Академический Документы
Профессиональный Документы
Культура Документы
199,244
199,062
198,966
184,764
183,646
182,457
171,656
165,795
165,032
159,977
153,734
148,200
NO. OF VOTES
225,674
217,789
139,386
107,455
17.
Macapeges,
(Independent)
Malamama
101,350
handwriting and finger print experts who had examined the voting records
and lists of voters in 878 voting centers, out of 2,700 which they specified in
their complaints or petitions in Election Cases 78-8, 78-9, 78-10, 78-11 and
7812 in the Comelec. In regard to 501 voting centers, the records cf. which,
consisting of the voters lists and voting records were not available- and
could not be brought to Manila, petitions asked that the results therein be
completely excluded from the canvass. On July 11, 1978, respondent Board
terminated its canvass and declared the result of the voting to be as follows:
NAME OF CANDIDATE
VALDEZ, Estanislao
DIMAPORO, Abdullah
PANGANDAMAN, Sambolayan
SINSUAT, Blah
ARATUC, Tomatic
205,829
GURO, Mangontawar
190,489
DIAZ, Ciscolario
190,077
TAMULA, Fred
180,280
LEGASPI, Bonifacio
174,396
MACAPEGES, Malamana
160,271
VOTES OBTAIN
436,069
429,351
406,106
403,445
(Pp. 11-12, Record.)
AMPARO, Jesus
399,997
MANDANGAN, Linang
387,025
BAGA, Tomas
386,393
BADOY,Anacleto
374,933
ROLDAN, Ernesto
275,141
TOCAO, Sergio
239,914
CANDIDATES
VOTES
VALDEZ, Estanislao
319,514
DIMAPORO, Abdullah
289.751
AMPARO, Jesus
286,180
BADOY, Anacleto
285,985
BAGA, Tomas
271,473
PANGANDAMAN, Sambolayan
271,393
SINSUAT, Blah
269,905
ROLDAN, Ernesto
268,287
MANDANGAN, Linang
251,226
TACAO, Sergio
229,124
DIAZ, Ciscolario
187,986
ARATUC, Tomatic
183,316
LEGASPI, Bonifacio
178,564
TAMULA, Fred
177,270
GURO, Mangontawar
163,449
LOMA, Nemesio
129,450
submitted for decision in September, 1978; and the statement that the KBL
acquiesced to the same is absolutely without foundation.
5. In excluding election returns from areas where the conditions of peace
and order were allegedly unsettled or where there was a military operation
going on immediately before and during election and where the voter turn
out was high (90 % to 100 %), and where the people had been asked to
evacuate, as a ruling without jurisdiction and in violation of due process
because no evidence was at all submitted by the parties before the Regional
Board of Canvasssers. (Pp. 23-25, Record, L-47917-21.)
Now before discussing the merits of the foregoing contentions, it is
necessary to clarify first the nature and extent of the Supreme Court's power
of review in the premises. The Aratuc petition is expressly predicated on the
ground that respondent Comelec "committed grave abuse of discretion,
amounting to lack of jurisdiction" in eight specifications. On the other hand,
the Mandangan petition raises pure questions of law and jurisdiction. In
other words, both petitions invoked the Court's certiorari jurisdiction, not its
appellate authority of review.
This is as it should be. While under the Constitution of 1935, "the decisions,
orders and rulings of the Commission shall be subject to review by the
Supreme Court" (Sec. 2, first paragraph, Article X) and pursuant to the Rules
of Court, the petition for "certiorari or review" shall be on the ground that
the Commission "has decided a question of substance not theretofore
determined by the Supreme Court, or has decided it in a way not in accord
with law or the applicable decisions of the Supreme Court" (Sec. 3. Rule 43),
and such provisions refer not only to election contests but even to preproclamation proceedings, the 1973 Constitution provides somewhat
differently thus: "Any decision, order or ruling of the Commissionmay be
brought to the Supreme Court on certiorari by the aggrieved party within
thirty days from his receipt of a copy thereof" (Section 11, Article XII c), even
as it ordains that the Commission shall "be the sole judge of all contests
relating to the elections, returns and qualifications of all members of the
National Assembly and elective provincial and city official" (Section 2(2).)
Correspondingly, the ElectionCode of 1978, which is the first legislative
constructionof the pertinent constitutional provisions, makes the
Commission also the "sole judge of all pre-proclamation controversies" and
further provides that "any of its decisions, orders or rulings (in such
contoversies) shall be final and executory", just as in election contests, "the
decision of the Commission shall be final, and executory and inappealable."
(Section 193)
It is at once evident from these constitutional and statutory modifications
that there is a definite tendency to enhance and invigorate the role of the
Commission on Elections as the independent constitutinal body charged with
the safeguarding of free, peaceful and honest elections. The framers of the
new Constitution must be presumed ot have definite knowledge of what it
means to make the decisions, orders and rulings of the Commission "subject
to review by the Supreme Court". And since instead of maintaining that
provision intact, it ordained that the Commission's actuations be instead
"brought to the Supreme Court on certiorari", We cannot insist that there
was no intent to change the nature of the remedy, considering that the
limited scope of certiorari, compared to a review, is well known in remedial
law.
The errors assigned in this petition boil down to two main propositions,
namely, (1) that it was an error of law on the part of respondent Comelec to
have applied to the extant circumstances hereof the ruling of this Court in
Diaz vs. Comelec 42 SCRA 426 instead of that of Bashier vs. Comelec 43
SCRA 238; and (2) that respondent Comelec exceeded its jurisdiction and
denied due process to petitioner Mandangan in extending its inquiry beyond
the election records of "the 878 voting centers examined by the KB experts
and passed upon by the Regional Board of Canvassers" and in excluding
from the canvass the returns showing 90 to 100 % voting, from voting
centers where military operations were by the Army to be going on, to the
extent that said voting centers had to be transferred to the poblaciones the
same being by evidence.
Anent the first proposition, it must be made clear that the Diaz and Bashier
rulings are not mutually exclusive of each other, each being an outgrowth of
the basic rationale of statistical improbability laid down in Lagumbay vs.
Comelec and , 16 SCRA 175. Whether they be apply together or separately
or which of them be applied depends on the situation on hand. In the factual
milieu of the instant case as found by the Comelec, We see no cogent
reason, and petitioner has not shown any, why returns in voting centers
showing that the votes of the candidate obtaining highest number of votes
of the candidate obtaining the highest number of votes exceeds the highest
possible number of valid votes cast therein should not be deemed as
spurious and manufactured just because the total number of excess votes in
said voting centers were not more than 40 %. Surely, this is not the
occasion, consider the historical antecedents relative to the highly
questionable manner in which elections have been bad in the past in the
provinces herein involved, of which the Court has judicial notice as attested
by its numerous decisions in cases involving practically every such election,
of the Court to move a whit back from the standards it has enunciated in
those decisions.
In regard to the jurisdictional and due process points raised by herein
petitioner, it is of decisive importance to bear in mind that under Section
168 of the Revised Election Code of 1978, "the Commission (on Elections)
shall have direct control and supervision on over the board of canvassers"
and that relatedly, Section 175 of the same Code provides that it "shall be
the sole judge of all pre-proclamation controversies." While nominally, the
procedure of bringing to the Commission objections to the actuations of
boards of canvassers has been quite loosely referred to in certain quarters,
even by the Commission and by this Court, such as in the guidelines of May
23,1978 quoted earlier in this opinion, as an appeal, the fact of the matter is
that the authority of the Commission in reviewing such actuations does not
spring from any appellate jurisdiction conferred by any specific provision of
law, for there is none such provision anywhere in the Election Code, but from
the plenary prerogative of direct control and supervision endowed to it by
the above-quoted provisions of Section 168. And in administrative law, it is a
too well settled postulate to need any supporting citation here, that a
superior body or office having supervision and control over another may do
directly what the latter is supposed to do or ought to have done.
Consequently, anything said in Lucman vs. Dimaporo, 33 SCRA 387, cited by
petitioner, to the contrary notwithstanding, We cannot fault respondent
Comelec for its having extended its inquiry beyond that undertaken by the
SUMMARY
PROVINCE
TOTAL
EXCLUDED
INCLUDED
30
30
342
137
205
Maguindanao
21
20
North Cotabato
Sultan Kudarat
12
10
totals -----
412
141
271
resolution of August 30, 1978. On the other hand, We cannot really blame
the Commission too much, since the exacting tenor of the guidelines issued
by Us left it with very little elbow room, so to speak, to use its own discretion
independently of what We had ordered. What could have saved matters
altogether would have been a timely move on the part of petitioners on or
before June 3, 1978, as contemplated in Our resolution. After all come to
think of it, that the possible outcome of the opening of the ballot boxes
would favor the petitioners was not a certainty the contents them could
conceivably boomerang against them, such as, for example, if the ballots
therein had been found to be regular and preponderantly for their
opponents. Having in mind that significantly, petitioners filed their motion
for only on January 9, 1979, practically on the eve of the promulgation of the
resolution, We hold that by having adhered to Our guidelines of June 1,
1978, Comelec certainly cannot be held to be guilty of having gravely
abused its discretion, in examining and passing on the returns from the
voting centers reffered to in the second and fourth assignments of error in
the canvass or in denying petitioners' motion for the of the ballot boxes
concerned.
The first, third and sixth assignment of involve related matters and maybe
discussed together. They all deal with the inclusion in or exclusion from the
canvass of returns on the basis of the percentage of voting in specified
voting centers and the corresponding findings of the Comelec on the extent
of substitute voting therein as indicated by the result of either the technical
examination by experts of the signatures and thumb-prints of the voters
threat.
To begin with, petitioners' complaint that the Comelec did not examine and
study 1,694 of the records in an the 2,775 voting centers questioned by
them is hardly accurate. To be more exact, the Commission excluded a total
of 1,267 returns coming under four categories namely: 1,001 under the Diaz,
supra, ruling, 79 because of 90-100 % turnout of voters despite military
operations, 105 palpably manufactured owe and 82 returns excluded by the
board of canvass on other grounds. Thus, 45.45 % of the of the petitioners
were sustained by the Comelec. In contrast, in the board of canvassers, only
453 returns were excluded. The board was reversed as to 6 of these, and
821 returns were excluded by Comelec over and above those excluded by
the board. In other words, the Comelec almost doubled the exclusions by the
board.
Petitioners would give the impression by their third assignment of error that
Comelec refused to consider high percentage of voting, coupled with mass
substitute voting, as proof that the pertinent returns had been
manufactured. That such was not the case is already shown in the above
specifications. To add more, it can be gleaned from the resolution that in t to
the 1,065 voting centers in Lanao del Sur and Marawi City where a high
percentage of voting appeared, the returns from the 867 voting centers
were excluded by the Comelec and only 198 were included a ratio of roughly
78 % to 22 %. The following tabulation drawn from the figures in the
resolution shows how the Comelec went over those returns center by center
and acted on them individually:
90% 100% VOTING
MARAWI CITY AND LANAO DEL SUR
NO. OF V/C THAT V/C WITH 90% to 100%
Exclude
d
Included
Marawi City
151
112
107
Bacolod Grande
28
28
27
Balabagan
53
53
49
Balindong
22
22
15
Bayang
29
20
13
Binidayan
37
33
29
Buadiposo Bunton
41
10
10
Bubong
24
23
21
Bumbaran
21 (All excluded)
Butig
35
33
32
Calanogas
23
21
21
Ditsaan-Ramain
Ganassi
Lumba Bayabao
Lumbatan
Lumbayanague
Madalum
Madamba
Maguing
Malabang
42
39
64
30
37
14
20
57
59
39
38
63
28
33
13
20
55
47
38
23
47
17
28
53
1
Piagapo
39
39
36
Poona-Bayabao
44
44
42
Pualas
23
20
20
Saguiaran
36
32
21
11
Sultan Gumander
35
31
31
Tamparan
24
21
15
Taraka
31
31
31
Tubaran
23
19
19
1,218
1,065
867
198
15
16
11
15
42
TOTALS: Marawi &
Marantao
79
63
41
22
Lanao del Sur
Marugong
37
35
32
Masiu
27
26
24
Pagayawan
15
13
100 % turnout of voters? The peace and order conditions in the two cities of
Iligan and Cotabato on the day of the elections were normal and yet the
total percentages of voting were only 73 % and 52 %, lively. How then can
the Comelec explained why and how in many voting centers located in areas
where there had been military operations there was a voting turnout of 100
%? Assuming that the KB candidates did not call the attention of the
Comelecalthough they actually didto the stark improbability of 100 %
vote turnout in the said places, because the peace and order conditions
were far from normal it perforce devolved on the Comelec to conduct, motu
propio, an in-depth and full-blown inquiry into this paradox. The record
shows that there was l00 % voting in the whole of each of three
municipalities, over 99 % viting in each of thirteen other municipalities, and
an average 97 % turnout in five more municipalities. Of inescapable
significance is the fact that most of these municipalities are located in the
provinces of Lanao del Sur and Lanao del Norte, the past election history of
which is replete with the perpetration of massive frauds, terrorism and
scandalous substitutions of voters.
c. Why did the Comelec deny the motion of the KB candidates for the
opening of ballot boxes Pertaining to a total of 408 voting centers the
voting record of which were not available as they had somehow mysteriously
disappeared to determine whether or not the election in each of the said
voting centers was a sham? This remedial measure was resorted to by the
Comelec in 1969 when it Order the opening of a number of ballot boxes in
the pre-proclamation contest inLucman vs. Dimaporo in order to see
whether or not there were ballots, and determine whether there had been an
actual election in each of the disputed precincts. In that case to almost 200
ballot boxes found to be without padlocks?
3
Of incalculable significance is the abscence of any statement in the Comelec
resolution that indicates that, granting that all the questions I have above
raised would be resolved in favor of the KB candidates, the election results
would not be materially altered.Upon the other hand , the KB candidates
state categorically, with benefit of extrapolation, that the election results
would be considerably changed in their favor.
4
The majority of my brethren anchor their denial of the petition on two
principal grounds, namely:
a. The issues raised by the KB candidates would be better and properly
ventilated in an election protest; and
b. No grave abuse of discretion is discernible from the actuations of the
Comelec.
Anent the first ground, it is a notorious fact in the history of Philippine
politics that an election protest not only is usually inordinately protracted
but as well entails heavy and prohibitive expenditure of time, money and
effort on the part of the protestant. More than this, should the protestant in
the end win, very little time or none at all is left for him to assume and
discharge the duties of his office. In the meantime, the person previously
proclaimed elected continues to fraudulently represent the people who had
in law and in fact duly elected someone else to represent them.
Besides, taking a broad view of the fundamental issues raised by the KB
candidates, I am of the opinion that resolution of these issues by the
Comelec would not take more than six months of conscientious laborand
surely this period is short, very short indeed, compared to the time that win
be wasted by the Comelec in deciding a formal electoral protest. Is it not
time the Supreme Court asserted its powers in order to excise completely
the Old Society pernicious evil of "grab the proclamation at all costs"?
Anent the second ground, I squarely traverse the statement that no grave
abuse of discretion can be imputed to the Comelec. The grave misgivings I
have above articulated demonstrate what to my mind constitute the size
and shape of the remissness of the Comelec. And more compelling and overriding a consideration than the overwrought technicality of "grave abuse of
discretion" is the fundamental matter of the faith of the people of Region XII
in the electoral process. There will always be the nagging question in the
minds of the voters in that Region as to the legitimacy of those who will be
proclaimed elected under the Comelec resolution should the Court refuse to
direct that body to continue the meticulous for legitimacy and truth.
5
Upon all the foregoing, it behooves the Court to remand these cases to the
Comelec, with the direction that body immediately convene and within an
unextendible period and as speedily as possible, resolve with definitiveness
all the questions I have above posed, under such unequivocal guidelines as
the Court may prescribe.
For my part, unless and until this is done, I shall continue to enter grave
doubt as to the correctness and validity of the results already reached by the
Comelec, especially when political history, placed in perspective, pointedly
reminds me of the massive frauds, terrorism and scandalous substitutions of
voters that have characterized past elections in the two Lanao provinces.
DE CASTRO, J., concuring:
The present case has afforded Us an early opportunity to examine and
define the extent of the power of judicial review as granted to the Supreme
Court over any decision, order or ruling of the Commission on Elections
under the new Constitution the pertinent provision of which reads:
Section 11. Any decision order or ruling of the on may be brought to the
Supreme Court on certiorari by the party within thirty days from his receipt
of a copy thereof XII, Constitution).
The Commission on Elections has been granted powers under the new
Constitution which, under the old Constitution, belonged either to the
legislative body(Electoral Tribunals) or the courts. This evident from the
provision of the new Constitution which reads:
(2) Be the sole judge of all contents relating to the elections, returns, and
quallifications of all Members of the National Assembly and elective
provincial and city officials. (Section 2, Article XII, Constitution).
The Commission is thus envisioned to exercise exclusive powers on all
electoral matters except the right to vote, such as the enforcement and
administration of laws relative to the conduct of elections deciding
administrative questions affecting elections, except those involving the right
to vote, but also those that heretofore have been agreed as matters for
strictly judicial inquiry, such as the hearing and disposition of election
contests, as is doubtlessly shown by the transfer thereto of the powers
previously conferred upon the Electoral Tribunal of Congress and the Courts.
(see Section 2, par. 2, Article XII, New Constitution). This change may
properly be viewed as having the intention to relieve the Courts, particularly
the Supreme Court, of those burdens placed upon them relating to the
conduct of election and matters incident thereto. It could have been,
likewise, intended to insulate judicial bodies from the baneful effects of
partisan politics, the more deleterious ones being those that could come
from the higher mats of political power, such a those in the Assembly and in
the provincial and city government levels.
It is, therefore, my view that what was intended by the new Constitution is to
limit the intervention of the Supreme Court in the acts of the Commission as
constitutional body like said Court, but with broadened powers, allocating to
it a domain as exclusive as that of the legislative body (which includes the
President or Prime Minister) on matters of lawmaking , to that of "judicial
inquiry". This power is confined to justifiable questions not of political
nature, and always involving alleged violation of constitutional rights or the
constitution itself.. For a controversy of a political character, commonly
referred to as "Political questions", is excluded from the scope of the
Supreme Courts power of judicial inquiry. 1 The exclusive character of the
Power conferred upon the Commission on Elections, and considering that
political rights, as distinguished from civil and personal Or Property rights, 2
are for the most part, if not in their totality, the subject of its authority,
should counsel an expansive intervention by the Supreme Court in the acts
of the Commission on Election. With the confernment of exclusive authority
on the electoral process upon it, the Commission may be said to have been
given hill discretionary authority, the exercise of which would give rise to a
controversy involving a political question. 3
What then is the test or criterion in de whether the Supreme Court may
exercise its power under Article XII, Section 11 of the new Constitution? It is
my humble submission that the aforecited provision is merely a reassertion
of the power of the Supreme Court as guardian of the Constitution and
protector of constitutional rights, of which, under no circumstance, could it
be deprived, if our present Constitution system is to be maintained. For it is
a power constitutionally assigned to it as the essence of the high judicial
power of the Supreme Court, for the orderly and salutary apportionment of
governmental powers among the different b of the government, as well as
the Constitution bodies created to deal more effectively with specific matters
requiring governmental actions.
Examining the instant petition, nothing reveals itself as raising more than
questions merely affecting the conduct of the election held on April 7, 1978,
much less a truly constitutional question, aside perhaps from the alegation
that the COMELEC undertook an examination of election records beyond
those examined during the pendency of the controversy before the Regional
Board of Canvassers, allegedly without notice to the petitioners, thus
intimating a violation of due process. This particular matter, however, can
easily be disposed of by citing the provision of Section 175 of the Electoral
Code of 1978 which reads:
... The Commission shall be the sole judge of all pre-proclamation
controversies and any of its decisions, orders or rulings shall be final and
executory. It may, motu proprio or upon written petition, and after due
notice and heating order the suspension of the proclamation of a candidateelect or annul any proclamation, if one has been made, on any of the
grounds mentioned in Sections 172, 173 and 174 hereof.
If the Commission has the power to suspend motu proprio the proclamation
DECISION
SARMIENTO, J.:
The petitioners pray for injunctive relief, to stop the Energy Regulatory Board
(Board hereinafter) from implementing its Order, dated September 21, 1990,
mandating a provisional increase in the prices of petroleum and petroleum
products, as follows:
PRODUCTS IN PESOS PER LITER
OPSF
The intervenor, the Trade Union of the Philippines and Allied Services
(TUPAS/FSM)-W.F.T.U., 6 argues on the other hand, that the increase cannot
be allowed since the respondents oil companies had not exhausted their
existing oil stock which they had bought at old prices and that they cannot
be allowed to charge new rates for stock purchased at such lower rates.
The Court set the cases (in G.R. Nos. 95203-05) for hearing on October 25,
1990, in which Senator Maceda and his counsel, Atty. Alexander Padilla,
argued. The Solicitor General, on behalf of the Board, also presented his
arguments, together with Board Commissioner Rex Tantiangco. Attys.
Federico Alikpala, Jr. and Joselia Poblador represented the oil firms (Petron
and Caltex, respectively).
The parties were thereafter required to submit their memorandums after
which, the Court considered the cases submitted for resolution.
On November 20, 1990, the Court ordered these cases consolidated.
On November 27, 1990, we gave due course to both petitions.
The Court finds no merit in these petitions.
Senator Maceda and Atty. Lozano, in questioning the lack of a hearing, have
overlooked the provisions of Section 8 of Executive Order No. 172, which we
quote:
"SECTION 8. Authority to Grant Provisional Relief . The Board may, upon
the filing of an application, petition or complaint or at any stage thereafter
and without prior hearing, on the basis of supporting papers duly verified or
authenticated, grant provisional relief on motion of a party in the case or on
its own initiative, without prejudice to a final decision after hearing, should
the Board find that the pleadings, together with such affidavits, documents
and other evidence which may be submitted in support of the motion,
substantially support the provisional order: Provided, That the Board shall
immediately schedule and conduct a hearing thereon within thirty (30) days
thereafter, upon publication and notice to all affected parties.: nad
As the Order itself indicates, the authority for provisional increase falls within
the above provision.
There is no merit in the Senator's contention that the "applicable" provision
is Section 3, paragraph (e) of the Executive Order, which we quote:
(e) Whenever the Board has determined that there is a shortage of any
petroleum product, or when public interest so requires, it may take such
steps as it may consider necessary, including the temporary adjustment of
the levels of prices of petroleum products and the payment to the Oil Price
Stabilization Fund created under Presidential Decree No. 1956 by persons or
entities engaged in the petroleum industry of such amounts as may be
determined by the Board, which will enable the importer to recover its cost
of importation.
What must be stressed is that while under Executive Order No. 172, a
hearing is indispensable, it does not preclude the Board from ordering, ex
parte, a provisional increase, as it did here, subject to its final disposition of
whether or not: (1) to make it permanent; (2) to reduce or increase it
of crude oil and imported petroleum products. The Oil Price Stabilization
Fund (OPSF) may be sourced from any of the following:
a) Any increase in the tax collection from ad valorem tax or customs duty
imposed on petroleum products subject to tax under this Decree arising from
exchange rate adjustment, as may be determined by the Minister of Finance
in consultation with the Board of Energy;
b) Any increase in the tax collection as a result of the lifting of tax
exemptions of government corporations, as may be determined by the
Minister of Finance in consultation with the Board of Energy;
c) Any additional amount to be imposed on petroleum products to augment
the resources of the Fund through an appropriate Order that may be issued
by the Board of Energy requiring payment by persons or companies engaged
in the business of importing, manufacturing and/or marketing petroleum
products;
d) Any resulting peso cost differentials in case the actual peso costs paid by
oil companies in the importation of crude oil and petroleum products is less
than the peso costs computed using the reference foreign exchange rates as
fixed by the Board of Energy.
Anent claims that oil companies cannot charge new prices for oil purchased
at old rates, suffice it to say that the increase in question was not prompted
alone by the increase in world oil prices arising from tension in the Persian
Gulf. What the Court gathers from the pleadings as well as events of which it
takes judicial notice, is that: (1) as of June 30, 1990, the OPSF has incurred a
deficit of P6.1 Billion; (2) the exchange rate has fallen to P28.00 to $1.00; (3)
the country's balance of payments is expected to reach $1 Billion; (4) our
trade deficit is at $2.855 Billion as of the first nine months of the year.
Evidently, authorities have been unable to collect enough taxes necessary to
replenish the OPSF as provided by Presidential Decree No. 1956, and hence,
there was no available alternative but to hike existing prices.
The OPSF, as the Court held in the aforecited CACP cases, must not be
understood to be a funding designed to guarantee oil firms' profits although
as a subsidy, or a trust account, the Court has no doubt that oil firms make
money from it. As we held there, however, the OPSF was established
precisely to protect the consuming public from the erratic movement of oil
prices and to preclude oil companies from taking advantage of fluctuations
occurring every so often. As a buffer mechanism, it stabilizes domestic
prices by bringing about a uniform rate rather than leaving pricing to the
caprices of the market.
In all likelihood, therefore, an oil hike would have probably been imminent,
with or without trouble in the Gulf, although trouble would have probably
aggravated it.: nad
The Court is not to be understood as having prejudged the justness of an oil
price increase amid the above premises. What the Court is saying is that it
thinks that based thereon, the Government has made out a prima facie case
to justify the provisional increase in question. Let the Court therefore make
clear that these findings are not final; the burden, however, is on the
majority says that "the Board Order authorizing the proceeds generated by
the increases" is "authorized by Presidential Decree No. 1456, as amended
by Executive Order No. 137" (See Decision, pp. 7-8). Assuming that such is
authorized by law, still a law, no matter how imperative, cannot prevail over
the Constitution which grants only to Congress the power to tax. And indeed,
there can be no denying the fact that when revenue is earned by the
government from the consuming public (except when only licenses are
concerned) there is an exercise of the taxing power.
I am of course aware of the dangerous economic quagmire to which our
country has been plunged by the sadism precipitating the Middle East crisis,
but certainly one error cannot be corrected by another error. Besides there
are more significant and clear-cut reasons for our economic crisis: namely,
the intentional depreciation (actually, a devaluation) of our already
demeaned currency, our unfortunate liberalization of imports, and our
slavish subservience to the dictates of the IMF.:-cralaw
Separate Opinions
PARAS, J., dissenting:
I dissent.
In fixing the oil prices complained of, the Energy Regulatory Board (ERB)
gravely abused its discretion
(1) in approving the prices without due process of law, and
(2) in exercising the taxing power in gross violation of the 1987 Constitution
which vests such power only in Congress.: nad
With respect to due process, it will be noted that it is Sec. 3(e) (and not Sec.
8) of Ex. Order No. 172 which should apply to the instant case (and therefore
a hearing is essential) 1 for it is Sec. 3(e) that refers to "the temporary
adjustment of the levels of prices of petroleum products" or instances "when
public interest so requires." Sec. 8, which is relied upon by the majority
opinion, does NOT speak of price increases. Additionally it is clear that in the
instant case, "public interest" [also mentioned in Sec. 3 (e)] necessitated a
prior hearing.
Anent the unconstitutional use of the taxing power, the decision of the
investigation?
xxx xxx xxx
It is a notorious fact that many branches of the Government organized by
the Civil Commission are rotten and corrupt. The fiscal system, upon which
life, liberty, and justice depends, is admitted by the Attorney-General himself
to be most unsatisfactory. It is a fact that the Philippine judiciary is far from
being what it should. Neither fiscals nor judges can be persuaded to convict
insurgents when they wish to protect them.
xxx xxx xxx
Now we hear all sorts of reports as to rottenness existing in the province [of
Tayabas], and especially the northern end of it; it is said that it is impossible
to secure the conviction of lawbreakers and outlaws by the native justices,
or a prosecution by the native fiscals.
xxx xxx xxx
The long and short of it is that Americans will not stand for an arbitrary
government, especially when evidences of carpetbagging and rumors of
graft are too thick to be pleasant.
We do not understand that it is claimed that the defendants succeeded in
establishing at the trial the truth of any of the foregoing statements. The
only question which we have considered is whether their publication
constitutes an offense under section 8 of Act No. 292, above cited.
Several allied offenses or modes of committing the same offense are defined
in that section, viz: (1) The uttering of seditious words or speeches; (2) the
writing, publishing, or circulating of scurrilous libels against the Government
of the United States or the Insular Government of the Philippine Islands; (3)
the writing, publishing, or circulating of libels which tend to disturb or
obstruct any lawful officer in executing his office; (4) or which tend to
instigate others to cabal or meet together for unlawful purposes; (5) or
which suggest or incite rebellious conspiracies or riots; (6) or which tend to
stir up the people against the lawful authorities or to disturb the peace of
the community, the safety and order of the Government; (7) knowingly
concealing such evil practices.
The complaint appears to be framed upon the theory that a writing, in order
to be punishable as a libel under this section, must be of a scurrilous nature
and directed against the Government of the United States or the Insular
Government of the Philippine Islands, and must, in addition, tend to some
one of the results enumerated in the section. The article in question is
described in the complaint as "a scurrilous libel against the Government of
the United States and the Insular Government of the Philippine Islands,
which tends to obstruct the lawful officers of the United States and the
Insular Government of the Philippine Islands in the execution of their offices,
and which tends to instigate others to cabal and meet together for unlawful
purposes, and which suggests and incites rebellious conspiracies, and which
tends to stir up the people against the lawful authorities, and which disturbs
the safety and order of the Government of the United States and the Insular
Government of the Philippine Islands." But it is "a well-settled rule in
considering indictments that where an offense may be committed in any of
several different modes, and the offense, in any particular instance, is
alleged to have been committed in two or more modes specified, it is
sufficient to prove the offense committed in any one of them, provided that
it be such as to constitute the substantive offense" (Com. vs. Kneeland, 20
Pick., Mass., 206, 215), and the defendants may, therefore, be convicted if
any one of the substantive charges into which the complaint may be
separated has been made out.
We are all, however, agreed upon the proposition that the article in question
has no appreciable tendency to "disturb or obstruct any lawful officer in
executing his office," or to "instigate" any person or class of persons "to
cabal or meet together for unlawful purposes," or to "suggest or incite
rebellious conspiracies or riots," or to "stir up the people against the lawful
authorities or to disturb the peace of the community, the safety and order of
the Government." All these various tendencies, which are described in
section 8 of Act No. 292, each one of which is made an element of a certain
form of libel, may be characterized in general terms as seditious tendencies.
This is recognized in the description of the offenses punished by this section,
which is found in the title of the act, where they are defined as the crimes of
the "seditious utterances, whether written or spoken."
Excluding from consideration the offense of publishing "scurrilous libels
against the Government of the United States or the Insular Government of
the Philippine Islands," which may conceivably stand on a somewhat
different footing, the offenses punished by this section all consist in inciting,
orally or in writing, to acts of disloyalty or disobedience to the lawfully
constituted authorities in these Islands. And while the article in question,
which is, in the main, a virulent attack against the policy of the Civil
Commission in appointing natives to office, may have had the effect of
exciting among certain classes dissatisfaction with the Commission and its
measures, we are unable to discover anything in it which can be regarded as
having a tendency to produce anything like what may be called disaffection,
or, in other words, a state of feeling incompatible with a disposition to
remain loyal to the Government and obedient to the laws. There can be no
conviction, therefore, for any of the offenses described in the section on
which the complaint is based, unless it is for the offense of publishing a
scurrilous libel against the Government of the of the United States or the
Insular Government of the Philippine Islands.
Can the article be regarded as embraced within the description of "scurrilous
libels against the Government of the United States or the Insular
Government of the Philippine Islands?" In the determination of this question
we have encountered great difficulty, by reason of the almost entire lack of
American precedents which might serve as a guide in the construction of the
law. There are, indeed, numerous English decisions, most of them of the
eighteenth century, on the subject of libelous attacks upon the
"Government, the constitution, or the law generally," attacks upon the
Houses of Parliament, the Cabinet, the Established Church, and other
governmental organisms, but these decisions are not now accessible to us,
and, if they were, they were made under such different conditions from
those which prevail at the present day, and are founded upon theories of
government so foreign to those which have inspired the legislation of which
the enactment in question forms a part, that they would probably afford but
little light in the present inquiry. In England, in the latter part of the
eighteenth century, any "written censure upon public men for their conduct
as such," as well as any written censure "upon the laws or upon the
institutions of the country," would probably have been regarded as a libel
upon the Government. (2 Stephen, History of the Criminal Law of England,
348.) This has ceased to be the law in England, and it is doubtful whether it
was ever the common law of any American State. "It is true that there are
ancient dicta to the effect that any publication tending to "possess the
people with an ill opinion of the Government" is a seditious libel ( per Holt, C.
J., in R. vs. Tuchin, 1704, 5 St. Tr., 532, and Ellenborough, C. J., in R. vs.
Cobbett, 1804, 29 How. St. Tr., 49), but no one would accept that doctrine
now. Unless the words used directly tend to foment riot or rebellion or
otherwise to disturb the peace and tranquility of the Kingdom, the utmost
latitude is allowed in the discussion of all public affairs." (11 Enc. of the Laws
of England, 450.) Judge Cooley says (Const. Lim., 528): "The English
common law rule which made libels on the constitution or the government
indictable, as it was administered by the courts, seems to us unsuited to the
condition and circumstances of the people of America, and therefore never
to have been adopted in the several States."
We find no decisions construing the Tennessee statute (Code, sec. 6663),
which is apparently the only existing American statute of a similar character
to that in question, and from which much of the phraseology of then latter
appears to have been taken, though with some essential modifications.
The important question is to determine what is meant in section 8 of Act No.
292 by the expression "the Insular Government of the Philippine Islands."
Does it mean in a general and abstract sense the existing laws and
institutions of the Islands, or does it mean the aggregate of the individuals
by whom the government of the Islands is, for the time being, administered?
Either sense would doubtless be admissible.
We understand, in modern political science, . . . by the term government,
that institution or aggregate of institutions by which an independent society
makes and carries out those rules of action which are unnecessary to enable
men to live in a social state, or which are imposed upon the people forming
that society by those who possess the power or authority of prescribing
them. Government is the aggregate of authorities which rule a society. By
"dministration, again, we understand in modern times, and especially in
more or less free countries, the aggregate of those persons in whose hands
the reins of government are for the time being (the chief ministers or heads
of departments)." (Bouvier, Law Dictionary, 891.) But the writer adds that
the terms "government" and "administration" are not always used in their
strictness, and that "government" is often used for "administration."
In the act of Congress of July 14, 1798, commonly known as the "Sedition
Act," it is made an offense to "write, print, utter, or published," or to
"knowingly and willingly assist or aid in writing, printing, uttering, or
publishing any false, scandalous, and malicious writing or writings against
the Government of the United States, or either House of the Congress of the
United States, or the President of the United States, with intent to defame
the said Government, or either House of the said Congress, or the said
President, or to bring them, or either of them, into contempt or disrepute, or
to excite against them or either or any of them the hatred of the good
people of the United States," etc. The term "government" would appear to
be used here in the abstract sense of the existing political system, as
distinguished from the concrete organisms of the Government the Houses
of Congress and the Executive which are also specially mentioned.
Upon the whole, we are of the opinion that this is the sense in which the
term is used in the enactment under consideration.
It may be said that there can be no such thing as a scurrilous libel, or any
sort of a libel, upon an abstraction like the Government in the sense of the
laws and institutions of a country, but we think an answer to this suggestion
is that the expression "scurrilous libel" is not used in section 8 of Act No. 292
in the sense in which it is used in the general libel law (Act No. 277) that
is, in the sense of written defamation of individuals but in the wider
sense, in which it is applied in the common law to blasphemous, obscene, or
seditious publications in which there may be no element of defamation
whatever. "The word 'libel' as popularly used, seems to mean only
defamatory words; but words written, if obscene, blasphemous, or seditious,
are technically called libels, and the publication of them is, by the law of
England, an indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607,
627, per Bramwell L. J. See Com. vs. Kneeland, 20 Pick., 206, 211.)
While libels upon forms of government, unconnected with defamation of
individuals, must in the nature of things be of uncommon occurrence, the
offense is by no means an imaginary one. An instance of a prosecution for
an offense essentially of this nature is Republica vs. Dennie, 4 Yeates (Pa.),
267, where the defendant was indicted "as a factious and seditious person
of a wicked mind and unquiet and turbulent disposition and conversation,
seditiously, maliciously, and willfully intending, as much as in him lay, to
bring into contempt and hatred the independence of the United States, the
constitution of this Commonwealth and of the United States, to excite
popular discontent and dissatisfaction against the scheme of polity
instituted, and upon trial in the said United States and in the said
Commonwealth, to molest, disturb, and destroy the peace and tranquility of
the said United States and of the said Commonwealth, to condemn the
principles of the Revolution, and revile, depreciate, and scandalize the
characters of the Revolutionary patriots and statesmen, to endanger,
subvert, and totally destroy the republican constitutions and free
governments of the said United States and this Commonwealth, to involve
the said United States and this Commonwealth in civil war, desolation, and
anarchy, and to procure by art and force a radical change and alteration in
the principles and forms of the said constitutions and governments, without
the free will, wish, and concurrence of the people of the said United States
and this Commonwealth, respectively," the charge being that "to fulfill,
perfect, and bring to effect his wicked, seditious, and detestable intentions
aforesaid he . . . falsely, maliciously, factiously, and seditiously did make,
compose, write, and publish the following libel, to wit; 'A democracy is
scarcely tolerable at any period of national history. Its omens are always
sinister and its powers are unpropitious. With all the lights or experience
blazing before our eyes, it is impossible not to discover the futility of this
form of government. It was weak and wicked at Athens, it was bad in Sparta,
and worse in Rome. It has been tried in France and terminated in despotism.
it was tried in England and rejected with the utmost loathing and
abhorrence. It is on its trial here and its issue will be civil war, desolation,
and anarchy. No wise man but discerns its imperfections; no good man but
shudders at its miseries; no honest man but proclaims its fraud, and no
brave man but draws his sword against its force. The institution of a scheme
of polity so radically contemptible and vicious is a memorable example of
what the villainy of some men can devise, the folly of others receive, and
both establish, in despite of reason, reflection, and sensation.'"
ground that the state has adopted his act and exonerated him, cannot rest
on the bare assertion of his defense, but is bound to establish it, and, as the
state is a political corporate body which can act only through agents and
command only by laws in order to complete his defense, he must produce a
valid law of the state, which constitutes his commission as its agent, and a
warrant for his act.
7. The act of the General Assembly of Virginia of January 26, 1882, "to
provide for the more efficient collection of the revenue to support
government, maintain the public schools, and to pay interest on the public
debt," requiring tax collectors to receive in discharge of the taxes, license
taxes, and other dues gold, silver, United States Treasury notes, national
bank currency, and nothing else, and thereby forbidding the receipt of
coupons issued under the Act of March 30, 1871, in payment therefor,
although it is a legislative act of the government of Virginia, is not a law of
the Virginia, because it impairs the obligation of its contract, and is annulled
by the Constitution of the United States.
8. The state has passed no such law, for it cannot, and what it cannot do, in
contemplation of law, it has not done. The Constitution of the United States,
and its own contract, both irrepealable by any act on its part, are the law of
Virginia, and that law made it the duty o4 the defendant to receive the
coupons tendered in payment of taxes, and declared every step to enforce
the tax thereafter taken to be without warrant of law, and therefore a wrong.
This strips the defendant of his official character, and convicts him of a
personal violation of the plaintiff's rights, for which he must personally
answer.
9. It is no objection to the remedy in such cases that the statute the
application of which in the particular case is sought to be prevented is not
void on its face, but is complained of only because its operation in the
particular instance works a violation of a constitutional right, for the cases
are numerous where the tax laws of a state, which in their general and
proper application are perfectly valid, have been held to become void in
particular cases either as unconstitutional regulations of commerce, or as
violations of contracts prohibited by the Constitution, or because in some
other way they operate to deprive the party complaining of a right secured
to him by the Constitution of the United States.
10. In cases of detinue, the action is purely defensive on the part of the
plaintiff. Its object is merely to resist an attempted wrong and to restore the
status in quo as it was when the right to be vindicated was invaded. It is
analogous to the preventive remedy of injunction in equity when that
jurisdiction is invoked, of which frequent examples occur in cases to prevent
the illegal taxation of national banks by state authorities.
11. The suit authorized by the act of the General Assembly of Virginia of
January
Page 114 U. S. 272
26, 1882, against the collector of taxes refusing to accept a tender of
coupons, to recover back the amount paid under protest, is no remedy at all
for the breach of the contract, which required him to receive the coupons in
payment. The taxpayer and coupon holder has a right to say he will not pay
the amount a second time, and, insisting upon his tender as equivalent to
payment, to resist the further exaction and treat as a wrongdoer the officer
who seizes his property to enforce it.
payment of the public debt;" that said coupons so tendered by plaintiff were
all due and past maturity, and amounted in the aggregate to twelve dollars,
and were all cut from bonds issued by the said State of Virginia under the
provisions of the said Act of March 30, 1871; that the said coupons and
money so tendered by the plaintiff amounted together to exactly the sum so
due the state by the plaintiff for taxes; that the defendant refused to receive
the said coupons and money so tendered in payment of the plaintiff's taxes;
that the defendant, after said tender was made, as he deemed himself
required to do by the acts of assembly of Virginia, entered the plaintiff's
place of business in said city
Page 114 U. S. 274
and levied upon and took possession of the desk, the property of the plaintiff
now sued for, for the purpose of selling the same to pay the taxes due from
him, and that the said desk is of the value of thirty dollars, and still remains
in possession of the defendant for the purpose aforesaid, he having refused
to return the same to the plaintiff on demand.
The hustings court was of the opinion that the police justice erred in
deciding that he had no jurisdiction, and that the issue in the action might
have been tried by him, and that it should be tried by that court on the
appeal, but it was also of the opinion that in tendering to the defendant, as
part of the tender in payment of the plaintiff's taxes, the coupons mentioned
and described, the plaintiff did not tender what the law required, nor what
the defendant was, as treasurer, obliged to or should have received in
payment of the plaintiff's taxes under the provisions of the Act of the
General Assembly of Virginia, approved January 26, 1882, entitled "An act to
provide for the more efficient collection of the revenue to support
government, maintain the public schools, and to pay interest on the public
debt;" that the plaintiff's remedy for the failure of the defendant, as
treasurer, to receive coupons in payment of taxes, was to be found in the
provisions of said Act of January 26, 1882, and that therefore the defendant
does not unlawfully or wrongfully detain the plaintiff's property levied on by
the defendant, as treasurer of the City of Richmond, for the plaintiff's taxes,
and judgment was accordingly rendered for the defendant.
It appears from the record that there was drawn in question the validity of
the said Act of the General Assembly of Virginia approved January 26, 1882,
and of the eighteenth section of the act of the General Assembly of the State
of Virginia, approved April 1, 1879, which authorizes the collection of
delinquent taxes by distraint of personal property, upon the ground that
these acts are repugnant to Section 10 of Article I of the Constitution of the
United States, which declares that no state shall pass any law impairing the
obligation of contracts, the judgment of the court being in favor of the
validity of said acts and against the rights claimed by the plaintiff under the
Page 114 U. S. 275
Constitution of the United States. The hustings court is the highest court of
the state to which the said cause could be taken.
The Act of January 26, 1882, the validity of which is thus questioned, is as
follows:
"Be it enacted by the General Assembly of the State of Virginia that the
several tax collectors of this commonwealth shall receive, in discharge of the
taxes, license taxes, and other dues, gold, silver, United States Treasury
notes, national bank currency, and nothing else, provided that in all cases in
which an officer charged by law with the collection of revenue due the state,
shall take any steps for the collection of same, claimed to be due from any
citizen or taxpayer, such person against whom such step is taken, if he
conceives the same to be unjust or illegal or against any statute, or to be
unconstitutional, may pay the same under protest, and under such payment
the officer collecting the same shall pay such revenue into the state
Treasury, giving notice at the time of such payment to the treasurer that the
same was paid under protest. The person so paying such revenue may at
any time within thirty days after making such payment, and not longer
thereafter, sue the said officer so collecting such revenue in the court having
jurisdiction of the parties and amounts."
"If it be determined that the same was wrongfully collected, for any reason
going to the merits of the same, then the court trying the case may certify of
record that the same was wrongfully paid and ought to be refunded and
thereupon the auditor of public accounts shall issue his proper warrant for
the same, which shall be paid in preference to other claims on the treasury
except such as have priority by constitutional requirement."
"There shall be no other remedy in any case of the collection of revenue or
the attempt to collect revenues illegally or the attempt to collect revenue in
funds only receivable by said officers under this law, the same being other
and different funds than the taxpayer may tender or claim the right to pay,
than such as are herein provided, and no writ for the prevention of any
revenue claim or to hinder or delay the collection
Page 114 U. S. 276
of the same, shall in any wise issue, either injunction, supersedeas,
mandamus, prohibition, or any other writ or process whatever; but in all
cases, if for any reason any person shall claim that the revenue so collected
of him was wrongfully or illegally collected, the remedy for such person shall
be as above provided, and in no other manner. In all such cases, if the court
certify of record that the officer defendant acted in good faith and diligently
defended the action, the necessary costs incurred by him shall be taxed to
and paid by the state, as in criminal cases. The commonwealth attorney for
the county or corporation in which suit is brought shall appear and represent
the defense. In every case where judgment is rendered for the defendant, a
fee of five dollars shall be taxed in favor of said attorney and against the
plaintiff, and whenever the court shall refuse to certify the good faith and
diligence of the officer defending the case, a like fee of five dollars shall be
taxed against said officer. Any officer charged with the collection of revenue
who shall receive payment thereof in anything other than that hereinbefore
provided shall be deemed guilty of a misdemeanor and fined not less than
one hundred nor more than five hundred dollars, in the discretion of the
court, but nothing herein contained shall be construed to subject any officer
of the state to any suit, other than as hereinbefore provided, for any refusal
on his part to accept in payment of revenue due the state any kind or
description of funds, security, or paper not authorized by this act."
"2. This act shall be in force from and after the first day of December,
eighteen hundred and eighty-two."
18 of the Act of April 1, 1879, Acts 1878-79, p. 318, so far as material, is
that
"It shall be the duty of the treasurer, after the first day of December, to call
upon each person chargeable with taxes and levies, who has not paid the
same prior to that time, or upon the agent of such person resident within the
county or corporation, and, upon failure or refusal of such person or agent to
pay the same, he shall proceed to collect by distress or otherwise."
Goods and chattels distrained by an officer, by provisions of other statutes
then in force, were required to be sold at public sale after due notice, as
prescribed.
Page 114 U. S. 277
The Act of January 26, 1882, was amended by an act which was passed and
took effect March 13, 1884, by the addition of the following sections:
" 2. Whenever any papers, purporting to be coupons cut from bonds of this
state shall be tendered to the collecting officer in payment of any taxes due
to the state by any party desiring to bring a suit under this statute, it shall
be the duty of the collecting officer to place the coupons so tendered in an
envelope, to seal the said envelope, write his name across the seal thereof,
endorse it with the numbers of the coupons enclosed, and return it to the
taxpayer. Upon the trial of any proceeding under this act, the said coupons,
enclosed in the said envelope so sealed and endorsed, must be produced in
evidence to prove the tender. If the court shall certify that the money paid
under protest ought to be refunded, the said coupons shall be delivered to
the auditor of public accounts, to be cancelled simultaneously with the issue
of his warrant."
" 3. No action of trespass or trespass on the case shall be brought or
maintained against any collecting officer for levying upon the property of
any taxpayer who may have tendered in payment, in whole or in part, any
coupon, or paper purporting to be a coupon, cut from bonds of this state for
such taxes, and who shall refuse to pay his taxes in gold, silver, United
States Treasury notes, or national banknotes. The suit contemplated by this
act shall be commenced by a petition filed at rules, upon which a summons
shall be issued to the collecting officer, and the said suit shall be regularly
matured like other actions at law, and the coupons tendered shall be filed
with said petition."
The contract which the plaintiff in error alleges has been violated is with the
State of Virginia, and is contained in the Act of March 30, 1871, known as
the "Funding Act," entitled "An act to provide for the funding and payment of
the public debt," and in the bonds and coupons issued under its authority. It
provided for the funding of two-thirds of the existing state debt, and of twothirds of the interest accrued thereon to July 1, 1871, in new six percent
bonds, to run thirty-four years, the bonds, coupon or registered, payable to
Page 114 U. S. 278
order or bearer, and the coupons to bearer, and declared that the coupons
should be payable semiannually, and "be receivable at and after maturity for
all taxes, debts, dues, and demands due the state," and that this should be
expressed on their face. For the remaining one-third, certificates were to be
issued to the creditors to hold as claims against the State of West Virginia,
that being assumed as her just proportion of the entire debt. "Under this
act," it was said by this Court, in Hartman v. Greenhow, 102 U. S. 672, 102
U. S. 679,
"a large number of the creditors of the state, holding bonds amounting,
including interest thereon, to about thirty millions of dollars, surrendered
them and took new bonds with interest coupons annexed for two-thirds of
their amount, and certificates for the balance. A contract was thus
consummated between the state and the holders of the new bonds and the
holders of the coupons, from the obligation of which she could not, without
their consent, release herself by any subsequent legislation. She thus bound
herself not only to pay the bonds when they became due, but to receive the
interest coupons from the bearer at and after their maturity, to their full
amount, for any taxes or dues by him to the state. This receivability of the
coupons for such taxes and dues was written on their face, and
accompanied them in whatever hands they passed. It constituted their chief
value, and was the main consideration offered to the holders of the old
bonds to surrender them and accept new bonds for two-thirds of their
amount."
The same view had been taken by the Supreme Court of Appeals of Virginia
in the cases of Antoni v. Wright, 22 Grattan 833; Wise v. Rogers, 24 Grattan
169, and Clarke v. Tyler, 30 Grattan 134, in the last of which cases it was
declared to be the settled law of the state. It was repeated by this Court in
Antoni v. Greenhow, 107 U. S. 769, where it was said, p. 107 U. S. 775: "The
right of the coupon holder is to have his coupon received for taxes when
offered," and p. 107 U. S. 771, "any act of the state which forbids the receipt
of these coupons for taxes is a violation of the contract, and void as against
coupon holders." Upon these propositions there was an entire agreement
between the majority and minority of the Court in that case.
Page 114 U. S. 279
The nature and value of this contract right to the coupon holder deserve to
be further explained. It was evidently a part of the consideration on which
the creditors of the state were induced to accept, under the Act of March 30,
1871, from the State of Virginia, new obligations for two-thirds of their claim,
in exchange for the surrender of the original bonds. The latter depended for
their payment, as to both principle and interest, upon the continued good
faith of the state in making, from time to time, necessary appropriations out
of the public treasury to meet its recurring liabilities by positive legislation to
that effect. In case of default, there was no remedy by legal process. The
state itself could not be sued. Its bare promises to pay had no sanction but
the public sense of duty to the public creditors. The only security for their
performance was the public faith.
But immediately on the passage of the Act of March 30, 1871, and
thereafter, occasional or continued default in the payment of interest on the
bonds issued in pursuance of its provisions by reason of failures to provide
by laws necessary appropriations for its payment was met, if not obviated,
by a self-executing remedy lodged by the law in the hands of the creditor
himself. For from that time it became the legal duty of every tax collector to
receive coupons from these bonds, offered for that purpose by taxpayers in
payment of taxes upon an equal footing at an equal value and with equal
effect as though they were gold or silver or legal tender treasury notes. They
were by that act reduced in effect into money, and as between the state and
its taxpayers, were a legal tender as money. And, being not only a law but a
contract, it became, by force of the Constitution of the United States,
irrepealable, and therefore is today what it was when first enacted -- the
unchangeable law of Virginia. After a tender of such coupons by a taxpayer
in payment of taxes and a refusal by a tax collector to receive them, the
situation and rights of the taxpayer and coupon holder were precisely what
they would have been if he had made a like tender in gold coin and it had
that if any wrong has been done, it has been done by the state in refusing to
perform its contract, and for that wrong the state is alone liable, but is
exempted from suit by the Eleventh Article of Amendment to the
Constitution of the United States, which declares that
"The judicial power of the United States shall not be construed to extend to
any suit in law or equity, commenced or prosecuted against one of the
United States by citizens of another state, or by citizens or subjects of any
foreign state."
This immunity from suit secured to the states is undoubtedly a part of the
Constitution of equal authority with every other, but no greater, and to be
construed and applied in harmony with all the provisions of that instrument.
That immunity, however, does not exempt the state from the operation of
the constitutional provision that no state shall pass any law impairing the
obligation of contracts, for it has long been settled that contracts between a
state and an individual are as fully protected by the Constitution as
contracts between two individuals. It is true that no remedy for a breach of
its contract by a state, by way of damages as compensation or by means of
process to compel its performance, is open under the Constitution in the
courts of the United States by a direct suit against the state itself on the part
of the injured party, being a citizen of another state or a citizen or subject of
a foreign state. But it is equally true that whenever, in a controversy
between parties to a suit of which these courts have jurisdiction, the
question arises upon the validity of a law by a state impairing the obligation
of its contract, the jurisdiction is not thereby ousted, but must be exercised
with whatever legal consequences to the rights of the litigants may be the
result of the determination. The cases establishing these propositions, which
have been decided by this Court since the adoption of the Eleventh
Amendment to the Constitution are numerous. Fletcher v. Peck, 6 Cranch 87;
New Jersey v. Wilson, 7 Cranch 164; Green v. Biddle, 8 Wheat. 1, 21 U. S. 84;
Providence Bank v. Billings, 4 Pet. 514; Woodruff v. Trapnall, 10
Page 114 U. S. 287
How. 190; Wolff v. New Orleans, 103 U. S. 358; Jefferson Branch Bank v.
Skelly, 1 Black 436.
It is also true that the question whether a suit is within the prohibiting of the
Eleventh Amendment is not always determined by reference to the nominal
parties on the record. The provision is to be substantially applied in
furtherance of its intention, and not to be evaded by technical and trivial
subtleties. Accordingly, it was held in New Hampshire v. Louisiana and New
York v. Louisiana, 108 U. S. 76, that although the judicial power of the United
States extends to "controversies between two or more states," it did not
embrace a suit in which, although nominally between two states, the
plaintiff state had merely permitted the use of its name for the benefit of its
citizens in the prosecution of their claims, for the enforcement of which they
could not sue in their own names. So, on the other hand, in Cunningham v.
Macon & Brunswick Railroad Co., 109 U. S. 446, where the State of Georgia
was not nominally a party on the record, it was held that as it clearly
appeared that the state was so interested in the property that final relief
could not be granted without making it a party, the Court was without
jurisdiction.
In that case, the general question was discussed in the light of the
authorities, and the cases in which the Court has taken jurisdiction, when
the objection has been interposed that a state was a necessary party to
enable the Court to grant relief, were examined and classified. The second
head of that classification is thus described:
"Another class of cases is where an individual is sued in tort for some act
injurious to another in regard to person or property, to which his defense is
that he has acted under the orders of the government. In these cases, he is
not sued as, or because he is, the officer of the government, but as an
individual, and the Court is not ousted of jurisdiction because he asserts
authority as such officer. To make out his defense, he must show that his
authority was sufficient in law to protect him."
And in illustration of this principle, reference was made to Mitchell v.
Harmony, 13 How. 115; Bates v. Clark, 95 U. S. 204;Meigs v. McClung's
Lessee, 9 Cranch 11; Wilcox v. Jackson, 13 Pet. 498; Brown v. Huger, 21 How.
315;
Page 114 U. S. 288
Grisar v. McDowell, 6 Wall. 363, and United States v Lee, 106 U. S. 196.
The ratio decidendi in this class of cases is very plain. A defendant sued as a
wrongdoer who seeks to substitute the state in his place or to justify by the
authority of the state or to defend on the ground that the state has adopted
his act and exonerated him cannot rest on the bare assertion of his defense.
He is bound to establish it. The state is a political corporate body, can act
only through agents, and can command only by laws. It is necessary,
therefore, for such a defendant, in order to complete his defense, to produce
a law of the state which constitutes his commission as its agent and a
warrant for his act. This the defendant in the present case undertook to do.
He relied on the Act of January 26, 1882, requiring him to collect taxes in
gold, silver, United States Treasury notes, national bank currency, and
nothing else, and thus forbidding his receipt of coupons in lieu of money.
That, it is true, is a legislative act of the government of Virginia, but it is not
a law of the State of Virginia. The state has passed no such law, for it
cannot, and what it cannot do, it certainly, in contemplation of law, has not
done. The Constitution of the United States, and its own contract, both
irrepealable by any act on its part, are the law of Virginia, and that law made
it the duty of the defendant to receive the coupons tendered in payment of
taxes, and declared every step to enforce the tax thereafter taken to be
without warrant of law, and therefore a wrong. He stands, then, stripped of
his official character, and, confessing a personal violation of the plaintiff's
rights for which he must personally answer, he is without defense.
No better illustration of this principle can be found than that which is
furnished by the case of United States v. Lee, 106 U. S. 196, in which it was
applied to a claim made on behalf of the national government. The action
was one in ejectment to recover possession of lands to which the plaintiff
claimed title. The defendants were natural persons whose defense was that
they were in possession as officers of the United States under the orders of
the government and for its
Page 114 U. S. 289
uses. The Attorney General called this aspect of the case to the attention of
the Court, but without making the United States a party defendant. It was
decided by this Court that to sustain the defense and to defeat the plaintiff's
cause of action it was necessary to show that the defendants were in
possession under the United States, and on their behalf, by virtue of some
valid authority. As this could not be shown, the contrary clearly appearing,
possession of lands, actually in use as a national cemetery, was adjudged to
the plaintiffs. The decision in that case was rested largely upon the authority
of Osborn v. Bank of the United States, 9 Wheat. 738, which was a suit in
equity against an officer of the State of Ohio who sought to enforce one of
her statutes which was in violation of rights secured to the bank by the
Constitution of the United States. The defendants, Osborn and others,
denied the jurisdiction of the court upon the ground that the state was the
real party in interest and could not be sued, and that a suit against her
officers, who were executing her will, was in violation of the Eleventh
Amendment of the Constitution. To this objection Chief Justice Marshall
replied:
"If the State of Ohio could have been made a party defendant, it can
scarcely be denied that this would be a strong case for an injunction. The
objection is that, as the real party cannot be brought before the court, a suit
cannot be sustained against the agents of that party, and cases have been
cited to show that a court of chancery will not make a decree unless all
those who are substantially interested be made parties to the suit. This is
certainly true where it is in the power of the plaintiff to make them parties,
but if the person who is the real principal -- the person who is the true
source of the mischief, by whose power and for whose advantage it is done
-- be himself above the law, be exempt from all judicial process, it would be
subversive of the best-established principles to say that the laws could not
afford the same remedies against the agent employed in doing the wrong
which they would afford against him could his principal be joined in the suit."
This language, it may be observed, was quoted with approval in United
States v. Lee. The principle which it enunciates constitutes
Page 114 U. S. 290
the very foundation upon which the decision in that case rested.
In the discussion of such questions, the distinction between the government
of a state and the state itself is important, and should be observed. In
common speech and common apprehension, they are usually regarded as
identical, and as ordinarily the acts of the government are the acts of the
state, because within the limits of its delegation of power, the government
of the state is generally confounded with the state itself, and often the
former is meant when the latter is mentioned. The state itself is an ideal
person, intangible, invisible, immutable. The government is an agent, and,
within the sphere of the agency, a perfect representative; but outside of
that, it is a lawless usurpation. The constitution of the state is the limit of the
authority of its government, and both government and state are subject to
the supremacy of the Constitution of the United States and of the laws made
in pursuance thereof. So that, while it is true in respect to the government of
a state, as was said in Langford v. United States, 101 U. S. 341, that the
maxim that the King can do no wrong has no place in our system of
government, yet it is also true, in respect to the state itself, that whatever
wrong is attempted in its name is imputable to its government, and not to
the state, for, as it can speak and act only by law, whatever it does say and
do must be lawful. That which therefore is unlawful because made so by the
supreme law, the Constitution of the United States, is not the word or deed
of the state, but is the mere wrong and trespass of those individual persons
who falsely speak and act in its name. It was upon the ground of this
important distinction that this Court proceeded in the case of Texas v. White,
7 Wall. 700, when it adjudged that the acts of secession, which constituted
the civil war of 1861, were the unlawful acts of usurping state governments,
and not the acts of the states themselves, inasmuch as "the Constitution, in
all its provisions, looks to an indestructible Union, composed of
indestructible states," and that consequently the war itself was not a war
between the states, nor a war of the United States against states, but a war
of the United States against
Page 114 U. S. 291
unlawful and usurping governments representing not the states, but a
rebellion against the United States. This is, in substance, what was said by
Chief Justice Chase, delivering the opinion of the Court in Thorington v.
Smith, 8 Wall. 1, 75 U. S. 9, when he declared, speaking of the Confederate
government, that "it was regarded as simply the military representative of
the insurrection against the authority of the United States." The same
distinction was declared and enforced in Williams v. Bruffy, 96 U. S. 176, 96
U. S. 192, and in Horn v. Lockhart, 17 Wall. 570, both of which were referred
to and approved in Keith v. Clark, 97 U. S. 454, 97 U. S. 465.
This distinction is essential to the idea of constitutional government. To deny
it or blot it out obliterates the line of demarcation that separates
constitutional government from absolutism, free self-government based on
the sovereignty of the people from that despotism, whether of the one or the
many, which enables the agent of the state to declare and decree that he is
the state; to say "L'Etat, c'est moi." Of what avail are written constitutions,
whose bills of right for the security of individual liberty have been written too
often with the blood of martyrs shed upon the battlefield and the scaffold, if
their limitations and restraints upon power may be overpassed with impunity
by the very agencies created and appointed to guard, defend, and enforce
them, and that too with the sacred authority of law, not only compelling
obedience, but entitled to respect? And how else can these principles of
individual liberty and right be maintained if, when violated, the judicial
tribunals are forbidden to visit penalties upon individual offenders, who are
the instruments of wrong, whenever they interpose the shield of the state?
The doctrine is not to be tolerated. The whole frame and scheme of the
political institutions of this country, state and federal, protest against it.
Their continued existence is not compatible with it. It is the doctrine of
absolutism, pure, simple, and naked, and of communism, which is its twin,
the double progeny of the same evil birth.
It was said by Chief Justice Chase, speaking for the whole Court in Lane
County v. Oregon, 7 Wall. 71, 74 U. S. 76, that the people,
Page 114 U. S. 292
through the Constitution of the United States,
"established a more perfect union by substituting a national government,
acting, with ample power, directly upon the citizens, instead of the
Confederate government, which acted with powers, greatly restricted, only
upon the states."
In no other way can the supremacy of that Constitution be maintained. It
creates a government in fact as well as in name, because its Constitution is
the supreme law of the land, "anything in the constitution or laws of any
state to the contrary notwithstanding," and its authority is enforced by its
power to regulate and govern the conduct of individuals, even where its
prohibitions are laid only upon the states themselves. The mandate of the
state affords no justification for the invasion of rights secured by the
Constitution of the United States; otherwise, that Constitution would not be
the supreme law of the land.
When, therefore, an individual defendant pleads a statute of a state, which
is in violation of the Constitution of the United States as his authority for
taking or holding property to which the citizen asserts title and for the
protection or possession of which he appeals to the courts, to say that the
judicial enforcement of the supreme law of the land, as between the
individual parties, is to coerce the state ignores the fundamental principles
on which the Constitution rest, as contrasted with the Articles of
Confederation, which it displaced, and practically makes the statutes of the
states the supreme law of the land within their respective limits.
When, therefore, by the Act of March 30, 1871, the contract was made by
which it was agreed that the coupons issued under that act should
thereafter be receivable in payment of taxes, it was the contract of the State
of Virginia, because, though made by the agency of the government, for the
time being, of the state, that government was acting within the scope of its
authority, and spoke with its voice as its true representative, and inasmuch
as, by the Constitution of the United States, which is also the supreme law of
Virginia, that contract, when made, became thereby unchangeable and
irrepealable by the state, the subsequent Act of January 26, 1882, and all
other like acts, which deny the obligation of that contract
Page 114 U. S. 293
and forbid its performance, are not the acts of the State of Virginia. The true
and real commonwealth which contracted the obligation is incapable in law
of doing anything in derogation of it. Whatever having that effect, if
operative, has been attempted or done is the work of its government acting
without authority, in violation of its fundamental law, and must be looked
upon in all courts of justice as if it were not and never had been. The
argument, therefore, which seeks to defeat the present action for the reason
that it is a suit against the State of Virginia, because the nominal defendant
is merely its officer and agent, acting in its behalf, in its name, and for its
interest, and amenable only to it, falls to the ground because its chief
postulate fails. The State of Virginia has done none of these things with
which this defense charges her. The defendant in error is not her officer, her
agent, or her representative in the matter complained of, for he has acted
not only without her authority, but contrary to her express commands. The
plaintiff in error, in fact and in law, is representing her as he seeks to
establish her law, and vindicates her integrity as he maintains his own right.
Tried by every test which has been judicially suggested for the determination
of the question, this cannot be considered to be a suit against the state. The
state is not named as a party in the record; the action is not directly upon
the contract; it is not for the purpose of controlling the discretion of
executive officers, or administering funds actually in the public Treasury, as
was held to be the case in Louisiana v. Junel, 107 U. S. 711; it is not an
attempt to compel officers of the state to do the acts which constitute a
performance of its contract by the state, as suggested by a minority of the
court in Antoni v. Greenhow, 107 U. S. 769, 107 U. S. 783, nor is it a case
where the state is a necessary party, that the defendant may be protected
from liability to it, after having answered to the present plaintiff. For, on this
equity jurisdiction
"that when a rule or system of valuation is adopted by those whose duty it is
to make the assessment, which is designed to operate unequally and to
violate a fundamental principle of the Constitution, and when this rule is
applied not solely to one individual, but to a large class of individuals or
corporations, equity may properly interfere to restrain the operation of this
unconstitutional exercise of power."
And it is no objection to the remedy in such cases that the statute whose
application in the particular case is sought to be restrained is not void on its
face, but is complained of only because its operation in the particular
instance works a violation of a constitutional right, for the cases are
numerous where the tax laws of a state which in their general and proper
application are perfectly valid have been held to become void in particular
cases either as unconstitutional regulations of commerce or as violations of
contracts prohibited by the Constitution, or because in some other way they
operate to deprive the party complaining of a right secured to him by the
Constitution of the United States. At the present term of this Court, at least
three cases have been decided in which railroad companies
Page 114 U. S. 296
have been complainants in equity seeking to restrain officers of states from
collecting taxes on the ground of an exemption by contract, and no question
of jurisdiction has been raised. The practice has become common, and is
well settled on incontestable principles of equity procedure. Memphis
Railroad v. Railroad Commissioners, 112 U. S. 609; St. Louis &c. Ry. Co. v.
Berry, 113 U. S. 465; Chesapeake & Ohio Railroad Co. v. Miller, ante, 114 U.
S. 176.
It is still urged upon us, however, in argument that notwithstanding all that
has been or can be said, it still remains that the controversy disclosed by the
record is between an individual and the state; that the state alone has any
real interest in its determination; that the practical effect of such
determination is to control the action of the state in the regular and orderly
administration of its public affairs, and that therefore the suit is and must be
regarded as a suit against the state within the prohibition of the Eleventh
Amendment to the Constitution. Omitting for the time being the
consideration already enforced of the fallacy that lies at the bottom of this
objection, arising from the distinction to be kept in view between the
government of a state and the state itself, the premises which it assumes
may all be admitted, but the conclusion would not follow. The same
argument was employed in the name of the United States in the Lee case,
and did not prevail. It was pressed with the greatest force of which it was
susceptible in the case of Osborn v. Bank of the United States, and was met
and overcome by the masterly reasoning of Chief Justice Marshall. It
appeared early in the history of this Court, in 1799, in the case of Fowler v.
Lindsey, 3 Dall. 411, in which that able magistrate Mr. Justice Washington
pronounced his first reported opinion. On a motion to remove the cause by
certiorari from the circuit court on the ground that it was a suit in which a
state was a party, it being an ejectment for lands the title to which was
claimed under grants from different states, he said:
"A case which belongs to the jurisdiction of the Supreme Court on account of
the interest that a state has in the controversy must be a case in which a
state is either nominally or substantially the party.
government of laws, and not of men. It will certainly cease to deserve this
high appellation if the laws furnish no remedy for the violation of a vested
legal right."
It is contended, however, in behalf of the defendant in error that the Act of
January 26, 1882, under which he justified his refusal of the tender of
coupons, does not impair the obligation of the contract between the coupon
holder and the State of Virginia inasmuch as it secures to him a remedy
equal in legal value to all that it takes away, and that consequently, as the
state may lawfully legislate by changing remedies so that it does not destroy
rights, the remedy thus provided is exclusive, and must defeat the plaintiff's
action. The remedy thus substituted and declared exclusive is one that
requires the taxpayer demanding to have coupons received in payment of
taxes, first, to pay the taxes due from him in money, under protest, when,
within thirty days thereafter, he may sue the officer to recover back the
amount paid, which, on obtaining judgment therefor, shall be refunded by
the auditor of public accounts out of the treasury. By the amendment passed
March 13, 1884, the coupons tendered are required to
Page 114 U. S. 299
be sealed up and marked for identification, filed with the petition at the
commencement of the suit, produced on the trial as evidence of the tender,
and delivered to the auditor of public accounts, to be cancelled when he
issues his warrant for the amount of the judgment.
It is contended that in view of this remedy, the case is ruled by the decision
of this Court in Antoni v. Greenhow, 107 U. S. 769. We have, however,
already shown by extracts from the opinion of the Court in that case that the
question involved in the present proceeding was not covered by that
judgment. In that case, the plaintiff in error was seeking to compel the
officer specifically to receive his coupons in payment of taxes by mandamus
on the ground that he was entitled to that remedy when the contract was
made by the law of March 30, 1871. The law giving that remedy was
subsequently amended, requiring the petitioner to pay the taxes in money in
the first instance, and permitting the writ to issue only after a trial in which
the genuineness of the coupons tendered had been established. The Court
held that he might have been put to the same proof in the former mode of
proceeding, and that the amendment did not destroy the efficiency of the
remedy.
But here the plaintiff did not seek any compulsory process against the officer
to require him specifically to receive the coupons tendered. He offered them
and they were refused. He chose to stand upon the defensive and maintain
his rights as they might be assailed. His right was to have his coupon
received for taxes when offered. That was the contract. To refuse to receive
them was an open breach of its obligation. It is no remedy for this that he
may acquiesce in the wrong, pay his taxes in money which he was entitled
to pay in coupons and bring suit to recover it back. His tender, as we have
already seen, was equivalent to payment, so far as concerns the legality of
all subsequent steps by the collector to enforce payment by distraint of his
property. He has the right to say he will not pay the amount a second time,
even for the privilege of recovering it back. And if he chooses to stand upon
a lawful payment once made, he asks no remedy to recover back taxes
illegally collected, but may resist the exaction, and treat
Page 114 U. S. 300
payment of taxes are secured in their right of action for redress. But the
coupon holder, to whom the Constitution of the United States guarantees
the right, conferred upon him by the law and contract of Virginia, to pay his
taxes in coupons is excepted. The discrimination is made against him in
order to deprive him of that right, and, if permitted, will have the effect of
denying to him all redress for a deprivation of a right secured to him by the
Constitution. To take away all remedy for the enforcement of a right is to
take away the right itself. But that is not within the power of the state.
Rev.Stat. 721, it will be observed, makes an express exception, in
reference to the adoption of state laws as rules of decision, of cases where
the Constitution otherwise requires, which it does wherever the adoption of
the state law deprives a complaining party of a remedy essential to the
vindication of a right and that right is derived from or protected by the
Constitution of the United States. The same exception is implied in 914,
the language of which indeed is not imperative, as the conformity required
in the practice and procedure of the courts of the United States with that of
the state courts needs only to be "as near as may be." No one would
contend that a law of a state forbidding all redress by actions at law for
injuries to property would be upheld in the courts of the United States, for
that would be to deprive one of his property without due process of law. This
is exactly what the statutes in question undertake to do in respect to that
class of persons whose property is taken from them for the offense of
asserting, under the protection of the Constitution, the right to pay their
taxes in coupons. The contract with Virginia was not only that the coupons
should be received in payment of taxes, but, by necessary implication, that
the taxpayer making such a tender should not be molested further, as
though he were a
Page 114 U. S. 304
delinquent, and that for every illegal attempt subsequently to enforce the
collection of the tax by the seizure of property, he should have the remedies
of the law in force when the contract was made for redress, or others equally
effective. "The obligation of a contract," said this Court in McCracken v.
Hayward, 2 How. 608, 43 U. S. 612,
"consists in its binding force on the party who makes it. This depends on the
laws in existence when it is made. These are necessarily referred to in all
contracts, and forming a part of them, as the measure of the obligation to
perform them by the one party and the right acquired by the other. There
can be no other standard by which to ascertain the extent of either than that
which the terms of the contract indicate, according to their settled legal
meaning; when it becomes consummated, the law defines the duty and the
right, compels one party to perform the thing contracted for, and gives the
other a right to enforce the performance by the remedies then in force. If
any subsequent law affect to diminish the duty or to impair the right, it
necessarily bears on the obligation of the contract in favor of one party to
the injury of the other; hence, any law which in its operation amounts to a
denial or obstruction of the rights accruing by a contract, though professing
to act only on the remedy, is directly obnoxious to the prohibition of the
Constitution."
The acts of assembly in question must be taken together, as one is but an
amendment to the other. The scheme of the whole is indivisible. It cannot be
separated into parts. It must stand or fall together. The substantive part of it,
respondents. Salas, Villareal & Velasco for petitioners. Virgilio A. Sindico for
respondents. SYLLABUS 1. ADMINISTRATIVE LAW; GOVERNMENT
INSTRUMENTALITY, DEFINED. The 1987 Administrative Code defines a
government instrumentality as follows: Instrumentality refers to any agency
of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions, and government-owned or
controlled corporations. (Sec. 2 (5) Introductory Provisions). 2. ID.;
CHARTERED INSTITUTION; DEFINED; APPLICATION IN CASE AT BAR. The
1987 Administrative Code describes a chartered institution thus: Chartered
institution refers to any agency organized or operating under a special
charter, and vested by law with functions relating to specific constitutional
policies or objectives. This term includes the state universities and colleges,
and the monetary authority of the state. (Sec. 2 (12) Introductory
Provisions). It is clear from the above definitions that ISCOF is a chartered
institution and is therefore covered by P.D. 1818. There are also indications
in its charter that ISCOF is a government instrumentality. First, it was created
in pursuance of the integrated fisheries development policy of the State, a
priority program of the government to effect the socioeconomic life of the
nation. Second, the Treasurer of the Republic of the Philippines shall also be
the ex-officio Treasurer of the state college with its accounts and expenses
to be audited by the Commission on Audit or its duly authorized
representative. Third, heads of bureaus and offices of the National
Government are authorized to loan or transfer to it, upon request of the
president of the state college, such apparatus, equipment, or supplies and
even the services of such employees as can be spared without serious
detriment to public service. Lastly, an additional amount of P1.5M had been
appropriated out of the funds of the National Treasury and it was also
decreed in its charter that the funds and maintenance of the state college
would henceforth be included in the General Appropriations Law.
(Presidential Decree No. 1523) 3. ID.; PROHIBITION OF ANY COURT FROM
ISSUING INJUNCTION IN CASES INVOLVING INFRASTRUCTURE PROJECTS OF
GOVERNMENT (P.D. 1818); POWER OF THE COURTS TO RESTRAIN
APPLICATION. In the case of Datiles and Co. vs. Sucaldito, (186 SCRA 704)
this Court interpreted a similar prohibition contained in P.D. 605, the law
after which P.D. 1818 was patterned. It was there declared that the
prohibition pertained to the issuance of injunctions or restraining orders by
courts against administrative acts in controversies involving facts or the
exercise of discretion in technical cases. The Court observed that to allow
the courts to judge these matters would disturb the smooth functioning of
the administrative machinery. Justice Teodoro Padilla made it clear, however,
that on issues definitely outside of this dimension and involving questions of
law, courts could not be prevented by P.D. No. 605 from exercising their
power to restrain or prohibit administrative acts. We see no reason why the
above ruling should not apply to P.D. 1818. There are at least two
irregularities committed by PBAC that justified injunction of the bidding and
the award of the project. 4. ID.; POLICIES AND GUIDELINES PRESCRIBED FOR
GOVERNMENT INFRASTRUCTURE (PD 1594); RULES IMPLEMENTING
THEREOF, NOT SUFFICIENTLY COMPLIED WITH IN CASE AT BAR. Under the
time, yet after 10:00 o'clock of the given late, the PBAC already refused to
accept petitioners' documents. 2. The time and date of bidding was
published as December 12, 1988 at 3:00 p.m. yet it was held at 10:00
o'clock in the morning. 3. Private respondents, for the purpose of inviting
bidders to participate, issued a mimeographed "Invitation to Bid" form,
which by law (P.D. 1594 and Implementing Rules, Exh. B-1) is to contain the
particulars of the project subject of bidding for the purpose of. (i) enabling
bidders to make an intelligent and accurate bids; (ii) for PBAC to have a
uniform basis for evaluating the bids; (iii) to prevent collusion between a
bidder and the PBAC, by opening to all the particulars of a project.
Additionally, the Invitation to Bid prepared by the respondents and the
Itemized Bill of Quantities therein were left blank. 5 And although the project
in question was a "Construction," the private respondents used an Invitation
to Bid form for "Materials." 6 The petitioners also point out that the validity
of the writ of preliminary injunction had not yet become moot and academic
because even if the bids had been opened before the restraining order was
issued, the project itself had not yet been awarded. The ISCOF president was
not an indispensable party because the signing of the award was merely a
ministerial function which he could perform only upon the recommendation
of the Award Committee. At any rate, the complaint had already been duly
amended to include him as a party defendant. In their Comment, the private
respondents maintain that since the members of the board of trustees of the
ISCOF are all government officials under Section 7 of P.D. 1523 and since the
operations and maintenance of the ISCOF are provided for in the General
Appropriations Law, it is should be considered a government institution
whose infrastructure project is covered by P.D. 1818. Regarding the schedule
for pre-qualification, the private respondents insist that PBAC posted on the
ISCOF bulletin board an announcement that the deadline for the submission
of pre-qualifications documents was at 10 o'clock of December 2, 1988, and
the opening of bids would be held at 1 o'clock in the afternoon of December
12, 1988. As of ten o'clock in the morning of December 2, 1988, B.E.
construction and Best Built construction had filed only their letters of intent.
At two o'clock in the afternoon, B.E., and Best Built filed through their
common representative, Nenette Garuello, their pre-qualification documents
which were admitted but stamped "submitted late." The petitioners were
informed of their disqualification on the same date, and the disqualification
became final on December 6, 1988. Having failed to take immediate action
to compel PBAC to pre-qualify them despite their notice of disqualification,
they cannot now come to this Court to question the binding proper in which
they had not participated. In the petitioners' Reply, they raise as an
additional irregularity the violation of the rule that where the estimate
project cost is from P1M to P5M, the issuance of plans, specifications and
proposal book forms should made thirty days before the date of bidding. 7
They point out that these forms were issued only on December 2, 1988, and
not at the latest on November 12, 1988, the beginning of the 30-day period
prior to the scheduled bidding. In their Rejoinder, the private respondents
aver that the documents of B.E. and Best Built were received although filed
late and were reviewed by the Award Committee, which discovered that the
contractors had expired licenses. B.E.'s temporary certificate of Renewal of
Contractor's License was valid only until September 30, 1988, while Best
Built's license was valid only up to June 30, 1988. The Court has considered
of Agreement was signed by and among the PMS, the HIGC, and UNITED.
The Memorandum of Agreement called for the PMS to sell the Dominican
Hills property to HIGC which would, in turn, sell the same to UNITED. The
parties agreed on a selling price of P75.00 per square meter.
Thus, on June 12, 1991, HIGC sold 2.48 hectares of the property to UNITED.
The deed of conditional sale provided that ten (10) per cent of the purchase
price would be paid upon signing, with the balance to be amortized within
one year from its date of execution. After UNITED made its final payment on
January 31, 1992, HIGC executed a Deed of Absolute Sale dated July 1, 1992.
Petitioner alleges that sometime in 1993, private respondents entered the
Dominican Hills property allocated to UNITED and constructed houses
thereon. Petitioner was able to secure a demolition order from the city
mayor.4
Unable to stop the razing of their houses, private respondents, under the
name DOMINICAN HILL BAGUIO RESIDENTS HOMELESS ASSOCIATION
(ASSOCIATION, for brevity) filed an action 5 for injunction docketed as Civil
Case No. 3316-R, in the Regional Trial Court of Baguio City, Branch 4. Private
respondents were able to obtain a temporary restraining order but their
prayer for a writ of preliminary injunction was later denied in an Order dated
March 18, 1996.6
While Civil Case No. 3316-R was pending, the ASSOCIATION, this time
represented by the Land Reform Beneficiaries Association, Inc.
(BENEFICIARIES, for brevity), filed Civil Case No. 3382-R before Branch 61 of
the same court. The complaint 7 prayed for damages, injunction and
annulment of the said Memorandum of Agreement between UNITED and
HIGC. Upon motion of UNITED, the trial court in an Order dated May 27,
1996 dismissed Civil Case No. 3382-R. 8 The said Order of dismissal is
currently on appeal with the Court of Appeals.9
Demolition Order No. 1-96 was subsequently implemented by the Office of
the City Mayor and the City Engineer's Office of Baguio City. However,
petitioner avers that private respondents returned and reconstructed the
demolished structures.
To forestall the re-implementation of the demolition order, private
respondents filed on September 29, 1998 a petition 10 for annulment of
contracts with prayer for a temporary restraining order, docketed as COSLAP
Case No. 98-253, in the Commission on the Settlement of Land Problems
(COSLAP) against petitioner, HIGC, PMS, the City Engineer's Office, the City
Mayor, as well as the Register of Deeds of Baguio City. On the very same
day, public respondent COSLAP issued the contested order requiring the
parties to maintain the status quo.
Without filing a motion for reconsideration from the aforesaid status quo
order, petitioner filed the instant petition questioning the jurisdiction of the
COSLAP.
The issues we are called upon to resolve are:
1
IS THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP]
CREATED UNDER EXECUTIVE ORDER NO. 561 BY THE OFFICE OF THE
PHILIPPINES [sic] EMPOWERED TO HEAR AND TRY A PETITION FOR
ANNULMENT OF CONTRACTS WITH PRAYER FOR A TEMPORARY RESTRAINING
ORDER AND THUS, ARROGATE UNTO ITSELF THE POWER TO ISSUE STATUS
QUO ORDER AND CONDUCT A HEARING THEREOF [sic]?
2
ASSUMING THAT THE COMMISSION ON THE SETTLEMENT OF LAND
PROBLEMS [COSLAP] HAS JURISDICTION ON THE MATTER, IS IT EXEMPTED
FROM OBSERVING A CLEAR CASE OF FORUM SHOPPING ON THE PART OF THE
PRIVATE RESPONDENTS?
To the extent that the instant case is denominated as one for declaratory
relief, we initially clarify that we do not possess original jurisdiction to
entertain such petitions.11 Such is vested in the Regional Trial
Courts.12Accordingly, we shall limit our review to ascertaining if the
proceedings before public respondent COSLAP are without or in excess, of its
jurisdiction. In this wise, a recounting of the history of the COSLAP may
provide useful insights into the extent of its powers and functions.
The COSLAP was created by virtue of Executive Order No. 561 dated
September 21, 1979. Its forerunner was the Presidential Action Committee
on Land Problems (PACLAP) founded on July 31, 1970 by virtue of Executive
Order No. 251. As originally conceived, the committee was tasked "to
expedite and coordinate the investigation and resolution of land disputes,
streamline and shorten administrative procedures, adopt bold and decisive
measures to solve land problems, and/or recommend other solutions." It was
given the power to issue subpoenasduces tecum and ad testificandum and
to call upon any department, office, agency or instrumentality of the
government, including government owned or controlled corporations and
local government units, for assistance in the performance of its functions. At
the time, the PACLAP did not exercise quasi-judicial functions.
On March 19, 1971, Executive Order No. 305 was issued reconstituting the
PACLAP.13 The committee was given exclusive jurisdiction over all cases
involving public lands and other lands of the public domain and accordingly
was tasked:
1. To investigate, coordinate, and resolve expeditiously land disputes,
streamline administrative procedures, and in general, to adopt bold and
decisive measures to solve problems involving public lands and lands of the
public domain;
2. To coordinate and integrate the activities of all government agencies
having to do with public lands or lands of the public domain;
3. To study and review present policies as embodied in land laws and
administrative rules and regulations, in relation to the needs for land of the
agro-industrial sector and small farmers, with the end in view to evolving
and recommending new laws and policies and establishing priorities in the
grant of public land, and the simplification of processing of land applications
in order to relieve the small man from the complexities of existing laws,
rules and regulations;
4. To evolve and implement a system for the speedy investigation and
resolution of land disputes;
5. To receive all complaints of settlers and small farmers, involving public
lands or other lands of the public domain;
6. To look into the conflicts between Christians and non-Christians, between
corporations and small settlers and farmers; cause the speedy settlement of
such conflicts in accordance with priorities or policies established by the
Committee; and
7. To perform such other functions as may be assigned to it by the President.
Thereafter, the PACLAP was reorganized pursuant to Presidential Decree No.
provides:
Revised Circular No. 28-91, dated February 8, 1994, applies to and governs
the filing of petitions in the Supreme Court and the Court of Appeals and is
intended to prevent the multiple filing of petitions or complaints involving
the same issues in other tribunals or agencies as a form of forum shopping.
Complementary thereto and for the same purpose, the following
requirements, in addition to those in pertinent provisions of the Rules of
Court and existing circulars, shall be strictly complied with in the filing of
complaints, petitions, applications or other initiatory pleadings in all courts
and agencies other than the Supreme Court and the Court of Appeals and
shall be subject to the sanctions provided hereunder.
1. The plaintiff, petitioner, applicant or principal part seeking relief in the
complaint, petition, application or other initiatory pleading shall certify under
oath in such original pleading, or in a sworn certification annexed thereto
and simultaneously filed therewith, to the truth of the following facts and
undertakings: (a) he has not theretofore commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no
such action or proceedings is pending in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (c) if there is any such action or
proceeding which is either pending or may have been terminated, he must
state the status thereof; and (d) if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme Court,
the Court of Appeals or any other tribunal or agency, he undertakes to
report that fact within five (5) days therefrom to the court or agency wherein
the original pleading and sworn certification contemplated herein have been
filed.
The complaint and other initiatory pleadings referred to and subject of this
Circular are the original civil complaint, counterclaim, cross-claim, third
(fourth, etc.) party complaint, or complaint-in-intervention, petition, or
application wherein a party asserts his claim for relief.
2. Any violation of this Circular shall be a cause for the dismissal of the
complaint, petition, application or other initiatory pleading, upon motion and
after hearing. However, any clearly willful and deliberate forum shopping by
any other party and his counsel through the filing of multiple complaints or
other initiatory pleadings to obtain favorable action shall be a ground for the
summary dismissal thereof and shall constitute contempt of court.
Furthermore, the submission of a false certification or non-compliance with
the undertakings therein, as provided in Paragraph 1 hereof, shall constitute
indirect contempt of court, without prejudice to disciplinary proceedings
against the counsel and the filing of a criminal action against the part.
[emphasis supplied]
xxx
xxx
xxx
The said Administrative Circular's use of the auxiliary verb "shall" imports
"an imperative obligation . . . inconsistent with the idea of discretion." 28
Hence, compliance therewith is mandatory.29
It bears stressing that there is a material distinction between the
requirement of submission of the certification against forum shopping from
the undertakings stated therein. Accordingly,
x x x [f]ailure to comply with this requirement cannot be excused by the fact
that plaintiff is not guilty of forum shopping. The Court of Appeals, therefore,
erred in concluding that Administrative Circular No. 04-94 did not apply to
private respondent's case merely because her complaint was not based on
petitioner's cause of action. The Circular applies to any complaint, petition,
application, or other initiatory pleading, regardless of whether the party
filing it has actually committed forum shopping. Every party filing a
complaint or any other initiatory pleading is required to swear under oath
that he has not committed nor will he commit forum shopping. Otherwise,
we would have an absurd situation where the parties themselves would be
the judge of whether their actions constitute a violation of said Circular, and
compliance therewith would depend on their belief that they might or might
not have violated the requirement. Such interpretation of the requirement
would defeat the very purpose of Circular 04-94.
Indeed, compliance with the certification against forum shopping is separate
from, and independent of, the avoidance of forum shopping itself. Thus,
there is a difference in the treatment in terms of imposable sanctions
between failure to comply with the certification requirement and violation of
the prohibition against forum shopping. The former is merely a cause for the
dismissal, without prejudice, of the complaint or initiatory pleading, while
the latter is a ground for summary dismissal thereof and constitutes direct
contempt.30
A scrutiny of the pleadings filed before the trial courts and the COSLAP
sufficiently establishes private respondents' propensity for forum shopping.
We lay the premise that the certification against forum shopping must be
executed by the plaintiff or principal party, and not by his counsel. 31 Hence,
one can deduce that the certification is a peculiar personal representation
on the part of the principal party, an assurance given to the court or other
tribunal that there are no other pending cases involving basically the same
parties, issues and causes of action. In the case at bar, private respondents'
litany of omissions range from failing to submit the required certification
against forum shopping to filing a false certification, and then to forum
shopping itself. First, the petition filed before the COSLAP conspicuously
lacked a certification against forum shopping. Second, it does not appear
from the record that the ASSOCIATION informed Branch 4 of the Regional
Trial Court of Baguio City before which Civil Case No. 3316-R was pending,
that another action, Civil Case No. 3382-R, was filed before Branch 61 of the
same court. Another group of homeless residents of Dominican Hill, the
LAND REFORM BENEFICIARIES ASSOCIATION, INC. initiated the latter case.
The aforesaid plaintiff, however, does not hesitate to admit that it filed the
second case in representation of private respondent, as one of its affiliates.
