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G.R. No. L-13428 November 27, 1959

YAO LIT (YAO DIT), petitioner-appellee,
vs.
HON. A. M. GERALDEZ, ET AL., respondents-appellants.
City Fiscal Edilberto Barot and Asst. Fiscal Eulogio S. Serrano for appellants.
Vicente R. Formoso, Jr. for appellee.
MONTEMAYOR, J.:
This is an appeal from the order of the Court of First Instance of Manila, dated
December 26, 1957, granting the petition for certiorari with injunction filed with it, and
annulling the order of respondent Judge Geraldez of the Municipal Court of Manila,
denying the motion to quash the information filed with him against the petitioner,
restraining said Judge from further taking cognizance of the case.
The facts in this case are not in dispute. Petitioner Yao Lit (Yao Dit) was found by
members of the Manila Police Department on August 15, 1957 at Salazar-Benavides
streets in Manila, acting suspiciously, and he was placed under arrest. In his possession,
they found a Chinese jueteng list. To establish his identity and other personal
circumstances, he was required to produce hi alien certificate of registration, which he
failed to do, as a result of which, the Office of the City of Fiscal filed two complaints
against him: one for violation of the Gambling Law, Article 195 (c) Revised Penal Code in
the Court of First Instance of Manila, and another complaint for violation of Section 7 of
Republic Act 562, as amended in the Municipal Court of the same city. On September 25,
1957, the petitioner filed a motion to quash the second complaint in the Municipal Court
on the ground that said court had no jurisdiction over the offense charged and that the
Fiscal had no authority to file the complaint or information. Acting upon said motion to
quash, respondent Judge denied the motion as well as the motion to reconsider his order
of denial. Dissatisfied with said orders of the municipal Judge, petitioner filed in the
Court of First Instance of Manila, the present case for certiorari with injunction against
the respondent Judge and the Assistant City Fiscal, seeking to annul the said orders of
the respondent Judge and to restrain the latter from trying the case against him.
Appellants take the position that the City Fiscal, under Section 38 (b) of Republic Act No.
1201, is charged with the prosecution of all crimes and violations of the city ordinances,
in the Court of First Instance and in the Municipal Court of the City of Manila; that he is
equally charged with the investigation of all crimes and violations of ordinances
committed within the said city and that this includes offenses and violations of the law
by aliens.
Section 7 of Republic Act No. 562, as amended by Section 3 of Republic Act No. 751,
provides as follows:
SEC. 7. Every alien subject to the provisions of this Act shall, on demand of any
immigration officials, or a member of the Philippine Constabulary, police, or
other peace officer, exhibit his certificate of registration. In the case of an a lie for
whom a parent or legal guardian has applied for the registration of such alien, the
exhibition of the certificate herein required shall be made by such parent or legal
guardian. Every alien, or parent or legal guardian of such alien, violating this
section, at the option of the Commissioner of Immigration, be subject to the

Page | 2

administrative fine not exceeding one hundred pesos, or be prosecuted and upon
conviction be punished by a fine not exceeding two hundred pesos, or
imprisonment for not more than thirty days, or both.
It is significant to note that the original provisions of Section 7 of Republic Act 562,
provided for the punishment of violation of its provisions, namely, failure to exhibit his
certificate of registration when demanded by any immigration official or member of the
Philippine Constabulary, police, or other peace officer, with a fine not exceeding P200 or
imprisonment for not more than thirty days, or both, that is to say, that any such
violation may immediately be followed by prosecution by the prosecuting official.
However, the amendment as above-reproduced, introduces the intervention of the
Commissioner of Immigration in the sense that he has the choice or option to either
subject the erring alien to an administrative fine or indorse his prosecution before the
court. The logical conclusion is that the prosecuting official may not initiate prosecution
until and unless the Commissioner of Immigration has elected and decided upon said
prosecution in lieu of an administrative charge and fine. In the well prepared appealed
decision of Judge Antonio Canizares, he correctly discusses and resolves this question,
and we reproduce with favor the pertinent portion of said decision:
A cursory reading of the original provision (Sec. 7, Republic Act No. 562), shows
that a violation thereof subjects the offender to prosecution before the court and
if found guilty be punished by a fine not exceeding two hundred pesos, or
imprisonment for not more than 30 days, or both, while the amendatory
provision (Sec. 3, Rep. Act No. 751) gives the Commissioner of Immigration
having first exercised such discretion. This is obviously the intention of Congress,
as can be gleaned from a reading of the Explanatory Note to House Bill No. 2138
(Exh. 'H'), which is the bill that seeks to amend the Alien Registration Law of
1950 (Rep. Act No. 562), the Congressional Record of the proceedings and
consideration thereof by the Senate (Exhs. "1-2", "I-3"), and also the
appropriation of the sum of P50,000 for the employment of additional personnel
for the Bureau of Immigration to carry out the provisions of Republic Act No. 751
considering the thousands of violation thereof expected to be investigated by said
office. It is also clear that Congress intended to bestow upon the Commissioner of
Immigration the duty of investigating and imposing administrative fines upon
violators of the provisions of Republic Act No. 751, before their prosecution
before the courts, for the reason that said official has better facilities than the
prosecuting officials to carry out the provisions of said Act, the former official
being the keeper of records pertaining to aliens. Moreover, as indicated in the
explanatory note to House Bill No. 2138, the alien violator may have valid reasons
for his failure to comply with the law, and for such light misdemeanor he would
be more disposed to pay an administrative fine assessed by the Commissioner of
Immigration in accordance with the facts of the particular case, rather than
undergo the trouble and expense of facing criminal prosecution. It can also be
inferred that Congress, in enacting Republic Act No 751, intended that the
prosecuting officials give their attention to more serious offenses than to
violations of this act, which can properly be handled by the Commissioner of
Immigration. Furthermore, the Revised Charter of Manila, which has the nature
of a general law, under which the Fiscal maintains that he has the duty and
authority to investigate and prosecute all crimes and violations of the city
ordinances, cannot prevail over Republic Act No. 751, which is a special law,
specially when the Charter of Manila does not contain any provision specifically
repealing said special law. Consequently, the prosecuting fiscal, in immediately
prosecuting the petitioner in court without first affording the Commissioner of

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Immigration an opportunity to exercise his discretion over the matter involved in
the offense charged against the petitioner, clearly acted in excess of his authority.
In view of the foregoing, the decision appealed from is affirmed. The motion to quash
should have been granted by respondent Judge. No costs.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, Endencia, Barrera,
and Gutierrez David, JJ.,concur.
Cecilio de Villa vs. CA [G.R. No. 87416. April 08, 1991]
FACTS:
[P]etitioner Cecilio S. de Villa was charged before the Regional Trial Court of the
National Capital Judicial Region (Makati, Branch 145) with violation of Batas Pambansa
Bilang 22. Petitioner moved to dismiss the Information on the following grounds: (a)
Respondent court has no jurisdiction over the offense charged; and (b) That no offense
was committed since the check involved was payable in dollars, hence, the obligation
created is null and void pursuant to Republic Act No. 529 (An Act to Assure Uniform
Value of Philippine Coin and Currency). A petition for certiorari seeking to declare the
nullity of the RTC ruling was filed by the petitioner in the Court of Appeals. The Court of
Appeals dismissed the petition with costs against the petitioner. A motion for
reconsideration of the said decision was filed by the petitioner but the same was denied
by the Court of Appeals, thus elevated to the Supreme Court.
ISSUES:
Whether or not:
(1) The Regional Trial Court of Makati City has jurisdiction over the case; and,
(2) The check in question, drawn against the dollar account of petitioner with a
foreign bank, is covered by the Bouncing Checks Law (B.P. Blg. 22).
HELD:
YES on both cases. Petition was dismissed for lack of merit.
RATIO:
For the first issue: The trial courts jurisdiction over the case, subject of this review, can
not be questioned, as Sections 10 and 15(a), Rule 110 of the Rules of Court specifically
provide. The information under consideration specifically alleged that the offense was
committed in Makati, Metro Manila and therefore, the same is controlling and sufficient
to vest jurisdiction upon the Regional Trial Court of Makati. The Court acquires
jurisdiction over the case and over the person of the accused upon the filing of a
complaint or information in court which initiates a criminal action (Republic vs. Sunga,
162 SCRA 191 [1988]).
For the second issue: Exception in the Statute. It is a cardinal principle in statutory
construction that where the law does not distinguish courts should not distinguish.
Parenthetically, the rule is that where the law does not make any
exception, courts may not except something unless compelling reasons
exist to justify it (Phil. British Assurance Co., Inc. vs. IAC, 150 SCRA 520 [1987]). The
records of the Batasan, Vol. III, unmistakably show that the intention of the lawmakers
is to apply the law to whatever currency may be the subject thereof. The discussion on
the floor of the then Batasang Pambansa fully sustains this view.

