G.R. No.

L-54554 March 30, 1981

EUSTAQUIO M. MEDALLA, JR., petitioner,
vs.
THE HONORABLE MARCELINO N. SAYO, Judge of the CFI
of Rizal, Branch XXXIII and HONORATO G. MACKAY, acting
Hospital Administrator of the Caloocan City General
Hospital and the CITY MAYOR OF CALOOCAN, respondents.

MELENCIO-HERRERA, J.:
In this Petition for "Certiorari, mandamus and Prohibition",
seeking the dismissal of Civil Case No. C-7770 below, we have,
as factual background, the following:
Petitioner, Dr. Eustaquio M. Medalla, Jr., is the Chief of Clinics
of the Caloocan City General Hospital, Caloocan City. Private
respondent,, Dr. Honorato G. Mackay was the Resident
Physician thereat.
When the position of Assistant, hospital Administrator of the
Caloocan City General Hospital became vacant upon the
resignation of the incumbent, former Caloocan City Mayor
Alejandro A. Fider designated and subsequently appointed, as
Assistant Hospital Administrator private respondent Dr.
Mackay, a Resident Physician in said hospital. Petitioner, Dr.
Medalla, Jr., protested Dr. Mackay's designation and
subsequent appointment alleging among others that, as Chief
of Clinics, he (Medalla) was next-in-rank. The then Acting City
Mayor Virgilio P. Robles, who succeeded former Mayor, now
Assemblyman Alejandro A. Fider, in his 4th Indorsement dated
September 20, 1978, sustained Mackay's appointment stating:
... as of April 18, 1978 when Dr. Honorato G.
Mackay was promoted to Assistant Hospital
Administrator from his previous position of
Resident Physician, he was next in rank to the
said higher position by reason of his having
completed all academic requirements for the
Certificate in Hospital Administration ...
contrary to the claim of Dr. Eustaquio
Medalla, Jr. in his letter of May 2, 1978.
xxx xxx xxx
Dissatisfied, Medalla elevated his case to the Civil Service
Commission on appeal. On December 29, 1978, the Civil
Service Merit Systems Board issued Resolution No. 49
sustaining Medalla's appeal and revoking Mackay's
appointment as Assistant Hospital Administrator. The pertinent
portion of the aforestated Resolution reads:
A perusal of the records shows that appellant
Medalla is the Chief of Clinics of the
Caloocan City General Hospital; he is a
holder of the Degree of Doctor of Medicine;

he has completed the requirements in

Hospital Administration and is recommended
for the title of Certificate in Hospital
Administration; he is also a candidate of a
Masters degree in Hospital Administration
He possesses the First Grade eligibility (BA
1080) and had undergone relevant training
in Hospital Administration. His performance
rating is 'Very Satisfactory'.
On the other hand, appellee Mackay had
been a Resident Physician, the position he
held prior to his promotion to the contested
position. He is a holder of the degree of
Doctor of Medicine and is a First Grade
eligible (BA 1080-Medical Board). He is a
graduate student in Hospital Administration
and as completed all academic requirements
for a certificate in Hospital Administration.
His performance rating is "Very Satisfactory".
A perusal of the organizational chart of the
Ospital ng Caloocan approved by the
Hospital Administrator would show that the
Chief of Clinics is the next lower position to
the Assistant Hospital Administrator. The
Resident Physician is not a next lower
position
to
the
Assistant
Hospital
Administrator. Therefore, Medalla and not
Mackay is the person next in rank who may
be promoted to the position involved.
Moreover, even on the basis of competence
and qualifications to perform the duties of
the position, the records show that Dr.
Medalla is more competent and qualified
than Dr. Mackay. The qualification relied
upon by the Acting City Mayor in justifying
the appointment of Dr. Mackay which is his
having
completed
the
academic
requirements for the Certificate in Hospital
Administration does not give Dr. Mackay the
advantage inasmuch as Dr. Medalla has also
completed the academic requirements for a
certificate in Hospital Administration and is
recommended for a title of Certificate in
Hospital Administration apart from being
also a candidate for a Masters degree in
1
Hospital Administration.
xxx xxx xxx
Upon automatic review by the Office of the President, pursuant
to section 19(6), PD No. 807, Presidential Executive Assistant
Jacobo C. Clave rendered a Decision on April 24, 1979
declaring that:
WHEREFORE, premises considered, and as
recommended by Civil Service Commission,

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the appointment of Dr. Honorato G. Mackay

as Assistant Hospital Administrator in the
Caloocan City General Hospital is hereby
revoked and the position awarded in favor of
2
appellant Dr. Eustaquio M. Medalla.
The Acting City Mayor, on behalf of Mackay, moved for
reconsideration.
On May 7, 1979, totally disregarding the Decision of the Office
of the President, the same Acting City Mayor appointed
Mackay, this time as Hospital Administrator, and designated Dr.
Tantoco as his Assistant, thereby again completely bypassing
Medalla. Mackay took his oath of office on May 7, 1979.
On June 27, 1979, however, the Civil Service Commission,
acting on Medalla's protest, and besides calling attention to
the penal provision of P.D. No. 807, disapproved Mackay's
appointment as follows:
Wherefore, premises considered and finding
the protest of Dr. Medalla in order, the
appointment of Dr. Mackay as hospital
Administrator at P26,388 per annum effective
May 7, 1979 is hereby disapproved. it is
hereby ordered that Dr. Medalla be
appointed to the position of Hospital
Administrator of the Caloocan City General
3
Hospital.
On July 20, 1979, Mackay moved for reconsideration asserting
1) denial of due process of law inasmuch as the contested
Resolution/Decisions were issued ex-parte, and 2) that the Civil
Service Commission can not ignore nor overrule an
appointment made by a City Executive.
Without awaiting the resolution of his Motion for
Consideration- Mackay filed, on July 23, 1979, before tile Court
of First Instance of Rizal, Caloocan City, presided by
respondent, Judge, a Petition for "Certiorari, Prohibition and
mandamus with Preliminary Injunction and Damages" civil Case
No. C7770) against Hon. Jacobo Clave, the Civil Service
Commission, the Acting City Mayor, the City Treasurer, and
Medalla, praying that said respondents be restrained from
implementing the Decision of Hon. Jacobo Clave of April 24,
1979, the Resolution No. 49 of the Merit Systems Board dated
December 29, 1978, and the Decision of the Civil Service
Commission of June 27, 1979. The Court a quo issued the
Restraining Order prayed for on July 25, 1979 enjoining
implementation of the aforestated Resolution/Decisions.
On August 2, 1979, Medalla moved to dissolve the Restraining
Order and to dismiss the Petition alleging mainly that Mackay
had not exhausted his administrative remedies and that the
latter's right to a Writ of Preliminary Injunction was not only
dubious or debatable but was clearly non-existent. Hon. Jacobo
Clave and the Civil Service Commission likewise filed a Motion

to Dismiss on the same ground of failure to exhaust

administrative remedies.
On August 13, 1979, Mackay moved to suspend proceedings
pending final resolution by the Civil Service Commission of his
Motion for the reconsideration of the Decision of said
Commission dated June 27, 1979.
On September 24, 1979, the Trial Court denied both Motions to
Dismiss filed by Medalla, on the one hand, and Hon. Clave and
the Civil Service Commission, on the other, holding that
Mackay's failure to await resolution of his Motions for
Reconsideration pending before the Office of the President and
the Civil Service Commission did not deprive him of a cause of
action besides the fact that according to the respective
Manifestations of the said Offices, the Motions for
Reconsideration had already been resolved adversely against
Mackay.
Acting on Medalla's Motion for Reconsideration thereof as well
as his Motion to Lift Restraining Order, the Court a quo, in its
Order of July 15, 1980, denied reconsideration but lifted the
Restraining Order "there being no showing that petitioner is
entitled to the issuance of a Writ of Preliminary Injunction. "
Respondent Judge then set the case for hearing.
At this juncture, Medalla instituted this Petition before us
praying that the Court a quo be restrained from proceeding
with the hearing and that judgment be rendered as follows:
1. Ordering the Honorable
Marcelino N. Sayo, Judge
of the Court of First
Instance of Rizal Branch
XXXIII, Caloocan City, to
dismiss
respondent
Mackay's petitions, on the
ground
of
lack
of
jurisdiction and/or nonexhaustion
of
administrative
remedies
resulting to a lack of cause
of action;
2. Declaring the decision of
the Office of the President
(Annex "C") and the Merit
Systems Board (Annex "E")
4
as valid and enforceable.
We issued a Restraining Order on August 27, 1980 enjoining
respondents from proceeding with the case below.
On November 7, 1980, we required petitioner Medalla to
implead the Mayor of Caloocan City as party-respondent, and
the latter to comment on the Petition and to state whether he
is ready to issue an appointment to Medalla as Hospital
Administrator, Medalla's rights thereto having been upheld by

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the Civil Service Merit Systems Board and by the Office of the
President.
In his Compliance, Medalla included an additional prayer that
the City Mayor of Caloocan be ordered to immediately appoint
him as Hospital Administrator and to pay him salary
differentials.
In his Comment, the City Mayor of Caloocan invoked the
privilege of an appointing authority to determine who can best
fulfill the functions of an office citing the case of Aguilar vs.
5
Nieva, Jr. to that effect. And as to the matter of his readiness
to issue an appointment to Medalla, he manifested his
preference to withhold action pending Mackay's unresolved
Motion for Reconsideration of the Decision of June 27, 1979 of
the Civil Service Merit Systems Board.
Petitioner Medalla submits that the Trial Court erred in not
dismissing Mackay's Petition before it, there being a clear
showing of non-exhaustion of administrative remedies, and
that said Court was devoid of jurisdiction in reviewing on
certiorari decisions of the Office of the President and of the
Civil service Commission rendered in the exercise of their
quasi-judicial functions.
Private respondent Mackay takes the contrary view and prays,
instead, that the contested Decisions/Resolution be declared
null and void and respondent Judge ordered to proceed with
the hearing of the case below.
Although Mackay's Motions for Reconsideration were, in fact,
still pending resolution by Hon. Jacobo C. Clave and the Civil
Service Commission, respectively, at the time private
respondent Mackay filed the Petition below, dismissal of said
Petition can no longer be anchored on the ground of nonexhaustion of administrative remedies, as Medalla prays,
considering that Manifestations dated August 17 and 23, 1979
filed by the said parties before the Court a quo show that they
6
had resolved the incidents adversely against Mackay. That
issue, therefore, has become moot and academic.
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 Presidential Executive Assistant 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 coequal
departments, the executive, the legislative
and the judicial, each supreme within its own
assigned powers and duties. When a
presidential act is challenged before the
courts of justice, it is not to be implied

therefrom that the Executive is being made

subject and subordinate to the courts. The
legality of his acts are under judicial review,
not because the Executive is inferior to the
courts, but because the law is above the
Chief Executive himself, and the courts seek
only to interpret, apply or implement it (the
law). A judicial review of the 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 judicial
review of all administrative acts of all
7
administrative officers.
The courts may always examine into the
exercise of power by a ministerial officer to
the extent of determining whether the
particular power has been granted to the
officer, whether it is a legal power that could
have been granted to him, and whether it
has been exercised in a legal manner. This
jurisdiction does not depend upon an act of
the legislature authorizing it, but inheres in
the courts of general jurisdiction as an
essential
function
of
the
judicial
department (State Racing Commission v.
8
Latonia Agri. Asso. 123 SW 68 1). (emphasis
supplied).
For the speedy determination of the controversy, however, and
considering that the position involved is infused with public
interest, rather than remand the case to the Court below for
further proceedings, we hold that grave abuse of discretion on
the part of Hon. Jacobo C. Clave and the Civil Service Merit
Systems Board is absent.
To start with, under the Revised Charter of the City of Caloocan
RA No. 5502), it is clear that the power of appointment by the
City Mayor of heads of offices entirely paid out of city funds
is subject to Civil Service law, rules and regulations (ibid., section
19). The Caloocan City General Hospital is one of the city
departments provided for in the said law (ibid., sec. 17). The
Hospital Administrator is appointed by the City Mayor (ibid.,
section 66-B). The Hospital Administrator is the head of the
City General Hospital empowered to administer, direct, and
coordinate all activities of the hospital to carry out its
objectives as to the care of the sick and the injured (ibid.).
Under section 19 (3) of the Civil Service Decree (PD No. 807,
effective on October 6, 1975), the recruitment or selection of
employees for promotions is drawn from the next-in-rank.
SEC. 19. Recruitment and Selection of
Employees.
xxx xxx xxx

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(3) When a vacancy occurs in a position in

the second level of the Career Service as
defined in Section 7, the employees in the
government service who occupy the next
lower positions i the occupational group
under which the vacant position is classified
and
in
other
functionally
related
occupational
groups
and
who
are
competent,
qualified
and
with
the
appropriate civil service eligibility shall be
considered for promotion.
Section 19 (6) of the same Decree provides for the
administrative procedure by an aggrieved employee in case of
non-observance by the appointing authority of the next-inrank rule, thus:
Sec. 19(6) A qualified next-in-rank employee
shall have the right to appeal initially, to the
department head and finally to the Office of
the President an appointment made ... (2. in
favor of one who is not next-in-rank, ... if the
employee making the appeal is not satisfied
with the written special reason or reasons
given by the appointing authority for such
appointment: ... Before deciding a contested
appointment the Office of the President shall
consult the Civil Service Commission. For
purposes of this Section, .qualified next-inrank' refers to an employee appointed on a
permanent basis to a position previously
determined to be next-in- rank to the
vacancy proposed to be filled and who
meets the requisites for appointment thereto
as previously determined by the appointing
authority and approved by the Commission.
The prescribed procedure has been followed by petitioner
Medalla He had appealed to the department head and from
thence, in view of the latter's unfavorable action, to the Civil
Service Commission and thereafter to the Office of the
President. Resolution No. 49 of the Civil Service Merit Systems
Board its Decision of June 27, 1979, and the Decision of the
presidential Executive Assistant dated April 24, 1979, were all
rendered in Medalla's favor. The special reason given by the
Acting City Mayor for Mackay's appointment, which is, that lie
had completed all academic requirements for the Certificate of
Hospital Administration, is not tenable, since Medalla himself
was found to be in possession of the same qualification. But
while the qualifications of both petitioner Medalla and private
respondent Mackay are at par, yet, it is clear that the position
of Chief of Clinics is the next lower position to I hospital
Administrator under the organizational line-up of the hospital.
Consequently, at the time of Mackays appointment as Assistant
Hospital
Administrator
and
subsequently
hospital
Administrator, Medalla outranked Mackay who was only a
Resident Physician and, therefore, as the next-in rank, Medalla
is entitled to appointment as Hospital Administrator.

Respondent Mackay's urging that he was denied due process

deserves scant consideration considering that subsequent
developsments in the case establish that he was heardon his
Motions for Reconsideration by both the Civil Service
Commission and the office of the President.
It is true that, as the respondent City Mayor alleges, a local
executive should be allowed the choice of men of his
confidence, provided they are qualified and elligible, who in his
best estimation are possesses of the requisite reputation,
9
integrity, knowledgeability, energy and judgement. However,
as reproduced heretofore, the Decision of the Civil Service
Merit Systems Board, upheld by the Office of the President,
contains a judicious assessment of the qualifications of both
petitioner Medalla and private respondent Mackay for the
contested position, revealing a careful study of the controversy
between the parties, which cannot be ignored. The revocation
of Mackay's appointment reveals no arbitrariness nor grave
abuse of discretion.
WHEREFORE, 1) the appointment extended to private
respondent, Dr. Honorato C. Mackay, as Hospital Administrator
is hereby declared null and void; 2) respondent City Mayor of
Caloocan City is hereby ordered to extend an appointment to
petitioner, Dr. Eustaquio M. Medalla, as Hospital Administrator
of the Caloocan City General Hospital immediately upon notice
of this Decision; 3) petitioner, Dr. Eustaquio M. Medalla, shall
receive all compensation and emoluments appertaining to said
position thenceforth, but without entitlement to salary
differentials; and 4) respondent Judge is hereby permanently
enjoined from further proceeding with Civil Case No. 7770.
This Decision is immediately executory. No costs.
SO ORDERED.

[G.R. No. 86695. September 3, 1992.]

MARIA ELENA MALAGA, doing business under the name
B.E. CONSTRUCTION; JOSIELEEN NAJARRO, doing business
under the name BEST BUILT CONSTRUCTION; JOSE N.
OCCEA, doing business under the name THE FIRM OF
JOSE N. OCCEA; and the ILOILO BUILDERS
CORPORATION, Petitioners, v. MANUEL R. PENACHOS, JR.,
ALFREDO MATANGGA, ENRICO TICAR AND TERESITA
VILLANUEVA, in their respective capacities as Chairman
and Members of the Pre-qualification Bids and Awards
Committee (PBAC)-BENIGNO PANISTANTE, in his capacity
as President of Iloilo State College of Fisheries, as well as in
their respective personal capacities; and HON. LODRIGIO L.
LEBAQUIN, Respondents.
Salas, Villareal & Velasco, for Petitioners.
Virgilio A. Sindico for Respondents.

SYLLABUS

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least two irregularities committed by PBAC that justified

injunction of the bidding and the award of the project.
1. ADMINISTRATIVE LAW; GOVERNMENT INSTRUMENTALITY,
DEFINED. The 1987 Administrative Code defines a
government instrumentality as follows: Instrumentality refers to
any agency of the National Government, not integrated within
the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational
autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions, and governmentowned or controlled corporations. (Sec. 2 (5) Introductory
Provisions).
2. ID.; CHARTERED INSTITUTION; DEFINED; APPLICATION IN
CASE AT BAR. The 1987 Administrative Code describes a
chartered institution thus: Chartered institution refers to any
agency organized or operating under a special charter, and
vested by law with functions relating to specific constitutional
policies or objectives. This term includes the state universities
and colleges, and the monetary authority of the state. (Sec. 2
(12) Introductory Provisions). It is clear from the above
definitions that ISCOF is a chartered institution and is therefore
covered by P.D. 1818. There are also indications in its charter
that ISCOF is a government instrumentality. First, it was created
in pursuance of the integrated fisheries development policy of
the State, a priority program of the government to effect the
socio-economic life of the nation. Second, the Treasurer of the
Republic of the Philippines shall also be the ex-officio Treasurer
of the state college with its accounts and expenses to be
audited by the Commission on Audit or its duly authorized
representative. Third, heads of bureaus and offices of the
National Government are authorized to loan or transfer to it,
upon request of the president of the state college, such
apparatus, equipment, or supplies and even the services of
such employees as can be spared without serious detriment to
public service. Lastly, an additional amount of P1.5M had been
appropriated out of the funds of the National Treasury and it
was also decreed in its charter that the funds and maintenance
of the state college would henceforth be included in the
General Appropriations Law. (Presidential Decree No. 1523)
3. ID.; PROHIBITION OF ANY COURT FROM ISSUING
INJUNCTION IN CASES INVOLVING INFRASTRUCTURE
PROJECTS OF GOVERNMENT (P.D. 1818); POWER OF THE
COURTS TO RESTRAIN APPLICATION. In the case of Datiles
and Co. v. Sucaldito, (186 SCRA 704) this Court interpreted a
similar prohibition contained in P.D. 605, the law after which
P.D. 1818 was patterned. It was there declared that the
prohibition pertained to the issuance of injunctions or
restraining orders by courts against administrative acts in
controversies involving facts or the exercise of discretion in
technical cases. The Court observed that to allow the courts to
judge these matters would disturb the smooth functioning of
the administrative machinery. Justice Teodoro Padilla made it
clear, however, that on issues definitely outside of this
dimension and involving questions of law, courts could not be
prevented by P.D. No. 605 from exercising their power to
restrain or prohibit administrative acts. We see no reason why
the above ruling should not apply to P.D. 1818. There are at

4. ID.; POLICIES AND GUIDELINES PRESCRIBED FOR

GOVERNMENT
INFRASTRUCTURE
(PD
1594);
RULES
IMPLEMENTING THEREOF, NOT SUFFICIENTLY COMPLIED
WITH IN CASE AT BAR. Under the Rules Implementing P.D.
1594, prescribing policies and guidelines for government
infrastructure contracts, PBAC shall provide prospective bidders
with the Notice to Pre-qualification and other relevant
information regarding the proposed work. Prospective
contractors shall be required to file their ARC-Contractors
Confidential Application for Registration & Classifications & the
PRE-C2 Confidential Pre-qualification Statement for the Project
(prior to the amendment of the rules, this was referred to as
Pre-C1) not later than the deadline set in the published
Invitation to Bid, after which date no PRE-C2 shall be submitted
and received. Invitations to Bid shall be advertised for at least
three times within a reasonable period but in no case less than
two weeks in at least two newspapers of general circulations.
(IB 13 1.2-19, Implementing Rules and Regulations of P.D. 1594
as amended) PBAC advertised the pre-qualification deadline as
December 2, 1988, without stating the hour thereof, and
announced that the opening of bids would be at 3 oclock in
the afternoon of December 12, 1988. This scheduled was
changed and a notice of such change was merely posted at the
ISCOF bulletin board. The notice advanced the cut-off time for
the submission of pre-qualification documents to 10 oclock in
the morning of December 2, 1988, and the opening of bids to 1
oclock in the afternoon of December 12, 1988. The new
schedule caused the pre-disqualification of the petitioners as
recorded in the minutes of the PBAC meeting held on
December 6, 1988. While it may be true that there were
fourteen contractors who were pre-qualified despite the
change in schedule, this fact did not cure the defect of the
irregular notice. Notably, the petitioners were disqualified
because they failed to meet the new deadline and not because
of their expired licenses. (B.E. & Best Builts licenses were valid
until June 30, 1989. [Ex. P & O respectively: both were marked
on December 28, 1988]) We have held that where the law
requires a previous advertisement before government
contracts can be awarded, non-compliance with the
requirement will, as a general rule, render the same void and of
no effect. (Caltex Phil. v. Delgado Bros., 96 Phil. 368) The fact
that an invitation for bids has been communicated to a number
of possible bidders is not necessarily sufficient to establish
compliance with the requirements of the law if it is shown that
other possible bidders have not been similarly notified.
5. ID.; ID.; ID.; PURPOSE THEREOF; CASE AT BAR. The
purpose of the rules implementing P.D. 1594 is to secure
competitive bidding and to prevent favoritism, collusion and
fraud in the award of these contracts to the detriment of the
public. This purpose was defeated by the irregularities
committed by PBAC. It has been held that the three principles
in public bidding are the offer to the public, an opportunity for
competition and a basis for exact comparison of bids. A
regulation of the matter which excludes any of these factors
destroys the distinctive character of the system and thwarts the
purpose of its adoption. (Hannan v. Board of Education, 25

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Okla. 372) In the case at bar, it was the lack of proper notice
regarding the pre-qualification requirement and the bidding
that caused the elimination of petitioners B.E. and Best Built. It
was not because of their expired licenses, as private
respondents now claim. Moreover, the plans and specifications
which are the contractors guide to an intelligent bid, were not
issued on time, thus defeating the guaranty that contractors be
placed on equal footing when they submit their bids. The
purpose of competitive bidding is negated if some contractors
are informed ahead of their rivals of the plans and
specifications that are to be the subject of their bids.

conducted, the defendants be directed not to award the

project pending resolution of their complaint.
On the same date, Judge Lodrigio L. Lebaquin issued a
restraining order prohibiting PBAC from conducting the
bidding and awarding the project.
On December 16, 1988, the defendants filed a motion to lift the
restraining order on the ground that the Court was prohibited
from issued restraining orders, preliminary injunctions and
preliminary mandatory injunctions by P.D. 1818.
The decree reads pertinently as follows:chanrob1es virtual 1aw
library

DECISION

CRUZ, J.:

This controversy involves the extent and applicability of P.D.

1818, which prohibits any court from issuing injunctions in
cases involving infrastructure projects of the government.
The facts are not disputed.
The Iloilo State College of Fisheries (henceforth ISCOF) through
its Pre-qualification, Bids and Awards Committee (henceforth
PBAC) caused the publication in the November 25, 26, 28, 1988
issues of the Western Visayas Daily an Invitation to Bid for the
construction of the Micro Laboratory Building at ISCOF. The
notice announced that the last day for the submission of prequalification requirements (PRE C-1) ** was December 2, 1988,
and that the bids would be received and opened on December
12, 1988, 3 oclock in the afternoon.
Petitioners Maria Elena Malaga and Josieleen Najarro,
respectively doing business under the name of the B.E.
Construction and Best Built Construction, submitted their prequalification documents at two oclock in the afternoon of
December 2, 1988. Petitioner Jose Occea submitted his own
PRE-C1 on December 5, 1988. All three of them were not
allowed to participate in the bidding because their documents
were considered late, having been submitted after the cut-off
time of ten oclock in the morning of December 2, 1988.
On December 12, 1988, the petitioners filed a complaint with
the Regional Trial Court of Iloilo against the chairman and
members of PBAC in their official and personal capacities. The
plaintiffs claimed that although they had submitted their PREC1 on time, the PBAC refused without just cause to accept
them. As a result, they were not included in the list of prequalified bidders, could not secure the needed plans and other
documents, and were unable to participate in the scheduled
bidding.
In their prayer, they sought the resetting of the December 12,
1988 bidding and the acceptance of their PRE-C1 documents.
They also asked that if the bidding had already been

Section 1. No Court in the Philippines shall have jurisdiction to

issue any restraining order, preliminary injunction, or
preliminary infrastructure project, or a mining, fishery, forest or
other natural resource development project of the government,
or any public utility operated by the government, including
among others public utilities for the transport of the goods and
commodities, stevedoring and arrastre contracts, to prohibit
any person or persons, entity or government official from
proceeding with, or continuing the execution or
implementation of any such project, or the operation of such
public utility, or pursuing any lawful activity necessary for such
execution, implementation or operation.
The movants also contended that the question of the propriety
of a preliminary injunction had become moot and academic
because the restraining order was received late, at 2 oclock in
the afternoon of December 12, 1988, after the bidding had
been conducted and closed at eleven thirty in the morning of
that date.
In their opposition of the motion, the plaintiffs argued against
the applicability of P.D. 1818, pointing out that while ISCOF was
a state college, it had its own charter and separate existence
and was not part of the national government or of any local
political subdivision. Even if P.D. 1818 were applicable, the
prohibition presumed a valid and legal government project,
not one tainted with anomalies like the project at bar.
They also cited Filipinas Marble Corp. v. IAC, 3 where the Court
allowed the issuance of a writ of preliminary injunction despite
a similar prohibition found in P.D. 385. The Court therein stated
that:
The government, however, is bound by basic principles of
fairness and decency under the due process clauses of the Bill
of Rights. P.D. 385 was never meant to protect officials of
government-lending institutions who take over the
management of a borrower corporation, lead that corporation
to bankruptcy through mismanagement or misappropriation of
its funds, and who, after ruining it, use the mandatory
provisions of the decree to avoid the consequences of their
misleads (p. 188, Emphasis supplied).
On January 2, 1989, the trial court lifted the restraining order
and denied the petition for preliminary injunction. It declared

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that the building sought to be construed at the ISCOF was an

infrastructure project of the government falling within the
coverage of P.D. 1818. Even if it were not, the petition for the
issuance of a writ of preliminary injunction would still fail
because the sheriffs return showed that PBAC was served a
copy of the restraining order after the bidding sought to be
restrained had already been held. Furthermore, the members of
the PBAC could not be restrained from awarding the project
because the authority to do so was lodged in the President of
the ISCOF, who was not a party to the case.
In the petition now before us, it is reiterated that P.D. 1818
does not cover the ISCOF because of its separate and distinct
corporate personality. It is also stressed again that the
prohibition under P.D. 1818 could not apply to the present
controversy because the project was vitiated with irregularities,
to wit:
1. The invitation to bid as published fixed the deadline of
submission of pre-qualification document on December 2,
1988 without indicating any time, yet after 10:00 oclock of the
given late, the PBAC already refused to accept petitioners
documents.
2. The time and date of bidding was published as December
12, 1988 at 3:00 p.m. yet it was held at 10:00 oclock in the
morning.
3. Private respondents, for the purpose of inviting bidders to
participate, issued a mimeographed "Invitation to Bid" form,
which by law (P.D. 1594 and Implementing Rules, Exh. B-1) is to
contain the particulars of the project subject of bidding for the
purpose of.

the members of the board of trustees of the ISCOF are all

government officials under Section 7 of P.D. 1523 and since the
operations and maintenance of the ISCOF are provided for in
the General Appropriations Law, it is should be considered a
government institution whose infrastructure project is covered
by P.D. 1818
Regarding the schedule for pre-qualification, the private
respondents insist that PBAC posted on the ISCOF bulletin
board an announcement that the deadline for the submission
of pre-qualifications documents was at 10 oclock of December
2, 1988, and the opening of bids would be held at 1 oclock in
the afternoon of December 12, 1988. As of ten oclock in the
morning of December 2, 1988, B.E. construction and Best Built
construction had filed only their letters of intent. At two oclock
in the afternoon, B.E., and Best Built filed through their
common representative, Nenette Garuello, their prequalification documents which were admitted but stamped
"submitted late." The petitioners were informed of their
disqualification on the same date, and the disqualification
became final on December 6, 1988. Having failed to take
immediate action to compel PBAC to pre-qualify them despite
their notice of disqualification, they cannot now come to this
Court to question the binding proper in which they had not
participated.
In the petitioners Reply, they raise as an additional irregularity
the violation of the rule that where the estimate project cost is
from P1M to P5M, the issuance of plans, specifications and
proposal book forms should made thirty days before the date
of bidding. 7 They point out that these forms were issued only
on December 2, 1988, and not at the latest on November 12,
1988, the beginning of the 30-day period prior to the
scheduled bidding.

(i) enabling bidders to make an intelligent and accurate bids;

(ii) for PBAC to have a uniform basis for evaluating the bids;
(iii) to prevent collusion between a bidder and the PBAC, by
opening to all the particulars of a project.
Additionally, the Invitation to Bid prepared by the respondents
and the Itemized Bill of Quantities therein were left blank.
And although the project in question was a "Construction," the
private respondents used an Invitation to Bid form for
"Materials."
The petitioners also point out that the validity of the writ of
preliminary injunction had not yet become moot and academic
because even if the bids had been opened before the
restraining order was issued, the project itself had not yet been
awarded. The ISCOF president was not an indispensable party
because the signing of the award was merely a ministerial
function which he could perform only upon the
recommendation of the Award Committee. At any rate, the
complaint had already been duly amended to include him as a
party defendant.
In their Comment, the private respondents maintain that since

In their Rejoinder, the private respondents aver that the

documents of B.E. and Best Built were received although filed
late and were reviewed by the Award Committee, which
discovered that the contractors had expired licenses. B.E.s
temporary certificate of Renewal of Contractors License was
valid only until September 30, 1988, while Best Builts license
was valid only up to June 30, 1988.
The Court has considered the arguments of the parties in light
of their testimonial and documentary evidence and the
applicable laws and jurisprudence. It finds for the petitioners.
The 1987 Administrative
instrumentality as follows:

Code

defines

government

Instrumentality refers to any agency of the National

Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers, administering special
funds, and enjoying operational autonomy, usually through a
charter. This term includes regulatory agencies, chartered
institutions,
and
government-owned
or
controlled
corporations. (Sec. 2 (5) Introductory Provisions).
The same Code describes a chartered institution thus:

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Chartered institution refers to any agency organized or

operating under a special charter, and vested by law with
functions relating to specific constitutional policies or
objectives. This term includes the state universities and
colleges, and the monetary authority of the state. (Sec. 2 (12)
Introductory Provisions).
It is clear from the above definitions that ISCOF is a chartered
institution and is therefore covered by P.D. 1818.
There are also indications in its charter that ISCOF is a
government instrumentality. First, it was created in pursuance
of the integrated fisheries development policy of the State, a
priority program of the government of effect the socioeconomic life of the nation. Second, the Treasurer of the
Republic of the Philippines also be the ex-officio Treasurer of
the state college with its accounts and expenses to be audited
by the Commission on Audit or its duly authorized
representative. Third, heads of bureaus and offices of the
National Government are authorized to loan or transfer to it,
upon request of the president of the state college, such
apparatus, equipment, or supplies and even the services of
such employees as can be spared without serious detriment to
public service. Lastly, an additional amount of P1.5M had been
appropriated out of the funds of the National Treasury and it
was also decreed in its charter that the funds and maintenance
of the state college would henceforth be included in the
General Appropriations Law.
Nevertheless, it does not automatically follow that ISCOF is
covered by the prohibition in the said decree.
In the case of Datiles and Co. v. Sucaldito, 9 this Court
interpreted a similar prohibition contained in P.D. 605, the law
after which P.D. 1818 was patterned. It was there declared that
the prohibition pertained to the issuance of injunctions or
restraining orders by courts against administrative acts in
controversies involving facts or the exercise of discretion in
technical cases. The Court observed that to allow the courts to
judge these matters would disturb the smooth functioning of
the administrative machinery. Justice Teodoro Padilla made it
clear, however, that on issues definitely outside of this
dimension and involving questions of law, courts could not be
prevented by P.D. No. 605 from exercising their power to
restrain or prohibit administrative acts.
We see no reason why the above ruling should not apply to
P.D. 1818.
There are at least two irregularities committed by PBAC that
justified injunction of the bidding and the award of the project.
First, PBAC set deadlines for the filing of the PRE-C1 and the
opening of bids and then changed these deadlines without
prior notice to prospective participants.
Under the Rules Implementing P.D. 1594, prescribing policies
and guidelines for government infrastructure contracts, PBAC
shall provide prospective bidders with the Notice of Pre-

qualification and other relevant information regarding the

proposed work. Prospective contractors shall be required to file
their ARC-Contractors Confidential Application for Registration
& Classifications & the PRE-C2 Confidential Pre-qualification
Statement for the Project (prior to the amendment of the rules,
this was referred to as PRE-C1) not later than the deadline set
in the published Invitation to Bid, after which date no PRE-C2
shall be submitted and received. Invitations to Bid shall be
advertised for at least three times within a reasonable period
but in no case less than two weeks in at least two newspapers
of general circulations.
PBAC advertised the pre-qualification deadline as December 2,
1988, without stating the hour thereof, and announced that the
opening of bids would be at 3 oclock in the afternoon of
December 12, 1988. This schedule was changed and a notice of
such change was merely posted at the ISCOF bulletin board.
The notice advanced the cut-off time for the submission of
pre-qualification documents to 10 oclock in the morning of
December 2, 1988, and the opening of bids to 1 oclock in the
afternoon of December 12, 1988.
The new schedule caused the pre-disqualification of the
petitioners as recorded in the minutes of the PBAC meeting
held on December 6, 1988. While it may be true that there
were fourteen contractors who were pre-qualified despite the
change in schedule, this fact did not cure the defect of the
irregular notice. Notably, the petitioners were disqualified
because they failed to meet the new deadline and not because
of their expired licenses. ***
We have held that where the law requires a previous
advertisement before government contracts can be awarded,
non-compliance with the requirement will, as a general rule,
render the same void and of no effect 11 The facts that an
invitation for bids has been communicated to a number of
possible bidders is not necessarily sufficient to establish
compliance with the requirements of the law if it is shown that
other public bidders have not been similarly notified.
Second, PBAC was required to issue to pre-qualified applicants
the plans, specifications and proposal book forms for the
project to be bid thirty days before the date of bidding if the
estimate project cost was between P1M and P5M. PBAC has
not denied that these forms were issued only on December 2,
1988, or only ten days before the bidding scheduled for
December 12, 1988. At the very latest, PBAC should have issued
them on November 12, 1988, or 30 days before the scheduled
bidding.
It is apparent that the present controversy did not arise from
the discretionary acts of the administrative body nor does it
involve merely technical matters. What is involved here is noncompliance with the procedural rules on bidding which
required strict observance. The purpose of the rules
implementing P.D. 1594 is to secure competitive bidding and
to prevent favoritism, collusion and fraud in the award of these
contracts to the detriment of the public. This purpose was
defeated by the irregularities committed by PBAC red.

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It has been held that the three principles in public bidding are
the offer to the public, an opportunity for competition and a
basis for exact comparison of bids. A regulation of the matter
which excludes any of these factors destroys the distinctive
character of the system and thwarts and purpose of its
adoption.

These damages are to assessed against the private

respondents in the amount of P10,000.00 each, to be paid
separately for each of petitioners B.E. Construction and Best
Built Construction. The other petitioner, Occea Builders, is not
entitled to relief because it admittedly submitted its prequalification documents on December 5, 1988, or three days
after the deadline.

In the case at bar, it was the lack of proper notice regarding the
pre-qualification requirement and the bidding that caused the
elimination of petitioners B.E. and Best Built. It was not because
of their expired licenses, as private respondents now claim.
Moreover, the plans and specifications which are the
contractors guide to an intelligent bid, were not issued on
time, thus defeating the guaranty that contractors be placed on
equal footing when they submit their bids. The purpose of
competitive bidding is negated if some contractors are
informed ahead of their rivals of the plans and specifications
that are to be the subject of their bids.

WHEREFORE, judgment is hereby rendered: a) upholding the

restraining order dated December 12, 1988, as not covered by
the prohibition in P.D. 1818; b) ordering the chairman and the
members of the PBAC board of trustees, namely Manuel R.
Penachos, Jr., Alfredo Matangga, Enrico Ticar, and Teresita
Villanueva, to each pay separately to petitioners Maria Elena
Malaga and Josieleen Najarro nominal damages P10,000.00
each; and c) removing the said chairman and members from
the PBAC board of trustees, or whoever among them is still
incumbent therein, for their malfeasance in office. Costs against
PBAC.

P.D. 1818 was not intended to shield from judicial scrutiny

irregularities committed by administrative agencies such as the
anomalies above described. Hence, the challenged restraining
order was not improperly issued by the respondent judge and
the writ of preliminary injunction should not have been denied.
We note from Annex Q of the private respondents
memorandum, however, that the subject project has already
been "100% completed as to the Engineering Standard." This
fait accompli has made the petition for a writ of preliminary
injunction moot and academic.

Let a copy of this decision be sent to the Office of the

Ombudsman.

We come now to the liabilities of the private respondents.

It has been held in a long line of cases that a contract granted
without the competitive bidding required by law is void, and
the party to whom it is awarded cannot benefit from it. 14 It
has not been shown that the irregularities committed by PBAC
were induced by or participated in by any of the contractors.
Hence, liability shall attach only to the private respondents for
the prejudice sustained by the petitioners as a result of the
anomalies described above.
As there is no evidence of the actual loss suffered by the
petitioners, compensatory damage may not be awarded to
them. Moral damages do not appear to be due either. Even so,
the Court cannot close its eyes to the evident bad faith that
characterized the conduct of the private respondents, including
the irregularities in the announcement of the bidding and their
efforts to persuade the ISCOF president to award the project
after two days from receipt of the restraining order and before
they moved to lift such order. For such questionable acts, they
are liable in nominal damages at least in accordance with
Article 2221 of the Civil Code, which states:
"Art. 2221. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the
defendant may be vindicated or, recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by
him.

SO ORDERED.

FIRST DIVISION
G.R. No. 162784

June 22, 2007

NATIONAL HOUSING AUTHORITY, petitioner,

vs.
SEGUNDA ALMEIDA, COURT OF APPEALS, and RTC of SAN
PEDRO, LAGUNA, BR. 31, respondents.
DECISION
PUNO, C.J.:
This is a Petition for Review on Certiorari under Rule 45 filed by
the National Housing Authority (NHA) against the Court of
Appeals, the Regional Trial Court of San Pedro Laguna, Branch
31, and private respondent Segunda Almeida.
On June 28, 1959, the Land Tenure Administration (LTA)
awarded to Margarita Herrera several portions of land which
are part of the Tunasan Estate in San Pedro, Laguna. The award
1
is evidenced by an Agreement to Sell No. 3787. By virtue of
Republic Act No. 3488, the LTA was succeeded by the
Department of Agrarian Reform (DAR). On July 31, 1975, the
DAR was succeeded by the NHA by virtue of Presidential
2
Decree No. 757. NHA as the successor agency of LTA is the
petitioner in this case.
The records show that Margarita Herrera had two children:
Beatriz Herrera-Mercado (the mother of private respondent)

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and Francisca Herrera. Beatriz Herrera-Mercado predeceased

her mother and left heirs.
Margarita Herrera passed away on October 27, 1971.

kasalukuyang naninirahan at tumatanggap ng sulat sa

Nayong ng San Vicente, San Pedro Laguna, o sa
kaniyang mga tagapagmana at;

On August 22, 1974, Francisca Herrera, the remaining child of

the late Margarita Herrera executed a Deed of SelfAdjudication claiming that she is the only remaining relative,
being the sole surviving daughter of the deceased. She also
claimed to be the exclusive legal heir of the late Margarita
Herrera.
The Deed of Self-Adjudication was based on a Sinumpaang
Salaysay dated October 7, 1960, allegedly executed by
Margarita Herrera. The pertinent portions of which are as
follows:
SINUMPAANG SALAYSAY
SA SINO MAN KINAUUKULAN;
Akong si MARGARITA HERRERA, Filipina, may 83
taong gulang, balo, kasalukuyang naninirahan at
tumatanggap ng sulat sa Nayon ng San Vicente, San
Pedro Laguna, sa ilalim ng panunumpa ay malaya at
kusang loob kong isinasaysay at pinagtitibay itong
mga sumusunod:
1. Na ako ay may tinatangkilik na isang lagay na
lupang tirikan (SOLAR), tumatayo sa Nayon ng San
Vicente, San Pedro, Laguna, mayroong PITONG DAAN
AT PITUMPU'T ISANG (771) METRONG PARISUKAT
ang laki, humigit kumulang, at makikilala sa tawag na
Lote 17, Bloke 55, at pag-aari ng Land Tenure
Administration;
2. Na ang nasabing lote ay aking binibile, sa
pamamagitan ng paghuhulog sa Land Tenure
Administration, at noong ika 30 ng Julio, 1959, ang
Kasunduang sa Pagbibile (AGREEMENT TO SELL No.
3787) ay ginawa at pinagtibay sa Lungsod ng Maynila,
sa harap ng Notario Publico na si G. Jose C. Tolosa, at
lumalabas sa kaniyang Libro Notarial bilang
Documento No. 13, Pagina No. 4; Libro No. IV, Serie
ng 1959;
3. Na dahilan sa ako'y matanda na at walang ano
mang hanap buhay, ako ay nakatira at pinagsisilbihan
nang aking anak na si Francisca Herrera, at ang
tinitirikan o solar na nasasabi sa unahan ay
binabayaran ng kaniyang sariling cuarta sa Land
Tenure Administration;
4. Na alang-alang sa nasasaysay sa unahan nito,
sakaling ako'y bawian na ng Dios ng aking buhay, ang
lupang nasasabi sa unahan ay aking ipinagkakaloob
sa nasabi kong anak na FRANCISCA HERRERA, Filipina,
nasa katamtamang gulang, kasal kay Macario Berroya,

5. Na HINIHILING KO sa sino man kinauukulan, na

sakaling ako nga ay bawian na ng Dios ng aking
buhay ay KILALANIN, IGALANG at PAGTIBAYIN ang
nilalaman sa pangalan ng aking anak na si Francisca
Herrera ang loteng nasasabi sa unahan.
SA KATUNAYAN NG LAHAT, ako ay nag-didiit ng
hinlalaki ng kanan kong kamay sa ibaba nito at sa
kaliwang gilid ng unang dahon, dito sa Lungsod ng
4
Maynila, ngayong ika 7 ng Octubre, 1960.
The said document was signed by two witnesses and notarized.
The witnesses signed at the left-hand side of both pages of the
document with the said document having 2 pages in total.
5
Margarita Herrera placed her thumbmark above her name in
the second page and at the left-hand margin of the first page
of the document.
The surviving heirs of Beatriz Herrera-Mercado filed a case for
annulment of the Deed of Self-Adjudication before the then
Court of First Instance of Laguna, Branch 1 in Binan, Laguna
(now, Regional Trial Court Branch 25). The case for annulment
6
was docketed as Civil Case No. B-1263.
On December 29, 1980, a Decision in Civil Case No. B-1263
(questioning the Deed of Self-Adjudication) was rendered and
7
the deed was declared null and void.
During trial on the merits of the case assailing the Deed of SelfAdjudication, Francisca Herrera filed an application with the
NHA to purchase the same lots submitting therewith a copy of
the "Sinumpaang Salaysay" executed by her mother. Private
respondent Almeida, as heir of Beatriz Herrera-Mercado,
protested the application.
8

In a Resolution dated February 5, 1986, the NHA granted the

application made by Francisca Herrera, holding that:
From the evidence of the parties and the records of
the lots in question, we gathered the following facts:
the lots in question are portions of the lot awarded
and sold to the late Margarita Herrera on July 28,
1959 by the defunct Land Tenure Administration;
protestant is the daughter of the late Beatriz Herrera
Mercado who was the sister of the protestee;
protestee and Beatriz are children of the late
Margarita Herrera; Beatriz was the transferee from
Margarita of Lot Nos. 45, 46, 47, 48 and 49, Block 50;
one of the lots transferred to Beatriz, e.g. Lot 47, with
an area of 148 square meters is in the name of the
protestant; protestant occupied the lots in question
with the permission of the protestee; protestee is a
resident of the Tunasan Homesite since birth;
protestee was born on the lots in question; protestee

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left the place only after marriage but resided in a lot

situated in the same Tunasan Homesite; her
(protestee) son Roberto Herrera has been occupying
the lots in question; he has been there even before
the death of the late Margarita Herrera; on October 7,
1960, Margarita Herrera executed a "Sinumpaang
Salaysay" whereby she waived or transferred all
her rights and interest over the lots in question in
favor of the protestee; and protestee had paid the
lots in question in full on March 8, 1966 with the
defunct Land Tenure Administration.
This Office finds that protestee has a better preferential right to
9
purchase the lots in question.
Private respondent Almeida appealed to the Office of the
10
President. The NHA Resolution was affirmed by the Office of
11
the President in a Decision dated January 23, 1987.
On February 1, 1987, Francisca Herrera died. Her heirs executed
an extrajudicial settlement of her estate which they submitted
to the NHA. Said transfer of rights was approved by the
12
NHA. The NHA executed several deeds of sale in favor of the
heirs of Francisca Herrera and titles were issued in their
13
favor. Thereafter, the heirs of Francisca Herrera directed
Segunda Mercado-Almeida to leave the premises that she was
occupying.
Feeling aggrieved by the decision of the Office of the President
and the resolution of the NHA, private respondent Segunda
Mercado-Almeida sought the cancellation of the titles issued in
favor of the heirs of Francisca. She filed a Complaint on
February 8, 1988, for "Nullification of Government Lot's
Award," with the Regional Trial Court of San Pedro, Laguna,
Branch 31.
In her complaint, private respondent Almeida invoked her
forty-year occupation of the disputed properties, and re-raised
the fact that Francisca Herrera's declaration of self-adjudication
has been adjudged as a nullity because the other heirs were
disregarded. The defendant heirs of Francisca Herrera alleged
that the complaint was barred by laches and that the decision
of the Office of the President was already final and
14
executory. They also contended that the transfer of purchase
of the subject lots is perfectly valid as the same was supported
by a consideration and that Francisca Herrera paid for the
15
property with the use of her own money. Further, they argued
that plaintiff's occupation of the property was by mere
16
tolerance and that they had been paying taxes thereon.
The Regional Trial Court issued an Order dated June 14, 1988
17
dismissing the case for lack of jurisdiction. The Court of
Appeals in a Decision dated June 26, 1989 reversed and held
that the Regional Trial Court had jurisdiction to hear and
decide the case involving "title and possession to real property
18
within its jurisdiction." The case was then remanded for further
proceedings on the merits.

A pre-trial was set after which trial ensued.

On March 9, 1998, the Regional Trial Court rendered a Decision
setting aside the resolution of the NHA and the decision of the
Office of the President awarding the subject lots in favor of
Francisca Herrera. It declared the deeds of sale executed by
NHA in favor of Herrera's heirs null and void. The Register of
Deeds of Laguna, Calamba Branch was ordered to cancel the
Transfer Certificate of Title issued. Attorney's fees were also
awarded to private respondent.
The Regional Trial Court ruled that the "Sinumpaang Salaysay"
was not an assignment of rights but a disposition of property
which shall take effect upon death. It then held that the said
document must first be submitted to probate before it can
transfer property.
Both the NHA and the heirs of Francisca Herrera filed their
respective motions for reconsideration which were both denied
on July 21, 1998 for lack of merit. They both appealed to the
Court of Appeals. The brief for the heirs of Francisca Herrera
was denied admission by the appellate court in a Resolution
dated June 14, 2002 for being a "carbon copy" of the brief
submitted by the NHA and for being filed seventy-nine (79)
days late.
On August 28, 2003, the Court of Appeals affirmed the decision
of the Regional Trial Court, viz:
There is no dispute that the right to repurchase the
subject lots was awarded to Margarita Herrera in
1959. There is also no dispute that Margarita executed
a "Sinumpaang Salaysay" on October 7, 1960.
Defendant NHA claims that the "Sinumpaang
Salaysay" is, in effect, a waiver or transfer of rights and
interest over the subject lots in favor of Francisca
Herrera. This Court is disposed to believe otherwise.
After a perusal of the "Sinumpaang Salaysay" of
Margarita Herrera, it can be ascertained from its
wordings taken in their ordinary and grammatical
sense that the document is a simple disposition of her
estate to take effect after her death. Clearly the Court
finds that the "Sinumpaang Salaysay" is a will of
Margarita Herrera. Evidently, if the intention of
Margarita Herrera was to merely assign her right over
the lots to her daughter Francisca Herrera, she should
have given her "Sinumpaang Salaysay" to the
defendant NHA or to Francisca Herrera for submission
to the defendant NHA after the full payment of the
purchase price of the lots or even prior thereto but
she did not. Hence it is apparent that she intended
the "Sinumpaang Salaysay" to be her last will and not
an assignment of rights as what the NHA in its
resolution would want to make it appear. The
intention of Margarita Herrera was shared no less by
Francisca Herrera who after the former's demise
executed on August 22, 1974 a Deed of SelfAdjudication claiming that she is her sole and legal
heir. It was only when said deed was questioned in

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court by the surviving heirs of Margarita Herrera's

other daughter, Beatriz Mercado, that Francisca
Herrera filed an application to purchase the subject
lots and presented the "Sinumpaang Salaysay" stating
19
that it is a deed of assignment of rights.
The Court of Appeals ruled that the NHA acted arbitrarily in
awarding the lots to the heirs of Francisca Herrera. It upheld
the trial court ruling that the "Sinumpaang Salaysay" was not
an assignment of rights but one that involved disposition of
property which shall take effect upon death. The issue of
whether it was a valid will must first be determined by probate.
Petitioner NHA elevated the case to this Court.
Petitioner NHA raised the following issues:
A. WHETHER OR NOT THE RESOLUTION OF THE NHA
AND THE DECISION OF THE OFFICE OF THE
PRESIDENT HAVE ATTAINED FINALITY, AND IF SO,
WHETHER
OR
NOT
THE
PRINCIPLE
OF
ADMINISTRATIVE RES JUDICATA BARS THE COURT
FROM FURTHER DETERMINING WHO BETWEEN THE
PARTIES HAS PREFERENTIAL RIGHTS FOR AWARD
OVER THE SUBJECT LOTS;
B. WHETHER OR NOT THE COURT HAS JURISDICTION
TO MAKE THE AWARD ON THE SUBJECT LOTS; AND
C. WHETHER OR NOT THE AWARD OF THE SUBJECT
LOTS BY THE NHA IS ARBITRARY.
We rule for the respondents.
Res judicata is a concept applied in review of lower court
decisions in accordance with the hierarchy of courts. But
jurisprudence has also recognized the rule of administrative res
judicata: "the rule which forbids the reopening of a matter once
judicially determined by competent authority applies as well to
the judicial and quasi-judicial facts of public, executive or
administrative officers and boards acting within their
jurisdiction as to the judgments of courts having general
judicial powers . . . It has been declared that whenever final
adjudication of persons invested with power to decide on the
property and rights of the citizen is examinable by the Supreme
Court, upon a writ of error or a certiorari, such final
20
adjudication may be pleaded as res judicata." To be sure,
early jurisprudence were already mindful that the doctrine of
res judicata cannot be said to apply exclusively to decisions
rendered by what are usually understood as courts without
unreasonably circumscribing the scope thereof and that the
more equitable attitude is to allow extension of the defense to
decisions of bodies upon whom judicial powers have been
conferred.
In Ipekdjian Merchandising Co., Inc. v. Court of Tax
21
Appeals, the Court held that the rule prescribing that
"administrative orders cannot be enforced in the courts in the

absence of an express statutory provision for that purpose" was

relaxed in favor of quasi-judicial agencies.
In fine, it should be remembered that quasi-judicial powers will
always be subject to true judicial powerthat which is held by
the courts. Quasi-judicial power is defined as that power of
adjudication of an administrative agency for the "formulation
22
of a final order." This function applies to the actions,
discretion and similar acts of public administrative officers or
bodies who are required to investigate facts, or ascertain the
existence of facts, hold hearings, and draw conclusions from
them, as a basis for their official action and to exercise
23
discretion of a judicial nature. However, administrative
agencies are not considered courts, in their strict sense. The
doctrine of separation of powers reposes the three great
powers into its three (3) branchesthe legislative, the
executive, and the judiciary. Each department is co-equal and
coordinate, and supreme in its own sphere. Accordingly, the
executive department may not, by its own fiat, impose the
judgment of one of its agencies, upon the judiciary. Indeed,
under the expanded jurisdiction of the Supreme Court, it is
empowered to "determine whether or not there has been
grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the
24
Government." Courts have an expanded role under the 1987
Constitution in the resolution of societal conflicts under the
grave abuse clause of Article VIII which includes that duty to
check whether the other branches of government committed
an act that falls under the category of grave abuse of discretion
25
amounting to lack or excess of jurisdiction.
Next, petitioner cites Batas Pambansa Blg. 129 or the Judiciary
26
Reorganization Act of 1980 where it is therein provided that
the Intermediate Appellate Court (now, Court of Appeals) shall
exercise the "exclusive appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards, of the
Regional
Trial
Courts
and
Quasi-Judicial
agencies,
instrumentalities, boards or commissions, except those falling
within the jurisdiction of the Supreme Court in accordance with
27
the Constitution" and contends that the Regional Trial Court
has no jurisdiction to rule over awards made by the NHA.
Well-within its jurisdiction, the Court of Appeals, in its decision
of August 28, 2003, already ruled that the issue of the trial
court's authority to hear and decide the instant case has
already been settled in the decision of the Court of Appeals
dated June 26, 1989 (which has become final and executory on
August 20, 1989 as per entry of judgment dated October 10,
28
1989). We find no reason to disturb this ruling. Courts are
duty-bound to put an end to controversies. The system of
judicial review should not be misused and abused to evade the
29
operation of a final and executory judgment. The appellate
court's decision becomes the law of the case which must be
30
adhered to by the parties by reason of policy.
Next, petitioner NHA contends that its resolution was
grounded on meritorious grounds when it considered the
application for the purchase of lots. Petitioner argues that it
was the daughter Francisca Herrera who filed her application

ADMIN LAW 1st Set

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on the subject lot; that it considered the respective application

and inquired whether she had all the qualifications and none of
the disqualifications of a possible awardee. It is the position of
the petitioner that private respondent possessed all the
qualifications and none of the disqualifications for lot award
and hence the award was not done arbitrarily.
The petitioner further argues that assuming that the
"Sinumpaang Salaysay" was a will, it could not bind the
31
NHA. That, "insofar as [the] NHA is concerned, it is an
evidence that the subject lots were indeed transferred by
Margarita Herrera, the original awardee, to Francisca Herrera
32
was then applying to purchase the same before it."
We are not impressed. When the petitioner received the
"Sinumpaang Salaysay," it should have noted that the
effectivity of the said document commences at the time of
death of the author of the instrument; in her words "sakaling
ako'y bawian na ng Dios ng aking buhay" Hence, in such
period, all the interests of the person should cease to be hers
and shall be in the possession of her estate until they are
transferred to her heirs by virtue of Article 774 of the Civil Code
which provides that:
Art. 774. Succession is a mode of acquisition by virtue
of which the property, rights and obligations to the
extent of the value of the inheritance, of a person are
transmitted through his death to another or others
33
either by his will or by operation of law.
By considering the document, petitioner NHA should have
noted that the original applicant has already passed away.
34
Margarita Herrera passed away on October 27, 1971. The
35
NHA issued its resolution on February 5, 1986. The NHA gave
due course to the application made by Francisca Herrera
without considering that the initial applicant's death would
transfer all her property, rights and obligations to the estate
including whatever interest she has or may have had over the
disputed properties. To the extent of the interest that the
original owner had over the property, the same should go to
her estate. Margarita Herrera had an interest in the property
and that interest should go to her estate upon her demise so
as to be able to properly distribute them later to her heirsin
accordance with a will or by operation of law.
The death of Margarita Herrera does not extinguish her interest
over the property. Margarita Herrera had an existing Contract
36
to Sell with NHA as the seller. Upon Margarita Herrera's
demise, this Contract to Sell was neither nullified nor revoked.
This Contract to Sell was an obligation on both parties
Margarita
Herrera
and
NHA.
Obligations
are
37
transmissible. Margarita Herrera's obligation to pay became
transmissible at the time of her death either by will or by
operation of law.
If we sustain the position of the NHA that this document is not
a will, then the interests of the decedent should transfer by
virtue of an operation of law and not by virtue of a resolution
by the NHA. For as it stands, NHA cannot make another

contract to sell to other parties of a property already initially

paid for by the decedent. Such would be an act contrary to the
38
law on succession and the law on sales and obligations.
When the original buyer died, the NHA should have considered
39
the estate of the decedent as the next "person" likely to stand
in to fulfill the obligation to pay the rest of the purchase price.
The opposition of other heirs to the repurchase by Francisca
Herrera should have put the NHA on guard as to the award of
the lots. Further, the Decision in the said Civil Case No. B-1263
(questioning the Deed of Self-Adjudication) which rendered the
40
deed therein null and void should have alerted the NHA that
there are other heirs to the interests and properties of the
decedent who may claim the property after a testate or
intestate proceeding is concluded. The NHA therefore acted
arbitrarily in the award of the lots.
We need not delve into the validity of the will. The issue is for
the probate court to determine. We affirm the Court of Appeals
and the Regional Trial Court which noted that it has an element
of testamentary disposition where (1) it devolved and
transferred property; (2) the effect of which shall transpire upon
41
the death of the instrument maker.
IN VIEW WHEREOF, the petition of the National Housing
Authority is DENIED. The decision of the Court of Appeals in
CA-G.R. No. 68370 dated August 28, 2003, affirming the
decision of the Regional Trial Court of San Pedro, Laguna in
Civil Case No. B-2780 dated March 9, 1998, is hereby
AFFIRMED.
No cost.
SO ORDERED.

G.R. No. 102358 November 19, 1992

SPOUSES VICENTE and GLORIA MANALO, petitioners,
vs.
HON. NIEVES ROLDAN-CONFESOR, in her capacity as
Undersecretary of Labor and Employment, JOSE
SARMIENTO as POEA Administrator, CAREERS PLANNERS
SPECIALISTS INTERNATIONAL, INC., and SPOUSES VICTOR
and ELNORA FERNANDEZ, respondents.

BELLOSILLO, J.:
The Court views with grave concern the alarming incidents of
illegal recruitment which demonstrate all too clearly that
overseas employment has fast developed into a major source
not only of much-needed foreign exchanged but also, for the
cunning and the crafty, of easy money.

ADMIN LAW 1st Set

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In response to a newspaper advertisement looking for a couple

to work as driver and tutor cum baby sitter, petitioners Vicente
and Gloria Manalo went to Career Planners Specialists
International, Inc. (CPSI), a licensed service contracting firm
owned by private respondents, the spouses Victor and Elnora
Fernandez. After the requisite interview and testing, they were
hired to work for a family in Saudi Arabia for a monthly salary
of US$350.00 each. According to petitioners, a placement fee
of P40,000.00 was imposed as a precondition for the
processing of their papers. They paid only P30,000.00 in cash
and executed a promissory note for the balance. Then they
were allowed by respondent Elnora Fernandez to sign their
contract papers but did not issue a receipt for the placement
fee despite demand.
Shortly before boarding their flight to Saudi Arabia, petitioners
were handed their contracts. According to Gloria, she was
surprised to discover that her position had been changed to
that of domestic help. However, a CPSI employee assured her
that the change was only for the purpose of facilitating her
departure and did not in any way alter her employment as
tutor. Incidentally, CPSI provided petitioners with the Travel Exit
Pass (TEP) of Filipino Manpower Services, Inc. (FILMAN), a duly
licensed recruitment agency.
Contrary to the representation of her recruiter, Gloria was
actually hired as a domestic help and not as a tutor, so that
after working for only twenty-five (25) days in Jeddah, she
returned to Manila. Soon after, Vicente also resigned from his
work and followed her home. He could not stand the
unbearable working conditions of his employment. However,
before leaving, he had to execute a promissory note to cover
his plane fare which respondent Victor Fernandez advanced.
Vicente also had to sign a quitclaim in favor of CPSI and his
employer.
On 29 February 1988, petitioners sued private respondents
before the Philippines Overseas Employment Administration
1
(POEA) charging them with illegal exaction, false
2
adverstisement, and violation of other pertinents laws, rules
and regulations. They demanded the refund of the amount
exacted from them, plus payment of moral damages and the
3
imposition of administrative sanctions.
Private respondents countered: (1) that Gloria applied as
domestic help fully aware that she could not be a tutor since
she did not speak Arabic; (2) that the promissory note for
P10,000.00 was required of petitioners because they were hired
without paying placement fees; (3) that it was unlikely for
petitioners, who were mature, educated and experienced in
overseas work, to part with P30,000.00 without securing a
receipt; (4) that Vicente executed a quitclaim in favor of CPSI
duly authenticated by embassy officials in Saudi Arabia; (5) that
there was no impropriety in having the employment papers of
petitioners processed by FILMAN because it was a sister
company of CPSI, and private respondents Victor and Elnora
were officers in both agencies.

Private respondents prayed for the disqualification of

petitioners from overseas employment, and sought to recover
from them the SR 1,150 plane fare advanced by Victor for
Vicente, P10,000.00 as placement fee evidenced by a
promissory note, and attorney's fees.
Mainly, on the basis of the transcripts of petitioners'
testimonies in the clarificatory questioning before the Rizal
4
Provincial Prosecutor in a related criminal case, the POEA
issued its Order of 7 May 1990 giving more weight and
credence to petitioners' version thus
After a careful evaluation of the facts and the
evidence presented, we are more inclined to
give weight to complainants' posture.
Complainants'
version
of
the
case
spontaneously presented in their pleadings
is, to our mind, more convincing than
respondent's stand. Moreover, the manner
by which complainants narrated the whole
incident inspired belief in the allegation that
respondent Career is indeed guilty of illegal
exaction. Thus, the actual expenses incurred
by
herein
complainants
computed
hereinbelow less the allowable fees of
P3,000.00 (P1,500.00 per worker, respondent
being a service contractor) should be
returned to them.
Actual Expenses
P30,000.00 placement
fees
14.00 application form
300.00 psychological
test
1,400.00 medical exam
P31,000.00 total
less 3,000.00 processing
fees
at
P1,500.00 per applicant
P28,714.00 amount to
be refunded
It appearing, however, that only respondent
Career Planners Specialist(s) Int'l. Inc., took
part in the collection of the aforesaid
amount, the same should be solely held
liable.
We cannot likewise give credence to the
Final Quitclaim signed by complainant
Vicente Manalo before he left for the
Philippines and presented by respondent as
defense. While its genuineness may not be in
question, we believe that it has no bearing

ADMIN LAW 1st Set

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on the issue at bar. The aforesaid Quitclaim

deals more with matters concerning
complainants' employment abroad. However,
the subject of the instant claim is the refund
of complainants' expenses prior to their
deployment to Saudi Arabia.
On the other hand, we hold FILMAN liable
for allowing its document such as the TEP to
be used by other agency. Respondent's
defense that there is nothing wrong in this
because FILMAN is a sister company of
CAREER does not merit consideration
because such practice is not allowed under
the POEA Rules and Regulations. A check
with our records, however, showed that
respondent FILMAN had been put in the list
of forever banned agencies effective April 5,
1989.
Anent the claim for moral damages, this
Office has no jurisdiction to entertain the
same.
WHEREFORE, . . . the Authority of Career
Planners Specialist(s) International is hereby
suspended for four (4) months or in lieu
thereof, a fine of P40,000.00 is hereby
imposed for illegal exaction on two counts
plus restitution of the amount of P28,714.00
to herein complainants in both instances.
Filipino Manpower Services, Inc. is hereby
meted a fine of P40,000.00 for two counts of
misrepresentation.
Its
perpetual
disqualification from recruitment activities is
hereby reiterated.
The claim for moral damages is dismissed for
lack of jurisdiction.
Respondent Career's counterclaim is likewise
5
dismissed or lack of merit.
Private respondents filed a motion for reconsideration and on 4
February 1991, POEA issued a resolution setting arise its earlier
order stating that
It is worth mentioning at this point that our
sole basis for holding respondent Career
liable for illegal exaction was the
uncorroborated
testimony
of
the
complainants.
As we have consistently held, (the) charge of
illegal exaction is a serious charge which may
cause the suspension or cancellation of the
authority or license of the offending agency.

Hence,
it
should
be
proven
and
substantiated by a clear and convincing
evidence. Mere allegation of complainant
that the agency charged more than the
authorized fee will not suffice to indict the
agency for illegal exaction unless the
allegation
is
supported
by
other
corroborative circumstantial evidence.
Thus, for lack of concrete evidence or proof
to support our initial findings, we are inclined
to reconsider the penalty imposed upon
respondent.
Foregoing premises, the penalty of
suspension imposed upon respondent
Career Planners Specialist(s) International,
Inc. pursuant to our Order dated May 7, 1990
is hereby LIFTED.
Accordingly,
the alternative fine of
P40,000.00 which was paid under protest by
respondent is hereby ordered refunded to
6
them.
Petitioners appealed to the Secretary of Labor. On 5 July 1991,
then Undersecretary of Labor Ma. Nieves Roldan-Confesor
(now Secretary of Labor) sustained the reconsideration of
POEA. Her Order reads in part
We find . . . no cogent reason or sufficient
justification to reverse or modify the assailed
Order.
Records reveal that the only basis for holding
respondent Career Planners Specialist(s)
International, Inc., liable for illegal exaction,
as held in the previous POEA Order dated
May 7, 1990 was the uncorroborated
testimony of the complainants. There was no
concrete evidence or proof to support the
POEA Administrator's initial findings.
We take this opportunity to inform the
complainants that the charge of illegal
exaction is a serious charge which may cause
the suspension or cancellation of the
authority or license of a recruitment agency.
Therefore, said charge must be proven and
substantiated by clear and convincing
evidence. A mere allegation will not suffice to
find an agency liable for illegal exaction
unless said allegation is supported by other
corroborative circumstantial evidence. In this
connection, records show that complainants
could not narrate the specific circumstances
surrounding their alleged payment of the
amount of P30,000.00. They could not even

ADMIN LAW 1st Set

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remember the specific date when said

amount was paid to respondent agency. In
addition, when complainants were separately
questioned as to how the money was kept
bundled together prior to being handed to
respondent agency for payment, Gloria
Manalo said it was wrapped in a piece of
paper while Vicente Manalo said it was
7
placed inside an envelope.
On the charge of petitioners that they were given jobs
(driver/domestic help) different from those advertised by
private respondents, the Undersecretary ruled that there was
no misrepresentation by way of false advertisement because it
was established that private respondents also caused to be
printed in the same newspaper page a second box looking for
a couple driver/domestic help.
In her Order of 9 October 1991, then Undersecretary Ma.
Nieves Roldan-Confesor denied petitioners' motion for
reconsideration. 8
In the present recourse, petitioners claim that public
respondent POEA committed a fatal jurisdictional error when it
resolved private respondents' motion for reconsideration in
violation of Rule V, Book VI of the 1985 POEA Rules and
Regulations directing the transmittal of motions for
reconsideration to the National Labor Relations Commission
(NLRC) for determination. Consequently, for want of legal
competence to act on said motion, the Order of 4 February
1991, as well as the subsequent orders of public respondent
Undersecretary of Labor dated 5 July 1991 and 9 October 1991,
is null and void.
In Aguinaldo Industries Corporation v. Commissioner of Internal
9
Revenue We ruled
To allow a litigant to assume a different
posture when he comes before the court and
challenge the position he had accepted at
the administrative level, would be to sanction
a procedure whereby the court which is
supposed
to review administrative
determinations would not review, but
determine and decide for the first time, a
question not raised at the administrative
forum. This cannot be permitted, for the
same reason that underlies the requirement
of prior exhaustion of administrative
remedies to give administrative authorities
the prior opportunity to decide controversies
within its competence, and in much the same
way that, on the judicial level, issues not
raised in the lower court cannot be raised for
the first time on appeal.
The alleged procedural lapse by respondent POEA was raised
by petitioners only before Us, notwithstanding that such
ground was already existing when they appealed to the

Secretary of Labor. Ironically, petitioners now question the

jurisdiction of the Secretary of Labor over the appeal which
they themselves elevated to that office. When petitioners filed
their motion for reconsideration with the Undersecretary of
Labor, this procedural issue was not even mentioned. Clearly, it
would be the height of unfairness and inequity if We now allow
petitioners to backtrack after getting an unfavorable verdict
from public respondents whose authority they themselves
10
involved. In Tijam v. Sibonghanoy We said: ". . . we frown
upon the "undesirable practice" of a party submitting his case
for decision and then accepting the judgment, only if favorable,
and attacking it for lack of jurisdiction, when adverse . . . ."
In this regard, however, We find no procedural infirmity
constituting reversible error.
11

The 1985 POEA Rules and Regulations is divided into eight

(8) Books. Book VI, cited by petitioners, is entitled "Adjudication
Rules". The procedure outlined therein relates to the original
and exclusive jurisdiction exercised by POEA through its
Adjudication Department "to hear and decide all cases
involving employer-employee relations arising out of or by
virtue of a law or contact involving Filipino workers for
overseas employment," involving "[v]iolation of the terms and
conditions of employment . . . . [d]isputes relating to the
implementation and interpretation of employment contracts . .
. [m]oney claims of workers against their employers and/or
their duly authorized agents in the Philippines or vice versa . . . .
[c]laims for death, disability and other benefits arising out of
employment . . . . and . . . . [v]iolations of our non-compliance
with any compromise agreement entered into by and between
the parties in an overseas employment contract."
On the other hand, Book II entitled "Licensing and Regulations"
of the 1985 POEA Rules and Regulations, notably Rule VI cited
by private respondents, refers particularly to the procedure for
suspension, cancellation and revocation of Authority or
12
License through the POEA Licensing and Regulation Office
(LRO).
The controversy in the present case centers on the liability of
private respondents for illegal exaction, false advertisement
and violation of pertinent laws and rules on recruitment of
overseas workers and the resulting imposition of penalty of
suspension of the Authority of respondent CPSI. Quite plainly,
We are not concerned here with employer-employee relations,
the procedure of which is outlined in Book VI; rather, with the
suspension or revocation of Authority embodied in Book II.
Evidently, no jurisdictional error was accordingly committed
because in cases affecting suspension, revocation or
cancellation of Authority, the POEA has authority under Sec. 18,
Rule VI, Book II, to resolve motions for reconsideration which
may thereafter be appealed to the Secretary of Labor. Section
18, provides: "A motion for reconsideration of an order o
suspension (issued by POEA) or an appeal to the Minister (now
Secretary of Labor) from an order cancelling a license or
authority may be entertained only when filed with the LRO

ADMIN LAW 1st Set

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within ten (10) working days from the service of the order or
decision" (parenthesis supplied).
Petitioners also argue that public respondents gravely abused
their discretion when they violated petitioners' right to
administrative due process by requiring clear and convincing
evidence to establish the charge illegal exaction. This point is
well taken. There was grave abuse of discretion.
In the administrative proceedings for cancellation, revocation
or suspension of Authority or License, no rule requires that
testimonies of complainants be corroborated by documentary
evidence, if the charge of unlawful exaction is substantially
proven. All administrative determinations require only
substantial proof and not clear and convincing evidence as
erroneously contended by pubic respondents.
Clear and convincing proof is ". . . more than mere
preponderance, but not to extent of such certainty as is
required beyond reasonable doubt as in criminal cases . .
13
." while substantial evidence ". . . consists of more than a
mere scintilla of evidence but may be somewhat less than a
14
preponderance . . . ." Consequently, in the hierarchy of
evidentiary values, We find proof beyond reasonable doubt at
the highest level, followed by clear and convincing evidence,
preponderance of evidence, and substantial evidence, in that
order.
That the administrative determination of facts may result in the
suspension or revocation of the authority of CPSI does not
require a higher degree of proof. The proceedings are
administrative,
and
the
consequent
imposition
of
suspension/revocation of Authority/License does not make the
proceedings criminal. Moreover, the sanctions are
administrative and, accordingly, their infliction does not give
rise to double jeopardy when a criminal action is instituted for
the same act.
Thus We held in Atlas Consolidated Mining and Development
15
Corporation v. Factoran, Jr.
. . . it is sufficient that administrative findings
of fact are supported by evidence, or
negatively stated, it is sufficient that findings
of fact are not shown to be unsupported by
evidence. Substantial evidence is all that is
needed to support an administrative finding
of fact, and substantial evidence is such
relevant evidence as a reasonable mind
might accept as adequate to support a
conclusion (Ang Tibay v. Court of Industrial
Relations, 69
Phil.
635,
642;
Police
Commission v. Lood, 127 SCRA 762 [1984].
The POEA, after assessing the evidence of both parties, found
that private respondents collected from petitioners P30,000.00
as placement fees; consequently, it ruled that there was illegal
exaction. Surprisingly, without altering its findings of fact, POEA

reconsidered its order. It held that uncorroborated testimonies

were not enough to conclude that illegal exaction was
committed, particularly so that this might result in the
suspension or revocation of respondents' authority to engage
in recruitment activities. The premise that testimonies of
petitioners should be supported by some other form of
evidence is, to say the least, fallacious. In Castillo v. Court of
16
Appeals, where the appellate court reversed the findings of
fact of the trial court by requiring a higher degree of proof, We
held
. . . we find no strong and cogent reason
which justifies the appellate court's deviation
from the findings and conclusions of the trial
court. As pointed out in Hernandez v.
Intermediate Appellate Court (189 SCRA 758
[1990]), in agrarian cases, all that is required
is mere substantial evidence. Hence, the
agrarian court's findings of fact which went
beyond the minimum evidentiary support
demanded by law, that is, supported by
substantial evidence, are final and conclusive
and cannot be reversed by the appellate
tribunal.
The seeming discrepancy in the statements of the witnesses
(one saying the money was wrapped in paper, the other, that
the money was in an envelope; neither testified on the specific
date of the exaction), refers only to minor details. Perhaps it
would be different if the variance refers to essential points, e.g.,
whether the amount of P30,000.00 was actually paid by
petitioners to private respondents. Consequently, whether the
money was wrapped in paper, or placed in an envelope, or
unwrapped or whether the parties could not recall when there
payment was effected is unimportant. After all, the money
could have been wrapped in paper and placed in the envelope,
or placed in the envelope without being wrapped, or wrapped
with use of an unpasted envelope that appeared to be the
envelope itself. In either case, petitioners, could have viewed
them differently; but the difference is ultimately
inconsequential. The crucial point to consider is that the
petitioners categorically and unequivocally testified that
respondents collected from them the amount of P30,000.00 as
their placement fees and that they paid the amount demanded.
In this regard, it may be worth to emphasize that only
substantial evidence, not necessarily clear and convincing
evidence, is required. Moreover, when confronted with
conflicting assertions, the rule that "as between a positive and
categorical testimony which has a ring of truth on one hand,
and a bare denial on the other, the former is generally held to
17
prevail . . . ." applies.
But even on the supposition that there was no payment of
P30,000.00, it cannot be denied that private respondents
required petitioners to execute a promissory note for
P10,000.00 purportedly because petitioners were hired without
paying placement fees. The mere charging of P10,000.00,
standing alone, is enough to hold private respondents
answerable for illegal exaction because the allowable amount

ADMIN LAW 1st Set

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to be collected per contract worker according to respondent

POEA was only P1,500.00, or P3,000.00 for both petitioners.
WHEREFORE, the petition is GRANTED. The challenged Orders
of respondent Undersecretary of Labor dated 5 July 1991 and 9
October 1991, as well as the Resolution of respondent POEA
dated 4 February 1991, having been issued with grave abuse of
discretion amounting to lack or excess of jurisdiction are SET
ASIDE, and the original Order of respondent POEA dated 7 May
1990 is ordered REINSTATED and AFFIRMED.
SO ORDERED.

G.R. No. 169067

REPUBLIC OF THE PHILIPPINES,
Petitioner, - versus
ANGELO B. MALABANAN, PABLO B. MALABANAN,
GREENTHUMB REALTY AND DEVELOPMENT
CORPORATION and THE REGISTRAR OF DEEDS OF
BATANGAS,
Respondents.
Promulgated: October 6, 2010
DECISION
VILLARAMA, JR., J.:
This petition for review on certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, seeks to
[1]
overturn the Resolution dated July 20, 2005 of the Court of
Appeals (CA) in CA-G.R. CV No. 70770 dismissing petitioners
appeal.
The facts are as follows:
Respondents Angelo B. Malabanan and Pablo B.
Malabanan were registered owners of a 405,000-square-meter
parcel of land situated in Talisay, Batangas and covered by
[2]
Transfer Certificate of Title (TCT) No. T-24268 of the Register
of Deeds of Tanauan, Batangas. Said parcel of land was
originally registered on April 29, 1936 in the Register of Deeds
of Batangas under Original Certificate of Title (OCT) No. 0[3]
[4]
17421 pursuant to Decree No. 589383 issued in L.R.C.
Record No. 50573. OCT No. 0-17421 was cancelled and was
replaced with TCT No. T-9076 from which respondents title,
TCT No. T-24268, was derived. The parcel of land was later
subdivided into smaller lots resulting in the cancellation of TCT
No. T-24268. The derivative titles are now either in the names
of the Malabanans or respondent Greenthumb Realty and
Development Corporation.
Petitioner Republic of the Philippines claims that in an
investigation conducted by the Department of Environment
and Natural Resources (Region IV), it was revealed that the land
covered by TCT No. T-24268 was within the unclassified
public forest of Batangas per L.C. CM No. 10. This prompted
[5]
petitioners filing of a complaint for reversion and cancellation
of title against respondents on March 30, 1998. The case was
docketed as Civil Case No. T-1055 and raffled off to Branch 83
of the Regional Trial Court (RTC) of Batangas. The case was
later re-docketed as Civil Case No. C-192.

On May 5, 1998, the Malabanans filed a Motion to

[6]
Dismiss. They argued that the complaint failed to state a
cause of action; the court has no jurisdiction over the subject
[7]
matter; the complaint violates Section 7, Rule 8 of the 1997
Rules of Civil Procedure, as amended, since petitioner did not
attach a copy of Decree No. 589383 of the Court of First
Instance of Batangas, pursuant to which OCT No. 0-17421 was
issued in LRC Record No. 50573; and that a similar complaint
for reversion to the public domain of the same parcels of land
between the same parties has already been dismissed by the
same court.
[8]
In an Order dated December 11, 1998, the trial court
dismissed the complaint. The salient portions of the order read:
A similar complaint for reversion to
the public domain of the same parcels of
land was filed with this Court on July 14,
1997 by
plaintiff
against
defendantsmovants. The case, docketed as Civil Case
No. T-784, was dismissed on December 7,
1992 (sic) for lack of jurisdiction.
As pointed out by movants, the nullification
of Original Certificate of Title No. 0-17421
and all its derivative titles would involve the
nullification of the judgment of the Land
Registration Court which decreed the
issuance of the title over the property.
Therefore, the applicable provision of law is
Section 9 (2) of Batas Pambansa Blg. 129
which vests upon the Court of Appeals
exclusive jurisdiction over actions for
annulment of judgments of the Regional
Trial Court.
Moreover, this Court is aware, and takes
judicial notice, of the fact that the parcels
of land, subject of reversion had been the
subject of several cases before this Court
concerning the ownership and possession
thereof by defendants-movants. These
cases were even elevated to the Court of
Appeals and the Supreme Court which, in
effect, upheld the ownership of the
properties by defendants Malabanans.
Said decisions of this Court, the Court of
Appeals, and the Supreme Court should
[9]
then also be annulled. (Emphasis and
underscoring supplied.)
On January 5, 1999, petitioner filed a Notice of
[10]
Appeal
from the order of dismissal. On January 18, 1999, the
Malabanans moved to deny due course and to dismiss appeal
arguing that petitioner, in filing a notice of appeal, adopted an
improper mode of appeal. The Malabanans contended that the
issue of jurisdiction of the trial court over the complaint filed by
petitioner is a question of law which should be raised before
the Supreme Court via a petition for review on certiorari
[11]
under Rule 45.
On June 29, 1999, the trial court issued an
[12]
Order
denying due course and dismissing petitioners
[13]
appeal. However, on certiorari,
docketed as CA-G.R. SP No.
54721, said order was reversed by the CA on February 29, 2000.
The CA ruled that the determination of whether or not an

ADMIN LAW 1st Set

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appeal may be dismissed on the ground that the issue involved

is purely a question of law is exclusively lodged within the
discretion of the CA. Consequently, the trial court was directed
to give due course to petitioners appeal and order the
[14]
transmittal of the original records on appeal to the CA.
[15]
Petitioner, in its Appeal Brief
filed before the CA,
raised this lone assignment of error:
THE COURT A QUO ERRED IN DISMISSING
THE COMPLAINT ON THE GROUND OF LACK
[16]
OF JURISDICTION.
A perusal of the arguments in the brief reveals that not only did
petitioner raise the jurisdictional issue, it likewise questioned the
portion of the dismissal order where it was held that several
cases involving the subject land have already been filed and in
those cases, the CA and the Supreme Court have upheld
respondents ownership. Petitioner argued that the question
of whether the right of the Malabanans had, in fact, been
upheld is factual in nature and necessarily requires
[17]
presentation of evidence.
On July 20, 2005, however, the CA issued the assailed
Resolution dismissing petitioners appeal, holding that the issue
of jurisdiction, being a pure question of law, is cognizable only
by the Supreme Court via a petition for review on certiorari. It
[18]
dismissed petitioners appeal under Section 2,
Rule 50 of
the 1997 Rules of Civil Procedure, as amended.
Before us, petitioner raises the sole issue of:
WHETHER THE
COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR IN
DISMISSING PETITIONERS APPEAL FOR BEING
THE WRONG MODE TO ASSAIL THE TRIAL
[19]
COURTS ORDER.
Petitioner argues that the issue surrounding the
validity of the order dismissing the complaint does not only
involve a question of law but also involves a question of fact.
The question of fact pertains to the portion of the trial courts
assailed order which stated that the Malabanans ownership
had been upheld by the CA and the Supreme Court. Petitioner
contends that the question of whether such right had in fact
been upheld is factual in nature. Petitioner adds that the trial
court has jurisdiction over the complaint and should not have
dismissed the complaint in the first place.
Respondents, on the other hand, counter that there
are no factual issues involved because they are deemed to
have hypothetically admitted the truth of the facts alleged in
the complaint when they filed a motion to dismiss.
The petition is meritorious.
[20]
In Murillo v. Consul,
we had the opportunity to
clarify the three (3) modes of appeal from decisions of the RTC,
to wit: (1) by ordinary appeal or appeal by writ of error under
[21]
Rule 41,
where judgment was rendered in a civil or criminal
action by the RTC in the exercise of original jurisdiction; (2) by
[22]
petition for review under Rule 42, where judgment was
rendered by the RTC in the exercise of appellate jurisdiction;
and (3) by petition for review on certiorari to the Supreme
[23]
Court under Rule 45.
The first mode of appeal is taken to the
CA on questions of fact or mixed questions of fact and law. The
second mode of appeal is brought to the CA on questions of
fact, of law, or mixed questions of fact and law. The third mode
of appeal is elevated to the Supreme Court only on questions
[24]
of law.

