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EN BANC Memorandum of Agreement

on promotion.

Hence, this petition for certiorari and


G.R. No. 120319 October 6, 1995 prohibition seeking to set aside the decision of
the Voluntary Arbitrator and to prohibit her
LUZON DEVELOPMENT BANK, petitioner, from enforcing the same.
vs.
ASSOCIATION OF LUZON DEVELOPMENT In labor law context, arbitration is the
BANK EMPLOYEES and ATTY. ESTER S. reference of a labor dispute to an impartial
GARCIA in her capacity as VOLUNTARY third person for determination on the basis of
ARBITRATOR, respondents. evidence and arguments presented by such
parties who have bound themselves to accept
the decision of the arbitrator as final and
binding.
ROMERO, J.:
Arbitration may be classified, on the basis of
From a submission agreement of the Luzon the obligation on which it is based, as either
Development Bank (LDB) and the Association compulsory or voluntary.
of Luzon Development Bank Employees
(ALDBE) arose an arbitration case to resolve Compulsory arbitration is a system whereby
the following issue: the parties to a dispute are compelled by the
government to forego their right to strike and
Whether or not the company are compelled to accept the resolution of their
has violated the Collective dispute through arbitration by a third
Bargaining Agreement party.1The essence of arbitration remains
provision and the since a resolution of a dispute is arrived at by
Memorandum of Agreement resort to a disinterested third party whose
dated April 1994, on decision is final and binding on the parties, but
promotion. in compulsory arbitration, such a third party is
normally appointed by the government.
At a conference, the parties agreed on the
submission of their respective Position Papers Under voluntary arbitration, on the other hand,
on December 1-15, 1994. Atty. Ester S. referral of a dispute by the parties is made,
Garcia, in her capacity as Voluntary Arbitrator, pursuant to a voluntary arbitration clause in
received ALDBE's Position Paper on January their collective agreement, to an impartial third
18, 1995. LDB, on the other hand, failed to person for a final and binding
submit its Position Paper despite a letter from resolution.2Ideally, arbitration awards are
the Voluntary Arbitrator reminding them to do supposed to be complied with by both parties
so. As of May 23, 1995 no Position Paper had without delay, such that once an award has
been filed by LDB. been rendered by an arbitrator, nothing is left
to be done by both parties but to comply with
On May 24, 1995, without LDB's Position the same. After all, they are presumed to have
Paper, the Voluntary Arbitrator rendered a freely chosen arbitration as the mode of
decision disposing as follows: settlement for that particular dispute. Pursuant
thereto, they have chosen a mutually
acceptable arbitrator who shall hear and
WHEREFORE, finding is
decide their case. Above all, they have
hereby made that the Bank
mutually agreed to de bound by said
has not adhered to the
arbitrator's decision.
Collective Bargaining
Agreement provision nor the
In the Philippine context, the parties to a 4. Claims for actual, moral,
Collective Bargaining Agreement (CBA) are exemplary and other forms of
required to include therein provisions for a damages arising from the
machinery for the resolution of grievances employer-employee relations;
arising from the interpretation or
implementation of the CBA or company 5. Cases arising from any
personnel policies.3 For this purpose, parties violation of Article 264 of this
to a CBA shall name and designate therein a Code, including questions
voluntary arbitrator or a panel of arbitrators, or involving the legality of strikes
include a procedure for their selection, and lockouts;
preferably from those accredited by the
National Conciliation and Mediation Board 6. Except claims for
(NCMB). Article 261 of the Labor Code Employees Compensation,
accordingly provides for exclusive original Social Security, Medicare and
jurisdiction of such voluntary arbitrator or maternity benefits, all other
panel of arbitrators over (1) the interpretation claims, arising from employer-
or implementation of the CBA and (2) the employee relations, including
interpretation or enforcement of company those of persons in domestic
personnel policies. Article 262 authorizes or household service, involving
them, but only upon agreement of the parties, an amount exceeding five
to exercise jurisdiction over other labor thousand pesos (P5,000.00)
disputes. regardless of whether
accompanied with a claim for
On the other hand, a labor arbiter under reinstatement.
Article 217 of the Labor Code has jurisdiction
over the following enumerated cases: xxx xxx xxx

. . . (a) Except as otherwise It will thus be noted that the jurisdiction


provided under this Code the conferred by law on a voluntary arbitrator or a
Labor Arbiters shall have panel of such arbitrators is quite limited
original and exclusive compared to the original jurisdiction of the
jurisdiction to hear and decide, labor arbiter and the appellate jurisdiction of
within thirty (30) calendar days the National Labor Relations Commission
after the submission of the (NLRC) for that matter.4 The state of our
case by the parties for present law relating to voluntary arbitration
decision without extension, provides that "(t)he award or decision of the
even in the absence of Voluntary Arbitrator . . . shall be final and
stenographic notes, the executory after ten (10) calendar days from
following cases involving all receipt of the copy of the award or decision by
workers, whether agricultural the parties,"5 while the "(d)ecision, awards, or
or non-agricultural: orders of the Labor Arbiter are final and
executory unless appealed to the Commission
1. Unfair labor practice cases; by any or both parties within ten (10) calendar
days from receipt of such decisions, awards,
2. Termination disputes; or orders."6 Hence, while there is an express
mode of appeal from the decision of a labor
3. If accompanied with a claim arbiter, Republic Act No. 6715 is silent with
for reinstatement, those cases respect to an appeal from the decision of a
that workers may file involving voluntary arbitrator.
wages, rates of pay, hours of
work and other terms and Yet, past practice shows that a decision or
conditions of employment; award of a voluntary arbitrator is, more often
than not, elevated to the Supreme Court itself (1) of the third paragraph and
on a petition for certiorari,7 in effect equating subparagraph (4) of the fourth
the voluntary arbitrator with the NLRC or the paragraph of Section 17 of the
Court of Appeals. In the view of the Court, this Judiciary Act of 1948.
is illogical and imposes an unnecessary
burden upon it. xxx xxx xxx

In Volkschel Labor Union, et al. v. NLRC, et Assuming arguendo that the voluntary
al.,8 on the settled premise that the judgments arbitrator or the panel of voluntary arbitrators
of courts and awards of quasi-judicial may not strictly be considered as a quasi-
agencies must become final at some definite judicial agency, board or commission, still
time, this Court ruled that the awards of both he and the panel are comprehended
voluntary arbitrators determine the rights of within the concept of a "quasi-judicial
parties; hence, their decisions have the same instrumentality." It may even be stated that it
legal effect as judgments of a court. was to meet the very situation presented by
In Oceanic Bic Division (FFW), et the quasi-judicial functions of the voluntary
al. v. Romero, et al.,9 this Court ruled that "a arbitrators here, as well as the subsequent
voluntary arbitrator by the nature of her arbitrator/arbitral tribunal operating under the
functions acts in a quasi-judicial capacity." Construction Industry Arbitration
Under these rulings, it follows that the Commission,11 that the broader term
voluntary arbitrator, whether acting solely or in "instrumentalities" was purposely included in
a panel, enjoys in law the status of a quasi- the above-quoted provision.
judicial agency but independent of, and apart
from, the NLRC since his decisions are not An "instrumentality" is anything used as a
appealable to the latter.10 means or agency.12 Thus, the terms
governmental "agency" or "instrumentality"
Section 9 of B.P. Blg. 129, as amended by are synonymous in the sense that either of
Republic Act No. 7902, provides that the them is a means by which a government acts,
Court of Appeals shall exercise: or by which a certain government act or
function is performed.13 The word
xxx xxx xxx "instrumentality," with respect to a state,
contemplates an authority to which the state
(B) Exclusive appellate delegates governmental power for the
jurisdiction over all final performance of a state function.14 An individual
judgments, decisions, person, like an administrator or executor, is a
resolutions, orders or awards judicial instrumentality in the settling of an
of Regional Trial Courts and estate,15 in the same manner that a sub-agent
quasi-judicial agencies, appointed by a bankruptcy court is an
instrumentalities, boards or instrumentality of the court,16and a trustee in
commissions, including the bankruptcy of a defunct corporation is an
Securities and Exchange instrumentality of the state.17
Commission, the Employees
Compensation Commission The voluntary arbitrator no less performs a
and the Civil Service state function pursuant to a governmental
Commission, except those power delegated to him under the provisions
falling within the appellate therefor in the Labor Code and he falls,
jurisdiction of the Supreme therefore, within the contemplation of the term
Court in accordance with the "instrumentality" in the aforequoted Sec. 9 of
Constitution, the Labor Code B.P. 129. The fact that his functions and
of the Philippines under powers are provided for in the Labor Code
Presidential Decree No. 442, does not place him within the exceptions to
as amended, the provisions of said Sec. 9 since he is a quasi-judicial
this Act, and of subparagraph instrumentality as contemplated therein. It will
be noted that, although the Employees for certiorari from that award or decision, the
Compensation Commission is also provided Court of Appeals must be deemed to have
for in the Labor Code, Circular No. 1-91, concurrent jurisdiction with the Supreme
which is the forerunner of the present Revised Court. As a matter of policy, this Court shall
Administrative Circular No. 1-95, laid down the henceforth remand to the Court of Appeals
procedure for the appealability of its decisions petitions of this nature for proper disposition.
to the Court of Appeals under the foregoing
rationalization, and this was later adopted by ACCORDINGLY, the Court resolved to
Republic Act No. 7902 in amending Sec. 9 of REFER this case to the Court of Appeals.
B.P. 129.
SO ORDERED.
A fortiori, the decision or award of the
voluntary arbitrator or panel of arbitrators
should likewise be appealable to the Court of
Appeals, in line with the procedure outlined in
Revised Administrative Circular No. 1-95, just
like those of the quasi-judicial agencies,
boards and commissions enumerated therein.

This would be in furtherance of, and


consistent with, the original purpose of
Circular No. 1-91 to provide a uniform
procedure for the appellate review of LUZON
adjudications of all quasi-judicial entities18 not
expressly excepted from the coverage of Sec. DEVELOPMENT
BANK vs. ASSO. OF
9 of B.P. 129 by either the Constitution or
another statute. Nor will it run counter to the
legislative intendment that decisions of the
NLRC be reviewable directly by the Supreme
Court since, precisely, the cases within the
LDB EMPLOYEES
adjudicative competence of the voluntary
arbitrator are excluded from the jurisdiction of and GARCIA
the NLRC or the labor arbiter.
MARCH 26, 2011 ~ VBDIAZ
In the same vein, it is worth mentioning that
under Section 22 of Republic Act No. 876,
also known as the Arbitration Law, arbitration LUZON DEVELOPMENT BANK
is deemed a special proceeding of which the vs. ASSO. OF LDB EMPLOYEES
court specified in the contract or submission,
or if none be specified, the Regional Trial and GARCIA
Court for the province or city in which one of
the parties resides or is doing business, or in G.R. No. 120319
which the arbitration is held, shall have
jurisdiction. A party to the controversy may, at
October 6, 1995
any time within one (1) month after an award FACTS: From a submission agreement
is made, apply to the court having jurisdiction
for an order confirming the award and the of the LDB and the Association of
court must grant such order unless the award
is vacated, modified or corrected.19
Luzon Development Bank Employees
(ALDBE) arose an arbitration case to
In effect, this equates the award or decision of
the voluntary arbitrator with that of the resolve the following issue:
regional trial court. Consequently, in a petition
Whether or not the company has ISSUE: WON a voluntary arbiter’s
violated the CBA provision and the decision is appealable to the CA and
MOA on promotion. not the SC
HELD: the Court resolved to REFER
At a conference, the parties agreed on this case to the Court of Appeals.
the submission of their respective YES
Position Papers. Atty. Garcia, in her
capacity as Voluntary Arbitrator, The jurisdiction conferred by law on a
received ALDBE’s Position Paper ; voluntary arbitrator or a panel of such
LDB, on the other hand, failed to arbitrators is quite limited compared to
submit its Position Paper despite a the original jurisdiction of the labor
letter from the Voluntary Arbitrator arbiter and the appellate jurisdiction of
reminding them to do so. As of May the NLRC for that matter. The
23, 1995 no Position Paper had been “(d)ecision, awards, or orders of the
filed by LDB. Labor Arbiter are final and
executory unless appealed to the
Without LDB’s Position Paper, the Commission …” Hence, while there is
Voluntary Arbitrator rendered a an express mode of appeal from the
decision disposing as follows: decision of a labor arbiter, Republic
Act No. 6715 is silent with respect to
WHEREFORE, finding is hereby made an appeal from the decision of a
that the Bank has not adhered to the voluntary arbitrator.
CBA provision nor the MOA on Yet, past practice shows that a decision
promotion. or award of a voluntary arbitrator is,
more often than not, elevated to the SC
Hence, this petition for certiorari and itself on a petition for certiorari, in
prohibition seeking to set aside the effect equating the voluntary arbitrator
decision of the Voluntary Arbitrator with the NLRC or the CA. In the view
and to prohibit her from enforcing the of the Court, this is illogical and
same. imposes an unnecessary burden upon it.
In Volkschel Labor Union, et instrumentalities, boards or
al. v. NLRC, et al., 8 on the settled commissions, including the Securities
premise that thejudgments of courts and Exchange Commission, the
and awards of quasi-judicial Employees Compensation Commission
agencies must become final at some and the Civil Service Commission,
definite time, this Court ruled that the except those falling within the appellate
awards of voluntary arbitrators jurisdiction of the Supreme Court in
determine the rights of parties; hence, accordance with the Constitution, the
their decisions have the same legal Labor Code of the Philippines under
effect as judgments of a Presidential Decree No. 442, as
court. In Oceanic Bic Division amended, the provisions of this Act,
(FFW), et al. v. Romero, et al., this and of subparagraph (1) of the third
Court ruled that “a voluntary arbitrator paragraph and subparagraph (4) of the
by the nature of her functionsacts in a fourth paragraph of Section 17 of the
quasi-judicial capacity.” Under these Judiciary Act of 1948.
rulings, it follows that the voluntary Assuming arguendo that the voluntary
arbitrator, whether acting solely or in a arbitrator or the panel of voluntary
panel, enjoys in law the status of a arbitrators may not strictly be
quasi-judicial agency but independent considered as a quasi-judicial agency,
of, and apart from, the NLRC since his board or commission, still both he and
decisions are not appealable to the the panel are comprehended within the
latter. concept of a “quasi-judicial
Section 9 of B.P. Blg. 129, as amended instrumentality.”
by Republic Act No. 7902, provides An “instrumentality” is anything used
that the Court of Appeals shall as a means or agency. Thus, the terms
exercise: governmental “agency” or
“instrumentality” are synonymous in
(B) Exclusive appellate jurisdiction the sense that either of them is a means
over all final judgments, decisions, by which a government acts, or by
resolutions, orders or awards of RTC s which a certain government act or
and quasi-judicial agencies, function is performed. The word
“instrumentality,” with respect to a Circular No. 1-91, which is the
state, contemplates an authority to forerunner of the present Revised
which the state delegates governmental Administrative Circular No. 1-95, laid
power for the performance of a state down the procedure for the
function. An individual person, like an appealability of its decisions to the CA
administrator or executor, is a judicial under the foregoing rationalization, and
instrumentality in the settling of an this was later adopted by Republic Act
estate, in the same manner that a sub- No. 7902 in amending Sec. 9 of B.P.
agent appointed by a bankruptcy court 129. A fortiori, the decision or award of
is an instrumentality of the court, and a the voluntary arbitrator or panel of
trustee in bankruptcy of a defunct arbitrators should likewise be
corporation is an instrumentality of the appealable to the CA, in line with the
state. procedure outlined in Revised
The voluntary arbitrator no less Administrative Circular No. 1-95, just
performs a state function pursuant to a like those of the quasi-judicial
governmental power delegated to him agencies, boards and commissions
under the provisions therefor in the enumerated therein.
Labor Code and he falls, therefore, In the same vein, it is worth mentioning
within the contemplation of the term that under Section 22 of Republic Act
“instrumentality” in the aforequoted No. 876, also known as the Arbitration
Sec. 9 of B.P. 129. The fact that his Law, arbitration is deemed a special
functions and powers are provided for proceeding of which the court specified
in the Labor Code does not place him in the contract or submission, or if
within the exceptions to said Sec. 9 none be specified, the RTC for the
since he is a quasi-judicial province or city in which one of the
instrumentality as contemplated parties resides or is doing business, or
therein. in which the arbitration is held, shall
have jurisdiction.
It will be noted that, although the In effect, this equates the award or
Employees Compensation Commission decision of the voluntary arbitrator with
is also provided for in the Labor Code, that of the RTC. Consequently, in a
petition for certiorari from that award party is normally appointed by the
or decision, the CA must be deemed to government.
have concurrent jurisdiction with the Under voluntary arbitration, on the
SC. As a matter of policy, this Court other hand, referral of a dispute by the
shall henceforth remand to the Court of parties is made, pursuant to a voluntary
Appeals petitions of this nature for arbitration clause in their collective
proper disposition. agreement, to an impartial third person
NOTES: for a final and binding
1. In labor law context, arbitration is resolution. 2Ideally, arbitration awards
the reference of a labor dispute to an are supposed to be complied with by
impartial third person for determination both parties without delay, such that
on the basis of evidence and once an award has been rendered by an
arguments presented by such parties arbitrator, nothing is left to be done by
who have bound themselves to accept both parties but to comply with the
the decision of the arbitrator as final same. After all, they are presumed to
and binding. Arbitration may be have freely chosen arbitration as the
classified, on the basis of the obligation mode of settlement for that particular
on which it is based, as either dispute. Pursuant thereto, they have
compulsory or voluntary. chosen a mutually acceptable arbitrator
Compulsory arbitration is a system who shall hear and decide their case.
whereby the parties to a dispute are Above all, they have mutually agreed
compelled by the government to forego to de bound by said arbitrator’s
their right to strike and are compelled decision.
to accept the resolution of their dispute 2. Article 261 of the Labor Code
through arbitration by a third accordingly provides for exclusive
party. 1The essence of arbitration original jurisdiction of such voluntary
remains since a resolution of a dispute arbitrator or panel of arbitrators over
is arrived at by resort to a disinterested
third party whose decision is final and (1) the interpretation or implementation
binding on the parties, but in of the CBA and
compulsory arbitration, such a third
(2) the interpretation or enforcement of may file involving wages, rates of pay,
company personnel policies. hours of work and other terms and
conditions of employment;
Article 262 authorizes them, but only
upon agreement of the parties, to 4. Claims for actual, moral, exemplary
exercise jurisdiction over other labor and other forms of damages arising
disputes. from the employer-employee relations;