Page | 4


HON. RICARDO T. GLORIA, in his capacity as Secretary of
the Department of Education, Culture, and
Sports, petitioner, vs. COURT OF APPEALS,
AMPARO A. ABAD, VIRGILIA M. BANDIGAS,
ELIZABETH A. SOMEBANG and NICANOR
MARGALLO, respondents.
D E C I S I O N
MENDOZA, J.:
This case arose out of the unfortunate strikes and walk-outs staged by public school
teachers on different dates in September and October 1990. The illegality of the strikes
was declared in our 1991 decision in Manila Public School Teachers Association v.
Laguio, Jr.,
[1]
but many incidents of those strikes are still to be resolved. At issue in this
case is the right to back salaries of teachers who were either dismissed or suspended
because they did not report for work but who were eventually ordered reinstated because
they had not been shown to have taken part in the strike, although reprimanded for
being absent without leave.
The facts are as follows:
Private respondents are public school teachers. On various dates in September and
October 1990, during the teachers strikes, they did not report for work. For this reason,
they were administratively charged with (1) grave misconduct, (2) gross neglect of duty,
(3) gross violation of Civil Service Law Rules and Regulations and reasonable office
regulations, (4) refusal to perform official duty, (5) gross insubordination, (6) conduct
prejudicial to the best interest of the service, and (7) absence without leave (AWOL), and
placed under preventive suspension. The investigation was concluded before the lapse of
their 90-day suspension and private respondents were found guilty as
charged. Respondent Nicanor Margallo was ordered dismissed from the service effective
October 29, 1990, while respondents Amparo Abad, Virgilia Bandigas, and Elizabeth
Somebang were ordered suspended for six months effective December 4, 1990.
[2]

Respondent Margallo appealed to the Merit Systems and Protection Board (MSPB)
which found him guilty of conduct prejudicial to the best interest of the service and
imposed on him a six-month suspension.
[3]
The other respondents also appealed to the
MSPB, but their appeal was dismissed because of their failure to file their appeal
memorandum on time.
[4]

On appeal, the Civil Service Commission (CSC) affirmed the decision of the MSPB
with respect to Margallo, but found the other three (Abad, Bandigas, and Somebang)
guilty only of violation of reasonable office rules and regulations by failing to file
applications for leave of absence and, therefore, reduced the penalty imposed on them to
reprimand and ordered them reinstated to their former positions.
Respondents filed a petition for certiorari under Rule 65 in this Court. Pursuant to
Revised Administrative Circular No. 1-95, the case was referred to the Court of Appeals
which, on September 3, 1996, rendered a decision (1) affirming the decision of the CSC
with respect to Amparo Abad, Virgilia Bandigas, and Elizabeth Somebang but (2)
reversing it insofar as the CSC ordered the suspension of Nicanor Margallo. The

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appellate court found him guilty of violation of reasonable office rules and regulations
only and imposed on him the penalty of reprimand.
[5]

Private respondents moved for a reconsideration, contending that they should be
exonerated of all charges against them and that they be paid salaries during their
suspension. In its resolution, dated July 15, 1997, the Court of Appeals, while
maintaining its finding that private respondents were guilty of violation of reasonable
office rules and regulations for which they should be reprimanded, ruled that private
respondents were entitled to the payment of salaries during their suspension beyond
ninety (90) days. Accordingly, the appellate court amended the dispositive portion of its
decision to read as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, petition is hereby DENIED. CSC
Resolution Nos. 93-2302 dated June 24, 1993 and 93-3124 dated August 10, 1993 (In re:
Amparo Abad), CSC Resolution Nos. 93-2304 dated June 24, 1993 and 93-3227 dated
August 17, 1993 (In re: Virgilia Bandigas) and CSC Resolution Nos. 93-2301 undated
and 93-3125 dated August 10, 1993 (In re: Elizabeth Somebang) are hereby AFFIRMED
while CSC Resolution Nos. 93-2211 dated June 21, 1993 are hereby MODIFIED finding
petitioner Nicanor Margallo guilty of a lesser offense of violation of reasonable office
rules and regulations and meting upon him the penalty of reprimand. Respondent DECS
is ordered to pay petitioners Amparo Abad, Virgilia Bandigas, Elizabeth Somebang and
Nicanor Margallo their salaries, allowances and other benefits during the period of their
suspension/dismissal beyond the ninety (90) day preventive suspension. No
pronouncement as to costs.
[6]

Petitioner Ricardo T. Gloria, then Secretary of Education, Culture, and Sports,
moved for a reconsideration insofar as the resolution of the Court of Appeals ordered the
payment of private respondents salaries during the period of their appeal.
[7]
His motion
was, however, denied by the appellate court in its resolution of October 6, 1997.
[8]
Hence,
this petition for review on certiorari.
Petitioner contends that the administrative investigation of respondents was
concluded within the 90-day period of preventive suspension, implying that the
continued suspension of private respondents is due to their appeal, hence, the
government should not be held answerable for payment of their salaries. Moreover,
petitioner lays so much store by the fact that, under the law, private respondents are
considered under preventive suspension during the period of their appeal and, for this
reason, are not entitled to the payment of their salaries during their suspension.
[9]

Petitioners contentions have no merit.
I.

Preventive Suspension and the Right to Compensation in Case of Exoneration

The present Civil Service Law is found in Book V, Title I, Subtitle A of the
Administrative Code of 1987 (E.O. 292). So far as pertinent to the questions in this case,
the law provides:
SEC. 47. Disciplinary Jurisdiction. -
. . . .
(2) The Secretaries and heads of agencies and instrumentalities, provinces, cities and
municipalities shall have jurisdiction to investigate and decide matters involving

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disciplinary action against officers and employees under their jurisdiction. Their
decisions shall be final in case the penalty imposed is suspension for not more than
thirty days or fine in an amount not exceeding thirty days salary. In case the decision
rendered by a bureau or office head is appealable to the Commission, the same may be
initially appealed to the department and finally to the Commission and pending appeal,
the same shall be executory except when the penalty is removal, in which case the same
shall be executory only after confirmation by the Secretary concerned.
. . . .
(4) An appeal shall not stop the decision from being executory, and in case the penalty is
suspension or removal, the respondent shall be considered as having been under
preventive suspension during the pendency of the appeal in the event he wins an appeal.
SEC. 51. Preventive Suspension. - The proper disciplining authority may preventively
suspend any subordinate officer or employee under his authority pending an
investigation, if the charge against such officer or employee involves dishonesty,
oppression or grave misconduct, or neglect in the performance of duty, or if there are
reasons to believe that the respondent is guilty of charges which would warrant his
removal from the service.
SEC. 52. Lifting of Preventive Suspension. Pending Administrative Investigation. -
When the administrative case against the officer or employee under preventive
suspension is not finally decided by the disciplining authority within the period of ninety
(90) days after the date of suspension of the respondent who is not a presidential
appointee, the respondent shall be automatically reinstated in the service: Provided,
That when the delay in the disposition of the case is due to the fault, negligence or
petition of the respondent, the period of delay shall not be counted in computing the
period of suspension herein provided.
There are thus two kinds of preventive suspension of civil service employees who are
charged with offenses punishable by removal or suspension: (1) preventive suspension
pending investigation (51) and (2) preventive suspension pending appeal if the penalty
imposed by the disciplining authority is suspension or dismissal and, after review, the
respondent is exonerated (47(4)).
Preventive suspension pending investigation is not a penalty.
[10]
It is a measure
intended to enable the disciplining authority to investigate charges against respondent
by preventing the latter from intimidating or in any way influencing witnesses against
him. If the investigation is not finished and a decision is not rendered within that
period, the suspension will be lifted and the respondent will automatically be reinstated.
If after investigation respondent is found innocent of the charges and is exonerated, he
should be reinstated.
A.

