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G.R. No.

160093

July 31, 2007

MALARIA EMPLOYEES AND WORKERS ASSOCIATION OF THE PHILIPPINES, INC. (MEWAP), represented by its National President, DR. RAMON A. SULLA, and MEWAP DOH Central Office Chapter President, DR. GRACELA FIDELA MINARAMOS, and PRISCILLA CARILLO, and HERMINIO JAVIER, petitioners, vs. THE HONORABLE EXECUTIVE SECRETARY ALBERTO ROMULO, (substituting the former Executive Secretary Renato de Villa), THE HONORABLE SECRETARY OF HEALTH MANUEL DAYRIT and THE HONORABLE SECRETARY OF BUDGET AND MANAGEMENT EMILIA T. BONCODIN, respondents. DECISION PUNO, CJ.: At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals in CA-G.R. SP No. 65475 dated September 12, 2003 which upheld the validity of Executive Order (E.O.) No. 102,1 the law Redirecting the Functions and Operations of the Department of Health. Then President Joseph E. Estrada issued E.O. No. 102 on May 24, 1999 pursuant to Section 20, Chapter 7, Title I, Book III of E.O. No. 292, otherwise known as the Administrative Code of 1987, and Sections 78 and 80 of Republic Act (R.A.) No. 8522, also known as the General Appropriations Act (GAA) of 1998. E.O. No. 102 provided for structural changes and redirected the functions and operations of the Department of Health. On October 19, 1999, the President issued E.O. No. 165 "Directing the Formulation of an Institutional Strengthening and Streamlining Program for the Executive Branch" which created the Presidential Committee on Executive Governance (PCEG) composed of the Executive Secretary as chair and the Secretary of the Department of Budget and Management (DBM) as co-chair. The DBM, on July 8, 2000, issued the Notice of Organization, Staffing and Compensation Action (NOSCA). On July 17, 2000, the PCEG likewise issued Memorandum Circular (M.C.) No. 62, entitled "Implementing Executive Order No. 102, Series of 1999 Redirecting the Functions and Operations of the Department of Health."2 M.C. No. 62 directed the rationalization and streamlining of the said Department. On July 24, 2000, the Secretary of Health issued Department Memorandum No. 136, Series of 2000, ordering the Undersecretary, Assistant Secretaries, Bureau or Service Directors and Program Managers of the Department of Health to direct all employees under their respective offices to accomplish and submit the Personal Information Sheet due to the approval of the Department of Health Rationalization and Streamlining Plan. On July 28, 2000, the Secretary of Health again issued Department Circular No. 221, Series of 2000, stating that the Department will start implementing the Rationalization and Streamlining Plan by a process of selection, placement or matching of personnel to the approved organizational chart and the list of the approved plantilla items. 3 The Secretary also issued Administrative Order (A.O.) No. 94, Series of 2000, which set the implementing guidelines for the restructuring process on personnel selection and placement, retirement and/or voluntary resignation. A.O. No. 94 outlined the general guidelines for the selection and placement of employees adopting the procedures and standards set forth in R.A. No. 66564 or the "Rules on Governmental Reorganization," Civil Service Rules and Regulations, Sections 76 to 78 of the GAA for the Year 2000, and Section 42 of E.O. No. 292. On August 29, 2000, the Secretary of Health issued Department Memorandum No. 157, Series of 2000, viz.: Pursuant to the Notice of Organization, Staffing and Compensation Action (NOSCA) approved by the DBM on 8 July 2000 and Memorandum Circular No. 62 issued by the Presidential Committee on Effective Governance (PCEG) on 17 July 2000, Implementing E.O. 102 dated 24 May 1999, the following approved Placement List of DOH Personnel is hereby disseminated for your information and guidance. All personnel are hereby directed to report to their new assignments on or before 2 October 2000 pending processing of new appointments, required clearances and other pertinent documents. All Heads of Office/Unit in the Department of Health are hereby directed to facilitate the implementation of E.O. 102, to include[,] among others, the transfer or movement of personnel, properties, records and documents to appropriate office/unit and device other necessary means to minimize disruption of office functions and delivery of health services. Appeals, oversights, issues and concerns of personnel related to this Placement List shall be made in writing using the Appeals Form (available at the Administrative Service) addressed to the Appeals Committee chaired by

Dr. Gerardo Bayugo. All Appeals Forms shall be submitted to the Re-Engineering Secretariat xxx not later than 18 September 2000. 5 Petitioner Malaria Employees and Workers Association of the Philippines, Inc. (MEWAP) is a union of affected employees in the Malaria Control Service of the Department of Health. MEWAP filed a complaint, docketed as Civil Case No. 00-98793, with the Regional Trial Court of Manila seeking to nullify Department Memorandum No. 157, the NOSCA and the Placement List of Department of Health Personnel and other issuances implementing E.O. No. 102. On May 2, 2001, while the civil case was pending at the Regional Trial Court of Manila, Branch 22, petitioners filed with this Court a petition for certiorari under Rule 65 of the Rules of Court. Petitioners sought to nullify E.O. No. 102 for being issued with grave abuse of discretion amounting to lack or excess of jurisdiction as it allegedly violates certain provisions of E.O. No. 292 and R.A. No. 8522. The petition was referred to the Court of Appeals which dismissed the same in its assailed Decision. Hence, this appeal where petitioners ask for a re-examination of the pertinent pronouncements of this Court that uphold the authority of the President to reorganize a department, bureau or office in the executive department. Petitioners raise the following issues, viz.: 1. Whether Sections 78 and 80 of the General Provision of Republic Act No. 8522, otherwise known as the General Appropriation[s] Act of 1998[,] empower former President Joseph E. Estrada to reorganize structurally and functionally the Department of Health. 2. Whether Section 20, Chapter I, title i, Book III of the Administrative Code of 1987 provides legal basis in reorganizing the Department of Health. (A) Whether Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, has been repealed. 3. Whether the President has authority under Section 17, Article VIII of the Constitution to effect a reorganization of a department under the executive branch. 4. Whether there has been abuse of discretion amounting to lack or excess of jurisdiction on the part of former President Joseph E. Estrada in issuing Executive Order No. 102, Redirecting the functions and operations of the Department of Health. 5. Whether Executive Order No. 102 is null and void.6 We deny the petition. The President has the authority to carry out a reorganization of the Department of Health under the Constitution and statutory laws. This authority is an adjunct of his power of control under Article VII, Sections 1 and 17 of the 1987 Constitution, viz.: Section 1. The executive power shall be vested in the President of the Philippines. Section 17. The President shall have control of all the executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed. In Canonizado v. Aguirre,7 we held that reorganization "involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions." It alters the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. 8 While the power to abolish an office is generally lodged with the legislature, the authority of the President to reorganize the executive branch, which may include such abolition, is permissible under our present laws, viz.: The general rule has always been that the power to abolish a public office is lodged with the legislature. This proceeds from the legal precept that the power to create includes the power to destroy. A public office is either created by the Constitution, by statute, or by authority of law. Thus, except where the office was created by the Constitution itself, it may be abolished by the same legislature that brought it into existence. The exception, however, is that as far as bureaus, agencies or offices in the executive department are concerned, the Presidents power of control may justify him to inactivate the functions of a particular office, or certain laws may grant him the broad authority to carry out reorganization measures.9 The Presidents power to reorganize the executive branch is also an exercise of his residual powers under Section 20, Title I, Book III of E.O. No. 292 which grants the President broad organization powers to implement reorganization measures, viz.:

SEC. 20. Residual Powers. Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above, or which are not delegated by the President in accordance with law.10 We explained the nature of the Presidents residual powers under this section in the case of Larin v. Executive Secretary, 11 viz.: This provision speaks of such other powers vested in the President under the law. What law then gives him the power to reorganize? It is Presidential Decree No. 1772 which amended Presidential Decree No. 1416. These decrees expressly grant the President of the Philippines the continuing authority to reorganize the national government, which includes the power to group, consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities and to standardize salaries and materials. The validity of these two decrees [is] unquestionable. The 1987 Constitution clearly provides that "all laws, decrees, executive orders, proclamations, letters of instructions and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed or revoked." So far, there is yet no law amending or repealing said decrees.12 The pertinent provisions of Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, clearly support the Presidents continuing power to reorganize the executive branch, viz.: 1. The President of the Philippines shall have continuing authority to reorganize the National Government. In exercising this authority, the President shall be guided by generally acceptable principles of good government and responsive national development, including but not limited to the following guidelines for a more efficient, effective, economical and development-oriented governmental framework: xxx b) Abolish departments, offices, agencies or functions which may not be necessary, or create those which are necessary, for the efficient conduct of government functions, services and activities; c) Transfer functions, appropriations, equipment, properties, records and personnel from one department, bureau, office, agency or instrumentality to another; d) Create, classify, combine, split, and abolish positions; e) Standardize salaries, materials, and equipment; f) Create, abolish, group, consolidate, merge, or integrate entities, agencies, instrumentalities, and units of the National Government, as well as expand, amend, change, or otherwise modify their powers, functions, and authorities, including, with respect to government-owned or controlled corporations, their corporate life, capitalization, and other relevant aspects of their charters; g) Take such other related actions as may be necessary to carry out the purposes and objectives of this Decree. Petitioners argue that the residual powers of the President under Section 20, Title I, Book III of E.O. No. 292 refer only to the Office of the President and not to the departments, bureaus or offices within the executive branch. They invoke Section 31, Chapter 10, Title III, Book III of the same law, viz.: Section 31. Continuing Authority of the President to Reorganize his Office. The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. x x x The interpretation of petitioners is illogically restrictive and lacks legal basis. The residual powers granted to the President under Section 20, Title I, Book III are too broad to be construed as having a sole application to the Office of the President. As correctly stated by respondents, there is nothing in E.O. No. 292 which provides that the continuing authority should apply only to the Office of the President.13 If such was the intent of the law, the same should have been expressly stated. To adopt the argument of petitioners would result to two conflicting provisions in one statute. It is a basic canon of statutory construction that in interpreting a statute, care should be taken that every part thereof be given effect, on the theory that it was enacted as an integrated measure and not as a hodge-podge of conflicting provisions. The rule is that a construction that would render a provision inoperative should be avoided; instead, apparently inconsistent provisions should be reconciled whenever possible as parts of a coordinated and harmonious whole.14

In fact, as pointed out by respondents, the Presidents power to reorganize the executive department even finds further basis under Sections 78 and 80 of R.A. No. 8522, viz.:15 Section 78. Organizational Changes Unless otherwise provided by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organizational structure and funded from appropriations provided by this Act. Section 80. Scaling Down and Phase-out of Activities of Agencies within the Executive Branch The heads of departments, bureaus, offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased-out or abolished subject to Civil Service rules and regulations. Said activities shall be reported to the Office of the President through the Department of Budget and Management and to the Chairman, Committee on Appropriations of the House of Representatives and the Chairman, Committee on Finance of the Senate. Actual scaling down, phaseout or abolition of the activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. Petitioners contend that Section 78 refers only to changes in "organizational units" or "key positions" in any department or agency, while Section 80 refers merely to scaling down and phasing out of "activities" within the executive department. They argue that neither section authorizes reorganization. Thus, the realignment of the appropriations to implement the reorganization of the Department of Health under E.O. No. 102 is illegal. Again, petitioners construction of the law is unduly restrictive. This Court has consistently held in Larinand Buklod ng Kawanihang EIIB v. Zamora that the corresponding pertinent provisions in the GAA in these subject cases authorize the President to effect organizational changes in the department or agency concerned. Be that as it may, the President must exercise good faith in carrying out the reorganization of any branch or agency of the executive department. Reorganization is effected in good faith if it is for the purpose of economy or to make bureaucracy more efficient. R.A. No. 6656 provides for the circumstances which may be considered as evidence of bad faith in the removal of civil service employees made as a result of reorganization, to wit: (a) where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned; (b) where an office is abolished and another performing substantially the same functions is created; (c) where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit; (d) where there is a classification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices; and (e) where the removal violates the order of separation. We agree with the ruling of the Court of Appeals that the President did not commit bad faith in the questioned reorganization, viz.: In this particular case, there is no showing that the reorganization undertaking in the [Department of Health] had violated this requirement, nor [are] there adequate allegations to that effect. It is only alleged that the petitioners were directly affected by the reorganization ordered under E.O. [No.] 102. Absent is any showing that bad faith attended the actual implementation of the said presidential issuance. IN VIEW WHEREOF, the petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 65475 dated September 12, 2003 is AFFIRMED. Costs against petitioners. SO ORDERED.

G.R. No. 167324

July 17, 2007

TONDO MEDICAL CENTER EMPLOYEES ASSOCIATION, RESEARCH INSTITUTE FOR TROPICAL MEDICINE EMPLOYEES ASSOCIATION, NATIONAL ORTHOPEDIC WORKERS UNION, DR. JOSE R. REYES MEMORIAL HOSPITAL EMPLOYEES UNION, SAN LAZARO HOSPITAL EMPLOYEES ASSOCIATION, ALLIANCE OF HEALTH WORKERS, INC., HEALTH ALLIANCE FOR DEMOCRACY, COUNCIL FOR HEALTH DEVELOPMENT, NETWORK OPPOSED TO PRIVATIZATION, COMMUNITY MEDICINE DEVELOPMENT FOUNDATION INC., PHILIPPINE SOCIETY OF SANITARY ENGINEERS INC., KILUSANG MAYO UNO, GABRIELA, KILUSANG MAGBUBUKID NG PILIPINAS, KALIPUNAN NG DAMAYAN NG MGA MARALITA, ELSA O. GUEVARRA, ARCADIO B. GONZALES, JOSE G. GALANG, DOMINGO P. MANAY, TITO P. ESTEVES, EDUARDO P. GALOPE, REMEDIOS M. YSMAEL, ALFREDO BACUATA, EDGARDO J. DAMICOG, REMEDIOS M. MALTU AND REMEGIO S. MERCADO, Petitioners, vs. THE COURT OF APPEALS, EXECUTIVE SECRETARY ALBERTO G. ROMULO, SECRETARY OF HEALTH MANUEL M. DAYRIT, SECRETARY OF BUDGET AND MANAGEMENT EMILIA T. BONCODIN, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision,1 promulgated by the Court of Appeals on 26 November 2004, denying a petition for the nullification of the Health Sector Reform Agenda (HSRA) Philippines 1999-2004 of the Department of Health (DOH); and Executive Order No. 102, "Redirecting the Functions and Operations of the Department of Health," which was issued by then President Joseph Ejercito Estrada on 24 May 1999. Prior hereto, petitioners originally filed a Petition for Certiorari, Prohibition and Mandamus under Rule 65 of the 1997 Revised Rules of Civil Procedure before the Supreme Court on 15 August 2001. However, the Supreme Court, in a Resolution dated 29 August 2001, referred the petition to the Court of Appeals for appropriate action. HEALTH SECTOR REFORM AGENDA (HSRA) In 1999, the DOH launched the HSRA, a reform agenda developed by the HSRA Technical Working Group after a series of workshops and analyses with inputs from several consultants, program managers and technical staff possessing the adequate expertise and experience in the health sector. It provided for five general areas of reform: (1) to provide fiscal autonomy to government hospitals; (2) secure funding for priority public health programs; (3) promote the development of local health systems and ensure its effective performance; (4) strengthen the capacities of health regulatory agencies; and (5) expand the coverage of the National Health Insurance Program (NHIP).2 Petitioners questioned the first reform agenda involving the fiscal autonomy of government hospitals, particularly the collection of socialized user fees and the corporate restructuring of government hospitals. The said provision under the HSRA reads: Provide fiscal autonomy to government hospitals. Government hospitals must be allowed to collect socialized user fees so they can reduce the dependence on direct subsidies from the government. Their critical capacities like diagnostic equipment, laboratory facilities and medical staff capability must be upgraded to effectively exercise fiscal autonomy. Such investment must be cognizant of complimentary capacity provided by public-private networks. Moreover such capacities will allow government hospitals to supplement priority public health programs. Appropriate institutional arrangement must be introduced such as allowing them autonomy towards converting them into government corporations without compromising their social responsibilities. As a result, government hospitals are expected to be more competitive and responsive to health needs. Petitioners also assailed the issuance of a draft administrative order issued by the DOH, dated 5 January 2001, entitled "Guidelines and Procedure in the Implementation of the Corporate Restructuring of Selected DOH Hospitals to Achieve Fiscal Autonomy, and Managerial Flexibility to Start by January 2001;"3 and Administrative Order No. 172 of the DOH, entitled "Policies and Guidelines on the Private Practice of Medical and Paramedical Professionals in Government Health Facilities,"4 dated 9 January 2001, for imposing an added burden to indigent Filipinos, who cannot afford to pay for medicine and medical services.5

Petitioners alleged that the implementation of the aforementioned reforms had resulted in making free medicine and free medical services inaccessible to economically disadvantaged Filipinos. Thus, they alleged that the HSRA is void for being in violation of the following constitutional provisions:6 ART. III, SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the law. ART II, SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of the general welfare are essential for the enjoyment of all the people of the blessings of democracy. ART II, SEC. 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all. ART II, SEC. 10. The State shall promote social justice in all phases of national development. ART II, SEC. 11. The State values the dignity of every human person and guarantees full respect for human rights. ART II, SEC. 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect their physical, moral, spiritual, intellectual and social well-being x x x. ART II, SEC. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. ART XV, SEC. 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its solidarity and actively promote its total development. ART XV, SEC. 3. The State shall defend: xxxx (2) the right of children to assistance, including proper care and nutrition, and special protection from all forms of neglect, abuse, cruelty, exploitation and other conditions prejudicial to their development. xxxx ART XIII, SEC. 14. The State shall protect working women by providing safe and healthful working conditions, taking into account their maternal functions, and such facilities and opportunities that will enhance their welfare and enable them to realize their full potential in the service of the nation. ART II, SEC. 15. The State shall protect and promote the right to health of the people and instill health consciousness among them. ART XIII, SEC. 11. The State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all people at affordable cost. There shall be priority for the needs of the underprivileged sick, elderly, disabled, women, and children. The State shall endeavor to provide free medical care to paupers. EXECUTIVE ORDER NO. 102 On 24 May 1999, then President Joseph Ejercito Estrada issued Executive Order No. 102, entitled "Redirecting the Functions and Operations of the Department of Health," which provided for the changes in the roles, functions, and organizational processes of the DOH. Under the assailed executive order, the DOH refocused its mandate from being the sole provider of health services to being a provider of specific health services and technical assistance, as a result of the devolution of basic services to local government units. The provisions for the streamlining of the DOH and the deployment of DOH personnel to regional offices and hospitals read: Sec. 4. Preparation of a Rationalization and Streamlining Plan. In view of the functional and operational redirection in the DOH, and to effect efficiency and effectiveness in its activities, the Department shall prepare a Rationalization and Streamlining Plan (RSP) which shall be the basis of the intended changes. The RSP shall contain the following: a) the specific shift in policy directions, functions, programs and activities/strategies;

b) the structural and organizational shift, stating the specific functions and activities by organizational unit and the relationship of each units; c) the staffing shift, highlighting and itemizing the existing filled and unfilled positions; and d) the resource allocation shift, specifying the effects of the streamline set-up on the agency budgetary allocation and indicating where possible, savings have been generated. The RSP shall [be] submitted to the Department of Budget and Management for approval before the corresponding shifts shall be affected (sic) by the DOH Secretary. Sec. 5. Redeployment of Personnel. The redeployment of officials and other personnel on the basis of the approved RSP shall not result in diminution in rank and compensation of existing personnel. It shall take into account all pertinent Civil Service laws and rules. Section 6. Funding. The financial resources needed to implement the Rationalization and Streamlining Plan shall be taken from funds available in the DOH, provided that the total requirements for the implementation of the revised staffing pattern shall not exceed available funds for Personnel Services. Section 7. Separation Benefits. Personnel who opt to be separated from the service as a consequence of the implementation of this Executive Order shall be entitled to the benefits under existing laws. In the case of those who are not covered by existing laws, they shall be entitled to separation benefits equivalent to one month basic salary for every year of service or proportionate share thereof in addition to the terminal fee benefits to which he/she is entitled under existing laws. Executive Order No. 102 was enacted pursuant to Section 17 of the Local Government Code (Republic Act No. 7160), which provided for the devolution to the local government units of basic services and facilities, as well as specific healthrelated functions and responsibilities.7 Petitioners contended that a law, such as Executive Order No. 102, which effects the reorganization of the DOH, should be enacted by Congress in the exercise of its legislative function. They argued that Executive Order No. 102 is void, having been issued in excess of the Presidents authority.8 Moreover, petitioners averred that the implementation of the Rationalization and Streamlining Plan (RSP) was not in accordance with law. The RSP was allegedly implemented even before the Department of Budget and Management (DBM) approved it. They also maintained that the Office of the President should have issued an administrative order to carry out the streamlining, but that it failed to do so.9 Furthermore, petitioners Elsa O. Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P. Manay, Eduardo P. Galope, Remedios M. Ysmael, Alfredo U. Bacuata and Edgardo J. Damicog, all DOH employees, assailed the validity of Executive Order No. 102 on the ground that they were likely to lose their jobs, and that some of them were suffering from the inconvenience of having to travel a longer distance to get to their new place of work, while other DOH employees had to relocate to far-flung areas.10 Petitioners also pointed out several errors in the implementation of the RSP. Certain employees allegedly suffered diminution of compensation,11 while others were supposedly assigned to positions for which they were neither qualified nor suited.12 In addition, new employees were purportedly hired by the DOH and appointed to positions for which they were not qualified, despite the fact that the objective of the ongoing streamlining was to cut back on costs.13 It was also averred that DOH employees were deployed or transferred even during the three-month period before the national and local elections in May 2001,14 in violation of Section 2 of the Republic Act No. 7305, also known as "Magna Carta for Public Health Workers."15 Petitioners, however, failed to identify the DOH employees referred to above, much less include them as parties to the petition. The Court of Appeals denied the petition due to a number of procedural defects, which proved fatal: 1) Petitioners failed to show capacity or authority to sign the certification of non-forum shopping and the verification; 2) Petitioners failed to show any particularized interest for bringing the suit, nor any direct or personal injury sustained or were in the immediate danger of sustaining; 3) the Petition, brought before the Supreme Court on 15 August 1999, was filed out of time, or beyond 60 days from the time the reorganization methods were implemented in 2000; and 4) certiorari, Prohibition and Mandamus will not lie where the President, in issuing the assailed Executive Order, was not acting as a tribunal, board or officer exercising judicial or quasi-judicial functions. In resolving the substantial issues of the case, the Court of Appeals ruled that the HSRA cannot be declared void for violating Sections 5, 9, 10, 11, 13, 15, 18 of Article II; Section 1 of Article III; Sections 11 and 14 of Article XIII; and

Sections 1 and 3(2) of Article XV, all of the 1987 Constitution, which directly or indirectly pertain to the duty of the State to protect and promote the peoples right to health and well-being. It reasoned that the aforementioned provisions of the Constitution are not self-executing; they are not judicially enforceable constitutional rights and can only provide guidelines for legislation. Moreover, the Court of Appeals held that the petitioners assertion that Executive Order No. 102 is detrimental to the health of the people cannot be made a justiciable issue. The question of whether the HSRA will bring about the development or disintegration of the health sector is within the realm of the political department. Furthermore, the Court of Appeals decreed that the President was empowered to issue Executive Order No. 102, in accordance with Section 17 Article VII of the 1987 Constitution. It also declared that the DOH did not implement Executive Order No. 102 in bad faith or with grave abuse of discretion, as alleged by the petitioners, as the DOH issued Department Circular No. 275-C, Series of 2000, which created the different committees tasked with the implementation of the RSP, only after both the DBM and Presidential Committee on Effective Governance (PCEG) approved the RSP on 8 July 2000 and 17 July 2000, respectively.1avvphi1 Petitioners filed with the Court of Appeals a Motion for Reconsideration of the Decision rendered on 26 November 2004, but the same was denied in a Resolution dated 7 March 2005. Hence, the present petition, where the following issues are raised: I. THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING THAT ANY QUESTION ON THE WISDOM AND EFFICACY OF THE HEALTH SECTOR REFORM AGENDA IS NOT A JUSTICIABLE CONTROVERSY AND THAT THE CONSTITUTIONAL PROVISIONS PROTECTING THE HEALTH OF THE FILIPINO PEOPLE ARE NOT JUDICIALLY ENFORCEABLE; II. THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING THAT PETITIONERS COMPLAINT THAT EXECUTIVE ORDER NO. 102 IS DETRIMENTAL TO THE FILIPINO IS LIKEWISE NOT A JUSTICIABLE CONTROVERSY AND THAT THE PRESIDENT HAS THE AUTHORITY TO ISSUE SAID ORDER; AND III. THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN UPHOLDING TECHNICALITIES OVER AND ABOVE THE ISSUES OF TRANSCENDENTAL IMPORTANCE RAISED IN THE PETITION BELOW. 16 The Court finds the present petition to be without merit. Petitioners allege that the HSRA should be declared void, since it runs counter to the aspiration and ideals of the Filipino people as embodied in the Constitution.17 They claim that the HSRAs policies of fiscal autonomy, income generation, and revenue enhancement violate Sections 5, 9, 10, 11, 13, 15 and 18 of Article II, Section 1 of Article III; Sections 11 and 14 of Article XIII; and Sections 1 and 3 of Article XV of the 1987 Constitution. Such policies allegedly resulted in making inaccessible free medicine and free medical services. This contention is unfounded. As a general rule, the provisions of the Constitution are considered self-executing, and do not require future legislation for their enforcement. For if they are not treated as self-executing, the mandate of the fundamental law can be easily nullified by the inaction of Congress.18 However, some provisions have already been categorically declared by this Court as non self-executing. In Tanada v. Angara,19 the Court specifically set apart the sections found under Article II of the 1987 Constitution as non self-executing and ruled that such broad principles need legislative enactments before they can be implemented: By its very title, Article II of the Constitution is a "declaration of principles and state policies." x x x. These principles in Article II are not intended to be self-executing principles ready for enforcement through the courts. They are used by the judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. In Basco v. Philippine Amusement and Gaming Corporation,20 this Court declared that Sections 11, 12, and 13 of Article II; Section 13 of Article XIII; and Section 2 of Article XIV of the 1987 Constitution are not self-executing provisions. In Tolentino v. Secretary of Finance,21 the Court referred to Section 1 of Article XIII and Section 2 of Article XIV of the

Constitution as moral incentives to legislation, not as judicially enforceable rights. These provisions, which merely lay down a general principle, are distinguished from other constitutional provisions as non self-executing and, therefore, cannot give rise to a cause of action in the courts; they do not embody judicially enforceable constitutional rights.22 Some of the constitutional provisions invoked in the present case were taken from Article II of the Constitution -specifically, Sections 5, 9, 10, 11, 13, 15 and 18 -- the provisions of which the Court categorically ruled to be non selfexecuting in the aforecited case of Taada v. Angara.23 Moreover, the records are devoid of any explanation of how the HSRA supposedly violated the equal protection and due process clauses that are embodied in Section 1 of Article III of the Constitution. There were no allegations of discrimination or of the lack of due process in connection with the HSRA. Since they failed to substantiate how these constitutional guarantees were breached, petitioners are unsuccessful in establishing the relevance of this provision to the petition, and consequently, in annulling the HSRA. In the remaining provisions, Sections 11 and 14 of Article XIII and Sections 1 and 3 of Article XV, the State accords recognition to the protection of working women and the provision for safe and healthful working conditions; to the adoption of an integrated and comprehensive approach to health; to the Filipino family; and to the right of children to assistance and special protection, including proper care and nutrition. Like the provisions that were declared as non selfexecutory in the cases of Basco v. Philippine Amusement and Gaming Corporation24 and Tolentino v. Secretary of Finance,25 they are mere statements of principles and policies. As such, they are mere directives addressed to the executive and the legislative departments. If unheeded, the remedy will not lie with the courts; but rather, the electorates displeasure may be manifested in their votes. The rationale for this is given by Justice Dante Tinga in his Separate Opinion in the case of Agabon v. National Labor Relations Commission26 : x x x However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and the realization of the ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and exaggerated. x x x Subsequent legislation is still needed to define the parameters of these guaranteed rights. x x x Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution. The HSRA cannot be nullified based solely on petitioners bare allegations that it violates the general principles expressed in the non self-executing provisions they cite herein. There are two reasons for denying a cause of action to an alleged infringement of broad constitutional principles: basic considerations of due process and the limitations of judicial power.27 Petitioners also claim that Executive Order No. 102 is void on the ground that it was issued by the President in excess of his authority. They maintain that the structural and functional reorganization of the DOH is an exercise of legislative functions, which the President usurped when he issued Executive Order No. 102.28 This line of argument is without basis. This Court has already ruled in a number of cases that the President may, by executive or administrative order, direct the reorganization of government entities under the Executive Department.29 This is also sanctioned under the Constitution, as well as other statutes. Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have control of all executive departments, bureaus and offices." Section 31, Book III, Chapter 10 of Executive Order No. 292, also known as the Administrative Code of 1987 reads: SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions: (1) Restructure the internal organization of the Office of the President Proper, including the immediate offices, the Presidential Special Assistants/Advisers System and the Common Staff Support System, by abolishing consolidating or merging units thereof or transferring functions from one unit to another; (2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of the President from other Departments or Agencies; and (3) Transfer any agency under the Office of the President to any other department or agency as well as transfer agencies to the Office of the President from other Departments or agencies.

In Domingo v. Zamora,30 this Court explained the rationale behind the Presidents continuing authority under the Administrative Code to reorganize the administrative structure of the Office of the President. The law grants the President the power to reorganize the Office of the President in recognition of the recurring need of every President to reorganize his or her office "to achieve simplicity, economy and efficiency." To remain effective and efficient, it must be capable of being shaped and reshaped by the President in the manner the Chief Executive deems fit to carry out presidential directives and policies. The Administrative Code provides that the Office of the President consists of the Office of the President Proper and the agencies under it.31 The agencies under the Office of the President are identified in Section 23, Chapter 8, Title II of the Administrative Code: Sec. 23. The Agencies under the Office of the President.The agencies under the Office of the President refer to those offices placed under the chairmanship of the President, those under the supervision and control of the President, those under the administrative supervision of the Office of the President, those attached to it for policy and program coordination, and those that are not placed by law or order creating them under any specific department. (Emphasis provided.) Section 2(4) of the Introductory Provisions of the Administrative Code defines the term "agency of the government" as follows: Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. Furthermore, the DOH is among the cabinet-level departments enumerated under Book IV of the Administrative Code, mainly tasked with the functional distribution of the work of the President.32 Indubitably, the DOH is an agency which is under the supervision and control of the President and, thus, part of the Office of the President. Consequently, Section 31, Book III, Chapter 10 of the Administrative Code, granting the President the continued authority to reorganize the Office of the President, extends to the DOH. The power of the President to reorganize the executive department is likewise recognized in general appropriations laws. As early as 1993, Sections 48 and 62 of Republic Act No. 7645, the "General Appropriations Act for Fiscal Year 1993," already contained a provision stating that: Sec. 48. Scaling Down and Phase Out of Activities Within the Executive Branch.The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased out, or abolished, subject to civil service rules and regulations. x x x. Actual scaling down, phasing out, or abolition of activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. (Emphasis provided.) Sec. 62. Unauthorized Organizational Changes. Unless otherwise created by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organizational structures and be funded form appropriations by this Act. Again, in the year when Executive Order No. 102 was issued, "The General Appropriations Act of Fiscal Year 1999" (Republic Act No. 8745) conceded to the President the power to make any changes in any of the key positions and organizational units in the executive department thus: Sec. 77. Organized Changes. Unless otherwise provided by law or directed by the President of the Philippines, no changes in key positions or organizational units in any department or agency shall be authorized in their respective organizational structures and funded from appropriations provided by this Act. Clearly, Executive Order No. 102 is well within the constitutional power of the President to issue. The President did not usurp any legislative prerogative in issuing Executive Order No. 102. It is an exercise of the Presidents constitutional power of control over the executive department, supported by the provisions of the Administrative Code, recognized by other statutes, and consistently affirmed by this Court. Petitioners also pointed out several flaws in the implementation of Executive Order No. 102, particularly the RSP. However, these contentions are without merit and are insufficient to invalidate the executive order. The RSP was allegedly implemented even before the DBM approved it. The facts show otherwise. It was only after the DBM approved the Notice of Organization, Staffing and Compensation Action on 8 July 2000, 33 and after the Presidential Committee on Effective Governance (PCEG) issued on 17 July 2000 Memorandum Circular No. 62, 34 approving the RSP,

that then DOH Secretary Alberto G. Romualdez issued on 28 July 2000 Department Circular No. 275-C, Series of 2000,35 creating the different committees to implement the RSP. Petitioners also maintain that the Office of the President should have issued an administrative order to carry out the streamlining, but that it failed to do so. Such objection cannot be given any weight considering that the acts of the DOH Secretary, as an alter ego of the President, are presumed to be the acts of the President. The members of the Cabinet are subject at all times to the disposition of the President since they are merely his alter egos. 36 Thus, their acts, performed and promulgated in the regular course of business, are, unless disapproved by the President, presumptively acts of the President.37 Significantly, the acts of the DOH Secretary were clearly authorized by the President, who, thru the PCEG, issued the aforementioned Memorandum Circular No. 62, sanctioning the implementation of the RSP. Petitioners Elsa Odonzo Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P. Manay, Eduardo P. Galope, Remedios M. Ysmael, Alfredo U. Bacuata, and Edgardo Damicog, all DOH employees, assailed the validity of Executive Order No. 102 on the ground that they were likely to lose their jobs, and that some of them were suffering from the inconvenience of having to travel a longer distance to get to their new place of work, while other DOH employees had to relocate to far-flung areas. In several cases, this Court regarded reorganizations of government units or departments as valid, for so long as they are pursued in good faiththat is, for the purpose of economy or to make bureaucracy more efficient.38 On the other hand, if the reorganization is done for the purpose of defeating security of tenure or for ill-motivated political purposes, any abolition of position would be invalid. None of these circumstances are applicable since none of the petitioners were removed from public service, nor did they identify any action taken by the DOH that would unquestionably result in their dismissal. The reorganization that was pursued in the present case was made in good faith. The RSP was clearly designed to improve the efficiency of the department and to implement the provisions of the Local Government Code on the devolution of health services to local governments. While this Court recognizes the inconvenience suffered by public servants in their deployment to distant areas, the executive departments finding of a need to make health services available to these areas and to make delivery of health services more efficient and more compelling is far from being unreasonable or arbitrary, a determination which is well within its authority. In all, this Court finds petitioners contentions to be insufficient to invalidate Executive Order No. 102. Without identifying the DOH employees concerned, much less including them as parties to the petition, petitioners went on identifying several errors in the implementation of Executive Order No. 102. First, they alleged that unidentified DOH employees suffered from a diminution of compensation by virtue of the provision on Salaries and Benefits found in Department Circular No. 312, Series of 2000, issued on 23 October 2000, which reads: 2. Any employee who was matched to a position with lower salary grade (SG) shall not suffer a reduction in salary except where his/her current salary is higher than the maximum step of the SG of the new position, in which case he/she shall be paid the salary corresponding to the maximum step of the SG of the new position. RATA shall no longer be received, if employee was matched to a Non-Division Chief Position. Incidentally, the petition shows that none of the petitioners, who are working in the DOH, were entitled to receive RATA at the time the petition was filed. Nor was it alleged that they suffered any diminution of compensation. Secondly, it was claimed that certain unnamed DOH employees were matched with unidentified positions for which they were supposedly neither qualified nor suited. New employees, again unnamed and not included as parties, were hired by the DOH and appointed to unidentified positions for which they were purportedly not qualified, despite the fact that the objective of the ongoing streamlining was to cut back on costs. Lastly, unspecified DOH employees were deployed or transferred during the three-month period before the national and local elections in May 2001, in violation of Section 2 of the Republic Act No. 7305, also known as "Magna Carta for Public Health Workers." Petitioners allegations are too general and unsubstantiated by the records for the Court to pass upon. The persons involved are not identified, details of their appointments and transfers such as position, salary grade, and the date they were appointed - are not given; and the circumstances which attended the alleged violations are not specified. Even granting that these alleged errors were adequately proven by the petitioners, they would still not invalidate Executive Order No. 102. Any serious legal errors in laying down the compensation of the DOH employees concerned can only invalidate the pertinent provisions of Department Circular No. 312, Series of 2000. Likewise, any questionable appointments or transfers are properly addressed by an appeal process provided under Administrative Order No. 94, series of 2000;39 and if the appeal is meritorious, such appointment or transfer may be invalidated. The validity of Executive Order No. 102 would, nevertheless, remain unaffected. Settled is the rule that courts are not at liberty to declare statutes invalid, although they may be abused or misabused, and may afford an opportunity for abuse in the manner of application. The validity of a statute or ordinance is to be determined from its general purpose and its efficiency to accomplish the end desired, not from its effects in a particular case.40

In a number of cases,41 the Court upheld the standing of citizens who filed suits, wherein the "transcendental importance" of the constitutional question justified the granting of relief. In spite of these rulings, the Court, in Domingo v. Carague,42 dismissed the petition when petitioners therein failed to show any present substantial interest. It demonstrated how even in the cases in which the Court declared that the matter of the case was of transcendental importance, the petitioners must be able to assert substantial interest. Present substantial interest, which will enable a party to question the validity of the law, requires that a party sustained or will sustain direct injury as a result of its enforcement.43 It is distinguished from a mere expectancy or future, contingent, subordinate, or inconsequential interest.44 In the same way, the Court, in Telecommunications & Broadcast Attorneys of the Philippines, Inc. v. Comelec, 45 ruled that a citizen is allowed to raise a constitutional question only when he can show that he has personally suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and the injury is likely to be redressed by a favorable action. This case likewise stressed that the rule on constitutional questions which are of transcendental importance cannot be invoked where a partys substantive claim is without merit. Thus, a partys standing is determined by the substantive merit of his case or a preliminary estimate thereof. After a careful scrutiny of the petitioners substantive claims, this Court finds that the petitioners miserably failed to show any merit to their claims. IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 26 November 2004, declaring both the HSRA and Executive Order No. 102 as valid. No costs. SO ORDERED.

G.R. Nos. 142801-802

July 10, 2001

BUKLOD NG KAWANING EIIB, CESAR POSADA, REMEDIOS G. PRINCESA, BENJAMIN KHO, BENIGNO MANGA, LULU MENDOZA, petitioners, vs. HON. EXECUTIVE SECRETARY RONALDO B. ZAMORA, HON. SECRETARY JOSE PARDO, DEPARTMENT OF FINANCE, HON. SECRETARY BENJAMIN DIOKNO, DEPARTMENT OF BUDGET AND MANAGEMENT, HON. SECRETARY ARTEMIO TUQUERO, DEPARTMENT OF JUSTICE, respondents. SANDOVAL-GUTIERREZ, J.: In this petition for certiorari, prohibition and mandamus, petitioners Buklod Ng Kawaning EIIB, Cesar Posada, Remedios Princesa, Benjamin Kho, Benigno Manga and Lulu Mendoza, for themselves and in behalf of others with whom they share a common or general interest, seek the nullification of Executive Order No. 1911 and Executive Order No. 2232 on the ground that they were issued by the Office of the President with grave abuse of discretion and in violation of their constitutional right to security of tenure. The facts are undisputed: On June 30, 1987, former President Corazon C. Aquino, issued Executive Order No. 1273 establishing the Economic Intelligence and Investigation Bureau (EIIB) as part of the structural organization of the Ministry of Finance. 4 The EIIB was designated to perform the following functions: "(a) Receive, gather and evaluate intelligence reports and information and evidence on the nature, modes and extent of illegal activities affecting the national economy, such as, but not limited to, economic sabotage, smuggling, tax evasion, and dollar-salting, investigate the same and aid in the prosecution of cases;

(b) Coordinate with external agencies in monitoring the financial and economic activities of persons or entities, whether domestic or foreign, which may adversely affect national financial interest with the goal of regulating, controlling or preventing said activities; (c) Provide all intelligence units of operating Bureaus or Offices under the Ministry with the general framework and guidelines in the conduct of intelligence and investigating works; (d) Supervise, monitor and coordinate all the intelligence and investigation operations of the operating Bureaus and Offices under the Ministry; (e) Investigate, hear and file, upon clearance by the Minister, anti-graft and corruption cases against personnel of the Ministry and its constituents units; (f) Perform such other appropriate functions as may be assigned by the Minister or his deputies."5 In a desire to achieve harmony of efforts and to prevent possible conflicts among agencies in the course of their antismuggling operations, President Aquino issued Memorandum Order No. 225 on March 17, 1989, providing, among others, that the EIIB "shall be the agency of primary responsibility for anti-smuggling operations in all land areas and inland waters and waterways outside the areas of sole jurisdiction of the Bureau of Customs."6 Eleven years after, or on January 7, 2000, President Joseph Estrada issued Executive Order No. 191 entitled "Deactivation of the Economic Intelligence and Investigation Bureau."7 Motivated by the fact that "the designated functions of the EIIB are also being performed by the other existing agencies of the government" and that "there is a need to constantly monitor the overlapping of functions" among these agencies, former President Estrada ordered the deactivation of EIIB and the transfer of its functions to the Bureau of Customs and the National Bureau of Investigation. Meanwhile, President Estrada issued Executive Order No. 1968 creating the Presidential Anti-Smuggling Task Force "Aduana."9 Then the day feared by the EIIB employees came. On March 29, 2000, President Estrada issued Executive Order No. 22310 providing that all EIIB personnel occupying positions specified therein shall be deemed separated from the service effective April 30, 2000, pursuant to a bona fide reorganization resulting to abolition, redundancy, merger, division, or consolidation of positions.11 Agonizing over the loss of their employment, petitioners now come before this Court invoking our power of judicial review of Executive Order Nos. 191 and 223. They anchor their petition on the following arguments: "A Executive Order Nos. 191 and 223 should be annulled as they are unconstitutional for being violative of Section 2(3), Article IX-B of the Philippine Constitution and/or for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. B. The abolition of the EIIB is a hoax. Similarly, if Executive Order Nos. 191 and 223 are considered to effect a reorganization of the EIIB, such reorganization was made in bad faith. C. The President has no authority to abolish the EIIB." Petitioners contend that the issuance of the afore-mentioned executive orders is: (a) a violation of their right to security of tenure; (b) tainted with bad faith as they were not actually intended to make the bureaucracy more efficient but to give way to Task Force "Aduana," the functions of which are essentially and substantially the same as that of EIIB; and (c) a usurpation of the power of Congress to decide whether or not to abolish the EIIB. Arguing in behalf of respondents, the Solicitor General maintains that: (a) the President enjoys the totality of the executive power provided under Sections 1 and 7, Article VII of the Constitution, thus, he has the authority to issue Executive Order Nos. 191 and 223; (b) the said executive orders were issued in the interest of national economy, to avoid duplicity of work and to streamline the functions of the bureaucracy; and (c) the EIIB was not "abolished," it was only "deactivated."

The petition is bereft of merit. Despite the presence of some procedural flaws in the instant petition, such as, petitioners' disregard of the hierarchy of courts and the non-exhaustion of administrative remedies, we deem it necessary to address the issues. It is in the interest of the State that questions relating to the status and existence of a public office be settled without delay. We are not without precedent. In Dario v. Mison,12 we liberally decreed: "The Court disregards the questions raised as to procedure, failure to exhaust administrative remedies, the standing of certain parties to sue, for two reasons, `[b]ecause of the demands of public interest, including the need for stability in the public service,' and because of the serious implications of these cases on the administration of the Philippine civil service and the rights of public servants." At first glance, it seems that the resolution of this case hinges on the question - Does the "deactivation" of EIIB constitute "abolition" of an office? However, after coming to terms with the prevailing law and jurisprudence, we are certain that the ultimate queries should be a) Does the President have the authority to reorganize the executive department? and, b) How should the reorganization be carried out? Surely, there exists a distinction between the words "deactivate" and "abolish." To "deactivate" means to render inactive or ineffective or to break up by discharging or reassigning personnel,13 while to "abolish" means to do away with, to annul, abrogate or destroy completely.14 In essence, abolition denotes an intention to do away with the office wholly and permanently.15 Thus, while in abolition, the office ceases to exist, the same is not true in deactivation where the office continues to exist, albeit remaining dormant or inoperative. Be that as it may, deactivation and abolition are both reorganization measures. The Solicitor General only invokes the above distinctions on the mistaken assumption that the President has no power to abolish an office. The general rule has always been that the power to abolish a public office is lodged with the legislature.16 This proceeds from the legal precept that the power to create includes the power to destroy. A public office is either created by the Constitution, by statute, or by authority of law.17 Thus, except where the office was created by the Constitution itself, it may be abolished by the same legislature that brought it into existence.18 The exception, however, is that as far as bureaus, agencies or offices in the executive department are concerned, the President's power of control may justify him to inactivate the functions of a particular office,19 or certain laws may grant him the broad authority to carry out reorganization measures.20 The case in point is Larin v. Executive Secretary.21 In this case, it was argued that there is no law which empowers the President to reorganize the BIR. In decreeing otherwise, this Court sustained the following legal basis, thus: "Initially, it is argued that there is no law yet which empowers the President to issue E.O. No. 132 or to reorganize the BIR. We do not agree. xxx xxx

Section 48 of R.A. 7645 provides that: 'Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch. The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased out or abolished, subject to civil service rules and regulations. X x x. Actual scaling down, phasing out or abolition of the activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President.' Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of offices only and does not cover the creation of offices or transfer of functions. Nevertheless, the act of creating and decentralizing is included in the subsequent provision of Section 62 which provides that: 'Sec. 62. Unauthorized organizational charges. - Unless otherwise created by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organization structures and be funded from appropriations by this Act.' (italics ours)

The foregoing provision evidently shows that the President is authorized to effect organizational changes including the creation of offices in the department or agency concerned. xxx xxx

Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. No. 292 which states: 'Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above or which are not delegated by the President in accordance with law.' (italic ours) This provision speaks of such other powers vested in the President under the law. What law then gives him the power to reorganize? It is Presidential Decree No. 1772 which amended Presidential Decree No. 1416. These decrees expressly grant the President of the Philippines the continuing authority to reorganize the national government, which includes the power to group, consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities and to standardize salaries and materials. The validity of these two decrees are unquestionable. The 1987 Constitution clearly provides that "all laws, decrees, executive orders, proclamations, letters of instructions and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed or revoked. So far, there is yet no law amending or repealing said decrees." (Emphasis supplied) Now, let us take a look at the assailed executive order. In the whereas clause of E.O. No. 191, former President Estrada anchored his authority to deactivate EIIB on Section 77 of Republic Act 8745 (FY 1999 General Appropriations Act), a provision similar to Section 62 of R.A. 7645 quoted in Larin, thus; "Sec. 77. Organized Changes. Unless otherwise provided by law or directed by the President of the Philippines, no changes in key positions or organizational units in any department or agency shall be authorized in their respective organizational structures and funded from appropriations provided by this Act." We adhere to the precedent or ruling in Larin that this provision recognizes the authority of the President to effect organizational changes in the department or agency under the executive structure. Such a ruling further finds support in Section 78 of Republic Act No. 8760.22 Under this law, the heads of departments, bureaus, offices and agencies and other entities in the Executive Branch are directed (a) to conduct a comprehensive review of their respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; (b) identify activities which are no longer essential in the delivery of public services and which may be scaled down, phased-out or abolished; and (c) adopt measures that will result in the streamlined organization and improved overall performance of their respective agencies.23 Section 78 ends up with the mandate that the actual streamlining and productivity improvement in agency organization and operation shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President.24 The law has spoken clearly. We are left only with the duty to sustain. But of course, the list of legal basis authorizing the President to reorganize any department or agency in the executive branch does not have to end here. We must not lose sight of the very source of the power that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), "the President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of the Office of the President." For this purpose, he may transfer the functions of other Departments or Agencies to the Office of the President. In Canonizado v. Aguirre,25 we ruled that reorganization "involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions." It takes place when there is an alteration of the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. The EIIB is a bureau attached to the Department of Finance. 26 It falls under the Office of the President. Hence, it is subject to the President's continuing authority to reorganize. It having been duly established that the President has the authority to carry out reorganization in any branch or agency of the executive department, what is then left for us to resolve is whether or not the reorganization is valid. In this jurisdiction, reorganizations have been regarded as valid provided they are pursued in good faith. Reorganization is carried out in 'good faith' if it is for the purpose of economy or to make bureaucracy more efficient. 27 Pertinently, Republic Act No. 665628 provides for the circumstances which may be considered as evidence of bad faith in the removal of civil service employees made as a result of reorganization, to wit: (a) where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned; (b) where an office is abolished and another performing substantially the same functions is created; (c) where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit; (d) where there is a classification of offices in the

department or agency concerned and the reclassified offices perform substantially the same functions as the original offices, and (e) where the removal violates the order of separation.29 Petitioners claim that the deactivation of EIIB was done in bad faith because four days after its deactivation, President Estrada created the Task Force Aduana. We are not convinced. An examination of the pertinent Executive Orders30 shows that the deactivation of EIIB and the creation of Task Force Aduana were done in good faith. It was not for the purpose of removing the EIIB employees, but to achieve the ultimate purpose of E.O. No. 191, which is economy. While Task Force Aduana was created to take the place of EIIB, its creation does not entail expense to the government. Firstly, there is no employment of new personnel to man the Task Force. E.O. No. 196 provides that the technical, administrative and special staffs of EIIB are to be composed of people who are already in the public service, they being employees of other existing agencies. Their tenure with the Task Force would only be temporary, i.e., only when the agency where they belong is called upon to assist the Task Force. Since their employment with the Task force is only by way of detail or assignment, they retain their employment with the existing agencies. And should the need for them cease, they would be sent back to the agency concerned. Secondly, the thrust of E.O. No. 196 is to have a small group of military men under the direct control and supervision of the President as base of the government's anti-smuggling campaign. Such a smaller base has the necessary powers 1) to enlist the assistance of any department, bureau, or office and to use their respective personnel, facilities and resources; and 2) "to select and recruit personnel from within the PSG and ISAFP for assignment to the Task Force." Obviously, the idea is to encourage the utilization of personnel, facilities and resources of the already existing departments, agencies, bureaus, etc., instead of maintaining an independent office with a whole set of personnel and facilities. The EIIB had proven itself burdensome for the government because it maintained separate offices in every region in the Philippines. And thirdly, it is evident from the yearly budget appropriation of the government that the creation of the Task Force Aduana was especially intended to lessen EIIB's expenses. Tracing from the yearly General Appropriations Act, it appears that the allotted amount for the EIIB's general administration, support, and operations for the year 1995, was P128,031,000;31 for 1996, P182,156,000;32 for 1998, P219,889,000;33 and, for 1999, P238,743,000.34 These amounts were far above the P50,000,00035 allocation to the Task Force Aduana for the year 2000. While basically, the functions of the EIIB have devolved upon the Task Force Aduana, we find the latter to have additional new powers. The Task Force Aduana, being composed of elements from the Presidential Security Group (PSG) and Intelligence Service Armed Forces of the Philippines (ISAFP),36 has the essential power to effect searches, seizures and arrests. The EIIB did not have this power. The Task Force Aduana has the power to enlist the assistance of any department, bureau, office, or instrumentality of the government, including government-owned or controlled corporations; and to use their personnel, facilities and resources. Again, the EIIB did not have this power. And, the Task Force Aduana has the additional authority to conduct investigation of cases involving ill-gotten wealth. This was not expressly granted to the EIIB.1wphi1.nt Consequently, it cannot be said that there is a feigned reorganization. In Blaquera v. Civil Sevice Commission, 37 we ruled that a reorganization in good faith is one designed to trim the fat off the bureaucracy and institute economy and greater efficiency in its operation. Lastly, we hold that petitioners' right to security of tenure is not violated. Nothing is better settled in our law than that the abolition of an office within the competence of a legitimate body if done in good faith suffers from no infirmity. Valid abolition of offices is neither removal nor separation of the incumbents.38 In the instructive words laid down by this Court in Dario v. Mison,39 through Justice Abraham F. Sarmiento: Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of dismissal) or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the 'abolition,' which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, otherwise not in good faith, no valid 'abolition' takes and whatever 'abolition' is done, is void ab initio. There is an invalid 'abolition' as where there is merely a change of nomenclature of positions, or where claims of economy are belied by the existence of ample funds.

