Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 188046 July 24, 2013

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
AMERICAN RUBBER CORPORATION, Respondent.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari filed by Land Bank of the Philippines (LBP) assailing the August 26,
2008 Decision1 and May 12, 2009 Resolution2 of the Court of Appeals (CA)-Mindanao Station in CAG.R. SP No.
00990-MIN which affirmed with modification the Orders3 dated June 16, 2005 and March 14, 2006 of the Regional
Trial Court (Special Agrarian Court [SAC]) of Pagadian City, Branch 18.

The facts follow:

American Rubber Corporation (respondent) is the registered owner of two parcels of land with a combined area of
940.7276 hectares situated in Barangay Ba1uno, Isabela City, Basilan. The first parcel with an area of 927.9366
hectares is covered by Transfer Certificate of Title (TCT) No. T-1286, while the second parcel consists of 12.7910
hectares under TCT No. T-1285.4

Sometime in January 1998, respondent voluntarily offered to sell the two parcels and another property (TCT No. T-
4747) together with all improvements for the total price of ₱105,732,921.00. Subsequently, respondent offered to
sell only the properties covered by TCT Nos. T-1285 and T-1286 at the higher amount of ₱83,346.77 per hectare,
for the total price of ₱1,066,588.60 (12.7970 hectares) and ₱76,928,492.00 (922.9930 hectares), respectively.5

The Department of Agrarian Reform (DAR) initially acquired 835.0771 hectares of respondent’s landholding, with an
average valuation of ₱64,288.16 per hectare or for a total amount of ₱53,685,570.62. Subsequently, an additional
37.7013 hectares were also covered, with an average valuation of ₱62,660.10 per hectare or for a total amount of
₱1,604,141.34. The total area acquired by DAR was 888.6489 hectares valued by petitioner at ₱55,682,832.67.6

Since respondent rejected DAR’s offer based on petitioner’s valuation, the Provincial Agrarian Reform Office
(PARO) endorsed the claim folder to the Department of Agrarian Reform Adjudication Board (DARAB) Central
Office for summary administrative proceedings.7 DAR also requested petitioner to deposit the amount fixed as
compensation for respondent’s land. On February 22, 2000, petitioner deposited in cash and agrarian reform bonds
the sum of ₱53,685,570.62.8 Upon orders of the DAR Secretary, respondent’s titles were partially cancelled and
new transfer certificates of title were issued over the areas taken in the name of the Republic of the Philippines on
August 7, 2000. Thereafter, DAR issued Certificates of Land Ownership Award (CLOAs) in favor of the agrarian
reform beneficiaries.9

Exasperated by DARAB’s inaction for more than two years, respondent filed in the Regional Trial Court (SAC) a
suit10 for judicial determination of just compensation (Civil Case No. 4401-2K2). Petitioner filed a motion to
dismiss11 on the ground of non-exhaustion of administrative remedies, citing the pendency of administrative
proceedings and respondent’s admission that it had withdrawn and collected the preliminary amount of
compensation deposited by petitioner. On January 28, 2003, the SAC denied the motion to dismiss.12 Petitioner’s
motion for reconsideration was likewise denied.13

Pursuant to the Rules of Court, the SAC designated three commissioners nominated by the parties: an IBP member
(Ret. Judge Cecilio G. Martin) as Chairman, and Engr. Sean C. Collantes from the Development Bank of the
Philippines and BIR Revenue Officer Cesar P. Dayagdag as Members.

On July 29, 2004, the Commissioners’ Report14 was submitted to the Court, with the following findings and
recommendation:

INVESTIGATIONS TAKEN

On March 8, 2004, we conducted an ocular inspection. The entire membership of the Court appointed
commissioners were all present and both the contending parties also sent their duly authorized representatives.

Our ocular inspection reveal that both parcels of land are pre-dominantly planted to rubber with an approximate
density of 290-295 rubber trees per hectare. There are relatively smaller portions thereof which are devoted to the
production of rice, cacao, coffee, black pepper, and coconuts. Also found inside the rubber plantation are plant
nurseries, office buildings and other infrastructures. The land has an airstrip of about 10 hectares and is likewise
traversed and criss-crossed by plantation roads, which were built by plaintiff, American Rubber, containing an area
of 27 hectares more or less. The location [of] the rubber plantation is approximately 8 kilometers to the city proper of
Isabela, Basilan.

During the course of ocular inspection, some of our members inquired from occupants/workers of the rubber
plantation and adjoining owners to get information on the probable selling price of land particularly rubberland. Our
inquiry revealed that rubberland commands a selling price of between ₱120,000 to ₱150,000 depending on the size
of the land and condition of the rubber trees.

xxxx

x x x we conducted inquiries from the different government agency/officials such as the City Assessors Office of
Isabela, Department of Agriculture, Register of Deeds, Department of Agrarian Reform, and the Bureau of Internal
Revenue for the purpose of obtaining information on the approximate selling price of rubberland in the Isabela City
area. Our investigation reveal that the reasonable selling price of rubber land within the City of Isabela ranges from
₱90,000 to ₱150,000.

During the March 26, 2004 hearing, defendant LBP submitted a Valuation Summary for plaintiff’s property while the
plaintiff submitted a copy of the appraisal report prepared by Cuervo Appraisers Inc. x x x

xxxx

RECOMMENDATIONS

xxxx

In VIEW of all the foregoing considerations, this Commission hereby recommends that just compensation of the
plaintiff’s property be fixed at ONE HUNDRED FIFTEEN MILLION THREE HUNDRED SEVENTY TWO
THOUSAND TWO HUNDRED SIX PESOS (₱115,372,206) x x x.15

On June 16, 2005, the SAC issued an Order16 adopting the Commissioners’ recommendation:

WHEREFORE, judgment is hereby rendered ordering defendant LBP and DAR to jointly and severally pay [plaintiff]
the following:

1. Just compensation of plaintiff’s property amounting to ONE HUNDRED FIFTEEN MILLION THREE
HUNDRED SEVENTY TWO THOUSAND TWO HUNDRED SIX PESOS (₱115,372,206) which amount is
broken down below:

AREA VALUE/ TOTAL

LAND USE
TAKEN HECTARE VALUE

Rubberland 814.6625 ₱130,342 ₱106,184,739

Riceland 14.8470 ₱126,000 P 1,870,722

Coconutland 5.5676 P 98,430 P 548,018

Cacaoland 0.8971 ₱157,063 P 140,901

Idle/Rawland 13.4160 P 80,000 P 1,073,280

Black Pepper land 0.5918 ₱218,013 P 129,020

Plant Nursery 1.5574 ₱200,000 P 311,480

Plantation road 27.5043 ₱130,342 P 3,584,496

Airstrip 10.1970 ₱150,000 P 1,529,550

GRAND
₱115,372,206
TOTAL

2. Interest based on the 91-day treasury bills rate as provided for under Section 18 of R.A. 6657 be
reckoned from the date when plaintiff’s property was taken and/or transferred to the Republic of the
Philippines
 3. Commissioners fees to be taxed as part of the costs pursuant to Section 12, Rule 67, of the 1997 RCP, as
amended, which shall be claimed in a Bill of Costs to be submitted to the Court for its evaluation and proper
action thereto;

4. Reasonable attorney’s fees amounting to One Hundred Fifty Thousand Pesos (₱150,000.00);

5. Costs of suit.

SO ORDERED.17

After the SAC denied its motion for reconsideration, petitioner filed a petition for review under Rule 43 with the CA.

On August 26, 2008, the CA rendered the assailed decision, the dispositive portion of which reads:

WHEREFORE, premises foregoing, the instant petition is PARTIALLY GRANTED. The assailed Orders dated June
16, 2005 and March 14, 2006 of Branch 18 of the Regional Trial Court of Pagadian City is hereby AFFIRMED with
MODIFICATION that the award of interest based on the 91-day treasury bill is deleted.

SO ORDERED.18

The CA also denied petitioner’s motion for reconsideration.

Hence, this petition asserting that –

1. THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN AFFIRMING WITH

MODIFICATION THE ORDERS DATED JUNE 16, 2005 AND MARCH 14, 2006 OF THE SPECIAL
AGRARIAN COURT (SAC), THE COMPENSATION FIXED BY THE SAC NOT BEING IN ACCORDANCE
WITH THE LEGALLY PRESCRIBED VALUATION FACTORS UNDER SECTION 17 OF R.A. 6657 AS
TRANSLATED INTO A BASIC FORMULA IN DAR ADMINISTRATIVE ORDER NO. 05, SERIES OF 1998
AND JOINT DAR-LBP MEMORANDUM CIRCULAR NO. 7, SERIES OF 1999, AND AS RULED BY THE
SUPREME COURT IN THE CASES OF SPS. BANAL, G.R. NO. 143276 (JULY 20, 2004); CELADA, G.R.
NO. 164876 (JANUARY 23, 2006); AND LUZ LIM, G.R. NO. 171941 (AUGUST 2, 2007).

2. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER LBP LIABLE FOR
COMMISSIONERS’ FEE AS THE LATTER IS PERFORMING GOVERNMENTAL FUNCTION AND,
THEREFORE, NOT LIABLE FOR COST.19

Petitioner assails the CA in affirming the SAC valuation which merely adopted the Commissioners’ Report which, in
turn, is based solely on the recommended valuation by respondent’s private appraiser, Cuervo Appraisers, Inc.
using a different criteria. It cites our ruling in Land Bank of the Philippines v. Kumassie Plantation Company,
Inc.20 where this Court noted that no basis had been shown in the appraisal report for concluding that the market
data approach and income approach, the same criteria used by Cuervo Appraisers, Inc. in this case, "conformed to
statutory and regulatory requirements."21 Accordingly, we sustained in said case the valuation made by LBP, which
was patterned after the applicable administrative order issued by the DAR.

Petitioner further points out that the SAC’s valuation violated AO 5 guidelines stating that "the computed value using
the applicable formula shall in no case exceed the Landowner’s offer in case of VOs."22 In this case, respondent’s
revised offer was only ₱83,346.77 per hectare but the SAC arrived at an average value of ₱129,742.38 per hectare
which is 55.66% more than the landowner’s offer.

Respondent, on the other hand, distinguished the factual setting of this case from that of Land Bank v. Kumassie
Plantation Company, Inc.23 It points out that in Kumassie, the SAC merely cited the location of the land and nature of
the trees planted, and relied heavily on the appraisal report of the private appraiser which pegged the value of the
land on its potential benefits of land ownership. But here, respondent claims that the SAC through its appointed
commissioners, "appeared to have dwelt on the Market Data Approach, Income Approach and Residual Value
Approach, in determining just compensation of respondent’s property, the data gathered under the said approaches
to valuation basically encompassed/embraced most, if not all, of the factors enumerated in Section 17, R.A. 6657 in
relation to the relevant DAR Administrative Orders."24 It cannot be said, therefore, that the SAC herein had no basis
in fixing the just compensation of respondent’s property after having taken into consideration the factors enumerated
in Section 17 of R.A. No. 6657.

Respondent further invokes our ruling in Apo Fruits Corporation v. Court of Appeals,25 where this Court upheld the
valuation made by the RTC which did not merely rely on the report of Commissioners nor on the Cuervo appraiser’s
report but also took into account the nature of the property as irrigated land, location along the highway, market
value, assessor’s value and the volume and value of its produce, such valuation was considered to be in
accordance with R.A. No. 6657.

Section 17 of the law enumerates the factors to be considered by the RTC in determining just compensation to be
paid to the landowner:
Section 17. Determination of Just Compensation. – In determining just compensation, the cost of acquisition of the
land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the
tax declarations, and the assessment made by government assessors, shall be considered. The social and
economic benefits contributed by the farmers and the farmworkers and by the Government to the property as well
as the non-payment of taxes or loans secured from any government financing institution on the said land shall be
considered as additional factors to determine its valuation.

Thus, the RTC shall be guided by the following factors in just compensation cases: (1) the acquisition cost of the
land; (2) the current value of the properties; (3) its nature, actual use, and income; (4) the sworn valuation by the
owner; (5) the tax declarations; (6) the assessment made by government assessors; (7) the social and economic
benefits contributed by the farmers and the farmworkers, and by the government to the property; and (8) the non-
payment of taxes or loans secured from any government financing institution on the said land, if any.26 These factors
have been translated into the following basic formula under relevant issuances27 by the DAR:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value

CNI = Capitalized Net Income

CS = Comparable Sales

MV = Market Value per Tax Declaration28

The mandatory application by the RTC of the above formula in accordance with DAR administrative orders and
circulars had been settled by this Court. In Land Bank of the Philippines v. Honeycomb Farms Corporation,29 we
cited a long line of jurisprudence and reiterated the standing rule on the matter:

In Land Bank of the Philippines v. Sps. Banal, we recognized that the DAR, as the administrative agency tasked
with the implementation of the agrarian reform program, already came up with a formula to determine just
compensation which incorporated the factors enumerated in Section 17 of RA 6657. We said:

"These factors enumerated in Section 17 have been translated into a basic formula in DAR Administrative Order No.
6, Series of 1992, as amended by DAR Administrative Order No. 11, Series of 1994, issued pursuant to the DAR’s
rule-making power to carry out the object and purposes of R.A. 6657, as amended." [emphases ours]

In Landbank of the Philippines v. Celada, we emphasized the duty of the RTC to apply the formula provided in the
applicable DAR AO to determine just compensation, stating that:

"While the RTC is required to consider the acquisition cost of the land, the current value of like properties, its nature,
actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the
government assessors to determine just compensation, it is equally true that these factors have been translated into
a basic formula by the DAR pursuant to its rule-making power under Section 49 of R.A. No. 6657. As the
government agency principally tasked to implement the agrarian reform program, it is the DAR’s duty to issue rules
and regulations to carry out the object of the law. The DAR Administrative Order precisely "filled in the details" of
Section 17, R.A. No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into
account. The RTC was at no liberty to disregard the formula which was devised to implement the said provision.
1âw phi 1

It is elementary that rules and regulations issued by administrative bodies to interpret the law which they are
entrusted to enforce, have the force of law, and are entitled to great respect. Administrative issuances partake of the
nature of a statute and have in their favor a presumption of legality. As such, courts cannot ignore administrative
issuances especially when, as in this case, its validity was not put in issue. Unless an administrative order is
declared invalid, courts have no option but to apply the same." [emphases ours]

We reiterated the mandatory application of the formula in the applicable DAR administrative regulations in Land
Bank of the Philippines v. Lim, Land Bank of the Philippines v. Heirs of Eleuterio Cruz, and Land Bank of the
Philippines v. Barrido. In Barrido, we were explicit in stating that:

"While the determination of just compensation is essentially a judicial function vested in the RTC acting as a Special
Agrarian Court, the judge cannot abuse his discretion by not taking into full consideration the factors specifically
identified by law and implementing rules. Special Agrarian Courts are not at liberty to disregard the formula laid
down in DAR A.O. No. 5, series of 1998, because unless an administrative order is declared invalid, courts have no
option but to apply it. The courts cannot ignore, without violating the agrarian law, the formula provided by the DAR
for the determination of just compensation." (emphases ours)

These rulings plainly impose on the RTC the duty to apply the formula laid down in the pertinent DAR administrative
regulations to determine just compensation. Clearly, the CA and the RTC acted with grievous error when they
disregarded the formula laid down by the DAR, and chose instead to come up with their own basis for the valuation
of the subject land.30 [Additional emphasis and underscoring supplied; citations omitted.]
In ruling for the respondent, the CA ruled that the RTC is not bound to adopt exclusively the formula set by DAR’s
issuances, citing this Court’s ruling in Apo Fruits Corporation v. Court of Appeals,31 and that the SAC "may in the
exercise of its judicial discretion use other factors and alternative formula in fixing the proper valuation of just
compensation.

As already mentioned, the SAC is duty-bound to apply the formula laid down in DAR AO No. 5. The CA clearly erred
in affirming the valuation by the SAC in this case based on the private appraiser’s correlated income, market data
and residual value approaches which did not conform to the guidelines set forth in DAR AO No. 5 and Joint DAR-
LBP Memorandum Circular (MC) No. 7, Series of 1999. It must be stressed that MC No. 7 was issued to provide
revised guidelines in determining the Capitalized Net Income (CNI) specifically for rubberlands:

1. PREFATORY STATEMENT

The rubber plantation income models presented under the old rubber Land Valuation Guideline (LVG No. 6, Series
of 1990) recognized the income of rubber plantations based on processed crumb rubber. However, recent
consultations with rubber authorities (industry, research, etc.) disclosed that the standard income approach to
valuation should measure the net income or productivity of the land based on the farm produce (in their raw forms)
and not on the entire agri-business income enhanced by the added value of farm products due to processing.
Hence, it is more appropriate to determine the Capitalized Net Income (CNI) of rubber plantations based on the
actual yield and farm gate prices of raw products (field latex and cuplump) and the corresponding cost of production.

