solicitor General for respondent Director.

Estelito P. Mendoza for respondent Ravago Comm'l Co.

Anacleto Badoy for respondent Atanacio Mallari.

Mariano de Joya, Jr. for respondent Jorge Lao Happick, Jr.

APEL FULL CASE

MAKASIAR, J:

This is an appeal from the order dated January 20, 1965 of the then Court of First Instance of
Manila, Branch VII, in Civil Case No. 56813, a petition for certiorari, prohibition and mandamus with
preliminary prohibitory injunction (p. 2. rec.), which dismissed the petition of petitioner-appellant
Wenceslao Vinzons Tan on the ground that it does not state a sufficient cause of action, and upon
the respondents-appellees' (Secretary of Agriculture and Natural resources and the Director of
Forestry) motion to dismiss (p. 28, rec.).

Sometime in April 1961, the Bureau of Forestry issued Notice No. 2087, advertising for public
bidding a certain tract of public forest land situated in Olongapo, Zambales, provided tenders were
received on or before May 22, 1961 (p. 15, CFI rec.). This public forest land, consisting of 6,420
hectares, is located within the former U.S. Naval Reservation comprising 7,252 hectares of
timberland, which was turned over by the United States Government to the Philippine Government
(P. 99, CFI rec.).

On May 5, 1961, petitioner-appellant Wenceslao Vinzons Tan submitted his application in due form
after paying the necessary fees and posting tile required bond therefor. Nine other applicants
submitted their offers before the deadline (p. 29, rec.).

Thereafter, questions arose as to the wisdom of having the area declared as a forest reserve or
allow the same to be awarded to the most qualified bidder. On June 7, 1961, then President Carlos
P. Garcia issued a directive to the Director of the Bureau of Forestry, which read as follows:

It is desired that the area formerly covered by the Naval Reservation be made a
forest reserve for watershed purposes. Prepare and submit immediately a draft of a
proclamation establishing the said area as a watershed forest reserve for Olongapo,
Zambales. It is also desired that the bids received by the Bureau of Forestry for the
issuance of the timber license in the area during the public bidding conducted last
May 22, 1961 be rejected in order that the area may be reserved as above stated. ...

(SGD.)
CARL
OS P.
GARCI
A

(pp. 98, CFI rec.).

On August 3, 1961, Secretary Cesar M. Fortich of Agriculture and Natural Resources sustained the
findings and re comendations of the Director of Forestry who concluded that "it would be beneficial
to the public interest if the area is made available for exploitation under certain conditions," and

We quote:

Respectfully forwarded to the honorable, the Executive Secretary Malacanang.

Manila inviting particular attention to the comment and recommendation of the
Director of Forestry in the proceeding in indorsement in which this Of fice fully
concurs.
APEL FULL CASE

The observations of responsible forest officials are most revealing of their zeal to
promote forest conservation and watershed protection especially in Olongapo,
Zambales area. In convincing fashion, they have demonstrated that to declare the
forest area involved as a forest reserve ratify than open it for timber exploitation
under license and regulation would do more harm than of to the public interest. To
convert the area into a forest reserve without an adequate forest protection force,
would make of it a 'Free Zone and Logging Paradise,' to the ever 'Problem Loggers'
of Dinalupihan, Bataan . . . an open target of timber smugglers, kaingineros and
other forms of forest vandals and despoilers. On the other hand, to award the area,
as planned, to a reputable and responsible licensee who shall conduct logging
operations therein under the selective logging method and who shall be obliged to
employ a sufficient number of forest guards to patrol and protect the forest
consecration and watershed protection.

Worthy of mention is the fact that the Bureau of Forestry had already conducted a
public bidding to determine the most qualified bidder to whom the area advertised
should be awarded. Needless to stress, the decision of the Director of Forestry to
dispose of the area thusly was arrived at after much thought and deliberation and
after having been convinced that to do so would not adversely affect the watershed
in that sector. The result of the bidding only have to be announced. To be sure, some
of the participating bidders like Mr. Edgardo Pascual, went to much expense in the
hope of winning a virgin forest concession. To suddenly make a turn about of this
decision without strong justifiable grounds, would cause the Bureau of Forestry and
this Office no end of embarrassment.

In view of the foregoing, it is earnestly urged that the Director of Forestry be allowed
to proceed with the announcement of the results of the bidding for the subject forest
area (p. 13, CFI rec.).

The Office of the President in its 4th Indorsement dated February 2, 1962, signed by Atty. Juan
Cancio, Acting Legal Officer, "respectfully returned to the Honorable Secretary of the Department of
Agriculture and Natural Resources for appropriate action," the papers subject of Forestry Notice No.
2087 which was referred to the Bureau of Forestry for decision (p. 14, CFI rec.).

Finally, of the ten persons who submitted proposed the area was awarded to herein petitioner-
appellant Wenceslao Vinzons Tan, on April 15, 1963 by the Bureau of Forestry (p. 17, CFI rec.).
Against this award, bidders Ravago Commercial Company and Jorge Lao Happick filed motions for
reconsideration which were denied by the Director of Forestry on December 6, 1963.

On May 30, 1963, the Secretary of Agriculture and Natural Resources Benjamin M. Gozon — who
succeeded Secretary Cesar M. Fortich in office — issued General Memorandum Order No. 46,
series of 1963, pertinent portions of which state:

xxx xxx xxx

SUBJECT: ... ... ...

(D)elegation of authority to the Director of Forestry to grant ordinary timber licenses.

1. ... ... ...

APEL FULL CASE

2. The Director of Forestry is hereby authorized to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and
(be the extension of ordinary timber licenses for areas not exceeding 5,000 hectares
each;

3. This Order shall take effect immediately (p. 267, CFI rec.).

Thereafter, Jose Y. Feliciano was appointed as Acting secretary of Agriculture and Natural
Resources, replacing secretary Benjamin M. Gozon. Upon assumption of office he Immediately
promulgate on December 19, 19b3 General memorandum Order No. 60, revoking the authority
delegated to the Director of Forestry, under General Memorandum order No. 46, to grant ordinary
timber licenses, which order took effect on the same day, December 19, 1963. Pertinent portions of
the said Order read as follows:

xxx xxx xxx

SUBJECT: Revocation of General Memorandum Order No 46 dated May 30, 1963 —

1. In order to acquaint the undersigned with the volume and Nature of the work of the
Department, the authority delegated to the Director of forestry under General
Memorandum Order No. 46, dated May 30, 1963, to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and
(b) the extension of ordinary timber licenses for areas not exceeding 3,000 hectares
each is hereby revoked. Until further notice, the issuance of' new licenses , including
amendments thereto, shall be signed by the secretary of Agriculture and Natural
Resources.

2. This Order shall take effect immediately and all other previous orders, directives,
circulars, memoranda, rules and regulations inconsistent with this Order are hereby
revoked (p. 268, CFl rec.; Emphasis supplied).

On the same date that the above-quoted memorandum took effect, December 19, 1963, Ordinary
Timber License No. 20-'64 (NEW) dated April 22, 1963, in the name of Wenceslao Vinzons Tan, was
signed by then Acting Director of Forestry Estanislao R. Bernal without the approval of the Secretary
of Agriculture and Natural Resources. On January 6, 1964, the license was released by the Office of
the Director of Forestry (p. 30, CFI rec.; p. 77, rec.). It was not signed by the Secretary of Agriculture
and Natural Resources as required by Order No. 60 aforequoted.

On February 12, 1964, Ravago Commercial Company wrote a letter to the Secretary of Agriculture
and Natural Resources shall be considered by tile Natural Resources praying that, pending
resolution of the appeal filed by Ravago Commercial Company and Jorge Lao Happick from the
order of the Director of Forestry denying their motion for reconsideration, OTI No. 20-'64 in the name
of Wenceslao V. Tan be cancelled or revoked on the ground that the grant thereof was irregular,
anomalous and contrary to existing forestry laws, rules and regulations.

On March 9, 1964, acting on the said representation made by Ravago Commercial Company, the
Secretary of Agriculture and Natural Resources promulgated an order declaring Ordinary Timber
License No. 20-'64 issued in the name of Wenceslao Vinzons Tan, as having been issued by the
Director of Forestry without authority, and is therefore void ab initio. The dispositive portion of said
order reads as follows:
APEL FULL CASE

WHEREFORE, premises considered, this Office is of the opinion and so holds that
O.T. License No. 20-'64 in the name of Wenceslao Vinzons Tan should be, as
hereby it is, REVOKED AND DECLARED without force and effect whatsoever from
the issuance thereof.

The Director of Forestry is hereby directed to stop the logging operations of

Wenceslao Vinzons Tan, if there be any, in the area in question and shall see to it
that the appellee shall not introduce any further improvements thereon pending the
disposition of the appeals filed by Ravago Commercial Company and Jorge lao
Happick in this case" (pp. 30-31, CFI rec.).

Petitioner-appellant moved for a reconsideration of the order, but the Secretary of Agriculture and
Natural Resources denied the motion in an Order dated March 25, 1964, wherein this paragraph
appears:

In this connection, it has been observed by the Acting Director of Forestry in his 2nd
indorsement of February 12, 1964, that the area in question composes of water basin
overlooking Olongapo, including the proposed Olongapo watershed Reservation; and
that the United States as well as the Bureau of Forestry has earmarked this entire
watershed for a watershed pilot forest for experiment treatment Concerning erosion
and water conservation and flood control in relation to wise utilization of the forest,
denudation, shifting cultivation, increase or decrease of crop harvest of agricultural
areas influenced by the watershed, etc. .... (pp. 3839, CFI rec.; p. 78, rec.).

On April 11, 1964, the Secretary of Agriculture and Natural Resources, acting on the separate
appeals filed by Jorge Lao Happick and Ravago Commercial Company, from the order of the
Director of Forestry dated April 15, 1963, awarding to Wenceslao Vinzons Tan the area under Notive
No. 2087, and rejecting the proposals of the other applicants covering the same area, promulgated
an order commenting that in view of the observations of the Director of Forestry just quoted, "to grant
the area in question to any of the parties herein, would undoubtedly adversely affect public interest
which is paramount to private interests," and concluding that, "for this reason, this Office is of the
opinion and so holds, that without the necessity of discussing the appeals of the herein appellants,
the said appeals should be, as hereby they are, dismissed and this case is considered a closed
matter insofar as this Office is concerned" (p. 78, rec.).