Indeed, there is no such thing as an absolute right to hold office. Except constitutional offices which provide for special immunity as regards salary and tenure, no one can be said to have any vested right in an office or its salary. While we cast a commiserating look upon the plight of all the EIIB employees whose lives perhaps are now torn with uncertainties, we cannot ignore the unfortunate reality that our government is also battling the impact of a plummeting economy. Unless the government is given the chance to recuperate by instituting economy and efficiency in its system, the EIIB will not be the last agency to suffer the impact. We cannot frustrate valid measures which are designed to rebuild the executive department. WHEREFORE, the petition is hereby DENIED. No costs. SO ORDERED.

G.R. No. 140423

July 14, 2006 ANGEL B. OROSA, petitioner,

JOSE LUIS vs. ALBERTO C. ROA, respondent.

Assailed and sought to be set aside in this petition for review is the Resolution1 dated July 8, 1999 of the Court of Appeals (CA) in CA-G.R. SP No. 53190, dismissing the petition for review under Rule 43 of the 1997 Rules of Civil Procedure thereat filed by the herein petitioner from an adverse resolution of the Secretary of Justice. The petition is casts against the following factual backdrop: On November 27, 1996, petitioner, a dentist by profession, filed with the Pasig City Prosecution Office a complaintaffidavit charging respondent Alberto C. Roa, likewise a dentist, with the crime of libel. The complaint, docketed in said office as I.S. No. 96-5442, stemmed from an article entitled "Truth vs. Rumors: Questions against Dr. Orosa" written by respondent and published in the March-April 1996 issue of the Dental Trading Post, a bi-monthly publication of the Dental Exchange Co., Inc. In gist, the article delved into the possibility of a father, who happened to be an examiner in a licensure examination for dentistry where his sons were examinees, manipulating the examinations or the results thereof to enable his children to top the same. In his complaint-affidavit, petitioner alleged that the article in question is defamatory as it besmirched his honor and reputation as a dentist and as the topnotcher in the dental board examinations held in May 1994. Respondent denied the accusation, claiming that the article constitutes a "fair and accurate report on a matter of both public and social concern." He averred that the article in question was not written with malice but with a sincere desire to contribute to the improvement of the integrity of professional examinations. After preliminary investigation, Pasig City Prosecutor Noel Paz issued a Resolution, dismissing petitioner's complaint in this wise: The publication being a bona fide communication on matters of public concern, and made without malice, we find the respondent entitled to the protection of the rule on privileged matters under Article 354 of the Revised Penal Code. Petitioner appealed to the Department of Justice (DOJ). Acting on the appeal, Chief State Prosecutor Jovencito Zuo issued a Resolution (Zuo Resolution), setting aside the findings of the City Prosecutor and directing the latter to file an Information for libel against respondent. Accordingly, in the Regional Trial Court (RTC) of Pasig City, an Information for libel was filed against respondent, thereat docketed as Criminal Case No. 114517. Adversely affected, respondent appealed to the Secretary of Justice. On October 28, 1998, then Justice Secretary Serafin Cuevas reversed the Zuo Resolution and directed the City Prosecutor of Pasig to withdraw the Information earlier filed

with the RTC. In compliance therewith, a "Motion to Withdraw Information" was accordingly filed in court by the Pasig City Prosecution Office. Petitioner seasonably moved for a reconsideration but his motion was denied by the Secretary of Justice in his Resolution of May 12, 1999. Therefrom, petitioner went to the CA on a petition for review under Rule 43 2 of the 1997 Rules of Civil Procedure, docketed as CA-G.R. No. SP No. 53190. As stated at the outset hereof, the CA, in the herein assailed Resolution dated July 8, 1999, dismissed petitioner's petition for review. Partly says the CA in its dismissal Resolution: The Pasig City Prosecution Office and the Department of Justice are not among the quasi-judicial agencies included in Section 1 of Rule 43 whose final orders or resolutions are subject to review by the Court of Appeals. The Supreme Court in its Resolution En Banc dated April 8, 1997, approving the 1997 Rules of Civil Procedure in Bar Matter No. 803, did not include final orders or resolutions issued by these agencies as appealable under Rule 43. The Court of Appeals is therefore not at liberty to supply the omissions in the Rule, that would constitute an encroachment on the rule making power of the Supreme Court.3 With his motion for reconsideration having been denied by the CA in its subsequent Resolution of October 14, 1999, petitioner is now with this Court on his submission that the appellate court erred: I XXX IN HOLDING THAT THE RESOLUTIONS OF THE DEPARTMENT OF JUSTICE ARE NOT REVIEWABLE BY IT UNDER RULE 43 OF THE 1997 RULES OF CIVIL PROCEDURE. II XXX IN FINDING THE PETITION IN CA G.R. SP NO. 53190 [WAS] PREMATURELY FILED. III XXX IN HOLDING THAT THE RESOLUTIONS OF THE DEPARTMENT OF JUSTICE ASSAILED IN CA G.R. SP NO. 53190 ARE NOT REVIEWABLE UNDER RULE 65 (sic) OF THE 1997 RULES OF CIVIL PROCEDURE SINCE THESE RESOLUTIONS WERE ISSUED BY THE SECRETARY OF JUSTICE IN THE EXERCISE OF HIS POWER OF CONTROL AND SUPERVISION OVER PROSECUTORS. IV XXX IN NOT RESOLVING THE PETITION IN CA G.R. SP NO. 53190 ON THE MERITS. V XXX IN NOT REVERSING THE ASSAILED RESOLUTION OF THE DEPARTMENT OF JUSTICE IN CA G.R. SP NO. 53190 ON THE FOLLOWING GROUNDS: a. RESPONDENT'S APPEAL FROM THE RESOLUTION OF THE DEPARTMENT OF JUSTICE, THROUGH THE CHIEF STATE PROSECUTOR, DATED JANUARY 22, 1998, WAS FATALLY DEFECTIVE. b. RESPONDENT'S ARTICLE WAS DEFAMATORY. c. MALICE ATTENDED THE PUBLICATION OF RESPONDENT'S ARTICLE. d. RESPONDENT'S ARTICLE WAS NOT PROTECTED BY THE MANTLE OF PRIVILEGED MATTER. As the Court sees it, the petition commends for its consideration the issue of whether or not a petition for review under Rule 43 of the 1997 Rules of Civil Procedure is a proper mode of appeal from a resolution of the Secretary of Justice directing the prosecutor to withdraw an information in a criminal case. It is petitioner's thesis that Rule 43 was intended to apply to all quasi-judicial agencies exercising quasi-judicial functions. Upon this premise, petitioner submits that resolutions of the DOJ in the exercise of its quasi-judicial functions are

properly appealable to the CA via a petition for review under Rule 43, adding that the quasi-judicial bodies enumerated under said Rule are not exclusive. Petitioner's above posture, while valid to a point, will not carry the day for him. Rule 43 governs all appeals from the Court of Tax Appeals and quasi-judicial bodies to the CA. Section 1 thereof provides: Section 1. Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals, and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service and Insurance System, Employees' Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law. As may be noted, the DOJ is not among the agencies expressly enumerated under Section 1 of Rule 43, albeit any suggestion that it does not perform quasi-judicial functions may have to be rejected. However, its absence from the list of agencies mentioned thereunder does not, by this fact alone, already imply its exclusion from the coverage of said Rule. This is because said Section 1 uses the phrase "among these agencies," thereby implying that the enumeration made is not exclusive of the agencies therein listed. There is compelling reason to believe, however, that the exclusion of the DOJ from the list is deliberate, being in consonance with the constitutional power of control4 lodged in the President over executive departments, bureaus and offices. This power of control, which even Congress cannot limit, let alone withdraw, means the power of the Chief Executive to review, alter, modify, nullify, or set aside what a subordinate, e.g., members of the Cabinet and heads of line agencies, had done in the performance of their duties and to substitute the judgment of the former for that of the latter.5 Being thus under the control of the President, the Secretary of Justice, or, to be precise, his decision is subject to review of the former. In fine, recourse from the decision of the Secretary of Justice should be to the President, instead of the CA, under the established principle of exhaustion of administrative remedies. The thrust of the rule on exhaustion of administrative remedies is that if an appeal or remedy obtains or is available within the administrative machinery, this should be resorted to before resort can be made to the courts.6 Immediate recourse to the court would be premature and precipitate; 7 subject to defined exception, a case is susceptible of dismissal for lack of cause of action should a party fail to exhaust administrative remedies.8 Notably, Section 1, supra, of Rule 43 includes the Office of the President in the agencies named therein, thereby accentuating the fact that appeals from rulings of department heads must first be taken to and resolved by that office before any appellate recourse may be resorted to. Given the above perspective, the question of whether or not a preliminary investigation is a quasi-judicial proceeding, as petitioner posits, or whether or not the Secretary of Justice performs quasi-judicial functions when he reviews the findings of a state or city prosecutor is of little moment. The Court wishes, however, to draw attention to what it said in Santos v. Go9 where the Court, citing Bautista v. Court of Appeals, stated: [t]he prosecutor in a preliminary investigation does not determine the guilt or innocence of the accused. He does not exercise adjudication nor rule-making functions. Preliminary investigation is merely inquisitorial, and is often the only means of discovering the persons who may be reasonably charged with a crime and to enable the fiscal [prosecutor] to prepare his complaint or information. It is not a trial of the case on the merits and has no purpose except that of determining whether a crime has been committed and whether there is probable cause to believe that the accused is guilty thereof. While the fiscal [prosecutor] makes that determination, he cannot be said to be acting as a quasi-court, for it is the courts, ultimately that pass judgment on the accused, not the fiscal [prosecutor]. (Words in bracket ours) While now perhaps anti-climactic to delve into, the ensuing holdings of the appellate court are worth quoting: The petition is premature. The Information charging respondent with the crime of libel, docketed as Criminal Case No. 114517, is now with Branch 155 of the Regional Trial Court in Pasig City. Thus understood, the said trial court has now the control of the case. The remedy of petitioner is to reiterate the reasons or grounds alleged in his present petition by way of an appropriate opposition to the Pasig City Prosecution Office's "Motion to Withdraw Information" dated November 5, 1998, filed in compliance with the assailed directive of the Secretary

of Justice. Having control of the case, the trial court can look into the claim of petitioner. This will enable the trial court to rule on the matter first without the precipitate intervention of this Court. In other words, this is a prerequisite to the elevation of the case to this Court.11 In view of the foregoing disquisition, the Court deems it unnecessary to address the other issues raised in the petition. WHEREFORE, the instant petition is DENIED and the assailed resolution of the Court of Appeals is AFFIRMED. SO ORDERED.

G.R. No. 88291 June 8, 1993 ERNESTO M. MACEDA, petitioner, vs. HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the President, HON. VICENTE JAYME, ETC., ET AL., respondents. Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation. Siguion Reyna, Montecillo & Ongsiako for Caltex.

NOCON, J.: Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. Unfazed by the Decision We promulgated on May 31, 1991 1 petitioner Ernesto Maceda asks this Court to reconsider said Decision. Lest We be criticized for denying due process to the petitioner. We have decided to take a second look at the issues. In the process, a hearing was held on July 9, 1992 where all parties presented their respective arguments. Etched in this Court's mind are the paradoxical claims by both petitioner and private respondents that their respective positions are for the benefit of the Filipino people. I A Chronological review of the relevant NPC laws, specially with respect to its tax exemption provisions, at the risk of being repetitious is, therefore, in order. On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines. 2 The sum of P250,000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work. 3 The main source of funds for the NPC was the flotation of bonds in the capital markets 4 and these bonds . . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face of said bonds. . . . . 5 On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the initial operations of the NPC and reiterating the provision of the flotation of bonds as soon as the first construction of any hydraulic power project was to be decided by the NPC Board. 6 The provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted. On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the bond's principal and interest in "gold coins" but adding that payment could be made in United States dollars. 7 The provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted. On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans. 8 He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives 9 and for the reconstruction and development of the economy of the country. 10 It was expressly stated that: Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. 11 On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds. 12 As to the pertinent tax exemption provision, the law stated as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. 13 On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the President of the Philippines was authorized to negotiate, contract and guarantee loans with the Export-Import Bank of of Washigton, D.C., U.S.A., or any other international financial institution. 14 The tax provision for repayment of these loans, as stated in R.A. No. 357, was not amended. On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate taxes. As enacted, the law states as follows: To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, except real property tax, and from all duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities, and municipalities. 15

On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by the increased indebtedness 16 should bear the National Economic Council's stamp of approval. The tax exemption provision related to the payment of this total indebtedness was not amended nor deleted. On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357. 17 The tax provision related to the repayment of these loans was not amended nor deleted. On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31, 2000. provisions of laws and executive orders contrary to said R.A. No. 2058 were expressly repealed. 19
18

All laws or

On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100,000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government. 20 No tax exemption was incorporated in said Act. On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250,000,000.00 with the increase to be wholly subscribed by the Government. 21 No tax provision was incorporated in said Act. On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300,000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act. 22 On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Declared as primary objectives of the nation were: Declaration of Policy. Congress hereby declares that (1) the comprehensive development, utilization and conservation of Philippine water resources for all beneficial uses, including power generation, and (2) the total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and dispersal and the needs of rural electrification are primary objectives of the nation which shall be pursued coordinately and supported by all instrumentalities and agencies of the government, including the financial institutions. 23 Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority to incur Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign Loans). As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows: The bonds issued under the authority of this subsection shall be exempt from the payment of all taxes by the Republic of the Philippines, or by any authority, branch, division or political subdivision thereof which facts shall be stated upon the face of said bonds. . . . 24 As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as follows: The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials and supplies by the Corporation, paid from the proceeds of any loan, credit or indebtedeness incurred under this Act, shall also be exempt from all taxes, fees, imposts, other charges and restrictions, including import restrictions, by the Republic of the Philippines, or any of its agencies and political subdivisions. 25 A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the non-profit character and tax exemptions of NPC as follows: The Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation is hereby declared exempt: (a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees in any court or administrative proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities, and municipalities and other government agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities; (c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods required for its operations and projects; and (d) From all taxes, duties, fees, imposts and all other charges its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of electric power. 26 On November 7, 1972, Presidential Decree No. 40 was issued declaring that the electrification of the entire country was one of the primary concerns of the country. And in connection with this, it was specifically stated that: The setting up of transmission line grids and the construction of associated generation facilities in Luzon, Mindanao and major islands of the country, including the Visayas, shall be the responsibility of the National Power Corporation (NPC) as the authorized implementing agency of the State. 27 xxx xxx xxx It is the ultimate objective of the State for the NPC to own and operate as a single integrated system all generating facilities supplying electric power to the entire area embraced by any grid set up by the NPC.
28

On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role under aforesaid P.D. No. 40. Its authorized capital stock was raised to P2,000,000,000.00, 29 its total domestic indebtedness was pegged at a maximum of P3,000,000,000.00 at any one time, 30 and the NPC was authorized to borrow a total of US$1,000,000,000.00 31 in foreign loans. The relevant tax exemption provision for these foreign loans states as follows: The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including import restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its agencies and political subdivisions. 32 (Emphasis supplied) Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows: (a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities including the taxes, duties, fees, imposts and other charges provided for under the Tariff and Customs Code of the Philippines, Republic Act Numbered Nineteen Hundred Thirty-Seven, as amended, and as further amended by Presidential Decree No. 34 dated October 27, 1972, and Presidential Decree No. 69, dated November 24, 1972, and costs and service fees in any court or administrative proceedings in which it may be a party; xxx xxx xxx (d) From all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization and sale of electric power. 33 (Emphasis supplied) On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of electricity to its different customers. 34 No tax exemption provision was amended, deleted or added. On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated annually to cover the unpaid subscription of the Government in the NPC authorized capital stock, which amount would be taken from taxes accruing to the General Funds of the Government, proceeds from loans, issuance of bonds, treasury bills or notes to be issued by the Secretary of Finance for this particular purpose. 35

On May 27, 1976 P.D. No. 938 was issued (I)n view of the accelerated expansion programs for generation and transmission facilities which includes nuclear power generation, the present capitalization of National Power Corporation (NPC) and the ceilings for domestic and foreign borrowings are deemed insufficient; 36 xxx xxx xxx (I)n the application of the tax exemption provisions of the Revised Charter, the non-profit character of NPC has not been fully utilized because of restrictive interpretation of the taxing agencies of the government on said provisions; 37 xxx xxx xxx (I)n order to effect the accelerated expansion program and attain the declared objective of total electrification of the country, further amendments of certain sections of Republic Act No. 6395, as amended by Presidential Decrees Nos. 380, 395 and 758, have become imperative; 38 Thus NPC's capital stock was raised to P8,000,000,000.00, 39 the total domestic indebtedness ceiling was increased to P12,000,000,000.00, 40 the total foreign loan ceiling was raised to US$4,000,000,000.00 41 and Section 13 of R.A. No. 6395, was amended to read as follows: The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess revenues from its operation, for expansion. To enable the Corporation to pay to its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation, including its subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings. 42 II On the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and Executive Order No. 93 (S'86). On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to imports as follows: WHEREAS, importations by certain government agencies, including government-owned or controlled corporation, are exempt from the payment of customs duties and compensating tax; and WHEREAS, in order to reduce foreign exchange spending and to protect domestic industries, it is necessary to restrict and regulate such tax-free importations. NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, and do hereby decree and order the following: Sec. 1. All importations of any government agency, including government-owned or controlled corporations which are exempt from the payment of customs duties and internal revenue taxes, shall be subject to the prior approval of an Inter-Agency Committee which shall insure compliance with the following conditions: (a) That no such article of local manufacture are available in sufficient quantity and comparable quality at reasonable prices; (b) That the articles to be imported are directly and actually needed and will be used exclusively by the grantee of the exemption for its operations and projects or in the conduct of its functions; and (c) The shipping documents covering the importation are in the name of the grantee to whom the goods shall be delivered directly by customs authorities. xxx xxx xxx Sec. 3. The Committee shall have the power to regulate and control the tax-free importation of government agencies in accordance with the conditions set forth in Section 1 hereof and the regulations

to be promulgated to implement the provisions of this Decree. Provided, however, That any government agency or government-owned or controlled corporation, or any local manufacturer or business firm adversely affected by any decision or ruling of the Inter-Agency Committee may file an appeal with the Office of the President within ten days from the date of notice thereof. . . . . xxx xxx xxx Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all general and special laws and decrees are hereby amended accordingly. xxx xxx xxx On July 30, 1977, P.D. 1177 was issued as it was . . . declared the policy of the State to formulate and implement a National Budget that is an instrument of national development, reflective of national objectives, strategies and plans. The budget shall be supportive of and consistent with the socio-economic development plan and shall be oriented towards the achievement of explicit objectives and expected results, to ensure that funds are utilized and operations are conducted effectively, economically and efficiently. The national budget shall be formulated within a context of a regionalized government structure and of the totality of revenues and other receipts, expenditures and borrowings of all levels of government-owned or controlled corporations. The budget shall likewise be prepared within the context of the national long-term plan and of a long-term budget program. 43 In line with such policy, the law decreed that All units of government, including government-owned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees are imposed under revenues laws: provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund. 44 The law also declared that [A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are inconsistent with the provisions of the Decree are hereby repealed and/or modified accordingly. 45 On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino assassination, P.D. No. 1931 was issued to reiterate that: WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to any government-owned or controlled corporation and all other units of government; 46 and since there was a . . . need for government-owned or controlled corporations and all other units of government enjoying tax privileges to share in the requirements of development, fiscal or otherwise, by paying the duties, taxes and other charges due from them. 47 it was decreed that: Sec. 1. The provisions of special on general law to the contrary notwithstanding, all exemptions from the payment of duties, taxes, fees, imposts and other charges heretofore granted in favor of governmentowned or controlled corporations including their subsidiaries, are hereby withdrawn. Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal Incentives Review Board created under Presidential Decree No. 776, is hereby empowered to restore, partially or totally, the exemptions withdrawn by Section 1 above, any applicable tax and duty, taking into account, among others, any or all of the following: 1) The effect on the relative price levels;

2) The relative contribution of the corporation to the revenue generation effort; 3) The nature of the activity in which the corporation is engaged in; or 4) In general the greater national interest to be served. xxx xxx xxx Sec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees, executive orders, administrative orders, rules, regulations or parts thereof which are inconsistent with this Decree are hereby repealed, amended or modified accordingly. On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or grant of tax exemption to other government and private entities without benefit of review by the Fiscal Incentives Review Board, to wit: WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and October 14, 1984, respectively, withdrew the tax and duty exemption privileges, including the preferential tax treatment, of government and private entities with certain exceptions, in order that the requirements of national economic development, in terms of fiscals and other resources, may be met more adequately; xxx xxx xxx WHEREAS, in addition to those tax and duty exemption privileges were restored by the Fiscal Incentives Review Board (FIRB), a number of affected entities, government and private, had their tax and duty exemption privileges restored or granted by Presidential action without benefit or review by the Fiscal Incentives Review Board (FIRB); xxx xxx xxx Since it was decided that: [A]ssistance to government and private entities may be better provided where necessary by explicit subsidy and budgetary support rather than tax and duty exemption privileges if only to improve the fiscal monitoring aspects of government operations. It was thus ordered that: Sec. 1. The Provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives granted to government and private entities are hereby withdrawn, except: a) those covered by the non-impairment clause of the Constitution; b) those conferred by effective internation agreement to which the Government of the Republic of the Philippines is a signatory; c) those enjoyed by enterprises registered with: (i) the Board of Investment pursuant to Presidential Decree No. 1789, as amended; (ii) the Export Processing Zone Authority, pursuant to Presidential Decree No. 66 as amended; (iii) the Philippine Veterans Investment Development Corporation Industrial Authority pursuant to Presidential Decree No. 538, was amended. d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of Instructions No. 1416; e) those conferred under the four basic codes namely: (i) the Tariff and Customs Code, as amended;

(ii) the National Internal Revenue Code, as amended; (iii) the Local Tax Code, as amended; (iv) the Real Property Tax Code, as amended; f) those approved by the President upon the recommendation of the Fiscal Incentives Review Board. Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, is hereby authorized to: a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part; b) revise the scope and coverage of tax and/or duty exemption that may be restored; c) impose conditions for the restoration of tax and/or duty exemption; d) prescribe the date of period of effectivity of the restoration of tax and/or duty exemption; e) formulate and submit to the President for approval, a complete system for the grant of subsidies to deserving beneficiaries, in lieu of or in combination with the restoration of tax and duty exemptions or preferential treatment in taxation, indicating the source of funding therefor, eligible beneficiaries and the terms and conditions for the grant thereof taking into consideration the international commitment of the Philippines and the necessary precautions such that the grant of subsidies does not become the basis for countervailing action. Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board shall take into account any or all of the following considerations: a) the effect on relative price levels; b) relative contribution of the beneficiary to the revenue generation effort; c) nature of the activity the beneficiary is engaged; and d) in general, the greater national interest to be served. xxx xxx xxx Sec. 5. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with this Executive Order are hereby repealed or modified accordingly. E.O. No. 93 (S'86) was decreed to be effective 48 upon the promulgation of the rules and regulations, to be issued by the Ministry of Finance. 49 Said rules and regulations were promulgated and published in the Official Gazette on February 23, 1987. These became effective on the 15th day after promulgation 50 in the Official Gasetter, 51 which 15th day was March 10, 1987. III Now to some definitions. We refer to the very simplistic approach that all would-be lawyers, learn in their TAXATION I course, which fro convenient reference, is as follows: Classifications or kinds of Taxes: According to Persons who pay or who bear the burden: a. Direct Tax the where the person supposed to pay the tax really pays it. WITHOUT transferring the burden to someone else. Examples: Individual income tax, corporate income tax, transfer taxes (estate tax, donor's tax), residence tax, immigration tax

b. Indirect Tax that where the tax is imposed upon goods BEFORE reaching the consumer who ultimately pays for it, not as a tax, but as a part of the purchase price. Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and the tariff and customs indirect taxes (import duties, special import tax and other dues) 52 IV To simply matter, the issues raised by petitioner in his motion for reconsideration can be reduced to the following: (1) What kind of tax exemption privileges did NPC have? (2) For what periods in time were these privileges being enjoyed? (3) If there are taxes to be paid, who shall pay for these taxes? V Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms of taxes etc.," in its section 10, amending Section 13, R.A. No. 6395, as amended by P.D. No. 380, does not expressly include "indirect taxes." His point is not well-taken. A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes direct and indirect. NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its operations upon its creation by virtue of C.A. No. 120. When the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained were to be completely tax exempt. After the NPC was authorized to borrow from other sources of funds aside issuance of bonds it was again specifically exempted from all types of taxes "to facilitate payment of its indebtedness." Even when the ceilings for domestic and foreign borrowings were periodically increased, the tax exemption privileges of the NPC were maintained. NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as above stated. The exemption was, however, restored by R.A. No. 6395. Section 13, R.A. No. 6395, was very comprehensive in its enumeration of the tax exemptions allowed NPC. Its section 13(d) is the starting point of this bone of contention among the parties. For easy reference, it is reproduced as follows: [T]he Corporation is hereby declared exempt: xxx xxx xxx (d) From all taxes, duties, fees, imposts and all other charges imposed by the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of electric power. P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d), which now reads as follows: xxx xxx xxx (d) From all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization and sale of electric power. (Emphasis supplied) Then came P.D. No. 938 which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation, including its subsidiaries, is hereby declared exempt from the payment of ALL FORMS OF taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings. (Emphasis supplied) Petitioner reminds Us that: [I]t must be borne in mind that Presidential Decree and 938 were issued by one man, acting as such the Executive and Legislative. 53 xxx xxx xxx [S]ince both presidential decrees were made by the same person, it would have been very easy for him to retain the same or similar language used in P.D. No. 380 P.D. No. 938 if his intention were to preserve the indirect tax exemption of NPC. 54 Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his fault were. It should be noted that section 13, R.A. No. 6395, provided for tax exemptions for the following items: 13(a) : court or administrative proceedings; 13(b) : income, franchise, realty taxes; 13(c) : import of foreign goods required for its operations and projects; 13(d) : petroleum products used in generation of electric power. P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,", included 13(a) under the "as well as" clause and added PNOC subsidiaries as qualified for tax exemptions. This is the only conclusion one can arrive at if he has read all the NPC laws in the order of enactment or issuance as narrated above in part I hereof. President Marcos must have considered all the NPC statutes from C.A. No. 120 up to its latest amendments, P.D. No. 380, P.D. No. 395 and P.D. No. 759, AND came up 55 with a very simple Section 13, R.A. No. 6395, as amended by P.D. No. 938. One common theme in all these laws is that the NPC must be enable to pay its indebtedness 56 which, as of P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved. By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be remembered that to pay the government share in its capital stock P.D. No. 758 was issued mandating that P200 Million would be appropriated annually to cover the said unpaid subscription of the Government in NPC's authorized capital stock. And significantly one of the sources of this annual appropriation of P200 million is TAX MONEY accruing to the General Fund of the Government. It does not stand to reason then that former President Marcos would order P200 Million to be taken partially or totally from tax money to be used to pay the Government subscription in the NPC, on one hand, and then order the NPC to pay all its indirect taxes, on the other. The above conclusion that then President Marcos lumped up Sections 13 (b), 13 (c) and (d) into the phrase "All FORMS OF" is supported by the fact that he did not do the same for the tax exemption provision for the foreign loans to be incurred. The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395, reads as follows: The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials and supplies by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all taxes, fees, imposts, other charges and restrictions, including import restrictions, by the Republic of the Philippines, or any of its agencies and political subdivisions. 57 The same was amended by P.D. No. 380 as follows: Nos. 380

The loans, credits and indebtedness contracted this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including import restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its agencies and political subdivisions. 58 (Emphasis supplied) P.D. No. 938 did not amend the same 59 and so the tax exemption provision in Section 8 (b), R.A. No. 6395, as amended by P.D. No. 380, still stands. Since the subject matter of this particular Section 8 (b) had to do only with loans and machinery imported, paid for from the proceeds of these foreign loans, THERE WAS NO OTHER SUBJECT MATTER TO LUMP IT UP WITH, and so, the tax exemption stood as is with the express mention of "direct and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege extended to "taxes, fees, imposts, other charges . . . to be imposed" in the future surely, an indication that the lawmakers wanted the NPC to be exempt from ALL FORMS of taxes direct and indirect. It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and indirect taxes under P.D. No. 938. VI Five (5) years on into the now discredited New Society, the Government decided to rationalize government receipts and expenditures by formulating and implementing a National Budget. 60 The NPC, being a government owned and controlled corporation had to be shed off its tax exemption status privileges under P.D. No. 1177. It was, however, allowed to ask for a subsidy from the General Fund in the exact amount of taxes/duties due. Actually, much earlier, P.D. No. 882 had already repealed NPC's tax-free importation privileges. It allowed, however, NPC to appeal said repeal with the Office of the President and to avail of tax-free importation privileges under its Section 1, subject to the prior approval of an Inter-Agency Committed created by virtue of said P.D. No. 882. It is presumed that the NPC, being the special creation of the State, was allowed to continue its tax-free importations. This Court notes that petitioner brought to the attention of this Court, the matter of the abolition of NPC's tax exemption privileges by P.D. No. 1177 61 only in his Common Reply/Comment to private Respondents' "Opposition" and "Comment" to Motion for Reconsideration, four (4) months AFTER the motion for Reconsideration had been filed. During oral arguments heard on July 9, 1992, he proceeded to discuss this tax exemption withdrawal as explained by then Secretary of Justice Vicente Abad Santos in opinion No. 133 (S '77). 62 A careful perusal of petitioner's senate Blue Ribbon Committee Report No. 474, the basis of the petition at bar, fails to yield any mention of said P.D. No. 1177's effect on NPC's tax exemption privileges. 63 Applying by analogy Pulido vs. Pablo, 64 the court declares that the matter of P.D. No. 1177 abolishing NPC's tax exemption privileges was not seasonably invoked 65 by the petitioner. Be that as it may, the Court still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption privileges as this statute has been reiterated twice in P.D. No. 1931. The express repeal of tax privileges of any government-owned or controlled corporation (GOCC). NPC included, was reiterated in the fourth whereas clause of P.D. No. 1931's preamble. The subsidy provided for in Section 23, P.D. No. 1177, being inconsistent with Section 2, P.D. No. 1931, was deemed repealed as the Fiscal Incentives Revenue Board was tasked with recommending the partial or total restoration of tax exemptions withdrawn by Section 1, P.D. No. 1931. The records before Us do not indicate whether or not NPC asked for the subsidy contemplated in Section 23, P.D. No. 1177. Considering, however, that under Section 16 of P.D. No. 1177, NPC had to submit to the Office of the President its request for the P200 million mandated by P.D. No. 758 to be appropriated annually by the Government to cover its unpaid subscription to the NPC authorized capital stock and that under Section 22, of the same P.D. No. NPC had to likewise submit to the Office of the President its internal operating budget for review due to capital inputs of the government (P.D. No. 758) and to the national government's guarantee of the domestic and foreign indebtedness of the NPC, it is clear that NPC was covered by P.D. No. 1177. There is reason to believe that NPC availed of subsidy granted to exempt GOCC's that suddenly found themselves having to pay taxes. It will be noted that Section 23, P.D. No. 1177, mandated that the Secretary of Finance and the Commissioner of the Budget had to establish the necessary procedure to accomplish the tax payment/tax subsidy scheme of the Government. In effect, NPC, did not put any cash to pay any tax as it got from the General Fund the amounts necessary to pay different revenue collectors for the taxes it had to pay. In his memorandum filed July 16, 1992, petitioner submits:

[T]hat with the enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty and tax exemptions, whether direct or indirect. And so there was nothing to be withdrawn or to be restored under P.D. No. 1931, issued on June 11, 1984. This is evident from sections 1 and 2 of said P.D. No. 1931, which reads: "Section 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the payment of duties, taxes, fees, imports and other charges heretofore granted in favor of government-owned or controlled corporations including their subsidiaries are hereby withdrawn." Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal Incentives Review Board created under P.D. No. 776, is hereby empowered to restore partially or totally, the exemptions withdrawn by section 1 above. . . . Hence, P.D. No. 1931 did not have any effect or did it change NPC's status. Since it had already lost all its tax exemptions privilege with the issuance of P.D. No. 1177 seven (7) years earlier or on July 30, 1977, there were no tax exemptions to be withdrawn by section 1 which could later be restored by the Minister of Finance upon the recommendation of the FIRB under Section 2 of P.D. No. 1931. Consequently, FIRB resolutions No. 10-85, and 1-86, were all illegally and validly issued since FIRB acted beyond their statutory authority by creating and not merely restoring the tax exempt status of NPC. The same is true for FIRB Res. No. 17-87 which restored NPC's tax exemption under E.O. No. 93 which likewise abolished all duties and tax exemptions but allowed the President upon recommendation of the FIRB to restore those abolished. The Court disagrees. Applying by analogy the weight of authority that: When a revised and consolidated act re-enacts in the same or substantially the same terms the provisions of the act or acts so revised and consolidated, the revision and consolidation shall be taken to be a continuation of the former act or acts, although the former act or acts may be expressly repealed by the revised and consolidated act; and all rights 66 and liabilities under the former act or acts are preserved and may be enforced. the Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the first half of Section 23, P.D. No. 1177, on withdrawal of tax exemption privileges of all GOCC's said Section 1, P.D. No. 1931 was deemed to be a continuation of the first half of Section 23, P.D. No. 1177, although the second half of Section 23, P.D. No. 177, on the subsidy scheme for former tax exempt GOCCs had been expressly repealed by Section 2 with its institution of the FIRB recommendation of partial/total restoration of tax exemption privileges. The NPC tax privileges withdrawn by Section 1. P.D. No. 1931, were, therefore, the same NPC tax exemption privileges withdrawn by Section 23, P.D. No. 1177. NPC could no longer obtain a subsidy for the taxes it had to pay. It could, however, under P.D. No. 1931, ask for a total restoration of its tax exemption privileges, which, it did, and the same were granted under FIRB Resolutions Nos. 10-85 67 and 1-86 68 as approved by the Minister of Finance. Consequently, contrary to petitioner's submission, FIRB Resolutions Nos. 10-85 and 1-86 were both legally and validly issued by the FIRB pursuant to P.D. No. 1931. FIRB did not created NPC's tax exemption status but merely restored it. 69 Some quarters have expressed the view that P.D. No. 1931 was illegally issued under the now rather infamous Amendment No. 6 70 as there was no showing that President Marcos' encroachment on legislative prerogatives was justified under the then prevailing condition that he could legislate "only if the Batasang Pambansa 'failed or was unable to act inadequately on any matter that in his judgment required immediate action' to meet the 'exigency'. 71 Actually under said Amendment No. 6, then President Marcos could issue decrees not only when the Interim Batasang Pambansa failed or was unable to act adequately on any matter for any reason that in his (Marcos') judgment required immediate action, but also when there existed a grave emergency or a threat or thereof. It must be remembered that said Presidential Decree was issued only around nine (9) months after the Philippines unilaterally declared a moratorium on its foreign debt payments 72 as a result of the economic crisis triggered by loss of confidence in the government brought about by the Aquino assassination. The Philippines was then trying to reschedule its debt payments. 73 One of the big borrowers was the NPC 74 which had a US$ 2.1 billion white elephant of a Bataan Nuclear Power Plant on its back. 75 From all indications, it must have been this grave emergency of a debt rescheduling which compelled Marcos to issue P.D. No. 1931, under his Amendment 6 power. 76

The rule, therefore, that under the 1973 Constitution "no law granting a tax exemption shall be passed without the concurrence of a majority of all the members of the Batasang Pambansa" 77 does not apply as said P.D. No. 1931 was not passed by the Interim Batasang Pambansa but by then President Marcos under His Amendment No. 6 power. P.D. No. 1931 was, therefore, validly issued by then President Marcos under his Amendment No. 6 authority. Under E.O No. 93 (S'86) NPC's tax exemption privileges were again clipped by, this time, President Aquino. Its section 2 allowed the NPC to apply for the restoration of its tax exemption privileges. The same was granted under FIRB Resolution No. 17-87 78 dated June 24, 1987 which restored NPC's tax exemption privileges effective, starting March 10, 1987, the date of effectivity of E.O. No. 93 (S'86). FIRB Resolution No. 17-87 was approved by the President on October 5, 1987. 79 There is no indication, however, from the records of the case whether or not similar approvals were given by then President Marcos for FIRB Resolutions Nos. 10-85 and 1- 86. This has led some quarters to believe that a "travesty of justice" might have occurred when the Minister of Finance approved his own recommendation as Chairman of the Fiscal Incentives Review Board as what happened in Zambales Chromate vs. Court of Appeals 80 when the Secretary of Agriculture and Natural Resources approved a decision earlier rendered by him when he was the Director of Mines, 81 and in Anzaldo vs. Clave 82 where Presidential Executive Assistant Clave affirmed, on appeal to Malacaang, his own decision as Chairman of the Civil Service Commission. 83 Upon deeper analysis, the question arises as to whether one can talk about "due process" being violated when FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of Finance when the same were recommended by him in his capacity as Chairman of the Fiscal Incentives Review Board. 84 In Zambales Chromite and Anzaldo, two (2) different parties were involved: mining groups and scientist-doctors, respectively. Thus, there was a need for procedural due process to be followed. In the case of the tax exemption restoration of NPC, there is no other comparable entity not even a single public or private corporation whose rights would be violated if NPC's tax exemption privileges were to be restored. While there might have been a MERALCO before Martial Law, it is of public knowledge that the MERALCO generating plants were sold to the NPC in line with the State policy that NPC was to be the State implementing arm for the electrification of the entire country. Besides, MERALCO was limited to Manila and its environs. And as of 1984, there was no more MERALCO as a producer of electricity which could have objected to the restoration of NPC's tax exemption privileges. It should be noted that NPC was not asking to be granted tax exemption privileges for the first time. It was just asking that its tax exemption privileges be restored. It is for these reasons that, at least in NPC's case, the recommendation and approval of NPC's tax exemption privileges under FIRB Resolution Nos. 10-85 and 1-86, done by the same person acting in his dual capacities as Chairman of the Fiscal Incentives Review Board and Minister of Finance, respectively, do not violate procedural due process. While as above-mentioned, FIRB Resolution No. 17-87 was approved by President Aquino on October 5, 1987, the view has been expressed that President Aquino, at least with regard to E.O. 93 (S'86), had no authority to sub-delegate to the FIRB, which was allegedly not a delegate of the legislature, the power delegated to her thereunder. A misconception must be cleared up. When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and Legislative powers. Thus, there was no power delegated to her, rather it was she who was delegating her power. She delegated it to the FIRB, which, for purposes of E.O No. 93 (S'86), is a delegate of the legislature. Clearly, she was not sub-delegating her power. And E.O. No. 93 (S'86), as a delegating law, was complete in itself it set forth the policy to be carried out 85 and it fixed the standard to which the delegate had to conform in the performance of his functions, 86 both qualities having been enunciated by this Court in Pelaez vs. Auditor General. 87 Thus, after all has been said, it is clear that the NPC had its tax exemption privileges restored from June 11, 1984 up to the present. VII The next question that projects itself is who pays the tax? The answer to the question could be gleamed from the manner by which the Commissaries of the Armed Forces of the Philippines sell their goods.

By virtue of P.D. No. 83, 88 veterans, members of the Armed of the Philippines, and their defendants but groceries and other goods free of all taxes and duties if bought from any AFP Commissaries. In practice, the AFP Commissary suppliers probably treat the unchargeable specific, ad valorem and other taxes on the goods earmarked for AFP Commissaries as an added cost of operation and distribute it over the total units of goods sold as it would any other cost. Thus, even the ordinary supermarket buyer probably pays for the specific, ad valorem and other taxes which theses suppliers do not charge the AFP Commissaries. 89 IN MUCH THE SAME MANNER, it is clear that private respondents-oil companies have to absorb the taxes they add to the bunker fuel oil they sell to NPC. It should be stated at this juncture that, as early as May 14, 1954, the Secretary of Justice renders an opinion, 90 wherein he stated and We quote: xxx xxx xxx Republic Act No. 358 exempts the National Power Corporation from "all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines and its provinces, cities, and municipalities." This exemption is broad enough to include all taxes, whether direct or indirect, which the National Power Corporation may be required to pay, such as the specific tax on petroleum products. That it is indirect or is of no amount [should be of no moment], for it is the corporation that ultimately pays it. The view which refuses to accord the exemption because the tax is first paid by the seller disregards realities and gives more importance to form than to substance. Equity and law always exalt substance over from. xxx xxx xxx Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as knowledge that many impositions taxpayers have to pay are in the nature of indirect taxes. To limit the exemption granted the National Power Corporation to direct taxes notwithstanding the general and broad language of the statue will be to thwrat the legislative intention in giving exemption from all forms of taxes and impositions without distinguishing between those that are direct and those that are not. (Emphasis supplied) In view of all the foregoing, the Court rules and declares that the oil companies which supply bunker fuel oil to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect taxation, the economic burden of such taxation is expected to be passed on through the channels of commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted from both direct and indirect taxation, the NPC must beheld exempted from absorbing the economic burden of indirect taxation. This means, on the one hand, that the oil companies which wish to sell to NPC absorb all or part of the economic burden of the taxes previously paid to BIR, which could they shift to NPC if NPC did not enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to pay the part of the "normal" purchase price of bunker fuel oil which represents all or part of the taxes previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil from the oil companies because to do so may be more convenient and ultimately less costly for NPC than NPC itself importing and hauling and storing the oil from overseas NPC is entitled to be reimbursed by the BIR for that part of the buying price of NPC which verifiably represents the tax already paid by the oil company-vendor to the BIR. It should be noted at this point in time that the whole issue of who WILL pay these indirect taxes HAS BEEN RENDERED moot and academic by E.O. No. 195 issued on June 16, 1987 by virtue of which the ad valorem tax rate on bunker fuel oil was reduced to ZERO (0%) PER CENTUM. Said E.O. no. 195 reads as follows: EXECUTIVE ORDER NO. 195 AMENDING PARAGRAPH (b) OF SECTION 128 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED BY REVISING THE EXCISE TAX RATES OF CERTAIN PETROLEUM PRODUCTS. xxx xxx xxx Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as amended, is hereby amended to read as follows: Par. (b) For products subject to ad valorem tax only:

PRODUCT AD VALOREM TAX RATE 1. . . . 2. . . . 3. . . . 4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or less the same generating power 0% xxx xxx xxx Sec. 3. This Executive Order shall take effect immediately. Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen hundred and eightyseven. (Emphasis supplied) The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going to bear the economic burden of the ad valorem taxes. What this Court will now dispose of are petitioner's complaints that some indirect tax money has been illegally refunded by the Bureau of Internal Revenue to the NPC and that more claims for refunds by the NPC are being processed for payment by the BIR. A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC last July 7, 1986 for P58.020.110.79 which were for "erroneously paid specific and ad valorem taxes during the period from October 31, 1984 to April 27, 1985. 91 Petitioner asks Us to declare this Tax Credit Memo illegal as the PNC did not have indirect tax exemptions with the enactment of P.D. No. 938. As We have already ruled otherwise, the only questions left are whether NPC Is entitled to a tax refund for the tax component of the price of the bunker fuel oil purchased from Caltex (Phils.) Inc. and whether the Bureau of Internal Revenue properly refunded the amount to NPC. After P.D. No. 1931 was issued on June 11, 1984 withdrawing the tax exemptions of all GOCCs NPC included, it was only on May 8, 1985 when the BIR issues its letter authority to the NPC authorizing it to withdraw tax-free bunker fuel oil from the oil companies pursuant to FIRB Resolution No. 10-85. 92 Since the tax exemption restoration was retroactive to June 11, 1984 there was a need. therefore, to recover said amount as Caltex (PhiIs.) Inc. had already paid the BIR the specific and ad valorem taxes on the bunker oil it sold NPC during the period above indicated and had billed NPC correspondingly. 93 It should be noted that the NPC, in its letterclaim dated September 11, 1985 to the Commissioner of the Bureau of Internal Revenue DID NOT CATEGORICALLY AND UNEQUIVOCALLY STATE that itself paid the P58.020,110.79 as part of the bunker fuel oil price it purchased from Caltex (Phils) Inc. 94 The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National Internal Revenue Code of 1977, as amended which reads as follows: Sec. 230. Recover of tax erroneously or illegally collected. No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any Manner wrongfully collected. until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly, to have been erroneously paid. xxx xxx xxx Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985, 95 the Commissioner correctly issued the Tax Credit Memo in view of NPC's indirect tax exemption.

Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for P410.580,000.00 which represents specific and ad valorem taxes paid by the oil companies to the BIR from June 11, 1984 to the early part of 1986. 96 A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when the alleged claim for a P410,580,000.00 tax refund was filed. It is only stated In paragraph No. 2 of the Deed of Assignment 97 executed by and between NPC and Caltex (Phils.) Inc., as follows: That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal Revenue amounting to P442,887,716.16. P58.020,110.79 of which is due to Assignor's oil purchases from the Assignee (Caltex [Phils.] Inc.) Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from refunding said amount because of Our ruling that NPC has both direct and indirect tax exemption privileges. Neither can We order the BIR to refund said amount to NPC as there is no pending petition for review on certiorari of a suit for its collection before Us. At any rate, at this point in time, NPC can no longer file any suit to collect said amount EVEN IF lt has previously filed a claim with the BIR because it is time-barred under Section 230 of the National Internal Revenue Code of 1977. as amended, which states: In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty REGARDLESS of any supervening cause that may arise after payment. . . . (Emphasis supplied) The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for the amount of P410,580,000.00 had been made on said date. it is clear that more than two (2) years had already elapsed from said date. At the same time, We should note that there is no legal obstacle to the BIR granting, even without a suit by NPC, the tax credit or refund claimed by NPC, assuming that NPC's claim had been made seasonably, and assuming the amounts covered had actually been paid previously by the oil companies to the BIR. WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby DENIED for lack of merit and the decision of this Court promulgated on May 31, 1991 is hereby AFFIRMED. SO ORDERED.

G.R. No. 108461 October 21, 1996 PHILIPPINE INTERNATIONAL TRADING CORPORATION, petitioner, vs. HON. PRESIDING JUDGE ZOSIMO Z. ANGELES, BRANCH 58, RTC, MAKATI; REMINGTON INDUSTRIAL SALES CORPORATION; AND FIRESTONE CERAMIC, INC., respondents.

TORRES, JR., J.:p The PHILIPPINE INTERNATIONAL TRADING CORPORATION (PITC, for brevity) filed this Petition for Review on Certiorari, seeking the reversal of the Decision dated January 4, 1993 of public respondent Hon. Zosimo Z.

Angeles, Presiding Judge of the Regional Trial Court of Makati, Branch 58, in Civil Case No. 92-158 entitled Remington Industrial Sales Corporation, et. al. vs. Philippine Industrial Trading Corporation. The said decision upheld the Petition for Prohibition and Mandamus of REMINGTON INDUSTRIAL SALES CORPORATION (Remington, for brevity) and FIRESTONE CERAMICS, INC. (Firestone, for brevity), and, in the process, declared as null and void and unconstitutional, PITC's Administrative Order No. SOCPEC 89-08-01 and its appurtenant regulations. The dispositive portion of the decision reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of Petitioner and Intervenor and against the Respondent, as follows: 1) Enjoining the further implementation by the respondent of the following issuances relative to the applications for importation of products from the People's Republic of China, to wit: a) Administrative Order No. SOCPEC 89-08-01 dated August 30, 1989 (Annex A, Amended Petition); b) Prescribed Export Undertaking Form (Annex B, Id.); c) Prescribed Importer-Exporter Agreement Form for non-exporter-importer (Annex C, Id.); d) Memorandum dated April 16, 1990 relative to amendments of Administrative Order No. SOCPEC 8908-01 (Annex D, Id.); e) Memorandum dated May 6, 1991 relative to Revised Schedule of Fees for the processing of import applications (Annexes E, E-1., Ind.); f) Rules and Regulations relative to liquidation of unfulfilled Undertakings and expired export credits (Annex Z, Supplemental Petition), the foregoing being all null and void and unconstitutional; and, 2) Commanding respondent to approve forthwith all the pending applications of, and all those that may hereafter be filed by, the petitioner and the Intervenor, free from and without the requirements prescribed in the above-mentioned issuances. IT IS SO ORDERED. The controversy springs from the issuance by the PITC of Administrative Order No. SOCPEC 89-08-01, 1 under which, applications to the PITC for importation from the People's Republic of China (PROC, for brevity) must be accompanied by a viable and confirmed Export Program of Philippine Products to PROC carried out by the improper himself or through a tie-up with a legitimate importer in an amount equivalent to the value of the importation from PROC being applied for, or, simply, at one is to one ratio. Pertinent provisions of the questioned administrative order read: 3. COUNTERPART EXPORTS TO PROC In addition to existing requirements for the processing of import application for goods and commodities originating from PROC, it is declared that: 3.1 All applications covered by these rules must be accompanied by a viable and confirmed EXPORT PROGRAM of Philippine products to PROC in an amount equivalent to the value of the importation from PROC being applied for. Such export program must be carried out and completed within six (6) months from date of approval of the Import Application by PITC. PITC shall reject/deny any application for importation from PROC without the accompanying export program mentioned above. 3.2 The EXPORT PROGRAM may be carried out by any of the following: a. By the IMPORTER himself if he has the capabilities and facilities to carry out the export of Philippine products to PROC in his own name; or

b. Through a tie-up between the IMPORTER and a legitimate exporter (of Philippine products) who is willing to carry out the export commitments of the IMPORTER under these rules. The tie-up shall not make the IMPORTER the exporter of the goods but shall merely ensure that the importation sought to be approved is matched one-to-one (1:1) in value with a corresponding export of Philippine products to PROC. 2 3.3 EXPORT PROGRAM DOCUMENTS which are to be submitted by the improper together with his Import Application are as follows: a) Firm Contract, Sales Invoice or Letter of Credit. b) Export Performance Guarantee (See Article 4 hereof). c) IMPORTER-EXPORTER AGREEMENT for non-exporter IMPORTER (PITC Form No. M-1006). This form should be used if IMPORTER has tie-up with an exporter for the export of Philippine Products to PROC. 4. EXPORT GUARANTEE To ensure that the export commitments of the IMPORTER are carried out in accordance with these rules, all IMPORTERS concerned are required to submit an EXPORT PERFORMANCE GUARANTEE (the "Guarantee") at the time of filing of the Import Application. The amount of the guarantee shall be as follows: For essential commodities: 15% of the value of the imports applied for. For other commodities: 50% of the value of the imports applied for. 4.1 The guarantee may be in the form of (i) a non-interest bearing cash deposit; (ii) Bank hold-out in favor of PITC (PITC Form No. M-1007) or (iii) a Domestic Letter of Credit (with all bank opening charges for account of Importer) opened in favor of PITC as beneficiary. 4.2 The guarantee shall be made in favor of PITC and will be automatically forfeited in favor of PITC, fully or partially, if the required export program is not completed by the importer within six (6) months from date of approval of the Import Application. 4.3 Within the six (6) months period above stated, the IMPORTER is entitled to a (i) refund of the cash deposited without interest; (ii) cancellation of the Bank holdout or (iii) Cancellation of the Domestic Letter of Credit upon showing that he has completed the export commitment pertaining to his importation and provided further that the following documents are submitted to PITC: a) Final Sales Invoice b) Bill of lading or Airway bill c) Bank Certificate of Inward Remittance d) PITC EXPORT APPLICATION FOR NO. M-1005 5. MISCELLANEOUS 5.1 All other requirements for importations of goods and commodities from PROC must be complied with in addition to the above. 5.2 PITC shall have the right to disapprove any and all import applications not in accordance with the rules and regulations herein prescribed. 5.3 Should the IMPORTER or any of his duly authorized representatives make any false statements or fraudulent misrepresentations in the Import/Export Application, or falsify, forge or simulate any document required under these rules and regulations, PITC is authorized to reject all pending and future import/export applications of said IMPORTER and/or disqualify said IMPORTER from doing any business with SOCPEC through PITC.