[25]

And in Leoncio v. De Vera, this Court has

differentiated a question of law from a question of fact. A
question of law arises when there is doubt as to what the law is
on a certain state of facts, while there is a question of fact when
the doubt arises as to the truth or falsity of the alleged facts. For
a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by
the litigants or any of them. The resolution of the issue must rest
solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of
the evidence presented, the question posed is one of fact. Thus,
the test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same;
rather, it is whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which
[26]
case, it is a question of law; otherwise it is a question of fact.
Here, petitioners appeal does not only involve a
question of law. Aside from the trial courts ruling that it has
no jurisdiction over the complaint, petitioner likewise
questioned the other basis for the trial courts ruling, which
refers to previously decided cases allegedly upholding with
finality the ownership of the Malabanans over the disputed
property. As correctly argued by petitioner, the question of
whether the ownership of the Malabanans has in fact been
sustained with finality is factual in nature as it requires the
presentation of evidence.
Since the appeal raised mixed questions of fact and
law, no error can be imputed on petitioner for invoking the
appellate jurisdiction of the CA through an ordinary appeal
under Rule 41.
WHEREFORE, the Resolution dated July 20, 2005 of the Court
of Appeals in CA-G.R. CV No. 70770 is REVERSED and SET
ASIDE. Petitioners appeal is REINSTATED and the instant case
is REMANDED to the Court of Appeals, which is directed to
proceed with the usual appeal process therein with deliberate
dispatch.
No costs.
SO ORDERED.

G.R. No. 88550

April 18, 1990

INDUSTRIAL ENTERPRISES, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, MARINDUQUE MINING &
INDUSTRIAL CORPORATION, THE HON. GERONIMO
VELASCO in his capacity as Minister of Energy and
PHILIPPINE NATIONAL BANK, respondents.
Manuel M. Antonio and Dante Cortez for petitioner.
Pelaez, Adriano & Gregorio for respondent MMIC.
The Chief Legal Counsel for respondent PNB.

MELENCIO-HERRERA, J.:

ADMIN LAW 1st Set

Page 19 of 150

This petition seeks the review and reversal of the Decision of

1
respondent Court of Appeals in CA-G.R. CV No. 12660, which
ruled adversely against petitioner herein.
Petitioner Industrial Enterprises Inc. (IEI) was granted a coal
operating contract by the Government through the Bureau of
Energy Development (BED) for the exploration of two coal
blocks in Eastern Samar. Subsequently, IEI also applied with the
then Ministry of Energy for another coal operating contract for
the exploration of three additional coal blocks which, together
with the original two blocks, comprised the so-called "Giporlos
Area."
IEI was later on advised that in line with the objective of
rationalizing the country's over-all coal supply-demand balance
. . . the logical coal operator in the area should be the
Marinduque Mining and Industrial Corporation (MMIC), which
was already developing the coal deposit in another area
(Bagacay Area) and that the Bagacay and Giporlos Areas should
be awarded to MMIC (Rollo, p. 37). Thus, IEI and MMIC
executed a Memorandum of Agreement whereby IEI assigned
and transferred to MMIC all its rights and interests in the two
coal blocks which are the subject of IEI's coal operating
contract.
Subsequently, however, IEI filed an action for rescission of the
Memorandum of Agreement with damages against MMIC and
the then Minister of Energy Geronimo Velasco before the
2
Regional Trial Court of Makati, Branch 150, alleging that MMIC
took possession of the subject coal blocks even before the
Memorandum of Agreement was finalized and approved by
the BED; that MMIC discontinued work thereon; that MMIC
failed to apply for a coal operating contract for the adjacent
coal blocks; and that MMIC failed and refused to pay the
reimbursements agreed upon and to assume IEI's loan
obligation as provided in the Memorandum of Agreement
(Rollo, p. 38). IEI also prayed that the Energy Minister be
ordered to approve the return of the coal operating contract
from MMIC to petitioner, with a written confirmation that said
contract is valid and effective, and, in due course, to convert
said contract from an exploration agreement to a
development/production or exploitation contract in IEI's favor.
Respondent, Philippine National Bank (PNB), was later
impleaded as co-defendant in an Amended Complaint when
the latter with the Development Bank of the Philippines
effected extra-judicial foreclosures on certain mortgages,
particularly the Mortgage Trust Agreement, dated 13 July 1981,
constituted in its favor by MMIC after the latter defaulted in its
obligation totalling around P22 million as of 15 July 1984. The
Court of Appeals eventually dismissed the case against the PNB
(Resolution, 21 September 1989).
Strangely enough, Mr. Jesus S. Cabarrus is the President of
both IEI and MMIC.
In a summary judgment, the Trial Court ordered the rescission
of the Memorandum of Agreement, declared the continued
efficacy of the coal operating contract in favor of IEI; ordered

the reversion of the two coal blocks covered by the coal

operating contract; ordered BED to issue its written affirmation
of the coal operating contract and to expeditiously cause the
conversion thereof from exploration to development in favor of
IEI; directed BED to give due course to IEI's application for a
coal operating contract; directed BED to give due course to
IEI's application for three more coal blocks; and ordered the
payment of damages and rehabilitation expenses (Rollo, pp. 910).
In reversing the Trial Court, the Court of Appeals held that the
rendition of the summary judgment was not proper since there
were genuine issues in controversy between the parties, and
more importantly, that the Trial Court had no jurisdiction over
the action considering that, under Presidential Decree No.
1206, it is the BED that has the power to decide controversies
relative to the exploration, exploitation and development of
coal blocks (Rollo, pp. 43-44).
Hence, this petition, to which we resolved to give due course
and to decide.
Incidentally, the records disclose that during the pendency of
the appeal before the Appellate Court, the suit against the then
Minister of Energy was dismissed and that, in the meantime, IEI
had applied with the BED for the development of certain coal
blocks.
The decisive issue in this case is whether or not the civil court
has jurisdiction to hear and decide the suit for rescission of the
Memorandum of Agreement concerning a coal operating
contract over coal blocks. A corollary question is whether or
not respondent Court of Appeals erred in holding that it is the
Bureau of Energy Development (BED) which has jurisdiction
over said action and not the civil court.
While the action filed by IEI sought the rescission of what
appears to be an ordinary civil contract cognizable by a civil
court, the fact is that the Memorandum of Agreement sought
to be rescinded is derived from a coal-operating contract and
is inextricably tied up with the right to develop coal-bearing
lands and the determination of whether or not the reversion of
the coal operating contract over the subject coal blocks to IEI
would be in line with the integrated national program for coaldevelopment and with the objective of rationalizing the
country's over-all coal-supply-demand balance, IEI's cause of
action was not merely the rescission of a contract but the
reversion or return to it of the operation of the coal blocks.
Thus it was that in its Decision ordering the rescission of the
Agreement, the Trial Court, inter alia, declared the continued
efficacy of the coal-operating contract in IEI's favor and
directed the BED to give due course to IEI's application for
three (3) IEI more coal blocks. These are matters properly
falling within the domain of the BED.
For the BED, as the successor to the Energy Development
Board (abolished by Sec. 11, P.D. No. 1206, dated 6 October
1977) is tasked with the function of establishing a
comprehensive and integrated national program for the

ADMIN LAW 1st Set

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exploration, exploitation, and development and extraction of

fossil fuels, such as the country's coal resources; adopting a
coal development program; regulating all activities relative
thereto; and undertaking by itself or through service contracts
such exploitation and development, all in the interest of an
effective and coordinated development of extracted resources.
Thus, the pertinent sections of P.D. No. 1206 provide:
Sec. 6. Bureau of Energy Development. There is created
in the Department a Bureau of Energy Development,
hereinafter referred to in this Section as the Bureau,
which shall have the following powers and functions,
among others:
a.
Administer
a national
program for
the
encouragement, guidance, and whenever necessary,
regulation of such business activity relative to
the exploration,
exploitation,
development,
and
extraction of fossil fuels such as petroleum, coal, . . .
The decisions, orders, resolutions or actions of the
Bureau may be appealed to the Secretary whose
decisions are final and executory unless appealed to
the President. (Emphasis supplied.)
That law further provides that the powers and functions of the
defunct Energy Development Board relative to the
implementation of P.D. No. 972 on coal exploration and
development have been transferred to the BED, provided that
coal operating contracts including the transfer or assignment
of interest in said contracts, shall require the approval of the
Secretary (Minister) of Energy (Sec. 12, P.D. No. 1206).
Sec. 12. . . . the powers and functions transferred to
the Bureau of Energy Development are:
xxx

xxx

xxx

ii. The following powers and functions of the Energy

Development Board under PD No. 910 . . .
(1) Undertake by itself or through other arrangements,
such as service contracts, the active exploration,
exploitation, development, and extraction of energy
resources . . .
(2) Regulate all activities relative to the exploration,
exploitation, development, and extraction of fossil and
nuclear fuels . . .

Sec. 8. Each coal operating contract herein authorized

shall . . . be executed by the Energy Development
Board.
Considering the foregoing statutory provisions, the jurisdiction
of the BED, in the first instance, to pass upon any question
involving the Memorandum of Agreement between IEI and
MMIC, revolving as its does around a coal operating contract,
should be sustained.
In recent years, it has been the jurisprudential trend to apply
the doctrine of primary jurisdiction in many cases involving
matters that demand the special competence of administrative
agencies. It may occur that the Court has jurisdiction to take
cognizance of a particular case, which means that the matter
involved is also judicial in character. However, if the case is
such that its determination requires the expertise, specialized
skills and knowledge of the proper administrative bodies
because technical matters or intricate questions of facts are
involved, then relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts
even though the matter is within the proper jurisdiction of a
court. This is the doctrine of primary jurisdiction. It applies
"where a claim is originally cognizable in the courts, and comes
into play whenever enforcement of the claim requires the
resolution of issues which, under a regulatory scheme, have
been placed within the special competence of an
administrative body, in such case the judicial process is
suspended pending referral of such issues to the administrative
body for its view" (United States v. Western Pacific Railroad Co.,
352 U.S. 59, Emphasis supplied).
Clearly, the doctrine of primary jurisdiction finds application in
this case since the question of what coal areas should be
exploited and developed and which entity should be granted
coal operating contracts over said areas involves a technical
determination by the BED as the administrative agency in
possession of the specialized expertise to act on the matter.
The Trial Court does not have the competence to decide
matters concerning activities relative to the exploration,
exploitation, development and extraction of mineral resources
like coal. These issues preclude an initial judicial determination.
It behooves the courts to stand aside even when apparently
they have statutory power to proceed in recognition of the
primary jurisdiction of an administrative agency.
One thrust of the multiplication of administrative
agencies is that the interpretation of contracts and the
determination of private rights thereunder is no
longer a uniquely judicial function, exercisable only by
our regular courts (Antipolo Realty Corp. vs. National
Housing Authority, 153 SCRA 399, at 407).

(P.D. No. 1206) (Emphasis supplied.)

P.D. No. 972 also provides:

The application of the doctrine of primary jurisdiction, however,

does not call for the dismissal of the case below. It need only
be suspended until after the matters within the competence of
the BED are threshed out and determined. Thereby, the
principal purpose behind the doctrine of primary jurisdiction is
salutarily served.

ADMIN LAW 1st Set

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Uniformity and consistency in the regulation of

business entrusted to an administrative agency are
secured, and the limited function of review by the
judiciary are more rationally exercised, by preliminary
resort, for ascertaining and interpreting the
circumstances underlying legal issues, to agencies that
are better equipped than courts by specialization, by
insight gained through experience, and by more
flexible procedure (Far East Conference v. United
States, 342 U.S. 570).
With the foregoing conclusion arrived at, the question as to the
propriety of the summary judgment rendered by the Trial Court
becomes unnecessary to resolve.
WHEREFORE, the Court Resolved to DENY the petition. No
costs.
SO ORDERED.

[G.R. No. 158455. June 28, 2005]

SHERWILL DEVELOPMENT CORPORATION, petitioner, vs.
SITIO STO. NIO RESIDENTS ASSOCIATION, INC.
and/or NILDA DEVILLERES, and the LANDS
MANAGEMENT BUREAU, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing the
[1]
Order of the Regional Trial Court (RTC) of Muntinlupa City,
Branch 205, dismissing Civil Action No. 02-237 on the ground
of litis pendentia and forum shopping.
Petitioner Sherwill Development Corporation is the
registered owner of two parcels of land in Muntinlupa, Rizal.
Lot 88 is covered by Transfer Certificate of Title (TCT) No.
[2]
131918 consisting of 8,774 square meters, while Lot 86, with
an area of 16,766 square meters, is covered by TCT No.
[3]
131919. Both lots form part of the Muntinlupa Estate, while
the titles thereon were issued by the Registry of Deeds of Rizal
on September 24, 1913.
On October 16, 2002, the petitioner filed a
[4]
Complaint for quieting of title against respondents Sitio Sto.
Nio Residents Association, Inc. (SSNRAI), Nilda Devilleres, and
the Lands Management Bureau (LMB). The petitioner made the
following allegations in its complaint:
6. Since petitioner acquired subject two (2) lots in 1984, it has
dutifully paid realty taxes thereon. A copy of its latest taxpayment receipt is attached as Annex E.
7. In the late 1960s and the 1970s, and up to the 1980s,
unauthorized persons, without the prior knowledge and
consent of petitioner and/or Mr. Lipio, by force, stealth and
strategy, unlawfully entered and occupied the lots covered by
TCT Nos. 131918 and 131919. Among said unauthorized

persons are members and officers of SSNRAI, Devilleres

included;
8. Said LMB Case No. 7-98 is the first step of respondents to
disturb and/or cast clouds on TCT Nos. 131918 and 131919, as
in fact they are disturbing and casting clouds over said titles.
From all indications, LMB is set to recommend to the
Philippine Government, [through] the Office of the Solicitor
General (OSG), the nullification of TCT Nos. 131918 and 131919
and/or the reversion thereof to the Philippine Government,
despite the fact that the latter, sometime in 1927 or
thereabout, sold and/or disposed of subject lots, then covered
by Original Certificate of Title (OCT) No. 684, pursuant to Act
No. 1120 and other pertinent laws. Petitioner is the third or
fourth transferee and buyer in good faith of the lots in
question. Certainly, its titles (TCT Nos. 131918 and 131919)
have long become indefeasible and conclusive, considering
that indefeasibility and conclusiveness of titles accrue one year
[5]
after the issuance thereof.
As part of its prayer for relief, the petitioner prayed that a
writ of preliminary injunction be issued, ordering the LMB to
cease and desist from proceeding with the hearings in LMB
Case No. 7-98, a case pending before it where petitioners titles
to the subject lots were being questioned by the respondents
SSNRAI and Nilda Devilleres. Thus:
WHEREFORE, petitioner most respectfully prays for the
following:
(a) The immediate issuance of a writ of preliminary injunction
against LMB, ordering it to cease and desist from hearing or
continuing its hearing of LMB Case No. 7-98; thereafter, after
due hearing, the issuance of another order making said
injunction permanent; and
(b) The quieting of title of TCT Nos. 131918 and 131919, and
the complete removal of any and all clouds thereon, and the
accompanying declaration that said titles are indefeasible and
conclusive against the whole world, as in fact they are.
Petitioner further prays for other reliefs which this Honorable
[6]
Court may deem proper to grant.
The trial court set the hearing of the prayer of the writ of
[7]
preliminary injunction at 8:30 a.m. of November 22, 2002. On
November 6, 2002, the private respondents, through counsel,
[8]
filed a Motion to Dismiss the petition on the following
grounds:
(a) THE PETITION ITSELF IS FATALLY DEFECTIVE AS
THE CERTIFICATE OF NON-FORUM SHOPPING
DID NOT SPECIFY AND/OR DISCLOSE THE
PENDENCY OF THE ADMINISTRATIVE CASE,
LANDS MANAGEMENT BUREAU CASE NO. 7-98;
(b) PETITIONER IS GUILTY OF FORUM-SHOPPING;
and

ADMIN LAW 1st Set

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(c) THERE IS ANOTHER ACTION PENDING BETWEEN

THE PARTIES INVOLVING THE SAME SUBJECT
MATTER AND FOR THE SAME CAUSE.
In its opposition to the motion to dismiss, the petitioner
averred that contrary to the private respondents allegations, it
did disclose the pendency of LMB Case No. 7-98 in paragraph
3 of its petition, to wit:
3. Said LMB Case No. 7-98 was filed on May 5, 1995 and is, at
present, being heard by [the] LMB thru Hearing Officer Rogelio
C. Mandar, the same Special Investigator-Designate who, on
Feb. 12, 1998, wrote the LMB Director thru the Chief, Legal
Division, recommending that an order be issued directing the
Surveys Divisions of this Office or its duly-authorized
representatives to conduct verification and relocation survey of
subject lots. In effect, Atty. Mandar as such Hearing Officer has
already prejudged the case in favor of SSNRAI. A copy of the
petition filed by SSNRAI (minus annexes) is attached as Annex
B, and that of Atty. Mandars letter consisting of seven (7) pages
[9]
(minus annexes), as Annex C;
According to the petitioner, there was no identity of
actions and reliefs sought in the two cases. The petitioner
pointed out that in LMB Case No. 7-98, the private respondents
(as the petitioners therein) sought the declaration of the nullity
of the said titles issued in its favor, on their claim that their
issuance was highly irregular and erroneous, and that the
subject properties were not disposed of in accordance with Act
No. 1120, otherwise known as the Friar Lands Act. On the other
hand, in SP Civil Action No. 02-237, the petitioners right of
action was based on the private respondents act of disturbing
and casting clouds over TCT Nos. 131918 and 131919,
considering that such titles have long become indefeasible and
conclusive.
The motion to dismiss filed by the private respondents
[10]
was submitted for resolution on November 15, 2002.
[11]

In its Order dated February 24, 2003, the trial court

dismissed the petition on the grounds of litis pendencia and
forum shopping. In so ruling, the trial court made the following
ratiocination:
As alleged in the petition filed with the LMB itself, quoted
elsewhere in this order, and as shown in the copy of said
petition attached to this petition, herein petitioner is
respondent therein and herein private respondents are
petitioners there. The element of identity of parties is therefore
present. The cause of action and reliefs sought in the two sets
of cases are, likewise, identical. The ultimate issue involved in
both is who between the parties has a better right to the
properties covered by TCT Nos. 131918 and 131919 which are
alleged in the LMB case to originally constitute a portion of the
Muntinlupa Friar Lands Estate titled in the name of the
government. As to the third requirement that the result of the
first action is determinative of the second, it is true here
inasmuch as the Lands Management Bureau, public respondent
herein before which the case earlier filed is pending, absorbed
the functions and powers of the Bureau of Lands (abolished by

Executive Order No. 131) and is mandated by law to implement

the provisions of the Public Land Act (Com. Act No. 141) which
governs the administration and disposition of lands commonly
known as friar lands, so an earlier recourse to it would be an
exercise of the doctrine of exhaustion of administrative
remedies, regardless of which party is successful.
It is clear from the petition that what the petitioner wants is for
this court to enjoin public respondent from proceeding with
the case before it and take over the same which it cannot and
should not do.
WHEREFORE, this case is hereby dismissed on the grounds
of litis pendencia and forum shopping. No cost.
[12]

SO ORDERED.

The petitioner filed a motion for reconsideration, which

[13]
the trial court denied in an Order dated May 29, 2003.
Hence, the present petition, on the following question of
law: whether or not the grounds of litis pendentia and forum
shopping insofar as SP Civil Action No. 02-237 is concerned are
applicable. The petitioner puts forth the following arguments:
1.

THE GROUNDS OF LITIS PENDENCIA AND

FORUM SHOPPING RELIED UPON BY THE
COURT A QUO IN DISMISSING SP. CIVIL ACTION
NO. 02-237 AND DENYING PETITIONERS
MOTION FOR RECONSIDERATION ARE SHAKY
[14]
AT BEST. IN FACT, THEY ARE NON-EXISTENT.

2. MOREOVER, AS ALREADY RAISED BY PETITIONER

IN ITS REPLIES TO RESPONDENTS COMMENTS
ON
ITS
AFORESAID
MOTION
FOR
RECONSIDERATION,
LMB
HAS
NO
JURISDICTION TO TRY LMB CASE NO. 7-98
INASMUCH AS CASES LIKE THIS FALL UNDER
THE EXCLUSIVE ORIGINAL JURISDICTION OF
[15]
REGIONAL TRIAL COURTS.
To bolster its pose that no forum shopping and litis
pendentia exist, the petitioner invokes the ruling of the Court
[16]
in Silahis International Hotel, Inc. v. NLRC, et al., averring that
when a party does not pursue simultaneous remedies in fora,
there is no forum shopping. The petitioner reiterates that the
issue and the causes of action in LMB Case No. 7-98 and SP
Civil Action No. 02-237 are different. It points out that it
certainly is not a party against whom an adverse judgment or
order has been rendered in one forum; neither has it instituted
two or more actions or proceedings grounded on the same
cause. The petitioner further insists that the LMB has no
jurisdiction to try LMB Case No. 7-98; it is the regional trial
courts that have original jurisdiction in such cases. The
petitioner points out that the private respondents failed to file
an action for nullification of TCT Nos. 131918 and 131919
within the one-year period from the date of issuance of the
subject titles and are, therefore, barred from questioning the
said titles. The petitioner further points out that the certificates
of title under the Torrens system of registration cannot be
collaterally attacked. The petitioner concludes that the trial

ADMIN LAW 1st Set

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court should not have dismissed SP Civil Action No. 02-237,

but instead should have given it due course.
The Office of the Solicitor General (OSG), for its part,
points out that the parties in both cases are identical. It further
points out that LMB Case No. 7-98 was filed as early as 1995,
and that the petitioner subsequently initiated SP Civil Action
No. 02-237 obviously to preempt the outcome of the case
before the Lands Management Bureau. Hence, the trial court
correctly dismissed SP Civil Action No. 02-237 on the ground
of litis pendentia.
The OSG further contends that the determination of
whether there was a violation of the Friar Lands Act, the very
issue raised in the two cases, is well within the authority of the
LMB to investigate, it being the agency of the government
charged with administrative control over Friar Land Estates
under Commonwealth Act No. 2550. As such, according to the
OSG, the LMB has primary jurisdiction over the subject matter.
The OSG points out that the petitioners resort to the courts is
premature, considering that the LMB has primary jurisdiction
over the matter.
The OSG, likewise, avers that the petitioner is guilty of
violating Section 5, Rule 7 of the Rules of Court, on certification
against forum shopping. It points out that the petitioners
representative, Roland Leslie V. Lipio, certified under oath that
the petitioner had no knowledge of any action pending before
any tribunal or agency. It further points out that it cannot be
said that the petitioner was unaware of LMB Case No. 7-98,
since it even filed an Answer therein on July 31, 1995. To justify
the dismissal of the case, the OSG cites the ruling of the Court
[17]
in Republic v. Carmel Development, Inc.

The Ruling of the Court

At the outset, the Court notes that the petitioner assails
an order of dismissal issued by the RTC, with direct recourse to
this Court. It must be stressed that in so doing, the petitioner
violated an established policy, one that is necessary to prevent
inordinate demands upon the Courts time and attention which
are better devoted to those matters within its exclusive
jurisdiction, and to prevent further overcrowding of the Courts
[18]
docket. There is, after all, a hierarchy of courts which is
[19]
determinative of the venue of appeals. This rule may be
relaxed only for special and important reasons clearly and
[20]
specifically set out in the petition. The petitioner should thus
have filed its petition first before the Court of Appeals,
conformably with this principle of hierarchy of courts. The
Court notes that the petitioner failed to satisfactorily explain its
failure to comply with or its non-observance of judicial
hierarchy.
Even upon the merits of the case, the petition at bar is still
destined to fail for the following additional reasons:
First. Contrary to the petitioners contention, at this
instance, it is the courts which should defer the exercise of
jurisdiction on the matter. Jurisdiction having been correctly

assumed by the Director of Lands over the parties conflicting

claims, the case should, in accordance with law, remain there
[21]
for final adjudication. After all, the Director of Lands, who is
the officer charged with carrying out the provisions of the
Public Land Act, has control over the survey, classification,
lease, sale or any other form of concession or disposition and
management of the public lands, and his finding and decision
as to questions of fact, when approved by the Secretary of
Agriculture and Natural Resources (now Secretary of
[22]
Environment and Natural Resources), is conclusive.
The power and authority of the Director of Lands were
discussed in the recent case of Republic of the Philippines v. De
[23]
Guzman. According to the Court, the Director of Lands does
not lose authority over the land even upon the issuance of an
original certificate of title over the same. Thus:
The authority of the Director of Lands to investigate conflicts
over public lands is derived from Section 91 of the Public Land
Act. In fact, it is not merely his right but his specific duty to
conduct investigations of alleged fraud in securing patents and
the corresponding titles thereto. While title issued on the basis
of a patent is as indefeasible as one judicially secured, such
indefeasibility is not a bar to an investigation by the Director of
Lands as to how such title had been acquired, if the purpose of
such investigation is to determine whether or not fraud had
been committed in securing such title, in order that the
appropriate action for reversion may be filed by the
[24]
Government.
As a rule then, courts have no jurisdiction to intrude upon
[25]
matters properly falling within the powers of the LMB.
On the petitioners claim that its titles to the subject lots
have been rendered indefeasible, the pronouncement of the
[26]
Court in Republic v. Court of Appeals is instructive:
It is true that under Section 122 of the Land Registration Act, a
Torrens title issued on the basis of a free patent or a
homestead patent is as indefeasible as one judicially secured.
And in repeated previous decisions of this Court that
indefeasibility has been emphasized by our holding that not
even the Government can file an action for annulment, but at
the same time, it has been made clear that an action for
reversion may be instituted by the Solicitor General, in the
name of the Republic of the Philippines. It is also to the public
interest that one who succeeds in fraudulently acquiring title to
a public land should not be allowed to benefit therefrom, and
the State should, therefore, have an even existing authority,
thru its duly-authorized officers, to inquire into the
circumstances surrounding the issuance of any such title, to the
end that the Republic, thru the Solicitor General or any other
officer who may be authorized by law, may file the
corresponding action for the reversion of the land involved to
the public domain, subject thereafter to disposal to other
qualified persons in accordance with law. In other words, the
indefeasibility of a title over land previously public is not a bar
to an investigation by the Director of Lands as to how such title
has been acquired, if the purpose of such investigation is to
determine whether or not fraud had been committed in

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securing such title in order that the appropriate action for

[27]
reversion may be filed by the Government.
Second. The OSG correctly invoked the doctrine of
primary jurisdiction in this case. Indeed, the courts cannot and
will not resolve a controversy involving a question which is
within the jurisdiction of an administrative tribunal, especially
where the question demands the exercise of sound
administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to
[28]
determine technical and intricate matters of fact. The
doctrine of primary jurisdiction applies where a claim is
originally cognizable in the courts, and comes into play
whenever enforcement of the claim requires the resolution of
issues which, under a regulatory scheme, have been placed
within the special competence of an administrative body; in
such case, the judicial process is suspended pending referral of
such issues to the administrative body for its view. And in such
cases, the court cannot arrogate unto itself the authority to
resolve a controversy, the jurisdiction over which is initially
lodged
with
an
administrative
body
of
special
[29]
competence, in this case, the LMB.
Third. The trial court correctly ruled that the petitioners
action was barred by the pendency of the proceedings before
the LMB. For litis pendencia to lie, the following requisites must
be satisfied:
1. Identity of parties or representation in both cases;
2. Identity of rights asserted and relief prayed for;
3. The relief must be founded on the same facts and
the same basis; and
4. Identity of the two preceding particulars should
be such that any judgment, which may be
rendered in the other action, will, regardless of
which party is successful, amount to res
[30]
judicata on the action under consideration.
To the Courts mind, these requisites are present in the
instant case. For one, the parties in the LMB case and in SP Civil
Action No. 02-237 are the same. There is, likewise, identity of
rights asserted and reliefs prayed for. The petition filed by the
private respondents SSNRAI and its President Devilleres before
the LMB alleged that the lots in question had been the subject
of double titling; on the other hand, the petition with prayer for
preliminary injunction filed before the RTC sought the
declaration from the court that TCT Nos. 131918 and 131919,
in the name of the petitioner, are indefeasible and conclusive
as against the whole world. The resolution of the foregoing
issue would likewise require the presentation of evidence from
the parties. Verily, the conclusion in one proceeding would
amount to the adjudication of the merits on the other that is, a
favorable ruling from the LMB would have virtually removed
any and all existing clouds from the petitioners titles to the
subject property; in the same vein, a declaration of the
indefeasibility of TCT Nos. 131918 and 131919 would preempt
any ruling of the LMB on the matter.

Indeed, the underlying principle of litis pendentia is the

theory that a party is not allowed to vex another more than
once regarding the same subject matter and for the same
cause of action. This theory is founded on the public policy that
the same subject matter should not be the subject of
controversy in court more than once in order that possible
conflicting judgments may be avoided, for the sake of the
[31]
stability of the rights and status of persons. The RTC of
Muntinlupa City, Branch 205, recognized this doctrine when it
dismissed SP Civil Action No. 02-237 to avoid the possibility of
two contradictory decisions on the question of the validity of
the subject titles.
In any case, should the petitioner disagree with the ruling
of the LMB, it is not precluded from taking the matter up to
with the courts of law.
Fourth. To determine whether a party violated the rule
against forum shopping, the test applied is whether the
elements of litis pendentia are present or whether a final
judgment in one case will amount to res judicata in
[32]
another. Considering our pronouncement that the requisites
of litis pendentia barred the filing of SP Civil Action No. 02-237,
the RTC correctly dismissed the same on the additional ground
of forum shopping.
WHEREFORE, considering the foregoing, the petition is
DENIED for lack of merit. The Order of the Regional Trial Court
of Muntinlupa City, Branch 205, dismissing SP Civil Action No.
02-237 on the ground of litis pendentia and forum shopping, is
AFFIRMED.
SO ORDERED.
Warning: Long case
[G.R. No. 95694. October 9, 1997]
VICENTE
VILLLAFLOR,
substituted
by
heirs, petitioner, vs. COURT OF APPEALS
NASIPIT LUMBER CO., INC., respondents.
DECISION

his
and

PANGANIBAN ,J.:
In this rather factually complicated case, the Court
reiterates the binding force and effect of findings of specialized
administrative agencies as well as those of trial courts when
affirmed by the Court of Appeals; rejects petitioners theory of
simulation of contracts; and passes upon the qualifications of
private respondent corporation to acquire disposable public
agricultural lands prior to the effectivity of the 1973
Constitution.

The Case
Before us is a petition for review on certiorari seeking the
[1]
reversal of the Decision of the Court of Appeals, dated
September 27, 1990, in C.A. G.R. CV No. 09062, affirming the
dismissal by the trial court of Petitioner Vicente Villaflors

ADMIN LAW 1st Set

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complaint against Private Respondent Nasipit Lumber Co.,

Inc. The disposition of both the trial and the appellate courts
are quoted in the statement of facts below.

The Facts
The facts of this case, as narrated in detail by Respondent
[2]
Court of Appeals, are as follows:
The evidence, testimonial and documentary, presented during
the trial show that on January 16, 1940, Cirilo Piencenaves, in a
Deed of Absolute Sale (exh. A), sold to [petitioner], a parcel of
[3]
agricultural land containing an area of 50 hectares, more or
less, and particularly described and bounded as follows:
A certain parcel of agricultural land planted to abaca with
visible concrete monuments marking the boundaries and
bounded on the NORTH by Public Land now Private Deeds on
the East by Serafin Villaflor, on the SOUTH by Public Land; and
on the West by land claimed by H. Patete, containing an area
of 60 hectares more or less, now under Tax Dec. 29451 in the
(sic) of said Vicente Villaflor, the whole parcel of which this
particular parcel is only a part, is assessed at P22,550.00 under
the above said Tax Dec. Number.
This deed states:

That the above described land was sold to the said VICENTE
VILLAFLOR, xxx on June 22, 1937, but no sound document was
then executed, however since then and until the present time,
the said Vicente Villaflor has been in open and continuous
possession and occupation of said land; (and)
That the above described land was before the sale, my own
exclusive property, being inherited from my deceased parents,
and my ownership to it and that of my predecessors lasted
more than fifty (50) years, possessing and occupying the same,
peacefully, openly and continuously without interruption for
that length of time.
Likewise on January 16, 1940, Hermogenes Patete, in a Deed of
Absolute Sale (exh. D), sold to Villaflor, a parcel of agricultural
land, containing an area of 20 hectares, more or less, and
particularly described and bounded as follows:
A certain parcel of agricultural land planted to abaca and corn
with visible concrete monuments marking the boundaries and
bounded on the North by Public Land area-private Road; on
the East by land claimed by Cirilo Piencenaves; on the South by
Public Land containing an area of 20 hectares more or less,
now under Tax Declaration No. 29451 in the name of Vicente
Villaflor the whole parcel of which this particular parcel, is
assessed at P22,550.00 for purposes of taxation under the
above said Tax Declaration No. 29451.
This deed states:

That the above described land was sold to the said VICENTE
VILLAFLOR, xxx on June 22, 1937, but no formal document was
then executed, and since then until the present time, the said
Vicente Villaflor has been in possession and occupation of (the
same); (and)

xxx (O)n June 22, 1937 but the formal document was then
executed, and since then until the present time, the said
VICENTE VILLAFLOR has been in continuous and open
possession and occupation of the same; (and)

That the above described property was before the sale, of my

exclusive property having inherited from my long dead parents
and my ownership to it and that of my [sic] lasted for more
than fifty (50) years, possessing and occupying same
peacefully, publicly and continuously without interruption for
that length of time.

That the above described property was before the sale, my own
and exclusive property, being inherited from my deceased
parents and my ownership to it and that of my predecessors
lasted more than fifty (50) years, possessing and occupying
same, peacefully, openly and continuously without interruption
for that length of time.

Also on January 16, 1940, Claudio Otero, in a Deed of Absolute

Sale (exh. C) sold to Villaflor a parcel of agricultural land,
containing an area of 24 hectares, more or less, and particularly
described and bounded as follows:

On February 15, 1940, Fermin Bocobo, in a Deed of Absolute

Sale (exh. B), sold to Villaflor, a parcel of agricultural land,
containing an area of 18 hectares, more or less, and particularly
described and bounded as follows:

A certain land planted to corn with visible concrete

measurements marking the boundaries and bounded on the
North by Public Land and Tungao Creek; on the East by Agusan
River; on the South by Serafin Villaflor and Cirilo Piencenaves;
and on the West by land of Fermin Bacobo containing an area
of 24 hectares more or less, under Tax Declaration No. 29451 in
the name already of Vicente Villaflor, the whole parcel of which
this particular land is only a part, is assessed at P22,550.00
under the above said Tax Declaration No. 29451.

A certain parcel of agricultural land planted with abaca with

visible part marking the corners and bounded on the North by
the corners and bounded on the North by Public Land; on the
East by Cirilo Piencenaves; on the South by Hermogenes Patete
and West by Public Land, containing an area of 18 hectares
more or less now under Tax Declaration No. 29451 in the name
of Vicente Villaflor. The whole parcel of which this particular
parcel is only a part is assessed as P22,550.00 for purposes of
taxation under the above said Tax Declaration Number (Deed
of Absolute Sale executed by Fermin Bocobo date Feb. 15,

This deed states:

ADMIN LAW 1st Set

Page 26 of 150

1940). This document was annotated in Registry of Deeds on

February 16, 1940).
This deed states:
That the above described property was before the sale of my
own exclusive property, being inherited from my deceased
parents, and my ownership to it and that of my predecessors
lasted more than fifty (50) years, possessing and occupying the
same peacefully, openly and continuously without interruption
for that length of time.
On November 8, 1946, Villaflor, in a Lease Agreement (exh.
[4]
Q), leased to Nasipit Lumber Co., Inc. a parcel of land,
containing an area of two (2) hectares, together with all the
improvements existing thereon, for a period of five (5) years
from June 1, 1946 at a rental of P200.00 per annum to cover
the annual rental of house and building sites for thirty three
[5]
(33) houses or buildings. This agreement also provides:
3. During the term of this lease, the Lessee is authorized and
empowered to build and construct additional houses in
addition to the 33 houses or buildings mentioned in the next
preceding paragraph, provided however, that for every
additional house or building constructed the Lessee shall pay
unto the Lessor an amount of fifty centavos (50) per month for
every house or building. The Lessee is empowered and
authorized by the Lessor to sublot (sic) the premises hereby
leased or assign the same or any portion of the land
hereby leased to any person, firm and corporation; (and)
4. The Lessee is hereby authorized to make any construction
and/or improvement on the premises hereby leased as he may
deem necessary and proper thereon, provided however, that
any and all such improvements shall become the property of
the Lessor upon the termination of this lease without
obligation on the part of the latter to reimburse the Lessee for
expenses incurred in the construction of the same.
Villaflor claimed having discovered that after the execution of
the lease agreement, that Nasipit Lumber in bad faith x x x
surreptitiously grabbed and occupied a big portion of plaintiffs
property x x x; that after a confrontation with the corporates
(sic) field manager, the latter, in a letter dated December 3,
[6]
1973 (exh. R), stated recalling having made some sort of
agreement for the occupancy (of the property at Acacia, San
Mateo), but I no longer recall the details and I had forgotten
whether or not we did occupy your land. But if, as you say, we
did occupy it, then (he is ) sure that the company is obligated
to pay the rental.
On July 7, 1948, in an Agreement to Sell (exh. 2), Villaflor
conveyed to Nasipit Lumber, two (2) parcels of land xxx
[7]
described as follows:
PARCEL ONE

Bounded on the North by Public Land and Tungao Creek; on

the East by Agusan River and Serafin Villaflor; on the South by
Public Land, on the West by Public Land. Improvements
thereon consist of abaca, fruit trees, coconuts and thirty houses
of mixed materials belonging to the Nasipit Lumber
Company. Divided into Lot Nos. 5412, 5413, 5488, 5490, 5491,
5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858,
5857, 5853, and 5852. Boundaries of this parcel of land are
marked by concrete monuments of the Bureau of
Lands. Containing an area of 112,000 hectares. Assessed at
P17,160.00 according to Tax Declaration No. V-315 dated April
14, 1946.
PARCEL TWO
Bounded on the North by Pagudasan Creek; on the East by
Agusan River; on the South by Tungao Creek; on the West by
Public Land. Containing an area of 48,000 hectares more or
less. Divided into Lot Nos. 5411, 5410, 5409, and
5399. Improvements 100 coconut trees, productive, and 300
cacao trees. Boundaries of said land are marked by concrete
monuments of the Bureau pf (sic) Lands. Assessed value -P6,290.00 according to Tax No. 317, April 14, 1946.
This Agreement to Sell provides:
3. That beginning today, the Party of the Second Part shall
continue to occupy the property not anymore in concept of
lessee but as prospective owners, it being the sense of the
parties hereto that the Party of the Second Part shall not in any
manner be under any obligation to make any compensation to
the Party of the First Part, for the use, and occupation of the
property herein before described in such concept of
prospective owner, and it likewise being the sense of the
parties hereto to terminate as they do hereby terminate,
effective on the date of this present instrument, the Contract of
Lease, otherwise known as Doc. No. 420, Page No. 36, Book No.
II, Series of 1946 of Notary Public Gabriel R. Banaag, of the
Province of Agusan.
4. That the Party of the Second Part has bound as it does
hereby bind itself, its executors and administrators, to pay unto
the party of the First Part the sum of Five Thousand Pesos
(P5,000.00), Philippine Currency, upon presentation by the
latter to the former of satisfactory evidence that:
(a) The Bureau of Lands will not have any objection to the
obtainment by the Party of the First Part of a Certificate of
Torrens Title in his favor, either thru ordinary land registration
proceedings or thru administrative means procedure.
(b) That there is no other private claimant to the properties
hereinbefore described.
5. That the Party of the First Part has bound as he does hereby
bind to undertake immediately after the execution of these
presents to secure and obtain, or cause to be secured and
obtained, a Certificate of Torrens Title in his favor over the

ADMIN LAW 1st Set

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properties described on Page (One) hereof, and after

obtainment of such Certificate of Torrens Title, the said Party of
the First Part shall execute a (D)eed of Absolute Sale unto and
in favor of the Party of the Second Part, its executors,
administrators and assigns, it being the sense of the parties
that the Party of the Second Part upon delivery to it of such
deed of absolute sale, shall pay unto the Party of the First Part
in cash, the sum of Twelve Thousand (P12,000.00) Pesos in
Philippine Currency, provided, however, that the Party of the
First Part, shall be reimbursed by the Party of the Second Part
with one half of the expenses incurred by the Party of the First
Part for survey and attorneys fees; and other incidental
expenses not exceeding P300.00.

Par. 4. That the Party of the Second Part has bound as it does
hereby bind itself, its executors and administrators, to pay unto
the Party of the First Part of the sum of FIVE THOUSAND
PESOS (P5,000.00)Philippine Currency, upon presentation by
the latter to the former of satisfactory evidence that:

On December 2, 1948, Villaflor filed Sales Application No. V[8]

807 (exh. 1) with the Bureau of Lands, Manila, to purchase
under the provisions of Chapter V, XI or IX of Commonwealth
Act. No. 141 (The Public Lands Act), as amended, the tract of
public lands x x x and described as follows: North by Public
Land; East by Agusan River and Serafin Villaflor; South by
Public Land and West by public land (Lot Nos. 5379, 5489,
5412, 5490, 5491, 5492, 5849, 5850, 5851, 5413, 5488, 5489,
5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 x x
x containing an area of 140 hectares xxx. Paragraph 6 of the
Application, states: I understand that this application conveys
no right to occupy the land prior to its approval, and I
recognized (sic) that the land covered by the same is of public
domain and any and all rights I may have with respect thereto
by virtue of continuous occupation and cultivation are hereby
[9]
relinquished to the Government. (exh. 1-D)

That the First Party has on December 2, 1948, submitted to the

Bureau of Lands, a Sales Application for the twenty-two (22)
lots comprising the two abovementioned parcels of land, the
said Sales Application was registered in the said Bureau under
No. V-807;

On December 7, 1948, Villaflor and Nasipit Lumber executed an

[10]
Agreement (exh 3). This contract provides:
1. That the First Party is the possessor since 1930 of two (2)
parcels of land situated in sitio Tungao, Barrio of San Mateo,
Municipality of Butuan, Province of Agusan;
2. That the first parcel of land abovementioned and described
in Plan PLS-97 filed in the office of the Bureau of Lands is made
up of Lots Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5849, 5850,
5851, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860
and the second parcel of land is made of Lots Nos. 5399, 5409,
5410 and 5411;
3. That on July 7, 1948, a contract of Agreement to Sell was
executed between the contracting parties herein, covering the
said two parcels of land, copy of said Agreement to Sell is
hereto attached marked as Annex A and made an integral part
of this document. The parties hereto agree that the said
Agreement to Sell be maintained in full force and effect with all
its terms and conditions of this present agreement and in no
way be considered as modified.
4. That paragraph 4 of the Contract of Agreement to Sell,
marked as annex, A stipulates as follows:

a) The Bureau of Lands will have any objection to the

obtainment by Party of the First Part of a favor, either thru
ordinary land registration proceedings or thru administrative
means and procedure.
b) That there is no other private claimant to the properties
hereinabove described.

6. That in reply to the request made by the First Party to the

Bureau of Lands, in connection with the Sales Application No.
V-807, the latter informed the former that action on his request
will be expedited, as per letter of the Chief, Public Land
Division, dated December 2, 1948, copy of which is hereto
attached marked as annex B and made an integral part of this
agreement:
7. That for and in consideration of the premises above stated
and the amount of TWENTY FOUR THOUSAND (P24,000.00)
PESOS that the Second Party shall pay to the First Party, by
these presents, the First Party hereby sells, transfers and
conveys unto the Second Party, its successors and assigns, his
right, interest and participation under an(d) by virtue of the
Sales Application No. V-807, which he has or may have in the
lots mentioned in said Sales Application No. V-807;
8. That the amount of TWENTY FOUR THOUSAND (P24,000.00)
PESOS, shall be paid by the Second Party to the First Party, as
follows:
a) The amount of SEVEN THOUSAND (P7,000.00) PESOS, has
already been paid by the Second Party to the First Party upon
the execution of the Agreement to Sell, on July 7, 1948;
b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be
paid upon the signing of this present agreement; and
c) The balance of TWELVE THOUSAND (P12,000.00) PESOS,
shall be paid upon the execution by the First Party of the
Absolute Deed of Sale of the two parcels of land in question in
favor of the Second Party, and upon delivery to the Second
Party of the Certificate of Ownership of the said two parcels of
land.
9. It is specially understood that the mortgage constituted by
the First Party in favor of the Second Party, as stated in the said
contract of Agreement to Sell dated July 7, 1948, shall cover

ADMIN LAW 1st Set

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not only the amount of SEVEN THOUSAND (P7,000.00) PESOS

as specified in said document, but shall also cover the amount
of FIVE THOUSAND (P5,000.00) PESOS to be paid as stipulated
in paragraph 8, sub-paragraph (b) of this present agreement, if
the First Party should fail to comply with the obligations as
provided for in paragraphs 2, 4, and 5 of the Agreement to Sell;
10. It is further agreed that the First Party obligates himself to
sign, execute and deliver to and in favor of the Second Party,
its successors and assigns, at anytime upon demand by the
Second Party such other instruments as may be necessary in
order to give full effect to this present agreement;
In the Report dated December 31, 1949 by the public land
inspector, District Land Office, Bureau of Lands, in Butuan, the
report contains an Indorsement of the aforesaid District Land
Officer recommending rejection of the Sales Application of
Villaflor for having leased the property to another even before
he had acquired transmissible rights thereto.
In a letter of Villaflor dated January 23, 1950, addressed to the
Bureau of Lands, he informed the Bureau Director that he was
already occupying the property when the Bureaus Agusan River
Valley Subdivision Project was inaugurated, that the property
was formerly claimed as private properties (sic), and that
therefore, the property was segregated or excluded from
disposition because of the claim of private ownership. In a
letter of Nasipit Lumber dated February 22, 1950 (exh.
[11]
X) addressed to the Director of Lands, the corporation
informed the Bureau that it recognized Villaflor as the real
owner, claimant and occupant of the land; that since June 1946,
Villaflor leased two (2) hectares inside the land to the company;
that it has no other interest on the land; and that the Sales
Application of Villaflor should be given favorable consideration.
xxx xxx xxx
On July 24, 1950, the scheduled date of auction of the property
covered by the Sales Application, Nasipit Lumber offered the
highest bid of P41.00 per hectare, but since an applicant under
CA 141, is allowed to equal the bid of the highest bidder,
Villaflor tendered an equal bid, deposited the equivalent of
10% of the bid price and then paid the assessment in full.
xxx xxx xxx
On August 16, 1950, Villaflor executed a document,
denominated as a Deed of Relinquishment of Rights (exh.
[12]
N), pertinent portion of which reads:
5. That in view of my present business in Manila, and my
change in residence from Butuan, Agusan to the City of Manila,
I cannot, therefore, develope (sic) or cultivate the land applied
for as projected before;
6. That the Nasipit Lumber Company, Inc., a corporation duly
organized xxx is very much interested in acquiring the land
covered by the aforecited application xxx;

7. That I believe the said company is qualified to acquire public

land, and has the means to develop (sic) the above-mentioned
land;
xxx xxx xxx
WHEREFORE, and in consideration of the amount of FIVE
THOUSAND PESOS (P5,000.00) to be reimbursed to me by the
aforementioned Nasipit Lumber Company, Inc., after its receipt
of the order of award, the said amount representing part of the
purchase price of the land aforesaid, the value of the
improvements I introduced thereon, and the expenses incurred
in the publication of the Notice of Sale, I, the applicant, Vicente
J. Villaflor, hereby voluntarily renounce and relinquish whatever
rights to, and interests I have in the land covered by my abovementioned application in favor of the Nasipit Lumber
Company, Inc.
Also on August 16, 1950, Nasipit Lumber filed a Sales
Application over the two (2) parcels of land, covering an area of
140 hectares, more or less. This application was also numbered
V-807 (exh. Y).
On August 17, 1950 the Director of Lands issued an Order of
[13]
Award in favor of Nasipit Lumber Company, Inc., pertinent
portion of which reads:
4. That at the auction sale of the land held on July 24, 1950 the
highest bid received was that of Nasipit Lumber Company, Inc.
which offered P41.00 per hectare or P5,740.00 for the whole
tract, which bid was equaled by applicant Vicente J. Villaflor,
who deposited the amount of P574.00 under Official Receipt
No. B-1373826 dated July 24, 1950 which is equivalent to 10%
of the bid. Subsequently, the said xxx Villaflor paid the amount
of P5,160.00 in full payment of the purchase price of the
above-mentioned land and for some reasons stated in an
instrument of relinquishment dated August 16, 1950, he
(Vicente J. Villaflor) relinquished his rights to and interest in the
said land in favor of the Nasipit Lumber Company, Inc. who
filed the corresponding application therefore.
In view of the foregoing, and it appearing that the proceedings
had xxx were in accordance with law and in [sic] existing
regulations, the land covered thereby is hereby awarded to
Nasipit Lumber Company, Inc. at P41.00 per hectare
or P5,740.00 for the whole tract.
This application should be entered in the record of this Office
as Sales Entry No. V-407.
It is Villaflors claim that he only learned of the Order of Award
on January 16, 1974, or after his arrival to the Philippines,
coming from Indonesia, where he stayed for more than ten (10)
years; that he went to Butuan City in the latter part of 1973
upon the call of his brother Serafin Villaflor, who was then sick
and learned that Nasipit Lumber (had) failed and refused to
pay the agreed rentals, although his brother was able to collect
during the early years; and that Serafin died three days after his

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(Vicentes) arrival, and so no accounting of the rentals could be

made; that on November 27, 1973, Villaflor wrote a letter to
Mr. G.E.C. Mears of Nasipit Lumber, reminding him of their
verbal agreement in 1955 xxx that Mr. Mears in a Reply dated
December 3, 1973, appears to have referred the matter to Mr.
Noriega, the corporate general manager, but the new set of
corporate officers refused to recognize (Villaflors) claim, for Mr.
Florencio Tamesis, the general manager of Nasipit Lumber, in a
letter dated February 19, 1974, denied Villaflors itemized claim
dated January 5, 1974 (exh. V) to be without valid and legal
basis. In that 5th January, 1974 letter, Villaflor claimed the total
amount of P427,000.00 x x x.
[14]

In a formal protest dated January 31, 1974 which Villaflor

filed with the Bureau of Lands, he protested the Sales
Application of Nasipit Lumber, claiming that the company has
not paid him P5,000.00 as provided in the Deed of
Relinquishment of Rights dated August 16, 1950.
xxx xxx xxx
x x x (T)hat in a Decision dated August 8, 1977 (exh. 8), the
Director of Lands found that the payment of the amount
of P5,000.00 in the Deed xxx and the consideration in the
Agreement to Sell were duly proven, and ordered the dismissal
of Villaflors protest and gave due course to the Sales
Application of Nasipit Lumber. Pertinent portion of the
Decision penned by Director of Lands, Ramon Casanova, in the
Matter of SP No. V-807 (C-V-407) xxx reads:
xxx xxx xxx
During the proceedings, Villaflor presented another claim
entirely different from his previous claim -- this time, for
recovery of rentals in arrears arising from a supposed contract
of lease by Villaflor as lessor in favor of Nasipit as lessee, and
indemnity for damages supposedly caused improvements on
his other property xxx in the staggering amount of Seventeen
Million (P17,000,000.00) Pesos. Earlier, he had also demanded
from NASIPIT xxx (P427,000.00) xxx also as indemnity for
damages to improvements supposedly caused by NASIPIT on
his other real property as well as for reimbursement of realty
taxes allegedly paid by him thereon.
xxx xxx xxx
It would seem that xxx Villaflor has sought to inject so many
collaterals, if not extraneous claims, into this case. It is the
considered opinion of this Office that any claim not within the
sphere or scope of its adjudicatory authority as an
administrative as well as quasi-judicial body or any issue which
seeks to delve into the merits of incidents clearly outside of the
administrative competence of this Office to decide may not be
entertained.
There is no merit in the contention of Villaflor that owing to
Nasipits failure to pay the amount of xxx (P5,000.00) xxx

(assuming that Nasipit had failed) the deed of relinquishment

became null and void for lack of consideration. xxxx.
xxx xxx xxx
x x x The records clearly show, however, that since the
execution of the deed of relinquishment xxx Villaflor has always
considered and recognized NASIPIT as having the juridical
personality to acquire public lands for agricultural
purposes. xxxx.
xxx xxx xxx
Even this Office had not failed to recognize the juridical
personality of NASIPIT to apply for the purchase of public lands
xxx when it awarded to it the land so relinquished by Villaflor
(Order of Award dated August 17, 1950) and accepted its
application therefor. At any rate, the question whether an
applicant is qualified to apply for the acquisition of public lands
is a matter between the applicant and this Office to decide and
which a third party like Villaflor has no personality to question
beyond merely calling the attention of this Office thereto.
xxx xxx xxx
Villaflor offered no evidence to support his claim of nonpayment beyond his own self-serving assertions and
expressions that he had not been paid said amount. As
protestant in this case, he has the affirmative of the issue. He is
obliged to prove his allegations, otherwise his action will
fail. For, it is a well settled principle () that if plaintiff upon
whom rests the burden of proving his cause of action fails to
show in a satisfactory manner the facts upon which he bases
his claim, the defendant is under no obligation to prove his
exceptions or special defenses (Belen vs. Belen, 13 Phil. 202;
Mendoza vs. Fulgencio, 8 Phil. 243).
xxx xxx xxx
Consequently, Villaflors claim that he had not been paid must
perforce fail.
On the other hand, there are strong and compelling reasons to
presume that Villaflor had already been paid the amount of
Five Thousand (P5,000.00) Pesos.
First, xxx What is surprising, however, is not so much his claims
consisting of gigantic amounts as his having forgotten to
adduce evidence to prove his claim of non-payment of the Five
Thousand (P5,000.00) Pesos during the investigation
proceedings when he had all the time and opportunity to do
so. xxx The fact that he did not adduce or even attempt to
adduce evidence in support thereof shows either that he had
no evidence to offer xxx that NASIPIT had already paid him in
fact. What is worse is that Villaflor did not even bother to
command payment, orally or in writing, of the Five Thousand
(P5,000.00) Pesos which was supposed to be due him since
August 17, 1950, the date when the order of award was issued

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to Nasipit, and when his cause of action to recover payment

had accrued. The fact that he only made a command (sic) for
payment on January 31, 1974, when he filed his protest or
twenty-four (24) years later is immediately nugatory of his
claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that
the order of award had already been issued to NASIPIT as he
had gone to Indonesia and he had been absent from the
Philippines during all those twenty-four (24) years. This of
course taxes credulity. xxx.
Second, it should be understood that the condition that
NASIPIT should reimburse Villaflor the amount of Five
Thousand (P5,000.00) Pesos upon its receipt of the order of
award was fulfilled as said award was issued to NASIPIT on
August 17, 1950. The said deed of relinquishment was
prepared and notarized in Manila with Villaflor and NASIPIT
signing the instrument also in Manila on August 16, 1950 (p.77,
(sic)). The following day or barely a day after that, or on August
17, 1950, the order of award was issued by this Office to
NASIPIT also in Manila. Now, considering that Villaflor is
presumed to be more assiduous in following up with the
Bureau of Lands the expeditious issuance of the order of award
as the payment of the Five Thousand (P5,000.00) Pesos
(consideration) would depend on the issuance of said order to
award NASIPIT, would it not be reasonable to believe that
Villaflor was at hand when the award was issued to NASIPIT on
August 17, 1950, or barely a day which (sic) he executed the
deed of relinquishment on August 16, 1950, in Manila? xxx.
Third, on the other hand, NASIPIT has in his possession a sort
of order upon itself -- (the deed of relinquishment wherein he
(sic) obligated itself to reimburse or pay Villaflor the xxx
consideration of the relinquishment upon its receipt of the
order of award) for the payment of the aforesaid amount the
moment the order of award is issued to it. It is reasonable to
presume that NASIPIT has paid the Five Thousand (P5,000.00)
Pesos to Villaflor.
A person in possession of an order on himself for the payment
of money, or the delivery of anything, has paid the money or
delivered the thing accordingly. (Section 5(k) B-131-Revised
Rules of Court.
It should be noted that NASIPIT did not produce direct
evidence as proof of its payment of the Five Thousand
(P5,000.00) Pesos to Villaflor. Nasipits explanation on this point
is found satisfactory.
x x x (I)t was virtually impossible for NASIPIT, after the lapse of
the intervening 24 years, to be able to cope up with all the
records necessary to show that the consideration for the deed
of relinquishment had been fully paid. To expect NASIPIT to
keep intact all records pertinent to the transaction for the
whole quarter of a century would be to require what even the
law does not. Indeed, even the applicable law itself (Sec. 337,
National Internal Revenue Code) requires that all records of
corporations be preserved for only a maximum of five years.

NASIPIT may well have added that at any rate while there are
transactions where the proper evidence is impossible or
extremely difficult to produce after the lapse of time xxx the
law creates presumptions of regularity in favor of such
transactions (20 Am. Jur. 232) so that when the basic fact is
established in an action the existence of the presumed fact
must be assumed by force of law. (Rule 13, Uniform Rules of
Evidence; 9 Wigmore, Sec. 2491).
Anent Villaflors claim that the 140-hectare land relinquished
and awarded to NASIPIT is his private property, little (need) be
said. xxxx The tracks of land referred to therein are not identical
to the lands awarded to NASIPIT. Even in the assumption that
the lands mentioned in the deeds of transfer are the same as
the 140-hectare area awarded to NASIPIT, their purchase by
Villaflor (or) the latters occupation of the same did not change
the character of the land from that of public land to a private
property. The provision of the law is specific that public lands
can only be acquired in the manner provided for therein and
not otherwise (Sec. 11, C.A. No. 141, as amended). The records
show that Villaflor had applied for the purchase of the lands in
question with this Office (Sales Application No. V-807) on
December 2, 1948. xxxx There is a condition in the sales
application signed by Villaflor to the effect that he recognizes
that the land covered by the same is of public domain and any
and all rights he may have with respect thereto by virtue of
continuous occupation and cultivation are relinquished to the
Government (paragraph 6, Sales Application No. V-807 xxx) of
which Villaflor is very much aware. It also appears that Villaflor
had paid for the publication fees appurtenant to the sale of the
land. He participated in the public auction where he was
declared the successful bidder. He had fully paid the purchase
prive (sic) thereof (sic). It would be a (sic) height of absurdity
for Villaflor to be buying that which is owned by him if his
claim of private ownership thereof is to be believed. The most
that can be said is that his possession was merely that of a
sales applicant to when it had not been awarded because he
relinquished his interest therein in favor of NASIPIT who (sic)
filed a sales application therefor.
xxx xxx xxx
x x x During the investigation proceedings, Villaflor presented
as his Exhibit (sic) (which NASIPIT adopted as its own exhibit
and had it marked in evidence as Exhibit 1) a duly notarized
agreement to Sell dated July 7, 1948, by virtue of which Villaflor
undertook to sell to Nasipit the tracts of land mentioned
therein, for a consideration of Twenty-Four Thousand
(P24,000.00) Pesos. Said tracts of land have been verified to be
identical to the parcels of land formerly applied for by Villaflor
and which the latter had relinquished in favor of NASIPIT under
a deed of relinquishment executed by him on August 16,
1950.In another document executed on December 7, 1948 xxx
Villaflor as FIRST PARTY and NASIPIT as SECOND PARTY
confirmed the Agreement to Sell of July 7, 1948, which was
maintained in full force and effect with all its terms and
conditions x x x (Exh. 38-A); and that for and in consideration of
xxx TWENTY FOUR THOUSAND (P24,000.00) PESOS that the
Second Party shall pay to the First Party xxx the First Party

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hereby sells, transfers and conveys unto the Second Party xxx
his right interest and participation under and by virtue of the
Sales Application No. V-807 and, in its paragraph 8, it made
stipulations as to when part of the said consideration xxx was
paid and when the balance was to be paid, to wit:
a) the amount of SEVEN THOUSAND xxx PESOS has already
been paid by the Second Party to the First Party upon the
execution of the Agreement to Sell, on July 17, 1948;
b) the amount of FIVE THOUSAND xxx PESOS shall be paid
upon the signing of this present agreement; and
c) the amount of TWELVE THOUSAND xxx PESOS, shall be paid
upon the execution by the First Party of the Absolute Sale of
the Two parcels of land in question in favor of the Second Party
of the Certificate of Ownership of the said two parcels of land.
(Exh. 38-B). (Emphasis ours)
It is thus clear from this subsequent document marked Exhibit
38 ANALCO that of the consideration of the Agreement to Sell
dated July7, 1948, involving the 140-hectare area relinquished
by Villaflor in favor of NASIPIT, in the amount of Twenty-Four
Thousand (P24,000.00) Pesos:
(1) the amount of Seven Thousand (P7,000.00) Pesos was
already paid upon the execution of the Agreement to Sell on
July 7, 1948, receipt of which incidentally was admitted by
Villaflor in the document of December 7, 1948;
(2) the amount of Five Thousand (P5,000.00) Pesos was
paid when said document was signed by Vicente J. Villaflor as
the First Party and Nasipit thru its President, as the Second
Party, on December 7, 1948; and
(3) the balance of Twelve Thousand (P12,000.00) Pesos to be
paid upon the execution by the First Party of the Absolute
Deed of Sale of the two parcels of land in favor of the Second
Party, and upon delivery to the Second Party of the Certificate
of Ownership of the said two parcels of land.
Villaflor contends that NASIPIT could not have paid Villaflor the
balance of Twelve Thousand (P12,000.00) Pesos x x x
consideration in the Agreement to Sell will only be paid to
applicant-assignor (referring to Villaflor) upon obtaining a
Torrens Title in his favor over the 140-hectare of land applied
for and upon execution by him of a Deed of Absolute Sale in
favor of Nasipit Lumber Company, Inc. x x x. Inasmuch as
applicant-assignor was not able to obtain a Torrens Title over
the land in question he could not execute an absolute Deed of
(sic) Nasipit Lumber Co., Inc. Hence, the Agreement to Sell was
not carried out and no Twelve Thousand (P12,000.00) Pesos
was overpaid either to the applicant-assignor, much less to
Howard J. Nell Company. (See MEMORANDUM FOR THE
APPLICANT-ASSIGNOR, dated January 5, 1977). xxx.
xxx Villaflor did not adduce evidence in support of his claim
that he had not been paid the xxx (P12,000.00) xxx

consideration of the Agreement to Sell dated July 7, 1948 (Exh.

38 NALCO) beyond his mere uncorroborated assertions. On the
other hand, there is strong evidence to show that said Twelve
Thousand (P12,000.00) Pesos had been paid by (private
respondent) to Edward J. Nell Company by virtue of the Deed
of Assignment of Credit executed by Villaflor (Exh. 41 NALCO)
for the credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT who is in a
position to know the facts, testified for NASIPIT. He described
that it was he who notarized the Agreement to Sell (Exh. F);
that he knew about the execution of the document of
December 7, 1948 (Exh. 38) confirming the said Agreement to
Sell having been previously consulted thereon by Jose
Fernandez, who signed said document on behalf of NASIPIT
xxx that subsequently, in January 1949, Villaflor executed a
Deed of Assignment of credit in favor of Edward J. Nell
Company (Exh. 41 NALCO) whereby Villaflor ceded to the latter
his receivable for NASIPIT corresponding to the remaining
balance in the amount of Twelve Thousand xxx Pesos of the
total consideration xxx stipulated in both the Agreement to Sell
(Exh. F) and the document dated December 7, 1948 (Exh. 39);
xxx. He further testified that the said assignment of credit was
communicated to (private respondent) under cover letter dated
January 24, 1949 (Exh. 41-A) and not long thereafter, by virtue
of the said assignment of credit, (private respondent) paid the
balance of Twelve Thousand xxx due to Villaflor to Edward J.
Nell Company xxx. Atty. Banaags aforesaid testimony stand
unrebutted; hence, must be given full weight and credit. xxx
Villaflor and his counsel were present when Atty. Banaags
foregoing testimony was given. Yet, Villaflor did not demur, nor
did he rebut the same, despite having been accorded full
opportunity to do so.
xxx xxx xxx
Having found that both the Five Thousand xxx consideration of
the deed of Relinquishment xxx and that the remaining balance
of xxx (P12,000.00) to complete the Twenty-Four Thousand
(P24,000.00) Pesos consideration of both the Agreement to Sell
dated July 7, 1948, and the document, dated December 7,
1948, executed by the former in favor of the latter, have been
paid Villaflor the issue on prescription and laches becomes
academic and needs no further discussion.
But more than all the questions thus far raised and resolved is
the question whether a sales patent can be issued to NASIPIT
for the 140-hectare area awarded to it in the light of Section
11, Article XIV of the new Constitution which provides in its
pertinent portion to wit:
x x x No private corporation or association may hold alienable
land of the public domain except by lease not to exceed one
thousand hectares in area xxx.
The Secretary of Justice had previous occasion to rule on this
point in his opinion No. 140, s. 1974. Said the Honorable
Justice Secretary:

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On the second question, (referring to the questions when may

a public land be considered to have been acquired by purchase
before the effectivity of the new Constitution posed by the
Director of Lands in his query on the effect on pending
applications for the issuance of sales patent in the light of
Section 11, Art. XIV of the New Constitution aforecited), you
refer to this Offices Opinion No. 64 series of 1973 in which I
stated:
On the other hand, with respect to sales applications ready for
issuance of sales patent, it is my opinion that where the
applicant had, before the Constitution took effect, fully
complied with all this obligations under the Public Land Act in
order to entitle him to a Sales patent, there would be no legal
or equitable justification for refusing to issue or release the
sales patent.

It is a basic assumption of our policy that lands of whatever

classification belong to the state. Unless alienated in
accordance with law, it retains its rights over the same as
dominus, (Santiago vs. de los Santos, L-20241, November 22,
1974, 61 SCRA 152).
For, it is well-settled that no public land can be acquired by
private persons without any grant, express or implied from the
government. It is indispensable then that there be showing of
title from the state or any other mode of acquisition
recognized by law. (Lee Hong Hok, et al. vs. David, et al., L30389, December 27, 1972, 48 SCRA 379.)
It is well-settled that all lands remain part of the public domain
unless severed therefrom by state grant or unless alienated in
accordance with law.

With respect to the point as to when the Sales applicant has

complied with all the terms and conditions which would entitle
him to a sales patent, the herein above Secretary of Justice
went on:

We, therefore, believe that the aforesaid deeds of sale do not

constitute clear and convincing evidence to establish that the
contested area is of private ownership. Hence, the property
must be held to be public domain.

That as to when the applicant has complied with all the terms
and conditions which would entitle him to a patent is a
questioned (sic) fact which your office would be in the best
position to determine.However, relating this to the procedure
for the processing of applications mentioned above, I think
that as the applicant has fulfilled the construction/cultivation
requirements and has fully paid the purchase price, he should
be deemed to have acquired by purchase the particular tract of
land and (sic) the area (sic) in the provision in question of the
new constitution would not apply.

There being no evidence whatever that the property in

question was ever acquired by the applicants or their ancestors
either by composition title from the Spanish Government or by
possessory information title or by any other means for the
acquisition of public lands, the property must be held to be
public domain. (Lee Hong Hok, et al., vs. David , et al., L-30389
December 27, 1972, 48 SCRA 378-379 citing Heirs of Datu
Pendatun vs. Director of Lands; see also Director of Lands vs.
Reyes, L-27594, November 28, 1975, 68 SCRA 177).

From the decision of the Director of Lands, Villaflor filed a

Motion for Reconsideration which was considered as an Appeal
M.N.R. Case 4341, to the Ministry of Natural Resources.
On June 6, 1979, the Minister of Natural Resources rendered a
[15]
Decision (exh. 9), dismissing the appeal and affirming the
decision of the Director of Lands, pertinent portions of which
reads:
After a careful study of the records and the arguments of the
parties, we believe that the appeal is not well taken.
Firstly, the area in dispute is not the private property of
appellant.
The evidence adduced by appellant to establish his claim of
ownership over the subject area consists of deeds of absolute
sale executed in his favor on January 16, and February 15, 1940,
by four (4) different persons, namely, Cirilo Piencenaves, Fermin
Balobo, Claudio Otero and Hermogenes Patete.
However, an examination of the technical descriptions of the
tracts of land subject of the deeds of sale will disclose that said
parcels are not identical to, and do not tally with, the area in
controversy.

Be that as it may, appellant, by filing a sales application over

the controverted land, acknowledged unequivocably [sic] that
the same is not his private property.
As such sales applicant, appellant manifestly acknowledged
that he does not own the land and that the same is a public
land under the administration of the Bureau of Lands, to which
the application was submitted, xxx All of its acts prior thereof,
including its real estate tax declarations, characterized its
possessions of the land as that of a sales applicant and
consequently, as one who expects to buy it, but has not as yet
done so, and is not, therefore, its owner. (Palawan Agricultural
and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21,
1972, 44 SCRA 20, 21).
Secondly, appellants alleged failure to pay the consideration
stipulated in the deed of relinquishment neither converts said
deed into one without a cause or consideration nor ipso
facto rescinds the same.Appellant, though, has the right to
demand payment with legal interest for the delay or to
demand rescission.
xxx xxx xxx

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However, appellants cause of action, either for specific

performance or rescission of contract, with damages, lies within
the jurisdiction of civil courts, not with administrative bodies.
xxx xxx xxx
Lastly, appellee has acquired a vested right to the subject area
and, therefore, is deemed not affected by the new
constitutional provision that no private corporation may hold
alienable land of the public domain except by lease.
xxx xxx xxx
Implementing the aforesaid Opinion No. 64 of the Secretary of
Justice, the then Secretary of Agriculture and Natural Resources
issued a memorandum, dated February 18, 1974, which
pertinently reads as follows:
In the implementation of the foregoing opinion, sales
application of private individuals covering areas in excess of 24
hectares and those of corporations, associations, or partnership
which fall under any of the following categories shall be given
due course and issued patents, to wit:
1. Sales application for fishponds and for agricultural purposes
(SFA, SA and IGPSA) wherein prior to January 17, 1973;
a. the land covered thereby was awarded;
b. cultivation requirements of law were complied with as shown
by investigation reports submitted prior to January 17, 1973;
c. land was surveyed and survey returns already submitted to
the Director of Lands for verification and approval; and
d. purchase price was fully paid.
From the records, it is evident that the aforestated requisites
have been complied with by appellee long before January 17,
1973, the effectivity of the New Constitution. To restate, the
disputed area was awarded to appellee on August 17, 1950, the
purchase price was fully paid on July 26, 1951, the cultivation
requirements were complied with as per investigation report
dated December 31, 1949, and the land was surveyed under
Pls-97.
[16]

On July 6, 1978, petitioner filed a complaint in the trial

court for Declaration of Nullity of Contract (Deed of
Relinquishment of Rights), Recovery of Possession (of two
parcels of land subject of the contract), and Damages at about
the same time that he appealed the decision of the Minister of
Natural Resources to the Office of the President.
On January 28, 1983, petitioner died. The trial court
ordered his widow, Lourdes D. Villaflor, to be substituted as
petitioner. After trial in due course, the then Court of First
Instance of Agusan del Norte and Butuan City, Branch
[17]
III, dismissed the complaint on the grounds that: (1)

petitioner admitted the due execution and genuineness of the

contract and was estopped from proving its nullity, (2) the
verbal lease agreements were unenforceable under Article
1403 (2)(e) of the Civil Code, and (3) his causes of action were
barred by extinctive prescription and/or laches. It ruled that
there was prescription and/or laches because the alleged
verbal lease ended in 1966, but the action was filed only on
January 6, 1978. The six-year period within which to file an
action on an oral contract per Article 1145 (1) of the Civil Code
[18]
expired in 1972. The decretal portion of the trial courts
decision reads:
WHEREFORE, the foregoing premises duly considered,
judgment is hereby rendered in favor of the defendant and
against the plaintiff. Consequently, this case is hereby ordered
DISMISSED. The defendant is hereby declared the lawful actual
physical possessor-occupant and having a better right of
possession over the two (2) parcels of land in litigation
described in par. 1.2 of the complaint as Parcel I and Parcel II,
containing a total area of One Hundred Sixty (160) hectares,
and was then the subject of the Sales Application No. V-807 of
the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to 421-A, Record), and
now of the Sales Application No. 807, Entry No. V-407 of the
defendant Nasipit Lumber Company (Exhibit Y, pp. 357-358,
Record). The Agreements to Sell Real Rights, Exhibits 2 to 2-C,
3 to 3-B, and the Deed of Relinquishment of Rights, Exhibits N
to N-1, over the two parcels of land in litigation are hereby
declared binding between the plaintiff and the defendant, their
successors and assigns.
Double the costs against the plaintiff.
The heirs of petitioner appealed to Respondent Court of
[19]
Appeals which, however, rendered judgment against
petitioner via the assailed Decision dated September 27, 1990
finding petitioners prayers -- (1) for the declaration of nullity of
the deed of relinquishment, (2) for the eviction of private
respondent from the property and (3) for the declaration
of petitioners heirs as owners to be without basis. The decretal
[20]
portion of the assailed 49-page, single-spaced Decision
curtly reads:
WHEREFORE, the Decision appealed from, is hereby AFFIRMED,
with costs against plaintiff-appellants.
Not satisfied, petitioners heirs filed the instant 57-page
petition for review dated December 7, 1990. In a Resolution
dated June 23, 1991, the Court denied this petition for being
late. On reconsideration -- upon plea of counsel that
petitioners were poor and that a full decision on the merits
should be rendered -- the Court reinstated the petition and
required comment from private respondent. Eventually, the
petition was granted due course and the parties thus filed their
respective memoranda.

The Issues

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Petitioner, through his heirs, attributes the following

errors to the Court of Appeals:

relinquishment of rights and the contracts to sell valid, and not

simulated or fictitious?

I. Are the findings of the Court of Appeals conclusive and

binding upon the Supreme Court?

(3) Is the private respondent qualified to acquire title over the

disputed property?

II. Are the findings of the Court of Appeals fortified by the

similar findings made by the Director of Lands and the Minister
of Natural Resources (as well as by the Office of the President)?
III. Was there forum shopping?
IV. Are the findings of facts of the Court of Appeals and the
trial court supported by the evidence and the law?
V. Are the findings of the Court of Appeals supported by the
very terms of the contracts which were under consideration by
the said court?
VI. Did the Court of Appeals, in construing the subject
contracts, consider the contemporaneous and subsequent act
of the parties pursuant to article 1371 of the Civil Code?
VII. Did the Court of Appeals consider the fact and the
unrefuted claim of Villaflor that he never knew of the award in
favor of Nasipit?
VIII. Did the Court of Appeals correctly apply the rules on
evidence in its findings that Villaflor was paid the P5,000.00
consideration because Villaflor did not adduce any proof that
he was not paid?
IX. Is the Court of Appeals conclusion that the contract is not
simulated or fictitious simply because it is genuine and duly
executed by the parties, supported by logic or the law?
X. May the prestations in a contract agreeing to transfer certain
rights constitute estoppel when this very contract is the subject
of an action for annulment on the ground that it is fictitious?
XI. Is the Court of Appeals conclusion that the lease agreement
between Villaflor is verbal and therefore, unenforceable
supported by the evidence and the law?
After a review of the various submissions of the parties,
particularly those of petitioner, this Court believes and holds
that the issues can be condensed into three as follows:
(1) Did the Court of Appeals err in adopting or relying on the
factual findings of the Bureau of Lands, especially those
affirmed by the Minister (now Secretary) of Natural Resources
and the trial court?
(2) Did the Court of Appeals err in upholding the validity of the
contracts to sell and the deed of relinquishment? Otherwise
stated, did the Court of Appeals err in finding the deed of

The Courts Ruling

The petition is bereft of merit. It basically questions the
sufficiency of the evidence relied upon by the Court of Appeals,
alleging that public respondents factual findings were based on
speculations, surmises and conjectures. Petitioner insists that a
review of those findings is in order because they were allegedly
(1) rooted, not on specific evidence, but on conclusions and
inferences of the Director of Lands which were, in turn, based
on misapprehension of the applicable law on simulated
contracts; (2) arrived at whimsically -- totally ignoring the
substantial and admitted fact that petitioner was not notified of
the award in favor of private respondent; and (3) grounded on
errors and misapprehensions, particularly those relating to the
identity of the disputed area.

First Issue: Primary Jurisdiction of the Director of Lands

and Finality of Factual Findings of the Court of Appeals
Underlying the rulings of the trial and appellate courts is
the doctrine of primary jurisdiction; i.e., courts cannot and will
not resolve a controversy involving a question which is within
the jurisdiction of an administrative tribunal, especially where
the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical
[21]
and intricate matters of fact.
In recent years, it has been the jurisprudential trend to
apply this doctrine to cases involving matters that demand the
special competence of administrative agencies even if the
question involved is also judicial in character. It applies where a
claim is originally cognizable in the courts, and comes into play
whenever enforcement of the claim requires the resolution of
issues which, under a regulatory scheme, have been placed
within the special competence of an administrative body; in
such case, the judicial process is suspended pending referral of
[22]
such issues to the administrative body for its view.
In cases where the doctrine of primary jurisdiction is
clearly applicable, the court cannot arrogate unto itself the
authority to resolve a controversy, the jurisdiction over which is
initially lodged with an administrative body of special
[23]
competence. In Machete vs. Court of Appeals, the Court
upheld the primary jurisdiction of the Department of Agrarian
Reform Adjudicatory Board (DARAB) in an agrarian dispute
over the payment of back rentals under a leasehold
[24]
contract. In Concerned Officials of the Metropolitan
[25]
Waterworks and Sewerage System vs. Vasquez, the Court
recognized that the MWSS was in the best position to evaluate

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and to decide which bid for a waterworks project was

compatible with its development plan.
The rationale
underlying the doctrine
of
primary
jurisdiction finds application in this case, since the questions on
the identity of the land in dispute and the factual qualification
of private respondent as an awardee of a sales application
require a technical determination by the Bureau of Lands as the
administrative agency with the expertise to determine such
matters.Because
these
issues
preclude prior
judicial
determination, it behooves the courts to stand aside even
when they apparently have statutory power to proceed, in
recognition of the primary jurisdiction of the administrative
[26]
agency.
One thrust of the multiplication of administrative agencies is
that the interpretation of contracts and the determination of
private rights thereunder is no longer a uniquely judicial
[27]
function, exercisable only by our regular courts
Petitioner initiated his action with a protest before the
Bureau of Lands and followed it through in the Ministry of
Natural Resources and thereafter in the Office of the
President.Consistent with the doctrine of primary jurisdiction,
the trial and the appellate courts had reason to rely on the
findings of these specialized administrative bodies.
The primary jurisdiction of the director of lands and the
minister of natural resources over the issues regarding the
identity of the disputed land and the qualification of an
awardee of a sales patent is established by Sections 3 and 4 of
Commonwealth Act No. 141, also known as the Public Land
Act:
Section 3. The Secretary of Agriculture and Commerce (now
Secretary of Natural Resources) shall be the executive officer
charged with carrying out the provisions of this Act through
the Director of Lands, who shall act under his immediate
control.
Section 4. Subject to said control, the Director of Lands shall
have direct executive control of the survey, classification, lease,
sale or any other form of concession or disposition and
management of the lands of the public domain, and his
decision as to questions of fact shall be conclusive when
approved by the Secretary of Agriculture and Commerce.
Thus, the Director of Lands, in his decision, said:

[28]

x x x It is merely whether or not Villaflor has been paid the Five

Thousand (P5,000.00) Pesos stipulated consideration of the
deed of relinquishment made by him without touching on the
nature of the deed of relinquishment. The administration and
disposition of public lands is primarily vested in the Director of
Lands and ultimately with the Secretary of Agriculture and
Natural Resources (now Secretary of Natural Resources), and to
this end--

Our Supreme Court has recognized that the Director of Lands

is a quasi-judicial officer who passes on issues of mixed facts
and law (Ortua vs. Bingson Encarnacion, 59 Phil 440). Sections 3
and 4 of the Public Land Law thus mean that the Secretary of
Agriculture and Natural Resources shall be the final arbiter on
questions of fact in public land conflicts (Heirs of Varela vs.
Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442).
The ruling of this Office in its order dated September 10, 1975,
is worth reiterating, thus:
x x x it is our opinion that in the exercise of his power of
executive control, administrative disposition and allegation of
public land, the Director of Lands should entertain the protest
of Villaflor and conduct formal investigation xxx to determine
the following points: (a) whether or not the Nasipit Lumber
Company, Inc. paid or reimbursed to Villaflor the consideration
of the rights in the amount of P5,000.00 and what evidence the
company has to prove payment, the relinquishment of rights
being part of the administrative process in the disposition of
the land in question xxx.
xxxx Besides, the authority of the Director of Lands to pass
upon and determine questions considered inherent in or
essential to the efficient exercise of his powers like the incident
at issue, i.e. , whether Villaflor had been paid or not, is
conceded by law.
Reliance by the trial and the appellate courts on the
factual findings of the Director of Lands and the Minister of
Natural Resources is not misplaced. By reason of the special
knowledge and expertise of said administrative agencies over
matters falling under their jurisdiction, they are in a better
position to pass judgment thereon; thus, their findings of fact
in that regard are generally accorded great respect, if not
[29]
[30]
finality, by the courts. The findings of fact of an
administrative agency must be respected as long as they are
supported by substantial evidence, even if such evidence might
not be overwhelming or even preponderant. It is not the task
of an appellate court to weigh once more the evidence
submitted before the administrative body and to substitute its
own judgment for that of the administrative agency in respect
[31]
of sufficiency of evidence.
However, the rule that factual findings of an
administrative agency are accorded respect and even finality by
courts admits of exceptions. This is true also in assessing
[32]
factual findings of lower courts. It is incumbent on the
petitioner to show that the resolution of the factual issues by
the administrative agency and/or by the trial court falls under
any of the exceptions.Otherwise, this Court will not disturb
[33]
such findings.
We mention and quote extensively from the rulings of the
Bureau of Lands and the Minister of Natural Resources because
the points, questions and issues raised by petitioner before the
trial court, the appellate court and now before this Court are
basically the same as those brought up before the aforesaid
specialized administrative agencies. As held by the Court of
[34]
Appeals:

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We find that the contentious points raised by appellant in this

action, are substantially the same matters he raised in BL Claim
No. 873 (N). In both actions, he claimed private ownership over
the land in question, assailed the validity and effectiveness of
the Deed of Relinquishment of Rights he executed in August
16, 1950, that he had not been paid the P5,000.00
consideration, the value of the improvements he introduced on
the land and other expenses incurred by him.
In this instance, both the principle of primary jurisdiction
of administrative agencies and the doctrine of finality of factual
findings of the trial courts, particularly when affirmed by the
Court of Appeals as in this case, militate against petitioners
cause. Indeed, petitioner has not given us sufficient reason to
deviate from them.

