Republic of the Philippines

SUPREME COURT
Baguio City

c. Printing of public documents such as the Official

Gazette, General Appropriations Act, Philippine
Reports, and development information materials of
the Philippine Information Agency.

EN BANC
G.R. No. 166620

April 20, 2010

ATTY.
SYLVIA
BANDA,
et
al,
Petitioners,
vs.
EDUARDO R. ERMITA, in his capacity as Executive
Secretary, The Director General of the Philippine
Information
Agency
and
The
National
Treasurer, Respondents.
DECISION

The Office may also accept other government printing jobs,

including government publications, aside from those
enumerated above, but not in an exclusive basis.
The details of the organization, powers, functions,
authorities, and related management aspects of the Office
shall be provided in the implementing details which shall be
prepared and promulgated in accordance with Section II of
this Executive Order.
The Office shall be attached to the Philippine Information
Agency.

LEONARDO-DE CASTRO, J.:

The present controversy arose from a Petition
for Certiorari and prohibition challenging the constitutionality
of Executive Order No. 378 dated October 25, 2004, issued
by President Gloria Macapagal Arroyo (President Arroyo).
Petitioners characterize their action as a class suit filed on
their own behalf and on behalf of all their co-employees at
the National Printing Office (NPO).
The NPO was formed on July 25, 1987, during the term of
former President Corazon C. Aquino (President Aquino), by
virtue of Executive Order No. 2851 which provided, among
others, the creation of the NPO from the merger of the
Government Printing Office and the relevant printing units of
the Philippine Information Agency (PIA). Section 6 of
Executive Order No. 285 reads:
SECTION 6.Creation of the National Printing Office. There
is hereby created a National Printing Office out of the merger
of the Government Printing Office and the relevant printing
units of the Philippine Information Agency. The Office shall
have exclusive printing jurisdiction over the following:
a. Printing, binding and distribution of all standard
and accountable forms of national, provincial, city
and municipal governments, including government
corporations;
b. Printing of officials ballots;

On October 25, 2004, President Arroyo issued the herein

assailed Executive Order No. 378, amending Section 6 of
Executive Order No. 285 by, inter alia, removing the
exclusive jurisdiction of the NPO over the printing services
requirements of government agencies and instrumentalities.
The pertinent portions of Executive Order No. 378, in turn,
provide:
SECTION 1. The NPO shall continue to provide printing
services to government agencies and instrumentalities as
mandated by law. However, it shall no longer enjoy exclusive
jurisdiction over the printing services requirements of the
government over standard and accountable forms. It shall
have to compete with the private sector, except in the printing
of election paraphernalia which could be shared with the
BangkoSentral ng Pilipinas, upon the discretion of the
Commission on Elections consistent with the provisions of
the Election Code of 1987.
SECTION 2. Government agencies/instrumentalities may
source printing services outside NPO provided that:
2.1 The printing services to be provided by the
private sector is superior in quality and at a lower
cost than what is offered by the NPO; and
2.2 The private printing provider is flexible in terms
of meeting the target completion time of the
government agency.
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SECTION 3. In the exercise of its functions, the amount to be

appropriated for the programs, projects and activities of the
NPO in the General Appropriations Act (GAA) shall be limited
to its income without additional financial support from the
government. (Emphases and underscoring supplied.)
Pursuant to Executive Order No. 378, government agencies
and instrumentalities are allowed to source their printing
services from the private sector through competitive bidding,
subject to the condition that the services offered by the
private supplier be of superior quality and lower in cost
compared to what was offered by the NPO. Executive Order
No. 378 also limited NPOs appropriation in the General
Appropriations Act to its income.
Perceiving Executive Order No. 378 as a threat to their
security of tenure as employees of the NPO, petitioners now
challenge its constitutionality, contending that: (1) it is beyond
the executive powers of President Arroyo to amend or repeal
Executive Order No. 285 issued by former President Aquino
when the latter still exercised legislative powers; and (2)
Executive Order No. 378 violates petitioners security of
tenure, because it paves the way for the gradual abolition of
the NPO.
We dismiss the petition.
Before proceeding to resolve the substantive issues, the
Court must first delve into a procedural matter. Since
petitioners instituted this case as a class suit, the Court, thus,
must first determine if the petition indeed qualifies as one. In
Board of Optometry v. Colet,2 we held that "[c]ourts must
exercise utmost caution before allowing a class suit, which is
the exception to the requirement of joinder of all
indispensable parties. For while no difficulty may arise if the
decision secured is favorable to the plaintiffs, a quandary
would result if the decision were otherwise as those who
were deemed impleaded by their self-appointed
representatives would certainly claim denial of due process."
Section 12, Rule 3 of the Rules of Court defines a class suit,
as follows:
Sec. 12.Class suit. When the subject matter of the
controversy is one of common or general interest to many
persons so numerous that it is impracticable to join all as
parties, a number of them which the court finds to be

sufficiently numerous and representative as to fully protect

the interests of all concerned may sue or defend for the
benefit of all. Any party in interest shall have the right to
intervene to protect his individual interest.
From the foregoing definition, the requisites of a class suit
are: 1) the subject matter of controversy is one of common or
general interest to many persons; 2) the parties affected are
so numerous that it is impracticable to bring them all to court;
and 3) the parties bringing the class suit are sufficiently
numerous or representative of the class and can fully protect
the interests of all concerned.
In Mathay v. The Consolidated Bank and Trust
Company,3 the Court held that:
An action does not become a class suit merely because it is
designated as such in the pleadings. Whether the suit is or is
not a class suit depends upon the attending facts, and the
complaint, or other pleading initiating the class action should
allege the existence of the necessary facts, to wit, the
existence of a subject matter of common interest, and the
existence of a class and the number of persons in the
alleged class, in order that the court might be enabled to
determine whether the members of the class are so
numerous as to make it impracticable to bring them all before
the court, to contrast the number appearing on the record
with the number in the class and to determine whether
claimants on record adequately represent the class and the
subject matter of general or common interest. (Emphases
ours.)
Here, the petition failed to state the number of NPO
employees who would be affected by the assailed Executive
Order and who were allegedly represented by petitioners. It
was the Solicitor General, as counsel for respondents, who
pointed out that there were about 549 employees in the
NPO.4 The 67 petitioners undeniably comprised a small
fraction of the NPO employees whom they claimed to
represent. Subsequently, 32 of the original petitioners
executed an Affidavit of Desistance, while one signed a letter
denying ever signing the petition,5 ostensibly reducing the
number of petitioners to 34. We note that counsel for the
petitioners challenged the validity of the desistance or
withdrawal of some of the petitioners and insinuated that
such desistance was due to pressure from people "close to
the seat of power."6 Still, even if we were to disregard the
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affidavit of desistance filed by some of the petitioners, it is

highly doubtful that a sufficient, representative number of
NPO employees have instituted this purported class suit. A
perusal of the petition itself would show that of the 67
petitioners who signed the Verification/Certification of NonForum Shopping, only 20 petitioners were in fact mentioned
in the jurat as having duly subscribed the petition before the
notary public. In other words, only 20 petitioners effectively
instituted the present case.
Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council
of the Philippines, Inc.,7 we observed that an element of a
class suit or representative suit is the adequacy of
representation. In determining the question of fair and
adequate representation of members of a class, the court
must consider (a) whether the interest of the named party is
coextensive with the interest of the other members of the
class; (b) the proportion of those made a party, as it so
bears, to the total membership of the class; and (c) any other
factor bearing on the ability of the named party to speak for
the rest of the class.
Previously, we held in Ibaes v. Roman Catholic Church 8 that
where the interests of the plaintiffs and the other members of
the class they seek to represent are diametrically opposed,
the class suit will not prosper.
It is worth mentioning that a Manifestation of Desistance,9 to
which the previously mentioned Affidavit of Desistance10 was
attached, was filed by the President of the National Printing
Office Workers Association (NAPOWA). The said
manifestation expressed NAPOWAs opposition to the filing
of the instant petition in any court. Even if we take into
account the contention of petitioners counsel that the
NAPOWA President had no legal standing to file such
manifestation, the said pleading is a clear indication that
there is a divergence of opinions and views among the
members of the class sought to be represented, and not all
are in favor of filing the present suit. There is here an
apparent conflict between petitioners interests and those of
the persons whom they claim to represent. Since it cannot be
said that petitioners sufficiently represent the interests of the
entire class, the instant case cannot be properly treated as a
class suit.

As to the merits of the case, the petition raises two main

grounds to assail the constitutionality of Executive Order No.
378:
First, it is contended that President Arroyo cannot amend or
repeal Executive Order No. 285 by the mere issuance of
another executive order (Executive Order No. 378).
Petitioners maintain that former President Aquinos Executive
Order No. 285 is a legislative enactment, as the same was
issued while President Aquino still had legislative powers
under the Freedom Constitution;11 thus, only Congress
through legislation can validly amend Executive Order No.
285.
Second, petitioners maintain that the issuance of Executive
Order No. 378 would lead to the eventual abolition of the
NPO and would violate the security of tenure of NPO
employees.
Anent the first ground raised in the petition, we find the same
patently without merit.
It is a well-settled principle in jurisprudence that the President
has the power to reorganize the offices and agencies in the
executive department in line with the Presidents
constitutionally granted power of control over executive
offices and by virtue of previous delegation of the legislative
power to reorganize executive offices under existing statutes.
In Buklod ng Kawaning EIIB v. Zamora,12 the Court pointed
out that Executive Order No. 292 or the Administrative Code
of 1987 gives the President continuing authority to
reorganize and redefine the functions of the Office of the
President. Section 31, Chapter 10, Title III, Book III of the
said Code, is explicit:
Sec. 31.Continuing Authority of the President to Reorganize
his Office. The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy
and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For
this purpose, he may take any of the following actions:
(1) Restructure the internal organization of the
Office of the President Proper, including the
immediate Offices, the President Special
Assistants/Advisers System and the Common Staff
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Support System, by abolishing, consolidating or

merging units thereof or transferring functions from
one unit to another;
(2) Transfer any function under the Office of the
President to any other Department or Agency as
well as transfer functions to the Office of the
President from other Departments and Agencies;
and
(3) Transfer any agency under the Office of the
President to any other department or agency as well
as transfer agencies to the Office of the President
from other Departments or agencies. (Emphases
ours.)
Interpreting the foregoing provision, we held in Buklod ng
Kawaning EIIB, thus:
But of course, the list of legal basis authorizing the President
to reorganize any department or agency in the executive
branch does not have to end here. We must not lose sight of
the very source of the power that which constitutes an
express grant of power. Under Section 31, Book III of
Executive Order No. 292 (otherwise known as the
Administrative Code of 1987), "the President, subject to the
policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have the continuing
authority to reorganize the administrative structure of the
Office of the President." For this purpose, he may transfer
the functions of other Departments or Agencies to the Office
of the President. In Canonizado v. Aguirre [323 SCRA 312
(2000)], we ruled that reorganization "involves the reduction
of personnel, consolidation of offices, or abolition thereof by
reason of economy or redundancy of functions." It takes
place when there is an alteration of the existing structure of
government offices or units therein, including the lines of
control, authority and responsibility between them. The EIIB
is a bureau attached to the Department of Finance. It falls
under the Office of the President. Hence, it is subject to the
Presidents continuing authority to reorganize.13 (Emphasis
ours.)
It is undisputed that the NPO, as an agency that is part of the
Office of the Press Secretary (which in various times has
been an agency directly attached to the Office of the Press

Secretary or as an agency under the Philippine Information

Agency), is part of the Office of the President.14
Pertinent to the case at bar, Section 31 of the Administrative
Code of 1987 quoted above authorizes the President (a) to
restructure the internal organization of the Office of the
President Proper, including the immediate Offices, the
President Special Assistants/Advisers System and the
Common Staff Support System, by abolishing, consolidating
or merging units thereof or transferring functions from one
unit to another, and (b) to transfer functions or offices from
the Office of the President to any other Department or
Agency in the Executive Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate
offices in the Office of the President Proper and to transfer
functions/offices not only among the offices in the Office of
President Proper but also the rest of the Office of the
President and the Executive Branch, the President implicitly
has the power to effect less radical or less substantive
changes to the functional and internal structure of the Office
of the President, including the modification of functions of
such executive agencies as the exigencies of the service
may require.
In the case at bar, there was neither an abolition of the NPO
nor a removal of any of its functions to be transferred to
another agency. Under the assailed Executive Order No.
378, the NPO remains the main printing arm of the
government for all kinds of government forms and
publications but in the interest of greater economy and
encouraging efficiency and profitability, it must now compete
with the private sector for certain government printing jobs,
with the exception of election paraphernalia which remains
the exclusive responsibility of the NPO, together with the
BangkoSentral ng Pilipinas, as the Commission on Elections
may determine. At most, there was a mere alteration of the
main function of the NPO by limiting the exclusivity of its
printing responsibility to election forms.15
There is a view that the reorganization actions that the
President may take with respect to agencies in the Office of
the President are strictly limited to transfer of functions and
offices as seemingly provided in Section 31 of the
Administrative Code of 1987.

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However, Section 20, Chapter 7, Title I, Book III of the same

Code significantly provides:

their respective organization structures and be funded from

appropriations by this Act."

Sec. 20.Residual Powers. Unless Congress provides

otherwise, the President shall exercise such other powers
and functions vested in the President which are provided for
under the laws and which are not specifically enumerated
above, or which are not delegated by the President in
accordance with law. (Emphasis ours.)

The foregoing provision evidently shows that the President is

authorized to effect organizational changes including the
creation of offices in the department or agency concerned.

Pursuant to Section 20, the power of the President to

reorganize the Executive Branch under Section 31 includes
such powers and functions that may be provided for under
other laws. To be sure, an inclusive and broad interpretation
of the Presidents power to reorganize executive offices has
been consistently supported by specific provisions in general
appropriations laws.
In the oft-cited Larin v. Executive Secretary,16 the Court
likewise adverted to certain provisions of Republic Act No.
7645, the general appropriations law for 1993, as among the
statutory bases for the Presidents power to reorganize
executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
"Sec. 48. Scaling Down and Phase Out of Activities of
Agencies Within the Executive Branch. The heads of
departments, bureaus and offices and agencies are hereby
directed to identify their respective activities which are no
longer essential in the delivery of public services and which
may be scaled down, phased out or abolished, subject to civil
[service] rules and regulations. x xx. Actual scaling down,
phasing out or abolition of the activities shall be effected
pursuant to Circulars or Orders issued for the purpose by the
Office of the President."
Said provision clearly mentions the acts of "scaling down,
phasing out and abolition" of offices only and does not cover
the creation of offices or transfer of functions. Nevertheless,
the act of creating and decentralizing is included in the
subsequent provision of Section 62, which provides that:
"Sec. 62.Unauthorized organizational changes. Unless
otherwise created by law or directed by the President of the
Philippines, no organizational unit or changes in key
positions in any department or agency shall be authorized in

The contention of petitioner that the two provisions are riders

deserves scant consideration. Well settled is the rule that
every law has in its favor the presumption of constitutionality.
Unless and until a specific provision of the law is declared
invalid and unconstitutional, the same is valid and binding for
all intents and purposes.17 (Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,18 where the Court
upheld as valid then President Joseph Estradas Executive
Order No. 191 "deactivating" the Economic Intelligence and
Investigation Bureau (EIIB) of the Department of Finance,
hewed closely to the reasoning in Larin. The Court, among
others, also traced from the General Appropriations Act19 the
Presidents authority to effect organizational changes in the
department or agency under the executive structure, thus:
We adhere to the precedent or ruling in Larin that this
provision recognizes the authority of the President to effect
organizational changes in the department or agency under
the executive structure. Such a ruling further finds support in
Section 78 of Republic Act No. 8760. Under this law, the
heads of departments, bureaus, offices and agencies and
other entities in the Executive Branch are directed (a) to
conduct a comprehensive review of their respective
mandates, missions, objectives, functions, programs,
projects, activities and systems and procedures; (b) identify
activities which are no longer essential in the delivery of
public services and which may be scaled down, phased-out
or abolished; and (c) adopt measures that will result in the
streamlined organization and improved overall performance
of their respective agencies. Section 78 ends up with the
mandate that the actual streamlining and productivity
improvement in agency organization and operation shall be
effected pursuant to Circulars or Orders issued for the
purpose by the Office of the President. x x x. 20 (Emphasis
ours)
Notably, in the present case, the 2003 General
Appropriations Act, which was reenacted in 2004 (the year of
the issuance of Executive Order No. 378), likewise gave the
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President the authority to effect a wide variety of

organizational changes in any department or agency in the
Executive Branch. Sections 77 and 78 of said Act provides:
Section 77.Organized Changes. Unless otherwise provided
by law or directed by the President of the Philippines, no
changes in key positions or organizational units in any
department or agency shall be authorized in their respective
organizational structures and funded from appropriations
provided by this Act.
Section 78.Institutional Strengthening and Productivity
Improvement in Agency Organization and Operations and
Implementation of Organization/Reorganization Mandated by
Law. The Government shall adopt institutional strengthening
and productivity improvement measures to improve service
delivery and enhance productivity in the government, as
directed by the President of the Philippines. The heads of
departments, bureaus, offices, agencies, and other entities of
the Executive Branch shall accordingly conduct a
comprehensive review of their respective mandates,
missions, objectives, functions, programs, projects, activities
and systems and procedures; identify areas where
improvements are necessary; and implement corresponding
structural, functional and operational adjustments that will
result in streamlined organization and operations and
improved performance and productivity: PROVIDED, That
actual streamlining and productivity improvements in agency
organization and operations, as authorized by the President
of the Philippines for the purpose, including the utilization of
savings generated from such activities, shall be in
accordance with the rules and regulations to be issued by the
DBM, upon consultation with the Presidential Committee on
Effective Governance: PROVIDED, FURTHER, That in the
implementation of organizations/reorganizations, or specific
changes in agency structure, functions and operations as a
result of institutional strengthening or as mandated by
law, the appropriation, including the functions, projects,
purposes and activities of agencies concerned may be
realigned as may be necessary: PROVIDED, FINALLY, That
any unexpended balances or savings in appropriations may
be made available for payment of retirement gratuities and
separation benefits to affected personnel, as authorized
under existing laws. (Emphases and underscoring ours.)
Implicitly, the aforequoted provisions in the appropriations
law recognize the power of the President to reorganize even

executive offices already funded by the said appropriations

act, including the power to implement structural, functional,
and operational adjustments in the executive bureaucracy
and, in so doing, modify or realign appropriations of funds as
may be necessary under such reorganization. Thus, insofar
as petitioners protest the limitation of the NPOs
appropriations to its own income under Executive Order No.
378, the same is statutorily authorized by the above
provisions.
In the 2003 case of Bagaoisan v. National Tobacco
Administration,21 we upheld the "streamlining" of the National
Tobacco Administration through a reduction of its personnel
and deemed the same as included in the power of the
President to reorganize executive offices granted under the
laws, notwithstanding that such streamlining neither involved
an abolition nor a transfer of functions of an office. To quote
the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs.
Hon. Ronaldo D. Zamora, in his capacity as the Executive
Secretary, et al., this Court has had occasion to also delve on
the Presidents power to reorganize the Office of the
President under Section 31(2) and (3) of Executive Order No.
292 and the power to reorganize the Office of the
President Proper. x xx
x xxx
The first sentence of the law is an express grant to the
President of a continuing authority to reorganize the
administrative structure of the Office of the President. The
succeeding numbered paragraphs are not in the nature
of provisos that unduly limit the aim and scope of the grant to
the President of the power to reorganize but are to be viewed
in consonance therewith. Section 31(1) of Executive Order
No. 292 specifically refers to the Presidents power to
restructure the internal organization of the Office of the
President Proper, by abolishing, consolidating or merging
units hereof or transferring functions from one unit to another,
while Section 31(2) and (3) concern executive offices outside
the Office of the President Proper allowing the President to
transfer any function under the Office of the President to any
other Department or Agency and vice-versa, and the transfer
of any agency under the Office of the President to any other
department or agency and vice-versa.
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In the present instance, involving neither an abolition nor

transfer of offices, the assailed action is a mere
reorganization under the general provisions of the law
consisting mainly of streamlining the NTA in the interest of
simplicity, economy and efficiency. It is an act well within the
authority of the President motivated and carried out,
according to the findings of the appellate court, in good faith,
a factual assessment that this Court could only but
accept.22 (Emphases and underscoring supplied.)
In the more recent case of Tondo Medical Center Employees
Association v. Court of Appeals,23 which involved a structural
and functional reorganization of the Department of Health
under an executive order, we reiterated the principle that the
power of the President to reorganize agencies under the
executive department by executive or administrative order is
constitutionally and statutorily recognized. We held in that
case:
This Court has already ruled in a number of cases that the
President may, by executive or administrative order, direct
the reorganization of government entities under the
Executive Department. This is also sanctioned under the
Constitution, as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states:
"[T]he president shall have control of all executive
departments, bureaus and offices." Section 31, Book III,
Chapter 10 of Executive Order No. 292, also known as the
Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize
his Office - The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy
and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For
this purpose, he may take any of the following actions:
x xxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court
explained the rationale behind the Presidents continuing
authority under the Administrative Code to reorganize the
administrative structure of the Office of the President. The
law grants the President the power to reorganize the Office
of the President in recognition of the recurring need of every
President to reorganize his or her office "to achieve

simplicity, economy and efficiency." To remain effective and

efficient, it must be capable of being shaped and reshaped
by the President in the manner the Chief Executive deems fit
to carry out presidential directives and policies.
The Administrative Code provides that the Office of the
President consists of the Office of the President Proper and
the agencies under it. The agencies under the Office of the
President are identified in Section 23, Chapter 8, Title II of
the Administrative Code:
Sec. 23. The Agencies under the Office of the President.
The agencies under the Office of the President refer to those
offices placed under the chairmanship of the
President, those under the supervision and control of the
President, those under the administrative supervision of the
Office of the President, those attached to it for policy and
program coordination, and those that are not placed by law
or order creating them under any specific department.
x xxx
The power of the President to reorganize the executive
department is likewise recognized in general appropriations
laws.
x xx.x xxx
Clearly, Executive Order No. 102 is well within the
constitutional power of the President to issue. The President
did not usurp any legislative prerogative in issuing Executive
Order No. 102. It is an exercise of the Presidents
constitutional power of control over the executive
department, supported by the provisions of the Administrative
Code, recognized by other statutes, and consistently affirmed
by this Court.24 (Emphases supplied.)
Subsequently, we ruled in Anak Mindanao Party-List Group v.
Executive Secretary25 that:
The Constitutions express grant of the power of control in
the President justifies an executive action to carry out
reorganization measures under a broad authority of law.
In enacting a statute, the legislature is presumed to have
deliberated with full knowledge of all existing laws and
jurisprudence on the subject. It is thus reasonable to
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conclude that in passing a statute which places an agency

under the Office of the President, it was in accordance with
existing laws and jurisprudence on the Presidents power to
reorganize.
In establishing an executive department, bureau or office, the
legislature necessarily ordains an executive agencys
position in the scheme of administrative structure. Such
determination is primary, but subject to the Presidents
continuing authority to reorganize the administrative
structure. As far as bureaus, agencies or offices in the
executive department are concerned, the power of control
may justify the President to deactivate the functions of a
particular office. Or a law may expressly grant the President
the broad authority to carry out reorganization measures.
The Administrative Code of 1987 is one such law.26
The issuance of Executive Order No. 378 by President
Arroyo is an exercise of a delegated legislative power
granted by the aforementioned Section 31, Chapter 10, Title
III, Book III of the Administrative Code of 1987, which
provides for the continuing authority of the President to
reorganize the Office of the President, "in order to achieve
simplicity, economy and efficiency." This is a matter already
well-entrenched in jurisprudence. The reorganization of such
an office through executive or administrative order is also
recognized in the Administrative Code of 1987. Sections 2
and 3, Chapter 2, Title I, Book III of the said Code provide:
Sec. 2.Executive Orders. - Acts of the President providing for
rules of a general or permanent character in implementation
or execution of constitutional or statutory powers shall be
promulgated in executive orders.
Sec. 3.Administrative Orders. - Acts of the President which
relate to particular aspects of governmental operations in
pursuance of his duties as administrative head shall be
promulgated in administrative orders. (Emphases supplied.)
To reiterate, we find nothing objectionable in the provision in
Executive Order No. 378 limiting the appropriation of the
NPO to its own income. Beginning with Larin and in
subsequent cases, the Court has noted certain provisions in
the general appropriations laws as likewise reflecting the
power of the President to reorganize executive offices or
agencies even to the extent of modifying and realigning
appropriations for that purpose.

Petitioners contention that the issuance of Executive Order

No. 378 is an invalid exercise of legislative power on the part
of the President has no legal leg to stand on.
In all, Executive Order No. 378, which purports to institute
necessary reforms in government in order to improve and
upgrade efficiency in the delivery of public services by
redefining the functions of the NPO and limiting its funding to
its own income and to transform it into a self-reliant agency
able to compete with the private sector, is well within the
prerogative of President Arroyo under her continuing
delegated legislative power to reorganize her own office. As
pointed out in the separate concurring opinion of our learned
colleague, Associate Justice Antonio T. Carpio, the objective
behind Executive Order No. 378 is wholly consistent with the
state policy contained in Republic Act No. 9184 or the
Government Procurement Reform Act to encourage
competitiveness by extending equal opportunity to private
contracting parties who are eligible and qualified.271avvphi1
To be very clear, this delegated legislative power to
reorganize pertains only to the Office of the President and
the departments, offices and agencies of the executive
branch and does not include the Judiciary, the Legislature or
the constitutionally-created or mandated bodies. Moreover, it
must be stressed that the exercise by the President of the
power to reorganize the executive department must be in
accordance with the Constitution, relevant laws and
prevailing jurisprudence.
In this regard, we are mindful of the previous pronouncement
of this Court in Dario v. Mison28 that:
Reorganizations in this jurisdiction have been regarded as
valid provided they are pursued in good faith. As a general
rule, a reorganization is carried out in "good faith" if it is for
the purpose of economy or to make bureaucracy more
efficient. In that event, no dismissal (in case of a dismissal)
or separation actually occurs because the position itself
ceases to exist. And in that case, security of tenure would not
be a Chinese wall. Be that as it may, if the "abolition," which
is nothing else but a separation or removal, is done for
political reasons or purposely to defeat security of tenure, or
otherwise not in good faith, no valid "abolition" takes place
and whatever "abolition" is done, is void ab initio. There is an
invalid "abolition" as where there is merely a change of
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nomenclature of positions, or where claims of economy are

belied by the existence of ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to reorganize
agencies and offices in the executive branch of government
is subject to the condition that such reorganization is carried
out in good faith.
If the reorganization is done in good faith, the abolition of
positions, which results in loss of security of tenure of
affected government employees, would be valid. In Buklod
ng Kawaning EIIB v. Zamora,29 we even observed that there
was no such thing as an absolute right to hold office. Except
those who hold constitutional offices, which provide for
special immunity as regards salary and tenure, no one can
be said to have any vested right to an office or salary.30
This brings us to the second ground raised in the petition
that Executive Order No. 378, in allowing government
agencies to secure their printing requirements from the
private sector and in limiting the budget of the NPO to its
income, will purportedly lead to the gradual abolition of the
NPO and the loss of security of tenure of its present
employees. In other words, petitioners avow that the
reorganization of the NPO under Executive Order No. 378 is
tainted with bad faith. The basic evidentiary rule is that he
who asserts a fact or the affirmative of an issue has the
burden of proving it.31
A careful review of the records will show that petitioners
utterly failed to substantiate their claim. They failed to allege,
much less prove, sufficient facts to show that the limitation of
the NPOs budget to its own income would indeed lead to the
abolition of the position, or removal from office, of any
employee. Neither did petitioners present any shred of proof
of their assertion that the changes in the functions of the
NPO were for political considerations that had nothing to do
with improving the efficiency of, or encouraging operational
economy in, the said agency.
In sum, the Court finds that the petition failed to show any
constitutional infirmity or grave abuse of discretion amounting
to lack or excess of jurisdiction in President Arroyos
issuance of Executive Order No. 378.

WHEREFORE, the petition is hereby DISMISSED and the

prayer for a Temporary Restraining Order and/or a Writ of
Preliminary Injunction is hereby DENIED. No costs.
SO ORDERED.

G.R. No. 152845

August 5, 2003

DRIANITA BAGAOISAN, FELY MADRIAGA, , Petitioners,

vs.
NATIONAL TOBACCO ADMINISTRATION, represented by
ANTONIO DE GUZMAN and PERLITA
BAULA,Respondents.
DECISION
VITUG, J.:
President Joseph Estrada issued on 30 September 1998
Executive Order No. 29, entitled "Mandating the Streamlining
of the National Tobacco Administration (NTA)," a government
agency under the Department of Agriculture. The order was
followed by another issuance, on 27 October 1998, by
President Estrada of Executive Order No. 36, amending
Executive Order No. 29, insofar as the new staffing pattern
was concerned, by increasing from four hundred (400) to not
exceeding seven hundred fifty (750) the positions affected
thereby. In compliance therewith, the NTA prepared and
adopted a new Organization Structure and Staffing Pattern
(OSSP) which, on 29 October 1998, was submitted to the
Office of the President.
On 11 November 1998, the rank and file employees of NTA
Batac, among whom included herein petitioners, filed a letterappeal with the Civil Service Commission and sought its
assistance in recalling the OSSP. On 04 December 1998, the
OSSP was approved by the Department of Budget and
Management (DBM) subject to certain revisions. On even
date, the NTA created a placement committee to assist the
appointing authority in the selection and placement of
permanent personnel in the revised OSSP. The results of the
evaluation by the committee on the individual qualifications of
applicants to the positions in the new OSSP were then
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disseminated and posted at the central and provincial offices

of the NTA.

best qualified and most deserving among the

incumbent applicant-employees.

On 10 June 1996, petitioners, all occupying different

positions at the NTA office in Batac, Ilocos Norte, received
individual notices of termination of their employment with the
NTA effective thirty (30) days from receipt thereof. Finding
themselves without any immediate relief from their dismissal
from the service, petitioners filed a petition forcertiorari,
prohibition and mandamus, with prayer for preliminary
mandatory injunction and/or temporary restraining order, with
the Regional Trial Court (RTC) of Batac, Ilocos Norte, and
prayed -

"II. Whether or not incumbent permanent

employees,
including
herein
petitioners,
automatically enjoy a preferential right and the right
of first refusal to appointments/reappointments in
the new Organization Structure And Staffing Pattern
(OSSP) of respondent NTA.

"1) that a restraining order be immediately issued

enjoining the respondents from enforcing the notice
of termination addressed individually to the
petitioners and/or from committing further acts of
dispossession and/or ousting the petitioners from
their respective offices;

"III. Whether or not respondent NTA in implementing

the mandated reorganization pursuant to E.O. No.
29, as amended by E.O. No. 36, strictly adhere to
the implementing rules on reorganization,
particularly RA 6656 and of the Civil Service
Commission

Rules
on
Government
Reorganization.
"IV. Whether or not the validity of E.O. Nos. 29 and
36 can be put in issue in the instant case/appeal."2

"2) that a writ of preliminary injunction be issued

against the respondents, commanding them to
maintain the status quo to protect the rights of the
petitioners pending the determination of the validity
of the implementation of their dismissal from the
service; and

On 20 February 2002, the appellate court rendered a

decision reversing and setting aside the assailed orders of
the trial court.

"3) that, after trial on the merits, judgment be

rendered declaring the notice of termination of the
petitioners illegal and the reorganization null and
void and ordering their reinstatement with
backwages, if applicable, commanding the
respondents to desist from further terminating their
services, and making the injunction permanent."1

"I. The Court of Appeals erred in making a finding

that went beyond the issues of the case and which
are contrary to those of the trial court and that it
overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would
justify a different conclusion;

The RTC, on 09 September 2000, ordered the NTA to

appoint petitioners in the new OSSP to positions similar or
comparable to their respective former assignments. A motion
for reconsideration filed by the NTA was denied by the trial
court in its order of 28 February 2001. Thereupon, the NTA
filed an appeal with the Court of Appeals, raising the
following issues:
"I. Whether or not respondents submitted evidence
as proof that petitioners, individually, were not the

Petitioners went to this Court to assail the decision of the

Court of Appeals, contending that -

"II. The Court of Appeals erred in upholding

Executive Order Nos. 29 and 36 of the Office of the
President which are mere administrative issuances
which do not have the force and effect of a law to
warrant abolition of positions and/or effecting total
reorganization;
"III. The Court of Appeals erred in holding that
petitioners removal from the service is in
accordance with law;

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"IV. The Court of Appeals erred in holding that

respondent NTA was not guilty of bad faith in the
termination of the services of petitioners; (and)
"V. The Court of Appeals erred in ignoring case
law/jurisprudence in the abolition of an office."3
In its resolution of 10 July 2002, the Court required the NTA
to file its comment on the petition. On 18 November 2002,
after the NTA had filed its comment of 23 September 2002,
the Court issued its resolution denying the petition for failure
of petitioners to sufficiently show any reversible error on the
part of the appellate court in its challenged decision so as to
warrant the exercise by this Court of its discretionary
appellate jurisdiction. A motion for reconsideration filed by
petitioners was denied in the Courts resolution of 20 January
2002.
On 21 February 2003, petitioners submitted a "Motion to
Admit Petition For En Banc Resolution" of the case allegedly
to address a basic question, i.e., "the legal and constitutional
issue on whether the NTA may be reorganized by an
executive fiat, not by legislative action."4 In their "Petition for
an En Banc Resolution" petitioners would have it that "1. The Court of Appeals decision upholding the
reorganization of the National Tobacco
Administration sets a dangerous precedent in that:
"a) A mere Executive Order issued by the
Office of the President and procured by a
government functionary would have the
effect of a blanket authority to reorganize a
bureau, office or agency attached to the
various executive departments;
b) The President of the Philippines would
have the plenary power to reorganize the
entire government Bureaucracy through
the issuance of an Executive Order, an
administrative issuance without the benefit
of due deliberation, debate and discussion
of members of both chambers of the
Congress of the Philippines;
c) The right to security of tenure to a
career position created by law or statute

would be defeated by the mere adoption of

an Organizational Structure and Staffing
Pattern issued pursuant to an Executive
Order which is not a law and could thus not
abolish an office created by law;
"2. The case law on abolition of an office would be
disregarded, ignored and abandoned if the Court of
Appeals decision subject matter of this Petition
would remain undisturbed and untouched. In other
words, previous doctrines and precedents of this
Highest Court would in effect be reversed and/or
modified with the Court of Appeals judgment, should
it remain unchallenged.
"3. Section 4 of Executive Order No. 245 dated July
24, 1987 (Annex D, Petition), issued by the
Revolutionary government of former President
Corazon Aquino, and the law creating NTA, which
provides that the governing body of NTA is the
Board of Directors, would be rendered meaningless,
ineffective and a dead letter law because the
challenged NTA reorganization which was
erroneously upheld by the Court of Appeals was
adopted and implemented by then NTA
Administrator Antonio de Guzman without the
corresponding authority from the Board of Directors
as mandated therein. In brief, the reorganization is
an ultra vires act of the NTA Administrator.
"4. The challenged Executive Order No. 29 issued
by former President Joseph Estrada but unsigned
by then Executive Secretary Ronaldo Zamora would
in effect be erroneously upheld and given legal
effect as to supersede, amend and/or modify
Executive Order No. 245, a law issued during the
Freedom Constitution of President Corazon Aquino.
In brief, a mere executive order would amend,
supersede and/or render ineffective a law or
statute."5
In order to allow the parties a full opportunity to ventilate their
views on the matter, the Court ultimately resolved to hear the
parties in oral argument. Essentially, the core question raised
by them is whether or not the President, through the
issuance of an executive order, can validly carry out the
reorganization of the NTA.
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Notwithstanding the apparent procedural lapse on the part of

petitioner to implead the Office of the President as party
respondent pursuant to Section 7, Rule 3, of the 1997
Revised Rules of Civil Procedure, 6 this Court resolved to
rule on the merits of the petition.
Buklod ng Kawaning EIIB vs. Zamora7 ruled that the
President, based on existing laws, had the authority to carry
out a reorganization in any branch or agency of the executive
department. In said case, Buklod ng Kawaning EIIB
challenged the issuance, and sought the nullification, of
Executive Order No. 191 (Deactivation of the Economic
Intelligence and Investigation Bureau) and Executive Order
No. 223 (Supplementary Executive Order No. 191 on the
Deactivation of the Economic Intelligence and Investigation
Bureau and for Other Matters) on the ground that they were
issued by the President with grave abuse of discretion and in
violation of their constitutional right to security of tenure. The
Court explained:
"The general rule has always been that the power to abolish
a public office is lodged with the legislature. This proceeds
from the legal precept that the power to create includes the
power to destroy. A public office is either created by the
Constitution, by statute, or by authority of law. Thus, except
where the office was created by the Constitution itself, it may
be abolished by the same legislature that brought it into
existence.
"The exception, however, is that as far as bureaus, agencies
or offices in the executive department are concerned, the
Presidents power of control may justify him to inactivate the
functions of a particular office, or certain laws may grant him
the broad authority to carry out reorganization measures.
The case in point is Larin v. Executive Secretary [280 SCRA
713]. In this case, it was argued that there is no law which
empowers the President to reorganize the BIR. In decreeing
otherwise, this Court sustained the following legal basis,
thus:
"`Initially, it is argued that there is no law yet which empowers
the President to issue E.O. No. 132 or to reorganize the BIR.
`We do not agree.
`x xxxxx

`Section 48 of R.A. 7645 provides that:

``Sec. 48. Scaling Down and Phase Out of Activities of
Agencies Within the Executive Branch. The heads of
departments, bureaus and offices and agencies are hereby
directed to identify their respective activities which are no
longer essential in the delivery of public services and which
may be scaled down, phased out or abolished,subject to civil
service rules and regulations. x xx. Actual scaling down,
phasing out or abolition of the activities shall be effected
pursuant to Circulars or Orders issued for the purpose by the
Office of the President.
`Said provision clearly mentions the acts of `scaling down,
phasing out and abolition of offices only and does not cover
the creation of offices or transfer of functions. Nevertheless,
the act of creating and decentralizing is included in the
subsequent provision of Section 62 which provides that:
``Sec. 62. Unauthorized organizational changes. Unless
otherwise created by law or directed by the President of the
Philippines, no organizational unit or changes in key
positions in any department or agency shall be authorized in
their respective organization structures and be funded from
appropriations by this Act.
`The foregoing provision evidently shows that the President
is authorized to effect organizational changes including the
creation of offices in the department or agency concerned.
`x xxxxx
`Another legal basis of E.O. No. 132 is Section 20, Book III of
E.O. No. 292 which states:
``Sec. 20. Residual Powers. Unless Congress provides
otherwise, the President shall exercise such other powers
and functions vested in the President which are provided for
under the laws and which are not specifically enumerated
above or which are not delegated by the President in
accordance with law.
`This provision speaks of such other powers vested in the
President under the law. What law then gives him the power
to reorganize? It is Presidential Decree No. 1772 which
amended Presidential Decree No. 1416. These decrees
expressly grant the President of the Philippines the
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continuing authority to reorganize the national government,

which includes the power to group, consolidate bureaus and
agencies, to abolish offices, to transfer functions, to create
and classify functions, services and activities and to
standardize salaries and materials. The validity of these two
decrees are unquestionable. The 1987 Constitution clearly
provides that `all laws, decrees, executive orders,
proclamations, letter of instructions and other executive
issuances not inconsistent with this Constitution shall remain
operative until amended, repealed or revoked. So far, there is
yet no law amending or repealing said decrees.
"Now, let us take a look at the assailed executive order.
"In the whereas clause of E.O. No. 191, former President
Estrada anchored his authority to deactivate EIIB on Section
77 of Republic Act 8745 (FY 1999 General Appropriations
Act), a provision similar to Section 62 of R.A. 7645 quoted
in Larin, thus:
"`Sec. 77. Organized Changes. Unless otherwise provided
by law or directed by the President of the Philippines, no
changes in key positions or organizational units in any
department or agency shall be authorized in their respective
organizational structures and funded from appropriations
provided by this Act.
"We adhere to the x xx ruling in Larin that this provision
recognizes the authority of the President to effect
organizational changes in the department or agency under
the executive structure. Such a ruling further finds support in
Section 78 of Republic Act No. 8760. Under this law, the
heads of departments, bureaus, offices and agencies and
other entities in the Executive Branch are directed (a) to
conduct a comprehensive review of this respective
mandates, missions, objectives, functions, programs,
projects, activities and systems and procedures; (b) identify
activities which are no longer essential in the delivery of
public services and which may be scaled down, phased-out
or abolished; and (c) adopt measures that will result in the
streamlined organization and improved overall performance
of their respective agencies. Section 78 ends up with the
mandate that the actual streamlining and productivity
improvement in agency organization and operation shall be
effected pursuant to Circulars or Orders issued for the
purpose by the Office of the President. The law has spoken
clearly. We are left only with the duty to sustain.

"But of course, the list of legal basis authorizing the

President to reorganize any department or agency in the
executive branch does not have to end here. We must not
lose sight of the very source of the power that which
constitutes an express grant of power. Under Section 31,
Book III of Executive Order No. 292 (otherwise known as the
Administrative Code of 1987), the President, subject to the
policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have the continuing
authority to reorganize the administrative structure of the
Office of the President. For this purpose, he may transfer the
functions of other Departments or Agencies to the Office of
the President. In Canonizado vs. Aguirre [323 SCRA 312],
we ruled that reorganization involves the reduction of
personnel, consolidation of offices, or abolition thereof by
reason of economy or redundancy of functions. It takes
place when there is an alteration of the existing structure of
government offices or units therein, including the lines of
control, authority and responsibility between them. The EIIB
is a bureau attached to the Department of Finance. It falls
under the Office of the President. Hence, it is subject to the
Presidents continuing authority to reorganize.
"It having been duly established that the President has the
authority to carry out reorganization in any branch or agency
of the executive department, what is then left for us to
resolve is whether or not the reorganization is valid. In this
jurisdiction, reorganizations have been regarded as valid
provided they are pursued in good faith. Reorganization is
carried out in `good faith if it is for the purpose of economy
or to make bureaucracy more efficient. Pertinently, Republic
Act No. 6656 provides for the circumstances which may be
considered as evidence of bad faith in the removal of civil
service employees made as a result of reorganization, to
wit: (a) where there is a significant increase in the number of
positions in the new staffing pattern of the department or
agency concerned;(b) where an office is abolished and
another performing substantially the same functions is
created; (c) where incumbents are replaced by those less
qualified in terms of status of appointment, performance and
merit; (d)where there is a classification of offices in the
department or agency concerned and the reclassified offices
perform substantially the same functions as the original
offices, and (e) where the removal violates the order of
separation."8

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The Court of Appeals, in its now assailed decision, has found

no evidence of bad faith on the part of the NTA; thus "In the case at bar, we find no evidence that the respondents
committed bad faith in issuing the notices of nonappointment to the petitioners.
"Firstly, the number of positions in the new staffing
pattern did not increase. Rather, it decreased from
1,125 positions to 750. It is thus natural that ones
position may be lost through the removal or
abolition of an office.
"Secondly, the petitioners failed to specifically show
which offices were abolished and the new ones that
were created performing substantially the same
functions.
"Thirdly, the petitioners likewise failed to prove that
less qualified employees were appointed to the
positions to which they applied.
"x xx

x xx

x xx

"Fourthly, the preference stated in Section 4 of R.A.

6656, only means that old employees should be
considered first, but it does not necessarily follow
that they should then automatically be appointed.
This is because the law does not preclude the
infusion of new blood, younger dynamism, or
necessary talents into the government service,
provided that the acts of the appointing power are
bonafide for the best interest of the public service
and the person chosen has the needed
qualifications."9
These findings of the appellate court are basically factual
which this Court must respect and be held bound.
It is important to emphasize that the questioned
Executive Orders No. 29 and No. 36 have not abolished
the National Tobacco Administration but merely
mandated its reorganization through the streamlining or
reduction of its personnel. Article VII, Section 17,10 of the
Constitution, expressly grants the President control of all
executive departments, bureaus, agencies and offices which
may justify an executive action to inactivate the functions of a

particular office or to carry out reorganization measures

under a broad authority of law.11 Section 78 of the General
Provisions of Republic Act No. 8522 (General Appropriations
Act of FY 1998) has decreed that the President may direct
changes in the organization and key positions in any
department, bureau or agency pursuant to Article VI, Section
25,12 of the Constitution, which grants to the Executive
Department the authority to recommend the budget
necessary for its operation. Evidently, this grant of power
includes the authority to evaluate each and every
government agency, including the determination of the most
economical and efficient staffing pattern, under the Executive
Department.
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon.
Ronaldo D. Zamora, in his capacity as the Executive
Secretary, et al.,13 this Court has had occasion to also delve
on the Presidents power to reorganize the Office of the
President under Section 31(2) and (3) of Executive Order No.
292 and the power to reorganize the Office of the President
Proper. The Court has there observed:
"x xx. Under Section 31(1) of EO 292, the President can
reorganize the Office of the President Proper by abolishing,
consolidating or merging units, or by transferring functions
from one unit to another. In contrast, under Section 31(2) and
(3) of EO 292, the Presidents power to reorganize offices
outside the Office of the President Proper but still within the
Office of the President is limited to merely transferring
functions or agencies from the Office of the President to
Departments or Agencies, and vice versa."
The provisions of Section 31, Book III, Chapter 10, of
Executive Order No. 292 (Administrative Code of 1987),
above-referred to, reads thusly:
"SEC. 31.Continuing Authority of the President to Reorganize
his Office. The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy
and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For
this purpose, he may take any of the following actions:
"(1) Restructure the internal organization of the
Office of the President Proper, including the
immediate Offices, the Presidential Special
Assistants/Advisers System and the Common Staff
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Support System, by abolishing, consolidating or

merging units thereof or transferring functions from
one unit to another;
"(2) Transfer any function under the Office of the
President to any other Department or Agency as
well as transfer functions to the Office of the
President from other Departments and Agencies;
and
"(3) Transfer any agency under the Office of the
President to any other department or agency as well
as transfer agencies to the Office of the President
from other departments and agencies."
The first sentence of the law is an express grant to the
President of a continuing authority to reorganize the
administrative structure of the Office of the President. The
succeeding numbered paragraphs are not in the nature
of provisos that unduly limit the aim and scope of the grant to
the President of the power to reorganize but are to be viewed
in consonance therewith. Section 31(1) of Executive Order
No. 292 specifically refers to the Presidents power to
restructure the internal organization of the Office of the
President Proper, by abolishing, consolidating or merging
units hereof or transferring functions from one unit to another,
while Section 31(2) and (3) concern executive offices outside
the Office of the President Proper allowing the President to
transfer any function under the Office of the President to any
other Department or Agency and vice-versa, and the transfer
of any agency under the Office of the President to any other
department or agency and vice-versa.14
In the present instance, involving neither an abolition nor
transfer of offices, the assailed action is a mere
reorganization under the general provisions of the law
consisting mainly of streamlining the NTA in the interest of
simplicity, economy and efficiency. It is an act well within the
authority of President motivated and carried out, according to
the findings of the appellate court, in good faith, a factual
assessment that this Court could only but accept.15
In passing, relative to petitioners "Motion for an En
Banc Resolution of the Case," it may be well to remind
counsel, that the Court En Banc is not an appellate tribunal
to which appeals from a Division of the Court may be taken.
A Division of the Court is the Supreme Court as fully and

veritably as the Court En Banc itself and a decision of its

Division is as authoritative and final as a decision of the
Court En Banc. Referrals of cases from a Division to the
Court En Banc do not take place as just a matter of routine
but only on such specified grounds as the Court in its
discretion may allow.16
WHEREFORE, the Motion to Admit Petition for En
Banc resolution and the Petition for an En Banc Resolution
are DENIED for lack of merit. Let entry of judgment be made
in due course. No costs.
SO ORDERED.

G.R. No. 84301. April 7, 1993.

NATIONAL LAND TITLES AND DEEDS REGISTRATION
ADMINISTRATION,
petitioner,
vs.
CIVIL SERVICE COMMISSION and VIOLETA L. GARCIA,
respondents.
The Solicitor General for petitioner.
Raul R. Estrella for private respondent.
SYLLABUS
1. ADMINISTRATIVE LAW; EXECUTIVE ORDER NO. 649;
REORGANIZED LAND REGISTRATION COMMISSION TO
NALTDRA; EXPRESSLY PROVIDED THE ABOLITION OF
EXISTING POSITIONS. Executive Order No. 649
authorized the reorganization of the Land Registration
Commission (LRC) into the National Land Titles and Deeds
Registration Administration (NALTDRA). It abolished all the
positions in the now defunct LRC and required new
appointments to be issued to all employees of the NALTDRA.
The question of whether or not a law abolishes an office is
one of legislative intent about which there can be no
controversy whatsoever if there is an explicit declaration in
the law itself. A closer examination of Executive Order No.
649 which authorized the reorganization of the Land
Registration Commission (LRC) into the National Land Titles
and Deeds Registration Administration (NALTDRA), reveals
that said law in express terms, provided for the abolition of
existing positions. Thus, without need of any interpretation,
the law mandates that from the moment an implementing
order is issued, all positions in the Land Registration
Commission are deemed non-existent. This, however, does
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not mean removal. Abolition of a position does not involve or

mean removal for the reason that removal implies that the
post subsists and that one is merely separated therefrom.
(Arao vs. Luspo, 20 SCRA 722 [1967]) After abolition, there
is in law no occupant. Thus, there can be no tenure to speak
of. It is in this sense that from the standpoint of strict law, the
question of any impairment of security of tenure does not
arise. (De la Llana vs. Alba, 112 SCRA 294 [1982])
2. ID.; ID.; ID.; REORGANIZATION, VALID WHEN
PURSUED IN GOOD FAITH; CASE AT BAR. Nothing is
better settled in our law than that the abolition of an office
within the competence of a legitimate body if done in good
faith suffers from no infirmity. Two questions therefore arise:
(1) was the abolition carried out by a legitimate body?; and
(2) was it done in good faith? There is no dispute over the
authority to carry out a valid reorganization in any branch or
agency of the Government. Under Section 9, Article XVII of
the 1973 Constitution. The power to reorganize is, however;
not absolute. We have held in Dario vs. Mison that
reorganizations in this jurisdiction have been regarded as
valid provided they are pursued in good faith. This court has
pronounced that if the newly created office has substantially
new, different or additional functions, duties or powers, so
that it may be said in fact to create an office different from the
one abolished, even though it embraces all or some of the
duties of the old office it will be considered as an abolition of
one office and the creation of a new or different one. The
same is true if one office is abolished and its duties, for
reasons of economy are given to an existing officer or office.
Executive Order No. 649 was enacted to improve the
services and better systematize the operation of the Land
Registration Commission. A reorganization is carried out in
good faith if it is for the purpose of economy or to make
bureaucracy more efficient. To this end, the requirement of
Bar membership to qualify for key positions in the NALTDRA
was imposed to meet the changing circumstances and new
development of the times. Private respondent Garcia who
formerly held the position of Deputy Register of Deeds II did
not have such qualification. It is thus clear that she cannot
hold any key position in the NALTDRA, The additional
qualification was not intended to remove her from office.
Rather, it was a criterion imposed concomitant with a valid
reorganization measure.
3. ID.; ID.; ID.; THERE IS NO VESTED PROPERTY RIGHT
TO BE RE-EMPLOYED IN A REORGANIZED OFFICE;
CASE AT BAR. There is no such thing as a vested interest
or an estate in an office, or even an absolute right to hold it.
Except constitutional offices which provide for special
immunity as regards salary and tenure, no one can be said to
have any vested right in an office or its salary. None of the
exceptions to this rule are obtaining in this case. To reiterate,

the position which private respondent Garcia would like to

occupy anew was abolished pursuant to Executive Order No.
649, a valid reorganization measure. There is no vested
property right to be re employed in a reorganized office. Not
being a member of the Bar, the minimum requirement to
qualify under the reorganization law for permanent
appointment as Deputy Register of Deeds II, she cannot be
reinstated to her former position without violating the express
mandate of the law.
DECISION
CAMPOS, JR., J p:
The sole issue for our consideration in this case is whether or
not membership in the bar, which is the qualification
requirement prescribed for appointment to the position of
Deputy Register of Deeds under Section 4 of Executive
Order No. 649 (Reorganizing the Land Registration
Commission (LRC) into the National Land Titles and Deeds
Registration Administration or NALTDRA) should be required
of and/or applied only to new applicants and not to those who
were already in the service of the LRC as deputy register of
deeds at the time of the issuance and implementation of the
abovesaid Executive Order.
The facts, as succinctly stated in the Resolution ** of the Civil
Service Commission, are as follows:
"The records show that in 1977, petitioner Garcia, a Bachelor
of Laws graduate and a first grade civil service eligible was
appointed Deputy Register of Deeds VII under permanent
status. Said position was later reclassified to Deputy Register
of Deeds III pursuant to PD 1529, to which position,
petitioner was also appointed under permanent status up to
September 1984. She was for two years, more or less,
designated as Acting Branch Register of Deeds of
Meycauayan, Bulacan. By virtue of Executive Order No. 649
(which took effect on February 9, 1981) which authorized the
restructuring of the Land Registration Commission to
National Land Titles and Deeds Registration Administration
and regionalizing the Offices of the Registers therein,
petitioner Garcia was issued an appointment as Deputy
Register of Deeds II on October 1, 1984, under temporary
status, for not being a member of the Philippine Bar. She
appealed to the Secretary of Justice but her request was
denied. Petitioner Garcia moved for reconsideration but her
motion remained unacted. On October 23, 1984, petitioner
Garcia was administratively charged with Conduct Prejudicial
to the Best Interest of the Service. While said case was
pending decision, her temporary appointment as such was
renewed in 1985. In a Memorandum dated October 30, 1986,
the then Minister, now Secretary, of Justice notified petitioner
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Garcia of the termination of her services as Deputy Register

of Deeds II on the ground that she was "receiving bribe
money". Said Memorandum of Termination which took effect
on February 9, 1987, was the subject of an appeal to the
Inter-Agency Review Committee which in turn referred the
appeal to the Merit Systems Protection Board (MSPB).
In its Order dated July 6, 1987, the MSPB dropped the
appeal of petitioner Garcia on the ground that since the
termination of her services was due to the expiration of her
temporary appointment, her separation is in order. Her
motion for reconsideration was denied on similar ground." 1
However, in its Resolution 2 dated June 30, 1988, the Civil
Service Commission directed that private respondent Garcia
be restored to her position as Deputy Register of Deeds II or
its equivalent in the NALTDRA. It held that "under the vested
right theory the new requirement of BAR membership to
qualify for permanent appointment as Deputy Register of
Deeds II or higher as mandated under said Executive Order,
would not apply to her (private respondent Garcia) but only to
the filling up of vacant lawyer positions on or after February
9, 1981, the date said Executive Order took effect." 3 A
fortiori, since private respondent Garcia had been holding the
position of Deputy Register of Deeds II from 1977 to
September 1984, she should not be affected by the operation
on February 1, 1981 of Executive Order No. 649.
Petitioner NALTDRA filed the present petition to assail the
validity of the above Resolution of the Civil Service
Commission. It contends that Sections 8 and 10 of Executive
Order No. 649 abolished all existing positions in the LRC and
transferred their functions to the appropriate new offices
created by said Executive Order, which newly created offices
required the issuance of new appointments to qualified office
holders. Verily, Executive Order No. 649 applies to private
respondent Garcia, and not being a member of the Bar, she
cannot be reinstated to her former position as Deputy
Register of Deeds II.
We find merit in the petition.

649 which authorized the reorganization of the Land

Registration Commission (LRC) into the National Land Titles
and Deeds Registration Administration (NALTDRA), reveals
that said law in express terms, provided for the abolition of
existing positions, to wit:
Sec. 8. Abolition of Existing Positions in the Land
Registration Commission . . .
All structural units in the Land Registration Commission and
in the registries of deeds, and all Positions therein shall
cease to exist from the date specified in the implementing
order to be issued by the President pursuant to the preceding
paragraph. Their
pertinent
functions,
applicable
appropriations, records, equipment and property shall be
transferred to the appropriate staff or offices therein created.
(Emphasis Supplied.)
Thus, without need of any interpretation, the law mandates
that from the moment an implementing order is issued, all
positions in the Land Registration Commission are deemed
non-existent. This, however, does not mean removal.
Abolition of a position does not involve or mean removal for
the reason that removal implies that the post subsists and
that one is merely separated therefrom. 5 After abolition,
there is in law no occupant. Thus, there can be no tenure to
speak of. It is in this sense that from the standpoint of strict
law, the question of any impairment of security of tenure
does not arise. 6
Nothing is better settled in our law than that the abolition of
an office within the competence of a legitimate body if done
in good faith suffers from no infirmity. Two questions
therefore arise: (1) was the abolition carried out by a
legitimate body?; and (2) was it done in good faith?
There is no dispute over the authority to carry out a valid
reorganization in any branch or agency of the Government.
Under Section 9, Article XVII of the 1973 Constitution, the
applicable law at that time:

Executive Order No. 649 authorized the reorganization of the

Land Registration Commission (LRC) into the National Land
Titles and Deeds Registration Administration (NALTDRA). It
abolished all the positions in the now defunct LRC and
required new appointments to be issued to all employees of
the NALTDRA.

