IRENE K. NACU, substituted by BENJAMIN M. G.R. No.

187752
NACU, ERVIN K. NACU, and NEJIE N. DE SAGUN,
Petitioners, Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,VELASCO,
JR., NACHURA, LEONARDO-DE
CASTRO,
BRION,
- versus - PERALTA,
BERSAMIN,
DEL CASTILLO,*
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.
CIVIL SERVICE COMMISSION and PHILIPPINE
ECONOMIC ZONE AUTHORITY, Promulgated:
Respondents.
November 23, 2010

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

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari, seeking the reversal of the Court of Appeals (CA) Decision[1] dated
December 24, 2008 and Resolution[2] dated May 6, 2009. The assailed Decision held that Irene K. Nacu (Nacu), Enterprise
Service Officer III at the Philippine Economic Zone Authority (PEZA), assigned at the Bataan Economic Zone (BEZ), was
guilty of dishonesty, grave misconduct, and conduct prejudicial to the best interest of the service, and imposed upon her
the penalty of dismissal from the service and its accessory penalties.
The case arose from the following facts:

On December 17, 1999, PEZA issued Memorandum Order No. 99-003, prohibiting its employees from charging and
collecting overtime fees from PEZA-registered enterprises. The pertinent portions of the said regulation read:
Effective immediately, PEZA shall provide processing/documentation services required by economic zone
export-producers for incoming and outgoing shipments x x x FREE OF OVERTIME FEES/CHARGES x x x.

xxxx
Economic zone export producers, customs brokers, freight forwarders, truckers and other service
providers and enterprises are strictly prohibited from offering financial and/or non-financial tokens,
compensation, etc. to any PEZA official and/or personnel, in connection with PEZA overtime services
rendered and/or other transactions.

In addition, economic zone export-producers, customs brokers, freight forwarders, truckers and other
service providers and enterprises are enjoined to notify ranking PEZA officials (Administrator, Manager,
Officer-in-Charge, Deputy Director Generals and the Director General) on any difficulties or problems they
encounter, particularly those pertaining to lack of service-orientation or improper behavior of any PEZA
officer and/or personnel.[3]

1
Sometime in September 2001, Edison (Bataan) Cogeneration Corporation (EBCC) filed a complaint against Nacu for
allegedly charging it overtime fees, despite Memorandum Order No. 99-003.

Acting on the complaint, PEZA immediately conducted a preliminary investigation, during which Atty. Norma B. Cajulis,
PEZAs lawyer, interviewed Rey Ligan (Ligan), a document processor at EBCC. Ligan attested, among others, that the
overtime fees went to Nacus group, and that, during the time Nacu was confined in the hospital, she pre-signed documents
and gave them to him.

On November 21, 2001, Atty. Procolo Olaivar (Atty. Olaivar) of PEZA Legal Services Group requested the National Bureau
of Investigation (NBI) to verify the genuineness of Nacus signatures appearing on the Statements of Overtime Services
(SOS).[4] Original copies of 32 SOS and a specimen of Nacus signature were then sent to the NBI for comparison.

On January 25, 2002, the NBI informed Atty. Olaivar that no definite opinion can be rendered on the matter since the
standards/sample signatures of the subject submitted [we]re not sufficient and appropriate to serve as basis for a specific
comparative examination. The NBI then requested that, should PEZA still want it to conduct further examination, it be
furnished with additional standard/sample signatures, in the same style and pattern as that of the questioned document,
appearing in official/legal documents on file, executed before, during, and after the date of the questioned document.[5]
PEZA referred the 32 SOS, together with the same standard specimen of Nacus signatures/initials, to the Philippine
National Police Crime Laboratory (PNP Crime Lab) for determination of the genuineness of Nacus signature appearing
therein.

In Questioned Document Report No. 052-02 dated May 3, 2002, Rosario C. Perez, Document Examiner II of the PNP Crime
Lab, stated her findings, thus
1. Scientific comparative examination and analysis of the questioned initials/signatures IRENE NACU/I.
NACU marked Q-1 to Q-6, Q-11, Q-12, Q-13, Q-15, Q-19, Q-20, Q-21, Q-23, Q-24, Q-25, Q-27 to Q-32
and the submitted standard initials/signatures of Irene K. Nacu marked S-1 to S-19 inclusive reveal
significant divergences in the matter of execution, line quality and stroke structure.

2. Scientific comparative examination and analysis of the questioned initials/signatures IRENE NACU/I.
NACU marked Q-7 to Q-10, Q-14, Q-16 to Q-18; Q-22, Q-26 and the submitted standard
signatures/initials of Irene K. Nacu marked S-1 to S-19 inclusive reveal significant similarities in the
manner of execution, line quality and stroke structure.

xxxx

CONCLUSION

1. The questioned initials/signatures IRENE NACU/I. NACU marked Q-1 to Q-6, Q-11, Q-12, Q-13, Q-15,
Q-19 to Q-21, Q-23 to Q-25, Q-27 to Q-32 appearing in the twenty-two (22) pieces [of] Statement of
Overtime Services and the submitted standard initials/signatures of Irene K. Nacu marked S-1 to S-19
inclusive WERE NOT WRITTEN BY ONE AND THE SAME PERSON.

2. The questioned initials/signatures IRENE NACU/I. NACU marked Q-7 to Q-10, Q-14, Q-16 to Q-18; Q-
22, Q-26 appearing in the ten (10) pieces of Statement of Overtime Service and the submitted
standard initials/signatures [of] Irene K. Nacu marked S-1 to S-19 inclusive WERE WRITTEN BY ONE
AND THE SAME PERSON.[6]

Finding a prima facie case against Nacu, PEZA Director General Lilia B. de Lima (Director General De Lima) filed a Formal
Charge against her for Dishonesty, Grave Misconduct, and Conduct Prejudicial to the Best Interest of the Service. It was

2
alleged that Nacu unlawfully charged P3,500.00 overtime fee from EBCC on ten occasions (covered by the ten SOS which
the PNP Crime Lab found to have been written by Nacu), for a total amount of P35,000.00.

Nacu denied that the signatures appearing on the ten overtime billing statements were hers. She averred that it was
impossible for her to charge EBCC overtime fees as the latter was well aware that PEZA employees may no longer charge
for overtime services; that she had no actual notice of Memorandum Order No. 99-003; and that she caused no damage
and prejudice to PEZA and EBCC.

During the hearing, PEZA presented the following witnesses: Rosario Perez, the document examiner who examined the
SOS; Atty. Dante Quindoza, Zone Administrator of BEZ, who testified that Nacu was one of the officials authorized to sign
the documents; Romy Zaragosa, Corporate Relations Manager of Covanta Energy, who attested that meetings were held
on November 17, 2001 and January 25, 2002, wherein Ligan testified that he gave the payment for overtime fees to Nacu;
Roberto Margallo (Margallo), Enterprise Service Officer III of PEZA, who testified that he knows Nacus signature and that
he was certain that the signatures appearing on the SOS were hers; Omar Dana, EBCC plant chemist, who testified that
EBCC paid, through Ligan, overtime fees to Nacu and some other persons; Elma Bugho, PEZA Records Officer, who testified
on the issuance of PEZA Memorandum Order No. 99-003;[7] and Miguel Herrera, then Division Chief of PEZA at the BEZ,
who testified that he was responsible for the implementation of PEZA rules and regulations and for assigning examiners
upon the request of zone enterprises and brokers.[8]

On February 8, 2005, the PEZA Central Board of Inquiry, Investigation, and Discipline (CBIID), with the approval of Director
General De Lima, found Nacu guilty of the acts charged, thus:

Wherefore, in view of the foregoing, the Central Board of Inquiry, Investigation and Discipline (CBIID)
1. resolves that Irene K. Nacu committed an act which constitutes a ground for disciplinary action and
finds her guilty of dishonesty, grave misconduct[, and conduct] prejudicial to the best interest of service
pursuant to Section 46(b)(1), (4) and (27), Book V of Executive Order No. 292 and hereby

2. recommends that respondent be dismissed from service pursuant to Section 52, Rule IV, Revised
Uniform Rules in Administrative Cases in Philippine Civil Service with accessory penalties of:

a) cancellation of eligibility;

b) forfeiture of retirement benefits; and

c) perpetual disqualification from re-employment in the government service.[9]

Nacu moved for a reconsideration of the CBIIDs findings, but the motion was denied. By way of appeal, Nacu elevated the
case to the Civil Service Commission (CSC).

On February 19, 2007, the CSC promulgated Resolution No. 070327, affirming the CBIIDs resolution, viz.:

WHEREFORE, the appeal of Irene K. Nacu, former Enterprise Service Officer III, Philippine
Economic Zone Authority (PEZA), is hereby DISMISSED. Accordingly, the Decision dated February 08, 2005
issued by Director General Lilia B. de Lima finding Nacu guilty of Dishonesty, Grave Misconduct, and
Conduct Prejudicial to the Best Interest of the Service and imposing upon her the penalty of dismissal
from the service with the accessory penalties of cancellation of eligibility, forfeiture of retirement
benefits, and disqualification from being re-employed in the government service is AFFIRMED.[10]

Nacu filed a motion for reconsideration of CSC Resolution No. 070327, but the motion was denied in Resolution No.
071489 dated August 1, 2007.[11]

3
Nacu forthwith filed a petition for review with the CA, assailing the CSC resolutions. On September 17, 2007, while the
case was pending resolution, Nacu died and was substituted by her heirs, Benjamin Nacu (husband), Nejie N. de Sagun
(daughter), and Ervin K. Nacu (son), herein petitioners.
The CA, in the assailed Decision dated December 24, 2008, affirmed the CSC resolutions. The CA could not believe Nacus
claim that she was not aware of Memorandum Order No. 99-003, considering that the order was issued almost two years
earlier. According to the CA, as a PEZA employee, Nacu had the obligation to keep herself abreast of everything that
transpires in her office and of developments that concern her position. It stressed that even if Nacu had not actually
received a copy of the memorandum order, such circumstance will not foreclose the orders effectivity; and that it is
merely an internal regulation which does not require publication for its effectivity.[12]

The CA brushed aside Nacus objections to (a) Ligans written statement because it was not made under oath and Ligan was
not presented as witness during the hearing; (b) the PNP Crime Labs findings for being unreliable in light of the NBIs own
finding that the samples were not sufficient; and (c) Margallos testimony identifying Nacus signatures on the SOS, on the
ground that he was not presented as an expert witness. The CA pointed out that proceedings in administrative cases are
not strictly governed by technical rules of procedure and evidence, as they are required to be disposed of summarily.