Land in Dispute Is Public Land

Petitioner argues that even if the technical description in
the deeds of sale and those in the sales application were not
identical, the area in dispute remains his private property. He
alleges that the deeds did not contain any technical
description, as they were executed prior to the survey
conducted by the Bureau of Lands; thus, the properties sold
were merely described by reference to natural boundaries. His
private ownership thereof was also allegedly attested to by
private respondents former field manager in the latters
February 22, 1950 letter, which contained an admission that the
land leased by private respondent was covered by the sales
application.
This contention is specious. The lack of technical
description did not prove that the finding of the Director of
Lands lacked substantial evidence. Here, the issue is not so
much whether the subject land is identical with the property
purchased by petitioner. The issue, rather, is whether the land
covered by the sales application is private or public land. In his
sales application, petitioner expressly admitted that said
property was public land. This is formidable evidence as it
amounts to an admission against interest.
In the exercise of his primary jurisdiction over the issue,
[35]
Director of Lands Casanova ruled that the land was public:
x x x Even (o)n the assumption that the lands mentioned in the
deeds of transfer are the same as the 140-hectare area
awarded to Nasipit, their purchase by Villaflor (or) the latters
occupation of the same did not change the character of the
land from that of public land to a private property. The
provision of the law is specific that public lands can only be
acquired in the manner provided for therein and not otherwise
(Sec. 11, C.A. No. 141, as amended). The records show that
Villaflor had applied for the purchase of lands in question with
this Office (Sales Application No. V-807) on December 2,
1948. xxx There is a condition in the sales application xxx to the
effect that he recognizes that the land covered by the same is
of public domain and any and all rights he may have with
respect thereto by virtue of continuous occupation and

cultivation are relinquished to the Government (paragraph 6,

Sales Application No. V-807 of Vicente J. Villaflor, p. 21,
carpeta) of which Villaflor is very much aware. It also appears
that Villaflor had paid for the publication fees appurtenant to
the sale of the land. He participated in the public auction where
he was declared the successful bidder. He had fully paid the
purchase prive (sic) thereor (sic). It would be a (sic) height of
absurdity for Villaflor to be buying that which is owned by him
if his claim of private ownership thereof is to be believed. xxx.
This finding was affirmed by the Minister of Natural
[36]
Resources:
Firstly, the area in dispute is not the private property of
appellant (herein petitioner).
The evidence adduced by (petitioner) to establish his claim of
ownership over the subject area consists of deeds of absolute
sale executed in his favor xxx.
However, an examination of the technical descriptions of the
tracts of land subject of the deeds of sale will disclose that said
parcels are not identical to, and do not tally with, the area in
controversy.
It is a basic assumption of our policy that lands of whatever
classification belong to the state. Unless alienated in
accordance with law, it retains its rights over the same as
dominus. (Santiago vs. de los Santos, L-20241, November 22,
1974, 61 SCRA 152).
For it is well-settled that no public land can be acquired by
private persons without any grant, express or implied from the
government. It is indispensable then that there be showing of
title from the state or any other mode of acquisition
recognized by law. (Lee Hong Hok, et al. vs. David, et al., L30389, December 27, 1972, 48 SCRA 379).
xxx xxx xxx xxx
We, therefore, believe that the aforesaid deeds of sale do not
constitute clear and convincing evidence to establish that the
contested area is of private ownership. Hence, the property
must be held to be public domain.
There being no evidence whatever that the property in
question was ever acquired by the applicants or their ancestors
either by composition title from the Spanish Government or by
possessory information title or by any other means for the
acquisition of public lands, the property must be held to be
public domain.
Be that as it may, [petitioner], by filing a sales application over
the controverted land, acknowledged unequivocably [sic] that
the same is not his private property.
As such sales applicant manifestly acknowledged that he does
not own the land and that the same is a public land under the

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administration of the Bureau of Lands, to which the application

was submitted, xxx All of its acts prior thereof, including its real
estate tax declarations, characterized its possessions of the
land as that of a sales applicant. And consequently, as one who
expects to buy it, but has not as yet done so, and is not,
therefore, its owner.(Palawan Agricultural and Industrial Co.,
Inc. vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA
15).
Clearly, this issue falls under the primary jurisdiction of
the Director of Lands because its resolution requires survey,
classification, xxx disposition and management of the lands of
the public domain. It follows that his rulings deserve great
respect. As petitioner failed to show that this factual finding of
the Director of Lands was unsupported by substantial evidence,
it assumes finality. Thus, both the trial and the appellate courts
[37]
correctly relied on such finding. We can do no less.

Second Issue: No Simulation of Contracts Proven

[38]

Petitioner insists that contrary to Article 1371 of the

Civil Code, Respondent Court erroneously ignored the
contemporaneous and subsequent acts of the parties; hence, it
failed toascertain their true intentions. However, the rule on the
interpretation of contracts that was alluded to by petitioner is
used in affirming, not negating, their validity. Thus, Article
[39]
1373, which is a conjunct of Article 1371, provides that, if the
instrument is susceptible of two or more interpretations, the
interpretation which will make it valid and effectual should be
adopted. In this light, it is not difficult to understand that the
legal basis urged by petitioner does not support his allegation
that the contracts to sell and the deed of relinquishment are
simulated and fictitious. Properly understood, such rules on
interpretation even negate petitioners thesis.
But let us indulge the petitioner awhile and determine
whether the cited contemporaneous and subsequent acts
of the parties support his allegation of simulation. Petitioner
asserts that the relinquishment of rights and the agreements to
sell were simulated because, first, the language and terms of
said contracts negated private respondents acquisition of
ownership of the land in issue; and second, contemporaneous
and subsequent communications between him and private
respondent allegedly showed that the latter admitted that
petitioner owned and occupied the two parcels; i.e., that private
respondent was not applying for said parcels but was
interested only in the two hectares it had leased, and that
private respondent supported petitioners application for a
patent.
Petitioner explains that the Agreement to Sell dated
December 7, 1948 did not and could not transfer ownership
because paragraph 8 (c) thereof stipulates that the balance of
twelve thousand pesos (P12,000.00) shall be paid upon the
execution by the First Party [petitioner] of the Absolute Deed of
Sale of the two parcels of land in question in favor of the
Second Party, and upon delivery to the Second Party [private
respondent] of the Certificate of Ownership of the said two

parcels of land. The mortgage provisions in paragraphs 6 and 7

of the agreement state that the P7,000.00 and P5,000.00 were
earnest money or a loan with antichresis by the free occupancy
and use given to Nasipit of the 140 hectares of land not
anymore as a lessee.If the agreement to sell transferred
ownership to Nasipit, then why was it necessary to require
petitioner, in a second agreement, to mortgage his property in
the event of nonfulfillment of the prestations in the first
agreement?
True, the agreement to sell did not absolutely transfer
ownership of the land to private respondent. This fact,
however, does not show that the agreement was
simulated. Petitioners delivery of the Certificate of Ownership
and execution of the deed of absolute sale were suspensive
conditions, which gave rise to a corresponding obligation on
the part of the private respondent, i.e., the payment of the last
installment of the consideration mentioned in the December 7,
1948 Agreement. Such conditions did not affect the perfection
of the contract or prove simulation. Neither did the mortgage.
Simulation occurs when an apparent contract is a
declaration of a fictitious will, deliberately made by agreement
of the parties, in order to produce, for the purpose of
deception, the appearance of a juridical act which does not
[40]
exist or is different from that which was really executed. Such
an intention is not apparent in the agreements. The intent to
sell, on the other hand, is as clear as daylight.
Petitioner alleges further that the deed of relinquishment
of right did not give full effect to the two agreements to sell,
because the preliminary clauses of the deed allegedly served
only to give private respondent an interest in the property as a
future owner thereof and to enable respondent to follow up
petitioners sales application.
We disagree. Such an intention is not indicated in the
deed. On the contrary, a real and factual sale is evident in
paragraph 6 thereof, which states: That the Nasipit Lumber Co.,
Inc., xxx is very much interested in acquiring the land covered
by the aforecited application to be used for purposes of
mechanized farming and the penultimate paragraph stating:
xxx VICENTE J. VILLAFLOR, hereby voluntarily renounce and
relinquish whatever rights to, and interests I have in the land
covered by my above-mentioned application in favor of the
Nasipit Lumber Co., Inc.
We also hold that no simulation is shown either in the
letter, dated December 3, 1973, of the former field manager of
private respondent, George Mear. A pertinent portion of the
letter reads:
(a)s regards your property at Acacia, San Mateo, I recall that we
made some sort of agreement for the occupancy, but I no
longer recall the details and I had forgotten whether or not we
actually did occupy your land. But if, as you say, we did occupy
it, then I am sure that the Company is obligated to pay a rental.
The letter did not contain any express admission that
private respondent was still leasing the land from petitioner as
of that date. According to Mear, he could no longer recall the

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details of his agreement with petitioner. This cannot be read as

evidence of the simulation of either the deed of relinquishment
or the agreements to sell. It is evidence merely of an honest
lack of recollection.
Petitioner also alleges that he continued to pay realty
taxes on the land even after the execution of said
contracts. This is immaterial because payment of realty taxes
does not necessarily prove ownership, much less simulation of
[41]
said contracts.

Nonpayment of the Consideration

Did Not Prove Simulation
Petitioner insists that nonpayment of the consideration in
the
contracts
proves
their
simulation. We
disagree. Nonpayment, at most, gives him only the right to sue
for collection.Generally, in a contract of sale, payment of the
price is a resolutory condition and the remedy of the seller is to
exact fulfillment or, in case of a substantial breach, to rescind
[42]
the contract under Article 1191 of the Civil Code. However,
failure to pay is not even a breach, but merely an event which
prevents the vendors obligation to convey title from acquiring
[43]
binding force.
Petitioner also argues that Respondent Court violated
evidentiary rules in upholding the ruling of the Director of
Lands that petitioner did not present evidence to show private
respondents failure to pay him. We disagree. Prior to the
amendment of the rules on evidence on March 14, 1989,
Section 1, Rule 131, states that each party must prove his or
[44]
her own affirmative allegations. Thus, the burden of proof in
any cause rested upon the party who, as determined by the
pleadings or the nature of the case, asserts the affirmative of
an issue and remains there until the termination of the
[45]
action. Although nonpayment is a negative fact which need
not be proved, the party seeking payment is still required to
prove the existence of the debt and the fact that it is already
[46]
due.
Petitioner showed the existence of the obligation with the
presentation of the contracts, but did not present any evidence
that he demanded payment from private respondent. The
demand letters dated January 2 and 5, 1974 (Exhs. J and U),
adduced in evidence by petitioner, were for the payment of
back rentals, damages to improvements and reimbursement of
acquisition costs and realty taxes, not payment arising from the
contract to sell.
Thus, we cannot fault Respondent Court for adopting the
finding of the Director of Lands that petitioner offered no
evidence to support his claim of nonpayment beyond his own
self-serving assertions, as he did not even demand payment,
orally or in writing, of the five thousand (P5,000.00) pesos
which was supposed to be due him since August 17, 1950, the
date when the order of award was issued to Nasipit, and when
his
cause
of
action
to
recover
payment
had
accrued. Nonpayment of the consideration in the contracts to
sell or the deed of relinquishment was raised for the first time

in the protest filed with the Bureau of Lands on January 31,

1974. But this protest letter was not the demand letter required
by law.
Petitioner alleges that the assignment of credit and the
letter of the former field manager of private respondent are
contemporaneous and subsequent acts revealing the
nonpayment of the consideration. He maintains that
the P12,000.00 credit assigned pertains to the P5,000.00
and P7,000.00 initial payments in the December 7, 1948
Agreement, because the balance of P12,000.00 was not yet due
and accruing. This is consistent, he argues, with the
representation that private respondent was not interested in
filing a sales application over the land in issue and that Nasipit
was instead supporting petitioners application thereto in Mears
letter to the Director of Lands dated February 22, 1950 (Exh.
[47]
X).
This argument is too strained to be acceptable. The
assignment of credit did not establish the nondelivery of
these initial payments of the total consideration. First, the
assignment of credit happened on January 19, 1949, or a
month after the signing of the December 7, 1948 Agreement
and almost six months after the July 7, 1948 Agreement to
Sell. Second, it does not overcome the recitation in the
Agreement of December 7, 1948: xxx a) The amount of SEVEN
THOUSAND (P7,000.00) PESOS has already been paid by the
Second Party to the First Party upon the execution of the
Agreement to Sell, on July 7, 1948; b) The amount of FIVE
THOUSAND (P5,000.00) PESOS shall be paid upon the signing
of this present agreement; xxx.
Aside from these facts, the Director of Lands found
evidence of greater weight showing that payment was actually
[48]
made:
x x x (T)here is strong evidence to show that said xxx
(P12,000.00) had been paid by NASIPIT to Edward J. Nell
Company by virtue of the Deed of Assignment of Credit
executed by Villaflor (Exh. 41 NALCO) for the credit of the
latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT xxx declared
that it was he who notarized the Agreement to Sell (Exh. F);
xxxx that subsequently, in January 1949, Villaflor executed a
Deed of Assignment of credit in favor of Edward J. Nell
Company (Exh. 41 NALCO) whereby Villaflor ceded to the latter
his receivable for NASIPIT corresponding to the remaining
balance in the amount of xxx (P12,000.00) xxx of the total
consideration xxxx; He further testified that the said assignment
xxx was communicated to NASIPIT under cover letter dated
January 24, 1949 (Exh. 41-A) and not long thereafter, by virtue
of the said assignment of credit, NASIPIT paid the balance xxx
to Edward J. Nell Company (p. 58, bid). Atty. Banaags aforesaid
testimony stand unrebutted; hence, must be given full weight
and credit.
xxx xxx xxx.
The Director of Lands also found that there had been
[49]
payment of the consideration in the relinquishment of rights:

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On the other hand, there are strong and compelling reasons to

presume that Villaflor had already been paid the amount of
Five Thousand (P5,000.00) Pesos.
First, x x x What is surprising, however, is not so much his
claims consisting of gigantic amounts as his having forgotten
to adduce evidence to prove his claim of non-payment of the
Five Thousand (P5,000.00) Pesos during the investigation
proceedings when he had all the time and opportunity to do
so. xxxx The fact that he did not adduce or even attempt to
adduce evidence in support thereof shows either that he had
no evidence to offer of that NASIPIT had already paid him in
fact. What is worse is that Villaflor did not even bother to
command payment, orally or in writing, of the Five Thousand
(P5,000.00) Pesos which was supposed to be due him since
August 17, 1950, the date when the order of award was issued
to Nasipit, and when his cause of action to recover payment
had accrued. The fact that he only made a command for
payment on January 31, 1974, when he filed his protest or
twenty-four (24) years later is immediately nugatory of his
claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that
the order of award had already been issued to NASIPIT as he
had gone to Indonesia and he had been absent from the
Philippines during all those twenty-four (24) years. This of
course taxes credulity.xxxx
x x x It is more in keeping with the ordinary course of things
that he should have acquired information as to what was
transpiring in his affairs in Manila x x x.
Second, it should be understood that the condition that
NASIPIT should reimburse Villaflor the amount of Five
Thousand (P5,000.00) Pesos upon its receipt of the order of
award was fulfilled as said award was issued to NASIPIT on
August 17, 1950. The said deed of relinquishment was
prepared and notarized in Manila with Villaflor and NASIPIT
signing the instrument also in Manila. Now, considering that
Villaflor is presumed to be more assiduous in following up with
the Bureau of Lands the expeditious issuance of the order of
award as the (consideration) would depend on the issuance of
said order to award NASIPIT, would it not be reasonable to
believe that Villaflor was at hand when the award was issued to
NASIPIT on August 17, 1950, or barely a day which he executed
the deed of relinquishment on August 16, 1950, in
Manila? xxxx.
Third, on the other hand, NASIPIT has in his possession a sort
of order upon itself -- (the deed of relinquishment wherein
he(sic) obligated itself to reimburse or pay Villaflor the xxx
consideration of the relinquishment upon its receipt of the
order of award) for the payment of the aforesaid amount the
moment the order of award is issued to it. It is reasonable to
presume that NASIPIT has paid the (consideration) to Villaflor.
xxx xxx xxx

x x x (I)t was virtually impossible for NASIPIT, after the lapse of

the intervening 24 years, to be able to cope up with all the
records necessary to show that the consideration for the deed
of relinquishment had been fully paid. To expect NASIPIT to
keep intact all records pertinent to the transaction for the
whole quarter of a century would be to require what even the
law does not. Indeed, even the applicable law itself (Sec. 337,
National Internal Revenue Code) requires that all records of
corporations be preserved for only a maximum of five years.
NASIPIT may well have added that at any rate while there are
transactions where the proper evidence is impossible or
extremely difficult to produce after the lapse of time xxx the
law creates presumptions of regularity in favor of such
transactions (20 Am. Jur. 232) so that when the basic fact is
established in an action the existence of the presumed fact
must be assumed by force of law. (Rule 13, Uniform Rules of
Evidence; 9 Wigmore, Sec. 2491).
The Court also notes that Mears letter of February 22,
1950 was sent six months prior to the execution of the deed of
relinquishment of right. At the time of its writing, private
respondent had not perfected its ownership of the land to be
able to qualify as a sales applicant. Besides, although he was a
party to the July 7, 1948 Agreement to Sell, Mear was not a
signatory to the Deed of Relinquishment or to the December 7,
1948 Agreement to Sell. Thus, he cannot be expected to know
the existence of and the amendments to the later
contracts. These
circumstances
explain
the
mistaken
representations, not misrepresentations, in said letter.

Lack of Notice of the Award

Petitioner insists that private respondent suppressed
evidence, pointing to his not having been notified of the Order
[50]
of Award dated August 17, 1950. At the bottom of page 2 of
the order, petitioner was not listed as one of the parties who
were to be furnished a copy by Director of Lands Jose P.
Dans. Petitioner also posits that Public Land Inspector Sulpicio
A. Taeza irregularly received the copies for both private
respondent and the city treasurer of Butuan City. The lack of
notice for petitioner can be easily explained. Plainly, petitioner
was not entitled to said notice of award from the Director of
Lands, because by then, he had already relinquished his rights
to the disputed land in favor of private respondent. In the
heading of the order, he was referred to as sales applicantassignor. In paragraph number 4, the order stated that, on
August 16, 1950, he relinquished his rights to the land subject
of the award to private respondent. From such date, the sales
application was considered to be a matter between the Bureau
of Lands and private respondent only. Considering these facts,
the failure to give petitioner a copy of the notice of the award
cannot
be
considered
as
suppression
of
[51]
evidence. Furthermore, this order was in fact available to
petitioner and had been referred to by him since January 31,
[52]
1974 when he filed his protest with the Bureau of Lands.

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Third Issue: Private Respondent Qualified

for an Award of Public Land
Petitioner asserts that private respondent was legally
disqualified from acquiring the parcels of land in question
because it was not authorized by its charter to acquire
disposable public agricultural lands under Sections 121, 122
and 123 of the Public Land Act, prior to its amendment by P.D.
No. 763. We disagree. The requirements for a sales application
under the Public Land Act are: (1) the possession of the
qualifications required by said Act (under Section 29) and (2)
the lack of the disqualifications mentioned therein (under
Sections 121, 122, and 123).However, the transfer of ownership
via the two agreements dated July 7 and December 7, 1948
and the relinquishment of rights, being private contracts, were
binding only between petitioner and private respondent. The
Public Land Act finds no relevance because the disputed land
was covered by said Act only after the issuance of the order of
award in favor of private respondent. Thus, the possession of
any disqualification by private respondent under said Act is
immaterial to the private contracts between the parties
thereto. (We are not, however, suggesting a departure from the
rule that laws are deemed written in contracts.) Consideration
of said provisions of the Act will further show their
inapplicability to these contracts. Section 121 of the Act
pertains to acquisitions of public land by a corporation from a
grantee, but petitioner never became a grantee of the disputed
land. On the other hand, private respondent itself was the
direct grantee. Sections 122 and 123 disqualify corporations,
which are not authorized by their charter, from acquiring public
land; the records do not show that private respondent was not
so authorized under its charter.
Also, the determination by the Director of Lands and the
Minister of Natural Resources of the qualification of private
respondent to become an awardee or grantee under the Act is
persuasive
on
Respondent
Court. In Espinosa
vs.
[53]
Makalintal, the Court ruled that, by law, the powers of the
Secretary of Agriculture and Natural Resources regarding the
disposition of public lands -- including the approval, rejection,
and reinstatement of applications are of executive and
administrative nature. (Such powers, however, do not include
the judicial power to decide controversies arising from
disagreements in civil or contractual relations between the
litigants.) Consequently, the determination of whether private
respondent is qualified to become an awardee of public land
under C.A. 141 by sales application is included therein.
All told, the only disqualification that can be imputed to
private respondent is the prohibition in the 1973 Constitution
against the holding of alienable lands of the public domain by
[54]
corporations. However, this Court earlier settled the matter,
ruling that said constitutional prohibition had no retroactive
effect and could not prevail over a vested right to the
[55]
land. In Ayog vs. Cusi, Jr., this Court declared:
We hold that the said constitutional prohibition has no
retroactive application to the sales application of Bian
Development Co., Inc. because it had already acquired a vested

right to the land applied for at the time the 1973 Constitution
took effect.
That vested right has to be respected. It could not be
abrogated by the new Constitution. Section 2, Article XIII of the
1935 Constitution allows private corporations to purchase
public agricultural lands not exceeding one thousand and
twenty-four hectares. Petitioners prohibition action is barred by
the doctrine of vested rights in constitutional law.
A right is vested when the right to enjoyment has become the
property of some particular person or persons as a present
interest. (16 C.J.S. 1173). It is the privilege to enjoy property
legally vested, to enforce contracts, and enjoy the rights of
property conferred by existing law (12 C.J. 955, Note 46, No. 6)
or some right or interest in property which has become fixed
and established and is no longer open to doubt or controversy
(Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales,
51 Phil. 498, 502).
The due process clause prohibits the annihilation of vested
rights. A state may not impair vested rights by legislative
enactment, by the enactment or by the subsequent repeal of a
municipal ordinance, or by a change in the constitution of the
State, except in a legitimate exercise of the police power (16
C.J.S. 1177-78).
It has been observed that, generally, the term vested right
expresses the concept of present fixed interest, which in right
reason and natural justice should be protected against arbitrary
State action, or an innately just an imperative right which an
enlightened free society, sensitive to inherent and irrefragable
individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5,
citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 Atl.
nd
2 587).
Secretary of Justice Abad Santos in his 1973 opinion ruled that
where the applicant, before the Constitution took effect, had
fully complied with all his obligations under the Public Land Act
in order to entitle him to a sales patent, there would seem to
be no legal or equitable justification for refusing to issue or
release the sales patent (p. 254, Rollo).
In Opinion No. 140, series of 1974, he held that as soon as the
applicant had fulfilled the construction or cultivation
requirements and has fully paid the purchase price, he should
be deemed to have acquired by purchase the particular tract of
land and to him the area limitation in the new Constitution
would not apply.
In Opinion No. 185, series of 1976, Secretary Abad Santos held
that where the cultivation requirements were fulfilled before
the new Constitution took effect but the full payment of the
price was completed after January 17, 1973, the applicant was,
nevertheless, entitled to a sales patent (p. 256, Rollo).
Such a contemporaneous construction of the constitutional
prohibition by a high executive official carries great weight and

ADMIN LAW 1st Set

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should be accorded much respect. It is a correct interpretation

of section 11 of Article XIV.
In the instant case, it is incontestable that prior to the
effectivity of the 1973 Constitution the right of the corporation
to purchase the land in question had become fixed and
established and was no longer open to doubt or controversy.
Its compliance with the requirements of the Public Land Law
for the issuance of a patent had the effect of segregating the
said land from the public domain. The corporations right to
obtain a patent for that land is protected by law. It cannot be
deprived of that right without due process (Director of Lands
vs. CA, 123 Phil. 919).
The Minister of Natural Resources ruled, and we agree,
that private respondent was similarly qualified to become an
awardee of the disputed land because its rights to it vested
[56]
prior to the effectivity of the 1973 Constitution:
Lastly, appellee has acquired a vested right to the subject area
and, therefore, is deemed not affected by the new
constitutional provision that no private corporation may hold
alienable land of the public domain except by lease.
It may be recalled that the Secretary of Justice in his Opinion
No. 64, series of 1973, had declared, to wit:
On the other hand, with respect to sales application ready for
issuance of sales patent, it is my opinion that where the
applicant had, before, the constitution took effect, fully
complied with all his obligations under the Public Land act in
order to entitle him to sales patent, there would seem to be
not legal or equitable justification for refusing to issue or
release the sales patent.
Implementing the aforesaid Opinion No. 64 xxx, the then
Secretary of Agriculture and Natural Resources issued a
memorandum, dated February 18, 1974, which pertinently
reads as follows:
In the implementation of the foregoing opinion, sales
application of private individuals covering areas in excess of 24
hectares and those of corporations, associations, or partnership
which fall under any of the following categories shall be given
due course and issued patents, to wit:
Sales application for fishponds and for agricultural purposes
(SFA, SA and IGPSA) wherein prior to January 17, 1973,
a. the land covered thereby was awarded;
b. cultivation requirements of law were complied with as shown
by investigation reports submitted prior to January 17, 1973;
c. land was surveyed and survey returns already submitted to
the Director of Lands for verification and approval; and

d. purchase price was fully paid.

From the records, it is evident that the aforestated requisites
have been complied with by appellee long before January 17,
1973, the effectivity of the New Constitution. To restate, the
disputed area was awarded to appellee on August 17, 1950, the
purchase price was fully paid on July 26, 1951, the cultivation
requirements were complied with as per investigation report
dated December 31, 1949, and the land was surveyed under
Pls-97.
The same finding was earlier made by the Director
[57]
of Lands:
It is further contended by Villaflor that Nasipit has no juridical
personality to apply for the purchase of public lands for
agricultural purposes. The records clearly show, however, that
since the execution of the deed of relinquishment of August
16, 1950, in favor of Nasipit, Villaflor has always considered and
recognized Nasipit as having the juridical personality to acquire
public lands for agricultural purposes. In the deed of
relinquishment xxx, it is stated:
6. That the Nasipit Lumber Co., Inc., a corporation duly
organized in accordance with the laws of the Philippines, x x x.
Even this Office had not failed to recognize the juridical
personality of Nasipit to apply for the purchase of public lands
xxx when it awarded to it the land so relinquished by Villaflor
(Order of Award dated August 17, 1950) and accepted its
application therefor. At any rate, the question whether an
applicant is qualified to apply for the acquisition of public lands
is a matter between the applicant and this Office to decide and
which a third party like Villaflor has no personality to question
beyond merely calling the attention of this Office thereto.
Needless to say, we also agree that the November 8, 1946
Lease Agreement between petitioner and private respondent
had been terminated by the agreements to sell and the
relinquishment of rights. By the time the verbal leases were
[58]
allegedly made in 1951 and 1955, the disputed land had
already been acquired and awarded to private respondent. In
any event, petitioners cause of action on these alleged lease
agreements prescribed long before he filed Civil Case No.
2072-III, as correctly found by the trial and appellate
[59]
courts. Thus, it is no longer important, in this case, to pass
upon the issue of whether or not amendments to a lease
contract can be proven by parol evidence. The same holds true
as regards the issue of forum-shopping.
All in all, petitioner has not provided us sufficient reason
to disturb the cogent findings of the Director of Lands, the
Minister of Natural Resources, the trial court and the Court of
Appeals.
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.

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G.R. No. 109093 November 20, 1995

LOPE MACHETE, NICASIO JUMAWID, SANTIAGO
JUMAWID, JOHN JUMAWID, PEDRO GAMAYA, RENATO
DELGADO, FERNANDO OMBAHIN, MATIAS ROLEDA,
PASIANO BARO, IGNACIO BARO, MAMERTO PLARAS and
JUSTINIANO VILLALON, petitioners,
vs.
COURT OF APPEALS and CELESTINO
VILLALON, respondents.

BELLOSILLO, J.:
Are Regional Trial Courts' vested with jurisdiction over cases for
collection of back rentals from leasehold tenants?
On 21 July 1989 private respondent Celestino Villalon filed a
complaint for collection of back rentals and damages before
the Regional Trial Court of Tagbilaran City against petitioners
Lope Machete, Nicasio Jumawid, Santiago Jumawid, John
Jumawid, Pedro Gamaya, Renato Delgado, Fernando Ombahin,
Matias Roleda, Pasiano Baro, Ignacio Baro, Mamerto Plaras and
Justiniano Villalon. The complaint alleged that the parties
entered into a leasehold agreement with respect to private
respondent's landholdings at Poblacion Norte, Carmen, Bohol,
under which petitioners were to pay private respondent a
certain amount or percentage of their harvests. However,
despite repeated demands and with no valid reason,
petitioners failed to pay their respective rentals. Private
respondent thus prayed that petitioners be ordered to pay him
back rentals and damages.
Petitioners moved to dismiss the complaint on the ground of
lack of jurisdiction of the trial court over the subject matter.
They contended that the case arose out of or was connected
with agrarian relations, hence, the subject matter of the
complaint fell squarely within the jurisdiction of the
Department of Agrarian Reform (DAR) in the exercise of its
quasi-judicial powers under Sec. 1, pars. (a) and (b), Rule II of
the Revised Rules of the Department of Agrarian Reform
Adjudication Board (DARAB).
On 22 August 1989 the trial court granted the motion to
1
dismiss, and on 28 September 1989 denied the motion for
2
reconsideration.
Private respondent sought annulment of both orders before
respondent Court of Appeals which on 21 May 1992 rendered
judgment reversing the trial court and directing it to assume
3
jurisdiction over the case on the basis of its finding that
. . . The CARL (RA 6657) and other pertinent
laws on agrarian reform cannot be seen to
encompass a case of simple collection of
back rentals by virtue of an agreement, as
the one at bar, where there is no agrarian

dispute to speak of (since the allegation of

failure to pay the agreed rentals was never
controverted in the motion to dismiss) nor
the issue raised on application,
implementation, enforcement or
4
interpretation of these laws.
On 18 January 1993 the appellate court rejected the
motion for
5
reconsideration.
Petitioners maintain that the alleged cause of action of private
respondent arose from an agrarian relation and that
respondent appellate court failed to consider that the
agreement involved is an agricultural leasehold contract, hence,
the dispute is agrarian in nature. The laws governing its
execution and the rights and obligations of the parties thereto
6
7
are necessarily R.A. 3844, R.A. 6657 and other pertinent
agrarian laws. Considering that the application,
implementation, enforcement or interpretation of said laws are
matters which have been vested in the DAR, this case is outside
the jurisdiction of the trial court.
The petition is impressed with merit. Section 17 of E.O.
8
229 vested the DAR with quasi-judicial powers to determine
and adjudicate agrarian reform matters as well as exclusive
original jurisdiction over all matters involving implementation
of agrarian reform except those falling under the exclusive
original jurisdiction of the Department of Agriculture and the
Department of Environment and Natural Resources in
accordance with law.
Executive Order 129-A, while in the process of reorganizing
and strengthening the DAR, created the DARAB to assume the
powers and functions with respect to the adjudication of
9
agrarian reform cases. Section 1, pars. (a) and (b), Rule II of
the Revised Rules of the DARAB explicitly provides
Sec. 1. Primary, Original and Appellate
Jurisdiction. The Agrarian Reform
Adjudication Board shall have primary
jurisdiction, both original and appellate, to
determine and adjudicate all agrarian
disputes, cases, controversies, and matters or
incidents involving the implementation of
the Comprehensive Agrarian Reform
Program under Republic Act No. 6657,
Executive Orders Nos. 229, 228 and 129-A,
Republic Act No. 3844 as amended by
Republic Act No. 6389, Presidential Decree
No. 27 and other agrarian laws and their
implementing rules and regulations.
Specifically, such jurisdiction shall extend
over but not be limited to the following: (a)
Cases involving the rights and obligations of
persons engaged in the cultivation and use
of agricultural land covered by the
Comprehensive Agrarian Reform Program
(CARP) and other agrarian laws, (b) Cases

ADMIN LAW 1st Set

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involving the valuation of land, and

determination and payment of just
compensation, fixing and collection of lease
rentals, disturbance compensation,
amortization payments, and similar disputes
concerning the functions of the Land Bank . .
.
10

In Quismundo v. Court of Appeals, this Court interpreted the

effect of Sec. 17 of E.O. 229 on P.D. 946, which amended R.A.
3844, the agrarian law then in force
The above quoted provision (Sec. 17) should
11
be deemed to have repealed Sec. 12 (a)
and (b) of Presidential Decree No. 946 which
invested the then courts of agrarian relations
with original exclusive jurisdiction over cases
and questions involving rights granted and
obligations imposed by presidential
issuances promulgated in relation to the
agrarian reform program.
Formerly, under Presidential Decree No. 946,
amending Chapter IX of Republic Act No.
3844, the courts of agrarian relations had
original and exclusive jurisdiction over "cases
involving the rights and obligations of
persons in the cultivation and use of
agricultural land except those cognizable by
the National Labor Relations Commission"
and "questions involving rights granted and
obligations imposed by laws, Presidential
Decrees, Orders, Instructions, Rules and
Regulations issued and promulgated in
relation to the agrarian reform program,"
except those matters involving the
administrative implementation of the transfer
of land to the tenant-farmer under
Presidential Decree No. 27 and amendments
thereto which shall be exclusively cognizable
12
by the Secretary of Agrarian Reform.
In 1980, upon the passage of Batas
Pambansa Blg. 129, otherwise known as the
Judiciary Reorganization Act, the courts of
agrarian relations were integrated into the
regional trial courts and the jurisdiction of
13
the former was vested in the latter courts.
However, with the enactment of Executive
Order No. 229, which took effect on August
29, 1987, fifteen (15) days after its release for
14
publication in the Official Gazette, the
regional trial courts were divested of their
general jurisdiction to try agrarian reform
matters. The said jurisdiction is now vested in
the Department of Agrarian Reform.

On 15 June 1988 R.A. 6657 was passed containing provisions

which evince and support the intention of the legislature to
vest in the DAR exclusive jurisdiction over all agrarian reform
15
matters. Section 50 thereof substantially reiterates Sec. 17 of
E.O. 229 thus
Sec. 50. Quasi-Judicial Powers of the DAR.
The DAR is hereby vested with primary
jurisdiction to determine and adjudicate
agrarian reform matters and shall have
exclusive original jurisdiction over all matters
involving the implementation of agrarian
reform, except those falling under the
exclusive jurisdiction of the Department of
Agriculture (DA) and the Department of
Environment and Natural Resources
(DENR) . . .
Section 3, par. (d), thereof defines the term "agrarian
dispute" as referring to any controversy relating to
tenurial arrangements, whether leasehold, tenancy,
stewardship or otherwise, over lands devoted to
agriculture, including disputes concerning farm
workers' associations or representation of persons in
negotiating, fixing, maintaining, changing or seeking
to arrange terms or conditions of such tenurial
arrangements.
However it may be mentioned in passing that the Regional
Trial Courts have not been completely divested of jurisdiction
over agrarian reform matters. Section 56 of R.A. 6657 confers
"special jurisdiction" on "Special Agrarian Courts," which are
Regional Trial Courts designated by this Court at least one
(1) branch within each province to act as such. These
Regional Trial Courts designated as Special Agrarian Courts
have, according to Sec. 57 of the same law, original and
exclusive jurisdiction over: (a) all petitions for the determination
of just compensation to landowners, and (b) the prosecution of
16
all criminal offenses under the Act.
Consequently, there exists an agrarian dispute in the case at
bench which is exclusively cognizable by the DARAB. The
failure of petitioners to pay back rentals pursuant to the
leasehold contract with private respondent is an issue which is
clearly beyond the legal competence of the trial court to
resolve. The doctrine of primary jurisdiction does not warrant a
court to arrogate unto itself the authority to resolve a
controversy the jurisdiction over which is initially lodged with
17
an administrative body of special competence.
Thus, respondent appellate court erred in directing the trial
court to assume jurisdiction over this case. At any rate, the
present legal battle is "not altogether lost" on the part of
private respondent because as this Court was quite emphatic
18
in Quismundo v. Court of Appeals, the resolution by the DAR
is to the best advantage of the parties since it is in a better
position to resolve agrarian disputes, being the administrative
agency presumably possessing the necessary expertise on the
matter. Further, the proceedings therein are summary in nature

ADMIN LAW 1st Set

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and the department is not bound by the technical rules of

procedure and evidence, to the end that agrarian reform
disputes and other issues will be adjudicated in a just,
19
expeditious and inexpensive proceeding.
WHEREFORE, the decision of respondent Court of Appeals as
well as its resolution denying reconsideration is REVERSED and
SET ASIDE. The orders of the Regional Trial Court of Tagbilaran
City dated 22 August and 28 September 1989 are REINSTATED.
Consequently, let the records of this case be immediately
transmitted to the appropriate Department of Agrarian Reform
Adjudication Board (DARAB) for proper adjudication in
accordance with the ruling in Vda. de Tangub v. Court of
Appeals 20 and reiterated in Quismundo v. Court of
21
Appeals, as well as pertinent agrarian laws.
SO ORDERED.
G.R. No. 87437

May 29, 1991

JOAQUIN M. TEOTICO, petitioner,

vs.
DEMOCRITO O. AGDA, SR., and HON. JUDGE IGNACIO M.
CAPULONG, Regional Trial Court, Branch No. 134, Makati,
Metro Manila, respondents.
Ramon M. Miranda for private respondent.

DAVIDE, JR., J.:

Petitioner, Administrator of the Fiber Industry Development
Authority, assisted by the Office of the Solicitor General, filed
this original petition for certiorari and prohibition, with a prayer
for a writ of preliminary injunction and for temporary
restraining order. He urges Us to annul the Orders of 16 and 29
December 1988 and 14 February 1989, and the writ of
injunction dated 11 May 1988 issued by respondent Judge of
Branch 134 (Makati, Metro Manila) of the Regional Trial Court,
1
National Capital Judicial Region, in Civil Case No. 88-577; to
prohibit respondent Judge from hearing said case; and to order
the dismissal thereof for lack of cause of action as private
respondent (petitioner therein, and who shall hereafter be
referred to as Agda) has not exhausted all administrative
remedies available to him.
2

In Our resolution of 12 April 1989 We required respondents

to comment on the petition and issued a Temporary
Restraining Order effective as of that date and continuing until
otherwise ordered by the Court.
The factual antecedents as culled from the Petition in this case
and the Amended Petition of Agda in Civil Case No. 88-577 are
as follows:
On 2 January 1984, Honorable Cesar Lanuza, then
Administrator of the Fiber Development Authority (FIDA for

short), an agency attached to the Department of Agriculture,

appointed Agda as CHIEF FIBER DEVELOPMENT OFFICER
3
(Range 73) of the FIDA effective upon assumption of office.
This appointment does not indicate any specific station or
place of assignment.
Under Special Order No. 29, series of 1984, dated 2 January
1984, which was to take effect immediately and to "remain in
force until revoked," Administrator Lanuza designated Agda as
4
"Acting Regional Administrator for FIDA Regions I and II."
In Special Order No. 219 dated 13 November 1987, series of
1987, Administrator Lanuza "temporarily re-assigned" Agda, "in
the interest of the service," at the main office of the
Administrator to perform special functions which may be
assigned to him, and one Mr. Epitacio Lanuza, Jr., Assistant
Fiber Regional Administrator, was designated Officer in Charge
5
of FIDA Region I.
On 9 December 1987 Agda prepared for filing with the Civil
Service Commission, the Secretary of the Department of
Agriculture, and the Commission on Audit an Urgent Petition
To Stop Implementation and Nullify Special Order No. 219, s.
'87, alleging therein that the Special Order is (a) devoid of legal
basis as it does not preserve and maintain a status quo before
the controversy, (b) against the interest of public service
considering that Epitacio Lanuza has been cited for two cases
both involving dishonesty, abuse of privileges and character
unbecoming a government official, (c) improper, inappropriate
and devoid of moral justification, and (d) a violation of Civil
Service rules and regulation considering that it violates the rule
on nepotism since Epitacio Lanuza and Administrator Lanuza
6
are cousins. The copy of the Civil Service Commission was
personally indorsed to it by Agda on 14 December 1987 for its
"proper resolution, perusal and appropriate action." The Merit
Systems Protection Board indorsed it on 21 January 1988 to
the Secretary of the Department of Agriculture for comment
7
and/or appropriate action.
Earlier however, or on 11 December 1987, by Special Order No.
239, series of 1987, Administrator Lanuza designated Mr.
Wilfredo Seguritan, Supervising Fiber Development Officer, as
Officer in Charge of FIDA Region I vice Mr. Epitacio Lanuza, Jr.,
who was ordered relieved as such pending the final
determination of the case filed against him by the Board of
8
Personnel Inquiry of the Department of Agriculture.
On 7 January 1988, herein petitioner (hereafter referred to as
Teotico), as Acting Administrator of FIDA issued a
Memorandum to Agda directing him to immediately submit his
development programs for Region I for the years 1988 to 1993
and his proposals concerning the potentials for sericulture and
9
the maguey industry in the Region.
In his 1st indorsement of 12 January 1988, Agda returned the
aforesaid Memorandum to Teotico with the comment that it is
in the best interest of the service that submission of the

ADMIN LAW 1st Set

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required proposals be deferred since Special Order No. 219

had re-assigned him to FIDA Central Office where "he now
reports up to the present," while Wilfredo Seguritan, per
Special Order No. 239, is the OIC of FIDA for the Region. He
suggested, however, that if compliance is imperative, Special
10
Order No. 219 should be reconsidered and set aside.

a) grave misconduct and gross

insubordinationfor refusal to turn over the
keys to the safe in Region I. With the
considerable amount of cash advances being
handled in the region, Mr. Agda's refusal to
turn over said keys has become prejudicial to
the best interests of the service;

On 2 March 1988 Teotico issued a Memorandum to Agda

informing him that although Special Order No. 219 instructed
him to report to the Office of the Administrator, he has neither
been seen nor officially heard from during the past several
weeks and directing him to submit not later than 4 March 1988
an official clarification on his whereabouts and
11
accomplishments for the past three weeks.

b) neglect in the performance of dutyfor

his refusal to report to the office of the
Administrator and his refusal to accept
assignment claiming that it is a form of
harassment since he still has a pending
unresolved petition; and

In his Reply of 9 March 1988 Agda reminded Teotico that his

urgent petition to stop the Implementation of Special Order
No. 219 is still unresolved; consequently, its implementation
should be held in abeyance; and, as regards his whereabouts,
he referred Teotico to the logbook kept by the FIDA guard and
certificates of appearance "attached from the respective offices
12
during the past three (3) weeks."

c) pending an investigation in some

instances involving falsification of public
documents and instances of possible
malversation of funds for services and
maintenance and operating expenses in
Region I as per results of the recent FIDA
Management Audit.

On 9 March 1988 FIDA Region I OIC, Mr. Seguritan, requested

Teotico to require Agda to turn over to him (Seguritan) the
keys of the vault in FIDA Region I "for the safekeeping of our
blank cheeks, official receipts, approved checks but not yet
issued to payee creditors, salaries and other vital official
13
documents of the Region"; in a routing slip dated 11 March
1988, Teotico referred the request to Agda with the note: "For
immediate compliance pls. so as not to hamper the conduct of
14
our operations and service in Region I."
On 16 March 1988 Agda indorsed the above routing slip
request to the Secretary of the Department of Agriculture
wherein he admits that he has the key of the safety vault, but
impliedly asserts that he will not yield it to anybody alleging
that his petition to stop the implementation of Special Order
No. 219 and to nullify it is still unresolved and, besides, the
intended re-assignment is merely temporary; hence, it would
be in keeping with substantial justice if a status quo of things
be maintained. He also asks that the urgent petition be
resolved and that meanwhile the directive to turn over the keys
15
be held in abeyance.
On 23 March 1988 Teotico formally charged Agda for
insubordination and conduct prejudical to the best interest of
the service for, among others, his failure to comply with the
memorandum of January 7, 1988 and with the routing slip
16
request of 11 March 1988.
On 4 April 1988 Teotico placed Agda under preventive
suspension pursuant to his Special Order No. 74, to wit:
Pursuant to Section (sic) 41 and 42 of P.D. 807, Mr.
Democrito Agda, Sr. is placed under preventive
suspension for the following reasons:

In this regard, the cashier is instructed to withhold the

salary of Mr. Agda.
This order takes effect upon receipt of this
memorandum and shall remain in force unless earlier
revoked or until the cases involving Mr. Agda are
17
resolved.
On 8 April 1988 Agda asked Teotico for an extension of twenty
days from 11 April 1988 within which to submit his answer to
18
the formal charge; however, in his memorandum of 11 April
1988, Teotico granted him an extension of only five days from
19
receipt thereof. Also on 11 April, Teotico issued Special Order
No. 26 reconstituting the Committee on Adjudication of Cases
FIDA-AC headed by Senior State Prosecutor Hipolita Ordinario
20
of the Department of Justice.
On 13 April 1988 counsel for Agda, Atty. Ramon Miranda,
submitted a letter requesting for an extension of fifteen days to
21
file the answer. In the letter of Senior State Prosecutor
Ordinario of 14 April 1988, Agda, through his counsel, was
22
given until 21 April 1988 within which to file the answer.
It likewise appears that on 13 April 1988 Agda sent a letter to
23
the Commission on Elections inquiring if Special Order No.
219, series of 1987, of Administrator Lanuza was referred and
submitted to it for approval three days before its
implementation. In a letter dated 14 April 1988, Atty. Horacio
SJ Apostol, Manager of the Law Department of the
Commission, informed private respondent that "as of this date,
records of the Department do not show that aforesaid Special
Order was submitted or referred to this Commission for
24
approval."

ADMIN LAW 1st Set

Page 46 of 150

On 18 April 1988 Agda filed with the court below in Civil Case
25
No. 88-577 his Amended Petition for Certiorari, Prohibition
and Injunction with preliminary injunction and restraining order
against Teotico and the three (3) members of the FIDA-AC
alleging, in substance, that Special Order No. 219 of 13
November 1987 issued by then Fida Administrator Lanuza is
null and void for having been issued in violation of Section 48
of P.D. No. 807 (Civil Service Decree) which prohibits the detail
or re-assignment of civil service personnel within three months
before an election and Section 261(h) of Batas Pambansa Blg
881 (The Omnibus Election Code) which prohibits transfer or
detail of officers and employees in the civil service within the
election period except upon prior approval of the Commission
on Elections, and that all succeeding orders or memoranda
issued in connection with or by reason of such Special Order or
in implementation thereof are likewise null and void. The
election referred to was the January 18, 1988 local election. He
further alleges therein that he "is filing" with the COMELEC
criminal charges for violation of Sections 3, 261(h) and 264 of
B. P. No. 881 against former Administrator Lanuza and Teotico.
He prays inter alia, that the court declare null and void and set
aside Special Order No. 219, Teotico's Memoranda of 7
January, 2 March, and 11 March, 1988, the Formal Charges of
23 March, the preventive suspension of 4 April, Special Order
No. 86, the Memorandum of 11 April 1988, and Ordinario's
letter of 14 April 1988, and the formal investigation to be
conducted on the charge against him.
On 18 April 1988 respondent Judge issued a restraining order
directing respondents therein to refrain from enforcing
Annexes "E", "I", "M", "O", "R", "S", and "Z" of the amended
petition until further orders of the court and setting the
hearing of the application for a writ of preliminary injunction
26
on 26 April 1988.
On 2 May 1988 Teotico and his co-respondents in the court
below filed, through the office of the Solicitor General, a
motion to dismiss the case and opposition to the issuance of a
27
writ of preliminary injunction alleging that the petition is
premature for failure to exhaust administrative remedies and
patently lacks merit and is merely intended to derail the
administrative investigation against Agda. Movants set the
hearing thereof on 5 May 1988.
On 4 May 1988 Agda filed an opposition to the motion to
dismiss and memorandum in support of his application for a
28
writ of preliminary injunction.
On 11 May 1988 respondent Judge issued an Order granting
the application for a writ of preliminary injunction upon the
29
filing of a bond of P50,000. 00 on the basis of the following
findings:
xxx

xxx

xxx

After careful consideration of the pleadings and their

annexes filed by the parties, this Court finds, to wit:
the petitioner was appointed on June 16, 1984, as
Chief, Fiber Industry Development Authority by Cesar

C. Lanuza, former Administrator of FIDA and was

assigned in Regions 1 and 2 with office at San
Fernando, La Union; that on November 13, 1987, three
months before the local elections, which was held on
January 18, 1987, the petitioner was reassigned by
former FIDA Administrator Lanuza to the FIDA main
office and designated Epitacio E. Lanuza, Jr. as officerin-charge (OIC) of FIDA Region 1; that on December
15, 1987, petitioner requested the Civil Service
Commission (CSC) to stay the implementation of
Special Order No. 219; that on January 7, 1988,
respondent Teotico implemented said Special Order
219, despite the fact that petitioner requested the
Civil Service Commission to stay implementation of
the said Special Order 219; that on January 12, 1988,
petitioner requested the respondent Teotico to defer
the implementation of said Special Order No. 219;
that on March 2, 1988, respondent Teotico again
implemented Special Order 219, requiring petitioner
to submit his accomplishment report; that on March 9,
1988, petitioner requested respondent Teotico to
defer the implementation of said special order,
considering that the same has not yet been resolved
by the Secretary of Agriculture; that on December 11,
1987, former FIDA Administrator designated Wilfredo
G. Siguritan as officer-in-charge of FIDA Region 1; that
on March 9, 1988, FIDA Region 1 administrator
Siguritan requested the petitioner through
respondent Teotico to require petitioner to turn over
to him the keys of the vault in FIDA Region 1; that on
March 14, 1988, respondent Teotico implemented
Special Order No. 219, requiring petitioner to turn
over said keys to OIC Seguritan; that on March 16,
1988, petitioner requested the Secretary of Agriculture
to defer the implementation of said special order
pending resolution of said office; that on March 23,
1988, respondent Teotico implemented Special Order
219 by instituting administrative charges against
petitioner for insubordination prejudicial to the best
interest of the service; that on April 4, 1988,
respondent Teotico placed the petitioner under
preventive suspension, effective April 6, 1988; that on
April 8, 1988, petitioner requested respondent Teotico
to give him twenty (20) days from April 11, 1988,
within which to submit his explanation to the formal
administrative charges.
xxx

xxx

xxx

After careful consideration of the allegations of the

facts in this case, this Court believes that petitioner
was denied due process of law. The fact that
petitioner informed respondent Teotico to stay and/or
defer the implementation of Special Order No. 219,
considering that the same is still pending before the
Secretary of Agriculture, despite of which,
respondents, more particularly, Teotico, in grave
abuse of discretion whimsical and capricious,
tantamounting (sic) to the denial of due process of

ADMIN LAW 1st Set

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law to the petitioner, implemented the same and

aggravated by the fact that respondents Teotico filed
insubordination charges against the petitioner. This
court believes, that actuations of the respondents in
railroading the request of the petitioner to stay the
implementation of Special Order No. 219 tantamounts
to the denial of due process of law as mandated by
the new (C)onstitution, which falls under one of the
principle of exhaustion of administrative remedies.
(New Filipino Maritime Agencies, Inc. vs. Rivera, L5359-60, June 15, 1978) (De Lara, et al. vs. Cloribin, et
al., G.R. No. L-21763, May 31, 1965).

order them to comply with the 11 May Order before their

motion for reconsideration is finally resolved and they pray that
the motion for reconsideration dated 2 June 1988 be resolved
and that further action on its 16 December Order be deferred
38
until resolution of the motion.
On 29 December 1988 respondent Judge issued an
39
Order denying the motion for reconsideration filed on 2 June
and the motion of 22 December 1988 and directing Teotico to
comply with the Order of 16 December 1988 immediately upon
receipt of said Order of 29 December.

It does not appear from the records that Agda presented

evidence at a hearing on the application for a writ of
preliminary injunction. On the contrary, as reflected in the
above-quoted order of respondent Judge, the writ was issued
on the basis of his "consideration of the pleadings and their
annexes filed by the parties."

On 5 January 1989 Teotico and his co-respondents filed a

motion for reconsideration/clarification, alleging, inter alia, that
there is no basis for ordering Teotico to reinstate Agda with full
back wages and allowances since not even the Order of 11 May
granting the motion for preliminary injunction ordains the
40
same. But respondent Judge also denied this motion in his
41
Order of 14 February 1989.

On 17 May 1988, respondent Judge issued a Writ of

30
Preliminary Preventive or Prohibitory Injunction restraining
Teotico and his co-respondents from enforcing Annexes "E",
"I", "K", "M", "O", "R", "S", and "Z" of the amended petition.

Finding no other avenue of relief in the court below, petitioner

filed this petition on 27 March 1989 submitting to Us the
following grounds:

On 2 June 1988 Teotico and his co-respondents below filed a

motion, dated 31 May 1988, to reconsider the 11 May Order
alleging therein that the bases of the findings of denial of due
process are not supported by facts; they set the motion for
31
hearing on 10 June 1988.
On 2 June 1988 Agda filed a motion to declare respondents
below in contempt for refusing to comply with the writ
32
33
. Then on 17 June 1988 he filed his opposition to the
motion for reconsideration.
Teotico and his co-respondents filed on 17 June 1988 their
opposition to the motion to declare them in contempt of
34
court.
The motion for contempt was ultimately denied in the Order of
35
respondent Judge of 8 September 1988.
On September 23, 1988 Agda filed a motion to reconsider the
36
8 September Order.
37

In his Order of 16 December 1988, respondent Judge held

that Teotico and his co-respondents cannot be held for
contempt; however they were directed to comply with the
Order of 11 May 1988 and Teotico was specifically ordered "to
immediately reinstate the petitioner, Democrito O. Agda, Sr.,
from (sic) his previous position as Fiber Regional Administrator,
FIDA Region I, with full back wages and allowances mandated
by law."
On 22 December 1988 Teotico and his co-respondents filed a
motion to reconsider the above 16 December 1988 Order
stating therein that it would be premature for the court to

I
Respondent Judge acted with grave abuse of
discretion when he ordered petitioner, allegedly in
compliance with the writ of injunction issued, to
reinstate respondent Agda to his previous position as
Fiber Regional Administrator FIDA Region I with full
backwages and allowances notwithstanding that such
act was not mandated or even mentioned in the
prohibitory injunctive writ.
II
Respondent Judge acted with grave abuse of
discretion when he refused to dismiss respondent's
petition in Civil Case No. 88-577 despite his finding
that respondent has already availed of an
administrative remedy which is pending resolution by
the Civil Service Commission.
III
Respondent Judge acted with grave abuse of
discretion when he issued a writ of preliminary
injunction dated May 11, 1988 without hearing on the
merits.
In compliance with Our resolution of 12 April 1989, herein
respondents filed their Comment on 2 May 1989.
As We stated in the introductory portion of this Decision, in the
resolution of 29 May 1989 We gave due course to the petition
and required the parties to submit their Memoranda, which
they complied with.

ADMIN LAW 1st Set

Page 48 of 150

The petition is impressed with merit.

Respondent Judge clearly acted with grave abuse of discretion
in taking cognizance of Civil Case No. 88-577, in deliberately
failing to act on the motion to dismiss, in issuing a writ of
preliminary injunction, and in ordering the "reinstatement" of
Agda, "as Fiber Regional Administrator, FIDA Region I, with full
back wages and allowances mandated by law."
Agda was not appointed as Fiber Regional Administrator, FIDA
Region I, but as CHIEF FIBER DEVELOPMENT OFFICER; he was
42
not appointed to any specific station. He was
merely designated as Acting Regional Administrator For FIDA
43
Regions I and II.
Not having been appointed to any specific station, he could be
tranferred or assigned to any other place by the head of office
where in the opinion of the latter his services may be utilized
44
more effectively.
In Ibaez vs. COMELEC,

45

., We held:

Assayed upon the foregoing legal crucible the

petitioner's case suffers an initial set back. The
appointments upon which they respectively anchor
their claim state that they were merely appointed as
"Election Registrars in the Commission on Elections. . .
. ." Therefore, there can be no gainsaying the fact that
the petitioners were not appointed to, and
consequently, not entitled to any security of tenure or
permanence in, any specific station. On the general
principle, they may be transferred as the exigencies of
the service require. They ordinarily have no right to
46
complain against any change of assignment.
In the latest case of Department of Education, Culture and
Sports, et al. vs. The Honorable Court of Appeals, et al., 183
SCRA 555, 562, We held:
The appointment of Navarro as principal does not
refer to any particular station or school. As such, she
could be assigned to any station and she is not
entitled to stay permanently at any specific school.
(Bongbong vs. Parado, 57 SCRA 623). When she was
assigned to the Carlos Albert High School, it would
not have been with the intention to let her stay in said
school permanently. Otherwise, her appointment
would have so stated. Consequently, she may be
assigned to any station or school in Quezon City as
the exigencies of public service require even without
her consent.
Moreover, it should be borne in mind that Special Order No. 29
of 2 January 1984 merely designated Agda as Acting Regional
Administrator for Regions I and II. Such being the case, the rule
enunciated in Cuadra vs. Cordova etc., 103 Phil. 391, on
temporary appointments or appointments in an acting capacity
that they are terminable at the pleasure of the appointing

authority, is applicable to Agda. He can neither claim a vested

right to the station to which he was assigned nor to security of
tenure thereat.
Accordingly, private respondent could be re-assigned to any
place and Special Order No. 219 dated 13 November 1987
reassigning private respondent at the Office of the
Administrator of the FIDA "in the interest of the service" was in
order. Although denominated as "reassignment", it was in fact
a mere detail in that office.
The Civil Service Decree, P.D. No. 807, allows transfer, detail
47
and re-assignment. If the employee concerned believes that
there is no justification therefore, he "may appeal his case to"
the Civil Service Commission. Unless otherwise ordered by the
Commission, the decision to detail an employee shall be
executory. Agda invoked the appellate jurisdiction of the
Commission when he filed his Urgent Petition To Stay
Implementation and Nullify the Special Order in question with
48
the Civil Service Commission. It does not, however, appear to
Us that he exerted genuine and sincere efforts to obtain an
expeditious resolution thereof What appears to be clear is that
he used its pendency as an excuse for his refusal to comply
with the memorandum of Teotico of 7 January 1988 and the
routing slip request of 11 March 1988 for the key to the safety
vault.
We are not persuaded by Agda's claim that the questioned
detail was done in violation of Section 261(h) of Batas
Pambansa Blg. 881 (Omnibus Election Code) Considering that
(a) he raised this matter for the first time only in his Amended
Petition, or five (5) months after the issuance of the Special
Order. No evidence has been presented, or at least strongly
and convincingly suggested, to prove or show that no prior
approval was obtained by Administrator Lanuza from the
COMELEC for such detail, or that a case for violation of Section
261(h) was in fact filed against Lanuza or Teotico. All that Agda
can show are his alleged letter to the COMELEC to inquire if
Special Order No. 219 had been referred to it and an alleged
answer dated 14 April 1988 of Atty. Horacio SJ Apostol,
Manager of the Law Department of the Commission, to the
effect that the records of the Department do not show, as of
that date, that the Special Order was submitted or referred to
the Commission. The latter is not conclusive proof that no prior
authority was in fact obtained by Administrator Lanuza for the
reassignment or detail of Agda. No law requires the
submission. to the COMELEC of special orders reassigning or
detailing employees within the prohibited period. What is
needed is "prior authority," the request for which and its
approval may be in separate documents or papers.
Moreover, although Agda alleges in his amended petition that:
11.20. Petitioner is filing criminal charges for violations
of Secs. 3, 261(h) and 264 of B.P. 881 against former
FIDA Administrator Lanuza and respondent Teotico in
the COMELEC." (Emphasis supplied)

ADMIN LAW 1st Set

Page 49 of 150

none of his subsequent pleadings both before the lower court

and before Us disclose that he had in fact filed such charges.
Obviously, said allegation was a clever attempt to show a
semblance of a valid grievance.
Furthermore, even in the cases of transfer or detail within the
probihited period prior to an election, an aggrieved party is
provided an appropriate administrative remedy. Section 6 of
Rule VI of the Civil Service Rules on Personnel Actions and
Policies provides:
Sec. 6. Except when the exigencies of the service
require, an official or employee of the government
may not be ordered detailed or reassigned during the
three-month period before any local or national
election, and if he believes that the order for his detail
or reassignment is due to harassment, coercion,
intimidation, or other personal reasons, he may
appeal the order to the Commission. Until this is
proven, however, the order is presumed to be in the
interest of the service and notwithstanding the appeal,
the decision to detail or reassign him shall be
executory, but the Commission may order deferment
of suspension of the detail or reassignment ex parte."
Agda made no attempt to avail of this remedy. In his Urgent
Petition to Stay Implementation and Nullify Special Order No.
219, nothing is mentioned about a violation of the ban on
transfer or detail. The reason seems too obvious. Until he filed
the Amended Petition before the court below he did not
consider his re-assignment per Special Order No. 219 as a
violation of the ban on transfer or detail during the threemonth period before the election.
Not having yet fully exhausted the existing adequate
administrative remedy which he already took advantage of,
Agda cannot be permitted to abandon it at his chosen time
and leisure and invoke the jurisdiction of regular courts. As
aptly summarized:
Within the administrative forum the law may provide
for review of decisions by higher authorities. Before a
party can be allowed to invoke the jurisdiction of the
courts of justice, he is expected to have exhausted all
means of administrative redress afforded him. There
are both legal and practical reasons for this. The
administrative process is intended to provide less
expensive and more speedy solutions to disputes.
Where the enabling statute indicates a procedure for
administrative review, and provides a system of
administrative appeal, or reconsideration, the courts
for reasons of law, comity and convenience, will not
entertain a case unless the available administrative
remedies have been resorted to and the appropriate
authorities have been given opporturity to act and
correct the errors committed in the administrative
49
forum.

The doctrine of exhaustion of administrative remedies is wellentrenched in this jurisdiction and a host of cases has
50
buttressed its stability. There are, of course, recognized
exceptions thereto, but, unfortunately, private respondent
cannot seek safe refuge under their protective mantle, for in
respect to the remedy provided for in Section 24(c) of P.D. No.
807, which is also the remedy provided for in Section 24(f),
availment thereof is indispensable for the viability of any
judicial action. As we held in Department of Education, Culture
and Sports, et al. vs. The Honorable Court of Appeals, et
al., supra:
Finally, respondent Navarro has not exhausted
administrative remedies as she did not elevate the
matter of her transfer to the Civil Service Commission
in accordance with Section 24(c), P.D. No. 807,
otherwise known as the Civil Service Decree, which
provides:
xxx

xxx

xxx

By not appealing her case to the Civil Service

Commission before filing Special Civil Action No Q37025, respondent Navarro is indubitably without
cause of action.
Respondent Judge, as clearly shown in his Order of 11 May
1988, was fully aware of Agda's urgent petition before the Civil
Service Commission to suspend its implementation of Special
Order No. 219 and to nullify the same. He had, therefore, no
other business to do except to grant the motion to dismiss. He
should have, forthwith, stayed his hands until the
51
administrative processes had been completed. Yet, for
reasons only known to him, which We cannot divine at, he did
not do so. On the contrary, he granted the application for a
writ of preliminary injunction and issued the writ on 17 May
1988.
The writ was improvidently and capriciously issued. The
issuance of the writ, although addressed to the sound
discretion of the court, is conditioned on the existence of a
clear and positive right which should be
52
protected. Considering that the amended petition should
have been dismissed outright because Agda prematurely
invoked the jurisdiction of the court in view of his appeal to the
Civil Service Commission, it follows that, even if he had a right,
no protection was available from the court below. But even if
We disregard for the moment the above weakness of the
amended petition and consider, as the respondent Judge did,
"the pleadings and their annexes," the inescapable action that
should follow would be denial of the application for the
issuance of the writ. The pleadings and the annexes do not at
all demonstrate a clear and positive right for Agda, for as
discussed above, by the very nature of his appointment he had
no security of tenure in the station to where he was assigned
on 2 January 1984; besides, his designation as acting Regional
Administrator for FIDA Regions I and II was terminable at any
time at the pleasure of the head of office. Moreover, as could
be gleaned from the annexes of the Amended Petition, Agda

ADMIN LAW 1st Set

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impliedly accepted his re-assignment to the Control Office of

FIDA To Teotico's Memorandum of January 1988 addressed to
Agda as "Regional Administrator" which required him to
submit his development programs for Region I (1988-1993)
and his proposals for sericulture and the maguey industry in
said Region, Agda, in his indorsement of 12 January 1-988
claims and admits that "this representation was reassigned to
FIDA Central Office where he now reports up to the present"
and that "Mr. Wilfredo Seguritan . . . remains up to the present
as the OIC of FIDA for the said Region." In this indorsement
Agda wrote below his signature the following: (Detailed to
Central Office). To Teotico's Memorandum of 2 March 1988
requiring him to submit an official clarification on his
whereabouts and his accomplishments for the past three weeks
since he had not been seen or officially heard from, Agda
referred the former to the record (log book) kept by the FIDA
Guard and certificates of appearance. Clearly then, as of the
filing of the Amended Petition, Special Order No. 219 was a fait
accompli. Acts already consummated cannot be enjoined by
53
preliminary injunction.
The respondent Judge did not stop there. As complained by
Teotico, on 16 December 1988 the former issued an Order
wherein although he denied the motion for the reconsideration
of his 8 September 1988 Order denying the motion for
contempt, he ordered Teotico to immediately reinstate Agda
"from (sic) his previous position as Fiber Regional
Administrator, FIDA Region I, with full back wages and
allowances mandated by law." This, in effect, amounted to a
mandatory injunction, issued without a hearing and in violation
of Section 5 of Rule 58 of the Rules of Court. There was no
basis for its issuance. A mandatory injunction may only be
issued upon a showing that the invasion of the right is material
and substantial; the right of complainant is clear and
unmistakable; and there is an urgent and permanent necessity
54
for the writ to prevent serious damage. They have not been
shown to exist in this case.
Even if the 16 December reinstatement order should be
construed to be directed against the preventive suspension
order issued by Teotico on 4 April 1988, respondent Judge
clearly capriciously breached the limits of his discretion for
nowhere in his amended petition has Agda attacked its validity
or legality on any other ground than its being issued
55
to implement Special Order No. 219, which he claims was
issued in violation of the pertinent provisions of the Omnibus
Election Code and the Civil Service Decree prohibiting transfer
or reassignment of civil service officials and employees within
three months before the local election of January 18, 1988. He
assailed the suspension order not on the ground that Teotico
does not have the authority to file the formal charge and to
preventively suspend him, but solely on the basis of his selfserving claim that both were issued without or in excess of
jurisdiction or with grave abuse of discretion because they
were meant to implement Special Order No. 219.
Preventive suspension is allowed under Section 41 of P.D. No.
807 which reads:

Sec. 41. Preventive Suspension. The proper

disciplining authority may preventively suspend any
subordinate officer or employee under his authority
pending an investigation, if the charge against such
officer or employee involves dishonesty, oppression
or grave misconduct, or neglect in the performance of
duty, or if there are reasons to believe that the
respondent is guilty of charges which would warrant
his removal from the service.
However, per Section 42 of the same decree, if the
administrative cases against the suspended officer or
employee, who is not a Presidential appointee, is not finally
decided by the disciplining authority within ninety days after
date of suspension, he shall be automatically reinstated in the
service provided that when the delay in the disposition of the
case is due to the fault, negligence or petition of the
respondent, the period of delay shall not be counted in
computing the period of suspension.1wphi1
In the instant case, by Agda's own act and the cooperation of
respondent Judge, the administrative case against the former is
not yet even ready for hearing. He has not filed his Answer,
although he was given until 21 April 1988 within which to do
so.
Lastly, We hold that both the preliminary injunction and the
reinstatement order issued by respondent Judge practically
granted the main relief prayed for by Agda even before the
hearing on the case on the merits. In Obias, et al., vs. Hon.
Borja, et al., 136 SCRA 687, We ruled that respondent judge
acted with grave abuse of discretion in issuing a writ of
preliminary injunction which in effect practically granted the
principal relief sought in the Mandamus case. The reason for
this is that such issuance "would, in effect, be a prejudgment of
the main case and a reversal of the rule on the burden of proof
since it would assume the proposition which the petitioner is
56
inceptively bound to prove.
The foregoing conclusions render unnecessary a discussion on
other matters raised in this case.
WHEREFORE, the Petition is GRANTED. The Orders of
respondent Judge of 11 May 1988, 16 December 1988, 29
December 1988 and 14 February 1989 and the Writ of
Injunction issued on 17 May 1987 in Civil Case No. 88-577
entitled Democrito D. Agda, Sr., vs. Joaquin M. Teotico, et al.,
are SET ASIDE and said Civil Case is hereby ordered
DISMISSED. With costs against private respondent.
SO ORDERED.
[G.R. No. 163123. April 15, 2005]
PHILIPPINE
HEALTH
INSURANCE
CORPORATION, petitioner, vs. CHINESE GENERAL
HOSPITAL AND MEDICAL CENTER, respondent.
DECISION

ADMIN LAW 1st Set

Page 51 of 150

CORONA, J.:
Before us is a petition for review on certiorari under Rule
45 of the Rules of Court assailing the March 29, 2004
[1]
decision of the Court of Appeals, the dispositive portion of
which read:
FOR THE FOREGOING DISQUISITIONS, the petition
[2]
is GRANTED, the Philippine Health Insurance Corporation is
hereby ordered to give due course to petitioners, Chinese
General Hospital and Medical Center, claims for the period
from 1989 to 1992, amounting to FOURTEEN MILLION TWO
HUNDRED NINETY ONE THOUSAND FIVE HUNDRED SIXTY
[3]
EIGHT PESOS and 71/100 PESOS (P14,291,568.71).

Commission shall be merged with those of the Corporation

(PHILHEALTH) without need of conveyance, transfer or
assignment. The PMCC shall thereafter cease to exist.
The liabilities of the PMCC shall be treated in accordance with
existing laws and pertinent rules and regulations. xxx
SECTION 52. Transfer of Health Insurance Funds of the SSS and
GSIS. The Health Insurance Funds being administered by the
SSS and GSIS shall be transferred to the Corporation within
sixty (60) days from the promulgation of the implementing
rules and regulations. The SSS and GSIS shall, however,
continue to perform Medicare functions under contract with
the Corporation until such time that such functions are
assumed by the Corporation xxx.

The facts, as culled by the Court of Appeals, follow.

On February 14, 1995, Republic Act No. 7875, otherwise known
as An Act Instituting a National Health Insurance Program for
all Filipinos and Establishing the Philippine Health Insurance
Corporation For the Purpose, was approved and signed into
law. As its guiding principle, it is provided in Section 2 thereof,
thus:
Section 2. Declaration of Principles and Policies. Section 11,
Article XIII of the Constitution of the Republic of the Philippines
declares that the state shall adopt an integrated and
comprehensive approach to health development which shall
endeavor to make essential goods, health and other social
services available to all the people at affordable cost. Priority
for the needs of the underprivileged, sick, elderly, disabled,
women, and children should be recognized. Likewise, it shall be
the policy of the State to provide free medical care to paupers.
[4]

Prior to the enactment of R.A. 7875. CGH had been an

accredited health care provider under the Philippine Medical
Care Commission (PMCC), more popularly known as Medicare.
As defined by R.A. 7875, a health care provider refers to a
health care institution, which is duly licensed and accredited
devoted primarily to the maintenance and operation of
facilities for health promotion, prevention, diagnosis, treatment
and care of individuals suffering from illness, disease, injury,
disability or deformity, or in need of obstetrical or other
[5]
medical and nursing care.
[6]

As such, petitioner filed its Medicare claims with the Social

Security System (SSS), which, together with the Government
Service Insurance System (GSIS), administered the Health
Insurance Fund of the PMMC. Thus, petitioner filed its claim
from 1989 to 1992 with the SSS, amounting to EIGHT MILLION
ONE HUNDRED TWO THOUSAND SEVEN HUNDRED EIGHTYTWO and 10/100 (P8,102,782.10). Its application for the
payment of its claim with the SSS was overtaken by the
passage of R.A. 7875, which in Section 51 and 52, provides:
SECTION 51. Merger. Within sixty (60) days from the
promulgation of the implementing rules and regulations, all
functions and assets of the Philippine Medical Care

Being the successor of the PMCC, PHILHEALTH, in compliance

[7]
with the mandate of R.A. 7875, promulgated the rules and
regulations implementing said act, Section 52 of which
provides:
SECTION 52. Fee for Service Guidelines on Claims Payment. xxx
b. All claims for payment of services rendered shall be filed
within sixty (60) calendar days from the date of discharge of
the patient. Otherwise, the claim shall be barred from payment
except if the delay in the filing of thee claim is due to natural
calamities and other fortuitous events. If the claim is sent
through mail, the date of the mailing as stamped by the post
office of origin shall be considered as the date of the filing.
If the delay in the filing is due to natural calamities or other
fortuitous events, the health care provider shall be accorded an
extension period of sixty (60) calendar days.
If the delay in the filing of the claim is caused by the health
care provider, and the Medicare benefits had already been
deducted, the claim will not be paid. If the claim is not yet
deducted, it will be paid to the member chargeable to the
future claims of the health care provider.
Instead of giving due course to petitioners claims totaling to
EIGHT MILLION ONE HUNDRED TWO THOUSAND SEVEN
HUNDRED EIGHTY-TWO and 10/100 (P8,102,782.10), only ONE
MILLION THREE HUNDRED SIXTY-FIVE THOUSAND FIVE
HUNDRED FIFTY-SIX and 32/100 Pesos (1,365,556.32) was paid
to petitioner, representing its claims from 1989 to 1992 (sic).
Petitioner again filed its claims representing services rendered
to its patients from 1998 to 1999, amounting to SEVEN
MILLION FIVE HUNDRED FIFTY FOUR THOUSAND THREE
HUNDRED FORTY TWO and 93/100 Pesos (P7,554,342.93). For
being allegedly filed beyond the sixty (60) day period allowed
by the implementing rules and regulations, Section 52 thereof,
petitioners claims were denied by the Claims Review Unit of
Philhealth in its letter dated January 14, 200, thus:
xxx

ADMIN LAW 1st Set

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This pertains to your three hundred seventy three Philhealth

medicare claims (373) which were primarily denied by Claims
Processing Department for late filing and for which you made
an appeal to this office. We regret to inform you that after
thorough evaluation of your claims, [your] 361 medicare
claims were DENIED, due to the fact that the claims were filed 5
to 16 months after discharge. However, the
remaining medicare claims have been forwarded to Claims
Processing Department (CPD) for payment.
SECTION 52 (B) Rule 52 (B) Rule VIII of the Implementing Rules
and Regulations of 7875 provides that all claims for payment of
services rendered shall be filed within sixty (60) days from the
day of discharge of the patient. However, Philhealth Circular No,
31-A, series of 1998, state that all claims pending with
Philhealth as of September 15, 1998 and claims with discharge
dates from September to December 31, 1998 are given one
hundred twenty (120) days from the date of discharge to file
their claim. In as much as we would like to grant your request
for reconsideration, the Corporation could no longer extend
the period of filing xxx.

members. Thus, how can these accredited health care givers be

encouraged to serve an increasing number of members when
they end up on the losing end of this venture. We must admit
that the costs of operating these medical institutions cannot be
taken lightly. They must also earn a modicum amount of profit
in order to operate properly.
Again, it is trite to emphasize that essentially, the purpose of
the national health insurance program is to provide members
immediate medical care with the least amount of cash
expended. Thus, with PHILHEALTH, members/patients need
only to present their card to prove their membership and the
accredited health care giver is mandated by law to provide the
necessary medical assistance, said health care giver
shouldering the PHILHEALTH part of the bill. However, it is the
members/patients who bear the brunt. Thus, they are made to
shoulder the PHILHEALTH part of the bill, and the refund
thereof is subject to whether or not the claims of the health
care providers are approved by PHILHEALTH. This is blatantly
contrary to the very purpose for which the National Health
[8]
Insurance Program was created.

Petitioners claim was denied with finality by PHILHEALTH in its

assailed decision dated June 6, 2000.

xxxxxxxxx
We agree.

In a petition for review under Rule 43 of the Rules of

Court, the Court of Appeals ordered herein petitioner
Philippine Health Insurance Corporation (Philhealth) to pay the
claims in the amount of Fourteen Million Two Hundred Ninetyone Thousand Five Hundred Sixty-eight Pesos and 71/100
(P14,291,568.71), principally on the ground of liberal
application of the 60-day rule under Section 52 of RA 7875s
Implementing Rules and Regulations. According to the Court of
Appeals:
The avowed policy in the creation of a national health program
is, as provided in Section 11, Article XIII of the 1987
Constitution, to adopt an integrated and comprehensive
approach to health development which shall endeavor to make
essential goods, health and other social services available to
all people at affordable cost. To assist the state in pursuing
this policy, hospitals and medical institutions such as herein
petitioner are accredited to provide health care. It is true, as
aptly stated by the OGCC, that petitioner was not required by
the government to take part in its program, it did so
voluntarily. But the fact that the government did not twist
petitioners arm, so to speak, to participate does not make
petitioners participation in the program less commendable,
considering that at rate PHILHEALTH is denying claims of
health care givers, it is more risky rather than providential for
health care givers to take part in the governments health
program.
It is Our firmly held view that the policy of the state in creating
a national health insurance program would be better served by
granting the instant petition. Thus, it is noteworthy to mention
that health care givers are threatening to boycott PHILHEALTH,
reasoning that the claims approved by PHILHEALTH are not
commensurate to the services rendered by them to its

The state policy in creating a national health insurance

program is to grant discounted medical coverage to all citizens,
with priority to the needs of the underprivileged, sick, elderly,
disabled, women and children, and free medical care to
[9]
paupers .
The very same policy was adopted in RA 7875
sought to:

[10]

which

a) provide all citizens of the Philippines with the

mechanism to gain financial access to health
services;
b) create the National Health Insurance Program to
serve as the means to help the people pay
for the health services;
c) prioritize and accelerate the provision of health
services to all Filipinos, especially that
segment of the population who cannot
afford such services; and
d) establish the Philippine Health Insurance
Corporation that will administer the program
[11]
at central and local levels.
To assist the state in pursuing the aforementioned policy,
health institutions were granted the privilege of applying for
[12]
accreditation as health care providers. Respondent Chinese
General Hospital and Medical Center (CGH) was one of those
which received such accreditation.