On the other hand, a labor arbiter under 5. Cases arising from any violation of
Article 217 of the Labor Code has Article 264 of this Code, including
jurisdiction over the following questions involving the legality of
enumerated cases: strikes and lockouts;

. . . (a) Except as otherwise provided 6. Except claims for Employees


under this Code the Labor Arbiters Compensation, Social Security,
shall have original and exclusive Medicare and maternity benefits, all
jurisdiction to hear and decide, within other claims, arising from employer-
thirty (30) calendar days after the employee relations, including those of
submission of the case by the parties persons in domestic or household
for decision without extension, even in service, involving an amount exceeding
the absence of stenographic notes, the five thousand pesos (P5,000.00)
following cases involving all workers, regardless of whether accompanied
whether agricultural or non- with a claim for reinstatement.
agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for


reinstatement, those cases that workers
THIRD DIVISION the interests of investors,
consumers suppliers, and the
public at large;

G.R. No. 102976 October 25, 1995 (d) to promote full utilization of
the existing capacity of the
IRON AND STEEL AUTHORITY, petitioner, industry, to discourage
vs. investment in excess capacity,
THE COURT OF APPEALS and MARIA and in coordination, with
CRISTINA FERTILIZER appropriate government
CORPORATION, respondents. agencies to encourage capital
investment in priority areas of
the industry;

FELICIANO, J.: (e) to assist the industry in


securing adequate and low-
Petitioner Iron and Steel Authority ("ISA") was cost supplies of raw materials
created by Presidential Decree (P.D.) No. 272 and to reduce the excessive
dated 9 August 1973 in order, generally, to dependence of the country on
develop and promote the iron and steel imports of iron and steel.
industry in the Philippines. The objectives of
the ISA are spelled out in the following terms: The list of powers and functions of the
ISA included the following:
Sec. 2. Objectives — The
Authority shall have the Sec. 4. Powers and Functions.
following objectives: — The authority shall have the
following powers and
(a) to strengthen the iron and functions:
steel industry of the
Philippines and to expand the xxx xxx xxx
domestic and export markets
for the products of the (j) to initiate expropriation of
industry; land required for basic iron
and steel facilities for
(b) to promote the subsequent resale and/or
consolidation, integration and lease to the companies
rationalization of the industry involved if it is shown that
in order to increase industry such use of the State's power
capability and viability to is necessary to implement the
service the domestic market construction of capacity which
and to compete in international is needed for the attainment of
markets; the objectives of the Authority;

(c) to rationalize the marketing xxx xxx xxx


and distribution of steel
products in order to achieve a (Emphasis supplied)
balance between demand and
supply of iron and steel P.D. No. 272 initially created petitioner ISA for
products for the country and to a term of five (5) years counting from 9 August
ensure that industry prices and 1973.1 When ISA's original term expired on 10
profits are at levels that October 1978, its term was extended for
provide a fair balance between
another ten (10) years by Executive Order No. P1,760,789.69 representing ten percent (10%)
555 dated 31 August 1979. of the declared market values of that property.
The Philippine National Bank, as mortgagee
The National Steel Corporation ("NSC") then a of the plant facilities and improvements
wholly owned subsidiary of the National involved in the expropriation proceedings, was
Development Corporation which is itself an also impleaded as party-defendant.
entity wholly owned by the National
Government, embarked on an expansion On 17 September 1983, a writ of possession
program embracing, among other things, the was issued by the trial court in favor of ISA.
construction of an integrated steel mill in Iligan ISA in turn placed NSC in possession and
City. The construction of such a steel mill was control of the land occupied by MCFC's
considered a priority and major industrial fertilizer plant installation.
project of the Government. Pursuant to the
expansion program of the NSC, Proclamation The case proceeded to trial. While the trial
No. 2239 was issued by the President of the was ongoing, however, the statutory existence
Philippines on 16 November 1982 withdrawing of petitioner ISA expired on 11 August 1988.
from sale or settlement a large tract of public MCFC then filed a motion to dismiss,
land (totalling about 30.25 hectares in area) contending that no valid judgment could be
located in Iligan City, and reserving that land rendered against ISA which had ceased to be
for the use and immediate occupancy of NSC. a juridical person. Petitioner ISA filed its
opposition to this motion.
Since certain portions of the public land
subject matter Proclamation No. 2239 were In an Order dated 9 November 1988, the trial
occupied by a non-operational chemical court granted MCFC's motion to dismiss and
fertilizer plant and related facilities owned by did dismiss the case. The dismissal was
private respondent Maria Cristina Fertilizer anchored on the provision of the Rules of
Corporation ("MCFC"), Letter of Instruction Court stating that "only natural or juridical
(LOI), No. 1277, also dated 16 November persons or entities authorized by law may be
1982, was issued directing the NSC to parties in a civil case."3 The trial court also
"negotiate with the owners of MCFC, for and referred to non-compliance by petitioner ISA
on behalf of the Government, for the with the requirements of Section 16, Rule 3 of
compensation of MCFC's present occupancy the Rules of Court.4
rights on the subject land." LOI No. 1277 also
directed that should NSC and private Petitioner ISA moved for reconsideration of
respondent MCFC fail to reach an agreement the trial court's Order, contending that despite
within a period of sixty (60) days from the date the expiration of its term, its juridical existence
of LOI No. 1277, petitioner ISA was to continued until the winding up of its affairs
exercise its power of eminent domain under could be completed. In the alternative,
P.D. No. 272 and to initiate expropriation petitioner ISA urged that the Republic of the
proceedings in respect of occupancy rights of Philippines, being the real party-in-interest,
private respondent MCFC relating to the should be allowed to be substituted for
subject public land as well as the plant itself petitioner ISA. In this connection, ISA referred
and related facilities and to cede the same to to a letter from the Office of the President
the NSC.2 dated 28 September 1988 which especially
directed the Solicitor General to continue the
Negotiations between NSC and private expropriation case.
respondent MCFC did fail. Accordingly, on 18
August 1983, petitioner ISA commenced The trial court denied the motion for
eminent domain proceedings against private reconsideration, stating, among other things
respondent MCFC in the Regional Trial Court, that:
Branch 1, of Iligan City, praying that it (ISA) be
places in possession of the property involved
upon depositing in court the amount of
The property to be At the same time, however, the Court
expropriated is not for public of Appeals held that it was premature
use or benefit [__] but for the for the trial court to have ruled that the
use and benefit [__] of NSC, a expropriation suit was not for a public
government controlled private purpose, considering that the parties
corporation engaged in private had not yet rested their respective
business and for profit, cases.
specially now that the
government, according to In this Petition for Review, the Solicitor
newspaper reports, is offering General argues that since ISA initiated and
for sale to the public its prosecuted the action for expropriation in its
[shares of stock] in the capacity as agent of the Republic of the
National Steel Corporation in Philippines, the Republic, as principal of ISA,
line with the pronounced policy is entitled to be substituted and to be made a
of the present administration party-plaintiff after the agent ISA's term had
to disengage the government expired.
from its private business
ventures.5 (Brackets supplied) Private respondent MCFC, upon the other
hand, argues that the failure of Congress to
Petitioner went on appeal to the Court of enact a law further extending the term of ISA
Appeals. In a Decision dated 8 October 1991, after 11 August 1988 evinced a "clear
the Court of Appeals affirmed the order of legislative intent to terminate the juridical
dismissal of the trial court. The Court of existence of ISA," and that the authorization
Appeals held that petitioner ISA, "a issued by the Office of the President to the
government regulatory agency exercising Solicitor General for continued prosecution of
sovereign functions," did not have the same the expropriation suit could not prevail over
rights as an ordinary corporation and that the such negative intent. It is also contended that
ISA, unlike corporations organized under the the exercise of the eminent domain by ISA or
Corporation Code, was not entitled to a period the Republic is improper, since that power
for winding up its affairs after expiration of its would be exercised "not on behalf of the
legally mandated term, with the result that National Government but for the benefit of
upon expiration of its term on 11 August 1987, NSC."
ISA was "abolished and [had] no more legal
authority to perform governmental functions." The principal issue which we must address in
The Court of Appeals went on to say that the this case is whether or not the Republic of the
action for expropriation could not prosper Philippines is entitled to be substituted for ISA
because the basis for the proceedings, the in view of the expiration of ISA's term. As will
ISA's exercise of its delegated authority to be made clear below, this is really the only
expropriate, had become ineffective as a issue which we must resolve at this time.
result of the delegate's dissolution, and could
not be continued in the name of Republic of
Rule 3, Section 1 of the Rules of Court
the Philippines, represented by the Solicitor
specifies who may be parties to a civil action:
General:
Sec. 1. Who May Be Parties.
It is our considered opinion
— Only natural or juridical
that under the law, the
persons or entities authorized
complaint cannot prosper, and
by law may be parties in a civil
therefore, has to be
action.
dismissed without prejudice to
the refiling of a new complaint
for expropriation if the Under the above quoted provision, it
Congress sees it fit." will be seen that those who can be
(Emphases supplied)
parties to a civil action may be broadly (i) to negotiate, and when
categorized into two (2) groups: necessary, to enter into
contracts for and in behalf of
(a) those who are recognized the government, for the bulk
as persons under the law purchase of materials,
whether natural, i.e., biological supplies or services for any
persons, on the one hand, or sectors in the industry, and to
juridical person such as maintain inventories of such
corporations, on the other materials in order to insure a
hand; and continuous and adequate
supply thereof and thereby
(b) entities authorized by reduce operating costs of such
law to institute actions. sector;

Examination of the statute which created xxx xxx xxx


petitioner ISA shows that ISA falls under
category (b) above. P.D. No. 272, as already (Emphasis supplied)
noted, contains express authorization to ISA
to commence expropriation proceedings like Clearly, ISA was vested with some of the
those here involved: powers or attributes normally associated with
juridical personality. There is, however, no
Sec. 4. Powers and Functions. provision in P.D. No. 272 recognizing ISA as
— The Authority shall have the possessing general or comprehensive juridical
following powers and personality separate and distinct from that of
functions: the Government. The ISA in fact appears to
the Court to be a non-incorporated agency or
xxx xxx xxx instrumentality of the Republic of the
Philippines, or more precisely of the
Government of the Republic of the
(j) to initiate expropriation of
Philippines. It is common knowledge that
land required for basic iron
other agencies or instrumentalities of the
and steel facilities for
Government of the Republic are cast
subsequent resale and/or
in corporate form, that is to say,
lease to the companies
are incorporated agencies orinstrumentalities,
involved if it is shown that
sometimes with and at other times without
such use of the State's power
capital stock, and accordingly vested with a
is necessary to implement the
juridical personality distinct from the
construction of capacity which
personality of the Republic. Among such
is needed for the attainment of
incorporated agencies or instrumentalities are:
the objectives of the Authority;
National Power Corporation;6 Philippine Ports
Authority;7 National Housing
xxx xxx xxx Authority;8 Philippine National Oil
Company;9 Philippine National
(Emphasis supplied) Railways; 10 Public Estates
Authority; 11 Philippine Virginia Tobacco
It should also be noted that the Administration,12 and so forth. It is worth noting
enabling statute of ISA expressly that the term "Authority" has been used to
authorized it to enter into certain kinds designate both incorporated and non-
of contracts "for and in behalf of the incorporated agencies or instrumentalities of
Government" in the following terms: the Government.

xxx xxx xxx 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 framework, vested with special
corporate and juridical person vested with the functions or jurisdiction by
full panoply of powers and attributes which are law, endowed with some if not
compendiously described as "legal all corporate powers,
personality." The relevant definitions are administering special funds,
found in the Administrative Code of 1987: and enjoying operational
autonomy, usually through a
Sec. 2. General Terms charter. This term includes
Defined. — Unless the specific regulatory agencies, chartered
words of the text, or the institutions and government-
context as a whole, or a owned or controlled
particular statute, require a corporations.
different meaning:
xxx xxx xxx
(1) Government of the
Republic of the (Emphases supplied)
Philippines refers to
the corporate governmental When the statutory term of a non-
entity through which the incorporated agency expires, the powers,
functions of government are duties and functions as well as the assets and
exercised throughout the liabilities of that agency revert back to, and
Philippines, including, save as are re-assumed by, the Republic of the
the contrary appears from the Philippines, in the absence of special
context, the various arms provisions of law specifying some other
through which political disposition thereof such as, e.g., devolution or
authority is made effective in transmission of such powers, duties,
the Philippines, whether functions, etc. to some other identified
pertaining to the autonomous successor agency or instrumentality of the
regions, the provincial, city, Republic of the Philippines. When the expiring
municipal or barangay agency is an incorporated one, the
subdivisions or other forms of consequences of such expiry must be looked
local government. for, in the first instance, in the charter of that
agency and, by way of supplementation, in the
xxx xxx xxx provisions of the Corporation Code. Since, in
the instant case, ISA is a non-incorporated
(4) Agency of the agency or instrumentality of the Republic, its
Government refers to any of powers, duties, functions, assets and liabilities
the various units of the are properly regarded as folded back into the
Government, including a Government of the Republic of the Philippines
department, bureau, office, and hence assumed once again by the
instrumentality, or Republic, no special statutory provision having
government-owned or been shown to have mandated succession
controlled corporation, or a thereto by some other entity or agency of the
local government or a distinct Republic.
unit therein.
The procedural implications of the relationship
xxx xxx xxx between an agent or delegate of the Republic
of the Philippines and the Republic itself are,
(10) Instrumentality refers to at least in part, spelled out in the Rules of
any agency of the National Court. The general rule is, of course, that an
Government, not integrated action must be prosecuted and defended in
within the department the name of the real party in interest. (Rule 3,
Section 2) Petitioner ISA was, at the
commencement of the expropriation From the foregoing premises, it follows that
proceedings, a real party in interest, having the Republic of the Philippines is entitled to be
been explicitly authorized by its enabling substituted in the expropriation proceedings
statute to institute expropriation proceedings. as party-plaintiff in lieu of ISA, the statutory
The Rules of Court at the same time expressly term of ISA having expired. Put a little
recognize the role of representative parties: differently, the expiration of ISA's statutory
term did not by itself require or justify the
Sec. 3. Representative dismissal of the eminent domain proceedings.
Parties. — A trustee of an
expressed trust, a guardian, It is also relevant to note that the non-joinder
an executor or administrator, of the Republic which occurred upon the
or a party authorized by expiration of ISA's statutory term, was not a
statute may sue or be sued ground for dismissal of such proceedings
without joining the party for since a party may be dropped or added by
whose benefit the action is order of the court, on motion of any
presented or defended; but the party or on the court's own initiative at any
court may, at any stage of the stage of the action and on such terms as are
proceedings, order such just. 13 In the instant case, the Republic has
beneficiary to be made a precisely moved to take over the proceedings
party. . . . . (Emphasis as party-plaintiff.
supplied)
In E.B. Marcha Transport Company, Inc. v.
In the instant case, ISA instituted the Intermediate Appellate Court, 14 the Court
expropriation proceedings in its capacity as an recognized that the Republic may initiate or
agent or delegate or representative of the participate in actions involving its agents.
Republic of the Philippines pursuant to its There the Republic of the Philippines was held
authority under P.D. No. 272. The present to be a proper party to sue for recovery of
expropriation suit was brought on behalf of possession of property although the "real" or
and for the benefit of the Republic as the registered owner of the property was the
principal of ISA. Paragraph 7 of the complaint Philippine Ports Authority, a government
stated: agency vested with a separate juridical
personality. The Court said:
7. The Government, thru the
plaintiff ISA, urgently needs It can be said that in suing for
the subject parcels of land for the recovery of the rentals, the
the construction and Republic of the Philippines
installation of iron and steel acted as principal of the
manufacturing facilities that Philippine Ports Authority,
are indispensable to the directly exercising the
integration of the iron and commission it had earlier
steel making industry which is conferred on the latter as its
vital to the promotion of public agent. . . .15 (Emphasis
interest and welfare. supplied)
(Emphasis supplied)
In E.B. Marcha, the Court also
The principal or the real party in stressed that to require the Republic
interest is thus the Republic of the to commence all over again another
Philippines and not the National Steel proceeding, as the trial court and
Corporation, even though the latter Court of Appeals had required, was to
may be an ultimate user of the generate unwarranted delay and
properties involved should the create needless repetition of
condemnation suit be eventually proceedings:
successful.
More importantly, as we see commencement of the present expropriation
it, dismissing the complaint on proceedings before the Iligan Regional Trial
the ground that the Republic of Court, provided that:
the Philippines is not the
proper party would result in Sec. 64. Particular powers and
needless delay in the duties of the President of the
settlement of this matter and Philippines. — In addition to
also in derogation of the policy his general supervisory
against multiplicity of suits. authority, the President of the
Such a decision would require Philippines shall have such
the Philippine Ports Authority other specific powers and
to refile the very same duties as are expressly
complaint already proved by conferred or imposed on him
the Republic of the Philippines by law, and also, in particular,
and bring back as it were to the powers and duties set forth
square one.16 (Emphasis in this Chapter.
supplied)
Among such special powers
As noted earlier, the Court of Appeals and duties shall be:
declined to permit the substitution of the
Republic of the Philippines for the ISA upon xxx xxx xxx
the ground that the action for expropriation
could not prosper because the basis for the
(h) To determine when it is
proceedings, the ISA's exercise of its
necessary or advantageous to
delegated authority to expropriate, had
exercise the right of eminent
become legally ineffective by reason of the
domain in behalf of the
expiration of the statutory term of the agent or
Government of the
delegated i.e., ISA. Since, as we have held
Philippines; and to direct the
above, the powers and functions of ISA have
Secretary of Justice, where
reverted to the Republic of the Philippines
such act is deemed advisable,
upon the termination of the statutory term of
to cause the condemnation
ISA, the question should be addressed
proceedings to be begun in
whether fresh legislative authority is
the court having proper
necessary before the Republic of the
jurisdiction. (Emphasis
Philippines may continue the expropriation
supplied)
proceedings initiated by its own delegate or
agent.
The Revised Administrative Code of
1987 currently in force has
While the power of eminent domain is, in
substantially reproduced the foregoing
principle, vested primarily in the legislative
provision in the following terms:
department of the government, we believe
and so hold that no new legislative act is
necessary should the Republic decide, upon Sec. 12. Power of eminent
being substituted for ISA, in fact to continue to domain. — The President
prosecute the expropriation proceedings. For shall determine when it is
the legislative authority, a long time ago, necessary or advantageous to
enacted a continuing or standing delegation of exercise the power of eminent
authority to the President of the Philippines to domain in behalf of the
exercise, or cause the exercise of, the power National Government,
of eminent domain on behalf of the anddirect the Solicitor
Government of the Republic of the General, whenever he deems
Philippines. The 1917 Revised Administrative the action advisable, to
Code, which was in effect at the time of the institute expopriation
proceedings in the proper WHEREFORE, for all the foregoing, the
court. (Emphasis supplied) Decision of the Court of Appeals dated 8
October 1991 to the extent that it affirmed the
In the present case, the President, trial court's order dismissing the expropriation
exercising the power duly delegated proceedings, is hereby REVERSED and SET
under both the 1917 and 1987 ASIDE and the case is REMANDED to the
Revised Administrative Codes in effect court a quo which shall allow the substitution
made a determination that it was of the Republic of the Philippines for petitioner
necessary and advantageous to Iron and Steel Authority and for further
exercise the power of eminent domain proceedings consistent with this Decision. No
in behalf of the Government of the pronouncement as to costs.
Republic and accordingly directed the
Solicitor General to proceed with the SO ORDERED.
suit. 17