Sec. 9. All officials and employees in the existing

Government of the Republic of the Philippines shall continue
in office until otherwise provided by law or decreed by the
incumbent President of the Philippines, but all officials whose
appointments are by this Constitution vested in the Prime
Minister shall vacate their respective offices upon the
appointment and qualifications of their successors.

The question of whether or not a law abolishes an office is

one of legislative intent about which there can be no
controversy whatsoever if there is an explicit declaration in
the law itself. 4 A closer examination of Executive Order No.

The power to reorganize is, however; not absolute. We have

held in Dario vs. Mison 7 that reorganizations in this
jurisdiction have been regarded as valid provided they are
pursued in good faith. This court has pronounced 8 that if the
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newly created office has substantially new, different or

additional functions, duties or powers, so that it may be said
in fact to create an office different from the one abolished,
even though it embraces all or some of the duties of the old
office it will be considered as an abolition of one office and
the creation of a new or different one. The same is true if one
office is abolished and its duties, for reasons of economy are
given to an existing officer or office.

G.R. No. 101251 November 5, 1992

Executive Order No. 649 was enacted to improve the

services and better systematize the operation of the Land
Registration Commission. 9 A reorganization is carried out in
good faith if it is for the purpose of economy or to make
bureaucracy more efficient. 10 To this end, the requirement
of Bar membership to qualify for key positions in the
NALTDRA was imposed to meet the changing circumstances
and new development of the times. 11 Private respondent
Garcia who formerly held the position of Deputy Register of
Deeds II did not have such qualification. It is thus clear that
she cannot hold any key position in the NALTDRA, The
additional qualification was not intended to remove her from
office. Rather, it was a criterion imposed concomitant with a
valid reorganization measure.

CAMPOS, JR., J.:

A final word, on the "vested right theory" advanced by

respondent Civil Service Commission. There is no such thing
as a vested interest or an estate in an office, or even an
absolute right to hold it. Except constitutional offices which
provide for special immunity as regards salary and tenure, no
one can be said to have any vested right in an office or its
salary. 12 None of the exceptions to this rule are obtaining in
this case.
To reiterate, the position which private respondent Garcia
would like to occupy anew was abolished pursuant to
Executive Order No. 649, a valid reorganization measure.
There is no vested property right to be re employed in a
reorganized office. Not being a member of the Bar, the
minimum requirement to qualify under the reorganization law
for permanent appointment as Deputy Register of Deeds II,
she cannot be reinstated to her former position without
violating the express mandate of the law.
WHEREFORE, premises considered, We hereby GRANT the
petition and SET ASIDE the questioned Resolution of the
Civil Service Commission reinstating private respondent to
her former position as Deputy Register of Deeds II or its
equivalent in the National Land Titles and Deeds Registration
Administration.
SO ORDERED.

ELISEO
A.
SINON, petitioner,
vs.
CIVIL SERVICE COMMISSION, DEPARTMENT OF
AGRICULTURE-REORGANIZATION APPEALS BOARD
AND JUANA BANAN, respondents.

This petition for certiorari seeks to annul the following

Resolutions of the public respondents Civil Service
Commission (the "CSC") * and Department of Agriculture
Reorganization Appeals Board (the "DARAB"), ** to wit:
1. Resolution No. 97 dated August 23, 1989, issued
by respondent DARAB which revoked petitioner's
permanent appointment as Municipal Agriculture
Officer (MAO) and appointed, in his stead, private
respondent Juana Banan (Rollo 17);
2. Resolution dated February 8, 1991 issued by the
respondent CSC affirming the aforementioned
Resolution of respondent DARAB (Rollo 22);
3. Resolution dated July 11, 1991 issued by the
respondent CSC which denied petitioner's motion
for the reconsideration of the respondent
Commission's Resolution dated February 8, 1991. 1
The antecedent facts are as follows:
Prior to the reorganization of the then Minister of Agriculture
and Food (the "MAF"), the private respondent Juana Banan
was the incumbent Municipal Agricultural Officer (MAO) of
the aforesaid Minister in Region II, Cagayan, while the
petitioner Eliseo Sinon occupied the position of Fisheries
Extension Specialist (FES) II in the Bureau of Fisheries and
Aquatic Resources (BFAR) in the same region.
However, the reorganization of the MAF into the Department
of Agriculture (the "DA"), with the issuance of Executive
Order No. 116 dated 30 January 1987, called for the
evaluation of the following employees for twenty nine position
of MAO in Region II, Cagayan. The list as prepared by the
Placement Committee included the herein petitioner Sinon
but excluded the respondent Banan:
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1. Binoya, Vicente 76.20%

25. Soliman, Clemente 61.52%

2. Cabana, Isidro 75.01%

26. Llopis, Lino 61.47%

3. Sebastian, Alice 74.18%

27. Baliuag, Felicidad 61.39%

4. Zingapan, Benjamin 70.73%

28. Aresta, Leticia 60.67%

5. Guzman, Wilhemina de la P. 70.50%

29. Sinon, Eliseo A. 60.66% 2

6. Gervacio, Agnes 69.86%

(Emphasis supplied)

7. Somera, Hilario S. 68.13%

8. Tolentino, Julian R. 67.64%
9. Guillermo, Pedro 67.22%

Thus, respondents Banan filed an appeal with the DARAB for

re-evaluation of the qualification of all those included in the
aforementioned list made by the Placement Committee.

10. Tambio, Rodolfo 67.00%

On August 23, 1989, the DARAB released Resolution No. 97

in which the ranking for 29 MAO prepared by the Placement
Committee was re-evaluated as follows:

11. Aquino, Martina 66.94%

1. Binoya, Vicente 76.20%

12. Bassig, Pio P. 66.84%

2. Cabana, Isidro 75.01%

13. Rumpon, Danilo P. 65.61%

3. Sebastian, Alice 72.18%

14. Zareno, Bernardo 65.57%

4. Zingapan, Benjamin 70.73%

15. Madrid, Angel S. 65.57%

5. Guzman, Wilhemina de la P. 70.50%

16. Callangan, Napoleon 65.45%

6. Gervacio, Agnes 70.04%

17. Fiesta, Felicisimo 65.29%

7. Somera, Hilario S. 68.13%

18. Alvarez, Benefranco 64.99%

8. Tolentino, Julian Jr. 67.22%

19. Baggayan, Samuel O. 64.42%

9. Guillermo, Pedro 67.22%

20. Umbay, Pedro T. 64.01%

10. Tambio, Rodolfo 67.00%

21. De la Cruz, Florencio M. 62.07%

11. Aquino, Martina D. 66.94%

22. Leonador, Ernesto T. 61.88%

12. Bassig, Pio P. 66.84%

23. Miguel, Jose 61.86%

13. Rumpon, Danilo P. 65.61%

24. Berlan, Herminia C. 61.76%

14. Madrid, Angel 65.57%

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15. Callangan, Napoleon 65.45%

16. Fiesta, Felicisimo 65.29%

is a question of fact which the appointing authority or the

Placement Committee assisting him is in a better position to
determine. Hence, the Resolution dated 28 February 1989 of
the DARAB was set aside. 4

17. Alvarez, Benefranco 64.99%

18. Baggayan, Samuel O. 64.42%
19. Umbay, Pedro T. 64.01%
20. De la Cruz, Florencio M. 62.07%
21. Leonador, Ernesto T. 61.88%
22. Miguel, Jose L. 61.86%
23. Berlan, Herminia C. 61.76%
24. Soliman, Clemente 61.52%
25. Zareno, Bernardo 61.50%

On March 19, 1990, Banan filed a Motion for

Reconsideration in which she pitted her qualifications against
Sinon for the last slot in the 29 available MAO positions. At
the same time, she pointed out that to allow the findings of
the Placement Committee to supersede the DARAB
resolution which the Secretary of Agriculture had approved
would be tantamount to giving precedence to the Placement
Committee over the head of the agency.
Finally, on February 8, 1991, CSC, after reviewing the
Comment filed by the DARAB which had not been
considered earlier in the Civil Service Case No. 573, the
CSC granted respondent Banan's Motion for
Reconsideration and gave due course to her appointment by
the DARAB.

27. Baliuag, Felicidad 61.39%

On March 21, 1991, Sinon filed a Motion for Reconsideration

of the February 8, 1991 Resolution which however was
denied by the CSC in its assailed Resolution dated July 11,
1991.

28. Aresta, Leticia 60.67%

According to the respondent CSC:

26. Llopis, Lino 61.47%

29. Banan, Juana 59.32% 2

(Emphasis supplied)
In this re-evaluation, petitioner Sinon was displaced by the
respondent Banan and this same resolution was duly
approved by the Secretary of the Department of Agriculture,
Carlos G. Dominguez, who also affixed his signature on the
same date.
However, on August 30, 1988, Sinon received an
appointment as MAO for Region II in Cagayan as approved
by Regional Director Gumersindo D. Lasam on the basis of
the first evaluation made by the Placement Committee.
Thus, Sinon filed an appeal docketed as Civil Service Case
No. 573 on November 22, 1989 to the CSC. This appeal was
granted mainly for two reasons: first, the respondent DARAB
failed to file its Comment within the period required; and
second, the evaluation of the qualification of the employees

Mr. Sinon strongly argued that the findings

of the Placement Committee on the
qualifications of the parties should be
accorded deference and greater weight
over that of the RAB. Under the Placement
Committee's evaluation, Mr. Sinon
garnered 60.66 while Ms. Juana Banan
earned 57.32 after assessing the
contending parties qualification in
education, relevant experience, eligibility
and other factors. Following the request of
several parties for reevaluation, the RAB in
their decision gave Mr. Sinon 57.66 while
Ms. Banan obtained 59.32. Seemingly the
findings of the two bodies are in conflict.
Mr. Sinon argues that the findings of the
Placement Committee should prevail since
it is specially mandated by RA 6656.
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We disagree. The Placement Committee's function is

recommendatory in nature. The agency's Reorganization
Appeals Board was specially created by the Circular of the
Office of the President dated October 2, 1987 and conferred
with authority to review appeals and complaints of officials
and employees affected by the reorganization. thedecision of
the agency RAB has the imprimatur of the Secretary of that
agency and is therefore controlling in matters of and is
therefore controlling in matters of appointment. Under this
principle, the decision of the DARAB in this case enjoys
precedence over the Placement Committee. 5
Hence, this petition was filed with a prayer for a writ of
preliminary injunction and/or restraining order to enjoin the
execution of the assailed resolutions.
Without giving due course to the petition for a writ of
preliminary injunction, the court required the parties to file
their respective Comments. 6
On 12 November 1991, the Court gave due course to the
petition and required the parties to submit their respective
Memoranda. 7
The main issue for Our consideration is this: whether or not
the CSC committed grave abuse discretion in reviewing and
re-evaluating the ring or qualification of the petitioner Sinon.
The arguments of the petitioner can be summed up as
follows:
1). In issuing the Resolution of 8 February 1991, the
CSC in effect revoked the appointment that the
petitioner received as early as 30 August 1989 and
which was deemed permanent by virtue of the
approval of the Regional Director of the Department
of Agriculture:
2). In giving petitioner a rating of only
57.66%, 8 from his previous rating of 60.66% and at
the same time according a rating of 59.32% to
private respondent from a rating of only 57.32%, the
CSC departed from its power which is limited only to
that of "review", and hence encroached upon the
power of appointment exclusively lodged in the
appointment authority;

3) In giving due course to the appointment of

respondent Banan in its Resolution of 8 February
1991, CSC was directing the appointment of a
substitute of their own choice when the power to
appoint was exclusively lodged in the appointing
authority.
We rule as follows.
By grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction. The abuse of discretion must be patent and
gross as to amount to an evasion of positive duty or a virtual
refusal to perform a duty enjoined by law, or to act at all in
contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion or
hostility. 9
Contrary to the allegations of the petitioner, We do not find
any evidence of grave abuse of discretion on the part of the
CSC when it issued Resolution dated 8 February 1991 which
in effect approved the appointment of respondent Banan
over petitioner Sinon.
With the reorganization of the MAF into the DA with
Executive order No. 116, it became imperative to "protect the
security of tenure of Civil Service Officers and employees in
the implementation of government reorganization". Thus,
Congress passed Republic Act No. 6656. 10
It was under the same law of R.A. 6656 that the Placement
Committee was created:
Section 6. In order that the best qualified and mot
deserving persons shall be appointed in any
reorganization, there shall be created a Placement
Committee in each department or agency to assist
the appointing authority in the judicious selection
and placement of personnel. The Committee shall
consist of two (2) members appointed by the head
of the department or agency, a representative of the
appointing authority, and two (2) members duly
elected by the employees holding positions in the
first and second levels of the career
service: Provided, that if there is a registered
employee association with a majority of the
employees as members, that employee association
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shall also have a representative in the

Committee: Provided, Further, that immediately
upon the approval of the staffing pattern of the
department or agency concerned, such staffing
pattern shall be made known to all officers and
employees of the agency who shall be invited to
apply for any of the positions authorized therein.
Such application shall be considered by the
committee in the placement and selection of
personnel. (Emphasis supplied).
To "assist" mean to lend an aid to, 11 or to contribute effort in
the complete accomplishment of an ultimate purpose
intended to be effected by those engaged. 12
In contrast, to "recommend" 13 is to present one's advice or
choice as having one's approval or to represent or urge as
advisable or expedient. It involves the Idea that another has
the final decision.
Clearly, the Placement Committee was charged with the duty
of exercising the same discretionary functions as the
appointing authority in the judicious selection and placement
of personnel when the law empowered it to "assist" the
appointment authority.
The same law also allows any officer or employee aggrieved
by the appointments to file an appeal with the appointing
authority who shall made a decision within thirty (30) days
from the filing thereof. If the same employee is still not
satisfied with the decision of the appointing authority, he may
further appeal within ten (10) days from the receipt thereof
the CSC. 14
In the case at bar, the Circular dated October 2, 1987 of the
Office of the President created the agency Reorganization
Appeals Board to address the problem of the employees
affected by the reorganizations.
The foregoing legal measures spell out the remedies of
aggrieved parties which make it impossible to give the status
of finality to any appointment until all protests or oppositions
are duly heard.
Thus, while it is true that the appointment paper received by
petitioner Sinon on 30 August 1989 for the position of MAO
had not conferred any permanent status and was still subject

to the following conditions attached to any appointment in the

civil service:
Provided that there is no pending administrative
case against the appointee, no pending protest
against the appointment, nor any decision by
competent authority that will adversely affect the
approval of the appointment . 15
Hence, for as long as the re-evaluation of the qualification
filed by Banan was pending, the petitioner cannot claim that
he had been issued with a "complete" appointment. Neither
is there any point in asserting that his appointment had
"cured" whatever changes was subsequently recommended
by the DARAB. 16
The fact that the DARAB is capable of re-evaluating the
findings of the Placement Committed only to find that Sinon
is not qualified should no be taken as a grave abuse of
discretion.
We cannot subscribe to petitioner Sinon's insistence that the
public respondent CSC had disregarded the findings of the
Placement Committee. The truth is, these findings of the
Placement Committee. The truth is, these findings were reevaluated and the report after such re-evaluation was
submitted to and approved by the Secretary of Agriculture.
The CSC affirmed the findings of the DARAB.
Because of all the foregoing circumstances, the
jurisprudence cited by the petitioner Sinon appears to be
incorrect. 17
Neither do we find in the Resolution of 8 February 1991, any
statement by the CSC directing the appointment of the
respondent Banan. Hence, there was no directive from the
CSC that may be misinterpreted as a usurpation of any
appointing power. 18
Besides, in affirming the appointment of Banan as
recommended by the DARAB and approved by the Secretary
of Agriculture, the CSC is only being consistent with the law.
Section 4 or R.A. 6656 mandates that officers and
employees holding permanent appointments shall be given
preference for appointment to the new positions in the
approved staffing pattern comparable to their former
positions. Also, the term incumbent officer and the privileges
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generally accorded to them would more aptly refer to Banan

and not to petitioner Sinon whose appointment was never
confirmed completely. 19 There is no dispute that the position
of MAO in the old staffing pattern is most comparable to the
MAO in the new staffing pattern.
Finally, the Solicitor General in behalf of the CSC correctly
noted that the petitioner Sinon had conveniently omitted the
then Secretary of Agriculture who had affixed his approval on
the findings of the DARAB. Petitioner Sinon knew fully well
that as head of the agency, the Secretary of Agriculture was
the appointing authority.
It must be recalled that the whole purpose of reorganization
is that is it is a "process of restructuring the bureaucracy's
organizational and functional set-up, to make it more viable
in terms of the economy, efficiency, effectiveness and make it
more responsive to the needs of its public clientele as
authorized by law." 20 For as long as the CSC confines itself
within the limits set out by law and does not encroach upon
the prerogatives endowed to other authorities, this Court
must sustain the Commission.
WHEREFORE, the petition is DENIED with costs against the
petitioner.
SO ORDERED.

and Career Development Officer of the Development Bank of

the Philippines (DBP).
Petitioner was employed by DBP as Senior Training and
Career Development Officer on permanent status from
February, 1979 to December 1986.
On December 3, 1986, Executive Order No 81 (The Revised
Charter of DBP) was passed authorizing the reorganization
of DBP in this wise:
Sec. 32.Authority to Reorganize. In view of the
new scope of operations of the Bank, a
reorganization of the Bank and a reduction in force
are hereby authorized to achieve simplicity and
economy in operations, including adopting a new
staffing pattern to suit the reduced operations
envisioned. The formulation of the program of
reorganization shall be completed within six months
after the approval of this Charter, and the full
implementation of the reorganization program within
thirty months thereafter.
Further, Sections 33 and 34 thereof provide:
Sec. 33.Implementing Details; Organization and
Staffing of the Bank.
xxxxxxxxx

G.R. No. 93355 April 7, 1992

LUIS
B.
DOMINGO,
petitioner,
vs.
DEVELOPMENT BANK OF THE PHILIPPINES and CIVIL
SERVICE COMMISSION, respondents.
REGALADO, J.:
This special civil action impugns the resolution 1 of
respondent Civil Service Commission (CSC) promulgated on
April 10, 1990 in CSC Case No. 473 setting aside its earlier
resolution of November 27, 1989 and affirming the
separation of petitioner Luis B. Domingo as Senior Training

In the implementation of the reorganization of the

Bank, as authorized under the preceding section,
qualified personnel of the Bank may be appointed to
appropriate positions in the new staffing pattern
thereof and those not so appointed are deemed
separated from the service. No preferential or
priority rights shall be given to or enjoyed by any
officer or personnel of the Bank for appointment to
any position in the new staffing pattern nor shall any
officer or personnel be considered as having prior or
vested rights with respect to retention in the Bank or
in any position as may have been created in its new
staffing pattern, even if he should be the incumbent
of a similar position therein.
xxxxxxxxx
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Sec. 34.Separation Benefits. All those who shall

retire from the service or are separated therefrom
on account of the reorganization of the Bank under
the provisions of this Charter shall be entitled to all
gratuities and benefits provided for under existing
laws and/or supplementary retirement plans
adopted by and effective in the Bank: . . .

Consequently, petitioner, together with a certain Evangeline

Javier, filed with the CSC a joint verified complaint 4against
DBP for illegal dismissal. The complainants therein alleged
that their dismissal constituted a violation of the Civil Service
Law against the issuance of temporary appointments to
permanent employees, as well as of their right to security of
tenure and due process.

Pursuant thereto, DBP issued Board Resolution No. 304-87

allowing the issuance of temporary appointments to all DBP
personnel in order to fully implement the reorganization. The
resolution states in part:

On November 27, 1989, CSC issued a resolution 5 in CSC

Case No. 473 directing "the reappointment of Mr. Domingo
and Ms. Javier as Senior Training and Career Development
Officer and Research Analyst or any such equivalent rank
under the staffing pattern of DBP." The order for
reappointment was premised on the findings of the CSC that
"(t)he action of the DBP to issue temporary appointments to
all DBP personnel in order to allow for the maximum flexibility
in evaluating the performance of incumbents is not in accord
with civil service law rules," in that "(t)o issue a temporary
appointment to one who has been on permanent status
before will deprive the employee of benefits accorded
permanent employees and will adversely affect his security
of tenure," aside from the fact that such an act is contrary to
Section 25 (a) of Presidential Decree No. 807.

It is understood that pursuant to Section 32 of the

new DBP Charter full implementation of the
reorganization program shall be completed within a
period of thirty-six (36) months from the approval of
this Charter. In this connection, the plantilla
approved and appointments issued are purely
interim and the Bank is reserving its right to put in
place the permanent structure of the Bank as well
as the permanent appointments thereto until the
end of the 36-month period. 2
In effect, said resolution authorized the issuance of
temporary appointments to all DBP personnel to allow
maximum flexibility in the implementation of the
reorganization. Such temporary appointments issued had a
maximum period of twelve (12) months during which period
the performance of the incumbents were assessed on the
basis of the results of their evaluation.
With the passage of Executive Order No. 81 and Board
Resolution No. 304 87, DBP undertook the evaluation and
comparative assessment of all its personnel under the CSC
approved New Performance Appraisal System, a peer and
control rating process which served as an assessment tool of
DBP's screening process.
Petitioner Domingo was issued a temporary appointment on
January 2, 1987 for a period of one (1) year, which was
renewed for another period up to November 30, 1988.
Thereafter, in a memorandum 3 dated November 23, 1988
issued by the Final Review Committee, petitioner got a
performance rating of "below average," by reason of which
his appointment was "made to lapse."

DBP filed a motion for reconsideration 6 on December 27,

1989 alleging, inter alia, that the issuance of temporary
appointments to all the DBP employees was purely an
interim arrangement; that in spite of the temporary
appointment, they continued to enjoy the salary, allowances
and other benefits corresponding to permanent employees;
that there can be no impairment of herein petitioner's security
of tenure since the new DBP charter expressly provides that
"qualified personnel of the bank may be appointed to
appropriate positions in the new staffing pattern and those
not so appointed are deemed separated from the service;"
that petitioner was evaluated and comparatively assessed
under a rating system approved by the respondent
commission; and that petitioner cannot claim that he was
denied due process of law considering that, although several
appeals were received by the Final Review Committee from
other employees similarly situated, herein petitioner never
appealed his rating or the extension of his temporary
appointment although he was advised to do so by his direct
supervisor.
On April 10, 1990, CSC rendered the questioned resolution
setting aside its previous decision and affirming the
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separation of herein petitioner. In so ruling, CSC explained

that:
While it is true that this Commission ruled that the
issuance of temporary appointment to all DBP
personnel in order to allow "for maximum flexibility"
in evaluating the performance of incumbents is not
in accord with civil service laws and rules, however
it cannot lose sight of the fact that appellants are
among those who indeed got a below average
rating (unsatisfactory) when their performance were
reevaluated and comparatively reassessed by the
Final Review Committee of the Bank approved by
the Vice Chairman.
xxxxxxxxx
In effect, the determinative factor for retention and
the separation from the service is the individual
performance rating.
While the Commission supports the principle of
merit and fitness and strongly protects the security
of tenure of civil service officials and employees
which are the essence of careerism in the civil
service, it does not however, sanction the
reappointment of said officials and employees who
have fallen short of the performance necessary in
order to maintain at all times efficiency and
effectiveness in the Office.
It bears stressing that the DBP submitted the
records and documents in support of its allegations
that Mr. Domingo and Ms. Javier have indeed
got(ten) a below average rating (unsatisfactory)
during the filing of the instant motion for
reconsideration. Had DBP promptly submitted the
records/documents supporting its allegations, this
Commission at the outset should have sustained
the separation of the appellants from the service on
ground of poor performance (below average rating,
unsatisfactory) after the reassessment and reevaluation by the Bank through the Final Review
Committee. The CSC could not have guessed that
such was the basis of the DBP's termination of
Domingo and Javier until the papers were submitted
to it. . . .

It must be pointed out that appellants' separation

from the service was the lapse of their temporary
appointment. The non-extension or non-issuance of
permanent appointments were principally based on
their below average rating (unsatisfactory)
performance after they were reevaluated and
comparatively reassessed by the Final Review
Committee of the Bank. After all, the 1986 DBP
Revised Charter (E.O. No. 81) gives the Bank a
wide latitude of discretion in the reappointment of its
personnel, subject to existing civil service laws,
rules and regulations.
There is no doubt that the DBP conducted a
reevaluation and comparative reassessment of its
employees for placement/retention (for permanent)
and for separation from the service and found out
that appellants are wanting of performance, having
been rated as "Below Average." 7
Hence this petition, whereby petitioner raises the following
issues:
1. Petitioner's tenure of office was violated by
respondents;
2. Petitioner was not afforded a day in court and
was denied procedural due process in the unilateral
evaluation by his peers of his efficiency ratings for
the years 1987 and 1988;
3. Average and below average efficiency ratings are
not valid grounds for termination of the service of
petitioner;
4. Section 5 of the rules implementing Republic Act
No. 6656 is repugnant to the constitutional mandate
that "no officer or employee of the Civil Service be
removed or suspended except for causeprovided by
law;" and
5. Section 16, Article XVIII, Transitory
Provisions of the New Constitution was
also violated by respondents. 8
I. Petitioner puts in issue the validity of the reorganization
implemented by DBP in that the same violates his right to
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security of tenure. He contends that government

reorganization cannot be a valid ground to terminate the
services of government employees, pursuant to the ruling in
the case of Dario vs. Mison, et al. 9
This statement of petitioner is incomplete and inaccurate, if
not outright erroneous. Either petitioner misunderstood or he
totally overlooked what was stated in the aforecited decision
which held that "reorganizations in this jurisdiction have been
regarded as valid provided they are pursued in good faith."
As we said in Dario:
Reorganizations in this jurisdiction have
been regarded as valid provided they are
pursued in good faith. As a general rule, a
reorganization is carried out in "good faith"
if it is for the purpose of economy or to
make bureaucracy more efficient. In that
event, no dismissal (in case of dismissal)
or separation actually occurs because the
position itself ceases to exist. And in that
case, security of tenure would not be a
Chinese wall.
Clearly, from our pronouncements in Dario, reorganization is
a recognized valid ground for separation of civil service
employees, subject only to the condition that it be done in
good faith. No less than the Constitution itself in Section 16
of the Transitory Provisions, together with Sections 33 and
34 of Executive Order No. 81 and Section 9 of Republic Act
No. 6656, support this conclusion with the declaration that all
those not so appointed in the implementation of said
reorganization shall be deemed separated from the service
with the concomitant recognition of their entitlement to
appropriate separation benefits and/or retirement plans of the
reorganized government agency.
The facts of this case, particularly the evaluation process
adopted by DBP, bear out the existence of good faith in the
course of reorganization.
As a tool in the assessment process, a bank-wide peer and
control rating process was implemented. Under this process,
the peers and supervisors rated the DBP employees. 10

Placement Screening Committee (GPSC) and (2) the Central

Placement Screening Committee (CPSC), to review all
recommendations (for retention or separation) prior to
submissions to the Chairman an the Board of Directors. The
members of the two screening committees were the
Department and Group Heads and representatives from the
Career Officials Association and the DBP Employees Union.
The CPSC was further represented by the DBP Civil Service
Officer, who sat as consultant to help resolve questions on
Civil Service rules and regulations.
As an assessment tool to the Bank's screening process, a
peer and control rating process was implemented bank-wide,
the results of which were used as a gauge to determine the
suitability of an employee to stay in the Bank. Through this
rating, the Bank determines the value of the individual
employee to the Bank with the help of his peers (peer rating)
and
his
supervisors
(control
11
rating).
Also, as part of the evaluation process, a Final Review
Committee, composed of the group, department or unit head,
the heads of the Human Resource Center and of the
Personnel Services, and representatives from the Career
Officials Association and the Employees Union, was created
to screen further and to recommend the change in status of
the employee's appointment from temporary to permanent
beginning 1988. For the rank and file level, the committee
was chaired by the Vice-Chairman while the officer level was
presided over by the Chairman of the Bank. 12
The performance rating system used and adopted by DBP
was duly approved by the Civil Service Commission. Herein
petitioner was evaluated and comparatively assessed under
this approved rating system. This is shown by the
memorandum to the Vice-Chairman from the DBP Final
Review Committee wherein petitioner, among other DBP
employees, was evaluated and rated on his performance,
and was shown to have gotten a rating of "below average." 13
In the comment 14 filed by DBP with the CSC, respondent
bank explained the procedure it adopted in the evaluation of
herein petitioner, together with one Evangeline Javier, to wit:
xxxxxxxxx

To make the reorganization as open, representative and fair

as possible, two principal groups were formed: (1) the Group
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4. During the second phase of the

screening process, the Bank used several
instruments for determining proficiency or
skills on the job. More than skills, however,
the evaluation also covered trait factors to
determine a positive work attitude. The
Bank placed a premium on work attitude
because it believes that technical and
professional skills can easily be acquired
by an ordinary normal individual as long as
he has the right attitude towards learning.

9. Along with others whose performance

for 1987 was found wanting, Mr. Domingo
and Miss Javier were recommended for
reappointment as temporary for another
period from January to November 1988 to
give the Bank sufficient time to consider
their cases. However, in an evaluation of
performance for all extendees in
November 1988, Mr. Domingo and Miss
Javier were again found wanting having
both acquired a rating of "Below Average."

5. These attitudes are part of the new

corporate culture outlined in the corporate
philosophy instituted for the Bank and
disseminated thru the various corporate
culture seminars, monthly tertulias,
speeches of the Chairman and numerous
various internal communications and
bulletins. One of the most important values
emphasized was TEAMWORK due to the
very lean personnel force that the Bank
was left with and the competition it has to
contend with in the industry.

In addition, it is not disputed that DBP now has less than

2,000 employees from a former high level of around 4,000
employees in 1986. And, under Section 27 of Presidential
Decree No. 807, the Government is authorized to lay off
employees in case of a reduction due to reorganization, thus:

6. Mr. Domingo and Miss Javier were

subjected to this rating process as all other
employees of the Bank were.
xxxxxxxxx
8. Mr. Domingo and Miss Javier were
recommended for a renewal of temporary
status after assessment of their
performance
because
of
several
indications of lack of skill and their inability
to work with others in the department
where they were stationed. In a
compassionate stance, it was considered
in the Central Personnel Committee to
transfer them to another department or unit
of the Bank where they may be more
effective and productive, but they
expressed preference to stay in the
training unit of the Bank, the Human
Resource Center.

Sec. 27.Reduction in Force. Whenever

it becomes necessary because of lack of
work or funds or due to a change in the
scope or nature of an agency's program, or
as a result of reorganization, to reduce the
staff of any department or agency, those in
the same group or class of positions in one
or more agencies within the particular
department or agency wherein the
reduction is to be effected shall be
reasonably compared in terms of relative
fitness, efficiency and length of service,
and those found to be least qualified for
the remaining positions shall be laid off.
Lastly, petitioner failed to invoke the presence of any of the
circumstances enumerated under Section 2 of Republic Act
No. 6656 which would show or tend to show the existence of
bad faith in the implementation of the reorganization.
Quintessentially, the reorganization having been conducted
in accordance with the mandate of Dario, it can safely be
concluded that indeed the reorganization was attended by
good faith, ergo, valid. The dismissal of herein petitioner is a
removal for cause which, therefore, does not violate his
security of tenure.

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As a final note on this issue, we quote with approval the

statement of Mme. Justice Ameurfina A. Melencio-Herrera in
her dissenting opinion in the above-cited case:
To be sure, the reorganization could affect
the tenure of members of the career
service as defined in Section 5, Article IV
of Presidential Decree No. 807, and may
even result in the separation from office of
some meritorious employees. But even
then, the greater good of the greatest
number and the right of the citizenry to a
good government, and as they themselves
have mandated through the vehicle of
Proclamation No. 3, provide the
justification for the said injury to the
individual. In terms of values, the interest
of an employee to security of tenure must
yield to the interest of the entire populace
and to an efficient and honest government.
II. Petitioner also maintains that "average" and "below
average" efficiency ratings are not valid grounds for his
termination from the service.

accepted into the career service. A civil service employee's

efficiency rating, therefore, is a decisive factor for his
continued service with the Government. The inescapable
conclusion is that a "below average" efficiency rating is
sufficient justification for the termination of a government
employee such as herein petitioner. This is the reason why,
painful as it may be, petitioner's separation must be affirmed
if public good is to be subserved. In the words of respondent
commission in its questioned resolution, it cannot "sanction
the reappointment of said officials and employees who have
fallen short of the performance necessary in order to
maintain at all times efficiency and effectiveness in the
Office." 20
III. Petitioner finally contends that where the purpose of the
evaluation proceeding is to ascertain whether he should be
retained or separated from the service, it is a proceeding to
determine the existence of a ground for his termination and,
therefore, he should be afforded a day in court, pursuant to
the requirements of procedural due process, to defend
himself against any adverse findings in the process of
evaluation of his performance.
Petitioner's contention cannot be sustained.

It has become a basic and primordial concern of the State to

insure and promote the constitutional mandate that
appointments in the civil service shall be made only
according to merit and fitness pursuant to its adopted policy
of requiring public officers and employees to serve with the
highest degree of responsibility, integrity, loyalty and
efficiency. 15 As a matter of fact, the development and
retention of a competent and efficient work force in the public
service is considered as a primary concern of the
Government. 16 Hence, employees are selected on the basis
of merit and fitness to perform the duties and assume the
responsibilities of the position to which they are
appointed. 17 Concomitantly, the government has committed
itself to engender a continuing program of career and
personnel development for all government employees, 18 by
establishing a performance evaluation system to be
administered in such manner as to continually foster the
improvement of individual employee efficiency and
organizational effectiveness. 19

Section 2 of Republic Act No. 6656 provides that "no officer

or employee in the career service shall be removed except
for a valid cause and after due notice and hearing." Thus,
there is no question that while dismissal due to abona
fide reorganization is recognized as a valid cause, this does
not justify a detraction from the mandatory requirement of
notice and hearing. However, it is equally true and it is a
basic rule of due process that "what the law prohibits is not
the absence of previous notice but the absolute absence
thereof and the lack of opportunity to be heard." 21 There is
no violation of procedural due process even where no
hearing was conducted for as long as the party was given a
chance to present his evidence and defend himself.

All these abundantly show that the State puts a premium on

an individual's efficiency, merit and fitness before one is

It may be stated that although several

appeals were received by the Final Review

The records show that petitioner had the opportunity to

present his side and/or to contest the results of the
evaluation proceedings. In DBP's motion for the
reconsideration of the original decision of respondent
commission, respondent bank averred:

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Committee from other employees similarly

situated (i.e., also given temporary
appointments for 1988), Mr. Domingo and
Miss Javier never appealed their ratings or
the extension of their temporary
appointments in 1988. Even at this writing,
the Bank has not received any formal
appeal from them although they were
advised to do so by their direct
supervisor. 22
The fact that petitioner made no appeal to the Final Review
Committee was duly considered by respondent commission
in resolving said motion for reconsideration and in affirming
the separation of petitioner from the service, noting that
"appellants Mr. Domingo, and Miss Javier did not file or
submit their opposition to the motion for reconsideration."
Consequently, petitioner cannot, by his own inaction, legally
claim that he was denied due process of law.

BENGZON, C.J.:
This is a review of the resolution of the Securities and
Exchange Commission which would deny the Makati Stock
Exchange, Inc., permission to operate a stock exchange
unless it agreed not to list for trading on its board, securities
already listed in the Manila Stock Exchange.
Objecting to the requirement, Makati Stock Exchange, Inc.
contends that the Commission has no power to impose it and
that, anyway, it is illegal, discriminatory and unjust.
Under the law, no stock exchange may do business in the
Philippines unless it is previously registered with the
Commission by filing a statement containing the information
described in Sec. 17 of the Securities Act (Commonwealth
Act 83, as amended).

Considering petitioner's years of service, despite the

unfortunate result of the reorganization insofar as he is
concerned, he should be allowed separation and other
retirement benefits accruing to him by reason of his
termination, as provided for in Section 16, Article XVIII of the
1987 Constitution, as well as in Section 9 of Republic Act No.
6656 and Section 34 of Executive Order No. 81.

It is assumed that the Commission may permit registration if

the section is complied with; if not, it may refuse. And there is
now no question that the section has been complied with, or
would be complied with, except that the Makati Stock
Exchange, upon challenging this particular requirement of
the Commission (rule against double listing) may be deemed
to have shown inability or refusal to abide by its rules, and
thereby to have given ground for denying registration. [Sec.
17 (a) (1) and (d)].

WHEREFORE, no grave abuse of discretion having been

committed by respondent Civil Service Commission, its
challenged resolution of April 10, 1990 is hereby AFFIRMED.

Such rule provides: "... nor shall a security already listed in

any securities exchange be listed anew in any other
securities exchange ... ."

SO ORDERED.

The objection of Makati Stock Exchange, Inc., to this rule is

understandable. There is actually only one securities
exchange The Manila Stock Exchange that has been
operating alone for the past 25 years; and all or
presumably all available or worthwhile securities for
trading in the market are now listed there. In effect, the
Commission permits the Makati Stock Exchange, Inc., to
deal only with other securities. Which is tantamount to
permitting a store to open provided it sells only those goods
not sold in other stores. And if there's only one existing
store, 1 the result is a monopoly.

G.R. No. L-23004

June 30, 1965

MAKATI STOCK EXCHANGE, INC., petitioner,

vs.
SECURITIES AND EXCHANGE COMMISSION and
MANILA STOCK EXCHANGE, respondents.
Hermenegildo
B.
Reyes
for
petitioner.
Office of the Solicitor General for respondent Securities and
Exchange
Commission.
Norberto J. Quisumbing and Emma Quisumbing-Fernando
for respondent Manila Stock Exchange.

It is not farfetched to assert as petitioner does 2 that for all

practical purposes, the Commission's order or resolution
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would make it impossible for the Makati Stock Exchange to

operate. So, its "permission" amounted to a "prohibition."
Apparently, the Commission acted "in the public
interest." 3 Hence, it is pertinent to inquire whether the
Commission may "in the public interest" prohibit (or make
impossible) the establishment of another stock exchange
(besides the Manila Stock Exchange), on the ground that the
operation of two or more exchanges adversely affects the
public interest.
At first glance, the answer should be in the negative,
because the law itself contemplated, and, therefore, tacitly
permitted or tolerated at least, the operation of two or more
exchanges.
Wherever two or more exchanges exist, the
Commission, by order, shall require and enforce
uniformity of trading regulations in and/or between
said exchanges. [Emphasis Ours] (Sec. 28b-13,
Securities Act.)
In fact, as admitted by respondents, there were five stock
exchanges in Manila, before the Pacific War (p. 10, brief),
when the Securities Act was approved or amended.
(Respondent Commission even admits that dual listing was
practiced then.) So if the existence of more than one
exchange were contrary to public interest, it is strange that
the Congress having from time to time enacted legislation
amending the Securities Act, 4 has not barred multiplicity of
exchanges.
Forgetting for the moment the monopolistic aspect of the
Commission's resolution, let us examine the authority of the
Commission to promulgate and implement the rule in
question.
It is fundamental that an administrative officer has only such
powers as are expressly granted to him by the statute, and
those necessarily implied in the exercise thereof.
In its brief and its resolution now subject to review, the
Commission cites no provision expressly supporting its rule.
Nevertheless, it suggests that the power is "necessary for the
execution of the functions vested in it"; but it makes no
explanation, perhaps relying on the reasons advanced in
support of its position that trading of the same securities in

two or more stock exchanges, fails to give protection to the

investors, besides contravening public interest. (Of this, we
shall treat later) .
On the legality of its rule, the Commission's argument is that:
(a) it was approved by the Department Head before the
War; and (b) it is not in conflict with the provisions of the
Securities Act. In our opinion, the approval of the
Department, 5 by itself, adds no weight in a judicial litigation;
and the test is not whether the Act forbids the Commission
from imposing a prohibition, but whether it empowers the
Commission to prohibit. No specific portion of the statute has
been cited to uphold this power. It is not found in sec. 28 (of
the Securities Act), which is entitled "Powers (of the
Commission) with Respect to Exchanges and Securities." 6
According to many court precedents, the general power to
"regulate" which the Commission has (Sec. 33) does not
imply authority to prohibit." 7
The Manila Stock Exchange, obviously the beneficiary of the
disputed rule, contends that the power may be inferred from
the express power of the Commission to suspend trading in a
security, under said sec. 28 which reads partly:
And if in its opinion, the public interest so requires,
summarily to suspend trading in any registered
security on any securities exchange ... . (Sec. 28[3],
Securities Act.)
However, the Commission has not acted nor claimed to
have acted in pursuance of such authority, for the simple
reason that suspension under it may only be for ten days.
Indeed, this section, if applicable, precisely argues against
the position of the Commission because the "suspension," if
it is, and as applied to Makati Stock Exchange, continues for
an indefinite period, if not forever; whereas this Section 28
authorizes suspension for ten days only. Besides, the
suspension of trading in the security should not be on one
exchange only, but on allexchanges; bearing in mind that
suspension should be ordered "for the protection of
investors" (first par., sec. 28) in all exchanges, naturally, and
if "the public interest so requires" [sec. 28(3)].
This brings up the Commission's principal conclusions
underlying its determination viz.: (a) that the establishment of
another exchange in the environs of Manila would be inimical
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to the public interest; and (b) that double or multiple listing of

securities should be prohibited for the "protection of the
investors."
(a) Public Interest Having already adverted to this aspect
of the matter, and the emerging monopoly of the Manila
Stock Exchange, we may, at this juncture, emphasize that by
restricting free competition in the marketing of stocks, and
depriving the public of the advantages thereof the
Commission all but permits what the law punishesas
monopolies as "crimes against public interest." 8
"A stock exchange is essentially monopolistic," the
Commission states in its resolution (p. 14-a, Appendix, Brief
for Petitioner). This reveals the basic foundation of the
Commission's process of reasoning. And yet, a few pages
afterwards, it recalls the benefits to be derived "from the
existence of two or more exchanges," and the desirability of
"a healthy and fair competition in the securities market," even
as it expresses the belief that "a fair field of competition
among stock exchanges should be encouraged only to
resolve, paradoxically enough, that Manila Stock Exchange
shall, in effect, continue to be the only stock exchange in
Manila or in the Philippines.
"Double listing of a security," explains the Commission,
"divides the sellers and the buyers, thus destroying the
essence of a stock exchange as a two-way auction market
for the securities, where all the buyers and sellers in one
geographical area converge in one defined place, and the
bidders compete with each other to purchase the security at
the lowest possible price and those seeking to sell it compete
with each other to get the highest price therefor. In this
sense, a stock exchange is essentially monopolistic."
Inconclusive premises, for sure. For it is debatable
whether the buyer of stock may get the lowest price where all
the sellers assemble in only one place. The price there, in
one sale, will tend to fix the price for the succeeding, sales,
and he has no chance to get a lower price except at another
stock exchange. Therefore, the arrangement desired by the
Commission may, at most, be beneficial to sellers of stock
not to buyers although what applies to buyers should
obtain equally as to sellers (looking for higher prices).
Besides, there is the brokerage fee which must be
considered. Not to mention the personality of the broker.

(b) Protection of investors. At any rate, supposing the

arrangement contemplated is beneficial to investors (as the
Commission says), it is to be doubted whether it is
"necessary" for their "protection" within the purview of the
Securities Act. As the purpose of the Act is to give adequate
and effective protection to the investing publicagainst
fraudulent representations, or false promises and the
imposition of worthless ventures, 9 it is hard to see how the
proposed concentration of the market has a necessary
bearing to the prevention of deceptive devices or unlawful
practices. For it is not mere semantics to declare that acts for
the protection of investors are necessarily beneficial to them;
but not everything beneficial to them is necessary for their
protection.
And yet, the Commission realizes that if there were two or
more exchanges "the same security may sell for more in one
exchange and sell for less in the other. Variance in price of
the same security would be the rule ... ." Needless to add,
the brokerage rates will also differ.
This, precisely, strengthens the objection to the
Commission's ruling. Such difference in prices and rates
gives the buyer of shares alternative options, with the
opportunity to invest at lower expense; and the seller, to
dispose at higher prices. Consequently, for the investors'
benefit (protection is not the word), quality of listing 10 should
be permitted, nay, encouraged, and other exchanges allowed
to operate. The circumstance that some people "made a lot
of money due to the difference in prices of securities traded
in the stock exchanges of Manila before the war" as the
Commission noted, furnishes no sufficient reason to let one
exchange corner the market. If there was undue
manipulation or unfair advantage in exchange trading the
Commission should have other means to correct the specific
abuses.
Granted that, as the Commission observes, "what the
country needs is not another" market for securities already
listed on the Manila Stock Exchange, but "one that would
focus its attention and energies on the listing of new
securities and thus effectively help in raising capital sorely
needed by our ... unlisted industries and enterprises."
Nonetheless, we discover no legal authority for it to shore up
(and stifle) free enterprise and individual liberty along
channels leading to that economic desideratum. 11
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The Legislature has specified the conditions under which a

stock exchange may legally obtain a permit (sec. 17,
Securities Act); it is not for the Commission to impose others.
If the existence of two competing exchanges jeopardizes
public interest which is doubtful let the Congress
speak. 12 Undoubtedly, the opinion and recommendation of
the Commission will be given weight by the Legislature, in
judging whether or not to restrict individual enterprise and
business opportunities. But until otherwise directed by law,
the operation of exchanges should not be so regulated as
practically to create a monopoly by preventing the
establishment of other stock exchanges and thereby
contravening:
(a) the organizers' (Makati's) Constitutional right to
equality before the law;
(b) their guaranteed civil liberty to pursue any lawful
employment or trade; and
(c) the investor's right to choose where to buy or to
sell, and his privilege to select the brokers in his
employment. 13
And no extended elucidation is needed to conclude that for a
licensing officer to deny license solely on the basis of what
he believes is best for the economy of the country may
amount to regimentation or, in this instance, the exercise of
undelegated legislative powers and discretion.
Thus, it has been held that where the licensing statute does
not expressly or impliedly authorize the officer in charge,
he may not refuse to grant a license simply on the ground
that a sufficient number of licenses to serve the needs of the
public have already been issued. (53 C.J.S. p. 636.)
Concerning res judicata. Calling attention to the
Commission's order of May 27, 1963, which Makati Stock did
not appeal, the Manila Stock Exchange pleads the doctrine
of res judicata. 14 (The order now reviewed is dated May 7,
1964.)
It appears that when Makati Stock Exchange, Inc. presented
its articles of incorporation to the Commission, the latter, after
making some inquiries, issued on May 27, 1963, an order
reading as follows.

Let the certificate of incorporation of the MAKATI

STOCK EXCHANGE be issued, and if the
organizers thereof are willing to abide by the
foregoing conditions, they may file the proper
application for the registration and licensing of the
said Exchange.
In that order, the Commission advanced the opinion that "it
would permit the establishment and operation of the
proposed Makati Stock Exchange, provided ... it shall not list
for trading on its board, securities already listed in the Manila
Stock Exchange ... ."
Admittedly, Makati Stock Exchange, Inc. has not appealed
from that order of May 27, 1963. Now, Manila Stock insists
on res judicata.
Why should Makati have appealed? It got the certificate
of incorporation which it wanted. The condition or proviso
mentioned would only apply if and when it subsequently
filed the application for registration as stock exchange. It had
not yet applied. It was not the time to question the
condition; 15 Makati was still exploring the convenience of
soliciting the permit to operate subject to that condition. And
it could have logically thought that, since the condition did not
affect its articles of incorporation, it should not appeal the
order (of May 27, 1963) which after all, granted the certificate
of incorporation (corporate existence) it wanted at that time.
And when the Makati Stock Exchange finally found that it
could not successfully operate with the condition attached, it
took the issue by the horns, and expressing its desire for
registration and license, it requested that the condition
(against double listing) be dispensed with. The order of the
Commission denying, such request is dated May 7, 1964,
and is now under, review.
Indeed, there can be no valid objection to the discussion of
this issue of double listing now, 16 because even if the Makati
Stock Exchange, Inc. may be held to have accepted the
permission to operate with the condition against double
listing (for having failed to appeal the order of May 27, 1963),
still it was not precluded from afterwards contesting 17 the
validity of such condition or rule:
(1) An agreement (which shall not be construed as a waiver
of any constitutional right or any right to contest the validity
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of any rule or regulation) to comply and to enforce so far as

is within its powers, compliance by its members, with the
provisions of this Act, and any amendment thereto, and any
rule or regulation made or to be made thereunder. (See. 17a-1, Securities Act [Emphasis Ours].)

the rule whichresults in discrimination and violation of

constitutional rights. It is fundamental thatan administrative
officer has such powers as are expressly granted to him by
statute,and those necessarily implied in the exercise thereof.
Accordingly, the license of Makati Stock Exchange is
approved without such condition against double listing.

Surely, this petition for review has suitably been coursed.

And making reasonable allowances for the presumption of
regularity and validity of administrative action, we feel
constrained to reach the conclusion that the respondent
Commission possesses no power to impose the condition of
the rule, which, additionally, results in discrimination and
violation of constitutional rights.
ACCORDINGLY, the license of the petition to operate a stock
exchange is approved without such condition. Costs shall be
paid by the Manila Stock Exchange. So ordered.
FACTS:
The SEC in its resolution, denied the Makati Stock
Exchange, Inc permission to operate a stock exchange
unless it agreed not to list for trading on its board, securities
already listed in the Manila Stock Exchange.
Objecting to the requirement, Makati Stock
Exchange, Inc. contends that the Commission has no power
to impose it and that anyway, it is illegal, discriminatory and
unjust. The Commissions order or resolution would make
impossible, for all practical purposes, for the Makati Stock
Exchange to operate, such that its permission amounted to
prohibition.
Issue:
Does the Commission have the authority to promulgate the
rule in question?
Held: None.1.
Test for determining the existence of authorityThe
commission cites no provision of law expressly supporting its
rule againstdouble listing. It suggests that the power is
necessary for the execution of thefunctions vested in it. It
argues that said rule was approved by the Department
Headbefore the war and it is not in conflict with the provisions
of the Securities Act. Theapproval of the Department, by
itself, adds no weight in judicial litigation.The test is not
whether the Act forbids Commission from imposing a
prohibition butwhether it empowers the Commission to
prohibit.2.
Commission without power to impose prohibitionThe
Commission possesses no power to impose the condition of

G.R. No. 85439 January 13, 1992

KILUSANG BAYAN SA PAGLILINGKOD NG MGA
MAGTITINDA NG BAGONG PAMILIHANG BAYAN NG
MUNTINLUPA, INC. (KBMBPM), TERESITA A. FAJARDO,
NADYESDA B. PONSONES, MA. FE V. BOMBASE, LOIDA
D. LUCES, MARIO S. FRANCISCO, AMADO V. MANUEL
and ROLANDO G. GARCIA, incumbent members of the
Board, AMADO G. PEREZ and MA. FE V. BOMBASE,
incumbent General Manager and Secretary-Treasurer,
respectively, petitioners,
vs.
HON. CARLOS G. DOMINGUEZ, Secretary of Agriculture,
Regional Director of Region IV of the Department of
Agriculture ROGELIO P. MADRIAGA, RECTO
CORONADO and Municipal Mayor IGNACIO R. BUNYE,
both in his capacity as Municipal Mayor of Muntinlupa,
Metro Manila and as Presiding Officer of Sangguniang
Bayan ng Muntinglupa, and JOHN DOES, respondents.
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G.R. No. 91927 January 13, 1992

IGNACIO R. BUNYE, JAIME R. FRESNEDI, CARLOS G.
TENSUAN, VICTOR E. AGUINALDO, ALEJANDRO I.
MARTINEZ, EPIFANIO A. ESPELETA, REY E. BULAY,
LUCIO B. CONSTANTINO, ROMAN E. NIEFES, NEMESIO
O. MOZO, ROGER SMITH, RUFINO B. JOAQUIN,
NOLASCO I. DIAZ, RUFINO IBE and NESTOR
SANTOS,petitioners,
vs.
THE SANDIGANBAYAN, THE OMBUDSMAN and ROGER
C. BERBANO, Special Prosecutor III, respondents.
Jose O. Villanueva and Roberto B. Romanillos for petitioners
in G.R. No. 85439.
Alampay&Manhit Law Offices for petitioners in G.R. No.
91927.
DAVIDE, JR., J.:
These cases have been consolidated because they are
closely linked with each other as to factual antecedents and
issues.
The first case, G.R. No. 85439 (hereinafter referred to as
the Kilusang Bayan case), questions the validity of the order
of 28 October 1988 of then Secretary of Agriculture Hon.
Carlos G. Dominguez which ordered: (1) the take-over by the
Department of Agriculture of the management of the
petitioner Kilusang Bayan saPaglilingkod Ng MgaMagtitinda
ng BagongPamilihang Bayan ng Muntilupa, Inc. (KBMBPM)
pursuant to the Department's regulatory and supervisory
powers under Section 8 of P.D. No. 175, as amended, and
Section 4 of Executive Order No. 13, (2) the creation of a
Management Committee which shall assume the
management of KBMBPM upon receipt of the order, (3) the
disbandment of the Board of Directors, and (4) the turn over
of all assets, properties and records of the KBMBPM the
Management Committee.
The second case. G.R. No. 91927 (hereinafter referred to as
the Bunye case), seeks the nullification of the Resolution of 4
January 1990 of the Sandiganbayan admitting the Amended
Information against petitioners in Criminal Case No. 13966
and denying their motion to order or direct preliminary

investigation, and its Resolution of 1 February 1990 denying

the motion to reconsider the former.
The procedural and factual antecedents are not disputed.
On 2 September 1985, the Municipal Government of
Muntinlupa (hereinafter, Municipality), Metro Manila, thru its
then Mayor Santiago Carlos, Jr., entered into a contract with
the KILUSANG BAYAN SA PAGLILINGKOD NG MGA
MAGTITINDA SA BAGONG PAMILIHANG BAYAN NG
MUNTINLUPA, INC. (KBMBPM) represented by its General
Manager, Amado Perez, for the latter's management and
operation of the new Muntinlupa public market. The contract
provides for a twenty-five (25) year term commencing on 2
September 1985, renewable for a like period, unless sooner
terminated and/or rescinded by mutual agreement of the
parties, at a monthly consideration of Thirty-Five Thousand
Pesos (P35,000) to be paid by the KBMBPM within the first
five (5) days of each month which shall, however, be
increased by ten percent (10%) each year during the first five
(5) years only. 1
The KBMBPM is a service cooperative organized by and
composed of vendors occupying the New Muntinlupa Public
Market in Alabang, Muntinlupa, Metro Manila pursuant to
Presidential Decree No. 175 and Letter of Implementation
No. 23; its articles of incorporation and by-laws were
registered with the then Office of the Bureau of Cooperatives
Development (thereafter the Bureau of Agricultural
Cooperatives Development or BACOD and now the
Cooperative Development Authority). 2
Following his assumption into office as the new mayor
succeeding Santiago Carlos, Jr., petitioner Ignacio Bunye,
claiming to be particularly scandalized by the "virtual 50-year
term of the agreement, contrary to the provision of Section
143, paragraph 3 of Batas PambansaBlg. 337," and the
"patently inequitable rental," directed a review of the
aforesaid contract. 3 He sought opinions from both the
Commission on Audit and the Metro Manila Commission
(MMC) on the validity of the instrument. In separate letters,
these agencies urged that appropriate legal steps be taken
towards its rescission. The letter of Hon. Elfren Cruz of the
MMC even granted the Municipality authority "to take the
necessary legal steps for the cancellation/recission of the
above cited contract and make representations with
KBMBPM for the immediate transfer/takeover of the
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possession, management and operation of the New

Muntinlupa Market to the Municipal Government of
Muntinlupa." 4
Consequently, upon representations made by Bunye with the
Municipal Council, the latter approved on 1 August 1988
Resolution No. 45 abrogating the contract. To implement this
resolution, Bunye, together with his co-petitioners and
elements of the Capital Command of the Philippine
Constabulary, proceeded, on 19 August 1986, to the public
market and announced to the general public and the
stallholders thereat that the Municipality was taking over the
management and operation of the facility, and that the
stallholders should henceforth pay their market fees to the
Municipality, thru the Market Commission, and no longer to
the KBMBPM. 5
On 22 August 1988, the KBMBPM filed with Branch 13 of the
Regional Trial Court of Makati a complaint for breach of
contract, specific performance and damages with prayer for a
writ of preliminary injunction against the Municipality and its
officers, which was docketed as Civil Case No. 881702. 6 The complaint was premised on the alleged illegal
take-over of the public market effected "in excess of his
(Bunye's) alleged authority" and thus "constitutes breach of
contract and duty as a public official."
The writ applied for having been denied, 7 the KBMBPM
officers resisted the attempts of Bunye and company to
complete the take-over; they continued holding office in the
KBS building, under their respective official capacities. The
matter having been elevated to this Court by way
of certiorari, 8 We remanded the same to the Court of
Appeals which docketed it as C.A.-G.R. No. L-16930. 9
On 26 August 1988, Amado Perez filed with the Office of the
Ombudsman a letter-complaint charging Bunye and his copetitioners with oppression, harassment, abuse of authority
and violation of the Anti-Graft and Corrupt Practices Act 10 for
taking over the management and operation of the public
market from KBMBPM. 11
In a subpoena dated 7 October 1988, prosecutor Mothalib C.
Onos of the Office of the Special Prosecutor directed Bunye
and his co-petitioners to submit within ten (10) days from
receipt thereof counter-affidavits, affidavits of their witnesses

and other supporting documents. 12 The subpoena and lettercomplaint were received on 12 October 1988.
On 20 October 1988, two (2) days before the expiration of
the period granted to file said documents, Bunye, et al. filed
by mail an urgent motion for extension of "at least fifteen (15)
days from October 22, 1988" within which to comply 13 with
the subpoena.
Thereafter, the following transpired which subsequently gave
rise to these petitions:
G.R. No. 85439
In the early morning of 29 October 1988, a Saturday,
respondent Madriaga and Coronado, allegedly accompanied
by Mayor Bunye and the latters' heavily armed men, both in
uniform and in civilian clothes, together with other civilians,
namely: Romulo Bunye II, Alfredo Bunye, Tomas Osias,
Reynaldo Camilon, Benjamin Taguibao, Benjamin Bulos and
other unidentified persons, allegedly through force, violence
and intimidation, forcibly broke open the doors of the offices
of petitioners located at the second floor of the KBS Building,
new Muntinlupa Public Market, purportedly to serve upon
petitioners the Order of respondent Secretary of Agriculture
dated 28 October 1988, and to implement the same, by
taking over and assuming the management of KBMBPM,
disbanding the then incumbent Board of Directors for that
purpose and excluding and prohibiting the General Manager
and the other officers from exercising their lawful functions as
such. 14 The Order of the Secretary reads as follows: 15
ORDER
WHEREAS, the KILUSANG BAYAN SA
PAGLILINGKOD NG MGA MAGTITINDA
NG BAGONG PAMILIHANG BAYAN NG
MUNTINLUPA, INC., (KBMBPM), Alabang,
Muntinlupa, Metro Manila is a Cooperative
registered under the provisions of
Presidential Decree No. 175, as amended;
WHEREAS, the Department of Agriculture
is empowered to regulate and supervise
cooperatives registered under the
provisions of Presidential Decree No. 175,
as amended;
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WHEREAS, the general membership of

the KBMBPM has petitioned the
Department of Agriculture for assistance in
the removal of the members of the Board
of Directors who were not elected by the
general membership of said cooperative;
WHEREAS, the on-going financial and
management audit of the Department of
Agriculture auditors show (sic) that the
management of the KBMBPM is not
operating that cooperative in accordance
with PD. 175, LOI No. 23, the Circulars
issued by DA/BACOD and the provisions
of the by-laws of KBMBPM;
WHEREAS, the interest of the public so
demanding it is evident and urgently
necessary that the KBMBPM MUST BE
PLACED UNDER MANAGEMENT TAKEOVER of the Department of Agriculture in
order to preserve the financial interest of
the members of the cooperative and to
enhance the cooperative development
program of the government;
WHEREAS, it is ordered that the
Department of Agriculture in the exercise
of its regulatory and supervisory powers
under Section 8 of PD 175, as amended,
and Section 4 of Executive Order No. 113,
take over the management of KBMBPM
under the following directives:
1. THAT a Management Committee is
hereby created composed of the following:

e) One (1) from the Municipal Government

of Muntinlupa to be designated by the
SangguniangPambayan ng Muntinlupa;
2. THAT the Management Committee shall,
upon receipt of this Order, assume the
management of KBMBPM;
3. THAT the present Board of Directors is
hereby disbanded and the officers and
Manager of the KBMBPM are hereby
directed to turnover all assets, properties
and records of the KBMBPM to the
Management Committee herein created;
4. THAT the Management Committee is
hereby empowered to promulgate rules of
procedure to govern its workings as a
body;
5. THAT the Management Committee shall
submit to the undersigned thru the Director
of BACOD monthly reports on the
operations of KBMBPM;
6. THAT the Management Committee shall
call a General Assembly of all registered
members of the KBMBPM within Ninety
(90) days from date of this Order to decide
such matters affecting the KBMBPM,
including the election of a new set of Board
of Director (sic).
This Order takes effect immediately and
shall continue to be in force until the
members of the Board of Directors shall
have been duly elected and qualified.

a) Reg. Dir. or OIC RD DA Region IV

b) Atty. Rogelio P. Madriaga BACOD
c) Mr. Recto Coronado KBMBPM
d) Mrs. NadjasdaPonsones KBMBPM

Done this 28th day of October, 1988 at

Quezon City.
As claimed by petitioners, the Order served on them was not
written on the stationary of the Department, does not bear its
seal and is a mere xerox copy.
The so-called petition upon which the Order is based
appears to be an unverified petition dated 10 October 1988
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signed, according to Mayor Bunye, 16 by 371 members of the

KBMBPM.
On 2 November 1988, petitioners filed the petition in this
case alleging, inter alia, that:
(a) Respondent Secretary acted without or in
excess of jurisdiction in issuing the Order for he
arrogated unto himself a judicial function by
determining the alleged guilt of petitioners on the
strength of a mere unverified petition; the
disbandment of the Board of Directors was done
without authority of law since under Letter of
Implementation No. 23, removal of officers,
directors or committee members could be done only
by the majority of the members entitled to vote at an
annual or special general assembly and only after
an opportunity to be heard at said assembly.
(b) Respondent Secretary acted in a capricious,
whimsical, arbitrary and despotic manner, so patent
and gross that it amounted to a grave abuse of
discretion.
(c) The Order is a clear violation of the By-Laws of
KBMBPM and is likewise illegal and unlawful for it
allows or tolerates the violation of the penal
provisions under paragraph (c), Section 9 of P.D.
No. 175.
(d) The Order is a clear violation of the
constitutional right of the individual petitioners to be
heard. 17
They pray that upon the filing of the petition, respondents,
their agents, representatives or persons acting on their
behalf be ordered to refrain, cease and desist from enforcing
and implementing the questioned Order or from excluding
the individual petitioners from the exercise of their rights as
such officers and, in the event that said acts sought to be
restrained were already partially or wholly done, to
immediately restore the management and operation of the
public market to petitioners, order respondents to vacate the
premises and, thereafter, preserve the status quo; and that,
finally, the challenged Order be declared null and void.