In the same manner, the certification against forum shopping accompanying
the complaint in Civil Case No. 3382-R does not mention the pendency of
Civil Case No. 3316-R. In fact, the opposite assurance was given, that there
was no action pending before any other tribunal. Another transgression is
that both branches of the trial court do not appear to have been notified of
the filing of the subject COSLAP Case No. 98-253.
It is evident from the foregoing facts that private respondents, in filing
multiple petitions, have mocked our attempts to eradicate forum shopping
and have thereby upset the orderly administration of justice. They sought
recourse from three (3) different tribunals in order to obtain the writ of
injunction they so desperately desired. "The willful attempt by private
respondents to obtain a preliminary injunction in another court after it failed
to acquire the same from the original court constitutes grave abuse of the
judicial process."32
In this connection, we expounded on forum shopping in Viva Productions,
Inc. v. Court of Appeals33 that:
Private respondent's intention to engage in forum shopping becomes
manifest with undoubted clarity upon the following considerations. Notably,
if not only to ensure the issuance of an injunctive relief, the significance of
the action for damages before the Makati court would be nil. What damages
against private respondent would there be to speak about if the Paraaque
court already enjoins the performance of the very same act complained of in
the Makati court? Evidently, the action for damages is premature if not for
the preliminary injunctive relief sought. Thus, we find grave abuse of
discretion on the part of the Makati court, being a mere co-equal of the
Paraaque court, in not giving due deference to the latter before which the
issue of the alleged violation of the sub-judice rule had already been raised
and submitted. In such instance, the Makati court, if it was wary of
dismissing the action outrightly under Administrative Circular No. 04-94,
should have, at least, ordered the consolidation of its case with that of the
Paraaque court, which had first acquired jurisdiction over the related case x
x x, or it should have suspended the proceedings until the Paraaque court
may have ruled on the issue x x x.
xxx
xxx
xxx
Thus, while we might admit that the causes of action before the Makati
court and the Paraaque court are distinct, and that private respondent
cannot seek civil indemnity in the contempt proceedings, the same being in
the nature of criminal contempt, we nonetheless cannot ignore private
respondent's intention of seeking exactly identical reliefs when it sought the
preliminary relief of injunction in the Makati court. As earlier indicated, had
private respondent been completely in good faith there would have been no
hindrance in filing the action for damages with the regional trial court of
Paraaque and having it consolidated with the contempt proceedings before
Branch 274, so that the same issue on the alleged violation of the sub judice
rule will not have to be passed upon twice, and there would be no possibility
of having two courts of concurrent jurisdiction making two conflicting
resolutions.
Yet from another angle, it may be said that when the Paraaque court
acquired jurisdiction over the said issue, it excluded all other courts of
concurrent jurisdiction from acquiring jurisdiction over the same. To hold
otherwise would be to risk instances where courts of concurrent jurisdiction
might have conflicting orders. This will create havoc and result in an
extremely disordered administration of justice. Therefore, even on the
assumption that the Makati court may acquire jurisdiction over the subject
matter of the action for damages, without prejudice to the application of
Administrative Circular No. 04-94, it cannot nonetheless acquire jurisdiction
over the issue of whether or not petitioner has violated the sub judice rule.
At best, theMakati court may hear the case only with respect to the alleged
injury suffered by private respondent afterthe Paraaque court shall have
ruled favorably on the said issue.
We also noted several indications of private respondents' bad faith. The
complaint filed in Civil Case No. 3316-R was prepared by the ASSOCIATION's
counsel, Atty. Conrado Villamor Catral, Jr. whereas the complaint filed in Civil
Case No. 3382-R was signed by a different lawyer, Atty. Thomas S. Tayengco.
With regard to the petition filed with the COSLAP, the same was signed by
private respondents individually. As to the latter case, we noted that the
petition itself could not have been prepared by ordinary laymen, inasmuch
as it exhibits familiarity with statutory provisions and legal concepts, and is
written in a lawyerly style.
In the same manner, the plaintiffs in the three (3) different cases were made
to appear as dissimilar: in Civil Case No. 3316-R, the plaintiff was
ASSOCIATION of which private respondent Mario Padilan was head, while the
plaintiff in Civil Case No. 3382-R was the BENEFICIARIES. Before the COSLAP,
private respondents themselves were the petitioners, led again by Padilan. 34
Private respondents also attempted to vary their causes of action: in Civil
Case No. 3382-R and COSLAP Case No. 98-253, they seek the annulment of
the Memorandum of Agreement executed by and among UNITED, the PMS,
and HIGC as well as the transfer certificates of title accordingly issued to
petitioner. All three (3) cases sought to enjoin the demolition of private
respondents' houses.
It has been held that forum shopping is evident where the elements of litis
pendentia or res judicata are present. Private respondents' subterfuge
comes to naught, for the effects of res judicata or litis pendentia may not be
avoided by varying the designation of the parties or changing the form of
the action or adopting a different mode of presenting one's case. 35
In view of the foregoing, all that remains to be done is the imposition of the
proper penalty. A party's willful and deliberate act of forum shopping is
punishable by summary dismissal of the actions filed. 36 The summary
dismissal of both COSLAP Case No. 98-253 and Civil Case No. 3316-R is
therefore warranted under the premises. We shall refrain from making any
pronouncement on Civil Case No. 3382-R, the dismissal of which was
elevated on appeal to the Court of Appeals where it is still pending.
WHEREFORE, the petition is hereby GRANTED. The status quo order dated
September 29, 1998 issued in COSLAP Case No. 98-253 by respondent
Commission On The Settlement Of Land Problems (COSLAP) is hereby SET
ASIDE; and the petition filed in COSLAP Case No. 98-253 and the complaint
in Civil Case No. 3316-R are hereby DISMISSED for lack of jurisdiction and
forum shopping. Costs against private respondents.
SO ORDERED.
G.R. No. 97149 March 31, 1992
FIDENCIO Y. BEJA, SR., petitioner,
vs.
COURT OF APPEALS, HONORABLE REINERIO O. REYES, in his
capacity as Secretary of the Department of Transportation and
Communications; COMMODORE ROGELIO A. DAYAN, in his capacity
as General Manager of the Philippine Ports Authority; DEPARTMENT
OF TRANSPORTATION AND COMMUNICATIONS, ADMINISTRATIVE
ACTION BOARD; and JUSTICE ONOFRE A. VILLALUZ, in his capacity
as Chairman of the Administrative Action Board, DOTC, respondents.
ROMERO, J.:
The instant petition for certiorari questions the jurisdiction of the Secretary
of the Department of Transportation and Communications (DOTC) and/or its
Administrative Action Board (AAB) over administrative cases involving
"WHEREAS, Section 1(1) of Article IX-B provides that the Civil Service shall
be administered by the Civil Service Commission, . . . ";
"WHEREAS, Section 3, Article IX-B of the 1987 Philippine Constitution
provides that 'The Civil Service Commission, as the central personnel agency
of the government, is mandated to establish a career service and adopt
measures to promote morale, efficiency, integrity, responsiveness,
progressiveness and courtesy in the civil service, . . . ';
"WHEREAS, Section 12 (1), Title I, Subtitle A, Book V of the Administrative
Code of 1981 grants the Commission the power, among others, to
administer and enforce the constitutional and statutory provisions on the
merit system for all levels and ranks in the Civil Service;
"WHEREAS, Section 7, Title I, Subtitle A, Book V of the Administrative Code
of 1987 provides, among others, that 'The Career Service shall be
characterized by (1) entrance based on merit and fitness to be determined
as far as practicable by competitive examination, or based on highly
technical qualifications; (2) opportunity for advancement to higher career
positions; and (3) security of tenure;
"WHEREAS, Section 8 (c), Title I, Subtitle A, Book V of the Administrative
Code of 1987 provides that 'The third level shall cover position in the Career
Executive Service';
AIDA D. EUGENIO, Petitioner, v. CIVIL SERVICE COMMISSION,
DAVIDE, JR., HON. TEOFISTO T. GUINGONA. JR. & HON. SALVADOR
ENRIQUEZ, JR., Respondent.
PUNO, J.:
The power of the Civil Service Commission to abolish the Career Executive
Service Board is challenged in this petition for Certiorari and prohibition.
"WHEREAS, Section 5, Article IX-A of the Constitution provides that the Civil
Service Commission shall enjoy fiscal autonomy and the necessary
implications thereof;
DECISION
First the facts. Petitioner is the Deputy Director of the Philippine Nuclear
Research Institute. She applied for a Career Executive Service (CES)
Eligibility and a CESO rank. On August 2, 1993, she was given a CES
eligibility. nadchanroblesvirtuallawlibrary
On September 15, 1993, she Was recommended to the President for a CESO
rank by the Career Executive Service Board. 1
All was not to turn well for petitioner. On October 1, 1993, respondent Civil
Service
Commission
2
passed
Resolution
No.
93-4359,
viz:nadchanroblesvirtualawlibrary
"On 1 October 1993, the Civil Service Commission issued CSC Resolution No.
93-4359 which abolished the Career Executive Service Board.
nadchanroblesvirtuallawlibrary
"Several legal issues have arisen as a result of the issuance of CSC
Resolution No. 93-4359, including whether the Civil Service Commission has
authority to abolish the Career Executive Service Board. Because these
issues remain unresolved, the Office of the President has refrained from
considering appointments of career service eligibles to career executive
ranks.
xxx xxx xxx
"You may, however, bring a case before the appropriate court to settle the
legal issues arising from the issuance by the Civil Service Commission of
CSC Resolution No. 93-4359, for guidance of all concerned.
"Thank you."
Finding herself bereft of further administrative relief as the Career Executive
Service Board which recommended her CESO Bank IV has been abolished,
petitioner filed the petition at bench to annul, among others, resolution No.
93-4359.
The
petition
is
anchored
on
the
following
arguments:nadchanroblesvirtualawlibrary
"A.
IN VIOLATION OF THE CONSTITUTION, RESPONDENT COMMISSION USURPED
THE LEGISLATIVE FUNCTIONS OF CONGRESS WHEN IT ABOLISHED THE CESB,
AN OFFICE CREATED BY LAW, THROUGH THE ISSUANCE OF CSC RESOLUTION
NO. 93-4359;
"B.
ALSO IN VIOLATION OF THE CONSTITUTION, RESPONDENT CSC USURPED
THE LEGISLATIVE FUNCTIONS OF CONGRESS WHEN IT ILLEGALLY
AUTHORIZED THE TRANSFER OF PUBLIC MONEY, THROUGH THE ISSUANCE.
OF CSC RESOLUTION NO. 93-4359."
Required to file its Comment, the Solicitor General agreed with the
contentions of petitioner, Respondent Commission, however, chose to
defend
its
ground.
It
posited
the
following
position:nadchanroblesvirtualawlibrary
"5. The Board shall promulgate rules, standards and procedures on the
selection, classification, compensation and career development of members
of the Career Executive Service. The Board shall set up the organization and
But, as well pointed out by petitioner and the Solicitor General, Section 17
must be read together with Section 16 of the said Code which enumerates
the
offices
under
the
respondent
Commission,
viz:nadchanroblesvirtualawlibrary
"(9) The Office of Career Systems and Standards shall provide leadership
and assistance in the formulation and evaluation of personnel systems and
standards relative to performance appraisal merit promotion, and employee
incentive benefits and awards.
"Sec. 16. The Office in the Commission. The Commission shall have the
following offices:nadchanroblesvirtualawlibrary
"(11) The Office of Personnel Inspection and Relations and Audit shall
develop policies, standards rules and regulations for the effective conduct or
inspection and audit personnel and personnel management programs and
the exercise of delegated authority; provide technical and advisory services
to Civil Service Regional Offices and government agencies in the
"(13) The Office of Corporate Affairs shall formulate and implement policies,
standards, wales regulations governing corporate officials and employees in
the areas of recruitment, examination, placement, career development,
merit and awards systems, position classification and compensation,
performing appraisal, employee welfare and benefit, discipline and other
aspects of personnel management on the basis of comparable industry
practices.
"(14) The Office of Retirement Administration shall be responsible for the
enforcement of the constitutional and statutory provisions, relative to
retirement and the regulation for the effective implementation of the
retirement of government officials and employees.
"(15) The Regional and Field Offices. The Commission shall have not less
than thirteen (13) Regional offices each to be headed by a Director, and
such field offices as may be needed, each to be headed by an official with at
least the rank of an Assistant Director.
As read together, the inescapable conclusion is that respondent
Commissions power to reorganize is limited to offices under its control as
enumerated in Section 16, supra. From its inception. the CESB was intended
to be an autonomous entity, albeit administratively attached to respondent
Commission. As conceptualized by the Reorganization Committee "the CESB
shall be autonomous. It is expected to view the problem of building up
executive manpower in the government with a broad and positive outlook."
6 The essential autonomous character of the CESB is not negated by its
attachment to respondent Commission. By said attachment, CESB was not
made to fall within the control of respondent Commission. Under the
Administrative Code of 1987, the purpose of attaching and functionally interrelated government agency to another is to attain "policy and program
coordination." This is clearly etched out in Section 38(3), Chapter 7, Book IV
of the aforecited Code, to wit:nadchanroblesvirtualawlibrary
"(3) Attachment. (a) This refers to the lateral relationship between the
department or its equivalent and the attached agency or corporation for
purposes of policy and program coordination. The coordination may be
accomplished by having the department represented in the governing board
of the attached agency or corporation, either as chairman or as a member,
with or without voting rights, if this is permitted by the charter; having the
attached corporation or agency comply with a system of periodic reporting
which shall reflect the progress of programs and projects: and having the
department or its equivalent provide general policies through its
representative in the board, which shall serve as the framework: for the
IN VIEW WHEREOF, the petition is granted and Resolution No. 93-4359 of the
respondent Commission is hereby annulled and set aside. No costs.
SO ORDERED.
G.R. No. 120319 October 6, 1995
LUZON DEVELOPMENT BANK, petitioner,
vs.
ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY.
ESTER S. GARCIA in her capacity as VOLUNTARY ARBITRATOR,
respondents.
ROMERO, J.:
From a submission agreement of the Luzon Development Bank (LDB) and
the Association of Luzon Development Bank Employees (ALDBE) arose an
arbitration case to resolve the following issue:
Whether or not the company has violated the Collective Bargaining
Agreement provision and the Memorandum of Agreement dated April 1994,
on promotion.
At a conference, the parties agreed on the submission of their respective
Position Papers on December 1-15, 1994. Atty. Ester S. Garcia, in her
capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January
18, 1995. LDB, on the other hand, failed to submit its Position Paper despite
a letter from the Voluntary Arbitrator reminding them to do so. As of May 23,
1995 no Position Paper had been filed by LDB.
On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator
rendered a decision disposing as follows:
WHEREFORE, finding is hereby made that the Bank has not adhered to the
Collective Bargaining Agreement provision nor the Memorandum of
Agreement on promotion.
Hence, this petition for certiorari and prohibition seeking to set aside the
decision of the Voluntary Arbitrator and to prohibit her from enforcing the
same.
In labor law context, arbitration is the reference of a labor dispute to an
impartial third person for determination on the basis of evidence and
arguments presented by such parties who have bound themselves to accept
the decision of the arbitrator as final and binding.
Arbitration may be classified, on the basis of the obligation on which it is
based, as either compulsory or voluntary.
Compulsory arbitration is a system whereby the parties to a dispute are
compelled by the government to forego their right to strike and are
compelled to accept the resolution of their dispute through arbitration by a
third party. 1The essence of arbitration remains since a resolution of a
dispute is arrived at by resort to a disinterested third party whose decision is
final and binding on the parties, but in compulsory arbitration, such a third
party is normally appointed by the government.
Under voluntary arbitration, on the other hand, referral of a dispute by the
parties is made, pursuant to a voluntary arbitration clause in their collective
agreement, to an impartial third person for a final and binding resolution.
2
Ideally, arbitration awards are supposed to be complied with by both parties
without delay, such that once an award has been rendered by an arbitrator,
nothing is left to be done by both parties but to comply with the same. After
all, they are presumed to have freely chosen arbitration as the mode of
settlement for that particular dispute. Pursuant thereto, they have chosen a
mutually acceptable arbitrator who shall hear and decide their case. Above
all, they have mutually agreed to de bound by said arbitrator's decision.
In the Philippine context, the parties to a Collective Bargaining Agreement
(CBA) are required to include therein provisions for a machinery for the
resolution of grievances arising from the interpretation or implementation of
the CBA or company personnel policies. 3 For this purpose, parties to a CBA
shall name and designate therein a voluntary arbitrator or a panel of
arbitrators, or include a procedure for their selection, preferably from those
accredited by the National Conciliation and Mediation Board (NCMB). Article
261 of the Labor Code accordingly provides for exclusive original jurisdiction
of such voluntary arbitrator or panel of arbitrators over (1) the interpretation
or implementation of the CBA and (2) the interpretation or enforcement of
company personnel policies. Article 262 authorizes them, but only upon
agreement of the parties, to exercise jurisdiction over other labor disputes.
On the other hand, a labor arbiter under Article 217 of the Labor Code has
jurisdiction over the following enumerated cases:
. . . (a) Except as otherwise provided under this Code the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts;
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
xxx xxx xxx
It will thus be noted that the jurisdiction conferred by law on a voluntary
arbitrator or a panel of such arbitrators is quite limited compared to the
original jurisdiction of the labor arbiter and the appellate jurisdiction of the
National Labor Relations Commission (NLRC) for that matter. 4 The state of
our present law relating to voluntary arbitration provides that "(t)he award
Appeals.
SO ORDERED.
Padilla, Regalado, Davide, Jr., Bellosillo, Puno, Vitug, Kapunan, Mendoza,
Francisco and Hermosisima, Jr., JJ., concur.
Feliciano, J., concurs in the result.
Narvasa, C.J. and Melo, J. are on leave.
(a) to strengthen the iron and steel industry of the Philippines and to expand
the domestic and export markets for the products of the industry;
(b) to promote the consolidation, integration and rationalization of the
industry in order to increase industry capability and viability to service the
domestic market and to compete in international markets;
(c) to rationalize the marketing and distribution of steel products in order to
achieve a balance between demand and supply of iron and steel products
for the country and to ensure that industry prices and profits are at levels
that provide a fair balance between the interests of investors, consumers
suppliers, and the public at large;
(d) to promote full utilization of the existing capacity of the industry, to
discourage investment in excess capacity, and in coordination, with
appropriate government agencies to encourage capital investment in
priority areas of the industry;
(e) to assist the industry in securing adequate and low-cost supplies of raw
materials and to reduce the excessive dependence of the country on imports
of iron and steel.
The list of powers and functions of the ISA included the following:
Sec. 4. Powers and Functions. The authority shall have the following
powers and functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities
for subsequent resale and/or lease to the companies involved if it is shown
that such use of the State's power is necessary to implement the
construction of capacity which is needed for the attainment of the objectives
of the Authority;
xxx xxx xxx
(Emphasis supplied)
P.D. No. 272 initially created petitioner ISA for a term of five (5) years
counting from 9 August 1973. 1 When ISA's original term expired on 10
October 1978, its term was extended for another ten (10) years by Executive
Order No. 555 dated 31 August 1979.
The National Steel Corporation ("NSC") then a wholly owned subsidiary of
the National Development Corporation which is itself an entity wholly owned
by the National Government, embarked on an expansion program
embracing, among other things, the construction of an integrated steel mill
in Iligan City. The construction of such a steel mill was considered a priority
and major industrial project of the Government. Pursuant to the expansion
program of the NSC, Proclamation No. 2239 was issued by the President of
the Philippines on 16 November 1982 withdrawing from sale or settlement a
large tract of public land (totalling about 30.25 hectares in area) located in
Iligan City, and reserving that land for the use and immediate occupancy of
NSC.
Since certain portions of the public land subject matter Proclamation No.
2239 were occupied by a non-operational chemical fertilizer plant and
related facilities owned by private respondent Maria Cristina Fertilizer
Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16
November 1982, was issued directing the NSC to "negotiate with the owners
of MCFC, for and on behalf of the Government, for the compensation of
MCFC's present occupancy rights on the subject land." LOI No. 1277 also
directed that should NSC and private respondent MCFC fail to reach an
agreement within a period of sixty (60) days from the date of LOI No. 1277,
petitioner ISA was to exercise its power of eminent domain under P.D. No.
272 and to initiate expropriation proceedings in respect of occupancy rights
of private respondent MCFC relating to the subject public land as well as the
plant itself and related facilities and to cede the same to the NSC. 2
Negotiations between NSC and private respondent MCFC did fail.
Accordingly, on 18 August 1983, petitioner ISA commenced eminent domain
proceedings against private respondent MCFC in the Regional Trial Court,
Branch 1, of Iligan City, praying that it (ISA) be places in possession of the
property involved upon depositing in court the amount of P1,760,789.69
representing ten percent (10%) of the declared market values of that
property. The Philippine National Bank, as mortgagee of the plant facilities
and improvements involved in the expropriation proceedings, was also
impleaded as party-defendant.
On 17 September 1983, a writ of possession was issued by the trial court in
favor of ISA. ISA in turn placed NSC in possession and control of the land
occupied by MCFC's fertilizer plant installation.
The case proceeded to trial. While the trial was ongoing, however, the
statutory existence of petitioner ISA expired on 11 August 1988. MCFC then
filed a motion to dismiss, contending that no valid judgment could be
rendered against ISA which had ceased to be a juridical person. Petitioner
ISA filed its opposition to this motion.
In an Order dated 9 November 1988, the trial court granted MCFC's motion
to dismiss and did dismiss the case. The dismissal was anchored on the
provision of the Rules of Court stating that "only natural or juridical persons
or entities authorized by law may be parties in a civil case." 3 The trial court
also referred to non-compliance by petitioner ISA with the requirements of
Section 16, Rule 3 of the Rules of Court. 4
Petitioner ISA moved for reconsideration of the trial court's Order,
contending that despite the expiration of its term, its juridical existence
continued until the winding up of its affairs could be completed. In the
alternative, petitioner ISA urged that the Republic of the Philippines, being
the real party-in-interest, should be allowed to be substituted for petitioner
ISA. In this connection, ISA referred to a letter from the Office of the
President dated 28 September 1988 which especially directed the Solicitor
General to continue the expropriation case.
The trial court denied the motion for reconsideration, stating, among other
things that:
The property to be expropriated is not for public use or benefit [__] but for
the use and benefit [__] of NSC, a government controlled private corporation
engaged in private business and for profit, specially now that the
government, according to newspaper reports, is offering for sale to the
public its [shares of stock] in the National Steel Corporation in line with the
pronounced policy of the present administration to disengage the
government from its private business ventures. 5 (Brackets supplied)
Petitioner went on appeal to the Court of Appeals. In a Decision dated 8
October 1991, the Court of Appeals affirmed the order of dismissal of the
trial court. The Court of Appeals held that petitioner ISA, "a government
regulatory agency exercising sovereign functions," did not have the same
rights as an ordinary corporation and that the ISA, unlike corporations
organized under the Corporation Code, was not entitled to a period for
winding up its affairs after expiration of its legally mandated term, with the
result that upon expiration of its term on 11 August 1987, ISA was
"abolished and [had] no more legal authority to perform governmental
functions." The Court of Appeals went on to say that the action for
expropriation could not prosper because the basis for the proceedings, the
ISA's exercise of its delegated authority to expropriate, had become
ineffective as a result of the delegate's dissolution, and could not be
continued in the name of Republic of the Philippines, represented by the
Solicitor General:
It is our considered opinion that under the law, the complaint cannot
prosper, and therefore, has to be dismissed without prejudice to the refiling
of a new complaint for expropriation if the Congress sees it fit." (Emphases
supplied)
At the same time, however, the Court of Appeals held that it was premature
for the trial court to have ruled that the expropriation suit was not for a
public purpose, considering that the parties had not yet rested their
respective cases.
In this Petition for Review, the Solicitor General argues that since ISA
initiated and prosecuted the action for expropriation in its capacity as agent
of the Republic of the Philippines, the Republic, as principal of ISA, is entitled
to be substituted and to be made a party-plaintiff after the agent ISA's term
had expired.
Private respondent MCFC, upon the other hand, argues that the failure of
Congress to enact a law further extending the term of ISA after 11 August
1988 evinced a "clear legislative intent to terminate the juridical existence
of ISA," and that the authorization issued by the Office of the President to
the Solicitor General for continued prosecution of the expropriation suit
could not prevail over such negative intent. It is also contended that the
exercise of the eminent domain by ISA or the Republic is improper, since
that power would be exercised "not on behalf of the National Government
but for the benefit of NSC."
The principal issue which we must address in this case is whether or not the
Republic of the Philippines is entitled to be substituted for ISA in view of the
expiration of ISA's term. As will be made clear below, this is really the only
issue which we must resolve at this time.
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil
action:
Sec. 1. Who May Be Parties. Only natural or juridical persons or entities
authorized by law may be parties in a civil action.
Under the above quoted provision, it will be seen that those who can be
parties to a civil action may be broadly categorized into two (2) groups:
(a) those who are recognized as persons under the law whether natural, i.e.,
biological persons, on the one hand, or juridical person such as corporations,
on the other hand; and
(b) entities authorized by law to institute actions.
Examination of the statute which created petitioner ISA shows that ISA falls
under category (b) above. P.D. No. 272, as already noted, contains express
authorization to ISA to commence expropriation proceedings like those here
involved:
Sec. 4. Powers and Functions. The Authority shall have the following
powers and functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities
for subsequent resale and/or lease to the companies involved if it is shown
that such use of the State's power is necessary to implement the
construction of capacity which is needed for the attainment of the objectives
of the Authority;
xxx xxx xxx
(Emphasis supplied)
It should also be noted that the enabling statute of ISA expressly authorized
it to enter into certain kinds of contracts "for and in behalf of the
Government" in the following terms:
xxx xxx xxx
(i) to negotiate, and when necessary, to enter into contracts for and in
behalf of the government, for the bulk purchase of materials, supplies or
services for any sectors in the industry, and to maintain inventories of such
materials in order to insure a continuous and adequate supply thereof and
thereby reduce operating costs of such sector;
xxx xxx xxx
(Emphasis supplied)
Clearly, ISA was vested with some of the powers or attributes normally
associated with juridical personality. There is, however, no provision in P.D.
No. 272 recognizing ISA as possessing general or comprehensive juridical
personality separate and distinct from that of the Government. The ISA in
fact appears to the Court to be a non-incorporated agency or instrumentality
of the Republic of the Philippines, or more precisely of the Government of
the Republic of the Philippines. It is common knowledge that other agencies
or instrumentalities of the Government of the Republic are cast in corporate
form, that is to say, are incorporated agencies orinstrumentalities,
sometimes with and at other times without capital stock, and accordingly
vested with a juridical personality distinct from the personality of the
Republic. Among such incorporated agencies or instrumentalities are:
National Power Corporation; 6 Philippine Ports Authority; 7 National Housing
Authority; 8 Philippine National Oil Company; 9 Philippine National Railways; 10
Public Estates Authority; 11 Philippine Virginia Tobacco Administration, 12 and
so forth. It is worth noting that the term "Authority" has been used to
designate
both
incorporated
and
non-incorporated
agencies
or
instrumentalities of the Government.
We consider that the ISA is properly regarded as an agent or delegate of the
Republic of the Philippines. The Republic itself is a body corporate and
juridical person vested with the full panoply of powers and attributes which
are compendiously described as "legal personality." The relevant definitions
are found in the Administrative Code of 1987:
Sec. 2. General Terms Defined. Unless the specific words of the text, or
the context as a whole, or a particular statute, require a different meaning:
(1) Government of the Republic of the Philippines refers to the corporate
governmental entity through which the functions of government are
exercised throughout the Philippines, including, save as the contrary
appears from the context, the various arms through which political authority
is also absent. We agree with the Court of Appeals in this connection that
these contentions, which were adopted and set out by the Regional Trial
Court in its order of dismissal, are premature and are appropriately
addressed in the proceedings before the trial court. Those proceedings have
yet to produce a decision on the merits, since trial was still on going at the
time the Regional Trial Court precipitously dismissed the expropriation
proceedings. Moreover, as a pragmatic matter, the Republic is, by such
substitution as party-plaintiff, accorded an opportunity to determine whether
or not, or to what extent, the proceedings should be continued in view of all
the subsequent developments in the iron and steel sector of the country
including, though not limited to, the partial privatization of the NSC.
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals
dated 8 October 1991 to the extent that it affirmed the trial court's order
dismissing the expropriation proceedings, is hereby REVERSED and SET
ASIDE and the case is REMANDED to the court a quo which shall allow the
substitution of the Republic of the Philippines for petitioner Iron and Steel
Authority and for further proceedings consistent with this Decision. No
pronouncement as to costs.
SO ORDERED.
Romero, Melo, Vitug and Panganiban, JJ., concur.
circumstance that petitioner had already filed a collection case before the
Regional Trial Court of Manila-Br. 15, docketed as Civil Case No. 97-83354.
Moreover, the Ombudsman found that the filing of the motion for
reconsideration on 31 March 1998 was beyond the inextendible period of
five (5) days from notice of the assailed resolution on 19 March 1998. 3
Petitioner now imputes grave abuse of discretion on public respondent in
dismissing his complaint. He submits that inasmuch as Philippine Coconut
Producers Federation, Inc. (COCOFED) v. PCGG4 and Republic
v.Sandiganbayan5 have declared that the coconut levy funds are public
funds then, conformably with Quimpo v. Tanodbayan,6 corporations formed
and organized from those funds or whose controlling stocks are from those
funds should be regarded as government owned and/or controlled
corporations. As in the present case, since the funding or controlling interest
of the companies being headed by private respondents was given or owned
by the CIIF as shown in the certification of their Corporate Secretary, 7 it
follows that they are government owned and/or controlled corporations.
Corollarily, petitioner asserts that respondents Antiporda and Torralba are
public officers subject to the jurisdiction of the Ombudsman.
Petitioner alleges next that public respondent's conclusion that his complaint
refers to a breach of contract is whimsical, capricious and irresponsible
amounting to a total disregard of its main point, i. e., whether private
respondents violated The Anti-Graft and Corrupt Practices Act when they
entered into a contract with Southwest Maritime Corporation which was
grossly disadvantageous to the government in general and to the CIIF in
particular. Petitioner admits that his motion for reconsideration was filed out
of time. Nonetheless, he advances that public respondent should have
relaxed its rules in the paramount interest of justice; after all, the delay was
just a matter of days and he, a layman not aware of technicalities,
personally filed the complaint.
Private respondents counter that the CIIF companies were duly organized
and are existing by virtue of the Corporation Code. Their stockholders are
private individuals and entities. In addition, private respondents contend
that they are not public officers as defined under The Anti-Graft and Corrupt
Practices Act but are private executives appointed by the Boards of Directors
of the CIIF companies. They asseverate that petitioner's motion for
reconsideration was filed through the expert assistance of a learned counsel.
They then charge petitioner with forum shopping since he had similarly filed
a case for collection of a sum of money plus damages before the trial court.
The Office of the Solicitor General maintains that the Ombudsman approved
the recommendation of the investigating officer to dismiss the complaint
because he sincerely believed there was no sufficient basis for the criminal
indictment of private respondents.
We find no grave abuse of discretion committed by the Ombudsman.
COCOFED v. PCGG referred to in Republic v. Sandiganbayan reviewed the
history of the coconut levy funds. These funds actually have four (4) general
classes: (a) the Coconut Investment Fund created under R. A. No. 6260; 8 (b)
the Coconut Consumers Stabilization Fund created under P. D. No. 276; 9 (c)
the Coconut Industry Development Fund created under P. D. No. 582; 10 and,
(d) the Coconut Industry Stabilization Fund created under P. D. No. 1841. 11
The various laws relating to the coconut industry were codified in 1976. On
21 October of that year, P. D. No. 961 12 was promulgated. On 11 June 1978 it
DECISION
CORONA, J.:
Does the Sandiganbayan have jurisdiction over presidents, directors or
trustees, or managers of government-owned or controlled corporations
organized and incorporated under the Corporation Code for purposes of the
provisions of RA 3019, otherwise known as the Anti-Graft and Corrupt
Practices Act? The petitioner, represented by the Office of the Special
Prosecutor (OSP), takes the affirmative position in this petition for certiorari
under Rule 65 of the Rules of Court. Respondent Efren L. Alas contends
otherwise, together with the respondent court.
Pursuant to a resolution dated September 30, 1999 of the Office of the
its provision while those incorporated under the general corporation law are
not within its coverage.
Likewise in Davao City Water District vs. Civil Service Commission, 201 SCRA
601 it was held that by government-owned or controlled corporation with
original charter we mean government-owned or controlled corporation
created by a special law and not under the Corporation Code of the
Philippines while in Llenes vs. Dicdican, et al., 260 SCRA 207, a public officer
has been ruled, as a person whose duties involve the exercise of discretion
in the performance of the function of government.
Clearly, on the basis of the foregoing pronouncements of the Supreme Court,
the accused herein cannot be considered a public officer. Thus, this Court
may not exercise jurisdiction over his act.[2]
Dissatisfied, the People, through the Office of the Special Prosecutor
(OSP), filed this petition[3] arguing, in essence, that the PPSB was a
government-owned or controlled corporation as the term was defined under
Section 2(13) of the Administrative Code of 1987. [4] Likewise, in further
defining the jurisdiction of the Sandiganbayan, RA 8249 did not make a
distinction as to the manner of creation of the government-owned or
controlled corporations for their officers to fall under its jurisdiction. Hence,
being President and Chief Operating Officer of the PPSB at the time of
commission of the crimes charged, respondent Alas came under the
jurisdiction of the Sandiganbayan.
Quoting at length from the assailed resolution dated February 15, 2001,
respondent Alas, on the other hand, practically reiterated the
pronouncements made by the respondent court in support of his conclusion
that the PPSB was not created by special law, hence, its officers did not fall
within the jurisdiction of the Sandiganbayan.[5]
We find merit in the petition.
Section 2(13) of EO 292[6] defines government-owned or controlled
corporations as follows:
Sec. 2. General Terms Defined Unless the specific words of the text or the
context as a whole or a particular statute, shall require a different meaning:
xxx xxx xxx
(13) government owned or controlled corporations refer to any agency
organized as a stock or non-stock corporation vested with functions relating
to public needs whether governmental or proprietary in nature, and owned
by the government directly or indirectly or through its instrumentalities
either wholly, or where applicable as in the case of stock corporations to the
extent of at least 51% of its capital stock: provided, that government owned
or controlled corporations maybe further categorized by the department of
the budget, the civil service commission and the commission on audit for the
purpose of the exercise and discharge of their respective powers, functions
and responsibilities with respect to such corporations.
From the foregoing, PPSB fits the bill as a government-owned or
controlled corporation, and organized and incorporated under the
Corporation Code as a subsidiary of the Philippine Postal Corporation
(PHILPOST). More than 99% of the authorized capital stock of PPSB belongs
to the government while the rest is nominally held by its incorporators who
are/were themselves officers of PHILPOST. The creation of PPSB was
expressly sanctioned by Section 32 of RA 7354, otherwise known as the
Postal Service Act of 1992, for purposes of, among others, to encourage and
promote the virtue of thrift and the habit of savings among the general
public, especially the youth and the marginalized sector in the countryside
xxx and to facilitate postal service by receiving collections and making
payments, including postal money orders.[7]
It is not disputed that the Sandiganbayan has jurisdiction over
presidents, directors or trustees, or managers of government-owned or
controlled corporations with original charters whenever charges of graft and
corruption are involved. However, a question arises whether the
Sandiganbayan has jurisdiction over the same officers in government-owned
or controlled corporations organized and incorporated under the Corporation
Code in view of the delimitation provided for in Article IX-B Section 2(1) of
the 1987 Constitution which states that:
SEC. 2. (1) The Civil Service embraces all branches, subdivisions,
instrumentalities, and agencies of the government, including governmentowned or controlled corporations with original charters.
It should be pointed out however, that the jurisdiction of the
Sandiganbayan is separate and distinct from the Civil Service Commission.
The same is governed by Article XI, Section 4 of the 1987 Constitution which
provides that the present anti-graft court known as the Sandiganbayan shall
continue to function and exercise its jurisdiction as now or hereafter may be
provided by law. This provision, in effect, retained the jurisdiction of the antigraft court as defined under Article XIII, Section 5 of the 1973 Constitution
which mandated its creation, thus:
Sec. 5. The Batasang Pambansa shall create a special court, to be known as
Sandiganbayan, which shall have jurisdiction over criminal and civil cases
involving graft and corrupt practices and such other offense committed by
public officers and employees, including those in government-owned or
controlled corporations, in relation to their office as may be determined by
law. (Italics ours)
Sandoval-Gutierrez,
Carpio-Morales,
and
"parts of an original act which are omitted from the act as revised are to be
considered as annulled and repealed, provided it clearly appears to have
been the intention of the legislature to cover the whole subject by the
revision." (82 C. J. S. p. 501.)
Inasmuch as we agree to the appellants lack of personality before the Court
of Tax Appeals, we find it unnecessary to review the question whether or not
his appeal had been perfected in due time.
Wherefore, the challenge order is hereby affirmed.
G.R. No. 143672
April 24, 2003
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
GENERAL FOODS (PHILS.), INC., respondent.
CORONA, J.:
Petitioner Commissioner of Internal Revenue (Commissioner) assails the
resolution1 of the Court of Appeals reversing the decision 2 of the Court of Tax
Appeals which in turn denied the protest filed by respondent General Foods
(Phils.), Inc., regarding the assessment made against the latter for deficiency
taxes.
The records reveal that, on June 14, 1985, respondent corporation, which is
engaged in the manufacture of beverages such as "Tang," "Calumet" and
"Kool-Aid," filed its income tax return for the fiscal year ending February 28,
1985. In said tax return, respondent corporation claimed as deduction,
among other business expenses, the amount of P9,461,246 for media
advertising for "Tang."
On May 31, 1988, the Commissioner disallowed 50% or P4,730,623 of the
deduction claimed by respondent corporation. Consequently, respondent
corporation was assessed deficiency income taxes in the amount of P2,635,
141.42. The latter filed a motion for reconsideration but the same was
denied.
On September 29, 1989, respondent corporation appealed to the Court of
Tax Appeals but the appeal was dismissed:
With such a gargantuan expense for the advertisement of a singular
product, which even excludes "other advertising and promotions" expenses,
we are not prepared to accept that such amount is reasonable "to stimulate
the current sale of merchandise" regardless of Petitioners explanation that
such expense "does not connote unreasonableness considering the grave
economic situation taking place after the Aquino assassination characterized
by capital fight, strong deterioration of the purchasing power of the
Philippine peso and the slacking demand for consumer products"
(Petitioners Memorandum, CTA Records, p. 273). We are not convinced with
such an explanation. The staggering expense led us to believe that such
expenditure was incurred "to create or maintain some form of good will for
the taxpayers trade or business or for the industry or profession of which
the taxpayer is a member." The term "good will" can hardly be said to have
any precise signification; it is generally used to denote the benefit arising
from connection and reputation (Words and Phrases, Vol. 18, p. 556 citing
Douhart vs. Loagan, 86 III. App. 294). As held in the case of Welch vs.
Helvering, efforts to establish reputation are akin to acquisition of capital
assets and, therefore, expenses related thereto are not business expenses
but capital expenditures. (Atlas Mining and Development Corp. vs.
Commissioner of Internal Revenue, supra). For sure such expenditure was
meant not only to generate present sales but more for future and
prospective benefits. Hence, "abnormally large expenditures for advertising
are usually to be spread over the period of years during which the benefits
of the expenditures are received" (Mertens, supra, citing Colonial Ice Cream
Co., 7 BTA 154).
WHEREFORE, in all the foregoing, and finding no error in the case appealed
from, we hereby RESOLVE to DISMISS the instant petition for lack of merit
and ORDER the Petitioner to pay the respondent Commissioner the assessed
amount of P2,635,141.42 representing its deficiency income tax liability for
the fiscal year ended February 28, 1985."3
Aggrieved, respondent corporation filed a petition for review at the Court of
Appeals which rendered a decision reversing and setting aside the decision
of the Court of Tax Appeals:
Since it has not been sufficiently established that the item it claimed as a
deduction is excessive, the same should be allowed.
WHEREFORE, the petition of petitioner General Foods (Philippines), Inc. is
hereby GRANTED. Accordingly, the Decision, dated 8 February 1994 of
respondent Court of Tax Appeals is REVERSED and SET ASIDE and the letter,
dated 31 May 1988 of respondent Commissioner of Internal Revenue is
CANCELLED.
SO ORDERED.4
Thus, the instant petition, wherein the Commissioner presents for the
Courts consideration a lone issue: whether or not the subject media
advertising expense for "Tang" incurred by respondent corporation was an
ordinary and necessary expense fully deductible under the National Internal
Revenue Code (NIRC).
It is a governing principle in taxation that tax exemptions must be construed
in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority;5 and he who claims an exemption must be able to justify his claim
by the clearest grant of organic or statute law. An exemption from the
common burden cannot be permitted to exist upon vague implications. 6
Deductions for income tax purposes partake of the nature of tax
exemptions; hence, if tax exemptions are strictly construed, then deductions
must also be strictly construed.
We then proceed to resolve the singular issue in the case at bar. Was the
media advertising expense for "Tang" paid or incurred by respondent
corporation for the fiscal year ending February 28, 1985 "necessary and
ordinary," hence, fully deductible under the NIRC? Or was it a capital
expenditure, paid in order to create "goodwill and reputation" for respondent
corporation and/or its products, which should have been amortized over a
reasonable period?
Section 34 (A) (1), formerly Section 29 (a) (1) (A), of the NIRC provides:
(A) Expenses.(1) Ordinary and necessary trade, business or professional expenses.(a) In general.- There shall be allowed as deduction from gross income all
ordinary and necessary expenses paid or incurred during the taxable year in
ASIDE. Pursuant to Sections 248 and 249 of the Tax Code, respondent
General Foods (Phils.), Inc. is hereby ordered to pay its deficiency income
tax in the amount of P2,635,141.42, plus 25% surcharge for late payment
and 20% annual interest computed from August 25, 1989, the date of the
denial of its protest, until the same is fully paid.
SO ORDERED.
Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ.,
concur.
CARPIO, and
- versus - AZCUNA, JJ.
Promulgated:
COURT OF APPEALS, COURT OF
TAX APPEALS and COMMISSIONER December 9, 2005
OF INTERNAL REVENUE,
Respondents.
x ---------------------------------------------------------------------------------------- x
DECISION
AZCUNA, J.:
orders, and official receipts issued by the Central Bank and the BIR with CDB
as the payor;
[2]
(2) Income Tax Returns for 1990 and 1991 with attached
financial statements filed by petitioner with the BIR;[3] and, (3) a list
prepared by the Accounting Department of petitioner purportedly showing
the CDB schedule of creditable withholding tax applied for refund for 1990
and 1991,[4] all failed to clearly establish that the taxes arising from the sale
of its acquired assets sometime in 1990 and 1991 were properly withheld
and remitted to the BIR. The CA likewise ruled that it was incumbent upon
petitioner to present BIR Form No. 1743.1 as required under Revenue
Regulation 6-85 to conclusively prove its right to the refund. It held that
petitioners failure to do so was fatal to its cause.
and indicating the amount of taxes withheld for each transaction should
have been given more weight by the court a quo as this document, when
taken with the tax withholding forms, indubitably establishes the fact of
withholding and the basis for the claims for refund. [7] Considering, therefore,
system, possession of the amount that is used to settle the tax liability is
that petitioner had adequately established by other evidence the basis for
acquired by the payor as the withholding agent of the government. [13] For
the grant of the claim for tax refund, petitioner asserts that its failure to
this reason, the Tax Code imposes, among others, certain obligations upon
the withholding agent to monitor its compliance with this duty. These include
the filing of the quarterly withholding tax returns, [14] the submission to the
The crucial issue in this case turns on a question of fact, that is,
payee, in respect of his or its receipts during the calendar quarter or year, of
refund.
withholding agent during such quarter or year and the amount of the tax
deducted and withheld therefrom, [15] and the filing with the BIR of a
The findings of fact of the CTA, a special court exercising particular
expertise on the subject of tax, are generally regarded as final, binding and
the findings of the CA which is normally the final arbiter of questions of fact.
The findings shall not be reviewed nor disturbed on appeal [10] unless a
party can show that these are not supported by evidence, [11] or when the
bad faith. In addition, the former could not be deemed to have evaded the
[9]
courts failed to notice certain relevant facts which if considered would justify
a different conclusion.[12]
withheld at the source. Only when there is an excess of the amount of tax so
withheld over the tax due on the payees return can a refund become
possible.
withholding taxes on the sale of its acquired assets. In our withholding tax
a claim for the tax refund: (a) declare the income payments it received as
part of its gross income and (b) establish the fact of withholding. [18] On this
score, the relevant revenue regulation provides as follows:
Section 10. Claims for tax credit or refund. -- Claims
for tax credit or refund of income tax deducted and withheld
on income payments shall be given due course only when it
is shown on the return that the income payment received
was declared as part of the gross income and the fact of
withholding is established by a copy of the statement duly
issued by the payor to the payee (BIR Form No. 1743.1)
showing the amount paid and the amount of tax withheld
therefrom.[19]
acquired assets. The CA, however, found the same to be self-serving and
with the corresponding official receipts and payment orders to support its
case. Standing alone, however, these documents only establish that CDB
finding on an issue of fact the highest respect and we will not set it aside
withheld certain amounts in 1990 and 1991. It does not follow that the
lightly.
that CDB had excess creditable withholding taxes can only be upheld if it
were clearly and positively shown that the amounts on the various
or spurious, or whether the proofs on one side or the other are clear and
confirmation receipts were the amounts withheld by virtue of the sale of the
doubt questions of fact. This is true regardless of whether the body of proofs
presented by a party, weighed and analyzed in relation to contrary evidence
law raised in the petition and therein distinctly set forth. [23] We note that
why CDB took upon itself the task of withholding the taxes arising from the
Payment Orders and Official Receipts to the taxes allegedly withheld by CDB
sale, to ensure accuracy. Assuming this were true, CDB should have,
presented
the circular clearly provides that the amount of withholding tax paid by a
by petitioner, we must stress that the mere admission into the records of
and which are creditable against the corporations tax liability are evidenced
its returns are not a sufficient proof of the amount of its refund entitlement.
1743-B. On the other hand, Revenue Regulation 6-85 states that BIR Form
[24]
the amount of petitioners entitlement during the trial phase of this case is
Furthermore, we note that in the proceedings below, respondent
fatal to its cause. For its negligence, petitioner cannot be allowed to seek
Commissioner of Internal Revenue (CIR) raised the fact that there was a
refuge in a liberal application of the [r]ules. [28] The liberal interpretation and
and 1991 Income Tax Returns indicated that CDB had excess creditable
withholding tax in the amounts of P535,310 and P357,511, respectively, the
construed strictly against the taxpayer and liberally in favor of the taxing
P512,940.50 for 1990 and P242,774.50 for 1991.[26] The records are bereft of
authority.[30] In the event, petitioner has not met its burden of proof in
establishing the factual basis for its claim for refund and we find no reason
DECISION
The Issue
PARDO, J.:
The Case
The issue raised is whether or not the income that petitioner derived
from services in transporting the household goods and effects of U. S.
military personnel falls within the tax exemption provided in Article XII,
paragraph 4 of the RP-US Military Bases Agreement.
Appeal via certiorari from the decision of the Court of Appeals affirming
in toto that of the Court of Tax Appeals which denied petitioners claim for tax
credit or refund of income tax paid on its gross Philippine billings for taxable
year 1984, in the amount of P870,093.12.[1]
The Judgment
proper mode of judicial review undertaken from decisions of the regional trial
courts resolving the denial of tax protests made by local government
treasurers, pursuant to the Local Government Code. The second is whether a
local government unit can, under the Local Government Code, impel a
condominium corporation to pay business taxes.[1]
While we agree with the City Treasurers position on the first issue,
there ultimately is sufficient justification for the Court to overlook what is
essentially a procedural error. We uphold respondents on the second issue.
Indeed, there are disturbing aspects in both procedure and substance that
attend the attempts by the City of Makati to flex its taxing muscle.
LUZ R. YAMANE, in her G.R. No. 154993
capacity as the CITY
TREASURER OF MAKATI Present:
CITY,
Petitioner, PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
- versus - TINGA, and
Considering that the tax imposition now in question has utterly no basis in
law, judicial relief is imperative. There are fewer indisputable causes for the
exercise of judicial review over the exercise of the taxing power than when
the tax is based on whim, and not on law.
CHICO-NAZARIO, JJ.
x-------------------------------------------------------------------x
duly organized condominium corporation constituted in accordance with the
DECISION
TINGA, J.:
Condominium Act,[2]which owns and holds title to the common and limited
common areas of the BA-Lepanto Condominium (the Condominium), situated
in Paseo de Roxas, Makati City. Its membership comprises the various unit
presents for resolution of this Court two novel questions: one procedural, the
other substantive, yet both of obvious significance. The first pertains to the
was effected primarily to sustain and maintain the expenses of the common
areas, with the end in view [sic] of getting full appreciative living values [sic]
for the individual condominium
occupants
and to
command better
marketable [sic] prices for those occupants who would in the future sell their
respective units.[6] Thus, she concluded since the chances of getting higher
prices for well-managed common areas of any condominium are better and
more effective that condominiums with poor [sic] managed common areas,
the corporation activity is a profit venture making [sic].[7]
From the denial of the protest, the Corporation filed an Appeal with the
Proceeding from the premise that its tax liability arose from Section
Regional Trial Court (RTC) of Makati. [8] On 1 March 2000, the Makati RTC
3A.02(m) of the Makati Revenue Code, the Corporation proceeded to argue
Branch 57 rendered aDecision[9] dismissing the appeal for lack of merit.
that under both the Makati Code and the Local Government Code, business
Accepting the premise laid by the City Treasurer, the RTC acknowledged, in
reversed the RTC and declared that the Corporation was not liable to pay
business taxes to the City of Makati. [17] In doing so, the Court of Appeals
delved into jurisprudential definitions of profit, [18]and concluded that the
Corporation was not engaged in profit. For one, it was held that the very
statutory concept of a condominium corporation showed that it was not a
juridical entity intended to make profit, as its sole purpose was to hold title to
the common areas in the condominium and to maintain the condominium. [19]
With this, the RTC concluded that the activities of the Corporation fell
squarely under the definition of business under Section 13(b) of the Local
Government Code, and thus subject to local business taxation. [11]
From this Decision of the RTC, the Corporation filed a Petition for Review
and the assessment collected from unit owners limited to those necessary to
under Rule 42 of the Rules of Civil Procedure with the Court of Appeals.
Initially, the petition was dismissed outright [12] on the ground that only
decisions of the RTC brought on appeal from a first level court could be
elevated for review under the mode of review prescribed under Rule 42. [13]
However, the Corporation pointed out in its Motion for Reconsideration that
under Section 195 of the Local Government Code, the remedy of the
taxpayer on the denial of the protest filed with the local treasurer is to
appeal the denial with the court of competent jurisdiction. [14] Persuaded by
elevated the present Petition for Review under Rule 45. It is argued that the
Corporation is engaged in business, for the dues collected from the different
unit owners is utilized towards the beautification and maintenance of the
Condominium, resulting in full appreciative living values for the condominium
units which would command better market prices should they be sold in the
future. The City Treasurer likewise avers that the rationale for business taxes
rendered the Decision[16] now assailed before this Court. The appellate court
is not on the income received or profit earned by the business, but the
which states that the remedy of the taxpayer whose protest is denied by the
engaging in business.[22]
Apparently though, the Local Government Code does not elaborate on how
such appeal should be undertaken.
The City Treasurer also claims that the Corporation had filed the
wrong mode of appeal before the Court of Appeals when the latter filed its
The other view, as maintained by the City Treasurer, is that the
Petition for Review under Rule 42. It is reasoned that the decision of the
jurisdiction exercised by the RTC is original in character. This is the first time
Makati RTC was rendered in the exercise of original jurisdiction, it being the
that the position has been presented to the court for adjudication. Still, this
first court which took cognizance of the case. Accordingly, with the
argument does find jurisprudential mooring in our ruling in Garcia v. De
Corporation having pursued an erroneous mode of appeal, the RTC Decision
Jesus,[25] where the Court proffered the following distinction between original
is deemed to have become final and executory.
jurisdiction and appellate jurisdiction: Original jurisdiction is the power of the
Court to take judicial cognizance of a case instituted for judicial action for the
First, we dispose of the procedural issue, which essentially boils down
first time under conditions provided by law. Appellate jurisdiction is the
to whether the RTC, in deciding an appeal taken from a denial of a protest by
authority of a Court higher in rank to re-examine the final order or judgment
a local treasurer under Section 195 of the Local Government Code, exercises
of a lower Court which tried the case now elevated for judicial review. [26]
original jurisdiction or appellate jurisdiction. The question assumes a
measure of importance to this petition, for the adoption of the position of the
The quoted definitions were taken from the commentaries of the
City Treasurer that the mode of review of the decision taken by the RTC is
esteemed Justice Florenz Regalado. With the definitions as beacon, the
governed by Rule 41 of the Rules of Civil Procedure means that the decision
review taken by the RTC over the denial of the protest by the local treasurer
of the RTC would have long become final and executory by reason of the
would fall within that courts original jurisdiction. In short, the review is the
failure of the Corporation to file a notice of appeal.[23]
initial judicial cognizance of the matter. Moreover, labeling the said review as
an exercise of appellate jurisdiction is inappropriate, since the denial of the
There are discernible conflicting views on the issue. The first, as
protest is not the judgment or order of a lower court, but of a local
expressed by the Court of Appeals, holds that the RTC, in reviewing denials of
government official.
non-judicial entities.
Treasurer is correct as a matter of law, and that the proper remedy of the
Batas Pambansa Blg. 129 (B.P. 129), [27] ineluctably confers appellate
significant reasons for the Court to overlook the procedural error and
Republic Act No. 9282, the law which expanded the jurisdiction of the Court
Republic Act No. 9282 definitively proves in its Section 7(a)(3) that
the CTA exercises exclusive appellate jurisdiction to review on appeal
decisions, orders or resolutions of the Regional Trial Courts in local tax cases
Yet significantly, the Local Government Code, or any other statute for
that matter, does not expressly confer appellate jurisdiction on the part of
appellate jurisdiction. Moreover, the provision also states that the review is
regional trial courts from the denial of a tax protest by a local treasurer. On
the other hand, Section 22 of B.P. 129 expressly delineates the appellate
provided for under Rule 42 of the 1997 Rules of Civil Procedure. [29]
Republic Act No. 9282, however, would not apply to this case simply
Trial Courts. Unlike in the case of the Court of Appeals, B.P. 129 does not
case should be clearly conferred and should not be deemed to exist on mere
faced a greater risk of having its petition rejected by the Court of Appeals as
mechanical application would defeat the higher ends that animates our civil
compared to having filed an ordinary appeal under Rule 41. This was not an
they should have appropriately been filed. [32] The Court of Appeals could very
well have treated the Corporations petition for review as an ordinary appeal.
The power of local government units to impose taxes within its territorial
jurisdiction derives from the Constitution itself, which recognizes the power
the case records are when the appeal was taken out of time or when the
of these units to create its own sources of revenue and to levy taxes, fees,
docket fees were not paid. [33] On the other hand, Section 6, Rule 42 provides
and charges subject to such guidelines and limitations as the Congress may
that in order that the Court of Appeals may allow due course to the petition
provide, consistent with the basic policy of local autonomy. [36] These
for review, it must first make aprima facie finding that the lower court has
the Local Government Code of 1991 (the Code), which provides for
impose taxes on any other businesses not otherwise specified under Section
comprehensive instances when and how local government units may impose
income taxes except when levied on banks and other financial institutions. [37]
None of the other general limitations under Section 133 find application to
this
writing. Article A, Chapter III of the Revenue Code governs business taxes in
The most well-known mode of local government taxation is perhaps the real
property tax, which is governed by Title II, Book II of the Code, and which
under the Revenue Code which are not enumerated under the Local
Title I of Book II, governs other taxes imposable by local government units,
Government Code, we cite Section 3A.02(f) of the Code, which levies a gross
including business taxes. Under Section 151 of the Code, cities such as
receipt tax :
Makati are authorized to levy the same taxes fees and charges as provinces
and municipalities. It is in Article II, Title II, Book II of the Code, governing
municipal taxes, where the provisions on business taxation relevant to this
petition may be found.[38]
municipalities
and
cities
may
impose
taxes.
These
include
Corporation, the RTC, the Court of Appeals, or this Court for that matter, as to
what exactly is the precise statutory basis under the Makati Revenue Code
for the levying of the business tax on petitioner. We have examined all of the
pleadings submitted by the City Treasurer in all the antecedent judicial
proceedings, as well as in this present petition, and also the communications
by the City Treasurer to the Corporation which form part of the record.
Nowhere therein is there any citation made by the City Treasurer of any
restaurant owners and operators[40], real estate dealers, and lessors of real
provision of the Revenue Code which would serve as the legal authority for
there is also a catch-all provision similar to that under the Local Government
instance the taxpayer is officially made aware of the pending tax liability,
provides:
the tax. Section 195 of the Local Government Code does not go as far as to
expressly require that the notice of assessment specifically cite the provision
of the ordinance involved but it does require that it state the nature of the
tax, fee or charge, the amount of deficiency, surcharges, interests and
penalties. In this case, the notice of assessment sent to the Corporation did
state that the assessment was for business taxes, as well as the amount of
The initial inquiry is what provision of the Makati Revenue Code does
the assessment. There may have been prima faciecompliance with the
the City Treasurer rely on to make the Corporation liable for business taxes.
requirement under Section 195. However in this case, the Revenue Code
Even at this point, there already stands a problem with the City Treasurers
provides multiple provisions on business taxes, and at varying rates. Hence,
cause of action.
we could appreciate the Corporations confusion, as expressed in its protest,
as to the exact legal basis for the tax. [43] Reference to the local tax ordinance
Our careful examination of the record reveals a highly disconcerting
is vital, for the power of local government units to impose local taxes is
fact. At no point has the City Treasurer been candid enough to inform the
Certainly, the City Treasurer has not been helpful in that regard, as
the tax ordinance, the Local Government Code being the enabling law for the
she has been silent all through out as to the exact basis for the tax
imposition which she wishes that this Court uphold. Indeed, there is only one
thing that prevents this Court from ruling that there has been a due process
statutory basis of the taxthat the Corporation itself does not allege injury
3A.02(f), which provides for a different tax rate from that of the former
We do not know why the Corporation chose not to put this issue into
because the City Treasurer failed to cite the specific statutory basis of the
tax. What is essential though is that the local treasurer be required to explain
units to impose local taxes on businesses other than those specified under
case.
subjected to business taxes, its activities must fall within the definition of
business as provided in the Local Government Code. And to hold that they do
that form the basis of the City Treasurers claim that the Corporation is doing
business.
The
Condominium
Act
imposes
several
limitations
on
the
located and in other common areas of the building. [46] To enable the orderly
administration over these common areas which are jointly owned by the
accomplishment of such purpose. [51] Further, the same provision prohibits the
holding title to the common area, in which the holders of separate interests
contained
in
the
Condominium
Act.
Per
the
Articles
of
Incorporation, the Corporations corporate purposes are limited to: (a) owning
and holding title to the common and limited common areas in the
these amounts collected are not intended for the incurrence of profit by the
protection and safeguard of the unit owners and their property, including the
power to contract for security services and for insurance coverage on the
expenses that arise from the maintenance of the Condominium Project. Just
entire project; (c) making and adopting needful rules and regulations
concerning the use, enjoyment and occupancy of the units and common
enumerate
areas, including the power to fix penalties and assessments for violation of
assessments collected from the unit owners. These would include the
such rules; (d) to provide for the maintenance, repair, sanitation, and
cleanliness of the common and limited common areas; (e) to provide and
the
particular
expenses
to
be
defrayed
by
the
regular
contract for public utilities and other services to the common areas; (f) to
The City Treasurer nonetheless contends that the collection of these
contract for the services of persons or firms to assist in the management and
assessments and dues are with the end view of getting full appreciative
living values for the condominium units, and as a result, profit is obtained
basis of the standard of full appreciative living values, a phrase that defies
once these units are sold at higher prices. The Court cites with approval the
First, if any profit is obtained by the sale of the units, it accrues not to the
corporation but to the unit owner. Second, if the unit owner does obtain profit
from the sale of the corporation, the owner is already required to pay capital
gains tax on the appreciated value of the condominium unit. [55]
due process clause,[56] and the taxpayers right to due process is violated
when arbitrary or oppressive methods are used in assessing and collecting
taxes.[57] The fact that the Corporation did not fall within the enumerated
classes of taxable businesses under either the Local Government Code or the
Makati Revenue Code already forewarns that a clear demonstration is
essential on the part of the City Treasurer on why the Corporation should be
this rationale, every Makati City car owner may be considered as being
taxed anyway. Full appreciative living values is nothing but blather in search
deemed oriented towards appreciating the value of the car upon resale.
and oppressive.
incorporated under the Code has the power and capacity to purchase,
receive, take or grant, hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property . . . as the transaction of
officers and members from invoking the void nature of its undertakings for
such were not subject to the 3% lending investors tax under Section 195A.
The CTA archived respondents case for several years while another
case with a similar issue was pending before the higher courts. When
respondents case was reinstated, the CTA ruled that respondents were
entitled to their refund.
The Case
Before the Court is a petition for review [1] assailing the Decision[2] of 7
January 2000 of the Court of Appeals in CA-G.R. SP No. 36816. The Court
of Appeals affirmed the Decision [3]of 5 January 1995 of the Court of Tax
Appeals (CTA) in CTA Cases Nos. 2514, 2515 and 2516. The CTA ordered
the Commissioner of Internal Revenue (petitioner) to refund a total
ofP29,575.02 to respondent companies (respondents).
Antecedent Facts
The CTA held that respondents are not taxable as lending investors
because the term lending investors does not embrace insurance
companies. The CTA traced the history of the tax on lending investors, as
follows:
Originally, a person who was engaged in lending money at interest was
taxed as a money lender. [Sec. 1464(x), Rev. Adm. Code] The term money
lenders was defined as including all persons who make a practice of
lending money for themselves or others at interest. [Sec. 1465(v), id.]
Under this law, an insurance company was not considered a money lender
and was not taxable as such. To quote from an old BIR Ruling:
The lending of money at interest by insurance companies constitutes a
necessary incident of their regular business. For this reason, insurance
companies are not liable to tax as money lenders or real estate brokers for
making or negotiating loans secured by real property. (Ruling, February 28,
1920; BIR 135.2) (The Internal Revenue Law, Annotated, 2nd ed., 1929, by
B.L. Meer, page 143)
The same rule has been applied to banks.
For making investments on salary loans, banks will not be required to pay
the money lenders tax imposed by this subsection, for the reason that
money lending is considered a mere incident of the banking business. [See
Ruling No. 43, (October 8, 1926) 25 Off. Gaz. 1326) (The Internal Revenue
Law, Annotated, id.)
The term money lenders was later changed to lending investors but the
definition of the term remains the same. [Sec. 1464(x), Rev. Adm. Code, as
finally amended by Com. Act No. 215, and Sec. 1465(v) of the same Code,
as finally amended by Act No. 3963] The same law is embodied in the
present National Internal Revenue Code (Com. Act No. 466) without
change, except in the amount of the tax. [See Secs. 182(A) (3) (dd) and
194(u), National Internal Revenue Code.]
It is a well-settled rule that an administrative interpretation of a law which
has been followed and applied for a long time, and thereafter the law is reenacted without substantial change, such administrative interpretation is
deemed to have received legislative approval. In short, the administrative
interpretation becomes part of the law as it is presumed to carry out the
legislative purpose.[5]
The CTA held that the practice of lending money at interest is part of
the insurance business. CA 466 already taxes the insurance business. The
CTA pointed out that the law recognizes and even regulates this practice
of lending money by insurance companies.
The CTA observed that CA 466 also treated differently insurance
companies from lending investors in regard to fixed taxes. Under Section
182(A)(3)(gg), insurance companies were subject to the same fixed tax as
banks and finance companies. The CTA reasoned that insurance
companies were grouped with banks and finance companies because the
latters lending activities were also integral to their business. In contrast,
lending investors were taxed at a different fixed tax under Section 182(A)
(3)(dd) of CA 466. The CTA stated that insurance companies xxx had never
been required by respondent [CIR] to pay the fixed tax imposed on lending
investors xxx.[6]
The dispositive portion of the Decision of 5 January 1995 of the Court
of Tax Appeals (CTA Decision) reads:
WHEREFORE, premises considered, petitioners Philippine American
Accident Insurance Co., Philippine American Assurance Co., and Philippine
American General Insurance Co., Inc. are not taxable on their lending
transactions independently of their insurance business. Accordingly,
respondent is hereby ordered to refund to petitioner[s] the sum of
P7,985.25, P7,047.80 and P14,541.97 in CTA Cases No. 2514, 2515 and
2516, respectively representing the fixed and percentage taxes when (sic)
paid by petitioners as lending investor from August 1971 to September
1972.
No pronouncement as to cost.
SO ORDERED.[7]
Dissatisfied, petitioner elevated the matter to the Court of Appeals. [8]
The Issues
(u) Lending investor includes all persons who make a practice of lending
money for themselves or others at interest.
xxx
The rule that tax exemptions should be construed strictly against the
taxpayer presupposes that the taxpayer is clearly subject to the tax being
levied against him. Unless a statute imposes a tax clearly, expressly and
unambiguously, what applies is the equally well-settled rule that the
imposition of a tax cannot be presumed. [17] Where there is doubt, tax laws
must be construed strictly against the government and in favor of the
taxpayer.[18] This is because taxes are burdens on the taxpayer, and should
not be unduly imposed or presumed beyond what the statutes expressly
and clearly import.[19]
As can be seen, Section 194(u) does not tax the practice of lending per
se. It merely defines what lending investors are. The question is whether the
lending activities of insurance companies make them lending investors for
purposes of taxation.
We agree with the CTA and Court of Appeals that it does not. Insurance
companies cannot be considered lending investors under CA 466, as
amended.
Definition of Lending
Investors under CA 466 Does
Not Include Insurance
Companies.
The definition in Section 194(u) of CA 466 is not broad enough to
include the business of insurance companies. The Insurance Code of 1978 [21]
is very clear on what constitutes an insurance company. It provides that an
insurer or insurance company shall include all individuals, partnerships,
associations or corporations xxx engaged as principals in the insurance
business, excepting mutual benefit associations. [22] More specifically,
respondents fall under the category of insurance corporations as defined in
Section 185 of the Insurance Code, thus:
SECTION 185. Corporations formed or organized to save any person or
persons or other corporations harmless from loss, damage, or liability arising
from any unknown or future or contingent event, or to indemnify or to
compensate any person or persons or other corporations for any such loss,
damage, or liability, or to guarantee the performance of or compliance with
contractual obligations or the payment of debts of others shall be known as
insurance corporations.
Plainly, insurance companies and lending investors are different
enterprises in the eyes of the law. Lending investors cannot, for a
consideration, hold anyone harmless from loss, damage or liability, nor
provide compensation or indemnity for loss. The underwriting of risks is the
which is merely a part of, incidental to and is necessary to its main business.
[30]
Respondents already paid percentage and fixed taxes on their insurance
business. To require them to pay percentage and fixed taxes again for an
activity which is necessarily a part of the same business, the law must
expressly require such additional payment of tax. There is, however, no
provision of law requiring such additional payment of tax.
Sections 195-A and 182(A)(3)(dd) of CA 466 do not require insurance
companies to pay double percentage and fixed taxes. They merely tax
lending investors, not lending activities. Respondents were not transformed
into lending investors by the mere fact that they granted loans, as these
investments were part of, incidental and necessary to their insurance
business.
lending investors. As the CTA pointed out, banks also regularly lend money
at interest, but are not taxable as lending investors.
We find no merit in petitioners contention that Congress intended to
subject respondents to two percentage taxes and two fixed taxes. Petitioners
argument goes against the doctrine of strict interpretation of tax
impositions.
Petitioners argument is likewise not in accord with existing
jurisprudence. In Commissioner of Internal Revenue v. Michel J.
Lhuillier Pawnshop, Inc.,[31] the Court ruled that the different tax
treatment accorded to pawnshops and lending investors in the NIRC of 1977
and the NIRC of 1986 showed the intent of Congress to deal with both
subjects differently. The same reasoning applies squarely to the present
case.
Even the current tax law does not treat insurance companies as lending
investors. Under Section 108(A)[32] of the NIRC of 1997, lending investors and
non-life insurance companies, except for their crop insurances, are subject
to value-added tax (VAT). Life insurance companies are exempt from VAT,
but are subject to percentage tax under Section 123 of the NIRC of 1997.
Indeed, the fact that Sections 195-A and 182(A)(3)(dd) of CA 466 failed
to mention insurance companies already implies the latters exclusion from
the coverage of these provisions. When a statute enumerates the things
upon which it is to operate, everything else by implication must be excluded
from its operation and effect.[33]
Definition of Lending
Investors in CA 466 is Not
New.
Petitioner does not dispute that it issued a ruling in 1920 to the effect
that the lending of money at interest was a necessary incident of the
insurance business, and that insurance companies were thus not subject to
the tax on money lenders. Petitioner argues only that the 1920 ruling does
not apply to the instant case because RA 6110 introduced the definition of
lending investors to CA 466 only in 1969.
The subject definition was actually introduced much earlier, at a time
when lending investors were still referred to as money lenders. Sections 45
and 46 of the Internal Revenue Law of 1914[34] (1914 Tax Code) state:
SECTION 45. Amount of Tax on Business. Fixed taxes on business shall be
collected as follows, the amount stated being for the whole year, when not
otherwise specified:
xxx
(x) Money lenders, eighty pesos;
xxx
SECTION 46. Words and Phrases Defined. In applying the provisions
after taking the required oath of office, entered upon his duties. On July 25,
1933, President Roosevelt addressed a letter to the commissioner asking for
his resignation, on the ground
"that the aims and purposes of the Administration with respect to the work
of the Commission can be carried out most effectively with personnel of my
own selection,"
but disclaiming any reflection upon the commissioner personally or upon his
services. The commissioner replied, asking time to consult
Page 295 U. S. 619
his friends. After some further correspondence upon the subject, the
President, on August 31, 1933, wrote the commissioner expressing the hope
that the resignation would be forthcoming, and saying:
"You will, I know, realize that I do not feel that your mind and my mind go
along together on either the policies or the administering of the Federal
Trade Commission, and, frankly, I think it is best for the people of this
country that I should have a full confidence."
The commissioner declined to resign, and on October 7, 1933, the President
wrote him:
"Effective as of this date, you are hereby removed from the office of
Commissioner of the Federal Trade Commission."
Humphrey never acquiesced in this action, but continued thereafter to insist
that he was still a member of the commission, entitled to perform its duties
and receive the compensation provided by law at the rate of $10,000 per
annum. Upon these and other facts set forth in the certificate, which we
deem it unnecessary to recite, the following questions are certified:
"1. Do the provisions of section 1 of the Federal Trade Commission Act,
stating that 'any commissioner may be removed by the President for
inefficiency, neglect of duly, or malfeasance in office,' restrict or limit the
power of the President to remove a commissioner except upon one or more
of the causes named?"
"If the foregoing question is answered in the affirmative, then -- "
"2. If the power of the President to remove a commissioner is restricted or
limited as shown by the foregoing interrogatory and the answer made
thereto, is such a restriction or limitation valid under the Constitution of the
United States?"
The Federal Trade Commission Act, c. 311, 38 Stat. 717; 15 U.S.C. 41, 42,
creates a commission of five
Page 295 U. S. 620
members to be appointed by the President by and with the advice and
consent of the Senate, and 1 provides:
"Not more than three of the commissioners shall be members of the same
political party. The first commissioners appointed shall continue in office for
terms of three, four, five, six, and seven years, respectively, from the date of
the taking effect of this Act, the term of each to be designated by the
President, but their successors shall be appointed for terms of seven years,
except that any person chosen to fill a vacancy shall be appointed only for
the unexpired term of the commissioner whom he shall succeed. The
commission shall choose a chairman from its own membership. No
commissioner shall engage in any other business, vocation, or employment.
Any commissioner may be removed by the President for inefficiency, neglect
of duty, or malfeasance in office. . . ."
deny like security to their successors. Putting this phrase aside, however,
the fixing of a definite term subject to removal for cause, unless there be
some countervailing provision or circumstance indicating the contrary, which
here we are unable to find, is enough to establish the legislative intent that
the term is not to be curtailed in the absence of such cause. But if the
intention of
Page 295 U. S. 624
Congress that no removal should be made during the specified term except
for one or more of the enumerated causes were not clear upon the face of
the statute, as we think it is, it would be made clear by a consideration of
the character of the commission and the legislative history which
accompanied and preceded the passage of the act. The commission is to be
nonpartisan, and it must, from the very nature of its duties, act with entire
impartiality. It is charged with the enforcement of no policy except the policy
of the law. Its duties are neither political nor executive, but
predominantlyquasi-judicial and quasi-legislative. Like the Interstate
Commerce Commission, its members are called upon to exercise the trained
judgment of a body of experts "appointed by law and informed by
experience." Illinois Central R. Co. v. Interstate Commerce Comm'n, 206 U.
S. 441, 206 U. S. 454; Standard Oil Co. v. United States, 283 U. S. 235, 283
U. S. 238-239. The legislative reports in both houses of Congress clearly
reflect the view that a fixed term was necessary to the effective and fair
administration of the law. In the report to the Senate (No. 597, 63d Cong., 2d
Sess., pp. 10-11) the Senate Committee on Interstate Commerce, in support
of the bill which afterwards became the act in question, after referring to the
provision fixing the term of office at seven years, so arranged that the
membership would not be subject to complete change at any one time, said:
"The work of this commission will be of a most exacting and difficult
character, demanding persons who have experience in the problems to be
met -- that is, a proper knowledge of both the public requirements and the
practical affairs of industry. It is manifestly desirable that the terms of the
commissioners shall be long enough to give them an opportunity to acquire
the expertness in dealing with these special questions concerning industry
that comes from experience. "
Page 295 U. S. 625
The report declares that one advantage which the commission possessed
over the Bureau of Corporations (an executive subdivision in the Department
of Commerce which was abolished by the act) lay in the fact of its
independence, and that it was essential that the commission should not be
open to the suspicion of partisan direction. The report quotes (p. 22) a
statement to the committee by Senator Newlands, who reported the bill,
that the tribunal should be of high character and
"independent of any department of the government . . . a board or
commission of dignity, permanence, and ability, independent of executive
authority, except in its selection, and independent in character."
The debates in both houses demonstrate that the prevailing view was that
the commission was not to be "subject to anybody in the government, but . .
. only to the people of the United States"; free from "political domination or
control" or the "probability or possibility of such a thing"; to be "separate
and apart from any existing department of the government -- not subject to
the orders of the President."
More to the same effect appears in the debates, which were long and
thorough, and contain nothing to the contrary. While the general rule
precludes the use of these debates to explain the meaning of the words of
the statute, they may be considered as reflecting light upon its general
purposes and the evils which it sought to remedy. Federal Trade Comm'n v.
Raladam Co., 283 U. S. 643, 283 U. S. 650.
Thus, the language of the act, the legislative reports, and the general
purposes of the legislation as reflected by the debates all combine to
demonstrate the Congressional intent to create a body of experts who shall
gain experience by length of service -- a body which shall be independent of
executive authority except in its selection, and free to exercise its judgment
without the leave or hindrance
Page 295 U. S. 626
of any other official or any department of the government. To the
accomplishment of these purposes it is clear that Congress was of opinion
that length and certainty of tenure would vitally contribute. And to hold that,
nevertheless, the members of the commission continue in office at the mere
will of the President might be to thwart, in large measure, the very ends
which Congress sought to realize by definitely fixing the term of office.
We conclude that the intent of the act is to limit the executive power of
removal to the causes enumerated, the existence of none of which is
claimed here, and we pass to the second question.
Second. To support its contention that the removal provision of 1, as we
have just construed it, is an unconstitutional interference with the executive
power of the President, the government's chief reliance is Myers v. United
States, 272 U. S. 52. That case has been so recently decided, and the
prevailing and dissenting opinions so fully review the general subject of the
power of executive removal, that further discussion would add little of value
to the wealth of material there collected. These opinions examine at length
the historical, legislative and judicial data bearing upon the question,
beginning with what is called "the decision of 1789" in the first Congress and
coming down almost to the day when the opinions were delivered. They
occupy 243 pages of the volume in which they are printed. Nevertheless, the
narrow point actually decided was only that the President had power to
remove a postmaster of the first class without the advice and consent of the
Senate as required by act of Congress. In the course of the opinion of the
court, expressions occur which tend to sustain the government's contention,
but these are beyond the point involved, and, therefore do not come within
the rule of stare decisis. Insofar as they are out of harmony with the views
here set forth, these expressions are disapproved. A like situation was
Page 295 U. S. 627
presented in the case of Cohens v. Virginia, 6 Wheat. 264, 19 U. S. 399, in
respect of certain general expressions in the opinion in Marbury v. Madison,
1 Cranch 137. Chief Justice Marshall, who delivered the opinion in the
Marbury case, speaking again for the court in the Cohens case, said:
"It is a maxim not to be disregarded that general expressions, in every
opinion, are to be taken in connection with the case in which those
expressions are used. If they go beyond the case, they may be respected,
but ought not to control the judgment in a subsequent suit when the very
point is presented for decision. The reason of this maxim is obvious. The
question actually before the Court is investigated with care, and considered
in its full extent. Other principles which may serve to illustrate it are
considered in their relation to the case decided, but their possible bearing on
all other cases is seldom completely investigated."
And he added that these general expressions in the case of Marbury v.
Madison were to be understood with the limitations put upon them by the
opinion in the Cohens case. See also Carroll v. Lessee of Carroll, 16 How.
275, 57 U. S. 286-287; O'Donoghue v. United States, 289 U. S. 516, 289 U. S.
550.
The office of a postmaster is so essentially unlike the office now involved
that the decision in the Myers case cannot be accepted as controlling our
decision here. A postmaster is an executive officer restricted to the
performance of executive functions. He is charged with no duty at all related
to either the legislative or judicial power. The actual decision in theMyers
case finds support in the theory that such an officer is merely one of the
units in the executive department, and, hence, inherently subject to the
exclusive and illimitable power of removal by the Chief Executive, whose
subordinate and aid he is. Putting aside dicta, which may be followed if
sufficiently persuasive but which are not controlling, the necessary reach of
the decision goes far enough to include
Page 295 U. S. 628
all purely executive officers. It goes no farther; much less does it include an
officer who occupies no place in the executive department, and who
exercises no part of the executive power vested by the Constitution in the
President.
The Federal Trade Commission is an administrative body created by
Congress to carry into effect legislative policies embodied in the statute in
accordance with the legislative standard therein prescribed, and to perform
other specified duties as a legislative or as a judicial aid. Such a body cannot
in any proper sense be characterized as an arm or an eye of the executive.
Its duties are performed without executive leave, and, in the contemplation
of the statute, must be free from executive control. In administering the
provisions of the statute in respect of "unfair methods of competition" -- that
is to say, in filling in and administering the details embodied by that general
standard -- the commission acts in part quasi-legislatively and in part quasijudicially. In making investigations and reports thereon for the information of
Congress under 6, in aid of the legislative power, it acts as a legislative
agency. Under 7, which authorizes the commission to act as a master in
chancery under rules prescribed by the court, it acts as an agency of the
judiciary. To the extent that it exercises any executive function -- as
distinguished from executive power in the constitutional sense -- it does so
in the discharge and effectuation of its quasi-legislative or quasi-judicial
powers, or as an agency of the legislative or judicial departments of the
government.*
Page 295 U. S. 629
If Congress is without authority to prescribe causes for removal of members
of the trade commission and limit executive power of removal accordingly,
that power at once becomes practically all-inclusive in respect of civil
officers with the exception of the judiciary provided for by the Constitution.
The Solicitor General, at the bar, apparently recognizing this to be true, with
commendable candor, agreed that his view in respect of the removability of
members of the Federal Trade Commission necessitated a like view in
20, 1988, 2 reversing its Decision, dated October 24, 1986. 3 The Decision
set aside an Order, dated April 16, 1985, of the Regional Trial Court, 4 as
well as its Order, dated August 21, 1985. The Resolution, dated September
24, 1987 disposed of, and granted, the private respondent Karamfil ImportExport Co., Inc.'s motion for reconsideration of the October 24, 1986
Decision; the Resolution dated May 20, 1988, in turn, denied the petitioner's
own motion for reconsideration.
The facts are not in controversy. We quote:
On March 12, 1985, State Prosecutor Jose B. Rosales, who is assigned with
the Presidential Anti-Dollar Salting Task Force hereinafter referred to as PADS
Task Force for purposes of convenience, issued search warrants Nos. 156,
157, 158, 159, 160 and 161 against the petitioners Karamfil Import-Export
Co., Inc., P & B Enterprises Co., Inc., Philippine Veterans Corporation,
Philippine Veterans Development Corporation, Philippine Construction
Development Corporation, Philippine Lauan Industries Corporation, Intertrade Development (Alvin Aquino), Amelili U. Malaquiok Enterprises and
Jaime P. Lucman Enterprises.
The application for the issuance of said search warrants was filed by Atty.
Napoleon Gatmaytan of the Bureau of Customs who is a deputized member
of the PADS Task Force. Attached to the said application is the affidavit of
Josefin M. Castro who is an operative and investigator of the PADS Task
Force. Said Josefin M. Castro is likewise the sole deponent in the purported
deposition to support the application for the issuance of the six (6) search
warrants involved in this case. The application filed by Atty. Gatmaytan, the
affidavit and deposition of Josefin M. Castro are all dated March 12, 1985. 5
Shortly thereafter, the private respondent (the petitioner below) went to the
Regional Trial Court on a petition to enjoin the implementation of the search
warrants in question. 6 On March 13, 1985, the trial court issued a
temporary restraining order [effective "for a period of five (5) days notice " 7
] and set the case for hearing on March 18, 1985.
In disposing of the petition, the said court found the material issues to be:
1) Competency of this Court to act on petition filed by the petitioners;
2) Validity of the search warrants issued by respondent State Prosecutor;
3) Whether or not the petition has become moot and academic because all
the search warrants sought to be quashed had already been implemented
and executed. 8
G.R. No. 83578 March 16, 1989
THE PRESIDENTIAL ANTI-DOLLAR SALTING TASK FORCE, petitioner,
vs.
HONORABLE COURT OF APPEALS, HONORABLE TEOFILO L, GUADIZ,
JR.,Presiding Judge, REGIONAL TRIAL COURT, Branch 147: NCR
(MAKATI), and KARAMFIL IMPORT-EXPORT CO., INC., respondents.
K. V. Faylona & Associates for respondents.
SARMIENTO, J.:
The petitioner, the Presidential Anti-Dollar Salting Task Force, the President's
arm assigned to investigate and prosecute so-called "dollar salting"
activities in the country (per Presidential Decree No. 1936 as amended by
Presidential Decree No. 2002), asks the Court to hold as null and void two
Resolutions of the Court of Appeals, dated September 24, 1987 1 and May
On April 16, 1985, the lower court issued the first of its challenged Orders,
and held:
WHEREFORE, in view of all the foregoing, the Court hereby declares Search
Warrant Nos. 156, 157, 158, 159, 160, and 161 to be null and void.
Accordingly, the respondents are hereby ordered to return and surrender
immediately all the personal properties and documents seized by them from
the petitioners by virtue of the aforementioned search warrants.
SO ORDERED. 9
On August 21, 1985, the trial court denied reconsideration.
On April 4, 1986, the Presidential Anti-Dollar Salting Task Force went to the
respondent Court of Appeals to contest, on certiorari, the twin Order(s) of
We find, upon the foregoing facts, that the essential questions that confront
us are- (i) is the Presidential Anti-Dollar Salting Task Force a quasi-judicial
body, and one co-equal in rank and standing with the Regional Trial Court,
and accordingly, beyond the latter's jurisdiction; and (ii) may the said
presidential body be said to be "such other responsible officer as may be
authorized by law" to issue search warrants under the 1973 Constitution
questions we take up seriatim.**
In submitting that it is a quasi-judicial entity, the petitioner states that it is
endowed with "express powers and functions under PD No. 1936, to
prosecute foreign exchange violations as defined and punished under PD No.
1883." 13 "By the very nature of its express powers as conferred by the
laws," so it is contended, "which are decidedly quasi-judicial or discretionary
function, such as to conduct preliminary investigation on the charges of
foreign exchange violations, issue search warrants or warrants of arrest, hold
departure orders, among others, and depending upon the evidence
presented, to dismiss the charges or to file the corresponding information in
court of Executive Order No. 934, PD No. 1936 and its Implementing Rules
and Regulations effective August 26, 1984), petitioner exercises quasijudicial power or the power of adjudication ." 14
The Court of Appeals, in its Resolution now assailed, 15 was of the opinion
that "[t]he grant of quasi-judicial powers to petitioner did not diminish the
regular courts' judicial power of interpretation. The right to interpret a law
and, if necessary to declare one unconstitutional, exclusively pertains to the
judiciary. In assuming this function, courts do not proceed on the theory that
the judiciary is superior to the two other coordinate branches of the
government, but solely on the theory that they are required to declare the
law in every case which come before them." 16
This Court finds the Appellate Court to be in error, since what the petitioner
puts to question is the Regional Trial Court's act of assuming jurisdiction over
the private respondent's petition below and its subsequent countermand of
the Presidential Anti-Dollar Salting Task Force's orders of search and seizure,
for the reason that the presidential body, as an entity (allegedly) coordinate
and co-equal with the Regional Trial Court, was (is) not vested with such a
jurisdiction. An examination of the Presidential Anti-Dollar Salting Task
Force's petition shows indeed its recognition of judicial review (of the acts of
Government) as a basic privilege of the courts. Its objection, precisely, is
whether it is the Regional Trial Court, or the superior courts, that may
undertake such a review.
Under the Judiciary Reorganization Act of 1980, 17 the Court of Appeals
exercises:
(3) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Court and quasi-judicial
agencies, instrumentalities, boards or commissions, except those falling
within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the provisions of this Act, and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948. 18
xxx xxx xxx
The fine shall be paid to the Task Force which shall retain Twenty percent (20
%) thereof. The informer, if any, shall be entitled to Twenty percent (20 %) of
the fine. Should there be no informer, the Task Force shall be entitle to retain
Forty percent (40 %) of the fine and the balance shall accrue to the general
funds of the National government. The amount of the fine to be retained by
the Task Force shall form part of its Confidential Fund and be utilized for the
operations of the Task Force . 33
The Court sees nothing in the aforequoted provisions (except with respect to
the Task Force's powers to issue search warrants) that will reveal a
legislative intendment to confer it with quasi-judicial responsibilities relative
to offenses punished by Presidential Decree No. 1883. Its undertaking, as we
said, is simply, to determine whether or not probable cause exists to warrant
the filing of charges with the proper court, meaning to say, to conduct an
inquiry preliminary to a judicial recourse, and to recommend action "of
appropriate authorities". It is not unlike a fiscal's office that conducts a
preliminary investigation to determine whether or not prima facie evidence
exists to justify haling the respondent to court, and yet, while it makes that
determination, it cannot be said to be acting as a quasi-court. For it is the
courts, ultimately, that pass judgment on the accused, not the fiscal.
It is not unlike the Presidential Commission on Good Government either, the
executive body appointed to investigate and prosecute cases involving "illgotten wealth". It had been vested with enormous powers, like the issuance
of writs of sequestration, freeze orders, and similar processes, but that did
not, on account thereof alone, make it a quasi-judicial entity as defined by
recognized authorities. It cannot pronounce judgement of the accused's
culpability, the jurisdiction to do which is exclusive upon the Sandiganbayan.
34
If the Presidential Anti-Dollar Salting Task Force is not, hence, a quasi-judicial
body, it cannot be said to be co-equal or coordinate with the Regional Trial
Court. There is nothing in its enabling statutes that would demonstrate its
standing at par with the said court.
In that respect, we do not find error in the respondent Court of Appeal's
resolution sustaining the assumption of jurisdiction by the court a quo.
It will not do to say that the fact that the Presidential Task Force has been
empowered to issue warrants of arrest, search, and seizure, makes it, ergo, a
"semi-court". Precisely, it is the objection interposed by the private
respondent, whether or not it can under the 1973 Charter, issue such kinds
of processes.
It must be observed that under the present Constitution, the powers of
arrest and search are exclusive upon judges. 35 To that extent, the case has
become moot and academic. Nevertheless, since the question has been
specifically put to the Court, we find it unavoidable to resolve it as the final
arbiter of legal controversies, pursuant to the provisions of the 1973
Constitution during whose regime the case was commenced.
Since the 1973 Constitution took force and effect and until it was so
unceremoniously discarded in 1986, its provisions conferring the power to
issue arrest and search warrants upon an officer, other than a judge, by fiat
of legislation have been at best controversial. In Lim v. Ponce de Leon, 36 a
1975 decision, this Court ruled that a fiscal has no authority to issue search
warrants, but held in the same vein that, by virtue of the responsible officer"
clause of the 1973 Bill of Rights, "any lawful officer authorized by law can
issue a search warrant or warrant of arrest.37 Authorities, however, have
continued to express reservations whether or not fiscals may, by statute, be
given such a power. 38
Less than a year later, we promulgated Collector of Customs v. Villaluz, 39 in
which we categorically averred: Until now only the judge can issue the
warrant of arrest." 40 "No law or presidential decree has been enacted or
promulgated vesting the same authority in a particular responsible officer ."
41
Apparently, Villaluz had settled the debate, but the same question persisted
following this Courts subsequent rulings upholding the President's alleged
emergency arrest powers .42 [Mr. Justice Hugo Gutierrez would hold,
however, that a Presidential Commitment Order (PCO) is (was) not a species
of "arrest" in its technical sense, and that the (deposed) Chief Executive, in
issuing one, does not do so in his capacity as a "responsible officer" under
the 1973 Charter, but rather, as Commander-in-Chief of the Armed Forces in
times of emergency, or in order to carry out the deportation of undesirable
aliens.43 In the distinguished Justice's opinion then, these are acts that can
be done without need of judicial intervention because they are not,
precisely, judicial but Presidential actions.]