It is argued by private respondent MCFC that,


because Congress after becoming once more
the depository of primary legislative power,
had not enacted a statute extending the term
of ISA, such non-enactment must be deemed
a manifestation of a legislative design to
discontinue or abort the present expropriation Iron and Steel
suit. We find this argument much too
speculative; it rests too much upon simple Authority vs. Court of
silence on the part of Congress and casually
disregards the existence of Section 12 of the Appeals GR No.
1987 Administrative Code already quoted
above. 102976, October 25,
Other contentions are made by private 1995
respondent MCFC, such as, that the
constitutional requirement of "public use" or
"public purpose" is not present in the instant
case, and that the indispensable element of FACTS: The Iron and Steel Authority (ISA)
just compensation is also absent. We agree was created by PD No. 272, in order,
with the Court of Appeals in this connection generally, to develop and promote the iron
that these contentions, which were adopted
and steel industry in the Philippines. Initially, it
and set out by the Regional Trial Court in its
order of dismissal, are premature and are was created for a term of 5 years but when its
appropriately addressed in the proceedings original term expired, its term was extended
before the trial court. Those proceedings have for another 10 years by EO No. 555. The
yet to produce a decision on the merits, since National Steel Corporation (NSC) then a
trial was still on going at the time the Regional wholly owned subsidiary of the National
Trial Court precipitously dismissed the Development Corporation which is an entity
expropriation proceedings. Moreover, as a
wholly owned by the National Government
pragmatic matter, the Republic is, by such
substitution as party-plaintiff, accorded an embarked on an expansion program which
opportunity to determine whether or not, or to includes the construction of a steel mill in
what extent, the proceedings should be Iligan City. Proclamation No. 2239 was issued
continued in view of all the subsequent by the President withdrawing from sale or
developments in the iron and steel sector of settlement a tract of land in Iligan City to be
the country including, though not limited to, used by the NSC. However, certain portions of
the partial privatization of the NSC.
the public land under Proclamation 2239 were say, are incorporated agencies or
occupied by Maria Cristina Fertilizer Co. instrumentalities, sometimes with and other
(MCFC). LOI No. 1277 was issued directing times without capital stock, and accordingly
NSC to negotiate with the owners of MCFC for vested with a juridical personality distinct from
and on behalf of the Government for the the personality of the Republic. The term
compensation of MCFCâs present occupancy âAuthorityâ has been used to designate both
rights on the subject land. The LOI directed incorporated and non-incorporated agencies
that ISA may exercise the power of eminent or instrumentalities of the Government. The
domain should the negotiations fail. The Court considers that ISA is properly regarded
negotiations failed and ISA commenced as an agent or delegate of the Republic of the
expropriation proceedings against MCFC. Philippines. The Republic itself is a body
While trial was on-going the statutory corporate and juridical person vested with full
existence of ISA had expired prompting panoply of powers and attributes which are
MCFC to file the dismissal of the case since compendiously described as âlegal
ISA has ceased to be a juridical person. The personality.â When the statutory term of a
trial court granted MCFCâs motion to dismiss non-incorporated agency expires, the powers,
anchoring on the Rules of Court that âonly duties and functions as well as the assets and
natural or juridical persons or entities liabilities of that agency revert back to, and
authorized by law may be parties to a civil are re-assumed by, the Republic of the
case.â ISA moved for a reconsideration Philippines, in the absence of special
contending that despite the expiration of its provisions of law specifying some other
term, its juridicial existence continued until the disposition thereof such as e.g. devolution or
winding up of its affairs could be completed. In transmission of such powers, duties,
the alternative ISA urged that the Rep. of the functions, etc. to some other identified
Philippines should be allowed to be successor agency or instrumentality of the
substituted in its place. The RTC denied its Republic of the Philippines. When the expiring
motion for reconsideration. This was affirmed agency is an incorporated one, the
by the CA. consequences of such expiry must be looked
for, in the first instance, in the charter of that
agency and, by way of supplementation in the
provisions of the Corporation Code. Since ISA
ISSUE: Whether or not the Republic of the
is a non-incorporated agency or
Philippines is entitled to be substituted for ISA
instrumentality of the Republic, its powers,
in view of the expiration of ISAâs term.
duties, functions, assets and liabilities are
properly regarded as folded back into the
Government of the Philippines and hence
HELD: There is no provision in PD No. 272 assumed once again by the Republic, no
recognizing ISA as possessing general or special statutory provision having been shown
comprehensive juridical personality separate to have mandated succession thereto by
and distinct from that of the Government. ISA some other entity or agency of the Republic. It
in fact appears to be a non-incorporated follows that the Republic of the Philippines is
agency or instrumentality of the Government entitled to be substituted in the expropriation
of the Republic of the Philippines. It is proceedings as party-plaintiff in lieu of ISA,
common knowledge that other agencies or the statutory term of ISA having expired. The
instrumentalities of the Government of the expiration of ISAâs statutory did not by itself
Republic are case in corporate form, that is to require or justify the dismissal of the eminent
domain proceedings. Further, no new of all its gross receipts, which franchise tax
legislative act is necessary should the shall be "in lieu of all taxes". More specifically,
Republic decide, upon being substituted for the provision pertinently reads:
ISA, in fact to continue to prosecute the
SEC. 12. xxx In addition thereto, the grantee,
expropriation proceedings.
its successors or assigns shall pay a franchise
tax equivalent to three percent (3%) of all
gross receipts of the telephone or other
telecommunications businesses transacted
under this franchise by the grantee, its
successors or assigns, and the said
THIRD DIVISION percentage shall be in lieu of all taxeson this
franchise or earnings thereof. xxx (Italics
G.R. No. 149179. July 15, 2005 ours).

PHILIPPINE LONG DISTANCE TELEPHONE Meanwhile, or on January 1, 1992, Republic


COMPANY, INC., Petitioners, Act No. 7160, otherwise known as the Local
vs. Government Code, took effect. Section 137 of
CITY OF BACOLOD, FLORENTINO T. the Code, in relation to Section 151 thereof,
GUANCO, in his capacity as the City grants cities and other local government units
Treasurer of Bacolod City, and ANTONIO the power to impose local franchise tax on
G. LACZI, in his capacity as the City Legal businesses enjoying a franchise, thus:
Officer of Bacolod City, Respondents.
SEC. 137. Franchise Tax. – Notwithstanding
DECISION any exemption granted by any law or other
special law, the province may impose a tax on
GARCIA, J.: businesses enjoying a franchise, at a rate not
exceeding fifty percent (50%) of one percent
In this appeal by way of a petition for review (1%) of the gross annual receipts for the
on certiorari under Rule 45 of the Rules of preceding calendar year based on the
Court, petitioner Philippine Long Distance incoming receipt, or realized, within its
Telephone Company (PLDT), seeks the territorial jurisdiction.
reversal and setting aside of the July 23,
2001 decision1of the Regional Trial Court at xxx xxx xxx
Bacolod City, Branch 42, dismissing its
petition in Civil Case No. 99-10786, an action SEC. 151. Scope of Taxing Powers. – Except
to declare petitioner as exempt from the as otherwise provided in this Code, the city,
payment of franchise and business taxes may levy the taxes, fees, and charges which
sought to be imposed and collected by the the province or municipality may
respondent City of Bacolod. impose: Provided, however, That the taxes,
fees, and charges levied and collected by
The material facts are not at all disputed: highly urbanized and independent component
cities shall accrue to them and distributed in
PLDT is a holder of a legislative franchise accordance with the provisions of this Code.
under Act No. 3436, as amended, to render
local and international telecommunications The rates of taxes that the city may levy may
services. On August 24, 1991, the terms and exceed the maximum rates allowed for the
conditions of its franchise were consolidated province or municipality by not more than fifty
under Republic Act No. 7082,2 Section 12 of percent (50%) except the rates of professional
which embodies the so-called "in-lieu-of-all- and amusement taxes.
taxes" clause, whereunder PLDT shall pay a
franchise tax equivalent to three percent (3%)
By Section 193 of the same Code, all tax assessment on PLDT for the payment of
exemption privileges then enjoyed by all franchise tax due the City.
persons, whether natural or juridical, save
those expressly mentioned therein, were Complying therewith, PLDT began paying the
withdrawn, necessarily including those taxes City franchise tax from the year 1994 until the
from which PLDT is exempted under the "in- third quarter of 1998, at which time the total
lieu-of-all-taxes" clause in its charter. We franchise tax it had paid the City already
quote Section 193: amounted to ₱2,770,696.37.

SEC. 193. Withdrawal of Tax Exemption On June 2, 1998, the Department of Finance
Privileges. – Unless otherwise provided in this through its Bureau of Local Government
Code, tax exemptions or incentives granted Finance (BLGF), issued a ruling to the effect
to, or presently enjoyed by all persons, that as of March 16, 1995, the effectivity date
whether natural or juridical, including of the Public Telecommunications Policy Act
government-owned or controlled corporations, of the Philippines (Rep. Act. No. 7925), PLDT,
except local water districts, cooperatives duly among other telecommunication companies,
registered under R.A. 6938, non-stock and became exempt from local franchise tax.
non-profit hospitals and educational Pertinently, the BLGF ruling reads:
institutions, are hereby withdrawn upon the
effectivity of this Code. It appears that RA 7082 further amending
ACT No. 3436 which granted to PLDT a
Aiming to level the playing field among franchise to install, operate and maintain a
telecommunication companies, Congress telephone system throughout the Philippine
enacted Republic Act No. 7925, otherwise Islands was approved on August 3, 1991.
known as the Public Telecommunications Section 12 of said franchise, likewise,
Policy Act of the Philippines, which took effect contains the ‘in lieu of all taxes’ proviso.
on March 16, 1995. To achieve the legislative
intent, Section 23 thereof, also known as the In this connection, Section 23 of RA 7925,
"most-favored- treatment" clause, provides for quoted hereunder, which was approved on
an equality of treatment in the March 1, 1995 provides for the equality of
telecommunications industry, thus: treatment in the telecommunications industry:

SEC. 23. Equality of Treatment in the xxx xxx xxx


Telecommunications Industry – Any
advantage, favor, privilege, exemption, or
On the basis of the aforequoted Section 23 of
immunity granted under existing franchises, or
RA 7925, PLDT as a telecommunications
may hereafter be granted shall ipso
franchise holder becomes automatically
facto become part of previously granted
covered by the tax exemption provisions of
telecommunications franchises and shall be
RA 7925, which took effect on March 16,
accorded immediately and unconditionally to
1995.
the grantees of such franchises: Provided,
however, That the foregoing shall neither
apply to nor affect provisions of Accordingly, PLDT shall be exempt from the
telecommunications franchises concerning payment of franchise and business taxes
territory covered by the franchise, the life span imposable by LGUs under Sections 137 and
of the franchise, or the type of the service 143, respectively, of the LGC [Local
authorized by the franchise. Government Code], upon the effectivity of RA
7925 on March 16, 1995. However, PLDT
shall be liable to pay the franchise and
In August 1995, the City of Bacolod, invoking
business taxes on its gross receipts realized
its authority under Section 137, in relation to
from January 1, 1992 up to March 15, 1995,
Section 151 and Section 193, supra, of
during which period PLDT was not enjoying
the Local Government Code, made an
the ‘most favored clause’ proviso of RA 7025 law despite the enactment of the Public
[sic].3 Telecommunications Policy Act of the
Philippines (Rep. Act No. 7925), and
Invoking the aforequoted ruling, PLDT then accordingly prayed for the dismissal of the
stopped paying local franchise and business petition.
taxes to Bacolod City starting the fourth
quarter of 1998. In the ensuing pre-trial conference, the parties
manifested that they would not present any
The controversy came to a head-on when, testimonial evidence, and merely requested
sometime in 1999, PLDT applied for the for time to file their respective memoranda, to
issuance of a Mayor’s Permit but the City of which the trial court acceded.
Bacolod withheld issuance thereof pending
PLDT’s payment of its franchise tax liability in Eventually, in the herein assailed decision
the following amounts: (1) ₱358,258.30 for the dated July 23, 2001,9 the trial court dismissed
fourth quarter of 1998; and (b) ₱1,424,578.10 PLDT’s petition, thus:
for the year 1999, all in the aggregate amount
of ₱1,782,836.40, excluding surcharges and WHEREFORE, premises considered, the
interest, about which PLDT was duly informed petition should be, as it is hereby
by the City Treasurer via a 5th Indorsement DISMISSED. No costs.
dated March 16, 1999 for PLDT’s "appropriate
action".4 SO ORDERED.