ADMIN LAW 1st Set

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Under the rules promulgated by the Philhealth Board

pursuant to RA 7875, any claim for payment of services
rendered (to a patient) shall be filed within sixty (60) calendar
days from the date of discharge of the patient. Otherwise, the
[13]
claim is barred.
But before a claim is filed with petitioner Philhealth for
services already rendered, an accredited health care provider
like respondent CGH is required to:
a. accomplish a Philhealth claim form;
b. accomplish an itemized list of the medicines
administered to and medical supplies used by
the patient concerned, indicating therein the
quality, unit, price and total price
corresponding thereto;
c. require the patient concerned and his/her
employer to accomplish and submit a
Philhealth member/employer certification;
d. in case the patient gave birth, require her to
submit a certified true copy of the childs birth
certificate;
e. in case the patient died, require the immediate
relatives to submit a certified true copy of the
deceaseds death certificate; and
f. in case a members dependent is hospitalized for
which the member seeks coverage, require the
member to submit proof of relationship to the
patient and to execute an affidavit of
[14]
support.
Apart from the foregoing requirements which often
necessitate securing documents from other government
offices, and the fact that most patients are unable to
immediately accomplish and submit the required documents,
an accredited health care provider like CGH has to contend
with an average of about a thousand members and/or
dependents seeking medical treatment for various illnesses per
month.
Under these circumstances, it is unreasonable to expect
respondent CGH to comply 100% of the time with the
prescribed 60-day rule of Philhealth. Despite the prescribed
standard procedures, respondent has no assurance of the
members prompt submission of the required documents. This
factor is completely beyond its control. There will always be
delay not attributable to respondent.
The unreasonably strict implementation of the 60-day
rule, without regard to the causes of delay beyond respondents
control, will be counter-productive to the long-term
effectiveness of the NHIP. Instead of placing a premium on
participation in the Program, Philhealth punishes an accredited
health provider like CGH by refusing to pay its claims for
services already rendered. Under these circumstances, no

accredited provider will gamble on honoring claims with

delayed supporting papers no matter how meritorious
knowing that reimbursement from Philhealth will not be
forthcoming.
This Court will not hesitate, whenever necessary, to allow
a liberal implementation of the rules and regulations of an
administrative agency in cases where their unjustifiably rigid
enforcement will result in a deprivation of legal rights. In this
case, respondent had already rendered the services for which it
was filing its claims. Technicalities should not be allowed to
defeat respondents right to be reimbursed, specially since
petitioners charter itself guarantees such reimbursement.
A careful reading of RA 7875 shows that the law itself
does not provide for any specific period within which to file
claims. We can safely presume therefore that the period for
filing was not per se the principal concern of the legislature.
More important than mere technicalities is the realization of
the state policy to provide Philhealth members with the
requisite medical care at the least possible cost. Truly, nothing
can be more disheartening than to see the Acts noble objective
frustrated by the overly stringent application of technical rules.
The fact is that it was not RA 7875 itself but Section 52 of
its Implementing Rules and Regulations which established the
60-day cut-off for the filing of claims.
While it is doctrinal in administrative law that the rules
and regulations of administrative bodies interpreting the law
[15]
they are entrusted to enforce have the force of law , these
issuances are by no means iron-clad norms. Administrative
bodies themselves can and have in fact bent the rules for
reasons of public interest. On September 15, 1998, for instance,
[16]
petitioner issued Philhealth Circular No. 31-A:
IN ORDER to allow members of the National Health Insurance
Program (NHIP) sufficient time to complete all documents to
support their medical care claims, Philhealth is temporarily
suspending the sixty (60)-day reglementary period for filing
claims.
While Section 52 (b), Rule VIII of the Implementing Rules
and Regulations of R.A. 7875 provides that all claims for
payment of services shall be filed within 60 calendar days
from the day of discharge of a patient, there is a need to
extend this period to minimize the incidence of late filing
due to members personal difficulties and circumstances
beyond their control. (emphasis ours)
And then again, on April 20, 1999, Philhealth Circular No.
50 was issued:
TO MINIMIZE the incidence of late filing of claims due to
members personal difficulties in preparing the needed
documents, Philhealth is extending the period for filing of
claims xxx (emphasis ours)
The above circulars indubitably recognized the necessity
of extending the 60-day period because of the difficulties

ADMIN LAW 1st Set

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encountered by members in completing the required

documents, often due to circumstances beyond their control.
Petitioner appeared to be well aware of the problems
encountered by its members in complying with the 60-day rule.
Furthermore, implicit in the wording of the circulars was the
cognition of the fact that the fault was not always attributable
to the health care providers like CGH but to the members
themselves.
Delay on the part of members is an ordinary occurrence.
There is no need to make a mountain out of a molehill as far as
this particular point is concerned. To this day, members
continue to encounter delay in submitting their documents.
There was therefore no compelling reason for the exacting and
meticulous enforcement of the rule when, in at least two
instances, petitioner itself implemented it liberally and on the
same ground that it was using against respondent.
Petitioner likewise contends that respondent failed to
exhaust administrative remedies before resorting to judicial
intervention. We disagree.
Under the doctrine of exhaustion of administrative
remedies, an administrative decision must first be appealed to
the administrative superiors at the highest level before it may
be elevated to a court of justice for review.
This doctrine, however, is a relative one and its flexibility
[17]
is conditioned on the peculiar circumstances of a case. There
are a number of instances when the doctrine has been held to
be inapplicable. Among the established exceptions are:
1) when the question raised is purely legal;
2) when the administrative body is in estoppel;
3) when the act complained of is patently illegal;
4) when there is urgent need for judicial intervention;
5) when the claim involved is small;
6) when irreparable damage will be suffered;
7) when there is no other plain, speedy and adequate remedy;
8) when strong public interest is involved;

are considered, nonetheless, parties to the present case. This

Court is mandated herein to take conscious and detailed
consideration of the interplay of the interests of the state, the
health care giver and the members. With these in mind, We
hold that the greater interest of the greater number of people,
mostly members of PHILHEALTH, is paramount.
Furthermore, when the representatives of herein petitioner met
with Dr. Enrique Zalamea, PHILHEALTHs President and Chief
Executive Officer, he informed them that, in lieu of protest to
be filed directly with him, the representatives could make
representations with the Office of the President, which
petitioner did to no avail, considering that the formal protest
filed was referred back by the Office of the President to Dr.
Zalamea. Being then the head of PHILHEALTH, and expected to
have an intimate knowledge of the law and the rules creating
the National Health Insurance Program, under which
PHILHEALTH was created, he instructed herein petitioner to
pursue a remedy not sanctioned by the rules and not in accord
with the rule of exhaustion of administrative remedies. In so
doing, PHILHEALTH is deemed estopped from assailing the
instant petition for failure to exhaust administrative remedies
when PHILHEALTH itself, through its president, does not
[19]
subscribe to it.
There is no need to belabor the fact that the baseless
denial of respondents claims will be gravely disturbing to the
health care industry, specially the providers whose claims will
be unpaid. The unfortunate reality is that there are today some
health care providers who admit numbers for treatment and/or
confinement yet require them to pay the portion which ought
to be shouldered by Philhealth. A refund is made only if their
claim is first paid, due to the apprehension of not being
reimbursed. Simply stated, a member cannot avail of his
benefits under the NHIP at the time he needs it most.
We cannot turn a deaf ear to respondents plea for
fairness which essentially demands that its claims for services
already rendered be honored as the National Health Insurance
Program law intended.
WHEREFORE, the assailed decision of the Court of
Appeals is hereby AFFIRMED. Petitioner is hereby ordered to
pay respondents claims representing services rendered to its
members from 1989 to 1992.
No costs.
SO ORDERED.

9) when the subject of the controversy is private land;

[18]

10) in quo warranto proceedings.

As explained by the appellate court:

It is Our view that the instant case falls as one of the
exceptions, concerning as it does public interest. As mentioned
earlier, although they were not made parties to the instant
case, the rights of millions of Filipinos who are members of
PHILHEALTH and who obviously rely on it for their health care,

G.R. No. 85502 February 24, 1992

SUNVILLE TIMBER PRODUCTS, INC., petitioner,
vs.
HON. ALFONSO G. ABAD, as Judge RTC, Br. 22 of Pagadian
City, COURT OF APPEALS, ISIDRO GILBOLINGO AND
ROBUSTIANO BUGTAI, respondents.
Manuel V. Trinida for petitioner.

ADMIN LAW 1st Set

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Adolf Leo P. Boncavil for private respondents.

CRUZ, J.:
The Court will focus its attention only on one of the issues
raised in this petition the correct application of the doctrine
of exhaustion of administrative remedies.
The petitioner was granted a Timber License Agreement (TLA),
authorizing it to cut, remove and utilize timber within the
concession area covering 29,500 hectares of forest land in
Zamboanga del Sur, for a period of ten years expiring on
September 31, 1992.
On July 31, 1987, the herein private respondents filed a petition
with the Department of Environment and Natural Resources for
the cancellation of the TLA on the ground of serious violations
of its conditions and the provisions of forestry laws and
regulations.
The same charges were subsequently made, also by the herein
private respondents, in a complaint for injunction with
damages against the petitioner, which was docketed as Civil
Case No. 2732 in the Regional Trial Court of Pagadian City.
The petitioner moved to dismiss this case on three grounds, to
wit: 1) the court had no jurisdiction over the complaint; 2) the
plaintiffs had not yet exhausted administrative remedies; and 3)
the injunction sought was expressly prohibited by section 1 of
PD 605.
Judge Alfonso G. Abad denied the motion to dismiss on
1
December 11, 1987, and the motion for reconsideration on
2
February 15, 1988. The petitioner then elevated the matter to
the respondent Court of Appeals, which sustained the trial
3
court in a decision dated July 4, 1988, and in its resolution of
4
September 27, 1988, denying the motion for reconsideration.
The Court of Appeals held that the doctrine of exhaustion of
administrative remedies was not without exception and
pointed to the several instances approved by this Court where
it could be dispensed with. The respondent court found that in
the case before it, the applicable exception was the urgent
need for judicial intervention, which it explained thus:
The lower court found out that sometime on July
1981, the City Council of Pagadian in its Resolution
No. 111 requested the Bureau of Forest Development
to reserve 1,000 hectares in Lison Valley. This request
remained unacted upon. Instead in 1982, a TLA
covering 29,500 hectares, including the area
requested, was given to petitioner.
Then the fear expressed by the City Council of
Pagadian in its resolution became reality.
"As averred in the complaint, the erosion
caused by the logging operations of the

defendant has caused heavy siltation not

only in the Labangan River (as predicted by
the City Council of Pagadian City in 1981)
but also in the Tukuran River, Salug River,
Sindangan River, and Sibuguey River. In
other words, the adverse effects of the
logging operations of the defendant have
already covered a wider area than that feared
to be adversely affected by the City Council
of Pagadian City.
Floods are unknown phenomena in heavily
forested areas years back, particularly in the
Island of Mindanao. When the grant of
logging concessions started, so was the
denudation of forests. . . . It is common
knowledge that heavy floods have occurred
in areas/places adjoining logging
concessions. (Resolution dated December 11,
1987, p. 5).
Thus, it is urgent that indiscriminate logging
be stopped. Irreparable damage would
ensue unless the court intervenes. Reliance
on the DENR may not be enough, judging
from its inaction on the council's request
seven years back.
The respondent court cited in support of this conclusion the
5
case of De Lara v. Cloribel, where "irreparable damage and
injury" was allowed as an exceptional ground, and Arrow
6
Transportation Corporation v. Board of Transportation, where
the doctrine was waived because of "the strong public interest
in having the matter settled" as soon as possible.
The decision also declared invalid Section 1 of PD 605, which
provides:
Sec. 1. No court of the Philippines shall have
jurisdiction to issue any restraining order,
preliminary injunction or preliminary
mandatory injunction in any case involving
or growing out of the issuance, approval or
disapproval, revocation or suspension of, or
any action whatsoever by the proper
administrative official or body on
concessions, licenses, permits, patents, or
public grants of any kind in connection with
the disposition, exploitation, utilization,
exploration and/or development of the
natural resources of the Philippines.
This was held to be an encroachment on the judicial power
vested in the Supreme Court and the lower courts by Article
VIII, Section 1, of the Constitution. The respondent court
7
cited Export Processing Zone Authority v. Dulay, where several
presidential decrees were declared unconstitutional for
divesting the courts of the judicial power to determine just
compensation in expropriation cases.

ADMIN LAW 1st Set

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The petitioner is now before the Court, contending that the

doctrine of exhaustion of administrative remedies was not
correctly applied and that the declaration of the
unconstitutionality of Section 1 of PD 605 was improper.
The doctrine of exhaustion of administrative remedies calls for
resort first to the appropriate administrative authorities in the
resolution of a controversy falling under their jurisdiction
before the same may be elevated to the courts of justice for
review. Non-observance of the doctrine results in lack of a
cause of action, 8 which is one of the grounds allowed in the
Rules of Court for the dismissal of the complaint. The
deficiency is not jurisdictional. Failure to invoke it operates as a
waiver of the objection as a ground for a motion to dismiss and
the court may then proceed with the case as if the doctrine had
been observed.
One of the reasons for the doctrine of exhaustion is the
separation of powers, which enjoins upon the Judiciary a
becoming policy of non-interference with matters coming
primarily (albeit not exclusively) within the competence of the
other departments. The theory is that the administrative
authorities are in a better position to resolve questions
addressed to their particular expertise and that errors
committed by subordinates in their resolution may be rectified
by their superiors if given a chance to do so. A no less
important consideration is that administrative decisions are
usually questioned in the special civil actions of certiorari,
prohibition and mandamus, which are allowed only when there
is no other plain, speedy and adequate remedy available to the
petitioner. It may be added that strict enforcement of the rule
could also relieve the courts of a considerable number of
avoidable cases which otherwise would burden their heavily
9
loaded dockets.
As correctly suggested by he respondent court, however, there
are a number of instances when the doctrine may be dispensed
with and judicial action validly resorted to immediately. Among
these exceptional cases are: 1) when the question raised is
10
purely legal; 2) when the administrative body is in
11
estoppel; 3) when the act complained of is patently
12
illegal; 4) when there is urgent need for judicial
13
14
intervention; 5) when the claim involved is small; 6) when
15
irreparable damage will be suffered; 7) when there is no
16
other plain, speedy and adequate remedy; 8) when strong
17
public interest is involved; 9) when the subject of the
18
controversy is private land; and 10) in quo
19
warranto proceedings.
The private respondents now submit that their complaint
comes under the exceptions because forestry laws do not
require observance of the doctrine as a condition precedent to
judicial action; the question they are raising is purely legal;
application of the doctrine will cause great and irreparable
damage; and public interest is involved.
We rule for the petitioner.

Even if it be assumed that the forestry laws do not expressly

require prior resort to administrative remedies, the reasons for
the doctrine above given, if nothing else, would suffice to still
require its observance. Even if such reasons were disregarded,
there would still be the explicit language of pertinent laws
vesting in the DENR the power and function "to regulate the
development, disposition, extraction, exploration and use of
the country's forests" and "to exercise exclusive jurisdiction" in
the "management and disposition of all lands of the public
20
domain," and in the Forest Management Bureau (formerly
the Bureau of Forest Development) the responsibility for the
21
enforcement of the forestry laws aid regulations here
claimed to have been violated. This comprehensive conferment
clearly implies at the very least that the DENR should be
allowed to rule in the first instance on any controversy coming
under its express powers before the courts of justice may
intervene.
The argument that the questions raised in the petition are
purely legal is also not acceptable. The private respondents
have charged, both in the administrative case before the DENR
and in the civil case before the Regional Trial Court of Pagadian
City, that the petitioner has violated the terms and conditions
of the TLA and the provisions of forestry laws and regulations.
The charge involves factual issues calling for the presentation
of supporting evidence. Such evidence is best evaluated first by
the administrative authorities, employing their specialized
knowledge of the agreement and the rules allegedly violated,
before the courts may step in to exercise their powers of
review.
As for the alleged urgent necessity for judicial action and the
claimed adverse impact of the case on the national interest, the
record does not show that the petitioners have satisfactorily
established these extraordinary circumstances to justify
deviation from the doctrine by exhaustion of administrative
remedies and immediate resort to the courts of justice. In fact,
this particular submission must fall flat against the petitioner's
uncontested contention that it has since 1988 stopped its
operations under the TLA in compliance with the order of the
DENR.
In the Petition for prohibition filed with the respondent court,
the petitioner alleged that its logging operations had been
22
suspended pursuant to a telegram received on February 23,
1988, by the District Forester from the Regional Executive
Director of the DENR, Zamboanga City; reading as follows:
DISTRICT FORESTER
PAGADIAN CITY
QUOTED HEREUNDER IS RADIO MESSAGE DATED
FEBRUARY 22, 1988 FROM SECRETARY FULGENCIO S.
FACTORAN, JR. QUOTE EFFECTIVE IMMEDIATELY CMA
SUSPEND ALL LOGGING OPERATIONS OF SUNVILLE IN
VIEW OF SERIOUS VIOLATIONS OF FOREST
PROTECTION AND REFORESTATION UNQUOTE SUBMIT
REPORT ASAP. AN

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The petition now before us contains the allegations that the

"petition for cancellation of petitioner's TLA is still pending up
to this date and that petitioner's logging operations (were)
ordered suspended by the Secretary of the DENR pending
23
further investigation."
In the memorandum filed by the petitioner with this Court, it is
informed that "the Secretary of the DENR suspended
petitioner's logging operations until further investigation. The
suspension is still in force up to this date after the lapse of
24
almost 3 years."

VIOLETA J. JOSEF,
Respondents.
x-------------------- - - - - - -x
HAZEL MA. C. ANTOLIN
Petitioner,

G.R. No. 175705

Present:
CORONA, C. J., Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

- versus -

These statements have not been disputed by the private

respondents in their pleadings before the respondent court
and this Court and are therefore deemed admitted.
There in no question that Civil Case No. 2732 comes within the
jurisdiction of the respondent court. Nevertheless, as the wrong
alleged in the complaint was supposedly committed as a result
of the unlawful logging activities of the petitioner, it will be
necessary first to determine whether or not the TLA and the
forestry laws and regulations had indeed been violated. To
repeat for emphasis, determination of this question is the
primary responsibility of the Forest Management Bureau of the
DENR. The application of the expertise of the administrative
agency in the resolution of the issue raised is a condition
precedent for the eventual examination, if still necessary, of the
same question by a court of justice.
In view of the above observations, we find that there was no
need for the respondent court to declare the
unconstitutionality of Section 1 of PD 605. The rule is that a
question of constitutionality must be avoided where the case
25
can be decided on some other available ground, as we have
done in the case before us. The resolution of this same
question must await another case, where all the indispensable
requisites of a judicial inquiry into a constitutional question are
satisfactorily established. In such an event, it will be time for
the Court "to make the hammer fall, and heavily," in the words
of Justice Laurel, if such action is warranted.
WHEREFORE, the petition is GRANTED. The decision of the
respondent court dated July 4, 1988, and its resolution dated
September 27, 1988, as well as the resolutions of the trial court
dated December 11, 1987 and February 15, 1988, are all
REVERSED and SET ASIDE. Civil Case No. 2732 in the Regional
Trial Court of Pagadian City is hereby DISMISSED.
SO ORDERED.

HAZEL MA. C. ANTOLIN,

Petitioner,

G.R. No. 165036

ANTONIETA FORTUNA-IBE,
Respondent.

Promulgated:
July 5, 2010

DECISION

DEL CASTILLO, J.:

Examinations have a two-fold purpose. First, they are summative;
examinations are intended to assess and record what and how much
the students have learned. Second, and perhaps more importantly,
they are formative; examinations are intended to be part and parcel of
the learning process. In a perfect system, they are tools for learning. In
view of the pedagogical aspect of national examinations, the need for
all parties to fully ventilate their respective positions, and the view that
government transactions can only be improved by public scrutiny, we
remand these cases to the trial court for further proceedings.
Factual Antecedents
Petitioner took the accountancy licensure examinations (the
Certified Public Accountant [CPA] Board Exams) conducted by the
[1]
Board of Accountancy (the Board) in October 1997. The examination
results were released on October 29, 1997; out of 6,481 examinees,
only 1,171 passed. Unfortunately, petitioner did not make it. When the
results were released, she received failing grades in four out of the
[2]
seven subjects.

Subject
Theory of Accounts
Business Law
Management Services
Auditing Theory
Auditing Problems
Practical Accounting I
Practical Accounting II

Petitioners Grade
65 %
66 %
69 %
82 %
70 %
68 %
77 %

- versus ABELARDO T. DOMONDON,

JOSE A. GANGAN, and

Convinced that she deserved to pass the examinations, she

wrote to respondent Abelardo T. Domondon (Domondon), Acting
Chairman of the Board of Accountancy, and requested that her

ADMIN LAW 1st Set

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[3]

answer sheets be re-corrected. On November 3, 1997, petitioner was

shown her answer sheets, but these consisted merely of shaded
marks, so she was unable to determine why she failed the
[4]
exam. Thus, on November 10, 1997, she again wrote to the Board to
request for copies of (a) the questionnaire in each of the seven
subjects (b) her answer sheets; (c) the answer keys to the
questionnaires, and (d) an explanation of the grading system used in
[5]
each subject (collectively, the Examination Papers).
Acting Chairman Domondon denied petitioners request on
two grounds: first, that Section 36, Article III of the Rules and
Regulations Governing the Regulation and Practice of Professionals, as
amended by Professional Regulation Commission (PRC) Resolution
No. 332, series of 1994, only permitted access to the petitioners
answer sheet (which she had been shown previously), and that
reconsideration of her examination result was only proper under the
grounds stated therein:
Sec. 36 An examinee shall be allowed to have
access or to go over his/her test papers or answer
sheets on a date not later than thirty (30) days
from the official release of the results of the
examination. Within ten (10) days from such date,
he/she may file his/her request for
reconsideration of ratings. Reconsideration of
rating shall be effected only on grounds of
mechanical error in the grading of his/her
[6]
testpapers or answer sheets, or malfeasance.

Second, Acting Chairman Domondon clarified that the

Board was precluded from releasing the Examination Papers (other
than petitioners answer sheet) by Section 20, Article IV of PRC
Resolution No. 338, series of 1994, which provides:
Sec.
20. Illegal,
Immoral,
Dishonorable,
Unprofessional Acts The hereunder acts shall
constitute prejudicial, illegal, grossly immoral,
dishonorable, or unprofessional conduct:
A. Providing, getting, receiving, holding,
using or reproducing questions

case was raffled to Branch 33, and docketed as Civil Case No. 9886881. The Petition included a prayer for the issuance of a preliminary
mandatory injunction ordering the Board of Accountancy and its
members (the respondents) to furnish petitioner with copies of the
Examination Papers. Petitioner also prayed that final judgment be
issued ordering respondents to furnish petitioner with all documents
and other materials as would enable her to determine whether
respondents fairly administered the examinations and correctly
graded petitioners performance therein, and, if warranted, to issue to
[11]
her a certificate of registration as a CPA.
On February 5, 1998, respondents filed their Opposition to
the Application for a Writ of Preliminary Mandatory Injunction, and
argued, inter alia, that petitioner was not entitled to the relief sought,
that the respondents did not have the duty to furnish petitioner with
copies of the Examination Papers, and that petitioner had other plain,
speedy, adequate remedy in the ordinary course of law, namely,
[12]
recourse to the PRC. Respondents also filed their Answer with
Compulsory Counterclaim in the main case, which asked that the
Petition for Mandamus with Damages be dismissed for lack of merit
on the following grounds: (1) petitioner failed to exhaust
administrative remedies; (2) the petition stated no cause of action
because there was no ministerial duty to release the information
demanded; and (3) the constitutional right to information on matters
of public concern is subject to limitations provided by law, including
[13]
Section 20, Article IV, of PRC Resolution No. 338, series of 1994.
On March 3, 1998, petitioner filed an Amended Petition
(which was admitted by the RTC), where she included the following
allegation in the body of her petition:
The allegations in this amended petition are
meant only to plead a cause of action for access
to the documents requested, not for re-correction
which petitioner shall assert in the proper forum
depending on, among others, whether she finds
sufficient error in the documents to warrant such
or any other relief. None of the allegations in this
amended petition, including those in the
following paragraphs, is made to assert a cause of
[14]
action for re-correction.

xxxx
3. that have been given in the
examination except if the test
bank for the subject has on
deposit at least two thousand
[7]
(2,000) questions.

[8]

After a further exchange of correspondence, the Board

informed petitioner that an investigation was conducted into her
exam and there was no mechanical error found in the grading of her
[9]
test papers.
Proceedings before the Regional Trial Court
Undeterred, on January 12, 1998, petitioner filed a Petition
for Mandamus with Damages against the Board of Accountancy and
[10]
its members before the Regional Trial Court (RTC) of Manila. The

If only to underscore the fact that she was not asking for a re-checking
of her exam, the following prayer for relief was deleted from the
Amended Petition: and, if warranted, to issue to her a certificate of
registration as a CPA.
On June 23, 1998, respondents filed a Manifestation and
Motion to Dismiss Application for Writ of Preliminary Mandatory
Injunction, on the ground that petitioner had taken and passed the
May 1998 CPA Licensure Examination and had taken her oath as a
[15]
CPA. Petitioner
filed
her
Opposition
on July
8,
[16]
1998. Subsequently, on October 29, 1998, respondents filed their
Answer with Counterclaim to the amended petition. They reiterated
their original allegations and further alleged that there was no cause
of action because at the time the Amended Petition was admitted,
they had ceased to be members of the Board of Accountancy and
they were not in possession of the documents sought by the
[17]
petitioner.

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Ruling of the Regional Trial Court

In an Order dated October 16, 1998, the trial court granted
respondents Motion to Dismiss Petitioners Application for a Writ of
Preliminary Mandatory Injunction (not the main case), ruling that the
matter had become moot since petitioner passed the May CPA
Licensure 1998 Examination and had already taken her oath as a
[18]
CPA.
Undaunted, petitioner sought and obtained leave to file
[19]
a Second Amended Petition for Mandamus with Damages where
she finally impleaded the PRC as respondent and included the
following plea in her prayer:
WHEREFORE, petitioner respectfully prays that:
xxxx

filed by the petitioner which this Court is inclined

to grant.
As to the Motion for Conservatory Measures filed
by the petitioner, the Court denies the same. It is
clear that the PRC has in custody the documents
being requested by the petitioner. It has also an
adequate facility to preserve and safeguard the
documents. To be sure that the questioned
documents are preserved and safeguarded, the
Court will order the PRC to preserve and
safeguard the documents and make them
available anytime the Court or petitioner needs
them.
WHEREFORE, the Order of this Court dated June
20, 2002 is reconsidered and set aside. The
Professional Regulation Commission is ordered to
preserve and safeguard the following documents:

2. Judgment be issued
a)
(a) commanding respondents to give petitioner all
documents and other materials as would enable
her to determine whether respondents fairly
administered the same examinations and
correctly graded petitioners performance
therein and, if warranted, to make the
appropriate revisions on the results of her
examination. (Emphasis ours)

b)
c)

Questionnaire in each of
the seven subjects comprising
the Accountancy Examination of
October, 1997;
Petitioners
Answer
Sheets; and
Answer keys to the
questionnaires.
[23]

SO ORDERED.
On June 21, 2002, the trial court dismissed the petition on
the ground that the petition had already become moot, since
petitioner managed to pass the 1998 CPA Board
[20]
[21]
examinations. Petitioner sought reconsideration which was
[22]
granted by the trial court in its Omnibus Order dated November 11,
2002. The Omnibus Order provides in part:
On the motion for reconsideration filed by the
petitioner, the Court is inclined to reconsider its
Order dismissing the petition. The Court agrees
with the petitioner that the passing of the
petitioner in the subsequent CPA examination did
not render the petition moot and academic
because the relief and if warranted, to issue to her
a certificate of registration as Certified Public
Accountant was deleted from the original
petition. As regard the issue of whether the
petitioner has the constitutional right to have
access to the questioned documents, the Court
would want first the parties to adduce evidence
before it can resolve the issue so that it can make
a complete determination of the rights of the
parties.
The Court would also want the Professional
Regulation Commission to give its side of the case
the moment it is impleaded as a respondent in
the Second Amended Petition for Mandamus

[24]

Respondents filed a motion for reconsideration which was denied.

Proceedings before the
Court of Appeals

The RTC Decisions led to the filing of three separate

petitions for certiorari before the Court of Appeals (CA):

(a)

(b)
(c)

CA-GR SP No. 76498, a petition filed by

respondents Domondon, Gangan, and Josef
on April 11, 2003;
CA-GR SP No. 76546, a petition filed by
respondent Ibe on April 30, 2003; and
CA-GR SP No. 76545, a petition filed by
the Board of Accountancy and PRC.

It is the first two proceedings that are pending before us. In

both cases, the CA set aside the RTC Decisions and ordered the
dismissal of Civil Case No. 98-8681.
Ruling of the Court of Appeals
[25]

In its December 11, 2006 Decision in CA-GR SP No.

76546, the CA ruled that the petition has become moot in view of
petitioners eventual passing of the 1998 CPA Board Exam. In CA-GR
SP No. 76498, the CA found, in a Decision dated February 16,
[26]
2004, that (i) Section 20, Article IV of PRC Resolution No. 338

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constituted a valid limitation on petitioners right to information and

access to government documents; (ii) the Examination Documents
were not of public concern, because petitioner merely sought review
of her failing marks; (iii) it was not the ministerial or mandatory
function of the respondents to review and reassess the answers to
examination questions of a failing examinee; (iv) the case has become
moot, since petitioner already passed the May 1998 CPA Board
Examinations and took her oath as a CPA; and (v) petitioner failed to
exhaust administrative remedies, because, having failed to secure the
desired outcome from the respondents, she did not elevate the
[27]
matter to the PRC before seeking judicial intervention.
CA-GR SP No. 76498 and CA-GR SP No. 76546 were
brought before us by the petitioner and docketed as G.R. Nos. 165036
and 175705, respectively. The cases were then consolidated, in view of
the similarity of the factual antecedents and issues, and to avoid the
[28]
possibility of conflicting decisions by different divisions of this Court.
Issues
Before us, petitioner argues that she has a right to obtain
copies of the examination papers so she can determine for herself
why and how she failed and to ensure that the Board properly
[29]
performed its duties. She argues that the Constitution as well as the
Code of Conduct and Ethical Standards for Public Officials and
[30]
Employees support her right to demand access to the Examination
Papers. Furthermore, she claims that there was no need to exhaust
administrative remedies, since no recourse to the PRC was available,
and only a pure question of law is involved in this case. Finally, she
claims that her demand for access to documents was not rendered
moot by her passing of the 1998 CPA Board Exams.

Medical Board of Examiners was an appeal to the

Professional Regulation Commission itself, and
thence to the Court of Appeals; and since they did
not apply for relief to the Commission prior to
their institution of the special civil action of
mandamus in the Regional Trial Court, the
omission was fatal to the action under the familiar
doctrine requiring exhaustion of administrative
remedies. Apart from the obvious undesirability of
a procedure which would allow Courts to
substitute their judgment for that of Government
boards in the determination of successful
examinees in any administered examination an
area in which courts have no expertise and the
circumstance that the law declares the Court of
Appeals to be the appropriate review Court, the
Regional Trial Court was quite correct in refusing
to take cognizance of an action seeking reversal
of the quasi-judicial action taken by the Medical
[32]
Board of Examiners. (Emphasis ours)

For a writ of mandamus to issue, the applicant must have a

well-defined, clear, and certain legal right to the thing demanded. The
corresponding duty of the respondent to perform the required act
[33]
must be equally clear. No such clarity exists here; neither does
petitioners right to demand a revision of her examination results. And
despite petitioners assertions that she has not made any demand for
re-correction, the most cursory perusal of her Second Amended
Petition and her prayer that the respondents make the appropriate
revisions on the results of her examination belies this claim.

Our Ruling
Propriety of Writ of Mandamus
At the very outset let us be clear of our ruling. Any claim for recorrection or revision of her 1997 examination cannot be compelled
by mandamus. This much was made evident by our ruling in Agustin[31]
Ramos v. Sandoval, where we stated:
After deliberating on the petition in relation to the
other pleadings filed in the proceedings at bar,
the Court resolved to DENY said petition for lack
of merit. The petition at bar prays for the setting
aside of the Order of respondent Judge
dismissing petitioners mandamus action to
compel the other respondents (Medical Board of
Examiners and the Professional Regulation
Commission) to reconsider, recorrect and/or
rectify the board ratings of the petitioners from
their present failing grades to higher or passing
marks. The function of reviewing and reassessing the petitioners answers to the
examination questions, in the light of the facts
and arguments presented by them x x x is a
discretionary function of the Medical Board,
not a ministerial and mandatory one, hence,
not within the scope of the writ of
mandamus. The obvious remedy of the
petitioners from the adverse judgment by the

Like the claimants in Agustin, the remedy of petitioner from

the refusal of the Board to release the Examination Papers should
have been through an appeal to the PRC. Undoubtedly, petitioner had
an adequate remedy from the Boards refusal to provide her with
copies of the Examination Papers. Under Section 5(a) of Presidential
[34]
Decree No. 223, the PRC has the power to promulgate rules and
regulations to implement policies for the regulation of the accounting
[35]
profession. In fact, it is one such regulation (PRC Resolution No. 338)
that is at issue in this case. In addition, under Section 5(c), the PRC has
the power to
review, coordinate, integrate and approve the
policies, resolutions, rules and regulations,
orders or decisions promulgated by the
various Boards with respect to the profession or
occupation under their jurisdictions including the
results of their licensure examinations but their
decisions on administrative cases shall be final
and executory unless appealed to the
Commission within thirty (30) days from the date
of promulgation thereof.

Petitioner posits that no remedy was available because the PRCs

power to review and approve in Section 5(c) only refers to appeals in
[36]
decisions concerning administrative investigations and not to
instances where documents are being requested. Not only is this
position myopic and self-serving, it is bereft of either statutory or

ADMIN LAW 1st Set

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jurisprudential basis. The PRCs quasi-legislative and enforcement

powers, encompassing its authority to review and approve policies,
resolutions, rules and regulations, orders, or decisions cover more than
administrative investigations conducted pursuant to its quasi-judicial
[37]
powers. More significantly, since the PRC itself issued the resolution
questioned by the petitioner here, it was in the best position to resolve
questions addressed to its area of expertise. Indeed, petitioner could
have saved herself a great deal of time and effort had she given the
PRC the opportunity to rectify any purported errors committed by the
Board.
One of the reasons for exhaustion of administrative
remedies is our well-entrenched doctrine on separation of powers,
which enjoins upon the Judiciary a becoming policy of noninterference with matters falling primarily (albeit not exclusively) within
[38]
the competence of other departments. Courts, for reasons of law,
comity and convenience, should not entertain suits unless the
available administrative remedies have first been resorted to and the
proper authorities have been given an appropriate opportunity to act
and correct their alleged errors, if any, committed in the administrative
[39]
forum.
However, the principle of exhaustion of administrative
remedies is subject to exceptions, among which is when only a
[40]
question of law is involved. This is because issues of law such as
whether petitioner has a constitutional right to demand access to the
Examination Papers - cannot be resolved with finality by the
[41]
administrative officer.
Issues of Mootness
We now turn to the question of whether the petition has
become moot in view of petitioners having passed the 1998 CPA
examination. An issue becomes moot and academic when it ceases to
present a justiciable controversy, so that a declaration on the issue
[42]
would be of no practical use or value.
In this jurisdiction, any citizen may challenge any attempt to
obstruct the exercise of his or her right to information and may seek
[43]
its enforcement by mandamus. And since every citizen possesses
[44]
the inherent right to be informed by the mere fact of citizenship, we
find that petitioners belated passing of the CPA Board Exams does not
automatically mean that her interest in the Examination Papers has
become mere superfluity. Undoubtedly, the constitutional question
presented, in view of the likelihood that the issues in this case will be
[45]
repeated, warrants review.
The crux of this case is whether petitioner may compel
access to the Examination Documents through mandamus. As always,
our inquiry must begin with the Constitution. Section 7, Article III
provides:
Sec.7. The right of the people to information on
matters of public concern shall be recognized.
Access to official records, and to documents, and
papers pertaining to official acts, transactions, or
decisions, as well to government research data
used as basis for policy development, shall be
afforded the citizen, subject to such limitations as
may be provided by law.

Together with the guarantee of the right to information,

Section 28, Article II promotes full disclosure and transparency in
government, viz:
Sec. 28. Subject to reasonable conditions
prescribed by law, the State adopts and
implements a policy of full public disclosure of all
its transactions involving public interest.

Like all the constitutional guarantees, the right to

information is not absolute. The people's right to information is limited
to "matters of public concern," and is further "subject to such
limitations as may be provided by law." Similarly, the State's policy of
full disclosure is limited to "transactions involving public interest," and
is "subject to reasonable conditions prescribed by law". The Court has
always grappled with the meanings of the terms "public interest" and
[46]
"public concern." As observed in Legaspi v. Civil Service Commission:
In determining whether x x x a particular
information is of public concern there is no rigid
test which can be applied. "Public concern" like
"public interest" is a term that eludes exact
definition. Both terms embrace a broad spectrum
of subjects which the public may want to know,
either because these directly affect their lives, or
simply because such matters naturally arouse the
interest of an ordinary citizen. In the final analysis,
it is for the courts to determine on a case by case
basis whether the matter at issue is of interest or
importance, as it relates to or affects the public.

We have also recognized the need to preserve a measure of

confidentiality on some matters, such as national security, trade
secrets and banking transactions, criminal matters, and other
[47]
confidential matters.
We are prepared to concede that national board examinations such as
the CPA Board Exams are matters of public concern. The populace in
general, and the examinees in particular, would understandably be
interested in the fair and competent administration of these exams in
order to ensure that only those qualified are admitted into the
accounting profession. And as with all matters pedagogical, these
examinations could be not merely quantitative means of assessment,
but also means to further improve the teaching and learning of the art
and science of accounting.
On the other hand, we do realize that there may be valid reasons to
limit access to the Examination Papers in order to properly administer
the exam. More than the mere convenience of the examiner, it may
well be that there exist inherent difficulties in the preparation,
generation, encoding, administration, and checking of these multiple
choice exams that require that the questions and answers remain
confidential for a limited duration. However, the PRC is not a party to
these proceedings. They have not been given an opportunity to
explain the reasons behind their regulations or articulate the
justification for keeping the Examination Documents confidential. In
view of the far-reaching implications of this case, which may impact on

ADMIN LAW 1st Set

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every board examination administered by the PRC, and in order that

all relevant issues may be ventilated, we deem it best to remand these
cases to the RTC for further proceedings.
IN
VIEW
OF
THE
FOREGOING,
the
petitions
are GRANTED. The December
11,
2006 and February
16,
2004 Decisions of the Court of Appeals in CA-GR SP No. 76546 and
CA-GR
SP
No.
76498,
respectively, are
hereby SET
ASIDE. The November 11, 2002 and January 30, 2003 Orders of the
Regional Trial Court of Manila, Branch 33, in Civil Case No. 98-86881
are AFFIRMED. The case is remanded to the Regional Trial Court for
further proceedings.
SO ORDERED.

FIRST DIVISION
MERIDA WATER DISTRICT,
ITS BOARD OF DIRECTORS,
NAMELY: SUSANO
TOREJAS,
JR., LOURDES QUINTE,
ROMULO
PALES,
CARMELITA
DE
LOS
ANGELES, VILLAFRANCA
ROSAL,
AND
MWD
GENERAL MANAGER NILO
C. LUCERO,
Petitioners,

G.R. NO. 165993

Present:
PUNO, C.J., Chairperson,
CARPIO,
AZCUNA,
REYES,* and
LEONARDO-DE CASTRO, JJ.

- versus FRANCISCO
BACARRO,
VICTORINO DOMANILLO,
PATRICK BACOL, CARLITO
BARRERA,
RUSTICA
MENDOLA, JOSE DELIO
HERMOSO,
CHARITO
TOLORIO, MA. VICTORIA
MAINGQUE, ELMER GO,
AND GERARDO BIOCO,
Respondents.

Promulgated:

SEPTEMBER 30, 2008

x----------------------------------------------------------------------------------------x
DECISION
PUNO, C.J.:
This Petition for Review on Certiorari seeks to set aside the
[1]
Decision
[2]

and Resolution of the Court of Appeals (CA), dated January

30, 2004 and September 16, 2004, respectively, in CA-G.R. SP
[3]
No.77141, which affirmed the Orders of the Regional Trial
Court (RTC) in favor of respondents.

Petitioners are Merida Water District, a government[4]

owned and controlled corporation that operates the water
utility services in the municipality of Merida, Leyte; its
Chairman, Susano Torejas, Jr.; members of the Board of
Directors, Lourdes Quinte, Romulo Pales, Carmelita de los
Angeles, and Villafranca Rosal; and General Manager, Nilo C.
Lucero. On October 10, 2001, Merida Water District conducted
[5]
a public hearing for the purpose of increasing the water rate.
On March 7, 2002, Merida Water District received a
letter from the Local Water Utilities Administration
[6]
(LWUA). The letter stated that on March 5, 2002, the LWUA
Board of Trustees, per Board Resolution No. 63, series of 2002,
confirmed
Merida
Water
Districts
proposed
water
[7]
rates. Attached to the letter was the Rate Schedule of
Approved Water Rates containing a progressive increase of
[8]
water rates over a certain period.
On September 3, 2002, Merida Water District
approved Resolution No. 006-02, implementing a water rate
increase of P90 for the first ten cubic meters of water
[9]
consumption. Thereafter, petitioners issued notices of
disconnection to concessionaires who refused to pay the water
rate increase and did not render service to those who opted to
[10]
pay the increased rate on installment basis.
On February 13, 2003, respondents, consumers of
Merida Water District, filed a Petition for Injunction,
[11]
etc. against petitioners before the RTC. Respondents sought
to enjoin the petitioners from collecting payment of P90 for the
first ten cubic meters of water consumption. Respondents
alleged that the imposed rate was contrary to the rate increase
agreed upon during the public hearing. Respondents claimed
that petitioners violated Letter of Instructions (LOI) No. 700 by:
(1) implementing a water rate increase exceeding 60% of the
previous rate; and (2) failing to conduct a public hearing for the
[12]
imposed rate of P90.
On February 26, 2003, petitioners filed a Motion to
Dismiss, alleging that respondents petition lacked a cause of
action as they failed to exhaust administrative remedies under
Presidential Decree (P.D.) No. 198, the Provincial Water Utilities
[13]
Act of 1973, as amended by P.D. Nos. 768 and 1479. On the
same date, respondents questioned the legality of the water
rate increase before the National Water Resources Board
[14]
(NWRB).
[15]

In its Order dated March 3, 2003, the RTC denied

petitioners motion to dismiss. The RTC held there was no need
to exhaust administrative remedies, because petitioners: (1)
failed to comply with the legal requisites of hearing and notice;
and (2) violated LOI No. 700 for prescribing a water rate
increase of almost 100% from the previous rate. Petitioners
[16]
Motion for Reconsideration was denied on March 31,
[17]
2003.
On April 15, 2003, petitioners filed a Petition
[18]
for Certiorari with the CA, assailing the trial court orders for
lack of jurisdiction. The CA affirmed the orders, upholding the
RTCs jurisdiction and the propriety of respondents recourse to

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the trial court notwithstanding the rule on the exhaustion of

administrative remedies. Petitioners filed a Motion for
[19]
Reconsideration, which the CA denied.
Petitioners reiterate their arguments before this Court,
alleging the impropriety of the respondents recourse to the
trial court considering their failure to exhaust administrative
remedies. Thus, the sole issue for resolution is whether
respondents recourse to the trial court is proper despite their
failure to exhaust administrative remedies.
At the outset, it must be clarified that the case at bar
concerns a local water districts establishment of a rate increase.
As can be gleaned from the material averments in the
complaint below, respondents allegations, that petitioners
committed a patently illegal act by implementing a water rate
increase beyond that prescribed by LOI No. 700 and that
petitioners violated due process in implementing a rate not
agreed upon during the public hearing, point to the conclusion
that this controversy arose from the determination of the rate
itself.
P.D. No. 198 as amended by P.D. No. 1479 provides
for the administrative remedies regarding a review of water
rates, to determine whether a local water district complied with
the legal requirements in establishing such rates:
SEC. 11. The last paragraph of Section 63 of
the same decree is hereby amended to read
as follows:
The
rates
or
charges
established by such local
district, after hearing shall
have been conducted for the
purpose, shall be subject to
review by the Administration
to establish compliance with
the abovestated provisions.
Said review of rates or
charges shall be executory
and enforceable after the
lapse of seven calendar days
from posting thereof in a
public place in the locality of
the water district, without
prejudice to an appeal being
taken therefrom by a water
concessionaire to the [NWRB]
whose decision thereon shall
be appealable to the Office of
the President. An appeal to
the [NWRB] shall be perfected
within thirty days after the
expiration of the seven-day
period
of
posting.
The
[NWRB] shall decide on
appeal within thirty days from
[20]
perfection.

After LWUA reviews the rates established by a local water

district, a water concessionaire may appeal the same to the
NWRB. The NWRBs decision may then be appealed to the
Office of the President.
Respondents failed to exhaust administrative
remedies by their failure to appeal to the NWRB. Nonexhaustion of administrative remedies renders the action
[21]
premature. The Court has consistently reiterated the
rationale behind the doctrine of exhaustion of administrative
remedies:
One of the reasons for the doctrine of
exhaustion is the separation of powers, which
enjoins upon the Judiciary a becoming policy
of non-interference with matters coming
primarily (albeit not exclusively) within the
competence of the other departments. The
theory is that the administrative authorities
are in a better position to resolve questions
addressed to their particular expertise and
that errors committed by subordinates in their
resolution may be rectified by their superiors
if given a chance to do so It may be added
that strict enforcement of the rule could also
relieve the courts of a considerable number of
avoidable cases which otherwise would
[22]
burden their heavily loaded dockets.
Respondents justify their failure to observe the
administrative process due to the following grounds: (1) that
petitioners increase of the water rate is patently illegal; and (2)
a denial of due process.
We are not convinced.
The argument of patent illegality is without merit.
The first paragraph of LOI No. 700 provides that the LWUA
shall:
(f) Ensure that the water rates are not abruptly
increased beyond the water users ability to
pay, seeing to it that each increase if
warranted, does not exceed 60% of the
[23]
current rate.
The non-observance of the doctrine of exhaustion has been
upheld in cases when the patent illegality of the assailed act is
clear,
undisputed,
and
more
importantly,
evident
[24]
outright. In these cases, the assailed act did not require the
consideration of the existence and relevancy of specific
surrounding circumstances and their relation to each other for
the Court to conclude that the act was indeed patently illegal.
In the case at bar, certain facts need to be resolved first, to
determine whether petitioners increase of the water rate is a
patently illegal act.
The determination of the current rate from which to
compute the allowable increase of 60% is a question of fact
that cannot be properly threshed out before this Court. The
NWRB must be given an opportunity to make a factual finding
with respect to this question. This Court accords the factual

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findings of administrative agencies with utmost consideration

because of the special knowledge and expertise gained by
these quasi-judicial tribunals from handling specific matters
[25]
falling under their jurisdiction. Considering that the LWUA
confirmed the Rate Schedule of Approved Water Rates for
Merida Water District, a schedule that contains different rates
that gradually increase, the determination of whether the
computation of the percentage increase complies with the
60% limitation is a factual matter best left to the competence
of the NWRB.
The argument of denial of due process deserves scant
consideration. The non-observance of the doctrine of
exhaustion has been recognized in cases where the party
seeking outright judicial intervention was denied the
[26]
opportunity to be heard in administrative proceedings. In
the case at bar, respondents were not denied the opportunity
to be heard, as Merida Water District conducted a public
hearing on October 10, 2001 regarding the increase of water
rates.
The allegation of a denial of due process actually involves the
question of whether the public hearing on October 10,
2001 complied with the legal requirement of conducting a
public hearing prior to increasing water rates. The fifth
paragraph of LOI No. 700 requires the water district concerned
to conduct a public hearing prior to any increase in water
[27]
rates. The third paragraph of LOI No. 744 requires the
LWUA and water districts to prepare a system of public
consultation through hearings when considering increases in
[28]
water rates. Furthermore, Section 63 of P.D. No. 198, as
amended by P.D. No. 1479 requires the following:
The rates or charges established by such local
district, after hearing shall have been
conducted for the purpose, shall be subject to
review by the Administration to establish
compliance with the abovestated provisions.
Said review of rates or charges shall be
executory and enforceable after the lapse of
seven calendar days from posting thereof in a
public place in the locality of the water district
x x x.
When a local water district increases water rates, the law
requires the district concerned to conduct a public hearing
regarding these rates. The same rates are subject to review by
the LWUA, which is tasked to determine whether the
[29]
establishment of the rates complies with the law. Thus,
compliance with the public hearing requirement means that
the rates presented in the hearing should be the same rates
submitted to the LWUA for review and approval. Considering
that there was no finding with regard to this question of fact,
whether the rates presented in the hearing were the same
rates approved by the LWUA, the NWRB must be given the
opportunity to resolve this matter.
IN VIEW WHEREOF, the petition is GRANTED. The Decision
and Resolution of the Court of Appeals in CA-G.R. SP

No.77141 dated January 30, 2004 and September 16, 2004,

respectively, are REVERSED and SET ASIDE.
SO ORDERED.

Warning: Long case

[G.R. No. 158540. August 3, 2005]
SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs.
CEMENT MANUFACTURERS ASSOCIATION OF THE
PHILIPPINES,
THE
SECRETARY
OF
THE
DEPARTMENT OF TRADE AND INDUSTRY, THE
SECRETARY OF THE DEPARTMENT OF FINANCE
and THE COMMISSIONER OF THE BUREAU OF
CUSTOMS, respondents.
RESOLUTION
TINGA, J.:
Cement is hardly an exciting subject for litigation. Still, the
parties in this case have done their best to put up a spirited
advocacy of their respective positions, throwing in everything
including the proverbial kitchen sink. At present, the burden of
passion, if not proof, has shifted to public respondents
Department of Trade and Industry (DTI) and private respondent
Philippine
Cement
Manufacturers
Corporation
[1]
(Philcemcor), who
now
seek
reconsideration
of
our Decision dated 8 July 2004 (Decision), which granted the
petition of petitioner Southern Cross Cement Corporation
(Southern Cross).
This case, of course, is ultimately not just about cement.
For respondents, it is about love of country and the future of
the domestic industry in the face of foreign competition. For
this Court, it is about elementary statutory construction,
constitutional limitations on the executive power to impose
tariffs and similar measures, and obedience to the law. Just as
much was asserted in the Decision, and the same holds true
with this present Resolution.
An extensive narration of facts can be found in
[2]
the Decision. As can well be recalled, the case centers on the
interpretation of provisions of Republic Act No. 8800, the
Safeguard Measures Act (SMA), which was one of the laws
enacted by Congress soon after the Philippines ratified the
General Agreement on Tariff and Trade (GATT) and the World
[3]
Trade Organization (WTO) Agreement. The SMA provides the
structure and mechanics for the imposition of emergency
measures, including tariffs, to protect domestic industries and
producers from increased imports which inflict or could inflict
[4]
serious injury on them.
A brief summary as to how the present petition came to
be filed by Southern Cross. Philcemcor, an association of at
least eighteen (18) domestic cement manufacturers filed with
the DTI a petition seeking the imposition of safeguard
[5]
measures on gray Portland cement, in accordance with the
SMA. After the DTI issued a provisional safeguard
[6]
measure, the application was referred to the Tariff

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Commission for a formal investigation pursuant to Section 9 of

the SMA and its Implementing Rules and Regulations, in order
to determine whether or not to impose a definitive safeguard
measure on imports of gray Portland cement. The Tariff
Commission held public hearings and conducted its own
investigation, then on 13 March 2002, issued its Formal
Investigation Report (Report). The Report determined as
follows:
The elements of serious injury and imminent threat of serious
injury not having been established, it is hereby recommended
that no definitive general safeguard measure be imposed on
[7]
the importation of gray Portland cement.
The DTI sought the opinion of the Secretary of Justice
whether it could still impose a definitive safeguard measure
notwithstanding the negative finding of the Tariff Commission.
After the Secretary of Justice opined that the DTI could not do
[8]
so under the SMA, the DTI Secretary then promulgated
[9]
a Decision wherein he expressed the DTIs disagreement with
the conclusions of the Tariff Commission, but at the same time,
ultimately denying Philcemcors application for safeguard
measures on the ground that the he was bound to do so in
[10]
light of the Tariff Commissions negative findings.
Philcemcor challenged this Decision of the DTI Secretary
by filing with the Court of Appeals a Petition for Certiorari,
[11]
Prohibition and Mandamus seeking to set aside the
DTI Decision, as well as the Tariff Commissions Report. It
prayed that the Court of Appeals direct the DTI Secretary to
disregard the Report and to render judgment independently of
the Report. Philcemcor argued that the DTI Secretary, vested as
he is under the law with the power of review, is not bound to
adopt the recommendations of the Tariff Commission; and,
that the Report is void, as it is predicated on a flawed
framework,
inconsistent
inferences
and
erroneous
[12]
methodology.
The
Court
of
Appeals
Twelfth
Division,
in
[13]
a Decision penned by Court of Appeals Associate Justice Elvi
[14]
John Asuncion, partially granted Philcemcors petition. The
appellate court ruled that it had jurisdiction over the petition
for certiorari since it alleged grave abuse of discretion. While it
[15]
refused to annul the findings of the Tariff Commission, it
also held that the DTI Secretary was not bound by the factual
findings of the Tariff Commission since such findings are
merely recommendatory and they fall within the ambit of the
Secretarys discretionary review. It determined that the
legislative intent is to grant the DTI Secretary the power to
make a final decision on the Tariff Commissions
[16]
recommendation.
On 23 June 2003, Southern Cross filed the present
petition, arguing that the Court of Appeals has no jurisdiction
over Philcemcors petition, as the proper remedy is a petition
for review with the CTA conformably with the SMA, and; that
the factual findings of the Tariff Commission on the existence
or non-existence of conditions warranting the imposition of
general safeguard measures are binding upon the DTI
Secretary.

Despite the fact that the Court of Appeals Decision had

not yet become final, its binding force was cited by the DTI
Secretary when he issued a new Decision on 25 June 2003,
wherein he ruled that that in light of the appellate
courts Decision, there was no longer any legal impediment to
his deciding Philcemcors application for definitive safeguard
[17]
measures. He made a determination that, contrary to the
findings of the Tariff Commission, the local cement industry
had suffered serious injury as a result of the import
[18]
surges. Accordingly, he imposed a definitive safeguard
measure on the importation of gray Portland cement, in the
form of a definitive safeguard duty in the amount of P20.60/40
[19]
kg. bag for three years on imported gray Portland Cement.
On 7 July 2003, Southern Cross filed with the Court a Very
Urgent Application for a Temporary Restraining Order and/or A
Writ of Preliminary Injunction (TRO Application), seeking to
enjoin the DTI Secretary from enforcing his Decision of 25 June
2003 in view of the pending petition before this Court.
Philcemcor filed an opposition, claiming, among others, that it
is not this Court but the CTA that has jurisdiction over the
application under the law.
On 1 August 2003, Southern Cross filed with the CTA
a Petition for Review, assailing the DTI Secretarys 25 June
2003 Decision which imposed the definite safeguard measure.
Yet Southern Cross did not promptly inform this Court about
this filing. The first time the Court would learn about
this Petition with the CTA was when Southern Cross mentioned
such fact in a pleading dated 11 August 2003 and filed the next
[20]
day with this Court.
Philcemcor argued before this Court that Southern Cross
had deliberately and willfully resorted to forum-shopping; that
the CTA, being a special court of limited jurisdiction, could only
review the ruling of the DTI Secretary when a safeguard
measure is imposed; and that the factual findings of the Tariff
[21]
Commission are not binding on the DTI Secretary.
After giving due course to Southern Crosss Petition, the
Court called the case for oral argument on 18 February
[22]
2004. At the oral argument, attended by the counsel for
Philcemcor and Southern Cross and the Office of the Solicitor
General, the Court simplified the issues in this wise: (i) whether
the Decision of the DTI Secretary is appealable to the CTA or
the Court of Appeals; (ii) assuming that the Court of Appeals
has jurisdiction, whether its Decision is in accordance with law;
[23]
and, whether a Temporary Restraining Order is warranted.
After the parties had filed their respective memoranda,
the Courts Second Division, to which the case had been
assigned,
promulgated
its Decision granting
Southern
[24]
Crosss Petition. The Decision was unanimous, without any
separate or concurring opinion.
The Court ruled that the Court of Appeals had no
jurisdiction over Philcemcors Petition, the proper remedy under
Section 29 of the SMA being a petition for review with the CTA;
and that the Court of Appeals erred in ruling that the DTI
Secretary was not bound by the negative determination of the
Tariff Commission and could therefore impose the general
safeguard measures, since Section 5 of the SMA precisely

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required that the Tariff Commission make a positive final

determination before the DTI Secretary could impose these
measures. Anent the argument that Southern Cross had
committed forum-shopping, the Court concluded that there
was no evident malicious intent to subvert procedural rules so
as to match the standard under Section 5, Rule 7 of the Rules
of Court of willful and deliberate forum shopping. Accordingly,
the Decision of the Court of Appeals dated 5 June 2003 was
declared null and void.
The Court likewise found it necessary to nullify
the Decision of the DTI Secretary dated 25 June 2003, rendered
after the filing of this present Petition. This Decision by the DTI
Secretary had cited the obligatory force of the null and void
Court of Appeals Decision, notwithstanding the fact that the
decision of the appellate court was not yet final and executory.
Considering that the decision of the Court of Appeals was a
nullity to begin with, the inescapable conclusion was that the
new decision of the DTI Secretary, prescinding as it did from
the imprimatur of the decision of the Court of Appeals, was a
nullity as well.
After the Decision was reported in the media, there was a
flurry of newspaper articles citing alleged negative reactions to
the ruling by the counsel for Philcemcor, the DTI Secretary, and
[25]
others. Both respondents promptly filed their respective
motions for reconsideration.
On 21 September 2004, the Court En Banc resolved, upon
motion of respondents, to accept the petition and resolve
[26]
the Motions for Reconsideration. The case was then
[27]
reheard on oral argument on 1 March 2005. During the
hearing, the Court elicited from the parties their arguments on
the two central issues as discussed in the assailed Decision,
pertaining to the jurisdictional aspect and to the substantive
aspect of whether the DTI Secretary may impose a general
safeguard measure despite a negative determination by the
Tariff Commission. The Court chose not to hear argumentation
[28]
on the peripheral issue of forum-shopping, although this
question shall be tackled herein shortly. Another point of
concern emerged during oral arguments on the exercise of
quasi-judicial powers by the Tariff Commission, and the parties
were required by the Court to discuss in their respective
memoranda whether the Tariff Commission could validly
exercise quasi-judicial powers in the exercise of its mandate
under the SMA.
The Court has likewise been notified that subsequent to
the rendition of the Courts Decision, Philcemcor filed a Petition
for Extension of the Safeguard Measure with the DTI, which has
[29]
been referred to the Tariff Commission. In an Urgent
Motion dated 21 December 2004, Southern Cross prayed that
Philcemcor, the DTI, the Bureau of Customs, and the Tariff
Commission be directed to cease and desist from taking any
and all actions pursuant to or under the null and void CA
Decision and DTI Decision, including proceedings to extend the
[30]
safeguard measure. In a Manifestation and Motion dated 23
June 2004, the Tariff Commission informed the Court that since
no prohibitory injunction or order of such nature had been
issued by any court against the Tariff Commission, the
Commission proceeded to complete its investigation on the

petition for extension, pursuant to Section 9 of the SMA, but

opted to defer transmittal of its report to the DTI Secretary
pending guidance from this Court on the propriety of such a
step considering this pending Motion for Reconsideration. In
a Resolutiondated 5 July 2005, the Court directed the parties to
maintain the status quo effective of even date, and until further
orders from this Court. The denial of the pending motions for
reconsideration will obviously render the pending petition for
extension academic.

I. Jurisdiction of the Court of Tax Appeals

Under Section 29 of the SMA
The first core issue resolved in the assailed Decision was
whether the Court of Appeals had jurisdiction over the special
civil action for certiorari filed by Philcemcor assailing the 5 April
2002 Decision of the DTI Secretary. The general jurisdiction of
the Court of Appeals over special civil actions for certiorari is
beyond doubt. The Constitution itself assures that judicial
review avails to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the
Government. At the same time, the special civil action of
certiorari is available only when there is no plain, speedy and
[31]
adequate remedy in the ordinary course of law. Philcemcors
recourse of special civil action before the Court of Appeals to
challenge the Decision of the DTI Secretary not to impose the
general safeguard measures is not based on the SMA, but on
the general rule on certiorari. Thus, the Court proceeded to
inquire whether indeed there was no other plain, speedy and
adequate remedy in the ordinary course of law that would
warrant the allowance of Philcemcors special civil action.
The answer hinged on the proper interpretation of
Section 29 of the SMA, which reads:
Section 29. Judicial Review. Any interested party who is
adversely affected by the ruling of the Secretary in
connection with the imposition of a safeguard
measure may file with the CTA, a petition for review of such
ruling within thirty (30) days from receipt thereof.
Provided, however, that the filing of such petition for review
shall not in any way stop, suspend or otherwise toll the
imposition or collection of the appropriate tariff duties or the
adoption of other appropriate safeguard measures, as the case
may be.
The petition for review shall comply with the same
requirements and shall follow the same rules of procedure and
shall be subject to the same disposition as in appeals in
connection with adverse rulings on tax matters to the Court of
[32]
Appeals. (Emphasis supplied)
The matter is crucial for if the CTA properly had
jurisdiction over the petition challenging the DTI Secretarys
ruling not to impose a safeguard measure, then the special civil
action of certiorari resorted to instead by Philcemcor would not

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avail, owing to the existence of a plain, speedy and adequate

[33]
remedy in the ordinary course of law. The Court of Appeals,
in asserting that it had jurisdiction, merely cited the general
rule on certiorari jurisdiction without bothering to refer to, or
possibly even study, the import of Section 29. In contrast, this
Court duly considered the meaning and ramifications of
Section 29, concluding that it provided for a plain, speedy and
adequate remedy that Philcemcor could have resorted to
instead of filing the special civil action before the Court of
Appeals.
Philcemcor still holds on to its hypothesis that the
petition for review allowed under Section 29 lies only if the DTI
Secretarys ruling imposes a safeguard measure. If, on the other
hand, the DTI Secretarys ruling is not to impose a safeguard
measure, judicial review under Section 29 could not be
resorted to since the provision refers to rulings in connection
with the imposition of the safeguard measure, as opposed to
the non-imposition. Since the Decision dated 5 April 2002
resolved against imposing a safeguard measure, Philcemcor
claims that the proper remedial recourse is a petition for
certiorari with the Court of Appeals.
Interestingly, Republic Act No. 9282, promulgated on 30
March 2004, expressly vests unto the CTA jurisdiction over
[d]ecisions of the Secretary of Trade and Industry, in case of
nonagricultural product, commodity or article . . . involving . .
. safeguard measures under Republic Act No. 8800, where
either party may appeal the decision to impose or not to
[34]
impose said duties. It is clear that any future attempts to
advance the literalist position of the respondents would
consequently fail. However, since Republic Act No. 9282 has no
retroactive effect, this Court had to decide whether Section 29
vests jurisdiction on the CTA over rulings of the DTI Secretary
not to impose a safeguard measure. And the Court, in its
assailed Decision, ruled that the CTA is endowed with such
jurisdiction.
Both respondents reiterate their fundamentalist reading
that Section 29 authorizes the petition for review before the
CTA only when the DTI Secretary decides to impose a
safeguard measure, but not when he decides not to. In doing
so, they fail to address what the Court earlier pointed out
would be the absurd consequences if their interpretation is
followed to its logical end. But in affirming, as the Court now
does, its previous holding that the CTA has jurisdiction over
petitions for review questioning the non-imposition of
safeguard measures by the DTI Secretary, the Court relies on
the plain reading that Section 29 explicitly vests jurisdiction
over such petitions on the CTA.
Under Section 29, there are three requisites to enable the
CTA to acquire jurisdiction over the petition for review
contemplated therein: (i) there must be a ruling by the DTI
Secretary; (ii) the petition must be filed by an interested party
adversely affected by the ruling; and (iii) such ruling must be in
connection with the imposition of a safeguard measure.
Obviously, there are differences between a ruling for the
imposition of a safeguard measure, and one issued in
connection with the imposition of a safeguard measure. The
first adverts to a singular type of ruling, namely one that

imposes a safeguard measure. The second does not

contemplate only one kind of ruling, but a myriad of rulings
issued in connection with the imposition of a safeguard
measure.
Respondents argue that the Court has given an expansive
interpretation to Section 29, contrary to the established rule
requiring strict construction against the existence of jurisdiction
[35]
in specialized courts. But it is the express provision of
Section 29, and not this Court, that mandates CTA
jurisdiction to be broad enough to encompass more than
just a ruling imposing the safeguard measure.
The key phrase remains in connection with. It has
connotations that are obvious even to the layman. A ruling
issued in connection with the imposition of a safeguard
measure would be one that bears some relation to the
imposition of a safeguard measure. Obviously, a ruling
imposing a safeguard measure is covered by the phrase in
connection with, but such ruling is by no means exclusive.
Rulings which modify, suspend or terminate a safeguard
measure are necessarily in connection with the imposition of a
safeguard measure. So does a ruling allowing for a provisional
safeguard measure. So too, a ruling by the DTI Secretary
refusing to refer the application for a safeguard measure to the
Tariff Commission. It is clear that there is an entire subset of
rulings that the DTI Secretary may issue in connection with the
imposition of a safeguard measure, including those that are
[36]
provisional, interlocutory, or dispositive in character. By the
same token, a ruling not to impose a safeguard measure is also
issued in connection with the imposition of a safeguard
measure.
In arriving at the proper interpretation of in connection
with, the Court referred to the U.S. Supreme Court cases
[37]
of Shaw v. Delta Air Lines, Inc. and New York State Blue Cross
[38]
Plans v. Travelers Ins. Both cases considered the
interpretation of the phrase relates to as used in a federal
statute, the Employee Retirement Security Act of 1974.
Respondents criticize the citations on the premise that the
cases are not binding in our jurisdiction and do not involve
safeguard measures. The criticisms are off-tangent considering
that our ruling did not call for the application of the Employee
Retirement Security Act of 1974 in the Philippine milieu. The
American cases are not relied upon as precedents, but as
guides of interpretation. Certainly, if there are applicable local
precedents pertaining to the interpretation of the phrase in
connection with, then these certainly would have some binding
force. But none avail, and neither do the respondents
demonstrate a countervailing holding in Philippine
jurisprudence.
Yet we should consider the claim that an expansive
interpretation was favored in Shaw because the law in question
was an employees benefit law that had to be given an
[39]
interpretation favorable to its intended beneficiaries. In the
next breath, Philcemcor notes that the U.S. Supreme Court
itself was alarmed by the expansive interpretation in Shaw and
thus in Blue Cross, the Shaw ruling was reversed and a more
restrictive interpretation was applied based on congressional
[40]
intent.

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Respondents would like to make it appear that the Court

acted rashly in applying a discarded precedent in Shaw, a nonbinding foreign precedent nonetheless. But the Court did make
the following observation in its Decision pertaining to Blue
Cross:
Now, let us determine the maximum scope and reach of the
phrase in connection with as used in Section 29 of the SMA. A
literalist reading or linguistic survey may not satisfy. Even the
U.S. Supreme Court in New York State Blue Cross Plans v.
[41]
Travelers Ins. conceded that the phrases relate to or in
connection with may be extended to the farthest stretch of
indeterminacy for, universally, relations or connections are
[42]
infinite and stop nowhere. Thus, in the case the U.S. High
Court, examining the same phrase of the same provision of
law involved in Shaw, resorted to looking at the statute
and its objectives as the alternative to an uncritical
literalism. A similar inquiry into the other provisions of the
SMA is in order to determine the scope of review accorded
[43]
therein to the CTA.
In the next four paragraphs of the Decision,
encompassing four pages, the Court proceeded to inquire into
the SMA and its objectives as a means to determine the scope
of rulings to be deemed as in connection with the imposition
of a safeguard measure. Certainly, this Court did not resort to
the broadest interpretation possible of the phrase in
connection with, but instead sought to bring it into the context
of the scope and objectives of the SMA. The ultimate
conclusion of the Court was that the phrase includes all rulings
of the DTI Secretary which arise from the time an application
or motu proprio initiation for the imposition of a safeguard
[44]
measure is taken. This conclusion was derived from the
observation that the imposition of a general safeguard
measure is a process, initiated motu proprio or through
application, which undergoes several stages upon which the
DTI Secretary is obliged or may be called upon to issue a
ruling.
It should be emphasized again that by utilizing the phrase
in connection with, it is the SMA that expressly vests
jurisdiction on the CTA over petitions questioning the nonimposition by the DTI Secretary of safeguard measures. The
Court is simply asserting, as it should, the clear intent of the
legislature in enacting the SMA. Without in connection with or
a synonymous phrase, the Court would be compelled to favor
the respondents position that only rulings imposing safeguard
measures may be elevated on appeal to the CTA. But
considering that the statute does make use of the phrase, there
is little sense in delving into alternate scenarios.
Respondents fail to convincingly address the absurd
consequences pointed out by the Decision had their proposed
interpretation been adopted. Indeed, suffocated beneath the
respondents legalistic tinsel is the elemental questionwhat
sense is there in vesting jurisdiction on the CTA over a decision
to impose a safeguard measure, but not on one choosing not
to impose. Of course, it is not for the Court to inquire into the
wisdom of legislative acts, hence the rule that jurisdiction must
be expressly vested and not presumed. Yet ultimately,

respondents muddle the issue by making it appear that

the Decision has uniquely expanded the jurisdictional rules. For
the respondents, the proper statutory interpretation of the
crucial phrase in connection with is to pretend that the phrase
did not exist at all in the statute. The Court, in taking the effort
to examine the meaning and extent of the phrase, is merely
giving breath to the legislative will.
The Court likewise stated that the respondents position
calls for split jurisdiction, which is judicially abhorred. In
rebuttal, the public respondents cite Sections 2313 and 2402 of
the Tariff and Customs Code (TCC), which allegedly provide for
a splitting of jurisdiction of the CTA. According to public
respondents, under Section 2313 of the TCC, a decision of the
Commissioner of Customs affirming a decision of the Collector
of Customs adverse to the government is elevated for review to
the Secretary of Finance. However, under Section 2402 of the
TCC, a ruling of the Commissioner of the Bureau of Customs
against a taxpayer must be appealed to the Court of Tax
Appeals, and not to the Secretary of Finance.
Strictly speaking, the review by the Secretary of Finance of
the decision of the Commissioner of Customs is not judicial
review, since the Secretary of Finance holds an executive and
not a judicial office. The contrast is apparent with the situation
in this case, wherein the interpretation favored by the
respondents calls for the exercise of judicial review by two
different courts over essentially the same questionwhether the
DTI Secretary should impose general safeguard measures.
Moreover, as petitioner points out, the executive department
cannot appeal against itself. The Collector of Customs, the
Commissioner of Customs and the Secretary of Finance are all
part of the executive branch. If the Collector of Customs rules
against the government, the executive cannot very well bring
suit in courts against itself. On the other hand, if a private
person is aggrieved by the decision of the Collector of
Customs, he can have proper recourse before the courts, which
now would be called upon to exercise judicial review over the
action of the executive branch.
More fundamentally, the situation involving split review
of the decision of the Collector of Customs under the TCC is
not apropos to the case at bar. The TCC in that instance is quite
explicit on the divergent reviewing body or official depending
on which party prevailed at the Collector of Customs level. On
the other hand, there is no such explicit expression of
bifurcated appeals in Section 29 of the SMA.
Public
respondents
likewise
cite Fabian
v.
[45]
Ombudsman as another instance wherein the Court
purportedly allowed split jurisdiction. It is argued that the
Court, in ruling that it was the Court of Appeals which
possessed appellate authority to review decisions of the
Ombudsman in administrative cases while the Court retaining
appellate jurisdiction of decisions of the Ombudsman in nonadministrative cases, effectively sanctioned split jurisdiction
[46]
between the Court and the Court of Appeals.
Nonetheless, this argument is successfully undercut by
Southern Cross, which points out the essential differences in
the power exercised by the Ombudsman in administrative
cases and non-administrative cases relating to criminal

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complaints. In the former, the Ombudsman may impose an

administrative penalty, while in acting upon a criminal
complaint what the Ombudsman undertakes is a preliminary
investigation. Clearly, the capacity in which the Ombudsman
takes on in deciding an administrative complaint is wholly
different from that in conducting a preliminary investigation. In
contrast, in ruling upon a safeguard measure, the DTI Secretary
acts in one and the same role. The variance between an order
granting or denying an application for a safeguard measure is
polar though emanating from the same equator, and does not
arise from the distinct character of the putative actions
involved.
Philcemcor imputes intelligent design behind the alleged
intent of Congress to limit CTA review only to impositions of
the general safeguard measures. It claims that there is a
necessary tax implication in case of an imposition of a tariff
where the CTAs expertise is necessary, but there is no such tax
implication, hence no need for the assumption of jurisdiction
by a specialized agency, when the ruling rejects the imposition
of a safeguard measure. But of course, whether the ruling
under review calls for the imposition or non-imposition of the
safeguard measure, the common question for resolution still is
whether or not the tariff should be imposed an issue definitely
fraught with a tax dimension. The determination of the
question will call upon the same kind of expertise that a
specialized body as the CTA presumably possesses.
In response to the Courts observation that the setup
proposed by respondents was novel, unusual, cumbersome
and unwise, public respondents invoke the maxim that courts
should not be concerned with the wisdom and efficacy of
[47]
legislation. But this prescinds from the bogus claim that the
CTA may not exercise judicial review over a decision not to
impose a safeguard measure, a prohibition that finds no
statutory support. It is likewise settled in statutory construction
that an interpretation that would cause inconvenience and
absurdity is not favored. Respondents do not address the
particular illogic that the Court pointed out would ensue if their
position on judicial review were adopted. According to the
respondents, while a ruling by the DTI Secretary imposing a
safeguard measure may be elevated on review to the CTA and
assailed on the ground of errors in fact and in law, a ruling
denying the imposition of safeguard measures may be assailed
only on the ground that the DTI Secretary committed grave
abuse of discretion. As stressed in the Decision, [c]ertiorari is a
remedy narrow in its scope and inflexible in its character. It is
[48]
not a general utility tool in the legal workshop.
It is incorrect to say that the Decision bars any effective
remedy should the Tariff Commission act or conclude
erroneously in making its determination whether the factual
conditions exist which necessitate the imposition of the general
safeguard measure. If the Tariff Commission makes a negative
final determination, the DTI Secretary, bound as he is by this
negative determination, has to render a decision denying the
application for safeguard measures citing the Tariff
Commissions findings as basis. Necessarily then, such negative
determination of the Tariff Commission being an integral part
of the DTI Secretarys ruling would be open for review before
the CTA, which again is especially qualified by reason of its

expertise to examine the findings of the Tariff Commission.

Moreover, considering that the Tariff Commission is an
instrumentality of the government, its actions (as opposed to
those undertaken by the DTI Secretary under the SMA) are not
beyond the pale of certiorari jurisdiction. Unfortunately for
Philcemcor, it hinged its cause on the claim that the DTI
Secretarys actions may be annulled on certiorari,
notwithstanding the explicit grant of judicial review over that
cabinet members actions under the SMA to the CTA.
Finally on this point, Philcemcor argues that assuming this
Courts interpretation of Section 29 is correct, such ruling
should not be given retroactive effect, otherwise, a gross
violation of the right to due process would be had. This
erroneously presumes that it was this Court, and not Congress,
which vested jurisdiction on the CTA over rulings of nonimposition rendered by the DTI Secretary. We have repeatedly
stressed that Section 29 expressly confers CTA jurisdiction over
rulings in connection with the imposition of the safeguard
measure, and the reassertion of this point in the Decision was a
matter of emphasis, not of contrivance. The due process
protection does not shield those who remain purposely blind
to the express rules that ensure the sporting play of procedural
law.
Besides, respondents claim would also apply every time
this Court is compelled to settle a novel question of law, or to
reverse precedent. In such cases, there would always be
litigants whose causes of action might be vitiated by the
application of newly formulated judicial doctrines. Adopting
their claim would unwisely force this Court to treat its
dispositions in unprecedented, sometimes landmark decisions
not as resolutions to the live cases or controversies, but as legal
doctrine applicable only to future litigations.

II. Positive Final Determination

By the Tariff Commission an
Indispensable Requisite to the
Imposition of General Safeguard Measures
The second core ruling in the Decision was that contrary
to the holding of the Court of Appeals, the DTI Secretary was
barred from imposing a general safeguard measure absent a
positive final determination rendered by the Tariff Commission.
The fundamental premise rooted in this ruling is based on the
acknowledgment that the required positive final determination
of the Tariff Commission exists as a properly enacted
constitutional limitation imposed on the delegation of the
legislative power to impose tariffs and imposts to the President
under Section 28(2), Article VI of the Constitution.

Congressional Limitations Pursuant

To Constitutional Authority on the
Delegated Power to Impose
Safeguard Measures

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The safeguard measures imposable under the SMA

generally involve duties on imported products, tariff rate
quotas, or quantitative restrictions on the importation of a
product into the country. Concerning as they do the foreign
importation of products into the Philippines, these safeguard
measures fall within the ambit of Section 28(2), Article VI of the
Constitution, which states:
The Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development
[49]
program of the Government.
The Court acknowledges the basic postulates ingrained in
the provision, and, hence, governing in this case. They are:
(1) It is Congress which authorizes the President to
impose tariff rates, import and export quotas, tonnage and
wharfage dues, and other duties or imposts. Thus, the
authority cannot come from the Finance Department, the
National Economic Development Authority, or the World Trade
Organization, no matter how insistent or persistent these
bodies may be.
(2) The authorization granted to the President must be
embodied in a law. Hence, the justification cannot be supplied
simply by inherent executive powers. It cannot arise from
administrative or executive orders promulgated by the
executive branch or from the wisdom or whim of the President.
(3) The authorization to the President can be exercised
only within the specified limits set in the law and is further
subject to limitations and restrictions which Congress may
impose. Consequently, if Congress specifies that the tariff rates
should not exceed a given amount, the President cannot
impose a tariff rate that exceeds such amount. If Congress
stipulates that no duties may be imposed on the importation of
corn, the President cannot impose duties on corn, no matter
how actively the local corn producers lobby the President. Even
the most picayune of limits or restrictions imposed by
Congress must be observed by the President.
There is one fundamental principle that animates these
constitutional postulates. These impositions under Section
28(2), Article VI fall within the realm of the power of
taxation, a power which is within the sole province of the
legislature under the Constitution.
Without Section 28(2), Article VI, the executive
branch has no authority to impose tariffs and other similar
tax levies involving the importation of foreign goods.
Assuming that Section 28(2) Article VI did not exist, the
enactment of the SMA by Congress would be voided on the
ground that it would constitute an undue delegation of the
legislative power to tax. The constitutional provision shields
such delegation from constitutional infirmity, and should be
recognized as an exceptional grant of legislative power to the
President, rather than the affirmation of an inherent executive
power.

This being the case, the qualifiers mandated by the

Constitution on this presidential authority attain primordial
consideration. First, there must be a law, such as the SMA.
Second, there must be specified limits, a detail which would be
filled in by the law. And further, Congress is further empowered
to impose limitations and restrictions on this presidential
authority. On this last power, the provision does not provide
for specified conditions, such as that the limitations and
restrictions must conform to prior statutes, internationally
accepted practices, accepted jurisprudence, or the considered
opinion of members of the executive branch.
The Court recognizes that the authority delegated to the
President under Section 28(2), Article VI may be exercised, in
accordance with legislative sanction, by the alter egos of the
President, such as department secretaries. Indeed, for purposes
of the Presidents exercise of power to impose tariffs under
Article VI, Section 28(2), it is generally the Secretary of Finance
who acts as alter ego of the President. The SMA provides an
exceptional instance wherein it is the DTI or Agriculture
Secretary who is tasked by Congress, in their capacities as alter
egos of the President, to impose such measures. Certainly, the
DTI Secretary has no inherent power, even as alter ego of the
President, to levy tariffs and imports.
Concurrently, the tasking of the Tariff Commission under
the SMA should be likewise construed within the same context
as part and parcel of the legislative delegation of its inherent
power to impose tariffs and imposts to the executive branch,
subject to limitations and restrictions. In that regard, both the
Tariff Commission and the DTI Secretary may be regarded as
agents of Congress within their limited respective spheres, as
ordained in the SMA, in the implementation of the said law
which significantly draws its strength from the plenary
legislative power of taxation. Indeed, even the President may
be considered as an agent of Congress for the purpose of
imposing safeguard measures. It is Congress, not the
President, which possesses inherent powers to impose
tariffs and imposts. Without legislative authorization
through statute, the President has no power, authority or
right to impose such safeguard measures because taxation
is inherently legislative, not executive.
When Congress tasks the President or his/her alter
egos to impose safeguard measures under the delineated
conditions, the President or the alter egos may be properly
deemed as agents of Congress to perform an act that
inherently belongs as a matter of right to the legislature. It
is basic agency law that the agent may not act beyond the
specifically delegated powers or disregard the restrictions
imposed by the principal. In short, Congress may establish the
procedural framework under which such safeguard measures
may be imposed, and assign the various offices in the
government bureaucracy respective tasks pursuant to the
imposition of such measures, the task assignment including the
factual determination of whether the necessary conditions
exists to warrant such impositions. Under the SMA, Congress
assigned the DTI Secretary and the Tariff Commission their
[50]
respective functions in the legislatures scheme of things.

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There is only one viable ground for challenging the

legality of the limitations and restrictions imposed by Congress
under Section 28(2) Article VI, and that is such limitations and
restrictions are themselves violative of the Constitution. Thus,
no matter how distasteful or noxious these limitations and
restrictions may seem, the Court has no choice but to uphold
their validity unless their constitutional infirmity can be
demonstrated.
What are these limitations and restrictions that are
material to the present case? The entire SMA provides for a
limited framework under which the President, through the DTI
and Agriculture Secretaries, may impose safeguard measures in
the form of tariffs and similar imposts. The limitation most
relevant to this case is contained in Section 5 of the SMA,
captioned Conditions for the Application of General Safeguard
Measures, and stating:
The Secretary shall apply a general safeguard measure upon
a positive final determination of the [Tariff]
Commission that a product is being imported into the country
in increased quantities, whether absolute or relative to the
domestic production, as to be a substantial cause of serious
injury or threat thereof to the domestic industry; however, in
the case of non-agricultural products, the Secretary shall first
establish that the application of such safeguard measures will
[51]
be in the public interest.

