1. ABELLA vs.

CSC
Facts:
"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
"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.
"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."
The Issues

"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
Ruling
1. Who May File Reconsideration or
Appeal
The appointing officer and the CSC acting
together, though not concurrently but
consecutively,
make
an
appointment
complete.19 In acting on the appointment, the
CSC determines whether the appointee
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.20According to the appellate court,
only the appointing authority had the right to
challenge the CSC's disapproval. It relied on
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."
Appointee's
Legal
Standing
Challenge the CSC Disapproval

to

Petitioner raises the following issues for our

consideration:
1

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.30 On this point, the concepts of "legal
standing" and "real party in interest" become
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.
Morato31explained:
"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-ininterest 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)
"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,33 it was his eligibility that was being
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.
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.
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,45 petitioner challenges the
constitutionality of CSC Circular 21, s.
1994.46 The pertinent part of this Circular
reads:
"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 (departmentwide and bureau-wide), Assistant
Regional Director (departmentwide and bureau-wide) and Chief
of Department Service[.]
"(b) In addition to the above Memorandum

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 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 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.
The Constitution mandates that, as "the central
personnel agency of the government," 47 the
CSC should "establish a career service and
adopt measures to promote the morale,
efficiency,
integrity,
responsiveness,
progressiveness, and courtesy in the Civil
Service."48 It further requires that appointments
in the civil service be made only through merit

and fitness to be determined by competitive

examination.49 Civil
Service
laws
have
expressly empowered the CSC to issue and
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.50 Logically, the CSC had to
issue guidelines to meet this objective,
specifically through the issuance of the
challenged Circular.
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;53 hence, there is no basis to argue
that it is an ex post facto law 54 or a bill of
attainder.55 These terms, which have settled
meanings in criminal jurisprudence, are clearly
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
reemployment56years later 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.
Petitioner contends that his due process rights,
as enunciated in Ang Tibay v. Court of
Appeals,58 were
violated.59 We
are
not
convinced. He points in particular to the CSC's
alleged failure to 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.60 The
determination of facts and the applicable law,
as basis for official action and the exercise of
judicial discretion, are essential for the
performance of this function.61 On these
considerations, it is elementary that due
process requirements, as enumerated in Ang
Tibay, must be observed. These requirements
include prior notice and hearing.62
3

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.63 Prior notice to
and hearing of every affected party, as
elements of due process, are not 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.
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.66 The CSC, in approving
or disapproving an 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.
Case No. 2
G. R. No. 156982
September 8, 2004
NATIONAL AMNESTY COMMISSION,
petitioner,
vs.
COMMISSION ON AUDIT, JUANITO G.
ESPINO, Director IV, NCR, Commission on

Audit, and ERNESTO C. EULALIA, Resident

Auditor, National Amnesty Commission.
respondents.
DECISION
CORONA, J.:
This petition for review1 seeks to annul the two
decisions of respondent COA affirming the
ruling of the National Government Audit Office.
The latter in turn upheld Auditor Ernesto C.
Eulalia's order disallowing the payment of
honoraria to the representatives of petitioner's
ex officio members, per COA Memorandum
No. 97-038.
It appears that after personally attending the
initial NAC meetings, the three ex officio
members turned over said responsibility to
their representatives who were paid honoraria.
However, NAC resident auditor Eulalia
disallowed on audit the payment of honoraria
to these representatives amounting pursuant to
COA Memorandum No. 97-038.
The ex officio members may
designate their representatives to the
Commission. Said Representatives shall
be entitled to per diems, allowances,
bonuses and other benefits as may
be authorized by law. (Emphasis
supplied)
Petitioner invoked Administrative Order No. 2
in assailing before the COA the rulings of the
resident auditor and the NGAO disallowing
payment of honoraria to the ex officio
members' representatives, to no avail.
Issues:
The NAC contends that the COA committed
grave abuse of discretion in:
(1) implementing COA Memorandum No. 97038 without the required notice and
publication under Article 2 of the Civil
Code;
(2) invoking paragraph 2, Section 7, Article
IX-B of the 1987 Constitution to sustain the
disallowance of honoraria under said
Memorandum;
(3) applying the Memorandum to the NAC
ex officio members' representatives who
were all appointive officials with ranks
below that of an Assistant Secretary;

(4) interpreting laws and rules outside of its

mandate and declaring Section 1, Rule II of
Administrative Order No. 2 null and void,
and
(5) disallowing the payment of honoraria
on the ground of lack of authority of
representatives to attend the NAC meetings
in behalf of the ex officio members.
We hold that the position of petitioner NAC is
against the law and jurisprudence. The COA is
correct that there is no legal basis to grant per
diem, honoraria or any allowance whatsoever
to the NAC ex officio members' official
representatives. Article IX-D of the Constitution
ordains the COA to exercise exclusive and
broad auditing powers over all government
entities or trustees, without any exception. It is
in accordance with this constitutional mandate
that the COA issued Memorandum No. 97-038.
Contrary
to
petitioner's
claim,
COA
Memorandum No. 97-038 does not need, for
validity and effectivity, the publication required
by Article 2 of the Civil Code. COA
Memorandum No. 97-038 is merely an internal
and interpretative regulation or letter of
instruction which does not need publication to
be effective and valid
The NAC ex officio members' representatives
who were all appointive officials with ranks
below Assistant Secretary are covered by the
two constitutional prohibitions. Sections 54 and
56 of the Administrative Code of 1987 reiterate
the constitutional prohibition against multiple
positions in the government and receiving
additional or double compensation: SEC. 54.
Limitation on Appointment; SEC. 56. Additional
or Double Compensation
RA 6758, the Salary Standardization Law, also
bars the receipt of such additional emolument.
The representatives in fact assumed their
responsibilities not by virtue of a new
appointment but by mere designation from the
ex officio members who were themselves also
designated as such.
There is a considerable difference between
an appointment and designation. An
appointment is the selection by the proper
authority of an individual who is to exercise
the powers and functions of a given office;
a designation merely connotes an
imposition of additional duties, usually by
law, upon a person already in the public
service by virtue of an earlier appointment.

Designation does not entail payment of

additional benefits or grant upon the person so
designated the right to claim the salary
attached to the position. Without an
appointment, a designation does not entitle the
officer to receive the salary of the position.
In Civil Liberties Union, we held that cabinet
secretaries, including their deputies and
assistants, who hold positions in ex officio
capacities, are proscribed from receiving
additional
compensation
because
their
services are already paid for and covered by
the compensation attached to their principal
offices.
The problem lies not in the administrative order
but how the NAC and the COA interpreted it.
The representatives cannot be considered
de facto officers because they were not
appointed but were merely designated to
act as such. Furthermore, they are not
entitled to something their own principals
are prohibited from receiving. Neither can
they claim good faith, given the express
prohibition of the Constitution and the
finality of our decision in Civil Liberties
Union prior to their receipt of such
allowances.
WHEREFORE
the
petition
DISMISSED for lack of merit.

is

hereby

3) [1998V590E] BLAQUERA vs ALCALA

1998 Sep 11En BancG.R. No. 109406D E C I
SION
PURISIMA, J.:
These are cases for certiorari and prohibition,
challenging the constitutionality and validity of
Administrative Order Nos. 29 and 268 on
various grounds.
The facts in G.R. Nos. 109406, 110642,
111494, and 112056 are undisputed, to wit:
Petitioners are officials and employees of
several government departments and agencies
who were paid incentive benefits for the year
1992, pursuant to Executive Order No. 292[1]
(EO 292), otherwise known as the
Administrative Code of 1987, and the Omnibus
Rules Implementing Book V[2]of EO 292. On
January 19, 1993, then President Fidel V.
Ramos
(President
Ramos)
issued
Administrative Order No. 29 (AO 29)
authorizing the grant of productivity incentive
benefits for the year 1992 in the maximum
amount of P1,000.00[3] and reiterating the
5

prohibition[4]
under
Section
7[5]of
Administrative Order No. 268 (AO 268),
enjoining the grant of productivity incentive
benefits without prior approval of the President.
Section 4 of AO 29 directed [a]ll departments,
offices and agencies which authorized payment
of CY 1992 Productivity Incentive Bonus in
excess of the amount authorized under Section
1 hereof [are hereby directed] to immediately
cause the return/refund of the excess within a
period of six months to commence fifteen (15)
days after the issuance of this Order. In
compliance therewith, the heads of the
departments or agencies of the government
concerned, who are the herein respondents,
caused the deduction from petitioners salaries
or allowances of the amounts needed to cover
the alleged overpayments. To prevent the
respondents from making further deductions
from their salaries or allowances, the
petitioners have come before this Court to seek
relief.
In G.R. No. 119597, the facts are different but
the petition poses a common issue with the
other consolidated cases. The petitioner,
Association of Dedicated Employees of the
Philippine Tourism Authority (ADEPT), is an
association of employees of the Philippine
Tourism Authority (PTA) who were granted
productivity incentive bonus for calendar year
1992 pursuant to Republic Act No. 6971 (RA
6971), otherwise known as the Productivity
Incentives Act of 1990. Subject bonus was,
however, disallowed by the Corporate Auditor
on the ground that it was prohibited under
Administrative Order No. 29 dated January 19,
1993.[6] The disallowance of the bonus in
question was finally brought on appeal to the
Commission on Audit (COA) which denied the
appeal in its Decision[7]of March 6, 1995,
ratiocinating, thus:
xxx Firstly, the provisions of RA #6971 insofar
as the coverage is concerned, refer to
business enterprises including government
owned
and/or
controlled
corporations
performing proprietary functions.
Section 1a of the Supplemental Rules
Implementing RA #6971 classified such
coverage as:
All business enterprises, with or without
existing duly certified labor organizations,
including government owned and/or controlled
corporations performing proprietary functions
which are established solely for business or
profit and accordingly excluding those created,
maintained or acquired in pursuance of a policy
of the State enunciated in the Constitution, or

by law and those whose officers and

employees are covered by the Civil Service.
underscoring supplied)
The PTrA is a GOCC created in pursuance of a
policy of the State. Section 9 of Presidential
Decree
No. 189 states that To implement
the policies and program of the Department
(Dept. of Tourism), there is hereby created a
Philippine Tourism Authority, xxx. Likewise,
Section 21 of the same decree provides that
All officials and employees of the Authority,
xxx, shall be subject to Civil Service Law, rules
and regulations, and the coverage of the Wage
and Position Classification Office.
Furthermore, although Supplemental Rules
and Regulations implementing R.A. #6971 was
issued only on December 27, 1991, the law
itself is clear that it pertains to private business
enterprises whose employees are covered by
the Labor Code of the Philippines, as
mentioned in the following provisions:
Section 5. Labor Management Committee. xxx
that at the request of any party to the
negotiation,
the
National
Wages and
Productivity Commission of the Department of
Labor and Employment shall provide the
necessary studies, xxx.
Section 8. Notification. - A business enterprise
which adopts a productivity incentive program
shall submit copies of the same to the National
Wages and Productivity Commission and to the
Bureau of Internal Revenue for their
information and record.
Section 9. Disputes and Grievances. Whenever disputes, grievances, or other
matters arise from the interpretation or
implementation of the productivity incentive
program, xxx may seek the assistance of the
National Conciliation and Mediation Board of
the Department of Labor and Employment for
such purpose. xxx
Therefore, considering the foregoing, the PTrA
is within the exclusion provision of the
Implementing Rules of RA #6971 and so, it
(PTrA) does not fall within its coverage as
being entitled to the productivity incentive
bonus under RA #6971.
Secondly, Administrative Order No. 29 which is
the basis for the grant of the productivity
incentive bonus/benefits for CY 1992 also
expressly provides prohibiting payments of
similar benefits in future years unless duly
authorized by the President.
6

Thirdly, the disallowance of the Auditor, PTrA

has already been resolved when this
Commission
circularized
thru
COA
Memorandum #92-758 dated April 3, 1992 the
Supplemental to Rules Implementing RA 6971
otherwise known as the Productivity
Incentives Act of 1990. xxx
Lastly, considering the title of RA #6971, i.e.
An Act to encourage productivity and maintain
industrial peace by providing incentives to both
labor and capital, and its implementing rules
and regulations prepared by the Department of
Labor and Employment and the Department of
Finance, this Office concludes that said
law/regulation pertains to agencies in the
private sector whose employees are covered
by the Labor Code.
With the denial of its appeal, petitioner found
its way here via the petition in G.R. No.
119597, to seek relief from the aforesaid
decision of COA.

Issues:
Applicability of RA 6971 to petitioner ADEPT in
G.R. No. 119597.
Main issue: The constitutionality or validity of
Administrative Orders 29 and 268.
Ruling:
SECTION 3. Coverage. This Act shall apply
to all business enterprises with or without
existing and duly recognized or certified labor
organizations, including government-owned
and
controlled
corporations
performing
proprietary functions.
It shall cover all
employees and workers including casual,
regular,
supervisory
and
managerial
employees. (underscoring ours)
Pursuant to Section 10[8] of RA 6971, the
Secretary of Labor and Secretary of Finance
issued Supplemental Rules to Implement the
said law, as follows:
Section 1. - Paragraph (a) Section 1, Rule II
of the Rules Implementing RA 6971, shall be
amended to read as follows:
Coverage. These Rules shall apply to:
(a) All business enterprises with or without
existing duly certified labor organizations,
including government-owned and controlled
corporations performing proprietary functions
which are established solely for business or
profit or gain and accordingly excluding those

created, maintained or acquired in pursuance

of a policy of the state, enunciated in the
Constitution or by law, and those whose
officers and employees are covered by the Civil
Service. (underscoring ours)
Government-owned
and
controlled
corporations may perform governmental or
proprietary functions or both, depending on the
purpose for which they have been created. If
the purpose is to obtain special corporate
benefits or earn pecuniary profit, the function is
proprietary. If it is in the interest of health,
safety and for the advancement of public good
and welfare, affecting the public in general, the
function is governmental.[9] Powers classified
as proprietary are those intended for private
advantage and benefit.[10]
To ascertain whether PTA is within the ambit of
RA 6971, there is need to find out the
legislative intent, and to refer to other
provisions of RA 6971 and other pertinent laws,
that may aid the Court in ruling on the right of
officials and employees of PTA to receive
bonuses under RA 6971.
Petitioner cites an entry in the journal of the
House of Representatives to buttress its
submission that PTA is within the coverage of
RA 6971, to wit:
Chairman Veloso: The intent of including
government-owned and controlled corporations
within the coverage of the Act is the recognition
of the principle that when government goes
into business, it (divests) itself of its immunity
from suit and goes down to the level of
ordinary private enterprises and subjects itself
to the ordinary laws of the land just like
ordinary private enterprises.
Now, when
people work therefore in government-owned or
controlled corporations, it is as if they are also,
just like in the private sector, entitled to all the
benefits of all laws that apply to workers in the
private sector. In my view, even including the
right to organize, bargain....
VELOSO
(Bicameral Conference Committee on Labor
and Employment, pp. 15-16)
After a careful study, the Court is of the view,
and so holds, that contrary to petitioners
interpretation, the government-owned and
controlled corporations Mr. Chairman Veloso
had in mind were government-owned and
controlled corporations incorporated under the
general corporation law. This is so because
only workers in private corporations and
government-owned
and
controlled
corporations, incorporated under the general
corporation law, have the right to bargain
7

(collectively).
Those
in
government
corporations with special charter, which are
subject to Civil Service Laws, have no right to
bargain (collectively), except where the terms
and conditions of employment are not fixed by
law.[15] Their rights and duties are not
comparable with those in the private sector.
Since the terms and conditions of government
employment are fixed by law, government
workers cannot use the same weapons
employed by workers in the private sector to
secure concessions from their employers. The
principle behind labor unionism in private
industry is that industrial peace cannot be
secured through compulsion by law. Relations
between
private
employers
and
their
employees rest on an essentially voluntary
basis. Subject to the minimum requirements of
wage laws and other labor and welfare
legislation, the terms and conditions of
employment in the unionized private sector are
settled through the process of collective
bargaining.
In government employment,
however, it is the legislature and, where
properly
given
delegated
power,
the
administrative heads of government which fix
the terms and conditions of employment. And
this is effected through statutes or
administrative circulars, rules, and regulations,
not through collective bargaining agreements.
(Alliance of Government Workers v. Minister of
Labor and Employment, 124 SCRA 1) (italics
ours)
Government corporations may be created by
special charters or by incorporation under the
general corporation law. Those created by
special charters are governed by the Civil
Service Law while those incorporated under
the general corporation law are governed by
the Labor Code.[16]
The legislative intent to place only governmentowned and controlled corporations performing
proprietary functions under the coverage of RA
6971 is gleanable from the other provisions of
the law. For instance, section 2[17] of said law
envisions industrial peace and harmony and
to provide corresponding incentives to both
labor and capital; section 4[18] refers to
representatives of labor and management;
section 5[19] mentions of collective bargaining
agent(s) of the bargaining unit(s); section
6[20] relates to existing collective bargaining
agreements, and labor and management;
section 7[21] speaks of strike or lockout; and
section 9[22] purports to seek the assistance
of the National Conciliation and Mediation
Board of the Department of Labor and
Employment and include the name(s) of the

voluntary arbitrators or panel of voluntary

arbitrator. All the aforecited provisions of law
apply only to private corporations and
government-owned and controlled corporations
organized under the general corporation law.
Only they have collective bargaining agents,
collective
bargaining
units,
collective
bargaining agreements, and the right to strike
or lockout.
It is a rule in statutory construction that every
part of the statute must be interpreted with
reference to the context, i.e., that every part of
the statute must be considered together with
the other parts, and kept subservient to the
general intent of the whole enactment.[23] The
provisions of RA 6971, taken together, reveal
the legislative intent to include only
government-owned and controlled corporations
performing proprietary functions within its
coverage.
Every statute must be construed and
harmonized with other statutes as to form a
uniform system of jurisprudence.[24] We note
Section 1, Rule X of the Omnibus Rules
Implementing Book V of
EO 292, which
reads:
SECTION 1. - Each department or agency of
government, whether national or local,
including bureaus and agencies, state colleges
and universities, and government owned and
controlled corporations with original charters,
shall establish its own Department or Agency
Employee Suggestions and Incentives Award
System in accordance with these Rules and
shall submit the same to the Commission for
approval. (underscoring ours)
It is thus evident that PTA, being a
government-owned and controlled corporation
with original charter subject to Civil Service
Law, Rules and Regulations,[25] is already
within the scope of an incentives award system
under Section 1, Rule X of the Omnibus Rules
Implementing EO 292 issued by the Civil
Service Commission (Commission). Since
government-owned and controlled corporations
with original charters do have an incentive
award system, Congress enacted a law that
would address the same concern of officials
and employees of government-owned and
controlled corporations incorporated under the
general corporation law.
All things studiedly considered in proper
perspective, the Court finds no reversible error
in the finding by respondent Commission that
PTA is not within the purview of RA 6971. As
regards the promulgation of implementing rules
8

and regulations, it bears stressing that the

power of administrative officials to promulgate
rules in the implementation of the statute is
necessarily limited to what is provided for
in the legislative enactment.[26] In the case
under scrutiny, the Supplementary Rules
Implementing
RA 6971 issued by the
Secretary of Labor and Employment and the
Secretary of Finance
accord with the
intendment and provisions of RA 6971.
Consequently, not being covered by RA 6971,
AO 29 applies to the petitioner.
Ruling for the Main Issue:
The President is the head of the government.
Governmental power and authority are
exercised and implemented through him. His
power includes the control over executive
departments -The president shall have control of all the
executive departments, bureaus, and offices.
He shall ensure that the laws be faithfully
executed. (Section 17, Article VII, 1987
Constitution)
Control means the power of an officer to alter
or modify or set aside what a subordinate
officer had done in the performance of his
duties and to substitute the judgment of the
former for that of the latter.[32] It has been
held that [t]he President can, by virtue of his
power of control, review, modify, alter or nullify
any action, or decision, of his subordinate in
the executive departments, bureaus, or offices
under him. He can exercise this power motu
proprio without need of any appeal from any
party.[33]
When the President issued AO 29 limiting the
amount of incentive benefits, enjoining heads
of government agencies from granting
incentive benefits without prior approval from
him, and directing the refund of the excess
over the prescribed amount, the President was
just exercising his power of control over
executive departments. This is decisively clear
from the WHEREAS CLAUSES of AO 268 and
AO 29, to wit:
ADMINISTRATIVE ORDER NO. 268
x x x
WHEREAS, the productivity incentive benefits
granted by the different agencies are of varying
amounts, causing dissension/demoralization
on the part of those who had received less and
those who have not yet received any such
benefit, thereby defeating the purpose for
which the same should be granted; and

WHEREAS, there exists the need to regulate

the grant of the productivity incentive benefits
or other similar allowances in conformity with
the policy on standardization of compensation
pursuant to Republic Act No. 6758;
x x x.
ADMINISTRATIVE ORDER NO. 29
x x x
WHEREAS, the faithful implementation of
statutes, including the Administrative Code of
1987 and all laws governing all forms of
additional compensation and personnel
benefits is a Constitutional prerogative vested
in the President of the Philippines under
Section 17, Article VII of the 1987 Constitution;
WHEREAS, the Constitutional prerogative
includes the determination of the rates, the
timing and schedule of payment, and final
authority to commit limited resources of
government for the payment of personnel
incentives, cash awards, productivity bonus,
and other forms of additional compensation
and fringe benefits;
WHEREAS, some government agencies have
overlooked said Constitutional prerogative and
have unilaterally granted to their respective
officials and employees incentive awards;
WHEREAS, the Office of the President issued
Administrative Order No. 268, dated February
21, 1992, strictly prohibiting the grant of
Productivity Incentive Bonus or other
allowances of similar nature for Calendar Year
1992 and future years pending the issuance of
the requisite authorization by the President;
WHEREAS, notwithstanding said prohibition
some government offices/agencies and
government-owned
and/or
controlled
corporations and financial institutions have
granted productivity incentive benefits in
varying nomenclature and amounts without the
proper authorization/coordination with the
Office of the President;
WHEREAS, the unilateral and uncoordinated
grant of productivity incentive benefits gave
rise to discontentment, dissatisfaction and
demoralization among government personnel
who have received less or have not received at
all such benefits;
x x x.
The President issued subject Administrative
Orders to regulate the grant of productivity
incentive
benefits
and
to
prevent
discontentment,
dissatisfaction
and
demoralization among government personnel
by committing limited resources of government
9

for the equal payment of incentives and

awards. The President was only exercising
his power of control by modifying the acts of
the respondents who granted incentive benefits
to their employees without appropriate
clearance from the Office of the President,
thereby resulting in the uneven distribution of
government resources. In the view of the
President, respondents did a mistake which
had to be corrected.
In so acting, the
President exercised a constitutionally-protected
prerogative -The Presidents duty to execute the law is of
constitutional origin. So, too, is his control of
all executive departments. Thus it is, that
department heads are men of his confidence.
His is the power to appoint them; his, too, is
the privilege to dismiss them at pleasure.
Naturally, he controls and directs their acts.
Implicit then is his authority to go over, confirm,
modify or reverse the action taken by his
department secretaries. In this context, it may
not be said that the President cannot rule on
the correctness of a decision of a department
secretary. (Lacson-Magallanes Co., Inc. v.
Pao, 21 SCRA 898)
Neither can it be said that the President
encroached upon the authority of the
Commission on Civil Service to grant benefits
to government personnel. AO 29 and AO 268
did not revoke the privilege of employees to
receive incentive benefits. The same merely
regulated the grant and amount thereof.
Conformably, it is the President or the head of
each department or agency who is authorized
to incur the necessary expenses involved in
the honorary recognition of subordinate officers
and employees of the government. It is not
the duty of the Commission to fix the amount of
the incentives. Such function belongs to the
President or his duly empowered alter ego.
Anent petitioners contention that the forcible
refund
of
incentive
benefits
is
an
unconstitutional impairment of a contractual
obligation, suffice it to state that [n]ot all
contracts entered into by the government will
operate as a waiver of its non-suability;
distinction must be made between its
sovereign and proprietary acts (United States
of America v. Ruiz, 136 SCRA 487).[35] The
acts involved in this case are governmental.
Besides, the Court is in agreement with the
Solicitor General that the incentive pay or
benefit is in the nature of a bonus which is not
a demandable or enforceable obligation.