In time, PLDT filed a protest5 with the Office of Therefrom, PLDT came to this Court via the
the City Legal Officer, questioning the present recourse, imputing the following errors
assessment and at the same time asking for a on the part of the trial court:
refund of the local franchise taxes it paid in
1997 until the third quarter of 1998.
5.01.a. THE LOWER COURT ERRED IN
SUSTAINING RESPONDENTS’ POSITION
In a reply-letter dated March 26, 1999,6 City THAT SECTION 137 OF THE LOCAL
Legal Officer Antonio G. Laczi denied the GOVERNMENT CODE, WHICH, IN
protest and ordered PLDT to pay the RELATION TO SECTION 151 THEREOF,
questioned assessment. ALLOWS RESPONDENT CITY TO IMPOSE
THE FRANCHISE TAX, IS APPLICABLE IN
Hence, on May 14, 1999, in the Regional Trial THIS CASE.
Court at Bacolod City, PLDT filed its
petition7 in Civil Case No. 99-10786, therein 5.01.b. THE LOWER COURT ERRED IN NOT
praying for a judgment declaring it as exempt HOLDING THAT UNDER PETITIONER’S
from the payment of local franchise and FRANCHISE (REPUBLIC ACT NO. 7082), AS
business taxes; ordering the respondent City AMENDED AND EXPANDED BY SECTION
to henceforth cease and desist from 23 OF REPUBLIC ACT NO. 7925 (PUBLIC
assessing and collecting said taxes; directing TELECOMMUNICATIONS POLICY ACT),
the City to issue the Mayor’s Permit for the TAKING INTO ACCOUNT THE
year 1999; and requiring it to refund the FRANCHISES OF GLOBE TELECOM, INC.,
amount of ₱2,770,606.37, allegedly (GLOBE) (REPUBLIC ACT NO. 7229) AND
representing overpaid franchise taxes for the SMART COMMUNICATIONS, INC. (SMART)
years 1997 and 1998 with interest until fully (REPUBLIC ACT NO. 7294), WHICH WERE
paid. ENACTED SUBSEQUENT TO THE LOCAL
GOVERNMENT CODE, NO FRANCHISE
In time, the respondent City filed its TAXES MAY BE IMPOSED ON PETITIONER
Answer/Comment to the petition,8 basically BY RESPONDENT CITY.
maintaining that Section 137 of the Local
Government Code remains as the operative
5.01.c. THE LOWER COURT ERRED IN NOT paid by it for the period covering the first to the
GIVING WEIGHT TO THE RULING OF THE third quarter of 1998.11
DEPARTMENT OF FINANCE, THROUGH
ITS BUREAU OF LOCAL GOVERNMENT Explains this Court in the same case:
FINANCE, THAT PETITIONER IS EXEMPT
FROM THE PAYMENT OF FRANCHISE AND To begin with, tax exemptions are highly
BUSINESS TAXES IMPOSABLE BY LOCAL disfavored. The reason for this was explained
GOVERNMENT UNITS UNDER THE LOCAL by this Court in Asiatic Petroleum Co. v.
GOVERNMENT CODE. Llanes, in which it was held:

5.01.d. THE LOWER COURT ERRED IN . . . Exemptions from taxation are highly
DISMISSING THE PETITION BELOW. disfavored, so much so that they may almost
be said to be odious to the law. He who claims
As we see it, the only question which an exemption must be able to point to some
commends itself for our resolution is, whether positive provision of law creating the right. . .
or not Section 23 of Rep. Act No. 7925, also As was said by the Supreme Court of
called the "most-favored-treatment" clause, Tennessee in Memphis vs. U. & P. Bank (91
operates to exempt petitioner PLDT from the Tenn., 546, 550), ‘The right of taxation is
payment of franchise tax imposed by the inherent in the State. It is a prerogative
respondent City of Bacolod. essential to the perpetuity of the government;
and he who claims an exemption from the
Contrary to petitioner’s claim, the issue thus common burden must justify his claim by the
posed is not one of "first impression" insofar clearest grant of organic or statute law.’ Other
as this Court is concerned. For sure, this is utterances equally or more emphatic come
not the first time for petitioner PLDT to invoke readily to hand from the highest authority.
the jurisdiction of this Court on the same In Ohio Life Ins. and Trust Co. vs. Debolt (16
question, albeit involving another city. Howard, 416), it was said by Chief Justice
Taney, that the right of taxation will not be
In PLDT vs. City of Davao,10 this Court has held to have been surrendered, ‘unless the
had the occasion to interpret Section 23 of intention to surrender is manifested by words
Rep. Act No. 7925. There, we ruled that too plain to be mistaken.’ In the case of
Section 23 does not operate to exempt PLDT the Delaware Railroad Tax (18 Wallace, 206,
from the payment of franchise tax imposed 226), the Supreme Court of the United States
upon it by the City of Davao: said that the surrender, when claimed, must
be shown by clear, unambiguous language,
In sum, it does not appear that, in approving which will admit of no reasonable construction
§23 of R.A. No. 7925, Congress intended it to consistent with the reservation of the power. If
operate as a blanket tax exemption to all a doubt arises as to the intent of the
telecommunications entities. Applying the rule legislature, that doubt must be solved in favor
of strict construction of laws granting tax of the State. In Erie Railway Company vs.
exemptions and the rule that doubts should be Commonwealth of Pennsylvania (21 Wallace,
resolved in favor of municipal corporations in 492, 499), Mr. Justice Hunt, speaking of
interpreting statutory provisions on municipal exemptions, observed that a State cannot
taxing powers, we hold that §23 of R.A. No. strip itself of the most essential power of
7925 cannot be considered as having taxation by doubtful words. ‘It cannot, by
amended petitioner's franchise so as to entitle ambiguous language, be deprived of this
it to exemption from the imposition of local highest attribute of sovereignty.’ In Tennessee
franchise taxes. Consequently, we hold that vs. Whitworth (117 U.S., 129, 136), it was
petitioner is liable to pay local franchise taxes said: ‘In all cases of this kind the question is
in the amount of ₱3,681,985.72 for the period as to the intent of the legislature, the
covering the first to the fourth quarter of 1999 presumption always being against any
and that it is not entitled to a refund of taxes surrender of the taxing power.’ In Farrington
vs. Tennessee and County of Shelby (95 U.S.,
379, 686), Mr. Justice Swayne said: ‘. . . those whose exemptions had been withdrawn
When exemption is claimed, it must be shown by the LGC.
indubitably to exist. At the outset, every
presumption is against it. A well-founded What this Court said in Asiatic Petroleum Co.
doubt is fatal to the claim. It is only when the v. Llanes applies mutatis mutandis to this
terms of the concession are too explicit to case: ‘When exemption is claimed, it must be
admit fairly of any other construction that the shown indubitably to exist. At the outset, every
proposition can be supported.’ presumption is against it. A well-founded
doubt is fatal to the claim. It is only when the
The tax exemption must be expressed in the terms of the concession are too explicit to
statute in clear language that leaves no doubt admit fairly of any other construction that the
of the intention of the legislature to grant such proposition can be supported.’ In this case,
exemption. And, even if it is granted, the the word ‘exemption’ in §23 of R.A. No. 7925
exemption must be interpreted in strictissimi could contemplate exemption from certain
juris against the taxpayer and liberally in favor regulatory or reporting requirements, bearing
of the taxing authority. in mind the policy of the law. It is noteworthy
that, in holding Smart and Globe exempt from
xxx xxx xxx local taxes, the BLGF did not base its opinion
on §23 but on the fact that the franchises
The fact is that the term ‘exemption’ in §23 is granted to them after the effectivity of the LGC
too general. A cardinal rule in statutory exempted them from the payment of local
construction is that legislative intent must be franchise and business taxes.
ascertained from a consideration of the statute
as a whole and not merely of a particular As in City of Davao, supra, petitioner presently
provision. For, taken in the abstract, a word or argues that because Smart Communications,
phrase might easily convey a meaning which Inc. (SMART) and Globe Telecom (GLOBE)
is different from the one actually intended. A under whose respective franchises granted
general provision may actually have a limited after the effectivity of the Local Government
application if read together with other Code, are exempt from franchise tax, it follows
provisions. Hence, a consideration of the law that petitioner is likewise exempt from the
itself in its entirety and the proceedings of franchise tax sought to be collected by the
both Houses of Congress is in order. City of Bacolod, on the reasoning that the
grant of tax exemption to SMART and
xxx xxx xxx GLOBE ipso facto applies to PLDT, consistent
with the "most-favored-treatment" clause
found in Section 23 of the Public
R.A. No. 7925 is thus a legislative enactment
Telecommunications Policy Act of the
designed to set the national policy on
Philippines (Rep. Act No. 7925).
telecommunications and provide the
structures to implement it to keep up with the
technological advances in the industry and the Again, there is nothing novel in petitioner’s
needs of the public. The thrust of the law is to contention. In fact, this Court in City of Davao,
promote gradually the deregulation of the even adverted to PLDT’s argument therein,
entry, pricing, and operations of all public thus:
telecommunications entities and thus promote
a level playing field in the telecommunications Finally, it [PLDT] argues that because Smart
industry. There is nothing in the language of and Globe are exempt from the franchise tax,
§23 nor in the proceedings of both the House it follows that it must likewise be exempt from
of Representatives and the Senate in enacting the tax being collected by the City of Davao
R.A. No. 7925 which shows that it because the grant of tax exemption to Smart
contemplates the grant of tax exemptions to and Globe ipso facto extended the same
all telecommunications entities, including exemption to it.
In rejecting PLDT’s contention, this Court There is also a need to promote a level
ruled in City of Davao as follows: playing field in the telecommunications
industry. New entities must be granted
The acceptance of petitioner’s theory would protection against dominant carriers through
result in absurd consequences. To illustrate: the encouragement of equitable access
In its franchise, Globe is required to pay a charges and equal access clauses in
franchise tax of only one and one-half interconnection agreements and the strict
percentum (1/2% [sic] ) of all gross receipts policing of predatory pricing by dominant
from its transactions while Smart is required to carriers.Equal access should be granted to all
pay a tax of three percent (3%) on all gross operators connecting into the interexchange
receipts from business transacted. Petitioner’s network. There should be no discrimination
theory would require that, to level the playing against any carrier in terms of priorities and/or
field, any "advantage, favor, privilege, quality of services.
exemption, or immunity" granted to Globe
must be extended to all telecommunications Nor does the term ‘exemption’ in § 23 of R.A.
companies, including Smart. If, later, No. 7925 mean tax exemption. The term
Congress again grants a franchise to another refers to exemption from certain regulations
telecommunications company imposing, say, and requirements imposed by the National
one percent (1%) franchise tax, then all other Telecommunications Commission (NTC). For
telecommunications franchises will have to be instance, R.A. No. 7925, § 17 provides: ‘The
adjusted to "level the playing field" so to Commission shall exempt any specific
speak. This could not have been the intent of telecommunications service from its rate or
Congress in enacting Section 23 of Rep. Act tariff regulations if the service has sufficient
7925. Petitioner’s theory will leave the competition to ensure fair and reasonable
Government with the burden of having to keep rates or tariffs.’ Another exemption granted by
track of all granted telecommunications the law in line with its policy of deregulation is
franchises, lest some companies be treated the exemption from the requirement of
unequally. It is different if Congress enacts a securing permits from the NTC every time a
law specifically granting uniform advantages, telecommunications company imports
favor, privilege, exemption or immunity to all equipment.13
telecommunications entities.
In the same en banc Resolution, the Court
On PLDT’s motion for reconsideration even rejected PLDT’s contention that the "in-
in Davao, the Court added in its en lieu-of-all-taxes" clause does not refer to "tax
banc Resolution of March 25, 2003,12that even exemption" but to "tax exclusion" and hence,
as it is a state policy to promote a level the strictissimi juris rule does not apply,
playing field in the communications industry, explaining that these two terms actually mean
Section 23 of Rep. Act No. 7925 does not the same thing, such that the rule that tax
refer to tax exemption but only to exemption exemption should be applied in strictissimi
from certain regulations and requirements juris against the taxpayer and liberally in favor
imposed by the National Telecommunications of the government applies equally to tax
Commission: exclusions. Thus:

xxx. The records of Congress are bereft of Indeed, both in their nature and in their effect
any discussion or even mention of tax there is no difference between tax exemption
exemption. To the contrary, what the and tax exclusion. Exemption is an immunity
Chairman of the Committee on or privilege; it is freedom from a charge or
Transportation, Rep. Jerome V. Paras, burden to which others are subjected.
mentioned in his sponsorship of H.B. No. Exclusion, on the other hand, is the removal of
14028, which became R.A. No. 7925, were otherwise taxable items from the reach of
‘equal access clauses’ in interconnection taxation, e.g., exclusions from gross income
agreements, not tax exemptions. He said: and allowable deductions. Exclusion is thus
also an immunity or privilege which frees a
taxpayer from a charge to which others are WHEREFORE, the instant petition is DENIED
subjected. Consequently, the rule that tax and the assailed decision dated July 23, 2001
exemption should be applied in strictissimi of the lower court AFFIRMED.
juris against the taxpayer and liberally in favor
of the government applies equally to tax Costs against petitioner.
exclusions. To construe otherwise the ‘in lieu
of all taxes’ provision invoked is to be SO ORDERED.
inconsistent with the theory that R.A. No.
7925, § 23 grants tax exemption because of a
similar grant to Globe and Smart.14

PLDT likewise argued in said case that the


RTC at Davao City erred in not giving weight
to the ruling of the BLGF which, according to
petitioner, is an administrative agency with
technical expertise and mastery over the
specialized matters assigned to it. But then
again, we held in Davao:

To be sure, the BLGF is not an administrative FIRST DIVISION


agency whose findings on questions of fact
are given weight and deference in the courts. G.R. No. 84811 August 29, 1989
The authorities cited by petitioner pertain to
the Court of Tax Appeals, a highly specialized SOLID HOMES, INC., petitioner,
court which performs judicial functions as it vs.
was created for the review of tax cases. In TERESITA PAYAWAL and COURT OF
contrast, the BLGF was created merely to APPEALS, respondents.
provide consultative services and technical
assistance to local governments and the
general public on local taxation, real property
assessment, and other related matters,
among others. The question raised by CRUZ, J.:
petitioner is a legal question, to wit, the
interpretation of §23 of R.A. No. 7925. There We are asked to reverse a decision of the
is, therefore, no basis for claiming expertise Court of Appeals sustaining the jurisdiction of
for the BLGF that administrative agencies are the Regional Trial Court of Quezon City over a
said to possess in their respective fields.15 complaint filed by a buyer, the herein private
respondent, against the petitioner, for delivery
We note, quite interestingly, that apart from of title to a subdivision lot. The position of the
the particular local government unit involved in petitioner, the defendant in that action, is that
the earlier case ofPLDT vs. Davao, the the decision of the trial court is null and
arguments presently advanced by petitioner void ab initio because the case should have
on the issue herein posed are but a mere been heard and decided by what is now called
reiteration if not repetition of the very same the Housing and Land Use Regulatory Board.
arguments it has already raised in Davao. For
sure, the errors presently assigned are The complaint was filed on August 31, 1982,
substantialy the same as those in Davao, all by Teresita Payawal against Solid Homes,
of which have been adequately addressed Inc. before the Regional Trial Court of Quezon
and passed upon by this Court in its decision City and docketed as Civil Case No. Q-36119.
therein as well as in its en banc resolution in The plaintiff alleged that the defendant
that case. contracted to sell to her a subdivision lot in
Marikina on June 9, 1975, for the agreed price
of P 28,080.00, and that by September 10,
1981, she had already paid the defendant the addition to any and all other
total amount of P 38,949.87 in monthly rights and remedies that may
installments and interests. Solid Homes be available under existing
subsequently executed a deed of sale over laws.
the land but failed to deliver the corresponding
certificate of title despite her repeated and declared that "its clear and unambiguous
demands because, as it appeared later, the tenor undermine(d) the (petitioner's)
defendant had mortgaged the property in bad pretension that the court a quowas bereft of
faith to a financing company. The plaintiff jurisdiction." The decision also dismissed the
asked for delivery of the title to the lot or, contrary opinion of the Secretary of Justice as
alternatively, the return of all the amounts paid impinging on the authority of the courts of
by her plus interest. She also claimed moral justice. While we are disturbed by the findings
and exemplary damages, attorney's fees and of fact of the trial court and the respondent
the costs of the suit. court on the dubious conduct of the petitioner,
we nevertheless must sustain it on the
Solid Homes moved to dismiss the complaint jurisdictional issue.
on the ground that the court had no
jurisdiction, this being vested in the National The applicable law is PD No. 957, as
Housing Authority under PD No. 957. The amended by PD No. 1344, entitled
motion was denied. The defendant repleaded "Empowering the National Housing Authority
the objection in its answer, citing Section 3 of to Issue Writs of Execution in the Enforcement
the said decree providing that "the National of Its Decisions Under Presidential Decree
Housing Authority shall have exclusive No. 957." Section 1 of the latter decree
jurisdiction to regulate the real estate trade provides as follows:
and business in accordance with the
provisions of this Decree." After trial, judgment SECTION 1. In the exercise of
was rendered in favor of the plaintiff and the its function to regulate the real
defendant was ordered to deliver to her the estate trade and business and
title to the land or, failing this, to refund to her in addition to its powers
the sum of P 38,949.87 plus interest from provided for in Presidential
1975 and until the full amount was paid. She Decree No. 957, the National
was also awarded P 5,000.00 moral damages, Housing Authority shall
P 5,000.00 exemplary damages, P 10,000.00 have exclusive jurisdiction to
attorney's fees, and the costs of the suit.1 hear and decide cases of the
following nature:
Solid Homes appealed but the decision was
affirmed by the respondent court, 2 which also A. Unsound real estate
berated the appellant for its obvious efforts to business practices;
evade a legitimate obligation, including its
dilatory tactics during the trial. The petitioner
B. Claims involving refund and
was also reproved for its "gall" in collecting the
any other claims filed by
further amount of P 1,238.47 from the plaintiff
subdivision lot or condominium
purportedly for realty taxes and registration
unit buyer against the project
expenses despite its inability to deliver the title
owner, developer, dealer,
to the land.
broker or salesman; and
In holding that the trial court had jurisdiction,
C. Cases involving specific
the respondent court referred to Section 41 of
performance of contractuala
PD No. 957 itself providing that:
statutory obligations filed by
buyers of subdivision lot or
SEC. 41. Other remedies.-The condominium unit against the
rights and remedies provided owner, developer, dealer,
in this Decree shall be in
broker or salesman. been promulgated in 1981, after PD No. 957
(Emphasis supplied.) was issued in 1975 and PD No. 1344 in 1978.