There is also a growing market for old rubber trees which are estimated to generate net incomes ranging between
₱20,000 and ₱30,000 per hectare or an average of about ₱100 per tree, depending on the remaining stand of old
trees at the end of its economic life. This market condition for old rubber trees was not present at the time LVG No.
6, Series of 1990, was being prepared. (The terminal or salvage value of old rubber trees was at that time pegged at
only ₱6,000 per hectare, representing the amount then being paid by big landholders to contractors for clearing and
uprooting old trees.

LVG No. 6, Series of 1990, was therefore revised to address the foregoing considerations and in accordance with
DAR Administrative Order (AO) No. 05, Series of 1998.

Petitioner, however, admits that it did not consider data on comparative sales transactions (CS) which it said are not
applicable since under DAR AO 5, the sales transactions should have been executed "within the period January 1,
1985 to June 15, 1988 and registered within the period January 1, 1985 to September 13, 1988."32

We cannot accept petitioner’s valuation as it failed to consider the value of the property at the time of taking, the
current value of like properties being among those factors enumerated in Section 17. Indeed, these administrative
issuances or orders, though they enjoy the presumption of legalities, are still subject to the interpretation by the
Supreme Court pursuant to its power to interpret the law. While rules and regulation issued by the administrative
bodies have the force and effect of law and are entitled to great respect, courts interpret administrative regulations in
harmony with the law that authorized them and avoid as much as possible any construction that would annul them
as invalid exercise of legislative power.33

This Court has defined "just compensation" for parcels of land taken pursuant to the agrarian reform program as
"the full and fair equivalent of the property taken from its owner by the expropriator." The measure of compensation
is not the taker’s gain but the owner’s loss.34 Just compensation means the equivalent for the value of the property
at the time of its taking. It means a fair and full equivalent value for the loss sustained. All the facts as to the
condition of the property and its surroundings, its improvements and capabilities should be considered.35 Thus, the
current value of like properties should have been considered by petitioner to accurately determine the value of the
land at the time of taking, that is, in August 2000 when respondent’s title was transferred to the Government.

In Land Bank of the Philippines v. Heirs of Salvador Encinas we said that:

The "taking of private lands under the agrarian reform program partakes of the nature of an expropriation
proceeding." In computing the just compensation for expropriation proceedings, the RTC should take into
consideration the "value of the land at the time of the taking, not at the time of the rendition of judgment." "The ‘time
of taking’ is the time when the landowner was deprived of the use and benefit of his property, such as when title is
transferred to the Republic.36

However, while the CA correctly observed that petitioner’s valuation omitted an integral factor mandated by Section
17, the records are bereft of any supporting evidence to compute the CS. The documents submitted by the
respondent to the Commissioners consisted merely of sworn affidavits of adjacent owners/sellers and not
registerable deeds of sale. The SAC’s decision actually did not contain any discussion of its application of any
formula to the facts established by evidence, as it merely adopted the Commissioners’ Report, which in turn was
based solely on the findings and computation of the Cuervo Appraisal Report.

Considering, therefore, that the SAC based its valuation on a different formula,37 while petitioner failed to take into
full consideration the factors set forth in Section 17, and in the absence of sufficient evidence for the determination
of just compensation,38 we are constrained to remand the present case to the SAC for the determination of just
compensation in accordance with Section 17 of RA 6657, DAR AO 5, Series of 1998 and Joint DAR-LBP MC No. 7,
Series of 1999. The said trial court may, motu proprio or at the instance of any of the parties, again appoint one or
more commissioners to ascertain facts relevant to the dispute and file a written report thereof.39

WHEREFORE, the petition is GRANTED. The August 26, 2008 Decision and May 12, 2009 Resolution of the Court
of Appeals-Mindanao Station in CA-G.R. SP No. 00990-MIN are REVERSED and SET ASIDE. The case is hereby
REMANDED to the Regional Trial Court (Special Agrarian Court) of Pagadian City, Branch 18, which is directed to
determine with dispatch, and with the assistance of at least three commissioners, the just compensation due to the
respondent American Rubber Corporation, in accordance with Section 17 of R.A. No. 6657, DAR AO 5, Series of
1998, Joint DAR-LBP MC No. 7, Series of 1999 and other applicable DAR issuances.

No pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
 August 24, 2016

G.R. No. 183173

THE CHAIRMAN and EXECUTIVE DIRECTOR, PALAWAN COUNCIL FOR SUSTAINABLE DEVELOPMENT,
and THE PALAWAN COUNCIL FOR SUSTAINABLE DEVELOPMENT, Petitioners
vs.
EJERCITO LIM DOING BUSINESS AS BONANZA AIR SERVICES, AS REPRESENTED BY HIS ATTORNEY-IN-
FACT, CAPT. ERNESTO LIM, Respondent

DECISION

BERSAMIN, J.:

This appeal seeks the reversal of the decision promulgated on May 28, 2008, 1 whereby the Court of Appeals (CA)
granted the petition for prohibition of the respondent,2 and enjoined the petitioners from enforcing Administrative
Order (A.O.) No. 00-05, Series of 2002; Resolution No. 03- 211; any and all of their revisions; and the Notice of
Violation and Show Cause Order for being null and void.

Antecedents

Petitioners Ex.ecutive Director and Chairman of the Palawan Council for Sustainable Development (PCSD), Messrs.
Winston G. Arzaga and Vicente A. Sandoval, respectively, were the public officials tasked with the duty of executing
and implementin A.O. No. 00-05 and the Notice of Violation and Show Cause Order, while the PCSD was the
government agency responsible for the governance, implementation, and policy direction of the Strategic
Environment Plan (SEP) for Pala wan. On the other hand, the respondent was the operator of a domestic air carrier
doing business under the name and style Bonanza Air Services, with authority to engage in nonscheduled air taxi
transportation of passengers and cargo for the public. His business operation was primarily that of transporting live
fish from Palawan to fish traders.3

The PCSD issued A.O. No. 00-05 on February 25, 2002 to ordain that the transport of live fish from Palawan would
be allowed only through traders and carriers who had sought and secured accreditation from the PCSD. On
September 4, 2002, the Air Transportation Office (ATO) sent to the PCSD its communication to the effect that A TO-
authorized carriers were considered common carriers, and, as such, should be exempt from the PCSD accreditation
requirement. It attached to the communication a list of its authorized carriers, which included the respondent's air
transport service.4

The respondent asserted that he had continued his trade without securing the PCSD-required accreditation; that the
PCSD Chairman had started harassing his clients by issuing Memorandum Circular No. 02, Series of 2002, which
contained a penal clause imposhig sanctions on the availment of transfer services by unaccredited aircraft carriers
such as cancellation of the PCSD accreditation and perpetual disqualification from engaging in live fish trading in
Palawan; that due to the serious effects of the memorandum, the respondent had sent a grievance letter to the
Office of the President; and that the PCSD Chairman had nonetheless maintained that the respondent's business
was not a common carrier, and should comply with the requirement for PCSD accreditation.

In disregard of the prohibition, the respondent continued his business operation in Palawan until a customer showed
him the Notice of Violation and Show Cause Order issued by the PCSD to the effect that he had still made 19 flights
in October 2002 despite his failure to secure accreditation from the PCSD; and that he should explain his actuations
within 15 days, otherwise, he would be sanctioned with a fine of ₱50,000.00. 5

According to the respondent, he had not received the Notice of Violation and Show Cause Order. 6

The respondent filed a petition for prohibition in the CA, which issued a temporary restraining order (TRO) upon his
application after finding that there were sufficient grounds to issue the TR0. 7 After the petitioners did not file their
comment despite notice, the CA issued the writ of preliminary injunction upon his posting of the injunction bond for
P.50,000.00.8

The petitioners countered that the petition for prohibition should have been dismissed because A.O. No. 00-05 was
in accord with the mandate of the Constitution and of Republic Act No. 7611 (Strategic Environmental Plan for
Palawan Act);9 that Resolution No. 03-211 had meanwhile amended or repealed portions of A.O. No. 00-05, thereby
rendering the issues raised by the petition for prohibition moot and academic; 10 that by virtue of such developments,
the PCSD accreditation was now required for all carriers, except those belonging to the Government; that on August
18, 2003, the respondent had received another notice regarding the enactment of Resolution No. 03-211; and that
they had subsequently dispatched to the respondent on September 9, 2003 another show cause order in view of his
continued non-compliance with Resolution No. 03-211. 11