No Right to Compensation for Preventive Suspension

Pending Investigation

Even if
Employee is Exonerated

Is he entitled to the payment of salaries during the period of suspension? As already
stated, the Court of Appeals ordered the DECS to pay private respondents their salaries,
allowances, and other benefits beyond the ninety (90) day preventive suspension. In
other words, no compensation was due for the period of the preventive

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suspension pending investigation but only for the period of preventive
suspension pending appeal in the event the employee is exonerated.
The separate opinion of Justice Panganiban argues that the employee concerned
should be paid his salaries after his suspension.
The Civil Service Act of 1959 (R.A. No. 2260) provided for the payment of such
salaries in case of exoneration. Sec. 35 read:
Sec. 35. Lifting of Preventive Suspension Pending Administrative Investigation. - When
the administrative case against the officer or employee under preventive suspension is
not finally decided by the Commissioner of Civil Service within the period of sixty (60)
days after the date of suspension of the respondent, the respondent shall be reinstated in
the service. If the respondent officer or employee is exonerated, he shall be restored to
his position with full pay for the period of suspension.
[11]

However, the law was revised in 1975 and the provision on the payment of salaries
during suspension was deleted. Sec. 42 of the Civil Service Decree (P.D. No. 807) read:
Sec. 42. Lifting of Preventive Suspension Pending Administrative Investigation. -
When the administrative case against the officer or employee under preventive
suspension is not finally decided by the disciplining authority within the period of ninety
(90) days after the date of suspension of the respondent who is not a presidential
appointee, the respondent shall be automatically reinstated in the service; Provided,
That when the delay in the disposition of the case is due to the fault, negligence or
petition of the respondent, the period of delay shall not be counted in computing the
period of suspension herein provided.
This provision was reproduced in 52 of the present Civil Service Law. It is noteworthy
that the Ombudsman Act of 1989 (R.A. No. 6770) categorically provides that preventive
suspension shall be without pay. Sec. 24 reads:
Sec. 24. Preventive Suspension. The Ombudsman or his Deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such officer or
employee involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty; (b) the charges would warrant removal from the service; or (c) the
respondents continued stay in office may prejudice the case filed against him.
The preventive suspension shall continue until the case is terminated by the Office of the
Ombudsman but not more than six months, without pay, except when the delay in the
disposition of the case by the Office of the Ombudsman is due to the fault, negligence or
petition of the respondent, in which case the period of such delay shall not be counted in
computing the period of suspension herein provided.
It is clear that the purpose of the amendment is to disallow the payment of salaries
for the period of suspension. This conclusion is in accord with the rule of statutory
construction that -
As a rule, the amendment by deletion of certain words or phrases in a statute indicates
that the legislature intended to change the meaning of the statute, for the presumption is
that the legislature would not have made the deletion had the intention been not in effect

Page | 8

a change in its meaning. The amended statute should accordingly be given a
construction different from that previous to its amendment.
[12]

The separate opinion of Justice Panganiban pays no heed to the evident legislative
intent to deny payment of salaries for the preventive suspension pending investigation.
First, it says that to deny compensation for the period of preventive suspension
would be to reverse the course of decisions ordering the payment of salaries for such
period. However, the cases
[13]
cited are based either on the former rule which expressly
provided that if the respondent officer or employee is exonerated, he shall be restored to
his position with full pay for the period of suspension
[14]
or that upon subsequent
reinstatement of the suspended person or upon his exoneration, if death should render
reinstatement impossible, any salary so withheld shall be paid,
[15]
or on cases which do
not really support the proposition advanced.
Second, it is contended that the exoneration of employees who have been
preventively suspended is proof that there was no reason at all to suspend them and thus
makes their preventive suspension a penalty.
The principle governing entitlement to salary during suspension is cogently stated in
Floyd R. Mechems A Treatise on the Law of Public Offices and Officers as follows:
864. Officer not entitled to Salary during Suspension from Office. - An
officer who has been lawfully suspended from his office is not entitled to compensation
for the period during which he was so suspended, even though it be subsequently
determined that the cause for which he was suspended was insufficient. The reason
given is that salary and perquisites are the reward of express or implied services, and
therefore cannot belong to one who could not lawfully perform such services.
[16]

Thus, it is not enough that an employee is exonerated of the charges against him. In
addition, his suspension must be unjustified. The case of Bangalisan v. Court of
Appeals itself similarly states that payment of salaries corresponding to the period [1]
when an employee is not allowed to work may be decreed if he is found innocent of the
charges which caused his suspension and [2] when the suspension is unjustified.
[17]

The preventive suspension of civil service employees charged with dishonesty,
oppression or grave misconduct, or neglect of duty is authorized by the Civil Service
Law. It cannot, therefore, be considered unjustified, even if later the charges are
dismissed so as to justify the payment of salaries to the employee concerned. It is one of
those sacrifices which holding a public office requires for the public good. For this
reason, it is limited to ninety (90) days unless the delay in the conclusion of the
investigation is due to the employee concerned. After that period, even if the
investigation is not finished, the law provides that the employee shall be automatically
reinstated.
Third, it is argued in the separate opinion that to deny employees salaries on the
frivolous ground that the law does not provide for their payment would be to provide a
tool for the oppression of civil servants who, though innocent, may be falsely charged of
grave or less grave administrative offenses. Indeed, the possibility of abuse is not an
argument against the recognition of the existence of power. As Justice Story aptly put it,
It is always a doubtful course, to argue against the use or existence of a power, from the
possibility of its abuse. . . . [For] from the very nature of things, the absolute right of
decision, in the last resort, must rest somewhere - wherever it may be vested it is
susceptible of abuse.
[18]
It may be added that if and when such abuse occurs, that would

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be the time for the courts to exercise their nay-saying function. Until then, however, the
public interest in an upright civil service must be upheld.
Finally, it is argued that even in the private sector, the law provides that employees
who are unjustly dismissed are entitled to reinstatement with full pay. But that is
because R.A. No. 6715 expressly provides for the payment to such employees of full
backwages, inclusive of allowances, and . . . other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.
[19]
In the case of the public sector, as has been noted, the provision
for payment of salaries during the preventive suspension pending investigation has been
deleted.
B.

Right to Compensation for Preventive Suspension

Pending Appeal

if Employee is
Exonerated

But although we hold that employees who are preventively suspended pending
investigation are not entitled to the payment of their salaries even if they are exonerated,
we do not agree with the government that they are not entitled to compensation for the
period of their suspension pending appeal if eventually they are found innocent.
Preventive suspension pending investigation, as already discussed, is not a penalty
but only a means of enabling the disciplining authority to conduct an unhampered
investigation. On the other hand, preventive suspension pending appeal is actually
punitive although it is in effect subsequently considered illegal if respondent is
exonerated and the administrative decision finding him guilty is reversed. Hence, he
should be reinstated with full pay for the period of the suspension. Thus, 47(4) states
that respondent shall be considered as under preventive suspension during the
pendency of the appeal in the event he wins. On the other hand, if his conviction is
affirmed, i.e., if he is not exonerated, the period of his suspension becomes part of the
final penalty of suspension or dismissal.
It is precisely because respondent is penalized before his sentence is confirmed that
he should be paid his salaries in the event he is exonerated. It would be unjust to deprive
him of his pay as a result of the immediate execution of the decision against him and
continue to do so even after it is shown that he is innocent of the charges for which he
was suspended. Indeed, to sustain the governments theory would be to make the
administrative decision not only executory but final and executory. The fact is that
47(2) and (4) are similar to the execution of judgment pending appeal under Rule 39,
2 of the Rules of Court. Rule 39, 5 provides that in the event the executed judgment is
reversed, there shall be restitution or reparation of damages as equity and justice may
require.
Sec. 47 of the present law providing that an administrative decision meting out the
penalty of suspension or dismissal shall be immediately executory and that if the
respondent appeals he shall be considered as being merely under preventive suspension
if eventually he prevails is taken from 37 of the Civil Service Decree of 1975 (P.D. No.
807). There was no similar provision in the Civil Service Act of 1959 (R.A. No. 2260),
although under it the Commissioner of Civil Service could order the immediate execution
of an administrative decision in the interest of the public service.
[20]
Nor was there
provision for immediate execution of administrative decisions ordering dismissal or
suspension in 695 of the Administrative Code of 1917, as amended by C.A. No. 598,
1.
[21]
Nonetheless, under R.A. No. 2260 the payment of salaries was ordered in cases in
which employees were found to be innocent of the charges
[22]
or their suspension was

Page | 10

held to be unjustified, because the penalty of suspension or dismissal was executed
without a finding by the Civil Service Commissioner that it was necessary in the interest
of the public service.
[23]
On the other hand, payment of back salaries was denied where
it was shown that the employee concerned was guilty as charged and the immediate
execution of the decision was ordered by the Civil Service Commissioner in the interest
of the public service.
[24]

Nothing in what has thus far been said is inconsistent with the reason for denying
salaries for the period of preventive suspension. We have said that an employee who is
exonerated is not entitled to the payment of his salaries because his suspension, being
authorized by law, cannot be unjustified. To be entitled to such compensation, the
employee must not only be found innocent of the charges but his suspension must
likewise be unjustified. But though an employee is considered under preventive
suspension during the pendency of his appeal in the event he wins, his suspension is
unjustified because what the law authorizes is preventive suspension for a period not
exceeding 90 days. Beyond that period the suspension is illegal. Hence, the employee
concerned is entitled to reinstatement with full pay. Under existing jurisprudence, such
award should not exceed the equivalent of five years pay at the rate last received before
the suspension was imposed.
[25]

II.