The language of this section, especially the This construction must yield to the familiar
italicized portions, leaves no room for doubt canon that in case of conflict between a
that "exclusive jurisdiction" over the case general law and a special law, the latter must
between the petitioner and the private prevail regardless of the dates of their
respondent is vested not in the Regional Trial enactment. Thus, it has been held that-
Court but in the National Housing Authority. 3
The fact that one law is special
The private respondent contends that the and the other general creates
applicable law is BP No. 129, which confers a presumption that the special
on regional trial courts jurisdiction to hear and act is to be considered as
decide cases mentioned in its Section 19, remaining an exception of the
reading in part as follows: general act, one as a general
law of the land and the other
SEC. 19. Jurisdiction in civil as the law of the particular
cases.-Regional Trial Courts case. 4
shall exercise exclusive
original jurisdiction: xxx xxx xxx

(1) In all civil actions in which The circumstance that the


the subject of the litigation is special law is passed before or
incapable of pecuniary after the general act does not
estimation; change the principle. Where
the special law is later, it will
(2) In all civil actions which be regarded as an exception
involve the title to, or to, or a qualification of, the
possession of, real property, prior general act; and where
or any interest therein, except the general act is later, the
actions for forcible entry into special statute will be
and unlawful detainer of lands construed as remaining an
or buildings, original exception to its terms, unless
jurisdiction over which is repealed expressly or by
conferred upon Metropolitan necessary implication. 5
Trial Courts, Municipal Trial
Courts, and Municipal Circuit It is obvious that the general law in this case is
Trial Courts; BP No. 129 and PD No. 1344 the special law.

xxx xxx xxx The argument that the trial court could also
assume jurisdiction because of Section 41 of
PD No. 957, earlier quoted, is also
unacceptable. We do not read that provision
(8) In all other cases in which as vesting concurrent jurisdiction on the
the demand, exclusive of Regional Trial Court and the Board over the
interest and cost or the value complaint mentioned in PD No. 1344 if only
of the property in controversy, because grants of power are not to be lightly
amounts to more than twenty inferred or merely implied. The only purpose
thousand pesos (P 20,000.00). of this section, as we see it, is to reserve. to
the aggrieved party such other remedies as
may be provided by existing law, like a
It stresses, additionally, that BP No. 129
should control as the later enactment, having
prosecution for the act complained of under valid, just and demandable
the Revised Penal Code. 6 claim.

On the competence of the Board to award xxx xxx xxx


damages, we find that this is part of the
exclusive power conferred upon it by PD No. Besides, a strict construction
1344 to hear and decide "claims involving of the subject provisions of PD
refund and any other claims filed by No. 1344 which would deny
subdivision lot or condominium unit buyers the HSRC the authority to
against the project owner, developer, dealer, adjudicate claims for damages
broker or salesman." It was therefore and for damages and for
erroneous for the respondent to brush aside attorney's fees would result in
the well-taken opinion of the Secretary of multiplicity of suits in that the
Justice that- subdivision condominium
buyer who wins a case in the
Such claim for damages which HSRC and who is thereby
the subdivision/condominium deemed entitled to claim
buyer may have against the damages and attorney's fees
owner, developer, dealer or would be forced to litigate in
salesman, being a necessary the regular courts for the
consequence of an purpose, a situation which is
adjudication of liability for non- obviously not in the
performance of contractual or contemplation of the law.
statutory obligation, may be (Emphasis supplied.)7
deemed necessarily included
in the phrase "claims involving As a result of the growing complexity of the
refund and any other claims" modern society, it has become necessary to
used in the aforequoted create more and more administrative bodies
subparagraph C of Section 1 to help in the regulation of its ramified
of PD No. 1344. The phrase activities. Specialized in the particular fields
"any other claims" is, we assigned to them, they can deal with the
believe, sufficiently broad to problems thereof with more expertise and
include any and all claims dispatch than can be expected from the
which are incidental to or a legislature or the courts of justice. This is the
necessary consequence of the reason for the increasing vesture of quasi-
claims/cases specifically legislative and quasi-judicial powers in what is
included in the grant of now not unreasonably called the fourth
jurisdiction to the National department of the government.
Housing Authority under the
subject provisions. Statutes conferring powers on their
administrative agencies must be liberally
The same may be said with construed to enable them to discharge their
respect to claims for attorney's assigned duties in accordance with the
fees which are recoverable legislative purpose. 8 Following this policy in
either by agreement of the Antipolo Realty Corporation v. National
parties or pursuant to Art. Housing Authority, 9 the Court sustained the
2208 of the Civil Code (1) competence of the respondent administrative
when exemplary damages are body, in the exercise of the exclusive
awarded and (2) where the jurisdiction vested in it by PD No. 957 and PD
defendant acted in gross and No. 1344, to determine the rights of the
evident bad faith in refusing to parties under a contract to sell a subdivision
satisfy the plaintiff 's plainly lot.
It remains to state that, contrary to the
contention of the petitioner, the case of
Tropical Homes v. National Housing
Authority 10 is not in point. We upheld in that
case the constitutionality of the procedure for FACTS: The complaint was filed by Teresita
appeal provided for in PD No. 1344, but we Payawal against Solid Homes, Inc. before the
did not rule there that the National Housing
Regional Trial Court of Quezon City. Teresite,
Authority and not the Regional Trial Court had
exclusive jurisdiction over the cases alleged that Solid Homes sold to her a
enumerated in Section I of the said decree. subdivision lot in Marikina on June 9, 1975, for
That is what we are doing now. P 28,080.00, and that by September 10, 1981,
she had already paid the full amount of P
It is settled that any decision rendered without 38,949.87 including interests. Solid Homes
jurisdiction is a total nullity and may be struck subsequently executed a deed of sale over
down at any time, even on appeal before this the land but failed to deliver the corresponding
Court. 11 The only exception is where the party
certificate of title because it was later
raising the issue is barred by estoppel,12 which
does not appear in the case before us. On the discovered that Solid Homes had mortgaged
contrary, the issue was raised as early as in the property in bad faith to a financing
the motion to dismiss filed in the trial court by company. The plaintiff asked for delivery of
the petitioner, which continued to plead it in its the title to the lot or, alternatively, the return of
answer and, later, on appeal to the all the amounts paid by her plus interest. She
respondent court. We have no choice,
also claimed moral and exemplary damages,
therefore, notwithstanding the delay this
decision will entail, to nullify the proceedings attorney's fees and the costs of the suit. Solid
in the trial court for lack of jurisdiction. Homes moved to dismiss the complaint on the
ground that the court had no jurisdiction, this
WHEREFORE, the challenged decision of the being vested in the National Housing Authority
respondent court is REVERSED and the under PD No. 957.
decision of the Regional Trial Court of Quezon
City in Civil Case No. Q-36119 is SET ASIDE, ISSUE: WON the National Housing Authority
without prejudice to the filing of the has the jurisdiction to decide the case.
appropriate complaint before the Housing and
Land Use Regulatory Board. No costs.

SO ORDERED. HELD: Yes. The applicable law is PD No.


957, as amended by PD No. 1344, entitled
"Empowering the National Housing Authority
to Issue Writs of Execution in the Enforcement
of Its Decisions Under Presidential Decree
No. 957." SECTION 1. In the exercise of its
function to regulate the real estate trade and
†¦ shall have exclusive jurisdiction to hear
and decide cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other


claims filed by subdivision lot or condominium
unit buyer against the project owner,
developer, dealer, broker or salesman; and
C. Cases involving specific performance of SECOND DIVISION
contractual statutory obligations’ filed by
buyers of subdivision lot or condominium unit G.R. No. 164789 August 27, 2009
against the owner, developer, dealer, broker
or salesman. (Emphasis supplied.) This CHRISTIAN GENERAL ASSEMBLY,
INC., Petitioner,
construction must yield to the familiar canon
vs.
that in case of conflict between a general law SPS. AVELINO C. IGNACIO and PRISCILLA
and a special law, the latter must prevail T. IGNACIO, Respondents.
regardless of the dates of their enactment. It is
obvious that the general law in this case is BP DECISION
No. 129(Jurisdiction of courts in Civil Cases)
and PD No. 1344 (Empowering the NHA) the BRION, J.:
special law. As a result of the growing
complexity of the modern society, it has We resolve in this Rule 45 petition the legal
become necessary to create more and more issue of whether an action to rescind a
contract to sell a subdivision lot that the buyer
administrative bodies to help in the regulation
found to be under litigation falls under the
of its ramified activities. Specialized in the exclusive jurisdiction of the Housing and Land
particular fields assigned to them, they can Use Regulatory Board (HLURB).
deal with the problems thereof with more
expertise and dispatch than can be expected In this petition,1 Christian General Assembly,
from the legislature or the courts of justice. Inc. (CGA) prays that we set aside the
This is the reason for the increasing vesture of decision2 issued by the Court of Appeals (CA)
quasi-legislative and quasi-judicial powers in in CA–G.R. SP No. 75717 that dismissed its
complaint for rescission filed with the Regional
what is now not unreasonably called the fourth
Trial Court (RTC) of Bulacan for lack of
department of the government. jurisdiction, as well as the CA resolution3 that
denied its motion for reconsideration.

FACTUAL ANTECEDENTS

The present controversy traces its roots to the


case filed by CGA against the Spouses
Avelino and Priscilla Ignacio (respondents) for
rescission of their Contract to Sell before the
RTC, Branch 14, Malolos, Bulacan. The facts,
drawn from the records and outlined below,
are not in dispute.

On April 30, 1998, CGA entered into a


Contract to Sell a subdivision lot4 (subject
property) with the respondents – the
registered owners and developers of a
housing subdivision known as Villa Priscilla
Subdivision located in Barangay Cutcut,
Pulilan, Bulacan. Under the Contract to Sell,
CGA would pay ₱2,373,000.00 for the subject
property on installment basis; they were to
pay a down payment of ₱1,186,500, with the
balance payable within three years on equal
monthly amortization payments of
₱46,593.85, inclusive of interest at 24% per court to rescind the contract; order the
annum, starting June 1998. respondents to return the amounts already
paid; and award actual, moral and exemplary
On August 5, 2000, the parties mutually damages, attorney’s fees and litigation
agreed to amend the Contract to Sell to expenses.
extend the payment period from three to five
years, calculated from the date of purchase Instead of filing an answer, the respondents
and based on the increased total filed a motion to dismiss asserting that the
consideration of ₱2,706,600, with equal RTC had no jurisdiction over the case.11 Citing
monthly installments of ₱37,615.00, inclusive PD No. 95712 and PD No. 1344, the
of interest at 24% per annum, starting respondents claimed that the case falls within
September 2000. the exclusive jurisdiction of the HLURB since
it involved the sale of a subdivision lot. CGA
According to CGA, it religiously paid the opposed the motion to dismiss, claiming that
monthly installments until its administrative the action is for rescission of contract, not
pastor discovered that the title covering the specific performance, and is not among the
subject property suffered from fatal flaws and actions within the exclusive jurisdiction of the
defects. CGA learned that the subject property HLURB, as specified by PD No. 957 and PD
was actually part of two consolidated lots No. 1344.
(Lots 2-F and 2-G Bsd-04-000829 [OLT]) that
the respondents had acquired from Nicanor On October 15, 2002, the RTC issued an
Adriano (Adriano) and Ceferino Sison (Sison), order denying the respondents’ motion to
respectively. Adriano and Sison were former dismiss. The RTC held that the action for
tenant-beneficiaries of Purificacion S. Imperial rescission of contract and damages due to the
(Imperial) whose property in Cutcut, Pulilan, respondents’ fraudulent misrepresentation
Bulacan5 had been placed under Presidential that they are the rightful owners of the subject
Decree (PD) No. 27’s Operation Land property, free from all liens and
Transfer.6 According to CGA, Imperial applied encumbrances, is outside the HLURB’s
for the retention of five hectares of her land jurisdiction.
1avv phi1

under Republic Act No. 6657,7 which the


Department of Agrarian Reform (DAR) The respondents countered by filing a petition
granted in its October 2, 1997 order (DAR for certiorari with the CA. In its October 20,
Order). The DAR Order authorized Imperial to 2003 decision, the CA found merit in the
retain the farm lots previously awarded to the respondents’ position and set the RTC order
tenant-beneficiaries, including Lot 2-F aside; the CA ruled that the HLURB had
previously awarded to Adriano, and Lot 2-G exclusive jurisdiction over the subject matter
Bsd-04-000829 awarded to Sison. On appeal, of the complaint since it involved a contract to
the Office of the President8 and the sell a subdivision lot based on the provisions
CA9 upheld the DAR Order. Through the of PD No. 957 and PD No. 1344.
Court’s Resolution dated January 19, 2005 in
G.R. No. 165650, we affirmed the DAR Order Contending that the CA committed reversible
by denying the petition for review of the error, the CGA now comes before the Court
appellate decision. asking us to overturn the CA decision and
resolution.
Understandably aggrieved after discovering
these circumstances, CGA filed a complaint THE PETITION
against the respondents before the RTC on
April 30, 2002.10 CGA claimed that the
In its petition, CGA argues that the CA erred -
respondents fraudulently concealed the fact
that the subject property was part of a
property under litigation; thus, the Contract to (1) in applying Article 1191 of the Civil
Sell was a rescissible contract under Article Code for breach of reciprocal
1381 of the Civil Code. CGA asked the trial obligation, while the petitioner’s action
is for the rescission of a rescissible real estate subdivision and condominium
contract under Article 1381 of the businesses in order to curb the growing
same Code, which is cognizable by number of swindling and fraudulent
the regular court; and manipulations perpetrated by unscrupulous
subdivision and condominium sellers and
(2) in holding that the HLURB has operators. As one of its "whereas clauses"
exclusive jurisdiction over the states:
petitioner’s action by applying Antipolo
Realty Corp v. National Housing WHEREAS, reports of alarming magnitude
Corporation13 and other cited cases. also show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous
In essence, the main issue we are asked to subdivision and condominium sellers and
resolve is which of the two – the regular court operators, such as failure to deliver titles to
or the HLURB – has exclusive jurisdiction over the buyers or titles free from liens and
CGA’s action for rescission and damages. encumbrances, and to pay real estate taxes,
and fraudulent sales of the same subdivision
According to CGA, the exclusive jurisdiction of lots to different innocent purchasers for value;
the HLURB, as set forth in PD No. 1344 and
PD No. 957, is limited to cases involving Section 3 of PD No. 957 granted the National
specific performance and does not cover Housing Authority (NHA) the "exclusive
actions for rescission. jurisdiction to regulate the real estate trade
and business." Thereafter, PD No. 1344 was
Taking the opposing view, respondents insist issued on April 2, 1978 to expand the
that since CGA’s case involves the sale of a jurisdiction of the NHA to include the following:
subdivision lot, it falls under the HLURB’s
exclusive jurisdiction. SECTION 1. In the exercise of its functions to
regulate the real estate trade and business
THE COURT’S RULING and in addition to its powers provided for in
Presidential Decree No. 957, the National
Housing Authority shall have exclusive
We find no merit in the petition and
jurisdiction to hear and decide cases of the
consequently affirm the CA decision.
following nature:
Development of the HLURB’s jurisdiction
A. Unsound real estate business
practices;
The nature of an action and the jurisdiction of
a tribunal are determined by the material
B. Claims involving refund and any
allegations of the complaint and the law
other claims filed by subdivision lot or
governing at the time the action was
condominium unit buyer against the
commenced. The jurisdiction of the tribunal
project owner, developer, dealer,
over the subject matter or nature of an action
broker or salesman; and
is conferred only by law, not by the parties’
consent or by their waiver in favor of a court
that would otherwise have no jurisdiction over C. Cases involving specific
the subject matter or the nature of an performance of contractual and
action.14Thus, the determination of whether statutory obligations filed by buyers of
the CGA’s cause of action falls under the subdivision lot or condominium unit
jurisdiction of the HLURB necessitates a against the owner, developer, dealer,
closer examination of the laws defining the broker or salesman.
HLURB’s jurisdiction and authority.
Executive Order No. 648 (EO 648), dated
PD No. 957, enacted on July 12, 1976, was February 7, 1981, transferred the regulatory
intended to closely supervise and regulate the and quasi-judicial functions of the NHA to the
Human Settlements Regulatory Commission and spells out the quasi-judicial dimensions of
(HSRC). Section 8 of EO 648 provides: the grant of jurisdiction to the HLURB in the
following specific terms:
SECTION 8. Transfer of Functions. -The
regulatory functions of the National Housing SEC. 1. In the exercise of its functions to
Authority pursuant to Presidential Decree Nos. regulate the real estate trade and business
957, 1216, 1344 and other related laws are and in addition to its powers provided for in
hereby transferred to the Commission [Human Presidential Decree No. 957, the National
Settlements Regulatory Commission]. x x x. Housing Authority shall have exclusive
Among these regulatory functions are: 1) jurisdiction to hear and decide cases of the
Regulation of the real estate trade and following nature:
business; x x x 11) Hear and decide cases of
unsound real estate business practices; A. Unsound real estate business
claims involving refund filed against project practices;
owners, developers, dealers, brokers, or
salesmen; and cases of specific performance. B. Claims involving refund and any
other claims filed by subdivision lot or
Pursuant to Executive Order No. 90 dated condominium unit buyer against the
December 17, 1986, the HSRC was renamed project owner, developer, dealer,
as the HLURB. broker or salesman; and