In particular, the CA found pointless Nacus criticism of the PNP Crime Labs findings based on the NBIs opinion on the
samples given. To counter the same, the CA highlighted the fact that the NBIs opinion did not conclusively state that the
signatures were not that of Nacu. It stressed that Nacu failed to adduce clear and convincing evidence to contradict the
PNP Crime Labs findings, relying merely on the NBIs opinion which, to the mind of the CA, did not actually absolve
petitioner.

According to the CA, Memorandum Order No. 99-003, the PNPs findings, and the witnesses testimonies, taken together,
were sufficient to hold Nacu administratively liable for the acts complained of. Nacu was not denied due process,
considering that she was given the opportunity to explain her side and present evidence, and that she had, in fact,
participated in the hearing.

The dispositive portion of the assailed CA Decision reads:

WHEREFORE, premises considered, the Petition for Review is hereby DISMISSED for lack of merit.
SO ORDERED.[13]
A motion for reconsideration was filed by petitioners, but the CA denied the motion in its Resolution[14] dated May 6, 2009.
They then elevated the case to this Court through this petition for review on certiorari.

Petitioners submit to this Court the issue of whether the finding that Nacu is guilty of dishonesty, grave misconduct, and
conduct prejudicial to the best interest of the service is supported by substantial evidence.
Petitioners arguments focus largely on the weight given by the CA to the PNP Crime Labs report, which, they insist, should
not be given credence as it is unreliable. Firstly, it was not shown that the questioned document examiner who examined
the SOS was a handwriting expert. Secondly, the signature samples were, according to the NBI, insufficient references for
a comparative examination. Thirdly, the sample signatures used were obtained in violation of Nacus right against self-
incrimination. And lastly, the report merely states that there were similarities in the manner of execution, line quality, and
stroke structures of the signatures, and that such conclusion does not translate to a finding that the signatures appearing
on the SOS are genuine.

4
Petitioners also object to the CAs reliance on the statements made by Ligan during the preliminary investigation, which
were not given under oath. They contend that Nacu was denied due process when Ligan was not presented as witness
during the trial, and that there were inconsistencies in Ligans statements.

And finally, as an affirmative defense, they reiterate that Nacu was not aware of the issuance and implementation of
Memorandum Order No. 99-003. They point out that there was, in fact, no showing that the said order had been published
in a newspaper, posted at the BEZ, or a copy thereof furnished to Nacu.
We find no merit in this petition.

Substantial evidence, the quantum of evidence required in administrative proceedings, means such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.[15] The standard of substantial
evidence is satisfied when there is reasonable ground to believe that a person is responsible for the misconduct
complained of, even if such evidence might not be overwhelming or even preponderant.[16]

Overall, the testimonies of the witnesses, the statements made by Ligan during the preliminary investigation, and
the findings of the PNP Crime Lab on its examination of the signatures on the SOS, amounted to substantial evidence that
adequately supported the conclusion that Nacu was guilty of the acts complained of. Petitioners allegations of
unreliability, irregularities, and inconsistencies of the evidence neither discredited nor weakened the case against Nacu.

For one, petitioners cite the PNPs findings as unreliable in light of the NBIs opinion that the samples utilized by the PNP
Crime Labthe same samples submitted to the NBIwere not sufficient to make a comparative examination.
We do not agree. The PNP and the NBI are separate agencies, and the findings of one are not binding or conclusive upon
the other. Moreover, as pointed out by the Office of the Solicitor General in its Comment, the NBIs finding referred only
to the insufficiency of the samples given; the NBI did not actually make a determination of the genuineness of the
signatures. While the NBI may have found the samples to be insufficient, such finding should not have any bearing on the
PNP Crime Labs own findings that the samples were sufficient and that some of the signatures found on the overtime
billings matched the sample signatures. The difference of opinion with respect to the sufficiency of the samples could only
mean that the PNP Crime Lab observes a standard different from that used by the NBI in the examination of handwriting.

Instead of just discrediting the PNP Crime Labs findings, Nacu should have channeled her efforts into providing
her own proof that the signatures appearing on the questioned SOS were forgeries. After all, whoever alleges forgery has
the burden of proving the same by clear and convincing evidence.[17] Nacu could not simply depend on the alleged
weakness of the complainants evidence without offering stronger evidence to contradict the former.

In any case, the CA did not rely solely on the PNP Crime Lab report in concluding that the signatures appearing on
the ten SOS were Nacus. Margallo, a co-employee who holds the same position as Nacu, also identified the latters
signatures on the SOS. Such testimony deserves credence. It has been held that an ordinary witness may testify on a
signature he is familiar with.[18] Anyone who is familiar with a persons writing from having seen him write, from carrying
on a correspondence with him, or from having become familiar with his writing through handling documents and papers
known to have been signed by him may give his opinion as to the genuineness of that persons purported signature when
it becomes material in the case.[19]

Petitioners also posit that Nacu was denied her right against self-incrimination when she was made to give samples of her
signature. We do not agree. The right against self-incrimination is not self-executing or automatically operational. It must
be claimed; otherwise, the protection does not come into play. Moreover, the right must be claimed at the appropriate
time, or else, it may be deemed waived.[20] In the present case, it does not appear that Nacu invoked her right against self-

5
incrimination at the appropriate time, that is, at the time she was asked to provide samples of her signature. She is
therefore deemed to have waived her right against self-incrimination.

Next, petitioners assail the credibility of Ligans statement because it was not made under oath and Ligan was not
presented as witness during the hearing. Nacu was allegedly denied due process when she was deprived of the
opportunity to cross-examine Ligan.

It is settled that, in administrative proceedings, technical rules of procedure and evidence are not strictly applied.
Administrative due process cannot be fully equated with due process in its strict judicial sense.[21] In a recent case, a party
likewise protested against the non-presentation of a witness during trial and the lack of opportunity to cross-examine the
said witness. Addressing the issue, the Court held that the contention was unavailing, stating that -
In another case, the Court addressed a similar contention by stating that the petitioner therein could not
argue that she had been deprived of due process merely because no cross-examination took place.
[Citing Casimiro v. Tandog, 459 SCRA 624, 633 (2005)]. Indeed, in administrative proceedings, due process
is satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the
controversy or given opportunity to move for a reconsideration of the action or ruling complained of.[22]

The measure of due process to be observed by administrative tribunals allows a certain degree of latitude as long as
fairness is not compromised. It is, therefore, not legally objectionable or violative of due process for an administrative
agency to resolve a case based solely on position papers, affidavits, or documentary evidence submitted by the parties, as
affidavits of witnesses may take the place of their direct testimonies.[23]

In addition, petitioners claim that there were inconsistencies in Ligans statement. While Ligan allegedly stated that Nacu
gave him pre-signed documents during the time that she was in the hospital, and that these pre-signed documents
referred to the ten overtime billings referred to in the formal charge, the record does not show that Nacu was confined in
the hospital on the dates indicated in the said billings.
To set the record straight, Ligan did not specifically mention that the dates indicated in the pre-signed documents were
also the days when Nacu was confined in the hospital. He merely said that Nacu pre-signed some documents during the
time that she was in the hospital, and that she gave these documents to him. Neither did he state that these pre-signed
SOS were the same ten SOS cited in the formal charge against Nacu. It was petitioners own assumption that led to this
baseless conclusion.

In Nacus defense, petitioners contend that she (Nacu) was not aware of the existence of Memorandum Order No.
99-003. They aver that there was no evidence showing that Memorandum Order No. 99-003 was posted, published, and
promulgated; hence, it cannot be said that the order had already taken effect and was being implemented in the BEZ.
Petitioners claim that Nacu had, in fact, no actual knowledge of the said order as she was not furnished with a copy
thereof.

Nacu cannot feign ignorance of the existence of the said order. As correctly opined by the CA, it is difficult to
believe that Nacu, one of the employees of PEZA affected by the memorandum order, was not in any way informedby
posting or personal noticeof the implementation of the said order, considering that over a year had lapsed since it had
been issued. From the testimonies of the other witnesses, who were employees of PEZA and PEZA-registered enterprises,
it was evident that the prohibition against charging and collecting overtime fees was common knowledge to them.
At any rate, no publication is required for such a regulation to take effect. Memorandum Order No. 99-003 is an
internal regulation that clearly falls within the administrative rules and regulations exempted from the publication
requirement, as set forth in the prevailing case of Taada v. Hon. Tuvera:[24]

6
 Interpretative regulations and those merely internal in nature, that is, regulating only the
personnel of the administrative agency and not the public, need not be published. Neither is
publication required of the so-called letters of instructions issued by administrative superiors concerning
the rules on guidelines to be followed by their subordinates in the performance of their duties.[25]

At the very least, Nacu should have been aware that collecting payments directly from PEZA-registered enterprises
was strictly prohibited. Months before Memorandum Order No. 99-003 was promulgated, PEZA had already put a stop to
the practice of collecting direct payments for overtime fees from PEZA-registered enterprises under Office Order No. 99-
0002 dated March 8, 1999. The latter specifically provides that overtime shall be paid only through the regular payroll
system, and that overtime claims shall be supported by the required documents.[26] This was followed by PEZA General
Circular No. 99-0001 (Prescribing New Rates of Overtime Pay Payable by Zone Enterprises, Customs Brokers And Other
Entities Concerned) dated August 10, 1999, providing that

4.5. All payments to be made by requesting parties shall be covered by official receipts. IN NO CASE SHALL
PAYMENT BE MADE DIRECTLY TO ZONE/PCDU PERSONNEL.

4.6 No additional charges or fees shall be paid by requesting parties, nor shall they offer gifts, tips and
other financial/material favors to PEZA employees rendering overtime services.

4.7 At the end of the month, all claims of personnel for payment of overtime services shall be supported
by the following documents:

4.7.1. Copies of written requests by enterprises and other parties;

4.7.2. Certificate of service or DTR;
4.7.3. Authority to render overtime services; and
4.7.4. Certificate of accomplishment.[27]

Petitioners desperately argue that Nacu could not have charged and collected overtime fees from EBCC as it was
well aware of Memorandum Order No. 99-003. The contention is puerile. Petitioners are, in effect, saying that knowledge
of the existence of a rule prohibiting a certain act would absolutely prevent one from doing the prohibited act. This
premise is undeniably false, and, as a matter of fact, judicial institutions have been founded based on the reality that not
everyone abides by the law.