In the Resolution of 9 October 1988, 18 We required the

respondents to Comment on the petition. Before any
Comment could be filed, petitioners filed on 2 January 1989
an Urgent Ex-Parte Motion praying that respondent Atty.
Rogelio Madriaga, who had assumed the position of
Chairman of the Management Committee, be ordered to stop
and/or cancel the scheduled elections of the officers of the
KBMBPM on 6 January 1989 and, henceforth, desist from
scheduling any election of officers or Members of the Board
of Directors thereof until further orders on the Court. 19 The
elections were, nevertheless, held and a new board of
directors was elected. So, on 19 January 1989, petitioners
filed a supplemental motion 20 praying that respondent
Madriaga and the "newly elected Board of Directors be
ordered to cease and desist from assuming, performing or
exercising powers as such, and/or from removing or
replacing the counsels of petitioners as counsels for
KBMBPM and for Atty. Fernando Aquino, Jr., to cease and
desist from unduly interfering with the affairs and business of
the cooperative."
Respondent Bunye, by himself, filed his Comment on 23
January 1989. 21 He denies the factual allegations in the
petition and claims that petitioners failed to exhaust
administrative remedies. A reply thereto was filed by
petitioners on 7 February 1989. 22
Respondent Recto Coronado filed two (2) Comments. The
first was filed on 6 February 1989 23 by his counsel, Atty.
Fernando Aquino, Jr., and the second, which is for both him
and Atty. Madriaga, was filed by the latter on 10 February
1989. 24
On 20 February 1989, petitioners filed a Reply to the first
Comment of Coronado 25 and an Ex-Parte Motion for the
immediate issuance of a cease and desist order 26 praying
that the so-called new directors and officers of KBMBPM,
namely: Tomas M. Osias, Ildefonso B. Reyes,
PaulinoMoldez, Fortunato M. Medina, Aurora P. del Rosario,
Moises Abrenica, and LambertoCasalla, be ordered to
immediately cease and desist from filing notices of
withdrawals or motions to dismiss cases filed by the
Cooperative now pending before the courts, administrative
offices and the Ombudsman and Tanodbayan, and that if
such motions or notices were already filed, to immediately
withdraw and desist from further pursuing the same until
further orders of this Court. The latter was precipitated by the
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Resolution No. 19 of the "new" board of directors

withdrawing all cases filed by its predecessors against
Bunye, et al., and more particularly the following cases: (a)
G.R. No. 85439 (the instant petition), (b) Civil Case No. 881702, (c) OSP Case No. 88-2110 before the Ombudsman,
(d) IBP Case No. 88-0119 before the Tanodbayan, and Civil
Case No. 88-118 for Mandamus. 27
On 1 March 1989, We required the Solicitor General to file
his Comment to the petition and the urgent motion for the
immediate issuance of a cease and desist order. 28
A motion to dismiss the instant petition was filed on 30 March
1989. 29 On 19 April 1989, We resolved to dismiss the case
and consider it closed and terminated. 30 Thereupon, after
some petitioners filed a motion for clarification and
reconsideration, We set aside the dismissal order and
required the new directors to comment on the Opposition to
Motion to Dismiss filed by the former. 31
The new board, on 14 June 1989, prayed that its
Manifestation of 6 June 1989 and Opposition dated 9 June
1989, earlier submitted it response to petitioners' motion for
reconsideration of the order dismissing the instant petition,
be treated as its Comment. 32 Both parties then continued
their legal fencing, serving several pleadings on each other.
In Our Resolution of 9 August 1989, 33 We gave the petition
due course and required the parties to submit their
respective Memoranda.
On 14 August 1989, petitioners filed an urgent exparte motion for the immediate issuance of a cease and
desist order 34 in view of the new board's plan to enter into a
new management contract; the motion was noted by this
Court on 23 August 1989. A second ex-parte motion, noted
on 18 October 1989, was filed on 19 September 1989 asking
this court to consider the "Invitation to pre-qualify and bid" for
a new contract published by respondent Bunye. 35
In a belated Comment 36 for the respondent Secretary of
Agriculture filed on 22 September 1989, the Office of the
Solicitor General asserts that individual petitioners, who were
not allegedly elected by the members or duly designated by
the BACOD Director, have no right or authority to file this
case; the assailed Order of the Secretary was issued
pursuant to P.D. No. 175, more particularly Section 8 thereof

which authorizes him "(d) to suspend the operation or cancel

the registration of any cooperative after hearing and when in
its judgment and based on findings, such cooperative is
operating in violation of this Decree, rules and regulations,
existing laws as well as the by-laws of the cooperative itself;"
the Order is reasonably necessary to correct serious flaws in
the cooperative and provide interim measures until election
of regular members to the board and officers thereof; the
elections conducted on 6 January 1989 are valid; and that
the motion to dismiss filed by the new board of directors
binds the cooperative. It prays for the dismissal of the
petition.
Respondent Secretary of Agriculture manifested on 22
September 1989 that he is adopting the Comment submitted
by the Office of the Solicitor General as his
memorandum; 37 petitioners and respondents Coronado and
Madriaga filed their separate Memoranda on 6 November
1989; 38 while the new board of directors submitted its
Memorandum on 11 December 1989. 39
The new KBMBPM board submitted additional pleadings on
16 February 1990 which it deemed relevant to the issues
involved herein. Reacting, petitioners filed a motion to strike
out improper and inadmissible pleadings and annexes and
sought to have the pleaders cited for contempt. Although We
required respondents to comment, the latter did not comply.
Nevertheless, a manifestation was filed by the same board
on 25 February 1991 40 informing this Court of the holding, on
9 January 1991, of its annual general assembly and election
of its board of directors for 1991. It then reiterates the prayer
that the instant petition be considered withdrawn and
dismissed. Petitioners filed a counter manifestation alleging
that the instant petition was already given due course on 9
August 1989. 41 In its traverse to the counter manifestation,
the new board insists that it "did not derive authority from the
October 28, 1988 Order, the acts of the Management
Committee, nor (sic) from the elections held in (sic) January
6, 1989," but rather from the members of the cooperative
who elected them into office during the elections.
Petitioners filed a rejoinder asserting that the election of new
directors is not a supervening event independent of the main
issue in the present petition and that to subscribe to the
argument that the issues in the instant petition became moot
with their assumption into office is to reward a wrong done.
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G. R. NO. 91927
Petitioners claim that without ruling on their 20 October 1988
motion for an extension of at last 15 days from 22 October
1988 within which to file their counter-affidavits, which was
received by the Office of the Special Prosecutor on 3
November 1988, Special Prosecutor Onos promulgated on
11 November 1988 a Resolution finding the evidence on
hand sufficient to establish a prima facie case against
respondents (herein petitioners) and recommending the filing
of the corresponding information against them before the
Sandiganbayan. 42Petitioners also claim that they submitted
their counter-affidavits on 9 November 1988. 43
In their motion dated 2 December 1988, petitioners move for
a reconsideration of the above Resolution, 44 which was
denied by Onos 45 in his 18 January 1989 Order. The
information against the petitioners was attached to this order.
Upon submission of the records for his approval, the
Ombudsman issued a first indorsement on 4 April 1989
referring to "Judge Gualberto J. de la Llana, Acting Director ,
IEO/RSSO, this Office, the within records of OSP Case No.
88-02110 . . . for further preliminary investigation . . ." 46
Thereafter, on 28 April 1989, Bunye and company received a
subpoena from de la Llana requiring them to appear before
the latter on 25 April 1989, 47 submit a report and file
comment. After being granted an extension, Bunye and
company submitted their comment on 18 May 1989. 48
On 22 August 1989, de la Llana recommended the filing of
an information for violation of section 3 (e) of the Anti-Graft
and Corrupt Practices Act. 49 The case was referred to
special prosecuting officer Jose Parentela, Jr. who, in his
Memorandum 50 to the Ombudsman through the Acting
Special Prosecutor, likewise urged that an information be
filed against herein petitioners. On 3 October 1989, the
Ombudsman signed his conformity to the Memorandum and
approved the 18 January information prepared by Onos,
which was then filed with the Sandiganbayan.
Consequently, Bunye, et al. were served arrest warrants
issued by the Sandiganbayan. Detained at the NBI on 9
October 1989, they claim to have discovered only then the
existence of documents recommending and approving the
filing of the complaint and a memorandum by special

prosecutor Bernardita G. Erum proposing the dismissal of the

same. 51
Arraignment was set for 18 October 1989. 52
However, on 14 October 1989, petitioners filed with the
Sandiganbayan an "Omnibus Motion to Remand to the Office
of the Ombudsman; to Defer Arraignment and to Suspend
Proceedings." 53
Subsequently, through new counsel, petitioners filed on 17
October 1989 a Consolidated Manifestation and
Supplemental Motion 54 praying, inter alia, for the quashal of
the information on the ground that they were deprived of their
right to a preliminary investigation and that the information
did not charge an offense.
The Sandiganbayan issued an order on 18 October 1989
deferring arraignment and directing the parties to submit their
respective memoranda, 55 which petitioners complied with on
2 November 1989. 56 On 16 November 1989, special
Prosecutor Berbano filed a motion to admit amended
information. 57
On 17 November 1989, the Sandiganbayan handed down a
Resolution 58 denying for lack of merit the Omnibus Motion to
Remand the Case To The Office of the Ombudsman, to Defer
Arraignment and to Suspend Proceedings. Petitioners then
filed a motion to order a preliminary investigation 59 on the
basis of the introduction by the amended information of new,
material and substantive allegations, which the special
prosecutor opposed, 60 thereby precipitating a rejoinder filed
by petitioners. 61
On 4 January 1990, the Sandiganbayan handed down a
Resolution 62 admitting the Amended Information and
denying the motion to direct preliminary investigation. Their
motion to reconsider this Resolution having been denied in
the Resolution of 1 February 1990, 63 petitioners filed the
instant petition on 12 February 1990.
Petitioners claim that respondent Sandiganbayan acted
without or in excess of jurisdiction or with manifest grave
abuse of discretion amounting to lack of jurisdiction in
denying petitioners their right to preliminary investigation and
in admitting the Amended Information.
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They then pray that: (a) the 4 January and 1 February 1990
Resolutions of the Sandiganbayan, admitting the amended
information and denying the motion for reconsideration,
respectively, be annulled; (b) a writ be issued enjoining the
Sandiganbayan from proceeding further in Criminal Case No.
13966; and (c) respondents be enjoined from pursuing
further actions in the graft case.
We required the respondents to Comment on the petition.
On 21 February 1990, petitioners' counsel filed a motion to
drop EpifanioEspeleta and Rey E. Dulay as
petitioners, 64 and in the Comment they filed on 30 March
1990, in compliance with Our Resolution of 1 March 1990,
they state that they do not interpose any objection to the
motion.
On 20 March 1990, the Office of the Solicitor General moved
that it be excused from filing comment for the respondents as
it cannot subscribe to the position taken by the latter with
respect to the questions of law involved.65 We granted this
motion in the resolution of 8 May 1990.
Respondent Berbano filed his comment on 10 September
1991 and petitioners replied on 20 December 1990; Berbano
subsequently filed a Rejoinder thereto on 11 January
1991. 66 The Sandiganbayan then filed a manifestation
proposing that it be excused from filing comment as its
position
on the matters in issue is adequately stated in the resolutions
sought to be annulled. 67 On 7 March 1991, We resolved to
note the manifestation and order the instant petition
consolidated with G.R. No. 85439.
The present dispute revolves around the validity of the
antecedent proceedings which led to the filing of the original
information on 18 January 1989 and the amended
information afterwards.
THE ISSUES AND THEIR RESOLUTION
1. G. R. No. 85439.
As adverted to in the introductory portion of this Decision, the
principal issue in G.R. No. 85439 is the validity of the 28
October 1988 Order of respondent Secretary of Agriculture.
The exordium of said Order unerringly indicates that its basis

is the alleged petition of the general membership of the

KBMBPM requesting the Department for assistance "in the
removal of the members of the Board of Directors who were
not elected by the general membership" of the cooperative
and that the "ongoing financial and management audit of the
Department of Agriculture auditors show (sic) that the
management of the KBMBPM is not operating that
cooperative in accordance with P.D. 175, LOI 23, the
Circulars issued by DA/BACOD and the provisions and bylaws of KBMBPM." It is also professed therein that the Order
was issued by the Department "in the exercise of its
regulatory and supervisory powers under Section 8 of P.D.
175, as amended, and Section 4 of Executive Order No.
113."
Respondents challenge the personality of the petitioners to
bring this action, set up the defense of non-exhaustion of
administrative remedies, and assert that the Order was
lawfully and validly issued under the above decree and
Executive Order.
We find merit in the petition and the defenses interposed do
not persuade Us.
Petitioners have the personality to file the instant petition and
ask, in effect, for their reinstatement as Section 3, Rule 65 of
the Rules of Court, defining an action for mandamus, permits
a person who has been excluded from the use and
enjoyment of a right or office to which he is entitled, to file
suit. 68 Petitioners, as ousted directors of the KBMBPM, are
questioning precisely the act of respondent Secretary in
disbanding the board of directors; they then pray that this
Court restore them to their prior stations.
As to failure to exhaust administrative remedies, the rule is
well-settled that this requirement does not apply where the
respondent is a department secretary whose acts, as an alter
ego of the President, bear the implied approval of the latter,
unless actually disapproved by him. 69 This doctrine of
qualified political agency ensures speedy access to the
courts when most needed. There was no need then to
appeal the decision to the office of the President; recourse to
the courts could be had immediately. Moreover, the doctrine
of exhaustion of administrative remedies also yields to other
exceptions, such as when the question involved is purely
legal, as in the instant case, 70 or where the questioned act is
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patently illegal, arbitrary or oppressive. 71 Such is the claim of

petitioners which, as hereinafter shown, is correct.
And now on the validity of the assailed Order.
Regulation 34 of Letter of Implementation No. 23
(implementing P.D. No. 175) provides the procedure for the
removal of directors or officers of cooperatives, thus:
An elected officer, director or committee
member may be removed by a vote of
majority of the members entitled to vote at
an annual or special general assembly.
The person involved shall have an
opportunity to be heard.
A substantially identical provision, found in Section 17, Article
III of the KBMBPM's by-laws, reads:
Sec. 17.Removal of Directors and
Committee Members. Any elected
director or committee member may be
removed from office for cause by a majority
vote of the members in good standing
present at the annual or special general
assembly called for the purpose after
having been given the opportunity to be
heard at the assembly.
Under the same article are found the requirements for the
holding of both the annual general assembly and a special
general assembly.
Indubitably then, there is an established procedure for the
removal of directors and officers of cooperatives. It is
likewise manifest that the right to due process is respected
by the express provision on the opportunity to be heard. But
even without said provision, petitioners cannot be deprived of
that right.
The procedure was not followed in this case. Respondent
Secretary of Agriculture arrogated unto himself the power of
the members of the KBMBPM who are authorized to vote to
remove the petitioning directors and officers. He cannot take
refuge under Section 8 of P.D. No. 175 which grants him
authority to supervise and regulate all cooperatives. This
section does not give him that right.

An administrative officer has only such powers as are

expressly granted to him and those necessarily implied in the
exercise thereof. 72 These powers should not be extended by
implication beyond what may to necessary for their just and
reasonable execution. 73
Supervision and control include only the authority to: (a) act
directly whenever a specific function is entrusted by law or
regulation to a subordinate; (b) direct the performance of
duty; restrain the commission of acts; (c) review, approve,
reverse or modify acts and decisions of subordinate officials
or
units; (d) determine priorities in the execution of plans and
programs; and (e) prescribe standards, guidelines, plans and
programs. Specifically, administrative supervision is limited to
the authority of the department or its equivalent to: (1)
generally oversee the operations of such agencies and
insure that they are managed effectively, efficiently and
economically but without interference with day-to-day
activities; (2) require the submission of reports and cause the
conduct of management audit, performance evaluation and
inspection to determine compliance with policies, standards
and guidelines of the department; (3) take such action as
may be necessary for the proper performance of official
functions, including rectification of violations, abuses and
other forms of mal-administration; (4) review and pass upon
budget proposals of such agencies but may not increase or
add to them. 74
The power to summarily disband the board of directors may
not be inferred from any of the foregoing as both P.D. No.
175 and the by-laws of the KBMBPM explicitly mandate the
manner by which directors and officers are to be removed.
The Secretary should have known better than to disregard
these procedures and rely on a mere petition by the general
membership of the KBMBPM and an on-going audit by
Department of Agriculture auditors in exercising a power
which he does not have, expressly or impliedly. We cannot
concede to the proposition of the Office of the Solicitor
General that the Secretary's power under paragraph (d),
Section 8 of P.D. No. 175 above quoted to suspend the
operation or cancel the registration of any cooperative
includes the "milder authority of suspending officers and
calling for the election of new officers." Firstly, neither
suspension nor cancellation includes the take-over and
ouster of incumbent directors and officers, otherwise the law
itself would have expressly so stated. Secondly, even
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granting that the law intended such as postulated, there is

the requirement of a hearing. None was conducted.
Likewise, even if We grant, for the sake of argument, that
said power includes the power to disband the board of
directors and remove the officers of the KBMBPM, and that
a hearing was not expressly required in the law, still the
Order can be validly issued only after giving due process to
the affected parties, herein petitioners.
Due process is guaranteed by the Constitution 75 and
extends to administrative proceedings. In the landmark case
ofAngTibay vs. Court of Industrial Relations, 76 this Court,
through Justice Laurel, laid down the cardinal primary
requirements of due process in administrative proceedings,
foremost of which is the right to a hearing, which includes the
right to present one's case and submit evidence in support
thereof. The need for notice and the opportunity to be heard
is the heart of procedural due process, be it in either judicial
or administrative proceedings. 77 Nevertheless, a plea of a
denial of procedural due process does not lie where a defect
consisting in an absence of notice of hearing was thereafter
cured by the aggrieved party himself as when he had the
opportunity to be heard on a subsequent motion for
reconsideration. This is consistent with the principle that what
the law prohibits is not the absence of previous notice but the
absolute absence thereof and lack of an opportunity to be
heard. 78
In the instant case, there was no notice of a hearing on the
alleged petition of the general membership of the KBMBPM;
there was, as well, not even a semblance of a hearing. The
Order was based solely on an alleged petition by the general
membership of the KBMBPM. There was then a clear denial
of due process. It is most unfortunate that it was done after
democracy was restored through the peaceful people revolt
at EDSA and the overwhelming ratification of a new
Constitution thereafter, which preserves for the generations
to come the gains of that historic struggle which earned for
this Republic universal admiration.
If there were genuine grievances against petitioners, the
affected members should have timely raise these issues in
the annual general assembly or in a special general
assembly. Or, if such a remedy would be futile for some
reason or another, judicial recourse was available.

Be that as it may, petitioners cannot, however, be restored to

their positions. Their terms expired in 1989, thereby
rendering their prayer for reinstatement moot and academic.
Pursuant to Section 13 of the by-laws, during the election at
the first annual general assembly after registration, one-half
plus one (4) of the directors obtaining the highest number of
votes shall serve for two years, and the remaining directors
(3) for one year; thereafter, all shall be elected for a term of
two years. Hence, in 1988, when the board was disbanded,
there was a number of directors whose terms would have
expired the next year (1989) and a number whose terms
would have expired two years after (1990). Reversion to
the status quo preceding 29 October 1988 would not be
feasible in view of this turn of events. Besides, elections were
held in 1990 and 1991. 79 The affairs of the cooperative are
presently being managed by a new board of directors duly
elected in accordance with the cooperative's by-laws.
2. G. R. No. 91927.
The right of an accused to a preliminary investigation is not
among
the rights guaranteed him in the Bill of Rights. As stated
in Marcos, et al. vs. Cruz, 80 "the preliminary investigation in
criminal cases is not a creation of the Constitution; its origin
is statutory and it exists and the right thereto can be invoked
when so established and granted by law. It is so specifically
granted by procedural law. 81 If not waived, absence thereof
may amount to a denial of due process. 82 However, lack of
preliminary investigation is not a ground to quash or dismiss
a complaint or information. Much less does it affect the
court's jurisdiction. In People vs.Casiano, 83 this Court ruled:
Independently of the foregoing, the
absence of such investigation [preliminary]
did not impair the validity of the information
or otherwise render it defective. Much less
did it affect the jurisdiction of the court of
first instance over the present case.
Hence, had the defendant-appellee been
entitled
to
another
preliminary
investigation, and had his plea of not guilty
upon arraignment not implied a waiver of
said right, the court of first instance should
have, either conducted such preliminary
investigation, or ordered the Provincial
Fiscal to make it, in pursuance of section
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1687 of the Revised Administrative Code

(as amended by Republic Act No. 732), or
remanded the record for said investigation
to the justice of the peace court, instead of
dismissing the case as it did in the order
appealed from.
This doctrine was thereafter reiterated or affirmed in several
case. 84
In the instant case, even if it is to be conceded for
argument's sake that there was in fact no preliminary
investigation,
the
Sandiganbayan,
per Doromal
vs. Sandiganbayan, 85 "should merely suspend or hold in
abeyance proceedings upon the questioned Amended
Information and remand the case to the Office of the
Ombudsman for him to conduct a preliminary investigation."
It is Our view, however, that petitioners were not denied the
right to preliminary investigation. They, nevertheless, insist
that the preliminary investigation conducted by the Office of
the Special Prosecutor existed more in form than in
substance. This is anchored on the failure by prosecutor
Onos to consider the counter-affidavits filed by petitioners.
The same sin of omission is ascribed to Acting Director de la
Llana who purportedly failed to consider the comments
submitted by the petitioners pursuant to a subpoena dated
13 April 1989. The failure of special prosecutor Berbano to
conduct a preliminary investigation before amending the
information is also challenged.
It is finally urged that the Sandiganbayan completely
disregarded the "glaring anomaly that on its face the
Information filed by the Office of the Special Prosecutor" was
prepared and subscribed on 18 January 1989, while the
records indicate that the preliminary investigation was
concluded on 3 October 1989.
In his Comment, respondent Berbano dispassionately traces
the genesis of the criminal information filed before the
Sandiganbayan. His assessment that a preliminary
investigation sufficient in substance and manner was
conducted prior to the filing of the information reflects the
view of the Sandiganbayan, maintained in both the 17
November 1989 and 4 January 1990 resolutions, that there
was compliance with the requirements of due process.

Petitioners were provided a reasonable period within which

to submit their counter-affidavits; they did not avail of the
original period; they moved for an extension of at least fifteen
(15) days from 22 October 1988. Despite the urgency of its
nature, the motion was sent by mail. The extension prayed
for was good up to 6 November 1988. But, as admitted by
them, they filed the Counter-Affidavits only on 9 November
1988. Yet, they blamed prosecutor Onos for promulgating the
11 November 1989 Resolution and for, allegedly, not acting
on the motion. Petitioners then should not lay the blame on
Onos; they should blame themselves for presuming that the
motion would be granted.
This notwithstanding, petitioners were able to file a Motion for
Reconsideration on 13 December 1988 requesting that the
reviewing prosecutor consider the belatedly filed
documents; 86 thus, there is the recommendation of
prosecutor BernarditaErum calling for the dismissal of the
charges on 2 March 1989, which, however, was not
sustained upon subsequent review. The Sandiganbayan, in
its 17 November 1989 Resolution, succinctly summed up the
matter when it asserted that "even granting, for the sake of
argument, that prosecutor Onos . . . failed to consider
accused-movants' counter-affidavits, such defect was cured
when a "Motion for Reconsideration" was filed, and
which . . . de la Llana took into account upon review."
It may not then be successfully asserted that the counteraffidavits were not considered by the Ombudsman in
approving the information. Perusal of the factual antecedents
reveals that a second investigation was conducted upon the
"1st Indorsement" of the Ombudsman of 4 April 1989. As a
result, subpoenas were issued and comments were asked to
be submitted, which petitioners did, but only after a further
extension of fifteen (15) days from the expiration of the
original deadline. From this submission the matter underwent
further review.
Moreover, in the 18 January 1989 Order of prosecutor Onos,
there was an ample discussion of the defenses raised by the
petitioners in their counter-affidavits, thus negating the
charge that the issues raised by them were not considered at
all. 87
It is indisputable that the respondents were not remiss in
their duty to afford the petitioners the opportunity to contest
the charges thrown their way. Due process does not require
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that the accused actually file his counter-affidavits before the

preliminary investigation is deemed completed. All that is
required is that he be given the opportunity to submit such if
he is so minded. 88
In any event, petitioners did in fact, although belatedly,
submit their counter-affidavits and as a result thereof, the
prosecutors concerned considered them in subsequent
reviews of the information, particularly in the re-investigation
ordered by the Ombudsman.

become moot and academic, the prayer of petitioners that

they be restored to their positions in the KBMBPM.
2. DISMISSING, for lack of merit, the petition in G.R. No.
91927.
No pronouncement as to costs.
IT IS SO ORDERED.
DIGEST

And now, as to the protestation of lack of preliminary

investigation prior to the filing of the Amended Information.
The prosecution may amend the information without leave of
court before arraignment, 89 and such does not prejudice the
accused. 90 Reliance on the pronouncements in Doromal
vs. Sandiganbayan 91 is misplaced as what obtained therein
was the preparation of an entirely new information as
contrasted with mere amendments introduced in the
amended information, which also charges petitioners with
violating Section 3 (e) of the Anti-Graft Law.
In Gaspar vs. Sandiganbayan, 92 We held that there is no
rule or law requiring the Tanodbayan to conduct another
preliminary investigation of a case under review by it. On the
contrary, under P.D. No. 911, in relation to Rule 12,
Administrative Order No. VII, the Tanodbayan may, upon
review, reverse the findings of the investigator and thereafter
"where he finds a prima facie case, to cause the filing of an
information in court against the respondent, based on the
same sworn statements or evidence submitted, without the
necessity of conducting another preliminary investigation."
Respondent Sandiganbayan did not then commit any grave
abuse of discretion in respect to its Resolutions of 4 January
1990 and 1 February 1990.
The petition then must fail.
CONCLUSION
WHEREFORE, judgment is hereby rendered:
1. GRANTING the petition in G.R. No. 85439; declaring null
and void the challenged Order of 28 October 1988 of the
respondent Secretary of Agriculture; but denying, for having

Facts:
Petitioners questopn the validity of the order of
then Secretary of Agriculture Hon. Carlos G. Dominguez
which ordered: (1) the take-over by the Department of
Agriculture of the management of the petitioner Kilusang
Bayan
saPaglilingkod
Ng
MgaMagtitinda
ng
BagongPamilihang Bayan ng Muntilupa, Inc. (KBMBPM)
pursuant to the Departments regulatory and supervisory
powers under Section 8 of P.D. No. 175, as amended, and
Section 4 of Executive Order No. 13, (2) the creation of a
Management Committee which shall assume the
management of KBMBPM upon receipt of the order, (3) the
disbandment of the Board of Directors, and (4) the turn over
of all assets, properties and records of the KBMBPM the
Management Committee.
The exordium of said Order unerringly indicates
that its basis is the alleged petition of the general
membership of the KBMBPM requesting the Department for
assistance in the removal of the members of the Board of
Directors who were not elected by the general membership
of the cooperative and that the ongoing financial and
management audit of the Department of Agriculture auditors
shows that the management of the KBMBPM is not operating
that cooperative in accordance with P.D. 175, LOI 23, the
Circulars issued by DA/BACOD and the provisions and bylaws of KBMBPM. It is also professed therein that the Order
was issued by the Department in the exercise of its
regulatory and supervisory powers under Section 8 of P.D.
175, as amended, and Section 4 of Executive Order No. 113.
Issue:
whether or not the Order issued by the Secretary
of Agriculture is illegal
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Held:
Regulation 34 of Letter of Implementation No. 23
(implementing P.D. No. 175) provides the procedure for the
removal of directors or officers of cooperatives, thus:
An elected officer, director or committee member may be
removed by a vote of majority of the members entitled to vote
at an annual or special general assembly. The person
involved shall have an opportunity to be heard.
A substantially identical provision, found in Section
17, Article III of the KBMBPMs by-laws, reads:
Sec. 17. Removal of Directors and Committee Members.
Any elected director or committee member may be removed
from office for cause by a majority vote of the members in
good standing present at the annual or special general
assembly called for the purpose after having been given the
opportunity to be heard at the assembly.
Under the same article are found the requirements
for the holding of both the annual general assembly and a
special general assembly.
Indubitably then, there is an established procedure
for the removal of directors and officers of cooperatives. It is
likewise manifest that the right to due process is respected
by the express provision on the opportunity to be heard. But
even without said provision, petitioners cannot be deprived of
that right.
The procedure was not followed in this case.
Respondent Secretary of Agriculture arrogated unto himself
the power of the members of the KBMBPM who are
authorized to vote to remove the petitioning directors and
officers. He cannot take refuge under Section 8 of P.D. No.
175 which grants him authority to supervise and regulate all
cooperatives. This section does not give him that right.

reverse or modify acts and decisions of subordinate officials

or units; (d) determine priorities in the execution of plans and
programs; and (e) prescribe standards, guidelines, plans and
programs. Specifically, administrative supervision is limited to
the authority of the department or its equivalent to: (1)
generally oversee the operations of such agencies and
insure that they are managed effectively, efficiently and
economically but without interference with day-to-day
activities; (2) require the submission of reports and cause the
conduct of management audit, performance evaluation and
inspection to determine compliance with policies, standards
and guidelines of the department; (3) take such action as
may be necessary for the proper performance of official
functions, including rectification of violations, abuses and
other forms of mal-administration; (4) review and pass upon
budget proposals of such agencies but may not increase or
add to them.
The power to summarily disband the board of
directors may not be inferred from any of the foregoing as
both P.D. No. 175 and the by-laws of the KBMBPM explicitly
mandate the manner by which directors and officers are to
be removed. The Secretary should have known better than to
disregard these procedures and rely on a mere petition by
the general membership of the KBMBPM and an on-going
audit by Department of Agriculture auditors in exercising a
power which he does not have, expressly or impliedly. We
cannot concede to the proposition of the Office of the
Solicitor General that the Secretarys power under paragraph
(d), Section 8 of P.D. No. 175 above quoted to suspend the
operation or cancel the registration of any cooperative
includes the milder authority of suspending officers and
calling for the election of new officers. Firstly, neither
suspension nor cancellation includes the take-over and
ouster of incumbent directors and officers, otherwise the law
itself would have expressly so stated. Secondly, even
granting that the law intended such as postulated, there is
the requirement of a hearing. None was conducted

An administrative officer has only such powers as are

expressly granted to him and those necessarily implied in the
exercise thereof. These powers should not be extended by
implication beyond what may to necessary for their just and
reasonable execution.
Supervision and control include only the authority to: (a) act
directly whenever a specific function is entrusted by law or
regulation to a subordinate; (b) direct the performance of
duty; restrain the commission of acts; (c) review, approve,
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G.R. No. 144463

January 14, 2004

SENATOR
ROBERT
S.
JAWORSKI, petitioner,
vs.
PHILIPPINE AMUSEMENT AND GAMING CORPORATION
and SPORTS AND GAMES ENTERTAINMENT
CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:
The instant petition for certiorari and prohibition under Rule
65 of the Rules of Court seeks to nullify the "Grant of
Authority and Agreement for the Operation of Sports Betting
and Internet Gaming," executed by respondent Philippine
Amusement and Gaming Corporation (hereinafter referred to
as PAGCOR) in favor of respondent Sports and Games and
Entertainment Corporation (also referred to as SAGE).
The facts may be summarized as follows:
PAGCOR is a government owned and controlled
corporation existing under Presidential Decree No.
1869 issued on July 11, 1983 by then President
Ferdinand Marcos. Pertinent provisions of said
enabling law read:
SECTION 1. Declaration of Policy. It is hereby
declared to be the policy of the State to centralize
and integrate all games of chance not heretofore
authorized by existing franchises or permitted by
law in order to attain the following objectives:
x xx

x xx

x xx

b) To establish and operate clubs and casinos, for

amusement and recreation, including sports,
gaming pools (basketball, football, lotteries, etc.)
and such other forms of amusement and recreation
including games of chance, which may be allowed
by law within the territorial jurisdiction of the
Philippines and which will: x xx (3) minimize, if not
totally eradicate, the evils, malpractices and
corruptions that are normally prevalent in the

conduct and operation of gambling clubs and

casinos without direct government involvement.
x xx

x xx

x xx

TITLE IV GRANT OF FRANCHISE

Sec.10. Nature and term of franchise. Subject to the terms
and conditions established in this Decree, the Corporation is
hereby granted for a period of twenty-five (25) years,
renewable for another twenty-five (25) years, the rights,
privileges and authority to operate and maintain gambling
casinos, clubs, and other recreation or amusement places,
sports, gaming pools, i.e. basketball, football, lotteries, etc.
whether on land or sea, within the territorial jurisdiction of the
Republic of the Philippines.
On March 31, 1998, PAGCORs board of directors approved
an instrument denominated as "Grant of Authority and
Agreement for the Operation of Sports Betting and Internet
Gaming", which granted SAGE the authority to operate and
maintain Sports Betting station in PAGCORs casino
locations, and Internet Gaming facilities to service local and
international bettors, provided that to the satisfaction of
PAGCOR, appropriate safeguards and procedures are
established to ensure the integrity and fairness of the games.
On September 1, 1998, PAGCOR, represented by its
Chairperson, Alicia Ll. Reyes, and SAGE, represented by its
Chairman of the Board, Henry Sy, Jr., and its President,
Antonio D. Lacdao, executed the above-named document.
Pursuant to the authority granted by PAGCOR, SAGE
commenced its operations by conducting gambling on the
Internet on a trial-run basis, making pre-paid cards and
redemption of winnings available at various Bingo Bonanza
outlets.
Petitioner, in his capacity as member of the Senate and
Chairman of the Senate Committee on Games, Amusement
and Sports, files the instant petition, praying that the grant of
authority by PAGCOR in favor of SAGE be nullified. He
maintains that PAGCOR committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it authorized
SAGE to operate gambling on the internet. He contends that
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PAGCOR is not authorized under its legislative franchise,

P.D. 1869, to operate gambling on the internet for the simple
reason that the said decree could not have possibly
contemplated internet gambling since at the time of its
enactment on July 11, 1983 the internet was yet inexistent
and gambling activities were confined exclusively to realspace. Further, he argues that the internet, being an
international network of computers, necessarily transcends
the territorial jurisdiction of the Philippines, and the grant to
SAGE of authority to operate internet gambling contravenes
the limitation in PAGCORs franchise, under Section 14 of
P.D. No. 1869 which provides:
Place. The Corporation [i.e., PAGCOR] shall
conduct gambling activities or games of chance on
land or water within the territorial jurisdiction of the
Republic of the Philippines. x xx
Moreover, according to petitioner, internet gambling does not
fall under any of the categories of the authorized gambling
activities enumerated under Section 10 of P.D. No. 1869
which grants PAGCOR the "right, privilege and authority to
operate and maintain gambling casinos, clubs, and other
recreation or amusement places, sports gaming pools, within
the territorial jurisdiction of the Republic of the
Philippines."1 He contends that internet gambling could not
have been included within the commonly accepted definition
of "gambling casinos", "clubs" or "other recreation or
amusement places" as these terms refer to a physical
structure in real-space where people who intend to bet or
gamble go and play games of chance authorized by law.
The issues raised by petitioner are as follows:
I. WHETHER OR NOT RESPONDENT PAGCOR IS
AUTHORIZED UNDER P.D. NO. 1869 TO
OPERATE GAMBLING ACTIVITIES ON THE
INTERNET;
II. WHETHER RESPONDENT PAGCOR ACTED
WITHOUT OR IN EXCESS OF ITS JURISDICTION,
OR
GRAVE ABUSE
OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF
JURISDICTION,
WHEN
IT AUTHORIZED
RESPONDENT SAGE TO OPERATE INTERNET
GAMBLING ON THE BASIS OF ITS RIGHT "TO
OPERATE AND MAINTAIN GAMBLING CASINOS,

CLUBS AND OTHER AMUSEMENT PLACES"

UNDER SECTION 10 OF P.D. 1869;
III. WHETHER RESPONDENT PAGCOR ACTED
WITHOUT OR IN EXCESS OF ITS JURISDICTION
OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT GRANTED AUTHORITY
TO SAGE TO OPERATE GAMBLING ACTIVITIES
IN THE INTERNET.
The above-mentioned issues may be summarized into a
single pivotal question: Does PAGCORs legislative franchise
include the right to vest another entity, SAGE in this case,
with the authority to operate Internet gambling? Otherwise
put, does Presidential Decree No. 1869 authorize PAGCOR
to contract any part of its franchise to SAGE by authorizing
the latter to operate Internet gambling?
Before proceeding with our main discussion, let us first try to
hurdle a number of important procedural matters raised by
the respondents.
In their separate Comments, respondents PAGCOR and
SAGE insist that petitioner has no legal standing to file the
instant petition as a concerned citizen or as a member of the
Philippine Senate on the ground that he is not a real party-ininterest entitled to the avails of the suit. In this light, they
argue that petitioner does not have the requisite personal
and substantial interest to impugn the validity of PAGCORs
grant of authority to SAGE.
Objections to the legal standing of a member of the Senate
or House of Representative to maintain a suit and assail the
constitutionality or validity of laws, acts, decisions, rulings, or
orders of various government agencies or instrumentalities
are not without precedent. Ordinarily, before a member of
Congress may properly challenge the validity of an official act
of any department of the government there must be an
unmistakable showing that the challenged official act affects
or impairs his rights and prerogatives as legislator.2 However
in a number of cases,3we clarified that where a case involves
an issue of utmost importance, or one of overreaching
significance to society, the Court, in its discretion, can brush
aside procedural technicalities and take cognizance of the
petition. Considering that the instant petition involves legal
questions that may have serious implications on public
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interests, we rule that petitioner has the requisite legal

standing to file this petition.
Respondents likewise urge the dismissal of the petition for
certiorari and prohibition because under Section 1, Rule 65
of the 1997 Rules of Civil Procedure, these remedies should
be directed to any tribunal, board, officer or person whether
exercising judicial, quasi-judicial, or ministerial functions.
They maintain that in exercising its legally-mandated
franchise to grant authority to certain entities to operate a
gambling or gaming activity, PAGCOR is not performing a
judicial or quasi-judicial act. Neither should the act of
granting licenses or authority to operate be construed as a
purely ministerial act. According to them, in the event that
this Court takes cognizance of the instant petition, the same
should be dismissed for failure of petitioner to observe the
hierarchy of courts.
Practically the same procedural infirmities were raised in Del
Mar v. Philippine Amusement and Gaming Corporation where
an almost identical factual setting obtained. Petitioners
therein filed a petition for injunction directly before the Court
which sought to enjoin respondent from operating the jai-alai
games by itself or in joint venture with another corporate
entity allegedly in violation of law and the Constitution.
Respondents contended that the Court had no jurisdiction to
take original cognizance of a petition for injunction because it
was not one of the actions specifically mentioned in Section
1 of Rule 56 of the 1997 Rules of Civil Procedure.
Respondents likewise took exception to the alleged failure of
petitioners to observe the doctrine on hierarchy of courts. In
brushing aside the apparent procedural lapse, we held that
"x xx this Court has the discretionary power to take
cognizance of the petition at bar if compelling reasons, or the
nature and importance of the issues raised, warrant the
immediate exercise of its jurisdiction."4
In the case at bar, we are not inclined to rule differently. The
petition at bar seeks to nullify, via a petition for certiorari and
prohibition filed directly before this Court, the "Grant of
Authority and Agreement for the Operation of Sports Betting
and Internet Gaming" by virtue of which SAGE was vested
by PAGCOR with the authority to operate on-line Internet
gambling. It is well settled that averments in the complaint,
and not the nomenclature given by the parties, determine the
nature of the action.5 Although the petition alleges grave
abuse of discretion on the part of respondent PAGCOR, what

it primarily seeks to accomplish is to prevent the enforcement

of the "Grant of Authority and Agreement for the Operation of
Sports Betting and Internet Gaming." Thus, the action may
properly be characterized as one for Prohibition under
Section 2 of Rule 65, which incidentally, is another remedy
resorted to by petitioner.
Granting arguendo that the present action cannot be properly
treated as a petition for prohibition, the transcendental
importance of the issues involved in this case warrants that
we set aside the technical defects and take primary
jurisdiction over the petition at bar. One cannot deny that the
issues raised herein have potentially pervasive influence on
the social and moral well being of this nation, specially the
youth; hence, their proper and just determination is an
imperative need. This is in accordance with the wellentrenched principle that rules of procedure are not inflexible
tools designed to hinder or delay, but to facilitate and
promote the administration of justice. Their strict and rigid
application, which would result in technicalities that tend to
frustrate, rather than promote substantial justice, must
always be eschewed.6
Having disposed of these procedural issues, we now come to
the substance of the action.
A legislative franchise is a special privilege granted by the
state to corporations. It is a privilege of public concern which
cannot be exercised at will and pleasure, but should be
reserved for public control and administration, either by the
government directly, or by public agents, under such
conditions and regulations as the government may impose
on them in the interest of the public. It is Congress that
prescribes the conditions on which the grant of the franchise
may be made. Thus the manner of granting the franchise, to
whom it may be granted, the mode of conducting the
business, the charter and the quality of the service to be
rendered and the duty of the grantee to the public in
exercising the franchise are almost always defined in clear
and unequivocal language.7
After a circumspect consideration of the foregoing discussion
and the contending positions of the parties, we hold that
PAGCOR has acted beyond the limits of its authority when it
passed on or shared its franchise to SAGE.

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In the Del Mar case where a similar issue was raised when
PAGCOR entered into a joint venture agreement with two
other entities in the operation and management of jai alai
games, the Court,8 in an En Banc Resolution dated 24
August 2001, partially granted the motions for clarification
filed by respondents therein insofar as it prayed that
PAGCOR has a valid franchise, but only by itself (i.e. not in
association with any other person or entity), to operate,
maintain and/or manage the game of jai-alai.
In the case at bar, PAGCOR executed an agreement with
SAGE whereby the former grants the latter the authority to
operate and maintain sports betting stations and Internet
gaming operations. In essence, the grant of authority gives
SAGE the privilege to actively participate, partake and share
PAGCORs franchise to operate a gambling activity. The
grant of franchise is a special privilege that constitutes a right
and a duty to be performed by the grantee. The grantee must
not perform its activities arbitrarily and whimsically but must
abide by the limits set by its franchise and strictly adhere to
its terms and conditionalities. A corporation as a creature of
the State is presumed to exist for the common good. Hence,
the special privileges and franchises it receives are subject to
the laws of the State and the limitations of its charter. There
is therefore a reserved right of the State to inquire how these
privileges had been employed, and whether they have been
abused.9
While PAGCOR is allowed under its charter to enter into
operators and/or management contracts, it is not allowed
under the same charter to relinquish or share its franchise,
much less grant a veritable franchise to another entity such
as SAGE. PAGCOR can not delegate its power in view of the
legal principle of delegatapotestasdelegare non potest,
inasmuch as there is nothing in the charter to show that it
has been expressly authorized to do so. In Lim v.
Pacquing,10 the Court clarified that "since ADC has no
franchise from Congress to operate the jai-alai, it may not so
operate even if it has a license or permit from the City Mayor
to operate the jai-alai in the City of Manila." By the same
token, SAGE has to obtain a separate legislative franchise
and not "ride on" PAGCORs franchise if it were to legally
operate on-line Internet gambling.
WHEREFORE, in view of all the foregoing, the instant
petition is GRANTED. The "Grant of Authority and Agreement

to Operate Sports Betting and Internet Gaming" executed by

PAGCOR in favor of SAGE is declared NULL and VOID.
SO ORDERED.
DIGEST
FACTS:
The Philippine Amusement and Gaming Corporation
(PAGCOR) is a government owned and controlled
corporation existing under PD No. 1869 issued on July 11,
1983 by then President Ferdinand Marcos.
On March 31, 1998, PAGCORs board of directors approved
an instrument denominated as Grant of Authority and
Agreement for the Operation of Sports Betting and Internet
Gaming, which granted Sports and Games and
Entertainment Corporation (SAGE) the authority to operate
and maintain Sports Betting station in PAGCORs casino
locations, and Internet Gaming facilities to service local and
international bettors, provided that to the satisfaction of
PAGCOR, appropriate safeguards and procedures are
established to ensure the integrity and fairness of the games.
On September 1, 1998, PAGCOR, represented by its
Chairperson, Alicia LI. Reyes, and SAGE, represented by its
Chairman of the Board, Henry Sy, Jr., and its President,
Antonio D. Lacdao, executed the above-named document.
Pursuant to the authority granted by PAGCOR, SAGE
commended its operations by conducting gambling on the
Internet on a trial-run basis, making pre-paid cards and
redemption of winnings available at various Bingo Bonanza
outlets.
Petitioner Senator Robert Jaworski, in his capacity as
member of the Senate and Chairman of the Senate
Committee on Games, Amusement and Sports, filed the
instant petition, praying that the grant of authority by
PAGCOR in favor of SAGE be nullified. He maintains that
PAGCOR committed grave abuse of discretion amounting to
lack or excess of jurisdiction when it authorized SAGE to
operate gambling on the internet. He contends that PAGCOR
is not authorized under its legislative franchise, PD No. 1869,
to operate gambling on the internet for the simple reason that
the said decree could not have possibly contemplated
internet gambling since at the time of its enactment on July
11, 1983 the internet was yet inexistent and gambling
activities were confined exclusively to real-space. Further, he
argues that the internet, being an international network of
computers, necessarily transcends the territorial jurisdiction
of the Philippines, and the grant to SAGE of authority to
operate internet gambling contravenes the limitation of
PAGCORs franchise, under Section 14 of PD No. 1869
which provides: Place. The Corporation [i.e., PAGCOR]
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shall conduct gambling activities or games of chance on land

or water within the territorial jurisdiction of the Republic of the
Philippines. x xx.
Moreover, according to petitioner, internet gambling does not
fall under any of the categories of the authorized gambling
activities enumerated under Section 10 of PD No. 1869
which grants PAGCOR the right, privilege and authority to
operate and maintain gambling casinos, clubs, and other
recreation or amusement places, sports gaming pools, within
the territorial jurisdiction of the Republic of the Philippines.
He contends that internet gambling could not have been
included within the commonly accepted definition of
gambling casinos, clubs or other recreation or
amusement places as these terms refer to a physical
structure in real-space where people who intend to bet or
gamble go and play games of chance authorized by law.
ISSUE:
Whether or not PAGCOR is allowed to contract any of its
franchise to another entity such as SAGE.
RULING:
No.
A legislative franchise is a special privilege granted by the
state to corporations. It is a privilege of public concern which
cannot be exercised at will and pleasure, but should be
reserved for public control and administration, either by the
government directly, or by public agents, under such
conditions and regulations as the government may impose
on them in the interest of the public. It is Congress that
prescribes the conditions on which the grant of the franchise
may be made. Thus the manner of granting the franchise, to
whom it may be granted, the mode of conducting the
business, the charter and the quality of the service to be
rendered and the duty of the grantee to the public in
exercising the franchise are almost always defined in clear
and unequivocal language.
While PAGCOR is allowed under its charter to enter into
operators and/or management contracts, it is not allowed
under the same charter to relinquish or share its franchise,
much less grant a veritable franchise to another entity such
as SAGE. PAGCOR cannot delegate its power in view of the
legal principle of delegatapotestasdelegare non potest,
inasmuch as there is nothing in the charter to show that it
has been expressly authorized to do so. In Lim v. Pacquing,
the Court clarified that since ADC has no franchise from
Congress to operate the jai-alai, it may not so operate even if
it has a license or permit from the City Mayor to operate the
jai-alai in the City of Manila. By the same token, SAGE has

to obtain a separate legislative franchise and not ride on

PAGCORs franchise if it were to legally operate on-line
Internet gambling.

G.R. No. 93237 November 6, 1992

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC.
(RCPI), petitioner,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC)
and JUAN A. ALEGRE, respondents.
PADILLA, J.:
Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre,
sent two (2) RUSH telegrams through petitioner RCPI's
facilities in Taft Ave., Manila at 9:00 in the morning of 17
March 1989 to his sister and brother-in-law in Valencia,
Bohol and another sister-in-law in Espiritu, Ilocos Norte, with
the following identical texts:
MANONG POLING DIED INTERMENT
TUESDAY 1
Both telegrams did not reach their destinations on the
expected dates. Private respondent filed a letter-complaint
against the RCPI with the National Telecommunications
Commission (NTC) for poor service, with a request for the
imposition of the appropriate punitive sanction against the
company.
Taking cognizance of the complaint, NTC directed RCPI to
answer the complaint and set the initial hearing of the case to
2 May 1989. After two (2) resettings, RCPI moved to dismiss
the case on the following grounds:
1. Juan Alegre is not the real party in interest;
2. NTC has no jurisdiction over the case;
3. the continued hearing of the case violates its
constitutional right to due process of law. 2

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RCPI likewise moved for deferment of scheduled hearings

until final determination of its motion to dismiss.

