Sei sulla pagina 1di 112

G.R. No.

96681 December 2, 1991


HON. ISIDRO CARIO, in his capacity as Secretary of the Department of Education,
Culture & Sports, DR. ERLINDA LOLARGA, in her capacity as Superintendent of City
Schools of Manila, petitioners,
vs.
THE COMMISSION ON HUMAN RIGHTS, GRACIANO BUDOY, JULIETA BABARAN,
ELSA IBABAO, HELEN LUPO, AMPARO GONZALES, LUZ DEL CASTILLO, ELSA
REYES and APOLINARIO ESBER,respondents.

NARVASA, J.:p
The issue raised in the special civil action of certiorari and prohibition at bar, instituted by
the Solicitor General, may be formulated as follows: where the relief sought from the
Commission on Human Rights by a party in a case consists of the review and reversal or
modification of a decision or order issued by a court of justice or government agency or
official exercising quasi-judicial functions, may the Commission take cognizance of the case
and grant that relief? Stated otherwise, where a particular subject-matter is placed by law
within the jurisdiction of a court or other government agency or official for purposes of trial
and adjudgment, may the Commission on Human Rights take cognizance of the same
subject-matter for the same purposes of hearing and adjudication?
The facts narrated in the petition are not denied by the respondents and are hence taken as
substantially correct for purposes of ruling on the legal questions posed in the present
action. These facts, 1 together with others involved in related cases recently resolved by this Court 2 or otherwise undisputed on
the record, are hereunder set forth.

1. On September 17, 1990, a Monday and a class day, some 800 public school teachers,
among them members of the Manila Public School Teachers Association (MPSTA) and
Alliance of Concerned Teachers (ACT) undertook what they described as "mass concerted
actions" to "dramatize and highlight" their plight resulting from the alleged failure of the
public authorities to act upon grievances that had time and again been brought to the
latter's attention. According to them they had decided to undertake said "mass concerted
actions" after the protest rally staged at the DECS premises on September 14, 1990 without
disrupting classes as a last call for the government to negotiate the granting of demands
had elicited no response from the Secretary of Education. The "mass actions" consisted in
staying away from their classes, converging at the Liwasang Bonifacio, gathering in
peaceable assemblies, etc. Through their representatives, the teachers participating in the
mass actions were served with an order of the Secretary of Education to return to work in
24 hours or face dismissal, and a memorandum directing the DECS officials concerned to
initiate dismissal proceedings against those who did not comply and to hire their
replacements. Those directives notwithstanding, the mass actions continued into the week,
with more teachers joining in the days that followed. 3

Among those who took part in the "concerted mass actions" were the eight (8) private
respondents herein, teachers at the Ramon Magsaysay High School, Manila, who had
agreed to support the non-political demands of the MPSTA. 4
2. For failure to heed the return-to-work order, the CHR complainants (private respondents)
were administratively charged on the basis of the principal's report and given five (5) days
to answer the charges. They were also preventively suspended for ninety (90) days
"pursuant to Section 41 of P.D. 807" and temporarily replaced (unmarked CHR Exhibits,
Annexes F, G, H). An investigation committee was consequently formed to hear the
charges in accordance with P.D. 807. 5
3. In the administrative case docketed as Case No. DECS 90-082 in which CHR
complainants Graciano Budoy, Jr., Julieta Babaran, Luz del Castillo, Apolinario Esber were,
among others, named respondents, 6 the latter filed separate answers, opted for a formal investigation, and also moved
"for suspension of the administrative proceedings pending resolution by . . (the Supreme) Court of their application for issuance of an
injunctive writ/temporary restraining order." But when their motion for suspension was denied by Order dated November 8, 1990 of the
Investigating Committee, which later also denied their motion for reconsideration orally made at the hearing of November 14, 1990, "the
respondents led by their counsel staged a walkout signifying their intent to boycott the entire proceedings." 7 The case eventually resulted in
a Decision of Secretary Cario dated December 17, 1990, rendered after evaluation of the evidence as well as the answers, affidavits and
documents submitted by the respondents, decreeing dismissal from the service of Apolinario Esber and the suspension for nine (9) months
of Babaran, Budoy and del Castillo. 8

4. In the meantime, the "MPSTA filed a petition for certiorari before the Regional Trial Court
of Manila against petitioner (Cario), which was dismissed (unmarked CHR Exhibit, Annex
I). Later, the MPSTA went to the Supreme Court (on certiorari, in an attempt to nullify said
dismissal, grounded on the) alleged violation of the striking teachers" right to due process
and peaceable assembly docketed as G.R. No. 95445, supra. The ACT also filed a similar
petition before the Supreme Court . . . docketed as G.R. No. 95590." 9 Both petitions in this Court were
filed in behalf of the teacher associations, a few named individuals, and "other teacher-members so numerous similarly situated" or "other
similarly situated public school teachers too numerous to be impleaded."

5. In the meantime, too, the respondent teachers submitted sworn statements dated
September 27, 1990 to the Commission on Human Rights to complain that while they were
participating in peaceful mass actions, they suddenly learned of their replacements as
teachers, allegedly without notice and consequently for reasons completely unknown to
them. 10
6. Their complaints and those of other teachers also "ordered suspended by the . . .
(DECS)," all numbering forty-two (42) were docketed as "Striking Teachers CHR Case
No. 90775." In connection therewith the Commission scheduled a "dialogue" on October 11,
1990, and sent a subpoena to Secretary Cario requiring his attendance therein. 11
On the day of the "dialogue," although it said that it was "not certain whether he (Sec.
Cario) received the subpoena which was served at his office, . . . (the) Commission, with
the Chairman presiding, and Commissioners Hesiquio R. Mallilin and Narciso C. Monteiro,
proceeded to hear the case;" it heard the complainants' counsel (a) explain that his clients
had been "denied due process and suspended without formal notice, and unjustly, since
they did not join the mass leave," and (b) expatiate on the grievances which were "the
cause of the mass leave of MPSTA teachers, (and) with which causes they (CHR
complainants) sympathize." 12 The Commission thereafter issued an Order 13 reciting these facts and making the following
disposition:

To be properly apprised of the real facts of the case and be accordingly


guided in its investigation and resolution of the matter, considering that these
forty two teachers are now suspended and deprived of their wages, which
they need very badly, Secretary Isidro Cario, of the Department of
Education, Culture and Sports, Dr. Erlinda Lolarga, school superintendent of
Manila and the Principal of Ramon Magsaysay High School, Manila, are
hereby enjoined to appear and enlighten the Commission en banc on October
19, 1990 at 11:00 A.M. and to bring with them any and all documents relevant
to the allegations aforestated herein to assist the Commission in this matter.
Otherwise, the Commission will resolve the complaint on the basis of
complainants' evidence.
xxx xxx xxx
7. Through the Office of the Solicitor General, Secretary Cario sought and was granted
leave to file a motion to dismiss the case. His motion to dismiss was submitted on
November 14, 1990 alleging as grounds therefor, "that the complaint states no cause of
action and that the CHR has no jurisdiction over the case." 14
8. Pending determination by the Commission of the motion to dismiss, judgments affecting
the "striking teachers" were promulgated in two (2) cases, as aforestated, viz.:
a) The Decision dated December l7, 1990 of Education Secretary Cario in
Case No. DECS 90-082, decreeing dismissal from the service of Apolinario
Esber and the suspension for nine (9) months of Babaran, Budoy and del
Castillo; 15 and
b) The joint Resolution of this Court dated August 6, 1991 in G.R. Nos. 95445
and 95590 dismissing the petitions "without prejudice to any appeals, if still
timely, that the individual petitioners may take to the Civil Service
Commission on the matters complained of," 16 and inter alia "ruling that it was prima facielawful
for petitioner Cario to issue return-to-work orders, file administrative charges against recalcitrants, preventively
suspend them, and issue decision on those charges." 17

9. In an Order dated December 28, 1990, respondent Commission denied Sec. Cario's
motion to dismiss and required him and Superintendent Lolarga "to submit their counteraffidavits within ten (10) days . . . (after which) the Commission shall proceed to hear and
resolve the case on the merits with or without respondents counter affidavit." 18 It held that the
"striking teachers" "were denied due process of law; . . . they should not have been replaced without a chance to reply to the administrative
charges;" there had been a violation of their civil and political rights which the Commission was empowered to investigate; and while
expressing its "utmost respect to the Supreme Court . . . the facts before . . . (it) are different from those in the case decided by the Supreme
Court" (the reference being unmistakably to this Court's joint Resolution of August 6, 1991 in G.R. Nos. 95445 and 95590, supra).

It is to invalidate and set aside this Order of December 28, 1990 that the Solicitor General,
in behalf of petitioner Cario, has commenced the present action of certiorari and
prohibition.
The Commission on Human Rights has made clear its position that it does not feel bound
by this Court's joint Resolution in G.R. Nos. 95445 and 95590, supra. It has also made plain
its intention "to hear and resolve the case (i.e., Striking Teachers HRC Case No. 90-775) on

the merits." It intends, in other words, to try and decide or hear and determine, i.e., exercise
jurisdiction over the following general issues:
1) whether or not the striking teachers were denied due process, and just cause exists for
the imposition of administrative disciplinary sanctions on them by their superiors; and
2) whether or not the grievances which were "the cause of the mass leave of MPSTA
teachers, (and) with which causes they (CHR complainants) sympathize," justify their mass
action or strike.
The Commission evidently intends to itself adjudicate, that is to say, determine with
character of finality and definiteness, the same issues which have been passed upon and
decided by the Secretary of Education, Culture & Sports, subject to appeal to the Civil
Service Commission, this Court having in fact, as aforementioned, declared that the
teachers affected may take appeals to the Civil Service Commission on said matters, if still
timely.
The threshold question is whether or not the Commission on Human Rights has the power
under the Constitution to do so; whether or not, like a court of justice, 19 or even a quasi-judicial
agency, 20 it has jurisdiction or adjudicatory powers over, or the power to try and decide, or hear and determine, certain specific type of
cases, like alleged human rights violations involving civil or political rights.

The Court declares the Commission on Human Rights to have no such power; and that it
was not meant by the fundamental law to be another court or quasi-judicial agency in this
country, or duplicate much less take over the functions of the latter.
The most that may be conceded to the Commission in the way of adjudicative power is that
it may investigate,i.e., receive evidence and make findings of fact as regards claimed
human rights violations involving civil and political rights. But fact finding is not adjudication,
and cannot be likened to the judicial function of a court of justice, or even a quasi-judicial
agency or official. The function of receiving evidence and ascertaining therefrom the facts of
a controversy is not a judicial function, properly speaking. To be considered such, the
faculty of receiving evidence and making factual conclusions in a controversy must be
accompanied by the authority ofapplying the law to those factual conclusions to the end that
the controversy may be decided or determined authoritatively, finally and definitively,
subject to such appeals or modes of review as may be provided by law.21 This function, to repeat, the
Commission does not have. 22

The proposition is made clear by the constitutional provisions specifying the powers of the
Commission on Human Rights.
The Commission was created by the 1987 Constitution as an independent office.

23 Upon its
constitution, it succeeded and superseded the Presidential Committee on Human Rights existing at the time of the effectivity of the
Constitution. 24 Its powers and functions are the following 25

(1) Investigate, on its own or on complaint by any party, all forms of human
rights violations involving civil and political rights;
(2) Adopt its operational guidelines and rules of procedure, and cite for
contempt for violations thereof in accordance with the Rules of Court;

(3) Provide appropriate legal measures for the protection of human rights of
all persons within the Philippines, as well as Filipinos residing abroad, and
provide for preventive measures and legal aid services to the underprivileged
whose human rights have been violated or need protection;
(4) Exercise visitorial powers over jails, prisons, or detention facilities;
(5) Establish a continuing program of research, education, and information to
enhance respect for the primacy of human rights;
(6) Recommend to the Congress effective measures to promote human rights
and to provide for compensation to victims of violations of human rights, or
their families;
(7) Monitor the Philippine Government's compliance with international treaty
obligations on human rights;
(8) Grant immunity from prosecution to any person whose testimony or whose
possession of documents or other evidence is necessary or convenient to
determine the truth in any investigation conducted by it or under its authority;
(9) Request the assistance of any department, bureau, office, or agency in
the performance of its functions;
(10) Appoint its officers and employees in accordance with law; and
(11) Perform such other duties and functions as may be provided by law.
As should at once be observed, only the first of the enumerated powers and functions bears
any resemblance to adjudication or adjudgment. The Constitution clearly and categorically
grants to the Commission the power toinvestigate all forms of human rights violations
involving civil and political rights. It can exercise that power on its own initiative or on
complaint of any person. It may exercise that power pursuant to such rules of procedure as
it may adopt and, in cases of violations of said rules, cite for contempt in accordance with
the Rules of Court. In the course of any investigation conducted by it or under its authority, it
may grant immunity from prosecution to any person whose testimony or whose possession
of documents or other evidence is necessary or convenient to determine the truth. It may
also request the assistance of any department, bureau, office, or agency in the performance
of its functions, in the conduct of its investigation or in extending such remedy as may be
required by its findings. 26
But it cannot try and decide cases (or hear and determine causes) as courts of justice, or
even quasi-judicial bodies do. To investigate is not to adjudicate or adjudge. Whether in the
popular or the technical sense, these terms have well understood and quite distinct
meanings.
"Investigate," commonly understood, means to examine, explore, inquire or delve or probe
into, research on, study. The dictionary definition of "investigate" is "to observe or study

closely: inquire into systematically. "to search or inquire into: . . . to subject to an official
probe . . .: to conduct an official inquiry." 27 The purpose of investigation, of course, is to discover, to find out, to learn,
obtain information. Nowhere included or intimated is the notion of settling, deciding or resolving a controversy involved in the facts inquired
into by application of the law to the facts established by the inquiry.

The legal meaning of "investigate" is essentially the same: "(t)o follow up step by step by
patient inquiry or observation. To trace or track; to search into; to examine and inquire into
with care and accuracy; to find out by careful inquisition; examination; the taking of
evidence; a legal inquiry;" 28 "to inquire; to make an investigation," "investigation" being in turn describe as "(a)n administrative
function, the exercise of which ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; . . . an inquiry, judicial or otherwise, for the
discovery and collection of facts concerning a certain matter or matters." 29

"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate, judge,


decide, determine, resolve, rule on, settle. The dictionary defines the term as "to settle
finally (the rights and duties of the parties to a court case) on the merits of issues raised: . . .
to pass judgment on: settle judicially: . . . act as judge." 30 And "adjudge" means "to decide or rule upon as a
judge or with judicial or quasi-judicial powers: . . . to award or grant judicially in a case of controversy . . . ." 31

In the legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To
determine finally. Synonymous with adjudge in its strictest sense;" and "adjudge" means:
"To pass on judicially, to decide, settle or decree, or to sentence or condemn. . . . Implies a
judicial determination of a fact, and the entry of a judgment." 32
Hence it is that the Commission on Human Rights, having merely the power "to investigate,"
cannot and should not "try and resolve on the merits" (adjudicate) the matters involved in
Striking Teachers HRC Case No. 90-775, as it has announced it means to do; and it cannot
do so even if there be a claim that in the administrative disciplinary proceedings against the
teachers in question, initiated and conducted by the DECS, their human rights, or civil or
political rights had been transgressed. More particularly, the Commission has no power to
"resolve on the merits" the question of (a) whether or not the mass concerted actions
engaged in by the teachers constitute and are prohibited or otherwise restricted by law; (b)
whether or not the act of carrying on and taking part in those actions, and the failure of the
teachers to discontinue those actions, and return to their classes despite the order to this
effect by the Secretary of Education, constitute infractions of relevant rules and regulations
warranting administrative disciplinary sanctions, or are justified by the grievances
complained of by them; and (c) what where the particular acts done by each individual
teacher and what sanctions, if any, may properly be imposed for said acts or omissions.
These are matters undoubtedly and clearly within the original jurisdiction of the Secretary of
Education, being within the scope of the disciplinary powers granted to him under the Civil
Service Law, and also, within the appellate jurisdiction of the Civil Service Commission.
Indeed, the Secretary of Education has, as above narrated, already taken cognizance of the
issues and resolved them, 33 and it appears that appeals have been seasonably taken by the aggrieved parties to the Civil
Service Commission; and even this Court itself has had occasion to pass upon said issues. 34

Now, it is quite obvious that whether or not the conclusions reached by the Secretary of
Education in disciplinary cases are correct and are adequately based on substantial
evidence; whether or not the proceedings themselves are void or defective in not having
accorded the respondents due process; and whether or not the Secretary of Education had

in truth committed "human rights violations involving civil and political rights," are matters
which may be passed upon and determined through a motion for reconsideration addressed
to the Secretary Education himself, and in the event of an adverse verdict, may be reviewed
by the Civil Service Commission and eventually the Supreme Court.
The Commission on Human Rights simply has no place in this scheme of things. It has no
business intruding into the jurisdiction and functions of the Education Secretary or the Civil
Service Commission. It has no business going over the same ground traversed by the latter
and making its own judgment on the questions involved. This would accord success to what
may well have been the complaining teachers' strategy to abort, frustrate or negate the
judgment of the Education Secretary in the administrative cases against them which they
anticipated would be adverse to them.
This cannot be done. It will not be permitted to be done.
In any event, the investigation by the Commission on Human Rights would serve no useful
purpose. If its investigation should result in conclusions contrary to those reached by
Secretary Cario, it would have no power anyway to reverse the Secretary's conclusions.
Reversal thereof can only by done by the Civil Service Commission and lastly by this Court.
The only thing the Commission can do, if it concludes that Secretary Cario was in error, is
to refer the matter to the appropriate Government agency or tribunal for assistance; that
would be the Civil Service Commission. 35 It cannot arrogate unto itself the appellate jurisdiction of the Civil Service
Commission.

WHEREFORE, the petition is granted; the Order of December 29, 1990 is ANNULLED and
SET ASIDE, and the respondent Commission on Human Rights and the Chairman and
Members thereof are prohibited "to hear and resolve the case (i.e., Striking Teachers HRC
Case No. 90-775) on the merits."
SO ORDERED.
Melencio-Herrera, Cruz, Feliciano, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr.
and Romero, JJ, concur.

Separate Opinions

GUTIERREZ, JR., J., concurring:


I concur in the result. The teachers are not to be blamed for exhausting all means to
overcome the Secretary's arbitrary act of not reinstating them.
PARAS, J., concurring:

I concur with the brilliant and enlightening decision of Chief Justice Andres R. Narvasa
I wish to add however that the Commission on Human Rights should concern itself in this
case and in many other similar cases:
(1) not only with the human rights of striking teachers but also the human
rights of students and their parents;
(2) not only with the human rights of the accused but also the human rights of
the victims and the latter's families;
(3) not only with the human rights of those who rise against the government
but also those who defend the same;
(4) not only the human rights of striking laborers but also those who as a
consequence of strikes may be laid off because of financial repercussions.
The defense of human rights is not a monopoly of a government agency (such as
the Commission on Human Rights) nor the monopoly of a group of lawyers
defending so-called "human rights' but the responsibility of ALL AGENCIES
(governmental or private) and of ALL LAWYERS, JUDGES, and JUSTICES.
Finally, the Commission should realize that while there are "human rights", there are also
corresponding "human obligations."

PADILLA, J., dissenting:


I vote to dismiss the petition for the same reasons stated in my earlier separate opinion filed
in this case.

# Separate Opinions
GUTIERREZ, JR., J., concurring:
I concur in the result. The teachers are not to be blamed for exhausting all means to
overcome the Secretary's arbitrary act of not reinstating them.

PARAS, J., concurring:


I concur with the brilliant and enlightening decision of Chief Justice Andres R. Narvasa
I wish to add however that the Commission on Human Rights should concern itself in this
case and in many other similar cases:
(1) not only with the human rights of striking teachers but also the human
rights of students and their parents;
(2) not only with the human rights of the accused but also the human rights of
the victims and the latter's families;
(3) not only with the human rights of those who rise against the government
but also those who defend the same;
(4) not only the human rights of striking laborers but also those who as a
consequence of strikes may be laid off because of financial repercussions.
The defense of human rights is not a monopoly of a government agency (such as
the Commission on Human Rights) nor the monopoly of a group of lawyers
defending so-called "human rights' but the responsibility of ALL AGENCIES
(governmental or private) and of ALL LAWYERS, JUDGES, and JUSTICES.
Finally, the Commission should realize that while there are "human rights", there are also
corresponding "human obligations."

PADILLA, J., dissenting:


I vote to dismiss the petition for the same reasons stated in my earlier separate opinion filed
in this case.

G.R. No. 153310

March 2, 2004

MEGAWORLD GLOBUS ASIA, INC., petitioner,


vs.
DSM CONSTRUCTION AND DEVELOPMENT CORPORATION and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., respondents.
DECISION
TINGA, J.:
Before this Court is a Petition for Review on Certiorari assailing the Decision dated
February 14, 2002, of the Court of Appeals in CA G.R. SP No. 67432,1 which affirmed
the Decision2 of the Construction Industry Arbitration Commission (CIAC)3 dated
September 8, 2001, in CIAC Case No. 22-2000 finding petitioner Megaworld Globus
Asia, Inc., liable to DSM Construction in the amount of P62,760,558.49.
The antecedents are as follows:
Relative to the construction of a condominium project called "The Salcedo Park,"
located at H.V. dela Costa St., Salcedo Village, Makati City, the project owner,
Megaworld, entered into three separate contracts with DSM Construction, namely: (1)
Contract for Architectural Finishing Works; (2) Contract for Interior Finishing Works; and
(3) Contract for Supply and Installation of Kitchen Cabinets and Closets. The total
contract price, which was initially placed at P300 Million, was later reduced to P240
Million when the items for kitchen cabinets and walk-in closets were deleted.4 The
contracts also contain a stipulation for Retention Money, which is a portion of the total
contract price (usually, as in this case, 10%) set aside by the project owner from all
approved billings and retained for a certain period to guarantee the performance by the
contractor of all corrective works during the defect-liability period which, in this case, is
twelve months from the issuance of the Taking Over Certificate of Works.5
The Letter of Award for Architectural Finishing Works provides that the period for
commencement and completion shall be twelve months, from August 1, 1997 to July 31,
1998. However, on February 21, 2000, representatives of both Megaworld and DSM
Construction entered into an Interim Agreement whereby they agreed on a new
schedule of the turnover of units from the 26th floor to the 40th floor, which was the last of
the contracted works.6 The consideration agreed upon in the Interim
Agreement was P53,000,000.00. Of this amount, P3,000,000.00 was to be released
immediately while five (5) equal installments of P7,000,000.00 were to be released
depending on the turn-over of units from the 26th floor to the 40th floor. The remaining
amount ofP15,000,000.00 of the P53,000,000.00 consisted of half of the retention
money.7
Because of the differences that arose from the billings, DSM Construction filed on
August 21, 2002, a Complaintbefore the CIAC for compulsory arbitration, claiming

payment of P97,743,808.33 for the outstanding balance of the three construction


contracts, variation works, labor escalation, preliminaries loss and expense, earned
retention money, interests, and attorneys fees.8 DSM Construction alleged that it
already commenced the finishing works on the existing 12 floors on August 1, 1997,
instead of waiting for the entire 40-floor structure to be completed. At one time, DSM
Construction worked with other contractors whose work often depended on, interfered
or conflicted with said contractors. Delay by a trade contractor would start a chain
reaction by delaying or putting off other works.9
Interposing mainly the defense of delay in the turn-over of units and the poor quality of
work of DSM Construction, Megaworld filed its Answer and made a counter-claim for
loss of profits, liquidated damages, costs of take-over and rectification works,
administration expenses, interests, attorneys fees and cost of arbitration in the total
amount of P85,869,870.28.10
Prudential Guarantee and Assurance, Inc. (PGAI), which issued a Performance Bond to
guarantee Megaworlds contractual obligation on the project, was impleaded by
Megaworld as a third-party respondent.11
On March 28, 2001, the parties signed before the members of the Arbitral Tribunal
the Terms of Reference12(TOR) where they setforth their admitted facts,13 respective
documentary evidence,14 summary of claims15 and issues to be resolved by the
tribunal.16 After presenting their evidence in the form of affidavits of witnesses, 17 the
parties submitted their respective memoranda/draft decisions.18
On October 19, 2001, the Arbitral Tribunal promulgated its Decision dated September
28, 2001, awardingP62,760,558.49 to DSM Construction and P9,473,799.46 to
Megaworld.19
Megaworld filed a Petition for Review under Rule 43 of the Rules of Civil Procedure
before the Court of Appeals. It faulted the Arbitral Tribunal for finding that DSM
Construction achieved a 95.56% level of accomplishment as of February 14, 2000; for
absolving DSM Corporation of the consequences of the alleged delay in the
performance of its work; and for ruling that DSM Construction had complied with the
contractual requirements for filing requests for extension. Megaworld likewise
questioned the sufficiency of evidence to justify the awards for liquidated damages; the
balance of the contract price; the balance of amounts payable on account of
the InterimAgreement of February 21, 2000; the amount of P6,596,675.55 for variation
orders; the amount ofP29,380,902.35 as reimbursement for preliminaries/loss and
expense; the amount of P413,041.52 for labor escalation costs; and the balance of the
retention money in the amount of P14,700,000.00 despite its award ofP11,820,000.00
under the February 21, 2000, Interim Agreement. Finally, Megaworld claimed that the
Arbitral Tribunal erred in denying its claim for liquidated damages, expenses incurred for
the cost of take-over work, administrative expenses, and its recourse against PGAI and
for limiting its recovery for rectification work to onlyP9,197,863.55.20

On February 14, 2002, the Court of Appeals promulgated its Decision21 affirming that of
the Arbitral Tribunal. The court pointed out that only questions of law may be raised
before it on appeal from an award of the CIAC.22 That pronouncement notwithstanding,
the Court of Appeals proceeded to review the decision of the Arbitral Tribunal and found
the same to be amply supported by evidence.23
Megaworld sought reconsideration of the Court of Appeals Decision arguing, among
other things, that the appellate court ignored the ruling in Metro Construction, Inc. v.
Chatham Properties24 that the review of the CIAC award may involve either questions of
fact, law, or both fact and law.
The Court of Appeals denied the motion for reconsideration in its Resolution25 dated
April 25, 2002. While acknowledging that the findings of fact of the CIAC may be
questioned in line with Metro Construction,26 the appellate court stressed that the
tribunals decision is not devoid of factual or evidentiary support.
Megaworld elevated the case to this Court through the present Petition, advancing the
following grounds, viz:
I
THE COURT OF APPEALS IN EFFECT REFUSED TO HEED THE RULE LAID DOWN BY
THIS Honorable Court in the Metro Construction, INC. vs. Chatham properties, inc. case
when it dismissed mgais petition despite the grave questions of both fact and law brought
before it by the petitioner.
II
the finding of the appellate court that the decision was based on substantial evidence
adduced by both parties sans any review of the record or of attachments of dsm is fatally
wrong, such finding being merely an adoption of the tribunals decision which, as earlier
pointed out, was not supported by competent, credible and admissible evidence.
III
the court of appeals seriously erred in giving blanket approval of all the unfounded claims
and conclusions of the ciac arbitral tribunals SEPTEMBER 28, 2001 decision to the
detriment of petitioners cardinal right to due process, particularly to its right to
administrative due process.
IV
the findings and conclusions made by a highly partisan ciac arbitral tribunal have no basis
on the evidence on record. hence, the exception to the rule that only questions of law may
be brought to the honorable court is applicable in the case AT bar. 27

Although Megaworld, at the outset,28 intimates that the case involves grave questions of
both fact and law, a cursory reading of the Petition reveals that, except for the
amorphous advertence to administrative due process, the alleged errors fundamentally
involve only questions of fact. Megaworlds plea for the Court to pass upon the findings
of facts of the Arbitral Tribunal, which were upheld by the appellate court, must perforce
fail.
To jumpstart its bid, Megaworld exploits the Court of Appeals pronouncement in the
assailed decision that only questions of law may be raised before it from an award of
the CIAC. The appellate court did so, Megaworld continues, in evident disregard
of Metro Construction.29
Under Section 19 of Executive Order No. 1008,30 the CIACs arbitral award "shall be
final and inappealable except on questions of law which shall be appealable to the
Supreme Court." In Metro Construction, however, this Court held that, with the
modification of E.O. No. 1008 by subsequent laws and issuances, 31 decisions of the
CIAC may be appealed to the Court of Appeals not only on questions of law but also on
questions of fact and mixed questions of law and fact.
Of such subsequent laws and issuances, only Section 1,32 Rule 43 of the 1997 Rules of
Civil Procedure expressly mentions the CIAC. While an argument may be made that
procedural rules cannot modify substantive law, adding in support thereof that Section
1, Rule 43 has increased the jurisdiction of the Court of Appeals by expanding the
scope of review of CIAC awards, or that it contravenes the rationale for arbitration,
extant from the record is the fact that no party raised such argument. Consequently, the
matter need not be delved into.
In any case, the attack against the merits of the Court of Appeals Decision must fail.
Although Metro Construction may have been unbeknownst to the appellate court when
it promulgated its Decision, the fact remains that, as noted therein,33 it reviewed the
findings of facts of the CIAC and ruled that the findings are amply supported by the
evidence.
The Court of Appeals is presumed to have reviewed the case based on the Petition and
its annexes, and weighed them against the Comment of DSM Construction and
the Decision of the Arbitral Tribunal to arrive at the conclusion that the said Decision is
based on substantial evidence. In administrative or quasi-judicial bodies like the CIAC, a
fact may be established if supported by substantial evidence or that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. 34
The tenability of the assailed Decision is clear from the following discussion of the
arguments raised by Megaworld before the Court of Appeals which significantly are the
same arguments it has raised before this Court.
Issue of Accomplishment Level

Megaworld contested the finding of 95.56% level of accomplishment by the Arbitral


Tribunal, alleging that the receipts DSM Construction issued for payments under
the Interim Agreement show that the latter only achieved 90% accomplishment up to the
31st floor while the 32nd to the 34th floors were only 60% completed.35 Megaworld
insisted, therefore, that the level of accomplishment was nowhere near 90%.
DSM Construction countered that Megaworld, in claiming a level of accomplishment of
only 90%, contradicted its own Project Manager, TCGI,36 which came up with a different
percentage of accomplishment that are notably higher than Megaworlds computation.37
In resolving this issue, the Arbitral Tribunal relied on the computation of Davis Langdon
& Seah (DLS), the projects independent surveyor,38 which found the level of
accomplishment as of February 14, 2000, to be 95.56%. DLSs computation is recited in
Exhibit "NN",39 thus:
Architectural Finishing :40
The 24th
Progress
Billing
evaluated
by DLS
covering the
period
November
=
15, 1999 to Php213,658,888.7741Php223,456,756.6842
95.62%
December
15, 1999
over the
Contract
Price for
Architectural
Finishing
Works.
Kitchen Cabinets & Bedroom Closets:43
The 9th
Progress
Billing
evaluated
by DLS
covering the
Php26,228,091.7344Php28,556,915.1745
period
December
1, 1999 to
December
9, 1999 over
the contract

=
91.84%

price for
Kitchen
Cabinet and
Bedroom
Closet.
Interior Finishing Works:46
The 13th
Progress
Billing
evaluated
by DLS
covering the
period
January 8,
2000 to
February 7, Php49,383,114.6747Php50,685,416.5548
2000 for the
Interior
Finishing
Works over
the contract
price for
Interior
Finishing
Work.