Rationale for HLURB’s extensive quasi- C. Cases involving specific


judicial powers performance of contractual and
statutory obligations filed by buyers of
The surge in the real estate business in the subdivision lots or condominium units
country brought with it an increasing number against the owner, developer, dealer,
of cases between subdivision broker or salesman.
owners/developers and lot buyers on the
issue of the extent of the HLURB’s exclusive The extent to which the HLURB has been
jurisdiction. In the cases that reached us, we vested with quasi-judicial authority must also
have consistently ruled that the HLURB has be determined by referring to the terms of
exclusive jurisdiction over complaints arising P.D. No. 957, "The Subdivision And
from contracts between the subdivision Condominium Buyers' Protective Decree."
developer and the lot buyer or those aimed at Section 3 of this statute provides:
compelling the subdivision developer to
comply with its contractual and statutory x x x National Housing Authority [now
obligations to make the subdivision a better HLURB]. - The National Housing Authority
place to live in.15 shall have exclusive jurisdiction to regulate the
real estate trade and business in accordance
We explained the HLURB’s exclusive with the provisions of this Decree.
jurisdiction at length in Sps. Osea v.
Ambrosio,16 where we said: The need for the scope of the regulatory
authority thus lodged in the HLURB is
Generally, the extent to which an indicated in the second, third and fourth
administrative agency may exercise its preambular paragraphs of PD 957 which
powers depends largely, if not wholly, on the provide:
provisions of the statute creating or
empowering such agency. Presidential WHEREAS, numerous reports reveal that
Decree (P.D.) No. 1344, "Empowering The many real estate subdivision owners,
National Housing Authority To Issue Writ Of developers, operators, and/or sellers have
Execution In The Enforcement Of Its Decision reneged on their representations and
Under Presidential Decree No. 957," clarifies obligations to provide and maintain properly
subdivision roads, drainage, sewerage, water the fast-changing times. There are hundreds
systems, lighting systems, and other similar of administrative bodies now performing this
basic requirements, thus endangering the function by virtue of a valid authorization from
health and safety of home and lot buyers; the legislature. This quasi-judicial function, as
it is called, is exercised by them as an incident
WHEREAS, reports of alarming magnitude of the principal power entrusted to them of
also show cases of swindling and fraudulent regulating certain activities falling under their
manipulations perpetrated by unscrupulous particular expertise.
subdivision and condominium sellers and
operators, such as failure to deliver titles to In the Solid Homes case for example the
the buyers or titles free from liens and Court affirmed the competence of the Housing
encumbrances, and to pay real estate taxes, and Land Use Regulatory Board to award
and fraudulent sales of the same subdivision damages although this is an essentially
lots to different innocent purchasers for value; judicial power exercisable ordinarily only by
the courts of justice. This departure from the
xxxx traditional allocation of governmental powers
is justified by expediency, or the need of the
WHEREAS, this state of affairs has rendered government to respond swiftly and
it imperative that the real estate subdivision competently to the pressing problems of the
and condominium businesses be closely modern world. [Emphasis supplied.]
supervised and regulated, and that penalties
be imposed on fraudulent practices and Another case – Antipolo Realty Corporation v.
manipulations committed in connection NHA17 – explained the grant of the HLURB’s
therewith. expansive quasi-judicial powers. We said:

The provisions of PD 957 were intended to In this era of clogged court dockets, the need
encompass all questions regarding for specialized administrative boards or
subdivisions and condominiums. The intention commissions with the special knowledge,
was aimed at providing for an appropriate experience and capability to hear and
government agency, the HLURB, to which all determine promptly disputes on technical
parties aggrieved in the implementation of matters or essentially factual matters, subject
provisions and the enforcement of contractual to judicial review in case of grave abuse of
rights with respect to said category of real discretion, has become well nigh
estate may take recourse. The business of indispensable. Thus, in 1984, the Court noted
developing subdivisions and corporations that ‘between the power lodged in an
being imbued with public interest and welfare, administrative body and a court, the
any question arising from the exercise of that unmistakable trend has been to refer it to the
prerogative should be brought to the HLURB former’.
which has the technical know-how on the
matter. In the exercise of its powers, the xxx
HLURB must commonly interpret and apply
contracts and determine the rights of private In general, the quantum of judicial or quasi-
parties under such contracts. This ancillary judicial powers which an administrative
power is no longer a uniquely judicial function, agency may exercise is defined in the
exercisable only by the regular courts. enabling act of such agency. In other words,
the extent to which an administrative entity
As observed in C.T. Torres Enterprises, Inc. v. may exercise such powers depends largely, if
Hibionada: not wholly on the provisions of the statute
creating or empowering such agency. In the
The argument that only courts of justice can exercise of such powers, the agency
adjudicate claims resoluble under the concerned must commonly interpret and apply
provisions of the Civil Code is out of step with contracts and determine the rights of private
parties under such contracts, One thrust of the owners. The rationale behind this can be
multiplication of administrative agencies is that found in the wordings of Sec. 1, PD No. 1344,
the interpretation of contracts and the which expressly qualifies that the cases
determination of private rights thereunder is cognizable by the HLURB are those instituted
no longer a uniquely judicial function, by subdivision or condomium buyers or
exercisable only by our regular courts. owners against the project developer or
[Emphasis supplied.] owner. This is also in keeping with the policy
of the law, which is to curb unscrupulous
Subdivision cases under the RTC’s jurisdiction practices in the real estate trade and
business.21
The expansive grant of jurisdiction to the
HLURB does not mean, however, that all Thus, in the cases of Fajardo Jr. v. Freedom
cases involving subdivision lots automatically to Build, Inc.,[22] and Cadimas v.
fall under its jurisdiction. As we said in Roxas Carrion,23 we upheld the RTC’s jurisdiction
v. Court of Appeals: 18 even if the subject matter was a subdivision
lot since it was the subdivision developer who
In our view, the mere relationship between the filed the action against the buyer for violation
parties, i.e., that of being subdivision of the contract to sell.
owner/developer and subdivision lot buyer,
does not automatically vest jurisdiction in the The only instance that HLURB may take
HLURB. For an action to fall within the cognizance of a case filed by the developer is
exclusive jurisdiction of the HLURB, the when said case is instituted as a compulsory
decisive element is the nature of the action as counterclaim to a pending case filed against it
enumerated in Section 1 of P.D. 1344. On this by the buyer or owner of a subdivision lot or
matter, we have consistently held that the condominium unit. This was what happened in
concerned administrative agency, the National Francel Realty Corporation v. Sycip,24 where
Housing Authority (NHA) before and now the the HLURB took cognizance of the
HLURB, has jurisdiction over complaints developer’s claim against the buyer in order to
aimed at compelling the subdivision developer forestall splitting of causes of action.
to comply with its contractual and statutory
obligations. Obviously, where it is not clear from the
allegations in the complaint that the property
xxx involved is a subdivision lot, as in Javellana v.
Hon. Presiding Judge, RTC, Branch 30,
Note particularly pars. (b) and (c) as worded, Manila,25 the case falls under the jurisdiction
where the HLURB’s jurisdiction concerns of the regular courts and not the HLURB.
cases commenced by subdivision lot or Similarly, in Spouses Dela Cruz v. Court of
condominium unit buyers. As to par. (a), Appeals,26 we held that the RTC had
concerning "unsound real estate practices," it jurisdiction over a case where the conflict
would appear that the logical complainant involved a subdivision lot buyer and a party
would be the buyers and customers against who owned a number of subdivision lots but
the sellers (subdivision owners and was not himself the subdivision developer.
developers or condominium builders and
realtors ), and not vice versa. [Emphasis The Present Case
supplied.]
In the present case, CGA is unquestionably
Pursuant to Roxas, we held in Pilar the buyer of a subdivision lot from the
Development Corporation v. Villar19 and respondents, who sold the property in their
Suntay v. Gocolay20 that the HLURB has no capacities as owner and developer. As CGA
jurisdiction over cases filed by subdivision or stated in its complaint:
condominium owners or developers against
subdivision lot or condominium unit buyers or
2.01. Defendants are the registered 04-000829 (OLT), which were
owners and developers of a housing respectively acquired by defendants
subdivision presently known as Villa from Nicanor Adriano and Ceferino
Priscilla Subdivision located at Brgy. Sison, former tenants-beneficiaries of
Cutcut, Pulilan, Bulacan; Purificacion S. Imperial, whose
property at Cutcut, Pulilan, Bulacan
2.02 On or about April 30, 1998, the originally covered by TCT No. 240878
plaintiff thru its Administrative Pastor containing an area of 119,431 square
bought from defendants on installment meters was placed under Operation
basis a parcel of land designated at Land Transfer under P.D. No. 27;
Lot 1, Block 4 of the said Villa Priscilla
Subdivision xxx 2.07 Said Purificacion S. Imperial
applied for retention of five (5)
xxx hectares of her property at Cutcut,
Pulilan, Bulacan under Rep, Act No.
2.04 At the time of the execution of the 6657 and the same was granted by
second Contract to Sell (Annex "B"), the Department of Agrarian Reform
Lot 1, Block 4 of the Villa Priscilla (DAR) to cover in whole or in part farm
Subdivision was already covered by lots previously awarded to tenants-
Transfer Certificate of Title No. T- beneficiaries, including inter alia
127776 of the Registry of Deeds of Nicanor Adriano’s Lot 2-F and
Quezon City in the name of Iluminada Ceferino Sison’s Lot 2-G Bsd-04-
T. Soneja, married to Asterio Soneja 000829 (OLT).
(defendant Priscilla T. Ignacio’s sister
and brother-in-law) and the xxx
defendants as co-owners, but the
latter represented themselves to be 2.08 Said order of October 2, 1997
the real and absolute owners thereof, was affirmed and declared final and
as in fact it was annotated in the title executory, and the case was
that they were empowered to sell the considered closed, as in fact there
same. Copy of TCT No. T-127776 is was already an Implementing Order
hereto attached and made part hereof dated November 10, 1997.
as Annex "C".
xxx
2.05 Plaintiff has been religiously
paying the agreed monthly 3.03 As may thus be seen, the
installments until its Administrative defendants deliberately and
Pastor discovered recently that while fraudulently concealed from the
apparently clean on its face, the title plaintiff that fact that the parcel of land
covering the subject lot actually sold to the latter under the Contract to
suffers from fatal flaws and defects as Sell (Annexes "A" and "B") is part of
it is part of the property involved in the property already under litigation
litigation even before the original and in fact part of the five-hectare
Contract to Sell (Annex "A"), which retention awarded to the original
defendants deliberately and owner, Purificacion S. Imperial.
fraudulently concealed from the
plaintiff; xxx

2.06 As shown in the technical 3.05 Plaintiff is by law entitled to the


description of TCT No. T-127776 rescission of the Contracts to Sell
(Annex "C"), it covers a portion of (Annexes "A" and "B") by restitution of
consolidated Lots 2-F and 2-G Bsd- what has already been paid to date for
the subject property in the total of the HLURB’s exclusive jurisdiction and
amount of P2,515,899.20, thus formal outside the reach of the regular courts.
demand therefor was made on the Accordingly, CGA has to file its complaint
defendants thru a letter dated April 5, before the HLURB, the body with the proper
2002, which they received but refused jurisdiction.
to acknowledge receipt. Copy of said
letter is hereto attached and made WHEREFORE, premises considered, we
part hereof as Annex "J". 27 [Emphasis DENY the petition and AFFIRM the October
supplied.] 20, 2003 Decision of the Court of Appeals in
CA G.R. SP No. 75717 dismissing for lack of
From these allegations, the main thrust of the jurisdiction the CGA complaint filed with the
CGA complaint is clear – to compel the RTC, Branch 14 of Malolos, Bulacan.
respondents to refund the payments already
made for the subject property because the SO ORDERED.
respondents were selling a property that they
apparently did not own. In other words, CGA
claims that since the respondents cannot
comply with their obligations under the
contract, i.e., to deliver the property free from
all liens and encumbrances, CGA is entitled to
rescind the contract and get a refund of the
payments already made. This cause of action
clearly falls under the actions contemplated by
Paragraph (b), Section 1 of PD No. 1344,
which reads:

SEC. 1. In the exercise of its functions to


regulate the real estate trade and business
and in addition to its powers provided for in
Presidential Decree No. 957, the National
Housing Authority shall have exclusive
jurisdiction to hear and decide cases of the
following nature:

xxx

B. Claims involving refund and any


other claims filed by subdivision lot or
condominium unit buyer against the
project owner, developer, dealer,
broker or salesman; and

We view CGA’s contention – that the CA erred


in applying Article 1191 of the Civil Code as
basis for the contract’s rescission – to be a
negligible point. Regardless of whether the
rescission of contract is based on Article 1191
or 1381 of the Civil Code, the fact remains
that what CGA principally wants is a refund of
all payments it already made to the
respondents. This intent, amply articulated in
its complaint, places its action within the ambit
CHRISTIAN GENERAL ASSEMBLY, INC., and damages due to the respondents’
Petitioner, vs. SPS. AVELINO C. IGNACIO fraudulent misrepresentation that they are the
and PRISCILLA T. IGNACIO, Respondents. rightful owners of the subject property, free
G.R. No. 164789 August 27, 2009 from all liens and encumbrances, is outside
the HLURB’s jurisdiction. The respondents
countered by filing a petition for certiorari with
the CA. CA set the RTC order aside and ruled
Facts: CGA entered into a Contract to Sell a
that the HLURB had exclusive jurisdiction over
subdivision lotwith the respondents – the
the subject matter of the complaint since it
registered owners and developers of a
involved a contract to sell a subdivision lot
housing subdivision known as Villa Priscilla
based on the provisions of PD No. 957 and
Subdivision located in Barangay Cutcut,
PD No. 1344. Contending that the CA
Pulilan, Bulacan. Under the Contract to Sell,
committed reversible error, the CGA now
CGA would for the subject property on
comes before the Court asking us to overturn
installment basis. Subsequently, the parties
the CA decision and resolution.
mutually agreed to amend the Contract to Sell
to extend the payment period from three to
five years, calculated from the date of
purchase and based on an increased total Issue: is it the regular courts or the HLURB
consideration CGA religiously paid the which has jurisdiction over CGA’s action for
monthly installments until its administrative rescission and damages?
pastor discovered that the title covering the
subject property suffered from fatal flaws and
defects. CGA learned that the subject property
Ruling: The action within the ambit of the
was actually a part of a property under
HLURB’s exclusive jurisdiction and outside
litigation making the contract to sell entered
the reach of the regular courts since the main
into a rescissible contract under Article 1381
thrust of the CGA complaint is clear – to
of the Civil Code. Aggrieved after discovering
compel the respondents to refund the
these circumstances, CGA filed a complaint
payments already made for the subject
against the respondents before the RTC
property because the respondents were
asking trial court to rescind contract and an
selling a property that they apparently did not
award of damages. Instead of filing an
own. In other words, CGA claims that since
answer, the respondents filed a motion to
the respondents cannot comply with their
dismiss asserting that the RTC had no
obligations under the contract, i.e., to deliver
jurisdiction over the case Citing PD No. 12
the property free from all liens and
957 and PD No. 1344, the respondents
encumbrances, CGA is entitled to rescind the
claimed that the case falls within the exclusive
contract and get a refund of the payments
jurisdiction of the HLURB since it involved the
already made. This cause of action clearly
sale of a subdivision lot. CGA opposed the
falls under the actions contemplated by
motion to dismiss, claiming that the action is
Paragraph (b), Section 1 of PD No. 1344,
for rescission of contract, not specific
which reads: SEC. 1. In the exercise of its
performance, and is not among the actions
functions to regulate the real estate trade and
within the exclusive jurisdiction of the HLURB,
business and in addition to its powers
as specified by PD No. 957 and PD No. 1344.
provided for in Presidential Decree No. 957,
The RTC issued an order denying the
the National Housing Authority shall have
respondents’ motion to dismiss. The RT C
exclusive jurisdiction to hear and decide cases
held that the action for rescission of contract
of the following nature: B. Claims involving Reynaldo Dorado, who signed the voucher
refund and any other claims filed by ledger card of the Tius' savings account and
subdivision lot or condominium unit buyer forwarded the documents to Apolinario
Babaylon, bookkeeper, who was also acting
against the project owner, developer, dealer,
as posting machine operator. After posting the
broker or salesman. Accordingly, CGA has to amount of P60,000.00 on the ledger card and
file its complaint before the HLURB, the body passbook, Babaylon initialed the withdrawal
with the proper jurisdiction. slip and returned the documents to Dorado,
who approved the withdrawal and thereafter
disbursed the P60,000.00 to Veloso.
The Received payment portion of the
EN BANC withdrawal slip was signed Veloso but Cidro,
who disbursed the amount, failed to initial the
passbook.