Private Respondents Entitled to Back Salaries Although Found Guilty of Violation of
Office Rules and Regulations and Reprimanded

Private respondents were exonerated of all charges against them for acts connected
with the teachers strike of September and October 1990. Although they were absent
from work, it was not because of the strike. For being absent without leave, they were
held liable for violation of reasonable office rules and regulations for which the penalty is
a reprimand. Their case thus falls squarely within ruling in Bangalisan, which likewise
involved a teacher found guilty of having violated reasonable office rules and
regulations. Explaining the grant of salaries during their suspension despite the fact
that they were meted out reprimand, this Court stated:
With respect to petitioner Rodolfo Mariano, payment of his backwages is in order. A
reading of the resolution of the Civil Service Commission will show that he was
exonerated of the charges which formed the basis for his suspension. The Secretary of
the DECS charged him with and he was later found guilty of grave misconduct, gross
neglect of duty, gross violation of the Civil Service Law, rules and regulations and
reasonable office regulations, refusal to perform official duty, gross insubordination,
conduct prejudicial to the best interest of the service, and absence without official
leave, for his participation in the mass actions on September 18, 20 and 21, 1990. It was
his alleged participation in the mass actions that was the basis of his preventive
suspension and, later, his dismissal from the service.
However, the Civil Service Commission, in the questioned resolution, made a finding
that Mariano was not involved in the mass actions but was absent because he was in
Ilocos Sur to attend the wake and interment of his grandmother. Although the CSC
imposed upon him the penalty of reprimand, the same was for his violation of reasonable
office rules and regulations because he failed to inform the school of his intended
absence and neither did he file an application for leave covering such absences.
Under Section 23 of the Rules Implementing Book V of Executive Order No. 292 and
other pertinent civil service laws, in violations of reasonable office rules and regulations,

Page | 11

the first offense is punishable by reprimand. To deny petitioner Mariano his back wages
during his suspension would be tantamount to punishing him after his exoneration from
the charges which caused his dismissal from the service.
[26]

In Jacinto v. Court of Appeals,
[27]
a public school teacher who was found guilty of
violation of reasonable office rules and regulations for having been absent without leave
and reprimanded was given back salaries after she was exonerated of the charge of
having taken part in the strikes.
Petitioner Secretary of Education contends, however, that respondents Abad,
Bandigas, and Somebang signed a letter in which they admitted having taken part in the
mass action. This question cannot be raised now. The Civil Service Commission gave no
weight to this letter in view of individual letters written by the three citing reasons for
their absences, to wit: Abad, because she decided to stay home to correct student papers;
Bandigas, because she had to accompany her brother to the Commission on
Immigration, and Somebang because of economic reasons. Petitioner did not appeal
from this ruling. Hence, he is bound by the factual findings of the CSC and the appellate
court.
WHEREFORE, the decision, dated September 3, 1996, as amended by the
resolutions, dated July 15, 1997 and October 6, 1997, of the Court of Appeals, is hereby
AFFIRMED with the MODIFICATION that the award of salaries to private respondents
shall be computed from the time of their dismissal/suspension by the Department of
Education, Culture, and Sports until their actual reinstatement, for a period not
exceeding five years.
SO ORDERED.
Romero, Bellosillo, Vitug, Kapunan, Quisumbing, Purisima, and Gonzaga-Reyes,
JJ., concur.
Davide, C.J., concurs in the result and subject to the modification expressed in the
separate opinion of Justice Panganiban.
Panganiban, J., please see separate opinion.
Puno, Pardo, Buena, and Ynares-Santiago, join Justice Panganiban's separate
opinion.
Melo, J., in the result.


REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY
REGULATORY BOARD, petitioner, vs. MANILA ELECTRIC
COMPANY, respondent.
[G.R. No. 141369. April 9, 2003]
LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of
CEFERINO PADUA, Chairman, G. FULTON ACOSTA, GALILEO
BRION, ANATALIA BUENAVENTURA, PEDRO CASTILLO,
NAPOLEON CORONADO, ROMEO ECHAUZ, FERNANDO GAITE,
ALFREDO DE GUZMAN, ROGELIO KARAGDAG, JR., MA. LUZ
ARZAGA-MENDOZA, ANSBERTO PAREDES, AQUILINO PIMENTEL

Page | 12

III, MARIO REYES, EMMANUEL SANTOS, RUDEGELIO TACORDA,
members, and ROLANDO ARZAGA, Secretary-General, JUSTICE
ABRAHAM SARMIENTO, SENATOR AQUILINO PIMENTEL, JR. and
COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of
Consultants, and Lawyer GENARO LUALHATI, petitioners,
vs. MANILA ELECTRIC COMPANY (MERALCO), respondent.
R E S O L U T I O N
PUNO, J.:
The business and operations of a public utility are imbued with public interest. In a
very real sense, a public utility is engaged in public service-- providing basic
commodities and services indispensable to the interest of the general public. For this
reason, a public utility submits to the regulation of government authorities and
surrenders certain business prerogatives, including the amount of rates that may be
charged by it. It is the imperative duty of the State to interpose its protective power
whenever too much profits become the priority of public utilities.
For resolution is the Motion for Reconsideration filed by respondent Manila Electric
Company (MERALCO) on December 5, 2002 from the decision of this Court dated
November 15, 2002 reducing MERALCOs rate adjustment in the amount of P0.017 per
kilowatthour (kwh) for its billing cycles beginning 1994 and further directing MERALCO
to credit the excess average amount of P0.167 per kwh to its customers starting with
MERALCOs billing cycles beginning February 1994.
[1]

First, we leapfrog through the facts. On December 23, 1993, MERALCO filed with
the Energy Regulatory Board (ERB) an application for revised rates, with an average
increase of P0.21 per kwh in its distribution charge. On January 28, 1994 the ERB
granted a provisional increase ofP0.184 per kwh subject to the condition that in
the event the ERB determines that MERALCO is entitled to a lesser increase in rates, all
excess amounts collected by MERALCO shall be refunded to its customers or credited in
their favor. The Commission on Audit (COA) conducted an examination of the books of
accounts and records of MERALCO and thereafter recommended, among others, that:
(1) income taxes paid by MERALCO should not be included as part of MERALCOs
operating expenses and (2) the net average investment method or the number of
months use method should be applied in determining the proportionate value of the
properties used by MERALCO during the test year.
In its decision dated February 16, 1998, the ERB adopted the
recommendations of the COA and authorized MERALCO to adopt a rate adjustment
of P0.017 per kilowatthour (kwh) for its billing cycles beginning 1994. The ERB
further directed MERALCO to credit the excess average amount of P0.167 per
kwh to its customers starting with MERALCOs billing cycles beginning February
1994. The said ruling of the ERB was affirmed by this Court in its decision dated
November 15, 2002.
In its Motion for Reconsideration, respondent MERALCO contends that: (1) the
deduction of income tax from revenues allowed for rate determination of public utilities
is part of its constitutional right to property; (2) it correctly used the average investment
method or the simple average in computing the value of its properties entitled to a
return instead of the net average investment method or the number of months use
method; and (3) the decision of the ERB ordering the refund of P0.167 per kwh to its
customers should not be given retroactive effect.
[2]