2 days x P200.00 per day = P400.00

Total = P1,000.00

On 15 June 1989, NTC proceeded with the hearing and

received evidence for private respondent Juan Alegre. On 3
October 1989, RCPI's motion to dismiss was denied, thus:
The herein complainant is the husband of the
sender of the "rush" telegram that respondent
allegedly failed to deliver in a manner respondent
bound itself to undertake, so his legal interest in this
administrative case cannot be seriously called in
question. As regards the issue of jurisdiction, the
authority of the Commission to hear and decide this
case stems from its power of control and
supervision over the operation of public
communication utilities as conferred upon it by law.
Besides, the filing of a motion to dismiss is not
allowed by the rules (Section 1, Rule 12, Rules of
Practice and Procedures). Following, however, the
liberal construction of the rules, respondent (sic)
motion shall be treated as its answer or be passed
upon after the conclusion of the hearing on the
merits. . . . 3
Hearings resumed in the absence of petitioner RCPI which
was, however, duly notified thereof. On 27 November 1989,
NTC disposed of the controversy in the following manner:
WHEREFORE, in view of all the foregoing, the
Commission finds respondent administratively liable
for deficient and inadequate service defined under
Section 19(a) of C.A. 146 and hereby imposes the
penalty of FINE payable within thirty (30) days from
receipt hereof in the aggregate amount of ONE
THOUSAND PESOS (P1,000.00) for:
1. Rush Telegram sent to Valencia, Bohol
on March 17, 1989 and received on March
21, 1989
3 days x P200.00 per day = P600.00
2. Rush Telegram sent to Espiritu, Ilocos
Norte on March 17, 1989 and received on
March 20, 1989

ENTERED. November 27, 1989. 4

A motion for reconsideration by RCPI reiterating averments
in its earlier motion to dismiss was denied for lack of
merit; 5 hence, this petition for review invoking C.A. 146 Sec.
19(a) which limits the jurisdiction of the Public Service
Commission (precursor of the NTC) to the fixing of rates.
RCPI submits that its position finds support in two (2)
decided cases 6 identical with the present one. Then Justice
(later Chief Justice) Fernando writing for the Court stated:
. . . There can be no justification then for
the Public Service Commission imposing
the fines for these two petitions. The law
cannot be any clearer. The only power it
possessed over radio companies, as noted
was the (sic ) fix rates. It could not take to
task a radio company for negligence or
misfeasance. It was bereft of such
competence. It was not vested within such
authority. . . .
The Public Service Commission having
been abolished by virtue of a Presidential
Decree, as set forth at the outset, and a
new Board of Communications having
been created to take its place, nothing said
in its decision has reference to whatever
powers are now lodged in the latter
body. . . . . . . (Footnotes omitted)
Two (2) later cases, 7 adhering to the above tenet ruled:
Even assuming that the respondent Board
of Communications has the power of
jurisdiction over petitioner in the exercise
of its supervision to insure adequate public
service, petitioner cannot be subjected to
payment of fine under sec. 21 of the Public
Service Act, because this provision of the
law subjects to a fine every public service
that violates or falls (sic) to comply with the
terms and conditions of any certificate or
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any orders, decisions and regulations of

the Commission. . . . .
The Office of the Solicitor General now claims that the cited
cases are no longer applicable, that the power and authority
of the NTC to impose fines is incidental to its power to
regulate public service utilities and to supervise
telecommunications facilities, which are now clearly defined
in Section 15, Executive Order No. 546 dated 23 July 1979:
thus:
Functions of the Commission. The
Commission shall exercise the following
functions:
xxxxxxxxx
b. Establish, prescribe and regulate the
areas of operation of particular operators
of the public service communications;
xxxxxxxxx
h. Supervise and inspect the operation of
radio stations and telecommunications
facilities.
Regulatory administrative agencies necessarily impose
sanctions, adds the Office of the Solicitor General. RCPI was
fined based on the finding of the NTC that it failed to
undertake adequate service in delivering two (2) rush
telegrams. NTC takes the view that its power of supervision
was broadened by E. O. No. 546, and that this development
superseded the ruling in RCPI vs. Francisco Santiago and
companion cases.
The issues of due process and real parties in interest do not
have to be discussed in this case. This decision will dwell on
the primary question of jurisdiction of the NTC to
administratively impose fines on a telegraph company which
fails to render adequate service to a consumer.
E. O. 546, it will be observed, is couched in general terms.
The NTC stepped "into the shoes" of the Board of
Communications which exercised powers pursuant to the
Public Service Act. The power to impose fines should
therefore be read in the light of the Francisco Santiago case

because subsequent legislation did not grant additional

powers to the Board of Communications. The Board in other
words, did not possess the power to impose administrative
fines on public services rendering deficient service to
customers, ergo its successor cannot arrogate unto itself
such power, in the absence of legislation. It is true that the
decision in RCPI vs. Board of Communications seems to
have modified the Santiago ruling in that the later case held
that the Board of Communications can impose fines if the
public service entity violates or fails to comply with the terms
and conditions of any certificate or any order, decision or
regulation of the Commission. But can private respondent's
complaint be similarly treated when the complaint seeks
redress of a grievance against the company? 8 NTC has no
jurisdiction to impose a fine. Globe Wireless Ltd. vs. Public
Service Commission (G. R. No. L-27250, 21 January 1987,
147 SCRA 269) says so categorically.
Verily, Section 13 of Commonwealth Act
No. 146, as amended, otherwise known as
the Public Service Act, vested in the Public
Service
Commission
jurisdiction,
supervision and control over all public
services and their franchises, equipment
and other properties.
xxxxxxxxx
The act complained of consisted in
petitioner having allegedly failed to deliver
the telegraphic message of private
respondent to the addressee in Madrid,
Spain. Obviously, such imputed negligence
has nothing whatsoever to do with the
subject matter of the very limited
jurisdiction of the Commission over
petitioner.
Moreover, under Section 21 of C. A. 146,
as amended, the Commission was
empowered to impose an administrative
fine in cases of violation of or failure by a
public service to comply with the terms and
conditions of any certificate or any orders,
decisions or regulations of the
Commission. Petitioner operated under a
legislative franchise, so there were no
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terms nor conditions of any certificate

issued by the Commission to violate.
Neither was there any order, decision or
regulation from the Commission applicable
to petitioner that the latter had allegedly
violated, disobeyed, defied or disregarded.
No substantial change has been brought about by Executive
Order No. 546 invoked by the Solicitor General's Office to
bolster NTC's jurisdiction. The Executive Order is not an
explicit grant of power to impose administrative fines on
public service utilities, including telegraphic agencies, which
have failed to render adequate service to consumers. Neither
has it expanded the coverage of the supervisory and
regulatory power of the agency. There appears to be no
alternative but to reiterate the settled doctrine in
administrative law that:
Too basic in administrative law to need
citation of jurisprudence is the rule that
jurisdiction and powers of administrative
agencies, like respondent Commission, are
limited to those expressly granted or
necessarily implied from those granted in
the legislation creating such body; and any
order without or beyond such jurisdiction is
void and ineffective . . . (Globe Wireless
case, supra).
WHEREFORE, the decision appealed from is REVERSED
and SET ASIDE for lack of jurisdiction of the NTC to render
it. The temporary restraining order issued on 18 June 1990 is
made PERMANENT without prejudice, however, to the filing
by the party aggrieved by the conduct of RCPI, of the proper
action in the proper forum. No costs.
SO ORDERED.

G.R. No. L-45839 June 1, 1988

RUFINO
MATIENZO,
GODOFREDO
ESPIRITU,
DIOSCORRO
FRANCO,
AND
LA
SUERTE
TRANSPORTATION
CORPORATION, petitioners,
vs.
HON. LEOPOLDO M. ABELLERA, ACTING CHAIRMAN

OF THE BOARD OF TRANSPORTATION, HON.

GODOFREDO Q. ASUNCION, MEMBER OF THE BOARD
OF TRANSPORTATION, ARTURO DELA CRUZ, MS
TRANSPORTATION CO., INC., NEW FAMILIA
TRANSPORTATION CO., ROBERTO MOJARES, ET
AL.,respondents.
GUTIERREZ, JR., J.:
This is a petition for certiorari and prohibition, with application
for preliminary injunction, seeking the annulment and
inhibition of the grant or award of provisional permits or
special authority by the respondent Board of Transportation
(BOT) to respondent taxicab operators, for the operation and
legalization of "excess taxicab units" under certain provisions
of Presidential Decree No. 101 "despite the lapse of the
power to do so thereunder," and "in violation of other
provisions of the Decree, Letter of Instructions No. 379 and
other relevant rules of the BOT."
The petitioners and private respondents are all authorized
taxicab operators in Metro Manila. The respondents,
however, admittedly operate "colorum" or "kabit" taxicab
units. On or about the second week of February, 1977,
private respondents filed their petitions with the respondent
Board for the legalization of their unauthorized "excess"
taxicab units citing Presidential Decree No. 101, promulgated
on January 17, 1973, "to eradicate the harmful and unlawful
trade of clandestine operators, by replacing or allowing them
to become legitimate and responsible operators." Within a
matter of days, the respondent Board promulgated its orders
setting the applications for hearing and granting applicants
provisional authority to operate their "excess taxicab units"
for which legalization was sought. Thus, the present petition.
Opposing the applications and seeking to restrain the grant
of provisional permits or authority, as well as the annulment
of permits already granted under PD 101, the petitioners
allege that the BOT acted without jurisdiction in taking
cognizance of the petitions for legalization and awarding
special permits to the private respondents.
Presidential Decree No. 101 vested in the Board of
Transportation the power, among others "To grant special
permits of limited term for the operation of public utility motor
vehicles as may, in the judgment of the Board, be necessary
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to replace or convert clandestine operators into legitimate

and responsible operators." (Section 1, PD 101)
Citing, however, Section 4 of the Decree which provides:
SEC. 4.Transitory Provision. Six months
after the promulgation of this Decree, the
Board of Transportation, the Bureau of
Transportation,
The
Philippine
Constabulary, the city and municipal
forces, and the provincial and city fiscals
shall wage a concerted and relentless
drive towards the total elimination and
punishment of all clandestine and unlawful
operators of public utility motor vehicles."
the petitioners argue that neither the Board of Transportation
chairman nor any member thereof had the power, at the time
the petitions were filed (i.e. in 1977), to legitimize clandestine
operations under PD 101 as such power had been limited to
a period of six (6) months from and after the promulgation of
the Decree on January 17, 1973. They state that, thereafter,
the power lapses and becomes functus officio.
To reinforce their stand, the petitioners refer to certain
provisions of the Rules and Regulations implementing PD
101 issued by respondent Board, Letter of Instructions No.
379, and BOT Memorandum Circular No. 76-25 (a). In
summary, these rules provide inter alia that (1) only
applications for special permits for "colorum" or "kabit"
operators filed before July 17, 1973 shall be accepted and
processed (Secs. 3 and 16 (c), BOT-LTC-HPG Joint
Regulations Implementing PD 101, pp. 33 and 47, Rollo); (2)
Every provisional authority given to any taxi operator shall be
cancelled immediately and no provisional authority shall
thereafter be issued (par. 6, Letter of Instructions No. 379,
issued March 10, 1976, p. 58, Rollo); (3) Effective
immediately, no provisional authorities on applications for
certificates of public convenience shall be granted or existing
provisional authorities on new applications extended to,
among others, taxi denominations in Metro Manila (BOT
Memorandum Circular No. 75-25 (a), August 30, 1976, p. 64,
Rollo); (4) All taxis authorized to operate within Metro Manila
shall obtain new special permits from the BOT, which permits
shall be the only ones recognized within the area (par. 8, LOI
No. 379, supra); and (5) No bonafide applicant may apply for
special permit to operate, among others, new taxicab

services, and, no application for such new service shall be

accepted for filing or processed by any LTC agency or
granted under these regulations by any LTC Regional Office
until after it shall have announced its program of
development for these types of public motor vehicles (Sec.
16d, BOT-LTC-HPG Joint Regulations, p. 47, Rollo).
The petitioners raise the following issues:
I. WHETHER OR NOT THE BOARD OF
TRANSPORTATION HAS THE POWER
TO GRANT PROVISIONAL PERMITS TO
OPERATE DESPITE THE BAN THEREON
UNDER LETTER OF INSTRUCTIONS
NO. 379;
II. WHETHER OR NOT THE BOARD OF
TRANSPORTATION HAS THE POWER
TO LEGALIZE, AT THIS TIME,
CLANDESTINE
AND
UNLAWFUL
TAXICAB
OPERATIONS
UNDER
SECTION 1, P.D. 101; AND
III.
WHETHER
OR
NOT THE
PROCEDURE BEING FOLLOWED BY
THE BOARD IN THE CASES IN
QUESTION
SATISFIES
THE
PROCEDURAL
DUE
PROCESS
REQUIREMENTS. (p. 119, Rollo)
We need not pass upon the first issue raised anent the grant
of provisional authority to respondents. Considering that the
effectivity of the provisional permits issued to the
respondents was expressly limited to June 30, 1977, as
evidenced by the BOT orders granting the same (Annexes G,
H, I and J among others) and Memorandum Circular No. 774 dated January 20, 1977 (p. 151, Rollo), implementing
paragraph 6 of LOI 379 (ordering immediate cancellation of
all provisional authorities issued to taxicab operators, supra),
which provides:
5. After June 30, 1977, all provisional
authorities are deemed cancelled, even if
hearings on the main application have not
been terminated.

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the issue is MOOT and ACADEMIC. Only the issue on

legalization remains under consideration.
Justifying its action on private respondent's applications, the
respondent Board emphasizes public need as the overriding
concern. It is argued that under PD 101, it is the fixed policy
of the State "to eradicate the harmful and unlawful trade of
clandestine operators by replacing or allowing them to
become legitimate and responsible ones" (Whereas clause,
PD 101). In view thereof, it is maintained that respondent
Board may continue to grant to "colorum" operators the
benefits of legalization under PD 101, despite the lapse of its
power, after six (6) months, to do so, without taking punitive
measures against the said operators.
Indeed, a reading of Section 1, PD 101, shows a grant of
powers to the respondent Board to issue provisional permits
as a step towards the legalization of colorum taxicab
operations without the alleged time limitation. There is
nothing in Section 4, cited by the petitioners, to suggest the
expiration of such powers six (6) months after promulgation
of the Decree. Rather, it merely provides for the withdrawal of
the State's waiver of its right to punish said colorum
operators for their illegal acts. In other words, the cited
section declares when the period of moratorium suspending
the relentless drive to eliminate illegal operators shall end.
Clearly, there is no impediment to the Board's exercise of
jurisdiction under its broad powers under the Public Service
Act to issue certificates of public convenience to achieve the
avowed purpose of PD 101 (Sec. 16a, Public Service Act,
Nov. 7, 1936).
It is a settled principle of law that in determining whether a
board or commission has a certain power, the authority given
should be liberally construed in the light of the purposes for
which it was created, and that which is incidentally necessary
to a full implementation of the legislative intent should be
upheld as being germane to the law. Necessarily, too, where
the end is required, the appropriate means are deemed given
(Martin, Administrative Law, 1979, p. 46). Thus, as averred
by the respondents:
... [A]ll things considered, the question is
what is the best for the interest of the
public. Whether PD 101 has lost its
effectiveness or not, will in no way prevent
this Board from resolving the question in

the same candor and spirit that P.D. 101

and LOI 379 were issued to cope with the
multifarious ills that plague our transport
system. ... (Emphasis supplied) (pp. 91-92,
Rollo)
This, the private respondents appreciate, as they make
reference to PD 101, merely to cite the compassion with
which colorum operators were dealt with under the law. They
state that it is "in the same vein and spirit that this Honorable
Board has extended the Decree of legalization to the
operatives of the various PUJ and PUB services along
legislative methods," that respondents pray for authorization
of their colorum units in actual operation in Metro Manila
(Petitions for Legalization, Annexes E & F, par. 7, pp. 65-79,
Rollo).
Anent the petitioners' reliance on the BOT Rules and
Regulations Implementing PD 101 as well as its
Memorandum Circular No. 76-25(a), the BOT itself has
declared:
In line with its duty to rationalize the
transport industry, the Board shall. from
time to time, re- study the public need for
public utilities in any area in the Philippines
for the purpose of re- evaluating the
policies. (p. 64, Rollo)
Thus, the respondents correctly argue that "as the need of
the public changes and oscillates with the trends of modern
life, so must the Memo Orders issued by respondent jibe with
the dynamic and flexible standards of public needs. ...
Respondent Board is not supposed to 'tie its hands' on its
issued Memo Orders should public interest demand
otherwise" (Answer of private respondents, p. 121, Rollo).
The fate of the private respondent's petitions is initially for the
Board to determine. From the records of the case,
acceptance of the respondent's applications appears to be a
question correctly within the discretion of the respondent
Board to decide. As a rule, where the jurisdiction of the BOT
to take cognizance of an application for legalization is settled,
the Court enjoins the exercise thereof only when there is
fraud, abuse of discretion or error of law. Furthermore, the
court does not interfere, as a rule, with administrative action
prior to its completion or finality . It is only after judicial review
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is no longer premature that we ascertain in proper cases

whether the administrative findings are not in violation of law,
whether they are free from fraud or imposition and whether
they find substantial support from the evidence.
Finally, with respect to the last issue raised by the petitioners
alleging the denial of due process by respondent Board in
granting the provisional permits to the private respondents
and in taking cognizance of their applications for legalization
without notice and hearing, suffice it to say that PD 101 does
not require such notice or hearing for the grant of temporary
authority . The provisional nature of the authority and the fact
that the primary application shall be given a full hearing are
the safeguards against its abuse. As to the applications for
legalization themselves, the Public Service Act does enjoin
the Board to give notice and hearing before exercising any of
its powers under Sec. 16 thereof. However, the allegations
that due process has been denied are negated by the
hearings set by the Board on the applications as expressed
in its orders resolving the petitions for special permits
(Annexes G, H, I, pp. 80-102, Rollo).
The Board stated:
The grounds involved in the petition are of
first impression. It cannot resolve the issue
ex-parte. It needs to hear the views of
other parties who may have an interest, or
whose interest may be affected by any
decision that this Board may take.
The Board therefore, decides to set the
petition for hearing.
xxxxxxxxx
As to the required notice, it is impossible for the respondent
Board to give personal notice to all parties who may be
interested in the matter, which parties are unknown to it. Its
aforementioned order substantially complies with the
requirement. The petitioners having been able to timely
oppose the petitions in question, any lack of notice is
deemed cured.
WHEREFORE.the petition is hereby DISMISSED for lack of
merit. The questioned orders of the then Board of
Transportation are AFFIRMED.

SO ORDERED.
DIGEST
FACTS: Petitioners and private respondents are all
authorized taxicab operators in Metro Manila. Respondents
however, admittedly operate colorum or kabit taxicab
units. The
private respondents filed their petition with respondent Board
for the legalization of their unauthorized excess taxicab
units citing PD 101, which eradicates the harmful and
unlawful trade of clandestine operators, by replacing or
allowing them to become legitimate and responsible
operations. Within a matter of days,the respondent Board
promulgated its orders settling the applications for hearing
and granting applications applicants provisional authority to
operate their excess taxicab units for which legalization was
sought. Thus, the present petition. The petitioners allege that
the BOT acted without jurisdiction intaking cognizance of the
petitions for legalization and awarding special permits to
private respondents.
ISSUE: Whether or not the Board of Transportation has the
power to legalize, at this time, clandestineand unlawful
taxicab operations.
HELD:
Justifying its action on private respondents applications,
the respondent Board emphasizes public
need as the overriding concern. It is argued that under PD
101, it is fixed policy of the State to eradicatethe harmful and
unlawful trade of clandestine operators by replacing or
allowing them to becomelegitimate and responsible ones. In
view thereof, it is maintained that respondent Board may
continue
to grant to colorum operators the benefit of legalization
under PD 101, despite
the lapse of its power,after six months, to do so, without
taking punitive measures against the said operators.Indeed,
a reading of Section 1, PD 101, shows a grant of powers to
the respondent Board to issueprovisional permits as a
step towards the legalization of colorum taxicab operations
without the allegedtime limitation. There is nothing in Section
4, cited by the petitioners, to suggest the expiration of
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suchpowers six months after promulgation of the Decree.

Rather, it merely provides for the withdrawal of
the States waiver of its right
to punish said colorum operators for their illegal acts. In
other words, thecited section declares when the period of
moratorium suspending the relentless drive to eliminate
illegal
operators shall end. Clearly, there is no impediment to the
Boards exercise of jurisdiction under its
broad powers under Public Service Act to issue certificates of
public convenience to achieve the avowedpurpose of PD
101.It is a settled principle of law that in determining whether
a board or commission has a certain power,the authority
given should be liberally construed in light of the purposes for
which it was created, andthat which is incidentally necessary
to a full implementation of the legislative intent should be
upheld asbeing germane to the law. Necessarily, too, where
the end is required, the appropriate means aredeemed
given.Wherefore the petition is hereby dismissed for lack of
merit. The questioned orders of the Board ofTransportation
are affirmed

G.R. No. 137489

May 29, 2002

COOPERATIVE DEVELOPMENT AUTHORITY, petitioner,

vs.
DOLEFIL AGRARIAN REFORM BENEFICIARIES
COOPERATIVE, INC., ESMERALDO A. DUBLIN, ALICIA
SAVAREZ, EDNA URETA, ET AL., respondents.
DE LEON, JR., J.:
At the core of the instant petition for review on certiorari of
the Decision1 of the Court of Appeals, 13th Division, in CAG.R. SP. No. 47933 promulgated on September 9, 1998 and
its Resolution2 dated February 9, 1999 is the issue of
whether or not petitioner Cooperative Development Authority
(CDA for brevity) is vested with quasi-judicial authority to
adjudicate intra-cooperative disputes.

The record shows that sometime in the later part of 1997, the
CDA received from certain members of the Dolefil Agrarian
Reform Beneficiaries Cooperative, Inc. (DARBCI for brevity),
an agrarian reform cooperative that owns 8,860 hectares of
land in Polomolok, South Cotabato, several complaints
alleging mismanagement and/or misappropriation of funds of
DARBCI by the then incumbent officers and members of the
board of directors of the cooperative, some of whom are
herein private respondents.
Acting on the complaints docketed as CDA-CO Case No. 97011, CDA Executive Director Candelario L. Verzosa, Jr.
issued an order3 dated December 8, 1997 directing the
private respondents to file their answer within ten (10) days
from receipt thereof.
Before the private respondents could file their answer,
however, CDA Administrator Alberto P. Zingapan issued on
December 15, 1997 an order,4 upon the motion of the
complainants in CDA-CO Case No. 97-011, freezing the
funds of DARBCI and creating a management committee to
manage the affairs of the said cooperative.
On December 18, 1991, the private respondents filed a
Petition for Certiorari5 with a prayer for preliminary injunction,
damages and attorneys fees against the CDA and its officers
namely: Candelario L. Verzosa, Jr. and Alberto P. Zingapan,
including the DOLE Philippines Inc. before the Regional Trial
Court (RTC for brevity) of Polomolok, South Cotabato,
Branch 39. The petition which was docketed as SP Civil
Case No. 25, primarily questioned the jurisdiction of the CDA
to resolve the complaints against the private respondents,
specifically with respect to the authority of the CDA to issue
the "freeze order" and to create a management committee
that would run the affairs of DARBCI.
On February 24, 1998, CDA Chairman Jose C. Medina, Jr.
issued an order6 in CDA-CO Case No. 97-011 placing the
private respondents under preventive suspension, hence,
paving the way for the newly-created management
committee7 to assume office on March 10, 1998.
On March 27, 1998, the RTC of Polomolok, South Cotabato,
Branch 39, issued a temporary restraining order8(TRO),
initially for seventy-two (72) hours and subsequently
extended to twenty (20) days, in an Order dated March 31,
1998. The temporary restraining order, in effect, directed the
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parties to restore status quo ante, thereby enabling the

private respondents to reassume the management of
DARBCI.
The CDA questioned the propriety of the temporary
restraining order issued by the RTC of Polomolok, South
Cotabato on March 27, 1998 through a petition for certiorari
before the Court of Appeals, 12th Division, which was
docketed as CA-G.R. SP No. 47318.

issued by the CDA in CDA-CO Case No. 97-011 with a

prayer for temporary restraining order and preliminary
injunction. On the following day, June 11, 1998, the trial court
issued a temporary restraining order14 enjoining the
respondents therein from proceeding with the scheduled
special general assembly and the elections of officers and
members of the board of directors of DARBCI on June 14,
1998. Thereafter, it also issued a writ of preliminary
injunction.

On April 21, 1998, the Court of Appeals, 12th Division, issued

a temporary restraining order9 in CA-G.R. SP No. 47318
enjoining the RTC of Polomolok, South Cotabato, Branch 39,
from enforcing the restraining order which the latter court
issued on March 27, 1998, and ordered that the proceedings
in SP Civil Case No. 25 be held in abeyance.1wphi1.nt

With the issuance of the two (2) restraining orders by the

Court of Appeals, 13th Division, and the RTC of Polomolok,
South Cotabato, Branch 39, on June 10 and 11, 1998,
respectively, the scheduled special general assembly and the
election of officers and members of the board of directors of
DARBCI on June 14, 1998 did not take place.

Consequently, the CDA continued with the proceedings in

CDA-CO Case No. 97-011. On May 26, 1998 CDA
Administrator Arcadio S. Lozada issued a resolution10 which
directed the holding of a special general assembly of the
members of DARBCI and the creation of an ad hoc election
committee to supervise the election of officers and members
of the board of directors of DARBCI scheduled on June 14,
1998.

Nevertheless, on July 12, 1998, the majority of the 7,511

members of DARBCI, on their own initiative, convened a
general assembly and held an election of the members of the
board of directors and officers of the cooperative, thereby
effectively replacing the private respondents. Hence, the
private respondents filed a Twin Motions for Contempt of
Court and to Nullify Proceedings15 with the Court of Appeals
in CA-G.R. SP No. 47933.

The said resolution of the CDA, issued on May 26, 1998

prompted the private respondents to file on June 8, 1998 a
Petition for Prohibition11 with a prayer for preliminary
mandatory injunction and temporary restraining order with
the Court of Appeals, 13th Division, which was docketed as
CA-G.R. SP No. 47933. On June 10, 1998, the appellate
court issued a resolution12 restraining the CDA and its
administrator, Arcadio S. Lozada, the three (3) members of
the ad hoc election committee or any and all persons acting
in their behalf from proceeding with the election of officers
and members of the board of directors of DARBCI scheduled
on June 14, 1998.

On September 9, 1998 the Court of Appeals, 13 th Division,

promulgated its subject appealed Decision16 granting the
petition in CA-G.R. SP No. 47933, the dispositive portion of
which reads:

Incidentally, on the same date that the Court of Appeals

issued a temporary restraining order in CA-G.R. SP No.
47933 on June 10, 1998, a corporation by the name of
Investa Land Corporation (Investa for brevity) which allegedly
executed a "Lease Agreement with Joint Venture" with
DARBCI filed a petition13 with the RTC of Polomolok, South
Cotabato, Branch 39, docketed as SP Civil Case No. 28,
essentially seeking the annulment of orders and resolutions

Wherefore, the foregoing considered, the Petition is

hereby GRANTED. The Orders of the respondent
Cooperative Development Authority in CDA-CO
case No. 97-011 dated 08 December 1997, 15
December 1997, 26 January 1998, 24 February
1998, 03 March 1998, and the Resolution dated 26
May 1998, are hereby declared NULL AND VOID
and of no legal force and effect.
Further, the respondents are hereby ORDERED to
perpetually CEASE AND DESIST from taking any
further proceedings in CDA-CO Case No. 97-011.
Lastly, the respondent CDA is hereby ORDERED to
REINSTATE the Board of Directors of DARBCI who
were ousted by virtue of the questioned Orders, and
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to RESTORE the status quo prior to the filing of

CDA-CO Case No. 97-011.
SO ORDERED.
The CDA filed a motion for reconsideration17 of the Decision
in CA-G.R. SP No. 47933 but it was denied by the Court of
Appeals in its assailed Resolution18 dated February 9, 1999,
thus:
WHEREFORE, the Motion for Reconsideration is
hereby DENIED for being patently without merit.
MOREOVER, acting on petitioners Twin Motion,
and in view of the Decision in this case dated 09,
September 1998, the tenor of which gives it legal
effect nunc pro tunc. We therefore hold the 12 July
1998 election of officers, the resolutions passed
during the said assembly, and the subsequent oathtaking of the officers elected therein, and all actions
taken during the said meeting, being in blatant
defiance of a valid restraining order issued by this
Court, to be NULL AND VOID AB INITIO AND OF
NO LEGAL FORCE AND EFFECT.
FURTHERMORE, the private respondents are
hereby given thirty (30) days from receipt of this
Resolution within which to explain in writing why
they should not be held in contempt of this Court for
having openly defied the restraining order dated 10
July 1998. The Hon. Jose C. Medina of the CDA is
given a like period to explain in writing why he
should not be cited in contempt for having
administered the oath of the "Board of Officers"
pending the effectivity of the restraining order. The
respondent Arcadio S. Lozada, Administrator of the
CDA, is likewise given the same period to explain
why he should not be held in contempt for issuing a
resolution on 21 July 1998 validating the
proceedings of the assembly, and another
resolution on 28 August 1998 confirming the
election of the officers thereof.
SO ORDERED.
Hence, the instant petition19 for review which raises the
following assignments of error:

I
THE HONORABLE COURT OF APPEALS, IN
NULLIFYING THE ORDERS AND RESOLUTIONS
OF THE COOPERATIVE DEVELOPMENT
AUTHORITY IN CDA CO CASE NO. 97-011,
DECIDED A QUESTION OF SUBSTANCE THAT IS
NOT IN ACCORD WITH LAW AND APPLICABLE
DECISIONS OF THE SUPREME COURT.
II
THE HONORABLE COURT OF APPEALS ERRED
IN NOT APPLYING THE RULE ON FORUMSHOPPING.
III
THE HONORABLE COURT OF APPEALS ERRED
IN RENDERING A DECISION ON THE BASIS OF
PURE CONJECTURES AND SURMISES AND HAS
DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS WHICH
CALL FOR AN EXERCISE OF THIS HONORABLE
COURTS SUPERVISION.
Petitioner CDA claims that it is vested with quasi-judicial
authority to adjudicate cooperative disputes in view of its
powers, functions and responsibilities under Section 3 of
Republic Act No. 6939.20 The quasi-judicial nature of its
powers and functions was confirmed by the Department of
Justice, through the then Acting Secretary of Justice
Demetrio G. Demetria, in DOJ Opinion No. 10, Series of
1995, which was issued in response to a query of the then
Chairman Edna E. Aberina of the CDA, to wit:
Applying the foregoing, the express powers of the
CDA to cancel certificates of registration of
cooperatives for non-compliance with administrative
requirements or in cases of voluntary dissolution
under Section 3(g), and to mandate and conciliate
disputes within a cooperative or between
cooperatives under Section 8 of R.A. No. 6939, may
be deemed quasi-judicial in nature.
The reason is that in the performance of its
functions such as cancellation of certificate of
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registration, it is necessary to establish noncompliance or violation of administrative

requirement. To do so, there arises an
indispensable need to hold hearings, investigate or
ascertain facts that possibly constitute noncompliance or violation and, based on the facts
investigated or ascertained, it becomes incumbent
upon the CDA to use its official discretion whether
or not to cancel a cooperatives certificate of
registration, thus, clearly revealing the quasi-judicial
nature of the said function. When the CDA acts as a
conciliatory body pursuant to Section 8 of R.A. No.
6939, it in effect performs the functions of an
arbitrator. Arbitrators are by the nature of their
functions act in quasi-judicial capacity xxx.
The quasi-judicial nature of the foregoing functions
is bolstered by the provisions of Sections 3(o) of
R.A. No. 6939 which grants CDA on (sic) the
exercise of other functions as may be necessary to
implement the provisions of cooperative laws, the
power to summarily punish for direct contempt any
person guilty of misconduct in the presence thereof
who seriously interrupts any hearing or inquiry with
a fine or imprisonment prescribed therein, a power
usually granted to make effective the exercise of
quasi-judicial functions.21
Likewise, the Office of the President, through the then
Deputy Executive Secretary, Hon. Leonardo A. Quisumbing,
espoused the same view in the case of Alberto Ang, et al. v.
The Board of Directors, Metro Valenzuela Transport Services
Cooperative, Inc., O.P. Case No. 51111, when it declared and
ruled that:
Concededly, Section 3(o) of R.A. No. 6939 and
Article 35(4) of R.A. 6938, may not be relied upon
by the CDA as authority to resolve internal conflicts
of cooperatives, they being general provisions.
Nevertheless, this does not preclude the CDA from
resolving the instant case. The assumption of
jurisdiction by the CDA on matters which partake of
cooperative disputes is a logical, necessary and
direct consequence of its authority to register
cooperatives. Before a cooperative can acquire
juridical personality, registration thereof is a
condition sine qua non, and until and unless the

CDA issues a certificate of registration under its

official seal, any cooperative for that matter cannot
be considered as having been legally
constituted. To our mind, the grant of this power
impliedly carries with it the visitorial power to
entertain cooperative conflicts, a lesser power
compared to its authority to cancel registration
certificates when, in its opinion, the cooperative fails
to comply with some administrative requirements
(Sec. 2(g), R.A. No. 6939). Evidently, respondentsappellants claim that the CDA is limited to
conciliation and mediation proceedings is bereft of
legal basis. Simply stated, the CDA, in the exercise
of such other function and in keeping with the
mandate of the law, could render the decisions
and/or resolutions as long as they pertain to the
internal affairs of the public service cooperative,
such as the rights and privileges of its members, the
rules and procedures for meetings of the general
assembly, Board of Directors and committees,
election and qualifications of officers, directors and
committee members, and allocation and distribution
of surpluses.22
The petitioner avers that when an administrative agency is
conferred with quasi-judicial powers and functions, such as
the CDA, all controversies relating to the subject matter
pertaining to its specialization are deemed to be covered
within the jurisdiction of said administrative agency. The
courts will not interfere in matters which are addressed to the
sound discretion of government agencies entrusted with the
regulation of activities undertaken upon their special
technical knowledge and training.
The petitioner added that the decision in the case
of CANORECO v. Hon. Ruben D. Torres,23 affirmed the
adjudicatory powers and functions of CDA contrary to the
view held by the Court of Appeals, when the Supreme Court
upheld therein the ruling of the CDA annulling the election of
therein respondents Norberto Ochoa, et al. as officers of the
Camarines Norte Electric Cooperative.
Petitioner CDA also claims that herein private respondents
are guilty of forum-shopping by filing cases in three (3)
different fora seeking the same relief. Petitioner pointed out
that private respondents originally filed a petition with a
prayer for preliminary injunction dated December 17, 1997
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before the RTC of Polomolok, South Cotabato which was

docketed as SP Civil Case No. 25. Subsequently, the same
private respondents filed another petition with a prayer for
preliminary injunction with the Court of Appeals, 13th Division,
docketed as CA-G.R. SP No. 47933. Thereafter, Investa,
also represented by the same counsel of private
respondents, Atty. Reni Dublin, filed another case with the
RTC of Polomolok, South Cotabato, docketed as SP Civil
Case No. 28, likewise praying, among others, for the
issuance of preliminary injunction and an application for a
temporary restraining order. In effect, petitioner was
confronted with three (3) TROs issued in three (3) separate
actions enjoining it from enforcing its orders and resolutions
in CDA-CO Case No. 97-011.
In their Comment,24 private respondents contend that the
instant petition for review on certiorari filed by CDA
Administrator Alberto Zingapan should be dismissed and
struck down as a mere scrap of paper for lack of authority to
file the same from the Office of the Solicitor General and for
having been filed without approval from the Board of
Administrators of CDA.
The private respondents also contend that, contrary to the
claim of the petitioner, the powers, functions and
responsibilities of the CDA show that it was merely granted
regulatory or supervisory powers over cooperatives in
addition to its authority to mediate and conciliate between
parties involving the settlement of cooperative disputes.
Private respondents denied that they are guilty of forumshopping. They clarified that the case filed with the RTC of
Polomolok, South Cotabato, Branch 39, docketed as SP Civil
Case No. 25, was a petition for certiorari. On the other hand,
the case that they filed with the Court of Appeals, 13th
Division, docketed therein as CA-G.R. SP No. 47933, was a
petition for prohibition to stop the holding of a special general
assembly and the election of a new set of DARBCI officers
on June 14, 1998 as ordered by the petitioner CDA on May
26, 1998, which events have not yet occurred at the time the
petition for certiorari was filed by the private respondents with
the RTC of Polomolok, South Cotabato, Branch 39.
Private respondents also denied that the filing by Investa of
the petition for the declaration of nullity of the orders and
resolutions of petitioner CDA, with a prayer for temporary
restraining order with the RTC of Polomolok, South

Cotabato, docketed therein as SP Civil Case No. 28,

constituted forum-shopping on their part. They pointed out
that Investa has a separate juridical personality from
DARBCI and that, contrary to the claim of petitioner CDA, the
former is not represented by the lawyer of the private
respondents.
By way of reply,25 petitioner claims that Atty. Rogelio P.
Madriaga was properly deputized, among other lawyers, as
Special Attorney by the Office of the Solicitor General to
represent the CDA in the instant petition pursuant to the
letter26 of Assistant Solicitor General Carlos N. Ortega
addressed to CDA Chairman Jose C. Medina, Jr. dated April
8, 1999. Likewise, the filing of the instant petition was an
official act of CDA Administrator Alberto P. Zingapan who was
duly appointed by the CDA Board of Administrators as
chairman of the Oversight Committee on Legal Matters per
Resolution No. 201, S-1998.27
Meanwhile, on March 26, 1999, certain persons alleging to
be incumbent officers and members of the board of directors
of DARBCI filed a motion to intervene in the instant petition
which was granted by this Court per its Resolution dated July
7, 1999.28 In the same resolution, this Court required both
petitioner CDA and the private respondents in this case to file
their respective comments to the petition-in-intervention
within ten (10) days from notice, but both parties failed to
comply to do so up to the present.
We note that the instant petition for review on certiorari
suffers from a basic infirmity for lack of the requisite
imprimatur from the Office of the Solicitor General, hence, it
is dismissible on that ground. The general rule is that only
the Solicitor General can bring or defend actions on behalf of
the Republic of the Philippines and that actions filed in the
name of the Republic, or its agencies and instrumentalities
for that matter, if not initiated by the Solicitor General, will be
summarily dismissed.29
The authority of the Office of the Solicitor General to
represent the Republic of the Philippines, its agencies and
instrumentalities, is embodied under Section 35(1), Chapter
12, Title III, Book IV of the Administrative Code of 1987 which
provides that:
SEC. 35. Powers and Functions.The Office of the
Solicitor General shall represent the Government of
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the Philippines, its agencies and instrumentalities

and its officials and agents in any litigation,
proceeding, investigation or matter requiring the
services of lawyers. When authorized by the
President or head of the office concerned, it shall
also represent government owned or controlled
corporations. The Office of the Solicitor General
shall constitute the law office of the Government
and, as such, shall discharge duties requiring the
services of lawyers. It shall have the following
specific powers and functions:
(1) Represent the Government in the
Supreme Court and the Court of Appeals in
all criminal proceedings; represent the
Government and its officers in the
Supreme Court, Court of Appeals, and all
other courts or tribunals in all civil actions
and special proceedings in which the
Government or any officer thereof in his
official capacity is a party.
The import of the above-quoted provision of the
Administrative Code of 1987 is to impose upon the Office of
the Solicitor General the duty to appear as counsel for the
Government, its agencies and instrumentalites and its
officials and agents before the Supreme Court, the Court of
Appeals, and all other courts and tribunals in any litigation,
proceeding, investigation or matter requiring the services of a
lawyer. Its mandatory character was emphasized by this
Court in the case of Gonzales v. Chavez,30 thus:
It is patent that the intent of the lawmaker was to
give the designated official, the Solicitor General, in
this case, the unequivocal mandate to appear for
the government in legal proceedings. Spread out in
the laws creating the office is the discernible intent
which may be gathered from the term "shall", which
is invariably employed, from Act No. 136 (1901) to
the more recent Executive Order No. 292 (1987).
xxx

xxx

xxx

The decision of this Court as early as 1910 with

respect to the duties of the Attorney-General well
applies to the Solicitor General under the facts of
the present case. The Court then declared:

In this jurisdiction, it is the duty of the

Attorney General to perform the duties
imposed upon him by law and he shall
prosecute all causes, civil and criminal, to
which the Government of the Philippine
Islands, or any officer thereof, in his official
capacity, is a party xxx.
xxx

xxx

xxx

The Court is firmly convinced that considering the

spirit and the letter of the law, there can be no other
logical interpretation of Sec. 35 of the Administrative
Code than that it is, indeed, mandatory upon the
OSG to "represent the Government of the
Philippines, its agencies and instrumentalities and
its officials and agents in any litigation, proceeding,
investigation or matter requiring the services of a
lawyer."
As an exception to the general rule, the Solicitor General, in
providing legal representation for the government, is
empowered under Section 35(8), Chapter 12, Title III, Book
IV of the Administrative Code of 1987 to "deputize legal
officers of government departments, bureaus, agencies and
offices to assist the Solicitor General and appear or
represent the Government in cases involving their respective
offices, brought before the courts and exercise supervision
and control over such legal officers with respect to such
cases."
Petitioner claims that its counsel of record, Atty. Rogelio P.
Madriaga, was deputized by the Solicitor General to
represent the CDA in the instant petition. To prove its claim,
the petitioner attached to its Reply to the Comment dated
January 31, 2000, a photocopy of the alleged deputation
letter31 from the Office of the Solicitor General signed by Hon.
Carlos N. Ortega, Assistant Solicitor General, addressed to
CDA Chairman Jose C. Medina, Jr.
A close scrutiny of the alleged deputation letter from the
Office of the Solicitor General shows, however, that said
counsel for the petitioner was only "authorized to appear as
counsel in all civil cases in the lower courts (RTCs and
MTCs) wherein the CDA is a party-litigant". Likewise, the
same letter appears to be dated April 8, 1999 while the
Petition for Review on Certiorari filed by the petitioner was
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dated February 26, 1999. Clearly then, when the petition was
filed with this Court on March 3, 1999, Atty. Rogelio P.
Madriaga was not yet deputized by the Office of the Solicitor
General to represent the CDA.
Even on the assumption that the alleged letter from the
Office of the Solicitor General was intended to validate or
ratify the authority of counsel to represent the petitioner in
this case, the same contains certain conditions, one of which
is that petitioner "shall submit to the Solicitor General,
for review, approval and signature, all important pleadings
and motions, including motions to withdraw complaints or
appeals, as well as compromise agreements." Significantly,
one of the major pleadings filed subsequently by the
petitioner in this case namely, the Reply to the Respondents
Comment on the Petition dated January 31, 2000, does not
have any indication that the same was previously submitted
to the Office of the Solicitor General for review or approval,
much less bear the requisite signature of the Solicitor
General as required in the alleged deputation letter.
Nonetheless, in view of the novelty of the main issue raised
in this petition concerning the nature and scope of jurisdiction
of the CDA in the settlement of cooperative disputes as well
as the long standing legal battle involving the management of
DARBCI between two (2) opposing factions that inevitably
threatens the very existence of one of the countrys major
cooperatives, this Court has decided to act on and determine
the merits of the instant petition.
Section 3 of R.A. No. 6939 enumerates the powers, functions
and responsibilities of the CDA, thus:
SEC. 3. Powers, Functions and Responsibilities.
The Authority shall have the following powers,
functions and responsibilities:
(a) Formulate, adopt and implement integrated and
comprehensive plans and programs on cooperative
development consistent with the national policy on
cooperatives and the overall socio-economic
development plan of the Government;
(b) Develop and conduct management and training
programs upon request of cooperatives that will
provide members of cooperatives with the
entrepreneurial capabilities, managerial expertise,

and technical skills required for the efficient

operation of their cooperatives and inculcate in
them the true spirit of cooperativism and provide,
when necessary, technical and professional
assistance to ensure the viability and growth of
cooperatives with special concern for agrarian
reform, fishery and economically depressed sectors;
(c) Support the voluntary organization and
consensual development of activities that promote
cooperative movements and provide assistance to
wards upgrading managerial and technical expertise
upon request of the cooperatives concerned;
(d) Coordinate the effects of the local government
units and the private sector in the promotion,
organization, and development of cooperatives;
(e) Register all cooperatives and their federations
and unions, including their division, merger,
consolidation, dissolution or liquidation. It shall also
register the transfer of all or substantially all of their
assets and liabilities and such other matters as may
be required by the Authority;
(f) Require all cooperatives, their federations and
unions to submit their annual financial statements,
duly audited by certified public accountants, and
general information sheets;
(g) Order the cancellation after due notice and
hearing of the cooperatives certificate of
registration for non-compliance with administrative
requirements and in cases of voluntary dissolution;
(h) Assist cooperatives in arranging for financial and
other forms of assistance under such terms and
conditions as are calculated to strengthen their
viability and autonomy;
(i) Establish extension offices as may be necessary
and financially viable to implement this Act. Initially,
there shall be extension offices in the Cities of
Dagupan, Manila, Naga, Iloilo, Cebu, Cagayan de
Oro and Davao;

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(j) Impose and collect reasonable fees and charges

in connection with the registration of cooperatives;
(k) Administer all grants and donations coursed
through the Government for cooperative
development, without prejudice to the right of
cooperatives to directly receive and administer such
grants and donations upon agreement with the
grantors and donors thereof;
(l) Formulate and adopt continuing policy initiatives
consultation with the cooperative sector through
public hearing;
(m) Adopt rules and regulations for the conduct of
its internal operations;
(n) Submit an annual report to the President and
Congress on the state of the cooperative
movement;
(o) Exercise such other functions as may be
necessary to implement the provisions of the
cooperative laws and, in the performance thereof,
the Authority may summarily punish for direct
contempt any person guilty of misconduct in the
presence of the Authority which seriously interrupts
any hearing or inquiry with a fine of not more than
five hundred pesos (P500.00) or imprisonment of
not more than ten (10) days, or both. Acts
constituting indirect contempt as defined under Rule
71 of the Rules of Court shall be punished in
accordance with the said Rule.
It is a fundamental rule in statutory construction that when
the law speaks in clear and categorical language, there is no
room for interpretation, vacillation or equivocation there is
only room for application.32 It can be gleaned from the abovequoted provision of R.A. No. 6939 that the authority of the
CDA is to discharge purely administrative functions which
consist of policy-making, registration, fiscal and technical
assistance to cooperatives and implementation of
cooperative laws. Nowhere in the said law can it be found
any express grant to the CDA of authority to adjudicate
cooperative disputes. At most, Section 8 of the same law
provides that "upon request of either or both parties, the
Authority shall mediate and conciliate disputes with a

cooperative or between cooperatives" however, with a

restriction "that if no mediation or conciliation succeeds
within three (3) months from request thereof, a certificate of
non-resolution shall be issued by the commission prior to the
filing of appropriate action before the proper courts". Being
an administrative agency, the CDA has only such powers as
are expressly granted to it by law and those which are
necessarily implied in the exercise thereof.33
Petitioner CDA, however, insists that its authority to conduct
hearings or inquiries and the express grant to it of contempt
powers under Section 3, paragraphs (g) and (o) of R. A. No.
6939, respectively, necessarily vests upon the CDA quasijudicial authority to adjudicate cooperative disputes. A review
of the records of the deliberations by both chambers of
Congress prior to the enactment of R.A. No. 6939 provides a
definitive answer that the CDA is not vested with quasijudicial authority to adjudicate cooperative disputes. During
the house deliberations on the then House Bill No. 10787,
the following exchange transpired:
MR. AQUINO (A.). The response of the sponsor is
not quite clear to this humble Representation. Let
me just point out other provisions under this
particular section, which to the mind of this humble
Representation appear to provide this proposed
Authority with certain quasi-judicial functions. Would
I be correct in this interpretation of paragraphs (f)
and (g) under this section which state that among
the powers of the Authority are:
To administer the dissolution, disposal of
assets and settlement of liabilities of any
cooperative that has been found to be
inoperable, inactive or defunct.
To make appropriate action on
cooperatives found to be in violation of any
provision
It appears to the mind of this humble
Representation that the proposed Authority may be
called upon to adjudicate in these particular
instances. Is it therefore vested with quasi-judicial
authority?

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MR. ROMUALDO. No, Mr. Speaker. We have to

resort to the courts, for instance, for the dissolution
of cooperatives. The Authority only administers
once a cooperative is dissolved. It is also the CDA
which initiates actions against any group of persons
that may use the name of a cooperative to its
advantage, that is, if the word "cooperative" is
merely used by it in order to advance its intentions,
Mr. Speaker.
MR. AQUINO (A.). So, is the sponsor telling us that
the adjudication will have to be left to the courts of
law?
MR. ROMUALDO. To the courts, Mr. Speaker.34
xxx

xxx

xxx

MR. ADASA. One final question, Mr. Speaker. On

page 4, line 33, it seems that one of the functions
given to the Cooperative Development Authority is
to recommend the filing of legal charges against any
officer or member of a cooperative accused of
violating the provisions of this Act, existing laws and
cooperative by-laws and other rules and regulations
set forth by the government. Would this not conflict
with the function of the prosecuting fiscal?
MR. ROMUALDO. No, it will be the provincial fiscal
that will file the case. The Authority only
recommends the filing of legal charges, that is, of
course, after preliminary investigation conducted by
the provincial fiscal or the prosecuting arm of the
government.

MR. CHIONGBIAN. xxx. Under the same section,

line 28, subparagraph (g) says that the Authority
can take appropriate action on cooperatives found
to be violating any provision of this Act, existing
laws and cooperative by-laws, and other rules and
regulations set forth by the government by way of
withdrawal of Authority assistance, suspension of
operation or cancellation of accreditation.
My question is: If a cooperative, whose officers are
liable for wrongdoing, is found violating any of the
provisions of this Act, are we going to sacrifice the
existence of that cooperative just because some of
the officers have taken advantage of their positions
and misused some of the funds? It would be very
unfair for the Authority to withdraw its assistance at
the expense of the majority. It is not clear as to what
the liabilities of the members of these cooperatives
are.
xxx

xxx

xxx

MR. ROMUALDO. Mr. Speaker, before this action

may be taken by the Authority, there will be due
process. However, this provision is applicable in
cases where the cooperative as a whole violated
the provisions of this Act as well as existing laws. In
this case, punitive actions may be taken against the
cooperative as a body.
With respect to the officials, if they themselves
should be punished, then Section (h) of this chapter
provides that legal charges shall be filed by the
Cooperative Development Authority.36

MR. ADASA. Does the Gentleman mean to say that

the Cooperative Development Authority can take the
place of the private complainant or the persons who
are the offended party if the latter would not pursue
the case?

In like manner, the deliberations on Senate Bill No. 485,

which was the counterpart of House Bill No. 10787, yield the
same legislative intent not to grant quasi-judicial authority to
the CDA as shown by the following discussions during the
period of amendments:

MR. ROMULDO. Yes, Mr. Speaker. The Authority

can initiate even the filing of the charges as
embraced and defined on line 33 of page 4 of this
proposed bill.35

SEN. ALVAREZ. On page 3, between lines 5 and 6,

if I may, insert the following as one of the powers:
CONDUCT INQUIRIES, STUDIES, HEARINGS
AND INVESTIGATIONS AND ISSUE ORDERS,
DECISIONS AND CIRCULARS AS MAY BE
NECESSARY TO IMPLEMENT ALL LAWS, RULES

xxx

xxx

xxx

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AND
REGULATIONS
RELATING
TO
COOPERATIVES.
THE
AGENCY
MAY
SUMMARILY PUNISH FOR CONTEMPT BY A
FINE OF NOT MORE THAN TWO HUNDRED
PESOS (P200.00) OR IMPRISONMENT NOT
EXCEEDING TEN (10) DAYS, OR BOTH, ANY
PERSONS GUILTY OF SUCH MISCONDUCT IN
THE PRESENCE OF THE AGENCY WHICH
SERIOUSLY INTERRUPTS ANY HEARING OR
INVESTIGATION, INCLUDING WILFULL FAILURE
OR REFUSAL, WITHOUT JUST CAUSE, COMPLY
WITH A SUMMONS, SUBPOENA, SUBPOENA
DUCES TECUM, DECISION OR ORDER, RULE
OR REGULATION, OR, BEING PRESENT AT A
HEARING OR INVESTIGATION, REFUSES TO BE
SWORN IN AS A WITNESS OR TO ANSWER
QUESTIONS OR TO FURNISH INFORMATION
REQUIRED BY THE AGENCY. THE SHERIFF
AND/OR POLICE AGENCIES OF THE PLACE
WHERE THE HEARING OR INVESTIGATION IS
CONDUCTED SHALL, UPON REQUEST OF THE
AGENCY, ASSIST IT TO ENFORCE THE
PENALTY.
THE PRESIDENT. That is quite a long amendment.
Does the Gentleman have a written copy of his
amendment, so that the Members will have an
opportunity to go over it and examine its
implications?
Anyway, why do we not hold in abeyance the
proposed amendment? Do we have that?
xxx

xxx

xxx

SEN. ALVAREZ. Mr. President, this is almost an

inherent power of a registering body. With the
tremendous responsibility that we have assigned to
the Authority or the agencyfor it to be able to
function and discharge its mandateit will need this
authority.1wphi1.nt
SEN. AQUINO. Yes, Mr. President, conceptually, we
do not like the agency to have quasi-judicial powers.
And, we are afraid that if we empower the agency to
conduct inquiries, studies, hearings and
investigations, it might interfere in the autonomous

character of cooperatives. So, I am sorry Mr.