It is understood that the Judiciary, Civil Service

Commission,
Commission
on
Audit,
Commission on Elections, and Office of the
Ombudsman, which enjoy fiscal autonomy, are
not covered by the amount fixed by the
President. As explained in Bengzon vs. Drilon
(208 SCRA 133):
As envisioned in the Constitution, the fiscal
autonomy enjoyed by the Judiciary, the Civil
Service Commission, the Commission on
Audit, the Commission on Elections, and the
Office of the Ombudsman contemplates a
guarantee of full flexibility to allocate and utilize
their resources with the wisdom and dispatch
that their needs require. It recognizes the
power and authority to levy, assess and collect
fees, fix rates of compensation not exceeding
the highest rates authorized by law for
compensation and pay plans of the
government and allocate and disburse such
sums as may be provided by law or prescribed
by them in the course of the discharge of their
functions.
Fiscal autonomy means freedom from outside
control.
Untenable is petitioners contention that the
herein respondents be held personally liable
for the refund in question. Absent a showing of
bad faith or malice, public officers are not
personally liable for damages resulting from
the performance of official duties.[36]
Every public official is entitled to the
presumption of good faith in the discharge of
official duties.[37] Absent any showing of bad
faith or malice, there is likewise a presumption
of regularity in the performance of official
duties.[38]
In upholding the constitutionality of AO 268 and
AO 29, the Court reiterates
the wellentrenched doctrine that in interpreting
statutes, that which will avoid a finding of
unconstitutionality is to be preferred.[39]
Considering, however, that all the parties here
acted in good faith, we cannot countenance the
refund of subject incentive benefits for the year
1992, which amounts the petitioners have
already received. Indeed, no indicia of bad
faith can be detected under the attendant facts
and circumstances. The officials and chiefs of
offices concerned disbursed such incentive
benefits in the honest belief that the amounts
given were due to the recipients and the latter
accepted the same with gratitude, confident
that they richly deserve such benefits.
10

WHEREFORE, the Petitions in G.R. Nos.

109406, 110642, 111494, and 112056 are
hereby
DISMISSED, and as above
ratiocinated,
further deductions from the
salaries and allowances of petitioners are
hereby ENJOINED.
In G.R. No. 119597, the assailed Decision of
respondent
Commission
on
Audit
is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.

CASE NO. 4: RCPI

COMMUNICATIONS

VS

BOARD

OF

FACTS:
In GR No. L-43653, Diego Morales daughter
sent him a telegram while he was in Manila,
informing him that his wife has died. The
telegram was sent through petitioner RCPI.
The telegram, however, never reached Morales
because of the failure of the RCPI to transmit
said telegram to him. Respondent allegedly
suffered
inconvenience
and
additional
expenses and prays for damages.
Meanwhile, in GR No. L-45378, complainant
Pacifico Innocencio claims that his sister,
Lourdes, sent him a telegram on July 13, 1975
through petitioner for the purpose of informing
him of the death of their father. However, the
telegram was never received by Pacifico but
the sender, Lourdes, was never notified of such
failure. Pacifico claims to have suffered mental
anguish and personal inconveniences and thus
prays for damages.
After hearing, respondent board in both cases
imposed upon petitioner in each case a
disciplinary fine of P200.00.
ISSUE:
WON the Board of Communications has
jurisdiction to take cognizance of complaints for
injury caused by breach of obligation arising
from negligence.
HELD:
NO. As provided under Section 129 of the
Public Service Act governing the organization
of the Specialized Regulatory Board, the BOC
has the power to issue certificates of public

convenience. But this power to issue

certificates of public convenience does not
carry with it the power or supervision over
matters not related to the issuance of the
certificate of public convenience or in the
performance therewith in a manner suitable to
promote public interest. The BOC has power to
impose fine only where public service violates
or fails to comply with terms or conditions of
the certificate of public convenience or the
orders, decisions and regulations of the board.
Moreover, the proper forum for complaints of
injury caused by breach of obligation should be
in the courts.
DECISION of BOC, reversed, set aside,
declared null and void for lack of jurisdiction to
take cognizance of both cases.

Case No. 5
Debulgado v. Civil Service Commission
Facts:
Rogelio R. Debulgado is the
incumbent Mayor of the City of San Carlos,
Negros Occidental.
On October 1, 1992,
petitioner Mayor appointed his wife, Victoria T.
Debulgado, as General Services Officer, that
is, as head of the Office of General Services of
the City Government of San Carlos. Victoria
was one of three (3) employees of the City
Government who were considered for the
position of General Services Officer. Before her
promotion in 1992, she had been in the service
of the City Government for about thirty-two (32)
years. She joined the City Government on
January 3, 1961 as Assistant License Clerk.
Through the years, she rose from the ranks
from being Asst. Chief of the Licenses & Fees
Division until being a Cashier IV. On October 1,
1992, petitioner Victoria assumed the new
post, and commenced discharging the
functions, of General Services Officer of San
Carlos City and receiving the regular salary
attached to that position. On December 16,
1992, the Civil Service Commission received a
letter from Congressman Tranquilino B.
Carmona of the First District of Negros
Occidental, calling attention to the promotional
appointment issued by petitioner Mayor in
favor of his wife. During the investigation, the
CSC found that the appointee was the lawful
wife of the Mayor. Acting on the investigation
report, the CSC disapproved the promotion of
Victoria to the position of General Services
Officer of San Carlos City upon the ground that
that promotion violated the statutory prohibition
against nepotic appointments. The Debulgados
11

moved for reconsideration, contending that the

statutory prohibition against nepotism was not
applicable to the appointment of Victoria as
General Services Officer. They also asserted
that the Commission had deprived Victoria of
her right to due process by unilaterally revoking
her appointment. MR denied.
1st Issue: Whether the prohibition against
nepotic appointments is applicable only to
original
appointments and not to promotional
appointments
Held:
The prohibitory norm against
nepotism in the public service is set out in
Section 59, Book
V of the Revised Administrative Code of 1987.
A textual examination of Section 59 at once
reveals that the prohibition was cast in
comprehensive and unqualified terms. Firstly, it
explicitly covers "all appointments", without
seeking to make any distinction between
differing kinds or types of appointments.
Secondly, Section 59 covers all appointments
to the national, provincial, city and municipal
government, as well as any branch or
instrumentality thereof and all government
owned or controlled corporations. Thirdly, there
is a list of exceptions set out in Section 59
itself, but it is a short list which includes (a)
persons employed in a confidential capacity;
(b) teachers; (c) physicians; and (d) members
of the Armed Forces of the Philippines. The list
has not been added to or subtracted from for
the past thirty (30) years. The list does not
contain words like "and other similar positions."
Thus, the list appears to us to be a closed one,
at least closed until lengthened or shortened by
Congress. Under Sec. 1, Rule VII of the
Implementing Rules of the Admin Code, both
an original appointment and a promotion are
particular species of personnel action. The
original appointment of a civil service employee
and all subsequent personnel actions
undertaken by or in respect of that employee
such as promotion, transfer, reinstatement,
reemployment, etc., must comply with the
Implementing Rules including, of course, the
prohibition against nepotism in Rule XVIII. To
the extent that all personnel actions occurring
after an original appointment, require the
issuance of a new appointment to another
position (or to the original position in case of
reinstatement),
we
believe
that
such
appointment must comply with all applicable
rules and prohibitions, including the statutory
and regulatory prohibition against nepotism. To
limit the thrust of the prohibition against
nepotism to the appointment issued at the time
of initial entry into the government service, and

to insulate from that prohibition appointments

subsequently issued when personnel actions
are thereafter taken in respect of the same
employee, would be basically to render that
prohibition meaningless and toothless. The
purpose of the rule is to ensure that all
appointments and other personnel actions in
the civil service should be based on merit and
fitness and should never depend on how close
or intimate an appointee is to the appointing
power.
2nd Issue: Whether the CSC exercised due
process
in
recalling/disapproving
the
appointment of Victoria
Held:
No. The action was not the
imposition of an administrative disciplinary
measure upon
petitioner Victoria, nor upon petitioner Mayor.
There were no administrative charges in
respect of which petitioner Victoria would have
been entitled to notice and hearing. The
Commission, in approving or disapproving an
appointment, only examines the conformity of
the appointment with applicable provisions of
law and whether the appointee possesses all
the minimum qualifications and none of the
disqualifications. In any case, Victoria was
afforded an opportunity to be heard when she
filed a motion for reconsideration with the
Commission and there challenged the
disapproval by the Commission.
Jose C. Laurel v. Civil Service Commission
Facts:
On March 3, 1980, the governor of
Batangas appointed his brother Benjamin
Laurel as Senior Executive Assistant, a noncareer service position which belongs to the
personal and confidential staff of n elective
official.
On December 31 1980, the position of
Provincial Administrator, a career Civil Service
position, became vacant and so Laurel was
designated as Acting Provincial Administrator
effective January 2.
On April 28 1981, Benjamin Laurel was
issued a promotional appointment as Civil
Security Officer, a primarily confidential position
as classified by PD 868.
On January 10 1983, Sangalang wrote
letter to CSC to bring its attention to the
appointment of Laurel as Provincial
12

Administrator, questioning the validity of the

appointment. Jose Oliveros, the Acting
Provincial Attorney of Batangas wrote a letter
to the Chairman of CSC stating that what what
is prohibited by PD 807 the appointment of a
relative to a career civil service position.
Governonr Laurel did not appoint, he just
designated. Appointment and designation are
two different things. Appointment implies
original establishment of a legal relation while
designation is the imposition of a new or
additional duties upon an officer to be
performed by him in a special manner. CSC
revoked the designation of Laurel on the
ground that it is nepotic, stating that the
prohibitive mantle of on nepotism would
include designation, because what cannot be
done directly, cannot be done indirectly.
Petioners motion for reconsideration was
denied. The Solicitor general sustains the
challenged resolutions. Hence, this petition.
Issues:
a. WON the questioned position is confidential
or not.
b. WON the rule on nepotism apply to
designation.
c. WON a private citizen who does not claim
any better right to the position file a verified
complaint with the CSC to denounce a violation
by an appointing authority of the CSL and
rules.
Ruling:
For the first issue, it is important since if
the position is confidential, the law on nepotism
will not apply to it. However, the position is a
career service position as admitted by
petitioner stating that Sec.49 of PD 807
prohibits the appointment of a relative to a
career service position like that of a Provincial
Administrator. Moreover, after the Solicitor
GeneralHis claim that the Provincial
Administrator is primarily confidential is without
merit.
For the third issue, the court rules that
the letter complaint of Sangalang was validly
given due course. Section 37 of PD 807
expressly allows a private citizen to directly file
with CSC a complaint against a government
official or employee in which case it may hear

and decide the case or may deputize any

department or agency or official or group of
officials to conduct an investigation.
The petition is denied for lack of merit
and the challenged resolutions of the CSC are
affirmed. Costs against petitioner.
Case No. 7
July 23, 1998
BLAS F. OPLE, petitioner, vs. RUBEN D.
TORRES, ALEXANDER AGUIRRE, HECTOR
VILLANUEVA, CIELITO HABITO,
ROBERT BARBERS, CARMENCITA
REODICA, CESAR SARINO, RENATO
VALENCIA, TOMAS P. AFRICA, HEAD OF
THE NATIONAL COMPUTER CENTER and
CHAIRMAN OF THE COMMISSION ON
AUDIT, respondents.

Facts:
President Fidel V. Ramos issued, on December
12 1996, A.O. no. 308 or the Adoption of a
National Computerized Identification Reference
System which requires an I.D. system so that
the Filipino citizens and foreign residents will
be able to transact business with the
government to avail basic services and social
security.
Senator Blas F. Ople filed a petition
questioning the constitutionality of A.O. No.
308, contending that:
A. THE ESTABLISNMENT OF A
NATIONAL COMPUTERIZED
IDENTIFICATION REFERENCE
SYSTEM REQUIRES A
LEGISLATIVE ACT. THE
ISSUANCE OF A.O. NO. 308 BY
THE PRESIDENT OF THE
REPUBLIC OF THE
PHILIPPINES IS, THEREFORE,
AN UNCONSTITUTIONAL
USURPATION OF THE
LEGISLATIVE POWERS OF THE
CONGRESS OF THE REPUBLIC
OF THE PHILIPPINES.
B. THE APPROPRIATION OF
PUBLIC FUNDS BY THE
PRESIDENT FOR THE
IMPLEMENTATION OF A.O. NO.
308 IS AN UNCONSTITUTIONAL
USURPATION OF THE
EXCLUSIVE RIGHT OF
13

CONGRESS TO APPROPRIATE
PUBLIC FUNDS FOR
EXPENDITURE.

a. In harmony with the law,

and
b. for the sole purpose of
implementing the law and
carrying out the legislative
policy.

C. THE IMPLEMENTATION OF
A.O. NO. 308 INSIDIOUSLY
LAYS THE GROUNDWORK FOR
A SYSTEM WHICH WILL
VIOLATE THE BILL OF RIGHTS
ENSHRINED IN THE
CONSTITUTION.

To simply argue that A.O. 308

merely implements the
administrative Code of 1987 is
not enough because
1. The code is a general law,
and AO 308 does not specify
which aspect of said code it
relates.
2. It ought to be evident that AO
308 deals with a subject that
should be covered by law.
b. Being a law, AO 308 erodes the
plenary power of Congress to
make laws.

Issue:
1. WON the petition is a justiciable as
would warrant a judicial review.Yes
2. WON the issuance of A.O. No. 308
encroaches on the legislative powers of
the Congress.Yes
3. WON A.O. No. 308 protects the
individuals interest in privacy. No
Ruling:

1. it not correct to argue as the

dissenters do that A.D. No. 308 is
not a law because it confers no
right, imposes no duty, affords no
proctection, and creates no office.
Under A.O. No. 308, a citizen
cannot transact business with
government agencies delivering
basic services to the people
without the contemplated
identification card. No citizen will
refuse to get this identification
card for no one can avoid dealing
with government. It is thus clear
as daylight that without the ID, a
citizen will have difficulty
exercising his rights and enjoying
his privileges. Given this reality,
the contention that A.O. No. 308
gives no right and imposes no
duty cannot stand.

the petition is granted and Adminisrative Order

No. 308 entitled "Adoption of a National
Computerized Identification Reference System"
declared null and void for being
unconstitutional.
I.

The petition is a justiciable case as

to warrant a judicial review bcoz:
a. Petitioner, Sen. Ople, has legal
standing to sue
1. As a Senator, he is possessed of
the requisite to bring suit raising
the issue that the issuance of
A.O. 308 is a usurpation of
legislative power.
2. As a taxpayer ad member of the
GSIS, he can impugn the legality
of the misalignment of the public
funds and the misuse of GSIS
funds to implement A.O. 308.
b. Petition at bar is ripe for adjudication
regardless of the fact that
implementing rules of A.O. 308 have
yet been promulgated because such
rules does not cure the fatal defect of
said A.O.
II.
The issuance of A.O. 308
encroaches on the legislative powers
of the Congress bcoz:
a. A.O. 308 involves a subject that
is not appropriate to be covered
by an A.O.
A.O.- is an ordinance issued
by the President which relates
to SPECIFIC aspects in the
administrative operation of
government. And it must be:

2. Fisher: Regulations are not

supposed to be a substitute for
the general policy-making that
Congress enacts in the form of a
public law.
III.

A.O. 308 does not protect an

individuals interest in privacy but
instead provides for its intrusion
1. It is so widely or not narrowly
drawn that it warrants potential
misuse of data to be gathered
under A.O. 308.Widely drawn in
the sense that:
a. A.O. 308 is not in clear and
categorical term on how
information gathered and
14

stored in the computer shall

be handled.
A.O. No. 308 does not state
what specific biological
characteristics and what
particular biometrics
technology shall be used to
identify people who will seek
its coverage.

human rights and to prevent

authoritarianism.
3. when the integrity of a
fundamental right is at stake,
this court will give the
challenged law, administrative
order, rule or regulation a
stricter scrutiny.
4. The Court will not be true to
its role as the ultimate
guardian of the people's
liberty if it would not
immediately smother the
sparks that endanger their
rights but would rather wait for
the fire that could consume
them.
5. In case of doubt, the least we
can do is to lean towards the
stance that will not put in
danger the rights protected by
the Constitutions.

b. A.O. does not provide

safeguards because it does not provide
1. who shall control ad access
the data, under what
circumstances, and for what
purpose-it does not state whether
encoding of data is limited to
biological information alone for
identification purposes.
2.no controls to against leakage
of information because there is
no sanction or penalty against the
intruder.

Being narrowly drawn and lacking

of safeguards reasonable
expectation of privacy (also, our
present law does not provide for
adequate safeguard for this
expectation), rational relation
test, the case of Whale v. Roe
(also, patient and identification
requirement in this case was a
product of orderly and rational
legislative decision and its
safeguards warrant a valid
exercise of police power which
justifies the intrusion of patients
privacy) cannot apply.