Page | 13

The Republic of the Philippines through the ERB, now Energy Regulatory
Commission (ERC), represented by the Office of the Solicitor General, filed its Comment
on March 7, 2003. Surprisingly, in its Comment, the ERC proffered a divergent view
from the Office of the Solicitor General. The ERC submits that income taxes are not
operating expenses but are reasonable costs that may be recoverable from the consuming
public. While the ERC admits that there is still no categorical determination on whether
income tax should indeed be deducted from revenues of a public utility, it agrees with
MERALCO that to disallow public utilities from recovering its income tax payments will
effectively lower the return on rate base enjoyed by a public utility to 8%. The ERC,
however, agrees with this Courts ruling that the use of the net average investment
method or the number of months use method is not unreasonable.
[3]

The Office of the Solicitor General, under its solemn duty to protect the interests of
the people, defended the thesis that income tax payments by a public utility should not
be recovered as costs from the consuming public. It contended that: (1) the foreign
jurisprudence cited by MERALCO in support of its position is not applicable in this
jurisdiction; (2) MERALCO was given a fair rate of return; (3) the COA and the ERB
followed the National Accounting and Auditing Manual which expressly disallows the
treatment of income tax as operating expense; (4) Executive Order No. 72 does not grant
electric utilities the privilege of treating income tax as operating expense; (5) the COA
and the ERB have been consistent in not allowing income tax as part of operating
expenses; (6) ERB decisions allowing the application of a tax recovery clause
are inapropos; (7) allowing MERALCO to treat income tax as an operating expense
would set a dangerous precedent; (8) assuming that the disallowance of income tax as
operating expense would discourage foreign investors and lenders, the government is not
precluded from enacting laws and instituting measures to lure them back; and (9) the
findings and conclusions of the ERB carry great weight and should be binding on the
courts in the absence of grave abuse of discretion. The Solicitor General agrees with the
ERC that the net average investment method is a reasonable method for property
valuation. Finally, the Solicitor General argues that the ERB decision may be applied
retroactively and the use of a test period to determine the rate base and allowable rates
to be collected by a public utility is an accepted practice.
[4]

We shall discuss the main issues in seriatim.
I
MERALCO argues that deduction of all kinds of taxes, including income tax, from
the gross revenues of a public utility is firmly entrenched in American jurisprudence. It
contends that the Public Service Act (Commonwealth Act No. 146) was patterned after
Act 2306 of the Philippine Commission, which, in turn, was borrowed from American
state public utility laws such as the New Jersey Public Utility Act. Hence, it maintains
that American jurisprudence on the inclusion of income taxes as a lawful charge to
operating expenses should be controlling. It cites the rule on statutory construction that
a statute adopted from a foreign country will be presumed to be adopted with the
construction placed upon it by the courts of that country before its adoption.
[5]

We are not persuaded. American decisions and authorities are not per
se controlling in this jurisdiction. At best, they are persuasive for no court
holds a patent on correct decisions. Our laws must be construed in accordance
with the intention of our own lawmakers and such intent may be deduced from the
language of each law and the context of other local legislation related thereto. More
importantly, they must be construed to serve our own public interest which is
the be-all and the end-all of all our laws. And it need not be stressed that
our public interest is distinct and different from others.

Page | 14

Rate regulation calls for a careful consideration of the totality of facts and
circumstances material to each application for an upward rate revision. Rate
regulators should strain to strike a balance between the clashing interests of
the public utility and the consuming public and the balance must assure a
reasonable rate of return to public utilities without being unreasonable to
the consuming public. What is reasonable or unreasonable depends on a
calculus of changing circumstances that ebb and flow with time. Yesterday
cannot govern today, no more than today can determine tomorrow.
Prescinding from these premises, we reject MERALCOs insistence that the non-
inclusion of income tax payments as a legitimate operating expense will deny public
utilities a fair return of their investment. This stubborn stance is belied by the report
submitted by the COA on the audit conducted on MERALCOs books of accounts and the
findings of the ERB.
[6]

Upon the instructions of the ERB, the COA conducted an audit of the operations of
MERALCO covering the period from February 1, 1994 to January 31, 1995, or the
period immediately after the implementation of the provisional rate
increase.
[7]
Hence, amounts culled by the COA from its examination of the books of
MERALCO already included the provisional rate increase of P0.184 granted by the ERB.
From the figures submitted by the COA, the ERB was able to determine that
MERALCO derived excess revenue during the test year in the amount
of P2,448,378,000.
[8]
This means that during the test year, and after the rates were
increased by P0.184, MERALCO earned P2,448,378,000 or 8.15% more than the
amount it should have earned at a 12% rate of return on rate
base. Accordingly, based on this amount of excess revenue, the ERB determined that
the provisional rate granted by it to MERALCO was P0.167 per kwh more than the
amount MERALCO ought to charge its customers to obtain the prescribed
12% rate of return on rate base. Thus, the ERB correspondingly lowered the
provisional increase by P0.167 per kwh and ordered MERALCO to increase its rates at
a reduced amount of P0.017 per kwh, computed as follows:
[9]

At appraised value
Total Invested Capital Entitled P 30,059,614,000
[10]

to Return
12% return thereon P 3,607,154,000
Add: Total Operating expenses P 38,260,420,000
[11]

for Rate Determination
Purposes
Computed Revenue P 41,867,573,000
Actual Revenue P 44,315,951,000
Excess Revenue P 2,448,378,000
Percent of Excess Revenue to 8.15%
Invested Capital
Authorized Rate of Return 12.00%

Page | 15

Actual Rate of Return 20.15%
Total kwh sold 14,640,094,000
Ratio of Excess Revenue to
Total kwh Sold P 0.167
In fact, even if MERALCOs income tax liability would be included as an
operating expense, MERALCO would still enjoy excess revenue
of P312,738,000.00 or 1.04% above the authorized rate of return of
12%. Based on its audit, the COA determined that the provision for income tax liability
of MERALCO amounted to P2,135,639,000.00.
[12]
Thus, even if such amount of income
tax liability would be included as operating expense, the amount of excess revenue
earned by MERALCO during the test year would be more than sufficient to
cover the additional income tax expense. Thus:
At appraised value
Total Invested Capital Entitled P 30,059,614,000
to Return
12% return thereon P 3,607,154,000
Add: Total Operating expenses P 40,396,059,000
[13]

for Rate Determination
Purposes
Computed Revenue P 44,003,213,000
Actual Revenue P 44,315,951,000
Excess Revenue P 312,738,000
Percent of Excess Revenue
to Invested Capital 1.04%
Authorized Rate of Return 12.00%
Actual Rate of Return 13.04%
It is crystal clear, therefore, that even if income tax is to be included as an operating
expense and hence, recoverable from the consuming public, MERALCO would still enjoy
a rate of return that is above the authorized rate of 12%. Public utilities cannot be
allowed to overcharge at the expense of the public and worse, they cannot
complain that they are not overcharging enough.
Be that as it may, MERALCO contends that considering income tax payments of
public utilities constitute one-third of their net income, public utilities will effectively get,
not the 12% rate of return on rate base allowed them, but only about 8%.
[14]
Again, we are
not persuaded.
The foregoing argument assumes that the 12% return allowed to public utilities is
equivalent to its taxable income which will be subject to income tax. The 12% rate of

Page | 16

return is computed only for the purpose of fixing the allowable rates to be
charged by a public utility and is in no way determinative of the income
subject to income tax of the public utility. The computation of a corporations
income tax liability is an altogether different matter, with the corporations taxable
income derived by taking into account the corporations gross revenues less allowable
deductions.
[15]

At any rate, even on the assumption that in the test year involved (February 1, 1994
to January 31, 1995), MERALCOs computed revenue of P 41,867,573,000 or the amount
that it is allowed to earn based on a 12% rate of return is its taxable income, after
payment of its income tax liability ofP2,135,639,000.00, MERALCO would still obtain
an 11.38% rate of return or a return that is well within the 12% rate allowed
to public utilities.
[16]