Desiring to make importations from PROC, private respondents Remington and Firestone, both domestic corporations, organized and existing under Philippine laws, individually applied for authority to import from PROC with the petitioner. They were granted such authority after satisfying the requirements for importers, and after they executed respective undertakings to balance their importations from PROC with corresponding export of Philippine products to PROC. Private respondent Remington was allowed to import tools, machineries and other similar goods. Firestone, on the other hand, imported Calcine Vauxite, which it used for the manufacture of fire bricks, one of its products. Subsequently, for failing to comply with their undertakings to submit export credits equivalent to the value of their importations, further import applications were withheld by petitioner PITC from private respondents, such that the latter were both barred from importing goods from PROC. 3 Consequently, Remington filed a Petition for Prohibition and Mandamus, with prayer for issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction on January 20, 1992, against PITC in the RTC Makati Branch 58. 4 The court issued a Temporary Restraining Order on January 21, 1992, ordering PITC to cease from exercising any power to process applications of goods from PROC. 5 Hearing on the application for writ of preliminary injunction ensued. Private respondent Firstone was allowed to intervene in the petition on July 2, 1992, 6 thus joining Remington in the latter's charges against PITC. It specifically asserts that the questioned Administrative Order is an undue restriction of trade, and hence, unconstitutional. Upon trial, it was agreed that the evidence adduced upon the hearing on the Preliminary Injunction was sufficient to completely adjudicate the case, thus, the parties deemed it proper that the entire case be submitted for decision upon the evidence so far presented. The court rendered its Decision 7 on January 4, 1992. The court ruled that PITC's authority to process and approve applications for imports from SOCPEC and to issue rules and regulations pursuant to LOI 444 and P.D. No. 1071, has already been repealed by EO No. 133, issued on February 27, 1987 by President Aquino. The court observed: Given such obliteration and/or withdrawal of what used to be PITC's regulatory authority under the Special provisions embodied in LOI 444 from the enumeration of power that it could exercise effective February 27, 1987 in virtue of Section 16 (d), EO No. 133, it may now be successfully argued that the PITC can no longer exercise such specific regulatory power in question conformably with the legal precept "expresio unius est exclusio alterius." Moreover, the court continued, none of the Trade protocols of 1989, 1990 or 1991, has empowered the PITC, expressly or impliedly to formulate or promulgate the assailed Administrative Order. This fact, makes the continued exercise by PITC of the regulatory powers in question unworthy of judicial approval. Otherwise, it would be sanctioning an undue exercise of legislative power vested solely in the Congress of the Philippines by Section, 1, Article VII of the 1987 Philippine Constitution. The lower court stated that the subject Administrative Order and other similar issuances by PITC suffer from serious constitutional infirmity, having been promulgated in pursuance of an international agreement (the Memorandum of Agreement between the Philippines and PROC), which has not been concurred in by at least 2/3 of all the members of the Philippine Senate as required by Article VII, Section 21, of the 1987 Constitution, and therefore, null and void. Sec. 21. No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the Members of the Senate. Furthermore, the subject Administrative Order was issued in restraint of trade, in violation of Sections 1 and 19, Article XII of the 1987 Constitution, which reads: Sec. 1. The goals of the national economy are a more equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and, an expanding productivity as the key to raising the equality of life for all, especially the underprivileged.

Sec. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combination in restraint of trade or unfair competition shall be allowed. Lastly, the court declared the Administrative Order to be null and void, since the same was not published, contrary to Article 2 of the New Civil Code which provides, that: Art. 2. Laws shall take effect fifteen (15) days following the completion of their publication in the Official Gazette, unless the law otherwise provides. . . . Petitioner now comes to use on a Petition for Review on Certiorari, 8 questioning the court's decision particularly on the propriety of the lower court's declarations on the validity of Administrative Order No. 89-08-01. The Court directed the respondents to file their respective Comments. Subsequent events transpired, however, which affect to some extent, the submissions of the parties to the present petition. Following President Fidel V. Ramos' trip to Beijing, People's Republic of China (PROC), from April 25 to 30, 1993, a new trade agreement was entered into between the Philippines and PROC, encouraging liberalization of trade between the two countries. In line therewith, on April 20, 1993, the President, through Chief Presidential Legal Counsel Antonio T. Carpio, directed the Department of Trade and Industry and the PITC to cease implementing Administrative Order No. SOCPEC 89-08-01, as amended by PITC Board Resolution Nos. 92-01-05 and 92-03-08. 9 In the implementation of such order, PITC President Jose Luis U. Yulo, Jr. issued a corporate Memorandum 10 instructing that all import applications for the PROC filed with the PITC as of April 20, 1993 shall no longer be covered by the trade balancing program outlined in the Administrative Order. Forthwith, the PITC allowed the private respondents to import anew from the PROC, without being required to comply anymore with the lifted requirement of balancing its imports with exports of Philippine products to PROC. 11 In its Constancia 12 filed with the Court on November 22, 1993, Remington expressed its desire to have the present action declared moot and academic considering the new supervening developments. For its part, respondent Firestone made a Manifestation 13 in lieu of its Memorandum, informing the court of the aforesaid developments of the new trade program of the Philippines with China, and prayed for the court's early resolution of the action. To support its submission that the present action is now moot and academic, respondent Remington cites Executive Order No. 244, 14 issued by President Ramos on May 12, 1995. The Executive Order states: WHEREAS, continued coverage of the People's Republic of China by Letter of Instructions No. 444 is no longer consistent with the country's national interest, as coursing Republic of the Philippines-People's Republic China Trade through the Philippine International Trading Corporations as provided for under Letter of Instructions No. 444 is becoming an unnecessary barrier to trade; NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order; The Committee on Scientific and Technical Cooperation with Socialist Countries to delete the People's Republic of China from the list of countries covered by Letter of Instructions No. 444. Done in the City of Manila, this 12th day of May in the year of Our Lord, Nineteen Hundred and NinetyFive. PITC filed its own Manifestation 15 on December 15, 1993, wherein it adopted the arguments raised in its Petition as its Memorandum. PITC disagrees with Remington on the latter's submission that the case has become moot and academic as a result of the abrogation of Administrative Order SOCPEC No. 89-08-01, since respondent Remington had incurred obligations to the petitioner consisting of charges for the 0.5% Counter Export Development Service provided by PITC to Remington, which obligations remain outstanding. 16 The propriety of such charges must still be resolved, petitioner argues, thereby maintaining the issue of the validity of SOCPEC Order No. 89-08-01, before it was abrogated by Executive fiat. There is no question that from April 20, 1993, when trading balancing measures with PROC were lifted by the President, Administrative Order SOCPEC No. 89-08-01 no longer has force and effect, and respondents are thus entitled anew to apply for authority to import from the PROC, without the trade balancing requirements

previously imposed on proposed importers. Indeed, it appears that since the lifting of the trade balancing measures, Remington had been allowed to import anew from PROC. There remains, however, the matter of the outstanding obligations of the respondent for the charges relating to the 0.5% Counter Export Development Service in favor of PITC, for the period when the questioned Administrative Order remained in effect. Is the obligation still subsisting, or are the respondents freed from it? To resolve this issue, we are tasked to consider the constitutionality of Administrative Order No. SOCPEC 89-0801, based on the arguments set up by the parties in their Petition and Comment. In so doing, we must inquire into the nature of the functions of the PITC, in the light of present realities. The PITC is a government owned or controlled corporation created under P.D. No. 252 17 dated August 6, 1973. P.D. No. 1071, 18 issued on May 9, 1977 which revised the provisions of P.D. 252. The purposes and powers of the said governmental entity were enumerated under Section 5 and 6 thereof. 19 On August 9, 1976, the late President Ferdinand Marcos issued Letter of Instruction (LOI) No. 444, 20 directing, inter alia, that trade (export or import of all commodities), whether direct or indirect, between the Philippines and any of the Socialist and other Centrally Planned Economy Countries (SOCPEC), including the People's Republic of China (PROC) shall be undertaken or coursed through the PITC. Under the LOI, PITC was mandated to: 1) participate in all official trade and economic discussions between the Philippines and SOCPEC; 2) adopt such measures and issue such rules and regulations as may be necessary for the effective discharge of its functions under its instructions; and, 3) undertake the processing and approval of all applications for export to or import from the SOCPEC. Pertinent provisions of the Letter of Instruction are herein reproduced: LETTER OF INSTRUCTION 444 xxx xxx xxx II. CHANNELS OF TRADE 1. The trade, direct or indirect, between the Philippines and any of the Socialist and other centrallyplanned economy countries shall upon issuance hereof, be undertaken by or coursed through the Philippine International Trading Corporation. This shall apply to the export and import of all commodities of products including those specified for export or import by expressly authorized government agencies. xxx xxx xxx 4. The Philippine International Trading Corporation shall participate in all official trade and economic discussions between the Philippines and other centrally-planned economy countries. xxx xxx xxx V. SPECIAL PROVISIONS The Philippine International Trading Corporation shall adopt such measures and issue such rules and regulations as may be necessary for the effective discharge of its functions under these instructions. In this connection, the processing and approval of applications for export to or import from the Socialist and other centrally-planned economy countries shall, henceforth, be performed by the said Corporation. (Emphasis ours) After the EDSA Revolution, or more specifically on February 27, 1987, then President Corazon C. Aquino promulgated Executive Order (EO) No. 133 21 reorganizing the Department of Trade and Industry (DTI) empowering the said department to be the "primary coordinative, promotive, facilitative and regulatory arm of the government for the country's trade, industry and investment activities" (Sec. 2, EO 133). The PITC was made one of DTI's line agencies. 22 The Executive Order reads in part: EXECUTIVE ORDER NO. 133

xxx xxx xxx Sec. 16. Line Corporate Agencies and Government Entities. The following line corporate agencies and government entities defined in Section 9 (c) of this Executive Order that will perform their specific regulatory functions, particularly developmental responsibilities and specialized business activities in a manner consonant with the Department mandate, objectives, policies, plans and programs: xxx xxx xxx d) Philippine International Trading Corporation. This corporation, which shall be supervised by the Undersecretary for International Trade, shall only engage in both export and trading on new or nontraditional products and markets not normally pursued by the private business sector; provide a wide range of export oriented auxiliary services to the private sector; arrange for or establish comprehensive system and physical facilities for handling the collection, processing, and distribution of cargoes and other commodities; monitor or coordinate risk insurance services for existing institutions; promote and organize, whenever warranted, production enterprises and industrial establishments and collaborate or associate in joint venture with any person, association, company or entity, whether domestic or foreign, in the fields of production, marketing, procurement, and other relate businesses; and provide technical advisory, investigatory, consultancy and management services with respect to any and all of the functions, activities, and operations of the corporation. Sometime in April, 1988, following the State visit of President Aquino to the PROC, the Philippines and PROC entered into a Memorandum of Understanding 23 (MOU) wherein the two countries agreed to make joint efforts within the next five years to expand bilateral trade to US $600 US $800 Million by 1992, and to strive for a steady progress towards achieving a balance between the value of their imports and exports during the period, agreeing for the purpose that upon the signing of the Memorandum, both sides shall undertake to establish the necessary steps and procedures to be adopted within the framework of the annual midyear review meeting under the Trade Protocol, in order to monitor and ensure the implementation of the MOU. Conformably with the MOU, the Philippines and PROC entered into a Trade Protocol for the years 1989, 1990 and 1991, 24 under which was specified the commodities to be traded between them. The protocols affirmed their agreement to jointly endeavor between them. The protocols affirmed their agreement to jointly endeavor to achieve more or less a balance between the values of their imports and exports in their bilateral trade. It is allegedly in line with its powers under LOI 444 and in keeping with the MOU and Trade Protocols with PROC that PITC issued its now assailed Administrative Order No. SOCPEC 89-08-01 25 on August 30, 1989 (amended in March, 1992). Undoubtedly, President Aquino, in issuing EO 133, is empowered to modify and amend the provisions of LOI 444, which was issued by then President Marcos, both issuances being executive directives. As observed by us in Philippine Association of Services Exporters, Inc. vs. Torres, 26 there is no need for legislative delegation of power to the President to revoke the Letter of Instruction by way of an Executive Order. This is notwithstanding the fact that the subject LOI 1190 was issued by President Marcos, when he was extraordinarily empowered to exercise legislative powers, whereas EO 450 was issued by Pres. Aquino when her transitional legislative powers have already ceased, since it was found that LOI 1190 was a mere administrative directive, hence, may be repealed, altered, or modified by EO 450. We do not agree, however, with the trial court's ruling PITC's authority to issue rules and regulations pursuant to the Special Provision of LOI 444 and P.D. No. 1071, have already been repealed by EO 133. While PITC's power to engage in commercial import and export activities is expressly recognized and allowed under Section 16 (d) of EO 133, the same is not limited only to new or non-traditional products and markets not normally pursued by the private business sector. There is not indication in the law of the removal of the powers of the PITC to exercise its regulatory functions in the area of importations from SOCPEC countries. Though it does not mention the grant of regulatory power, EO 133, as worded, is silent as to the abolition or limitation of such powers, previously granted under P.D. 1071, from the PITC. Likewise, the general repealing clause in EO 133 stating that "all laws, ordinances, rules, and regulations, or other parts thereof, which are inconsistent with the Executive Order are hereby repealed or modified

accordingly, cannot operate to abolish the grant of regulatory powers to the PITC. There can be no repeal of the said powers, absent any cogency of irreconcilable inconsistency or repugnancy between the issuances, relating to the regulatory power of the PITC. The President, in promulgating EO 133, had not intended to overhaul the functions of the PITC. The DTI was established, and was given powers and duties including those previously held by the PITC as an independent government entity, under P.D. 1071 and LOI 444. The PITC was thereby attached to the DTI as an implementing arm of the said department. EO 133 established the DTI as the primary coordinative, promotive, facilitative and regulatory arm of government for the country's trade, industry and investment activities, which shall act as a catalyst for intensified private sector activity in order to accelerate and sustain economic growth. 27 In furtherance of this mandate, the DTI was empowered, among others, to plan, implement, and coordinate activities of the government related to trade industry and investments; to formulate and administer policies and guidelines for the investment priorities plan and the delivery of investment incentives; to formulate country and product export strategies which will guide the export promotion and development thrusts of the government. 28 Corollarily, the Secretary of Trade and Industry is given the power to promulgate rules and regulations necessary to carry out the department's objectives, policies, plans, programs and projects. The PITC, on the other hand, was attached as an integral part to the said department as one of its line agencies, 29 and given the focal task of implementing the department's programs. 30 The absence of the regulatory power formerly enshrined in the Special Provision of LOI 444, from Section 16 of EO 133, and the limitation of its previously wide range of functions, is noted. This does not mean, however, that PITC has lost the authority to issue the questioned Administrative Order. It is our view that PITC still holds such authority, and may legally exercise it, as an implementing arm, and under the supervision of, the Department of Trade and Industry. Furthermore, the lower court's ruling to the effect that the PITC's authority to process and approve applications for imports from SOCPEC and to issue rules and regulations pursuant to LOI 444 and P.D. 1071 has been repealed by EO 133, is misplaced, and did not consider the import behind the issuance of the later presidential edict. The President could not have intended to deprive herself of the power to regulate the flow of trade between the Philippines and PROC under the two countries' Memorandum of Understanding, a power which necessarily flows from her office as Chief Executive. In issuing Executive Order 133, the President intended merely to reorganize the Department of Trade and Industry to cope with the need of a streamlined bureaucracy. 31 Thus, there is not real inconsistency between LOI 444 and EO 133. There is, admittedly, a rearranging of the administrative functions among the administrative bodies affective by the edict, but not an abolition of executive power. Consistency in statutes as in executive issuances, is of prime importance, and, in the absence of a showing to the contrary, all laws are presumed to be consistent with each other. Where it is possible to do so, it is the duty of courts, in the construction of statutes, to harmonize and reconcile them, and to adopt a construction of a statutory provision which harmonizes and reconciles it with other statutory provisions. 32 The fact that a later enactment may relate to the same subject matter as that of an earlier statute is not of itself sufficient to cause an implied repeal of the latter, since the law may be cumulative or a continuation of the old one. 33 Similarly, the grant of quasi-legislative powers in administrative bodies is not unconstitutional. Thus, as a result of the growing complexity of the modern society, it has become necessary to create more and more administrative bodies to help in the regulation of its ramified activities. Specialized in the particular field assigned to them, they can deal within the problems thereof with more expertise and dispatch than can be expected from the legislature or the courts of justice. This is the reason for the increasing vesture of quasilegislative and quasi-judicial powers in what is now not unreasonably called the fourth department of the government. 34 Evidently, in the exercise of such powers, the agency concerned must commonly interpret and apply contracts and determine the rights of private parties under such contracts. One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer uniquely judicial function, exercisable only by our regular courts. (Antipolo Realty Corporation vs. National Housing Authority, G.R. No. L-50444, August 31, 1987, 153 SCRA 399). With global trade and business becoming more intricate may even with new discoveries in technology and electronics notwithstanding, the time has come to grapple with legislations and even judicial decisions aimed at resolving issues affecting not only individual rights but also activities of which foreign governments or entities may have interests. Thus, administrative policies and regulations must be devised to suit these changing business needs in a faster rate than to resort to traditional acts of the legislature.

This tendency finds support in a well-stated work on the subject, viz.: Since legislatures had neither the time nor the knowledge to create detailed rules, however, it was soon clear that new governmental arrangements would be needed to handle the job of rule-making. The courts, moreover, many of them already congested, would have been swamped if they had to adjudicate all the controversies that the new legislation was bound to create; and the judges, already obliged to handle a great diversity of cases, would have been hard pressed to acquire the knowledge they needed to deal intelligently with all the new types of controversy. So the need to "create a large number of specialized administrative agencies and to give them broader powers than administrators had traditionally exercised. These included the power to issue regulations having the force of law, and the power to hear and decide cases powers that had previously been reserved to the legislatures and the courts. (Houghteling/Pierce, Lawmaking by Administrative Agencies, p. 166) The respondents likewise argue that PITC is not empowered to issue the Administrative Order because no grant of such power was made under the Trade Protocols of 1989, 1990 or 1991. We do not agree. The Trade Protocols aforesaid, are only the enumeration of the products and goods which signatory countries have agreed to trade. They do not bestow any regulatory power, for executive power is vested in the Executive Department, 35 and it is for the latter to delegate the exercise of such power among its designated agencies. In sum, the PITC was legally empowered to issue Administrative Orders, as a valid exercise of a power ancillary to legislation. This does not imply however, that the subject Administrative Order is a valid exercise of such quasi-legislative power. The original Administrative Order issued on August 30, 1989, under which the respondents filed their applications for importation, was not published in the Official Gazette or in a newspaper of general circulation. The questioned Administrative Order, legally, until it is published, is invalid within the context of Article 2 of Civil Code, which reads: Art. 2. Laws shall take effect fifteen days following the completion of their publication in the Official Gazette (or in a newspaper of general circulation in the Philippines), unless it is otherwise provided. . . . The fact that the amendments to Administrative Order No. SOCPEC 89-08-01 were filed with, and published by the UP Law Center in the National Administrative Register, does not cure the defect related to the effectivity of the Administrative Order. This court, in Tanada vs. Tuvera 36 stated, thus: We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity is fixed by the legislature. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers or, at present, directly conferred by the Constitution. Administrative Rules and Regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties xxx xxx xxx We agree that the publication must be in full or it is no publication at all since its purpose is to inform the public of the contents of the laws. The Administrative Order under consideration is one of those issuances which should be published for its effectivity, since its purpose is to enforce and implement an existing law pursuant to a valid delegation, i.e., P.D. 1071, in relation to LOI 444 and EO 133.

Thus, even before the trade balancing measures issued by the petitioner were lifted by President Fidel V. Ramos, the same were never legally effective, and private respondents, therefore, cannot be made subject to them, because Administrative Order 89-08-01 embodying the same was never published, as mandated by law, for its effectivity. It was only on March 30, 1992 when the amendments to the said Administrative Order were filed in the UP Law Center, and published in the National Administrative Register as required by the Administrative Code of 1987. Finally, it is the declared Policy of the Government to develop and strengthen trade relations with the People's Republic of China. As declared by the President in EO 244 issued on May 12, 1995, continued coverage of the People's Republic of China by Letter of Instructions No. 444 is no longer consistent with the country's national interest, as coursing RP-PROC trade through the PITC as provided for under Letter of Instructions No. 444 is becoming an unnecessary barrier to trade. 37 Conformably with such avowed policy, any remnant of the restrained atmosphere of trading between the Philippines and PROC should be done away with, so as to allow economic growth and renewed trade relations with our neighbors to flourish and may be encouraged. ACCORDINGLY, the assailed decision of the lower court is hereby AFFIRMED, to the effect that judgment is hereby rendered in favor of the private respondents, subject to the following MODIFICATIONS: 1) Enjoining the petitioner: a) From further charging the petitioners the Counter Export Development Service fee of 0.5% of the total value of the unliquidated or unfulfilled Undertakings of the private respondents; b) From further implementing the provisions of Administrative Order No. SOCPEC 89-08-01 and its appurtenant rules; and, 2) Requiring petitioner to approve forthwith all the pending applications of, and all those that may hereafter be filed by, the petitioner and the Intervenor, free from and without complying with the requirements prescribed in the above-stated issuances. SO ORDERED.

G.R. No. 124360 November 5, 1997 FRANCISCO S. TATAD, petitioner, vs. THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY OF THE DEPARTMENT OF FINANCE, respondents. G.R. No. 127867 November 5, 1997 EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO TANADA, FLAG HUMAN RIGHTS FOUNDATION, INC., FREEDOM FROM DEBT COALITION (FDC), SANLAKAS, petitioners, vs. HON. RUBEN TORRES in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY, in his capacity as the Secretary of Energy, CALTEX Philippines, Inc., PETRON Corporation and PILIPINAS SHELL Corporation, respondents.

PUNO, J.: The petitions at bar challenge the constitutionality of Republic Act No. 8180 entitled "An Act Deregulating the Downstream Oil Industry and For Other Purposes". 1 R.A. No. 8180 ends twenty six (26) years of government regulation of the downstream oil industry. Few cases carry a surpassing importance on the life of every Filipino as these petitions for the upswing and downswing of our economy materially depend on the oscillation of oil. First, the facts without the fat. Prior to 1971, there was no government agency regulating the oil industry other than those dealing with ordinary commodities. Oil companies were free to enter and exit the market without any government

interference. There were four (4) refining companies (Shell, Caltex, Bataan Refining Company and Filoil Refining) and six (6) petroleum marketing companies (Esso, Filoil, Caltex, Getty, Mobil and Shell), then operating in the country. 2 In 1971, the country was driven to its knees by a crippling oil crisis. The government, realizing that petroleum and its products are vital to national security and that their continued supply at reasonable prices is essential to the general welfare, enacted the Oil Industry Commission Act. 3 It created the Oil Industry Commission (OIC) to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and selling crude oil, gasoline, kerosene, gas and other refined petroleum products. The OIC was vested with the power to fix the market prices of petroleum products, to regulate the capacities of refineries, to license new refineries and to regulate the operations and trade practices of the industry. 4 In addition to the creation of the OIC, the government saw the imperious need for a more active role of Filipinos in the oil industry. Until the early seventies, the downstream oil industry was controlled by multinational companies. All the oil refineries and marketing companies were owned by foreigners whose economic interests did not always coincide with the interest of the Filipino. Crude oil was transported to the country by foreign-controlled tankers. Crude processing was done locally by foreign-owned refineries and petroleum products were marketed through foreign-owned retail outlets. On November 9, 1973, President Ferdinand E. Marcos boldly created the Philippine National Oil Corporation (PNOC) to break the control by foreigners of our oil industry. 5 PNOC engaged in the business of refining, marketing, shipping, transporting, and storing petroleum. It acquired ownership of ESSO Philippines and Filoil to serve as its marketing arm. It bought the controlling shares of Bataan Refining Corporation, the largest refinery in the country. 6 PNOC later put up its own marketing subsidiary Petrophil. PNOC operated under the business name PETRON Corporation. For the first time, there was a Filipino presence in the Philippine oil market. In 1984, President Marcos through Section 8 of Presidential Decree No. 1956, created the Oil Price Stabilization Fund (OPSF) to cushion the effects of frequent changes in the price of oil caused by exchange rate adjustments or increase in the world market prices of crude oil and imported petroleum products. The fund is used (1) to reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustment and/or increase in world market prices of crude oil, and (2) to reimburse oil companies for cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products. Under the law, the OPSF may be sourced from: 1. any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under P.D. No. 1956 arising from exchange rate adjustment, 2. any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy, 3. any additional amount to be imposed on petroleum products to augment the resources of the fund through an appropriate order that may be issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products, or 4. any resulting peso costs differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. 7 By 1985, only three (3) oil companies were operating in the country Caltex, Shell and the government-owned PNOC. In May, 1987, President Corazon C. Aquino signed Executive Order No. 172 creating the Energy Regulatory Board to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, marketing and distributing energy resources "when warranted and only when public necessity requires." The Board had the following powers and functions: 1. Fix and regulate the prices of petroleum products; 2. Fix and regulate the rate schedule or prices of piped gas to be charged by duly franchised gas companies which distribute gas by means of underground pipe system; 3. Fix and regulate the rates of pipeline concessionaries under the provisions of R.A. No. 387, as amended . . . ; 4. Regulate the capacities of new refineries or additional capacities of existing refineries and license refineries that may be organized after the issuance of

(E.O. No. 172) under such terms and conditions as are consistent with the national interest; and 5. Whenever the Board has determined that there is a shortage of any petroleum product, or when public interest so requires, it may take such steps as it may consider necessary, including the temporary adjustment of the levels of prices of petroleum products and the payment to the Oil Price Stabilization Fund . . . by persons or entities engaged in the petroleum industry of such amounts as may be determined by the Board, which may enable the importer to recover its cost of importation. 8 On December 9, 1992, Congress enacted R.A. No. 7638 which created the Department of Energy to prepare, integrate, coordinate, supervise and control all plans, programs, projects, and activities of the government in relation to energy exploration, development, utilization, distribution and conservation. 9 The thrust of the Philippine energy program under the law was toward privatization of government agencies related to energy, deregulation of the power and energy industry and reduction of dependency on oil-fired plants. 10 The law also aimed to encourage free and active participation and investment by the private sector in all energy activities. Section 5(e) of the law states that "at the end of four (4) years from the effectivity of this Act, the Department shall, upon approval of the President, institute the programs and timetable of deregulation of appropriate energy projects and activities of the energy industry." Pursuant to the policies enunciated in R.A. No. 7638, the government approved the privatization of Petron Corporation in 1993. On December 16, 1993, PNOC sold 40% of its equity in Petron Corporation to the Aramco Overseas Company. In March 1996, Congress took the audacious step of deregulating the downstream oil industry. It enacted R.A. No. 8180, entitled the "Downstream Oil Industry Deregulation Act of 1996." Under the deregulated environment, "any person or entity may import or purchase any quantity of crude oil and petroleum products from a foreign or domestic source, lease or own and operate refineries and other downstream oil facilities and market such crude oil or use the same for his own requirement," subject only to monitoring by the Department of 11 Energy. The deregulation process has two phases: the transition phase and the full deregulation phase. During the transition phase, controls of the non-pricing aspects of the oil industry were to be lifted. The following were to be accomplished: (1) liberalization of oil importation, exportation, manufacturing, marketing and distribution, (2) implementation of an automatic pricing mechanism, (3) implementation of an automatic formula to set margins of dealers and rates of haulers, water transport operators and pipeline concessionaires, and (4) restructuring of oil taxes. Upon full deregulation, controls on the price of oil and the foreign exchange cover were to be lifted and the OPSF was to be abolished. The first phase of deregulation commenced on August 12, 1996. On February 8, 1997, the President implemented the full deregulation of the Downstream Oil Industry through E.O. No. 372. The petitions at bar assail the constitutionality of various provisions of R.A No. 8180 and E.O. No. 372. In G.R. No. 124360, petitioner Francisco S. Tatad seeks the annulment of section 5(b) of R.A. No. 8180. Section 5(b) provides: b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%), except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil: Provided, That beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same: Provided, further, That this provision may be amended only by an Act of Congress. The petition is anchored on three arguments: First, that the imposition of different tariff rates on imported crude oil and imported refined petroleum products violates the equal protection clause. Petitioner contends that the 3%-7% tariff differential unduly favors the three existing oil refineries and discriminates against prospective investors in the downstream oil industry who do not have their own refineries and will have to source refined petroleum products from abroad.

Second, that the imposition of different tariff rates does not deregulate the downstream oil industry but instead controls the oil industry, contrary to the avowed policy of the law. Petitioner avers that the tariff differential between imported crude oil and imported refined petroleum products bars the entry of other players in the oil industry because it effectively protects the interest of oil companies with existing refineries. Thus, it runs counter to the objective of the law "to foster a truly competitive market." Third, that the inclusion of the tariff provision in section 5(b) of R.A. No. 8180 violates Section 26(1) Article VI of the Constitution requiring every law to have only one subject which shall be expressed in its title. Petitioner contends that the imposition of tariff rates in section 5(b) of R.A. No. 8180 is foreign to the subject of the law which is the deregulation of the downstream oil industry. In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique Garcia, Wigberto Tanada, Flag Human Rights Foundation, Inc., Freedom from Debt Coalition (FDC) and Sanlakas contest the constitutionality of section 15 of R.A. No. 8180 and E.O. No. 392. Section 15 provides: Sec. 15. Implementation of Full Deregulation. Pursuant to Section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the President, implement the full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable. Upon the implementation of the full deregulation as provided herein, the transition phase is deemed terminated and the following laws are deemed repealed: xxx xxx xxx E.O. No. 372 states in full, viz.: WHEREAS, Republic Act No. 7638, otherwise known as the "Department of Energy Act of 1992," provides that, at the end of four years from its effectivity last December 1992, "the Department (of Energy) shall, upon approval of the President, institute the programs and time table of deregulation of appropriate energy projects and activities of the energy sector;" WHEREAS, Section 15 of Republic Act No. 8180, otherwise known as the "Downstream Oil Industry Deregulation Act of 1996," provides that "the DOE shall, upon approval of the President, implement full deregulation of the downstream oil industry not later than March, 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable;" WHEREAS, pursuant to the recommendation of the Department of Energy, there is an imperative need to implement the full deregulation of the downstream oil industry because of the following recent developments: (i) depletion of the buffer fund on or about 7 February 1997 pursuant to the Energy Regulatory Board's Order dated 16 January 1997; (ii) the prices of crude oil had been stable at $21-$23 per barrel since October 1996 while prices of petroleum products in the world market had been stable since mid-December of last year. Moreover, crude oil prices are beginning to soften for the last few days while prices of some petroleum products had already declined; and (iii) the exchange rate of the peso in relation to the US dollar has been stable for the past twelve (12) months, averaging at around P26.20 to one US dollar; WHEREAS, Executive Order No. 377 dated 31 October 1996 provides for an institutional framework for the administration of the deregulated industry by defining the functions and responsibilities of various government agencies; WHEREAS, pursuant to Republic Act No. 8180, the deregulation of the industry will foster a truly competitive market which can better achieve the social policy objectives of fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products; NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by the powers vested in me by law, do hereby declare the full deregulation of the downstream oil industry. In assailing section 15 of R.A. No. 8180 and E.O. No. 392, petitioners offer the following submissions: First, section 15 of R.A. No. 8180 constitutes an undue delegation of legislative power to the President and the Secretary of Energy because it does not provide a determinate or determinable standard to guide the Executive Branch in determining when to implement the full deregulation of the downstream oil industry. Petitioners contend that the law does not define when it is practicable for the Secretary of Energy to recommend to the President the full deregulation of

the downstream oil industry or when the President may consider it practicable to declare full deregulation. Also, the law does not provide any specific standard to determine when the prices of crude oil in the world market are considered to be declining nor when the exchange rate of the peso to the US dollar is considered stable. Second, petitioners aver that E.O. No. 392 implementing the full deregulation of the downstream oil industry is arbitrary and unreasonable because it was enacted due to the alleged depletion of the OPSF fund a condition not found in R.A. No. 8180. Third, section 15 of R.A. No. 8180 and E.O. No. 392 allow the formation of a de facto cartel among the three existing oil companies Petron, Caltex and Shell in violation of the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition. Respondents, on the other hand, fervently defend the constitutionality of R.A. No. 8180 and E.O. No. 392. In addition, respondents contend that the issues raised by the petitions are not justiciable as they pertain to the wisdom of the law. Respondents further aver that petitioners have no locus standi as they did not sustain nor will they sustain direct injury as a result of the implementation of R.A. No. 8180. The petitions were heard by the Court on September 30, 1997. On October 7, 1997, the Court ordered the private respondents oil companies "to maintain the status quo and to cease and desist from increasing the prices of gasoline and other petroleum fuel products for a period of thirty (30) days . . . subject to further orders as conditions may warrant." We shall now resolve the petitions on the merit. The petitions raise procedural and substantive issues bearing on the constitutionality of R.A. No. 8180 and E.O. No. 392. The procedural issues are: (1) whether or not the petitions raise a justiciable controversy, and (2) whether or not the petitioners have the standing to assail the validity of the subject law and executive order. The substantive issues are: (1) whether or not section 5 (b) violates the one title one subject requirement of the Constitution; (2) whether or not the same section violates the equal protection clause of the Constitution; (3) whether or not section 15 violates the constitutional prohibition on undue delegation of power; (4) whether or not E.O. No. 392 is arbitrary and unreasonable; and (5) whether or not R.A. No. 8180 violates the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition. We shall first tackle the procedural issues. Respondents claim that the avalanche of arguments of the petitioners assail the wisdom of R.A. No. 8180. They aver that deregulation of the downstream oil industry is a policy decision made by Congress and it cannot be reviewed, much less be reversed by this Court. In constitutional parlance, respondents contend that the petitions failed to raise a justiciable controversy. Respondents' joint stance is unnoteworthy. Judicial power includes not only the duty of the courts to settle actual controversies involving rights which are legally demandable and enforceable, but also the duty to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government. 12 The courts, as guardians of the Constitution, have the inherent authority to determine whether a statute enacted by the legislature transcends the limit imposed by the fundamental law. Where a statute violates the Constitution, it is not only the right but the duty of the judiciary to declare such act as unconstitutional and void. 13 We held in the recent case of Tanada v. Angara: 14 xxx xxx xxx In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. The question thus posed is judicial rather than political. The duty to adjudicate remains to assure that the supremacy of the Constitution is upheld. Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court, it becomes a legal issue which the Court is bound by constitutional mandate to decide. Even a sideglance at the petitions will reveal that petitioners have raised constitutional issues which deserve the resolution of this Court in view of their seriousness and their value as precedents. Our statement of facts and definition of issues clearly show that petitioners are assailing R.A. No. 8180 because its provisions infringe the Constitution and not because the law lacks wisdom. The principle of separation of power mandates that challenges on the constitutionality of a law should be resolved in our courts of justice while doubts on the wisdom of a law should be debated in the halls of Congress. Every now and then, a law may be denounced in court both as bereft of wisdom and constitutionally infirmed. Such denunciation will not deny this Court of its jurisdiction to resolve the constitutionality of the said law while prudentially refusing to pass on its wisdom.

The effort of respondents to question the locus standi of petitioners must also fall on barren ground. In language too lucid to be misunderstood, this Court has brightlined its liberal stance on a petitioner's locus standi where the petitioner is able to craft an issue of transcendental significance to the people. 15 In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 16 we stressed: xxx xxx xxx Objections to taxpayers' suit for lack of sufficient personality, standing or interest are, however, in the main procedural matters. Considering the importance to the public of the cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine whether or not the other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions. There is not a dot of disagreement between the petitioners and the respondents on the far reaching importance of the validity of RA No. 8180 deregulating our downstream oil industry. Thus, there is no good sense in being hypertechnical on the standing of petitioners for they pose issues which are significant to our people and which deserve our forthright resolution. We shall now track down the substantive issues. In G.R. No. 124360 where petitioner is Senator Tatad, it is contended that section 5(b) of R.A. No. 8180 on tariff differential violates the provision 17 of the Constitution requiring every law to have only one subject which should be expressed in its title. We do not concur with this contention. As a policy, this Court has adopted a liberal construction of the one title one subject rule. We have consistently ruled 18 that the title need not mirror, fully index or catalogue all contents and minute details of a law. A law having a single general subject indicated in the title may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general subject. 19 We hold that section 5(b) providing for tariff differential is germane to the subject of R.A. No. 8180 which is the deregulation of the downstream oil industry. The section is supposed to sway prospective investors to put up refineries in our country and make them rely less on imported petroleum. 20 We shall, however, return to the validity of this provision when we examine its blocking effect on new entrants to the oil market. We shall now slide to the substantive issues in G.R. No. 127867. Petitioners assail section 15 of R.A. No. 8180 which fixes the time frame for the full deregulation of the downstream oil industry. We restate its pertinent portion for emphasis, viz.: Sec. 15. Implementation of Full Deregulation Pursuant to section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the President, implement the full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable . . . Petitioners urge that the phrases "as far as practicable," "decline of crude oil prices in the world market" and "stability of the peso exchange rate to the US dollar" are ambivalent, unclear and inconcrete in meaning. They submit that they do not provide the "determinate or determinable standards" which can guide the President in his decision to fully deregulate the downstream oil industry. In addition, they contend that E.O. No. 392 which advanced the date of full deregulation is void for it illegally considered the depletion of the OPSF fund as a factor. The power of Congress to delegate the execution of laws has long been settled by this Court. As early as 1916 in Compania General de Tabacos de Filipinas vs. The Board of Public Utility Commissioners, 21 this Court thru, Mr. Justice Moreland, held that "the true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made." Over the years, as the legal engineering of men's relationship became more difficult, Congress has to rely more on the practice of delegating the execution of laws to the executive and other administrative agencies. Two tests have been developed to determine whether the delegation of the power to execute laws does not involve the abdication of the power to make law itself. We delineated the metes and bounds of these tests in Eastern Shipping Lines, Inc. VS. POEA, 22 thus: There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz: the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislative such that when it reaches the delegate the only thing he will have to do is to enforce it. Under the sufficient standard test, there must be adequate guidelines or limitations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot.

Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. The validity of delegating legislative power is now a quiet area in our constitutional landscape. As sagely observed, delegation of legislative power has become an inevitability in light of the increasing complexity of the task of government. Thus, courts bend as far back as possible to sustain the constitutionality of laws which are assailed as unduly delegating legislative powers. Citing Hirabayashi v. United States 23 as authority, Mr. Justice Isagani A. Cruz states "that even if the law does not expressly pinpoint the standard, the courts will bend over backward to locate the same elsewhere in order to spare the statute, if it can, from constitutional infirmity." 24 Given the groove of the Court's rulings, the attempt of petitioners to strike down section 15 on the ground of undue delegation of legislative power cannot prosper. Section 15 can hurdle both the completeness test and the sufficient standard test. It will be noted that Congress expressly provided in R.A. No. 8180 that full deregulation will start at the end of March 1997, regardless of the occurrence of any event. Full deregulation at the end of March 1997 is mandatory and the Executive has no discretion to postpone it for any purported reason. Thus, the law is complete on the question of the final date of full deregulation. The discretion given to the President is to advance the date of full deregulation before the end of March 1997. Section 15 lays down the standard to guide the judgment of the President he is to time it as far as practicable when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable. Petitioners contend that the words "as far as practicable," "declining" and "stable" should have been defined in R.A. No. 8180 as they do not set determinate or determinable standards. The stubborn submission deserves scant consideration. The dictionary meanings of these words are well settled and cannot confuse men of reasonable intelligence. Webster defines "practicable" as meaning possible to practice or perform, "decline" as meaning to take a downward direction, and "stable" as meaning firmly established. 25 The fear of petitioners that these words will result in the exercise of executive discretion that will run riot is thus groundless. To be sure, the Court has sustained the validity of similar, if not more general standards in other cases. 26 It ought to follow that the argument that E.O. No. 392 is null and void as it was based on indeterminate standards set by R.A. 8180 must likewise fail. If that were all to the attack against the validity of E.O. No. 392, the issue need not further detain our discourse. But petitioners further posit the thesis that the Executive misapplied R.A. No. 8180 when it considered the depletion of the OPSF fund as a factor in fully deregulating the downstream oil industry in February 1997. A perusal of section 15 of R.A. No. 8180 will readily reveal that it only enumerated two factors to be considered by the Department of Energy and the Office of the President, viz.: (1) the time when the prices of crude oil and petroleum products in the world market are declining, and (2) the time when the exchange rate of the peso in relation to the US dollar is stable. Section 15 did not mention the depletion of the OPSF fund as a factor to be given weight by the Executive before ordering full deregulation. On the contrary, the debates in Congress will show that some of our legislators wanted to impose as a pre-condition to deregulation a showing that the OPSF fund must not be in deficit. 27 We therefore hold that the Executive department failed to follow faithfully the standards set by R.A. No. 8180 when it considered the extraneous factor of depletion of the OPSF fund. The misappreciation of this extra factor cannot be justified on the ground that the Executive department considered anyway the stability of the prices of crude oil in the world market and the stability of the exchange rate of the peso to the dollar. By considering another factor to hasten full deregulation, the Executive department rewrote the standards set forth in R.A. 8180. The Executive is bereft of any right to alter either by subtraction or addition the standards set in R.A. No. 8180 for it has no power to make laws. To cede to the Executive the power to make law is to invite tyranny, indeed, to transgress the principle of separation of powers. The exercise of delegated power is given a strict scrutiny by courts for the delegate is a mere agent whose action cannot infringe the terms of agency. In the cases at bar, the Executive co-mingled the factor of depletion of the OPSF fund with the factors of decline of the price of crude oil in the world market and the stability of the peso to the US dollar. On the basis of the text of E.O. No. 392, it is impossible to determine the weight given by the Executive department to the depletion of the OPSF fund. It could well be the principal consideration for the early deregulation. It could have been accorded an equal significance. Or its importance could be nil. In light of this uncertainty, we rule that the early deregulation under E.O. No. 392 constitutes a misapplication of R.A. No. 8180. We now come to grips with the contention that some provisions of R.A. No. 8180 violate section 19 of Article XII of the 1987 Constitution. These provisions are: (1) Section 5 (b) which states "Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%) except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil. Provided, that beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same. Provided, further, that this provision may be amended only by an Act of Congress."

(2) Section 6 which states "To ensure the security and continuity of petroleum crude and products supply, the DOE shall require the refiners and importers to maintain a minimum inventory equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days of supply, whichever is lower," and (3) Section 9 (b) which states "To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts shall be prohibited: xxx xxx xxx (b) Predatory pricing which means selling or offering to sell any product at a price unreasonably below the industry average cost so as to attract customers to the detriment of competitors. On the other hand, section 19 of Article XII of the Constitution allegedly violated by the aforestated provisions of R.A. No. 8180 mandates: "The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed." A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service. 28 On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its, production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. 29 Combination in restraint of trade refers to the means while monopoly refers to the end. 30 Article 186 of the Revised Penal Code and Article 28 of the New Civil Code breathe life to this constitutional policy. Article 186 of the Revised Penal Code penalizes monopolization and creation of combinations in restraint of trade, 31 while Article 28 of the New Civil Code makes any person who shall engage in unfair competition liable for damages. 32 Respondents aver that sections 5(b), 6 and 9(b) implement the policies and objectives of R.A. No. 8180. They explain that the 4% tariff differential is designed to encourage new entrants to invest in refineries. They stress that the inventory requirement is meant to guaranty continuous domestic supply of petroleum and to discourage fly-by-night operators. They also submit that the prohibition against predatory pricing is intended to protect prospective entrants. Respondents manifested to the Court that new players have entered the Philippines after deregulation and have now captured 3% 5% of the oil market. The validity of the assailed provisions of R.A. No. 8180 has to be decided in light of the letter and spirit of our Constitution, especially section 19, Article XII. Beyond doubt, the Constitution committed us to the free enterprise system but it is a system impressed with its own distinctness. Thus, while the Constitution embraced free enterprise as an economic creed, it did not prohibit per se the operation of monopolies which can, however, be regulated in the public interest. 33 Thus too, our free enterprise system is not based on a market of pure and unadulterated competition where the State pursues a strict hands-off policy and follows the let-the-devil devour the hindmost rule. Combinations in restraint of trade and unfair competitions are absolutely proscribed and the proscription is directed both against the State as well as the private sector. 34 This distinct free enterprise system is dictated by the need to achieve the goals of our national economy as defined by section 1, Article XII of the Constitution which are: more equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged. It also calls for the State to protect Filipino enterprises against unfair competition and trade practices. Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle of section 19, Article XII of our Constitution which cannot be violated by R.A. No. 8180. We subscribe to the observation of Prof. Gellhorn that the objective of anti-trust law is "to assure a competitive economy, based upon the belief that through competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the fewest resources. Competition among producers allows consumers to bid for goods and services, and thus matches their desires with society's opportunity costs." 35 He adds with appropriateness that there is a reliance upon "the operation of the 'market' system (free enterprise) to decide what shall be produced, how resources shall be allocated in the production process, and to whom the various products will be distributed. The market system relies on the consumer to decide what and how much shall be produced, and on competition, among producers to determine who will manufacture it."

Again, we underline in scarlet that the fundamental principle espoused by section 19, Article XII of the Constitution is competition for it alone can release the creative forces of the market. But the competition that can unleash these creative forces is competition that is fighting yet is fair. Ideally, this kind of competition requires the presence of not one, not just a few but several players. A market controlled by one player (monopoly) or dominated by a handful of players (oligopoly) is hardly the market where honest-to-goodness competition will prevail. Monopolistic or oligopolistic markets deserve our careful scrutiny and laws which barricade the entry points of new players in the market should be viewed with suspicion. Prescinding from these baseline propositions, we shall proceed to examine whether the provisions of R.A. No. 8180 on tariff differential, inventory reserves, and predatory prices imposed substantial barriers to the entry and exit of new players in our downstream oil industry. If they do, they have to be struck down for they will necessarily inhibit the formation of a truly competitive market. Contrariwise, if they are insignificant impediments, they need not be stricken down. In the cases at bar, it cannot be denied that our downstream oil industry is operated and controlled by an oligopoly, a foreign oligopoly at that. Petron, Shell and Caltex stand as the only major league players in the oil market. All other players belong to the lilliputian league. As the dominant players, Petron, Shell and Caltex boast of existing refineries of various capacities. The tariff differential of 4% therefore works to their immense benefit. Yet, this is only one edge of the tariff differential. The other edge cuts and cuts deep in the heart of their competitors. It erects a high barrier to the entry of new players. New players that intend to equalize the market power of Petron, Shell and Caltex by building refineries of their own will have to spend billions of pesos. Those who will not build refineries but compete with them will suffer the huge disadvantage of increasing their product cost by 4%. They will be competing on an uneven field. The argument that the 4% tariff differential is desirable because it will induce prospective players to invest in refineries puts the cart before the horse. The first need is to attract new players and they cannot be attracted by burdening them with heavy disincentives. Without new players belonging to the league of Petron, Shell and Caltex, competition in our downstream oil industry is an idle dream. The provision on inventory widens the balance of advantage of Petron, Shell and Caltex against prospective new players. Petron, Shell and Caltex can easily comply with the inventory requirement of R.A. No. 8180 in view of their existing storage facilities. Prospective competitors again will find compliance with this requirement difficult as it will entail a prohibitive cost. The construction cost of storage facilities and the cost of inventory can thus scare prospective players. Their net effect is to further occlude the entry points of new players, dampen competition and enhance the control of the market by the three (3) existing oil companies. Finally, we come to the provision on predatory pricing which is defined as ". . . selling or offering to sell any product at a price unreasonably below the industry average cost so as to attract customers to the detriment of competitors." Respondents contend that this provision works against Petron, Shell and Caltex and protects new entrants. The ban on predatory pricing cannot be analyzed in isolation. Its validity is interlocked with the barriers imposed by R.A. No. 8180 on the entry of new players. The inquiry should be to determine whether predatory pricing on the part of the dominant oil companies is encouraged by the provisions in the law blocking the entry of new players. Text-writer Hovenkamp, 36 gives the authoritative answer and we quote: xxx xxx xxx The rationale for predatory pricing is the sustaining of losses today that will give a firm monopoly profits in the future. The monopoly profits will never materialize, however, if the market is flooded with new entrants as soon as the successful predator attempts to raise its price. Predatory pricing will be profitable only if the market contains significant barriers to new entry. As aforediscsussed, the 4% tariff differential and the inventory requirement are significant barriers which discourage new players to enter the market. Considering these significant barriers established by R.A. No. 8180 and the lack of players with the comparable clout of PETRON, SHELL and CALTEX, the temptation for a dominant player to engage in predatory pricing and succeed is a chilling reality. Petitioners' charge that this provision on predatory pricing is anticompetitive is not without reason. Respondents belittle these barriers with the allegation that new players have entered the market since deregulation. A scrutiny of the list of the alleged new players will, however, reveal that not one belongs to the class and category of PETRON, SHELL and CALTEX. Indeed, there is no showing that any of these new players intends to install any refinery and effectively compete with these dominant oil companies. In any event, it cannot be gainsaid that the new players could have been more in number and more impressive in might if the illegal entry barriers in R.A. No. 8180 were not erected. We come to the final point. We now resolve the total effect of the untimely deregulation, the imposition of 4% tariff differential on imported crude oil and refined petroleum products, the requirement of inventory and the prohibition on

predatory pricing on the constitutionality of R.A. No. 8180. The question is whether these offending provisions can be individually struck down without invalidating the entire R.A. No. 8180. The ruling case law is well stated by author Agpalo, 37 viz.: xxx xxx xxx The general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if separable from the invalid, may stand and be enforced. The presence of a separability clause in a statute creates the presumption that the legislature intended separability, rather than complete nullity of the statute. To justify this result, the valid portion must be so far independent of the invalid portion that it is fair to presume that the legislature would have enacted it by itself if it had supposed that it could not constitutionally enact the other. Enough must remain to make a complete, intelligible and valid statute, which carries out the legislative intent. . . . The exception to the general rule is that when the parts of a statute are so mutually dependent and connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, the nullity of one part will vitiate the rest. In making the parts of the statute dependent, conditional, or connected with one another, the legislature intended the statute to be carried out as a whole and would not have enacted it if one part is void, in which case if some parts are unconstitutional, all the other provisions thus dependent, conditional, or connected must fall with them. R.A. No. 8180 contains a separability clause. Section 23 provides that "if for any reason, any section or provision of this Act is declared unconstitutional or invalid, such parts not affected thereby shall remain in full force and effect." This separability clause notwithstanding, we hold that the offending provisions of R.A. No. 8180 so permeate its essence that the entire law has to be struck down. The provisions on tariff differential, inventory and predatory pricing are among the principal props of R.A. No. 8180. Congress could not have deregulated the downstream oil industry without these provisions. Unfortunately, contrary to their intent, these provisions on tariff differential, inventory and predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces. R.A. No. 8180 needs provisions to vouchsafe free and fair competition. The need for these vouchsafing provisions cannot be overstated. Before deregulation, PETRON, SHELL and CALTEX had no real competitors but did not have a free run of the market because government controls both the pricing and non-pricing aspects of the oil industry. After deregulation, PETRON, SHELL and CALTEX remain unthreatened by real competition yet are no longer subject to control by government with respect to their pricing and non-pricing decisions. The aftermath of R.A. No. 8180 is a deregulated market where competition can be corrupted and where market forces can be manipulated by oligopolies. The fall out effects of the defects of R.A. No. 8180 on our people have not escaped Congress. A lot of our leading legislators have come out openly with bills seeking the repeal of these odious and offensive provisions in R.A. No. 8180. In the Senate, Senator Freddie Webb has filed S.B. No. 2133 which is the result of the hearings conducted by the Senate Committee on Energy. The hearings revealed that (1) there was a need to level the playing field for the new entrants in the downstream oil industry, and (2) there was no law punishing a person for selling petroleum products at unreasonable prices. Senator Alberto G. Romulo also filed S.B. No. 2209 abolishing the tariff differential beginning January 1, 1998. He declared that the amendment ". . . would mean that instead of just three (3) big oil companies there will be other major oil companies to provide more competitive prices for the market and the consuming public." Senator Heherson T . Alvarez, one of the principal proponents of R.A. No. 8180, also filed S.B. No. 2290 increasing the penalty for violation of its section 9. It is his opinion as expressed in the explanatory note of the bill that the present oil companies are engaged in cartelization despite R.A. No. 8180, viz,: xxx xxx xxx Since the downstream oil industry was fully deregulated in February 1997, there have been eight (8) fuel price adjustments made by the three oil majors, namely: Caltex Philippines, Inc.; Petron Corporation; and Pilipinas Shell Petroleum Corporation. Very noticeable in the price adjustments made, however, is the uniformity in the pump prices of practically all petroleum products of the three oil companies. This, despite the fact, that their selling rates should be determined by a combination of any of the following factors: the prevailing peso-dollar exchange rate at the time payment is made for crude purchases, sources of crude, and inventory levels of both crude and refined petroleum products. The abovestated factors should have resulted in different, rather than identical prices. The fact that the three (3) oil companies' petroleum products are uniformly priced suggests collusion, amounting to cartelization, among Caltex Philippines, Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation to fix the prices of petroleum products in violation of paragraph (a), Section 9 of R.A. No. 8180.