Principles: The SC held that

1. The right to privacy is not
intended to stifle scientific and
technological advancements
that enhance public service
and the common good. It
merely requires that the law
be narrowly focused and a
compelling interest justify
such intrusions. Intrusions into
the right must be
accompanied by proper
safeguards and well-defined
standards to prevent
unconstitutional invasions.
2. the right to privacy is a
fundamental right guaranteed
by the Constitution, hence, it
is the burden of government
to show that A.O. No. 308 is
justified by some compelling
state interest and that it is
narrowly drawn. It will not do
for the authorities to invoke
the presumption of regularity
in the performance of official
duties. Nor is it enough for the
authorities to prove that their
act is not irrational for a basic
right can be diminished, if not
defeated, even when the
government does not act
irrationally. The burden is
demanded by the 1987
Constitution whose entire
matrix is designed to protect

8.)
[2002V26]
REPUBLIC
OF
THE
PHILIPPINES, represented by NATIONAL
TELECOMMUNICATIONS
COMMISSION,
petitioner,
vs.
EXPRESS
TELECOMMUNICATION CO., INC. and
BAYAN TELECOMMUNICATIONS CO., INC.,
respondents.2002 Jan 151st DivisionG.R.
No.
147096ADMINISTRATIVE
PROCEEDINGS
Facts:
December 29, 1992, Bayantel filed an
application
with
the
National
Telecommunication
Commission
for
a
certificate of public convenience and necessity
(CPCN) to install, operate and maintain a
digital Cellular Mobile Telephone System
(CMTS) with prayer for a Provisional Authority
15

(PA). The application was docketed as NTC

Case No. 92-486.
January 22, 1993, NTC issued memorandum
circular directing all interested applicants for
national & regional CMTS to file their
applications on or before February 15, 1993.
May 26, 1993 filed an urgent ex-parte
application to file amended application.
Hearings on the amended application were
conducted, but before bayantel can complete
the presentation of its evidence, NTC issued
an order that all frequencies were closed in
view of the 2 separate PAs in favor of Islacom
& GMCR, Inc., all other applications ordered
archived without prejudice to its reinstatement
should the requisite frequencies be made
available.
March 9, 2000, NTC issued MC No. 9-3-2000
reallocating frequencies for assignment to
existing CMTS operators and to public
telecommunication entities which shall be
authorized to install, operate and maintain
CMTS networks.
May 17, 1999, Bayantel filed a motion to revive
case when NTC issued MC for the availability
of new frequencies.
Extelcom filed with the CA a petition for
certiorari
and prohibition seeking the
annulment of the order reviving the application
of Bayantel and the order granting Bayantel the
PA.
The CA annulled and set aside the order of the
NTC and the amended application of Bayantel
was dismissed without prejudice to the filing of
a new CMTS.
Bayantel and NTC filed their separate motions
for Reconsideration.
Now this petition for review on certiorari filed by
NTC.
The CA denied all the motions of the parties for
lack of merit.
NTC filed this petition for review on certiorari.
Bayantel also filed its petition for review.
Issue:
1)
Whether
Extelcom
administrative remedies.

exhausted

all

2) May a purely administrative and

discretionary function be interfered with by the
courts
3) Whether the NTC is the proper forum and
whether it adopted the proper rules in resolving
the case.
Decision
1) We now come to the issue of exhaustion of
administrative remedies.
The rule is well
entrenched that a party must exhaust all
administrative remedies before resorting to the
courts.
The premature invocation of the
intervention of the court is fatal to ones cause
of action. 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. In the case of Lopez v. City of Manila,
we held:
2) It is a well-recognized principle that purely
administrative and discretionary functions may
not be interfered with by the courts. (Coloso
vs. Board of Accountancy, G.R. No. L-5750,
April 20, 1953) In general, courts have no
supervising power over the proceedings and
actions of the administrative departments of
the government. This is generally true with
respect to acts involving the exercise of
judgement or discretion and findings of fact.
(54 Am. Jur. 558-559) xxx.
The established exception to the rule is where
the issuing authority has gone beyond its
statutory authority, exercised unconstitutional
powers or clearly acted arbitrarily and without
regard to his duty or with grave abuse of
discretion. None of these obtains in the case
at bar.
This Court has consistently held that the courts
will not interfere in matters which are
addressed to the sound discretion of the
government agency entrusted with the
regulation of activities coming under the
special and technical training and knowledge of
such agency. It has also been held that the
exercise of administrative discretion is a policy
decision and a matter that can best be
discharged by the government agency
concerned, and not by the courts.
In
Villanueva v. Court of Appeals, it was held that
findings of fact which are supported by
evidence and the conclusion of experts should
not be disturbed. This was reiterated in Metro
Transit Organization, Inc. v. National Labor
Relations Commission, wherein it was ruled
that factual findings of quasi-judicial bodies
16

which have acquired expertise because their

jurisdiction is confined to specific matters are
generally accorded not only respect but even
finality and are binding even upon the Supreme
Court if they are supported by substantial
evidence.
Administrative agencies are given a wide
latitude in the evaluation of evidence and in the
exercise of its adjudicative functions. This
latitude includes the authority to take judicial
notice of facts within its special competence.
In the case at bar, we find no reason to disturb
the factual findings of the NTC which formed
the basis for awarding the provisional authority
to Bayantel.
3) In the regulatory telecommunications
industry, the NTC has the sole authority to
issue Certificates of Public Convenience and
Necessity (CPCN) for the installation,
operation,
and
maintenance
of
communications facilities and services, radio
communications systems, telephone and
telegraphy systems. Such power includes the
authority to determine the areas of operations
of applicants for telecommunications services.
Specifically, Section 16 of the Public Service
Act Authorizes the then PSC, upon notice and
hearing, to issue Certificates of Public
Convenience for the operation of public
services within the Philippines "whenever the
Commission finds that the operation of the
public service proposed and the authorization
to do business will promote the public interests
in a proper and suitable manner."
The
procedure governing the issuance of such
authorizations is set forth in Section 29 of the
said Act, the pertinent portion of which states:
"All hearings and investigations before the
Commission shall be governed by rules and
adopted by the Commission, and in the
conduct thereof, the Commission shall not be
bound by the technical rules of legal
evidence.xxx.
The NTC was correct when it applied the 1978
Rules of practice and procedure, particularly
Rule 15, Sec. 3 (Provisional Relief. Upon the
filing of an application, complaint or petition or
at any stage thereafter, the Board may grant on
motion of the pleader or on its own initiative,
the relief prayed for, based on the pleading,
together with the affidavits and supporting
documents attached thereto, without prejudice
to a final decision after completion of the
hearing which shall be called within thirty (30)
days from grant of authority asked for.)
because the 1993 Revised Rules have never

been published in a newspaper of general

circulation.
WHEREFORE, in view of the foregoing, the
consolidated petitions are GRANTED. The
Court of Appeals' Decision dated September
13, 2000 and Resolution dated February 9,
2001 are REVERSED and SET ASIDE. The
permanent injunction issued by the Court of
Appeals is LIFTED. The Orders of the NTC
dated February 1, 2000 and May 3, 2000 are
REINSTATED. No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan,
and Pardo, JJ., concur.

Case 9: Marcos vs. Manglapus

We recall that in February 1986, Ferdinand E.
Marcos was deposed from the presidency via
the non-violent "people power" revolution and
forced into exile.

Now, Mr. Marcos, in his deathbed, has signified

his wish to return to the Philippines to die. But
Mrs.
Aquino,
considering
the
dire
consequences to the nation of his return at a
time when the stability of government is
threatened from various directions and the
economy is just beginning to rise and move
forward, has stood firmly on the decision to bar
the return of Mr. Marcos and his family.

This petition for mandamus and prohibition

asks the Court to order the respondents to
issue travel documents to Mr. Marcos and the
immediate members of his family and to enjoin
the implementation of the President's decision
to bar their return to the Philippines.

Our resolution of the issue will involve a twotiered approach. We shall:

a. First resolve whether or not the President

has the power under the Constitution, to bar
the Marcoses from returning to the Philippines.
17

b. Then, we shall determine, pursuant to the

express power of the Court under the
Constitution in Article VIII, Section 1, whether
or not the President acted arbitrarily or with
grave abuse of discretion amounting to lack or
excess of jurisdiction when she determined
that the return of the Marcoses to the
Philippines poses a serious threat to national
interest and welfare and decided to bar their
return.

A. The power under the constitution.

We hold the view that although the 1987
Constitution imposes limitations on the
exercise of specific powers of the President, it
maintains intact what is traditionally considered
as within the scope of "executive power."
Corollarily, the powers of the President cannot
be said to be limited only to the specific powers
enumerated in the Constitution. In other words,
executive power is more than the sum of
specific powers so enumerated.

It has been advanced that whatever power

inherent in the government that is neither
legislative nor judicial has to be executive.

The Constitution declares among the guiding

principles that "[t]he prime duty of the
Government is to serve and protect the people"
and that "[t]he maintenance of peace and
order, the protection of life, liberty, and
property, and the promotion of the general
welfare are essential for the enjoyment by all
the people of the blessings of democracy." [Art.
II, Secs. 4 and 5.]

Faced with the problem of whether or not the

time is right to allow the Marcoses to return to
the Philippines, the President is, under the
Constitution, constrained to consider these
basic principles in arriving at a decision. More
than that, having sworn to defend and uphold
the Constitution, the President has the
obligation under the Constitution to protect the

people, promote their welfare and advance the

national interest.

To the President, the problem is one of

balancing the general welfare and the common
good against the exercise of rights of certain
individuals.

B. Extent of Review
Pursuant to the principle of separation of
powers underlying our system of government,
the Executive is supreme within his own
sphere. However, the separation of powers,
under the Constitution, is not absolute. What is
more, it goes hand in hand with the system of
checks and balances, under which the
Executive is supreme, as regards the
suspension of the privilege, but only if and
when he acts within the sphere alloted to him
by the Basic Law, and the authority to
determine whether or not he has so acted is
vested in the Judicial Department, which, in
this respect, is, in turn, constitutionally
supreme.

In the exercise of such authority, the function of

the Court is merely to check - not to supplant the Executive, or to ascertain merely whether
he has gone beyond the constitutional limits of
his jurisdiction, not to exercise the power
vested in him or to determine the wisdom of his
act.

Accordingly, the question for the Court to

determine is whether or not there exist factual
bases for the President to conclude that it was
in the national interest to bar the return of the
Marcoses to the Philippines. If such postulates
do exist, it cannot be said that she has acted,
or acts, arbitrarily or that she has gravely
abused her discretion in deciding to bar their
return.

The documented history of the efforts of the

Marcoses and their followers to destabilize the
country, as earlier narrated in this ponencia
18

bolsters the conclusion that the return of the

Marcoses at this time would only exacerbate
and intensify the violence directed against the
State and instigate more chaos.

With these before her, the President cannot be

said to have acted arbitrarily and capriciously
and whimsically in determining that the return
of the Marcoses poses a serious threat to the
national interest and welfare and in prohibiting
their return.

WHEREFORE, and it being our wellconsidered opinion that the President did not
act arbitrarily or with grave abuse of discretion
in determining that the return of former
President Marcos and his family at the present
time and under present circumstances poses a
serious threat to national interest and welfare
and in prohibiting their return to the Philippines,
the instant petition is hereby DISMISSED.
10.)
[2003V399] VICTOR G. VALENCIA,
petitioner, vs. COURT OF APPEALS, HON.
TEOFISTO T. GUINGONA, JR., as Executive
Secretary, HON. ERNESTO GARILAO,
Secretary
of
Agrarian
Reform,
CRISOSTOMO
M.
CORPIN,
Regional
Director, DAR Region VII, SANTOS
GARGAYA,
JULIANO
MAGDAYAO,
CRESCENCIANO FRIAS, FEDERICO JARE,
ROSENDO
LOBRESCO,
ERNESTO
LOBRESCO,
FELICIANO
LOBRESCO,
CATALINO MANTAC, VICTORIANO MONTEFALCON, FRANCISCO OBANG, AMBROSIO
SEMILLANO, ROGELIO TAMAYO and
EDILBERTO LOBRESCO, respondents.2003
Apr 292nd DivisionG.R. No. 122363D E C I S
ION
FATCS:
For more than a quarter of a century petitioner
Victor G. Valencia, a government retiree,
sought justice through administrative and
judicial channels to regain possession of his
two (2) parcels of land which he claims to have
been unjustly withheld from him by persons
claiming to be tenants with the ostensible
complicity of government officials implementing
the agrarian reform program. In the meantime
his appeal for fairness and justice was denied
him through procedural infirmities. We are now
asked to probe into his lonely plight with a

reminder that it is our solemn duty to dispense

equal justice to the rich and the poor.
The property in dispute involves two (2) parcels
of land situated at Barangay Linothangan,
Canlaon City, Negros Oriental, covered by TCT
No. H-T-137 with an area of 23.7279 hectares,
and by Homestead Application No. HA-231601
with Final Proof and Tax Declaration No. 0515
with an area of 6.4397 hectares.
On 7 May 1957 Victor G. Valencia acquired the
first parcel covered by TCT No. H-T-137 from a
certain Bonifacio Supnet. The only tenant of
the property at that time was a certain Digoy
Besario who was succeeded by his son Jesus
Besario. On 2 July 1961 Valencia and Jesus
Besario terminated their landlord-tenant
relationship through a public instrument
voluntarily executed by them, thus reverting the
actual physical possession of the property to
petitioner Valencia.
On 22 October 1962 Valencia entered into a
ten (10)-year civil law lease agreement over his
two (2) parcels of land with a certain Glicerio
Henson.
Before the ten (10)-year lease
expired, apparently without objection from
Henson, Valencia leased the property for five
(5) years to Fr. Andres Flores under a civil law
lease concept beginning 21 August 1970 or
until 30 June 1975 after which the lease was
cancelled and inscribed as Entry No. 1578 in
TCT No. H-T-137.
The lease agreement
between Valencia and Fr. Flores was subject to
a
prohibition
against
subleasing
or
encumbering the land without Valencias
written consent. This was admitted by the
parties as reflected in the DAR Investigation
Report
and
Recommendations.[2]
The
prohibition against subleasing or encumbering
of the land apparently included the prohibition
against installing a leasehold tenant thereon.
Incidentally, it may be mentioned that in the
prior lease agreement with Henson no such
prohibition was stipulated.
During the period of his lease, Henson
instituted Crescenciano Frias and Marciano
Frias to work on the property, although only
Crescenciano Frias apparently remained in the
land while Marciano Frias must have
abandoned his cause if any, as he was not
impleaded in this case; neither did he appear
on record to have been issued a CLT in his
name.
During the lease of Fr. Andres Flores, he
designated Francisco Obang (as overseer),
Rogelio Tamayo, Federico Jare, Feliciano
Lobresco,
Melchor
Moncada,
Rosendo
19

Lobresco, Victoriano Montefalcon, Santos

Gargaya, Catalino Mantac, Herodita Semillano,
Ernesto Lobresco, Natividad Lobresco and
Alfredo Demerin, along with Crescenciano and
Marciano Frias, to cultivate the land. These
farmhands shared their produce with Fr.
Flores.
Subsequently, Francisco Obang,
Santos Gargaya, Crescenciano Frias, Federico
Jare, Rosendo Lobresco, Juliano Magdayao,
Ernesto
Lobresco,
Feliciano
Lobresco,
Catalino Mantac, Victoriano Montefalcon,
Ambrosio Semillano, Rogelio Tamayo and
Edilberto Lobresco, became recipients of CLTs
and are collectively referred to herein as
private respondents.
When the lease agreement between Valencia
and Fr. Flores expired on 30 June 1975,
Valencia demanded that private respondents
vacate the premises.
Instead of complying
with the demand, they refused and continued
cultivating the land despite the demand for
them to vacate. Valencia wanted to regain
possession of his property so he could work it
by administration, having in fact appointed
Bernie Bautista as overseer until petitioner
could retire from the government service.
In his initial step in his long and agonizing
journey, Valencia filed a letter of protest with
the Minister of Agrarian Reform to take back
the actual possession of his property that was
subject of the civil law lease agreement. On
20 March 1976 his letter was referred to the
DAR Regional Office in Cebu City.
Meanwhile, without the knowledge much less
consent of Valencia, private respondents
applied for Certificates of Land Transfer (CLTs)
under the Operation Land Transfer (OLT)
Program pursuant to Presidential Decree No.
27 claiming they were bona fide tenants of the
property.
In view of the issuance of CLTs to private
respondents, petitioner Valencia filed a second
letter of protest and requested an investigation
and subsequent cancellation of the CLTs.
In February 1988 petitioner Valencia and
Catalino Mantac, one of private respondents,
entered into a leasehold contract undertaking
to have a profit-sharing agreement. No other
respondent entered into any agreement or
tenancy contract, whether written or verbal,
with Valencia, Henson or Fr. Flores.
On 6 and 8 July 1988 an administrative
investigation was conducted by the DAR
Hearing Officer, Atty. Vilmo Ampong. This was
done more than twelve (12) years after the

initial letter of protest was filed on 20 March

1976.
After an on-site investigation and
inspection of the Valencia property, Atty.
Ampong, in his Investigation Report and
Recommendations dated 7 December 1988
found that: (a) Bernie Bautista, without any
authority from protestant Valencia, obtained
and/or received shares of the palay produced
every harvest from private respondents starting
1975 to 1983 with his wife Hazel issuing the
corresponding receipts; (b) Since the time
Bautista and spouse obtained and/or received
the owner's shares of the produce from private
respondents not a single cavan nor its
equivalent in cash was turned over or remitted
to Valencia; (c) Private respondents stopped
giving the landowner's shares to Bautista and
his wife when they already refused to issue
receipts, and so from then on private
respondents appropriated to themselves all the
landowner's shares; (d) While enjoying the
possession, cultivation and utilization of the
two (2) parcels of land, some of the private
respondents sublet their farmholdings for
financial considerations and turned them over
to the sublessees for specified periods;[4] (e)
The DAR Team Office in Canlaon City had the
landholding included in the Final Survey of
1983 notwithstanding Valencias pending
protest contesting the issuance of the CLTs;[5]
and, (f) Sometime in February 1988 Valencia
and Catalino Mantac entered into a leasehold
contract over a 0.0425 hectare of the 23.7279
hectares covered by TCT No. H-T-137.[6]
Atty. Vilmo Ampong also found that the right of
private respondents to the land ceased upon
the termination of the lease contracts, except
as regards respondent Catalino Mantac with
whom petitioner Valencia entered into a
tenancy agreement.
Atty. Ampong further
confirmed that Valencia did not receive
anything from private respondents as
consideration for tilling his land. Consequently,
Atty. Ampong recommended that the CLTs
issued to private respondents be cancelled and
the final survey conducted on the landholding
of Valencia set aside.
On 24 August 1989 the DAR Regional Office in
Cebu City, in DARRO Adm. Case No. VII-11789, notwithstanding the Investigation Report
and Recommendations of its DAR Team Office,
dismissed Valencia's protest and held that
private respondents had the right to continue
on the land until otherwise ordered by the
court.[7] Valencia moved for reconsideration
but on 12 July 1991 the motion was denied.
On 8 October 1993 Executive Secretary
Teofisto Guingona, Jr., by authority of the
20

President, affirmed the order of the DAR of 12

July 1991 subject to the modification that the
area acquired by petitioner Valencia as
homestead be excluded from the coverage of
P. D. No. 27.
Valencia then brought his case to the Court of
Appeals contending that the Executive
Secretary erred in recognizing private
respondents as tenants and disallowing him
and his seven (7) "compulsory heirs" from
exercising their right of retention under R. A.
No. 6657. However, in a decision promulgated
on 27 July 1995 the Court of Appeals
dismissed the case on a technical ground, i.e.,
that his appeal was filed out of time.[9] The
appellate court ruled that petitioner should
have filed with it a petition for review within
fifteen (15) days from receipt of the order of the
DAR Secretary pursuant to Sec. 54 of R. A.
No. 6657 and Supreme Court Adm. Circ. No. 195, instead of elevating the case to the Office
of the President pursuant to DAR Memo. Circ.
No. 3, series of 1994. Hence, according to the
Court of Appeals, the petition of Valencia was
filed out of time.
ISSUES:
1. DAR Memo. Circ. No. 3, series of 1994, is
valid not being contrary to law and
jurisprudence, and should be accorded respect
being the Agrarian Reform Secretarys
construction of the law that his Department
administers and implements
2. Is an appeal to the Office of the President
from the Department Secretary pursuant to
DAR Memo. Circ. No. 3, series of 1994, proper
under the doctrine of exhaustion of
administrative remedies?
3. (Substantive issue) Can a contract of civil
law lease prohibit a civil law lessee from
employing a tenant on the land subject matter
of the lease agreement?
Otherwise stated,
can petitioners civil law lessee, Fr. Flores,
install tenants on the subject premises without
express authority to do so under Art. 1649 of
the Civil Code, more so when the lessee is
expressly prohibited from doing so, as in the
instant case?
RULING:
FIRST ISSUE:
We agree with petitioner. Interpreting and
harmonizing laws with laws is the best method
of interpretation. Interpretare et concordare
leges legibus est optimus interpretandi modus.

[16] This manner of construction would provide

a complete, consistent and intelligible system
to secure the rights of all persons affected by
different legislative and quasi-legislative acts.
Where two (2) rules on the same subject, or on
related subjects, are apparently in conflict with
each other, they are to be reconciled by
construction, so far as may be, on any fair and
reasonable hypothesis.
Validity and legal
effect should therefore be given to both, if this
can be done without destroying the evident
intent and meaning of the later act. Every
statute should receive such a construction as
will harmonize it with the pre-existing body of
laws.
Harmonizing DAR Memo. Circ. No. 3, series of
1994, with SC Adm. Circ. No. 1-95 and Sec. 54
of R. A. No. 6657 would be consistent with
promoting the ends of substantial justice for all
parties seeking the protective mantle of the
law. To reconcile and harmonize them, due
consideration must be given to the purpose for
which each was promulgated. The purpose of
DAR Memo. Circ. No. 3, series of 1994, is to
provide a mode of appeal for matters not falling
within the jurisdictional ambit of the
Department of Agrarian Reform Adjudication
Board (DARAB) under R. A. No. 6657 and
correct technical errors of the administrative
agency.
In such exceptional cases, the
Department Secretary has established a mode
of appeal from the Department of Agrarian
Reform to the Office of the President as a
plain, speedy, adequate and inexpensive
remedy in the ordinary course of law. This
would enable the Office of the President,
through the Executive Secretary, to review
technical matters within the expertise of the
administrative machinery before judicial review
can be resorted to by way of an appeal to the
Court of Appeals under Rule 43 of the 1997
Rules on Civil Procedure.
SECOND ISSUE:
Petitioner contends that an appeal to the Office
of the President from the Secretary of Agrarian
Reform is proper under the doctrine of
exhaustion of administrative remedies. On the
other hand, it is the contention of public
respondent, the Office of the Solicitor General,
that an exception to this well-settled principle is
the doctrine of qualified political agency.
Where the respondent is a Department
Secretary, whose acts as an alter ego of the
President bear the implied or assumed
approval of the latter, unless the President
actually disapproves them, administrative
remedies have already been exhausted.
Recourse to the court may be made at that
point, according to private respondents, a view
21

that was sustained by the Court of Appeals. In

this case, the appellate court ruled that the
appeal before it was filed beyond the
reglementary period as petitioner appealed to
the Office of the President, and not to the Court
of Appeals, where it should have been brought.
In Tan v. Director of Forestry this Court ruled
that even if the respondent was a Department
Secretary, an appeal to the President was
proper where the law expressly provided for
exhaustion.[20]
As a valid exercise of the Secretarys rulemaking power to issue internal rules of
procedure, DAR Memo. Circ. No. 3, series of
1994, expressly provides for an appeal to the
Office of the President.
Thus, petitioner
Valencia filed on 24 November 1993 a timely
appeal by way of a petition for review under
Rule 43 to the Court of Appeals from the
decision of the Office of the President, which
was received on 11 November 1993, well
within the fifteen (15)-day reglementary period.
An administrative decision must first be
appealed to administrative superiors up to the
highest level before it may be elevated to a
court of justice for review.
The power of
judicial review may therefore be exercised only
if an appeal is first made by the highest
administrative body in the hierarchy of the
executive branch of government.
In Calo v. Fuertes this Court held that an
administrative appeal to the President was the
final step in the administrative process and
thus a condition precedent to a judicial appeal.
[21] Hence, an appeal to the Office of the
President from the decision of the Department
Secretary in an administrative case is the last
step that an aggrieved party should take in the
administrative hierarchy, as it is a plain, speedy
and adequate remedy available to the
petitioner.
THIRD ISSUE:
Contrary to the impression of private
respondents, Sec. 6 of R. A. No. 3844, as
amended, does not automatically authorize a
civil law lessee to employ a tenant without the
consent of the landowner. The lessee must be
so specifically authorized. For the right to hire
a tenant is basically a personal right of a
landowner, except as may be provided by law.
But certainly nowhere in Sec. 6 does it say that
a civil law lessee of a landholding is
automatically authorized to install a tenant
thereon. A different interpretation would create
a perverse and absurd situation where a
person who wants to be a tenant, and taking
advantage of this perceived ambiguity in the