MERALCO also contends that even the successor of the ERB or the ERC created
under the Electric Power Industry Reform Act of 2001 (EPIRA)
[17]
adheres to the
principle that income tax is part of operating expense.
[18]
To bolster its argument,
MERALCO cites Article 36 of the EPIRA which charges the ERC with the responsibility
of unbundling the rates of the National Power Corporation (NPC) and each distribution
utility coming within the coverage of the law.
[19]
MERALCO alleges that pursuant to said
provision, the ERC issued a set of Uniform Rate Filing Requirements (UFR) containing
guidelines to be followed with respect to rate unbundling applications to be filed.
MERALCO asserts that under the UFR, the enumeration of the expenses which are to be
recovered through the rates, and which are to be separated or allocated for the purpose
of unbundling of these rates include income tax expenses.
Under Section 36 of the EPIRA, the NPC and every distribution facility covered by
the law is mandated to unbundle, segregate or itemize its rates according to the various
sectors of the electric power industry identified in the law, namely: generation,
transmission, distribution and supply.
[20]
The law further directs the ERC to regulate and
facilitate the unbundling of rates prescribed by Section 36. Thus, on October 30, 2001,
the ERC issued guidelines prescribing the uniform rate filing requirements to be
followed by distribution facilities for the purposes of unbundling rates.
[21]

A proper appreciation of the UFR shows that it simply specifies a uniform
accounting system to be complied with by a distribution facility when filing an
application for revised rates under the EPIRA. As the EPIRA requires the unbundling or
segregation of rates according to the different sectors of the electric power industry, the
UFR seeks to facilitate this process by properly identifying the accounts or information
required for proper evaluation by the ERB. Thus, the introductory statements of the UFR
provide:
These uniform rate filing requirements are intended to promote consistency and
completeness in the rate filings required by Republic Act No. 9136 (RA 9136), Section
36. To that end, the filing requirements only specify minimum form and
content. A rate application in all its aspects continues to be subject to
subsequent Commission review and deliberation.
[22]

At the onset, it is clear that the UFR does not seek to determine which
accounting method will be used by the ERC for determination of rate base or
the items of expenses that may be recovered by a public utility from its
customers. The UFR only seeks to prescribe auniform system or format to
standardize or facilitate the process of unbundling of rates mandated by the EPIRA. At
best, the UFR prescribes the set of raw data or figures to be disclosed by a distribution
facility that the ERC will need to determine the authorized rates that a distribution

Page | 17

facility may charge. The UFR does not, in any way, determine the manner by
which the set of data or figures indicated in the rate application will be
evaluated by the ERC for rate determination purposes.
II
MERALCO also challenges the use of the net average investment method or the
number of months use method on the ground that MERALCO and the Public Service
Commission (PSC) have been consistently applying the average investment method or
simple average, which it alleged was also affirmed by this Court in the case
of MERALCO v. PSC
[23]
and Republic v. Medina.
[24]

It is true that in MERALCO v. PSC,
[25]
the issue of the proper valuation method to
be used in determining the value of MERALCOs utility plants for rate fixing purposes
was brought to fore. In the said case, MERALCO applied the average investment
method or simple average by obtaining the average value of the utility plants, using its
values at the beginning and at the end of the test year. In contrast, the General Auditing
Office used the appraisal method which fixes the value of the utility plants by
ascertaining the cost of production per kilowatt and multiplying the same by the total
capacity of said plants, less the corresponding depreciation.
[26]
In upholding the average
investment method used by MERALCO, this Court adopted the findings of the PSC for
being by and large, supported by the records of the case.
[27]
This Court did not make an
independent assessment of the validity or applicability of the average investment
method but simply did not disturb the findings of the PSC for being supported by
substantial evidence. To conclude that the said decision affirmed the use of the
average investment method thereby implying that the said method is the only method
to be applied in all instances, is a strained reading of the decision.
In fact, in the case of Republic v. Medina,
[28]
also cited by MERALCO to have
affirmed the use of the average investment method, this Court ruled:
The decided weight of authority, however, is to the effect that property valuation is
not to be solved by formula but depends upon the particular circumstances
and relevant facts affecting each utility as to what constitutes a just rate base and
what would be a fair return, just to both the utility and the public.
[29]

Further, Mr. Justice Castro in his concurring opinion in the same case elucidated:
A regulatory commissions field of inquiry, however, is not confined to the computation
of the cost of service or capital nor to a mere prognostication of the future behavior of the
money and capital markets. It must also balance investor and consumer expectations in
such a way that broad requirements of public interest may be meaningfully realized. It
would hence appear in keeping with its public duty if a regulatory body is
allowed wide discretion in the choice of methods rationally related to the
achievement of this end.
[30]

Thus, the rule then as it is now, is that rate regulating authorities are not hidebound
to use any single formula or combination of formulas for property valuation purposes
because the rate-making process involves the balancing of investor and consumer
interests which takes into account various factors that may be unique or peculiar to a
particular rate revision application.
We again stress the long established doctrine that findings of administrative or
regulatory agencies on matters which are within their technical area of expertise are
generally accorded not only respect but at times even finality if such findings and

Page | 18

conclusions are supported by substantial evidence.
[31]
Rate fixing calls for a technical
examination and a specialized review of specific details which the courts are ill-equipped
to enter, hence, such matters are primarily entrusted to the administrative or regulating
authority.
[32]

Thus, this Court finds no reversible error on the part of the COA and the ERB in
adopting the net average investment method or the number of months use method
for property valuation purposes in the cases at bar.
III
MERALCO also rants against the retroactive application of the rate adjustment
ordered by the ERB and affirmed by this Court. In its decision, the ERB, after
authorizing MERALCO to adopt a rate adjustment in the amount of P0.017 per kwh,
directed MERALCO to refund or credit to its customers future consumption the excess
average amount of P0.167 per kwh from its billing cycles beginning February
1994
[33]
until its billing cycles beginning February 1998.
[34]
In the decision appealed
from, this Court likewise ordered that the refund in the average amount of P0.167 per
kwh be made to retroact from MERALCOs billing cycles beginning February 1994.
MERALCO contends that the refund cannot be given retroactive effect as the figures
determined by the ERB only apply to the test year or the period subject of the COA
Audit, i.e., February 1, 1994 to January 31, 1995. It reasoned that the amounts used to
determine the proper rates to be charged by MERALCO would vary from year to year
and thus the computation of the excess average charge of P0.167 would hold true only for
the test year. Thus, MERALCO argues that if a refund of P0.167 would be uniformly
applied to its billing cycles beginning 1994, with respect to periods after January 31,
1995, there will be instances wherein its operating revenues would fall below the 12%
authorized rate of return. MERALCO therefore suggests that the dispositive portion be
modified and order that the refund applicable to the periods after January 31, 1995 is to
be computed on the basis of the excess collection in proportion to the excess over the
12% return.
[35]

The purpose of the audit procedures conducted in a rate application proceeding is to
determine whether the rate applied for will generate a reasonable return for the public
utility, which, in accordance with settled laws and jurisprudence, is 12% on rate base or
the present value of the assets used in the operations of a public utility. For audit
purposes, however, there is a need to obtain a sample set of data-- usually derived from
figures within a designated period of time-- to determine the amount of returns obtained
by a public utility during such period. In the cases at bar, the COA conducted an audit for
the test year beginning February 1, 1994 and ending January 31, 1995 or a 12-month
period immediately after the order of the ERB granting a provisional increase in the
amount of P0.184 per kwh was issued. Thus, the ultimate issue resolved by the COA
when it conducted its audit was whether the provisional increase granted by the ERB
generated an amount of return well within the rates authorized by law. As stated earlier,
based on the findings of the ERB, with the increase of P0.184 per kwh, MERALCO
obtained a rate of return which was 8.15% more than the authorized rate of return of
12%.
[36]
Thus, a refund in the amount of P0.167 was determined and ordered by ERB.
The essence of the use of a test year for auditing purposes is to obtain a sample or
representative set of figures to enable the examining authority to arrive at a conclusion
or finding based on the gathered data. The use of a test year does not mean that the
information and conclusions so derived would only be correct for that year and would be
incorrect on the succeeding years. The use of a test year assumes that within a
reasonable period after such test year, figures used to determine the amount of return
would only vary slightly from the figures culled during the test year such that the impact