In Ponsica v. Ignalaga,44 however, we held that the mayor has been made a
"responsible officer' by the Local Government Code, 45 but had ceased to
be one with the approval of the 1987 Constitution according judges sole
authority to issue arrest and search warrants. But in the same breath, we did
not rule the grant under the Code unconstitutional based on the provisions
of the former Constitution. We were agreed, though, that the "responsible
officer" referred to by the fundamental law should be one capable of
approximating "the cold neutrality of an impartial judge." 46
In striking down Presidential Decree No. 1936 the respondent Court relied on
American jurisprudence, notably,Katz v. United States, 47 Johnson v. United
States, 48 and Coolidge v. New Hampshire 49 in which the American
Supreme Court ruled that prosecutors (like the petitioner) cannot be given
such powers because of their incapacity for a "detached scrutiny" 50 of the
cases before them. We affirm the Appellate Court.
We agree that the Presidential Anti-Dollar Salting Task Force exercises, or
was meant to exercise, prosecutorial powers, and on that ground, it cannot
be said to be a neutral and detached "judge" to determine the existence of
probable cause for purposes of arrest or search. Unlike a magistrate, a
prosecutor is naturally interested in the success of his case. Although his
office "is to see that justice is done and not necessarily to secure the
conviction of the person accused," 51 he stands, invariably, as the
accused's adversary and his accuser. To permit him to issue search warrants
and indeed, warrants of arrest, is to make him both judge and jury in his own
right, when he is neither. That makes, to our mind and to that extent,
Presidential Decree No. 1936 as amended by Presidential Decree No. 2002,
unconstitutional.
It is our ruling, thus, that when the 1973 Constitution spoke of "responsible
officer" to whom the authority to issue arrest and search warrants may be
delegated by legislation, it did not furnish the legislator with the license to
FERNANDO, C.J.:
This Court, pursuant to its grave responsibility of passing upon the validity of
any executive or legislative act in an appropriate cases, has to resolve the
crucial issue of the constitutionality of Batas Pambansa Blg. 129, entitled
"An act reorganizing the Judiciary, Appropriating Funds Therefor and for
Other Purposes." The task of judicial review, aptly characterized as exacting
and delicate, is never more so than when a conceded legislative power, that
of judicial reorganization, 1 may possibly collide with the time-honored
principle of the independence of the judiciary 2 as protected and
safeguarded by this constitutional provision: "The Members of the Supreme
Court and judges of inferior courts shall hold office during good behavior
until they reach the age of seventy years or become incapacitated to
discharge the duties of their office. The Supreme Court shall have the power
to discipline judges of inferior courts and, by a vote of at least eight
Members, order their dismissal." 3 For the assailed legislation mandates that
Justices and judges of inferior courts from the Court of Appeals to municipal
circuit courts, except the occupants of the Sandiganbayan and the Court of
Tax Appeals, unless appointed to the inferior courts established by such Act,
would be considered separated from the judiciary. It is the termination of
their incumbency that for petitioners justifies a suit of this character, it being
alleged that thereby the security of tenure provision of the Constitution has
been ignored and disregarded,
That is the fundamental issue raised in this proceeding, erroneously entitled
Petition for Declaratory Relief and/or for Prohibition 4 considered by this
Court as an action for prohibited petition, seeking to enjoin respondent
Minister of the Budget, respondent Chairman of the Commission on Audit,
and respondent Minister of Justice from taking any action implementing
Batas Pambansa Blg. 129. Petitioners 5 sought to bolster their claim by
imputing lack of good faith in its enactment and characterizing as an undue
delegation of legislative power to the President his authority to fix the
compensation and allowances of the Justices and judges thereafter
appointed and the determination of the date when the reorganization shall
be deemed completed. In the very comprehensive and scholarly Answer of
Cohen, the barrier thus set up if not breached has definitely been
lowered." 11
2. The imputation of arbitrariness to the legislative body in the enactment of
Batas Pambansa Blg. 129 to demonstrate lack of good faith does manifest
violence to the facts. Petitioners should have exercised greater care in
informing themselves as to its antecedents. They had laid themselves open
to the accusation of reckless disregard for the truth, On August 7, 1980, a
Presidential Committee on Judicial Reorganization was organized. 12 This
Executive Order was later amended by Executive Order No. 619-A., dated
September 5 of that year. It clearly specified the task assigned to it: "1. The
Committee shall formulate plans on the reorganization of the Judiciary which
shall be submitted within seventy (70) days from August 7, 1980 to provide
the President sufficient options for the reorganization of the entire Judiciary
which shall embrace all lower courts, including the Court of Appeals, the
Courts of First Instance, the City and Municipal Courts, and all Special
Courts, but excluding the Sandigan Bayan." 13 On October 17, 1980, a Report
was submitted by such Committee on Judicial Reorganization. It began with
this paragraph: "The Committee on Judicial Reorganization has the honor to
submit the following Report. It expresses at the outset its appreciation for
the opportunity accorded it to study ways and means for what today is a
basic and urgent need, nothing less than the restructuring of the judicial
system. There are problems, both grave and pressing, that call for remedial
measures. The felt necessities of the time, to borrow a phrase from Holmes,
admit of no delay, for if no step be taken and at the earliest opportunity, it is
not too much to say that the people's faith in the administration of justice
could be shaken. It is imperative that there be a greater efficiency in the
disposition of cases and that litigants, especially those of modest means
much more so, the poorest and the humblest can vindicate their rights in
an expeditious and inexpensive manner. The rectitude and the fairness in
the way the courts operate must be manifest to all members of the
community and particularly to those whose interests are affected by the
exercise of their functions. It is to that task that the Committee addresses
itself and hopes that the plans submitted could be a starting point for an
institutional reform in the Philippine judiciary. The experience of the
Supreme Court, which since 1973 has been empowered to supervise inferior
courts, from the Court of Appeals to the municipal courts, has proven that
reliance on improved court management as well as training of judges for
more efficient administration does not suffice. I hence, to repeat, there is
need for a major reform in the judicial so stem it is worth noting that it will
be the first of its kind since the Judiciary Act became effective on June 16,
1901." 14 I t went to say: "I t does not admit of doubt that the last two
decades of this century are likely to be attended with problems of even
greater complexity and delicacy. New social interests are pressing for
recognition in the courts. Groups long inarticulate, primarily those
economically underprivileged, have found legal spokesmen and are
asserting grievances previously ignored. Fortunately, the judicially has not
proved inattentive. Its task has thus become even more formidable. For so
much grist is added to the mills of justice. Moreover, they are likewise to be
quite novel. The need for an innovative approach is thus apparent. The
national leadership, as is well-known, has been constantly on the search for
solutions that will prove to be both acceptable and satisfactory. Only thus
may there be continued national progress." 15 After which comes: "To be less
abstract, the thrust is on development. That has been repeatedly stressed
and rightly so. All efforts are geared to its realization. Nor, unlike in the past,
was it to b "considered as simply the movement towards economic progress
and growth measured in terms of sustained increases in per capita income
and Gross National Product (GNP). 16 For the New Society, its implication
goes further than economic advance, extending to "the sharing, or more
appropriately, the democratization of social and economic opportunities, the
substantiation of the true meaning of social justice." 17 This process of
modernization and change compels the government to extend its field of
activity and its scope of operations. The efforts towards reducing the gap
between the wealthy and the poor elements in the nation call for more
regulatory legislation. That way the social justice and protection to labor
mandates of the Constitution could be effectively implemented." 18 There is
likelihood then "that some measures deemed inimical by interests adversely
affected would be challenged in court on grounds of validity. Even if the
question does not go that far, suits may be filed concerning their
interpretation and application. ... There could be pleas for injunction or
restraining orders. Lack of success of such moves would not, even so, result
in their prompt final disposition. Thus delay in the execution of the policies
embodied in law could thus be reasonably expected. That is not conducive
to progress in development." 19 For, as mentioned in such Report, equally of
vital concern is the problem of clogged dockets, which "as is well known, is
one of the utmost gravity. Notwithstanding the most determined efforts
exerted by the Supreme Court, through the leadership of both retired Chief
Justice Querube Makalintal and the late Chief Justice Fred Ruiz Castro, from
the time supervision of the courts was vested in it under the 1973
Constitution, the trend towards more and more cases has continued." 20 It is
understandable why. With the accelerated economic development, the
growth of population, the increasing urbanization, and other similar factors,
the judiciary is called upon much oftener to resolve controversies. Thus
confronted with what appears to be a crisis situation that calls for a remedy,
the Batasang Pambansa had no choice. It had to act, before the ailment
became even worse. Time was of the essence, and yet it did not hesitate to
be duly mindful, as it ought to be, of the extent of its coverage before
enacting Batas Pambansa Blg. 129.
3. There is no denying, therefore, the need for "institutional reforms,"
characterized in the Report as "both pressing and urgent." 21 It is worth
noting, likewise, as therein pointed out, that a major reorganization of such
scope, if it were to take place, would be the most thorough after four
generations. 22 The reference was to the basic Judiciary Act generations .
enacted in June of 1901, 23 amended in a significant way, only twice previous
to the Commonwealth. There was, of course, the creation of the Court of
Appeals in 1935, originally composed "of a Presiding Judge and ten appellate
Judges, who shall be appointed by the President of the Philippines, with the
consent of the Commission on Appointments of the National Assembly, 24 It
could "sit en banc, but it may sit in two divisions, one of six and another of
five Judges, to transact business, and the two divisions may sit at the same
time." 25 Two years after the establishment of independence of the Republic
of the Philippines, the Judiciary Act of 1948 26 was passed. It continued the
existing system of regular inferior courts, namely, the Court of Appeals,
Courts of First Instance, 27 the Municipal Courts, at present the City Courts,
and the Justice of the Peace Courts, now the Municipal Circuit Courts and
Municipal Courts. The membership of the Court of Appeals has been
continuously increased. 28 Under a 1978 Presidential Decree, there would be
forty-five members, a Presiding Justice and forty-four Associate Justices, with
fifteen divisions. 29 Special courts were likewise created. The first was the
Court of Tax Appeals in 1954, 30 next came the Court of Agrarian Relations in
1955, 31 and then in the same year a Court of the Juvenile and Domestic
Relations for Manila in 1955, 32 subsequently followed by the creation of two
other such courts for Iloilo and Quezon City in 1966. 33 In 1967, Circuit
Criminal Courts were established, with the Judges having the same
qualifications, rank, compensation, and privileges as judges of Courts of First
Instance. 34
4. After the submission of such Report, Cabinet Bill No. 42, which later
became the basis of Batas Pambansa Blg. 129, was introduced. After setting
forth the background as above narrated, its Explanatory Note continues:
"Pursuant to the President's instructions, this proposed legislation has been
drafted in accordance with the guidelines of that report with particular
attention to certain objectives of the reorganization, to wit, the attainment of
more efficiency in disposal of cases, a reallocation of jurisdiction, and a
revision of procedures which do not tend to the proper meeting out of
justice. In consultation with, and upon a consensus of, the governmental and
parliamentary leadership, however, it was felt that some options set forth in
the Report be not availed of. Instead of the proposal to confine the
jurisdiction of the intermediate appellate court merely to appellate
adjudication, the preference has been opted to increase rather than diminish
its jurisdiction in order to enable it to effectively assist the Supreme Court.
This preference has been translated into one of the innovations in the
proposed Bill." 35 In accordance with the parliamentary procedure, the Bill
was sponsored by the Chairman of the Committee on Justice, Human Rights
and Good Government to which it was referred. Thereafter, Committee
Report No. 225 was submitted by such Committee to the Batasang
Pambansa recommending the approval with some amendments. In the
sponsorship speech of Minister Ricardo C. Puno, there was reference to the
Presidential Committee on Judicial Reorganization. Thus: "On October 17,
1980, the Presidential Committee on Judicial Reorganization submitted its
report to the President which contained the 'Proposed Guidelines for Judicial
Reorganization.' Cabinet Bill No. 42 was drafted substantially in accordance
with the options presented by these guidelines. Some options set forth in the
aforesaid report were not availed of upon consultation with and upon
consensus of the government and parliamentary leadership. Moreover, some
amendments to the bill were adopted by the Committee on Justice, Human
Rights and Good Government, to which The bill was referred, following the
public hearings on the bill held in December of 1980. The hearings consisted
of dialogues with the distinguished members of the bench and the bar who
had submitted written proposals, suggestions, and position papers on the bill
upon the invitation of the Committee on Justice, Human Rights and Good
Government." 36 Stress was laid by the sponsor that the enactment of such
Cabinet Bill would, firstly, result in the attainment of more efficiency in the
disposal of cases. Secondly, the improvement in the quality of justice
dispensed by the courts is expected as a necessary consequence of the
easing of the court's dockets. Thirdly, the structural changes introduced in
the bill, together with the reallocation of jurisdiction and the revision of the
rules of procedure, are designated to suit the court system to the exigencies
of the present day Philippine society, and hopefully, of the foreseeable
future." 37 it may be observed that the volume containing the minutes of the
proceedings of the Batasang Pambansa show that 590 pages were devoted
to its discussion. It is quite obvious that it took considerable time and effort
as well as exhaustive study before the act was signed by the President on
August 14, 1981. With such a background, it becomes quite manifest how
lacking in factual basis is the allegation that its enactment is tainted by the
vice of arbitrariness. What appears undoubted and undeniable is the good
faith that characterized its enactment from its inception to the affixing of the
Presidential signature.
5. 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. The ponencia of Justice J.B.L. Reyes in Cruz v. Primicias,
Jr. 38 reiterated such a doctrine: "We find this point urged by respondents, to
be without merit. No removal or separation of petitioners from the service is
here involved, but the validity of the abolition of their offices. This is a legal
issue that is for the Courts to decide. It is well-known rule also that valid
abolition of offices is neither removal nor separation of the incumbents. ...
And, of course, if the abolition is void, the incumbent is deemed never to
have ceased to hold office. The preliminary question laid at rest, we pass to
the merits of the case. As well-settled as the rule that the abolition of an
office does not amount to an illegal removal of its incumbent is the principle
that, in order to be valid, the abolition must be made in good faith." 39 The
above excerpt was quoted with approval in Bendanillo, Sr. v. Provincial
Governor, 40 two earlier cases enunciating a similar doctrine having
preceded it. 41 As with the offices in the other branches of the government,
so it is with the judiciary. The test remains whether the abolition is in good
faith. As that element is conspicuously present in the enactment of Batas
Pambansa Blg. 129, then the lack of merit of this petition becomes even
more apparent. The concurring opinion of Justice Laurel in Zandueta v. De la
Costa 42 cannot be any clearer. This is a quo warranto proceeding filed by
petitioner, claiming that he, and not respondent, was entitled to he office of
judge of the Fifth Branch of the Court of First Instance of Manila. There was a
Judicial Reorganization Act in 1936, 43 a year after the inauguration of the
Commonwealth, amending the Administrative Code to organize courts of
original jurisdiction known as the Courts of First Instance Prior to such
statute, petitioner was the incumbent of such branch. Thereafter, he
received an ad interim appointment, this time to the Fourth Judicial District,
under the new legislation. Unfortunately for him, the Commission on
Appointments of then National Assembly disapproved the same, with
respondent being appointed in his place. He contested the validity of the Act
insofar as it resulted in his being forced to vacate his position This Court did
not rule squarely on the matter. His petition was dismissed on the ground of
estoppel. Nonetheless, the separate concurrence of Justice Laurel in the
10. There are other objections raised but they pose no difficulty. Petitioners
would characterize as an undue delegation of legislative power to the
President the grant of authority to fix the compensation and the allowances
of the Justices and judges thereafter appointed. A more careful reading of
the challenged Batas Pambansa Blg. 129 ought to have cautioned them
against raising such an issue. The language of the statute is quite clear. The
questioned provisions reads as follows: "Intermediate Appellate Justices,
Regional Trial Judges, Metropolitan Trial Judges, municipal Trial Judges, and
Municipal Circuit Trial Judges shall receive such receive such compensation
and allowances as may be authorized by the President along the guidelines
set forth in Letter of Implementation No. 93 pursuant to Presidential Decree
No. 985, as amended by Presidential Decree No. 1597." 87 The existence of a
standard is thus clear. The basic postulate that underlies the doctrine of nondelegation is that it is the legislative body which is entrusted with the
competence to make laws and to alter and repeal them, the test being the
completeness of the statue in all its terms and provisions when enacted. As
pointed out in Edu v. Ericta: 88 "To avoid the taint of unlawful delegation,
there must be a standard, which implies at the very least that the legislature
itself determines matters of principle and lays down fundamental policy.
Otherwise, the charge of complete abdication may be hard to repel. A
standard thus defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the
circumstances under which the legislative command is to be effected. It is
the criterion by which legislative purpose may be carried out. Thereafter, the
executive or administrative office designated may in pursuance of the above
guidelines promulgate supplemental rules and regulations. The standard
may be either express or implied. If the former, the non-delegation objection
is easily met. The standard though does not have to be spelled out
specifically. It could be implied from the policy and purpose of the act
considered as a whole." 89 The undeniably strong links that bind the
executive and legislative departments under the amended Constitution
assure that the framing of policies as well as their implementation can be
accomplished with unity, promptitude, and efficiency. There is accuracy,
therefore, to this observation in the Free Telephone Workers Union decision:
"There is accordingly more receptivity to laws leaving to administrative and
executive agencies the adoption of such means as may be necessary to
effectuate a valid legislative purpose. It is worth noting that a highlyrespected legal scholar, Professor Jaffe, as early as 1947, could speak of
delegation as the 'dynamo of modern government.'" 90 He warned against a
"restrictive approach" which could be "a deterrent factor to much-needed
legislation." 91 Further on this point from the same opinion" "The spectre of
the non-delegation concept need not haunt, therefore, party caucuses,
cabinet sessions or legislative chambers." 92 Another objection based on the
absence in the statue of what petitioners refer to as a "definite time frame
limitation" is equally bereft of merit. They ignore the categorical language of
this provision: "The Supreme Court shall submit to the President, within
thirty (30) days from the date of the effectivity of this act, a staffing pattern
for all courts constituted pursuant to this Act which shall be the basis of the
implementing order to be issued by the President in accordance with the
immediately succeeding section." 93 The first sentence of the next section is
even more categorical: "The provisions of this Act shall be immediately
reform at the federal level and, to the extent issues of judicial federalism
arise, at the state level as well." 103
12. It is a cardinal article of faith of our constitutional regime that it is the
people who are endowed with rights, to secure which a government is
instituted. Acting as it does through public officials, it has to grant them
either expressly or impliedly certain powers. Those they exercise not for
their own benefit but for the body politic. The Constitution does not speak in
the language of ambiguity: "A public office is a public trust." 104 That is more
than a moral adjuration It is a legal imperative. The law may vest in a public
official certain rights. It does so to enable them to perform his functions and
fulfill his responsibilities more efficiently. It is from that standpoint that the
security of tenure provision to assure judicial independence is to be viewed.
It is an added guarantee that justices and judges can administer justice
undeterred by any fear of reprisal or untoward consequence. Their
judgments then are even more likely to be inspired solely by their knowledge
of the law and the dictates of their conscience, free from the corrupting
influence of base or unworthy motives. The independence of which they are
assured is impressed with a significance transcending that of a purely
personal right. As thus viewed, it is not solely for their welfare. The
challenged legislation Thus subject d to the most rigorous scrutiny by this
Tribunal, lest by lack of due care and circumspection, it allow the erosion of
that Ideal so firmly embedded in the national consciousness There is this
farther thought to consider. independence in thought and action necessarily
is rooted in one's mind and heart. As emphasized by former Chief Justice
Paras in Ocampo v. Secretary of Justice, 105 there is no surer guarantee of
judicial independence than the God-given character and fitness of those
appointed to the Bench. The judges may be guaranteed a fixed tenure of
office during good behavior, but if they are of such stuff as allows them to be
subservient to one administration after another, or to cater to the wishes of
one litigant after another, the independence of the judiciary will be nothing
more than a myth or an empty Ideal. Our judges, we are confident, can be of
the type of Lord Coke, regardless or in spite of the power of Congress we
do not say unlimited but as herein exercised to reorganize inferior
courts." 106 That is to recall one of the greatest Common Law jurists, who at
the cost of his office made clear that he would not just blindly obey the
King's order but "will do what becomes [him] as a judge." So it was pointed
out in the first leading case stressing the independence of the
judiciary, Borromeo v. Mariano, 107 The ponencia of Justice Malcolm Identified
good judges with "men who have a mastery of the principles of law, who
discharge their duties in accordance with law, who are permitted to perform
the duties of the office undeterred by outside influence, and who are
independent and self-respecting human units in a judicial system equal and
coordinate to the other two departments of government." 108 There is no
reason to assume that the failure of this suit to annul Batas Pambansa Blg.
129 would be attended with deleterious consequences to the administration
of justice. It does not follow that the abolition in good faith of the existing
inferior courts except the Sandiganbayan and the Court of Tax Appeals and
the creation of new ones will result in a judiciary unable or unwilling to
discharge with independence its solemn duty or one recreant to the trust
reposed in it. Nor should there be any fear that less than good faith will
Separate Opinions
Us only confuses and compounds the task We are called upon to perform.
For how can there be a satisfactory and rational reconciliation of the
pretended right of a judge to continue as such, when the position occupied
by him no longer exists? To suggest, as some do, that the solution is for the
court he is sitting in not to be deemed abolished or that he should in some
way be allowed to continue to function as judge until his constitutional
tenure expires is obviously impractical, if only because we would then have
the absurd spectacle of a judiciary with old and new courts functioning
under distinct set-ups, such as a district court continuing as such in a region
where the other judges are regional judges or of judges exercising powers
not purely judicial which is offensive to the Constitution. The other
suggestion that the incumbent of the abolished court should be deemed
appointed to the corresponding new court is even worse, since it would
deprive the appointing authority, the president, of the power to make his
own choices and would, furthermore, amount to an appointment by
legislation which is a Constitutional anachronism. more on this point later .
Inasmuch as pursuant to the analysis of the majority of the Members of this
Court, in fact and in law, the structure of judicial system created by Batas
Pambansa 129 is substantially different from that under the Judiciary Act of
1948, as amended, hence the courts now existing are actually being
abolished, why do We have to indulge in any reconciliation or feel bound to
determine whose power, that of the Batasang Pambansa or that of this
Court, should be considered more imperious? It being conceded that the
power to create or establish carries with it the power to abolish, and it is a
legal axiom, or at least a pragmatic reality that the tenure of the holder of
an office must of necessity end when his office no longer exists, as I see it,
be have no alternative than to hold that petitioners' invocation of the
independence of the judiciary principle of the Constitution is unavailing ill
the cases at bar. It is as simple as that. I might hasten to add, in this
connection, that to insist that what Batas Pambansa 129 is doing is just a
renaming and not a substantial and actual modification or alteration of the
present judicial structure or system assuming a close scrutiny might
somehow support such a conclusion, is pure wishful thinking, it being
explicitly and unequivocally provided in the section in question that said
courts are deemed abolished" and further, as if to make it most
unmistakably emphatic, that "the incumbents thereat shall cease to hold
office." Dura les, sed les. As a matter of fact, I cannot conceive of a more
emphatic way of manifesting and conveying the determined legislative
intent about it.
Now, why am I yielding to the above reasoning and conclusion? Why don't I
insist on championing the cause of the independence of the judiciary by
maintaining that the constitutional safeguards thereof I have already
enumerated earlier must be respected in any reorganization ordained by the
parliament My answer is simple. Practically all the Members of the Court
concede that what is contemplated is not only general reorganization but
abolition in other words, not only a rearrangement or remodelling of the
old structure but a total demolition thereof to be followed by the building of
a new and different one. I am practically alone in contemplating a different
view. True, even if I should appear as shouting in the wilderness, I would still
make myself a hero in the eyes of man justices and judges, members of the
bar and concerned discerning citizens, all lovers of the judicial
independence, but understandably, I should not be, as I am not, disposed to
play such a role virtually at the expense not only of my distinguished
colleagues but of the Batasang Pambansa that framed the law and, most of
all, the President who signed and, therefore, sanctioned the Act as it is,
unless I am absolutely sure that my position is formidable, unassailable and
beyond all possible contrary ratiocination, which I am not certain of, as I
shall demonstrate anon.
To start with, the jurisprudence, here and abroad, touching on the question
now before Us cannot be said to be clear and consistent, much less
unshakeable and indubitably definite either way. None of the local
cases 1 relied upon and discussed by the parties and by the Members of the
Court during the deliberations, such as
Borromeo, 2 Ocampo, 3Zandueta, 4 Brillo, 5 etc. can, to my mind, really serve
as reliable pole stars that could lead me to certainty of correctness.
Of course, my instinct and passion for an independent judiciary are
uncompromising and beyond diminution. Indeed, my initial reactions,
publicly known, about Batas Pambansa 129 explaining academically its
apparent tendency to invade the areas of authority of the Supreme Court,
not to speak of its dangerously impairing the independence of the judiciary,
must have, I imagine, created the impression that I would vote to declare
the law unconstitutional. But, during the deliberations of the Court, the
combined wisdom of my learned colleagues was something I could not
discount or just brush aside. Pondering and thinking deeper about all
relevant factors, I have come to the conviction that at least on this day and
hour there are justifiable grounds to uphold the Act, if only to try how it will
operate so that thereby the people may see that We are one with the
President and the Batasan in taking what appear to be immediate steps
needed to relieve the people from a fast spreading cancer in the judiciary of
our country.
Besides, the Philippines has somehow not yet returned to complete
normalcy The improved national discipline so evident during the earlier days
of martial law, has declined at a quite discernible degree. Different sectors of
society are demanding urgent reforms in their respective field And about the
most vehement and persistent, loud and clear, among their gripes, which as
a matter of fact is common to all of them is that about the deterioration in
the quality of performance of the judges manning our courts and the slow
and dragging pace of pending judicial proceedings. Strictly speaking, this is,
to be sure, something that may not necessarily be related to lack of
independence of the judiciary. It has more to do with the ineptness and/or
corruption among and corruptibility of the men sitting in the courts in some
parts of the country And what is worse, while in the communities concerned
the malady is known to factually exist and is actually graver and
widespread, very few, if any individuals or even associations and organized
groups, truly incensed and anxious to be of help, have the courage and
possess the requisite legal evidence to come out and file the corresponding
charges with the Supreme Court, And I am not vet referring to similar
situations that are not quite openly known but nevertheless just as
deleterious. On the other hand, if all these intolerable instances should
actually be formally brought to the Supreme Court, it would be humanly
impossible for the Court to dispose of them with desirable dispatch, what
with the thousands of other cases it has to attend to and the rather
cumbersome strict requirements of procedural due process it has to observe
in each and every such administrative case all of which are time consulting.
Verily, under the foregoing circumstances, it may be said that there is
justification for the patience of the people about the possibility of early
eradication of this disease or evil in our judiciary pictured above to be
nearing the breaking point.
Withal, we must bear in mind that judicial reorganization becomes urgent
and inevitable not alone because of structural inadequacies of the system or
of the cumbersomeness and technicality-peppered and dragging procedural
rules in force, but also when it becomes evident that a good number of
those occupying positions in the judiciary, make a mockery of justice and
take advantage of their office for selfish personal ends and yet, as already
explained, those in authority cannot expeditiously cope with the situation
under existing laws and rules. It is my personal assessment of the present
situation in our judiciary that its reorganization has to be of necessity twopronged, as I have just indicated, for the most Ideal judicial system with the
most perfect procedural rules cannot satisfy the people and the interests of
justice unless the men who hold positions therein possess the character,
competence and sense of loyalty that can guarantee their devotion to duty
and absolute impartiality, nay, impregnability to an temptations of graft and
corruption, including the usual importunings and the fearsome albeit
improper pressures of the powers that be. I am certain that the Filipino
people feel happy that Batas Pambansa 129 encompasses both of these
objectives, which indeed are aligned with the foundation of the principle of
independence of the judiciary.
The above premises considered, I have decided to tackle our problem from
the viewpoint of the unusual situation in which our judiciary is presently
perilously situated. Needless to say, to all of us, the Members of the Court,
the constitutional guarantees of security of tenure and removal only by the
Supreme Court, among others, against impairment of the independence of
the judiciary, which is one of the bedrock's and, therefore, of the essence in
any "democracy under a regime of justice, peace, liberty and equality
(Preamble of the 1973 Constitution), are priceless and should be defended,
most of all by the Supreme Court, with all the wisdom and courage God has
individually endowed to each of Us. Withal, we are all conscious of the fact
that those safeguards have never been intended to place the person of the
judge in a singular position of privilege and untouchability, but rather, that
they are essentially part and parcel of what is required of an independent
judiciary where judges can decide cases and do justice to everyone before
them ruat caelum. However, We find Ourselves face to face with a situation,
in our judiciary which is of emergency proportions and to insist on
Batas Pambansa 129 has precisely opened our eyes to how, despite doubts
and misgivings, the Constitution can be so construed as to make it possible
for those in authority to answer the clamor of the people for an upright
judiciary and overcome constitutional roadblocks more apparent than real.
To those justices, judges, members of the bar and concerned citizens whose
eyes may be dimming with tears of disappointment and disenchantment
because of the stand I have chosen to adopt in these cases, may I try to
assuage them by joining their fervent prayers that some other day,
hopefully in the near future, Divine Providence may dictate to another
constitutional convention to write the guarantees of judicial independence
with ink of deeper hue and words that are definite, clear, unambiguous and
unequivocal, in drawing the line of demarcation between the Parliament and
the Judiciary in the manner that in His Infinite wisdom would most promote
genuine and impartial justice for our people, free, not only from graft,
corruption, ineptness and incompetence but even from the tentacles of
interference and insiduous influence of the political powers that be.
Presently, I am constrained from going along with any other view than that
the Constitution allows abolition of existing courts even if the effect has to
be the elimination of any incumbent judge and the consequent cutting of his
constitutional tenure of office.
I cannot close this concurrence without referring to the apprehensions in
some quarters about the choice that will ultimately be made of those who
will be eased out of the judiciary in the course of the implementation of
Batas Pambansa 129. By this decision, the Court has in factual effect albeit
not in constitutional conception yielded generally to the Batasang
Pambansa, and more specifically to the President, its own constitutionally
conferred power of removal of judges. Section 44 of the Batasan's Act
declares that all of them shall be deemed to have ceased to hold office,
leaving it to the President to appoint those whom he may see fit to occupy
the new courts. Thus, those who will not be appointed can be considered as
"ceasing to hold their respective offices", or, as others would say they would
be in fact removed. How the President will make his choices is beyond Our
power to control. But even if some may be eased out even without being
duly informed of the reason therefor, much less being given the opportunity
to be heard the past actuations of the President on all matters of deep public
interest shouted serve as sufficient assurance that when lie ultimately acts,
he will faithfully adhere to his solemn oath "to do justice to every man
hence, lie will equip himself first with the fullest reliable information before
acts. This is not only my individual faith founded on my personal
acquaintance with the character and sterling qualities of President Ferdinand
E. Marcos. I dare say this is the faith of the nation in a man who has led it
successfully through crises and emergencies, with justice to all, with malice
towards none. I am certain, the President will deal with each and every
individual to be affected by this reorganization with the best light that God
will give him every moment he acts in each individual case as it comes for
his decision
ion, I must also reckon with and rely on the ruling that "another guide to the
meaning of a statute is found in the evil which it is designed to remedy, and
for this the court properly looks at contemporaneous events, the situation as
it existed, and as it was pressed upon the attention of the legislative body." 2
I have no doubt in my mind that the institutional reforms and changes
envisioned by the law are clearly conducive to the promotion of national
interests. The objectives of the legislation namely: (a) An institutional
restructuring by the creation of an Intermediate Appellate Court, thirteen (I
3) Regional Trial Courts, Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts: (b) A reappointment of jurisdiction geared
towards greater efficiency: (c) A simplification of procedures and (d) The
abolition of the inferior courts created by the Judiciary Act of 1948 and other
statutes, as approved by the Congress of the Philippines 3 are undoubtedly
intended to improve the regime of justice and thereby enhance public good
and order. Indeed, the purpose of the Act as further stated in the
Explanatory Note, which is "to embody reforms in the structure, organization
and composition of the Judiciary, with the aim of improving the
administration of justice, of decongesting judicial dockets, and coping with
the more complex problems on the present and forseeable future cannot but
"promote the welfare of society, since that is the final cause of law. 4
Hence, from the standpoint of The general utility and functional value of the
Judiciary Reorganization Act, there should be no difficulty, doubt or disbelief
in its legality and constitutionality. That there are ills and evils plaguing the
judicial system is undeniable. The notorious and scandalous congestion of
court dockets as too well-known to be ignored as are the causes which
create and produce such anomaly. Evident is the need to look for devices
and measures that are more practical, workable and economical. 5
From the figures alone (301,497 pending cases in 1976; 351, 943 in 1977;
404, 686 in 1978; 426, 911 in 1979; 441, 332 in 1980; and 450, 063 as of
February 3, 1982) 6 the congested character of court dockets rising year
after year is staggering and enormous, looming like a legal monster.
But greater than the need to dispense justice speedily and promptly is the
necessity to have Justices and Judges who are fair and impartial, honest and
incorruptible, competent and efficient. The general clamor that the prestige
of the Judiciary today has deteriorated and degenerated to the lowest ebb in
public estimation is not without factual basis. Records in the Supreme Court
attest to the unfitness and incompetence, corruption and immorality of
many dispensers of justice. According to the compiled data, the total
number of Justices and Judges against whom administrative charges have
been filed for various offenses, misconduct, venalities and other
irregularities reaches 322. Of this total, 8 are Justices of the Court of
Appeals, 119 CFI Judges, 2 Criminal Circuit Judges, 8 CAR Judges, 1 Juvenile
& Domestic Relations Court Judge, 38 City Judges, and 146 Municipal Judges.
The Supreme Court has found 102 of them guilty and punished them with
either suspension, admonition, reprimand or fine. The number includes 1 CA
Justice, 35 CFI Judges, 1 CCC Judge, 3 CAR Judges, 1 JDRC Judge, 9 City
Judges and 53 Municipal Judges.
Seventeen (17) Judges have been ordered dismissed and separated from the
service. And these are 3 CFI, 1 CAR, 1 City Judge and 12 Municipal Judges.
Going over these administrative proceedings, it took an average of two-year
period from the filing of the charge to the dismissal of the respondent. In one
case, the proceedings were terminated after seven years. How long the
pending administrative cases will be disposed of, only time will tell as an
increasing number of administrative cases are being filed by victims of
judicial misconduct, abuse and arbitrariness.
Excepting those who have been punished and dismissed from the service,
there are many who have been castigated and censured in final judgments
of the Supreme Court upon appeal or review of the decisions, orders and
other acts of the respondent courts, Justices and Judges. To cite a few cases,
Our decisions have categorically pronounced respondents' actuations, thus:
"deplorable, giving no credit to the Judiciary" 7; applicable rules. The whole
proceedings looked no more than a pre-arranged compromise between the
accused and the Judge to flaunt the law and every norm of propriety and
procedure" 8; "there was a deliberate failure of respondent Judge to respect
what is so clearly provided in the Rules of Court" 9; "It is unfortunate that
respondent Judge failed to acquaint himself with, 01' misinterpreted, those
controlling provisions and doctrines" 10; "The failure of the respondent
Municipal Judge to yield obedience to authoritative decisions of the Supreme
Court and of respondent Court of First Instance Judge and his deplorable
insistence on procedural technicalities was called down in L-49828, July 25,
1981. For peremptorily dismissing the third party complaint on the ground
that the motion to dismiss was 'well-taken' and respondent Judge did not
elaborate, the Court remarked: "May his tribe vanish." 11 In one case, We
noted "There is here so something unusual, but far from palliating the
gravity of the error incurred, it merely exacerbated it. ... it did render the
due process requirement nugatory, for instead of a fair and impartial trial,
there was an Idle form, a useless ceremony." 12
It is dishonorable enough to be publicly and officially rebuked but to allow
these Judges and their ilk to remain and continue to preside in their
courtrooms is a disgrace to the Judiciary. It is to be deplored that the
Supreme Court has not found time to exercise its power and authority in the
premises, for no charges or proceedings have been instituted against them.
We have a list of these crooked Judges whose actuations have been found to
be patiently wrong and manifestly in-defeasible. There ought to be no
objection or compunction in weeding them out from the service. If they are
not booted out now, it will take from here to eternity to clean this Augean
stable.
Candidly, one reason for writing this concurring opinion is to call attention to
these evils, abuses and wrongs which are surreptitiously but surely
destroying the trust and faith of the people in the integrity of the entire
Judiciary. Some members of the Court felt that these revelations would be
like washing dirty linen in public. But these facts are of public and official
record nay court cases, and sooner or later, Truth will come out.
In the light of these known evils and infirmities of the judiciary system, it
would be absurd and unreasonable to claim that the legislators did not act
upon them in good faith and honesty of purpose and with legitimate ends. It
is presumed that official duty has been regularly performed. 13 The
presumption of regularity is not confined to the acts of the individual officers
but also applies to the acts of boards, such as administrative board or
bodies, and to acts of legislative bodies. 14 Good faith is always to be
presumed in the absence of proof to the contrary, of which there is none in
the case at bar. It could not be otherwise if We are to accord as We must, full
faith and credit to the lawmakers' deep sense of public service and the
judicious exercise of their high office as the duly-elected representatives of
the people.
It is conceded that the abolition of an office is legal if attendant with good
faith. 15 The question of good faith then is the crux of the conflict at bar.
Good faith in the enactment of the law does not refer to the wisdom of the
measure, the propriety of the Act, or to its expediency. The questions raised
by petitioners and amicus curiae for their cause, viz: Why abolish all the
courts Why legislate out the judges Why not amend the Rules of Court only
Is abolition of all courts the proper remedy to weed out corrupt and misfits in
our Judiciary? may not be inquired into by Us. "It is not the province of the
courts to supervise legislation and keep it within the bounds of propriety and
common sense. That is primarily and exclusively a legislative
concern." 16 The Courts "are not supposed to override legitimate policy
and ... never inquire into the wisdom of the law." 17 Chief Justice Fernando
who penned the Morfe decision, writes that while "(i)t is thus settled, to
paraphrase Chief Justice Concepcion in Gonzales v. Commission on
Elections, that only congressional power or competence, not the wisdom of
the action taken, may be the basis for declaring a statute invalid," 18 he adds
that it is "useful to recall what was so clearly stated by Laurel that 'the
Judiciary in the determination of actual cases and controversies must reflect
the wisdom and justice of the people as expressed through their
representatives in the executive and legislative departments of the
government.'" 19In any case, petitioners have not shown an iota of proof of
bad faith. There is no factual foundation of bad faith on record. And I do not
consider the statement in the sponsorship speech for Cabinet Bill No. 42 of
Minister of Justice Ricardo J. Puno that the Bill would be a more efficient
vehicle of "eliminating incompetent and unfit Judges as indicative of
impermissible legislative motive. 20
It may be true that while the remedy or solution formulated by the
legislation will eradicate hopefully or at least minimize the evils and ills that
infect and pester the judicial body, it will result in the actual removal of the
Justices of the Court of Appeals and Judges of the lower courts. It is also true
that whether it is termed abolition of office or removal from office, the endresult is the same termination of the services of these incumbents.
Indeed, the law may be harsh, but that is the law. Dura lex sed lex.
The Justices and Judges directly affected by the law, being lawyers, should
know or are expected to know the nature and concept of a public office. It is
created for the purpose of effecting the ends for which government has
been instituted, which are for the common good, and not the profit, honor or
private interest of any one man, family or class of men. In our form of
government, it is fundamental that public offices are public trust, and that
the person to be appointed should be selected solely with a view to the
public welfare. 21 In the last analysis, a public office is a privilege in the gift
of the State. 22
There is no such thing as a vested interest or an estate in an office, or even
an absolute right to hold office. Excepting 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. When an office is
created by the Constitution, it cannot be abolished by the legislature, but
when created by the State under the authority of the Constitution, it may be
abolished by statute and the incumbent deprived of his office. 23 Acceptance
of a judicial appointment must be deemed as adherence to the rule that
"when the court is abolished, any unexpired term is abolished also. The
Judge of such a court takes office with that encumbrance and
knowledge." 24 "The Judge's right to his full term and his full salary are not
dependent alone upon his good conduct, but also upon the contingency that
the legislature may for the public good, in ordaining and establishing the
courts, from time to time consider his office unnecessary and abolish it." 25
The removal from office of the incumbent then is merely incidental to the
valid act of abolition of the office as demanded by the superior and
paramount interest of the people. The bad and the crooked Judges must be
removed. The good and the straight, sober Judges should be reappointed but
that is the sole power and prerogative of the President who, I am certain, will
act according to the best interest of the nation and in accordance with his
solemn oath of office "to preserve and defend its Constitution, execute its
laws, do justice to everyone ... " There and then the proper balance between
the desire to preserve private interest and the desideratum of promoting the
public good shall have been struck. 26
The Supreme Court has been called the conscience of the Constitution. It
may be the last bulwark of constitutional government. 27 It Must, however,
be remembered "that legislatures are ultimate guardians of the liberties and
welfare of the people in quite as great a degree as courts." 28 The
responsibility of upholding the Constitution rests not on the courts alone but
on the legislatures as well. It adheres, therefore, to the well-settled principle
that "all reasonable doubts should be resolved in favor of the
constitutionality of a statute" for which reason it will not set aside a law as
violative of the Constitution "except in a clear case." 29
of the questioned legislation is not congruent with the basic conclusion that
it is not unconstitutional.
less interfere with. By this secondary position it has to the primary power of
the legislature to create courts, the security of tenure given to the
incumbents should not be a legal impediment to the exercise of that basic
power of creating the statutory courts which, by necessary implication,
includes the power to abolish them in order to create new ones. This primary
legislative power is a continuing one, and the resultant right of security of
tenure of those appointed to said courts could not bring about the
exhaustion of that power. Unquestionably, the legislature can repeal its own
laws, and that power can never be exhausted without, as a consequence,
violating a fundamental precept of constitutional and representative
government that no irrepealable laws shall be passed.
If the creation of courts is a legislative prerogative their abolition is,
therefore, a matter of legislative intent. it involves the exercise of legislative
power, an act of legislation which generally concerns policy in the formation
of which the courts have no say Initially, when the legislature creates the
courts, it suffers from no limitation arising from the necessity or respecting
the security of tenure of judges who are not yea there. This inherent
character of fullness and plenitude of the power to create and abolish courts
does not change when that same power is once more exercised thereafter,
as the need therefor is felt. Which only goes to show that when done in good
faith and motivated solely by the good and the well-being of the people, the
exercise of the power is not meant to be restricted, curtailed, much less
exhausted by the so-called judicial security of tenure.
The passage of the Judiciary Reorganization Act of 1980 is no more than the
exercise of the power vested by the Constitution on the legislative body of
the Republic as described above. That power carries with it the duty and
responsibility of providing the people with the most effective and efficient
system of administration of justice. This is by far of more imperative and
transcedental importance than the security of tenure of judges which,
admittedly, is one of the factors that would conduce to independence of the
judiciary but first of all, a good, efficient and effective judiciary. A judiciary
wanting in these basic qualities does not deserve the independence that is
meant only for a judiciary that can serve best the interest and welfare of the
people which is the most primordial and paramount consideration, not a
judiciary in which the people's faith has been eroded, a condition which the
security of tenure, in some instances, may even be contributory.
In enacting the Judiciary Reorganization Act of 1980, the legislature is
presumed to have been motivated by no other objective than to provide the
people the kind of judicial machinery that would best serve their interest and
welfare, in its belief that the present machinery is falling short of that
measure of public service. It should, likewise, be presumed that it has been
led to this low estimate of the utility and effectiveness of the present set-up
of the judiciary after informing itself, with the facilities at its command, such
as the power of legislative investigation, of the actual condition of the
courts, particularly as to whether they continue to enjoy the trust, faith and
confidence of the public, and what the cause or causes are of their erosion, if
not loss, as is the keenly perceptible feeling of the people in general.
the existence of the office, not when it is abolished. Admittedly, as has been
held, abolition of office for no reason related to public welfare or for the good
of the service, let alone when done in bad faith, amounts to an unlawful
removal. 2 The abolition of the courts as declared in the Act as a result of a
reorganization of the judiciary, as the Title of the law curtly but announces,
can by no means, from any viewpoint, be so branded. And whether by said
reorganization, the present would be deemed abolished, as the law
expresses such an unmistakable intent, the matter is one for the sole and
exclusive determination of the legislature. It rests entirely on its discretion
whether by the nature and extent of the changes it has introduced, it has
done enough to consider them abolished. To give the Supreme Court the
power to determine the extent or nature of the changes as to their structure,
distribution and jurisdiction, before the clear intent to abolish them, or to
declare them so abolished, is given effect, would be to allow undue
interference in the function of legislation. This would be contrary to the
primary duty of courts precisely to give effect to the legislative intent as
expressed in the law or as my be discovered therefrom.
From the above observation, it would be futile to insist that the present
courts would not effectively be abolished by the Act in question. it might be
to arrogate power for Us to say that the changes the law brings to the
present judicial system, do not suffice for this Court to give effect to the
clear intent of the legislative body. Where would the agrarian courts, the
circuit criminal courts, the JDRC's be in the judicial structure as envisioned
by the law? Are they not abolished by merger with the regional trial courts,
which by such merger, and by the other changes introduced by the law,
would make said courts different from the present Courts of First Instance
which, as a consequence, may then be considered abolished Integrated as
the present courts are supposed to be, changes somewhere in the judicial
machinery would necessarily affect the entire system.
The fact that the Supreme Court may specially assign courts to function as
the special courts just mentioned, does not mean that the changes wrought
are only superficial or "cosmetic" as this term has been used so often in the
oral argument. Without the new law, these courts will remain fixed and
permanent where they are at present. Yet in the course of time, the need for
their independent existence may disappear, or that by changed conditions,
where they are needed at present at a certain place, the need for them may
be somewhere else in later years, if maximum benefit at the least expense is
to be achieved, as always should be a most desirable goal and objective of
government.
Demonstrably then, the abolition of the courts is a matter of legislative
intent into which no judicial inquiry is proper, except perhaps if they intent is
so palpably tainted with constitutional repugnancy, which is not so in the
instant case. We have, therefore, no occasion, as earlier intimated, to speak
of removal of judges when the reorganization of the judiciary would result in
the abolition of the courts other than the Supreme Court and the Court of
Tax Appeals. Hence, the provision of the Constitution giving to the Supreme
Court power to dismiss a judge by a vote of eight justices does not come
into the vortex of the instant controversy. Its possible violation by the
assailed statute cannot happen, and may, therefore, not constitute an
argument against the constitutionality of the law.
Former Justice Barrera, in a speech before the Philippine Bar
Association, 3 impliedly indorsed the judicial revamp when he enumerated
the qualities of a good judge that the appointing power should consider in
making new appointments to the judiciary upon its reorganization pursuant
to the questioned Act. The words of the eminent jurist may well reflect the
favorable reaction of the public in general to what the Act aim to achieve in
the name of good and clean government. The present judicial incumbents,
who have not in any way, by their acts and behavior while in office,
tarnished the good image that the judiciary should have, therefore, have no
cause for apprehension that what they are entitled to under the Constitution
by way of security of tenure wig be denied them, considering the publicly
known aim and purpose of the massive judicial revamp, specially as
cherished with deep concern by the President who initiated the move when
he created the Judiciary Reorganization Committee to recommend needed
and appropriate judicial reforms.
If the only obstacle to a verdict in favor of constitutionality of the law is its
possible effect of impairing the security of tenure of the incumbents, We
may have the following facts to consider:
1. Under the 1973 Constitution all incumbent judges and justices may
continue in office until replaced or reappointed by the President. As to those
judicial officials, no security of tenure, in the traditional concept, attaches to
their incumbency which is, in a real sense, only a holdover tenure. How the
President has exercised this immense power with admirable restraint should
serve as the strongest guarantee of how justice and fairness will be his sole
guide in implementing the law.
2. As to the rest of the incumbents, they are all appointees of Our present
President, and he should feel concerned more than anyone else to protect
whatever rights they may rightfully claim to maintain their official standing
and integrity. They need have no fear of being ignored for no reason at all,
much less for mere spirit of vindictiveness or lack of nobility of heart.
From the foregoing, it would become apparent that only in the
implementation of the law may there possibly be a taint of constitutional
repugnancy as when a judge of acknowledged honesty, industry and
competence is separated, because an act of arbitrariness would thereby be
committed, but the abolition of the courts as decreed by the law is not by
itself or per se unconstitutional.
Consequently, the law, the result of serious and concerned study by a highly
competent committee, deserves to be given a chance to prove its worth in
the way of improving the judiciary. If in its implementation, any one, if at all,
feels aggrieved, he can always seek judicial redress, if he can make out a
be declared abolished. For the law clearly continues their existence until all
the new courts have been filled up with new appointments, or at least such
number as would be equal to the number of actual incumbents, and they are
the very courts to which they may lay claim to the right to continue therein,
so that the status of each and everyone of them has thereby been made
certain. Only then, upon the actual abolition of the courts, may there
possibly be a violation of the security of tenure, as contented, that would
give rise to an "actual controversy" in which the 6 improper party" can be no
other than the judges who feel aggrieved by their non- appointment to the
new courts.
It would, therefore, not be proper to declare the law void at this stage,
before it has even been given a chance to prove its worth, as the legislature
itself and an those who helped by their exhaustive and scholarly study, felt it
to be an urgent necessity, and before any of the proper parties who could
assail its constitutionality would know for a fact, certain and actual, not
merely probable or hypothetical, that they have a right violated by what
they could possibly contend to be an unconstitutional enforcement of the
law, not by a law that is unconstitutional unto itself.
I am, therefore, for giving the law a chance to be put into application so as
not to douse great popular expectations for the courts to regain their highest
level of efficiency had reputation for probity. Inevitably, this is to be so since
only when the law is fully implemented will all the courts affected be
declared abolished, undoubtedly to avoid an interregnum when the country
is without any court, except the Supreme Court, the Court of Tax Appeals
and the Sandigan. Only then will it be known whether an actual controversy
would arise because any of the incumbents have been left out in the
restructured judiciary.
There would then be also a proper party to assail the constitutionality of the
law, conformably to the conditions requisite for the exercise of the power of
judicial inquiry which by their stringent character, together with the
constitutional prescription of a comparatively higher vote to declare a law
unconstitutional, reveal a salutary principle of government that a law should,
by all reasonable intendment and feasible means, be saved from the doom
of unconstitutionality, the rule corollary thereto being that if a law is
susceptible to two interpretations, one of which would make it constitutional,
that interpretation should be adopted that will not kill the law.
It is to adhere to the above principles that the submission is made herein,
that while in the implementation of the law, constitutional repugnancy may
not entirely be ruled out, a categorical ruling hereon not being necessary or
desirable at the moment, the law itself is definitely not
unconstitutional. 4 Any of the incumbent judges who feel injured after the
law shall have been implemented has adequate remedy in law, with full
relief as would be proper. But surely, the benefits envisioned by the law in
the discharge of one of the basic duties of government to the people the
administration of justice should not be sacrificed, as it would be, if the law
is, as sought in the present petition, declared void right now, on the claim of
a few of being allegedly denied a right, at best of doubtful character, for the
claim would seem to rest on an unsupportable theory that they have a
vested right to a public office.
Just one more point. The law in question is not self-executing in the sense
that upon its effectivity, certain judges and justices cease to be so by direct
action of the law. This is what distinguishes the Act in question from R.A. No.
1186 involved in the Ocampo case, 5 which by its direct action, no act of
implementation being necessary, all the judges whose positions were
abolished, automatically ceased as such. The Act in question, therefore, is
not as exposed to the same vulnerability to constitutional attack as R.A. No.
1186 was. Yet by the operation of the Constitution with its wise provision on
how a law may be declared unconstitutional, R.A. No. 1186 stood the test for
it to be enforced to the fullness of its intent, which was, as in the law under
consideration, Identified with public interest and general welfare, through a
more efficient and effective judicial system as the Judiciary Reorganization
Act of 1980 seeks to establish.
Hence, the constitutionality of the law should not be assailed, and the law
itself, striken down, on the ground that some judges or justices may be
removed or separated in violation of their security of tenure. The law does
not directly operate with Chat effect. It is in how the law would be
implemented that this feared eventuality may or may not occur. We would
then be killing the law on a mere speculation if We do so at this stage. This
would be an injudicious act done in reckless disregard of the safeguards built
around a law to defend it when its constitutionality is attacked; first the
presumption that a law is constitutional; second when a law is susceptible to
two interpretations one that would make it constitutional, the other,
unconstitutional, the former should be adopted; and third, the Constitution
itself which ordains that a law may not be declared unconstitutional except
on the vote of at least ten (10) members of the Supreme Court, more than
what is required for an ordinary decision of the Court en banc. This is not to
mention the stringent requisites for the exercise of the power of judicial
inquiry as already adverted to, all designed to save the law from the dire
fate of unconstitutionality.
To the writer, the question before this Court is a simple matter of choosing
between protecting some judges from possible separation, as the
implementation of the law to achieve its primary purpose of improving the
judiciary may have to result in, or serving the interest of the entire society
through an honest, efficient and effective judiciary. For, it is unthinkable that
what is for the good of the people as a whole could have been meant by the
Constitution to be sacrificed for the sake of only the few. The greatest good
for the greatest number is an unwritten rule, more firm and enduring than
any of the postulates spread in our written Constitution. This, I might say, is
the main theme of this separate opinion, otherwise expressed in the wellknown and time-honored maxim "Salus populi establish suprema lex."
those who have abused the prerogatives of their judicial position knowing
that they are untouchables by virtue of the permanence of their tenure
b) A distinction should be made between tenure of Judges and tenure of
Courts. Section 1 heretofore mentioned refers to the "Judiciary" as a
fundamental department of Government. Section 7 quoted above refers to
the tenure of office of "individual" Judges (inclusive of Justices of inferior
Courts that is to say, tenure of office is a matter concerning the individual
Judge. This "individuality" character of Section 7 is supported by the clause
that the Supreme Court has the power to discipline individual judges of
inferior Courts.
A legislature is not bound to give security of tenure to Courts. Courts can be
abolished. In fact, the entire judicial system can be changed. If that system
can no longer admit of change, woe to the wheels of progress and the
imperatives of growth in the development of the Judiciary. To hold that
tenure of Judges is superior to the legislative power to reorganize is to
render impotent the exercise of that power.
It may even be stated that, under Section 7, supra, Judges are entailed to
their Courts, from which they cannot be separated before retirement age
except as a disciplinary action for bad behavior. Under Section 1, Courts are
not entailed to their Judges, because the power of the legislative to establish
inferior Courts presupposes the power to abolish those Courts. If an inferior
Court is abolished, the Judge presiding that Court will necessarily have to
lose his position because the abolished Court is not entailed to him.
c) The constitutional guarantee of tenure of Judges applies only as their
Courts exist. As long as those Courts exist, the Judges cannot be ousted
without just cause; that is the extent of the constitutional provision relative
to security of tenure of Judges. Upon declaration of the completion of the
reorganization as provided for in the Reorganization Act, the affected Courts
"shall be deemed automatically abolished There being no Courts, there are
no offices for which tenure of Judges may be claimed. By the abolition of
those offices, the rights to them are necessarily extinguished (Manalang vs.
Quitoriano, 94 Phil. 903 [1954]).
2. I am satisfied that the challenged law was enacted by the Batasang
Pambansa in response to an urgent and pressing public need and not for the
purpose of affecting adversely the security of tenure of all Judges or
legislating them out to the detriment of judicial independence. It should riot
be said of the Batasang Pambansa that its power of abolition of Courts has
been used to disguise an unconstitutional and evil purpose to defeat the
security of tenure of Judges. The Judiciary Reorganization Act of 1981
sufficiently complies with the bona fide rule in the abolition of public office,
as clearly explained in the main opinion. Besides, every presumption of good
faith in its actuations must be accorded a coordinate and coequal branch of
government, supreme within the limits of its own sphere, until that
presumption is clearly overcome. There is no showing that the
on Public Officers and Election Law, p. 112, 1970 ed.). Besides, it bears
stressing that there is no removal from office but abolition of the office itself.
5. The questioned statute is in keeping with major reforms in other
departments of government. "The thrust is on development." It is "the first
major reorganization after four generations." It does not provide for a
piecemeal change, which could be ineffective. It goes to the roots and does
not just scratch the surface of our judicial system. Its main objectives are an
improved administration of justice, the "attainment of more efficiency in the
disposal of cases, a reallocation of jurisdiction, and a revision of procedures
which do not tend to the proper meting out of justice." These aims are policy
matters of necessity in the pursuit of developmental goals within the
Judiciary.
6. The Reorganization Act reorganizing the entire judicial system excluding
the Supreme Court, which is the only constitutional Court, and the
Sandiganbayan. It envisages institutional reforms in the Philippine judiciary.
It does not simply change the names of the Courts. The facts herein are
dissimilar from those in Brillo vs. Enage (94 Phil. 732 [1954]) where the
position of Justice of the Peace, although ostensibly abolished, was merely
changed to Municipal Judge after the municipality of Tacloban was converted
into a city with its own charter.
Significant among the institutional changes and procedural reforms are:
The Intermediate Appellate Court
This Court is now constituted into ten (10) divisions instead of fifteen (15),
five members composing each division, and a majority vote of three
members being needed for a decision. This obviates the cumbersome
procedure, in case of dissent, of assigning two other members to compose a
"division of five". It also allows flexibility in that any three members of a
division, arriving at unanimity, can promulgate a decision. Now provided for
is specialization into four (4) Civil Cases Divisions, two (2) Criminal Cases
Divisions and four (4) Special Cases Divisions. The specialization is expected
to contribute to the expeditious disposal of cases. The Court has been given
original jurisdiction to issue Writs of mandamus, prohibition, certiorari,
habeas corpus, quo warranto and auxiliary writs or processes whether or not
in aid of its appellate jurisdiction. This would undoubtedly ease the burden of
the Supreme Court where numerous such cases are filed daily.
It has exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of quasi-judicial agencies, instrumentalities,
boards or commissions, except those falling within the exclusive appellate
jurisdiction of the Supreme Court in accordance with the Constitution.
The Intermediate Appellate Court would now have the power to try cases
and conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original
and appellate jurisdiction, including the power to grant and conduct new
trials or further proceedings (Sec. 9). This does away with the delays
attendant to the remand of cases to the lower trial Courts.
Regional Trial Courts
There are now thirteen (13) Judicial Regions, the same as the present
administrative and Batasang Pambansa Regions, instead of sixteen (16)
Judicial Districts.
Specialized Courts are integrated into the Regional Trial Courts. Thus,
Regional Trial Courts would try all cases within its jurisdiction unless special
cases are assigned to them, in which case, they remain as Branches of
Regional Trial Courts. Special procedures and technical rules governing
special Courts will continue to remain applicable in Branches assigned those
special cases.
Judges of the courts herein created for each five years of continuous,
efficient, and meritorious service rendered in the Judiciary, Provided that, in
no case shall the total salary of each Justice or Judge concerned, after this
longevity pay is added, exceed the salary of the Justice or Judge next in
rank." Thus, Justices and Judges who may not reach the top, where
unfortunately there is not enough room for all, may have the satisfaction of
at least approximating the salary scale of those above him depending on his
length of service,
8. But while the law itself as written is constitutional, the manner in which it
will be administered should not be tainted with unconstitutionality (Myles
Salt Co. vs. Board of Commrs., 239 US 478, 60 L. Ed. 392, 36 Sct 204). To
obviate the possibility of an unconstitutional exercise of power the following
safeguards are recommended and/or expected to be undertaken:
a) The President can be expected to indicate a reasonable time frame for the
completion of the reorganization provided for in the Act and the issuance of
the corresponding implementing Order.
b) Appointments and their effectivity should be simultaneous with, or as
close as possible, to the declaration by the President of the completion of
the reorganization under Section 44 to avoid any detriment to the smooth
and continuous functioning of the judicial machinery.
c) The services of those not separated should be deemed uninterrupted, as
recommended by the Committee on Judicial Reorganization (Article XI of its
Report).
9. For the speedy implementation of the law, the Supreme Court can be
expected to submit to the President within thirty (30) days from the date of
finality of its Decision the staffing pattern for all Courts required by Section
43.
I am constrained to disagree with the suggestion of one of the amici
curiae that the staffing pattern be made to include the names of Judges. The
staffing pattern for Judges is already clearly and explicitly provided in the
law itself which enumerates the various Judges and Justices in their
hierarchical order. Furthermore, to include the superior positions of Judges
would depart from the traditional concept of a staffing pattern, which refers
more to personnel organization and corresponding salaries of inferior
employees. It is also constitutionally objectionable in that it would interfere
with the prerogative of appointment intrinsically executive in nature
(Guevara vs. Inocentes, 16 SCRA 379 [1966]; Government of the Philippines
vs. Springer, 50 Phil. 259 [1927]). The President may not be deprived of, nor
be limited in, the full use of his discretion in the appointment of persons to
any public office. Nothing should so trench upon executive choice as to be,
in effect, judicial designation.
10. A word of explanation. If I had resolved not to inhibit myself in this case
upon motion filed by petitioners, it was because the Committee on Judicial
Reorganization, of which I was privileged to be a member, confined its work
to the recommendation of options and guidelines in the task of
reorganization. The Committee had no part whatsoever in the drafting of the
bill nor in the public hearings conducted. In fact, some of its
recommendations like the circuitization or regionalization of the
Intermediate Appellate Court, the appellation of members of the Judiciary,
the confinement of the jurisdiction of the Intermediate Appellate Court
merely to appellate jurisdiction, the adoption of the system found in the
United Kingdom and in Commonwealth countries of having a Court of
general jurisdiction with trial and appellate divisions, were not availed of in
the final Act.
11. Lastly, but by no means the least, I entertain no doubt that reliance can
be placed on the good faith of the President that all the deserving, upon
considerations of "efficiency, integrity, length of service and other relevant
factors shall be appointed to a strengthened and revitalized judicial system
in the interest of public service; that appointments will not be unduly
delayed; and that appointees will be evaluated thoroughly to ensure quality
and impartiality in the men and women who will keep vigil over our judicial
ramparts.
The implementation of the law will entail appointments to the new courts.
The power of appointment is the exclusive prerogative of the President. The
implementation of the law should be left exclusively to the wisdom,
patriotism and statesmanship of the President.
As the lawmaking body has the power to create inferior courts and define,
prescribe and apportion their jurisdiction, so it has the power to abolish or
replace them with other courts as long as the act is done in good faith and
not for the purpose of attaining an unconstitutional end. Good faith has thus
become the crucial issue in the case at bar.
Upon an examination of the legislative history of Batas Pambansa 129, as
has been done in the main opinion, it is manifest that actual, not merely
presumed good faith attended its enactment. On this basis, I concur in the
opinion penned by the learned Chief Justice, qualified only by the following
observations:
1. Executive consultation with the Supreme Court. I believe the President
is under no obligation to consult with the Supreme Court; and the Supreme
Court as such is not called upon to give legal advice to the President.
Indeed, as the Supreme Court itself has said, it cannot give advisory
opinions (Bacolod Murcia Planters' Asso., Inc. vs. Bacolod Murcia milling
Co., 30 SCRA 67; NWSA vs. Court of Industrial Relations, 90 SCRA 629) even
to the President.
In the drafting of the present Constitution, there was an attempt to vest the
Supreme Court with the function of giving advisory opinions. The framers of
the Constitution, however, did not see fit to adopt the proposal.
If the President should consult the Supreme Court on the implementation of
Batas Pambansa 129 and the Supreme Court should give its advice (leaving
aside the question of procedure), I believe the President would be free to
follow or disregard the advice; but, in either case, there would be no
guarantee that the implementing action would be upheld in one case or
stricken down in the other.
As pointed out in the main opinion, the legislature has provided ample
standards or guidelines for the implementation of the delegated power,
which makes the delegation inoffensive. I would like to add however some
observations on the doctrine of undue delegation of legislative power.
Under the old Constitution, when the abiding rule was separation of
legislative and executive powers, there was good reason to maintain the
doctrine of non-delegation of legislative power. Otherwise, the principle
of separation of governmental powers could be negated via
unbridled delegation of legislative power. The 1973 Constitution has
the Convention evidently could not have permitted the removal of judges
thru re-organization.
Now, if the framers of the 1973 Constitution wished to dispel the strong
doubts, to say the least in the light of the 7 to 4 vote in the Ocampo case
against removal of incumbent judges through legislative action by abolition
of their courts, then they would have so clearly provided for such form of
removal in the 1973 Constitution, but on the contrary as already stated they
ruled out such removal or ouster of judges by legislative action by vesting
exclusively in the Supreme Court the power of discipline and removal of
judges of all inferior courts.
4. This being so, the fundamental point emphasized by former Chief Justice
Bengzon that abolition of the 33 judicial positions in the Ocampo case was
"merely an indirect manner of removing the petitioners-judges" while the
"positions [that] were eliminated . . . were in fact substituted or replaced by
other positions of judges" applies with greater force in the case at bar which
involves an unprecedented total "abolition," thus: "(C)all it reorganization, or
legislation or removal or abolition, this law disregards the constitutional
assurance that these judges, once appointed, shall hold office during good
behavior ... [unless incapacitated and until retirement].
The abolition of their offices was merely an indirect manner of removing
these petitioners. Remember that on June 19, 1954, there were 107 judges
of first instance, district judges, judges at-large and cadastral judges (Rep.
Act 296). After the passage of Republic Act No. 1186 there were 114
positions of judges of first instance. There was no reduction there was
increase in the number of judges, nor in the number of courts. The
positions of Judges-at-Large and Cadastral Judges were eliminated; but they
were in fact substituted or replaced by other positions of judges; or if you
please, there was a mere change of designation from 'Cadastral Judge or
Judge at large to district judge Hence it should be ruled that as their
positions had not been 'abolished' de facto, but actually retained with
another name, these petitioners are entitled to remain in the service. (Brillo
v. Enage, G.R. No. L-7115, March 30, 1954.) For it is not permissible to effect
the removal of one judge thru the expediency of abolishing his office even
as the office with same power is created with another name. (Brillo v. Enage,
Malone v. Williams, 118 tenn. 391, Gibbe's Case 4 A.L.R. p. 211). In this view
of the picture, we believe, Congress could have, and should haveas
suggested by Secretary Tuazon during the hearings in Congress directed in
said Republic Act No. 1186 that 'the present judges-at-large and cadastral
judges shall become district judges presiding such districts as may be fixed
by the President with the consent of the Commission on Appointments or by
the Secretary of Justice, as originally proposed by Senator Laurel in
connection with the same bill. Something similar was done before, and it
would not be objectionable as an encroachment on the President's
prerogative of appointment, because such judges had already been
appointed to the judiciary before the passage of the act, and the provision
may be construed in the light of mere change of official designation plus
increase in salary."
hard put to conjure a case where the Court could speculate on the good or
bad motives behind the enactment of the Act without appearing to be
imprudent and improper and declare that "the legislative power of
reorganization (is) sought to cloak an unconstitutional and evil purpose." The
good faith in the enactment of the challenged Act must needs be granted.
What must be reconciled is the legislative power to abolish courts as implied
from the power to establish them with the express constitutional guaranty of
tenure of the judges which is essential for a free and independent judiciary.
Adherents of the Rule of Law are agreed that indispensable for the
maintenance of the Rule of Law is a free and independent judiciary, sworn to
protect and enforce. it without fear or favor "free, not only from graft,
corruption, ineptness and incompetence but even from the tentacles of
interference and insiduous influence of the political powers that be to quote
again from Justice Barredo's separate concurring opinion. 14 Hence, my
adherence to the 7-member majority opinion of former Chief Justice Bengzon
in the Ocampo case, supra, as restated by the Philippine Association of Law
Professors headed by former Chief Justice Roberto Concepcion that "any
reorganization should at least snow the incumbents of the existing courts to
remain in office [the appropriate counterpart 'new courts'] unless they are
removed for cause."
7. The "judges' broader and stronger guarantees of tenure than ordinary civil
servants" as stressed by former Chief Justice Bengzon in Ms majority opinion
in Ocampo is based on the judiciary's status as a coequal and coordinate
branch of government, whereas the long line of Philippine cases upholding
the legislative power to abolish offices refers to officers or employees in the
executive branch of government and "the underlying consideration must be
borne in mind that Manalang [the aggrieved petitioner] belonged to the
Executive Department and because the President approved the law no
question or encroachment by one branch on the other could be
apprehended or alleged. 15 This is not a matter of personal privilege for the
incumbent judges but as aptly stated by former U.P. Law Dean Irene Cortez
in her memorandum as amicus curiae, "for the judiciary whose
independence is not only eroded but is in grave danger of being completely
destroyed." Dean Cortez aptly stressed that "judicial independence is not a
guarantee intended for the Supreme Court alone, it extends to the entire
court system and is even more vital to the courts at the lowest levels
because there are more of them and they operate closest to the people,"
and "(P)articularly under the present form of modified parliamentary
government with legislative and executive functions overlapping and in
certain areas merging, the judiciary is left to perform the checking function
in the performance of which its independence assumes an even more vital
importance. "
The extensive memoranda filed by Dean Cortez and other amici curiae such
as former Senator Jose W. Diokno who strongly urges the Court to strike
down the Act "to prevent further destruction of judicial independence,"
former Senator Lorenzo Sumulong, president of the Philippine Constitution
Association who advocates for the Court's adoption of the B Bengzon
majority opinion in the Ocampo case so as to abide by "the elementary rule
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 for certiorari,
prohibition andmandamus, with prayer for preliminary mandatory injunction
and/or temporary restraining order, with the Regional Trial Court (RTC) of
Batac, Ilocos Norte, and prayed 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;
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
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]
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 best qualified and
most deserving among the incumbent applicant-employees.
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.
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]
On 20 February 2002, the appellate court rendered a decision reversing and
setting aside the assailed orders of the trial court.
Petitioners went to this Court to assail the decision of the Court of
Appeals, contending that 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,
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 x x. 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 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
Properallowing 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 ofstreamlining the NTA in the
interest of simplicity, economy and efficiency. It is an act well within the
DOTC Secretary may legally and validly decree the reorganization of the
Department, particularly the establishment of DOTC-CAR as the LTFRB
Regional Office at the Cordillera Administrative Region, with the concomitant
transfer and performance of public functions and responsibilities
appurtenant to a regional office of the LTFRB.
Similarly, in the case at bar, the DENR Secretary can validly reorganize
the DENR by ordering the transfer of the DENR XII Regional Offices from
Cotabato City to Koronadal, South Cotabato. The exercise of this authority by
the DENR Secretary, as an alter ego, is presumed to be the acts of the
President for the latter had not expressly repudiated the same.
The trial court should have taken judicial notice of R.A. No. 6734, as
implemented by E.O. No. 429, as legal basis of the Presidents power to
reorganize the executive department, specifically those administrative
regions which did not vote for their inclusion in the ARMM. It is axiomatic
that a court has the mandate to apply relevant statutes and jurisprudence in
determining whether the allegations in a complaint establish a cause of
action. While it focuses on the complaint, a court clearly cannot disregard
decisions material to the proper appreciation of the questions before it. [22] In
resolving the motion to dismiss, the trial court should have taken cognizance
of the official acts of the legislative, executive, and judicial departments
because they are proper subjects of mandatory judicial notice as provided
by Section 1 of Rule 129 of the Rules of Court, to wit:
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. (Emphasis
supplied)
Article XIX, Section 13 of R.A. No. 6734 provides:
SECTION 13. The creation of the Autonomous Region in Muslim Mindanao
shall take effect when approved by a majority of the votes cast by the
constituent units provided in paragraph (2) of Sec. 1 of Article II of this Act in
a plebiscite which shall be held not earlier than ninety (90) days or later
than one hundred twenty (120) days after the approval of this Act: Provided,
That only the provinces and cities voting favorably in such plebiscite shall be
included in the Autonomous Region in Muslim Mindanao. The provinces and
cities which in the plebiscite do not vote for inclusion in the Autonomous
Region shall remain in the existing administrative regions: Provided,
however, That the President may, by administrative determination, merge
the existing regions.
Pursuant to the authority granted by the aforequoted provision, then
President Corazon C. Aquino issued on October 12, 1990 E.O. 429, Providing
for the Reorganization of the Administrative Regions in Mindanao. Section 4
thereof provides:
DECISION
FELIX, J.:
San Miguel Bay, located between the provinces of Camarines Norte and
Camarines Sur, a part of the National waters of the Philippines with an
extension of about 250 square miles and an average depth of approximately
6 fathoms (Otter trawl explorations in Philippine waters p. 21, Exh. B), is
considered as the most important fishing area in the Pacific side of the Bicol
region. Sometime in 1950, trawl 1 operators from Malabon, Navotas and
other places migrated to this region most of them settling at Sabang,
Calabanga, Camarines Sur, for the purpose of using this particular method of
fishing in said bay. On account of the belief of sustenance fishermen that the
operation of this kind of gear caused the depletion of the marine resources
of that area, there arose a general clamor among the majority of the
inhabitants of coastal towns to prohibit the operation of trawls in San Miguel
Bay. This move was manifested in the resolution of December 18, 1953 (Exh.
F), passed by the Municipal Mayors League condemning the operation of
trawls as the cause of the wanton destruction of the shrimp specie and
resolving to petition the President of the Philippines to regulate fishing in
San Miguel Bay by declaring it closed for trawl fishing at a certain period of
the year. In another resolution dated March 27, 1954, the same League of
Municipal Mayors prayed the President to protect them and the fish
resources of San Miguel Bay by banning the operation of trawls therein (Exh.
4). The Provincial Governor also made proper representations to this effect
and petitions in behalf of the non-trawl fishermen were likewise presented to
the President by social and civic organizations as the NAMFREL (National
Movement for Free Elections) and the COMPADRE (Committee for Philippine
Action in Development, Reconstruction and Education), recommending the
cancellation of the licenses of trawl operators after investigation, if such
inquiry would substantiate the charges that the operation of said fishing
method was detrimental to the welfare of the majority of the inhabitants
(Exh. 2).
In response to these pleas, the President issued on April 5, 1954, Executive
Order No. 22 (50 Off. Gaz., 1421) prohibiting the use of trawls in San Miguel
Bay, but said executive order was amended by Executive Order No. 66,
issued on September 23, 1954 (50 Off. Gaz., 4037), apparently in answer to
a resolution of the Provincial Board of Camarines Sur recommending the
allowance of trawl fishing during the typhoon season only. On November 2,
1954, however, Executive Order No. 80 (50 Off. Gaz., 5198) was issued
reviving Executive Order No. 22, to take effect after December 31, 1954.
A group of Otter trawl operators took the matter to the court by filing a
complaint for injunction and/or declaratory relief with preliminary injunction
with the Court of First Instance of Manila, docketed as Civil Case No. 24867,
praying that a writ of preliminary injunction be issued to restrain the
Secretary of Agriculture and Natural Resources and the Director of Fisheries
from enforcing said executive order; to declare the same null and void, and
for such other relief as may be just and equitable in the premises.
The Secretary of Agriculture and Natural Resources and the Director of
Fisheries, represented by the Legal Adviser of said Department and a Special
Attorney of the Office of the Solicitor General, answered the complaint
alleging, among other things, that of the 18 plaintiffs (Exequiel Soriano,
Teodora Donato, Felipe Concepcion, Venancio Correa, Santo Gaviana, Alfredo
General, Constancio Gutierrez, Arsenio de Guzman, Pedro Lazaro, Porfirio
Lazaro, Deljie de Leon, Jose Nepomuceno, Bayani Pingol, Claudio Salgado,
Porfirio San Juan, Luis Sioco, Casimiro Villar and Enrique Voluntad), only 11
were issued licenses to operate fishing boats for the year 1954 (Annex B,
petition L-8895); that the executive orders in question were issued in
accordance with law; that the encouragement by the Bureau of Fisheries of
the use of Otter trawls should not be construed to mean that the general
welfare of the public could be disregarded, and set up the affirmative
defenses that since plaintiffs question the validity of the executive orders
issued by the President, then the Secretary of Agriculture and Natural
Resources and the Director of Fisheries were not the real parties in interest;
that said executive orders do not constitute a deprivation of property
without due process of law, and therefore prayed that the complaint be
dismissed (Exh. B, petition, L-8895).
During the trial of the case, the Governor of Camarines Sur appearing for the
municipalities of Siruma, Tinambac, Calabanga, Cabusao and Sipocot, in said
province, called the attention of the Court that the Solicitor General had not
been notified of the proceeding. To this manifestation, the Court ruled that in
view of the circumstances of the case, and as the Solicitor General would
only be interested in maintaining the legality of the executive orders sought
to be impugned, Section 4 of Rule 66 could be interpreted to mean that the
trial could go on and the Solicitor General could be notified before judgment
is entered.
After the evidence for both parties was submitted and the Solicitor General
was allowed to file his memorandum, the Court rendered decision on
February
2,
1955,
the
last
part
of
which
reads
as
follows:jgc:chanrobles.com.ph
"The power to close any definite area of the Philippine waters, from the fact
that Congress has seen fit to define under what conditions it may be done
by the enactment of the sections cited, in the mind of Congress must be of
transcendental significance. It is primarily within the fields of legislation not
of execution; for it goes far and says who can and who can not fish in
definite territorial waters. The court can not accept that Congress had
intended to abdicate its inherent right to legislate on this matter of national
importance. To accept respondents view would be to sanction the exercise
of legislative power by executive decrees. If it is San Miguel Bay now, it may
be Davao Gulf tomorrow, and so on. That may be done only by Congress.
This being the conclusion, there is hardly need to go any further. Until the
trawler is outlawed by legislative enactment, it cannot be banned from San
Miguel Bay by executive proclamation. The remedy for respondents and
population of the coastal towns of Camarines Sur is to go to the Legislature.
The result will be to issue the writ prayed for, even though this be to strike
at public clamor and to annul the orders of the President issued in response
therefor. This is a task unwelcome and unpleasant; unfortunately, courts of
justice use only one measure for both the rich and poor, and are not bound
by the more popular cause when they give judgments.
"IN VIEW WHEREOF, granted; Executive Order Nos. 22, 66 and 80 are
declared invalid; the injunction prayed for is ordered to issue; no
pronouncement as to costs."
Petitioners immediately filed an ex-parte motion for the issuance of a writ of
injunction which was opposed by the Solicitor General and after the parties
had filed their respective memoranda, the Court issued an order dated
February 19, 1955, denying respondents motion to set aside judgment and
ordering them to file a bond in the sum of P30,000 on or before March 1,
1955, as a condition for the non- issuance of the injunction prayed for by
petitioners pending appeal. The Solicitor General filed a motion for
reconsideration which was denied for lack of merit, and the Court, acting
upon the motion for new trial filed by respondents, issued another order on
March 3, 1955, denying said motion and granting the injunction prayed for
by petitioners upon the latters filing a bond for P30,000 unless respondents
could secure a writ of preliminary injunction from the Supreme Court on or
before March 15, 1955. Respondents, therefore, brought the matter to this
Court in a petition for prohibition and certiorari with preliminary injunction,
docketed as G. R. No. L-8895, and on the same day filed a notice to appeal
from the order of the lower court dated February 2, 1955, which appeal was
docketed in this Court as G. R. No. L-9191.
In the petition for prohibition and certiorari, petitioners (respondents therein)
contended among other things, that the order of the respondent Judge
requiring petitioners Secretary of Agriculture and Natural Resources and the
Director of Fisheries to post a bond in the sum of P30,000 on or before March
1, 1955, had been issued without jurisdiction or in excess thereof, or at the
very least with grave abuse of discretion, because by requiring the bond, the
Republic of the Philippines was in effect made a party defendant and
therefore transformed the suit into one against the Government which is
beyond the jurisdiction of the respondent Judge to entertain; that the failure
to give the Solicitor General the opportunity to defend the validity of the
challenged executive orders resulted in the receipt of objectionable matters
at the hearing; that Rule 66 of the Rules of Court does not empower a court
of law to pass upon the validity of an executive order in a declaratory relief
proceeding; that the respondent Judge did not have the power to grant the
5. In its suggestion that the only remedy for respondents and the people of
the coastal towns of Camarines Sur and Camarines Norte is to go to the
Legislature; and
"Done in the City of Manila, this 23rd day of September, in the year of our
Lord, nineteen hundred and fifty-four, and of the Independence of the
Philippines, the ninth." (50 Off. Gaz. 4037).
It is indisputable that the President issued Executive Orders Nos. 22, 66 and
80 in response to the clamor of the inhabitants of the municipalities along
the coastline of San Miguel Bay. They read as follows:chanrob1es virtual 1aw
library
regulations on fishing and fisheries. In its order of February 19, 1955, the
trial court denied defendants motion to set aside judgment and they were
required to file a bond for P30,000 to answer for damages that plaintiffs
were allegedly suffering at the time, as otherwise the injunction prayed for
by the latter would be issued.
Because of these facts, We agree with the Solicitor General when he says
that the action, being one against herein petitioners as such Government
officials, is essentially one against the Government, and to require these
officials to file a bond would be indirectly a requirement against the
Government, for as regards bonds or damages that may be proved, if any,
the real party in interest would be the Republic of the Philippines (L. S. Moon
and Co. v. Harrison, 43 Phil., 39; Salgado v. Ramos, 64 Phil., 724-727, and
others). The reason for this pronouncement is understandable; the State
undoubtedly is always solvent (Tolentino v. Carlos, 66 Phil., 140; Government
of the P. I. v. Judge of the Court of First Instance of Iloilo, 34 Phil., 157, cited
in Joaquin Gutierrez Et. Al. v. Camus Et. Al. * G. R. No. L-6725, promulgated
October 30, 1954). However, as the records show that herein petitioners
failed to put up the bond required by the lower court, allegedly due to
difficulties encountered with the Auditor Generals Office (giving the
impression that they were willing to put up said bond but failed to do so for
reasons beyond their control), and that the orders subjects of the prohibition
and certiorari proceedings in G. R. No. L-8895, were enforced, if at all, 1 in
accordance with section 4 of Rule 39, which We hold to be applicable to the
case at bar, the issue as to the regularity or adequacy of requiring herein
petitioners to post a bond, becomes moot and academic.
II. Passing upon the question involved in the second proposition, the trial
judge extending the controversy to the determination of which between the
Legislative and Executive Departments of the Government had "the power
to close any definite area of the Philippine waters" instead of limiting the
same to the real issue raised by the enactment of Executive Orders Nos. 22,
66 and 80, specially the first and the last "absolutely prohibiting fishing by
means of trawls in all the waters comprised within the San Miguel Bay",
ruled in favor of Congress, and as the closing of any definite area of the
Philippine waters is, according to His Honor, primarily within the fields of
legislation and Congress had not intended to abdicate its power to legislate
on the matter, he maintained, as stated before, that "until the trawler is
outlawed by legislative enactment, it cannot be banned from San Miguel Bay
by executive proclamation", and that "the remedy for respondents and
population of the coastal towns of Camarines Sur is to go to the Legislature,"
and thus declared said Executive Orders Nos. 22, 66 and 80 invalid."
The Solicitor General, on the contrary, asserts that the President is
empowered by law to issue the executive enactments in question.
Sections 6, 13 and 75 of Act No. 4003, known as the Fisheries Law, the latter
two sections as amended by section 1 of Commonwealth Act No. 471, read
as follows:jgc:chanrobles.com.ph
"SEC. 6. WORDS AND PHRASES DEFINED. Words and terms used in this
purposes or for propagation), destroying or killing of any fish fry or fish eggs,
and the Secretary of Agriculture and Commerce (now the Secretary of
Agriculture and Natural Resources) is authorized to promulgate regulations
restricting the use of any fish net or fishing device (which includes the net
used by trawl fishermen) for the protection of fry or fish eggs, as well as to
set aside and establish fishery reservations or fish refuges and sanctuaries
to be administered in the manner prescribed by him, from which no person
could lawfully take, destroy or kill in any of the places aforementioned, or in
any manner disturb or drive away or take therefrom any small or immature
fish, fry or fish eggs. It is true that said section 75 mentions certain streams,
ponds and waters within the game refuges, . . . communal forests, etc.,
which the law itself declares fish refuges and sanctuaries, but this
enumeration of places does not curtail the general and unlimited power of
the Secretary of Agriculture and Natural Resources in the first part of section
75, to set aside and establish fishery reservations or fish refuges and
sanctuaries, which naturally include seas or bays, like the San Miguel Bay in
Camarines.
From the resolution passed at the Conference of Municipal Mayors held at
Tinambac, Camarines Sur, on December 18, 1953 (Exh. F), the following
manifestation is made:jgc:chanrobles.com.ph
"WHEREAS, the continuous operation of said trawls even during the close
season as specified in said Executive Order No. 20 caused the wanton
destruction of the mother shrimps laying their eggs and the millions of eggs
laid and the inevitable extermination of the shrimps specie; in order to save
the shrimps specie from eventual extermination and in order to conserve the
shrimps specie for posterity;"
In the brief submitted by the NAMFREL and addressed to the President of the
Philippines (Exh. 2), in support of the petition of San Miguel Bay fishermen
(allegedly 6,175 in number), praying that trawlers be banned from operating
in San Miguel Bay, it is also stated that:jgc:chanrobles.com.ph
"The trawls ram and destroy the fish corrals. The heavy trawl nets dig deep
into the ocean bed. They destroy the fish food which lies below the ocean
floor. Their daytime catches net millions of shrimps scooped up from the
mud. In their nets they bring up the life of the sea: algea, shell fish and star
fish . . .
"The absence of some species or the apparent decline in the catch of some
fishermen operating in the bay may be due to several factors, namely: the
indiscriminate catching of fry and immature sizes of fishes, the wide spread
use of explosives inside as well as at the mouth and approaches of the bay,
and the extensive operation of the trawls." (p. 9, Report of Santos B.
Rasalan, Exh. A).
Extensive Operation of Trawls: The strenuous effect of the operations of
the 17 TRAWLS of the demersal fisheries of San Miguel Bay is better
appreciated when we consider the fact that out of its about 850 square
kilometers area, only about 350 square kilometers of 5 fathoms up could be
Administrative
Code
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power to enact any law. If Act No. 2868 is a law unto itself, and within itself,
and it does nothing more than to authorize the Governor-General to make
rules and regulations to carry it into effect, then the Legislature created the
law. There is no delegation of power and it is valid. On the other hand, if the
act within itself does not define a crime and is not complete, and some
legislative act remains to be done to make it a law or a crime, the doing of
which is vested in the Governor-General, the act is a delegation of legislative
power, is unconstitutional and void."cralaw virtua1aw library
From the provisions of Act No. 4003 of the Legislature, as amended by
Commonwealth Act No. 471, which have been aforequoted, We find that
Congress (a) declared it unlawful "to take or catch fry or fish eggs in the
territorial waters of the Philippines; (b) towards this end, it authorized the
Secretary of Agriculture and Natural Resources to provide by the regulations
such restrictions as may be deemed necessary to be imposed on the use of
any fishing net or fishing device for the protection of fish fry or fish eggs
(Sec. 13); (c) it authorized the Secretary of, Agriculture and Natural
Resources to set aside and establish fishery reservations or fish refuges and
sanctuaries to be administered in the manner to be prescribed by him and
declared it unlawful for any person to take, destroy or kill in any of said
places, or in any manner disturb or drive away or take therefrom, any fish
fry or fish eggs (Sec. 75); and (d) it penalizes the execution of such acts
declared unlawful and in violation of this Act (No. 4003) or of any rules and
regulations promulgated thereunder, making the offender subject to a fine of
not more than P200, or imprisonment for not more than 6 months, or both,
in the discretion of the court (Sec. 83).
From the foregoing it may be seen that in so far as the protection of fish fry
or fish egg is concerned, the Fisheries Act is complete in itself, leaving to the
Secretary of Agriculture and Natural Resources the promulgation of rules and
regulations to carry into effect the legislative intent. It also appears from the
exhibits on record in these cases that fishing with trawls causes "a wanton
destruction of the mother shrimps laying their eggs and the millions of eggs
laid and the inevitable extermination of the shrimps specie" (Exh. F), and
that "the trawls ram and destroy the fish corrals. The heavy trawl nets dig
deep into the ocean bed. They destroy the fish food which lies below the
ocean floor. Their daytime catches net millions of shrimps scooped up from
the mud. In their nets they bring up the life of the sea" (Exh. 2).
In the light of these facts it is clear to Our mind that for the protection of fry
or fish eggs and small and immature fishes, Congress intended with the
promulgation of Act No. 4003, to prohibit the use of any fish net or fishing
device like trawl nets that could endanger and deplete our supply of sea
food, and to that end authorized the Secretary of Agriculture and Natural
Resources to provide by regulations such restrictions as he deemed
necessary in order to preserve the aquatic resources of the land.
Consequently, when the President, in response to the clamor of the people
and authorities of Camarines Sur issued Executive Order No. 80 absolutely
prohibiting fishing by means of trawls in all waters comprised within the San
Miguel Bay, he did nothing but show an anxious regard for the welfare of the
inhabitants of said coastal province and dispose of issues of general concern
(Sec. 63, R.A.C.) which were in consonance and strict conformity with the
law.
Wherefore, and on the strength of the foregoing considerations We render
judgment, as follows:chanrob1es virtual 1aw library
(a) Declaring that the issues involved in case G. R. No. L-8895 have become
moot, as no writ of preliminary injunction has been issued by this Court
enjoining the respondent Judge of the Court of First Instance of Manila,
Branch XIV, from enforcing his order of March 3, 1955; and
(b) Reversing the decision appealed from in case G. R. No. L- 9191;
dissolving the writ of injunction prayed for in the lower court by plaintiffs, if
any has been actually issued by the court a quo; and declaring Executive
Orders Nos. 22, 66 and 80, series of 1954, valid for having been issued by
authority of the Constitution, the Revised Administrative Code and the
Fisheries Act.
Without pronouncement as to costs. It is so ordered.
Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion,
Reyes, J.B.L. and Endencia,JJ., concur.
This unquestionably negates the assertion that the President cannot undo an
act of his department secretary.
2. Plaintiff next submits that the decision of the Executive Secretary herein is
an undue delegation of power. The Constitution, petitioner asserts, does not
contain any provision whereby the presidential power of control may be
delegated to the Executive Secretary. It is argued that it is the constitutional
duty of the President to act personally upon the matter.
It is correct to say that constitutional powers there are which the President
must exercise in person.10 Not as correct, however, is it so say that the Chief
Executive may not delegate to his Executive Secretary acts which the
Constitution does not command that he perform in person. 11 Reason is not
wanting for this view. The President is not expected to perform in person all
the multifarious executive and administrative functions. The Office of the
Executive Secretary is an auxiliary unit which assists the President. The rule
which has thus gained recognition is that "under our constitutional setup the
Executive Secretary who acts for and in behalf and by authority of the
President has an undisputed jurisdiction to affirm, modify, or even reverse
any order" that the Secretary of Agriculture and Natural Resources, including
the Director of Lands, may issue.12
3. But plaintiff underscores the fact that the Executive Secretary is equal in
rank to the other department heads, no higher than anyone of them. From
this, plaintiff carves the argument that one department head, on the pretext
that he is an alter ego of the President, cannot intrude into the zone of
action allocated to another department secretary. This argument betrays
lack of appreciation of the fact that where, as in this case, the Executive
Secretary acts "[b]y authority of the President," his decision is that of the
President's. Such decision is to be given full faith and credit by our courts.
The assumed authority of the Executive Secretary is to be accepted. For,
only the President may rightfully say that the Executive Secretary is not
authorized to do so. Therefore, unless the action taken is "disapproved or
reprobated by the Chief Executive,"13 that remains the act of the Chief
Executive, and cannot be successfully assailed. 14 No such disapproval or
reprobation is even intimated in the record of this case.
For the reasons given, the judgment under review is hereby affirmed. Costs
against plaintiff. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar,
Castro and Angeles, JJ., concur.
Separate Opinions
FERNANDO, J., concurring:
The learned opinion of Justice Sanchez possesses merit and inspires assent.
A further observation may not be amiss concerning that portion thereof
which speaks of "the standard practice" allowing appeals from [decisions of
Secretary of Natural Resources affirming the action taken by the Director of
Lands] to the Office of the President. That for me is more than a "standard
practice." It is sound law. The constitutional grant to the President of the
power of control over all executive departments, bureaus and offices yields
that implication.1
If this were all, there would be no need for an additional expression of my
views. I feel constrained to do so however in order to emphasize that the
opinion of the Court appears to me to reflect with greater fidelity the
Petitioner filed an action in the Court of First Instance of Manila to review the
decision, but the said court dismissed the action on a motion to dismiss, on
the ground that petitioner had not exhausted all his administrative remedies
before he instituted the action. The case is now before us on appeal against
the order of dismissal.
SYLLABUS
The law which was applied by the lower court is Section 2 of Commonwealth
Act No. 598, which provides:jgc:chanrobles.com.ph
1. CIVIL SERVICE BOARD OF APPEALS; DECISION OF, REVIEWABLE BY THE
PRESIDENT; JUDICIAL REVIEW OF PRESIDENTS DECISION DOES NOT MAKE
EXECUTIVE SUBORDINATE TO COURTS. When a presidential act is
challenged before the courts of justice, it is not to be implied therefrom that
the Executive is being made subject and subordinate to the courts. The
legality of his acts are under judicial review, not because the executive is
inferior to the courts, but because the law is above the Chief Executive
himself, and the courts seek only to interpret, apply or implement the law. A
judicial review of the Presidents decision on a case of an employee decided
by the Civil Service Board of Appeals should be viewed in this light and the
bringing of the case to the courts should be governed by the same principles
as govern the judicial review of all administrative acts of all administrative
officers.
2. ID.; APPEAL FROM DECISION OF; EXHAUST ALL ADMINISTRATIVE
REMEDIES FIRST BEFORE RESOLVING TO COURTS. The doctrine of
exhaustion of administrative remedies requires that where an administrative
remedy is provided by statute, relief must be sought by exhausting this
remedy before the courts will act. If, as in this case, the President, under
whom the Civil Service directly falls in our administrative system as head of
the executive department may be able to grant the remedy that petitioner
pursues, reasons of comity and orderly procedure demand that resort be
made to him before recourse can be had to the courts.
DECISION
LABRADOR, J.:
Petitioner-appellant was on and before January, 1953, a watchman of the
Floating Equipment Section, Ports and Harbors Division, Bureau of Public
Works. In Administrative Case No. R-8182 instituted against him for
negligence in the performance of duty (Dredge No. 6 under him had sunk
because of water in the bilge, which he did not pump out while under his
"The Civil Service Board of Appeals shall have the power and authority to
hear and decide all administrative cases brought before it on appeal, and its
decisions in such cases shall be final, unless revised or modified by the
President of the Philippines."cralaw virtua1aw library
It is urged on the appeal that there is no duty imposed on a party against
whom a decision has been rendered by the Civil Service Board of Appeals to
appeal to the President, and that the tendency of courts has been not to
subject the decision of the President to judicial review. It is further argued
that if decisions of the Auditor General may be appealed to the courts, those
of the Civil Service Board of Appeals need not be acted upon by the
President also, before recourse may be had to the courts. It is also argued
that if a case is appealed to the President, his action should be final and not
reviewable by the courts because such a course of action would be
derogatory to the high office of the President.
The objection to a judicial review of a Presidential act arises from a failure to
recognize the most important principle in our system of government, i.e.,
the separation of powers into three co-equal departments, the executive,
the legislative and the judicial, each supreme within its own assigned powers
and duties. When a presidential act is challenged before the courts of
justice, it is not to be implied therefrom that the Executive is being made
subject and subordinate to the courts. The legality of his acts are under
judicial review, not because the Executive is inferior to the courts, but
because the law is above the Chief Executive himself, and the courts seek
only to interpret, apply or implement it (the law). A judicial review of the
Presidents decision on a case of an employee decided by the Civil Service
Board of Appeals should be viewed in this light and the bringing of the case
to the courts should be governed by the same principles as govern the
judicial review of all administrative acts of all administrative officers.
The doctrine of exhaustion of administrative remedies requires that where
an administrative remedy is provided by statute, as in this case, relief must
be sought by exhausting this remedy before the courts will act. (42 Am. Jur.
580-581.) The doctrine is a device based on considerations of comity and
or reasons given by the appointing authority for such appointment: ... Before
deciding a contested appointment the Office of the President shall consult
the Civil Service Commission. For purposes of this Section, .qualified next-inrank' refers to an employee appointed on a permanent basis to a position
previously determined to be next-in- rank to the vacancy proposed to be
filled and who meets the requisites for appointment thereto as previously
determined by the appointing authority and approved by the Commission.
The prescribed procedure has been followed by petitioner Medalla He had
appealed to the department head and from thence, in view of the latter's
unfavorable action, to the Civil Service Commission and thereafter to the
Office of the President. Resolution No. 49 of the Civil Service Merit Systems
Board its Decision of June 27, 1979, and the Decision of the presidential
Executive Assistant dated April 24, 1979, were all rendered in Medalla's
favor. The special reason given by the Acting City Mayor for Mackay's
appointment, which is, that lie had completed all academic requirements for
the Certificate of Hospital Administration, is not tenable, since Medalla
himself was found to be in possession of the same qualification. But while
the qualifications of both petitioner Medalla and private respondent Mackay
are at par, yet, it is clear that the position of Chief of Clinics is the next lower
position to I hospital Administrator under the organizational line-up of the
hospital. Consequently, at the time of Mackays appointment as Assistant
Hospital Administrator and subsequently hospital Administrator, Medalla
outranked Mackay who was only a Resident Physician and, therefore, as the
next-in rank, Medalla is entitled to appointment as Hospital Administrator.
Respondent Mackay's urging that he was denied due process deserves scant
consideration considering that subsequent developsments in the case
establish that he was heardon his Motions for Reconsideration by both the
Civil Service Commission and the office of the President.
It is true that, as the respondent City Mayor alleges, a local executive should
be allowed the choice of men of his confidence, provided they are qualified
and elligible, who in his best estimation are possesses of the requisite
reputation, integrity, knowledgeability, energy and judgement. 9 However,
as reproduced heretofore, the Decision of the Civil Service Merit Systems
Board, upheld by the Office of the President, contains a judicious assessment
of the qualifications of both petitioner Medalla and private respondent
Mackay for the contested position, revealing a careful study of the
controversy between the parties, which cannot be ignored. The revocation of
Mackay's appointment reveals no arbitrariness nor grave abuse of
discretion.
WHEREFORE, 1) the appointment extended to private respondent, Dr.
Honorato C. Mackay, as Hospital Administrator is hereby declared null and
void; 2) respondent City Mayor of Caloocan City is hereby ordered to extend
an appointment to petitioner, Dr. Eustaquio M. Medalla, as Hospital
Administrator of the Caloocan City General Hospital immediately upon notice
of this Decision; 3) petitioner, Dr. Eustaquio M. Medalla, shall receive all
compensation and emoluments appertaining to said position thenceforth,
but without entitlement to salary differentials; and 4) respondent Judge is
hereby permanently enjoined from further proceeding with Civil Case No.
7770.
This Decision is immediately executory. No costs.
SO ORDERED.
Forester Cipriano Melchor undertook the survey and fixed the common
boundary as "Corner 5 of Lianga Bay Logging Company at Km. 10.2 instead
of Km. 9.7 on the Lianga-Arcos Road and lines N900E, 21,000 meters; N12
W, 21,150 meters; N40 W, 3,000 meters; N31 W, 2,800 meters; N50 W,
1,700 meters" which respondent Ago protested claiming that "its eastern
boundary should be the provincial boundary line of Agusan-Surigao as
described in Section 1 of Art. 1693 of the Philippine Commission as indicated
in the green pencil in the attached sketch" of the areas as prepared by the
Bureau of Forestry. 2 The Director of Forestry, after considering the evidence,
found:
That the claim of the Ago Timber Corporation portrays a line (green line) far
different in alignment with the line (red) as indicated in the original License
Control Map of this Office;
That the claim of the Ago Timber Corporation (green line does not conform
to the distance of 6,800 meters from point 3 to point 4 of the original
description of the area of Narciso Lansang but would project said line to a
distance of approximately 13,800 meters;
That to follow the claim of the Ago Timber Corporation would increase the
area of Narciso Lansang from 9,000 to 12,360 hectares;
That to follow the claim of the Ago Timber Corporation would reduce the
area of the Lianga Bay Logging, Co., Inc. to 107,046 hectares instead of the
area granted which is 110,406 hectares.
and ruled that "the claim of the Ago Timber Corporation runs counter to the
intentions of this Office is granting the license of Mr. Narciso Lansang; and
further, that it also runs counter to the intentions of this Office in granting
the Timber License Agreement to the Lianga Bay Logging Co., Inc. The
intentions of this Office in granting the two licenses (Lansang and Lianga
Bay Logging Co., Inc.) are patently manifest in that distances and bearings
are the controlling factors. If mention was ever made of the Agusan-Surigao
boundary, as the common boundary line of both licensees, this Office could
not have meant the Agusan-Surigao boundary as described under Section 1
of Act 1693 of the Philippine Commission for were it so it could have been so
easy for this Office to mention the distance from point 3 to point 4 of Narciso
Lansang as approximately 13,800 meters. This cannot be considered a
mistake considering that the percentage of error which is more or less 103%
is too high an error to be committed by an Office manned by competent
technical men. The Agusan-Surigao boundary as mentioned in the technical
descriptions of both licensees, is, therefore, patently an imaginary line based
on B.F. License Control Map. Such being the case, it is reiterated that
distance and bearings control the description where an imaginary line exists.
3
The decision fixed the common boundary of the licensed areas of the Ago
Timber Corporation and Lianga Bay Logging Co., Inc. as that indicated in red
pencil of the sketch attached to the decision.
In an appeal interposed by respondent Ago, docketed in the Department of
Agriculture and Natural Resources as DANR Case No. 2268, the then Acting
Secretary of Agriculture and Natural Resources Jose Y. Feliciano, in a decision
dated August 9, 1965 set aside the appealed decision of the Director of
Forestry and ruled that "(T)he common boundary line of the licensed areas
of the Ago Timber Corporation and the Lianga Bay Logging Co., Inc., should
be that indicated by the green line on the same sketch which had been
made an integral part of the appealed decision." 4
another case of Ago v. Court of Appeals,24 (where herein respondent Ago was
the petitioner) the Court held that, "While it is to be presumed that the
judgment that was dictated in open court will be the judgment of the court,
the court may still modify said order as the same is being put into writing.
And even if the order or judgment has already been put into writing and
signed, while it has not yet been delivered to the clerk for filing, it is stin
subject to amendment or change by the judge. It is only when the judgment
signed by the judge is actually filed with the clerk of court that it becomes a
valid and binding judgment. Prior thereto, it could still be subject to
amendment and change and may not, therefore, constitute the real
judgment of the court."
Respondent alleges "that in view of the hopelessly conflicting decisions of
the administrative bodies and/or offices of the Philippine government, and
the important questions of law and fact involved therein, as well as the wellgrounded fear and suspicion that some anomalous, illicit and unlawful
considerations had intervened in the concealment of the decision of August
15, 1966 (Annex "D") of Assistant Executive Secretary Gilberto M. Duavit, a
judicial review of such divergent administrative decisions is necessary in
order to determine the correct boundary line of the licensed areas in
question and restore the faith and confidence of the people in the actuations
of our public officials and in our system of administration of justice."
The mere suspicion of respondent that there were anomalies in the nonrelease of the Leido "decision" allegedly denying petitioner's motion for
reconsideration and the substitution thereof by the Duavit decision granting
reconsideration does not justify judicial review. Beliefs, suspicions and
conjectures cannot overcome the presumption of regularity and legality of
official actions. 25 It is presumed that an official of a department performs his
official duties regularly. 26 It should be noted, furthermore, that as
hereinabove stated with regard to the case history in the Office of the
President, Ago's motion for reconsideration of the Duavit decision dated
August 9, 1968 was denied in the Order dated October 2, 1968 and signed
by Assistant Executive Secretary Leido himself (who thereby joined in the
reversal of his own first decision dated June 16, 1966 and signed by himself).
The Ordinary Timber License No. 1323-'60[New] which approved the transfer
to respondent Ago of the 4,000 hectares from the forest area originally
licensed to Narciso Lansang, stipulates certain conditions, terms and
limitations, among which were: that the decision of the Director of Forestry
as to the exact location of its licensed areas is final; that the license is
subject to whatever decision that may be rendered on the boundary conflict
between the Lianga Bay Logging Co. and the Ago Timber Corporation; that
the terms and conditions of the license are subject to change at the
discretion of the Director of Forestry and the license may be made to expire
at an earlier date. Under Section 1834 of the Revised Administrative Code,
the Director of Forestry, upon granting any license, may prescribe and insert
therein such terms, conditions, and limitations, not inconsistent with law, as
may be deemed by him to be in the public interest. The license operates as
a contract between the government and respondent. Respondent, therefore,
is estopped from questioning the terms and stipulation thereof.
Clearly, the injunctive writ should not have been issued. The provisions of
law explicitly provide that Courts of First Instance shall have the power to
issue writ of injunction, mandamus, certiorari, prohibition, quo warranto and
habeas corpus in their respective places, 27 if the petition filed relates to the
acts or omissions of an inferior court, or of a corporation, board, officer or
person, within their jurisdiction. 28
The jurisdiction or authority of the Court of First Instance to control or
restrain acts by means of the writ of injunction is limited only to acts which
are being committed within the territorial boundaries of their respective
provinces or districts 29 except where the sole issue is the legality of the
decision of the administrative officials. 30
In the leading case of Palanan Lumber Plywood Co., Inc. v. Arranz 31 which
involved a petition for certiorari and prohibition filed in the Court of First
Instance of Isabela against the same respondent public officials as here and
where the administrative proceedings taken were similar to the case at bar,
the Court laid down the rule that: "We agree with the petitioner that the
respondent Court acted without jurisdiction in issuing a preliminary
injunction against the petitioners Executive Secretary, Secretary of
Agriculture and Natural Resources and the Director of Forestry, who have
their official residences in Manila and Quezon City, outside of the territorial
jurisdiction of the respondent Court of First Instance of Isabela. Both the
statutory provisions and the settled jurisdiction of this Court unanimously
affirm that the extraordinary writs issued by the Court of First Instance are
limited to and operative only within their respective provinces and districts."
A different rule applies only when the point in controversy relates solely to a
determination of a question of law whether the decision of the respondent
administrative officials was legally correct or not. 32 We thus declared
inDirector of Forestry v. Ruiz. 33 "In Palanan Lumber & Plywood Co., Inc.,
supra, we reaffirmed the rule of non-jurisdiction of courts of first instance to
issue injunctive writs in order to control acts outside of their premises or
districts. We went further and said that when the petition filed with the
courts of first instance not only questions the legal correctness of the
decision of administrative officials but also seeks to enjoin the enforcement
of the said decision, the court could not validly issue the writ of injunction
when the officials sought to be restrained from enforcing the decision are
not stationed within its territory.1avvphi1
"To recapitulate, insofar as injunctive or prohibitory writs are concerned, the
rule still stands that courts of first instance have the power to issue writs
limited to and operative only within their respective provinces or districts. "
The writ of preliminary injunction issued by respondent court is furthermore
void, since it appears that the forest area described in the injunctive writ
includes areas not licensed to respondent Ago. The forest area referred to
and described therein comprises the whole area originally licensed to
Narciso Lansang under the earlier Ordinary Timber License No. 58452. Only
a portion of this area was in fact transferred to respondent Ago as described
in its Ordinary Timber License No. 1323-'60[New].
It is abundantly clear that respondent court has no jurisdiction over the
subject matter of Civil Case No. 1253 of the Court of First Instance of Agusan
nor has it jurisdiction to decide on the common boundary of the licensed
areas of petitioner Lianga and respondent Ago, as determined by
respondents public officials against whom no case of grave abuse of
discretion has been made. Absent a cause of action and jurisdiction,
respondent Judge acted with grave abuse of discretion and excess, if not
lack, of jurisdiction in refusing to dismiss the case under review and in
affirming the judgment of the lower court which convicted the petitioner of
the crime of qualified theft, and (2) the facts found by the Court of Appeals
in its decision do not constitute the offense of qualified theft, because even
assuming that the petitioner was responsible for the disappearance of the
materials deposited on the yard of his house, he is not criminally liable for
the crime of theft, but only civilly liable, or guilty of the crime of
misappropriation of public funds. And he prayed in his petition that, after a
due consideration of the case, (1) the judgment of the Court of Appeals, and
not only the order denying the motion for new trial, be set aside and a new
trial ordered; (2) that the question of law he raises to the effect that the
facts proven do not constitute the offense of qualified theft with which the
petitioner was charged be decided, and (3) that this Supreme Court grant
the petitioner such other relief as it may deem proper.
This Court, in view of the grounds on which the petitioner for certiorari was
based and the relief prayed for in the petition, properly considered the
petition as appeal by certiorari filed in time, that is, within ten days after the
entry of first judgment of the Court of Appeals on October 26, 1950, and
dismissed the petition on the ground that the question therein raised were
factual.
Now a motion for reconsideration was filed by the petitioner in which he
states that the petition forcertiorari filed by him, was not an appeal by
certiorari, but a special civil action of certiorari under Rule 67 of the Rules of
Court, because what the petitioner prayed for in his petitions was, not that
this Court revise the judgment of the Court of Appeals and absolve the
defendant, but only that the judgment of the Court be set aside and a new
trial ordered. If this allegation were correct, this Court would have
considered and passed upon the petition as a special civil action of certiorari
under Rule 67 of the Rules of Court, but, as already stated, the petitioner
also raised the question of law whether the facts found by the Court of
Appeals constituted qualified theft, or merely a civil liability, or at most a
misappropriation of public funds, and prayed this Court to grant the
petitioner such other relief as it may deem proper besides the granting of his
motion for new trial. It is to be observed that, although appeal does not lie
from a resolution rendered in the exercise of the Courts discretion, abuse of
discretion of the lower court may be corrected by the Superior Court on
appeal from an appealable order or decision.
But considering now the petition for certiorari as filed under Rule 63 of the
Rules of Court, the same must also be dismissed. It is true that the granting
or denial of a motion for new trial on any of the grounds specified in section
2 of Rule 117, relating to new trial in criminal cases, lies in the sound
discretion of the court to which such motion is submitted (U. S. v. Visguera, 4
Phil., 380). By grave abuse of discretion is meant such capricious and
whimsical exercise of discretion as is equivalent to acting without or in
excess of jurisdiction (Abad Santos v. Province of Tarlac, * 38 Off. Gaz 830);
but a mere perusal of the testimonies of Jose S. Catbagan, Catalina
Calagnara and Severino Lucea whose affidavits are attached to the petition
as part thereof, will show that they are merely cumulative, corroborative or
impeaching, and the Court of Appeals did not exercise capriciously and
whimsically its discretion but acted correctly in denying the motion for new
trial filed by the petitioner, because the so called newly discovered
evidence, if admitted, would not probably change the judgment of the lower
court.
Jose S. Catbagan states in his affidavit that, during the incumbency of the
petitioner as warehouseman of the Surplus Property Commission, Guian,
Samar, he was one of the boarders of the petitioner in the quonset hut of the
latter, and he had not seen any G. I. sheet, Celotex nor Plywood that was
stored in their house. The testimony of this witness is merely corroborative
of that denial of the accused petitioner and cannot be a newly discovered
evidence because the petitioner ought to know such testimony before the
trial if the affiant was really living with the accused at the time the offense is
alleged to have been committed.
Catalina Calagnara says in her affidavit that, on or about the 30th of July,
1949, she was invited by Mrs. Cabaas to live with her at the residence of
the petitioner who was then in Manila, and on that day Mrs. Valdomero
visited Mrs. Cabaas and threatened her with having her arrested and
prosecuted for having bought parachutes from some Americans from the U.
S. Navy at Tubabao, Guian, Samar, and sold them, if she did not sign the
papers he was taking with him, which, he explained to Mrs. Cabaas, were
about Mr. Tan storing quonset hut materials in his residence, and that
although Mrs. Cabaas contended that there were no quonset hut materials
stored in the petitioners residence, Mrs. Cabaas signed the papers for fear
that Mr. Valdomero will have her arrested. This testimony or evidence, aside
from being merely impeaching, is not worthy of credence, not only because
it is highly incredible that Valdomero had made such threat to Mrs. Cabaas
in the presence of the affiant, but because of the following findings of the
lower court.
In an attempt to discredit the testimony of Soledad Cabaas, the defense
presented in evidence her affidavit, Exhibit 1, dated November 22, 1947,
wherein she alleged that she did not know anything about the crime at bar
but that Aquilino Valdomero threatened and forced her to be a witness in the
instant case. But the circumstances under which said affidavit was executed,
to wit: that the affiant was taken at nighttime from her house by the
defendant herein and not Capt. Sakay and brought to the house of Justice of
the Peace Ilao, where she signed her said affidavit about midnight after the
said accused had impressed her, by touching meaningfully his revolver, that
something would happen to her were she to refuse to sign it, lead the Court
to believe that she did not execute it of her own free will, as she claims.
And Severino Lucea testifies in his affidavit that, during the petitioners
residence at Guian, Samar, as warehouseman of the Surplus Property
Commission, the affiant was one of the boarders in the house of the
petitioner, and during that period he had not seen any galvanized iron sheet,
celotex nor plywood in the quonset hut Mr. Tan was occupying, dismantled
from any building or quonset hut. That the affiant was an inventory clerk of
the Surplus Property Commission at the Samar Naval Base, Guian, Samar,
and Mr. Valdomero, "who was the Chief of all Inventory team, and as such
the immediate superior of all inventory clerks and of all laborers detailed to
work with the Inventory Clerk," on one occasion confided to him that he was
aspiring to be appointed as Base Superintendent, and Mr. Tans aspiration to
the same position was an obstacle to his appointment, and so Valdomero
"proposed to me to help eliminate Mr. Tan by using me and the laborers
working directly, under me, Messrs. Vicente Ogaro and Felix Yape as
witnesses." That Valdomero told him that "he planned to order Messrs.
Ogaro and Yape to dismantle a certain building and later upon being
questioned for their act of dismantling to impute Mr. Tan as the person who
ordered them to dismantle the building and consequently a charge will be
filed against Mr. Tan that may lead to his suspension and probable
dismissal." That to convince the affiant to agree to be a witness against Mr.
Tan Valdomero "repeated his plan before Messrs. Ogaro and Yape and made
it evident to me that these laborers were amenable to follow to the letter
and execute his plan," but the affiant "did not agree to Mr. Valdomeros
request because it was contrary to his conscience," and "the witness did not
inform Mr. Tan about Mr. Valdomeros intended machination at first, nor did
he inform him upon its consummation, because the witness was still under
Mr. Valdomero, and he feared that the latter may make him a victim of his
revenge."cralaw virtua1aw library
The testimony of this affiant, which tends only to impeach the veracity of
three of the witnesses for the prosecution, Valdomero, Ogaro and Yape,
cannot affect the weight of the latters testimony, because it is incredible
that Valdomero would confide to the affiant his nefarious plan to utilize the
services of Ogaro and Yape against the petitioner without any necessity, for
Valdomero was the chief not only of the affiant but also of said Ogaro and
Yape according to the affiant himself, and not only that, but Valdomero had
to give afterwards his instructions to said Ogaro and Yape about what they
would do in the presence of the affiant. The theory of the defense in this
motion for new trial had already been presented as petitioners defense and
rejected by the lower Court in the following findings of the Court of Appeals
decision:chanrob1es virtual 1aw library
As a matter of fact the accused had admitted that he did not know of any
personal motive which could have prompted any of said government
witnesses to testify falsely against him, except that they might have been
instigated to do so by certain envious officials in the Guian Base to prevent
him, Accused, from being appointed Base Superintendent therein, as it was
then of common knowledge, according to the accused, that he would be
named to that position. But this is a mere supposition and has not gone
beyond it. Besides, if the accuseds alleged appointment as Base
Superintendent were really impending then, said two laborers of the Base
Ogaro and Yape, would have thought twice, for obvious reasons, before
testifying against him. More so, if they were perjured witnesses, as the
accused insinuates. It is clear, therefore, that if they implicated the accused
with the theft at bar it is because they were actuated by truth and
conscience.
In view of the foregoing, petitioners petition for certiorari under Rule 67 of
the Rules of Court is dismissed. So ordered.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Jugo and Bautista
Angelo, JJ., concur.
YNARES-SANTIAGO, J.:
Pursuant to its rule-making and regulatory powers, the National
Telecommunications Commission (NTC) issued on June 16, 2000
Memorandum Circular No. 13-6-2000, promulgating rules and regulations on
the billing of telecommunications services. Among its pertinent provisions
are the following:
(1) The billing statements shall be received by the subscriber of the
telephone service not later than 30 days from the end of each billing cycle.
In case the statement is received beyond this period, the subscriber shall
have a specified grace period within which to pay the bill and the public
telecommunications entity (PTEs) shall not be allowed to disconnect the
service within the grace period.
(2) There shall be no charge for calls that are diverted to a voice mailbox,
voice prompt, recorded message or similar facility excluding the customer's
own equipment.
(3) PTEs shall verify the identification and address of each purchaser of
prepaid SIM cards. Prepaid call cards and SIM cards shall be valid for at least
2 years from the date of first use. Holders of prepaid SIM cards shall be
given 45 days from the date the prepaid SIM card is fully consumed but not
beyond 2 years and 45 days from date of first use to replenish the SIM card,
otherwise the SIM card shall be rendered invalid. The validity of an invalid
SIM card, however, shall be installed upon request of the customer at no
additional charge except the presentation of a valid prepaid call card.
(4) Subscribers shall be updated of the remaining value of their cards before
the start of every call using the cards.
(5) The unit of billing for the cellular mobile telephone service whether
postpaid or prepaid shall be reduced from 1 minute per pulse to 6 seconds
per pulse. The authorized rates per minute shall thus be divided by 10. 1
The Memorandum Circular provided that it shall take effect 15 days after its
publication in a newspaper of general circulation and three certified true
copies thereof furnished the UP Law Center. It was published in the
newspaper, The Philippine Star, on June 22, 2000. 2 Meanwhile, the provisions
of the Memorandum Circular pertaining to the sale and use of prepaid cards
and the unit of billing for cellular mobile telephone service took effect 90
days from the effectivity of the Memorandum Circular.
On August 30, 2000, the NTC issued a Memorandum to all cellular mobile
telephone service (CMTS) operators which contained measures to minimize
if not totally eliminate the incidence of stealing of cellular phone units. The
Memorandum directed CMTS operators to:
a. strictly comply with Section B(1) of MC 13-6-2000 requiring the
presentation and verification of the identity and addresses of prepaid SIM
card customers;
b. require all your respective prepaid SIM cards dealers to comply with
Section B(1) of MC 13-6-2000;
c. deny acceptance to your respective networks prepaid and/or postpaid
customers using stolen cellphone units or cellphone units registered to
somebody other than the applicant when properly informed of all
information relative to the stolen cellphone units;
d. share all necessary information of stolen cellphone units to all other CMTS
operators in order to prevent the use of stolen cellphone units; and
e. require all your existing prepaid SIM card customers to register and
SO ORDERED.8
Defendants filed a motion for reconsideration, which was denied in an Order
dated February 1, 2001.9
Respondent NTC thus filed a special civil action for certiorari and prohibition
with the Court of Appeals, which was docketed as CA-G.R. SP. No. 64274. On
October 9, 2001, a decision was rendered, the decretal portion of which
reads:
WHEREFORE, premises considered, the instant petition for certiorari and
prohibition is GRANTED, in that, the order of the court a quo denying the
petitioner's motion to dismiss as well as the order of the court a quo
granting the private respondents' prayer for a writ of preliminary injunction,
and the writ of preliminary injunction issued thereby, are hereby ANNULLED
and SET ASIDE. The private respondents' complaint and complaint-inintervention below are hereby DISMISSED, without prejudice to the referral
of the private respondents' grievances and disputes on the assailed
issuances of the NTC with the said agency.
SO ORDERED.10
Petitioners' motions for reconsideration were denied in a Resolution dated
January 10, 2002 for lack of merit.11
Hence, the instant petition for review filed by Smart and Piltel, which was
docketed as G.R. No. 151908, anchored on the following grounds:
A.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE
REGULAR COURTS HAS JURISDICTION OVER THE CASE.
B.
THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING
THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE
ADMINISTRATIVE REMEDY.
C.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
BILLING CIRCULAR ISSUED BY THE RESPONDENT NTC IS UNCONSTITUTIONAL
AND CONTRARY TO LAW AND PUBLIC POLICY.
D.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE
RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT
THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION. 12
Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No.
152063, assigning the following errors:
1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE
DOCTRINES
OF
PRIMARY
JURISDICTION
AND
EXHAUSTION
OF
ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR
LEGAL NULLIFICATION (BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF
LAW) OF A PURELY ADMINISTRATIVE REGULATION PROMULGATED BY AN
AGENCY IN THE EXERCISE OF ITS RULE MAKING POWERS AND INVOLVES
ONLY QUESTIONS OF LAW.
2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE
DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY
WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS.
3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE
DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY
remedies before going to court. This principle applies only where the act of
the administrative agency concerned was performed pursuant to its quasijudicial function, and not when the assailed act pertained to its rule-making
or quasi-legislative power. In Association of Philippine Coconut Dessicators v.
Philippine Coconut Authority,20 it was held:
The rule of requiring exhaustion of administrative remedies before a party
may seek judicial review, so strenuously urged by the Solicitor General on
behalf of respondent, has obviously no application here. The resolution in
question was issued by the PCA in the exercise of its rule- making or
legislative power. However, only judicial review of decisions of administrative
agencies made in the exercise of their quasi-judicial function is subject to
the exhaustion doctrine.
Even assuming arguendo that the principle of exhaustion of administrative
remedies apply in this case, the records reveal that petitioners sufficiently
complied with this requirement. Even during the drafting and deliberation
stages leading to the issuance of Memorandum Circular No. 13-6-2000,
petitioners were able to register their protests to the proposed billing
guidelines. They submitted their respective position papers setting forth
their objections and submitting proposed schemes for the billing circular. 21
After the same was issued, petitioners wrote successive letters dated July 3,
200022 and July 5, 2000,23 asking for the suspension and reconsideration of
the so-called Billing Circular. These letters were not acted upon until October
6, 2000, when respondent NTC issued the second assailed Memorandum
implementing certain provisions of the Billing Circular. This was taken by
petitioners as a clear denial of the requests contained in their previous
letters, thus prompting them to seek judicial relief.
In like manner, the doctrine of primary jurisdiction applies only where the
administrative agency exercises its quasi-judicial or adjudicatory function.
Thus, in cases involving specialized disputes, the practice has been to refer
the same to an administrative agency of special competence pursuant to the
doctrine of primary jurisdiction. The courts will not determine a controversy
involving a question which is within the jurisdiction of the administrative
tribunal prior to the resolution of that question by the administrative
tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience and services of the
administrative tribunal to determine technical and intricate matters of fact,
and a uniformity of ruling is essential to comply with the premises of the
regulatory statute administered. The objective of the doctrine of primary
jurisdiction is to guide a court in determining whether it should refrain from
exercising its jurisdiction until after an administrative agency has
determined some question or some aspect of some question arising in the
proceeding before the court. It applies where the claim is originally
cognizable in the courts and comes into play whenever enforcement of the
claim requires the resolution of issues which, under a regulatory scheme,
has been placed within the special competence of an administrative body; in
such case, the judicial process is suspended pending referral of such issues
to the administrative body for its view. 24
However, where what is assailed is the validity or constitutionality of a rule
or regulation issued by the administrative agency in the performance of its
quasi-legislative function, the regular courts have jurisdiction to pass upon
the same. The determination of whether a specific rule or set of rules issued
the proceedings.
SO ORDERED.
Davide, Jr., C.J., Vitug, and Carpio, JJ., concur.
Azcuna, J., took no part.
foreign brands since they were listed in the World Tobacco Directory as
belonging to foreign companies. However, Fortune Tobacco changed the
names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby
removing the said brands from the foreign brand category. Proof was also
submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion' was an
original Fortune Tobacco Corporation register and therefore a local brand." 3
Ad Valorem taxes were imposed on these brands, 4 at the following rates:
BRAND AD VALOREM TAX RATE
E.O. 22 and E.O. 273 RA 6956
06-23-86 07-25-87 06-18-90
07-01-86 01-01-88 07-05-90
Hope Luxury M. 100's
Sec. 142, (c), (2) 40% 45%
Hope Luxury M. King
Sec. 142, (c), (2) 40% 45%
More Premium M. 100's
Sec. 142, (c), (2) 40% 45%
More Premium International
Sec. 142, (c), (2) 40% 45%
Champion Int'l. M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20% 5
A bill, which later became Republic Act ("RA") No. 7654, 6 was enacted, on
10 June 1993, by the legislature and signed into law, on 14 June 1993, by the
President of the Philippines. The new law became effective on 03 July 1993.
It amended Section 142(c)(1) of the National Internal Revenue Code ("NIRC")
to read; as follows:
Sec. 142. Cigars and Cigarettes.
xxx xxx xxx
(c) Cigarettes packed by machine. There shall be levied, assessed and
collected on cigarettes packed by machine a tax at the rates prescribed
below based on the constructive manufacturer's wholesale price or the
actual manufacturer's wholesale price, whichever is higher:
(1) On locally manufactured cigarettes which are currently classified and
taxed at fifty-five percent (55%) or the exportation of which is not
authorized by contract or otherwise, fifty-five (55%) provided that the
minimum tax shall not be less than Five Pesos (P5.00) per pack.
(2) On other locally manufactured cigarettes, forty-five percent (45%)
provided that the minimum tax shall not be less than Three Pesos (P3.00)
per pack.
xxx xxx xxx
When the registered manufacturer's wholesale price or the actual
manufacturer's wholesale price whichever is higher of existing brands of
cigarettes, including the amounts intended to cover the taxes, of cigarettes
packed in twenties does not exceed Four Pesos and eighty centavos (P4.80)
per pack, the rate shall be twenty percent (20%). 7 (Emphasis supplied)
About a month after the enactment and two (2) days before the effectivity of
RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was
issued by the BIR the full text of which expressed:
REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
July 1, 1993
REVENUE MEMORANDUM CIRCULAR NO. 37-93
SUBJECT: Reclassification of Cigarettes Subject to Excise Tax
TO: All Internal Revenue Officers and Others Concerned.
In view of the issues raised on whether "HOPE," "MORE" and "CHAMPION"
cigarettes which are locally manufactured are appropriately considered as
locally manufactured cigarettes bearing a foreign brand, this Office is
compelled to review the previous rulings on the matter.
Section 142 (c)(1) National Internal Revenue Code, as amended by R.A. No.
6956, provides:
On locally manufactured cigarettes bearing a foreign brand, fifty-five percent
(55%) Provided, That this rate shall apply regardless of whether or not the
right to use or title to the foreign brand was sold or transferred by its owner
to the local manufacturer. Whenever it has to be determined whether or not
a cigarette bears a foreign brand, the listing of brands manufactured in
foreign countries appearing in the current World Tobacco Directory shall
govern.
Under the foregoing, the test for imposition of the 55% ad valorem tax on
cigarettes is that the locally manufactured cigarettes bear a foreign brand
regardless of whether or not the right to use or title to the foreign brand was
sold or transferred by its owner to the local manufacturer. The brand must
be originally owned by a foreign manufacturer or producer. If ownership of
the cigarette brand is, however, not definitely determinable, ". . . the listing
of brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern. . . ."
"HOPE" is listed in the World Tobacco Directory as being manufactured by (a)
Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. "MORE" is listed
in the said directory as being manufactured by: (a) Fills de Julia Reig,
Andorra; (b) Rothmans, Australia; (c) RJR-Macdonald Canada; (d) RettigStrenberg, Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g)
Rothmans, New Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds,
Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds,
Switzerland; and (m) R.J. Reynolds, USA. "Champion" is registered in the said
directory as being manufactured by (a) Commonwealth Bangladesh; (b)
Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e)
Haggar, Sudan; and (f) Tabac Reunies, Switzerland.
Since there is no showing who among the above-listed manufacturers of the
cigarettes bearing the said brands are the real owner/s thereof, then it
follows that the same shall be considered foreign brand for purposes of
determining the ad valorem tax pursuant to Section 142 of the National
Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24,
1988, "in cases where it cannot be established or there is dearth of evidence
as to whether a brand is foreign or not, resort to the World Tobacco Directory
should be made."
On 10 August 1994, the CTA upheld the position of Fortune Tobacco and
adjudged:
WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the
brands of cigarettes, viz: "HOPE," "MORE" and "CHAMPION" being
manufactured by Fortune Tobacco Corporation as locally manufactured
cigarettes bearing a foreign brand subject to the 55% ad valorem tax on
cigarettes is found to be defective, invalid and unenforceable, such that
when R.A. No. 7654 took effect on July 3, 1993, the brands in question were
not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)
(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still
classified as other locally manufactured cigarettes and taxed at 45% or 20%
as the case may be.
Accordingly, the deficiency ad valorem tax assessment issued on petitioner
Fortune Tobacco Corporation in the amount of P9,598,334.00, exclusive of
surcharge and interest, is hereby canceled for lack of legal basis.
Respondent Commissioner of Internal Revenue is hereby enjoined from
collecting the deficiency tax assessment made and issued on petitioner in
relation to the implementation of RMC No. 37-93.
SO ORDERED. 9
In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit
the motion for reconsideration.
The CIR forthwith filed a petition for review with the Court of Appeals,
questioning the CTA's 10th August 1994 decision and 11th October 1994
resolution. On 31 March 1993, the appellate court's Special Thirteenth
Division affirmed in all respects the assailed decision and resolution.
In the instant petition, the Solicitor General argues: That
I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL
REVENUE INTERPRETING THE PROVISIONS OF THE TAX CODE.
II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF
RMC 37-93, FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND
PRIOR HEARING ARE NOT NECESSARY TO ITS VALIDITY, EFFECTIVITY AND
ENFORCEABILITY.
III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 3793 ON JULY 2, 1993.
IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY
MANUFACTURED CIGARETTES SIMILARLY SITUATED AS "HOPE," "MORE" AND
"CHAMPION" CIGARETTES.
V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING
"HOPE," "MORE" AND "CHAMPION" CIGARETTES BEFORE THE EFFECTIVITY
OF R.A. NO. 7654.
VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO
ITS VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS
OR PROPRIETY; RMC 37-93 IS CORRECT. 10
already prescribed. When, upon the other hand, the administrative rule goes
beyond merely providing for the means that can facilitate or render least
cumbersome the implementation of the law but substantially adds to or
increases the burden of those governed, it behooves the agency to accord at
least to those directly affected a chance to be heard, and thereafter to be
duly informed, before that new issuance is given the force and effect of law.
A reading of RMC 37-93, particularly considering the circumstances under
which it has been issued, convinces us that the circular cannot be viewed
simply as a corrective measure (revoking in the process the previous
holdings of past Commissioners) or merely as construing Section 142(c)(1)
of the NIRC, as amended, but has, in fact and most importantly, been made
in order to place "Hope Luxury," "Premium More" and "Champion" within the
classification of locally manufactured cigarettes bearing foreign brands and
to thereby have them covered by RA 7654. Specifically, the new law would
have its amendatory provisions applied to locally manufactured cigarettes
which at the time of its effectivity were not so classified as bearing foreign
brands. Prior to the issuance of the questioned circular, "Hope Luxury,"
"Premium More," and "Champion" cigarettes were in the category of locally
manufactured cigarettes not bearing foreign brand subject to 45% ad
valorem tax. Hence, without RMC 37-93, the enactment of RA 7654, would
have had no new tax rate consequence on private respondent's products.
Evidently, in order to place "Hope Luxury," "Premium More," and "Champion"
cigarettes within the scope of the amendatory law and subject them to an
increased tax rate, the now disputed RMC 37-93 had to be issued. In so
doing, the BIR not simply intrepreted the law; verily, it legislated under its
quasi-legislative authority. The due observance of the requirements of
notice, of hearing, and of publication should not have been then ignored.
Indeed, the BIR itself, in its RMC 10-86, has observed and provided:
RMC NO. 10-86
Effectivity of Internal Revenue Rules and Regulations
It has been observed that one of the problem areas bearing on compliance
with Internal Revenue Tax rules and regulations is lack or insufficiency of due
notice to the tax paying public. Unless there is due notice, due compliance
therewith may not be reasonably expected. And most importantly, their
strict enforcement could possibly suffer from legal infirmity in the light of the
constitutional provision on "due process of law" and the essence of the Civil
Code provision concerning effectivity of laws, whereby due notice is a basic
requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).
In order that there shall be a just enforcement of rules and regulations, in
conformity with the basic element of due process, the following procedures
are hereby prescribed for the drafting, issuance and implementation of the
said Revenue Tax Issuances:
(1) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue
Audit Memorandum Orders; and (c) Revenue Memorandum Circulars and
Revenue Memorandum Orders bearing on internal revenue tax rules and
regulations.
(2) Except when the law otherwise expressly provides, the aforesaid internal
revenue tax issuances shall not begin to be operative until after due notice
thereof may be fairly presumed.
Due notice of the said issuances may be fairly presumed only after the
following procedures have been taken;
The court quoted at length from the transcript of the hearing conducted on
10 August 1993 by the Committee on Ways and Means of the House of
Representatives; viz:
THE CHAIRMAN. So you have specific information on Fortune Tobacco alone.
You don't have specific information on other tobacco manufacturers. Now,
there are other brands which are similarly situated. They are locally
manufactured bearing foreign brands. And may I enumerate to you all these
brands, which are also listed in the World Tobacco Directory . . . Why were
these brand not reclassified at 55 if your want to give a level playing filed to
foreign manufacturers?
MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue
Memorandum Circular that was supposed to come after RMC No. 37-93
which have really named specifically the list of locally manufactured
cigarettes bearing a foreign brand for excise tax purposes and includes all
these brands that you mentioned at 55 percent except that at that time,
when we had to come up with this, we were forced to study the brands of
Hope, More and Champion because we were given documents that would
indicate the that these brands were actually being claimed or patented in
other countries because we went by Revenue Memorandum Circular 1488
and we wanted to give some rationality to how it came about but we
couldn't find the rationale there. And we really found based on our own
interpretation that the only test that is given by that existing law would be
registration in the World Tobacco Directory. So we came out with this
proposed revenue memorandum circular which we forwarded to the
Secretary of Finance except that at that point in time, we went by the
Republic Act 7654 in Section 1 which amended Section 142, C-1, it said, that
on locally manufactured cigarettes which are currently classified and taxed
at 55 percent. So we were saying that when this law took effect in July 3 and
if we are going to come up with this revenue circular thereafter, then I think
our action would really be subject to question but we feel that . . .
Memorandum Circular Number 37-93 would really cover even similarly
situated brands. And in fact, it was really because of the study, the short
time that we were given to study the matter that we could not include all
the rest of the other brands that would have been really classified as foreign
brand if we went by the law itself. I am sure that by the reading of the law,
you would without that ruling by Commissioner Tan they would really have
been included in the definition or in the classification of foregoing brands.
These brands that you referred to or just read to us and in fact just for your
information, we really came out with a proposed revenue memorandum
circular for those brands. (Emphasis supplied)
(Exhibit "FF-2-C," pp. V-5 TO V-6, VI-1 to VI-3).
xxx xxx xxx
MS. CHATO. . . . But I do agree with you now that it cannot and in fact that is
why I felt that we . . . I wanted to come up with a more extensive coverage
and precisely why I asked that revenue memorandum circular that would
cover all those similarly situated would be prepared but because of the lack
of time and I came out with a study of RA 7654, it would not have been
possible to really come up with the reclassification or the proper
classification of all brands that are listed there. . .(emphasis supplied)
(Exhibit "FF-2d," page IX-1)
Separate Opinions
BELLOSILLO, J.: separate opinion:
RA 7654 was enacted by Congress on 10 June 1993, signed into law by the
President on 14 June 1993, and took effect 3 July 1993. It amended partly
Sec. 142, par. (c), of the National Internal Revenue Code (NIRC) to read
Sec. 142. Cigars and cigarettes. . . . . (c) Cigarettes packed by machine.
There shall be levied, assessed and collected on cigarettes packed by
machine a tax at the rates prescribed below based on the constructive
manufacturer's wholesale price or the actual manufacturer's wholesale price,
whichever is higher.
(1) On locally manufactured cigarettes which are currently classified and
taxed at fifty-five percent (55%) or the exportation of which is not
authorized by contract or otherwise, fifty-five percent (55%) provided that
the minimum tax shall not be less than Five Pesos (P5.00) per pack
(emphasis supplied).
(2) On other locally manufactured cigarettes, forty-five percent (45%)
provided that the minimum tax shall not be less than Three Pesos (P3.00)
per pack.
Prior to the effectivity of RA 7654, cigarette brands Hope Luxury, Premium
More and Champion were considered local brands subjected to an ad
valorem tax at the rate of 20-45%. However, on 1 July 1993 or two (2) days
before RA 7654 took effect, petitioner Commissioner of Internal Revenue
issued RMC 37-93 reclassifying "Hope,More and Champion being
manufactured by Fortune Tobacco Corporation . . . . (as) locally
manufactured cigarettes bearing a foreign brand subject to the 55% ad
Respondent corporation on the other hand contends that RMC 37-93 is not a
mere interpretative ruling but is adjudicatory in nature where prior notice
and hearing are mandatory, and that Misamis Oriental Association of Coco
Traders, Inc. v. Department of Finance Secretary on which the Solicitor
General relies heavily is not applicable. Respondent Fortune Tobacco
Corporation also argues that RMC 37-93 discriminates against its cigarette
brands since those of its competitors which are similarly situated have not
been reclassified.
The main issues before us are (a) whether RMC 37-93 is merely an
interpretative rule the issuance of which needs no prior notice and hearing,
or an adjudicatory ruling which calls for the twin requirements of prior notice
and hearing, and, (b) whether RMC 37-93 is discriminatory in nature.
A brief discourse on the powers and functions of administrative bodies may
be instructive.
Administrative agencies posses quasi-legislative or rule making powers and
quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule
making power is the power to make rules and regulations which results in
delegated legislation that is within the confines of the granting statute and
the doctrine of nondelegability and separability of powers.
Interpretative rule, one of the three (3) types of quasi-legislative or rule
making powers of an administrative agency (the other two being
supplementary or detailed legislation, and contingent legislation), is
promulgated by the administrative agency to interpret, clarify or explain
statutory regulations under which the administrative body operates. The
purpose or objective of an interpretative rule is merely to construe the
statute being administered. It purports to do no more than interpret the
statute. Simply, the rule tries to say what the statute means. Generally, it
refers to no single person or party in particular but concerns all those
belonging to the same class which may be covered by the said interpretative
rule. It need not be published and neither is a hearing required since it is
issued by the administrative body as an incident of its power to enforce the
law and is intended merely to clarify statutory provisions for proper
observance by the people. In Taada v. Tuvera, 6 this Court expressly said
that "[i]interpretative regulations . . . . need not be published."
Quasi-judicial or administrative adjudicatory power on the other hand is the
power of the administrative agency to adjudicate the rights of persons
before it. It is the power to hear and determine questions of fact to which
the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the
same law. 7 The administrative body exercises its quasi-judicial power when
it performs in a judicial manner an act which is essentially of an executive or
administrative nature, where the power to act in such manner is incidental
to or reasonably necessary for the performance of the executive or
administrative duty entrusted to it. 8 In carrying out their quasi-judicial
functions the administrative officers or bodies are required to investigate
facts or ascertain the existence of facts, hold hearings, weigh evidence, and
draw conclusions from them as basis for their official action and exercise of
discretion in a judicial nature. Since rights of specific persons are affected it
is elementary that in the proper exercise of quasi-judicial power due process
must be observed in the conduct of the proceedings.
The importance of due process cannot be underestimated. Too basic is the
rule that no person shall be deprived of life, liberty or property without due
process of law. Thus when an administrative proceeding is quasi-judicial in
character, notice and fair open hearing are essential to the validity of the
proceeding. The right to reasonable prior notice and hearing embraces not
only the right to present evidence but also the opportunity to know the
claims of the opposing party and to meet them. The right to submit
arguments implies that opportunity otherwise the right may as well be
considered impotent. And those who are brought into contest with
government in a quasi-judicial proceeding aimed at the control of their
activities are entitled to be fairy advised of what the government proposes
and to be heard upon its proposal before it issues its final command.
There are cardinal primary rights which must be respected in administrative
proceedings. The landmark case ofAng Tibay v. The Court of Industrial
Relations 9 enumerated these rights: (1) the right to a hearing, which
includes the right of the party interested or affected to present his own case
and submit evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to support itself;
(4) the evidence must be substantial; (5) the decision must be rendered on
the evidence presented at the hearing, or at least contained in the record
and disclosed to the parties affected; (6) the tribunal or any of its judges
must act on its or his own independent consideration of the law and facts of
the controversy, and not simply accept the views of a subordinate in arriving
at a decision; and, (7) the tribunal should in all controversial questions
render its decision in such manner that the parties to the proceeding may
know the various issues involved and the reasons for the decision rendered.
In determining whether RMC No. 37-93 is merely an interpretative rule which
requires no prior notice and hearing, or an adjudicatory rule which demands
the observance of due process, a close examination of RMC 37-93 is in order.
Noticeably, petitioner Commissioner of Internal Revenue at first interprets
Sec. 142, par. (c), subpar. (1), of the NIRC, as amended, by citing the law and
clarifying or explaining what it means
Section 142 (c) (1), National Internal Revenue Code, as amended by R.A. No.
6956, provides: On locally manufactured cigarettes bearing a foreign brand,
fifty-five percent (55%) Provided, That this rate shall apply regardless of
whether or not the right to use or title to the foreign brand was sold or
transferred by its owner to the local manufacturer. Whenever it has to be
determined whether or not a cigarette bears a foreign brand, the listing of
brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern.
Under the foregoing, the test for imposition of the 55% ad valorem tax on
cigarettes is that the locally manufactured cigarettes bear a foreign brand
regardless of whether or not the right to use or title to the foreign brand was
sold or transferred by its owner to the local manufacturer. The brand must
be originally owned by a foreign manufacturer or producer. If ownership of
the cigarette brand is, however, not definitely determinable,
". . . the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern . . ."
Then petitioner makes a factual finding by declaring that Hope (Luxury),
(Premium) More and Champion are manufactured by other foreign
manufacturers
Hope is listed in the World Tobacco Directory as being manufactured by (a)
Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. More is listed in
the said directory as being manufactured by: (a) Fills de Julia Reig, Andorra;
(b) Rothmans, Australia; (c) RJR-MacDonald, Canada; (d) Rettig-Strenberg,
Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New
Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j)
R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and
(m) R.J. Reynolds, USA. "Champion" is registered in the said directory as
being manufactured by: (a) Commonwealth Bangladesh; (b) Sudan, Brazil;
(c) Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar,
Sudan; and (f) Tabac Reunies, Switzerland.
From this finding, petitioner thereafter formulates an inference that since it
cannot be determined who among the manufacturers are the real owners of
the brands in question, then these cigarette brands should be considered
foreign brands
Since there is no showing who among the above-listed manufacturers of the
cigarettes bearing the said brands are the real owner/s thereof, then it
follows that the same shall be considered foreign brand for purposes of
determining the ad valorem tax pursuant to Section 142 of the National
Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24,
1988, "in cases where it cannot be established or there is dearth of evidence
as to whether a brand is foreign or not, resort to the World Tobacco Directory
should be made."
Finally, petitioner caps RMC 37-93 with a disposition specifically directed at
respondent corporation reclassifying its cigarette brands as locally
manufactured bearing foreign brands
In view of the foregoing, the aforesaid brands of cigarettes, viz: Hope, More
and Champion being manufactured by Fortune Tobacco Corporation are
hereby considered locally manufactured cigarettes bearing a foreign brand
subject to the 55% ad valorem tax on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.
It is evident from the foregoing that in issuing RMC 37-93 petitioner
Commissioner of Internal Revenue was exercising her quasi-judicial or
administrative adjudicatory power. She cited and interpreted the law, made
a factual finding, applied the law to her given set of facts, arrived at a
conclusion, and issued a ruling aimed at a specific individual. Consequently
prior notice and hearing are required. It must be emphasized that even the
text alone of RMC 37-93 implies that reception of evidence during a hearing
is appropriate if not necessary since it invokes BIR Ruling No. 410-88, dated
August 24, 1988, which provides that "in cases where it cannot be
established or there is dearth of evidence as to whether a brand is foreign or
not . . . ." Indeed, it is difficult to determine whether a brand is foreign or not
if it is not established by, or there is dearth of, evidence because no hearing
has been called and conducted for the reception of such evidence. In fine, by
no stretch of the imagination can RMC 37-93 be considered purely as an
interpretative rule requiring no previous notice and hearing and simply
interpreting, construing, clarifying or explaining statutory regulations being
administered by or under which the Bureau of Internal Revenue operates.
It is true that both RMC 47-91 in Misamis Oriental Association of Coco
Traders v. Department of Finance Secretary, and RMC 37-93 in the instant
case reclassify certain products for purposes of taxation. But the similarity
between the two revenue memorandum circulars ends there. For in properly
Sirs:
This has reference to your letter dated January 16, 1990 wherein you
represented that inspite of your VAT registration of your copra trading
company, you are supposed to be exempt from VAT on the basis of BIR
Ruling dated January 8, 1988 which considered copra as an agricultural food
product in its original state. In this connection, you request for a
confirmation of your opinion as aforestated.
In reply, please be informed that copra, being an agricultural non-food
product, is exempt from VAT only if sale is made by the primary producer
pursuant to Section 103 (a) of the Tax Code, as amended. Thus as a trading
company and a subsequent seller, your sale of copra is already subject to
VAT pursuant to Section 9(b) (1) of Revenue Regulations 5-27.
This revokes VAT Ruling Nos. 009-88 and 279-88.
Very truly yours,
(Sgd.) JOSE U. ONG
Commissioner of Internal Revenue
As a clarification, this is the present and official stand of this Office unless
sooner revoked or amended. All revenue officials and employees are
enjoined to give this Circular as wide a publicity as possible.
(Sgd.) JOSE U. ONG
Commissioner of Internal Revenue
Quite obviously, the very text of RMC 47-91 itself shows that it is merely an
interpretative rule as it simply quotes a VAT Ruling and reminds those
concerned that the ruling is the present and official stand of the Bureau of
Internal Revenue. Unlike in RMC 37-93 where petitioner Commissioner
manifestly exercised her quasi-judicial or administrative adjudicatory power,
in RMC 47-91 there were no factual findings, no application of laws to a
given set of facts, no conclusions of law, and no dispositive portion directed
at any particular party.
Another difference is that in the instant case, the issuance of the assailed
revenue memorandum circular operated to subject the taxpayer to the new
law which was yet to take effect, while in Misamis, the disputed revenue
memorandum circular was issued simply to restate and then clarify the
prevailing position and ruling of the administrative agency, and no new law
yet to take effect was involved. It merely interpreted an existing law which
had already been in effect for some time and which was not set to be
amended. RMC 37-93 is thus prejudicial to private respondent alone.
A third difference, and this likewise resolves the issue of discrimination, is
that RMC 37-93 was ostensibly issued to subject the cigarette brands of
respondent corporation to a new law as it was promulgated two days before
the expiration of the old law and a few hours before the effectivity of the
new law. That RMC 37-93 is particularly aimed only at respondent
corporation and its three (3) cigarette brands can be seen from the
dispositive portion of the assailed revenue memorandum circular
In view of the foregoing, the aforesaid brands of cigarettes, viz: Hope, More,
and Champion being manufactured by Fortune Tobacco Corporation are
hereby considered locally manufactured cigarettes bearing a foreign brand
subject to the 55% ad valorem tax on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.
Thus the argument of the Solicitor General that RMC 37-93 is not
discriminatory as "[i]t merely lays down the test in determining whether or
not a locally manufactured cigarette bears a foreign brand using the
cigarette brandsHope, More and Champion as specific examples," cannot be
accepted, much less sustained. Without doubt, RMC 37-93 has a tremendous
effect on respondent corporation and solely on respondent corporation
as its deficiency ad valorem tax assessment on its removals of Hope,
Luxury, Premium More, and Champion cigarettes for six (6) hours alone, i.e.,
from six o'clock in the evening of 2 July 1993 which is presumably the time
respondent corporation was supposed to have received the facsimile
message sent by Deputy Commissioner Victor A. Deoferio, until twelve
o'clock midnight upon the effectivity of the new law, was already
P9,598,334.00. On the other hand, RMC 47-91 was issued with no purpose
except to state and declare what has been the official stand of the
administrative agency on the specific subject matter, and was
indiscriminately directed to all copra traders with no particular individual in
mind.
That petitioner Commissioner of Internal Revenue is an expert in her filed is
not attempted to be disputed; hence, we do not question the wisdom of her
act in reclassifying the cigarettes. Neither do we deny her the exercise of her
quasi-legislative or quasi-judicial powers. But most certainly, by
constitutional mandate, the Court must check the exercise of these powers
and ascertain whether petitioner has gone beyond the legitimate bounds of
her authority.
In the final analysis, the issue before us in not the expertise, the authority to
promulgate rules, or the wisdom of petitioner as Commissioner of Internal
Revenue is reclassifying the cigarettes of private respondents. It is simply
the faithful observance by government by government of the basic
constitutional right of a taxpayer to due process of law and equal protection
of the laws. This is what distresses me no end the manner and the
circumstances under which the cigarettes of private respondent were
"More," and "Champion" cigarettes from 6:00 p.m. to 12:00 midnight of July
2, 1993, in the total amount of P9,598,334.00. It claims that the circular,
upon which the assessment was based and made, is defective, invalid and
unenforceable for having been issued without notice and hearing and in
violation of the equal protection clause guaranteed by the Constitution.
The majority upholds these claims of private respondent, convinced that the
Circular in question, in the first place, did not give prior notice and hearing,
and so, it could not have been valid and effective. It proceeds to affirm the
factual findings of the Court of Tax Appeals, which findings were considered
correct by respondent Court of Appeals, to the effect that the petitioner
Commissioner of Internal Revenue had indeed blatantly failed to comply with
the said twin requirements of notice and hearing, thereby rendering the
issuance of the questioned Circular to be in violation of the due process
clause of the Constitution. It is also its dominant opinion that the questioned
Circular discriminates against private respondent Fortune Tobacco
Corporation insofar as it seems to affect only its "Hope," "More," and
"Champion" cigarettes, to the exclusion of other cigarettes apparently of the
same kind or classification as these cigarettes manufactured by private
respondent.
With all due respect, I disagree with the majority in its disquisition of the
issues and its resulting conclusions.
Section 245 of the National Internal Revenue Code,
as amended, empowers the Commissioner of Internal
Revenue to issue the questioned Circular
Section 245 of the National Internal Revenue Code, as amended, provides:
Sec. 245. Authority of Secretary of Finance to promulgate rules and
regulations. The Secretary of Finance, upon recommendation of the
Commissioner, shall promulgate all needful rules and regulations for the
effective enforcement of the provisions of this Code . . . without prejudice to
the power of the Commissioner of Internal Revenue to make rulings or
opinions in connection with the implementation of the provisions of internal
revenue laws, including rulings on the classification of articles for sales tax
and similar purposes.
The subject of the questioned Circular is the reclassification of cigarettes
subject to excise taxes. It was issued in connection with Section 142 (c) (1)
of the National Internal Revenue Code, as amended, which imposes ad
valorem excise taxes on locally manufactured cigarettes bearing a foreign
brand. The same provision prescribes the ultimate criterion that determines
which cigarettes are to be considered "locally manufactured cigarettes
bearing a foreign brand." It provides:
. . . Whenever it has to be determined whether or not a cigarette bears a
foreign brand, the listing of brands manufactured in foreign countries
appearing in the current World Tobacco Directory shall govern.
There is only one World Tobacco Directory for a given current year, and the
same is mandated by law to be the BIR Commissioner's controlling basis for
determining whether or not a particular locally manufactured cigarette is
one bearing a foreign brand. In so making a determination, petitioner should
inquire into the entries in the World Tobacco Directory for the given current
year and shall be held bound by such entries therein. She is not required to
subject the results of her inquiries to feedback from the concerned cigarette
manufacturers, and it is doubtlessly not desirable nor managerially sound to
court dispute thereon when the law does not, in the first place, require
debate or hearing thereon. Petitioner may make such a determination
because she is the Chief Executive Officer of the administrative agency that
is the Bureau of Internal Revenue in which are vested quasi-legislative
powers entrusted to it by the legislature in recognition of its more
encompassing and unequalled expertise in the field of taxation.
The vesture of quasi-legislative and quasi-judicial powers in administrative
bodies is not unconstitutional, unreasonable and oppressive. It has been
necessitated by "the growing complexity of the modern society" (Solid
Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative
bodies are necessary to help in the regulation of society's ramified activities.
"Specialized in the particular field assigned to them, they can deal with the
problems thereof with more expertise and dispatch than can be expected
from the legislature or the courts of justice" . . . 1
Statutorily empowered to issue rulings or opinions embodying the proper
determination in respect to classifying articles, including cigarettes, for
purposes of tax assessment and collection, petitioner was acting well within
her prerogatives when she issued the questioned Circular. And in the
exercise of such prerogatives under the law, she has in her favor the
presumption of regular performance of official duty which must be overcome
by clearly persuasive evidence of stark error and grave abuse of discretion
in order to be overturned and disregarded.
It is irrelevant that the Court of Tax Appeals makes much of the effect of the
passing of Republic Act No. 7654 2on petitioner's power to classify
cigarettes. Although the decisions assailed and sought to be reviewed, as
well as the pleadings of private respondent, are replete with alleged
admissions of our legislators to the effect that the said Act was intended to
freeze the current classification of cigarettes and make the same an integral
part of the said Act, certainly the repeal, if any, of petitioner's power to
classify cigarettes must be reckoned from the effectivity of the said Act and
not before. Suffice it to say that indisputable is the plain fact that the
questioned Circular was issued on July 1, 1993, while the said Act took effect
on July 3, 1993.
The contents of the questioned circular have not
been proven to be erroneous or illegal as to render
issuance thereof an act of grave abuse of
discretion on the part of petitioner Commissioner
Prior to the effectivity of R.A. No. 7654, Section 142 (c) (1) of the National
Internal Revenue Code, as amended, levies the following ad valorem taxes
on cigarettes in accordance with their predetermined classifications as
established by the Commissioner of Internal Revenue:
. . . based on the manufacturer's registered wholesale price:
(1) On locally manufactured cigarettes bearing a foreign brand, fifty-five
percent (55%) Provided, That this rate shall apply regardless of whether or
not the right to use or title to the foreign brand was sold or transferred by its
owner to the local manufacturer. Whenever it has to be determined whether
or not a cigarette bears a foreign brand, the listing of brands manufactured
in foreign countries appearing in the current World Tobacco Directory shall
govern.
SO ORDERED.[9]
Amante, et al. appealed the aforesaid decision to the CA, docketed as
CA-G.R. CV No. 38182.
On June 28, 1994, the CA affirmed with modification the decision of the
trial court in the injunction case. The dispositive portion of the appellate
courts decision[10] reads as follows:
Between October 1986 and August 1987, after the injunction case was
filed by Amante, et al., SRRDC filed with the Municipal Trial Court (MTC) of
Cabuyao, Laguna, several complaints for forcible entry with preliminary
injunction and damages against Amante, et al., docketed as Civil Cases Nos.
250, 258, 260, 262 and 266. SRRDC alleged that some time in July 1987,
they learned that Amante, et al., without their authority and through stealth
and strategy, were clearing, cultivating and planting on the subject property;
and that despite requests from SRRDCs counsel, Amante, et al. refused to
vacate the property, prompting them to file the ejectment cases. [16] Amante,
et al. denied that SRRDC are the absolute owners of the property, stating
that they have been in peaceful possession thereof, through their
predecessors-in-interest, since 1910.[17]
Administrative Proceedings
While the injunction and ejectment cases were still in process, it
appears that in August, 1989, the Municipal Agrarian Reform Office (MARO)
issued a Notice of Coverage to SRRDC, informing petitioners that the
property covered by TCT Nos. T-81949, T-84891 and T-92014 is scheduled for
compulsory acquisition under the Comprehensive Agrarian Reform Program
(CARP).[22] SRRDC filed its Protest and Objection with the MARO on the
grounds that the area was not appropriate for agricultural purposes, as it
was rugged in terrain with slopes of 18% and above, and that the occupants
of the land were squatters, who were not entitled to any land as
beneficiaries.[23] Thereafter, as narrated in the Decision of the Court dated
October 12, 2001 in G.R. No. 112526, the following proceedings ensued:
On August 29, 1989, the farmer beneficiaries together with the BARC
chairman answered the protest and objection stating that the slope of the
land is not 18% but only 5-10% and that the land is suitable and
economically viable for agricultural purposes, as evidenced by the
Certification of the Department of Agriculture, municipality of Cabuyao,
Laguna.
On September 8, 1989, MARO Belen dela Torre made a summary
investigation report and forwarded the Compulsory Acquisition Folder
Indorsement (CAFI) to the Provincial Agrarian Reform Officer (hereafter,
PARO).
On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of
the compulsory acquisition to the Secretary of Agrarian Reform.
On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of
Land Acquisition and Development, DAR forwarded two (2) Compulsory
Acquisition Claim Folders covering the landholding of SRRDC, covered by
TCT Nos. T-81949 and T-84891 to the President, Land Bank of the Philippines
for further review and evaluation.
On December 12, 1989, Secretary of Agrarian Reform Miriam
Defensor Santiago sent two (2) notices of acquisition to petitioner,
stating that petitioners landholdings covered by TCT Nos. T-81949
and T-84891, containing an area of 188.2858 and 58.5800 hectares,
valued at P4,417,735.65 and P1,220,229.93, respectively, had been
placed under the Comprehensive Agrarian Reform Program.
On February 6, 1990, petitioner SRRDC in two letters separately addressed
to Secretary Florencio B. Abad and the Director, Bureau of Land Acquisition
and Distribution, sent its formal protest, protesting not only the amount of
compensation offered by DAR for the property but also the two (2) notices of
acquisition.
On March 17, 1990, Secretary Abad referred the case to the DARAB
for summary proceedings to determine just compensation under
R.A. No. 6657, Section 16.
On March 23, 1990, the LBP returned the two (2) claim folders previously
referred for review and evaluation to the Director of BLAD mentioning its
inability to value the SRRDC landholding due to some deficiencies.
On March 28, 1990, Executive Director Emmanuel S. Galvez wrote
the Land Bank President Deogracias Vistan to forward the two (2)
claim folders involving the property of SRRDC to the DARAB for it to
conduct summary proceedings to determine the just compensation
for the land.
On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines
stating that its property under the aforesaid land titles were exempt from
CARP coverage because they had been classified as watershed area and
were the subject of a pending petition for land conversion.
On May 10, 1990, Director Narciso Villapando of BLAD turned over the two
(2) claim folders (CACFs) to the Executive Director of the DAR Adjudication
Board for proper administrative valuation. Acting on the CACFs, on
Ownership Award (CLOA) were issued in the name of the farmersbeneficiaries on February 26, 1992.[27]
In the meantime, SRRDC had filed with the CA a petition for review of
the DARABs decision, docketed as CA-G.R. SP No. 27234.
On November 5, 1993, the CA affirmed the decision of DARAB, to wit:
WHEREFORE, premises considered, the DARAB decision dated December 19,
1991 is AFFIRMED, without prejudice to petitioner Sta. Rosa Realty
Development Corporation ventilating its case with the Special Agrarian Court
on the issue of just compensation.[28]
Hence, SRRDC filed on November 24, 1993, herein petition, docketed as
G.R. No. 112526 on the following grounds:
I
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT
THE SRRDC PROPERTIES, DESPITE THE UNDISPUTED FACT OF THEIR NONAGRICULTURAL CLASSIFICATION PRIOR TO RA 6657, ARE COVERED BY THE
CARP CONTRARY TO THE NATALIA REALTY DECISION OF THIS HONORABLE
COURT.
i. The SRRDC properties have been zoned and approved as
PARK since 1979.
ii. The SRRDC properties form part of a watershed area.
II
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DISREGARDING
ECOLOGICAL CONSIDERATIONS AS MANDATED BY LAW.
III
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN AFFIRMING THE
DISTRIBUTION OF THE SRRDC PROPERTIES TO PRIVATE RESPONDENTS WHO
HAVE BEEN JUDICIALLY DECLARED AS SQUATTERS AND THEREFORE ARE NOT
QUALIFIED BENEFICIARIES PURSUANT TO THE CENTRAL MINDANAO
UNIVERSITY DECISION OF THIS HONORABLE COURT.
i. The acquisition of the SRRDC properties cannot be valid for
future beneficiaries.
ii. Section 22 of RA 6657 insofar as it expands the coverage of
the CARP to landless residents is unconstitutional.
IV
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN HOLDING THAT
THE DARAB HAS JURISDICTION TO PASS UPON THE ISSUE OF WHETHER THE
SRRDC PROPERTIES ARE SUBJECT TO CARP COVERAGE. [29]
On October 12, 2001, the Court rendered its Decision in G.R. No.
112526 only, setting aside the decision of the CA in CA-G.R. SP No. 27234
and ordering the remand of the case to the DARAB for re-evaluation and
determination of the nature of the land. The dispositive portion of the
Decision reads as follows:
IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of
Appeals in CA-G.R. SP No. 27234.
In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation
and determination of the nature of the parcels of land involved to resolve
the issue of its coverage by the Comprehensive Land Reform Program.
In the meantime, the effects of the CLOAs issued by the DAR to supposed
farmer beneficiaries shall continue to be stayed by the temporary restraining
order issued on December 15, 1993, which shall remain in effect until final
decision on the case.
No costs.
SO ORDERED.[30]
It is the opinion of the Court in G.R. No. 112526, that the property is
part of a watershed, and that during the hearing at the DARAB, there was
proof that the land may be excluded from the coverage of the CARP because
of its high slopes.[31] Thus, the Court concluded that a remand of the case to
the DARAB for re-evaluation of the issue of coverage is appropriate in order
to resolve the true nature of the subject property.[32]
In their Memorandum, Amante, et al. argues that there exist compelling
reasons to grant the second motion for reconsideration of the assailed
decision of the Court, to wit:
2.1 Only QUESTIONS OF LAW are admittedly and undeniably at issue; yet
the Honorable Court reviewed the findings of facts of the Court of Appeals
and the DARAB although the case does not fall into any of the wellrecognized exceptions to conduct a factual review. Worse, the 12 October
2001 Decision assumed facts not proven before any administrative, quasijudicial or judicial bodies;
2.2 The DARAB and the Court of Appeals already found the land to be
CARPable; yet the Honorable Court remanded the case to DARAB to reevaluate if the land is CARPable;
2.3 The Decision did not express clearly and distinctly the facts and the law
on which it is based;
2.4 The Decision renewed the Temporary Restraining Order issued on 15
December 1993, issuance of which is barred by Sec. 55 of R.A. 6657; and
2.5 This Honorable Court denied private respondents Motion for
Reconsideration although issues raised therein were never passed upon in
the 12 October 2001 Decision or elsewhere.[33]
The DAR and the DARAB, through the Office of the Solicitor General, did
not interpose any objection to the second motion for reconsideration. It also
maintained that if SRRDCs claim that the property is watershed is true, then
it is the DENR that should exercise control and supervision in the disposition,
utilization, management, renewal and conservation of the property. [34]
SRRDC meanwhile insists that there are no compelling reasons to give
due course to the second motion for reconsideration.[35]
At the outset, the Court notes that petitioner designated its petition in
G.R. No. 112526 as one for review on certiorari of the decision of the CA. In
the same breath, it likewise averred that it was also being filed as a special
civil action for certiorari as public respondents committed grave abuse of
discretion.[36] Petitioner should not have been allowed, in the first place, to
pursue such remedies simultaneously as these are mutually exclusive. [37]
It is SRRDCs claim that the CA committed grave abuse of discretion in
holding that the subject property is agricultural in nature. In support of its
contention, it argued, among others, that the subject property had already
been classified as park since 1979 under the Zoning Ordinance of Cabuyao,
as approved by the Housing and Land Use Regulatory Board (HLURB); that it
forms part of a watershed; and that the CA disregarded ecological
considerations.[38] SRRDC also claimed that Amante, et al. are not qualified
beneficiaries.[39]
Clearly, these issues are factual in nature, which the Court, as a rule,
should not have considered in this case. However, there are recognized
exceptions, e.g., when the factual inferences of the appellate court are
manifestly mistaken; the judgment is based on a misapprehension of facts;
or the CA manifestly overlooked certain relevant and undisputed facts that,
if properly considered, would justify a different legal conclusion. [40] The
present cases fall under the above exceptions.
Thus, in order to finally set these cases to rest, the Court shall resolve
the substantive matters raised, which in effect comes down to the issue of
the validity of the acquisition of the subject property by the Government
under Republic Act (R.A.) No. 6657, or the Comprehensive Agrarian Reform
Law of 1988 (CARL).
As noted earlier, the DARAB made its finding regarding the nature of
the property in question, i.e., the parcels of land are agricultural and may be
the subject of compulsory acquisition for distribution to farmer-beneficiaries,
thus:
Ocular inspections conducted by the Board show that the subject
landholdings have been under the possession and tillage of the DAR
identified potential beneficiaries which they inherited from their forebears
(workers of the Yulo Estate). They are bonafide residents and registered
voters (DARAB Exhibits C and J) of Barangay Casile, Cabuyao, Laguna. There
is a barangay road leading toward the barangay school and sites and the
settlement has a barangay hall, church, elementary school buildings (DARAB
Exhibit Q), Comelec precincts (DARAB Exhibits J-1 and J-2), and other
structures extant in progressive communities. The barangay progressive
development agencies, like the DECS, DA, COMELEC, DAR and Support
Services of Land Bank, DPWH, DTI and the Cooperative Development
Authority have extended support services to the community (DARAB Exhibits
I, K to K-3, L, M, N, O, P to P-6). More importantly, subject landholdings
are suitable for agriculture. Their topography is flat to undulating 315% slope. (Testimony of Rosalina Jumaquio, Agricultural Engineer,
DAR, TSN, June 21, 1991, DARAB Exhibits F and H). Though some
portions are over 18% slope, nevertheless, clearly visible thereat
are fruit-bearing trees, like coconut, coffee, and pineapple
3. Photocopies of pictures taken by Mr. Ernesto Garcia, Officer-inCharge of the Special Project Section of CJ Yulo and Sons, Inc.,
of portions of Barangay Casile;[48]
The Court recognizes the power of a local government to reclassify and
convert lands through local ordinance, especially if said ordinance is
approved by the HLURB.[49] Municipal Ordinance No. 110-54 dated November
3, 1979, enacted by the Municipality of Cabuyao, divided the municipality
into residential, commercial, industrial, agricultural and institutional districts,
and districts and parks for open spaces. [50] It did not convert, however,
existing agricultural lands into residential, commercial, industrial, or
institutional. While it classified Barangay Casile into a municipal park, as
shown in its permitted uses of land map, the ordinance did not provide for
the retroactivity of its classification. In Co vs. Intermediate Appellate Court,
[51]
it was held that an ordinance converting agricultural lands into residential
or light industrial should be given prospective application only, and should
not change the nature of existing agricultural lands in the area or the legal
relationships existing over such lands. Thus, it was stated:
A reading of Metro Manila Zoning Ordinance No. 81-01, series of 1981, does
not disclose any provision converting existing agricultural lands in the
covered area into residential or light industrial. While it declared that after
the passage of the measure, the subject area shall be used only for
residential or light industrial purposes, it is not provided therein that it shall
have retroactive effect so as to discontinue all rights previously acquired
over lands located within the zone which are neither residential nor light
industrial in nature. This simply means that, if we apply the general
rule, as we must, the ordinance should be given prospective
operation only. The further implication is that it should not change
the nature of existing agricultural lands in the area or the legal
relationships existing over such lands [52] (Emphasis supplied)
Under Section 3 (c) of R.A. No. 6657, agricultural land is defined as land
devoted to agricultural activity and not classified as mineral, forest,
residential, commercial or industrial land. Section 3 (b) meanwhile defines
agricultural activity as the cultivation of the soil, planting of crops, growing
of fruit trees, raising of livestock, poultry or fish, including the harvesting of
such products, and other farm activities, and practices performed by a
farmer in conjunction with such farming operations done by persons whether
natural or juridical.
Before Barangay Casile was classified into a municipal park by the local
government of Cabuyao, Laguna in November 1979, it was part of a vast
property popularly known as the Canlubang Sugar Estate. SRRDC claimed
that in May 1979, the late Miguel Yulo allowed the employees of the Yulo
group of companies to cultivate a maximum area of one hectare each
subject to the condition that they should not plant crops being grown by the
Canlubang Sugar Estate, like coconuts and coffee, to avoid confusion as to
ownership of crops.[53] The consolidation and subdivision plan surveyed for
SRRDC on March 10-15, 1984[54] also show that the subject property is sugar
land. Evidently, the subject property is already agricultural at the time the
municipality of Cabuyao enacted the zoning ordinance, and such ordinance
should not affect the nature of the land. More so since the municipality
of Cabuyao did not even take any step to utilize the property as a
park.
SRRDC cites the case of Natalia Realty, Inc. vs. DAR,[55] wherein it was
ruled that lands not devoted to agricultural activity and not classified as
mineral or forest by the DENR and its predecessor agencies, and not
classified in town plans and zoning ordinances as approved by the HLURB
and its preceding competent authorities prior to the enactment of R.A. No.
6657 on June 15, 1988, are outside the coverage of the CARP. Said ruling,
however, finds no application in the present case. As previously stated,
Municipal Ordinance No. 110-54 of the Municipality of Cabuyao did not
provide for any retroactive application nor did it convert existing agricultural
lands into residential, commercial, industrial, or institutional. Consequently,
the subject property remains agricultural in nature and therefore within the
coverage of the CARP.
Only on March 9, 2004, SRRDC filed with the Court a Manifestation
pointing out DAR Order No. (E)4-03-507-309 dated February 17, 2004,
exempting from CARP coverage two parcels of land owned by SRRDC and
covered by TCT Nos. T-85573 and T-92014. [56] The DAR found that these
properties have been re-classified into Municipal Parks by the Municipal
Ordinance of Cabuyao, Laguna, and are part of the Kabangaan-Casile
watershed, as certified by the DENR.[57]
The Court notes however that the said DAR Order has absolutely no
bearing on these cases. The herein subject property is covered by TCT Nos.
81949 and 34891, totally different, although adjacent, from the property
referred to in said DAR Order.
SRRDC also contends that the property has an 18% slope and over and
therefore exempt from acquisition and distribution under Section 10 of R.A.
No. 6657. What SRRDC opted to ignore is that Section 10, as implemented
by DAR Administrative Order No. 13 dated August 30, 1990, also provides
that those with 18% slope and over but already developed for
agricultural purposes as of June 15, 1988, may be allocated to
qualified occupants.[58] Hence, even assuming that the property has an
18% slope and above, since it is already developed for agricultural purposes,
then it cannot be exempt from acquisition and distribution. Moreover, the
topography maps prepared by Agricultural Engineer Rosalina H. Jumaquio
show that the property to be acquired has a 5-10% flat to undulating scope;
[59]
that it is suitable to agricultural crops;[60] and it is in fact already planted
with diversified crops.[61]
Also, the Certification dated July 1, 1991 by Geodetic Engineer Conrado
R. Rigor that the top portion of Barangay Casile has a 0 to 18% slope while
the side of the hill has a 19 to 75% slope, [62] was presented by SRRDC only
during the proceedings before the CA which had no probative value in a
petition for review proceedings. The Court notes that SRRDC had been given
ample time and opportunity by the DARAB to prove the grounds for its
protest and objection but miserably failed to take advantage of such time
and opportunity[63] in the DARAB proceedings.
Evidently, SRRDC had a hand in the degradation of the area, and now
wants to put the entire blame on the farmer-beneficiaries. It is reasonable to
conclude that SRRDC is merely using ecological considerations to avert any
disposition of the property adverse to it.
But SRRDCs reliance on the CMU case is flawed. In the CMU case, the
subject property from the very beginning was not alienable and disposable
because Proclamation No. 476 issued by the late President Carlos P. Garcia
already reserved the property for the use of the school. Besides, the subject
property in the CMU case was actually, directly and exclusively used and
Finally, the Court notes that then DAR Secretary Benjamin T. Leong
issued a Memorandum on July 11, 1991, ordering the opening of a trust
account in favor of SRRDC. In Land Bank of the Philippines vs. Court of
Appeals, this Court struck down as void DAR Administrative Circular No. 9,
Series of 1990, providing for the opening of trust accounts in lieu of the
deposit in cash or in bonds contemplated in Section 16 (e) of R.A. No. 6657.
As a result, the DAR issued Administrative Order No. 2, Series of 1996,
converting trust accounts in the name of landowners into deposit accounts.
[98]
Thus, the trust account opened by the LBP per instructions of DAR
Secretary Benjamin T. Leong should be converted to a deposit account, to be
retroactive in application in order to rectify the error committed by the DAR
in opening a trust account and to grant the landowners the benefits
concomitant to payment in cash or LBP bonds prior to the ruling of the Court
in Land Bank of the Philippines vs. Court of Appeals. The account shall earn
a 12% interest per annum from the time the LBP opened a trust account up
to the time said account was actually converted into cash and LBP bonds
deposit accounts.
Given the foregoing conclusions, the petition filed in G.R. No. 118838,
which primarily rests on G.R. No. 112526, should be granted.
The judgments of the trial court in the injunction case (Civil Case No. B2333) and the CA in CA-G.R. SP No. 38182 were premised on SRRDCs
transfer certificates of title over the subject property. The trial court and the
CA cannot be faulted for denying the writ of injunction prayed for by
Amante, et al. since at the time the trial court rendered its decision in the
injunction case on January 20, 1992, SRRDC was still the holder of the titles
covering the subject property. The titles in its name were cancelled and
corresponding TCTs were issued in the name of the Republic of the
Philippines on February 11, 1992, and CLOAs were issued to the farmerbeneficiaries on February 26, 1992. When Amante, et al., in their motion for
reconsideration filed in CA-G.R. SP No. 38182, brought to the CAs attention
the issuance of the CLOAs, the CA, per Resolution dated January 19, 1995,
reiterated its ruling that whether or not the subject property is covered by
the Comprehensive Agrarian Reform Law (R.A. No. 6657) is the subject
matter of a separate case, and we cannot interfere with the same at the
present time. The CA further stated that (O)ur present decision is, therefore,
not intended to preempt any judgment or prejudice the right of any party in
the said case.[99] It must be noted that at that juncture, the DARAB Decision
and the CA decision in CA-G.R. SP No. 27234, finding the subject property
covered by the CARP Law, is yet to be finally resolved by this Court inG.R.
No. 112526 and in fact, a temporary restraining order was issued by the
Court on December 15, 1993, enjoining the DARAB from enforcing the
effects of the CLOAs. Amante, et al. was likewise restrained from further
clearing the subject property.[100] Hence, the decision of the trial court and
the CA denying the writ of injunction was warranted.
Nevertheless, considering that the subject property is agricultural and
may be acquired for distribution to farmer-beneficiaries identified by the
DAR under the CARP, the transfer certificates of title issued in the name of
the Republic of the Philippines and the CLOAs issued by the DAR in the
names of Amante, et al., [101] are valid titles and therefore must be upheld.By
virtue thereof, Amante, et al. who have been issued CLOAs are now
the owners of the subject property. Consequently, the decisions of the
trial court in the injunction case and the CA in CA-G.R. SP No. 38182 must
now be set aside, insofar as it orders Amante, et al. to vacate and/or enjoins
them from entering the subject property.
The Court, however, agrees with the CA that Amante, et al. is not
entitled to actual, moral and exemplary damages, as well as attorneys fees.
SRRDCs right of possession over the subject property was predicated on its
claim of ownership, and it cannot be sanctioned in exercising its rights or
protecting its interests thereon. As was ruled by the CA, Amante, et al. is
merely entitled to nominal damages as a result of SRRDCs acts. [102]
All is not lost in this case. In its Memorandum dated September 29,
1993, to the DAR Secretary, the DENR manifested that:
. . . the farmers themselves could be tapped to undertake watershed
management and protection. This community-based approach in natural
resource management, is in fact, being used in numerous watershed
management projects nationwide. Adopting the same approach in the area
is deemed the best possible solution to the case since it will not prejudice
the CLOAs issued to the farmer-beneficiaries. They should, however, be
required to undertake the necessary reforestation and other watershed
management/rehabilitation measures in the area.
In view of the foregoing, we recommend that a watershed management plan
for the area espousing the community-based approach be drawn-up jointly
by the DAR and DENR. . . .[103]
If SRRDC sincerely wants to preserve the property for ecological
considerations, it can be done regardless of who owns it. After all, we are all
stewards of this earth, and it rests on all of us to tend to it.
WHEREFORE, the Second Motion for Reconsideration is GRANTED. The
Courts Decision dated October 12, 2001 in G.R. No. 112526 is SET ASIDE and
the Decision of the Court of Appeals dated November 5, 1993 in CA-G.R. SP
No. 27234 is AFFIRMED with MODIFICATION, in that the Land Bank of the
Philippines is ordered to convert the trust account in the name of Sta. Rosa
Realty Development Corporation to a deposit account, subject to a 12%
interest per annum from the time the LBP opened a trust account up to the
time said account was actually converted into cash and LBP bonds deposit
accounts. The temporary restraining order issued by the Court on December
15, 1993, is LIFTED.
The petition filed by Amante, et al. in G.R. No. 118838 is GRANTED in
that Sta. Rosa Realty Development Corporation is hereby ENJOINED from
disturbing the peaceful possession of the farmer-beneficiaries with CLOAs.
The Decision of the Court of Appeals dated June 28, 1994 in CA-G.R. CV No.
38182 is AFFIRMED insofar as the award of nominal damages is concerned.
The Department of Environment and Natural Resources and the
Department of Agrarian Reform, in coordination with the farmer-beneficiaries
identified by the DAR, are URGED to formulate a community-based
watershed plan for the management and rehabilitation of Barangay Casile.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and CarpioMorales, JJ., concur.
on September 30, 1991, Department Circular No. 91-260, with the purpose
of minimizing or eliminating situations wherein multiple operators provide
local exchange service in a given area. Pursuant thereto, the National
Telecommunications Commission (NTC) was tasked to define the boundaries
of local exchange areas and authorize only one franchised local exchange
carrier to provide local exchange service within such areas.
Thereafter, on July 12, 1993, then President Fidel V. Ramos issued
Executive Order No. 109 entitled Local Exchange Carrier Service. Section 2
thereof provides that all existing International Gateway Facility (IGF)
operators[2] are required to provide local exchange carrier services in
unserved and underserved areas, including Metro Manila, thereby promoting
universal access to basic telecommunications service.
EASTERN
TELECOMMUNICATIONS
PHILIPPINES,
INC.
and
TELECOMMUNICATIONS TECHNOLOGIES, INC., petitioners, vs.