law, asks a third person to become a civil law

lessee of the landowner. Incredibly, this tenant
would technically have a better right over the
property than the landowner himself. This
tenant would then gain security of tenure, and
eventually become owner of the land by
operation of law. This is most unfair to the
hapless and unsuspecting landowner who
entered into a civil law lease agreement in
good faith only to realize later on that he can
no longer regain possession of his property
due to the installation of a tenant by the civil
law lessee.
On the other hand, under the express provision
of Art. 1649 of the Civil Code, the lessee
cannot assign the lease without the consent of
the lessor, unless there is a stipulation to the
contrary. In the case before us, not only is
there no stipulation to the contrary; the lessee
is expressly prohibited from subleasing or
encumbering the land, which includes installing
a leasehold tenant thereon since the right to do
so is an attribute of ownership. Plainly stated
therefore, a contract of civil law lease can
prohibit a civil law lessee from employing a
tenant on the land subject matter of the lease
agreement.
An extensive and correct
discussion of the statutory interpretation of
Sec. 6 of R. A. No. 3844, as amended, is
provided by the minority view in Bernas v.
Court of Appeals.[22]
In Ponce v. Guevarra[32] and Joya v.
Pareja[33] the agricultural leasehold relations
were preserved because the "legal possessors
therein were clearly clothed with legal authority
or capacity to install tenants." But even
assuming that they were not so authorized as
in the Ponce case where the civil law lessee
was expressly barred from installing a tenant
under their contract of lease, the subsequent
actions of the landowners in extending the
lifetime of the lease, or in negotiating for better
terms with the tenants, placed the landowners
in estoppel to contest the agricultural leasehold
relations. Consequently, the tenants in those
cases may be categorized as tenants de jure
enjoying tenurial security guaranteed by the
Agricultural Tenancy Law, now by the
Agricultural Land Reform Code, as amended.
This is not the case before us.
It must be noted that Valencia never extended
the term of the civil law lease, nor did he
negotiate with respondents for "better terms"
upon the expiration of the lease. He wanted
precisely to recover possession of the property
upon the expiration of the contract on 30 June
1975, except from Mantac with whom he
already entered into a tenancy contract as
22

herein before stated. Valencia appointed an

overseer to prepare for his eventual takeover
and to cultivate the property through labor
administration after his long years in the
government service. Verily, the intention of
Valencia after the expiration of the lease
contract was for him to cultivate the land by
administration, or by himself, and not to
surrender possession, much less ownership, to
the private respondents.
From the foregoing discussion, it is reasonable
to conclude that a civil law lessee cannot
automatically institute tenants on the property
under to Sec. 6 of R. A. No. 3844. The correct
view that must necessarily be adopted is that
the civil law lessee, although a legal possessor,
may not install tenants on the property unless
expressly authorized by the lessor. And if a
prohibition exists or is stipulated in the contract
of lease the occupants of the property are
merely civil law sublessees whose rights
terminate upon the expiration of the civil law
lease agreement.
In the present case, the Decision of the
Secretary of Agrarian Reform, as modified by
the Office of the President through the
Executive Secretary, held that private
respondents were deemed leasehold tenants.
They anchored their proposition on Sec. 6 of R.
A. No. 3844, as amended, otherwise known as
The Agricultural Land Reform Code, which
states that since the civil law lessees had a
valid contract with Valencia, the sublessees
were automatically deemed his tenants by
operation of law.
This conclusion espoused by the Secretary of
Agrarian Reform is arbitrary and unfounded.
The following essential requisites must concur
in order to establish a tenancy relationship:[36]
(a) the parties being landowner and tenant; (b)
the subject matter is agricultural land; (c) there
is consent by the landowner; (d) the purpose is
agricultural production; (e) there is personal
cultivation by the tenant; and, (f) there is
sharing of harvests between the parties. An
allegation that an agricultural tenant tilled the
land in question does not make the case an
agrarian dispute.[37] Claims that one is a
tenant do not automatically give rise to security
of tenure. The elements of tenancy must first
be proved in order to entitle the claimant to
security of tenure.[38]
A tenancy relationship cannot be presumed.
There must be evidence to prove this
allegation. Hence, a perusal of the records
and documents is in order to determine
whether there is substantial evidence to prove

the allegation that a tenancy relationship does

exist
between
petitioner
and
private
respondents.
The principal factor in determining whether a
tenancy relationship exists is intent. Tenancy is
not a purely factual relationship dependent on
what the alleged tenant does upon the land. It
is also a legal relationship. The intent of the
parties, the understanding when the farmer is
installed, and their written agreements,
provided these are complied with and are not
contrary to law, are even more important. [39]
In the present case, it is not disputed that the
relationship between Valencia and Henson,
and subsequently, Valencia and Fr. Flores,
partook of a civil law lease. Henson and later
Fr. Flores were not instituted as agricultural
lessees but as civil law lessees. As a finding of
fact, the Secretary of Agrarian Reform held that
a written civil law lease contract between
Valencia and Fr. Flores was on file which
contained in clear and precise terms the
stipulation prohibiting the subleasing or
encumbering of his parcels of land without the
written consent of Valencia.[47] The Secretary
even went as far as stating for the record that
such stipulation barring the subletting of the
property was violated by Fr. Flores when he
subleased the subject parcels of land to private
respondents.[48]
The findings of fact by the DAR Hearing
Officer, Atty. Ampong, in his Investigation
Report and Recommendations dated 7
December 1988 concerning the admission by
private respondents that they never turned
over the rentals or harvests to Valencia and,
instead, to his overseer who was not
authorized to receive any payments, must be
deemed conclusive.[49]
As to the civil law lease between Valencia and
Fr. Flores, the prohibition against subletting the
property without the written consent of Valencia
must be upheld. Thus, there is no tenurial
security for private respondents designated by
the civil law lessee, except for the oftmentioned Catalino Mantac.
Furthermore, it must be noted that private
respondents Ernesto Lobresco and Francisco
Obang sublet the land to third persons. Even
assuming arguendo then that they were
tenants, although installed without authority,
the act of subletting to third persons
extinguished
the
agricultural
leasehold
relations of Ernesto Lobresco and Francisco
Obang as it constituted an abandonment of the
23

landholding due to absence of personal

cultivation.
Since private respondents with the exception of
Catalino Mantac cannot be deemed tenants in
contemplation of law, they are therefore not
entitled to Certificates of Land Transfer (CLTs)
under the Operation Land Transfer (OLT)
Program pursuant to Pres. Decree No. 27 and
L.O.I. No. 474. All other persons found in the
land in question are considered unlawful
occupants of the property unless otherwise
authorized by the landowner to possess the
same in a lawful capacity.
With respect to the retention limits of land
ownership by Valencia and his "direct
descendants," the Comprehensive Agrarian
Reform Law allows landowners whose lands
have been covered by Pres. Decree No. 27 to
keep the area originally retained by them
provided the original homestead grantees who
still own the original homestead at the time of
the approval of Rep. Act No. 6657 shall retain
the same areas as long as they continue to
cultivate the homestead.[50] The right to
choose the area to be retained, which shall be
compact or contiguous, shall pertain to the
landowner, as a general rule.[51] However, the
factual determination of whether Valencia and
his "direct descendants" have complied with
Sec. 6 of Rep. Act No. 6657 should be
addressed by the Department of Agrarian
Reform. Ascertaining if petitioner and his
"direct descendants" are within the seven (7)hectare retention limit provided by Pres.
Decree No. 27 requires the technical expertise
of the administrative agency concerned.

(CLT No. 0-071160), Juliano Magdayao (CLTs

Nos. 0-071161, 0-071163, 0-071166 & 0071175), Crescenciano Frias (CLT No. 0071164), Federico Jare (CLTs Nos. 0-071171 &
0-071172), Rosendo Lobresco (CLTs Nos. 0071189 & 0-071182), Ernesto Lobresco (CLTs
Nos. 0-071185 & 0-071187), Feliciano
Lobresco (CLT No. 0-071188), Victoriano
Montefalcon (CLT No. 0-071190), Francisco
Obang (CLT No. 0-071168), Ambrosio
Semillano (CLTs Nos. 0-071165, 0-071176 & 0071177), Rogelio Tamayo (CLT No. 0-071194)
and Edilberto Lobresco (CLT No. 0-071173)
are CANCELLED and NULLIFIED for having
been issued without factual and legal basis;
3. The agricultural leasehold of respondent
Catalino Mantac (CLT No. 0-071162) covering
an area of 0.0425 hectare subject of tenancy
agreement with petitioner Victor G. Valencia is
maintained and respected;
4. All unlawful occupants of the property under
TCT No. H-T-137 and Homestead Application
No. HA-231601 with Final Proof, and Tax
Declaration No. 0515 including but not limited
to the private respondents mentioned in par. 2
hereof are ORDERED to IMMEDIATELY
VACATE and RETURN peacefully to the lawful
owner, petitioner Victor G. Valencia, the parcels
of land respectively possessed or occupied by
them.
No pronouncement as to costs.

Case no. 11
PANDI vs. CA

Executive or administrative justice must always

be dispensed with an even hand, regardless of
a persons economic station in life.
WHEREFORE, the petition is GRANTED. The
assailed Decision of the Court of Appeals in
CA-G.R. SP No. 32669 dated 27 July 1995 and
its Resolution dated 22 September 1995
denying the Motion for Reconsideration are
REVERSED and SET ASIDE, and a new one
is entered as follows:
1. The area acquired by petitioner Victor G.
Valencia under his Homestead Application No.
HA-231601 with Final Proof and Tax
Declaration No. 0515 is EXCLUDED from the
coverage of Pres. Decree No. 27, hence, must
be retained by him;
2. The Certificates of Land Transfer (CLTs)
issued to private respondents Santos Gargaya

Facts:
On August 9, 1993, Macacua, in her capacity
as Regional Director4 and as Secretary5 of the
Department of Health of the Autonomous
Region in Muslim Mindanao ("DOH" and
"ARMM", respectively, for brevity), issued a
Memorandum designating Pandi, who was
then
DOH-ARMM
Assistant
Regional
Secretary, as Officer-in-Charge of the IPHOAPGH, Lanao del Sur. In the same
Memorandum, Macacua detailed Dr. Mamasao
Sani ("Sani" for brevity), then the provincial
health officer of the IPHO-APGH, Lanao del
Sur, to the DOH-ARMM Regional Office in
Cotabato City.
On September 15, 1993, Lanao del Sur
Provincial Governor Mahid M. Mutilan issued
Office Order No. 07 designating Saber also as
24

Officer-in-Charge of the IPHO-APGH, Lanao

del Sur.
On August 12, 1993, Sani filed a
complaint6 with the Regional Trial Court of
Lanao del Sur, Branch 10, Marawi City
challenging the August 9, 1993 Memorandum
transferring him to the DOH-ARMM Regional
Office in Cotabato City, alleging that he is the
holder of a permanent appointment as
provincial health officer of the IPHO-APGH,
Lanao del Sur.
On October 5, 1993, Saber filed with the Court
of Appeals a petition for quo warranto with
prayer for preliminary injunction, claiming that
he is the lawfully designated Officer-in-Charge
of the IPHO-APGH, Lanao del Sur. On October
14, 1993, the Court of Appeals issued a
temporary restraining order enjoining Pandi
from further discharging the functions and
duties as Officer-in-Charge of the IPHO-APGH,
Lanao del Sur. On October 25, 1993, Pandi
and Macacua filed their comment on the
petition and opposition to the application for
writ of preliminary injunction.
On October 29, 1993, then President Fidel V.
Ramos issued Executive Order No. 133
transferring the powers and functions of the
Department of Health in the region to the
Regional Government of the ARMM. On
November 6, 1993, Macacua, again in her
capacity as DOH-ARMM Secretary-Designate,
issued a Memorandum reiterating Pandis
designation as Officer-in-Charge of the IPHOAPGH, Lanao del Sur, as well as Sanis detail
to the Regional Office of the DOH-ARMM in
Cotabato City.
On November 19, 1993, the Court of Appeals
issued a writ of preliminary injunction upon the
filing by Saber of a P100,000.00 bond. On
November 24, 1993, Pandi and Macacua filed
a motion for reconsideration or recall of the writ
of preliminary injunction. With an offer of a
P200,000.00
counter-bond,
Pandi
and
Macacua moved on December 13, 1993 to
dissolve the writ of preliminary injunction. The
Court of Appeals denied both motions.
On December 8, 1993, Sani filed with the Court
of Appeals a motion for intervention
accompanied by a complaint in intervention.
Pandi, Macacua and Saber opposed the same.
On March 21, 1994, Pandi and Macacua filed a
motion seeking the dismissal of Sabers
petition, on the ground that the issues therein
had become moot and academic. Pandi and
Macacua cited as reason the enactment by the

ARMM Regional Assembly of the Muslim

Mindanao Autonomy Act No. 25, otherwise
known as the ARMM Local Government Code
("ARMM Local Code" for brevity), as well as
the execution of the Memorandum of
Agreement dated March 14, 1994 between the
DOH of the National Government and the
ARMM Regional Government.7
On April 15, 1994, the Court of Appeals
rendered the assailed decision.8 In a resolution
dated August 16, 1994, the Court of Appeals
denied Pandi and Macacuas motion for
reconsideration and supplemental motion for
reconsideration of the decision.
Issue:
. First, whether an incumbent provincial health
officer of Lanao del Sur can be assigned to
another province and if so, who can order such
assignment.
Second, who can designate the Officer-inCharge in the provincial health office of Lanao
del Sur - the Provincial Governor or the ARMM
Secretary of Health.
Third, who is empowered to appoint the
provincial health officer of Lanao del Sur - the
Provincial Governor, the Regional Governor or
the ARMM Secretary of Health.

Ruling:
Application of the law to the designation of
Saber
Lanao del Sur Provincial Governor Mahid M.
Mutilan designated Saber as Officer-in-Charge
of the IPHO-APGH, Lanao del Sur, on
September 15, 1993. On this date the
provincial health officer of Lanao del Sur was
still a national government official paid entirely
from national funds. The provincial health
officer was still appointed by the national
Secretary of Health to a region and not to a
province. The Secretary of Health exercised
supervision and control over the provincial
health officer. The Secretary of Health was also
the official authorized by law to assign the
provincial health officer to any province within
the region. Indisputably, on September 15,
1993, Provincial Governor Mutilan had no
power to designate Saber as Officer-in-Charge
of IPHO-APGH, Lanao del Sur. Consequently,
the designation of Saber as such Officer-inCharge is void.
25

The provincial health officer of Lanao del Sur

became a provincial government official only
after the effectivity of the ARMM Local Code,
which was enacted by the Regional Assembly
on January 25, 1994 and approved by the
Regional Governor on March 3, 1994. Prior to
the ARMM Local Code but after the issuance of
Executive Order No. 133, the Regional
Governor appointed the provincial health officer
while the Regional Secretary of Health could
assign the provincial health officer to any
province within the ARMM. The Provincial
Governor had no power to appoint or even
designate the Officer-in-Charge of the
provincial health office.
The Court of Appeals reliance on Section 478
of the 1991 LGU Code as Provincial Governor
Mutilans authority to appoint Saber is
misplaced. Section 478 of the 1991 LGU Code,
which provides that "[T]he appointment of a
health officer shall be mandatory for provincial,
city and municipal governments," is not a grant
of power to governors and mayors to appoint
local health officers. It is simply a directive that
those empowered to appoint local health
officers are mandated to do so. In short, the
appointment of local health officers, being
essential for public services, is a mandatory
obligation on the part of those vested by law
with the power to appoint them. Moreover, as
explained earlier, the 1991 LGU Code did not
amend the Organic Act of 1989.
Application of the law to the appointment and
transfer of Sani
Sani was appointed provincial health officer by
then Secretary of Health Alfredo R.A. Bengzon
on January 1, 1988. He was appointed as
"Provincial Health Officer (R-05 5th Step),
Office of the Regional Health Director, Regional
Health Office No. XII, Cotabato City." Sani
was appointed provincial health officer in
Region XII since at that time Executive Order
No. 119, the charter of the Department of
Health, expressly stated that provincial health
officers were to be appointed to a region. The
Secretary of Health, upon recommendation of
the Regional Director, could assign provincial
health officers to any province within the
region. In Miclat vs. Ganaden,23 this Court held
that:
"While the doctrine x x x to the effect
that the transfers of officers against their
will amount to a removal, the same is
predicated upon the theory that said
officers are appointed to particular
stations and as such cannot be
transferred without their consent. x x x.

The case before us, however, does not

involve any appointment to any
particular station. It merely concerns an
assignment to a station made in the
interest of the service. x x x."
Consequently, Sani cannot claim any security
of tenure as provincial health officer of Lanao
del Sur because he was never appointed to
that office.
Macacua, in her capacity as Regional Director
and ARMM Secretary of Health, detailed Sani
to the DOH-ARMM Regional Office in Cotabato
City on August 9, 1993. As of that date, the
powers and functions of the Department of
Health were not yet transferred to the Regional
Government, and the Secretary of Health of
the National Government still exercised the
power to assign the provincial health officers in
the ARMM. Consequently, the August 9, 1993
directive of Macacua detailing or assigning
Sani to the Regional Office in Cotabato City is
void.
However, on November 6, 1993, Macacua
issued another Memorandum reiterating Sanis
detail or assignment to the Regional Office in
Cotabato City. This second Memorandum was
issued after the issuance of Executive Order
No.
133
which
expressly
transferred
"supervision and control over all functions and
activities of the Regional Department of Health"
to "the Head of the Regional Department of
Health." In Gen. Renato de Villa vs. City of
Bacolod,24 this Court ruled that the power of
administrative control encompasses the power
to transfer personnel who under the law may
be reassigned to other stations. The second
detail or assignment of Sani to the Regional
Office in Cotabato, issued on November 6,
1993, is within the authority of Macacua as
Regional Secretary of Health. Thus, the second
detail of Sani is valid.
Application of the law to the designation of
Pandi
Macacua, as Regional Director and Regional
Secretary of Health, designated Pandi Officerin-Charge of the IPHO-APGH, Lanao del Sur,
on August 9, 1993 and again on November 6,
1993. The designation dated August 9, 1993 is
void since the Regional Secretary at that time
did not yet exercise supervision and control
over the provincial health offices of the ARMM.
However, the designation of Pandi on
November 6, 1993 is valid since at that time
Executive Order No. 133 had already been
issued vesting in the Regional Secretary of
Health supervision and control over all
26

functions and activities of the Department of

Health in the ARMM. The designation of Pandi,
however, while valid is only temporary in
nature, good until a new designation or a
permanent appointment is made.
As Regional Secretary of Health, Macacua
was, as of November 6, 1993, the official
vested by law to exercise supervision and
control over all provincial health offices in the
ARMM. The Regional Secretary, by virtue of
Executive Order No. 133, assumed the
administrative powers and functions of the
Secretary of Health of the National
Government with respect to provincial health
offices within the ARMM. The official exercising
supervision and control over an office has the
administrative authority to designate, in the
interest of public service, an Officer-in-Charge
if the office becomes vacant. Macacua,
therefore, had the authority on November 6,
1993 to designate an Officer-in-Charge in the
provincial health office of Lanao del Sur
pending the appointment of the permanent
provincial health officer. After the effectivity of
the ARMM Local Code, the Regional Secretary
of Health lost the authority to make such a
designation.
Under the ARMM Local Code, the provincial
health officer became for the first an official of
the provincial government even though he is
appointed by the Regional Governor and draws
his salary from regional funds. The ARMM
Local Code vests in the Provincial Governor
the power to "exercise general supervision and
control over all programs, projects, services,
and activities of the provincial government."
Upon the effectivity of the ARMM Local Code,
the power of supervision and control over the
provincial health officer passed from the
Regional Secretary to the Provincial Governor.
From then on the Provincial Governor began to
exercise the administrative authority to
designate an Officer-in-Charge in the provincial
health office pending the appointment of a
permanent provincial health officer.
WHEREFORE, the petition is GRANTED and
the assailed decision of the Court of Appeals
dated April 15, 1994 in CA-G.R. SP No. 32242
is SET ASIDE. The designation on September
15, 1993 of Dr. Amer A. Saber as Officer-inCharge of the Integrated Provincial Health
Office of Lanao del Sur is declared void. On the
other hand, the designation on November 6,
1993 of Dr. Lampa I. Pandi as Officer-inCharge of the Integrated Provincial Health
Office of Lanao del Sur, and the assignment on
November 6, 1993 of Dr. Mamasao Sani to the

DOH-ARMM Regional Office in Cotabato City,

are declared valid. No costs.
Case No. 13
[G.R. No. 163123. April 15, 2005]
PHILIPPINE HEALTH INSURANCE
CORPORATION, petitioner, vs.
CHINESE GENERAL HOSPITAL AND
MEDICAL CENTER, respondent.
DECISION
CORONA, J.:
Before us is a petition for review on
certiorari assailing the decision[1] of the Court of
Appeals.
On February 14, 1995, Republic
Act No. 7875, otherwise known as An
Act Instituting a National Health
Insurance Program for all Filipinos and
Establishing the Philippine Health
Insurance
Corporation
For
the
Purpose, was approved and signed
into law.
Prior to the enactment of R.A.
7875. CGH[4] had been an accredited
health care provider under the
Philippine Medical Care Commission
(PMCC), more popularly known as
Medicare. As defined by R.A. 7875, a
health care provider refers to a health
care institution, which is duly licensed
and accredited devoted primarily to the
maintenance and operation of facilities
for health promotion, prevention,
diagnosis, treatment and care of
individuals suffering from illness,
disease, injury, disability or deformity,
or in need of obstetrical or other
medical and nursing care.[5]
As such, petitioner[6] filed its
Medicare claims with the Social
Security
System
(SSS),
which,
together with the Government Service
Insurance
System
(GSIS),
administered the Health Insurance
Fund of the PMMC. Thus, petitioner
filed its claim from 1989 to 1992 with
the SSS, amounting to EIGHT
MILLION ONE HUNDRED TWO
THOUSAND
SEVEN
HUNDRED
EIGHTY-TWO
and
10/100
(P8,102,782.10). Its application for the
payment of its claim with the SSS was
overtaken by the passage of R.A.
7875, which in Section 51 and 52,
provides:
27

Being the successor of the PMCC,

PHILHEALTH, in compliance with the
mandate of R.A. 7875,[7] promulgated
the rules and regulations implementing
said act.
Instead of giving due course to
petitioners claims, only ONE MILLION
THREE
HUNDRED
SIXTY-FIVE
THOUSAND FIVE HUNDRED FIFTYSIX and 32/100 Pesos (1,365,556.32)
was paid to petitioner, representing its
claims from 1989 to 1992 (sic).
Petitioner again filed its claims
representing services rendered to its
patients from 1998 to 1999. For being
allegedly filed beyond the sixty (60)
day
period
allowed
by
the
implementing rules and regulations,
Section 52 thereof, petitioners claims
were denied by the Claims Review Unit
of Philhealth.
Petitioners claim was denied with
finality by PHILHEALTH in its assailed
decision dated June 6, 2000.
Issue:
1. Whether or not there should be a
strict interpretation of the sixty (60)
day period of filing as stated in
Section 52 of R.A. 7875.
2. Whether or not the respondent failed
to exhaust administrative remedies
before
resorting
to
judicial
intervention.
In a petition for review the Court of Appeals
ordered herein petitioner Philippine Health
Insurance Corporation (Philhealth) to pay the
claims principally on the ground of liberal
application of the 60-day rule.
.The state policy in creating a
national health insurance program is to
grant discounted medical coverage to
all citizens, with priority to the needs of
the underprivileged, sick, elderly,
disabled, women and children, and
free medical care to paupers[9].
To assist the state in pursuing the
aforementioned policy, health institutions were
granted the privilege of applying for
accreditation as health care providers. [12]
Respondent Chinese General Hospital and
Medical Center (CGH) was one of those which
received such accreditation.