To deter this pernicious practice and to assure that present and prospective players in the downstream oil industry conduct their business with conscience and propriety, cartel-like activities ought to be severely penalized. Senator Francisco S. Tatad also filed S.B. No. 2307 providing for a uniform tariff rate on imported crude oil and refined petroleum products. In the explanatory note of the bill, he declared in no uncertain terms that ". . . the present set-up has raised serious public concern over the way the three oil companies have uniformly adjusted the prices of oil in the country, an indication of a possible existence of a cartel or a cartel-like situation within the downstream oil industry. This situation is mostly attributed to the foregoing provision on tariff differential, which has effectively discouraged the entry of new players in the downstream oil industry." In the House of Representatives, the moves to rehabilitate R.A. No. 8180 are equally feverish. Representative Leopoldo E. San Buenaventura has filed H.B. No. 9826 removing the tariff differential for imported crude oil and imported refined petroleum products. In the explanatory note of the bill, Rep. Buenaventura explained: xxx xxx xxx As we now experience, this difference in tariff rates between imported crude oil and imported refined petroleum products, unwittingly provided a built-in-advantage for the three existing oil refineries in the country and eliminating competition which is a must in a free enterprise economy. Moreover, it created a disincentive for other players to engage even initially in the importation and distribution of refined petroleum products and ultimately in the putting up of refineries. This tariff differential virtually created a monopoly of the downstream oil industry by the existing three oil companies as shown by their uniform and capricious pricing of their products since this law took effect, to the great disadvantage of the consuming public. Thus, instead of achieving the desired effects of deregulation, that of free enterprise and a level playing field in the downstream oil industry, R.A. 8180 has created an environment conducive to cartelization, unfavorable, increased, unrealistic prices of petroleum products in the country by the three existing refineries. Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to prevent collusion among the present oil companies by strengthening the oversight function of the government, particularly its ability to subject to a review any adjustment in the prices of gasoline and other petroleum products. In the explanatory note of the bill, Rep. Punzalan, Jr., said: xxx xxx xxx To avoid this, the proposed bill seeks to strengthen the oversight function of government, particularly its ability to review the prices set for gasoline and other petroleum products. It grants the Energy Regulatory Board (ERB) the authority to review prices of oil and other petroleum products, as may be petitioned by a person, group or any entity, and to subsequently compel any entity in the industry to submit any and all documents relevant to the imposition of new prices. In cases where the Board determines that there exist collusion, economic conspiracy, unfair trade practice, profiteering and/or overpricing, it may take any step necessary to protect the public, including the readjustment of the prices of petroleum products. Further, the Board may also impose the fine and penalty of imprisonment, as prescribed in Section 9 of R.A. 8180, on any person or entity from the oil industry who is found guilty of such prohibited acts. By doing all of the above, the measure will effectively provide Filipino consumers with a venue where their grievances can be heard and immediately acted upon by government. Thus, this bill stands to benefit the Filipino consumer by making the price-setting process more transparent and making it easier to prosecute those who perpetrate such prohibited acts as collusion, overpricing, economic conspiracy and unfair trade. Representative Sergio A.F . Apostol filed H.B. No. 10039 to remedy an omission in R.A. No. 8180 where there is no agency in government that determines what is "reasonable" increase in the prices of oil products. Representative Dente O. Tinga, one of the principal sponsors of R.A. No. 8180, filed H.B. No. 10057 to strengthen its anti-trust provisions. He elucidated in its explanatory note: xxx xxx xxx The definition of predatory pricing, however, needs to be tightened up particularly with respect to the definitive benchmark price and the specific anti-competitive intent. The definition in the bill at hand which was taken from the Areeda-Turner test in the United States on predatory pricing resolves the questions. The definition reads, "Predatory pricing means selling or offering to sell any oil product at a price below the average variable cost for

the purpose of destroying competition, eliminating a competitor or discouraging a competitor from entering the market." The appropriate actions which may be resorted to under the Rules of Court in conjunction with the oil deregulation law are adequate. But to stress their availability and dynamism, it is a good move to incorporate all the remedies in the law itself. Thus, the present bill formalizes the concept of government intervention and private suits to address the problem of antitrust violations. Specifically, the government may file an action to prevent or restrain any act of cartelization or predatory pricing, and if it has suffered any loss or damage by reason of the antitrust violation it may recover damages. Likewise, a private person or entity may sue to prevent or restrain any such violation which will result in damage to his business or property, and if he has already suffered damage he shall recover treble damages. A class suit may also be allowed. To make the DOE Secretary more effective in the enforcement of the law, he shall be given additional powers to gather information and to require reports. Representative Erasmo B. Damasing filed H.B. No. 7885 and has a more unforgiving view of R.A. No. 8180. He wants it completely repealed. He explained: xxx xxx xxx Contrary to the projections at the time the bill on the Downstream Oil Industry Deregulation was discussed and debated upon in the plenary session prior to its approval into law, there aren't any new players or investors in the oil industry. Thus, resulting in practically a cartel or monopoly in the oil industry by the three (3) big oil companies, Caltex, Shell and Petron. So much so, that with the deregulation now being partially implemented, the said oil companies have succeeded in increasing the prices of most of their petroleum products with little or no interference at all from the government. In the month of August, there was an increase of Fifty centavos (50) per liter by subsidizing the same with the OPSF, this is only temporary as in March 1997, or a few months from now, there will be full deregulation (Phase II) whereby the increase in the prices of petroleum products will be fully absorbed by the consumers since OPSF will already be abolished by then. Certainly, this would make the lives of our people, especially the unemployed ones, doubly difficult and unbearable. The much ballyhooed coming in of new players in the oil industry is quite remote considering that these prospective investors cannot fight the existing and well established oil companies in the country today, namely, Caltex, Shell and Petron. Even if these new players will come in, they will still have no chance to compete with the said three (3) existing big oil companies considering that there is an imposition of oil tariff differential of 4% between importation of crude oil by the said oil refineries paying only 3% tariff rate for the said importation and 7% tariff rate to be paid by businessmen who have no oil refineries in the Philippines but will import finished petroleum/oil products which is being taxed with 7% tariff rates. So, if only to help the many who are poor from further suffering as a result of unmitigated increase in oil products due to deregulation, it is a must that the Downstream Oil Industry Deregulation Act of 1996, or R.A. 8180 be repealed completely. Various resolutions have also been filed in the Senate calling for an immediate and comprehensive review of R.A. No. 8180 to prevent the downpour of its ill effects on the people. Thus, S. Res. No. 574 was filed by Senator Gloria M. Macapagal entitled Resolution "Directing the Committee on Energy to Inquire Into The Proper Implementation of the Deregulation of the Downstream Oil Industry and Oil Tax Restructuring As Mandated Under R.A. Nos. 8180 and 8184, In Order to Make The Necessary Corrections In the Apparent Misinterpretation Of The Intent And Provision Of The Laws And Curb The Rising Tide Of Disenchantment Among The Filipino Consumers And Bring About The Real Intentions And Benefits Of The Said Law." Senator Blas P. Ople filed S. Res. No. 664 entitled resolution "Directing the Committee on Energy To Conduct An Inquiry In Aid Of Legislation To Review The Government's Oil Deregulation Policy In Light Of The Successive Increases In Transportation, Electricity And Power Rates, As well As Of Food And Other Prime Commodities And Recommend Appropriate Amendments To Protect The Consuming Public." Senator Ople observed: xxx xxx xxx WHEREAS, since the passage of R.A. No. 8180, the Energy Regulatory Board (ERB) has imposed successive increases in oil prices which has triggered increases in electricity and power rates, transportation fares, as well as in prices of food and other prime commodities to the detriment of our people, particularly the poor; WHEREAS, the new players that were expected to compete with the oil cartel-Shell, Caltex and Petron-have not come in;

WHEREAS, it is imperative that a review of the oil deregulation policy be made to consider appropriate amendments to the existing law such as an extension of the transition phase before full deregulation in order to give the competitive market enough time to develop; WHEREAS, the review can include the advisability of providing some incentives in order to attract the entry of new oil companies to effect a dynamic competitive market; WHEREAS, it may also be necessary to defer the setting up of the institutional framework for full deregulation of the oil industry as mandated under Executive Order No. 377 issued by President Ramos last October 31, 1996 . . . Senator Alberto G. Romulo filed S. Res. No. 769 entitled resolution "Directing the Committees on Energy and Public Services In Aid Of Legislation To Assess The Immediate Medium And Long Term Impact of Oil Deregulation On Oil Prices And The Economy." Among the reasons for the resolution is the finding that "the requirement of a 40-day stock inventory effectively limits the entry of other oil firms in the market with the consequence that instead of going down oil prices will rise." Parallel resolutions have been filed in the House of Representatives. Representative Dante O. Tinga filed H. Res. No. 1311 "Directing The Committee on Energy To Conduct An Inquiry, In Aid of Legislation, Into The Pricing Policies And Decisions Of The Oil Companies Since The Implementation of Full Deregulation Under the Oil Deregulation Act (R.A. No. 8180) For the Purpose of Determining In the Context Of The Oversight Functions Of Congress Whether The Conduct Of The Oil Companies, Whether Singly Or Collectively, Constitutes Cartelization Which Is A Prohibited Act Under R.A. No. 8180, And What Measures Should Be Taken To Help Ensure The Successful Implementation Of The Law In Accordance With Its Letter And Spirit, Including Recommending Criminal Prosecution Of the Officers Concerned Of the Oil Companies If Warranted By The Evidence, And For Other Purposes." Representatives Marcial C. Punzalan, Jr. Dante O. Tinga and Antonio E. Bengzon III filed H.R. No. 894 directing the House Committee on Energy to inquire into the proper implementation of the deregulation of the downstream oil industry. House Resolution No. 1013 was also filed by Representatives Edcel C. Lagman, Enrique T . Garcia, Jr. and Joker P. Arroyo urging the President to immediately suspend the implementation of E.O. No. 392. In recent memory there is no law enacted by the legislature afflicted with so much constitutional deformities as R.A. No. 8180. Yet, R.A. No. 8180 deals with oil, a commodity whose supply and price affect the ebb and flow of the lifeblood of the nation. Its shortage of supply or a slight, upward spiral in its price shakes our economic foundation. Studies show that the areas most impacted by the movement of oil are food manufacture, land transport, trade, electricity and water. 38 At a time when our economy is in a dangerous downspin, the perpetuation of R.A. No. 8180 threatens to multiply the number of our people with bent backs and begging bowls. R.A. No. 8180 with its anti-competition provisions cannot be allowed by this Court to stand even while Congress is working to remedy its defects. The Court, however, takes note of the plea of PETRON, SHELL and CALTEX to lift our restraining order to enable them to adjust upward the price of petroleum and petroleum products in view of the plummeting value of the peso. Their plea, however, will now have to be addressed to the Energy Regulatory Board as the effect of the declaration of unconstitutionality of R.A. No. 8180 is to revive the former laws it repealed. 39 The length of our return to the regime of regulation depends on Congress which can fasttrack the writing of a new law on oil deregulation in accord with the Constitution. With this Decision, some circles will chide the Court for interfering with an economic decision of Congress. Such criticism is charmless for the Court is annulling R.A. No. 8180 not because it disagrees with deregulation as an economic policy but because as cobbled by Congress in its present form, the law violates the Constitution. The right call therefor should be for Congress to write a new oil deregulation law that conforms with the Constitution and not for this Court to shirk its duty of striking down a law that offends the Constitution. Striking down R.A. No. 8180 may cost losses in quantifiable terms to the oil oligopolists. But the loss in tolerating the tampering of our Constitution is not quantifiable in pesos and centavos. More worthy of protection than the supra-normal profits of private corporations is the sanctity of the fundamental principles of the Constitution. Indeed when confronted by a law violating the Constitution, the Court has no option but to strike it down dead. Lest it is missed, the Constitution is a covenant that grants and guarantees both the political and economic rights of the people. The Constitution mandates this Court to be the guardian not only of the people's political rights but their economic rights as well. The protection of the economic rights of the poor and the powerless is of greater importance to them for they are concerned more with the exoterics of living and less with the esoterics of liberty. Hence, for as long as the Constitution reigns supreme so long will this Court be vigilant in upholding the economic rights of our people especially from the onslaught of the powerful. Our defense of the people's economic rights may appear heartless because it cannot be half-hearted. IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared unconstitutional and E.O. No. 372 void. SO ORDERED.

G.R. No. 151908

August 12, 2003

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL), petitioners, vs. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent. x---------------------------------------------------------x G.R. No. 152063 August 12, 2003 GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC. (ISLACOM), petitioners, vs. COURT OF APPEALS (The Former 6th Division) and the NATIONAL TELECOMMUNICATIONS COMMISSION, respondents. YNARES-SANTIAGO, J.: Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission (NTC) issued on June 16, 2000 Memorandum Circular No. 13-6-2000, promulgating rules and regulations on the billing of telecommunications services. Among its pertinent provisions are the following: (1) The billing statements shall be received by the subscriber of the telephone service not later than 30 days from the end of each billing cycle. In case the statement is received beyond this period, the subscriber shall have a specified grace period within which to pay the bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the service within the grace period.

(2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt, recorded message or similar facility excluding the customer's own equipment. (3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards. Prepaid call cards and SIM cards shall be valid for at least 2 years from the date of first use. Holders of prepaid SIM cards shall be given 45 days from the date the prepaid SIM card is fully consumed but not beyond 2 years and 45 days from date of first use to replenish the SIM card, otherwise the SIM card shall be rendered invalid. The validity of an invalid SIM card, however, shall be installed upon request of the customer at no additional charge except the presentation of a valid prepaid call card. (4) Subscribers shall be updated of the remaining value of their cards before the start of every call using the cards. (5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid shall be reduced from 1 minute per pulse to 6 seconds per pulse. The authorized rates per minute shall thus be divided by 10.1 The Memorandum Circular provided that it shall take effect 15 days after its publication in a newspaper of general circulation and three certified true copies thereof furnished the UP Law Center. It was published in the newspaper, The Philippine Star, on June 22, 2000.2 Meanwhile, the provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit of billing for cellular mobile telephone service took effect 90 days from the effectivity of the Memorandum Circular. On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which contained measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. The Memorandum directed CMTS operators to: a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and verification of the identity and addresses of prepaid SIM card customers; b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC 13-6-2000; c. deny acceptance to your respective networks prepaid and/or postpaid customers using stolen cellphone units or cellphone units registered to somebody other than the applicant when properly informed of all information relative to the stolen cellphone units; d. share all necessary information of stolen cellphone units to all other CMTS operators in order to prevent the use of stolen cellphone units; and e. require all your existing prepaid SIM card customers to register and present valid identification cards.3 This was followed by another Memorandum dated October 6, 2000 addressed to all public telecommunications entities, which reads: This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use pursuant to MC 13-6-2000. In addition, all CMTS operators are reminded that all SIM packs used by subscribers of prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use. Also, the billing unit shall be on a six (6) seconds pulse effective 07 October 2000. For strict compliance.4 On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation filed against the National Telecommunications Commission, Commissioner Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for declaration of nullity of NTC Memorandum Circular No. 13-62000 (the Billing Circular) and the NTC Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction and temporary restraining order. The complaint was docketed as Civil Case No. Q-00-42221 at the Regional Trial Court of Quezon City, Branch 77.5 Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale of consumer goods such as the prepaid call cards since such jurisdiction belongs to the Department of Trade and Industry under the Consumer Act of the Philippines; that the Billing Circular is oppressive, confiscatory and violative of the constitutional prohibition against deprivation of property without due process of law; that the Circular will result in the impairment of

the viability of the prepaid cellular service by unduly prolonging the validity and expiration of the prepaid SIM and call cards; and that the requirements of identification of prepaid card buyers and call balance announcement are unreasonable. Hence, they prayed that the Billing Circular be declared null and void ab initio. Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion for Leave to Intervene and to Admit Complaint-in-Intervention.6 This was granted by the trial court. On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from implementing Memorandum Circular No. 13-6-2000 and the Memorandum dated October 6, 2000.7 In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the ground of petitioners' failure to exhaust administrative remedies. Subsequently, after hearing petitioners' application for preliminary injunction as well as respondent's motion to dismiss, the trial court issued on November 20, 2000 an Order, the dispositive portion of which reads: WHEREFORE, premises considered, the defendants' motion to dismiss is hereby denied for lack of merit. The plaintiffs' application for the issuance of a writ of preliminary injunction is hereby granted. Accordingly, the defendants are hereby enjoined from implementing NTC Memorandum Circular 13-6-2000 and the NTC Memorandum, dated October 6, 2000, pending the issuance and finality of the decision in this case. The plaintiffs and intervenors are, however, required to file a bond in the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00), Philippine currency. SO ORDERED.8 Defendants filed a motion for reconsideration, which was denied in an Order dated February 1, 2001.9 Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of Appeals, which was docketed as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was rendered, the decretal portion of which reads: WHEREFORE, premises considered, the instant petition for certiorari and prohibition is GRANTED, in that, the order of the court a quo denying the petitioner's motion to dismiss as well as the order of the court a quo granting the private respondents' prayer for a writ of preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby ANNULLED and SET ASIDE. The private respondents' complaint and complaint-in-intervention below are hereby DISMISSED, without prejudice to the referral of the private respondents' grievances and disputes on the assailed issuances of the NTC with the said agency. SO ORDERED.10 Petitioners' motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack of merit.11 Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No. 151908, anchored on the following grounds: A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE REGULAR COURTS HAS JURISDICTION OVER THE CASE. B. THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE REMEDY. C. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING CIRCULAR ISSUED BY THE RESPONDENT NTC IS UNCONSTITUTIONAL AND CONTRARY TO LAW AND PUBLIC POLICY. D.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION.12 Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the following errors: 1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE OF ITS RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW. 2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS. 3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE, WHEN THERE IS NO OTHER REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE AND IRREPARABLE INJURY. 4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE REMEDIES AVAILABLE TO THEM. 5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR RIGHT TO AN INJUNCTION.13 The two petitions were consolidated in a Resolution dated February 17, 2003.14 On March 24, 2003, the petitions were given due course and the parties were required to submit their respective memoranda.15 We find merit in the petitions. Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and separability of powers.16 The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and be not in contradiction to, but in conformity with, the standards prescribed by law.17 They must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be valid. Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by an administrative body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute. In case of conflict between a statute and an administrative order, the former must prevail.18 Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its quasi-judicial or administrative adjudicatory power. This 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 which is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it. In carrying out their quasi-judicial functions, the administrative officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their official action and exercise of discretion in a judicial nature.19 In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power. In Association of Philippine Coconut Dessicators v. Philippine Coconut Authority,20 it was held:

The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in the exercise of its rule- making or legislative power. However, only judicial review of decisions of administrative agencies made in the exercise of their quasi-judicial function is subject to the exhaustion doctrine. Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this case, the records reveal that petitioners sufficiently complied with this requirement. Even during the drafting and deliberation stages leading to the issuance of Memorandum Circular No. 13-6-2000, petitioners were able to register their protests to the proposed billing guidelines. They submitted their respective position papers setting forth their objections and submitting proposed schemes for the billing circular.21 After the same was issued, petitioners wrote successive letters dated July 3, 200022 and July 5, 2000,23 asking for the suspension and reconsideration of the so-called Billing Circular. These letters were not acted upon until October 6, 2000, when respondent NTC issued the second assailed Memorandum implementing certain provisions of the Billing Circular. This was taken by petitioners as a clear denial of the requests contained in their previous letters, thus prompting them to seek judicial relief. In like manner, the doctrine of primary jurisdiction applies only where the administrative agency exercises its quasijudicial or adjudicatory function. Thus, in cases involving specialized disputes, the practice has been to refer the same to an administrative agency of special competence pursuant to the doctrine of primary jurisdiction. The courts will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court. It applies where the claim is originally cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the administrative body for its view.24 However, where what is assailed is the validity or constitutionality of a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts.25 This is within the scope of judicial power, which includes the authority of the courts to determine in an appropriate action the validity of the acts of the political departments.26 Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.27 In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-making power. As such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the constitutionality and validity of the said issuances. In Drilon v. Lim,28 it was held: We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all civil cases in which the subject of the litigation is incapable of pecuniary estimation, even as the accused in a criminal action has the right to question in his defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in 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.29 In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened Civil Code provisions on sales and violated the constitutional prohibition against the deprivation of property without due process of law. These are within the competence of the trial judge. Contrary to the finding of the Court of Appeals, the issues raised in the complaint do not entail highly technical matters. Rather, what is required of the judge who will resolve this issue is a basic familiarity with the workings of the cellular telephone service, including prepaid SIM and call cards and this is judicially known to be within the knowledge of a good percentage of our population and expertise in fundamental principles of civil law and the Constitution.

Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-00-42221. The Court of Appeals erred in setting aside the orders of the trial court and in dismissing the case. WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution dated January 10, 2002 are REVERSED and SET ASIDE. The Order dated November 20, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This case is REMANDED to the court a quo for continuation of the proceedings. SO ORDERED.

G.R. No. 130230

April 15, 2005 DEVELOPMENT AUTHORITY, Petitioner,

METROPOLITAN MANILA vs. DANTE O. GARIN, respondent. DECISION CHICO-NAZARIO, J.:

At issue in this case is the validity of Section 5(f) of Republic Act No. 7924 creating the Metropolitan Manila Development Authority (MMDA), which authorizes it to confiscate and suspend or revoke driver's licenses in the enforcement of traffic laws and regulations. The issue arose from an incident involving the respondent Dante O. Garin, a lawyer, who was issued a traffic violation receipt (TVR) and his driver's license confiscated for parking illegally along Gandara Street, Binondo, Manila, on 05 August 1995. The following statements were printed on the TVR: You are hereby directed to report to the MMDA Traffic Operations Center Port Area Manila after 48 hours from date of apprehension for disposition/appropriate action thereon. Criminal case shall be filed for failure to redeem license after 30 days. Valid as temporary DRIVER'S license for seven days from date of apprehension.1 Shortly before the expiration of the TVR's validity, the respondent addressed a letter2 to then MMDA Chairman Prospero Oreta requesting the return of his driver's license, and expressing his preference for his case to be filed in court. Receiving no immediate reply, Garin filed the original complaint3 with application for preliminary injunction in Branch 260 of the Regional Trial Court (RTC) of Paraaque, on 12 September 1995, contending that, in the absence of any implementing rules and regulations, Sec. 5(f) of Rep. Act No. 7924 grants the MMDA unbridled discretion to deprive erring motorists of their licenses, pre-empting a judicial determination of the validity of the deprivation, thereby violating the due process clause of the Constitution. The respondent further contended that the provision violates the constitutional prohibition against undue delegation of legislative authority, allowing as it does the MMDA to fix and impose unspecified and therefore unlimited - fines and other penalties on erring motorists. In support of his application for a writ of preliminary injunction, Garin alleged that he suffered and continues to suffer great and irreparable damage because of the deprivation of his license and that, absent any implementing rules from the Metro Manila Council, the TVR and the confiscation of his license have no legal basis. For its part, the MMDA, represented by the Office of the Solicitor General, pointed out that the powers granted to it by Sec. 5(f) of Rep. Act No. 7924 are limited to the fixing, collection and imposition of fines and penalties for traffic

violations, which powers are legislative and executive in nature; the judiciary retains the right to determine the validity of the penalty imposed. It further argued that the doctrine of separation of powers does not preclude "admixture" of the three powers of government in administrative agencies.4 The MMDA also refuted Garin's allegation that the Metro Manila Council, the governing board and policy making body of the petitioner, has as yet to formulate the implementing rules for Sec. 5(f) of Rep. Act No. 7924 and directed the court's attention to MMDA Memorandum Circular No. TT-95-001 dated 15 April 1995. Respondent Garin, however, questioned the validity of MMDA Memorandum Circular No. TT-95-001, as he claims that it was passed by the Metro Manila Council in the absence of a quorum. Judge Helen Bautista-Ricafort issued a temporary restraining order on 26 September 1995, extending the validity of the TVR as a temporary driver's license for twenty more days. A preliminary mandatory injunction was granted on 23 October 1995, and the MMDA was directed to return the respondent's driver's license. On 14 August 1997, the trial court rendered the assailed decision5 in favor of the herein respondent and held that: a. There was indeed no quorum in that First Regular Meeting of the MMDA Council held on March 23, 1995, hence MMDA Memorandum Circular No. TT-95-001, authorizing confiscation of driver's licenses upon issuance of a TVR, is void ab initio. b. The summary confiscation of a driver's license without first giving the driver an opportunity to be heard; depriving him of a property right (driver's license) without DUE PROCESS; not filling (sic) in Court the complaint of supposed traffic infraction, cannot be justified by any legislation (and is) hence unconstitutional. WHEREFORE, the temporary writ of preliminary injunction is hereby made permanent; th(e) MMDA is directed to return to plaintiff his driver's license; th(e) MMDA is likewise ordered to desist from confiscating driver's license without first giving the driver the opportunity to be heard in an appropriate proceeding. In filing this petition,6 the MMDA reiterates and reinforces its argument in the court below and contends that a license to operate a motor vehicle is neither a contract nor a property right, but is a privilege subject to reasonable regulation under the police power in the interest of the public safety and welfare. The petitioner further argues that revocation or suspension of this privilege does not constitute a taking without due process as long as the licensee is given the right to appeal the revocation. To buttress its argument that a licensee may indeed appeal the taking and the judiciary retains the power to determine the validity of the confiscation, suspension or revocation of the license, the petitioner points out that under the terms of the confiscation, the licensee has three options: 1. To voluntarily pay the imposable fine, 2. To protest the apprehension by filing a protest with the MMDA Adjudication Committee, or 3. To request the referral of the TVR to the Public Prosecutor's Office. The MMDA likewise argues that Memorandum Circular No. TT-95-001 was validly passed in the presence of a quorum, and that the lower court's finding that it had not was based on a "misapprehension of facts," which the petitioner would have us review. Moreover, it asserts that though the circular is the basis for the issuance of TVRs, the basis for the summary confiscation of licenses is Sec. 5(f) of Rep. Act No. 7924 itself, and that such power is self-executory and does not require the issuance of any implementing regulation or circular. Meanwhile, on 12 August 2004, the MMDA, through its Chairman Bayani Fernando, implemented Memorandum Circular No. 04, Series of 2004, outlining the procedures for the use of the Metropolitan Traffic Ticket (MTT) scheme. Under the circular, erring motorists are issued an MTT, which can be paid at any Metrobank branch. Traffic enforcers may no longer confiscate drivers' licenses as a matter of course in cases of traffic violations. All motorists with unredeemed TVRs were given seven days from the date of implementation of the new system to pay their fines and redeem their license or vehicle plates.7 It would seem, therefore, that insofar as the absence of a prima facie case to enjoin the petitioner from confiscating drivers' licenses is concerned, recent events have overtaken the Court's need to decide this case, which has been rendered moot and academic by the implementation of Memorandum Circular No. 04, Series of 2004.

The petitioner, however, is not precluded from re-implementing Memorandum Circular No. TT-95-001, or any other scheme, for that matter, that would entail confiscating drivers' licenses. For the proper implementation, therefore, of the petitioner's future programs, this Court deems it appropriate to make the following observations: 1. A license to operate a motor vehicle is a privilege that the state may withhold in the exercise of its police power. The petitioner correctly points out that a license to operate a motor vehicle is not a property right, but a privilege granted by the state, which may be suspended or revoked by the state in the exercise of its police power, in the interest of the public safety and welfare, subject to the procedural due process requirements. This is consistent with our rulings in Pedro v. Provincial Board of Rizal8 on the license to operate a cockpit, Tan v. Director of Forestry9 and Oposa v. Factoran10 on timber licensing agreements, and Surigao Electric Co., Inc. v. Municipality of Surigao11 on a legislative franchise to operate an electric plant. Petitioner cites a long list of American cases to prove this point, such as State ex. Rel. Sullivan,12 which states in part that, "the legislative power to regulate travel over the highways and thoroughfares of the state for the general welfare is extensive. It may be exercised in any reasonable manner to conserve the safety of travelers and pedestrians. Since motor vehicles are instruments of potential danger, their registration and the licensing of their operators have been required almost from their first appearance. The right to operate them in public places is not a natural and unrestrained right, but a privilege subject to reasonable regulation, under the police power, in the interest of the public safety and welfare. The power to license imports further power to withhold or to revoke such license upon noncompliance with prescribed conditions." Likewise, the petitioner quotes the Pennsylvania Supreme Court in Commonwealth v. Funk,13 to the effect that: "Automobiles are vehicles of great speed and power. The use of them constitutes an element of danger to persons and property upon the highways. Carefully operated, an automobile is still a dangerous instrumentality, but, when operated by careless or incompetent persons, it becomes an engine of destruction. The Legislature, in the exercise of the police power of the commonwealth, not only may, but must, prescribe how and by whom motor vehicles shall be operated on the highways. One of the primary purposes of a system of general regulation of the subject matter, as here by the Vehicle Code, is to insure the competency of the operator of motor vehicles. Such a general law is manifestly directed to the promotion of public safety and is well within the police power." The common thread running through the cited cases is that it is the legislature, in the exercise of police power, which has the power and responsibility to regulate how and by whom motor vehicles may be operated on the state highways. 2. The MMDA is not vested with police power.

In Metro Manila Development Authority v. Bel-Air Village Association, Inc.,14 we categorically stated that Rep. Act No. 7924 does not grant the MMDA with police power, let alone legislative power, and that all its functions are administrative in nature. The said case also involved the herein petitioner MMDA which claimed that it had the authority to open a subdivision street owned by the Bel-Air Village Association, Inc. to public traffic because it is an agent of the state endowed with police power in the delivery of basic services in Metro Manila. From this premise, the MMDA argued that there was no need for the City of Makati to enact an ordinance opening Neptune Street to the public. Tracing the legislative history of Rep. Act No. 7924 creating the MMDA, we concluded that the MMDA is not a local government unit or a public corporation endowed with legislative power, and, unlike its predecessor, the Metro Manila Commission, it has no power to enact ordinances for the welfare of the community. Thus, in the absence of an ordinance from the City of Makati, its own order to open the street was invalid. We restate here the doctrine in the said decision as it applies to the case at bar: police power, as an inherent attribute of sovereignty, is the power vested by the Constitution in the legislature to make, ordain, and establish all manner of wholesome and reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the Constitution, as they shall judge to be for the good and welfare of the commonwealth, and for the subjects of the same. Having been lodged primarily in the National Legislature, it cannot be exercised by any group or body of individuals not possessing legislative power. The National Legislature, however, may delegate this power to the president and administrative boards as well as the lawmaking bodies of municipal corporations or local government units (LGUs). Once delegated, the agents can exercise only such legislative powers as are conferred on them by the national lawmaking body.

Our Congress delegated police power to the LGUs in the Local Government Code of 1991.15 A local government is a "political subdivision of a nation or state which is constituted by law and has substantial control of local affairs."16 Local government units are the provinces, cities, municipalities and barangays, which exercise police power through their respective legislative bodies. Metropolitan or Metro Manila is a body composed of several local government units. With the passage of Rep. Act No. 7924 in 1995, Metropolitan Manila was declared as a "special development and administrative region" and the administration of "metro-wide" basic services affecting the region placed under "a development authority" referred to as the MMDA. Thus: . . . [T]he powers of the MMDA are limited to the following acts: formulation, coordination, regulation, implementation, preparation, management, monitoring, setting of policies, installation of a system and administration. There is no syllable in R. A. No. 7924 that grants the MMDA police power, let alone legislative power. Even the Metro Manila Council has not been delegated any legislative power. Unlike the legislative bodies of the local government units, there is no provision in R. A. No. 7924 that empowers the MMDA or its Council to "enact ordinances, approve resolutions and appropriate funds for the general welfare" of the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a "development authority." It is an agency created for the purpose of laying down policies and coordinating with the various national government agencies, people's organizations, non-governmental organizations and the private sector for the efficient and expeditious delivery of basic services in the vast metropolitan area . All its functions are administrative in nature and these are actually summed up in the charter itself, viz: "Sec. 2. Creation of the Metropolitan Manila Development Authority. -- -x x x. The MMDA shall perform planning, monitoring and coordinative functions, and in the process exercise regulatory and supervisory authority over the delivery of metro-wide services within Metro Manila, without diminution of the autonomy of the local government units concerning purely local matters." . Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is that given to the Metro Manila Council to promulgate administrative rules and regulations in the implementation of the MMDA's functions. There is no grant of authority to enact ordinances and regulations for the general welfare of the inhabitants of the metropolis. 17 (footnotes omitted, emphasis supplied) Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is understood by the lower court and by the petitioner to grant the MMDA the power to confiscate and suspend or revoke drivers' licenses without need of any other legislative enactment, such is an unauthorized exercise of police power. 3. Sec. 5(f) grants the MMDA with the duty to enforce existing traffic rules and regulations.

Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of the Metro Manila Development Authority." The contested clause in Sec. 5(f) states that the petitioner shall "install and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of violations of traffic rules and regulations, whether moving or nonmoving in nature, and confiscate and suspend or revoke drivers' licenses in the enforcement of such traffic laws and regulations, the provisions of Rep. Act No. 413618 and P.D. No. 160519 to the contrary notwithstanding," and that "(f)or this purpose, the Authority shall enforce all traffic laws and regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP, traffic enforcers of local government units, duly licensed security guards, or members of non-governmental organizations to whom may be delegated certain authority, subject to such conditions and requirements as the Authority may impose." Thus, where there is a traffic law or regulation validly enacted by the legislature or those agencies to whom legislative powers have been delegated (the City of Manila in this case), the petitioner is not precluded and in fact is duty-bound to confiscate and suspend or revoke drivers' licenses in the exercise of its mandate of transport and traffic management, as well as the administration and implementation of all traffic enforcement operations, traffic engineering services and traffic education programs.20 This is consistent with our ruling in Bel-Air that the MMDA is a development authority created for the purpose of laying down policies and coordinating with the various national government agencies, people's organizations, nongovernmental organizations and the private sector, which may enforce, but not enact, ordinances. This is also consistent with the fundamental rule of statutory construction that a statute is to be read in a manner that would breathe life into it, rather than defeat it,21 and is supported by the criteria in cases of this nature that all reasonable doubts should be resolved in favor of the constitutionality of a statute.22

A last word. The MMDA was intended to coordinate services with metro-wide impact that transcend local political boundaries or would entail huge expenditures if provided by the individual LGUs, especially with regard to transport and traffic management,23 and we are aware of the valiant efforts of the petitioner to untangle the increasingly trafficsnarled roads of Metro Manila. But these laudable intentions are limited by the MMDA's enabling law, which we can but interpret, and petitioner must be reminded that its efforts in this respect must be authorized by a valid law, or ordinance, or regulation arising from a legitimate source. WHEREFORE, the petition is dismissed. SO ORDERED.

G.R. No. 137034

February 23, 2004

NATIONAL POWER CORPORATION, PABLO V. MALIXI and MEMBERS OF THE BOARD OF INQUIRY AND DISCIPLINE, petitioners, vs. COURT OF APPEALS, RAMON AREL, LEE LICUP and ROMY L. FUENTES, respondents. This is a petition for review on certiorari1 to annul the Resolution2 dated 23 September 1998 of the Court of Appeals in CA-G.R. SP No. 48171, as well as its Resolution dated 6 January 1999 denying the motion for reconsideration. The Court of Appeals dismissed the appeal of the National Power Corporation ("NPC"), NPCs President Pablo Malixi ("Malixi"), and the members of the Board of Inquiry and Discipline ("BID") for non-observance of Section 10, Rule 44 of the 1997 Rules of Civil Procedure. Antecedent Facts In August 1990, Oscar R. Verdeflor of Nymex Industrial Corporation ("Nymex") executed a sworn statement reporting alleged anomalous practices in the bidding for the Fiberglass Reinforced Plastic ("FRP") Ejector Headers of the Tiwi Geothermal Power Plant Units 1 and 4. The sworn statement identified Atty. Romy L. Fuentes ("Fuentes") and Ramon Arel ("Arel") as participants in the anomaly.3 NPCs Internal Audit Department ("IAD") investigated the complaint and subsequently recommended the filing of a formal administrative charge against Fuentes, Arel, Lee Licup ("Licup") and other members of the Bidding Committee. NPC then proceeded to conduct a formal administrative investigation. The IAD submitted its report on 4 July 1991. NPC issued an order on 8 August 1991 administratively charging and preventively suspending Fuentes, Arel, Licup ("private respondents"), and other members of the Bidding Committee from the service. The next day, 9 August 1991, NPC issued an order banning private respondents from the NPC office premises.4 Instead of immediately filing an answer within seventy-two hours (three days),5 private respondents requested for several motions for extension. Private respondents received their charge sheets on 8 August 1991, thus the seventy-two hour period should have expired on 11 August 1991. The first motion for extension filed on 9 August 1991 was for one hundred and twenty hours (five days) from the expiration of the original seventy-two hour period. NPC partially granted this by extending the period for ninety-six hours (four days), or until 15 August 1991. On 14 August 1991, private respondents filed a second motion for extension for thirty days from 15 August 1991. NPC partially granted this by extending the period for five days, or until 20 August 1991, with a warning that the same is the final extension. Private respondents filed yet another motion for extension of thirty days. NPC denied this request and considered the case submitted for resolution.6 Private respondents were effectively in default for failing to file their answer despite having been given an extension period of nine days.

On 4 September 1991, private respondents filed a petition against NPC before the Civil Service Commission ("CSC"), docketed as Merit Systems Protection Board ("MSPB") Case No. 91-1247. Private respondents prayed that the CSC take cognizance of the administrative case filed against them due to NPCs partiality in conducting the investigation. On 21 October 1991, the MSPB-CSC dismissed the petition for lack of merit.7 Meanwhile, NPCs BID proceeded with its formal hearing and investigation against private respondents. On 23 September 1991, the BID ruled that: In accordance with the above-stated findings, the respondents have been found guilty as follows: PENALTY 1) Ramon Arel Gross Neglect of Forced Resignation Duty 2) Romy L. Grave Misconduct Dismissal Fuentes 3) Lee N. Licup Gross Neglect of Forced Duty Resignation8 Malixi approved the recommendation. Sometime in September 1991, after having been in default before the NPC proceedings, private respondents filed a Petition for Certiorari, Prohibition and Mandamus with a prayer for a temporary restraining order against NPC, Malixi, and members of the BID ("petitioners") before the Regional Trial Court of Quezon City, Branch 101 ("trial court"), docketed as Sp. Civil Case No. Q-91-10192. Private respondents prayed that: (1) a writ of prohibition be issued commanding petitioners to desist from proceeding with the administrative cases; (2) judgment be rendered annulling the proceedings and the questioned orders; (3) a writ of mandamus be issued commanding petitioners to reinstate private respondents immediately, and to pay their backwages and other benefits retroactive as of 8 August 1991, and allowing availment of the early retirement package as granted by NPC management; and (4) petitioners solidarily pay each of private respondents not less than P1,000,000 as moral damages, P150,000 as attorneys fees, P150,000 as litigation expenses and costs of suit.9 On 2 October 1991, NPC implemented the BID recommendation. The trial court subsequently issued an order granting private respondents Motion for Issuance of a Writ of Preliminary Injunction on 17 October 1991. The order was premised on the supposed denial of due process of law and alleged persecution behind the filing of the administrative charges against private respondents.10 On 14 November 1991, the Office of the Solicitor General ("OSG"), filed on NPCs behalf, an Answer to the petition pending before the trial court. NPC claimed that private respondents: (1) failed to exhaust all available administrative remedies; (2) do not have a valid and enforceable cause of action against NPC; and that (3) heads of government agencies have exclusive original jurisdiction to investigate and decide matters involving officers and employees under their employ.11 On 10 February 1992, the BID recommended the exoneration of three of Licups companions12 in the Bidding Committee. Malixi exonerated Aquino, Legados and Maranca soon thereafter.13 It also appears in the records that Malixi filed a complaint against private respondents with the Office of the Ombudsman ("Ombudsman"), docketed as OMB Case No. 92-0753.14 On 26 June 1996, the Ombudsman dismissed the complaint against the private respondents for lack of merit. The Ombudsman stated: Since the NPC Board of Inquiry and Discipline has found that the members of the Bidding Committee has [sic] acted properly in declaring the bidding in question a failure, then there is no basis for the charges against herein respondents Lee Licup who is also a member of the said Committee, and Romy L. Fuentes, who merely acted on the basis of said valid declaration of the second bidding. With more reason with respect to respondent Ramon V. Arel who had no participation in the declaration of failure of bidding.15 On 19 March 1992, the trial court issued another order setting aside NPCs implementation of the BID recommendation. The trial court stated that NPCs act of placing private respondents "immediately under preventive suspension" was issued without jurisdiction and with abuse of authority. The trial court ordered NPC to reinstate private respondents.16 Petitioners later filed a Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 27702. Petitioners sought to annul the 19 March 1992 trial court order and to prohibit Judge Pedro T. Santiago from proceeding with the case. On 18 May 1994, the Court of Appeals issued a resolution dismissing petitioners petition for lack of merit. The

Court of Appeals found that the trial court did not gravely abuse its discretion in issuing the 19 March 1992 order. Petitioners did not appeal the Court of Appeals 18 May 1994 resolution dismissing CA-G.R. SP No. 27702.17 In accordance with the 18 May 1994 Court of Appeals resolution, NPC issued Office Order No. 94-1320 on 13 June 1994, reinstating private respondents to their former positions and ordering payment of their corresponding backwages.18 On 28 November 1997, the trial court finally handed down its decision in Civil Case No. Q-91-10192.19 The dispositive portion of the trial courts decision reads: WHEREFORE, judgment is hereby rendered: 1. Declaring as permanent the writ of preliminary injunction, thereby barring and enjoining the respondents National Power Corporation and NPC Board of Inquiry and Discipline from further initiating, conducting, and proceeding with any administrative case against the petitioners involving their acts in the public biddings for the fabrication and installation of second stage FRP ejector headers for Units 3 and 4, Tiwi Geothermal Power Plant; 2. Ordering the immediate reinstatement and return to [sic] of petitioner Atty. Romy L. Fuentes to the position of Division Manager A, National Power Corporation, with station at the SLRC offices at Bian, Laguna, without loss of seniority, and with the privilege of early retirement under the latest terms granted by respondent NPC when said petitioner shall opt for early retirement; 3. Ordering respondent National Power Corporation to recall the temporary assignment/detail of petitioner Lee N. Licup at the office of the NPC President or at whatever temporary assignment he now has, and assign said petitioner to a specific department, with specific duties and responsibilities, as befits his new position of Department Manager A, the position equivalent to his old position of Assistant to the VP-SLRC, without loss of seniority rights, and with the right to early retirement priviletes [sic] under the latest NPC retirement plan, whenever said petitioner opts to go on early retirement; 4. Directing the respondents, jointly and severally, to pay the petitioners as follows: a. To petitioner [Ramon] Arel: Representation and Transportation Allowance (RATA) of P312,000.00 for the period from August 8, 1991 to June 14,1994 Moral damages of P2,000,000.00 Exemplary P1,000,000.00 damages of Attorneys fees of P100,000.00 Litigation expenses P50,000.00 of b. To Actual damages of P997,073.20 petitioner [Lee] Licup:

Representation and Transportation Allowance (RATA) of P287,710.00 for the period from August 8, 1991 to June 14,1994 Moral damages of P2,000,000.00 Exemplary P1,000,000.00 damages of Attorneys fees of P100,000.00 Litigation expenses P50,000.00 of c. To Actual damages of P307,721.30 petitioner Romy L. Fuentes:

Representation and Transportation Allowance (RATA) of P236,240.00 for the period from August 8, 1991 to June 14,1994 Moral damages of P2,000,000.00

Exemplary P1,000,000.00 damages of Attorneys fees of P100,000.00 Litigation expenses P50,000.00 of SO ORDERED.20 Petitioners appealed the trial courts decision to the Court of Appeals on 16 December 1997, docketed as CA-G.R. SP No. 48171.21 Petitioners received private respondents motion for execution pending appeal also on 16 December 1997.22 Petitioners filed their opposition to private respondents motion for execution pending appeal on 29 December 1997.23 On 13 January 1998, the trial court issued an order directing petitioners to pay additional docket fees. The trial court issued another order on 26 January 1998 granting private respondents motion for execution pending appeal. The next day, the Philippine National Bank, NPC branch, notified NPC that the sheriff had garnished NPCs deposit worth P11,000,000.24 On 30 January 1998, petitioners sought recourse in the Court of Appeals for the third time by way of a Petition for Certiorari, Prohibition, and Preliminary Injunction with a prayer for a temporary restraining order, docketed as CA-G.R. SP No. 46674. Petitioners assailed the trial courts grant of the writ of execution pending appeal. The Court of Appeals resolved this petition on 7 April 1998, disposing as follows: WHEREFORE, the petition for certiorari is GIVEN DUE COURSE, and judgment is hereby rendered SETTING ASIDE the Order of respondent court dated January 26, 1998 granting execution pending appeal, insofar as the award for moral and exemplary damages, attorneys fees and litigation expenses is concerned, but AFFIRMING the same insofar as the award for actual damages, in the total amount of P2,140,744.50 is concerned. The supersedeas bond of P11 Million posted by private respondents may accordingly be reduced to P2,140,744.50. SO ORDERED. Petitioners did not appeal this decision.25 On 6 July 1998, the Court of Appeals sent a notice to petitioners regarding its petition in CA-G.R. SP No. 48171. Portions of the notice read: In pursuance with the Resolution No. 231 of this Court En Banc and Supreme Court Circular No. 22-92, which took effect on June 1, 1992, you are hereby required to file in lieu of briefs, your respective memoranda within a non-extendible period of THIRTY (30) DAYS from receipt hereof. Failure of the PETITIONER(S)/RESPONDENT(S) APPELLANT(S) to comply with this rule may be a ground for dismissal of the appeal. However, the case shall be deemed submitted for decision with or without memorandum from the petitioner(s)/respondent(s) appellee(s) after the lapse of the thirty day period. (Emphasis supplied) Petitioners received the notice on 21 July 1998.26 Petitioners filed on 24 August 1998 an Urgent Motion for Extension of Time to File Memorandum. The motion prayed for an additional period of 15 days within which to file their memorandum.27 On 25 August 1998, private respondents filed their memorandum with the Court of Appeals.28 Private respondents filed their opposition to the motion for extension on 27 August 1998. Private respondents prayed to expunge the motion for extension from the records and to dismiss NPCs appeal because no factual and legal issues were timely raised before the Court and the trial courts decision was supported by a preponderance of evidence.29 Petitioners finally filed their memorandum on 7 September 1998.30 Resolution of the Court of Appeals The Court of Appeals issued on 23 September 1998 a resolution in CA-G.R. SP No. 48171 denying the motion for extension of time to file a memorandum and dismissing the case, 31 as follows:

WHEREFORE, the motion for the extension of time to file memorandum by the respondents-appellants is hereby DENIED, and, pursuant to Rule 44, section 10 of the 1997 Rules of Civil Procedure, the appeal of the respondents-appellants is hereby DISMISSED. SO ORDERED. Petitioners moved to reconsider the dismissal of their petition in CA-G.R. SP No. 48171 on 15 October 1998.32 On 6 January 1999, the Court of Appeals issued its resolution denying petitioners motion for reconsideration.33 The resolution reads: After due consideration of the motion for reconsideration of the respondents-appellants, the opposition thereto by the petitioners-appellees, the reply of the respondents-appellants, and the manifestation and comment on reply of petitioners-appellees, the Court finds no cogent reason for modifying its Resolution dated September 23, 1998. WHEREFORE, the aforesaid motion for the extension of time is hereby DENIED. SO ORDERED. Petitioners filed with this Court on 26 February 1999 a Petition for Review on Certiorari under Rule 45. Petitioners questioned the dismissal of their appeal by the Court of Appeals pursuant to Section 10, Rule 44 of the 1997 Rules of Court.34 Issue Petitioners lone assignment of error reads: THE COURT OF APPEALS ERRED IN DISMISSING NPCS APPEAL PURSUANT TO SECTION 10, RULE 44 OF THE 1997 RULES OF CIVIL PROCEDURE.35 The Courts Ruling The petition is meritorious. Dismissal of petitioners appeal pursuant to Section 10, Rule 44 of the 1997 Rules of Civil Procedure Petitioners urge us to rule that the Court of Appeals erred in applying Section 10, Rule 44 of the 1997 Rules of Civil Procedure in dismissing their appeal. Section 10 of Rule 44 gives the Court of Appeals the discretion to dismiss petitioners appeal for failure to file their memorandum within the prescribed period. Section 10 of Rule 44 reads: SECTION 10. Time of filing memoranda in special cases. In certiorari, prohibition, mandamus, quo warranto and habeas corpus cases, the parties shall file, in lieu of briefs, their respective memoranda within a nonextendible period of thirty (30) days from receipt of the notice issued by the clerk that all the evidence, oral and documentary, is already attached to the record. The failure of the appellant to file his memorandum within the period therefor may be a ground for dismissal of the appeal. However, realizing the heavy workload of the OSG, the Court under A.M. No. 99-2-03-SC grants the OSG an extension of 60 to 90 days to file its comment or brief. 36 We agree with the OSG that the non-extendible 30-day period granted by the appellate court is not enough for the preparation of the memorandum. Even if an appellant failed to file a motion for extension of time to file his brief before the expiration of the reglementary period, the Court of Appeals does not necessarily lose jurisdiction to decide the appealed case. The Court of Appeals has discretion to dismiss or not to dismiss appellants appeal, which discretion must be soundly exercised in accordance with the tenets of justice and fair play having in mind the circumstances obtaining in each case.37 The trial court enjoined NPC from proceeding with the administrative investigation, thus ignoring the twin principles of primary administrative jurisdiction and exhaustion of administrative remedies. The settled rule is before a party may seek the intervention of the courts, he should first avail of all the means afforded by administrative processes. Hence, if a remedy within the administrative machinery is still available, with a procedure prescribed pursuant to law for an administrative officer to decide the controversy, a party should first exhaust such remedy before resorting to the courts.38

In this case, the trial court became overzealous since it not only ordered the reinstatement of private respondents during the pendency of the administrative case, it also took over the administrative case by rendering a decision on the merits. The trial court should have allowed the administrative process, from the administrative investigation by NPC to the appeal to the Civil Service Commission,39 to continue after ordering the reinstatement of private respondents. In assuming the functions of administrative agencies involving administrative investigation of government personnel, the trial court transgressed the boundaries of administrative jurisdiction in its exercise of judicial power. We remand the case to the Court of Appeals for a thorough examination of the evidence and a judicious disposal of the case. WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals in CA-G.R. SP No. 48171 dated 23 September 1998 and its Resolution dated 6 January 1999 denying the motion for reconsideration are SET ASIDE. Petitioners appeal is REINSTATED and the instant case REMANDED to the Court of Appeals for further proceedings. SO ORDERED. G.R. No. 139492 November 19, 2002

LAGUNA CATV NETWORK, INC., petitioner, vs. HON. ALEX E. MARAAN, Regional Director, Region IV, Dept. of Labor and Employment (DOLE), ENRICO SAGMIT, Acting Deputy Sheriff, DOLE Region IV, PEDRO IGNACIO, DIOMEDES CASTRO, FE ESPERANZA CANDILLA, RUBEN LAMINA, JR., JOEL PERSIUNCULA, ALVINO PRUDENTE, JOEL RAYMUNDO, REGIE ROCERO, LINDA RODRIGUEZ, JOHN SELUDO, ALBERTO REYES, and ANACLETA VALOIS, respondents. DECISION SANDOVAL-GUTIERREZ, J.: On March 3, 1998, private respondents Pedro Ignacio, Diomedes Castro, Fe Esperanza Candilla, Ruben Lamina, Jr., Joel Persiuncula, Alvino Prudente, Joel Raymundo, Regie Rocero, Linda Rodriguez, John Seludo, Alberto Reyes and Anacleta Valois filed with the Department of Labor and Employment, Regional Office No. IV (DOLE Region IV), separate complaints for underpayment of wages and non-payment of other employee benefits.1 Impleaded as respondent was their employer, Laguna CATV Network, Inc. (Laguna CATV). Private respondents filed their separate complaints pursuant to Article 128 of the Labor Code, as amended by Republic Act No. 7730,2 which provides: "Article 128. Visitorial and enforcement powers. - (a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access to employers records and premises at any time of the day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto. "(b) x x x "An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from. (emphasis added) "x x x." On April 1, 1998, DOLE Region IV conducted an inspection within the premises of Laguna CATV and found that the latter violated the laws on payment of wages and other benefits. Thereupon, DOLE Region IV requested Laguna CATV to correct its violations but the latter refused, prompting Regional Director Alex E. Maraan to set the case for summary investigation.3 Thereafter, he issued an Order dated August 19, 19984 directing Laguna CATV to pay the concerned employees the sum of Two Hundred Sixty-One Thousand, Nine and 19/100 (P261,009.19) Pesos representing their unpaid claims, within 10 days from notice, and to submit proof of payment within the same period. Forthwith, Laguna CATV filed a motion for reconsideration.5 In view of Laguna CATVs failure to comply with the Order directing it to pay the unpaid claims of its employees, DOLE Regional Director Maraan issued a writ of execution on January 29, 19996 ordering Sheriff Enrico Sagmit to collect in

cash from Laguna CATV the amount specified in the writ or, in lieu thereof, to attach its goods and chattels or those of its owner, Dr. Bernardino Bailon. Sheriff Sagmit subsequently levied on Dr. Bailons L300 van and garnished his bank deposits. On March 2, 1999, Laguna CATV and Dr. Bailon, in his personal capacity, filed a motion to quash the writ of execution, notice of levy and sale on execution and garnishment of bank deposits,7 alleging that the writ was premature because Laguna CATVs motion for reconsideration of the Order dated August 19, 1998 has not yet been resolved by Re gional Director Maraan. On April 21, 1999, he issued an Order8 denying the motion to quash the writ of execution, stating inter alia, that Laguna CATV failed to perfect its appeal of the August 19, 1998 Order because it did not comply with the mandatory requirement of posting a bond equivalent to the monetary award of P261,009.19; and that the writ of execution dated January 29, 1999 should be considered as an "overt denial" of Laguna CATVs motion for reconsideration.9 Instead of appealing to the Secretary of Labor, Laguna CATV filed with the Court of Appeals a motion for extension of time to file a petition for review.10 Laguna CATV was of the view that an appeal to the Secretary of Labor "would be an exercise in futility considering that the said appeal will be filed with the Regional Office and it will surely be disapproved."11 On May 13, 1999, the Court of Appeals issued a Resolution12 denying Laguna CATVs motion for extension and dismissing the case. The Appellate Court found, among others, that it failed to exhaust administrative remedies. Laguna CATV filed a motion for reconsideration but was denied by the Court of Appeals in its Resolution dated July 22, 1999.13 Hence, it filed the instant petition for review on certiorari.14 Specifically, petitioner contends that the Court of Appeals erred in denying its motion for extension and in dismissing the case. Private respondents, in their comment on the petition, claim that the assailed Orders of DOLE Region IV have become final and executory for petitioners failure to appeal to the Secretary of Labor. The petition lacks merit. The Court of Appeals was correct in holding that petitioner failed to exhaust all administrative remedies. As provided under Article 128 of the Labor Code, as amended, earlier quoted, an order issued by the duly authorized representative of the Secretary of Labor may be appealed to the latter. Thus, petitioner should have first appealed to the Secretary of Labor instead of filing with the Court of Appeals a motion for extension of time to file a petition for review. Courts, for reasons of law, comity and convenience, should not entertain suits unless the available administrative remedies have first been resorted to and the proper authorities have been given an appropriate opportunity to act and correct their alleged errors, if any, committed in the administrative forum.15 Observance of this doctrine is a sound practice and policy. As succinctly explained by this Court in Carale vs. Abarintos:16 "It (the doctrine of exhaustion of administrative remedies) ensures an orderly procedure which favors a preliminary sifting process, particularly with respect to matters peculiarly within the competence of the administrative agency, avoidance of interference with functions of the administrative agency by withholding judicial action until the administrative process had run its course, and prevention of attempts to swamp the courts by a resort to them in the first instance."17 This Court, in a long line of cases, has consistently held that if a remedy within the administrative machinery can still be resorted to by giving the administrative officer concerned every opportunity to decide on a matter that comes within his jurisdiction, then such remedy should be exhausted first before the courts judicial power can be sought.18 The party with an administrative remedy must not merely initiate the prescribed administrative procedure to obtain relief but also pursue it to its appropriate conclusion before seeking judicial intervention in order to give the administrative agency an opportunity to decide the matter itself correctly and prevent unnecessary and premature resort to the court. 19 The underlying principle of the rule rests on the presumption that the administrative agency, if afforded a complete chance to pass upon the matter will decide the same correctly.20 Therefore, petitioner should have completed the administrative process by appealing the questioned Orders to the Secretary of Labor. Although this Court has allowed certain exceptions to the doctrine of exhaustion of administrative remedies, such as: 1) when there is a violation of due process;

2) when the issue involved is a purely legal question; 3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction; 4) when there is estoppel on the part of the administrative agency concerned; 5) when there is irreparable injury; 6) when the respondent is a Department Secretary whose acts as an alter ego of the President bears the implied and assumed approval of the latter; 7) when to require exhaustion of administrative remedies would be unreasonable; 8) when it would amount to a nullification of a claim; 9) when the subject matter is a private land in land case proceedings; 10) when the rule does not provide a plain, speedy, adequate remedy; 11) when there are circumstances indicating the urgency of judicial intervention; 12) when no administrative review is provided by law; 13) where the rule of qualified political agency applies; and 14) when the issue of non-exhaustion of administrative remedies has been rendered moot,21 petitioner fails to show that the instant case falls under any of the exceptions. Its contention that an appeal to the Secretary of Labor would be futile as "it will surely be disapproved," is purely conjectural and definitely misplaced. In the recent case of Republic of the Philippines vs. Express Telecommunication Co.,22 this Court held that "the premature invocation of the courts intervention is fatal to ones cause of action." Accordingly, absent any finding of waiver, estoppel, or any of the exceptions to the doctrine of exhaustion of administrative remedies, the case is susceptible of dismissal for lack of cause of action.23 WHEREFORE, the instant petition for review is DENIED. SO ORDERED.