On April 18, 1964, on the basis of the denial of his motion for reconsideration by the Secretary of
Agriculture and Natural Resources, petitioner-appellant filed the instant case before tile court a
quo (Court of First Instance, Manila), Special Civil Action No. 56813, a petition for certiorari,
prohibition and mandamus with preliminary prohibitory injunction (pp. 1-12, CFI rec.). Petitioner-
appellant claims that the respondents-appellees "unlawfully, illegally whimsically, capriciously and
arbitrarily acted without or in excess of their jurisdiction, and/or with grave abuse of discretion by
revoking a valid and existing timber license without just cause, by denying petitioner-appellant of the
equal protection of the laws, by depriving him of his constitutional right to property without due
process of law, and in effect, by impairing the obligation of contracts" (P. 6, CFI rec.). Petitioner-
appellant prayed for judgment making permanent the writ of preliminary injunction against the
respondents- appellees; declaring the orders of the Secretary of Agriculture and Natural Resources
dated March 9, March 25, and April 11, 1964, as well as all his acts and those of the Director of
Forestry implementing said orders, and all the proceedings in connection therewith, null and void,
unlawful and of no force and effect; ordering the Director of Forestry to renew OTI No. 20-'64 upon
expiration, and sentencing the respondents, jointly and severally, to pay the petitioner-appellant the
sum of Two Hundred Thousand Pesos (P200,000.000) by way of pecuniary damage, One Hundred
Thousand Pesos (P100,000.00) by way of moral and exemplary damages, and Thirty Thousand
APEL FULL CASE

Pesos (P30,000-00) as attorney's fees and costs. The respondents-appellees separately filed
oppositions to the issuance of the writ of preliminary injunction, Ravago Commercial Company,
Jorge Lao, Happick and Atanacio Mallari, presented petitions for intervention which were granted,
and they too opposed the writ.

The Director of Forestry in his motion to dismiss dated April 24, 1964, alleges the following grounds:
(1) that the court has no jurisdiction; (2) that the respondents may not be sued without their consent;
(3) that the petitioner has not exhausted all available administrative remedies; (4) that the petition
does not state a cause of action; and (5) that purely administrative and discretionary functions of
administrative officials may not be interfered with by the courts. The Secretary of Agriculture and
Natural Resources joined the motion to dismiss when in his answer of May 18, 1964, he avers the
following special and affirmative defenses: (1) that the court has no jurisdiction to entertain the action
for certiorari, prohibition and mandamus; (2) that the petitioner has no cause of action; (3) that venue
is improperly laid; (4) that the State is immune from suit without its consent; (5) that the court has no
power to interfere in purely administrative functions; and (6) that the cancellation of petitioner's
license was dictated by public policy (pp. 172-177, rec.). Intervenors also filed their respective
answers in intervention with special and affirmative defenses (pp. 78-79, rec.). A hearing was held
on the petition for the issuance of writ of preliminary injunction, wherein evidence was submitted by
all the parties including the intervenors, and extensive discussion was held both orally and in writing.

After the said hearing, on January 20, 1965, the court a quo, from the evidence received, resolved
not only the question on the issuance of a writ of preliminary injunction but also the motion to
dismiss, declared that the petition did not state a sufficient cause of action, and dismissed the same
accordingly. To justify such action, the trial court, in its order dismissing the petition, stated that "the
court feels that the evidence presented and the extensive discussion on the issuance of the writ of
preliminary mandatory and prohibitory injunction should also be taken into consideration in resolving
not only this question but also the motion to dismiss, because there is no reason to believe that the
parties will change their stand, arguments and evidence" (p. 478, CFI rec.). His motion for
reconsideration having been denied (p. 488, CFI rec.), petitioner-appellant Wenceslao Vinzons Tan
appealed directly to this Court.

Petitioner-appellant now comes before this Court, claiming that the trial court erred in:

(1) holding that the petition does not state a sufficient cause of action: and

(2) dismissing the petition [p.27,rec. ].

He argues that the sole issue in the present case is, whether or not the facts in the petition constitute
a sufficient cause of action (p. 31, rec.). Petitioner-appellant, in his brief, presented a lengthy
discussion on the definition of the term cause of action wherein he contended that the three
essential elements thereon, — namely, the legal right of the plaintiff, the correlative obligation of the
defendants and the act or omission of the defendant in violation of that right — are satisfied in the
averments of this petition (pp. 31-32, rec.). He invoked the rule that when the ground for dismissal is
that the complaint states no cause of action, such fact can be determined only from the facts alleged
in the complaint and from no other, and the court cannot consider other matters aliunde He further
invoked the rule that in a motion to dismiss based on insufficiency of cause of action, the facts
alleged in the complaint are deemed hypothetically admitted for the purpose of the motion (pp. 32-
33, rec.).
APEL FULL CASE

A perusal of the records of the case shows that petitioner-appellant's contentions are untenable. As
already observed, this case was presented to the trial court upon a motion to dismiss for failure of
the petition to state a claim upon which relief could be granted (Rule 16 [g], Revised Rules of Court),
on the ground that the timber license relied upon by the petitioner- appellant in his petition was
issued by the Director of Forestry without authority and is therefore void ab initio. This motion
supplanted the general demurrer in an action at law and, as a rule admits, for the purpose of the
motion, ail facts which are well pleaded however while the court must accept as true all well pleaded
facts, the motion does not admit allegations of which the court will take judicial notice are not true,
nor does the rule apply to legally impossible facts, nor to facts inadmissible in evidence, nor to facts
which appear by record or document included in the pleadings to be unfounded (Vol. 1, Moran's
Comments on the Rules of Court, 1970 ed., p. 505, citing cases).

It must be noted that there was a hearing held in the instant case wherein answers were interposed
and evidence introduced. In the course of the hearing, petitioner-appellant had the opportunity to
introduce evidence in support of tile allegations iii his petition, which he readily availed of.
Consequently, he is estopped from invoking the rule that to determine the sufficiency of a cause of
action on a motion to dismiss, only the facts alleged in the complaint must be considered. If there
were no hearing held, as in the case of Cohen vs. U.S. CCA Minn 1942,129 F. 2d 733), "where the
case was presented to District Court upon a motion to dismiss because of alleged failure of
complaint to state a claim upon which relief could be granted, and no answer was interposed and no
evidence introduced, the only facts which the court could properly consider in passing upon the
motion were those facts appearing in the complaint, supplemented be such facts as the court
judicially knew.

In Llanto vs. Ali Dimaporo, et al. (16 SCRA 601, March 31, 1966), this Court, thru Justice Conrado
V. Sanchez, held that the trial court can properly dismiss a complaint on a motion to dismiss due to
lack of cause of action even without a hearing, by taking into consideration the discussion in said
motion and the opposition thereto. Pertinent portion of said decision is hereby quoted:

Respondents moved to dismiss. Ground therefor is lack of cause of action. The Court
below granted the motion, dismissed the petition. The motion to reconsider failed.
Offshoot is this appeal.

1. The threshold questions are these: Was the dismissal order issued
without any hearing on the motion to dismiss? Is it void?

WE go to the record. The motion to dismiss was filed on February 1, 1961 and set for
hearing on February 10 following. On February 8, 1961 petitioner's counsel
telegraphed the court, (r)equest postponement motion dismissal till written opposition
filed.' He did not appear at the scheduled hearing. But on March 4, 1961, he followed
up his wire, with his written opposition to the motion to dismiss. Adverting to the 5-
page motion to dismiss and the 6-page opposition thereto, We find that the
arguments pro and con on the question of the board's power to abolish petitioner's
position to discussed the problem said profusely cited authorities. The May 15, 1961
8-page court order recited at length the said arguments and concluded that petitioner
made no case.

One good reason for the statutory requirement of hearing on a motion as to enable
the suitors to adduce evidence in support of their opposing claims. But here the
motion to dismiss is grounded on lack of cause of action. Existence of a cause of
action or lack of it is determined be a reference to the facts averred in the challenged
pleading. The question raised in the motion is purely one of law. This legal issue was
APEL FULL CASE

fully discussed in said motion and the opposition thereto. In this posture, oral
arguments on the motion are reduced to an unnecessary ceremony and should be
overlooked. And, correctly so, because the other intendment of the law in requiring
hearing on a motion, i.e., 'to avoid surprises upon the opposite party and to give to
the latter time to study and meet the arguments of the motion,' has been sufficiently
met. And then, courts do not exalt form over substance (Emphasis supplied).

Furthermore even if the complaint stated a valid cause of action, a motion to dismiss for-
insufficiency of cause of action will be granted if documentary evidence admitted by stipulation
disclosing facts sufficient to defeat the claim enabled the court to go beyond disclosure in the
complaint (LOCALS No. 1470, No. 1469, and No. 1512 of the International Longshoremen's
Association vs. Southern Pacific Co., 6 Fed. Rules Service, p. 107; U.S. Circuit Court of Appeals,
Fifth Circuit, Dec. 7, 1952; 131 F. 2d 605). Thus, although the evidence of the parties were
presented on the question of granting or denying petitioner-appellant's application for a writ of
preliminary injunction, the trial court correctly applied said evidence in the resolution of the motion to
dismiss. Moreover, in applying said evidence in the resolution of the motion to dismiss, the trial
court, in its order dismissing the petition, pointed out that, "there is no reason to believe that the
parties will change their stand, arguments and evidence" (p. 478, CFI rec.). Petitioner-appellant did
not interpose any objection thereto, nor presented new arguments in his motion for reconsideration
(pp. 482-484, CFI rec.). This omission means conformity to said observation, and a waiver of his
right to object, estopping him from raising this question for the first time on appeal. " I question not
raised in the trial court cannot be raised for the first time on appeal" (Matienzo vs. Servidad, Sept.
10, 1981, 107 SCRA 276).

Moreover, petitioner-appellant cannot invoke the rule that, when the ground for asking dismissal is
that the complaint states no cause of action, its sufficiency must be determined only from the
allegations in the complaint. "The rules of procedure are not to be applied in a very rigid, technical
sense; rules of procedure are used only to help secure substantial justice. If a technical and rigid
enforcement of the rules is made, their aim would be defeated. Where the rules are merely
secondary in importance are made to override the ends of justice; the technical rules had been
misapplied to the prejudice of the substantial right of a party, said rigid application cannot be
countenanced" (Vol. 1, Francisco, Civil Procedure, 2 ed., 1973, p. 157, citing cases).

What more can be of greater importance than the interest of the public at large, more particularly the
welfare of the inhabitants of Olongapo City and Zambales province, whose lives and properties are
directly and immediately imperilled by forest denudation.