Page | 19

on the utilitys rate of return would not be very significant. Thus, in the event that there
is a substantial change in circumstances significantly affecting the variable amounts that
would determine the reasonableness of a return, an event which would normally occur
after a certain period of time has elapsed, the public utility may subsequently apply for a
rate revision.
We agree with the Solicitor General that following MERALCOs reasoning that the
figures culled from a test year would only be relevant during such year, there would be a
need for public utilities to apply for a rate adjustment every year and perform an audit
examination on a public utilitys books of accounts every year as the amount of a
utilitys revenue may fall above or below the authorized rates at any given year. Needless
to say, the trajectory of MERALCOs arguments will lead to an absurdity.
From the time the order granting a provisional increase was issued by the ERB,
nowhere in the records does it appear that the subsequent refund of P0.167 per kwh
ordered by the ERB was ever implemented or executed by MERALCO.
[37]
Accordingly,
from January 28, 1994 MERALCO imposed on its customers a charge that is P0.167 in
excess of the proper amount. In fact, any application for rate adjustment that may have
been applied for and/or granted to MERALCO during the intervening period would have
to be reckoned from rates increased by P0.184 per kwh as these were the rates prevailing
at the time any application for rate adjustment was made by MERALCO.
While we agree that the amounts used to determine the utilitys rate of return would
vary from year to year, we are unable to subscribe to the view that the refund applicable
to the periods after January 31, 1995 should be computed on the basis of the excess
collection in proportion to the excess over the 12% return. MERALCOs contention that
the refund for periods after January 31, 1995 should be computed on the basis of revenue
of each year in excess of the 12% authorized rate of return calls for a year-by-year
computation of MERALCOs revenues and assets which would be contrary to the essence
of an audit examination of a public utility based on a test year. To grant MERALCOs
prayer would, in effect, allow MERALCO the benefit of a year-by-year adjustment of
rates not normally enjoyed by any other public utility required to adopt a subsequent
rate modification. Indeed, had the ERB ordered an increase in the provisional rates it
previously granted, said increase in rates would apply retroactively and would not have
varied from year to year, depending on the variable amounts used to determine the
authorized rates that may be charged by MERALCO. We find no significant circumstance
prevailing in the cases at bar that would justify the application of a yearly adjustment as
requested by MERALCO.
WHEREFORE, in view of the foregoing, the petitioners Motion for
Reconsideration is DENIED WITH FINALITY.
SO ORDERED.

Adasa v. Abalos Feb. 19, 2007
Facts:
Respondent alleged that petitioner, through deceit, received and encashed 2 checks
issued in the name of respondent without his knowledge and consent and that despite
repeated demands by the respondent, petitioner failed and refused to pay the proceeds of
the checks.

Page | 20

Petitioner filed a counter-affidavit admitting that she received and encashed the 2
checks. Then she alleged in a Supplemental affidavit claiming that it was instead Bebie
Correa who received the 2 checks, but that Correa had already left the country.
On April 2001, the City Prosecutor of Iligan ordered the filing of 2 separate Informations
for Estafa through Falsification of Commercial Document by a Private Individual.
Consequently, 2 separate criminal cases were filed against petitioner. This instant
petition concerns only one of these criminal cases (Criminal Case No. 8782).
The trial court then issued an order directing the Office of the City Prosecutor to conduct
a reinvestigation. Afterwards, they issued a resolution affirming the finding of probable
cause against petitioner.
During her arraignment, petitioner entered an unconditional plea of not guilty. The, she
filed a Petition for Review before the DOJ, with regard to the findings of the Office of the
City Prosecutor.
DOJ reversed and set aside the resolution and directed the Office of the City Prosecutor
to withdraw the Information for Estafa against petitioner. Said Officed filed a Motion to
Withdraw Information.
Respondent filed a motion for reconsideration arguing that DOJ should have dismissed
outright the petition for review since Sec. 7 of DOJ Circular NO. 70 mandates that when
an accused has already been arraigned and the aggrieved party files a petition for review
before the DOJ, the Secretary of Justice cannot, and should not take cognizance of the
petition, or even give due course thereto, but instead deny it outright.
On Feb. 2003, the trial court granted petitioners Motion to Withdraw Information and
dismissed Criminal Case No. 8782. No action was taken by respondent regarding this.
Respondent filed a Petition for Certiorari before the Court of Appeals regarding the DOJ
resolution. CA granted the petition and reversed the resolution of the DOJ. CA
ruled that since petitioner was arraigned before she filed the petition for
review with the DOJ, it was imperative for the DOJ to dismiss such
petition, that when petitioner pleaded to the charge, she was deemed to
have waived her right to reinvestigation and right o question any
irregularity that surrounds it, and that the order of the trial court
dismissing the case pursuant to the assailed resolutions of the DOJ did not
render the petition moot and academic. Since the trial courts order rested solely
on the resolutions, it is void since it violated the rules which enjoins the trial court to
assess the evidence presented before it in a motion to dismiss and not to rely solely on
the prosecutors averment that the Secretary of Justice had recommended the dismissal.
Petitioner filed a Motion for Reconsideration, on the grounds that 1) the language of Sec.
7 and 12 of Circular No. 70 is permissive and directory such that the Secretary of Justice
may entertain an appeal despite the fact that the accused had been arraigned; and that
the contemporaneous construction by the Secretary of Justice be given great weight and
respect.

Page | 21

CA stood by its decision, construing Sec. 7 side by side with Sec. 12 and attempted to
reconcile them. It stated that the word shall not in par. 2, sentence 1 of Sec. 7 denotes a
positive prohibition. It renders the provision mandatory, meaning that the Secretary of
Justice had no other course of action but to deny or dismiss a petition before him when
arraignment of an accused had already taken place prior to the filing of the petition for
review. Sec. 12, which read that the Secretary may reverse, affirm or modify the
appealed resolution, should be read together with Sec. 7. Together, they meant that
when an accused was already arraigned when the aggrieved party files a petition for
review, the Secretary of Justice cannot, and should not take cognizance of the petition, or
even give due course thereto, but instead dismiss or deny it outright.CA added that
may in Sec. 12 should be read as shall or must since such construction is necessary
to give effect to the apparent intention of the rule.
As to the other grounds presented by petitioner, CA found them to be erroneous/without
merit/without evidence.
Petitioner remained unconvinced and thus filed this current petition.
Issue: Can the DOJ give due course to an appeal or petition for review despite its having
been filed after the accused had already been arraigned?
Held: NO. Petition denied. Decision of the CA is affirmed.
Reasoning:
1) Petitioner contends that yes, DOJ can give due course to an appeal despite its
having been filed after the accused had already been arraigned. Petitioner relied
on statements from other cases, Crespo v. Mogul, and Roberts v. CA, and
Marcelo v. CA, all of which basically stated that it was still within the discretion of
the DOJ to decide what to do with petitions presented to it, regardless of whether
it was done before or after an arraignment.
- The Court is unconvinced by this argument. It states that the cases
cited arent really talking about the same issue as the current case and
that the given circumstances arent the same.
2) Petitioner asserts that the CA interpretation of the DOJ Circular violated 3 basic
rules of statutory construction. 1) That the provision that appears last in the order
of position in the rule or regular must prevail, 2) that contemporaneous
construction of a statute or regulation by the officers who enforce it should be
given great weight, 3) that the word shall had been construed as a permissive,
and not a mandatory language (from Agpalos Statutory Construction).
- Court cites the rule that when a statute or rules is clear and
unambiguous, interpretation need not be resorted to. Since Sec. 7
clearly and categorically directs the DOJ to dismiss outright an appeal
or a petition for review filed after arraignment, no resort to
interpretation is necessary.
- Court states that Petitioners reliance on the aforementioned 1
st

violated principle is not applicable because there is no

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irreconcilable conflict between Sec. 7 and Sec. 12 of the DOJ
Circular No. 70.
o Sec. 7 states that If an information is filed in court pursuant to
the appealed resolution, the petition shall not be given due
course if the accused had already been arraigned.
o Sec. 12 states that He (Secretary of Justice) may, motu
proprio or upon motion, dismiss the petition for review on any
of the ff. grounds:
e) That the accused had already been arraigned when the
appeal was taken.
- Sec. 7 pertains to the action that the DOJ must take, while Sec. 12
enumerates the options the DOJ has with regard to the disposition of a
petition for review or of an appeal
- Sec. 7 specifically applies to a situation on what the DOJ must do when
confronted with an appeal or a petition for review that is either clearly
without merit, manifestly intended to delay, or filed after an accused
has already been arraigned.
- Sec. 12 applies generally to the disposition of an appeal. Under said
section, the DOJ may reverse, modify, affirm or dismiss the appealed
resolution. The grounds are provided for in Sec. 12 as to the dismissal
of an appeal.
- The DOJ, noting that the arraignment of an accused prior to the filing
of an appeal or petition is a ground for dismissal under Sec. 12, must
go back to Sec. 7 and act as mandated therein. Thus, it must not give
due course to, and must necessarily dismiss the appeal.
3) Petitioner relies on the principle of contemporaneous construction
- However, Court affirmed CA reasoning that contemporaneous
construction by the officers charged with the enforcement of
the rules and regulations it promulgated is entitled to great
weight by the court in the latters construction of such rules
and regulations. That does not, however, make such a
construction necessarily controlling or binding. Equally settled
is the rule that courts may disregard contemporaneous construction in
instances where the law or rule construed possesses no ambiguity,
where the construction is clearly erroneous, where strong reason to the
contrary exists, and where the court has previously given the statute a
different interpretation. Also that If a contemporaneous construction
is found to be erroneous, the same must be declared null and void.
4) Petitioner contends that Sec. 12 is permissive and thus the mandate in Sec. 7 is a
transformed into a matter within the discretion of the DOJ. He cites a passage
from Agpalos Statutory Construction which did not use shall as mandatory.
- However, the cited passage was connected to certain conditions
(subject to availability, etc). No such conditions are found in Sec. 7 and
hence, shall remains mandatory.
- CA reasoning: If the intent of the Dept. Circular No. 70 were to give
the Secretary of Justice a discretionary power to dismiss or to entertain