INTERNATIONAL
COMMUNICATION
CORPORATION,
respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
The role of the telecommunications industry in Philippine progress and
development cannot be understated. Time was when the industry was
dominated by a few -- an oligarchy of sorts where the elite made the
decisions and serfdom had no choice but acquiesce. Sensing the need to
abrogate their dominion, the government formulated policies in order to
create an environment conducive to the entry of new players. Thus, in
October 1990, the National Telecommunications Development Plan 19912010 (NTDP) was formulated and came into being. Designed by the
Department of Transportation and Communications (DOTC), the NTDP
provides for the framework of government policies, objectives and strategies
that will guide the industrys development for the next 20 years. As
expected, with it came the increase in the demand for telecommunications
services, especially in the area of local exchange carrier service (LECS). [1]
Concomitantly, the DOTC issued guidelines for the rationalization of
local exchange telecommunications service. In particular, the DOTC issued
Court held:
RETELCOs foremost argument is that such operations and maintenance of
the telephone system and solicitation of subscribers by [petitioners]
constituted an unfair and ruinous competition to the detriment of [RETELCO
which] is a grantee of both municipal and legislative franchises for the
purpose. In effect, RETELCO pleads for protection from the courts on the
assumption that its franchises vested in it an exclusive right as prior
operator. There is no clear showing by RETELCO, however, that its franchises
are of an exclusive character. xxx At any rate, it may very well be pointed
out as well that neither did the franchise of PLDT at the time of the
controversy confer exclusive rights upon PLDT in the operation of a
telephone system. In fact, we have made it a matter of judicial notice that all
legislative franchises for the operation of a telephone system contain the
following provision:
It is expressly provided that in the event the Philippine Government should
desire to maintain and operate for itself the system and enterprise herein
authorized, the grantee shall surrender his franchise and will turn over to the
Government said system and all serviceable equipment therein, at cost, less
reasonable depreciation.[19]
Similarly in this case, the grant of a PA to ICC to operate in areas
covered by TTPI is not tainted with any grave abuse of discretion as it was
issued by the NTC after taking into account ICCs technical and financial
capabilities, and in keeping with the policy of healthy competition fostered
by E.O. No. 109 and R.A. No. 7925.
In addition, Section 6 of R.A. No. 7925 specifically limits the DOTC from
exercising any power that will tend to influence or effect a review or a
modification of the NTCs quasi-judicial functions, to wit:
Section 6. Responsibilities of and Limitations to Department Powers. -- The
Department of Transportation and Communications (Department) shall not
exercise any power which will tend to influence or effect a review or a
modification of the Commissions quasi-judicial function.
The power of the NTC in granting or denying a provisional authority to
operate a local exchange carrier service is a quasi-judicial function, [20] a
sphere in which the DOTC cannot intrude upon. If at all, the service area
scheme provided in DOTC Dept. Circular No. 91-260 is only one of the
factors, but should not in any way, tie down the NTC in its determination of
the propriety of a grant of a provisional authority to a qualified applicant for
local exchange service.
True, NTC MC No. 11-9-93 requires prior consultation with the NTC of the
proposed service areas. As petitioners themselves argue, prior consultation
allows the NTC to assess the impact of the proposed application on the
viability of the local exchange operator in the area desired by the would-be
applicant and on the viability of the entire telecommunications industry as
well as rationalize the plans to minimize any adverse impact. [21] In this case,
prior consultation was substantially complied with and its purpose
accomplished, when ICC filed its application and the NTC was given the
opportunity to assess ICCs viability to render local exchange service in the
Manila and Navotas areas, and its impact on the telecommunications
industry.
It is also true that NTC MC No. 8-9-95 allows a duly enfranchised entity
to maintain a local exchange network if it is shown that an existing
authorized local exchange operator fails to satisfy the demand for local
exchange service.[22] In this case, the NTC noted the increasing rate in the
demand for local lines within the Manila and Navotas areas, and in order for
these areas to catch up with its neighboring cities, installation of lines must
be sped up.[23] This, in fact, is tantamount to a finding that the existing local
exchange operator failed to meet the growing demand for local lines.
ICCs technical and financial capabilities, as well as the growth rate in
the number of lines in particular areas, are matters within NTCs competence
and should be accorded respect. The NTC is given wide latitude in the
evaluation of evidence and in the exercise of its adjudicative functions, and
this includes the authority to take judicial notice of facts within its special
competence.[24]
TTPI anticipates that allowing ICC to enter its service areas will make it
difficult for it to cross-subsidize its operations in the less profitable areas.
Such argument, however, is futile. The cross-subsidy approach is apparently
the governments response to the foreseen situation wherein given its policy
of universal access, a local exchange provider will find itself operating in
areas where the demand and the publics capacity to subscribe will be lesser
than in other areas, making these areas more of a liability than an asset.
Thus, Section 4 of E.O. No. 109 provides:
SEC. 4. Cross-Subsidy. Until universal access to basic
telecommunications is achieved, and such service is
priced to reflect actual costs, local exchange service
shall continue to be cross-subsidized by other
telecommunications services within the same
company.
Meanwhile, NTC MC No. 8-9-95 provides:
ACCESS CHARGES
GENERAL
(a) Until the local exchange service is priced reflecting actual costs,
the local exchange service shall be cross-subsidized by
other telecommunications services.
(c) The subsidy need by the LE service operator to earn a rate of
return at parity with other segments of telecommunications
industry shall be charged against the international and
domestic toll and CMTS interconnect services.[25]
Both issuances allow a local exchange operator to cross-subsidize its
operations from its other telecommunications services, and not solely on the
revenues derived from the operators local exchange service.
Notably, R.A. No. 7617, as amended by R.A. No. 7674, grants TTPI the
legislative franchise to install, operate and maintain telecommunications
systems throughout the Philippines but not limited to the operations of local
exchange service or public switched network, public-calling stations, interexchange carrier or national toll transmission, value-added or enhanced
services intelligent networks, mobile or personal communications services,
international gateway facility, and paging services, among others. [26] From
these services, TTPI has other sources of revenue from which it may crosssubsidize its local exchange operations.
The Court, however, agrees with petitioners that the NTC erred when it
failed to require ICC to make an escrow deposit and a performance bond.
Section 27 of NTC MC No. 11-9-93 specifically provides:
SEC. 27. Authorized public telecommunications carriers shall be
required to deposit in escrow in a reputable bank
20% of the investment required for the first two
years of the implementation of the proposed
project.
In addition to escrow, the authorized public
telecommunications carriers shall be required to
post a performance bond equivalent to 10% of
the investment required for the first two years of the
approved project but not to exceed P500 Million.
The performance bond shall be forfeited in favor of
the government in the event that the authorized PTC
fail to comply with the terms and conditions of the
authority granted. (Emphases Ours)
The escrow deposit and the posting of a performance bond are required in
each proposed and approved project of a local exchange operator. Project
refers to a planned undertaking.[27]ICCs project for local exchange service in
the Manila and Navotas areas is separate and distinct from its projects in
other areas; hence, the NTC should have directed ICC to submit such
requirements. Evidently, the escrow deposit is required to ensure that there
is available money on hand to defray ICCs expenditures for its project, while
the performance bond will answer for the faithful compliance and
performance of ICCs rollout obligation and to compensate the government
for any damages incurred in case of ICCs default. Without these, the
government will be left holding an empty bag in the event ICC reneges in its
rollout obligation.
Section 27 of NTC MC No. 11-9-93 is silent as to whether the posting of
an escrow deposit and performance bond is a condition sine qua non for the
grant of a provisional authority. While the provision uses the term shall, said
directive pertains to the NTC, which shall require the public
telecommunications carrier to make such deposit and posting. In any event,
records show that as of May 20, 2004, ICC has been granted an extension of
its provisional authority up to November 10, 2006. [28] Records also show that
ICC has already been providing local exchange carrier service in the areas
concerned, having installed 16,000 lines in the City of Manila, 12,000 of
which have already been subscribed, 624 lines in Caloocan City, all of which
have been subscribed, while the roll-out plan for facilities and provisioning in
the City of Navotas is being finalized. [29] Hence, so as not to disrupt ICCs
rollout plan compliance, it would be more judicious for the Court to merely
require ICC to comply with Section 27 of NTC MC No. 11-9-93, within such
period to be determined by the NTC.
Furthermore, it is well to stress that petitioner TTPI cannot claim any
exclusive right to render telecommunications service in areas which the NTC
considers to be in need of additional providers. R.A. No. 7925 is quite
emphatic on this score, viz.:
SEC. 23. Equality of Treatment in the Telecommunications Industry. Any
advantage, favor, privilege, exemption, or immunity granted under existing
franchises, or may hereafter be granted, shall ipso factobecome part of
previously granted telecommunications franchises and shall be accorded
immediately and unconditionally to the grantees of such franchises:
Provided, however, That the foregoing shall neither apply to nor affect
provisions of telecommunications franchises concerning territory
covered by the franchise, the life span of the franchise, or the type of
service authorized by the franchise. (Emphasis Ours)
More than anything else, public service should be the primordial
objective of local exchange operators. The entry of another provider in areas
covered by TTPI should pose as a challenge for it to improve its quality of
service. Ultimately, it will be the public that will benefit. As pointed out in
Republic of the Phils. vs. Rep. Telephone Co, Inc.:[30]
Free competition in the industry may also provide the answer to a muchdesired improvement in the quality and delivery of this type of public utility,
to improved technology, fast and handy mobil service, and reduced user
dissatisfaction. After all, neither PLDT nor any other public utility has a
constitutional right to a monopoly position in view of the Constitutional
proscription that no franchise certificate or authorization shall be exclusive
in character or shall last longer than fifty (50) years (ibid., Section 11; Article
XIV, Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution).
WHEREFORE, the petition for review on certiorari is PARTIALLY
GRANTED. The Order of the National Telecommunications Commission dated
November 10, 1997 in NTC Case No. 96-195 is AFFIRMED with the following
modifications:
Respondent International Communication Corporation, in accordance
with Section 27 of NTC MC No. 11-9-93, is required to:
(1) Deposit in escrow in a reputable bank 20% of the investment
required for the first two years of the implementation of the
proposed project; and
(2) Post a performance bond equivalent to 10% of the investment
required for the first two years of the approved project but
not to exceed P500 Million.
within such period to be determined by the National Telecommunications
Commission.
No pronouncement as to costs.
SO ORDERED.
Petitioner alleged therein that she was the registered owner of several
parcels of land covered by Original Certificate of Title (OCT) No. 0-1670 of
the Registry of Deeds of Bulacan, [1] among which is a parcel of land
described therein as Lot 4 of Plan Psu-164390. The petition further averred
that as early as July 1973, petitioner applied with the Department of
Agrarian Reform (DAR) for the reclassification or conversion of the land for
residential, commercial or industrial purposes. The application for
conversion, however, was not acted upon. Instead, on April 25, 1988,
Emancipation Patents, and, thereafter, Transfer Certificates of Title, were
issued in favor of private respondents.
Section 50. Quasi-Judicial Powers of the DAR. The DAR is hereby vested with
primary jurisdiction to determine and adjudicate agrarian reform matters
and shall have exclusive original jurisdiction over all matters involving the
implementation of agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the Department of
Environment and Natural Resources (DENR).
xxx
CARL took effect on June 15, 1988, after it was published in two newspapers
of general circulation.
Section 17 of Executive Order No. 229 (Providing for the Mechanism for
the Implementation of the Comprehensive Agrarian Reform Program) [9]
granted DAR quasi-judicial powers to adjudicate agrarian reform matters,
thus:
Section 50. Quasi-Judicial Powers of the DAR. The DAR is hereby vested with
quasi-judicial powers to determine and adjudicate agrarian reform matters,
and shall have exclusive original jurisdiction over all matters involving
implementation of agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the Department of
Environment and Natural Resources (DENR).
xxx
Executive Order No. 129-A (Modifying Executive Order No. 129
the DAR Regional Office has no jurisdiction over the subject case.
In view of this conclusion, we need not resolve the issue of deprivation
of due process allegedly suffered by petitioner in the proceedings before the
Regional Director.
WHEREFORE, the petition is given DUE COURSE and GRANTED. The
Decision and Resolution of the Court of Appeals is REVERSED and SET
ASIDE. The restraining order issued per this Courts Resolution dated May 17,
1993 is hereby made permanent.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ.,
concur.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
challenging the November 16, 2001 Decision [2] and the March 8, 2002
Resolution[3] of the Court of Appeals (CA) in CA-GR SP No. 58987. The
Assailed Decision disposed as follows:
WHEREFORE, the petition for review is DENIED for lack of merit.[4]
The
challenged
Reconsideration.
Resolution
denied
petitioners
Motion
for
The Facts
The CA narrates the factual antecedents in this wise:
Petitioner Francisco A. Abella, Jr., a lawyer, retired from the Export Processing
Zone Authority (EPZA), now the Philippine Economic Zone Authority (PEZA),
on July 1, 1996 as Department Manager of the Legal Services Department.
He held a civil service eligibility for the position of Department Manager,
having completed the training program for Executive Leadership and
Management in 1982 under the Civil Service Academy, pursuant to CSC
Resolution No. 850 dated April 16, 1979, which was then the required
eligibility for said position.
It appears, however, that on May 31, 1994, the Civil Service Commission
issued Memorandum Circular No. 21, series of 1994, the pertinent provisions
of which read:
1. Positions Covered by the Career Executive Service
xxxxxxxxx
(b) In addition to the above identified positions and other
positions of the same category which had been previously
classified and included in the CES, all other third level
positions of equivalent category in all branches and
instrumentalities of the national government, including
government owned and controlled corporations with original
charters are embraced within the Career Executive Service
provided that they meet the following criteria:
1. the position is a career position;
2. the position is above division chief level
3. the duties and responsibilities of the position require
the performance of executive or managerial
functions.
4. Status of Appointment of Incumbents of Positions Included
Under the Coverage of the CES. Incumbents of positions which
are declared to be Career Executive Service positions for the
first time pursuant to this Resolution who hold permanent
appointments thereto shall remain under permanent status in
their respective positions. However, upon promotion or
transfer to other Career Executive Service (CES) positions,
these incumbents shall be under temporary status in said
other CES positions until they qualify.
Two years after his retirement, petitioner was hired by the Subic Bay
Metropolitan Authority (SBMA) on a contractual basis. On January 1, 1999,
petitioner was issued by SBMA a permanent employment as Department
Manager III, Labor and Employment Center. However, when said
appointment was submitted to respondent Civil Service Commission
Regional Office No. III, it was disapproved on the ground that petitioners
eligibility was not appropriate. Petitioner was advised by SBMA of the
disapproval of his appointment. In view thereof, petitioner was issued a
temporary appointment as Department Manager III, Labor and Employment
Center, SBMA on July 9, 1999.
Petitioner appealed the disapproval of his permanent appointment by
respondent to the Civil Service Commission, which issued Resolution No.
000059, dated January 10, 2000, affirming the action taken by respondent.
Petitioners motion for reconsideration thereof was denied by the CSC in
Resolution No. 001143 dated May 11, 2000.
xxxxxxxxx
Undaunted, petitioner filed with [the CA] a petition for review seeking the
reversal of the CSC Resolutions dated January 10, 2000 and May 11, 2000 on
the ground that CSC Memorandum Circular No. 21, s. 1994 is
unconstitutional as it rendered his earned civil service eligibility ineffective
or inappropriate for the position of Department Manager [III][5]
The Issues
Petitioner raises the following issues for our consideration:
A. Whether or not Respondent Court committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that petitioner
lacks the personality to question the disapproval by respondent
office of petitioners appointment as Department Manager III, Labor
and Employment Center, SBMA.
B. Whether or not Respondent Court committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that petitioner
is not the real party in interest to question the disapproval by
respondent office of petitioners appointment as Department
Manager III, Labor and Employment Center, SBMA.
C. Whether or not Respondent Court committed grave abuse of
discretion amounting to lack of jurisdiction, in dismissing
petitioners appeal on a mere technicality considering that
petitioner is questioning the constitutionality of respondent office
issuance of Section 4 of CSC Memorandum Circular No. 21, s.
1994, which deprived petitioner his property right without due
process of law.[11]
First Issue:
Who May File Reconsideration or Appeal
Preliminary Observation
Petitioner imputes to the CA grave abuse of discretion amounting to
lack of jurisdiction for ruling that he had no legal standing to contest the
disapproval of his appointment.[12] Grave abuse of discretion is a ground for a
petition for certiorari under Rule 65 of the Rules of Court. Nevertheless, this
Court resolved to grant due course to the Petition and to treat it
appropriately as a petition for review on certiorari under Rule 45 of the Rules
of Court. The grounds shall be deemed reversible errors, not grave abuse of
discretion.
shall keep a record of appointments of all officers and employees in the civil
service. All appointments requiring the approval of the Commission as
herein provided, shall be submitted to it by the appointing authority within
thirty days from issuance, otherwise, the appointment becomes ineffective
thirty days thereafter.[18]
The appointing officer and the CSC acting together, though not
concurrently but consecutively, make an appointment complete. [19] In acting
on the appointment, the CSC determines whether the appointee possesses
the appropriate civil service eligibility or the required qualifications. If the
appointee does, the appointment must be approved; if not, it should be
disapproved.[20] According to the appellate court, only the appointing
authority had the right to challenge the CSCs disapproval. It relied on
Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 (Omnibus
Rules on Appointment and Other Personal Actions), which provides:
Section 2. Request for Reconsideration of, or appeal from, the disapproval of
an appointment may be made by the appointing authority and submitted to
the Commission within fifteen (15) calendar days from receipt of the
disapproved appointment.
Appointee Allowed
Procedural Relief
Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 should not
be interpreted to restrict solely to the appointing authority the right to move
for a reconsideration of, or to appeal, the disapproval of an appointment. PD
807 and EO 292, from which the CSC derives the authority to promulgate its
rules and regulations, are silent on whether appointees have a similar right
to file motions for reconsideration of, or appeals from, unfavorable decisions
involving appointments. Indeed, there is no legislative intent to bar
appointees from challenging the CSCs disapproval.
The view that only the appointing authority may request
reconsideration or appeal is too narrow. The appointee should have the
same right. Parenthetically, CSC Resolution 99-1936 [38]recognizes the right of
the adversely affected party to appeal to the CSC Regional Offices prior to
elevating a matter to the CSC Central Office. [39] The adversely affected party
Second Issue:
Constitutionality of
Section 4, CSC Memorandum
Circular 21, Series of 1994
Alleging that his civil service eligibility was rendered ineffective and
that he was consequently deprived of a property right without due process,
[45]
petitioner challenges the constitutionality of CSC Memorandum Circular
21, s. 1994.[46] The pertinent part of this Circular reads:
1. Positions Covered by the Career Executive Service.
(a) The Career Executive Service includes the positions of
Undersecretary, Assistant Secretary, Bureau Director,
Assistant Bureau Director, Regional Director
(department-wide and bureau-wide), Assistant
Regional Director (department-wide and bureau-wide)
and Chief of Department Service[.]
(b) In addition to the above identified positions and other
positions of the same category which had been
previously classified and included in the CES, all other
third level positions in all branches and
instrumentalities of the national government, including
government-owned or controlled corporations with
original charters are embraced within the Career
Executive Service provided that they meet the
following criteria:
1. the position is a career position;
2. the position is above division chief level;
3. the duties and responsibilities of the position require
the performance of executive or managerial
functions.
xxxxxxxxx
4. Status of Appointment of Incumbents of Positions Under the Coverage of
the CES. Incumbents of positions which are declared to be Career Executive
Service positions for the first time pursuant to this Resolution who hold
permanent appointments thereto shall remain under permanent status in
their respective positions. However, upon promotion or transfer to other
Career Executive Service (CES) positions, these incumbents shall be under
temporary status in said other CES positions until they qualify.
Petitioner argues that his eligibility, through the Executive Leadership
and Management (ELM) training program, could no longer be affected by a
new eligibility requirement. He claims that he was eligible for his previous
position as department manager of the Legal Services Department, PEZA;
hence, he should retain his eligibility for the position of department manager
III, Labor and Employment Center, SBMA, notwithstanding the classification
of the latter as a CES position.
Career Service
Classified by Levels
Positions in the career service, for which appointments require
examinations, are grouped into three major levels:
(a) The first level shall include clerical, trades, crafts, and custodial service
positions which involve non-professional or sub[-]professional work in a nonsupervisory or supervisory capacity requiring less than four years of
collegiate studies;
(b) The second level shall include professional, technical, and scientific
positions which involve professional, technical, or scientific work in a nonsupervisory or supervisory capacity requiring at least four years of college
work up to Division Chief level; and
(c) The third level shall cover positions in the Career Executive Service. [51]
Entrance to the different levels requires the corresponding civil service
eligibility. Those in the third level (CES positions) require Career Service
Executive Eligibility (CSEE) as a requirement for permanent appointment. [52]
The challenged Circular did not revoke petitioners ELM eligibility. He
was appointed to a CES position; however, his eligibility was inadequate.
Eligibility must necessarily conform to the requirements of the position,
which in petitioners case was a CSEE.
Rights Protected
The challenged Circular protects the rights of incumbents as long as
they remain in the positions to which they were previously appointed. They
are allowed to retain their positions in a permanent capacity,
notwithstanding the lack of CSEE. Clearly, the Circular recognizes the rule of
prospectivity of regulations;[53] hence, there is no basis to argue that it is an
ex post facto law[54] or a bill of attainder.[55] These terms, which have settled
meanings in criminal jurisprudence, are clearly inapplicable here.
The government service of petitioner ended when he retired in 1996;
thus, his right to remain in a CES position, notwithstanding his lack of
eligibility, also ceased. Upon hisreemployment[56] years later as department
manager III at SBMA in 2001, it was necessary for him to comply with the
eligibility prescribed at the time for that position.
Security of Tenure
Not Impaired
The argument of petitioner that his security of tenure is impaired is
unconvincing. First, security of tenure in the Career Executive Service -except in the case of first and second level employees in the civil service -pertains only to rank, not to the position to which the employee may be
appointed.[57] Second, petitioner had neither rank nor position prior to his
reemployment. One cannot claim security of tenure if one held no tenure
prior to appointment.
Due Process
Not Violated
Petitioner contends that his due process rights, as enunciated in Ang
Tibay v. Court of Appeals,[58] were violated.[59] We are not convinced. He
points in particular to the CSCs alleged failure to notify him of a hearing
relating to the issuance of the challenged Circular.
The classification of positions in career service was a quasi-legislative,
not a quasi-judicial, issuance. This distinction determines whether prior
notice and hearing are necessary.
In exercising its quasi-judicial function, an administrative body
adjudicates the rights of persons before it, in accordance with the standards
laid down by the law.[60] The determination of facts and the applicable law, as
basis for official action and the exercise of judicial discretion, are essential
for the performance of this function. [61] On these considerations, it is
elementary that due process requirements, as enumerated in Ang Tibay,
must be observed. These requirements include prior notice and hearing. [62]
On the other hand, quasi-legislative power is exercised by
administrative agencies through the promulgation of rules and regulations
within the confines of the granting statute and the doctrine of nondelegation of certain powers flowing from the separation of the great
branches of the government.[63] Prior notice to and hearing of every affected
party, as elements of due process, are not required since there is no
determination of past events or facts that have to be established or
ascertained. As a general rule, prior notice and hearing are not essential to
the validity of rules or regulations promulgated to govern future conduct. [64]
Significantly, the challenged Circular was an internal matter addressed
to heads of departments, bureaus and agencies. It needed no prior
publication, since it had been issued as an incident of the administrative
bodys power to issue guidelines for government officials to follow in
performing their duties.[65]
Final Issue:
Disapproval of Appointment
Since petitioner had no CES eligibility, the CSC correctly denied his
permanent appointment. The appointee need not have been previously
heard, because the nature of the action did not involve the imposition of an
administrative disciplinary measure. [66] The CSC, in approving or
disapproving an appointment, merely examines the conformity of the
appointment with the law and the appointees possession of all the minimum
qualifications and none of the disqualification.[67]
In sum, while petitioner was able to demonstrate his standing to appeal
the CSC Resolutions to the courts, he failed to prove his eligibility to the
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.
Macario Asistio." 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.
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 Pambansa Blg. 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 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:
xxx xxx xxx
(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
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 lettercomplaint 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 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.
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:
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 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 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.
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
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 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
work of the Magat River Multi-Purpose Project. The contract price for the
work was pegged at P1,489,146,473.72 with the peso component thereof
amounting to P1,041,884,766.99 and the US$ component valued at
$60,657,992.37 at the exchange rate of P7.3735 to the dollar or
P447,361,706.73.
On November 6, 1978, the parties signed Amendment No. 1 [6] of the
contract whereby NIA agreed to increase the foreign currency allocation for
equipment financing from US$28,000,000.00 for the first and second years
of the contract to US$38,000,000.00, to be made available in full during the
first year of the contract to enable the contractor to purchase the needed
equipment and spare parts, as approved by NIA, for the construction of the
project. On April 9, 1980, the parties entered into a Memorandum of
Agreement[7] (MOA) whereby they agreed that Hydro may directly avail of
the foreign currency component of the contract for the sole purpose of
purchasing necessary spare parts and equipment for the project. This was
made in order for the contractor to avoid further delays in the procurement
of the said spare parts and equipment.
A few months after the MOA was signed, NIA and Hydro entered into a
Supplemental Memorandum of Agreement (Supplemental MOA) to include
among the items to be financed out of the foreign currency portion of the
Contract construction materials, supplies and services as well as equipment
and materials for incorporation in the permanent works of the Project. [8]
Work on the project progressed steadily until Hydro substantially
completed the project in 1982 and the final acceptance was made by NIA on
February 14, 1984.[9]
During the period of the execution of the contract, the foreign exchange
value of the peso against the US dollar declined and steadily deteriorated.
Whenever Hydros availment of the foreign currency component exceeded
the amount of the foreign currency payable to Hydro for a particular period,
NIA charged interest in dollars based on the prevailing exchange rate
instead of the fixed exchange rate of P7.3735 to the dollar. Yet when Hydro
received payments from NIA in Philippine Pesos, NIA made deductions from
Hydros foreign currency component at the fixed exchange rate of P7.3735 to
US$1.00 instead of the prevailing exchange rate.
Upon completion of the project, a final reconciliation of the total
entitlement of Hydro to the foreign currency component of the contract was
made. The result of this final reconciliation showed that the total entitlement
of Hydro to the foreign currency component of the contract exceeded the
amount of US dollars required by Hydro to repay the advances made by NIA
for its account in the importation of new equipment, spare parts and tools.
Hydro then requested a full and final payment due to the underpayment of
the foreign exchange portion caused by price escalations and extra work
orders. In 1983, NIA and Hydro prepared a joint computation denominated
as the MPI-C-2 Dollar Rate Differential on Foreign Component of Escalation.
[10]
Based on said joint computation, Hydro was still entitled to a foreign
exchange differential of US$1,353,771.79 equivalent to P10,898,391.17.
Hydro then presented its claim for said foreign exchange differential to
NIA on August 12, 1983[11] but the latter refused to honor the same. Hydro
made several[12] demands to recover its claim until the same was turned
down with finality by then NIA Administrator Federico N. Alday, Jr. on January
6, 1987.[13]
On December 7, 1994, Hydro filed a request for arbitration with the
Construction Industry Arbitration Commission (CIAC). [14] In the said request,
Hydro nominated six (6) arbitrators. The case was docketed as CIAC Case
No. 18-94.
NIA filed its Answer with Compulsory Counterclaim[15] raising laches,
estoppel and lack of jurisdiction by CIAC as its special defenses. NIA also
submitted its six (6) nominees to the panel of arbitrators. After appointment
of the arbitrators, both parties agreed on the Terms of Reference [16] as well
as the issues submitted for arbitration.
On March 13, 1995, NIA filed a Motion to Dismiss [17] questioning CIACs
jurisdiction to take cognizance of the case. The latter, however, deferred
resolution of the motion and set the case for hearing for the reception of
evidence.[18] NIA moved[19] for reconsideration but the same was denied by
CIAC in an Order dated April 25, 1995.[20]
Dissatisfied, NIA filed a petition for certiorari and prohibition with the
Court of Appeals where the same was docketed as CA-G.R. SP No. 37180, [21]
which dismissed the petition in a Resolution dated June 28, 1996. [22]
NIA challenged the resolution of the Court of Appeals before this Court
in a special civil action for certiorari, docketed as G.R. No. 129169. [23]
Meanwhile, on June 10, 1997, the CIAC promulgated a decision in favor
of Hydro.[24] NIA filed a Petition for Review on Appeal before the Court of
Appeals, which was docketed as CA-G.R. SP No. 44527. [25]
During the pendency of CA-G.R. SP No. 44527 before the Court of
Appeals, this Court dismissed special civil action for certiorari docketed as
G.R. No. 129169 on the ground that CIAC had jurisdiction over the dispute
and directed the Court of Appeals to proceed with reasonable dispatch in the
disposition of CA-G.R. SP No. 44527. NIA did not move for reconsideration of
the said decision, hence, the same became final and executory on
December 15, 1999.[26]
Thereafter, the Court of Appeals rendered the challenged decision in
CA-G.R. SP No. 44527, reversing the judgment of the CIAC on the grounds
that: (1) Hydros claim has prescribed; (2) assuming that Hydro was entitled
to its claim, the rate of exchange should be based on a fixed rate; (3) Hydros
claim is contrary to R.A. No. 529;[27] (4) NIAs Certification of Non-ForumShopping was proper even if the same was signed only by counsel and not
by NIAs authorized representative; and (5) NIA did not engage in forumshopping.
Hydros Motion for Reconsideration was denied in Resolution of
September 24, 2003.
Hence, this petition.
Therefore, we regret that we have to reiterate the earlier official stand of NIA
under its letter dated January 7, 1986, that confirms the original
recommendation which had earlier been presented in our 4th Indorsement
dated February 5, 1985 to your office.
In view hereof, we regret to say with finality that the claim cannot be
given favorable consideration. (Emphasis and italics supplied)
Hydro received the above-mentioned letter on January 27, 1987. [30]
Pursuant to Section 25 of the Contracts General Conditions (GC-25), Hydro
had thirty (30) days from receipt of said denial, or until February 26, 1987,
within which to notify NIA of its desire to submit the dispute to arbitration.
On February 18, 1987, Hydro sent a letter [31] to NIA, addressed to then
NIA Administrator Federico N. Alday, Jr., manifesting its desire to submit the
dispute to arbitration. The letter was received by NIA on February 19, 1987,
which was within the thirty-day prescriptive period.
Moreover, a circumspect scrutiny of the wording of GC-25 with regard to
the thirty-day prescriptive period shows that said proviso is intended to
apply to disputes which arose during theactual construction of the project
and not for controversies which occured after the project is completed. The
rationale for such a stipulation was aptly explained thus by the CIAC in its
Decision in CIAC Case No. 18-94:
In construction contracts, there is invariably a provision for interim
settlement of disputes. The right to settle disputes is given to the owner or
his representative, either an architect or engineer, designated as owners
representative, only for the purpose of avoiding delay in the completion of
the project. In this particular contract, that right was reserved to the NIA
Administrator. The types of disputes contemplated were those which may
have otherwise affected the progress of the work. It is very clear that this is
the purpose of the limiting periods in this clause that the dispute shall be
resolved by the Administrator within 30 days from receipt of a written notice
from the Contractor and that the Contractor may submit to arbitration this
dispute if it does not agree with the decision of the Administrator, and
Pending decision from arbitration, Contractor shall proceed diligently with
the performance of the Contract and in accordance with the decision of the
Administrator.
In this case, the dispute had arisen after completion of the Project. The
reason for the 30-day limitation no longer applies, and we find no legal basis
for applying it. Moreover, in Exhibit B, NIA Administrator Cesar L. Tech had,
instead of rendering an adverse decision, by signing the document with
HRCCs Onofre B. Banson, implicitly approved the payment of the foreign
exchange differential, but this payment could not be made because of the
opinion of Auditor Saldua and later of the Commission on Audit. [32]
Second, as early as April 1983, Hydro and NIA, through its Administrator
Cesar L. Tech, prepared the Joint Computation which shows that Hydro is
entitled to the foreign currency differential.[33] As correctly found by the CIAC,
this computation constitutes a written acknowledgment of the debt by the
debtor under Article 1155 of the Civil Code, which states:
ART. 1155. The prescription of actions is interrupted when they are filed
Even assuming for the sake of argument that the Administrator had no
authority to bind NIA, the latter is already estopped after repeatedly
representing to Hydro that the Administrator had such authority. A
corporation may be held in estoppel from denying as against third persons
the authority of its officers or agents who have been clothed by it with
ostensible or apparent authority.[34] Indeed
SECTION 1. Section one of Republic Act Numbered Five hundred and twentynine, entitled An Act to Assure Uniform Value of Philippine Coin and
Currency, is hereby amended to read as follows:
Sec. 1. Every provision contained in, or made with respect to, any domestic
obligation to wit, any obligation contracted in the Philippines which
provisions purports to give the obligee the right to require payment in gold
or in a particular kind of coin or currency other than Philippine currency or in
an amount of money of the Philippines measured thereby, be as it is hereby
declared against public policy, and null, void, and of no effect, and no such
provision shall be contained in, or made with respect to, any obligation
hereafter incurred. The above prohibition shall not apply to (a) transactions
where the funds involved are the proceeds of loans or investments
made directly or indirectly, through bona fide intermediaries or agents,
by foreign governments, their agencies and instrumentalities, and
international financial and banking institutions so long as the funds
are identifiable, as having emanated from the sources enumerated above;
(b) transactions affecting high-priority economic projects for agricultural,
industrial and power development as may be determined by the National
Economic Council which are financed by or through foreign funds; (c)
forward exchange transaction entered into between banks or between banks
and individuals or juridical persons; (d) import-export and other international
banking, financial investment and industrial transactions. With the exception
of the cases enumerated in items (a), (b), (c) and (d) in the foregoing
provisions, in which bases the terms of the parties agreement shall apply,
every other domestic obligation heretofore or hereafter incurred, whether or
not any such provision as to payment is contained therein or made with
respect thereto, shall be discharged upon payment in any coin or currency
[35]
Third, NIA has clearly waived the prescriptive period when it continued
to entertain Hydros claim regarding new matters raised by the latter in its
letters to NIA and then issuing rulings thereon. In this regard, Article 1112 of
the Civil Code provides that:
ART. 1112. Persons with capacity to alienate property may renounce
prescription already obtained, but not the right to prescribe in the future.
Prescription is deemed to have been tacitly renounced when the
renunciation results from acts which imply the abandonment of the
right acquired. (Emphasis and italics supplied)
Certainly, when a party has renounced a right acquired by prescription
through its actions, it can no longer claim prescription as a defense. [36]
Fourth, even assuming that NIA did not waive the thirty-day prescriptive
period, it clearly waived the effects of such period when it actively
participated in arbitration proceedings through the following acts:
which at the time of payment is legal tender for public and private debts:
Provided,That if the obligation was incurred prior to the enactment of this
Act and required payment in a particular kind of coin or currency other than
Philippine currency, it shall be discharged in Philippine currency measured at
the prevailing rates of exchange at the time the obligation was incurred,
except in case of a loan made in a foreign currency stipulated to be payable
in the same currency in which case the rate of exchange prevailing at the
time of the stipulated date of payment shall prevail. All coin and currency,
including Central Bank notes, heretofore and hereafter issued and declared
by the Government of the Philippines shall be legal tender for all debts,
public and private.
SECTION 2. This Act shall take effect upon its approval. (Emphasis and italics
supplied)
instances like these, NIA actually charged Hydro interest in foreign currency
computed at the prevailing exchange rate and not at the fixed rate. NIA now
insists that the exchange rate should be computed according to the fixed
rate and not the escalating rate it actually charged Hydro.
. . . it is clear from Section 1 of R.A. No. 529 that what is declared null and
void is the provision contained in, or made with respect to, any domestic
obligation to wit, any obligation contracted in the Philippines which provision
purports to give the obligee the right to require payment in gold or in a
particular kind of coin or currency other than Philippine currency or in an
amount of money of the Philippines measured thereby and not the
contract or agreement which contains such proscribed provision.
(Emphasis supplied)
More succinctly, we held in San Buenaventura v. Court of Appeals [39]
that
It is to be noted under the foregoing provision that while an agreement to
pay an obligation in a currency other than Philippine currency is null and
void as contrary to public policy, what the law specifically prohibits is
payment in currency other than legal tender but does not defeat a
creditors claim for payment. A contrary rule would allow a person to
profit or enrich himself inequitably at anothers expense. (Emphasis supplied)
It is thus erroneous for the Court of Appeals to disallow petitioners claim
for foreign currency differential because NIAs obligation should be converted
to Philippine Pesos which was legal tender at the time. [40]
The next issue to be resolved is whether or not Hydros claim should be
computed at the fixed rate of exchange.
When the MOA[41] and the Supplemental MOA[42] were in effect, there
were instances when the foreign currency availed of by Hydro exceeded the
foreign currency payable to it for that particular Progress Payment. In
DECISION
CARPIO MORALES, J.:
Being assailed via petition for review on certiorari under Rule 45 of the
Rules of Court is the August 28, 2002 Decision [1] of the Court of Appeals (CA)
in CA-G.R. SP No. 49406 which dismissed the petition for review of Liberty
Ayo-Alburo (petitioner).
The controversy in the case at bar involves a parcel of private
agricultural land primarily devoted to rice with an area of 1.787 hectares
situated at Barangay San Pedro, Alangalang, Leyte (the property) which was
owned by Dr. Victoria Marave-Tiu.
On October 21, 1972, then President Marcos issued Presidential Decree
No. 27 (P.D. 27),[2] otherwise known as the Tenant Emancipation Decree,
which transfers to qualified tenant-farmers the ownership of the lands they
till. The Decree is applicable to agricultural lands primarily devoted to rice
and corn.
As the property was covered by Operation Land Transfer pursuant to
P.D. 27, Dr. Marave-Tiu submitted to the Department of Agrarian Reform
(DAR) a list of the names of her farmer-tenants including petitioners
adoptive father Estanislao Ayo (Estanislao) who was also administrator of the
property.
The property was eventually awarded to Estanislao who, being at that
time already old and sickly, requested that it be instead registered in the
name of petitioner. The request was granted.[3]
Certificate of Land Transfer No. D-038564[4] covering the property was
thus issued in petitioners name on April 23, 1984. And Emancipation Patent
No. A-025173[5] with the corresponding Transfer Certificate of Title (TCT) No.
TE-775[6] covering the property was subsequently issued in petitioners favor
on March 5, 1987.
The Department of Agrarian Reform, represented by the Provincial
Agrarian Reform Officer of Leyte and its Regional Director for Region VIII, and
Uldarico Matobato (respondent) later filed a Petition dated April 2, 1996
before the Provincial Agrarian Reform Adjudicator (PARAD) of Tanghas,
Tolosa, Leyte, docketed as DARAB Case No. R-0801-0016-96, for the
cancellation of the Certificate of Land Transfer and Emancipation Patent
issued in petitioners favor and for the issuance of a new certificate and
patent in respondents name.
[G. R. No. 155181. April 15, 2005]
LIBERTY AYO-ALBURO,
respondent.
petitioner,
vs.
ULDARICO
MATOBATO,
Respondent alleged that since 1966 until the filing of the petition before
the PARAD, he had been cultivating the property and giving shares of the
harvest as rentals to petitioner; and that the Certificate of Land Transfer and
Emancipation Patent had been issued to petitioner due to a possible
oversight, inadvertence and excusable neglect, she not having ever been
engaged in the actual cultivation and tillage of the property.
As of April 20, 1996, petitioner had fully paid to the Land Bank the
private petitioner did not give shares private respondent through her uncle,
Mauricio Ayo moved to get back the land. Nevertheless, private petitioner
continued the cultivation because of their friendship, lack of funds on the
part of private respondent to operate the cultivation, assurance of her share
every harvest and the payment of the land amortization with Land Bank by
the private petitioner. It maybe posed therefore who now deserves the land
under P.D. 27? Admittedly, Estanislao Ayo, the administrator-tenant had it
registered in the name of private respondent during the land distribution in
1981 a short cut to succession because Estanislao Ayo was already sickly in
fact he died on February 5, 1985 after the CLT was issued to private
respondent in April of 1984. Perhaps, for humanitarian reason the DAR
Officials of Alangalang, Leyte, Oscar Ripalda and Romulo Bacale did not
consider the identification of private respondent irregular on the honest
belief that upon the death of Estanislao Ayo, private respondent, assuming
that she is the only heir, would succeed (sic) the land anyway. Nevertheless,
the stubborn fact remains that from 1985 continuously up to the present it is
private petitioner who cultivated the land as tenant with private respondent
as landlord.[11]
Petitioner filed a Motion for Reconsideration [12] of the PARAD decision
but it was denied for lack of merit by Order [13] of November 7, 1996 in this
wise:
In the case at bar, it has been established that [respondent] has for long a
period been in cultivation of the land in question and have (sic) shared
produce with [petitioner].
Finally, cancellation of Emancipation Patent and its reallocation to other
beneficiary is governed by PD 27, Executive Order No. 228 and its
implementing rules and regulation. Acquisition of land under PD 27 is
distinct from other system of titling of alienable and disposable land in that
under PD 27 the title may be cancelled even after one (1) year from
issuance of title if it (sic) shown that the beneficiary has transferred its use
to another person before full payment of its land value.[14] (Underscoring
supplied)
On appeal by petitioner to the Department of Agrarian Reform
Adjudication Board (DARAB), the DARAB, by Decision [15] of June 29, 1998,
affirmed in toto the September 25, 1996 PARAD Decision.
Petitioner thus filed before the CA a Petition for Review [16] which, by
Decision of August 28, 2002, denied the same.
Apart from echoing the ratiocination of the DARAB, the CA explained:
Even assuming that the Emancipation Patent issued to the petitioner is valid,
a careful perusal of the case shows that she had committed a violation of
the terms and conditions of the Land Title xxx
Markedly absent in the case of the petitioner is the element of personal
cultivation. Both the PARAD and the DARAB found that the petitioner herself
did not actually cultivate the land, nor did her immediate family or farm
household. Instead, she permitted and actually engaged the service of the
private respondent to do the farm work in exchange for the payment of the
land amortization and shares in the produce of the land.
Hence, the present petition for review on certiorari [18] faulting the CA as
follows:
I
THE COURT OF APPEALS HAD DECIDED THE INSTANT CASE IN A WAY
PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISIONS OF
THE SUPREME COURT WHEN IT SET ASIDE THE EMANCIPATION PATENT OF
PETITIONER AFTER IT HAD LONG BEEN ISSUED
II
THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF PROCEEDINGS, OR SO FAR SANCTIONED SUCH DEPARTURE BY
THE DEPARTMENT OF AGRARIAN REFORM AS TO CALL FOR AN EXERCISE OF
THE POWER OF SUPERVISION WHEN IT AFFIRMED THAT PETITIONER WAS
GUILTY OF VIOLATING THE TERMS AND CONDITIONS OF THE CERTIFICATE OF
LAND TRANSFER AND EMANCIPATION PATENT.
III
THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF PROCEEDINGS, OR SO FAR SANCTIONED SUCH DEPARTURE BY
THE DEPARTMENT OF AGRARIAN REFORM AS TO CALL FOR AN EXERCISE OF
THE POWER OF SUPERVISION WHEN IT AFFIRMED THE AWARD OF THE
PROPERTY IN FAVOR OF PRIVATE RESPONDENT.
IV
THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE NOT
THERETOFORE DETERMINED BY THE SUPREME COURT, OR HAS DECIDED IT
IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT ORDERED THE FORFEITURE
OF THE AMORTIZATION PAID BY PETITIONER IN FAVOR OF PRIVATE
RESPONDENT.
V
THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL
Petitioner thus argues that since an emancipation patent and a TCT had
been issued to her, her ownership of the property had become conclusive
and no longer open to doubt or controversy.[24] Petitioners argument fails.
The mere issuance of an emancipation patent does not put the
ownership of the agrarian reform beneficiary beyond attack and scrutiny. [25]
Emancipation patents may be cancelled for violations of agrarian laws, rules
and regulations. Section 12(g) of P.D. 946[26] (issued on June 17, 1976)
vested the then Court of Agrarian Relations with jurisdiction over cases
involving the cancellation of emancipation patents issued under P.D. 266. [27]
Exclusive jurisdiction over such cases was later lodged with the DARAB
under Section 1 of Rule II of the DARAB Rules of Procedure.
Aside from ordering the cancellation of emancipation patents, the
DARAB may order reimbursement of lease rental as amortization to agrarian
reform beneficiaries, forfeiture of amortization, ejectment of beneficiaries,
reallocation of the land to qualified beneficiaries, perpetual disqualification
to become agrarian reform beneficiaries, reimbursement of amortization
payment and value of improvements, and other ancillary matters related to
the cancellation of emancipation patents.[28]
Petitioner nevertheless goes on to argue that the CA, DARAB and PARAD
erred in finding her guilty of violating the terms and conditions of the
certificate of land transfer and emancipation patent, she asserting that
private respondent was not a bona fide tenant of the property and thus
praying for an assessment of the evidence.
Only questions of law, however, can be raised in a petition for review on
certiorari under Rule 45 of the Rules of Court. Findings of fact by the CA are
final and conclusive and cannot be reviewed on appeal to the Supreme
Court, more so if the factual findings of the appellate court coincide with
those of the DARAB, an administrative body with expertise on matters within
its specific and specialized jurisdiction. [29] This Court is not thus duty-bound
to analyze and weigh all over again the evidence already considered in the
At all events, petitioner has not shown that her case falls under any of
the recognized instances when the factual findings of the CA may be
reviewed and set aside.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ.,
concur.
owned by Filipinos. Our resolution of this issue will determine the fate of the
shipbuilding and ship repair industry. It can either spell the industrys demise
or breathe new life to the struggling but potentially healthy partner in the
countrys bid for economic growth. It can either kill an initiative yet in its
infancy, or harness creativity in the productive disposition of government
assets.
The facts are undisputed and can be summarized briefly as follows:
On January 27, 1977, the National Investment and Development
Corporation (NIDC), a government corporation, entered into a Joint Venture
Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan
(KAWASAKI) for the construction, operation and management of the Subic
National Shipyard, Inc. (SNS) which subsequently became the Philippine
Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NIDC
and KAWASAKI will contribute P330 million for the capitalization of PHILSECO
in the proportion of 60%-40% respectively.[1] One of its salient features is the
grant to the parties of the right of first refusal should either of them
decide to sell, assign or transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its interest in
SNS [PHILSECO] to any third party without giving the other under the same
terms the right of first refusal. This provision shall not apply if the transferee
is a corporation owned or controlled by the GOVERNMENT or by a KAWASAKI
affiliate.[2]
On November 25, 1986, NIDC transferred all its rights, title and interest
in PHILSECO to the Philippine National Bank (PNB). Such interests were
subsequently transferred to the National Government pursuant to
Administrative Order No. 14. On December 8, 1986, President Corazon C.
Aquino issued Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to take title to,
and possession of, conserve, manage and dispose of non-performing assets
of the National Government. Thereafter, on February 27, 1987, a trust
agreement was entered into between the National Government and the APT
wherein the latter was named the trustee of the National Governments
share in PHILSECO. In 1989, as a result of a quasi-reorganization of
PHILSECO to settle its huge obligations to PNB, the National Governments
shareholdings in PHILSECO increased to 97.41% thereby reducing
KAWASAKIs shareholdings to 2.59%.[3]
In the interest of the national economy and the government, the COP
and the APT deemed it best to sell the National Governments share in
PHILSECO to private entities. After a series of negotiations between the APT
and KAWASAKI, they agreed that the latters right of first refusal under the
JVA be exchanged for the right to top by five percent (5%) the highest bid for
the said shares. They further agreed that KAWASAKI would be entitled to
name a company in which it was a stockholder, which could exercise the
right to top. On September 7, 1990, KAWASAKI informed APT that Philyards
Holdings, Inc. (PHI) would exercise its right to top. [4]
At the pre-bidding conference held on September 18, 1993, interested
bidders were given copies of the JVA between NIDC and KAWASAKI, and of
the Asset Specific Bidding Rules (ASBR) drafted for the National
Governments 87.6% equity share in PHILSECO. [5] The provisions of the ASBR
were explained to the interested bidders who were notified that the bidding
would be held on December 2, 1993. A portion of the ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through public
bidding is the National Governments equity in PHILSECO consisting of
896,869,942 shares of stock (representing 87.67% of PHILSECOs
outstanding capital stock), which will be sold as a whole block in accordance
with the rules herein enumerated.
...
2.0 The highest bid, as well as the buyer, shall be subject to the final
approval of both the APT Board of Trustees and the Committee on
Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis. The
Indicative price set for the National Governments 87.67% equity in
PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION
(P1,300,000,000.00).
...
6.0 The highest qualified bid will be submitted to the APT Board of Trustees
at its regular meeting following the bidding, for the purpose of determining
whether or not it should be endorsed by the APT Board of Trustees to the
COP, and the latter approves the same. The APT shall advise Kawasaki
Heavy Industries, Inc. and/or its nominee, Philyards Holdings, Inc., that the
highest bid is acceptable to the National Government. Kawasaki Heavy
Industries, Inc. and/or Philyards Holdings, Inc. shall then have a period of
thirty (30) calendar days from the date of receipt of such advice from APT
within which to exercise their Option to Top the Highest Bid by offering a bid
equivalent to the highest bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc.
exercise their Option to Top the Highest Bid, they shall so notify the APT
about such exercise of their option and deposit with APT the amount
equivalent to ten percent (10%) of the highest bid plus five percent (5%)
thereof within the thirty (30)-day period mentioned in paragraph 6.0 above.
APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or
Philyards Holdings, Inc. declaring them as the preferred bidder and they
shall have a period of ninety (90) days from the receipt of the APTs notice
within which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or Philyards Holdings, Inc.
fail to exercise their Option to Top the Highest Bid within the thirty (30)-day
period, APT will declare the highest bidder as the winning bidder.
...
12.0 The bidder shall be solely responsible for examining with appropriate
care these rules, the official bid forms, including any addenda or
amendments thereto issued during the bidding period. The bidder shall
likewise be responsible for informing itself with respect to any and all
conditions concerning the PHILSECO Shares which may, in any manner,
affect the bidders proposal. Failure on the part of the bidder to so examine
and inform itself shall be its sole risk and no relief for error or omission will
be given by APT or COP. . ..[6]
At the public bidding on the said date, petitioner J.G. Summit Holdings,
Inc. submitted a bid of Two Billion and Thirty Million Pesos
(P2,030,000,000.00) with an acknowledgement of KAWASAKI/Philyards right
to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up to
thirty (30) days to act on APTs recommendation based on the result of this
bidding. Should the COP approve the highest bid, APT shall advise Kawasaki
Heavy Industries, Inc. and/or its nominee, Philyards Holdings, Inc. that the
highest bid is acceptable to the National Government. Kawasaki Heavy
Industries, Inc. and/or Philyards Holdings, Inc. shall then have a period of
thirty (30) calendar days from the date of receipt of such advice from APT
within which to exercise their Option to Top the Highest Bid by offering a bid
equivalent to the highest bid plus five (5%) percent thereof. [7]
As petitioner was declared the highest bidder, the COP approved the
sale on December 3, 1993 subject to the right of Kawasaki Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in the
bidding rules.[8]
On December 29, 1993, petitioner informed APT that it was protesting
the offer of PHI to top its bid on the grounds that: (a) the KAWASAKI/PHI
consortium composed of Kawasaki, Philyards, Mitsui, Keppel, SM Group,
ICTSI and Insular Life violated the ASBR because the last four (4) companies
were the losing bidders thereby circumventing the law and prejudicing the
weak winning bidder; (b) only KAWASAKI could exercise the right to top; (c)
giving the same option to top to PHI constituted unwarranted benefit to a
third party; (d) no right of first refusal can be exercised in a public bidding or
auction sale; and (e) the JG Summit consortium was not estopped from
questioning the proceedings.[9]
On February 2, 1994, petitioner was notified that PHI had fully paid the
balance of the purchase price of the subject bidding. On February 7, 1994,
the APT notified petitioner that PHI had exercised its option to top the
highest bid and that the COP had approved the same on January 6, 1994. On
February 24, 1994, the APT and PHI executed a Stock Purchase Agreement.
[10]
Consequently, petitioner filed with this Court a Petition for Mandamus
under G.R. No. 114057. On May 11, 1994, said petition was referred to the
Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for
lack of merit. It ruled that the petition for mandamus was not the proper
remedy to question the constitutionality or legality of the right of first refusal
and the right to top that was exercised by KAWASAKI/PHI, and that the
matter must be brought by the proper party in the proper forum at the
proper time and threshed out in a full blown trial. The Court of Appeals
further ruled that the right of first refusal and the right to top are prima facie
legal and that the petitioner, by participating in the public bidding, with full
knowledge of the right to top granted to KASAWASAKI/Philyards is . .
.estopped from questioning the validity of the award given to Philyards after
the latter exercised the right to top and had paid in full the purchase price of
the subject shares, pursuant to the ASBR. Petitioner filed a Motion for
Reconsideration of said Decision which was denied on March 15, 1996.
Petitioner thus filed a Petition for Certiorari with this Court alleging grave
I.
Whether PHILSECO is a Public Utility.
After carefully reviewing the applicable laws and jurisprudence, we hold
so as not to dilute their respective interests with the issuance of the new
shares. Unlike the right of first refusal, a preemptive right gives a partner a
preferential right over the newly issued shares only to the extent that it
retains its original proportionate share in the joint venture.
The case at bar does not concern the issuance of new shares but the
transfer of a partners share in the joint venture. Verily, the operative
protective mechanism is the right of first refusal which does not impose any
limitation in the maximum shares that the non-selling partner may acquire.
III.
Whether the right to top granted to KAWASAKI
in exchange for its right of first refusal violates
the principles of competitive bidding.
We also hold that the right to top granted to KAWASAKI and exercised
by private respondent did not violate the rules of competitive bidding.
The word bidding in its comprehensive sense means making an offer or
an invitation to prospective contractors whereby the government manifests
its intention to make proposals for the purpose of supplies, materials and
equipment for official business or public use, or for public works or repair. [38]
The three principles of public bidding are: (1) the offer to the public; (2) an
opportunity for competition; and (3) a basis for comparison of bids. [39] As
long as these three principles are complied with, the public bidding can be
considered valid and legal. It is not necessary that the highest bid be
automatically accepted. The bidding rules may specify other conditions or
the bidding process be subjected to certain reservation or qualification such
as when the owner reserves to himself openly at the time of the sale the
right to bid upon the property, or openly announces a price below which the
property will not be sold. Hence, where the seller reserves the right to refuse
to accept any bid made, a binding sale is not consummated between the
seller and the bidder until the seller accepts the bid. Furthermore, where a
right is reserved in the seller to reject any and all bids received, the owner
may exercise the right even after the auctioneer has accepted a bid, and
this applies to the auction of public as well as private property. [40] Thus:
It is a settled rule that where the invitation to bid contains a reservation for
the Government to reject any or all bids, the lowest or the highest bidder, as
the case may be, is not entitled to an award as a matter of right for it does
not become a ministerial duty of the Government to make such an award.
Thus, it has been held that where the right to reject is so reserved, the
lowest bid or any bid for that matter may be rejected on a mere technicality,
that all bids may be rejected, even if arbitrarily and unwisely, or under a
mistake, and that in the exercise of a sound discretion, the award may be
made to another than the lowest bidder. And so, where the Government as
advertiser, availing itself of that right, makes its choice in rejecting any or all
bids, the losing bidder has no cause to complain nor right to dispute that
choice, unless an unfairness or injustice is shown. Accordingly, he has no
ground of action to compel the Government to award the contract in his
favor, nor compel it to accept his bid.[41]
In the instant case, the sale of the Government shares in PHILSECO was
publicly known. All interested bidders were welcomed. The basis for
comparing the bids were laid down. All bids were accepted sealed and were
opened and read in the presence of the COAs official representative and
before all interested bidders. The only question that remains is whether or
not the existence of KAWASAKIs right to top destroys the essence of
competitive bidding so as to say that the bidders did not have an
opportunity for competition. We hold that it does not.
The essence of competition in public bidding is that the bidders are
placed on equal footing. This means that all qualified bidders have an equal
chance of winning the auction through their bids. In the case at bar, all of
the bidders were exposed to the same risk and were subjected to the same
condition, i.e., the existence of KAWASAKIs right to top. Under the ASBR, the
Government expressly reserved the right to reject any or all bids, and
manifested its intention not to accept the highest bid should KAWASAKI
decide to exercise its right to top under the ABSR. This reservation or
qualification was made known to the bidders in a pre-bidding conference
held on September 28, 1993. They all expressly accepted this condition in
writing without any qualification. Furthermore, when the Committee on
Privatization notified petitioner of the approval of the sale of the National
Government shares of stock in PHILSECO, it specifically stated that such
approval was subject to the right of KAWASAKI Heavy Industries,
Inc./Philyards Holdings, Inc. to top JGSMIs bid by 5% as specified in the
bidding rules. Clearly, the approval of the sale was a conditional one. Since
Philyards eventually exercised its right to top petitioners bid by 5%, the sale
was not consummated. Parenthetically, it cannot be argued that the
existence of the right to top set for naught the entire public bidding. Had
Philyards Holdings, Inc. failed or refused to exercise its right to top, the sale
between the petitioner and the National Government would have been
consummated. In like manner, the existence of the right to top cannot be
likened to a second bidding, which is countenanced, except when there is
failure to bid as when there is only one bidder or none at all. A prohibited
second bidding presupposes that based on the terms and conditions of the
sale, there is already a highest bidder with the right to demand that the
seller accept its bid. In the instant case, the highest bidder was well aware
that the acceptance of its bid was conditioned upon the non-exercise of the
right to top.
To be sure, respondents did not circumvent the requirements for
bidding by granting KAWASAKI, a non-bidder, the right to top the highest
bidder. The fact that KAWASAKIs nominee to exercise the right to top has
among its stockholders some losing bidders cannot also be deemed unfair.
It must be emphasized that none of the parties questions the existence
of KAWASAKIs right of first refusal, which is concededly the basis for the
grant of the right to top. Under KAWASAKIs right of first refusal, the National
Government is under the obligation to give preferential right to KAWASAKI in
the event it decides to sell its shares in PHILSECO. It has to offer to
KAWASAKI the shares and give it the option to buy or refuse under the
same terms for which it is willing to sell the said shares to third parties.
KAWASAKI is not a mere non-bidder. It is a partner in the joint venture; the
Promulgated:
Industry
Corporation
(Cabral
Corporation)
50-hectare
DECISION
At the time the two (2) aforementioned lease agreements were
GARCIA, J.:
On June 10, 1998, Cabral Corporation whose President at that time was
to wit: (1) Cabral Corporations primary asset is its leasehold rights over FLAs
rights over FLAs No. 2126 and 2132 to respondent Eno Corporation, a
No. 2126 and 2132 and that the assignment thereof by the said corporation
in favor of Eno Corporation was without the consent of Editha Cabral who did
not receive any consideration therefor; and (2) the assignment would
Assignment
[2]
she told the latter that she was thereby revoking her April 29, 1998 deed of
assignment of her shares of stock in Cabral Corporation, allegedly because
Belarmino breached their agreement in the matter of payment. Later, in her
letter to Undersecretary Drilon dated December 2, 1999, [7] Editha made
clear that she was no longer interested in pursuing her letter-protest of
February 24, 1999 in DA Case No. 99-439-F against Eno Corporations
application for the transfer in its name of the leaseholds rights over FLAs No.
2126 and 2132, explaining that she had settled her differences with her
daughters and that she is now convinced that Enos application is in order,
and accordingly prayed for the approval thereof.
motion for intervention. The Undersecretary brushed aside Cabral and Eno
corporations argument that DA Case No. 99-439-F involves an intracorporate dispute, adding that since the Department of Agriculture is the
sole approving authority in the matter of transfer of leasehold rights over
SO ORDERED.
fishponds, his office has jurisdiction to resolve the issues relating to the
over FLAs No. 2126 and 2132. He further stated that intervenor Belarmino
Therefrom, both Cabral and Eno corporations went to the Court of Appeals
via a petition for certiorari in CA-G.R. SP No. 60406.
As stated at the outset hereof, the appellate court, in its Decision of July
16, 2002, set aside the challenged orders of Undersecretary Drilon; allowed
Editha Cabral to withdraw her protest against the application of Eno
Corporation; and directed the Undersecretary to act on Enos application.
Partly explains the appellate court in its decision:
1.
2.
3.
4.
stockholders,
partners
or
associates
themselves. (Espino v. National Labor
Relations Commission, citing Bernardo, Sr. v.
Court of Appeals, 263 SCRA 660).
The parties in D.A. Case No. 99-439-F were Eno
Corporation which is a stranger to Cabral Corporation and
Editha Cabral who was a stockholder of said corporation. A
dispute between these two parties cannot be categorized as
intra-corporate dispute because the parties did not fall under
any of the relationships mentioned above.
The
thru
the
Solicitor
General,
in
representation
of
Undersecretary Drilon, the DA and BFAR is now with us via the instant
petition on its sole submission that THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
NOT CONSIDERING THAT THE NULLIFICATION OF THE
TRANSFER OF FISHPOND LEASE AGREEMENTS NOS. 2126
AND 2132 FROM CABRAL CORPORATION TO ENO
CORPORATION AND DENIAL OF NOTICE TO WITHDRAW
LETTER PROTEST OF EDITHA CABRAL OF THE 29 APRIL 1998
DEED OF ASSIGNMENT OF FISHPOND LEASE AGREEMENT
WITH PATERNO BELARMINO ARE MERE INCIDENTS TO
PETITIONERS POWER TO DENY ENO CORPORATIONS
APPLICATION FOR FISHPOND LEASE AGREEMENT.[12]
Republic,
We do not agree.
The office of petitioner Republic charged with the power to oversee the use
of
public
fishponds
is
the
Department
of
Agriculture
under
the
Functions.
The
Department
[of
within the parameters set forth by law. Applications for transfer of leasehold
application
for
transfer
of
leasehold
rights.
Compliance
with
the
otherwise. Conversely, the failure of the applicant to meet the standards set
conditions:
forth in FAO No. 60 does not entitle him the confidence to expect the
(a) The areas of twenty-five (25)
hectares or less, covered by permits or
leases,
shall
be
approved
by
the
Commissioner of Fisheries, and areas more
than twenty-five (25) hectares shall be
approved by the Secretary of Agriculture and
Natural Resources;
Undersecretary
be approved. For sure, there was not even an attempt to rationalize the
his
disapproval
action
on
ground
not
SO ORDERED.
P 2,952,349.23
P 91,003,129.89
P 93,955,479.12[13]
P 385,961,580.82
0.15
P 57,894,237.12
P 14,093,321.89
P 43,800,915.25[15]
still pending with the BIR, private respondent Savellano filed a Petition for
Review ad cautelam with the CTA, docketed as CTA Case No. 4249. He
claimed therein that BIR Commissioner Tan acted with grave abuse of
discretion and/or whimsical exercise of jurisdiction in entering into a
compromise agreement that resulted in a gross and unconscionable
diminution of his reward. Private respondent Savellano prayed for the
enforcement and collection of the total tax assessment against taxpayer
PNOC and/or withholding agent PNB; and the payment to him by the BIR
Commissioner of the 15% informers reward on the total tax collected. [18] He
would later amend his Petition to implead PNOC and PNB as necessary and
indispensable parties since they were parties to the compromise agreement.
[19]
In his Answer filed with the CTA, BIR Commissioner Tan asserted that
the Petition stated no cause of action against him, and that private
respondent Savellano was already paid the informers reward due him.
Alleging that the Petition was baseless and malicious, BIR Commissioner Tan
filed a counterclaim for exemplary damages against private respondent
Savellano.[20]
PNOC and PNB filed separate Motions to Dismiss, both arguing that the
CTA lacked jurisdiction to decide the case. [21] In its Resolution, dated 28
November 1988, the CTA denied the Motions to Dismiss since the question
of lack of jurisdiction and/or cause of action do not appear to be indubitable.
[22]
After their Motions to Dismiss were denied by the CTA, PNOC and PNB
filed their respective Answers to the amended Petition. PNOC averred,
among other things, that (1) it had no privity with private respondent
Savellano; (2) the BIR Commissioners discretionary act in entering into the
compromise agreement had legal basis under E.O. No. 44 and RMO No. 3986 and RMO No. 4-87; and (3) the CTA had no jurisdiction to resolve the case
against it.[23] On the other hand, PNB asserted that (1) the CTA lacked
jurisdiction over the case; and (2) the BIR Commissioners decision to accept
the compromise was discretionary on his part and, therefore, cannot be
reviewed or interfered with by the courts. [24] PNOC and PNB later filed their
amended Answer invoking an opinion of the Commission on Audit (COA)
disallowing the payment by the BIR of informers reward to private
respondent Savellano.[25]
The CTA, thereafter, ordered the parties to submit their evidence, [26] to
be followed by their respective Memoranda.[27]
On 23 November 1990, private respondent Savellano, filed a
Manifestation with Motion for Suspension of Proceedings, claiming that his
pending Motion for Reconsideration with the BIR Commissioner may soon be
resolved.[28] Both PNOC and PNB opposed the said Motion.[29]
Subsequently, the new BIR Commissioner, Jose U. Ong, in a letter to
PNB, dated 16 January 1991, demanded that PNB pay deficiency withholding
tax on the interest earnings and/or yields from PNOCs money placements, in
the amount of P294,958,450.73, computed as follows:
P 385,961,580.82
P 91,003,129.89
P 294,958,450.73[30]
This BIR letter was received by PNB on 06 February 1991, [31] and was
protested by it through a letter, dated 11 April 1991. [32] The BIR denied PNBs
protest on the ground that it was filed out of time and, thus, the assessment
had already become final.[33]
Private respondent Savellano, on 22 February 1991, filed an Omnibus
Motion moving to withdraw his previous Motion for Suspension of Proceeding
since BIR Commissioner Ong had finally resolved his Motion for
Reconsideration, and submitting by way of supplemental offer of evidence
(1) the letter of BIR Commissioner Ong, dated 13 February 1991, informing
private respondent Savellano of the action on his Motion for
Reconsideration; and (2) the demand-letter of BIR Commissioner Ong to
PNB, dated 16 January 1991.[34]
Despite the oppositions of PNOC and PNB, the CTA, in a Resolution,
dated 02 May 1991, resolved to allow private respondent Savellano to
withdraw his previous Motion for Suspension of Proceeding and to admit the
supplementary evidence being offered by the same party. [35]
In its Order, dated 03 June 1991, the CTA considered the case submitted
for decision as of the following day, 04 June 1991. [36]
On 11 June 1991, PNB appealed to the Department of Justice (DOJ) the
BIR assessment, dated 16 January 1991, for deficiency withholding tax in the
sum of P294,958,450.73. PNB alleged that its appeal to the DOJ was
sanctioned under P.D. No. 242, which provided for the administrative
settlement of disputes between government offices, agencies, and
instrumentalities, including government-owned and controlled corporations.
[37]
PNOC and PNB filed separate appeals with the Court of Appeals seeking
the reversal of the CTA decision in CTA Case No. 4249, dated 28 May 1992,
and the CTA Resolution in the same case, dated 16 November 1992. PNOCs
appeal was docketed as CA-G.R. SP No. 29583, while PNBs appeal was CAG.R. SP No. 29526. In both cases, the Court of Appeals affirmed the decision
of the CTA.
In the meantime, the Central Bank again issued on 02 September 1992
a debit advice against the demand deposit account of PNB with the Central
Bank for the amount ofP294,958,450.73,[47] and on 15 September 1992,
credited the same amount to the demand deposit account of the Treasurer
of the Republic of the Philippines. [48] On 04 November 1992, the Treasurer of
the Republic issued a journal voucher transferring P294,958,450.73 to the
account of the BIR.[49] PNB, in turn, debited P294,958,450.73 from the
deposit account of PNOC with PNB.[50]
PNOC and PNB then filed separate Petitions for Review on Certiorari
with this Court, praying that the decisions of the Court of Appeals in CA-G.R.
SP No. 29583 and CA-G.R. SP No. 29526, respectively, both affirming the
decision of the CTA in CTA Case No. 4249, be reversed and set aside. These
two Petitions were consolidated since they involved identical parties and
factual background, and the resolution of related, if not exactly, the same
issues.
In its Petition for Review, PNOC alleged the following errors committed
by the Court of Appeals in CA-G.R. SP No. 29583:
1. The Court of Appeals erred in holding that the deficiency taxes
of PNOC could not be the subject of a compromise under
Executive Order No. 44; and
The CTA, on 28 May 1992, rendered its decision, wherein it upheld its
jurisdiction and disposed of the case as follows:
PNB, in its own Petition for Review, assailed the decision of the Court of
Appeals in CA-G.R. SP No. 29526, assigning the following errors:
of the deficiency withholding tax was based on the figures from the 1986
assessments against PNOC and PNB, and BIR no longer conducted a new
audit or investigation of either PNOC and PNB before it issued the demand
letter on 16 January 1991.
These constant references to past events and circumstances
demonstrate that the demand letter, dated 16 January 1991, was not a new
assessment, but rather, the latest action taken by the BIR to collect on the
tax assessments issued against PNOC and PNB in 1986.
PNB argues that the demand letter, dated 16 January 1991, introduced
a new controversy. We see it differently as the said demand letter presented
the resolution by BIR Commissioner Ong of the previous controversy
involving the compromise of the 1986 tax assessments. BIR Commissioner
Ong explicitly declared therein that the compromise agreement was without
legal basis, and requested PNB, as the withholding agent, to pay the amount
of withholding tax still due.
B. The CTA correctly retained jurisdiction over CTA Case No. 4249 by virtue
of Republic Act No. 1125.
Having established that the BIR demand letter, dated 16 January 1991,
did not constitute a new assessment, then, there could be no basis for PNBs
claim that any dispute arising from the new assessment should only be
between BIR and PNB.
Still proceeding from the argument that there was a new dispute
between PNB and BIR, PNB sought the suspension of the proceedings in CTA
Case No. 4249, after it contested the deficiency withholding tax assessment
against it and the demand for payment thereof before the DOJ, pursuant to
P.D. No. 242. The CTA, however, correctly sustained its jurisdiction and
continued the proceedings in CTA Case No. 4249; and, in effect, rejected
DOJs claim of jurisdiction to administratively settle or adjudicate BIRs
assessment against PNB.
The CTA assumed jurisdiction over the Petition for Review filed by
private respondent Savellano based on the following provision of Rep. Act
No. 1125, the Act creating the Court of Tax Appeals:
SECTION 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive
appellate jurisdiction to review by appeal, as herein provided (1) Decisions of the Collector of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees
or other charges, penalties imposed in relation thereto, or
other matters arising under the National Internal Revenue
Code or other law or part of law administered by the Bureau
of Internal Revenue; . . . (Underscoring ours.)
In his Petition before the CTA, private respondent Savellano requested a
review of the decisions of then BIR Commissioner Tan to enter into a
compromise agreement with PNOC and to reject his claim for additional
informers reward. He submitted before the CTA questions of law involving
the interpretation and application of (1) E.O. No. 44, and its implementing
PNB, however, insists on the jurisdiction of the DOJ over its appeal of
the deficiency withholding tax assessment by virtue of P.D. No. 242.
Provisions on jurisdiction of P.D. No. 242 read:
In the said case, it was expressly declared that P.D. No. 242 repealed Section
7(2) of Rep. Act No. 1125, which provides for the exclusive appellate
jurisdiction of the CTA over decisions of the Commissioner of Customs. PNB
contends that P.D. No. 242 should be deemed to have likewise repealed
Section 7(1) of Rep. Act No. 1125, which provide for the exclusive appellate
jurisdiction of the CTA over decisions of the BIR Commissioner. [57]
The cases relating to the subject of repeal by implication all proceed on the
assumption that if the act of later date clearly reveals an intention on the
part of the law making power to abrogate the prior law, this intention must
be given effect; but there must always be a sufficient revelation of this
intention, and it has become an unbending rule of statutory construction
that the intention to repeal a former law will not be imputed to the
Legislature when it appears that the two statutes, or provisions, with
reference to which the question arises bear to each other the relation of
general to special. (Underscoring ours.)
When there appears to be an inconsistency or conflict between two
statutes and one of the statutes is a general law, while the other is a special
law, then repeal by implication is not the primary rule applicable. The
following rule should principally govern instead:
Specific legislation upon a particular subject is not affected by a general law
upon the same subject unless it clearly appears that the provisions of the
two laws are so repugnant that the legislators must have intended by the
later to modify or repeal the earlier legislation. The special act and the
general law must stand together, the one as the law of the particular subject
and the other as the general law of the land. (Ex Parte United States, 226 U.
S., 420; 57 L. ed., 281; Ex Parte Crow Dog, 109 U. S., 556; 27 L. ed., 1030;
Partee vs. St. Louis & S. F. R. Co., 204 Fed. Rep., 970.)
Where there are two acts or provisions, one of which is special and
particular, and certainly includes the matter in question, and the other
general, which, if standing alone, would include the same matter and thus
conflict with the special act or provision, the special must be taken as
intended to constitute an exception to the general act or provision,
especially when such general and special acts or provisions are
contemporaneous, as the Legislature is not to be presumed to have intended
a conflict. (Crane v. Reeder and Reeder, 22 Mich., 322, 334; University of
Utah vs. Richards, 77 Am. St. Rep., 928.)[60]
It has, thus, become an established rule of statutory construction that
between a general law and a special law, the special law prevails Generalia
specialibus non derogant.[61]
1) if the same is administratively protested within thirty (30) days from the
date the taxpayer received the assessment, or
2.) if the decision of the BIR on the taxpayers administrative protest is
appealed by the taxpayer before an appropriate court.
PNOCs tax liability could not be considered a delinquent account since
(1) it was not self-assessed, because the BIR conducted an investigation and
assessment of PNOC and PNB after obtaining information regarding the nonwithholding of tax from private respondent Savellano; and (2) the demand
letter, issued against it on 08 August 1986, could not have been a deficiency
assessment that became final and executory by 31 December 1985.
The dissenting opinion contends, however, that the tax liability of PNOC
constitutes a self-assessed tax, and is, therefore, a delinquent account as of
31 December 1985, qualifying for a compromise under E.O. No. 44. It
anchors its argument on the declaration made by this Court in Tupaz v. Ulep,
[65]
that internal revenue taxes are self-assessing.
It is not denied herein that the self-assessing system governs Philippine
internal revenue taxes. The dissenting opinion itself defines self-assessed
tax as, a tax that the taxpayer himself assesses or computes and pays to
the taxing authority. Clearly, such a system imposes upon the taxpayer the
obligation to conduct an assessment of himself so he could determine and
declare the amount to be used as tax basis, any deductions therefrom, and
finally, the tax due.
E.O. No. 44 covers self-assessed tax, whether or not a tax return was
filed. The phrase whether or not a tax return was filed only refers to the
compliance by the taxpayer with the obligation to file a return on the dates
specified by law, but it does not do away with the requisite that the tax must
be self-assessed in order for the taxpayer to avail of the compromise. The
second paragraph of Section 2(a) of RR No. 17-86 expressly commands, and
still imposes upon the taxpayer, who is availing of the compromise under
E.O. No. 44, and who has not previously filed any return, the duty to conduct
self-assessment by filing a tax return that would be used as the basis for
computing the amount of compromise to be paid.
Section 2(a)(1) of RR No. 17-86 thus involves a situation wherein a
taxpayer, after conducting a self-assessment, discovers or becomes aware
that he had failed to pay a tax due on or before 31 December 1985,
regardless of whether he had previously filed a return to reflect such tax;
voluntarily comes forward and admits to the BIR his tax liability; and applies
for a compromise thereof. In case the taxpayer has not previously filed any
return, he must fill out such a return reflecting therein his own declaration of
the taxable amount and computation of the tax due. The compromise
payment shall be computed based on the amount reflected in the tax return
submitted by the taxpayer himself.
Neither PNOC nor PNB, the taxpayer and the withholding agent,
respectively, conducted self-assessment in this case. There is no showing
that in the absence of the tax assessment issued by the BIR against them,
that PNOC and/or PNB would have voluntarily admitted their tax liabilities,
already amounting to P385,961,580.82, as of 15 November 1986, and would
have offered to compromise the same. In fact, both PNOC and PNB were
conspicuously silent about their tax liabilities until they were assessed
thereon.
Any attempt by PNOC and PNB to assess and declare by themselves
their tax liabilities had already been overtaken by the BIRs conduct of its
audit and investigation and subsequent issuance of the assessments, dated
08 August 1986 and 08 October 1986, against PNOC and PNB, respectively.
The said tax assessments, uncontested and undisputed, presented the
results of the BIR audit and investigation and the computation of the total
amount of tax liabilities of PNOC and PNB. They should be controlling in this
case, and should not be so easily and conveniently ignored and set aside. It
would be a contradiction to claim that the tax liabilities of PNOC and PNB are
self-assessed and, at the same time, BIR-assessed; when it is clear and
simple that it had been the BIR that conducted the assessment and
determined the tax liabilities of PNOC and PNB.
That the BIR-assessed tax liability should be differentiated from a selfassessed one, is supported by the provisions of RR No. 17-86 on the basis for
computing the amount of compromise payment. Note that where tax
liabilities are self-assessed, the compromise payment shall be computed
based on the tax return filed by the taxpayer. [66] On the other hand, where
the BIR already issued an assessment, the compromise payment shall be
computed based on the tax due on the assessment notice. [67]
For instances where the BIR had already issued an assessment against
the taxpayer, the tax liability could still be compromised under E.O. No. 44
only if: (1) the assessment had been final and executory on or before 31
December 1985 and, therefore, considered a delinquent account as of said
date;[68] or (2) the assessment had been disputed or protested on or before
31 December 1985.[69]
RMO No. 39-86, which provides the guidelines for the implementation of
E.O. No. 44, does mention different types of assessments that may be
compromised under said statute (i.e., jeopardy assessments, arbitrary
assessments, and tax assessments of doubtful validity). RMO No. 39-86 may
not have expressly stated any qualification for these particular types of
assessments; nonetheless, E.O. No. 44 specifically refers only to
assessments that were delinquent or disputed as of 31 December 1985.
E.O. No. 44 and all BIR issuances to implement said statute should be
interpreted so that they are harmonized and consistent with each other.
Accordingly, this Court finds that the different types of assessments
mentioned in RMO No. 39-86 would still have to qualify as delinquent
accounts or disputed assessments as of 31 Dcember 1985, so that they
could be compromised under E.O. No. 44.
The BIR had first written to PNOC on 08 August 1986, demanding
payment of the income tax on the interest earnings and/or yields from
PNOCs money placements with PNB from 15 October 1984 to 15 October
1986. This demand letter could be regarded as the first assessment notice
against PNOC.
under the said law shall be effective only until March 31, 1987. Applications
filed on or before this date shall be valid even if the payment or payments of
the compromise amount shall be made after the said date, subject, however,
to the provisions of Executive Order No. 44 and its implementing Revenue
Regulations No. 17-86.
It is well-settled in this jurisdiction that administrative authorities are
vested with the power to make rules and regulations because it is
impracticable for the lawmakers to provide general regulations for various
and varying details of management. The interpretation given to a rule or
regulation by those charged with its execution is entitled to the greatest
weight by the court construing such rule or regulation, and such
interpretation will be followed unless it appears to be clearly unreasonable
or arbitrary.[75]
RMO No. 39-86, particularly paragraph 2 thereof, does not appear to be
unreasonable or arbitrary. It does not unduly expand the coverage of E.O.
No. 44 by merely providing that applications for compromise filed until 31
March 1987 are still valid, even if payment of the compromised amount is
made on a later date.
It cannot be expected that the compromise allowed under E.O. No. 44
can be automatically granted upon mere filing of the application by the
taxpayer. Irrefutably, the applications would still have to be processed by the
BIR to determine compliance with the requirements of E.O. No. 44. As it is
uncontested that a taxpayer could still file an application for compromise on
31 March 1987, the very last day of effectivity of E.O. No. 44, it would be
unreasonable to expect the BIR to process and approve the taxpayers
application within the same date considering the volume of applications filed
and pending approval, plus the other matters the BIR personnel would also
have to attend to. Thus, RMO No. 39-86 merely assures the taxpayers that
their applications would still be processed and could be approved on a later
date. Payment, of course, shall be made by the taxpayer only after his
application had been approved and the compromised amount had been
determined.
Given that paragraph 2 of RMO No. 39-86 is valid, the next question
that needs to be addressed is whether PNOC had been able to submit an
application for compromise on or before 31 March 1987 in compliance
thereof. Although the compromise agreement was executed only on 22 June
1987, PNOC is claiming that it had already written a letter to the BIR, as
early as 25 September 1986, offering to compromise its tax liability, and
that the said letter should be considered as PNOCs application for
compromise settlement.
A perusal of PNOCs letter, dated 25 September 1986, would reveal,
however, that the terms of its proposed compromise did not conform to
those authorized by E.O. No. 44. PNOC did not offer to pay outright 30% of
the basic tax assessed against it as required by E.O. No. 44; and instead,
made the following offer:
(2) That PNOC be permitted to set-off its foregoing mentioned tax liability of
P304,419,396.83 against the tax refund/credit claims of the National Power
Corporation (NPC) for specific taxes on fuel oil sold to NPC totaling
P335,259,450.21, which tax refunds/credits are actually receivable accounts
of our Company from NPC.[76]
PNOC reiterated the offer in its letter to the BIR, dated 14 October 1986.
The BIR, in its letters to PNOC, dated 8 October 1986 [78] and 11 November
1986,[79] consistently denied PNOCs offer because the claim for tax
refund/credit of NAPOCOR was still under process, so that the offer to set-off
such claim against PNOCs tax liability was premature.
[77]
It was only in its letter, dated 09 June 1987, that PNOC actually offered
to compromise its tax liability in accordance with the terms and
circumstances prescribed by E.O. No. 44 and its implementing rules and
regulations, by stating that:
Consequently, we reiterate our previous request for compromise under E.O.
No. 44, and convey our preparedness to settle the subject tax assessment
liability by payment of the compromise amount ofP91,003,129.89,
representing thirty percent (30%) of the basic tax assessment of
P303,343,766.29, in accordance with E.O. No. 44 and its implementing BIR
Revenue Memorandum Order No. 39-86.[80]
PNOC claimed in the same letter that it had previously requested for a
compromise under the terms of E.O. No. 44, but this Court could not find
evidence of such previous request. There are stark and substantial
differences in the terms of PNOCs offer to compromise in its earlier letters,
dated 25 September 1986 and 14 October 1986 (set-off of the entire amount
of its tax liability against the claim for tax refund/credit of NAPOCOR), to
those in its letter, dated 09 June 1987 (payment of the compromise amount
representing 30% of the basic tax assessed against it), making it difficult for
this Court to accept that the letter of 09 June 1987 merely reiterated PNOCs
offer to compromise in its earlier letters.
This Court likewise cannot give credence to PNOCs allegation that
beginning 25 September 1986, the date of its first letter to the BIR, there
were continuing negotiations between PNOC and BIR that culminated in the
compromise agreement on 22 June 1987. Aside from the exchange of letters
recounted in the preceding paragraphs, both PNOC and PNB failed to present
any other proof of the supposed negotiations.
After the BIR denied the second offer of PNOC to set-off its tax liability
against the claim for tax refund/credit of NAPOCOR in a letter, dated 11
November 1986, there is no other evidence of subsequent communication
between PNOC and the BIR. It was only after almost seven months, or on 09
June 1987, that PNOC again wrote a letter to the BIR, this time offering to
pay the compromise amount of 30% of the basic tax assessed against. This
letter was already filed beyond 31 March 1987, after the lapse of the
effectivity of E.O. No. 44 and the deadline for filing applications for
compromise under the said statute.
Evidence of meetings between PNOC and the BIR, or any other form of
communication, wherein the parties presented their offer and counter-offer
to the other, would have been very valuable in explaining and supporting
BIR Commissioner Tans decision to accept PNOCs third offer to compromise
after denying the previous two. The absence of such evidence herein
negates PNOCs claim of actual negotiations with the BIR.
Therefore, even assuming arguendo that the tax liabilities of PNOC and
PNB qualify as delinquent accounts or disputed assessments as of 31
December 1985, the application for compromise filed by PNOC on 09 June
1987, and accepted by then BIR Commissioner Tan on 22 June 1987, was still
filed way beyond 31 March 1987, the expiration date of the effectivity of E.O.
No. 44 and the deadline for filing of applications for compromise under RMO
No. 39-86.
D.
PNB also asserts that the CTA had no jurisdiction to set aside a
compromise agreement entered into in good faith. It relies on the decision of
this Court in Republic v. Sandiganbayan[85]that a compromise agreement
cannot be set aside merely because it is too one-sided. A compromise
agreement should be respected by the courts as the res judicata between
the parties thereto.
This Court, though, finds that there are substantial differences in the
factual background of Republic v. Sandiganbayan and the present case.
The compromise agreement executed between the Presidential
Commission on Good Government (PCGG) and Roberto S. Benedicto in
Republic v. Sandiganbayan was judicially approved by the Sandiganbayan.
The Sandiganbayan had ample opportunity to examine the validity of the
compromise agreement since two years elapsed from the time the
agreement was executed up to the time it was judicially approved. This
Court even stated in the said case that, We are not dealing with the usual
compromise agreement perfunctorily submitted to a court and approved as
a matter of course. The PCGG-Benedicto agreement was thoroughly and, at
times, disputatiously discussed before the respondent court. There could be
no deception or misrepresentation foisted on either the PCGG or the
Sandiganbayan.[86]
In addition, the new PCGG Chairman originally prayed for the renegotiation of the compromise agreement so that it could be more just, fair,
and equitable, an action considered by this Court as an implied admission
that the agreement was not contrary to law, public policy or morals nor was
there any circumstance which had vitiated consent.[87]
The above-mentioned circumstances strongly supported the validity of
the compromise agreement in Republic v. Sandiganbayan, which was why
this Court refused to set it aside. Unfortunately for the petitioners in the
present case, the same cannot be said herein.
The Court of Appeals, in upholding the jurisdiction of the CTA to set
aside the compromise agreement, ruled that:
We are unable to accept petitioners submissions. Its formulation of the
issues on CIR and CTAs lack of jurisdiction to disturb a compromise
agreement presupposes a compromise agreement validly entered into by
the CIR and not, when as in this case, it was indubitably shown that the
supposed compromise agreement is without legal support. In case of
arbitrary or capricious exercise by the Commissioner or if the proceedings
were fatally defective, the compromise can be attacked and reversed
through the judicial process (Meralco Securities Corporation v. Savellano,
117 SCRA 805, 812 [1982]; Sarah E. Ramsay, et. al. v. U.S. 21 Ct. C1 443,
affd 120 U.S. 214, 30 L. Ed. 582; Tyson v. U.S., 39 F. Supp. 135 cited in page
18 of decision) .[88]
Although the general rule is that compromises are to be favored, and
that compromises entered into in good faith cannot be set aside, [89] this rule
is not without qualification. A court may still reject a compromise or
settlement when it is repugnant to law, morals, good customs, public order,
or public policy.[90]
The compromise agreement between the BIR and PNOC was contrary to
law having been entered into by BIR Commissioner Tan in excess or in abuse
of the authority granted to him by legislation. E.O. No. 44 and the NIRC of
1977, as amended, had identified the situations wherein the BIR
Commissioner may compromise tax liabilities, and none of these situations
existed in this case.
The compromise, moreover, was contrary to public policy. The primary
duty of the BIR is to collect taxes, since taxes are the lifeblood of the
Government and their prompt and certain availability are imperious needs.
[91]
In the present case, however, BIR Commissioner Tan, by entering into the
compromise agreement that was bereft of any legal basis, would have
caused the Government to lose almost P300 million in tax revenues and
would have deprived the Government of much needed monetary resources.
Allegations of good faith and previous execution of the terms of the
compromise agreement on the part of PNOC would not be enough for this
Court to disregard the demands of law and public policy. Compromise may
be the favored method to settle disputes, but when it involves taxes, it may
be subject to closer scrutiny by the courts. A compromise agreement
involving taxes would affect not just the taxpayer and the BIR, but also the
whole nation, the ultimate beneficiary of the tax revenues collected.
F. The Government cannot be estopped from collecting taxes by the
mistake, negligence, or omission of its agents.
The new BIR Commissioner, Commissioner Ong, had acted well within
his powers when he set aside the compromise agreement, dated 22 June
1987, after finding that the said compromise agreement was without legal
basis. When he took over from his predecessor, there was still a pending
motion for reconsideration of the said compromise agreement, filed by
private respondent Savellano on 24 March 1988. To resolve the said motion,
he reviewed the compromise agreement and, thereafter, came upon the
conclusion that it did not comply with E.O. No. 44 and its implementing rules
and regulations.
It had been declared by this Court in Hilado v. Collector of Internal
Revenue, et al.,[92] that an administrative officer, such as the BIR
Commissioner, may revoke, repeal or abrogate the acts or previous rulings
of his predecessor in office. The construction of a statute by those
administering it is not binding on their successors if, thereafter, the latter
becomes satisfied that a different construction should be given.
It is evident in this case that the new BIR Commissioner, Commissioner
Ong, construed E.O. No. 44 and its implementing rules and regulations
differently from that of his predecessor, former Commissioner Tan, which led
to Commissioner Ongs revocation of the BIR approval of the compromise
agreement, dated 22 June 1987. Such a revocation was only proper
considering that the former BIR Commissioners decision to approve the said
compromise agreement was based on the erroneous construction of the law
(i.e., E.O. No. 44 and its implementing rules and regulations) and should not
The CTA and the Court of Appeals declared as final and unappealable,
and thus, enforceable, the assessment against PNB, dated 16 January 1991,
since PNB failed to protest said assessment within the 30-day prescribed
period. This Court, though, finds that the significant BIR assessment, as far
as this case is concerned, should be the one issued by the BIR against PNB
on 08 October 1986.
The BIR issued on 08 October 1986 an assessment against PNB for its
withholding tax liability on the interest earnings and/or yields from PNOCs
money placements with the bank. It had 30 days from receipt to protest the
BIRs assessment. [99] PNB, however, did not take any action as to the said
assessment so that upon the lapse of the period to protest, the withholding
tax assessment against it, dated 8 October 1986, became final and
unappealable, and could no longer be disputed. [100] The courts may therefore
order the enforcement of this assessment.
It is the enforcement of this BIR assessment against PNB, dated 08
October 1986, that is in issue in the instant case. If the compromise
agreement is valid, it would effectively bar the BIR from enforcing the
assessment and collecting the assessed tax; on the other hand, if the
compromise agreement is void, then the courts can order the BIR to enforce
the assessment and collect the assessed tax.