G.R. No. 140839

May 26, 2005

ABELARDO C. RIVAS, petitioner, vs. JESUS C. SISON and ARMIDA P. E. SIGUION REYNA, in their capacity as Former Chairman and Present Chairman of the Movie and Television Review and Classification Board (MTRCB), respondents. This resolves the petition for review on certiorari seeking to set aside the Decision1 of the Court of Appeals (CA) dated September 24, 1999 denying the petition for review in CA-G.R. No. 52341 and the Resolution dated November 16, 1999 denying petitioners motion for reconsideration of the aforementioned decision. After a scrutiny of the records, the Court finds the respondents narration of the antecedent facts to be undisputed, hence, the pertinent portion of respondents Comment is reproduced hereunder: In 1996, the MTRCB and the National Bureau of Investigation (NBI) conducted a joint investigation to look into reports that unauthorized MTRCB employees/board members have been visiting movie theaters and/or their respective booking offices to collect, for a fee, the required annual registration fee for movie theaters. On June 25, 1996, MTRCB and NBI agents were dispatched to the province of Iloilo to monitor unregistered movie theaters operating in the area. On June 26, 1996, NBI Special Investigator Norman Revita secured a Sinumpaang Salaysay of Marcelina Concepcion, wife of Jose Concepcion who owned the Crown Theater in Bacolod City. Marcelina stated that on or about February 20, 1996, her husband paid the annual registration fee of One Thousand Pesos (P1,000.00) to petitioner, thinking him to be a legitimate and authorized collector for the MTRCB. Every year, just before the expiration of their theaters registration, petitioner would allegedly collect the annual registration fee from them at their booking office in Sta. Cruz, Manila. On June 27, 1996, Leonardo Ungoco, Jr., the authorized representative of Panay Cinema Corporation, owner of several movie theaters in the province of Iloilo and Bacolod City, executed an affidavit stating that around ten oclock that morning, petitioner called him up with the following tip: "Pare, magbayad ka na ng theater registration fee, dahil may mga tao na tiga MTRCB pinapunta na sa Iloilo, buti pa magbayad ka na ngayon." Thus, forewarned, Leonardo immediately proceeded to the MTRCB Registration Office to pay the registration fee. On November 21, 1996, Marvin B. Inigo, the owner and operator of the Guimba Theater in Guimba, Nueva Ecija, executed an affidavit stating that in 1992 and 1993, petitioner, representing himself as an MTRCB collector, collected from him One Thousand Two Hundred Pesos (P1,200.00) as registration fee. Despite these payments, however, Marvin never received his registration certificate for the years 1992 and 1993. Further investigation disclosed that no such payment of the annual registration fee for the year 1993 by the Guimba Theater was recorded in the MTRCB Official Cash Book for registration fees. Based on the above sworn statements, the MTRCB filed an administrative case against petitioner for conduct grossly detrimental to the best interest of the service. As an MTRCB Registration Officer II, petitioner allegedly acted without authority and beyond the scope of his official duties and responsibilities when he collected registration fees from theater owners and warned them of impending MTRCB operations, thus, thwarting and frustrating the same. In view of the above administrative case, the MTRCB Chairman ordered the temporary transfer of petitioner to the Information Unit. Meanwhile, the initial investigation of the case was scheduled for February 13, 1997. Upon petitioners request, however, it was reset to February 21, March 4, and March 14, 1997. During the March 4, 1997 hearing, petitioner answered the clarificatory questions posed by the Investigating Committee. He also submitted his counter-affidavit and manifested his intention to question the jurisdiction and authority of the Investigating Committee.

On March 14, 1997, petitioner filed a motion for bill of particulars, followed on July 25, 1997 by a motion to dismiss on the ground of lack of cause of action. The Investigating Committee denied petitioners motion to dismiss, but granted his motion for bill of particulars. It then required petitioner to submit within five days from notice his verified answer to the complaint. Instead of submitting his verified answer as required by the Investigating Committee, petitioner, on October 21, 1997, filed a motion for reconsideration of the denial of his motion to dismiss. On December 16, 1997, the Investigating Committee issued a resolution denying petitioners motion for reconsideration. It also reiterated its previous order for petitioner to file his verified answer to the complaint, this time giving him twenty days from receipt of the resolution within which to do so. Petitioner again failed to comply with the above order. Instead, he filed a motion to suspend proceedings pending the NBIs own investigation of the case. Pointing out that the MTRCBs investigation was independent of that of the NBI, the Investigating Committee denied petitioners motion. On March 18, 1998, petitioner finally filed his unverified answer to the complaint. Essentially, he denied knowledge of, and being an obstacle to, the MTRCBs operations. He also denied ever having left the MTRCBs premises during office hours in order to collect registration fees from theater owners/managers. He allegedly only reminded theater owners/managers to register or renew their registration since this was part of his duties and functions as a Registration Officer. On March 25, 1998, the Investigating Committee issued its resolution on the case, the dispositive portion of which reads as follows: IN VIEW OF THE FOREGOING, the Investigation Committee recommends to the Board the suspension of the Respondent (herein petitioner) for SIX (6) MONTHS for committing acts constituting "conduct grossly prejudicial to the best interest of the service" in accordance with Section 23, par. (t) of Rule XIV of the Omnibus Rules Implementing Book V of Executive Order No. 292; and, that, the Memorandum of Temporary Transfer of Assignment dated 16 August 1996 be made permanent. Respectfully recommended. During its meeting on April 28, 1998, the MTRCB adopted the above recommendations of the Investigating Committee. Petitioner filed a motion for reconsideration of this decision which, however, was denied by the MTRCB on July 15, 1998. Thus, petitioner appealed to the Civil Service Commission. On December 29, 1998, the Civil Service Commission issued its Resolution No. 983231, denying petitioners appeal and affirming the MTRCBs decision with modification, in this wise: WHEREFORE, the appeal of Abelardo C. Rivas is hereby denied for lack of merit. Accordingly, the Decision dated March 25, 1998 of the MTRCB finding Rivas guilty of Conduct Grossly Prejudicial to the Best Interest of the Service imposing upon him the penalty of suspension for six (6) months is hereby affirmed. However, the additional penalty of transfer (reassignment) which became permanent is hereby set aside. Hence, Rivas should now be reverted back to his former assignment as Registration Officer II in the Technical Service Division of the MTRCB. On March 10, 1999, petitioners motion for reconsideration of the above resolution was similarly denied by the Civil Service Commission for lack of merit in its Resolution No. 990621. Refusing to give up, petitioner appealed the above resolutions of the Civil Service Commission via a petition for review to the Court of Appeals. Finding no merit in the petition, however, the Court of Appeals issued its assailed Decision dated September 24, 1999, dismissing the petition and affirming in toto the resolutions of the Civil Service Commission. Petitioner then filed a motion for reconsideration, but this was likewise denied by the Court of Appeals for lack of merit in its assailed Resolution dated November 16, 1999. Hence, this petition. The sole ground raised in the present petition is that:

THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF OR EXCESS OF JURISDICTION IN DISMISSING THE PETITION FOR CERTIORARI FILED BY PETITIONER ON THE GROUND THAT PETITIONER WAS AFFORDED DUE PROCESS BY THE MTRCB. Petitioner argues that in the proceedings before the Movie and Television Review and Classification Board (MTRCB), he pleaded for an opportunity to confront and cross-examine the affiants who executed the sworn statements against him, but his pleas were not granted. He points out the possibility that anyone could have just used his name or misrepresented themselves as "Boy" Rivas because he was in the MTRCB offices, as shown by his time card, at the time one of the affiants (affiant Marcelina Concepcion) claimed he was collecting fees at their booking office. We find merit in the petition but based on a different ground. On the issue of denial of due process, this Court has consistently held that in administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged to answer the accusations against him constitute the minimum requirements of due process. In Cayago vs. Lina,3 petitioners therein also used the argument that they were denied due process since the complainant failed to testify on his sworn affidavit, and that they were not given the opportunity to cross-examine said complainant during the summary dismissal proceedings. The Court ruled that petitioners therein were not in any way denied due process since: (1) they were apprised of the charges against them; (2) they presented their counter-affidavits, supplemental affidavits and other pieces of evidence to rebut the Sworn Affidavit of the complainant; (3) they were represented by counsel before the Summary Dismissal Hearing Officer; and (4) they were able to redress their case all the way from the PNP Director General up to the Civil Service Commission (CSC). Thus, it was explained therein that: Due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding. Due process is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged to answer the accusations against him constitute the minimum requirements of due process. As long as a party was given the opportunity to defend his interests in due course, he was not denied due process. In this case, petitioner had definitely been given all the chances to present his defense. He submitted his counteraffidavit and Answer with supporting documentary evidence, i.e., his daily time record for the month of February 1996, and copies of official receipts and certificates of registration for Crown Theater and Guimba Theater. Several hearings were held where he answered the clarificatory questions posed by the Investigating Committee of the MTRCB. His motion for a bill of particulars was granted and his motions for reconsideration were considered and passed upon by said Investigating Committee. The CSC and the CA also reviewed petitioners case. Hence, petitioner cannot claim that he was denied due process or the opportunity to fully ventilate his defense in the administrative case against him. Nevertheless, while it is true that petitioner was not denied due process, the Court cannot accede to the factual findings made by the MTRCB and affirmed by the CSC. Indeed, in a petition for review on certiorari filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure, it is not the function of this Court to re-examine the evidence submitted by the parties. However, the Court may still review factual findings of the lower court if it believes that such findings are not supported by evidence on record or the judgment is based on a misapprehension of facts. In the case at bar, the question raised by petitioner against the credibility of the evidence presented to prove the charges against him behooves the Court to take a closer look at said evidence. Both the MTRCB Investigating Committee and the CSC based their findings on the sworn affidavits of Marcelina Concepcion, Leonardo Ungoco, Jr., and Marvin B. Ynigo. However, after a careful examination of said sworn statements, the Court finds reason to believe that the evidence on record does not support the findings of fact of the MTRCB and the CSC. The sworn statement of Marcelina Concepcion is especially doubtful. She stated that she resides in Bacolod City, employed as the Theater Manager of Crown Theater at Bacolod City. Next, she stated that it was her husband who dealt with a person named Boy Rivas by giving the latter the amount of P1,000.00 sometime around February 20, 1996. She did not state where the transaction was made, but she stated thereafter that every year, before their registration expires, this person known as Boy Rivas would go to their Booking Office at Escolta, Manila to collect said annual registration fees. How, then, could she have personally seen the transactions that supposedly transpired in Escolta, Manila, when she resides and works in Bacolod City? There is nothing in her statement to explain how she could have derived from her own perception the knowledge that a certain Boy Rivas goes to collect fees at their Booking Office at Escolta, Manila, despite the fact that she lives and works in Bacolod City. The Court is convinced that her statements are merely hearsay and cannot be used against petitioner. The Court likewise cannot give full credence to the statement of Marvin Ynigo, a resident of Guimba, Nueva Ecija and the operator of Guimba Theather in the same province, that a certain Abelardo "Boy" Rivas went to their office in Nueva Ecija sometime in March of 1992 and then again in March of 1993 to collect the amount of P1,200.00 as registration fee. Ynigo declared that he never received the Certificate of Registration for the year 1992 as promised by the person who

introduced himself as Abelardo "Boy" Rivas. Thus, it is highly doubtful and contrary to human experience that he would again entrust the money for registration fees for the year 1993 to the very same person who appeared to have misappropriated the sum he gave a year earlier. The Court also notes that there is no statement as to exactly how much the annual registration fees cost and the amount supposedly given to one Abelardo "Boy" Rivas exceeding said fees. In the absence of proof that said Boy Rivas was obtaining monetary gain from collecting said fees, it is beyond human comprehension that petitioner Rivas would exert time and effort to go all the way to Guimba, Nueva Ecija, just to collect fees from one theater owner. The statements in the sworn affidavits of Marcelina Concepcion and Marvin Ynigo show that their evidentiary value is not as weighty as the MTRCB and the CSC opined. The Court cannot give credence to hearsay or to statements that stretch credulity. Lastly, the statement of Leonardo Ungoco, Jr. that petitioner Rivas called him by phone sometime on June 27, 1996 telling him to pay the registration fees for his theaters since the MTRCB already sent out its people to Iloilo, even if completely true, would not make petitioner Rivas administratively liable. Even assuming that such actuation of petitioner is beyond the scope of his official duties and responsibilities, the Court does not see how such act could be inimical to the interest of the service. The interest of the MTRCB is to make sure that theater owners pay the required fees. Considering that Mr. Ungoco stated in his affidavit that after he received the call, he immediately paid all the required fees, it is then clear that petitioners conduct did not cause any damage to the service but, rather, worked in favor of the MTRCB as his phone call to a theater owner obtained for the MTRCB the desired result of a theater owner paying his obligations to said agency. Verily, the Court cannot consider such act of reminding and encouraging a theater owner to pay his obligations to the MTRCB as an act inimical to the service. The Court, therefore, finds that the evidence against petitioner lacks credibility and is insufficient to hold petitioner liable for Conduct Grossly Prejudicial To The Best Interest Of The Service. IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The Decision of the Court of Appeals dated September 24, 1999 and its Resolution dated November 16, 1999 are hereby REVERSED and SET ASIDE. The administrative complaint against petitioner is DISMISSED for lack of merit and the Movie and Television Review and Classification Board is ORDERED to pay petitioner backwages for the duration of his suspension; and to revert him back to his former assignment as Registration Officer II in the Technical Service Division of the MTRCB. SO ORDERED. G.R. No. 152574 November 17, 2004 JR., petitioner,

FRANCISCO ABELLA vs. CIVIL SERVICE COMMISSION, respondent.

Both the appointing authority and the appointee are the real parties in interest, and both have legal standing, in a suit assailing a Civil Service Commission (CSC) order disapproving an appointment. Despite having legal interest and standing, herein petitioner unsuccessfully challenges the constitutionality of the CSC circular that classifies certain positions in the career service of the government. In sum, petitioner was appointed to a Career Executive Service (CES) position, but did not have the corresponding eligibility for it; hence, the CSC correctly disapproved his appointment. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the November 16, 2001 Decision2 and the March 8, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 58987. The Assailed Decision disposed as follows: "WHEREFORE, the petition for review is DENIED for lack of merit."4 The challenged Resolution denied petitioner's Motion for Reconsideration. The Facts The CA narrates the factual antecedents in this wise: "Petitioner Francisco A. Abella, Jr., a lawyer, retired from the Export Processing Zone Authority (EPZA), now the Philippine Economic Zone Authority (PEZA), on July 1, 1996 as Department Manager of the Legal Services

Department. He held a civil service eligibility for the position of Department Manager, having completed the training program for Executive Leadership and Management in 1982 under the Civil Service Academy, pursuant to CSC Resolution No. 850 dated April 16, 1979, which was then the required eligibility for said position. "It appears, however, that on May 31, 1994, the Civil Service Commission issued Memorandum Circular No. 21, series of 1994, the pertinent provisions of which read: '1. Positions Covered by the Career Executive Service xxx xxx xxx

(b) In addition to the above identified positions and other positions of the same category which had been previously classified and included in the CES, all other third level positions of equivalent category in all branches and instrumentalities of the national government, including government owned and controlled corporations with original charters are embraced within the Career Executive Service provided that they meet the following criteria: '1. the position is a career position; '2. the position is above division chief level '3. the duties and responsibilities of the position require the performance of executive or managerial functions. '4. Status of Appointment of Incumbents of Positions Included Under the Coverage of the CES. Incumbents of positions which are declared to be Career Executive Service positions for the first time pursuant to this Resolution who hold permanent appointments thereto shall remain under permanent status in their respective positions. However, upon promotion or transfer to other Career Executive Service (CES) positions, these incumbents shall be under temporary status in said other CES positions until they qualify.' "Two years after his retirement, petitioner was hired by the Subic Bay Metropolitan Authority (SBMA) on a contractual basis. On January 1, 1999, petitioner was issued by SBMA a permanent employment as Department Manager III, Labor and Employment Center. However, when said appointment was submitted to respondent Civil Service Commission Regional Office No. III, it was disapproved on the ground that petitioner's eligibility was not appropriate. Petitioner was advised by SBMA of the disapproval of his appointment. In view thereof, petitioner was issued a temporary appointment as Department Manager III, Labor and Employment Center, SBMA on July 9, 1999. "Petitioner appealed the disapproval of his permanent appointment by respondent to the Civil Service Commission, which issued Resolution No. 000059, dated January 10, 2000, affirming the action taken by respondent. Petitioner's motion for reconsideration thereof was denied by the CSC in Resolution No. 001143 dated May 11, 2000." "x x x xxx xxx

"Undaunted, petitioner filed with [the CA] a petition for review seeking the reversal of the CSC Resolutions dated January 10, 2000 and May 11, 2000 on the ground that CSC Memorandum Circular No. 21, s. 1994 is unconstitutional as it rendered his earned civil service eligibility ineffective or inappropriate for the position of Department Manager [III]"5 Ruling of the Court of Appeals The CA shunned the issue of constitutionality, arguing that a constitutional question should not be passed upon if there are other grounds upon which the case may be decided.6 Citing CSC Memorandum Circular 40, s. 1998 and Mathay v. Civil Service Commission,7 the appellate court ruled that only the appointing officer may request reconsideration of the action taken by the CSC on appointments. Thus, it held that petitioner did not have legal standing to question the disapproval of his appointment.8 On reconsideration, the CA added that petitioner was not the real party in interest, as his appointment was dependent on the CSC's approval. Accordingly, he had no vested right in the office, since his appointment was disapproved.9 Unsatisfied, petitioner brought this recourse to this Court.10

The Issues Petitioner raises the following issues for our consideration: "A. Whether or not Respondent Court committed grave abuse of discretion amounting to lack of jurisdiction in ruling that petitioner lacks the personality to question the disapproval by respondent office of petitioner's appointment as Department Manager III, Labor and Employment Center, SBMA. "B. Whether or not Respondent Court committed grave abuse of discretion amounting to lack of jurisdiction in ruling that petitioner is not the real party in interest to question the disapproval by respondent office of petitioner's appointment as Department Manager III, Labor and Employment Center, SBMA. "C. Whether or not Respondent Court committed grave abuse of discretion amounting to lack of jurisdiction, in dismissing petitioner's appeal on a mere technicality considering that petitioner is questioning the constitutionality of respondent office' issuance of Section 4 of CSC Memorandum Circular No. 21, s. 1994, which deprived petitioner his property right without due process of law."11 The Court's Ruling The Petition is partly meritorious. First Issue: Who May File Reconsideration or Appeal Preliminary Observation Petitioner imputes to the CA "grave abuse of discretion amounting to lack of jurisdiction" for ruling that he had no legal standing to contest the disapproval of his appointment.12 Grave abuse of discretion is a ground for a petition for certiorari under Rule 65 of the Rules of Court. Nevertheless, this Court resolved to grant due course to the Petition and to treat it appropriately as a petition for review on certiorari under Rule 45 of the Rules of Court. The grounds shall be deemed "reversible errors," not "grave abuse of discretion." Approval Permanent Appointment Required for

A permanent appointment in the career service is issued to a person who has met the requirements of the position to which the appointment is made in accordance with the provisions of law, the rules and the standards promulgated pursuant thereto.13 It implies the civil service eligibility of the appointee.14 Thus, while the appointing authority has the discretion to choose whom to appoint, the choice is subject to the caveat that the appointee possesses the required qualifications.15 To make it fully effective, an appointment to a civil service position must comply with all legal requirements.16 Thus, the law requires the appointment to be submitted to the CSC which will ascertain, in the main, whether the proposed appointee is qualified to hold the position and whether the rules pertinent to the process of appointment were observed.17 The applicable provision of the Civil Service Law reads: "SECTION 9. Powers and Functions of the Commission. The Commission shall administer the Civil Service and shall have the following powers and functions: "x x x xxx xxx

"(h) Approve all appointments, whether original or promotional, to positions in the civil service, except those of presidential appointees, members of the Armed Forces of the Philippines, police forces, firemen, and jailguards, and disapprove those where the appointees do not possess the appropriate eligibility or required qualifications. An appointment shall take effect immediately upon issue by the appointing authority if the appointee assumes his duties immediately and shall remain effective until it is disapproved by the Commission, if this should take place, without prejudice to the liability of the appointing authority for appointments issued in violation of existing laws or rules: Provided, finally, That the Commission shall keep a record of appointments of all officers and employees in the civil service. All appointments requiring the approval of the Commission as herein provided, shall be submitted to it by the appointing authority within thirty days from issuance, otherwise, the appointment becomes ineffective thirty days thereafter."18

The appointing officer and the CSC acting together, though not concurrently but consecutively, make an appointment complete.19 In acting on the appointment, the CSC determines whether the appointee possesses the appropriate civil service eligibility or the required qualifications. If the appointee does, the appointment must be approved; if not, it should be disapproved.20 According to the appellate court, only the appointing authority had the right to challenge the CSC's disapproval. It relied on Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 (Omnibus Rules on Appointment and Other Personal Actions), which provides: "Section 2. Request for Reconsideration of, or appeal from, the disapproval of an appointment may be made by the appointing authority and submitted to the Commission within fifteen (15) calendar days from receipt of the disapproved appointment." Appointing Challenge CSC Disapproval Authority's Right to

While petitioner does not challenge the legality of this provision, he now claims that it is merely a technicality, which does not prevent him from requesting reconsideration. We clarify. The power of appointment necessarily entails the exercise of judgment and discretion. 21 Luego v. Civil Service Commission22 declared: "Appointment is an essentially discretionary power and must be performed by the officer in which it is vested according to his best lights, the only condition being that the appointee should possess the qualifications required by law. If he does, then the appointment cannot be faulted on the ground that there are others better qualified who should have been preferred. This is a political question involving considerations of wisdom which only the appointing authority can decide."23 Significantly, "the selection of the appointee -- taking into account the totality of his qualifications, including those abstract qualities that define his personality -- is the prerogative of the appointing authority."24 No tribunal, not even this Court,25 may compel the exercise of an appointment for a favored person.26 The CSC's disapproval of an appointment is a challenge to the exercise of the appointing authority's discretion. The appointing authority must have the right to contest the disapproval. Thus, Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 is justified insofar as it allows the appointing authority to request reconsideration or appeal. In Central Bank v. Civil Service Commission,27 this Court has affirmed that the appointing authority stands to be adversely affected when the CSC disapproves an appointment. Thus, the said authority can "defend its appointment since it knows the reasons for the same."28 It is also the act of the appointing authority that is being questioned when an appointment is disapproved.29 Appointee's Challenge the CSC Disapproval Legal Standing to

While there is justification to allow the appointing authority to challenge the CSC disapproval, there is none to preclude the appointee from taking the same course of action. Aggrieved parties, including the Civil Service Commission, should be given the right to file motions for reconsideration or to appeal.30 On this point, the concepts of "legal standing" and "real party in interest" become relevant. Although commonly directed towards ensuring that only certain parties can maintain an action, "legal standing" and "real party in interest" are different concepts. Kilosbayan v. Morato31 explained: "The difference between the rule on standing and real party-in-interest has been noted by authorities thus: 'It is important to note . . . that standing because of its constitutional and public policy underpinnings, is very different from questions relating to whether a particular plaintiff is the real party-in-interest or has capacity to sue. Although all three requirements are directed towards ensuring that only certain parties can maintain an action, standing restrictions require a partial consideration of the merits, as well as broader policy concerns relating to the proper role of the judiciary in certain areas. (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985]) "Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence the question in standing is whether such parties have 'alleged such a personal stake in the outcome of the controversy to assure that concrete

adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions.' (Baker v. Carr, 369 U.S. 186, 7 L. Ed. 2d 633 (1962)) "x x x xxx xxx

"On the other hand, the question as to 'real party-in-interest' is whether he is 'the party who would be [benefited] or injured by the judgment, or the 'party entitled to the avails of the suit.' (Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125, 131 [1951])"32 If legal standing is granted to challenge the constitutionality or validity of a law or governmental act despite the lack of personal injury on the challenger's part, then more so should petitioner be allowed to contest the CSC Order disapproving his appointment. Clearly, he was prejudiced by the disapproval, since he could not continue his office. Although petitioner had no vested right to the position,33 it was his eligibility that was being questioned. Corollary to this point, he should be granted the opportunity to prove his eligibility. He had a personal stake in the outcome of the case, which justifies his challenge to the CSC act that denied his permanent appointment. The Party in Interest Appointee a Real

A real party in interest is one who would be benefited or injured by the judgment, or one entitled to the avails of the suit.34 "Interest" within the meaning of the rule means material interest or an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved or a mere incidental interest. 35 Otherwise stated, the rule refers to a real or present substantial interest as distinguished from a mere expectancy; or from a future, contingent, subordinate, or consequential interest.36 As a general rule, one who has no right or interest to protect cannot invoke the jurisdiction of the court as a party-plaintiff in an action.37 Although the earlier discussion demonstrates that the appointing authority is adversely affected by the CSC's Order and is a real party in interest, the appointee is rightly a real party in interest too. He is also injured by the CSC disapproval, because he is prevented from assuming the office in a permanent capacity. Moreover, he would necessarily benefit if a favorable judgment is obtained, as an approved appointment would confer on him all the rights and privileges of a permanent appointee. Appointee Procedural Relief Allowed

Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 should not be interpreted to restrict solely to the appointing authority the right to move for a reconsideration of, or to appeal, the disapproval of an appointment. PD 807 and EO 292, from which the CSC derives the authority to promulgate its rules and regulations, are silent on whether appointees have a similar right to file motions for reconsideration of, or appeals from, unfavorable decisions involving appointments. Indeed, there is no legislative intent to bar appointees from challenging the CSC's disapproval. The view that only the appointing authority may request reconsideration or appeal is too narrow. The appointee should have the same right. Parenthetically, CSC Resolution 99-193638 recognizes the right of the adversely affected party to appeal to the CSC Regional Offices prior to elevating a matter to the CSC Central Office.39 The adversely affected party necessarily includes the appointee. This judicial pronouncement does not override Mathay v. Civil Service Commission,40 which the CA relied on. The Court merely noted in passing -- by way of obiter -- that based on a similar provision,41 only the appointing officer could request reconsideration of actions taken by the CSC on appointments. In that case, Quezon City Mayor Ismael A. Mathay Jr. sought the nullification of CSC Resolutions that recalled his appointment of a city government officer. He filed a Petition assailing the CA Decision, which had previously denied his Petition for Certiorari for being the wrong remedy and for being filed out of time. We observed then that the CSC Resolutions were already final and could no longer be elevated to the CA.42 Furthermore, Mathay's Petition for Certiorari filed with the CA was improper, because there was an available remedy of appeal. And the CSC could not have acted without jurisdiction, considering that it was empowered to recall an appointment initially approved.43 The right of the appointee to seek reconsideration or appeal was not the main issue in Mathay. At any rate, the present case is being decided en banc, and the ruling may reverse previous doctrines laid down by this Court.44 Second Issue:

Constitutionality of Section 4, CSC Memorandum Circular 21, Series of 1994 Alleging that his civil service eligibility was rendered ineffective and that he was consequently deprived of a property right without due process,45 petitioner challenges the constitutionality of CSC Memorandum Circular 21, s. 1994.46 The pertinent part of this Circular reads: "1. Positions Covered by the Career Executive Service. "(a) The Career Executive Service includes the positions of Undersecretary, Assistant Secretary, Bureau Director, Assistant Bureau Director, Regional Director (department-wide and bureau-wide), Assistant Regional Director (department-wide and bureau-wide) and Chief of Department Service[.] "(b) In addition to the above identified positions and other positions of the same category which had been previously classified and included in the CES, all other third level positions in all branches and instrumentalities of the national government, including government-owned or controlled corporations with original charters are embraced within the Career Executive Service provided that they meet the following criteria: "1. the position is a career position; "2. the position is above division chief level; "3. the duties and responsibilities of the position require the performance of executive or managerial functions." xxx xxx xxx

"4. Status of Appointment of Incumbents of Positions Under the Coverage of the CES. Incumbents of positions which are declared to be Career Executive Service positions for the first time pursuant to this Resolution who hold permanent appointments thereto shall remain under permanent status in their respective positions. However, upon promotion or transfer to other Career Executive Service (CES) positions, these incumbents shall be under temporary status in said other CES positions until they qualify." Petitioner argues that his eligibility, through the Executive Leadership and Management (ELM) training program, could no longer be affected by a new eligibility requirement. He claims that he was eligible for his previous position as department manager of the Legal Services Department, PEZA; hence, he should retain his eligibility for the position of department manager III, Labor and Employment Center, SBMA, notwithstanding the classification of the latter as a CES position. CSC Rules and Regulations Authorized to Issue

The Constitution mandates that, as "the central personnel agency of the government,"47 the CSC should "establish a career service and adopt measures to promote the morale, efficiency, integrity, responsiveness, progressiveness, and courtesy in the Civil Service."48 It further requires that appointments in the civil service be made only through merit and fitness to be determined by competitive examination.49 Civil Service laws have expressly empowered the CSC to issue and enforce rules and regulations to carry out its mandate. In the exercise of its authority, the CSC deemed it appropriate to clearly define and identify positions covered by the Career Executive Service.50 Logically, the CSC had to issue guidelines to meet this objective, specifically through the issuance of the challenged Circular. Career Classified by Levels Service

Positions in the career service, for which appointments require examinations, are grouped into three major levels: "(a) The first level shall include clerical, trades, crafts, and custodial service positions which involve nonprofessional or sub[-]professional work in a non-supervisory or supervisory capacity requiring less than four years of collegiate studies;

"(b) The second level shall include professional, technical, and scientific positions which involve professional, technical, or scientific work in a non-supervisory or supervisory capacity requiring at least four years of college work up to Division Chief level; and "(c) The third level shall cover positions in the Career Executive Service."51 Entrance to the different levels requires the corresponding civil service eligibility. Those in the third level (CES positions) require Career Service Executive Eligibility (CSEE) as a requirement for permanent appointment.52 The challenged Circular did not revoke petitioner's ELM eligibility. He was appointed to a CES position; however, his eligibility was inadequate. Eligibility must necessarily conform to the requirements of the position, which in petitioner's case was a CSEE. Rights Protected The challenged Circular protects the rights of incumbents as long as they remain in the positions to which they were previously appointed. They are allowed to retain their positions in a permanent capacity, notwithstanding the lack of CSEE. Clearly, the Circular recognizes the rule of prospectivity of regulations;53 hence, there is no basis to argue that it is an ex post facto law54 or a bill of attainder.55 These terms, which have settled meanings in criminal jurisprudence, are clearly inapplicable here. The government service of petitioner ended when he retired in 1996; thus, his right to remain in a CES position, notwithstanding his lack of eligibility, also ceased. Upon his reemployment56 years later as department manager III at SBMA in 2001, it was necessary for him to comply with the eligibility prescribed at the time for that position. Security Not Impaired of Tenure

The argument of petitioner that his security of tenure is impaired is unconvincing. First, security of tenure in the Career Executive Service -- except in the case of first and second level employees in the civil service -- pertains only to rank, not to the position to which the employee may be appointed.57 Second, petitioner had neither rank nor position prior to his reemployment. One cannot claim security of tenure if one held no tenure prior to appointment. Due Not Violated Process

Petitioner contends that his due process rights, as enunciated in Ang Tibay v. Court of Appeals, 58 were violated.59 We are not convinced. He points in particular to the CSC's alleged failure to notify him of a hearing relating to the issuance of the challenged Circular. The classification of positions in career service was a quasi-legislative, not a quasi-judicial, issuance. This distinction determines whether prior notice and hearing are necessary. In exercising its quasi-judicial function, an administrative body adjudicates the rights of persons before it, in accordance with the standards laid down by the law.60 The determination of facts and the applicable law, as basis for official action and the exercise of judicial discretion, are essential for the performance of this function.61 On these considerations, it is elementary that due process requirements, as enumerated in Ang Tibay, must be observed. These requirements include prior notice and hearing.62 On the other hand, quasi-legislative power is exercised by administrative agencies through the promulgation of rules and regulations within the confines of the granting statute and the doctrine of non-delegation of certain powers flowing from the separation of the great branches of the government.63 Prior notice to and hearing of every affected party, as elements of due process, are not required since there is no determination of past events or facts that have to be established or ascertained. As a general rule, prior notice and hearing are not essential to the validity of rules or regulations promulgated to govern future conduct.64 Significantly, the challenged Circular was an internal matter addressed to heads of departments, bureaus and agencies. It needed no prior publication, since it had been issued as an incident of the administrative body's power to issue guidelines for government officials to follow in performing their duties.65 Final Issue: Disapproval of Appointment

Since petitioner had no CES eligibility, the CSC correctly denied his permanent appointment. The appointee need not have been previously heard, because the nature of the action did not involve the imposition of an administrative disciplinary measure.66 The CSC, in approving or disapproving an appointment, merely examines the conformity of the appointment with the law and the appointee's possession of all the minimum qualifications and none of the disqualification.67 In sum, while petitioner was able to demonstrate his standing to appeal the CSC Resolutions to the courts, he failed to prove his eligibility to the position he was appointed to. WHEREFORE, the Petition is GRANTED insofar as it seeks legal standing for petitioner, but DENIED insofar as it prays for the reversal of the CSC Resolutions disapproving his appointment as department manager III of the Labor and Employment Center, Subic Bay Metropolitan Authority. Costs against petitioner. SO ORDERED.

G.R. No. 129329

July 31, 2001

ESTER M. ASUNCION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, Second Division, MABINI MEDICAL CLINIC and DR. WILFRIDO JUCO, respondents. KAPUNAN, J.: In her petition filed before this Court, Ester Asuncion prays that the Decision, dated November 29, 1996, and the Resolution, dated February 20,1997, of the public respondent National Labor Relations Commission, Second Division, in NLRC CA. 011188 which reversed the Decision of the Labor Arbiter, dated May 15, 1996 be set aside. The antecedents of this case are as follows: On August 16, 1993, petitioner Ester M. Asuncion was employed as an accountant/bookkeeper by the respondent Mabini Medical Clinic. Sometime in May 1994, certain officials of the NCR-Industrial Relations Division of the Department of Labor and Employment conducted a routine inspection of the premises of the respondent company and discovered upon the disclosure of the petitioner of (documents) violations of the labor standards law such as the noncoverage from the SSS of the employees. Consequently, respondent Company was made to correct these violations. On August 9, 1994, the private respondent, Medical Director Wilfrido Juco, issued a memorandum to petitioner charging her with the following offenses: 1. Chronic Absentism (sic) You have incurred since Aug. 1993 up to the present 35 absences and 23 half-days. 2. Habitual tardiness You have late (sic) for 108 times. As shown on the record book. 3. Loitering and wasting of company time on several occasions and witnessed by several employees. 4. Getting salary of an absent employee without acknowledging or signing for it. 5. Disobedience and insubordination - continued refusal to sign memos given to you.1

Petitioner was required to explain within two (2) days why she should not be terminated based on the above charges. Three days later, in the morning of August 12, 1994, petitioner submitted her response to the memorandum. On the same day, respondent Dr. Juco, through a letter dated August 12, 1994, dismissed the petitioner on the ground of disobedience of lawful orders and for her failure to submit her reply within the two-day period. This prompted petitioner to file a case for illegal termination before the NLRC. In a Decision, dated May 15, 1996, Labor Arbiter Manuel Caday rendered judgment declaring that the petitioner was illegally dismissed. The Labor Arbiter found that the private respondents were unable to prove the allegation of chronic absenteeism as it failed to present in evidence the time cards, logbooks or record book which complainant signed recording her time in reporting for work. These documents, according to the Labor Arbiter, were in the possession of the private respondents. In fact, the record book was mentioned in the notice of termination. Hence, the non-presentation of these documents gives rise to the presumption that these documents were intentionally suppressed since they would be adverse to private respondents claim. Moreover, the Labor Arbiter ruled that the petitioners absences were with the conformity of the private respondents as both parties had agreed beforehand that petitioner would not report to work on Saturdays. The handwritten listing of the days when complainant was absent from work or late in reporting for work and even the computerized print-out, do not suffice to prove that petitioners absences were unauthorized as they could easily be manufactured.2 Accordingly, the dispositive portion of the decision states, to wit: WHEREFORE, Premises Considered, judgment is hereby rendered declaring the dismissal of the complainant as illegal and ordering the respondent company to immediately reinstate her to her former position without loss of seniority rights and to pay the complainants backwages and other benefits, as follows: 1) P73,500.00 representing backwages as of the date of this decision until she is actually reinstated in the service; 2) P20,000.00 by way of moral damages and another P20,000.00 representing exemplary damages; and 3) 10% of the recoverable award in this case representing attorneys fees. SO ORDERED.3 On appeal, public respondent NLRC rendered the assailed decision which set aside the Labor Arbiters ruling. Insofar as finding the private respondents as having failed to present evidence relative to petitioners absences and tardiness, the NLRC agrees with the Labor Arbiter. However, the NLRC ruled that petitioner had admitted the tardiness and absences though offering justifications for the infractions. The decretal portion of the assailed decision reads: WHEREFORE, premises considered, the appealed decision is hereby VACATED and SET ASIDE and a NEW ONE entered dismissing the complaint for illegal dismissal for lack of merit. However, respondents Mabini Medical Clinic and Dr. Wilfrido Juco are jointly and solidarily ordered to pay complainant Ester Asuncion the equivalent of her three (3) months salary for and as a penalty for respondents non-observance of complainants right to due process. SO ORDERED.4 Petitioner filed a motion for reconsideration which the public respondent denied in its Resolution, dated February 19, 1997. Hence, petitioner through a petition for certiorari under Rule 65 of the Rules of Court seeks recourse to this Court and raises the following issue: THE PUBLIC RESPONDENT ERRED IN FINDING THAT THE PETITIONER WAS DISMISSED BY THE PRIVATE RESPONDENT FOR A JUST OR AUTHORIZED CAUSE. The petition is impressed with merit. Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and respect, we are constrained to take a second look at the facts before us because of the diversity in the opinions of the Labor Arbiter and the NLRC.5 A disharmony between the factual findings of the Labor Arbiter and those of the NLRC opens the door to a review thereof by this Court.6 It bears stressing that a workers employment is property in the constitutional sense. He cannot be deprived of his work without due process. In order for the dismissal to be valid, not only must it be based on just cause supported by clear

and convincing evidence,7 the employee must also be given an opportunity to be heard and defend himself. 8 It is the employer who has the burden of proving that the dismissal was with just or authorized cause. 9 The failure of the employer to discharge this burden means that the dismissal is not justified and that the employee is entitled to reinstatement and backwages.10 In the case at bar, there is a paucity of evidence to establish the charges of absenteeism and tardiness. We note that the employer company submitted mere handwritten listing and computer print-outs. The handwritten listing was not signed by the one who made the same. As regards the print-outs, while the listing was computer generated, the entries of time and other annotations were again handwritten and unsigned.11 We find that the handwritten listing and unsigned computer print-outs were unauthenticated and, hence, unreliable. Mere self-serving evidence of which the listing and print-outs are of that nature should be rejected as evidence without any rational probative value even in administrative proceedings. For this reason, we find the findings of the Labor Arbiter to be correct. On this point, the Labor Arbiter ruled, to wit: x x x In the instant case, while the Notice of Termination served on the complainant clearly mentions the record book upon which her tardiness (and absences) was based, the respondent (company) failed to establish (through) any of these documents and the handwritten listing, notwithstanding, of (sic) the days when complainant was absent from work or late in reporting for work and even the computerized print-outs, do not suffice to prove the complainants absences were unauthorized as they could easily be manufactured. x x x12 In IBM Philippines, Inc. v. NLRC,13 this Court clarified that the liberality of procedure in administrative actions is not absolute and does not justify the total disregard of certain fundamental rules of evidence. Such that evidence without any rational probative value may not be made the basis of order or decision of administrative bodies. The Courts ratiocination in that case is relevant to the propriety of rejecting the unsigned handwritten listings and computer printouts submitted by private respondents which we quote, to wit: However, the liberality of procedure in administrative actions is subject to limitations imposed by basic requirements of due process. As this Court said in Ang Tibay v. CIR, the provision for flexibility in administrative procedure "does not go so far as to justify orders without a basis in evidence having rational probative value." More specifically, as held in Uichico v. NLRC: "It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases. However, this procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules. While the rules of evidence prevailing in the courts of law or equity are not controlling in proceedings before the NLRC, the evidence presented before it must at least have a modicum of admissibility for it to be given some probative value. The Statement of Profit and Losses submitted by Crispa, Inc. to prove its alleged losses, without the accompanying signature of a certified public accountant or audited by an independent auditor, are nothing but self-serving documents which ought to be treated as a mere scrap of paper devoid of any probative value." The computer print-outs, which constitute the only evidence of petitioners, afford no assurance of their authenticity because they are unsigned. The decisions of this Court, while adhering to a liberal view in the conduct of proceedings before administrative agencies, have nonetheless consistently required some proof of authenticity or reliability as condition for the admission of documents. In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC,14 this Court held as incompetent unsigned daily time records presented to prove that the employee was neglectful of his duties: Indeed, the DTRs annexed to the present petition would tend to establish private respondents neglectful attitude towards his work duties as shown by repeated and habitual absences and tardiness and propensity for working undertime for the year 1992. But the problem with these DTRs is that they are neither originals nor certified true copies. They are plain photocopies of the originals, if the latter do exist. More importantly, they are not even signed by private respondent nor by any of the employers representatives. x x x. In the case at bar, both the handwritten listing and computer print-outs being unsigned, the authenticity thereof is highly suspect and devoid of any rational probative value especially in the light of the existence of the official record book of the petitioners alleged absences and tardiness in the possession of the employer company. Ironically, in the memorandum charging petitioner and notice of termination, private respondents referred to the record book as its basis for petitioners alleged absenteeism and tardiness. Interestingly, however, the record book was never presented in evidence. Private respondents had possession thereof and the opportunity to present the same. Being the

basis of the charges against the petitioner, it is without doubt the best evidence available to substantiate the allegations. The purpose of the rule requiring the production of the best evidence is the prevention of fraud, because if a party is in possession of such evidence and withholds it, and seeks to substitute inferior evidence in its place, the presumption naturally arises that the better evidence is withheld for fraudulent purposes which its production would expose and defeat.15 Thus, private respondents unexplained and unjustified non-presentation of the record book, which is the best evidence in its possession and control of the charges against the petitioner, casts serious doubts on the factual basis of the charges of absenteeism and tardiness. We find that private respondents failed to present a single piece of credible evidence to serve as the basis for their charges against petitioner and consequently, failed to fulfill their burden of proving the facts which constitute the just cause for the dismissal of the petitioner. However, the NLRC ruled that despite such absence of evidence, there was an admission on the part of petitioner in her Letter dated August 11, 1994 wherein she wrote: I am quite surprised why I have incurred 35 absences since August 1993 up to the present. I can only surmise that Saturdays were not included in my work week at your clinic. If you will please recall, per agreement with you, my work days at your clinic is from Monday to Friday without Saturday work. As to my other supposed absences, I believe that said absences were authorized and therefore cannot be considered as absences which need not be explained (sic). It is also extremely difficult to understand why it is only now that I am charged to explain alleged absences incurred way back August 1993.16 In reversing the decision of the Labor Arbiter, public respondent NLRC relied upon the supposed admission of the petitioner of her habitual absenteeism and chronic tardiness. We do not subscribe to the findings of the NLRC that the above quoted letter of petitioner amounted to an admission of her alleged absences. As explained by petitioner, her alleged absences were incurred on Saturdays. According to petitioner, these should not be considered as absences as there was an arrangement between her and the private respondents that she would not be required to work on Saturdays. Private respondents have failed to deny the existence of this arrangement. Hence, the decision of the NLRC that private respondent had sufficient grounds to terminate petitioner as she admitted the charges of habitual absences has no leg to stand on. Neither have the private respondents shown by competent evidence that the petitioner was given any warning or reprimanded for her alleged absences and tardiness. Private respondents claimed that they sent several notices to the petitioner warning her of her absences, however, petitioner refused to receive the same. On this point, the Labor Arbiter succinctly observed: The record is bereft of any showing that complainant was ever warned of her absences prior to her dismissal on August 9, 1994. The alleged notices of her absences from August 17, until September 30, 1993, from October until November 27, 1993, from December 1, 1993 up to February 26, 1994 and the notice dated 31 May 1994 reminding complainant of her five (5) days absences, four (4) half-days and tardiness for 582 minutes (Annex "1" to "1-D" attached to respondent' Rejoinder), fail to show that the notices were received by the complainant. The allegation of the respondents that the complainant refused to received (sic) the same is self-serving and merits scant consideration. xxx17 The Court, likewise, takes note of the fact that the two-day period given to petitioner to explain and answer the charges against her was most unreasonable, considering that she was charged with several offenses and infractions (35 absences, 23 half-days and 108 tardiness), some of which were allegedly committed almost a year before, not to mention the fact that the charges leveled against her lacked particularity. Apart from chronic absenteeism and habitual tardiness, petitioner was also made to answer for loitering and wasting of company time, getting salary of an absent employee without acknowledging or signing for it and disobedience and insubordination.18 Thus, the Labor Arbiter found that actually petitioner tried to submit her explanation on August 11, 1994 or within the two-day period given her, but private respondents prevented her from doing so by instructing their staff not to accept complainants explanation, which was the reason why her explanation was submitted a day later.19 The law mandates that every opportunity and assistance must be accorded to the employee by the management to enable him to prepare adequately for his defense.20 In Ruffy v. NLRC,21 the Court held that what would qualify as sufficient or "ample opportunity," as required by law, would be "every kind of assistance that management must accord to the employee to enable him to prepare adequately for his defense." In the case at bar, private respondents cannot be gainsaid to have given petitioner the ample opportunity to answer the charges leveled against her. From the foregoing, there are serious doubts in the evidence on record as to the factual basis of the charges against petitioner. These doubts shall be resolved in her favor in line with the policy under the Labor Code to afford protection to labor and construe doubts in favor of labor.22 The consistent rule is that if doubts exist between the evidence

presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.23 Not having satisfied its burden of proof, we conclude that the employer dismissed the petitioner without any just cause. Hence, the termination is illegal. Having found that the petitioner has been illegally terminated, she is necessarily entitled to reinstatement to her former previous position without loss of seniority and the payment of backwages.24 WHEREFORE, the Decision of the National Labor Relations Commission, dated November 29, 1996 and the Resolution, dated February 20, 1997 are hereby REVERSED and SET ASIDE, and the Decision of the Labor Arbiter, dated May 15, 1996 REINSTATED. SO ORDERED.