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a petition for review despite its being outrightly dismissible, the result
would not only be incongruous but also irrational and even unjust. For
then, the action of the Secretary of Justice of giving due course to the
petition would serve no purpose and would only allow a great waste of
time. Also, giving said section a directory application would not only
subvert the objectives of the circular, but also render its other
mandatory provisions nugatory.
5) Petitioner contends that the issue of whether the DOJ rightfully acted had been
rendered moot and academic by the order of dismissal of the trial court.
- Trial court dismissed the case precisely because of the Resolutions of
the DOJ, after it had, in grave abuse of discretion, took cognizance of
the petition for review. Thus, having been rendered in grave abuse, the
Resolutions of the DOJ are void. The order of dismissal of the trial
court, pursuant to the void resolutions, is likewise void.
- Rule is that a void judgment is a complete nullity and without
legal effect, and that all proceedings or actions founded
thereon are themselves regarded as invalid and ineffective
for any purpose.
6) Petitioner asserts that Sec. 7 of said Circular applies only to appeals from original
resolution of the City Prosecutor and does not apply in this case.
- Sec. 7 does not give a qualification to limit its application to
appeals from original resolutions.
- Rule is that when the law does not distinguish, we must not
distinguish.
7) Petitioner asserts that her arraignment was null and void
- Contention is without merit because the arraignment was without any
restriction, condition, or reservation.
- Rule is that when an accused pleads to the charge, he is deemed to
have waived the right to preliminary investigation and the right to
question any irregularity that surrounds it.
- In this case, when petitioner unconditionally pleaded to the charge, she
effectively waived the reinvestigation of the case by the Prosecutor as
well as the right to appeal the result thereof to the DOJ Secretary

Bernadette Adasa vs. Cecille Abalos
G.R. No. 168617 February 19, 2007
Chico-Nazario, J.:
Facts:
Respondent Cecille Abalos alleged in the complaints-affidavits that petitioner Bernadette
Adasa, through deceit, received and encashed two checks issued in the name of
respondent without respondents knowledge and consent and that despite repeated
demands by the latter, petitioner failed and refused to pay the proceeds of the checks. A
resolution was issued by the Office of the City Prosecutor of Iligan City finding probable
cause against petitioner and ordering the filing of two separate Informations for Estafa
Thru Falsification of Commercial Document by a Private Individual, under Article 315 in
relation to Articles 171 and 172 of the Revised Penal Code, as amended.

Page | 24

Dissatisfied with the finding of the Office of the City Prosecutor of Iligan City, petitioner
later filed a Petition for Review before the DOJ. In a Resolution, the DOJ reversed and
set aside the resolution of the Office of the City Prosecutor of Iligan City and directed the
said office to withdraw the Information for Estafa against petitioner. The said DOJ
resolution prompted the Office of the City Prosecutor of Iligan City to file a Motion to
Withdraw Information.
Respondent Abalos thereafter filed a motion for reconsideration of said resolution of the
DOJ arguing that the DOJ should have dismissed outright the petition for review since
Section 7 of DOJ Circular No. 70 mandates that when an accused has already been
arraigned and the aggrieved party files a petition for review before the DOJ, the
Secretary of Justice cannot, and should not take cognizance of the petition, or even give
due course thereto, but instead deny it outright. Respondent claimed Section 12 thereof
mentions arraignment as one of the grounds for the dismissal of the petition for review
before the DOJ.
In another resolution, the DOJ denied the Motion for Reconsideration opining that
under Section 12, in relation to Section 7, of DOJ Circular No. 70, the Secretary of Justice
is not precluded from entertaining any appeal taken to him even where the accused has
already been arraigned in court. This is due to the permissive language may utilized in
Section 12 whereby the Secretary has the discretion to entertain an appealed resolution
notwithstanding the fact that the accused has been arraigned.
Issue:
Is the over-all language of Sections 7 and 12 of Department Circular No. 70 permissive
and directory such that the Secretary of Justice may entertain an appeal despite the fact
that the accused had been arraigned?

Held:
No. When an accused has already been arraigned, the DOJ must not give the appeal or
petition for review due course and must dismiss the same. If the intent of Department
Circular No. 70 were to give the Secretary of Justice a discretionary power to dismiss or
to entertain a petition for review despite its being out rightly dismissible, such as when
the accused has already been arraigned, or where the crime the accused is being charged
with has already prescribed, or there is no reversible error that has been committed, or
that there are legal or factual grounds warranting dismissal, the result would not only be
incongruous but also irrational and even unjust. For then, the action of the Secretary of
Justice of giving due course to the petition would serve no purpose and would only allow
a great waste of time. Moreover, to give the second sentence of Section 12 in relation to
its paragraph (e) a directory application would not only subvert the avowed objectives of
the Circular, that is, for the expeditious and efficient administration of justice, but would
also render its other mandatory provisions Sections 3, 5, 6 and 7, nugatory.


ABS-CBN v. CTA

FACTS:
ABS-CBN is engaged in the business of telecasting local as well as foreign films acquired
from foreign corporations not engaged in trade or business within the Philippines. The
applicable law wrt the income tax of non-resident corporations is section 24 (b) of the

Page | 25

National Internal Revenue Code, as amended by Republic Act No. 2343 dated June 20,
19598.
On April 12, 1961, in implementation of said provision, the CIR issued General Circular
No. V-3349.Pursuant to the foregoing, ABS-CBN dutifully withheld and turned over to
the BIR the amount of 30% of one-half of the film rentals paid by it to foreign
corporations not engaged in trade or business within the Philippines. The last year that
ABS-CBN withheld taxes pursuant to the foregoing Circular was in 1968.
On June 27, 1968, RA 5431 amended Section 24 (b) 10 of the Tax Code increasing the tax
rate from 30 % to 35 % and revising the tax basis from "such amount" referring to rents,
etc. to "gross income."
On February 8, 1971, the CIR issued Revenue Memorandum Circular No. 4-71, revoking
General Circular No. V-334, and holding that the latter was "erroneous for lack of legal
basis," because "the tax therein prescribed should be based on gross income without
deduction whatever.
On the basis of this new Circular, CIR issued against ABS- CBN a letter of assessment
and demand requiring them to pay deficiency withholding income tax on the remitted
film rentals for the years 1965 through 1968 and film royalty as of the end of 1968 in the
total amount of P525,897.06.


ISSUE:
Whether or not respondent can apply General Circular No. 4-71 retroactively and issue a
deficiency assessment against petitioner in the amount of P 525,897.06 as deficiency
withholding income tax for the years 1965, 1966, 1967 and 1968.



DECISION:
No. Sec. 338-A11 (now Sec. 327) of the Tax Code applies in this case. Rulings or circulars
promulgated by the CIR have no retroactive application where to so apply them would be
prejudicial to taxpayers. The retroactive application of Memorandum Circular No. 4-71
prejudices ABS-CBN since:
a) it was issued only in 1971, or 3 years after 1968, the last year that petitioner had
withheld taxes under General Circular No. V-334.
b) the assessment and demand on petitioner to pay deficiency withholding income tax
was also made three years after 1968 for a period of time commencing in 1965.
c) ABS-CBN was no longer in a position to withhold taxes due from foreign corporations
because it had already remitted all film rentals and no longer had any control over them
when the new Circular was issued.
And in so far as the enumerated exceptions (to non- retroactivity) are concerned, ABS-
CBN does not fall under any of them.