The salient portions of Resolution No 03-211 read:

SECTION 3. A new Paragraph 1.5 is hereby added to Section 1 of Administrative Order No. 00-05, as amended, as
follows:

"CARRIER - any natural or juridical person or entity, except the Government, that is engaged or involved in the
transportation of live fish or any other aquatic fresh or saltwater products, whether or not on a daily or regular
manner or schedule and whether or not for compensation, from any point within or out of the Province of Palawan
under a contract or transportation, whether or not in writing, through the use of aircrafts, seacrafts, land vehicles or
any other mode of transportation, whether or not registered, mechanical or motorized in nature, and whether or not
such persons or entities are common carriers or not as defined by law and regardless of the place of registration of
such persons or entities as well as the crafts and vehicles used or employed by them."

xxxx

SECTION 5. The new section 2 for Administrative Order No. 00- 05, as amended, shall read as follows:

"Section 2. Accreditation. Before it can proceed with the transport or carriage of live fish or any other aquatic fresh
or saltwater products within or out of the Province of Palawan, a CARRIER must secure a CERTIFICATE OF
ACCREDITATION from the PCSD." 12

The respondent then filed a supplemental petition alleging that due to the implementation of Resolution No. 03-211,
his carriers were forbidden to transport or deliver fish from Palawan to his clients resulting in loss of income
amounting to ₱132,000.00; and that such supervening event was a mere scheme to circumvent the TRO and the
writ of preliminary injunction issued by the CA.

As stated, the CA promulgated its assailed decision on May 28, 2008, disposing as follows:

WHEREFORE, the instant petition is GRANTED. Administrative Order No. 00-05, Series of 2002, Resolution
No. 03-211, and any and all of its revisions, and the Notice of Violation and Show-Cause Order are
declared NULL and VOID. The injunctive writ previously issued by this Court prohibiting the Respondents from
implementing or enforcing the said issuance(s) is declared PERMANENT. Costs against the Respondents.

SO ORDERED. 13

Hence, this appeal by the petitioners.

Issues

The sole issue for determination is whether or not the CA erred in declaring A.O. No. 00-05, Series of 2002;
Resolution No. 03-211; and the the Notice of Violation and Show Cause Order null and void for having been issued
in excess of the PCSD’s authoity.

The petitioners submit the following grounds for consideration, to wit:

THE COURT OF APPEALS ERRED IN INTERPRETING SECTIONS 4, 6, 16, AND 19 OF RA 7611 AS

LIMITATIONS TO THE POWER OF THE PCSD TO PROMULGATE ADMINISTRATIVE ORDER NO 00-05.

II

THE COURT OF APPEALS ERRED IN HOLDING THAT THE PCSD'S ISSUANCE OF ADMINISTRATIVE ORDER
NO. 05 (sic) IS AN ENCROACHMENT OF THE LEGISLATIVE FUNCTION OF THE SANGGUNIANG PANLALA
WIGAN OF PALA WAN,

A. ADMINISTRATIVE ORDER NO. 00-05 AND ITS REVISIONS WERE PROMULGATED PURSUANT TO THE
RULE-MAKING POWER OF THE PCSD.

B. ADMINISTRATIVE ORDER NO. 00-05 AND ITS REVISIONS POSSESS ALL THE REQUISITES OF A VALID
ADMINISTRATIVE REGULATION.

III

THE COURT OF APPEALS ERRED IN RULING THAT THE PROMULGATION OF ADMINISTRATIVE ORDER NO.
00-05 AND ITS REVISIONS IS VESTED SOLELY IN THE SANGGUNIANG PANLALAWIGAN OF PALAWAN. 14

Ruling of the Court

We grant the petition for review on certiorari, and reverse the decision of the CA
 1.

Procedural Matters

We first deal with the propriety of the petition for prohibition for the purpose of annulling the challenged
administrative issuances.

Administrative agencies possess two kinds of powers, the quasi-legislative or rule-making power, and the quasi-
judicial or administrative adjudicatory power. The first is the power to make rules and regulations that results in
delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and
separability of powers. 15 The issuance of the assailed A.O. No. 00-05, Resolution. No. 03-211 and the other
issuances by the PCSD was in the exercise of the agency's quasilegislative powers. The second is the power to
hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the same law. The administrative body
exercises its quasi-judicial power when it performs in a judicial manner an act that is essentially of an executive or
administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the
performance of the executive or administrative duty entrusted to it. 16

The challenge being brought by the petitioners rests mainly on the theory that the CA should not have interpreted
the functions of the PCSD, particularly those provided for in Sections 4, 6, 16, and 19 of R.A. No. 7611, as
limitations on the power of the PCSD to promulgate A.O. No. 00-05. Clearly, what was assailed before the CA was
the validity or constitutionality of a rule or regulation issued by the PCSD as an administrative agency in the
performance of its quasi-legislative function. The question thus presented was a matter incapable of pecuniary
estimation, and exclusively and originally pertained to the proper Regional Trial Court pursuant to Section 19(1)
of Batas Pambansa Blg. 129. Indeed, Section 1, Rule 63 of the Rules of Court expressly states that any person
"whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental
regulation" may bring an action in the appropriate Regional Trial Court "to determine any question of construction or
validity arising, and for a declaration of his rights or duties, thereunder." The judicial course to raise the issue against
such validity should have adhered to the doctrine of hierarchy of courts except only if the respondent had sufficient
justification to do otherwise. Yet, he utterly failed to show justification to merit the exception of bypassing the
Regional Trial Court. Moreover, by virtue of Section 5, Article VIII of the Constitution,17 the Court's power to evaluate
the validity of an implementing rule or regulation is generally appellate in nature.

In this regard, the Court has categorically observed in Smart Communications, Inc. v. National Telecommunications
Commission 18 that if what is being assailed is the validity or constitutionality of a rule or regulation issued by an
administrative agency in the performance of its quasi-legislative functions, then the Regional Trial Court has
jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by an
administrative agency contravenes the law or the Constitution is within the jurisdiction of the Regional Trial Court. 19

To accord with the doctrine of hierarchy of courts, therefore, the petition for prohibition should have been originally
brought in the proper Regional Trial Court as a petition for declaratory relief.

We also need to remind that a petition for prohibition is not the proper remedy to assail an administrative order
issued in the exercise of a quasilegislative function. Prohibition is an extraordinary writ directed against any tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, ordering said
entity or person to desist from further proceedings when said proceedings are without or in excess of said entity's or
person's jurisdiction, or are accompanied with grave abuse of discretion, and there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of law. 20 Its lies against the exercise of judicial or ministerial
functions, not against the exercise of legislative or quasi-legislative functions. Generally, the purpose of the writ of
prohibition is to keep a lower court within the limits of its jurisdiction in order to maintain the administration of justice
in orderly channels.21 In other words, prohibition is the proper remedy to afford relief against usurpation of jurisdiction
or power by an inferior court, or when, in the exercise of jurisdiction in handling matters clearly within its cognizance
the inferior court transgresses the bounds prescribed to it by the law, or where there is no adequate remedy
available in the ordinary course of law by which such relief can be obtained.22

Nevertheless, the Court will not shirk from its duty to rule on this case on the merits if only to facilitate its speedy
resolution. In proper cases, indeed, the rigidity of procedural rules may be relaxed or suspended in the interest of
substantial justice. The power of the Court to except a particular case from its rules whenever the purposes of
justice so require cannot be questioned. 23

2.

Substantive Matters

Were A.O. No. 00-05, Series of 2002; Resolution No. 03-211; and the the Notice of Violation and Show Cause
Order null and void for having been issued in excess of the PCSD's authority?

We answer the query in the negative.

R.A. No. No. 7611 has adopted the Strategic Environmental Plan (SEP) for Palawan consistent with the declared
policy of the State to protect, develop, and conserve its natural resources. The SEP is a comprehensive framework
for the sustainable development of Palawan to protect and enhance the Province's natural resources and
endangered environment.