As has been previously discussed by this Court, the BIR demand letter,
dated 16 January 1991, is not a new assessment against PNB. It only
demanded from PNB the payment of the balance of the withholding tax
assessed against it on 08 October 1986. The same demand letter also has
no substantial effect or impact on the resolution of the present case. It is
already unnecessary and superfluous, having been issued by the BIR when
CTA Case No. 4249 was already pending before the CTA. At best, the
demand letter, dated 16 January 1991, constitute a useful reference for the
courts in computing the balance of PNBs tax liability, after applying as
partial payment thereon the amount previously received by the BIR from
PNOC pursuant to the compromise agreement.
IV
Prescription
A. The defense of prescription was never raised by petitioners PNOC and
PNB, and should be considered waived.
The dissenting opinion takes the position that the right of the BIR to
assess and collect income tax on the interest earnings and/or yields from
PNOCs money placements with PNB, particularly for taxable year 1985, had
already prescribed, based on Section 268 of the NIRC of 1977, as amended.
Section 268 of the NIRC of 1977, as amended, provides a three-year
period of limitation for the assessment and collection of internal revenue
taxes, which begins to run after the last day prescribed for filing of the
return.[101]
The dissenting opinion points out that more than four years have
elapsed from 25 January 1986 (the last day prescribed by law for PNB to file
its withholding tax return for the fourth quarter of 1985) to 16 January 1991
(the date when the alleged final assessment of PNBs tax liability was
issued).
The issue of prescription, however, was brought up only in the
dissenting opinion and was never raised by PNOC and PNB in the
proceedings before the BIR nor in any of their pleadings submitted to the
CTA and the Court of Appeals.
Section 1, Rule 9 of the Rules of Civil Procedure lays down the rule on
defenses and objections not pleaded, and reads:
SECTION 1. Defenses and objections not pleaded. Defenses and objections
not pleaded either in a motion to dismiss or in the answer are deemed
waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there
is another action pending between the parties for the same cause, or that
the action is barred by prior judgment or by the statute of limitations, the
court shall dismiss the claim.
The general rule enunciated in the above-quoted provision governs the
present case, that is, the defense of prescription, not pleaded in a motion to
dismiss or in the answer, is deemed waived. The exception in same provision
cannot be applied herein because the pleadings and the evidence on record
do not sufficiently show that the action is barred by prescription.
It has been consistently held in earlier tax cases that the defense of
prescription of the period for the assessment and collection of tax liabilities
shall be deemed waived when such defense was not properly pleaded and
the facts alleged and evidences submitted by the parties were not sufficient
to support a finding by this Court on the matter. [102] In Querol v. Collector of
Internal Revenue,[103] this Court pronounced that prescription, being a matter
of defense, imposes the burden on the taxpayer to prove that the full period
of the limitation has expired; and this requires him to positively establish the
date when the period started running and when the same was fully
accomplished.
In making its conclusion that the assessment and collection in this case
had prescribed, the dissenting opinion took liberties to assume the following
facts even in the absence of allegations and evidences to the effect that: (1)
PNB filed returns for its withholding tax obligations for taxable year 1985; (2)
PNB reported in the said returns the interest earnings of PNOCs money
placements with the bank; and (3) that the returns were filed on or before
the prescribed date, which was 25 January 1986.
It is not safe to adopt the first and second assumptions in this case
considering that Section 269 of the NIRC of 1977, as amended, provides for
a different period of limitation for assessment and collection of taxes in case
of false or fraudulent return or for failure to file a return. In such cases, the
BIR is given 10 years after discovery of the falsity, fraud, or omission within
which to make an assessment. [104]
It is also not safe to accept the third assumption since there can be a
possibility that PNB filed the withholding tax return later than the prescribed
date, in which case, following the dictates of Section 268 of the NIRC of
1977, as amended, the three-year prescriptive period shall be counted from
the date the return was actually filed.[105]
PNBs withholding tax returns for taxable year 1985, duly received by
the BIR, would have been the best evidence to prove actual filing, the date
of filing and the contents thereof. These facts are relevant in determining
which prescriptive period should apply, and when such prescriptive period
should begin to run and when it had lapsed. Yet, the pleadings did not refer
to any return, and no return was made part of the records of the present
case.
This Court could not make a proper ruling on the matter of prescription
on the mere basis of assumptions; such an issue should have been properly
raised, argued, and supported by evidences submitted by the parties
themselves before the BIR and the courts below.
B. Granting that this Court can take cognizance of the defense of
prescription, this Court finds that the assessment of the withholding tax
liability against PNOC and collection of the tax assessed were done
within the prescriptive period.
Assuming, for the sake of argument, that this Court can give due course
to the defense of prescription, it finds that the assessment against PNB for
its withholding tax liability for taxable year 1985 and the collection of the
tax assessed therein were accomplished within the prescribed periods for
assessment and collection under the NIRC of 1977, as amended.
If this Court adopts the assumption made by the dissenting opinion that
PNB filed its withholding tax return for the last quarter of 1985 on 25 January
1986, then the BIR had until 24 January 1989 to assess PNB. The original
assessment against PNB was issued as early as 08 October 1986, well-within
the three-year prescriptive period for making the assessment as prescribed
by the following provisions of the NIRC of 1977, as amended:
SEC. 268. Period of limitation upon assessment and collection. Except as
provided in the succeeding section, internal revenue taxes shall be assessed
within three years after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period
SEC. 269. Exceptions as to period of limitation of assessment and collection
of taxes.
(c) Any internal revenue tax which has been assessed within the period of
limitation above-prescribed may be collected by distraint or levy or by a
proceeding in court within three years following the assessment of the tax.
Sections 268 and 269(c) of the NIRC of 1977, as amended, should be
read in conjunction with one another. Section 268 requires that assessment
be made within three years from the last day prescribed by law for the filing
of the return. Section 269(c), on the other hand, provides that when an
assessment is issued within the prescribed period provided in Section 268,
the BIR has three years, counted from the date of the assessment, to collect
the tax assessed either by distraint, levy or court action. Therefore, when an
assessment is timely issued in accordance with Section 268, the BIR is given
another three-year period, under Section 269(c), within which to collect the
tax assessed, reckoned from the date of the assessment.
In the case of PNB, an assessment was issued against it by the BIR on
08 October 1986, so that the BIR had until 07 October 1989 to enforce it and
to collect the tax assessed. The filing, however, by private respondent
Savellano of his Amended Petition for Review before the CTA on 02 July 1988
already constituted a judicial action for collection of the tax assessed which
stops the running of the three-year prescriptive period for collection thereof.
A judicial action for the collection of a tax may be initiated by the filing
of a complaint with the proper regular trial court; or where the assessment is
appealed to the CTA, by filing an answer to the taxpayers petition for review
wherein payment of the tax is prayed for.[106]
The present case is unique, however, because the Petition for Review
was filed by private respondent Savellano, the informer, against the BIR,
PNOC, and PNB. The BIR, the collecting government agency; PNOC, the
taxpayer; and PNB, the withholding agent, initially found themselves on the
same side. The prayer in the Amended Petition for Review of private
respondent Savellano reads:
WHEREFORE, in view of the foregoing, petitioner respectfully prays that the
compromise agreement of June 22, 1987 be reviewed and declared null and
void, and that this Court directs:
a) respondent Commissioner to enforce and collect and respondents PNB
and/or PNOC to pay in a joint and several capacity, the total tax liability of
P387,987,785.73, plus interests from 31 October 1986; and
b) respondent Commissioner to pay unto petitioner, as informers reward,
15% of the tax liability collected under clause (a) hereof.
Other equitable reliefs under the premises are likewise prayed for. [107]
(Underscoring ours.)
Private respondent Savellano, in his Amended Petition for Review in CTA
Case No. 4249, prayed for (1) the CTA to direct the BIR Commissioner to
enforce and collect the tax, and (2) PNB and/or PNOC to pay the tax making
CTA Case No. 4249 a collection case. That the Amended Petition for Review
was filed by the informer and not the taxpayer; and that the prayer for the
enforcement of the tax assessment and payment of the tax was also made
by the informer, not the BIR, should not affect the nature of the case as a
judicial action for collection. In case the CTA grants the Petition and the
prayer therein, as what has happened in the present case, the ultimate
result would be the collection of the tax assessed. Consequently, upon the
filing of the Amended Petition for Review by private respondent Savellano,
judicial action for collection of the tax had been initiated and the running of
the prescriptive period for collection of the said tax was terminated.
Supposing that CTA Case No. 4249 is not a collection case which stops
the running of the prescriptive period for the collection of the tax, CTA Case
No. 4249, at the very least, suspends the running of the said prescriptive
period. Under Section 271 of the NIRC of 1977, as amended, the running of
the prescriptive period to collect deficiency taxes shall be suspended for the
period during which the BIR Commissioner is prohibited from beginning a
distraint or levy or instituting a proceeding in court, and for 60 days
thereafter.[108] Just as in the cases of Republic v. Ker & Co., Ltd.[109] and
Protectors Services, Inc. v. Court of Appeals,[110] this Court declares herein
that the pendency of the present case before the CTA, the Court of Appeals
and this Court, legally prevents the BIR Commissioner from instituting an
action for collection of the same tax liabilities assessed against PNOC and
PNB in the CTA or the regular trial courts. To rule otherwise would be to
violate the judicial policy of avoiding multiplicity of suits and the rule on lis
pendens.
Once again, that CTA Case No. 4249 was initiated by private respondent
Savellano, the informer, instead of PNOC, the taxpayer, or PNB, the
withholding agent, would not prevent the suspension of the running of the
prescriptive period for collection of the tax. What is controlling herein is the
fact that the BIR Commissioner cannot file a judicial action in any other court
for the collection of the tax because such a case would necessarily involve
the same parties and involve the same issues already being litigated before
the CTA in CTA Case No. 4249. The three-year prescriptive period for
collection of the tax shall commence to run only after the promulgation of
the decision of this Court in which the issues of the present case are
resolved with finality.
Whether the filing of the Amended Petition for Review by private
respondent Savellano entirely stops or merely suspends the running of the
prescriptive period for collection of the tax, it had been premature for the
BIR Commissioner to issue a writ of garnishment against PNB on 12 August
1991 and for the Central Bank of the Philippines to debit the account of PNB
on 02 September 1992 pursuant to the said writ, because the case was by
then, pending review by the Court of Appeals. However, since this Court
already finds that the compromise agreement is without force and effect and
hereby orders the enforcement of the assessment against PNB, then, any
issue or controversy arising from the premature garnishment of PNBs
account and collection of the tax by the BIR has become moot and academic
at this point.
V
Additional Informers Reward
Private respondent Savellano is entitled to additional informers reward since
the BIR had already collected the full amount of the tax assessment against
PNB.
PNOC insists that private respondent Savellano is not entitled to
additional informers reward because there was no voluntary payment of the
withholding tax liability. PNOC, however, fails to state any legal basis for its
argument.
Section 316(1) of the NIRC of 1977, as amended, granted a reward to
an informer equivalent to 15% of the revenues, surcharges, or fees
recovered, plus, any fine or penalty imposed and collected. [111] The provision
The Facts
[G.R. No. 148191. November 25, 2003]
Quoting petitioner, the CA[6] summarized the facts of this case as
follows:
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SOLIDBANK
CORPORATION, respondent.
DECISION
PANGANIBAN, J.:
Under the Tax Code, the earnings of banks from passive income are
subject to a twenty percent final withholding tax (20% FWT). This tax is
withheld at source and is thus not actuallyand physically received by the
banks, because it is paid directly to the government by the entities from
which the banks derived the income. Apart from the 20% FWT, banks are
also subject to a five percent gross receipts tax (5% GRT) which is imposed
by the Tax Code on their gross receipts, including the passive income.
Since the 20% FWT is constructively received by the banks and forms
part of their gross receipts or earnings, it follows that it is subject to the 5%
GRT. After all, the amount withheld is paid to the government on their behalf,
in satisfaction of their withholding taxes. That they do not actually receive
the amount does not alter the fact that it is remitted for their benefit in
satisfaction of their tax obligations.
Stated otherwise, the fact is that if there were no withholding tax
system in place in this country, this 20 percent portion of the passive
income of banks would actually be paid to the banks and then remitted by
them to the government in payment of their income tax. The institution of
the withholding tax system does not alter the fact that the 20 percent
portion of their passive income constitutes part of their actual earnings,
except that it is paid directly to the government on their behalf in
satisfaction of the 20 percent final income tax due on their passive incomes.
The Case
Before us is a Petition for Review [1] under Rule 45 of the Rules of Court,
seeking to annul the July 18, 2000 Decision [2] and the May 8, 2001
Resolution[3] of the Court of Appeals[4] (CA) in CA-GR SP No. 54599. The
decretal portion of the assailed Decision reads as follows:
WHEREFORE, we AFFIRM in toto the assailed decision and resolution of the
Court of Tax Appeals.[5]
The
challenged
Reconsideration.
Resolution
denied
petitioners
Motion
for
For the calendar year 1995, [respondent] seasonably filed its Quarterly
Percentage Tax Returns reflecting gross receipts (pertaining to 5% [Gross
Receipts Tax] rate) in the total amount of P1,474,691,693.44 with
corresponding gross receipts tax payments in the sum of P73,734,584.60,
broken down as follows:
Period Covered Gross Receipts Gross Receipts Tax
January to March 1994 P 188,406,061.95 P 9,420,303.10
April to June 1994 370,913,832.70 18,545,691.63
July to September 1994 481,501,838.98 24,075,091.95
October to December 1994 433,869,959.81 21,693,497.98
Total P 1,474,691,693.44 P 73,734,584.60
[Respondent] alleges that the total gross receipts in the amount of
P1,474,691,693.44 included the sum of P350,807,875.15 representing gross
receipts from passive income which was already subjected to 20% final
withholding tax.
On January 30, 1996, [the Court of Tax Appeals] rendered a decision in CTA
Case No. 4720 entitled Asian Bank Corporation vs. Commissioner of Internal
Revenue[,] wherein it was held that the 20% final withholding tax on [a]
banks interest income should not form part of its taxable gross receipts for
purposes of computing the gross receipts tax.
On June 19, 1997, on the strength of the aforementioned decision,
[respondent] filed with the Bureau of Internal Revenue [BIR] a letter-request
for the refund or issuance of [a] tax credit certificate in the aggregate
amount of P3,508,078.75, representing allegedly overpaid gross receipts tax
for the year 1995, computed as follows:
Gross Receipts Subjected to the Final Tax
Derived from Passive [Income] P 350,807,875.15
Multiply by Final Tax rate 20%
20% Final Tax Withheld at Source P 70,161,575.03
Multiply by [Gross Receipts Tax] rate 5%
Overpaid [Gross Receipts Tax] P 3,508,078.75
Without waiting for an action from the [petitioner], [respondent] on the same
day filed [a] petition for review [with the Court of Tax Appeals] in order to toll
the running of the two-year prescriptive period to judicially claim for the
refund of [any] overpaid internal revenue tax[,] pursuant to Section 230
[now 229] of the Tax Code [also National Internal Revenue Code] x x x.
xxxxxxxxx
After trial on the merits, the [Court of Tax Appeals], on August 6, 1999,
rendered its decision ordering x x x petitioner to refund in favor of x x x
respondent the reduced amount of P1,555,749.65 as overpaid [gross
receipts tax] for the year 1995. The legal issue x x x was resolved by the
[Court of Tax Appeals], with Hon. Amancio Q. Saga dissenting, on the
strength of its earlier pronouncement in x x x Asian Bank Corporation vs.
Commissioner of Internal Revenue x x x, wherein it was held that the 20%
[final withholding tax] on [a] banks interest income should not form part of
its taxable gross receipts for purposes of computing the [gross receipts tax].
the amount of interest income withheld in payment of the 20% FWT forms
part of gross receipts in computing for the GRT on banks.
[7]
Ruling of the CA
The CA held that the 20% FWT on a banks interest income did not form
part of the taxable gross receipts in computing the 5% GRT, because the
FWT was not actually received by the bank but was directly remitted to the
government. The appellate court curtly said that while the Tax Code does
not specifically state any exemption, x x x the statute must receive a
sensible construction such as will give effect to the legislative intention, and
so as to avoid an unjust or absurd conclusion.[8]
Hence, this appeal.[9]
Issue
Petitioner raises this lone issue for our consideration:
Whether or not the 20% final withholding tax on [a] banks interest income
forms part of the taxable gross receipts in computing the 5% gross receipts
tax.[10]
Sole Issue:
Whether the 20% FWT Forms Part
of the Taxable Gross Receipts
Petitioner claims that although the 20% FWT on respondents interest
income was not actually received by respondent because it was remitted
directly to the government, the fact that the amount redounded to the banks
benefit makes it part of the taxable gross receipts in computing the 5% GRT.
Respondent, on the other hand, maintains that the CA correctly ruled
otherwise.
We agree with petitioner. In fact, the same issue has been raised
recently in China Banking Corporation v. CA,[11] where this Court held that
A perusal of these provisions clearly shows that two types of taxes are
involved in the present controversy: (1) the GRT, which is a percentage tax;
and (2) the FWT, which is an income tax. As a bank, petitioner is covered by
both taxes.
A percentage tax is a national tax measured by a certain percentage of
the gross selling price or gross value in money of goods sold, bartered or
imported; or of the gross receipts or earnings derived by any person
engaged in the sale of services.[22] It is not subject to withholding.
An income tax, on the other hand, is a national tax imposed on the net
or the gross income realized in a taxable year.[23] It is subject to withholding.
In a withholding tax system, the payee is the taxpayer, the person on
whom the tax is imposed; the payor, a separate entity, acts as no more than
an agent of the government for the collection of the tax in order to ensure
its payment. Obviously, this amount that is used to settle the tax liability is
deemed sourced from the proceeds constitutive of the tax base. [24] These
proceeds are either actual or constructive. Both parties herein agree that
there is no actual receipt by the bank of the amount withheld. What needs to
be determined is if there isconstructive receipt thereof. Since the payee -not the payor -- is the real taxpayer, the rule on constructive receipt can be
easily rationalized, if not made clearly manifest.[25]
Section 4(e) of RR 12-80, on the other hand, states that the tax rates to
be imposed on the gross receipts of banks, non-bank financial
intermediaries, financing companies, and other non-bank financial
intermediaries not performing quasi-banking activities shall be based on all
items of income actually received. This provision reads:
SEC. 4. x x x x x x x x x
(e) Gross receipts tax on banks, non-bank financial intermediaries, financing
companies, and other non-bank financial intermediaries not performing
quasi-banking activities. The rates of tax to be imposed on the gross receipts
of such financial institutions shall be based on all items of income actually
received. Mere accrual shall not be considered, but once payment is
received on such accrual or in cases of prepayment, then the amount
actually received shall be included in the tax base of such financial
institutions, as provided hereunder x x x.
Respondent argues that the above-quoted provision is plain and clear:
since there is no actual receipt, the FWT is not to be included in the tax base
for computing the GRT. There is supposedly no pecuniary benefit or
advantage accruing to the bank from the FWT, because the income is
subjected to a tax burden immediately upon receipt through the withholding
process. Moreover, the earlier RR 12-80 covered matters not falling under
the later RR 17-84.[31]
We are not persuaded.
By analogy, we apply to the receipt of income the rules on actual and
constructive possession provided in Articles 531 and 532 of our Civil Code.
Constructive Receipt
Versus Actual Receipt
Manila Jockey Club does not apply to this case. Earmarking is not the
same as withholding. Amounts earmarked do not form part of gross receipts,
because, although delivered or received, these are by law or regulation
reserved for some person other than the taxpayer. On the contrary, amounts
withheld form part of gross receipts, because these are in
constructivepossession and not subject to any reservation, the withholding
agent being merely a conduit in the collection process.
The Manila Jockey Club had to deliver to the Board on Races, horse
owners and jockeys amounts that never became the property of the race
track.[74] Unlike these amounts, the interest income that had been withheld
for the government became property of the financial institutions upon
constructive possession thereof. Possession was indeed acquired, since it
was ratified by the financial institutions in whose name the act of possession
had been executed. The money indeed belonged to the taxpayers; merely
holding it in trust was not enough.[75]
The government subsequently becomes the owner of the money when
the financial institutions pay the FWT to extinguish their obligation to the
government. As this Court has held before, this is the consideration for the
transfer of ownership of the FWT from these institutions to the government.
[76]
It is ownership that determines whether interest income forms part of
taxable gross receipts.[77] Being originally owned by these financial
institutions as part of their interest income, the FWT should form part of
their taxable gross receipts.
Besides, these amounts withheld are in payment of an income tax
liability, which is different from a percentage tax liability. Commissioner of
Internal Revenue v. Tours Specialists, Inc. aptly held thus:[78]
x x x [G]ross receipts subject to tax under the Tax Code do not include
monies or receipts entrusted to the taxpayer which do not belong to them
and do not redound to the taxpayers benefit; and it is not necessary that
there must be a law or regulation which would exempt such monies and
receipts within the meaning of gross receipts under the Tax Code. [79]
In the construction and interpretation of tax statutes and of statutes in
general, the primary consideration is to ascertain and give effect to the
intention of the legislature.[80] We ought to impute to the lawmaking body
the intent to obey the constitutional mandate, as long as its enactments
fairly admit of such construction.[81] In fact, x x x no tax can be levied
without express authority of law, but the statutes are to receive a
reasonable construction with a view to carrying out their purpose and intent.
[82]
Looking again into Sections 24(e)(1) and 119 of the Tax Code, we find
that the first imposes an income tax; the second, a percentage tax. The
legislature clearly intended two different taxes. The FWT is a tax on passive
income, while the GRT is on business. [83] The withholding of one is not
equivalent to the payment of the other.
economic slump.[116]
No Double Taxation
We have repeatedly said that the two taxes, subject of this litigation,
are different from each other. The basis of their imposition may be the same,
but their natures are different, thus leading us to a final point. Is there
double taxation?
The Court finds none.
Double taxation means taxing the same property twice when it should
be taxed only once; that is, x x x taxing the same person twice by the same
jurisdiction for the same thing.[117] It is obnoxious when the taxpayer is taxed
twice, when it should be but once.[118] Otherwise described as direct duplicate
taxation,[119] the two taxes must be imposed on the same subject matter, for the
same purpose, by the same taxing authority, within the same jurisdiction,
during the same taxing period; and they must be of the same kind or character.
[120]
First, the taxes herein are imposed on two different subject matters.
The subject matter of the FWT is the passive income generated in the form
of interest on deposits and yield on deposit substitutes, while the subject
matter of the GRT is the privilege of engaging in the business of banking.
A tax based on receipts is a tax on business rather than on the
property; hence, it is an excise [121] rather than a property tax. [122] It is not an
income tax, unlike the FWT. In fact, we have already held that one can be
taxed for engaging in business and further taxed differently for the income
derived therefrom.[123] Akin to our ruling in Velilla v. Posadas,[124] these two
taxes are entirely distinct and are assessed under different provisions.
Second, although both taxes are national in scope because they are
imposed by the same taxing authority -- the national government under the
Tax Code -- and operate within the same Philippine jurisdiction for the same
purpose of raising revenues, the taxing periods they affect are different. The
FWT is deducted and withheld as soon as the income is earned, and is paid
after every calendar quarter in which it is earned. On the other hand, the
GRT is neither deducted nor withheld, but is paid only after every taxable
quarter in which it is earned.
Third, these two taxes are of different kinds or characters. The FWT is
an income tax subject to withholding, while the GRT is a percentage tax not
subject to withholding.
In short, there is no double taxation, because there is no taxing twice,
by the same taxing authority, within the same jurisdiction, for the same
purpose, in different taxing periods, some of the property in the territory. [125]
Subjecting interest income to a 20% FWT and including it in the computation
of the 5% GRT is clearly not double taxation.
the term "compensation" contained in Section 8 (f) of Republic Act No. 1161
which, before its amendment, reads as follows: .
(f) Compensation All remuneration for employment include the cash value
of any remuneration paid in any medium other than cash except (1) that
part of the remuneration in excess of P500 received during the month; (2)
bonuses, allowances or overtime pay; and (3) dismissal and all other
payments which the employer may make, although not legally required to
do so.
Republic Act No. 1792 changed the definition of "compensation" to:
(f) Compensation All remuneration for employment include the cash value
of any remuneration paid in any medium other than cash except that part of
the remuneration in excess of P500.00 received during the month.
It will thus be seen that whereas prior to the amendment, bonuses,
allowances, and overtime pay given in addition to the regular or base pay
were expressly excluded, or exempted from the definition of the term
"compensation", such exemption or exclusion was deleted by the
amendatory law. It thus became necessary for the Social Security
Commission to interpret the effect of such deletion or elimination. Circular
No. 22 was, therefore, issued to apprise those concerned of the
interpretation or understanding of the Commission, of the law as amended,
which it was its duty to enforce. It did not add any duty or detail that was
not already in the law as amended. It merely stated and circularized the
opinion of the Commission as to how the law should be
construed.1wph1.t
The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959)
cited by appellant, does not support its contention that the circular in
question is a rule or regulation. What was there said was merely that a
regulation may be incorporated in the form of a circular. Such statement
simply meant that the substance and not the form of a regulation is decisive
in determining its nature. It does not lay down a general proposition of law
that any circular, regardless of its substance and even if it is only
interpretative, constitutes a rule or regulation which must be published in
the Official Gazette before it could take effect.
The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is
not applicable to the present case, because the penalty that may be
incurred by employers and employees if they refuse to pay the
corresponding premiums on bonus, overtime pay, etc. which the employer
pays to his employees, is not by reason of non-compliance with Circular No.
22, but for violation of the specific legal provisions contained in Section
27(c) and (f) of Republic Act No. 1161.
We find, therefore, that Circular No. 22 purports merely to advise employersmembers of the System of what, in the light of the amendment of the law,
they should include in determining the monthly compensation of their
employees upon which the social security contributions should be based,
and that such circular did not require presidential approval and publication
in the Official Gazette for its effectivity.
It hardly need be said that the Commission's interpretation of the
amendment embodied in its Circular No. 22, is correct. The express
elimination among the exemptions excluded in the old law, of all bonuses,
allowances and overtime pay in the determination of the "compensation"
paid to employees makes it imperative that such bonuses and overtime pay
xxxxxxxxx
We agree.
The state policy in creating a national health insurance program is to
grant discounted medical coverage to all citizens, with priority to the needs
of the underprivileged, sick, elderly, disabled, women and children, and free
medical care to paupers[9].
The very same policy was adopted in RA 7875[10] which sought to:
a) provide all citizens of the Philippines with the mechanism to gain
financial access to health services;
b) create the National Health Insurance Program to serve as the
means to help the people pay for the health services;
c) prioritize and accelerate the provision of health services to all
Filipinos, especially that segment of the population who
cannot afford such services; and
d) establish the Philippine Health Insurance Corporation that will
administer the program at central and local levels.[11]
To assist the state in pursuing the aforementioned policy, health
institutions were granted the privilege of applying for accreditation as health
care providers.[12] Respondent Chinese General Hospital and Medical Center
(CGH) was one of those which received such accreditation.
Under the rules promulgated by the Philhealth Board pursuant to RA
7875, any claim for payment of services rendered (to a patient) shall be filed
within sixty (60) calendar days from the date of discharge of the patient.
Otherwise, the claim is barred.[13]
But before a claim is filed with petitioner Philhealth for services already
rendered, an accredited health care provider like respondent CGH is required
to:
a. accomplish a Philhealth claim form;
b. accomplish an itemized list of the medicines administered to
and medical supplies used by the patient concerned,
indicating therein the quality, unit, price and total price
corresponding thereto;
c. require the patient concerned and his/her employer to
accomplish and submit a Philhealth member/employer
certification;
d. in case the patient gave birth, require her to submit a certified
true copy of the childs birth certificate;
e. in case the patient died, require the immediate relatives to
submit a certified true copy of the deceaseds death certificate;
and
f. in case a members dependent is hospitalized for which the
member seeks coverage, require the member to submit proof
of relationship to the patient and to execute an affidavit of
support.[14]
Apart from the foregoing requirements which often necessitate securing
documents from other government offices, and the fact that most patients
are unable to immediately accomplish and submit the required documents,
an accredited health care provider like CGH has to contend with an average
of about a thousand members and/or dependents seeking medical treatment
for various illnesses per month.
Under these circumstances, it is unreasonable to expect respondent
CGH to comply 100% of the time with the prescribed 60-day rule of
Philhealth. Despite the prescribed standard procedures, respondent has no
assurance of the members prompt submission of the required documents.
This factor is completely beyond its control. There will always be delay not
attributable to respondent.
The unreasonably strict implementation of the 60-day rule, without
regard to the causes of delay beyond respondents control, will be counterproductive to the long-term effectiveness of the NHIP. Instead of placing a
premium on participation in the Program, Philhealth punishes an accredited
health provider like CGH by refusing to pay its claims for services already
rendered. Under these circumstances, no accredited provider will gamble on
honoring claims with delayed supporting papers no matter how
meritorious knowing that reimbursement from Philhealth will not be
forthcoming.
This Court will not hesitate, whenever necessary, to allow a liberal
implementation of the rules and regulations of an administrative agency in
cases where their unjustifiably rigid enforcement will result in a deprivation
of legal rights. In this case, respondent had already rendered the services for
which it was filing its claims. Technicalities should not be allowed to defeat
respondents right to be reimbursed, specially since petitioners charter itself
guarantees such reimbursement.
A careful reading of RA 7875 shows that the law itself does not provide
for any specific period within which to file claims. We can safely presume
therefore that the period for filing was not per se the principal concern of the
legislature. More important than mere technicalities is the realization of the
state policy to provide Philhealth members with the requisite medical care at
the least possible cost. Truly, nothing can be more disheartening than to see
the Acts noble objective frustrated by the overly stringent application of
technical rules.
The fact is that it was not RA 7875 itself but Section 52 of its
Implementing Rules and Regulations which established the 60-day cut-off
for the filing of claims.
While it is doctrinal in administrative law that the rules and regulations
of administrative bodies interpreting the law they are entrusted to enforce
have the force of law[15], these issuances are by no means iron-clad norms.
Administrative bodies themselves can and have in fact bent the rules for
reasons of public interest. On September 15, 1998, for instance, petitioner
issued Philhealth Circular No. 31-A:[16]
IN ORDER to allow members of the National Health Insurance Program
(NHIP) sufficient time to complete all documents to support their medical
care claims, Philhealth is temporarily suspending the sixty (60)-day
reglementary period for filing claims.
While Section 52 (b), Rule VIII of the Implementing Rules and
Regulations of R.A. 7875 provides that all claims for payment of
services shall be filed within 60 calendar days from the day of
discharge of a patient, there is a need to extend this period to
minimize the incidence of late filing due to members personal
difficulties and circumstances beyond their control. (emphasis ours)
And then again, on April 20, 1999, Philhealth Circular No. 50 was issued:
TO MINIMIZE the incidence of late filing of claims due to members
personal difficulties in preparing the needed documents, Philhealth
is extending the period for filing of claims xxx (emphasis ours)
The above circulars indubitably recognized the necessity of extending
the 60-day period because of the difficulties encountered by members in
completing the required documents, often due to circumstances beyond
their control. Petitioner appeared to be well aware of the problems
encountered by its members in complying with the 60-day rule. Furthermore,
implicit in the wording of the circulars was the cognition of the fact that the
fault was not always attributable to the health care providers like CGH but to
the members themselves.
Delay on the part of members is an ordinary occurrence. There is no
need to make a mountain out of a molehill as far as this particular point is
concerned. To this day, members continue to encounter delay in submitting
their documents. There was therefore no compelling reason for the exacting
and meticulous enforcement of the rule when, in at least two instances,
petitioner itself implemented it liberally and on the same ground that it was
using against respondent.
Petitioner likewise contends that respondent failed to exhaust
administrative remedies before resorting to judicial intervention. We
disagree.
Under the doctrine of exhaustion of administrative remedies, an
administrative decision must first be appealed to the administrative
superiors at the highest level before it may be elevated to a court of justice
for review.
This doctrine, however, is a relative one and its flexibility is conditioned
on the peculiar circumstances of a case.[17] There are a number of instances
when the doctrine has been held to be inapplicable. Among the established
exceptions are:
1) when the question raised is purely legal;
2) when the administrative body is in estoppel;
3) when the act complained of is patently illegal;
4) when there is urgent need for judicial intervention;
5) when the claim involved is small;
6) when irreparable damage will be suffered;
7) when there is no other plain, speedy and adequate remedy;
8) when strong public interest is involved;
9) when the subject of the controversy is private land;
10) in quo warranto proceedings.[18]
As explained by the appellate court:
It is Our view that the instant case falls as one of the exceptions, concerning
as it does public interest. As mentioned earlier, although they were not
made parties to the instant case, the rights of millions of Filipinos who are
members of PHILHEALTH and who obviously rely on it for their health care,
are considered, nonetheless, parties to the present case. This Court is
mandated herein to take conscious and detailed consideration of the
interplay of the interests of the state, the health care giver and the
members. With these in mind, We hold that the greater interest of the
greater number of people, mostly members of PHILHEALTH, is paramount.
Furthermore, when the representatives of herein petitioner met with Dr.
Enrique Zalamea, PHILHEALTHs President and Chief Executive Officer, he
informed them that, in lieu of protest to be filed directly with him, the
representatives could make representations with the Office of the President,
which petitioner did to no avail, considering that the formal protest filed was
referred back by the Office of the President to Dr. Zalamea. Being then the
head of PHILHEALTH, and expected to have an intimate knowledge of the
law and the rules creating the National Health Insurance Program, under
which PHILHEALTH was created, he instructed herein petitioner to pursue a
remedy not sanctioned by the rules and not in accord with the rule of
exhaustion of administrative remedies. In so doing, PHILHEALTH is deemed
estopped from assailing the instant petition for failure to exhaust
of film piracy." The Intervenors were thereafter allowed to file their Comment
in Intervention.
The rationale behind the enactment of the DECREE, is set out in its
preambular clauses as follows:
1. WHEREAS, the proliferation and unregulated circulation of videograms
including, among others, videotapes, discs, cassettes or any technical
improvement or variation thereof, have greatly prejudiced the operations of
moviehouses and theaters, and have caused a sharp decline in theatrical
attendance by at least forty percent (40%) and a tremendous drop in the
collection of sales, contractor's specific, amusement and other taxes,
thereby resulting in substantial losses estimated at P450 Million annually in
government revenues;
2. WHEREAS, videogram(s) establishments collectively earn around P600
Million per annum from rentals, sales and disposition of videograms, and
such earnings have not been subjected to tax, thereby depriving the
Government of approximately P180 Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram establishments have
also affected the viability of the movie industry, particularly the more than
1,200 movie houses and theaters throughout the country, and occasioned
industry-wide displacement and unemployment due to the shutdown of
numerous moviehouses and theaters;
4. "WHEREAS, in order to ensure national economic recovery, it is imperative
for the Government to create an environment conducive to growth and
development of all business industries, including the movie industry which
has an accumulated investment of about P3 Billion;
5. WHEREAS, proper taxation of the activities of videogram establishments
will not only alleviate the dire financial condition of the movie industry upon
which more than 75,000 families and 500,000 workers depend for their
livelihood, but also provide an additional source of revenue for the
Government, and at the same time rationalize the heretofore uncontrolled
distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of obscene videogram
features constitutes a clear and present danger to the moral and spiritual
well-being of the youth, and impairs the mandate of the Constitution for the
State to support the rearing of the youth for civic efficiency and the
development of moral character and promote their physical, intellectual, and
social well-being;
7. WHEREAS, civic-minded citizens and groups have called for remedial
measures to curb these blatant malpractices which have flaunted our
censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding the moral
values of the people and betraying the national economic recovery program,
bold emergency measures must be adopted with dispatch; ... (Numbering of
paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on the
following grounds:
1. Section 10 thereof, which imposes a tax of 30% on the gross receipts
payable to the local government is a RIDER and the same is not germane to
the subject matter thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful
restraint of trade in violation of the due process clause of the Constitution;
3. There is no factual nor legal basis for the exercise by the President of the
vast powers conferred upon him by Amendment No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a nuisance,
which it is not.
We shall consider the foregoing objections in seriatim.
1. The Constitutional requirement that "every bill shall embrace only one
subject which shall be expressed in the title thereof" 1 is sufficiently
complied with if the title be comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not necessary that the title
express each and every end that the statute wishes to accomplish. The
requirement is satisfied if all the parts of the statute are related, and are
germane to the subject matter expressed in the title, or as long as they are
not inconsistent with or foreign to the general subject and title. 2 An act
having a single general subject, indicated in the title, may contain any
number of provisions, no matter how diverse they may be, so long as they
are not inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the method and
means of carrying out the general object." 3 The rule also is that the
constitutional requirement as to the title of a bill should not be so narrowly
construed as to cripple or impede the power of legislation. 4 It should be
given practical rather than technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax provision
of the DECREE is a rider is without merit. That section reads, inter alia:
Section 10. Tax on Sale, Lease or Disposition of Videograms.
Notwithstanding any provision of law to the contrary, the province shall
collect a tax of thirty percent (30%) of the purchase price or rental rate, as
the case may be, for every sale, lease or disposition of a videogram
containing a reproduction of any motion picture or audiovisual program. Fifty
percent (50%) of the proceeds of the tax collected shall accrue to the
province, and the other fifty percent (50%) shall acrrue to the municipality
where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax
shall be shared equally by the City/Municipality and the Metropolitan Manila
Commission.
xxx
xxx
xxx
The foregoing provision is allied and germane to, and is reasonably
necessary for the accomplishment of, the general object of the DECREE,
which is the regulation of the video industry through the Videogram
Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool for
regulation 6 it is simply one of the regulatory and control mechanisms
scattered throughout the DECREE. The express purpose of the DECREE to
include taxation of the video industry in order to regulate and rationalize the
heretofore uncontrolled distribution of videograms is evident from Preambles
2 and 5, supra. Those preambles explain the motives of the lawmaker in
presenting the measure. The title of the DECREE, which is the creation of the
Videogram Regulatory Board, is comprehensive enough to include the
purposes expressed in its Preamble and reasonably covers all its provisions.
It is unnecessary to express all those objectives in the title or that the latter
be an index to the body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh
and oppressive, confiscatory, and in restraint of trade. However, it is beyond
serious question that a tax does not cease to be valid merely because it
regulates, discourages, or even definitely deters the activities taxed. 8 The
power to impose taxes is one so unlimited in force and so searching in
extent, that the courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the discretion of the authority
which exercises it. 9 In imposing a tax, the legislature acts upon its
constituents. This is, in general, a sufficient security against erroneous and
oppressive taxation. 10
The tax imposed by the DECREE is not only a regulatory but also a revenue
measure prompted by the realization that earnings of videogram
establishments of around P600 million per annum have not been subjected
to tax, thereby depriving the Government of an additional source of revenue.
It is an end-user tax, imposed on retailers for every videogram they make
available for public viewing. It is similar to the 30% amusement tax imposed
or borne by the movie industry which the theater-owners pay to the
government, but which is passed on to the entire cost of the admission
ticket, thus shifting the tax burden on the buying or the viewing public. It is a
tax that is imposed uniformly on all videogram operators.
The levy of the 30% tax is for a public purpose. It was imposed primarily to
answer the need for regulating the video industry, particularly because of
the rampant film piracy, the flagrant violation of intellectual property rights,
and the proliferation of pornographic video tapes. And while it was also an
objective of the DECREE to protect the movie industry, the tax remains a
valid imposition.
The public purpose of a tax may legally exist even if the motive which
impelled the legislature to impose the tax was to favor one industry over
another. 11
It is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that "inequities which result from a
singling out of one particular class for taxation or exemption infringe no
constitutional limitation". 12 Taxation has been made the implement of the
state's police power.13
At bottom, the rate of tax is a matter better addressed to the taxing
legislature.
3. Petitioner argues that there was no legal nor factual basis for the
promulgation of the DECREE by the former President under Amendment No.
6 of the 1973 Constitution providing that "whenever in the judgment of the
President ... , there exists a grave emergency or a threat or imminence
thereof, or whenever the interim Batasang Pambansa or the regular National
Assembly fails or is unable to act adequately on any matter for any reason
that in his judgment requires immediate action, he may, in order to meet the
exigency, issue the necessary decrees, orders, or letters of instructions,
which shall form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver that the
8th "whereas" clause sufficiently summarizes the justification in that grave
emergencies corroding the moral values of the people and betraying the
national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the
judgment" of the then President, considering that the issue of the validity of
the exercise of legislative power under the said Amendment still pends
resolution in several other cases, we reserve resolution of the question
raised at the proper time.
4. Neither can it be successfully argued that the DECREE contains an undue
delegation of legislative power. The grant in Section 11 of the DECREE of
authority to the BOARD to "solicit the direct assistance of other agencies and
units of the government and deputize, for a fixed and limited period, the
heads or personnel of such agencies and units to perform enforcement
functions for the Board" is not a delegation of the power to legislate but
merely a conferment of authority or discretion as to its execution,
enforcement, and implementation. "The true distinction is between the
delegation of power to make the law, which necessarily involves a discretion
as to what it shall be, and conferring authority or discretion as to its
execution to be exercised under and in pursuance of the law. The first
cannot be done; to the latter, no valid objection can be made." 14 Besides, in
the very language of the decree, the authority of the BOARD to solicit such
assistance is for a "fixed and limited period" with the deputized agencies
concerned being "subject to the direction and control of the BOARD." That
the grant of such authority might be the source of graft and corruption
would not stigmatize the DECREE as unconstitutional. Should the eventuality
occur, the aggrieved parties will not be without adequate remedy in law.
5. The DECREE is not violative of the ex post facto principle. An ex post facto
law is, among other categories, one which "alters the legal rules of evidence,
and authorizes conviction upon less or different testimony than the law
required at the time of the commission of the offense." It is petitioner's
position that Section 15 of the DECREE in providing that:
All videogram establishments in the Philippines are hereby given a period of
forty-five (45) days after the effectivity of this Decree within which to
register with and secure a permit from the BOARD to engage in the
videogram business and to register with the BOARD all their inventories of
videograms, including videotapes, discs, cassettes or other technical
improvements or variations thereof, before they could be sold, leased, or
otherwise disposed of. Thereafter any videogram found in the possession of
any person engaged in the videogram business without the required proof of
registration by the BOARD, shall be prima facie evidence of violation of the
Decree, whether the possession of such videogram be for private showing
and/or public exhibition.
raises immediately a prima facie evidence of violation of the DECREE when
the required proof of registration of any videogram cannot be presented and
thus partakes of the nature of an ex post facto law.
The argument is untenable. As this Court held in the recent case of Vallarta
vs. Court of Appeals, et al. 15
... it is now well settled that "there is no constitutional objection to the
passage of a law providing that the presumption of innocence may be
overcome by a contrary presumption founded upon the experience of
human conduct, and enacting what evidence shall be sufficient to overcome
such presumption of innocence" (People vs. Mingoa 92 Phil. 856 [1953] at
858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL
LIMITATIONS, 639-641). And the "legislature may enact that when certain
facts have been proved that they shall be prima facie evidence of the
existence of the guilt of the accused and shift the burden of proof provided
there be a rational connection between the facts proved and the ultimate
facts presumed so that the inference of the one from proof of the others is
not unreasonable and arbitrary because of lack of connection between the
two in common experience". 16
Applied to the challenged provision, there is no question that there is a
rational connection between the fact proved, which is non-registration, and
the ultimate fact presumed which is violation of the DECREE, besides the
fact that the prima facie presumption of violation of the DECREE attaches
only after a forty-five-day period counted from its effectivity and is,
therefore, neither retrospective in character.
6. We do not share petitioner's fears that the video industry is being overregulated and being eased out of existence as if it were a nuisance. Being a
relatively new industry, the need for its regulation was apparent. While the
underlying objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at bottom of its
enactment, considering "the unfair competition posed by rampant film
piracy; the erosion of the moral fiber of the viewing public brought about by
the availability of unclassified and unreviewed video tapes containing
pornographic films and films with brutally violent sequences; and losses in
government revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video establishments are virtually
untaxed since mere payment of Mayor's permit and municipal license fees
are required to engage in business. 17
The enactment of the Decree since April 10, 1986 has not brought about the
"demise" of the video industry. On the contrary, video establishments are
seen to have proliferated in many places notwithstanding the 30% tax
imposed.
In the last analysis, what petitioner basically questions is the necessity,
wisdom and expediency of the DECREE. These considerations, however, are
primarily and exclusively a matter of legislative concern.
Only congressional power or competence, not the wisdom of the action
taken, may be the basis for declaring a statute invalid. This is as it ought to
be. The principle of separation of powers has in the main wisely allocated
the respective authority of each department and confined its jurisdiction to
such a sphere. There would then be intrusion not allowable under the
Constitution if on a matter left to the discretion of a coordinate branch, the
judiciary would substitute its own. If there be adherence to the rule of law,
as there ought to be, the last offender should be courts of justice, to which
rightly litigants submit their controversy precisely to maintain unimpaired
the supremacy of legal norms and prescriptions. The attack on the validity of
the challenged provision likewise insofar as there may be objections, even if
valid and cogent on its wisdom cannot be sustained. 18
In fine, petitioner has not overcome the presumption of validity which
attaches to a challenged statute. We find no clear violation of the
Constitution which would justify us in pronouncing Presidential Decree No.
1987 as unconstitutional and void.
WHEREFORE, the instant Petition is hereby dismissed.
No costs.
SO ORDERED.
Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.
1991 letter of Director Cawad to Rabor and advised him "to stop reporting
for work effective August 16, 1991." 4
Petitioner Rabor then sent to the Regional Director, CSRO-XI, a letter dated
14 August 1991, asking for extension of his services in the City Government
until he "shall have completed the fifteen (15) years service [requirement] in
the Government so that [he] could also avail of the benefits of the
retirement laws given to employees of the Government." The extension he
was asking for was about two (2) years. Asserting that he was "still in good
health and very able to perform the duties and functions of [his] position as
Utility Worker," Rabor sought "extension of [his] service as an exception to
Memorandum Circular No. 65 of the Office of the President." 5 This request
was denied by Director Cawad on 15 August 1991.
Petitioner Rabor next wrote to the Office of the President on 29 January 1992
seeking reconsideration of the decision of Director Cawad, CSRO-XI. The
Office of the President referred Mr. Rabor's letter to the Chairman of the Civil
Service Commission on 5 March 1992.
In its Resolution No. 92-594, dated 28 April 1992, the Civil Service
Commission dismissed the appeal of Mr. Rabor and affirmed the action of
Director Cawad embodied in the latter's letter of 26 July 1991. This
Resolution stated in part:
In his appeal, Rabor requested that he be allowed to continue rendering
services as Utility Worker in order to complete the fifteen (15) year service
requirement under P.D. 1146.
CSC Memorandum Circular No. 27, s. 1990 provides, in part:
1. Any request for extension of service of compulsory retirees to complete
the fifteen years service requirement for retirement shall be allowed only to
permanent appointees in the career service who are regular members of the
Government Service Insurance System (GSIS) and shall be granted for a
period of not exceeding one (1) year.
Considering that as early as October 18, 1988, Rabor was already due for
retirement, his request for further extension of service cannot be given due
course. 6 (Emphasis in the original)
On 28 October 1992, Mr. Rabor sought reconsideration of Resolution No. 92594 of the Civil Service Commission this time invoking the Decision of this
Court in Cena v. Civil Service Commission. 7 Petitioner also asked for
reinstatement with back salaries and benefits, having been separated from
the government service effective 16 August 1991. Rabor's motion for
reconsideration was denied by the Commission.
Petitioner Rabor sent another letter dated 16 April 1993 to the Office of the
Mayor, Davao City, again requesting that he be allowed to continue
rendering service to the Davao City Government as Utility Worker in order to
complete the fifteen (15) years service requirement under P.D. No. 1146.
This request was once more denied by Mayor Duterte in a letter to petitioner
dated 19 May 1993. In this letter, Mayor Duterte pointed out that,
underCena grant of the extension of service was discretionary on the part of
the City Mayor, but that he could not grant the extension requested. Mayor
Duterte's letter, in relevant part, read:
The matter was referred to the City Legal Office and the Chairman of the
Civil Service Commission, in the advent of the decision of the Supreme Court
in the Cena vs. CSC, et al. (G.R. No. 97419 dated July 3, 1992), for legal
opinion. Both the City Legal Officer and the Chairman of the Civil Service
Commission are one in these opinion that extending you an appointment in
order that you may be able to complete the fifteen-year service requirement
is discretionary [on the part of] the City Mayor.
Much as we desire to extend you an appointment but circumstances are that
we can no longer do so.As you are already nearing your 70th birthday may
no longer be able to perform the duties attached to your position. Moreover,
the position you had vacated was already filled up.
We therefore regret to inform you that we cannot act favorably on your
request. 8 (Emphases supplied)
At this point, Mr. Rabor decided to come to this Court. He filed a
Letter/Petition dated 6 July 1993 appealing from Civil Service Resolution No.
92-594 and from Mayor Duterte's letter of 10 May 1993.
The Court required petitioner Rabor to comply with the formal requirements
for instituting a special civil action ofcertiorari to review the assailed
Resolution of the Civil Service Commission. In turn, the Commission was
required to comment on petitioner's Letter/Petition. 9 The Court subsequently
noted petitioner's Letter of 13 September 1993 relating to compliance with
the mentioned formal requirements and directed the Clerk of Court to advise
petitioner to engage the services of counsel or to ask for legal assistance
from the Public Attorney's Office (PAO). 10
The Civil Service Commission, through the Office of the Solicitor General,
filed its comment on 16 November 1993. The Court then resolved to give
due course to the Petition and required the parties to file memoranda. Both
the Commission and Mr. Rabor (the latter through PAO counsel) did so.
In this proceeding, petitioner Rabor contends that his claim falls squarely
within the ruling of this Court in Cena v. Civil Service Commission. 11
Upon the other hand, the Commission seeks to distinguish this case from
Cena. The Commission, through the Solicitor General, stressed that in Cena,
this Court had ruled that the employer agency, the Land Registration
Authority of the Department of Justice, was vested with discretion to grant to
Cena the extension requested by him. The Land Registration Authority had
chosen not to exercise its discretion to grant or deny such extension. In
contrast, in the instant case, the Davao City Government did exercise its
discretion on the matter and decided to deny the extension sought by
petitioner Rabor for legitimate reasons.
While the Cena decision is barely three (3) years old, the Court considers
that it must reexamine the doctrine ofCena and the theoretical and policy
underpinnings thereof. 12
We start by recalling the factual setting of Cena.
Gaudencio Cena was appointed Registrar of the Register of Deeds of
Malabon, Metropolitan Manila, on 16 July 1987. He reached the compulsory
retirement age of sixty-five (65) years on 22 January 1991. By the latter
date, his government service would have reached a total of eleven (11)
years, nine (9) months and six (6) days. Before reaching his 65th birthday,
Cena requested the Secretary of Justice, through the Administrator of the
(Citations omitted)
While Section 11 (b) appeared cast in verbally unqualified terms, there were
(and still are) two (2) administrative issuances which prescribe limitations on
the extension of service that may be granted to an employee who has
reached sixty-five (65) years of age.
The first administrative issuance is Civil Service Commission Circular No. 27,
Series of 1990, which should be quoted in its entirety:
TO : ALL HEADS OF DEPARTMENTS, BUREAUS AND AGENCIES OF THE
NATIONAL/LOCAL GOVERNMENTS INCLUDING GOVERNMENT- OWNED
AND/OR CONTROLLED CORPORATIONS WITH ORIGINAL CHARTERS.
SUBJECT : Extension of Service of Compulsory Retiree to Complete the
Fifteen Years Service Requirement for Retirement Purposes.
Pursuant to CSC Resolution No. 90-454 dated May 21, 1990, the Civil Service
Commission hereby adopts and promulgates the following policies and
guidelines in the extension of services of compulsory retirees to complete
the fifteen years service requirement for retirement purposes:
1. Any request for the extension of service of compulsory retirees to
complete the fifteen (15) years service requirement for retirement shall be
allowed only to permanent appointees in the career service who are regular
members of the Government Service Insurance System (GSIS), and shall be
granted for a period not exceeding one (1) year.
2. Any request for the extension of service of compulsory retiree to complete
the fifteen (15) years service requirement for retirement who entered the
government service at 57 years of age or over upon prior grant of authority
to appoint him or her, shall no longer be granted.
3. Any request for the extension of service to complete the fifteen (15) years
service requirement of retirement shall be filled not later than three (3)
years prior to the date of compulsory retirement.
4. Any request for the extension of service of a compulsory retiree who
meets the minimum number of years of service for retirement purposes may
be granted for six (6) months only with no further extension.
This Memorandum Circular shall take effect immediately. (Emphases
supplied)
The second administrative issuance Memorandum Circular No. 65 of the
Office of the President, dated 14 June 1988 provides:
xxx xxx xxx
WHEREAS, this Office has been. receiving requests for reinstatement and/or
retention in the service of employees who have reached the compulsory
retirement age of 65 years, despite the strict conditions provided for in
Memorandum Circular No. 163, dated March 5, 1968, as amended.
WHEREAS, the President has recently adopted a policy to adhere more
strictly to the law providing for compulsory retirement age of 65 years and,
in extremely meritorious cases, to limit the service beyond the age of 65
years to six (6) months only.
WHEREFORE, the pertinent provision of Memorandum Circular No. 163 or on
the retention in the service of officials or employees who have reached the
compulsory retirement age of 65 years, is hereby amended to read as
follows:
Officials or employees who have reached the compulsory retirement age of
65 yearsshall not be retained in the service, except for extremely
meritorious reasons in which case the retention shall not exceed six (6)
months.
All heads of departments, bureaus, offices and instrumentalities of the
government including government-owned or controlled corporations, are
hereby enjoined to require their respective offices to strictly comply with this
circular.
This Circular shall take effect immediately.
By authority of the President
(Sgd.)
CATALINO MACARAIG, JR.
Executive Secretary
Manila, June 14, 1988. 15 (Emphasis supplied)
Medialdea, J. resolved the challenges posed by the above two (2)
administrative regulations by, firstly, considering as invalid Civil Service
Memorandum No. 27 and, secondly, by interpreting the Office of the
President's Memorandum Circular No. 65 as inapplicable to the case of
Gaudencio T. Cena.
We turn first to the Civil Service Commission's Memorandum Circular No. 27.
Medialdea, J. wrote:
The Civil Service Commission Memorandum Circular No. 27 being in the
nature of an administrative regulation, must be governed by the principle
that administrative regulations adopted under legislative authority by a
particular department must be in harmony with the provisions of the law,
and should be for the sole purpose of carrying into effect its general
provisions (People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA
450; Teoxon v. Members of the Board of Administrators, L-25619, June 30,
1970, 33 SCRA 585; Manuel v. General Auditing Office, L-28952, December
29, 1971, 42 SCRA 660; Deluao v. Casteel, L-21906, August 29, 1969, 29
SCRA 350). . . . . The rule on limiting to one the year the extension of service
of an employee who has reached the compulsory retirement age of sixty-five
(65) years, but has less than fifteen (15) years of service under Civil Service
Memorandum Circular No. 27, S. 1990, cannot likewise be accorded validity
because it has no relationship or connection with any provision of P.D. 1146
supposed to be carried into effect. The rule was an addition to or extension
of the law, not merely a mode of carrying it into effect. The Civil Service
Commission has no power to supply perceived omissions in P.D. 1146. 16
(Emphasis supplied)
It will be seen that Cena, in striking down Civil Service Commission
Memorandum No. 27, took a very narrow view on the question of what
subordinate rule-making by an administrative agency is permissible and
valid. That restrictive view must be contrasted with this Court's earlier ruling
in People v. Exconde, 17 where Mr. Justice J.B.L. Reyes said:
It is well established in this jurisdiction that, while the making of laws is a
non-delegable activity that corresponds exclusively to Congress,
nevertheless, the latter may constitutionally delegate authority and
promulgate rules and regulations to implement a given legislation and
effectuate its policies, for the reason that the legislature often finds it
impracticable (if not impossible) to anticipate and provide for the
multifarious and complex situations that may be met in carrying the law into
effect. All that is required is that the regulation should be germane to the
objects and purposes of the law; that the regulation be not in contradiction
with it, but conform to standards that the law prescribes. 18(Emphasis
supplied)
In Tablarin v. Gutierrez, 19 the Court, in sustaining the validity of a MECS
Order which established passing a uniform admission test called the National
Medical Admission Test (NMAT) as a prerequisite for eligibility for admission
into medical schools in the Philippines, said:
The standards set for subordinate legislation in the exercise of rule making
authority by an administrative agency like the Board of Medical Education
are necessarily broad and highly abstract. As explained by then Mr. Justice
Fernando in Edu v. Ericta (35 SCRA 481 [1970])
The standards may be either expressed or implied. If the former, the nondelegation objection is easily met. The Standard though does not have to be
spelled out specifically. It could be implied from the policy and purpose of
the act considered as a whole. In the Reflector Law, clearly the legislative
objective is public safety. What is sought to be attained in Calalang v.
William is "safe transit upon the roads."
We believe and so hold that the necessary standards are set forth in Section
1 of the 1959 Medical Act: "the standardization and regulation of medical
education" and in Section 5 (a) and 7 of the same Act, the body of the
statute itself, and that these considered together are sufficient compliance
with the requirements of the non-delegation principle. 20 (Citations omitted;
emphasis partly in the original and partly supplied)
In Edu v. Ericta, 21 then Mr. Justice Fernando stressed the abstract and very
general nature of the standards which our Court has in prior case law upheld
as sufficient for purposes of compliance with the requirements for validity of
subordinate or administrative rule-making:
This Court has considered as sufficient standards, "public welfare,"
(Municipality of Cardona v. Municipality of Binangonan, 36 Phil. 547 [1917]);
"necessary in the interest of law and order," (Rubi v. Provincial Board, 39
Phil. 660 [1919]); "public interest," (People v. Rosenthal, 68 Phil. 328
[1939]); and "justice and equity and substantial merits of the case,"
(International Hardwood v. Pangil Federation of Labor, 17 Phil. 602 [1940]). 22
(Emphasis supplied)
Clearly, therefore, Cena when it required a considerably higher degree of
detail in the statute to be implemented, went against prevailing doctrine. It
seems clear that if the governing or enabling statute is quite detailed and
specific to begin with, there would be very little need (or occasion) for
implementing administrative regulations. It is, however, precisely the
inability of legislative bodies to anticipate all (or many) possible detailed
situations in respect of any relatively complex subject matter, that makes
subordinate, delegated rule-making by administrative agencies so important
and unavoidable. All that may be reasonably; demanded is a showing that
the delegated legislation consisting of administrative regulations are
germane to the general purposes projected by the governing or enabling
statute. This is the test that is appropriately applied in respect of Civil
Service Memorandum Circular No. 27, Series of 1990, and to this test we
now turn.
We consider that the enabling statute that should appropriately be examined
is the present Civil Service law found in Book V, Title I, Subtitle A, of
Executive Order No. 292 dated 25 July 1987, otherwise known as the
Administrative Code of 1987 and not alone P.D. No. 1146, otherwise
known as the "Revised Government Service Insurance Act of 1977." For the
matter of extension of service of retirees who have reached sixty-five (65)
years of age is an area that is covered by both statutes and not alone by
Section 11 (b) of P.D. 1146. This is crystal clear from examination of many
provisions of the present civil service law.
Section 12 of the present Civil Service law set out in the 1987 Administrative
Code provides, in relevant part, as follows:
Sec. 12 Powers and Functions. The [Civil Service] Commission shall have
the following powers and functions:
xxx xxx xxx
(2) Prescribe, amend and enforce rules and regulations for carrying into
effect the provisions of the Civil Service Law and other pertinent laws;
(3) Promulgate policies, standards and guidelines for the Civil Service and
adopt plans and programsto promote economical, efficient and effective
personnel administration in the government;
xxx xxx xxx
(10) Formulate, administer and evaluate programs relative to the
development and retention of aqualified and competent work force in the
public service;
xxx xxx xxx
(14) Take appropriate action on all appointments and other personnel
matters in the Civil Serviceincluding extension of service beyond retirement
age;
xxx xxx xxx
(17) Administer the retirement program for government officials and
employees, and accredit government services and evaluate qualifications
for retirement;
xxx xxx xxx
(19) Perform all functions properly belonging to a central personnel agency
and such other functions as may be provided by law. (Emphasis supplied)
It was on the bases of the above quoted provisions of the 1987
Administrative Code that the Civil Service Commission promulgated its
Memorandum Circular No. 27. In doing so, the Commission was acting as
"the central personnel agency of the government empowered to promulgate
policies, standards and guidelines for efficient, responsive and effective
personnel administration in the government." 23 It was also discharging its
function of "administering the retirement program for government officials
and employees" and of "evaluat[ing] qualifications for retirement."
In addition, the Civil Service Commission is charged by the 1987
Administrative Code with providing leadership and assistance "in the
development and retention of qualified and efficient work force in the Civil
Service" (Section 16 [10]) and with the "enforcement of the constitutional
and statutory provisions, relative to retirement and the regulation for the
effective implementation of the retirement of government officials and
employees" (Section 16 [14]).
obtained either from the President of the Philippines or from the Civil Service
Commission and the Commission found that the other conditions laid down
in Section 22 of Rule III, CSRPAP, did not exist. The Court nevertheless struck
down Section 22, Rule III on the same exceedingly restrictive view of
permissible administrative legislation that Cena relied on. 26
When one combines the doctrine of Toledo with the ruling in Cena, very
strange results follow. Under these combined doctrines, a person sixty-four
(64) years of age may be appointed to the government service and one (1)
year later may demand extension of his service for the next fourteen (14)
years; he would retire at age seventy-nine (79). The net effect is thus that
the general statutory policy of compulsory retirement at sixty-five (65) years
is heavily eroded and effectively becomes unenforceable. That general
statutory policy may be seen to embody the notion that there should be a
certain minimum turn-over in the government service and that opportunities
for government service should be distributed as broadly as possible,
specially to younger people, considering that the bulk of our population is
below thirty (30) years of age. That same general policy also reflects the life
expectancy of our people which is still significantly lower than the life
expectancy of, e.g., people in Northern and Western Europe, North America
and Japan.
Our conclusion is that the doctrine of Cena should be and is hereby modified
to this extent: that Civil Service Memorandum Circular No. 27, Series of
1990, more specifically paragraph (1) thereof, is hereby declared valid and
effective. Section 11 (b) of P.D. No. 1146 must, accordingly, be read together
with Memorandum Circular No. 27. We reiterate, however, the holding in
Cena that the head of the government agency concerned is vested with
discretionary authority to allow or disallow extension of the service of an
official or employee who has reached sixty-five (65) years of age without
completing fifteen (15) years of government service; this discretion is,
nevertheless, to be exercised conformably with the provisions of Civil
Service Memorandum Circular No. 27, Series of 1990.
We do not believe it necessary to deal specifically with Memorandum
Circular No. 65 of the Office of the President dated 14 June 1988. It will be
noted from the text quoted supra (pp. 11-12) that the text itself of
Memorandum Circular No. 65 (and for that matter, that of Memorandum
Circular No. 163, also of the Office of the President, dated 5 March 1968) 27
does not purport to apply only to officers or employees who have reached
the age of sixty-five (65) years and who have at least fifteen (l5) years of
government service. We noted earlier that Cena interpreted Memorandum
Circular No. 65 as referring only to officers and employees who have both
reached the compulsory retirement age of sixty-five (65) and completed the
fifteen (15) years of government service. Cena so interpreted this
Memorandum Circular precisely because Cena had reached the conclusion
that employees who have reached sixty-five (65) years of age, but who have
less than fifteen (15) years of government service, may be allowed such
extension of service as may be needed to complete fifteen (15) years of
service. In other words, Cena read Memorandum Circular No. 65 in such a
way as to comfort with Cena's own conclusion reached without regard to
that Memorandum Circular. In view of the conclusion that we today reached
in the instant case, this last ruling of Cena is properly regarded as merely
orbiter.
We also do not believe it necessary to determine whether Civil Service
Memorandum Circular No. 27 is fully compatible with Office of the
President's Memorandum Circular No. 65; this question must be reserved for
detailed analysis in some future justiciable case.
Applying now the results of our reexamination of Cena to the instant case,
we believe and so hold that Civil Service Resolution No. 92-594 dated 28
April 1992 dismissing the appeal of petitioner Rabor and affirming the action
of CSRO-XI Director Cawad dated 26 July 1991, must be upheld and affirmed.
ACCORDINGLY, for all the foregoing, the Petition for Certiorari is hereby
DISMISSED for lack of merit. No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug,
Kapunan, Mendoza and Francisco, JJ., concur.
Quiason, J., is on leave.
Separate Opinions
PADILLA, J., concurring:
I vote to grant the petition for the same reasons stated in my concurring
opinion in Cena vs. CSC reported in 211 SCRA 192.
lack of jurisdiction of the Board to hear the application because GrandAir did
not possess a legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an
Order denying petitioner's Opposition. Pertinent portions of the Order read:
"PAL alleges that the CAB has no jurisdiction to hear the petitioner's
application until the latter has first obtained a franchise to operate from
Congress.
The Civil Aeronautics Board has jurisdiction to hear and resolve the
application. In Avia Filipina vs. CAB, CA G.R. No. 23365, it has been ruled
that under Section 10 (c) (I) of R.A. 776, the Board possesses this specific
power and duty.
In view thereof, the opposition of PAL on this ground is hereby denied.
SO ORDERED."
Meantime, on December 22, 1994, petitioner this time, opposed private
respondent's application for a temporary permit maintaining that:
"1. The applicant does not possess the required fitness and capability of
operating the services applied for under RA 776; and,
2. Applicant has failed to prove that there is clear and urgent public need for
the services applied for."[6]
On December 23, 1994, the Board promulgated Resolution No. 119(92)
approving the issuance of a Temporary Operating Permit in favor of Grand
Air[7] for a period of three months, i.e., from December 22, 1994 to March 22,
1994. Petitioner moved for the reconsideration of the issuance of the
Temporary Operating Permit on January 11, 1995, but the same was denied
in CAB Resolution No. 02 (95) on February 2, 1995. [8] In the said Resolution,
the Board justified its assumption of jurisdiction over GrandAir's application.
"WHEREAS, the CAB is specifically authorized under Section 10-C (1) of
Republic Act No. 776 as follows:
'(c) The Board shall have the following specific powers and duties:
(1) In accordance with the provision of Chapter IV of this Act, to issue, deny,
amend revise, alter, modify, cancel, suspend or revoke, in whole or in part,
upon petitioner-complaint, or upon its own initiative, any temporary
operating permit or Certificate of Public Convenience and Necessity;
Provided, however; that in the case of foreign air carriers, the permit shall be
issued with the approval of the President of the Republic of the Philippines."
WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992),
wherein the Supreme Court held that the CAB can even on its own initiative,
grant a TOP even before the presentation of evidence;
WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365),
promulgated on October 30, 1991, held that in accordance with its mandate,
the CAB can issue not only a TOP but also a Certificate of Public
Convenience and Necessity (CPCN) to a qualified applicant therefor in the
absence of a legislative franchise, citing therein as basis the decision of
Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that:
a) Franchises by Congress are not required before each and every public
utility may operate when the law has granted certain administrative
agencies the power to grant licenses for or to authorize the operation of
for the reason that under R.A. No. 776, as amended, the CAB is explicitly
empowered to issue operating permits or certificates of public convenience
and necessity and that this statutory provision is not inconsistent with the
current charter.
We concur with the view expressed by the House Committee on
Corporations and Franchises. In an opinion rendered in favor of your
predecessor-in-office, this Department observed that,xxx it is useful to note the distinction between the
franchise to operate and a permit to commence
operation. The former is sovereign and legislative in
nature; it can be conferred only by the lawmaking
authority (17 W and P, pp. 691-697). The latter is
administrative and regulatory in character (In re
Application of Fort Crook-Bellevue Boulevard Line, 283
NW 223); it is granted by an administrative agency, such
as the Public Service Commission [now Board of
Transportation], in the case of land transportation, and
the Civil Aeronautics Board, in case of air services. While
a legislative franchise is a pre-requisite to a grant of a
certificate of public convenience and necessity to an
airline company, such franchise alone cannot constitute
the authority to commence operations, inasmuch as
there are still matters relevant to such operations which
are not determined in the franchise, like rates, schedules
and routes, and which matters are resolved in the
process of issuance of permit by the administrative.
(Secretary of Justice opn No. 45, s. 1981)
Indeed, authorities are agreed that a certificate of public convenience and
necessity is an authorization issued by the appropriate governmental
agency for the operation of public services for which a franchise is required
by law (Almario, Transportation and Public Service Law, 1977 Ed., p. 293;
Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed., pp. 380-381).
Based on the foregoing, it is clear that a franchise is the legislative
authorization to engage in a business activity or enterprise of a public
nature, whereas a certificate of public convenience and necessity is a
regulatory measure which constitutes the franchises authority to commence
operations. It is thus logical that the grant of the former should precede the
latter.
Please be guided accordingly.
(SGD.) SEDFREY A. ORDOEZ
Secretary of Justice"
Respondent GrandAir, on the other hand, relies on its interpretation of
the provisions of Republic Act 776, which follows the pronouncements of the
Court of Appeals in the cases of Avia Filipinas vs. Civil Aeronautics Board,
and Silangan Airways, Inc. vs. Grand International Airways (supra).
In both cases, the issue resolved was whether or not the Civil
Aeronautics Board can issue the Certificate of Public Convenience and
Necessity or Temporary Operating Permit to a prospective domestic air
courts will not interfere with the exercise of that discretion when it is just
and reasonable and founded upon a legal right.[17]
It is this policy which was pursued by the Court in Albano vs. Reyes.
Thus, a reading of the pertinent issuances governing the Philippine Ports
Authority,[18] proves that the PPA is empowered to undertake by itself the
operation and management of the Manila International Container Terminal,
or to authorize its operation and management by another by contract or
other means, at its option. The latter power having been delegated to the
PPA, a franchise from Congress to authorize an entity other than the PPA to
operate and manage the MICP becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board
has the authority to issue a Certificate of Public Convenience and Necessity,
or Temporary Operating Permit to a domestic air transport operator, who,
though not possessing a legislative franchise, meets all the other
requirements prescribed by the law. Such requirements were enumerated in
Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that
a legislative franchise is an indispensable requirement for an entity to
operate as a domestic air transport operator. Although Section 11 of Article
XII recognizes Congress' control over any franchise, certificate or authority
to operate a public utility, it does not mean Congress has exclusive authority
to issue the same. Franchises issued by Congress are not required before
each and every public utility may operate. [19] In many instances, Congress
has seen it fit to delegate this function to government agencies, specialized
particularly in their respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress
to delegate the authority to regulate the issuance of a license to operate
domestic air transport services:
SECTION 10. Powers and Duties of the Board. (A) Except as otherwise
provided herein, the Board shall have the power to regulate the economic
aspect of air transportation, and shall have general supervision and
regulation of, the jurisdiction and control over air carriers, general sales
agents, cargo sales agents, and air freight forwarders as well as their
property rights, equipment, facilities and franchise, insofar as may be
necessary for the purpose of carrying out the provision of this Act.
In support of the Board's authority as stated above, it is given the
following specific powers and duties:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny,
amend, revise, alter, modify, cancel, suspend or revoke in whole or in part
upon petition or complaint or upon its own initiative any Temporary
Operating Permit or Certificate of Public Convenience and Necessity:
Provided however, That in the case of foreign air carriers, the permit shall be
issued with the approval of the President of the Republic of the Philippines.
Petitioner argues that since R.A. 776 gives the Board the authority to
SO ORDERED.
Regalado (Chairman), and Puno, JJ., concur.
Romero, J., no part. Related to counsel.
Mendoza, J., no part. Relative in management of party.
following: (a) a franchise from Congress (Sec. 1); (b) a permit to construct or
install a station from the Secretary of Commerce and Industry (Sec. 2); and
(c) a license to operate the station also from the Secretary of Commerce and
Industry (id.). The franchise is the privilege granted by the State through its
legislative body and is subject to regulation by the State itself by virtue of its
police power through its administrative agencies (RCPI vs. NTC, 150 SCRA
450). The permit and license are the administrative authorizations issued by
the administrative agency in the exercise of regulation. It is clear that what
was transferred to the Board of Communications and the Secretary of
Commerce and Industry under Section 6 of P.D. No. 576-A was merely the
regulatory powers vested solely in the Secretary of Commerce and Industry
under Section 2 of Act No. 3846, as amended. The franchising authority was
retained by the then incumbent President as repository of legislative power
under Martial Law, as is clearly indicated in the first WHEREAS clause of P.D.
No. 576-A to wit:
WHEREAS, the President of the Philippines is empowered under the
Constitution to review and approve franchises for public utilities.
Of course, under the Constitution, said power (the power to review and
approve franchises), belongs to the lawmaking body (Sec. 5, Art. XIV, 1973
Constitution; Sec. 11, Art. XII, 1987 Constitution).
The corollary question to be resolved is: Has E.O. No 546 (which is a law
issued pursuant to P.D. No. 1416, as amended by P.D. No. 1771, granting the
then President continuing authority to reorganize the administrative
structure of the national government) modified the franchising and licensing
arrangement for radio and television broadcasting systems under P.D. No.
576-A?
We believe so.
E.O. No. 546 integrated the Board of Communications and the
Telecommunications Bureau into a single entity known as the NTC (See Sec.
14), and vested the new body with broad powers, among them, the power to
issue Certificates of Public Convenience for the operation of communications
utilities, including radio and televisions broadcasting systems and the power
to grant permits for the use of radio frequencies (Sec. 14[a] and [c], supra).
Additionally, NTC was vested with broad rule making authority to encourage
a larger and more effective use of communications, radio and television
broadcasting facilities, and to maintain effective competition among private
entities in these activities whenever the Commission finds it reasonably
feasible (Sec. 15[f]).
In the recent case of Albano vs. Reyes (175 SCRA 264), the Supreme Court
held that franchises issued by Congress are not required before each and
every public utility may operate. Administrative agencies may be
empowered by law to grant licenses for or to authorize the operation of
certain public utilities. The Supreme Court stated that the provision in the
Constitution (Art. XII, Sec. 11) that the issuance of a franchise, certificate or
other form of authorization for the operation of a public utility shall be
subject to amendment, alteration or repeal by Congress, does not
necessarily imply . . . that only Congress has the power to grant such
authorization. Our statute books are replete with laws granting specified
agencies in the Executive Branch the power to issue such authorization for
certain classes of public utilities.
We believe that E.O. No. 546 is one law which authorizes an administrative
agency, the NTC, to issue authorizations for the operation of radio and
television broadcasting systems without need of a prior franchise issued by
Congress.
Based on all the foregoing, we hold the view that NTC is empowered under
E.O. No. 546 to issue authorization and permits to operate radio and
television broadcasting system.[5]
However, on May 3, 1994, the NTC, the Committee on Legislative
Franchises of Congress, and the Kapisanan ng mga Brodkaster sa Pilipinas of
which petitioner is a member of good standing, entered into a Memorandum
of Understanding (MOU) that requires a congressional franchise to operate
radio and television stations. The MOU states, viz:
WHEREAS, under the provisions of Section 1 of Act No. 3846 (Radio Laws of
the Philippines, as amended), only radio and television broadcast stations
with legislative franchise are authorized to operate.
WHEREAS, Executive Order No. 546, which created the National
Telecommunications Commission (NTC) and abolished the Board of
Communications (BOC) and the Telecommunications Control Bureau (TCB),
and integrated the functions and prerogative of the latter two agencies into
the National Telecommunications Commission (NTC);
WHEREAS, the National Telecommunications Commission (NTC) is authorized
to issue certificate of public convenience for the operation of radio and
television broadcast stations;
WHEREAS, there is a pervading confusion in the state of affairs of the
broadcast industry brought about by conflicting laws, decrees, executive
orders and other pronouncements promulgated during the Martial Law
regime, the parties in their common desire to rationalize the broadcast
industry, promote the interest of public welfare, avoid a vacuum in the
delivery of broadcast services, and foremost to better serve the ends of
press freedom, the parties hereto have agreed as follows:
The NTC shall continue to issue and grant permits or authorizations to
operate radio and television broadcast stations within their mandate under
Section 15 of Executive Order No. 546, provided that such temporary
permits or authorization to operate shall be valid for two (2) years within
which the permittee shall be required to file an application for legislative
franchise with Congress not later than December 31, 1994; provided finally,
that if the permittee of the temporary permit or authorization to operate fails
to secure the legislative franchise with Congress within this period, the NTC
shall not extend or renew its permit or authorization to operate any further. [6]
Prior to the December 31, 1994 deadline set by the MOU, petitioner
filed with Congress an application for a franchise on December 20, 1994.
Pending its approval, the NTC issued to petitioner a temporary permit dated
July 7, 1995 to operate a television station via Channel 25 of the UHF Band
from June 29, 1995 to June 28, 1997. [7] In 1996, the NTC authorized
petitioner to increase the power output of Channel 25 from 1.0 kilowatt to 25
kilowatts after finding it financially and technically capable; [8] it also granted
petitioner a permit to purchase radio transmitters/transceivers for use in its
television Channel 25 broadcasting.[9] Shortly before the expiration of its
temporary permit, petitioner applied for its renewal on May 14, 1997. [10]
at bar, the law applicable in Albano, i.e., E.O. No. 30, did not require a
franchise for the Philippine Ports Authority to take over, manage and operate
the Manila International Port Complex and undertake the providing of cargo
handling and port related services thereat. Similarly, in Philippine Airlines,
Inc. v. Civil Aeronautics Board, et al.,[35] we ruled that a legislative
franchise is not necessary for the operation of domestic air transport
because there is nothing in the law nor in the Constitution which indicates
that a legislative franchise is an indispensable requirement for an entity to
operate as a domestic air transport operator. [36] Thus, while it is correct to
say that specified agencies in the Executive Branch have the power to issue
authorization for certain classes of public utilities, this does not mean that
the authorization or CPC issued by the NTC dispenses with the requirement
of a franchise as this is clearly required under P.D. No. 576-A.
Petitioner contends that the NTC erroneously denied its application for
renewal of its temporary permit to operate Channel 25 and recalled its
Channel 25 frequency based on the May 3, 1994 MOU that requires a
congressional franchise for the operation of television broadcast stations.
The MOU is not an act of Congress and thus cannot amend Act No. 3846
which requires a congressional franchise for the operation of radio stations
alone, and not television stations.
We find no merit in petitioners contention. As we have shown, even
assuming that Act No. 3846 requires only radio stations to secure a
congressional franchise for its operation, P.D. No. 576-A was subsequently
issued in 1974, which clearly requires a franchise for both radio and
television stations. Thus, the 1994 MOU did not amend any law, but merely
clarified the existing law that requires a franchise.
That the legislative intent is to continue requiring a franchise for the
operation of radio and television broadcasting stations is clear from the
franchises granted by Congress after the effectivity of E.O. No. 546 in 1979
for the operation of radio and television stations. Among these are: (1) R.A.
No. 9131 dated April 24, 2001, entitled An Act Granting the Iddes Broadcast
Group, Inc., a Franchise to Construct, Install, Establish, Operate and Maintain
Radio and Television Broadcasting Stations in the Philippines; (2) R.A. No.
9148 dated July 31, 2001, entitled An Act Granting the Hypersonic
Broadcasting Center, Inc., a Franchise to Construct, Install, Establish,
Operate and Maintain Radio Broadcasting Stations in the Philippines; and (3)
R.A. No. 7678 dated February 17, 1994, entitled An Act Granting the Digital
Telecommunication Philippines, Incorporated, a Franchise to Install, Operate
and Maintain Telecommunications Systems Throughout the Philippines. All
three franchises require the grantees to secure a CPCN/license/permit to
construct and operate their stations/systems. Likewise, the Tax Reform Act of
1997 provides in Section 119 for tax on franchise of radio and/or television
broadcasting companies, viz:
Sec. 119. Tax on Franchises. Any provision of general or special law to the
contrary notwithstanding, there shall be levied, assessed and collected in
respect to all franchises on radio and/or television broadcasting
companies whose annual gross receipts of the preceding year does not
exceed Ten million pesos (P10,000,000), subject to Section 236 of this Code,
a tax of three percent (3%) and on electric, gas and water utilities, a tax of
two percent (2%) on the gross receipts derived from the business covered by
the law granting the franchise. . . (emphasis supplied)
Undeniably, petitioner is aware that a congressional franchise is
necessary to operate its television station Channel 25 as shown by its
actuations. Shortly before the December 31, 1994 deadline set in the MOU,
petitioner filed an application for a franchise with Congress. It was not,
however, acted upon in the 9th Congress for petitioners failure to submit the
necessary supporting documents; petitioner failed to re-file the application
in the following Congress. Petitioner also filed an application for a franchise
with Congress on September 2, 1998, before the November 30, 1998
deadline under Memorandum Circular No. 14-10-98.[37]
We now come to the fourth assigned error. Petitioner avers that the
Court of Appeals erred in upholding the recall of frequency Channel 25
previously assigned to it and the cancellation of its permit to operate which
was already approved in January 1998. It claims that these acts of the NTC
were unreasonable, unfair, oppressive, whimsical and confiscatory
considering that the NTC previously issued petitioner a temporary permit
without requiring a congressional franchise.
On February 26, 1998, the NTC issued a show cause order to petitioner
with the following decretal portion:
IN VIEW THEREOF, respondents are hereby directed to show cause in writing
within ten (10) days from receipt of this order why their assigned frequency,
more specifically Channel 25 in the UHF Band, should not be recalled for lack
of the necessary Congressional Franchise as required by Section 1, Act No.
3846, as amended.
Moreover, respondent is hereby directed to cease and desist from operating
DWQH-TV, unless subsequently authorized by the Commission. [38]
The order was supposedly based on a letter of the NTC dated November 17,
1997 informing petitioner that its application for renewal of temporary
permits of its seven radio stations were being held in abeyance pending
submission of its new congressional franchise. Petitioner was directed to
submit the franchise within thirty days from expiration of its temporary
permits to be renewed and informed that its failure to do so might constitute
denial of its application.
Petitioner is correct that the November 17, 1997 letter referred only to
its radio stations and not to its television Channel 25. Thus, it could not
serve as basis for the February 26, 1998 show cause order which referred
solely to its television Channel 25. Besides, petitioner claims that it did not
receive the letter. Be that as it may, the NTCs February 26, 1998 order for
petitioner to cease and desist from operating Channel 25 was not
unreasonable, unfair, oppressive, whimsical and confiscatory. The 1994 MOU
states in unmistakable terms that petitioners temporary permit to operate
Channel 25 would be valid for only two years, i.e., from June 29, 1995 to
June 28, 1997. During these two years, petitioner was supposed to have
secured a congressional franchise, otherwise the NTC shall not extend or
renew its permit or authorization to operate any further. [39] Apparently,
petitioner did not submit a congressional franchise to the NTC in applying for
renewal of this temporary permit on May 14, 1997. The NTCs approval of
petitioners application to renew its temporary permit in January 1998 was
thus erroneous because under the 1994 MOU, the NTC could not renew
petitioners temporary permit to operate Channel 25 without a congressional
franchise. In the absence of a renewed temporary permit, the NTC was
correct in ordering petitioner to cease and desist from operating Channel 25,
regardless of whether or not petitioner received the November 17, 1997
letter. The NTCs erroneous approval of petitioners application in January
1998 did not estop the NTC from ordering petitioner on February 26, 1998 to
cease and desist from operating Channel 25 for failure to comply with the
franchise requirement as estoppel does not work against the government. [40]
Likewise, the NTCs denial of petitioners application for renewal of its
temporary permit to operate Channel 25 and recall of its Channel 25
frequency in its January 13, 1999 decision were not unreasonable, unfair,
oppressive, whimsical and confiscatory so as to offend petitioners right to
due process. In Crusaders Broadcasting System, Inc. v. National
Telecommunications Commission,[41] the Court ruled that although a
particular ground for suspending operations of the broadcasting company
was not reflected in the show cause order, the NTC could nevertheless raise
said ground if any basis therefore was gleaned during the administrative
proceedings. In the instant case, the lack of congressional franchise as
ground for denial of petitioners application for renewal of temporary permit
and recall of its Channel 25 frequency was raised not only during the
administrative proceedings against it, but was even stated in the February
26, 1998 show cause order, viz:
IN VIEW THEREOF, respondents are hereby directed to show cause in writing
within ten (10) days from receipt of this order why their assigned frequency,
more specifically Channel 25 in the UHF Band, should not be recalled for
lack of the necessary Congressional Franchise as required by Section
1, Act No. 3846, as amended.
Moreover, respondent is hereby directed to cease and desist from operating
DWQH-TV, unless subsequently authorized by the Commission. [42] (emphasis
supplied)
In Eastern Broadcasting Corporation v. Dans, Jr., et al.,[43] we held
that the requirements of due process in administrative proceedings laid
down by this Court in Ang Tibay v. Court of Industrial Relations[44]
should be satisfied before a broadcast station may be closed or its
operations curtailed. We enumerated these requirements, viz:
. . . (1) the right to a hearing which includes the right to present ones case
and submit evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to support itself;
(4) the evidence must be substantial. Substantial evidence means such
reasonable evidence as a reasonable mind might accept as adequate to
support a conclusion; (5) the decision must be based on the evidence
presented at the hearing, or at least contained in the record and disclosed to
the parties affected; (6) the tribunal or body or any of its judges must act on
its own independent consideration of the law and facts of the controversy
and not simply accept the views of a subordinate; (7) the board or body
should, in all controversial questions, render its decisions in such a manner
that the parties to the proceeding can know the various issues involved, and
the reasons for the decision rendered.[45]
Petitioner had the opportunity to present its case and submit evidence on
why its assigned frequency Channel 25 should not be recalled and its
application for renewal denied. Petitioner filed its Answer to the show cause
order on March 17, 1998.[46] A hearing was held on April 22, 1998 wherein
petitioner presented its evidence in compliance with the show cause
order.Based on the NTCs findings that petitioner failed to comply with the
requirement of a congressional franchise, the NTC denied its application for
renewal of its temporary permit to operate Channel 25 and recalled its
assigned Channel 25 frequency. The requirements of due process in Ang
Tibay were satisfied, thus petitioner cannot say that the NTCs actions were
unreasonable, unfair, oppressive, whimsical and confiscatory.
Finally, petitioner contends that the Court of Appeals erred in not
holding that Administrative Case No. 98-009, the administrative proceeding
against it for failure to secure a congressional franchise to operate its
television Channel 25, has been rendered moot and academic by the
adoption and promulgation of NTC Memorandum Circular No. 14-10-98 dated
August 17, 1998 which took effect on November 15, 1998. The
Memorandum Circular states, viz:
In compliance with the MOU and in order to clear the ambiguity surrounding
the operation of broadcast operators who were not able to have their
legislative franchise approved during the last Congress, the following
guidelines are hereby issued:
1. Existing broadcast operators who were not able to secure a legislative
franchise up to this date (August 17, 1998) are given up to December 31,
1999 within which to have their application for a legislative franchise bill
approved by Congress. The franchise bill must be filed immediately but not
later than November 30th of this year . . .
Petitioner avers that the NTC erroneously held that this Memorandum
Circular is not applicable to it because the words of the circular are clear
that it covers existing broadcasting operators including petitioner. In
compliance with the Memorandum Circular, petitioner filed House Bill No. 32
on September 2, 1998, well within the November 30, 1998 deadline. Thus,
petitioner argues that the NTC erred in denying its application for renewal of
permit to operate Channel 25 and recalling its assigned Channel 25
frequency on January 13, 1999, long before the Memorandum Circulars
December 31, 1999 deadline to secure a congressional franchise. Petitioner
posits that the NTCs premature and arbitrary promulgation of its January 13,
1999 decision slammed the door for the petitioner to secure its legislative
franchise. The pending application for legislative franchise of petitioner was
effectively struck out by said NTC decision. [47]
Whether or not the benefits of the Memorandum Circular extend to
petitioner, the fact is, as correctly pointed out by the appellate court,
petitioner failed to secure a legislative franchise by December 31, 1999.
Consequently, the NTCs recall of petitioners assigned frequency Channel 25
and denial of its application for renewal of its permit to operate the said
television channel were proper as the Memorandum Circular provides, viz:
1. Existing broadcast operators who are not able to secure a legislative
franchise up to this date (August 17, 1998) are given up to December 31,
1999 within which to have their application for a legislative franchise
approved by Congress. The franchise bill must be filed immediately but not
later than November 30th of this year . . .
xxxxxxxxx
3. In the event the permittee will not be able to have its franchise bill
approved within the prescribed period, the NTC will no longer
renew/extend its temporary permit and the Commission shall
initiate the recall of its assigned frequency provided that due
process of law is observed.
4. Henceforth, no application/petition for Certificate of Public Convenience
(CPC) to establish, maintain and operate a broadcast station in the
broadcast service shall be accepted for filing without showing that the
applicant has an approved legislative franchise.(emphasis supplied)
Petitioners argument is flawed when it states that the January 13, 1999
decision of the NTC slammed the door on its application for a congressional
franchise as the process of securing a congressional franchise is separate
and distinct from the process of applying for renewal of a temporary permit
with the NTC. The latter is not a prerequisite to the former. In fact, in the
normal course of securing authorizations to operate a television and radio
station, the application for a CPC with the NTC comes after securing a
franchise from Congress.[48] The CPC is not a condition for the grant of a
congressional franchise.[49]
The Court is not unmindful that there is a trend towards delegating the
legislative power to authorize the operation of certain public utilities to
administrative agencies and dispensing with the requirement of a
congressional franchise as in the Albano case which involved the provision
of cargo handling and port related services at the Manila International Port
Complex and the PAL case involving the operation of domestic air transport.