All told, Nacu was rightfully found guilty of grave misconduct, dishonesty, and conduct prejudicial to the best interest of
the service, and penalized with dismissal from the service and its accessory penalties. The general rule is that where the
findings of the administrative body are amply supported by substantial evidence, such findings are accorded not only
respect but also finality, and are binding on this Court. It is not for the reviewing court to weigh the conflicting evidence,
determine the credibility of witnesses, or otherwise substitute its own judgment for that of the administrative agency on
the sufficiency of evidence.[28]
Nacus length of service or the fact that this was her first offense has not been clearly established. We cannot reasonably
take them into consideration in reviewing the case. At any rate, these circumstances cannot serve to mitigate the violation,
considering the gravity of the offense and the fact that Nacus act irreparably tarnished the integrity of PEZA.
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated December 24,
2008 and its Resolution dated May 6, 2009 are AFFIRMED.

SO ORDERED.

7
[G.R. No. 109023. August 12, 1998]

RODOLFO S. DE JESUS, EDELWINA DE PARUNGAO, VENUS M. POZON AND other similarly situated personnel of the
LOCAL WATER UTILITIES ADMINISTRATION (LWUA), petitioners, vs. COMMISSION ON AUDIT AND LEONARDO
L. JAMORALIN in his capacity as COA-LWUA Corporate Auditor respondents.

DECISION
PURISIMA, J.:

The pivotal issue raised in this petition is whether or not the petitioners are entitled to the payment of honoraria
which they were receiving prior to the effectivity of Rep. Act 6758.
Petitioners are employees of the Local Water Utilities Administration (LWUA). Prior to July 1, 1989, they were
receiving honoraria as designated members of the LWUA Board Secretariat and the Pre-Qualification, Bids and Awards
Committee.
On July 1, 1989, Republic Act No. 6758 (Rep. Act 6758), entitled An Act Prescribing A Revised Compensation and
Position Classification System in the Government and For Other Purposes, took effect. Section 12 of said law provides for
the consolidation of allowances and additional compensation into standardized salary rates. Certain additional
compensations, however, were exempted from consolidation.
Section 12, Rep. Act 6758, reads -

Sec. 12. - Consolidation of Allowances and Compensation.- Allowances, except for representation and transportation
allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign services personnel stationed abroad; and such other
additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in
the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being
received by incumbents as of July 1, 1989 not integrated into the standardized salary rates shall continue
to be authorized.[1](Underscoring supplied)

To implement Rep. Act 6758, the Department of Budget and Management (DBM) issued Corporate Compensation
Circular No. 10 (DBM-CCC No. 10), discontinuing without qualification effective November 1, 1989, all allowances and
fringe benefits granted on top of basic salary.
Paragraph 5.6 of DBM-CCC No. 10 provides :

Payment of other allowances/fringe benefits and all other forms of compensation granted on top of basic salary, whether
in cash or in kind, xxx shall be discontinued effective November 1, 1989. Payment made for such allowances/fringe benefits
after said date shall be considered as illegal disbursement of public funds.[2]

Pursuant to the aforesaid Law and Circular, respondent Leonardo Jamoralin, as corporate auditor, disallowed on post
audit, the payment of honoraria to the herein petitioners.
Aggrieved, petitioners appealed to the COA, questioning the validity and enforceability of DBM-CCC No. 10. More
specifically, petitioners contend that DBM-CCC No. 10 is inconsistent with the provisions of Rep. Act 6758 (the law it is
supposed to implement) and, therefore, void. And it is without force and effect because it was not published in the Official
Gazette; petitioners stressed.
In its decision dated January 29, 1993, the COA upheld the validity and effectivity of DBM-CCC No. 10 and sanctioned
the disallowance of petitioners honoraria.[3]
Undaunted, petitioners found their way to this court via the present petition, posing the questions:

(1) Whether or not par. 5.6 of DBM-CCC No. 10 can supplant or negate the express provisions of Sec. 12 of Rep. Act 6758
which it seeks to implement; and

(2) Whether or not DBM-CCC No. 10 is legally effective despite its lack of publication in the Official
Gazette. Petitioners are of the view that par. 5.6 of DBM-CCC No. 10 prohibiting fringe benefits and allowances effective
November 1, 1989, is violative of Sec. 12 of Rep. Act 6758 which authorizes payment of additional compensation not
integrated into the standardized salary which incumbents were enjoying prior to July 1, 1989.

8
 To buttress petitioners stance, the Solicitor General presented a Manifestation and Motion in Lieu of Comment,
opining that Sec. 5.6 of DBM-CCC No. 10 is a nullity for being inconsistent with and repugnant to the very law it is intended
to implement. The Solicitor General theorized, that:

xxx following the settled principle that implementing rules must necessarily adhere to and not depart from the provisions
of the statute it seeks to implement, it is crystal clear that Section 5.6 of DBM-CCC No. 10 is a patent nullity. An
implementing rule can only be declared valid if it is in harmony with the provisions of the legislative act and for the sole
purpose of carrying into effect its general provisions. When an implementing rule is inconsistent or repugnant to the
provisions of the statute it seeks to interpret, the mandate of the statute must prevail and must be followed.[4]

Respondent COA, on the other hand, pointed out that to allow honoraria without statutory, presidential or DBM
authority, as in this case, would run counter to Sec. 8, Article IX-B of the Constitution which proscribes payment of
additional or double compensation, unless specifically authorized by law. Therefore, the grant of honoraria or like
allowances requires a specific legal or statutory authority. And DBM-CCC No. 10 need not be published for it is merely an
interpretative regulation of a law already published[5]; COA concluded.
In his Motion for Leave to intervene, the DBM Secretary asserted that the honoraria in question are considered
included in the basic salary, for the reason that they are not listed as exceptions under Sec. 12 of Rep. Act 6758.
Before resolving the other issue - whether or not Paragraph 5.6 of DBM-CCC No. 10 can supplant or negate the
pertinent provisions of Rep. Act 6758 which it seeks to implement, we have to tackle first the other question whether or
not DBM-CCC No. 10 has legal force and effect notwithstanding the absence of publication thereof in the Official
Gazette. This should take precedence because should we rule that publication in the Official Gazette or in a newspaper of
general circulation in the Philippines[6] is sine qua non to the effectiveness or enforceability of DBM-CCC No. 10, resolution
of the first issue posited by petitioner would not be necessary.
The applicable provision of law requiring publication in the Official Gazette is found in Article 2 of the New Civil Code
of the Philippines, which reads:

Art. 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless
it is otherwise provided. This Code shall take effect one year after such publication.

In Tanada v. Tuvera, 146 SCRA 453, 454, this Court succinctly construed the aforecited provision of law in point, thus:

We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition
for their effectivity, which shall begin fifteen days after publication unless a different effectivity, which shall begin fifteen
days after publication unless a different effectivity date is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative
powers whenever the same are validly delegated by the legislature or, at present, deirectly conferred by the Constitution.
Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law
pursuant to a valid delegation.

Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative
agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions
issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the
performance of their duties.

Accordingly, even the charter of a city must be published notwithstanding that it applies to only a portion of the national
territory and directly affects only the inhabitants of that place. All presidential decrees must be published, including even,
say, those naming a public place after a favored individual or exempting him from certain prohibitions or requirements. The
circulars issued by the Monetary Board must be published if they are meant not merely to interpret but to fill in the details
of the Central Bank Act which that body is supposed to enforce. (Italics ours)

The same ruling was reiterated in the case of Philippine Association of Service Exporters, Inc. vs. Torres, 212 SCRA 299
[1992].
On the need for publication of subject DBM-CCC No. 10, we rule in the affirmative. Following the doctrine enunciated
in Tanada, publication in the Official Gazette or in a newspaper of general circulation in the Philippines is required since
DBM-CCC No. 10 is in the nature of an administrative circular the purpose of which is to enforce or implement an existing
law. Stated differently, to be effective and enforceable, DBM-CCC No. 10 must go through the requisite publication in the
Official Gazette or in a newspaper of general circulation in the Philippines.

9
 In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, which completely disallows payment of
allowances and other additional compensation to government officials and employees, starting November 1, 1989, is not
a mere interpretative or internal regulation. It is something more than that. And why not, when it tends to deprive
government workers of their allowances and additional compensation sorely needed to keep body and soul together. At
the very least, before the said circular under attack may be permitted to substantially reduce their income, the
government officials and employees concerned should be apprised and alerted by the publication of subject circular in
the Official Gazette or in anewspaper of general circulation in the Philippines - to the end that they be given amplest
opportunity to voice out whatever opposition they may have, and to ventilate their stance on the matter. This approach
is more in keeping with democratic precepts and rudiments of fairness and transparency.
In light of the foregoing disquisition on the ineffectiveness of DBM-CCC No. 10 due to its non-publication in the Official
Gazette or in a newspaper of general circulation in the country,as required by law, resolution of the other issue at bar is
unnecessary.
WHEREFORE, the Petition is hereby GRANTED, the assailed Decision of respondent Commission on Audit is SET ASIDE,
and respondents are ordered to pass on audit the honoraria of petitioners. No pronouncement as to costs.
SO ORDERED.
Narvasa CJ., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban,
Martinez and Quisumbing, JJ., concur.

G.R. No. 119761 August 29, 1996

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION, respondents.

VITUG, J.:p

The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March 1995, of respondent Court of
Appeals 1 affirming the 10th August 1994 decision and the 11th October 1994 resolution of the Court of Tax
Appeals 2 ("CTA") in C.T.A. Case No. 5015, entitled "Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her
capacity as Commissioner of Internal Revenue."

The facts, by and large, are not in dispute.

Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes.