Under the rules promulgated by the

Philhealth Board pursuant to RA 7875, any
claim for payment of services rendered (to a
patient) shall be filed within sixty (60) calendar
days from the date of discharge of the patient.
Otherwise, the claim is barred.[13]
Under
these
circumstances,
it
is
unreasonable to expect respondent CGH to
comply 100% of the time with the prescribed
60-day rule of Philhealth. Despite the
prescribed standard procedures, respondent
has no assurance of the members prompt
submission of the required documents. This
factor is completely beyond its control. There
will always be delay not attributable to
respondent.
The unreasonably strict implementation of
the 60-day rule, without regard to the causes of
delay beyond respondents control, will be
counter-productive
to
the
long-term
effectiveness of the NHIP. Instead of placing a
premium on participation in the Program,
Philhealth punishes an accredited health
provider like CGH by refusing to pay its claims
for services already rendered.
This Court will not hesitate, whenever
necessary, to allow a liberal implementation of
the rules and regulations of an administrative
agency in cases where their unjustifiably rigid
enforcement will result in a deprivation of legal
rights. Technicalities should not be allowed to
defeat respondents right to be reimbursed,
specially since petitioners charter itself
guarantees such reimbursement.
A careful reading of RA 7875 shows that
the law itself does not provide for any
specific period within which to file claims.
We can safely presume therefore that the
period for filing was not per se the principal
concern of the legislature. More important than
mere technicalities is the realization of the
state policy to provide Philhealth members with
the requisite medical care at the least possible
cost.
The fact is that it was not RA 7875 itself
but Section 52 of its Implementing Rules
and Regulations which established the 60day cut-off for the filing of claims.
While it is doctrinal in administrative law
that the rules and regulations of administrative
bodies interpreting the law they are entrusted
to enforce have the force of law [15], these
issuances are by no means iron-clad norms.
Administrative bodies themselves can and
have in fact bent the rules for reasons of
public interest.
Petitioner appeared to be well aware of the
problems encountered by its members in
28

complying with the 60-day rule. Furthermore,

implicit in the wording of the circulars was the
cognition of the fact that the fault was not
always attributable to the health care providers
like CGH but to the members themselves.
Petitioner
likewise
contends
that
respondent failed to exhaust administrative
remedies
before
resorting
to
judicial
intervention. We disagree.
Under the doctrine of exhaustion of
administrative remedies, an administrative
decision must first be appealed to the
administrative superiors at the highest level
before it may be elevated to a court of justice
for review.
This doctrine, however, is a relative one
and its flexibility is conditioned on the peculiar
circumstances of a case.[17] There are a
number of instances when the doctrine has
been held to be inapplicable. Among the
established exceptions are:
1)
when the question raised is
purely legal;
2)
when the administrative body
is in estoppel;

No costs.
SO ORDERED.
14.)
[2005V495] LAND BANK OF THE
PHILIPPINES, Petitioner, versus HON. ELI
G. C. NATIVIDAD, Presiding Judge of the
Regional Trial Court, Branch 48, San
Fernando, Pampanga, and JOSE R.
CAGUIAT represented by Attorneys-in-fact
JOSE T. BARTOLOME and VICTORIO
MANGALINDAN, Respondents.2005 May
162nd DivisionG.R. No. 127198D E C I S I O
N
Tinga, J.:
This is a Petition for Review[1] dated
December 6, 1996 assailing the Decision[2] of
the Regional Trial Court[3] dated July 5, 1996
which ordered the Department of Agrarian
Reform (DAR) and petitioner Land Bank of the
Philippines (Land Bank) to pay private
respondents the amount of P30.00 per square
meter as just compensation for the States
acquisition of private respondents properties
under the land reform program.

3)
when the act complained of
is patently illegal;
4)
when there is urgent need for
judicial intervention;
5)
small;

when the claim involved is

6)
when irreparable damage will
be suffered;
7)
when there is no other plain,
speedy and adequate remedy;
8)
when strong public interest is
involved;
9)
when the subject of the
controversy is private land;
10)

in quo warranto proceedings.

[18]

There is no need to belabor the fact that

the baseless denial of respondents claims will
be gravely disturbing to the health care
industry, specially the providers whose claims
will be unpaid. A refund is made only if their
claim is first paid, due to the apprehension of
not being reimbursed.
WHEREFORE, the assailed decision of the
Court of Appeals is hereby AFFIRMED.
Petitioner is hereby ordered to pay
respondents claims representing services
rendered to its members from 1989 to 1992.

The facts follow.

On May 14, 1993, private respondents filed a
petition before the trial court for the
determination of just compensation for their
agricultural
lands
situated
in
Arayat,
Pampanga, which were acquired by the
government pursuant to Presidential Decree
No. 27 (PD 27). The petition named as
respondents the DAR and Land Bank. With
leave of court, the petition was amended to
implead as co-respondents the registered
tenants of the land.
After trial, the court rendered the assailed
Decision the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in
favor of petitioners and against respondents,
ordering respondents, particularly, respondents
Department of Agrarian Reform and the Land
Bank of the Philippines, to pay these lands
owned by petitioners and which are the subject
of acquisition by the State under its land reform
program, the amount of THIRTY PESOS
(P30.00) per square meter, as the just
compensation due for payment for same lands
of petitioners located at San Vicente (or
Camba), Arayat, Pampanga.

29

Respondent Department of Agrarian Reform is

also ordered to pay petitioners the amount of
FIFTY THOUSAND PESOS (P50,000.00) as
Attorneys Fee, and to pay the cost of suit.
SO ORDERED.[4]
DAR and Land Bank filed separate motions for
reconsideration which were denied by the trial
court in its Order[5] dated July 30, 1996 for
being pro forma as the same did not contain a
notice of hearing. Thus, the prescriptive period
for filing an appeal was not tolled. Land Bank
consequently failed to file a timely appeal and
the assailed Decision became final and
executory.
Land Bank then filed a Petition for Relief from
Order Dated 30 July 1996,[6] citing excusable
negligence as its ground for relief. Attached to
the petition for relief were two affidavits of merit
claiming that the failure to include in the motion
for reconsideration a notice of hearing was due
to accident and/or mistake.[7] The affidavit of
Land Banks counsel of record notably states
that he simply scanned and signed the Motion
for Reconsideration for Agrarian Case No.
2005, Regional Trial Court of Pampanga,
Branch 48, not knowing, or unmindful that it
had no notice of hearing[8] due to his heavy
workload.

The trial court, in its Order[9] of November 18,

1996, denied the petition for relief because
Land Bank lost a remedy in law due to its own
negligence.
In the instant petition for review, Land Bank
argues that the failure of its counsel to include
a notice of hearing due to pressure of work
constitutes excusable negligence and does not
make the motion for reconsideration pro forma
considering its allegedly meritorious defenses.
Hence, the denial of its petition for relief from
judgment was erroneous.
ISSUES:
1. Counsels failure to include a notice of
hearing constitutes excusable negligence
entitling Land Bank to a relief from judgment.
2.
Private respondents alleged failure to
exhaust administrative remedies and the
question of just compensation
RULING:
Section 1, Rule 38 of the 1997 Rules of Civil
Procedure provides:

Sec. 1. Petition for relief from judgment, order,

or other proceedings.When a judgment or
final order is entered, or any other proceeding
is thereafter taken against a party in any court
through fraud, accident, mistake, or excusable
negligence, he may file a petition in such court
and in the same case praying that the
judgment, order or proceeding be set aside.
As can clearly be gleaned from the foregoing
provision, the remedy of relief from judgment
can only be resorted to on grounds of fraud,
accident, mistake or excusable negligence.
Negligence to be excusable must be one which
ordinary diligence and prudence could not
have guarded against.[14]
Measured against this standard, the reason
profferred by Land Banks counsel, i.e., that his
heavy workload prevented him from ensuring
that the motion for reconsideration included a
notice of hearing, was by no means excusable.
Indeed, counsels admission that he simply
scanned and signed the Motion for
Reconsideration for Agrarian Case No. 2005,
Regional Trial Court of Pampanga, Branch 48,
not knowing, or unmindful that it had no notice
of hearing speaks volumes of his arrant
negligence, and cannot in any manner be
deemed to constitute excusable negligence.
The failure to attach a notice of hearing would
have been less odious if committed by a
greenhorn but not by a lawyer who claims to
have mastered the intricate art and technique
of pleading.[15]
It should be emphasized at this point that
procedural rules are designed to facilitate the
adjudication of cases. Courts and litigants
alike are enjoined to abide strictly by the rules.
While in certain instances, we allow a
relaxation in the application of the rules, we
never intend to forge a weapon for erring
litigants to violate the rules with impunity. The
liberal interpretation and application of rules
apply only in proper cases of demonstrable
merit and under justifiable causes and
circumstances. While it is true that litigation is
not a game of technicalities, it is equally true
that every case must be prosecuted in
accordance with the prescribed procedure to
ensure an orderly and speedy administration of
justice. Party litigants and their counsel are
well advised to abide by, rather than flaunt,
procedural rules for these rules illumine the
path of the law and rationalize the pursuit of
justice.[17]
30

Land Bank avers that private respondents

should have sought the reconsideration of the
DARs valuation instead of filing a petition to fix
just compensation with the trial court.
The records reveal that Land Banks
contention is not entirely true. In fact, private
respondents did write a letter[18] to the DAR
Secretary objecting to the land valuation
summary submitted by the Municipal Agrarian
Reform Office and requesting a conference for
the purpose of fixing just compensation. The
letter, however, was left unanswered prompting
private respondents to file a petition directly
with the trial court.
At any rate, in Philippine Veterans Bank v.
Court of Appeals,[19] we declared that there is
nothing contradictory between the DARs
primary jurisdiction to determine and adjudicate
agrarian reform matters and exclusive original
jurisdiction over all matters involving the
implementation of agrarian reform, which
includes the determination of questions of just
compensation, and the original and exclusive
jurisdiction of regional trial courts over all
petitions for the determination of just
compensation.
The
first
refers
to
administrative proceedings, while the second
refers to judicial proceedings.
In accordance with settled principles of
administrative law, primary jurisdiction is
vested in the DAR to determine in a preliminary
manner the just compensation for the lands
taken under the agrarian reform program, but
such determination is subject to challenge
before the courts. The resolution of just
compensation cases for the taking of lands
under agrarian reform is, after all, essentially a
judicial function.[20]
Thus, the trial did not err in taking cognizance
of the case as the determination of just
compensation is a function addressed to the
courts of justice.
Section 17 of RA 6657 which is particularly
relevant, providing as it does the guideposts for
the determination of just compensation, reads
as follows:
Sec. 17. Determination of Just Compensation.
In determining just compensation, the cost of
acquisition of the land, the current value of like
properties, its nature, actual use and income,
the sworn valuation by the owner, the tax
declarations, and the assessment made by
government assessors shall be considered.
The social and economic benefits contributed
by the farmers and the farm-workers and by

the Government to the property as well as the

non-payment of taxes or loans secured from
any government financing institution on the
said land shall be considered as additional
factors to determine its valuation.
It would certainly be inequitable to determine
just compensation based on the guideline
provided by PD 27 and EO 228 considering the
DARs failure to determine the just
compensation for a considerable length of
time.
That just compensation should be
determined in accordance with RA 6657,
and not PD 27 or EO 228, is especially
imperative considering that just compensation
should be the full and fair equivalent of the
property taken from its owner by the
expropriator, the equivalent being real,
substantial, full and ample.[24]
In this case, the trial court arrived at the just
compensation due private respondents for their
property, taking into account its nature as
irrigated land, location along the highway,
market value, assessors value and the volume
and value of its produce.
This Court is
convinced that the trial court correctly
determined the amount of just compensation
due private respondents in accordance with,
and guided by, RA 6657 and existing
jurisprudence.
WHEREFORE, the petition is DENIED. Costs
against petitioner.
SO ORDERED.

CASE NO.15: CABAL VS KAPUNAN

FACTS:
Col. Jose C. Maristela filed with the Secretary
of National Defense a letter-complaint charging
petitioner Manuel Cabal, then Chief of Staff of
the AFP, with "graft, corrupt practices,
unexplained wealth, and other equally
reprehensible acts". The President of the
Philippines created a committee to investigate
the charge of unexplained wealth. The
Committee ordered petitioner herein to take the
witness
stand
in
the administrative
proceeding and be sworn to as witness for
Maristela, in support of his aforementioned
charge of unexplained wealth. Petitioner
objected to the order of the Committee,
invoking his constitutional right against selfincrimination. The Committee insisted that
31

petitioner take the witness stand and be sworn

to, subject to his right to refuse to answer such
questions as may be incriminatory. This
notwithstanding, petitioner respectfully refused
to be sworn to as a witness to take the witness
stand.
The Committee referred the matter to the
Fiscal of Manila, for such action as he may
deem proper. The City Fiscal filed with the
Court of First Instance of Manila a "charge" of
contempt for failing to obey the order of the
Committee to take the witness stand. The
"charge" was assigned to the sala of
respondent judge Kapunan. Petitioner filed with
respondent Judge a motion to quash, which
was denied. Hence, this petition for certiorari
and prohibition.
ISSUE:
WON the Committees order requiring
petitioner to take the witness stand violates his
constitutional right against self-incrimination.
HELD:
Yes. Although the said Committee was created
to investigate the administrative charge of
unexplained wealth, it seems that the purpose
of the charge against petitioner is to apply the
provisions of the Anti-Graft Law, which
authorizes the forfeiture to the State of property
of a public officer or employee which is
manifestly out of proportion to his salary as
such public officer or employee and his other
lawful income and the income from legitimately
acquired property. However, such forfeiture has
been held to partake of the nature of a penalty.
As a consequence, proceedings for forfeiture
of property are deemed criminal or penal, and,
hence, the exemption of defendants in criminal
case from the obligation to be witnesses
against themselves are applicable thereto.
No person shall be compelled in any criminal
case to be a witness against himself. This
prohibition against compelling a person to take
the stand as a witness against himself applies
to criminal, quasi-criminal, and penal
proceedings, including a proceeding civil in
form for forfeiture of property by reason of the
commission of an offense, but not a proceeding
in which the penalty recoverable is civil or
remedial
in
nature.

The privilege of a witness not to incriminate

himself is not infringed by merely asking the
witness a question which he refuses to answer.
The privilege is simply an option of refusal, and
not a prohibition of inquiry. A question is not
improper merely because the answer may tend
to incriminate but, where a witness exercises
his constitutional right not to answer, a
question by counsel as to whether the reason
for refusing to answer is because the answer
may tend to incriminate the witness is
improper.
The possibility that the examination of the
witness will be pursued to the extent of
requiring self-incrimination will not justify the
refusal to answer questions. However, where
the position of the witness is virtually that of an
accused on trial, it would appear that he may
invoke the privilege in support of a blanket
refusal to answer any and all questions.
DECISION, writ is granted and respondent
judge enjoined permanently from proceeding
further in the criminal case.

Case No. 16
RAMON A. GONZALES, petitioner,
vs.
LAND BANK OF THE PHILIPPINES and
COURT OF APPEALS, respondents.
GR 76759, March 22, 1990.
This petition for review on certiorari seeks to
reverse and set aside the December 2, 1986
decision of the Court of Appeals, reversing the
decision of the trial court and in effect denying
the direct issuance of Land Bank bonds in the
name of herein petitioner as assignee thereof.
On the strength of a Deed of Assignment
executed on August 8, 1981 by Ramos
Plantation Company Inc. through its president,
Antonio Vic Zulueta, assigning its rights under
Land Transfer Claim 82-757 unto Ramon A.
Gonzales. Gonzales filed an action before the
RTC Manila, Branch 51 (Civil Case 84-24461)
to compel Land Bank of the Philippines to
issue Land Bank Bonds for the amount of
P400,000.00 in Gonzales name of instead of in
the name of the corporation as the original and
registered owner of the property covered by
TCT T-28755 situated in La Suerte, Malang,
North Cotabato with a total area of 251.4300
32

hectares, which had been brought under the

land transfer program of the government.
Corporation was declared in default for failure
to file its answer within the reglementary period
while the LBP filed an answer alleging that the
complaint states no cause of action since there
is no privity of contract between Gonzales and
itself and that it deals only with the landowner
whose land was subjected to operation land
transfer of the government under PD 27 in
order to save time and effort in ascertaining the
identities of additional claimants. On October
15, 1985, the lower court found Gonzales
entitled to the issuance of the Land Bank
bonds and thus ordered the LBP to issue to his
name P400,000 P400,000.00 worth of land
bank bonds deducted from the P509,000 LBP
bonds payable to the corporation under claim
82-757 with the directive to the landowner
corporation to comply with the 6 requirements
listed in paragraph 1 of the Supplemental
Stipulation of Facts dated 10 September 1985
(parties submitted the first Stipulation of Facts
29 July 1985).
LBP filed an appeal before Court of Appeals
resulting in the reversal of the trial courts
decision on 2 December 1986 and the
dismissal of the complaint filed therein on the
ground that even if there was compliance with
the remaining 6 requirements by the
corporation still, the Land Bank bonds will have
to be issued in the name of the said
corporation and not to Gonzales. It is only
thereafter that the corporation may indorse the
same to Gonzales. Hence, the petition for
review on certiorari.
The Supreme Court modified the decision of
the appellate court, by reinstating the directive
to Ramos Plantation Company, Inc. contained
in the lower courts decision; and ordered the
corporation to comply within 30 days from
notice with the 6 requirements listed in
paragraph 1 of the Supplemental Stipulation of
Facts dated 10 September 1985, and as soon
as the bonds are released in its name, to
immediately endorse the same to Gonzales as
assignee thereof.
ADMIN PRINCIPLES
a. Rules and regulation on the issuance of
Bonds, based on Section 76 of RA
3844, as amended by PD 251
In the promulgation of said rules and
regulations, the LBP relied on the
provisions of Section 76, RA 3844 as
amended by PD 251, which specifically
provides that the Board of Directors
shall have the power to prescribe rules

and regulations for the issuance,

reissuance, servicing, placement and
redemption of the bonds herein
authorized to be issued as well as the
registration of such bonds at the request
of the holders thereof.
b. Administrative regulations and policies
have force of law and entitled to great
respect; their legality is presumed
It is an elementary rule in administrative
law that administrative regulations and
policies enacted by administrative
bodies to interpret the law which they
are entrusted to enforce have the force
of law and entitled to great respect.
They have in their favor a presumption
of legality.
c. Corporation to comply with requirements
imposed
by
LBP
The corporation should comply with all
the requirements imposed by LBP to
effect the release of payments under
land transfer claims, because of the
restriction that the bonds will only be
released in the name of the landownerassignor
corporation
which
may
thereafter indorse the same to the
assignee.
d. The necessity to modify the decision of
the
appellate
court
The decision of the appellate court,
however,
dismissing
Gonzales
complaint had the effect of reversing
said directive, thereby leaving Gonzales
without legal authority to compel the
corporation to comply with the
requirements of the LBP for the release
of the bonds and thereafter to endorse
the same to Gonzales as assignee
thereof. The decision of the appellate
court should therefore be modified
accordingly.
18. EASTERN TELECOMMUNICATIONS
PHILIPPINES, INC.
and TELECOMMUNICATIONS
TECHNOLOGIES, INC., petitione
vs.
INTERNATIONAL COMMUNICATION
CORPORATION, Respondent.
AMENDED DECISION
On July 23, 2004, the Court promulgated its
Decision in the above-captioned case with the
following dispositive portion:

33

WHEREFORE, the petition for review on

certiorari is PARTIALLY GRANTED. The Order
of the National Telecommunications
Commissions dated November 10, 1997 in
NTC Case No. 96-195 is AFFIRMED with the
following modifications:

In a Resolution dated October 4, 2004, the

Court required petitioners and the NTC to file
their respective comments on the motion.3

Respondent International Communication

Corporation, in accordance with Section 27 of
NTC MC No. 11-9-93, is required to:

the Office of the Solicitor General (OSG), in

behalf of the NTC, likewise referred to the
same letter of OIC Heceta and declared that it
fully agrees with respondent that the escrow
deposit and performance bond are not required
in subsequent authorizations for additional/new
areas outside its original roll-out obligation
under the Service Area Scheme of E.O. No.
109.