The rationale for this trend was explained in the PAL case, viz:
. . . With the growing complexity of modern life, the multiplication of the
subjects of governmental regulation, and the increased difficulty of
administering the laws, there is a constantly growing tendency towards the
delegation of greater powers by the legislature, and towards the approval of
the practice by the courts. (Pangasinan Transportation Co., Inc. vs. The
Public Service Commission, G.R. No. 47065, June 26, 1940, 70 Phil 221.) It is
generally recognized that a franchise may be derived indirectly from the
state through a duly designated agency, and to this extent, the power to
grant franchises has frequently been delegated, even to agencies other than
those of a legislative nature. (Dyer vs. Tuskaloosa Bridge Co., 2 Port. 296, 27
Am. D. 655; Christian-Todd Tel. Co. vs. Commonwealth, 161 S.W. 543, 156 Ky.
557, 37 C.J.S. 158) In pursuance of this, it has been held that privileges
conferred by grant by local authorities as agents for the state constitute as
much a legislative franchise as though the grant had been made by an act of
the Legislature. (Superior Water, Light and Power Co. vs. City of Superior,
181 N.W. 113, 174 Wis. 257, affirmed 183 N.W. 254, 37 C.J.S. 158.)
The trend of modern legislation is to vest the Public Service Commissioner
with the power to regulate and control the operation of public services under
reasonable rules and regulations, and as a general rule, courts will not
interfere with the exercise of that discretion when it is just and reasonable
and founded upon a legal right.[50]
The criticism against the requirement of a congressional franchise is
incisively expressed by a public utilities lawyer, viz:
As will be noted, a legislative franchise is required to install and operate a
radio station before an applicant can apply for a Certificate of Public
Convenience to operate a radio station based in any part of the country.
Under Act No. 3846 of 1929, Sec. 1, it was provided that no one may install
and operate a radio station without having first obtained a franchise
therefore from the Congress of the Philippines. Since then, this has been
strictly followed. And this holds true with respect to application for electric,
telephone and many other telecommunications services. Before, even mere
application for authority to operate an ice plant must have prior
congressional franchise. But this was not strictly followed until ice plant
operations were eventually deregulated. Right now, the both houses of the
legislature are saddled with House Bill Nos. etc. for the grant of legislative
franchise to operate this and that public utility services in various places in
the Philippines. We hear during sessions in both houses the time wasted on
reports and considerations of these house bills for grant of franchises. The
legislature is empowered and has created respective regulatory bodies with
requisite expertise to handle franchising and regulation of such types of
public utility services, why not just entrust all these functions to them?
What exactly is the reason or rationale for imposing a prior congressional
franchise? There seems to be no valid reason for it except to impose added
burden and expenses on the part of the applicant. The justification appears
to be simply because this was required in the past so it is now. We are
reminded of the forceful denunciation of Justice Holmes of a stubborn
adherence to an anachronistic rule of law:
It is revolting to have no better reason for a rule of law that so it was laid
down in the time of Henry IV. It is still more revolting if the grounds upon
which it was laid down have vanished long since, and the rule simply
persists from blind imitation of the past. (The Path of the Law, Collected
Legal Papers [1920] 210, 212 quoted from The Justice Holmes Reader, Julius
N. Marke, 1955 ed., p. 278.)[51]
The call to dispense with the requisite legislative franchise must, however,
be addressed to Congress as the lawmaker of the land for the Courts
function is to interpret and not to rewrite the law. As long as the law remains
unchanged, the requirement of a franchise to operate a television station
must be upheld.
WHEREFORE, the petition is DENIED and the Court of Appeals January
13, 2000 decision and February 21, 2000 resolution are AFFIRMED. No costs.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.
petitioner cannot install and operate radio telephone services on the basis of
its legislative franchise alone.
The position of the petitioner that by the mere grant of its franchise under
RA No. 2036 it can operate a radio communications system anywhere within
the Philippines is erroneous. Section 1 of said statute reads:
Section 1. Subject to the provisions of the Constitution, and to the
provisions, not inconsistent herewith, of Act Numbered Three thousand eight
hundred and forty-six, entitled.' An Act providing for the regulation of radio
stations and radio communications in the Philippine Islands, and for other
purposes;' Commonwealth Act Numbered One hundred forty-six, known as
the Public Service Act, and their amendments, and other applicable laws,
there is hereby granted to the Radio Communications of the Philippines, its
successors or assigns, the right and privilege of constructing, installing,
establishing and operating in the Philippines, at such places as the said
corporation may select and the Secretary of Public Works and
Communications may approve, radio stations for the reception and
transmission of wireless messages on radiotelegraphy and/or
radiotelephone, including both coastal and marine telecommunications,
each station to consist of two radio apparatus comprising of a receiving and
sending radio apparatus. (Emphasis supplied).
Section 4(a) of the same Act further provides that:
Sec. 4(a). This franchise shall not take effect nor shall any powers
thereunder be exercised by the grantee until the Secretary of Public works
and Communications shall have allotted to the grantee the frequencies and
wave lengths to be used, and issued to the grantee a license for such case.
(Emphasis supplied)
Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of
Public Works and Communications was a precondition before the petitioner
could put up radio stations in areas where it desires to operate. It has been
repeated time and again that where the statutory norm speaks
unequivocally, there is nothing for the courts to do except to apply it. The
law, leaving no doubt as to the scope of its operation, must be obeyed.
(Gonzaga v. Court of Appeals, 51 SCRA 381).
The records of the case do not show any grant of authority from the then
Secretary of Public Works and Communications before the petitioner
installed the questioned radio telephone services in San Jose, Mindoro in
1971. The same is true as regards the radio telephone services opened in
Sorsogon, Sorsogon and Catarman, Samar in 1983. No certificate of public
convenience and necessity appears to have been secured by the petitioner
from the public respondent when such certificate,was required by the
applicable public utility regulations (See executive Order No. 546, sec. 15,
supra.; Philippine Long Distance Telephone Co. v. City of Davao, 15 SCRA 75;
Olongapo Electric Light and Power Corp. v. National Power Corporation, et
al., G.R. No. L-24912, promulgated April 9, 1987.)
It was well within the powers of the public respondent to authorize the
installation by the private respondent network of radio communications
systems in Catarman, Samar and San Jose, Mindoro. Under the
circumstances of this case, the mere fact that the petitioner possesses a
franchise to put up and operate a radio communications system in certain
areas is not an insuperable obstacle to the public respondent's issuing the
proper certificate to an applicant desiring to extend the same services to
PARAS, J.:
This is a Petition for Prohibition with prayer for Preliminary Injunction or
Restraining Order seeking to restrain the respondents Philippine Ports
Authority (PPA) and the Secretary of the Department of Transportation and
Communications Rainerio O. Reyes from awarding to the International
Container Terminal Services, Inc. (ICTSI) the contract for the development,
management and operation of the Manila International Container Terminal
(MICT).
On April 20, 1987, the PPA Board adopted its Resolution No. 850 directing
PPA management to prepare the Invitation to Bid and all relevant bidding
documents and technical requirements necessary for the public bidding of
the development, management and operation of the MICT at the Port of
Manila, and authorizing the Board Chairman, Secretary Rainerio O. Reyes, to
oversee the preparation of the technical and the documentation
requirements for the MICT leasing as well as to implement this project.
Accordingly, respondent Secretary Reyes, by DOTC Special Order 87-346,
created a seven (7) man "Special MICT Bidding Committee" charged with
evaluating all bid proposals, recommending to the Board the best bid, and
preparing the corresponding contract between the PPA and the winning
bidder or contractor. The Bidding Committee consisted of three (3) PPA
representatives, two (2) Department of Transportation and Communications
(DOTC) representatives, one (1) Department of Trade and Industry (DTI)
representative and one (1) private sector representative. The PPA
management prepared the terms of reference, bid documents and draft
contract which materials were approved by the PPA Board.
The PPA published the Invitation to Bid several times in a newspaper of
general circulation which publication included the reservation by the PPA of
"the right to reject any or all bids and to waive any informality in the bids or
to accept such bids which may be considered most advantageous to the
government."
Seven (7) consortia of companies actually submitted bids, which bids were
opened on July 17, 1987 at the PPA Head Office. After evaluation of the
several bids, the Bidding Committee recommended the award of the
contract to develop, manage and operate the MICT to respondent
International Container Terminal Services, Inc. (ICTSI) as having offered the
best Technical and Financial Proposal. Accordingly, respondent Secretary
declared the ICTSI consortium as the winning bidder.
Before the corresponding MICT contract could be signed, two successive
cases were filed against the respondents which assailed the legality or
regularity of the MICT bidding. The first was Special Civil Action 55489 for
"Prohibition with Preliminary Injunction" filed with the RTC of Pasig by Basilio
H. Alo, an alleged "concerned taxpayer", and, the second was Civil Case 8843616 for "Prohibition with Prayer for Temporary Restraining Order (TRO)"
filed with the RTC of Manila by C.F. Sharp Co., Inc., a member of the nine (9)
firm consortium "Manila Container Terminals, Inc." which had actively
participated in the MICT Bidding.
Restraining Orders were issued in Civil Case 88-43616 but these were
subsequently lifted by this Court in Resolutions dated March 17, 1988 (in
G.R. No. 82218 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Hon.
Doroteo N. Caneba, etc., et al.) and April 14, 1988 (in G.R. No. 81947
captioned "Hon. Rainerio O. Reyes etc., et al. vs. Court of Appeals, et al.")
On May 18, 1988, the President of the Philippines approved the proposed
MICT Contract, with directives that "the responsibility for planning, detailed
engineering, construction, expansion, rehabilitation and capital dredging of
the port, as well as the determination of how the revenues of the port
system shall be allocated for future port works, shall remain with the PPA;
and the contractor shall not collect taxes and duties except that in the case
of wharfage or tonnage dues and harbor and berthing fees, payment to the
Government may be made through the contractor who shall issue
provisional receipts and turn over the payments to the Government which
will issue the official receipts." (Annex "I").
The next day, the PPA and the ICTSI perfected the MICT Contract (Annex "3")
incorporating therein by "clarificatory guidelines" the aforementioned
presidential directives. (Annex "4").
Meanwhile, the petitioner, Rodolfo A. Albano filed the present petition as
citizen and taxpayer and as a member of the House of Representatives,
assailing the award of the MICT contract to the ICTSI by the PPA. The
petitioner claims that since the MICT is a public utility, it needs a legislative
franchise before it can legally operate as a public utility, pursuant to Article
12, Section 11 of the 1987 Constitution.
The petition is devoid of merit.
A review of the applicable provisions of law indicates that a franchise
specially granted by Congress is not necessary for the operation of the
Manila International Container Port (MICP) by a private entity, a contract
entered into by the PPA and such entity constituting substantial compliance
with the law.
1. Executive Order No. 30, dated July 16, 1986, provides:
WHEREFORE, I, CORAZON C. AQUINO, President of the Republic of the
Philippines, by virtue of the powers vested in me by the Constitution and the
law, do hereby order the immediate recall of the franchise granted to the
Manila International Port Terminals, Inc. (MIPTI) and authorize the Philippine
Ports Authority (PPA) to take over, manage and operate the Manila
International Port Complex at North Harbor, Manila and undertake the
provision of cargo handling and port related services thereat, in accordance
with P.D. 857 and other applicable laws and regulations.
Section 6 of Presidential Decree No. 857 (the Revised Charter of the
Philippine Ports Authority) states:
a) The corporate duties of the Authority shall be:
xxx xxx xxx
(ii) To supervise, control, regulate, construct, maintain, operate, and provide
such facilities or services as are necessary in the ports vested in, or
belonging to the Authority.
xxx xxx xxx
(v) To provide services (whether on its own, by contract, or otherwise) within
the Port Districts and the approaches thereof, including but not limited to
berthing, towing, mooring, moving, slipping, or docking of any vessel;
loading or discharging any vessel;
sorting, weighing, measuring, storing, warehousing, or otherwise handling
goods.
xxx xxx xxx
b) The corporate powers of the Authority shall be as follows:
less than the President of the Philippines herself enjoys the legal
presumption of validity and regularity of official action. In the case at bar,
there is no evidence which clearly shows the constitutional infirmity of the
questioned act of government.
For these reasons the contention that the contract between the PPA and
ICTSI is illegal in the absence of a franchise from Congress appears bereft of
any legal basis.
3. On the peripheral issues raised by the party, the following observations
may be made:
A. That petitioner herein is suing as a citizen and taxpayer and as a Member
of the House of Representatives, sufficiently clothes him with the standing to
institute the instant suit questioning the validity of the assailed contract.
While the expenditure of public funds may not be involved under the
contract, public interest is definitely involved considering the important role
of the MICP in the economic development of the country and the magnitude
of the financial consideration involved. Consequently, the disclosure
provision in the Constitution 5would constitute sufficient authority for
upholding petitioner's standing. [Cf. Taada v. Tuvera, G.R. No. 63915, April
24, 1985,136 SCRA 27, citing Severino v. Governor General, 16 Phil. 366
(1910), where the Court considered the petitioners with sufficient standing
to institute an action where a public right is sought to be enforced.]
B. That certain committees in the Senate and the House of Representatives
have, in their respective reports, and the latter in a resolution as well,
declared their opinion that a franchise from Congress is necessary for the
operation of the MICP by a private individual or entity, does not necessarily
create a conflict between the Executive and the Legislative Branches
needing the intervention of the Judicial Branch. The court is not faced with a
situation where the Executive Branch has contravened an enactment of
Congress. As discussed earlier, neither is the Court confronted with a case of
one branch usurping a power pertaining to another.
C. Petitioner's contention that what was bid out, i.e., the development,
management and operation of the MICP, was not what was subsequently
contracted, considering the conditions imposed by the President in her letter
of approval, thus rendering the bids and projections immaterial and the
procedure taken ineffectual, is not supported by the established facts. The
conditions imposed by the President did not materially alter the substance of
the contract, but merely dealt on the details of its implementation.
D. The determination of whether or not the winning bidder is qualified to
undertake the contracted service should be left to the sound judgment of
the PPA. The PPA, having been tasked with the formulation of a plan for the
development of port facilities and its implementation [Sec. 6(a) (i)], is the
agency in the best position to evaluate the feasibility of the projections of
the bidders and to decide which bid is compatible with the development
plan. Neither the Court, nor Congress, has the time and the technical
expertise to look into this matter.
Thus, the Court in Manuel v. Villena (G.R. No. L-28218, February 27, 1971, 37
SCRA 745] stated:
[C]ourts, as a rule, refuse to interfere with proceedings undertaken by
administrative bodies or officials in the exercise of administrative functions.
This is so because such bodies are generally better equipped technically to
decide administrative questions and that non-legal factors, such as
government policy on the matter, are usually involved in the decisions. [at p.
750.]
In conclusion, it is evident that petitioner has failed to show a clear case of
grave abuse of discretion amounting to lack or excess of jurisdiction as to
warrant the issuance of the writ of prohibition.
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Gancayco, Bidin, Cortes,
Grio-Aquino, Medialdea and Regalado, JJ., concur.
Feliciano, J., concurs in the result.
Padilla and Sarmiento, JJ., took no part.
Separate Opinions
GUTIERREZ, JR., J., concurring:
I concur in the Court's decision that the determination of whether or not the
winning bidder is qualified to undertake the contracted service should be left
to the sound judgment of the Philippine Ports Authority (PPA). I agree that
the PPA is the agency which can best evaluate the comparative
qualifications of the various bidding contractors and that in making such
evaluation it has the technical expertise which neither this Court nor
Congress possesses.
However, I would feel more comfortable in the thought that the above
rulings are not only grounded on firm legal foundations but are also factually
accurate if the PPA shows greater consistency in its submissions to this
Court.
I recall that in E. Razon, Inc. v. Philippine Ports Authority (151 SCRA 233
[1977]), this Court decided the case in favor of the PPA because, among
others, of its submissions that: (1) the petitioner therein committed
violations as to outside stevedoring services, inadequate equipment,
delayed submission of reports, and non-compliance with certain port
regulations; (2) respondent Marina Port Services and not the petitioner was
better qualified to handle arrastre services; (3) the petitioner being
controlled by Alfredo Romualdez could not enter into a management
contract with PPA and any such contract would be null and void; and (4)
even if the petitioner may not have shared in the illegal intention behind the
transfer of majority shares, it shared in the benefits of the violation of law.
I was surprised during the oral arguments of the present petition to hear the
counsel for PPA submit diametrically different statements regarding the
capabilities and worth of E. Razon, Inc., as an arrastre operator. It now turns
out that the Manila International Container Terminal will depend a great deal
on the expertise, reliability and competence of E. Razon, Inc., for its
successful operations. The time difference between the two petitions is
insubstantial. After going over the pleadings of the present petition, I am
now convinced that it is the submissions of PPA in this case and not its
contentions in G.R. No. 75197 which are accurate and meritorious. There is
the distinct possibility that we may have been unfair in the earlier petition
because of assertions made therein which are contradictory to the
submissions in the instant petition. No such doubts would exist if the
Government is more consistent in its pleadings on such important factual
matters as those raised in these two petitions.
promulgated June 12, 1939, citing New York Central Securities Corporation
vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law. ed. 138, 145, 146; Schenchter
Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585; Ferrazzini vs.
Gsell, 34 Phil., 697, 711-712.)
Section 8 of Article XIII of the Constitution provides, among other things, that
no franchise, certificate, or any other form of authorization for the operation
of a public utility shall be "for a longer period than fifty years," and when it
was ordained, in section 15 of Commonwealth Act No. 146, as amended by
Commonwealth Act No. 454, that the Public Service Commission may
prescribed as a condition for the issuance of a certificate that it "shall be
valid only for a definite period of time" and, in section 16 (a) that "no such
certificates shall be issued for a period of more than fifty years," the National
Assembly meant to give effect to the aforesaid constitutional mandate. More
than this, it has thereby also declared its will that the period to be fixed by
the Public Service Commission shall not be longer than fifty years. All that
has been delegated to the Commission, therefore, is the administrative
function, involving the use discretion, to carry out the will of the National
Assembly having in view, in addition, the promotion of "public interests in a
proper and suitable manner." The fact that the National Assembly may itself
exercise the function and authority thus conferred upon the Public Service
Commission does not make the provision in question constitutionally
objectionable.
The theory of the separation of powers is designed by its originators to
secure action and at the same time to forestall overaction which necessarily
results from undue concentration of powers, and thereby obtain efficiency
and prevent deposition. Thereby, the "rule of law" was established which
narrows the range of governmental action and makes it subject to control by
certain devices. As a corollary, we find the rule prohibiting delegation of
legislative authority, and from the earliest time American legal authorities
have proceeded on the theory that legislative power must be exercised by
the legislature alone. It is frankness, however, to confess that as one delves
into the mass of judicial pronouncement, he finds a great deal of confusion.
One thing, however, is apparent in the development of the principle of
separation of powers and that is that the maxim of delegatus non potest
delegari or delegata potestas non potest delegari, attributed to Bracton (De
Legius et Consuetedinious Angliae, edited by G. E. Woodbine, Yale University
Press, 1922, vol. 2, p. 167) but which is also recognized in principle in the
Roman Law (D. 17.18.3), has been made to adapt itself to the complexities
of modern governments, giving rise to the adoption, within certain limits, of
the principle of "subordinate legislation," not only in the United States and
England but in practically all modern governments. (People vs. Rosenthal
and Osmea, G. R. Nos. 46076 and 46077, promulgated June 12, 1939.)
Accordingly, with the growing complexity of modern life, the multiplication of
the subjects of governmental regulation, and the increased difficulty of
administering the laws, there is a constantly growing tendency toward the
delegation of greater powers by the legislature, and toward the approval of
the practice by the court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141
S. E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d. 973, 976,
165 Tenn. 319.) In harmony with such growing tendency, this Court, since
the decision in the case of Compaia General de Tabacos de Filipinas vs.
Board of Public Utility Commissioner (34 Phil., 136), relied upon by the
Act No. 146, was approved, it must be deemed to have the right of holding
them in perpetuity. Section 74 of the Philippine Bill provided that "no
franchise, privilege, or concession shall be granted to any corporation
except under the conditions that it shall be subject to amendment,
alteration, or repeal by the Congress of the United States." The Jones Law,
incorporating a similar mandate, provided, in section 28, that "no franchise
or right shall be granted to any individual, firm, or corporation except under
the conditions that it shall be subject to amendment, alteration, or repeal by
the Congress of the United States." Lastly, the Constitution of the Philippines
provided, in section 8 of Article XIII, that "no franchise or right shall be
granted to any individual, firm, or corporation, except under the condition
that it shall be subject to amendment, alteration, or repeal by the National
Assembly when the public interest so requires." The National Assembly, by
virtue of the Constitution, logically succeeded to the Congress of the United
States in the power to amend, alter or repeal any franchise or right granted
prior to or after the approval of the Constitution; and when Commonwealth
Acts Nos. 146 and 454 were enacted, the National Assembly, to the extent
therein provided, has declared its will and purpose to amend or alter existing
certificates of public convenience.
Upon the other hand, statutes enacted for the regulation of public utilities,
being a proper exercise by the state of its police power, are applicable not
only to those public utilities coming into existence after its passage, but
likewise to those already established and in operation.
Nor is there any merit in petitioner's contention, that, because of the
establishment of petitioner's operations prior to May 1, 1917, they are not
subject to the regulations of the Commission. Statutes for the regulation of
public utilities are a proper exercise by the state of its police power. As soon
as the power is exercised, all phases of operation of established utilities,
become at once subject to the police power thus called into operation.
Procedures' Transportation Co. v. Railroad Commission, 251 U. S. 228, 40
Sup. Ct. 131, 64 Law. ed. 239, Law v. Railroad Commission, 184 Cal. 737,
195 Pac. 423, 14 A. L. R. 249. The statute is applicable not only to those
public utilities coming into existence after its passage, but likewise to those
already established and in operation. The 'Auto Stage and Truck
Transportation Act' (Stats. 1917, c. 213) is a statute passed in pursuance of
the police power. The only distinction recognized in the statute between
those established before and those established after the passage of the act
is in the method of the creation of their operative rights. A certificate of
public convenience and necessity it required for any new operation, but no
such certificate is required of any transportation company for the operation
which was actually carried on in good faith on May 1, 1917, This distinction
in the creation of their operative rights in no way affects the power of the
Commission to supervise and regulate them. Obviously the power of the
Commission to hear and dispose of complaints is as effective against
companies securing their operative rights prior to May 1, 1917, as against
those subsequently securing such right under a certificate of public
convenience and necessity. (Motor Transit Co. et al. v. Railroad Commission
of California et al., 209 Pac. 586.)
Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic
acts of the Public Service Commission but are "a part of the charter of every
utility company operating or seeking to operate a franchise" in the
Philippines. (Streator Aqueduct Co. v. et al., 295 Fed. 385.) The business of a
common carrier holds such a peculiar relation to the public interest that
there is superinduced upon it the right of public regulation. When private
property is "affected with a public interest it ceased to be juris privati only."
When, therefore, one devotes his property to a use in which the public has
an interest, he, in effect, grants to the public an interest in that use, and
must submit to be controlled by the public for the common good, to the
extent of the interest he has thus created. He may withdraw his grant by
discounting the use, but so long as he maintains the use he must submit to
control. Indeed, this right of regulation is so far beyond question that it is
well settled that the power of the state to exercise legislative control over
public utilities may be exercised through boards of commissioners. (Fisher
vs.Yangco Steamship Company, 31 Phil., 1, citing Munn vs. Illinois, 94 U.S.
113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143
U.S. 517; New York etc. R. Co. vs. Bristol 151 U.S. 556, 571; Connecticut etc.
R. Co. vs. Woodruff, 153 U.S. 689; Louisville etc. Ry Co. vs. Kentucky, 161
U.S. 677, 695.) This right of the state to regulate public utilities is founded
upon the police power, and statutes for the control and regulation of utilities
are a legitimate exercise thereof, for the protection of the public as well as of
the utilities themselves. Such statutes are, therefore, not unconstitutional,
either impairing the obligation of contracts, taking property without due
process, or denying the equal protection of the laws, especially inasmuch as
the question whether or not private property shall be devoted to a public
and the consequent burdens assumed is ordinarily for the owner to decide;
and if he voluntarily places his property in public service he cannot complain
that it becomes subject to the regulatory powers of the state. (51 C. J., sec.
21, pp. 9-10.) in the light of authorities which hold that a certificate of public
convenience constitutes neither a franchise nor contract, confers no
property right, and is mere license or privilege. (Burgess vs. Mayor &
Alderman of Brockton, 235 Mass. 95, 100, 126 N. E. 456; Roberto
vs.Commisioners of Department of Public Utilities, 262 Mass. 583, 160 N. E.
321; Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J.
L.] Cartage Co. [1937], 132 Ohio St. 271, 7 N. E. [d] 220; Manila Yellow
Taxicab Co. vs. Sabellano, 59 Phil., 773.)
Whilst the challenged provisions of Commonwealth Act No. 454 are valid and
constitutional, we are, however, of the opinion that the decision of the Public
Service Commission should be reversed and the case remanded thereto for
further proceedings for the reason now to be stated. The Public Service
Commission has power, upon proper notice and hearing, "to amend, modify
or revoke at any time any certificate issued under the provisions of this Act,
whenever the facts and circumstances on the strength of which said
certificate was issued have been misrepresented or materially changed."
(Section 16, par. [m], Commonwealth Act No. 146.) The petitioner's
application here was for an increase of its equipment to enable it to comply
with the conditions of its certificates of public convenience. On the matter of
limitation to twenty five (25) years of the life of its certificates of public
convenience, there had been neither notice nor opportunity given the
petitioner to be heard or present evidence. The Commission appears to have
taken advantage of the petitioner to augment petitioner's equipment in
imposing the limitation of twenty-five (25) years which might as well be
twenty or fifteen or any number of years. This is, to say the least, irregular
and should not be sanctioned. There are cardinal primary rights which must
be respected even in proceedings of this character. The first of these rights
is the right to a hearing, which includes the right of the party interested or
affected to present his own case and submit evidence in support thereof. In
the language of Chief Justice Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct.
773, 999, 82 Law. ed. 1129), "the liberty and property of the citizen shall be
protected by the rudimentary requirements of fair play." Not only must the
party be given an opportunity to present his case and to adduce evidence
tending to establish the rights which he asserts but the tribunal must
consider the evidence presented. (Chief Justice Hughes in Morgan vs. U.S.,
298 U.S. 468, 56 S. Ct. 906, 80 :Law. ed. 1288.) In the language of this Court
in Edwards vs. McCoy (22 Phil., 598), "the right to adduce evidence, without
the corresponding duty on the part of the board to consider it, is vain. Such
right is conspicuously futile if the person or persons to whom the evidence is
presented can thrust it aside without or consideration." While the duty to
deliberate does not impose the obligation to decide right, it does imply a
necessity which cannot be disregarded, namely, that of having something to
support its decision. A decision with absolutely nothing to support it is a
nullity, at least when directly attacked. (Edwards vs. McCoy, supra.) This
principle emanates from the more fundamental principle that the genius of
constitutional government is contrary to the vesting of unlimited power
anywhere. Law is both a grant and a limitation upon power.
The decision appealed from is hereby reversed and the case remanded to
the Public Service Commission for further proceedings in accordance with
law and this decision, without any pronouncement regarding costs. So
ordered.
Avancea, C.J., Imperial, Diaz, Concepcion and Moran, JJ., concur.
SEC. 7. At any time that the Governor-General, with the consent of the
Council of State, shall consider that the public interest requires the
application of the provisions of this Act, he shall so declare by proclamation,
and any provisions of other laws inconsistent herewith shall from then on be
temporarily suspended.
Upon the cessation of the reasons for which such proclamation was issued,
the Governor-General, with the consent of the Council of State, shall declare
the application of this Act to have likewise terminated, and all laws
temporarily suspended by virtue of the same shall again take effect, but
such termination shall not prevent the prosecution of any proceedings or
cause begun prior to such termination, nor the filing of any proceedings for
an offense committed during the period covered by the Governor-General's
proclamation.
August 1, 1919, the Governor-General issued a proclamation fixing the price
at which rice should be sold.
August 8, 1919, a complaint was filed against the defendant, Ang Tang Ho,
charging him with the sale of rice at an excessive price as follows:
The undersigned accuses Ang Tang Ho of a violation of Executive Order No.
53 of the Governor-General of the Philippines, dated the 1st of August, 1919,
in relation with the provisions of sections 1, 2 and 4 of Act No. 2868,
committed as follows:
That on or about the 6th day of August, 1919, in the city of Manila, Philippine
Islands, the said Ang Tang Ho, voluntarily, illegally and criminally sold to
Pedro Trinidad, one ganta of rice at the price of eighty centavos (P.80), which
is a price greater than that fixed by Executive Order No. 53 of the GovernorGeneral of the Philippines, dated the 1st of August, 1919, under the
authority of section 1 of Act No. 2868. Contrary to law.
Upon this charge, he was tried, found guilty and sentenced to five months'
imprisonment and to pay a fine of P500, from which he appealed to this
court, claiming that the lower court erred in finding Executive Order No. 53
of 1919, to be of any force and effect, in finding the accused guilty of the
offense charged, and in imposing the sentence.
The official records show that the Act was to take effect on its approval; that
it was approved July 30, 1919; that the Governor-General issued his
proclamation on the 1st of August, 1919; and that the law was first
published on the 13th of August, 1919; and that the proclamation itself was
first published on the 20th of August, 1919.
The question here involves an analysis and construction of Act No. 2868, in
so far as it authorizes the Governor-General to fix the price at which rice
should be sold. It will be noted that section 1 authorizes the GovernorGeneral, with the consent of the Council of State, for any cause resulting in
an extraordinary rise in the price of palay, rice or corn, to issue and
promulgate temporary rules and emergency measures for carrying out the
purposes of the Act. By its very terms, the promulgation of temporary rules
and emergency measures is left to the discretion of the Governor-General.
The Legislature does not undertake to specify or define under what
conditions or for what reasons the Governor-General shall issue the
proclamation, but says that it may be issued "for any cause," and leaves the
question as to what is "any cause" to the discretion of the Governor-General.
The Act also says: "For any cause, conditions arise resulting in an
extraordinary rise in the price of palay, rice or corn." The Legislature does
not specify or define what is "an extraordinary rise." That is also left to the
discretion of the Governor-General. The Act also says that the GovernorGeneral, "with the consent of the Council of State," is authorized to issue
and promulgate "temporary rules and emergency measures for carrying out
the purposes of this Act." It does not specify or define what is a temporary
rule or an emergency measure, or how long such temporary rules or
emergency measures shall remain in force and effect, or when they shall
take effect. That is to say, the Legislature itself has not in any manner
specified or defined any basis for the order, but has left it to the sole
judgement and discretion of the Governor-General to say what is or what is
not "a cause," and what is or what is not "an extraordinary rise in the price
of rice," and as to what is a temporary rule or an emergency measure for the
carrying out the purposes of the Act. Under this state of facts, if the law is
valid and the Governor-General issues a proclamation fixing the minimum
price at which rice should be sold, any dealer who, with or without notice,
sells rice at a higher price, is a criminal. There may not have been any
cause, and the price may not have been extraordinary, and there may not
have been an emergency, but, if the Governor-General found the existence
of such facts and issued a proclamation, and rice is sold at any higher price,
the seller commits a crime.
By the organic law of the Philippine Islands and the Constitution of the
United States all powers are vested in the Legislative, Executive and
Judiciary. It is the duty of the Legislature to make the law; of the Executive to
execute the law; and of the Judiciary to construe the law. The Legislature has
no authority to execute or construe the law, the Executive has no authority
to make or construe the law, and the Judiciary has no power to make or
execute the law. Subject to the Constitution only, the power of each branch
is supreme within its own jurisdiction, and it is for the Judiciary only to say
when any Act of the Legislature is or is not constitutional. Assuming, without
deciding, that the Legislature itself has the power to fix the price at which
rice is to be sold, can it delegate that power to another, and, if so, was that
power legally delegated by Act No. 2868? In other words, does the Act
delegate legislative power to the Governor-General? By the Organic Law, all
Legislative power is vested in the Legislature, and the power conferred upon
the Legislature to make laws cannot be delegated to the Governor-General,
or any one else. The Legislature cannot delegate the legislative power to
enact any law. If Act no 2868 is a law unto itself and within itself, and it does
nothing more than to authorize the Governor-General to make rules and
regulations to carry the law into effect, then the Legislature itself created the
law. There is no delegation of power and it is valid. On the other hand, if the
Act within itself does not define crime, and is not a law, and some legislative
act remains to be done to make it a law or a crime, the doing of which is
vested in the Governor-General, then the Act is a delegation of legislative
power, is unconstitutional and void.
The Supreme Court of the United States in what is known as the Granger
Cases (94 U.S., 183-187; 24 L. ed., 94), first laid down the rule:
Railroad companies are engaged in a public employment affecting the public
interest and, under the decision in Munn vs. Ill., ante, 77, are subject to
legislative control as to their rates of fare and freight unless protected by
their charters.
The Illinois statute of Mar. 23, 1874, to establish reasonable maximum rates
that the industrial or merchant may demand." The law is a general law and
not a local or special law.
The proclamation undertakes to fix one price for rice in Manila and other and
different prices in other and different provinces in the Philippine Islands, and
delegates the power to determine the other and different prices to provincial
treasurers and their deputies. Here, then, you would have a delegation of
legislative power to the Governor-General, and a delegation by him of that
power to provincial treasurers and their deputies, who "are hereby directed
to communicate with, and execute all instructions emanating from the
Director of Commerce and Industry, for the most effective and proper
enforcement of the above regulations in their respective localities." The
issuance of the proclamation by the Governor-General was the exercise of
the delegation of a delegated power, and was even a sub delegation of that
power.
Assuming that it is valid, Act No. 2868 is a general law and does not
authorize the Governor-General to fix one price of rice in Manila and another
price in Iloilo. It only purports to authorize him to fix the price of rice in the
Philippine Islands under a law, which is General and uniform, and not local or
special. Under the terms of the law, the price of rice fixed in the
proclamation must be the same all over the Islands. There cannot be one
price at Manila and another at Iloilo. Again, it is a mater of common
knowledge, and of which this court will take judicial notice, that there are
many kinds of rice with different and corresponding market values, and that
there is a wide range in the price, which varies with the grade and quality.
Act No. 2868 makes no distinction in price for the grade or quality of the
rice, and the proclamation, upon which the defendant was tried and
convicted, fixes the selling price of rice in Manila "at P15 per sack of 57
kilos, or 63 centavos per ganta," and is uniform as to all grades of rice, and
says nothing about grade or quality. Again, it will be noted that the law is
confined to palay, rice and corn. They are products of the Philippine Islands.
Hemp, tobacco, coconut, chickens, eggs, and many other things are also
products. Any law which single out palay, rice or corn from the numerous
other products of the Islands is not general or uniform, but is a local or
special law. If such a law is valid, then by the same principle, the GovernorGeneral could be authorized by proclamation to fix the price of meat, eggs,
chickens, coconut, hemp, and tobacco, or any other product of the Islands.
In the very nature of things, all of that class of laws should be general and
uniform. Otherwise, there would be an unjust discrimination of property
rights, which, under the law, must be equal and inform. Act No. 2868 is
nothing more than a floating law, which, in the discretion and by a
proclamation of the Governor-General, makes it a floating crime to sell rice
at a price in excess of the proclamation, without regard to grade or quality.
When Act No. 2868 is analyzed, it is the violation of the proclamation of the
Governor-General which constitutes the crime. Without that proclamation, it
was no crime to sell rice at any price. In other words, the Legislature left it to
the sole discretion of the Governor-General to say what was and what was
not "any cause" for enforcing the act, and what was and what was not "an
extraordinary rise in the price of palay, rice or corn," and under certain
undefined conditions to fix the price at which rice should be sold, without
regard to grade or quality, also to say whether a proclamation should be
issued, if so, when, and whether or not the law should be enforced, how long
defendant, who sold it to one of his customers. The government had not
bought and did not claim to own the rice, or have any interest in it, and at
the time of the alleged sale, it was the personal, private property of the
defendant. It may be that the law was passed in the interest of the public,
but the members of this court have taken on solemn oath to uphold and
defend the Constitution, and it ought not to be construed to meet the
changing winds or emergency conditions. Again, we say that no state or
nation under a republican form of government ever enacted a law
authorizing any executive, under the conditions states, to fix the price at
which a price person would sell his own rice, and make the broad statement
that no decision of any court, on principle or by analogy, will ever be found
which sustains the constitutionality of the particular portion of Act No. 2868
here in question. By the terms of the Organic Act, subject only to
constitutional limitations, the power to legislate and enact laws is vested
exclusively in the Legislative, which is elected by a direct vote of the people
of the Philippine Islands. As to the question here involved, the authority of
the Governor-General to fix the maximum price at which palay, rice and corn
may be sold in the manner power in violation of the organic law.
This opinion is confined to the particular question here involved, which is the
right of the Governor-General, upon the terms and conditions stated in the
Act, to fix the price of rice and make it a crime to sell it at a higher price, and
which holds that portions of the Act unconstitutional. It does not decide or
undertake to construe the constitutionality of any of the remaining portions
of the Act.
The judgment of the lower court is reversed, and the defendant discharged.
So ordered.
Araullo, C.J., Johnson, Street and Ostrand, JJ., concur.
Romualdez, J., concurs in the result.
Separate Opinions
MALCOLM, J., concurring:
I concur in the result for reasons which reach both the facts and the law. In
the first place, as to the facts, one cannot be convicted ex post facto of a
violation of a law and of an executive order issued pursuant to the law, when
the alleged violation thereof occurred on August 6, 1919, while the Act of the
Legislature in question was not published until August 13, 1919, and the
order was not published until August 20, 1919. In the second place, as to the
law, one cannot be convicted of a violation of a law or of an order issued
pursuant to the law when both the law and the order fail to set up an
ascertainable standard of guilt. (U.S. vs. Cohen Grocery Company [1921],
255 U.S., 81, holding section 4 of the Federal Food Control Act of August 10,
1917, as amended, invalid.)
In order that there may not be any misunderstanding of our position, I would
respectfully invite attention to the decision of the United States Supreme
Court in German Alliance Ins. Co. vs. Lewis ([1914, 233 U.S., 389),
concerning the legislative regulation of the prices charged by business
affected with a public interest, and to another decision of the United States
Supreme Court, that of Marshall Field & Co. vs. Clark ([1892], 143 U.S., 649),
which adopts as its own the principles laid down in the case of Locke's
Appeal ([1873], 72 Pa. St., 491), namely; "The Legislature cannot delegate
its power to make a law; but it can make a law to delegate a power to
determine some fact or state of things upon which the law makes, or intends
to make, its own action depend. To deny this would be to stop the wheels of
government. There are many things upon which wise and useful legislation
must depend which cannot be known to the law-making power, and must,
therefore, be a subject of inquiry and determination outside of the halls of
legislation."
Avancea and Villamor, JJ., concur.
CRUZ, J.:
The essence of due process is distilled in the immortal cry of Themistocles to
Alcibiades "Strike but hear me first!" It is this cry that the petitioner in
effect repeats here as he challenges the constitutionality of Executive Order
No. 626-A.
The said executive order reads in full as follows:
WHEREAS, the President has given orders prohibiting the interprovincial
movement of carabaos and the slaughtering of carabaos not complying with
the requirements of Executive Order No. 626 particularly with respect to
age;
WHEREAS, it has been observed that despite such orders the violators still
manage to circumvent the prohibition against inter-provincial movement of
carabaos by transporting carabeef instead; and
WHEREAS, in order to achieve the purposes and objectives of Executive
Order No. 626 and the prohibition against interprovincial movement of
carabaos, it is necessary to strengthen the said Executive Order and provide
for the disposition of the carabaos and carabeef subject of the violation;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by
virtue of the powers vested in me by the Constitution, do hereby promulgate
the following:
SECTION 1. Executive Order No. 626 is hereby amended such that
henceforth, no carabao regardless of age, sex, physical condition or purpose
and no carabeef shall be transported from one province to another. The
carabao or carabeef transported in violation of this Executive Order as
amended shall be subject to confiscation and forfeiture by the government,
to be distributed to charitable institutions and other similar institutions as
the Chairman of the National Meat Inspection Commission may ay see fit, in
the case of carabeef, and to deserving farmers through dispersal as the
Director of Animal Industry may see fit, in the case of carabaos.
SECTION 2. This Executive Order shall take effect immediately.
Done in the City of Manila, this 25th day of October, in the year of Our Lord,
nineteen hundred and eighty.
(SGD.) FERDINAND E. MARCOS
President
Republic of the Philippines
The petitioner had transported six carabaos in a pump boat from Masbate to
Iloilo on January 13, 1984, when they were confiscated by the police station
commander of Barotac Nuevo, Iloilo, for violation of the above measure. 1
The petitioner sued for recovery, and the Regional Trial Court of Iloilo City
issued a writ of replevin upon his filing of a supersedeas bond of P12,000.00.
After considering the merits of the case, the court sustained the confiscation
of the carabaos and, since they could no longer be produced, ordered the
confiscation of the bond. The court also declined to rule on the
constitutionality of the executive order, as raise by the petitioner, for lack of
authority and also for its presumed validity. 2
The petitioner appealed the decision to the Intermediate Appellate Court,* 3
which upheld the trial court, ** and he has now come before us in this
petition for review on certiorari.
other, as unto the bow the arrow, in leading to the correct ruling after
examination of the problem not from one or the other perspective only but
in its totality. A judgment based on less that this full appraisal, on the pretext
that a hearing is unnecessary or useless, is tainted with the vice of bias or
intolerance or ignorance, or worst of all, in repressive regimes, the insolence
of power.
The minimum requirements of due process are notice and hearing 13 which,
generally speaking, may not be dispensed with because they are intended
as a safeguard against official arbitrariness. It is a gratifying commentary on
our judicial system that the jurisprudence of this country is rich with
applications of this guaranty as proof of our fealty to the rule of law and the
ancient rudiments of fair play. We have consistently declared that every
person, faced by the awesome power of the State, is entitled to "the law of
the land," which Daniel Webster described almost two hundred years ago in
the famous Dartmouth College Case, 14 as "the law which hears before it
condemns, which proceeds upon inquiry and renders judgment only after
trial." It has to be so if the rights of every person are to be secured beyond
the reach of officials who, out of mistaken zeal or plain arrogance, would
degrade the due process clause into a worn and empty catchword.
This is not to say that notice and hearing are imperative in every case for, to
be sure, there are a number of admitted exceptions. The conclusive
presumption, for example, bars the admission of contrary evidence as long
as such presumption is based on human experience or there is a rational
connection between the fact proved and the fact ultimately presumed
therefrom. 15 There are instances when the need for expeditions action will
justify omission of these requisites, as in the summary abatement of a
nuisance per se, like a mad dog on the loose, which may be killed on sight
because of the immediate danger it poses to the safety and lives of the
people. Pornographic materials, contaminated meat and narcotic drugs are
inherently pernicious and may be summarily destroyed. The passport of a
person sought for a criminal offense may be cancelled without hearing, to
compel his return to the country he has fled. 16Filthy restaurants may be
summarily padlocked in the interest of the public health and bawdy houses
to protect the public morals. 17 In such instances, previous judicial hearing
may be omitted without violation of due process in view of the nature of the
property involved or the urgency of the need to protect the general welfare
from a clear and present danger.
The protection of the general welfare is the particular function of the police
power which both restraints and is restrained by due process. The police
power is simply defined as the power inherent in the State to regulate liberty
and property for the promotion of the general welfare. 18 By reason of its
function, it extends to all the great public needs and is described as the
most pervasive, the least limitable and the most demanding of the three
inherent powers of the State, far outpacing taxation and eminent domain.
The individual, as a member of society, is hemmed in by the police power,
which affects him even before he is born and follows him still after he is
dead from the womb to beyond the tomb in practically everything he
does or owns. Its reach is virtually limitless. It is a ubiquitous and often
unwelcome intrusion. Even so, as long as the activity or the property has
some relevance to the public welfare, its regulation under the police power
is not only proper but necessary. And the justification is found in the
venerable Latin maxims, Salus populi est suprema lex and Sic utere tuo ut
alienum non laedas, which call for the subordination of individual interests to
the benefit of the greater number.
It is this power that is now invoked by the government to justify Executive
Order No. 626-A, amending the basic rule in Executive Order No. 626,
prohibiting the slaughter of carabaos except under certain conditions. The
original measure was issued for the reason, as expressed in one of its
Whereases, that "present conditions demand that the carabaos and the
buffaloes be conserved for the benefit of the small farmers who rely on them
for energy needs." We affirm at the outset the need for such a measure. In
the face of the worsening energy crisis and the increased dependence of our
farms on these traditional beasts of burden, the government would have
been remiss, indeed, if it had not taken steps to protect and preserve them.
A similar prohibition was challenged in United States v. Toribio, 19 where a
law regulating the registration, branding and slaughter of large cattle was
claimed to be a deprivation of property without due process of law. The
defendant had been convicted thereunder for having slaughtered his own
carabao without the required permit, and he appealed to the Supreme Court.
The conviction was affirmed. The law was sustained as a valid police
measure to prevent the indiscriminate killing of carabaos, which were then
badly needed by farmers. An epidemic had stricken many of these animals
and the reduction of their number had resulted in an acute decline in
agricultural output, which in turn had caused an incipient famine.
Furthermore, because of the scarcity of the animals and the consequent
increase in their price, cattle-rustling had spread alarmingly, necessitating
more effective measures for the registration and branding of these animals.
The Court held that the questioned statute was a valid exercise of the police
power and declared in part as follows:
To justify the State in thus interposing its authority in behalf of the public, it
must appear, first, that the interests of the public generally, as distinguished
from those of a particular class, require such interference; and second, that
the means are reasonably necessary for the accomplishment of the purpose,
and not unduly oppressive upon individuals. ...
From what has been said, we think it is clear that the enactment of the
provisions of the statute under consideration was required by "the interests
of the public generally, as distinguished from those of a particular class" and
that the prohibition of the slaughter of carabaos for human consumption, so
long as these animals are fit for agricultural work or draft purposes was a
"reasonably necessary" limitation on private ownership, to protect the
community from the loss of the services of such animals by their slaughter
by improvident owners, tempted either by greed of momentary gain, or by a
desire to enjoy the luxury of animal food, even when by so doing the
productive power of the community may be measurably and dangerously
affected.
In the light of the tests mentioned above, we hold with the Toribio Case that
the carabao, as the poor man's tractor, so to speak, has a direct relevance
to the public welfare and so is a lawful subject of Executive Order No. 626.
The method chosen in the basic measure is also reasonably necessary for
the purpose sought to be achieved and not unduly oppressive upon
individuals, again following the above-cited doctrine. There is no doubt that
by banning the slaughter of these animals except where they are at least
seven years old if male and eleven years old if female upon issuance of the
necessary permit, the executive order will be conserving those still fit for
farm work or breeding and preventing their improvident depletion.
But while conceding that the amendatory measure has the same lawful
subject as the original executive order, we cannot say with equal certainty
that it complies with the second requirement, viz., that there be a lawful
method. We note that to strengthen the original measure, Executive Order
No. 626-A imposes an absolute ban not on theslaughter of the carabaos but
on their movement, providing that "no carabao regardless of age, sex,
physical condition or purpose (sic) and no carabeef shall be transported from
one province to another." The object of the prohibition escapes us. The
reasonable connection between the means employed and the purpose
sought to be achieved by the questioned measure is missing
We do not see how the prohibition of the inter-provincial transport of
carabaos can prevent their indiscriminate slaughter, considering that they
can be killed anywhere, with no less difficulty in one province than in
another. Obviously, retaining the carabaos in one province will not prevent
their slaughter there, any more than moving them to another province will
make it easier to kill them there. As for the carabeef, the prohibition is made
to apply to it as otherwise, so says executive order, it could be easily
circumvented by simply killing the animal. Perhaps so. However, if the
movement of the live animals for the purpose of preventing their slaughter
cannot be prohibited, it should follow that there is no reason either to
prohibit their transfer as, not to be flippant dead meat.
Even if a reasonable relation between the means and the end were to be
assumed, we would still have to reckon with the sanction that the measure
applies for violation of the prohibition. The penalty is outright confiscation of
the carabao or carabeef being transported, to be meted out by the executive
authorities, usually the police only. In the Toribio Case, the statute was
sustained because the penalty prescribed was fine and imprisonment, to be
imposed by the court after trial and conviction of the accused. Under the
challenged measure, significantly, no such trial is prescribed, and the
property being transported is immediately impounded by the police and
declared, by the measure itself, as forfeited to the government.
In the instant case, the carabaos were arbitrarily confiscated by the police
station commander, were returned to the petitioner only after he had filed a
complaint for recovery and given a supersedeas bond of P12,000.00, which
was ordered confiscated upon his failure to produce the carabaos when
ordered by the trial court. The executive order defined the prohibition,
convicted the petitioner and immediately imposed punishment, which was
carried out forthright. The measure struck at once and pounced upon the
petitioner without giving him a chance to be heard, thus denying him the
centuries-old guaranty of elementary fair play.
It has already been remarked that there are occasions when notice and
hearing may be validly dispensed with notwithstanding the usual
requirement for these minimum guarantees of due process. It is also
conceded that summary action may be validly taken in administrative
proceedings as procedural due process is not necessarily judicial only. 20 In
the exceptional cases accepted, however. there is a justification for the
omission of the right to a previous hearing, to wit, the immediacy of the
problem sought to be corrected and the urgency of the need to correct it.
In the case before us, there was no such pressure of time or action calling
for the petitioner's peremptory treatment. The properties involved were not
even inimical per se as to require their instant destruction. There certainly
was no reason why the offense prohibited by the executive order should not
have been proved first in a court of justice, with the accused being accorded
all the rights safeguarded to him under the Constitution. Considering that, as
we held in Pesigan v. Angeles, 21 Executive Order No. 626-A is penal in
nature, the violation thereof should have been pronounced not by the police
only but by a court of justice, which alone would have had the authority to
impose the prescribed penalty, and only after trial and conviction of the
accused.
We also mark, on top of all this, the questionable manner of the disposition
of the confiscated property as prescribed in the questioned executive order.
It is there authorized that the seized property shall "be distributed to
charitable institutions and other similar institutions as the Chairman of the
National Meat Inspection Commissionmay see fit, in the case of carabeef,
and to deserving farmers through dispersal as the Director of Animal
Industrymay see fit, in the case of carabaos." (Emphasis supplied.) The
phrase "may see fit" is an extremely generous and dangerous condition, if
condition it is. It is laden with perilous opportunities for partiality and abuse,
and even corruption. One searches in vain for the usual standard and the
reasonable guidelines, or better still, the limitations that the said officers
must observe when they make their distribution. There is none. Their options
are apparently boundless. Who shall be the fortunate beneficiaries of their
generosity and by what criteria shall they be chosen? Only the officers
named can supply the answer, they and they alone may choose the grantee
as they see fit, and in their own exclusive discretion. Definitely, there is here
a "roving commission," a wide and sweeping authority that is not "canalized
within banks that keep it from overflowing," in short, a clearly profligate and
therefore invalid delegation of legislative powers.
To sum up then, we find that the challenged measure is an invalid exercise
of the police power because the method employed to conserve the carabaos
is not reasonably necessary to the purpose of the law and, worse, is unduly
oppressive. Due process is violated because the owner of the property
confiscated is denied the right to be heard in his defense and is immediately
condemned and punished. The conferment on the administrative authorities
of the power to adjudge the guilt of the supposed offender is a clear
encroachment on judicial functions and militates against the doctrine of
separation of powers. There is, finally, also an invalid delegation of
legislative powers to the officers mentioned therein who are granted
unlimited discretion in the distribution of the properties arbitrarily taken. For
these reasons, we hereby declare Executive Order No. 626-A
unconstitutional.
We agree with the respondent court, however, that the police station
commander who confiscated the petitioner's carabaos is not liable in
damages for enforcing the executive order in accordance with its mandate.
The law was at that time presumptively valid, and it was his obligation, as a
member of the police, to enforce it. It would have been impertinent of him,
being a mere subordinate of the President, to declare the executive order
unconstitutional and, on his own responsibility alone, refuse to execute it.
Even the trial court, in fact, and the Court of Appeals itself did not feel they
had the competence, for all their superior authority, to question the order
we now annul.
The Court notes that if the petitioner had not seen fit to assert and protect
his rights as he saw them, this case would never have reached us and the
taking of his property under the challenged measure would have become
afait accompli despite its invalidity. We commend him for his spirit. Without
the present challenge, the matter would have ended in that pump boat in
Masbate and another violation of the Constitution, for all its obviousness,
would have been perpetrated, allowed without protest, and soon forgotten in
the limbo of relinquished rights.
The strength of democracy lies not in the rights it guarantees but in the
courage of the people to invoke them whenever they are ignored or violated.
Rights are but weapons on the wall if, like expensive tapestry, all they do is
embellish and impress. Rights, as weapons, must be a promise of protection.
They become truly meaningful, and fulfill the role assigned to them in the
free society, if they are kept bright and sharp with use by those who are not
afraid to assert them.
WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional.
Except as affirmed above, the decision of the Court of Appeals is reversed.
The supersedeas bond is cancelled and the amount thereof is ordered
restored to the petitioner. No costs.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Gutierrez, Jr., Paras, Gancayco,
Padilla Bidin Sarmiento and Cortes, JJ., concur.
Melencio-Herrera and Feliciano, JJ., are on leave.
obtain from earth, petroleum, rock or carbon oils, natural gas, other volatile
mineral substances and salt, and to manufacture, refine, prepare for market,
buy, sell and transport the same in crude and refined condition", and the
capital stock of which, as per agreement of all the incorporators thereof in
their articles of incorporation, the accused herein included, consisting of
2,800 shares without par value, 200 shares of which having been subscribed
by the accused Nicasio Osmea, and 100 shares of which having been
subscribed by the accused Jacob Rosenthal and paid by both at the price of
only P5 per share, according to the said agreement, which shares were
speculative securities, because the value thereof materially depended upon
proposed promise of future promotion and development of the oil business
above mentioned rather than on actual tangible assets and conditions
thereof, did then and there, with deliberate intent of evading the provisions
of sections 2 and 5 of Act No. 2581, and conspiring and confederating
together and helping one another, willfully, unlawfully and feloniously trade
in, negotiate and speculate with, their shares aforesaid, by making
personally or through brokers or agents repeated and successive sales of the
said shares at a price ranging from P100 to P300 per share, as follows:
The accused Nicasio Osmea sold 185 shares to nine different parties, and
the accused Jacob Rosenthal sold 12 shares to seven others, without first
obtaining the corresponding written permit or license form the Insular
Treasurer of the Commonwealth of the Philippines, as by law provided.
Upon motion of Jacob Rosenthal, the Court of First Instance of Manila granted
him separate trial although, when the cases were called for hearing, the
court acceded to the motion of the prosecution that the two cases be tried
jointly inasmuch as the evidence to be adduced by the government therein
was the same, without prejudice to allowing the defendants to present their
proof separately. After trial, the lower court, on March 22, 1937, in separate
decisions, found the defendants guilty as charged in the informations. In
case No. 52365 Jacob Rosenthal was sentenced to pay a fine of P500, with
subsidiary imprisonment in case of insolvency, and to pay one-half of the
costs; Nicasio Osmea was sentenced to pay a fine of P1,000, with
subsidiary imprisonment in case of insolvency, and to pay one-half of the
costs. In case No. 52366 Jacob Rosenthal was sentenced to pay a fine of
P500, with subsidiary imprisonment in case of insolvency, and to pay onehalf of the costs; Nicasio Osmea was sentenced to pay a fine of P2,000,
with subsidiary imprisonment in case of insolvency, and to pay one-half of
the costs. The defendants duly perfected their appeal from these judgments
and the cases were originally elevated to the Court of Appeals but, upon
motion of the Solicitor-General, the same were forwarded to this court in
view of the fact that the constitutionality of Act No. 2581 has been put in
issue by appellants. Two separate briefs have been filed by Rosenthal and
Osmea. In the brief for appellant Rosenthal the following "joint assignment
of errors" is made:
1. In declaring that according to the report of the geologist contracted by the
O.R. Oil Co. and the South Cebu Oil Co. to explore the properties leased to
said companies, "no habia ninguna indicacion de que hubiese petroleo en
aquellos terrenos", when in truth what the report stated was that in so far as
the O.R.O. Oil Co. land was concerned, the territory covered by the lease if
full of possibilities; and with respect to the South Cebu Oil Co. lease, that no
further investigations and expenses be made "unless favorable test results
that a permit had not been issued by the Insular Treasurer for the sale of the
stocks of the corporations.
10. In holding that there were repeated and successive sales made by the
defendant Rosenthal of his own shares of stock.
11. In holding that although the defendant was the absolute owner of the
stock he sold, his repeated and successive sales of such stock prove that
this claim of ownership (esta pretension de propriedad) was but a means
employed by him to sell said stock at prices very much higher than those he
paid for them.
12. In holding that said stock was sold by the defendant without the required
permit having been first issued by the Insular Treasurer, and that the sale
was effected as if such permit had been actually issued (como si en realidad
pudieran venderse por haberse expedido tal permiso).
13. In holding that as a result of an investigation conducted by the City
Fiscal, the defendant refunded to Belden, O'Brien and Fitzimmons and others
the amount they paid for the stock they purchased.
14. In holding that the opinion given by the Chief of the Insurance Division of
the Office of the Insular Treasurer to the effect that the defendant could sell
the said stock without a permit as long as no false representations were
made by the said defendant, can not and does not exempt the latter from
criminal responsibility even though no false representations whatsoever
were made by the aforesaid defendant.
15. In holding that the prima facie presumption in section 8 of the law to the
effect that the claim of ownership is not bona fide when repeated and
successive sales of such stock are effected, has been totally destroyed by
the fact that said stock absolutely belongs to the defendant, and in not
further holding that because of such absolute ownership the defendant
could have legally disposed of such stock in as many sales as he saw fit
without any permit from the Insular Treasurer.
16. In not holding that the Blue Sky Law contravenes the constitutional
provisions of the Jones Act in so far as such law constitutes an undue
delegation of legislative powers to the Insular Treasurer, and in so far as it
does not afford equal protection before the law.
17. In not absolving the defendant.
In the brief for appellant Osmea the following "relacion conjunta de errores"
is in turn submitted:
1. Al no sobreseer esta causa despues de promulgada la Ley No. 83 del
Commonwealth, no obstante haberse llamado su atencion al hecho de que
esta Ley derogaba la Ley No. 2581 de la Legislatura Filipina, bajo cuyas
disposiciones ha sido procesado el acusado.
2. Al condenar al acusado por infraccion de la "Blue Sky Law", no obstante
reconocerse en la decision que consta en las pruebas que el acusado
Osmea no ha of recido en venta ninguna de aquellas acciones, ni ha hecho
manifestaciones falsas a nadie para poder venderlas, y que la mayor parte,
si no todos los que las compraron, estaban satisfechos de la inversion de su
dinero en la adquisicion de tales acciones.
3. Al condenar al acusado por haber vendido acciones especulativas sin
licencia, cuando no se probo: (a) que las acciones de la O.R.O. Oil Co., Inc., y
de la South Cebu Oil Co., Inc., eran especulativas por su naturaleza, y (b)
que el acusado Osmea carecia de licencia para venderlas.
4. Al declarar que la posesion por el acusado Osmea de sus acciones de la
O.R.O. Oil Co., Inc., y de la South Cebu Oil Co., Inc., no era de buena fe y que
no las habia adquirido por su propia cuenta sino para la promocion indirecta
de un provecto de negocio o empresa especulativa.
5. Al no declarar que la "Blue Sky Law" es contraria a las normas
constitucionales que gozaba al tiempo de su promulgacion : (1) porque
contiene en sus disposiciones una delegacion indebida de facultades
legislativas; (2) porque es vaga e incierte en sus disposiciones y, por tanto,
nula; y (3) porque infringe el derecho de igual proteccion ante la ley, viola la
libertad de contratacion y contraviene el derecho de adquirir, gozar y
disponer libremente de la propriedad privada, siendo su promulgacion, por
tanto, un acto de opresion y de verdadera tirania.
6. Al no absolveral acusado Nicasio Osmea..
To meet the foregoing errors assigned by the appellants, plaintiff-appellee
contends:
(a) That the enactment of Commonwealth Act No. 83 did not have the effect
of relieving appellants from criminal liability.
(b) That the appellants acted as promoters of the O.R.O. Oil Co. and the
South Cebu Oil Co.
(c) That the shares of the two corporations are speculative in nature.
(d) That the appellants sold their shares in said corporations without permit
or knowing that the latter did not have the permit required by law.
(e) That the appellants are not entitled to the exemption provided in section
8 of the Blue Sky Law (Act No. 2581).
(f) That the Blue Sky Law is valid and constitutional.
Most of the errors assigned by the appellants deal with questions of fact.
This is particularly true with reference to errors one, two, three, four, five,
six, seven, eight, nine, ten, eleven, twelve and thirteen of appellant Jacob
Rosenthal, and error four of appellant Nicasio Osmea. There is no material
discrepancy regarding the facts, and we shall proceed to consider the legal
questions propounded, which are in the main set forth by the SolicitorGeneral in his brief.
It is contended by the appellants that Act No. 2581 is unconstitutional on
three grounds. (1) That it constitutes an undue delegation of legislative
authority to the Insular Treasurer: (2) that it does not afford equal protection
before the law; and (3) that it is vague and ambiguous.
Under section 2 of Act No. 2581, every person, partnership, association, or
corporation attempting to offer to sell in the Philippines speculative
securities of any kind or character whatsoever, is under obligation to file
previously with the Insular Treasurer the various documents and papers
enumerated therein and to pay the required tax of twenty pesos. Certain
securities listed in section 3 are exempted from the operation of the Act.
Section 5 imposes upon the Insular Treasurer the mandatory duty to
examine the statements and documents thus filed and the additional duty to
make or cause to be made, if deemed advisable by him, a detailed
examination of the affairs of the applicant. Section 5 also provides that
"whatever the said Treasurer of the Philippine Islands is satisfied, either with
or without the examination herein provided, that any person, partnership,
association or corporation is entitled to the right to offer its securities as
above defined and provided for sale in the Philippine Islands, he shall issue
to such person, partnership, association or corporation a certificate or permit
reciting that such person, partnership, association or corporation has
complied with the provisions of this Act, and that such person, partnership,
association or corporation, its brokers or agents are entitled to offer the
securities named in said certificate or permit for sale"; that "said Treasurer
shall furthermore have authority, whenever in his judgment it is in the public
interest, to cancel said certificate or permit", and that "an appeal from the
decision of the Insular Treasurer may be had within the period of thirty days
to the Secretary of Finance."
Appellants argue that, while Act No. 2581 empowers the Insular Treasurer to
issue and cancel certificates or permits for the sale of speculative securities,
no standard or rule is fixed in the Act which can guide said official in
determining the cases in which a certificate or permit ought to be issued,
thereby making his opinion the sole criterion in the matter of its issuance,
with the result that, legislative powers being unduly delegated to the Insular
Treasurer, Act No. 2581 is unconstitutional. We are of the opinion that the
Act furnishes a sufficient standard for the Insular Treasurer to follow in
reaching a decision regarding the issuance or cancellation of a certificate or
permit. The certificate or permit to be issued under the Act must recite that
the person, partnership, association or corporation applying therefor "has
complied with the provisions of this Act", and this requirement, construed in
relation to the other provisions of the law, means that a certificate or permit
shall be issued by the Insular Treasurer when the provisions of Act No. 2581
have been complied with. Upon the other hand, the authority of the Insular
Treasurer to cancel a certificate or permit is expressly conditioned upon a
finding that such cancellation "is in the public interest." In view of the
intention and purpose of Act No. 2581 to protect the public against
"speculative schemes which have no more basis than so many feet of blue
sky" and against the "sale of stock in fly-by-night concerns, visionary oil
wells, distant gold mines, and other like fraudulent exploitations", we
incline to hold that "public interest" in this case is a sufficient standard to
guide the Insular Treasurer in reaching a decision on a matter pertaining to
the issuance or cancellation of certificates or permits. As we observed in the
case of People vs. Fernandez and Trinidad (G.R. No. 45655, June 15, 1938),
"siendo el objecto de la ley el evitar especulaciones ruinosas, es claro que el
interes publico, es, y debe ser la razon en que el Tesorero Insular deba basar
sus resoluciones." And the term "public interest" is not without a settled
meaning.
Appellant insists that the delegation of authority to the Commission is invalid
because the stated criterion is uncertain. That criterion is the public interest.
It is a mistaken assumption that this is a mere general reference to public
welfare without any standard to guide determinations. The purpose of the
Act, the requirement it imposes, and the context of the provision in question
show the contrary. . . . (New York Central Securities Corporation vs. U.S.A.,
287 U.S., 12, 24, 25; 77 Law. ed., 138, 145, 146.) (See alsoSchenchter
Poultry Corporation vs. U.S., 295 U.S., 495; 540; 79 Law. ed., 1570, 1585;
Ferrazzini vs. Gsell, 34 Phil., 697, 711, 712.)
In this connection, we cannot overlook the fact that the Act No. 2581 allows
an appeal from the decision of the Insular Treasurer to the Secretary of
Finance. Hence, it cannot be contended that the Insular Treasurer can act
and decide without any restraining influence.
The theory of the separation of powers is designed by its originators to
secure action and at the same time to forestall over action which necessarily
In the case of State ex rel. Central Steam Heat & Power Co. vs. Gettle (Wis.
[1928], 220 N.W., 201), where it was argued that the requirement of the
Wisconsin Blue Sky Law (St. 1925, sec. 184.09 [3]; Law 1927, c. 444) that
the Railroad Commission shall find that the "financial condition, plan of
operation, and the proposed undertakings of the corporation are such as to
afford reasonable protection to the purchasers of the securities to be
issued", is unconstitutional for the reason that (1) the Legislature has no
power to regulate the issuance of securities in order to protect the investing
public; (2) the Legislature does not provide a standard to control the
commission; (3) the statute is so indefinite and uncertain in its meaning as
to be incapable of administration; and (4) the statute delegates to the
railroad commission legislative power, the court said:
This is but a usual provision found in the many so-called Blue Sy Laws, the
constitutionality of which has been upheld by the courts generally. The
constitutionality of similar provisions has been so thoroughly considered by
this court that further discussion thereof is unnecessary. The following cases
abundantly establish the constitutionality of this provision. (State ex rel.
Minneapolis, St. Paul & Sault Ste. Marie Railway Company vs. Railroad
Commission of Wisconsin, 137 Wis., 80; 117 N.W., 846; Appleton Water
Works Co. vs. Railroad Commission of Wisconsin, 154 Wis., 121; 142 N.E.,
476; 47 L.R.A. [N.S.], 770; Ann. Cas. 1915B, 1160; State ex rel. City of
Milwaukee vs. Milwaukee Electric Railway & Light Co., 169 Wis., 183; 172
N.W., 230; City of Milwaukee vs. Railroad Commission of Wisconsin, 183 Wis.,
498; 196 N.W., 853; Wisconsin Southern Ry. Co. vs. Railroad Commission of
Wisconsin, 185 Wis., 313; 201 N.W., 244; Kretuzer vs. Westfahl, 187 Wis.,
463; 204 N.W., 595.)
Another ground relied upon by appellants in contending that Act No. 2581 is
unconstitutional is that it denies equal protection of the laws because the
law discriminates between an owner who sells his securities in a single
transaction and one who disposes of them in repeated and successive
transactions. In disposing of this contention we need only refer to the case
of Hall vs. Geiger-Jones Co., supra, wherein the Supreme Court of the United
States held:
"Discriminations are asserted against the statute which extend, it is
contended, to denying appellees the equal protection of the laws. Counsel
enumerates them as follows:
"Prominent among such discriminations are . . . between an owner who sells
his securities in a single transaction and one who disposes of them in
successive transactions; . . . "
We cannot give separate attention to the asserted discriminations. It is
enough to say that they are within the power of classification which a state
has. A state "ay direct its law against what it deems the evil as it actually
exists without covering the whole field of possible abuses, and it may do so
none the less that the forbidden act does not differ in kind from those that
are allowed . . .. If a class is deemed to present a conspicuous example of
what the legislature seeks to prevent, the 14th Amendment allows it to be
dealt with although otherwise and merely logically not distinguishable from
others not embraced in the law.
Counsel for appellant Nicasio Osmea further alleges that Act No. 2581 is
unconstitutional on the ground that it is vague and uncertain. A similar
contention has already been overruled by this court in the case of People vs.
Fernandez and Trinidad, supra. An Act will be declared void and inoperative
on the ground of vagueness and uncertainty only upon a showing that the
defect is such that the courts are unable to determine, with any reasonable
degree of certainty, what the legislature intended. The circumstance that
this court has no more than one occasion given effect and application to Act.
No. 2581 (Valhalla Hotel Construction Co. vs. Carmona, 44 Phil., 233; People
vs. Nimrod McKinney, 47 Phil., 792; People vs. Fernandez and Trinidad,
supra) decisively argues against the position taken by appellant Osmea. In
this connection we cannot pretermit reference to the rule that "legislation
should not be held invalid on the ground of uncertainty if susceptible of any
reasonable construction that will support and give it effect. An Act will not be
declared inoperative and ineffectual on the ground that it furnishes no
adequate means to secure the purpose for which it is passed, if men of
common sense and reason can devise and provide the means, and all the
instrumentalities necessary for its execution are within the reach of those
intrusted therewith." (25 R.C.L., pp. 810, 811.)
Reaffirming our view in People vs. Fernandez and Trinidad, supra, we hold
that Act No. 2581 is valid and constitutional.
Taking up now the question raised with reference to the speculative nature
of the shares of the ). O.R.O. Oil Co. and the South Cebu Oil Co., we find that
section 1, paragraph (b) of Act No. 2581, in defining speculative securities,
provides:
. . . The term "speculative securities" as used in this Act shall be deemed to
mean and include:
xxx
xxx
xxx
(b) All securities the value of which materially depend upon proposed or
promised future promotion or development rather than on present tangible
assets and conditions.
At the beginning, and at the time of the issuance of the shares of the O.R.O.
Oil Co. and the South Cebu Oil Co., all that these companies had were their
exploration leases. Beyond this, there was nothing tangible. The value of
those shares depended upon future development and the uncertainty of
"striking" oil. The shares issued under these circumstances are clearly
speculative because they depended upon proposed or promised future
promotion or development rather than on present tangible assets and
conditions.
Appellants next contend that in view of the repeal of Act No. 2581 by
Commonwealth Act. No. 83, they have been relieved of criminal
responsibility. Assuming that the former Act has been entirely and
completely abrogated by the latter Act a point we do not have to decide
this fact does not relieve appellants from criminal responsibility. "It has
been the holding, and it must again be the holding, that where an Act of the
Legislature which penalizes an offense repeals a former Act which penalized
the same offense, such repeal does not have the effect of thereafter
depriving the courts of jurisdiction to try, convict and sentence offenders
charged with violations of the old law." (People vs. Concepcion, 44 Phil., 126,
132; Ong Chang Wing and Kwong Fok vs. U.S., 218 U.S., 272; 40 Phil., 1046;
U.S. vs. Cuna, 12 Phil., 241; U.S. vs. Aron, 12 Phil., 778; U.S. vs. Tonga, 15
Phil., 43; U.S. vs. Molina, 17 Phil., 582.)
Appellants further contend that they come under the exception provided in
section 8 of Act No. 2581. This section provides:
This Act shall not apply to the holder of any speculative security who is not
the issuer thereof, nor to the person who has acquired the same for his own
account in the usual and ordinary course of business and not for the direct
or indirect promotion of any enterprise or scheme within the purview of this
Act, unless such possession is in good faith. Repeated and successive sales
of any speculative securities shall beprima facie evidence that the claim of
ownership is not bona fide, but is a mere shift, device or plot to evade the
provisions of this Act. Such speculators shall incur the penalty provided for in
section seven of this Act.
Under this section, there are clearly two classes of persons to whom the law
is not applicable: (1) Persons who hold speculative securities but who are not
the issuers thereof; and (2) persons who have acquired the same for their
own account in the usual and ordinary course of business and not for the
direct or indirect promotion of any enterprise or scheme within the purview
of this Act, provided (the law uses the term "unless") such possession is in
good faith.
Passing upon the questions of fact necessarily involved in the application of
section 8 of Act No. 2581, the trial court in case No. 52365 makes the
following findings with reference to Nicasio Osmea:
. . . El acusado Osmea no ha adquirido por su propia cuenta en el curso
ordinario y corriente de los negocios en la O.R.O. Oil Co. Las acciones por el
vendidas, pues las adquirio mediante suscripcion como uno de los
fundadores de dicha corporacion, pero si para la promocion indirecta de un
proyecto de negocio o empresa para el cual se habia organizado le
corporacion, habiendo pagado totalmente el importe de dichas acciones a la
misma corporacion; ni tampoco las poseia de buena fe, puesto que como
fundador y miembro de la junta directiva de dicha corporacion debia saber
que no se habia expedido por el Tesorero Insular ningun permiso por escrito
a al corporacion para la venta de dichas acciones. Y las ventas sucesivas y
repetidas de esas acciones que tenia en la misma corporacion, aunque tales
acciones eran suyas por haberlas el obtenido de la corporacion mediante
suscripcion y pago del importe correspondiente prueban que esta pretension
de propiedad ha sido solamente un medio de que se ha valido para vender
tales acciones a precios mucho mayores que el importe por por haberse
expedido tal permiso.
The same findings, mutatis mutandis, are made in case No. 52366 against
the same appellant, and against Jacob Rosenthal in the two cases. Even if
we could, we do not feel justified in disturbing the findings of the trial court.
The good faith set up by appellant Rosenthal for having acted on the advice
of one Garcia, an officer in the Insular Treasury, and the subsequent
devolution by him of amounts collected from some of the purchasers of the
shares may be considered as a circumstance in his favor in the imposition of
the penalty prescribed by law but does not exempt him from criminal
responsibility. (People vs. McCalla, 63 Cal. App., 783; 220 Pac., 436; 367 U.S.,
585; 69 Law. ed., 799; 45 Sup. Ct., 461; People vs. Fernandez and Trinidad,
supra.)
The judgments of the lower court are affirmed, with the modification that the
fines are reduced as to accused Jacob Rosenthal from P500 to P200 in each
case, and as to accused Nicasio Osmea, from P1,000 to P500 in case No.
52365 and from P2,000 to P1,000 in case No. 52366, with subsidiary
imprisonment for both in case of insolvency, and costs. So ordered.
Avancea, C.J., Villa-Real, Imperial, Diaz, Concepcion, and Moran, JJ., concur.
(1) To supervise, for and under the direction of the President, all the
corporations owned or controlled by the Government for the purpose of
insuring efficiency and economy in their operations;
(2) To pass upon the program of activities and the yearly budget of
expenditures approved by the respective Boards of Directors of the said
corporations; and
(3) To carry out the policies and measures formulated by the Government
Enterprises Council with the approval of the President. (Sec. 3, Executive
Order No. 93.)
With its controlling stock owned by the Government and the power of
appointing its directors vested in the President of the Philippines, there can
be no question that the NAFCO is Government controlled corporation subject
to the provisions of Republic Act No. 51 and the executive order (No. 93)
promulgated in accordance therewith. Consequently, it was also subject to
the powers of the Control Committee created in said executive order, among
which is the power of supervision for the purpose of insuring efficiency and
economy in the operations of the corporation and also the power to pass
upon the program of activities and the yearly budget of expenditures
approved by the board of directors. It can hardly be questioned that under
these powers the Control Committee had the right to pass upon, and
consequently to approve or disapprove, the resolution of the NAFCO board of
directors granting quarters allowance to the petitioners as such allowance
necessarily constitute an item of expenditure in the corporation's budget.
That the Control Committee had good grounds for disapproving the
resolution is also clear, for, as pointed out by the Auditor General and the
NAFCO auditor, the granting of the allowance amounted to an illegal
increase of petitioner's salary beyond the limit fixed in the corporate charter
and was furthermore not justified by the precarious financial condition of the
corporation.
It is argued, however, that Executive Order No. 93 is null and void, not only
because it is based on a law that is unconstitutional as an illegal delegation
of legislature power to executive, but also because it was promulgated
beyond the period of one year limited in said law.
The second ground ignores the rule that in the computation of the time for
doing an act, the first day is excluded and the last day included (Section 13
Rev. Ad. Code.) As the act was approved on October 4, 1946, and the
President was given a period of one year within which to promulgate his
executive order and that the order was in fact promulgated on October 4,
1947, it is obvious that under the above rule the said executive order was
promulgated within the period given.
As to the first ground, the rule is that so long as the Legislature "lays down a
policy and a standard is established by the statute" there is no undue
delegation. (11 Am. Jur. 957). Republic Act No. 51 in authorizing the
President of the Philippines, among others, to make reforms and changes in
government-controlled corporations, lays down a standard and policy that
the purpose shall be to meet the exigencies attendant upon the
establishment of the free and independent government of the Philippines
and to promote simplicity, economy and efficiency in their operations. The
standard was set and the policy fixed. The President had to carry the
mandate. This he did by promulgating the executive order in question which,
tested by the rule above cited, does not constitute an undue delegation of
legislative power.
It is also contended that the quarters allowance is not compensation and so
the granting of it to the petitioner by the NAFCO board of directors does not
contravene the provisions of the NAFCO charter that the salary of the
chairman of said board who is also to be general manager shall not exceed
P15,000 per anum. But regardless of whether quarters allowance should be
considered as compensation or not, the resolution of the board of the
directors authorizing payment thereof to the petitioner cannot be given
effect since it was disapproved by the Control Committee in the exercise of
powers granted to it by Executive Order No. 93. And in any event,
petitioner's contention that quarters allowance is not compensation, a
proposition on which American authorities appear divided, cannot be
insisted on behalf of officers and employees working for the Government of
the Philippines and its Instrumentalities, including, naturally, governmentcontrolled corporations. This is so because Executive Order No. 332 of 1941,
which prohibits the payment of additional compensation to those working for
the Government and its Instrumentalities, including government-controlled
corporations, was in 1945 amended by Executive Order No. 77 by expressly
exempting from the prohibition the payment of quarters allowance "in favor
of local government officials and employees entitled to this under existing
law." The amendment is a clear indication that quarters allowance was
meant to be included in the term "additional compensation", for otherwise
the amendment would not have expressly excepted it from the prohibition.
This being so, we hold that, for the purpose of the executive order just
mentioned, quarters allowance is considered additional compensation and,
therefore, prohibited.
In view of the foregoing, the petition for review is dismissed, with costs.
Paras, C.J., Feria, Pablo, Bengzon, Tuason, Montemayor and Bautista Angelo,
JJ., concur.
exercise of the paramount police power of the state. Said Act, by virtue of
which the rules and regulations complained of were promulgated, aims to
promote safe transit upon and avoid obstructions on national roads, in the
interest and convenience of the public. In enacting said law, therefore, the
National Assembly was prompted by considerations of public convenience
and welfare. It was inspired by a desire to relieve congestion of traffic, which
is, to say the least, a menace to public safety. Public welfare, then, lies at the
bottom of the enactment of said law, and the state in order to promote the
general welfare may interfere with personal liberty, with property, and with
business and occupations. Persons and property may be subjected to all
kinds of restraints and burdens, in order to secure the general comfort,
health, and prosperity of the state (U.S. v. Gomer Jesus, 31 Phil., 218). To this
fundamental aim of our Government the rights of the individual are
subordinated. Liberty is a blessing without which life is a misery, but liberty
should not be made to prevail over authority because then society will fall
into anarchy. Neither should authority be made to prevail over liberty
because then the individual will fall into slavery. The citizen should achieve
the required balance of liberty and authority in his mind through education
and, personal discipline, so that there may be established the resultant
equilibrium, which means peace and order and happiness for all. The
moment greater authority is conferred upon the government, logically so
much is withdrawn from the residuum of liberty which resides in the people.
The paradox lies in the fact that the apparent curtailment of liberty is
precisely the very means of insuring its preservation.
3. ID.; ID.; SOCIAL JUSTICE. Social justice is "neither communism, nor
despotism, nor atomism, nor anarchy," but the humanization of laws and the
equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated.
Social justice means the promotion of the welfare of all the people, the
adoption by the Government of measures calculated to insure economic
stability of all the competent elements of society, through the maintenance
of a proper economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the adoption of
measures legally justifiable, or extra-constitutionally, through the exercise of
powers underlying the existence of all governments on the time-honored
principle of salus populi est suprema lex. Social justice, therefore, must be
founded on the recognition of the necessity of interdependence among
divers and diverse units of a society and of the protection that should be
equally and evenly extended to all groups as a combined force in our social
and economic life, consistent with the fundamental and paramount objective
of the state of promoting the health, comfort, and quiet of all persons, and of
bringing about "the greatest good to the greatest number."
DECISION
LAUREL, J.:
make the law, which necessarily involves a discretion as to what it shall be,
and conferring an authority or discretion as to its execution, to be exercised
under and in pursuance of the law. The first cannot be done; to the latter no
valid objection can be made. (Cincinnati, W. & Z. R. Co. v. Commrs. Clinton
County, 1 Ohio St., 88.) Discretion, as held by Chief Justice Marshall in
Wayman v. Southard (10 Wheat., 1) may be committed by the Legislature to
an executive department or official. The Legislature may make decisions of
executive departments or subordinate officials thereof, to whom it has
committed the execution of certain acts, final on questions of fact. (U.S. v.
Kinkead, 248 Fed., 141.) The growing tendency in the decisions is to give
prominence to the necessity of the case."cralaw virtua1aw library
Section
1
of
Commonwealth
follows:jgc:chanrobles.com.ph
Act
No.
548
reads
as
"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads
and streets designated as national roads by acts of the National Assembly or
by executive orders of the President of the Philippines, the Director of Public
Works, with the approval of the Secretary of Public Works and
Communications, shall promulgate the necessary rules and regulations to
regulate and control the use of and traffic on such roads and streets. Such
rules and regulations, with the approval of the President, may contain
provisions controlling or regulating the construction of buildings or other
structures within a reasonable distance from along the national roads. Such
roads may be temporarily closed to any or all classes of traffic by the
Director of Public Works and his duly authorized representatives whenever
the condition of the road or the traffic thereon makes such action necessary
or advisable in the public convenience and interest, or for a specified period,
with
the
approval
of
the
Secretary
of
Public
Works
and
Communications."cralaw virtua1aw library
The above provisions of law do not confer legislative power upon the
Director of Public Works and the Secretary of Public Works and
Communications. The authority therein conferred upon them and under
which they promulgated the rules and regulations now complained of is not
to determine what public policy demands but merely to carry out the
legislative policy laid down by the National Assembly in said Act, to wit, "to
promote safe transit upon and avoid obstructions on, roads and streets
designated as national roads by acts of the National Assembly or by
executive orders of the President of the Philippines" and to close them
temporarily to any or all classes of traffic "whenever the condition of the
road or the traffic makes such action necessary or advisable in the public
convenience and interest." The delegated power, if at all, therefore, is not
the determination of what the law shall be, but merely the ascertainment of
the facts and circumstances upon which the application of said law is to be
predicated. To promulgate rules and regulations on the use of national roads
and to determine when and how long a national road should be closed to
traffic, in view of the condition of the road or the traffic thereon and the
requirements of public convenience and interest, is an administrative
function which cannot be directly discharged by the National Assembly. It
must depend on the discretion of some other government official to whom is
confided the duty of determining whether the proper occasion exists for
executing the law. But it cannot be said that the exercise of such discretion
is the making of the law. As was said in Lockes Appeal (72 Pa. 491): "To
assert that a law is less than a law, because it is made to depend on a future
event or act, is to rob the Legislature of the power to act wisely for the
public welfare whenever a law is passed relating to a state of affairs not yet
developed, or to things future and impossible to fully know." The proper
distinction the court said was this: "The Legislature cannot delegate its
power to make the law; but it can make a law to delegate a power to
determine some fact or state of things upon which the law makes, or intends
to make, its own action depend. To deny this would be to stop the wheels of
government. There are many things upon which wise and useful legislation
must depend which cannot be known to the law-making power, and, must,
therefore, be a subject of inquiry and determination outside of the halls of
legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmea, G.R. Nos. 46076 and 46077,
promulgated June 12, 1939, and in Pangasinan Transportation v. The Public
Service Commission, G.R. No. 47065, promulgated June 26, 1940, this Court
had occasion to observe that the principle of separation of powers has been
made to adapt itself to the complexities of modern governments, giving rise
to the adoption, within certain limits, of the principle of "subordinate
legislation," not only in the United States and England but in practically all
modern governments. Accordingly, with the growing complexity of modern
life, the multiplication of the subjects of governmental regulations, and the
increased difficulty of administering the laws, the rigidity of the theory of
separation of governmental powers has, to a large extent, been relaxed by
permitting the delegation of greater powers by the legislative and vesting a
larger amount of discretion in administrative and executive officials, not only
in the execution of the laws, but also in the promulgation of certain rules and
regulations calculated to promote public interest.
The petitioner further contends that the rules and regulations promulgated
by the respondents pursuant to the provisions of Commonwealth Act No. 548
constitute an unlawful interference with legitimate business or trade and
abridge the right to personal liberty and freedom of locomotion.
Commonwealth Act No. 548 was passed by the National Assembly in the
exercise of the paramount police power of the state.
Said Act, by virtue of which the rules and regulations complained of were
promulgated, aims to promote safe transit upon and avoid obstructions on
national roads, in the interest and convenience of the public. In enacting
said law, therefore, the National Assembly was prompted by considerations
of public convenience and welfare. It was inspired by a desire to relieve
congestion of traffic. which is, to say the least, a menace to public safety.
Public welfare, then, lies at the bottom of the enactment of said law, and the
state in order to promote the general welfare may interfere with personal
liberty, with property, and with business and occupations. Persons and
property may be subjected to all kinds of restraints and burdens, in order to
secure the general comfort, health, and prosperity of the state (U.S. v.
Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the
comfort, and quiet of all persons, and of bringing about "the greatest good
to the greatest number."cralaw virtua1aw library
In view of the foregoing, the writ of prohibition prayed for is hereby denied,
with costs against the petitioner. So ordered.
Avancea, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.
which the proposed barrio is situated." Petitioner argues, accordingly: "If the
President, under this new law, cannot even create a barrio, can he create a
municipality which is composed of several barrios, since barrios are units of
municipalities?"
Respondent answers in the affirmative, upon the theory that a new
municipality can be created without creating new barrios, such as, by
placing old barrios under the jurisdiction of the new municipality. This theory
overlooks, however, the main import of the petitioner's argument, which is
that the statutory denial of the presidential authority to create a new barrio
implies a negation of the bigger power to create municipalities, each of
which consists of several barrios. The cogency and force of this argument is
too obvious to be denied or even questioned. Founded upon logic and
experience, it cannot be offset except by a clear manifestation of the intent
of Congress to the contrary, and no such manifestation, subsequent to the
passage of Republic Act No. 2379, has been brought to our attention.
Moreover, section 68 of the Revised Administrative Code, upon which the
disputed executive orders are based, provides:
The (Governor-General) President of the Philippines may by executive order
define the boundary, or boundaries, of any province, subprovince,
municipality, [township] municipal district, or other political subdivision, and
increase or diminish the territory comprised therein, may divide any
province into one or more subprovinces, separate any political division other
than a province, into such portions as may be required, merge any of such
subdivisions or portions with another, name any new subdivision so created,
and may change the seat of government within any subdivision to such
place therein as the public welfare may require: Provided, That the
authorization of the (Philippine Legislature) Congress of the Philippines shall
first be obtained whenever the boundary of any province or subprovince is
to be defined or any province is to be divided into one or more subprovinces.
When action by the (Governor-General) President of the Philippines in
accordance herewith makes necessary a change of the territory under the
jurisdiction of any administrative officer or any judicial officer, the (GovernorGeneral) President of the Philippines, with the recommendation and advice
of the head of the Department having executive control of such officer, shall
redistrict the territory of the several officers affected and assign such
officers to the new districts so formed.
Upon the changing of the limits of political divisions in pursuance of the
foregoing authority, an equitable distribution of the funds and obligations of
the divisions thereby affected shall be made in such manner as may be
recommended by the (Insular Auditor) Auditor General and approved by the
(Governor-General) President of the Philippines.
Respondent alleges that the power of the President to create municipalities
under this section does not amount to an undue delegation of legislative
power, relying upon Municipality of Cardona vs. Municipality of Binagonan
(36 Phil. 547), which, he claims, has settled it. Such claim is untenable, for
said case involved, not the creation of a new municipality, but a mere
transfer of territory from an already existing municipality (Cardona) to
another municipality (Binagonan), likewise, existing at the time of and prior
to said transfer (See Gov't of the P.I. ex rel. Municipality of Cardona vs.
Municipality, of Binagonan [34 Phil. 518, 519-5201) in consequence of
the fixing and definition, pursuant to Act No. 1748, of the common
exercised; whereas the last part of the first sentence of said section referred
exclusively to the place to which the seat of the government was to be
transferred.
At any rate, the conclusion would be the same, insofar as the case at bar is
concerned, even if we assumed that the phrase "as the public welfare may
require," in said Section 68, qualifies all other clauses thereof. It is true that
in Calalang vs. Williams (70 Phil. 726) and People vs. Rosenthal (68 Phil.
328), this Court had upheld "public welfare" and "public interest,"
respectively, as sufficient standards for a valid delegation of the authority to
execute the law. But, the doctrine laid down in these cases as all judicial
pronouncements must be construed in relation to the specific facts and
issues involved therein, outside of which they do not constitute precedents
and have no binding effect. 4 The law construed in the Calalang case
conferred upon the Director of Public Works, with the approval of the
Secretary of Public Works and Communications, the power to issue rules and
regulations topromote safe transit upon national roads and streets. Upon the
other hand, the Rosenthal case referred to the authority of the Insular
Treasurer, under Act No. 2581, to issue and cancel certificates or permits for
the sale ofspeculative securities. Both cases involved grants to
administrative officers of powers related to the exercise of their
administrative functions, calling for the determination of questions of fact.
Such is not the nature of the powers dealt with in section 68. As above
indicated, the creation of municipalities, is not an administrative function,
but one which is essentially and eminently legislative in character. The
question of whether or not "public interest" demands the exercise of such
power is not one of fact. it is "purely a legislativequestion "(Carolina-Virginia
Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310-313, 315318), or apolitical question (Udall vs. Severn, 79 P. 2d. 347-349). As the
Supreme Court of Wisconsin has aptly characterized it, "the question as to
whether incorporation is for the best interest of the community in any case
is emphatically a question of public policy and statecraft" (In re Village of
North Milwaukee, 67 N.W. 1033, 1035-1037).