The area covered by petitioner-appellant's timber license practically comprises the entire Olongapo
watershed (p. 265, CFI rec.). It is of public knowledge that watersheds serves as a defense against
soil erosion and guarantees the steady supply of water. As a matter of general policy, the Philippine
Constitution expressly mandated the conservation and proper utilization of natural resources, which
includes the country's watershed. Watersheds in the Philippines had been subjected to rampant
abusive treatment due to various unscientific and destructive land use practices. Once lush
watersheds were wantonly deforested due to uncontrolled timber cutting by licensed
concessionaries and illegal loggers. This is one reason why, in paragraph 27.of the rules and
regulations included in the ordinary timber license it is stated:

The terms and conditions of this license are subject to change at the discretion of the
Director of Forestry, and that this license may be made to expire at an earlier date,
when public interests so require (Exh. D, p. 22, CFI rec.).
APEL FULL CASE

Considering the overriding public interest involved in the instant case, We therefore take judicial
notice of the fact that, on April 30, 1964, the area covered by petitioner-appellant's timber license
has been established as the Olongapo Watershed Forest Reserve by virtue of Executive
Proclamation No. 238 by then President Diosdado Macapagal which in parts read as follows:

Pursuant to the provisions of Section 1824 of the Revised Administrative Code, as

amended, 1, Diosdado Macapagal, President of the Philippines do hereby withdraw
from entry, sale, or settlement and establish as Olongapo Watershed Forest Reserve
for watershed, soil protection, and timber production purposes, subject to private
rights, if any there be, under the administration and control of the Director of
Forestry, xx the following parcels of land of the public domain situated in the
municipality of Olongapo, province of Zambales, described in the Bureau of Forestry
map No. FR-132, to wit: ... ... (60 O.G. No. 23, 3198).

Petitioner-appellant relies on Ordinary Timber License No. 20-'64 (NEW) for his alleged right over
the timber concession in question. He argues thus: "The facts alleged in the petition show: (1) the
legal right of the petitioner to log in the area covered by his timber license; (2) the legal or
corresponding obligation on the part of the respondents to give effect, recognize and respect the
very timber license they issued to the petitioner; and (3) the act of the respondents in arbitrarily
revoking the timber license of the petitioner without giving him his day in court and in preventing him
from using and enjoying the timber license issued to him in the regular course of official business" (p.
32, rec.).

In the light of petitioner-appellant's arguments, it is readily seen that the whole controversy hinges on
the validity or invalidity of his timber license.

WE fully concur with the findings of the trial court that petitioner- appellant's timber license was
signed and released without authority by then Acting Director Estanislao R. Bernal of Forestry, and
is therefore void ab initio. WE hereby quote such findings:

In the first place, in general memorandum order No. 46 dated May 30, 1963, the
Director of Forestry was authorized to grant a new ordinary timber license only where
the area covered thereby was not more than 3,000 hectares; the tract of public forest
awarded to the petitioner contained 6,420 hectares (Exhs. 2-A and 2-B Ravago,
embodied in Annex B; Exh. B). The petitioner contends that only 1,756 hectares of
the said area contain commercial and operable forest; the authority given to the
Director of Forestry to grant a new ordinary timber license of not more than 3,000
hectares does not state that the whole area should be commercial and operable
forest. It should be taken into consideration that the 1,756 hectares containing
commercial and operable forest must have been distributed in the whole area of
6,420 hectares. Besides the license states, 'Please see attached sketch and
technical description,' gives an area of 6,420 hectares and does not state what is the
area covered of commmercial and operable forest (Exh. Ravago Also Annex B of the
petition, which was marked as Exhibit B, states:

Under Notice No. 2087, a tract of public forest containing 6,420

hectares located in Olongapo, Zambales was declared available for
timber utilization and development. Pursuant to this Notice, there
were received bid proposals from the following persons: ...
APEL FULL CASE

Wherefore, confirming the findings of said Committee, the area described in Notice
No. 2087 shall be awarded, as it is hereby awarded to Wenceslao Vinzons Tan,
subject to the following conditions: ... ...

In the second place, at the time it was released to the petitioner, the Acting Director
of Forestry had no more authority to grant any license. The license was signed by the
Acting Director of Forestry on December 19, 1963, and released to the petitioner on
January 6, 1964 (Exh. RavaGo The authority delegated to the Director of Forestry to
grant a new ordinary timber license was contained in general memorandum order
No. 46 dated May 30, 1963. This was revoked by general memorandum order No.
60, which was promulgated on December 19, 1963. In view thereof, the Director of
Forestry had no longer any authority to release the license on January 6, 1964, and
said license is therefore void ab initio (pp. 479480, CFI rec.).

The release of the license on January 6, 1964, gives rise to the impression that it was ante-dated to
December 19, 1963 on which date the authority of the Director of Forestry was revoked. But, what is
of greatest importance is the date of the release or issuance, and not the date of the signing of the
license. While petitioner-appellant's timber license might have been signed on December 19, 1963 it
was released only on January 6, 1964. Before its release, no right is acquired by the licensee. As
pointed out by the trial court, the Director of Forestry had no longer any authority to release the
license on January 6, 1964. Therefore, petitioner-appellant had not acquired any legal right under
such void license. This is evident on the face of his petition as supplemented by its annexes which
includes Ordinary Timber License No. 20-'64 (NEW). Thus, in the case of World Wide Insurance &
Surety Co., Inc. vs. Macrohon, et al. (105 Phil. 250, Feb. 28, 1959), this Court held that if from the
face of the complaint, as supplemented by its annexes, plaintiff is not the owner, or entitled to the
properties it claims to have been levied upon and sold at public auction by the defendants and for
which it now seeks indemnity, the said complaint does not give plaintiff any right of action against the
defendants. In the same case, this Court further held that, in acting on a motion to dismiss, the court
cannot separate the complaint from its annexes where it clearly appears that the claim of the plaintiff
to be the A owner of the properties in question is predicated on said annexes. Accordingly,
petitioner-appellant's petition must be dismissed due to lack of cause of action.

II

Petitioner-appellant, in his petition, alleged that he has exhausted all his administrative remedies to
no avail as respondents-appellees have failed, neglected, refused and continue to refuse to allow
petitioner-appellant to continue operation in the area covered by his timber license. He further
alleged that he has neither recourse by way of appeal, nor any plain, speedy and adequate remedy
in the ordinary course of law except thru this special civil action, as the last official act of the
respondent-appellee Secretary of Agriculture and Natural Resources in declaring void the timber
license referred to above after denying petitioner-appellant's motion for reconsideration, is the last
administrative act. Petitioner-appellant relies on the case of Demaisip vs. The Court of Appeals, et
al. (106 Phil. 237, Sept. 24, 1959), wherein it was held that the failure of the plaintiff to appeal from
the adverse decision of the Secretary to the President cannot preclude the plaintiff from taking court
action in view of the theory that the Secretary of a department is merely an alter-ego of the
President. The presumption is that the action of the Secretary bears the implied sanction of the
President unless the same is disapproved by the latter (Villena vs. the Secretary of Interior, 67 Phil.
451; p. 7, CFI rec.).

To this We cannot agree. Petitioner-appellant did not appeal the order of the respondent Secretary
of Agriculture and Natural Resources to the President of the Philippines, who issued Executive
Proclamation No. 238 withdrawing the area from private exploitation, and establishing it as the
APEL FULL CASE

Olongapo Watershed Forest Reserve. Considering that the President has the power to review on
appeal the orders or acts of the respondents-appellees, the failure of the petitioner-appellant to take
that appeal is failure on his part to exhaust his administrative remedies. Thus, this Court, in the case
of Calo vs. Fuertes (5 SCRA 399, 400, June 29, 1962), held that:

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 the administrative remedies, is untenable.

The withdrawal of the appeal taken to the President of the Philippines is tantamount
to not appealing all thereto. Such withdrawal is fatal, because the appeal to the
President is the last step he should take in an administrative case.

In 1912, in the case of Lamb vs. Phipps (22 Phil. 491-92, July 22, 1912), this Court stressed the
doctrine of exhaustion of administrative remedies, thus:

When a plain, adequate and speedy remedy is afforded by and within the executive
department of the government the courts will not interfere until at least that remedy
has been exhausted. Jao Igco vs. Shuster, 10 Phil. Rep. 448; Ekiu vs. U.S., 142 U.S.
651; U.S. vs. Sing Tuck, 194 U.S. 161; U.S. vs. Ju Toy 198 U.S. 253; Chill Yow vs.
U.S., 28 Sup. Ct. Rep. 201). The administrative remedies afforded by law must first
be exhausted before resort can be had to the courts, especially when the
administrative remedies are by law exclusive and final. Some matters and some
questions are by law delegated entirely and absolutely to the discretion of particular
branches of the executive department of the government. When the law confers
exclusive and final jurisdiction upon the executive department of the government to
dispose of particular questions, their judgments or the judgments of that particular
department are no more reviewable by the courts than the final judgment or
decisions of the courts are subject to be reviewed and modified by them" (emphasis
supplied).

Moreover, this being a special civil action, petitioner-appellant must allege and prove that he has no
other speedy and adequate remedy (Diego vs. The Court of Appeals, et al., 54 Off. Gaz., No. 4,
956). In the case at bar, petitioner- appellant's speedy and adequate remedy is an appeal to the
President of the Philippines.