President, we dont accept the amendment.37
The decision to withhold quasi-judicial powers from the CDA
is in accordance with the policy of the government granting
autonomy to cooperatives. It was noted that in the past 75
years cooperativism failed to flourish in the Philippines. Of
the 23,000 cooperatives organized under P.D. No. 175, only
10 to 15 percent remained operational while the rest became
dormant. The dismal failure of cooperativism in the
Philippines was attributed mainly to the stifling attitude of the
government toward cooperatives. While the government
wished to help, it invariably wanted to control.38 Also, in its
anxious efforts to push cooperativism, it smothered
cooperatives with so much help that they failed to develop
self-reliance. As one cooperative expert put it, "The strong
embrace of government ends with a kiss of death for
cooperatives."39
But then, acknowledging the role of cooperatives as
instruments of national development, the framers of the 1987
Constitution directed Congress under Article XII, Section 15
thereof to create a centralized agency that shall promote the
viability and growth of cooperatives. Pursuant to this
constitutional mandate, the Congress approved on March 10,
1990 Republic Act No. 6939 which is the organic law creating
the Cooperative Development Authority. Apparently
cognizant of the errors in the past, Congress declared in an
unequivocal language that the state shall "maintain the policy
of non-interference in the management and operation of
cooperatives."40
After ascertaining the clear legislative intent underlying R.A.
No. 6939, effect should be given to it by the
judiciary.41 Consequently, we hold and rule that the CDA is
devoid of any quasi-judicial authority to adjudicate intracooperative disputes and more particularly disputes as
regards the election of the members of the Board of Directors
and officers of cooperatives. The authority to conduct
hearings or inquiries and the power to hold any person in
contempt may be exercised by the CDA only in the
performance of its administrative functions under R.A. No.
6939.
The petitioners reliance on the case of CANORECO is
misplaced for the reason that the central issue raised therein
was whether or not the Office of the President has the
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authority to supplant or reverse the resolution of an

administrative agency, specifically the CDA, that had long
became final and on which issue we ruled in the negative. In
fact, this Court declared in the said case that the CDA has no
jurisdiction to adjudicate intra-cooperative disputes thus:42
xxx

xxx

xxx

Obviously there was a clear case of intracooperative dispute. Article 121 of the Cooperative
Code is explicit on how the dispute should be
resolved; thus:
ART. 121. Settlement of Disputes. Disputes
among members, officers, directors, and committee
members, and intra-cooperative disputes shall, as
far as practicable, be settled amicably in
accordance with the conciliation or mediation
mechanisms embodied in the by-laws of the
cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding
fail, the matter shall be settled in a court of
competent jurisdiction.
Complementing this Article is Section 8 of R.A. No.
6939, which provides:
SEC. 8. Mediation and Conciliation. Upon request
of either or both or both parties, the [CDA] shall
mediate and conciliate disputes with the cooperative
or between cooperatives: Provided, That if no
mediation or conciliation succeeds within three (3)
months from request thereof, a certificate of nonresolution shall be issued by the request thereof, a
certificate of non-resolution shall be issued by the
commission prior to the filing of appropriate action
before the proper courts.
Likewise, we do not find any merit in the allegation of forumshopping against the private respondents. Forum-shopping
exists where the elements of litispendentia are present or
where a final judgment in one case will amount to res
judicata in the other.43 The requisites for the existence
of litispendentia, in turn, are (1) identity of parties or at least
such representing the same interest in both actions; (2)
identity of rights asserted as prayed for, the relief being

founded on the same facts; and (3) the identity in both cases
is such that the judgment that may be rendered in the
pending case, regardless of which party is successful, would
amount to res judicata to the other case.44
While there may be identity of parties between SP Civil Case
No. 25 filed with the RTC of Polomolok, South Cotabato,
Branch 39, and CA-G.R. SP No. 47933 before the Court of
Appeals, 13th Division, the two (2) other requisites are not
present. The Court of Appeals correctly observed that the
case filed with the RTC of Polomolok, South Cotabato was a
petition for certiorari assailing the orders of therein
respondent CDA for having been allegedly issued without or
in excess of jurisdiction. On the other hand, the case filed
with the Court of Appeals was a petition for prohibition
seeking to restrain therein respondent from further
proceeding with the hearing of the case. Besides, the filing of
the petition for prohibition with the Court of Appeals was
necessary after the CDA issued the Order dated May 26,
1998 which directed the holding of a special general
assembly for purposes of conducting elections of officers and
members of the board of DARBCI after the Court of Appeals,
12th Division, in CA-G.R. SP No. 47318 issued a temporary
restraining order enjoining the proceedings in Special Civil
Case No. 25 and for the parties therein to maintain the
status quo. Under the circumstances, the private
respondents could not seek immediate relief before the trial
court and hence, they had to seek recourse before the Court
of Appeals via a petition for prohibition with a prayer for
preliminary injunction to forestall the impending damage and
injury to them in view of the order issued by the petitioner on
May 26, 1998.
The filing of Special Civil Case No. 28 with the RTC of
Polomolok, South Cotabato does not also constitute forumshopping on the part of the private respondents. Therein
petitioner Investa, which claims to have a subsisting lease
agreement and a joint venture with DARBCI, is an entity
whose juridical personality is separate and distinct from that
of private respondent cooperative or herein individual private
respondents and that they have totally different interests in
the subject matter of the case. Moreover, it was incorrect for
the petitioner to charge the private respondents with forumshopping partly based on its erroneous claim that DARBCI
and Investa were both represented by the same counsel. A
charge of forum-shopping may not be anchored simply on
the fact that the counsel for different petitioners in two (2)
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cases is one and the same.45 Besides, a review of the

records of this case shows that the counsel of record of
Investa in Special Civil Case No. 28 is a certain Atty. Ignacio
D. Debuque, Jr. and not the same counsel representing the
private respondents.46
Anent the petition-in-intervention, the intervenors aver that
the Resolution of the Court of Appeals dated February 9,
1999 in CA-G.R. SP No. 47933 denying the motion for
reconsideration of herein petitioner CDA also invalidated the
election of officers and members of the board of directors of
DARBCI held during the special general assembly on July
12, 1998, thus adversely affecting their substantial rights
including their right to due process. They claim that the
object of the order issued by the appellate court on June 10,
1998 was to restrain the holding of the general assembly of
DARBCI as directed in the order of CDA Administrator
ArcadioLozada dated May 26, 1998. In compliance with the
said order of the Court of Appeals, no general assembly was
held on June 14, 1998. However, due to the grave concern
over the alleged tyrannical administration and unmitigated
abuses of herein private respondents, the majority of the
members of DARBCI, on their own initiative and in the
exercise of their inherent right to assembly under the law and
the 1987 Constitution, convened a general assembly on July
12, 1998. On the said occasion, the majority of the members
of DARBCI unanimously elected herein petitioners-inintervention as new officers and members of the board of
directors of DARBCI,47 and thereby resulting in the removal
of the private respondents from their positions in DARBCI.
Petitioners-in-intervention pointed out that the validity of the
general assembly held on July 12, 1998 was never raised as
an issue in CA-G.R. SP No. 47933. The petitioners-inintervention were not even ordered by the Court of Appeals
to file their comment on the "Twin Motions For Contempt of
Court and to Nullify Proceedings" filed by the private
respondents on July 29, 1998.
As earlier noted, the Court of Appeals issued a temporary
restraining order48 in CA-G.R. SP No. 47933 on June 10,
1998, the pertinent portion of which reads:
Meanwhile, respondents or any and
acting in their behalf and stead are
restrained from proceeding with the
officers and members of the board of

all persons
temporarily
election of
directors of

the Dolefil Agrarian Reform Beneficiaries

Cooperative, Inc. scheduled on June 14, 1998 and
or any other date thereafter.
It was also noted that as a consequence of the temporary
restraining order issued by the appellate court, the general
assembly and the election of officers and members of the
board of directors of DARBCI, pursuant to the resolution
issued by CDA Administrator Arcadio S. Lozada, did not take
place as scheduled on June 14, 1998. However, on July 12,
1998 the majority of the members of DARBCI, at their own
initiative, held a general assembly and elected a new set of
officers and members of the board of directors of the
cooperative which resulted in the ouster of the private
respondents from their posts in the said cooperative.
The incident on July 12, 1998 prompted herein private
respondents to file their Twin Motions for Contempt of Court
and to Nullify Proceedings on July 26, 1998. The twin
motions prayed, among others, that after due notice and
hearing, certain personalities, including the petitioners-inintervention, be cited in indirect contempt for their
participation in the subject incident and for the nullification of
the election on July 12, 1998 for being illegal, contrary to the
by-laws of the cooperative and in defiance of the injunctive
processes of the appellate court.
On September 9, 1998, the Court of Appeals, 13th Division,
rendered a Decision in CA-G.R. SP No. 47933 which
declared the CDA devoid of quasi-judicial jurisdiction to settle
the dispute in CDA-CO Case No. 97-011 without however,
taking any action on the "Twin Motions for Contempt of Court
and to Nullify Proceedings" filed by the private respondents.
As it turned out, it was only in its Resolution dated February
9, 1999 denying petitioners motion for reconsideration of the
Decision in CA-G.R. SP No. 47933 that the Court of Appeals,
13th Division, acted on the "Twin Motions for Contempt of
Court and to Nullify Proceedings" by declaring as null and
void the election of the petitioners-in-intervention on July 12,
1998 as officers and members of the board of directors of
DARBCI.
We find, however, that the action taken by the Court of
Appeals, 13th Division, on the "Twin Motions for Contempt of
Court and to Nullify Proceedings" insofar as it nullified the
election of the officers and members of the Board of
Directors of DARBCI, violated the constitutional right of the
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petitioners-in-intervention to due process. The requirement of

due process is satisfied if the following conditions are
present, namely: (1) there must be a court or tribunal clothed
with judicial power to hear and determine the matter before it;
(2) jurisdiction must be lawfully acquired over the person of
the defendant or over the property which is the subject of the
proceedings; (3) the defendant must be given an opportunity
to be heard; and (4) judgment must be rendered upon lawful
hearing.49The appellate court should have first required the
petitioners-in-intervention to file their comment or opposition
to the said "Twin Motions For Contempt Of Court And to
Nullify Proceedings" which also refers to the elections held
during the general assembly on July 12, 1998. It was
precipitate for the appellate court to render judgment against
the petitioners-in-intervention in its Resolution dated
February 9, 1999 without due notice and opportunity to be
heard. Besides, the validity of the general assembly held on
July 12, 1998 was not raised as an issue in CA-G.R. SP No.
47933.1wphi1.nt
WHEREFORE, judgment is hereby rendered as follows:
1. The petition for review on certiorari is
hereby DENIED for lack of merit. The orders,
resolutions, memoranda and any other acts
rendered by petitioner Cooperative Development
Authority in CDA-CO Case No. 97-011 are hereby
declared null and void ab initio for lack of quasijudicial authority of petitioner to adjudicate intracooperative disputes; and the petitioner is hereby
ordered to cease and desist from taking any further
proceedings therein; and
2. In the interest of justice, the dispositive portion of
the Resolution of the Court of Appeals, dated
February 9, 1999, in CA-G.R. SP No. 47933, insofar
as it nullified the elections of the members of the
Board of Directors and Officers of DARBCI held
during the general assembly of the DARBCI
members on July 12, 1998, is hereby SET ASIDE.

FACTS
Sometime in the later part of 1997, the CDA received from
certain members of the Dolefil Agrarian Reform Beneficiaries
Cooperative, Inc. (DARBCI for brevity), an agrarian reform
cooperative that owns 8,860 hectares of land in Polomolok,
South
Cotabato,
several
complaints
alleging
mismanagement and/or misappropriation of funds of
DARBCI by the then incumbent officers and members of the
board of directors of the cooperative, some of whom are
herein private respondents.
The complaints led the CDA to act according to its function
and issued a freeze order on the DARBCI funds and creating
management committee to manage the affairs of the said
cooperative.
ISSUE
At the core of the instant petition for review on certiorari of
the Decision1 of the Court of Appeals, 13th Division, in CAG.R. SP. No. 47933 promulgated on September 9, 1998 and
its Resolution2 dated February 9, 1999 is the issue of
whether or not petitioner Cooperative Development Authority
(CDA for brevity) is vested with quasi-judicial authority to
adjudicate intra-cooperative disputes.
HELD
WHEREFORE, judgment is hereby rendered as follows:
1. The petition for review on certiorari is hereby DENIED for
lack of merit. The orders, resolutions, memoranda and any
other acts rendered by petitioner Cooperative Development
Authority in CDA-CO Case No. 97-011 are hereby declared
null and void ab initio for lack of quasi-judicial authority of
petitioner to adjudicate intra-cooperative disputes; and the
petitioner is hereby ordered to cease and desist from taking
any further proceedings therein; and
2. In the interest of justice, the dispositive portion of the
Resolution of the Court of Appeals, dated February 9, 1999,
in CA-G.R. SP No. 47933, insofar as it nullified the elections
of the members of the Board of Directors and Officers of
DARBCI held during the general assembly of the DARBCI
members on July 12, 1998, is hereby SET ASIDE.
No pronouncement as to costs.

No pronouncement as to costs.
SO ORDERED.

G.R. No. 110120 March 16, 1994

DIGEST

LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner,

vs.
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COURT OF APPEALS, HON. MANUEL JN. SERAPIO,

Presiding Judge RTC, Branch 127, Caloocan City, HON.
MACARIO A. ASISTIO, JR., City Mayor of Caloocan
and/or
THE
CITY
GOVERNMENT
OF
CALOOCAN,respondents.
Alberto N. Hidalgo and Ma.Teresa T. Oledan for petitioner.
The City Legal Officer & Chief, Law Department for Mayor
Macario A. Asistio, Jr. and the City Government of Caloocan.
ROMERO, J.:
The clash between the responsibility of the City Government
of Caloocan to dispose off the 350 tons of garbage it collects
daily and the growing concern and sensitivity to a pollutionfree environment of the residents of Barangay Camarin, Tala
Estate, Caloocan City where these tons of garbage are
dumped everyday is the hub of this controversy elevated by
the protagonists to the Laguna Lake Development Authority
(LLDA) for adjudication.
The instant case stemmed from an earlier petition filed with
this Court by Laguna Lake Development Authority (LLDA for
short)
docketed
as
G.R.
No. 107542 against the City Government of Caloocan, et al.
In the Resolution of November 10, 1992, this Court referred
G.R. No. 107542 to the Court of Appeals for appropriate
disposition. Docketed therein as CA-G.R. SP
No. 29449, the Court of Appeals, in a decision 1 promulgated
on January 29, 1993 ruled that the LLDA has no power and
authority to issue a cease and desist order enjoining the
dumping of garbage in Barangay Camarin, Tala Estate,
Caloocan City. The LLDA now seeks, in this petition, a review
of the decision of the Court of Appeals.
The facts, as disclosed in the records, are undisputed.
On March 8, 1991, the Task Force Camarin Dumpsite of Our
Lady of Lourdes Parish, Barangay Camarin, Caloocan City,
filed a letter-complaint 2 with the Laguna Lake Development
Authority seeking to stop the operation of the 8.6-hectare
open garbage dumpsite in Tala Estate, Barangay Camarin,
Caloocan City due to its harmful effects on the health of the
residents and the possibility of pollution of the water content
of the surrounding area.

On November 15, 1991, the LLDA conducted an on-site

investigation, monitoring and test sampling of the
leachate 3 that seeps from said dumpsite to the nearby creek
which is a tributary of the Marilao River. The LLDA Legal and
Technical personnel found that the City Government of
Caloocan was maintaining an open dumpsite at the Camarin
area without first securing an Environmental Compliance
Certificate (ECC) from the Environmental Management
Bureau (EMB) of the Department of Environment and Natural
Resources, as required under Presidential Decree No.
1586, 4 and clearance from LLDA as required under Republic
Act No. 4850, 5 as amended by Presidential Decree No. 813
and Executive Order No. 927, series of 1983. 6
After a public hearing conducted on December 4, 1991, the
LLDA, acting on the complaint of Task Force Camarin
Dumpsite, found that the water collected from the leachate
and the receiving streams could considerably affect the
quality, in turn, of the receiving waters since it indicates the
presence of bacteria, other than coliform, which may have
contaminated the sample during collection or handling. 7 On
December 5, 1991, the LLDA issued a Cease and Desist
Order 8 ordering the City Government of Caloocan,
Metropolitan Manila Authority, their contractors, and other
entities, to completely halt, stop and desist from dumping any
form or kind of garbage and other waste matter at the
Camarin dumpsite.
The dumping operation was forthwith stopped by the City
Government of Caloocan. However, sometime in August
1992 the dumping operation was resumed after a meeting
held in July 1992 among the City Government of Caloocan,
the representatives of Task Force Camarin Dumpsite and
LLDA at the Office of Environmental Management Bureau
Director Rodrigo U. Fuentes failed to settle the problem.
After an investigation by its team of legal and technical
personnel on August 14, 1992, the LLDA issued another
order reiterating the December 5, 1991, order and issued an
Alias Cease and Desist Order enjoining the City Government
of Caloocan from continuing its dumping operations at the
Camarin area.
On September 25, 1992, the LLDA, with the assistance of
the Philippine National Police, enforced its Alias Cease and
Desist Order by prohibiting the entry of all garbage dump
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trucks into the Tala Estate, Camarin area being utilized as a

dumpsite.
Pending resolution of its motion for reconsideration earlier
filed on September 17, 1992 with the LLDA, the City
Government of Caloocan filed with the Regional Trial Court
of Caloocan City an action for the declaration of nullity of the
cease and desist order with prayer for the issuance of writ of
injunction, docketed as Civil Case No. C-15598. In its
complaint, the City Government of Caloocan sought to be
declared as the sole authority empowered to promote the
health and safety and enhance the right of the people in
Caloocan City to a balanced ecology within its territorial
jurisdiction. 9
On September 25, 1992, the Executive Judge of the
Regional Trial Court of Caloocan City issued a temporary
restraining order enjoining the LLDA from enforcing its cease
and desist order. Subsequently, the case was raffled to the
Regional Trial Court, Branch 126 of Caloocan which, at the
time, was presided over by Judge Manuel Jn. Serapio of the
Regional Trial Court, Branch 127, the pairing judge of the
recently-retired presiding judge.
The LLDA, for its part, filed on October 2, 1992 a motion to
dismiss on the ground, among others, that under Republic
Act No. 3931, as amended by Presidential Decree No. 984,
otherwise known as the Pollution Control Law, the cease and
desist order issued by it which is the subject matter of the
complaint is reviewable both upon the law and the facts of
the case by the Court of Appeals and not by the Regional
Trial Court. 10
On October 12, 1992 Judge Manuel Jn. Serapio issued an
order consolidating Civil Case No. C-15598 with Civil Case
No. C-15580, an earlier case filed by the Task Force Camarin
Dumpsite entitled "Fr. John Moran, et al. vs. Hon.
MacarioAsistio." The LLDA, however, maintained during the
trial that the foregoing cases, being independent of each
other, should have been treated separately.
On October 16, 1992, Judge Manuel Jn. Serapio, after
hearing the motion to dismiss, issued in the consolidated
cases an order 11 denying LLDA's motion to dismiss and
granting the issuance of a writ of preliminary injunction
enjoining the LLDA, its agent and all persons acting for and
on its behalf, from enforcing or implementing its cease and

desist order which prevents plaintiff City of Caloocan from

dumping garbage at the Camarin dumpsite during the
pendency of this case and/or until further orders of the court.
On November 5, 1992, the LLDA filed a petition for certiorari,
prohibition and injunction with prayer for restraining order
with the Supreme Court, docketed as G.R. No. 107542,
seeking to nullify the aforesaid order dated October 16, 1992
issued by the Regional Trial Court, Branch 127 of Caloocan
City denying its motion to dismiss.
The Court, acting on the petition, issued a Resolution 12 on
November 10, 1992 referring the case to the Court of
Appeals for proper disposition and at the same time, without
giving due course to the petition, required the respondents to
comment on the petition and file the same with the Court of
Appeals within ten (10) days from notice. In the meantime,
the Court issued a temporary restraining order, effective
immediately and continuing until further orders from it,
ordering the respondents: (1) Judge Manuel Jn. Serapio,
Presiding Judge, Regional Trial Court, Branch 127, Caloocan
City to cease and desist from exercising jurisdiction over the
case for declaration of nullity of the cease and desist order
issued by the Laguna Lake Development Authority (LLDA);
and (2) City Mayor of Caloocan and/or the City Government
of Caloocan to cease and desist from dumping its garbage at
the Tala Estate, Barangay Camarin, Caloocan City.
Respondents City Government of Caloocan and Mayor
Macario A. Asistio, Jr. filed on November 12, 1992 a motion
for reconsideration and/or to quash/recall the temporary
restraining order and an urgent motion for reconsideration
alleging that ". . . in view of the calamitous situation that
would arise if the respondent city government fails to collect
350 tons of garbage daily for lack of dumpsite (i)t is
therefore, imperative that the issue be resolved with dispatch
or with sufficient leeway to allow the respondents to find
alternative solutions to this garbage problem."
On November 17, 1992, the Court issued a
Resolution 13 directing the Court of Appeals to immediately
set the case for hearing for the purpose of determining
whether or not the temporary restraining order issued by the
Court should be lifted and what conditions, if any, may be
required if it is to be so lifted or whether the restraining order
should be maintained or converted into a preliminary
injunction.
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The Court of Appeals set the case for hearing on November

27, 1992, at 10:00 in the morning at the Hearing Room, 3rd
Floor, New Building, Court of Appeals. 14 After the oral
argument, a conference was set on December 8, 1992 at
10:00 o'clock in the morning where the Mayor of Caloocan
City, the General Manager of LLDA, the Secretary of DENR
or his duly authorized representative and the Secretary of
DILG or his duly authorized representative were required to
appear.
It was agreed at the conference that the LLDA had until
December 15, 1992 to finish its study and review of
respondent's technical plan with respect to the dumping of its
garbage and in the event of a rejection of respondent's
technical plan or a failure of settlement, the parties will
submit within 10 days from notice their respective
memoranda on the merits of the case, after which the petition
shall be deemed submitted for resolution.15 Notwithstanding
such efforts, the parties failed to settle the dispute.
On April 30, 1993, the Court of Appeals promulgated its
decision holding that: (1) the Regional Trial Court has no
jurisdiction on appeal to try, hear and decide the action for
annulment of LLDA's cease and desist order, including the
issuance of a temporary restraining order and preliminary
injunction in relation thereto, since appeal therefrom is within
the exclusive and appellate jurisdiction of the Court of
Appeals under Section 9, par. (3), of Batas PambansaBlg.
129; and (2) the Laguna Lake Development Authority has no
power and authority to issue a cease and desist order under
its enabling law, Republic Act No. 4850, as amended by P.D.
No.
813
and
Executive
Order
No. 927, series of 1983.
The Court of Appeals thus dismissed Civil Case No. 15598
and the preliminary injunction issued in the said case was set
aside; the cease and desist order of LLDA was likewise set
aside and the temporary restraining order enjoining the City
Mayor of Caloocan and/or the City Government of Caloocan
to cease and desist from dumping its garbage at the Tala
Estate, Barangay Camarin, Caloocan City was lifted, subject,
however, to the condition that any future dumping of garbage
in said area, shall be in conformity with the procedure and
protective works contained in the proposal attached to the
records of this case and found on pages 152-160 of
the Rollo, which was thereby adopted by reference and
made an integral part of the decision, until the corresponding

restraining and/or injunctive relief is granted by the proper

Court upon LLDA's institution of the necessary legal
proceedings.
Hence, the Laguna Lake Development Authority filed the
instant petition for review on certiorari, now docketed as G.R.
No. 110120, with prayer that the temporary restraining order
lifted by the Court of Appeals be re-issued until after final
determination by this Court of the issue on the proper
interpretation of the powers and authority of the LLDA under
its enabling law.
On July, 19, 1993, the Court issued a temporary restraining
order 16 enjoining the City Mayor of Caloocan and/or the City
Government of Caloocan to cease and desist from dumping
its garbage at the Tala Estate, Barangay Camarin, Caloocan
City, effective as of this date and containing until otherwise
ordered by the Court.
It is significant to note that while both parties in this case
agree on the need to protect the environment and to maintain
the ecological balance of the surrounding areas of the
Camarin open dumpsite, the question as to which agency
can lawfully exercise jurisdiction over the matter remains
highly open to question.
The City Government of Caloocan claims that it is within its
power, as a local government unit, pursuant to the general
welfare provision of the Local Government Code, 17 to
determine the effects of the operation of the dumpsite on the
ecological balance and to see that such balance is
maintained. On the basis of said contention, it questioned,
from the inception of the dispute before the Regional Trial
Court of Caloocan City, the power and authority of the LLDA
to issue a cease and desist order enjoining the dumping of
garbage in the Barangay Camarin over which the City
Government of Caloocan has territorial jurisdiction.
The Court of Appeals sustained the position of the City of
Caloocan on the theory that Section 7 of Presidential Decree
No. 984, otherwise known as the Pollution Control law,
authorizing the defunct National Pollution Control
Commission to issue an ex-parte cease and desist order was
not incorporated in Presidential Decree No. 813 nor in
Executive
Order
No.
927,
series
of
1983. The Court of Appeals ruled that under Section 4, par.
(d), of Republic Act No. 4850, as amended, the LLDA is
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instead required "to institute the necessary legal proceeding

against any person who shall commence to implement or
continue implementation of any project, plan or program
within the Laguna de Bay region without previous clearance
from the Authority."
The LLDA now assails, in this partition for review, the
abovementioned ruling of the Court of Appeals, contending
that, as an administrative agency which was granted
regulatory and adjudicatory powers and functions by
Republic Act No. 4850 and its amendatory laws, Presidential
Decree No. 813 and Executive Order No. 927, series of
1983, it is invested with the power and authority to issue a
cease and desist order pursuant to Section 4 par. (c), (d), (e),
(f) and (g) of Executive Order No. 927 series of 1983 which
provides, thus:
Sec. 4.Additional Powers and Functions.
The authority shall have the following
powers and functions:
xxxxxxxxx
(c) Issue orders or decisions to compel
compliance with the provisions of this
Executive Order and its implementing rules
and regulations only after proper notice
and hearing.
(d) Make, alter or modify orders requiring
the discontinuance of pollution specifying
the conditions and the time within which
such
discontinuance
must
be
accomplished.
(e) Issue, renew, or deny permits, under
such conditions as it may determine to be
reasonable, for the prevention and
abatement of pollution, for the discharge of
sewage, industrial waste, or for the
installation or operation of sewage works
and industrial disposal system or parts
thereof.
(f) After due notice and hearing, the
Authority may also revoke, suspend or
modify any permit issued under this Order

whenever the same is necessary to

prevent or abate pollution.
(g) Deputize in writing or request
assistance of appropriate government
agencies or instrumentalities for the
purpose of enforcing this Executive Order
and its implementing rules and regulations
and the orders and decisions of the
Authority.
The LLDA claims that the appellate court deliberately
suppressed and totally disregarded the above provisions of
Executive Order No. 927, series of 1983, which granted
administrative quasi-judicial functions to LLDA on pollution
abatement cases.
In light of the relevant environmental protection laws cited
which are applicable in this case, and the corresponding
overlapping jurisdiction of government agencies
implementing these laws, the resolution of the issue of
whether or not the LLDA has the authority and power to issue
an order which, in its nature and effect was injunctive,
necessarily requires a determination of the threshold
question: Does the Laguna Lake Development Authority,
under its Charter and its amendatory laws, have the authority
to entertain the complaint against the dumping of garbage in
the open dumpsite in Barangay Camarin authorized by the
City Government of Caloocan which is allegedly endangering
the health, safety, and welfare of the residents therein and
the sanitation and quality of the water in the area brought
about by exposure to pollution caused by such open garbage
dumpsite?
The matter of determining whether there is such pollution of
the environment that requires control, if not prohibition, of the
operation of a business establishment is essentially
addressed to the Environmental Management Bureau (EMB)
of the DENR which, by virtue of Section 16 of Executive
Order No. 192, series of 1987, 18 has assumed the powers
and functions of the defunct National Pollution Control
Commission created under Republic Act No. 3931. Under
said Executive Order, a Pollution Adjudication Board (PAB)
under the Office of the DENR Secretary now assumes the
powers and functions of the National Pollution Control
Commission with respect to adjudication of pollution cases. 19
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As a general rule, the adjudication of pollution cases

generally pertains to the Pollution Adjudication Board (PAB),
except in cases where the special law provides for another
forum. It must be recognized in this regard that the LLDA, as
a specialized administrative agency, is specifically mandated
under Republic Act No. 4850 and its amendatory laws to
carry out and make effective the declared national policy 20 of
promoting and accelerating the development and balanced
growth of the Laguna Lake area and the surrounding
provinces of Rizal and Laguna and the cities of San Pablo,
Manila, Pasay, Quezon and Caloocan 21 with due regard and
adequate provisions for environmental management and
control, preservation of the quality of human life and
ecological systems, and the prevention of undue ecological
disturbances, deterioration and pollution. Under such a broad
grant and power and authority, the LLDA, by virtue of its
special charter, obviously has the responsibility to protect the
inhabitants of the Laguna Lake region from the deleterious
effects of pollutants emanating from the discharge of wastes
from the surrounding areas. In carrying out the
aforementioned declared policy, the LLDA is mandated,
among others, to pass upon and approve or disapprove all
plans, programs, and projects proposed by local government
offices/agencies within the region, public corporations, and
private persons or enterprises where such plans, programs
and/or projects are related to those of the LLDA for the
development of the region. 22
In the instant case, when the complainant Task Force
Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay
Camarin, Caloocan City, filed its letter-complaint before the
LLDA, the latter's jurisdiction under its charter was validly
invoked by complainant on the basis of its allegation that the
open dumpsite project of the City Government of Caloocan in
Barangay Camarin was undertaken without a clearance from
the LLDA, as required under Section 4, par. (d), of Republic
Act. No. 4850, as amended by P.D. No. 813 and Executive
Order No. 927. While there is also an allegation that the said
project was without an Environmental Compliance Certificate
from the Environmental Management Bureau (EMB) of the
DENR, the primary jurisdiction of the LLDA over this case
was recognized by the Environmental Management Bureau
of the DENR when the latter acted as intermediary at the
meeting among the representatives of the City Government
of Caloocan, Task Force Camarin Dumpsite and LLDA
sometime in July 1992 to discuss the possibility of
re-opening the open dumpsite.

Having thus resolved the threshold question, the inquiry then

narrows down to the following issue: Does the LLDA have
the power and authority to issue a "cease and desist" order
under Republic Act No. 4850 and its amendatory laws, on the
basis of the facts presented in this case, enjoining the
dumping of garbage in Tala Estate, Barangay Camarin,
Caloocan City.
The irresistible answer is in the affirmative.
The cease and desist order issued by the LLDA requiring the
City Government of Caloocan to stop dumping its garbage in
the Camarin open dumpsite found by the LLDA to have been
done in violation of Republic Act No. 4850, as amended, and
other relevant environment laws, 23 cannot be stamped as an
unauthorized exercise by the LLDA of injunctive powers. By
its express terms, Republic Act No. 4850, as amended by
P.D. No. 813 and Executive Order No. 927, series of 1983,
authorizes the LLDA to "make, alter or modify order requiring
the discontinuance or pollution." 24(Emphasis supplied)
Section 4, par. (d) explicitly authorizes the LLDA
to make whatever order may be necessary in the exercise of
its jurisdiction.
To be sure, the LLDA was not expressly conferred the power
"to issue and ex-parte cease and desist order" in a language,
as suggested by the City Government of Caloocan, similar to
the express grant to the defunct National Pollution Control
Commission under Section 7 of P.D. No. 984 which,
admittedly was not reproduced in P.D. No. 813 and E.O. No.
927, series of 1983. However, it would be a mistake to draw
therefrom the conclusion that there is a denial of the power to
issue the order in question when the power "to make, alter or
modify orders requiring the discontinuance of pollution" is
expressly and clearly bestowed upon the LLDA by Executive
Order No. 927, series of 1983.
Assuming arguendo that the authority to issue a "cease and
desist order" were not expressly conferred by law, there is
jurisprudence enough to the effect that the rule granting such
authority need not necessarily be express.25 While it is a
fundamental rule that an administrative agency has only such
powers as are expressly granted to it by law, it is likewise a
settled rule that an administrative agency has also such
powers as are necessarily implied in the exercise of its
express powers. 26 In the exercise, therefore, of its express
powers under its charter as a regulatory and quasi-judicial
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body with respect to pollution cases in the Laguna Lake

region, the authority of the LLDA to issue a "cease and desist
order" is, perforce, implied. Otherwise, it may well be
reduced to a "toothless" paper agency.

The State shall protect and advance the

right of the people to a balanced and
healthful ecology in accord with the rhythm
and harmony of nature.

In this connection, it must be noted that in Pollution

Adjudication Board v. Court of Appeals, et al., 27 the Court
ruled that the Pollution Adjudication Board (PAB) has the
power to issue an ex-parte cease and desist order when
there is prima facie evidence of an establishment exceeding
the allowable standards set by the anti-pollution laws of the
country. Theponente, Associate Justice Florentino P.
Feliciano, declared:

As a constitutionally guaranteed right of every person, it

carries the correlative duty of non-impairment. This is but in
consonance with the declared policy of the state "to protect
and promote the right to health of the people and instill health
consciousness among them." 28 It is to be borne in mind that
the Philippines is party to the Universal Declaration of
Human Rights and the Alma Conference Declaration of 1978
which recognize health as a fundamental human right. 29

Ex parte cease and desist orders are

permitted by law and regulations in
situations like that here presented
precisely because stopping the continuous
discharge of pollutive and untreated
effluents into the rivers and other inland
waters of the Philippines cannot be made
to wait until protracted litigation over the
ultimate correctness or propriety of such
orders has run its full course, including
multiple and sequential appeals such as
those which Solar has taken, which of
course may take several years. The
relevant pollution control statute and
implementing regulations were enacted
and promulgated in the exercise of that
pervasive, sovereign power to protect the
safety, health, and general welfare and
comfort of the public, as well as the
protection of plant and animal life,
commonly designated as the police power.
It is a constitutional commonplace that the
ordinary requirements of procedural due
process yield to the necessities of
protecting vital public interests like those
here involved, through the exercise of
police power. . . .

The issuance, therefore, of the cease and desist order by the

LLDA, as a practical matter of procedure under the
circumstances of the case, is a proper exercise of its power
and authority under its charter and its amendatory laws. Had
the cease and desist order issued by the LLDA been
complied with by the City Government of Caloocan as it did
in the first instance, no further legal steps would have been
necessary.

The immediate response to the demands of "the necessities

of protecting vital public interests" gives vitality to the
statement on ecology embodied in the Declaration of
Principles and State Policies or the 1987 Constitution. Article
II, Section 16 which provides:

The charter of LLDA, Republic Act No. 4850, as amended,

instead of conferring upon the LLDA the means of directly
enforcing such orders, has provided under its Section 4 (d)
the power to institute "necessary legal proceeding against
any person who shall commence to implement or continue
implementation of any project, plan or program within the
Laguna de Bay region without previous clearance from the
LLDA."
Clearly, said provision was designed to invest the LLDA with
sufficiently broad powers in the regulation of all projects
initiated in the Laguna Lake region, whether by the
government or the private sector, insofar as the
implementation of these projects is concerned. It was meant
to deal with cases which might possibly arise where
decisions or orders issued pursuant to the exercise of such
broad powers may not be obeyed, resulting in the thwarting
of its laudabe objective. To meet such contingencies, then
the writs of mandamus and injunction which are beyond the
power of the LLDA to issue, may be sought from the proper
courts.
Insofar as the implementation of relevant anti-pollution laws
in the Laguna Lake region and its surrounding provinces,
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cities and towns are concerned, the Court will not dwell
further on the related issues raised which are more
appropriately addressed to an administrative agency with the
special knowledge and expertise of the LLDA.
WHEREFORE, the petition is GRANTED. The temporary
restraining order issued by the Court on July 19, 1993
enjoining the City Mayor of Caloocan and/or the City
Government of Caloocan from dumping their garbage at the
Tala Estate, Barangay Camarin, Caloocan City is hereby
made permanent.
SO ORDERED.
DIGEST
FACTS:
The LLDA Legal and Technical personnel found that the
City Government of Caloocan was maintaining an open
dumpsite at the Camarin area without first securing an
Environmental Compliance Certificate (ECC) from the
Environmental Management Bureau (EMB) of the
Department of Environment and Natural Resources, as
required under Presidential Decree N o. 1586, and
clearance from LLDA as required under Republic Act N o.
4850 and issued a CEASE and DESIST ORDER (CDO) for
the City Government of Caloocan to stop the use of the
dumpsite.
ISSUES:

RULING:
1. YES, LLDA has authority. It must be recognized in this
regard that the LLDA, as a specialized administrative
agency, is specifically mandated under Republic Act No.
4850 and its amendatory law s to carry out and make
effective the declared national policy of promoting and
accelerating the development and balanced growth of the
Laguna Lake area and the surrounding provinces of
Rizal and Laguna and the cities of San Pablo, Manila,
Pasay, Quezon and Caloocan with due regard and
adequate provisions for environmental management and
control, preservation of the quality of human life and
ecological systems, and the prevention of undue ecological
disturbances, deterioration and pollution. Under such a
broad grant and power and authority, the LLDA, by virtue of
its special charter, obviously has the responsibility to protect
the inhabitants of the Laguna Lake region from the
deleterious effects of pollutants emanating from the
discharge of wastes from the surrounding areas.
2. YES, pursuant to EO 927 Section 4. While it is a
fundamental rule that an administrative agency has only
such powers as are expressly granted to it by law , it is
likewise a settled rule that an administrative agency has
also such powers as are necessarily implied in the exercise
of its ex press powers. In the exercise, therefore, of its
express powers under its charter as a regulatory and
quasi-judicial body with respect to pollution cases in the
Laguna Lake region, the authority of the LLDA to issue
a "cease and desist order" is, perforce, implied. NOTE:
HOWEVER, writs of mandamus and injunction are
beyond the power of the LLDA to issue.

1. Does the LLDA and its amendatory laws, have the

authority to entertain the complaint against the dumping
of garbage in the open dumpsite in Barangay Camarin
authorized by the City Government of Caloocan?
2. Does the LLDA have the power and authority to issue a
"cease and desist" order?
APPLICABLE LAWS:
Executive Order N o. 927 series of 1983 which provides,
thus: Sec. 4. Additional Powers and Functions. The authority
shall have the following powers and functions: (d) Make,
alter or modify orders requiring the discontinuance of
pollution specifying the conditions and the time within
which such discontinuance must be accomplished
As a general rule, the adjudication of pollution cases
generally pertains to the Pollution Adjudication Board
(PAB), except in cases w here the special law provides
for another forum
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PANGAN, SPOUSES FELIPE and ROSALIE DALAY,

SPOUSES MARCELO and CATALINA B. DALAY, and
SPOUSES RENATO and ELIZABETH DALAY,
DEPARTMENT OF AGRARIAN REFORM PROVINCIAL AGRARIAN REFORM OFFICER OF
LAGUNA, and REGISTER OF DEEDS OF
SINOLOAN,
LAGUNA, Petitioners,
vs.
SPOUSES DANIEL and ANA ROMUALDEZ, and
JACQUELINE L. ROMUALDEZ, Respondents.
DECISION
NACHURA, J.:

G.R. No. 179844

March 23, 2011

EMERSON B. BAGONGAHASA, GIRLIE B.

BAGONGAHASA, DEPARTMENT OF AGRARIAN
REFORM - PROVINCIAL AGRARIAN REFORM
OFFICER OF LAGUNA, and REGISTER OF DEEDS
OF
SINOLOAN,
LAGUNA, Petitioners,
vs.
JOHANNA L. ROMUALDEZ, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
SPOUSES CESAR M. CAGUIN and GERTRUDES
CAGUIN, SPOUSES TEODORO MADRIDEJOS and
ANICETA IBANEZ MADRIDEJOS, DEPARTMENT
OF
AGRARIAN
REFORM
PROVINCIAL
AGRARIAN REFORM OFFICER OF LAGUNA, and
REGISTER
OF
DEEDS
OF
SINOLOAN,
LAGUNA, Petitioners,
vs.
DIETMAR L. ROMUALDEZ, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
SOTELA D. ADEA, SPOUSES ESPERANZA and
LEONCIO MARIO, SPOUSES DELIA and DANILO
CACHOLA, SPOUSES MA. ALICIA and REYMUNDO
CAINTO, EDUARDO B. DALAY, SPOUSES JOSE
LEVITICO and EPIFANIA DALAY, SPOUSES JIFFY
and FAUSTINO DALAY, SPOUSES MA. RUTH and
MELCHOR PACURIB, MA. JERIMA B. DALAY,
SPOUSES CLEOFAS and TERESITA VITOR,
SPOUSES CELESTINA and ALEJANDRO COSICO,
SPOUSES AUREA and ANTONIO HERNANDEZ,
SPOUSES JULIA and RAFAEL DELA CRUZ,
SPOUSES RAQUEL and SEBASTIAN SAN JUAN,
SPOUSES MARGARITA and PABLITO LLANES, SR.,
FIDEL M. DALAY, SPOUSES JAIME and MELVITA
DALAY, SPOUSES EMILY and FLORENCIO

Before this Court is a Consolidated Petition for Review

on Certiorari1 under Rule 45 of the Rules of Civil
Procedure, seeking the reversal of the Court of Appeals (CA)
Decision2 dated May 31, 2007 and its Amended Decision
(Partial)3 dated September 25, 2007.
The facts, as summarized by the Department of Agrarian
Reform Adjudication Board (DARAB) and as quoted by the
CA, are as follows:
It appears that Complainants Johanna L. Romualdez;
Dietmar L. Romualdez; Sps. Daniel and [Ana] Romualdez
and Jacquelin[e] C. (sic) Romualdez are absolute and lawful
owners of separate parcels of lands, each parcel with an area
of 36,670 square meters, 47,187.50 square meters and
55,453 square meters, respectively, all situated [in] Sitio
Papatahan, Paete, Laguna. Johanna and Dietmar purchased
their properties from Roberto Manalo on January 6, 1994;
while Sps. Daniel and [Ana], as well as Jacqueline bought
their landholdings from Leonisa A. Zarraga on August 5,
1998. They allege that the said properties are planted [with]
different fruit-bearing trees. They and their predecessors-ininterest have been paying realty taxes due on the properties
up to the present. However, sometime in 1994 and 1995, the
then Secretary of Agrarian Reform declared the property to
be part of the public domain, awarded the same to the
Defendants and forthwith issued Certificates of Land
Ownership Award (CLOAs) to the respective defendants as
follows:
CLOA NO.

BENEFICIARIES

Date
Registration

of

In Registry of Deeds of Laguna

1. 00155653

Emerson Bagongahasa,

April 10, 1995 et

al.

2. 00155652

Cesar Caguin, et al.

April 10, 1995

3. 00119810

Sotela Adea, et al.

June 30, 1994

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It was only in 1998 when the complainants learned of the

issuance of said CLOAs by the Register of Deeds of
Siniloan, Laguna.
The Complainants pointed out that while the Defendants
respective CLOAs describe a property purportedly located in
Sitio Lamao, San Antonio, Municipality of Kalayaan,
Province of Laguna, each of the Complainants tax
declaration describes a property located [in] Sitio Papatahan,
Municipality of Paete, Province of Laguna. Inspite of the
discrepancy in the municipality and sitio of the respective
documents, the lots described in the CLOAs and in the Tax
Declarations are almost identical, except that the property
described in Defendants title covers a larger area, but the
title and the tax declaration refer to the same lot; that they
and their predecessors-in-interest have been in possession of
the properties for more than thirty years; that the Defendants
have never been in possession of the same; that they have
not paid any real estate taxes and have not caused the
issuance of a tax declaration over the property in their
names; that there is no basis for the award of certificates of
land ownership to the Defendants by the Secretary of
Agrarian Reform, for the lands have already become private
properties by virtue of the open, continuous, exclusive and
notorious possession of the property by the Complainants
and/or their predecessors-in-interest which possession was in
the concept of an owner. As absolute and lawful owners
thereof, the complainants also maintain that they have not
been notified of any intended coverage thereof by the DAR;
that to the best of their knowledge, there is no valuation
being conducted by the Land Bank of the Philippines and the
DAR involving the property; that there was no compensation
paid and that the DAR-CENRO Certification shows that the
landholdings have 24-32% slopes and therefore exempt from
CARP coverage.
The complainants[,] thus, pray for the reconveyance of their
respective landholdings; cancellation of the CLOAs and
payment of litigation fee.
On the other hand, the Defendants specifically denied the
allegations of the Plaintiff, maintaining in their Affirmative
Defenses that they are farmer beneficiaries of the subject
properties, covered by Proclamation No. 2280 (sic) which
reclassifies certain portion of the public domain as
agricultural land and declares the same alienable and
disposable for agricultural and resettlement purposes of the
Kilusang Kabuhayan at Kaunlaran Land Resource
Management Program of the KKK, Ministry of Human
Settlements and the area covered is Barangay Papatahan,
Paete; that the Plaintiffs act of questioning the issuance of
title is an exercise in futility because Defendants were
already in possession of the properties prior to said
Proclamation; that upon the issuance of the CLOAs, they
became the owners of the landholdings and that the
complainants claim for damages has no basis.

On the part of public Respondent PARO, he invoked the

doctrine of regularity in the performance of their official
functions and their adherence in pursuing the
implementation of CARP. He claims that DAR received
from the National Livelihood Support Fund (NLSF) portions
of the public domain covered by Presidential Proclamation
No. 2282, Series of 1983 and has been mandated to
implement the agrarian reform laws by distributing alienable
and disposable portions of the public domain, to which the
subject lands fall; that actual investigation, proper screening
of applicants-beneficiaries, survey and proper evaluation
were conducted, warranting the generation of the CLOAs
and that the registration of the CLOAs with the Registry of
Deed brought the same under the coverage of the Torrens
System of land registration and have already become
indefeasible or uncontestable.4
On December 28, 2000, the Provincial Agrarian Reform
Adjudicator (PARAD) of Laguna rendered his
decision,5finding that the Department of Agrarian Reform
(DAR) Secretary committed a mistake in placing the subject
properties under the Comprehensive Agrarian Reform
Program (CARP). Moreover, the PARAD found that no
notice of coverage was sent to respondents and that they
were also not paid any just compensation. The dispositive
portion of the said decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered:
1. Ordering the cancellation of Certificate of Land
Ownership Award (CLOA) NOS. 00155653,
00155652 and 00119810 issued to herein private
respondents; [and]
2. Ordering the Register of Deeds of Siniloan,
Laguna to cause the cancellation of the Certificate
of Land Ownership Award (CLOA) to herein
named defendants.
SO ORDERED.6
Aggrieved, petitioners appealed to the DARAB.
In its decision7 dated May 3, 2005, the DARAB held that the
complaints filed were virtual protests against the CARP
coverage, to which it has no jurisdiction. The DARAB
further held that, while it has jurisdiction to cancel the
Certificate of Land Ownership Awards (CLOAs), which had
been registered with the Register of Deeds (RD) of Laguna,
it cannot pass upon matters exclusively vested in the DAR
Secretary. Moreover, the DARAB ruled that the assailed
CLOAs having been registered in 1994 and 1995 became
incontestable and indefeasible. Thus:

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WHEREFORE, premises considered, the appealed decision

is hereby REVERSED and/or SET ASIDE. A new judgment
is hereby entered:
1. Sustaining the validity of the subject Certificates
of Land Ownership Award (CLOAs) Nos.
00155653, 00155652 and 00119810 issued to the
herein Defendants-Appellants: and
2. Dismissing the instant complaints for lack of
merit.
No costs.
SO ORDERED.8
Respondents filed a Motion for Reconsideration, which the
DARAB, however, denied for lack of merit. 9 Thus,
respondents sought recourse from the CA.
On May 31, 2007, the CA, invoking Section 1 (1.6), Rule II
of the 2003 DARAB Rules of Procedure,10 held that the
DARAB has the exclusive original jurisdiction to determine
and adjudicate cases involving correction, partition, and
cancellation of Emancipation Patents and CLOAs which are
registered with the Land Registration Authority (LRA), as in
this case. The CA ratiocinated that other than the registration
of the assailed CLOAs, the RD already issued Original
Certificate of Title No. OCL-474 in favor of respondents.
Moreover, the CA relied on the PARADs finding that
respondents were deprived of due process when no notice of
coverage was ever furnished and no just compensation was
paid to them. The CA disposed of the case in this wise:
WHEREFORE, premises considered, the petition is
GRANTED. The assailed Decision dated May 3, 2005 and
the Resolution dated October 10, 2006 are hereby
REVERSED and SET ASIDE. The Joint Decision of the
Provincial Adjudicator dated December 28, 2000 is hereby
REINSTATED with MODIFICATION as follows:
"WHEREFORE, premises considered, judgment is hereby
rendered:

Both parties filed their respective

Reconsideration. The CA held, to wit:

Motions

for

Finding petitioners arguments meritorious, We PARTIALLY

AMEND our previous decision in this case by ordering the
Register of Deeds of Siniloan, Laguna to cancel OCT No.
OCL-475 and OCT No. OCL-395 and to issue new
certificates of title deducting the area of 47,187.50 square
meters claimed by petitioner Dietmar L. Romualdez and
55,453.50 square meters claimed by Spouses Daniel and Ana
Romualdez and Jacqueline [L.] Romualdez, respectively.
WHEREFORE, premises considered, private respondents
Motion for Reconsideration is hereby DENIED. Petitioners
Motion for Partial Reconsideration is hereby GRANTED.
The Decision dated May 31, 2007 is hereby PARTIALLY
AMENDED to read as follows:
"WHEREFORE, premises considered, judgment is hereby
rendered:
1. Ordering the cancellation of the Certificate of
Land Ownership Award (CLOA) NOS. 00155653,
00155652 and 00119810 issued to herein private
respondents.
2. Ordering the Register of Deeds of Siniloan,
Laguna to cause the cancellation of OCT No. OCL474 to herein named private respondents.
3. Ordering the Register of Deeds of Siniloan,
Laguna to cause the cancellation of OCT No. OCL475 and to issue a new one deducting the area of
47,187.50 square meters claimed by petitioner
Dietmar L. Romualdez.
4. Ordering the Register of Deeds of Siniloan,
Laguna to cause the cancellation of OCT No. OCL395 and to issue a new one deducting the area of
55,453.50 square meters claimed by petitioners
Spouses Daniel and Ana Romualdez and Jacqueline
L. Romualdez.
SO ORDERED."

1. Ordering the cancellation of the Certificate of

Land Ownership Award (CLOA) NOS. 00155653,
00155652 and 00119810 issued to herein private
respondents [petitioners in the instant case];
2. Ordering the Register of Deeds of Siniloan,
Laguna to cause the cancellation of OCT No. OCL474 to herein named private respondents
[petitioners in the instant case].
SO ORDERED."
SO ORDERED.11

SO ORDERED.12
Hence, this Petition, assigning the following as errors:
I.
The Honorable Court of Appeals has no basis in
REVERSING the DECISION of the Department of
Agrarian Reform Adjudication Board in upholding
the validity of Certificate of Land Ownership
Award Nos. 00155653, 00155652 and 00119810
issued to herein petitioners; [and]

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II.
The Honorable Court of Appeals erred in
undermining [the] ISSUE OF JURISDICTION as
this is cognizable by the Regional Director and not
by the PARAD and/or the DARAB.13
Petitioners Cesar Caguin, Cleofas Vitor, Teresita Vitor, Jose
Levitico Dalay, Marcelo Dalay, Esperanza Mario, Celestina
Cosico, Ma. Ruth Pacurib, and Raquel San Juan, through the
Legal Assistance Division of the DAR, claim that findings of
fact of the DARAB should have been respected by the CA;
that the CLOAs covering the subject properties were
registered in 1994 and 1995 but respondents only assailed
the validity of the same in 2000; and that the said CLOAs
are already incontestable and indefeasible. Moreover,
petitioners highlight the fact that the parties in this case are
not partners to any tenancy venture. Invoking this Courts
ruling in Heirs of Julian dela Cruz v. Heirs of Alberto
Cruz,14 petitioners submit that the DAR Secretary has
jurisdiction in this case, not the DARAB.15
On the other hand, respondents prefatorily manifest that out
of the 44 respondents before the CA, only 9 signed the
petition filed before this Court, and that petitioners counsel
failed to indicate the full names of petitioners in the petition.
Respondents argue that the errors assigned by petitioners are
matters not pertaining to questions of law but rather to the
CAs factual findings. Respondents rely on the CAs findings
that their constitutional right to due process was violated
because no notice of coverage was sent to them and that they
were deprived of payment of just compensation. Moreover,
respondents claim that they are not barred by prescription
and petitioners cannot raise this issue for the first time on
appeal; that they have been paying the real property taxes
and are actually in possession of the subject properties; and
that documents, which petitioners failed to refute, show that
the said properties are private lands owned by respondents
and their predecessors-in-interest. Respondents stress that
the action initially filed before the PARAD was not a protest
considered as an Agrarian Law Implementation (ALI) case,
but for quieting and cancellation of title, reconveyance, and
damages; that the 2003 DARAB Rules of Procedure clearly
states that the DARAB has jurisdiction to cancel CLOAs
registered with the LRA; and that the assailed CLOAs were
already registered with the RD of Laguna.16
The petition is impressed with merit.
Verily, our ruling in Heirs of Julian dela Cruz v. Heirs of
Alberto Cruz17 is instructive:
The Court agrees with the petitioners contention that, under
Section 2(f), Rule II of the DARAB Rules of Procedure, the
DARAB has jurisdiction over cases involving the issuance,
correction and cancellation of CLOAs which were registered
with the LRA. However, for the DARAB to have
jurisdiction in such cases, they must relate to an agrarian

dispute between landowner and tenants to whom CLOAs

have been issued by the DAR Secretary. The cases involving
the issuance, correction and cancellation of the CLOAs by
the DAR in the administrative implementation of agrarian
reform laws, rules and regulations to parties who are not
agricultural tenants or lessees are within the jurisdiction of
the DAR and not of the DARAB.18
It is established and uncontroverted that the parties herein do
not have any tenancy relationship. In one case, this Court
held that even if the parties therein did not have tenancy
relations, the DARAB still has jurisdiction. However, the
said case must be viewed with particularity because, based
on the material allegations of the complaint therein, the
incident involved the implementation of the CARP, as it was
founded on the question of who was the actual tenant and
eventual beneficiary of the subject land. Hence, this Court
held therein that jurisdiction should remain with the
DARAB and not with the regular courts.19
However, this case is different. Respondents complaint was
bereft of any allegation of tenancy and/or any matter that
would place it within the ambit of DARABs jurisdiction.
While it is true that the PARAD and the DARAB lack
jurisdiction in this case due to the absence of any tenancy
relations between the parties, lingering essential issues are
yet to be resolved as to the alleged lack of notice of coverage
to respondents as landowners and their deprivation of just
compensation. Let it be stressed that while these issues were
discussed by the PARAD in his decision, the latter was
precisely bereft of any jurisdiction to rule particularly in the
absence of any notice of coverage for being an ALI
case.20 Let it also be stressed that these issues were not met
head-on by petitioners. At this juncture, the issues should not
be left hanging at the expense and to the prejudice of
respondents.
However, this Court refuses to rule on the validity of the
CARP coverage of the subject properties and the issuance of
the assailed CLOAs. The doctrine of primary jurisdiction
precludes the courts from resolving a controversy over
which jurisdiction was initially lodged with an
administrative body of special competence. 21 The doctrine of
primary jurisdiction does not allow a court to arrogate unto
itself authority to resolve a controversy, the jurisdiction over
which is initially lodged with an administrative body of
special competence.22 The Office of the DAR Secretary is in
a better position to resolve the particular issue of nonissuance of a notice of coverage an ALI case being
primarily the agency possessing the necessary expertise on
the matter.23 The power to determine such issue lies with the
DAR, not with this Court.
A final note.
It must be borne in mind that this Court is not merely a
Court of law but of equity as well.1avvphil Justice dictates

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that the DAR Secretary must determine with deliberate

dispatch whether indeed no notice of coverage was furnished
to respondents and payment of just compensation was
unduly withheld from them despite the fact that the assailed
CLOAs were already registered, on the premise that
respondents were unaware of the CARP coverage of their
properties; hence, their right to protest the same under the
law was defeated. Respondents right to due process must be
equally respected. Apropos is our ruling in Heir of Nicolas
Jugalbot v. Court of Appeals:24
G.R. No. 174674
[I]t may not be amiss to stress that laws which have for their
object the preservation and maintenance of social justice are
not only meant to favor the poor and underprivileged. They
apply with equal force to those who, notwithstanding their
more comfortable position in life, are equally deserving of
protection from the courts. Social justice is not a license to
trample on the rights of the rich in the guise of defending the
poor, where no act of injustice or abuse is being committed
against them.
As the court of last resort, our bounden duty to protect the
less privileged should not be carried out to such an extent as
to deny justice to landowners whenever truth and justice
happen to be on their side. For in the eyes of the Constitution
and the statutes, EQUAL JUSTICE UNDER THE LAW
remains the bedrock principle by which our Republic abides.

October 20, 2010

NESTLE PHILIPPINES, INC. and NESTLE WATERS

PHILIPPINES, INC. (formerly HIDDEN SPRINGS &
PERRIER,
INC.), Petitioners,
vs.
UNIWIDE SALES, INC., UNIWIDE HOLDINGS, INC.,
NAIC
RESOURCES
AND
DEVELOPMENT
CORPORATION, UNIWIDE SALES REALTY AND
RESOURCES CLUB, INC., FIRST PARAGON
CORPORATION,
and
UNIWIDE
SALES
WAREHOUSE CLUB, INC., Respondents.
RESOLUTION
CARPIO, J.:

WHEREFORE, the instant petition is GRANTED. The

assailed Decision dated May 31, 2007 and Amended
Decision (Partial) dated September 25, 2007 of the Court of
Appeals
in
CA-G.R.
SP
No.
97768
are
herebyREVERSED and SET ASIDE. The case is
DISMISSED for lack of jurisdiction of the Department of
Agrarian Reform Adjudication Board. This decision is
without prejudice to the rights of respondents Johanna L.
Romualdez, Dietmar L. Romualdez, Jacqueline L.
Romualdez, and Spouses Daniel and Ana Romualdez to seek
recourse from the Office of the Department of Agrarian
Reform Secretary. No costs.
SO ORDERED.

The Case
This is a petition for review1 of the 10 January 2006
Decision2 and the 13 September 2006 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 82184. The 10 January
2006 Decision denied for lack of merit the petition for
review filed by petitioners. The 13 September 2006
Resolution denied petitioners' motion for reconsideration
and referred to the Securities and Exchange Commission
petitioners' supplemental motion for reconsideration.
The Facts
The petitioners in this case are Nestle Philippines, Inc. and
Nestle Waters Philippines, Inc., formerly Hidden Springs &
Perrier Inc. The respondents are Uniwide Sales, Inc.,
Uniwide Holdings, Inc., Naic Resources and Development
Corporation, Uniwide Sales Realty and Resources Club,
Inc., First Paragon Corporation, and Uniwide Sales
Warehouse Club, Inc.
On 25 June 1999, respondents filed in the Securities and
Exchange Commission (SEC) a petition for declaration of
suspension of payment, formation and appointment of
rehabilitation receiver, and approval of rehabilitation plan.

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The petition was docketed as SEC Case No. 06-996340.4 The SEC approved the petition on 29 June 1999.

the executive jurisdiction can only be set aside on proof of

grave abuse of discretion, fraud, or error of law.

On 18 October 1999, the newly appointed Interim

Receivership Committee filed a rehabilitation plan in the
SEC. The plan was anchored on return to core business of
retailing; debt reduction via cash settlement and dacion en
pago; loan restructuring; waiver of penalties and charges;
freezing of interest payments; and restructuring of credit of
suppliers, contractors, and private lenders.

WHEREFORE, the petition for review is DENIED for lack

of merit.

On 14 February 2000, the Interim Receivership Committee

filed in the SEC an Amended Rehabilitation Plan (ARP).
The ARP took into account the planned entry of Casino
Guichard Perrachon, envisioned to infuse P3.57 billion in
fresh capital. On 11 April 2001, the SEC approved the ARP.
On 11 October 2001, the Interim Receivership Committee
filed in the SEC a Second Amendment to the Rehabilitation
Plan (SARP) in view of Casino Guichard Perrachon's
withdrawal. In its Order dated 23 December 2002, the SEC
approved the SARP.
Petitioners, as unsecured creditors of respondents, appealed
to the SEC praying that the 23 December 2002 Order
approving the SARP be set aside and a new one be issued
directing the Interim Receivership Committee, in
consultation with all the unsecured creditors, to improve the
terms and conditions of the SARP.

SO ORDERED.5
Petitioners moved for reconsideration. They also filed a
supplemental motion for reconsideration alleging that they
received a letter on 25 January 2006, from the president of
the Uniwide Sales Group of Companies, informing them of
the decision to transfer, by way of full concession, the
operation of respondents' supermarkets to Suy Sing
Commercial Corporation starting 1 March 2006.
In its questioned 13 September 2006 Resolution, the Court
of Appeals denied for lack of merit petitioners' motion for
reconsideration and referred to the SEC petitioners'
supplemental motion for reconsideration.
Dissatisfied, petitioners filed in this Court on 3 November
2006 the present petition for review.
The Issue
Before us, petitioners raise the issue of whether the SARP
should be revoked and the rehabilitation proceedings
terminated.1avvphi1

The Ruling of the SEC

The Court's Ruling

In its 13 January 2004 Order, the SEC denied petitioners'

appeal for lack of merit. Petitioners then filed in the Court of
Appeals a petition for review of the 13 January 2004 Order
of the SEC.

The petition lacks merit.