Positive Final Determination

By Tariff Commission Plainly
Required by Section 5 of SMA
There is no question that Section 5 of the SMA operates
as a limitation validly imposed by Congress on the
[52]
presidential authority under the SMA to impose tariffs and
imposts. That the positive final determination operates as an
indispensable requisite to the imposition of the safeguard
measure, and that it is the Tariff Commission which makes such
determination, are legal propositions plainly expressed in
Section 5 for the easy comprehension for everyone but
respondents.
Philcemcor attributes this Courts conclusion on the
indispensability of the positive final determination to flawed
syllogism in that we read the proposition if A then B as if it
[53]
stated if A, and only A, then B. Translated in practical terms,
our conclusion, according to Philcemcor, would have only been
justified had Section 5 read shall apply a general safeguard
measure upon, and only upon, a positive final determination of
the Tariff Commission.
Statutes are not designed for the easy comprehension of
the five-year old child. Certainly, general propositions laid
down in statutes need not be expressly qualified by clauses
denoting exclusivity in order that they gain efficacy. Indeed,
applying this argument, the President would, under the
Constitution, be authorized to declare martial law despite the
absence of the invasion, rebellion or public safety requirement

just because the first paragraph of Section 18, Article VII fails to
[54]
state the magic word only.
But let us for the nonce pursue Philcemcors logic further.
It claims that since Section 5 does not allegedly limit the
circumstances upon which the DTI Secretary may impose
general safeguard measures, it is a worthy pursuit to determine
whether the entire context of the SMA, as discerned by all the
other familiar indicators of legislative intent supplied by norms
of statutory interpretation, would justify safeguard measures
absent a positive final determination by the Tariff Commission.
The first line of attack employed is on Section 5 itself, it
allegedly not being as clear as it sounds. It is advanced that
Section 5 does not relate to the legal ability of either the Tariff
Commission or the DTI Secretary to bind or foreclose review
and reversal by one or the other. Such relationship should
instead be governed by domestic administrative law and
remedial law. Philcemcor thus would like to cast the
proposition in this manner: Does it run contrary to our legal
order to assert, as the Court did in its Decision, that a body of
relative junior competence as the Tariff Commission can bind
an administrative superior and cabinet officer, the DTI
Secretary? It is easy to see why Philcemcor would like to
divorce this DTI Secretary-Tariff Commission interaction from
the confines of the SMA. Shorn of context, the notion would
seem radical and unjustifiable that the lowly Tariff Commission
can bind the hands and feet of the DTI Secretary.
It can be surmised at once that respondents preferred
interpretation is based not on the express language of the
SMA, but from implications derived in a roundabout manner.
Certainly, no provision in the SMA expressly authorizes the DTI
Secretary to impose a general safeguard measure despite the
absence of a positive final recommendation of the Tariff
Commission. On the other hand, Section 5 expressly states that
the DTI Secretary shall apply a general safeguard measure
upon a positive final determination of the [Tariff] Commission.
The causal connection in Section 5 between the imposition by
the DTI Secretary of the general safeguard measure and the
positive final determination of the Tariff Commission is patent,
and even respondents do not dispute such connection.
As stated earlier, the Court in its Decision found Section 5
to be clear, plain and free from ambiguity so as to render
unnecessary resort to the congressional records to ascertain
legislative intent. Yet respondents, on the dubitable premise
that Section 5 is not as express as it seems, again latch on to
the record of legislative deliberations in asserting that there
was no legislative intent to bar the DTI Secretary from
imposing the general safeguard measure anyway despite the
absence of a positive final determination by the Tariff
Commission.
Let us take the bait for a moment, and examine
respondents commonly cited portion of the legislative record.
One would presume, given the intense advocacy for the
efficacy of these citations, that they contain a smoking
gun express declarations from the legislators that the DTI
Secretary may impose a general safeguard measure even if the
Tariff Commission refuses to render a positive final
determination. Such smoking gun, if it exists, would

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characterize our Decision as disingenuous for ignoring such

contrary expression of intent from the legislators who enacted
the SMA. But as with many things, the anticipation is more
dramatic than the truth.
The excerpts cited by respondents are derived from the
interpellation of the late Congressman Marcial Punzalan Jr., by
then
(and
still
is)
Congressman
Simeon
[55]
Datumanong. Nowhere in these records is the view expressed
that the DTI Secretary may impose the general safeguard
measures if the Tariff Commission issues a negative final
determination or otherwise is unable to make a positive final
determination. Instead, respondents hitch on the observations
of Congressman Punzalan Jr., that the results of the [Tariff]
Commissions findings . . . is subsequently submitted to [the DTI
Secretary] for the [DTI Secretary] to impose or not to impose;
and that the [DTI Secretary] here iswho would make the final
decision on the recommendation that is made by a more
[56]
technical body [such as the Tariff Commission].
There is nothing in the remarks of Congressman Punzalan
which contradict our Decision. His observations fall in accord
with the respective roles of the Tariff Commission and the DTI
Secretary under the SMA. Under the SMA, it is the Tariff
Commission that conducts an investigation as to whether the
conditions exist to warrant the imposition of the safeguard
measures. These conditions are enumerated in Section 5,
namely; that a product is being imported into the country in
increased quantities, whether absolute or relative to the
domestic production, as to be a substantial cause of serious
injury or threat thereof to the domestic industry. After the
investigation of the Tariff Commission, it submits a report to
the DTI Secretary which states, among others, whether the
above-stated conditions for the imposition of the general
safeguard measures exist. Upon a positive final determination
that these conditions are present, the Tariff Commission then is
mandated to recommend what appropriate safeguard
measures should be undertaken by the DTI Secretary. Section
13 of the SMA gives five (5) specific options on the type of
safeguard measures the Tariff Commission recommends to the
DTI Secretary.
At the same time, nothing in the SMA obliges the DTI
Secretary to adopt the recommendations made by the Tariff
Commission. In fact, the SMA requires that the DTI Secretary
establish that the application of such safeguard measures is in
the public interest, notwithstanding the Tariff Commissions
recommendation on the appropriate safeguard measure upon
its positive final determination. Thus, even if the Tariff
Commission makes a positive final determination, the DTI
Secretary may opt not to impose a general safeguard measure,
or choose a different type of safeguard measure other than
that recommended by the Tariff Commission.
Congressman Punzalan was cited as saying that the DTI
Secretary makes the decision to impose or not to impose,
which is correct since the DTI Secretary may choose not to
impose a safeguard measure in spite of a positive final
determination by the Tariff Commission. Congressman
Punzalan also correctly stated that it is the DTI Secretary who
makes the final decision on the recommendation that is made

[by the Tariff Commission], since the DTI Secretary may choose
to impose a general safeguard measure different from that
recommended by the Tariff Commission or not to impose a
safeguard measure at all. Nowhere in these cited deliberations
was Congressman Punzalan, or any other member of Congress
for that matter, quoted as saying that the DTI Secretary may
ignore a negative determination by the Tariff Commission as to
the existence of the conditions warranting the imposition of
general safeguard measures, and thereafter proceed to impose
these measures nonetheless. It is too late in the day to
ascertain from the late Congressman Punzalan himself whether
he had made these remarks in order to assure the other
legislators that the DTI Secretary may impose the general
safeguard measures notwithstanding a negative determination
by the Tariff Commission. But certainly, the language of Section
5 is more resolutory to that question than the recorded
remarks of Congressman Punzalan.
Respondents employed considerable effort to becloud
Section 5 with undeserved ambiguity in order that a proper
resort to the legislative deliberations may be had. Yet assuming
that Section 5 deserves to be clarified through an inquiry into
the legislative record, the excerpts cited by the respondents are
far more ambiguous than the language of the assailed
provision regarding the key question of whether the DTI
Secretary may impose safeguard measures in the face of a
negative determination by the Tariff Commission. Moreover,
even Southern Cross counters with its own excerpts of the
[57]
legislative record in support of their own view.
It will not be difficult, especially as to heavily-debated
legislation, for two sides with contrapuntal interpretations of a
statute to highlight their respective citations from the
[58]
legislative debate in support of their particular views. A futile
exercise of second-guessing is happily avoided if the meaning
of the statute is clear on its face. It is evident from the text of
Section 5 that there must be a positive final determination
by the Tariff Commission that a product is being imported
into the country in increased quantities (whether absolute
or relative to domestic production), as to be a substantial
cause of serious injury or threat to the domestic industry.
Any disputation to the contrary is, at best, the product of
wishful thinking.
For the same reason that Section 5 is explicit as regards
the essentiality of a positive final determination by the Tariff
Commission, there is no need to refer to the Implementing
Rules of the SMA to ascertain a contrary intent. If there is
indeed a provision in the Implementing Rules that allows the
DTI Secretary to impose a general safeguard measure even
without the positive final determination by the Tariff
Commission, said rule is void as it cannot supplant the express
language of the legislature. Respondents essentially rehash
their previous arguments on this point, and there is no reason
to consider them anew. The Decision made it clear that nothing
in Rule 13.2 of the Implementing Rules, even though captioned
Final Determination by the Secretary, authorizes the DTI
Secretary to impose a general safeguard measure in the
absence of a positive final determination by the Tariff
[59]
Commission. Similarly, the Rules and Regulations to Govern
the Conduct of Investigation by the Tariff Commission Pursuant

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to Republic Act No. 8800 now cited by the respondent does

not contain any provision that the DTI Secretary may impose
the general safeguard measures in the absence of a positive
final determination by the Tariff Commission.
Section 13 of the SMA further bolsters the interpretation
as argued by Southern Cross and upheld by the Decision. The
first paragraph thereof states that [u]pon its positive
determination, the [Tariff] Commission shall recommend to the
Secretary an appropriate definitive measure, clearly referring to
the Tariff Commission as the entity that makes the positive
determination. On the other hand, the penultimate paragraph
of the same provision states that [i]n the event of a negative
final determination, the DTI Secretary is to immediately issue
through the Secretary of Finance, a written instruction to the
Commissioner of Customs authorizing the return of the cash
bonds previously collected as a provisional safeguard measure.
Since the first paragraph of the same provision states that it is
the Tariff Commission which makes the positive determination,
it necessarily follows that it, and not the DTI Secretary, makes
the negative final determination as referred to in the
[60]
penultimate paragraph of Section 13.
The Separate Opinion considers as highly persuasive of
former Tariff Commission Chairman Abon, who stated that the
[61]
Commissions findings are merely recommendatory. Again,
the considered opinion of Chairman Abon is of no operative
effect if the statute plainly states otherwise, and Section 5
bluntly does require a positive final determination by the Tariff
Commission before the DTI Secretary may impose a general
[62]
safeguard measure. Certainly, the Court cannot give
controlling effect to the statements of any public officer in
serious denial of his duties if the law otherwise imposes the
duty on the public office or officer.
Nonetheless, if we are to render persuasive effect on the
considered opinion of the members of the Executive Branch, it
bears noting that the Secretary of the Department of Justice
rendered an Opinion wherein he concluded that the DTI
Secretary could not impose a general safeguard measure if the
Tariff
Commission
made
a
negative
final
[63]
determination. Unlike Chairman Abons impromptu remarks
made during a hearing, the DOJ Opinion was rendered only
after a thorough study of the question after referral to it by the
DTI. The DOJ Secretary is the alter ego of the President with a
stated mandate as the head of the principal law agency of the
[64]
government. As the DOJ Secretary has no denominated role
in the SMA, he was able to render his Opinion from the
vantage of judicious distance. Should not his Opinion, studied
and direct to the point as it is, carry greater weight than the
spontaneous remarks of the Tariff Commissions Chairman
which do not even expressly disavow the binding power of the
Commissions positive final determination?

III. DTI Secretary has No Power of Review

Over Final Determination of the Tariff Commission
We should reemphasize that it is only because of the
SMA, a legislative enactment, that the executive branch has the

power to impose safeguard measures. At the same time, by

constitutional fiat, the exercise of such power is subjected to
the limitations and restrictions similarly enforced by the SMA.
In examining the relationship of the DTI and the Tariff
Commission as established in the SMA, it is essential to
acknowledge and consider these predicates.
It is necessary to clarify the paradigm established by the
SMA and affirmed by the Constitution under which the Tariff
Commission and the DTI operate, especially in light of the
suggestions that the Courts rulings on the functions of quasijudicial power find application in this case. Perhaps the
reflexive application of the quasi-judicial doctrine in this case,
rooted as it is in jurisprudence, might allow for some
convenience in ruling, yet doing so ultimately betrays
ignorance of the fundamental power of Congress to reorganize
the administrative structure of governance in ways it sees fit.
The Separate Opinion operates from wholly different
premises which are incomplete. Its main stance, similar to that
of respondents, is that the DTI Secretary, acting as alter ego of
the President, may modify and alter the findings of the Tariff
Commission, including the latters negative final determination
by substituting it with his own negative final determination to
pave the way for his imposition of a safeguard
[65]
measure. Fatally, this conclusion is arrived at without
considering the fundamental constitutional precept under
Section 28(2), Article VI, on the ability of Congress to impose
restrictions and limitations in its delegation to the President to
impose tariffs and imposts, as well as the express condition of
Section 5 of the SMA requiring a positive final determination of
the Tariff Commission.
Absent Section 5 of the SMA, the President has no
inherent, constitutional, or statutory power to impose a
general
safeguard
measure.
Tellingly,
the Separate
Opinion does not directly confront the inevitable question as to
how the DTI Secretary may get away with imposing a general
safeguard measure absent a positive final determination from
the Tariff Commission without violating Section 5 of the SMA,
which along with Section 13 of the same law, stands as the only
direct legal authority for the DTI Secretary to impose such
measures. This is a constitutionally guaranteed limitation of the
highest order, considering that the presidential authority
exercised under the SMA is inherently legislative.
Nonetheless, the Separate Opinion brings to fore the
issue of whether the DTI Secretary, acting either as alter ego of
the President or in his capacity as head of an executive
department, may review, modify or otherwise alter the final
determination of the Tariff Commission under the SMA. The
succeeding discussion shall focus on that question.
Preliminarily, we should note that none of the parties
question the designation of the DTI or Agriculture secretaries
under the SMA as the imposing authorities of the safeguard
measures, even though Section 28(2) Article VI states that it is
the President to whom the power to impose tariffs and imposts
may be delegated by Congress. The validity of such
designation under the SMA should not be in doubt. We
recognize that the authorization made by Congress in the SMA

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to the DTI and Agriculture Secretaries was made in

contemplation of their capacities as alter egos of the President.
[66]

Indeed, in Marc Donnelly & Associates v. Agregado the

Court upheld the validity of a Cabinet resolution fixing the
schedule of royalty rates on metal exports and providing for
their collection even though Congress, under Commonwealth
Act No. 728, had specifically empowered the President and not
any other official of the executive branch, to regulate and
curtail the export of metals. In so ruling, the Court held that the
members of the Cabinet were acting as alter egos of the
[67]
President. In this case, Congress itself authorized the DTI
Secretary as alter ego of the President to impose the safeguard
measures. If the Court was previously willing to uphold the
alter egos tariff authority despite the absence of explicit
legislative grant of such authority on the alter ego, all the more
reason now when Congress itself expressly authorized the alter
ego to exercise these powers to impose safeguard measures.
Notwithstanding, Congress in enacting the SMA and
prescribing the roles to be played therein by the Tariff
Commission and the DTI Secretary did not envision that the
President, or his/her alter ego, could exercise supervisory
powers over the Tariff Commission. If truly Congress intended
to allow the traditional alter ego principle to come to fore in
the peculiar setup established by the SMA, it would have
assigned the role now played by the DTI Secretary under the
law instead to the NEDA. The Tariff Commission is an attached
agency
of
the
National
Economic
Development
[68]
Authority, which in turn is the independent planning agency
[69]
of the government.
The Tariff Commission does not fall under the
[70]
administrative supervision of the DTI. On the other hand, the
administrative relationship between the NEDA and the Tariff
Commission is established not only by the Administrative Code,
but similarly affirmed by the Tariff and Customs Code.
Justice Florentino Feliciano, in his ponencia in Garcia v.
[71]
Executive Secretary , acknowledged the interplay between the
NEDA and the Tariff Commission under the Tariff and Customs
Code when he cited the relevant provisions of that law
evidencing such setup. Indeed, under Section 104 of the Tariff
and Customs Code, the rates of duty fixed therein are subject
to periodic investigation by the Tariff Commission and may be
revised by the President upon recommendation of the
[72]
NEDA. Moreover, under Section 401 of the same law, it is
upon periodic investigations by the Tariff Commission and
recommendation of the NEDA that the President may cause a
[73]
gradual reduction of protection levels granted under the law.
At the same time, under the Tariff and Customs Code, no
similar role or influence is allocated to the DTI in the matter of
imposing tariff duties. In fact, the long-standing tradition has
been for the Tariff Commission and the DTI to proceed
independently in the exercise of their respective functions. Only
very recently have our statutes directed any significant
interplay between the Tariff Commission and the DTI, with the
enactment in 1999 of Republic Act No. 8751 on the imposition
of countervailing duties and Republic Act No. 8752 on the
imposition of anti-dumping duties, and of course the
promulgation a year later of the SMA. In all these three laws,

the Tariff Commission is tasked, upon referral of the matter by

the DTI, to determine whether the factual conditions exist to
warrant the imposition by the DTI of a countervailing duty, an
anti-dumping duty, or a general safeguard measure,
respectively. In all three laws, the determination by the Tariff
Commission that these required factual conditions exist is
necessary before the DTI Secretary may impose the
corresponding duty or safeguard measure. And in all three
laws, there is no express provision authorizing the DTI
Secretary to reverse the factual determination of the Tariff
[74]
Commission.
In fact, the SMA indubitably establishes that the Tariff
Commission is no mere flunky of the DTI Secretary when it
mandates that the positive final recommendation of the former
be indispensable to the latters imposition of a general
safeguard measure. What the law indicates instead is a
relationship of interdependence between two bodies
independent of each other under the Administrative Code and
the SMA alike. Indeed, even the ability of the DTI Secretary to
disregard the Tariff Commissions recommendations as to the
particular safeguard measures to be imposed evinces the
independence from each other of these two bodies. This is
properly so for two reasons the DTI and the Tariff Commission
are independent of each other under the Administrative Code;
and impropriety is avoided in cases wherein the DTI itself is the
one seeking the imposition of the general safeguard measures,
pursuant to Section 6 of the SMA.
Thus, in ascertaining the appropriate legal milieu
governing the relationship between the DTI and the Tariff
Commission, it is imperative to apply foremost, if not
exclusively, the provisions of the SMA. The argument that the
usual rules on administrative control and supervision apply
between the Tariff Commission and the DTI as regards
safeguard measures is severely undercut by the plain fact that
there is no long-standing tradition of administrative interplay
between these two entities.
Within the administrative apparatus, the Tariff
Commission appears to be a lower rank relative to the DTI. But
does this necessarily mean that the DTI has the intrinsic right,
absent statutory authority, to reverse the findings of the Tariff
Commission? To insist that it does, one would have to concede
for instance that, applying the same doctrinal guide, the
Secretary of the Department of Science and Technology (DOST)
has the right to reverse the rulings of the Civil Aeronautics
Board (CAB) or the issuances of the Philippine Coconut
Authority (PCA). As with the Tariff Commission-DTI, there is no
statutory authority granting the DOST Secretary the right to
overrule the CAB or the PCA, such right presumably arising
only from the position of subordinacy of these bodies to the
DOST. To insist on such a right would be to invite department
secretaries to interfere in the exercise of functions by
administrative agencies, even in areas wherein such secretaries
are bereft of specialized competencies.
The Separate Opinion notes that notwithstanding above,
the Secretary of Department of Transportation and
Communication may review the findings of the CAB, the
Agriculture Secretary may review those of the PCA, and that

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the Secretary of the Department of Environment and Natural

Resources may pass upon decisions of the Mines and
[75]
Geosciences Board. These three officers may be alter egos of
the President, yet their authority to review is limited to those
agencies or bureaus which are, pursuant to statutes such as the
Administrative Code of 1987, under the administrative control
and supervision of their respective departments. Thus, under
the express provision of the Administrative Code expressly
[76]
provides that the CAB is an attached agency of the DOTC ,
and that the PCA is an attached agency of the Department of
[77]
Agriculture. The same law establishes the Mines and Geo[78]
Sciences Bureau as one of the Sectoral Staff Bureaus that
[79]
forms part of the organizational structure of the DENR.
As repeatedly stated, the Tariff Commission does not fall
under the administrative control of the DTI, but under the
NEDA, pursuant to the Administrative Code. The reliance made
by the Separate Opinion to those three examples are thus
misplaced.
Nonetheless, the Separate Opinion asserts that the SMA
created a functional relationship between the Tariff
Commission and the DTI Secretary, sufficient to allow the DTI
Secretary to exercise alter ego powers to reverse the
determination of the Tariff Commission. Again, considering
that the power to impose tariffs in the first place is not inherent
in the President but arises only from congressional grant, we
should affirm the congressional prerogative to impose
limitations and restrictions on such powers which do not
normally belong to the executive in the first place. Nowhere in
the SMA does it state that the DTI Secretary may impose
general safeguard measures without a positive final
determination by the Tariff Commission, or that the DTI
Secretary may reverse or even review the factual determination
made by the Tariff Commission.
Congress in enacting the SMA and prescribing the roles
to be played therein by the Tariff Commission and the DTI
Secretary did not envision that the President, or his/her alter
egocould exercise supervisory powers over the Tariff
Commission. If truly Congress intended to allow
the traditional alter ego principle to come to fore in the
peculiar setup established by the SMA, it would have assigned
the role now played by the DTI Secretary under the law instead
to the NEDA, the body to which the Tariff Commission is
attached under the Administrative Code.
The Court has no issue with upholding administrative
control and supervision exercised by the head of an executive
department, but only over those subordinate offices that are
attached to the department, or which are, under statute,
relegated under its supervision and control. To declare that a
department secretary, even if acting as alter ego of the
President, may exercise such control or supervision over all
executive offices below cabinet rank would lead to absurd
results such as those adverted to above. As applied to this case,
there is no legal justification for the DTI Secretary to exercise
control, supervision, review or amendatory powers over the
Tariff Commission and its positive final determination. In
passing, we note that there is, admittedly, a feasible mode by
which administrative review of the Tariff Commissions final

determination could be had, but it is not the procedure

adopted by respondents and now suggested for affirmation.
This mode shall be discussed in a forthcoming section.
The Separate Opinion asserts that the President, or
his/her alter ego cannot be made a mere rubber stamp of the
Tariff Commission since Section 17, Article VII of the
Constitution denominates the Chief Executive exercises control
[80]
over all executive departments, bureaus and offices. But let
us be clear that such executive control is not absolute. The
definition of the structure of the executive branch of
government, and the corresponding degrees of administrative
control and supervision, is not the exclusive preserve of the
executive. It may be effectively be limited by the Constitution,
by law, or by judicial decisions.
The Separate Opinion cites the respected constitutional
law authority Fr. Joaquin Bernas, in support of the proposition
that such plenary power of executive control of the President
cannot be restricted by a mere statute passed by Congress.
However, the cited passage from Fr. Bernas actually states,
Since the Constitution has given the President the power of
control, with all its awesome implications, it is the Constitution
[81]
alone which can curtail such power. Does the President have
such tariff powers under the Constitution in the first place
which may be curtailed by the executive power of control? At
the risk of redundancy, we quote Section 28(2), Article VI: The
Congress may, by law, authorize the President to fix within
specified limits, and subject to such limitations and restrictions
as it may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within
the framework of the national development program of the
Government. Clearly the power to impose tariffs belongs to
Congress and not to the President.
It is within reason to assume the framers of the
Constitution deemed it too onerous to spell out all the possible
limitations and restrictions on this presidential authority to
impose tariffs. Hence, the Constitution especially allowed
Congress itself to prescribe such limitations and restrictions
itself, a prudent move considering that such authority
inherently belongs to Congress and not the President. Since
Congress has no power to amend the Constitution, it should be
taken to mean that such limitations and restrictions should be
provided by mere statute. Then again, even the presidential
authority to impose tariffs arises only by mere statute. Indeed,
this presidential privilege is both contingent in nature and
legislative in origin. These characteristics, when weighed
against the aspect of executive control and supervision,
cannot militate against Congresss exercise of its inherent
power to tax.
The bare fact is that the administrative superstructure, for
all its unwieldiness, is mere putty in the hands of Congress. The
functions and mandates of the particular executive
departments and bureaus are not created by the President, but
by the legislative branch through the Administrative
[82]
Code.
The President is the administrative head of the
executive department, as such obliged to see that every
government office is managed and maintained properly by the
persons in charge of it in accordance with pertinent laws and

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regulations, and empowered to promulgate rules and issuances

that would ensure a more efficient management of the
executive branch, for so long as such issuances are not contrary
[83]
to law. Yet the legislature has the concurrent power to
reclassify or redefine the executive bureaucracy, including the
relationship between various administrative agencies, bureaus
and departments, and ultimately, even the power to abolish
executive departments and their components, hamstrung only
by constitutional limitations. The DTI itself can be abolished
with ease by Congress through deleting Title X, Book IV of the
Administrative Code. The Tariff Commission can similarly be
[84]
abolished through legislative enactment.
At the same time, Congress can enact additional tasks or
responsibilities on either the Tariff Commission or the DTI
Secretary, such as their respective roles on the imposition of
general safeguard measures under the SMA. In doing so, the
same Congress, which has the putative authority to abolish
the Tariff Commission or the DTI, is similarly empowered
to alter or expand its functions through modalities which
do not align with established norms in the bureaucratic
structure. The Court is bound to recognize the legislative
prerogative to prescribe such modalities, no matter how
atypical they may be, in affirmation of the legislative power to
restructure the executive branch of government.
There are further limitations on the executive control
adverted to by the Separate Opinion. The President, in the
exercise of executive control, cannot order a subordinate to
disobey a final decision of this Court or any courts. If the
subordinate chooses to disobey, invoking sole allegiance to the
President, the judicial processes can be utilized to compel
obeisance. Indeed, when public officers of the executive
department take their oath of office, they swear allegiance and
obedience not to the President, but to the Constitution and the
laws of the land. The invocation of executive control must yield
when under its subsumption includes an act that violates the
law.
The Separate Opinion concedes that the exercise of
executive control and supervision by the President is bound by
[85]
the Constitution and law. Still, just three sentences after
asserting that the exercise of executive control must be within
the bounds of the Constitution and law, the Separate
Opinion asserts, the control power of the Chief Executive
emanates from the Constitution; no act of Congress may validly
[86]
curtail it. Laws are acts of Congress, hence valid confusion
arises whether the Separate Opinion truly believes the first
proposition that executive control is bound by law. This is a
quagmire for the Separate Opinion to resolve for itself
The Separate Opinion unduly considers executive control
as the ne plus ultra constitutional standard which must govern
in this case. But while the President may generally have the
power to control, modify or set aside the actions of a
subordinate, such powers may be constricted by the
Constitution, the legislature, and the judiciary. This is one of the
essences of the check-and-balance system in our tri-partite
constitutional democracy. Not one head of a branch of
government may operate as a Caesar within his/her particular
fiefdom.

Assuming there is a conflict between the specific

limitation in Section 28 (2), Article VI of the Constitution and
the general executive power of control and supervision, the
former prevails in the specific instance of safeguard measures
such as tariffs and imposts, and would thus serve to qualify the
general grant to the President of the power to exercise control
and supervision over his/her subalterns.
Thus, if the Congress enacted the law so that the DTI
Secretary is bound by the Tariff Commission in the sense the
former cannot impose general safeguard measures absent a
final positive determination from the latter the Court is obliged
to respect such legislative prerogative, no matter how such
arrangement deviates from traditional norms as may have been
enshrined in jurisprudence. The only ground under which such
legislative determination as expressed in statute may be
successfully challenged is if such legislation contravenes the
Constitution. No such argument is posed by the respondents,
who do not challenge the validity or constitutionality of the
SMA.
Given these premises, it is utterly reckless to examine the
interrelationship between the Tariff Commission and the DTI
Secretary beyond the context of the SMA, applying instead
traditional precepts on administrative control, review and
supervision. For that reason, the Decision deemed inapplicable
respondents previous citations of Cario v. Commissioner on
Human Rights and Lamb v. Phipps, since the executive power
adverted to in those cases had not been limited by
constitutional restrictions such as those imposed under Section
[87]
28(2), Article VI.
A similar observation can be made on the case of Sharp
[88]
International Marketing v. Court of Appeals, now cited by
Philcemcor, wherein the Court asserted that the Land Bank of
the Philippines was required to exercise independent judgment
and not merely rubber-stamp deeds of sale entered into by the
Department of Agrarian Reform in connection with the agrarian
reform program. Philcemcor attempts to demonstrate that the
DTI Secretary, as with the Land Bank of the Philippines, is
required to exercise independent discretion and is not
expected to just merely accede to DAR-approved
compensation packages. Yet again, such grant of independent
discretion is expressly called for by statute, particularly Section
18 of Rep. Act No. 6657 which specifically requires the joint
concurrence of the landowner and the DAR and the [Land Bank
of the Philippines] on the amount of compensation. Such
power of review by the Land Bank is a consequence of clear
statutory language, as is our holding in the Decision that
Section 5 explicitly requires a positive final determination by
the Tariff Commission before a general safeguard measure may
be imposed. Moreover, such limitations under the SMA are
coated by the constitutional authority of Section 28(2), Article
VI of the Constitution.
Nonetheless, is this administrative setup, as envisioned by
Congress and enshrined into the SMA, truly noxious to existing
legal standards? The Decision acknowledged the internal logic
of the statutory framework, considering that the DTI cannot
exercise review powers over an agency such as the Tariff
Commission which is not within its administrative jurisdiction;

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that the mechanism employed establishes a measure of check

and balance involving two government offices with different
specializations; and that safeguard measures are the exception
[89]
rather than the rule, pursuant to our treaty obligations.
We see no reason to deviate from these observations,
and indeed can add similarly oriented comments. Corollary to
the legislative power to decree policies through legislation is
the ability of the legislature to provide for means in the statute
itself to ensure that the said policy is strictly implemented by
the body or office tasked so tasked with the duty. As earlier
stated, our treaty obligations dissuade the State for now from
implementing default protectionist trade measures such as
tariffs, and allow the same only under specified
[90]
conditions. The conditions enumerated under the GATT
Agreement on Safeguards for the application of safeguard
measures by a member country are the same as the requisites
[91]
laid down in Section 5 of the SMA. To insulate the factual
determination from political pressure, and to assure that it be
conducted by an entity especially qualified by reason of its
general functions to undertake such investigation, Congress
deemed it necessary to delegate to the Tariff Commission the
function of ascertaining whether or not the those factual
conditions exist to warrant the atypical imposition of safeguard
measures. After all, the Tariff Commission retains a degree of
relative independence by virtue of its attachment to the
National Economic Development Authority, an independent
[92]
planning agency of the government, and also owing to its
vaunted expertise and specialization.
The matter of imposing a safeguard measure almost
always involves not just one industry, but the national interest
as it encompasses other industries as well. Yet in all candor, any
decision to impose a safeguard measure is susceptible to all
sorts of external pressures, especially if the domestic industry
concerned is well-organized. Unwarranted impositions of
safeguard measures may similarly be detrimental to the
national interest. Congress could not be blamed if it desired to
insulate the investigatory process by assigning it to a body with
a putative degree of independence and traditional expertise in
ascertaining factual conditions. Affected industries would have
cause to lobby for or against the safeguard measures. The
decision-maker is in the unenviable position of having to bend
an ear to listen to all concerned voices, including those which
may speak softly but carry a big stick. Had the law mandated
that the decision be made on the sole discretion of an
executive officer, such as the DTI Secretary, it would be
markedly easier for safeguard measures to be imposed or
withheld based solely on political considerations and not on
the factual conditions that are supposed to predicate the
decision.
Reference of the binding positive final determination to
the Tariff Commission is of course, not a fail-safe means to
ensure a bias-free determination. But at least the legislated
involvement of the Commission in the process assures some
measure of measure of check and balance involving two
different governmental agencies with disparate specializations.
There is no legal or constitutional demand for such a setup, but
its wisdom as policy should be acknowledged. As prescribed by
Congress, both the Tariff Commission and the DTI Secretary

operate within limited frameworks, under which nobody

acquires an undue advantage over the other.
We recognize that Congress deemed it necessary to
insulate the process in requiring that the factual determination
to be made by an ostensibly independent body of specialized
competence, the Tariff Commission. This prescribed framework,
constitutionally sanctioned, is intended to prevent the baseless,
whimsical, or consideration-induced imposition of safeguard
measures. It removes from the DTI Secretary jurisdiction over a
matter beyond his putative specialized aptitude, the
compilation and analysis of picayune facts and determination
of their limited causal relations, and instead vests in the
Secretary the broad choice on a matter within his
unquestionable competence, the selection of what particular
safeguard measure would assist the duly beleaguered local
industry yet at the same time conform to national trade policy.
Indeed, the SMA recognizes, and places primary importance on
the DTI Secretarys mandate to formulate trade policy, in his
capacity as the Presidents alter ego on trade, industry and
investment-related matters.
At the same time, the statutory limitations on this
authorized power of the DTI Secretary must prevail since the
Constitution itself demands the enforceability of those
limitations and restrictions as imposed by Congress. Policy
wisdom will not save a law from infirmity if the statutory
provisions violate the Constitution. But since the Constitution
itself provides that the President shall be constrained by the
limits and restrictions imposed by Congress and since these
limits and restrictions are so clear and categorical, then the
Court has no choice but to uphold the reins.
Even assuming that this prescribed setup made little
[93]
sense, or seemed uncommonly silly, the Court is bound by
propriety not to dispute the wisdom of the legislature as long
as its acts do not violate the Constitution. Since there is no
convincing demonstration that the SMA contravenes the
Constitution, the Court is wont to respect the administrative
regimen propounded by the law, even if it allots the Tariff
Commission a higher degree of puissance than normally
expected. It is for this reason that the traditional conceptions of
administrative review or quasi-judicial power cannot control in
this case.
Indeed, to apply the latter concept would cause the Court
to fall into a linguistic trap owing to the multi-faceted
denotations the term quasi-judicial has come to acquire.
Under the SMA, the Tariff Commission undertakes formal
[94]
hearings, receives and evaluates testimony and evidence by
[95]
interested parties, and renders a decision is rendered on the
basis of the evidence presented, in the form of the final
determination. The final determination requires a conclusion
whether the importation of the product under consideration is
causing serious injury or threat to a domestic industry
producing like products or directly competitive products, while
evaluating all relevant factors having a bearing on the situation
[96]
of the domestic industry. This process aligns conformably
with definition provided by Blacks Law Dictionary of quasijudicial as the action, discretion, etc., of public administrative
officers or bodies, who are required to investigate facts, or

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ascertain the existence of facts, hold hearings, weigh evidence,

and draw conclusions from them, as a basis for their official
[97]
action, and to exercise discretion of a judicial nature.
However, the Tariff Commission is not empowered to
hear actual cases or controversies lodged directly before it by
private parties. It does not have the power to issue writs of
injunction or enforcement of its determination. These
considerations militate against a finding of quasi-judicial
powers attributable to the Tariff Commission, considering the
pronouncement that quasi-judicial adjudication would mean a
determination of rights privileges and duties resulting in a
[98]
decision or order which applies to a specific situation.
Indeed, a declaration that the Tariff Commission
possesses quasi-judicial powers, even if ascertained for the
limited purpose of exercising its functions under the SMA, may
have the unfortunate effect of expanding the Commissions
powers beyond that contemplated by law. After all, the Tariff
Commission is by convention, a fact-finding body, and its role
under the SMA, burdened as it is with factual determination, is
but a mere continuance of this tradition. However, Congress
through the SMA offers a significant deviation from this
traditional role by tying the decision by the DTI Secretary to
impose a safeguard measure to the required positive factual
determination by the Tariff Commission. Congress is not bound
by past traditions, or even by the jurisprudence of this Court, in
enacting legislation it may deem as suited for the times. The
sole benchmark for judicial substitution of congressional
wisdom is constitutional transgression, a standard which the
respondents do not even attempt to match.

Respondents Suggested Interpretation

Of the SMA Transgresses Fair Play
Respondents have belabored the argument that
the Decisions interpretation of the SMA, particularly of the role
of the Tariff Commission vis--vis the DTI Secretary, is noxious
to traditional notions of administrative control and supervision.
But in doing so, they have failed to acknowledge the
congressional
prerogative
to
redefine
administrative
relationships, a license which falls within the plenary province
of Congress under our representative system of democracy.
Moreover, respondents own suggested interpretation falls
wayward of expectations of practical fair play.
Adopting respondents suggestion that the DTI Secretary
may disregard the factual findings of the Tariff Commission
and investigatory process that preceded it, it would seem that
the elaborate procedure undertaken by the Commission under
the SMA, with all the attendant guarantees of due process, is
but an inutile spectacle. As Justice Garcia noted during the oral
arguments, why would the DTI Secretary bother with the Tariff
[99]
Commission and instead conduct the investigation himself.
Certainly, nothing in the SMA authorizes the DTI
Secretary, after making the preliminary determination, to
personally oversee the investigation, hear out the interested
[100]
parties, or receive evidence.
In fact, the SMA does not even

require the Tariff Commission, which is tasked with the custody

[101]
of the submitted evidence,
to turn over to the DTI Secretary
such evidence it had evaluated in order to make its factual
[102]
determination.
Clearly, as Congress tasked it to be, it is the
Tariff Commission and not the DTI Secretary which acquires the
necessary intimate acquaintance with the factual conditions
and evidence necessary for the imposition of the general
safeguard measure. Why then favor an interpretation of the
SMA that leaves the findings of the Tariff Commission bereft of
operative effect and makes them subservient to the wishes of
the DTI Secretary, a personage with lesser working familiarity
with the relevant factual milieu? In fact, the bare theory of the
respondents would effectively allow the DTI Secretary to adopt,
under the subterfuge of his discretion, the factual
determination of a private investigative group hired by the
industry concerned, and reject the investigative findings of the
Tariff Commission as mandated by the SMA. It would be highly
irregular to substitute what the law clearly provides for a
dubious setup of no statutory basis that would be readily
susceptible to rank chicanery.
Moreover, the SMA guarantees the right of all concerned
parties to be heard, an elemental requirement of due process,
by the Tariff Commission in the context of its investigation. The
DTI Secretary is not similarly empowered or tasked to hear out
the concerns of other interested parties, and if he/she does so,
it arises purely out of volition and not compulsion under law.
Indeed, in this case, it is essential that the position of
other than that of the local cement industry should be given
due consideration, cement being an indispensable need for the
operation of other industries such as housing and construction.
While the general safeguard measures may operate to the
better interests of the domestic cement industries, its
deprivation of cheaper cement imports may similarly work to
the detriment of these other domestic industries and
correspondingly, the national interest. Notably, the Tariff
Commission in this case heard the views on the application of
representatives of other allied industries such as the housing,
construction, and cement-bag industries, and other interested
parties
such
as
consumer
groups
and
foreign
[103]
governments.
It is only before the Tariff Commission that
their views had been heard, and this is because it is only the
Tariff Commission which is empowered to hear their positions.
Since due process requires a judicious consideration of all
relevant factors, the Tariff Commission, which is in a better
position to hear these parties than the DTI Secretary, is similarly
more capable to render a determination conformably with the
due process requirements than the DTI Secretary.
In a similar vein, Southern Cross aptly notes that in
instances when it is the DTI Secretary who initiates motu
proprio the application for the safeguard measure pursuant to
Section 6 of the SMA, respondents suggested interpretation
would result in the awkward situation wherein the DTI
Secretary would rule upon his own application after it had been
evaluated by the Tariff Commission. Pertinently cited is our
[104]
ruling in Corona v. Court of Appeals
that no man can be at
[105]
once a litigant and judge.
Certainly, this anomalous
situation is avoided if it is the Tariff Commission which is
tasked with arriving at the final determination whether the

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conditions exist to warrant the general safeguard measures.

This is the setup provided for by the express provisions of the
SMA, and the problem would arise only if we adopt the
interpretation urged upon by respondents.

The Possibility for Administrative Review

Of the Tariff Commissions Determination
The Court has been emphatic that a positive final
determination from the Tariff Commission is required in order
that the DTI Secretary may impose a general safeguard
measure, and that the DTI Secretary has no power to exercise
control and supervision over the Tariff Commission and its final
determination. These conclusions are the necessary
consequences of the applicable provisions of the Constitution,
the SMA, and laws such as the Administrative Code. However,
the law is silent though on whether this positive final
determination may otherwise be subjected to administrative
review.
There is no evident legislative intent by the authors of the
SMA to provide for a procedure of administrative review. If ever
there is a procedure for administrative review over the final
determination of the Tariff Commission, such procedure must
be done in a manner that does not contravene or disregard
legislative prerogatives as expressed in the SMA or the
Administrative Code, or fundamental constitutional limitations.
In order that such procedure of administrative review
would not contravene the law and the constitutional scheme
provided by Section 28(2), Article VI, it is essential to assert that
the positive final determination by the Tariff Commission is
indispensable as a requisite for the imposition of a general
safeguard measure. The submissions of private respondents
and the Separate Opinion cannot be sustained insofar as they
hold that the DTI Secretary can peremptorily ignore or
disregard the determinations made by the Tariff Commission.
However, if the mode of administrative review were in such a
manner that the administrative superior of the Tariff
Commission were to modify or alter its determination, then
such reversal may still be valid within the confines of Section 5
of the SMA, for technically it is still the Tariff Commissions
determination, administratively revised as it may be, that would
serve as the basis for the DTI Secretarys action.
However, and fatally for the present petitions, such
administrative review cannot be conducted by the DTI
Secretary. Even if conceding that the Tariff Commissions
findings may be administratively reviewed, the DTI Secretary
has no authority to review or modify the same. We have been
emphatic on the reasons such as that there is no traditional or
statutory basis placing the Commission under the control and
supervision of the DTI; that to allow such would contravene
due process, especially if the DTI itself were to apply for the
safeguard measures motu proprio. To hold otherwise would
destroy the administrative hierarchy, contravene constitutional
due process, and disregard the limitations or restrictions
provided in the SMA.

Instead, assuming administrative review were available, it

is the NEDA that may conduct such review following the
principles of administrative law, and the NEDAs decision in turn
is reviewable by the Office of the President. The decision of the
Office of the President then effectively substitutes as the
determination of the Tariff Commission, which now forms the
basis of the DTI Secretarys decision, which now would be ripe
for judicial review by the CTA under Section 29 of the SMA.
This is the only way that administrative review of the Tariff
Commissions determination may be sustained without
violating the SMA and its constitutional restrictions and
limitations, as well as administrative law.
In bare theory, the NEDA may review, alter or modify the
Tariff Commissions final determination, the Commission being
an attached agency of the NEDA. Admittedly, there is nothing
in the SMA or any other statute that would prevent the NEDA
to exercise such administrative review, and successively, for the
President to exercise in turn review over the NEDAs decision.
Nonetheless, in acknowledging this possibility, the Court,
without denigrating the bare principle that administrative
officers may exercise control and supervision over the acts of
the bodies under its jurisdiction, realizes that this comes at the
expense of a speedy resolution to an application for a
safeguard measure, an application dependent on fluctuating
factual conditions. The further delay would foster uncertainty
and insecurity within the industry concerned, as well as with all
other allied industries, which in turn may lead to some measure
of economic damage. Delay is certain, since judicial review
authorized by law and not administrative review would have
the final say. The fact that the SMA did not expressly prohibit
administrative review of the final determination of the Tariff
Commission does not negate the supreme advantages of
engendering exclusive judicial review over questions arising
from the imposition of a general safeguard measure.
In any event, even if we conceded the possibility of
administrative review of the Tariff Commissions final
determination by the NEDA, such would not deny merit to the
present petition. It does not change the fact that the Court of
Appeals erred in ruling that the DTI Secretary was not bound
by the negative final determination of the Tariff Commission, or
that the DTI Secretary acted without jurisdiction when he
imposed general safeguard measures despite the absence of
the statutory positive final determination of the Commission.

IV. Courts Interpretation of SMA

In Harmony with Other
Constitutional Provisions
In response to our citation of Section 28(2), Article VI,
respondents elevate two arguments grounded in constitutional
law. One is based on another constitutional provision, Section
12, Article XIII, which mandates that [t]he State shall promote
the preferential use of Filipino labor, domestic materials and
locally produced goods and adopt measures that help make
them competitive. By no means does this provision dictate that
the Court favor the domestic industry in all competing claims

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that it may bring before this Court. If it were so, judicial

proceedings in this country would be rendered a mockery,
resolved as they would be, on the basis of the personalities of
the litigants and not their legal positions.
Moreover, the duty imposed on by Section 12, Article XIII
falls primarily with Congress, which in that regard enacted the
SMA, a law designed to protect domestic industries from the
possible ill-effects of our accession to the global trade order.
Inconveniently perhaps for respondents, the SMA also happens
to provide for a procedure under which such protective
measures may be enacted. The Court cannot just impose what
it deems as the spirit of the law without giving due regard to its
letter.
In like-minded manner, the Separate Opinion loosely
states that the purpose of the SMA is to protect or safeguard
local industries from increased importation of foreign
[106]
products. This inaccurately leaves the impression that the
SMA ipso facto unravels a protective cloak that shelters all local
industries and producers, no matter the conditions. Indeed, our
country has knowingly chosen to accede to the world trade
regime, as expressed in the GATT and WTO Agreements,
despite the understanding that local industries might suffer illeffects, especially with the easier entry of competing foreign
products. At the same time, these international agreements
were designed to constrict protectionist trade policies by its
member-countries. Hence, the median, as expressed by the
SMA, does allow for the application of protectionist measures
such as tariffs, but only after an elaborate process of
investigation that ensures factual basis and indispensable need
for such measures. More accurately, the purpose of the SMA is
to provide a process for the protection or safeguarding of
domestic industries that have duly established that there is
substantial injury or threat thereof directly caused by the
increased imports. In short, domestic industries are not entitled
to safeguard measures as a matter of right or influence.
Respondents also make the astounding argument that
the imposition of general safeguard measures should not be
seen as a taxation measure, but instead as an exercise of police
power. The vain hope of respondents in divorcing the
safeguard measures from the concept of taxation is to exclude
from consideration Section 28(2), Article VI of the Constitution.
This argument can be debunked at length, but it deserves
little attention. The motivation behind many taxation measures
is the implementation of police power goals. Progressive
income taxes alleviate the margin between rich and poor; the
so-called sin taxes on alcohol and tobacco manufacturers help
dissuade the consumers from excessive intake of these
potentially harmful products. Taxation is distinguishable from
police power as to the means employed to implement these
public good goals. Those doctrines that are unique to taxation
arose from peculiar considerations such as those especially
[107]
punitive effects of taxation,
and the belief that taxes are the
[108]
lifeblood of the state.
These considerations necessitated the
evolution of taxation as a distinct legal concept from police
power. Yet at the same time, it has been recognized that
taxation may be made the implement of the states police
[109]
power.

Even assuming that the SMA should be construed

exclusively as a police power measure, the Court recognizes
that police power is lodged primarily in the national legislature,
though it may also be exercised by the executive branch by
[110]
virtue of a valid delegation of legislative power.
Considering
these premises, it is clear that police power, however illimitable
in theory, is still exercised within the confines of implementing
legislation. To declare otherwise is to sanction rule by whim
instead of rule of law. The Congress, in enacting the SMA, has
delegated the power to impose general safeguard measures to
the executive branch, but at the same time subjected such
imposition to limitations, such as the requirement of a positive
final determination by the Tariff Commission under Section 5.
For the executive branch to ignore these boundaries imposed
by Congress is to set up an ignoble clash between the two coequal branches of government. Considering that the exercise of
police power emanates from legislative authority, there is little
question that the prerogative of the legislative branch shall
prevail in such a clash.

V. Assailed Decision Consistent

With Ruling in Taada v. Angara
Public respondents allege that the Decision is contrary to
[111]
our holding in Taada v. Angara,
since the Court noted
therein that the GATT itself provides built-in protection from
unfair foreign competition and trade practices, which according
to the public respondents, was a reason why the Honorable
[Court] ruled the way it did. On the other hand,
the Decision eliminates safeguard measures as a mode of
defense.
This is balderdash, as with any and all claims that
the Decision allows foreign industries to ride roughshod over
our domestic enterprises. The Decision does not prohibit the
imposition of general safeguard measures to protect domestic
industries in need of protection. All it affirms is that the positive
final determination of the Tariff Commission is first required
before the general safeguard measures are imposed and
implemented, a neutral proposition that gives no regard to the
nationalities of the parties involved. A positive determination
by the Tariff Commission is hardly the elusive Shangri-la of
administrative law. If a particular industry finds it difficult to
obtain a positive final determination from the Tariff
Commission, it may be simply because the industry is still
sufficiently competitive even in the face of foreign competition.
These safeguard measures are designed to ensure salvation,
not avarice.
Respondents well have the right to drape themselves in
the colors of the flag. Yet these postures hardly advance legal
claims, or nationalism for that matter. The fineries of the
costume pageant are no better measure of patriotism than
simple obedience to the laws of the Fatherland. And even
assuming that respondents are motivated by genuine patriotic
impulses, it must be remembered that under the setup
provided by the SMA, it is the facts, and not impulse, that
determine whether the protective safeguard measures should

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be imposed. As once orated, facts are stubborn things; and

whatever may be our wishes, our inclinations, or the dictates of
our passions, they cannot alter the state of facts and
[112]
evidence.
It is our goal as judges to enforce the law, and not what
we might deem as correct economic policy. Towards this end,
we should not construe the SMA to unduly favor or disfavor
domestic industries, simply because the law itself provides for a
mechanism by virtue of which the claims of these industries are
thoroughly evaluated before they are favored or disfavored.
What we must do is to simply uphold what the law says.
Section 5 says that the DTI Secretary shall impose the general
safeguard measures upon the positive final determination of
the Tariff Commission. Nothing in the whereas clauses or the
invisible ink provisions of the SMA can magically delete the
words positive final determination and Tariff Commission from
Section 5.

VI. On Forum-Shopping
We remain convinced that there was no willful and
deliberate forum-shopping in this case by Southern Cross. The
causes of action that animate this present petition for review
and the petition for review with the CTA are distinct from each
other, even though they relate to similar factual antecedents.
Yet it also appears that contrary to the undertaking signed by
the President of Southern Cross, Hironobu Ryu, to inform this
Court of any similar action or proceeding pending before any
court, tribunal or agency within five (5) days from knowledge
thereof, Southern Cross informed this Court only on 12 August
2003 of the petition it had filed with the CTA eleven days
earlier. An appropriate sanction is warranted for such failure,
but not the dismissal of the petition.

VII. Effects of Courts Resolution

Philcemcor argues that the granting of Southern
Crosss Petition should not necessarily lead to the voiding of
the Decision of the DTI Secretary dated 5 August 2003
imposing the general safeguard measures. For Philcemcor, the
availability of appeal to the CTA as an available and adequate
remedy would have made the Court of Appeals Decision merely
erroneous or irregular, but not void. Moreover, the
said Decision merely required the DTI Secretary to render a
decision, which could have very well been a decision not to
impose a safeguard measure; thus, it could not be said that the
annulled decision resulted from the judgment of the Court of
Appeals.
The Court of Appeals Decision was annulled precisely
because the appellate court did not have the power to rule on
the petition in the first place. Jurisdiction is necessarily the
power to decide a case, and a court which does not have the
power to adjudicate a case is one that is bereft of jurisdiction.

We find no reason to disturb our earlier finding that the Court

of Appeals Decision is null and void.
At the same time, the Court in its Decision paid particular
heed to the peculiarities attaching to the 5 August
2003 Decision of
the
DTI
Secretary.
In
the
DTI
Secretarys Decision, he expressly stated that as a result of the
Court of Appeals Decision, there is no legal impediment for the
Secretary to decide on the application. Yet the truth remained
that there was a legal impediment, namely, that the decision of
the appellate court was not yet final and executory. Moreover,
it was declared null and void, and since the DTI Secretary
expressly denominated the Court of Appeals Decision as his
basis for deciding to impose the safeguard measures, the latter
decision must be voided as well. Otherwise put, without the
Court of Appeals Decision, the DTI Secretarys Decision of 5
August 2003 would not have been rendered as well.
Accordingly, the Court reaffirms as a nullity the DTI
Secretarys Decision dated 5 August 2003. As a necessary
consequence, no further action can be taken on
Philcemcors Petition for Extension of the Safeguard Measure.
Obviously, if the imposition of the general safeguard measure
is void as we declared it to be, any extension thereof should
likewise be fruitless. The proper remedy instead is to file a new
application for the imposition of safeguard measures, subject
to the conditions prescribed by the SMA. Should this step be
eventually availed of, it is only hoped that the parties involved
would content themselves in observing the proper procedure,
instead of making a mockery of the rule of law.
WHEREFORE,
respondents Motions
Reconsideration are DENIED WITH FINALITY.

for

Respondent DTI Secretary is hereby ENJOINED from

taking any further action on the pending Petition for Extension
of the Safeguard Measure.
Hironobu Ryu, President of petitioner Southern Cross
Cement Corporation, and Angara Abello Concepcion Regala &
Cruz, counsel petitioner, are hereby given FIVE (5) days from
receipt of this Resolution to EXPLAIN why they should not be
meted disciplinary sanction for failing to timely inform the
Court of the filing of Southern Crosss Petition for Review with
the Court of Tax Appeals, as adverted to earlier in
this Resolution.
SO ORDERED.
[G.R. No. 151908. August 12, 2003]
SMART COMMUNICATIONS, INC. (SMART) and PILIPINO
TELEPHONE CORPORATION (PILTEL), petitioners,
vs. NATIONAL
TELECOMMUNICATIONS
COMMISSION (NTC), respondent.
[G.R. No. 152063. August 12, 2003]
GLOBE
TELECOM,
INC.
(GLOBE)
and
ISLA
COMMUNICATIONS
CO.,
INC.
(ISLACOM), petitioners, vs. COURT OF APPEALS
th
(The Former 6 Division) and the NATIONAL
TELECOMMUNICATIONS
COMMISSION, respondents.

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DECISION
YNARES-SANTIAGO, J.:
Pursuant to its rule-making and regulatory powers, the
National Telecommunications Commission (NTC) issued on
June 16, 2000 Memorandum Circular No. 13-6-2000,
promulgating rules and regulations on the billing of
telecommunications services. Among its pertinent provisions
are the following:
(1) The billing statements shall be received by the subscriber of
the telephone service not later than 30 days from the end of
each billing cycle. In case the statement is received beyond this
period, the subscriber shall have a specified grace period within
which to pay the bill and the public telecommunications entity
(PTEs) shall not be allowed to disconnect the service within the
grace period.
(2) There shall be no charge for calls that are diverted to a
voice mailbox, voice prompt, recorded message or similar
facility excluding the customers own equipment.
(3) PTEs shall verify the identification and address of each
purchaser of prepaid SIM cards. Prepaid call cards and SIM
cards shall be valid for at least 2 years from the date of first
use. Holders of prepaid SIM cards shall be given 45 days from
the date the prepaid SIM card is fully consumed but not
beyond 2 years and 45 days from date of first use to replenish
the SIM card, otherwise the SIM card shall be rendered
invalid. The validity of an invalid SIM card, however, shall be
installed upon request of the customer at no additional charge
except the presentation of a valid prepaid call card.
(4) Subscribers shall be updated of the remaining value of their
cards before the start of every call using the cards.
(5) The unit of billing for the cellular mobile telephone service
whether postpaid or prepaid shall be reduced from 1 minute
per pulse to 6 seconds per pulse. The authorized rates per
[1]
minute shall thus be divided by 10.
The Memorandum Circular provided that it shall take
effect 15 days after its publication in a newspaper of general
circulation and three certified true copies thereof furnished the
UP Law Center. It was published in the newspaper, The
[2]
Philippine Star, on June 22, 2000. Meanwhile, the provisions
of the Memorandum Circular pertaining to the sale and use of
prepaid cards and the unit of billing for cellular mobile
telephone service took effect 90 days from the effectivity of the
Memorandum Circular.
On August 30, 2000, the NTC issued a Memorandum to
all cellular mobile telephone service (CMTS) operators which
contained measures to minimize if not totally eliminate the
incidence of stealing of cellular phone units. The Memorandum
directed CMTS operators to:
a. strictly comply with Section B(1) of MC 13-6-2000
requiring the presentation and verification of the

identity and addresses of prepaid SIM card

customers;
b. require all your respective prepaid SIM cards
dealers to comply with Section B(1) of MC 13-62000;
c. deny acceptance to your respective networks
prepaid and/or postpaid customers using stolen
cellphone units or cellphone units registered to
somebody other than the applicant when
properly informed of all information relative to
the stolen cellphone units;
d. share all necessary information of stolen
cellphone units to all other CMTS operators in
order to prevent the use of stolen cellphone
units; and
e. require all your existing prepaid SIM card
customers to register and present valid
[3]
identification cards.
This was followed by another Memorandum dated
October 6, 2000 addressed to all public telecommunications
entities, which reads:
This is to remind you that the validity of all prepaid
cards sold on 07 October 2000 and beyond shall be
valid for at least two (2) years from date of first use
pursuant to MC 13-6-2000.
In addition, all CMTS operators are reminded that all
SIM packs used by subscribers of prepaid cards sold on
07 October 2000 and beyond shall be valid for at least
two (2) years from date of first use.Also, the billing unit
shall be on a six (6) seconds pulse effective 07 October
2000.
For strict compliance.

[4]

On October 20, 2000, petitioners Isla Communications

Co., Inc. and Pilipino Telephone Corporation filed against the
National Telecommunications Commission, Commissioner
Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali
and Deputy Commissioner Nestor C. Dacanay, an action for
declaration of nullity of NTC Memorandum Circular No. 13-62000 (the Billing Circular) and the NTC Memorandum dated
October 6, 2000, with prayer for the issuance of a writ of
preliminary injunction and temporary restraining order. The
complaint was docketed as Civil Case No. Q-00-42221 at the
[5]
Regional Trial Court of Quezon City, Branch 77.
Petitioners Islacom and Piltel alleged, inter alia, that the
NTC has no jurisdiction to regulate the sale of consumer goods
such as the prepaid call cards since such jurisdiction belongs to
the Department of Trade and Industry under the Consumer Act
of the Philippines; that the Billing Circular is oppressive,
confiscatory and violative of the constitutional prohibition
against deprivation of property without due process of law;
that the Circular will result in the impairment of the viability of

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the prepaid cellular service by unduly prolonging the validity

and expiration of the prepaid SIM and call cards; and that the
requirements of identification of prepaid card buyers and call
balance announcement are unreasonable. Hence, they prayed
that the Billing Circular be declared null and void ab initio.
Soon thereafter, petitioners Globe Telecom, Inc and Smart
Communications, Inc. filed a joint Motion for Leave to
[6]
Intervene and to Admit Complaint-in-Intervention. This was
granted by the trial court.
On October 27, 2000, the trial court issued a temporary
restraining order enjoining the NTC from implementing
Memorandum Circular No. 13-6-2000 and the Memorandum
[7]
dated October 6, 2000.
In the meantime, respondent NTC and its co-defendants
filed a motion to dismiss the case on the ground of petitioners
failure to exhaust administrative remedies.
Subsequently, after hearing petitioners application for
preliminary injunction as well as respondents motion to
dismiss, the trial court issued on November 20, 2000 an Order,
the dispositive portion of which reads:
WHEREFORE, premises considered, the defendants motion to
dismiss is hereby denied for lack of merit. The plaintiffs
application for the issuance of a writ of preliminary injunction is
hereby granted.Accordingly, the defendants are hereby
enjoined from implementing NTC Memorandum Circular 13-62000 and the NTC Memorandum, dated October 6, 2000,
pending the issuance and finality of the decision in this
case. The plaintiffs and intervenors are, however, required to
file a bond in the sum of FIVE HUNDRED THOUSAND PESOS
(P500,000.00), Philippine currency.
SO ORDERED.

[8]

Defendants filed a motion for reconsideration, which was

[9]
denied in an Order dated February 1, 2001.
Respondent NTC thus filed a special civil action for
certiorari and prohibition with the Court of Appeals, which was
docketed as CA-G.R. SP. No. 64274. On October 9, 2001, a
decision was rendered, the decretal portion of which reads:
WHEREFORE, premises considered, the instant petition for
certiorari and prohibition is GRANTED, in that, the order of the
court a quo denying the petitioners motion to dismiss as well
as the order of the court a quo granting the private
respondents prayer for a writ of preliminary injunction, and the
writ of preliminary injunction issued thereby, are hereby
ANNULLED and SET ASIDE. The private respondents complaint
and complaint-in-intervention below are hereby DISMISSED,
without prejudice to the referral of the private respondents
grievances and disputes on the assailed issuances of the NTC
with the said agency.
SO ORDERED.

[10]

Petitioners motions for reconsideration were denied in a

[11]
Resolution dated January 10, 2002 for lack of merit.
Hence, the instant petition for review filed by Smart and
Piltel, which was docketed as G.R. No. 151908, anchored on the
following grounds:
A.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT THE NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC) AND
NOT THE REGULAR COURTS HAS JURISDICTION
OVER THE CASE.
B.
THE HONORABLE COURT OF APPEALS ALSO
GRAVELY ERRED IN HOLDING THAT THE PRIVATE
RESPONDENTS FAILED TO EXHAUST AN AVAILABLE
ADMINISTRATIVE REMEDY.
C.
THE HONORABLE COURT OF APPEALS ERRED IN
NOT HOLDING THAT THE BILLING CIRCULAR ISSUED
BY THE RESPONDENT NTC IS UNCONSTITUTIONAL
AND CONTRARY TO LAW AND PUBLIC POLICY.
D.
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PRIVATE RESPONDENTS FAILED
TO SHOW THEIR CLEAR POSITIVE RIGHT TO
WARRANT THE ISSUANCE OF A WRIT OF
[12]
PRELIMINARY INJUNCTION.
Likewise, Globe and Islacom filed a petition for review,
docketed as G.R. No. 152063, assigning the following errors:
1. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE THE DOCTRINES OF
PRIMARY JURISDICTION AND EXHAUSTION OF
ADMINISTRATIVE REMEDIES DO NOT APPLY
SINCE THE INSTANT CASE IS FOR LEGAL
NULLIFICATION
(BECAUSE
OF
LEGAL
INFIRMITIES AND VIOLATIONS OF LAW) OF A
PURELY
ADMINISTRATIVE
REGULATION
PROMULGATED BY AN AGENCY IN THE
EXERCISE OF ITS RULE MAKING POWERS AND
INVOLVES ONLY QUESTIONS OF LAW.
2. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE THE DOCTRINE ON
EXHAUSTION OF ADMINISTRATIVE REMEDIES
DOES NOT APPLY WHEN THE QUESTIONS
RAISED ARE PURELY LEGAL QUESTIONS.
3. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE THE DOCTRINE OF
EXHAUSTION OF ADMINISTRATIVE REMEDIES
DOES NOT APPLY WHERE THE ADMINISTRATIVE
ACTION IS COMPLETE AND EFFECTIVE, WHEN
THERE IS NO OTHER REMEDY, AND THE

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PETITIONER STANDS TO SUFFER GRAVE AND

IRREPARABLE INJURY.
4. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE PETITIONERS IN FACT
EXHAUSTED ALL ADMINISTRATIVE REMEDIES
AVAILABLE TO THEM.
5. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED IN ISSUING ITS QUESTIONED
RULINGS IN THIS CASE BECAUSE GLOBE AND
ISLA HAVE A CLEAR RIGHT TO AN
[13]
INJUNCTION.
The two petitions were consolidated in a Resolution
[14]
dated February 17, 2003.
On March 24, 2003, the petitions were given due course
and the parties were required to submit their respective
[15]
memoranda.
We find merit in the petitions.
Administrative agencies possess quasi-legislative or rulemaking powers and quasi-judicial or administrative
adjudicatory powers. Quasi-legislative or rule-making power is
the power to make rules and regulations which results in
delegated legislation that is within the confines of the granting
statute and the doctrine of non-delegability and separability of
[16]
powers.
The rules and regulations that administrative agencies
promulgate, which are the product of a delegated legislative
power to create new and additional legal provisions that have
the effect of law, should be within the scope of the statutory
authority granted by the legislature to the administrative
agency. It is required that the regulation be germane to the
objects and purposes of the law, and be not in contradiction to,
[17]
but in conformity with, the standards prescribed by law. They
must conform to and be consistent with the provisions of the
enabling statute in order for such rule or regulation to be
valid. Constitutional and statutory provisions control with
respect to what rules and regulations may be promulgated by
an administrative body, as well as with respect to what fields
are subject to regulation by it. It may not make rules and
regulations which are inconsistent with the provisions of the
Constitution or a statute, particularly the statute it is
administering or which created it, or which are in derogation
of, or defeat, the purpose of a statute. In case of conflict
between a statute and an administrative order, the former must
[18]
prevail.
Not to be confused with the quasi-legislative or rulemaking power of an administrative agency is its quasi-judicial
or administrative adjudicatory power. This is the power to hear
and determine questions of fact to which the legislative policy
is to apply and to decide in accordance with the standards laid
down by the law itself in enforcing and administering the same
law.The administrative body exercises its quasi-judicial power
when it performs in a judicial manner an act which is essentially
of an executive or administrative nature, where the power to
act in such manner is incidental to or reasonably necessary for
the performance of the executive or administrative duty

entrusted to it. In carrying out their quasi-judicial functions, the

administrative officers or bodies are required to investigate
facts or ascertain the existence of facts, hold hearings, weigh
evidence, and draw conclusions from them as basis for their
[19]
official action and exercise of discretion in a judicial nature.
In questioning the validity or constitutionality of a rule or
regulation issued by an administrative agency, a party need not
exhaust administrative remedies before going to court. This
principle applies only where the act of the administrative
agency concerned was performed pursuant to its quasi-judicial
function, and not when the assailed act pertained to its rulemaking or quasi-legislative power. In Association of Philippine
[20]
Coconut Dessicators v. Philippine Coconut Authority, it was
held:
The rule of requiring exhaustion of administrative remedies
before a party may seek judicial review, so strenuously urged
by the Solicitor General on behalf of respondent, has obviously
no application here.The resolution in question was issued by
the PCA in the exercise of its rule- making or legislative
power. However, only judicial review of decisions of
administrative agencies made in the exercise of their quasijudicial function is subject to the exhaustion doctrine.
Even assuming arguendo that the principle of exhaustion
of administrative remedies apply in this case, the records reveal
that
petitioners
sufficiently
complied
with
this
requirement.Even during the drafting and deliberation stages
leading to the issuance of Memorandum Circular No. 13-62000, petitioners were able to register their protests to the
proposed billing guidelines. They submitted their respective
position papers setting forth their objections and submitting
[21]
proposed schemes for the billing circular. After the same was
issued, petitioners wrote successive letters dated July 3,
[22]
[23]
2000 and July 5, 2000, asking for the suspension and
reconsideration of the so-called Billing Circular. These letters
were not acted upon until October 6, 2000, when respondent
NTC issued the second assailed Memorandum implementing
certain provisions of the Billing Circular. This was taken by
petitioners as a clear denial of the requests contained in their
previous letters, thus prompting them to seek judicial relief.
In like manner, the doctrine of primary jurisdiction applies
only where the administrative agency exercises its quasijudicial or adjudicatory function. Thus, in cases involving
specialized disputes, the practice has been to refer the same to
an administrative agency of special competence pursuant to
the doctrine of primary jurisdiction. The courts will not
determine a controversy involving a question which is within
the jurisdiction of the administrative tribunal prior to the
resolution of that question by the administrative tribunal,
where the question demands the exercise of sound
administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to
determine technical and intricate matters of fact, and a
uniformity of ruling is essential to comply with the premises of
the regulatory statute administered. The objective of the
doctrine of primary jurisdiction is to guide a court in
determining whether it should refrain from exercising its

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jurisdiction until after an administrative agency has determined

some question or some aspect of some question arising in the
proceeding before the court. It applies where the claim is
originally cognizable in the courts and comes into play
whenever enforcement of the claim requires the resolution of
issues which, under a regulatory scheme, has been placed
within the special competence of an administrative body; in
such case, the judicial process is suspended pending referral of
[24]
such issues to the administrative body for its view.
However, where what is assailed is the validity or
constitutionality of a rule or regulation issued by the
administrative agency in the performance of its quasilegislative function, the regular courts have jurisdiction to pass
upon the same. The determination of whether a specific rule or
set of rules issued by an administrative agency contravenes the
law or the constitution is within the jurisdiction of the regular
courts. Indeed, the Constitution vests the power of judicial
review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction,
ordinance, or regulation in the courts, including the regional
[25]
trial courts. This is within the scope of judicial power, which
includes the authority of the courts to determine in an
appropriate action the validity of the acts of the political
[26]
departments. Judicial power includes the duty of the courts
of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any
[27]
branch or instrumentality of the Government.
In the case at bar, the issuance by the NTC of
Memorandum Circular No. 13-6-2000 and its Memorandum
dated October 6, 2000 was pursuant to its quasi-legislative or
rule-making power. As such, petitioners were justified in
invoking the judicial power of the Regional Trial Court to assail
the constitutionality and validity of the said issuances. In Drilon
[28]
v. Lim, it was held:
We stress at the outset that the lower court had jurisdiction to
consider the constitutionality of Section 187, this authority
being embraced in the general definition of the judicial power
to determine what are the valid and binding laws by the
criterion of their conformity to the fundamental
law. Specifically, B.P. 129 vests in the regional trial courts
jurisdiction over all civil cases in which the subject of the
litigation is incapable of pecuniary estimation, even as the
accused in a criminal action has the right to question in his
defense the constitutionality of a law he is charged with
violating and of the proceedings taken against him, particularly
as they contravene the Bill of Rights. Moreover, Article X,
Section 5(2), of the Constitution vests in the Supreme Court
appellate jurisdiction over final judgments and orders of lower
courts in all cases in which the constitutionality or validity of
any treaty, international or executive agreement, law,
presidential decree, proclamation, order, instruction, ordinance,
[29]
or regulation is in question.
In their complaint before the Regional Trial Court,
petitioners averred that the Circular contravened Civil Code

provisions on sales and violated the constitutional prohibition

against the deprivation of property without due process of
law. These are within the competence of the trial
judge. Contrary to the finding of the Court of Appeals, the
issues raised in the complaint do not entail highly technical
matters. Rather, what is required of the judge who will resolve
this issue is a basic familiarity with the workings of the cellular
telephone service, including prepaid SIM and call cards and this
is judicially known to be within the knowledge of a good
percentage of our population and expertise in fundamental
principles of civil law and the Constitution.
Hence, the Regional Trial Court has jurisdiction to hear
and decide Civil Case No. Q-00-42221. The Court of Appeals
erred in setting aside the orders of the trial court and in
dismissing the case.
WHEREFORE, in view of the foregoing, the consolidated
petitions are GRANTED. The decision of the Court of Appeals in
CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution
dated January 10, 2002 are REVERSED and SET ASIDE. The
Order dated November 20, 2000 of the Regional Trial Court of
Quezon City, Branch 77, in Civil Case No. Q-00-42221 is
REINSTATED. This case is REMANDED to the court a quo for
continuation of the proceedings.
SO ORDERED.
[G.R. No. 156109. November 18, 2004]
KHRISTINE REA M. REGINO, Assisted and Represented by
ARMANDO REGINO, petitioner, vs. PANGASINAN
COLLEGES OF SCIENCE AND TECHNOLOGY,
RACHELLE
A.
GAMUROT
and
ELISSA
BALADAD, respondents.
DECISION
PANGANIBAN, J.:
Upon enrolment, students and their school enter upon a
reciprocal contract. The students agree to abide by the
standards of academic performance and codes of conduct,
issued usually in the form of manuals that are distributed to
the enrollees at the start of the school term. Further, the school
informs them of the itemized fees they are expected to pay.
Consequently, it cannot, after the enrolment of a student, vary
the terms of the contract. It cannot require fees other than
those it specified upon enrolment.

The Case
Before the Court is a Petition for Review under Rule
[1]
[2]
45, seeking to nullify the July 12, 2002 and the November
[3]
22, 2002 Orders of the Regional Trial Court (RTC) of Urdaneta
City, Pangasinan (Branch 48) in Civil Case No. U-7541. The
decretal portion of the first assailed Order reads:

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WHEREFORE, the Court GRANTS

the instant motion to dismiss for lack of
[4]
cause of action.
The second challenged Order denied petitioners Motion
for Reconsideration.

unnecessary, because her action was not administrative in

nature, but one purely for damages arising from respondents
breach of the laws on human relations. As such, jurisdiction lay
with the courts.
On July 12, 2002, the RTC dismissed the Complaint for
lack of cause of action.

The Facts
Ruling of the Regional Trial Court
Petitioner Khristine Rea M. Regino was a first year
computer science student at Respondent Pangasinan Colleges
of Science and Technology (PCST). Reared in a poor family,
Regino went to college mainly through the financial support of
her relatives. During the second semester of school year 20012002, she enrolled in logic and statistics subjects under
Respondents Rachelle A. Gamurot and Elissa Baladad,
respectively, as teachers.
In February 2002, PCST held a fund raising campaign
dubbed the Rave Party and Dance Revolution, the proceeds of
which were to go to the construction of the schools tennis and
volleyball courts. Each student was required to pay for two
tickets at the price of P100 each. The project was allegedly
implemented by recompensing students who purchased tickets
with additional points in their test scores; those who refused to
pay were denied the opportunity to take the final examinations.
Financially strapped and prohibited by her religion from
attending dance parties and celebrations, Regino refused to
pay for the tickets. On March 14 and March 15, 2002, the
scheduled dates of the final examinations in logic and statistics,
her teachers -- Respondents Rachelle A. Gamurot and Elissa
Baladad -- allegedly disallowed her from taking the tests.
According to petitioner, Gamurot made her sit out her logic
class while her classmates were taking their examinations. The
next day, Baladad, after announcing to the entire class that she
was not permitting petitioner and another student to take their
statistics examinations for failing to pay for their tickets,
allegedly ejected them from the classroom. Petitioners pleas
ostensibly went unheeded by Gamurot and Baladad, who
unrelentingly defended their positions as compliance with
PCSTs policy.
On April 25, 2002, petitioner filed, as a pauper litigant, a
[5]
Complaint for damages against PCST, Gamurot and Baladad.
In her Complaint, she prayed for P500,000 as nominal
damages; P500,000 as moral damages; at least P1,000,000 as
exemplary damages; P250,000 as actual damages; plus the
costs of litigation and attorneys fees.
On May 30, 2002, respondents filed a Motion to
[6]
Dismiss on the ground of petitioners failure to exhaust
administrative remedies. According to respondents, the
question raised involved the determination of the wisdom of
an administrative policy of the PCST; hence, the case should
have been initiated before the proper administrative body, the
Commission of Higher Education (CHED).
In her Comment to respondents Motion, petitioner
argued that prior exhaustion of administrative remedies was

In granting respondents Motion to Dismiss, the trial court

noted that the instant controversy involved a higher institution
of learning, two of its faculty members and one of its students.
It added that Section 54 of the Education Act of 1982 vested in
the Commission on Higher Education (CHED) the supervision
and regulation of tertiary schools. Thus, it ruled that the CHED,
[7]
not the courts, had jurisdiction over the controversy.
In its dispositive portion, the assailed Order dismissed the
Complaint for lack of cause of action without, however,
explaining this ground.
Aggrieved, petitioner filed the present Petition on pure
[8]
questions of law.

Issues
In her Memorandum, petitioner raises the following issues
for our consideration:
Whether or not the principle of exhaustion of administrative
remedies applies in a civil action exclusively for damages based
on violation of the human relation provisions of the Civil Code,
filed by a student against her former school.
Whether or not there is a need for prior declaration of
invalidity of a certain school administrative policy by the
Commission on Higher Education (CHED) before a former
student can successfully maintain an action exclusively for
damages in regular courts.
Whether or not the Commission on Higher Education (CHED)
has exclusive original jurisdiction over actions for damages
based upon violation of the Civil Code provisions on human
[9]
relations filed by a student against the school.
All of the foregoing point to one issue -- whether the
doctrine of exhaustion of administrative remedies is applicable.
The Court, however, sees a second issue which, though not
expressly raised by petitioner, was impliedly contained in her
Petition: whether the Complaint stated sufficient cause(s) of
action.

The Courts Ruling

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The Petition is meritorious.

First Issue:
Exhaustion of Administrative Remedies
Respondents anchored their Motion to Dismiss on
petitioners alleged failure to exhaust administrative remedies
before resorting to the RTC. According to them, the
determination of the controversy hinge on the validity, the
wisdom and the propriety of PCSTs academic policy. Thus, the
Complaint should have been lodged in the CHED, the
administrative body tasked under Republic Act No. 7722 to
implement the state policy to protect, foster and promote the
right of all citizens to affordable quality education at all levels
and to take appropriate steps to ensure that education is
[10]
accessible to all.
Petitioner counters that the doctrine finds no relevance to
the present case since she is praying for damages, a remedy
beyond the domain of the CHED and well within the
[11]
jurisdiction of the courts.
Petitioner is correct. First, the doctrine of exhaustion of
administrative remedies has no bearing on the present case.
[12]
In Factoran Jr. v. CA, the Court had occasion to elucidate on
the rationale behind this doctrine:
The doctrine of exhaustion of
administrative remedies is basic. Courts, for
reasons of law, comity, and convenience,
should not entertain suits unless the
available administrative remedies have first
been resorted to and the proper authorities
have been given the appropriate opportunity
to act and correct their alleged errors, if any,
committed in the administrative forum. x x
[13]
x.
Petitioner is not asking for the reversal of the policies of
PCST. Neither is she demanding it to allow her to take her final
examinations; she was already enrolled in another educational
institution. A reversal of the acts complained of would not
adequately redress her grievances; under the circumstances,
the consequences of respondents acts could no longer be
undone or rectified.
Second, exhaustion of administrative remedies is
applicable when there is competence on the part of the
administrative body to act upon the matter complained
[14]
of. Administrative agencies are not courts; they are neither
part of the judicial system, nor are they deemed judicial
[15]
tribunals. Specifically, the CHED does not have the power to
[16]
award damages. Hence, petitioner could not have
commenced her case before the Commission.
Third, the exhaustion doctrine admits of exceptions, one
of which arises when the issue is purely legal and well within
[17]
the jurisdiction of the trial court. Petitioners action for
damages inevitably calls for the application and the

interpretation of the Civil Code, a function that falls within the

[18]
jurisdiction of the courts.

Second Issue:
Cause of Action

Sufficient Causes of Action Stated

in the Allegations in the Complaint
As a rule, every complaint must sufficiently allege a cause
[19]
of action; failure to do so warrants its dismissal. A complaint
is said to assert a sufficient cause of action if, admitting what
appears solely on its face to be correct, the plaintiff would be
entitled to the relief prayed for. Assuming the facts that are
alleged to be true, the court should be able to render a valid
[20]
judgment in accordance with the prayer in the complaint.
A motion to dismiss based on lack of cause of action
hypothetically admits the truth of the alleged facts. In their
Motion to Dismiss, respondents did not dispute any of
petitioners allegations, and they admitted that x x x the crux of
plaintiffs cause of action is the determination of whether or not
the assessment of P100 per ticket is excessive or
[21]
oppressive. They thereby premised their prayer for dismissal
on the Complaints alleged failure to state a cause of action.
Thus, a reexamination of the Complaint is in order.
The Complaint contains the following factual allegations:
10. In the second week of February 2002, defendant
Rachelle A. Gamurot, in connivance
with PCST, forced plaintiff and her
classmates to buy or take two tickets
each, x x x;
11. Plaintiff and many of her classmates objected to
the forced distribution and selling of
tickets to them but the said defendant
warned them that if they refused [to]
take or pay the price of the two tickets
they would not be allowed at all to take
the final examinations;
12. As if to add insult to injury, defendant Rachelle
A. Gamurot bribed students with
additional fifty points or so in their test
score in her subject just to unjustly
influence and compel them into taking
the tickets;
13. Despite the students refusal, they were forced to
take the tickets because [of] defendant
Rachelle A. Gamurots coercion and act
of intimidation, but still many of them
including the plaintiff did not attend
the dance party imposed upon them by
defendants PCST and Rachelle A.
Gamurot;

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14. Plaintiff was not able to pay the price of her own
two tickets because aside form the fact
that she could not afford to pay them it
is also against her religious practice as
a member of a certain religious
congregation to be attending dance
parties and celebrations;
15. On March 14, 2002, before defendant Rachelle A.
Gamurot gave her class its final
examination in the subject Logic she
warned that students who had not paid
the tickets would not be allowed to
participate in the examination, for
which threat and intimidation many
students were eventually forced to
make payments:
16. Because plaintiff could not afford to pay,
defendant
Rachelle
A.
Gamurot
inhumanly made plaintiff sit out the
class but the defendant did not allow
her to take her final examination in
Logic;
17. On March 15, 2002 just before the giving of the
final examination in the subject
Statistics, defendant Elissa Baladad, in
connivance with defendants Rachelle A.
Gamurot and PCST, announced in the
classroom that she was not allowing
plaintiff and another student to take
the examination for their failure and
refusal to pay the price of the tickets,
and thenceforth she ejected plaintiff
and the other student from the
classroom;
18. Plaintiff pleaded for a chance to take the
examination but all defendants could
say was that the prohibition to give the
examinations to non-paying students
was an administrative decision;
19. Plaintiff has already paid her tuition fees and
other obligations in the school;
20. That the above-cited incident was not a first
since PCST also did another forced
distribution of tickets to its students in
the first semester of school year 2001[22]
2002; x x x
The foregoing allegations show two causes of action; first,
breach of contract; and second, liability for tort.