=
95.55%

Php213,658,888.77 Php26,228,091.72 Php49,383,114.67 289,270,295.17=95.5


+
+
=
6%
Php223,456,756.68

Php
28,556,915.17

Php50,685,416.55 302,699,097.40

Clearly, thus, CIACs finding that the level of accomplishment of DSM Construction as of
February 12, 2002, stood at 95.56% was affirmed by the Court of Appeals because it is
supported by substantial evidence.
The Court of Appeals also noted that the Arbitral Tribunal did not give due course to all
of DSM Constructions claims. Indeed, the Arbitral Tribunal rejected the construction
companys demand for payment for subsequent works done after February 12, 2000,
because Exhibit "OO," on which DSM Constructions demand was based, does not bear
any mark that it had been received by Megaworld. Thus, the Arbitral Tribunal concluded
that subsequent works up to September 22, 2000, when DSM Construction supposedly
stopped working on the project, had not been established.49
This Court observes that between the two contrasting claims of Megaworld and DSM
Construction on the percentage of work accomplishment, the Arbitral Tribunal instead

accorded weight to the assessment of DLS which is the project surveyor. Apart from
being reasonable, DLSs evaluation is impartial. Thus, as correctly pointed out by the
Arbitral Tribunal, DLS rejected DSM Constructions 99% accomplishment claim when it
limited its evaluation to only 95.56%.
Issues of Delay and Liquidated Damages
Next, Megaworld attributed the delay in the completion of the construction project solely
to DSM Construction. The latter countered that among the causes of delay was the lack
of coordination among trade contractors and the absence of a general
contractor.50 Although the contract purportedly contains a provision for the coordination
of trade contractors, the lack of privity among them prevented coordination such that
DSM Construction could not require compliance on the part of the other trade
contractors.
The Arbitral Tribunal decided this question by turning to Section 2.01 of the General
Conditions of the Contract, which states:
2.01 SITE, ACCESS & WORKS
The Contractor shall accept the Site as found on the date for possession and at their
own expense clear the site of any debris which may have been left by the preceding
occupants/contractors.
The Arbitral Tribunal held that Section 2.01 presupposes that on the date of possession
by DSM Construction of the work premises, the preceding contractor had already left
the same.51 The tribunal explained that the delay incurred by other trade contractors
also resulted in the delay of the work of DSM Construction.
It also pointed out that under Section 5.3 (1)52 of the Interim Agreement,53 Megaworld is
required to complete and turn over to DSM Construction preceding works for the latter
to complete their works in accordance with the Revised Work Schedule. Section 5.3 (1),
the Arbitral Tribunal noted, even allows DSM Construction to recover losses incurred on
account of the standby time of DSMs personnel/manpower or workers mobilized while
Megaworld is not ready to turn over the preceding works. The Arbitral Tribunal further
held that, in accordance with Section 5.3 (2)54 of the Interim Agreement, DSM
Construction was entitled to an extension of time corresponding to the number of days
of delay reckoned from the time the preceding work item or area should have been
turned over to DSM Construction. Consequently, such delay, which is not exclusively
imputable to DSM Construction, negates the claim for liquidated damages by
Megaworld.55
In affirming the Arbitral Tribunals disposition of the issues of delay and payment of
liquidated damages, the appellate court noted that the Arbitral Tribunal narrated the
claims and defenses of both DSM Construction and Megaworld before making an

evaluation thereof and arriving at its conclusion.56 Clearly, the evidence and arguments
were carefully weighed to justify the said disposition.
The Tribunals finding that the project had already been delayed even before DSM
Construction commenced its work is borne out by the evidence. In his letter, Exhibit X2,57 Project Management Consultant Eduardo C. Arrojado, conceded that the previous
contractors had delayed the project, at the same time faulting DSM Construction for
incurring its own delay. Furthermore, the work of DSM Construction pertaining as it did
to the architectural and interior finishing stages as well as the supply and installation of
kitchen cabinets and closets, obviously related to the final details and completion stage
of the project. Thus, commencement of its task had to depend on the turn over of the
complete work of the prior contractors. Hence, the delay of the previous contractors
resulted in the delay of DSM Constructions work.
Issues of the Contract Price Balance and Retention Money
Megaworld also questioned the Arbitral Tribunals awards of P7,129,825.19
corresponding to the balance of the contract price, and P11,820,000.00 pursuant to
the Interim Agreement.58 Megaworld alleged that DSM Construction was no longer
entitled to the balance of the contract price and the retention money after the latter
received payments pursuant to the Interim Agreement in the amounts of P5,444,553.18
for the 26th to the 28thfloors, another P5,444,553.18 for the 29th to the 31st floors at a 90%
completion rate, and P4,161,818.18 for the 32nd to the 34th floors which were 60%
completed. Megaworld also contended that since it spent more money to complete the
scope of work of DSM Construction, the latter was no longer entitled to any of the
balance.
On the other hand, DSM Construction argued that the award was justified in view of the
failure of Megaworld to controvert the amount of P7,129,825.19 included in the Account
Overview of DLS. DSM Construction also emphasized that it was not claiming the
entire P53 Million under the Interim Agreement but only the amount corresponding to
the actual work done. Even based on DLSs computation, a total of P11,820,000.00 of
retention money is still unpaid out of the 50% agreed to be released under the Interim
Agreement (P15,000,000.00 lessP3,180,000.00 retention money or P11,820,000.00 for
the paid billings).59
The Arbitral Tribunal ruled that the balance claimed under the three contracts was
based on what DSM Construction had actually accomplished less the payments it had
previously received. Considering that the remaining works which were performed by
another trade contractor, Deticio and Isabedra Builders, were paid directly by
Megaworld, no other cost for work accomplished in the Interim Agreement is due DSM
Construction except the retention money of P11,820,000.00.60
The Court of Appeals affirmed the award of the Arbitral Tribunal regarding the balance
of the contract price ofP7,129,825.19 and the retention money of P11,820,000.00 to
DSM Construction. The Court of Appeals noted that the Arbitral Tribunal again narrated

the claims and defenses of both DSM Construction and Megaworld before arriving at its
conclusion. The appellate court further stated that the mere fact that the tribunal did not
award the whole amount claimed by DSM Construction (P12,820,000.00) and instead
awarded onlyP11,820,000.00 belies Megaworlds allegation that the tribunal adopted
"hook, line and sinker" DSM Constructions claims.61
This Court finds the award of the balance of the contract price of P7,129,825.20 justified
in view of DLS explanation in Exhibit MM-362 that the amount of P7,129,825.20
represented the unpaid billing for architectural, interior and kitchen billings before
Megaworld and DSM Construction drafted the Interim Agreement.
Issue of Variation Works
Megaworld also disputed before the Court of Appeals the P6,686,675.5563 award by the
Arbitral Tribunal for variation works. Variation works consist of the addition, omission or
alteration to the kind, quality or quantity of the works.64 DSM Construction originally
claimed a total of P26,208,639.00 for variation works done but, of this claim, the Arbitral
Tribunal only awarded P6,686,675.55 in line with the evaluation of DLS.
Megaworld conceded that DSM Construction performed additional works to the extent
of P5,036,252.81. However, Megaworld claimed that since it incurred expenses when it
hired another trade contractor to take over the works left uncompleted by DSM
Construction, the latter lost its right to claim such amount especially since DSM
Construction did not comply with the documentation when claiming variation works. 65
DSM Construction asserted that the Arbitral Tribunal, in fact, should have
awarded P26,208,639.00 instead of limiting the award to only P6,686,675.55 because it
was not even disputed that variation works were performed. It also contended that it
cannot be faulted for the lack of documentation because the fault lay on Megaworlds
project manager who failed to forward the variation orders to DLS. 66
The Arbitral Tribunal ruled in favor of DSM Construction, holding that there was enough
evidence to prove that the contractor made a request for change or variation orders.
The Arbitral Tribunal also found the testimony of Engineer Eduardo C. Arrojado
convincing, factual and balanced despite Megaworlds attempt to discredit him.
However, while the amount claimed for variation works was P26,208,639.00, the Arbitral
Tribunal limited the awarded to only P6,686,675.5567 since a closer scrutiny of the other
items indicated that some works were not performed.68
The appellate court upheld the award of the Arbitral Tribunal because the award was
based not only on the documentary exhibits prepared by DLS but on the testimony of
Engineer Eduardo C. Arrojado, as well.69
This Court is convinced that payments for variation works is due. Undoubtedly, variation
works were performed by DSM Construction. This was confirmed by Engineer Eduardo
C. Arrojado who testified that he recommended the payment for substantial additional

works to DSM Construction. He further stated that since time was of the essence in the
completion of the project, there were variation orders which were performed without the
prior approval of the owner. However, he explained that this was a common
construction practice. Finally, he stated that he agreed with the evaluation of DLS. 70
The testimony justified the Arbitral Tribunals reliance on the evaluation made by DLS
which limited the claim for variation works to P6,596,675.55.
Issue of Preliminaries/Loss and Expense
Megaworld also disputed the award of P29,380,902.35 for preliminaries/losses and
expense.
The provision for preliminaries/loss and expense in the contract assumes a direct loss
and/or expense incurred in the regular progress of work for which the contractor would
not be reimbursed under any other provision of the contract.71 DSM Constructions claim
for preliminaries/loss and expense in the amount of P36,603,192.82 covered the loss
and expense incurred on payroll, equipment rental, materials and site clearing on
account of such factors as delay in the execution of the works for causes not
attributable to DSM Construction.72
Megaworld refused to recognize DSM Constructions claim because the latter allegedly
failed to comply with Clause 6.16 of the Conditions of Contract, which imposes a twomonth deadline for submission of claims for preliminaries reckoned from "the happening
of the event giving rise to the loss and expense."73 DSM Construction, however, argued
that the documentary evidence shows that out of the four claims for preliminaries, only
one (Exhibit MM-5 with an evaluation of P17,552,722.47), covering the period August 1,
1998 to April 1999, was submitted beyond the two-months requirement.74 DSM
Construction also pointed out that the two-month requirement for this claim was waived
by Megaworld through DLS when the latter recognized the validity of claims by coming
up with an evaluation of P17,552,722.47 for the period covered in Exhibit MM-5.75
The Arbitral Tribunal ruled that DSM Construction was entitled to extended preliminaries
considering that delay was not attributable to DSM Construction. The Arbitral Tribunal
observed that Megaworld did not present evidence to refute the claim for extended
preliminaries which were previously evaluated by DLS. However, after assessing the
two previous evaluations by DLS, the tribunal ruled that the claims for hauling and
disposal and cleaning and clearing of debris should not be included in the extended
preliminaries. Hence, the Arbitral Tribunal reduced the amount of P44,051.62 from the
claim of P2,655,879.89 per Exhibit "MM-7," and P3,883,309.54 from the claim
of P5,651,235.24 per Exhibit "MM-8," such amounts being unnecessary.76
The appellate court affirmed the award, stressing the fact that the Arbitral Tribunal
denied some of the claims which it did not find valid.77

DSM Constructions entitlement to the payment for preliminaries was explained by


Engineer Eduardo C. Arrojado to be the necessary result of the extension of the
contract between DSM Construction and Megaworld.78 Notably, majority of the claims of
DSM Construction was reduced by the Arbitral Tribunal on the basis of Exhibit MM-479or
the Summary of Variation Order Status Report prepared by DLS.
Although the Arbitral Tribunal ruled that DSM Construction was entitled to claim for
preliminaries, the award was not based on the claim of DSM Construction but on the
evaluation made by DLS.
The foregoing disquisition adequately shows that the evidence on record supports the
findings of facts of the Arbitral Tribunal on which the Court of Appeals based its
decision. In fact, although not all the exhibits in the Arbitral Tribunal were presented
before the Court of Appeals, the record of the appellate court contains the operative
facts and the substance of said exhibits, thus enabling the intelligent disposition of the
issues presented before it. This Court went over all the records, including the exhibits,
to ascertain whether the appellate court missed any crucial point. It did not.
The alleged undue favor accorded by the Arbitral Tribunal to DSM Construction is belied
by the fact that the Arbitral Tribunal did not grant all of DSM Constructions claims. In
majority of DSM Constructions claims, the Arbitral Tribunal awarded amounts lower
than what DSM Construction demanded. The Arbitral Tribunal also granted some of
Megaworlds claims.80
Neither did the Court of Appeals merely "swallow hook, line and sinker" the award of the
Arbitral Tribunal. While the appellate court affirmed the decision of the Arbitral Tribunal,
it also ruled in favor of Megaworld when it limited DSM Constructions lien to only six
units instead of all the condominium units to which DSM was entitled under the
Contract, rationalizing that the P62 Million award can be covered by the value of the six
units of the condominium project.81
Considering that the computations, as well as the propriety of the awards of the Arbitral
Tribunal, are unquestionably factual issues that have been discussed and ruled upon by
Arbitral Tribunal and affirmed by the Court of Appeals, we cannot depart from such
findings. Findings of fact of administrative agencies and quasi-judicial bodies, which
have acquired expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect, but finality when affirmed by the Court of
Appeals.82
Megaworld, however, adamantly contends that the present case constitutes an
exception to the above rule because: (1) there is grave abuse of discretion in the
appreciation of facts; (2) the judgment is premised on misapprehension of facts; and, (3)
the findings of fact of the Court of Appeals is premised on the supposed absence of
evidence and is contradicted by the evidence on record.83

We disagree. None of these flaws appear in this case. Grave abuse of discretion means
the capricious or whimsical exercise of judgment that is 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.84 No abuse of discretion
was established by Megaworld. On the contrary, what is apparent is Megaworlds effort
to attribute grave abuse of discretion to the Arbitral Tribunal simply because of the
unfavorable judgment against it. Megaworlds assertion that there was misapprehension
of facts and that the evidence is insufficient to support the decision is also untenable.
TheDecisions of the Arbitral Tribunal and the Court of Appeals adequately explain the
reasons therefor and are supported by substantial evidence.
Likewise unmeritorious is Megaworlds assertion that it was deprived of administrative
due process. The Arbitral Tribunal considered the arguments and the evidence
submitted by both parties. That it accorded greater weight to DSM Constructions
evidence, by itself, does not constitute a denial of due process.
WHEREFORE, the Petition is DENIED. The Decision dated February 14, 2001, of the
Court of Appeals is AFFIRMED. The Temporary Restraining Order issued by this Court
on July 12, 2002, is hereby LIFTED. Costs against Petitioner.
SO ORDERED.
Quisumbing, (Acting Chairman), Austria-Martinez, and Callejo, Sr., JJ., concur.
Puno, (Chairman), J., on leave.

NATIONAL POWER CORPORATION, petitioner, vs. HON. ROSE


MARIE ALONZO-LEGASTO, as Presiding Judge, RTC of Quezon
City, Branch 99, JOSE MARTINEZ, Deputy Sheriff, RTC of
Quezon City, CARMELO V. SISON, Chairman, Arbitration Board,
and
FIRST
UNITED
CONSTRUCTORS
CORPORATION,
respondents.
DECISION
TINGA, J.:

National Power Corporation (NPC) filed the instant Petition for


Review dated July 19, 2001, assailing the Decision of the Court of Appeals
dated May 28, 2001 which affirmed with modification the Order and Writ of
Execution respectively dated May 22, 2000 and June 9, 2000 issued by the
Regional Trial Court. In its assailed Decision, the appellate court declared
respondent First United Constructors Corporation (FUCC) entitled to just
compensation for blasting works it undertook in relation to a contract for the
construction of power facilities it entered into with petitioner. The Court of
Appeals, however, deleted the award for attorneys fees having found no
basis therefor.
[1]

[2]

[3]

[4]

The facts culled from the Decision of the Court of Appeals are undisputed:
On April 14, 1992, NPC and FUCC entered into a contract for the construction of
power facilities (civil works) Schedule 1 1x20 MW Bacon-Manito II Modular
Geothermal Power Plant (Cawayan area) and Schedule 1A 1x20 MW Bacon-Manito
II Modular Geothermal Power Plant (Botong area) in Bacon, Sorsogon (BACMAN
II). The total contract price for the two schedules isP108,493,966.30, broken down as
follows:
SCHEDULE
1 Cawayan area
1A Botong area

P52,081,421.00
P56,412,545.30
______________
P108,493,966.30

Appended with the Contract is the contract price schedule which was submitted by the
respondent FUCC during the bidding. The price for grading excavation was P76.00
per cubic meter.
Construction activities commenced in August 1992. In the latter part of September
1992 and after excavating 5.0 meters above the plant elevation, FUCC requested NPC

that it be allowed to blast to the design grade of 495 meters above sea level as its
dozers and rippers could no longer excavate. It further requested that it be
paid P1,346.00 per cubic meter similar to the rate of NPCs project in Palinpinon.
While blasting commenced on October 6, 1992, NPC and FUCC were discussing the
propriety of an extra work order and if such is in order, at what price should FUCC be
paid.
Sometime in March 1993, NPC Vice President for Engineering Construction, Hector
Campos, created a task force to review FUCCs blasting works. The technical task
force recommended that FUCC be paid P458.07 per cubic meter as such being the
price agreed upon by FUCC.
The matter was further referred to the Department of Public [W]orks and Highways
(DPWH), which in a letter dated May 19, 1993, recommended the price range
of P500.00 to P600.00 per cubic meter as reasonable. It further opined that the price
of P983.75 per cubic meter proposed by Lauro R. Umali, Project Manager of
BACMAN II was high. A copy of the DPWH letter is attached as Annex C,
FUCCs Exhibit EEE-Arbitration.
In a letter dated June 28, 1993, FUCC formally informed NPC that it is accepting the
proposed price of P458.07 per cubic meter. A copy of the said letter is attached as
Annex D, FUCCs Exhibit L Arbitration.
In the meantime, by March 1993, the works in Botong area were in considerable
delay. By May 1993, civil works in Botong were kept at a minimum until on
November 1, 1993, the entire operation in the area completely ceased and FUCC
abandoned the project.
Several written and verbal warnings were given by NPC to FUCC. On March 14,
1994, NPCs Board of Directors passed Resolution No. 94-63 approving the
recommendation of President Francisco L. Viray to take over the contract. President
Virays recommendation to take over the project was compelled by the need to staveoff huge pecuniary and non-monetary losses, namely:
(a)

Generation loss estimated to be at P26,546,400/month;

(b) Payment of steam penalties to PNOC-EDC the amount estimated to be


at P10,206,048.00/month;
(c) Payment of liquidated damages due to the standby of electromechanical contractor;
(d)

Loss of guaranteed protection (warranties) of all delivered plant equipment


and accessories as Mitsubishi Corporation, electromechanical contractor, will not be
liable after six months of delivery.

To prevent NPC from taking over the project, on March 28, 1994, FUCC filed an
action for Specific Performance and Damages with Preliminary Injunction and
Temporary Restraining Order before Branch 99, Regional Trial Court, Quezon City.
Under paragraph 19 of its Complaint, FUCC admitted that it agreed to pay the price
of P458.07 per cubic meter.
On April 5, 1994, Judge de Guzman issued a temporary restraining order and on April
21, 1994, the trial court resolved to grant the application for issuance of a writ of
preliminary injunction.
On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for Temporary
Restraining Order and Preliminary Injunction before the First Division of the Court of
Appeals asserting that no injunction may issue against any government projects
pursuant to Presidential Decree 1818.
On July 8, 1994, the Court of Appeals through then Associate Justice Bernardo Pardo
issued a temporary restraining order and on October 20, 1994, the said court rendered
a Decision granting NPCs Petition for Certiorari and setting aside the lower courts
Order dated April 21, 1994 and the Writ of Preliminary Injunction dated May 5, 1994.
However, notwithstanding the dissolution by the Court of Appeals of the said
injunction, on July 15, 1995, FUCC filed a Complaint before the Office of the
Ombudsman against several NPC employees for alleged violation of Republic Act
No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act. Together
with the complaint was an Urgent Ex-Parte Motion for the issuance of a cease and
[d]esist [o]rder to restrain NPC and other NPC officials involved in the BACMAN II
project from canceling and/or from taking over FUCCs contract for civil works of
said project.
Then on November 16, 1994, FUCC filed before the Supreme Court a Petition for
Review assailing the Decision of the Court of [A]ppeals dated October 20, 1994. In its
Comment, NPC raised the issue that FUCC resorted to forum shopping as it applied
for a cease and desist order before the National Ombudsman despite the dissolution of
the injunction by the Court of Appeals.
Pending the petition filed by FUCC before the Supreme Court, on April 20, 1995 the
NPC and FUCC entered into a Compromise Agreement.
Under the Compromise Agreement, the parties agreed on the following:

1. Defendant shall process and pay the undisputed unpaid billings of Plaintiff in
connection with the entire project fifteen (15) days after a reconciliation of accounts
by both Plaintiff and Defendant or thirty (30) days from the date of approval of this
Compromise Agreement by the Court whichever comes first. Both parties agree to
submit and include those accounts which could not be reconciled among the issues
to be arbitrated as hereunder provided;
2. Plaintiff accepts and acknowledges that Defendant shall have the right to proceed
with the works by re-bidding or negotiating the project immediately upon the signing
of herein Compromise Agreement;
3. This Compromise Agreement shall serve as the Supplemental Agreement for
payment of plaintiffs blasting works at the Botong site;
4. Upon approval of this Compromise Agreement by the Court or Plaintiffs receipt of
payment of this undisputed unpaid billings from Defendant whichever comes first,
the parties shall immediately file a Joint Manifestation and Motion for the withdrawal
of the following Plaintiffs petition from the Supreme Court, Plaintiffs Complaint from
the National Ombudsman, the Complaint and Amended Complaint from the RTC,
Br. 99 of Quezon City;
5. Upon final resolution of the Arbitration, as hereunder prescribed, the parties shall
immediately execute the proper documents mutually terminating Plaintiffs contract
for the civil works of the BACMAN II Project (Contract No. Sp90DLM-918 (I & A);
6. Such mutual termination of Plaintiffs contract shall have the following effects and/or
consequences: (a) the construction works of Plaintiff at the Kawayan and Bolong
sites, at its present stage of completion, shall be accepted and/or deemed to have
been accepted by defendant; (b) Plaintiff shall have no more obligation to Defendant
in respect of the BACMAN II Project except as provided in clause (e) below; (c)
Defendant shall release all retention moneys of plaintiff within a maximum period of
thirty (30) days from the date of final Resolution of the Arbitration; (d) no retention
money shall thenceforth be withheld by Defendant in its payment to Plaintiff under
this Compromise Agreement, and (e) Plaintiff shall put up a one-year guaranty bond
for its completed civil works at the Kawayan site, retroactive to the date of actual
use of the plant by defendant;
7. Plaintiffs blasting works claims and other unresolved claims, as well as the claims of
damages of both parties shall be settled through a two stage process to wit:
STAGE 1

7.1 Plaintiff and Defendant shall execute and sign this Compromise
Agreement which they will submit for approval by this Court.
Under this Compromise Agreement both parties agree that:
xxx

xxx

STAGE 2

7.1 The parties shall submit for arbitration to settle: (a) the price of
blasting, (b) both parties claims for damages, delays, interests, and
(c) all other unresolved claims of both parties, including the exact
volume of blasted rocks;

7.2 The arbitration shall be through a three-member commission to be


appointed by the Honorable Court. Each party shall nominate one
member. The Chairman of the Arbitration Board shall be [a] person
mutually acceptable to both parties, preferably from the academe;
7.3 The parties shall likewise agree upon the terms under which the
arbitrable issues shall be referred to the Arbitration Board. The
terms of reference shall form part of the Compromise Agreement
and shall be submitted by the parties to the Honorable Court within
a period of seven (7) days from the signing of the Compromise
Agreement;
7.4 The Arbitration Board shall have a non-extendible period of three
(3) months within which to complete the arbitration process and
submit its Decision to the Honorable Court;
7.5 The parties agree that the Decision of the Arbitration Board shall
be final and executory;
7.6 By virtue of this Compromise Agreement, except as herein
provided, the parties shall mutually waive, forgo and dismiss all of
their other claims and/or counterclaim in this case. Plaintiff and
defendant warrant that after approval by the Court of this
Compromise Agreement neither party shall file Criminal or
Administrative cases or suits against each other or its Board or
member of its officials on grounds arising from the case.
The Compromise Agreement was subsequently approved by the Court on May 24,
1995.
The case was subsequently referred by the parties to the arbitration board pursuant to
their Compromise Agreement. On December 9, 1999 the Arbitration Board rendered
its ruling the dispositive portion of which states:
WHEREFORE, claimant is hereby declared entitled to an award of P118,681,328.28
as just compensation for blasting works, plus ten percent (10%) thereof for attorneys
fees and expenses of litigation.
Considering that payment in the total amount of P36,550,000.00 had previously been
made, respondent is hereby ordered to pay claimant the remaining sum
of P82,131,328.28 for attorneys fees and expenses of litigation.
Pursuant to the Compromise Agreement approved by this Honorable Court, the parties
have agreed that the decision of the Arbitration Board shall be final and executory.

SO ORDERED.
On December 10, 1999 plaintiff FUCC filed a Motion for Execution while defendant
NPC filed a Motion to Vacate Award by the Arbitration Board on December 20, 1999.
On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto issued an order the
dispositive portion of which states:
WHEREFORE, the Arbitration Award issued by the Arbitration Board is hereby
APPROVED and the Motion for Execution filed by plaintiff hereby GRANTED. The
Motion to Vacate Award filed by defendant is hereby DENIED for lack of merit.
Accordingly, let a writ of execution be issued to enforce the Arbitration Award.
SO ORDERED. (Bracketed words supplied)
[5]

NPC went to the Court of Appeals on the lone issue of whether


respondent judge acted with grave abuse of discretion in issuing
the Order dated May 22, 2000 and directing the issuance of a Writ of
Execution.
In its assailed Decision, the appellate court declared that the court a
quo did not commit grave abuse of discretion considering that the Arbitration
Board acted pursuant to its powers under the Compromise Agreement and
that its award has factual and legal bases.
The Court of Appeals gave primacy to the court-approved Compromise
Agreement entered into by the parties and concluded that they intended the
decision of the arbitration panel to be final and executory. Said the court:
For one, what the price agreed to be submitted for arbitration are pure issues of fact
(i.e., the price of blasting; both parties claims for damages, delay, interests and all
other unresolved claims of both parties, including the exact volume of blasted rocks).
Also, the manner by which the Arbitration Board was formed and the terms under
which the arbitrable issues were referred to said Board are specified in the agreement.
Clearly, the parties had left to the Arbitration Board the final adjudication of their
remaining claims and waived their right to question said Decision of the Board.
Hence, they agreed in clear and unequivocal terms in the Compromise Agreement that
said Decision would be immediately final and executory. Plaintiff relied upon this
stipulation in complying with its various obligations under the agreement. To allow
defendant to now go back on its word and start questioning the Decision would be
grossly unfair considering that the latter was also a party to the Compromise

Agreement entered into part of which dealt with the creation of the Arbitration
Board.
[6]

The appellate court likewise held that petitioner failed to present evidence
to prove its claim of bias and partiality on the part of the Chairman of the
Arbitration Board, Mr. Carmelo V. Sison (Mr. Sison).
Further, the Court of Appeals found that blasting is not part of the unit
price for grading and structural excavation provided for in the contract for the
BACMAN II Project, and that there was no perfected contract between the
parties for an extra work order for blasting. Nonetheless, since FUCC relied
on the representation of petitioners officials that the extra work order would
be submitted to its Board of Directors for approval and that the blasting works
would be paid, the Court of Appeals ruled that FUCC is entitled to just
compensation on grounds of equity and promissory estoppel.
Anent the issue of just compensation, the appellate court took into account
the estimate prepared by a certain Mr. Lauro R. Umali (Mr. Umali), Project
Manager of the BACMAN II Project, which itemized the various costs involved
in blasting works and came up with P1,310.82 per cubic meter, consisting of
the direct cost for drilling, blasting excavation, stockpiling and hauling, and a
30% mark up for overhead, contractors tax and contingencies. This estimate
was later changed to P983.75 per cubic meter to which FUCC agreed. The
Court of Appeals, however, held that just compensation should cover only the
direct costs plus 10% for overhead expenses. Thus, it declared that the
amount of P763.00 per cubic meter is sufficient. Since the total volume of
blasted rocks as computed by Dr. Benjamin Buensuceso, Jr. of the U.P.
College of Engineering is 97,032.16 cubic meters, FUCC is entitled to the
amount of P74,035,503.50 as just compensation.
[7]

[8]

Although the Court of Appeals adjudged FUCC entitled to interest, the


dispositive portion of the assailed Decision did not provide for the payment of
interest. Moreover, the award of attorneys fees was deleted as there was no
legal and factual ground for its imposition.
[9]

[10]

Petitioner, represented by the Office of the Solicitor General in the


instant Petition, rehashes its submissions before the Court of Appeals. It
claims that the appellate court failed to pass upon the following issues:
1. The Chairman of the Arbitration Board showed extreme bias in prejudging the case.
2. The Chairman of the Arbitration Board greatly exceeded his powers when he
mediated for settlement in the court of arbitration proceedings.
3. The Chairman of the Arbitration Board committed serious irregularity in hastily
convening the Board in two days, which thereafter released its report.