The Ruling of the Court of Appeals

In its assailed 10 January 2006 Decision, the Court of
Appeals denied for lack of merit the petition for review filed
by petitioners, thus:
In reviewing administrative decisions, the findings of fact
made therein must be respected as long as they are supported
by substantial evidence, even if not overwhelming or
preponderant; that it is not for the reviewing court to weigh
the conflicting evidence, determine the credibility of the
witnesses, or otherwise substitute its own judgment for that
of the administrative agency on the sufficiency of the
evidence; that the administrative decision in matters within

Petitioners contend that the transfer of respondents'

supermarket operations to Suy Sing Commercial
Corporation has made the SARP incapable of
implementation. Petitioners point out that since the SARP
may no longer be implemented, the rehabilitation case
should be terminated pursuant to Section 4-26, Rule IV of
the SEC Rules of Procedure on Corporate Recovery.
Petitioners claim that the terms and conditions of the SARP
are unreasonable, biased in favor of respondents, prejudicial
to the interests of petitioners, and incapable of a
determination of feasibility.
Respondents maintain that the SARP is feasible and that the
SEC Hearing Panel did not violate any rule or law in
approving it. Respondents stress that the lack of majority
objection to the SARP bolsters the SEC's findings that the
SARP is feasible. Respondents insist that the terms and

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conditions of the SARP are in accord with the Constitution

and the law.

rehabilitation case as a consequence. The dispositive portion

of the Resolution reads:

The Court takes judicial notice of the fact that from the time
of the filing in this Court of the instant petition, supervening
events have unfolded substantially changing the factual
backdrop of this rehabilitation case.

WHEREFORE, premises considered:

As found by the SEC, several factors prevented the

realization of the desired goals of the SARP, to wit: (1)
unexpected refusal of some creditors to comply with all the
terms of the SARP; (2) unexpected closure of Uniwide
EDSA due to the renovation of EDSA Central Mall; (3)
closure of Uniwide Cabuyao and Uniwide Baclaran; (4) lack
of supplier support for supermarket operations; and (5)
increased expenses.6
On 11 July 2007, the rehabilitation receiver filed in the SEC
a Third Amendment to the Rehabilitation Plan (TARP). But
before the SEC could act on the TARP, the rehabilitation
receiver filed on 29 September 2008 a Revised Third
Amendment to the Rehabilitation Plan (revised TARP).
A majority of the secured creditors strongly opposed the
revised TARP, which focused on the immediate settlement of
all the obligations accruing to the unsecured creditors
through a dacion of part of respondents' Metro Mall
property.7 Since some creditors claimed that the value of the
Metro Mall property had gone down since 1999, the Hearing
Panel issued its 30 July 2009 Order directing the reappraisal
of the Metro Mall property.8
In its 17 September 2009 Order, the Hearing Panel directed
respondents to show cause why the rehabilitation case
should not be terminated considering that the rehabilitation
plan had undergone several revisions. The Hearing Panel
also directed the creditors to manifest whether they still
wanted the rehabilitation proceedings to continue.
Respondents moved for reconsideration of the 30 July 2009
and the 17 September 2009 Orders. The Hearing Panel, in its
6 November 2009 Order, denied the motion for
reconsideration for being a prohibited pleading.
Respondents then filed in the SEC a petition for certiorari
assailing the 30 July 2009, the 17 September 2009, and the 6
November 2009 Orders of the Hearing Panel. The petition
was docketed as SEC En Banc Case No. 12-09-183.
Meanwhile, in its 13 January 2010 Resolution, the Hearing
Panel disapproved the revised TARP and terminated the

1. Petitioners' Motion to Approve Revised Third

Amendment to the Group Rehabilitation Plan
(Revised TARP) is DENIED.
2. The motions to declare petitioners' rehabilitation
plan "not feasible" are GRANTED. Consequently,
the instant rehabilitation case is TERMINATED
and the stay order is lifted and dissolved. This case
is deemed finally disposed of pursuant to Section
5.2 of Republic Act No. 8799.9
On 22 January 2010, respondents filed another petition
appealing the Hearing Panel's 13 January 2010 Resolution.
The petition was docketed as SEC En Banc Case No. 01-10193. In order to preserve the parties' rights during the
pendency of the appeal, the SEC en banc in its Order dated
18 March 2010 directed the parties to observe the status quo
prevailing before the issuance of the 13 January 2010
Resolution of the Hearing Panel.
Meanwhile, on 27 April 2010, the SEC en banc issued an
Order directing the rehabilitation receiver, Atty. Julio C.
Elamparo, to submit a comprehensive report on the progress
of the implementation of the SARP.
Finally, in its 30 September 2010 Order, the SEC
consolidated SEC En Banc Case No. 01-10-193 with
SEC En Banc Case No. 12-09-183, the parties being
identical and the issues in both petitions being in reference
to the same rehabilitation case.
Considering the pendency of SEC En Banc Case No. 12-09183 and SEC En Banc Case No. 01-10-193, recently filed in
the SEC, involving the very same rehabilitation case subject
of this petition, the present petition has been rendered
premature.
SEC En Banc Case No. 12-09-183 deals with the Order of
the Hearing Panel directing respondents to show cause why
the rehabilitation case should not be terminated and the
creditors to manifest whether they still want the
rehabilitation proceedings to continue. On the other hand,
SEC En Banc Case No. 01-10-193 is an appeal of the
Hearing Panel's Resolution disapproving the revised TARP
and terminating the rehabilitation proceedings.

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In light of supervening events that have emerged from the

time the SEC approved the SARP on 23 December 2002 and
from the time the present petition was filed on 3 November
2006, any determination by this Court as to whether the
SARP should be revoked and the rehabilitation proceedings
terminated, would be premature.
Undeniably, supervening events have substantially changed
the factual backdrop of this case. The Court thus defers to
the competence and expertise of the SEC to determine
whether, given the supervening events in this case, the SARP
is no longer capable of implementation and whether the
rehabilitation case should be terminated as a consequence.
Under the doctrine of primary administrative jurisdiction,
courts will not determine a controversy where the issues for
resolution demand the exercise of sound administrative
discretion requiring the special knowledge, experience, and
services of the administrative tribunal to determine technical
and intricate matters of fact.10
In other words, if a case is such that its determination
requires the expertise, specialized training, and knowledge
of an administrative body, relief must first be obtained in an
administrative proceeding before resort to the court is had
even if the matter may well be within the latter's proper
jurisdiction.11
The objective of the doctrine of primary jurisdiction is to
guide the court in determining whether it should refrain from
exercising its jurisdiction until after an administrative
agency has determined some question or some aspect of
some question arising in the proceeding before the court.12
It is not for this Court to intrude, at this stage of the
rehabilitation proceedings, into the primary administrative
jurisdiction of the SEC on a matter requiring its technical
expertise. Pending a decision of the SEC on SEC En
Banc Case No. 12-09-183 and SEC En Banc Case No. 0110-193, which both seek to resolve the issue of whether the
rehabilitation proceedings in this case should be terminated,
we are constrained to dismiss this petition for prematurity.
WHEREFORE, we DISMISS the instant petition for
having been rendered premature pending a decision of the
Securities and Exchange Commission (SEC) in SEC En
Banc Case No. 12-09-183 and SEC En Banc Case No. 0110-193.
No pronouncement as to costs.

SO ORDERED.

G.R. No. 138381

April 16, 2002

GOVERNMENT
SERVICE
SYSTEM, petitioner,
vs.
COMMISSION ON AUDIT, respondent.

INSURANCE

x---------------------------------------------------------x
G.R. No. 141625 April 16, 2002
GOVERNMENT
SERVICE
INSURANCE
SYSTEM, petitioner,
vs.
ALFREDO D. PINEDA, DANIEL GO, FELINO
BULANDUS, FELICIMO J. FERRARIS, JR., BEN
HUR PORLUCAS, LUIS HIPONIA, MARIA LUISA A.
FERNANDEZ, VICTORINA JOVEN, CORAZON S.
ALIWANAG, SILVER L. MARTINES, SR., RENATO
PEREZ, LOLITA CAYLAN, DOUGLAS VALLEJO and
LETICIA ALMAZAN, on their own behalf and on behalf
of all GSIS retirees with all of whom they share a
common and general interest, respondents.
YNARES-SANTIAGO, J.:
At the core of these two consolidated petitions is the
determination of whether the Commission on Audit (COA)
properly disallowed on post-audit, certain allowances and/or
fringe benefits granted to employees of the Government
Service Insurance System (GSIS), after the effectivity of
Republic Act No. 6758, otherwise known as the Salary
Standardization Law on July 1, 1989.
I. G.R. No. 138381
In this special civil action for certiorari under Rule 65 in
relation to Rule 64 of the 1997 Rules of Civil Procedure,
petitioner GSIS seeks the annulment of COA Decision No.
98-337 dated August 25, 1998, which affirmed the Resident
Auditor's disallowance of monetary benefits granted to or
paid by GSIS in behalf of its employees.
After the effectivity of R.A. No. 6758 on July 1, 1989,
petitioner GSIS increased the following benefits of its

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personnel: a) longevity pay; b) children's allowance; c)

housing allowance for its branch and assistant branch
managers; and d) employer's share in the GSIS Provident
Fund from 20% to 45% of basic salary for incumbent
employees as of June 30, 1989.
The GSIS also remitted employer's share to the GSIS
Provident Fund for new employees hired after June 30,
1989, continued the payment of premiums for group
personnel accident insurance and granted loyalty cash award
to its employees in addition to a service cash award.
Upon post-audit and examination, the GSIS Corporate
Auditor disallowed the aforementioned allowances and
benefits, citing Section 12 of R.A. No. 6758 in relation to
sub-paragraphs 5.4 and 5.5 of its implementing rules, DBM
Corporate Compensation Circular No. 10 (CCC No. 10). The
first paragraph of Section 12, R.A. No. 6758 reads:
SEC. 12. Consolidation of Allowances and
Compensation.- All 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 service 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 only as of July 1, 1989, not integrated
into the standardized salary rates shall continue to
be authorized. x x x
Sub-paragraphs 5.4 and 5.5 of CCC No. 10, 1 meanwhile,
supplemented Section 12 above by enumerating the
additional compensation authorized to be continued for
incumbent employees as of July 1, 1989.
According to the Corporate Auditor, R.A. No. 6758
authorized the continued grant of allowances/fringe benefits
not integrated into the standardized salary for incumbents as
of June 30, 1989. However, these non-integrated benefits
may not be increased after effectivity of the statute, without
prior approval of the DBM or Office of the President or in
the absence of legislative authorization in accordance with
CCC No. 10. Explaining this position, the Corporate Auditor
invoked COA Memorandum No. 90-653 dated June 4, 1990,
which states:

x x x While it is true that R.A. 6758 and Corporate

Compensation Circular (CCC) No. 10 are silent
with respect to the increase of allowances/fringe
benefits not integrated into the basic salary and
allowed to be continued only for incumbents as of
June 30, 1989, it would be inconsistent to allow
further increase in said allowances and fringe
benefits after July 1, 1989 since continuance
thereof for incumbents is merely being tolerated
until they vacate their present positions for which
they have been authorized to receive
allowances/fringe benefits.2
The Corporate Auditor also did not allow in audit the
remittance of employer's share to the GSIS Provident Fund
for new-hires because the continuation of said benefit was
only in favor of incumbents, as explicitly stated in the law.
The payment of group insurance premiums covering all
employees was likewise disallowed, for the reason that
under sub-paragraph 5.6 of CCC No. 10,3 all fringe benefits
granted on top of basic salary not otherwise enumerated
under sub-paragraphs 5.4 and 5.5 thereof were already
discontinued effective November 1, 1989. As for the loyalty
cash award and the service cash award, the Corporate
Auditor opined that only one of the two monetary incentives
may be availed of by GSIS personnel.
On February 26, 1993, Mr. Julio Navarrete, Vice-President
of the GSIS Human Resources Group, wrote to respondent
COA appealing, in behalf of GSIS, the afore-stated
disallowances by the Corporate Auditor. Mr. Navarrete
averred that although it may be conceded that the Salary
Standardization Law did not extend the subject benefits to
new-hires after the law's effectivity, the increase thereof
should nonetheless be allowed for incumbents since these
benefits have been enjoyed by said employees even prior to
the passage of said law.4
In the case of Philippine Ports Authority v. Commission on
Audit,5 which involved a similar increase, after the
enactment of R.A. No. 6758, in the representation and
transportation allowance (RATA) of Philippine Ports
Authority (PPA) employees, it was held that:
x x x the date July 1, 1989 does not serve as a cutoff date with respect to the amount of RATA. The
date July 1, 1989 becomes crucial only to determine
that as of said date, the officer was
an incumbent and wasreceiving the RATA, for
purposes of entitling him to its continued
grant. This given date should not be interpreted as

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fixing the maximum amount of RATA to be received

by the official.6
It was further alleged that contrary to the Corporate
Auditor's contention, the GSIS Board of Trustees retained its
power to fix and determine the compensation package for
GSIS employees despite the passage of the Salary
Standardization Law, pursuant to Section 36 of Presidential
Decree No. 1146, as amended by Presidential Decree No.
1981, to wit:
Sec. 36. x x x
The Board of Trustees has the following powers
and functions, among others:
xxx

xxx

xxx

(d) Upon the recommendation of the President and

General Manager, to approve the System's
organizational and administrative structure and
staffing pattern, and "to establish, fix, review, revise
and adjust the appropriate compensation package
for the officers and employees of the System, with
reasonable allowances, incentives, bonuses,
privileges and other benefits as may be necessary
or proper for the effective management, operation
and administration of the System." For the purpose
of this and the preceding subsection, the System
shall be exempt from the rules and requirements of
the Office of the Budget and Management and the
Office of the Compensation and Position
Classification;
xxx

xxx

xxx

Pursuant thereto, the GSIS Board of Trustees may validly

increase and grant the subject benefits, even without
securing the imprimatur of the DBM, Office of the President
or Congress.

Jamoralin.9 Corporate Compensation Circular No. 10 (CCC

No. 10) was declared to be of no legal force or effect due to
its non-publication in the Official Gazette or a newspaper of
general circulation. In view of this development, GSIS
posited that the questioned disallowances no longer had any
leg to stand on and that COA should consequently lift the
disallowances premised on CCC No. 10.
On March 23, 1999, the COA denied the motion for
reconsideration stating:
Although CCC No. 10 has been declared ineffective
due to its non-publication as provided for in Article
2 of the Civil Code of the Philippines, the
disallowances on the increased rates of the
allowances/fringe benefits can still be sustained
because as ruled earlier, the power of the governing
boards of corporations to fix compensation and
allowances of personnel, including the authority to
increase the rates, pursuant to their specific charters
had already been repealed by Sec. 3 of P.D. 1597
and Section 16 of R.A. 6758. The other reasons or
grounds relied upon by the petitioner upon which
the Motion is predicated have already been
judiciously passed upon by this Commission when
it rendered the subject COA Decision No. 98-337.
Accordingly, there being no new, sufficient and
material evidence adduced as would warrant a
reversal or modification of the decision herein
sought to be reconsidered, this Commission denies
with finality the instant motion for reconsideration
for utter lack of merit.10
Hence, this petition, challenging the above decision and
resolution of the COA on the following grounds:

On August 25, 1998, the COA affirmed the disallowances

made by the Corporate Auditor and held that Section 36 of
P.D. No. 1146, as amended, was already repealed by Section
16 of R.A. No. 6758.7 The COA similarly concluded that the
GSIS Board of Trustees may not unilaterally augment or
grant benefits to its personnel, without the necessary
authorization required under CCC No. 10.8

A.)RESPONDENT
COMMITTED
GRAVE
ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION IN
HOLDING THAT THE POWER SPECIFICALLY
GRANTED BY PRESIDENTIAL DECREE NO.
1146, AS AMENDED, TO THE GSIS BOARD OF
TRUSTEES, TO ESTABLISH AND FIX THE
APPROPRIATE COMPENSATION PACKAGE
FOR GSIS OFFICERS AND EMPLOYEES HAS
ALREADY BEEN REPEALED BY REPUBLIC
ACT NO. 6758.

GSIS filed a motion for reconsideration of the COA

decision, invoking the ruling in De Jesus, et al. v. COA and

B.)RESPONDENT
COMMITTED
GRAVE
ABUSE OF DISCRETION AMOUNTING TO

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LACK OR EXCESS OF JURISDICTION IN

DENYING PETITONER'S MOTION FOR
RECONSIDERATION
DESPITE
THE
DECLARATION BY THIS HONORABLE
COURT IN THE CASE OF RODOLFO S. DE
JESUS et al. vs. COMMISSION ON AUDIT and
LEONARDO L. JAMORALIN, THAT CCC NO. 10
- THE MAIN BASIS OF THE QUESTIONED
DISALLOWANCE - IS INVALID AND
INEFFECTIVE FOR LACK OF THE REQUIRED
PUBLICATION.11
II. G.R. No. 141625
This petition for review on certiorari under Rule 45 of the
Rules of Court was precipitated by the factual antecedents of
G.R. No. 138381. While GSIS was appealing the
disallowances made by the Corporate Auditor above, some
of its employees retired and submitted the requisite papers
for the processing of their retirement benefits. Since the
retired employees received allowances and benefits which
had been disallowed by the Corporate Auditor, GSIS
required them to execute deeds of consent that would
authorize GSIS to deduct from their retirement benefits the
previously paid allowances, in case these were finally
adjudged to be improper. Some of the retired employees
agreed to sign the deed, while others did not. Nonetheless,
GSIS went ahead with the deductions.
On April 16, 1998, a number of these retired GSIS
employees12 (hereafter referred to as "retirees") brought Case
No. 001-98 before the GSIS Board of Trustees (hereafter
referred to as "GSIS Board") questioning the legality of the
deductions. They claimed that COA disallowances can not
be deducted from retirement benefits, considering that these
were explicitly exempted from such deductions under the
last paragraph of Section 39, Republic Act No. 8291, which
states:
SEC. 39. Exemption from Tax, Legal Process and
Lien. - x x x
xxx

xxx

xxx

The funds and/or the properties referred to herein as

well as the benefits, sums or monies corresponding
to the benefits under this Act shall be exempt from
attachment, garnishment, execution, levy or other
processes issued by the courts, quasi-judicial
agencies or administrative bodies including
Commission on Audit (COA) disallowances and

from all financial obligations of the members,

including his pecuniary accountability arising from
or caused or occasioned by his exercise or
performance of his official functions or duties, or
incurred relative to or in connection with his
position or work except when his monetary liability,
contractual or otherwise, is in favor of the GSIS.
The GSIS Board subsequently referred the case for hearing
to its Corporate Secretary, Atty. Alicia Albert. Thereafter, the
retirees and GSIS, through its Legal Services Group (LSG),
entered into a stipulation of facts and agreed on a focal issue,
namely: whether the COA disallowances may be legally
deducted from the retirement benefits, on the premise that
the same are monetary liabilities of the retirees in favor of
GSIS under Section 39 above. GSIS also insisted that since
the deductions were anchored on the disallowances made by
the COA, the retirees' remedy was to ventilate the issue
before said Commission and not the GSIS Board.
Meanwhile, the De Jesus case mentioned in G.R. No.
138381 was promulgated, rendering CCC No. 10 legally
ineffective. This prompted the hearing officer to suggest that
the parties enter into an agreement as to what allowances
and benefits are covered by CCC No. 10, so that a partial
decision can be rendered thereon. The retirees thus filed a
motion for partial decision, submitting that there no longer
existed any obstacle to the increase in allowances and
benefits covered by CCC No. 10. These allegedly include: a)
GSIS management's share in the Provident Fund; b) initial
payment of the productivity bonus; c) acceleration
implementation of the new salary schedule effective August
1, 1995; d) increase in clothing allowance, rice allowance,
meal subsidy, children's allowance and longevity pay; e)
loyalty award; f) 1995 mid-year financial assistance; and g)
other allowances as may be suggested by the Vice-President
of the GSIS Human Resources Group.13
On November 25, 1998, GSIS filed an opposition to the
retiree's motion for partial decision,14 asserting that De
Jesus had no bearing on the principal issue which, as agreed
upon, was the interpretation of Section 39 of RA No. 8291.
GSIS also filed on even date, a motion to dismiss, 15 alleging
that the nullity of CCC No. 10 rendered the petition moot
and academic and paved the way for the payment of the
controverted allowances earlier deducted from the retirement
benefits.
Replying to the two pleadings filed by GSIS, the retirees
countered that a motion to dismiss was a prohibited pleading
under Section 14.13, Rule XIV of the GSIS Implementing

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Rules and Regulations.16 Moreover, the retirees maintained

that a motion to dismiss may be filed in proceedings before
the GSIS Board only prior to the filing of an answer which
GSIS had already done. Also, the LSG had previously
agreed to a partial decision based on the De Jesus case; it
could thus no longer take a contradictory stand by opposing
the retiree's motion for partial decision.17

On January 14, 1999, the retirees filed a motion for

summary judgment18 claiming that there were no factual
issues involved and that the question raised in the petition
was purely legal in nature. The matter was directly submitted
to the GSIS Board for its consideration and resolution.

THE COURT OF APPEALS ERRED IN RULING THAT

THE CASE PENDING BEFORE THE SUPREME COURT
IS DIFFERENT FROM THE PRESENT CASE.22

On March 3, 1999, the GSIS Board issued Resolution No.

72,19 dismissing the petition. A motion for reconsideration
filed by the retirees was also denied by the Board in its
Resolution No. 16120 dated May 18, 1999.

During the pendency of these petitions, GSIS Board

Resolution No. 79,23 which authorized the Provident Fund
rate increase for incumbent employees, was approved
retroactively from March 1, 1994 by then President Joseph
Estrada.24 Thus, there no longer appears to be any basis for
disallowing the rate increase in management contribution to
the Provident Fund from 20% to 45% of the basic salary
received by petitioner's incumbent employees. The
presidential approval cured the lack of authorization cited by
respondent COA for disallowing this particular increase in
benefit.

The matter was then elevated to the Court of Appeals, which

rendered a decision on September 30, 1999, disposing as
follows:
IN THE LIGHT OF ALL THE FOREGOING, the
Petition is GRANTED. Resolution No. 72, Annex
"A" of the Petition and Resolution No. 161 Annex
"C" of the Petition are hereby SET ASIDE and
NULLIFIED. The Hearing Officer of the Board of
Trustees of the Respondent is directed to proceed,
with dispatch, with the proceedings of Case No.
001-98, as provided for in the Rules and regulations
implementing Republic Act 8291 (IRR).
SO ORDERED.21
The appellate court held that the motion to dismiss filed by
the LSG before the GSIS Board is a prohibited pleading
under applicable GSIS rules. The GSIS also had jurisdiction
over the retirees' petition, as it pertained to the interpretation
and application of Section 39 of R.A. No. 8291, a law
exclusively administered by the GSIS Board. Contrary to the
LSG's submissions, the Court of Appeals ruled that there
was no identity in subject matter between the retiree's
petition and the appeal from the auditor's disallowances filed
by GSIS with the COA. Thus, the GSIS Board may take
cognizance of the retirees' petition independently from the
COA proceedings.
Hence, this second petition, assigning the following as
errors:

THE COURT OF APPEALS ERRED IN RULING THAT

THE BOARD OF TRUSTEES OF GSIS HAS
JURISDICTION OVER THE CASE.
II

On August 20, 2001, the two petitions were consolidated.

We now proceed to the resolution of the twin petitions.

Petitioner GSIS insists that the GSIS Board retained its
power to increase the subject benefits under Section 36 of
P.D. 1146, as amended (or the Revised GSIS Charter),
despite the passage of R.A. No. 6758, particularly Section 16
thereof. The latter, which is a general law, can not repeal or
take precedence over the former because the Revised GSIS
Charter is a special law that specifically exempts GSIS from
Office of the Compensation and Position Classification
coverage.
We need not delve lengthily into this submission as this was
earlier laid to rest by the Court in Philippine International
Trading Corporation (PITC) v. COA,25 where we held that
"the repeal by Section 16 of RA 6758 of 'all corporate
charters that exempt agencies from the coverage of the
system' was clear and expressed necessarily to achieve the
purposes for which the law was enacted, that is, the
standardization of salaries of all employees in government
owned and/or controlled corporations to achieve 'equal pay
for substantially equal work'."26 As things now stand, GSIS
is already exempt from salary standardization by express
provision of R.A. 829127 a subsequent enactment approved
on May 30, 1997 which amended the Revised GSIS Charter.

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But since GSIS was still governed by the latter at the time
the increase in benefits were disallowed in audit, GSIS was
then yet covered by the Salary Standardization Law, thereby
making our ruling in PITC presently relevant and applicable.
We now come to the legal propriety of the COA
disallowances.
For purposes of clarity, a distinction must initially be made
between those allowances which are deemed consolidated
into the standardized salary and those which are not under
the terms of R.A. No. 6758. As correctly pointed out by
petitioner GSIS, the housing allowance, longevity pay and
children's allowance are non-integratedbenefits, expressly
made so by sub-paragraphs 5.4 and 5.5 of CCC No. 10 in
relation to the last sentence of Section 12 (par. 1), R.A. No.
6758. On the other hand, the payment of group personnel
accident insurance premiums, loyalty cash award and
service cash award are not excluded from the standardized
salary by the same provisions of CCC No. 10 or R.A. No.
6758.
These
latter
allowances
are
thus
considered integrated into the basic salary and are treated
differently under the same law.
A. NON-INTEGRATED BENEFITS AND ALLOWANCES
a. Longevity Pay and Children's Allowance
As regards the increase in longevity pay and children's
allowance, we find applicable our pronouncement
inPhilippine Ports Authority (PPA) v. COA.28 This case
involved an adjustment in the representation and
transportation allowance (RATA) of incumbent PPA
employees after the effectivity of R.A. No. 6758 on July 1,
1989. The RATA therein is similar to the longevity pay and
children's allowance subject of the instant petition, in the
sense that: a) it is also a non-integrated allowance authorized
to be continued for incumbents under Section 12, R.A. No.
6758; and b) the rate thereof did not consist of a definite
amount but was subject to certain factors and/or stipulations
that were nonetheless fixed before R.A. 6758 took effect.
In the PPA case, the adjustment was brought about by a
corresponding increase in the employees' basic salary upon
which the 40% RATA was based. Respondent Commission
disallowed the payment of RATA differentials arguing, as in
this petition, that the RATA should be fixed at the prevailing
rate prior to July 1, 1989, regardless of the increase in basic
salary. It was postulated therein that consistent with the
second sentence of said Section 12 (par. 1), the RATA should
no longer be based on 40% of basic standardized salary but

on the highest amount of RATA received by the incumbent

as of July 1, 1989.
We rejected respondent COA's interpretation of Section 12
and held that the date July 1, 1989 should not be construed
as a cut-off date for setting the amount of allowances
authorized to be continued under said provision. The date
July 1, 1989 is important only for determining whether an
employee is an incumbent and receiving the allowance prior
to the law's effectivity in order to ascertain if such employee
is qualified to its continued grant. It is not, however, to be
interpreted as fixing the maximum amount of allowance that
an incumbent employee is authorized to receive, but is only
a qualifying date imposed by the statute.
Accordingly, the specific amount of longevity pay and
children's allowance being received by an incumbent GSIS
employee as of July 1, 1989 is not to be considered as the
highest amount authorized under the law.
It is thus evident that in adjusting the amount of allowances
mentioned above, petitioner GSIS was merely complying
with the policy of non-diminution of pay and benefits
enunciated in R.A. No. 6758.29 This policy does not only
pertain specifically to the amount being received by the
incumbent as of July 1, 1989, but also to the terms and
conditions attached to these benefits prior to the passage of
the statute. Relative to this, it should be noted that
respondent COA did not dispute the fact that these benefits,
including the terms and conditions thereof, are part of a
compensation package granted by the GSIS Board to
incumbents even before R.A. 6758 took effect. In turn, this
compensation package was incorporated in the 1978 GSIS
Revised Compensation System approved by the President,
upon recommendation of the Department of Budget and
Management (DBM).
Thus, to peg the amount of these non-integrated allowances
at the figure being received by the incumbent as of July 1,
1989 would vary the terms of the benefits to which the
incumbents are entitled. This could not have been the
intendment of the statute, because such interpretation would
effectively impair the incumbents' rights to these allowances,
which have already accrued prior to July 1, 1989. In other
words, before R.A. No. 6758 was enacted, incumbent GSIS
employees had a fixed right to these allowances under the
terms and conditions then obtaining.30They could not
therefore be excluded from its enjoyment under the same
terms and conditions without violating basic precepts of
fairness and due process.

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b. Housing Allowance
In contrast to the two preceding non-integrated benefits, it
appears that the housing allowance given to petitioner's
incumbent branch and assistant branch managers before the
passage of R.A. No. 6758 consisted of a fixed amount of
P500.00 and P300.00 respectively. Said amounts were
subsequently increased to P2,000.00 and P3,000.00 by virtue
of GSIS Board Resolution No. 29431 dated July 26, 1991.
As stated earlier, the power of the GSIS Board to "establish,
fix, review, revise and adjust" the allowances, privileges and
other benefits of its employees under Section 36 of the
Revised GSIS Charter has been repealed by R.A. No.
6758.32 As a consequence, the GSIS Board may no longer
grant any increase in housing allowance on its own volition
after June 30, 1989.
Further, unlike the two preceding non-integrated benefits, it
cannot be said that the affected branch and assistant branch
managers acquired a vested right to any amount of housing
allowance in excess of that granted to them before the
passage of R.A. No. 6758. They could not have been entitled
to any amount other than that which was already determined
before the law took effect, because the terms of this
allowance did not admit of any adjustment. Otherwise
stated, since the amount of said housing allowance was
fixed, the disallowance by the COA of increases therein
would not result in any diminution of benefits for these
incumbent managers. Neither can the GSIS Board
unilaterally grant said increases by board resolution because
it no longer had any power to do so when it issued
Resolution No. 294.
It appears that respondent COA did not totally disallow the
increase in housing allowance, but merely approved a lesser
amount. Respondent COA allowed a 100% increase of
P1,000.00 and P600.00 respectively, in accordance with the
amount authorized by the DBM.33 In fact, the DBM
permitted the increase in express recognition of the fact that
this has been the practice in GSIS before the advent of R.A.
No. 6758. Consequently, it is only to the extent of the
approved amount that the housing allowance should be
allowed in audit.
B. INTEGRATED BENEFITS AND ALLOWANCES
a. Group Personnel Accident Insurance Premiums
As stated earlier, the payment of premiums for group
personnel accident insurance in favor of incumbent GSIS

employees was not listed as an exception to the standardized

salary under Section 12, R.A. No. 6758 and sub-paragraphs
5.4 and 5.5 of CCC No. 10. As such, it is considered as a
fringe benefit granted on top of basic salary which,
according to sub-paragraph 5.6 of CCC No. 10, must be
discontinued as of November 1, 1989.
However, as pointed out by petitioner GSIS, CCC No. 10
was declared to be of no legal force and effect in De Jesus v.
COA.34 It can not thus be utilized as a justification for
depriving incumbent employees of integrated benefits which
they were receiving prior to R.A. No. 6758. As held in De
Jesus:
x x x 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 and 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 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 a
newspaper of general circulation in the Philippinesto the end that they may 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.35
Conformably, since the disallowance of the premium
payments was founded upon CCC No. 10, the consequent
outcome of the latter's nullification is to remove any obstacle
to the aforesaid benefit.
The subsequent publication of CCC No. 10 in the Official
Gazette on March 1, 1999,36 neither cured the defect nor
retroact to the time that the aforesaid items were disallowed
in audit. Again, in PITC v. COA,37 we ruled that from the
time the COA disallowed the benefit up to the filing of the
instant petition, CCC No. 10 remained in legal limbo due to
its lack of publication. And because publication is
a condition precedent to the effectivity of CCC No. 10, it
must first be complied with before affecting individual
rights; otherwise, "such omission would offend due process

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insofar as it would deny the public, knowledge of the laws

that are supposed to govern it."38
b. Loyalty and Service Cash Award
We have carefully examined the records of the case and find
that the disallowance of the simultaneous grant of these two
integrated benefits was not so much founded on CCC No.
10, but upon a ruling made by the Civil Service Commission
(CSC). Notably, with respect to the loyalty and service cash
award, respondent COA held:
As regards the payment of loyalty cash award under
Sec. 7 (e), Rule X, of the CSC Omnibus rules
Implementing Book V of E.O. No. 292 and service
cash award, this Commission holds that only one
can be availed of by GSIS employees in the light of
the clear ruling of the Civil Service Commission
embodied in a letter dated May 12, 1993 that since
both benefits have the same rationale, which is to
reward long and dedicated service, "availment of
the award can be made only under either system,
whichever is more advantageous to the
employees."39
The foregoing conclusion was apparently based on the
position taken by Corporate Auditor Fe R. Munoz, who
expounded thereon in a second indorsement 40 dated
December 14, 1993 as follows:
Service Cash Award is an incentive granted
exclusively to any officer or employee of the GSIS
who has rendered at least fifteen (15) years
continuous and dedicated service to the GSIS. It
entitles them to receive amounts ranging from
P500.00 to P15,000.00 according to the number of
years of service, pursuant to the provisions of the
Collective Bargaining Agreement (CBA), which
payments are deducted by this Office from payment
of Loyalty (Cash) Award. On the other hand, this
should not be confused with the amount of Loyalty
(Cash) Award in graduated amounts of P1,200.00,
P1,300.00, P1,400.00 and P1,500.00 for every year
of service of GSIS executives and employees who
have completed at least ten (10) years of continuous
service as authorized under Board Resolution No.
333 dated October 29, 1992 (Annex 7), using as
legal basis Section 7 (e), Rule X of the Omnibus
Civil Service Law and Rules, Implementing Book
V of Executive Order No. 292, providing for the
cash bonus of not less than One Hundred Pesos

(P100.00) per year of service, chargeable against

Agency's savings. It seems that the foregoing
provision allows for a minimum but not for a
maximum amount to be given, thereby giving the
agencies enough flexibility to fix their own
maximum amounts depending on the agency's
savings.
It is worthy to note in this connection that when the
Civil Service Commission issued Memorandum
Circular No. 42, series 1992, amending Section 7
(e), Rule X of the Omnibus Civil Service Law and
Rules, providing that the amount of cash bonus to
be given should not be more than P100.00 per year
of service, the GSIS returned to the old
computation as authorized under Board Resolutions
No. 192 and 187 dated May 16, 1989 and May 29,
1992 respectively (Annexes 8 and 9). Hence, the
matter was referred to the Civil Service
Commission for clarification. The Commission
ruled in a letter dated May 12, 1993 (Annex 10)
addressed to PGM Cesar N. Sarino, that the
availment of the award can be made only under
either system, whichever is more advantageous to
the employees.
Petitioner GSIS did not squarely address the above finding
of respondent COA or the Corporate Auditor. Instead, it
based its arguments on the general assumption that all the
benefits and allowances subject of this petition were
disallowed on the basis of Section 12, R.A. No. 6758 and its
implementing rules. This is beside the point, however, as it
can readily be seen that respondent COA's ruling on the
loyalty and service cash award is actually based on a
purported CSC declaration relative thereto. As a result, there
has been no real joinder of issues as far as these benefits are
concerned.
Coming now to G.R. No. 141625, the Court of Appeals did
not commit any reversible error when it held that the petition
filed before the GSIS Board questioning the legality of the
deductions could proceed independently from the appeal
brought by petitioner GSIS from the COA disallowances. No
error could be attributed to the appellate court's finding that
there was no identity of subject matter or issue between the
COA proceedings and the retirees' claim before the GSIS
Board.
However, considering that it has already been resolved in
G.R. No. 138381, we no longer find it necessary to discuss
whether GSIS can deduct the COA disallowances from the

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respondents/retirees' retirement benefits. Having settled G.

R. No. 138381, it is now incumbent upon petitioner GSIS to
reimburse the proper amounts to respondents/retirees.
Necessarily, the amount of said refund should be in accord
with our ruling in G.R. No. 138381.
WHEREFORE, in view of the foregoing, G.R. No. 138381
is PARTLY GRANTED. The disallowance of the adjustment
in longevity pay and children's allowance and the payment
of group personnel accident insurance premiums in favor of
incumbent GSIS employees is SET ASIDE. The
disallowance of the increase in housing allowance and the
simultaneous grant of loyalty and service cash award are
AFFIRMED. Petitioner GSIS is further ordered to REFUND
the amounts deducted from the retirement benefits in G.R.
No. 141625, corresponding to the amount of benefits
allowed in G.R. No. 138381.
SO ORDERED.

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G.R. No. 180388

January 18, 2011

GREGORIO R. VIGILAR, SECRETARY OF THE

DEPARTMENT
OF
PUBLIC
WORKS
AND
HIGHWAYS (DPWH), DPWH UNDERSECRETARIES
TEODORO E. ENCARNACION AND EDMUNDO E.
ENCARNACION AND EDMUNDO V. MIR, DPWH
ASSISTANT SECRETARY JOEL L. ALTEA, DPWH
REGIONAL DIRECTOR VICENTE B. LOPEZ, DPWH
DISTRICT ENGINEER ANGELITO M. TWAO,
FELIX A. DESIERTO OF THE TECHNICAL
WORKING GROUP VALIDATION AND AUDITING
TEAM, AND LEONARDO ALVARO, ROMEO N.
SUPAN, VICTORINO C. SANTOS OF THE DPWH
PAMPANGA
2ND
ENGINEERING
DISTRICT, Petitioners,
vs.
ARNULFO D. AQUINO, Respondent.
DECISION
SERENO, J.:
Before the Court is a Petition for Review on
Certiorari1 under Rule 45 of the Rules of Court, assailing the
Decision2 of the Court of Appeals in C.A.-G.R. CV No.
82268, dated 25 September 2006.

Respondent Aquino, however, claimed that PhP1,262,696.20

was still due him, but petitioners refused to pay the amount.
He thus filed a Complaint3 for the collection of sum of
money with damages before the Regional Trial Court of
Guagua, Pampanga. The complaint was docketed as Civil
Case No. 3137.
Petitioners, for their part, set up the defense 4 that the
Complaint was a suit against the state; that respondent failed
to exhaust administrative remedies; and that the "Contract of
Agreement" covering the project was void for violating
Presidential Decree No. 1445, absent the proper
appropriation and the Certificate of Availability of Funds.5
On 28 November 2003, the lower court ruled in favor of
respondent, to wit:
WHEREFORE, premises
considered,
defendant
Department of Public Works and Highways is hereby
ordered to pay the plaintiff Arnulfo D. Aquino the following:
1.
PhP1,873,790.69,
Philippine
Currency,
representing actual amount for the completion of
the project done by the plaintiff;
2. PhP50,000.00 as attorneys fee and
3. Cost of this suit.

The antecedent facts are as follows:

SO ORDERED. 6
On 19 June 1992, petitioner Angelito M. Twao, then
Officer-in-Charge (OIC)-District Engineer of the
Department of Public Works and Highways (DPWH) 2nd
Engineering District of Pampanga sent an Invitation to Bid
to respondent Arnulfo D. Aquino, the owner of A.D. Aquino
Construction and Supplies. The bidding was for the
construction of a dike by bulldozing a part of the Porac
River at Barangay Ascomo-Pulungmasle, Guagua,
Pampanga.
Subsequently, on 7 July 1992, the project was awarded to
respondent, and a "Contract of Agreement" was thereafter
executed between him and concerned petitioners for the
amount of PhP1,873,790.69, to cover the project cost.
By 9 July 1992, the project was duly completed by
respondent, who was then issued a Certificate of Project
Completion dated 16 July 1992. The certificate was signed
by Romeo M. Yumul, the Project Engineer; as well as
petitioner Romeo N. Supan, Chief of the Construction
Section, and by petitioner Twao.

It is to be noted that respondent was only asking for

PhP1,262,696.20; the award in paragraph 1 above, however,
conforms to the entire contract amount.
On appeal, the Court of Appeals reversed and set aside the
Decision of the lower court and disposed as follows:
WHEREFORE, premises considered, the appeal is
GRANTED. The "CONTRACT AGREEMENT" entered
into between the plaintiff-appellees construction company,
which he represented, and the government, through the
Department of Public Works and Highway (DPWH)
Pampanga 2nd Engineering District, is declared null and
void ab initio.
The assailed decision of the court a quo is hereby
REVERSED AND SET ASIDE.
In line with the pronouncement in Department of Health
vs. C.V. Canchela & Associates, Architects, 7 the

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Commission on Audit (COA) is hereby ordered to determine

and ascertain with dispatch, on a quantum meruit basis, the
total obligation due to the plaintiff-appellee for his
undertaking in implementing the subject contract of public
works, and to allow payment thereof, subject to COA Rules
and Regulations, upon the completion of the said
determination.
No pronouncement as to costs.
SO ORDERED.8
Dissatisfied with the Decision of the Court of Appeals,
petitioners are now before this Court, seeking a reversal of
the appellate courts Decision and a dismissal of the
Complaint in Civil Case No. G-3137. The Petition raises the
following issues:
1. WHETHER OR NOT THE COURT OF APPEALS
ERRED IN HOLDING THAT THE DOCTRINE OF NONSUABILITY OF THE STATE HAS NO APPLICATION IN
THIS CASE.
2. WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NOT DISMISSING THE COMPLAINT FOR
FAILURE OF RESPONDENT TO EXHAUST ALL
ADMINISTRATIVE REMEDIES.
3. WHETHER OR NOT THE COURT OF APPEALS
ERRED IN ORDERING THE COA TO ALLOW
PAYMENT TO RESPONDENT ON A QUANTUM
MERUIT BASIS DESPITE THE LATTERS FAILURE TO
COMPLY
WITH
THE
REQUIREMENTS
OF
PRESIDENTIAL DECREE NO. 1445.
After a judicious review of the case, the Court finds the
Petition to be without merit.
Firstly, petitioners claim that the Complaint filed by
respondent before the Regional Trial Court was done
without exhausting administrative remedies. Petitioners aver
that respondent should have first filed a claim before the
Commission on Audit (COA) before going to the courts.
However, it has been established that the doctrine of
exhaustion of administrative remedies and the doctrine of
primary jurisdiction are not ironclad rules. In Republic of the
Philippines v. Lacap,9 this Court enumerated the numerous
exceptions to these rules, namely: (a) where there is estoppel
on the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting
to lack of jurisdiction; (c) where there is unreasonable delay

or official inaction that will irretrievably prejudice the

complainant; (d) where the amount involved is relatively so
small as to make the rule impractical and oppressive; (e)
where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; (f)
where judicial intervention is urgent; (g) where the
application of the doctrine may cause great and irreparable
damage; (h) where the controverted acts violate due process;
(i) where the issue of non-exhaustion of administrative
remedies has been rendered moot; (j) where there is no other
plain, speedy and adequate remedy; (k) where strong public
interest is involved; and (l) in quo warranto proceedings. In
the present case, conditions (c) and (e) are present.
The government project contracted out to respondent was
completed almost two decades ago. To delay the proceedings
by remanding the case to the relevant government office or
agency will definitely prejudice respondent. More
importantly, the issues in the present case involve the
validity and the enforceability of the "Contract of
Agreement" entered into by the parties. These are questions
purely of law and clearly beyond the expertise of the
Commission on Audit or the DPWH. In Lacap, this Court
said:
... It does not involve an examination of the probative value
of the evidence presented by the parties. There is a question
of law when the doubt or difference arises as to what the law
is on a certain state of facts, and not as to the truth or the
falsehood of alleged facts. Said question at best could be
resolved only tentatively by the administrative authorities.
The final decision on the matter rests not with them but with
the courts of justice. Exhaustion of administrative remedies
does not apply, because nothing of an administrative nature
is to be or can be done. The issue does not require technical
knowledge and experience but one that would involve the
interpretation and application of law. (Emphasis supplied.)
Secondly, in ordering the payment of the obligation due
respondent on a quantum meruit basis, the Court of Appeals
correctly relied on Royal Trust Corporation v. COA, 10 Eslao
v. COA,11 Melchor v. COA,12 EPG Construction Company v.
Vigilar,13 and Department of Health v. C.V. Canchela &
Associates, Architects.14 All these cases involved
government projects undertaken in violation of the relevant
laws, rules and regulations covering public bidding, budget
appropriations, and release of funds for the projects.
Consistently in these cases, this Court has held that the
contracts were void for failing to meet the requirements
mandated by law; public interest and equity, however,

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dictate that the contractor should be compensated for

services rendered and work done.
Specifically, C.V. Canchela & Associates is similar to the
case at bar, in that the contracts involved in both cases failed
to comply with the relevant provisions of Presidential
Decree No. 1445 and the Revised Administrative Code of
1987. Nevertheless, "(t)he illegality of the subject
Agreements proceeds, it bears emphasis, from an express
declaration or prohibition by law, not from any intrinsic
illegality. As such, the Agreements are not illegal per se, and
the party claiming thereunder may recover what had been
paid or delivered."15
The government project involved in this case, the
construction of a dike, was completed way back on 9 July
1992. For almost two decades, the public and the
government benefitted from the work done by respondent.
Thus, the Court of Appeals was correct in applying Eslao to
the present case. In Eslao, this Court stated:
...the Court finds that the contractor should be duly
compensated for services rendered, which were for the
benefit of the general public. To deny the payment to the
contractor of the two buildings which are almost fully
completed and presently occupied by the university would
be to allow the government to unjustly enrich itself at the
expense of another. Justice and equity demand compensation
on the basis of quantum meruit. (Emphasis supplied.)
Neither can petitioners escape the obligation to compensate
respondent for services rendered and work done by invoking
the states immunity from suit. This Court has long
established in Ministerio v. CFI of Cebu,16 and recently
reiterated in Heirs of Pidacan v. ATO,17 that the doctrine of
governmental immunity from suit cannot serve as an
instrument for perpetrating an injustice to a citizen. As this
Court enunciated in EPG Construction:181avvphi1
To our mind, it would be the apex of injustice and highly
inequitable to defeat respondents right to be duly
compensated for actual work performed and services
rendered, where both the government and the public have for
years received and accepted benefits from the project and
reaped the fruits of respondents honest toil and labor.
xxx

xxx

xxx

Under these circumstances, respondent may not validly

invoke the Royal Prerogative of Dishonesty and
conveniently hide under the State's cloak of invincibility

against suit, considering that this principle yields to certain

settled exceptions. True enough, the rule, in any case, is not
absolute for it does not say that the state may not be sued
under any circumstance.
xxx

xxx

xxx

Although the Amigable and Ministerio cases generously

tackled the issue of the State's immunity from suit vis a vis
the payment of just compensation for expropriated property,
this Court nonetheless finds the doctrine enunciated in the
aforementioned cases applicable to the instant
controversy, considering that the ends of justice would be
subverted if we were to uphold, in this particular instance,
the State's immunity from suit.
To be sure, this Court as the staunch guardian of the
citizens' rights and welfare cannot sanction an injustice so
patent on its face, and allow itself to be an instrument in the
perpetration thereof. Justice and equity sternly demand that
the State's cloak of invincibility against suit be shred in this
particular instance, and that petitioners-contractors be duly
compensated on the basis of quantum meruit for
construction done on the public works housing
project. (Emphasis supplied.)
WHEREFORE, in view of the foregoing, the Petition
is DENIED for lack of merit. The assailed Decision of the
Court of Appeals in CA-G.R. No. 82268 dated 25 September
2006 is AFFIRMED.
SO ORDERED.

G.R. No. 167824

July 2, 2010

GERALDINE GAW GUY and GRACE

CHEU, Petitioners,
vs.
ALVIN AGUSTIN T. IGNACIO, Respondent.

GUY

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 168622
GERALDINE GAW GUY and GRACE GUY
CHEU, Petitioners,
vs.
THE BOARD OF COMMISSIONERS OF THE

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BUREAU OF IMMIGRATION, HON. MARICEL U.

SALCEDO, MAYNARDO MARINAS, RICARDO
CABOCHAN and ELISEO EXCONDE, Respondents.
DECISION

citizens, for working without permit, for fraudulently

representing themselves as Philippine citizens in order to
evade immigration laws and for failure to comply with
the subpoena duces tecum/ad testificandum, in violation of
the Philippine Immigration Act of 1940, as amended,
committed as follows:

PERALTA, J.:
1

This is a petition for review on certiorari under Rule 45 of

the 1997 Rules of Civil Procedure seeking, among others, to
annul and set aside the Decisions dated January 6, 20052 and
April 20, 20053 and Resolutions dated March 10, 2005 4 and
June 29, 20055 rendered by the Court of Appeals (CA),
reversing and setting aside the Writ of Preliminary
Injunction issued by the Regional Trial Court6 (RTC),
Branch 37, Manila.
The antecedent facts follow.
The father of petitioners Geraldine Gaw Guy and Grace Guy
Cheu became a naturalized7 Filipino citizen sometime in
1959. The said petitioners, being minors at that time, were
also recognized8 as Filipino citizens.
Respondent Atty. Alvin Agustin T. Ignacio, filed a
Complaint9 dated March 5, 2004 for blacklisting and
deportation against petitioners Geraldine and Grace before
the Bureau of Immigration (BI) on the basis that the latter
two are Canadian citizens who are illegally working in the
Philippines, petitioners having been issued Canadian
passports.
Acting upon the Complaint, respondent Maricel U. Salcedo,
Special Prosecutor, Special Task Force of the BI
Commissioner, directed the petitioners, through the issuance
of a subpoenae,10 to appear before her and to bring pertinent
documents relative to their current immigration status, to
which the petitioners objected by filing with the Special
Task Force of the BI Commissioner a Comment/Opposition
with Motion Ad Cautelam to Quash Re: Subpoena11 dated 30
April 2004 (Duces Tecum/Ad Testificandum), which was
eventually denied by respondent Salcedo in an Order 12 dated
May 14, 2004.
Respondent Board of Commissioners (BOC) filed a Charge
Sheet13 dated June 1, 2004 for Violation of Sections 37 (a) 7,
45 (e) and 45-A of the Philippine Immigration Act of 1940,
as amended, which reads as follows:
The undersigned Special Prosecutor charges GRACE GUY
CHEU and GERALDINE GAW GUY, both Canadian

That respondents GRACE GUY CHEU and GERALDINE

GAW GUY, knowingly, willfully and unlawfully engage in
gainful activities in the Philippines without appropriate
permit by working as the Vice-President for Finance &
Treasurer and General Manager, respectively, of Northern
Islands Company, Inc., with office address at No. 3 Mercury
Avenue, Libis, Quezon City;
That both respondents, knowingly, willfully and fraudulently
misrepresent themselves as Philippine citizens as reflected in
the general Information Sheet of Northern Islands Company,
Inc., for 2004, in order to evade any requirement of the
Philippine Immigration Laws;
That both respondents, duly served with subpoenas duces
tecum/ad testificandum, dated April 20, 2004, knowingly,
willfully and unlawfully failed to comply with requirements
thereof.1avvphi1
CONTRARY TO LAW.
As a remedy, petitioners filed a Petition for Certiorari with
Damages and a Prayer for Issuance of a Temporary
Restraining Order and Preliminary Injunction 14 dated May
31, 2004 before the RTC of Manila, Branch 37.15
The trial court, after hearing petitioner's application for
issuance of a temporary restraining order (TRO) and writ of
preliminary injunction, issued an Order 16 dated June 28,
2004, the dispositive portion of which reads:
WHEREFORE, premises considered, the application for
temporary restraining order is hereby GRANTED. The
respondents and all persons acting in their behalf and those
under their instructions are directed to cease and desist from
continuing with the deportation proceedings involving the
petitioners. In the meantime set the case for hearing on
preliminary injunction on July 5 and 6, 2004, both at 2:00
o'clock in the afternoon and the respondents are directed to
show cause why writ of preliminary injunction should not
issue.
SO ORDERED.

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On July 5, 2004, public respondents filed their Answer17 and

on July 13, 2004, filed a Supplement (To the Special and
Affirmative Defenses/Opposition to the Issuance of a Writ of
Preliminary Injunction).18 The parties were then directed to
file their respective memoranda as to the application for
issuance of a writ of preliminary injunction and public
respondents' special and affirmative defenses. On July 16,
2004, public respondents as well as the petitioners, 19 filed
their respective Memoranda.20 On the same day, respondent
Atty. Ignacio filed his Answer21 to the petition.
In an Order22 dated July 19, 2004, the trial court granted the
application for preliminary injunction enjoining public
respondents from further continuing with the deportation
proceedings. The Order reads, in part:
In view of the foregoing, the Court finds that, indeed, there
exists a pressing reason to issue a writ of preliminary
injunction to protect the rights of the petitioners pending
hearing of the main case on the merits and unless this Court
issues a writ, grave irreparable injury would be caused
against the petitioners.
WHEREFORE, premises considered, the application for the
Writ of Preliminary Injunction is hereby GRANTED. The
respondents and all persons acting on their behalf and those
under their instructions are directed to cease and desist from
continuing with the deportation proceedings involving the
petitioners during the pendency of the instant case. The
petitioners are directed to post a bond in the amount
of P50,000.00 to answer for whatever damages that may be
sustained by the respondent should the court finally resolve
that the petitioners are not entitled thereto.
SO ORDERED.
As a consequence, public respondents, on September 10,
2004, filed a Petition for Certiorari with Prayer for Issuance
of Temporary Restraining Order and Writ of Preliminary
Injunction23 before the CA24 and, on September 17, 2004,
respondent Atty. Ignacio filed a Petition for Certiorari, 25 also
with the CA.26 Both petitions prayed for the nullification of
the Orders dated June 28, 2004 and July 19, 2004 issued by
the RTC in Civil Case No. 04-110179 and for the dismissal
of the petition therein. Later on, petitioner Geraldine filed a
Motion to Consolidate both petitions.
On January 6, 2005, the Ninth Division of the CA granted
the petition filed by respondent Atty. Ignacio and annulled
the writ of preliminary injunction issued by the trial court,
the dispositive portion of the Decision27 reads:

WHEREFORE, the instant petition is GRANTED and the

Order of the Regional Trial Court, Branch 37, Manila, dated
July 19, 2004, is hereby ANNULLED and SET ASIDE.
SO ORDERED.
On January 21, 2005, petitioners filed a Motion for
Reconsideration.28
On March 1, 2005, petitioners reiterated29 their prayer for the
consolidation of the petitions in the Eighth and Ninth
Divisions. In its Resolution30 dated March 10, 2005, the CA
Ninth
Division
denied
petitioners'
Motion
for
Reconsideration.
Hence, petitioners filed before this Court a Petition for
Review on Certiorari31 dated March 31, 2005 praying for the
reversal of the Decision rendered by the CA's Ninth
Division, which is now docketed as G.R. No. 167824.
Thereafter, the CA's Eighth Division rendered its own
Decision32 dated April 29, 2005 granting the petition therein
and nullifying the Orders dated June 28 and July 19, 2004 in
Civil Case No. 04-110179, the dispositive portion of which
reads as follows:
WHEREFORE, finding the instant petition impressed with
merit and in accordance with our decision in CA-G.R. SP
No. 86432, the same is GIVEN DUE COURSE and is
GRANTED. The assailed Orders of the respondent court
dated 28 June and 19 July 2004 are hereby NULLIFIED and
SET ASIDE.
SO ORDERED.
Petitioners filed their Motion for Reconsideration 33 from the
said Decision, which the CA denied in its Resolution 34dated
June 21, 2005.
Thus, petitioners filed before this Court a Petition for
Review on Certiorari35 dated July 12, 2005 seeking to
reverse and set aside the said Decision and Resolution
rendered by the Eighth Division of the CA and is now
docketed as G.R. No. 168622. In its Resolution 36 dated
August 10, 2005, the Court dismissed the said petition and
said
dismissal,
despite
petitioners'
motion
for
reconsideration,37 was affirmed in a Resolution38 dated
October 17, 2005. This Court, however, upon another
motion for reconsideration39 filed by the petitioners,
reinstated the petition and ordered its consolidation with
G.R. No. 167824.40

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On September 7, 2007, a Manifestation41 was filed informing

this Court that petitioner Grace Guy Cheu died intestate on
August 12, 2007 in the United States of America.
Petitioners raised the following grounds in
Consolidated Memorandum42 dated March 27, 2007:

their

FURTHER, IT IS RESPECTFULLY SUBMITTED THAT

THE RULING OF THIS HONORABLE COURT
IN DWIKARNA V. DOMINGO, 433 SCRA 748 (2004) DID
NOT STRIP THE LOWER COURT OF ITS AUTHORITY
TO ENTERTAIN THE PETITION IN CIVIL CASE NO. 04110179 AND TO ISSUE A WRIT OF PRELIMINARY
INJUNCTION IN THE AFORESAID CASE.

I.
III.
THE COURT OF APPEALS GRAVELY ABUSED ITS
DISCRETION AND ERRED IN HOLDING THAT THE
LOWER COURT HAS NO JURISDICTION OVER CIVIL
CASE NO. 04-110179 AND ISSUE A WRIT OF
PRELIMINARY INJUNCTION THEREIN CONSIDERING
THAT THE INSTANT CASE IS AN EXCEPTION TO THE
RULE ON PRIMARY JURISDICTION DOCTRINE AND
WARRANTS PETITIONERS' IMMEDIATE RESORT TO
JUDICIAL INTERVENTION.
A.
CONSIDERING
THAT
PROOF
OF
PETITIONERS' PHILIPPINE CITIZENSHIP IS
SUBSTANTIAL,
PETITIONERS
ARE
ALLOWED UNDER THIS HONORABLE
COURT'S RULING IN BID V. DELA ROSA,
SUPRA, TO SEEK INJUNCTIVE RELIEF FROM
THE REGIONAL TRIAL COURT TO ENJOIN
THE
DEPORTATION
PROCEEDINGS
CONDUCTED AGAINST THEM.