G.R. No. 158253

March 2, 2007

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL TREASURER, Petitioner, vs. CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND CONSTRUCTION SUPPLY, Respondent. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision 1 dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 56345 which affirmed with modification the Decision2 of the Regional Trial Court, Branch 41, San Fernando, Pampanga (RTC) in Civil Case No. 10538, granting the complaint for Specific Performance and Damages filed by Carlito Lacap (respondent) against the Republic of the Philippines (petitioner). The factual background of the case is as follows: The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated January 27, 1992. Respondent, doing business under the name and style Carwin Construction and Construction Supply (Carwin Construction), was prequalified together with two other contractors. Since respondent submitted the lowest bid, he was awarded the contract for the concreting of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract Agreement was executed by respondent and petitioner.4 On September 25, 1992, District Engineer Rafael S. Ponio issued a Notice to Proceed with the concreting of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the works, made advances for the purchase of the materials and payment for labor costs.6 On October 29, 1992, personnel of the Office of the District Engineer of San Fernando, Pampanga conducted a final inspection of the project and found it 100% completed in accordance with the approved plans and specifications. Accordingly, the Office of the District Engineer issued Certificates of Final Inspection and Final Acceptance.7

Thereafter, respondent sought to collect payment for the completed project.8 The DPWH prepared the Disbursement Voucher in favor of petitioner.9 However, the DPWH withheld payment from respondent after the District Auditor of the Commission on Audit (COA) disapproved the final release of funds on the ground that the contractors license of respondent had expired at the time of the execution of the contract. The District Engineer sought the opinion of the DPWH Legal Department on whether the contracts of Carwin Construction for various Mount Pinatubo rehabilitation projects were valid and effective although its contractors license had already expired when the projects were contracted.10 In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as the Contractors License Law, does not provide that a contract entered into after the license has expired is void and there is no law which expressly prohibits or declares void such contract, the contract is enforceable and payment may be paid, without prejudice to any appropriate administrative liability action that may be imposed on the contractor and the government officials or employees concerned.11 In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH Legal Department on whether Carwin Construction should be paid for works accomplished despite an expired contractors license at the time the contracts were executed.12 In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal Department, recommended that payment should be made to Carwin Construction, reiterating his earlier legal opinion.13 Despite such recommendation for payment, no payment was made to respondent. Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and Damages against petitioner before the RTC.14 On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed a Motion to Dismiss the complaint on the grounds that the complaint states no cause of action and that the RTC had no jurisdiction over the nature of the action since respondent did not appeal to the COA the decision of the District Auditor to disapprove the claim.15 Following the submission of respondents Opposition to Motion to Dismiss,16 the RTC issued an Order dated March 11, 1996 denying the Motion to Dismiss.17 The OSG filed a Motion for Reconsideration18 but it was likewise denied by the RTC in its Order dated May 23, 1996.19 On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of administrative remedies and the doctrine of non-suability of the State.20 Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion of which reads as follows: WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter, thru its District Engineer at Sindalan, San Fernando, Pampanga, to pay the following: a) P457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay Pare, Candaba, Pampanga plus interest at 12% from demand until fully paid; and b) The costs of suit. SO ORDERED.21 The RTC held that petitioner must be required to pay the contract price since it has accepted the completed project and enjoyed the benefits thereof; to hold otherwise would be to overrun the long standing and consistent pronouncement against enriching oneself at the expense of another.22 Dissatisfied, petitioner filed an appeal with the CA.23 On April 28, 2003, the CA rendered its Decision sustaining the Decision of the RTC. It held that since the case involves the application of the principle of estoppel against the government which is a purely legal question, then the principle of exhaustion of administrative remedies does not apply; that by its actions the government is estopped from questioning the validity and binding effect of the Contract Agreement with the respondent; that denial of payment to respondent on purely technical grounds after successful completion of the project is not countenanced either by justice or equity. The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion of which reads:

WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that the interest shall be six percent (6%) per annum computed from June 21, 1995. SO ORDERED.24 Hence, the present petition on the following ground: THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF ACTION AGAINST PETITIONER, CONSIDERING THAT: (a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND (b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO RESOLVE RESPONDENTS MO NEY CLAIM AGAINST THE GOVERNMENT.25 Petitioner contends that respondents recourse to judicial action was premature since the proper remedy was to appeal the District Auditors disapproval of payment to the COA, pursuant to Section 48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as the Government Auditing Code of the Philippines; that the COA has primary jurisdiction to resolve respondents money claim against the government under Section 2(1),26 Article IX of the 1987 Constitution and Section 2627 of P.D. No. 1445; that non-observance of the doctrine of exhaustion of administrative remedies and the principle of primary jurisdiction results in a lack of cause of action. Respondent, on the other hand, in his Memorandum28 limited his discussion to Civil Code provisions relating to human relations. He submits that equity demands that he be paid for the work performed; otherwise, the mandate of the Civil Code provisions relating to human relations would be rendered nugatory if the State itself is allowed to ignore and circumvent the standard of behavior it sets for its inhabitants. The present petition is bereft of merit. The general rule is that before a party may seek the intervention of the court, he should first avail of all the means afforded him by administrative processes.29 The issues which administrative agencies are authorized to decide should not be summarily taken from them and submitted to a court without first giving such administrative agency the opportunity to dispose of the same after due deliberation.30 Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary jurisdiction; that is, courts cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact.31 Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary doctrine of primary jurisdiction, which are based on sound public policy and practical considerations, are not inflexible rules. There are many accepted exceptions, such as: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice;32 (f) where judicial intervention is urgent; (g) when its application may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) when the issue of non-exhaustion of administrative remedies has been rendered moot;33 (j) when there is no other plain, speedy and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto proceedings.34 Exceptions (c) and (e) are applicable to the present case. Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and 1994 that payment to a contractor with an expired contractors license is proper, respondent remained unpaid for the completed work despite repeated demands. Clearly, there was unreasonable delay and official inaction to the great prejudice of respondent. Furthermore, whether a contractor with an expired license at the time of the execution of its contract is entitled to be paid for completed projects, clearly is a pure question of law. It does not involve an examination of the probative value of the evidence presented by the parties. There is a question of law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to the truth or the falsehood of alleged facts.35 Said question at best could be resolved only tentatively by the administrative authorities. The final decision on the matter rests not with them but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing of an administrative

nature is to be or can be done.36 The issue does not require technical knowledge and experience but one that would involve the interpretation and application of law. Thus, while it is undisputed that the District Auditor of the COA disapproved respondents claim against the Government, and, under Section 4837 of P.D. No. 1445, the administrative remedy available to respondent is an appeal of the denial of his claim by the District Auditor to the COA itself, the Court holds that, in view of exceptions (c) and (e) narrated above, the complaint for specific performance and damages was not prematurely filed and within the jurisdiction of the RTC to resolve, despite the failure to exhaust administrative remedies. As the Court aptly stated in Rocamora v. RTC-Cebu (Branch VIII):38 The plaintiffs were not supposed to hold their breath and wait until the Commission on Audit and the Ministry of Public Highways had acted on the claims for compensation for the lands appropriated by the government. The road had been completed; the Pope had come and gone; but the plaintiffs had yet to be paid for the properties taken from them. Given this official indifference, which apparently would continue indefinitely, the private respondents had to act to assert and protect their interests.39 On the question of whether a contractor with an expired license is entitled to be paid for completed projects, Section 35 of R.A. No. 4566 explicitly provides: SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a supervisory capacity of a construction work within the purview of this Act, without first securing a license to engage in the business of contracting in this country; or who shall present or file the license certificate of another, give false evidence of any kind to the Board, or any member thereof in obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or license, shall be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a fine of not less than five hundred pesos but not more than five thousand pesos. (Emphasis supplied) The "plain meaning rule" or verba legis in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without interpretation.40 This rule derived from the maxim Index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute.41 Verba legis non est recedendum, or from the words of a statute there should be no departure.42 The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void contracts entered into by a contractor whose license had already expired. Nonetheless, such contractor is liable for payment of the fine prescribed therein. Thus, respondent should be paid for the projects he completed. Such payment, however, is without prejudice to the payment of the fine prescribed under the law. Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of anothers injury) states: Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as "basic principles to be observed for the rightful relationship between human beings and for the stability of the social order, x x x designed to indicate certain norms that spring from the fountain of good conscience, x x x guides human conduct [that] should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice."43 The rules thereon apply equally well to the Government.44 Since respondent had rendered services to the full satisfaction and acceptance by petitioner, then the former should be compensated for them. To allow petitioner to acquire the finished project at no cost would undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such unjust enrichment is not allowed by law. WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the Court of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No pronouncement as to costs. SO ORDERED. G.R. No. 156109 November 18, 2004

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

DECISION

PANGANIBAN, J.: Upon enrolment, students and their school enter upon a reciprocal contract. The students agree to abide by the standards of academic performance and codes of conduct, issued usually in the form of manuals that are distributed to the enrollees at the start of the school term. Further, the school informs them of the itemized fees they are expected to pay. Consequently, it cannot, after the enrolment of a student, vary the terms of the contract. It cannot require fees other than those it specified upon enrolment. The Case Before the Court is a Petition for Review under Rule 45,1 seeking to nullify the July 12, 20022 and the November 22, 20023 Orders of the Regional Trial Court (RTC) of Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U-7541. The decretal portion of the first assailed Order reads: "WHEREFORE, the Court GRANTS the instant motion to dismiss for lack of cause of action."4 The second challenged Order denied petitioner's Motion for Reconsideration. The Facts Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science and Technology (PCST). Reared in a poor family, Regino went to college mainly through the financial support of her relatives. During the second semester of school year 2001-2002, she enrolled in logic and statistics subjects under Respondents Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers. In February 2002, PCST held a fund raising campaign dubbed the "Rave Party and Dance Revolution," the proceeds of which were to go to the construction of the school's tennis and volleyball courts. Each student was required to pay for two tickets at the price of P100 each. The project was allegedly implemented by recompensing students who purchased tickets with additional points in their test scores; those who refused to pay were denied the opportunity to take the final examinations. Financially strapped and prohibited by her religion from attending dance parties and celebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002, the scheduled dates of the final examinations in logic and statistics, her teachers -- Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests. According to petitioner, Gamurot made her sit out her logic class while her classmates were taking their examinations. The next day, Baladad, after announcing to the entire class that she was not permitting petitioner and another student to take their statistics examinations for failing to pay for their tickets, allegedly ejected them from the classroom. Petitioner's pleas ostensibly went unheeded by Gamurot and Baladad, who unrelentingly defended their positions as compliance with PCST's policy. On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint5 for damages against PCST, Gamurot and Baladad. In her Complaint, she prayed for P500,000 as nominal damages; P500,000 as moral damages; at least P1,000,000 as exemplary damages; P250,000 as actual damages; plus the costs of litigation and attorney's fees. On May 30, 2002, respondents filed a Motion to Dismiss6 on the ground of petitioner's failure to exhaust administrative remedies. According to respondents, the question raised involved the determination of the wisdom of an administrative policy of the PCST; hence, the case should have been initiated before the proper administrative body, the Commission of Higher Education (CHED). In her Comment to respondents' Motion, petitioner argued that prior exhaustion of administrative remedies was unnecessary, because her action was not administrative in nature, but one purely for damages arising from respondents' breach of the laws on human relations. As such, jurisdiction lay with the courts.

On July 12, 2002, the RTC dismissed the Complaint for lack of cause of action. Ruling of the Regional Trial Court In granting respondents' Motion to Dismiss, the trial court noted that the instant controversy involved a higher institution of learning, two of its faculty members and one of its students. It added that Section 54 of the Education Act of 1982 vested in the Commission on Higher Education (CHED) the supervision and regulation of tertiary schools. Thus, it ruled that the CHED, not the courts, had jurisdiction over the controversy.7 In its dispositive portion, the assailed Order dismissed the Complaint for "lack of cause of action" without, however, explaining this ground. Aggrieved, petitioner filed the present Petition on pure questions of law.8 Issues In her Memorandum, petitioner raises the following issues for our consideration: "Whether or not the principle of exhaustion of administrative remedies applies in a civil action exclusively for damages based on violation of the human relation provisions of the Civil Code, filed by a student against her former school. "Whether or not there is a need for prior declaration of invalidity of a certain school administrative policy by the Commission on Higher Education (CHED) before a former student can successfully maintain an action exclusively for damages in regular courts. "Whether or not the Commission on Higher Education (CHED) has exclusive original jurisdiction over actions for damages based upon violation of the Civil Code provisions on human relations filed by a student against the school."9 All of the foregoing point to one issue -- whether the doctrine of exhaustion of administrative remedies is applicable. The Court, however, sees a second issue which, though not expressly raised by petitioner, was impliedly contained in her Petition: whether the Complaint stated sufficient cause(s) of action. The Court's Ruling The Petition is meritorious. First Issue: Exhaustion of Administrative Remedies Respondents anchored their Motion to Dismiss on petitioner's alleged failure to exhaust administrative remedies before resorting to the RTC. According to them, the determination of the controversy hinge on the validity, the wisdom and the propriety of PCST's academic policy. Thus, the Complaint should have been lodged in the CHED, the administrative body tasked under Republic Act No. 7722 to implement the state policy to "protect, foster and promote the right of all citizens to affordable quality education at all levels and to take appropriate steps to ensure that education is accessible to all."10 Petitioner counters that the doctrine finds no relevance to the present case since she is praying for damages, a remedy beyond the domain of the CHED and well within the jurisdiction of the courts.11 Petitioner is correct. First, the doctrine of exhaustion of administrative remedies has no bearing on the present case. In Factoran Jr. v. CA,12 the Court had occasion to elucidate on the rationale behind this doctrine: "The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity, and convenience, should not entertain suits unless the available administrative remedies have first been resorted to and the proper authorities have been given the appropriate opportunity to act and correct their alleged errors, if any, committed in the administrative forum. x x x.13" Petitioner is not asking for the reversal of the policies of PCST. Neither is she demanding it to allow her to take her final examinations; she was already enrolled in another educational institution. A reversal of the acts complained of would not adequately redress her grievances; under the circumstances, the consequences of respondents' acts could no longer be undone or rectified.

Second, exhaustion of administrative remedies is applicable when there is competence on the part of the administrative body to act upon the matter complained of.14 Administrative agencies are not courts; they are neither part of the judicial system, nor are they deemed judicial tribunals.15 Specifically, the CHED does not have the power to award damages.16 Hence, petitioner could not have commenced her case before the Commission. Third, the exhaustion doctrine admits of exceptions, one of which arises when the issue is purely legal and well within the jurisdiction of the trial court.17 Petitioner's action for damages inevitably calls for the application and the interpretation of the Civil Code, a function that falls within the jurisdiction of the courts.18 Second Issue: Cause of Action Sufficient Causes of Action Stated in the Allegations in the Complaint As a rule, every complaint must sufficiently allege a cause of action; failure to do so warrants its dismissal.19 A complaint is said to assert a sufficient cause of action if, admitting what appears solely on its face to be correct, the plaintiff would be entitled to the relief prayed for. Assuming the facts that are alleged to be true, the court should be able to render a valid judgment in accordance with the prayer in the complaint.20 A motion to dismiss based on lack of cause of action hypothetically admits the truth of the alleged facts. In their Motion to Dismiss, respondents did not dispute any of petitioner's allegations, and they admitted that "x x x the crux of plaintiff's cause of action is the determination of whether or not the assessment of P100 per ticket is excessive or oppressive."21 They thereby premised their prayer for dismissal on the Complaint's alleged failure to state a cause of action. Thus, a reexamination of the Complaint is in order. The Complaint contains the following factual allegations: "10. In the second week of February 2002, defendant Rachelle A. Gamurot, in connivance with PCST, forced plaintiff and her classmates to buy or take two tickets each, x x x; "11. Plaintiff and many of her classmates objected to the forced distribution and selling of tickets to them but the said defendant warned them that if they refused [to] take or pay the price of the two tickets they would not be allowed at all to take the final examinations; "12. As if to add insult to injury, defendant Rachelle A. Gamurot bribed students with additional fifty points or so in their test score in her subject just to unjustly influence and compel them into taking the tickets; "13. Despite the students' refusal, they were forced to take the tickets because [of] defendant Rachelle A. Gamurot's coercion and act of intimidation, but still many of them including the plaintiff did not attend the dance party imposed upon them by defendants PCST and Rachelle A. Gamurot; "14. Plaintiff was not able to pay the price of her own two tickets because aside form the fact that she could not afford to pay them it is also against her religious practice as a member of a certain religious congregation to be attending dance parties and celebrations; "15. On March 14, 2002, before defendant Rachelle A. Gamurot gave her class its final examination in the subject 'Logic' she warned that students who had not paid the tickets would not be allowed to participate in the examination, for which threat and intimidation many students were eventually forced to make payments: "16. Because plaintiff could not afford to pay, defendant Rachelle A. Gamurot inhumanly made plaintiff sit out the class but the defendant did not allow her to take her final examination in 'Logic;' "17. On March 15, 2002 just before the giving of the final examination in the subject 'Statistics,' defendant Elissa Baladad, in connivance with defendants Rachelle A. Gamurot and PCST, announced in the classroom that she was not allowing plaintiff and another student to take the examination for their failure and refusal to pay the price of the tickets, and thenceforth she ejected plaintiff and the other student from the classroom; "18. Plaintiff pleaded for a chance to take the examination but all defendants could say was that the prohibition to give the examinations to non-paying students was an administrative decision; "19. Plaintiff has already paid her tuition fees and other obligations in the school;

"20. That the above-cited incident was not a first since PCST also did another forced distribution of tickets to its students in the first semester of school year 2001-2002; x x x " 22 The foregoing allegations show two causes of action; first, breach of contract; and second, liability for tort. Reciprocity School-Student Contract of the

In Alcuaz v. PSBA,23 the Court characterized the relationship between the school and the student as a contract, in which "a student, once admitted by the school is considered enrolled for one semester." 24 Two years later, in Non v. Dames II,25 the Court modified the "termination of contract theory" in Alcuaz by holding that the contractual relationship between the school and the student is not only semestral in duration, but for the entire period the latter are expected to complete it."26 Except for the variance in the period during which the contractual relationship is considered to subsist, both Alcuaz and Non were unanimous in characterizing the school-student relationship as contractual in nature. The school-student relationship is also reciprocal. Thus, it has consequences appurtenant to and inherent in all contracts of such kind -- it gives rise to bilateral or reciprocal rights and obligations. The school undertakes to provide students with education sufficient to enable them to pursue higher education or a profession. On the other hand, the students agree to abide by the academic requirements of the school and to observe its rules and regulations.27 The terms of the school-student contract are defined at the moment of its inception -- upon enrolment of the student. Standards of academic performance and the code of behavior and discipline are usually set forth in manuals distributed to new students at the start of every school year. Further, schools inform prospective enrollees the amount of fees and the terms of payment. In practice, students are normally required to make a down payment upon enrollment, with the balance to be paid before every preliminary, midterm and final examination. Their failure to pay their financial obligation is regarded as a valid ground for the school to deny them the opportunity to take these examinations. The foregoing practice does not merely ensure compliance with financial obligations; it also underlines the importance of major examinations. Failure to take a major examination is usually fatal to the students' promotion to the next grade or to graduation. Examination results form a significant basis for their final grades. These tests are usually a primary and an indispensable requisite to their elevation to the next educational level and, ultimately, to their completion of a course. Education is not a measurable commodity. It is not possible to determine who is "better educated" than another. Nevertheless, a student's grades are an accepted approximation of what would otherwise be an intangible product of countless hours of study. The importance of grades cannot be discounted in a setting where education is generally the gate pass to employment opportunities and better life; such grades are often the means by which a prospective employer measures whether a job applicant has acquired the necessary tools or skills for a particular profession or trade. Thus, students expect that upon their payment of tuition fees, satisfaction of the set academic standards, completion of academic requirements and observance of school rules and regulations, the school would reward them by recognizing their "completion" of the course enrolled in. The obligation on the part of the school has been established in Magtibay v. Garcia,28 Licup v. University of San Carlos29 and Ateneo de Manila University v. Garcia,30 in which the Court held that, barring any violation of the rules on the part of the students, an institution of higher learning has a contractual obligation to afford its students a fair opportunity to complete the course they seek to pursue. We recognize the need of a school to fund its facilities and to meet astronomical operating costs; this is a reality in running it. Crystal v. Cebu International School31 upheld the imposition by respondent school of a "land purchase deposit" in the amount of P50,000 per student to be used for the "purchase of a piece of land and for the construction of new buildings and other facilities x x x which the school would transfer [to] and occupy after the expiration of its lease contract over its present site." The amount was refundable after the student graduated or left the school. After noting that the imposition of the fee was made only after prior consultation and approval by the parents of the students, the Court held that the school committed no actionable wrong in refusing to admit the children of the petitioners therein for their failure to pay the "land purchase deposit" and the 2.5 percent monthly surcharge thereon.

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

(2) The right to freely choose their field of study subject to existing curricula and to continue their course therein up to graduation, except in cases of academic deficiency, or violation of disciplinary regulations." Liability for Tort In her Complaint, petitioner also charged that private respondents "inhumanly punish students x x x by reason only of their poverty, religious practice or lowly station in life, which inculcated upon [petitioner] the feelings of guilt, disgrace and unworthiness;"33 as a result of such punishment, she was allegedly unable to finish any of her subjects for the second semester of that school year and had to lag behind in her studies by a full year. The acts of respondents supposedly caused her extreme humiliation, mental agony and "demoralization of unimaginable proportions" in violation of Articles 19, 21 and 26 of the Civil Code. These provisions of the law state thus: "Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." "Article 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." "Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: (1) Prying into the privacy of another's residence; (2) Meddling with or disturbing the private life or family relations of another; (3) Intriguing to cause another to be alienated from his friends; (4) Vexing or humiliating another on account of his beliefs, lowly station in life, place of birth, physical defect, or other personal condition." Generally, liability for tort arises only between parties not otherwise bound by a contract. An academic institution, however, may be held liable for tort even if it has an existing contract with its students, since the act that violated the contract may also be a tort. We ruled thus in PSBA vs. CA,34 from which we quote: "x x x A perusal of Article 2176 [of the Civil Code] shows that obligations arising from quasi-delicts or tort, also known as extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied. However, this impression has not prevented this Court from determining the existence of a tort even when there obtains a contract. In Air France v. Carrascoso (124 Phil. 722), the private respondent was awarded damages for his unwarranted expulsion from a first-class seat aboard the petitioner airline. It is noted,

however, that the Court referred to the petitioner-airline's liability as one arising from tort, not one arising form a contract of carriage. In effect, Air France is authority for the view that liability from tort may exist even if there is a contract, for the act that breaks the contract may be also a tort. x x x This view was not all that revolutionary, for even as early as 1918, this Court was already of a similar mind. In Cangco v. Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus: 'x x x. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes a breach of the contract would have constituted the source of an extra-contractual obligation had no contract existed between the parties.' "Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21 x x x."35 Academic Freedom In their Memorandum, respondents harp on their right to "academic freedom." We are not impressed. According to present jurisprudence, academic freedom encompasses the independence of an academic institution to determine for itself (1) who may teach, (2) what may be taught, (3) how it shall teach, and (4) who may be admitted to study. 36 In Garcia v. the Faculty Admission Committee, Loyola School of Theology,37 the Court upheld the respondent therein when it denied a female student's admission to theological studies in a seminary for prospective priests. The Court defined the freedom of an academic institution thus: "to decide for itself aims and objectives and how best to attain them x x x free from outside coercion or interference save possibly when overriding public welfare calls for some restraint."38 In Tangonan v. Pao,39 the Court upheld, in the name of academic freedom, the right of the school to refuse readmission of a nursing student who had been enrolled on probation, and who had failed her nursing subjects. These instances notwithstanding, the Court has emphasized that once a school has, in the name of academic freedom, set its standards, these should be meticulously observed and should not be used to discriminate against certain students. 40 After accepting them upon enrollment, the school cannot renege on its contractual obligation on grounds other than those made known to, and accepted by, students at the start of the school year. In sum, the Court holds that the Complaint alleges sufficient causes of action against respondents, and that it should not have been summarily dismissed. Needless to say, the Court is not holding respondents liable for the acts complained of. That will have to be ruled upon in due course by the court a quo. WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders REVERSED. The trial court is DIRECTED to reinstate the Complaint and, with all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No costs. SO ORDERED.

G.R. No. 124185-87 January 20, 1998 RUBY INDUSTRIAL CORPORATION and BENHAR INTERNATIONAL, INC. petitioners, vs. COURT OF APPEALS, MIGUEL LIM, ALLIED LEASING and FINANCE CORPORATION, and THE MANAGEMENT COMMITTEE OF RUBY INDUSTRIAL CORPORATION, respondents.

PUNO, J.: Petitioners seek the reversal of the Court of Appeals Decision, 1 setting aside the Orders of the Securities and Exchange Commission (SEC), dated July 30, 1993 and October 15, 1993, which approved the Revised Rehabilitation Plan of Ruby Industrial Corporation (RUBY) and appointed Benhar International, Inc. (BENHAR) as member of RUBY's Management Committee. The facts: Petitioner Ruby Industrial Corporation (RUBY) is a domestic corporation engaged in glass manufacturing, while petitioner Benhar International, Inc. (BENHAR) is a domestic corporation engaged in importation and sale of vehicle spare parts. BENHAR is wholly-owned by the Yu family and headed by Henry Yu who is also a director and majority stockholder of RUBY. In 1983, RUBY suffered severe liquidity problems. Thus, on December 13, 1983, it filed a Petition for Suspension of Payments with the Securities and Exchange Commission (SEC). 2 On December 20, 1983, the SEC issued an Order 3 declaring RUBY under suspension of payments. Pending hearing of its petition, the SEC enjoined RUBY from disposing its property, except insofar as necessary in its ordinary operations. It also enjoined RUBY from making payments outside of the necessary or legitimate expenses of its business. On August 10, 1984, the SEC Hearing Panel 4 created a management committee 5 for RUBY to: (1) undertake the management of RUBY; (2) take custody of and control over all existing assets and liabilities of RUBY; (3) evaluate RUBY's existing assets and liabilities, earnings and operations; (4) determine the best way to salvage and protect the interest of its investors and creditors; and (5) study, review and evaluate the proposed rehabilitation plan for RUBY. 6 Subsequently, at RUBY's special stockholders meeting, its majority stockholders led by Yu Kim Giang presented the BENHAR/RUBY Rehabilitation Plan to be submitted to SEC. Under the plan, BENHAR shall lend its P60 million credit line in China Bank to RUBY, payable within ten (10) years. Moreover, BENHAR shall purchase the credits of RUBY's creditors and mortgage RUBY's properties to obtain credit facilities for RUBY. 7 Upon approval of the rehabilitation plan, BENHAR shall control and manage RUBY'S operations. For its service, BENHAR shall receive a management fee equivalent to 7.5% of RUBY's net sales. 8 Some 40% of the stockholders opposed the BENHAR/RUBY Plan, including private respondent MIGUEL LIM, a minority shareholder of RUBY. Private respondent Allied Leasing and Finance Corporation, the biggest unsecured creditor of RUBY and chairman of the management committee, also objected to the plan as it would transfer RUBY's assets beyond the reach and to the prejudice of its unsecured creditors. Despite the oppositions, the majority stockholders still submitted the BENHAR/RUBY Plan to the SEC for approval.

Upon the other hand, RUBY's minority stockholders, represented by private respondent Lim, submitted their own rehabilitation plan (the ALTERNATIVE PLAN) to the SEC where they proposed to: (1) pay all RUBY'S creditors without securing any bank loan; (2) run and operate RUBY without charging management fees; (3) buy-out the majority shares or sell their shares to the majority stockholders; (4) rehabilitate RUBY's two plants; and (5) secure a loan at 25% interest, as against the 28% interest charged in the loan under the BENHAR/RUBY Plan. 9 Both plans were endorsed by the SEC to RUBY's management committee for evaluation. On October 28, 1988, the SEC Hearing Panel approved the BENHAR/RUBY Plan. 10 The minority stockholders, thru private respondent Lim, appealed the approval to the SEC en banc. On November 15, 1988, the SEC en banc temporarily enjoined the implementation of the BENHAR/RUBY Plan. On December 20, 1988, after the expiration of the TRO, the SEC en banc granted the writ of preliminary injunction against the enforcement of the BENHAR/RUBY Plan. 11 Thereafter, BENHAR and Henry Yu, later joined by RUBY and Yu Kim Clang, appealed to the Court of Appeals (CA-G.R. SP No. 16798) questioning the issuance of the writ. Their appeal was denied. 12 BENHAR and company elevated the matter to this Court. In a minute Resolution, 13 dated February 28, 1990, we denied the petition and upheld the injunction against the implementation of the BENHAR/RUBY Plan. However, it appears that before the SEC Hearing Panel approved the BENHAR/RUBY Plan on October 28, 1988, BENHAR had already implemented part of the plan by paying off Far East Bank & Trust Company (FEBTC), one of RUBY's secured creditors. Thus, by May 30, 1988, FEBTC had already executed a deed of assignment of credit and mortgage rights in favor of BENHAR. Moreover, despite the SEC en banc's TRO and injunction, BENHAR still paid RUBY's other secured creditors who, in turn, assigned their credits in favor of BENHAR. Hence, RUBY's biggest unsecured creditor, Allied Leasing and Finance Corporation, and private respondent Lim moved to nullify the deeds of assignment executed in favor of BENHAR and cite the parties thereto in contempt for willful violation of the December 20, 1983 SEC Order enjoining RUBY from disposing its properties and making payments pending the hearing of its petition for suspension of payments. Private respondents Lim and Allied Leasing charged that in paying off FEBTC's credits, FEBTC was given undue preference over the other creditors of RUBY. Acting on private respondents' motions, the SEC Hearing Panel nullified the deeds of assignment executed by RUBY's creditors in favor of BENHAR and declared the parties thereto guilty of indirect contempt. 14 Petitioners appealed to the SEC en banc. Their appeal was denied. 15 It was ruled that, pending approval of the BENHAR/RUBY plan, BENHAR had no authority to pay off FEBTC, one of RUBY's creditors. In prematurely implementing the BENHAR/RUBY plan, BENHAR defied the SEC Order declaring RUBY under suspension of payments and directing the management committee to preserve its assets. Petitioners RUBY and BENHAR, joined by Henry Yu and Yu Kim Giang, appealed to the Court of Appeals (CA-G.R. SP No. 18310). On August 29, 1990, the Court of Appeals affirmed the SEC ruling nullifying the deeds of assignment. 16 It also declared that its decision is final and executory as to RUBY and Yu Kim Giang for their failure to file their pleadings within the reglementary period. This Court affirmed the Court of Appeals' decision in G.R. No. 96675. 17 Earlier, on May 29, 1990, after the SEC en banc enjoined the implementation of BENHAR/RUBY Plan, RUBY filed with the SEC en banc an ex-parte petition to create a new management committee and to approve its revised rehabilitation plan (Revised BENHAR/RUBY Plan). Under the revised plan, BENHAR shall receive P34.068 Million of the P60.437 Million credit facility to be extended to RUBY, as reimbursement for BENHAR's payment to some of RUBY's creditors. The SEC en banc directed RUBY to submit the Revised BENHAR/RUBY Plan to its creditors for comment and approval. The petition for the creation of a new management committee was remanded for further proceedings to the SEC Hearing Panel. The Alternative Plan of RUBY's minority stockholders was also forwarded to the hearing panel for evaluation. On April 26, 1991, over ninety (90%) percent of RUBY's creditors objected to the Revised BENHAR/RUBY Plan and the creation of a new management committee. Instead, they endorsed the minority stockholders' Alternative Plan. At the hearing of the petition for the creation of a new management committee, three (3) members of the original management committee 18 opposed the Revised BENHAR/RUBY Plan on the following grounds: (1) the Revised BENHAR/RUBY Plan would legitimize the entry of BENHAR, a total stranger, to RUBY as BENHAR would become the biggest creditor of RUBY;

(2) the revised plan would put RUBY's assets beyond the reach of the unsecured creditors and the minority stockholders; and, (3) the revised plan was not approved by RUBY's stockholders in a meeting called for the purpose. However, on September 18, 1991, despite the objections of over 90% of RUBY's creditors and three (3) members of the management committee, the SEC Hearing Panel approved the revised plan and dissolved the existing management committee. It also created a new management committee and appointed BENHAR as one of its members. 19 In addition to the powers originally conferred to the management committee under P.D. No. 902-A, the new management committee was tasked to oversee the implementation by the Board of Directors of the revised rehabilitation plan for RUBY. Consequently, the original management committee, Lim, and the Allied Leasing Corporation appealed to the SEC en banc. On July 30, 1993, the SEC En Banc affirmed the approval of the Revised BENHAR/RUBY Plan and the creation of a new management committee. 20 To avoid any group from controlling the management of RUBY, the SEC appointed SEC lawyers Ruben C. Ladia and Teresita R. Siao as additional members of the new management committee. Further, it declared that BENHAR's membership in the new management committee is subject to the condition that BENHAR will extend its credit facilities to RUBY without using the latter's assets as security or collateral. Private respondents Lim, Allied Leasing Corporation and the original management committee moved for reconsideration. Petitioners, on the other hand, asked the SEC to reconsider the portion of its Order prohibiting BENHAR from utilizing RUBY's assets as collateral. On October 15, 1993, the SEC denied private respondents' motions for reconsideration. However, it granted petitioners' motion and allowed BENHAR to use RUBY's assets as collateral for loans, subject to the approval of the majority of all the members of the new management committee. 21 On appeal by private respondents, the Court of Appeals set aside 22 SEC's approval of the Revised BENHAR/RUBY plan and remanded the case to the SEC for further proceedings. It ruled that the revised plan circumvented its earlier decision (CA-G.R. SP No. 18310) nullifying the deeds of assignment executed by RUBY's creditors in favor of BENHAR. Under the revised plan, BENHAR was to receive P34.068 Million of the P60.437 Million credit facility to be extended to RUBY, as settlement for its advance payment to RUBY's seven (7) secured creditors. In effect, the payments made by BENHAR under the void Deeds of Assignment were recognized as payable to BENHAR under the revised plan. Petitioners' motion for reconsideration was denied. 23 Hence, this petition where petitioners aver that: I. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR, GRAVELY ABUSED ITS DISCRETION AND EXCEEDED ITS JURISDICTION WHEN IT WENT AGAINST THE FACTS AS FOUND BY THE SEC AND, THEREAFTER, SUBSTITUTED ITS JUDGMENT FOR THAT OF THE SEC. II. THE COURT OF APPEALS COMMITTED AN ERROR REVIEWABLE ON APPEAL AND ALSO A PROPER SUBJECT OF CERTIORARI WHEN IT ALLOWED PRIVATE RESPONDENTS TO FILE SEPARATE PETITIONS PREPARED BY LAWYERS REPRESENTING THEMSELVES AS BELONGING TO DIFFERENT LAW FIRMS. We find no merit in the petition. Petitioners first contend that, in reversing the SEC's approval of the Revised BENHAR/RUBY Plan, the Court of Appeals exceeded its jurisdiction and disregarded the SEC's expertise in resolving corporate controversies. The settled doctrine is that factual findings of an administrative agency are accorded respect and, at times, finality for they have acquired the expertise inasmuch as their jurisdiction is confined to specific matters. 24 Nonetheless, these doctrines do not apply when the board or official has gone beyond his statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion. 25 In Leongson vs. Court of Appeals, 26 we held: "once the actuation of the administrative official or administrative board or agency is tainted by a failure to abide by the command of the law, then it is incumbent on the courts of justice to set matters right, with this Tribunal having the last say on the matter." We hold that the SEC acted arbitrarily when it approved the Revised BENHAR/RUBY Plan. As found by the Court of Appeals, the plan contained provisions which circumvented its final decision 27 in CA-G.R. SP No. 18310, nullifying the deeds of assignment of credits and mortgages executed by RUBY's creditors in favor of BENHAR, as well as this Court's resolution in G.R. No. 96675, affirming said Court of Appeals' decision. Specifically, the Revised BENHAR/RUBY Plan considered as valid the advance payments made by BENHAR in favor of some of RUBY'S creditors. The nullity of

BENHAR's unauthorized dealings with RUBY's creditors is settled. The deeds of assignment between BENHAR and RUBY's creditors had been categorically declared void by the SEC Hearing Panel in two (2) orders issued on January 12, 1989 and March 15, 1989. 28 The dispositive portion of the Order, dated January 12, 1989, held: WHEREFORE, the motion for reconsideration of the Order dated October 7, 1988, insofar as it relates to the motion of Allied Leasing and Finance Corporation to cite for contempt and to annul deed of assignment is hereby GRANTED. . . . The Deed of Assignment of Receivables and Mortgages, Rights, Credits and Interest Without Recourse having been executed in violation of the Order dated December 20, 1988 is hereby declared NULL and VOID. SO ORDERED. The dispositive portion of the Order dated March 15, 1989, similarly provided: WHEREFORE, Mr. Yu Kim Giang and others are hereby found guilty of indirect contempt and a penalty of P500.00 each is hereby imposed on them. The Deed of Assignment of Receivables and Mortgages, Rights, Credits and Interest Without Recourse, in favor of Benhar International, Inc., by Florence Danon, Philippine Bank of Communication, Philippine Commercial International Bank, Philippine Trust Company and PCI Leasing and Finance Incorporated, having been executed in violation of the Order dated December 20, 1988 are hereby declared NULL and VOID. These orders were upheld by the SEC en banc 29 and the Court of Appeals. 30 In CA-GR SP No. 18310, the Court of Appeals ruled as follows: xxx xxx xxx 1) . . . when the Deed of Assignment was executed on May 30, 1988 by and between Ruby Industrial Corp., Benhar International Inc., and FEBTC, the Rehabilitation Plan proposed by petitioner Ruby Industrial Corp. for Benhar International Inc. to assume all petitioner's obligation has not been approved by the SEC. The Rehabilitation Plan was not approved until October 28, 1988. There was a willful and blatant violation of the SEC order dated December 1983 on the part of petitioner Ruby Industrial Corp., represented by Yu Kim Giang, by Benhar International Inc., represented by Henry Yu and by FEBTC . . . . 2) The magnitude and coverage of the transactions involved were such that Yu Kim Giang and the other signatories cannot feign ignorance or pretend lack of knowledge thereto in view of the fact that they were all signatories to the transaction and privy to all the negotiations leading to the questioned transactions. In executing the Deeds of Assignments, the petitioners totally disregarded the mandate contained in the SEC order not to dispose the properties of Ruby Industrial Corp. in any manner whatsoever pending the approval of the Rehabilitation Plan and rendered illusory the SEC efforts to rehabilitate the petitioner corporation to the best interests of all the creditors. 3) The assignments were made without prior approval of the Management Committee created by the SEC in an Order dated August 10, 1984. Under Section 6, par. d, sub. par. (2) of P.D. 902-A as amended by P.D. 1799, the Management Committee, rehabilitation receiver, board or body shall have the power to take custody and control over all existing assets of such entities under management notwithstanding any provision of law, articles of incorporation or by-law to the contrary. The SEC therefore has the power and authority, through a Management Committee composed of petitioner's creditors or through itself directly, to declare all assignment of assets of the petitioner Corporation declared under suspension of payments, null and void, and to conserve the same in order to effect a fair, equitable and meaningful rehabilitation of the insolvent corporation. 4) . . . . The acts for which petitioners were held in indirect contempt by the SEC arose from the failure or willful refusal by petitioners to obey the lawful order of the SEC not to dispose of any of its properties in any manner whatsoever without authority or approval of the SEC. The execution of the Deeds of Assignment tend to defeat or obstruct the administration of justice. Such acts are offenses against the SEC because they are calculated to embarrass, hinder and obstruct the tribunal in the administration of justice or lessen its authority. In view of the foregoing conclusion which has now been reached, it is not necessary to discuss at length or to determine other questions which are presented on record. It is sufficient to say that the facts as established by the evidence on records warrant a finding that petitioners are guilty of indirect contempt. The Order of the SEC is hereby AFFIRMED. This petition is DISMISSED with costs against the petitioners.

SO ORDERED. (emphasis ours) Petitioners insist that the Court of Appeals did not make a categorical statement in the dispositive portion of its decision in CA-G.R. SP No. 18310 that it was nullifying the deeds of assignment in favor of BENHAR. Allegedly, it merely stated that it is affirming the decision of the SEC. Petitioners cite Olac vs. Court of Appeals 31 where we held that the dispositive portion or the fallo constitutes the court's resolution in a given case, while the discussion in the body of the decision merely expresses the court's opinion. The contention has no merit. The principle laid down in Olac applies only when there is a conflict between the dispositive part (fallo) and the opinion of the court contained in the decision. Hence, in the execution of the court's judgment, the fallo should be considered as the final disposition of the case before it. Such conflict does not exist in the Court of Appeals' decision in CA-G.R. SP No. 18310. It is crystal clear that what the Court of Appeals affirmed in CA-GR SP No. 18310 was the nullity of the deeds of assignment in favor of BENHAR. In a minute resolution in G.R. No. 96675, we even sustained the Court of Appeals' decision in CA-GR SP No. 18310. 32 In any event, petitioners actively participated in the proceedings before the SEC and the Court of Appeals when private respondents sought the nullification of the subject deeds. Petitioners are, therefore, estopped from questioning anew the validity of the deeds of assignment executed by RUBY 's creditors in favor of BENHAR. Petitioners should know that it is not for a party to participate in the proceedings, submit his case for decision, accept the judgment if it is favorable to him but attack it for any reason when it is adverse. 33 Even the SEC en banc, in its July 30, 1993 Order affirming the approval of the Revised BENHAR/RUBY Plan, has acknowledged the invalidity of the subject deeds of assignment. However, to justify its approval of the plan and the appointment of BENHAR to the new management committee, it gave the lame excuse that BENHAR became RUBY's creditor for having paid RUBY's debts. We quote the relevant portion of the SEC's ruling, thus: Anent the contention that BENHAR should not take an active participation in the management of petitioner corporation, the same deserves scant consideration. While the Deeds of Assignment executed by creditors of Ruby in favor of Benhar were all declared null and void, the Revised Rehabilitation plan, as herein approved by the Commission, shows that Benhar will assign its credit lines/loan proceeds or will act as financier whereby it re-lends the contracted loan to Ruby thereby converting Benhar as a creditor of the petitioner corporation once the Rehabilitation Plan is implemented. In fact, as of March 31, 1990, it appears that Benhar had made some advance payments to some creditors of Ruby further strengthening its status as a creditor. We cannot, therefore, see any reason why Benhar should not sit in the management team to oversee the implementation of the Plan. For its part, the Court of Appeals noted that the approved Revised BENHAR/RUBY Plan gave undue preference to BENHAR. The records, indeed, show that BENHAR's offer to lend its credit facility in favor of RUBY is conditioned upon the payment of the amount it advanced to RUBY's creditors, thus: FUND SOURCING xxx xxx xxx 1.1. Deed of Assignment of Credit Facility (or Loan Proceeds) to be executed by Benhar in favor of Ruby, under pre-arrangement with China Banking Corporation or by any other creditor-banks, and upon payment by Ruby of such amount already advanced by Benhar. In fact, BENHAR shall receive P34.068 Million out of the P60.437 Million credit facility to be extended to RUBY for the latter's rehabilitation. Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation to its former position of successful operation and solvency. 34 When a distressed company is placed under rehabilitation, the appointment of a management committee follows to avoid collusion between the previous management and creditors it might favor, to the prejudice of the other creditors. All assets of a corporation under rehabilitation receivership are held in trust for the equal benefit of all creditors to preclude one from obtaining an advantage or preference over another by the expediency of attachment, execution or otherwise. As between the creditors, the key phrase is equality in equity. Once the corporation threatened by bankruptcy is taken over by a receiver, all the creditors ought to stand on equal footing. Not any one of them should be paid ahead of the others. This is precisely the reason for suspending all pending claims against the corporation under receivership. 35

Parenthetically, BENHAR is a domestic corporation engaged in importing and selling vehicle spare parts with an authorized capital stock of thirty million pesos. Yet, it offered to lend its credit facility in the amount of sixty to eighty millions pesos to RUBY. It is to be noted that BENHAR is not a lending or financing corporation and lending its credit facilities, worth more than double its authorized capitalization, is not one of the powers granted to it under its Articles of Incorporation. Significantly, Henry Yu, a director and a majority stockholder of RUBY is, at the same time, a stockholder of BENHAR, a corporation owned and controlled by his family. These circumstances render the deals between BENHAR and RUBY highly irregular. To justify its appointment in the new management committee and to dispute that it will become a creditor of RUBY only on account of the proposed assignment of its credit facility to RUBY, BENHAR avers that as early as December 27, 1988, it already lent one million pesos (P1,000,000.00) to RUBY for the latter's working capital. The submission deserves scant consideration. To start with, this argument was raised by BENHAR for the first time in its motion for reconsideration before the Court of Appeals. The settled rule is that issues not raised in the court a quo cannot be raised for the first time on appeal in this case, in a motion for reconsideration for being offensive to the basic rules of fair play, justice and due process. 36 Moreover, when RUBY initiated its petition for suspension of payments with the SEC, BENHAR was not listed as one of RUBY's creditors. BENHAR is a total stranger to RUBY. If at all, BENHAR only served as a conduit of RUBY. As aptly stated in the challenged Court of Appeals decision: 37 Benhar's role in the Revised Benhar/Ruby Plan, as envisioned by the majority stockholders, is to contract the loan for Ruby and, serving the role of a financier, relend the same to Ruby. Benhar is merely extending its credit line facility with China Bank, under which the bank agrees to advance funds to the company should the need arise. This is unlikely a loan in which the entire amount is made available to the borrower so that it can be used and programmed for the benefit of the company's financial and operational needs. Thus, it is actually China Bank which will be the source of the funds to be relent to Ruby. Benhar will not shell out a single centavo of its own funds. It is the assets of Ruby which will be mortgaged in favor of Benhar. Benhar's participation will only make the rehabilitation plan more costly and, because of the mortgage of its (Ruby's) assets to a new creditor, will create a situation which is worse than the present. . . . . We need not say more. On the second issue, petitioners charge that private respondents are guilty of forum-shopping. It appears that the three (3) private respondents filed separate petitions before the Court of Appeals upon receipt of the adverse ruling of the SEC en banc. Private respondent Miguel Lim commenced CA-G. R. SP No. 32404, thru its counsel Romulo Mabanta Beunaventura Sayoc and De los Angeles. For their part, private respondent Allied Leasing and the original management committee of RUBY, represented by Attorney Waiter T. Young, commenced CA-G.R. SP No. 32483 and CA-G.R. SP No. 32469, respectively. In CA-G. R. SP No. 32483, Atty. Young signed for and in behalf of the law firm Ocampo Quiroz Pesayco and Associates, while in CA-G.R. SP No. 32469, Atty. Young signed for the law firm Quiroz and Young. In both petitions, he used the same business address Allied Bank Center, 6754 Ayala Avenue, Makati City. We hold that private respondents are not guilty of forum-shopping. In Ramos, Sr. vs. Court of Appeals, 38 we ruled: The private respondents can be considered to have engaged in forum shopping if all of them, acting as one group, filed identical special civil actions in the Court of Appeals and in this Court. There must be identity of parties or interests represented, rights asserted and relief sought in different tribunals. In the case at bar, two groups of private respondents appear to have acted independently of each other when they sought relief from the appellate court. Both group sought relief from the same tribunal. It would not matter even if there are several divisions in the Court of Appeals. The adverse party can always ask for the consolidation of the two cases. . . . In the case at bar, private respondents represent different groups with different interests the minority stockholders' group, represented by private respondent Lim; the unsecured creditors group, Allied Leasing & Finance Corporation; and the old management group. Each group has distinct rights to protect. In line with our ruling in Ramos , the cases filed by private respondents should be consolidated. In fact, BENHAR and RUBY did just that in their urgent motions filed on December 1, 1993 and December 6, 1993, respectively, they prayed for the consolidation of the cases before the Court of Appeals.

IN VIEW OF THE FOREGOING, the instant petition is DISMISSED for lack of merit. The Court of Appeals' Decision, dated March 31, 1995, and its Resolution, dated March 12, 1996, in CA-G.R. SP Nos. 32404, 42469 and 32483 are AFFIRMED. The case is remanded to the Securities and Exchange Commission for further proceedings. Costs against petitioners. SO ORDERED.

G.R. No. 109849 February 26, 1997 MAXIMINO FUENTES, petitioner, vs. THE HON. COURT OF APPEALS, THIRTEENTH DIVISION, AND VIRGILIO UY, BRIGIDO SAGUINDANG, LEONCIO CALIGANG, ET AL., respondents.

PANGANIBAN, J.: In deciding this appeal, the Court reiterates the oft-stated doctrine that factual findings of the Court of Appeals affirming those of the trial court are binding on this Court unless there is a clear showing that such findings are tainted with arbitrariness, capriciousness or palpable error. This is a petition under Rule 45 seeking a reversal of the Decision 1 of the Court of Appeals 2 promulgated on March 22, 1993, in CA-G.R. SP No. 29910. The Antecedent Facts The facts of the case as gleaned from the respondent Court of Appeals' Decision are as follows: (Herein petitioner) Maximino Fuentes and (herein private respondents) Virgilio Uy, et al. are owners of adjoining parcels of land situated in Dela Paz, Clarin, Misamis Occidental. The (herein petitioner's) land declared in his name is identified as Lot No. 1358, Pls 707 while that of the defendant Virgilio Uy, titled in the latter's name, is identified as Lot No. 1357. The boundary lines of the adjoining lands had been relocated twice by Engineer Armelito Amores in surveys conducted before the case for forcible entry was filed. When the case was already filed, further relocation surveys were conducted, this time, by Engineer Norberto lyog thru a court order on the litigated portion consisting of 411 square meters which according to the plaintiff was forcibly taken and entered into by (herein private respondents). In hearing the case, the MCTC of Clarin-Tudela stated the issues to be as follows: 1. Was there an act of dispossession effected by the defendants on the disputed property whereby the plaintiff was dispossessed of the disputed property? and 2. To whom did the area of 41 1 square meters belong? The trial court making a review of the evidence on record held that the (herein private respondents) have superior evidence to disprove the allegations of (herein petitioner) and on the basis of which, it found that the (herein private respondents) have not committed the acts complained of by (herein petitioner), in the main pointing to the statement of the witness Alfredo Dantes as reflected in the stenographic notes particularly indicated as tsn, p. 46, proceedings of February 8, 1991, wherein said

witness appeared to have testified that he bought the land from the heirs of the original owner, one Gadiane, which he improved gradually by putting up a dike which in effect was only an improvement of an already existing dike and in 1976, he had entered into an agreement with (herein private respondents) to develop the property on a sharing basis which finally culminated in his selling the said area in 1980 to the (herein private respondents). What appeared to have impressed the trial court most is expressed in its statement that the (herein petitioner) should have questioned the action of the (herein private respondents) in improving the dike and having it fenced, and also, why it was only in 1987 when he tried to restrain the (herein private respondents) when the same dike had existed many years before. The part of the decision in connection with said questions of the court is herein quoted: "This court finds it strange for the (herein petitioner) for him to question the action of the defendant in fencing the dikes. If it appeared to him that the dike fenced by the defendant which is the same dike existing when Dantes bought the property from Gadiane really belonged to him, why did he not question the same many years before? Yet, all the time when Dantes, since 1970 and later the (herein private respondent) in 1976, made improvements on the dike, the plaintiff did not make any adverse move to restrain them. It was only in 1987 when he made the initial move of trying to restrain (herein private respondent) which prompted the latter to cause a (sic) relocation surveys which were conducted by Engr. Amores twice. Prescinding from the foregoing findings, the trial court said it found nothing wrong for the (herein private respondents) to have fenced the dike after the relocation survey conducted by Engr. Amores which the (herein petitioner) had attended and further stated that the act of fencing the dike and cutting the nipa palms did not violate the property rights of the (herein petitioner) for the (herein private respondents) only acted to assert what properly belongs to them and on the basis of (the) Commissioner's Report more or less indicating the foregoing circumstances, it held that there was in fact no forcible dispossession of property and that further, the area of 411 square meters under dispute factually belongs to (herein private respondent) Virgilio Uy.. The decision of the MCTC of Clarin-Tudeia was appealed by the (herein plaintiff) and the RTC Ozamis City resolved to affirm the decision of the MCTC deleting only the monetary award therein granted in favor of the (herein private respondents). The (herein) petitioner in the case before (the respondent Court of Appeals) has raised two (2) purported errors of the court below thus: "That the honorable Regional Trial Court, Branch 15-A, Ozamiz City, gravely erred in deciding that (herein petitioner) had no evidence to support the allegation that (herein private respondents) entered the portion in question by force and intimidation. That the honorable Regional Trial Court Branch 15-A, Ozamiz City, erred in sustaining that the (herein private respondents) did not commit any act constituting forcible entry." 3 The Issue Hence, petitioner Maximino Fuentes filed the present six-page petition alleging the same assignment of errors raised before the Court of Appeals as follows: 1. That the Honorable Regional Trial Court, Branch 15-A, Ozamiz City, gravely erred in deciding that plaintiff had no evidence to support the allegation that defendants entered the portion in question by force and intimidation. 2. That the Honorable Regional Trial Court, Branch 15-A, Ozamiz City, erred in sustaining that the defendants did not commit any act constituting forcible entry. 4 In his Memorandum, the petitioner consolidated these into a single issue: Who is in actual, physical and prior possession of the portion in question? The Court's Ruling

The petition for review is unmeritorious. Jurisprudence teaches us that "(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals . . . is limited to the review and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed conclusive. As such this Court is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below. This rule, however, is not without exceptions." 5 The findings of fact of the Court of Appeals, which are as a general rule deemed conclusive, may admit of review by this Court: 6 (1) when the factual findings of the Court of Appeals and the trial court are contradictory; (2) when the findings are grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is grave abuse of discretion in the appreciation of facts; (5) when the appellate court, in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record. After a thorough review of the case at bench, the Court finds that the petition raises no substantial question of law. The question raised as to who has prior actual possession over the contested portion of land is patently a question of fact beyond the pale of Rule 45 of the Rules of Court which mandates that only questions of law be raised in the petition. 7 Moreover, petitioner utterly failed to show the presence of any of the previously mentioned exceptions to justify the Court's review of the factual findings of the Court of Appeals. On the contrary, the factual findings and conclusion of the Metropolitan Circuit Trial Court, the Regional Trial Court, and Court of Appeals in the instant case regarding the issue raised in this petition are consistent and backed up by the extant evidence. "Prevailing jurisprudence uniformly holds that findings of facts of the trial court, particularly when affirmed by the Court of Appeals, are binding upon this Court. 8 All in all, the petition, viewed in its entirety, sorely fails to demonstrate any reversible error committed by the respondent Court of Appeals. WHEREFORE, premises considered, the instant petition is hereby DISMISSED for utter lack of merit. Double costs against petitioner. SO ORDERED.