Reciprocity of the
School-Student Contract

[23]

In Alcuaz v. PSBA, the Court characterized the

relationship between the school and the student as a contract,
in which a student, once admitted by the school is considered
[24]
enrolled for one semester. Two years later, in Non v. Dames
[25]
II, the Court modified the termination of contract theory
in Alcuaz by holding that the contractual relationship between
the school and the student is not only semestral in duration,
but for the entire period the latter are expected to
[26]
complete it. Except for the variance in the period during
which the contractual relationship is considered to subsist,
both Alcuaz and Non were unanimous in characterizing the
school-student relationship as contractual in nature.
The school-student relationship is also reciprocal. Thus, it
has consequences appurtenant to and inherent in all contracts
of such kind -- it gives rise to bilateral or reciprocal rights and
obligations. The school undertakes to provide students with
education sufficient to enable them to pursue higher education
or a profession. On the other hand, the students agree to abide
by the academic requirements of the school and to observe its
[27]
rules and regulations.
The terms of the school-student contract are defined at
the moment of its inception -- upon enrolment of the student.
Standards of academic performance and the code of behavior
and discipline are usually set forth in manuals distributed to
new students at the start of every school year. Further, schools
inform prospective enrollees the amount of fees and the terms
of payment.
In practice, students are normally required to make a
down payment upon enrollment, with the balance to be paid
before every preliminary, midterm and final examination. Their
failure to pay their financial obligation is regarded as a valid
ground for the school to deny them the opportunity to take
these examinations.
The foregoing practice does not merely ensure
compliance with financial obligations; it also underlines the
importance of major examinations. Failure to take a major
examination is usually fatal to the students promotion to the
next grade or to graduation. Examination results form a
significant basis for their final grades. These tests are usually a
primary and an indispensable requisite to their elevation to the
next educational level and, ultimately, to their completion of a
course.
Education is not a measurable commodity. It is not
possible to determine who is better educated than another.
Nevertheless, a students grades are an accepted approximation
of what would otherwise be an intangible product of countless
hours of study. The importance of grades cannot be
discounted in a setting where education is generally the gate
pass to employment opportunities and better life; such grades
are often the means by which a prospective employer
measures whether a job applicant has acquired the necessary
tools or skills for a particular profession or trade.
Thus, students expect that upon their payment of tuition
fees, satisfaction of the set academic standards, completion of
academic requirements and observance of school rules and

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regulations, the school would reward them by recognizing their

completion of the course enrolled in.

and regulations, students and pupils in all

schools shall enjoy the following rights:

The obligation on the part of the school has been

[28]
established in Magtibay v. Garcia, Licup v. University of San
[29]
[30]
Carlos and Ateneo de Manila University v. Garcia, in which
the Court held that, barring any violation of the rules on the
part of the students, an institution of higher learning has
a contractual obligation to afford its students a fair
opportunity to complete the course they seek to pursue.
We recognize the need of a school to fund its facilities
and to meet astronomical operating costs; this is a reality in
[31]
running it. Crystal v. Cebu International School upheld the
imposition by respondent school of a land purchase deposit in
the amount of P50,000 per student to be used for the purchase
of a piece of land and for the construction of new buildings
and other facilities x x x which the school would transfer [to]
and occupy after the expiration of its lease contract over its
present site.
The amount was refundable after the student graduated
or left the school. After noting that the imposition of the fee
was made only after prior consultation and approval by the
parents of the students, the Court held that the school
committed no actionable wrong in refusing to admit the
children of the petitioners therein for their failure to pay the
land purchase deposit and the 2.5 percent monthly surcharge
thereon.
In the present case, PCST imposed the assailed revenueraising measure belatedly, in the middle of the semester. It
exacted the dance party fee as a condition for the students
taking the final examinations, and ultimately for its recognition
of their ability to finish a course. The fee, however, was not part
of the school-student contract entered into at the start of the
school year. Hence, it could not be unilaterally imposed to the
prejudice of the enrollees.
Such contract is by no means an ordinary one. In Non, we
stressed that the school-student contract is imbued with public
interest, considering the high priority given by the Constitution
to education and the grant to the State of supervisory and
[32]
regulatory powers over all educational institutions. Sections
5 (1) and (3) of Article XIV of the 1987 Constitution provide:
The State shall protect and
promote the right of all citizens to quality
education at all levels and shall take
appropriate steps to make such declaration
accessible to all.
Every student has a right to select
a profession or course of study, subject to
fair, reasonable and equitable admission
and academic requirements.
The same state policy resonates in Section 9(2) of BP 232,
otherwise known as the Education Act of 1982:
Section 9. Rights of Students in
School. In addition to other rights, and
subject to the limitations prescribed by law

xxxxxxxxx
(2) The right to
freely choose their
field of study subject
to existing curricula
and to continue their
course therein up to
graduation, except in
cases of academic
deficiency, or
violation of
disciplinary
regulations.
Liability for Tort
In her Complaint, petitioner also charged that private
respondents inhumanly punish students x x x by reason only of
their poverty, religious practice or lowly station in life, which
inculcated upon [petitioner] the feelings of guilt, disgrace and
[33]
unworthiness; as a result of such punishment, she was
allegedly unable to finish any of her subjects for the second
semester of that school year and had to lag behind in her
studies by a full year. The acts of respondents supposedly
caused her extreme humiliation, mental agony and
demoralization of unimaginable proportions in violation of
Articles 19, 21 and 26 of the Civil Code. These provisions of the
law state thus:
Article 19. Every person must, in the exercise of his rights and
in the performance of his duties, act with justice, give everyone
his due, and observe honesty and good faith.
Article 21. Any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs
or public policy shall compensate the latter for the damage.
Article 26. Every person shall respect the dignity, personality,
privacy and peace of mind of his neighbors and other persons.
The following and similar acts, though they may not constitute
a criminal offense, shall produce a cause of action for damages,
prevention and other relief:
(1) Prying into the privacy of anothers
residence;
(2) Meddling with or disturbing the
private life or family relations of
another;
(3) Intriguing to cause another to be
alienated from his friends;
(4) Vexing or humiliating another on
account of his beliefs, lowly station

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in life, place of birth, physical defect,

or other personal condition.
Generally, liability for tort arises only between parties not
otherwise bound by a contract. An academic institution,
however, may be held liable for tort even if it has an existing
contract with its students, since the act that violated the
contract may also be a tort. We ruled thus in PSBA vs.
[34]
CA, from which we quote:
x x x A perusal of Article 2176 [of the Civil Code]
shows that obligations arising from quasi-delicts or
tort, also known as extra-contractual obligations, arise
only between parties not otherwise bound by
contract, whether express or implied. However, this
impression has not prevented this Court from
determining the existence of a tort even when there
obtains a contract. In Air France v. Carrascoso(124 Phil.
722), the private respondent was awarded damages
for his unwarranted expulsion from a first-class seat
aboard the petitioner airline. It is noted, however, that
the Court referred to the petitioner-airlines liability as
one arising from tort, not one arising form a contract
of carriage. In effect, Air France is authority for the
view that liability from tort may exist even if there is a
contract, for the act that breaks the contract may be
also a tort. x x x This view was not all that
revolutionary, for even as early as 1918, this Court was
already of a similar mind. In Cangco v. Manila
Railroad(38 Phil. 780), Mr. Justice Fisher elucidated
thus: x x x. When such a contractual relation exists the
obligor may break the contract under such conditions
that the same act which constitutes a breach of the
contract would have constituted the source of an extracontractual obligation had no contract existed between
the parties.
Immediately what comes to mind is the chapter of the
Civil Code on Human Relations, particularly Article 21
[35]
x x x.

[39]

In Tangonan v. Pao, the Court upheld, in the name of

academic freedom, the right of the school to refuse
readmission of a nursing student who had been enrolled on
probation, and who had failed her nursing subjects. These
instances notwithstanding, the Court has emphasized that once
a school has, in the name of academic freedom, set its
standards, these should be meticulously observed and should
[40]
not be used to discriminate against certain students. After
accepting them upon enrollment, the school cannot renege on
its contractual obligation on grounds other than those made
known to, and accepted by, students at the start of the school
year.
In sum, the Court holds that the Complaint alleges
sufficient causes of action against respondents, and that it
should not have been summarily dismissed. Needless to say,
the Court is not holding respondents liable for the acts
complained of. That will have to be ruled upon in due course
by the court a quo.
WHEREFORE, the Petition is hereby GRANTED, and the
assailed Orders REVERSED. The trial court is DIRECTED to
reinstate the Complaint and, with all deliberate speed, to
continue the proceedings in Civil Case No. U-7541. No costs.
SO ORDERED.

CIVIL SERVICE COMMISSION,

Petitioner,

Present:

- versus -

DEPARTMENT OF BUDGET
AND MANAGEMENT,
Respondent.

Academic Freedom
In their Memorandum, respondents harp on their right to
academic freedom. We are not impressed. According to
present jurisprudence, academic freedom encompasses the
independence of an academic institution to determine for itself
(1) who may teach, (2) what may be taught, (3) how it shall
[36]
teach, and (4) who may be admitted to study. In Garcia v. the
[37]
Faculty Admission Committee, Loyola School of Theology, the
Court upheld the respondent therein when it denied a female
students admission to theological studies in a seminary for
prospective priests. The Court defined the freedom of an
academic institution thus: to decide for itself aims and
objectives and how best to attain them x x x free from outside
coercion or interference save possibly when overriding public
[38]
welfare calls for some restraint.

G.R. No. 158791

DAVIDE, JR., C.J.,

PUNO,
PANGANIBAN,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
TINGA,
CHICONAZARIO, and
GARCIA, JJ.
Promulgated:

July 22, 2005

_______________________
DECISION

CARPIO MORALES, J.:

The Civil Service Commission (petitioner) via the present
petition for mandamus seeks to compel the Department of
Budget and Management (respondent) to release the balance

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of its budget for fiscal year 2002. At the same time, it seeks a
determination by this Court of the extent of the constitutional
concept of fiscal autonomy.
By petitioners claim, the amount of P215,270,000.00 was
appropriated for its Central Office by the General
Appropriations Act (GAA) of 2002, while the total allocations
for the same Office, if all sources of funds are considered,
[1]
amount to P285,660,790.44. It complains, however, that the
total fund releases by respondent to its Central Office during
the fiscal year 2002 was only P279,853,398.14, thereby leaving
an unreleased balance of P5,807,392.30.

5. The Supreme Court may submit

to the Department of Budget and
Management reports of operation and
income, current plantilla of personnel, work
and financial plans and similar reports only
for recording purposes. The submission
thereof
concerning
funds
previously
released shall not
be
a
condition
precedent for subsequent fund releases.
(Emphasis and underscoring supplied)

To petitioner, this balance was intentionally withheld by

respondent on the basis of its no report, no release policy
whereby allocations for agencies are withheld pending their
submission of the documents mentioned in Sections 3.8 to 3.10
and Section 7.0 of National Budget Circular No. 478 on
[2]
Guidelines on the Release of the FY 2002 Funds, which
documents are:

Respondent proffers at any rate that the delay in releasing the

balance of petitioners budget was not on account of any failure
on petitioners part to submit the required reports; rather, it was
[4]
due to a shortfall in revenues.
The rule on exhaustion of administrative remedies invoked by
respondent applies only where there is an express legal
provision requiring such administrative step as a condition
[5]
precedent to taking action in court. As petitioner is not
mandated by any law to seek clarification from the Secretary of
Budget and Management prior to filing the present action, its
failure to do so does not call for the application of the rule.

1.
2.

3.
4.
5.
6.
7.
8.
9.
10.

Annual Cash Program (ACP)

Requests for the Release of Special Allotment
Release Order (SARO) and Notice of Cash
Allocation (NCA)
Summary List of Checks Issued and Cancelled
Statement of Allotment, Obligations and
Balances
Monthly Statement of Charges to Accounts
Payable
Quarterly Report of Actual Income
Quarterly Financial Report of Operations
Quarterly Physical Report of Operations
FY 2001 Preliminary and Final Trial Balance
Statement of Accounts Payable

As for the rule on hierarchy of courts, it is not absolute. A direct

invocation of this Court's original jurisdiction may be allowed
where there are special and important reasons therefor, clearly
[6]
and specifically set out in the petition. Petitioner justifies its
direct filing of the petition with this Court as the matter
involves the concept of fiscal autonomy granted to [it] as well
as other constitutional bodies, a legal question not heretofore
determined and which only the Honorable Supreme Court can
[7]
decide with authority and finality. To this Court, such
justification suffices for allowing the petition.
Now on the substantive issues.

Petitioner contends that the application of the no report, no

release policy upon independent constitutional bodies of which
it is one is a violation of the principle of fiscal autonomy and,
therefore, unconstitutional.
Respondent, at the outset, opposes the petition on procedural
grounds. It contends that first, petitioner did not exhaust
administrative remedies as it could have sought clarification
from respondents Secretary regarding the extent of fiscal
autonomy before resorting to this Court. Second, even
assuming that administrative remedies were exhausted, there
are no exceptional and compelling reasons to justify the direct
filing of the petition with this Court instead of the trial court,
thus violating the hierarchy of courts.
On the merits, respondent, glossing over the issue raised by
petitioner on the constitutionality of enforcing the no report,
no release policy, denies having strictly enforced the policy
upon offices vested with fiscal autonomy, it claiming that it has
applied by extension to these offices the Resolution of this
Court in A.M. No. 92-9-029-SC(Constitutional Mandate on
the Judiciarys Fiscal Autonomy) issued on June 3,
[3]
1993, particularly one of the guiding principles established
therein governing the budget of the Judiciary, to wit:

That the no report, no release policy may not be validly

enforced against offices vested with fiscal autonomy is not
disputed. Indeed, such policy cannot be enforced against
offices possessing fiscal autonomy without violating Article IX
(A), Section 5 of the Constitution which provides:
Sec. 5. The Commission shall enjoy fiscal
autonomy. Their approved appropriations
shall be automatically and regularly released.
[8]

In Province of Batangas v. Romulo, this Court, in construing

the phrase automatic release in Section 6, Article X of the
Constitution reading:
Section 6. Local government units shall have
a just share, as determined by law, in the
national taxes which shall be automatically
released to them,

held:

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Websters Third New International

Dictionary defines automatic as involuntary
either wholly or to a major extent so that any
activity of the will is largely negligible; of a
reflex nature; without volition; mechanical;
like or suggestive of an automaton. Further,
the word automatically is defined as in an
automatic manner: without thought or
conscious intention. Being automatic, thus,
connotes
something
mechanical,
spontaneous and perfunctory. As such the
LGUs are not required to perform any
act to receive the just share accruing to them
from the national coffers. x x x (Emphasis and
[9]
underscoring supplied)

By parity of construction, automatic release of approved annual

appropriations to petitioner, a constitutional commission which
is vested with fiscal autonomy, should thus be construed to
mean that no condition to fund releases to it may be imposed.
This conclusion is consistent with the above-cited June 3, 1993
Resolution of this Court which effectively prohibited the
enforcement of a no report, no release policy against the
Judiciary which has also been granted fiscal autonomy by the
[10]
Constitution.
Respecting respondents justification for the withholding of
funds from petitioner as due to a shortfall in revenues, the
same does not lie. In the first place, the alleged shortfall is
totally unsubstantiated. In the second place, even assuming
that there was indeed such a shortfall, that does not justify
non-compliance with the mandate of above-quoted Article IX
(A), Section 5 of the Constitution.
Asturias Sugar Central, Inc. v. Commissioner of Customs teaches
that [a]n interpretation should, if possible, be avoided under
which a statute or provision being construed is defeated, or as
otherwise expressed, nullified, destroyed, emasculated,
repealed, explained away, or rendered insignificant,
[11]
meaningless, inoperative, or nugatory.
If respondents theory were adopted, then the constitutional
mandate to automatically and regularly release approved
appropriations would be suspended every year, or even every
[12]
month that there is a shortfall in revenues, thereby
emasculating to a significant degree, if not rendering
insignificant altogether, such mandate.
Furthermore, the Constitution grants the enjoyment of fiscal
autonomy only to the Judiciary, the Constitutional
Commissions of which petitioner is one, and the Ombudsman.
To hold that petitioner may be subjected to withholding or
reduction of funds in the event of a revenue shortfall would, to
that extent, place petitioner and the other entities vested with
fiscal autonomy on equal footing with all others which are not
granted the same autonomy, thereby reducing to naught the
distinction established by the Constitution.
The agencies which the Constitution has vested with fiscal
autonomy should thus be given priority in the release of their

approved appropriations over all other agencies not similarly

vested when there is a revenue shortfall.
Significantly, the Year 2002 GAA itself distinguished between
two types of public institutions in the matter of fund releases.
With respect to government agencies in general, the
pertinent General Provisions of the GAA read as follows:
Sec. 62. Prohibition Against
Impoundment
of
Appropriations. No
appropriations authorized in this Act shall be
impounded
through
deduction
or
retention, unless in accordance with the
guidelines for the imposition and release
of reserves and the rules and regulations
for deduction, retention or deferral of
releases shall have been issued by the
DBM in coordination with the House
Committee on Appropriations and the
Senate
Committee
on
Finance.
Accordingly, all the funds appropriated for
the purposes, programs, projects and
activities authorized in this Act, except those
covered by Special Provision No. 1 of the
Unprogrammed
Fund shall be regularly and automatically r
eleased in accordance with the established
allotment period and system by the DBM
without any deduction, retention or
imposition of reserves. (Emphasis and
underscoring supplied)
Sec. 63. Unmanageable National
Government Budget Deficit. Retention or
reduction of appropriations authorized in
this Act shall be effected only in cases
where there is unmanageable national
government budget deficit.

Unmanageable
national
government budget deficit as used in this
Section shall be construed to mean that
the actual national government budget
deficit has exceeded the quarterly budget
deficit targets consistent with the full-year
target deficit of P130.0 billion as indicated in
the FY 2002 Budget of Expenditures and
Sources of Financing submitted by the
President to Congress pursuant to Section
22, Article VII of the Constitution or there are
clear economic indications of an impending
occurrence of such condition, as determined
by the Development Budget Coordinating
Committee and approved by the President.
(Emphasis and underscoring supplied)

In contrast, the immediately succeeding provision of the Year

2002 GAA, which specifically applied to offices vested with
fiscal autonomy, stated:

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Sec.
64.
Appropriations
of
Agencies
Vested
with
Fiscal
Autonomy. Any provision of law to the
contrary
notwithstanding,
the
appropriations authorized in this Act for the
Judiciary, Congress of the Philippines, the
Commission on Human Rights, the Office of
the
Ombudsman, the Civil Service
Commission, the Commission on Audit and
the Commission on Elections shall be
automatically and regularly released.
(Emphasis and underscoring supplied)

Clearly, while the retention or reduction of appropriations for

an office is generally allowed when there is an unmanageable
budget deficit, the Year 2002 GAA, in conformity with the
Constitution, excepted from such rule the appropriations for
entities vested with fiscal autonomy. Thus, even assuming that
there was a revenue shortfall as respondent claimed, it could
not withhold full release of petitioners funds without violating
not only the Constitution but also Section 64 of the General
Provisions of the Year 2002 GAA.
This Court is not unaware that its above-cited June 3, 1993
Resolution also states as a guiding principle on the
Constitutional Mandate on the Judiciarys Fiscal Autonomy that:
4. After approval by Congress, the
appropriations for the Judiciary shall be
automatically and regularly released subject
to availability of funds. (Underscoring
supplied)

This phrase subject to availability of funds does not, however,

contradict the present ruling that the funds of entities vested
with fiscal autonomy should be automatically and regularly
released, a shortfall in revenues notwithstanding. What is
contemplated in the said quoted phrase is a situation where
total revenue collections are so low that they are not sufficient
to cover the total appropriations for all entities vested with
fiscal autonomy. In such event, it would be practically
impossible to fully release the Judiciarys appropriations or any
of the entities also vested with fiscal autonomy for that matter,
without violating the right of such other entities to an
automatic release of their own appropriations. It is under that
situation that a relaxation of the constitutional mandate to
automatically and regularly release appropriations is allowed.
Considering that the budget for agencies enjoying fiscal
autonomy is only a small portion of the total national budget,
only in the most extreme circumstances will the total revenue
collections fall short of the requirements of such agencies. To
illustrate, in the Year 2002 GAA the budget for agencies vested
with fiscal autonomy amounted only to P14,548,620,000.00,
which is 2.53% of the total appropriations in the amount
[13]
of P575,123,728,000.00. In Year 2003 GAA, which was reenacted in 2004, the budget for the same agencies

was P13,807,932,000.00, which is 2.27% of the total

[14]
appropriations amounting to P609,614,730,000.00. And in
the Year 2005, the budget for the same agencies was
only P13,601,124,000.00, which is 2.28% of the total
[15]
appropriations amounting to P597,663,400,000.00.
Finally, petitioners claim that its budget may not be reduced by
Congress lower than that of the previous fiscal year, as is the
case of the Judiciary, must be rejected.
For with respect to the Judiciary, Art. VIII, Section 3 of the
Constitution explicitly provides:
Section 3. The Judiciary shall enjoy fiscal
autonomy. Appropriations for the Judiciary
may not be reduced by the legislature below
the amount appropriated for the previous
year and,
after
approval,
shall
be
automatically
and
regularly
[16]
released. (Emphasis and underscoring
supplied)

On the other hand, in the parallel provision granting fiscal

autonomy to Constitutional Commissions, a similar proscription
against the reduction of appropriations below the amount for
the previous year is clearly absent. Article IX (A), Section 5
merely states:
Section 5. The Commission shall enjoy fiscal
autonomy.
Their
approved
annual
appropriations shall be automatically and
regularly released.

The plain implication of the omission of the provision

proscribing such reduction of appropriations below that for the
previous year is that Congress is not prohibited from reducing
the appropriations of Constitutional Commissions below the
amount appropriated for them for the previous year.
WHEREFORE, the petition is, in light of all the foregoing
discussions, GRANTED. Respondents act of withholding the
subject funds from petitioner due to revenue shortfall is hereby
declared UNCONSTITUTIONAL.
Accordingly, respondent is directed to release to petitioner the
amount of Five Million Eight Hundred Seven Thousand, Three
hundred Ninety Two Pesos and Thirty Centavos (P5,807,392.30)
representing the unreleased balance of petitioners
appropriation for its Central Office by the General
Appropriations Act for FY 2002.
SO ORDERED.
[G.R. No. 115634. April 27, 2000]
FELIPE CALUB and RICARDO VALENCIA, DEPARTMENT of
ENVIRONMENT and NATURAL RESOURCES (DENR),
CATBALOGAN, SAMAR, petitioners, vs. COURT OF

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APPEALS, MANUELA T. BABALCON, and CONSTANCIO

ABUGANDA, respondents.
DECISION
QUISUMBING, J.:
.[1]

For review is the decision dated May 27, 1994, of the Court of
Appeals in CA-G.R. SP No. 29191, denying the petition filed by
herein petitioners for certiorari, prohibition and mandamus, in
order to annul the Order dated May 27, 1992, by the Regional
Trial Court of Catbalogan, Samar. Said Order had denied
petitioners (a) Motion to Dismiss the replevin case filed by
herein private respondents, as well as (b) petitioners Motion for
Reconsideration of the Order of said trial court dated April 24,
.[2]
1992, granting an application for a Writ of replevin. h Y
The pertinent facts of the case, borne by the records, are as
follows:
On January 28, 1992, the Forest Protection and Law
Enforcement Team of the Community Environment and Natural
Resources Office (CENRO) of the DENR apprehended two (2)
motor vehicles, described as follows:
"1. Motor Vehicle with Plate No. HAK-733
loaded with one thousand and twenty six
(1,026) board feet of illegally sourced lumber
valued at P8,544.75, being driven by one Pio
Gabon and owned by [a certain] Jose Vargas.
2. Motor Vehicle with Plate No. FCN-143
loaded with one thousand two hundred
twenty four and ninety seven (1,224.97)
board feet of illegally-sourced lumber valued
at P9,187.27, being driven by one Constancio
Abuganda and owned by [a certain] Manuela
.[3]
Babalcon. "
Constancio Abuganda and Pio Gabon, the drivers of the
vehicles, failed to present proper documents and/or licenses.
Thus, the apprehending team seized and impounded the
vehicles and its load of lumber at the DENR-PENR (Department
of Environment and Natural Resources-Provincial Environment
.[4]
and Natural Resources) Office in Catbalogan. Seizure receipts
were issued but the drivers refused to accept the
.[5]
receipts. Felipe Calub, Provincial Environment and Natural
Resources Officer, then filed before the Provincial Prosecutors
Office in Samar, a criminal complaint against Abuganda, in
Criminal Case No. 3795, for violation of Section 68 [78),
Presidential Decree 705 as amended by Executive Order 277,
[6]
otherwise known as the Revised Forestry Code. Mis sc
On January 31, 1992, the impounded vehicles were forcibly
taken by Gabon and Abuganda from the custody of the DENR,
prompting DENR Officer Calub this time to file a criminal
complaint for grave coercion against Gabon and Abuganda.

The complaint was, however, dismissed by the Public

.[7]
Prosecutor.
On February 11, 1992, one of the two vehicles, with plate
number FCN 143, was again apprehended by a composite
team of DENR-CENR in Catbalogan and Philippine Army
elements of the 802nd Infantry Brigade at Barangay Buray,
Paranas, Samar. It was again loaded with forest products with
an equivalent volume of 1,005.47 board feet, valued at
P10,054.70. Calub duly filed a criminal complaint against
Constancio Abuganda, a certain Abegonia, and several John
Does, in Criminal Case No. 3625, for violation of Section 68
[78], Presidential Decree 705 as amended by Executive Order
.[8]
277, otherwise known as the Revised Forestry Code.
In Criminal Cases Nos. 3795 and 3625, however, Abegonia and
Abuganda were acquitted on the ground of reasonable doubt.
But note the trial court ordered that a copy of the decision be
furnished the Secretary of Justice, in order that the necessary
criminal action may be filed against Noe Pagarao and all other
persons responsible for violation of the Revised Forestry Code.
For it appeared that it was Pagarao who chartered the subject
.[9]
vehicle and ordered that cut timber be loaded on it.
Subsequently, herein private respondents Manuela Babalcon,
the vehicle owner, and Constancio Abuganda, the driver, filed a
complaint for the recovery of possession of the two (2)
impounded vehicles with an application for replevin against
herein petitioners before the RTC of Catbalogan. The trial court
granted the application for replevin and issued the
corresponding writ in an Order dated April 24,
.[10]
1992.
Petitioners filed a motion to dismiss which was denied
[11]
by the trial court.
Thus, on June 15, 1992, petitioners filed with the Supreme
Court the present Petition for Certiorari, Prohibition
and Mandamus with application for Preliminary Injunction
and/or a Temporary Restraining Order. The Court issued a TRO,
enjoining respondent RTC judge from conducting further
proceedings in the civil case for replevin; and enjoining private
respondents from taking or attempting to take the motor
vehicles and forest products seized from the custody of the
petitioners. The Court further instructed the petitioners to see
to it that the motor vehicles and other forest products seized
are kept in a secured place and protected from deterioration,
said property being in custodia legis and subject to the direct
.[12]
order of the Supreme Court. In a Resolution issued on
September 28, 1992, the Court referred said petition to
.[13]
respondent appellate court for appropriate disposition.
On May 27, 1994, the Court of Appeals denied said petition for
lack of merit. It ruled that the mere seizure of a motor vehicle
pursuant to the authority granted by Section 68 [78] of P.D. No.
705 as amended by E.O. No. 277 does not automatically place
said conveyance in custodia legis. According to the appellate
court, such authority of the Department Head of the DENR or
his duly authorized representative to order the confiscation
and disposition of illegally obtained forest products and the
conveyance used for that purpose is not absolute and

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unqualified. It is subject to pertinent laws, regulations, or

policies on that matter, added the appellate court. The DENR
Administrative Order No. 59, series of 1990, is one such
regulation, the appellate court said. For it prescribes the
guidelines in the confiscation, forfeiture and disposition of
conveyances used in the commission of offenses penalized
under Section 68 [78] of P.D. No. 705 as amended by E.O. No.
.[14]
277.
Additionally, respondent Court of Appeals noted that the
petitioners failed to observe the procedure outlined in DENR
Administrative Order No. 59, series of 1990. They were unable
to submit a report of the seizure to the DENR Secretary, to give
a written notice to the owner of the vehicle, and to render a
report of their findings and recommendations to the Secretary.
Moreover, petitioners failure to comply with the procedure laid
down by DENR Administrative Order No. 59, series of 1990, was
confirmed by the admission of petitioners counsel that no
confiscation order has been issued prior to the seizure of the
vehicle and the filing of the replevin suit. Therefore, in failing to
follow such procedure, according to the appellate court, the
.[15]
subject vehicles could not be considered in custodia legis.
Respondent Court of Appeals also found no merit in
petitioners claim that private respondents complaint for
replevin is a suit against the State. Accordingly, petitioners
could not shield themselves under the principle of state
immunity as the property sought to be recovered in the instant
suit had not yet been lawfully adjudged forfeited in favor of the
government. Moreover, according to respondent appellate
court, there could be no pecuniary liability nor loss of property
that could ensue against the government. It reasoned that a
suit against a public officer who acted illegally or beyond the
scope of his authority could not be considered a suit against
the State; and that a public officer might be sued for illegally
seizing or withholding the possession of the property of
.[16]
another.
Respondent court brushed aside other grounds raised by
petitioners based on the claim that the subject vehicles were
validly seized and held in custody because they were
.[17]
contradicted by its own findings.
Their petition was found
[18]
without merit. Rtc spped
Now, before us, the petitioners assign the following errors:

.[19]

(1) THE COURT OF APPEALS ERRED IN

HOLDING THAT MERE SEIZURE OF A
CONVEYANCE PURSUANT TO SECTION 68-A
[78-A] OF P.D. NO. 705 AS AMENDED BY
EXECUTIVE ORDER 277 DOES NOT PLACE
SAID CONVEYANCE IN CUSTODIA LEGIS;
(2) THE COURT OF APPEALS ERRED IN NOT
HOLDING THAT THE OPERATIVE ACT GIVING
RISE FOR THE SUBJECT CONVEYANCE TO BE
IN CUSTODIA LEGIS IS ITS LAWFUL SEIZURE
BY THE DENR PURSUANT TO SECTION 68-A

[78-A] OF P.D. NO. 705, AS AMENDED BY

E.O. NO. 277; AND
(3) THE COURT OF APPEALS ERRED IN
HOLDING THAT THE COMPLAINT FOR
REPLEVIN AGAINST THE PETITIONERS IS
NOT A SUIT AGAINST THE STATE.
In brief, the pertinent issues for our consideration are:
(1) Whether or not the DENR-seized motor vehicle, with plate
number FCN 143, is in custodia legis.
(2) Whether or not the complaint for the recovery of
possession of impounded vehicles, with an application for
replevin, is a suit against the State.
We will now resolve both issues.
The Revised Forestry Code authorizes the DENR to seize all
conveyances used in the commission of an offense in violation
of Section 78. Section 78 states:
Sec. 78. Cutting, Gathering, and or Collecting
Timber, or Other Forest Products without
License. Any person who shall cut, gather,
collect, remove timber or other forest
products from any forestland, or timber from
alienable or disposable public land, or from
private land, without any authority, or
possess timber or other forest products
without the legal documents as required
under existing forest laws and regulations,
shall be punished with the penalties imposed
under Articles 309 and 310 of the Revised
Penal Codeslx mis
The Court shall further order the confiscation
in favor of the government of the timber or
any forest products cut, gathered, collected,
removed, or possessed, as well as the
machinery, equipment, implements and tools
illegally used in the area where the timber or
forest products are found.
This provision makes mere possession of timber or other forest
products without the accompanying legal documents unlawful
and punishable with the penalties imposed for the crime of
theft, as prescribed in Articles 309-310 of the Revised Penal
Code. In the present case, the subject vehicles were loaded
with forest products at the time of the seizure. But admittedly
no permit evidencing authority to possess and transport said
load of forest products was duly presented. These products, in
turn, were deemed illegally sourced. Thus there was a prima
facieviolation of Section 68 [78] of the Revised Forestry Code,
although as found by the trial court, the persons responsible
for said violation were not the ones charged by the public
prosecutor.

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The corresponding authority of the DENR to seize all

conveyances used in the commission of an offense in violation
of Section 78 of the Revised Forestry Code is pursuant to
Sections 78-A and 89 of the same Code. They read as
follows: Sc
Sec. 78-A. Administrative Authority of the
Department Head or His Duly Authorized
Representative to Order Confiscation. -- In all
cases of violation of this Code or other forest
laws, rules and regulations, the Department
Head or his duly authorized representative,
may order the confiscation of any forest
products illegally cut, gathered, removed, or
possessed or abandoned, and all
conveyances used either by land, water or air
in the commission of the offense and to
dispose of the same in accordance with
pertinent laws, regulations or policies on the
matter.
Sec. 89. Arrest; Institution of criminal actions.
-- A forest officer or employee of the Bureau
[Department] or any personnel of the
Philippine Constabulary/Philippine National
Police shall arrest even without warrant any
person who has committed or is committing
in his presence any of the offenses defined in
this Chapter. He shall also seize and
confiscate, in favor of the Government, the
tools and equipment used in committing the
offense... [Emphasis supplied.]
Note that DENR Administrative Order No. 59, series of 1990,
implements Sections 78-A and 89 of the Forestry Code, as
follows:
Sec. 2. Conveyances Subject to Confiscation
and Forfeiture. -- All conveyances used in the
transport of any forest product obtained or
gathered illegally whether or not covered
with transport documents, found spurious or
irregular in accordance with Sec. 68-A [78-A]
of P.D. No. 705, shall be confiscated in favor
of the government or disposed of in
accordance with pertinent laws, regulations
or policies on the matter.
Sec. 4. Who are Authorized to Seize
Conveyance. -- The Secretary or his duly
authorized representative such as the forest
officers and/or natural resources officers, or
deputized officers of the DENR
are authorized to seize said conveyances
subject to policies and guidelines pertinent
thereto. Deputized military personnel and
officials of other agencies apprehending
illegal logs and other forest products and
their conveyances shall notify the nearest

DENR field offices, and turn over said forest

products and conveyances for proper action
and disposition. In case where the
apprehension is made by DENR field officer,
the conveyance shall be deposited with the
nearest CENRO/PENRO/RED Office as the
case may be, for safekeeping wherever it is
most convenient and secured. [Emphasis
supplied.]
Upon apprehension of the illegally-cut timber while being
transported without pertinent documents that could evidence
title to or right to possession of said timber, a warrantless
seizure of the involved vehicles and their load was allowed
under Section 78 and 89 of the Revised Forestry Code. Slxs c
Note further that petitioners failure to observe the procedure
outlined in DENR Administrative Order No. 59, series of 1990
was justifiably explained. Petitioners did not submit a report of
the seizure to the Secretary nor give a written notice to the
owner of the vehicle because on the 3rd day following the
seizure, Gabon and Abuganda, drivers of the seized vehicles,
forcibly took the impounded vehicles from the custody of the
DENR. Then again, when one of the motor vehicles was
apprehended and impounded for the second time, the
petitioners, again were not able to report the seizure to the
DENR Secretary nor give a written notice to the owner of the
vehicle because private respondents immediately went to court
and applied for a writ of replevin. The seizure of the vehicles
and their load was done upon their apprehension for a
violation of the Revised Forestry Code. It would be absurd to
require a confiscation order or notice and hearing before said
seizure could be effected under the circumstances.
Since there was a violation of the Revised Forestry Code and
the seizure was in accordance with law, in our view the subject
vehicles were validly deemed in custodia legis. It could not be
subject to an action for replevin. For it is property lawfully
taken by virtue of legal process and considered in the custody
.[20]
of the law, and not otherwise.
In Mamanteo, et. al. v. Deputy Sheriff Magumun, A.M. No. P98-1264, promulgated on July 28, 1999, the case involves
property to be seized by a Deputy Sheriff in a replevin suit. But
said property were already impounded by the DENR due to
violation of forestry laws and, in fact, already forfeited in favor
of the government by order of the DENR. We said that such
property was deemed in custodia legis. The sheriff could not
insist on seizing the property already subject of a prior warrant
of seizure. The appropriate action should be for the sheriff to
inform the trial court of the situation by way of partial Sheriffs
Return, and wait for the judges instructions on the proper
procedure to be observed.
Note that property that is validly deposited in custodia
legis cannot be the subject of a replevin suit. In Mamanteo v.
Deputy Sheriff Magumun, we elucidated further:

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". . . the writ of replevin has been repeatedly

used by unscrupulous plaintiffs to retrieve
their chattel earlier taken for violation of the
Tariff and Customs Code, tax assessment,
attachment or execution. Officers of the
court, from the presiding judge to the sheriff,
are implored to be vigilant in their execution
of the law otherwise, as in this case, valid
seizure and forfeiture proceedings could
easily be undermined by the simple devise of
.[21]
a writ of replevin..."
Scslx
On the second issue, is the complaint for the recovery of
possession of the two impounded vehicles, with an application
for replevin, a suit against the State?
Well established is the doctrine that the State may not be sued
.[22]
without its consent.
And a suit against a public officer for his
official acts is, in effect, a suit against the State if its purpose is
.[23]
to hold the State ultimately liable.
However, the protection
afforded to public officers by this doctrine generally applies
only to activities within the scope of their authority in good
[24]
faith and without willfulness, malice or corruption. In the
present case, the acts for which the petitioners are being called
to account were performed by them in the discharge of their
official duties. The acts in question are clearly official in
[25]
nature. In implementing and enforcing Sections 78-A and 89
of the Forestry Code through the seizure carried out,
petitioners were performing their duties and functions as
officers of the DENR, and did so within the limits of their
authority. There was no malice nor bad faith on their part.
Hence, a suit against the petitioners who represent the DENR is
a suit against the State. It cannot prosper without the States
consent.
Given the circumstances in this case, we need not pursue the
Office of the Solicitor Generals line for the defense of
petitioners concerning exhaustion of administrative remedies.
We ought only to recall that exhaustion must be raised at the
earliest time possible, even before filing the answer to the
complaint or pleading asserting a claim, by a motion to
.[26]
dismiss.
If not invoked at the proper time, this ground for
dismissal could be deemed waived and the court could take
[27]
cognizance of the case and try it. Mesm
ACCORDINGLY, the Petition is GRANTED, and the assailed
Decision of the Court of Appeals in CA-G.R. SP No. 29191
is SET ASIDE. Consequently, the Order issued by the Regional
Trial Court of Catbalogan, dated May 27, 1992, and the Writ of
replevin issued in the Order dated April 24, 1992,
are ANNULLED. The Sheriff of the Regional Trial Court of
Catbalogan, Branch 29, is directed to take possession of the
subject motor vehicle, with plate number FCN 143, for delivery
to the custody of and appropriate disposition by petitioners.
Let a copy of this decision be provided the Honorable
Secretary of Justice for his appropriate action, against any and
all persons responsible for the abovecited violation of the
Revised Forestry Code.

Costs against private respondents.

SO ORDERED.

[G.R. No. 111107. January 10, 1997]

LEONARDO A. PAAT, in his capacity as Officer-in-Charge
(OIC), Regional Executive Director (RED), Region 2
and JOVITO LAYUGAN, JR., in his capacity as
Community Environment and Natural Resources
Officer (CENRO), both of the Department of
Environment
and
Natural
Resources
(DENR), petitioners, vs. COURT OF APPEALS, HON.
RICARDO A. BACULI in his capacity as Presiding
Judge of Branch 2, Regional Trial Court at
Tuguegarao, Cagayan, and SPOUSES BIENVENIDO
and VICTORIA DE GUZMAN, respondents.
DECISION
TORRES, JR., J.:
Without violating the principle of exhaustion of
administrative remedies, may an action for replevin prosper to
recover a movable property which is the subject matter of an
administrative forfeiture proceeding in the Department of
Environment and Natural Resources pursuant to Section 68-A
of P. D. 705, as amended, entitled The Revised Forestry Code of
the Philippines?
Are the Secretary of DENR and his representatives
empowered to confiscate and forfeit conveyances used in
transporting illegal forest products in favor of the government?
These are two fundamental questions presented before
us for our resolution.
The controversy on hand had its incipiency on May 19,
1989 when the truck of private respondent Victoria de Guzman
while on its way to Bulacan from San Jose, Baggao, Cagayan,
was seized by the Department of Environment and Natural
Resources (DENR, for brevity) personnel in Aritao, Nueva
Vizcaya because the driver could not produce the required
documents for the forest products found concealed in the
truck. Petitioner Jovito Layugan, the Community Environment
and Natural Resources Officer (CENRO) in Aritao, Cagayan,
issued on May 23, 1989 an order of confiscation of the truck
and gave the owner thereof fifteen (15) days within which to
submit an explanation why the truck should not be
forfeited. Private respondents, however, failed to submit the
[1]
required explanation. On June 22, 1989, Regional Executive
Director Rogelio Baggayan of DENR sustained petitioner
Layugans action of confiscation andordered the forfeiture of
the truck invoking Section 68-A of Presidential Decree No. 705
as amended by Executive Order No. 277. Private respondents
filed a letter of reconsideration dated June 28, 1989 of the June
22, 1989 order of Executive Director Baggayan, which was,
however, denied in a subsequent order of July 12,
[2]
1989. Subsequently, the case was brought by the petitioners
to the Secretary of DENR pursuant to private respondents

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statement in their letter dated June 28, 1989 that in case their
letter for reconsideration would be denied then this letter
[3]
should be considered as an appeal to the Secretary. Pending
resolution however of the appeal, a suit for replevin, docketed
as Civil Case 4031, was filed by the private respondents against
[4]
petitioner Layugan and Executive Director Baggayan with the
[5]
Regional Trial Court, Branch 2 of Cagayan, which issued a writ
ordering
the
return
of
the
truck
to
private
[6]
respondents. Petitioner Layugan and Executive Director
Baggayan filed a motion to dismiss with the trial court
contending, inter alia, that private respondents had no cause of
action for their failure to exhaust administrative remedies. The
trial court denied the motion to dismiss in an order dated
[7]
December 28, 1989. Their motion for reconsideration having
been likewise denied, a petition for certiorari was filed by the
petitioners with the respondent Court of Appeals which
sustained the trial courts order ruling that the question
[8]
involved is purely a legal question. Hence, this present
[9]
petition, with prayer for temporary restraining order and/or
preliminary injunction, seeking to reverse the decision of the
respondent Court of Appeals was filed by the petitioners on
September 9, 1993. By virtue of the Resolution dated
[10]
September 27, 1993, the prayer for the issuance of
temporary restraining order of petitioners was granted by this
Court.
Invoking the doctrine of exhaustion of administrative
remedies, petitioners aver that the trial court could not legally
entertain the suit for replevin because the truck was under
administrative seizure proceedings pursuant to Section 68-A of
P.D. 705, as amended by E.O. 277. Private respondents, on the
other hand, would seek to avoid the operation of this principle
asserting that the instant case falls within the exception of the
doctrine upon the justification that (1) due process was
violated because they were not given the chance to be heard,
and (2) the seizure and forfeiture was unlawful on the
grounds: (a) that the Secretary of DENR and his representatives
have no authority to confiscate and forfeit conveyances utilized
in transporting illegal forest products, and (b) that the truck as
admitted by petitioners was not used in the commission of the
crime.
Upon a thorough and delicate scrutiny of the records and
relevant jurisprudence on the matter, we are of the opinion
that the plea of petitioners for reversal is in order.
This Court in a long line of cases has consistently held
that before a party is allowed to seek the intervention of the
court, it is a pre-condition that he should have availed of all the
means of administrative processes afforded him. Hence, if a
remedy within the administrative machinery can still be
resorted to by giving the administrative officer concerned every
opportunity to decide on a matter that comes within his
jurisdiction then such remedy should be exhausted first before
courts judicial power can be sought. The premature invocation
of courts intervention is fatal to ones cause of
[11]
action. Accordingly, absent any finding of waiver
or estoppel the case is susceptible of dismissal for lack of cause
[12]
of action. This doctrine of exhaustion of administrative
remedies was not without its practical and legal reasons, for
one thing, availment of administrative remedy entails lesser

expenses and provides for a speedier disposition of

controversies. It is no less true to state that the courts of justice
for reasons of comity and convenience will shy away from a
dispute until the system of administrative redress has been
completed and complied with so as to give the administrative
agency concerned every opportunity to correct its error and to
dispose of the case. However, we are not amiss to reiterate that
the principle of exhaustion of administrative remedies as tested
by a battery of cases is not an ironclad rule. This doctrine is a
relative one and its flexibility is called upon by the peculiarity
and uniqueness of the factual and circumstantial settings of a
case. Hence, it is disregarded (1) when there is a violation of
[13]
due process, (2) when the issue involved is purely a legal
[14]
question, (3) when the administrative action is patently
[15]
illegal amounting to lack or excess of jurisdiction, (4) when
there is estoppel on the part of the administrative agency
[16]
[17]
concerned, (5) when there is irreparable injury, (6) when
the respondent is a department secretary whose acts as
an alter ego of the President bears the implied and assumed
[18]
approval of the latter, (7) when to require exhaustion of
[19]
administrative remedies would be unreasonable, (8) when it
[20]
would amount to a nullification of a claim, (9) when the
subject matter is a private land in land case
[21]
proceedings, (10) when the rule does not provide a plain,
speedy and adequate remedy, and (11) when there are
[22]
circumstances indicating the urgency of judicial intervention.
In the case at bar, there is no question that the
controversy was pending before the Secretary of DENR when it
was forwarded to him following the denial by the petitioners of
the motion for reconsideration of private respondents through
the order of July 12, 1989. In their letter of reconsideration
[23]
dated June 28, 1989, private respondents clearly recognize
the presence of an administrative forum to which they seek to
avail, as they did avail, in the resolution of their case. The letter,
reads, thus:
xxx
If this motion for reconsideration does not merit your favorable
action, then this letter should be considered as an appeal to
[24]
the Secretary.
It was easy to perceive then that the private respondents
looked up to the Secretary for the review and disposition of
their case. By appealing to him, they acknowledged the
existence of an adequate and plain remedy still available and
open to them in the ordinary course of the law. Thus, they
cannot now, without violating the principle of exhaustion of
administrative remedies, seek courts intervention by filing an
action for replevin for the grant of their relief during the
pendency of an administrative proceedings.
Moreover, it is important to point out that the
enforcement of forestry laws, rules and regulations and the
protection, development and management of forest lands fall
within the primary and special responsibilities of the
Department of Environment and Natural Resources. By the very
nature of its function, the DENR should be given a free hand
unperturbed by judicial intrusion to determine a controversy

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which is well within its jurisdiction. The assumption by the trial

court, therefore, of the replevin suit filed by private
respondents constitutes an unjustified encroachment into the
domain of the administrative agencys prerogative. The doctrine
of primary jurisdiction does not warrant a court to arrogate
unto itself the authority to resolve a controversy the jurisdiction
over which is initially lodged with an administrative body of
[25]
special competence. In Felipe Ismael, Jr. and Co. vs. Deputy
[26]
Executive Secretary, which was reiterated in the recent case
[27]
of Concerned Officials of MWSS vs. Vasquez, this Court held:
Thus, while the administration grapples with the complex and
multifarious problems caused by unbriddled exploitation of
these resources, the judiciary will stand clear. A long line of
cases establish the basic rule that the courts will not interfere in
matters which are addressed to the sound discretion of
government agencies entrusted with the regulation of activities
coming under the special technical knowledge and training of
such agencies.
To sustain the claim of private respondents would in
effect bring the instant controversy beyond the pale of the
principle of exhaustion of administrative remedies and fall
within the ambit of excepted cases heretofore stated. However,
considering the circumstances prevailing in this case, we can
not but rule out these assertions of private respondents to be
without merit. First, they argued that there was violation of due
process because they did not receive the May 23, 1989 order of
confiscation of petitioner Layugan. This contention has no leg
to stand on. Due process does not necessarily mean or require
a hearing, but simply an opportunity or right to be
[28]
heard. One may be heard , not solely by verbal presentation
but also, and perhaps many times more creditably and
[29]
practicable than oral argument, through pleadings. In
administrative proceedings moreover, technical rules of
procedure and evidence are not strictly applied; administrative
process cannot be fully equated with due process in its strict
[30]
judicial sense. Indeed, deprivation of due process cannot be
successfully invoked where a party was given the chance to be
[31]
heard on his motion for reconsideration, as in the instant
case, when private respondents were undisputedly given the
opportunity to present their side when they filed a letter of
reconsideration dated June 28, 1989 which was, however,
denied in an order of July 12, 1989 of Executive Director
[32]
Baggayan. In Navarro III vs. Damasco, we ruled that :
The essence of due process is simply an opportunity to be
heard, or as applied to administrative proceedings, an
opportunity to explain ones side or an opportunity to seek a
reconsideration of the action or ruling complained of. A formal
or trial type hearing is not at all times and in all instances
essential. The requirements are satisfied when the parties are
afforded fair and reasonable opportunity to explain their side
of the controversy at hand. What is frowned upon is the
absolute lack of notice or hearing.
Second, private respondents imputed the patent illegality
of seizure and forfeiture of the truck because the administrative
officers of the DENR allegedly have no power to perform these

acts under the law. They insisted that only the court is
authorized to confiscate and forfeit conveyances used in
transporting illegal forest products as can be gleaned from the
second paragraph of Section 68 of P.D. 705, as amended by
E.O. 277. The pertinent provision reads as follows:
SECTION 68. xxx
xxx
The court shall further order the confiscation in favor of the
government of the timber or any forest products cut, gathered,
collected, removed, or possessed, as well as the machinery,
equipments, implements and tools illegaly [sic] used in the area
where the timber or forest products are found. (Underline ours)
A reading, however, of the law persuades us not to go
along with private respondents thinking not only because the
aforequoted provision apparently does not mention nor
include conveyances that can be the subject of confiscation by
the courts, but to a large extent, due to the fact that private
respondents interpretation of the subject provision unduly
restricts the clear intention of the law and inevitably reduces
the other provision of Section 68-A , which is quoted herein
below:
SECTION 68-A. Administrative Authority of the Department or
His Duly Authorized Representative To Order Confiscation. In all
cases of violation of this Code or other forest laws, rules and
regulations, theDepartment Head or his duly authorized
representative, may order the confiscation of any forest
products illegally cut, gathered, removed, or possessed or
abandoned, and all conveyances used either by land, water or
air in the commission of the offense and to dispose of the
same in accordance with pertinent laws, regulations and
policies on the matter. (Underline ours)
It is, thus, clear from the foregoing provision that the
Secretary and his duly authorized representatives are given the
authority to confiscate and forfeit any conveyances utilized in
violating the Code or other forest laws, rules and regulations.
The phrase to dispose of the same is broad enough to
cover the act of forfeiting conveyances in favor of the
government. The only limitation is that it should be made in
accordance with pertinent laws, regulations or policies on the
matter. In the construction of statutes, it must be read in such a
way as to give effect to the purpose projected in the
[33]
statute. Statutes should be construed in the light of the
object to be achieved and the evil or mischief to be
suppressed, and they should be given such construction as will
advance the object, suppress the mischief, and secure the
[34]
benefits intended. In this wise, the observation of the
Solicitor General is significant, thus:
But precisely because of the need to make forestry laws more
responsive to present situations and realities and in view of the
urgency to conserve the remaining resources of the country,
that the government opted to add Section 68-A. This

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amendatory provision is an administrative remedy totally

separate and distinct from criminal proceedings. More than
anything else, it is intended to supplant the inadequacies that
characterize enforcement of forestry laws through criminal
actions. The preamble of EO 277-the law that added Section
68-A to PD 705-is most revealing:
WHEREAS, there is an urgency to conserve the remaining forest
resources of the country for the benefit and welfare of the
present and future generations of Filipinos;
WHEREAS, our forest resources may be effectively conserved
and protected through the vigilant enforcement and
implementation of our forestry laws, rules and regulations;
WHEREAS, the implementation of our forestry laws suffers from
technical difficulties, due to certain inadequacies in the penal
provisions of the Revised Forestry Code of the Philippines; and
WHEREAS, to overcome this difficulties, there is a need to
penalize certain acts more responsive to present situations and
realities;
It is interesting to note that Section 68-A is a new provision
authorizing the DENR to confiscate, not only conveyances, but
forest products as well. On the other hand, confiscation of
forest products by the court in a criminal action has long been
provided for in Section 68. If as private respondents insist, the
power on confiscation cannot be exercised except only through
the court under Section 68, then Section 68-A would have no
purpose at all. Simply put, Section 68-A would not have
provided any solution to the problem perceived in EO
[35]
277, supra.
Private respondents, likewise, contend that the seizure
was illegal because the petitioners themselves admitted in the
Order dated July 12, 1989 of Executive Director Baggayan that
the truck of private respondents was not used in the
commission of the crime. This order, a copy of which was given
to and received by the counsel of private respondents, reads in
part , viz. :
xxx while it is true that the truck of your client was not used by
her in the commission of the crime, we uphold your claim that
the truck owner is not liable for the crime and in no case could
a criminal case be filed against her as provided under Article
[36]
309 and 310 of the Revised Penal Code. xxx
We observed that private respondents misread the
content of the aforestated order and obviously misinterpreted
the intention of petitioners. What is contemplated by the
petitioners when they stated that the truck "was not used in
the commission of the crime" is that it was not used in the
commission of the crime of theft, hence, in no case can a
criminal action be filed against the owner thereof for violation
of Article 309 and 310 of the Revised Penal Code. Petitioners
did not eliminate the possibility that the truck was being used
in the commission of another crime, that is, the breach of

Section 68 of P.D.705 as amended by E.O. 277. In the same

order of July 12, 1989, petitioners pointed out:
xxx However, under Section 68 of P.D.705 as amended and
further amended by Executive Order No.277 specifically
provides for the confiscation of the conveyance used in the
transport of forest products not covered by the required legal
documents. She may not have been involved in the cutting and
gathering of the product in question but the fact that she
accepted the goods for a fee or fare the same is therefor liable.
[37]
xxx
Private respondents, however, contended that there is no
crime defined and punishable under Section 68 other than
qualified theft, so that, when petitioners admitted in the July
12, 1989 order that private respondents could not be charged
for theft as provided for under Articles 309 and 310 of the
Revised Penal Code, then necessarily private respondents could
not have committed an act constituting a crime under Section
68. We disagree. For clarity, the provision of Section 68 of P.D.
705 before its amendment by E.O. 277 and the provision of
Section 1 of E.O. No.277 amending the aforementioned Section
68 are reproduced herein, thus:
SECTION 68. Cutting, gathering and/or collecting timber or
other products without license. - Any person who shall cut ,
gather , collect , or remove timber or other forest products
from any forest land, or timber from alienable and disposable
public lands, or from private lands, without any authority under
a license agreement, lease, license or permit, shall be guilty of
qualified theft as defined and punished under Articles 309 and
310 of the Revised Penal Code xxx. (Underscoring ours; Section
68, P.D.705 before its amendment by E.O.277 )
SECTION 1. Section 68 of Presidential Decree No.705, as
amended, is hereby amended to read as follows:
Section 68. Cutting, gathering and/or collecting timber or other
forest products without license. -Any person who shall cut,
gather, collect, remove timber or other forest products from
any forest land, or timber from alienable or disposable public
land, or from private land, without any authority, or
possess timber or other forest products without the legal
documents as required under existing forest laws and
regulations, shall be punished with the penalties imposed
under Articles 309 and 310 of the Revised Penal
Code xxx." (Underscoring ours; Section 1, E.O No. 277
amending Section 68, P.D. 705 as amended)
With the introduction of Executive Order No. 277
amending Section 68 of P.D. 705, the act of cutting, gathering,
collecting, removing, or possessing forest products without
authority constitutes a distinct offense independent now from
the crime of theft under Articles 309 and 310 of the Revised
Penal Code, but the penalty to be imposed is that provided for
under Article 309 and 310 of the Revised Penal Code. This
is clear from the language of Executive Order No. 277 when it
eliminated the phrase shall be guilty of qualified theft as
defined and punished under Articles 309 and 310 of the

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Revised Penal Code and inserted the words shall be punished

with the penalties imposed under Article 309 and 310 of the
Revised Penal Code . When the statute is clear and explicit,
there is hardly room for any extended court ratiocination or
[38]
rationalization of the law.
From the foregoing disquisition, it is clear that a suit for
replevin can not be sustained against the petitioners for the
subject truck taken and retained by them for administrative
forfeiture proceedings in pursuant to Section 68-A of the P. D.
705, as amended. Dismissal of the replevin suit for lack of cause
of action in view of the private respondents failure to exhaust
administrative remedies should have been the proper course of
action by the lower court instead of assuming jurisdiction over
the case and consequently issuing the writ ordering the return
of the truck. Exhaustion of the remedies in the administrative
forum, being a condition precedent prior to ones recourse to
the courts and more importantly, being an element of private
respondents right of action, is too significant to be waylaid by
the lower court.
It is worth stressing at this point, that a suit for replevin is
founded solely on the claim that the defendant wrongfully
withholds the property sought to be recovered. It lies to
recover possession of personal chattels that are unlawfully
[39]
detained. To detain is defined as to mean to hold or keep in
[40]
custody, and it has been held that there is tortuous taking
whenever there is an unlawful meddling with the property, or
an exercise or claim of dominion over it, without any pretense
of authority or right; this, without manual seizing of the
[41]
property is sufficient. Under the Rules of Court, it is
indispensable in replevin proceedings, that the plaintiff must
show by his own affidavit that he is entitled to the possession
of property, that the property is wrongfully detained by the
defendant, alleging the cause of detention, that the same has
not been taken for tax assessment, or seized under execution,
or attachment, or if so seized, that it is exempt from such
[42]
seizure, and the actual value of the property. Private
respondents miserably failed to convince this Court that a
wrongful detention of the subject truck obtains in the instant
case. It should be noted that the truck was seized by the
petitioners because it was transporting forest products with out
the required permit of the DENR in manifest contravention of
Section 68 of P.D. 705 as amended by E.O 277. Section 68-A of
P.D. 705, as amended, unquestionably warrants the
confiscation as well as the disposition by the Secretary of DENR
or his duly authorized representatives of the conveyances used
in violating the provision of forestry laws. Evidently, the
continued possession or detention of the truck by the
petitioners for administrative forfeiture proceeding is legally
permissible, hence , no wrongful detention exists in the case at
bar.
Moreover, the suit for replevin is never intended as a
procedural tool to question the orders of confiscation and
forfeiture issued by the DENR in pursuance to the authority
given under P.D.705, as amended. Section 8 of the said law is
explicit that actions taken by the Director of the Bureau of
Forest Development concerning the enforcement of the
provisions of the said law are subject to review by the Secretary
of DENR and that courts may not review the decisions of the

Secretary except through a special civil action for certiorari or

prohibition. It reads :
SECTION 8 . REVIEW - All actions and decisions of the Director
are subject to review, motu propio or upon appeal of any
person aggrieved thereby, by the Department Head whose
decision shall be final and executory after the lapse of thirty
(30) days from the receipt of the aggrieved party of said
decision, unless appealed to the President in accordance with
Executive Order No. 19, Series of 1966. The Decision of the
Department Head may not be reviewed by the courts except
through a special civil action for certiorari or prohibition.
WHEREFORE, the Petition is GRANTED; the Decision of
the respondent Court of Appeals dated October 16, 1991 and
its Resolution dated July 14, 1992 are hereby SET ASIDE AND
REVERSED; the Restraining Order promulgated on September
27, 1993 is hereby made permanent; and the Secretary of
DENR is directed to resolve the controversy with utmost
dispatch.
SO ORDERED.

G.R. No. L-12944

March 30, 1959

MARIA NATIVIDAD VDA. DE TAN, petitioner-appellee,

vs.
VETERANS BACKPAY COMMISSION, respondent-appellant.
Atilano R. Cinco and Aguilan and Rosero Law Offices for
appellee.
Acting Solicitor General Guillermo E. Torres and Solicitor Camilo
D. Quiason for appellant.
REYES, J.B.L., J.:
On March 5, 1957, petitioner-appellee, Maria Natividad vda. de
Tan filed with the Court of First Instance of Manila a verified
petition for mandamus seeking an order to compel the
respondent-appellant Veterans Back Pay Commission: (1) to
declare deceased Lt. Tan Chiat Bee alias Tan Lian Lay, a Chinese
national, entitled to backpay rights, privileges, and prerogatives
under Republic Act No. 304, as amended by Republic Act No.
897; and (2) to give due course to the claim of petitioner, as the
widow of the said veterans, by issuing to her the corresponding
backpay certificate of indebtedness.
Respondent Commission filed its answer in due time asserting
certain special and affirmative defenses, on the basis of which,
the Commission unsuccessfully moved to dismiss the petition.
The parties then submitted a stipulation of facts hereinbelow
reproduced:
Come now the petitioner and respondent in the
above-entitled case through their respective counsel,

ADMIN LAW 1st Set

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and to this Honorable Court respectfully agree and

stipulate that the following facts are true:
1. That the petitioner is of legal age, widow, and a
resident of 400 Lallana, Tondo, Manila; that the
respondent is a government instrumentality or
agency, with offices in the City of Manila, Philippines,
duly vested with authority to implement the
provisions of the Backpay Law, otherwise known as
Republic Act No. 879, further amending Republic Act
No. 304;
2. That the petitioner is the widow of the late Lt. Tan
Chiat Bee alias Tan Lian Lay, a Chinese national, and a
bona fide member of the 1st Regiment, United StatesChinese Volunteers in the Philippines;
3. That the United States-Chinese Volunteers in the
Philippines is a guerrilla organization duly recognized
by the Army of the United States and forming part
and parcel of the Philippine Army;
4. That Tan Chiat Bee alias Tan Lian Lay died in the
service on April 4, 1945 in the battle at Ipo Dam, Rizal
Province, Philippines; he was duly recognized as a
guerrilla veteran and certified to by the Armed Forces
of the Philippines as having rendered meritorious
military services during the Japanese occupation;
5. That petitioner as the widow of the said recognized
deceased veteran, filed an application for back pay
under the provisions of Republic Act No. 897, the
resolution of the Veterans Back Pay Commissions
dated November 19, 1953 and the letter of the
Veterans Back Pay Commission dated December 9,
1953;
6. That on June 18, 1955, the Secretary and the Chief
of Office Staff of Veterans Back Pay Commission sent
a letter to General Vicente Lopez of the United StatesChinese Volunteers in the Philippines apprising the
latter that the Commission has reaffirmed its
resolution granting the back pay to alien members;

9. That after due liberation respondent revoked its

previous stands and ruled that aliens are not entitled
to back pay;
10. That on February 13, 1957, the respondent
Veterans Back Pay Commission, through its Secretary
& Chief of Office Staff, made a formal reply to the
aforesaid claim of the herein petitioner denying her
request on the ground that aliens are not entitled to
back pay;
11. That upon refusal of the Veterans Back Pay
Commission the petitioner brought the case direct to
this Honorable Court by way of mandamus;
12. That petitioner and respondent admit the
existence and authenticity of the following
documents;
Annex AResolution of the Veterans Back Pay dated
November 19, 1953.
Annex BLetter dated December 9, 1953.
Annex CLetter dated June 18, 1955.
Annex DExecutive Order No. 21 dated October 28,
1944.
Annex EExecutive Order No. 68 dated September
26, 1945.
Annex FMinutes of the Resolution of the Back Pay
Commission regarding the opinion of the Secretary of
Justice dated February 8, 1956.
Annex GLetter of Back Pay Commission dated
February 26, 1954 to Secretary of Justice.
Annex HOpinion No. 213 series of 1956 of the
Secretary of Justice.
Annex IReply of Veterans Backpay Commission.

7. That the Adjutant, Armed Forces of the Philippines,

has verified and certified that deceased veteran has
rendered service as a recognized guerrilla for the
period indicated in his (Adjutant's) indorsement to
the Chief, Finance Service Armed Forces of the
Philippines;
8. That, likewise, the Chief of Finance Service, Camp
Murphy, has computed the backpay due the
petitioner and the same was passed in audit by
representatives of the Auditor General;

Annex JExplanatory Note to House Bill No. 1953.

Annex KExplanatory note to Senate Bill No. 10.
Annex LExplanatory note to House Bill No. 1228,
now Republic Act No. 897.
Annex MJoint Resolution No. 5 of the First Congress
of the Philippines.
13. That the parties waive the presentation of further
evidence;

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14. That the respondents will file its memorandum

within ten (10) days from August 1, 1957 and the
petitioner may file her memorandum within ten (10)
days from receipt of respondent's memorandum, after
which the case is deemed submitted for decision.
Manila, July 31, 1957.
Based on the foregoing, the lower court rendered judgment
the dispositive portion of which, reads:
Wherefore, the petition is granted, ordering
respondent Commission to give due course to the
claim of herein petitioner to the backpay to which her
deceased husband was entitled as member of a duly
recognized guerrilla organization.
Against the decision, the respondent instituted this appeal
averring once more, in its assignment of errors, the special and
affirmative defenses that the petitioner failed to exhaust
available administrative remedies; that the suit is, in effect, an
action to enforce a money claim against the government
without its consent; that mandamus will not lie to compel the
exercise of a discretionary function; and that the Republic Act
Nos. 304 and 897 already referred to were never intended to
benefit aliens.
We find no merit in the appeal. As to the claim
that mandamus is not the proper remedy to correct the
exercise of discretion of the Commission, it may well be
remembered that its discretion is limited to the facts of the
case, i.e., in merely evaluating the evidence whether or not the
claimant is a member of a guerrilla force duly recognized by
the United States Army. Nowhere in the law is the respondent
Commission given the power to adjudicate or determine rights
after such facts are established. Having been satisfied that
deceased Tan Chiat Bee was an officer of a duly recognized
guerrilla outfit, certified to by the Armed Forces of the
Philippines, having served under the United States-Chinese
Volunteers in the Philippines, a guerrilla unit recognized by the
United States army and forming part of the Philippine Army, it
becomes the ministerial duty of the respondent to give due
course to his widow's application. (See sections 1 and 6,
Republic Act 897). Note that the Chief of the Finance Service,
Camp Murphy, has accepted the backpay due the petitioner's
husband and the same was passed in audit by the
representatives of the Auditor General.
It is insisted by the respondent Commission that aliens are not
included within the purview of the law. We disagree. The law is
contained in Republic Act Nos. 304 and 897 is explicit enough,
and it extends its benefits to members of "guerrilla forces duly
recognized by the Army of the United States." From the plain
and clear language thereof, we fail to see any indication that its
operation should be limited to citizens of the Philippines only,
for all that is required is that the guerrilla unit be duly
recognized by the Army of the United States. We are in full
accord with Opinion No. 213, series of 1956, of the Secretary of
Justice, which reads:

Section 1 of the cited Act (Republic act No. 304, as

amended by Republic Act No. 897), otherwise known
as the Back Pay Law, recognizes the rights to the
backpay of members of "guerrilla forces duly
recognized by the Army of the United States, among
others. A perusal of its provisions reveals nothing
which may be construed to mean that only Filipino
citizens are entitled to back pay thereunder. On the
contrary, the statute expressly includes within its
coverage "persons under contract with the
Government of the Commonwealth", which clause was
construed by this office to refer to service" by the
government (Opinion No. 137, s. 1953), a majority of
whom were non-citizens. Thus, the Opinion No. 30, s.
1949, this office ruled that a civil service employee of
the U.S. Coast and Geodetic Survey rendering the
service to the Philippine Government when war broke
out on December 8, 1941, was entitled to back pay.
As regards guerrillas, it seems clear that all the law
requires is that they be "duly recognized by the Army
of the United States." Section 1 of the Back Pay Law, it
is also noted, enumerates those who are not entitled
to its benefits; recognized guerrillas who were not
Filipino citizens are not among those expressly
mentioned. The maxim expressio unius est exclusio
alterius, I think, finds application here.
Moreover, Executive Order No. 21, dated October 28,
1944, expressly declared that, Sections 22 (a) and 27
of Commonwealth Act No. 1 to the contrary
notwithstanding, "all persons of any nationality or
citizenship, who are actively serving in recognized
military forces in the Philippines, are thereby
considered to be on active service in the Philippine
Army."
It is the respondent's main argument that it could not have
been the intention of Congress to extend its benefit to aliens,
as the purpose of the law was "precisely to help rehabilitate
members of the Armed Forces of the Philippines and
recognized guerrillas by giving them the right to acquire public
lands and public property by using the back pay certificate",
and "it is fundamental under the Constitution that aliens except
American citizens cannot acquire public lands or exploit our
natural resources". Respondent Commission fails to realize that
this is just one of the various uses of the certificate; and that it
may also be utilized for the payment of obligations to the
Government or to any of its branches or instrumentalities, i.e.,
taxes, government hospital bills, etc. (See Sec. 2, Rep. act No.
897).
As further observed by the lower court:
It is one thing to be entitled to backpay and to receive
acknowledgment therefor, and another thing to
receive backpay certificates in accordance with the
resolutions of the Commission and to make use of the
same.

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It was, therefore, unreasonable if not arbitrary on the part of

respondent Commission to deny petitioner's claim on the basis.
It is further contended by the Commission that the petitioner
should have first exhausted her administrative remedies by
appealing to the President of the Philippines, and that her
failure to do so is a bar to her action in court (Montes vs. The
Civil Service Board of Appeals, 101 Phil., 490; 54 Off. Gaz. [7]
2174. The respondent Commission is in estoppel to invoke this
rule, considering that in its resolution (Annex F of the
Stipulation of Facts) reiterating its obstinate refusal to abide by
the opinion of the Secretary of Justice, who is the legal adviser
of the Executive Department, the Commission declared that
The opinions promulgated by the Secretary of Justice
are advisory in nature, which may either be accepted
or ignored by the office seeking the opinion, and any
aggrieved party has the court for recourse, (Annex F)
thereby leading the petitioner to conclude that only a final
judicial ruling in her favor would be accepted by the
Commission.
Neither is there substance in the contention that the petition is,
in effect, a suit against the government without its consent. the
relief prayed for is simply "the recognition of the petitionerappellee" under the provisions of sections 1 and 2 of Republic
Act No. 897, and consists in "directing an agency of the
government to perform an act . . . it is bound to perform."
Republic Act Nos. 304 and 897 necessarily embody state
consent to an action against the officers entrusted with the
implementation of said Acts in case of unjustified refusal to
recognize the rights of proper applicants.
The decision appealed from should be, and hereby is, affirmed.
No costs. So ordered.

G.R. No. 158253

March 2, 2007

REPUBLIC OF THE PHILIPPINES, represented by the

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,
COMMISSION ON AUDIT and THE NATIONAL
TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name and style
CARWIN CONSTRUCTION AND CONSTRUCTION
SUPPLY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under
Rule 45 of the Revised Rules of Court assailing the
1
Decision dated April 28, 2003 of the Court of Appeals (CA) in
CA-G.R. CV No. 56345 which affirmed with modification the

Decision of the Regional Trial Court, Branch 41, San Fernando,

Pampanga (RTC) in Civil Case No. 10538, granting the
complaint for Specific Performance and Damages filed by
Carlito Lacap (respondent) against the Republic of the
Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published
an "Invitation To Bid" dated January 27, 1992. Respondent,
doing business under the name and style Carwin Construction
and Construction Supply (Carwin Construction), was prequalified together with two other contractors. Since respondent
submitted the lowest bid, he was awarded the contract for the
3
concreting of Sitio 5 Bahay Pare. On November 4, 1992, a
Contract Agreement was executed by respondent and
4
petitioner. On September 25, 1992, District Engineer Rafael S.
Ponio issued a Notice to Proceed with the concreting
5
of Sitio 5 Bahay Pare. Accordingly, respondent undertook the
works, made advances for the purchase of the materials and
6
payment for labor costs.
On October 29, 1992, personnel of the Office of the District
Engineer of San Fernando, Pampanga conducted a final
inspection of the project and found it 100% completed in
accordance with the approved plans and specifications.
Accordingly, the Office of the District Engineer issued
7
Certificates of Final Inspection and Final Acceptance.
Thereafter, respondent sought to collect payment for the
8
completed project. The DPWH prepared the Disbursement
9
Voucher in favor of petitioner. However, the DPWH withheld
payment from respondent after the District Auditor of the
Commission on Audit (COA) disapproved the final release of
funds on the ground that the contractors license of
respondent had expired at the time of the execution of the
contract. The District Engineer sought the opinion of the DPWH
Legal Department on whether the contracts of Carwin
Construction for various Mount Pinatubo rehabilitation projects
were valid and effective although its contractors license had
10
already expired when the projects were contracted.
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia,
Director III of the DPWH Legal Department opined that since
Republic Act No. 4566 (R.A. No. 4566), otherwise known as the
Contractors License Law, does not provide that a contract
entered into after the license has expired is void and there is no
law which expressly prohibits or declares void such contract,
the contract is enforceable and payment may be paid, without
prejudice to any appropriate administrative liability action that
may be imposed on the contractor and the government
11
officials or employees concerned.
In a Letter dated July 4, 1994, the District Engineer requested
clarification from the DPWH Legal Department on whether
Carwin Construction should be paid for works accomplished
despite an expired contractors license at the time the contracts
12
were executed.

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In a First Indorsement dated July 20, 1994, Cesar D. Mejia,

Director III of the Legal Department, recommended that
payment should be made to Carwin Construction, reiterating
13
his earlier legal opinion. Despite such recommendation for
payment, no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for
Specific Performance and Damages against petitioner before
14
the RTC.
On September 14, 1995, petitioner, through the Office of the
Solicitor General (OSG), filed a Motion to Dismiss the complaint
on the grounds that the complaint states no cause of action
and that the RTC had no jurisdiction over the nature of the
action since respondent did not appeal to the COA the
15
decision of the District Auditor to disapprove the claim.
Following the submission of respondents Opposition to
16
Motion to Dismiss, the RTC issued an Order dated March 11,
17
1996 denying the Motion to Dismiss. The OSG filed a Motion
18
for Reconsideration but it was likewise denied by the RTC in
19
its Order dated May 23, 1996.
On August 5, 1996, the OSG filed its Answer invoking the
defenses of non-exhaustion of administrative remedies and the
20
doctrine of non-suability of the State.
Following trial, the RTC rendered on February 19, 1997 its
Decision, the dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing consideration,
judgment is hereby rendered in favor of the plaintiff and
against the defendant, ordering the latter, thru its District
Engineer at Sindalan, San Fernando, Pampanga, to pay the
following:
a) P457,000.00 representing the contract for the concreting
project of Sitio 5 road, Bahay Pare, Candaba, Pampanga plus
interest at 12% from demand until fully paid; and
b) The costs of suit.
SO ORDERED.

21

The RTC held that petitioner must be required to pay the

contract price since it has accepted the completed project and
enjoyed the benefits thereof; to hold otherwise would be to
overrun the long standing and consistent pronouncement
22
against enriching oneself at the expense of another.
23

Dissatisfied, petitioner filed an appeal with the CA. On April

28, 2003, the CA rendered its Decision sustaining the Decision
of the RTC. It held that since the case involves the application
of the principle of estoppel against the government which is a
purely legal question, then the principle of exhaustion of
administrative remedies does not apply; that by its actions the
government is estopped from questioning the validity and
binding effect of the Contract Agreement with the respondent;

that denial of payment to respondent on purely technical

grounds after successful completion of the project is not
countenanced either by justice or equity.
The CA rendered herein the assailed Decision dated April 28,
2003, the dispositive portion of which reads:
WHEREFORE, the decision of the lower court is hereby
AFFIRMED with modification in that the interest shall be six
percent (6%) per annum computed from June 21, 1995.
24

SO ORDERED.

Hence, the present petition on the following ground:

THE COURT OF APPEALS ERRED IN NOT FINDING THAT
RESPONDENT HAS NO CAUSE OF ACTION AGAINST
PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE
REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE
PRIMARY JURISDICTION TO RESOLVE RESPONDENTS MONEY
25
CLAIM AGAINST THE GOVERNMENT.
Petitioner contends that respondents recourse to judicial
action was premature since the proper remedy was to appeal
the District Auditors disapproval of payment to the COA,
pursuant to Section 48, Presidential Decree No. 1445 (P.D. No.
1445), otherwise known as the Government Auditing Code of
the Philippines; that the COA has primary jurisdiction to resolve
respondents money claim against the government under
26
Section 2(1), Article IX of the 1987 Constitution and Section
27
26 of P.D. No. 1445; that non-observance of the doctrine of
exhaustion of administrative remedies and the principle of
primary jurisdiction results in a lack of cause of action.
28

Respondent, on the other hand, in his Memorandum limited

his discussion to Civil Code provisions relating to human
relations. He submits that equity demands that he be paid for
the work performed; otherwise, the mandate of the Civil Code
provisions relating to human relations would be rendered
nugatory if the State itself is allowed to ignore and circumvent
the standard of behavior it sets for its inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the
intervention of the court, he should first avail of all the means
29
afforded him by administrative processes. The issues which
administrative agencies are authorized to decide should not be
summarily taken from them and submitted to a court without
first giving such administrative agency the opportunity to
30
dispose of the same after due deliberation.
Corollary to the doctrine of exhaustion of administrative
remedies is the doctrine of primary jurisdiction; that is, courts

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cannot or will not determine a controversy involving a question

which is within the jurisdiction of the administrative tribunal
prior to the resolution of that question by the administrative
tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to
31
determine technical and intricate matters of fact.
Nonetheless, the doctrine of exhaustion of administrative
remedies and the corollary doctrine of primary jurisdiction,
which are based on sound public policy and practical
considerations, are not inflexible rules. There are many
accepted exceptions, such as: (a) where there is estoppel on the
part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting to
lack of jurisdiction; (c) where there is unreasonable delay or
official inaction that will irretrievably prejudice the complainant;
(d) where the amount involved is relatively small so as to make
the rule impractical and oppressive; (e) where the question
involved is purely legal and will ultimately have to be decided
32
by the courts of justice; (f) where judicial intervention is
urgent; (g) when its application may cause great and
irreparable damage; (h) where the controverted acts violate
due process; (i) when the issue of non-exhaustion of
33
administrative remedies has been rendered moot; (j) when
there is no other plain, speedy and adequate remedy; (k) when
strong public interest is involved; and, (l) in quo warranto
34
proceedings. Exceptions (c) and (e) are applicable to the
present case.
Notwithstanding the legal opinions of the DPWH Legal
Department rendered in 1993 and 1994 that payment to a
contractor with an expired contractors license is proper,
respondent remained unpaid for the completed work despite
repeated demands. Clearly, there was unreasonable delay and
official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at
the time of the execution of its contract is entitled to be paid
for completed projects, clearly is a pure question of law. It does
not involve an examination of the probative value of the
evidence presented by the parties. There is a question of law
when the doubt or difference arises as to what the law is on a
certain state of facts, and not as to the truth or the falsehood
35
of alleged facts. Said question at best could be resolved
only tentatively by the administrative authorities. The final
decision on the matter rests not with them but with the courts
of justice. Exhaustion of administrative remedies does not
apply, because nothing of an administrative nature is to be or
36
can be done. The issue does not require technical knowledge
and experience but one that would involve the interpretation
and application of law.
Thus, while it is undisputed that the District Auditor of the COA
disapproved respondents claim against the Government, and,
37
under Section 48 of P.D. No. 1445, the administrative remedy
available to respondent is an appeal of the denial of his claim
by the District Auditor to the COA itself, the Court holds that, in
view of exceptions (c) and (e) narrated above, the complaint for

specific performance and damages was not prematurely filed

and within the jurisdiction of the RTC to resolve, despite the
failure to exhaust administrative remedies. As the Court aptly
38
stated in Rocamora v. RTC-Cebu (Branch VIII):
The plaintiffs were not supposed to hold their breath and wait
until the Commission on Audit and the Ministry of Public
Highways had acted on the claims for compensation for the
lands appropriated by the government. The road had been
completed; the Pope had come and gone; but the plaintiffs had
yet to be paid for the properties taken from them. Given this
official indifference, which apparently would continue
indefinitely, the private respondents had to act to assert and
39
protect their interests.
On the question of whether a contractor with an expired
license is entitled to be paid for completed projects, Section 35
of R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission,
fee or wage, submits or attempts to submit a bid to construct,
or contracts to or undertakes to construct, or assumes charge
in a supervisory capacity of a construction work within the
purview of this Act, without first securing a license to engage in
the business of contracting in this country; or who shall present
or file the license certificate of another, give false evidence of
any kind to the Board, or any member thereof in obtaining a
certificate or license, impersonate another, or use an expired or
revoked certificate or license, shall be deemed guilty of
misdemeanor, and shall, upon conviction, be sentenced to pay
a fine of not less than five hundred pesos but not more than
five thousand pesos. (Emphasis supplied)
The "plain meaning rule" or verba legis in statutory
construction is that if the statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied
40
without interpretation. This rule derived from the
maxim Index animi sermo est (speech is the index of intention)
rests on the valid presumption that the words employed by the
legislature in a statute correctly express its intention or will and
preclude the court from construing it differently. The legislature
is presumed to know the meaning of the words, to have used
words advisedly, and to have expressed its intent by use of
41
such words as are found in the statute. Verba legis non est
recedendum, or from the words of a statute there should be no
42
departure.
The wordings of R.A. No. 4566 are clear. It does not declare,
expressly or impliedly, as void contracts entered into by a
contractor whose license had already expired. Nonetheless,
such contractor is liable for payment of the fine prescribed
therein. Thus, respondent should be paid for the projects he
completed. Such payment, however, is without prejudice to the
payment of the fine prescribed under the law.
Besides, Article 22 of the Civil Code which embodies the maxim
Nemo ex alterius incommode debet lecupletari (no man ought
to be made rich out of anothers injury) states:

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Art. 22. Every person who through an act of performance by

another, or any other means, acquires or comes into
possession of something at the expense of the latter without
just or legal ground, shall return the same to him.
This article is part of the chapter of the Civil Code on Human
Relations, the provisions of which were formulated as "basic
principles to be observed for the rightful relationship between
human beings and for the stability of the social order, x x x
designed to indicate certain norms that spring from the
fountain of good conscience, x x x guides human conduct
[that] should run as golden threads through society to the end
that law may approach its supreme ideal which is the sway and
43
dominance of justice." The rules thereon apply equally well to
44
the Government. Since respondent had rendered services to
the full satisfaction and acceptance by petitioner, then the
former should be compensated for them. To allow petitioner to
acquire the finished project at no cost would undoubtedly
constitute unjust enrichment for the petitioner to the prejudice
of respondent. Such unjust enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit.
The assailed Decision of the Court of Appeals dated April 28,
2003 in CA-G.R. CV No. 56345 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.