EVEN IF THE RULING OF THIS HONORABLE COURT

IN DWIKARNA V. DOMINGO, SUPRA, DID STRIP THE
LOWER COURT OF ITS JURISDICTION IN BID V. DELA
ROSA,
SUPRA,
TO
ENJOIN
DEPORTATION
PROCEEDINGS, THE RULING CAN ONLY HAVE
PROSPECTIVE EFFECT.
Basically, petitioners argue that the doctrine of primary
jurisdiction, relied upon by the CA in its decision, does not
apply in the present case because it falls under an exception.
Citing Board of Commissioners (CID) v. Dela
Rosa,43 petitioners assert that immediate judicial intervention
in deportation proceedings is allowed where the claim of
citizenship is so substantial that there are reasonable grounds
to believe that the claim is correct. In connection therewith,
petitioners assail the applicability of Dwikarna v.
Domingo in the present case, which the CA relied upon in
ruling against the same petitioners.
After a careful study of the arguments presented by the
parties, this Court finds the petition meritorious.

B.
LIKEWISE,
CONSIDERING
THAT
PETITIONERS STAND TO SUFFER GRAVE
AND IRREPARABLE INJURIES SHOULD THE
DEPORTATION PROCEEDINGS AGAINST
THEM BE ALLOWED TO CONTINUE,
PETITIONERS ARE ALLOWED UNDER TE
LAW TO IMMEDIATELY SEEK JUDICIAL
RELIEF DESPITE THE PENDENCY OF THE
ADMINISTRATIVE PROCEEDINGS.
II.

Petitioners rely on Board of Commissioners (CID) v. Dela

Rosa,44 wherein this Court ruled that when the claim of
citizenship is so substantial as to reasonably believe it to be
true, a respondent in a deportation proceeding can seek
judicial relief to enjoin respondent BOC from proceeding
with the deportation case. In particular, petitioners cited the
following portions in this Court's decision:
True, it is beyond cavil that the Bureau of Immigration has
the exclusive authority and jurisdiction to try and hear cases
against an alleged alien, and in the process, determine also
their citizenship (Lao vs. Court of Appeals, 180 SCRA 756
[1089]. And a mere claim of citizenship cannot operate to
divest the Board of Commissioners of its jurisdiction in
deportation proceedings (Miranda vs. Deportation Board, 94
Phil. 531 [1951]).
However, the rule enunciated in the above-cases admits of
an exception, at least insofar as deportation proceedings

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are concerned. Thus, what if the claim to citizenship of the

alleged deportee is satisfactory? Should the deportation
proceedings be allowed to continue or should the question of
citizenship be ventilated in a judicial proceeding? In Chua
Hiong vs. Deportation Board (96 Phil. 665 [1955]), this
Court answered the question in the affirmative, and We
quote:
When the evidence submitted by a respondent is
conclusive of his citizenship, the right to immediate
review should also be recognized and the courts should
promptly enjoin the deportation proceedings. A citizen is
entitled to live in peace, without molestation from any
official or authority, and if he is disturbed by a
deportation proceeding, he has the unquestionable right
to resort to the courts for his protection, either by a writ
of habeas corpus or of prohibition, on the legal ground
that the Board lacks jurisdiction. If he is a citizen and
evidence thereof is satisfactory, there is no sense nor justice
in allowing the deportation proceedings to continue, granting
him the remedy only after the Board has finished its
investigation of his undesirability.
x x x And if the right (to peace) is precious and valuable
at all, it must also be protected on time, to prevent undue
harassment at the hands of ill-meaning or misinformed
administrative officials. Of what use is this much boasted
right to peace and liberty if it can be availed of only after
the Deportation Board has unjustly trampled upon it,
besmirching the citizen's name before the bar of public
opinion?
The doctrine of primary jurisdiction of petitioners Board
of Commissioners over deportation proceedings is,
therefore, not without exception (Calayday vs. Vivo, 33
SCRA 413 [1970]; Vivo vs. Montesa, 24 SCRA 155
[1967]). Judicial intervention, however, should be granted in
cases where the claim of citizenship is so substantial that
there are reasonable grounds to believe that the claim is
correct. In other words, the remedy should be allowed
only on sound discretion of a competent court in a proper
proceeding (Chua Hiong v. Deportation Board, supra; Co
vs. Deportation Board, 78 SCRA 107 [1977]). It appearing
from the records that respondent's claim of citizenship is
substantial, as We shall show later, judicial intervention
should be allowed.45
The present case, as correctly pointed out by petitioners and
wrongfully found by the CA, falls within the above-cited
exception considering that proof of their Philippine
citizenship had been adduced, such as, the identification

numbers46 issued by the Bureau of Immigration confirming

their Philippine citizenship, they have duly exercised and
enjoyed all the rights and privileges exclusively accorded to
Filipino citizens, i.e., their Philippine passports47issued by
the Department of Foreign Affairs.
In BOC v. Dela Rosa, it is required that before judicial
intervention is sought, the claim of citizenship of a
respondent in a deportation proceeding must be so
substantial that there are reasonable grounds to believe that
such claim is correct. In the said case, the proof adduced by
the respondent therein was so substantial and conclusive as
to his citizenship that it warranted a judicial intervention. In
the present case, there is a substantial or conclusive evidence
that petitioners are Filipino citizens. Without necessarily
judging the case on its merits, as to whether petitioners had
lost their Filipino citizenship by having a Canadian passport,
the fact still remains, through the evidence adduced and
undisputed by the respondents, that they are naturalized
Filipinos, unless proven otherwise.
However, this Court cannot pass upon the issue of
petitioners' citizenship as this was not raised as an issue. The
issue in this petition is on the matter of jurisdiction, and as
discussed above, the trial court has jurisdiction to pass upon
the issue whether petitioners have abandoned their Filipino
citizenship or have acquired dual citizenship within the
confines of the law.
In this regard, it must be remembered though that this
Court's ruling in Dwikarna v. Domingo did not abandon the
doctrine laid down in BOC v. Dela Rosa. The exception
remains. Dwikarna merely reiterated the doctrine of primary
jurisdiction when this Court ruled that if the petitioner is
dissatisfied with the decision of the Board of
Commissioners of the Bureau of Immigration, he can
move for its reconsideration and if his motion is denied,
then he can elevate his case by way of a petition for
review before the Court of Appeals, pursuant to Section
1, Rule 43 of the Rules of Civil Procedure. However,
utmost caution must be exercised in availing of the
exception laid down in BOC v. Dela Rosa in order to avoid
trampling on the time-honored doctrine of primary
jurisdiction. The court cannot or will not determine a
controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to resolving
the same, where the question demands the exercise of sound
administrative discretion requiring special knowledge,
experience and services in determining technical and
intricate matters of fact.48 In cases where the doctrine of
primary jurisdiction is clearly applicable, the court cannot

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arrogate unto itself the authority to resolve a controversy, the

jurisdiction over which is initially lodged with an
administrative body of special competence.49
Above all else, this Court still upholds the doctrine of
primary jurisdiction. As enunciated in Republic v. Lacap: 50
The general rule is that before a party may seek the
intervention of the court, he should first avail of all the
means afforded him by administrative processes. 51 The
issues which administrative agencies are authorized to
decide should not be summarily taken from them and
submitted to a court without first giving such administrative
agency the opportunity to dispose of the same after due
deliberation.52

the Court of Appeals, nullifying and setting aside the Writ of

Preliminary Injunction issued by the Regional Trial Court
(RTC),
Branch
37,
Manila,
are
herebyNULLIFIED and SET ASIDE. The case is hereby
remanded to the trial court for further proceedings, with
dispatch.
SO ORDERED.

Corollary to the doctrine of exhaustion of administrative

remedies is the doctrine of primary jurisdiction; that is,
courts cannot or will not determine a controversy involving a
question which is within the jurisdiction of the
administrative tribunal prior to the resolution of that
question by the administrative tribunal, where the question
demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of
the administrative tribunal to determine technical and
intricate matters of fact.53
Nonetheless, the doctrine of exhaustion of administrative
remedies and the corollary doctrine of primary jurisdiction,
which are based on sound public policy and practical
considerations, are not inflexible rules. There are many
accepted exceptions, such as: (a) where there is estoppel on
the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting
to lack of jurisdiction; (c) where there is unreasonable delay
or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively
small so as to make the rule impractical and oppressive; (e)
where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; 54 (f)
where judicial intervention is urgent; (g) when its application
may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) when the issue of
non-exhaustion of administrative remedies has been
rendered moot;55 (j) when there is no other plain, speedy and
adequate remedy; (k) when strong public interest is
involved; and, (l) in quo warranto proceedings. x x x56
WHEREFORE, the petition is GRANTED. Consequently,
the Decisions dated January 6, 2005 and April 20, 2005, and
the Resolutions dated March 10, 2005 and June 29, 2005 of

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G.R. No. 156686

July 27, 2011

NEW SUN VALLEY HOMEOWNERS' ASSOCIATION,

INC., Petitioner,
vs.
SANGGUNIANG BARANGAY, Barangay Sun Valley,
Paraaque City, Roberto Guevarra IN HIS CAPACITY
AS Punong Barangay and MEMBERS OF THE
SANGGUNIANG BARANGAY, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of
the Rules of Court against the Decision1 dated October 16,
2002 in CA-G.R. CV No. 65559 and the Resolution 2 dated
January 17, 2003, both of the Court of Appeals.
The facts are as follows:
The Sangguniang Barangay of Barangay Sun Valley (the
"BSV Sangguniang Barangay") issued BSV Resolution No.
98-0963 on October 13, 1998, entitled "Directing the New
Sun Valley Homeowners Association to Open Rosemallow
and Aster Streets to Vehicular and Pedestrian Traffic," the
pertinent portions of which read as follows:
NOW, THEREFORE, be it resolved as it is hereby resolved
by the Sangguniang Barangay in session assembled that
1. Pursuant to its power and authority under the
Local Government Code of 1991 (Rep. Act No.
7160), the New Sun Valley Homeowners
Association (NSVHA) is hereby directed to open
Rosemallow and Aster Sts. to vehicular (private
cars only) and pedestrian traffic at all hours daily
except from 11 p.m. to 5 a.m. at which time the said
streets may be closed for the sake of the security of
the residents therein.
2. The Barangay government take steps to address
the security concerns of the residents of the area
concerned, including the possible assignment of a
barangay tanod or traffic enforcer therein, within
the limits of the authority and financial capability
of the Barangay.
3. This Resolution shall become executory within
72 hours upon receipt hereof by the Association or
any of its members.4

The New Sun Valley Homeowners Association, Inc.

(NSVHAI), represented by its President, Marita
Cortez, filed a Petition5 for a "Writ of Preliminary
Injunction/Permanent Injunction with prayer for
issuance of TRO" with the Regional Trial Court
(RTC) of Paraaque City. This was docketed as
Civil Case No. 98-0420. NSVHAI claimed therein
that the implementation of BSV Resolution No. 98096 would "cause grave injustice and irreparable
injury" as "[the] affected homeowners acquired
their
properties
for
strictly
residential
purposes";6 that the subdivision is a place that the
homeowners envisioned would provide them
privacy and "a peaceful neighborhood, free from
the hassles of public places"; 7 and that the passage
of the Resolution would destroy the character of the
subdivision. NSVHAI averred that contrary to what
was stated in the BSV Resolution, the opening of
the gates of the subdivision would not in any
manner ease the traffic congestion in the area, and
that there were alternative routes available.
According to NSVHAI, the opening of the
proposed route to all kinds of vehicles would result
in contributing to the traffic build-up on Doa
Soledad Avenue, and that instead of easing the
traffic flow, it would generate a heavier volume of
vehicles in an already congested choke point.
NSVHAI went on to state that a deterioration of the
peace and order condition inside the subdivision
would be inevitable; that the maintenance of peace
and order in the residential area was one of the
reasons why entry and exit to the subdivision was
regulated by the Association and why the passing
through of vehicles was controlled and limited; and
that criminal elements would take advantage of the
opening to public use of the roads in question.8
NSVHAI further contested the BSV Resolution by
submitting the following arguments to the RTC:
12. The road network inside the subdivision and
drainage system is not designed to withstand the
entry of a heavy volume of vehicles especially
delivery vans and trucks. Thus, destruction of the
roads and drainage system will result. The safety,
health and well-being of the residents will face
continuous danger to their detriment and prejudice;
13. When the residents bought their residential
properties, they also paid proportionately for the
roads and the park in then subdivision. They have

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therefore an existing equity on these roads. To open

the roads to public use is a violation of the rights
and interests to a secure, peaceful and healthful
environment;
14. Aside from the availability of a better route to
be opened, there are other ways to ease traffic flow.
The continuous presence of traffic enforcers on all
identified traffic choke points will prevent snarls
which impede smooth travel. The strict
enforcement of traffic rules and regulations should
be done;
15. There are a lot of undisciplined drivers of
tricycles, jeepneys, trucks and delivery [vans],
which contribute to the traffic congestion. The
barangay should require these drivers to observe
road courtesy and obedience to traffic rules[.]9
Executive Judge Helen Bautista-Ricafort of the RTC issued
a Temporary Restraining Order10 (TRO) in Civil Case No.
98-0420 on October 30, 1998. Said Order provides:
Acting on the Application for Writ of Preliminary
Injunction/ Permanent Injunction with Prayer for Issuance of
a Temporary Restraining Order, filed by plaintiff and
considering that there is extreme urgency, such that unless
the same is issued, plaintiff would suffer grave injustice
and/or irreparable injury, let a Temporary Restraining Order
issue directing the Sangguniang Barangay as represented by
Punong Barangay Roberto Guevarra to cease and desist from
the implementation of Resolution No. 98-096 or otherwise
maintain the status quo until further Orders of this Court.
This Temporary Restraining Order shall be effective for
seventy two (72) hours from issuance hereof, unless
extended by another Order of this Court.
Let this case be set for special raffle and conference on
November 3, 1998 at 10:30 in the morning.
On November 3, 1998, the RTC issued another
Order11 stating that, by agreement of the parties, the status
quo shall be maintained for seventeen (17) more days, and
that the case was set for hearing on the prayer for the
issuance of a writ of preliminary injunction on November
20, 1998 at 8:30 a.m.
NSVHAI submitted an Amended Petition12 on November 13,
1998, at about 11:10 a.m., wherein it claimed that the BSV
Sangguniang Barangay had no jurisdiction over the opening

of Rosemallow and Aster Streets (the "subject roads").

NSVHAI likewise attached to its Amended Petition its
Position Paper13 dated July 21, 1998, which set forth its
objection to the opening of the subject roads for public use
and argued that a Barangay Resolution cannot validly cause
the opening of the subject roads because under the law, an
ordinance is required to effect such an act.14
The BSV Sangguniang Barangay filed its Motion to
Dismiss15 likewise on November 13, 1998. The copy
provided by petitioner to the Court indicates the time of
receipt by NSVHAI as 11:00 a.m.16
The RTC heard the case on November 20, 1998, as
scheduled, and thereafter submitted the matter for
decision.17 On the same date, the RTC issued the following
Order18:
Acting on the prayer for the issuance of a writ of preliminary
injunction filed by petitioner, it appearing that petitioner
may suffer grave injustice or irreparable injury, let a writ of
preliminary injunction issue prohibiting the Sangguniang
Barangay represented by Punong Barangay Roberto
Guevarra from implementing Resolution no. 98-096 until
further orders from this Court.
Petitioner is directed to file a bond in the amount of ONE
HUNDRED THOUSAND (P100,000.00) PESOS (sic) to
answer for damages to defendants in the event the Court
finds petitioner is not entitled to said injunction.
The BSV Sangguniang Barangay filed on December 4, 1998
a Motion for Reconsideration and to Dissolve Preliminary
Injunction (with Memorandum of Authorities).19
NSVHAI then filed an Urgent Ex-Parte Motion to Expunge
on December 10, 1998, moving to declare the above motion
of the BSV Sangguniang Barangay as a mere scrap of paper
for being filed out of time and for failure to serve a copy
thereof to the counsel of petitioner.
The RTC subsequently dismissed the case
Order20 dated August 17, 1999, stating as follows:

in

an

Defendant Barangay Sun Valley moves to dismiss the instant

case on the grounds that the complaint states no cause of
action and the court has no jurisdiction over the subject
matter. In summary, defendant alleges that the subject streets
Aster and Rosemallow inside Sun Valley Subdivision are
owned by the local government. Such streets have long been
part of the public domain and beyond the commerce of man.

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In support of this, defendant cited the case of White Plains

Association, Inc. vs. Legaspi, 193 SCRA 765 wherein it was
held that road lots of subdivisions constitute a part of the
mandatory open space reserved for public use; ownership of
which is automatically vested in the Republic of the
Philippines although it is still registered in the name of the
developer/owner, its donation to the government is a mere
formality." The power or authority to close or open the said
streets is vested in the local government units and not on
homeowners associations, pursuant to Section 21 of the
local Government Code (RA 7160) quoted as follows:
"Section 21. Closure and Opening of Roads. (a) A local
government unit may, pursuant to an ordinance, permanently
or temporarily close or open any local road, alley, park, or
square falling within its jurisdiction x x x." In view thereof,
Resolution No. 98-096 was passed by the Sangguniang
Barangay. Hence there is no right whatsoever on the part of
Plaintiff NSVHA entitled to the protection of the law.
Further, defendant contends that petitioner failed to exhaust
administrative remedies as ordained in Sections 32 and 57 of
the Local Government Code giving the city mayor the
supervisory power, and the power of review by the
Sangguniang Panlungsod, respectively.

WHEREFORE, let this case be as it is hereby ordered

Dismissed. The writ of preliminary injunction is hereby
lifted.21

No opposition to the motion to dismiss was filed by the

Plaintiff.

The BSV Sangguniang Barangay, Roberto Guevarra in his

capacity as Punong Barangay, and members of the
Sangguniang Barangay (hereinafter, "respondents"), in their
Appellees Brief, argued as follows:

Same defendant seeks to reconsider the order granting the

issuance of the writ of preliminary injunction alleging that
there is a pending motion to dismiss and Plaintiff has not
been able to establish an actually existing right.
Plaintiff has not filed an opposition thereto, instead it filed
an urgent ex-parte motion to expunge the motion for
reconsideration on the ground that its counsel has not been
furnished with a copy of the motion for reconsideration, but
the record shows that Maria Cortez (plaintiffs
representative) has received a copy of said motion.
After considering the arguments of the parties in their
respective pleadings, this court hereby resolves as follows:
1. The "Motion for Reconsideration" and the
"Urgent Ex-parte Motion to Expunge (motion for
reconsideration)" are Denied being devoid of merit;
and
2. The "Motion to Dismiss" is hereby Granted for
failure of the plaintiff to exhaust the administrative
remedies under Sections 32 and 57 of the Local
Government Code.

NSVHAI filed a Motion for Reconsideration 22 of the abovequoted Order but this was denied by the RTC for lack of
merit in an Order23 dated September 21, 1999.
NSVHAI raised the matter to the Court of Appeals and the
case was docketed as CA-G.R. CV No. 65559. NSVHAI
alleged that "despite the lack of the required hearing" 24 and
without any order requiring it to submit its
Comment/Opposition to the BSV Sangguniang Barangays
Motion to Dismiss or that of submitting said Motion for
resolution, Judge Bautista-Ricafort issued an Order which, to
NSVHAIs complete surprise, granted the Motion. NSVHAI
argued that the RTC gravely erred in taking cognizance of,
and thereafter ruling on, said Motion and refusing to
exercise jurisdiction over the subject matter of Civil Case
No. 98-0420. Petitioner likewise argued that the RTC
committed serious errors which, if not corrected, would
cause grave or irreparable injury to petitioner and cause a
violation of law.25

I
THE TRIAL COURT DID NOT ERR IN
GRANTING
DEFENDANTS-APPELLEES
MOTION TO DISMISS DUE TO LACK OF
CAUSE OF ACTION AND JURISPRUDENCE
OVER THE SUBJECT MATTER AND
APPELLANTS FAILURE TO EXHAUST
ADMINISTRATIVE REMEDIES. AS NOTED BY
THE COURT, NO OPPOSITION TO THE
MOTION TO DISMISS WAS EVER FILED BY
APPELLANT.
II
THE TRIAL COURTS DISMISSAL OF THE
ACTION ASSAILING ITS SUBJECT-MATTER,
BARANGAY RESOLUTION NO. 98-096,
CONSISTING OF A DIRECTIVE OF AN LGU
TO A DEFIANT PRIVATE ORGANIZATION
WITHIN ITS JURISDICTION, IS JUDICIAL
RECOGNITION OF THE SOLE COMPETENCE

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AND WISE DISCRETION OF THE BARANGAY

OVER A LOCAL TRAFFIC PROBLEM.

2. Letter32 dated December 27, 1990 from Francisco B. Jose,

Jr., Municipal Attorney of Paraaque, addressed to the
Municipal Council Secretary, which reads:

III
THE TRIAL COURT DID NOT COMMIT ANY
SERIOUS
ERROR,
PROCEDURAL
OR
SUBSTANTIVE, AS FOUND BY THE COURT A
QUO. IT
IS
APPELLANT
THAT HAS
COMMITTED
THE
ERROR
OF
NOT
EXHAUSTING ADMINISTRATIVE REMEDIES.
HENCE, NO GRAVE OR IRREPARABLE
INJURY CAN BE CAUSED TO APPELLANT
FOR IT HAS NO RIGHT TO PROTECT.26
Respondents claimed that Barangay Resolution No. 98-096
was simply a directive to petitioner, "a private aggrupation
of some self-seeking homeowners,"27 and was just a measure
of internal policy among residents; that the opening of roads
for traffic reasons was "within the sole competence of the
barangay to determine";28 and the Mayor could have chosen,
as it was within his power to do so, to cause the demolition
of the gates, which were illegally built by petitioner and
therefore were obstructions on the road, even without a
Barangay resolution. Respondents likewise claimed that the
BSVs action could be considered a political question, which
should be essentially withdrawn from judicial cognizance,
and constitutional law doctrine provides that the courts
would not interfere with political issues unless grave abuse
of discretion is shown, of which there was none on the part
of the Barangay. Respondents argued that petitioner did not
have any actual legal right entitled to the protection of the
law.29
Respondents attached to their Appellees Brief six
documents, labeled as Annexes "2" to "7," all stamped
"Certified True Copy" by a certain Roman E. Loreto, Legal
Officer II of Legal Department.30 The detailed information
contained in each of the documents that comprise
respondents Annexes "2" to "7" is copied below:

This has reference to your request dated December 18, 1990

relative to the letter of inquiry of the Barangay Captain of
Barangay Sun Valley dated December 13, 1990.
We wish to inform you that based on the available records of
our office the open space and road lots of Sun Valley
Subdivision is already owned by the Municipal Government
of Paraaque as evidenced by TCT NOS. 133552, 119836,
and 122443. Copies of which are hereto attached for your
ready reference.
Considering that the Municipality of Paraaque is the
registered owner of the road lots of Sun Valley Subdivision,
we are of the opinion that the roads become public in use
and ownership, and therefore, use of the roads by persons
other than residents of the Subdivision can no longer be
curtailed. However, should the Municipal Government
decides to delegate its right to regulate the use of the said
roads to the Sun Valley Homeowners Association or Sun
Valley Barangay Council, such right may be exercise[d] by
said association or council.
3. Certification33 dated October 8, 1990 issued by Francisco
B. Jose, Jr. under the letterhead of the Office of the
Municipal Attorney of Paraaque, which reads:
This is to certify that based on the available records of this
Office, the open space and road lots of Sun Valley
Subdivision has been donated and now owned by the
Municipality of Paranaque, as evidenced by TCT Nos.
133552, 119836, and 122443 copies of which are hereto
attached.
This certification is being issued upon the request of Mr.
Mario Cortez, President of Sun Valley Homeowners
Association.

1. 1st Indorsement31 from the Office of the Mayor of

Paraaque dated May 20, 1988, signed by Luzviminda A.
Concepcion, Administrative Officer II, stating as follows:

4. Certification34 dated June 13, 1994, again signed by

Francisco B. Jose, Jr., of the Office of the Municipal
Attorney, providing as follows:

Respectfully indorsed to Atty. Antonio G. Cruz, Municipal

Attorney, of this municipality the herein attached "Original
Copies of Transfer Certificate of Title for Sun Valley Open
Space and Road Lots" with TCT Nos. 133552, 119836, and
122443 for your appropriate actions.

This is to certify that based on the available records of this

Office, the only road lots in Sun Valley Subdivision titled in
the name of the Municipality of Paraaque are those covered
by Transfer Certificates of Title Nos. 133552 and 122443.

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This certification is being issued upon the request of Coun.

Manuel T. De Guia.
35

5. Certification dated March 2, 1995 issued by Rodolfo O.

Alora, OIC, Asst. Municipal Legal Officer, which reads:
This is to certify that based on the available records of this
Office, the open space within Sun Valley Subdivision has
already been donated to the Municipality as evidenced by
Transfer Certificate of Title No. 119836, copy of which is
hereto attached.
This certification is being issued upon the request of Atty.
Rex G. Rico.
6. Certification36 dated October 26, 1998 issued by Ma. Riza
Pureza Manalese, Legal Researcher, Office of the Municipal
Attorney, Paraaque City, which reads:
This is to certify that based on the available records of this
Office, road lots of Sun Valley Subdivision have already
been donated to the Municipality of Paranaque as evidenced
by TCT NO. 133552, 119836, and 122443.
This certification is being issued upon the request of MR.
WILLIAM UY.
The Court of Appeals issued a Decision dated October 16,
2002 denying the appeal and affirming the Orders of the
RTC dated August 17, 1999 and September 21, 1999. The
Court of Appeals likewise denied NSVHAIs Motion for
Partial Reconsideration in its Resolution promulgated on
January 17, 2003, stating that after a thorough study of the
Motion for Reconsideration, it found no sufficient reason to
deviate from its findings and conclusion reached in its
decision.

A
In sustaining the dismissal of Civil Case No. 98-0420, the
Honorable Court of Appeals sanctioned the departure of the
Regional Trial Court from the accepted and usual course of
judicial proceedings
B
Whether or not the issuance of the Resolution promulgated
January 17, 2003 and the Decision promulgated October 16,
2002 by the Former 4th Division and the 4th Division of the
Court of Appeals sustaining the validity of dismissal of Civil
Case No. 98-0420 is not in accord with law or with the
applicable decisions of this Honorable Supreme Court
C
Whether or not the Honorable Court of Appeals, with due
respect, departed from the accepted and usual course of
judicial proceedings by making findings of fact not
supported by evidence of record38
Petitioner avers that the hearing for the respondents Motion
to Dismiss was set on November 20, 1998, without
indication as to time and that during the hearing on such
date, counsel for respondents moved that their Motion to
Dismiss be heard over the objection of counsel for petitioner,
who explained that there was an urgency in ruling on the
prayer for the issuance of a writ of preliminary injunction in
view of the expiration of the temporary restraining order
(TRO).39
Petitioner quotes the transcript of stenographic notes (TSN)
from the November 20, 1998 hearing before the RTC in the
following manner:

Thus, NSVHAI (hereinafter, "petitioner") went to this Court.

Atty. Herrera:

Arguments of Petitioner

Then, Your Honor, I files [sic] a motion petitioning to

dismiss this instant case, which should be resolved first
before hearing this case.

Petitioner alleges that the decision of the Court of Appeals

was based on "facts that [were] outside of the original
Petition and Amended Petition and on supposed findings of
facts that are not even evidence offered before the court a
quo."37 Petitioner likewise alleges that the facts used by the
Court of Appeals in dismissing the case were contrary to the
records of Civil Case No. 98-0420.
Petitioner lists the following as its Questions of Law:

Atty. Nuez:
Your Honor, please, with due respect to the opposing
counsel, the hearing today is supposed to be on the
presentation of petitioners evidence in support of its prayer
for preliminary injunction. In connection with the amended
complaint, I guess it is a matter of right to amend its
pleading. What happened here, the amended petition was

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filed before this Honorable Court on November 13 at 11:10

a.m. but I think the motion to dismiss was filed by the
respondent on November 13 at 11:20 a.m.. Therefore, it is
the right of the petitioner insofar as the case is concerned.
And therefore, this Court should proceed with the hearing on
the preliminary injunction instead of entertaining this
matter. The temporary restraining order will expire today
and we have the right to be heard.
Court:
We will proceed first with the hearing (referring to the
scheduled hearing of the prayer for the issuance of the writ
of preliminary injunction). (Transcript of Stenographic
Notes, November 20, 1998) (Underscoring and explanation
petitioners.)40
Petitioner claims that the RTC proceeded to hear the prayer
for the issuance of a preliminary injunction and no hearing
was conducted on the Motion to Dismiss. Petitioner
reiterates its earlier claim that it did not receive an order
requiring it to submit its Comment/Opposition to the Motion
to Dismiss or informing it that said Motion had been
submitted for resolution.41
Petitioner alleges that the dismissal of Civil Case No. 980420 arose from the grant of respondents Motion to
Dismiss. Petitioner claims that it filed its Amended Petition
on November 13, 1998 at 11:10 a.m., or before respondents
served any responsive pleading, or before they had filed
their Motion to Dismiss on the same date at about 11:20
a.m.42 Petitioner avers that the filing of said Amended
Petition was a matter of right under Section 2, Rule 10 of the
1997 Rules of Civil Procedure, and had the effect of
superseding the original petition dated October 28, 1998.
Petitioner concludes that the Motion to Dismiss was
therefore directed against a non-existing Petition.43
Petitioner argues that the RTCs ruling on the Motion to
Dismiss is contrary to procedural law because no hearing
was conducted on said Motion to Dismiss; that said motion
violated Section 5, Rule 10 of the 1997 Rules of Civil
Procedure for failing to set the time of hearing thereof; and
that instead of being resolved, said motion should have been
declared as a mere scrap of worthless paper.44
Petitioner claims that during the proceedings before the RTC
on November 20, 1998, both parties manifested that the
Motion to Dismiss was never set for hearing, and that when
Judge Bautista-Ricafort said, "We will proceed first with the

hearing,"45 she was referring to the scheduled hearing of the

prayer for the issuance of the writ of preliminary injunction.
Petitioner claims that it is crystal clear that it was deprived
due process when a ruling was had on the Motion to Dismiss
despite the clear absence of a hearing. Petitioner concludes
that the Court of Appeals was manifestly mistaken when it
ruled that due process was observed in the issuance of the
assailed Orders of Judge Bautista-Ricafort, despite the lack
of opportunity to submit a comment or opposition to the
Motion to Dismiss and the lack of issuance of an order
submitting said motion for resolution. Petitioner alleges that
the Court of Appeals sanctioned the ruling of the RTC that
violated both substantial and procedural law. 46
Moreover, petitioner avers that contrary to the ruling of the
Court of Appeals, the RTC had jurisdiction to hear and
decide the Amended Petition, and the doctrine of exhaustion
of administrative remedies was not applicable. This is
because, according to petitioner, such doctrine "requires that
were a remedy before an administrative agency is provided,
relief must first be sought from the administrative agencies
prior to bringing an action before courts of
justice."47 Petitioner claims that when it filed Civil Case No.
98-08420, it did not have the luxury of time to elevate the
matter to the higher authorities under Sections 32 and 57 of
the Local Government Code. Petitioner alleges that the tenor
of BSV Resolution No. 98-096 necessitated the immediate
filing of the injunction case on October 29, 1998, to forestall
the prejudicial effect of said resolution that was to take effect
two days later. Thus, petitioner claims that it had no other
plain, speedy, and adequate remedy except to file the case.48
Anent the question of whether the Sangguniang Barangay
should have passed an ordinance instead of a resolution to
open the subject roads, petitioner alleges that the Court of
Appeals should not have relied on respondents claim of
ownership, as this led to the erroneous conclusion that there
was no need to pass an ordinance. Petitioner insists that the
supposed titles to the subject roads were never submitted to
the RTC, and the respondents merely attached certifications
that the ownership of the subject roads was already vested in
the City Government of Paraaque City as Annexes to their
Appellees Brief before the Court of Appeals. Those
annexes, according to petitioner, were not formally offered
as evidence.49
Petitioner avers that the records of Civil Case No. 98-0420
clearly show that there was no proof or evidence on record
to support the findings of the Court of Appeals. This is
because, allegedly, the dismissal of said case was due to the
grant of a motion to dismiss, and the case did not go to trial

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to receive evidence.50 Petitioner avers that a motion to

dismiss hypothetically admits the truth of the facts alleged in
the complaint.51 In adopting the annexes as basis for its
findings of fact, the Court of Appeals allegedly disregarded
the rules on Evidence.
Petitioner raises the following grounds for the issuance by
this Court of a temporary restraining order and/or writ of
preliminary injunction:
Sangguniang Barangay Resolution No. 98-096 is repugnant
to the proprietary rights of the affected homeowners who are
members of petitioner NSVHAI, such rights undoubtedly
protected by the Constitution.
As there is no proof otherwise (except the baseless findings
of fact by the Honorable Court of Appeals) that the streets
encompassed by the concerned subdivision, Sun Valley
Subdivision, are all private properties. As such, the residents
of Sun Valley Subdivision have all the right to regulate the
roads and open spaces within their territorial jurisdiction.
This Honorable Supreme Court can take judicial knowledge
that criminal activities such as robbery and kidnappings are
becoming daily fares in Philippine society. Residents have
invested their lifetimes savings in private subdivision since
subdivision living afford them privacy, exclusivity and
foremost of all, safety. Living in a subdivision has a
premium and such premium translates into a comparatively
more expensive lot because of the safety, among others, that
subdivision lifestyle offers.
But, with the enactment and intended implementation of
Sangguniang Barangay Resolution No. 98-096 to open
Rosemallow and Aster Streets for public use, it is
indubitable that, instead of promoting the safety of resident
of Sun Valley Subdivision, respondents are endangering the
life and property of the residents of the said subdivision as
they will now be exposed to criminal and lawless elements.
It is respectfully submitted that Sangguniang Barangay
Resolution No. 98-096 has a place only in an authoritarian
government where proprietary rights and privacy are alien
concepts. Lest it be forgotten, ours is a democratic society
and therefore, it should not be ruled in a manner befitting of
a despotic government.
Petitioner NSVHAI, in protection of the rights and interest
of the residents of Sun Valley Subdivision and in order to
ensure that public officials will not abuse governmental
powers and use them in an oppressive and arbitrary manner,

invokes the judicial power of this Honorable Supreme Court

and pray that a writ of preliminary injunction be issued and,
after hearing, be declared permanent. 52
A perusal of the documents attached by petitioner as
Annexes revealed to the Court the following, which were not
discussed in the body of the petition:
1. A letter53 dated January 25, 2003 signed by Sonia G.
Sison, President of NSVHAI, to Mayor Joey P. Marquez, the
pertinent portions of which provide:
We admit that we erred in not going to you directly because
at that time, the NSVHA received the letter-order of Brgy.
Capt. Guevara two days before the effectivity of the order.
Aside from this, there was a long holiday (long weekend
prior to November 1). Thus, the Board of Governors had no
other recourse but to seek a TRO and thereafter a permanent
injunction.
We now would like to seek your assistance concerning this
urgent problem. For your information there are already two
(2) gates in and out of Sun Valley Subdivision.
Under P.D. 957, the Homeowners Association is mandated to
protect the interest of the homeowners and residents
especially in so far as it affects the security, comfort and the
general welfare of the homeowners.
Thank you and because of the urgency of the matter, we
anticipate your prompt and favorable action. (Emphasis
ours.)
2. A letter54 signed by Paraaque City Mayor Joey Marquez
dated January 27, 2003, addressed to Mr. Roberto Guevara,
Office of the Barangay Captain, Barangay Sun Valley, which
reads in part:
This refers to your intended implementation of Barangay
Sun Valley Resolution No. 98-096 entitled, "A
RESOLUTION DIRECTING THE NEW SUN VALLEY
HOMEOWNERS
ASSOCIATION
TO
OPEN
ROSEMALLOW
AND
ASTER
STREETS
TO
VEHICULAR AND PEDESTRIAN TRAFFIC."
In this regard and pursuant to the provisions of Sec. 32 of the
Local Government Code of 1991 which vests upon the city
mayor the right to exercise general supervision over
component barangays, to ensure that said barangays act
within the scope of their prescribed powers and functions,

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you are hereby directed to defer your implementation of the

subject ordinance based on the following grounds:
1. The roads subject of your resolution is a
municipal road and not a barangay road;
2. The opening or closure of any local road may be
undertaken by a local government unit pursuant to
an ordinance and not through a mere resolution as
provided under Sec. 21 of the Local Government
Code of 1991;
3. There is no more need to order the opening of the
aforementioned roads in view of the fact that Gelia
and State Ave., have already been opened by the
subdivision to the general public to accommodate
vehicular and pedestrian traffic in the area;
4. There is a need to conduct public hearings, as in
fact we shall be conducting public hearings, on the
matter to enable us to arrive at an intelligent
resolution of the issues involved.
3. A letter55 dated January 31, 2003 addressed to
Mayor Joey Marquez, signed by counsel for
respondents, wherein the latter wrote:
We regret to observe that all the reasons that you have cited
in your letter as grounds for your order of nonimplementation of the Barangay Resolution have been
passed upon and decided by the Court of Appeals, which
lately denied the NSVHA Motion for Reconsideration x x x.
xxxx
The Decision of the Court of Appeals is now the subject of
an appeal taken by the NSVHA to the Supreme Court. In
deference to the high Court, you would do well to reconsider
your order to the Barangay and not pre-empt the high Court
on its decision. x x x.
Arguments of Respondents
Respondents filed their Comment56 on July 17, 2003. They
manifest that the petition is substantially a reproduction of
petitioners brief filed with the Court of Appeals, and
consists of almost identical issues which have already been
ventilated and decided upon by the said court.
Respondents claim that the hearing held on November 20,
1998, as found by the Court of Appeals, covered both the

injunction and dismissal incidents, and that the motion to

dismiss on issues of jurisdiction was a prejudicial matter.
Respondents confirm that the RTC said it will proceed first
with the hearing, but the lower court did not specify if the
hearing was going to take up the prayer for the issuance of
preliminary injunction or the motion to dismiss.
Respondents further claim that by the end of the hearing,
after Atty. Florencio R. Herreras manifestation on the
donated public roads, counsels for both parties were asked
by the court if they were submitting, and both of them
answered in the affirmative. 57 Respondents aver that
petitioners reply to its charge of misleading the Court was
an admission that counsel had tampered without authority
with the TSN, and that the phrase "referring to the scheduled
hearing of the prayer for the issuance of the writ of
preliminary injunction"58 was said counsels own mere
footnote.
Respondents allege that the issuance of the titles in favor of
Paraaque over all the roads in Sun Valley Subdivision was
an official act by the land registration office of the City of
Paraaque, and was perfectly within the judicial notice of
the Courts, pursuant to Rule 129, Section 1 of the Rules of
Court.59 Respondents likewise allege that the gates were
earlier built illegally on the roads by the Association, and
while petitioner may lend a helping hand to the barangay, it
cannot control the latters discretion as to the wisdom of its
traffic policies within the barangay. They maintain that
petitioner had no business putting up road blocks in the first
place; that this matter is purely a local government
determination; and that it is even doubtful if courts would
encroach upon this autonomous determination for local
constituents of the Barangay in deference to the doctrine of
separation of powers.
Respondents claim that since the subject matter of the case is
a directive of the Barangay to the petitioner, the requirement
for an ordinance would not be necessary, as there was no
legislative determination in the Barangay resolution
regarding what class of roads to open or what to close by
way of general policy. 60
Respondents contend that the Barangay Resolution was
internal and temporary, passed to solve a traffic problem.
They propose a reason why petitioner allegedly wants to
control the subject roads, as follows:
The directive of the Barangay is certainly a declaration of an
intention expressed by resolution on complaints of residents
for a convenient outlet of cars and pedestrians during certain
hours of the [day] or night. This need not be the subject of an

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ordinance. It is addressed to a special group of residents, and

not to the general community. It refers to particular roads
and at certain hours only, not to all the roads and at all hours.
Hence, the Barangay Resolutions (sic) is but temporary in
character, being a solution to a momentary traffic problem
then visualized by the Barangay and encouraged by the
MMDA. There is no legal question involved that is of any
concern to the NSVHA. The prevailing reason why the
NSVHA desires to control the roads is the monetary
consideration it gains by its unilateral requirement of car
stickers and of substantial fees exacted from delivery vans
and trucks for bringing in cargo into the subdivision. And
yet, the residents who, never gave their consent to this
activities (sic), are busy people and have merely tolerated
this for a long time now. This tolerance did not of course
give legality to the illegal act. x x x.61
As regards petitioners argument that the BSV Sangguniang
Barangay should have passed an ordinance instead of a
resolution, respondents present their counter-argument as
follows:
Hence, even assuming for the sake of argument that a legal
question exists on whether it be a resolution or ordinance
that should contain the Barangay directive, such an issue is
of no moment as plaintiff-appellant failed to exhaust the
necessary administrative remedies before resorting to court
action, as found by the trial court and the Court of Appeals.
Section 32, R.A. 7160 (Local Government Code of 1991)
provides for a remedy from Barangay actions to the Mayor
under the latters power of general supervision.62
With regard to the Mayors involvement in this case,
respondents have this to say:
The Mayors act of interfering in Barangay Sun Valley
affairs stemmed out of a long-standing political feud of the
Mayor with the Punong Barangay. Its general supervision
did not extend to pure Barangay matters, which the
Barangay would be x x x in a better position to determine.
Furthermore, the general supervision of the Mayor is limited
to the overseeing authority that the Barangays act within the
scope of their prescribed powers and functions. Sadly, there
is nothing in this Mayors letter x x x that would as much as
show a deviation by the Barangay Sun Valley from any
prescribed powers or function. The Mayors directive to the
Barangay is of doubtful legality.

It was mainly the mounting traffic problem progressively

experienced through the years that prompted the Barangay to
resolve to open Rosemallow and Aster Streets in accordance
with its power under Section 21 of R.A. 7160 to
"temporarily open or close any local road falling within its
jurisdiction". This Resolution x x x was decided upon after
the Barangay Council made the necessary investigation and
conducted hearings in consultation with affected residents.
In order to maintain some kind of cordial relationship with
the NSVHA, the Barangay by its resolution, opted to give
the NSVHA the chance to open the roads, which it earlier
closed by means of arbitrarily putting up steel gates without
any apparent authority.63
Furthermore, respondents aver that the trial court and the
appellate court have ruled that only a local government unit
(LGU), in this case the Barangay, can open or close roads,
whether they be public or private, in accordance with
Section 21 of the Local Government Code. Respondents
contend that Metropolitan Manila Development Authority v.
Bel-Air Village Association, Inc., 64 wherein the Court
discussed the power of LGUs to open and close roads, is
substantially in point.65
After the submission of the parties respective
memoranda,66 this case was submitted for decision.
The issues before us are:
1. Whether or not petitioner has a right to the
protection of the law that would entitle it to
injunctive relief against the implementation of BSV
Resolution No. 98-096; and
2. Whether or not petitioner failed to exhaust
administrative remedies.
The Ruling of the Court
The Court of Appeals passed upon petitioners claims as to
the validity of the dismissal in this wise:
We do not agree. Although the Motion to Dismiss was filed
on the same day, but after, the Amended Petition was filed,
the same cannot be considered as directed merely against the
original petition which Appellant already considers as nonexisting. The records will show that Appellants Amended
Petition contained no material amendments to the original
petition. Both allege the same factual circumstances or
events that constitute the Appellants cause of action anent
the Appellees alleged violation of Appellants propriety

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rights over the subdivision roads in question. Corollarily, the

allegations in Appellees Motion to Dismiss, as well as the
grounds therefore predicated on lack of cause of action and
jurisdiction, could very well be considered as likewise
addressed to Appellants Amended Petition.

specialized areas of their respective competence. The

rationale for this doctrine is obvious. It entails lesser
expenses and provides for the speedier resolution of
controversies. Comity and convenience also impel courts of
justice to shy away from a dispute until the system of
administrative redress has been completed.68

xxxx
It bears stressing that due process simply means giving every
contending party the opportunity to be heard and the court to
consider every piece of evidence presented in their favor
(Batangas Laguna Tayabas Bus Company versus Benjamin
Bitanga, G.R. Nos. 137934 & 137936[)]. In the instant case,
Appellant cannot be said to have been denied of due process.
As borne by the records, while Appellees Motion to Dismiss
did not set the time for the hearing of the motion, the day set
therefore was the same date set for the hearing of
Appellants prayer for the issuance of a writ of preliminary
injunction that is, November 20, 1998, with the precise
purpose of presenting evidence in support of the motion to
dismiss on the same said scheduled hearing date and time
when Appellant and its counsel would be present. Moreover,
Appellants predication of lack of due hearing is belied by
the fact that the hearing held on November 20, 1999 took up
not only the matter of whether or not to grant the injunction,
but also tackled the jurisdictional issue raised in Appellees
Motion to Dismiss, which issues were intertwined in both
incidents. 67
We see no reason to depart from these findings by the Court
of Appeals. Petitioners recourse in questioning BSV
Resolution No. 98-096 should have been with the Mayor of
Paraaque City, as clearly stated in Section 32 of the Local
Government Code, which provides:
Section 32. City and Municipal Supervision over Their
Respective Barangays. - The city or municipality, through
the city or municipal mayor concerned, shall exercise
general supervision over component barangays to ensure that
said barangays act within the scope of their prescribed
powers and functions.
We do not see how petitioners act could qualify as an
exception to the doctrine of exhaustion of administrative
remedies. We have emphasized the importance of applying
this doctrine in a recent case, wherein we held:
The doctrine of exhaustion of administrative remedies is a
cornerstone of our judicial system. The thrust of the rule is
that courts must allow administrative agencies to carry out
their functions and discharge their responsibilities within the

It is the Mayor who can best review the Sangguniang

Barangays actions to see if it acted within the scope of its
prescribed powers and functions. Indeed, this is a local
problem to be resolved within the local government. Thus,
the Court of Appeals correctly found that the trial court
committed no reversible error in dismissing the case for
petitioners failure to exhaust administrative remedies, as the
requirement under the Local Government Code that the
closure and opening of roads be made pursuant to an
ordinance, instead of a resolution, is not applicable in this
case because the subject roads belong to the City
Government of Paraaque.
Moreover, being the party asking for injunctive relief, the
burden of proof was on petitioner to show ownership over
the subject roads. This, petitioner failed to do.
In civil cases, it is a basic rule that the party making
allegations has the burden of proving them by a
preponderance of evidence. Parties must rely on the strength
of their own evidence and not upon the weakness of the
defense offered by their opponent.69
Petitioner dared to question the barangays ownership over
the subject roads when it should have been the one to adduce
evidence to support its broad claims of exclusivity and
privacy. Petitioner did not submit an iota of proof to support
its acts of ownership, which, as pointed out by respondents,
consisted of closing the subject roads that belonged to the
then Municipality of Paraaque and were already being used
by the public, limiting their use exclusively to the
subdivisions homeowners, and collecting fees from delivery
vans that would pass through the gates that they themselves
had built. It is petitioners authority to put up the road blocks
in the first place that becomes highly questionable absent
any proof of ownership.
On the other hand, the local government units power to
close and open roads within its jurisdiction is clear under the
Local Government Code, Section 21 of which provides:
Section 21. Closure and Opening of Roads. (a) A local
government unit may, pursuant to an ordinance,permanently
or temporarily close or open any local road, alley, park, or

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square falling within its jurisdiction: Provided, however,

That in case of permanent closure, such ordinance must be
approved by at least two-thirds (2/3) of all the members of
the sanggunian, and when necessary, an adequate substitute
for the public facility that is subject to closure is provided.
We quote with approval the ruling of the Court of Appeals in
this regard, as follows:
Contrary, however, to Appellants position, the above-quoted
provision, which requires the passage of an ordinance by a
local government unit to effect the opening of a local road,
can have no applicability to the instant case since the
subdivision road lots sought to be opened to decongest
traffic in the area - namely Rosemallow and Aster Streets
have already been donated by the Sun Valley Subdivision to,
and the titles thereto already issued in the name of, the City
Government of Paraaque since the year 1964 (Annexes "2"
to "7" of Appellees Brief). This fact has not even been
denied by the Appellant in the proceedings below nor in the
present recourse. Having been already donated or turned
over to the City Government of Paraaque, the road lots in
question have since then taken the nature of public roads
which are withdrawn from the commerce of man, and hence
placed beyond the private rights or claims of herein
Appellant. Accordingly, the Appellant was not in the lawful
exercise of its predicated rights when it built obstructing
structures closing the road lots in question to vehicular
traffic for the use of the general Public. Consequently,
Appellees act of passing the disputed barangay resolution,
the implementation of which is sought to be restrained by
Appellant, had for its purpose not the opening of a private
road but may be considered merely as a directive or
reminder to the Appellant to cause the opening of a public
road which should rightfully be open for use to the general
public.70
Petitioner wants this Court to recognize the rights and
interests of the residents of Sun Valley Subdivision but it
miserably failed to establish the legal basis, such as its
ownership of the subject roads, which entitles petitioner to
the remedy prayed for. It even wants this Court to take
"judicial knowledge that criminal activities such as robbery
and kidnappings are becoming daily fares in Philippine
society."71 This is absurd. The Rules of Court provide which
matters constitute judicial notice, to wit:
Rule
WHAT NEED NOT BE PROVED

129

SECTION 1. Judicial notice, when mandatory.A court

shall take judicial notice, without the introduction of
evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of
nationality, the law of nations, the admiralty and maritime
courts of the world and their seals, the political constitution
and history of the Philippines, the official acts of the
legislative, executive and judicial departments of the
Philippines, the laws of nature, the measure of time, and the
geographical divisions.(1a)1avvphi1
The activities claimed by petitioner to be part of judicial
knowledge are not found in the rule quoted above and do not
support its petition for injunctive relief in any way.
As petitioner has failed to establish that it has any right
entitled to the protection of the law, and it also failed to
exhaust administrative remedies by applying for injunctive
relief instead of going to the Mayor as provided by the Local
Government Code, the petition must be denied.
WHEREFORE, premises considered, the petition is hereby
DENIED. The Court of Appeals DECISION dated October
16, 2002 and its RESOLUTION dated January 17, 2003 in
CA-G.R. CV No. 65559 are both AFFIRMED.
SO ORDERED.

G.R. No. 176707

February 17, 2010

ARLIN
B.
OBIASCA, 1 Petitioner,
vs.
JEANE O. BASALLOTE, Respondent.
DECISION
CORONA, J.:
When the law is clear, there is no other recourse but to apply
it regardless of its perceived harshness. Dura lex sed lex.
Nonetheless, the law should never be applied or interpreted
to oppress one in order to favor another. As a court of law
and of justice, this Court has the duty to adjudicate
conflicting claims based not only on the cold provision of
the law but also according to the higher principles of right
and justice.

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The facts of this case are undisputed.

On May 26, 2003, City Schools Division Superintendent
Nelly B. Beloso appointed respondent Jeane O. Basallote to
the position of Administrative Officer II, Item No. OSECDECSB-ADO2-390030-1998, of the Department of
Education (DepEd), Tabaco National High School in Albay.2
Subsequently, in a letter dated June 4, 2003, 3 the new City
Schools Division Superintendent, Ma. Amy O. Oyardo,
advised School Principal Dr. Leticia B. Gonzales that the
papers of the applicants for the position of Administrative
Officer II of the school, including those of respondent, were
being returned and that a school ranking should be
accomplished and submitted to her office for review. In
addition, Gonzales was advised that only qualified
applicants should be endorsed.
Respondent assumed the office of Administrative Officer II
on June 19, 2003. Thereafter, however, she received a letter
from Ma. Teresa U. Diaz, Human Resource Management
Officer I of the City Schools Division of Tabaco City, Albay,
informing her that her appointment could not be forwarded
to the Civil Service Commission (CSC) because of her
failure to submit the position description form (PDF) duly
signed by Gonzales.
Respondent tried to obtain Gozales signature but the latter
refused despite repeated requests. When respondent
informed Oyardo of the situation, she was instead advised to
return to her former teaching position of Teacher I.
Respondent followed the advice.
Meanwhile, on August 25, 2003, Oyardo appointed
petitioner Arlin B. Obiasca to the same position of
Administrative Officer II. The appointment was sent to and
was properly attested by the CSC. 4 Upon learning this,
respondent filed a complaint with the Office of the Deputy
Ombudsman for Luzon against Oyardo, Gonzales and Diaz.
In its decision, the Ombudsman found Oyardo and Gonzales
administratively liable for withholding information from
respondent on the status of her appointment, and suspended
them from the service for three months. Diaz was absolved
of any wrongdoing.5
Respondent also filed a protest with CSC Regional Office V.
But the protest was dismissed on the ground that it should
first be submitted to the Grievance Committee of the DepEd
for appropriate action.6

On motion for reconsideration, the protest was reinstated but

was eventually dismissed for lack of merit.7Respondent
appealed the dismissal of her protest to the CSC Regional
Office which, however, dismissed the appeal for failure to
show that her appointment had been received and attested by
the CSC.8
Respondent elevated the matter to the CSC. In its November
29, 2005 resolution, the CSC granted the appeal, approved
respondents appointment and recalled the approval of
petitioners appointment.9
Aggrieved, petitioner filed a petition for certiorari in the
Court of Appeals (CA) claiming that the CSC acted without
factual and legal bases in recalling his appointment. He also
prayed for the issuance of a temporary restraining order and
a writ of preliminary injunction.
In its September 26, 2006 decision,10 the CA denied the
petition and upheld respondents appointment which was
deemed effective immediately upon its issuance by the
appointing authority on May 26, 2003. This was because
respondent had accepted the appointment upon her
assumption of the duties and responsibilities of the position.
The CA found that respondent possessed all the
qualifications and none of the disqualifications for the
position of Administrative Officer II; that due to the
respondents valid appointment, no other appointment to the
same position could be made without the position being first
vacated; that the petitioners appointment to the position was
thus void; and that, contrary to the argument of petitioner
that he had been deprived of his right to due process when
he was not allowed to participate in the proceedings in the
CSC, it was petitioner who failed to exercise his right by
failing to submit a single pleading despite being furnished
with copies of the pleadings in the proceedings in the CSC.
The CA opined that Diaz unreasonably refused to affix her
signature on respondents PDF and to submit respondents
appointment to the CSC on the ground of non-submission of
respondents PDF. The CA ruled that the PDF was not even
required to be submitted and forwarded to the CSC.
Petitioner filed a motion for reconsideration but his motion
was denied on February 8, 2007.11
Hence, this petition.12
Petitioner maintains that respondent was not validly
appointed to the position of Administrative Officer II

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because her appointment was never attested by the CSC.

According to petitioner, without the CSC attestation,
respondents appointment as Administrative Officer II was
never completed and never vested her a permanent title. As
such, respondents appointment could still be recalled or
withdrawn by the appointing authority. Petitioner further
argues that, under the Omnibus Rules Implementing Book V
of Executive Order (EO) No. 292,13 every appointment is
required to be submitted to the CSC within 30 days from the
date of issuance; otherwise, the appointment becomes
ineffective.14 Thus, respondents appointment issued on May
23, 2003 should have been transmitted to the CSC not later
than June 22, 2003 for proper attestation. However, because
respondents appointment was not sent to the CSC within the
proper period, her appointment ceased to be effective and the
position of Administrative Officer II was already vacant
when petitioner was appointed to it.
In her comment,15 respondent points out that her
appointment was wrongfully not submitted by the proper
persons to the CSC for attestation. The reason given by
Oyardo for the non-submission of respondents appointment
papers to the CSC the alleged failure of respondent to
have her PDF duly signed by Gonzales was not a valid
reason because the PDF was not even required for the
attestation of respondents appointment by the CSC.
After due consideration of the respective arguments of the
parties, we deny the petition.
The law on the matter is clear. The problem is petitioners
insistence that the law be applied in a manner that is unjust
and unreasonable.
Petitioner relies on an overly restrictive reading of Section
9(h) of PD 80716 which states, in part, that an appointment
must be submitted by the appointing authority to the CSC
within 30 days from issuance, otherwise, the appointment
becomes ineffective:
Sec. 9. Powers and Functions of the Commission. The
[CSC] shall administer the Civil Service and shall have the
following powers and functions:

appropriate eligibility or required qualifications. An

appointment shall take effect immediately upon issue by the
appointing authority if the appointee assumes his duties
immediately and shall remain effective until it is
disapproved by the [CSC], if this should take place, without
prejudice to the liability of the appointing authority for
appointments issued in violation of existing laws or rules:
Provided, finally, That the [CSC] shall keep a record of
appointments of all officers and employees in the civil
service. All appointments requiring the approval of the
[CSC] as herein provided, shall be submitted to it by the
appointing authority within thirty days from issuance,
otherwise the appointment becomes ineffective thirty
days thereafter. (Emphasis supplied)
This provision is implemented in Section 11, Rule V of the
Omnibus Rules Implementing Book V of EO 292 (Omnibus
Rules):
Section 11. An appointment not submitted to the [CSC]
within thirty (30) days from the date of issuance which shall
be the date appearing on the fact of the appointment, shall be
ineffective. xxx
Based on the foregoing provisions, petitioner argues that
respondents appointment became effective on the day of her
appointment but it subsequently ceased to be so when the
appointing authority did not submit her appointment to the
CSC for attestation within 30 days.
Petitioner is wrong.
The real issue in this case is whether the deliberate failure of
the appointing authority (or other responsible officials) to
submit respondents appointment paper to the CSC within 30
days from its issuance made her appointment ineffective and
incomplete. Substantial reasons dictate that it did not.
Before discussing this issue, however, it must be brought to
mind that CSC resolution dated November 29, 2005
recalling petitioners appointment and approving that of
respondent has long become final and executory.
Remedy to Assail CSC Decision or Resolution

xxx

xxx

xxx

(h) Approve all appointments, whether original or

promotional, to positions in the civil service, except those of
presidential appointees, members of the Armed Forces of the
Philippines, police forces, firemen and jailguards, and
disapprove those where the appointees do not possess the

Sections 16 and 18, Rule VI of the Omnibus Rules provide

the proper remedy to assail a CSC decision or resolution:
Section 16. An employee who is still not satisfied with the
decision of the [Merit System Protection Board] may appeal
to the [CSC] within fifteen days from receipt of the decision.