G.R. No. 92869 October 18, 1990

ZENAIDA ORCINO, vs. CIVIL SERVICE COMMISSION and RUFINA B. MOTI, respondents.

petitioner,

The petitioner questions the resolutions of the Civil Service Commission (CSC) which reversed the findings of the CSC Merit Systems Board and the Department of Education, Culture, and Sports on the validity of the private respondent's reassignment. She contends that if the CSC resolutions are sustained, it would result in the "triumph of discourtesy and insubordination over that of order and efficiency in the performance of official duty." (Rollo, p. 2) On the other hand, the private respondent contends that the declaration of excess teacher in the Malvar Elementary School, her transfer by the Division Superintendent of City Schools to another school, and other acts of harassment constitute removal not for cause but because of personal ill-motives of the petitioner. The comments filed by the private respondent and the Civil Service Commission are treated as answers and the petition is decided accordingly. Significantly, the Solicitor General agrees with the petitioner and recommends that the CSC resolutions be set aside. Rufina B. Moti was appointed "National (City) Elementary Grades Teacher" in the Division of City Schools, Manila on September 1, 1970. Her status was "Regular (Permanent) Reappointment." The position to be filled was "Item No. 15702, RA 4092 (Intermediate). The controversy which led to this case arose at the beginning of school year 1984-1985 when the student population of Malvar Elementary School significantly decreased. Classes in the intermediate level were reduced from eleven to ten resulting in an overall excess of one teacher. There was, however, a vacancy in Grade IV in the primary level. Following the "Guidelines Governing Excess Teachers", Circular No. 10, Series of 1982 of the Division of City Schools, the 58 teachers of Malvar Elementary School were evaluated. The performance rating showed that Rufina B. Moti ranked No. 55 with Rebecca Estrella, Elena Morelos, and Rosario Alarcon ranking Nos. 56, 57, and 58 respectively. When length of service and relative fitness were added to performance ratings, Rufina B. Moti ranked last. She was, therefore, declared as excess teacher. When efforts to find an acceptable position in the intermediate grades were unsuccessful, she was assigned to the Grade IV class. Respondent Moti refused to accept the new assignment and insisted on any class provided it was in the intermediate grades. The refusal prompted petitioner Zenaida Orcino, principal of the school, to recommend that Ms. Moti be reassigned to another school. The then Superintendent Josefina Navarro assigned the respondent first to Lakandula Elementary School and later, to Moises Salvador Elementary School. Instead of complying with the order of the Division Superintendent, respondent Moti filed a protest with the Ministry of Education, Culture and Sports (MECS). The MECS sustained the Superintendent's order and ruled that Ms. Moti's transfer to Moises Salvador Elementary School was justified by the facts and the law. The respondent decided to go to the Civil Service Commission. The CSC Merit Systems Board ruled that the reassignment of Ms. Moti to another school was in order and dismissed her complaint. On appeal to the Commission itself, the CSC set aside the orders of the Merit Systems Board and ordered Ms. Moti restored to her former position of Grade VI classroom teacher. Disciplinary action against Orcino was also ordered. Hence, this petition. The petitioner raises the following arguments in her petition: I THE HONORABLE CIVIL SERVICE COMMISSION GRAVELY ERRED IN INTRODUCING MATTERS BELIED BY THE EVIDENCE ON RECORD. II THE COMMISSION A QUO GRAVELY ERRED IN ORDERING THAT APPROPRIATE DISCIPLINARY ACTION' BE METED ON PETITIONER ZENAIDA ORCINO WHO ACTED WITHIN THE SCOPE OF HER AUTHORITY AND SUSTAINED BY HER SUPERIORS. III

THE COMMISSION A QUO REVERSIBLY ERRED IN DEPRIVING PETITIONER ZENAIDA ORCINO THE OPPORTUNITY TO REBUT THE CHARGES OF PRIVATE RESPONDENT IN THE LATTER'S APPEAL WITH THE COMMISSION. IV THE COMMISSION A QUO ERRED IN REINSTATING RUFINA MOTI DESPITE HER PROVEN ACTS OF INSUBORDINATION AND ADAMANCE CLEARLY INIMICAL TO THE SERVICE. (Petition, pp. 5-6) As a rule, the Court respects the factual findings of the Court of Appeals and quasi-judicial agencies like the CSC, giving them a certain measure of finality. However, the rule is not without clearly defined exceptions. Findings of facts of the Court of Appeals (in this case, the Civil Service Commission) are not conclusive and may be set aside when: xxx xxx xxx ... (1) the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; (5) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admission of both appellant and appellees [Roque v. Buan, 21 SCRA 648 {1967}]; (6) the findings of facts of the Court of Appeals are contrary to those of the trial court; (7) said findings of facts are conclusions without citation of specific evidence on which they are based; (8) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents [Garcia v. CA, 33 SCRA 622 {l970}]; and (9) when the finding of fact of the Court of Appeals is premised on the absence of evidence and is contradicted by evidence on record [Salazar v. Gutierrez, 33 SCRA 243 {1970}]. (Tolentino v. De Jesus, 56 SCRA 167, 172 [1974]) In Insular Life Assurance Co. Ltd. Employees Association - Natu v. Insular Life Assurance Co. Ltd.(76 SCRA 50 [1977]), we ruled that factual findings of a quasi-judicial institution which are not supported by substantial and credible evidence do not bind this Court, e.g. the findings and conclusions have no basis in the records or are contrary to the evidence on record or the factual determinations of an appellate body are contrary to those of the initial fact-finding agency. (See also San Miguel Corp. v. National Labor Relations Commission, 128 SCRA 180 [1984]; Cuales v. National Labor Relations Commission, 121 SCRA 812 [1983]; Chong Guan Trading v. National Labor Relations Commission, 172 SCRA 831 [1989]; Villamor v. Court of Appeals, 162 SCRA 574 [1988]; Ongsiako v. Intermediate Appellate Court, 152 SCRA 627 [1987]; Metro Port Service, Inc. v. Court of Appeals, 131 SCRA 365 [1984]; and Fireman's Fund Insurance Co. v. Metro Port Service, Inc., G.R. No. 83613, February 21, 1990) In this particular case, both the Regional Director and the Minister of the MECS and CSC's own Merit System's Board sustained the recommendations made by the petitioner and upheld the actions of the Division Superintendent of City Schools. We have examined the records carefully and agree with the Solicitor General that the questioned CSC resolutions are not supported by the evidence on record. There can be no question that the decreased enrollment in the Malvar Elementary School led to a reduction of classes. Faced with an excess of teachers it was the duty of the petitioner as school principal to recommend a solution to the problem. There is no factual basis for the CSC conclusion that the reassignment of respondent Moti to another class or another school violated her security of tenure and the statutory restriction that any reassignment should not involve a reduction in rank, status or salary. A reassignment from Grade VI to Grade IV involves no reduction in rank, status, or salary. There is no showing in the records that there is less honor in teaching Grades I to IV than in teaching Grades V to VI. It is erroneous for the CSC to even intimate that an intermediate teacher is demoted when asked to teach a lower grade. The best teachers should welcome assignments to teach Grade One as this is where young minds need the best guidance and inspiration from talented and dedicated mentors. In this case, the reassignment was not only justified but also necessary. As to whether the transfer from one school to another was disciplinary, the records show that respondent Moti was appointed "National (City) Elementary Grades Teacher" in the Division of City Schools, Manila. (Annex 1, Petition; Rollo, p. 88) The Solicitor General correctly observes that her appointment is without specific station and does not specify any assignment as Grade Vl teacher. As Elementary Grades Teacher, she could be assigned to any public elementary school in Manila and ordered to teach any Grade or subject within her competence. The entries in the lower half of her appointment paper, alongside and below the signature of the appointing authority are merely informative, specifying where she would be assigned and stating some personal data. The Solicitor General

states that "these words do not constitute the appointment." (Manifestation in Lieu of Comment, p. 16) Among them are - Position to be filled: Item No. 15-702, Page No. 303, RA 4092 (Intermediate); Authorized Salary Range 35, Authorized Salary Rate 3264 and such entries as title, place, and date of teacher's examination, maiden name, performance rating, highest educational attainment, last station, who recommended her, etc. (Rollo, p.88) The respondent cannot rely on her initial assignment to fill a specific vacancy in the Intermediate Grades in a particular school as giving her a vested right to that item. She can be assigned to any grade anywhere in the City of Manila in the best interests of the service. Neither can the alleged length of experience of the respondent strengthen her case. The CSC finding that Ms. Moti taught Grade VI for 13 years is pointed out by the Solicitor General as contradicted by the evidence. It was only in 19831984 or the year before her questioned transfer that she was assigned to Grade VI-2. (Manifestation in Lieu of Comment, p. 14) The CSC disregarded the record before it-the revised check list to determine the allotment of teachers based on number of classes, the maximum teaching loads in specific subject areas per teacher, the number of subject preparations, and the table on how the number of classroom and special teachers for a certain number of pupils and grades is determined. The records show that all relevant factors were considered when MECS and the Merit Systems Board reviewed the Superintendent's action and sustained it. (See Original Records, pp. 48-65) There are other findings of the CSC which are contrary to the records. The CSC stated that there could have been no reduction of intermediate classes from eleven (11) to ten (10) because in 1984-1985, there were still the same five sections in Grade VI. This is non-sequitur. "Intermediate" consists of Grades V and VI, not Grade VI alone. Moreover, teachers in those grades teach according to subject areas instead of teaching all subjects in one class of one grade. This matter was thoroughly studied by the Division Superintendent and she was not misled on the number of classes and teachers in the entire school before she issued the appointments and transfer orders. There is likewise nothing arbitrary in the selection of the respondent as "excess" teacher. She ranked 58th out of 58 teachers evaluated for performance, length of service, and relative fitness. The CSC found something wrong in the transfer of Merly Evangelista to Malvar Elementary School and the reassignment of a provisional substitute teacher as elementary grade teacher. It also questioned why respondent Moti was reassigned to Grade IV and then transferred to two other schools in June and July, 1984. The records show that when Ms. Moti became an excess teacher and pending her assignment to Grade IV, she was asked to do office work, library work, and other assignments. There is nothing wrong in this. She could not be twiddling her thumbs while being paid her usual salaries. She was given her choice of a morning Grade IV class, with three other teachers yielding to her. When she refused, another teacher was assigned to the morning class. When she also turned down the remaining afternoon class, another teacher was appointed. Precisely, the reassignments and the appointments subject of her complaints were prompted by the changes in school population and her stubborn refusal to obey lawful orders. A cooperative attitude and a certain degree of flexibility are required of all who profess to be educators. The CSC found personal motives, bias, and injustice behind the petitioner's acts. That there is bad blood between the petitioner and the private respondent is apparent from the records. On June 27, 1984 or one day before the petitioner recommended to Superintendent Navarro that Ms. Moti be declared an "excess teacher", the latter filed a complaint with the Tanodbayan alleging among others that Ms. Orcino was collecting P1.00 each from teachers who failed to sign the city share payrolls and P10. 00 each for the purchase of an image of the Sto. Nino for the school premises. This was, however, immediately denied by some teachers who claimed that there were contributions for whoever was following up their payrolls at City Hall and for the Sto. Nino, but these were purely voluntary on the teachers' initiative and Ms. Orcino had nothing to do with them. The complaint was dismissed by the Tanodbayan on March 20, 1985 (Original Records, pp. 4-9; pp. 93-96) On the other hand, Ms. Orcino filed also on June 28, 1984, a complaint with the Superintendent of City Schools against Ms. Moti charging her with non-cooperation in specified school activities, reading newspapers during rehearsals for graduation exercises even with the Principal and Assistant Principal around, talking and laughing during baccalaureate mass to the annoyance of the priest, refusal to submit lesson plan and record book and to sit with the evaluators of the performance ratings and other acts of defiance of specified school regulations. The charges were found valid and Director Modesta G. Boquiren of the MECS National Capital Region fined Ms. Moti the equivalent of five (5) days salary. (Original Records, pp. 38-47)

The private respondent charged Ms. Orcino with coercing and embarrassing her and telling her to stop attending meetings of teacher associations, cease making representations for better professional and economic benefits of teachers, avoid joining delegations to Malacanang for the upgrading of teachers' benefits, etc. Significantly, in all these charges and counter charges, the petitioner was sustained by the Division Superintendent, Regional Director, Department Head, and CSC Merit Systems Board. Only the CSC arrived at different findings without, as earlier stated, any factual basis on record for its conclusions. At any rate, even assuming that the CSC is correct and that its findings are not based on surmises and presumptions, there is no explanation why the petitioner, a purely recommendatory authority should be the one penalized and disciplined while the Superintendent of City Schools who ordered the transfer and the higher MECS authorities who did not reverse it, remain free of blame. If there was any abuse of authority or arbitrariness, the Division Superintendent of City Schools who makes all the appointments, transfers, and other personnel action should have been charged and not the Principal. The Superintendent could have rejected the recommendation to transfer Ms. Moti and ordered her retention in Malvar Elementary School and the petitioner would have been bound to obey. As earlier stated, an appointment as "Elementary Grades Teacher" in Manila means that the teacher can be assigned to any school in Manila. The choice of grade, subject area, primary or intermediate level, school, and district is pure policy and the determination as to the capabilities of the teacher and the assignment where she would be most useful are, in the absence of arbitrariness or whimsicality, best left to the administrators concerned. In Brillantes v. Guevarra (27 SCRA 138 [1969]) this Court held that an excellent principal in a model and centrally located school may be transferred to a struggling school in a less attractive community to improve standards and to "spur the improvement of small schools" (at p. 149). In other words, the interest of the service may dictate that the worst school should get the best principal. The same principle applies to classroom teachers. No one has the vested right to balk at difficult assignments ordered for the best interests of the service. There would be nothing disciplinary in this and other transfers. Because of the bad blood existing between Ms. Moti and Ms. Orcino, the Division Superintendent of schools had to choose between transferring one or the other. Since Ms. Moti was clearly at fault, Superintendent Navarro exercised her sound discretion in reassigning the private respondent to another school. We see no error, much less grave abuse of discretion in her choice. Our ruling in Sta. Maria v. Lopez (31 SCRA 637, 652-654 [1970]) on transfers that are valid and which do not amount to removal squarely applies: xxx xxx xxx 4. Concededly transfers there are which do not amount to removal. Some such transfer's can be effected without the need for charges being preferred, without trial or hearing, and even without the consent of the employee. The clue to such transfers may be found in the "nature of the appointment." were the appointment does not indicate a specific station, an employee may be transferred or reassigned provided the transfer affects no substantial change in title, rank and salary. Thus, one who is appointed principal in the Bureau of Public Schools and is designated to head a pilot school may be transferred to the post of principal of another school. And the rule that outlaws unconsented transfers as anathema to security of tenure applies only to an officer who is appointed - not merely assigned to a particular station. Such a rule does not prescribe a transfer carried out under a specific statute that empowers the head of an agency to periodically reassign the employees and officers in order to improve the service of the agency. The use of approved techniques or methods in personnel management to harness the abilities of employees to promote optimum public service cannot be objected to. Neither does illegality attach to the transfer or reassignment of an officer pending the determination of an administrative charge against him, or to the transfer of an employee from his assigned station to the main office, effected in good faith and in the interest of the service pursuant to Section 32 of the Civil Service Act. And even assuming that Ms. Moti was not at fault, it is not what pleases her but the best interests of the service which form the primary criterion. In labor cases where relations between an employee and his employer are so strained or where an employee would no longer be useful because his employer has lost trust and confidence in him, this Court has ordered full backwages plus separation pay in lieu of reinstatement even where the employee was eventually cleared of the charges. Paramount are the continued health and best interests of the company and all its other employees. (Bautista v. Inciong, 158 SCRA 665 [1988]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]; Quezon Electric Cooperative v. National Labor Relations Commission, 172 SCRA 88 [1989]; Philippine Associated Smelting and

Refining Corp. v. National Labor Relations Commission, 174 SCRA 550 [1989]; and Citytrust Finance Corp. v. National Labor Relations Commission, 157 SCRA 87 [1988]). The CSC should adopt the reasons behind the above policy when considering the setting aside of reassignment or transfer orders. Where the discipline and morale of a teaching force, the peace and quiet essential to the learning process, the welfare of the student body, and the educational standards of a school require that unseemly wranglings and squabbles should be abated, remedial acts such as those questioned in this case should be sustained. It is not the welfare of the parties alone which is considered when disciplinary action involving classroom teachers or school principals is taken. The school children, their parents, other teachers, the community and nation are all affected by what goes on in a school. Their interlocking interests dictate that prudence and caution should be exercised when nullifying remedial transfers and other corrective actions. Except when there is strong showing of willful and arbitrary conduct, the school administrators deserve all the assistance they can get in maintaining discipline in their schools and solving the problems of education. There is no showing of arbitrary or ill-motivated conduct in this case. The resolutions of the respondent CSC are, therefore, tainted by grave abuse of discretion. WHEREFORE, the petition is hereby GRANTED. The questioned RESOLUTIONS of the Civil Service Commission are SET ASIDE. The private respondent's COMPLAINT is DISMISSED. The Temporary Restraining Order dated August 7, 1990 is made PERMANENT. SO ORDERED.

G.R. No. 156652 October 13, 2005 DR. BENITA F. OSORIO, Petitioner vs. HON. ANIANO A. DESIERTO, as Ombudsman, HON. PRIMO C. MIRO, as Deputy Ombudsman for the Visayas, HON. VIRGINIA PALANCA-SANTIAGO, Ombudsman Director for the Visayas, and HON. SAMUEL MALAZARTE, Ombudsman Investigating Prosecutor for the Visayas, Respondents. This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the 13 December 2002 Decision1 of the Court of Appeals in CA-G.R. SP No. 67511 which affirmed in toto the 12 January 2001 Resolution of the Office of the Ombudsman-Visayas in OMB-VIS-Crim-98-0811, as well as the order dated 17 July 2001 denying petitioners motion for reconsideration.

This instant petition originated from a letter-complaint dated 27 January 1998 by Beatriz L. Tenorio, addressed to the Ombudsman Aniano A. Desierto, accusing petitioner Dr. Benita Osorio, principal of Dr. Cecilio Putong National High School (formerly Bohol National High School) of committing the following acts2: 1. Failure to account for the rentals of the school facilities; 2. Non-remittance to the school trust funds of money from the sale of old newspapers to the school and appropriation of the said amount to herself; 3. Ready-made bidding with supplier of school-needed materials; 4. Double mandatory collection supposedly for the Boy and Girl Scouts of the Philippines, from all students of Bohol National High School and non-remittance of all the contributions to BSP and GSP; 5. Treatment of money from the school canteen as her personal money; 6. Conspiracy with treasure hunters in digging under the main ground of the school building for Yamashita treasures; 7. Falsification of travel document to claim bigger representation allowances; and 8. Other improper acts.

Acting on the complaint, the Office of the Ombudsman-Manila, on 29 January 1998, requested the National Bureau of Investigation (NBI) to conduct an investigation to verify the alleged anomalies at the Dr. Cecilio Putong National High School. Without delay, the NBI conducted an investigation. On 11 February 1998, the NBI submitted the results of the investigation which yielded the following findings: a) that petitioner Osorio authorized the sale of newspapers, but did not remit the proceeds thereof to the school; and b) that she issued a memorandum through which students were charged more than the allowable fees for their membership with Boy and Girl Scouts of the Philippines. The NBI suggested to the Office of the Ombudsman-Visayas that it ask the assistance of the Commission on Audit (COA) since the reported irregularities necessitated the conduct of proper auditing. On 17 February 1998, the Office of the Ombudsman-Manila requested audit specialists from the COA to conduct a thorough investigation on the alleged anomalies at the Dr. Cecilio Putong National High School. Meanwhile on 06 March 1998, the NBI submitted a follow-up report reiterating the findings stated in its previous report. On 05 June 1998, COA auditors Anita G. Quitara, Ma. Violeta Luala Luta and Diana G. Tabinas submitted the report of their findings. The NBI and COA findings were forwarded by the Office of the Ombudsman-Manila to the Office of the OmbudsmanVisayas for appropriate action. The adverse findings made by the COA were summarized by the Office of the Ombudsman-Visayas as follows3: Allegation no. 1: "No accounting of rentals of the school facilities." COA findings disclosed that no official receipt (OR) was issued by the school from the rentals of its facilities and as such no recording were reflected in the books. Allegation no. 2: "Money from the sale of old newspapers was not remitted to the school trust funds but pocketed by Dr. Benita Osorio" Proceeds from the sale of old newspapers totaling P2,621.75 were not receipted, recorded and accounted for in the books of the agency, instead these were allegedly turned over to the school principal. Allegation no. 3: "Practice ready-made bidding with supplier of school-needed materials" Supplies and materials were purchased from the same supplier and were delivered before the canvass papers were prepared, thereby casting doubts as to the regularity of the procurement. Allegation no. 4: "Double mandatory collection of BSP and GSP membership of all students of BNHS, and not all contribution were remitted to BSP and GSP but pocketed by Dr. Benita Osorio"

(i) students were assessed for membership fees of Girl and Boy Scouts of the Philippines in excess of the rates authorized by DECS Order No. 27 and regardless of gender. The total amount irregularly collected was P202,282.00. (ii) An additional fee of P1.00, or a total of P698 was collected from the fourth year students in the school year 19971998 without a stated purpose and authority from the DECS. Further, the donation paid by all students for the PNRC was in excess of the rate authorized by the DECS and actually remitted to the PNRC, resulting in excessive collection of P15,810.00. Allegation no. 5: "Money of the school canteen was treated as her personal money" Although recorded in the books as Trust Liability, collections from the canteen operations were not remitted intact, instead, daily expenses/purchases were deducted therefrom. Likewise, expenses incurred for the canteen operations totaling P269,890.92 were not recorded in the books. Further, a cash book was not maintained to record the total sales and expenses incurred during the day, hence, the actual sales for the day could not be ascertained. Allegation no. 6: "Conspiring with treasure hunters in digging under main school building for Yamashita treasures" No adverse findings. Allegation no. 7: "Falsification of travel document to claim representation allowance" This allegation could not be confirmed because the amount of daily per diem claimed was in accordance with existing regulations. Allegation no. 8: "Other improper acts" MOOE (Maintenance and Other Operating Expenses) funds were utilized in the purchase of construction materials totaling P82,717.75 for the construction of a modern guardhouse, in violation of Section 145 of GAAM, Vol. I, while the beautification projects costing P43,349.50 were given priority instead of the repair of the dilapidated windows and classrooms, resulting in the wasteful utilization of government funds. After evaluating the report of the COA auditors, the Office of the Ombudsman-Visayas was convinced that allegations no. 1 to no. 4 were duly substantiated while the rest of the allegations were not. It found prima facie case of five (5) counts of Malversation of Public Funds against petitioner on the proceeds of the sale of the schools old newspapers on five occasions, i.e., on 15 March 1993, 01 September 1997, 02 December 1997, 11 December 1997 and 07 January 1998. It also found prima facie evidence for violations of Section 3(e) of Republic Act No. 3019, two (2) counts for the alleged irregularity in the purchase of school supplies, as evidenced by the purchase orders issued by petitioner dated 09 July 1997 and 16 July 1997, and another three (3) counts in relation to the assessment for membership fees of the Girl and Boy Scouts of the Philippines, which was in excess of the rates authorized under the Department of Education Culture and Sports Order No. 27. Petitioners co-respondent, Mr. Nestor Robles, Supply Officer of the said school, was also found to have committed four (4) counts of Malversation of Public Funds in relation to his failure to account for the proceeds of the rentals of the school facilities. It docketed the criminal case as OMB-VIS-CRIM-98-0811. Based on the same findings the Office of the Ombudsman also filed an administrative case against petitioner which was docketed as OMB-VIS-ADM-98-0617. Thereafter, the Office of the Ombudsman-Visayas directed the COA investigating auditors to submit a sworn affidavit of their report and additional evidence necessary for the preliminary investigation of the cases.4 On 17 December 1998, the investigating auditors submitted a sworn affidavit. In an order dated 27 January 1999, the Office of the Ombudsman-Visayas issued an order placing petitioner and Mr. Nestor Robles under preventive suspension. On 05 February 1999, the Office of the Ombudsman-Visayas ordered petitioner and Mr. Nestor Robles to file their respective counter-affidavits to the complaint. On 01 March 1999, upon receipt of the order to file counter-affidavit and the order of preventive suspension, petitioner filed with the Office of the Ombudsman-Visayas a Joint Motion for Reconsideration and Recall of the Order of Preventive Suspension. Later, on 15 March 1999, petitioner and co-respondent Robles submitted their respective counter-affidavits, denying participation in the alleged irregularities. In a resolution dated 12 January 2001, the Office of the Ombudsman-Visayas found probable cause against petitioner for five (5) counts of Malversation of Public Funds and five (5) counts of violations of Section 3(e) of Rep. Act No. 3019, as amended. Prima facie evidence was also found against Mr. Nestor Robles for four (4) counts of malversation of public funds. On 07 March 2001, petitioner filed with the Office of the Ombudsman-Visayas a motion for reconsideration and the Deferral of the Filing or Recall of the Filed Information.

Meanwhile, the necessary Informations were filed against the petitioner and Robles before the Regional Trial Courts of Tagbilaran City, Branches 4 and 47, respectively. Their respective arraignments were both deferred on the basis of pending Motions for Reconsideration before the Office of the Ombudsman-Visayas. The Office of the Ombudsman-Visayas denied petitioners motion for reconsideration in its order dated 17 July 2001. This denial prompted petitioner to file before the Court of Appeals a Petition for Certiorari under Rule 65 of the Rules of Court interposing the following grounds: 1. Respondents committed abuse of discretion when it ruled that they no longer needed to conduct clarificatory hearing considering that the conduct of the same is discretionary on their part. 2. Respondent committed abuse of discretion in filing the questioned information considering that there is want of evidence establishing probable cause against herein petitioner. In a decision dated 13 December 2002, the Court of Appeals dismissed the petition and affirmed in toto the Resolution dated 12 January 2001, as well as the order dated 17 July 2001 of the Ombudsman. Hence, the instant appeal by certiorari. Petitioner raises the following issues: 1. Whether the Court of Appeals is correct in ruling that the Honorable Office of the Ombudsman did not commit any grave abuse of discretion when it opted not to conduct a clarificatory hearing in the case of herein petitioner. 2. Whether the Court of Appeals erred in ruling that the other issues raised by herein petitioner on certiorari are purely questions of evidence and not of law. At the outset, it must be pointed out that the remedy availed by petitioner is flawed. The title of this petition shows that petitioner filed the petition under Rule 45 of the Rules of Court. The remedy from resolutions of the Ombudsman in preliminary investigations of criminal cases is a petition for certiorari under Rule 65. In Estrada v. Desierto,5 we held that the remedy of aggrieved parties from resolutions of the Office of the Ombudsman finding probable cause in criminal cases or non-administrative cases, when tainted with grave abuse of discretion, is to file an original action for certiorari with this Court and not with the Court of Appeals. By availing of the wrong remedy, the petition should be dismissed outright. Nevertheless, we will consider the present petition as one filed under Rule 65 of the Rules of Court since a perusal of the contents reveals that petitioner is imputing grave abuse of discretion on the part of the Office of the Ombudsman when it issued the Resolution dated 12 January 2001 and the Order dated 17 July 2001, finding probable cause for the filing of Informations against petitioner and co-accused Robles. On the first issue raised by petitioner, she bewails respondent courts ruling decreeing that a clarificatory hearing in the instant criminal case is optional on the part of the investigating prosecutor. Petitioner believes that without a clarificatory hearing, it is impossible for the investigating prosecutor to resolve numerous irreconcilable issues and arrive at a lawful indictment. In particular, petitioner faults the Office of the Ombudsmans finding of probable cause to charge her for five (5) counts of Malversation relative to the sale of old newspapers. She insists that the two (2) gate passes issued by her, allowing utility worker Pergentina Baay to leave the school premises in order to sell the old newspapers of the school, do not support the fact that would lead to the conclusion that she received and misappropriated the proceeds of the sale, thus making her answerable for malversation. She said that the two gate passes merely prove that she approved the departure of the utility worker from the school campus in order to sell the old newspapers. She added that since the pieces of evidence submitted to the investigating prosecutor are susceptible to equivocal interpretation, he should have conducted a clarificatory hearing. In finding probable cause for the indictment of petitioner for malversation, the Office of the Ombudsman-Visayas ratiocinated: On allegation no. 2 above, the evidence on record tends to support a well-founded belief that the crime of Malversation of Public Funds, on five (5) counts, was committed and that herein respondent Dr. Benita F. Osorio is guilty thereof. In spite of the strong protestation by respondent Osorio against accusation that she received the proceeds from the sale of the schools old newspapers, existing documentary evidence loudly tells however that she must have actually received such proceeds. She had allowed one Pergentina Baay to go out (of school premises) and to sell old newspapers as shown by her written request for the purpose and an approved gate pass (Annexes I-1 & I-2, COA Report, pp. 153154, records). This in fact she has admitted though allegedly on only two occasions. Her denials that she never received from Mrs. Baay the newspaper proceeds and that she never bothered to ask about the same allegedly because she was

made to understand it would be used to purchase floor wax, library ID cards and others, are simply unbelievable under the normal course of events given the circumstances of this case. The said Mrs. Baay is just a mere school utility worker. The respondent, on the other hand, is the school principal who is naturally expected to have asked about the proceeds from the newspapers the sale of which she had authorized. Mrs. Baay could not have kept for herself such proceeds knowing that her selling the newspapers was with the knowledge and authority of the respondent principal. Logic, therefore, tells us that subject proceeds were turned over to and received by the respondent contrary to her disclaimer. ... There were several occasions (i.e., on March 15, 1993, September 01, 1997, December 02, 1997, December 11, 1997 and January 07, 1998) that said Mrs. Baay had sold newspapers of the school as disclosed in the above-mentioned COA Report. Since the audit examination found no record of receipt of such proceeds in the books of accounts of the school, it is only logical to presume that on every such occasion the respondent had put to her personal use the said proceeds.6 On the indictment for violations of Section 3(e) of Rep. Act No. 3019, it ruled: On allegation no. 3, probable cause exists to warrant an indictment for Violation of Sec. 3(e) of R.A. No. 3019, as amended, on two (2) counts, against respondent Dr. Benita F. Osorio. Both respondents Dr. Benita F. Osorio and Nestor Robles in effect contended that their school has a PBAC (Prequalification, Bids and Awards Committee) which conducts the bidding through which system the schools procurements are made, hence, not being members of said committee, they should not be held liable for whatever irregularity in the purchases of the school. This argument holds no water, especially for respondent Osorio, under the present case. The irregularity alleged to have marked the schools purchase transactions is the manner by which such transactions, were made to appear to have been legally undertaken through personal canvass in order to favor a particular supplier. It is therefore irrelevant whether or not the herein respondents are members of the PBAC, because there was no bidding to talk about in the questioned transactions. Further, the transactions referred to are those made under the incumbency of the present Supply Officer Hilaria E. Hora, not those during the time of respondent Robles as then Supply Officer. Hence, the respondents emphasis on transactions purportedly regularly entered into during respondent Robless time as Supply Officer has no bearing on the allegation against them. There is enough evidence to sustain the foregoing allegation as against respondent Osorio. It adequately appears from the evidence on record that purchases for school supplies/materials were made directly from certain favored supplier/s without the benefit of bidding. There is no other manner of concluding it but this way when herein respondent Dr. Benita F. Osorio issued Purchase Order No. 29 dated July 09, 1997, when in fact the items (construction materials) with a total price of P3,755.00 subject thereof were already earlier delivered to the school as per unnumbered Delivery Receipt of Butalid Traders dated June 17, 1997 and inspected on the same date the said PO (purchase order) was issued as per Inspection Report dated July 09, 1997, duly noted by the same respondent. Additional documentary evidence consisting of Purchase Order No. 030 dated July 16, 1997, for certain items with a total price of P3,575.00 and three (3) Delivery Receipts of Tantrade Corporation dated June 3, 5 & 18, 1997, which similarly indicate an apparent irregularity as those first mentioned, would show another instance of anomalous transaction. On allegation no. 4, there is prima facie evidence against respondent Dr. Benita F. Osorio for Violation of Sec. 3(e) of R.A. No. 3019, as amended (otherwise known as The Anti-Graft and Corrupt Practices Act), on three (3) counts. (i) DECS Order No. 27, s. 1995, dated May 24, 1995 (Annex M. COA Report, supra), very clearly specifies the amounts of contributions for the Boy Scouts and Girl Scouts of the Philippines at P20.00 and P25.00, respectively, among others, allowed to be collected during enrollment period. Notwithstanding this definite directive, the herein respondent Principal issued two (2) Memoranda dated March 14, 1996 and March 10, 1997 re: Enrollment Guidelines for SY 19961997 & SY 1997-1998, respectively, instructing the collection of fees of, among others, P26.00 (BSP) and P31.00 (GSP) for SY 1996-1997 and P30.00 (BSP) and P31.00 (GSP) for SY 1997-1998 (Annexes O-1 to 3 & P-1 to 3, respectively, COA Report, pp. 168-173, records). The foregoing issuance of the respondent in absolute defiance of the specific directive of the DECS Order mentioned, demonstrates evident bad faith or gross inexcusable negligence causing undue injury to the students of Dr. Cecilio Putong National High School arising from the collection of contributions from them in excess of the amounts legally allowed.7 With these opposing pieces of evidence adduced by the Office of the Ombudsman-Visayas and the petitioner, we believe that the former did not gravely abuse its discretion when it found probable cause against petitioner. Section 1 of Rule 112 of the Rules of Criminal Procedure provides:

Preliminary investigation is an inquiry or proceeding to determine whether there is sufficient ground to engender a wellfounded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for trial. The foregoing provision sets forth the purpose of preliminary investigation which is to determine whether there is a sufficient ground to engender a well-founded belief that a crime has been committed and that the respondent is probably guilty thereof. Subsection (e) of Section 3 and of the same rule provides: (e) The investigating officer may set a hearing if there are facts and issues to be clarified from a party or a witness. The parties can be present at the hearing but without the right to examine or cross-examine. They may, however, submit to the investigating officer questions which may be asked to the party or witness concerned. In accordance with Section 4 of Rule 112 of the Rules of Court, the investigating prosecutor shall prepare the resolution and information if he finds cause to hold the respondent for trial. He shall certify under oath that he, or as shown by the record, an authorized officer, has personally examined the complaint and his witnesses, that there is reasonable ground to believe that a crime has been committed and that the accused is probably guilty thereof. It is the call of the investigating prosecutor, in the exercise of his sound discretion, whether to conduct a clarificatory hearing or not. As correctly pointed out by the Court of Appeals, the term "may" under Subsection (e) of Section 3 of Rule 112 is merely permissive and operates to confer discretion upon the investigating prosecutor to conduct a clarificatory hearing or not.8 If he believes that the evidence before him is sufficient to support a finding of probable cause, he may not hold a clarificatory hearing. As held in Webb v. De Leon:9 . . . The decision to call witnesses for clarificatory questions is addressed to the sound discretion of the investigator and the investigator alone. If the evidence on hand already yields a probable cause, the investigator need not hold a clarificatory hearing. Probable cause, for the purpose of filing a criminal information, has been defined as such facts as are sufficient to engender a well-founded belief that a crime has been committed and that respondent is probably guilty thereof.10 It is a reasonable ground of presumption that a matter is, or may be, well founded, such a state of facts in the mind of the prosecutor as would lead a person of ordinary caution and prudence to believe, or entertain an honest or strong suspicion, that a thing is so.11 The term does not mean "actual and positive cause" nor does it import absolute certainty. Bearing in mind the inferior quantum of evidence needed to support a finding of probable cause, we find that the Office of the Ombudsman was well within its discretion in refusing to conduct clarificatory hearing. It has found enough evidence to establish probable cause, a fortiori rendering the conduct of a clarificatory hearing unnecessary. The consistent and general policy of the Court is not to interfere with the Office of the Ombudsmans exercise of its investigatory and prosecutory powers.12 The rule is based not only upon respect for the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman but upon practicality as well.13 Otherwise, the functions of the courts will be grievously hampered by innumerable petitions assailing the dismissal of investigatory proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, in much the same way that the courts would be extremely swamped if they would be compelled to review the exercise of discretion on the part of the fiscals or prosecuting attorneys each time they decide to file an Information in court or dismiss a complaint by a private complainant.14 The Court cannot interfere with the Office of the Ombudsmans discretion in determining the adequacy or inadequacy of the evidence before it. The investigation is advisedly called preliminary, as it is yet to be followed by the trial proper. The occasion is not for the full and exhaustive display of the parties evidence but for the presentation of such evidence only as may engender a well-founded belief that an offense has been committed and that the accused is probably guilty of the offense.15 Hence, in the absence of a clear case of abuse of discretion, this Court will not interfere with the Office of the Ombudsmans discretion in the conduct of preliminary investigation. Anent the second issue, petitioner protests the ruling of the Court of Appeals holding that the other issues raised by her are purely questions of evidence and not of law. She maintains that she properly raised issues which were purely questions of law in as much as she is inquiring into the propriety of the filing of the criminal complaint of Malversation and violation of Section 3(e) of Rep. Act No. 3019, premised on the proper interpretation of the elements of the laws she is being charged with. On the charges of malversation, petitioner opines that she cannot be indicted thereof considering that it is not the function of her office, as principal of the school, to receive and account for the funds of the school. One essential element of the crime of malversation is that the accused is "having custody or control of funds or property by reason of the duties of her office." Since she does not have direct responsibility for the keeping and accounting of the school funds, in this case the proceeds of the sale of the old newspapers, then she could not be charged with the said crime absent of such element.

The Court of Appeals, on the other hand, opines that petitioners argument that there is no probable cause to indict her of malversation and violation of Section 3(e) of Rep. Act No. 3019 are matters of evidence which could not be legally inquired into at the preliminary stage of the case. We agree with the Court of Appeals. The claims of petitioner that she did not receive and have control of the subject funds, as well as the absence of the elements of the crime of Section 3(e) of Rep. Act No. 3019, are undoubtedly evidentiary matters that are to be ventilated in a full-blown trial and not during the preliminary investigation. The presence and absence of the elements of the crime, which are by their nature evidentiary and defense matters, can be best passed upon after a trial on the merits.16 As earlier pointed out, the established rule is that a preliminary investigation is not the occasion for the full and exhaustive display of the parties evidence. 17 It is for the presentation of such evidence only as may engender a well-founded belief that an offense has been committed and that the accused is probably guilty thereof. WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit. The decision of the Court of Appeals in CA-G.R. SP No. 67511 dated 13 December 2002 affirming in toto the resolution dated 12 January 2001 and the order dated 17 July 2001 issued by the Office of the Ombudsman-Visayas is hereby AFFIRMED. SO ORDERED. G.R. No. 129742 September 16, 1998 TERESITA G. FABIAN, petitioner, vs. HON. ANIANO A. DESIERTO, in his capacity as Ombudsman; HON. JESUS F. GUERRERO, in his capacity as Deputy Ombudsman for Luzon; and NESTOR V. AGUSTIN, respondents.

REGALADO, J.: Petitioner has appealed to us by certiorari under Rule 45 of the Rules of Court from the "Joint Order" issued by public respondents on June 18, 1997 in OMB-Adm. Case No. 0-95-0411 which granted the motion for reconsideration of and absolved private respondent from administrative charges for inter alia grave misconduct committed by him as then Assistant Regional Director, Region IV-A, Department of Public Works and Highways (DPWH). I It appears from the statement and counter-statement of facts of the parties that petitioner Teresita G. Fabian was the major stockholder and president of PROMAT Construction Development Corporation (PROMAT) which was engaged in the construction business. Private respondent Nestor V. Agustin was the incumbent District Engineer of the First Metro Manila Engineering District (FMED) when he allegedly committed the offenses for which he was administratively charged in the Office of the Ombudsman. PROMAT participated in the bidding for government construction projects including those under the FMED, and private respondent, reportedly taking advantage of his official position, inveigled petitioner into an amorous relationship. Their affair lasted for some time, in the course of which private respondent gifted PROMAT with public works contracts and interceded for it in problems concerning the same in his office. Later, misunderstandings and unpleasant incidents developed between the parties and when petitioner tried to terminate their relationship, private respondent refused and resisted her attempts to do so to the extent of employing acts of harassment, intimidation and threats. She eventually filed the aforementioned administrative case against him in a letter-complaint dated July 24, 1995. The said complaint sought the dismissal of private respondent for violation of Section 19, Republic Act No. 6770 (Ombudsman Act of 1989) and Section 36 of Presidential Decree No. 807 (Civil Service Decree), with an ancillary prayer for his preventive suspension. For purposes of this case, the charges referred to may be subsumed under the category of oppression, misconduct, and disgraceful or immoral conduct. On January 31, 1996, Graft Investigator Eduardo R. Benitez issued a resolution finding private respondent guilty of grave misconduct and ordering his dismissal from the service with forfeiture of all benefits under the law. His resolution bore the approval of Director Napoleon Baldrias and Assistant Ombudsman Abelardo Aportadera of their office.

Herein respondent Ombudsman, in an Order dated February 26, 1996, approved the aforesaid resolution with modifications, by finding private respondent guilty of misconduct and meting out the penalty of suspension without pay for one year. After private respondent moved for reconsideration, respondent Ombudsman discovered that the former's new counsel had been his "classmate and close associate" hence he inhibited himself. The case was transferred to respondent Deputy Ombudsman Jesus F. Guerrero who, in the now challenged Joint Order of June 18, 1997, set aside the February 26, 1997 Order of respondent Ombudsman and exonerated private respondent from the administrative charges. II In the present appeal, petitioner argues that Section 27 of Republic Act No. 6770 (Ombudsman Act of 1989) 1 pertinently provides that In all administrative disciplinary cases, orders, directives or decisions of the Office of the Ombudsman may be appealed to the Supreme Court by filing a petition for certiorari within ten (10) days from receipt of the written notice of the order, directive or decision or denial of the motion for reconsideration in accordance with Rule 45 of the Rules of Court (Emphasis supplied) However, she points out that under Section 7, Rule III of Administrative Order No. 07 (Rules of Procedure of the Office of the Ombudsman), 2 when a respondent is absolved of the charges in an administrative proceeding the decision of the Ombudsman is final and unappealable. She accordingly submits that the Office of the Ombudsman has no authority under the law to restrict, in the manner provided in its aforesaid Rules, the right of appeal allowed by Republic Act No. 6770, nor to limit the power of review of this Court. Because of the aforecited provision in those Rules of Procedure, she claims that she found it "necessary to take an alternative recourse under Rule 65 of the Rules of Court, because of the doubt it creates on the availability of appeal under Rule 45 of the Rules of Court. Respondents filed their respective comments and rejoined that the Office of the Ombudsman is empowered by the Constitution and the law to promulgate its own rules of procedure. Section 13(8), Article XI of the 1987 Constitution provides, among others, that the Office of the Ombudsman can "(p)romulgate its rules of procedure and exercise such other powers or perform such functions or duties as may be provided by law." Republic Act No. 6770 duly implements the Constitutional mandate with these relevant provisions: Sec. 14. Restrictions. . . . No court shall hear any appeal or application for remedy against the decision or findings of the Ombudsman except the Supreme Court on pure questions of law. xxx xxx xxx Sec. 18. Rules of Procedure. (1) The Office of the Ombudsman shall promulgate its own rules of procedure for the effective exercise or performance of its powers, functions, and duties. xxx xxx xxx Sec. 23. Formal Investigation. (1) Administrative investigations by the Office of the Ombudsman shall be in accordance with its rules of procedure and consistent with due process. . . . . xxx xxx xxx Sec. 27. Effectivity and Finality of Decisions. All previsionary orders at the Office of the Ombudsman are immediately effective and executory. A motion for reconsideration of any order, directive or decision of the Office of the Ombudsman must be filed within five (5) days after receipt of written notice and shall be entertained only on any of the following grounds: xxx xxx xxx Findings of fact by the Office of the Ombudsman when supported by substantial evidence are conclusive. Any order, directive or decision imposing the penalty of public censure or reprimand, suspension of not more than one month salary shall be final and unappealable. In all administrative disciplinary cases, orders, directives or decisions of the Office of the Ombudsman may be appealed to the Supreme Court by filing a petition for certiorari within ten (10) days from receipt

of the written notice of the order, directive or decision or denial of the motion for reconsideration in accordance with Rule 45 of the Rules of Court. The above rules may be amended or modified by the Office of the Ombudsman as the interest of justice may require. Respondents consequently contend that, on the foregoing constitutional and statutory authority, petitioner cannot assail the validity of the rules of procedure formulated by the Office of the Ombudsman governing the conduct of proceedings before it, including those rules with respect to the availability or non-availability of appeal in administrative cases, such as Section 7, Rule III of Administrative Order No. 07. Respondents also question the propriety of petitioner's proposition that, although she definitely prefaced her petition by categorizing the same as "an appeal by certiorari under Rule 45 of the Rules of Court," she makes the aforequoted ambivalent statement which in effect asks that, should the remedy under Rule 45 be unavailable, her petition be treated in the alternative as an original action for certiorari under Rule 65. The parties thereafter engage in a discussion of the differences between a petition for review on certiorari under Rule 45 and a special civil action of certiorari under Rule 65. Ultimately, they also attempt to review and rationalize the decisions of this Court applying Section 27 of Republic Act. No. 6770 vis-a-vis Section 7, Rule III of Administrative Order No. 07. As correctly pointed out by public respondent, Ocampo IV vs. Ombudsman, et al. 3 and Young vs. Office of the Ombudsman, et al. 4 were original actions for certiorari under Rule 65. Yabut vs. Office of the Ombudsman, et al. 5 was commenced by a petition for review on certiorari under Rule 45. Then came Cruz, Jr. vs. People, et al., 6 Olivas vs. Office of the Ombudsman, et al., 7 Olivarez vs. Sandiganbayan, et al., 8 and Jao, et al. vs. Vasquez, 9 which were for certiorari, prohibition and/or mandamus under Rule 65. Alba vs. Nitorreda, et al. 10 was initiated by a pleading unlikely denominated as an "Appeal/Petition for Certiorari and/or Prohibition," with a prayer for ancillary remedies, and ultimately followed by Constantino vs. Hon. Ombudsman Aniano Desierto, et al. 11 which was a special civil action for certiorari. Considering, however, the view that this Court now takes of the case at bar and the issues therein which will shortly be explained, it refrains from preemptively resolving the controverted points raised by the parties on the nature and propriety of application of the writ of certiorari when used as a mode of appeal or as the basis of a special original action, and whether or not they may be resorted to concurrently or alternatively, obvious though the answers thereto appear to be. Besides, some seemingly obiter statements in Yabut and Alba could bear reexamination and clarification. Hence, we will merely observe and lay down the rule at this juncture that Section 27 of Republic Act No. 6770 is involved only whenever an appeal by certiorari under Rule 45 is taken from a decision in an administrative disciplinary action. It cannot be taken into account where an original action for certiorari under Rule 65 is resorted to as a remedy for judicial review, such as from an incident in a criminal action. III After respondents' separate comments had been filed, the Court was intrigued by the fact, which does not appear to have been seriously considered before, that the administrative liability of a public official could fall under the jurisdiction of both the Civil Service Commission and the Office of the Ombudsman. Thus, the offenses imputed to herein private respondent were based on both Section 19 of Republic Act No. 6770 and Section 36 of Presidential Decree No. 807. Yet, pursuant to the amendment of Section 9, Batas Pambansa Blg. 129 by Republic Act No. 7902, all adjudications by the Civil Service Commission in administrative disciplinary cases were made appealable to the Court of Appeals effective March 18, 1995, while those of the Office of the Ombudsman are appealable to this Court. It could thus be possible that in the same administrative case involving two respondents, the proceedings against one could eventually have been elevated to the Court of Appeals, while the other may have found its way to the Ombudsman from which it is sought to be brought to this Court. Yet systematic and efficient case management would dictate the consolidation of those cases in the Court of Appeals, both for expediency and to avoid possible conflicting decisions. Then there is the consideration that Section 30, Article VI of the 1987 Constitution provides that "(n)o law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and consent," and that Republic Act No. 6770, with its challenged Section 27, took effect on November 17, 1989, obviously in spite of that constitutional prohibition. The conventional rule, however, is that a challenge on constitutional grounds must be raised by a party to the case, neither of whom did so in this case, but that is not an inflexible rule, as we shall explain. Since the constitution is intended for the observance of the judiciary and other departments of the government and the judges are sworn to support its provisions; the courts are not at liberty to overlook or disregard its commands or