Accordingly, "it is settled to the point of being elementary that the only question involved n certiorari
is jurisdiction, either want of jurisdiction or excess thereof, and abuse of discretion shall warrant the
issuance of the extraordinary remedy of certiorari when the same is so grave as when the power is
exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal hostility,
and it must be so patent and gross as to amount to an evasion of positive duty, or to a virtual refusal
to perform a duty enjoined, or to act at all in contemplation of law" FS Divinagracia Agro-Commercial
Inc. vs. Court of Appeals, 104 SCRA 191 [April .1, 1981]). The foregoing is on the assumption that
there is any irregularity, albeit there is none in the acts or omissions of the respondents-appellees.
certiorari is not a substitute for appeal as held time and again by this Court (People vs. Villanueva,
110 SCRA 465), "it being a time honored and well known principle that before seeking judicial
redress, a party must first exhaust the administrative remedies available" (Garcia vs. Teehankee, 27
SCRA 944, April 18, 1969).
APEL FULL CASE

Moreover, from the decision of the Secretary of Agriculture and Natural Resources complained of,
petitioners had a plain, speedy and adequate remedy by appealing therefrom to the Chief Executive.
In other words, before filing the present action for certiorari in the court below, they should have
availed of this administrative remedy and their failure to do so must be deemed fatal to their case
[Calo vs. Fuertes, et al., G.R. No. L-16537, June 29,1962]. To place petitioners' case beyond the
pale of this rule, they must show that their case falls — which it does not — within the cases where,
in accordance with our decisions, the aggrieved party need not exhaust administrative remedies
within his reach in the ordinary course of the law [Tapales vs. The President and the Board of
Regents of the U.P., G.R. No. L-17532, March 30, 1963; Mangubat vs. Osmena, G.R. No. L- 12837,
April 30, 1959; Baguio vs. Hon. Jose Rodriguez, G. R. No. L-11078, May 27, 1959; Pascual vs.
Provincial Board, G.R. No. L-11959, Oct. 31, 1959; Marinduque Iron Mines, etc. vs. Secretary of
Public Works, G.R. No. L-15982, May 31, 1963; Alzate vs. Aldaba, G.R. No. L-14407, Feb. 29, 1960
and Demaisip vs. Court of Appeals, G.R. No. L- 13000, Sept. 25, 1959] (Ganob vs. Ramas, 27
SCRA 1178, April 28, 1969).

III

Petitioner-appellant not only failed to exhaust his administrative remedies, but also failed to note that
his action is a suit against the State which, under the doctrine of State immunity from suit, cannot
prosper unless the State gives its consent to be sued Kawananakoa vs. Polybank, 205 U.S. 349;
Siren vs. U.S., 7 Wall. 152; Sec. 16, Art. XV, 1973 Constitution).

The respondents-appellees, in revoking the petitioner-appellant's timber license, were acting within
the scope of their authority. Petitioner-appellant contends that "this case is not a suit against the
State but an application of a sound principle of law whereby administrative decisions or actuations
may be reviewed by the courts as a protection afforded the citizens against oppression" (p. 122, CFI
rec.). But, piercing the shard of his contention, We find that petitioner-appellant's action is just an
attempt to circumvent the rule establishing State exemption from suits. He cannot use that principle
of law to profit at the expense and prejudice of the State and its citizens. The promotion of public
welfare and the protection of the inhabitants near the public forest are property, rights and interest of
the State. Accordingly, "the rule establishing State exeraiption from suits may not be circumvented
by directing the action against the officers of the State instead of against the State itself. In such
cases the State's immunity may be validly invoked against the action as long as it can be shown that
the suit really affects the property, rights, or interests of the State and not merely those of the officer
nominally made party defendant" (SINCO, Phil. Political Law, 10th ed., p. 35; Salgado vs. Ramos, 64
Phil. 724; see also Angat River Irrigation System vs. Angat River Workers' Union, G.R. No. L-10943-
44, Dec. 28, 1957, 102 Phil. 789, 800-802; Mobil PhiL vs. Customs Arrastre Service, 18 SCRA 1120,
1121-1125; Bureau of Printing vs. Bureau of Printing Employees' Association, 1 SCRA 340, 341,
343).

Both the Secretary of Agriculture and Natural Resources and the Director of Forestry acted in their
capacity as officers of the State, representatives of the sovereign authority discharging governmental
powers. A private individual cannot issue a timber license.

Consequently, a favorable judgment for the petitioner-appellant would result in the government
losing a substantial part of its timber resources. This being the case, petitioner-appellant's action
cannot prosper unless the State gives its consent to be sued.

IV

Granting arguendo, that petitioner-appellant's timber license is valid, still respondents-appellees can
validly revoke his timber license. As pointed out earlier, paragraph 27 of the rules and regulations
APEL FULL CASE

included in the ordinary timber license states: "The terms and conditions of this license are subject
to change at the discretion of the Director of Forestry, and that this license may be made to expire at
an earlier date, when public interests so require" (Exh. D, p. 22, CFI rec.). A timber license is an
instrument by which the State regulates the utilization and disposition of forest resources to the end
that public welfare is promoted. A timber license is not a contract within the purview of the due
process clause; it is only a license or privilege, which can be validly withdrawn whenever dictated by
public interest or public welfare as in this ceise

"A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a
contract between the authority, federal, state, or municipal, granting it and the person to whom it is
granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation"
(37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights,
neither is it property or property rights (People vs. Ong Tin 54 O.G. 7576). In the case of Pedro vs.
Provincial Board of Rizal (56 Phil. 123), it was held that:

A license authorizing the operation and exploitation of a cockpit is not property of

which the holder may not be deprived without due process of law, but a mere
privilege which may be revoked when public interests so require.

The welfare of the people is the supreme law. Thus, no franchise or right can be availed of to defeat
the proper exercise of police power (Surigao Electric Co., Inc. vs. Municipality of Surigao, 24 SCRA
898, Aug. 30, 1968). The State has inherent power enabling it to prohibit all things hurtful to comfort,
safety, and welfare of society (Edu vs. Ericta, 35 SCRA 481, Oct. 24,1970).

As provided in the aforecited provision, timber licenses are subject to the authority of the Director of
Forestry. The utilization and disposition of forest resources is directly under the control and
supervision of the Director of Forestry. However, "while Section 1831 of the Revised Administrative
Code provides that forest products shall be cut, gathered and removed from any forest only upon
license from the Director of Forestry, it is no less true that as a subordinate officer, the Director of
Forestry is subject to the control of the Department Head or the Secretary of Agriculture and Natural
Resources (See. 79[c], Rev. Adm. Code), who, therefore, may impose reasonable regulations in the
exercise of the powers of the subordinate officer" (Director of Forestry vs. Benedicto, 104 SCRA
309, May 5, 1981). The power of control of the Department Head over bureaus and offices includes
the power to modify, reverse or set aside acts of subordinate officials (Province of Pangasinan vs.
Secretary of Public Works and Communications, 30 SCRA 134, Oct. 31, 1969; Montano vs. Silvosa,
97 Phil. 143, 144, 147-148). Accordingly, respondent-appellee Secretary of Agriculture and Natural
Resources has the authority to revoke, on valid grounds, timber licenses issued by the Director of
Forestry. There being supporting evidence, the revocation of petitioner-appellant's timber license
was a wise exercise of the power of the respondent- appellee (Secretary of Agriculture and Natural
Resources) and therefore, valid.

Thus, "this Court had rigorously adhered to the principle of conserving forest resources, as corollary
to which the alleged right to them of private individuals or entities was meticulously inquired into and
more often than not rejected. We do so again" (Director of Forestry vs. Benedicto, supra). WE
reiterate Our fidelity to the basic policy of conserving the national patrimony as ordained by the
Constitution.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, THE ORDER APPEALED FROM IS

HEREBY .AFFIRMED IN TOTO. COSTS AGAINST PETITIONER-APPELLANT.
APEL FULL CASE

SO ORDERED,

3. Calo vs. Fuertes 5 SCRA 399

TOPIC: Withdrawal of appeal

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.: chanrobles virtual law library

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 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 -
APEL FULL CASE

. . . 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).chanroblesvirtualawlibrary chanrobles virtual law library

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). chanroblesvirtualawlibrary chanrobles virtual law library

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
APEL FULL CASE

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. chanroblesvirtualawlibrary chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles 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. chanroblesvirtualawlibrary chanrobles virtual law library

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. chanroblesvirtualawlibrary chanrobles virtual law library

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.1 chanrobles virtual law library

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

Bengzon, C. J., Bautista Angelo, Labrador, Concepcion, Barrera,

Paredes, Dizon, Regala and Makalintal, JJ., concur.
Reyes, J.B.L., J., took no part.

DOCTRINE OF FINALITY OF ADMINISTRATIVE ACTION

1. Fortich vs. Corona, 289 SCRA 624

TOPIC: Failure to file motion for reconsideration

SECOND DIVISION

G.R. No. 131457. April 24, 1998

HON. CARLOS O. FORTICH, PROVINCIAL GOVERNOR OF

BUKIDNON, HON. REY B. BAULA, MUNICIPAL MAYOR OF
SUMILAO, BUKIDNON, NQSR MANAGEMENT AND
DEVELOPMENT CORPORATION, Petitioners, v. HON. RENATO C.
CORONA, DEPUTY EXECUTIVE SECRETARY, HON. ERNESTO D.
GARILAO, SECRETARY OF THE DEPARTMENT OF AGRARIAN
REFORM, Respondents.

DECISION

MARTINEZ, J.:

The dramatic and well-publicized hunger strike staged by some

alleged farmer-beneficiaries in front of the Department of Agrarian
Reform compound in Quezon City on October 9, 1997 commanded
nationwide attention that even church leaders and some presidential
candidates tried to intervene for the strikers cause.
APEL FULL CASE

The strikers protested the March 29, 1996 Decision1 of the Office of
the President (OP), issued through then Executive Secretary Ruben
D. Torres in OP Case No. 96-C-6424, which approved the conversion
of a one hundred forty-four (144)-hectare land from agricultural to
agro-industrial/institutional area. This led the Office of the
President, through then Deputy Executive Secretary Renato C.
Corona, to issue the so-called Win-Win Resolution2 on November 7,
1997, substantially modifying its earlier Decision after it
had already become final and executory. The said Resolution
modified the approval of the land conversion to agro-industrial area
only to the extent of forty-four (44) hectares, and ordered the
remaining one hundred (100) hectares to be distributed to qualified
farmer-beneficiaries.

But, did the Win-Win Resolution culminate in victory for all the
contending parties?

The above-named petitioners cried foul. They have come to this

Court urging us to annul and set aside the Win-Win Resolution and
to enjoin respondent Secretary Ernesto D. Garilao of the
Department of Agrarian Reform from implementing the said
Resolution.

Thus, the crucial issue to be resolved in this case is: What is the
legal effect of the Win-Win Resolution issued by the Office of the
President on its earlier Decision involving the same subject matter,
which had already become final and executory?

The antecedent facts of this controversy, as culled from the

pleadings, may be stated as follows:

1. This case involves a 144-hectare land located at San Vicente,

Sumilao, Bukidnon, owned by the Norberto Quisumbing, Sr.
Management and Development Corporation (NQSRMDC), one of the
petitioners. The property is covered by a Transfer Certificate of Title
No. 143713 of the Registry of Deeds of the Province of Bukidnon.