On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration
over "Champion," "Hope," and "More" cigarettes. In a letter, dated 06 January 1987, of then Commissioner of Internal
Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government,
"the initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands since they were
listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names
of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand
category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion' was an original Fortune
Tobacco Corporation register and therefore a local brand." 3 Ad Valorem taxes were imposed on these brands, 4 at the
following rates:

BRAND AD VALOREM TAX RATE

E.O. 22 and E.O. 273 RA 6956
06-23-86 07-25-87 06-18-90
07-01-86 01-01-88 07-05-90

Hope Luxury M. 100's

Sec. 142, (c), (2) 40% 45%
Hope Luxury M. King
Sec. 142, (c), (2) 40% 45%
More Premium M. 100's

10
Sec. 142, (c), (2) 40% 45%
More Premium International
Sec. 142, (c), (2) 40% 45%
Champion Int'l. M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20% 5

A bill, which later became Republic Act ("RA") No. 7654, 6 was enacted, on 10 June 1993, by the legislature and
signed into law, on 14 June 1993, by the President of the Philippines. The new law became effective on 03 July
1993. It amended Section 142(c)(1) of the National Internal Revenue Code ("NIRC") to read; as follows:

Sec. 142. Cigars and Cigarettes. —

xxx xxx xxx

(c) Cigarettes packed by machine. — There shall be levied, assessed and collected on cigarettes packed by
machine a tax at the rates prescribed below based on the constructive manufacturer's wholesale price or
the actual manufacturer's wholesale price, whichever is higher:

(1) On locally manufactured cigarettes which are currently classified and taxed at fifty-five percent
(55%) or the exportation of which is not authorized by contract or otherwise, fifty-five (55%) provided
that the minimum tax shall not be less than Five Pesos (P5.00) per pack.

(2) On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum tax shall
not be less than Three Pesos (P3.00) per pack.

xxx xxx xxx

When the registered manufacturer's wholesale price or the actual manufacturer's wholesale price
whichever is higher of existing brands of cigarettes, including the amounts intended to cover the taxes, of
cigarettes packed in twenties does not exceed Four Pesos and eighty centavos (P4.80) per pack, the rate
shall be twenty percent (20%). 7 (Emphasis supplied)

About a month after the enactment and two (2) days before the effectivity of RA 7654, Revenue Memorandum
Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full text of which expressed:

REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS

July 1,
1993

REVENUE MEMORANDUM CIRCULAR NO. 37-93

SUBJECT: Reclassification of Cigarettes Subject to Excise Tax

TO: All Internal Revenue Officers and Others Concerned.

In view of the issues raised on whether "HOPE," "MORE" and "CHAMPION" cigarettes which are locally
manufactured are appropriately considered as locally manufactured cigarettes bearing a foreign brand,
this Office is compelled to review the previous rulings on the matter.

Section 142 (c)(1) National Internal Revenue Code, as amended by R.A. No. 6956, provides:

11
 On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%)
Provided, That this rate shall apply regardless of whether or not the right to use or title to
the foreign brand was sold or transferred by its owner to the local manufacturer.
Whenever it has to be determined whether or not a cigarette bears a foreign brand, the
listing of brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern.

Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that the locally
manufactured cigarettes bear a foreign brand regardless of whether or not the right to use or title to the
foreign brand was sold or transferred by its owner to the local manufacturer. The brand must be originally
owned by a foreign manufacturer or producer. If ownership of the cigarette brand is, however, not
definitely determinable, ". . . the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern. . . ."

"HOPE" is listed in the World Tobacco Directory as being manufactured by (a) Japan Tobacco, Japan and
(b) Fortune Tobacco, Philippines. "MORE" is listed in the said directory as being manufactured by: (a) Fills
de Julia Reig, Andorra; (b) Rothmans, Australia; (c) RJR-Macdonald Canada; (d) Rettig-Strenberg, Finland;
(e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h) Fortune Tobacco,
Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds,
Switzerland; and (m) R.J. Reynolds, USA. "Champion" is registered in the said directory as being
manufactured by (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune
Tobacco, Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies, Switzerland.

Since there is no showing who among the above-listed manufacturers of the cigarettes bearing the said
brands are the real owner/s thereof, then it follows that the same shall be considered foreign brand for
purposes of determining the ad valorem tax pursuant to Section 142 of the National Internal Revenue
Code. As held in BIR Ruling No. 410-88, dated August 24, 1988, "in cases where it cannot be established
or there is dearth of evidence as to whether a brand is foreign or not, resort to the World Tobacco
Directory should be made."

In view of the foregoing, the aforesaid brands of cigarettes, viz: "HOPE," "MORE" and "CHAMPION" being
manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes
bearing a foreign brand subject to the 55% ad valorem tax on cigarettes.

Any ruling inconsistent herewith is revoked or modified accordingly.

(SGD) LIWAYWAY VINZONS-

CHATO
Commissioner

On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr., sent via telefax a copy of
RMC 37-93 to Fortune Tobacco but it was addressed to no one in particular. On 15 July 1993, Fortune Tobacco
received, by ordinary mail, a certified xerox copy of RMC 37-93.

In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune Tobacco requested for a
review, reconsideration and recall of RMC 37-93. The request was denied on 29 July 1993. The following day, or
on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.

On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. 8

On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged:

WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz:
"HOPE," "MORE" and "CHAMPION" being manufactured by Fortune Tobacco Corporation as locally
manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found
to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the
brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)(1) of
the Tax Code, as amended by R.A. No. 7654 and were therefore still classified as other locally
manufactured cigarettes and taxed at 45% or 20% as the case may be.

12
 Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune Tobacco Corporation
in the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby canceled for lack of legal
basis.

Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the deficiency tax
assessment made and issued on petitioner in relation to the implementation of RMC No. 37-93.

SO ORDERED. 9

In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for reconsideration.

The CIR forthwith filed a petition for review with the Court of Appeals, questioning the CTA's 10th August 1994
decision and 11th October 1994 resolution. On 31 March 1993, the appellate court's Special Thirteenth Division
affirmed in all respects the assailed decision and resolution.

In the instant petition, the Solicitor General argues: That —

I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL REVENUE

INTERPRETING THE PROVISIONS OF THE TAX CODE.

II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF RMC 37-93,

FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND PRIOR HEARING ARE NOT
NECESSARY TO ITS VALIDITY, EFFECTIVITY AND ENFORCEABILITY.

III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 37-93 ON JULY 2,
1993.

IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY

MANUFACTURED CIGARETTES SIMILARLY SITUATED AS "HOPE," "MORE" AND
"CHAMPION" CIGARETTES.

V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING "HOPE," "MORE"

AND "CHAMPION" CIGARETTES BEFORE THE EFFECTIVITY OF R.A. NO. 7654.

VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO ITS VALIDITY,
EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS OR PROPRIETY; RMC 37-93
IS CORRECT. 10

In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR which can thus become
effective without any prior need for notice and hearing, nor publication, and that its issuance is not discriminatory
since it would apply under similar circumstances to all locally manufactured cigarettes.

The Court must sustain both the appellate court and the tax court.

Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings for the effective
implementation of the provisions of the National Internal Revenue Code. Let it be made clear that such authority
of the Commissioner is not here doubted. Like any other government agency, however, the CIR may not disregard
legal requirements or applicable principles in the exercise of its quasi-legislative powers.

Let us first distinguish between two kinds of administrative issuances — a legislative rule and an interpretative
rule.

In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance Secretary, 11 the Court expressed:

. . . a legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation
by providing the details thereof . In the same way that laws must have the benefit of public hearing, it is
generally required that before a legislative rule is adopted there must be hearing. In this connection, the
Administrative Code of 1987 provides:

13
 Public Participation. — If not otherwise required by law, an agency shall, as far as practicable, publish or
circulate notices of proposed rules and afford interested parties the opportunity to submit their views
prior to the adoption of any rule.

(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been
published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon.

(3) In case of opposition, the rules on contested cases shall be observed.

In addition such rule must be published. On the other hand, interpretative rules are designed to provide
guidelines to the law which the administrative agency is in charge of enforcing. 12

It should be understandable that 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, upon 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 adds to or
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.

A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us
that the circular cannot be viewed simply as a corrective measure (revoking in the process the previous holdings
of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and
most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the
classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA
7654. Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes
which at the time of its effectivity were not so classified as bearing foreign brands. Prior to the issuance of the
questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally
manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax. Hence, without RMC 37-93,
the enactment of RA 7654, would have had no new tax rate consequence on private respondent's products.
Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the
amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so
doing, the BIR not simply intrepreted the law; verily, it legislated under its quasi-legislative authority. The due
observance of the requirements of notice, of hearing, and of publication should not have been then ignored.

Indeed, the BIR itself, in its RMC 10-86, has observed and provided:

RMC NO. 10-86

Effectivity of Internal Revenue Rules and Regulations

It has been observed that one of the problem areas bearing on compliance with Internal Revenue Tax
rules and regulations is lack or insufficiency of due notice to the tax paying public. Unless there is due
notice, due compliance therewith may not be reasonably expected. And most importantly, their strict
enforcement could possibly suffer from legal infirmity in the light of the constitutional provision on "due
process of law" and the essence of the Civil Code provision concerning effectivity of laws, whereby due
notice is a basic requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).

In order that there shall be a just enforcement of rules and regulations, in conformity with the basic
element of due process, the following procedures are hereby prescribed for the drafting, issuance and
implementation of the said Revenue Tax Issuances:

(1) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit
Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue
Memorandum Orders bearing on internal revenue tax rules and regulations.

(2) Except when the law otherwise expressly provides, the aforesaid internal revenue tax
issuances shall not begin to be operative until after due notice thereof may be fairly
presumed.

Due notice of the said issuances may be fairly presumed only after the following
procedures have been taken;

14
 xxx xxx xxx

(5) Strict compliance with the foregoing procedures is

enjoined. 13

Nothing on record could tell us that it was either impossible or impracticable for the BIR to observe and comply
with the above requirements before giving effect to its questioned circular.

Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.

Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be uniform and equitable.
Uniformity requires that all subjects or objects of taxation, similarly situated, are to be treated alike or put on
equal footing both in privileges and liabilities. 14 Thus, all taxable articles or kinds of property of the same class
must be taxed at the same rate 15 and the tax must operate with the same force and effect in every place where
the subject may be found.