(1) Deposit in escrow in a reputable

bank 20% of the investment required for
the first two years of the implementation
of the proposed project; and
(2) Post a performance bond equivalent
to 10% of the investment required for
the first two years of the approved
project but not to exceed P500 Million.
within such period to be determined by the
National Telecommunications Commission.
No pronouncement as to costs.
SO ORDERED.
Respondent now seeks a partial
reconsideration of the portion of the Courts
decision requiring it to make a 20% escrow
deposit and to post a 10% performance bond.

Subsequently, in its Manifestation/Comment

filed on January 11, 2005,

Petitioners did not file any comment and it was

only after the Court issued a show cause and
compliance Resolution on October 19, 2005
that petitioners manifested that they have no
further comments on respondents motion for
partial reconsideration in their Entry of Special
Appearance, Manifestation and Compliance
dated November 25, 2005.
The Court has observed in its Decision that
Section 27 of NTC MC No. 11-9-93 is silent as
to whether the posting of an escrow deposit
and performance bond is a condition sine qua
non for the grant of a provisional authority.
Issue:

Respondent claims that Section 27 of NTC MC

No. 11-9-93, which required the foregoing
amounts, pertains only to applications filed
under Executive Order No. 109 (E.O. No. 109)
and not to applications voluntarily filed. In its
Manifestation in support of the motion for
partial reconsideration, respondent attached a
letter from Deputy Commissioner and Officerin-Charge (OIC), Kathleen G. Heceta, of the
National Telecommunications Commission
(NTC), stating thus:
xxx
Please be informed that the escrow deposit
and performance bond were required to public
telecommunications entities to ensure that the
mandated installation of local exchange lines
are installed within three (3) years pursuant to
EO 109 and RA 7925. Since your company has
already complied with its obligation by the
installation of more than 300,000 lines in
Quezon City, Malabon City and Valenzuela City
in the National Capital Region and Region V in
early 1997, the escrow deposit and
performance bond were not required in your
subsequent authorizations.

I.
II.

WON the interpretation given by the

NTC o its own rules be given weight.
Yes
WON the respondent is required to
post an escrow deposit and a
performance bond. Yes

Ruling:
IN VIEW THEREOF, respondents Motion for
Partial Reconsideration is GRANTED. The
Courts Decision dated July 23, 2004 is
AMENDED, the dispositive portion of which
should read as follows:
WHEREFORE, the petition for review on
certiorari is DENIED. The Order of the National
Telecommunications Commission dated
November 10, 1997 in NTC Case No. 96-195
is AFFIRMED.
thereby deleting the order requiring respondent
to make a 20% escrow deposit and to post a
10% performance bond.
1. The interpretation by the NTC on its own
rules should be sustained
34

The NTC, being the government agency

entrusted with the regulation of activities
coming under its special and technical forte,
and possessing the necessary rule-making
power to implement its objectives, is in the best
position to interpret its own rules, regulations
and guidelines. The Court has consistently
yielded and accorded great respect to the
interpretation by administrative agencies of
their own rules unless there is an

the weight of an interpretation given by an

administrative agency to its own rules or
regulations? Authorities sustain the doctrine
that the interpretation given to a rule or
regulation by those charged with its execution
is entitled to the greatest weight by the Court
construing such rule or regulation, and such
interpretation will be followed unless it appears
to be clearly unreasonable or arbitrary (42 Am.
Jur. 431). It has also been said that:

a. error of law,
b. abuse of power,
c. lack of jurisdiction or grave abuse of
discretion clearly conflicting with the
letter and spirit of the law.

xxx

Thus, the Court holds that the interpretation of

the NTC that Section 27 of NTC MC No. 11-993 regarding the escrow deposit and
performance bond shall pertain only to a local
exchange operators original roll-out obligation
under E.O. No. 109, and not to roll-out
obligations made under subsequent or
voluntary applications outside E.O. No. 109,
should be sustained.
Cases cited by the SC in City Government of
Makati vs. Civil Service Commission where the
interpretation of a particular administrative
agency of a certain rule was adhered to, viz.:
a. Undoubtedly, the CSC like any other
agency has the power to interpret its
own rules and any phrase contained in
them with its interpretation significantly
becoming part of the rules themselves.
As observed in West Texas Compress &
Warehouse Co. v. Panhandle & S.F.
Railing Co.
b. In Geukeko v. Araneta this Court upheld
the interpretation of the Department of
Agriculture and Commerce of its own
rules of procedure in suspending the
period of appeal even if such action was
nowhere stated therein. We said xxx
x x x It must be remembered that Lands
Administrative Order No. 6 is in the nature of
procedural rules promulgated by the Secretary
of Agriculture and Natural Resources pursuant
to the power bestowed on said administrative
agency to promulgate rules and regulations
necessary for the proper discharge and
management of the functions imposed by law
upon said office. x x x x Recognizing the
existence of such rule-making authority, what is

c. Bagatsing v. Committee on Privatization

where we upheld the action of the
Commission on Audit (COA) in
validating the sale of Petron Corporation
to Aramco Overseas Corporation on the
basis of COA's interpretation of its own
circular that set bidding and audit
guidelines on the disposal of
government assets
The COA itself, the agency that adopted the
rules on bidding procedure to be followed by
government offices and corporations, had
upheld the validity and legality of the
questioned bidding. The interpretation of an
agency of its own rules should be given more
weight than the interpretation by that agency of
the law it is merely tasked to administer
(underscoring supplied).
NOTE: in cases where the dispute concerns
the interpretation by an agency of its own rules,
we should apply only these standards:
1. "Whether the delegation of power was
valid;
2. whether the regulation was within that
delegation; and if so,
3. whether it was a reasonable regulation
under a due process test." An affirmative
answer in each of these questions
should caution us from discarding the
agency's interpretation of its own rules.
CASE 20: Executive Secretary v. Southwing
Heavy Industries

The instant consolidated petitions seek to

annul and set aside the Decisions of the
Regional Trial Court of Olongapo City, Branch
72, in Civil Case No. 20-0-04 and Civil Case
No. 22-0-04, both dated May 24, 2004; and the
February 14, 2005 Decision of the Court of
Appeals in CA-G.R. SP. No. 83284, which
declared Article 2, Section 3.1 of Executive
35

Order No. 156 (EO 156) unconstitutional.

Said executive issuance prohibits the
importation into the country, inclusive of the
Special Economic and Freeport Zone or the
Subic Bay Freeport (SBF or Freeport), of used
motor vehicles, subject to a few exceptions.

We now come to the substantive issues, which

are: (1) whether there is statutory basis for the
issuance of EO 156; and (2) if the answer is in
the affirmative, whether the application of
Article 2, Section 3.1 of EO 156, reasonable
and within the scope provided by law.

To be valid, an administrative issuance, such

as an executive order, must comply with the
following requisites:

(1)
Its promulgation must be authorized by
the legislature;

(2)
It must be promulgated in accordance
with the prescribed procedure;

(3)
It must be within the scope of the
authority given by the legislature; and

(4)

It must be reasonable.[18]

Contrary to the conclusion of the Court of

Appeals, EO 156 actually satisfied the first
requisite of a valid administrative order. It has
both constitutional and statutory bases.

Anent the second requisite, that is, that the

order must be issued or promulgated in
accordance with the prescribed procedure, it is
necessary that the nature of the administrative
issuance is properly determined. As in the
enactment of laws, the general rule is that, the
promulgation of administrative issuances
requires previous notice and hearing, the only

exception being where the legislature itself

requires it and mandates that the regulation
shall be based on certain facts as determined
at an appropriate investigation.[23]
This
exception pertains to the issuance of legislative
rules as distinguished from interpretative rules
which give no real consequence more than
what the law itself has already prescribed;[24]
and are designed merely to provide guidelines
to the law which the administrative agency is in
charge of enforcing.[25] A legislative rule, on
the other hand, is in the nature of subordinate
legislation, crafted to implement a primary
legislation.

In the present case, respondents neither

questioned before this Court nor with the
courts below the procedure that paved the way
for the issuance of EO 156.
What they
challenged in their petitions before the trial
court was the absence of substantive due
process in the issuance of the EO.[30] Their
main contention before the court a quo is that
the importation ban is illogical and unfair
because it unreasonably drives them out of
business to the prejudice of the national
economy.

Considering the settled principle that in the

absence of strong evidence to the contrary,
acts of the other branches of the government
are presumed to be valid,[31] and there being
no objection from the respondents as to the
procedure in the promulgation of EO 156, the
presumption is that said executive issuance
duly complied with the procedures and
limitations imposed by law.

To determine whether EO 156 has complied

with the third and fourth requisites of a valid
administrative issuance, to wit, that it was
issued within the scope of authority given by
the legislature and that it is reasonable, an
examination of the nature of a Freeport under
RA 7227 and the primordial purpose of the
importation ban under the questioned EO is
necessary. (please browse the discussion in
the case proper)

36

Taking our bearings from the foregoing

discussions, we hold that the importation ban
runs afoul the third requisite for a valid
administrative order.
To be valid, an
administrative issuance must not be ultra vires
or beyond the limits of the authority conferred.

In the instant case, the subject matter of the

laws authorizing the President to regulate or
forbid importation of used motor vehicles, is the
domestic industry.
EO 156, however,
exceeded the scope of its application by
extending the prohibition on the importation of
used cars to the Freeport, which RA 7227,
considers to some extent, a foreign territory.
The domestic industry which the EO seeks to
protect is actually the customs territory which
is defined under the Rules and Regulations
Implementing RA 7227, as follows:

the portion of the Philippines outside the Subic

Bay Freeport where the Tariff and Customs
Code of the Philippines and other national tariff
and customs laws are in force and effect.

The proscription in the importation of used

motor vehicles should be operative only
outside the Freeport and the inclusion of said
zone within the ambit of the prohibition is an
invalid modification of RA 7227. Indeed, when
the application of an administrative issuance
modifies existing laws or exceeds the intended
scope, as in the instant case, the issuance
becomes void, not only for being ultra vires, but
also for being unreasonable.

This brings us to the fourth requisite. It is an

axiom in administrative law that administrative
authorities should not act arbitrarily and
capriciously in the issuance of rules and
regulations.
To be valid, such rules and
regulations must be reasonable and fairly
adapted to secure the end in view. If shown to
bear no reasonable relation to the purposes for
which they were authorized to be issued, then
they must be held to be invalid.[40]

There is no doubt that the issuance of the ban

to protect the domestic industry is a reasonable
exercise of police power.

The problem, however, lies with respect to the

application of the importation ban to the
Freeport. The Court finds no logic in the all
encompassing application of the assailed
provision to the Freeport which is outside the
customs territory. As long as the used motor
vehicles do not enter the customs territory, the
injury or harm sought to be prevented or
remedied will not arise.

If the aim of the EO is to prevent the entry of

used motor vehicles from the Freeport to the
customs territory, the solution is not to forbid
entry of these vehicles into the Freeport, but to
intensify
governmental
campaign
and
measures to thwart illegal ingress of used
motor vehicles into the customs territory.

In sum, the Court finds that Article 2, Section

3.1 of EO 156 is void insofar as it is made
applicable to the presently secured fenced-in
former Subic Naval Base area as stated in
Section 1.1 of EO 97-A.
Pursuant to the
separability clause[48] of EO 156, Section 3.1
is declared valid insofar as it applies to the
customs territory or the Philippine territory
outside the presently secured fenced-in former
Subic Naval Base area as stated in Section 1.1
of EO 97-A. Hence, used motor vehicles that
come into the Philippine territory via the
secured fenced-in former Subic Naval Base
area may be stored, used or traded therein, or
exported out of the Philippine territory, but they
cannot be imported into the Philippine territory
outside of the secured fenced-in former Subic
Naval Base area.

Said provision is declared VALID insofar as it

applies to the Philippine territory outside the
presently fenced-in former Subic Naval Base
area and VOID with respect to its application to
the secured fenced-in former Subic Naval Base
area.

37

21.)
[2006V642] The HONORABLE
SECRETARY VINCENT S. PEREZ, in his
capacity as the Secretary of the Department
of
Energy,
Petitioner,
versus
LPG
REFILLERS
ASSOCIATION
OF
THE
PHILIPPINES, INC., Respondent.2006 Jun
263rd DivisionG.R. No. 159149DECISION

SECTION 11. UNAUTHORIZED DECANTING

OR REFILLING OF LPG CYLINDERS

The facts are undisputed.

Batas Pambansa Blg. 33, as amended,
penalizes illegal trading, hoarding, overpricing,
adulteration, underdelivery, and underfilling of
petroleum products, as well as possession for
trade of adulterated petroleum products and of
underfilled liquefied petroleum gas (LPG)
cylinders.[3] The said law sets the monetary
penalty for violators to a minimum of P20,000
and a maximum of P50,000.[4]
On June 9, 2000, Circular No. 2000-06-010
was issued by the DOE to implement B.P. Blg.
33, thus proding specific penalties to the
following vilations:
SECTION 4. NO PRICE DISPLAY BOARD
SECTION 5. NO WEIGHING SCALE
SECTION 6. NO TARE WEIGHT OR
INCORRECT TARE WEIGHT MARKINGS.
(REQUIREMENT ON ENGRAVED TARE
WEIGHT SHALL TAKE EFFECT TWO (2)
YEARS AFTER EFFECTIVITY OF THIS
CIRCULAR)
SECTION 7. NO APPROPRIATE
AUTHORIZED LPG SEAL

OR

SECTION
8.
NO
TRADE
NAME,
UNBRANDED LPG CYLINDERS, NO SERIAL
NUMBER, NO DISTINGUISHING COLOR, NO
EMBOSSED IDENTIFYING MARKINGS ON
CYLINDER OR DISTINCTIVE COLLAR OR
DESIGN (REQUIREMENT ON SERIAL
NUMBER AND DISTINCTIVE COLLAR OR
DESIGN SHALL TAKE EFFECT TWO (2)
YEARS AFTER EFFECTIVITY OF THIS
CIRCULAR)
SECTION
9.
CYLINDERS

UNDERFILLED

MARKETER, DEALER, OR RETAIL OUTLET,

AS THE CASE MAY BE, WHO HAS
POSSESSION
OF
SUCH
ILLEGALLY
TAMPERED, ALTERED, OR OTHERWISE
MODIFIED LPG CYLINDER SHALL BE HELD
LIABLE FOR THIS OFFENSE

LPG

SECTION 10. TAMPERING, ALTERING, OR

MODIFYING OF LPG CYLINDER THRU ANY
MEANS SUCH AS BUT NOT LIMITED TO
CHANGING THE VALVE, REPAINTING, AND
RELABELLING BY ANY PERSON OR ENTITY
OTHER THAN THE LEGITIMATE AND
REGISTERED OWNER OF THE SAME. FOR
THIS
PURPOSE,
LPG
REFILLER,

SECTION 12. HOARDING OF PETROLEUM

PRODUCTS
INCLUDING
LIQUEFIED
PETROLEUM GAS
SECTION 13. REFUSAL TO ALLOW OR
COOPERATE WITH DULY AUTHORIZED
INSPECTORS OF THE ENERGY INDUSTRY
ADMINISTRATION BUREAU (EIAB) OF THE
DEPARTMENT OF ENERGY IN THE
CONDUCT
OF
THEIR
INSPECTION/INVESTIGATION,
WHETHER
REGULAR
AND
ROUTINARY
OR
COMPLAINT-INITIATED
SECTION 14. REFUSAL OR FAILURE TO PAY
FINE The Department of Energy shall
recommend to the proper local government
unit the closure of business of a respondent
who refuses or fails to pay any administrative
fine without prejudice to the filing of an
appropriate criminal action if warranted.[5]
Respondent LPG Refillers Association of the
Philippines, Inc. asked the DOE to set aside
the Circular for being contrary to law. The
DOE, however, denied the request for lack of
merit.
Respondent then filed a petition for prohibition
and annulment with prayer for temporary
restraining order and/or writ of preliminary
injunction before the trial court.
After trial on the merits, the trial court
nullified the Circular on the ground that it
introduced new offenses not included in the
law.[6] The court intimated that the Circular, in
providing penalties on a per cylinder basis for
each violation, might exceed the maximum
penalty under the law. The decretal part of its
Decision reads:
IN VIEW OF THE FOREGOING, this
Court renders judgment declaring DOE
Circular No. 2000-06-010 null and void and
prohibits the respondent from implementing the
same.
SO ORDERED.[7]

38

The trial court denied for lack of merit

petitioners motion for reconsideration. Hence
this petition.
ISSUE:
Whether the Regional Trial Court of Pasig
erred in declaring the provisions of the Circular
null and void, and prohibiting the Circulars
implementation.
We resolve to grant the petition.
For an administrative regulation, such as
the Circular in this case, to have the force of
penal law, (1) the violation of the administrative
regulation must be made a crime by the
delegating statute itself; and (2) the penalty for
such violation must be provided by the statute
itself.[16]
The Circular satisfies the first
requirement.
B.P. Blg. 33, as amended,
criminalizes illegal trading, adulteration,
underfilling, hoarding, and overpricing of
petroleum products.
Under this general
description of what constitutes criminal acts
involving petroleum products, the Circular
merely lists the various modes by which the
said criminal acts may be perpetrated, namely:
no price display board, no weighing scale, no
tare weight or incorrect tare weight markings,
no authorized LPG seal, no trade name,
unbranded LPG cylinders, no serial number, no
distinguishing color, no embossed identifying
markings on cylinder, underfilling LPG
cylinders, tampering LPG cylinders, and
unauthorized decanting of LPG cylinders.
These specific acts and omissions are
obviously within the contemplation of the law,
which seeks to curb the pernicious practices of
some petroleum merchants.
As for the second requirement, we find
that the Circular is in accord with the law.
Under B.P. Blg. 33, as amended, the monetary
penalty for any person who commits any of the
acts aforestated is limited to a minimum of
P20,000 and a maximum of P50,000. Under
the Circular, the maximum pecuniary penalty
for retail outlets is P20,000,[17] an amount
within the range allowed by law. However, for
the refillers, marketers, and dealers, the
Circular is silent as to any maximum monetary
penalty. This mere silence, nonetheless, does
not amount to violation of the aforesaid
statutory maximum limit. Further, the mere fact
that the Circular provides penalties on a per
cylinder basis does not in itself run counter to
the law since all that B.P. Blg. 33 prescribes
are the minimum and the maximum limits of
penalties.

The Circular merely implements the said law,

albeit it is silent on the maximum pecuniary
penalty for refillers, marketers, and dealers.
Nothing in the Circular contravenes the law.
Noteworthy, the enabling laws on which
the Circular is based were specifically intended
to provide the DOE with increased
administrative and penal measures with which
to effectively curtail rampant adulteration and
shortselling, as well as other acts involving
petroleum products, which are inimical to
public interest. To nullify the Circular in this
case would be to render inutile government
efforts to protect the general consuming public
against the nefarious practices of some
unscrupulous LPG traders.
WHEREFORE, the petition is
GRANTED. The assailed Circular No. 2000-06010 of DOE is declared valid. The Decision
and Order of the Regional Trial Court of Pasig
City, Branch 161, in SCA Case No. 2318,
nullifying said Circular
and prohibiting its
implementation are hereby REVERSED and
SET ASIDE.
No pronouncement as to costs.
SO ORDERED.