4. The Arbitration Board Committed manifest injustice prejudicial to petitioner based on


the following:

a. It rendered an award based on equity despite the mandatory provision


of the law.
b. The Boards decision to justify that equity applies herein despite the
fact that FUCC never submitted its own actual costs for
blasting and PHESCO, INC., the succeeding contractor, did not
employ blasting but used ordinary excavation method at P75.59 per
cubic meter which is approximately the same unit price of plaintiff
(FUCC).
c. It gravely erred when the Board claimed that an award of just
compensation must be given to respondent FUCC for what it has
actually spent and yet instead of using as basis P458.07 which is the
price agreed upon by FUCC, it chose an estimate made by an NPC
employee.
d. It gravely erred when it relied heavily on the purported letter of NPC
Project Manager Lauro R. Umali, when the same has not been
identified nor were the handwritten entries in Annex ii established to
be made by him.
5. The Arbitration Board gravely erred in computing interest at 12% and from the time
of plaintiffs extrajudicial claim despite the fact that herein case is an action for
specific performance and not for payment of loan or forbearance of money, and
despite the fact that it has resolved that there was no perfected contract and there
was no bad faith on the part of defendant.
6. On June 25, 2000, NPC discovered the Sub-Contract Agreement of FUCC with
a unit price of only P430/per cubic meter.[11] [Emphasis in the original]

Specifically, petitioner asserts that Mr. Sison exhibited bias and


prejudgment when he exhorted it to pay FUCC for the blasting works after
concluding that the latter was allowed to blast. Moreover, Mr. Sison allegedly
attempted to mediate the conflict between the parties in violation of Section
20, paragraph 2 of Republic Act No. 876 (R.A. 876) otherwise known as the
Arbitration Law. Petitioner also questions the abrupt manner by which the
decision of the Arbitration Board was released.
[12]

Petitioner avers that FUCCs claim for blasting works was not approved by
authorized officials in accordance with Presidential Decree No. 1594 (P.D.
1594) and its implementing rules which specifically require the approval of the
extra work by authorized officials before an extra work order may be issued in
favor of the contractor. Thus, it should not be held liable for the claim. If at
all, only the erring officials should be held liable. Further, FUCC did not

present evidence to prove the actual expenses it incurred for the blasting
works. What the Arbitration Board relied upon was the memorandum of Mr.
Umali which was neither identified or authenticated during the arbitration
proceedings nor marked as evidence for FUCC. Moreover, the figures
indicated in Mr. Umalis memorandum were allegedly mere estimates and
were recommendatory at most.
Petitioner likewise claims that its succeeding contractor, Phesco, Inc.
(Phesco), was able to excavate the same rock formation without blasting.
Finally, it asserts that the award of P763.00 per cubic meter has no factual
and legal basis as the sub-contract between FUCC and its blasting subcontractor, Dynamic Blasting Specialists of the Philippines (Dynamic), was
only P430.00 per cubic meter.
In its Comment dated October 15, 2001, FUCC points out that
petitioners arguments are exactly the same as the ones it raised before the
Arbitration Board, the trial court and the Court of Appeals. Moreover, in the
Compromise Agreement between the parties, petitioner committed to abide by
the decision of the Arbitration Board. It should not now be allowed to question
the decision.
[13]

FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one of
the members of the Arbitration Board, was nominated by petitioner itself. If
there was any irregularity in its proceedings such as the bias and prejudgment
petitioner imputes upon Mr. Sison, Atty. Samonte would have complained. As
it is, Atty. Samonte concurred in the decision of the Arbitration Board and
dissented only as to the award of attorneys fees.
As regards the issue of interest, FUCC claims that the case involves
forbearance of money and not a claim for damages for breach of an obligation
in which case interest on the amount of damages awarded may be imposed at
the rate of six percent (6%) per annum.
Finally, FUCC asserts that its sub-contract agreement with Dynamic is not
newly-discovered evidence. Petitioners lawyers allegedly had a copy of the
sub-contract in their possession. In any event, the unit price of P430.00 per
cubic meter appearing in the sub-contract represents only a fraction of the
costs incurred by FUCC for the blasting works.
Petitioner filed a Reply dated March 18, 2002 reiterating its earlier
submissions.
[14]

The parties in the present case mutually agreed to submit to arbitration the
settlement of the price of blasting, the parties claims for damages, delay and
interests and all other unresolved claims including the exact volume of blasted

rocks. They further mutually agreed that the decision of the Arbitration Board
shall be final and immediately executory.
[15]

[16]

A stipulation submitting an ongoing dispute to arbitration is valid. As a


rule, the arbitrators award cannot be set aside for mere errors of judgment
either as to the law or as to the facts. Courts are generally without power to
amend or overrule merely because of disagreement with matters of law or
facts determined by the arbitrators. They will not review the findings of law
and fact contained in an award, and will not undertake to substitute their
judgment for that of the arbitrators. A contrary rule would make an arbitration
award the commencement, not the end, of litigation. Errors of law and fact, or
an erroneous decision on matters submitted to the judgment of the arbitrators,
are insufficient to invalidate an award fairly and honestly made. Judicial review
of an arbitration award is, thus, more limited than judicial review of a trial.
[17]

However, an arbitration award is not absolute and without exceptions.


Where the conditions described in Articles 2038, 2039 and 2040 of the Civil
Code applicable to both compromises and arbitrations are obtaining, the
arbitrators award may be annulled or rescinded. Additionally, judicial review
of an arbitration award is warranted when the complaining party has
presented proof of the existence of any of the grounds for vacating, modifying
or correcting an award outlined under Sections 24 and 25 of R.A. 876, viz:
[18]

[19]

Section 24. Grounds for vacating an award. In any of the following cases, the court
must make an order vacating the award upon the petition of any party to the
controversy when such party proves affirmatively that in the arbitration proceedings:
(a) The award was procured by corruption, fraud, or other undue means; or
(b) That there was evident partiality or corruption in the arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing
upon sufficient cause shown, or in refusing to hear evidence pertinent and material
to the controversy; that one or more of the arbitrators was disqualified to act as such
under section nine hereof, and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights of any party have
been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a
mutual, final and definite award upon the subject matter submitted to them was not
made.

When an award is vacated, the court, in its discretion, may direct a new hearing either
before the same arbitrators or before a new arbitrator or arbitrators to be chosen in the
manner provided in the submission or contract for the selection of the original
arbitrator or arbitrators, and any provision limiting the time in which the arbitrators

may make a decision shall be deemed applicable to the new arbitration to commence
from the date of the courts order.
Where the court vacates an award, costs not exceeding fifty pesos and disbursements
may be awarded to the prevailing party and the payment thereof may be enforced in
like manner as the payment of costs upon the motion in an action.
Section 25. Grounds for modifying or correcting an award. In any one of the
following cases, the court must make an order modifying or correcting the award,
upon the application of any party to the controversy which was arbitrated:
(a) Where there was an evident miscalculation of figures, or an evident mistake in the
description of any person, thing or property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter not submitted to them, not
affecting the merits of the decision upon the matter submitted; or
(c) Where the award is imperfect in a matter of form not affecting the merits of the
controversy, and if it had been a commissioners report, the defect could have been
amended or disregarded by the court.

The order may modify and correct the award so as to effect the intent thereof and
promote justice between the parties.
In this case, petitioner does not specify which of the foregoing grounds it
relies upon for judicial review. Petitioner avers that if and when the factual
circumstances referred to in the provisions aforementioned are present,
judicial review of the award is warranted. From its presentation of issues,
however, it appears that the alleged evident partiality of Mr. Sison is singled
out as a ground to vacate the boards decision.
[20]

We note, however, that the Court of Appeals found that petitioner did not
present any proof to back up its claim of evident partiality on the part of Mr.
Sison. Its averments to the effect that Mr. Sison was biased and had
prejudged the case do not suffice to establish evident partiality. Neither does
the fact that a party was disadvantaged by the decision of the arbitration
committee prove evident partiality.
[21]

According to the appellate court, [p]etitioner was never deprived of the


right to present evidence nor was there any showing that the Board showed
signs of any bias in favor of FUCC. As correctly found by the trial court, this
Court cannot find its way to support petitioners contention that there was
evident partiality in the assailed Award of the Arbitrator in favor of the
respondent because the conclusion of the Board, which the Court found to be
well-founded, is fully supported by substantial evidence.
[22]

There is no reason to depart from this conclusion.


However, we take exception to the arbitrators determination that based on
promissory estoppel per se or alone, FUCC is entitled to just compensation for
blasting works for the reasons discussed hereunder.
Section 9 of P.D. No. 1594, entitled Prescribing Policies, Guidelines, Rules
and Regulations for Government Infrastructure Contracts, provides:
SECTION 9. Change Order and Extra Work Order.A change order or extra work
order may be issued only for works necessary for the completion of the project and,
therefore, shall be within the general scope of the contract as bid[ded] and awarded.
All change orders and extra work orders shall be subject to the approval of the
Minister of Public Works, Transportation and Communications, the Minister of Public
Highways, or the Minister of Energy, as the case may be.
The pertinent portions of the Implementing Rules and Regulations of P.D.
1594 provide:
CI - Contract Implementation:
These Provisions Refer to Activities During Project Construction, i.e., After Contract
Award Until Completion, Except as May Otherwise be Specifically Referred to
Provisions Under Section II. IB - Instructions to Bidders.
CI 1 - Variation Orders - Change Order/Extra Work Order/Supplemental Agreement
4. An Extra Work Order may be issued by the implementing official to cover the
introduction of new work items after the same has been found to strictly comply
with Section CI-1-1 and approved by the appropriate official if the amount of the
Extra Work Order is within the limits of the former's authority to approve original
contracts and under the following conditions:
a. Where there are additional works needed and necessary for the completion,
improvement or protection of the project which were not included as items of work in the
original contract.
b. Where there are subsurface or latent physical conditions at the site differing
materially from those indicated in the contract.
c. Where there are duly unknown physical conditions at the site of an unusual nature
differing materially from those ordinarily encountered and generally recognized as
inherent in the work or character provided for in the contract.
d. Where there are duly approved construction drawings or any instruction issued by the
implementing office/agency during the term of contract which involve extra cost.

6. A separate Supplemental Agreement may be entered into for all Change


Orders and Extra Work Orders if the aggregate amount exceeds 25% of the
escalated original contract price. All change orders/extra work orders beyond
100% of the escalated original contract cost shall be subject to public bidding

except where the works involved are inseparable from the original scope of the
project in which case negotiation with the incumbent contractor may be allowed,
subject to approval by the appropriate authorities.
7. Any Variation Order (Change Order, Extra Work Order or Supplemental Agreement)
shall be subject to the escalation formula used to adjust the original contract price less
the cost of mobilization. In claiming for any Variation Order, the contractor shall, within
seven (7) calendar days after such work has been commenced or after the
circumstances leading to such condition(s) leading to the extra cost, and within 28
calendar days deliver a written communication giving full and detailed particulars of any
extra cost in order that it may be investigated at that time. Failure to provide either of
such notices in the time stipulated shall constitute a waiver by the contractor for any
claim. The preparation and submission of Change Orders, Extra Work Orders or
Supplemental Agreements are as follows:
a. If the Project Engineer believes that a Change Order, Extra Work Order or
Supplemental Agreement should be issued, he shall prepare the proposed Order or
Supplemental Agreement accompanied with the notices submitted by the contractor,
the plans therefore, his computations as to the quantities of the additional works
involved per item indicating the specific stations where such works are needed, the date
of his inspections and investigations thereon, and the log book thereof, and a detailed
estimate of the unit cost of such items of work, together with his justifications for the
need of such Change Order, Extra Work Order or Supplemental Agreement, and shall
submit the same to the Regional Director of office/agency/corporation concerned.
b. The Regional Director concerned, upon receipt of the proposed Change Order,
Extra Work Order or Supplemental Agreement shall immediately instruct the technical
staff of the Region to conduct an on-the-spot investigation to verify the need for the
work to be prosecuted. A report of such verification shall be submitted directly to the
Regional Director concerned.
c. The Regional Director concerned after being satisfied that such Change Order,
Extra Work Order or Supplemental Agreement is justified and necessary, shall review
the estimated quantities and prices and forward the proposal with the supporting
documentation to the head of office/agency/corporation for consideration.
d. If, after review of the plans, quantities and estimated unit cost of the items of work
involved, the proper office/agency/corporation committee empowered to review and
evaluate Change Orders, Extra Work Orders or Supplemental Agreements
recommends approval thereof, the head of office/agency/corporation, believing the
Change Order, Extra Work Order or Supplemental Agreement to be in order, shall
approve the same. The limits of approving authority for any individual, and the
aggregate of, Change Orders, Extra Work Orders or Supplemental Agreements for any
project of the head of office/agency/corporation shall not be greater than those granted
for an original project.
CI 3 - Conditions under which Contractor is to Start Work under Variation Orders and
Receive Payments
1. Under no circumstances shall a contractor proceed to commence work under
any Change Order, Extra Work Order or Supplemental Agreement unless it has
been approved by the Secretary or his duly authorized representative. Exceptions
to the preceding rule are the following:

a. The Regional Director, or its equivalent position in agencies/offices/corporations


without plantilla position for the same, may, subject to the availability of funds, authorize
the immediate start of work under any Change or Extra Work Order under any or all of
the following conditions:
(1) In the event of an emergency where the prosecution of the work is urgent to avoid
detriment to public service, or damage to life and/or property; and/or
(2) When time is of the essence; provided, however, that such approval is valid on work
done up to the point where the cumulative increase in value of work on the project
which has not yet been duly fully approved does not exceed five percent (5%) of the
adjusted original contract price, or P500,000 whichever is less; provided, further, that
immediately after the start of work, the corresponding Change/Extra Work Order shall
be prepared and submitted for approval in accordance with the above rules herein set.
Payments for works satisfactorily accomplished on any Change/Extra Work Order may
be made only after approval of the same by the Secretary or his duly authorized
representative.
b. For a Change/Extra Work Order involving a cumulative amount exceeding five
percent (5%) of the original contract price or original adjusted contract price no
work thereon may be commenced unless said Change/Extra Work Order has
been approved by the Secretary or his duly authorized representative. [Emphasis
supplied]

It is petitioners submission, and FUCC does not deny, that the claim for
payment
of
blasting
works
in
Botong
alone
was
approximately P170,000,000.00, a figure which far exceeds the original
contract price of P80,000,000.00 for two (2) project sites. Under the foregoing
implementing rules, for an extra work order which exceeds 5% of the original
contract price, no blasting work may be commenced without the approval of
the Secretary or his duly authorized representative. Moreover, the procedure
for the preparation and approval of the extra work order outlined under
Contract Implementation (CI) 1(7) above should have been complied with.
Accordingly, petitioners officials should not have authorized the
commencement of blasting works nor should FUCC have proceeded with the
same.
The following events, culled from the decision of the Arbitration Board and
the assailed Decision, are made the bases for the finding of promissory
estoppel on the part of petitioner:
1. After claimant [respondent herein] encountered what it claimed to be massive
hard rock formation (Testimony of witness Dumaliang, TSN, 28 October 1996, pp.
41-42; Testimony of witness Lataquin, 28 November 1996, pp. 2-3; 20-23; Exh. JJJ
and sub-markings) and informed respondent [petitioner herein] about it,
respondents own geologists went to the Botong site to investigate and confirmed
the rock formation and recommended blasting (Cf. Memorandum of Mr. Petronilo

E. Pana, Acting Manager of the Geoscience Services Department and the report of the
geologists who conducted the site investigation; Exhs. F and F-1).
2. Claimant asked for clearance to blast the rock formation to the design grade (Letter
dated 28 September 1992; Exh. UU). The engineers of respondent at the project
site advised claimant to proceed with its suggested method of
extraction (Order/Instruction given by Mr. Reuel R. Declaro and Mr. Francis A.
Paderna dated 29 September 1992; Exh. C).
3. Claimant requested that the intended blasting works be confirmed as extra
work order by responsible officials of respondent directly involved in the
BACMAN II Project (i.e., then BACMAN II Project Manager, Mr. Lauro R. Umali
and Mr. Angelito G. Senga, Section Chief, Civil Engineering Design of respondents
Design Department which bidded the project). These officials issued verbal
instructions to the effect: (a) that claimant could blast the rock formation down
to the design grade of 495 masl; (b) that said blasting works would be an extra
work order; and (c) that claimant would be paid for said blasting works using
the price per cubic meter for similar blasting works at Palinpinon, or
at P1,346.00 per cubic meter.
4. Claimant sent two (2) confirmatory letters to respondent, both addressed to its
President, one dated 30 September 1992, and sent through Mr. Angelito Senga, Chief
Civil Design Thermal, the other dated 02 October 1992, and sent through Mr. Lauro
R. Umali, Project ManagerBacMan II (Exhs. D and E; Testimony of witness
Dumaliang, TSN, 28 October 1996, pp. 43-49). The identical letters read:
We wish to confirm your instruction for us to proceed with the blasting of the Botong
Plant site to the design grade pending issuance of the relevant variation order. This is
to avoid delay in the implementation of this critical project due to the urgent need to
blast rocks on the plant site.
We are confirming further your statement that the said blasting works is an extra work
order and that we will be paid using the price established in your Palinpinon contract
with Phesco.
Thank you for your timely action and we look forward to the immediate issuance of
the extra work order.
We are now mobilizing equipment and manpower for the said work and hope to start
blasting next week.

5. Respondent received the letters but did not reply thereto nor countermand the
earlier instructions given to claimant to proceed with the blasting works. The due
execution and authenticity of these letters (Exhs. D-1 and E-1) and the fact of
receipt (Exhs. D-2 and E-2) were duly proved by claimant (Testimony of witness
Dumaliang, TSN, 28 October 1996, 43-49).
6. In mid-October 1992, three (3) Vice-Presidents of respondent visited the project
site and were informed of claimants blasting activities. While respondent claims
that one of the Vice-Presidents, Mr. Rodrigo Falcon, raised objections to
claimants blasting works as an extra work order, they instructed claimant to
speed up the works because of the power crisis then hounding the
country. Stipulation no. 24 of the Joint Stipulation of Facts of the parties which
reads: 24. In mid-October 1992, three (3) Vice-Presidents of respondent, namely:
Mr. Hector N. Campos, Sr., of Engineering Construction, Mr. C.A. Pastoral of
Engineering Design, and Mr. Rodrigo P. Falcon, visited the project site and were
likewise apprised of claimants blasting activities. They never complained about the
blasting works, much less ordered its cessation. In fact, no official of respondent
ever ordered that the blasting works be stopped.
7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice President of
Engineering Construction, instructed Mr. Fernando A. Magallanes then Manager of
the Luzon Engineering Projects Department, to evaluate claimants blasting works
and to submit his recommendations on the proper price therefor. In a memorandum
dated 17 November 1992 (Exh. G and sub-markings), Mr. Magallanes confirmed
that claimants blasting works was an extra work order and recommended that it
be paid at the price for similar blasting works at Palinpinon, or at P1,346.00 per
cubic meter. Mr. Campos concurred with the findings and recommendations of
Mr. Magallanes and instructed Mr. Lauro R. Umali, then Project Manager of
BacMan II, to implement the same as shown by his instructions scribbled on the
memorandum.
8. Mr. Umali and the project team prepared proposed Extra Work Order No. 2
Blasting (Exh. DDD Memorandum of Mr. Umali to Mr. Campos dated 20
January 1993 forwarding proposed Extra Work Order No. 2), recommending a
price of P983.75 per cubic meter for claimants blasting works. Claimant agreed
to this price (Testimony of witness Dumaliang, 7 November 1996, p. 48).
9. On 19 February 1993, claimant brought the matter of its unpaid blasting works to
the attention of the then NPC Chairman [also Secretary of the Department of Energy
then] Delfin L. Lazaro during a meeting with the multi-sectoral task force monitoring
the implementation of power plant projects, who asked then NPC President Pablo B.
Malixi what he was doing about the problem. President Malixi thereafter convened

respondents vice-presidents and ordered them to quickly document the


variation order and pay claimant. The vice-president, and specifically Mr.
Campos, pledged that the variation order for claimants blasting works would be
submitted for the approval of the NPC Board during the first week of March
1993. Claimant thereafter sent respondent a letter dated 22 February 1993 (Ex.
K) to confirm this pledge (Testimony of witness Dumaliang, 7 November 1996,
pp. 28-30).
10. Mr. Campos created a task force (i.e., the Technical Task Force on the Study and
Review of Extra Work Order No. 2; Exh. FFF) to review claimants blasting
works. After several meetings with the task force, claimant agreed to the lower
price of P458.07 per cubic meter, in exchange for quick payment (Testimony of
witness Dumaliang, 7 November 1996, p. 30).
11. However, no variation order was issued and no payment came, although it
appears from two (2) radiograms sent by Mr. Campos to Mr. Paderna at the
project site that the variation order was being processed and that payment to
claimant was forthcoming (Exhs. AAA and BBB).
12. Respondent asked the Department of Public Works and Highways (DPWH) about
the standard prices for blasting in the projects of the DPWH. The DPWH officially
replied to respondents query in a letter dated 19 May 1993 but the task force still
failed to seek Board approval for claimants variation order. The task force eventually
recommended that the issue of grading excavation and structural excavation and the
unit prices therefor be brought into voluntary arbitration (Testimony of witness
Dumaliang, 7 November 1996, pp. 30-57).
13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC President,
who proposed that claimant accept the price of P458.07 per cubic meter for its
blasting works with the balance of its claim to be the subject of arbitration.
Claimant accepted the offer and sent the letter dated 28 September 1993 (Exh.
O) to formalize said acceptance. However, no variation order was issued and
the promised payment never came. (Testimony of witness Dumaliang, 7 November
1996, p. 58).
14. After some time, claimant met Mr. Viray on 19 October 1993 at the project
site, and with some NPC officers in attendance, particularly Mr. Gilberto A.
Pastoral, Vice-President for Engineering Design, who was instructed by Mr.
Viray to prepare the necessary memorandum (i.e., that claimant would be
paid P458.07 per cubic meter with the balance of its claim to be the subject of
arbitration) for the approval of the NPC Board. Claimant formalized what
transpired during this meeting in its letter to Mr. Pastoral dated 22 October 1993

(Exhibit R). But no action was taken by Mr. Pastoral and no variation order
was issued by respondent (Testimony of witness Dumaliang, 7 November 1996, pp.
57-58). [Emphasis supplied and bracketed words]
[23]

Promissory estoppel may arise from the making of a promise, even


though without consideration, if it was intended that the promise should be
relied upon and in fact it was relied upon, and if a refusal to enforce it would
be virtually to sanction the perpetration of fraud or would result in other
injustice. Promissory estoppel presupposes the existence of a promise on
the part of one against whom estoppel is claimed. The promise must be plain
and unambiguous and sufficiently specific so that the court can understand
the obligation assumed and enforce the promise according to its terms.
[24]

[25]

In the present case, the foregoing events clearly evince that the promise
that the blasting works would be paid was predicated on the approval of the
extra work order by petitioners Board. Even FUCC acknowledged that the
blasting works should be an extra work order and requested that the extra
work order be confirmed as such and approved by the appropriate officials.
Notably, even as the extra work order allegedly promised to it was not yet
forthcoming, FUCC commenced blasting.
The alleged promise to pay was therefore conditional and up to this point,
promissory estoppel cannot be established as the basis of petitioners liability
especially in light of P.D. 1594 and its implementing rules of which both
parties are presumed to have knowledge. In Mendoza v. Court of Appeals,
supra, we ruled that [a] cause of action for promissory estoppel does not lie
where an alleged oral promise was conditional, so that reliance upon it was
not reasonable. It does not operate to create liability where it does not
otherwise exist.
Petitioners argument that it is not bound by the acts of its officials who
acted beyond the scope of their authority in allowing the blasting works is
correct. Petitioner is a government agency with a juridical personality
separate and distinct from the government. It is not a mere agency of the
government but a corporate entity performing proprietary functions. It has its
own assets and liabilities and exercises corporate powers, including the power
to enter into all contracts, through its Board of Directors.
In this case, petitioners officials exceeded the scope of their authority
when they authorized FUCC to commence blasting works without an extra
work order properly approved in accordance with P.D. 1594. Their acts
cannot bind petitioner unless it has ratified such acts or is estopped from
disclaiming them.
[26]

However, the Compromise Agreement entered into by the parties,


petitioner being represented by its President, Mr. Guido Alfredo A. Delgado,
acting pursuant to its Board Resolution No. 95-54 dated April 3, 1995, is a
confirmatory act signifying petitioners ratification of all the prior acts of its
officers. Significantly, the parties agreed that [t]his Compromise Agreement
shall serve as the Supplemental Agreement for the payment of plaintiffs
blasting works at the Botong site in accordance with CI 1(6) afore-quoted.
In other words, it is primarily by the force of this Compromise Agreement that
the Court is constrained to declare FUCC entitled to payment for the blasting
works it undertook.
[27]

Moreover, since the blasting works were already rendered by FUCC and
accepted by petitioner and in the absence of proof that the blasting was done
gratuitously, it is but equitable that petitioner should make compensation
therefor, pursuant to the principle that no one should be permitted to enrich
himself at the expense of another.
[28]

This brings us to the issue of just compensation.