G.R. No. 106498 June 28, 1993 After banking hours, another withdrawal slip
was presented by Feliciano Bugtas, Jr., also
an employee of the Tius.3 This was the
LOLITA DADUBO, petitioner,
second P60,000.00 withdrawal. Veloso did not
vs.
know about it. The withdrawal slip was
CIVIL SERVICE COMMISSION and the
processed and approved on the same day,
DEVELOPMENT BANK OF THE
August 13, 1987. The space Posted by was
PHILIPPINES, respondents.
initialed by Babaylon but no posting was
actually made because the passbook was not
Francisco P. Duran for petitioner. presented. While the withdrawal slip was
dated August 13, 1987, all other supporting
documents were dated August 14, 1987, this
being a withdrawal after banking hours (ABH).
CRUZ, J.:
The following day, August 14, 1987, prior to
Petitioner Lolita A. Dadubo, Senior Accounts the payment of the ABH withdrawal, Veloso
Analyst and Rosario B. Cidro, Cash presented another undated withdrawal slip for
Supervisor, of the Development Bank of the P60,000.00.4 This was the third P60,000.00
Philippines, Borongan Branch were withdrawal. The withdrawal slip was received
administratively charged with conduct by Dorado, who handed it to Dadubo. At that
prejudicial to the best interest of the time, Cidro was encashing the check at PNB
service.1 The charges were based on reports to satisfy the ABH withdrawal. When she
on the unposted withdrawal of P60,000.00 returned from the bank, she paid this
from Savings Account No. 87-692 in the name withdrawal to Veloso, who thought that what
of Eric Tiu, Edgar Tiu, and/or Pilar Tiu. she was collecting was the P60,000.00
corresponding to the withdrawal slip she
The formal investigations revealed that in the presented that morning.
morning of August 13, 1987, Erlinda Veloso,
authorized representative of the Tius, When Dadubo informed Cidro about the third
presented an undated withdrawal slip for withdrawal, till money of P100,000.00 was
P60,000.00.2 Dadubo, as acting teller, made to service it. Prior to the payment of the
prepared the corresponding ticket and third P60,000.00 withdrawal, Veloso came
voucher in the name of the cash supervisor, back and presented another withdrawal slip
Rosario Cidro. Dadubo initialed the withdrawal for P40,000.00.5 The petitioner claimed she
slip, ticket and voucher, all dated August 13, disbursed P100,000.00 to Veloso, covering
1987, and passed on to Cidro all the the third P60,000.00 and the P40,000.00
documents on the said transaction. These withdrawals. On the other hand, Veloso
were then forwarded to the accountant, testified that she received only P40,000.00
from the petitioner. She acknowledged receipt Inefficiency and Incompetence
of the amount by signing the withdrawal slip in the Performance of Official
and indicating opposite her signature the Duty. It was also Dadubo who
amount of P40,000.00. reported on the irreconcilable
P60,000.00. The most that
That left the balance of P60,000.00 Dadubo could be charged with
unaccounted for and directly imputable to is willful violation of office
Dadubo. regulation when she undertook
reconciliation for under the
On the basis of these findings, DBP found Bank Manual the tellers are
Dadubo guilty of dishonesty for embezzlement not allowed access to the
of bank funds. She was penalized with savings account ledger cards.
dismissal from the service.6 Cidro was
adjudged guilty of gross neglect of duty and Respondent DBP moved reconsideration. On
fined in an amount equivalent to one month July 16, 1992, the Commission acting
basic salary, payable through salary favorably on the motion, promulgated
deductions in not more than 12 installments. Resolution No.
92-8789 affirming the earlier findings of the
Dadubo appealed to the Merit Systems DBP as to Dadubo guilt, thus —
Protection Board (MSPB),7 which affirmed the
decision of the DBP, declaring as follows: The records reveal that
Dadubo admitted in her
There is nothing in the records Answer that she changed
to show that the Senior entry of the date August 13 to
Manager, Personnel Services 14 in the ledger in the course
and Vice-Chairman, both of of her reconciliation which she
the DBP, abused their was advised not to do.
discretion in deciding the case
against the appellant or that xxx xxx xxx
their decision was made and
attended with arbitrariness or This act of admission needs
unfairness. To all intents and no further elaboration to prove
purposes, the ensuing that Dadubo is guilty of the
decision was a necessary charge. Such admission is
consequence of the evidence. however treated as a
mitigating circumstance which
However, DBP was reversed by the Civil is offset by the aggravating
Service Commission in its Resolution No. 91- circumstance of taking
642, dated May 21, 1991,8which reduced advantage of her official
Dadubo's penalty to suspension for six position. There is no reason
months on the ground that: for her to change or alter
entries in the ledger unless
Although Dadubo made she intends to benefit
alterations on the dates in the therefrom or to conceal some
Ledger Card from August 13 facts.
to August 14, the fact remains
that the bank was defrauded Further, it should be noted that
on account of said ABH the report was made only on
withdrawal (for) which Cidro is September 28, 1987 (the date
held responsible and the report on reconciliation
accordingly found guilty of was submitted to the Regional
Gross Neglect of Duty and Office). It should be
emphasized as earlier stated The petitioner's challenges are mainly factual.
that Dadubo was not The rule is that the findings of fact of
authorized to reconcile the administrative bodies, if based on substantial
subsidiary ledger cards for the evidence, are controlling on the reviewing
period ending August 20, authority. 10 is settled that it is not for the
1987. Hence, as emphatically appellate court to substitute its own judgment
stated in the MSPB decision, ". for that of the administrative agency on the
. . respondent Dadubo sufficiency of the evidence and the credibility
manipulated the bank records of the witnesses. 11 Administrative decisions
to conceal the offense which on matters within their jurisdiction are entitled
constituted the act of to respect and can only be set aside on proof
dishonesty." of grave abuse of discretion, fraud or error of
law. 12 None of these vices has been shown in
The opinion of an acting this case.
Internal Audit Officer, whose
report was among the The petitioner's invocation of due process is
preliminary findings without merit. Her complaint that she was not
considered in the investigation sufficiently informed of the charges against
of the case, is not conclusive her has no basis. While the rules governing
as there are other available Judicial trials should be observed as much as
and convincing evidence to possible, their strict observance is not
prove the guilt of Dadubo. indispensable in administrative cases. 13 As
this Court has held, "the standard of due
Dadubo has brought her case to this Court in process that must be met in administrative
this petition for certiorari. She claims that CSC tribunals allows a certain latitude as long as
Resolution No. 92-878 failed to comply with the element of fairness is not ignored." 14
the constitutional requirement to state clearly
and distinctly the facts an the law on which the The essence of due process is distilled in the
decision is based; CSC Resolution No. 92-878 immortal cry of Themistocles to Eurybiades:
conflicts with the findings of fact in CSC "Strike, but hear me first!" Less dramatically, it
Resolution No. 91-642; the Commission simply connotes an opportunity to be heard.
manifestly overlooked or disregarded certain The petitioner had several opportunities to be
relevant facts not disputed by the parties; and heard and to present evidence that she was
it based its conclusions entirely on not guilty of embezzlement but only of failure
speculations, surmises or conjectures. to comply with the tellering procedure. Not
only did she testify at her formal investigation
Required to comment, the Solicitor General but she also filed a motion for reconsideration
argued that CSC Resolution No. 92-878 did with the DBP, then appealed to the Merit
not need to restate the legal and factual bases Systems Protection Board (MSPB), and later
of the original decision in CSC-MSPB No. 497 elevated the case to the Civil Service
which already explained the relevant facts and Commission. Having been given all these
the applicable law. The petitioner had opportunities to be heard, which she fully
admitted that she changed the entry of the availed of, she cannot now complain that she
dates in the subsidiary ledger card from was denied due process.
August 13 to 14 in the course of her
reconciliation work although she was not Appreciation of the evidence submitted by the
authorized to do this. This admission, along parties was, to repeat, the prerogative of the
with the other evidence Presented during the administrative body, subject to reversal only
investigation in the bank, proved Dadubo's upon a clear showing of arbitrariness. The
guilt. Moreover, the affidavit of Albert C. rejection of the affidavit of Ballicud, for
Ballicud was inadmissible in evidence example, was not improper because there
because he was never subjected to cross- was nothing in that document showing that the
examination. petitioner did not embezzle the P60,000.00.
It is true that the petitioner was formally matter is not before this Court and cannot be
charged with conduct prejudicial to the best resolved by us at this time.
interest of the bank and not specifically with
embezzlement. Nevertheless, the allegations WHEREFORE, the petition is DISMISSED for
and the evidence presented sufficiently lack of a clear showing of grave abuse of
proved her guilt of embezzlement of bank discretion on the part of the Civil Service
funds, which in unquestionably prejudicial to Commission in issuing the questioned
the best interest of the bank. resolutions. Costs against the petitioner.

The charge against the respondent in an SO ORDERED.


administrative case need not be drafted with
the precision of an information in a criminal
prosecution. It is sufficient that he is apprised
of the substance of the charge against him; FACTS Petitioner Lolita Dadubo, Senior
what is controlling is the allegation of the acts
complained of, not the designation of the Accts Analyst and Rosario Cidro, Cash
offense. 15 Supervisor of the DBP were administratively
charged with conduct prejudicial to the best
We must also dismiss the petitioner's interest of the service. In the morning of
complaint that CSC Resolution No. 92-878 August 13, 1987 Erlinda Veloso authorized
failed to comply with the constitutional representative of the Tius, presented an
requirement to state clearly and distinctly the undated withdrawal slip for 60K. This was
facts and the law on which a decision is
encashed. After banking hours, a
based. We have held that this provision
applies only to courts of justice and not to 2nd withdrawal slip, also for 60 K, was
administrative bodies like the Civil Service presented by a Feliciano Bugtas Jr. also an
Commission. 16 In any event, there was an employee of the Tius. Veloso did not know
earlier statement of the facts and the law about this. No posting of this amount was
involved in the decision rendered by the actually made because the passbook was not
MSPB dated February 28, 1990, which presented. While the withdrawal slip was
affirmed DBP's decision to dismiss the
dated 8/13, all other supporting docs were
petitioner. In both decisions, the facts and the
law on which they were based were clearly dated 8/14 this being a withdrawal after
and distinctly stated. banking hours. The ff day, prior to the
payment of the 2 nd withdrawal, Veloso
It is worth adding that inasmuch as Civil presented another undated withdrawal slip for
Service Resolution No. 92-878 was rendered 60 K, which was handed to Dadubo. Cidro
only to resolve DBP's motion for paid Veloso the amount corresponding to the
reconsideration, it was not really necessary to 2 nd 60K, on the thought that it was such 2
re-state the factual an, legal bases for the said
nd withdrawal that Velosos was trying to
decisions. Even resolutions issued by this
Court do not need to conform, to the first collect. It turned out that the 3 rd 60K, that
paragraph of Article VIII, Section 14, of the was handed to Dadubo was not paid by the
Constitution, for reasoning extensively bank to Veloso. Dadubo and Cidro were then
discussed in Borromeo v. Court of found guilty by the DBP of dishonesty and
Appeals 17 and other subsequent cases. 18 embezzlement of bank funds, due to the
unposted withdrawal of 60K. Dadubo was
We find no justification to nullify or modify the
dismissed from service. Thi s was because of
questioned resolution. It would perhaps have
been more thorough if certain other officers of petitioner’s action in changing the entry date
the bank had been also investigated for their in the ledger in the course of her reconciliation
part in the anomalous transaction. But that which she was advised not to do. MSPB
affirmed CSC reversed and reduced Dadubo’s FIRST DIVISION
penalty to merely 6 mo suspension. However,
upon MR of the D BP, the CSC reversed its G.R. No. L-30637 July 16, 1987
own decision and affirmed the earlier findings
of the DBP as to Dadubo’s guilt. However, LIANGA BAY LOGGING, CO.,
INC., petitioner,
such resolution did not state clearly and
vs.
distinctly the facts and law on which it was HON. MANUEL LOPEZ ENAGE, in his
based. capacity as Presiding Judge of Branch II of
the Court of First, Instance of Agusan, and
ISSUE W/N the petitioner was deprived of AGO TIMBER CORPORATION, respondents.
due process when she was not sufficiently
informed of the charges against her. TEEHANKEE, C.J.:

HELD NO . While the rules governing judicial The Court grants the petition for certiorari and
trials should be observed as much as possible prohibition and holds that respondent judge,
their strict observance is not indispensable in absent any showing of grave abuse of
administrative cases. The standard of due discretion, has no competence nor authority to
process that must be met in admin tribunals review anew the decision in administrative
allows a certain latitude as long as the proceedings of respondents public officials
(director of forestry, secretary of agriculture
element of fairness is not ignored. The and natural resources and assistant executive
petitioner had several opportunities to be secretaries of the Office of the President) in
heard and to present evidence that she was determining the correct boundary line of the
not guilty of embezzlement but only of failure licensed timber areas of the contending
to comply with the tellering parties. The Court reaffirms the established
procedure. Chapter 5 (Rules of Procedure), principle that findings of fact by an
administrative board or agency or official,
Chapter 6 and Chapter 7 | Admin Law Cases |
following a hearing, are binding upon the
Dean Roy 2D 2012 4 Appreciation of the courts and will not be disturbed except where
evidence submitted by the parties was the the board, agency and/or official(s) have gone
prerogative of the admin body, subject to beyond their statutory authority, exercised
reversal only upon a clear showing of unconstitutional powers or clearly acted
arbitrariness. It is true that petitioner was arbitrarily and without regard to their duty or
charged with conduct prejudicial to the best with grave abuse of discretion.
interest of the bank and not specifically with
The parties herein are both forest
embezzlement. Nevertheless, the allegations
concessionaries whose licensed areas are
and the evidence presented sufficiently adjacent to each other. The concession of
proved her guilt of embezzlement. The petitioner Lianga Bay Logging Corporation
constitutional requirement to state clearly and Co., Inc. (hereinafter referred to as petitioner
distinctly the facts and the law upon which the Lianga) as described in its Timber License
decision is based applies only to courts of Agreement No. 49, is located in the
justice and not to administrative bodies like municipalities of Tago, Cagwait, Marihatag
and Lianga, all in the Province of Surigao,
the CSC. consisting of 110,406 hectares, more or less,
while that of respondent Ago Timber
Corporation (hereinafter referred to as
respondent Ago) granted under Ordinary
Timber License No. 1323-60 [New] is located
at Los Arcos and San Salvador, Province of
Agusan, with an approximate area of 4,000
hectares. It was a part of a forest area of far different in alignment with the line
9,000 hectares originally licensed to one (red) as indicated in the original
Narciso Lansang under Ordinary Timber License Control Map of this Office;
License No. 584-'52.
That the claim of the Ago Timber
Since the concessions of petitioner and Corporation (green line does not
respondent are adjacent to each other, they conform to the distance of 6,800
have a common boundary-the Agusan- meters from point 3 to point 4 of the
Surigao Provincial boundary-whereby the original description of the area of
eastern boundary of respondent Ago's Narciso Lansang but would project
concession is petitioner Lianga's western said line to a distance of
boundary. The western boundary of petitioner approximately 13,800 meters;
Lianga is described as "... Corner 5, a point in
the intersection of the Agusan-Surigao That to follow the claim of the Ago
Provincial boundary and Los Arcos-Lianga Timber Corporation would increase
Road; thence following Agusan-Surigao the area of Narciso Lansang from
Provincial boundary in a general northerly and 9,000 to 12,360 hectares;
northwesterly and northerly directions about
39,500 meters to Corner 6, a point at the That to follow the claim of the Ago
intersection of the Agusan-Surigao Provincial Timber Corporation would reduce the
boundary and Nalagdao Creek ..." The area of the Lianga Bay Logging, Co.,
eastern boundary of respondent Ago's Inc. to 107,046 hectares instead of the
concession is described as "... point 4, along area granted which is 110,406
the Agusan-Surigao boundary; thence hectares.
following Agusan-Surigao boundary in a
general southeasterly and southerly directions
and ruled that "the claim of the Ago Timber
about 12,000 meters to point 5, a point along
Corporation runs counter to the intentions of
Los Arcos-Lianga Road; ..." 1
this Office is granting the license of Mr.
Narciso Lansang; and further, that it also runs
Because of reports of encroachment by both counter to the intentions of this Office in
parties on each other's concession areas, the granting the Timber License Agreement to the
Director of Forestry ordered a survey to Lianga Bay Logging Co., Inc. The intentions of
establish on the ground the common this Office in granting the two licenses
boundary of their respective concession (Lansang and Lianga Bay Logging Co., Inc.)
areas. Forester Cipriano Melchor undertook are patently manifest in that distances and
the survey and fixed the common boundary as bearings are the controlling factors. If mention
"Corner 5 of Lianga Bay Logging Company at was ever made of the Agusan-Surigao
Km. 10.2 instead of Km. 9.7 on the Lianga- boundary, as the common boundary line of
Arcos Road and lines N900E, 21,000 meters; both licensees, this Office could not have
N12 W, 21,150 meters; N40 W, 3,000 meters; meant the Agusan-Surigao boundary as
N31 W, 2,800 meters; N50 W, 1,700 meters" described under Section 1 of Act 1693 of the
which respondent Ago protested claiming that Philippine Commission for were it so it could
"its eastern boundary should be the provincial have been so easy for this Office to mention
boundary line of Agusan-Surigao as described the distance from point 3 to point 4 of Narciso
in Section 1 of Art. 1693 of the Philippine Lansang as approximately 13,800 meters.
Commission as indicated in the green pencil This cannot be considered a mistake
in the attached sketch" of the areas as considering that the percentage of error which
prepared by the Bureau of Forestry. 2 The is more or less 103% is too high an error to be
Director of Forestry, after considering the committed by an Office manned by competent
evidence, found: technical men. The Agusan-Surigao boundary
as mentioned in the technical descriptions of
That the claim of the Ago Timber both licensees, is, therefore, patently an
Corporation portrays a line (green line) imaginary line based on B.F. License Control
Map. Such being the case, it is reiterated that Jose J. Leido, Jr. and Gilberto M. Duavit and
distance and bearings control the description Director of Forestry, as defendants, for
where an imaginary line exists. 3The decision "Determination of Correct Boundary Line of
fixed the common boundary of the licensed License Timber Areas and Damages with
areas of the Ago Timber Corporation and Preliminary Injunction" reiterating once more
Lianga Bay Logging Co., Inc. as that indicated the same question raised and passed upon in
in red pencil of the sketch attached to the DANR Case No. 2268 and insisting that "a
decision. judicial review of such divergent administrative
decisions is necessary in order to determine
In an appeal interposed by respondent Ago, the correct boundary fine of the licensed areas
docketed in the Department of Agriculture and in question." 8
Natural Resources as DANR Case No. 2268,
the then Acting Secretary of Agriculture and As prayed for, respondent judge issued a
Natural Resources Jose Y. Feliciano, in a temporary restraining order on October 28,
decision dated August 9, 1965 set aside the 1968, on a bond of P20,000, enjoining the
appealed decision of the Director of Forestry defendants from carrying out the decision of
and ruled that "(T)he common boundary line the Office of the President. The corresponding
of the licensed areas of the Ago Timber writ was issued the next day, or on October
Corporation and the Lianga Bay Logging Co., 29, 1968. 9
Inc., should be that indicated by the green line
on the same sketch which had been made an On November 10, 1968, defendant Lianga
integral part of the appealed decision." 4 (herein petitioner) moved for dismissal of the
complaint and for dissolution of the temporary
Petitioner elevated the case to the Office of restraining order on grounds that the
the President, where in a decision dated June complaint states no cause of action and that
16, 1966, signed by then Assistant Executive the court has no jurisdiction over the person of
Secretary Jose J. Leido, Jr., the ruling of the respondent public officials and respondent
then Secretary of Agriculture and Natural corporation. It also submitted its opposition to
Resources was affirmed. 5 On motion for plaintiff's (herein respondent prayer for the
reconsideration, the Office of the President issuance of a writ of preliminary injunction.10 A
issued another decision dated August 9, 1968 supplemental motion was filed on December
signed by then Assistant Executive Secretary 6, 1968. 11
Gilberto Duavit reversing and overturning the
decision of the then Acting Secretary of On December 19, 1968, the lower court
Agriculture and Natural Resources and issued an order denying petitioner Lianga's
affirming in toto and reinstating the decision, motion to dismiss and granting the writ of
dated March 20, 1961, of the Director of preliminary injunction prayed for by
Forestry. 6 respondent Ago. 12 Lianga's Motion for
Reconsideration of the Order was denied on
Respondent Ago filed a motion for May 9, 1969. 13 Hence, this petition praying of
reconsideration of the decision dated August the Court (a) to declare that the Director of
9, 1968 of the Office of the President but after Forestry has the exclusive jurisdiction to
written opposition of petitioner Lianga, the determine the common boundary of the
same was denied in an order dated October 2, licensed areas of petitioners and respondents
1968, signed by then Assistant Executive and that the decision of the Office of the
Secretary Jose J. Leido, Jr. 7 President dated August 9, 1968 is final and
executory; (b) to order the dismissal of Civil
On October 21, 1968, a new action was Case No. 1253 in the Court of First Instance
commenced by Ago Timber Corporation, as of Agusan; (c) to declare that respondent
plaintiff, in the Court of First Instance of Judge acted without jurisdiction or in excess
Agusan, Branch II, docketed thereat as Civil of jurisdiction and with grave abuse of
Case No. 1253, against Lianga Bay Logging discretion, amounting to lack of jurisdiction, in
Co., Inc., Assistant Executive Secretaries issuing the temporary restraining order dated
October 28, 1968 and granting the preliminary specifically vested in them by law. Such a
injunction per its Order dated December 19, posture cannot be entertained, for it is a well-
1968; and (d) to annul the aforementioned settled doctrine that the courts of justice will
orders. generally not interfere with purely
administrative matters which are addressed to
After respondent's comments on the petition the sound discretion of government agencies
and petitioner's reply thereto, this Court on and their expertise unless there is a clear
June 30, 1969 issued a restraining order showing that the latter acted arbitrarily or with
enjoining in turn the enforcement of the grave abuse of discretion or when they have
preliminary injunction and related orders acted in a capricious and whimsical manner
issued by the respondent court in Civil Case such that their action may amount to an
No. 1253. 14 excess or lack of jurisdiction. 18