2. In 1984, the land was leased as a pineapple plantation to the

Philippine Packing Corporation, now Del Monte Philippines, Inc.
(DMPI), a multinational corporation, for a period of ten (10) years
APEL FULL CASE

under the Crop Producer and Growers Agreement duly annotated in

the certificate of title. The lease expired in April, 1994.

3. In October, 1991, during the existence of the lease, the

Department of Agrarian Reform (DAR) placed the entire 144-hectare
property under compulsory acquisition and assessed the land value
at P2.38 million.4 cräläwvirtualibräry

4. NQSRMDC resisted the DARs action. In February, 1992, it sought

and was granted by the DAR Adjudication Board (DARAB), through
its Provincial Agrarian Reform Adjudicator (PARAD) in DARAB Case
No. X-576, a writ of prohibition with preliminary injunction which
ordered the DAR Region X Director, the Provincial Agrarian Reform
Officer (PARO) of Bukidnon, the Municipal Agrarian Reform Office
(MARO) of Sumilao, Bukidnon, the Land Bank of the Philippines
(Land Bank), and their authorized representatives to desist from
pursuing any activity or activities concerning the subject land until
further orders.5 cräläwvirtualibräry

5. Despite the DARAB order of March 31, 1992, the DAR Regional
Director issued a memorandum, dated May 21, 1992, directing the
Land Bank to open a trust account for P2.38 million in the name of
NQSRMDC and to conduct summary proceedings to determine the
just compensation of the subject property. NQSRMDC objected to
these moves and filed on June 9, 1992 an Omnibus Motion to
enforce the DARAB order of March 31, 1992 and to nullify the
summary proceedings undertaken by the DAR Regional Director and
Land Bank on the valuation of the subject property.

6. The DARAB, on October 22, 1992, acted favorably on the

Omnibus Motion by (a) ordering the DAR Regional Director and Land
Bank to seriously comply with the terms of the order dated March
31, 1992; (b) nullifying the DAR Regional Directors memorandum,
dated May 21, 1992, and the summary proceedings conducted
pursuant thereto; and (c) directing the Land Bank to return the
claim folder of Petitioner NQSRMDCs subject property to the DAR
until further orders.6 cräläwvirtualibräry

7. The Land Bank complied with the DARAB order and cancelled the
trust account it opened in the name of petitioner NQSRMDC.7 cräläwvirtualibräry
APEL FULL CASE

8. In the meantime, the Provincial Development Council (PDC) of

Bukidnon, headed by Governor Carlos O. Fortich, passed Resolution
No. 6,8 dated January 7, 1993, designating certain areas along
Bukidnon-Sayre Highway as part of the Bukidnon Agro-Industrial
Zones where the subject property is situated.

9. What happened thereafter is well-narrated in the OP (TORRES)

Decision of March 29, 1996, pertinent portions of which we quote:

Pursuant to Section 20 of R.A. No. 7160, otherwise known as the

Local Government Code, the Sangguniang Bayan of Sumilao,
Bukidnon, on March 4, 1993, enacted Ordinance No. 24 converting
or re-classifying 144 hectares of land in Bgy. San Vicente, said
Municipality, from agricultural to industrial/institutional with a view
of providing an opportunity to attract investors who can inject new
economic vitality, provide more jobs and raise the income of its
people.

Parenthetically, under said section, 4th to 5th class municipalities may

authorize the classification of five percent (5%) of their agricultural
land area and provide for the manner of their utilization or
disposition.

On 12 October 1993, the Bukidnon Provincial Land Use Committee

approved the said Ordinance. Accordingly, on 11 December 1993,
the instant application for conversion was filed by Mr. Gaudencio
Beduya in behalf of NQSRMDC/BAIDA (Bukidnon Agro-Industrial
Development Association).

Expressing support for the proposed project, the Bukidnon

Provincial Board, on the basis of a Joint Committee Report
submitted by its Committee on Laws, Committee on Agrarian
Reform and Socio-Economic Committee approved, on 1 February
1994, the said Ordinance now docketed as Resolution No. 94-95.
The said industrial area, as conceived by NQSRMDC (project
proponent) is supposed to have the following components:

1. The Development Academy of Mindanao which constitutes the

following: Institute for Continuing Higher Education; Institute for
Livelihood Science (Vocational and Technical School); Institute for
APEL FULL CASE

Agribusiness Research; Museum, Library, Cultural Center, and

Mindanao Sports Development Complex which covers an area of 24
hectares;

2. Bukidnon Agro-Industrial Park which consists of corn processing

for corn oil, corn starch, various corn products; rice processing for
wine, rice-based snacks, exportable rice; cassava processing for
starch, alcohol and food delicacies; processing plants, fruits and
fruit products such as juices; processing plants for vegetables
processed and prepared for market; cold storage and ice plant;
cannery system; commercial stores; public market; and abattoir
needing about 67 hectares;

3. Forest development which includes open spaces and parks for

recreation, horse-back riding, memorial and mini-zoo estimated to
cover 33 hectares; and

4. Support facilities which comprise the construction of a 360-room

hotel, restaurants, dormitories and a housing project covering an
area of 20 hectares.

The said NQSRMDC Proposal was, per Certification dated January 4,

1995, adopted by the Department of Trade and Industry, Bukidnon
Provincial Office, as one of its flagship projects. The same was
likewise favorably recommended by the Provincial Development
Council of Bukidnon; the municipal, provincial and regional office of
the DAR; the Regional Office (Region X) of the DENR (which issued
an Environmental Compliance Certificate on June 5, 1995); the
Executive Director, signing By Authority of PAUL G. DOMINGUEZ,
Office of the President Mindanao; the Secretary of DILG; and
Undersecretary of DECS Wilfredo D. Clemente.

In the same vein, the National Irrigation Administration, Provincial

Irrigation Office, Bagontaas Valencia, Bukidnon, thru Mr. Julius S.
Maquiling, Chief, Provincial Irrigation Office, interposed NO
OBJECTION to the proposed conversion as long as the development
cost of the irrigation systems thereat which is P2,377.00 per hectare
be replenished by the developer x x x. Also, the Kisolon-San Vicente
Irrigators Multi Purpose Cooperative, San Vicente, Sumilao,
Bukidnon, interposed no objection to the proposed conversion of the
APEL FULL CASE

land in question as it will provide more economic benefits to the

community in terms of outside investments that will come and
employment opportunities that will be generated by the projects to
be put up x x x.

On the same score, it is represented that during the public

consultation held at the Kisolan Elementary School on 18 March
1995 with Director Jose Macalindong of DAR Central Office and
DECS Undersecretary Clemente, the people of the affected barangay
rallied behind their respective officials in endorsing the project.

Notwithstanding the foregoing favorable recommendation, however,

on November 14, 1994, the DAR, thru Secretary Garilao, invoking
its powers to approve conversion of lands under Section 65 of R.A.
No. 6657, issued an Order denying the instant application for the
conversion of the subject land from agricultural to agro-industrial
and, instead, placed the same under the compulsory coverage of
CARP and directed the distribution thereof to all qualified
beneficiaries on the following grounds:

1. The area is considered as a prime agricultural land with irrigation

facility;

2. The land has long been covered by a Notice of Compulsory

Acquisition (NCA);

3. The existing policy on withdrawal or lifting on areas covered by

NCA is not applicable;

4. There is no clear and tangible compensation package

arrangements for the beneficiaries;

5. The procedures on how the area was identified and reclassified

for agro-industrial project has no reference to Memo Circular No.
54, Series of 1993, E.O. No. 72, Series of 1993, and E.O. No. 124,
Series of 1993.

A Motion for Reconsideration of the aforesaid Order was filed on

January 9, 1995 by applicant but the same was denied (in an Order
dated June 7, 1995).9 cräläwvirtualibräry
APEL FULL CASE

10. Thus, the DAR Secretary ordered the DAR Regional Director to
proceed with the compulsory acquisition and distribution of the
property.10 cräläwvirtualibräry

11. Governor Carlos O. Fortich of Bukidnon appealed11 the order of

denial to the Office of the President and prayed for the
conversion/reclassification of the subject land as the same would be
more beneficial to the people of Bukidnon.

12. To prevent the enforcement of the DAR Secretarys order,

NQSRMDC, on June 29, 1995, filed with the Court of Appeals a
petition for certiorari, prohibition with preliminary
injunction,12 docketed as CA-G.R. SP No. 37614.

13. Meanwhile, on July 25, 1995, the Honorable Paul G. Dominguez,

then Presidential Assistant for Mindanao, after conducting an
evaluation of the proposed project, sent a memorandum13 to the
President favorably endorsing the project with a recommendation
that the DAR Secretary reconsider his decision in denying the
application of the province for the conversion of the land.

14. Also, in a memorandum14 to the President dated August 23,

1995, the Honorable Rafael Alunan III, then Secretary of the
Department of the Interior and Local Government (DILG),
recommended the conversion of the subject land to
industrial/institutional use with a request that the President hold the
implementation of the DAR order to distribute the land in question.

15. On October 23, 1995, the Court of Appeals, in CA-G.R. SP No.

37614, issued a Resolution15 ordering the parties to observe status
quo pending resolution of the petition. At the hearing held in said
case on October 5, 1995, the DAR, through the Solicitor General,
manifested before the said court that the DAR was merely in the
processing stage of the applications of farmers-claimants and has
agreed to respect status quo pending the resolution of the
petition.16
cräläwvirtualibräry

16. In resolving the appeal, the Office of the President, through

then Executive Secretary Ruben D. Torres, issued a Decision in OP
APEL FULL CASE

Case No. 96-C-6424, dated March 29, 1996, reversing the DAR
Secretarys decision, the pertinent portions of which read:

After a careful evaluation of the petition vis--vis the grounds upon

which the denial thereof by Secretary Garilao was based, we find
that the instant application for conversion by the Municipality of
Sumilao, Bukidnon is impressed with merit. To be sure, converting
the land in question from agricultural to agro-industrial would open
great opportunities for employment and bring about real
development in the area towards a sustained economic growth of
the municipality. On the other hand, distributing the land to would-
be beneficiaries (who are not even tenants, as there are none) does
not guarantee such benefits.

Nevertheless, on the issue that the land is considered a prime

agricultural land with irrigation facility it maybe appropriate to
mention that, as claimed by petitioner, while it is true that there is,
indeed, an irrigation facility in the area, the same merely passes
thru the property (as a right of way) to provide water to the
ricelands located on the lower portion thereof. The land itself,
subject of the instant petition, is not irrigated as the same was, for
several years, planted with pineapple by the Philippine Packing
Corporation.