The parties proposed in the terms of reference jointly submitted to the
Arbitration Board that should FUCC be adjudged entitled to just compensation
for its blasting works, the price therefor should be determined based on the
payment for blasting works in similar projects of FUCC and the amount it paid
to its blasting subcontractor. They agreed further that the price of the
blasting at the Botong site . . . shall range from Defendants position of P76.00
per cubic meter as per contract to a maximum of P1,144.00
[29]

[30]

Petitioner contends that the Arbitration Board, trial court and the appellate
court unduly relied on the memorandum of Mr. Umali which was allegedly not
marked as an exhibit. We note, however, that this memorandum actually
forms part of the record of the case as Exhibit DDD. Moreover, both the
Arbitration Board and the Court of Appeals found that Mr. Umalis proposal is
the best evidence on record as it is supported by detailed cost estimates that
will serve as basis to determine just compensation.
[31]

While the Arbitration Board found that FUCC did not present evidence
showing the amount it paid to its blasting sub-contractor, it did present
testimony to the effect that it incurred other costs and expenses on top of the
actual blasting cost. Hence, the amount of P430.00 per cubic meter indicated
in FUCCs Contract of Agreement with Dynamic is not controlling.
Moreover, FUCC presented evidence showing that in two (2) other
projects where blasting works were undertaken, petitioner paid the
contractors P1,346 per cubic meter for blasting and disposal of solid rocks in

the Palinpinon project and P1,144.51 per cubic meter for rock excavation in
the Hermosa Balintawak project. Besides, while petitioner claims that in a
contract with Wilper Construction for the construction of the Tayabas substation, the price agreed for blasting was only P96.13, petitioner itself did not
present evidence in support of this claim.
[32]

Parenthetically, the point raised by petitioner that its subsequent


contractor, Phesco, did not undertake blasting works in excavating the same
rock formation is extraneous and irrelevant. The fact is that petitioner allowed
FUCC to blast and undertook to pay for the blasting works.
At this point, we hearken to the rule that the findings of the Arbitration
Board, affirmed by the trial court and the Court of Appeals and supported as
they are by substantial evidence, should be accorded not only respect but
finality. Accordingly, the amount of P763.00 per cubic meter fixed by the
Arbitration Board and affirmed by the appellate court as just compensation
should stand.
[33]

As regards the issue of interest, while the appellate court declared in the
body of its Decision that interest which would represent the cost of the money
spent be imposed on the money actually spent by claimant for the blasting
works, there is no pronouncement as to the payment of interest in the
dispositive portion of the Decision even as it specifically deleted the award of
attorneys fees.
[34]

Despite its knowledge of the appellate courts omission, FUCC did not file
a motion for reconsideration or appeal from its Decision. In failing to do so,
FUCC allowed theDecision to become final as to it.
In Edwards v. Arce, we ruled that in a case decided by a court, the true
judgment of legal effect is that entered by the clerk of said court pursuant to
the dispositive part of its decision. The only portion of the decision that may
be the subject of execution is that which is ordained or decreed in the
dispositive portion. Whatever may be found in the body of the decision can
only be considered as part of the reasons or conclusions of the court and
serve only as guides to determine the ratio decidendi.
[35]

[36]

Even so, the Court allows a judgment which had become final and
executory to be clarified when there is an ambiguity caused by an omission or
mistake in the dispositive portion of the decision. In Reinsurance Company
of the Orient, Inc. v. Court of Appeals, we held:
[37]

[38]

In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the
Court applying the above doctrine said:

xxx We clarify, in other words, what we did affirm. What is involved here is not
what is ordinarily regarded as a clerical error in the dispositive part of the decision of
the Court of First Instance, which type of error is perhaps best typified by an error in
arithmetical computation. At the same time, what is involved here is not a correction
of an erroneous judgment or dispositive portion of a judgment. What we believe is
involved here is in the nature of an inadvertent omission on the part of the Court of
First Instance (which should have been noticed by private respondents counsel who
had prepared the complaint), ofwhat might be described as a logical follow-through of
something set forth both in the body of the decision and in the dispositive portion
thereof: the inevitable follow-through, or translation into, operational or behavioral
terms, of the annulment of the Deed of Sale with Assumption of Mortgage, from
which petitioners title or claim of title embodied in TCT 133153 flows. (Italics
supplied)
[39]

In this case, the omission of the award of interest was obviously


inadvertent. Correction is therefore in order. However, we do not agree with
the Arbitration Board that the interest should be computed at 12%. Since the
case does not involve a loan or forbearance of money, goods or credit and
court judgments thereon, the interest due shall be computed at 6% per annum
computed from the time the claim was made in 1992 as determined by the
Arbitration Board and in accordance with Articles 2209 and 1169 of the Civil
Code. The actual base for the computation of legal interest shall be on the
amount finally adjudged. Further, when the judgment awarding a sum of
money becomes final and executory, the rate of legal interest shall be 12%
per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.
[40]

[41]

WHEREFORE, the petition is GRANTED in part. The appealed decision is


MODIFIED in that the amount of P74,035,503.50 shall earn legal interest of
six percent (6%) from 1992. A twelve percent (12%) interest, in lieu of six
percent (6%), shall be imposed on such amount upon finality of this decision
until the payment thereof.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario,
JJ., concur.

G.R. No. 77372 April 29, 1988


LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER
R. REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O.
ARCEGA, ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R.
RIMANDO, petitioner,
vs.
COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent.
Balgos & Perez Law Offices for petitioners.
The Solicitor General for respondents.

GANCAYCO, J.:
Is the Regional Trial Court of the same category as the Professional Regulation
Commission so that it cannot pass upon the validity of the administrative acts of the latter?
Can this Commission lawfully prohibit the examiness from attending review classes,
receiving handout materials, tips, or the like three (3) days before the date of the
examination? Theses are the issues presented to the court by this petition for certiorari to
review the decision of the Court of Appeals promulagated on January 13, 1987, in CA-G.R.
SP No. 10598, * declaring null and void the other dated Ocober 21, 1986 issued by the Regional Trial Court of Manila, Branch 32 in
Civil Case No. 86-37950 entitled " Lupo L. Lupangco, et al. vs. Professional Regulation Commission."

The records shows the following undisputed facts:


On or about October 6, 1986, herein respondent Professional Regulation Commission
(PRC) issued Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all
those applying for admission to take the licensure examinations in accountancy. The
resolution embodied the following pertinent provisions:
No examinee shall attend any review class, briefing, conference or the like
conducted by, or shall receive any hand-out, review material, or any tip from
any school, college or university, or any review center or the like or any
reviewer, lecturer, instructor official or employee of any of the aforementioned
or similars institutions during the three days immediately proceeding every
examination day including examination day.
Any examinee violating this instruction shall be subject to the sanctions
prescribed by Sec. 8, Art. III of the Rules and Regulations of the
Commission. 1
On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure
examinations in accountancy schedule on October 25 and November 2 of the same year,
filed on their own behalf of all others similarly situated like them, with the Regional Trial
Court of Manila, Branch XXXII, a complaint for injuction with a prayer with the issuance of a

writ of a preliminary injunction against respondent PRC to restrain the latter from enforcing
the above-mentioned resolution and to declare the same unconstitution.
Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the
lower court had no jurisdiction to review and to enjoin the enforcement of its resolution. In
an Order of October 21, 1987, the lower court declared that it had jurisdiction to try the case
and enjoined the respondent commission from enforcing and giving effect to Resolution No.
105 which it found to be unconstitutional.
Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of
Appeals a petition for the nullification of the above Order of the lower court. Said petiton
was granted in the Decision of the Court of Appeals promulagated on January 13, 1987, to
wit:
WHEREFORE, finding the petition meritorious the same is hereby GRANTED
and the other dated October 21, 1986 issued by respondent court is declared
null and void. The respondent court is further directed to dismiss with
prejudice Civil Case No. 86-37950 for want of jurisdiction over the subject
matter thereof. No cost in this instance.
SO ORDERED. 2
Hence, this petition.
The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction
to entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its
basis its conclusion that the Professional Regulation Commission and the Regional Trial
Court are co-equal bodies. Thus it held
That the petitioner Professional Regulatory Commission is at least a co-equal
body with the Regional Trial Court is beyond question, and co-equal bodies
have no power to control each other or interfere with each other's acts. 3
To strenghten its position, the Court of Appeals relied heavily on National Electrification
Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing, Inc. vs.
6

Luna, where this Court held that a Court of First Instance cannot interfere with the orders of the
Securities and Exchange Commission, the two being co-equal bodies.

After a close scrutiny of the facts and the record of this case,
We rule in favor of the petitioner.
The cases cited by respondent court are not in point. It is glaringly apparent that the reason
why this Court ruled that the Court of First Instance could not interfere with the orders of the
Securities and Exchange Commission was that this was so provided for by the law.
In Pineda vs. Lantin, We explained that whenever a party is aggrieved by or disagree with
an order or ruling of the Securities and Exchange Commission, he cannot seek relief from
courts of general jurisdiction since under the Rules of Court and Commonwealth Act No. 83,

as amended by Republic Act No. 635, creating and setting forth the powers and functions of
the old Securities and Exchange Commission, his remedy is to go the Supreme Court on a
petition for review. Likewise, in Philippine Pacific Fishing Co., Inc. vs. Luna, it was stressed
that if an order of the Securities and Exchange Commission is erroneous, the appropriate
remedy take is first, within the Commission itself, then, to the Supreme Court as mandated
in Presidential Decree No. 902-A, the law creating the new Securities and Exchange
Commission. Nowhere in the said cases was it held that a Court of First Instance has no
jurisdiction over all other government agencies. On the contrary, the ruling was specifically
limited to the Securities and Exchange Commission.
The respondent court erred when it place the Securities and Exchange Commission and the
Professional Regulation Commsision in the same category. As alraedy mentioned, with
respect to the Securities and Exchange Commission, the laws cited explicitly provide with
the procedure that need be taken when one is aggrieved by its order or ruling. Upon the
other hand, there is no law providing for the next course of action for a party who wants to
question a ruling or order of the Professional Regulation Commission. Unlike
Commonwealth Act No. 83 and Presidential Decree No. 902-A, there is no provision in
Presidential Decree No. 223, creating the Professional Regulation Commission, that orders
or resolutions of the Commission are appealable either to the Court of Appeals or to
theSupreme Court. Consequently, Civil Case No. 86-37950, which was filed in order to
enjoin the enforcement of a resolution of the respondent Professional Regulation
Commission alleged to be unconstitutional, should fall within the general jurisdiction of the
Court of First Instance, now the Regional Trial Court. 7
What is clear from Presidential Decree No. 223 is that the Professional Regulation
Commission is attached to the Office of the President for general direction and
coordination. 8 Well settled in our jurisprudence is the view that even acts of the Office of the President
9

may be reviewed by the Court of First Instance (now the Regional Trial Court). In Medalla vs. Sayo, this
rule was thoroughly propounded on, to wit:

In so far as jurisdiction of the Court below to review by certiorari decisions


and/or resolutions of the Civil Service Commission and of the residential
Executive Asssistant is concerned, there should be no question but that the
power of judicial review should be upheld. The following rulings buttress this
conclusion:
The objection to a judicial review of a Presidential act arises
from a failure to recognize the most important principle in our
system of government, i.e., the separation of powers into three
co-equal departments, the executives, the legislative and the
judicial, each supreme within its own assigned powers and
duties. When a presidential act is challenged before the courts
of justice, it is not to be implied therefrom that the Executive is
being made subject and subordinate to the courts. The legality
of his acts are under judicial review, not because the Executive
is inferior to the courts, but because the law is above the Chief
Executive himself, and the courts seek only to interpret, apply
or implement it (the law). A judicial review of the President's
decision on a case of an employee decided by the Civil Service

Board of Appeals should be viewed in this light and the bringing


of the case to the Courts should be governed by the same
principles as govern the jucucial review of all administrative
acts of all administrative officers. 10
Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here,
"the Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93
under the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for injunction
was filed with the Court of First Instance of Lanao del Norte because, allegedly, the enforcement of the
circular would impair some contracts already entered into by public school teachers. It was the contention
of petitioner therein that "the Court of First Instance is not empowered to amend, reverse and modify what
is otherwise the clear and explicit provision of the memorandum circular issued by the Executive Office
which has the force and effect of law." In resolving the issue, We held:

... We definitely state that respondent Court lawfully acquired jurisdiction in


Civil Case No. II-240 (8) because the plaintiff therein asked the lower court for
relief, in the form of injunction, in defense of a legal right (freedom to enter
into contracts) . . . . .
Hence there is a clear infringement of private respondent's constitutional right
to enter into agreements not contrary to law, which might run the risk of being
violated by the threatened implementation of Executive Office Memorandum
Circular No. 93, dated February 5, 1968, which prohibits, with certain
exceptions, cashiers and disbursing officers from honoring special powers of
attorney executed by the payee employees. The respondent Court is not only
right but duty bound to take cognizance of cases of this nature wherein a
constitutional and statutory right is allegedly infringed by the administrative
action of a government office. Courts of first Instance have original jurisdiction
over all civil actions in which the subject of the litigation is not capable of
pecuniary estimation (Sec. 44, Republic Act 296, as amended). 12 (Emphasis
supplied.)

In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance has
the authority to decide on the validity of a city tax ordinance even after its validity had been contested
before the Secretary of Justice and an opinion thereon had been rendered.

In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the
respondent Professional Regulation Commission, should be exempted from the general
jurisdiction of the Regional Trial Court.
Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P.
Blg. 129, it is the Court of Appeals which has jurisdiction over the case. The said law
provides:
SEC. 9. Jurisdiction. The Intermediate Appellate Court shall exercise:
xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions,


resolutions, orders, or awards of Regional Trial Courts and quasijudicial agencies, instrumentalities, boards or commissions, except those
falling within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the provisions of this Act, and of subparagraph (1) of
the third paragraph and subparagraph (4) of the fourth paragraph of Section
17 of the Judiciary Act of 1948.
The contention is devoid of merit.
In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided for
in Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which
resulted from proceedings wherein the administrative body involved exercised its quasijudicial functions. In Black's Law Dictionary, quasi-judicial is defined as a term applied to the
action, discretion, etc., of public administrative officers or bodies required to investigate
facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them, as
a basis for their official action, and to exercise discretion of a judicial nature. To expound
thereon, quasi-judicialadjudication would mean a determination of rights, privileges and
duties resulting in a decision or order which applies to a specific situation . 14 This does not
cover rules and regulations of general applicability issued by the administrative body to implement its
purely administrative policies and functions like Resolution No. 105 which was adopted by the respondent
PRC as a measure to preserve the integrity of licensure examinations.

The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer.

15

In
this case, the issue presented was whether or not the Court of First Instance had jurisdiction over a case
involving an order of the Commission on Elections awarding a contract to a private party which originated
from an invitation to bid. The said issue came about because under the laws then in force, final awards,
judgments, decisions or orders of the Commission on Elections fall within the exclusive jurisdiction of the
Supreme Court by way of certiorari. Hence, it has been consistently held that "it is the Supreme Court, not
the Court of First Instance, which has exclusive jurisdiction to review on certiorari final decisions, orders,
or rulings of the Commission on Elections relative to the conduct of elections and the enforcement of
16
election laws."

As to whether or not the Court of First Instance had jurisdiction in saidcase, We said:
We are however, far from convinced that an order of the COMELEC awarding
a contract to a private party, as a result of its choice among various proposals
submitted in response to its invitation to bid comes within the purview of a
"final order" which is exclusively and directly appealable to this court on
certiorari. What is contemplated by the term "final orders, rulings and
decisions, of the COMELEC reviewable by certiorari by the Supreme Court as
provided by law are those rendered in actions or proceedings before the
COMELEC and taken cognizance of by the said body in the exercise of its
adjudicatory or quasi-judicial powers. (Emphasis supplied.)
xxx xxx xxx
We agree with petitioner's contention that the order of the Commission
granting the award to a bidder is not an order rendered in a legal controversy
before it wherein the parties filed their respective pleadings and presented

evidence after which the questioned order was issued; and that this order of
the commission was issued pursuant to its authority to enter into contracts in
relation to election purposes. In short, the COMELEC resolution awarding the
contract in favor of Acme was not issued pursuant to its quasi-judicial
functions but merely as an incident of its inherent administrative functions
over the conduct of elections, and hence, the said resolution may not be
deemed as a "final order reviewable by certiorari by the Supreme
Court. Being non-judicial in character, no contempt order may be imposed by
the COMELEC from said order, and no direct and exclusive appeal by
certiorari to this Tribunal lie from such order. Any question arising from said
order may be well taken in an ordinary civil action before the trial courts.
(Emphasis supplied.) 17
One other case that should be mentioned in this regard is Salud vs. Central Bank of the
Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under Section 9,
paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only to the Intermediate
Appellate Court. Thus:

The Central Bank and its Liquidator also postulate, for the very first time, that
the Monetary Board is among the "quasi-judicial ... boards" whose judgments
are within the exclusive appellate jurisdiction of the IAC; hence, it is only said
Court, "to the exclusion of the Regional Trial Courts," that may review the
Monetary Board's resolutions. 19
Anent the posture of the Central Bank, We made the following pronouncement:
The contention is utterly devoid of merit. The IAC has no appellate jurisdiction
over resolution or orders of the Monetary Board. No law prescribes any mode
of appeal from the Monetary Board to the IAC. 20
In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain
Civil Case No. 86-37950 and enjoin the respondent PRC from enforcing its resolution.
Although We have finally settled the issue of jurisdiction, We find it imperative to decide
once and for all the validity of Resolution No. 105 so as to provide the much awaited relief
to those who are and will be affected by it.
Of course, We realize that the questioned resolution was adopted for a commendable
purpose which is "to preserve the integrity and purity of the licensure examinations."
However, its good aim cannot be a cloak to conceal its constitutional infirmities. On its face,
it can be readily seen that it is unreasonable in that an examinee cannot even attend any
review class, briefing, conference or the like, or receive any hand-out, review material, or
any tip from any school, collge or university, or any review center or the like or any reviewer,
lecturer, instructor, official or employee of any of the aforementioned or similar institutions .
... 21
The unreasonableness is more obvious in that one who is caught committing the prohibited
acts even without any ill motives will be barred from taking future examinations conducted

by the respondent PRC. Furthermore, it is inconceivable how the Commission can manage
to have a watchful eye on each and every examinee during the three days before the
examination period.
It is an aixiom in administrative law that administrative authorities should not act arbitrarily
and capriciously in the issuance of rules and regulations. To be valid, such rules and
regulations must be reasonable and fairly adapted to the end in view. If shown to bear no
reasonable relation to the purposes for which they are authorized to be issued, then they
must be held to be invalid. 22
Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the
examinees' right to liberty guaranteed by the Constitution. Respondent PRC has no
authority to dictate on the reviewees as to how they should prepare themselves for the
licensure examinations. They cannot be restrained from taking all the lawful steps needed
to assure the fulfillment of their ambition to become public accountants. They have every
right to make use of their faculties in attaining success in their endeavors. They should be
allowed to enjoy their freedom to acquire useful knowledge that will promote their personal
growth. As defined in a decision of the United States Supreme Court:
The term "liberty" means more than mere freedom from physical restraint or
the bounds of a prison. It means freedom to go where one may choose and to
act in such a manner not inconsistent with the equal rights of others, as his
judgment may dictate for the promotion of his happiness, to pursue such
callings and vocations as may be most suitable to develop his capacities, and
giv to them their highest enjoyment. 23
Another evident objection to Resolution No. 105 is that it violates the academic freedom of
the schools concerned. Respondent PRC cannot interfere with the conduct of review that
review schools and centers believe would best enable their enrolees to meet the standards
required before becoming a full fledged public accountant. Unless the means or methods of
instruction are clearly found to be inefficient, impractical, or riddled with corruption, review
schools and centers may not be stopped from helping out their students. At this juncture,
We call attention to Our pronouncement in Garcia vs. The Faculty Admission Committee,
Loyola School of Theology, 24 regarding academic freedom to wit:
... It would follow then that the school or college itself is possessed of such a
right. It decides for itself its aims and objectives and how best to attain them.
It is free from outside coercion or interference save possibly when the
overriding public welfare calls for some restraint. It has a wide sphere of
autonomy certainly extending to the choice of students. This constitutional
provision is not to be construed in a niggardly manner or in a grudging
fashion.
Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged
leakages in the licensure examinations will be eradicated or at least minimized. Making the
examinees suffer by depriving them of legitimate means of review or preparation on those
last three precious days-when they should be refreshing themselves with all that they have
learned in the review classes and preparing their mental and psychological make-up for the

examination day itself-would be like uprooting the tree to get ride of a rotten branch. What is
needed to be done by the respondent is to find out the source of such leakages and stop it
right there. If corrupt officials or personnel should be terminated from their loss, then so be
it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by examiners
should be set up and if violations are committed, then licenses should be suspended or
revoked. These are all within the powers of the respondent commission as provided for in
Presidential Decree No. 223. But by all means the right and freedom of the examinees to
avail of all legitimate means to prepare for the examinations should not be curtailed.
In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court
of Appeals in CA-G.R. SP No. 10591 and another judgment is hereby rendered declaring
Resolution No. 105 null and void and of no force and effect for being unconstitutional. This
decision is immediately executory. No costs.
SO ORDERED.
Narvasa and Cruz, JJ., concur.
Grio-Aquino, J., took no part.

G.R. No. 73123 September 2, 1991


IN RE: PETITION FOR DECLARATION OF INSOLVENCY OF [A] FILAND
MANUFACTURING AND ESTATE DEVELOPMENT COMPANY; [B] TOP
CONSTRUCTION ENTERPRISES, INC. AND [C] SPOUSES EMILIO CHING AND INAI
TEH; EMILIO CHING, petitioner, LAND BANK OF THE PHILIPPINES, oppositor. LAND
BANK OF THE PHILIPPINES, petitioner,
vs.
HON. DIONISIO N. CAPISTRANO, JUDGE OF THE REGIONAL TRIAL COURT OF
PASAY CITY, EMILIO CHING AND FILAND MANUFACTURING AND ESTATE
DEVELOPMENT CO., INC., respondents.
Lily K. Gruba and Florencio S. Jimenez for Land Bank of the Philippines.

FERNAN, C.J.:p
Assailed in this petition for review on certiorari is the jurisdiction of the Regional Trial Court
(RTC) of Pasay City over a petition for declaration of insolvency of two (2) private
corporations.
The antecedent facts are undisputed:
On September 19, 1980, private respondents Filand Manufacturing and Estate
Development Co., Inc. (hereafter, Filand Manufacturing) and Emilio Ching obtained from
petitioner Land Bank of the Philippines a loan in the amount of Ten Million Pesos
(P10,000,000.00). Private respondents having failed to pay the loan on its due date,
petitioner instituted before the RTC of Manila a complaint for recovery thereof, docketed as
Civil Case No. 0184-P.
During the pendency of the collection suit on December 29, 1984, private respondents
Filand Manufacturing, Emilio Ching and his spouse Inai Teh and Top Construction
Enterprises, Inc., thru Emilio Ching, filed before the respondent RTC of Pasay City a petition
docketed as Special Proceedings No. 3232P for declaration of insolvency. Cited as ground
therefor was their inability to pay the various debts and liabilities incurred by them, either
jointly or solidarily or guaranteed by one for the other, in the course of their businesses,
such inability being due to business reserves brought about by the fire on January 2, 1984
which gutted the old Holiday Plaza Building then owned and operated by Filand
Manufacturing, as well as the economic crisis which gripped the country following the
assassination of former Senator Benigno S. Aquino in 1983. 1
Acting on said petition, respondent court on January 29, 1985 issued an Order of
Adjudication declaring private respondents insolvent pursuant to Section 18 of the
Insolvency Law (Act No. 1956). The Sheriff of Pasay City was "directed to take possession
of, and safely keep, until the appointment of a receiver or assignee, all the deeds, vouchers,
books of account, papers, notes, bonds, bills and securities of (therein) petitioners, and all
the real and personal properties, estates and effects of the same petitioners, except such as

may, by law, be exempt from execution." Respondent court set "March 25, 1985 at 9:00
A.M. in its premises ... as the date of the meeting of the creditors of the petitioners for them
to choose an assignee/assignees of the estates of the petitioners." 2
Petitioner bank moved for a reconsideration of the Order of Adjudication on two (2) grounds,
namely: (1) that the court has no jurisdiction over the subject matter of the petition insofar
as petitioning corporations are concerned; and (2) the petition is defective in form and
substance. 3 After an exchange of pleadings between petitioner and private respondents, respondent
court issued on July 19, 1985 an Order upholding its jurisdiction over the petition and appointing petitioner
bank as the assignee for and in behalf of all the creditors without bond, thus:

WHEREFORE, all motions seeking to have this Court make a declaration that
it has no jurisdiction over the above-entitled proceeding are hereby DENIED,
and the Land Bank of the Philippines is appointed as the assignee for and in
behalf of all the creditors of the petitioners, without bond, to which assignee
the Clerk of Court, thru the Branch Sheriff, shall deliver any and all real and
personal properties, estates and effects, as well as the pertinent papers and
all deeds, vouchers, books of accounts, papers, notes, bonds, bills and
securities taken by him pursuant to the order of this Court of January 29,
1985.
The assignee is hereby ordered to comply with the time limit provided for in
Sec. 43 of Act 1956, and for this purpose, hereby sets his report for hearing
on October 29, 1985, at 9:00 A.M.
SO ORDERED. 4
Petitioner bank declined the appointment and the City Treasurer of Pasay City, being the
second biggest creditor of private respondents, was appointed in its stead Petitioner bank
then filed a Notice of Appeal and a Record on Appeal on August 19, 1985, on the basis of
which the respondent court forwarded the records of the case directly to this Court.
By resolution dated September 23, 1985, the Court resolved to "REQUIRE the Branch Clerk
of Court of the (respondent court) to EXPLAIN why he forwarded to this Court the aforesaid
records when the mode of seeking review by this Court of a lower court's judgment under
R.A. 5440 is by petition for review on certiorari; and the Presiding Judge of said trial court is
also directed to EXPLAIN why he accepted and approved the forwarding to this Court of the
aforesaid records, both within ten (10) days from notice hereof." Petitioner bank and/or
counsel were also "REQUIRED to EXPLAIN within ten (10) days from notice ..., since they
failed to pay timely the docket and legal research fund fees and to file timely a petition for
review on certiorari under R.A. 5440 why the judgment sought to be reviewed should not be
now deemed final and executory and the records returned for execution of judgment". 5 Upon
submission of the required explanations, the Court on December 4, 1985 resolved to require the
petitioner bank to file a petition for review on certiorari and to pay the docket and legal research fund fees,
6
both within a non-extendible period of ten (10) days from notice. This Order was seasonably complied
with.

After the private respondents had submitted their comment on the petition, petitioner bank
filed on March 24, 1986 a "Manifestation with motion for issuance of writ of preliminary

injunction" informing the Court that on March 3, 1986, the respondent court rendered a
decision in Special Proceedings No. 3232-P, providing in its dispositive portion as follows:
WHEREFORE, judgment is hereby rendered, as follows:
1. Petitioners Filand Manufacturing & Estate Development Co., Inc., and Top
Construction Enterprises, Inc., are declared by this Court as insolvent and,
pursuant to Sec. 52 of Act 1956, as amended, their properties and assets
shall be distributed to the creditors in the proceeding with respect to the
appointment of the City Treasurer of Pasay City as receiver of their estates
and effects. However, they are not discharged from their liabilities in
accordance with Sec. 52 of Act 1956, as amended.
2. Petitioners spouses Emilio Ching and Inai Teh are likewise declared
insolvent and their application for discharge is hereby approved, and they are
hereby ordered discharged and released from all claims, debts, liabilities and
demands, whether actual or contingent, and whether personally or as
guarantors or in a joint and solidary capacity, with respect to the obligations
set forth in the schedule and inventory of accounts due and payable, Annex
'A' of the petition, as well as with respect to the obligations and creditors listed
in the manifestation of April 29, 1985, and the supplemental manifestation
dated May 22, 1985, in the above-entitled proceedings.
The other aspect of the above-entitled proceedings as regards the receiver
and all incidents and matters in connection with his functions and duties are
hereby considered as mere interlocutory matters in the process of winding up
this proceeding.
SO ORDERED. 7
Acting on said manifestation and motion, the Court on April 14, 1986 issued a temporary
restraining order enjoining the respondent court from enforcing its decision of March 3,
1986. 8 The temporary restraining order was however lifted insofar as private respondents spouses
Emilio Ching and Inai Teh were concerned, the latter being natural persons over whom the jurisdiction of
9
the respondent court is not being questioned.

In its petition, given due course by the Court per resolution dated January 28, 1987,
petitioner bank advances the argument that it is the Securities and Exchange Commission
(SEC), rather than the Regional Trial Court (RTC) which has jurisdiction over the petition for
declaration of insolvency filed by private respondent corporations. This theory is allegedly
anchored on specific provisions of Presidential Decree No. 902-A, as amended, namely:
Sections 3, 5(d) and 6(c) and (d), which petitioner bank construes as having repealed the
Insolvency Law (Act 1956), which confers jurisdiction over insolvency proceedings on the
regular courts. Private respondents maintain the opposite view, contending simply that a
petition for declaration of insolvency is not one of those cases enumerated under Section 5,
P.D. No. 902-A, as amended, over which the SEC has original and exclusive jurisdiction.

In view of the far reaching importance of the issue presented before the Court, both from a
legal and economic standpoint, we resolved to implead the SEC as a party to this case and
to require it to inform the Court of its practice regarding insolvency proceedings. 10 The SEC
thru the Solicitor General, filed its memorandum on December 13, 1989.