The Court finds merit in the petition. A doctrine long recognized is that where the
law confines in an administrative office the
Respondent Judge erred in taking cognizance power to determine particular questions or
of the complaint filed by respondent Ago, matters, upon the facts to be presented, the
asking for the determination anew of the jurisdiction of such office shall prevail over the
correct boundary fine of its licensed timber courts. 19
area, for the same issue had already been
determined by the Director of Forestry, the The general rule, under the principles of
Secretary of Agriculture and Natural administrative law in force in this jurisdiction,
Resources and the Office of the President, is that decisions of administrative officers shall
administrative officials under whose not be disturbed by the courts, except when
jurisdictions the matter properly belongs. the former have acted without or in excess of
Section 1816 of the Revised Administrative their jurisdiction, or with grave abuse of
Code vests in the Bureau of Forestry, the discretion. Findings of administrative officials
jurisdiction and authority over the and agencies who have acquired expertise
demarcation, protection, management, because their jurisdiction is confined to
reproduction, reforestation, occupancy, and specific matters are generally accorded not
use of all public forests and forest reserves only respect but at times even finality of such
and over the granting of licenses for game findings are supported by substantial
and fish, and for the taking of forest products, evidence. 20 As recently stressed by the Court,
including stone and earth therefrom. The "in this era of clogged court dockets, the need
Secretary of Agriculture and Natural for specialized administrative boards or
Resources, as department head, may repeal commissions with the special knowledge,
or in the decision of the Director of Forestry experience and capability to hear and
when advisable in the public determine promptly disputes on technical
interests, 15 whose decision is in turn matters or essentially factual matters, subject
appealable to the Office of the President. 16 to judicial review in case of grave abuse of
discretion, has become well nigh
In giving due course to the complaint below, indispensable." 21
the respondent court would necessarily have
to assess and evaluate anew all the evidence The facts and circumstances in the instant
presented in the administrative case are similar to the earlier case of Pajo, et
proceedings, 17 which is beyond its al. v. Ago, et al. 22 (where therein respondent
competence and jurisdiction. For the Pastor Ago is the president of herein
respondent court to consider and weigh again respondent Ago Timber Corporation). In the
the evidence already presented and passed said case, therein respondent Pastor Ago,
upon by said officials would be to allow it to after an adverse decision of the Director of
substitute its judgment for that of said officials Forestry, Secretary of Agriculture and Natural
who are in a better position to consider and Resources and Executive Secretary in
weigh the same in the light of the authority connection with his application for renewal of
his expired timber licenses, filed with the we have repeatedly held that there is grave
Court of First instance of Agusan a petition for abuse of discretion justifying the issuance of
certiorari, prohibition and damages with the writ of certiorari only when there is
preliminary injunction alleging that the capricious and whimsical exercise of judgment
rejection of his application for renewal by the as is equivalent to lack of jurisdiction. (Abad
Director of Forestry and Secretary of Santos v. Province of Tarlac, 67 Phil. 480;
Agriculture and Natural Resources and its Tan vs. People, 88 Phil. 609)"
affirmance by the Executive Secretary
constituted an abuse of discretion and was Respondent Ago contends that the motion
therefore illegal. The Court held that "there filed by petitioner Lianga for reconsideration of
can be no question that petitioner Director of the decision of the Office of the President was
Forestry has jurisdiction over the grant or denied in an alleged "decision" dated August
renewal of respondent Ago's timber license 15, 1966, allegedly signed by then Assistant
(Sec. 1816, Rev. Adm. Code); that petitioner Executive Secretary Jose J. Leido, Jr. that,
Secretary of Agriculture and Natural "however, for some mysterious, unknown if
Resources as department head, is not anomalous reasons and/or illegal
empowered by law to affirm, modify or reject considerations, the "decision" allegedly dated
said grant or renewal of respondent Ago's August 15, 1966(Annex "D") was never
timber license by petitioner Director of released" and instead a decision was
Forestry (Sec. 79[c], Rev. Adm. Code); and released on August 9, 1968, signed by then
that petitioner Executive Secretary, acting for Assistant Executive Secretary Gilberto M.
and in behalf and by authority of the President Duavit, which reversed the findings and
has, likewise, jurisdiction to affirm, modify or conclusions of the Office of the President in its
reverse the orders regarding the grant or first decision dated June 16, 1966 and signed
renewal of said timber license by the two by then Assistant Executive Secretary Leido.
aforementioned officials." The Court went on
to say that, "(I)n the case of Espinosa, et al. v. It is elementary that a draft of a decision does
Makalintal, et al. (79 Phil. 134; 45 Off. Gaz. not operate as judgment on a case until the
712), we held that the powers granted to the same is duly signed and delivered to the clerk
Secretary of Agriculture and Commerce for filing and promulgation. A decision cannot
(Natural Resources) by law regarding the be considered as binding on the parties until
disposition of public lands such as granting of its promulgation. 23 Respondent should be
licenses, permits, leases, and contracts or aware of this rule. In still another case of Ago
approving, rejecting, reinstating, or cancelling v. Court of Appeals,24 (where herein
applications or deciding conflicting respondent Ago was the petitioner) the Court
applications, are all executive and held that, "While it is to be presumed that the
administrative in nature. It is a well-recognized judgment that was dictated in open court will
principle that purely administrative and be the judgment of the court, the court may
discretionary functions may not be interfered still modify said order as the same is being put
with by the courts. In general, courts have no into writing. And even if the order or judgment
supervising power over the proceedings and has already been put into writing and signed,
actions of the administrative departments of while it has not yet been delivered to the clerk
the government. This is generally true with for filing, it is stin subject to amendment or
respect to acts involving the exercise of change by the judge. It is only when the
judgment or discretion, and findings of act. judgment signed by the judge is actually filed
Findings of fact by an administrative board, with the clerk of court that it becomes a valid
agency or official, following a hearing, are and binding judgment. Prior thereto, it could
binding upon the courts and will not be still be subject to amendment and change and
disturbed except where the board, agency or may not, therefore, constitute the real
official has gone beyond his statutory judgment of the court."
authority, exercised unconstitutional powers or
clearly acted arbitrarily and without regard to
Respondent alleges "that in view of the
his duty or with grave abuse of discretion. And
hopelessly conflicting decisions of the
administrative bodies and/or offices of the earlier date. Under Section 1834 of the
Philippine government, and the important Revised Administrative Code, the Director of
questions of law and fact involved therein, as Forestry, upon granting any license, may
well as the well-grounded fear and suspicion prescribe and insert therein such terms,
that some anomalous, illicit and unlawful conditions, and limitations, not inconsistent
considerations had intervened in the with law, as may be deemed by him to be in
concealment of the decision of August 15, the public interest. The license operates as a
1966 (Annex "D") of Assistant Executive contract between the government and
Secretary Gilberto M. Duavit, a judicial review respondent. Respondent, therefore, is
of such divergent administrative decisions is estopped from questioning the terms and
necessary in order to determine the correct stipulation thereof.
boundary line of the licensed areas in
question and restore the faith and confidence Clearly, the injunctive writ should not have
of the people in the actuations of our public been issued. The provisions of law explicitly
officials and in our system of administration of provide that Courts of First Instance shall
justice." have the power to issue writ of injunction,
mandamus, certiorari, prohibition, quo
The mere suspicion of respondent that there warranto and habeas corpus in their
were anomalies in the non-release of the respective places, 27 if the petition filed relates
Leido "decision" allegedly denying petitioner's to the acts or omissions of an inferior court, or
motion for reconsideration and the substitution of a corporation, board, officer or person,
thereof by the Duavit decision granting within their jurisdiction. 28
reconsideration does not justify judicial review.
Beliefs, suspicions and conjectures cannot The jurisdiction or authority of the Court of
overcome the presumption of regularity and First Instance to control or restrain acts by
legality of official actions. 25 It is presumed that means of the writ of injunction is limited only
an official of a department performs his official to acts which are being committed within the
duties regularly. 26 It should be noted, territorial boundaries of their respective
furthermore, that as hereinabove stated with provinces or districts 29 except where the sole
regard to the case history in the Office of the issue is the legality of the decision of the
President, Ago's motion for reconsideration of administrative officials. 30
the Duavit decision dated August 9, 1968 was
denied in the Order dated October 2, 1968 In the leading case of Palanan Lumber
and signed by Assistant Executive Secretary Plywood Co., Inc. v. Arranz 31 which involved a
Leido himself (who thereby joined in the petition for certiorari and prohibition filed in the
reversal of his own first decision dated June Court of First Instance of Isabela against the
16, 1966 and signed by himself). same respondent public officials as here and
where the administrative proceedings taken
The Ordinary Timber License No. 1323- were similar to the case at bar, the Court laid
'60[New] which approved the transfer to down the rule that: "We agree with the
respondent Ago of the 4,000 hectares from petitioner that the respondent Court acted
the forest area originally licensed to Narciso without jurisdiction in issuing a preliminary
Lansang, stipulates certain conditions, terms injunction against the petitioners Executive
and limitations, among which were: that the Secretary, Secretary of Agriculture and
decision of the Director of Forestry as to the Natural Resources and the Director of
exact location of its licensed areas is final; that Forestry, who have their official residences in
the license is subject to whatever decision that Manila and Quezon City, outside of the
may be rendered on the boundary conflict territorial jurisdiction of the respondent Court
between the Lianga Bay Logging Co. and the of First Instance of Isabela. Both the statutory
Ago Timber Corporation; that the terms and provisions and the settled jurisdiction of this
conditions of the license are subject to change Court unanimously affirm that the
at the discretion of the Director of Forestry extraordinary writs issued by the Court of First
and the license may be made to expire at an
Instance are limited to and operative only made. Absent a cause of action and
within their respective provinces and districts." jurisdiction, respondent Judge acted with
grave abuse of discretion and excess, if not
A different rule applies only when the point in lack, of jurisdiction in refusing to dismiss the
controversy relates solely to a determination case under review and in issuing the writ of
of a question of law whether the decision of preliminary injunction enjoining the
the respondent administrative officials enforcement of the final decision dated August
was legally correct or not. 32 We thus declared 9, 1968 and the order affirming the same
inDirector of Forestry v. Ruiz. 33 "In Palanan dated October 2, 1968 of the Office of the
Lumber & Plywood Co., Inc., supra, we President.
reaffirmed the rule of non-jurisdiction of courts
of first instance to issue injunctive writs in ACCORDINGLY, the petition for certiorari and
order to control acts outside of their premises prohibition is granted. The restraining order
or districts. We went further and said that heretofore issued by the Court against
when the petition filed with the courts of first enforcement of the preliminary injunction and
instance not only questions the legal related orders issued by respondent judge is
correctness of the decision of administrative the case below is made permanent and the
officials but also seeks to enjoin the respondent judge or whoever has taken his
enforcement of the said decision, the court place is hereby ordered to dismiss Civil Case
could not validly issue the writ of injunction No. 1253.
when the officials sought to be restrained from
enforcing the decision are not stationed within SO ORDERED.
its territory.
1avv phi1

"To recapitulate, insofar as injunctive or Lianga Bay Logging, Co.,


prohibitory writs are concerned, the rule still
stands that courts of first instance have the Inc. v. Enage,
power to issue writs limited to and operative
only within their respective provinces or G.R. No. L-30637, July 16, 1987
districts. "
Facts: The parties are both forest
The writ of preliminary injunction issued by concessionaries whose licensed areas are
respondent court is furthermore void, since it adjacent to each other. Since the concessions
appears that the forest area described in the of petitioner and respondent are adjacent to
injunctive writ includes areas not licensed to each other, they have a common boundary.
respondent Ago. The forest area referred to
Reports of encroachment by both parties on
and described therein comprises the whole
area originally licensed to Narciso Lansang each other’s concessions triggered a survey
under the earlier Ordinary Timber License No. to establish the common boundary of the
58452. Only a portion of this area was in fact respective concession areas and was held
transferred to respondent Ago as described in that the claim of Ago Timber Corporation runs
its Ordinary Timber License No. 1323- counter to the intentions of the Office granting
'60[New]. the Timber License Agreement to Lianga Bay
Logging. Ago Timber appealed to Department
It is abundantly clear that respondent court
of Agriculture and Natural Resources and set
has no jurisdiction over the subject matter of
Civil Case No. 1253 of the Court of First aside the appealed decision of the Director of
Instance of Agusan nor has it jurisdiction to Forestry and ruled in favor of Ago. Lianga Bay
decide on the common boundary of the Logging elevated the case to office of
licensed areas of petitioner Lianga and President and ruling of Agriculture and Natural
respondent Ago, as determined by Resources was affirmed. On Motion for
respondents public officials against whom no Recon, decision was reversed and reinstated
case of grave abuse of discretion has been
decision of Director of Forestry. A civil action grave abuse of discretion or when they have
was instituted by Ago Timber to determine the acted in a capricious and whimsical manner
correct boundary line of license timber areas. such that their action may amount to an
TRO was set in place. Lianga brought the excess or lack of jurisdiction.
case to SC on certiorari.

Issue: WON respondent court has jurisdiction


over the administrative case

Held: Respondent Judge erred in taking


cognizance of the complaint filed by
respondent Ago, asking for the determination
anew of the correct boundary line of its
licensed timber area, for the same issue had
already been determined by the Director of
Forestry, the Secretary of Agriculture and
Natural Resources and the Office of the
President, administrative officials under whose
jurisdictions the matter properly belongs.
Section 1816 of the Revised Administrative
Code vests in the Bureau of Forestry, the
jurisdiction and authority over the
demarcation, protection, management,
reproduction, reforestation, occupancy, and
use of all public forests and forest reserves
and over the granting of licenses for game
and fish, and for the taking of forest products,
including stone and earth therefrom. The
Secretary of Agriculture and Natural
Resources, as department head, may repeal
or modify the decision of the Director of
Forestry when advisable in the public
interests, whose decision is in turn appealable
to the Office of the President. For the
respondent court to consider and weigh again
the evidence already presented and passed
upon by said officials would be to allow it to
substitute its judgment for that of said officials
who are in a better position to consider and
weigh the same in the light of the authority
specifically vested in them by law. it is a well-
settled doctrine that the courts of justice will
generally not interfere with purely
administrative matters which are addressed to
the sound discretion of government agencies
and their expertise unless there is a clear
showing that the latter acted arbitrarily or with