On the issue that the land has long been covered by a Notice of
Compulsory Acquisition (NCA) and that the existing policy on
withdrawal or lifting on areas covered by NCA is not applicable,
suffice it to state that the said NCA was declared null and void by
the Department of Agrarian Reform Adjudication Board (DARAB) as
early as March 1, 1992. Deciding in favor of NQSRMDC, the DARAB
correctly pointed out that under Section 8 of R.A. No. 6657, the
subject property could not validly be the subject of compulsory
acquisition until after the expiration of the lease contract with Del
Monte Philippines, a Multi-National Company, or until April 1994,
and ordered the DAR Regional Office and the Land Bank of the
Philippines, both in Butuan City, to `desist from pursuing any
activity or activities covering petitioners land.

On this score, we take special notice of the fact that the Quisumbing
family has already contributed substantially to the land reform
APEL FULL CASE

program of the government, as follows: 300 hectares of rice land in

Nueva Ecija in the 70s and another 400 hectares in the nearby
Municipality of Impasugong, Bukidnon, ten (10) years ago, for
which they have not received just compensation up to this time.

Neither can the assertion that there is no clear and tangible

compensation package arrangements for the beneficiaries hold
water as, in the first place, there are no beneficiaries to speak
about, for the land is not tenanted as already stated.

Nor can procedural lapses in the manner of identifying/reclassifying

the subject property for agro-industrial purposes be allowed to
defeat the very purpose of the law granting autonomy to local
government units in the management of their local affairs. Stated
more simply, the language of Section 20 of R.A. No. 7160, supra, is
clear and affords no room for any other interpretation. By
unequivocal legal mandate, it grants local government units
autonomy in their local affairs including the power to convert
portions of their agricultural lands and provide for the manner of
their utilization and disposition to enable them to attain their fullest
development as self-reliant communities.

WHEREFORE, in pursuance of the spirit and intent of the said legal

mandate and in view of the favorable recommendations of the
various government agencies abovementioned, the subject Order,
dated November 14, 1994 of the Hon. Secretary, Department of
Agrarian Reform, is hereby SET ASIDE and the instant application of
NQSRMDC/BAIDA is hereby APPROVED.17 cräläwvirtualibräry

17.On May 20, 1996, DAR filed a motion for reconsideration of the
OP decision.

18 On September 11, 1996, in compliance with the OP decision of

March 29, 1996, NQSRMDC and the Department of Education,
Culture and Sports (DECS) executed a Memorandum of Agreement
whereby the former donated four (4) hectares from the subject land
to DECS for the establishment of the NQSR High School.18 cräläwvirtualibräry

When NQSRMDC was about to transfer the title over the 4-hectare
donated to DECS, it discovered that the title over the subject
APEL FULL CASE

property was no longer in its name. It soon found out that during
the pendency of both the Petition for Certiorari, Prohibition, with
Preliminary Injunction it filed against DAR in the Court of Appeals
and the appeal to the President filed by Governor Carlos O. Fortich,
the DAR, without giving just compensation, caused the cancellation
of NQSRMDCs title on August 11, 1995 and had it transferred in the
name of the Republic of the Philippines under TCT No. T-5026419 of
the Registry of Deeds of Bukidnon. Thereafter, on September 25,
1995, DAR caused the issuance of Certificates of Land Ownership
Award (CLOA) No. 00240227 and had it registered in the name of
137 farmer-beneficiaries under TCT No. AT-353620 of the Registry of
Deeds of Bukidnon.

19. Thus, on April 10, 1997, NQSRMDC filed a complaint21 with the

Regional Trial Court (RTC) of Malaybalay, Bukidnon (Branch 9),
docketed as Civil Case No. 2687-97, for annulment and cancellation
of title, damages and injunction against DAR and 141 others. The
RTC then issued a Temporary Restraining Order on April 30,
199722 and a Writ of Preliminary Injunction on May 19,
1997,23 restraining the DAR and 141 others from entering,
occupying and/or wresting from NQSRMDC the possession of the
subject land.

20. Meanwhile, on June 23, 1997, an Order24 was issued by then

Executive Secretary Ruben D. Torres denying DARs motion for
reconsideration for having been filed beyond the reglementary
period of fifteen (15) days. The said order further declared that the
March 29, 1996 OP decision had already
become final and executory.

21. The DAR filed on July 11, 1997 a second motion for

reconsideration of the June 23, 1997 Order of the President.

22. On August 12, 1997, the said writ of preliminary injunction

issued by the RTC was challenged by some alleged farmers before
the Court of Appeals through a petition for certiorari and prohibition,
docketed as CA-G.R. SP No. 44905, praying for the lifting of the
injunction and for the issuance of a writ of prohibition from further
trying the RTC case.
APEL FULL CASE

23. On October 9, 1997, some alleged farmer-beneficiaries began

their hunger strike in front of the DAR Compound in Quezon City to
protest the OP Decision of March 29, 1996. On October 10, 1997,
some persons claiming to be farmer-beneficiaries of the NQSRMDC
property filed a motion for intervention (styled as Memorandum In
Intervention) in O.P. Case No. 96-C-6424, asking that the OP
Decision allowing the conversion of the entire 144-hectare property
be set aside.25 cräläwvirtualibräry

24. President Fidel V. Ramos then held a dialogue with the strikers
and promised to resolve their grievance within the framework of the
law. He created an eight (8)-man Fact Finding Task Force (FFTF)
chaired by Agriculture Secretary Salvador Escudero to look into the
controversy and recommend possible solutions to the problem.26 cräläwvirtualibräry

25. On November 7, 1997, the Office of the President resolved the

strikers protest by issuing the so-called Win/Win Resolution penned
by then Deputy Executive Secretary Renato C. Corona, the
dispositive portion of which reads:

WHEREFORE, premises considered, the decision of the Office of the

President, through Executive Secretary Ruben Torres, dated March
29, 1996, is hereby MODIFIED as follows:

1. NQSRMDCs application for conversion is APPROVED only

with respect to the approximately forty-four (44)
hectare portion of the land adjacent to the highway, as
recommended by the Department of Agriculture.

2. The remaining approximately one hundred (100)

hectares traversed by an irrigation canal and found to
be suitable for agriculture shall be distributed to
qualified farmer-beneficiaries in accordance with RA
6657 or the Comprehensive Agrarian Reform Law with a
right of way to said portion from the highway provided
in the portion fronting the highway. For this purpose,
the DAR and other concerned government agencies are
directed to immediately conduct the segregation survey
of the area, valuation of the property and generation of
titles in the name of the identified farmer-beneficiaries.
APEL FULL CASE

3. The Department of Agrarian Reform is hereby directed

to carefully and meticulously determine who among the
claimants are qualified farmer-beneficiaries.

4. The Department of Agrarian Reform is hereby further

directed to expedite payment of just compensation to
NQSRMDC for the portion of the land to be covered by
the CARP, including other lands previously surrendered
by NQSRMDC for CARP coverage.

5. The Philippine National Police is hereby directed to

render full assistance to the Department of Agrarian
Reform in the implementation of this Order.

We take note of the Memorandum in Intervention filed by 113

farmers on October 10, 1997 without ruling on the propriety or
merits thereof since it is unnecessary to pass upon it at this time.

SO ORDERED.27 cräläwvirtualibräry

A copy of the Win-Win Resolution was received by Governor Carlos

O. Fortich of Bukidnon, Mayor Rey B. Baula of Sumilao, Bukidnon,
and NQSRMDC on November 24, 199728 and, on December 4, 1997,
they filed the present petition for certiorari, prohibition (under Rule
65 of the Revised Rules of Court) and injunction with urgent prayer
for a temporary restraining order and/or writ of preliminary
injunction (under Rule 58, ibid.), against then Deputy Executive
Secretary Renato C. Corona and DAR Secretary Ernesto D. Garilao.

On December 12, 1997, a Motion For Leave To Intervene29 was filed

by alleged farmer-beneficiaries, through counsel, claiming that they
are real parties in interest as they were previously identified by
respondent DAR as agrarian reform beneficiaries on the 144-hectare
property subject of this case. The motion was vehemently
opposed30 by the petitioners.

In seeking the nullification of the Win-Win Resolution, the

petitioners claim that the Office of the President was prompted to
issue the said resolution after a very well-managed hunger strike
led by fake farmer-beneficiary Linda Ligmon succeeded in
APEL FULL CASE

pressuring and/or politically blackmailing the Office of the President

to come up with this purely political decision to appease the
farmers, by reviving and modifying the Decision of 29 March
1996 which has been declared final and executory in an Order
of 23 June 1997.31Thus, petitioners further allege, respondent
then Deputy Executive Secretary Renato C. Corona committed
grave abuse of discretion and acted beyond his jurisdiction when he
issued the questioned Resolution of 7 November 1997.32 They
availed of this extraordinary writ of certiorari because there is no
other plain, speedy and adequate remedy in the ordinary course of
law.33 They never filed a motion for reconsideration of the subject
Resolution because (it) is patently illegal or contrary to law and it
would be a futile exercise to seek a reconsideration .34cräläwvirtualibräry

The respondents, through the Solicitor General, opposed the

petition and prayed that it be dismissed outright on the following
grounds:

(1) The proper remedy of petitioners should have been to file a

petition for review directly with the Court of Appeals in accordance
with Rule 43 of the Revised Rules of Court;

(2) The petitioners failed to file a motion for reconsideration of the

assailed Win-Win Resolution before filing the present petition; and

(3) Petitioner NQSRMDC is guilty of forum-shopping.

These are the preliminary issues which must first be resolved,

including the incident on the motion for intervention filed by the
alleged farmer-beneficiaries.