23. LANDBANK vs. CA

Separate petitions for review were filed by
petitioners Department of Agrarian Reform
(DAR) (G.R. No. 118745) and Land Bank of the
Philippines (G.R. No. 118712) following the
adverse ruling by the Court of Appeals in CAG.R. SP No. 33465. However, upon motion
filed by private respondents, the petitions were
ordered consolidated.
Petitioners assail the decision of the Court of
Appeals promulgated on October 20, 1994,
which granted private respondents' Petition
for Certiorari and Mandamus and
ruled
as
follows:
WHEREFORE, premises considered, the
Petition
for Certiorari and Mandamus is
hereby GRANTED:
a) DAR Administrative Order No. 9, Series
of 1990 is declared null and void insofar as
it provides for the opening of trust accounts
in lieu of deposits in cash or bonds;
b) Respondent Landbank is ordered
to immediately deposit not merely
"earmark", "reserve" or "deposit in trust"
39

with an accessible bank designated by

respondent DAR in the names of the
following petitioners the following amounts
in cash and in government financial
instruments within the parameters of
Sec. 18 (1) of RA 6657:
P 1,455,207.31 Pedro L. Yap
P 135,482.12 Heirs of Emiliano Santiago
P 15,914,127.77 AMADCOR;
c) The DAR-designated bank is ordered
to allow the petitioners to withdraw the
above-deposited amounts without prejudice
to the final determination of just
compensation by the proper authorities;
and
d) Respondent DAR is ordered to
1) immediately conduct summary administr
ative proceedings to determine the just
compensation for the lands of the
petitioners giving the petitioners 15 days
from notice within which to submit evidence
and to 2) decide the cases within 30
days after they are submitted for decision. 4
Likewise, petitioners seek the reversal
of the Resolution dated January 18,
1995, 5 denying
their
motion
for
reconsideration.
Private respondents are landowners whose
landholdings were acquired by the DAR and
subjected to transfer schemes to qualified
beneficiaries under the Comprehensive
Agrarian Reform Law (CARL, Republic Act No.
6657).
Aggrieved by the alleged lapses of the
DAR and the Landbank with respect to
the
valuation
and
payment
of
compensation for their land pursuant to
the provisions of RA 6657, private
respondents filed with this Court a
Petition
for Certiorari and Mandamus with prayer
for preliminary mandatory injunction.
Private respondents questioned the
validity of DAR Administrative Order No.
6,
Series
of
1992 6 and
DAR
Administrative Order No. 9, Series of
1990, 7 and sought to compel the DAR to
expedite
the
pending
summary
administrative proceedings to finally
determine the just compensation of their
properties, and the Landbank to deposit
in cash and bonds the amounts
respectively "earmarked", "reserved"

and "deposited in trust accounts" for

private respondents, and to allow them
to withdraw the same.
Petitioner Pedro Yap alleges that
"(o)n 4 September 1992 the transfer
certificates of title (TCTs) of petitioner Yap
were totally cancelled by the Registrar of
Deeds of Leyte and were transferred in the
names of farmer beneficiaries collectively,
based on the request of the DAR together
with a certification of the Landbank that the
sum of P735,337.77 and P719,869.54 have
been earmarked for Landowner Pedro L.
Yap for the parcels of lands covered by TCT
Nos. 6282 and 6283, respectively, and
issued in lieu thereof TC-563 and TC-562,
respectively, in the names of listed
beneficiaries (ANNEXES "C" & "D") without
notice to petitioner Yap and without
complying with the requirement of Section
16 (e) of RA 6657 to deposit the
compensation in cash and Landbank bonds
in an accessible bank. (Rollo, p. 6).
The above allegations are not
disputed by any of the respondents.
Petitioner Heirs
of
Emiliano
Santiago allege that the heirs of Emiliano F.
Santiago are the owners of a parcel of land
located at Laur, NUEVA ECIJA with an area
of 18.5615 hectares covered by TCT No.
NT-60359 of the registry of Deeds of Nueva
Ecija, registered in the name of the late
Emiliano F. Santiago; that in November and
December 1990, without notice to the
petitioners, the Landbank required and the
beneficiaries executed Actual tillers Deed of
Undertaking (ANNEX "B") to pay rentals to
the LandBank for the use of their farmlots
equivalent to at least 25% of the net
harvest; that on 24 October 1991 the DAR
Regional Director issued an order directing
the Landbank to pay the landowner directly
or through the establishment of a trust fund
in the amount of P135,482.12, that on 24
February 1992, the Landbank reserved in
trust P135,482.12 in the name of Emiliano
F.
Santiago.
(ANNEX
"E"; Rollo,
p. 7); that the beneficiaries stopped paying
rentals to the landowners after they signed
the Actual Tiller's Deed of Undertaking
committing themselves to pay rentals to the
LandBank (Rollo, p. 133).
The above allegations are not
disputed by the respondents except that
respondent Landbank claims 1) that it was
respondent DAR, not Landbank which
required the execution of Actual Tillers
40

Deed of Undertaking (ATDU, for brevity);

and 2) that respondent Landbank, although
armed with the ATDU, did not collect any
amount as rental from the substituting
beneficiaries (Rollo, p. 99).
Petitioner
Agricultural
Management and Development Corporation
(AMADCOR, for brevity) alleges with
respect to its properties located in San
Francisco, Quezon that the properties of
AMADCOR in San Francisco, Quezon
consist of a parcel of land covered by TCT
No. 34314 with an area of 209.9215
hectares and another parcel covered by
TCT No. 10832 with an area of 163.6189
hectares; that a summary administrative
proceeding to determine compensation of
the property covered by TCT No. 34314
was conducted by the DARAB in Quezon
City without notice to the landowner; that a
decision was rendered on 24 November
1992 (ANNEX "F") fixing the compensation
for the parcel of land covered by TCT No.
34314 with an area of 209.9215 hectares at
P2,768,326.34 and ordering the Landbank
to pay or establish a trust account for said
amount in the name of AMADCOR; and that
the trust account in the amount of
P2,768,326.34 fixed in the decision was
established by adding P1,986,489.73 to the
first trust account established on 19
December 1991 (ANNEX "G"). With respect
to petitioner AMADCOR's property in
Tabaco, Albay, it is alleged that the property
of AMADCOR in Tabaco, Albay is covered
by TCT No. T-2466 of the Register of
Deeds of Albay with an area of 1,629.4578
hectares'; that emancipation patents were
issued covering an area of 701.8999
hectares which were registered on 15
February 1988 but no action was taken
thereafter by the DAR to fix the
compensation for said land; that on 21 April
1993, a trust account in the name of
AMADCOR was established in the amount
of P12,247,217.83', three notices of
acquisition having been previously rejected
by AMADCOR. (Rollo, pp. 8-9)
Private respondents argued that Administrative
Order No. 9, Series of 1990 was issued without
jurisdiction and with grave abuse of discretion
because it permits the opening of trust
accounts by the Landbank, in lieu of depositing
in cash or bonds in an accessible bank
designated by the DAR, the compensation for
the land before it is taken and the titles are
cancelled as provided under Section 16(e) of
RA 6657. 9 Private respondents also assail the
fact that the DAR and the Landbank merely

"earmarked", "deposited in trust" or "reserved"

the compensation in their names as
landowners despite the clear mandate that
before taking possession of the property, the
compensation must be deposited in cash or in
bonds. 10
Petitioner DAR, however, maintained that
Administrative Order No. 9 is a valid exercise
of its rule-making power pursuant to Section 49
of RA 6657. 11 Moreover, the DAR maintained
that the issuance of the "Certificate of Deposit"
by the Landbank was a substantial compliance
with Section 16(e) of RA 6657 and the ruling in
the case of Association of Small Landowners
in
the
Philippines, Inc., et
al. vs. Hon. Secretary of Agrarian Reform, G.R.
No. 78742, July 14, 1989 (175 SCRA 343). 12
For its part, petitioner Landbank declared that
the issuance of the Certificates of Deposits
was in consonance with Circular Nos. 29, 29-A
and 54 of the Land Registration Authority
where the words "reserved/deposited" were
also used. \
Issue:
Petitioners submit that respondent court erred
in (1) declaring as null and void DAR
Administrative Order No. 9, Series of 1990,
insofar as it provides for the opening of trust
accounts in lieu of deposit in cash or in bonds,
and (2) in holding that private respondents are
entitled as a matter of right to the immediate
and provisional release of the amounts
deposited in trust pending the final resolution of
the cases it has filed for just compensation.
Ruling:
Anent the first assignment of error, petitioners
maintain that the word "deposit" as used in
Section 16(e) of RA 6657 referred merely to
the act of depositing and in no way excluded
the opening of a trust account as a form of
deposit. Thus, in opting for the opening of a
trust account as the acceptable form of deposit
through Administrative Circular No. 9, petitioner
DAR did not commit any grave abuse of
discretion since it merely exercised its power to
promulgate
rules
and
regulations
in
implementing the declared policies of RA 6657.
The contention is untenable. Section 16(e) of
RA 6657 provides as follows:
Sec. 16. Procedure for Acquisition of
Private Lands

41

(e) Upon receipt by the landowner of the

corresponding payment or, in case of
rejection or no response from the
landowner, upon the deposit with an
accessible bank designated by the DAR
of the compensation in cash or in LBP
bonds in accordance with this Act, the
DAR shall take immediate possession of
the land and shall request the proper
Register of Deeds to issue a Transfer
Certificate of Title (TCT) in the name of
the Republic of the Philippines. . . .
(emphasis supplied)
It is very explicit therefrom that the deposit
must be made only in "cash" or in "LBP bonds".
Nowhere does it appear nor can it be inferred
that the deposit can be made in any other form.
If it were the intention to include a "trust
account" among the valid modes of deposit,
that should have been made express, or at
least, qualifying words ought to have appeared
from which it can be fairly deduced that a "trust
account" is allowed. In sum, there is no
ambiguity in Section 16(e) of RA 6657 to
warrant an expanded construction of the term
"deposit".
The 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 the spirit of a
legislative enactment. 18 In this regard, it must
be stressed that the function of promulgating
rules and regulations may be legitimately
exercised only for the purpose of carrying the
provisions of the law into effect. The power of
administrative agencies is thus confined to
implementing the law or putting it into effect.
Corollary to this is that administrative
regulations
cannot
extend
the
law
and
amend
a
legislative
enactment, 19 for settled is the rule that
administrative regulations must be in harmony
with the provisions of the law. And in case
there is a discrepancy between the basic law
and an implementing rule or regulation, it is the
former that prevails.
In the present suit, the DAR clearly
overstepped the limits of its power to enact
rules and regulations when it issued
Administrative Circular No. 9. There is no basis
in allowing the opening of a trust account in
behalf of the landowner as compensation for
his property because, as heretofore discussed,
Section 16(e) of RA 6657 is very specific that
the deposit must be made only in "cash" or in

"LBP bonds". In the same vein, petitioners

cannot invoke LRA Circular Nos. 29, 29-A and
54 because these implementing regulations
cannot outweigh the clear provision of the law.
Respondent court therefore did not commit any
error in striking down Administrative Circular
No. 9 for being null and void.
The ruling in the "Association" case merely
recognized the extraordinary nature of the
expropriation to be undertaken under RA 6657
thereby allowing a deviation from the traditional
mode of payment of compensation and
recognized payment other than in cash. It did
not, however, dispense with the settled rule
that there must be full payment of just
compensation before the title to the
expropriated property is transferred.
The attempt to make a distinction between the
deposit of compensation under Section 16(e)
of RA 6657 and determination of just
compensation
under
Section
18
is
unacceptable. To withhold the right of the
landowners to appropriate the amounts already
deposited in their behalf as compensation for
their properties simply because they rejected
the DAR's valuation, and notwithstanding that
they have already been deprived of the
possession and use of such properties, is an
oppressive exercise of eminent domain. The
irresistible expropriation of private respondents'
properties was painful enough for them. But
petitioner DAR rubbed it in all the more by
withholding that which rightfully belongs to
private respondents in exchange for the taking,
under an authority (the "Association" case) that
is, however, misplaced. This is misery twice
bestowed on private respondents, which the
Court must rectify.
Hence, we find it unnecessary to distinguish
between provisional compensation under
Section 16(e) and final compensation under
Section 18 for purposes of exercising the
landowners' right to appropriate the same. The
immediate effect in both situations is the same,
the landowner is deprived of the use and
possession of his property for which he should
be fairly and immediately compensated.
Fittingly, we reiterate the cardinal rule that:
. . . within the context of the State's inherent
power of eminent domain, just compensation
means not only the correct determination of
the amount to be paid to the owner of the land
but also the payment of the land within a
reasonable time from its taking. Without
prompt payment, compensation cannot be
considered "just" for the property owner is
made to suffer the consequence of being
42

immediately deprived of his land while being

made to wait for a decade or more before
actually receiving the amount necessary to
cope with his loss.
The promulgation of the "Association" decision
endeavored to remove all legal obstacles in the
implementation of the Comprehensive Agrarian
Reform Program and clear the way for the true
freedom of the farmer. 25 But despite this, cases
involving its implementation continue to
multiply and clog the courts' dockets.
Nevertheless, we are still optimistic that the
goal of totally emancipating the farmers from
their bondage will be attained in due time. It
must be stressed, however, that in the pursuit
of this objective, vigilance over the rights of the
landowners is equally important because social
justice cannot be invoked to trample on the
rights of property owners, who under our
Constitution and laws are also entitled to
protection. 26
WHEREFORE,
the
foregoing
premises
considered, the petition is hereby DENIED for
lack of merit and the appealed decision is
AFFIRMED in toto.
SO ORDERED.
Case No. 24
EN BANC
[G.R. No. 143596 : December 11, 2003]
JUDGE TOMAS C. LEYNES, Petitioner, v.
THE COMMISSION ON AUDIT (COA), HON.
GREGORIA
S.
ONG,
DIRECTOR,
COMMISSION ON AUDIT and HON.
SALVACION
DALISAY,
PROVINCIAL
AUDITOR, Respondents.
DECISION
CORONA, J.:
Before us is a petition for certiorari seeking to
reverse and set aside the decision of the
Commission on Audit (COA), affirming the
resolution of COA Regional Director Gregoria
S. Ong which in turn affirmed the opinion of the
Provincial Auditor of Oriental Mindoro,
Salvacion M. Dalisay. All three denied the grant
of P1,600 monthly allowance to petitioner
Judge Tomas C. Leynes by the Municipality of
Naujan, Oriental Mindoro.

sole presiding judge of the Municipal Trial

Court thereof. As such, his salary and
representation and transportation allowance
(RATA) were drawn from the budget of the
Supreme Court. In addition, petitioner received
a monthly allowance of P944 from the local
funds[2] of the Municipality of Naujan starting
1984.[3]
The Sangguniang Bayan of Naujan, through
Resolution No. 057, sought the opinion of the
Provincial Auditor and the Provincial Budget
Officer regarding any budgetary limitation on
the grant of a monthly allowance by the
municipality
to
petitioner
judge.
The
Sangguniang Bayan unanimously approved
Resolution No. 101 increasing petitioner judges
monthly allowance from P944 to P1,600 (an
increase of P656) starting May 1993.[4] By
virtue of said resolution, the municipal
government (the Municipal Mayor and the
Sangguniang Bayan) approved a supplemental
budget which was likewise approved by the
Sangguniang Panlalawigan and the Office of
Provincial Budget and Management of Oriental
Mindoro. In 1994, the Municipal Government of
Naujan again provided for petitioner judges
P1,600 monthly allowance in its annual budget
which
was
again
approved
by
the
Sangguniang Panlalawigan and the Office of
Provincial Budget and Management of Oriental
Mindoro.[5]
Provincial Auditor Salvacion M. Dalisay sent a
letter to the Municipal Mayor and the
Sangguniang Bayan of Naujan directing them
to stop the payment of the P1,600 monthly
allowance or RATA to petitioner judge and to
require the immediate refund of the amounts
previously paid to the latter. She opined that
the Municipality of Naujan could not grant
RATA to petitioner judge in addition to the
RATA the latter was already receiving from the
Supreme Court. Her directive was based on
Section 36, RA No. 7645, General
Appropriations Act of 1993 and National
Compensation Circular No. 67 dated January
1, 1992, of the Department of Budget and
Management
Petitioner judge appealed to COA Regional
Director Gregoria S. Ong who, however,
upheld the opinion of Provincial Auditor Dalisay
and who added that Resolution No. 101, Series
[

Petitioner Judge Tomas C. Leynes who, at

present, is the presiding judge of the Regional
Trial Court of Calapan City, Oriental Mindoro,
Branch 40 was formerly assigned to the
Municipality of Naujan, Oriental Mindoro as the

43

of 1993 of the Sangguniang Bayan of Naujan

failed to comply with Section 3 of Local Budget
Circular No. 53 outlining the conditions for the
grant of allowances to judges and other
national officials or employees by the local
government units (LGUs).
Petitioner judge appealed the unfavorable
resolution of the Regional Director to the
Commission on Audit. In the meantime, a
disallowance of the payment of the P1,600
monthly allowance to petitioner was issued. On
September 14, 1999, the COA issued its
decision affirming the resolution of Regional
Director
Issue:
Whether or not the Municipality of Naujan,
Oriental Mindoro can validly provide RATA
to its Municipal Judge, in addition to that
provided by the Supreme Court.
Generally, the grant of (RATA) [sic] to qualified
national government officials and employees
pursuant to Section 36 of R.A. 7645 [General
Appropriations Act of 1993] and NCC No. 67
dated 01 January 1992 is subject to the
following conditions to wit:
1. Payable from the programmed /appropriated
amount and others from personal services
savings of the respective offices where the
officials or employees draw their salaries;
2. Not exceeding the rates prescribed by the
Annual General Appropriations Act;
3. Officials /employees on detail with other
offices or assigned to serve other offices or
agencies shall be paid from their parent
agencies;
4. No one shall be allowed to collect RATA from
more than one source.
On the other hand, the municipal government
may provide additional allowances and other
benefits to judges and other national
government officials or employees assigned or
stationed in the municipality, provided, that the
finances of the municipality allow the grant
thereof pursuant to Section 447, Par. 1 (xi),
R.A. 7160, and provided further, that similar
allowance/additional compensation are not
granted by the national government to the
official/employee assigned to the local
government unit as provided under Section
3(e) of Local Budget Circular No. 53, dated 01
September 1993.

Consequently, the subject SB Resolution No.

101 dated 11 May 1993 of the Sangguniang
Bayan of Naujan, Oriental Mindoro, having
failed to comply with the inherent precondition
as defined in Section 3 (e). . . is null and void.
Furthermore, the Honorable Judge Tomas C.
Leynes, being a national government official is
prohibited to receive additional RATA from the
local government fund pursuant to Section 36
of the General Appropriations Act (R.A. 7645
for 1993) and National Compensation Circular
No. 67 dated 1 January 1992.[8] (emphasis
ours)
Petitioner
judge
filed
a
motion
for
reconsideration of the above decision but it
was denied by the Commission. Aggrieved,
petitioner filed the instant petition.
Respondent Commission on Audit
opposes the grant by the Municipality of
Naujan of the P1,600 monthly allowance to
petitioner Judge Leynes for the reason that the
municipality could not grant RATA to judges in
addition to the RATA already received from the
Supreme Court
Petitioner judge, on the other hand,
asserts that the municipality is expressly and
unequivocally empowered by RA 7160 (the
Local Government Code of 1991) to enact
appropriation ordinances granting allowances
and other benefits to judges stationed in its
territory. Petitioner also asserts that the DBM
cannot amend or modify a substantive law like
the Local Government Code of 1991 through
mere budget circulars. Petitioner emphasizes
that budget circulars must conform to, not
modify or amend, the provisions of the law it
seeks to implement.
CONSISTENT WITH THE CONSTITUTIONAL
PROVISION ON THE FISCAL AUTONOMY OF
THE JUDICIARY AND THE POLICY OF THE
NATIONAL GOVERNMENT OF ALLOWING
GREATER
AUTONOMY
TO
LOCAL
GOVERNMENT UNITS, JUDGES OF THE
JUDICIARY ARE HEREBY ALLOWED TO
CONTINUE TO RECEIVE ALLOWANCES AT
THE SAME RATES WHICH THEY HAVE
BEEN RECEIVING FROM THE LOCAL
GOVERNMENT UNITS AS OF JUNE 30,
1989, SUBJECT TO THE FOLLOWING
GUIDELINES:
1. THAT THE CONTINUANCE OF PAYMENT
OF SUBJECT ALLOWANCE TO THE
RECIPIENT JUDGE SHALL BE ENTIRELY
VOLUNTARY AND NON-COMPULSORY ON
[

44

THE PART OF THE LOCAL GOVERNMENT

UNITS;
2. THAT PAYMENT OF THE ABOVE SHALL
ALWAYS BE SUBJECT TO THE AVAILABILITY
OF LOCAL FUNDS;
3. THAT IT SHALL BE MADE ONLY IN
COMPLIANCE WITH THE POLICY OF NONDIMINUTION
OF
COMPENSATION
RECEIVED BY THE RECIPIENT JUDGE
BEFORE THE IMPLEMENTATION OF THE
SALARY STANDARDIZATION;
4. THAT THE SUBJECT ALLOWANCE SHALL
BE GIVEN ONLY TO JUDGES WHO WERE
RECEIVING THE SAME AS OF JUNE 30,
1989 AND SHALL BE CO-TERMINOUS WITH
THE INCUMBENT JUDGES; AND
5. THAT THE SUBJECT ALLOWANCE SHALL
AUTOMATICALLY
TERMINATE
UPON
TRANSFER OF A JUDGE FROM ONE LOCAL
GOVERNMENT UNIT TO ANOTHER LOCAL
GOVERNMENT UNIT. (EMPHASIS OURS)
WE STRUCK DOWN THE ABOVE
CIRCULAR IN DADOLE, ET AL. VS.
COA.[14] WE RULED THERE THAT THE
LOCAL GOVERNMENT CODE OF 1991
CLEARLY PROVIDED THAT LGUS COULD
GRANT ALLOWANCES
TO
JUDGES,
SUBJECT ONLY TO THE CONDITION THAT
THE FINANCES OF THE LGUS ALLOWED
IT. WE HELD THAT SETTING A UNIFORM
AMOUNT
FOR
THE
GRANT
OF
ALLOWANCES (WAS) AN INAPPROPRIATE
WAY OF ENFORCING SAID CRITERION.
ACCORDINGLY, WE DECLARED THAT THE
DBM
EXCEEDED
ITS
POWER
OF
SUPERVISION OVER LGUS BY IMPOSING A
PROHIBITION THAT DID NOT JIBE WITH
THE LOCAL GOVERNMENT CODE OF
1991.[15]
WE RULE IN FAVOR OF PETITIONER
JUDGE. RESPONDENT COA ERRED IN
OPPOSING THE GRANT OF THE P1,600
MONTHLY
ALLOWANCE
BY
THE
MUNICIPALITY
OF
NAUJAN
TO
PETITIONER JUDGE LEYNES.
IT IS ELEMENTARY IN STATUTORY
CONSTRUCTION
THAT
AN
ADMINISTRATIVE CIRCULAR CANNOT
SUPERSEDE, ABROGATE, MODIFY OR
NULLIFY A STATUTE. A STATUTE IS
SUPERIOR
TO AN ADMINISTRATIVE

CIRCULAR, THUS THE LATTER CANNOT

REPEAL OR AMEND IT.[17] IN THE
PRESENT CASE, NCC NO. 67, BEING A
MERE
ADMINISTRATIVE
CIRCULAR,
CANNOT REPEAL A SUBSTANTIVE LAW
LIKE RA 7160.
IT IS ALSO AN ELEMENTARY PRINCIPLE IN
STATUTORY
CONSTRUCTION
THAT
REPEAL OF STATUTES BY IMPLICATION IS
NOT FAVORED, UNLESS IT IS MANIFEST
THAT THE LEGISLATURE SO INTENDED.
MOREOVER, THE PRESUMPTION AGAINST
IMPLIED REPEAL BECOMES STRONGER
WHEN, AS IN THIS CASE, ONE LAW IS
SPECIAL AND THE OTHER IS GENERAL.[19]
THE PRINCIPLE IS EXPRESSED IN THE
MAXIM GENERALIA SPECIALIBUS NON
DEROGANT, A GENERAL LAW DOES NOT
NULLIFY A SPECIFIC OR SPECIAL LAW.
IN THIS CASE, RA 7160 (THE LGC OF 1991)
IS A SPECIAL LAW[21] WHICH EXCLUSIVELY
DEALS WITH LOCAL GOVERNMENT UNITS
(LGUS), OUTLINING THEIR POWERS AND
FUNCTIONS IN CONSONANCE WITH THE
CONSTITUTIONALLY MANDATED POLICY
OF LOCAL AUTONOMY. RA 7645 (THE GAA
OF 1993), ON THE OTHER HAND, WAS A
GENERAL LAW[22] WHICH OUTLINED THE
SHARE IN THE NATIONAL FUND OF ALL
BRANCHES
OF
THE
NATIONAL
GOVERNMENT. RA 7645 THEREFORE,
BEING A GENERAL LAW, COULD NOT HAVE,
BY MERE IMPLICATION, REPEALED RA
7160. RATHER, RA 7160 SHOULD BE TAKEN
AS THE EXCEPTION TO RA 7645 IN THE
ABSENCE
OF
CIRCUMSTANCES
WARRANTING
A
CONTRARY
CONCLUSION.[23]
THOUGH LBC NO. 53 OF THE DBM MAY BE
CONSIDERED WITHIN THE AMBIT OF THE
PRESIDENT'S POWER OF GENERAL
SUPERVISION OVER LGUS,[28] WE RULE
THAT SECTION 3, PARAGRAPH (E)
THEREOF IS INVALID. RA 7160, THE
LOCAL GOVERNMENT CODE OF 1991,
CLEARLY PROVIDES THAT PROVINCIAL,
CITY AND MUNICIPAL GOVERNMENTS
[

45

MAY GRANT ALLOWANCES TO JUDGES

AS LONG AS THEIR FINANCES ALLOW.
SECTION 3, PARAGRAPH (E) OF LBC NO.
53, BY OUTRIGHTLY PROHIBITING LGUS
FROM GRANTING ALLOWANCES TO
JUDGES WHENEVER SUCH ALLOWANCES
ARE (1) ALSO GRANTED BY THE
NATIONAL GOVERNMENT OR (2) SIMILAR
TO THE ALLOWANCES GRANTED BY THE
NATIONAL
GOVERNMENT,
VIOLATES
SECTION 447(A)(L)(XI) OF THE LOCAL
GOVERNMENT CODE OF 1991.[29] AS
ALREADY STATED, A CIRCULAR MUST
CONFORM TO THE LAW IT SEEKS TO
IMPLEMENT AND SHOULD NOT MODIFY
OR AMEND IT.[

ACCORDANCE
WITH
THE
CONSTITUTIONALLY MANDATED POLICY
OF
LOCAL
AUTONOMY
AND
THE
PROVISIONS
OF
THE
LOCAL
GOVERNMENT CODE OF 1991. WE ALSO
SUSTAIN THE VALIDITY OF RESOLUTION
NO. 101, SERIES OF 1993, OF THE
SANGGUNIANG BAYAN OF NAUJAN FOR
BEING IN ACCORDANCE WITH THE LAW.