After deliberating on the SEC's memorandum, the Court resolved to set the case for hearing
on May 14, 1990 at 10:00 o'clock in the morning. A senior and knowledgeable officer of the
SEC was requested to "appear and inform the Court of the law and practice actually applied
and followed by the SEC in respect of suspension of payments by, and voluntary and
involuntary insolvencies of Philippine corporations . ..." Former SEC Chairman Julito Sulit,
Jr. was appointed amicus curiae and was requested to appear at the hearing in that
capacity. 11
Before addressing the principal issue in the instant petition, the Court notes with dismay that
the petitioner and the lower court appear to be still in the dark as to the proper mode of
appeal to this Court. Hence, for their elucidation as well as the others similarly misinformed,
we deem it proper to quote the following resolution dated March 1, 1990 of the Court en
banc in UDK 9748, "Murillo v. Consul":
R.A. No. 5440 changed the mode of appeal from courts of first instance (now
Regional Trial Courts) to the Supreme Court in cases involving only questions
of law, or the constitutionality or validity of any treaty, law, ordinance, etc. or
the legality of any tax, impost, assessment or toll, etc., or the jurisdiction of
any inferior court, from ordinary appeal i.e., by notice of appeal, record on
appeal and appeal bond, under Rule 41 to appeal by certiorari, under Rule
45.
xxx xxx xxx
At present then, except in criminal cases where the penalty imposed is life
imprisonment or reclusion perpetua, there is no way by which judgments of
regional trial courts may be appealed to this Court except by petition for
review on certiorari in accordance with Rule 45 of the Rules of Court, in
relation to Section 17 of the Judiciary Act of 1948, as amended. The
proposition is clearly stated in the Interim Rules: 'Appeals to the Supreme
Court shall be taken by petition for certiorari which shall be governed by Rule
45 of the Rules of Court.
xxx xxx xxx
... To repeat, appeals to this Court cannot now be made by petition for review
or by notice of appeal (and, in certain instances, by record on appeal), but
only by petition for review on certiorari under Rule 45. As was stressed by this
Court as early as 1980 in Buenbrazo v. Marave, 101 SCRA 848, all the
members of the bench and bar are charged with knowledge, not only that
since the enactment of Republic Act No. 6031 in 1969,' 'the review of the
decision of the Court of First Instance in a case exclusively cognizable by the
inferior court ... cannot be made in an ordinary appeal or by record on appeal

but also that 'appeal by record on appeal to the Supreme Court under Rule
42 of the Rules of Court was abolished by Republic Act No. 5440 which, as
already stated, took effect on September 9, 1968.' Similarly, in Santos, Jr. v.
C.A., 152 SCRA 378, this Court declared that 'Republic Act No. 5440 had
long superseded Rule 41 and Section 1, Rule 122 of the Rules of Court on
direct appeals from the court of first instance to the Supreme Court in civil
and criminal cases,' ... and that 'direct appeals to this Court from the trial
court on questions of law had to be through the filing of a petition for review
on certiorari, wherein this Court could either give due course to the proposed
appeal or deny it outright to prevent the clogging of its docket with
unmeritorious and dilatory appeals.
Going now to the issue of jurisdiction raised in this petition and considering the arguments
proferred by the parties' respective counsel, the view spoused by the amicus curiae as well
as the submissions of the SEC thru the Office of the Solicitor General and its Assistant
Executive Director, we find for private respondents.
Under Act 1956, otherwise known as the Insolvency Law, jurisdiction over proceedings for
suspension of payments, voluntary and involuntary insolvency is exclusively vested in the
regular courts. However, P.D. No. 1758 issued in 1981 added to the exclusive and original
jurisdiction of the SEC defined and delineated in Section 5 of P.D. 902-A, 12 the following:
d) Petitions of corporations, partnerships or associations to be declared in the
state of suspension of payments in cases where the corporation, partnership
or association possesses sufficient property to cover all its debts but foresees
the impossibility of meeting them when they respectively fall due or in cases
where the corporation, partnership or association has no sufficient assets to
cover its liabilities, but is under the management of a Rehabilitation Receiver
or Management Committee created pursuant to this Decree.
It is petitioner's contention that said additional par. (d) effectively repealed the Insolvency
Law so as to transfer and confer upon the SEC jurisdiction theretofore enjoyed by the
regular courts over proceedings for suspension of payments and voluntary and involuntary
insolvency. We do not share such interpretation.
The SEC like any other administrative body, is a tribunal of limited jurisdiction and as such,
could wield only such powers as are specifically granted to it by its enabling statute. 13 Its
14

jurisdiction should be interpreted in strictissimi juris.

Section 5, par. (d) should be construed as vesting upon the SEC original and exclusive
jurisdiction only over petitions to be declared in a state of suspension of payments, which
may either be: (a) a simple petition for suspension of payments based on the provisions of
the Insolvency Law, or (b) a similar petition accompanied by a prayer for the
creation/appointment of a management committee and/or rehabilitation receiver based on
the provisions of P.D. No. 902-A. Said provision cannot be stretched to include petitions for
insolvency. The reason is that under said Section 5, par. (d) above-quoted, the jurisdiction
of the SEC over cases where the corporation, partnership or association has no sufficient
assets to cover its liabilities, (and therefore insolvent) is qualified by the conjunctive phrase

"but is under the management of a Rehabilitation Receiver or Management Committee


created pursuant to this Decree." This qualification effectively circumscribes the jurisdiction
of the SEC over insolvent corporations, partnerships and associations, and consequently,
over proceedings for the declaration of insolvency. It demonstrates beyond doubt that
jurisdiction over insolvency proceedings pertains neither in the first instance nor exclusively
to the SEC but only in continuation of or as an incident to the exercise of its jurisdiction over
petitions to be declared in a state of suspension of payments wherein the petitioning
corporation, partnership or association had previously been placed under a rehabilitation
receiver or management committee by the SEC itself.
Viewed differently, where the petition filed is one for declaration of a state of suspension of
payments due to a recognition of the inability to pay one's debts and liabilities, and where
the petitioning corporation either: (a) has sufficient property to cover all its debts but
foresees the impossibility of meeting them when they fall due (solvent but illiquid or (b) has
no sufficient property (insolvent) but is under the management of a rehabilitation receiver or
a management committee, the applicable law is P.D. No. 902-A pursuant to Sec. 5 par. (d)
thereof. However, if the petitioning corporation has no sufficient assets to cover its liabilities
and is not under a rehabilitation receiver or a management committee created under P.D.
No. 902-A and does not seek merely to have the payments of its debts suspended, but
seeks a declaration of insolvency, as in this case, the applicable law is Act 1956 on
voluntary insolvency, specifically section 14 thereof, which provides:
Sec. 14. An insolvent debtor, owing debts exceeding in amount the sum of
one thousand pesos, may apply to be discharged from his debts and liabilities
by petition to the Court of First Instance of the province or city in which he has
resided for six month next preceding the filing of such petition. In his petition,
he shall set forth his place of residence, the period of his residence therein
immediately prior to filing said petition, his inability to pay all his debts in full,
his willingness to surrender all his property, estate, and effects not exempt
from execution for the benefit of his creditors, and an application to be
adjudged an insolvent. He shall annex to his petition a schedule and
inventory in the form hereinafter provided. The filing of such petition shall be
an act of insolvency.
Neither could the grant of additional powers to SEC under Section 6(c) and (d) of P.D. No.
902- A, as amended, be construed as vesting upon it exclusive and original jurisdiction over
insolvency proceedings. The pertinent provisions read:
SEC. 6. In order to effectively exercise such jurisdiction, the Commission
shall possess the following powers:
xxx xxx xxx
c) To appoint one or more receivers of the property, real and personal, which
is the subject of the action pending before the Commission in accordance
with the pertinent provisions of the Rules of Court in such other cases
whenever necessary to preserve the rights of the parties-litigants to and/or
protect the interest of the investing public and creditors; Provided, however,

that the Commission may, in appropriate cases, appoint a rehabilitation


receiver of corporations, partnerships or other associations not supervised or
regulated by other government agencies who shall have, in addition to the
powers of a regular receiver under the provisions of the Rules of Court, such
functions and powers as are provided for in the succeeding paragraph (d)
hereof; Provided, further that the Commission may appoint a rehabilitation
receiver of corporations, partnerships or other nations supervised or
regulated by other government agencies, such as banks and insurance
companies, upon request of the government agency concerned; Provided,
finally that upon appointment of a management committee, rehabilitation
receiver, board or body pursuant to this Decree, all actions for claims against
corporations, partnerships or nations under management or receivership
pending before any court, tribunal, board or body shall be suspended
accordingly.
d) To create and appoint a management committee, board, or body upon
petition or motu proprio to undertake the management of corporations,
partnerships or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent danger of
dissipation, loss, wastage or destruction of assets or other properties or
paralization of business operations of such corporations or entities which may
be prejudicial to the interest of minority stockholders, parties-litigants or the
general public; Provided, further, that the Commission may create or appoint
a management committee, board or body to undertake the management of
corporations, partnerships or other associations supervised or regulated by
other government agencies, such as banks and insurance companies, upon
request of the government agency concerned.
The management committee or rehabilitation receiver, board or body shall
have the power to take custody of, and control over, all the existing assets
and property of such entities under management; to evaluate the existing
assets and liabilities, earnings and operations of such corporations,
partnerships or other associations, to determine the best way to wage and
protect the interest of the investors and creditors; to study, review and
evaluate the feasibility of continuing operations and restructure and
rehabilitate such entities if determined to be feasible by the Commission. It
shall report and be responsible to the Commission until dissolved by order of
the Commission: Provided, however, that the Commission may, on the basis
of the findings and recommendation of the management committee, or
rehabilitation receiver, board or body, or on its own findings, determine that
the continuance in business of such corporation or entity would not be
feasible or profitable nor work to the best interest of the stockholders, partieslitigants, creditors, or the general public, order the dissolution of such
corporation entity and its remaining assets liquidated accordingly.
The management committee or rehabilitation receiver, board or body may
overrule or revoke the actions of the previous management and board of

directors of the entity or entities under management notwithstanding any


provision of law, articles of incorporation or by-laws to the contrary.
The management committee, or rehabilitation receiver, board or body shall
not be subject to any action, claim or demand for, or in connection with any
act done or omitted to be done by it in good faith in the exercise of its
functions, or in connection with the exercise of its powers herein conferred.
As declared by the law itself, these are merely ancillary powers to enable the SEC to
effectively exercise its jurisdiction. These additional ancillary powers can be exercised only
in connection with an action pending before the SEC and therefore had to be viewed in
relation to Section 5 which defines the SEC's original and exclusive jurisdiction. Section 6
does not enlarge or add to the exclusive and original jurisdiction of the SEC as particularly
enumerated under Section 5 of said Presidential Decree, as amended.
A well-recognized rule in statutory construction is that repeals by implication are not favored
and will not be so declared unless it be manifest that the legislature so intended. 15 When
statutes are in pari material they should be construed together. In construing them the old statutes
relating to the same subject matter should be compared with the new provisions and if possible by
reasonable construction, both should be so construed that effect may be given to every provision of
16
each.

Construing P.D. 902-A, as amended, in relation to Act 1956, we rule that insofar as petitions
for declaration of insolvency of private corporations are concerned, it is the regular court
that has exclusive and original jurisdiction thereon. The SEC may entertain such petitions
only as an incident of and in continuation of its already acquired jurisdiction over petitions to
be declared in the state of suspension of payments in the two (2) cases provided in Section
5 (d) of P.D. 902-A, as amended.
WHEREFORE, the instant petition for review on certiorari is DENIED. The temporary
restraining order issued on April 14, 1986 is LIFTED. No pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.
Feliciano, J., is on leave.

ALFREDO L. AZARCON, petitioner, vs. SANDIGANBAYAN, PEOPLE


OF THE PHILIPPINES and JOSE C. BATAUSA, respondents.
DECISION
PANGANIBAN, J.:

Does the Sandiganbayan have jurisdiction over a private individual who is


charged with malversation of public funds as a principal after the said
individual had been designated by the Bureau of Internal Revenue as a
custodian of distrained property? Did such accused become a public officer
and therefore subject to the graft courts jurisdiction as a consequence of such
designation by the BIR?
These are the main questions in the instant petition for review of
respondent Sandiganbayans Decision in Criminal Case No. 14260
promulgated on March 8, 1994, convicting petitioner of malversation of public
funds and property, and Resolution dated June 20, 1994, denying his motion
for new trial or reconsideration thereof.
[1]

[2]

The Facts
Petitioner Alfredo Azarcon owned and operated an earth-moving business,
hauling dirt and ore. His services were contracted by the Paper Industries
Corporation of the Philippines (PICOP) at its concession in Mangagoy,
Surigao del Sur. Occasionally, he engaged the services of sub-contractors
like Jaime Ancla whose trucks were left at the formers premises. From this
set of circumstances arose the present controversy.
[3]

[4]

x x x It appears that on May 25, 1983, a Warrant of Distraint of Personal Property was issued
by the Main Office of the Bureau of Internal Revenue (BIR) addressed to the Regional Director
(Jose Batausa) or his authorized representative of Revenue Region 10, Butuan City commanding
the latter to distraint the goods, chattels or effects and other personal property of Jaime Ancla, a
sub-contractor of accused Azarcon and, a delinquent taxpayer. The Warrant of Garnishment was
issued to accused Alfredo Azarcon ordering him to transfer, surrender, transmit and/or remit to
BIR the property in his possession owned by taxpayer Ancla. The Warrant of Garnishment was
received by accused Azarcon on June 17, 1985.[5]

Petitioner Azarcon, in signing the Receipt for Goods, Articles, and Things
Seized Under Authority of the National Internal Revenue, assumed the
undertakings specified in the receipt the contents of which are reproduced as
follows:

(I), the undersigned, hereby acknowledge to have received from Amadeo V. San
Diego, an Internal Revenue Officer, Bureau of Internal Revenue of the Philippines,
the following described goods, articles, and things:
Kind of property
Motor number
Chassis No.
Number of CXL
Color
Owned By

-------------

Isuzu dump truck


E120-229598
SPZU50-1772440
6
Blue
Mr. Jaime Ancla

the same having been this day seized and left in (my) possession pending investigation by the
Commissioner of Internal Revenue or his duly authorized representative. (I) further promise that
(I) will faithfully keep, preserve, and, to the best of (my) ability, protect said goods, articles, and
things seized from defacement, demarcation, leakage, loss, or destruction in any manner; that (I)
will neither alter nor remove, nor permit others to alter or remove or dispose of the same in any
manner without the express authority of the Commissioner of Internal Revenue; and that (I) will
produce and deliver all of said goods, articles, and things upon the order of any court of the
Philippines, or upon demand of the Commissioner of Internal Revenue or any authorized officer
or agent of the Bureau of Internal Revenue.[6]

Subsequently, Alfredo Azarcon wrote a letter dated November 21, 1985 to


the BIRs Regional Director for Revenue Region 10 B, Butuan City stating that
x x x while I have made representations to retain possession of the property and
signed a receipt of the same, it appears now that Mr. Jaime Ancla intends to cease his
operations with us. This is evidenced by the fact that sometime in August, 1985 he
surreptitiously withdrew his equipment from my custody. x x x In this connection,
may I therefore formally inform you that it is my desire to immediately relinquish
whatever responsibilities I have over the above-mentioned property by virtue of the
receipt I have signed. This cancellation shall take effect immediately. x x x .
[7]

Incidentally, the petitioner reported the taking of the truck to the security
manager of PICOP, Mr. Delfin Panelo, and requested him to prevent this truck
from being taken out of the PICOP concession. By the time the order to bar
the trucks exit was given, however, it was too late.
[8]

Regional Director Batausa responded in a letter dated May 27, 1986, to


wit:
An analysis of the documents executed by you reveals that while you are (sic) in
possession of the dump truck owned by JAIME ANCLA, you voluntarily assumed the
liabilities of safekeeping and preserving the unit in behalf of the Bureau of Internal
Revenue. This is clearly indicated in the provisions of the Warrant of Garnishment

which you have signed, obliged and committed to surrender and transfer to this
office. Your failure therefore, to observe said provisions does not relieve you of your
responsibility.
[9]

Thereafter, the Sandiganbayan found that


On 11 June 1986, Mrs. Marilyn T. Calo, Revenue Document Processor of Revenue
Region 10 B, Butuan City, sent a progress report to the Chief of the Collection Branch
of the surreptitious taking of the dump truck and that Ancla was renting out the truck
to a certain contractor by the name of Oscar Cueva at PICOP (Paper Industries
Corporation of the Philippines, the same company which engaged petitioners earth
moving services), Mangagoy, Surigao del Sur. She also suggested that if the report
were true, a warrant of garnishment be reissued against Mr. Cueva for whatever
amount of rental is due from Ancla until such time as the latters tax liabilities shall be
deemed satisfied. x x x However, instead of doing so, Director Batausa filed a lettercomplaint against the (herein Petitioner) and Ancla on 22 January 1988, or after more
than one year had elapsed from the time of Mrs. Calos report.
[10]

Provincial Fiscal Pretextato Montenegro forwarded the records of the


complaint x x x to the Office of the Tanodbayan on May 18, 1988. He was
deputized Tanodbayan prosecutor and granted authority to conduct
preliminary investigation on August 22, 1988, in a letter by Special Prosecutor
Raul Gonzales approved by Ombudsman (Tanodbayan) Conrado Vasquez.
[11]

Along with his co-accused Jaime Ancla, petitioner Azarcon was charged
before the Sandiganbayan with the crime of malversation of public funds or
property under Article 217 in relation to Article 222 of the Revised Penal Code
(RPC) in the following Information filed on January 12, 1990, by Special
Prosecution Officer Victor Pascual:
[12]

That on or about June 17, 1985, in the Municipality of Bislig, Province of Surigao
del Sur, Philippines, and within the jurisdiction of this Honorable Court, accused
Alfredo L. Azarcon, a private individual but who, in his capacity as
depository/administrator of property seized or deposited by the Bureau of Internal
Revenue, having voluntarily offered himself to act as custodian of one Isuzu
Dumptruck (sic) with Motor No. E120-22958, Chasis No. SPZU 50-1772440, and
number CXL-6 and was authorized to be such under the authority of the Bureau of
Internal Revenue, has become a responsible and accountable officer and said motor
vehicle having been seized from Jaime C. Ancla in satisfaction of his tax liability in
the total sum of EIGHTY THOUSAND EIGHT HUNDRED THIRTY ONE PESOS
and 59/100 (P80,831.59) became a public property and the value thereof as public
fund, with grave abuse of confidence and conspiring and confederating with said

Jaime C. Ancla, likewise, a private individual, did then and there wilfully, (sic)
unlawfully and feloniously misappropriate, misapply and convert to his personal use
and benefit the aforementioned motor vehicle or the value thereof in the aforestated
amount, by then and there allowing accused Jaime C. Ancla to remove, retrieve,
withdraw and tow away the said Isuzu Dumptruck (sic) with the authority, consent
and knowledge of the Bureau of Internal Revenue, Butuan City, to the damage and
prejudice of the government in the amount of P80,831.59 in a form of unsatisfied tax
liability.
CONTRARY TO LAW.
The petitioner filed a motion for reinvestigation before the Sandiganbayan
on May 14, 1991, alleging that: (1) the petitioner never appeared in the
preliminary investigation; and (2) the petitioner was not a public officer,
hence a doubt exists as to why he was being charged with malversation under
Article 217 of the Revised Penal Code. The Sandiganbayan granted the
motion for reinvestigation on May 22, 1991. After the reinvestigation, Special
Prosecution Officer Roger Berbano, Sr., recommended the withdrawal of the
information but was overruled by the Ombudsman.
[13]

[14]

[15]

[16]

A motion to dismiss was filed by petitioner on March 25, 1992 on the


ground that the Sandiganbayan did not have jurisdiction over the person of
the petitioner since he was not a public officer. On May 18, 1992, the
Sandiganbayan denied the motion.
[17]

[18]

When the prosecution finished presenting its evidence, the petitioner then
filed a motion for leave to file demurrer to evidence which was denied on
November 16, 1992, for being without merit. The petitioner then
commenced and finished presenting his evidence on February 15, 1993.
[19]

The Respondent Courts Decision


On March 8, 1994, respondent Sandiganbayan rendered
Decision, the dispositive portion of which reads:
[20]

[21]

WHEREFORE, the Court finds accused Alfredo Azarcon y Leva GUILTY beyond
reasonable doubt as principal of Malversation of Public Funds defined and penalized
under Article 217 in relation to Article 222 of the Revised Penal Code and, applying
the Indeterminate Sentence Law, and in view of the mitigating circumstance of
voluntary surrender, the Court hereby sentences the accused to suffer the penalty of
imprisonment ranging from TEN (10) YEARS and ONE (1) DAY of prision mayor in

its maximum period to SEVENTEEN (17) YEARS, FOUR (4) MONTHS and ONE
(1) DAY of Reclusion Temporal. To indemnify the Bureau of Internal Revenue the
amount of P80,831.59; to pay a fine in the same amount without subsidiary
imprisonment in case of insolvency; to suffer special perpetual disqualification; and,
to pay the costs.
Considering that accused Jaime Ancla has not yet been brought within the jurisdiction
of this Court up to this date, let this case be archived as against him without prejudice
to its revival in the event of his arrest or voluntary submission to the jurisdiction of
this Court.
SO ORDERED.
Petitioner, through new counsel, filed a motion for new trial or
reconsideration on March 23, 1994, which was denied by the Sandiganbayan
in its Resolution dated December 2, 1994.
[22]

[23]

Hence, this petition.


The Issues
The petitioner submits the following reasons for the reversal of the
Sandiganbayans assailed Decision and Resolution:
I. The Sandiganbayan does not have jurisdiction over crimes committed
solely by private individuals.
II. In any event, even assuming arguendo that the appointment of a private
individual as a custodian or a depositary of distrained property is sufficient
to convert such individual into a public officer, the petitioner cannot still be
considered a public officer because:
[A]

There is no provision in the National Internal Revenue Code which authorizes the
Bureau of Internal Revenue to constitute private individuals as depositaries of
distrained properties.
[B]

His appointment as a depositary was not by virtue of a direct provision of law, or by


election or by appointment by a competent authority.

III. No proof was presented during trial to prove that the distrained vehicle was
actually owned by the accused Jaime Ancla; consequently, the governments right to
the subject property has not been established.
IV. The procedure provided for in the National Internal Revenue Code concerning the
disposition of distrained property was not followed by the B.I.R., hence the distraint
of personal property belonging to Jaime C. Ancla and found allegedly to be in the
possession of the petitioner is therefore invalid.
V. The B.I.R. has only itself to blame for not promptly selling the distrained property
of accused Jaime C. Ancla in order to realize the amount of back taxes owed by Jaime
C. Ancla to the Bureau.
[24]

In fine, the fundamental issue is whether the Sandiganbayan had


jurisdiction over the subject matter of the controversy. Corollary to this is the
question of whether petitioner can be considered a public officer by reason of
his being designated by the Bureau of Internal Revenue as a depositary of
distrained property.
The Courts Ruling
The petition is meritorious.
Jurisdiction of the Sandiganbayan
It is hornbook doctrine that in order (to) ascertain whether a court has
jurisdiction or not, the provisions of the law should be inquired
into. Furthermore, the jurisdiction of the court must appear clearly from the
statute law or it will not be held to exist. It cannot be presumed or
implied. And for this purpose in criminal cases, the jurisdiction of a court is
determined by the law at the time of commencement of the action.
[25]

[26]

[27]

In this case, the action was instituted with the filing of this information on
January 12, 1990; hence, the applicable statutory provisions are those of P.D.
No. 1606, as amended by P.D. No. 1861 on March 23, 1983, but prior to their
amendment by R.A. No. 7975 on May 16, 1995. At that time, Section 4 of
P.D. No. 1606 provided that:
SEC. 4. Jurisdiction. -- The Sandiganbayan shall exercise:

(a) Exclusive original jurisdiction in all cases involving:


(1) Violations of Republic Act No. 3019, as amended, otherwise known as the AntiGraft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2,
Title VII of the Revised Penal Code;
(2) Other offenses or felonies committed by public officers and employees in relation
to their office, including those employed in government-owned or controlled
corporations, whether simple or complexed with other crimes, where the penalty
prescribed by law is higher than prision correccional or imprisonment for six (6)
years, or a fine of P6,000.00: PROVIDED, HOWEVER, that offenses or felonies
mentioned in this paragraph where the penalty prescribed by law does not
exceed prision correccional or imprisonment for six (6) years or a fine of P6,000.00
shall be tried by the proper Regional Trial Court, Metropolitan Trial Court, Municipal
Trial Court and Municipal Circuit Trial Court.
xxx

xxx

xxx

In case private individuals are charged as co-principals, accomplices or accessories


with the public officers or employees, including those employed in governmentowned or controlled corporations, they shall be tried jointly with said public officers
and employees.
xxx

xxx

x x x.

The foregoing provisions unequivocally specify the only instances when


the Sandiganbayan will have jurisdiction over a private individual, i.e. when
the complaint charges the private individual either as a co-principal,
accomplice or accessory of a public officer or employee who has been
charged with a crime within its jurisdiction.
Azarcon: A Public Officer or A Private Individual?
The Information does not charge petitioner Azarcon of being a coprincipal, accomplice or accessory to a public officer committing an offense
under the Sandiganbayans jurisdiction. Thus, unless petitioner be proven a
public officer, the Sandiganbayan will have no jurisdiction over the crime
charged. Article 203 of the RPC determines who are public officers:
Who are public officers. -- For the purpose of applying the provisions of this and the
preceding titles of the book, any person who, by direct provision of the law, popular

election, popular election or appointment by competent authority, shall take part in the
performance of public functions in the Government of the Philippine Islands, or shall
perform in said Government or in any of its branches public duties as an employee,
agent, or subordinate official, of any rank or classes, shall be deemed to be a public
officer.
Thus,
(to) be a public officer, one must be -(1) Taking part in the performance of public functions in the government, or
Performing in said Government or any of its branches public duties as an employee,
agent, or subordinate official, of any rank or class; and
(2) That his authority to take part in the performance of public functions or to perform
public duties must be -a. by direct provision of the law, or
b. by popular election, or
c. by appointment by competent authority.[28]

Granting arguendo that the petitioner, in signing the receipt for the truck
constructively distrained by the BIR, commenced to take part in an activity
constituting public functions, he obviously may not be deemed authorized by
popular election. The next logical query is whether petitioners designation by
the BIR as a custodian of distrained property qualifies as appointment by
direct provision of law, or by competent authority. We answer in the
negative.
[29]

The Solicitor General contends that the BIR, in effecting constructive


distraint over the truck allegedly owned by Jaime Ancla, and in requiring the
petitioner Alfredo Azarcon who was in possession thereof to sign a pro
forma receipt for it, effectively designated petitioner a depositary and, hence,
citing U.S. vs. Rastrollo, a public officer. This is based on the theory that
[30]

[31]

(t)he power to designate a private person who has actual possession of a distrained
property as a depository of distrained property is necessarily implied in the BIRs
power to place the property of a delinquent tax payer (sic) in distraint as provided for
under Sections 206, 207 and 208 (formerly Sections 303, 304 and 305) of the National
Internal Revenue Code, (NIRC) x x x.
[32]

We disagree. The case of U.S. vs. Rastrollo is not applicable to the case
before us simply because the facts therein are not identical, similar or
analogous to those obtaining here. While the cited case involved
a judicial deposit of the proceeds of the sale of attached property in the hands
of the debtor, the case at bench dealt with the BIRs administrative act of
effecting constructive distraint over alleged property of taxpayer Ancla in
relation to his back taxes, property which was received by petitioner
Azarcon. In the cited case, it was clearly within the scope of that courts
jurisdiction and judicial power to constitute the judicial deposit and give the
depositary a character equivalent to that of a public official. However, in the
instant case, while the BIR had authority to require petitioner Azarcon to sign
a receipt for the distrained truck, the NIRC did not grant it power to appoint
Azarcon a public officer.
[33]

It is axiomatic in our constitutional framework, which mandates a limited


government, that its branches and administrative agencies exercise only that
power delegated to them as defined either in the Constitution or in legislation
or in both. Thus, although the appointing power is the exclusive prerogative
of the President, x x x the quantum of powers possessed by an
administrative agency forming part of the executive branch will still be limited
to that conferred expressly or by necessary or fair implication in its enabling
act. Hence, (a)n administrative officer, it has been held, has only such
powers as are expressly granted to him and those necessarily implied in the
exercise thereof. Corollarily, implied powers are those which are
necessarily included in, and are therefore of lesser degree than the power
granted. It cannot extend to other matters not embraced therein, nor are not
incidental thereto. For to so extend the statutory grant of power would be
an encroachment on powers expressly lodged in Congress by our
Constitution. It is true that Sec. 206 of the NIRC, as pointed out by the
prosecution, authorizes the BIR to effect a constructive distraint by requiring
any person to preserve a distrained property, thus:
[34]

[35]

[36]

[37]

[38]

x x x x x x

xxx

The constructive distraint of personal property shall be effected by requiring the


taxpayer or any person having possession or control of such property to sign a
receipt covering the property distrained and obligate himself to preserve the same
intact and unaltered and not to dispose of the same in any manner whatever
without the express authority of the Commissioner.
xxx

xxx

x x x

However, we find no provision in the NIRC constituting such person a


public officer by reason of such requirement. The BIRs power authorizing a
private individual to act as a depositary cannot be stretched to include the
power to appoint him as a public officer. The prosecution argues that Article
222 of the Revised Penal Code x x x defines the individuals covered by the
term officers under Article 217 x x x of the same Code. And accordingly,
since Azarcon became a depository of the truck seized by the BIR he also
became a public officer who can be prosecuted under Article 217 x x x.
[39]

[40]

[41]

The Court is not persuaded. Article 222 of the RPC reads:


Officers included in the preceding provisions. -- The provisions of this chapter shall
apply to private individuals who, in any capacity whatever, have charge of any
insular, provincial or municipal funds, revenues, or property and to any administrator
or depository of funds or property attached, seized or deposited by public authority,
even if such property belongs to a private individual.
Legislative intent is determined principally from the language of a
statute. Where the language of a statute is clear and unambiguous, the law is
applied according to its express terms, and interpretation would be resorted to
only where a literal interpretation would be either impossible or absurd or
would lead to an injustice. This is particularly observed in the interpretation
of penal statutes which must be construed with such strictness as to carefully
safeguard the rights of the defendant x x x. The language of the foregoing
provision is clear. A private individual who has in his charge any of the public
funds or property enumerated therein and commits any of the acts defined in
any of the provisions of Chapter Four, Title Seven of the RPC, should likewise
be penalized with the same penalty meted to erring public officers. Nowhere
in this provision is it expressed or implied that a private individual falling under
said Article 222 is to be deemed a public officer.
[42]

[43]

After a thorough review of the case at bench, the Court thus finds
petitioner Alfredo Azarcon and his co-accused Jaime Ancla to be both private
individuals erroneously charged before and convicted by Respondent
Sandiganbayan which had no jurisdiction over them. The Sandiganbayans
taking cognizance of this case is of no moment since (j)urisdiction cannot be
conferred by x x x erroneous belief of the court that it had jurisdiction. As
aptly and correctly stated by the petitioner in his memorandum:
[44]

From the foregoing discussion, it is evident that the petitioner did not cease to be a
private individual when he agreed to act as depositary of the garnished dump
truck. Therefore, when the information charged him and Jaime Ancla before the
Sandiganbayan for malversation of public funds or property, the prosecution was in

fact charging two private individuals without any public officer being similarly
charged as a co-conspirator. Consequently, the Sandiganbayan had no jurisdiction
over the controversy and therefore all the proceedings taken below as well as the
Decision rendered by Respondent Sandiganbayan, are null and void for lack of
jurisdiction.
[45]

WHEREFORE, the questioned Resolution and Decision of the


Sandiganbayan are hereby SET ASIDE and declared NULL and VOID for lack
of jurisdiction. No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

G.R. No. L-25133

September 28, 1968

S/SGT. JOSE SANTIAGO, petitioner-appellant,


vs.
LT. COL. CELSO ALIKPALA, ET AL., respondents-appellees.
Floro A. Sarmiento and Noe Maines for petitioner-appellant.
Cuadrato Palma and the Office of the Solicitor General for respondents-appellees.