countenance evasions thereof. When it is clear that a statute transgresses the authority vested in a legislative body, it is the duty of the courts to declare that the constitution, and not the statute, governs in a case before them for judgment. 12 Thus, while courts will not ordinarily pass upon constitutional questions which are not raised in the pleadings, 13 the rule has been recognized to admit of certain exceptions. It does not preclude a court from inquiring into its own jurisdiction or compel it to enter a judgment that it lacks jurisdiction to enter. If a statute on which a court's jurisdiction in a proceeding depends is unconstitutional, the court has no jurisdiction in the proceeding, and since it may determine whether or not it has jurisdiction, it necessarily follows that it may inquire into the constitutionality of the statute. 14 Constitutional questions, not raised in the regular and orderly procedure in the trial are ordinarily rejected unless the jurisdiction of the court below or that of the appellate court is involved in which case it may be raised at any time or on the court's own motion. 15 The Court ex mero motu may take cognizance of lack of jurisdiction at any point in the case where that fact is developed. 16 The court has a clearly recognized right to determine its own jurisdiction in any proceeding. 17 The foregoing authorities notwithstanding, the Court believed that the parties hereto should be further heard on this constitutional question. Correspondingly, the following resolution was issued on May 14, 1998, the material parts stating as follows: The Court observes that the present petition, from the very allegations thereof, is "an appeal by certiorari under Rule 45 of the Rules of Court from the "Joint Order (Re: Motion for Reconsideration)" issued in OMB-Adm. Case No. 0-95-0411, entitled "Teresita G. Fabian vs. Engr. Nestor V. Agustin, Asst. Regional Director, Region IV-A, EDSA, Quezon City," which absolved the latter from the administrative charges for grave misconduct, among others. It is further averred therein that the present appeal to this Court is allowed under Section 27 of the Ombudsman Act of 1987 (R.A. No. 6770) and, pursuant thereto, the Office of the Ombudsman issued its Rules of Procedure, Section 7 whereof is assailed by petitioner in this proceeding. It will be recalled that R.A. No. 6770 was enacted on November 17, 1989, with Section 27 thereof pertinently providing that all administrative disciplinary cases, orders, directives or decisions of the Office of the Ombudsman may be appealed to this Court in accordance with Rule 45 of the Rules of Court. The Court notes, however, that neither the petition nor the two comments thereon took into account or discussed the validity of the aforestated Section 27 of R.A. No. 8770 in light of the provisions of Section 30, Article VI of the 1987 Constitution that "(n)o law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and consent." The Court also invites the attention of the parties to its relevant ruling in First Lepanto Ceramics, Inc. vs. The Court of Appeals, et al. (G.R. No. 110571, October 7, 1994, 237 SCRA 519) and the provisions of its former Circular No. 1-91 and Revised Administrative Circular No. 1-95, as now substantially reproduced in Rule 43 of the 1997 revision of the Rules of Civil Procedure. In view of the fact that the appellate jurisdiction of the Court is invoked and involved in this case, and the foregoing legal considerations appear to impugn the constitutionality and validity of the grant of said appellate jurisdiction to it, the Court deems it necessary that the parties be heard thereon and the issue be first resolved before conducting further proceedings in this appellate review. ACCORDINGLY, the Court Resolved to require the parties to SUBMIT their position and arguments on the matter subject of this resolution by filing their corresponding pleadings within ten (10) days from notice hereof. IV The records do not show that the Office of the Solicitor General has complied with such requirement, hence the Court dispenses with any submission it should have presented. On the other hand, petitioner espouses the theory that the provision in Section 27 of Republic Act No. 6770 which authorizes an appeal by certiorari to this Court of the aforementioned adjudications of the Office of the Ombudsman is not violative of Section 30, Article VI of the Constitution. She claims that what is proscribed is the passage of a law "increasing" the appellate jurisdiction of this Court "as provided in this Constitution," and such appellate jurisdiction includes "all cases in which only an error or question of law is involved." Since Section 5(2)(e), Article VIII of the Constitution authorizes this Court to review, revise, reverse, modify, or affirm on appeal or certiorari the aforesaid final judgment or orders "as the law or the Rules of Court may provide," said Section 27 does not increase this Court's appellate jurisdiction since, by providing that the mode of

appeal shall be by petition for certiorari under Rule 45, then what may be raised therein are only questions of law of which this Court already has jurisdiction. We are not impressed by this discourse. It overlooks the fact that by jurisprudential developments over the years, this Court has allowed appeals by certiorari under Rule 45 in a substantial number of cases and instances even if questions of fact are directly involved and have to be resolved by the appellate court. 18 Also, the very provision cited by petitioner specifies that the appellate jurisdiction of this Court contemplated therein is to be exercised over "final judgments and orders of lower courts," that is, the courts composing the integrated judicial system. It does not include the quasijudicial bodies or agencies, hence whenever the legislature intends that the decisions or resolutions of the quasi-judicial agency shall be reviewable by the Supreme Court or the Court of Appeals, a specific provision to that effect is included in the law creating that quasi-judicial agency and, for that matter, any special statutory court. No such provision on appellate procedure is required for the regular courts of the integrated judicial system because they are what are referred to and already provided for, in Section 5, Article VIII of the Constitution. Apropos to the foregoing, and as correctly observed by private respondent, the revised Rules of Civil Procedure 19 preclude appeals from quasi-judicial agencies to the Supreme Court via a petition for review on certiorari under Rule 45. In the 1997 Rules of Civil Procedure, Section 1 of Rule 45, on "Appeal by Certiorari to the Supreme Court," explicitly states: Sec. 1. Filing of petition with Supreme Court. A person desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth. (Emphasis ours). This differs from the former Rule 45 of the 1964 Rules of Court which made mention only of the Court of Appeals, and had to be adopted in statutes creating and providing for appeals from certain administrative or quasi-judicial agencies, whenever the purpose was to restrict the scope of the appeal to questions of law. That intended limitation on appellate review, as we have just discussed, was not fully subserved by recourse to the former Rule 45 but, then, at that time there was no uniform rule on appeals from quasi-judicial agencies. Under the present Rule 45, appeals may be brought through a petition for review on certiorari but only from judgments and final orders of the courts enumerated in Section 1 thereof. Appeals from judgments and final orders of quasi-judicial agencies 20 are now required to be brought to the Court of Appeals on a verified petition for review, under the requirements and conditions in Rule 43 which was precisely formulated and adopted to provide for a uniform rule of appellate procedure for quasi-judicial agencies. 21 It is suggested, however, that the provisions of Rule 43 should apply only to "ordinary" quasi-judicial agencies, but not to the Office of the Ombudsman which is a "high constitutional body." We see no reason for this distinction for, if hierarchical rank should be a criterion, that proposition thereby disregards the fact that Rule 43 even includes the Office of the President and the Civil Service Commission, although the latter is even an independent constitutional commission, unlike the Office of the Ombudsman which is a constitutionally-mandated but statutorily created body. Regarding the misgiving that the review of the decision of the Office of the Ombudsman by the Court of Appeals would cover questions of law, of fact or of both, we do not perceive that as an objectionable feature. After all, factual controversies are usually involved in administrative disciplinary actions, just like those coming from the Civil Service Commission, and the Court of Appeals as a trier of fact is better prepared than this Court to resolve the same. On the other hand, we cannot have this situation covered by Rule 45 since it now applies only to appeals from the regular courts. Neither can we place it under Rule 65 since the review therein is limited to jurisdictional questions. * The submission that because this Court has taken cognizance of cases involving Section 27 of Republic Act No. 6770, that fact may be viewed as "acquiescence" or "acceptance" by it of the appellate jurisdiction contemplated in said Section 27, is unfortunately too tenuous. The jurisdiction of a court is not a question of acquiescence as a matter of fact but an issue of conferment as a matter of law. Besides, we have already discussed the cases referred to, including the inaccuracies of some statements therein, and we have pointed out the instances when Rule 45 is involved, hence covered by Section 27 of Republic Act No. 6770 now under discussion, and when that provision would not apply if it is a judicial review under Rule 65. Private respondent invokes the rule that courts generally avoid having to decide a constitutional question, especially when the case can be decided on other grounds. As a general proposition that is correct. Here, however, there is an actual case susceptible of judicial determination. Also, the constitutional question, at the instance of this Court, was raised by the proper parties, although there was even no need for that because the Court can rule on the matter sua sponte when its appellate jurisdiction is involved. The constitutional question was timely raised, although it could even

be raised any time likewise by reason of the jurisdictional issue confronting the Court. Finally, the resolution of the constitutional issue here is obviously necessary for the resolution of the present case. 22 It is, however, suggested that this case could also be decided on other grounds, short of passing upon the constitutional question. We appreciate the ratiocination of private respondent but regret that we must reject the same. That private respondent could be absolved of the charge because the decision exonerating him is final and unappealable assumes that Section 7, Rule III of Administrative Order No. 07 is valid, but that is precisely one of the issues here. The prevailing rule that the Court should not interfere with the discretion of the Ombudsman in prosecuting or dismissing a complaint is not applicable in this administrative case, as earlier explained. That two decisions rendered by this Court supposedly imply the validity of the aforementioned Section 7 of Rule III is precisely under review here because of some statements therein somewhat at odds with settled rules and the decisions of this Court on the same issues, hence to invoke the same would be to beg the question. V Taking all the foregoing circumstances in their true legal roles and effects, therefore, Section 27 of Republic Act No. 6770 cannot validly authorize an appeal to this Court from decisions of the Office of the Ombudsman in administrative disciplinary cases. It consequently violates the proscription in Section 30, Article VI of the Constitution against a law which increases the appellate jurisdiction of this Court. No countervailing argument has been cogently presented to justify such disregard of the constitutional prohibition which, as correctly explained in First Lepanto Ceramics, Inc. vs. The Court of Appeals, et al. 23 was intended to give this Court a measure of control over cases placed under its appellate jurisdiction. Otherwise, the indiscriminate enactment of legislation enlarging its appellate jurisdiction would unnecessarily burden the Court. 24 We perforce have to likewise reject the supposed inconsistency of the ruling in First Lepanto Ceramics and some statements in Yabut and Alba, not only because of the difference in the factual settings, but also because those isolated cryptic statements in Yabut and Alba should best be clarified in the adjudication on the merits of this case. By way of anticipation, that will have to be undertaken by the proper court of competent jurisdiction. Furthermore, in addition to our preceding discussion on whether Section 27 of Republic Act No. 6770 expanded the jurisdiction of this Court without its advice and consent, private respondent's position paper correctly yields the legislative background of Republic Act No. 6770. On September 26, 1989, the Conference Committee Report on S.B. No. 453 and H.B. No. 13646, setting forth the new version of what would later be Republic Act No. 6770, was approved on second reading by the House of Representatives. 25 The Senate was informed of the approval of the final version of the Act on October 2, 1989 26 and the same was thereafter enacted into law by President Aquino on November 17, 1989. Submitted with said position paper is an excerpt showing that the Senate, in the deliberations on the procedure for appeal from the Office of the Ombudsman to this Court, was aware of the provisions of Section 30, Article III of the Constitution. It also reveals that Senator Edgardo Angara, as a co-author and the principal sponsor of S.B. No. 543 admitted that the said provision will expand this Court's jurisdiction, and that the Committee on Justice and Human Rights had not consulted this Court on the matter, thus: INTERPELLATION OF SENATOR SHAHANI xxx xxx xxx Thereafter, with reference to Section 22(4) which provides that the decisions of the Office of the Ombudsman may be appealed to the Supreme Court, in reply to Senator Shahani's query whether the Supreme Court would agree to such provision in the light of Section 30, Article VI of the Constitution which requires its advice and concurrence in laws increasing its appellate jurisdiction, Senator Angara informed that the Committee has not yet consulted the Supreme Court regarding the matter. He agreed that the provision will expand the Supreme Court's jurisdiction by allowing appeals through petitions for review, adding that they should be appeals on certiorari. 27 There is no showing that even up to its enactment, Republic Act No. 6770 was ever referred to this Court for its advice and consent. 28 VI As a consequence of our ratiocination that Section 27 of Republic Act No. 6770 should be struck down as unconstitutional, and in line with the regulatory philosophy adopted in appeals from quasi-judicial agencies in the 1997 Revised Rules of Civil Procedure, appeals from decisions of the Office of the Ombudsman in administrative disciplinary cases should be taken to the Court of Appeals under the provisions of Rule 43.

There is an intimation in the pleadings, however, that said Section 27 refers to appellate jurisdiction which, being substantive in nature, cannot be disregarded by this Court under its rule-making power, especially if it results in a diminution, increase or modification of substantive rights. Obviously, however, where the law is procedural in essence and purpose, the foregoing consideration would not pose a proscriptive issue against the exercise of the rule-making power of this Court. This brings to fore the question of whether Section 27 of Republic Act No. 6770 is substantive or procedural. It will be noted that no definitive line can be drawn between those rules or statutes which are procedural, hence within the scope of this Court's rule-making power, and those which are substantive. In fact, a particular rule may be procedural in one context and substantive in another. 29 It is admitted that what is procedural and what is substantive is frequently a question of great difficulty. 30 It is not, however, an insurmountable problem if a rational and pragmatic approach is taken within the context of our own procedural and jurisdictional system. In determining whether a rule prescribed by the Supreme Court, for the practice and procedure of the lower courts, abridges, enlarges, or modifies any substantive right, the test is whether the rule really regulates procedure, that is, the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for a disregard or infraction of them. 31 If the rule takes away a vested right, it is no; procedural. If the rule creates a right such as the right to appeal, it may be classified as a substantive matter; but if it operates as a means of implementing an existing right then the rule deals merely with procedure. 32 In the situation under consideration, a transfer by the Supreme Court, in the exercise of its rule-making power, of pending cases involving a review of decisions of the Office of the Ombudsman in administrative disciplinary actions to the Court of Appeals which shall now be vested with exclusive appellate jurisdiction thereover, relates to procedure only. 33 This is so because it is not the right to appeal of an aggrieved party which is affected by the law. That right has been preserved. Only the procedure by which the appeal is to be made or decided has been changed. The rationale for this is that no litigant has a vested right in a particular remedy, which may be changed by substitution without impairing vested rights, hence he can have none in rules of procedure which relate to the remedy. 34 Furthermore, it cannot be said that the transfer of appellate jurisdiction to the Court of Appeals in this case is an act of creating a new right of appeal because such power of the Supreme Court to transfer appeals to subordinate appellate courts is purely a procedural and not a substantive power. Neither can we consider such transfer as impairing a vested right because the parties have still a remedy and still a competent tribunal to administer that remedy. 35 Thus, it has been generally held that rules or statutes involving a transfer of cases from one court to another, are procedural and remedial merely and that, as such, they are applicable to actions pending at the time the statute went into effect 36 or, in the case at bar, when its invalidity was declared. Accordingly, even from the standpoint of jurisdiction ex hypothesi, the validity of the transfer of appeals in said cases to the Court of Appeals can be sustained. WHEREFORE, Section 27 of Republic Act No. 6770 (Ombudsman Act of 1989), together with Section 7, Rule III of Administrative Order No. 07 (Rules of Procedure of the Office of the Ombudsman), and any other provision of law or issuance implementing the aforesaid Act and insofar as they provide for appeals in administrative disciplinary cases from the Office of the Ombudsman to the Supreme Court, are hereby declared INVALID and of no further force and effect. The instant petition is hereby referred and transferred to the Court of Appeals for final disposition, with said petition to be considered by the Court of Appeals pro hoc vice as a petition for review under Rule 43, without prejudice to its requiring the parties to submit such amended or supplemental pleadings and additional documents or records as it may deem necessary and proper. SO ORDERED.

G.R. No. 159190

June 30, 2005 JR., petitioner,

CAYETANO A. TEJANO, vs. THE HON. OMBUDSMAN and the HON. SANDIGANBAYAN, respondents. DECISION CHICO-NAZARIO, J.:

This petition for certiorari under Rule 65 of the Rules of Court, with application for temporary restraining order, seeks to nullify the Ombudsmans disapproval of the memorandum1 dated 03 November 1999 of Special Prosecutor Jesus A. Micael of the Office of the Special Prosecutor recommending the dismissal of Criminal Case No. 21654, as well as the memorandum2 dated 09 June 2003 denying petitioners motion for reconsideration. The Facts The instant petition stemmed from the report of Philippine National Bank (PNB) Resident Auditor Alexander A. Tan, dated 15 October 1992, on his investigation regarding an alleged unfunded withdrawal in the amount of P2.2 million by V&G Better Homes Subdivision (V&G) under Savings Account No. 365-5355-6-4. The report, as summarized by Special Prosecution Officer III Jesus A. Micael, is as follows:3 . . . [I]n the morning of 17 July 1992, Emilio P. Montesa (Bank Executive Officer of PNB Cebu) handed a note to Jane Rita Jecong (Cashier) instructing her to include her cash requisition for the day from Central Bank Cebu, the amount of P2.2 M at P1,000.00 denomination; that on 20 July 1992 at about past 10:00 A.M., Juanito Mata (Cashier III), upon the instruction of Cayetano A. Tejano Jr. (Vice President and Branch Manager of PNB Cebu), took the P2.2 M from Ms. Jecong and delivered the same to Mr. Tejano; that at about noontime of same day, Mr. Mara handed to Ms. Jecong a pre-signed withdrawal slip against SA No. 365-535506-4 under the name of V & G Better Homes for the same amount to replace the cash withdrawn and to serve as cash-on-hand at the end of the days transaction; that the withdrawal slip was approved by Mr. Tejano and was postdated 21 July 1992; that as of 20 July 1992 V & G Better Homes SA No. 365535506-4 has only P33,436.78; that in the afternoon of 20 July 1992 the amount of P2,336,563.32 (consisting of P2,200,000.00 in cash; P100,000.00 in check; and P36,563.22 in withdrawal slip) was received by Teller Mary Ann Aznar as payment for the loan of V & G Better Homes for which PNB Official Receipt No. 952981E was issued; that the transaction was recognized as an increase in PNB Cebu Branchs cash-on-hand and a decrease in the loan account of V & G Better Homes; that the PNB Cebu Credit Committee approved the loan at the rate of 23% lower than the 26% interest rate on its first renewal and 27% on its second renewal; that the loan proceeds was credited to the account of V & G Better Homes on 21 July 1992, the same day that the withdrawal slip of P2.2 M was taken by Mr. Montesa from Ms. Jecong and given to Irene Abellanosa to be taken as her transaction for the day; and that upon the instruction of Montesa, Savings Account No. 365-535506-4 of V & G Better Homes was debited and the withdrawal slip was validated by Teller Abellanosa although no actual cash withdrawal was made. The report of Resident Auditor Alexander A. Tan implicated Vice President Cayetano A. Tejano, Jr., the petitioner herein, Executive Officer Emilio Montesa, and Supervising Branch Teller Jane Rita Jecong, all of the PNB, Cebu City Branch, including Juana dela Cruz and Vicente dela Cruz of V&G, as persons involved in the irregular withdrawal of P2.2 million of PNB funds. In an order dated 22 December 1992, the Office of the Deputy Ombudsman for the Visayas ordered Tejano, Montesa, Jecong, Juana dela Cruz and Vicente dela Cruz to file their respective counter-affidavits.4 In a resolution dated 29 March 1993, Graft Investigation Officer Edgardo G. Canton recommended the filing of the proper information for violation of Section 3(e) of Republic Act No. 3019, 5 as amended, against petitioner Cayetano A. Tejano, Jr., Juana dela Cruz and Vicente dela Cruz of V&G.6 The case against Montesa and Jecong was dismissed for lack of evidence. The resolution was approved by Deputy Ombudsman for Visayas Arturo C. Mojica and then Ombudsman Conrado M. Vasquez. The resolution was thereafter referred for review to Special Prosecutor III Orlando I. Ines of the Office of the Special Prosecutor. In a Memorandum7 dated 25 October 1994, Ines affirmed the resolution of Graft Investigation Officer Edgardo G. Canton.

On 28 October 1994, Deputy Special Prosecutor Jose De G. Ferrer recommended the approval of the memorandum of Special Prosecution Officer Ines. On 08 November 1994, Aniano A. Desierto, then the Special Prosecutor, concurred in the approval of Ferrer.8 Ombudsman Conrado M. Vasquez concurred thereto on 11 November 1994. Subsequently, on 24 November 1994, an Information for violation of Section 3(e) of Rep. Act No. 3019, as amended, was filed before the Sandiganbayan, and docketed as Criminal Case No. 21654. On 08 December 1994, petitioner filed with the Sandiganbayan an Urgent Motion for a Period of Time to File Motion for Reinvestigation. In an order dated9 12 December 1994, the Sandiganbayan granted the motion for reinvestigation. On 22 December 1994, petitioner filed his motion for reinvestigation in the Office of the Special Prosecutor. On 20 April 1995, the Sandiganbayan ordered the Office of the Special Prosecutor to conduct the reinvestigation.10 The reinvestigation was assigned to Special Prosecution Officer III Jesus Micael. Convinced that no probable cause existed to indict petitioner Tejano, and spouses Juana and Vicente dela Cruz, Special Prosecutor Micael, in a memorandum11 dated 03 November 1999, recommended the dismissal of the case. The recommendation was approved by Deputy Special Prosecutor Robert E. Kallos and concurred in by Special Prosecutor Leonardo P. Tamayo. On 10 December 1999, Ombudsman Aniano A. Desierto, who earlier participated in the initial preliminary investigation as Special Prosecutor, disapproved the recommendation for the dismissal of the case with the marginal note " assign the case to another prosecutor to prosecute the case aggressively." On 02 February 2000, Special Prosecutor Micael filed a Manifestation, to which was attached a copy of his memorandum, informing the Sandiganbayan of the disapproval by Ombudsman Desierto of his recommendation to dismiss the case. On 10 February 2000, petitioner filed a Motion for Reconsideration of the disapproval by Ombudsman Desierto of the recommendation of Micael. Apparently, petitioners motion for reconsideration was not resolved on the merits because on 27 June 2000, Special Prosecution Officer III Joselito R. Ferrer filed a Motion to Set the Case for Arraignment alleging therein that the prosecution did not give due course to the motion for reconsideration on the ground that it was the second motion which is prohibited under the Ombudsman Act of 1989. He added that the results of the reinvestigation were already submitted to the respondent court before receiving the motion for reconsideration.12 Petitioner manifested before the Sandiganbayan the Office of the Special Prosecutors failure to resolve his motion for reconsideration. Thus, in a resolution13 dated 24 March 2003, the respondent court directed the Office of the Ombudsman to resolve the said motion. In a memorandum14 dated 09 June 2003, Special Prosecutor Joselito R. Ferrer recommended the denial of the motion for reconsideration filed by petitioner. Deputy Special Prosecutor Robert E. Kallos changed his previous position and recommended that the memorandum for the dismissal of the motion for reconsideration be approved, with Special Prosecutor Dennis M. Villa-Ignacio concurring in the denial. On 14 July 2003, Ombudsman Simeon V. Marcelo, who succeeded Ombudsman Desierto when he retired, approved Joselito Ferrers memorandum recommending the denial of the motion for reconsideration. Petitioner thus filed the instant petition with prayer for the issuance of a temporary restraining order to enjoin the Sandiganbayan from taking further action in Criminal Case No. 21654. On 25 August 2003, the First Division of this Court issued the temporary restraining order prayed for. On 28 July 2004, the instant petition was transferred to the Second Division of this Court. Issues Petitioner raises the following issues:

I WHETHER OR NOT RESPONDENT OFFICE OF THE OMBUDSMAN COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DISAPPROVED THE EARLIER RECOMMENDATION FOR THE DISMISSAL OF THE CASE AGAINST ALL THE ACCUSED WITHOUT ANY COGENT OR VERIFIABLE REASON AMOUNTING TO LACK OF JURISDICTION WHEN THEY: 1. THE OFFICE OF THE OMBUDSMAN ABUSED ITS DISCRETION IN THE DISAPPROVAL OF THE RESOLUTION DATED NOVEMBER 3, 1999 AGAINST ALL ACCUSED FOR LACK OF PROBABLE CAUSE AS MANDATED UNDER SECTION 13 R.A. 6770 IN RELATION TO SECTION 3, RULE 112 OF THE RULES ON CRIMINAL PROCEDURE. 2. THE OFFICE OF SPECIAL PROCECUTOR DID NOT DETERMINE THE EXISTENCE OF PROBABLE CAUSE IN A RESOLUTION DENYING PETITIONERS MOTION FOR RECONSIDERATION FOR APPROVAL BY THE NEW OMBUDSMAN. II WHETHER OR NOT THE CASE FILED AGAINST THE ACCUSED IS A CLEAR CASE OF PERSECUTION AND NOT PROSECUTION CONTEMPLATED UNDER R.A. 3019, AS AMENDED, OTHERWISE KNOWN AS THE ANTI-GRAFT AND CORRUPT PRACTICES ACT, REPUBLIC ACT NO. 1374 AND CHAPTER II, SECTION 2, TITLE VII, BOOK II OF THE REVISED PENAL CODE. III WHETHER OR NOT THE HONORABLE OMBUDSMAN HAS JURISDICTION OVER THE CASE. Ruling of the Court Quite apart from the above, we find a focal issue apparently glossed over by the parties - whether or not Ombudsman Desierto committed grave abuse of discretion in disapproving the 03 November 1999 memorandum of Special Prosecutor Jesus Micael recommending the dismissal of Criminal Case No. 21654 against petitioner Tejano, and spouses Juana and Vicente dela Cruz of V&G for violation of Section 3(e) of Rep. Act No. 3019, where he had earlier participated in the preliminary investigation of the said criminal case recommending the filing of the information. This Court has been consistent in holding that it will not interfere with the Ombudsmans exercise of his constitutionally mandated investigatory and prosecutory powers, and respect the initiative and independence inherent in the Ombudsman who "beholden to no one, acts as the champion of the people and the preserver of the integrity of public service."15 Such discretionary power of the Ombudsman is beyond the domain of this Court to review, save in cases where there is clear showing of grave abuse of discretion amounting to lack or excess of jurisdiction of the latter. Grave abuse of discretion is such capricious and whimsical exercise of judgment on the part of the public officer concerned which is equivalent to an excess or lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.16 Ombudsman Desierto, in this case, committed grave abuse of discretion. Petitioner attributes partiality on the part of Ombudsman Desierto for having participated in the reinvestigation of the instant case despite the fact that he earlier participated in the initial preliminary investigation of the same when he was a Special Prosecutor by concurring in the recommendation for the filing of the information before the Sandiganbayan. We agree with the petitioner. Steadfastly, we have ruled that the officer who reviews a case on appeal should not be the same person whose decision is under review. 17 In Zambales Chromite Mining Company v. Court of Appeals,18 the decision of the Secretary of Agriculture and Natural Resources was set aside by this Court after it had been established that the case concerned an appeal of the Secretarys own previous decision, which he handed down while he was yet the incumbent Director of Mines. We have equally declared void a decision rendered by the Second Division of the National Labor Relations Commission, because one of its members, Commissioner Raul Aquino, participated in the review of the case which he had earlier decided on as a former labor arbiter.19 Likewise, this Court struck down a decision of Presidential Executive Assistance Jacobo Clave over a resolution of the Civil Service Commission, in which he, then concurrently its Chairman, had earlier concurred.20 Having participated in the initial preliminary investigation of the instant case and having recommended the filing of an appropriate information, it behooved Ombudsman Desierto to recuse himself from participating in the review of the same during the reinvestigation. He should have delegated the review to his Deputies pursuant to Section 15 of Rep. Act No. 6770, which provides:

Sec. 15. Powers, Functions and Duties. The Office of the Ombudsman shall have the following powers, functions and duties: ... (10) Delegate to the Deputies, or its investigators or representatives such authority or duty as shall ensure the effective exercise or performance of the powers, functions and duties herein or hereinafter provided; . . . In earlier recommending the filing of information, then Special Prosecutor Desierto was already convinced, from that moment, that probable cause exists to indict the accused. It becomes a farfetched possibility that in a subsequent review of the same, Ombudsman Desierto would make a turnabout and take a position contradictory to his earlier finding. Due process dictates that one called upon to resolve a dispute may not review his decision on appeal. 21 We take our bearings from Zambales Chromite Mining Co. v. Court of Appeals22 which succinctly explained that: In order that the review of the decision of a subordinate officer might not turn out to be farce, the reviewing officer must perforce be other than the officer whose decision is under review; otherwise, there could be no different view or there would be no real review of the case. The decision of the reviewing officer would be a biased view; inevitably, it would be the same view since being human, he would not admit that he was mistaken in his first view of the case. Cojuangco, Jr. v. Presidential Commission on Good Government23 concedes the applicability of the prohibition on the reviewing officer to handle a case he earlier decided, thus: Where the circumstances do not inspire confidence in the objectivity and impartiality of the judge, such judge should inhibit voluntarily or if he refuses, he should be prohibited from handling the case. A judge must not only be impartial but must also appear impartial as an assurance to the parties that his decision will be just. His actuation must inspire that belief. This is an instance when appearance is as important as reality. The same rule of thumb should apply to an investigating officer conducting a preliminary investigation. This is the reason why under Section 1679 of the former Revised Administrative Code, the Secretary of Justice, who has supervision over the prosecution arm of the government, is given ample power to designate another prosecutor to handle the investigation and prosecution of a case when the prosecutor handling the same is otherwise disqualified by personal interest, or is unable or fails to perform his duty. (Underlining supplied) The fact that the motion for reconsideration of Ombudsman Desiertos disapproval of the 03 November 1999 memorandum of Special Prosecutor Jesus Micael recommending the dismissal of Criminal Case No. 21654 was denied by another reviewing officer, Ombudsman Marcelo, does not cure the infirmity of Ombudsman Des iertos actuation. As stressed in Singson v. NLRC:24 . . . The infirmity of the resolution was not cured by the fact that the motion for reconsideration of the petitioner was denied by two commissioners and without the participation of Commissioner Aquino. The right of petitioner to an impartial review of his appeal starts from the time he filed his appeal. He is not only entitled to an impartial tribunal in the resolution of his motion for reconsideration. Moreover, his right is to an impartial review of three commissioners. The denial of petitioners right to an impartial review of his appeal is not an innocuous error. It negated his right to due process. (Underlining supplied) With the foregoing conclusion, we deem it unnecessary to discuss the other issues raised by petitioner. WHEREFORE, the Ombudsmans disapproval of the memorandum dated 03 November 1999, where Prosecutor Jesus A. Micael of the Office of the Special Prosecutor recommended the dismissal of Criminal Case No. 21654, as well as the memorandum dated 09 June 2003, which denied petitioners motion for reconsideration, are SET ASIDE. The case is remanded to the Office of the Ombudsman for further proceedings. No costs. SO ORDERED.

G.R. No. 146873

May 9, 2002

REMEDIOS PASTOR, petitioner, vs. CITY OF PASIG, MAYOR VICENTE EUSEBIO, THE COURT OF APPEALS (15th Division), and the CIVIL SERVICE COMMISSION, respondents. MENDOZA, J.: Petitioner Remedios Pastor is Budget Officer of the Municipality (now City) of Pasig. In 1992, she was reassigned to the Office of the Municipal Administrator pending investigation of reports against her concerning the issuance of Advice of Allotments by her. In 1995, after three years with no case filed against her, she asked for reinstatement to her former position. But she was instead reassigned to another unit of the now city government. Upon her complaint, the Civil Service Commission ordered her reinstatement as Budget Officer of the City of Pasig. However, on appeal of the city government, the Court of Appeals set aside the decision of the Civil Service Commission (CSC). Hence this petition for certiorari. The question is whether the decision of the Court of Appeals should be set aside and that of the CSC reinstated. We answer the question in the affirmative.1wphi1.nt The facts are as follows: Petitioner Remedios Pastor was appointed Budget Officer of the then Municipality (now City) of Pasig on May 1, 1986. Her appointment was confirmed by the Department of Budget and Management on July 17, 1987. On July 6, 1992, the newly-elected Mayor of Pasig, Vicente P. Eusebio, issued a memorandum relieving petitioner from her position as Municipal Budget Officer and reassigning her to the Office of the Municipal Administrator of Pasig. The Mayor's order stated: In view of the adverse report of the Committee on Budget that you issued Advice of Allotments without sufficient cash collections and pending thorough investigation there[on], you are hereby relieved of your position as Municipal Budget Officer and temporarily detailed [sic]1 with the Office of the Municipal Administrator. Upon receipt hereof, you are hereby directed to turn over all records, properties, and responsibilities to MR. EDENISON FAINSAN who is hereby designated as Officer-In-Charge, Municipal Budget Officer. In this connection, you are hereby ordered to report to the Office of the Municipal Administrator for temporary assignment. This order is issued in the interest of public service and shall take effect immediately.2 On March 6, 1995, Mayor Eusebio issued another memorandum (Memorandum Order No. 06-95) directing petitioner to conduct an in-depth evaluation/study of the operations of the Pasig City Hall Annex.3 Alleging that since her relief as Budget Officer, no investigation had been conducted regarding the charge that she had issued Advice of Allotments without sufficient cash collections, petitioner filed on October 20, 1995 a complaint with the CSC.4 She contended that her "protracted detail" to the Office of the City Administrator and the deletion of her name from the payroll for the City Budget Office for the period October 1-15, 1995 were in violation of Civil Service laws, rules, and regulations and that they constituted oppression and abuse of authority on the part of Mayor Eusebio. Petitioner prayed for her reinstatement as City Budget Officer of Pasig and for an order enjoining Mayor Eusebio from designating another person to that petition. On December 6, 1995, Pasig City Administrator Atty. Reynaldo P. Dionisio issued a memorandum directing petitioner "in the exigency of the service, in addition to your present duties, to [conduct a] study on how to improve budgeting and disbursement procedures of city funds, as well as [a] study on how to enhance the revenue of the city in preparation [for] the adverse effects of the Supreme Court Ruling on Realty Tax against the City of Pasig."5

In his comment6 on petitioner's complaint before the CSC, respondent City Mayor alleged, among other things, that petitioner had been reassigned to the Office of the Municipal (now City) Administrator in view of "her long years of experience in finance and [that she had been] tasked to conduct studies best suited to her qualifications"; that instead of being suspended for issuing Advice of Allotments without sufficient cash collections, she was reassigned "for her professional productive growth [and for the benefit] of the city"; that her reassignment was in the best interest of the service and did not involve any diminution of salary or rank as a department head; and that the deletion of petitioner's name from the payroll for October 15, 1995 was due to a management directive that "every personnel should be in the payroll of actual office assignment" and that in fact petitioner received her salary for that period and continued to receive the salary and benefits attached to her position. In its Resolution No. 96-1190, dated February 5, 1996, the CSC ordered: WHEREFORE, the appeal of Remedios Pastor is hereby found meritorious. She should already be returned to her former position or assigned to an office where she can perform as head of a department.7 The CSC held that, while petitioner's reassignment was originally made in the exigency of the service without reduction in her rank, status, or salary, respondent City Mayor failed to advance "sufficient reason" to warrant petitioner's continuous reassignment for more than three years which "appears too long for one to conduct the study assigned to her." Respondent City of Pasig did not ask for reconsideration of Resolution No. 96-1190. Instead, apparently in compliance with the same, it designated petitioner head of the Pasig City Hall Annex, Karangalan, Pasig City. But petitioner was not satisfied. She asked the CSC for a clarification of its Resolution. She alleged that there was no position of "Head of Pasig City Hall Annex" in the plantilla of the city government nor an ordinance creating the Office of Pasig City Hall Annex which, she claimed, was in fact "just a small bungalow-type building located at Karangalan Village, Barangay Manggahan, Pasig City, manned by one (1) representative each from about five (5) departments who report directly to their respective Department Heads at the Pasig City Hall. Hence, there was really nothing for her to oversee." In its Resolution No. 97-2845,8 dated May 20, 1997, the CSC found petitioner's reassignment to the Pasig City Hall Annex to be not in compliance with its decision. It held that the so-called Pasig City Hall Annex was not a department of the City Government of Pasay but a mere extension of the City Hall. The CSC also cited the fact that under Municipal Ordinance No. 01-92 of the City, it was the Vice-Mayor who was Officer-in-Charge of the extension office. The CSC ordered further reassignments of petitioner to other offices be stopped "since [she] has been out of her official station as Budget Officer for such a long time." Respondent Mayor Eusebio moved for a reconsideration, arguing that (1) the Pasig City Hall Annex was, for all intents and purposes, a department of the Pasig local government and (2) Municipal Ordinance No. 01-92 had been amended and now provides that the officer-in-charge of the Pasig City Hall Annex shall be either the Vice-Mayor or a department head or official of equivalent rank.9 His motion was denied, however, by the CSC in its Resolution No. 99-0200.10 The CSC held that the position of Head of the Pasig City Hall Annex was not equivalent to the position of City Budget Officer because the Annex was not a line department. Petitioner then wrote Mayor Eusebio informing him of her intention to resume her duties as City Budget Officer.10 She was advised, however, to wait because the city government intended to appeal the decision of the CSC.12 Respondent City of Pasig then filed with the Court of Appeals a petition, denominated for "writ of certiorari," under Rule 43 of the 1997 Rules of Civil Procedure, impleading only the Civil Service Commission as respondent. On January 15, 1999, the appeals court rendered a decision,13 the dispositive portion of which reads: WHEREFORE, the assailed Resolution (No. 99-0200) of the Civil Service Commission dated January 15, 1999 is SET ASIDE and RECALLED. The appeals court held that petitioner's reassignment, first to the Office of the Municipal (now City) Administrator and later as head of the Pasig City Hall Annex, was a valid exercise of the "extraordinary powers of the respondent City Government." It pointed out that the reassignment to the Office of the Municipal Administrator was only "temporary in nature" and that, in designating petitioner as head of the City Hall Annex, the city government had substantially complied with Resolution No. 96-1190 of the CSC: The City Hall Annex was a creation of Municipal Ordinance (No. 01-92) dated January 22, 1992 to bring the services of the government expeditiously and efficiently to the residents of Manggahan, Dela Paz, and Santolan, Pasig City. There was no reduction of [petitioner's] rank, status, or salary. The officer-in-charge shall either be the Vice-Mayor [or] a department head or official of equivalent rank (Ordinance No. 22, Series of 1997. See: Annex "D") It is, according to [respondents], a small version of the Pasig City Hall. [Petitioner's] power was that

of a department head exercising general supervision, direction, and control over the operations of the postal services, library, Office of the Civil Registry, Police Headquarters, Offices of the Treasurer and Assessor, Engineering and Building Office [and the] Community Relation and Information Office. She was to oversee the payment of fees/revenues and communication facilities, and provided with sufficient funds for its operation and maintenance. (Municipal Ordinance No. 01-92, Annex "E," Petition) [Respondents] therefore had advanced sufficient reasons to warrant [petitioner's] assignment as head of the Pasig City Hall Annex in Manggahan, Pasig City pursuant to resolution No. 96-1190.14 On January 29, 2001, the Court of Appeals denied the CSC's motion for extension of time to file a motion for reconsideration on the ground that the same is not allowed under its internal rules.15 Petitioner filed this petition alleging that I. THE RESPONDENT APPELLATE COURT HAS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION WHEN IT HAD TAKEN COGNIZANCE AND PASSED JUDGMENT ON THE CIVIL SERVICE COMMISSION'S ORDER PARTICULARLY CSC RES. NO. 990200, WHICH WAS A MERE CLARIFICATORY ORDER OF CSC RESOLUTION NO. 961190 WHICH HAD LONG ATTAINED FINALITY AND EXECUTORY CHARACTER AFTER THE LAPSE OF THE 15-DAY REGLEMENTARY PERIOD AND NO [MOTION FOR] RECONSIDERATION WAS EVER FILED BY THE RESPONDENT CITY OF PASIG - AND THUS FAILED TO CONSIDER THE LATTER'S OBLIGATION (COMPELLABLE BY MANDAMUS) TO COMPLY WITH THE SUBJECT CSC RESOLUTIONS. II. THE RESPONDENT APPELLATE COURT HAS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT FAILED TO CONSIDER THAT THE RESPONDENT CITY OF PASIG NOT BEING THE PERSON ADVERSELY AFFECTED [BY] THE CSC RESOLUTION NO. 961190 AND OTHER CLARIFICATORY RESOLUTIONS HAS NO RIGHT NOR PERSONALITY TO APPEAL AND/OR ASSAIL VIA CERTIORARI IN SAID CA-G.R. S.P. NO. 51098 ASSAILING THE CSC RESOLUTIONS/ORDER FOR THE REINSTATEMENT OF THE HEREIN PETITIONER TO HER PREVIOUS POSITION AS CITY BUDGET OFFICER. III. WITHOUT PREJUDICE TO GROUND NO. 2, ABOVE STATED, THE RESPONDENT COURT OF APPEALS HAS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION WHEN IT DID NOT DISMISS RESPONDENT CITY OF PASIG'S PETITION IN C.A. G.R. S.P. NO. 51098 FOR FAILURE TO IMPLEAD AND/OR EVEN JUST FURNISH A COPY TO THE HEREIN PETITION OF THEIR SAID PETITION DESPITE THE FACT THAT PETITIONER IS A NECESSARY AND INDISPENSABLE PARTY [WHICH CONSTITUTES] A GROSS VIOLATION OF DUE PROCESS.16 Petitioner prays that the decision of the Court of Appeals be set aside and that a writ of mandamus be issued for the enforcement of CSC Resolution Nos. 96-1190, 97-2845, and 99-0200. The Court finds for petitioner Remedios Pastor. Appeals from the decisions or final orders of the Civil Service Commission to the Court of Appeals should be by a petition for review pursuant to Rule 43 of the 1997 Rules of Civil Procedure. As provided by 5 thereof, a copy of the petition should be served on the adverse party and on the Civil Service Commission. Section 6(a) provides that the petition should state the full names of the parties to the case without impleading the Civil Service Commission either as petitioner or respondent. Section 7 provides that the failure of the petitioner to comply with any of the foregoing requirements regarding proof of service and the contents of the petition is a sufficient ground for the dismissal of the same. The petition for "writ of certiorari" filed by respondent city government should therefore have been dismissed for its failure to implead petitioner as the adverse party and to serve a copy of the petition on her. We do not agree with petitioner's contention, however, that respondent City of Pasig did not have the requisite personality to file the petition in the Court of Appeals. Petitioner cites our ruling in University of the Philippines v. Civil Service Commission17 in support of her counterclaim that the phrase "party adversely affected" in P.D. No. 807, 3918 refers only to the person or the respondent employee against whom the administrative disciplinary case is filed. Petitioner's contention is without merit. The ruling cited, first made in Paredes v. Civil Service Commission,19 does not apply since it refers to administrative disciplinary cases, which this case is not. Moreover, said ruling has already been modified in Civil Service Commission v. Dacoycoy,20 so that appeal now lies from a decision exonerating a civil service employee of administrative charges. We turn now to the merits of the case. Book V, Title I, Subtitle A, 26(7) of Executive Order No. 292, otherwise known as the Administrative Code of 1987, provides:

Reassignment. - An employee may be reassigned from one organizational unit to another in the same agency: Provided, That such reassignment shall not involve a reduction in rank, status, or salary. It has been held that a reassignment that is indefinite and results in a reduction in rank, status, and salary is in effect a constructive removal from the service.21 In this case, contrary to the ruling of the Court of Appeals, petitioner's reassignment to different offices in the local government of Pasig City is indefinite. Petitioner has been on virtual floating assignments which cannot but amount to a diminution of her rank, hence impermissible under the law.22 As already noted, her reassignment began in 1992 with her detail to the Office of the (now) City Administrator pending investigation of reports that she had issued Advice of Allotments without sufficient cash collections. However, no investigation appears to have ever been conducted on the said charge. To justify her continuing reassignment, respondent City Mayor claimed that the same was "due to petitioner's long years of experience in finance" which especially fitted her for studies regarding the city's revenues.1wphi1.nt A similar justification was invoked in Gloria v. Court of Appeals23 for the reassignment of Dr. Bienvenido Icasiano, Superintendent of the Division of City Schools of Quezon City as Vocational School Superintendent of the Marikina Institute of Science and Technology. It was contended that the reassignment would "best fit his qualification and experience" as "an expert in vocational and technical education." Considering the reason given for the reassignment, it was held that the same was "more than [merely] temporary" and hence violative of Dr. Icasiano's security of tenure. For the same reason, petitioner's reassignment to various offices should be considered more than merely a temporary one. For all intents and purposes, her reassignment, lasting nearly ten years now, is a removal without cause as Budget Officer of the City of Pasig. Indeed, her duties in her new assignment as head of the Pasig City Hall Annex 1. Oversee the operation of all units in the City Hall Annex and submit weekly accomplishment reports to the City Mayor; 2. Institute measures to improve collections of all income-generating units and submit periodic progress reports with specific recommendations to the City Mayor through the City Administrator; 3. Prepare and submit the annual budget of City Hall Annex for inclusion in the regular city budget; 4. Prepare a sound personnel program to promote careerism and staff development; and 5. Perform other duties that may be assigned by the City Mayor or Ordinance24show the "more than temporary" nature of her reassignment. That she has suffered a diminution in her rank is also evident. Under 30 of the Charter of the City of Pasig, 25 her duties and functions as City Budget Officer are to: (c) . . . take charge of the City Budget Office, and . . . (1) Prepare forms, orders, and circulars embodying instructions on budgetary and appropriation matters for the signature of the city mayor; (2) Review and consolidate the budget proposals of different departments and offices of the City; (3) Assist the city mayor in the preparation of the budget and during budget hearings; (4) Study and evaluate budgetary implications of proposed legislation and submit comments and recommendations thereon; (5) Submit periodic budgetary reports to the Department of Budget and Management; (6) Coordinate with the city treasurer, the city accountant, and the city planning and development coordinator for the purpose of budgeting; (7) Assist the sangguniang panlungsod in reviewing the approved budgets of component barangays of the City; (8) Coordinate with the city planning and development coordinator in the formulation of the development plan of the City; and

(9) Perform such other duties and functions and exercise such other powers as provided for under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and those that are prescribed by law or ordinance. In contrast, as head of the Pasig City Hall Annex, petitioner's budget proposals for the same will be subject to review by the City Budget Officer. Moreover, the position of City Budget Officer is created by statute, while that of the head of the Pasig City Hall Annex is created by mere ordinance. We agree with the CSC that petitioner should now be returned to her original position for her indefinite detail to other positions would amount to her removal without cause from the position to which she has been permanently appointed. As we said in Cruz v. Navarro:26 There is no question that we recognize the validity and indispensable necessity of the well established rule that for the good of public service and whenever public interest demands, [a] public official may be temporarily assigned or detailed to other duties even over his objection without necessarily violating his fundamental and legal rights to security of tenure in the civil service. But as we have already stated, "such cannot be undertaken when the transfer of the employee is with a view to his removal" and "if the transfer is resorted to as a scheme to lure the employee away from his permanent position" because "such attitude is improper as it would in effect result in a circumvention of the prohibition which safeguards the tenure of office of those who are in the civil service." WHEREFORE, the petition is GRANTED and the questioned decision of the Court of Appeals is SET ASIDE. Respondent City of Pasig is ordered to forthwith REINSTATE petitioner Remedios Pastor to her original position as Budget Officer of the City of Pasig.1wphi1.nt SO ORDERED. G.R. No. 141246. September 9, 2002 PHILIPPINE NATIONAL BANK, petitioner, vs. RICARDO V. GARCIA JR., respondent. There is nothing in the law that bars an appeal of a decision exonerating a government official or an employee from an administrative charge. If a statute is clear, plain and free form ambiguity, it must be given its literal meaning and applied without attempted interpretation. Indeed, the campaign against corruption, malfeasance and misfeasance in government will be undermined if the government or the private offended party is prevented from appealing erroneous administrative decisions. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the February 24, 1999 Decision and the December 22, 1999 Resolution of the Court of Appeals (CA)[1] in CA-GR SP No. 43900. The Decision affirmed the Resolution of the Civil Service Commission (CSC) exonerating Respondent Ricardo V. Garcia Jr. from administrative liability. The dispositive portion of the assailed CA Decision reads as follows: WHEREFORE, for lack of merit, the petition is DENIED and the assailed Orders are AFFIRMED. SO ORDERED.*2+ The assailed Resolution denied reconsideration.[3] The Facts Adopting the narration of facts by the Office of the Solicitor General (OSG), the CA summarizes the antecedents in this wise: Private respondent Ricardo V. Garcia, Jr., a check processor and cash representative at the Buendia Branch of petitioner Philippine National Bank (PNB), was charged by the latter with Gross Neglect of Duty in connection with the funds it had lost on August 5, 1994 in the amount of Seven Million Pesos (P7,000,000.00).[4] On July 21, 1995, the PNB-Administrative Adjudication Office (AAO) rendered its decision, duly approved by PNB Executive Vice President Inocencio B. Deza, Jr., finding private respondent guilty as charged and, accordingly, imposing

upon him the penalty of Forced Resignation with Benefits. . . without prejudiced to his monetary liability arising from the case.*+ Private respondent moved for reconsideration of the aforesaid decision, but the same was denied by the PNB -AAO in its Resolution dated September 21, 1995. Aggrieved, private respondent appealed to public respondent on September 28, 1995. Meanwhile, on May 27, 1996, petitioner was privatized pursuant to Executive Order No. 80, otherwise known as the 1996 Revised Charter of the Philippine National Bank. Thereafter, public respondent issued Resolution No. 967612 on December 3, 1996, granting private respondents appeal after finding that the evidence on record failed to establish neglect of duty on the part of private respondent. The dispositive portion of the decision reads: WHEREFORE, the appeal of Ricardo V. Garcia, Jr. is hereby granted. Accordingly, he is exonerated of the charges and the appealed decision of PNB is set aside. Garcia is automatically reinstated to his position with back salaries. Petitioner moved for reconsideration of the above resolution, but public respondent, on March 11, 1997, denied the same in its Resolution No. 971762.*5+ The CA Ruling In dismissing PNBs appeal, the CA cited Mendez v. Civil Service Commission,[6] which had ruled that only the party adversely affected by the decision -- namely, the government employee -- may appeal an administrative case. The CA held that a decision exonerating a respondent in an administrative case is final and unappealable. Hence, this Petition.[7] The Issues Petitioner submits the following issue for resolution: Whether or not the Court of Appeals is correct in so holding that petitioner cannot anymore elevate on appeal the resolution of the Civil Service Commission reversing petitioners finding of guilt for gross neglect of duty on Respondent Garcia*.+*8+ The Courts Ruling The Petition is meritorious. Main Issue: Party Adversely Affected Construed The right to appeal is not a natural right or a part of due process, but a mere statutory privilege that may be exercised only in the manner prescribed by law.[9] Under Presidential Decree (PD) 807, the CSC has jurisdiction over appeals of administrative disciplinary cases, in which the penalty imposed is suspension for more than thirty days; a fine exceeding thirty days salary; a demotion in rank or salary; or transfer, removal, or dismissal from office.[10] The CA stated that this provision must be read in congruence with Section 39 of the same law. The latter provision reads thus: Sec. 39. Appeals. (a) Appeals, where allowable, shall be made by the party adversely affected by the decision within fifteen days from receipt of the decision unless a petition for reconsideration is seasonably filed, which petition shall be decided within fifteen days.*11+ Citing Mendez v. Civil Service Commission,[12] the CA construed the phrase party adversely affected in the abovequoted provision to refer solely to the public officer or employee who was administratively disciplined. Hence, an appeal may be availed of only in a case where the respondent is found guilty.[13] However, this interpretation has been overturned in Civil Service Commission v. Dacoycoy.[14] Speaking through Justice Bernardo P. Pardo, the Court said that we now expressly abandon and overrule extant jurisprudence that the phrase party adversely affected by the decision refers to the government employee against whom the administrative case is filed for the purpose of disciplinary action which may take the form of suspension, demotion in rank or salary, transfer, removal or dismissal from office x x x.

In his Concurring Opinion, Justice Reynato S. Puno explained that the Civil Service Law did not categorically sanction the old doctrine barring appeals by parties other than the respondent employee. What the law declared as final were only those decisions of heads of agencies involving suspensions of not more than thirty days or fines not exceeding thirty days salary. These decisions, he said, involved minor and petty offenses, and to allow multiple appeals in those instances would overburden the quasi-judicial machinery of our administrative systems.[15] Neither can the old doctrine barring appeal be justified by the provision limiting the jurisdiction of the Civil Service Commission. According to that provision, the CSC was limited to the review of decisions involving: (1) suspension for more than thirty days; (2) fine in an amount exceeding (30) days salary; (3) demotion in rank or salary; and (4) transfer, removal or dismissal from office. Nothing in the provision, however, indicates a legislative intent to bar appeals from decisions exonerating a government official or an employee from a administrative charge.[16] It is a well-entrenched rule that if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.[17] Verily, the words employed by the legislature in a statute correctly express its intent or will and preclude courts from construing it differently.[18] The legislature is presumed to have known the meanings of the words, to have used those words advisedly, and to have expressed its intent by the use of such words as are found in the statute.[19] Where the language of a statute is plain and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory construction, and this Court has no right to look for or impose another meaning.[20] Indeed, the battles against corruption, malfeasance and misfeasance will be seriously undermined if we bar appeals of exoneration. After all, administrative cases do not partake of the nature of criminal actions, in which acquittals are final and unappealable based on the constitutional proscription of double jeopardy.[21] Furthermore, our new Constitution expressly expanded the range and scope of judicial review. Thus, to prevent appeals of administrative decisions except those initiated by employees will effectively and pervertedly erode this constitutional grant. Finally, the Court in Dacoycoy ruled that the CSC had acted well within its rights in appealing the CAs exoneration of the respondent public official therein, because it has been mandated by the Constitution to preserve and safeguard the integrity of our civil service system. In the same light, herein Petitioner PNB has the standing to appeal to the CA the exoneration of Respondent Garcia. After all, it is the aggrieved party which has complained of his acts of dishonesty. Besides, this Court has not lost sight of the fact that PNB was already privatized on May 27, 1996. Should respondent be finally exonerated indeed, it might then be incumbent upon petitioner to take him back into its fold. It should therefore be allowed to appeal a decision that in its view hampers its right to select honest and trustworthy employees, so that it can protect and preserve its name as a premier banking institution in our country. WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution SET ASIDE. This case is remanded to the Court of Appeals, which is DIRECTED to review on the merits the Resolution of the Civil Service Commission exonerating Respondent Ricardo V. Garcia from administrative liability. No costs. SO ORDERED.

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