Anent the first issue, in order to determine whether the recourse of

petitioners is proper or not, it is necessary to draw a line between
an error of judgment and an error of jurisdiction. An error of
judgment is one which the court may commit in the exercise of its
jurisdiction, and which error is reviewable only by an appeal.35 On
the other hand, an error of jurisdiction is one where the act
complained of was issued by the court, officer or a quasi-judicial
body without  or in excess of jurisdiction, or with grave abuse of
discretion which is tantamount to lack or in excess of
APEL FULL CASE

jurisdiction.36 This error is correctable only by the extraordinary writ

of certiorari.37
chanroblesvirtuallawlibrary

It is true that under Rule 43, appeals from awards, judgments, final
orders or resolutions of any quasi-judicial agency exercising quasi-
judicial functions,38 including the Office of the President,39 may
be taken to the Court of Appeals by filing a verified petition for
review40 within fifteen (15) days from notice of the said judgment,
final order or resolution,41 whether the appeal involves questions of
fact, of law, or mixed questions of fact and law.42 cräläwvirtualibräry

However, we hold that, in this particular case, the remedy

prescribed in Rule 43 is inapplicable considering that the present
petition contains an allegation that the challenged resolution is
patently illegal43 and was issued with grave abuse of discretion and
beyond his (respondent Secretary Renato C. Coronas)
jurisdiction44 when said resolution substantially modified the earlier
OP Decision of March 29, 1996 which had long become final and
executory. In other words, the crucial issue raised here involves an
error of jurisdiction, not an error of judgment which is reviewable by
an appeal under Rule 43. Thus, the appropriate remedy to annul
and set aside the assailed resolution is an original special civil action
for certiorari under Rule 65, as what the petitioners have correctly
done. The pertinent portion of Section 1 thereof provides:

SECTION 1. Petition for certiorari. When any tribunal, board or

officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is
no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

xxx.
APEL FULL CASE

The office of a writ of certiorari is restricted to truly extraordinary

cases cases in which the act of the lower court or quasi-judicial
body is wholly void.45 cräläwvirtualibräry

The aforequoted Section 1 of Rule 65 mandates that the person

aggrieved by the assailed illegal act may file a verified petition (for
certiorari) in the proper court. The proper court where the petition
must be filed is stated in Section 4 of the same Rule 65 which
reads:

SEC. 4. Where petition filed.- The petition may be filed not later
than sixty (60) days from notice of the judgment, order or
resolution sought to be assailed in the Supreme Court or, if it
relates to the acts or omissions of a lower court or of a corporation,
board, officer or person, in the Regional Trial Court exercising
jurisdiction over the territorial area as defined by the Supreme
Court. It may also be filed in the Court of Appeals whether or not
the same is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts
or omissions of a quasi-judicial agency, and unless otherwise
provided by law or these Rules, the petition shall be filed in and
cognizable only by the Court of Appeals. (4a)

Under the above-quoted Section 4, the Supreme Court, Court of

Appeals and Regional Trial Court have original concurrent
jurisdiction to issue a writ of certiorari,46 prohibition47 and
mandamus.48 But the jurisdiction of these three (3) courts are also
delineated in that, if the challenged act relates to acts or omissions
of a lower court or of a corporation, board, officer or person, the
petition must be filed with the Regional Trial Court which exercises
jurisdiction over the territorial area as defined by the Supreme
Court. And if it involves the act or omission of a quasi-judicial
agency, the petition shall be filed only with the Court of Appeals,
unless otherwise provided by law or the Rules of Court. We have
clearly discussed this matter of concurrence of jurisdiction in People
vs. Cuaresma, et. al.,49 through now Chief Justice Andres R.
Narvasa, thus:

x x x. This Courts original jurisdiction to issue writs of certiorari (as

well as prohibition, mandamus, quo warranto, habeas corpus and
APEL FULL CASE

injunction) is not exclusive. It is shared by this Court with Regional

Trial Courts (formerly Courts of First Instance), which may issue the
writ, enforceable in any part of their respective regions. It is also
shared by this Court, and by the Regional Trial Court, with the Court
of Appeals (formerly, Intermediate Appellate Court), although prior
to the effectivity of Batas Pambansa Bilang  129 on August 14,
1981, the latters competence to issue the extraordinary writs was
restricted to those in aid of its appellate jurisdiction. This
concurrence of jurisdiction is not, however, to be taken as according
to parties seeking any of the writs an absolute, unrestrained
freedom of choice of the court to which application therefor will be
directed. There is after all a hierarchy of courts. That hierarchy is
determinative of the venue of appeals, and should also serve as a
general determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard for that judicial hierarchy
most certainly indicates that petitions for the issuance of
extraordinary writs against first level (inferior) courts should be filed
with the Regional Trial Court, and those against the latter, with the
Court of Appeals. (Citations omitted)

But the Supreme Court has the full discretionary power to take
cognizance of the petition filed directly to it if compelling reasons, or
the nature and importance of the issues raised, warrant. This has
been the judicial policy to be observed and which has been
reiterated in subsequent cases, namely:50 Uy vs. Contreras, et.
al.,51 Torres vs. Arranz,52  Bercero vs. De Guzman,53 and Advincula
vs. Legaspi, et. al.54 As we have further stated in Cuaresma:

x x x. A direct invocation of the Supreme Courts original jurisdiction

to issue these writs should be allowed only when there are special
and important reasons therefor, clearly and specifically set out in
the petition. This is established policy. It is a policy that is
necessary to prevent inordinate demands upon the Courts time and
attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the
Courts docket.

Pursuant to said judicial policy, we resolve to take primary

jurisdiction over the present petition in the interest of speedy
APEL FULL CASE

justice55 and to avoid future litigations so as to promptly put an end

to the present controversy which, as correctly observed by
petitioners, has sparked national interest because of the magnitude
of the problem created by the issuance of the assailed resolution.
Moreover, as will be discussed later, we find the assailed resolution
wholly void and requiring the petitioners to file their petition first
with the Court of Appeals would only result in a waste of time and
money.

That the Court has the power to set aside its own rules in the higher
interests of justice is well-entrenched in our jurisprudence. We
reiterate what we said in Piczon vs. Court of Appeals:56 cräläwvirtualibräry

Be it remembered that rules of procedure are but mere tools

designed to facilitate the attainment of justice. Their strict and rigid
application, which would result in technicalities that tend to frustrate
rather than promote substantial justice, must always be avoided.
Time and again, this Court has suspended its own rules and
excepted a particular case from their operation whenever the higher
interests of justice so require. In the instant petition, we forego a
lengthy disquisition of the proper procedure that should have been
taken by the parties involved and proceed directly to the merits of
the case."

As to the second issue of whether the petitioners committed a fatal

procedural lapse when they failed to file a motion for
reconsideration of the assailed resolution before seeking judicial
recourse, suffice it to state that the said motion is not necessary
when the questioned resolution is a patent nullity,57 as will be taken
up later.

With respect to the third issue, the respondents claim that the filing
by the petitioners of: (a) a petition for certiorari, prohibition with
preliminary injunction (CA-G.R. SP No. 37614) with the Court of
Appeals; (b) a complaint for annulment and cancellation of title,
damages and injunction against DAR and 141 others (Civil Case No.
2687-97) with the Regional Trial Court of Malaybalay, Bukidnon;
and (c) the present petition, constitute forum shopping.

We disagree.
APEL FULL CASE

The rule is that:

There is forum-shopping whenever, as a result of an adverse

opinion in one forum, a party seeks a favorable opinion (other than
by appeal or certiorari) in another. The principle applies not only
with respect to suits filed in the courts but also in connection with
litigation commenced in the courts while an administrative
proceeding is pending, as in this case, in order to defeat
administrative processes and in anticipation of an unfavorable
administrative ruling and a favorable court ruling. This specially so,
as in this case, where the court in which the second suit was
brought, has no jurisdiction (citations omitted).

The test for determining whether a party violated the rule against
forum shopping has been laid down in the 1986 case of Buan vs.
Lopez (145 SCRA 34), x x x and that is, forum shopping exists
where the elements of litis pendentia are present or where a
final judgment in one case will amount to  res judicata in the
other, as follows:

There thus exists between the action before this Court and RTC
Case No. 86-36563 identity of parties, or at least such parties as
represent the same interests in both actions, as well as identity of
rights asserted and relief prayed for, the relief being founded on
the same facts, and the identity on the two preceding particulars is
such that any judgment rendered in the other action, will,
regardless of which party is successful, amount to res
adjudicata in the action under consideration: all the requisites,
in fine, of auter action pendant.'58
cräläwvirtualibräry

It is clear from the above-quoted rule that the petitioners are not
guilty of forum shopping. The test for determining whether a party
has violated the rule against forum shopping is where a final
judgment in one case will amount to res adjudicata in the action
under consideration. A cursory examination of the cases filed by the
petitioners does not show that the said cases are similar with each
other. The petition for certiorari in the Court of Appeals sought the
nullification of the DAR Secretarys order to proceed with the
compulsory acquisition and distribution of the subject property. On
the other hand, the civil case in RTC of Malaybalay, Bukidnon for
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the annulment and cancellation of title issued in the name of the

Republic of the Philippines, with damages, was based on the
following grounds: (1) the DAR, in applying for cancellation of
petitioner NQSRMDCs title, used documents which were earlier
declared null and void by the DARAB; (2) the cancellation of
NQSRMDCs title was made without payment of just compensation;
and (3) without notice to NQSRMDC for the surrender of its title.
The present petition is entirely different from the said two cases as
it seeks the nullification of the assailed Win-Win Resolution of the
Office of the President dated November 7, 1997, which resolution
was issued long after the previous two cases were instituted.

The fourth and final preliminary issue to be resolved is the motion

for intervention filed by alleged farmer-beneficiaries, which we have
to deny for lack of merit. In their motion, movants contend that
they are the farmer-beneficiaries of the land in question, hence, are
real parties in interest. To prove this, they attached as Annex I in
their motion a Master List of Farmer-Beneficiaries. Apparently, the
alleged master list was made pursuant to the directive in the
dispositive portion of the assailed Win-Win Resolution which directs
the DAR to carefully and meticulously determine who among the
claimants are qualified farmer-beneficiaries. However, a perusal of
the said document reveals that movants are those purportedly
Found Qualified and Recommended for Approval. In other words,
movants are merely recommendee farmer-beneficiaries.

The rule in this jurisdiction is that a real party in interest is a

party who would be benefited or injured by the judgment or is the
party entitled to the avails of the suit. Real interest means
a present substantial interest, as distinguished from a mere
expectancy or a future, contingent, subordinate or consequential
interest.59 Undoubtedly, movants interest over the land in question
is a mere expectancy. Ergo, they are not real parties in interest.

Furthermore, the challenged resolution upon which movants based

their motion is, as intimated earlier, null and void. Hence, their
motion for intervention has no leg to stand on.
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Now to the main issue of whether the final and executory Decision
dated March 29,1996 can still be substantially modified by the Win-
Win Resolution.

We rule in the negative.