FERNANDO, J.:
The validity of a court-martial proceeding was challenged in the lower court on due
process grounds to show lack of jurisdiction. Petitioner, a sergeant in the Philippine
Army and the accused in a court-martial proceeding, through a writ of certiorari and
prohibition, filed on April 17, 1963, with the lower court, sought to restrain respondents,
the officers, constituting the court-martial, that was then in the process of trying
petitioner for alleged violation of two provisions of the Articles of War, from continuing
with the proceedings on the ground of its being without jurisdiction. There was likewise
a plea for a restraining order, during the pendency of his petition, but it was
unsuccessful.
No response, either way, was deemed necessary by the then Presiding Judge of the
lower court, now Justice Nicasio Yatco of the Court of Appeals, as petitioner had, in the
meanwhile, been convicted by the court-martial. The lower court verdict, rendered on
September 16, 1963, was one of dismissal, as in its opinion, "this case had already
become moot and academic ... ."
An appeal was taken to us, the same due process objections being raised. We think
that the question before us is of such import and significance that an easy avoidance
through the technicality of the "moot and academic" approach hardly recommends itself.
For reasons to be more fully set forth, we find that such court-martial was not lawfully
convened, and, consequently, devoid of jurisdiction. Accordingly, we reverse the lower
court.
There was a stipulation of facts submitted to the lower court on July 10, 1963, to the
following effect: "That the arraignment of the petitioner on December 17, 1962 was for
the purpose of avoiding prescription pursuant to Article of War 38 of one of the offenses
with which the accused is charged since, as charged, same was allegedly committed on
or about December 18, 1960; That prior to the said arraignment, no written summons or
subpoena was issued addressed to the petitioner or his counsel, informing them of said
arraignment; That instead of said written summons or subpoena Col. Eladio Samson,
Constabulary Staff Judge Advocate called up First Sergeant Manuel Soriano at the
Headquarters II Philippine Constabulary Zone, Camp Vicente Lim, Canlubang, Laguna
on December 16, 1962 by telephone with instructions to send the petitioner to HPC,

Camp Crame, Quezon City, under escort, for arraignment and only for arraignment;
That upon arrival in HPC, the petitioner was directed to proceed to the PC Officer's
Clubhouse, where a General Court-Martial composed of the respondents, created to try
the case of 'People vs. Capt. Egmidio Jose, for violation of Articles of War 96 and 97',
pursuant to paragraph 10, Special Order No. 14, Headquarters Philippine Constabulary,
dated 18 July 1962, ..., was to resume, as scheduled, the trial of 'People vs. Pfc.
Numeriano Ohagan, for violation of Articles of War 64, 85, and 97'; That it was only at
the time (December 17, 1962) that petitioner learned that he will be arraigned for
alleged violation of Articles of War 85 and 97, after being informed by one of the
respondents, Capt. Cuadrato Palma as Trial Judge Advocate why he was there; That
prior to that arraignment on December 17, 1962 there was no special order published
by the Headquarters Philippine Constabulary creating or directing the General CourtMartial composed of the respondents to arraign and try the case against the petitioner,
there however was already an existing court trying another case; That the respondents
relied on the first indorsement of the Acting Adjutant General, HPC, Camp Crame,
Quezon City, dated December 14, 1962 and addressed to the Trial Judge Advocate of
the General Court-martial ... directing the said Trial Judge Advocate to refer the case
against petitioner to the above-mentioned court, ...; That the above paragraph 10,
Special Order No. 14 dated 18 July 1962, does not contain the phrase 'and such other
cases which may be referred to it,' but however said orders were amended only on 8
January 1963, to include such phrase, ... ." 1
It was further stipulated that petitioner's counsel did object to his arraignment asserting
that a general court-martial then convened was without jurisdiction, as there was no
special order designating respondents to compose a general court-martial for the
purpose of trying petitioner, as petitioner was not furnished a copy of the charge sheet
prior to his arraignment as required in the Manual for Court-Martial, except on the very
day thereof, and as there was no written summons or subpoena served on either the
petitioner, as accused, or the counsel. Respondents, acting as the general court-martial,
overruled the above objections, and the Trial Judge Advocate was then ordered to
proceed to read the charges and specifications against petitioner over the vigorous
objections of counsel. It was shown, likewise, in the stipulation of facts, that the case,
having been postponed to February 21, 1963, petitioner's counsel had in the meanwhile
complained to the Chief of Constabulary against the proceedings on the ground of its
nullity, and sought to have respondents restrained from continuing with the trial of
petitioner due to such lack of jurisdiction but the Chief of Constabulary ruled that he
could not act on such complaint until the records of the trial were forwarded to him for
review. With such a ruling, and with the denial of two other motions by petitioner upon
the court-martial being convened anew on February 21, 1963, one to invalidate his
arraignment on December 17, 1962, and the other to quash the complaint based on the
denial of due process and lack of jurisdiction, the present petition for certiorari and
prohibition was filed with the lower court. 2
As above noted, the lower court dismissed the petition due to its belief that, petitioner
having been convicted in the meanwhile, there being no restraining order, the matter

had become moot and academic. As was set forth earlier, we differ, the alleged lack of
jurisdiction being too serious a matter to be thus summarily ignored.
The firm insistence on the part of petitioner that the general court-martial lacks
jurisdiction on due process grounds, cannot escape notice. The basic objection was the
absence of a special order "designating respondents to compose a general court-martial
to convene and try the case of petitioner; ... ." It was expressly stipulated that the
respondents were convened to try the case of a certain Capt. Egmidio Jose and not that
filed against petitioner. As a matter of fact, the opening paragraph of the stipulation of
facts made clear that he was arraigned on December 17, 1962 by respondents as a
general court-martial appointed precisely to try the above Capt. Jose solely "for the
purpose of avoiding prescription pursuant to Article of War 38 of one of the offenses
with which the accused is charged ... ."
Is such a departure from what the law and regulations 3 prescribe offensive to the due
process clause? If it were, then petitioner should be sustained in his plea for a writ
of certiorari and prohibition, as clearly the denial of the constitutional right would oust
respondents of jurisdiction, even on the assumption that they were vested with it
originally. Our decisions to that effect are impressive for their unanimity.
In Harden v. The Director of Prisons, 4 Justice Tuason, speaking for the Court, explicitly
announced that "deprivation of any fundamental or constitutional rights" justify a
proceeding for habeas corpus on the ground of lack of jurisdiction. Abriol v. Homeres 5 is
even more categorical. In that case, the action of a lower court, denying the accused the
opportunity to present proof for his defense, his motion for dismissal failing, was held by
this Court as a deprivation of his right to due process. As was made clear by the opinion
of Justice Ozaeta: "No court of justice under our system of government has the power to
deprive him of that right. If the accused does not waive his right to be heard but on the
contrary as in the instant case invokes the right, and the court denies it to him,
that court no longer has jurisdiction to proceed; it has no power to sentence the accused
without hearing him in his defense; and the sentence thus pronounced is void and may
be collaterally attacked in a habeas corpus proceeding." 6
A recent decision rendered barely a month ago, in Chavez v. Court of Appeals, 7 is even
more in point. Here, again, habeas corpus was relied upon by petitioner whose
constitutional rights were not respected, but, in addition, the special civil actions
of certiorari and mandamus were likewise availed of, in view of such consequent lack of
jurisdiction. The stress though in the opinion of Justice Sanchez was on habeas corpus.
Thus: "The course which petitioner takes is correct. Habeas corpus is a high prerogative
writ. It is traditionally considered as an exceptional remedy to release a person whose
liberty is illegally restrained such as when the accused's constitutional rights are
disregarded. Such defect results in the absence or loss of jurisdiction and therefore
invalidates the trial and the consequent conviction of the accused whose fundamental
right was violated. That void judgment of conviction may be challenged by collateral
attack, which precisely is the function of habeas corpus. This writ may issue even if
another remedy which is less effective may be availed of by the defendant."

The due process concept rightfully referred to as "a vital and living force in our
jurisprudence" calls for respect and deference, otherwise the governmental action taken
suffers from a fatal infirmity. As was so aptly expressed by the then Justice, now Chief
Justice, Concepcion: "... acts of Congress, as well as those of the Executive, can deny
due process only under pain of nullity, and judicial proceedings suffering from the same
flaw are subject to the same sanction, any statutory provision to the contrary
notwithstanding." 8
The crucial question, then, is whether such failure to comply with the dictates of the
applicable law insofar as convening a valid court martial is concerned, amounts to a
denial of due process. We hold that it does. There is such a denial not only under the
broad standard which delimits the scope and reach of the due process requirement, but
also under one of the specific elements of procedural due process.
It is to be admitted that there is no controlling and precise definition of due process
which, at the most furnishes a standard to which governmental action should conform in
order to impress with the stamp of validity any deprivation of life, liberty or property. A
recent decision of this Court, in Ermita-Malate Hotel v. Mayor of Manila 9treated the
matter thus: "It is responsiveness to the supremacy of reason, obedience to the dictates
of justice. Negatively put, arbitrariness is ruled out and unfairness avoided. To satisfy
the due process requirement, official action, to paraphrase Cardozo, must not outrun
the bounds of reason and result in sheer oppression. Due process is thus hostile to any
official action marred by lack of reasonableness. Correctly has it been identified as
freedom from arbitrariness. It is the embodiment of the sporting idea of fair play. It
exacts fealty 'to those strivings for justice' and judges the act of officialdom of whatever
branch 'in the light of reason drawn from considerations of fairness that reflect
[democratic] traditions of legal and political thought.'"
Nor is such a reliance on the broad reach of due process the sole ground on which the
lack of jurisdiction of the court-martial convened in this case could be predicated.
Recently, stress was laid anew by us on the first requirement of procedural due
process, namely, the existence of the court or tribunal clothed with judicial, or quasijudicial, power to hear and determine the matter before it. 10 This is a requirement that
goes back to Banco Espaol-Filipino v. Palanca, a decision rendered half a century
ago. 11
There is the express admission in the statement of facts that respondents, as a courtmartial, were not convened to try petitioner but someone else, the action taken against
petitioner being induced solely by a desire to avoid the effects of prescription; it would
follow then that the absence of a competent court or tribunal is most marked and
undeniable. Such a denial of due process is therefore fatal to its assumed authority to
try petitioner. The writ of certiorari and prohibition should have been granted and the
lower court, to repeat, ought not to have dismissed his petition summarily.
The significance of such insistence on a faithful compliance with the regular procedure
of convening court-martials in accordance with law cannot be over-emphasized. As was

pointed out by Justice Tuason in Ruffy v. The Chief of Staff, Philippine Army: 12 "Courtsmartial are agencies of executive character, and one of the authorities for the ordering
of courts-martial has been held to be attached to the constitutional functions of the
President as Commander-in-Chief, independently of legislation. (Winthrop's Military Law
and Precedents, 2d Edition, p. 49.) Unlike courts of law, they are not a portion of the
judiciary." Further on, his opinion continues: "Not belonging to the judicial branch of the
government, it follows that courts-martial must pertain to the executive department; and
they are in fact simply instrumentalities of the executive power, provided by Congress
for the President as Commander-in-Chief, to aid him in properly commanding the army
and navy and enforcing discipline therein, and utilized under his orders or those of his
authorized military representatives." 13
It is even more indispensable, therefore, that such quasi-judicial agencies, clothed with
the solemn responsibility of depriving members of the Armed Forces of their liberties,
even of their lives, as a matter of fact, should be held all the more strictly bound to
manifest fidelity to the fundamental concept of fairness and the avoidance of
arbitrariness for which due process stands as a living vital principle. If it were otherwise,
then, abuses, even if not intended, might creep in, and the safeguards so carefully
thrown about the freedom of an individual, ignored or disregarded. Against such an
eventuality, the vigilance of the judiciary furnishes a shield. That is one of its grave
responsibilities. Such a trust must be lived up to; such a task cannot be left undone.
WHEREFORE, the order of respondent Court of September 6, 1963, dismissing the
petition for certiorari and prohibition is reversed, and the writ of certiorari and prohibition
granted, annulling the proceedings as well as the decision rendered by respondents as
a court-martial and perpetually restraining them from taking any further action on the
matter. Without pronouncement as to costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Sanchez, Angeles and Capistrano, JJ.,
concur.
Dizon and Zaldivar, JJ., are on leave.
Separate Opinions
CASTRO, J., concurring:
My concurrence in the decision of this Court in the able pen of Mr. Justice Fernando is
unqualified.
Nonetheless, I feel compelled to express my views on certain disturbing facets of this
case which to my mind not merely indicate a censurabe denial of due process, but as
well pointedly exposes, from the perspective of military law, tradition and usage, the
intrinsic nullity of the proceedings had by the general court-martial in question.
The history and development of courts-martial as tribunals for the enforcement of
discipline in bodies of military character 1 underscore several time-honored tenets: a

court-martial is an instrumentality of the executive power, to aid the President as


commander-in-chief in properly commanding and controlling the armed forces and
enforcing discipline therein; it has only such powers as are expressly vested in it by
statute or as may be derived from military usage; it is a creature of orders; as a purely
executive agency designed for military uses, it is brought into being by a military order; it
is transient in its duration; it has no fixed place of session, nor permanent office or clerk,
no inherent power to issue a judicial mandate; its judgment is in quintessence simply a
recommendation until approved by the proper revisory commander; its competency
cannot be expanded by implication; and no intendment in favor of its acts can be made
where their legality does not indubitably appear. 2
The original concept of a court-martial in British Law, even with American and Philippine
statutory accretions, remains fundamentally the same today, with few modifications of
consequence.
Why a court-martial is essentially transient in nature, and is as a rule appointed to try a
single case, is not difficult to comprehend.
Firstly, in a military organization, every officer thereof belongs to a particular branch of
services and is for that reason assigned to a position which calls for the discharge, in a
continuing manner and for a period which is denominated tour of duty, of duties
pertaining to his specialization or branch of service. Thus an ordnance officer is
assigned to ordnance work, a field artillery officer to field artillery duties, a finance officer
to duties involving money and finances, a quartermaster officer to duties involving
supplies and other aspects of logistics, and so forth. Although generic military duty
perforce embraces occasional membership in courts-martial, it does not envision such
membership as a continuing assignment of long duration.
Secondly, the court-martial, as its history and development demonstrate, is a blend of
the jury system and the one-judge (non-jury) judicial system. In common law
jurisdictions, an accused is tried by his peers. In one-judge (non-jury) jurisdictions, the
accused is tried by a lone judicial arbiter. In a court-martial trial, the entire panel of
officers who constitute the court-martial is judge and jury.
1aw phl .nt

Thirdly, by virtue of military law, tradition and usage, a court-martial is constituted to try
a particular case (or several cases involving the same accused). After completion of the
trial and resolution of necessary post-trial incidents, the court is dissolved, and the
members thereof return to and resume their respective normal assignments. Even the
law member of a court-martial (who rules on questions of law and admissibility of
evidence and advises the other members on court procedure and the legal intricacies of
trial), rejoins his regular office or unit (although he may thereafter again be appointed
law member of a subsequent general court-martial, or an ordinary member of another
general court-martial, or even president of still another general court-martial).
In sum, a court-martial is not a continuing permanent tribunal.

Thus it is that, in the Armed Forces of the Philippines, the general rule has commanded
undiminished respect that a court-martial is appointed to try only a single case, or
several cases pertaining to a single individual. There is of course no legal impediment to
empowering a court-martial, in the same order creating it, to try more than one case, but
such creations are the exception and quite infrequent. And even if "roving" or "semipermanent" courts-martial were the rule in our Armed Forces, which I do not concede,
the general court-martial in the case at bar was not one such.
It is undisputed as in fact it is stipulated by the parties that the general courtmartial in question was constituted to try Captain Egmidio Jose. Nothing in the
phraseology of the order that created it authorized it to try the petitioner staff-sergeant
Santiago. It could not therefore proceed in any manner, which we can view as properly
coming within the periphery of its limited powers, with respect to the charge against
Santiago.When it arraigned Santiago on December 17, 1962, it was absolutely without
legal power to do so, and the arraignment was a futile ceremony, as meaningless as it
was inefficacious.
Undeniably the record shows that the order creating the court-martial to try Captain
Egmidio Jose was belatedly amended on January 8, 1963 by the addition of the phrase,
"and such other cases that may be referred to it." But this afterthought could not, in law,
serve to invest with validity an act that was ab initio a nullity. And it is of no moment that
petitioner was thereafter arraigned anew, assuming arguendo that he was. The
proceedings would have been palpably objectionable on the patent ground that the
offense imputed to the petitioner which was committed on December 18, 1960 was
already time-barred on December 18, 1962, pursuant to the provisions of Article of War
38 of Commonwealth Act 408, as amended.
As I see it, the arraignment of the petitioner by the general court-martial constituted to
try Captain Egmidio Jose was a desperate measure resorted to remedy a desperate
situation solely to interrupt the running of the prescriptive period provided by Article
of War 38. This action was not only completely devoid of any semblance of legality; it
likewise conclusively evinces gross negligence on the part of the military. Why nothing
was done toward the creation of a court-martial to try Santiago within the two years
following the commission of the crime is not explained by the record, and I venture the
opinion that there can be no satisfactory explanation therefor. The military authorities
allowed that long period to lapse without any assiduous effort at bringing the petitioner
to the forum of a duly constituted general court-martial. This should never come to pass
in the Armed Forces where disciplinary measures of whatever specie or character, by
law and tradition and usage, should be swiftly administered. For, the officer of average
military learning knows or should be cognizant of the proliferation in the Articles of War
of provisions designed to insure speedy trial of accused persons.
1awphl.nt

Because an accused charged with a serious offense such as that in the case at bar
unlawful disposition of ten carbines belonging to the Government is ordinarily placed
in arrest and is not entitled to bail, time is of the essence as undue delay would
obviously be prejudicial to the accused. The Articles of War (Commonwealth Act 408 as

amended by Rep. Act 242) and implementing military manuals and regulations explicitly
enjoin that the report of investigation, if practicable, be completed within 48 hours, that
the investigator forthwith make the proper recommendation as to the disposition of the
case, and that the officer exercising general court-martial jurisdiction over the accused
act on the report of the investigator with deliberate speed. As a matter of fact, Article of
War 71 explicitly commands that when a person subject to military law is placed in
arrest or confinement immediate steps be taken to try him or to dismiss the charge; that
when a person is held for trial by general court-martial his commanding officer, within
eight days after the accused is arrested or confined, forward the charges to the officer
exercising general court-martial jurisdiction and furnish the accused a copy of such
charges; and that if the same be not practicable, he report to superior authority the
reasons for the delay. The same Article of War poises the threat of punishment (as a
court-martial may direct) over any officer responsible for unnecessary delay "in
investigating or carrying the case to final conclusion."
The record propels me to the conclusion that everything that the military authorities did
or neglected to do with respect to the case of the petitioner was contrary to all the
imperatives of military law, tradition and usage.
In fine, it is my considered view that at the time the petitioner was arraigned, there was
no court-martial validly in existence that could legally take cognizance of the charge
against him. At best, the general court-martial in question, vis-a-vis the petitioner, was
disembodied if not innominate, with neither shape nor substance.

G.R. No. L-53961 June 30, 1987


NATIONAL DEVELOPMENT COMPANY, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.

CRUZ, J.:
We are asked to reverse the decision of the Court of Tax Appeals on the ground that it is
erroneous. We have carefully studied it and find it is not; on the contrary, it is supported by
law and doctrine. So finding, we affirm.
Reduced to simplest terms, the background facts are as follows.
The national Development Company entered into contracts in Tokyo with several Japanese
shipbuilding companies for the construction of twelve ocean-going vessels. 1 The purchase price
2

Initial payments were made in cash and through


irrevocable letters of credit. Fourteen promissory notes were signed for the balance by the NDC and, as
4
required by the shipbuilders, guaranteed by the Republic of the Philippines. Pursuant thereto, the
remaining payments and the interests thereon were remitted in due time by the NDC to Tokyo. The
5
vessels were eventually completed and delivered to the NDC in Tokyo.
was to come from the proceeds of bonds issued by the Central Bank.
3

The NDC remitted to the shipbuilders in Tokyo the total amount of US$4,066,580.70 as
interest on the balance of the purchase price. No tax was withheld. The Commissioner then
held the NDC liable on such tax in the total sum of P5,115,234.74. Negotiations followed but
failed. The BIR thereupon served on the NDC a warrant of distraint and levy to enforce
collection of the claimed amount. 6 The NDC went to the Court of Tax Appeals.
The BIR was sustained by the CTA except for a slight reduction of the tax deficiency in the
sum of P900.00, representing the compromise penalty. 7 The NDC then came to this Court in a
petition for certiorari.

The petition must fail for the following reasons.


The Japanese shipbuilders were liable to tax on the interest remitted to them under Section
37 of the Tax Code, thus:
SEC. 37. Income from sources within the Philippines. (a) Gross income
from sources within the Philippines. The following items of gross income
shall be treated as gross income from sources within the Philippines:
(1) Interest. Interest derived from sources within the Philippines, and
interest on bonds, notes, orother interest-bearing obligations of residents,
corporate or otherwise;
xxx xxx xxx

The petitioner argues that the Japanese shipbuilders were not subject to tax under the
above provision because all the related activities the signing of the contract, the
construction of the vessels, the payment of the stipulated price, and their delivery to the
NDC were done in Tokyo. 8 The law, however, does not speak of activity but of "source," which in
this case is the NDC. This is a domestic and resident corporation with principal offices in Manila.

As the Tax Court put it:


It is quite apparent, under the terms of the law, that the Government's right to
levy and collect income tax on interest received by foreign corporations not
engaged in trade or business within the Philippines is not planted upon the
condition that 'the activity or labor and the sale from which the (interest)
income flowed had its situs' in the Philippines. The law specifies: 'Interest
derived from sources within the Philippines, and interest on bonds, notes, or
other interest-bearing obligations of residents, corporate or otherwise.'
Nothing there speaks of the 'act or activity' of non-resident corporations in the
Philippines, or place where the contract is signed. The residence of the
obligorwho pays the interest rather than the physical location of the securities,
bonds or notes or the place of payment, is the determining factor of the
source of interest income. (Mertens, Law of Federal Income Taxation, Vol. 8,
p. 128, citing A.C. Monk & Co. Inc. 10 T.C. 77; Sumitomo Bank, Ltd., 19 BTA
480; Estate of L.E. Mckinnon, 6 BTA 412; Standard Marine Ins. Co., Ltd., 4
BTA 853; Marine Ins. Co., Ltd., 4 BTA 867.) Accordingly, if the obligor is a
resident of the Philippines the interest payment paid by him can have no
other source than within the Philippines. The interest is paid not by the bond,
note or other interest-bearing obligations, but by the obligor. (See mertens,
Id., Vol. 8, p. 124.)
Here in the case at bar, petitioner National Development Company, a
corporation duly organized and existing under the laws of the Republic of the
Philippines, with address and principal office at Calle Pureza, Sta. Mesa,
Manila, Philippines unconditionally promised to pay the Japanese
shipbuilders, as obligor in fourteen (14) promissory notes for each vessel, the
balance of the contract price of the twelve (12) ocean-going vessels
purchased and acquired by it from the Japanese corporations, including the
interest on the principal sum at the rate of five per cent (5%) per annum. (See
Exhs. "D", D-1" to "D-13", pp. 100-113, CTA Records; par. 11, Partial
Stipulation of Facts.) And pursuant to the terms and conditions of these
promisory notes, which are duly signed by its Vice Chairman and General
Manager, petitioner remitted to the Japanese shipbuilders in Japan during the
years 1960, 1961, and 1962 the sum of $830,613.17, $1,654,936.52 and
$1,541.031.00, respectively, as interest on the unpaid balance of the
purchase price of the aforesaid vessels. (pars. 13, 14, & 15, Partial
Stipulation of Facts.)
The law is clear. Our plain duty is to apply it as written. The residence of the
obligor which paid the interest under consideration, petitioner herein, is Calle
Pureza, Sta. Mesa, Manila, Philippines; and as a corporation duly organized

and existing under the laws of the Philippines, it is a domestic corporation,


resident of the Philippines. (Sec. 84(c), National Internal Revenue Code.) The
interest paid by petitioner, which is admittedly a resident of the Philippines, is
on the promissory notes issued by it. Clearly, therefore, the interest remitted
to the Japanese shipbuilders in Japan in 1960, 1961 and 1962 on the unpaid
balance of the purchase price of the vessels acquired by petitioner is interest
derived from sources within the Philippines subject to income tax under the
then Section 24(b)(1) of the National Internal Revenue Code. 9
There is no basis for saying that the interest payments were obligations of the Republic of
the Philippines and that the promissory notes of the NDC were government securities
exempt from taxation under Section 29(b)[4] of the Tax Code, reading as follows:
SEC. 29. Gross Income. xxxx xxx xxx xxx
(b) Exclusion from gross income. The following items shall not be included
in gross income and shall be exempt from taxation under this Title:
xxx xxx xxx
(4) Interest on Government Securities. Interest upon the obligations of the
Government of the Republic of the Philippines or any political subdivision
thereof, but in the case of such obligations issued after approval of this Code,
only to the extent provided in the act authorizing the issue thereof. (As
amended by Section 6, R.A. No. 82; emphasis supplied)
The law invoked by the petitioner as authorizing the issuance of securities is R.A. No. 1407,
which in fact is silent on this matter. C.A. No. 182 as amended by C.A. No. 311 does carry
such authorization but, like R.A. No. 1407, does not exempt from taxes the interests on
such securities.
It is also incorrect to suggest that the Republic of the Philippines could not collect taxes on
the interest remitted because of the undertaking signed by the Secretary of Finance in each
of the promissory notes that:
Upon authority of the President of the Republic of the Philippines, the
undersigned, for value received, hereby absolutely and unconditionally
guarantee (sic), on behalf of the Republic of the Philippines, the due and
punctual payment of both principal and interest of the above note. 10
There is nothing in the above undertaking exempting the interests from taxes. Petitioner has
not established a clear waiver therein of the right to tax interests. Tax exemptions cannot be
merely implied but must be categorically and unmistakably expressed. 11 Any doubt concerning this
question must be resolved in favor of the taxing power. 12

Nowhere in the said undertaking do we find any inhibition against the collection of the
disputed taxes. In fact, such undertaking was made by the government in consonance with
and certainly not against the following provisions of the Tax Code:

Sec. 53(b). Nonresident aliens. All persons, corporations and general copartnership (companies colectivas), in whatever capacity acting, including
lessees or mortgagors of real or personal capacity, executors, administrators,
receivers, conservators, fiduciaries, employers, and all officers and
employees of the Government of the Philippines having control, receipt,
custody; disposal or payment of interest, dividends, rents, salaries, wages,
premiums, annuities, compensations, remunerations, emoluments, or other
fixed or determinable annual or categorical gains, profits and income of any
nonresident alien individual, not engaged in trade or business within the
Philippines and not having any office or place of business therein, shall
(except in the cases provided for in subsection (a) of this section) deduct and
withhold from such annual or periodical gains, profits and income a tax to
twenty (now 30%) per centum thereof: ...
Sec. 54. Payment of corporation income tax at source. In the case of
foreign corporations subject to taxation under this Title not engaged in trade
or business within the Philippines and not having any office or place of
business therein, there shall be deducted and withheld at the source in the
same manner and upon the same items as is provided in section fifty-three a
tax equal to thirty (now 35%) per centum thereof, and such tax shall be
returned and paid in the same manner and subject to the same conditions as
provided in that section:....
Manifestly, the said undertaking of the Republic of the Philippines merely guaranteed the
obligations of the NDC but without diminution of its taxing power under existing laws.
In suggesting that the NDC is merely an administrator of the funds of the Republic of the
Philippines, the petitioner closes its eyes to the nature of this entity as a corporation. As
such, it is governed in its proprietary activities not only by its charter but also by the
Corporation Code and other pertinent laws.
The petitioner also forgets that it is not the NDC that is being taxed. The tax was due on the
interests earned by the Japanese shipbuilders. It was the income of these companies and
not the Republic of the Philippines that was subject to the tax the NDC did not withhold.
In effect, therefore, the imposition of the deficiency taxes on the NDC is a penalty for its
failure to withhold the same from the Japanese shipbuilders. Such liability is imposed by
Section 53(c) of the Tax Code, thus:
Section 53(c). Return and Payment. Every person required to deduct and
withhold any tax under this section shall make return thereof, in duplicate, on
or before the fifteenth day of April of each year, and, on or before the time
fixed by law for the payment of the tax, shall pay the amount withheld to the
officer of the Government of the Philippines authorized to receive it. Every
such person is made personally liable for such tax, and is indemnified against
the claims and demands of any person for the amount of any payments made
in accordance with the provisions of this section. (As amended by Section 9,
R.A. No. 2343.)