For this reason, courts of justice have annulled, as constituting undue
delegation of legislative powers, state laws granting the judicial department,
the power to determine whether certain territories should be annexed to a
particular municipality (Udall vs. Severn, supra, 258-359); or vesting in a
Commission the right to determine the plan and frame of government of
proposed villages and what functions shall be exercised by the same,
although the powers and functions of the village are specifically limited by
statute (In re Municipal Charters, 86 Atl. 307-308); or conferring upon courts
the authority to declare a given town or village incorporated, and designate
its metes and bounds, upon petition of a majority of the taxable inhabitants
thereof, setting forth the area desired to be included in such village (Territory
ex rel Kelly vs. Stewart, 23 Pac. 405-409); or authorizing the territory of a
town, containing a given area and population, to be incorporated as a town,
on certain steps being taken by the inhabitants thereof and on certain
determination by a court and subsequent vote of the inhabitants in favor
thereof, insofar as the court is allowed to determine whether the lands
embraced in the petition "ought justly" to be included in the village, and
whether the interest of the inhabitants will be promoted by such
incorporation, and to enlarge and diminish the boundaries of the proposed
village "as justice may require" (In re Villages of North Milwaukee, 67 N.W.
1035-1037); or creating a Municipal Board of Control which shall determine
whether or not the laying out, construction or operation of a toll road is in
the "public interest" and whether the requirements of the law had been
complied with, in which case the board shall enter an order creating a
municipal corporation and fixing the name of the same (Carolina-Virginia
Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310).
Insofar as the validity of a delegation of power by Congress to the President
is concerned, the case of Schechter Poultry Corporation vs. U.S. (79 L. Ed.
1570) is quite relevant to the one at bar. The Schechter case involved the
constitutionality of Section 3 of the National Industrial Recovery Act
authorizing the President of the United States to approve "codes of fair
competition" submitted to him by one or more trade or industrial
associations or corporations which "impose no inequitable restrictions on
admission to membership therein and are truly representative," provided
that such codes are not designed "to promote monopolies or to eliminate or
oppress small enterprises and will not operate to discriminate against them,
and will tend to effectuate the policy" of said Act. The Federal Supreme
Court held:
To summarize and conclude upon this point: Sec. 3 of the Recovery Act is
without precedent. It supplies no standards for any trade, industry or
activity. It does not undertake to prescribe rules of conduct to be applied to
particular states of fact determined by appropriate administrative procedure.
Instead of prescribing rules of conduct, it authorizes the making of codes to
prescribe them. For that legislative undertaking, Sec. 3 sets up no standards,
aside from the statement of the general aims of rehabilitation, correction
and expansion described in Sec. 1. In view of the scope of that broad
declaration, and of the nature of the few restrictions that are imposed, the
discretion of the President in approving or prescribing codes, and thus
enacting laws for the government of trade and industry throughout the
country, is virtually unfettered. We think that the code making authority thus
conferred is an unconstitutional delegation of legislative power.
If the term "unfair competition" is so broad as to vest in the President a
discretion that is "virtually unfettered." and, consequently, tantamount to a
delegation of legislative power, it is obvious that "public welfare," which has
even a broader connotation, leads to the same result. In fact, if the validity
of the delegation of powers made in Section 68 were upheld, there would no
longer be any legal impediment to a statutory grant of authority to the
President to do anything which, in his opinion, may be required by public
welfare or public interest. Such grant of authority would be a virtual
abdication of the powers of Congress in favor of the Executive, and would
bring about a total collapse of the democratic system established by our
Constitution, which it is the special duty and privilege of this Court to
uphold.
It may not be amiss to note that the executive orders in question were
issued after the legislative bills for the creation of the municipalities
involved in this case had failed to pass Congress. A better proof of the fact
that the issuance of said executive orders entails the exercise of purely
legislative functions can hardly be given.
Again, Section 10 (1) of Article VII of our fundamental law ordains:
The President shall have control of all the executive departments, bureaus,
From September 4, 1964 to October 29, 1964 the President of the Philippines
issued executive orders to create thirty-three municipalities pursuant to
Section 68 of the Revised Administrative Code. Public funds thereby stood to
be disbursed in implementation of said executive orders.
Suing as private citizen and taxpayer, Vice President Emmanuel Pelaez filed
in this Court a petition for prohibition with preliminary injunction against the
Auditor General. It seeks to restrain the respondent or any person acting in
his behalf, from passing in audit any expenditure of public funds in
implementation of the executive orders aforementioned.
Petitioner contends that the President has no power to create a municipality
by executive order. It is argued that Section 68 of the Revised Administrative
Code of 1917, so far as it purports to grant any such power, is invalid or, at
the least, already repealed, in light of the Philippine Constitution and
Republic Act 2370 (The Barrio Charter).
Section 68 is again reproduced hereunder for convenience:
SEC. 68. General authority of [Governor-General) President of the Philippines
to fix boundaries and make new subdivisions. The [Governor-General]
President of the Philippines may by executive order define the boundary, or
boundaries, of any province, subprovince, municipality, [township] municipal
district, or other political subdivision, and increase or diminish the territory
comprised therein, may divide any province into one or more subprovinces,
separate any political division other than a province, into such portions as
may be required, merge any of such subdivisions or portions with another,
name any new subdivision so created, and may change the seat of
government within any subdivision to such place therein as the public
welfare may require: Provided, That the authorization of the [Philippine
Legislature] Congress of the Philippines shall first be obtained whenever the
boundary of any province or subprovince is to be defined or any province is
to be divided into one or more subprovinces. When action by the [GovernorGeneral] President of the Philippines in accordance herewith makes
necessary a change of the territory under the jurisdiction of any
administrative officer or any judicial officer, the [Governor-General]
President of the Philippines, with the recommendation and advice of the
head of the Department having executive control of such officer, shall
redistrict the territory of the several officers to the new districts so formed.
Upon the changing of the limits of political divisions in pursuance of the
foregoing authority, an equitable distribution of the funds and obligations of
the divisions thereby affected shall be made in such manner as may be
recommended by the [Insular Auditor] Auditor General and approved by the
[Governor-General] President of the Philippines.
From such working I believe that power to create a municipality is included:
to "separate any political division other than a province, into such portions
as may be required, merge any such subdivisions or portions with another,
name any new subdivision so created." The issue, however, is whether the
legislature can validly delegate to the Executive such power.
The power to create a municipality is legislative in character. American
authorities have therefore favored the view that it cannot be delegated; that
what is delegable is not the power to create municipalities but only the
power to determine the existence of facts under which creation of a
municipality will result (37 Am. Jur. 628).
The test is said to lie in whether the statute allows any discretion on the
affairs. Such aim is the policy now embodied in Section 10 (1), Article VII of
the Constitution (Rodriguez v. Montinola, 50 O.G. 4820).
It is the evident decree of the Constitution, therefore, that the President shall
have no power of control over local governments. Accordingly, Congress
cannot by law grant him such power (Hebron v. Reyes, supra). And any such
power formerly granted under the Jones Law thereby became unavoidably
inconsistent with the Philippine Constitution.
It remains to examine the relation of the power to create and the power to
control local governments. Said relationship has already been passed upon
by this Court in Hebron v. Reyes, supra. In said case, it was ruled that the
power to control is an incident of the power to create or abolish
municipalities. Respondent's view, therefore, that creating municipalities and
controlling their local governments are "two worlds apart," is untenable. And
since as stated, the power to control local governments can no longer be
conferred on or exercised by the President, it follows a fortiori that the power
to create them, all the more cannot be so conferred or exercised.
I am compelled to conclude, therefore, that Section 10 (1), Article VII of the
Constitution has repealed Section 68 of the Revised Administrative Code as
far as the latter empowers the President to create local governments. Repeal
by the Constitution of prior statutes inconsistent with it has already been
sustained in De los Santos v. MaIlare, 87 Phil. 289. And it was there held that
such repeal differs from a declaration of unconstitutionality of a posterior
legislation, so much so that only a majority vote of the Court is needed to
sustain a finding of repeal.
Since the Constitution repealed Section 68 as far back as 1935, it is
academic to ask whether Republic Act 2370 likewise has provisions in
conflict with Section 68 so as to repeal it. Suffice it to state, at any rate, that
statutory prohibition on the President from creating a barrio does not, in my
opinion, warrant the inference of statutory prohibition for creating a
municipality. For although municipalities consist of barrios, there is nothing
in the statute that would preclude creation of new municipalities out of preexisting barrios.
It is not contrary to the logic of local autonomy to be able to create larger
political units and unable to create smaller ones. For as long ago observed in
President McKinley's Instructions to the Second Philippine Commission,
greater autonomy is to be imparted to the smaller of the two political units.
The smaller the unit of local government, the lesser is the need for the
national government's intervention in its political affairs. Furthermore, for
practical reasons, local autonomy cannot be given from the top downwards.
The national government, in such a case, could still exercise power over the
supposedly autonomous unit, e.g., municipalities, by exercising it over the
smaller units that comprise them, e.g., the barrios. A realistic program of
decentralization therefore calls for autonomy from the bottom upwards, so
that it is not surprising for Congress to deny the national government some
power over barrios without denying it over municipalities. For this reason, I
disagree with the majority view that because the President could not create
a barrio under Republic Act 2370, a fortiori he cannot create a municipality.
It is my view, therefore, that the Constitution, and not Republic Act 2370,
repealed Section 68 of the Revised Administrative Code's provision giving
the President authority to create local governments. And for this reason I
agree with the ruling in the majority opinion that the executive orders in
EN BANC
ABAKADA GURO PARTY LIST (Formerly
AASJAS) OFFICERS SAMSON S. ALCANTARA
and ED VINCENT S. ALBANO,
Petitioners,
- versus -
TINGA,
CHICO-NAZARIO, and
GARCIA, JJ.
THE HONORABLE EXECUTIVE SECRETARY
EDUARDO ERMITA; HONORABLE SECRETARY
OF THE DEPARTMENT OF FINANCE CESAR
PURISIMA; and HONORABLE COMMISSIONER
OF
INTERNAL
REVENUE
GUILLERMO
PARAYNO, JR.,
Respondents.
x-------------------------x
AQUILINO Q. PIMENTEL, JR., LUISA P.
EJERCITO-ESTRADA, JINGGOY E. ESTRADA,
PANFILO M. LACSON, ALFREDO S. LIM,
JAMBY A.S. MADRIGAL, AND SERGIO R.
OSMEA III,
Petitioners,
x-------------------------x
FRANCIS JOSEPH G. ESCUDERO, VINCENT
CRISOLOGO,
EMMANUEL
JOEL
J.
VILLANUEVA, RODOLFO G. PLAZA, DARLENE
ANTONINO-CUSTODIO,
OSCAR
G.
MALAPITAN, BENJAMIN C. AGARAO, JR. JUAN
EDGARDO M. ANGARA, JUSTIN MARC SB.
CHIPECO, FLORENCIO G. NOEL, MUJIV S.
HATAMAN, RENATO B. MAGTUBO, JOSEPH A.
SANTIAGO, TEOFISTO DL. GUINGONA III, RUY
ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI and
TEODORO A. CASIO,
Petitioners,
- versus -
wider coverage for full value-added tax benefits these are the reasons why
x-------------------------x
Republic Act No. 9337 (R.A. No. 9337) [1] was enacted. Reasons, the wisdom
of which, the Court even with its extensive constitutional power of review,
cannot probe. The petitioners in these cases, however, question not only the
passage.
Every law enjoys in its favor the presumption of constitutionality.
- versus -
the invalidity of the law. Hence, R.A. No. 9337 is not unconstitutional.
LEGISLATIVE HISTORY
Promulgated:
September 1, 2005
Respondents.
x----------------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:
January 7, 2005 for immediate enactment. On January 27, 2005, the House
2005, and with the House of Representatives agreeing thereto the next day,
House Bill No. 3705[3] on the other hand, substituted House Bill
On May 23, 2005, the enrolled copy of the consolidated House and
No. 3105 introduced by Rep. Salacnib F. Baterina, and House Bill No. 3381
Senate version was transmitted to the President, who signed the same into
introduced by Rep. Jacinto V. Paras. Its mother bill is House Bill No. 3555. The
July 1, 2005 is the effectivity date of R.A. No. 9337. [5] When said date
came, the Court issued a temporary restraining order, effective immediately
and continuing until further orders, enjoining respondents from enforcing
long,
the
Conference
Committee
on
the
Disagreeing
Provisions of House Bill No. 3555, House Bill No. 3705, and Senate Bill No.
1950, after having met and discussed in full free and conference,
recommended the approval of its report, which the Senate did on May 10,
Oral arguments were held on July 14, 2005. Significantly, during the
hearing, the Court speaking through Mr. Justice Artemio V. Panganiban,
voiced the rationale for its issuance of the temporary restraining order on
July 1, 2005, to wit:
J. PANGANIBAN : . . . But before I go into the details of your
presentation, let me just tell you a
little background. You know when the
law took effect on July 1, 2005, the
Court issued a TRO at about 5 oclock
in the afternoon. But before that,
there was a lot of complaints aired
on television and on radio. Some
people in a gas station were
complaining that the gas prices went
up by 10%. Some people were
complaining that their electric bill
will go up by 10%. Other times
people riding in domestic air carrier
were complaining that the prices
that theyll have to pay would have
to go up by 10%. While all that was
being aired, per your presentation
and per our own understanding of
the law, thats not true. Its not true
that the e-vat law necessarily
increased prices by 10% uniformly
isnt it?
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party
List, et al., filed a petition for prohibition on May 27, 2005. They question the
President to increase the VAT rate to 12%, on the ground that it amounts to
106, 107 and 108, respectively, of the National Internal Revenue Code
increase in the VAT rate to 12% contingent on any of the two conditions
being satisfied violates the due process clause embodied in Article III,
imposes a 10% VAT on sale of services and use or lease of properties. These
burden on the people, in that: (1) the 12% increase is ambiguous because it
does not state if the rate would be returned to the original 10% if the
conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as
12%, effective January 1, 2006, after any of the following conditions have
the people are unsure of the applicable VAT rate from year to year; and (3)
progressive, violative of Article VI, Section 28(1) of the Constitution, and that
it is the smaller businesses with higher input tax to output tax ratio that will
suffer the consequences thereof for it wipes out whatever meager margins
the petitioners make.
G.R. No. 168463
also
believe
that
these
provisions
violate
the
grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue
delegation of legislative power, in violation of Article
VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without
jurisdiction in deleting the no pass on provisions
present in Senate Bill No. 1950 and House Bill No.
3705; and
3) Insertion by the Bicameral Conference Committee of
Sections 27, 28, 34, 116, 117, 119, 121, 125, [7] 148,
151, 236, 237 and 288, which were present in
Senate Bill No. 1950, violates Article VI, Section
24(1) of the Constitution, which provides that all
appropriation, revenue or tariff bills shall originate
exclusively in the House of Representatives
G.R. No. 168730
further claims that allowing these establishments to pass on the tax to the
taxation is the core revenue measure that will tilt the balance towards a
Constitution.
ISSUES
RESPONDENTS COMMENT
The Court defined the issues, as follows:
The Office of the Solicitor General (OSG) filed a Comment in behalf
of respondents. Preliminarily, respondents contend that R.A. No. 9337 enjoys
the presumption of constitutionality and petitioners failed to cast doubt on
its validity.
Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA
630 (1994), respondents argue that the procedural issues raised by
petitioners, i.e., legality of the bicameral proceedings, exclusive origination
of revenue measures and the power of the Senate concomitant thereto,
have already been settled. With regard to the issue of undue delegation of
legislative power to the President, respondents contend that the law is
complete and leaves no discretion to the President but to increase the rate
to 12% once any of the two conditions provided therein arise.
PROCEDURAL ISSUE
Whether R.A. No. 9337
provisions of the Constitution:
violates
the
following
Reform Act of 1997,[18] and finally, the presently beleaguered R.A. No. 9337,
indirect tax on expenditure, the seller of goods or services may pass on the
amount of tax paid to the buyer, [9] with the seller acting merely as a tax
collector.[10] The burden of VAT is intended to fall on the immediate buyers
and ultimately, the end-consumers.
I.
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
system was
subsequently modified, and a mixture of the cost deduction method and tax
credit method was used to determine the value-added tax payable. [13] Under
the tax credit method, an entity can credit against or subtract from the VAT
charged on its sales or outputs the VAT paid on its purchases, inputs and
imports.[14]
It was only in 1987, when President Corazon C. Aquino issued
Executive Order No. 273, that the VAT system was rationalized by imposing
a multi-stage tax rate of 0% or 10% on all sales using the tax credit method.
[15]
Conference Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of
...
...
The Chairman of the House panel may be
interpellated on the Conference Committee Report prior to
the voting thereon. The House shall vote on the Conference
Committee Report in the same manner and procedure as it
votes on a bill on third and final reading.
of
both
houses
creating
the
bicameral
conference
committee
are
go behind the enrolled copy of the bill. Assailed in said case was Congresss
creation of two sets of bicameral conference committees, the lack of records
of said committees proceedings, the alleged violation of said committees of
the rules of both houses, and the disappearance or deletion of one of the
provisions in the compromise bill submitted by the bicameral conference
committee. It was argued that such irregularities in the passage of the law
nullified R.A. No. 9006, or the Fair Election Act.
where
petitioners
allege
irregularities
committed
by
the
conference
petroleum products
sellers, respectively
[24]
Provides that the input tax credit for capital goods on which
a VAT has been paid shall be equally distributed over 5
years or the depreciable life of such capital goods; the input
tax credit for goods and services other than capital goods
shall not exceed 5% of the total amount of such goods and
services; and for persons engaged in retail trading of goods,
the allowable input tax credit shall not exceed 11% of the
total amount of goods purchased.
No similar provision
No similar provision
No similar provision
No. 1950 on the other, reveals that there were indeed disagreements. As
pointed out in the petitions, said disagreements were as follows:
House Bill No. 3555
The disagreements between the provisions in the House bills and the
House Bill No.3705
Senate bill were with regard to (1) what rate of VAT is to be imposed; (2)
whether only the VAT imposed on electricity generation, transmission and
distribution companies should not be passed on to consumers, as proposed
in VAT
the in
Senate
bill,
bothof the
VATor imposed
onand
electricity generation,
Provides for 12%
general
on or
sales
goods
properties
reduced rates for sale of certain locally manufactured goods and
transmission and distribution companies and the VAT imposed on sale of
petroleum products and raw materials to be used in the manufacture
thereof (amending
Sec. 106products
of NIRC);
12% VAT
of consumers,
goods
petroleum
should
not on
be importation
passed on to
as proposed in
and reduced rates for certain imported products including petroleum
products (amending
Sec. 107
NIRC);
and 12%
VATinput
on sale
services
the House
bill;of(3)
in what
manner
taxofcredits
should be limited; (4)
and use or lease of properties and a reduced rate for certain services
including power and
generation
(amending
108 of NIRC)
whether
the NIRCSec.
provisions
on corporate income taxes, percentage,
franchise and excise taxes should be amended.
There being differences and/or disagreements on the foregoing
No similar provision
provisions
of the
Housegeneration
and Senate
bills,
Conference
Provides that the
VAT imposed
on power
and on
the the
sale Bicameral
of
following changes:
should be limited or not, the Bicameral Conference Committee decided to
1. With regard to the disagreement on the rate of VAT to be imposed,
it would appear from the Conference Committee Report that the Bicameral
input tax that may be credited against the output tax, although it crafted its
Conference Committee tried to bridge the gap in the difference between the
own language as to the amount of the limitation on input tax credits and the
10% VAT rate proposed by the Senate, and the various rates with 12% as the
the present 10% VAT rate would be retained until certain conditions arise,
i.e., the value-added tax collection as a percentage of gross domestic
product (GDP) of the previous year exceeds 2 4/5%, or National Government
deficit as a percentage of GDP of the previous year exceeds 1%, when the
President, upon recommendation of the Secretary of Finance shall raise the
rate of VAT to 12% effective January 1, 2006.
income
tax,
franchise,
percentage
and excise
taxes,
the
adopted the provisions found in Senate Bill No. 1950, with some changes as
The no pass-on provision was deleted altogether. In the transcripts
the
provisions
of
both
the
Rules
of
the
House
of
2005, Sen. Ralph Recto, Chairman of the Senate Panel, explained the reason
for deleting the no pass-on provision in this wise:
be carried into the final form of the bill, and/or (c) try to arrive at a
House bill and the Senate bill. The term settle is synonymous to reconcile
and harmonize.[25] To reconcile or harmonize disagreeing provisions, the
Bicameral Conference Committee may then (a) adopt the specific provisions
of either the House bill or Senate bill, (b) decide that neither provisions in
pass-on provision never really enjoyed the support of either House. [27]
With regard to the amount of input tax to be credited against output
percentage rate of the limitation or cap on such input tax credit, but again,
reconcile and harmonize the disagreeing provisions for it did not inject any
idea or intent that is wholly foreign to the subject embraced by the original
within the intent of both houses to put a cap on input tax that may be
provisions.
credited against the output tax. From the inception of the subject revenue
bill in the House of Representatives, one of the major objectives was to plug
chamber
supplied)
is
thus
without
any
basis.[31]
(Emphasis
committee is allowed to add or delete provisions in the House bill and the
Senate bill after these had passed three readings is in effect a circumvention
Philippine Judges Association vs. Prado [29] and Tolentino vs. Secretary of
of the no amendment rule (Sec. 26 (2), Art. VI of the 1987 Constitution), fails
to convince the Court to deviate from its ruling in the Tolentino case that:
giving
said
conference
committee
ample
latitude
for
compromising
differences between the Senate and the House. Thus, in the Tolentino case,
it was held that:
. . . it is within the power of a conference committee
to include in its report an entirely new provision that is not
found either in the House bill or in the Senate bill. If the
committee can propose an amendment consisting of one or
two provisions, there is no reason why it cannot propose
several provisions, collectively considered as an amendment
in the nature of a substitute, so long as such amendment is
germane to the subject of the bills before the committee.
After all, its report was not final but needed the approval of
both houses of Congress to become valid as an act of the
legislative department. The charge that in this case the
Conference Committee acted as a third legislative
before said bill is transmitted to the other house for its concurrence
or amendment. Verily, to construe said provision in a way as to proscribe
any further changes to a bill after one house has voted on it would lead to
absurdity as this would mean that the other house of Congress would be
deprived of its constitutional power to amend or introduce changes to said
bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be taken to mean
that
the
introduction
by
the
Bicameral
Conference
Committee
of
2
7
2
8
(
A
)
(
1
)
Inter-corporate Dividends
8
(
B
)
(
1
)
3
4
(
B
)
(
1
)
Inter-corporate Dividends
1
1
6
1
1
7
1
1
9
Tax on franchises
1
2
1
Tax on banks
Intermediaries
1
4
8
1
5
1
2
3
6
Registration requirements
2
3
7
2
8
8
and
Non-Bank
Financial
3555 proposed amendments only regarding Sections 106, 107, 108, 110 and
114 of the NIRC, while House Bill No. 3705 proposed amendments only to
Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, the other
sections of the NIRC which the Senate amended but which amendments
were not found in the House bills are not intended to be amended by the
House of Representatives. Hence, they argue that since the proposed
amendments did not originate from the House, such amendments are a
violation of Article VI, Section 24 of the Constitution.
The argument does not hold water.
Article VI, Section 24 of the Constitution reads:
Sec. 24. All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the
House of Representatives but the Senate may propose or
concur with amendments.
In the present cases, petitioners admit that it was indeed House Bill
Nos. 3555 and 3705 that initiated the move for amending provisions of the
NIRC dealing mainly with the value-added tax. Upon transmittal of said
House bills to the Senate, the Senate came out with Senate Bill No. 1950
proposing amendments not only to NIRC provisions on the value-added tax
but also amendments to NIRC provisions on other kinds of taxes. Is the
introduction by the Senate of provisions not dealing directly with the valueadded tax, which is the only kind of tax being amended in the House bills,
still within the purview of the constitutional provision authorizing the Senate
revenue bill.
Notably therefore, the main purpose of the bills emanating from the
Furthermore, the amendments introduced by the Senate to the NIRC
provisions that had not been touched in the House bills are still in
furtherance of the intent of the House in initiating the subject revenue bills.
The Explanatory Note of House Bill No. 1468, the very first House bill
introduced on the floor, which was later substituted by House Bill No. 3555,
stated:
Rep. Eric D. Singson, in his sponsorship speech for House Bill No.
3555, declared that:
In the budget message of our President in the year
can introduce amendments within the purposes of those bills. It can provide
for ways that would soften the impact of the VAT measure on the consumer,
i.e., by distributing the burden across all sectors instead of putting it entirely
on the shoulders of the consumers. The sponsorship speech of Sen. Ralph
Recto on why the provisions on income tax on corporation were included is
worth quoting:
All in all, the proposal of the Senate Committee on
Ways and Means will raise P64.3 billion in additional
revenues annually even while by mitigating prices of power,
services and petroleum products.
However, not all of this will be wrung out of VAT. In
fact, only P48.7 billion amount is from the VAT on twelve
goods and services. The rest of the tab P10.5 billion- will be
picked by corporations.
...
corporations are germane to the purpose of the house bills which is to raise
revenues for the government.
and excise taxes germane to the reforms to the VAT system, as these
SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107
and 108 of the NIRC, violate the following provisions of the Constitution:
as they would be paying the VAT in addition to these taxes. Thus, there is a
need to amend these sections to soften the impact of VAT. Again, in his
A.
of
transparency should dictate the actions of Congress and they should not
pass to the President the decision to impose taxes. They also argue that the
(i)
law also effectively nullified the Presidents power of control, which includes
the authority to set aside and nullify the acts of her subordinates like the
Secretary of Finance, by mandating the fixing of the tax rate by the
President upon the recommendation of the Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has ample powers
to cause, influence or create the conditions provided by the law to bring
exclusive power to tax because such delegation is not within the purview of
revolting the situation that the imposition of the 12% rate would be subject
They argue that the VAT is a tax levied on the sale, barter or
exchange of goods and properties as well as on the sale or exchange of
services, which cannot be included within the purview of tariffs under the
exempted delegation as the latter refers to customs duties, tolls or tribute
payable upon merchandise to the government and usually imposed on
will
make
his
recommendation.
They
claim,
nonetheless,
that
any
instructive.
They
insist
that
accountability,
responsibility
and
in matters falling within its own constitutionally allocated sphere. [37] A logical
non delegari potest which means what has been delegated, cannot be
that the delegation itself is valid. It is valid only if the law (a) is complete in
With respect to the Legislature, Section 1 of Article VI of the
implemented by the delegate;[41] and (b) fixes a standard the limits of which
are those which are strictly, or inherently and exclusively, legislative. Purely
which defines legislative policy, marks its limits, maps out its boundaries
legislative power, which can never be delegated, has been described as the
and specifies the public agency to apply it. It indicates the circumstances
under which the legislative command is to be effected. [43] Both tests are
delegate, who is not allowed to step into the shoes of the legislature and
[40]
...
The true distinction, says Judge Ranney, is
between the delegation of power to make the law,
which necessarily involves a discretion as to what it
shall be, and conferring an authority or discretion as
to its execution, to be exercised under and in
pursuance of the law. The first cannot be done; to the
latter no valid objection can be made.
...
It is contended, however, that a legislative act may
be made to the effect as law after it leaves the hands of the
legislature. It is true that laws may be made effective on
certain contingencies, as by proclamation of the executive or
the adoption by the people of a particular community. In
Wayman vs. Southard, the Supreme Court of the United
States ruled that the legislature may delegate a power not
legislative which it may itself rightfully exercise. The power
to ascertain facts is such a power which may be
delegated. There is nothing essentially legislative in
ascertaining the existence of facts or conditions as
the basis of the taking into effect of a law. That is a
mental process common to all branches of the
government.Notwithstanding the apparent tendency,
however, to relax the rule prohibiting delegation of
legislative authority on account of the complexity arising
from social and economic forces at work in this modern
industrial age, the orthodox pronouncement of Judge Cooley
in his work on Constitutional Limitations finds restatement in
Prof. Willoughby's treatise on the Constitution of the United
States in the following language speaking of declaration of
legislative power to administrative agencies: The principle
which permits the legislature to provide that the
administrative agent may determine when the
circumstances are such as require the application of a
law is defended upon the ground that at the time this
authority is granted, the rule of public policy, which is
the essence of the legislative act, is determined by
the legislature. In other words, the legislature, as it is
its duty to do, determines that, under given
circumstances, certain executive or administrative
action is to be taken, and that, under other
circumstances, different or no action at all is to be
taken. What is thus left to the administrative official
is not the legislative determination of what public
policy demands, but simply the ascertainment of
what the facts of the case require to be done
according to the terms of the law by which he is
and administration of the increase rate under the law is contingent. The
legislature has made the operation of the 12% rate effective January 1,
2006, contingent upon a specified fact or condition. It leaves the entire
[51]
every fact upon which it desires to base legislative action or that it make for
absence of discretion is the fact that the word shall is used in the common
proviso. The use of the word shall connotes a mandatory order. Its use in a
In the present case, the challenged section of R.A. No. 9337 is the
Pimentel, et al. that the word shall should be interpreted to mean may in
view of the phrase upon the recommendation of the Secretary of Finance.
Neither does the Court find persuasive the submission of petitioners
Escudero, et al. that any recommendation by the Secretary of Finance can
easily be brushed aside by the President since the former is a mere alter ego
of the latter.
When one speaks of the Secretary of Finance as the alter ego of the
agent of Congress and not of the President, the President cannot alter or
the assistant and agent of the Chief Executive. The multifarious executive
modify or nullify, or set aside the findings of the Secretary of Finance and to
through the executive departments, and the acts of the secretaries of such
departments,
such
as
the
Department
of
Finance,
performed
and
also argue that the 12% increase, dependent on any of the 2 conditions set
abdicate its functions or unduly delegate power when it describes what job
must be done, who must do it, and what is the scope of his authority; in our
complex economy that is frequently the only way in which the legislative
the VAT rate would be returned to the original 10% if the rates are no longer
[58]
satisfied. Petitioners also argue that such rate is unfair and unreasonable, as
As to the argument of petitioners ABAKADA GURO Party List, et al.
the people are unsure of the applicable VAT rate from year to year.
Congress did not delegate the power to tax but the mere implementation of
if any of the two conditions set forth therein are satisfied, the President shall
the law. The intent and will to increase the VAT rate to 12% came from
increase the VAT rate to 12%. The provisions of the law are clear. It does not
Congress and the task of the President is to simply execute the legislative
provide for a return to the 10% rate nor does it empower the President to so
revert if, after the rate is increased to 12%, the VAT collection goes below
province of the Court to inquire into, its task being to interpret the law. [59]
the 24/5 of the GDP of the previous year or that the national government
deficit as a percentage of GDP of the previous year does not exceed 1%.
The insinuation by petitioners Pimentel, et al. that the President has ample
powers to cause, influence or create the conditions to bring about either or
both the conditions precedent does not deserve any merit as this argument
is highly speculative. The Court does not rule on allegations which are
for. Rewriting the law is a forbidden ground that only Congress may tread
manifestly conjectural, as these may not exist at all.The Court deals with
upon.[60]
facts, not fancies; on realities, not appearances. When the Court acts on
appearances instead of realities, justice and law will be short-lived.
Petitioners Pimentel, et al. argue that the 12% increase in the VAT
rate imposes an unfair and additional tax burden on the people. Petitioners
present. The rule is that where the provision of the law is clear and
unambiguous, so that there is no occasion for the court's seeking the
legislative intent, the law must be taken as it is, devoid of judicial addition or
there is a public purpose for which the law was passed, which in this case, is
subtraction.[61]
mainly to raise revenue. In fact, fiscal adequacy dictated the need for a raise
in revenue.
Petitioners also contend that the increase in the VAT rate, which was
allegedly an incentive to the President to raise the VAT collection to at least
2 4/5 of the GDP of the previous year, should be based on fiscal adequacy.
conditions:
1.
In the same vein, the Court in this case will not dawdle on the
purpose of Congress or the executive policy, given that it is not for the
judiciary to "pass upon questions of wisdom, justice or expediency of
legislation.[67]
II.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and
110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section
114(C) of the NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
The image portrayed is chilling. Congress passed the law hoping for
rescue from an inevitable catastrophe. Whether the law is indeed sufficient
to answer the states economic dilemma is not for the Court to judge. In the
Farias case, the Court refused to consider the various arguments raised
therein that dwelt on the wisdom of Section 14 of R.A. No. 9006 (The Fair
Section 12 of R.A. No. 9337, amending Section 114 (C) of the NIRC are
arbitrary,
oppressive,
excessive
and
confiscatory.
Their
argument
is
Petitioners
also
contend
that
these
provisions
violate
the
exceeds 70% of the output tax, and therefore, the input tax in excess of 70%
remains uncredited. However, to the extent that the input tax is less than
70% of the output tax, then 100% of such input tax is still creditable.
the input tax exceeds the output tax, the excess shall be carried over to the
imposes a limitation on the amount of input tax that may be credited against
the output tax. It states, in part: [P]rovided, that the input tax inclusive of
the input VAT carried over from the previous quarter that may be credited in
refund for any unused input taxes, to the extent that such input taxes have
every quarter shall not exceed seventy percent (70%) of the output VAT:
not been applied against the output taxes. Such unused input tax may be
used in payment of his other internal revenue taxes.
effect of the 70% limitation is incomplete and one-sided. It ends at the net
person, and Output Tax is the value-added tax dueon the sale or lease of
effect that there will be unapplied/unutilized inputs VAT for a given quarter. It
does not proceed further to the fact that such unapplied/unutilized input tax
tax that has already been paid cannot now be credited against the output
On the other hand, it appears that petitioner Garcia failed to
tax.
comprehend the operation of the 70% limitation on the input tax. According
Petitioners argument is not absolute. It assumes that the input tax
to petitioner, the limitation on the creditable input tax in effect allows VAT-
person/taxpayer has already previously paid the input tax to a seller, and
violates the principle that tax collection and revenue should be for public
the seller will subsequently remit such input tax to the BIR. The party
directly liable for the payment of the tax is the seller. [71] What only needs to
be done is for the person/taxpayer to apply or credit these input taxes, as
As earlier stated, the input tax is the tax paid by a person, passed on
to him by the seller, when he buys goods. Output tax meanwhile is the tax
due to the person when he sells goods. In computing the VAT payable, three
possible scenarios may arise:
Second, when the output taxes exceed the input taxes, the person
shall be liable for the excess, which has to be paid to the Bureau of Internal
Revenue (BIR);[69] and
Third, if the input taxes exceed the output taxes, the excess shall be
carried over to the succeeding quarter or quarters. Should the input taxes
the state, although it may not take away property, which was vested by
virtue of such rights.[72]
revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-stage
tax on all sales, it was then that the crediting of the input tax paid on
purchase or importation of goods and services by VAT-registered persons
against the output tax was introduced. [73] This was adopted by the Expanded
VAT Law (R.A. No. 7716), [74] and The Tax Reform Act of 1997 (R.A. No. 8424).
The right to credit input tax as against the output tax is clearly a privilege
the government.[76] In the same breath, Congress also justified its move by
created by law, a privilege that also the law can remove, or in this case,
saying that the provision was designed to raise an annual revenue of 22.6
limit.
billion.[77] The legislature also dispelled the fear that the provision will fend
[75]
off foreign investments, saying that foreign investors have other tax
Petitioners also contest as arbitrary, oppressive, excessive and
confiscatory, Section 8 of R.A. No. 9337, amending Section 110(A) of the
NIRC, which provides:
SEC. 110. Tax Credits.
(A) Creditable Input Tax.
Provided, That the input tax on goods purchased or imported
in a calendar month for use in trade or business for which
deduction for depreciation is allowed under this Code, shall
be spread evenly over the month of acquisition and the fiftynine (59) succeeding months if the aggregate acquisition
cost for such goods, excluding the VAT component thereof,
exceeds One million pesos (P1,000,000.00): Provided,
however, That if the estimated useful life of the capital
goods is less than five (5) years, as used for depreciation
purposes, then the input VAT shall be spread over such a
shorter period: Provided, finally, That in the case of purchase
of services, lease or use of properties, the input tax shall be
creditable to the purchaser, lessee or license upon payment
of the compensation, rental, royalty or fee.
incentives provided by law, and citing the case of China, where despite a
17.5% non-creditable VAT, foreign investments were not deterred. [78] Again,
for whatever is the purpose of the 60-month amortization, this involves
executive economic policy and legislative wisdom in which the Court cannot
intervene.
With regard to the 5% creditable withholding tax imposed on
payments made by the government for taxable transactions, Section 12 of
R.A. No. 9337, which amended Section 114 of the NIRC, reads:
SEC. 114. Return and Payment of Value-added Tax.
(C) Withholding of Value-added Tax. The Government
or any of its political subdivisions, instrumentalities or
agencies, including government-owned or controlled
corporations (GOCCs) shall, before making payment on
account of each purchase of goods and services which are
subject to the value-added tax imposed in Sections 106 and
108 of this Code, deduct and withhold a final value-added
tax at the rate of five percent (5%) of the gross payment
thereof: Provided, That the payment for lease or use of
properties or property rights to nonresident owners shall be
subject to ten percent (10%) withholding tax at the time of
payment. For purposes of this Section, the payor or person
in control of the payment shall be considered as the
withholding agent.
The value-added tax withheld under this Section
shall be remitted within ten (10) days following the end of
the month the withholding was made.
payment of the tax payable on the transaction. This represents the net VAT
supplied by public work contractors; or 10% on payment for the lease or use
payable of the seller. The other 5% effectively accounts for the standard
input VAT (deemed input VAT), in lieu of the actual input VAT directly or
Section 114(C), these different rates, except for the 10% on lease or
The Court need not explore the rationale behind the provision. It is
clear that Congress intended to treat differently taxable transactions with
The Court observes, however, that the law the used the word final.
the government.[80] This is supported by the fact that under the old provision,
the 5% tax withheld by the government remains creditable against the tax
in Section 114(C): final value-added tax at the rate of five percent (5%).
As amended, the use of the word final and the deletion of the word
which is enjoyed by other persons or other classes in the same place and in
the only ones subjected to the 5% final withholding tax. It applies to all
like circumstances.[83]
The
power
of
the
State
to
make
reasonable
and
natural
Whether it relates to the subject of taxation, the kind of property, the rates
Value-Added Tax Regulations 2005 issued by the BIR, provides that should
the actual input tax exceed 5% of gross payments, the excess may form part
of the cost. Equally, should the actual input tax be less than 5%, the
validity. As a rule, the judiciary will not interfere with such power absent a
Petitioners point out that the limitation on the creditable input tax if
input tax, the government gets to tax a profit or value-added even if there is
the entity has a high ratio of input tax, or invests in capital equipment, or
no profit or value-added.
has several transactions with the government, is not based on real and
substantial differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law does not
what ifs, arguments, theoretical and facts, uncertain. Any disquisition by the
make any classification in the subject of taxation, the kind of property, the
Court on this point will only be, as Shakespeare describes life in Macbeth,[82]
law may yield varying end results depending on ones profit margin and
value-added, the Court cannot go beyond what the legislature has laid down
and interfere with the affairs of business.
equal
protection clause
does
not
require
the universal
property of the same class shall be taxed at the same rate. Different articles
may be taxed at different amounts provided that the rate is uniform on the
Bill No. 2038 by Sens. S.R. Osmea III and Ma. Ana Consuelo A.S. Madrigal on
June 6, 2005, and House Bill No. 4493 by Rep. Eric D. Singson. The proposed
legislation seeks to amend the 70% limitation by increasing the same to
90%. This, according to petitioners, supports their stance that the 70%
transaction.
Neither does the law make any distinction as to the type of industry
or trade that will bear the 70% limitation on the creditable input tax, 5-year
amortization of input tax paid on purchase of capital goods or the 5% final
withholding tax by the government. It must be stressed that the rule of
uniform taxation does not deprive Congress of the power to classify subjects
these are still proposed legislations. Until Congress amends the law, and
of taxation, and only demands uniformity within the particular class. [87]
absent any unequivocal basis for its unconstitutionality, the 70% limitation
stays.
B. Uniformity and Equitability of Taxation
R.A. No. 9337 is also equitable. The law is equipped with a threshold
margin. The VAT rate of 0% or 10% (or 12%) does not apply to sales of
goods or services with gross annual sales or receipts not exceeding
P1,500,000.00.[88] Also, basic marine and agricultural food products in their
original state are still not subject to the tax, [89] thus ensuring that prices at
corporations are still subject to 15% final withholding tax but the tax credit
allowed on the corporations domicile was increased to 20%. [96] The Philippine
C.
Progressivity of Taxation
low profit margins, and unduly favors those with high profit margins.
Congress was not oblivious to this. Thus, to equalize the weighty burden the
law entails, the law, under Section 116, imposed a 3% percentage tax on
VAT-exempt persons under Section 109(v), i.e., transactions with gross
annual sales and/or receipts not exceeding P1.5 Million. This acts as a
equalizer because in effect, bigger businesses that qualify for VAT coverage
and VAT-exempt taxpayers stand on equal-footing.
CONCLUSION
other words, the VAT paid eats the same portion of an income, whether big
or small. The disparity lies in the income earned by a person or profit margin
marked by a business, such that the higher the income or profit margin, the
smaller the portion of the income or profit that is eaten by VAT. A converso,
the lower the income or profit margin, the bigger the part that the VAT eats
away. At the end of the day, it is really the lower income group or businesses
with low-profit margins that is always hardest hit.
Nevertheless, the Constitution does not really prohibit the imposition
of indirect taxes, like the VAT. What it simply provides is that Congress shall
"evolve a progressive system of taxation." The Court stated in the Tolentino
case, thus:
The Constitution does not really prohibit the
imposition of indirect taxes which, like the VAT, are
regressive. What it simply provides is that Congress shall
evolve a progressive system of taxation. The constitutional
provision has been interpreted to mean simply that direct
taxes are . . . to be preferred [and] as much as possible,
indirect taxes should be minimized. (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 (Second ed. 1977))
Indeed, the mandate to Congress is not to prescribe, but to
evolve, a progressive tax system. Otherwise, sales taxes,
which perhaps are the oldest form of indirect taxes, would
have been prohibited with the proclamation of Art. VIII, 17
(1) of the 1973 Constitution from which the present Art. VI,
28 (1) was taken. Sales taxes are also regressive.
Resort to indirect taxes should be minimized but not
avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the
taxpayers' ability to pay. In the case of the VAT, the law
minimizes the regressive effects of this imposition by
providing for zero rating of certain transactions (R.A. No.
7716, 3, amending 102 (b) of the NIRC), while granting
exemptions to other transactions. (R.A. No. 7716, 4
amending 103 of the NIRC)[99]
It has been said that taxes are the lifeblood of the government. In
this case, it is just an enema, a first-aid measure to resuscitate an economy
in distress. The Court is neither blind nor is it turning a deaf ear on the plight
of the masses. But it does not have the panacea for the malady that the law
seeks to remedy. As in other cases, the Court cannot strike down a law as
unconstitutional simply because of its yokes.
Let us not be overly influenced by the plea that for
every wrong there is a remedy, and that the judiciary should
stand ready to afford relief. There are undoubtedly many
wrongs the judicature may not correct, for instance, those
involving political questions. . . .
Let us likewise disabuse our minds from the notion
that the judiciary is the repository of remedies for all political
or social ills; We should not forget that the Constitution has
judiciously allocated the powers of government to three
distinct and separate compartments; and that judicial
interpretation has tended to the preservation of the
independence of the three, and a zealous regard of the
prerogatives of each, knowing full well that one is not the
guardian of the others and that, for official wrong-doing,
each may be brought to account, either by impeachment,
trial or by the ballot box.[100]
The words of the Court in Vera vs. Avelino[101] holds true then, as it
still holds true now. All things considered, there is no raison d'tre for the
unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being unconstitutional, the
petitions in G.R. Nos. 168056, 168207, 168461, 168463, and 168730, are
hereby DISMISSED.
There being no constitutional impediment to the full enforcement
and implementation of R.A. No. 9337, the temporary restraining order issued
by the Court on July 1, 2005 is LIFTED upon finality of herein decision.
SO ORDERED.
Portland cement for a period not exceeding two hundred (200) days from the
date of issuance by the Bureau of Customs (BOC) of the implementing
Customs Memorandum Order.12 The corresponding Customs Memorandum
Order was issued on 10 December 2001, to take effect that same day and to
remain in force for two hundred (200) days.13
In the meantime, the Tariff Commission, on 19 November 2001, received a
request from the DTI for a formal investigation to determine whether or not
to impose a definitive safeguard measure on imports of gray Portland
cement, pursuant to Section 9 of the SMA and its Implementing Rules and
Regulations. A notice of commencement of formal investigation was
published in the newspapers on 21 November 2001. Individual notices were
likewise sent to concerned parties, such as Philcemcor, various importers
and exporters, the Embassies of Indonesia, Japan and Taiwan,
contractors/builders associations, industry associations, cement workers'
groups, consumer groups, non-government organizations and concerned
government agencies.14 A preliminary conference was held on 27 November
2001, attended by several concerned parties, including Southern Cross. 15
Subsequently, the Tariff Commission received several position papers both in
support and against Philcemcor's application.16 The Tariff Commission also
visited the corporate offices and manufacturing facilities of each of the
applicant companies, as well as that of Southern Cross and two other
cement importers.17
On 13 March 2002, the Tariff Commission issued its Formal Investigation
Report ("Report"). Among the factors studied by the Tariff Commission in its
Report were the market share of the domestic industry, 18 production and
sales,19 capacity utilization,20 financial performance and profitability, 21 and
return on sales.22 The Tariff Commission arrived at the following conclusions:
1. The circumstances provided in Article XIX of GATT 1994 need not be
demonstrated since the product under consideration (gray Portland cement)
is not the subject of any Philippine obligation or tariff concession under the
WTO Agreement. Nonetheless, such inquiry is governed by the national
legislation (R.A. 8800) and the terms and conditions of the Agreement on
Safeguards.
2. The collective output of the twelve (12) applicant companies constitutes a
major proportion of the total domestic production of gray Portland cement
and blended Portland cement.
3. Locally produced gray Portland cement and blended Portland cement
(Pozzolan) are "like" to imported gray Portland cement.
4. Gray Portland cement is being imported into the Philippines in increased
quantities, both in absolute terms and relative to domestic production,
starting in 2000. The increase in volume of imports is recent, sudden, sharp
and significant.
5. The industry has not suffered and is not suffering significant overall
impairment in its condition, i.e., serious injury.
6. There is no threat of serious injury that is imminent from imports of gray
Portland cement.
7. Causation has become moot and academic in view of the negative
determination of the elements of serious injury and imminent threat of
serious injury.23
Accordingly, the Tariff Commission made the following recommendation, to
wit:
The elements of serious injury and imminent threat of serious injury not
having been established, it is hereby recommended that no definitive
general safeguard measure be imposed on the importation of gray Portland
cement.24
The DTI received the Report on 14 March 2002. After reviewing the report,
then DTI Secretary Manuel Roxas II ("DTI Secretary") disagreed with the
conclusion of the Tariff Commission that there was no serious injury to the
local cement industry caused by the surge of imports. 25 In view of this
disagreement, the DTI requested an opinion from the Department of Justice
("DOJ") on the DTI Secretary's scope of options in acting on the
Commission's recommendations. Subsequently, then DOJ Secretary
Hernando Perez rendered an opinion stating that Section 13 of the SMA
precluded a review by the DTI Secretary of the Tariff Commission's negative
finding, or finding that a definitive safeguard measure should not be
imposed.26
On 5 April 2002, the DTI Secretary promulgated a Decision. After quoting the
conclusions of the Tariff Commission, the DTI Secretary noted the DTI's
disagreement with the conclusions. However, he also cited the DOJ Opinion
advising the DTI that it was bound by the negative finding of the Tariff
Commission. Thus, he ruled as follows:
The DTI has no alternative but to abide by the [Tariff] Commission's
recommendations.
IN VIEW OF THE FOREGOING, and in accordance with Section 13 of RA
8800 which states:
"In the event of a negative final determination; or if the cash bond
is in excess of the definitive safeguard duty assessed, the
Secretary shall immediately issue, through the Secretary of
Finance, a written instruction to the Commissioner of Customs,
authorizing the return of the cash bond or the remainder thereof,
as the case may be, previously collected as provisional general
safeguard measure within ten (10) days from the date a final
decision has been made; Provided, that the government shall not
be liable for any interest on the amount to be returned. The
Secretary shall not accept for consideration another petition from
the same industry, with respect to the same imports of the product
under consideration within one (1) year after the date of rendering
such a decision."
The DTI hereby issues the following:
The application for safeguard measures against the importation of gray
Portland cement filed by PHILCEMCOR (Case No. 02-2001) is hereby
denied.27 (Emphasis in the original)
Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days
later, it filed with the Court of Appeals a Petition for Certiorari, Prohibition
and Mandamus28 seeking to set aside the DTI Decision, as well as the Tariff
Commission's Report. Philcemcor likewise applied for a Temporary
Restraining Order/Injunction to enjoin the DTI and the BOC from
implementing the questioned Decision and Report. It prayed that the Court
of Appeals direct the DTI Secretary to disregard the Report and to render
judgment independently of the Report. Philcemcor argued that the DTI
Secretary, vested as he is under the law with the power of review, is not
bound to adopt the recommendations of the Tariff Commission; and, that the
13, 2002 is DENIED. On the other hand, the assailed April 5, 2002 Decision
of the Secretary of the Department of Trade and Industry is hereby SET
ASIDE. Consequently, the case is REMANDED to the public respondent
Secretary of Department of Trade and Industry for a final decision in
accordance with RA 8800 and its Implementing Rules and Regulations.
SO ORDERED.39
On 23 June 2003, Southern Cross filed the present petition, assailing the
appellate court's Decision for departing from the accepted and usual course
of judicial proceedings, and not deciding the substantial questions in
accordance with law and jurisprudence. The petition argues in the main that
the Court of Appeals has no jurisdiction over Philcemcor's petition, the
proper remedy being a petition for review with the CTA conformably with the
SMA, and; that the factual findings of the Tariff Commission on the existence
or non-existence conditions warranting the imposition of general safeguard
measures are binding upon the DTI Secretary.
The timely filing of Southern Cross's petition before this Court necessarily
prevented the Court of AppealsDecision from becoming final.40 Yet on 25
June 2003, the DTI Secretary issued a new Decision, ruling this time that
that in light of the appellate court's Decision there was no longer any legal
impediment to his deciding Philcemcor's application for definitive safeguard
measures.41 He made a determination that, contrary to the findings of the
Tariff Commission, the local cement industry had suffered serious injury as a
result of the import surges. 42 Accordingly, he imposed a definitive safeguard
measure on the importation of gray Portland cement, in the form of a
definitive safeguard duty in the amount of P20.60/40 kg. bag for three years
on imported gray Portland Cement.43
On 7 July 2003, Southern Cross filed with the Court a "Very Urgent
Application for a Temporary Restraining Order and/or A Writ of Preliminary
Injunction" ("TRO Application"), seeking to enjoin the DTI Secretary from
enforcing hisDecision of 25 June 2003 in view of the pending petition before
this Court. Philcemcor filed an opposition, claiming, among others, that it is
not this Court but the CTA that has jurisdiction over the application under
the law.
On 1 August 2003, Southern Cross filed with the CTA a Petition for Review,
assailing the DTI Secretary's 25 June 2003 Decision which imposed the
definite safeguard measure. Prescinding from this action, Philcemcor filed
with this Court a Manifestation and Motion to Dismiss in regard to Southern
Cross's petition, alleging that it deliberately and willfully resorted to forumshopping. It points out that Southern Cross's TRO Application seeks to enjoin
the DTI Secretary's second decision, while its Petition before the CTA prays
for the annulment of the same decision.44
Reiterating its Comment on Southern Cross's Petition for Review, Philcemcor
also argues that the CTA, being a special court of limited jurisdiction, could
only review the ruling of the DTI Secretary when a safeguard measure is
imposed, and that the factual findings of the Tariff Commission are not
binding on the DTI Secretary.45
After giving due course to Southern Cross's Petition, the Court called the
case for oral argument on 18 February 2004. 46 At the oral argument,
attended by the counsel for Philcemcor and Southern Cross and the Office of
the Solicitor General, the Court simplified the issues in this wise: (i) whether
the Decision of the DTI Secretary is appealable to the CTA or the Court of
Appeals; (ii) assuming that the Court of Appeals has jurisdiction, whether
itsDecision is in accordance with law; and, (iii) whether a Temporary
Restraining Order is warranted.47
During the oral arguments, counsel for Southern Cross manifested that due
to the imposition of the general safeguard measures, Southern Cross was
forced to cease operations in the Philippines in November of 2003. 48
Propriety of the Temporary Restraining Order
Before the merits of the Petition, a brief comment on Southern Cross's
application for provisional relief. It sought to enjoin the DTI Secretary from
enforcing the definitive safeguard measure he imposed in his 25 June
2003Decision. The Court did not grant the provisional relief for it would be
tantamount to enjoining the collection of taxes, a peremptory judicial act
which is traditionally frowned upon, 49 unless there is a clear statutory basis
for it.50 In that regard, Section 218 of the Tax Reform Act of 1997 prohibits
any court from granting an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by the internal revenue
code.51A similar philosophy is expressed by Section 29 of the SMA, which
states that the filing of a petition for review before the CTA does not stop,
suspend, or otherwise toll the imposition or collection of the appropriate
tariff duties or the adoption of other appropriate safeguard measures. 52 This
evinces a clear legislative intent that the imposition of safeguard measures,
despite the availability of judicial review, should not be enjoined
notwithstanding any timely appeal of the imposition.
The Forum-Shopping Issue
In the same breath, we are not convinced that the allegation of forumshopping has been duly proven, or that sanction should befall upon Southern
Cross and its counsel. The standard by Section 5, Rule 7 of the 1997 Rules of
Civil Procedure in order that sanction may be had is that "the acts of the
party or his counsel clearly constitute willful and deliberate forum
shopping."53 The standard implies a malicious intent to subvert procedural
rules, and such state of mind is not evident in this case.
The Jurisdictional Issue
On to the merits of the present petition.
In its assailed Decision, the Court of Appeals, after asserting only in brief
that it had jurisdiction over Philcemcor'sPetition, discussed the issue of
whether or not the DTI Secretary is bound to adopt the negative
recommendation of the Tariff Commission on the application for safeguard
measure. The Court of Appeals maintained that it had jurisdiction over the
petition, as it alleged grave abuse of discretion on the part of the DTI
Secretary, thus:
A perusal of the instant petition reveals allegations of grave abuse of
discretion on the part of the DTI Secretary in rendering the assailed April 5,
2002 Decision wherein it was ruled that he had no alternative but to abide
by the findings of the Commission on the matter of safeguard measures for
the local cement industry. Abuse of discretion is admittedly within the ambit
of certiorari.
Grave abuse of discretion implies such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction. It is alleged that, in the
assailed Decision, the DTI Secretary gravely abused his discretion in
wantonly evading to discharge his duty to render an independent
determination or decision in imposing a definitive safeguard measure. 54
(emphasis supplied)
The plain meaning of Section 5 shows that it is the Tariff Commission that
has the power to make a "positive final determination." This power lodged in
the Tariff Commission, must be distinguished from the power to impose the
general safeguard measure which is properly vested on the DTI Secretary. 88
All in all, there are two condition precedents that must be satisfied before
the DTI Secretary may impose a general safeguard measure on grey
Portland cement. First, there must be a positive final determination by the
Tariff Commission that a product is being imported into the country in
increased quantities (whether absolute or relative to domestic production),
as to be a substantial cause of serious injury or threat to the domestic
industry. Second, in the case of non-agricultural products the Secretary must
establish that the application of such safeguard measures is in the public
interest.89 As Southern Cross argues, Section 5 is quite clear-cut, and it is
impossible to finagle a different conclusion even through overarching
methods of statutory construction. There is no safer nor better settled canon
of interpretation that when language is clear and unambiguous it must be
held to mean what it plainly expresses:90 In the quotable words of an
illustrious member of this Court, thus:
[I]f a statute is clear, plain and free from ambiguity, it must be given its
literal meaning and applied without attempted interpretation. The verba
legis or plain meaning rule rests on the valid presumption that the words
employed by the legislature in a statute correctly express its intent 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 the use of such words as are found in
the statute.91
Moreover, Rule 5 of the Implementing Rules and Regulations of the SMA, 92
which interprets Section 5 of the law, likewise requires a positive final
determination on the part of the Tariff Commission before the application of
the general safeguard measure.
The SMA establishes a distinct allocation of functions between the Tariff
Commission and the DTI Secretary. The plain meaning of Section 5 shows
that it is the Tariff Commission that has the power to make a "positive final
determination." This power, which belongs to the Tariff Commission, must be
distinguished from the power to impose general safeguard measure properly
vested on the DTI Secretary. The distinction is vital, as a "positive final
determination" clearly antecedes, as a condition precedent, the imposition
of a general safeguard measure. At the same time, a positive final
determination does not necessarily result in the imposition of a general
safeguard measure. Under Section 5, notwithstanding the positive final
determination of the Tariff Commission, the DTI Secretary is tasked to decide
whether or not that the application of the safeguard measures is in the
public interest.
It is also clear from Section 5 of the SMA that the positive final determination
to be undertaken by the Tariff Commission does not entail a mere gathering
of statistical data. In order to arrive at such determination, it has to establish
causal linkages from the statistics that it compiles and evaluates: after
finding there is an importation in increased quantities of the product in
question, that such importation is a substantial cause of serious threat or
injury to the domestic industry.
provision does not vest on the CHR the power to adjudicate cases, but only
to investigate all forms of human rights violations. 110 Yet, without modifying
the thorough disquisition of the Court in Cario on the general limitations on
the investigatory power, the precedent is inapplicable because of the
difference in the involved statutory frameworks. The Constitution does not
repose binding effect on the results of the CHR's investigation. 111 On the
other hand, through Section 5 of the SMA and under the authority of Section
28(2), Article VI of the Constitution, Congress did intend to bind the DTI
Secretary to the determination made by the Tariff Commission. 112 It is of no
consequence that such determination results from the exercise of
investigatory powers by the Tariff Commission since Congress is well within
its constitutional mandate to limit the authority of the DTI Secretary to
impose safeguard measures in the manner that it sees fit.
The Court of Appeals and Philcemcor also rely on Section 13 of the SMA and
Rule 13 of the SMA's Implementing Rules in support of the view that the DTI
Secretary may decide independently of the determination made by the Tariff
Commission. Admittedly, there are certain infelicities in the language of
Section 13 and Rule 13. But reliance should not be placed on the textual
imprecisions. Rather, Section 13 and Rule 13 must be viewed in light of the
fundamental prescription imposed by Section 5. 113
Section 13 of the SMA lays down the procedure to be followed after the Tariff
Commission renders its report. The provision reads in full:
SEC. 13. Adoption of Definitive Measures. Upon its positive determination,
the Commission shall recommend to the Secretary an appropriate definitive
measure, in the form of:
(a) An increase in, or imposition of, any duty on the imported product;
(b) A decrease in or the imposition of a tariff-rate quota (MAV) on the
product;
(c) A modification or imposition of any quantitative restriction on the
importation of the product into the Philippines;
(d) One or more appropriate adjustment measures, including the provision of
trade adjustment assistance;
(e) Any combination of actions described in subparagraphs (a) to (d).
The Commission may also recommend other actions, including the initiation
of international negotiations to address the underlying cause of the increase
of imports of the product, to alleviate the injury or threat thereof to the
domestic industry, and to facilitate positive adjustment to import
competition.
The general safeguard measure shall be limited to the extent of redressing
or preventing the injury and to facilitate adjustment by the domestic
industry from the adverse effects directly attributed to the increased
imports: Provided, however, That when quantitative import restrictions are
used, such measures shall not reduce the quantity of imports below the
average imports for the three (3) preceding representative years, unless
clear justification is given that a different level is necessary to prevent or
remedy a serious injury.
A general safeguard measure shall not be applied to a product originating
from a developing country if its share of total imports of the product is less
than three percent (3%): Provided, however, That developing countries with
less than three percent (3%) share collectively account for not more than
nine percent (9%) of the total imports.
the wisdom of the legislature but only charts the boundaries of powers and
functions set in its enactments. But then, it is not difficult to see the internal
logic of this statutory framework.
For one, as earlier stated, the DTI cannot exercise review powers over the
Tariff Commission which is not its subordinate office.
Moreover, the mechanism established by Congress establishes a measure of
check and balance involving two different governmental agencies with
disparate specializations. The matter of safeguard measures is of such
national importance that a decision either to impose or not to impose then
could have ruinous effects on companies doing business in the Philippines.
Thus, it is ideal to put in place a system which affords all due deliberation
and calls to fore various governmental agencies exercising their particular
specializations.
Finally, if this arrangement drawn up by Congress makes it difficult to obtain
a general safeguard measure, it is because such safeguard measure is the
exception, rather than the rule. The Philippines is obliged to observe its
obligations under the GATT, under whose framework trade liberalization, not
protectionism, is laid down. Verily, the GATT actually prescribes conditions
before a member-country may impose a safeguard measure. The pertinent
portion of the GATT Agreement on Safeguards reads:
2. A Member may only apply a safeguard measure to a product only if that
member has determined, pursuant to the provisions set out below, that such
product is being imported into its territory in such increased quantities,
absolute or relative to domestic production, and under such conditions as to
cause or threaten to cause serious injury to the domestic industry that
produces like or directly competitive products.130
3. (a) A Member may apply a safeguard measure only following an
investigation by the competent authorities of that Member pursuant to
procedures previously established and made public in consonance with
Article X of the GATT 1994. This investigation shall include reasonable public
notice to all interested parties and public hearings or other appropriate
means in which importers, exporters and other interested parties could
present evidence and their views, including the opportunity to respond to
the presentations of other parties and to submit their views, inter alia, as to
whether or not the application of a safeguard measure would be in the
public interest. The competent authorities shall publish a report setting forth
their findings and reasoned conclusions reached on all pertinent issues of
fact and law.131
The SMA was designed not to contradict the GATT, but to complement it. The
two requisites laid down in Section 5 for a positive final determination are
the same conditions provided under the GATT Agreement on Safeguards for
the application of safeguard measures by a member country. Moreover, the
investigatory procedure laid down by the SMA conforms to the procedure
required by the GATT Agreement on Safeguards. Congress has chosen the
Tariff Commission as the competent authority to conduct such investigation.
Southern Cross stresses that applying the provision of the GATT Agreement
on Safeguards, the Tariff Commission is clearly empowered to arrive at
binding conclusions.132 We agree: binding on the DTI Secretary is the Tariff
Commission's determinations on whether a product is imported in increased
quantities, absolute or relative to domestic production and whether any such
increase is a substantial cause of serious injury or threat thereof to the
domestic industry.133
Satisfied as we are with the proper statutory paradigm within which the SMA
should be analyzed, the flaws in the reasoning of the Court of Appeals and in
the arguments of the respondents become apparent. To better understand
the dynamics of the procedure set up by the law leading to the imposition of
definitive safeguard measures, a brief step-by-step recount thereof is in
order.
1. After the initiation of an action involving a general safeguard measure, 134
the DTI Secretary makes a preliminary determination whether the increased
imports of the product under consideration substantially cause or threaten
to substantially cause serious injury to the domestic industry, 135 and whether
the imposition of a provisional measure is warranted under Section 8 of the
SMA.136 If the preliminary determination is negative, it is implied that no
further action will be taken on the application.
2. When his preliminary determination is positive, the Secretary immediately
transmits the records covering the application to the Tariff Commission for
immediate formal investigation.137
3. The Tariff Commission conducts its formal investigation, keyed towards
making a final determination. In the process, it holds public hearings,
providing interested parties the opportunity to present evidence or
otherwise be heard.138 To repeat, Section 5 enumerates what the Tariff
Commission is tasked to determine: (a) whether a product is being imported
into the country in increased quantities, irrespective of whether the product
is absolute or relative to the domestic production; and (b) whether the
importation in increased quantities is such that it causes serious injury or
threat to the domestic industry.139 The findings of the Tariff Commission as to
these matters constitute the final determination, which may be either
positive or negative.
4. Under Section 13 of the SMA, if the Tariff Commission makes a positive
determination, the Tariff Commission "recommends to the [DTI] Secretary an
appropriate definitive measure." The Tariff Commission "may also
recommend other actions, including the initiation of international
negotiations to address the underlying cause of the increase of imports of
the products, to alleviate the injury or threat thereof to the domestic
industry, and to facilitate positive adjustment to import competition." 140
5. If the Tariff Commission makes a positive final determination, the DTI
Secretary is then to decide, within fifteen (15) days from receipt of the
report, as to what appropriate safeguard measures should he impose.
6. However, if the Tariff Commission makes a negative final determination,
the DTI Secretary cannot impose any definitive safeguard measure. Under
Section 13, he is instructed instead to return whatever cash bond was paid
by the applicant upon the initiation of the action for safeguard measure.
The Effect of the Court's Decision
The Court of Appeals erred in remanding the case back to the DTI Secretary,
with the instruction that the DTI Secretary may impose a general safeguard
measure even if there is no positive final determination from the Tariff
Commission. More crucially, the Court of Appeals could not have acquired
jurisdiction over Philcemcor's petition for certiorari in the first place, as
Section 29 of the SMA properly vests jurisdiction on the CTA. Consequently,
the assailed Decision is an absolute nullity, and we declare it as such.
What is the effect of the nullity of the assailed Decision on the 5 June 2003
Present:
- versus - PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
ATTY. FIDEL H. BORRES, JR., CHICO-NAZARIO, JJ. Respondent.
Promulgated:
conveying to him Three Thousand Nine Hundred Eight (3,908) square meters
x ------------------------------------------------------------------x
Madarieta (Madarieta) and Eusebio E. Arce.[3] The parties agreed that the
RESOLUTION
TINGA, J.:
nephew, assumed the responsibility of tilling the land. Tadlip caused the
reality that a clear deprivation of such right would ensue should the petition
reallocation of the disputed land through the aid of the Bureau of Legal
be granted.
said complaint, Madarieta substantially alleged the same facts and prayed
1998 granting the petition of complainant reallocating the land to him and
for the same remedies except that she included one more allegation, that
of the same OCT No. P-106 and ordering the issuance of a transfer certificate
of
Cancellation
of
Original
Certificate
of
Title
No.
EPand legal.[11] In effect, complainant maintains that the filing of the petition
In any event, the Petition, despite its obvious flaws, was decided by
respondent in favor of Madrieta just four (4) days after it had been filed.
heirs, despite the existence of their legal interest over the property and
Thus, OCT No. P-106 was ordered cancelled even before Tadlip or the heirs of
but this was denied by respondent in an Order [14] dated 19 March 1999. As if
provisions of the 1994 New Rules of Procedure [20] (DARAB Rules) in disposing
respondent be suspended from the practice of law for a period of two (2)
months with a warning that a repetition of the same or similar act will be
[16]
of
the
This Court cannot delve into the factual or legal questions raised by
decision of the Adjudicator pending appeal shall be filed with the DARAB,
Hence,
on
20
March
2002,
complainant
filed
this
instant
the
latter
filed
another
case
before
the
Ombudsman
and
To hold the judge liable, this Court has time and again ruled that the
the law. The disregard of established rule of law which amounts to gross
ignorance of law makes a judge subject to disciplinary action. [25]
Clearly, complainant was a party in interest in the two DARAB cases
In Pesayco v. Layague,[26] the Court had the opportunity to declare
that:
was decided against him just four (4) days after it was filed. Evidently
complainant had no reasonable opportunity to be heard before he was
divested of the land over which respondent, just a few months earlier, had
affirmed complainants rights thereto.
It would be absurd to accept the reasoning of respondent that since
complainant was not impleaded as a party to DARAB Case No. X-99-02, the
latter was not entitled to be notified of the hearing and the eventual
disposition of the case. The DARAB Rules requires the joinder of all parties-
complainant with an interest in the lot with all the rights therewith
deny such right or interest from complainant to defend the latters claim and
subsequently cancel OCT No. P-106 unilaterally. In doing so, complainants
pay-off
between
respondent
and
the
Madarieta
Family. [31]
were a redundancy, considering that the relief prayed for had already been
execution pending appeal, he also disregarded Rule XII of the DARAB Rules,
granted.
which states:
same.
seems that he merely dispensed of the rules and replaced it with his own
appeal in effect deprived complainant of the land he tills and the source of
his income. Complainant woke up one day not knowing that the
emancipated land which he thought was already reallocated to him was lost
1993,
the
same
undersecretary
issued
another
official
While the duty to uphold the Constitution and obey the laws is an
obligation imposed upon every citizen, a lawyer assumes responsibilities
well beyond the basic requirements of good citizenship. As a servant of the
Hence, as early as 1993, the RARADs and PARADs have been aware
that executions pending appeal was to be acted upon by the DARAB and not
by them.
A member of the bar who assumes public office does not shed his
Respondents non-observance of the DARAB Rules on notice and
hearing and his grant to Madarieta of her motion for execution pending
and
penalty
of
six
(6)
months
suspension
more
appropriate.
premises
considered,
respondent
is
hereby
SUSPENDED from the practice of law for a period of six (6) months. Let a
copy of this Resolution be furnished the Bar Confidant for appropriate
annotation in the record of respondent.
SO ORDERED.
Bautista vs. Federico A. Poblete, et al., and docketed as EO Case No. 98-219.
Of the 77 persons offered by the complainant to prove the charges, 44
executed their respective affidavits and swore and subscribed to the truth
thereof, on the vote-buying of the respondents. The Law Department of the
petitioner conducted the requisite preliminary investigation, after which it
submitted its comments and recommendations to the COMELEC En Banc. On
February 25, 1999, the COMELEC En Banc issued Resolution No. 99-0346,
the dispositive portion of which reads:
The Antecedents
During the elections on May 11, 1998, Florentino A. Bautista was the
official candidate of the Lakas for the position of Municipal Mayor of Kawit,
Cavite. He executed an Affidavit-Complaint charging the incumbent
Municipal Mayor Atty. Federico Hit Poblete, Vice-Mayor Reynaldo Aguinaldo,
Bienvenido Pobre, Arturo Ganibe, Leonardo Llave, Diosdado del Rosario,
Manuel Ubod, Angelito Peregrino, Mario Espiritu, Salvador Olaes and Pedro
Paterno, Jr. of violation of paragraphs (a) and (b) of Section 261 of the
Omnibus Election Code (vote buying) and filed the same with the Law
Department of the COMELEC. The complaint was entitled Florentino A.
paragraph of Section 28 of Republic Act No. 6646 applies only to the offense
of vote-buying, as the accused in Criminal Case No. 7034-99 in which the
respondents-appellants gave their sworn statements was for vote-buying;
this exemption will not apply to the charge for vote-selling which was the
crime charged in I.S. No. 1-99-1080; (b) the July 6, 2000 Resolution No. 001378 of the petitioner had become final and executory; hence, it is no longer
subject to review by the petitioner; and (c) the review of the Provincial
Prosecutors resolution made by the petitioner was a re-investigation of the
case, and was done without prior authority of the Court.
On February 20, 2001, the trial court issued an Order denying the
Omnibus Motion of the petitioner. The petitioner filed a Motion for
Reconsideration of the said order on March 31, 2000. The Provincial
Prosecutor opposed the motion. On May 16, 2001, the trial court issued an
Order denying the said motion holding that the petitioner had no absolute
power to grant exemptions under Section 28 of Republic Act No. 6648. The
trial court also held that the issue of whether or not the accused are exempt
from prosecution and consequent conviction for vote-buying is a matter
addressed to the Court and not to the petitioner.
In its petition at bar, the petitioner raises the following issues for
resolution, viz:
(1) WHETHER THE ACCUSED ARE EXEMPT FROM CRIMINAL PROSECUTION
PURSUANT TO SECTION 28 (4) OF R.A. No. 6646.
(2) WHETHER THERE IS NO NEED FOR AN EN BANC RESOLUTION REVOKING
THE AUTHORITY OF THE PROVINCIAL PROSECUTOR FROM HANDLING THE
CASES FILED IN COURT SINCE THE COMELEC EN BANC ALREADY DIRECTED
THE LAW DEPARTMENT TO FILE A MOTION TO DISMISS THESE CASES; [9]
On the first issue, the petitioner contends that the complainantsappellees in I.S. No. 1-99-1080 failed to file any motion for the
reconsideration of the petitioners Resolution No. 00-2453 reversing
Resolution No. 00-1378 which, in turn, dismissed the respondents-appellants
appeal. Neither did the said complainants-appellees file a petition for
certiorari under Rule 65 of the Rules of Court from its Resolution No. 002453. Consequently, Resolution No. 00-2453 has become final and
executory; hence, is binding and conclusive on the complainants-appellees,
the Office of the Provincial Prosecutor and the herein respondent judge. The
petitioner further asserts that the respondents-appellants motion for
reconsideration in I.S. No. 1-99-1080 of COMELEC Resolution No. 00-1378 is
not a prohibited pleading under Rule 13, Section 1, paragraph (d) of the
COMELEC Rules of Procedure.
According to the petitioner, the prosecution of election offenses is under
its sole control. Any delegation of its authority to the Provincial or City
Prosecutor to prosecute election cases may be revoked or withdrawn by it,
expressly or impliedly, at any stage of the proceedings in the RTC. The
petitioner, through Atty. Michael Valdez of its Law Department, had already
entered his appearance for the petitioner as public prosecutor before the
respondent judge. The Provincial Prosecutor was, thus, ipso facto divested of
his authority, as deputized prosecutor, to represent the petitioner on the
motion to dismiss and to prosecute the cases before the respondent judge.
The respondent judge, for her part, avers that COMELEC Resolution No.
00-2453 was approved only by four of the seven members of the petitioner
sitting en banc, and as such, could not have validly revoked Resolution No.
00-1378 which was, in turn, approved by unanimous vote of the Commission
Members sitting en banc. It behooved the petitioner to conduct a joint
reinvestigation in I.S. No. 1-99-1080 and EO No. 98-219 to ascertain whether
the respondents-appellants in I.S. No. 1-99-1080 were exempt from
prosecution for vote-selling.
Finally, according to the respondent judge, Section 2, Rule 34 of the
COMELEC Rules of Procedure is contrary to Section 265 of the Omnibus
Election Code, which does not allow the petitioner to withdraw its deputation
of Provincial or City Prosecutors.
We agree with the petitioner.
Under Article IX, Section 2(b) of the Constitution, [10] the petitioner is
empowered to investigate and, when appropriate, prosecute election
offenses. The grant by the Constitution to the petitioner of the express
power to investigate and prosecute election offenses is intended to enable
the petitioner to assure the people of a fine, orderly, honest, peaceful and
credible election.[11] Under Section 265 of the Omnibus Election Code, the
petitioner, through its duly authorized legal officers, has the exclusive power
to conduct preliminary investigation of all election offenses punishable under
the Omnibus Election Code, and to prosecute the same. The petitioner may
avail of the assistance of the prosecuting arms of the government. [12] In
Section 2, Rule 34 of the COMELEC Rules of Procedure, all Provincial and City
Prosecutors and/or their respective assistants are given continuing authority
as its deputies to conduct preliminary investigation of complaints involving
election offenses under election laws and to prosecute the same. The
complaints may be filed directly with them or may be indorsed to them by
the petitioner or its duly authorized representatives. [13] The respondents
assertion that Section 2, Rule 34, of the COMELEC Rules of Procedure is a
violation of Section 265 of the Omnibus Election Code has been laid to rest
by this Court in Margarejo vs. Escoses,[14] wherein this Court ruled that until
revoked, the continuing authority of the Provincial or City Prosecutors stays.
The deputation of the Provincial and City Prosecutors is necessitated by
the need for prompt investigation and dispensation of election cases as an
indispensable part of the task of securing fine, orderly, honest, peaceful and
credible elections. Enfeebled by lack of funds and the magnitude of its
workload, the petitioner does not have a sufficient number of legal officers
to conduct such investigation and to prosecute such cases. The prosecutors
deputized by the petitioner are subject to its authority, control and
supervision in respect of the particular functions covered by such
deputation. The acts of such deputies within the lawful scope of their
delegated authority are, in legal contemplation, the acts of the petitioner
itself.[15] Such authority may be revoked or withdrawn any time by the
petitioner, either expressly or impliedly, when in its judgment such
revocation or withdrawal is necessary to protect the integrity of the process
to promote the common good, or where it believes that successful
prosecution of the case can be done by the petitioner. Moreover, being mere
information on the vote-buying of the accused in Criminal Cases Nos. 796000 to 7969-00. Based on the records, the witnesses in Criminal Case No.
7034-99 executed their sworn statements only after the preliminary
investigation of EO No. 98-219; hence, the Law Department of the petitioner
could not have intelligently determined whether the said witnesses were
exempt from prosecution or not.
We agree with the petitioner.
Section 261(a)(b) of the Omnibus Election Code penalizes vote-buying
and vote-selling and conspiracy to bribe voters.
(a) Vote-buying and vote-selling. (1) Any person who gives, offers or
promises money or anything of value, gives or promises any office or
employment, franchise or grant, public or private, or makes or offers to
make an expenditure, directly or indirectly, or cause an expenditure to be
made to any person, association, corporation, entity, or community in order
to induce anyone or the public in general to vote for or against any
candidate or withhold his vote in the election, or to vote for or against any
aspirant for the nomination or choice of a candidate in a convention or
similar election process of a political party.
...
(b) Conspiracy to bribe voters. Two or more persons, whether candidates or
not, who come to an agreement concerning the commission of any violation
of paragraph (a) of this section and decide to commit it.
Not only principals but also accomplices and accessories are criminally
liable for election offenses.[21] Section 28 of Republic Act No. 6648 governs
the prosecution of the crimes of vote-buying and vote-selling, thus:
SECTION 28. Prosecution of Vote-buying and Vote-selling. The presentation
of a complaint for violations of paragraph (a) or (b) of Section 261 of Batas
Pambansa Blg. 881 supported by affidavits of complaining witnesses
attesting to the offer or promise by or of the voters acceptance of money or
other consideration from the relatives, leaders or sympathizers of a
candidate, shall be sufficient basis for an investigation to be immediately
conducted by the Commission, directly or through its duly authorized legal
officers, under Section 68 or Section 265 of said Batas Pambansa Blg. 881.
Under the last paragraph of the said provision, any person guilty of
vote-buying and vote-selling who voluntarily gives information and willingly
testifies on violations of paragraphs (a) and (b) of Section 261 of the
Omnibus Election Code shall be exempt from prosecution and punishment
for the offense with reference to which their information and
testimony were given, without prejudice to their liability for perjury and
false testimony, thus:
SEC. 265. Prosecution. . . .
...
The giver, offerer, and promisor as well as the solicitor, acceptor, recipient
and conspirator referred to in paragraphs (a) and (b) of Section 261 of Batas
Pambansa Blg. 881 shall be liable as principals: Provided, That any person,
otherwise guilty under said paragraphs who voluntarily gives information
testifies but contrary to his affidavit, he loses his immunity from suit, and
may be prosecuted for violations of Section 261(a) and (b) of the Omnibus
Election Code, perjury under Article 183 of the Revised Penal Code, or false
testimony under Article 180 of the same Code.
The power to grant exemptions is vested solely on the petitioner. This
power is concomitant with its authority to enforce election laws, investigate
election offenses and prosecute those committing the same. The exercise of
such power should not be interfered with by the trial court. Neither may this
Court interfere with the petitioners exercise of its discretion in denying or
granting exemptions under the law, unless the petitioner commits a grave
abuse of its discretion amounting to excess or lack of jurisdiction.
There is no showing in the record that the petitioner committed abuse
of discretion in granting immunity to the witnesses in Criminal Case No.
7034-99 and in nullifying the Resolution of the Provincial Prosecutor in I.S.
No. 1-99-1080.
It cannot be over-emphasized that the authority given to the petitioner
to grant exemptions should be used to achieve and further its mandate to
insure clean, honest, peaceful and orderly elections.
The respondents reliance on the ruling of this Court in Lozano v. Yorac is
misplaced. The issue of the application of the immunity statute was not
raised in that case.
In sum then, the Court finds that the respondent committed a grave
abuse of discretion amounting to excess or lack of jurisdiction in denying the
petitioners motion to dismiss Criminal Cases Nos. 7960-00 to 7969-00 before
it and the motion for reconsideration of the said denial.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
assailed Orders dated February 20, 2001 and May 16, 2001 are SET ASIDE.
Respondent Judge Dolores Espaol, RTC, Imus, Cavite, Branch 90, is directed
to dismiss Criminal Cases Nos. 7960-00 to 7969-00. No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago,
Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales,
Azcuna, and Tinga, JJ., concur.
SECOND DIVISION
[G.R. No. L-16285. December 29, 1960.]
JOSE SETON and JULIANA SETON, Petitioners, v. HON. JOSE S.
RODRIGUEZ, Judge of the Court of First Instance (Branch IV) of
Cebu, and IGNACIO SETON, Respondents.
Cornelio E. Codilla, for Petitioners.
Cesar Gonzales for Respondents.
SYLLABUS
1. APPEAL AND ERROR; ANNOTATION OF ATTACHMENT, LIEN OR ADVERSE
CLAIMS; ORDER OF REGISTRATION COURT APPEALABLE. An order of the
registration court requiring the holder of a duplicate certificate of title to
surrender the same for the purpose of annotating an attachment, lien, or
adverse claim under section 72 of Act 496 is appealable because it resolves
important questions as to the respective rights of the parties.
The Commission believes that while Section 37 of the Revised Election Code
imposes upon the commission the ministerial duty to receive and
acknowledge certificates of candidacy, the law leaves to the Commission a
measure:of discretion on whether to give due course to a particular
certificate of candidacy should it find said certificate of candidacy to have
been filed not bona fide. We also believe that a certificate of candidacy is
not bona fide when it is filed, as a matter of caprice or fancy, by a person
who is incapable of understanding the full meaning of his acts and the true
significance of election and without any political organization or visible
supporters behind him so that he, has not even the tiniest chance to obtain
the favorable indorsement of a substantial portion of the electorate, or when
the one who files the same exerts no tangible effort, shown by overt acts, to
pursue to a semblance of success his candidacy.
The law requires the certificate of candidacy to be under oath in
acknowledgment of its serious character as an indispensable segment in the
process of election, the first step that a citizen has to take in seeking public
trust and in avoiding service to the common weal. It is a solemn matter, not
to be taken lightly.
The giving due course to a certificate of candidacy is a process of no mean
proportion, particularly for the offices of President and Vice President of the
Philippines and Senator which involve the printing at public expense of
around 136,000 copies of each certificate of candidacy; the printing of the
names of the candidates in several election forms; the mailing, sorting, and
distribution of the copies of said certificates of candidacy and forms among
the 34,000 polling places throughout the country; the entering of the names
of the candidates by the board of inspectors in still other forms; etc.
Conisidering all these, the Commission is satisfied with the view that
Congress could not have meant to make as a ministerial duty of the
Commission to give due course to every certificate of candidacy, no matter
how senseless said certificate of candidacy may be, thus in effect
authorizing a meaningless expenditure of a considerable amount of public
funds, and in the process put added routinary burden on the already heavily
burdened election machinery, as well as shear off the election much of its
dignity as a solemn process of democracy.
Based on existing records of the Commission and on evidence adduced
during the hearing on the certificates of candidacy mentioned above, the
Commission finds, and so declares, that the said certificates of candidacy
have not been filed in good faith on grounds hereunder stated.
Section 36 of the Revised Election Code provides that 96 certificates of
candidacy of candiddtes for President . . . shall be filed with the Commission
on Elections which shall order the preparation and distribution of copies for
the same to all the election precincts of the Philippines. . . .
It further provides that said certificates shall be distributed as follows:
. . . the Commission on Elections . . . shall immediately send copies thereof
to the secretary of the Provincial Board of each province where the elections
will be held, and the latter shall in turn immediately forward copies to all the
polling places. The Commission on Elections shall communicate the names
of said candidates to the secretary of the provincial board by telegraph. If
the certificate of candidacy is sent by mail, it shall be by registered mail, and
the date on which the package was deposited in the post-office may be
considered as the filing date thereof if confirmed by a telegram or radiogram
and Eulogio Palma Garcia is from Northern Mindanao. The names used are
such that all votes for "Carlos Garcia", "C. Garcia", "P. Garcia", and "Garcia"
would, be declared stray. The mischief aimed to be realize by the plan is too
plain to be missed by any impartial mind. . . .
The Commission, . . . is clear in the conclusion that all raid three certificates
of candidacy have been filed not for the purpose of winning the election or
even to obtain a substantial number of votes for the presidency of the
Philippines but for the purpose of prejudicing the candidacy of a candidate
in good faith by nullifying the votes cast for the same name and/or surname
of said candidate in good faith.
xxx
xxx
xxx
We reiterate here what the Commission has already said in the similar case
of Re-Certificate of Candidacy of Eduardo A. Barreto. (Case No. 179):
The duty of the Commission under these circumstances is too plain to be
mistaken. The law could not have intended nor will the Commission allow
itself to be made a party to fraud against the integrity and purity of election.
Election is not a game of mean political tricks where deceit wins a premium.
It is an honest process, governed by fair rules of law and good conduct. In
election as well as in any other field of fair contest, deceit cannot be allowed
to clothe itself in legal technicalities and demand a prize. It must be
condemned and never tolerated. (Emphasis ours.)
In other words, the candidates in question did not really aspire to be elected
President of the Philippines. Their certificates of candidacy were filed merely
for the purpose of nullifying, in effect, all votes cast in favor of "Garcia", "C.
Garcia", and "P. Garcia", even if the voters intended to vote for Carlos P.
Garcia, the incumbent of said office. The objective was, evidently, to prevent
a faithful determination of the true will of the electorate. Had the certificates
of candidacy in question been given due course, whether or not such tax
penalty, or sum has been election inspectors, who would be at a loss as to
whom to credit the votes cast for "Carlos Garcia", "C. Garcia", "P. Garcia",
and "Garcia" or whether said votes should not be counted, as stray votes.
Thus, an opportunity would be created to subject the election officers
throughout the Philippines to complaints, either by the opponents of, the
incumbent President, if the votes were credited to him or by the Nacionalista
Party, if the votes were counted in favor of either Ciriaco S. Garcia, or Carlos
C. Garcia, or Eulogio Palma Garcia, or considered as stray votes. What this
could have led to, or given an excuse for,public disorders which may not
have been altogether unlikely, in the light of the conditions then existing.
Worse, still, there would have been no means, under the law, to ascertain
whether the aforementioned votes were intended for the incumbent
President Carlos P. Garcia or for the petitioners in said case. The action of
the Commission therein tended, therefore, to insure free, orderly and honest
elections, which is its main Concern, under our fundamental law and the
Revised Election Code. Such, however, is not the situation obtaining in the
case at bar.
Whether or not the Commission on Election should incur the expenses
incident to the preparation and distribution of copies of the certificates of
candidacy of those who, in its opinion, do not have a chance to get a
substantial number of votes, is another question of policy for Congress,not
the Commission, to settle. When the Revised Election Code imposes upon
the Commission the ministerial duty to receive those certificates and
refused to sign "in violation of the clear legal rights of the petitioner," and
that he unjustly refused and still refuses to approve said warrant."chanrobles
virtual law library
The answer alleges "that the Philippine Legislature closed its last session on
November 9, 1925," and that the petitioner was paid his corresponding
salary to January 31, 1926. "That the respondent refused to approve the
payment of the alleged salary of the petitioner from February 1, 1926, up to
the present time for the reason that prior to February 1, 1926, very many
more than "several days" had elapsed since the closing of the last session of
the Philippine Legislature . . . ."chanrobles virtual law library
Section 18 of Act No. 2935 says:
The following rules are hereby establishment regarding the appropriations
for the Legislature and the Departments, Bureaus, offices or dependencies of
the Insular Government, and shall not be understood to be repealed by any
other law unless expressly repealed:
And subdivision 2 of that section provides:
The appropriation for "supplementary force" shall be understood to be
available for the payment of officers appointed in accordance with section
one hundred of the Administrative Code; of employees rendering service
before, during, and several days after a session, and employees within and
outside of the Philippine Islands . . .
It must be conceded that the services of the petitioner come under the
provision for "the appropriation for supplementary force." That is to say, that
he was employed as a "temporary clerk," and as such he is distinguished
from a "permanent employee" of the Legislature, and that the services in
question were rendered eighty-two days after the final adjourment of the
Legislature. Hence, if the words "several days after a session" cannot legally
be construed to cover and apply to the period in question, the petitioner was
not legally employed, and is not entitled to the compensation in
question.chanroblesvirtualawlibrary chanrobles virtual law library
No authority has been cited, and none will ever be found, construing the
words "several days" to cover and include a period of eighty-two days. A day
has twenty-four hours, and there are seven days in a week, and thirty days
in a month, and twelve months, in a year. In using the words "several days
after a session," the Legislature must have known the meaning of the words
and their legal force and effect, and it is the duty of the court to so construe
them.chanroblesvirtualawlibrary chanrobles virtual law library
It is unnecessary in this opinion to define or specify the exact period of time
meant by "several days after a session" as used in the Act. But we do hold
that, as to the "supplementary force," the words cannot be construed to
mean or apply to a period of eighty-two days, "after a session." Giving them
this construction, it follows that the petitioner has no legal right to
compensation for the services in question.chanroblesvirtualawlibrary
chanrobles virtual law library
Apparently recognizing the legal force and effect of the words used, the
petitioner contends that section 18 of Act No. 2935 is unconstitutional,
because ( a) it embraces two subjects, and "( b) that one of the subjects is
not expressed in the title of the bill." It is entitled "an Act appropriating funds
for the necessary expenses of the Government of the Philippine Islands
during the fiscal year ending December thirty-first, nineteen hundred and
twenty-on, and for other purposes." And section 18 provides that the