Apparently, RMC 37-93 would only apply to "Hope Luxury," "Premium More" and "Champion" cigarettes and,
unless petitioner would be willing to concede to the submission of private respondent that the circular should, as
in fact my esteemed colleague Mr. Justice Bellosillo so expresses in his separate opinion, be
considered adjudicatory in nature and thus violative of due process following the Ang Tibay 16 doctrine, the
measure suffers from lack of uniformity of taxation. In its decision, the CTA has keenly noted that other cigarettes
bearing foreign brands have not been similarly included within the scope of the circular, such as —

1. Locally manufactured by ALHAMBRA INDUSTRIES, INC.

(a) "PALM TREE" is listed as manufactured by office of Monopoly, Korea (Exhibit "R")

2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY

(a) "GOLDEN KEY" is listed being manufactured by United Tobacco, Pakistan (Exhibit "S")

(b) "CANNON" is listed as being manufactured by Alpha Tobacco, Bangladesh (Exhibit "T")

3. Locally manufactured by LA PERLA INDUSTRIES, INC.

(a) "WHITE HORSE" is listed as being manufactured by Rothman's, Malaysia (Exhibit "U")

(b) "RIGHT" is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit "V-1")

4. Locally manufactured by MIGHTY CORPORATION

(a) "WHITE HORSE" is listed as being manufactured by Rothman's, Malaysia (Exhibit "U-
1")

5. Locally manufactured by STERLING TOBACCO CORPORATION

(a) "UNION" is listed as being manufactured by Sumatra Tobacco, Indonesia and Brown
and Williamson, USA (Exhibit "U-3")

(b) "WINNER" is listed as being manufactured by Alpha Tobacco, Bangladesh; Nangyang,

Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier Tobacco, Pakistan
and Haggar, Sudan (Exhibit "U-4"). 17

The court quoted at length from the transcript of the hearing conducted on 10 August 1993 by the Committee on
Ways and Means of the House of Representatives; viz:

THE CHAIRMAN. So you have specific information on Fortune Tobacco alone. You don't have specific
information on other tobacco manufacturers. Now, there are other brands which are similarly situated.
They are locally manufactured bearing foreign brands. And may I enumerate to you all these brands, which
are also listed in the World Tobacco Directory . . . Why were these brand not reclassified at 55 if your want
to give a level playing filed to foreign manufacturers?
15
 MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue Memorandum Circular that was
supposed to come after RMC No. 37-93 which have really named specifically the list of locally
manufactured cigarettes bearing a foreign brand for excise tax purposes and includes all these brands that
you mentioned at 55 percent except that at that time, when we had to come up with this, we were forced
to study the brands of Hope, More and Champion because we were given documents that would indicate
the that these brands were actually being claimed or patented in other countries because we went by
Revenue Memorandum Circular 1488 and we wanted to give some rationality to how it came about but
we couldn't find the rationale there. And we really found based on our own interpretation that the only
test that is given by that existing law would be registration in the World Tobacco Directory. So we came
out with this proposed revenue memorandum circular which we forwarded to the Secretary of Finance
except that at that point in time, we went by the Republic Act 7654 in Section 1 which amended Section
142, C-1, it said, that on locally manufactured cigarettes which are currently classified and taxed at 55
percent. So we were saying that when this law took effect in July 3 and if we are going to come up with
this revenue circular thereafter, then I think our action would really be subject to question but we feel that
. . . Memorandum Circular Number 37-93 would really cover even similarly situated brands. And in fact, it
was really because of the study, the short time that we were given to study the matter that we could not
include all the rest of the other brands that would have been really classified as foreign brand if we went
by the law itself. I am sure that by the reading of the law, you would without that ruling by Commissioner
Tan they would really have been included in the definition or in the classification of foregoing brands.
These brands that you referred to or just read to us and in fact just for your information, we really came
out with a proposed revenue memorandum circular for those brands. (Emphasis supplied)

(Exhibit "FF-2-C," pp. V-5 TO V-6, VI-1 to VI-3).

xxx xxx xxx

MS. CHATO. . . . But I do agree with you now that it cannot and in fact that is why I felt that we . . . I wanted
to come up with a more extensive coverage and precisely why I asked that revenue memorandum circular
that would cover all those similarly situated would be prepared but because of the lack of time and I came
out with a study of RA 7654, it would not have been possible to really come up with the reclassification or
the proper classification of all brands that are listed there. . . (emphasis supplied) (Exhibit "FF-2d," page
IX-1)

xxx xxx xxx

HON. DIAZ. But did you not consider that there are similarly situated?

MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue Memorandum Circular
No. 37-93, the other brands came about the would have also clarified RMC 37-93 by I was saying really
because of the fact that I was just recently appointed and the lack of time, the period that was allotted to
us to come up with the right actions on the matter, we were really caught by the July 3 deadline. But in
fact, We have already prepared a revenue memorandum circular clarifying with the other . . . does not yet,
would have been a list of locally manufactured cigarettes bearing a foreign brand for excise tax purposes
which would include all the other brands that were mentioned by the Honorable Chairman. (Emphasis
supplied) (Exhibit "FF-2-d," par. IX-4). 18

All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and effective
administrative issuance.

WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax Appeals, is AFFIRMED. No costs.

SO ORDERED.

Kapunan, J., concurs.

G.R. No. 78385 August 31, 1987

PHILIPPINE CONSUMERS FOUNDATION, INC., petitioner,

vs.
THE SECRETARY OF EDUCATION, CULTURE AND SPORTS, respondent.

16
GANCAYCO, J.:

This is an original Petition for prohibition with a prayer for the issuance of a writ of preliminary injunction.

The record of the case discloses that the herein petitioner Philippine Consumers Foundation, Inc. is a non-stock, non-profit
corporate entity duly organized and existing under the laws of the Philippines. The herein respondent Secretary of
Education, Culture and Sports is a ranking cabinet member who heads the Department of Education, Culture and Sports
of the Office of the President of the Philippines.

On February 21, 1987, the Task Force on Private Higher Education created by the Department of Education, Culture and
Sports (hereinafter referred to as the DECS) submitted a report entitled "Report and Recommendations on a Policy for
Tuition and Other School Fees." The report favorably recommended to the DECS the following courses of action with
respect to the Government's policy on increases in school fees for the schoolyear 1987 to 1988 —

(1) Private schools may be allowed to increase its total school fees by not more than 15 per cent to 20 per
cent without the need for the prior approval of the DECS. Schools that wish to increase school fees beyond
the ceiling would be subject to the discretion of the DECS;

(2) Any private school may increase its total school fees in excess of the ceiling, provided that the total
schools fees will not exceed P1,000.00 for the schoolyear in the elementary and secondary levels, and
P50.00 per academic unit on a semestral basis for the collegiate level. 1

The DECS took note of the report of the Task Force and on the basis of the same, the DECS, through the respondent
Secretary of Education, Culture and Sports (hereinafter referred to as the respondent Secretary), issued an Order
authorizing, inter alia, the 15% to 20% increase in school fees as recommended by the Task Force. The petitioner sought
a reconsideration of the said Order, apparently on the ground that the increases were too high. 2 Thereafter, the DECS
issued Department Order No. 37 dated April 10, 1987 modifying its previous Order and reducing the increases to a lower
ceiling of 10% to 15%, accordingly. 3 Despite this reduction, the petitioner still opposed the increases. On April 23, 1987,
the petitioner, through counsel, sent a telegram to the President of the Philippines urging the suspension of the
implementation of Department Order No. 37. 4 No response appears to have been obtained from the Office of the
President.

Thus, on May 20, 1987, the petitioner, allegedly on the basis of the public interest, went to this Court and filed the instant
Petition for prohibition, seeking that judgment be rendered declaring the questioned Department Order unconstitutional.
The thrust of the Petition is that the said Department Order was issued without any legal basis. The petitioner also
maintains that the questioned Department Order was issued in violation of the due process clause of the Constitution in
asmuch as the petitioner was not given due notice and hearing before the said Department Order was issued.

In support of the first argument, the petitioner argues that while the DECS is authorized by law to regulate school fees in
educational institutions, the power to regulate does not always include the power to increase school fees. 5

Regarding the second argument, the petitioner maintains that students and parents are interested parties that should be
afforded an opportunity for a hearing before school fees are increased. In sum, the petitioner stresses that the questioned
Order constitutes a denial of substantive and procedural due process of law.

Complying with the instructions of this Court, 6 the respondent Secretary submitted a Comment on the Petition. 7The
respondent Secretary maintains, inter alia, that the increase in tuition and other school fees is urgent and necessary, and
that the assailed Department Order is not arbitrary in character. In due time, the petitioner submitted a Reply to the
Comment. 8 Thereafter, We considered the case submitted for resolution.

After a careful examination of the entire record of the case, We find the instant Petition devoid of merit.

We are not convinced by the argument that the power to regulate school fees "does not always include the power to
increase" such fees. Section 57 (3) of Batas Pambansa Blg. 232, otherwise known as The Education Act of 1982, vests the
DECS with the power to regulate the educational system in the country, to wit:

SEC. 57. Educations and powers of the Ministry. The Ministry shall:

xxx xxx xxx

17
 (3) Promulgate rules and regulations necessary for the administration, supervision and regulation of the
educational system in accordance with declared policy.

xxx xxx xxx 9

Section 70 of the same Act grants the DECS the power to issue rules which are likewise necessary to discharge its functions
and duties under the law, to wit:

SEC. 70. Rule-making Authority. — The Minister of Education and Culture, charged with the administration
and enforcement of this Act, shall promulgate the necessary implementing rules and regulations.

In the absence of a statute stating otherwise, this power includes the power to prescribe school fees. No other government
agency has been vested with the authority to fix school fees and as such, the power should be considered lodged with the
DECS if it is to properly and effectively discharge its functions and duties under the law.

We find the remaining argument of the petitioner untenable. The petitioner invokes the due process clause of the
Constitution against the alleged arbitrariness of the assailed Department Order. The petitioner maintains that the due
process clause requires that prior notice and hearing are indispensable for the Department Order to be validly issued.

We disagree.

The function of prescribing rates by an administrative agency may be either a legislative or an adjudicative function. If it
were a legislative function, the grant of prior notice and hearing to the affected parties is not a requirement of due process.
As regards rates prescribed by an administrative agency in the exercise of its quasi-judicial function, prior notice and
hearing are essential to the validity of such rates. When the rules and/or rates laid down by an administrative agency are
meant to apply to all enterprises of a given kind throughout the country, they may partake of a legislative character. Where
the rules and the rates imposed apply exclusively to a particular party, based upon a finding of fact, then its function
is quasi-judicial in character. 9a

Is Department Order No. 37 issued by the DECS in the exercise of its legislative function? We believe so. The assailed
Department Order prescribes the maximum school fees that may be charged by all private schools in the country for
schoolyear 1987 to 1988. This being so, prior notice and hearing are not essential to the validity of its issuance.