In Philippine Guaranty Co. v. The Commissioner of Internal Revenue and the Court of Tax
Appeals, 13 the Court quoted with approval the following regulation of the BIR on the responsibilities of withholding agents:
In case of doubt, a withholding agent may always protect himself by
withholding the tax due, and promptly causing a query to be addressed to the
Commissioner of Internal Revenue for the determination whether or not the
income paid to an individual is not subject to withholding. In case the
Commissioner of Internal Revenue decides that the income paid to an
individual is not subject to withholding, the withholding agent may thereupon
remit the amount of a tax withheld. (2nd par., Sec. 200, Income Tax
Regulations).
"Strict observance of said steps is required of a withholding agent before he could be
released from liability," so said Justice Jose P. Bengson, who wrote the decision.
"Generally, the law frowns upon exemption from taxation; hence, an exempting provision
should be construed strictissimi juris." 14
The petitioner was remiss in the discharge of its obligation as the withholding agent of the
government an so should be held liable for its omission.
WHEREFORE, the appealed decision is AFFIRMED, without any pronouncement as to
costs. It is so ordered.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano,
Gancayno, Padilla, Bidin, Sarmiento and Cortez, JJ., concur

HON. ARMAND FABELLA, in his capacity as SECRETARY OF THE


DEPARTMENT OF EDUCATION, CULTURE AND SPORTS; DR.
NILO ROSAS, in his capacity as REGIONAL DIRECTOR, DECSNCR; DR. BIENVENIDO ICASIANO, in his capacity as the
SUPERINTENDENT OF THE QUEZON CITY SCHOOLS and
DIVISION; ALMA BELLA O. BAUTISTA, AURORA C.
VALENZUELA
and
TERESITA
V.
DIMAGMALIW, petitioners, vs. THE COURT OF APPEALS,
ROSARITO A. SEPTIMO, ERLINDA B. DE LEON, CLARISSA T.
DIMAANO, WILFREDO N. BACANI, MARINA R. VIVAR, VICTORIA
S. UBALDO, JENNIE L. DOGWE, NORMA L. RONGCALES, EDITA
C. SEPTIMO, TERESITA E. EVANGELISTA, CATALINA R.
FRAGANTE, REBECCA D. BAGDOG, MARILYNNA C. KU,
MARISSA M. SAMSON, HENEDINA B.CARILLO, NICASIO C.
BRAVO, RUTH F. LACANILAO, MIRASOL C. BALIGOD, FELISA
S. VILLACRUEL, MA. VIOLETA ELIZABETH Y. HERNANDEZ,
ANTONIO C. OCAMPO, ADRIANO S. VALENCIA and ELEUTERIO
S. VARGAS, respondents.
DECISION
PANGANIBAN, J.:

Due process of law requires notice and hearing. Hearing, on the other
hand, presupposes a competent and impartial tribunal. The right to be heard
and, ultimately, the right to due process of law lose meaning in the absence
of an independent, competent and impartial tribunal.
Statement of the Case
This principium is explained by this Court as it resolves this petition for
review on certiorari assailing the May 21, 1993 Decision of the Court of
Appeals in CA-G.R. SP No. 29107 which affirmed the trial courts
decision, as follows:
[1]

[2]

[3]

WHEREFORE, the decision appealed from is AFFIRMED and the appeal is


DISMISSED.

The Hon. Armand Fabella is hereby ORDERED substituted as respondent-appellant


in place of former Secretary Isidro Cario and henceforth this fact should be reflected
in the title of this case.
SO ORDERED.

[4]

The Antecedent Facts


The facts, as found by Respondent Court, are as follows:
On September 17, 1990, then DECS Secretary Cario issued a return-to-work order
to all public school teachers who had participated in talk-outs and strikes on various
dates during the period September 26, 1990 to October 18, 1990. The mass action had
been staged to demand payment of 13th month differentials, clothing allowances and
passage of a debt-cap bill in Congress, among other things.
On October 18, 1990, Secretary Cario filed administrative cases against
herein petitioner-appellees, who are teachers of the Mandaluyong High
School. The charge sheets required petitioner-appellees to explain in writing
why they should not be punished for having taken part in the mass action in
violation of civil service laws and regulations, to wit:
1.

grave misconduct;

2.

gross neglect of duty;

3.

gross violation of Civil Service Law and rules on reasonable office regulations;

4.

refusal to perform official duty;

5.

conduct prejudicial to the best interest of the service;

6.

absence without leave (AWOL)

At the same time, Secretary Cario ordered petitioner-appellee to be


placed under preventive suspension.
The charges were subsequently amended by DECS-NCR Regional
Director Nilo Rosas on November 7, 1990 to include the specific dates when
petitioner-appellees allegedly took part in the strike.

Administrative hearings started on December 20, 1990. Petitionerappellees counsel objected to the procedure adopted by the committee and
demanded that he be furnished a copy of the guidelines adopted by the
committee for the investigation and imposition of penalties. As he received no
response from the committee, counsel walked out. Later, however, counsel,
was able to obtain a copy of the guidelines.
On April 10, 1991, the teachers filed a an injunctive suit (Civil Case No.
60675) with the Regional Trial Court in Quezon City, charging the committee
appointed by Secretary Cario with fraud and deceit and praying that it be
stopped from further investigating them and from rendering any decision in the
administrative case. However, the trial court denied them a restraining order.
They then amended their complaint and made it one for certiorari
and mandamus. They alleged that the investigating committee was acting
with grave abuse of discretion because its guidelines for investigation place
the burden of proof on them by requiring them to prove their innocence
instead of requiring Secretary Cario and his staff to adduce evidence to
prove the charges against the teachers.
On May 30, 1991, petitioner-appellee Adriano S. Valencia of the Ramon
Magsaysay High School filed a motion to intervene, alleging that he was in the
same situation as petitioners since he had likewise been charged and
preventively suspended by respondent-appellant Cario for the same grounds
as the other petitioner-appellees and made to shoulder the burden of proving
his innocence under the committees guidelines. The trial court granted his
motion on June 3, 1991 and allowed him to intervene.
On June 11, 1991, the Solicitor General answered the petitioner for
certiorari and mandamus in behalf of respondent DECS Secretary. In the
main he contended that, in accordance with the doctrine of primary resort, the
trial court should not interfere in the administrative proceedings.
The Solicitor General also asked the trial court to reconsider its order of
June 3, 1991, allowing petitioner-appellee Adriano S. Valencia to intervene in
the case.
Meanwhile, the DECS investigating committee rendered a decision on
August 6, 1991, finding the petitioner-appellees guilty, as charged and
ordering their immediate dismissal.
On August 15, 1991, the trial court dismissed the petition for certiorari and
mandamus for lack of merit. Petitioner-appellees moved for a
reconsideration, but their motion was denied on September 11, 1991.

The teachers then filed a petition for certiorari with the Supreme Court
which, on February 18, 1992, issued a resolution en banc declaring void the
trial courts order of dismissal and reinstating petitioner-appellees action,
even as it ordered the latters reinstatement pending decision of their case.
Accordingly, on March 25, 1992, the trial court set the case for
hearing. June 8, 1992, it issued a pre-trial order which reads:
As prayed for by Solicitor Bernard Hernandez, let this case be set for pre-trial
conference on June 17, 1992 at 1:30 p.m., so as to expedite the proceedings hereof. In
which case, DECS Secretary Isidro Cario, as the principal respondent, is hereby
ordered to PERSONALLY APPEAR before this Court on said date and time, with a
warning that should he fail to show up on said date, the Court will declare him as IN
DEFAULT. Stated otherwise, for the said Pre-Trial Conference, the Court will not
recognize any representative of his.
By agreement of the parties, the trial conference was reset on June 26,
1992. However, Secretary Cario failed to appear in court on the date set. It
was explained that he had to attend a conference in Maragondon,
Cavite. Instead, he was represented by Atty. Reno Capinpin, while the other
respondents were represented by Atty. Jocelyn Pili. But the court just the
same declared them as in default. The Solicitor General moved for a
reconsideration, reiterating that Cario could not personally come on June 26,
1992 because of prior commitment in Cavite. It was pointed out that Cario
was represented by Atty. Reno Capinpin, while the other respondents were
represented by Atty. Jocelyn Pili, both of the DECS-NCR and that both had
special powers of attorney. But the Solicitor Generals motion for
reconsideration was denied by the trial court. In its order of July 15, 1992, the
court stated:
The Motion For Reconsideration dated July 3, 1992 filed by the respondents thru
counsel, is hereby DENIED for lack of merit. It appears too obvious that respondents
simply did not want to comply with the lawful orders of the Court.
The respondents having lost their standing in Court, the Manifestation and Motion,
dated July 3, 1992 filed by the Office of the Solicitor General is hereby DENIED due
course.
SO ORDERED.

On July 3, 1992, the Solicitor General informed the trial court that Cario
had ceased to be DECS Secretary and asked for his substitution. But the
court failed to act on his motion.
The hearing of the case was thereafter conducted ex parte with only the
teachers allowed to present their evidence.
On August 10, 1992, the trial court rendered a decision, in which it stated:
The Court is in full accord with petitioners contention that Rep. Act No. 4670
otherwise known as the Magna Carta for Public School Teachers is the primary law
that governs the conduct of investigation in administrative cases filed against public
school teachers, with Pres. Decree No. 807 as its supplemental law. Respondents
erred in believing and contending that Rep. Act. No. 4670 has already been
superseded by the applicable provisions of Pres. Decree No. 807 and Exec. Order No.
292. Under the Rules of Statutory Construction, a special law, Rep. Act. No. 4670 in
the case at bar, is not regarded as having been replaced by a general law, Pres. Decree
No. 807, unless the intent to repeal or alter the same is manifest. A perusal of Pres.
Decree No. 807 reveals no such intention exists, hence, Rep. Act No. 4670 stands. In
the event that there is conflict between a special and a general law, the former shall
prevail since it evidences the legislators intent more clearly than that of the general
statute and must be taken as an exception to the General Act. The provision of Rep.
Act No. 4670 therefore prevails over Pres. Decree No. 807 in the composition and
selection of the members of the investigating committee. Consequently, the committee
tasked to investigate the charges filed against petitioners was illegally constituted,
their composition and appointment being violative of Sec. 9 of Rep. Act. No. 4670
hence all acts done by said body possess no legal color whatsoever.
Anent petitioners claim that their dismissal was effected without any formal
investigation, the Court, after consideration of the circumstances surrounding the case,
finds such claim meritorious. Although it cannot be gain said that respondents have a
cause of action against the petitioner, the same is not sufficient reason to detract from
the necessity of basic fair play. The manner of dismissal of the teachers is tainted
with illegality. It is a dismissal without due process. While there was a semblance of
investigation conducted by the respondents their intention to dismiss petitioners was
already manifest when it adopted a procedure provided for by law, by shifting the
burden of proof to the petitioners, knowing fully well that the teachers would boycott
the proceedings thereby giving them cause to render judgment ex-parte.
The DISMISSAL therefore of the teachers is not justified, it being arbitrary and
violative of the teachers right to due process. Due process must be observed in
dismissing the teachers because it affects not only their position but also their means
of livelihood.

WHEREFORE, premises considered, the present petition is hereby GRANTED and


all the questioned orders/decisions of the respondents are hereby declared NULL and
VOID and are hereby SET ASIDE.
The reinstatement of all the petitioners to their former positions without loss of
seniority and promotional rights is hereby ORDERED.
The payment, if any, of all the petitioners back salaries, allowances, bonuses, and
other benefits and emoluments which may have accrued to them during the entire
period of their preventive suspension and/or dismissal from the service is hereby
likewise ORDERED.
SO ORDERED.

[5]

From this adverse decision of the trial court, former DECS Secretary Isidro
Cario filed an appeal with the Court of Appeals raising the following grounds:
I. The trial court seriously erred in declaring appellants as in default.
II. The trial court seriously erred in not ordering the proper substitution of parties.
III. The trial court seriously erred in holding that R.A. No. 4670, otherwise known as
Magna Carta for Public School Teachers, should govern the conduct of the
investigations conducted.
IV. The trial court seriously erred in ruling that the dismissal of the teachers are without
due process.[6]

As mentioned earlier, the Court of Appeals affirmed the RTC decision,


holding in the main that private respondents were denied due process in the
administrative proceedings instituted against them.
Hence, this petition for review.

[7]

The Issues
Before us, petitioners raise the following issues:
I

Whether or not Respondent Court of Appeals committed grave abuse of


discretion in holding in effect that private respondents were denied due
process of law.
II

Whether or not Respondent Court of Appeals seriously erred and


committed grave abuse of discretion in applying strictly the provision of R.A.
No. 4670 in the composition of the investigating committee.
III

Whether or not Respondent Court of Appeals committed grave abuse of


discretion in dismissing the appeal and in affirming the trial courts decision.
[8]

These issues, all closely related, boil down to a single question: whether
private respondents were denied due process of law.
The Courts Ruling
The petition is bereft of merit. We agree with the Court of Appeals that
private respondents were denied due process of law.
Denial of Due Process
At the outset, we must stress that we are tasked only to determine
whether or not due process of law was observed in the administrative
proceedings against herein private respondents. We note the Solicitor
Generals extensive disquisition that government employees do not have the
right to strike. On this point, the Court, in the case of Bangalisan vs. Court of
Appeals, has recently pronounced, through Mr. Justice Florenz D. Regalado:
[9]

[10]

It is the settled rule in this jurisdiction that employees in the public service may not
engage in strikes. While the Constitution recognizes the right of government
employees to organize, they are prohibited from staging strikes, demonstrations mass
leaves, walk-outs and other forms of mass action which will result in temporary
stoppage or disruption of public services. The right of government employees to
organize is limited only to the formation of unions or associations, without including
the right to strike.
More recently, in Jacinto vs. Court of Appeals, the Court explained the
schoolteachers right to peaceful assembly vis-a-vis their right to mass protest:
[11]

Moreover, the petitioners here, except Merlinda Jacinto, were not penalized for the
exercise of their right to assemble peacefully and to petition the government for a
redress of grievances. Rather, the Civil Service Commission found them guilty of
conduct prejudicial to the best interest of the service for having absented themselves

without proper authority, from their schools during regular school days, in order to
participate in the mass protest, their absence ineluctably resulting in the non-holding
of classes and in the deprivation of students of education, for which they were
responsible. Had petitioners availed themselves of their free time -- recess, after
classes, weekends or holidays -- to dramatize their grievances and to dialogue with the
proper authorities within the bounds of law, no one -- not the DECS, the CSC or even
this Court -- could have held them liable for the valid exercise of their constitutionally
guaranteed rights. As it was, the temporary stoppage of classes resulting from their
activity necessarily disrupted public services, the very evil sought to be forestalled by
the prohibition against strikes by government workers. Their act by its nature was
enjoined by the Civil Service law, rules and regulations, for which they must,
therefore, be made answerable.
[12]

In the present case, however, the issue is not whether the private
respondents engaged in any prohibited activity which may warrant the
imposition of disciplinary sanctions against them as a result of administrative
proceedings. As already observed, the resolution of this case revolves
around the question of due process of law, not on the right of government
workers to strike. The issue is not whether private respondents may be
punished for engaging in a prohibited action but whether, in the course of the
investigation of the alleged proscribed activity, their right to due process has
been violated. In short, before they can be investigated and meted out any
penalty, due process must first be observed.
In administrative proceedings, due process has been recognized to
include the following: (1) the right to actual or constructive notice of the
institution of proceedings which may affect a respondents legal rights; (2) a
real opportunity to be heard personally or with the assistance of counsel, to
present witnesses and evidence in ones favor, and to defend ones
rights; (3) a tribunal vested with competent jurisdiction and so constituted as
to afford a person charged administratively a reasonable guarantee of honesty
as well as impartiality; and (4) a finding by said tribunal which
is supported by substantial evidence submitted for consideration during the
hearing or contained in the records or made known to the parties affected.
[13]

The legislature enacted a special law, RA 4670 known as the Magna


Carta for Public School Teachers, which specifically covers administrative
proceedings involving public schoolteachers. Section 9 of said law expressly
provides that the committee to hear public schoolteachers administrative
cases should be composed of the school superintendent of the division as
chairman, a representative of the local or any existing provincial or national

teachers organization and a supervisor of the division. The pertinent


provisions of RA 4670 read:
Sec. 8.
Safeguards in Disciplinary Procedure. Every teacher shall enjoy
equitable safeguards at each stage of any disciplinary procedure and shall have:
a.

the right to be informed, in writing, of the charges;

b.

the right to full access to the evidence in the case;

c.
the right to defend himself and to be defended by a representative of his choice
and/or by his organization, adequate time being given to the teacher for the
preparation of his defense; and
c.
the right to appeal to clearly designated authorities. No publicity shall be given
to any disciplinary action being taken against a teacher during the pendency of his
case.
Sec. 9.
Administrative Charges. Administrative charges against a teacher shall
be heard initially by a committee composed of the corresponding School
Superintendent of the Division or a duly authorized representative who would at least
have the rank of a division supervisor, where the teacher belongs, as chairman, a
representative of the local or, in its absence, any existing provincial or national
teachers organization and a supervisor of the Division, the last two to be designated
by the Director of Public Schools. The committee shall submit its findings, and
recommendations to the Director of Public Schools within thirty days from the
termination of the hearings: Provided, however, That where the school superintendent
is the complainant or an interested party, all the members of the committee shall be
appointed by the Secretary of Education.
The foregoing provisions implement the Declaration of Policy of the
statute; that is, to promote the terms of employment and career prospects of
schoolteachers.
In the present case, the various committees formed by DECS to hear the
administrative charges against private respondents did not include a
representative of the local or, in its absence, any existing provincial or national
teachers organization as required by Section 9 of RA 4670. Accordingly,
these committees were deemed to have no competent jurisdiction. Thus, all
proceedings undertaken by them were necessarily void. They could not
provide any basis for the suspension or dismissal of private respondents. The
inclusion of a representative of a teachers organization in these committees

was indispensable to ensure an impartial tribunal. It was this requirement that


would have given substance and meaning to the right to be heard. Indeed, in
any proceeding, the essence of procedural due process is embodied in the
basic requirement of notice and a real opportunity to be heard.
[14]

Petitioners argue that the DECS complied with Section 9 of RA 4670,


because all the teachers who were members of the various committees are
members of either the Quezon City Secondary Teachers Federation or the
Quezon City Elementary Teachers Federation and are deemed to be the
representatives of a teachers organization as required by Section 9 of RA
4670.
[15]

We disagree. Mere membership of said teachers in their respective


teachers organizations does not ipso facto make them authorized
representatives of such organizations as contemplated by Section 9 of RA
4670. Under this section, the teachers organization possesses the right to
indicate its choice of representative to be included by the DECS in the
investigating committee. Such right to designate cannot be usurped by the
secretary of education or the director of public schools or their underlings. In
the instant case, there is no dispute that none of the teachers appointed by
the DECS as members of its investigating committee was ever designated or
authorized by a teachers organization as its representative in said committee.
Contrary to petitioners asseverations, RA 4670 is applicable to this
case. It has not been expressly repealed by the general law PD 807, which
was enacted later, nor has it been shown to be inconsistent with the latter. It is
a fundamental rule of statutory construction that repeals by implication are
not favored. An implied repeal will not be allowed unless it is convincingly and
unambiguously demonstrated that the two laws are so clearly repugnant and
patently inconsistent that they cannot co-exist. This is based on the rationale
that the will of the legislature cannot be overturned by the judicial function of
construction and interpretation. Courts cannot take the place of Congress in
repealing statutes. Their function is to try to harmonize, as much as possible,
seeming conflicts in the laws and resolve doubts in favor of their validity and
co-existence. Thus, a subsequent general law does not repeal a prior
special law, unless the intent to repeal or alter is manifest, although the terms
of the general law are broad enough to include the cases embraced in the
special law.
[16]

[17]

[18]

The aforementioned Section 9 of RA 4670, therefore, reflects the


legislative intent to impose a standard and a separate set of procedural
requirements in connection with administrative proceedings involving public
schoolteachers. Clearly, private respondents right to due process of law

requires compliance with these requirements laid down by RA 4670. Verba


legis non est recedendum.
Hence, Respondent Court of Appeals, through Mr. Justice Vicente V.
Mendoza who is now a member of this Court, perceptively and correctly
stated:
Respondent-appellants argue that the Magna Carta has been superseded by the Civil
Service Decree (P.D. No. 807) and that pursuant to the latter law the head of a
department, like the DECS secretary, or a regional director, like the respondentappellant Nilo Rosas, can file administrative charges against a subordinate, investigate
him and take disciplinary action against him if warranted by his findings. Respondentappellants cite in support of their argument the following provisions of the Civil
Service Decree (P.D. No. 807):
Sec. 37. Disciplinary Jurisdiction. -xxx xxx

xxx

b)
The heads of departments, agencies and instrumentalities xxx shall have
jurisdiction to investigate and decide matters involving disciplinary action against
officers and employees under their jurisdiction xxx .
Sec. 38,. Procedure in Administrative Cases Against Non-Presidential Appointees. a)
Administrative Proceedings may be commenced against a subordinate officer
or the employee by the head of department or officer of equivalent rank, or head of
local government, or chiefs of agencies, or regional directors, or upon sworn, written
complaint of any other persons.
There is really no repugnance between the Civil Service Decree and the Magna Carta
for Public School Teachers. Although the Civil Service Decree gives the head of
department or the regional director jurisdiction to investigate and decide disciplinary
matters, the fact is that such power is exercised through committees. In cases
involving public school teachers, the Magna Carta provides that the committee be
constituted as follows:
Sec. 9. Administrative Charges. - Administrative charges against a teacher shall be
heard initially by a committee composed of the corresponding School Superintendent
of the Division or a duly authorized representative who would at least have the rank of
a division supervisor, where the teacher belongs, as chairman, a representative of the
local or, in its absence, any existing provincial or national teachers organization and a
supervisor of the Division, the last two to be designated by the Director of Public

Schools. The committee shall submit its findings, and recommendations to the
Director of Public Schools within thirty days from the termination of the hearings:
Provided, however, that where the school superintendent is the complainant or an
interested party, all the members of the committee shall be appointed by the Secretary
of Education.
Indeed, in the case at bar, neither the DECS [s]ecretary nor the DECS-NCR regional
director personally conducted the investigation but entrusted it to a committee
composed of a division supervisor, secondary and elementary school teachers, and
consultants. But there was no representative of a teachers organization. This is a
serious flaw in the composition of the committee because the provision for the
representation of a teachers organization is intended by law for the protection of the
rights of teachers facing administrative charges.
There is thus nothing in the Magna Carta that is in any way inconsistent with the Civil
Service Decree insofar as procedures for investigation is concerned. To the contrary,
the Civil Service Decree, [S]ec. 38(b) affirms the Magna Carta by providing that the
respondent in an administrative case may ask for a formal investigation, which was
what the teachers did in this case by questioning the absence of a representative of a
teachers organization in the investigating committee.
The administrative committee considered the teachers to have waived their right to a
hearing after the latters counsel walked out of the preliminary hearing. The
committee should not have made such a ruling because the walk out was staged in
protest against the procedures of the committee and its refusal to give the teachers
counsel a copy of the guidelines. The committee concluded its investigation and
ordered the dismissal of the teachers without giving the teachers the right to full
access of the evidence against them and the opportunity to defend themselves. Its
predisposition to find petitioner-appellees guilty of the charges was in fact noted by
the Supreme Court when in its resolution in G.R. No. 101943 (Rosario Septimo v.
Judge Martin Villarama, Jr.) it stated:
The facts and issues in this case are similar to the facts and issues in Hon. Isidro
Cario, et al. v. Hon. Carlos C. Ofilada, et al. G.R. No. 100206, August 22, 1961.
As in the Cario v. Ofilada case, the officials of the Department of Culture and
Education are predisposed to summarily hold the petitioners guilty of the charges
against them. In fact, in this case Secretary Cario, without awaiting formal
administrative procedures and on the basis of reports and implied admissions found
the petitioners guilty as charged and dismissed them from the service in separate
decisions dated May 16, 1991 and August 6, 1991. The teachers went to court. The
Court dismissed the case.
[19]

Furthermore, this Court sees no valid reason to disregard the factual


findings and conclusions of the Court of Appeals. It is not our function to
assess and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties particularly where, such as here, the
findings of both the trial court and the appellate court coincide.
[20]

It is as clear as day to us that the Court of Appeals committed no


reversible error in affirming the trial courts decision setting aside the
questioned orders of petitioners; and ordering the unqualified reinstatement of
private respondents and the payment to them of salaries, allowances,
bonuses and other benefits that accrued to their benefit during the entire
duration of their suspension or dismissal. Because the administrative
proceedings involved in this case are void, no delinquency or misconduct may
be imputed to private respondents. Moreover, the suspension or dismissal
meted on them is baseless. Private respondents should, as a consequence,
be reinstated and awarded all monetary benefits that may have accrued to
them during the period of their unjustified suspension or dismissal. This
Court will never countenance a denial of the fundamental right to due process,
which is a cornerstone of our legal system.
[21]

[22]

[23]

WHEREFORE, premises considered, the petition is hereby DENIED for its


utter failure to show any reversible error on the part of the Court of
Appeals. The assailed Decision is thus AFFIRMED.
SO ORDERED.
Narvasa, C.J., (Chairman), Romero, Melo, and Francisco, JJ., concur.

G.R. No. 89687 September 26, 1990


MARIA B. LUPO, petitioner,
vs
ADMINISTRATIVE ACTION BOARD (AAB) (Department of Transportation &
Communications Republic of the Philippines) and JUSTICE ONOFRE A.
VILLALUZ, respondents.
Baga, Castronuevo, Balitaan & Associates for petitioner.

PARAS, J.:
In this petition for prohibition, petitioner seeks the issuance of an order or writ of prohibition
which would direct public respondents Administrative Action Board and Chairman Onofre A.
Villaluz to permanently desist from assuming jurisdiction over Adm. Case No. AAB-034-88
until the same is finally disposed of by the Telecoms Office, Region V at Legaspi City and to
refrain from issuing orders setting the aforecited case for hearing.
Petitioner substantially assails the Resolution dated September 30, 1988 of then Secretary
Rainerio O. Reyes of the Department of Transportation and Communications which
suspended her for one year and disqualified her for promotion for a period of one year and
also, the Order of July 5, 1989 of Chairman Onofre A. Villaluz of the Administrative Action
Board of said department which set Adm. Case No. AAB-034-88 for trial.
The prefatory facts are:
On November 5, 1987, Fructuoso B. Arroyo, OIC/CDO, Message Center and then CDO of
Telecom Office stationed at Buhi, Camarines Sur, filed a complaint for Dishonesty Thru
Falsification (Multiple) of Official Documents against Maria B. Lupo, herein petitioner, as
Chief of Personnel Section, Telecom Office, Region V at Legaspi City. The complaint was
based on the alleged exclusion of several names from the Certification (on the list of
employees) submitted by petitioner in compliance with a Confidential Memorandum of
Director Claro Morante.
The aforesaid complaint was actually triggered off by the inquiry of Ignacio B. Arroyo,
brother of complainant Fructuoso B. Arroyo, into the alleged illegal termination of the
former's niece, Nenita Arroyo Noceda, as a daily wage clerk at Buhi Telecom Exchange in
Camarines Sur, in violation of a contract previously entered into between a certain Gloria D.
Palermo, lot donor and former Bureau Director Ceferino S. Carreon, donee of the lot. The
lot is located at Sta. Clara, Buhi on which the Telecom Office was to be constructed. This
inquiry of Ignacio B. Arroyo was dismissed for lack of merit on September 16, 1987.
It appears that the basis for the complaint of Fructuoso Arroyo from whom Ignacio sought
assistance was petitioner's exclusion of certain names of newly hired employees in Region
V who appeared related to certain ranking officials of the region, for the purpose of keeping
under wraps the appointment of said employees from Ignacio Arroyo who had previously

complained of the alleged illegal termination of his niece Nenita A. Noceda. Petitioner had
to falsify the list which she submitted in compliance with Regional Director Morante's
Confidential Memorandum to the alleged prejudice of Noceda and for the purpose of
protecting her future interest in the sense that those excluded (who should have been
included) were close relatives of ranking officials of the Telecommunications Office of
Region V. Telecom Investigator Florencio Calapano, acting on the unverified complaint of
Fructuoso Arroyo, conducted an informal fact-finding inquiry and came out with a
Memorandum recommending that petitioner be sternly warned that a repetition of a similar
offense in the future would be dealt with more drastically and that the case should be
considered closed.
Based solely on the aforesaid Memorandum, the Secretary of the Department of
Transportation and Communications handed down a Resolution on September 30, 1988
finding petitioner "guilty as charged" and suspending her for one year and disqualify her for
promotion for a period of one year. Petitioner moved for reconsideration of the resolution
but the same was denied. She thus appealed the resolution and order of denial of the
motion for reconsideration to the Civil Service Commission for review, anchoring her appeal
on lack of due process in the proceedings.
On March 2, 1989 the Civil Service Commission, thru its Merit Systems Board, issued the
Order setting aside the resolution of the Department of Transportation and Communications
and remanding the case to the Telecom Office of Region V for further investigation to
conform with the procedural requirements of due process.
Instead of complying with the above order, respondent Chairman Villaluz of the AAB issued
the Order of July 5, 1989 setting the case for trial on August 3, 1989.
On August 2, 1989, petitioner filed a Manifestation and Motion informing respondent Villaluz
that no formal charge had been instituted by the Telecommunications Office against her and
respondents, therefore, had no jurisdiction over the case. Respondents denied said
manifestation and motion for lack of merit in the Order of August 7, 1989 and again set the
case for hearing on August 23, 1989.
Hence, this petition.
Petitioner avers that respondent AAB never acquired jurisdiction over Adm. Case No. AAB034-88 because of the absence of a formal charge against her and that the proceedings
conducted by Regional Investigator Florencio Calapano was a mere fact-finding inquiry.
Respondent Chairman of the AAB however, contends that the Order of the Merit Systems
Board of the Civil Service Commission was rendered without lawful authority since
petitioner's appeal to said Board was filed when the assailed resolution had already become
final and executory; that the Board, not having acquired jurisdiction to entertain the appeal
for having been filed beyond the reglementary period could not have legally rendered its
decision in the said administrative case. Likewise, respondents claim that Regional Office
No. V could no longer take cognizance of the case as per order of the Merit Systems Board
for the reason that the decision had already become final and executory.