Towards this end, the PCSD was established as the administrative machinery for the SEP' s implementation. The 1avv phi 1

creation of the PCSD has been set forth in Section 16 ofR.A. No. 7611, to wit:

SEC. 16. Palawan Council for Sustainable Development. - The governance, implementation and policy direction
of the Strategic Environmental Plan shall be exercised by the herein created Palawan Council for Sustainable
Development (PCSD), hereinafter referred to as the Council, which shall be under the Office of the President. x x x

The functions of the PCSD are specifically enumerated in Section 19 of R.A. No. 7611, which relevantly provides:

SEC. 19. Powers and Functions. - In order to successfully implement the provisions of this Act, the Council is
hereby vested with the following powers and functions:

1. Formulate plans and policies as may be necessary to carry out the provisions of this Act;

2. Coordinate with the local governments to ensure that the latter's plans, programs and projects are aligned with
the plans, programs and policies of the SEP;

3. Call on any department, bureau, office, agency or instrumentality of the Government, and on private entities and
organizations for cooperation and assistance in the performance of its functions;

4. Arrange, negotiate for, and accept donations, grants, gifts, loans, and other funding from domestic and foreign
sources to carry out the activities and purposes of the SEP;

5. Recommend to the Congress of the Philippines such matters that may require legislation in support of the
objectives of the SEP;

6. Delegate any or all of its powers and functions to its support staffs, as hereinafter provided, except those which by
provisions of law cannot be delegated;

7. Establish policies and guidelines for employment on the basis of merit, technical competence and moral character
and prescribe a compensation and staffing pattern;

8. Adopt, amend and rescind such rules and regulations and impose penalties therefor for the effective
implementation of the SEP and the other provisions of this Act;

9. Enforce the provisions of this Act and other existing laws, rules and regulations similar to or complementary with
this Act;

10. Perform related functions which shall promote the development, conservation, management, protection, and
utilization of the natural resources of Palawan; and

11. Perform such other powers and functions as may be necessary in carrying out its functions, powers, and the
provisions of this Act. (Emphasis supplied)
1âw phi 1

Accordingly, the PCSD had the explicit authority to fill in the details as to how to carry out the objectives of R.A. No.
7611 in protecting and enhancing Palawan's natural resources consistent with the SEP. In that task, the PCSD
could establish a methodology for the effective implementation of the SEP. Moreover, the PCSD was expressly
given the authority to impose penalties and sanctions in relation to the implementation of the SEP and the other
provisions of R.A. No. 7611. As such, the PCSD's issuance of A.O. No. 00-95 and Resolution No. 03-211 was well
within its statutory authority.

WHEREFORE, the Court GRANTS the petition for review on certiorari; ANNULS and SETS ASIDE the decision
promulgated on May 28, 2008; DECLARES VALID and EFFECTIVE Administrative Order No. 00-05, Series of
2002; Resolution No. 03-211; and all their revisions, as well as the Notice of Violation and Show Cause Order
issued to the respondent; LIFTS the permanent injunction issued by the Court of Appeals enjoining petitioner
Palawan Council for Sustainable Development from enforcing Administrative Order No. 00-05, Series of 2002;
Resolution No. 03-211; and all their revisions, as well as the Notice of Violation and Show Cause Order issued to
the respondent; and ORDERS the respondent to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 189571 January 21, 2015

THE HONORABLE MONETARY BOARD and GAIL U. FULE, Director, Supervision and Examination
Department II, and BANGKO SENTRAL NG PILIPINAS, Petitioners,
vs.
PHILIPPINE VETERANS BANK, Respondent.

DECISION

PERALTA, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside
the Decision1 dated June 15, 2009 and Order2 dated August 25, 2009 of the Regional Trial Court (RTC) of Makati
City in Civil Case No. 07-271.

The factual antecedents follow.

Respondent established a pension loan product for bona fide veterans or their surviving spouses, as well as salary
loan product for teachers and low-salaried employees pursuant to its mandate under Republic Act (RA) Nos.
35183 and 71694 to provide financial assistance to veterans and teachers.

As its clientele usually do not have real estate or security to cover their pension or salary loan, other than their
continuing good health and/or employment, respondent devised a program by charging a premium in the form of a
higher fee known as Credit Redemption Fund(CRF) from said borrowers. Resultantly, Special Trust Funds were
established by respondent for the pension loans of the veteran-borrowers, salary loans of teachers and low-salaried
employees. These trust funds were, in turn, managed by respondent’s Trust and Investment Department, with
respondent as beneficiary. The fees charged against the borrowers were credited to the respective trust funds,
which would beused to fully pay the outstanding obligation of the borrowers in case of death.

On April 30, 2002, an examination was conducted by the Supervision and Examination Department (SED) II of the
Bangko Sentral ng Pilipinas (BSP). It found, among other things, that respondent’s collection of premiums from the
proceeds of various salary and pension loans of borrowers to guarantee payment of outstanding loans violated
Section 54 of RA No. 87915 which states that banks shall not directly engage in insurance business as insurer.

Subsequently, respondent wrote a letter to petitioners justifying the existence of the CRF.

In a letter dated March 17, 2003, the BSP notified respondent about the Insurance Commission’s opinion that the
CRF is a form of insurance. Thus, respondent was requested to discontinue the collection of said fees.

On February 24, 2004, respondent complied with the BSP’s directive and discontinued the collection of fees for
CRF.

On September 16, 2005, petitioners issued Monetary Board (MB) Resolution No. 1139 directing respondent’s Trust
and Investment Department to return to the borrowers all the balances of the CRF in the amount of
₱144,713,224.54 as of August31, 2004, and to preserve the records of borrowers who were deducted CRFs from
their loan proceeds pending resolution or ruling of the Office of the General Counsel of the BSP. Thus, respondent
requested reconsideration of said MB Resolution. However, the same was denied ina letter dated December 5,
2006.

Accordingly, respondent filed a Petition for Declaratory Relief with the RTC of Makati City.

In response, petitioners filed a Motion to Dismiss alleging that the petition for declaratory relief cannot prosper due
to respondent’s prior breach of Section 54 of RA No. 8791.

In an Order6 dated September 24, 2007, the RTC dismissed respondent’s petition for declaratory relief and held as
follows:

Upon a thorough analysis of the allegations of the petition and the documents attached thereto as annexes,the
arguments of both parties in support of their respective position on the incident up for resolution, the Court finds that
an ordinary civil action or other else but certainly not the present action for declaratory relief, is the proper remedy.
Clearly, as gleaned from the verydocuments attached to the petition, and as correctly pointed out by the
[petitioners], [respondent], as found by the BSP examiners and confirmed by the Monetary Board, violated Section
54 of RA No. 8791, subject matter of the instant case, by engaging in an insurance activity which is prohibited by
such law. To be precise, the law so provides thus: "SEC. 54. Prohibition to Act as Insurer. A bank shall not directly
engaged (sic) in the business as the insurer."

Hence, the issue of whether or not petitioner violated the foregoing law can only be fittingly resolved thru an
ordinaryaction. For which reason, the Court has no recourse but to put an end to this case.

In view of the foregoing, the Court deems it unnecessary to tackle the other grounds relied upon by [petitioners] in
their motion to dismiss.

WHEREFORE, for reasons afore-stated, the petition is hereby DISMISSED.

SO ORDERED.

Almost a year later, respondent filed a Motion to Admit its Motion for Reconsideration against said order alleging
that it did not receive a copy thereof until September 3, 2008.

Petitioners opposed said motion on the ground that per Certification of the Philippine Postal Office, an official copy
of the RTC’s Order was duly served and received by respondent on October 17, 2007.

Despite the foregoing, the RTC allowed respondent’s motion for reconsideration and required petitioners to file their
answer.

In a Decision dated June 15, 2009,the RTC of Makati City granted respondent’s petition for declaratory relief
disposing as follows:

WHEREFORE, premises considered, it is hereby DECLARED that [respondent], when it collected additional fees
known as "Credit Redemption Fund (CRF)" from its loan borrowers was not directly engaged in insurance business
as insurer; hence, it did not violate Sec. 54, R.A. 8791, otherwise known as the "General Banking Law of 2000."

The Monetary Board Resolution No. 1139 dated August 26, 2005 is hereby DECLARED null and void.

SO ORDERED.7

Petitioners filed a motion for reconsideration against said decision, but the same was denied in anOrder dated
August 25, 2009.

Hence, the present petition wherein petitioners raise the following grounds to support their petition:

I.