This observation notwithstanding, there is a failure on the part of the petitioner to show clear and convincing evidence of
such arbitrariness. As the record of the case discloses, the DECS is not without any justification for the issuance of the
questioned Department Order. It would be reasonable to assume that the report of the Task Force created by the DECS,
on which it based its decision to allow an increase in school fees, was made judiciously. Moreover, upon the instance of
the petitioner, as it so admits in its Petition, the DECS had actually reduced the original rates of 15% to 20% down to 10%
to 15%, accordingly. Under the circumstances peculiar to this case, We cannot consider the assailed Department Order
arbitrary.

Under the Rules of Court, it is presumed that official duty has been regularly performed. 10 In the absence of proof to the
contrary, that presumption prevails. This being so, the burden of proof is on the party assailing the regularity of official
proceedings. In the case at bar, the petitioner has not successfully disputed the presumption.

We commend the petitioner for taking the cudgels for the public, especially the parents and the students of the country.
Its zeal in advocating the protection of the consumers in its activities should be lauded rather than discouraged. But a
more convincing case should be made out by it if it is to seek relief from the courts some time in the future. Petitioner
must establish that respondent acted without or in excess of her jurisdiction; or with grave abuse of discretion, and there
is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law before the extraordinary writ
of prohibition may issue. 11

This Court, however, does not go to the extent of saying that it gives its judicial imprimatur to future increases in school
fees. The increases must not be unreasonable and arbitrary so as to amount to an outrageous exercise of government
authority and power. In such an eventuality, this Court will not hesitate to exercise the power of judicial review in its
capacity as the ultimate guardian of the Constitution.

WHEREFORE, in view of the foregoing, the instant Petition for prohibition is hereby DISMISSED for lack of merit. We make
no pronouncement as to costs.

SO ORDERED.

18
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin, Sarmiento
and Cortes, JJ., concur.

G.R. No. L-12596 July 31, 1958

JOSE L. GUEVARA, petitioner,

vs.
THE COMMISSION ON ELECTIONS, respondent.

Enrique M. Fernando for petitioner.

Dominador D. Dayot for respondent.

BAUTISTA ANGELO, J.:

Petitioner was ordered by the Commissioner on Elections to show cause why he should not be punished for contempt for
having published in the Sunday Times issue of June 2, 1957 an article entitled "Ballot Boxes Contract Hit", which tended
to interfere with and influence the Commission on Elections and its members in the adjudication of a controversy then
pending investigation and determination before said body "arising from the third petition for reconsideration of May 20,
1957 and the supplementary petition thereof of June 1, 1957 filed by Acme Steel Mfg. Co., Inc., praying for reconsideration
of the resolutions of the Commission of May 4 and 13, 1957, awarding the contracts for the manufacture and supply of
34,000 ballot boxes to the National Shipyards & Steel Corporation and the Asiatic Steel Mfg. Co., Inc. and the respective
answers of the latter two corporations to said petitions; and which article likewise tended to degrade, bring into disrepute,
and undermine the exclusive constitutional function of this Commission and its Chairman Domingo Imperial and Member
Sixto Brillantes in the administration of all the laws relative to the conduct of elections."

Petitioner, answering summons issued to him by the Commission, appeared and filed a motion to quash on the following
grounds:

a) The Commission has no jurisdiction to punish as contempt the publication of the alleged contemptuous article,
as neither in the Constitution nor in statutes is the Commission granted a power to so punish the same, for should
Section 5 of Republic Act No. 180, vesting the Commission with "power to punish contempts provided for in Rule
of the Court under the same procedure and with the same penalties provided therein," be applied to the case at
hand, said provision would be unconstitutional.

b) Assuming that the Commission's power to punish contempt exists, the same cannot be applied to the instant
case, where the Commission is exercising a purely administrative function for purchasing ballot boxes.

c) Assuming that the Commission's power to punish contempt exists, said power cannot apply to the present case
because the matter of purchasing the ballot boxes was already a closed case when the article in question was
published.

d) Assuming that controversy contemplated by the law was still pending, the article in question was a fair report
because it could be assumed that the news report of the respondent was based on the motion for reconsideration
filed by the Acme Steel where there was an allegation of fraud, etc.

The Commission, after hearing, denied the motion to quash but granted petitioner a period of fifteen (15) days within
which to elevate the matter to the Supreme Court in view of the issue raised which assails the jurisdiction of the
Commission to investigate and punish petitioner for contempt in connection with the alleged publication. Hence the
present petition for prohibition with preliminary injunction.

The facts which gave rise to the present contemptuous incident are: The Commission on Elections, on May 4, 1957, after
proper negotiations, awarded to the National Shipyards & Steel Corporation (NASSCO), the Acme Steel Mfg. Co., Inc.
(ACME), and the Asiatic Steel Mfg. Co., Inc. (ASIATIC), the contracts to manufacture and supply the Commission 12,000,
11,000 and 11,000 ballot boxes at P17.64, P14.00, and P17.00 each, respectively. On May 8, 1957, both the NASSCO and
the ASIATIC signed with the Commission on Elections the corresponding contracts thereon. On May 13, 1957, the
Commission cancelled the award to the ACME for failure of the latter to sign the contract within the designated time and
awarded to the NASSCO and the ASIATIC, one-half each, the 11,000 ballot boxes originally alloted to the ACME. The
corresponding contracts thereon were signed on May 16, 1957.

Then followed a series of petitions filed by the ACME for the reconsideration of the resolution of the Commission of May
13, 1957. The first of these petitions was filed on May 14, 1957 which, after hearing, was denied by the Commission in its

19
resolution of May 16, 1957. The second petition was filed on May 16, 1957 and was denied on May 17, 1957. The third
petition was filed on May 20, 1957, and because of the seriousness of the grounds alleged therein for the annulment of
its previous resolutions, the Commission resolved to conduct a formal investigation on the matter ordering the NASSCO
and the ASIATIC to file their respective answers. Thereafter, after these corporations had filed their answers, the
Commission held a formal hearing thereon on May 24, 1957. On May 28, 1957, the ACME filed a memorandum on the
points adduced during the hearing, and on June 4, 1957, the Commission issued its resolution denying the third motion
for reconsideration. The article signed by petitioner was published in the June 2, 1957 issue of the Sunday Times, a
newspaper of nation-wide circulation.

The question to be determined is whether the Commission on Elections has the power and jurisdiction to conduct
contempt proceedings against petitioner with a view to imposing upon him the necessary disciplinary penalty in
connection with the publication of an article in the Sunday Times issue of June 2, 1957 which, according to the charge,
tended to interfere with and influence said Commission in the adjudication of a controversy then pending determination
and to degrade and undermine the function of the Commission and its members in the administration of all laws relative
to the conduct of elections.

The Commission on Elections is an independent administrative body which was established by our Constitution to take
charge of the enforcement of all laws relative to the conduct of elections and devise means and methods that will insure
the accomplishment of free, orderly, and honest elections (Sumulong vs. Commission on Elections, 73 Phil., 288;
Nacionalista Party vs. The Solicitor General, 85 Phil., 101; 47 Off. Gaz. 2356). Its powers are defined in the Constitution. It
provides that it "shall have exclusive charge of the enforcement and administration of all laws relative to the conduct of
elections and shall exercise all other functions which may be conferred upon it by law. It shall decide, save those involving
the right to vote, all administrative questions, affecting elections, including the determination of the number and location
of polling places, and the appointment of election inspectors and of other election officials" (Section 2, Article X). The
Revised Election Code supplements what other powers may be exercised by said Commission. Among these powers are
those embodied in Section 5 thereof which, for ready reference, we quote:

SEC. 5. Powers of Commission. — The Commission on Elections or any of the members thereof shall have the
power to summon the parties to a controversy pending before it, issue subpoenas and subpoenas duces
tecum and otherwise take testimony in any investigation or hearing pending before it, and delegate such power
to any officer. Any controversy submitted to the Commission on Elections shall be tried, heard and decided by it
within fifteen days counted from the time the corresponding petition giving rise to said controversy is filed. The
Commission or any of the members thereof shall have the power to punish contempts provided for in rule sixty-
four of the Rules of Court, under the same procedure and with the same penalties provided therein.

Any violation of any final and executory decision, order or ruling of the Commission shall constitute contempt of
the Commission.

Any decision, order or ruling of the Commission on Elections may be reviewed by the Supreme Court by writ
of certiorari accordance with the Rules of Court or with such rules as may be promulgated by the Supreme Court.

It would therefore appear that the Commission on Elections not only has the duty to enforce and administer all laws
relative to the conduct of elections but the power to try, hear and decide any controversy that may be submitted to it in
connection with the elections. And as an incident of this power, it may also punish for contempt in those cases provided
for in Rule 64 of the Rules of Court under the same procedure and with the same penalties provided therein. In this sense,
the Commission, although it cannot be classified as a court of justice within the meaning of the Constitution (Section 13,
Article VIII), for it is merely an independent administrative body (The Nacionalista Party vs. Vera, 85 Phil., 126; 47 Off. Gaz.
2375), may however exercise quasi-judicial functions in so far as controversies that by express provision of the law come
under its jurisdiction. As to what question may come within this category, neither the Constitution nor the Revised Election
Code specifies. The former merely provides that it shall come under its jurisdiction, saving the right to vote, all
administrative questions affecting elections, including the determination of the number and location of polling places, and
the appointment of election inspectors and other election officials, while the latter is silent as to what questions may be
brought it for determination. But it is clear that, to come under its jurisdiction, the questions should be controversial in
nature and must refer to the enforcement and administration of all laws relative to the conduct of election. The difficulty
lies in drawing the demarcation line between a duty which inherently is administrative in character and a function which
is justiciable and which would therefore call for judicial action by the Commission. But this much depends upon the factors
that may intervene when a controversy should arise.

Thus, it has been held that the Commission has no power to annul an election which might not have been free, orderly
and honest for such matter devolves upon other agencies of the Government (Nacionalista Party vs. Commission on
Elections, 85 Phil., 148; 47 Off. Gaz. 2851); neither does it have the power to decide the validity or invalidity of votes cast
in an election for such devolves upon the courts or the electoral tribunals (Ibid.); it does not also have the power to order
20
a recounting of the votes before the proclamation of election even if there are discrepancies in the election returns for it
is a function of our courts of justice (Ramos vs. Commission on Elections, 80 Phil., 722); nor does it have the power to
order the correction of a certificate of canvass after a candidate had been proclaimed and assumed office (De Leon vs.
Imperial, 94 Phil., 680); and only very recently this Court has held that the Commission has no power to reject a certificate
of candidacy except only when its purpose is to create confusion in the minds of the electors (Abcede vs. Imperial, 103
Phil., 136).