[G.R. No. 139371. April 4, 2001]

INDIANA
AEROSPACE
UNIVERSITY, petitioner,
vs. COMMISSION
ON
HIGHER
EDUCATION
(CHED), respondent.
DECISION
PANGANIBAN, J.:
When the delayed filing of an answer causes no prejudice
to the plaintiff, default orders should be avoided. Inasmuch as
herein respondent was improvidently declared in default, its
Petition for Certiorari to annul its default may be given due
course. The act of the Commission on Higher Education
enjoining petitioner from using the word university in it
corporate name and ordering it to revert to its authorized
name does not violate its proprietary rights or constitute
irreparable damage to the school. Indeed, petitioner has no
vested right to misrepresent itself to the public. An injunction is
a remedy in equity and should not be used to perpetuate a
falsehood.

The Case

Before us is a Petition for Review on Certiorari under Rule

45 of the Rules of Court, challenging the July 21, 1999
[1]
Decision of the Court of Appeals (CA) in CA-GR SP No.
51346. The appellate court directed the Regional Trial Court
(RTC) of Makati City, Branch 136, to cease and desist from

proceeding with Civil Case No. 98-811 and to dismiss the

Complaint for Damages filed by the Indiana Aerospace
University against the Commission on Higher Education
(CHED). The dispositive portion of the CA Decision reads as
follows:
WHEREFORE, in the light of the foregoing consideration, and
pursuant to pertinent existing laws and jurisprudence on the
matter, [the trial court] is hereby DIRECTED to cease and desist
from proceeding with Civil case No. 98-811 and to order the
dismissal of [petitioners] Petition dated March 31, 1999 in Civil
[2]
Case No. 98-911 for lack of merit and valid cause of action.

The Facts

The facts of this case we are summarized by the CA, as

follows:
Sometime in October 1996, Dr. Reynaldo B. Vera, Chairman,
Technical Panel for Engineering, Architecture, and Maritime
Education (TPRAM) of [CHED], received a letter dated October
18, 1998 (Annex C) from Douglas R. Macias, Chairman, Board of
Aeronautical Engineering, Professional Regulat[ory]
Commission (PRC) and Chairman, Technical Committee for
Aeronautical Engineering (TPRAME) inquiring whether
[petitioner] had already acquired [u]niversity status in view of
the latters advertisement in [the] Manila Bulletin.
In a letter dated October 24, 1996, Dr. Vera formally referred
the aforesaid letter to Chairman Alcala with a request that the
concerned Regional Office of [CHED] be directed to conduct
appropriate investigation on the alleged misrepresentation by
[petitioner]. Thereafter, [CHED] referred the matter to its
Regional Director in Cebu City, requesting said office to
conduct an investigation and submit its report. The [R]eport
submitted in January 1997, stated in substance:
xxx xxx xxx
To recall it was in the month of May 1996, [that] Director Ma.
Lilia Gaduyon met the school [p]resident in the regional office
and verbally talked[with] and advised them not to use
University when it first came out in an advertisement column of
a local daily newspaper in Cebu City. It was explained that there
was a violation [committed by] his institution [when it used] the
term university unless the school ha[d] complied [with] the
basic requirement of being a university as prescribed in CHED
Memorandum Order No. 48, s. 1996.
x x x x x x x x x.
As a consequence of said Report, [respondents] Legal Affairs
Service was requested to take legal action against
[petitioner]. Subsequently, on February 3, 1997, [respondent]
directed [petitioner] to desist from using the term University,
including the use of the same in any of its alleged branches. In

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the course of it investigation, [respondent] was able to verify

from the Securities and Exchange Commission (SEC) that
[petitioner had] filed a proposal to amend its corporate name
from Indiana School of Aeronautics to Indiana Aerospace
University, which was supposedly favorably recommended by
the Department of Education, Culture and Sports (DECS) per its
Indorsement dated 17 July 1995, and on [that] basis, SEC issued
to [petitioner] Certificate of Registration No. AS-083-002689
dated August 7, 1995. Surprisingly, however, it ought to be
noted, that SEC Chairman Perfecto R. Yasay, Jr. wrote the
following letter to the [c]hairman of [respondent]:
Hon. Angel C. Alcala
Chairman
Commission on Higher Education
DAP Bldg., San Miguel Avenue
Ortigas Center, Pasig City
Dear Chairman Alcala:
This refers to your letter dated September 18, 1997 requesting
this Commission to make appropriate changes in the Articles of
Incorporation of Indiana School of aeronautics, Inc. due to its
unauthorized use of the term University in its corporate name.
Relative thereto, please be informed that our records show that
the above-mentioned corporation has not filed any amended
articles of incorporation that changed its corporate name to
include the term University.
In the case the corporation submit[s] an application for change
of name, your Cease and Desist Order shall be considered
accordingly.
Very truly yours,
(SGD.) PERFECTO R. YASAY, JR.
Chairman
In reaction to [respondents] order for [petitioner] to desist from
using the word University, Jovenal Toring, [c]hairman and
[f]ounder of [petitioner] wrote a letter dated February 24, 1997
(Annex G) appealing for reconsideration of [respondents]
Order, with a promise to follow the provisions of CMO No. 48,
pertinent portions of which have been quoted in the Petition,
to wit:
On 07 August 1995, in line with the call of the government to
go for global competitiveness and our vision to help in the
development of aerospace technology, the Board of Directors
applied with the SEC for the amendment of Article I of the
Articles of Incorporation to read as Indiana Aerospace
University instead of Indiana School of Aeronautics, Inc.
xxxxxxxxx
In view thereof, we would like to appeal to you Fr. Delagoza to
please reconsider your order of February 3, 1997, otherwise the

school will encounter financial difficulties and suffer damages

which will eventually result in the mass dislocation of xxx
thousand[s] of students. The undersigned, being the [c]hairman
and [f]ounder, will try our very best to follow the provisions of
CHED MEMO No. 48, series of 1996 that took effect last June
18, 1996.
xxxxxxxxx
Thank you very much for giving me a copy of said CHED
MEMO order No. 48. More power and God Bless You.
x x x x x x x x x.
The appeal of [petitioner] was however rejected by
[respondent] in its decision dated July 30, 1998 and the [the
latter] ordered the former to cease and desist from using the
word University. However, prior to said date, on April 2, 1998,
[petitioner] filed a Complaint for Damages with prayer for Writ
of preliminary and Mandatory Injunction and Temporary
Restraining Order against [respondent], docketed as Civil Case
No. 98-811 before public respondent judge.
On April 7, 1998, [respondent] filed a Special Appearance with
Motion to Dismiss, based on 1) improper venue; 2) lack of
authority of the person instituting the action; and 3) lack of
cause of action. On April 17, 1998, [petitioner] filed its
Opposition to the Motion to Dismiss [on] grounds stated
therein, to which [respondent] filed a Reply on April 21, 1998,
reiterating the same arguments in its Motion to Dismiss.After
due hearing, [petitioner] formally offered its evidence on July
23, 1998 while [respondent] made a formal offer of evidence
on July 28, 1998 to which [petitioner] filed its
Comments/Objections and finally, [respondent] submitted its
Memorandum relative thereto on October 1, 1998.
Public respondent judge, in an Order dated August 14, 1998,
denied [respondents] Motion to Dismiss and at the same time,
issued a Writ of preliminary Injunction in favor of
[petitioner]. [Respondent], in the same Order, was directed to
file its Answer within fifteen (15)days from receipt of said
Order, which was August 15, 1998.
xxxxxxxxx
WHEREFORE, and in consideration of all the foregoing
[respondents] Motion to Dismiss is hereby denied, and the
[respondent] is directed to file its [A]nswer to the [C]omplaint
within fifteen (15) days from receipt of this Order.
In the meantime, [respondent], its officials, employees and all
parties acting under its authority are hereby enjoined to
observe the following during the pendency of this case.
1. Not to publish or circulate any announcement in the
newspaper, radio or television regarding its Cease and Desist
Order against xxx [petitioner];

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2. Not to enforce the Cease and Desist Order issued against xxx
[petitioner];
3. To maintain the status quo by not withholding the issuance
of yearly school permits and special order to all graduates.
Let a writ of preliminary Injunction to that effect issue upon
posting by [petitioner] of an injunction bond in the amount of
One Hundred Thousand Pesos (P100,000.00), and subject to
the approval of the Court.
SO ORDERED.
On September 22, 1998, [petitioner] filed before public
respondent a Motion To Declare [Respondent] in [D]efault
pursuant to Section 3, Rule 9 in relation to Section 4, Rule 16 of
the Rules of Court, as amended, and at the same time praying
[for] the Motion to [S]et for [H]earing on October 30, 1998 at
8:30 a.m. On the same date, [respondent] filed a Motion For
Extension of Time to File its Answer, x x x until November 18,
1998. On November 17, 1998, [respondent] filed its [A]nswer.
[Petitioner], on November 11, 1998 filed its Opposition to the
Motion for Extension of Time to File [Respondents] Answer and
on November 9, 1998, a Motion to Expunge [Respondents]
answer and at the same time praying that its [M]otion be heard
on November 27, 1998 at 9:00 a.m. On even date, public
respondent judge issued an Order directing the Office of the
Solicitor General to file within a period of ten (10) days from
date its written Opposition to the Motion to Expunge
[Respondents] answer and within the same period to file a
written [N]otice of [A]ppearance in the case. Unable to file their
written Opposition to the Motion to Expunge within the period
given by public respondent, the OSG filed a Motion to Admit
Written Opposition stating the reasons for the same, attaching
thereto the Opposition with [F]ormal [E]ntry of [A]ppearance.
In an Order dated December 9, 1998, (Annex A), public
respondent judge ruled on [Petitioners ] Motion to Declare
[Respondent in Default], to wit:
WHEREFORE, and in view of all the foregoing, the present
motion is granted. [Petitioner] is hereby directed to present its
evidence ex-parte before the [b]ranch [c]lerk of [c]ourt, who is
designated as [c]ommissioner for the purpose, within ten (10)
days from receipt of this [O]rder, and for the latter to submit
his report within twenty (20) days from the date the case is
submitted for decision.
SO ORDERED.

[3]

On February 23, 1999, respondent filed with the CA a

Petition for certiorari, arguing that the RTC had committed
grave abuse of discretion (a) in denying the formers Motion to
Dismiss, (b) in issuing a Writ of Preliminary Injunction, and (c) in
declaring respondent in default despite its filing an Answer.

Ruling of the Court of Appeals

The CA ruled that petitioner had no cause of action

against respondent. Petitioner failed to show any evidence that
it had been granted university status by respondent as required
under existing law and CHED rules and regulations. A certificate
of incorporation under an Unauthorized name does not confer
upon petitioner the right to use the word university in its
name. The evidence submitted by respondent showed that the
Securities and Exchange Commission (SEC) had denied that
petitioner had ever amended its Articles of Incorporation to
include university in its corporate name. For its part, the
Department of Education, Culture and Sports (DECS) denied
having issued the alleged Certification dated May 18, 1998,
indorsing the change in petitioners corporate name. Besides,
neither the Corporation Code nor the SEC Charter vests the
latter with the authority to confer university status on a
corporation that it regulates.
For the same reason, the appellate court also ruled that
the Writ of Preliminary Injunction had improvidently been
issued. The doubtful right claimed by petitioner is subordinate
to the public interest to protect unsuspecting students and
their parents from the unauthorized operation and
misrepresentation of an educational institution.
Respondent should not have been declared in default,
because its answer had been filed long before the RTC ruled
upon petitioners Motion to declare respondent in
default. Thus, respondent had not obstinately refused to file an
Answer; on the contrary, its failure to do so on time was due to
excusable negligence. Declaring it in default did not serve the
ends of justice, but only prevented it from pursuing the merits
of its case.
Hence, this Petition.

[4]

Issues

Petitioner alleges that the appellate court committed the

following reversible errors:
A. In giving due course to respondent CHEDs
Petition for Certiorari filed way beyond the 60day reglementary period prescribed by Section
4, Rule 65 of the Rules of Court;
B. In not requiring Respondent CHED to first file a
motion to Set Aside the Order of Default dated
December 9, 1998; and
C. In ordering the dismissal of Civil Case No. 98[5]
811.
In its Memorandum, petitioner adds that the CA erred in
dissolving the Writ of Preliminary Injunction issued by the
RTC. We shall take up these issues in the following order: (1)
timeliness of the certiorari petition, (2) validity of the default

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order, (3) validity of the preliminary injunction, and (4) dismissal

of the Complaint.

understandable. For the reason mentioned, we rule that

respondents Petition for Certiorari did not require prior resort
to a motion for reconsideration.

This Courts Ruling

Second Issue: Validity of the Default Order

The Petition is partly meritorious.

First Issue: Timeliness of Certiorari

Petitioner claims that the Petition for certiorari of

respondent should have been dismissed by the CA, because it
was filed out of time and was not preceded by a motion for
reconsideration in the RTC.The copy of the Order of August 14,
1998 had been served at respondents office on August 15,
1998, but its Answer was filed only after 180 days which,
according to petitioner, could not be considered a reasonable
period. On the other hand, the Office of the Solicitor General
(OSG) argues that the Order is null and void and, hence, may
be assailed at any time.
We hold that respondents Petition for Certiorari was
seasonably filed. In computing its timeliness, what should have
been considered was not the Order of August 14, 1998, but the
date when respondent received the December 9, 1998 Order
declaring it in default. Since it received this Order only on
January 13, 1999, and filed its Petition for Certiorari on
February 23, 1999, it obviously complied with the sixty-day
reglementary period stated in Section 4, Rule 65 of the 1997
Rules of Court. Moreover, the August 14, 1998 Order was not a
proper subject of certiorari or appeal, since it was merely an
interlocutory order.

Exhaustion of Available Remedies

Petitioner also contends that certiorari cannot prosper in

this case, because respondent did not file a motion for
reconsideration before filing its Petition for Certiorari with the
CA. Respondent counters that reconsideration should be
dispensed with, because the December 9, 1998 Order is a
patent nullity.
The general rule is that, in order to give the lower court
the opportunity to correct itself, a motion for reconsideration is
a prerequisite to certiorari. It also basic that petitioner must
exhaust all other available remedies before resorting to
certiorari. This rule, however, is subject to certain exceptions
such as any of the following: (1) the issues raised are purely
legal in nature, (2) public interest is involved, (3) extreme
urgency is obvious or (4) special circumstances warrant
[6]
immediate or more direct action. It is patently clear that the
regulation or administration of educational institutions,
especially on the tertiary level, is invested with public
interest. Hence, the haste with which the solicitor general
raised these issues before the appellate court is

Petitioner avers the RTC was justified in declaring

respondent in default, because the August 14, 1998 Order
directing the filing of an answer had been served on August 25,
1998. And as late as October 30, 1998, respondent could only
file a Motion for Extension of Time, which the trial court denied
because of the expiry of the fifteen-day period. Petitioner adds
that respondents proper remedy would have been a Motion to
Set Aside the Order of Default, pursuant to Section 3(b), Rule 9
of the Rules of Court.
Respondent, in turn, avers that certiorari was the only
plain, speedy and adequate remedy in the ordinary course of
law, because the default Order had improvidently been issued.
We agree with respondent. Lina v. Court of
[7]
Appeals discussed the remedies available to a defendant
declared in default, as follows: (1) a motion to set aside the
order of default under Section 3(b), Rule 9 of the Rules of
Court, if the default was discovered before judgment could be
rendered; (2) a motion for new trial under Section 1(a) of Rule
37, if the default was discovered after judgment but while
appeal is still available; (3) a petition for relief under Rule 38, if
judgment has become final and executory; and (4) an appeal
from the judgment under Section 1, Rule 41, even if no petition
to set aside the order of default has been resorted to.
These remedies, however, are available only to a
defendant who has been validly declared in default. Such
defendant irreparably loses the right to participate in the
trial. On the other hand, a defendant improvidently declared in
default may retain and exercise such right after the order of
default and the subsequent judgment by default are annulled,
and the case remanded to the court of origin. The former is
limited to the remedy set forth in section 2, paragraph 3 of
Rule 41 of the pre 1997 Rules of Court, and can therefore
contest only the judgment by default on the designated
ground that it is contrary to evidence or law. The latter,
however, has the following options: to resort to this same
remedy; to interpose a petition for certiorari seeking the
nullification of the order of default, even before the
promulgation of a judgment by default; or in the event that
judgment has been rendered, to have such order and
judgment declared void.
In prohibiting appeals from interlocutory orders, the law
does not intend to accord executory force to such writs,
particularly when the effect would be to cause irreparable
damage. If in the course of trial, a judge proceeds without or in
excess of jurisdiction, this rule prohibiting an appeal does not
[8]
leave the aggrieved party without any remedy. In a case like
this, a special civil action of certiorari is the plain, speedy and
adequate remedy.

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Herein respondent controverts the judgment by default,

not on the ground that it is unsubstantiated by evidence or
that it is contrary to law, but on the ground that it is
intrinsically void for having been rendered pursuant to a
[9]
patently invalid order of default.

Grave Abuse of Discretion

Petitioner claims that in issuing the default Order, the RTC

did not act with grave abuse of discretion, because respondent
had failed to file its answer within fifteen days after receiving
the August 14, 1998 Order.
We disagree. Quite the contrary, the trial court gravely
abused its discretion when it declared respondent in default
[10]
despite the latters filing of an Answer. Placing respondent in
default thereafter served no practical purpose.
Petitioner was lax in calling the attention of the Court to
the fifteen-day period for filing an answer. It moved to declare
respondent in default only on September 20, 1998, when the
filing period had expired on August 30, 1998. The only
conclusion in this case is that petitioner has not been
prejudiced by the delay. The same leniency can also be
accorded to the RTC, which declared respondent in default
only on December 9, 1998, or twenty-two days after the latter
had filed its Answer on November 17, 1998. Defendants
Answer should be admitted, because it had been filed before it
was declared in default, and no prejudice was caused to
plaintiff. The hornbook rule is that default judgments are
[11]
generally disfavored.
While there are instances when a party may be properly
declared in default, these cases should be deemed exceptions
to the rule and should be resorted to only in clear cases of
obstinate refusal or inordinate neglect in complying with the
[12]
orders of the court. In the present case, however, no such
refusal or neglect can be attributed to respondent.
It appears that respondent failed to file its Answer
because of excusable negligence. Atty. Joel Voltaire Mayo,
director of the Legal Affairs Services of CHED, had to relinquish
his position in accordance with the Memorandum dated July 7,
1998, requiring all non-CESO eligibles holding non-career
positions to vacate their respective offices. It was only on
September 25, 1998, after CHED Special Order No. 63 had been
issued, when he resumed his former position. Respondent also
presented a meritorious defense in its Answer -- that it was
duty-bound to pursue that state policy of protecting, fostering
and promoting the right of all citizens to affordable quality
education at all levels. In stark contrast, petitioner neither
qualified for nor was ever conferred university status by
respondent.
Judges, as a rule, should avoid issuing default orders that
deny litigants the chance to be heard. Instead, the former
should give the latter every opportunity to present their
conflicting claims on the merits of the controversy, as much as
[13]
possible avoiding any resort to procedural technicalities.

Third Issue: Preliminary Injunction

Petitioner contends that the RTC validly issued the Writ of

Preliminary Injunction. According to the trial court, respondents
actions adversely affected petitioners interests, faculty and
students. In fact, the very existence of petitioner as a business
concern would have been jeopardized had its proprietary rights
not been protected.
We disagree. We concur with the CA that the trial court
acted with grave abuse of discretion in issuing the Writ of
Preliminary Injunction against respondent. Petitioner failed to
establish a clear right to continue representing itself to the
public as a university. Indeed, it has no vested right to
misrepresent itself. Before an injunction can be issued, it is
essential that (1) there must be a right in esse to be protected,
and (2) the act against which the injunction is to be directed
[14]
must have violated such right. The establishment and the
operation of schools are subject to prior authorization from the
government.No school may claim to be a university unless it
has first complied with the prerequisites provided in Section 34
of the Manual of Regulations for Private Schools. Section 3,
Rule 58 of the Rules of Court, limits the grant of preliminary
injunction to cases in which the plaintiff is clearly entitled to the
relief prayed for.
We also agree with the finding of the CA that the act
sought to be enjoined by petitioner is not violative of the
latters rights. Respondents Cease and Desist Order of July 30,
1997 merely restrained petitioner from using the term
university in its name. It was not ordered to close, but merely
to revert to its authorized name; hence, its proprietary rights
were not violated.

Fourth Issue: Dismissal of the Complaint

Petitioner claims that the CA went beyond its limited

jurisdiction under Rule 65 when it reversed the trial court and
dismissed the Complaint on the ground that petitioner had
failed to state a cause of action. The RTC had yet to conduct
trial, but the CA already determined the factual issue regarding
petitioners acquisition of university status, a determination that
is not permitted in certiorari proceedings.
The CA ruled that the trial court gravely abused its
discretion in denying respondents Motion to dismiss on the
ground of lack of cause of action because of petitioners lack of
legal authority or right to use the word university. Said
appellate court:
x x x. No matter how we interpret the Corporation Code and
the law granting the Securities and Exchange Commission its
powers and duties, there is nothing there which grants it the
power or authority to confer University Status to an
educational institution. Fundamental is the rule that when there
is no power granted, none exist[s], not even implied ones for
there is none from where to infer. The mere fact of securing an

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alleged Certificate of Incorporation under an unauthorized

name does not confer the right to use such name.
But what makes the conclusion of [the trial court] even
anomalous, to say the least, is that no less than the Chairman
of the SEC in his letter to the [respondent] (Exh. J) expressly
said that [petitioner] never filed any Amended Articles of
Incorporation so as to have a change of corporate name to
include the term university. Worse, the records officer of DECS
issued a Certification dated May 18, 1998 (Annex AA) to the
effect that there was no Indorsement made by that office
addressed to the SEC or the Proposed Amended Article of
Incorporation of Indiana Aeronautics. x x x.

When a motion to dismiss is grounded on the failure to

state a cause of action, a ruling thereon should be based only
[19]
on the facts alleged in the complaint. The court must pass
upon this issue based solely on such allegations, assuming
them to be true. For it to do otherwise would be a procedural
[20]
error and a denial of plaintiffs right to due process.
WHEREFORE, the Petition is hereby GRANTED IN PART,
and the assailed Decision MODIFIED. The trial court
is DIRECTED to SET ASIDE the Order of default of December 9,
1998; to ADMIT the Answer dated November 5, 1998;
to LIFT the preliminary injunction; and to CONTINUE, with all
deliberate speed, the proceedings in Civil Case No. 98-811.
SO ORDERED.

Under such clear pattern of deceitful maneuvering to

circumvent the requirement for acquiring University Status, it is
[a] patently reversible error for [the trial court] to hold that
[petitioner] has a right to use the word University which must
be protected. Dismissal of [petitioners] Complaint for lack of a
valid cause of action should have been the proper action taken
[15]
by [the trial court] judge.
An order denying a motion to dismiss is interlocutory,
and so the proper remedy in such a case is to appeal after a
decision has been rendered. A writ of certiorari is not intended
to correct every controversial interlocutory ruling; it is resorted
to only to correct a grave abuse of discretion or a whimsical
exercise of judgment equivalent to lack of jurisdiction. Its
function is limited to keeping an inferior court within its
jurisdiction and to relieve persons from arbitrary acts -- acts
which courts or judges have no power or authority in law to
perform. It is not designed to correct erroneous findings and
[16]
conclusions made by the court.
In the case at bar, we find no grave abuse of discretion in
the RTCs denial of the Motion to Dismiss, as contained in the
August 14, 1998 Order. The CA erred in ruling other wise. The
trial court stated in its Decision that petitioner was an
educational institution, originally registered with the Securities
and Exchange Commission as the Indiana School of
Aeronautics, Inc. That name was subsequently changed to
Indiana Aerospace University after the Department of
Education, Culture and Sports had interposed no objection to
[17]
such change.
Respondent issued a formal Cease and Desist Order
directing petitioner to stop using the word university in its
corporate name. The former also published an announcement
in the March 21, 1998 issue of Freeman, a local newspaper in
Cebu City, that there was no institution of learning by that
name. The counsel of respondent was quoted as saying in the
March 28, 1998 issue of the newspaper Today that petitioner
had been ordered closed by the respondent for illegal
advertisement, fraud and misrepresentation of itself as a
university. Such acts, according to the RTC undermined the
publics confidence in petitioner as an educational
[18]
institution. This was a clear statement of a sufficient cause of
action.

[G.R. No. 139492. November 19, 2002]

LAGUNA CATV NETWORK, INC., petitioner, vs. HON. ALEX
E. MARAAN, Regional Director, Region IV, Dept. of
Labor and Employment (DOLE), ENRICO SAGMIT,
Acting Deputy Sheriff, DOLE Region IV, PEDRO
IGNACIO, DIOMEDES CASTRO, FE ESPERANZA
CANDILLA,
RUBEN
LAMINA,
JR.,
JOEL
PERSIUNCULA,
ALVINO
PRUDENTE,
JOEL
RAYMUNDO,
REGIE
ROCERO,
LINDA
RODRIGUEZ, JOHN SELUDO, ALBERTO REYES,
and ANACLETA VALOIS, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
On March 3, 1998, private respondents Pedro Ignacio,
Diomedes Castro, Fe Esperanza Candilla, Ruben Lamina, Jr., Joel
Persiuncula, Alvino Prudente, Joel Raymundo, Regie Rocero,
Linda Rodriguez, John Seludo, Alberto Reyes and Anacleta
Valois filed with the Department of Labor and Employment,
Regional Office No. IV (DOLE Region IV), separate complaints
for underpayment of wages and non-payment of other
[1]
employee benefits. Impleaded as respondent was their
employer, Laguna CATV Network, Inc. (Laguna CATV).
Private respondents filed their separate complaints
pursuant to Article 128 of the Labor Code, as amended by
[2]
Republic Act No. 7730, which provides:
Article 128. Visitorial and enforcement powers. - (a) The
Secretary of Labor or his duly authorized representatives,
including labor regulation officers, shall have access to
employers records and premises at any time of the day or night
whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any
fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code
and of any labor law, wage order or rules and regulations
issued pursuant thereto.
(b) x x x

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An order issued by the duly authorized representative of

the Secretary of Labor and Employment under this article
may be appealed to the latter. In case said order involves a
monetary award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Secretary
of Labor and Employment in the amount equivalent to the
monetary award in the order appealed from. (emphasis added)
x x x.
On April 1, 1998, DOLE Region IV conducted an
inspection within the premises of Laguna CATV and found that
the latter violated the laws on payment of wages and other
benefits. Thereupon, DOLE Region IV requested Laguna CATV
to correct its violations but the latter refused, prompting
Regional Director Alex E. Maraan to set the case for summary
[3]
investigation. Thereafter, he issued an Order dated August 19,
[4]
1998 directing Laguna CATV to pay the concerned employees
the sum of Two Hundred Sixty-One Thousand, Nine and
19/100 (P261,009.19) Pesos representing their unpaid claims,
within 10 days from notice, and to submit proof of payment
within the same period. Forthwith, Laguna CATV filed a motion
[5]
for reconsideration.
In view of Laguna CATVs failure to comply with the Order
directing it to pay the unpaid claims of its employees, DOLE
Regional Director Maraan issued a writ of execution on January
[6]
29, 1999 ordering Sheriff Enrico Sagmit to collect in cash
from Laguna CATV the amount specified in the writ or, in lieu
thereof, to attach its goods and chattels or those of its owner,
Dr. Bernardino Bailon. Sheriff Sagmit subsequently levied on Dr.
Bailons L300 van and garnished his bank deposits.
On March 2, 1999, Laguna CATV and Dr. Bailon, in his
personal capacity, filed a motion to quash the writ of execution,
notice of levy and sale on execution and garnishment of bank
[7]
deposits, alleging that the writ was premature because
Laguna CATVs motion for reconsideration of the Order dated
August 19, 1998 has not yet been resolved by Regional
Director Maraan. On April 21, 1999, he issued an
[8]
Order denying the motion to quash the writ of execution,
stating inter alia, that Laguna CATV failed to perfect its appeal
of the August 19, 1998 Order because it did not comply with
the mandatory requirement of posting a bond equivalent to
the monetary award of P261,009.19; and that the writ of
execution dated January 29, 1999 should be considered as an
[9]
overt denial of Laguna CATVs motion for reconsideration.
Instead of appealing to the Secretary of Labor, Laguna
CATV filed with the Court of Appeals a motion for extension of
[10]
time to file a petition for review. Laguna CATV was of the
view that an appeal to the Secretary of Labor would be an
exercise in futility considering that the said appeal will be filed
[11]
with the Regional Office and it will surely be disapproved.
On May 13, 1999, the Court of Appeals issued a
[12]
Resolution denying Laguna CATVs motion for extension and
dismissing the case. The Appellate Court found, among others,
that it failed to exhaust administrative remedies.

Laguna CATV filed a motion for reconsideration but was

denied by the Court of Appeals in its Resolution dated July 22,
[13]
1999. Hence, it filed the instant petition for review on
[14]
certiorari.
Specifically, petitioner contends that the Court of Appeals
erred in denying its motion for extension and in dismissing the
case.
Private respondents, in their comment on the petition,
claim that the assailed Orders of DOLE Region IV have become
final and executory for petitioners failure to appeal to the
Secretary of Labor.
The petition lacks merit. The Court of Appeals was correct
in holding that petitioner failed to exhaust all administrative
remedies.
As provided under Article 128 of the Labor Code, as
amended, earlier quoted, an order issued by the duly
authorized representative of the Secretary of Labor may be
appealed to the latter. Thus, petitioner should have first
appealed to the Secretary of Labor instead of filing with the
Court of Appeals a motion for extension of time to file a
petition for review.
Courts, for reasons of law, comity and convenience,
should not entertain suits unless the available administrative
remedies have first been resorted to and the proper authorities
have been given an appropriate opportunity to act and correct
their alleged errors, if any, committed in the administrative
[15]
forum. Observance of this doctrine is a sound practice and
policy. As succinctly explained by this Court in Carale vs.
[16]
Abarintos:
It (the doctrine of exhaustion of administrative remedies)
ensures an orderly procedure which favors a preliminary sifting
process, particularly with respect to matters peculiarly within
the competence of the administrative agency, avoidance of
interference with functions of the administrative agency by
withholding judicial action until the administrative process had
run its course, and prevention of attempts to swamp the courts
[17]
by a resort to them in the first instance.
This Court, in a long line of cases, has consistently held
that if a remedy within the administrative machinery can still be
resorted to by giving the administrative officer concerned every
opportunity to decide on a matter that comes within his
jurisdiction, then such remedy should be exhausted first before
[18]
the courts judicial power can be sought. The party with an
administrative remedy must not merely initiate the
prescribed administrative procedure to obtain relief but
also pursue it to its appropriate conclusion before seeking
judicial intervention in order to give the administrative
agency an opportunity to decide the matter itself correctly and
[19]
prevent unnecessary and premature resort to the court. The
underlying principle of the rule rests on the presumption that
the administrative agency, if afforded a complete chance to
pass
upon
the
matter
will
decide
the
same
[20]
correctly. Therefore, petitioner should have completed the

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administrative process by appealing the questioned Orders to

the Secretary of Labor.
Although this Court has allowed certain exceptions to the
doctrine of exhaustion of administrative remedies, such as:

1) when there is a violation of due process;

Warning: Long case

G.R. No. 133250

July 9, 2002

FRANCISCO I. CHAVEZ, petitioner,

vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY
DEVELOPMENT CORPORATION, respondents.

2) when the issue involved is a purely legal question;

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

EN BANC

CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ
of preliminary injunction and a temporary restraining order.
The petition seeks to compel the Public Estates Authority
("PEA" for brevity) to disclose all facts on PEA's then on-going
renegotiations with Amari Coastal Bay and Development
Corporation ("AMARI" for brevity) to reclaim portions of Manila
Bay. The petition further seeks to enjoin PEA from signing a
new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the
Commissioner of Public Highways, signed a contract with the
Construction and Development Corporation of the Philippines
("CDCP" for brevity) to reclaim certain foreshore and offshore
areas of Manila Bay. The contract also included the
construction of Phases I and II of the Manila-Cavite Coastal
Road. CDCP obligated itself to carry out all the works in
consideration of fifty percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos
issued Presidential Decree No. 1084 creating PEA. PD No. 1084
tasked PEA "to reclaim land, including foreshore and
submerged areas," and "to develop, improve, acquire, x x x
1
lease and sell any and all kinds of lands." On the same date,
then President Marcos issued Presidential Decree No. 1085
transferring to PEA the "lands reclaimed in the foreshore and
2
offshore of the Manila Bay" under the Manila-Cavite Coastal
Road and Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a
memorandum directing PEA to amend its contract with CDCP,
so that "[A]ll future works in MCCRRP x x x shall be funded and
owned by PEA." Accordingly, PEA and CDCP executed a
Memorandum of Agreement dated December 29, 1981, which
stated:
"(i) CDCP shall undertake all reclamation, construction,
and such other works in the MCCRRP as may be
agreed upon by the parties, to be paid according to
progress of works on a unit price/lump sum basis for
items of work to be agreed upon, subject to price
escalation, retention and other terms and conditions
provided for in Presidential Decree No. 1594. All the
financing required for such works shall be provided by
PEA.

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xxx
(iii) x x x CDCP shall give up all its development rights
and hereby agrees to cede and transfer in favor of
PEA, all of the rights, title, interest and participation of
CDCP in and to all the areas of land reclaimed by
CDCP in the MCCRRP as of December 30, 1981 which
have not yet been sold, transferred or otherwise
disposed of by CDCP as of said date, which areas
consist of approximately Ninety-Nine Thousand Four
Hundred Seventy Three (99,473) square meters in the
Financial Center Area covered by land pledge No. 5
and approximately Three Million Three Hundred
Eighty Two Thousand Eight Hundred Eighty Eight
(3,382,888) square meters of reclaimed areas at
varying elevations above Mean Low Water Level
located outside the Financial Center Area and the First
3
Neighborhood Unit."
On January 19, 1988, then President Corazon C. Aquino issued
Special Patent No. 3517, granting and transferring to PEA "the
parcels of land so reclaimed under the Manila-Cavite Coastal
Road and Reclamation Project (MCCRRP) containing a total
area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters." Subsequently,
on April 9, 1988, the Register of Deeds of the Municipality of
Paraaque issued Transfer Certificates of Title Nos. 7309, 7311,
and 7312, in the name of PEA, covering the three reclaimed
islands known as the "Freedom Islands" located at the southern
portion of the Manila-Cavite Coastal Road, Paraaque City. The
Freedom Islands have a total land area of One Million Five
Hundred Seventy Eight Thousand Four Hundred and Forty One
(1,578,441) square meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement
("JVA" for brevity) with AMARI, a private corporation, to
develop the Freedom Islands. The JVA also required the
reclamation of an additional 250 hectares of submerged areas
surrounding these islands to complete the configuration in the
Master Development Plan of the Southern Reclamation
Project-MCCRRP. PEA and AMARI entered into the JVA through
4
negotiation without public bidding. On April 28, 1995, the
Board of Directors of PEA, in its Resolution No. 1245, confirmed
5
the JVA. On June 8, 1995, then President Fidel V. Ramos,
through then Executive Secretary Ruben Torres, approved the
6
JVA.
On November 29, 1996, then Senate President Ernesto Maceda
delivered a privilege speech in the Senate and denounced the
JVA as the "grandmother of all scams." As a result, the Senate
Committee on Government Corporations and Public
Enterprises, and the Committee on Accountability of Public
Officers and Investigations, conducted a joint investigation. The
Senate Committees reported the results of their investigation
in Senate Committee Report No. 560 dated September 16,
7
1997. Among the conclusions of their report are: (1) the
reclaimed lands PEA seeks to transfer to AMARI under the JVA
are lands of the public domain which the government has not
classified as alienable lands and therefore PEA cannot alienate

these lands; (2) the certificates of title covering the Freedom

Islands are thus void, and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued
Presidential Administrative Order No. 365 creating a Legal Task
Force to conduct a study on the legality of the JVA in view of
Senate Committee Report No. 560. The members of the Legal
8
Task Force were the Secretary of Justice, the Chief Presidential
9
10
Legal Counsel, and the Government Corporate Counsel. The
Legal Task Force upheld the legality of the JVA, contrary to the
11
conclusions reached by the Senate Committees.
On April 4 and 5, 1998, the Philippine Daily
Inquirer and Today published reports that there were on-going
renegotiations between PEA and AMARI under an order issued
by then President Fidel V. Ramos. According to these reports,
PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and
retired Navy Officer Sergio Cruz composed the negotiating
panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court
a Petition for Prohibition with Application for the Issuance of a
Temporary Restraining Order and Preliminary
Injunction docketed as G.R. No. 132994 seeking to nullify the
JVA. The Court dismissed the petition "for unwarranted
disregard of judicial hierarchy, without prejudice to the refiling
12
of the case before the proper court."
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for
brevity) as a taxpayer, filed the instant Petition for Mandamus
with Prayer for the Issuance of a Writ of Preliminary Injunction
and Temporary Restraining Order. Petitioner contends the
government stands to lose billions of pesos in the sale by PEA
of the reclaimed lands to AMARI. Petitioner prays that PEA
publicly disclose the terms of any renegotiation of the JVA,
invoking Section 28, Article II, and Section 7, Article III, of the
1987 Constitution on the right of the people to information on
matters of public concern. Petitioner assails the sale to AMARI
of lands of the public domain as a blatant violation of Section
3, Article XII of the 1987 Constitution prohibiting the sale of
alienable lands of the public domain to private corporations.
Finally, petitioner asserts that he seeks to enjoin the loss of
billions of pesos in properties of the State that are of public
dominion.
13

After several motions for extension of time, PEA and AMARI

filed their Comments on October 19, 1998 and June 25, 1998,
respectively. Meanwhile, on December 28, 1998, petitioner filed
an Omnibus Motion: (a) to require PEA to submit the terms of
the renegotiated PEA-AMARI contract; (b) for issuance of a
temporary restraining order; and (c) to set the case for hearing
on oral argument. Petitioner filed a Reiterative Motion for
Issuance of a TRO dated May 26, 1999, which the Court denied
in a Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due
course to the petition and required the parties to file their
respective memoranda.

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On March 30, 1999, PEA and AMARI signed the Amended Joint
Venture Agreement ("Amended JVA," for brevity). On May 28,
1999, the Office of the President under the administration of
then President Joseph E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the
President, petitioner now prays that on "constitutional and
statutory grounds the renegotiated contract be declared null
14
and void."
The Issues
The issues raised by petitioner, PEA
follows:

15

and AMARI

16

are as

I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN

THE PETITION ARE MOOT AND ACADEMIC BECAUSE
OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR
FAILING TO OBSERVE THE PRINCIPLE GOVERNING
THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR
NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO
BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO
INFORMATION INCLUDES OFFICIAL INFORMATION
ON ON-GOING NEGOTIATIONS BEFORE A FINAL
AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED
JOINT VENTURE AGREEMENT FOR THE TRANSFER TO
AMARI OF CERTAIN LANDS, RECLAIMED AND STILL
TO BE RECLAIMED, VIOLATE THE 1987
CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM
FOR RAISING THE ISSUE OF WHETHER THE AMENDED
JOINT VENTURE AGREEMENT IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the
petition are moot and academic because of subsequent
events.
The petition prays that PEA publicly disclose the "terms and
conditions of the on-going negotiations for a new agreement."
The petition also prays that the Court enjoin PEA from
"privately entering into, perfecting and/or executing any new
agreement with AMARI."

PEA and AMARI claim the petition is now moot and academic
because AMARI furnished petitioner on June 21, 1999 a copy of
the signed Amended JVA containing the terms and conditions
agreed upon in the renegotiations. Thus, PEA has satisfied
petitioner's prayer for a public disclosure of the renegotiations.
Likewise, petitioner's prayer to enjoin the signing of the
Amended JVA is now moot because PEA and AMARI have
already signed the Amended JVA on March 30, 1999.
Moreover, the Office of the President has approved the
Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the
constitutional issue by simply fast-tracking the signing and
approval of the Amended JVA before the Court could act on
the issue. Presidential approval does not resolve the
constitutional issue or remove it from the ambit of judicial
review.
We rule that the signing of the Amended JVA by PEA and
AMARI and its approval by the President cannot operate to
moot the petition and divest the Court of its jurisdiction. PEA
and AMARI have still to implement the Amended JVA. The
prayer to enjoin the signing of the Amended JVA on
constitutional grounds necessarily includes preventing its
implementation if in the meantime PEA and AMARI have
signed one in violation of the Constitution. Petitioner's
principal basis in assailing the renegotiation of the JVA is its
violation of Section 3, Article XII of the Constitution, which
prohibits the government from alienating lands of the public
domain to private corporations. If the Amended JVA indeed
violates the Constitution, it is the duty of the Court to enjoin its
implementation, and if already implemented, to annul the
effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but
one which seeks to transfer title and ownership to 367.5
hectares of reclaimed lands and submerged areas of Manila
Bay to a single private corporation. It now becomes more
compelling for the Court to resolve the issue to insure the
government itself does not violate a provision of the
Constitution intended to safeguard the national patrimony.
Supervening events, whether intended or accidental, cannot
prevent the Court from rendering a decision if there is a grave
violation of the Constitution. In the instant case, if the
Amended JVA runs counter to the Constitution, the Court can
still prevent the transfer of title and ownership of alienable
lands of the public domain in the name of AMARI. Even in
cases where supervening events had made the cases moot, the
Court did not hesitate to resolve the legal or constitutional
issues raised to formulate controlling principles to guide the
17
bench, bar, and the public.
Also, the instant petition is a case of first impression. All
previous decisions of the Court involving Section 3, Article XII
of the 1987 Constitution, or its counterpart provision in the
18
1973 Constitution, covered agricultural lands sold to private
corporations which acquired the lands from private parties. The
transferors of the private corporations claimed or could claim
the right to judicial confirmation of their imperfect

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19

titles under Title II of Commonwealth Act. 141 ("CA No. 141"

for brevity). In the instant case, AMARI seeks to acquire from
PEA, a public corporation, reclaimed lands and submerged
areas for non-agricultural purposes by purchase under PD
No. 1084 (charter of PEA) and Title III of CA No. 141. Certain
undertakings by AMARI under the Amended JVA constitute the
consideration for the purchase. Neither AMARI nor PEA can
claim judicial confirmation of their titles because the lands
covered by the Amended JVA are newly reclaimed or still to be
reclaimed. Judicial confirmation of imperfect title requires
open, continuous, exclusive and notorious occupation of
agricultural lands of the public domain for at least thirty years
since June 12, 1945 or earlier. Besides, the deadline for filing
applications for judicial confirmation of imperfect title expired
20
on December 31, 1987.
Lastly, there is a need to resolve immediately the constitutional
issue raised in this petition because of the possible transfer at
any time by PEA to AMARI of title and ownership to portions of
the reclaimed lands. Under the Amended JVA, PEA is obligated
to transfer to AMARI the latter's seventy percent proportionate
share in the reclaimed areas as the reclamation progresses. The
Amended JVA even allows AMARI to mortgage at any time
the entire reclaimed area to raise financing for the reclamation
21
project.
Second issue: whether the petition merits dismissal for
failing to observe the principle governing the hierarchy of
courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy
by seeking relief directly from the Court. The principle of
hierarchy of courts applies generally to cases involving factual
questions. As it is not a trier of facts, the Court cannot entertain
cases involving factual issues. The instant case, however, raises
constitutional issues of transcendental importance to the
22
public. The Court can resolve this case without determining
any factual issue related to the case. Also, the instant case is a
petition for mandamus which falls under the original
jurisdiction of the Court under Section 5, Article VIII of the
Constitution. We resolve to exercise primary jurisdiction over
the instant case.
Third issue: whether the petition merits dismissal for nonexhaustion of administrative remedies.
PEA faults petitioner for seeking judicial intervention in
compelling PEA to disclose publicly certain information without
first asking PEA the needed information. PEA claims petitioner's
direct resort to the Court violates the principle of exhaustion of
administrative remedies. It also violates the rule that
mandamus may issue only if there is no other plain, speedy
and adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Taada v.
23
Tuvera where the Court granted the petition for mandamus
even if the petitioners there did not initially demand from the
Office of the President the publication of the presidential
decrees. PEA points out that in Taada, the Executive

Department had an affirmative statutory duty under Article 2

24
of the Civil Code and Section 1 of Commonwealth Act No.
25
638 to publish the presidential decrees. There was, therefore,
no need for the petitioners in Taada to make an initial
demand from the Office of the President. In the instant case,
PEA claims it has no affirmative statutory duty to disclose
publicly information about its renegotiation of the JVA. Thus,
PEA asserts that the Court must apply the principle of
exhaustion of administrative remedies to the instant case in
view of the failure of petitioner here to demand initially from
PEA the needed information.
The original JVA sought to dispose to AMARI public lands held
by PEA, a government corporation. Under Section 79 of the
26
Government Auditing Code, the disposition of government
lands to private parties requires public bidding. PEA was under
a positive legal duty to disclose to the public the terms and
conditions for the sale of its lands. The law obligated PEA to
make this public disclosure even without demand from
petitioner or from anyone. PEA failed to make this public
disclosure because the original JVA, like the Amended JVA, was
the result of a negotiated contract, not of a public bidding.
Considering that PEA had an affirmative statutory duty to make
the public disclosure, and was even in breach of this legal duty,
petitioner had the right to seek direct judicial intervention.
Moreover, and this alone is determinative of this issue, the
principle of exhaustion of administrative remedies does not
apply when the issue involved is a purely legal or constitutional
27
question. The principal issue in the instant case is the capacity
of AMARI to acquire lands held by PEA in view of the
constitutional ban prohibiting the alienation of lands of the
public domain to private corporations. We rule that the
principle of exhaustion of administrative remedies does not
apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring
this suit
PEA argues that petitioner has no standing to
institute mandamus proceedings to enforce his constitutional
right to information without a showing that PEA refused to
perform an affirmative duty imposed on PEA by the
Constitution. PEA also claims that petitioner has not shown that
he will suffer any concrete injury because of the signing or
implementation of the Amended JVA. Thus, there is no actual
controversy requiring the exercise of the power of judicial
review.
The petitioner has standing to bring this taxpayer's suit
because the petition seeks to compel PEA to comply with its
constitutional duties. There are two constitutional issues
involved here. First is the right of citizens to information on
matters of public concern. Second is the application of a
constitutional provision intended to insure the equitable
distribution of alienable lands of the public domain among
Filipino citizens. The thrust of the first issue is to compel PEA to
disclose publicly information on the sale of government lands
worth billions of pesos, information which the Constitution and

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statutory law mandate PEA to disclose. The thrust of the

second issue is to prevent PEA from alienating hundreds of
hectares of alienable lands of the public domain in violation of
the Constitution, compelling PEA to comply with a
constitutional duty to the nation.
Moreover, the petition raises matters of transcendental
28
importance to the public. In Chavez v. PCGG, the Court
upheld the right of a citizen to bring a taxpayer's suit on
matters of transcendental importance to the public, thus "Besides, petitioner emphasizes, the matter of
recovering the ill-gotten wealth of the Marcoses is an
issue of 'transcendental importance to the public.' He
asserts that ordinary taxpayers have a right to initiate
and prosecute actions questioning the validity of acts
or orders of government agencies or instrumentalities,
if the issues raised are of 'paramount public interest,'
and if they 'immediately affect the social, economic
and moral well being of the people.'
Moreover, the mere fact that he is a citizen satisfies
the requirement of personal interest, when the
proceeding involves the assertion of a public right,
such as in this case. He invokes several decisions of
this Court which have set aside the procedural matter
of locus standi, when the subject of the case involved
public interest.
xxx
In Taada v. Tuvera, the Court asserted that when the
issue concerns a public right and the object of
mandamus is to obtain the enforcement of a public
duty, the people are regarded as the real parties in
interest; and because it is sufficient that petitioner is a
citizen and as such is interested in the execution of
the laws, he need not show that he has any legal or
special interest in the result of the action. In the
aforesaid case, the petitioners sought to enforce their
right to be informed on matters of public concern, a
right then recognized in Section 6, Article IV of the
1973 Constitution, in connection with the rule that
laws in order to be valid and enforceable must be
published in the Official Gazette or otherwise
effectively promulgated. In ruling for the petitioners'
legal standing, the Court declared that the right they
sought to be enforced 'is a public right recognized by
no less than the fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating
Taada, further declared that 'when a mandamus
proceeding involves the assertion of a public right, the
requirement of personal interest is satisfied by the
mere fact that petitioner is a citizen and, therefore,
part of the general 'public' which possesses the right.'

Further, in Albano v. Reyes, we said that while

expenditure of public funds may not have been
involved under the questioned contract for the
development, management and operation of the
Manila International Container Terminal, 'public
interest [was] definitely involved considering the
important role [of the subject contract] . . . in the
economic development of the country and the
magnitude of the financial consideration involved.' We
concluded that, as a consequence, the disclosure
provision in the Constitution would constitute
sufficient authority for upholding the petitioner's
standing.
Similarly, the instant petition is anchored on the right
of the people to information and access to official
records, documents and papers a right guaranteed
under Section 7, Article III of the 1987 Constitution.
Petitioner, a former solicitor general, is a Filipino
citizen. Because of the satisfaction of the two basic
requisites laid down by decisional law to sustain
petitioner's legal standing, i.e. (1) the enforcement of
a public right (2) espoused by a Filipino citizen, we
rule that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen,
involves the enforcement of constitutional rights - to
information and to the equitable diffusion of natural resources
- matters of transcendental public importance, the petitioner
has the requisite locus standi.
Fifth issue: whether the constitutional right to information
includes official information on on-going negotiations
before a final agreement.
Section 7, Article III of the Constitution explains the people's
right to information on matters of public concern in this
manner:
"Sec. 7. The right of the people to information on
matters of public concern shall be recognized. Access
to official records, and to documents, and papers
pertaining to official acts, transactions, or
decisions, as well as to government research data
used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may
be provided by law." (Emphasis supplied)
The State policy of full transparency in all transactions involving
public interest reinforces the people's right to information on
matters of public concern. This State policy is expressed in
Section 28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed
by law, the State adopts and implements a policy of
full public disclosure of all its transactions
involving public interest." (Emphasis supplied)

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These twin provisions of the Constitution seek to promote

transparency in policy-making and in the operations of the
government, as well as provide the people sufficient
information to exercise effectively other constitutional rights.
These twin provisions are essential to the exercise of freedom
of expression. If the government does not disclose its official
acts, transactions and decisions to citizens, whatever citizens
say, even if expressed without any restraint, will be speculative
and amount to nothing. These twin provisions are also essential
to hold public officials "at all times x x x accountable to the
29
people," for unless citizens have the proper information, they
cannot hold public officials accountable for anything. Armed
with the right information, citizens can participate in public
discussions leading to the formulation of government policies
and their effective implementation. An informed citizenry is
essential to the existence and proper functioning of any
democracy. As explained by the Court in Valmonte v.
30
Belmonte, Jr.
"An essential element of these freedoms is to keep
open a continuing dialogue or process of
communication between the government and the
people. It is in the interest of the State that the
channels for free political discussion be maintained to
the end that the government may perceive and be
responsive to the people's will. Yet, this open dialogue
can be effective only to the extent that the citizenry is
informed and thus able to formulate its will
intelligently. Only when the participants in the
discussion are aware of the issues and have access to
information relating thereto can such bear fruit."
31

PEA asserts, citing Chavez v. PCGG, that in cases of on-going

negotiations the right to information is limited to "definite
propositions of the government." PEA maintains the right does
not include access to "intra-agency or inter-agency
recommendations or communications during the stage when
common assertions are still in the process of being formulated
or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right
at the pre-decisional stage or before the closing of the
transaction. To support its contention, AMARI cites the
following discussion in the 1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which
should be distinguished from contracts, agreements,
or treaties or whatever, does the Gentleman refer to
the steps leading to the consummation of the
contract, or does he refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose is
generic and therefore, it can cover both steps
leading to a contract and already a consummated
contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of
negotiations leading to the consummation of the
transaction.

Mr. Ople: Yes, subject only to reasonable

safeguards on the national interest.
Mr. Suarez: Thank you."

32

(Emphasis supplied)

AMARI argues there must first be a consummated contract

before petitioner can invoke the right. Requiring government
officials to reveal their deliberations at the pre-decisional stage
will degrade the quality of decision-making in government
agencies. Government officials will hesitate to express their real
sentiments during deliberations if there is immediate public
dissemination of their discussions, putting them under all kinds
of pressure before they decide.
We must first distinguish between information the law on
public bidding requires PEA to disclose publicly, and
information the constitutional right to information requires PEA
to release to the public. Before the consummation of the
contract, PEA must, on its own and without demand from
anyone, disclose to the public matters relating to the
disposition of its property. These include the size, location,
technical description and nature of the property being
disposed of, the terms and conditions of the disposition, the
parties qualified to bid, the minimum price and similar
information. PEA must prepare all these data and disclose them
to the public at the start of the disposition process, long before
the consummation of the contract, because the Government
Auditing Code requires public bidding. If PEA fails to make
this disclosure, any citizen can demand from PEA this
information at any time during the bidding process.
Information, however, on on-going evaluation or review of
bids or proposals being undertaken by the bidding or review
committee is not immediately accessible under the right to
information. While the evaluation or review is still on-going,
there are no "official acts, transactions, or decisions" on the
bids or proposals. However, once the committee makes
its official recommendation, there arises a "definite
proposition" on the part of the government. From this
moment, the public's right to information attaches, and any
citizen can access all the non-proprietary information leading
33
to such definite proposition. In Chavez v. PCGG, the Court
ruled as follows:
"Considering the intent of the framers of the
Constitution, we believe that it is incumbent upon the
PCGG and its officers, as well as other government
representatives, to disclose sufficient public
information on any proposed settlement they have
decided to take up with the ostensible owners and
holders of ill-gotten wealth. Such information, though,
must pertain to definite propositions of the
government, not necessarily to intra-agency or interagency recommendations or communications during
the stage when common assertions are still in the
process of being formulated or are in the
"exploratory" stage. There is need, of course, to
observe the same restrictions on disclosure of
information in general, as discussed earlier such as

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on matters involving national security, diplomatic or

foreign relations, intelligence and other classified
information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the
1986 Constitutional Commission understood that the right to
information "contemplates inclusion of negotiations leading
to the consummation of the transaction." Certainly, a
consummated contract is not a requirement for the exercise of
the right to information. Otherwise, the people can never
exercise the right if no contract is consummated, and if one is
consummated, it may be too late for the public to expose its
defects.1wphi1.nt
Requiring a consummated contract will keep the public in the
dark until the contract, which may be grossly disadvantageous
to the government or even illegal, becomes a fait accompli.
This negates the State policy of full transparency on matters of
public concern, a situation which the framers of the
Constitution could not have intended. Such a requirement will
prevent the citizenry from participating in the public discussion
of any proposed contract, effectively truncating a basic right
enshrined in the Bill of Rights. We can allow neither an
emasculation of a constitutional right, nor a retreat by the State
of its avowed "policy of full disclosure of all its transactions
involving public interest."
The right covers three categories of information which are
"matters of public concern," namely: (1) official records; (2)
documents and papers pertaining to official acts, transactions
and decisions; and (3) government research data used in
formulating policies. The first category refers to any document
that is part of the public records in the custody of government
agencies or officials. The second category refers to documents
and papers recording, evidencing, establishing, confirming,
supporting, justifying or explaining official acts, transactions or
decisions of government agencies or officials. The third
category refers to research data, whether raw, collated or
processed, owned by the government and used in formulating
government policies.
The information that petitioner may access on the
renegotiation of the JVA includes evaluation reports,
recommendations, legal and expert opinions, minutes of
meetings, terms of reference and other documents attached to
such reports or minutes, all relating to the JVA. However, the
right to information does not compel PEA to prepare lists,
abstracts, summaries and the like relating to the renegotiation
34
of the JVA. The right only affords access to records,
documents and papers, which means the opportunity to
inspect and copy them. One who exercises the right must copy
the records, documents and papers at his expense. The exercise
of the right is also subject to reasonable regulations to protect
the integrity of the public records and to minimize disruption
to government operations, like rules specifying when and how
35
to conduct the inspection and copying.
The right to information, however, does not extend to matters
recognized as privileged information under the separation of

36

powers. The right does not also apply to information on

military and diplomatic secrets, information affecting national
security, and information on investigations of crimes by law
enforcement agencies before the prosecution of the accused,
37
which courts have long recognized as confidential. The right
may also be subject to other limitations that Congress may
impose by law.
There is no claim by PEA that the information demanded by
petitioner is privileged information rooted in the separation of
powers. The information does not cover Presidential
conversations, correspondences, or discussions during closeddoor Cabinet meetings which, like internal deliberations of the
Supreme Court and other collegiate courts, or executive
38
sessions of either house of Congress, are recognized as
confidential. This kind of information cannot be pried open by
a co-equal branch of government. A frank exchange of
exploratory ideas and assessments, free from the glare of
publicity and pressure by interested parties, is essential to
protect the independence of decision-making of those tasked
39
to exercise Presidential, Legislative and Judicial power. This is
not the situation in the instant case.
We rule, therefore, that the constitutional right to information
includes official information on on-going negotiations before
a final contract. The information, however, must constitute
definite propositions by the government and should not cover
recognized exceptions like privileged information, military and
diplomatic secrets and similar matters affecting national
40
security and public order. Congress has also prescribed other
41
limitations on the right to information in several legislations.
Sixth issue: whether stipulations in the Amended JVA for
the transfer to AMARI of lands, reclaimed or to be
reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and
submerged areas is rooted in the Regalian doctrine which
holds that the State owns all lands and waters of the public
domain. Upon the Spanish conquest of the Philippines,
ownership of all "lands, territories and possessions" in the
42
Philippines passed to the Spanish Crown. The King, as the
sovereign ruler and representative of the people, acquired and
owned all lands and territories in the Philippines except those
he disposed of by grant or sale to private individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian
doctrine substituting, however, the State, in lieu of the King, as
the owner of all lands and waters of the public domain. The
Regalian doctrine is the foundation of the time-honored
principle of land ownership that "all lands that were not
acquired from the Government, either by purchase or by grant,
43
belong to the public domain." Article 339 of the Civil Code of
1889, which is now Article 420 of the Civil Code of 1950,
incorporated the Regalian doctrine.

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Ownership and Disposition of Reclaimed Lands

The Spanish Law of Waters of 1866 was the first statutory law
governing the ownership and disposition of reclaimed lands in
the Philippines. On May 18, 1907, the Philippine Commission
enacted Act No. 1654 which provided for the lease, but not
the sale, of reclaimed lands of the government to
corporations and individuals. Later, on November 29, 1919,
the Philippine Legislature approved Act No. 2874, the Public
Land Act, which authorized the lease, but not the sale, of
reclaimed lands of the government to corporations and
individuals. On November 7, 1936, the National Assembly
passed Commonwealth Act No. 141, also known as the Public
Land Act, which authorized the lease, but not the sale, of
reclaimed lands of the government to corporations and
individuals. CA No. 141 continues to this day as the general
law governing the classification and disposition of lands of the
public domain.
The Spanish Law of Waters of 1866 and the Civil Code of
1889
Under the Spanish Law of Waters of 1866, the shores, bays,
coves, inlets and all waters within the maritime zone of the
Spanish territory belonged to the public domain for public
44
use. The Spanish Law of Waters of 1866 allowed the
reclamation of the sea under Article 5, which provided as
follows:
"Article 5. Lands reclaimed from the sea in
consequence of works constructed by the State, or by
the provinces, pueblos or private persons, with proper
permission, shall become the property of the party
constructing such works, unless otherwise provided by
the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea
belonged to the party undertaking the reclamation, provided
the government issued the necessary permit and did not
reserve ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public
dominion as follows:

Property devoted to public use referred to property open for

use by the public. In contrast, property devoted to public
service referred to property used for some specific public
service and open only to those authorized to use the property.
Property of public dominion referred not only to property
devoted to public use, but also to property not so used but
employed to develop the national wealth. This class of
property constituted property of public dominion although
employed for some economic or commercial activity to
increase the national wealth.
Article 341 of the Civil Code of 1889 governed the reclassification of property of public dominion into private
property, to wit:
"Art. 341. Property of public dominion, when no
longer devoted to public use or to the defense of the
territory, shall become a part of the private property
of the State."
This provision, however, was not self-executing. The legislature,
or the executive department pursuant to law, must declare the
property no longer needed for public use or territorial defense
before the government could lease or alienate the property to
45
private parties.
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No.
1654 which regulated the lease of reclaimed and foreshore
lands. The salient provisions of this law were as follows:
"Section 1. The control and disposition of the
foreshore as defined in existing law, and the title to
all Government or public lands made or reclaimed
by the Government by dredging or filling or
otherwise throughout the Philippine Islands, shall be
retained by the Government without prejudice to
vested rights and without prejudice to rights
conceded to the City of Manila in the Luneta
Extension.

1. That devoted to public use, such as roads, canals,

rivers, torrents, ports and bridges constructed by the
State, riverbanks, shores, roadsteads, and that of a
similar character;

Section 2. (a) The Secretary of the Interior shall cause

all Government or public lands made or reclaimed by
the Government by dredging or filling or otherwise to
be divided into lots or blocks, with the necessary
streets and alleyways located thereon, and shall cause
plats and plans of such surveys to be prepared and
filed with the Bureau of Lands.

2. That belonging exclusively to the State which,

without being of general public use, is employed in
some public service, or in the development of the
national wealth, such as walls, fortresses, and other
works for the defense of the territory, and mines, until
granted to private individuals."

(b) Upon completion of such plats and plans

the Governor-General shall give notice to the
public that such parts of the lands so made or
reclaimed as are not needed for public purposes
will be leased for commercial and business
purposes, x x x.

"Art. 339. Property of public dominion is

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xxx
(e) The leases above provided for shall be disposed
of to the highest and best bidder therefore, subject
to such regulations and safeguards as the GovernorGeneral may by executive order prescribe." (Emphasis
supplied)
Act No. 1654 mandated that the government should retain
title to all lands reclaimed by the government. The Act also
vested in the government control and disposition of foreshore
lands. Private parties could lease lands reclaimed by the
government only if these lands were no longer needed for
public purpose. Act No. 1654 mandated public bidding in the
lease of government reclaimed lands. Act No. 1654 made
government reclaimed lands sui generis in that unlike other
public lands which the government could sell to private parties,
these reclaimed lands were available only for lease to private
parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish
Law of Waters of 1866. Act No. 1654 did not prohibit private
parties from reclaiming parts of the sea under Section 5 of the
Spanish Law of Waters. Lands reclaimed from the sea by
private parties with government permission remained private
lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act
46
No. 2874, the Public Land Act. The salient provisions of Act
No. 2874, on reclaimed lands, were as follows:
"Sec. 6. The Governor-General, upon the
recommendation of the Secretary of Agriculture
and Natural Resources, shall from time to time
classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and
disposition of alienable or disposable public lands, the
Governor-General, upon recommendation by the
Secretary of Agriculture and Natural Resources,
shall from time to time declare what lands are
open to disposition or concession under this Act."
Sec. 8. Only those lands shall be declared open to
disposition or concession which have been
officially delimited or classified x x x.
xxx

Sec. 55. Any tract of land of the public domain which,

being neither timber nor mineral land, shall be
classified as suitable for residential purposes or for
commercial, industrial, or other productive
purposes other than agricultural purposes, and
shall be open to disposition or concession, shall be
disposed of under the provisions of this chapter, and
not otherwise.
Sec. 56. The lands disposable under this title shall
be classified as follows:
(a) Lands reclaimed by the Government by
dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with
water bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the
foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and
(c) of section fifty-six shall be disposed of to
private parties by lease only and not otherwise, as
soon as the Governor-General, upon
recommendation by the Secretary of Agriculture
and Natural Resources, shall declare that the same
are not necessary for the public service and are
open to disposition under this chapter. The lands
included in class (d) may be disposed of by sale or
lease under the provisions of this Act." (Emphasis
supplied)
Section 6 of Act No. 2874 authorized the Governor-General to
"classify lands of the public domain into x x x alienable or
47
disposable" lands. Section 7 of the Act empowered the
Governor-General to "declare what lands are open to
disposition or concession." Section 8 of the Act limited
alienable or disposable lands only to those lands which have
been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under
48
this title shall be classified" as government reclaimed,
foreshore and marshy lands, as well as other lands. All these
lands, however, must be suitable for residential, commercial,
industrial or other productive non-agricultural purposes.
These provisions vested upon the Governor-General the power
to classify inalienable lands of the public domain into
disposable lands of the public domain. These provisions also
empowered the Governor-General to classify further such
disposable lands of the public domain into government
reclaimed, foreshore or marshy lands of the public domain, as
well as other non-agricultural lands.

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Section 58 of Act No. 2874 categorically mandated that

disposable lands of the public domain classified as government
reclaimed, foreshore and marshy lands "shall be disposed of
to private parties by lease only and not otherwise." The
Governor-General, before allowing the lease of these lands to
private parties, must formally declare that the lands were "not
necessary for the public service." Act No. 2874 reiterated the
State policy to lease and not to sell government reclaimed,
foreshore and marshy lands of the public domain, a policy first
enunciated in 1907 in Act No. 1654. Government reclaimed,
foreshore and marshy lands remained sui generis, as the only
alienable or disposable lands of the public domain that the
government could not sell to private parties.
The rationale behind this State policy is obvious. Government
reclaimed, foreshore and marshy public lands for nonagricultural purposes retain their inherent potential as areas for
public service. This is the reason the government prohibited
the sale, and only allowed the lease, of these lands to private
parties. The State always reserved these lands for some future
public service.
Act No. 2874 did not authorize the reclassification of
government reclaimed, foreshore and marshy lands into other
non-agricultural lands under Section 56 (d). Lands falling under
Section 56 (d) were the only lands for non-agricultural
purposes the government could sell to private parties. Thus,
under Act No. 2874, the government could not sell government
reclaimed, foreshore and marshy lands to private parties,
49
unless the legislature passed a law allowing their sale.
Act No. 2874 did not prohibit private parties from reclaiming
parts of the sea pursuant to Section 5 of the Spanish Law of
Waters of 1866. Lands reclaimed from the sea by private
parties with government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its
ratification by the Filipino people. The 1935 Constitution, in
adopting the Regalian doctrine, declared in Section 1, Article
XIII, that
"Section 1. All agricultural, timber, and mineral lands
of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of
potential energy and other natural resources of the
Philippines belong to the State, and their disposition,
exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations
or associations at least sixty per centum of the capital
of which is owned by such citizens, subject to any
existing right, grant, lease, or concession at the time
of the inauguration of the Government established
under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be
alienated, and no license, concession, or lease for the
exploitation, development, or utilization of any of the
natural resources shall be granted for a period

exceeding twenty-five years, renewable for another

twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses
other than the development of water power, in which
cases beneficial use may be the measure and limit of
the grant." (Emphasis supplied)
The 1935 Constitution barred the alienation of all natural
resources except public agricultural lands, which were the only
natural resources the State could alienate. Thus, foreshore
lands, considered part of the State's natural resources, became
inalienable by constitutional fiat, available only for lease for 25
years, renewable for another 25 years. The government could
alienate foreshore lands only after these lands were reclaimed
and classified as alienable agricultural lands of the public
domain. Government reclaimed and marshy lands of the public
domain, being neither timber nor mineral lands, fell under the
50
classification of public agricultural lands. However,
government reclaimed and marshy lands, although subject to
classification as disposable public agricultural lands, could only
be leased and not sold to private parties because of Act No.
2874.
The prohibition on private parties from acquiring ownership of
government reclaimed and marshy lands of the public domain
was only a statutory prohibition and the legislature could
therefore remove such prohibition. The 1935 Constitution did
not prohibit individuals and corporations from acquiring
government reclaimed and marshy lands of the public domain
that were classified as agricultural lands under existing public
land laws. Section 2, Article XIII of the 1935 Constitution
provided as follows:
"Section 2. No private corporation or association
may acquire, lease, or hold public agricultural
lands in excess of one thousand and twenty four
hectares, nor may any individual acquire such
lands by purchase in excess of one hundred and
forty hectares, or by lease in excess of one
thousand and twenty-four hectares, or by
homestead in excess of twenty-four hectares. Lands
adapted to grazing, not exceeding two thousand
hectares, may be leased to an individual, private
corporation, or association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the
legislature did not repeal Section 58 of Act No. 2874 to open
for sale to private parties government reclaimed and marshy
lands of the public domain. On the contrary, the legislature
continued the long established State policy of retaining for the
government title and ownership of government reclaimed and
marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National
Assembly
On November 7, 1936, the National Assembly approved
Commonwealth Act No. 141, also known as the Public Land
Act, which compiled the then existing laws on lands of the

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public domain. CA No. 141, as amended, remains to this day

the existing general law governing the classification and
disposition of lands of the public domain other than timber
51
and mineral lands.
Section 6 of CA No. 141 empowers the President to classify
lands of the public domain into "alienable or
52
disposable" lands of the public domain, which prior to such
classification are inalienable and outside the commerce of man.
Section 7 of CA No. 141 authorizes the President to "declare
what lands are open to disposition or concession." Section 8 of
CA No. 141 states that the government can declare open for
disposition or concession only lands that are "officially
delimited and classified." Sections 6, 7 and 8 of CA No. 141
read as follows:
"Sec. 6. The President, upon the recommendation of
the Secretary of Agriculture and Commerce, shall
from time to time classify the lands of the public
domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such
53
lands from one class to another, for the purpose of
their administration and disposition.
Sec. 7. For the purposes of the administration and
disposition of alienable or disposable public lands, the
President, upon recommendation by the Secretary
of Agriculture and Commerce, shall from time to
time declare what lands are open to disposition or
concession under this Act.
Sec. 8. Only those lands shall be declared open to
disposition or concession which have been
officially delimited and classified and, when
practicable, surveyed, and which have not been
reserved for public or quasi-public uses, nor
appropriated by the Government, nor in any manner
become private property, nor those on which a private
right authorized and recognized by this Act or any
other valid law may be claimed, or which, having been
reserved or appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands
of the public domain, the President must first officially classify
these lands as alienable or disposable, and then declare them
open to disposition or concession. There must be no law
reserving these lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government
reclaimed, foreshore and marshy lands of the public domain,
are as follows:

"Sec. 58. Any tract of land of the public domain

which, being neither timber nor mineral land, is
intended to be used for residential purposes or for
commercial, industrial, or other productive
purposes other than agricultural, and is open to
disposition or concession, shall be disposed of
under the provisions of this chapter and not
otherwise.
Sec. 59. The lands disposable under this title shall
be classified as follows:
(a) Lands reclaimed by the Government by
dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with
water bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the
foregoing classes.
Sec. 60. Any tract of land comprised under this title
may be leased or sold, as the case may be, to any
person, corporation, or association authorized to
purchase or lease public lands for agricultural
purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and
(c) of section fifty-nine shall be disposed of to
private parties by lease only and not otherwise, as
soon as the President, upon recommendation by the
Secretary of Agriculture, shall declare that the same
are not necessary for the public service and are
open to disposition under this chapter. The lands
included in class (d) may be disposed of by sale or
lease under the provisions of this Act." (Emphasis
supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the
1935 Constitution, Section 58 of Act No. 2874 prohibiting the
sale of government reclaimed, foreshore and marshy
disposable lands of the public domain. All these lands are
intended for residential, commercial, industrial or other nonagricultural purposes. As before, Section 61 allowed only the
lease of such lands to private parties. The government could
sell to private parties only lands falling under Section 59 (d) of
CA No. 141, or those lands for non-agricultural purposes not
classified as government reclaimed, foreshore and marshy
disposable lands of the public domain. Foreshore lands,
however, became inalienable under the 1935 Constitution
which only allowed the lease of these lands to qualified private
parties.
Section 58 of CA No. 141 expressly states that disposable lands
of the public domain intended for residential, commercial,

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industrial or other productive purposes other than agricultural

"shall be disposed of under the provisions of this chapter
and not otherwise." Under Section 10 of CA No. 141, the term
"disposition" includes lease of the land. Any disposition of
government reclaimed, foreshore and marshy disposable lands
for non-agricultural purposes must comply with Chapter IX,
54
Title III of CA No. 141, unless a subsequent law amended or
repealed these provisions.
In his concurring opinion in the landmark case of Republic
55
Real Estate Corporation v. Court of Appeals, Justice
Reynato S. Puno summarized succinctly the law on this matter,
as follows:
"Foreshore lands are lands of public dominion
intended for public use. So too are lands reclaimed by
the government by dredging, filling, or other means.
Act 1654 mandated that the control and disposition of
the foreshore and lands under water remained in the
national government. Said law allowed only the
'leasing' of reclaimed land. The Public Land Acts of
1919 and 1936 also declared that the foreshore and
lands reclaimed by the government were to be
"disposed of to private parties by lease only and not
otherwise." Before leasing, however, the GovernorGeneral, upon recommendation of the Secretary of
Agriculture and Natural Resources, had first to
determine that the land reclaimed was not necessary
for the public service. This requisite must have been
met before the land could be disposed of. But even
then, the foreshore and lands under water were not
to be alienated and sold to private parties. The
disposition of the reclaimed land was only by
lease. The land remained property of the State."
(Emphasis supplied)
As observed by Justice Puno in his concurring opinion,
"Commonwealth Act No. 141 has remained in effect at
present."
The State policy prohibiting the sale to private parties of
government reclaimed, foreshore and marshy alienable lands
of the public domain, first implemented in 1907 was thus
reaffirmed in CA No. 141 after the 1935 Constitution took
effect. The prohibition on the sale of foreshore lands, however,
became a constitutional edict under the 1935 Constitution.
Foreshore lands became inalienable as natural resources of the
State, unless reclaimed by the government and classified as
agricultural lands of the public domain, in which case they
would fall under the classification of government reclaimed
lands.
After the effectivity of the 1935 Constitution, government
reclaimed and marshy disposable lands of the public domain
continued to be only leased and not sold to private
56
parties. These lands remained sui generis, as the only
alienable or disposable lands of the public domain the
government could not sell to private parties.

Since then and until now, the only way the government can sell
to private parties government reclaimed and marshy
disposable lands of the public domain is for the legislature to
pass a law authorizing such sale. CA No. 141 does not
authorize the President to reclassify government reclaimed and
marshy lands into other non-agricultural lands under Section
59 (d). Lands classified under Section 59 (d) are the only
alienable or disposable lands for non-agricultural purposes that
the government could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires
congressional authority before lands under Section 59 that the
government previously transferred to government units or
entities could be sold to private parties. Section 60 of CA No.
141 declares that
"Sec. 60. x x x The area so leased or sold shall be such
as shall, in the judgment of the Secretary of
Agriculture and Natural Resources, be reasonably
necessary for the purposes for which such sale or
lease is requested, and shall not exceed one hundred
and forty-four hectares: Provided, however, That this
limitation shall not apply to grants, donations, or
transfers made to a province, municipality or branch
or subdivision of the Government for the purposes
deemed by said entities conducive to the public
interest; but the land so granted, donated, or
transferred to a province, municipality or branch
or subdivision of the Government shall not be
alienated, encumbered, or otherwise disposed of in
a manner affecting its title, except when
authorized by Congress: x x x." (Emphasis supplied)
The congressional authority required in Section 60 of CA No.
141 mirrors the legislative authority required in Section 56 of
Act No. 2874.
One reason for the congressional authority is that Section 60 of
CA No. 141 exempted government units and entities from the
maximum area of public lands that could be acquired from the
State. These government units and entities should not just turn
around and sell these lands to private parties in violation of
constitutional or statutory limitations. Otherwise, the transfer of
lands for non-agricultural purposes to government units and
entities could be used to circumvent constitutional limitations
on ownership of alienable or disposable lands of the public
domain. In the same manner, such transfers could also be used
to evade the statutory prohibition in CA No. 141 on the sale of
government reclaimed and marshy lands of the public domain
to private parties. Section 60 of CA No. 141 constitutes by
57
operation of law a lien on these lands.
In case of sale or lease of disposable lands of the public
domain falling under Section 59 of CA No. 141, Sections 63 and
67 require a public bidding. Sections 63 and 67 of CA No. 141
provide as follows:
"Sec. 63. Whenever it is decided that lands covered by
this chapter are not needed for public purposes, the

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Director of Lands shall ask the Secretary of Agriculture

and Commerce (now the Secretary of Natural
Resources) for authority to dispose of the same. Upon
receipt of such authority, the Director of Lands shall
give notice by public advertisement in the same
manner as in the case of leases or sales of agricultural
public land, x x x.
Sec. 67. The lease or sale shall be made by oral
bidding; and adjudication shall be made to the
highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public
auction all leases or sales of alienable or disposable lands of
58
the public domain.
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did
not repeal Section 5 of the Spanish Law of Waters of 1866.
Private parties could still reclaim portions of the sea with
government permission. However, the reclaimed land could
become private land only if classified as alienable
agricultural land of the public domain open to disposition
under CA No. 141. The 1935 Constitution prohibited the
alienation of all natural resources except public agricultural
lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of
property of public dominion found in the Civil Code of 1889.
Articles 420 and 422 of the Civil Code of 1950 state that
"Art. 420. The following things are property of public
dominion:
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads, and others of
similar character;
(2) Those which belong to the State, without being for
public use, and are intended for some public service
or for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer
intended for public use or for public service, shall
form part of the patrimonial property of the State."
Again, the government must formally declare that the property
of public dominion is no longer needed for public use or public
service, before the same could be classified as patrimonial
59
property of the State. In the case of government reclaimed
and marshy lands of the public domain, the declaration of their
being disposable, as well as the manner of their disposition, is
governed by the applicable provisions of CA No. 141.

Like the Civil Code of 1889, the Civil Code of 1950 included as
property of public dominion those properties of the State
which, without being for public use, are intended for public
service or the "development of the national wealth." Thus,
government reclaimed and marshy lands of the State, even if
not employed for public use or public service, if developed to
enhance the national wealth, are classified as property of public
dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973,
likewise adopted the Regalian doctrine. Section 8, Article XIV of
the 1973 Constitution stated that
"Sec. 8. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, wildlife, and other
natural resources of the Philippines belong to the
State. With the exception of agricultural, industrial
or commercial, residential, and resettlement lands
of the public domain, natural resources shall not
be alienated, and no license, concession, or lease for
the exploration, development, exploitation, or
utilization of any of the natural resources shall be
granted for a period exceeding twenty-five years,
renewable for not more than twenty-five years, except
as to water rights for irrigation, water supply, fisheries,
or industrial uses other than the development of
water power, in which cases, beneficial use may be the
measure and the limit of the grant." (Emphasis
supplied)
The 1973 Constitution prohibited the alienation of all natural
resources with the exception of "agricultural, industrial or
commercial, residential, and resettlement lands of the public
domain." In contrast, the 1935 Constitution barred the
alienation of all natural resources except "public agricultural
lands." However, the term "public agricultural lands" in the
1935 Constitution encompassed industrial, commercial,
60
residential and resettlement lands of the public domain. If the
land of public domain were neither timber nor mineral land, it
would fall under the classification of agricultural land of the
public domain. Both the 1935 and 1973 Constitutions,
therefore, prohibited the alienation of all natural resources
except agricultural lands of the public domain.
The 1973 Constitution, however, limited the alienation of lands
of the public domain to individuals who were citizens of the
Philippines. Private corporations, even if wholly owned by
Philippine citizens, were no longer allowed to acquire alienable
lands of the public domain unlike in the 1935 Constitution.
Section 11, Article XIV of the 1973 Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into account
conservation, ecological, and development
requirements of the natural resources, shall determine
by law the size of land of the public domain which
may be developed, held or acquired by, or leased to,

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any qualified individual, corporation, or association,

and the conditions therefor. No private corporation
or association may hold alienable lands of the
public domain except by lease not to exceed one
thousand hectares in area nor may any citizen hold
such lands by lease in excess of five hundred hectares
or acquire by purchase, homestead or grant, in excess
of twenty-four hectares. No private corporation or
association may hold by lease, concession, license or
permit, timber or forest lands and other timber or
forest resources in excess of one hundred thousand
hectares. However, such area may be increased by the
Batasang Pambansa upon recommendation of the
National Economic and Development Authority."
(Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could
hold alienable lands of the public domain only through lease.
Only individuals could now acquire alienable lands of the
public domain, and private corporations became absolutely
barred from acquiring any kind of alienable land of the
public domain. The constitutional ban extended to all kinds of
alienable lands of the public domain, while the statutory ban
under CA No. 141 applied only to government reclaimed,
foreshore and marshy alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued
Presidential Decree No. 1084 creating PEA, a wholly
government owned and controlled corporation with a special
charter. Sections 4 and 8 of PD No. 1084, vests PEA with the
following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for
the following purposes:
(a) To reclaim land, including foreshore and
submerged areas, by dredging, filling or other
means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds
of lands, buildings, estates and other forms of real
property, owned, managed, controlled and/or
operated by the government;
(c) To provide for, operate or administer such service
as may be necessary for the efficient, economical and
beneficial utilization of the above properties.