THE COURT A QUOGRIEVOUSLY ERRED IN TAKING COGNIZANCE OF THE PETITION FOR DECLARATORY
RELIEF DESPITE:

(i) THE FINALITY OF THE BSP MB RESOLUTION: (a) DECLARING RESPONDENT VETERANS BANK’S
CRF SCHEME AS VIOLATIVE OF SECTION 54 OF RA 8791; and (b) DIRECTING RESPONDENT TO
RETURN THE ILLEGAL PROCEEDS THEREOF TO ITS BORROWERS; and

(ii) THE BLATANT IMPROPRIETY OF RESORTING TO SUCH PETITION FOR DECLARATORY RELIEF,
CONSIDERING RESPONDENT VETERANS BANK’S PRIOR BREACH OF THE MONETARY BOARD
RESOLUTION SUBJECT THEREOF [ASSUMING ARGUENDO THAT THE SUBJECT BSP RESOLUTION
HASNOT BECOME FINAL];

II.

THE COURT A QUO’S ORDER, DISMISSING THE PETITION FOR DECLARATORY RELIEF HAS LONG
BECOME FINAL AND EXECUTORY AND MAY NO LONGER BE DISTURBED.

III.

PETITIONERS’ FINDING,THAT RESPONDENT VETERANS BANK IS ENGAGED IN "INSURANCE BUSINESS,"

IS IN ACCORD WITH LAW.8

In essence, the issue is whether or not the petition for declaratory relief is proper.
We rule in the negative.

Section 1, Rule 63 of the Rules of Court governs petitions for declaratory relief, viz.:

SECTION 1. Who may file petition. – Any person interested under a deed, will, contract or other written instrument,
whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental
regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a declaration of his rights or duties, thereunder.

Declaratory relief is defined as an action by any person interested in a deed, will, contract or other written
instrument, executive order or resolution, to determine any question of construction or validity arising from the
instrument, executive order or regulation, or statute; and for a declaration of his rights and duties thereunder. The
only issue that may be raised in such a petition is the question of construction or validity of provisions in an
instrument or statute.9 Ergo, the Court, in CJH Development Corporation v. Bureau of Internal Revenue,10 held that in
the same manner that court decisions cannot be the proper subjects of a petition for declaratory relief, decisions of
quasijudicial agencies cannot be subjects of a petition for declaratory relief for the simple reason that if a party is not
agreeable to a decision either on questions of law or of fact, it may avail of the various remedies provided by the
Rules of Court.

In view of the foregoing, the decision of the BSP Monetary Board cannot be a proper subject matter for a petition for
declaratory relief since it was issued by the BSP Monetary Board inthe exercise of its quasi-judicial powers or
functions.

The authority of the petitioners to issue the questioned MB Resolution emanated from its powers under Section
3711 of RA No. 765312 and Section 6613 of RA No. 879114 to impose, at its discretion, administrative sanctions, upon
any bank for violation of any banking law.

The nature of the BSP Monetary Board as a quasi-judicial agency, and the character of its determination of whether
or not appropriate sanctions may be imposed upon erring banks, as anexercise of quasi-judicial function, have been
recognized by this Court in the case of United Coconut Planters Bank v. E. Ganzon, Inc.,15 to wit:

A perusal of Section 9(3) of Batas Pambansa Blg. 129, as amended, and Section 1, Rule 43 of the 1997 Rules of
Civil Procedure reveals that the BSP Monetary Board is not included among the quasi judicial agencies explicitly
named therein, whose final judgments, orders, resolutions or awards are appealableto the Court of Appeals. Such
omission, however, does not necessarily mean that the Court of Appeals has no appellate jurisdiction over the
judgments, orders, resolutions, or awards of the BSP Monetary Board.

It bears stressing that Section 9(3) of Batas Pambansa Blg. 129, as amended, on the appellate jurisdiction of the
Court of Appeals, generally refers to quasi-judicial agencies, instrumentalities, boards or commissions. The use of
the word "including" in the said provision, prior to the naming of several quasi-judicial agencies, necessarily conveys
the very idea of non-exclusivity of the enumeration. The principle of expressio unius est exclusio alterius does not
apply where other circumstances indicate that the enumeration was not intended to be exclusive, or where the
enumeration is by way of example only.

Similarly, Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure merely mentions several quasi-judicial
agencies without exclusivity in the phraseology. The enumeration of the agencies therein mentioned is not
exclusive. The introductory phrase "[a]mong these agencies are" preceding the enumeration of specific quasi-
judicial agencies only highlights the fact that the list is not meant to be exclusive or conclusive. Further, the overture
stresses and acknowledges the existence of other quasi-judicial agencies not included inthe enumeration but should
be deemed included.

A quasi-judicial agency or body isan organ of government other than a court and other thana legislature, which
affects the rights of private parties through either adjudication or rule-making. The very definition of an administrative
agency includes itsbeing vested with quasi-judicial powers. The ever increasing variety of powers and functions
given to administrative agencies recognizes the need for the active intervention of administrative agencies in
matters calling for technical knowledge and speed in countless controversies which cannot possibly be handled by
regular courts. A "quasi-judicial function" is a term which applies to the action, discretion, etc. of public
administrative officers or bodies, who are required to investigate facts, or ascertain the existence of facts, hold
hearings, and draw conclusions from them, as a basis for their official action and to exercise discretion of a judicial
nature.

Undoubtedly, the BSP Monetary Board is a quasi-,judicial agency exercising quasi-,judicial powers or functions. As 1âwphi 1

aptly observed by the Court of Appeals, the BSP Monetary Board is an independent central monetary authority and
a body corporate with fiscal and administrative autonomy, mandated to provide policy directions in the areas of
money, banking, and credit. It has the power to issue subpoena, to sue for contempt those refusing to obey the
subpoena without justifiable reason, to administer oaths and compel presentation of books, records and others,
needed in its examination, to impose fines and other sanctions and to issue cease and desist order. Section 37 of
Republic Act No. 7653, in particular, explicitly provides that the BSP Monetary Board shall exercise its discretion in
determining whether administrative sanctions should be imposed on banks and quasi-banks, which necessarily
implies that the BSP Monetary Board must conduct some form of investigation or hearing regarding the same.16

A priori, having established that the BSP Monetary Board is indeed a quasi-judicial body exercising quasi-judicial
functions, then its decision in MB Resolution No. 1139 cannot be the proper subject of declaratory relief.

Lastly, also worth noting is the fact that the court a quo's Order dated September 24, 2007, which dismissed
respondent's petition for declaratory relief, had long become final and executory.

To recall, said Order was duly served on and received by respondent on October 1 7, 2007, as evidenced by the
Ce1iification issued by the Philippine Postal Corporation. Almost a year later, however, or on October 15, 2008,
respondent moved for reconsideration of the court a quo's Order of dismissal, claiming it received a copy of said
Order only on September 3, 2008. Thus, respondent's self-serving claim should not have prevailed over the
Certification issued by the Philippine Postal Corporation. It was error for the trial court to ente1iain it for the second
time despite the lapse of almost a year before respondent filed its motion for reconsideration against said Order.

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Decision dated June 15, 2009
and Order dated August 25, 2009 of the Regional Trial Court of Makati City in Civil Case No. 07-271 are
REVERSED and SET ASIDE. The Order dated September 24, 2007 of the Regional Trial Court ofMakati City is
hereby REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice
 THIRD DIVISION
[ G.R. No. 200670, July 06, 2015 ]
CLARK INVESTORS AND LOCATORS ASSOCIATION, INC., PETITIONER, VS. SECRETARY OF
FINANCE AND COMMISSIONER OF INTERNAL REVENUE, RESPONDENTS.

DECISION
VILLARAMA, JR., J.:
This is a petition for certiorari with a prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction to
annul and set aside Revenue Regulations No. 2-2012 (RR 2-2012) issued by the Department of Finance (DOF) on February 17, 2012
upon recommendation of the Bureau of Internal Revenue (BIR). Petitioner Clark Investors and Locators Association, Inc. claims that RR
2-2012, which imposes Value Added Tax (VAT) and excise tax on the importation of petroleum and petroleum products from abroad
into the Freeport or Economic Zones, is void and contrary to Republic Act (RA) No. 7227, otherwise known as the Bases Conversion
and Development Act of 1992, as amended by RA No. 9400.

The salient facts follow.

On March 13, 1992, Congress enacted RA No. 7227 which mandated the accelerated conversion of the Clark and Subic military
reservations into special economic zones. Section 12 thereof provides for the creation of the Subic Special Economic Zone:

SEC. 12. Subic Special Economic Zone. — Subject to the concurrence by resolution of the sangguniang panlungsod of the City of
Olongapo and the sangguniang bayan of the Municipalities of Subic, Morong and Hermosa, there is hereby created a Special Economic
and Free-port Zone consisting of the City of Olongapo and the Municipality of Subic, Province of Zambales, the lands occupied by the
Subic Naval Base and its contiguous extensions as embraced, covered, and defined by the 1947 Military Bases Agreement between
the Philippines and the United States of America as amended, and within the territorial jurisdiction of the Municipalities of Morong and
Hermosa, Province of Bataan, hereinafter referred to as the Subic Special Economic Zone whose metes and bounds shall be
delineated in a proclamation to be issued by the President of the Philippines. Within thirty (30) days after the approval of this Act, each
local government unit shall submit its resolution of concurrence to join the Subic Special Economic Zone to the Office of the President.
Thereafter, the President of the Philippines shall issue a proclamation defining the metes and bounds of the zone as provided herein.