On the other hand, it has been held that the Commission has the power to annul an illegal registry list of voters (Feliciano,
et al. vs. Lugay, et al., 93 Phil., 744; 49 Off. Gaz. 3863); to annul an election canvass made by a municipal board of
canvassers (Mintu vs. Enage, et al., G. R. No. L-1834); and to investigate and act on the illegality of a canvass of election
made by a municipal board of canvassers (Ramos vs. Commission on Elections, 80 Phil., 722). And as to what are the
ministerial duties which the Commission on Elections must perform in connection with the conduct of elections, the
following resume made by the Commission itself in a controversy which was submitted to it for determination is very
enlightening:

In the enforcement and administration of all laws relative to the conduct of elections, the first duty of the
Commission is to set in motion all the multifarious preparatory processes ranging from the purchase of election
supplies, printing of election forms and ballots, appointments of members of the boards of inspectors,
establishment of precincts and designation of polling places to the preparation of the registry lists of voters, so as
to put in readiness on election day the election machinery in order that the people who are legally qualified to
exercise the right of suffrage may be able to cast their votes to express their sovereign will. It is incumbent upon
the Commission to see that all these preparatory acts will insure free, orderly and honest elections. All provisions
of the Revised Election Code contain regulations relative to these processes preparatory for election day. It is
incumbent upon the Commission on Elections to see that all these preparatory acts are carried out freely, honestly
and in an orderly manner. It is essential that the Commission or its authorized representatives, in establishing
precincts or designating polling places, must act freely, honestly and in an orderly manner. It is also essential that
the printing of election forms and the purchase of election supplies and their distribution are done freely, honestly
and in an orderly manner. It is further essential that the political parties or their duly authorized representatives
who are entitled to be represented in the boards of inspectors must have the freedom to choose the person who
will represent them in each precinct throughout the country. It is further essential that once organized, the boards
of inspectors shall be given all the opportunity to be able to perform their duties in accordance with law freely,
honestly and in an orderly manner, individually and as a whole. In other words, it is the duty of the Commission
to see that the boards of inspectors, in all their sessions, are placed in an atmosphere whereby they can fulfill
their duties without any pressure, influence and interference from any private person or public official. All these
preparatory steps are administrative in nature and all questions arising therefrom are within the exclusive powers
of the Commission to resolve. All irregularities, anomalies and misconduct committed by any official in these
preparatory steps are within the exclusive power of the Commission to correct. Any erring official must respond
to the Commission for investigation. Of these preparatory acts, the preparation of the permanent list of voters is
the matter involved in this case, which to our mind is completely an administrative matter. (Decision of the
Commission on Elections, October 28, 1951, In Re Petition of Angel Genuino vs. Prudente, et al., Case No. 196) 1

Considering that the paramount administrative duty of the Commission is to set in motion all the multifarious preparatory
processes ranging from the purchase of election supplies, printing of election forms and ballots, appoinments of members
of the board of inspectors, appointment of precincts and designation of polling preparation of registry lists of voters, so
as to as to put in readiness on election day the election machinery, it may also be reasonably said that the requisitioning
and preparation of the necessary ballot boxes to be used in the elections is by the same token an imperative ministerial
duty which the Commission is bound to perform if the elections are to be held. Such is the incident which gave rise to the
contempt case before us. It stems from the ministerial act of the Commission in requisitioning for the necessary ballot
boxes in connection with the last elections and in so proceeding it provoked a dispute between several dealers who offered
to do the job.

Although the negotiation conducted by the Commission has resulted in controversy between several dealers, that
however merely refers to a ministerial duty which the Commission has performed in its administrative capacity in relation
to the conduct of elections ordained by our Constitution. In proceeding on this matter, it only discharged a ministerial
duty; it did not exercise any judicial function. Such being the case, it could not exercise the power to punish for contempt
as postulated in the law, for such power is inherently judicial in nature. As this Court has aptly said: "The power to punish
for contempt is inherent in all courts; its existence is essential to the preservation of order in judicial proceedings, and to
the enforcement of judgments, orders and mandates of courts, and, consequently, in the administration of justice" (Slade
Perkins vs. Director of Prisons, 58 Phil., 271; U. S. vs. Loo Hoe, 36 Phil., 867; In Re Sotto, 46 Off. Gaz. 2570; In Re Kelly, 35
Phil., 944). The exercise of this power has always been regarded as a necessary incident and attribute of courts (Slade
Perkins vs. Director of Prisons, Ibid.). Its exercise by administrative bodies has been invariably limited to making effective
the power to elicit testimony (People vs. Swena, 296 P., 271). And the exercise of that power by an administrative body in
21
furtherance of its administrative function has been held invalid (Langenberg vs. Decker, 31 N.E. 190; In Re Sims 37 P., 135;
Roberts vs. Hacney, 58 S.W., 810). We are therefore persuaded to conclude that the Commission on Elections has no
power nor authority to submit petitioner to contempt proceedings if its purpose is to discipline him because of the
publication of the article mentioned in the charge under consideration.

Wherefore, petition is granted. Respondent Commission is hereby enjoined from proceeding with the case set forth in its
resolution of June 20, 1957, with pronouncement as to costs.

The preliminary injunction issued by this Court is made permanent.

Paras, C. J., Padilla, Montemayor, Reyes, A., Reyes, J. B. L., Endencia and Felix, JJ., concur.

G.R. No. L-46496 February 27, 1940

ANG TIBAY, represented by TORIBIO TEODORO, manager and propietor, and

NATIONAL WORKERS BROTHERHOOD, petitioners,
vs.
THE COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION, INC., respondents.

Office of the Solicitor-General Ozaeta and Assistant Attorney Barcelona for the Court of Industrial Relations.
Antonio D. Paguia for National Labor Unon.
Claro M. Recto for petitioner "Ang Tibay".
Jose M. Casal for National Workers' Brotherhood.

LAUREL, J.:

The Solicitor-General in behalf of the respondent Court of Industrial Relations in the above-entitled case has filed a motion
for reconsideration and moves that, for the reasons stated in his motion, we reconsider the following legal conclusions of
the majority opinion of this Court:

1. Que un contrato de trabajo, asi individual como colectivo, sin termino fijo de duracion o que no sea para una
determinada, termina o bien por voluntad de cualquiera de las partes o cada vez que ilega el plazo fijado para el
pago de los salarios segun costumbre en la localidad o cunado se termine la obra;

2. Que los obreros de una empresa fabril, que han celebrado contrato, ya individual ya colectivamente, con ell,
sin tiempo fijo, y que se han visto obligados a cesar en sus tarbajos por haberse declarando paro forzoso en la
fabrica en la cual tarbajan, dejan de ser empleados u obreros de la misma;

3. Que un patrono o sociedad que ha celebrado un contrato colectivo de trabajo con sus osbreros sin tiempo fijo
de duracion y sin ser para una obra determiminada y que se niega a readmitir a dichos obreros que cesaron como
consecuencia de un paro forzoso, no es culpable de practica injusta in incurre en la sancion penal del articulo 5 de
la Ley No. 213 del Commonwealth, aunque su negativa a readmitir se deba a que dichos obreros pertenecen a un
determinado organismo obrero, puesto que tales ya han dejado deser empleados suyos por terminacion del
contrato en virtud del paro.

The respondent National Labor Union, Inc., on the other hand, prays for the vacation of the judgement rendered by the
majority of this Court and the remanding of the case to the Court of Industrial Relations for a new trial, and avers:

1. That Toribio Teodoro's claim that on September 26, 1938, there was shortage of leather soles in ANG TIBAY
making it necessary for him to temporarily lay off the members of the National Labor Union Inc., is entirely false
and unsupported by the records of the Bureau of Customs and the Books of Accounts of native dealers in leather.

2. That the supposed lack of leather materials claimed by Toribio Teodoro was but a scheme to systematically
prevent the forfeiture of this bond despite the breach of his CONTRACT with the Philippine Army.

3. That Toribio Teodoro's letter to the Philippine Army dated September 29, 1938, (re supposed delay of leather
soles from the States) was but a scheme to systematically prevent the forfeiture of this bond despite the breach
of his CONTRACT with the Philippine Army.

22
 4. That the National Worker's Brotherhood of ANG TIBAY is a company or employer union dominated by Toribio
Teodoro, the existence and functions of which are illegal. (281 U.S., 548, petitioner's printed memorandum, p.
25.)

5. That in the exercise by the laborers of their rights to collective bargaining, majority rule and elective
representation are highly essential and indispensable. (Sections 2 and 5, Commonwealth Act No. 213.)

6. That the century provisions of the Civil Code which had been (the) principal source of dissensions and
continuous civil war in Spain cannot and should not be made applicable in interpreting and applying the salutary
provisions of a modern labor legislation of American origin where the industrial peace has always been the rule.

7. That the employer Toribio Teodoro was guilty of unfair labor practice for discriminating against the National
Labor Union, Inc., and unjustly favoring the National Workers' Brotherhood.

8. That the exhibits hereto attached are so inaccessible to the respondents that even with the exercise of due
diligence they could not be expected to have obtained them and offered as evidence in the Court of Industrial
Relations.

9. That the attached documents and exhibits are of such far-reaching importance and effect that their admission
would necessarily mean the modification and reversal of the judgment rendered herein.

The petitioner, Ang Tibay, has filed an opposition both to the motion for reconsideration of the respondent National Labor
Union, Inc.

In view of the conclusion reached by us and to be herein after stead with reference to the motion for a new trial of the
respondent National Labor Union, Inc., we are of the opinion that it is not necessary to pass upon the motion for
reconsideration of the Solicitor-General. We shall proceed to dispose of the motion for new trial of the respondent labor
union. Before doing this, however, we deem it necessary, in the interest of orderly procedure in cases of this nature, in
interest of orderly procedure in cases of this nature, to make several observations regarding the nature of the powers of
the Court of Industrial Relations and emphasize certain guiding principles which should be observed in the trial of cases
brought before it. We have re-examined the entire record of the proceedings had before the Court of Industrial Relations
in this case, and we have found no substantial evidence that the exclusion of the 89 laborers here was due to their union
affiliation or activity. The whole transcript taken contains what transpired during the hearing and is more of a record of
contradictory and conflicting statements of opposing counsel, with sporadic conclusion drawn to suit their own views. It
is evident that these statements and expressions of views of counsel have no evidentiary value.