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The decision of the [CSC] is final and executory if no

petition for reconsideration is filed within fifteen days
from receipt thereof.
xxx

xxx

xxx

Section 18. Failure to file a protest, appeal, petition for

reconsideration or petition for review within the
prescribed period shall be deemed a waiver of such right
and shall render the subject action/decision final and
executory. (Emphasis supplied)
In this case, petitioner did not file a petition for
reconsideration of the CSC resolution dated November 29,
2005 before filing a petition for review in the CA. Such fatal
procedural lapse on petitioners part allowed the CSC
resolution dated November 29, 2005 to become final and
executory.17 Hence, for all intents and purposes, the CSC
resolution dated November 29, 2005 has become immutable
and can no longer be amended or modified. 18 A final and
definitive judgment can no longer be changed, revised,
amended or reversed.19 Thus, in praying for the reversal of
the assailed Court of Appeals decision which affirmed the
final and executory CSC resolution dated November 29,
2005, petitioner would want the Court to reverse a final and
executory judgment and disregard the doctrine of
immutability of final judgments.
True, a dissatisfied employee of the civil service is not
preempted from availing of remedies other than those
provided in Section 18 of the Omnibus Rules. This is
precisely the purpose of Rule 43 of the Rules of Court,
which provides for the filing of a petition for review as a
remedy to challenge the decisions of the CSC.
While Section 18 of the Omnibus Rules does not supplant
the mode of appeal under Rule 43, we cannot disregard
Section 16 of the Omnibus Rules, which requires that a
petition for reconsideration should be filed, otherwise, the
CSC decision will become final and executory, viz.:
The decision of the [CSC] is final and executory if no
petition for reconsideration is filed within fifteen days
from receipt thereof. 1avvphi1

Note that the foregoing provision is a specific remedy as

against CSC decisions involving its administrativefunction,
that is, on matters involving "appointments, whether original
or promotional, to positions in the civil service," 20 as
opposed to its quasi-judicial function where it adjudicates
the rights of persons before it, in accordance with the
standards laid down by the law.21
The doctrine of exhaustion of administrative remedies
requires that, for reasons of law, comity and convenience,
where the enabling statute indicates a procedure for
administrative review and provides a system of
administrative appeal or reconsideration, the courts will not
entertain a case unless the available administrative remedies
have been resorted to and the appropriate authorities have
been given an opportunity to act and correct the errors
committed in the administrative forum.22 In Orosa v.
Roa,23 the Court ruled that if an appeal or remedy obtains or
is available within the administrative machinery, this should
be resorted to before resort can be made to the
courts.24 While the doctrine of exhaustion of administrative
remedies is subject to certain exceptions, 25 these are not
present in this case.
Thus, absent any definitive ruling that the second paragraph
of Section 16 is not mandatory and the filing of a petition for
reconsideration may be dispensed with, then the Court must
adhere to the dictates of Section 16 of the Omnibus Rules.
Moreover, even in its substantive aspect, the petition is
bereft of merit.
Section 9(h) of PD 807 Already Amended by Section 12
Book V of EO 292
It is incorrect to interpret Section 9(h) of Presidential Decree
(PD) 807 as requiring that an appointment must be submitted
by the appointing authority to the CSC within 30 days from
issuance, otherwise, the appointment would become
ineffective. Such interpretation fails to appreciate the
relevant part of Section 9(h) which states that "an
appointment shall take effect immediately upon issue by
the appointing authority if the appointee assumes his
duties immediately and shall remain effective until it is
disapproved by the [CSC]." This provision is reinforced by
Section 1, Rule IV of the Revised Omnibus Rules on
Appointments and Other Personnel Actions, which reads:
Section 1. An appointment issued in accordance with
pertinent laws and rules shall take effect immediately
upon its issuance by the appointing authority, and if the

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appointee has assumed the duties of the position, he shall be

entitled to receive his salary at once without awaiting the
approval of his appointment by the Commission. The
appointment shall remain effective until disapproved by
the Commission. x x x (Emphasis supplied)
More importantly, Section 12, Book V of EO 292 amended
Section 9(h) of PD 807 by deleting the requirement that all
appointments subject to CSC approval be submitted to it
within 30 days. Section 12 of EO 292 provides:
Sec. 12. Powers and Functions. - The Commission shall have
the following powers and functions:
xxx

xxx

xxx

(14) Take appropriate action on all appointments and other

personnel matters in the Civil Service, including extension
of Service beyond retirement age;
(15) Inspect and audit the personnel actions and programs of
the departments, agencies, bureaus, offices, local
government units and other instrumentalities of the
government including government -owned or controlled
corporations; conduct periodic review of the decisions and
actions of offices or officials to whom authority has been
delegated by the Commission as well as the conduct of the
officials and the employees in these offices and apply
appropriate sanctions whenever necessary.
As a rule, an amendment by the deletion of certain words or
phrases indicates an intention to change its meaning. 26 It is
presumed that the deletion would not have been made had
there been no intention to effect a change in the meaning of
the law or rule.27 The word, phrase or sentence excised
should accordingly be considered inoperative.28
The dissent refuses to recognize the amendment of Section
9(h) of PD 807 by EO 292 but rather finds the requirement
of submission of appointments within 30 days not
inconsistent with the authority of the CSC to take
appropriate action on all appointments and other personnel
matters. However, the intention to amend by deletion is
unmistakable not only in the operational meaning of EO 292
but in its legislative history as well.
PD 807 and EO 292 are not inconsistent insofar as they
require CSC action on appointments to the civil service. This
is evident from the recognition accorded by EO 292,
specifically under Section 12 (14) and (15) thereof, to the
involvement of the CSC in all personnel actions and

programs of the government. However, while a restrictive

period of 30 days within which appointments must be
submitted to the CSC is imposed under the last sentence of
Section 9(h) of PD 807, none was adopted by Section 12
(14) and (15) of EO 292. Rather, provisions subsequent to
Section 12 merely state that the CSC (and its liaison staff in
various
departments
and
agencies)
shallperiodically monitor, inspect and audit personnel
actions.29 Moreover, under Section 9(h) of PD 807,
appointments not submitted within 30 days to the CSC
become ineffective, no such specific adverse effect is
contemplated under Section 12 (14) and (15) of EO 292.
Certainly, the two provisions are materially inconsistent with
each other. And to insist on reconciling them by restoring the
restrictive period and punitive effect of Section 9(h) of PD
807, which EO 292 deliberately discarded, would be to
rewrite the law by mere judicial interpretation.30
Not even the historical development of civil service laws can
justify the retention of such restrictive provisions. Public
Law No. 5,31 the law formally establishing a civil service
system, merely directed that all heads of offices notify the
Philippine Civil Service Board "in writing without delay of
all appointments x x x made in the classified service." 32 The
Revised Administrative Code of 1917 was even less
stringent as approval by the Director of the Civil Service of
appointments of temporary and emergency employees was
required only when practicable. Finally, Republic Act (RA)
226033 imposed no period within which appointments were
attested to by local government treasurers to whom the CSC
delegated its authority to act on personnel actions but
provided that if within 180 days after receipt of said
appointments, the CSC shall not have made any correction
or revision, then such appointments shall be deemed to have
been properly made. Consequently, it was only under PD
807 that submission of appointments for approval by the
CSC was subjected to a 30-day period. That, however, has
been lifted and abandoned by EO 292.
There being no requirement in EO 292 that appointments
should be submitted to the CSC for attestation within 30
days from issuance, it is doubtful by what authority the CSC
imposed such condition under Section 11, Rule V of the
Omnibus Rules. It certainly cannot restore what EO 292
itself already and deliberately removed. At the very least,
that requirement cannot be used as basis to unjustly
prejudice respondent.
Under the facts obtaining in this case, respondent promptly
assumed her duties as Administrative Officer II when her
appointment was issued by the appointing authority. Thus,

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her appointment took effect immediately and remained

effective until disapproved by the CSC.34 Respondents
appointment was never disapproved by the CSC. In fact, the
CSC was deprived of the opportunity to act promptly as it
was wrongly prevented from doing so. More
importantly, the CSC subsequently approved respondents
appointment and recalled that of petitioner, which recall has
already become final and immutable.
Second, it is undisputed that respondents appointment was
not submitted to the CSC, not through her own fault but
because of Human Resource Management Officer I Ma.
Teresa U. Diazs unjustified refusal to sign it on the feigned
and fallacious ground that respondents position description
form had not been duly signed by School Principal Dr.
Leticia B. Gonzales.35 Indeed, the CSC even sanctioned Diaz
for her failure to act in the required manner.36 Similarly, the
Ombudsman found both City Schools Division
Superintendent Ma. Amy O. Oyardo and Gonzales
administratively liable and suspended them for three months
for willfully withholding information from respondent on the
status of her appointment.
xxx

xxx

xxx

All along, [respondent] was made to believe that her

appointment was in order. During the same period,
respondent Gonzales, with respondent Oyardos knowledge,
indifferently allowed [respondent] to plea for the signing of
her [position description form], when they could have easily
apprised [respondent] about the revocation/withdrawal of
her appointment. Worse, when [respondent] informed
Oyardo on 25 June 2003 about her assumption of office as
[Administrative Officer II], the latter directed [respondent]
to go back to her post as Teacher I on the ground that
[respondent] had not been issued an attested appointment as
[Administrative Officer II], even when [Oyardo] knew very
well that [respondents] appointment could not be processed
with the CSC because of her order to re-evaluate the
applicants. This act by [Oyardo] is a mockery of the trust
reposed upon her by [respondent], who, then in the state of
quandary, specifically sought [Oyardos] advice on what to
do with her appointment, in the belief that her superior could
enlighten her on the matter.
It was only on 02 July 2003 when [Gonzales], in her letter,
first made reference to a re-ranking of the applicants when
[respondent] learned about the recall by [Oyardo] of her
appointment. At that time, the thirty-day period within which
to submit her appointment to the CSC has lapsed. [Oyardos]
and Gonzales act of withholding information about the real

status of [respondents] appointment unjustly deprived her of

pursuing whatever legal remedies available to her at that
time to protect her interest.37
Considering these willful and deliberate acts of the coconspirators Diaz, Oyardo and Gonzales that caused undue
prejudice to respondent, the Court cannot look the other way
and make respondent suffer the malicious consequences of
Gonzaless and Oyardos malfeasance. Otherwise, the Court
would be recognizing a result that is unconscionable and
unjust by effectively validating the following inequities:
respondent, who was vigilantly following up her
appointment paper, was left to hang and dry; to add insult to
injury, not long after Oyardo advised her to return to her
teaching position, she (Oyardo) appointed petitioner in
respondents stead.
The obvious misgiving that comes to mind is why Gonzales
and Oyardo were able to promptly process petitioners
appointment and transmit the same to the CSC for attestation
when they could not do so for respondent. There is no doubt
that office politics was moving behind the scenes.
In effect, Gonzales and Oyardos scheming and plotting
unduly deprived respondent of the professional advancement
she deserved. While public office is not property to which
one may acquire a vested right, it is nevertheless a protected
right.38
It cannot be overemphasized that respondents appointment
became effective upon its issuance by the appointing
authority and it remained effective until disapproved by the
CSC (if at all it ever was). Disregarding this rule and putting
undue importance on the provision requiring the submission
of the appointment to the CSC within 30 days will reward
wrongdoing in the appointment process of public officials
and employees. It will open the door for scheming officials
to block the completion and implementation of an
appointment and render it ineffective by the simple
expedient of not submitting the appointment paper to the
CSC. As indubitably shown in this case, even respondents
vigilance could not guard against the malice and grave abuse
of discretion of her superiors.
There is no dispute that the approval of the CSC is a legal
requirement to complete the appointment. Under settled
jurisprudence, the appointee acquires a vested legal right to
the position or office pursuant to this completed
appointment.39 Respondents appointment was in fact
already approved by the CSC with finality.

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The purpose of the requirement to submit the appointment to

the CSC is for the latter to approve or disapprove such
appointment depending on whether the appointee possesses
the appropriate eligibility or required qualifications and
whether the laws and rules pertinent to the process of
appointment have been followed.40 With this in mind,
respondents appointment should all the more be deemed
valid.
Respondents papers were in order. What was sought from
her (the position description form duly signed by Gonzales)
was not even a prerequisite before her appointment papers
could be forwarded to the CSC. More significantly,
respondent was qualified for the position. Thus, as stated by
the CA:
The evidence also reveals compliance with the procedures
that should be observed in the selection process for the
vacant position of Administrative Officer II and the issuance
of the appointment to the respondent: the vacancy for the
said position was published on February 28, 2003; the
Personnel Selection Board of Dep-Ed Division of Tabaco
City conducted a screening of the applicants, which included
the respondent and the petitioner; the respondents
qualifications met the minimum qualifications for the
position of Administrative Officer II provided by the CSC.
She therefore qualified for permanent appointment.41
There is no doubt that, had the appointing authority only
submitted respondents appointment to the CSC within the
said 30 days from its issuance, the CSC would (and could )
have approved it. In fact, when the CSC was later apprised
of respondents prior appointment when she protested
petitioners subsequent appointment, it was respondents
appointment which the CSC approved. Petitioners
appointment was recalled. These points were never rebutted
as petitioner gave undue emphasis to the non-attestation by
the CSC of respondents appointment, without any regard for
the fact that the CSC actually approved respondents
appointment.
Third, the Court is urged to overlook the injustice done to
respondent by citing Favis v. Rupisan42 and Tomali v. Civil
Service Commission.43
However, reliance on Favis is misplaced. In Favis, the issue
pertains to the necessity of the CSC approval, not the
submission of the appointment to the CSC within 30 days
from issuance. Moreover, unlike Favis where there was an
apparent lack of effort to procure the approval of the CSC,
respondent in this case was resolute in following up her

appointment papers. Thus, despite Favis having assumed

the responsibilities of PVTA Assistant General Manager for
almost two years, the Court affirmed her removal, ruling
that:
The tolerance, acquiescence or mistake of the proper
officials, resulting in the non-observance of the pertinent
rules on the matter does not render the legal requirement, on
the necessity of approval by the Commissioner of Civil
Service
of
appointments,
ineffective
and
unenforceable.44 (Emphasis supplied)
Taken in its entirety, this case shows that the lack of CSC
approval was not due to any negligence on respondents
part. Neither was it due to the "tolerance, acquiescence
or mistake of the proper officials." Rather, the
underhanded machinations of Gonzales and Oyardo, as
well as the gullibility of Diaz, were the major reasons
why respondents appointment was not even forwarded
to the CSC.
Tomali, likewise, is not applicable. The facts are completely
different. In Tomali, petitioner Tomalis appointment was not
approved by the CSC due to the belated transmittal thereof
to the latter. The Court, citing Favis, ruled that the
appointees failure to secure the CSCs approval within the
30-day period rendered her appointment ineffective. It
quoted the Merit Systems Protection Boards finding that
"there is no showing that the non-submission was motivated
by bad faith, spite, malice or at least attributed to the fault of
the newly installed [Office of Muslim Affairs] Executive
Director." The Court observed:
Petitioner herself would not appear to be all that blameless.
She assumed the position four months after her appointment
was issued or months after that appointment had already
lapsed or had become ineffective by operation of law.
Petitioner's appointment was issued on 01 July 1990, but it
was only on 31 May 1991 that it was submitted to the CSC,
a fact which she knew, should have known or should have at
least verified considering the relatively long interval of time
between the date of her appointment and the date of her
assumption to office.45
The Court also found that "[t]here (was) nothing on record to
convince us that the new OMA Director (had) unjustly
favored private respondent nor (had) exercised his power of
appointment in an arbitrary, whimsical or despotic
manner."46

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The peculiar circumstances in Tomali are definitely not

present here. As a matter of fact, the situation was exactly
the opposite. As we have repeatedly stressed, respondent
was not remiss in zealously following up the status of her
appointment. It cannot be reasonably claimed that the failure
to submit respondents appointment to the CSC was due to
her own fault. The culpability lay in the manner the
appointing officials exercised their power with arbitrariness,
whim and despotism. The whole scheme was intended to
favor another applicant.
Therefore,
the
lack
of
CSC
approval
in Favis and Tomali should be taken only in that light and
not overly stretched to cover any and all similar cases
involving the 30-day rule. Certainly, the CSC approval
cannot be done away with. However, an innocent appointee
like the respondent should not be penalized if her papers
(which were in the custody and control of others who, it
turned out, were all scheming against her) did not reach the
CSC on time. After all, her appointment was subsequently
approved by the CSC anyway.
Under Article 1186 of the Civil Code, "[t]he condition shall
be deemed fulfilled when the obligor voluntarily prevents its
fulfillment." Applying this to the appointment process in the
civil service, unless the appointee himself is negligent in
following up the submission of his appointment to the CSC
for approval, he should not be prejudiced by any willful act
done in bad faith by the appointing authority to prevent the
timely submission of his appointment to the CSC. While it
may be argued that the submission of respondents
appointment to the CSC within 30 days was one of the
conditions for the approval of respondents appointment,
however, deliberately and with bad faith, the officials
responsible for the submission of respondents appointment
to the CSC prevented the fulfillment of the said condition.
Thus, the said condition should be deemed fulfilled.
The Court has already had the occasion to rule that an
appointment remains valid in certain instances despite noncompliance of the proper officials with the pertinent CSC
rules. In Civil Service Commission v. Joson, Jr.,47the CSC
challenged the validity of the appointment of Ong on the
ground that, among others, it was not reported in the July
1995 Report of Personnel Action (ROPA), thus making such
appointment ineffective. The subject rule provided that an
"appointment issued within the month but not listed in the
ROPA for the said month shall become ineffective thirty
days from issuance." Rejecting the CSCs contention, the
Court held that there was a legitimate justification for such
delayed observance of the rule:

We find the respondent's justification for the failure of the

POEA to include Ong's appointment in its ROPA for July
1995 as required by CSC Memorandum Circular No. 27,
Series of 1994 to be in order. The records show that the
[Philippine Overseas Employment Administration (POEA)]
did not include the contractual appointment of Ong in its
July ROPA because its request for exemption from the
educational requisite for confidential staff members provided
in [Memorandum Circular] No. 38 had yet been resolved by
the CSC. The resolution of the petitioner granting such
request was received only in November, 1995. The POEA,
thereafter, reported the appointment in its November, 1995
ROPA.48
The Court reached the same conclusion in the recent case
of Chavez v. Ronidel49 where there was a similar inaction
from the responsible officials which resulted in noncompliance with the requirement:
Lastly, we agree with the appellate court that respondent's
appointment could not be invalidated solely because of
[Presidential Commission for the Urban Poors (PCUPs)]
failure to submit two copies of the ROPA as required by
CSC Resolution No. 97368. xxxx
xxx

xxx

xxx

We quote with approval the appellate court's ratiocination in

this wise:
To our minds, however, the invalidation of the
[respondent's] appointment based on this sole technical
ground is unwarranted, if not harsh and arbitrary,
considering the factual milieu of this case. For one, it is
not the [respondent's] duty to comply with the
requirement of the submission of the ROPA and the
certified true copies of her appointment to [the Civil Service
Commission Field Office or] CSCFO within the period
stated in the aforequoted CSC Resolution. The said
resolution categorically provides that it is the PCUP, and not
the appointee as in the case of the [respondent] here, which
is required to comply with the said reportorial requirements.
Moreover, it bears pointing out that only a few days after the
[petitioner] assumed his new post as PCUP Chairman, he
directed the PCUP to hold the processing of [respondent's]
appointment papers in abeyance, until such time that an
assessment thereto is officially released from his office.
Unfortunately, up to this very day, the [respondent] is still
defending her right to enjoy her promotional appointment as
DMO V. Naturally, her appointment failed to comply

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with the PCUP's reportorial requirements under CSC

Resolution No. 97-3685precisely because of the
[petitioner's] inaction to the same.
We believe that the factual circumstances of this case calls
for the application of equity. To our minds, the invalidation
of the [respondent's] appointment due to a procedural
lapse which is undoubtedly beyond her control, and
certainly not of her own making but that of the
[petitioner], justifies the relaxation of the provisions of
CSC Board Resolution No. 97-3685, pars. 6,7 and 8. Hence,
her appointment must be upheld based on equitable
considerations, and that the non-submission of the ROPA
and the certified true copies of her appointment to the
CSCFO within the period stated in the aforequoted CSC
Resolution should not work to her damage and prejudice.
Besides, the [respondent] could not at all be faulted for
negligence as she exerted all the necessary vigilance and
efforts to reap the blessings of a work promotion. Thus, We
cannot simply ignore her plight. She has fought hard
enough to claim what is rightfully hers and, as a matter of
simple justice, good conscience, and equity, We should not
allow Ourselves to prolong her agony.
All told, We hold that the [respondent's] appointment is
valid, notwithstanding the aforecited procedural lapse on the
part of PCUP which obviously was the own making of
herein [petitioner]. (Emphasis supplied)
Respondent deserves the same sympathy from the Court
because there was also a telling reason behind the nonsubmission of her appointment paper within the 30-day
period.
The relevance of Joson and Chavez to this case cannot be
simply glossed over. While the agencies concerned in those
cases were accredited agencies of the CSC which could take
final action on the appointments, that is not the case here.
Thus, any such differentiation is unnecessary. It did not even
factor in the Courts disposition of the issue
in Joson and Chavez. What is crucial is that, in those cases,
the Court upheld the appointment despite the noncompliance with a CSC rule because (1) there were valid
justifications for the lapse; (2) the non-compliance was
beyond the control of the appointee and (3) the appointee
was not negligent. All these reasons are present in this case,
thus, there is no basis in saying that the afore-cited cases are
not applicable here. Similar things merit similar
treatment.1avvphi1

Fourth, in appointing petitioner, the appointing authority

effectively revoked the previous appointment of respondent
and usurped the power of the CSC to withdraw or revoke an
appointment that had already been accepted by the
appointee. It is the CSC, not the appointing authority, which
has this power.50 This is clearly provided in Section 9, Rule
V of the Omnibus Rules:
Section 9. An appointment accepted by the appointee
cannot be withdrawn or revoked by the appointing
authority and shall remain in force and effect until
disapproved by the [CSC]. xxxx (Emphasis supplied)
Thus, the Court ruled in De Rama v. Court of Appeals51 that
it is the CSC which is authorized to recall an appointment
initially approved when such appointment and approval are
proven to be in disregard of applicable provisions of the civil
service law and regulations.
Petitioner seeks to inflexibly impose the condition of
submission of the appointment to the CSC by the appointing
authority within 30 days from issuance, that is, regardless of
the negligence/diligence of the appointee and the bad
faith/good faith of the appointing authority to ensure
compliance with the condition. However, such stance
would place the appointee at the mercy and whim of the
appointing authority even after a valid appointment has
been made. For although the appointing authority may not
recall an appointment accepted by the appointee, he or she
can still achieve the same result through underhanded
machinations that impedes or prevents the transmittal of the
appointment to the CSC. In other words, the insistence on a
strict application of the condition regarding the submission
of the appointment to the CSC within 30 days, would give
the appointing authority the power to do indirectly what he
or she cannot do directly. An administrative rule that is of
doubtful basis will not only produce unjust consequences but
also corrupt the appointment process. Obviously, such
undesirable end result could not have been the intention of
the law.
The power to revoke an earlier appointment through the
appointment of another may not be conceded to the
appointing authority. Such position is not only contrary to
Section 9, Rule V and Section 1, Rule IV of the Omnibus
Rules. It is also a dangerous reading of the law because it
unduly expands the discretion given to the appointing
authority and removes the checks and balances that will rein
in any abuse that may take place. The Court cannot
countenance such erroneous and perilous interpretation of
the law.

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Accordingly, petitioners subsequent appointment was void.

There can be no appointment to a non-vacant position. The
incumbent must first be legally removed, or her appointment
validly terminated, before another can be appointed to
succeed her.52
In sum, the appointment of petitioner was inconsistent with
the law and well-established jurisprudence. It not only
disregarded the doctrine of immutability of final judgments
but also unduly concentrated on a narrow portion of the
provision of law, overlooking the greater part of the
provision and other related rules and using a legal doctrine
rigidly and out of context. Its effect was to perpetuate an
injustice.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.

G.R. No. 158253

March 2, 2007

REPUBLIC OF THE PHILIPPINES, represented by the

DEPARTMENT
OF
PUBLIC
WORKS
AND
HIGHWAYS, COMMISSION ON AUDIT and THE
NATIONAL
TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name and
style
CARWIN
CONSTRUCTION
AND
CONSTRUCTION SUPPLY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under
Rule 45 of the Revised Rules of Court assailing the
Decision1 dated April 28, 2003 of the Court of Appeals (CA)
in CA-G.R. CV No. 56345 which affirmed with
modification the Decision2 of the Regional Trial Court,
Branch 41, San Fernando, Pampanga (RTC) in Civil Case
No. 10538, granting the complaint for Specific Performance
and Damages filed by Carlito Lacap (respondent) against the
Republic of the Philippines (petitioner).
The factual background of the case is as follows:

The District Engineer of Pampanga issued and duly

published an "Invitation To Bid" dated January 27, 1992.
Respondent, doing business under the name and style
Carwin Construction and Construction Supply (Carwin
Construction), was pre-qualified together with two other
contractors. Since respondent submitted the lowest bid, he
was awarded the contract for the concreting
of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract
Agreement was executed by respondent and petitioner.4 On
September 25, 1992, District Engineer Rafael S. Ponio
issued a Notice to Proceed with the concreting
of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook
the works, made advances for the purchase of the materials
and payment for labor costs.6
On October 29, 1992, personnel of the Office of the District
Engineer of San Fernando, Pampanga conducted a final
inspection of the project and found it 100% completed in
accordance with the approved plans and specifications.
Accordingly, the Office of the District Engineer issued
Certificates of Final Inspection and Final Acceptance. 7
Thereafter, respondent sought to collect payment for the
completed project.8 The DPWH prepared the Disbursement
Voucher in favor of petitioner.9 However, the DPWH
withheld payment from respondent after the District Auditor
of the Commission on Audit (COA) disapproved the final
release of funds on the ground that the contractors license of
respondent had expired at the time of the execution of the
contract. The District Engineer sought the opinion of the
DPWH Legal Department on whether the contracts of
Carwin Construction for various Mount Pinatubo
rehabilitation projects were valid and effective although its
contractors license had already expired when the projects
were contracted.10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia,
Director III of the DPWH Legal Department opined that
since Republic Act No. 4566 (R.A. No. 4566), otherwise
known as the Contractors License Law, does not provide
that a contract entered into after the license has expired is
void and there is no law which expressly prohibits or
declares void such contract, the contract is enforceable and
payment may be paid, without prejudice to any appropriate
administrative liability action that may be imposed on the
contractor and the government officials or employees
concerned.11
In a Letter dated July 4, 1994, the District Engineer
requested clarification from the DPWH Legal Department
on whether Carwin Construction should be paid for works

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accomplished despite an expired contractors license at the

time the contracts were executed.12

to overrun the long standing and consistent pronouncement

against enriching oneself at the expense of another.22

In a First Indorsement dated July 20, 1994, Cesar D. Mejia,

Director III of the Legal Department, recommended that
payment should be made to Carwin Construction, reiterating
his earlier legal opinion.13 Despite such recommendation for
payment, no payment was made to respondent.

Dissatisfied, petitioner filed an appeal with the CA. 23 On

April 28, 2003, the CA rendered its Decision sustaining the
Decision of the RTC. It held that since the case involves the
application of the principle of estoppel against the
government which is a purely legal question, then the
principle of exhaustion of administrative remedies does not
apply; that by its actions the government is estopped from
questioning the validity and binding effect of the Contract
Agreement with the respondent; that denial of payment to
respondent on purely technical grounds after successful
completion of the project is not countenanced either by
justice or equity.

Thus, on July 3, 1995, respondent filed the complaint for

Specific Performance and Damages against petitioner before
the RTC.14
On September 14, 1995, petitioner, through the Office of the
Solicitor General (OSG), filed a Motion to Dismiss the
complaint on the grounds that the complaint states no cause
of action and that the RTC had no jurisdiction over the
nature of the action since respondent did not appeal to the
COA the decision of the District Auditor to disapprove the
claim.15
Following the submission of respondents Opposition to
Motion to Dismiss,16 the RTC issued an Order dated March
11, 1996 denying the Motion to Dismiss.17 The OSG filed a
Motion for Reconsideration18 but it was likewise denied by
the RTC in its Order dated May 23, 1996.19

The CA rendered herein the assailed Decision dated April

28, 2003, the dispositive portion of which reads:
WHEREFORE, the decision of the lower court is hereby
AFFIRMED with modification in that the interest shall be
six percent (6%) per annum computed from June 21, 1995.
SO ORDERED.24
Hence, the present petition on the following ground:

On August 5, 1996, the OSG filed its Answer invoking the

defenses of non-exhaustion of administrative remedies and
the doctrine of non-suability of the State.20

THE COURT OF APPEALS ERRED IN NOT FINDING

THAT RESPONDENT HAS NO CAUSE OF ACTION
AGAINST PETITIONER, CONSIDERING THAT:

Following trial, the RTC rendered on February 19, 1997 its

Decision, the dispositive portion of which reads as follows:

(a)
RESPONDENT
FAILED
TO
ADMINISTRATIVE REMEDIES; AND

WHEREFORE, in view of all the foregoing consideration,

judgment is hereby rendered in favor of the plaintiff and
against the defendant, ordering the latter, thru its District
Engineer at Sindalan, San Fernando, Pampanga, to pay the
following:

(b) IT IS THE COMMISSION ON AUDIT WHICH HAS

THE PRIMARY JURISDICTION TO RESOLVE
RESPONDENTS MONEY CLAIM AGAINST THE
GOVERNMENT.25

a) P457,000.00 representing the contract for the concreting

project of Sitio 5 road, Bahay Pare, Candaba, Pampanga plus
interest at 12% from demand until fully paid; and
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay the
contract price since it has accepted the completed project
and enjoyed the benefits thereof; to hold otherwise would be

EXHAUST

Petitioner contends that respondents recourse to judicial

action was premature since the proper remedy was to appeal
the District Auditors disapproval of payment to the COA,
pursuant to Section 48, Presidential Decree No. 1445 (P.D.
No. 1445), otherwise known as the Government Auditing
Code of the Philippines; that the COA has primary
jurisdiction to resolve respondents money claim against the
government under Section 2(1),26 Article IX of the 1987
Constitution and Section 2627 of P.D. No. 1445; that nonobservance of the doctrine of exhaustion of administrative
remedies and the principle of primary jurisdiction results in a
lack of cause of action.

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Respondent, on the other hand, in his Memorandum 28 limited

his discussion to Civil Code provisions relating to human
relations. He submits that equity demands that he be paid for
the work performed; otherwise, the mandate of the Civil
Code provisions relating to human relations would be
rendered nugatory if the State itself is allowed to ignore and
circumvent the standard of behavior it sets for its
inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the
intervention of the court, he should first avail of all the
means afforded him by administrative processes. 29 The
issues which administrative agencies are authorized to
decide should not be summarily taken from them and
submitted to a court without first giving such administrative
agency the opportunity to dispose of the same after due
deliberation.30
Corollary to the doctrine of exhaustion of administrative
remedies is the doctrine of primary jurisdiction; that is,
courts cannot or will not determine a controversy involving a
question which is within the jurisdiction of the
administrative tribunal prior to the resolution of that
question by the administrative tribunal, where the question
demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of
the administrative tribunal to determine technical and
intricate matters of fact.31

Nonetheless, the doctrine of exhaustion of administrative

remedies and the corollary doctrine of primary jurisdiction,
which are based on sound public policy and practical
considerations, are not inflexible rules. There are many
accepted exceptions, such as: (a) where there is estoppel on
the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting
to lack of jurisdiction; (c) where there is unreasonable delay
or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively
small so as to make the rule impractical and oppressive; (e)
where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; 32 (f)
where judicial intervention is urgent; (g) when its application
may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) when the issue of
non-exhaustion of administrative remedies has been
rendered moot;33 (j) when there is no other plain, speedy and
adequate remedy; (k) when strong public interest is
involved; and, (l) in quo warranto proceedings. 34 Exceptions
(c) and (e) are applicable to the present case.
Notwithstanding the legal opinions of the DPWH Legal
Department rendered in 1993 and 1994 that payment to a
contractor with an expired contractors license is proper,
respondent remained unpaid for the completed work despite
repeated demands. Clearly, there was unreasonable delay
and official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at
the time of the execution of its contract is entitled to be paid
for completed projects, clearly is a pure question of law. It
does not involve an examination of the probative value of
the evidence presented by the parties. There is a question of
law when the doubt or difference arises as to what the law is
on a certain state of facts, and not as to the truth or the
falsehood of alleged facts.35Said question at best could be
resolved only tentatively by the administrative authorities.
The final decision on the matter rests not with them but with
the courts of justice. Exhaustion of administrative remedies
does not apply, because nothing of an administrative nature
is to be or can be done.36 The issue does not require technical
knowledge and experience but one that would involve the
interpretation and application of law.
Thus, while it is undisputed that the District Auditor of the
COA disapproved respondents claim against the
Government, and, under Section 48 37 of P.D. No. 1445, the
administrative remedy available to respondent is an appeal
of the denial of his claim by the District Auditor to the COA
itself, the Court holds that, in view of exceptions (c) and (e)

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narrated above, the complaint for specific performance and

damages was not prematurely filed and within the
jurisdiction of the RTC to resolve, despite the failure to
exhaust administrative remedies. As the Court aptly stated in
Rocamora v. RTC-Cebu (Branch VIII):38

contractor whose license had already expired. Nonetheless,

such contractor is liable for payment of the fine prescribed
therein. Thus, respondent should be paid for the projects he
completed. Such payment, however, is without prejudice to
the payment of the fine prescribed under the law.

The plaintiffs were not supposed to hold their breath and

wait until the Commission on Audit and the Ministry of
Public Highways had acted on the claims for compensation
for the lands appropriated by the government. The road had
been completed; the Pope had come and gone; but the
plaintiffs had yet to be paid for the properties taken from
them. Given this official indifference, which apparently
would continue indefinitely, the private respondents had to
act to assert and protect their interests.39

Besides, Article 22 of the Civil Code which embodies the

maxim Nemo ex alterius incommode debet lecupletari (no
man ought to be made rich out of anothers injury) states:

On the question of whether a contractor with an expired

license is entitled to be paid for completed projects, Section
35 of R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price,
commission, fee or wage, submits or attempts to submit a
bid to construct, or contracts to or undertakes to construct, or
assumes charge in a supervisory capacity of a construction
work within the purview of this Act, without first securing a
license to engage in the business of contracting in this
country; or who shall present or file the license certificate of
another, give false evidence of any kind to the Board, or any
member thereof in obtaining a certificate or license,
impersonate another, or use an expired or revoked certificate
or license, shall be deemed guilty of misdemeanor, and shall,
upon conviction, be sentenced to pay a fine of not less than
five hundred pesos but not more than five thousand pesos.
(Emphasis supplied)
The "plain meaning rule" or verba legis in statutory
construction is that if the statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied
without interpretation.40 This rule derived from the
maxim Index animi sermo est (speech is the index of
intention) rests on the valid presumption that the words
employed by the legislature in a statute correctly express its
intention or will and preclude the court from construing it
differently. The legislature is presumed to know the meaning
of the words, to have used words advisedly, and to have
expressed its intent by use of such words as are found in the
statute.41 Verba legis non est recedendum, or from the words
of a statute there should be no departure.42
The wordings of R.A. No. 4566 are clear. It does not declare,
expressly or impliedly, as void contracts entered into by a

Art. 22. Every person who through an act of performance by

another, or any other means, acquires or comes into
possession of something at the expense of the latter without
just or legal ground, shall return the same to him.
This article is part of the chapter of the Civil Code on
Human Relations, the provisions of which were formulated
as "basic principles to be observed for the rightful
relationship between human beings and for the stability of
the social order, x x x designed to indicate certain norms that
spring from the fountain of good conscience, x x x guides
human conduct [that] should run as golden threads through
society to the end that law may approach its supreme ideal
which is the sway and dominance of justice." 43 The rules
thereon apply equally well to the Government.44 Since
respondent had rendered services to the full satisfaction and
acceptance by petitioner, then the former should be
compensated for them. To allow petitioner to acquire the
finished project at no cost would undoubtedly constitute
unjust enrichment for the petitioner to the prejudice of
respondent. Such unjust enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of
merit. The assailed Decision of the Court of Appeals dated
April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 156109

November 18, 2004

KHRISTINE REA M. REGINO, Assisted and

Represented by ARMANDO REGINO, petitioner,
vs.
PANGASINAN COLLEGES OF SCIENCE AND
TECHNOLOGY, RACHELLE A. GAMUROT and
ELISSA BALADAD, respondents.

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DECISION
PANGANIBAN, J.:
Upon enrolment, students and their school enter upon a
reciprocal contract. The students agree to abide by the
standards of academic performance and codes of conduct,
issued usually in the form of manuals that are distributed to
the enrollees at the start of the school term. Further, the
school informs them of the itemized fees they are expected
to pay. Consequently, it cannot, after the enrolment of a
student, vary the terms of the contract. It cannot require fees
other than those it specified upon enrolment.

The Case
Before the Court is a Petition for Review under Rule
45,1 seeking to nullify the July 12, 2002 2 and the November
22, 20023 Orders of the Regional Trial Court (RTC) of
Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U7541. The decretal portion of the first assailed Order reads:
"WHEREFORE, the Court GRANTS the instant
motion to dismiss for lack of cause of action."4
The second challenged Order denied petitioner's Motion for
Reconsideration.

the tests. According to petitioner, Gamurot made her sit out

her logic class while her classmates were taking their
examinations. The next day, Baladad, after announcing to
the entire class that she was not permitting petitioner and
another student to take their statistics examinations for
failing to pay for their tickets, allegedly ejected them from
the classroom. Petitioner's pleas ostensibly went unheeded
by Gamurot and Baladad, who unrelentingly defended their
positions as compliance with PCST's policy.
On April 25, 2002, petitioner filed, as a pauper litigant, a
Complaint5 for damages against PCST, Gamurot and
Baladad. In her Complaint, she prayed for P500,000 as
nominal damages; P500,000 as moral damages; at least
P1,000,000 as exemplary damages; P250,000 as actual
damages; plus the costs of litigation and attorney's fees.
On May 30, 2002, respondents filed a Motion to Dismiss 6 on
the ground of petitioner's failure to exhaust administrative
remedies. According to respondents, the question raised
involved the determination of the wisdom of an
administrative policy of the PCST; hence, the case should
have been initiated before the proper administrative body,
the Commission of Higher Education (CHED).
In her Comment to respondents' Motion, petitioner argued
that prior exhaustion of administrative remedies was
unnecessary, because her action was not administrative in
nature, but one purely for damages arising from respondents'
breach of the laws on human relations. As such, jurisdiction
lay with the courts.

The Facts
Petitioner Khristine Rea M. Regino was a first year
computer science student at Respondent Pangasinan
Colleges of Science and Technology (PCST). Reared in a
poor family, Regino went to college mainly through the
financial support of her relatives. During the second
semester of school year 2001-2002, she enrolled in logic and
statistics subjects under Respondents Rachelle A. Gamurot
and Elissa Baladad, respectively, as teachers.
In February 2002, PCST held a fund raising campaign
dubbed the "Rave Party and Dance Revolution," the
proceeds of which were to go to the construction of the
school's tennis and volleyball courts. Each student was
required to pay for two tickets at the price of P100 each. The
project was allegedly implemented by recompensing
students who purchased tickets with additional points in
their test scores; those who refused to pay were denied the
opportunity to take the final examinations.
Financially strapped and prohibited by her religion from
attending dance parties and celebrations, Regino refused to
pay for the tickets. On March 14 and March 15, 2002, the
scheduled dates of the final examinations in logic and
statistics, her teachers -- Respondents Rachelle A. Gamurot
and Elissa Baladad -- allegedly disallowed her from taking

On July 12, 2002, the RTC dismissed the Complaint for lack
of cause of action.
Ruling of the Regional Trial Court
In granting respondents' Motion to Dismiss, the trial court
noted that the instant controversy involved a higher
institution of learning, two of its faculty members and one of
its students. It added that Section 54 of the Education Act of
1982 vested in the Commission on Higher Education
(CHED) the supervision and regulation of tertiary schools.
Thus, it ruled that the CHED, not the courts, had jurisdiction
over the controversy.7
In its dispositive portion, the assailed Order dismissed the
Complaint for "lack of cause of action" without, however,
explaining this ground.
Aggrieved, petitioner filed the present Petition on pure
questions of law.8
Issues
In her Memorandum, petitioner raises the following issues
for our consideration:

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"Whether or not the principle of exhaustion of

administrative remedies applies in a civil action
exclusively for damages based on violation of the
human relation provisions of the Civil Code, filed
by a student against her former school.
"Whether or not there is a need for prior declaration
of invalidity of a certain school administrative
policy by the Commission on Higher Education
(CHED) before a former student can successfully
maintain an action exclusively for damages in
regular courts.
"Whether or not the Commission on Higher
Education (CHED) has exclusive original
jurisdiction over actions for damages based upon
violation of the Civil Code provisions on human
relations filed by a student against the school."9
All of the foregoing point to one issue -- whether the
doctrine of exhaustion of administrative remedies is
applicable. The Court, however, sees a second issue which,
though not expressly raised by petitioner, was impliedly
contained in her Petition: whether the Complaint stated
sufficient cause(s) of action.

"The doctrine of exhaustion of administrative

remedies is basic. Courts, for reasons of law,
comity, and convenience, should not entertain suits
unless the available administrative remedies have
first been resorted to and the proper authorities
have been given the appropriate opportunity to act
and correct their alleged errors, if any, committed in
the administrative forum. x x x.13"
Petitioner is not asking for the reversal of the policies of
PCST. Neither is she demanding it to allow her to take her
final examinations; she was already enrolled in another
educational institution. A reversal of the acts complained of
would not adequately redress her grievances; under the
circumstances, the consequences of respondents' acts could
no longer be undone or rectified.
Second, exhaustion of administrative remedies is applicable
when there is competence on the part of the administrative
body to act upon the matter complained of. 14 Administrative
agencies are not courts; they are neither part of the judicial
system, nor are they deemed judicial tribunals. 15 Specifically,
the CHED does not have the power to award
damages.16 Hence, petitioner could not have commenced her
case before the Commission.

First Issue:

Third, the exhaustion doctrine admits of exceptions, one of

which arises when the issue is purely legal and well within
the jurisdiction of the trial court. 17 Petitioner's action for
damages inevitably calls for the application and the
interpretation of the Civil Code, a function that falls within
the jurisdiction of the courts.18

Exhaustion of Administrative Remedies

Second Issue:

Respondents anchored their Motion to Dismiss on

petitioner's alleged failure to exhaust administrative
remedies before resorting to the RTC. According to them,
the determination of the controversy hinge on the validity,
the wisdom and the propriety of PCST's academic policy.
Thus, the Complaint should have been lodged in the CHED,
the administrative body tasked under Republic Act No. 7722
to implement the state policy to "protect, foster and promote
the right of all citizens to affordable quality education at all
levels and to take appropriate steps to ensure that education
is accessible to all."10

Cause of Action

The Court's Ruling

The Petition is meritorious.

Petitioner counters that the doctrine finds no relevance to the

present case since she is praying for damages, a remedy
beyond the domain of the CHED and well within the
jurisdiction of the courts.11
Petitioner is correct. First, the doctrine of exhaustion of
administrative remedies has no bearing on the present case.
In Factoran Jr. v. CA,12 the Court had occasion to elucidate
on the rationale behind this doctrine:

Sufficient Causes of Action Stated in the Allegations in the

Complaint
As a rule, every complaint must sufficiently allege a cause of
action; failure to do so warrants its dismissal. 19 A complaint
is said to assert a sufficient cause of action if, admitting what
appears solely on its face to be correct, the plaintiff would be
entitled to the relief prayed for. Assuming the facts that are
alleged to be true, the court should be able to render a valid
judgment in accordance with the prayer in the complaint.20
A motion to dismiss based on lack of cause of action
hypothetically admits the truth of the alleged facts. In their
Motion to Dismiss, respondents did not dispute any of
petitioner's allegations, and they admitted that "x x x the
crux of plaintiff's cause of action is the determination of
whether or not the assessment of P100 per ticket is excessive
or oppressive."21 They thereby premised their prayer for
dismissal on the Complaint's alleged failure to state a cause
of action. Thus, a reexamination of the Complaint is in order.

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The Complaint contains the following factual allegations:

"10. In the second week of February 2002,
defendant Rachelle A. Gamurot, in connivance with
PCST, forced plaintiff and her classmates to buy or
take two tickets each, x x x;
"11. Plaintiff and many of her classmates objected
to the forced distribution and selling of tickets to
them but the said defendant warned them that if
they refused [to] take or pay the price of the two
tickets they would not be allowed at all to take the
final examinations;
"12. As if to add insult to injury, defendant Rachelle
A. Gamurot bribed students with additional fifty
points or so in their test score in her subject just to
unjustly influence and compel them into taking the
tickets;
"13. Despite the students' refusal, they were forced
to take the tickets because [of] defendant Rachelle
A. Gamurot's coercion and act of intimidation, but
still many of them including the plaintiff did not
attend the dance party imposed upon them by
defendants PCST and Rachelle A. Gamurot;
"14. Plaintiff was not able to pay the price of her
own two tickets because aside form the fact that she
could not afford to pay them it is also against her
religious practice as a member of a certain religious
congregation to be attending dance parties and
celebrations;
"15. On March 14, 2002, before defendant Rachelle
A. Gamurot gave her class its final examination in
the subject 'Logic' she warned that students who
had not paid the tickets would not be allowed to
participate in the examination, for which threat and
intimidation many students were eventually forced
to make payments:
"16. Because plaintiff could not afford to pay,
defendant Rachelle A. Gamurot inhumanly made
plaintiff sit out the class but the defendant did not
allow her to take her final examination in 'Logic;'
"17. On March 15, 2002 just before the giving of
the final examination in the subject 'Statistics,'
defendant Elissa Baladad, in connivance with
defendants Rachelle A. Gamurot and PCST,
announced in the classroom that she was not
allowing plaintiff and another student to take the
examination for their failure and refusal to pay the
price of the tickets, and thenceforth she ejected
plaintiff and the other student from the classroom;

"18. Plaintiff pleaded for a chance to take the

examination but all defendants could say was that
the prohibition to give the examinations to nonpaying students was an administrative decision;
"19. Plaintiff has already paid her tuition fees and
other obligations in the school;
"20. That the above-cited incident was not a first
since PCST also did another forced distribution of
tickets to its students in the first semester of school
year 2001-2002; x x x " 22
The foregoing allegations show two causes of action; first,
breach of contract; and second, liability for tort.
Reciprocity
School-Student Contract

of

the

In Alcuaz v. PSBA,23 the Court characterized the relationship

between the school and the student as a contract, in which "a
student, once admitted by the school is considered enrolled
for one semester."24 Two years later, in Non v. Dames
II,25 the Court modified the "termination of contract theory"
in Alcuaz by holding that the contractual relationship
between the school and the student is not only semestral in
duration, but for the entire period the latter are expected to
complete it."26 Except for the variance in the period during
which the contractual relationship is considered to subsist,
both Alcuaz and Non were unanimous in characterizing the
school-student relationship as contractual in nature.
The school-student relationship is also reciprocal. Thus, it
has consequences appurtenant to and inherent in all contracts
of such kind -- it gives rise to bilateral or reciprocal rights
and obligations. The school undertakes to provide students
with education sufficient to enable them to pursue higher
education or a profession. On the other hand, the students
agree to abide by the academic requirements of the school
and to observe its rules and regulations.27
The terms of the school-student contract are defined at the
moment of its inception -- upon enrolment of the student.
Standards of academic performance and the code of
behavior and discipline are usually set forth in manuals
distributed to new students at the start of every school year.
Further, schools inform prospective enrollees the amount of
fees and the terms of payment.
In practice, students are normally required to make a down
payment upon enrollment, with the balance to be paid before
every preliminary, midterm and final examination. Their
failure to pay their financial obligation is regarded as a valid
ground for the school to deny them the opportunity to take
these examinations.

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The foregoing practice does not merely ensure compliance

with financial obligations; it also underlines the importance
of major examinations. Failure to take a major examination
is usually fatal to the students' promotion to the next grade
or to graduation. Examination results form a significant basis
for their final grades. These tests are usually a primary and
an indispensable requisite to their elevation to the next
educational level and, ultimately, to their completion of a
course.
Education is not a measurable commodity. It is not possible
to determine who is "better educated" than another.
Nevertheless, a student's grades are an accepted
approximation of what would otherwise be an intangible
product of countless hours of study. The importance of
grades cannot be discounted in a setting where education is
generally the gate pass to employment opportunities and
better life; such grades are often the means by which a
prospective employer measures whether a job applicant has
acquired the necessary tools or skills for a particular
profession or trade.
Thus, students expect that upon their payment of tuition fees,
satisfaction of the set academic standards, completion of
academic requirements and observance of school rules and
regulations, the school would reward them by recognizing
their "completion" of the course enrolled in.
The obligation on the part of the school has been established
in Magtibay v. Garcia,28 Licup v. University of San
Carlos29 and Ateneo de Manila University v. Garcia, 30 in
which the Court held that, barring any violation of the rules
on the part of the students, an institution of higher learning
has a contractual obligation to afford its students a fair
opportunity to complete the course they seek to pursue.
We recognize the need of a school to fund its facilities and to
meet astronomical operating costs; this is a reality in running
it. Crystal v. Cebu International School 31 upheld the
imposition by respondent school of a "land purchase
deposit" in the amount of P50,000 per student to be used for
the "purchase of a piece of land and for the construction of
new buildings and other facilities x x x which the school
would transfer [to] and occupy after the expiration of its
lease contract over its present site."
The amount was refundable after the student graduated or
left the school. After noting that the imposition of the fee
was made only after prior consultation and approval by the
parents of the students, the Court held that the school
committed no actionable wrong in refusing to admit the
children of the petitioners therein for their failure to pay the
"land purchase deposit" and the 2.5 percent monthly
surcharge thereon.
In the present case, PCST imposed the assailed revenueraising measure belatedly, in the middle of the semester. It
exacted the dance party fee as a condition for the students'

taking the final examinations, and ultimately for its

recognition of their ability to finish a course. The fee,
however, was not part of the school-student contract entered
into at the start of the school year. Hence, it could not be
unilaterally imposed to the prejudice of the enrollees.
Such contract is by no means an ordinary one. In Non, we
stressed that the school-student contract "is imbued with
public interest, considering the high priority given by the
Constitution to education and the grant to the State of
supervisory and regulatory powers over all educational
institutions."32 Sections 5 (1) and (3) of Article XIV of the
1987 Constitution provide:
"The State shall protect and promote the right of all
citizens to quality education at all levels and shall
take appropriate steps to make such declaration
accessible to all.
"Every student has a right to select a profession or
course of study, subject to fair, reasonable and
equitable admission and academic requirements."
The same state policy resonates in Section 9(2) of BP 232,
otherwise known as the Education Act of 1982:
"Section 9. Rights of Students in School. In
addition to other rights, and subject to the
limitations prescribed by law and regulations,
students and pupils in all schools shall enjoy the
following rights:
xxx

xxx

xxx

(2) The right to freely choose their field of

study subject to existing curricula and to
continue their course therein up to
graduation, except in cases of academic
deficiency, or violation of disciplinary
regulations."
Liability for Tort
In her Complaint, petitioner also charged that private
respondents "inhumanly punish students x x x by reason
only of their poverty, religious practice or lowly station in
life, which inculcated upon [petitioner] the feelings of guilt,
disgrace and unworthiness;"33 as a result of such punishment,
she was allegedly unable to finish any of her subjects for the
second semester of that school year and had to lag behind in
her studies by a full year. The acts of respondents
supposedly caused her extreme humiliation, mental agony
and "demoralization of unimaginable proportions" in
violation of Articles 19, 21 and 26 of the Civil Code. These
provisions of the law state thus:

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"Article 19. Every person must, in the exercise of

his rights and in the performance of his duties, act
with justice, give everyone his due, and observe
honesty and good faith."
"Article 21. Any person who wilfully causes loss or
injury to another in a manner that is contrary to
morals, good customs or public policy shall
compensate the latter for the damage."
"Article 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his
neighbors and other persons. The following and
similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for
damages, prevention and other relief:
(1) Prying into the privacy of another's
residence;
(2) Meddling with or disturbing the private
life or family relations of another;
(3) Intriguing to cause another to be
alienated from his friends;
(4) Vexing or humiliating another on
account of his beliefs, lowly station in life,
place of birth, physical defect, or other
personal condition."
Generally, liability for tort arises only between parties not
otherwise bound by a contract. An academic institution,
however, may be held liable for tort even if it has an existing
contract with its students, since the act that violated the
contract may also be a tort. We ruled thus in PSBA vs.
CA,34 from which we quote:
"x x x A perusal of Article 2176 [of the Civil Code]
shows that obligations arising from quasi-delicts or
tort, also known as extra-contractual obligations,
arise only between parties not otherwise bound by
contract, whether express or implied. However, this
impression has not prevented this Court from
determining the existence of a tort even when there
obtains a contract. In Air France v. Carrascoso (124
Phil. 722), the private respondent was awarded
damages for his unwarranted expulsion from a firstclass seat aboard the petitioner airline. It is noted,
however, that the Court referred to the petitionerairline's liability as one arising from tort, not one
arising form a contract of carriage. In effect, Air
France is authority for the view that liability from
tort may exist even if there is a contract, for the act
that breaks the contract may be also a tort. x x x
This view was not all that revolutionary, for even as
early as 1918, this Court was already of a similar

mind. In Cangco v. Manila Railroad (38 Phil. 780),

Mr. Justice Fisher elucidated thus: 'x x x. When
such a contractual relation exists the obligor may
break the contract under such conditions that the
same act which constitutes a breach of the contract
would have constituted the source of an extracontractual obligation had no contract existed
between the parties.'
"Immediately what comes to mind is the chapter of
the Civil Code on Human Relations, particularly
Article 21 x x x."35

Academic Freedom
In their Memorandum, respondents harp on their right to
"academic freedom." We are not impressed. According to
present jurisprudence, academic freedom encompasses the
independence of an academic institution to determine for
itself (1) who may teach, (2) what may be taught, (3) how it
shall teach, and (4) who may be admitted to study. 36 In
Garcia v. the Faculty Admission Committee, Loyola School
of Theology,37 the Court upheld the respondent therein when
it denied a female student's admission to theological studies
in a seminary for prospective priests. The Court defined the
freedom of an academic institution thus: "to decide for itself
aims and objectives and how best to attain them x x x free
from outside coercion or interference save possibly when
overriding public welfare calls for some restraint."38
In Tangonan v. Pao,39 the Court upheld, in the name of
academic freedom, the right of the school to refuse
readmission of a nursing student who had been enrolled on
probation, and who had failed her nursing subjects. These
instances notwithstanding, the Court has emphasized that
once a school has, in the name of academic freedom, set its
standards, these should be meticulously observed and should
not be used to discriminate against certain students. 40 After
accepting them upon enrollment, the school cannot renege
on its contractual obligation on grounds other than those
made known to, and accepted by, students at the start of the
school year.
In sum, the Court holds that the Complaint alleges sufficient
causes of action against respondents, and that it should not
have been summarily dismissed. Needless to say, the Court
is not holding respondents liable for the acts complained of.
That will have to be ruled upon in due course by the court a
quo.
WHEREFORE, the Petition is hereby GRANTED, and the
assailed Orders REVERSED. The trial court is DIRECTED
to reinstate the Complaint and, with all deliberate speed, to
continue the proceedings in Civil Case No. U-7541. No
costs.

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SO ORDERED.

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