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local
Government Code, the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and
investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign
investments;

(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or
movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide
incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal
of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to
customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be
imposed within the Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by
all businesses and enterprises within the Subic Special Economic Zone shall be remitted to the National Government, one
percent (1%) each to the local government units affected by the declaration of the zone in proportion to their population area,
and other factors. In addition, there is hereby established a development fund of one percent (1%) of the gross income
earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the development of
municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base
areas.

In case of conflict between national and local laws with respect to tax exemption privileges in the Subic Special Economic
Zone, the same shall be resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and futures shall be allowed and
maintained in the Subic Special Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operation of banks and other financial institutions
within the Subic Special Economic Zone;

(f) Banking and finance shall be liberalized with the establishment of foreign currency depository units of local commercial banks and
offshore banking units of foreign banks with minimum Central Bank regulation;

(g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less than Two hundred fifty
thousand dollars ($250,000), his/her spouse and dependent children under twenty-one (21) years of age, shall be granted permanent
resident status within the Subic Special Economic Zone. They shall have freedom of ingress and egress to and from the Subic Special
Economic Zone without any need of special authorization from the Bureau of Immigration and Deportation. The Subic Bay Metropolitan
Authority referred to in Section 13 of this Act may also issue working visas renewable every two (2) years to foreign executives and
other aliens possessing highly-technical skills which no Filipino within the Subic Special Economic Zone possesses, as certified by the
Department of Labor and Employment. The names of aliens granted permanent residence status and working visas by the Subic Bay
Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation within thirty (30) days after issuance thereof;

(h) The defense of the zone and the security of its perimeters shall be the responsibility of the National Government in coordination with
the Subic Bay Metropolitan Authority. The Subic Bay Metropolitan Authority shall provide and establish its own internal security and
firefighting forces; and

(i) Except as herein provided, the local government units comprising the Subic Special Economic Zone shall retain their basic autonomy
and identity. The cities shall be governed by their respective charters and the municipalities shall operate and function in accordance
with Republic Act No. 7160, otherwise known as the Local Government Code of 1991. (Emphasis supplied)

Based on Section 12 (c) above, in lieu of national and local taxes, all businesses and enterprises operating within the Subic Special
Economic Zone shall pay a preferential gross income tax rate of five percent (5%). In addition, Section 12 (b) also provides that such
businesses and enterprises shall be exempt from the payment of all taxes and duties on the importation of raw materials, capital, and
equipment into the Subic Special Economic Zone.

Meanwhile, on March 20, 2007, Congress enacted RA No. 9400 which extended the aforementioned tax and fiscal incentives under RA
No. 7227 to the Clark Freeport Zone. By way of amendment, Section 2 thereof provides:

SEC. 2. Section 15 of Republic Act No. 7227, as amended, is hereby amended to read as follows:

"SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ). - Subject to the concurrence by resolution of the local
government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone
covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the
1947 Military Bases Agreement between the Philippines and the United States of America, as amended, located within the territorial
jurisdiction of Angeles City, municipalities of Mabalacat and Porac, Province of Pampanga, and the municipalities of Capas and
Bamban, Province of Tarlac, in accordance with the provision as herein provided insofar as applied to the Clark military reservations.
The Clark Air Base proper with an area of not more than four thousand four hundred hectares (4,400 has.), with the exception of the
twenty-two-hectare commercial area situated near the main gate and the Bayanihan Park consisting of seven and a half hectares (7.5
has.) located outside the main gate of the Clark Special Economic Zone, is hereby declared a freeport zone.

"The CFZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and
capital equipment within, into and exported out of the CFZ, as well as provide incentives such as tax and duty-free
importation of raw materials and capital equipment. However, exportation or removal of goods from the territory of the CFZ to
the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of
the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the
Philippines.

"The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on
registered business enterprises within the CFZ. In lieu of said taxes, a five percent (5%) tax on gross income earned shall be paid by all
registered business enterprises within the CFZ and shall be directly remitted as follows: three percent (3%) to the National Government,
and two percent (2%) to the treasurer's office of the municipality or city where they are located.

"The governing body of the Clark Special Economic Zone shall likewise be established by executive proclamation with such powers and
functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66, as amended: Provided, That it
shall have no regulatory authority over public utilities, which authority pertains to the regulatory agencies created by law for the
purpose, such as the Energy Regulatory Commission created under Republic Act No. 9136 and the National Telecommunications
Commission created under Republic Act No. 7925.

"xxx

"Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of the Philippine
Economic Zone Authority (PEZA), the President is hereby authorized to create by executive proclamation Special Economic Zones
covering the City of Balanga and the municipalities of Limay, Mariveles, Morong, Hermosa, and Dinalupihan, Province of Bataan.

"Subject to the concurrence by resolution of the local government units directly affected and upon recommendation of the PEZA, the
President is hereby authorized to create by executive proclamation Special Economic Zones covering the municipalities of Castillejos,
San Marcelino, and San Antonio, Province of Zambales.

"Duly registered business enterprises that will operate in the Special Economic Zones to be created shall be entitled to the same tax
and duty incentives as provided for under Republic Act No. 7916, as amended: Provided, That for the purpose of administering these
incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the Special Economic Zones."

Thus, the businesses and enterprises within the Clark Freeport Zone are similarly exempt from the payment of all taxes and duties on
the importation of raw materials, capital and equipment.

On February 17, 2012, the DOF, upon recommendation of the BIR, issued RR 2-2012 which imposed VAT and excise tax on the
importation of petroleum and petroleum products from abroad and into the Freeport or Economic Zones. Section 3 thereof partly
provides:

SECTION 3. TAX TREATMENT OF ALL PETROLEUM AND PETROLEUM PRODUCTS IMPORTED AND ITS SUBSEQUENT
EXPORTATION OR SALES TO FREEPORT AND ECONOMIC ZONE LOCATORS OR OTHER PERSONS/ENTITIES; REFUND OF
TAXES PAID; AUTHORITY TO RELEASE IMPORTED GOODS (ATRIG) AND OTHER ADMINISTRATIVE REQUIREMENTS. — The
Value-Added and Excise taxes which are due on all petroleum and petroleum products that are imported and/or brought directly from
abroad to the Philippines, including Freeport and Economic zones, shall be paid by the importer thereof to the Bureau of Customs
(BOC).

The subsequent exportation or sale/delivery of these petroleum or petroleum products to registered enterprises enjoying tax privileges
within the Freeport and Economic zones, as well as the sale of said goods to persons engaged in international shipping or international
air transport operations, shall be subject to 0% VAT. With respect to the VAT paid on petroleum or petroleum products by the importer
on account of aforesaid 0% VAT transactions/entities and the Excise taxes paid on account of sales to international carriers of
Philippine or Foreign Registry for use or consumption outside the Philippines or exempt entities or agencies covered by tax treaties,
conventions and international agreements for their use or consumption (covered by Certification in such entity's favor), as well as
entities which are by law exempt from indirect taxes, the importer may file a claim for credit or refund with the BOC, which shall process
the claim for refund, subject to the favorable endorsement of the BIR, in accordance with existing rules and procedures: Provided, that
no claim for refund shall be granted unless it is properly shown to the satisfaction of the BIR that said petroleum or petroleum products
have been sold to a duly registered locator and have been utilized in the registered activity/operation of the locator, or that such have
been sold and have been used for international shipping or air transport operations, or that the entities to which the said goods were
sold are statutorily zero-rated for VAT, and/or exempt from Excise taxes.
xxxx

On March 8, 2012, petitioner, which represents the businesses and enterprises within the Clark Freeport Zone, filed the instant petition
alleging that respondents acted with grave abuse of discretion in issuing RR 2-2012. It argues that by imposing the VAT and excise tax
on the importation of petroleum and petroleum products from abroad and into the Freeport or Economic Zones, RR 2-2012 unilaterally
revoked the tax exemption granted by RA No. 7227 and RA No. 9400 to the businesses and enterprises operating within the Subic
Special Economic Zone and Clark Freeport Zone.