The rules and regulations governing appeals to the Office of the

President of the Philippines are embodied in Administrative Order
No. 18. Section 7 thereof provides:

SEC. 7. Decisions/resolutions/orders of the Office of the President

shall, except as otherwise provided for by special laws, become
final after the lapse of fifteen (15) days from receipt of a
copy thereof by the parties, unless a motion for
reconsideration thereof is filed within such period.

Only one motion for reconsideration by any one party shall

be allowed and entertained, save in exceptionally meritorious
cases. (Emphasis ours)

It is further provided for in Section 9 that The Rules of Court shall

apply in a suppletory character whenever practicable.

When the Office of the President issued the Order dated June
23,1997 declaring the Decision of March 29, 1996 final and
executory, as no one has seasonably filed a motion for
reconsideration thereto, the said Office had lost its jurisdiction to re-
open the case, more so modify its Decision. Having lost its
jurisdiction, the Office of the President has no more authority to
entertain the second motion for reconsideration filed by respondent
DAR Secretary, which second motion became the basis of the
assailed Win-Win Resolution. Section 7 of Administrative Order No.
18 and Section 4, Rule 43 of the Revised Rules of Court mandate
that only one (1) motion for reconsideration is allowed to be taken
from the Decision of March 29, 1996. And even if a second motion
for reconsideration was permitted to be filed in exceptionally
meritorious cases, as provided in the second paragraph of Section 7
of AO 18, still the said motion should not have been entertained
considering that the first motion for reconsideration was not
seasonably filed, thereby allowing the Decision of March 29, 1996 to
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lapse into finality. Thus, the act of the Office of the President in re-
opening the case and substantially modifying its March 29,1996
Decision which had already become final and executory, was in
gross disregard of the rules and basic legal precept that
accord finality to administrative determinations.

In San Luis, et al. vs. Court of Appeals, et al.60 we held:

Since the decisions of both the Civil Service Commission and the
Office of the President had long become final and executory, the
same can no longer be reviewed by the courts. It is well-established
in our jurisprudence that the decisions and orders of administrative
agencies, rendered pursuant to their quasi-judicial authority, have
upon their finality, the force and binding effect of a final judgment
within the purview of the doctrine of res judicata  [Brillantes v.
Castro, 99 Phil. 497 (1956), Ipekdijna Merchandizing Co., Inc. v.
Court of Tax Appeals, G.R. No. L-15430, September 30, 1963, 9
SCRA 72.] The rule of res judicata  which forbids the reopening of a
matter once judicially determined by competent authority applies as
well to the judicial and quasi-judicial acts of public, executive or
administrative officers and boards acting within their jurisdiction as
to the judgments of courts having general judicial powers [Brillantes
v. Castro, supra at 503].

The orderly administration of justice requires that the

judgments/resolutions of a court or quasi-judicial body must reach a
point of finality set by the law, rules and regulations. The noble
purpose is to write finis to disputes once and for all.61 This is a
fundamental principle in our justice system, without which there
would be no end to litigations. Utmost respect and adherence to this
principle must always be maintained by those who wield the power
of adjudication. Any act which violates such principle must
immediately be struck down.

Therefore, the assailed Win-Win Resolution which substantially

modified the Decision of March 29, 1996 after it has attained
finality, is utterly void. Such void resolution, as aptly stressed by
Justice Thomas A. Street62 in a 1918 case,63 is a lawless thing, which
can be treated as an outlaw and slain at sight, or ignored wherever
and whenever it exhibits its head.64 cräläwvirtualibräry
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WHEREFORE, the present petition is hereby GRANTED. The

challenged Resolution dated November 7, 1997, issued by the Office
of the President in OP Case No. 96-C-6424, is hereby NULLIFIED
and SET ASIDE. The Motion For Leave To Intervene filed by alleged
farmer-beneficiaries is hereby DENIED.

No pronouncement as to costs.

SO ORDERED.

2. Social Security System Employees Association vs. Bathan-Velasco 313 SCRA 250

TOPIC: Finality of factual determination by administrative body

G.R. No. 108765           August 27, 1999

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA) (PSLINK-TUCP), petitioner,

vs.
PERLITA BATHAN-VELASCO Officer in Charge, Bureau of Labor Relations,
ALERT AND CONCERNED EMPLOYEES FOR BETTER SSS (ACCESS), SOCIAL SECURITY
SYSTEM, respondents.

PARDO, J.:

The case before the Court is a special civil action for certiorari under Rule 65 of the Revised Rules of
Court, with prayer for temporary restraining order, filed by Social Security System Employees
Association (SSSEA), seeking to annul and set aside the Order of the Bureau of Labor
Relations1 dismissing the election protests or motions to annul the certification elections among the
rank and file of SSS employees.

On September 28, 1989, respondent Alert and Concerned Employees for Better Social Security
System (ACCESS) filed with the Bureau of Labor Relations a petition for certification election to
determine the sole and exclusive bargaining representative of the rank and file employees of
respondent Social Security System (SSS).

On August 24, 1990, the Bureau of Labor Relations ordered a certification election to be conducted
among the rank and file employees of the Social Security System in its main office and regional
branches.

Petitioner Social Security System Employees Association (SSSEA) (PSLINK-TUCP) was one of the
contending parties in the certification election, with respondent Alert and Concerned Employees for
Better SSS (ACCESS) as the other party.
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On October 11, 1991, the certification elections were held, with ACCESS garnering 1,378 votes,
SSSEA obtaining 1,116 votes, and "No Union" collecting 40 votes.2

On October 16, 1991, SSSEA filed with the Bureau of Labor Relations, an election protest and/or
motion to annul the certification Election. Director Calleja of the Bureau of Labor Relations, in an
Order dated March 20, 1992, denied the protest and/or motion.

On September 29, 1992, SSSEA filed an Election Protest and/or Motion to Nullify Certification
Elections in the SSS Regional Office After October 11, 1991.

On November 18, 1992, respondent Velasco denied the Election Protest and/or Motion to Nullify
Certification Elections in the Regional Offices After October 11, 1991, declared ACCESS the winner
in the certification election, and certified ACCESS as the sole and exclusive bargaining
representative of all the rank and file employees of SSS for the purpose of negotiating an agreement
with the latter.3

On January 25, 1993, respondent Velasco denied petitioner's motion for reconsideration.

Hence, this petition.

The rule is well-entrenched that a party must exhaust all administrative remedies before resorting to
the courts.4 The premature invocation of the intervention of the court is fatal to one's cause of
action.5 This rule would not only give the administrative agency an opportunity to decide the matter
by itself correctly, but would also prevent the unnecessary and premature resort to courts. 6

In this case, petitioner failed to take an appeal from the order of the Director, Bureau of Labor
Relations to the Secretary of Labor, pursuant to Article 259 of the Labor Code. 7

Absent a showing that petitioner had availed itself of the exhausted the appropriate administrative
remedies, a premature resort to the courts would result in the dismissal of the petition.

Moreover, the issues raised by petitioner call for a review of the factual findings of public respondent.
Petitioner argues that the certification election should not have proceeded because of the pendency
of a formal charge of a company — initiated, dominated, or supported union with the Bureau of
Labor Relations.8 Petitioner further contends that no certification election was held in the regional
offices of respondent SSS on October 11, 1991, resulting in incomplete certification election, thereby
rendering null and void the proclamation of ACCESS as the winner of the election.

Unfortunately for petitioner, factual issues are not proper subject of an original petition
for certiorari before the Supreme Court, as its power to review is limited to questions of jurisdiction or
grave abuse of discretion of judicial or quasi-judicial tribunals or officials.9 Judicial review does not
extend to an evaluation of the sufficiency of the evidence upon which the proper labor officer or
office based his or its determination. 10

IN VIEW WHEREOF, the petition is hereby DISMISSED for failure to exhaust administrative
remedies. No pronouncement as to costs. 1âwphi1.nêt

SO ORDERED.
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3.

JUDICIAL REVIEW

1. - Macailing, et al vs. Andrada, et

al January 30, 1970, G.R. No. L-21607

Mere silence of a statute on availability of judicial review does not necessarily imply that it
is unavailable

2. Office of the Court Administrator vs.

Lopez (A.M. no. p-10-2788, 18 January
2011

Quantum required is substantial evidence

3.

DOCTRINE OF EXHAUSTION OF
ADMINISTRATIVE REMEDIES
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1. Gonzales vs. CA, 357 SCRA 599

2. NFA vs. CA 311 SCRA 700 (1999)

3. Commissioner of Customs v. Navarro

77 SCRA 264, 267R. No. 191787, June
22, 2015

4. MACARIO CATIPON, JR.,

Petitioner, v. JEROME JAPSON, G.R.
No. 191787, June 22, 2015

5. Maglalang v. Philippine Amusement

and Gaming Corporation (PAGCOR),
G.R. No. 190566, December 11, 2013,
712 SCRA 472, 482-483.

6. PO2 Montoya v. Police Director

Varilla, 595 Phil. 507, 528 (2008).

7. Vidad v. Regional Trial Court of

Negros Oriental, Branch 42, G.R. No.
98084, October 18, 1993, 227 SCRA
271, 276.

8. Addition Hills vs Megaworld, G.R.

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No. 175039, 18 April 2012

9. Republic vs Lacap, G.R. No. 158253,

March 2, 2007, 517 SCRA 255.

1. Vda. De Tan vs. Veterans

Backpay Commission 105 Phil 377

2. - Bordallo vs. Professional

Regulations Commission 421 Phil. 281

3. - Kilusang Bayan sa Paglilingkod

ng mga Magtitinda ng Bagong
Pamilihang

4. Bayan ng Muntinlupa,Iinc. vs.

Dominguez, 205 SCRA 92, 113.

DOCTRINE OF PRIMARY
JURISDICTION

1. Industrial Enterprises, Inc. vs.CA

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184 SCRA 426

2. Roxas and Company Inc. vs. CA, 321

SCRA 106

3. Industrial Enterprises, Inc. v. Court

of Appeals, 263 Phil. 352, 358 (1990).

4. Aklan vs Jody King, G.R. Nos.

197592 & 20262, November 27, 2013

5. Phil Pharmawealth, Inc. v. Pfizer,

Inc. and Pfizer (Phil.) Inc., G.R. No.
167715, November 17, 2010

Inapplicability of the doctrine:

6. Samar vs Seludo, G.R. No. 173840,

25 April 2012

7. Aquilino Q. Pimentel, et al. vs. Senate

Committee of the Whole represented by
Senate President Juan Ponce Enrile,
G.R. No. 187714, March 8, 2011