The Court of Industrial Relations is a special court whose functions are specifically stated in the law of its creation
(Commonwealth Act No. 103). It is more an administrative than a part of the integrated judicial system of the nation. It is
not intended to be a mere receptive organ of the Government. Unlike a court of justice which is essentially passive, acting
only when its jurisdiction is invoked and deciding only cases that are presented to it by the parties litigant, the function of
the Court of Industrial Relations, as will appear from perusal of its organic law, is more active, affirmative and dynamic. It
not only exercises judicial or quasi-judicial functions in the determination of disputes between employers and employees
but its functions in the determination of disputes between employers and employees but its functions are far more
comprehensive and expensive. It has jurisdiction over the entire Philippines, to consider, investigate, decide, and settle
any question, matter controversy or dispute arising between, and/or affecting employers and employees or laborers, and
regulate the relations between them, subject to, and in accordance with, the provisions of Commonwealth Act No. 103
(section 1). It shall take cognizance or purposes of prevention, arbitration, decision and settlement, of any industrial or
agricultural dispute causing or likely to cause a strike or lockout, arising from differences as regards wages, shares or
compensation, hours of labor or conditions of tenancy or employment, between landlords and tenants or farm-laborers,
provided that the number of employees, laborers or tenants of farm-laborers involved exceeds thirty, and such industrial
or agricultural dispute is submitted to the Court by the Secretary of Labor or by any or both of the parties to the
controversy and certified by the Secretary of labor as existing and proper to be by the Secretary of Labor as existing and
proper to be dealth with by the Court for the sake of public interest. (Section 4, ibid.) It shall, before hearing the dispute
and in the course of such hearing, endeavor to reconcile the parties and induce them to settle the dispute by amicable
agreement. (Paragraph 2, section 4, ibid.) When directed by the President of the Philippines, it shall investigate and study
all industries established in a designated locality, with a view to determinating the necessity and fairness of fixing and
adopting for such industry or locality a minimum wage or share of laborers or tenants, or a maximum "canon" or rental to
be paid by the "inquilinos" or tenants or less to landowners. (Section 5, ibid.) In fine, it may appeal to voluntary arbitration
in the settlement of industrial disputes; may employ mediation or conciliation for that purpose, or recur to the more
effective system of official investigation and compulsory arbitration in order to determine specific controversies between
labor and capital industry and in agriculture. There is in reality here a mingling of executive and judicial functions, which
is a departure from the rigid doctrine of the separation of governmental powers.
23
In the case of Goseco vs. Court of Industrial Relations et al., G.R. No. 46673, promulgated September 13, 1939, we had
occasion to joint out that the Court of Industrial Relations et al., G. R. No. 46673, promulgated September 13, 1939, we
had occasion to point out that the Court of Industrial Relations is not narrowly constrained by technical rules of procedure,
and the Act requires it to "act according to justice and equity and substantial merits of the case, without regard to
technicalities or legal forms and shall not be bound by any technicalities or legal forms and shall not be bound by any
technical rules of legal evidence but may inform its mind in such manner as it may deem just and equitable." (Section 20,
Commonwealth Act No. 103.) It shall not be restricted to the specific relief claimed or demands made by the parties to
the industrial or agricultural dispute, but may include in the award, order or decision any matter or determination which
may be deemed necessary or expedient for the purpose of settling the dispute or of preventing further industrial or
agricultural disputes. (section 13, ibid.) And in the light of this legislative policy, appeals to this Court have been especially
regulated by the rules recently promulgated by the rules recently promulgated by this Court to carry into the effect the
avowed legislative purpose. The fact, however, that the Court of Industrial Relations may be said to be free from the
rigidity of certain procedural requirements does not mean that it can, in justifiable cases before it, entirely ignore or
disregard the fundamental and essential requirements of due process in trials and investigations of an administrative
character. There are primary rights which must be respected even in proceedings of this character:

(1) The first of these rights is the right to a hearing, which includes the right of the party interested or affected to
present his own case and submit evidence in support thereof. In the language of Chief Hughes, in Morgan v. U.S.,
304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129, "the liberty and property of the citizen shall be protected by the
rudimentary requirements of fair play.

(2) Not only must the party be given an opportunity to present his case and to adduce evidence tending to
establish the rights which he asserts but the tribunal must consider the evidence presented. (Chief Justice Hughes
in Morgan v. U.S. 298 U.S. 468, 56 S. Ct. 906, 80 law. ed. 1288.) In the language of this court in Edwards vs. McCoy,
22 Phil., 598, "the right to adduce evidence, without the corresponding duty on the part of the board to consider
it, is vain. Such right is conspicuously futile if the person or persons to whom the evidence is presented can thrust
it aside without notice or consideration."

(3) "While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which
cannot be disregarded, namely, that of having something to support it is a nullity, a place when directly attached."
(Edwards vs. McCoy, supra.) This principle emanates from the more fundamental is contrary to the vesting of
unlimited power anywhere. Law is both a grant and a limitation upon power.

(4) Not only must there be some evidence to support a finding or conclusion (City of Manila vs. Agustin, G.R. No.
45844, promulgated November 29, 1937, XXXVI O. G. 1335), but the evidence must be "substantial." (Washington,
Virginia and Maryland Coach Co. v. national labor Relations Board, 301 U.S. 142, 147, 57 S. Ct. 648, 650, 81 Law.
ed. 965.) It means such relevant evidence as a reasonable mind accept as adequate to support a conclusion."
(Appalachian Electric Power v. National Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor Relations
Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co. v. National Labor Relations
Board, 2 Cir., 98 F. 2d 758, 760.) . . . The statute provides that "the rules of evidence prevailing in courts of law
and equity shall not be controlling.' The obvious purpose of this and similar provisions is to free administrative
boards from the compulsion of technical rules so that the mere admission of matter which would be deemed
incompetent inn judicial proceedings would not invalidate the administrative order. (Interstate Commerce
Commission v. Baird, 194 U.S. 25, 44, 24 S. Ct. 563, 568, 48 Law. ed. 860; Interstate Commerce Commission v.
Louisville and Nashville R. Co., 227 U.S. 88, 93 33 S. Ct. 185, 187, 57 Law. ed. 431; United States v. Abilene and
Southern Ry. Co. S. Ct. 220, 225, 74 Law. ed. 624.) But this assurance of a desirable flexibility in administrative
procedure does not go far as to justify orders without a basis in evidence having rational probative force. Mere
uncorroborated hearsay or rumor does not constitute substantial evidence. (Consolidated Edison Co. v. National
Labor Relations Board, 59 S. Ct. 206, 83 Law. ed. No. 4, Adv. Op., p. 131.)"

(5) The decision must be rendered on the evidence presented at the hearing, or at least contained in the record
and disclosed to the parties affected. (Interstate Commence Commission vs. L. & N. R. Co., 227 U.S. 88, 33 S. Ct.
185, 57 Law. ed. 431.) Only by confining the administrative tribunal to the evidence disclosed to the parties, can
the latter be protected in their right to know and meet the case against them. It should not, however, detract
from their duty actively to see that the law is enforced, and for that purpose, to use the authorized legal methods
of securing evidence and informing itself of facts material and relevant to the controversy. Boards of inquiry may
be appointed for the purpose of investigating and determining the facts in any given case, but their report and
decision are only advisory. (Section 9, Commonwealth Act No. 103.) The Court of Industrial Relations may refer
any industrial or agricultural dispute or any matter under its consideration or advisement to a local board of
inquiry, a provincial fiscal. a justice of the peace or any public official in any part of the Philippines for investigation,
report and recommendation, and may delegate to such board or public official such powers and functions as the

24
 said Court of Industrial Relations may deem necessary, but such delegation shall not affect the exercise of the
Court itself of any of its powers. (Section 10, ibid.)

(6) The Court of Industrial Relations or any of its judges, therefore, must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the views of a subordinate in arriving
at a decision. It may be that the volume of work is such that it is literally Relations personally to decide all
controversies coming before them. In the United States the difficulty is solved with the enactment of statutory
authority authorizing examiners or other subordinates to render final decision, with the right to appeal to board
or commission, but in our case there is no such statutory authority.

(7) The Court of Industrial Relations should, in all controversial questions, render its decision in such a manner
that the parties to the proceeding can know the various issues involved, and the reasons for the decision rendered.
The performance of this duty is inseparable from the authority conferred upon it.

In the right of the foregoing fundamental principles, it is sufficient to observe here that, except as to the alleged agreement
between the Ang Tibay and the National Worker's Brotherhood (appendix A), the record is barren and does not satisfy the
thirst for a factual basis upon which to predicate, in a national way, a conclusion of law.

This result, however, does not now preclude the concession of a new trial prayed for the by respondent National Labor
Union, Inc., it is alleged that "the supposed lack of material claimed by Toribio Teodoro was but a scheme adopted to
systematically discharged all the members of the National Labor Union Inc., from work" and this avernment is desired to
be proved by the petitioner with the "records of the Bureau of Customs and the Books of Accounts of native dealers in
leather"; that "the National Workers Brotherhood Union of Ang Tibay is a company or employer union dominated by
Toribio Teodoro, the existence and functions of which are illegal." Petitioner further alleges under oath that the exhibits
attached to the petition to prove his substantial avernments" are so inaccessible to the respondents that even within the
exercise of due diligence they could not be expected to have obtained them and offered as evidence in the Court of
Industrial Relations", and that the documents attached to the petition "are of such far reaching importance and effect
that their admission would necessarily mean the modification and reversal of the judgment rendered herein." We have
considered the reply of Ang Tibay and its arguments against the petition. By and large, after considerable discussions, we
have come to the conclusion that the interest of justice would be better served if the movant is given opportunity to
present at the hearing the documents referred to in his motion and such other evidence as may be relevant to the main
issue involved. The legislation which created the Court of Industrial Relations and under which it acts is new. The failure
to grasp the fundamental issue involved is not entirely attributable to the parties adversely affected by the result.
Accordingly, the motion for a new trial should be and the same is hereby granted, and the entire record of this case shall
be remanded to the Court of Industrial Relations, with instruction that it reopen the case, receive all such evidence as may
be relevant and otherwise proceed in accordance with the requirements set forth hereinabove. So ordered.

Avanceña, C. J., Villa-Real, Imperial, Diaz, Concepcion and Moran, JJ., concur.

25