Respondents, through the Office of the Solicitor General (OSG), contend that the petition must be denied outright because the special
civil action for certiorari cannot be used to assail RR 2-2012 which was issued by the respondents in the exercise of their quasi-
legislative or rule-making powers. According to the OSG, certiorari can only be used against a public officer exercising judicial or quasi-
judicial powers. In addition, the OSG invokes the doctrine of hierarchy of courts and claims that a petition for certiorari cannot be filed
directly to this Court absent highly exceptional reasons which the petitioner failed to adduce. Finally, the OSG opposes the argument of
petitioner that RR 2-2012 unilaterally revoked the tax exemption granted by RA No. 7227 and RA No. 9400 to the businesses and
enterprises operating within the Subic Special Economic Zone and Clark Freeport Zone by referring to the tax refund under Section 3 of
RR 2-2012. It points out that Section 3 allows the businesses and enterprises operating within the Subic Special Economic Zone and
Clark Freeport Zone to claim for a tax refund upon submission of competent proof that they used the imported fuel exclusively within the
Subic Special Economic Zone and Clark Freeport Zone. Thus, the OSG claimed that RR 2-2012 is consistent with RA No. 7227 and RA
No. 9400.

We deny the petition for being an improper remedy.

Firstly, respondents did not act in any judicial or quasi-judicial capacity. A petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure, as amended, is a special civil action that may be invoked only against a tribunal, board, or officer exercising judicial or
quasi-judicial functions.

Section 1, Rule 65 of the 1997 Rules of Civil Procedure, as amended, provides:

SECTION 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without
or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal,
or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such
tribunal, board or officer, and granting such incidental reliefs as law and justice may require.

xxxx

For a special civil action for certiorari to prosper, the following requisites must concur: (1) it must be directed against a tribunal, board,
or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in excess of
jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy,
and adequate remedy in the ordinary course of law. [1]

A respondent is said to be exercising judicial function where he has the power to determine what the law is and what the legal rights of
the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties. [2] Quasi-judicial
function, on the other hand, is "a term which applies to the action, discretion, etc., of public administrative officers or bodies x x x
required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their
official action and to exercise discretion of a judicial nature." [3] Before a tribunal, board, or officer may exercise judicial or quasi-judicial
acts, it is necessary that there be a law that gives rise to some specific rights of persons or property under which adverse claims to
such rights are made, and the controversy ensuing therefrom is brought before a tribunal, board, or officer clothed with power and
authority to determine the law and adjudicate the respective rights of the contending parties.[4]

Respondents do not fall within the ambit of a tribunal, board, or officer exercising judicial or quasi-judicial functions. They issued RR 2-
2012 in the exercise of their quasi-legislative or rule-making powers, and not judicial or quasi-judicial functions. Verily, respondents did
not adjudicate or determine the rights of the parties.

In order to determine whether a Revenue Regulation is quasi-legislative in nature, we must examine the legal basis of the Secretary of
Finance in the issuance thereof. In BPI Leasing Corporation v. Court of Appeals,[5] we ruled that Revenue Regulation 19-86 was quasi-
legislative in nature because it was issued by the Secretary of Finance in the exercise of his rule-making powers under Section 244 of
the National Internal Revenue Code (NIRC):

The Court finds the questioned revenue regulation to be legislative in nature. Section 1 of Revenue Regulation 19-86 plainly states that
it was promulgated pursuant to Section 277 of the NIRC. Section 277 (now Section 244) is an express grant of authority to the
Secretary of Finance to promulgate all needful rules and regulations for the effective enforcement of the provisions of the NIRC. In
Paper Industries Corporation of the Philippines v. Court of Appeals, the Court recognized that the application of Section 277 calls for
none other than the exercise of quasi-legislative or rule-making authority. Verily, it cannot be disputed that Revenue Regulation 19-86
was issued pursuant to the rule-making power of the Secretary of Finance, thus making it legislative, and not interpretative as alleged
by BLC.[6]

Similarly, in the case at bar, RR 2-2012 was also issued by the Secretary of Finance based on Section 244 of the NIRC. Section 1 of
RR 2-2012 provides:

SECTION 1. SCOPE — Pursuant to Section 244, in relation to Section 245, of the National Internal Revenue Code (NIRC) of 1997, as
amended, these Regulations are hereby promulgated in order to prescribe: 1) the tax administration treatment of all petroleum and
petroleum products imported into the Philippines, including those coming in through Freeport zones or Economic Zones; and 2) the
refund of Value-Added Tax (VAT) and Excise taxes paid for transactions statutorily zero-rated or exempt therefrom; and to provide
administrative guidelines on the operation and maintenance of storage tanks, facilities, depots or terminals where commodities for
commercial use can be stored.

Relevantly, Section 244 of the NIRC provides:

SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. — The Secretary of Finance, upon recommendation
of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code.

Conformably with our ruling in BPI Leasing Corporation that the application of Section 244 of the NIRC is an exercise of quasi-
legislative or rule-making powers of the Secretary of Finance, and since RR 2-2012 was issued by the Secretary of Finance based on
Section 244 of the NIRC, such administrative issuance is therefore quasi-legislative in nature which is outside the scope of a petition for
certiorari.

Secondly, while this case is styled as a petition for certiorari, there is, however, no denying the fact that, in essence, it seeks the
declaration by this Court of the unconstitutionality and illegality of the questioned rule, thus partaking the nature, in reality, of one for
declaratory relief over which this Court has only appellate, not original, jurisdiction. [7] Section 5, Article VIII of the 1987 Philippine
Constitution provides:

Sec. 5. The Supreme Court shall have the following powers:

(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari,
prohibition, mandamus, quo warranto, and habeas corpus.

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may provide, final judgments and
orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in question.

xxxx

Accordingly, this petition must fail because this Court does not have original jurisdiction over a petition for declaratory relief even if only
questions of law are involved.[8] The special civil action of declaratory relief falls under the exclusive jurisdiction of the Regional Trial
Courts.9 The Rules of Court is explicit that such action shall be brought before the appropriate Regional Trial Court. Section 1, Rule 63
of the Rules of Court provides:

SECTION 1. Who may file petition. — Any person interested under a deed, will, contract or other written instrument, whose rights are
affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation
thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.

Lastly, although this Court, the Court of Appeals and the Regional Trial Courts have concurrent jurisdiction to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give the petitioner unrestricted
freedom of choice of court forum.[10] In Heirs ofBertuldo Hinog v. Hon. Melicor,[11] citing People v. Cuaresrna,[12] we held:

This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with Regional Trial Courts and with
the Court of Appeals. This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an
absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of
courts. That hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance
of extraordinary writs against first level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with
the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when
there are special and important reasons therefor, clearly and specifically set out in the petition. This is [an] established policy. It is a
policy necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the Court's docket.

The rationale for this rule is two-fold: (1) it would be an imposition upon the precious time of this Court; and (2) it would cause an
inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which in some instances had to be remanded or
referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues because this
Court is not a trier of facts.

We thus affirm the judicial policy that we shall not entertain a direct resort to this Court unless the remedy cannot be obtained in the
appropriate courts, and exceptional and compelling circumstances, such as cases of national interest and of serious implications, justify
the availment of the extraordinary remedy of writ of certiorari.

In Chamber of Real Estate and Builders Association, Inc. (CREBA) v. Secretary of Agrarian Reform, [15] we provided examples of such
exceptional and compelling circumstances, to wit:

Exceptional and compelling circumstances were held present in the following cases: (a) Chavez v. Romulo, on citizens' right to bear
anus; (b) Government of [the] United States of America v. Hon. Purganan, on bail in extradition proceedings; (c) Commission on
Elections v. Judge Quijano-Padilla, on government contract involving modernization and computerization of voters' registration list;
(d) Buklod ng Kawaning EIIB v. Hon. Sec. Zamora, on status and existence of a public office; and (e) Hon. Fortich v. Hon. Corona, on
the so-called "Win-Win Resolution" of the Office of the President which modified the approval of the conversion to agro-industrial
area.[16]

In the case at bar, petitioner failed to allege such exceptional and compelling circumstances which justify a direct resort to this Court.

In view of the serious procedural and technical defects of the petition, we see no need for this Court to resolve the other issues raised
by the petitioner.

WHEREFORE, premises considered, the petition is DISMISSED. With costs against the petitioner.
SO ORDERED.