MOREOVER, BY PROHIBITING LGUS FROM

GRANTING ALLOWANCES SIMILAR TO THE
ALLOWANCES
GRANTED
BY
THE
NATIONAL GOVERNMENT, SECTION 3 (E)
OF LBC NO. 53 PRACTICALLY PROHIBITS
LGUS FROM GRANTING ALLOWANCES TO
JUDGES AND, IN EFFECT, TOTALLY
NULLIFIES THEIR STATUTORY POWER TO
DO SO. BEING UNDULY RESTRICTIVE
THEREFORE OF THE STATUTORY POWER
OF LGUS TO GRANT ALLOWANCES TO
JUDGES AND BEING VIOLATIVE OF THEIR
AUTONOMY
GUARANTEED
BY
THE
CONSTITUTION, SECTION 3, PARAGRAPH
(E) OF LBC NO. 53 IS HEREBY DECLARED
NULL AND VOID.

NO COSTS.

MOREOVER, IT IS WELL-SETTLED THAT

AN ORDINANCE MUST BE PRESUMED
VALID IN THE ABSENCE OF EVIDENCE
SHOWING
THAT
IT
IS
NOT
IN
ACCORDANCE
WITH
THE
LAW.
RESPONDENT COA HAD THE BURDEN OF
PROVING THAT RESOLUTION NO. 101 OF
THE SANGGUNIANG BAYAN OF NAUJAN
DID NOT COMPLY WITH THE CONDITION
PROVIDED IN SECTION 447 OF THE CODE,
THE BUDGETARY REQUIREMENTS AND
GENERAL LIMITATIONS ON THE USE OF
MUNICIPAL
FUNDS
PROVIDED
IN
SECTIONS 324 AND 325 OF WE FIND THAT
THE RESOLUTION OF THE MUNICIPALITY
OF NAUJAN GRANTING THE P1,600
MONTHLY ALLOWANCE TO PETITIONER
JUDGE FULLY COMPLIED WITH THE LAW.
THUS, WE UPHOLD ITS VALIDITY.
IN SUM, WE HEREBY AFFIRM THE POWER
OF THE MUNICIPALITY OF NAUJAN TO
GRANT THE QUESTIONED ALLOWANCE TO
PETITIONER
JUDGE
LEYNES
IN
[

WHEREFORE, THE PETITION IS HEREBY

GRANTED. THE ASSAILED DECISION OF
THE COMMISSION OF AUDIT IS HEREBY
SET ASIDE AND SECTION 3, PARAGRAPH
(E) OF LBC NO. 53 IS HEREBY DECLARED
NULL AND VOID.

SO ORDERED.
Case No. 25
[2003V642] COMMISSIONER OF INTERNAL
REVENUE, petitioner, vs. MICHEL J.
LHUILLIER
PAWNSHOP,
INC.,
respondent.2003 Jul 151st DivisionG.R. No.
150947D E C I S I O N
The facts are as follows:
On 11 March 1991, CIR Jose U. Ong issued
Revenue Memorandum Order (RMO) No. 1591 imposing a 5% lending investors tax on
pawnshops; thus:
A restudy of P.D. [No.] 114 shows that the
principal activity of pawnshops is lending
money at interest and incidentally accepting a
"pawn" of personal property delivered by the
pawner to the pawnee as security for the loan.
(Sec. 3, Ibid). Clearly, this makes pawnshop
business akin to lending investors business
activity which is broad enough to encompass
the business of lending money at interest by
any person whether natural or juridical. Such
being the case, pawnshops shall be subject to
the 5% lending investors tax based on their
gross income pursuant to Section 116 of the
Tax Code, as amended.
This RMO was clarified by Revenue
Memorandum Circular (RMC) No. 43-91 on 27
May 1991, which reads:
1. RM[O] 15-91 dated March 11, 1991.
This Circular subjects to the 5% lending
investors tax the gross income of pawnshops
pursuant to Section 116 of the Tax Code, and it
thus revokes BIR Ruling No[]. 6-90, and VAT
Ruling Nos. 22-90 and 67-90. In order to have
46

a uniform cut-off date, avoid unfairness on the

part of tax- payers if they are required to pay
the tax on past transactions, and so as to give
meaning to the express provisions of Section
246 of the Tax Code, pawnshop owners or
operators shall become liable to the lending
investors tax on their gross income beginning
January 1, 1991. Since the deadline for the
filing of percentage tax return (BIR Form No.
2529A-0) and the payment of the tax on
lending investors covering the first calendar
quarter of 1991 has already lapsed, taxpayers
are given up to June 30, 1991 within which to
pay the said tax without penalty. If the tax is
paid after June 30, 1991, the corresponding
penalties shall be assessed and computed
from April 21, 1991.
Since pawnshops are considered as lending
investors effective January 1, 1991, they also
become subject to documentary stamp taxes
prescribed in Title VII of the Tax Code. BIR
Ruling No. 325-88 dated July 13, 1988 is
hereby revoked.
On 11 September 1997, pursuant to these
issuances, the Bureau of Internal Revenue
(BIR) issued Assessment Notice No. 81-PT-1394-97-9-118 against Lhuillier demanding
payment of deficiency percentage tax in the
sum of P3,360,335.11 for 1994 inclusive of
interest and surcharges.

matter to the CIR. Still, the protest was not

acted upon by the CIR. Thus, on 11 November
1998,
Lhuillier
filed
a
"Notice
and
Memorandum on Appeal" with the Court of Tax
Appeals invoking Section 228 of Republic Act
No. 8424, otherwise known as the Tax Reform
Act of 1997, which provides:
Section 228. Protesting of Assessment.
If the protest is denied in whole or in part, or is
not acted upon within one hundred eighty
(180) days from submission of documents, the
taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax
Appeals within thirty (30) days from receipt of
the said decision, or from the lapse of the one
hundred eighty (180)-day period; otherwise,
the decision shall become final, executory and
demandable.
The case was docketed as CTA Case No.
5690.
On 13 December 2000, the CTA rendered a
decision declaring (1) RMO No. 15-91 and
RMC No. 43-91 null and void insofar as they
classify pawnshops as lending investors
subject to 5% percentage tax; and (2)
Assessment Notice No. 81-PT-13-94-97-9-118
as cancelled, withdrawn, and with no force and
effect.[2]

On 3 October 1997, Lhuillier filed an

administrative protest with the Office of the
Revenue Regional Director contending that (1)
neither the Tax Code nor the VAT Law
expressly imposes 5% percentage tax on the
gross income of pawnshops; (2) pawnshops
are different from lending investors, which are
subject to the 5% percentage tax under the
specific provision of the Tax Code; (3) RMO
No. 15-91 is not implementing any provision of
the Internal Revenue laws but is a new and
additional tax measure on pawnshops, which
only Congress could enact; (4) RMO No. 15-91
impliedly amends the Tax Code and is
therefore taxation by implication, which is
proscribed by law; and (5) RMO No. 15-91 is a
"class legislation" because it singles out
pawnshops among other lending and financial
operations.

Dissatisfied, the CIR filed a petition for review

with the Court of Appeals praying that the
aforesaid decision be reversed and set aside
and another one be rendered ordering Lhuillier
to pay the 5% lending investors tax for 1994
with interests and surcharges.

On
12
October
1998,
Deputy
BIR
Commissioner Romeo S. Panganiban issued
Warrant of Distraint and/or Levy No. 81-043-98
against Lhuilliers property for the enforcement
and payment of the assessed percentage tax.

ISSUE:
Whether pawnshops are subject to the 5%
lending investors tax. Corollary to this issue
are the following questions: (1) Are RMO No.
15-91 and RMC No. 43-91 valid? (2) Were
they issued to implement Section 116 of the
NIRC of 1977, as amended? (3) Are
pawnshops considered "lending investors" for

Its protest having been unacted upon, Lhuillier,

in a letter dated 3 March 1998, elevated the

Upon due consideration of the issues

presented by the parties in their respective
memoranda, the Court of Appeals affirmed the
CTA decision on 20 November 2001.
The CIR is now before this Court via this
petition for review on certiorari, alleging that
the Court of Appeals erred in holding that
pawnshops are not subject to the 5% lending
investors tax. He invokes then Section 116 of
the Tax Code, which imposed a 5%
percentage tax on lending investors.

47

the purpose of the imposition of the lending

investors tax? (4) Is publication necessary for
the validity of RMO No. 15-91 and RMC No.
43-91.

(dd) Lending investors

We rule in the negative.

2. In second and third class municipalities, five

hundred pesos;

RMO No. 15-91 and RMC No. 43-91 were

issued in accordance with the power of the CIR
to make rulings and opinions in connection with
the implementation of internal revenue laws,
which was bestowed by then Section 245 of
the NIRC of 1977, as amended by E.O. No.
273.[6] Such power of the CIR cannot be
controverted. However, the CIR cannot, in the
exercise of such power, issue administrative
rulings or circulars not consistent with the law
sought to be applied. Indeed, administrative
issuances must not override, supplant or
modify the law, but must remain consistent with
the law they intend to carry out. Only Congress
can repeal or amend the law.[7]
The CIR argues that both issuances are mere
rules and regulations implementing
then
Section 116 of the NIRC, as amended, which
provided:
SEC. 116. Percentage tax on dealers in
securities; lending investors. - Dealers in
securities and lending investors shall pay a tax
equivalent to six (6) per centum of their gross
income. Lending investors shall pay a tax
equivalent to five (5%) percent of their gross
income.
It is clear from the aforequoted provision that
pawnshops are not specifically included. Thus,
the question is whether pawnshops are
considered lending investors for the purpose of
imposing percentage tax.
While it is true that pawnshops are engaged in
the business of lending money, they are not
considered "lending investors" for the purpose
of imposing the 5% percentage taxes for the
following reasons:
First. Under Section 192, paragraph 3, subparagraphs (dd) and (ff), of the NIRC of 1977,
prior to its amendment by E.O. No. 273, as well
as Section 161, paragraph 2, sub-paragraphs
(dd) and (ff), of the NIRC of 1986, pawnshops
and lending investors were subjected to
different tax treatments; thus:
(3) Other Fixed Taxes. - The following fixed
taxes shall be collected as follows, the amount
stated being for the whole year, when not
otherwise specified:

1. In chartered cities and first

municipalities, one thousand pesos;

class

3. In fourth and fifth class municipalities and

municipal districts, two hundred fifty pesos:
Provided, That lending investors who do
business as such in more than one province
shall pay a tax of one thousand pesos.
(ff) Pawnshops,
(underscoring ours)

one

thousand

pesos

Second. Congress never intended pawnshops

to be treated in the same way as lending
investors. Section 116 of the NIRC of 1977, as
renumbered and rearranged by E.O. No. 273,
was basically lifted from Section 175[8] of the
NIRC of 1986, which treated both tax subjects
differently. Section 175 of the latter Code read
as follows:
Sec. 175. Percentage tax on dealers in
securities, lending investors. -- Dealers in
securities shall pay a tax equivalent to six (6%)
percent of their gross income. Lending
investors shall pay a tax equivalent to five (5%)
percent of their gross income. (As amended by
P.D. No. 1739, P.D. No. 1959 and P.D. No.
1994).
We note that the definition of lending investors
found in Section 157 (u) of the NIRC of 1986 is
not found in the NIRC of 1977, as amended by
E.O. No. 273, where Section 116 invoked by
the CIR is found. However, as emphasized
earlier, both the NIRC of 1986 and the NIRC of
1977 dealt with pawnshops and lending
investors differently. Verily then, it was the
intent of Congress to deal with both subjects
differently. Hence, we must likewise interpret
the statute to conform with such legislative
intent.
Third. Section 116 of the NIRC of 1977, as
amended by E.O. No. 273, subjects to
percentage tax dealers in securities and
lending investors only. There is no mention of
pawnshops. Under the maxim expressio unius
est exclusio alterius, the mention of one thing
implies the exclusion of another thing not
mentioned. Thus, if a statute enumerates the
things upon which it is to operate, everything
else must necessarily and by implication be
excluded from its operation and effect.[9] This
rule, as a guide to probable legislative intent, is
48

based upon the rules of logic and natural

workings of the human mind.[10]
Fourth. The BIR had ruled several times prior
to the issuance of RMO No. 15-91 and RMC
43-91 that pawnshops were not subject to the
5% percentage tax imposed by Section 116 of
the NIRC of 1977, as amended by E.O. No.
273. This was even admitted by the CIR in
RMO No. 15-91 itself. Considering that Section
116 of the NIRC of 1977, as amended, was
practically lifted from Section 175 of the NIRC
of 1986, as amended, and there being no
change in the law, the interpretation thereof
should not have been altered.
Adding to the invalidity of the RMC No. 43-91
and RMO No. 15-91 is the absence of
publication. While the rule-making authority of
the CIR is not doubted, like any other
government agency, the CIR may not disregard
legal requirements or applicable principles in
the exercise of quasi-legislative powers.
Let us first distinguish between two kinds of
administrative issuances: the legislative rule
and the interpretative rule. A legislative rule is
in the nature of subordinate legislation,
designed to implement a primary legislation by
providing the details thereof. An interpretative
rule, on the other hand, is designed to provide
guidelines to the law which the administrative
agency is in charge of enforcing.
When an administrative rule is merely
interpretative in nature, its applicability needs
nothing further than its bare issuance, for it
gives no real consequence more than what the
law itself has already prescribed. When, on the
other hand, the administrative rule goes
beyond merely providing for the means that
can facilitate or render least cumbersome the
implementation of the law but substantially
increases the burden of those governed, it
behooves the agency to accord at least to
those directly affected a chance to be heard,
and thereafter to be duly informed, before that
new issuance is given the force and effect of
law.[15]
RMO No. 15-91 and RMC No. 43-91 cannot be
viewed simply as implementing rules or
corrective measures revoking in the process
the previous rulings of past Commissioners.
Specifically, they would have been amendatory
provisions applicable to pawnshops. Without
these disputed CIR issuances, pawnshops
would not be liable to pay the 5% percentage
tax, considering that they were not specifically
included in Section 116 of the NIRC of 1977, as
amended. In so doing, the CIR did not simply

interpret the law. The due observance of the

requirements
of
notice,
hearing,
and
publication should not have been ignored.
In view of the foregoing, RMO No. 15-91 and
RMC No. 43-91 are hereby declared null and
void. Consequently, Lhuillier is not liable to pay
the 5% lending investors tax.
WHEREFORE, the petition is hereby
DISMISSED for lack of merit. The decision of
the Court of Appeals of 20 November 2001 in
CA-G.R. SP No. 62463 is AFFIRMED.
SO ORDERED.

CASE NO.26: EVANGELISTA VS JARENCIO

FACTS:
Pursuant to his special powers and duties
under Section 64 of the Revised Administrative
Code, the President of the Philippines created
the Presidential Agency on Reforms and
Government Operations (PARGO) under
Executive Order No. 4 of January 7, 1966.
Purposedly, he charged the Agency with the
following functions and responsibilities: 3
b. To investigate all activities involving or
affecting immoral practices, graft and
corruptions, smuggling (physical or technical),
lawlessness, subversion, and all other activities
which are prejudicial to the government and
the public interests, and to submit proper
recommendations to the President of the
Philippines.
c. To investigate cases of graft and corruption
and violations of Republic Acts Nos. 1379 and
3019, and gather necessary evidence to
establish prima facie, acts of graft and
acquisition of unlawfully amassed wealth ... .
h. To receive and evaluate, and to conduct factfinding investigations of sworn complaints
against the acts, conduct or behavior of any
public official or employee and to file and
prosecute the proper charges with the
appropriate agency.
For a realistic performance of these functiuons,
President also vested in the Agency all the
powers of an investigating committee under
Sections 71 and 580 of the Revised
Administrative Code, including the power to
summon
witnesses
by
subpoena
or
subpoena duces tecum, administer oaths, take
testimony or evidence relevant to the
investigation.
49

Petitioner
Quirico
Evangelista,
as
Undersecretary of the Agency, issued to
respondent Fernando Manalastas, then Acting
City Public Service Officer of Manila, a
subpoena ad testificandumcommanding him
"to be and appear as witness at the Office of
the PRESIDENTIAL AGENCY ON REFORMS
AND GOVERNMENT OPERATIONS ... then
and there to declare and testify in a certain
investigation pending therein."
Instead of obeying the subpoena, respondent
Fernando Manalastas filed on June 25, 1968
with the Court of First Instance of Manila an
Amended
Petition
for
prohibition, certiorari and/or injunction with
preliminary injunction and/or restraining order
docketed as Civil Case No. 73305 and assailed
its legality.
Respondent Judge issued the aforementioned
Order:
IT IS ORDERED that, upon the filing of a bond
in the amount of P5,000.00, let the writ of
preliminary injunction prayed for by the
petitioner [private respondent] be issued
restraining the respondents [petitioners], their
agents, representatives, attorneys and/or other
persons acting in their behalf from further
issuing subpoenas in connection with the factfinding investigations to the petitioner [private
respondent] and from instituting contempt
proceedings against the petitioner [private
respondent] under Section 530 of the Revised
Administrative Code. (Stress supplied).

investigation be for a lawfully authorized

purpose. The purpose of the subpoena is to
discover evidence, not to prove a pending
charge, but upon which to make one if the
discovered evidence so justifies. Its obligation
cannot rest on a trial of the value of testimony
sought; it is enough that the proposed
investigation be for a lawfully authorized
purpose, and that the proposed witness be
claimed to have information that might shed
some helpful light. Because judicial power is
reluctant if not unable to summon evidence
until it is shown to be relevant to issues on
litigations it does not follow that an
administrative agency charged with seeing that
the laws are enforced may not have and
exercise powers of original inquiry. The
administrative agency has the power of
inquisition which is not dependent upon a case
or controversy in order to get evidence, but can
investigate merely on suspicion that the law is
being violated or even just because it wants
assurance that it is not. When investigative and
accusatory duties are delegated by statute to
an administrative body, it, too may take steps
to inform itself as to whether there is probable
violation of the law.In sum, it may be stated
that a subpoena meets the requirements for
enforcement if the inquiry is (1) within the
authority of the agency; (2) the demand is not
too indefinite; and (3) the information is
reasonably relevant.
DECSION, set aside and declared no force
and effect.

Because of this, petitioners 5 elevated the

matter direct to Us without a motion for
reconsideration first filed on the fundamental
submission that the Order is a patent nullity. 6

ISSUE:
WON the Agency, acting thru its officials,
enjoys the authority to issue subpoenas in its
conduct of fact-finding investigations.
HELD:
Yes. Administrative agencies may enforce
subpoenas issued in the course of
investigations, whether or not adjudication is
involved, and whether or not probable cause is
shown and even before the issuance of a
complaint. It is not necessary, as in the case of
a warrant, that a specific charge or complaint
of violation of law be pending or that the order
be made pursuant to one. It is enough that the
50