Complaints against employees, like petitioner herein, who belong to the Civil Service Career
System are still governed by P.D. No. 807. This mandate of P.D. No. 807 has been
recognized and implemented by respondent Administrative Action Board when it declared in
Office Order No. 88-318 dated July 1, 1988 that the Board shall observe the pertinent civil
service rules and policies designed to expedite action on cases referred to it. (Emphasis
supplied)
The pertinent provisions of the aforecited Civil Service Law read as follows:
SECTION 37. Disciplinary Jurisdiction. (a) The Commission shall decide
upon appeal all administrative disciplinary cases involving the imposition of a
penalty of suspension for more than thirty days, or fine in an amount,
exceeding thirty days' salary, demotion in rank or salary or transfer, removal
or dismissal from office. A complaint may be filed directly with the
Commission by a private citizen against a government official or employee in
which case it may hear any department or agency or and decide the case or it
may deputize official or group of officials to conduct the investigation. The
results of the investigation shall be submitted to the Commission with
recommendation as to the penalty to be imposed or other action to be taken.
(b) The heads of departments, agencies and instrumentalities, provinces,
cities and municipalities shall have jurisdiction to investigate and decide
matters involving disciplinary action against officers and employees under
their jurisdiction. Their decisions shall be final in case the penalty imposed is
suspension for not more than thirty days or fine in an amount not exceeding
thirty days' salary. In case the decision rendered by a bureau or office head is
appealable to the Commission, the same may be initially appealed to the
department and finally to the Commission and pending appeal, the same
shall be executory except when the penalty is removal, in which case the
same shall be executory only after confirmation by the department head.
(c) An investigation may be entrusted to regional director or similar officials
who shall make the necessary report and recommendation to the chief of
bureau or office or department within the period specified in Paragraph (d) of
the following Section.
(d) An appeal shall not stop the decision from being executory, and in case
the penalty is suspension or removal, the respondent shall be considered as
having been under preventive suspension during the pendency of the appeal
in the event he wins an appeal.
SEC. 38. Procedure in Administrative Cases Against Non-Presidential
Appointees. a) Administrative proceedings may be commenced against a
subordinate officer or employee by the head of department or office of
equivalent rank, or head of local government, or chiefs of agencies, or
regional directors, or upon sworn, written complaint of any other persons.

(b) In the case of a complaint filed by any other persons, the complainant
shall submit sworn statements covering his testimony and those of his
witnesses together with his documentary evidence. If on the basis of such
papers a prima facie case is found not to exist, the disciplining authority shall
dismiss the case. If a prima facie case exist, he shall notify the respondent in
writing, of the charges against the latter, to which shall be attached copies of
the complaint, sworn statements and other documents submitted, and the
respondent shall be allowed not less than seventy-two hours after receipt of
the complaint to answer the charges in writing under oath, together with
supporting sworn statements and documents, in which he shall indicate
whether or not he elects a formal investigation if his answer is not considered
satisfactory. If the answer is found satisfactory, the disciplining authority shall
dismiss the case.
(c) Although a respondent does not request a formal investigation, one shall
nevertheless be conducted when from the allegations of the complaint and
the answer of the respondent, including the supporting documents, the merits
of the case cannot be decided judiciously without conducting such an
investigation. . . .
Petitioner's contentions appear meritorious.
It should be noted that under Section 37 (b) as aforequoted, the decisions of heads of
departments become final only in cases where the penalty imposed is suspension for not
more than thirty (30) days or fine in an amount not exceeding thirty (30) days' salary. In the
case, therefore, of petitioner who had been made to suffer the penalty of suspension for one
(1) year, such penalty should not have been implemented without the appeal to the Civil
Service Commission for proper review.
Notably, paragraph (a) of the above Section explicitly provides that the Commission shall
decide upon appeal all administrative disciplinary cases involving the imposition of a penalty
of suspension for more than 30 days, or fine in an amount exceeding 30 days' salary.
Clearly, the enforcement of the penalty imposed upon petitioner under the resolution of the
Secretary of the Department of Transportation and Communications was premature.
From the very start, the basis upon which this case was investigated had been defective
and irregular. For, the letter-complaint of Fructuoso Arroyo was not verified and yet, the
same was haphazardly made the basis of the informal inquiry. It should be stressed that
par. (a) of Sec. 38 mandates that administrative proceedings may be commenced against
an employee by the head of the department or office of equivalent rank or upon sworn
written complaint of any other person. It should also be noted that under paragraph (b) of
said Section, a respondent is given the option to elect a formal investigation of the charge
against him if his answer is not found satisfactory. In the case of petitioner, it appears that
when her answer to the unverified complaint was found unsatisfactory, she was never given
a chance to decide whether or not to submit herself to a formal investigation.
The Memorandum of Telecom Investigator Calapano to the Regional Director is merely
recommendatory since it was only the outcome of a fact finding investigation based on the

unverified complaint. Note that the informal investigation was only an inquiry into the alleged
dishonest acts of petitioner in which case, the Memorandum could not be made as the basis
for any final resolution of the case. The legal and proper procedure should have been for
the Regional Director of Region V, the alter ego of the department secretary to initiate the
formal complaint on the basis of the results of the inquiry of the Telecom Investigator.
Instead of observing the mandatory rules on formal investigations as prescibed by PD No.
807, the DOTC Secretary cut corners and apparently railroaded this case by rendering the
assailed resolution.
Even the Telecom Investigator did not know what he was doing. He exceeded his authority
by imposing in the Memorandum a penalty in the form of a warning to petitioner. His job
was limited to an inquiry into the facts and a determination on whether or not a prima
facie case existed. His findings were merely preparatory to the filing of the necessary formal
administrative case by the Regional Director.
It should be noted with alarm that the Telecom Director who was supposed to review the
findings of the Telecom Investigator merely affixed his approval within the Memorandum (p.
7 of Memorandum), thus obviously indicating that he never reviewed the merits of the case.
It appears highly irregular that Asst. Secretary Sibal of the DOTC, in his letter dated August
2, 1989 to Chairman Villaluz of the Administrative Action Board, informed the latter that his
Office did not file any administrative complaint against petitioner nor had it filed a formal
charge against her for whatever administrative offense. Note that even with this letter,
Chairman Villaluz proceeded to order the hearing of this case. This is a clear indication that
for lack of coordination among the DOTC authorities and the Regional Office, the
mandatory requirements of due process to which petitioner was entitled were irreverently
ignored.
Thus, in the case of Jose Rizal College v. National Labor Relations Commission (G.R. No.
65482, December 1, 1987) this Court reiterated the "cardinal primary" requirements of due
process in administrative proceedings and these are: (1) the right to a hearing which
includes, the right to present one's case and submit evidence in support thereof; (2) the
tribunal must consider the evidence presented; (3) the decision must have something to
support itself, (4) the evidence must be substantial, and substantial evidence means such
evidence as a reasonable mind must accept as adequate to support a conclusion; (5) the
decision must be based on the evidence presented at the hearing, or at least contained in
the record and disclosed to the parties affected; (6) the tribunal or body or any of its judges
must act on its or his own independent consideration of the law and facts of the controversy,
and not simply accept the views of a subordinate; (7) the board or body should in all
controversial questions, render its decision in such manner that the parties to the
proceeding can know the various issues involved, and the reason for the decision rendered.
(Emphasis supplied)
Evidently, respondents denied petitioner her right to a formal and full-blown administrative
proceedings which she never had.
WHEREFORE, the Resolution dated September 30, 1988 of the Secretary of the
Department of Transportation and Communications and the proceedings before the

Administrative Action Board are hereby declared NULL and VOID. The Secretary of the
DOTC is hereby directed to restore to petitioner's record of service the period which she
served under suspension and to delete from her personnel file the period within which she
was disqualified for promotion.
SO ORDERED.
Melencio-Herrera (Chairman) and Regalado, JJ., concur.
Padilla, J., took no part.
Sarmiento, J., is on leave.

G.R. No. 93868 February 19, 1991


ARDELIZA MEDENILLA, petitioner,
vs.
CIVIL SERVICE COMMISSION, AMPARO DELLOSA, ROSALINDA JURIA and MARITA
BURDEOS,respondents.

GUTIERREZ, JR., J.:p


This is a petition seeking the annulment of the resolutions issued by the Civil Service
Commission which disapproved the appointment of the petitioner to the position of
Supervising Human Manpower Development Officer.
Petitioner Ardeliza Medenilla was a contractual employee of the Department of Public
Works and Highways (DPWH) occupying the position of Public Relations Officer II.
In 1987, Medenilla was detailed as Technical Assistant in the Office of the Assistant
Secretary for Administration and Manpower Management.
Pursuant to Executive Order No. 124 dated January 30, 1987, a reorganization ensued
within the DPWH and all the positions therein were abolished. A revised staffing pattern
together with the guidelines on the selection and placement of personnel was issued.
Included in the revised staffing pattern is the contested position of Supervising Human
Resource Development Officer.
On January 2, 1989, the petitioner was appointed to the disputed position.
On January 27, 1989, respondents Amparo Dellosa, Rosalinda Juria and Marita Burdeos
together with Matilde Angeles, Catalina Espinas, Alicia Nercelles and Ramon Racela, all of
whom are employees in the Human Resource Training and Material Development Division,
Administrative and Manpower Management Service of the DPWH, jointly lodged a protest
before the DPWH task force on reorganization contesting the appointment of the petitioner
to the position.
The protestants alleged that since they are next-in-rank employees, one of them should
have been appointed to the said position.
On August 2, 1989, the task force on reorganization dismissed the protest. The dispositive
portion of its decision reads as follows:
Premises considered, the Task Force on Reorganization Appeals finds the
instant protest of Matilde Angeles, et al. without merit and hereby
recommends to the Honorable Secretary that the appointment of Ardeliza
Medenilla to the contested position of Supervising Human Resource
Development Officer be upheld. (Rollo, p. 26)

Not satisfied, the private respondents appealed the decision to the Civil Service
Commission. The Commission found:
On the onset, it appears that protestee Medenilla does not possess the
required qualifications for the position. . . . Moreover, her eligibility is PD 907,
being a cum laude graduate. Let it be considered appropriate only for
appointment to "second level positions" which require the application of
knowledge and skills within the appointee's field of study. (Rollo, p. 28-29)
xxx xxx xxx
Further, it also appears that Medenilla is a contractual employee assigned or
detailed with the Office of the Assistant Secretary for Administrations and
Manpower Management (the appointing authority) as Public Relations Officer
II, while protestants are all permanent employee of the Division (Human
Resources Planning) where the vancancy exist.
Indeed, RA 6656 does not preclude the appointment of contractuals to a new
staffing pattern, however, in the presence and availability of qualified
permanent next-in-rank employees in the organization, the latter has to be
preferred, unless a contractual employee possesses superior qualifications
that could justify her appointment. However, in this case, we see no superior
qualifications or any special reasons for preferring Medenilla over the
protestants. (Rollo, p. 29)
We find merit in the protest. While as earlier mentioned, the appointing
authority is given the wide latitude of discretion, to sustain the appointment of
Medenilla may give the appointing power unnecessary opportunities to act
capriciously and thus thwart the natural and reasonable expectation of the
officer next-in-rank to any vacant position, to be promoted to it As held
in Millares v. Subido, G.R. No. L-23281, promulgated August 10, 1967, the
Supreme Court held:
We, therefore, hold that in the event of there occurring a vacancy, the officer
next-in-rank must, as far as practicable and as the appointing authority sees it
in his best judgment and estimation, be promoted . . . and that it is only in
cases of promotion, where an employee other than the ranking one is
promoted, is the appointing power under duty to give "special reason or
reasons" for his action . . . .
Again, the special reasons advanced by the appointing authority in this case
is (sic) not enough. Considering further that appointee is not meeting the
minimum qualification standards set by his own office, she could not be said
to possess far superior qualification than those permanent next-in-rank
employees of the Department. (Rollo, pp. 30-31)
Thus, on February 28, 1990, the Commission promulgated the assailed resolution, the
dispositive portion of which reads:

WHEREFORE, foregoing premises considered, the Commission resolved to


disapprove the promotional appointment of Ardeliza Medenilla to the position
of Supervising Human Manpower Development Officer. Accordingly, the
appointing authority may choose from among protestants Amparo Dellosa,
Marita Burdeos and Rosalinda Juria who to promote to the said position. The
Civil Service Field Office is directed to implement this resolution accordingly."
(Rollo, p. 31)
The petitioner on March 23, 1990 filed a motion for reconsideration of the resolution. On
May 30, 1990 a supplement to the Motion for Reconsideration was also filed. However, prior
thereto, the Commission on May 23, 1990 denied the petitioner's motion for
reconsideration. The pertinent portions of the denial are:
xxx xxx xxx
2. Experience of Medenilla
Medenilla alleges that the Commission failed to appreciate her 3 years and 8
months of experience directly relevant to Human Resource Development.
Looking more deeply into her experience as reflected in her CS Form 212, we
could not distinguish her experience directly relevant to the field of Human
Resource Development. The certification of a certain Elvira H. Villania stated
her duties in the Guthrie-Jensen Consultants, Inc. in her one (1) year and (7)
months as Research and Publication Officer of working included "providing
research assistance to our Management Consultants in drawing up
performance appraisal system, merit promotion system and conducting
development for our client-companies." Notwithstanding, assuming that her 1
year and 7 months experience in the company is relevant, yet, compared to
the experience of the protestants in the field of Human Resource
Development, said experience is obviously outweighed. There is no dispute
that Medenilla has experience as a Researcher but said experience is
basically on the field of journalism and information. (Rollo, p. 35)
xxx xxx xxx
4. Education background and eligibility of Medenilla.
. . . Notwithstanding, we are inclined to reconsider our position that the
educational background is not relevant. AB may therefore be taken as a
relevant degree for purposes of qualifying to the position. As such, her PD
907 eligibility may be considered appropriate." (Rollo, p. 37)
xxx xxx xxx
Granting for the sake of argument that the DPWH adhered to its rules relative
to reorganization, is at this point, no longer material and controlling. What is
now the issue is whether Medenilla indeed possesses superior qualifications
over any of the protestants. (Rollo, p. 38)

xxx xxx xxx


The edge of 1.30% of Medenilla over Dellosa cannot be considered by this
Commission significant enough to presume and declare that Medenilla
possesses far superior qualifications over the protestant and to warrant the
appointment of a contractual employee over a permanent employee of the
Department. (Rollo, p. 39)
Hence, this petition.
The petitioner interposes the following grounds:
I
The resolutions were issued by the Respondent Commission, without giving
notice to the petitioner of the existence of an appeal filed before the CSC,
thereby denying the petitioner due process of law.
II
The Civil Service Commission committed grave abuse of discretion
amounting to lack of jurisdiction in disapproving the appointment of the
petitioner. Its function, is limited only to determine whether the appointee
possesses the appropriate civil service eligibility and not whether another is
more qualified than the petitioner.
Without giving due course to the petition, the Court on July 10, 1990, issued a temporary
restraining order enjoining the Commission from implementing the assailed resolutions.
Anent the first ground, the petitioner contends that she was not notified by the Civil Service
Commission of the existence of the appeal before it. The resolutions, therefore, were
allegedly issued in violation of the petitioner's constitutionally guaranteed due process of
law.
The public respondent, on the other hand, advances the argument that what due process
abhors is not lack of previous notice but the absolute lack of opportunity to be heard. Since
the petitioner filed a motion for reconsideration, she cannot now complain that she was
deprived of due process.
The petitioner's first contention is without merit.
"Due process of law implies the right of the person affected thereby to be present before the
tribunal which pronounces judgment upon the question of life, liberty, and property in its
most comprehensive sense; to be heard, by testimony or otherwise, and to have the right of
controverting, by proof, every material fact which bears on the question of the light in the
matter involved." (Black's Law Dictionary, 4th Edition, p. 590)

The essence of due process is the opportunity to be heard. The presence of a party is not
always the cornerstone of due process. (Asprec v. Itchon, 16 SCRA 921 [1966]; Auyong
Hian v. Court of Tax Appeals, 59 SCRA 110 [1974]; Assistant Executive Secretary for Legal
Affairs of the Office of the President of the Philippines v. Court of Appeals, G.R. No. 76761,
January 9, 1989). What the law prohibits is not the absence of previous notice but the
absolute absence thereof and lack of opportunity to be heard. (Tajonero v. Lamarosa, 110
SCRA 438 [1981])
In the case at bar, any defect was cured by the filing of a motion for reconsideration.
(see De Leon v. Comelec, 129 SCRA 117 [1984])
The second contention of the petitioner alleges that the Commission acted with grave abuse
of discretion in disapproving her appointment.
The public respondent views it otherwise. The Civil Service Commission asserts that being
the Central Personnel Agency of the Government, it is the final arbiter on civil service
matters.
The Commission alleges, that, pursuant to RA 6656, the Commission is authorized to act on
appeals by aggrieved employees in the course of reorganization and, therefore, it has the
power to reverse or modify any decision brought before it on appeal.
The petitioner's second contention is impressed with merit.
The qualification standards for the contested position are as follows:
EDUCATION EXPERIENCE CIVIL SERVICE
REQUIREMENT REQUIREMENT ELIGIBILITY
Bachelor's degree 2 years of Manpower-Youth
relevant to the job experience in Development
with at least human resource Officer
9 units in post development Manpower
Development
Officer
Relevant RA
1080
Relevant

Second Level
Eligibility
Career Service
(Professional)
First Grade
Supervisor
It is not disputed that the petitioner possesses the appropriate civil service eligibility and
requisite educational background. The public respondent itself, in its resolution dated May
23, 1990, considered the petitioner's PD No. 907 eligibility appropriate for the position.
(Rollo, p. 37)
The controversy then centers on the experience of the petitioner.
The Commission contends that the experience of Medenilla is basically in the field of
journalism and not in Human Resource Development. The Commission also alleges that
since the petitioner is merely a contractual employee, in the absence of superior
qualifications, the private respondents must be preferred not only for the reason that they
are permanent career service employees but most especially because they are next-in-rank
to the disputed position.
In support of its argument, the Commission cited in the disputed resolution, the case of
Millares v. Subido, 20 SCRA 954 where this Court held:
. . . A vacant position shall be filled by promotion of the ranking officer or
employee. And only where, for special reason or reasons of which the
affected officer or employee will be notified, this mode of recruitment on
selection cannot be observed, that the position may be filled by transfer, or
re-employment, or by getting from the certified list of appropriate eligibles, in
that order.
Finally, the public respondent advances the view that, since the Revised Administrative
Code of 1987 now provides that the Commission shall "take appropriate action on all
appointment" its authority, therefore, is no longer limited to the mere approval or
disapproval of appointments submitted to it.
A careful review of the records of the case, will reveal that the petitioner possesses the
requisite experience for the contested position.
The petitioner, not only was a cum laude graduate from the University of the Philippines,
she has also acquired plenty of experience in the field of Human Resource Development, to
wit:

She was rated and ranked number one in the Trainor's Training Program (120
hours) conducted for the DPWH by the Phil-Tao, Inc., a private firm. Ms.
Dellosa was ranked number 7, Mrs. Juria was ranked number 10; Mrs.
Burdeos did not attend the seminar. This training program was undertaken to
strengthen the capabilities of HRD personnel, and to make them more
effective in the discharge of their functions.
She is a recipient of a special commendation, given by Executive Director
Remedios I. Rikken of the National Commission in the Role of Filipino
Woman, for her efficiency and exemplary performance as a facilitator in the
conduct of the workshops during the Second Congress of Women in
Government. (Letter of Ms. Rikken addressed to Sec. Estuar attached as
ANNEX "B".).
She obtained in her on-going MBA studies at the De La Salle University,
which she pursued as an entrance scholar, the highest grade of 4.0,
equivalent to "Excellent" in 2 HRD related subjects Organizational
Management which call for the integration of concepts with concrete
experience.
She participated in the preparation and dissemination of the corporate
planning processes installed and institutionalized in the DPWH. Corporate
Planning was introduced by Secretary Fiorello R. Estuar and is now being
implemented in all government offices as instructed by the President.
She conducted orientation/reorientation courses in DPWH Regional Offices
on (a) Management By Objectives and Results Evaluation, the Performance
Appraisal System, and (b) a specifically designed Performance Appraisal
System for DPWH District Engineers and Division Chiefs, being officially used
by the DPWH.
She participated in the conceptualizing and drafting of the Department Order
on the DPWH Incentives and Awards System, set up in compliance with RA
No. 6713." (Rollo, p. 63)
The public respondent failed to consider that the petitioner, in her one year and seven
months experience with Guthrie-Jensen was engaged in research relating to performance
appraisal systems and merit promotion systems which duties are all related to Human
Resource Development.
Precisely, it was because of her experience with Guthrie-Jensen that the petitioner was
detailed from January 1987 until December 1988 in the Office of the Assistant Secretary for
Administration and Manpower Management, where she was asked to assist in human
resource planning.
The rejoinder filed during the proceedings before the Commission, by the Assistant
Secretary for Administrative and Manpower Management, Carolina Mangawang, is very
revealing. The disputed position requires of the holder of the office, skills in human resource

developmental planning, research and statistics. The petitioner possesses these skills in
more than appropriate quantities.
The argument of the public respondent that the petitioner must possess superior
qualifications in order to be preferred over the private respondents deserves no credit.
It can be readily seen that the petitioner possesses superior qualifications. As earlier stated,
she is a cum laude graduate of the University of the Philippines. She was ranked No. 1 in
the department wide training program handled by a private firm. Two of the respondents
were ranked way below while a third did not even participate. She was commended for
exemplary performance as facilitator during the Second Congress of Women in
Government. She received the highest grades from De la Salle University in her MBA
studies. She helped draft the human resource program for the entire DPWH. Inspire of her
being a new employee, she was assigned to conduct seminars on Performance Appraisal
Systems and on Management by Objectives and Results for the DPWH. She was precisely
drafted from a private firm to assist in human resource planning for the DPWH. Her work is
apparently highly satisfactory as the top administrators of the DPWH not only appointed her
but have asked the respondent Commission to validate the appointment.
The respondents rely on Section 4 of R.A. 6656, which reads:
xxx xxx xxx
Sec. 4. Officers and employees holding permanent appointments shall be
given preference for appointment to new positions in the approved staffing
pattern comparable to their former positions or if there are not enough
comparable positions, to position next lower in rank.
Undoubtedly, old employees should be considered first. But it does not necessarily follow
that they should then automatically be appointed.
The preference given to permanent employees assumes that employees working in a
Department for longer periods have gained not only superior skills but also greater
dedication to the public service. This is not always true and the law, moreover, does not
preclude the infusion of new blood, younger dynamism, or necessary talents into the
government service. If, after considering all the current employees, the Department
Secretary cannot find among them the person he needs to revive a moribund office or to
upgrade second rate performance, there is nothing in the Civil Service Law to prevent him
from reaching out to other Departments or to the private sector provided all his acts are
bona fide for the best interest of the public service and the person chosen has the needed
qualifications. In the present case, there is no indication that the petitioner was chosen for
any other reason except to bring in a talented person with the necessary eligibilities and
qualifications for important assignments in the Department.
The reason behind P.D. No. 907 (which grants civil service eligibility to college graduates
with at least cum laudehonors) of attracting honor graduates into the public service would
be negated if they always have to start as Clerk I and wait for hundreds of deadwood above

them to first go into retirement before they can hope for significant and fulfilling
assignments.
The Commission's reliance on the dictum in Millares v. Subido, 20 SCRA 954 [19671 is
misplaced. The ruling inMillares has already been superseded by later decisions. We have
already held in cases subsequent to Millares that the next-in-rank rule is not absolute; it only
applies in cases of promotion (see Pineda v. Claudio, 28 SCRA 34 [19691). And even in
promotions, it can be disregarded for sound reasons made known to the next-in-rank. The
appointing authority, under the Civil Service Law, is allowed to fill vacancies by promotion,
transfer of present employees, reinstatement, reemployment, and appointment of outsiders
who have appropriate civil service eligibility, not necessarily in that order. (see Pineda v.
Claudio, supra; Luego v. Civil Service Commission, 143 SCRA 327 [1986]) There is no legal
fiat that a vacancy must be filled only by promotion; the appointing authority is given wide
discretion to fill a vacancy from among the several alternatives provided for by law.
In this case, the contested position was created in the course of reorganization. The
position appears to be a new one. The applicability, therefore, of the next-in-rank rule does
not come in clearly. Besides, as earlier stated, said rule is not absolute. There are valid
exceptions.
Granting for the sake of argument that the case involves a promotional appointment, the
next-in-rank rule must give way to the exigencies of the public service. The intent of the Civil
Service Laws not merely to bestow upon permanent employees the advantage arising from
their long employment but most specially, it is to foster a more efficient public service. Any
other factor must, therefore, yield to the demand for an effective government, which
necessarily entails the appointment of competent, qualified and proficient personnel. The
deliberation of this Court in the case of Aguilar v. Nieva, Jr., 40 SCRA 113 [19711 is
illuminating, to wit:
xxx xxx xxx
. . . It is not enough that an aspirant is qualified and eligible or that he is nextin-rank or in line for promotion, albeit by passive prescription. It is just
necessary, in order for public administration to be dynamic and responsive to
the needs of the times, that the local executive be allowed the choice of men
of its confidence, provided they are qualified and eligible, who in his best
estimation are possessed of the requisite reputation, integrity,
knowledgeability, energy and judgment. (Emphasis supplied, p. 121)
The point raised by the public respondent that, pursuant to the Revised Administrative Code
of 1987, it is authorized to revoke appointments, must necessarily fail.
We have already ruled on several occasions that when the appointee is qualified, the Civil
Service Commission has no choice but to attest to the appointment. It is not within its
prerogative to revoke an appointee on the ground that substituting its judgment for that of
the appointing power, another person has better qualifications for the job.

Once the function is discharged, the participation of the Civil Service Commission in the
appointment process ceases. The only purpose of attestation is to determine whether the
appointee possesses the requisite civil service eligibility, no more than that is left for the
Civil Service Commission to do. (see Luego v. CSC, 143 SCRA 327 [1986]; Central Bank of
the Philippines v. CSC, 171 SCRA 744 [1989]; Secretary Oscar Orbos v. CSC, G.R. No.
92561, September 12, 1990; Gaspar v. CSC, G.R. No. 90799, October 18, 1990).
The rationale of this doctrine is that the power of appointment is essentially discretionary.
The discretion to be granted to the appointing authority, if not plenary must at least be
sufficient.
After all, not only is the appointing authority the officer primarily responsible for the
administration of the office but he is also in the best position to determine who among the
prospective appointees can efficiently discharge the functions of the position (see Villegas
v. Subido, 30 SCRA 498 [1969]). As between the Commission which only looks into paper
qualifications and the appointing authority who views not only the listed qualifications but
also the prospective appointees themselves, the work to be accomplished, the objectives of
the Department, etc., the Court sustains the Department Head.
WHEREFORE, the petition is hereby GRANTED. The resolutions issued by the Civil
Service Commission dated February 28, 1990 and May 23, 1990 are SET ASIDE. The
restraining order issued by this Court on July 10, 1990 is made permanent.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ., concur.