(i) To hold lands of the public domain in excess of

the area permitted to private corporations by statute.
(j) To reclaim lands and to construct work across, or
otherwise, any stream, watercourse, canal, ditch, flume
x x x.
xxx
(o) To perform such acts and exercise such functions
as may be necessary for the attainment of the
purposes and objectives herein specified." (Emphasis
supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and
submerged areas of the public domain. Foreshore areas are
those covered and uncovered by the ebb and flow of the
61
tide. Submerged areas are those permanently under water
62
regardless of the ebb and flow of the tide. Foreshore and
submerged areas indisputably belong to the public
63
domain and are inalienable unless reclaimed, classified as
alienable lands open to disposition, and further declared no
longer needed for public service.
The ban in the 1973 Constitution on private corporations from
acquiring alienable lands of the public domain did not apply to
PEA since it was then, and until today, a fully owned
government corporation. The constitutional ban applied then,
as it still applies now, only to "private corporations and
associations." PD No. 1084 expressly empowers PEA "to hold
lands of the public domain" even "in excess of the area
permitted to private corporations by statute." Thus, PEA can
hold title to private lands, as well as title to lands of the
public domain.
In order for PEA to sell its reclaimed foreshore and submerged
alienable lands of the public domain, there must be legislative
authority empowering PEA to sell these lands. This legislative
authority is necessary in view of Section 60 of CA No.141,
which states
"Sec. 60. x x x; but the land so granted, donated or
transferred to a province, municipality, or branch or
subdivision of the Government shall not be alienated,
encumbered or otherwise disposed of in a manner
affecting its title, except when authorized by
Congress; x x x." (Emphasis supplied)

(a)To prescribe its by-laws.

Without such legislative authority, PEA could not sell but only
lease its reclaimed foreshore and submerged alienable lands of
the public domain. Nevertheless, any legislative authority
granted to PEA to sell its reclaimed alienable lands of the
public domain would be subject to the constitutional ban on
private corporations from acquiring alienable lands of the
public domain. Hence, such legislative authority could only
benefit private individuals.

xxx

Dispositions under the 1987 Constitution

Sec. 5. Powers and functions of the Authority. The

Authority shall, in carrying out the purposes for which
it is created, have the following powers and functions:

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The 1987 Constitution, like the 1935 and 1973 Constitutions

before it, has adopted the Regalian doctrine. The 1987
Constitution declares that all natural resources are "owned by
the State," and except for alienable agricultural lands of the
public domain, natural resources cannot be alienated. Sections
2 and 3, Article XII of the 1987 Constitution state that
"Section 2. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources
are owned by the State. With the exception of
agricultural lands, all other natural resources shall
not be alienated. The exploration, development, and
utilization of natural resources shall be under the full
control and supervision of the State. x x x.
Section 3. Lands of the public domain are classified
into agricultural, forest or timber, mineral lands, and
national parks. Agricultural lands of the public domain
may be further classified by law according to the uses
which they may be devoted. Alienable lands of the
public domain shall be limited to agricultural
lands. Private corporations or associations may
not hold such alienable lands of the public domain
except by lease, for a period not exceeding twentyfive years, renewable for not more than twentyfive years, and not to exceed one thousand
hectares in area. Citizens of the Philippines may lease
not more than five hundred hectares, or acquire not
more than twelve hectares thereof by purchase,
homestead, or grant.
Taking into account the requirements of conservation,
ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall
determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or
leased and the conditions therefor." (Emphasis
supplied)
The 1987 Constitution continues the State policy in the 1973
Constitution banning private corporations from acquiring any
kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations
to hold alienable lands of the public domain only through
lease. As in the 1935 and 1973 Constitutions, the general law
governing the lease to private corporations of reclaimed,
foreshore and marshy alienable lands of the public domain is
still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations
from acquiring, except through lease, alienable lands of the
public domain is not well understood. During the deliberations
of the 1986 Constitutional Commission, the commissioners
probed the rationale behind this ban, thus:

"FR. BERNAS: Mr. Vice-President, my questions have

reference to page 3, line 5 which says:
`No private corporation or association may hold
alienable lands of the public domain except by lease,
not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935
Constitution, but this was introduced in the 1973
Constitution. In effect, it prohibits private corporations
from acquiring alienable public lands. But it has not
been very clear in jurisprudence what the reason
for this is. In some of the cases decided in 1982 and
1983, it was indicated that the purpose of this is to
prevent large landholdings. Is that the intent of this
provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia
ni Cristo, there were instances where the Iglesia ni
Cristo was not allowed to acquire a mere 313-square
meter land where a chapel stood because the
Supreme Court said it would be in violation of this."
(Emphasis supplied)
64

In Ayog v. Cusi, the Court explained the rationale behind this

constitutional ban in this way:
"Indeed, one purpose of the constitutional prohibition
against purchases of public agricultural lands by
private corporations is to equitably diffuse land
ownership or to encourage 'owner-cultivatorship and
the economic family-size farm' and to prevent a
recurrence of cases like the instant case. Huge
landholdings by corporations or private persons had
spawned social unrest."
However, if the constitutional intent is to prevent huge
landholdings, the Constitution could have simply limited the
size of alienable lands of the public domain that corporations
could acquire. The Constitution could have followed the
limitations on individuals, who could acquire not more than 24
hectares of alienable lands of the public domain under the
1973 Constitution, and not more than 12 hectares under the
1987 Constitution.
If the constitutional intent is to encourage economic familysize farms, placing the land in the name of a corporation would
be more effective in preventing the break-up of farmlands. If
the farmland is registered in the name of a corporation, upon
the death of the owner, his heirs would inherit shares in the
corporation instead of subdivided parcels of the farmland. This
would prevent the continuing break-up of farmlands into
smaller and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the
constitutional limitation on individuals from acquiring more

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than the allowed area of alienable lands of the public domain.

Without the constitutional ban, individuals who already
acquired the maximum area of alienable lands of the public
domain could easily set up corporations to acquire more
alienable public lands. An individual could own as many
corporations as his means would allow him. An individual could
even hide his ownership of a corporation by putting his
nominees as stockholders of the corporation. The corporation
is a convenient vehicle to circumvent the constitutional
limitation on acquisition by individuals of alienable lands of the
public domain.
The constitutional intent, under the 1973 and 1987
Constitutions, is to transfer ownership of only a limited area of
alienable land of the public domain to a qualified individual.
This constitutional intent is safeguarded by the provision
prohibiting corporations from acquiring alienable lands of the
public domain, since the vehicle to circumvent the
constitutional intent is removed. The available alienable public
lands are gradually decreasing in the face of an ever-growing
population. The most effective way to insure faithful adherence
to this constitutional intent is to grant or sell alienable lands of
the public domain only to individuals. This, it would seem, is
the practical benefit arising from the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second
Whereas clause, consists of three properties, namely:
1. "[T]hree partially reclaimed and substantially eroded
islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a
combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters
contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an
additional 350 hectares more or less to regularize the
65
configuration of the reclaimed area."
PEA confirms that the Amended JVA involves "the development
of the Freedom Islands and further reclamation of about 250
hectares x x x," plus an option "granted to AMARI to
66
subsequently reclaim another 350 hectares x x x."
In short, the Amended JVA covers a reclamation area of 750
hectares. Only 157.84 hectares of the 750-hectare
reclamation project have been reclaimed, and the rest of
the 592.15 hectares are still submerged areas forming part
of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of
P1,894,129,200.00 for PEA's "actual cost" in partially reclaiming
the Freedom Islands. AMARI will also complete, at its own
expense, the reclamation of the Freedom Islands. AMARI will
further shoulder all the reclamation costs of all the other areas,

totaling 592.15 hectares, still to be reclaimed. AMARI and PEA

will share, in the proportion of 70 percent and 30 percent,
respectively, the total net usable area which is defined in the
Amended JVA as the total reclaimed area less 30 percent
earmarked for common areas. Title to AMARI's share in the net
usable area, totaling 367.5 hectares, will be issued in the name
of AMARI. Section 5.2 (c) of the Amended JVA provides that
"x x x, PEA shall have the duty to execute without
delay the necessary deed of transfer or conveyance of
the title pertaining to AMARI's Land share based on
the Land Allocation Plan. PEA, when requested in
writing by AMARI, shall then cause the issuance
and delivery of the proper certificates of title
covering AMARI's Land Share in the name of
AMARI, x x x; provided, that if more than seventy
percent (70%) of the titled area at any given time
pertains to AMARI, PEA shall deliver to AMARI only
seventy percent (70%) of the titles pertaining to
AMARI, until such time when a corresponding
proportionate area of additional land pertaining to
PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire
and own a maximum of 367.5 hectares of reclaimed land
which will be titled in its name.
To implement the Amended JVA, PEA delegated to the
unincorporated PEA-AMARI joint venture PEA's statutory
authority, rights and privileges to reclaim foreshore and
submerged areas in Manila Bay. Section 3.2.a of the Amended
JVA states that
"PEA hereby contributes to the joint venture its rights
and privileges to perform Rawland Reclamation and
Horizontal Development as well as own the
Reclamation Area, thereby granting the Joint Venture
the full and exclusive right, authority and privilege to
undertake the Project in accordance with the Master
Development Plan."
The Amended JVA is the product of a renegotiation of the
original JVA dated April 25, 1995 and its supplemental
agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation,
can acquire and own under the Amended JVA 367.5 hectares of
reclaimed foreshore and submerged areas in Manila Bay in
view of Sections 2 and 3, Article XII of the 1987 Constitution
which state that:
"Section 2. All lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources
are owned by the State. With the exception of

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agricultural lands, all other natural resources shall

not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain
shall be limited to agricultural lands. Private
corporations or associations may not hold such
alienable lands of the public domain except by
lease, x x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged
Areas
PEA readily concedes that lands reclaimed from foreshore or
submerged areas of Manila Bay are alienable or disposable
67
lands of the public domain. In its Memorandum, PEA admits
that
"Under the Public Land Act (CA 141, as
amended), reclaimed lands are classified as
alienable and disposable lands of the public
domain:
'Sec. 59. The lands disposable under this title
shall be classified as follows:
(a) Lands reclaimed by the government by
dredging, filling, or other means;
x x x.'" (Emphasis supplied)
68

Likewise, the Legal Task Force constituted under Presidential

Administrative Order No. 365 admitted in its Report and
Recommendation to then President Fidel V.
Ramos, "[R]eclaimed lands are classified as alienable and
69
disposable lands of the public domain." The Legal Task
Force concluded that
"D. Conclusion
Reclaimed lands are lands of the public domain.
However, by statutory authority, the rights of
ownership and disposition over reclaimed lands have
been transferred to PEA, by virtue of which PEA, as
owner, may validly convey the same to any qualified
person without violating the Constitution or any
statute.
The constitutional provision prohibiting private
corporations from holding public land, except by lease
70
(Sec. 3, Art. XVII, 1987 Constitution), does not apply
to reclaimed lands whose ownership has passed on to
PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the
foreshore and submerged areas of Manila Bay are part of the

"lands of the public domain, waters x x x and other natural

resources" and consequently "owned by the State." As such,
foreshore and submerged areas "shall not be alienated," unless
they are classified as "agricultural lands" of the public domain.
The mere reclamation of these areas by PEA does not convert
these inalienable natural resources of the State into alienable
or disposable lands of the public domain. There must be a law
or presidential proclamation officially classifying these
reclaimed lands as alienable or disposable and open to
disposition or concession. Moreover, these reclaimed lands
cannot be classified as alienable or disposable if the law has
71
reserved them for some public or quasi-public use.
Section 8 of CA No. 141 provides that "only those lands shall
be declared open to disposition or concession which have
72
been officially delimited and classified." The President has
the authority to classify inalienable lands of the public domain
into alienable or disposable lands of the public domain,
73
pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia, the
Executive Department attempted to sell the Roppongi property
in Tokyo, Japan, which was acquired by the Philippine
Government for use as the Chancery of the Philippine Embassy.
Although the Chancery had transferred to another location
thirteen years earlier, the Court still ruled that, under Article
74
422 of the Civil Code, a property of public dominion retains
such character until formally declared otherwise. The Court
ruled that
"The fact that the Roppongi site has not been used for
a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any
such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and
Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A
property continues to be part of the public domain,
not available for private appropriation or
ownership 'until there is a formal declaration on
the part of the government to withdraw it from
being such' (Ignacio v. Director of Lands, 108 Phil. 335
[1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the
issuance of special land patents for lands reclaimed by PEA
from the foreshore or submerged areas of Manila Bay. On
January 19, 1988 then President Corazon C. Aquino issued
Special Patent No. 3517 in the name of PEA for the 157.84
hectares comprising the partially reclaimed Freedom Islands.
Subsequently, on April 9, 1999 the Register of Deeds of the
Municipality of Paranaque issued TCT Nos. 7309, 7311 and
7312 in the name of PEA pursuant to Section 103 of PD No.
1529 authorizing the issuance of certificates of title
corresponding to land patents. To this day, these certificates of
title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual
issuance of a special patent covering the Freedom Islands, is
equivalent to an official proclamation classifying the Freedom
Islands as alienable or disposable lands of the public domain.
PD No. 1085 and President Aquino's issuance of a land patent

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also constitute a declaration that the Freedom Islands are no

longer needed for public service. The Freedom Islands are
thus alienable or disposable lands of the public domain,
open to disposition or concession to qualified parties.
At the time then President Aquino issued Special Patent No.
3517, PEA had already reclaimed the Freedom Islands although
subsequently there were partial erosions on some areas. The
government had also completed the necessary surveys on
these islands. Thus, the Freedom Islands were no longer part of
Manila Bay but part of the land mass. Section 3, Article XII of
the 1987 Constitution classifies lands of the public domain into
"agricultural, forest or timber, mineral lands, and national
parks." Being neither timber, mineral, nor national park lands,
the reclaimed Freedom Islands necessarily fall under the
classification of agricultural lands of the public domain. Under
the 1987 Constitution, agricultural lands of the public domain
are the only natural resources that the State may alienate to
qualified private parties. All other natural resources, such as the
seas or bays, are "waters x x x owned by the State" forming
part of the public domain, and are inalienable pursuant to
Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands
because CDCP, then a private corporation, reclaimed the
islands under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of
the Spanish Law of Waters of 1866, argues that "if the
ownership of reclaimed lands may be given to the party
constructing the works, then it cannot be said that reclaimed
lands are lands of the public domain which the State may not
75
alienate." Article 5 of the Spanish Law of Waters reads as
follows:
"Article 5. Lands reclaimed from the sea in
consequence of works constructed by the State, or by
the provinces, pueblos or private persons, with proper
permission, shall become the property of the party
constructing such works, unless otherwise provided
by the terms of the grant of authority." (Emphasis
supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private
parties could reclaim from the sea only with "proper
permission" from the State. Private parties could own the
reclaimed land only if not "otherwise provided by the terms of
the grant of authority." This clearly meant that no one could
reclaim from the sea without permission from the State
because the sea is property of public dominion. It also meant
that the State could grant or withhold ownership of the
reclaimed land because any reclaimed land, like the sea from
which it emerged, belonged to the State. Thus, a private person
reclaiming from the sea without permission from the State
could not acquire ownership of the reclaimed land which would
remain property of public dominion like the sea it
76
replaced. Article 5 of the Spanish Law of Waters of 1866
adopted the time-honored principle of land ownership that "all
lands that were not acquired from the government, either by
77
purchase or by grant, belong to the public domain."

Article 5 of the Spanish Law of Waters must be read together

with laws subsequently enacted on the disposition of public
lands. In particular, CA No. 141 requires that lands of the public
domain must first be classified as alienable or disposable
before the government can alienate them. These lands must
not be reserved for public or quasi-public
78
purposes. Moreover, the contract between CDCP and the
government was executed after the effectivity of the 1973
Constitution which barred private corporations from acquiring
any kind of alienable land of the public domain. This contract
could not have converted the Freedom Islands into private
lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973,
revoked all laws authorizing the reclamation of areas under
water and revested solely in the National Government the
power to reclaim lands. Section 1 of PD No. 3-A declared that
"The provisions of any law to the contrary
notwithstanding, the reclamation of areas under
water, whether foreshore or inland, shall be limited to
the National Government or any person authorized
by it under a proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of
1866 because reclamation of areas under water could now be
undertaken only by the National Government or by a person
contracted by the National Government. Private parties may
reclaim from the sea only under a contract with the National
Government, and no longer by grant or permission as provided
in Section 5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979,
designated PEA as the National Government's implementing
arm to undertake "all reclamation projects of the government,"
which "shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity." Under
such contract, a private party receives compensation for
reclamation services rendered to PEA. Payment to the
contractor may be in cash, or in kind consisting of portions of
the reclaimed land, subject to the constitutional ban on private
corporations from acquiring alienable lands of the public
domain. The reclaimed land can be used as payment in kind
only if the reclaimed land is first classified as alienable or
disposable land open to disposition, and then declared no
longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but
also an additional 592.15 hectares which are still submerged
and forming part of Manila Bay. There is no legislative or
Presidential act classifying these submerged areas as
alienable or disposable lands of the public domain open to
disposition. These submerged areas are not covered by any
patent or certificate of title. There can be no dispute that these
submerged areas form part of the public domain, and in their
present state are inalienable and outside the commerce of
man. Until reclaimed from the sea, these submerged areas are,

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under the Constitution, "waters x x x owned by the State,"

forming part of the public domain and consequently
inalienable. Only when actually reclaimed from the sea can
these submerged areas be classified as public agricultural
lands, which under the Constitution are the only natural
resources that the State may alienate. Once reclaimed and
transformed into public agricultural lands, the government may
then officially classify these lands as alienable or disposable
lands open to disposition. Thereafter, the government may
declare these lands no longer needed for public service. Only
then can these reclaimed lands be considered alienable or
disposable lands of the public domain and within the
commerce of man.
The classification of PEA's reclaimed foreshore and submerged
lands into alienable or disposable lands open to disposition is
necessary because PEA is tasked under its charter to undertake
public services that require the use of lands of the public
domain. Under Section 5 of PD No. 1084, the functions of PEA
include the following: "[T]o own or operate railroads, tramways
and other kinds of land transportation, x x x; [T]o construct,
maintain and operate such systems of sanitary sewers as may
be necessary; [T]o construct, maintain and operate such storm
drains as may be necessary." PEA is empowered to issue "rules
and regulations as may be necessary for the proper use by
private parties of any or all of the highways, roads, utilities,
buildings and/or any of its properties and to impose or
collect fees or tolls for their use." Thus, part of the reclaimed
foreshore and submerged lands held by the PEA would actually
be needed for public use or service since many of the functions
imposed on PEA by its charter constitute essential public
services.
Moreover, Section 1 of Executive Order No. 525 provides that
PEA "shall be primarily responsible for integrating, directing,
and coordinating all reclamation projects for and on behalf of
the National Government." The same section also states that
"[A]ll reclamation projects shall be approved by the President
upon recommendation of the PEA, and shall be undertaken by
the PEA or through a proper contract executed by it with any
person or entity; x x x." Thus, under EO No. 525, in relation to
PD No. 3-A and PD No.1084, PEA became the primary
implementing agency of the National Government to reclaim
foreshore and submerged lands of the public domain. EO No.
525 recognized PEA as the government entity "to undertake
the reclamation of lands and ensure their maximum utilization
79
in promoting public welfare and interests." Since large
portions of these reclaimed lands would obviously be needed
for public service, there must be a formal declaration
segregating reclaimed lands no longer needed for public
service from those still needed for public service.1wphi1.nt
Section 3 of EO No. 525, by declaring that all lands reclaimed
by PEA "shall belong to or be owned by the PEA," could not
automatically operate to classify inalienable lands into
alienable or disposable lands of the public domain. Otherwise,
reclaimed foreshore and submerged lands of the public
domain would automatically become alienable once reclaimed
by PEA, whether or not classified as alienable or disposable.

The Revised Administrative Code of 1987, a later law than

either PD No. 1084 or EO No. 525, vests in the Department of
Environment and Natural Resources ("DENR" for brevity) the
following powers and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest
lands, alienable and disposable public lands,
mineral resources and, in the process of exercising
such control, impose appropriate taxes, fees, charges,
rentals and any such form of levy and collect such
revenues for the exploration, development, utilization
or gathering of such resources;
xxx
(14) Promulgate rules, regulations and guidelines
on the issuance of licenses, permits, concessions,
lease agreements and such other privileges
concerning the development, exploration and
utilization of the country's marine, freshwater, and
brackish water and over all aquatic resources of
the country and shall continue to oversee,
supervise and police our natural resources; cancel
or cause to cancel such privileges upon failure, noncompliance or violations of any regulation, order, and
for all other causes which are in furtherance of the
conservation of natural resources and supportive of
the national interest;
(15) Exercise exclusive jurisdiction on the
management and disposition of all lands of the
public domain and serve as the sole agency
responsible for classification, sub-classification,
surveying and titling of lands in consultation with
80
appropriate agencies." (Emphasis supplied)
As manager, conservator and overseer of the natural resources
of the State, DENR exercises "supervision and control over
alienable and disposable public lands." DENR also exercises
"exclusive jurisdiction on the management and disposition of
all lands of the public domain." Thus, DENR decides whether
areas under water, like foreshore or submerged areas of Manila
Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake
reclamation projects in Manila Bay, or in any part of the
country.
DENR also exercises exclusive jurisdiction over the disposition
of all lands of the public domain. Hence, DENR decides
whether reclaimed lands of PEA should be classified as
81
82
alienable under Sections 6 and 7 of CA No. 141. Once DENR
decides that the reclaimed lands should be so classified, it then

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recommends to the President the issuance of a proclamation

classifying the lands as alienable or disposable lands of the
public domain open to disposition. We note that then DENR
Secretary Fulgencio S. Factoran, Jr. countersigned Special
Patent No. 3517 in compliance with the Revised Administrative
Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the
reclamation of areas under water, while PEA is vested with the
power to undertake the physical reclamation of areas under
water, whether directly or through private contractors. DENR is
also empowered to classify lands of the public domain into
alienable or disposable lands subject to the approval of the
President. On the other hand, PEA is tasked to develop, sell or
lease the reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of
foreshore or submerged areas does not make the reclaimed
lands alienable or disposable lands of the public domain, much
less patrimonial lands of PEA. Likewise, the mere transfer by the
National Government of lands of the public domain to PEA
does not make the lands alienable or disposable lands of the
public domain, much less patrimonial lands of PEA.
Absent two official acts a classification that these lands are
alienable or disposable and open to disposition and a
declaration that these lands are not needed for public service,
lands reclaimed by PEA remain inalienable lands of the public
domain. Only such an official classification and formal
declaration can convert reclaimed lands into alienable or
disposable lands of the public domain, open to disposition
83
under the Constitution, Title I and Title III of CA No. 141 and
84
other applicable laws.
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or
disposable lands of the public domain, the reclaimed lands
shall be disposed of in accordance with CA No. 141, the Public
Land Act. PEA, citing Section 60 of CA No. 141, admits that
reclaimed lands transferred to a branch or subdivision of the
government "shall not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, except when
85
authorized by Congress: x x x." (Emphasis by PEA)
86

In Laurel vs. Garcia, the Court cited Section 48 of the

Revised Administrative Code of 1987, which states that
"Sec. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government is
authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any
real property belonging to the Government. The Court
declared that -

"It is not for the President to convey real property of

the government on his or her own sole will. Any such
conveyance must be authorized and approved by a
law enacted by the Congress. It requires executive
and legislative concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the
legislative authority allowing PEA to sell its reclaimed lands. PD
No. 1085, issued on February 4, 1977, provides that
"The land reclaimed in the foreshore and offshore
area of Manila Bay pursuant to the contract for the
reclamation and construction of the Manila-Cavite
Coastal Road Project between the Republic of the
Philippines and the Construction and Development
Corporation of the Philippines dated November 20,
1973 and/or any other contract or reclamation
covering the same area is hereby transferred,
conveyed and assigned to the ownership and
administration of the Public Estates
Authority established pursuant to PD No. 1084;
Provided, however, That the rights and interests of the
Construction and Development Corporation of the
Philippines pursuant to the aforesaid contract shall be
recognized and respected.
Henceforth, the Public Estates Authority shall exercise
the rights and assume the obligations of the Republic
of the Philippines (Department of Public Highways)
arising from, or incident to, the aforesaid contract
between the Republic of the Philippines and the
Construction and Development Corporation of the
Philippines.
In consideration of the foregoing transfer and
assignment, the Public Estates Authority shall issue in
favor of the Republic of the Philippines the
corresponding shares of stock in said entity with an
issued value of said shares of stock (which) shall be
deemed fully paid and non-assessable.
The Secretary of Public Highways and the General
Manager of the Public Estates Authority shall execute
such contracts or agreements, including appropriate
agreements with the Construction and Development
Corporation of the Philippines, as may be necessary to
implement the above.
Special land patent/patents shall be issued by the
Secretary of Natural Resources in favor of the
Public Estates Authority without prejudice to the
subsequent transfer to the contractor or his
assignees of such portion or portions of the land
reclaimed or to be reclaimed as provided for in the
above-mentioned contract. On the basis of such
patents, the Land Registration Commission shall
issue the corresponding certificate of title."
(Emphasis supplied)

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On the other hand, Section 3 of EO No. 525, issued on February

14, 1979, provides that "Sec. 3. All lands reclaimed by PEA shall belong to
or be owned by the PEA which shall be responsible
for its administration, development, utilization or
disposition in accordance with the provisions of
Presidential Decree No. 1084. Any and all income that
the PEA may derive from the sale, lease or use of
reclaimed lands shall be used in accordance with the
provisions of Presidential Decree No. 1084."
There is no express authority under either PD No. 1085 or EO
No. 525 for PEA to sell its reclaimed lands. PD No. 1085 merely
transferred "ownership and administration" of lands reclaimed
from Manila Bay to PEA, while EO No. 525 declared that lands
reclaimed by PEA "shall belong to or be owned by PEA." EO No.
525 expressly states that PEA should dispose of its reclaimed
lands "in accordance with the provisions of Presidential Decree
No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop,
improve, acquire, administer, deal in, subdivide, dispose, lease
and sell any and all kinds of lands x x x owned, managed,
87
controlled and/or operated by the government." (Emphasis
supplied) There is, therefore, legislative authority granted
to PEA to sell its lands, whether patrimonial or alienable
lands of the public domain. PEA may sell to private parties
its patrimonial properties in accordance with the PEA charter
free from constitutional limitations. The constitutional ban on
private corporations from acquiring alienable lands of the
public domain does not apply to the sale of PEA's patrimonial
lands.
PEA may also sell its alienable or disposable lands of the
public domain to private individuals since, with the legislative
authority, there is no longer any statutory prohibition against
such sales and the constitutional ban does not apply to
individuals. PEA, however, cannot sell any of its alienable or
disposable lands of the public domain to private corporations
since Section 3, Article XII of the 1987 Constitution expressly
prohibits such sales. The legislative authority benefits only
individuals. Private corporations remain barred from acquiring
any kind of alienable land of the public domain, including
government reclaimed lands.
The provision in PD No. 1085 stating that portions of the
reclaimed lands could be transferred by PEA to the "contractor
or his assignees" (Emphasis supplied) would not apply to
private corporations but only to individuals because of the
constitutional ban. Otherwise, the provisions of PD No. 1085
would violate both the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of reclaimed
lands
Assuming the reclaimed lands of PEA are classified as alienable
or disposable lands open to disposition, and further declared

no longer needed for public service, PEA would have to

conduct a public bidding in selling or leasing these lands. PEA
must observe the provisions of Sections 63 and 67 of CA No.
141 requiring public auction, in the absence of a law exempting
88
PEA from holding a public auction. Special Patent No. 3517
expressly states that the patent is issued by authority of the
Constitution and PD No. 1084, "supplemented by
Commonwealth Act No. 141, as amended." This is an
acknowledgment that the provisions of CA No. 141 apply to
the disposition of reclaimed alienable lands of the public
domain unless otherwise provided by law. Executive Order No.
89
654, which authorizes PEA "to determine the kind and
manner of payment for the transfer" of its assets and
properties, does not exempt PEA from the requirement of
public auction. EO No. 654 merely authorizes PEA to decide the
mode of payment, whether in kind and in installment, but does
not authorize PEA to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known
as the Government Auditing Code, the government is required
to sell valuable government property through public bidding.
Section 79 of PD No. 1445 mandates that
"Section 79. When government property has become
unserviceable for any cause, or is no longer needed, it
shall, upon application of the officer accountable
therefor, be inspected by the head of the agency or
his duly authorized representative in the presence of
the auditor concerned and, if found to be valueless or
unsaleable, it may be destroyed in their presence. If
found to be valuable, it may be sold at public
auction to the highest bidder under the supervision
of the proper committee on award or similar body in
the presence of the auditor concerned or other
authorized representative of the Commission, after
advertising by printed notice in the Official
Gazette, or for not less than three consecutive days
in any newspaper of general circulation, or where
the value of the property does not warrant the
expense of publication, by notices posted for a like
period in at least three public places in the locality
where the property is to be sold. In the event that
the public auction fails, the property may be sold
at a private sale at such price as may be fixed by
the same committee or body concerned and
approved by the Commission."
It is only when the public auction fails that a negotiated sale is
allowed, in which case the Commission on Audit must approve
90
the selling price. The Commission on Audit implements
Section 79 of the Government Auditing Code through Circular
91
No. 89-296 dated January 27, 1989. This circular emphasizes
that government assets must be disposed of only through
public auction, and a negotiated sale can be resorted to only in
case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified
to bid for PEA's reclaimed foreshore and submerged alienable
lands of the public domain. Private corporations are barred

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from bidding at the auction sale of any kind of alienable land

of the public domain.
PEA originally scheduled a public bidding for the Freedom
Islands on December 10, 1991. PEA imposed a condition that
the winning bidder should reclaim another 250 hectares of
submerged areas to regularize the shape of the Freedom
Islands, under a 60-40 sharing of the additional reclaimed areas
92
in favor of the winning bidder. No one, however, submitted a
bid. On December 23, 1994, the Government Corporate
Counsel advised PEA it could sell the Freedom Islands through
negotiation, without need of another public bidding, because
93
of the failure of the public bidding on December 10, 1991.
However, the original JVA dated April 25, 1995 covered not
only the Freedom Islands and the additional 250 hectares still
to be reclaimed, it also granted an option to AMARI to reclaim
another 350 hectares. The original JVA, a negotiated contract,
94
enlarged the reclamation area to 750 hectares. The failure of
public bidding on December 10, 1991, involving only 407.84
95
hectares, is not a valid justification for a negotiated sale of
750 hectares, almost double the area publicly auctioned.
Besides, the failure of public bidding happened on December
10, 1991, more than three years before the signing of the
original JVA on April 25, 1995. The economic situation in the
country had greatly improved during the intervening period.
Reclamation under the BOT Law and the Local Government
Code
The constitutional prohibition in Section 3, Article XII of the
1987 Constitution is absolute and clear: "Private corporations
or associations may not hold such alienable lands of the public
domain except by lease, x x x." Even Republic Act No. 6957
("BOT Law," for brevity), cited by PEA and AMARI as legislative
authority to sell reclaimed lands to private parties, recognizes
the constitutional ban. Section 6 of RA No. 6957 states
"Sec. 6. Repayment Scheme. - For the financing,
construction, operation and maintenance of any
infrastructure projects undertaken through the buildoperate-and-transfer arrangement or any of its
variations pursuant to the provisions of this Act, the
project proponent x x x may likewise be repaid in the
form of a share in the revenue of the project or other
non-monetary payments, such as, but not limited to,
the grant of a portion or percentage of the reclaimed
land, subject to the constitutional requirements
with respect to the ownership of the land: x x x."
(Emphasis supplied)
A private corporation, even one that undertakes the physical
reclamation of a government BOT project, cannot acquire
reclaimed alienable lands of the public domain in view of the
constitutional ban.
Section 302 of the Local Government Code, also mentioned by
PEA and AMARI, authorizes local governments in land

reclamation projects to pay the contractor or developer in kind

consisting of a percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance,
Operation, and Management of Infrastructure Projects
by the Private Sector. x x x
xxx
In case of land reclamation or construction of
industrial estates, the repayment plan may consist of
the grant of a portion or percentage of the reclaimed
land or the industrial estate constructed."
Although Section 302 of the Local Government Code does not
contain a proviso similar to that of the BOT Law, the
constitutional restrictions on land ownership automatically
apply even though not expressly mentioned in the Local
Government Code.
Thus, under either the BOT Law or the Local Government Code,
the contractor or developer, if a corporate entity, can only be
paid with leaseholds on portions of the reclaimed land. If the
contractor or developer is an individual, portions of the
96
reclaimed land, not exceeding 12 hectares of non-agricultural
lands, may be conveyed to him in ownership in view of the
legislative authority allowing such conveyance. This is the only
way these provisions of the BOT Law and the Local
Government Code can avoid a direct collision with Section 3,
Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership
of the reclaimed lands to public respondent PEA transformed
such lands of the public domain to private lands." This theory is
echoed by AMARI which maintains that the "issuance of the
special patent leading to the eventual issuance of title takes the
subject land away from the land of public domain and converts
the property into patrimonial or private property." In short, PEA
and AMARI contend that with the issuance of Special Patent
No. 3517 and the corresponding certificates of titles, the 157.84
hectares comprising the Freedom Islands have become private
lands of PEA. In support of their theory, PEA and AMARI cite
the following rulings of the Court:
97

1. Sumail v. Judge of CFI of Cotabato, where the

Court held
"Once the patent was granted and the corresponding
certificate of title was issued, the land ceased to be
part of the public domain and became private
property over which the Director of Lands has neither
control nor jurisdiction."
98

2. Lee Hong Hok v. David, where the Court declared -

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"After the registration and issuance of the certificate

and duplicate certificate of title based on a public land
patent, the land covered thereby automatically comes
under the operation of Republic Act 496 subject to all
the safeguards provided therein."3. Heirs of Gregorio
99
Tengco v. Heirs of Jose Aliwalas, where the Court
ruled "While the Director of Lands has the power to review
homestead patents, he may do so only so long as the
land remains part of the public domain and continues
to be under his exclusive control; but once the patent
is registered and a certificate of title is issued, the land
ceases to be part of the public domain and becomes
private property over which the Director of Lands has
neither control nor jurisdiction."
100

4. Manalo v. Intermediate Appellate Court,

Court held

101

In the instant case, the only patent and certificates of title

issued are those in the name of PEA, a wholly government
owned corporation performing public as well as proprietary
functions. No patent or certificate of title has been issued to
any private party. No one is asking the Director of Lands to
cancel PEA's patent or certificates of title. In fact, the thrust of
the instant petition is that PEA's certificates of title should
remain with PEA, and the land covered by these certificates,
being alienable lands of the public domain, should not be sold
to a private corporation.

where the

"When the lots in dispute were certified as disposable

on May 19, 1971, and free patents were issued
covering the same in favor of the private respondents,
the said lots ceased to be part of the public domain
and, therefore, the Director of Lands lost jurisdiction
over the same."
5.Republic v. Court of Appeals,
stated

other facilities of Mindanao Medical Center, which performed a

public service. The Court affirmed the registration of the 12.8hectare public land in the name of Mindanao Medical Center
under Section 122 of Act No. 496. This fifth case is an example
of a public land being registered under Act No. 496 without the
land losing its character as a property of public dominion.

where the Court

"Proclamation No. 350, dated October 9, 1956, of

President Magsaysay legally effected a land grant to
the Mindanao Medical Center, Bureau of Medical
Services, Department of Health, of the whole lot,
validly sufficient for initial registration under the Land
Registration Act. Such land grant is constitutive of a
'fee simple' title or absolute title in favor of petitioner
Mindanao Medical Center. Thus, Section 122 of the
Act, which governs the registration of grants or
patents involving public lands, provides that
'Whenever public lands in the Philippine Islands
belonging to the Government of the United States or
to the Government of the Philippines are alienated,
granted or conveyed to persons or to public or private
corporations, the same shall be brought forthwith
under the operation of this Act (Land Registration Act,
Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land
patents and the corresponding certificates of titles issued to
private parties. These four cases uniformly hold that the
Director of Lands has no jurisdiction over private lands or that
upon issuance of the certificate of title the land automatically
comes under the Torrens System. The fifth case cited involves
the registration under the Torrens System of a 12.8-hectare
public land granted by the National Government to Mindanao
Medical Center, a government unit under the Department of
Health. The National Government transferred the 12.8-hectare
public land to serve as the site for the hospital buildings and

Registration of land under Act No. 496 or PD No. 1529 does

not vest in the registrant private or public ownership of the
land. Registration is not a mode of acquiring ownership but is
merely evidence of ownership previously conferred by any of
the recognized modes of acquiring ownership. Registration
does not give the registrant a better right than what the
102
registrant had prior to the registration. The registration of
lands of the public domain under the Torrens system, by itself,
103
cannot convert public lands into private lands.
Jurisprudence holding that upon the grant of the patent or
issuance of the certificate of title the alienable land of the
public domain automatically becomes private land cannot
apply to government units and entities like PEA. The transfer of
the Freedom Islands to PEA was made subject to the provisions
of CA No. 141 as expressly stated in Special Patent No. 3517
issued by then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of
the Constitution of the Philippines and in conformity
with the provisions of Presidential Decree No. 1084,
supplemented by Commonwealth Act No. 141, as
amended, there are hereby granted and conveyed
unto the Public Estates Authority the aforesaid tracts
of land containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four
(1,915,894) square meters; the technical description of
which are hereto attached and made an integral part
hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom
Islands on matters not covered by PD No. 1084. Section 60 of
CA No. 141 prohibits, "except when authorized by Congress,"
the sale of alienable lands of the public domain that are
transferred to government units or entities. Section 60 of CA
No. 141 constitutes, under Section 44 of PD No. 1529, a
"statutory lien affecting title" of the registered land even if not
104
annotated on the certificate of title. Alienable lands of the
public domain held by government entities under Section 60 of
CA No. 141 remain public lands because they cannot be
alienated or encumbered unless Congress passes a law

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authorizing their disposition. Congress, however, cannot

authorize the sale to private corporations of reclaimed
alienable lands of the public domain because of the
constitutional ban. Only individuals can benefit from such law.
The grant of legislative authority to sell public lands in
accordance with Section 60 of CA No. 141 does not
automatically convert alienable lands of the public domain into
private or patrimonial lands. The alienable lands of the public
domain must be transferred to qualified private parties, or to
government entities not tasked to dispose of public lands,
before these lands can become private or patrimonial lands.
Otherwise, the constitutional ban will become illusory if
Congress can declare lands of the public domain as private or
patrimonial lands in the hands of a government agency tasked
to dispose of public lands. This will allow private corporations
to acquire directly from government agencies limitless areas of
lands which, prior to such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing
agency of the National Government to reclaim foreshore and
submerged areas of the public domain. Thus, EO No. 525
declares that
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the
Agency Primarily Responsible for all Reclamation
Projects
Whereas, there are several reclamation projects which
are ongoing or being proposed to be undertaken in
various parts of the country which need to be
evaluated for consistency with national programs;
Whereas, there is a need to give further institutional
support to the Government's declared policy to
provide for a coordinated, economical and efficient
reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all
reclamation of areas shall be limited to the National
Government or any person authorized by it under
proper contract;
Whereas, a central authority is needed to act on
behalf of the National Government which shall
ensure a coordinated and integrated approach in
the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the
Public Estates Authority as a government
corporation to undertake reclamation of lands and
ensure their maximum utilization in promoting
public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the
President with continuing authority to reorganize the

national government including the transfer, abolition,

or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS,
President of the Philippines, by virtue of the powers
vested in me by the Constitution and pursuant to
Presidential Decree No. 1416, do hereby order and
direct the following:
Section 1. The Public Estates Authority (PEA) shall
be primarily responsible for integrating, directing,
and coordinating all reclamation projects for and
on behalf of the National Government. All
reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall
be undertaken by the PEA or through a proper
contract executed by it with any person or entity;
Provided, that, reclamation projects of any national
government agency or entity authorized under its
charter shall be undertaken in consultation with the
PEA upon approval of the President.
x x x ."
As the central implementing agency tasked to undertake
reclamation projects nationwide, with authority to sell
reclaimed lands, PEA took the place of DENR as the
government agency charged with leasing or selling reclaimed
lands of the public domain. The reclaimed lands being leased
or sold by PEA are not private lands, in the same manner that
DENR, when it disposes of other alienable lands, does not
dispose of private lands but alienable lands of the public
domain. Only when qualified private parties acquire these lands
will the lands become private lands. In the hands of the
government agency tasked and authorized to dispose of
alienable of disposable lands of the public domain, these
lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall
hold lands of the public domain" as well as "any and all kinds
of lands." PEA can hold both lands of the public domain and
private lands. Thus, the mere fact that alienable lands of the
public domain like the Freedom Islands are transferred to PEA
and issued land patents or certificates of title in PEA's name
does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to
be transferred to PEA as private lands will sanction a gross
violation of the constitutional ban on private corporations from
acquiring any kind of alienable land of the public domain. PEA
will simply turn around, as PEA has now done under the
Amended JVA, and transfer several hundreds of hectares of
these reclaimed and still to be reclaimed lands to a single
private corporation in only one transaction. This scheme will
effectively nullify the constitutional ban in Section 3, Article XII
of the 1987 Constitution which was intended to diffuse
equitably the ownership of alienable lands of the public
domain among Filipinos, now numbering over 80 million
strong.

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This scheme, if allowed, can even be applied to alienable

agricultural lands of the public domain since PEA can "acquire x
x x any and all kinds of lands." This will open the floodgates to
corporations and even individuals acquiring hundreds of
hectares of alienable lands of the public domain under the
guise that in the hands of PEA these lands are private lands.
This will result in corporations amassing huge landholdings
never before seen in this country - creating the very evil that
the constitutional ban was designed to prevent. This will
completely reverse the clear direction of constitutional
development in this country. The 1935 Constitution allowed
private corporations to acquire not more than 1,024 hectares of
105
public lands. The 1973 Constitution prohibited private
corporations from acquiring any kind of public land, and the
1987 Constitution has unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once
registered under Act No. 496 or PD No. 1529, automatically
become private lands is contrary to existing laws. Several laws
authorize lands of the public domain to be registered under
the Torrens System or Act No. 496, now PD No. 1529, without
losing their character as public lands. Section 122 of Act No.
496, and Section 103 of PD No. 1529, respectively, provide as
follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine
Islands belonging to the x x x Government of the
Philippine Islands are alienated, granted, or conveyed
to persons or the public or private corporations, the
same shall be brought forthwith under the operation
of this Act and shall become registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever
public land is by the Government alienated, granted
or conveyed to any person, the same shall be
brought forthwith under the operation of this Decree."
(Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any
person" in Section 103 of PD No. 1529 includes conveyances of
public lands to public corporations.
Alienable lands of the public domain "granted, donated, or
transferred to a province, municipality, or branch or subdivision
of the Government," as provided in Section 60 of CA No. 141,
may be registered under the Torrens System pursuant to
Section 103 of PD No. 1529. Such registration, however, is
expressly subject to the condition in Section 60 of CA No. 141
that the land "shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except when
authorized by Congress." This provision refers to government
reclaimed, foreshore and marshy lands of the public domain
that have been titled but still cannot be alienated or
encumbered unless expressly authorized by Congress. The

need for legislative authority prevents the registered land of

the public domain from becoming private land that can be
disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that
lands of the public domain may be registered under the
Torrens System. Section 48, Chapter 12, Book I of the Code
states
"Sec. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government is
authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following:
(1) x x x
(2) For property belonging to the Republic of the
Philippines, but titled in the name of any political
subdivision or of any corporate agency or
instrumentality, by the executive head of the agency
or instrumentality." (Emphasis supplied)
Thus, private property purchased by the National Government
for expansion of a public wharf may be titled in the name of a
government corporation regulating port operations in the
country. Private property purchased by the National
Government for expansion of an airport may also be titled in
the name of the government agency tasked to administer the
airport. Private property donated to a municipality for use as a
town plaza or public school site may likewise be titled in the
106
name of the municipality. All these properties become
properties of the public domain, and if already registered
under Act No. 496 or PD No. 1529, remain registered land.
There is no requirement or provision in any existing law for the
de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its
power of eminent domain become unquestionably part of the
public domain. Nevertheless, Section 85 of PD No. 1529
authorizes the Register of Deeds to issue in the name of the
National Government new certificates of title covering such
expropriated lands. Section 85 of PD No. 1529 states
"Sec. 85. Land taken by eminent domain. Whenever
any registered land, or interest therein, is expropriated
or taken by eminent domain, the National
Government, province, city or municipality, or any
other agency or instrumentality exercising such right
shall file for registration in the proper Registry a
certified copy of the judgment which shall state
definitely by an adequate description, the particular
property or interest expropriated, the number of the
certificate of title, and the nature of the public use. A
memorandum of the right or interest taken shall be
made on each certificate of title by the Register of
Deeds, and where the fee simple is taken, a new
certificate shall be issued in favor of the National

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Government, province, city, municipality, or any

other agency or instrumentality exercising such right
for the land so taken. The legal expenses incident to
the memorandum of registration or issuance of a new
certificate of title shall be for the account of the
authority taking the land or interest therein."
(Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No.
1529 are not exclusively private or patrimonial lands. Lands of
the public domain may also be registered pursuant to existing
laws.
AMARI makes a parting shot that the Amended JVA is not a
sale to AMARI of the Freedom Islands or of the lands to be
reclaimed from submerged areas of Manila Bay. In the words of
AMARI, the Amended JVA "is not a sale but a joint venture with
a stipulation for reimbursement of the original cost incurred by
PEA for the earlier reclamation and construction works
performed by the CDCP under its 1973 contract with the
Republic." Whether the Amended JVA is a sale or a joint
venture, the fact remains that the Amended JVA requires PEA
to "cause the issuance and delivery of the certificates of title
107
conveying AMARI's Land Share in the name of AMARI."
This stipulation still contravenes Section 3, Article XII of the
1987 Constitution which provides that private corporations
"shall not hold such alienable lands of the public domain
except by lease." The transfer of title and ownership to AMARI
clearly means that AMARI will "hold" the reclaimed lands other
than by lease. The transfer of title and ownership is a
"disposition" of the reclaimed lands, a transaction considered a
108
sale or alienation under CA No. 141, the Government
109
Auditing Code, and Section 3, Article XII of the 1987
Constitution.
The Regalian doctrine is deeply implanted in our legal system.
Foreshore and submerged areas form part of the public
domain and are inalienable. Lands reclaimed from foreshore
and submerged areas also form part of the public domain and
are also inalienable, unless converted pursuant to law into
alienable or disposable lands of the public domain. Historically,
lands reclaimed by the government are sui generis, not
available for sale to private parties unlike other alienable public
lands. Reclaimed lands retain their inherent potential as areas
for public use or public service. Alienable lands of the public
domain, increasingly becoming scarce natural resources, are to
be distributed equitably among our ever-growing population.
To insure such equitable distribution, the 1973 and 1987
Constitutions have barred private corporations from acquiring
any kind of alienable land of the public domain. Those who
attempt to dispose of inalienable natural resources of the State,
or seek to circumvent the constitutional ban on alienation of
lands of the public domain to private corporations, do so at
their own risk.
We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising

the Freedom Islands, now covered by certificates of
title in the name of PEA, are alienable lands of the
public domain. PEA may lease these lands to private
corporations but may not sell or transfer ownership of
these lands to private corporations. PEA may only sell
these lands to Philippine citizens, subject to the
ownership limitations in the 1987 Constitution and
existing laws.
2. The 592.15 hectares of submerged areas of Manila
Bay remain inalienable natural resources of the public
domain until classified as alienable or disposable
lands open to disposition and declared no longer
needed for public service. The government can make
such classification and declaration only after PEA has
reclaimed these submerged areas. Only then can
these lands qualify as agricultural lands of the public
domain, which are the only natural resources the
government can alienate. In their present state, the
592.15 hectares of submerged areas are inalienable
and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI,
a private corporation, ownership of 77.34
110
hectares of the Freedom Islands, such transfer is
void for being contrary to Section 3, Article XII of the
1987 Constitution which prohibits private
corporations from acquiring any kind of alienable land
of the public domain.
4. Since the Amended JVA also seeks to transfer to
111
AMARI ownership of 290.156 hectares of still
submerged areas of Manila Bay, such transfer is void
for being contrary to Section 2, Article XII of the 1987
Constitution which prohibits the alienation of natural
resources other than agricultural lands of the public
domain. PEA may reclaim these submerged areas.
Thereafter, the government can classify the reclaimed
lands as alienable or disposable, and further declare
them no longer needed for public service. Still, the
transfer of such reclaimed alienable lands of the
public domain to AMARI will be void in view of
Section 3, Article XII of the 1987 Constitution which
prohibits private corporations from acquiring any kind
of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3,
112
Article XII of the 1987 Constitution. Under Article 1409 of the
Civil Code, contracts whose "object or purpose is contrary to
law," or whose "object is outside the commerce of men," are
"inexistent and void from the beginning." The Court must
perform its duty to defend and uphold the Constitution, and
therefore declares the Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper forum to
raise the issue of whether the Amended JVA is grossly
disadvantageous to the government.

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Considering that the Amended JVA is null and void ab initio,

there is no necessity to rule on this last issue. Besides, the
Court is not a trier of facts, and this last issue involves a
determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates
Authority and Amari Coastal Bay Development Corporation
are PERMANENTLY ENJOINED from implementing the
Amended Joint Venture Agreement which is hereby
declared NULL and VOID ab initio.
SO ORDERED.

G.R. No. L-27793 February 28, 1972

LETICIA CIPRIANO, petitioner,
vs.
GREGORIO P. MARCELINO and the HONORABLE RAFAEL
DELA CRUZ, Presiding Judge of the Third Branch, Court of
First Instance, Camarines Sur, respondents.
Jaime C. Viola for petitioner.
Borja and Noval for respondent Gregorio P. Marcelino.

CASTRO, J.:p
Leticia Cipriano served as record clerk in the office of municipal
treasurer Gregorio P. Marcelino of Calabanga, Camarines Sur,
from January 1, 1963 to January 15, 1966, at a monthly salary of
eighty pesos (P80). On the latter date she resigned. Because
the respondent municipal treasurer, upon her severance from
the service, refused to pay her salary corresponding to the
period from September 1, 1965 to January 15, 1966, inclusive
(P349), as well as the commutation equivalent of her
accumulated vacation and sick leaves (P600), Cipriano filed on
May 5, 1966 with the Court of First Instance of Camarines Sur
an action for mandamus (civil case 6152) to compel the said
municipal treasurer to pay her the total amount of P949. She
also asked for moral and exemplary damages, attorney's fees
and costs of suit.
Marcelino moved to dismiss upon the ground that she had not
"exhausted all administrative remedies before filing the present
action," arguing that exhaustion of all administrative remedies
is a condition precedent before an aggrieved party may have
judicial recourse. Granting the motion, the court a quo ordered
the dismissal of the case. Cipriano's motion for reconsideration
was denied on May 15, 1967.
Hence, the present petition for certiorari on pure questions of
law.

Cipriano contends that there is no law that requires an appeal

to the Provincial Treasurer, Secretary of Finance, Auditor
General and then the President of the Philippines, from the
refusal by a municipal treasurer to pay the salary and money
value of the unused vacation and sick leaves of a municipal
employee; that assuming that an appeal all the way up to the
President of the Philippines is an administrative remedy
authorized by law, the same is not plain, speedy and adequate;
that the doctrine of exhaustion is not applicable when the
questions to be resolved are purely of law; that the payment of
her claim being a ministerial duty of the municipal
treasurer, mandamus is the proper remedy to compel such
payment; and, finally, that to require a small government
employee such as the petitioner Cipriano to appeal all the way
up to the President of the Philippines on such an
inconsequential matter as the collection of the sum of P949,
would be oppressive and expensive not only to the employee
but also to her dependents as well.
Upon the other hand, Marcelino insists that the petition
for mandamus below states no cause of action as the petitioner
Cipriano has not exhausted all administrative remedies
available to her; that she has not acquired any right to be paid
her salary and accumulated vacation and sick leave pay by
reason of her failure to comply with the requirements
prescribed in the 1966 Manual on Pre-audit of Government
Disbursements; and that she still has outstanding
accountability in the sense she has not accounted for the
missing triplicate copies of three official receipts which were in
her custody.
The documents required to be accomplished before Cipriano
can be paid her salary and her accumulated vacation and sick
leave pay are (a) a letter of resignation duly accepted, (b) a
certificate of clearance from money and property
accountability, and (c) a certificate of clearance from the
Government Service Insurance System (p. 9, 1966 Manual on
Pre-audit of Government Disbursements).
In her memorandum filed on December 22, 1967 with this
Court, Cipriano avers that she has a written resignation duly
accepted by the mayor of Calabanga; that in the investigation
conducted personally by the respondent Marcelino with
respect to the triplicate copies adverted to by him, it was his
finding that other persons, and not the petitioner, are
accountable for them; that the petitioner has no money or
property accountability; and, finally, that she need not present
a certificate of clearance from the GSIS because she is not a
member of the System.
These assertions are not controverted.
We have held time and time again that the principle of
exhaustion of administrative remedies is not without
1
exception, not is it a condition precedent to judicial
2
relief. The principle may be disregarded when it does not
3
provide a plain, speedy and adequate remedy. It may and
should be relaxed when its application may cause great and
4
irreparable damage.

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It is altogether too obvious that to require the petitioner

Cipriano to go all the way to the President of the Philippines on
appeal in the matter of the collection of the small total of nine
hundred forty-nine (P949) pesos, would not only be oppressive
but would be patently unreasonable. By the time her appeal
shall have been decided by the President, the amount of much
more than P949, which is the total sum of her claim, would in
all likelihood have been spent.
In De Leon vs. Libay (see footnote 3), this Court, with
considerable emphasis, made this statement which
is apropos of the case at bar: .

[G.R. No. 113357. February 1, 1996]

BENJAMIN PAREDES, LUZ BUENSUCESO, AUGUSTO

SEVERINO, RODRIGO TABANERA, STEPHEN
SOLIVEN and ROBERTO SANCHEZ; petitioners,
vs. COURT OF APPEALS, RIZALINO S. NAVARRO, as
Secretary of Trade and Industry, and IGNACIO S.
SAPAL, Director of the Bureau of Patents,
Trademarks and Technology Transfer, respondents.
RESOLUTION

The theory that a party must first exhaust his

remedies in the administrative branch before
seeking the aid of the strong arm of equity
must give way to the reality that a
government employee must depend for the
support of himself and his family upon his
salary, and were he to be deprived of that
even alone for a few months, possibly even
less, that must mean starvation because
more often than not, a government
employee lives hand-to-mouth existence and
he awaits with eager hands the arrival of the
forthnightly envelope because upon it must
hinge the supply of rice and fish and clothing
of his spouse and children and himself and
with it only can be maintained, and therefore
were the dogmatic rule of exhaustion of
administrative remedies be made to mean
that he should wait for the most final
administrative decision in his case, the only
logical result must be vital disaster to his
dependents and to himself, so that this is the
reason why the rule of exhaustion of
administrative remedies has always been
understood to mean that the same have
furnished a plain, speedy and adequate
remedy.
All the documents required to support payment of Cipriano's
salary and the cash commutation of her unused vacation and
sick leaves have been accomplished. Cipriano having thus
earned the right to the said payment, it has become the
corresponding duty of the respondent treasurer to recognize
such right and effect payment.
ACCORDINGLY, the present petition is granted, and the
orders a quo of April 14 and May 14, 1967 are set aside. The
municipal treasurer of the Municipality of Calabanga,
Camarines Sur, is hereby ordered to pay to the petitioner,
Leticia Cipriano, without further delay, the total sum of nine
hundred forty-nine (P949) pesos. No pronouncement as to
costs.

FIRST DIVISION

KAPUNAN, J.:
This is an appeal by certiorari under Rule 45 of the
Revised Rules of Court from the Decision dated 27 October
1993 of the Court of Appeals in CA-G.R. SP No. 30388 which
dismissed petitioners Special Civil Action for Prohibition and
said courts Resolution dated 10 January 1994 which denied
petitioners motion for reconsideration of the said decision.
On 9 November 1992, public respondents promulgated
Administrative Order Nos. 1 and 2, Series of 1992, revising the
rules of practice before the Bureau of Patents, Trademarks and
Technology Transfer (BPTTT) in patent and trademark cases, to
take effect on 15 March 1993. Among the provisions of said
administrative orders are Rule 16 of A.O. No. 1 and Rule 15 of
A.O. No. 2, which increased the fees payable to the BPTTT for
registration of patents and trademarks and Rule 59 of A.O. No.
2 which prohibited the filing of multi-class applications, that is,
[1]
one application covering several classes of goods.
On 11 March 1993, petitioners, who are registered patent
agents, filed with the Court of Appeals a Petition for
Prohibition with prayer for the issuance of a Writ of Preliminary
Injunction to stop public respondents from enforcing the
[2]
aforementioned administrative orders and to declare Rule 16
of A.O. No. 1 and Rules 15 and 59 of A.O. No. 2, series of 1992
of the BPTTT null and void.
On 27 October 1993, the Court of Appeals dismissed the
petition for prohibition and on 10 January 1994, denied the
motion for reconsideration filed by petitioners on 18
[3]
November 1993.
In the present appeal, petitioners assign the following
errors:
I
THE RESPONDENT COURT ERRED IN DISMISSING THE
PETITION ON THE GROUND OF NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES.
II
THE RESPONDENT COURT ERRED IN NOT HOLDING THAT THE
QUESTIONED ADMINISTRATIVE ORDERS ARE NULL AND VOID
FOR FAILURE TO COMPLY WITH THE PUBLICATION

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REQUIREMENTS OF BOTH THE ADMINISTRATIVE CODE AND

B.P. NO. 325.
III
THE RESPONDENT COURT ERRED IN NOT DECLARING NULL
AND VOID RULE 59 OF ADMINISTRATIVE ORDER NO. 1 ON
THE GROUND THAT THE PUBLIC RESPONDENTS DO NOT
[4]
HAVE THE POWER TO AMEND THE TRADEMARK LAW.
Petitioners do not dispute that public respondents are
expressly authorized to revise their fees and charges under B.P.
Blg. 325, entitled An Act Authorizing Heads of Ministries,
Offices, Agencies and Commissions of the National
Government, including the Supreme Court and Constitutional
Bodies, to Revise the Rates of Fees and Charges, which took
[5]
effect on 1 January 1983.
Petitioners, however, claim that the aforementioned
administrative orders, particularly Rule 16 of A.O. No. I and
Rules 15 and 59 of A.O. No. 2, series of 1992, are null and void
for failure of public respondents to comply with the
requirements of Cabinet approval and publication as
[6]
specifically provided in Sections 2 and 5 of B.P. BIg. 325.
We deny the petition.
Prohibition is not the proper remedy. The enabling law
itself, which is B.P. Blg. 325, has specifically tasked the Cabinet
to review and approve any proposed revisions of rates of fees
and charges. Petitioners should have availed of this easy and
accessible remedy instead of immediately resorting to the
judicial process.
Our legislature in delegating to administrative officers the
authority to revise fees and charges expressly required cabinet
approval for the proper exercise of said power. Petitioners
should not have wasted the opportunity to utilize this built-in
remedy.
The grant (or denial) of a writ of prohibition is ordinarily
within the sound discretion of the court to be exercised with
caution and forbearance, according to the circumstances of the
[7]
particular case, and only where the right to seek relief is clear.
Prohibition is granted only in cases where no other
remedy is available which is sufficient to afford redress. That
the petitioners have another and complete remedy at law
either by appeal or otherwise, is generally a sufficient reason
[8]
for dismissing the writ.
[9]

Hence, in Chua Huat v. CA,

we ruled that:

Where the enabling statute indicates a procedure for

administrative review, and provides a system of administrative
appeal, or reconsideration, the courts, for reasons of law,
comity and convenience, will not entertain a case unless the
available administrative remedies have been resorted to and
the appropriate authorities have been given opportunity to act
and correct the errors committed in the administrative forum.

And
declared:

in

Philnabank

Employees

v.

Estanislao,

[10]

we

Secondly, although not inflexible, we have repeatedly

declined on grounds of prematurity, as well as in the interest of
good order, a hasty recourse to the courts when administrative
avenues are still open.
In the instant case, we concur with the ruling of the Court
of Appeals that:
. . . herein petitioners have still another available recourse
under the law being relied upon. Section 2 of B.P. 325 reads in
part:
Sec. 2. Determination of Ratio.- xxx. The revision of rates shall
be determined by the respective ministry heads or equivalent
functionaries conformably with the rules and regulations of the
Ministry of Finance issued pursuant to Section 4 hereof, upon
recommendation of the imposing and collecting authorities
concerned, subject to the approval of the Cabinet. xx x (Italics
supplied)
The above provision envisions a three-step process
involving a hierarchy of authority before the rate increases and
charges can be imposed and collected. First, the BPTTT, which
is the imposing and collecting agency, makes a
recommendation of the fee increases and charges. Those
recommended rates and charges are submitted to the
Secretary of the DTI for his evaluation and approval. Second, if
the Secretary of the DTI finds that the rate increases and
charges conform with the rules and regulations of the Ministry
of Finance, then the same are approved and in turn become
the rates of the department. The determination of the
supposed rates and charges does not end here. As mentioned
in Section 2 above; the rates as determined by the department
head are subject to the approval of the Cabinet.
The phrase subject to is one qualification. It means under
the control, power or dominion of or subordinated to, a higher
authority (cf. PNB vs. Deputy, G.R. No. 35515-R, December 12,
1970). Meaning, that the proposed rates and charges still have
to obtain the imprimatur of the Cabinet, and prior to which,
they have to undergo Cabinet scrutiny. Thus, there is the
contingency that the same may not obtain the approval of the
[11]
Cabinet.
Petitioners are not unaware of this remedy provided by
law. They have, in fact, raised the lack of Cabinet approval as
one of the reasons for seeking the nullification of the
[12]
aforementioned administrative orders.
Petitioners claim that public respondents should have
brought the revised schedule of fees to the Cabinet for the
[13]
latters approval is trivial considering that prior to the filing of
the petition for prohibition, petitioners admittedly requested
public respondents to reconsider or defer implementation of
[14]
the subject administrative orders. They were already in the
process of availing themselves of the administrative process
when they suddenly abandoned the recourse and went to
court.

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Petitioners further contend that there was no appeal or

other plain, speedy and adequate remedy available to them
considering the alleged absence of any mechanism or
procedure in the administrative branch of the government to
stop public respondents from enforcing the questioned fee
increases. They insist that the Cabinet is not an appellate body
with the authority to pass upon the legality of the acts of
[15]
department heads.
We do not agree. The provisions of Section 2 of
B.P. 325 cannot be any clearer. The recommended rates and
charges are submitted to the Secretary of the DTI for his
evaluation and approval. The rate increases should be in
conformity with the rules and regulations of the Secretary of
Finance and are subject to the approval of the Cabinet. Since
according to petitioners the rate increases and charges have
not been submitted to the Cabinet for approval, judicial review
thereof is certainly premature.
The need for Cabinet approval can further be gleaned
from Sec. 5 of B.P. Blg. 325, which provides:
Sec. 5. Publication requirement. - Upon review and approval by
the Cabinet of the adjusted rates of fees or charges, the heads of
ministries, offices, agencies or commissions concerned,
including the courts and constitutional bodies, shall each cause
the revised schedule of fees and charges to be published once
a week for two consecutive weeks in two newspapers of
general circulation in the Philippines in lieu of publication in
the Official Gazette and the same shall be effective fifteen days
after the last publication. (Italics ours.)
However, we reject the claim of public respondents that
the required Cabinet approval was deemed to have been
fulfilled with the issuance of Executive Order (E.O.) No. 159,
dated 23 February 1994, the pertinent portions of which
provide:
xxx xxx xxx
Section 1. All departments, bureaus, offices, units, and
agencies, including government-owned or controlled
corporations, are hereby directed to revise their fees and
charges to recover at least the full cost of services rendered.
The full cost of services for the year rendered by a government
department, bureau, office, unit, or agency, including
government-owned or controlled corporation, shall be
equivalent to the appropriation of said department, bureau,
office, unit, or agency for the year under the relevant General
Appropriations Act or under the Corporate Operating Budget
submitted by the government-owned or controlled corporation
as approved by the Department of Budget and Management.
The revised rates shall, wherever practicable, be uniform for
similar or comparable services and functions and shall be
determined by the respective department heads, governing
boards, or equivalent functionaries; Provided that, this
Executive Order shall not apply to fees charged by
departments, bureaus, offices, units. and agencies, including

government-owned or controlled corporations, related to

constitutionally mandated free or subsidized services, such as
in education and health, as well as to those exempted by
international agreements, as shall be determined by the
President.
Section 2. The heads of departments shall be responsible for
the implementation of this Executive Order by the bureaus,
offices, units, and agencies, including government-owned or
controlled corporations, within their respective jurisdictions.
xxx xxx xxx
It is private respondents thesis that E.O. No. 159 explicitly
eliminated the requisite Cabinet approval. It is a general rule
[16]
that laws shall have prospective effect. E.O. No. 159 was
promulgated on 23 February 1994 or two years after the
subject administrative orders were issued and, therefore, has
no application in the case at bench.
Anent the second assigned error, it is petitioners
submission that the questioned administrative orders are null
and void for failure to comply with the publication requirement
of B.P. Blg. 325 and of the Administrative Code. We do not
agree.
B.P. BIg. 325 requires Cabinet review and approval of the
impugned
administrative
orders
before
their
publication. However, since the Cabinet has yet to review and
approve the proposed revised rates of fees and charges, there
can be no proper publication. The letter sent by the Office of
the National Administrative Register dated 30 September
1993acknowledging in general the filing of the administrative
orders issued by the BPTTT can hardly stand as proof of the
due publication and filing of the particular administrative
orders assailed in the present case, said letter not
having specified what administrative orders were thus filed.
Finally, as to the third issue, we concur with the findings
of the Court of Appeals as follows:
At this point in time, since the challenged administrative orders
have not yet been submitted to the Cabinet for its
consideration and approval, this Court finds it untimely to
discuss and resolve the merits of the questions of whether or
not the rate increases and charges are just and reasonable
sufficient to cover administrative costs, and/or that the same
are practicable and uniform for similar or comparable services
and functions, and/or that those rates conform with the rules
and regulations of the Ministry of Finance. Certainly, the
questions raised in this petition are not yet ripe for judicial
determination, in the light of Matienzo vs. Abellera, (162 SCRA
1,9), that courts should be reluctant to interfere with
administrative action prior to its completion or finality, the
reason being that absence of a final order or decision, the
power of the administrative agency concerned has not been
fully exercised and there can be no irreparable harm. The rule
of finality of administrative action for purposes of judicial
review also finds substance in Rochester Telephone Co. vs.
U.S. (307 U.S. 125) and Federal Power Commission vs.
Metropolitan Edison Co. (304 U.S. 375). The principle of

ADMIN LAW 1st Set

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exhaustion of administrative remedies which mandates that

relief should first be sought from the highest or most superior
admistrative agency, the likes of the Cabinet, may prove that a
resort to the courts would be unnecessary (Wee
Poco vs. Posadas, 65 Phil. 648), prevent the courts from being
swamped by a resort to them in the first instance (U.S. vs. Sing
Tuck, 194 U.S. 161), strengthened by the rule on comity and
convenience which requires Us to raise our hands until the
administrative process has been finally completed
(Matienzo vs. Abellana, supra; Railroad and Warehouse
Commission vs. Duluth, St. R. Co., 273 US 625), and thus it is
after judicial review is no longer premature that the courts may
ascertain, in process cases, whether the administrative action or
findings are not in violation of law, whether they are free from
fraud or imposition and whether they find substantial support
[17]
from the evidence.

4. The recall election is scheduled on January 25, 1997, within

one year immediately preceding a regular election of barangay
officials in May, 1997.

WHEREFORE, PREMISES CONSIDERED, the petition is

hereby DENIED.

ASSOCIATION OF BARANGAY COUNCILS

SO ORDERED.

As regards the first, petitioners allege that seven (7) of the

twenty-seven (27) Barangay Captains of the Municipality of
Basilisa and fifty-five (55) members of the different
Sangguniang Barangays (SB) thereof did not receive notice of
the Preparatory Recall Assembly (PRA) Meeting held on 24
August 1996 and which passed the resolution of recall. These 7
Barangay Captains and 55 SB members executed affidavits to
this effect which were attached to the petition.
As to the notice of meeting, petitioners allege that it was
[1]
in the form reproduced on page 8 of the petition and carried
the following heading:

Basilisa, Surigao del Norte

MUNICIPAL PREPARATORY RECALL ASSEMBLY

[G.R. No. 127456. March 20, 1997]

JESUS A. JARIOL, Municipal Mayor of Basilisa, Surigao del
Norte; ROMEO P. ECLEO, Vice Mayor of Basilisa,
Surigao del Norte; ANIANO BUSMEON, ALBERTO
TUBO, JUAN DIGAL, JR., GENEROSO SAREN,
ISIDRO MONESIT and SATURNINO LANUGON,
Sangguniang Bayan Member of Basilisa, Surigao
del Norte, petitioners, vs. THE COMMISSION ON
ELECTIONS,
FELIPE
A.
YCOT and DAISY
LUMAMBAS, respondents.
DECISION
DAVIDE, JR. J.:
This is a special civil action for certiorari under Rule 65 of
the Rules of Court to annul and set aside Resolution No. 2879
of the Commission on Elections (COMELEC) of 12 December
1996, which adopted the calendar of activities for the recall
election of the Mayor, Vice Mayor and six (6) members of
Sangguniang Bayan of the Municipality of Basilisa, Province of
Surigao del Norte, and scheduled said recall election on 25
January 1997.
Petitioners, as the officials sought to be recalled, submit
that:
1. Not all the members of the Preparatory Recall Assembly
were notified of the meeting for the recall of said municipal
officials;
2. The notice of the meeting did not state the purpose thereof,
much less, that it was for the recall of the Mayor, Vice Mayor
and six Sangguniang Bayan members;
3. The meeting was not open to the public, but behind closed
doors; and

It did not contain a statement of the purpose of the meeting

which was to be held in the remote barangay of Sering at a
school building located about one-half kilometer away from
the barangay proper. The meeting was likewise held behind
closed doors. Affidavits of witnesses to such fact were also
attached to the petition.
Petitioners then contend that the meeting was held in
violation of Section 70 of the Local Government Code of 1991
(R.A. No. 7160), which reads as follows:
SEC. 74. Limitations on Recall. - (a) Any elective local official
may be the subject of a recall election only once during his
term of office for loss of confidence.
(b) No recall shall take place within one (1) year from the date
of the officials assumption to office or one (1) year immediately
preceding a regular local election.
As to the last ground, petitioners contend that under
Section 74(b) of RA No. 7160, no recall should take place within
one (1) year from the date of the official's assumption to office
or one (1) year immediately preceding a regular local
election. Under Section 43(c) of the same Code, the term of
office of barangay officials and members of the Sangguniang
Kabataan shall be for three (3) years, which shall begin after the
regular election of barangay officials on the second Monday of
May, 1994. Per Resolution No. 2880 of 27 December 1996, the
COMELEC stated that the next barangay election would be on
12 May 1997 hence, no recall election could be done within
one year immediately preceding 12 May 1997. The recall then
in this case falls within the prohibited period.
On 21 January 1997 we issued a Temporary Restraining
Order ordering the respondent COMELEC to cease and desist
from implementing its questioned Resolution No. 2879 and

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directing the respondents to Comment on the petition within a

non-extendible period of ten (10) days.
In its Comment for public respondent COMELEC, the
Office of the Solicitor General alleges that per Report of the
Election Officer of Basilisa, Surigao del Norte, the PRA meeting
was attended by 109 members, a number sufficient to
constitute a quorum since Basilisa is composed of 27
barangays with eight officers for each unit. All of the 109
"signed the minutes of the meeting as they affixed therein their
signatures and thumbmarks signifying their assent to the
assembly; and the COMELEC, (u)pon examination of the
signatures and the minutes of the meeting," "affirmed the
authenticity of the signatures and thumbmarks of the members
of the PRA." Thereafter, the Office of the Solicitor General
further states, the COMELECs Deputy Executive Director for
Operation recommended to the Comelec en banc the holding
of the recall election." Pursuant thereto, the COMELEC en
banc issued on 12 December 1996 the challenged Resolution,
whose reconsideration petitioner never sought .
The Office of the Solicitor General then urges us to
dismiss the petition because: (a) of prematurity, since
petitioners had not asked the COMELEC to reconsider
Resolution No. 2879; (b) it raises factual issues which are not
proper subjects of a petition for certiorari; and (c) the barangay
election on 12 May 1997 will not bar the recall election in
question in light of our decision in Paras v. Commission on
Elections (G.R. No. 123169, 4 November 1996) where we held
that the regular election referred to in Section 74(b) of the
Local Government Code of 1991 refers to the election where
the office held by the local elective official sought to be
recalled will be contested and be filled by the electorate, which
is not the barangay election on 12 May 1997, but the election
for Mayor, Vice Mayor and members of the SB in May of 1998.
In their Comment, private respondents contend that there
was compliance with the requirements of due process as all
members of the PRA were duly notified of the date and place
of meeting for the purpose of recall. The PRA of Basilisa is
composed of 243 members, representing the total number of
elected barangay officials of the 27 barangays thereof. They
were all furnished and served with notice of said meeting,
which they received in due time as evidenced by 243 registry
receipts issued by the Post Office and which form part of the
records in the COMELEC. Only 123 responded and attended
the PRA meeting, while 114 did not respond nor attend the
meeting, the whereabouts of 5 were unknown and 1 had earlier
resigned.
Private respondents further claim that the meetings
venue was the Sering High School building in barangay Sering,
which is definitely a public place; and that the meeting was
attended by a majority of the barangay officials constituting
the PRA, as well as Barangay residents of the different
barangays.
Private respondents finally claim that the instant petition
is part of a continuing scheme to unjustly prevent a recall
process. According to them, the first meeting of the
Association of Barangay Councils to formally organize the
Municipal Preparatory Recall Assembly was set for 5 July 1996,

but had to be postponed to 9 July 1996 because petitioner

Mayor Jariol, upon learning of it, called a meeting of barangay
officials also on 5 July 1996. Again, on 9 July 1996, Mayor Jariol
called a meeting of the barangay officials to prevent the latter
from convening a Municipal PRA. Despite threats of disciplinary
action by Mayor Jariol, the barangay officials nevertheless
met, formally convened and constituted themselves into the
Municipal Preparatory Recall Assembly. On 15 July 1996,
respondent Felipe Ycot and 107 other barangay officials who
attended the aforesaid meeting of 9 July 1996 were
administratively charged before the Sangguniang Bayan of
Basilisa with dereliction of duty for their failure to attend the
meeting called by Mayor Jariol on 9 July 1996. Respondents
therein moved to inhibit the members of the SB, petitioners
herein; but, the motion was peremptorily denied. A motion for
reconsideration was denied on 13 September 1996. On even
date the SB handed down a decision dismissing from office the
herein private respondents with the 106 other barangay
officials. Fortunately, on appeal to the Sangguniang
Panlalawigan (SP) of Surigao del Norte, the decision was
reversed in the decision of the SP of 22 November 1996. This
was followed on 2 December 1996 by the letter of the
Governor of Surigao del Norte directing petitioner Jariol to
reinstate the barangay officials, which Jariol refused to comply
with.
In their Joint [Consolidated] Reply, petitioners reiterate
their reliance on the sworn statements of 7 barangay captains
and 55 SB members that they did not receive notice of the
meeting, and as to the 243 registry receipts alleged by private
respondents, petitioners maintain that it is not mentioned
when these registered notices were sent, from which Post
Office, and when these were received. They even claim that it is
rather unusual that the notices were sent allegedly by
registered mail because notices of meetings of barangay
officials are normally sent by personal delivery.
As to whether the notice of meeting stated a purpose and
the meeting was public or held in closed doors, petitioners
reiterated their earlier submission and further assert that the
sworn statements of 11 persons which they attached to the
petition were not traversed by any sworn statement.
As regards the claim of COMELEC that petitioners should
have first contested the factual findings of the PRA before the
COMELEC instead of filing this petition, petitioners allege that
they did not have enough opportunity to do so for the
challenged resolution was promulgated on 12 December 1996
and the recall election was scheduled on 25 January
1997. Further, the Resolution was first published only on 20
December 1996, and petitioners only learned of this the
following day in Surigao City as no newspapers are circulated
in Basilisa, and the copy of the resolution sent to petitioners
was delivered to petitioner Jariol on or about 3 January 1997.
Petitioners were silent on the charge of private
respondents that this petition was part of the formers scheme
to harass the private respondents to unjustly prevent the recall
process.
After due deliberation on the arguments adduced in the
foregoing pleadings, we resolved to DISMISS this petition for

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prematurity and for petitioners failure to sufficiently show that

respondent Commission on Elections committed grave abuse
of discretion in giving due course to the recall petition and in
promulgating Resolution No. 2879.
As correctly pointed out by the Office of the Solicitor
General, if petitioners were unsatisfied with the findings of the
COMELEC, they should have first moved for reconsideration
before filing this special civil action for certiorari under Rule 65
of the Rules of Court. The petitioners were fully aware of the
proceedings before the COMELEC.
The COMELEC performed a purely administrative function
when it promulgated Resolution No. 2879. A party aggrieved
thereby must not merely initiate the prescribed administrative
procedure to obtain relief, but also must pursue it to its
appropriate conclusion before seeking judicial intervention in
order to give that administrative agency an opportunity to
decide the matter by itself correctly and prevent unnecessary
and premature resort to the court. (Cruz v. del Rosario, 9 SCRA
755, 758 [1963]; Manuel v. Jimenez, 17 SCRA 55, 57
[1966]). This is the rule on exhaustion of administrative
remedies. A motion for reconsideration then is a pre-requisite
to the viability of a special civil action for certiorari, unless the
party who avails of the latter can convincingly show that his
case falls under any of the following exceptions to the rule: (1)
where the question is purely legal, (2) where judicial
intervention is urgent, (3) where its application may cause great
and irreparable damage, (4) where the controverted acts
violate due process, (5) failure of a high government official
from whom relief is sought to act on the matter, and (6) when
the issue for non-exhaustion of administrative remedies has
been rendered moot. (See Severino S. Tabios, Annotation on
Failure to Exhaust Administrative Remedies As a Ground for
Motion to Dismiss, 165 SCRA 352, 357-362 [1988]).
In the instant case, the only reason advanced by
petitioner was lack of enough opportunity to do so. We
disagree. Petitioner first learned of the promulgation of the
Resolution on 21 December 1996 through the 20 December
1996 issue of the Manila Bulletin and formally received a copy
of the Resolution on 3 January 1997. They had sufficient time
to file a motion for its reconsideration since the recall election
was scheduled on 25 January 1997. Instead of filing this
petition on 6 January 1997, petitioners should have first filed a
motion for reconsideration.
Verily, the principal issue in this case is focused on the
factual findings of COMELEC. Petitioners sought to disprove
them by sworn statements which they attached to the petition
at bar.Obviously, these were not offered before the COMELEC,
thus the latter could not have passed upon their admissibility
or probative value. It cannot then be said that the COMELEC
acted with grave abuse of discretion in ruling on the recall on
the basis of, among other things, the Report of its Municipal
Election Officer assigned in Basilisa, Surigao del Norte. The
latter has in his favor the presumption of regularity in the
performance of his duty (Sec. 3(M), Rule 131, Rules of
Court). Petitioners had the burden to disprove that
presumption, which they miserably failed to do. They did not
even assail the Report nor impute any improper motive on the

Election Officer as to create doubt as to the integrity of his

Report.
Finally, the scheduled barangay election on 12 May 1997
is not the regular election contemplated in Section 74(b) of the
Local Government Code of 1991 whose conduct is the basis for
computing the one-year prohibited period. As we held in Paras
v. Commission on Elections (supra):
It would, therefore, be in keeping with the intent of the recall
provision of the Code to construe regular local election as one
referring to an election where the office held by the local
elective official sought to be recalled could be contested and
be filled by the electorate.
Hence the holding of the recall election in question can be
validly done at any time before the commencement of the one
(1) year period immediately preceding the next general
election for municipal elective officials in May of 1998.
IN VIEW OF ALL THE FOREGOING, the instant petition is
DISMISSED for lack of merit and the Temporary Restraining
Order issued on 21 January 1997 is LIFTED. The Commission on
Elections is DIRECTED to set anew and hold the RECALL
ELECTION in question not later than 15 April 1997.
Costs against petitioners.
SO ORDERED.

G.R. No. L-45839 June 1, 1988

RUFINO MATIENZO, GODOFREDO ESPIRITU, DIOSCORRO
FRANCO, AND LA SUERTE TRANSPORTATION
CORPORATION, petitioners,
vs.
HON. LEOPOLDO M. ABELLERA, ACTING CHAIRMAN OF
THE BOARD OF TRANSPORTATION, HON. GODOFREDO Q.
ASUNCION, MEMBER OF THE BOARD OF
TRANSPORTATION, ARTURO DELA CRUZ, MS
TRANSPORTATION CO., INC., NEW FAMILIA
TRANSPORTATION CO., ROBERTO MOJARES, ET
AL., respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari and prohibition, with application
for preliminary injunction, seeking the annulment and
inhibition of the grant or award of provisional permits or
special authority by the respondent Board of Transportation
(BOT) to respondent taxicab operators, for the operation and
legalization of "excess taxicab units" under certain provisions of
Presidential Decree No. 101 "despite the lapse of the power to
do so thereunder," and "in violation of other provisions of the
Decree, Letter of Instructions No. 379 and other relevant rules
of the BOT."

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The petitioners and private respondents are all authorized

taxicab operators in Metro Manila. The respondents, however,
admittedly operate "colorum" or "kabit" taxicab units. On or
about the second week of February, 1977, private respondents
filed their petitions with the respondent Board for the
legalization of their unauthorized "excess" taxicab units citing
Presidential Decree No. 101, promulgated on January 17, 1973,
"to eradicate the harmful and unlawful trade of clandestine
operators, by replacing or allowing them to become legitimate
and responsible operators." Within a matter of days, the
respondent Board promulgated its orders setting the
applications for hearing and granting applicants provisional
authority to operate their "excess taxicab units" for which
legalization was sought. Thus, the present petition.
Opposing the applications and seeking to restrain the grant of
provisional permits or authority, as well as the annulment of
permits already granted under PD 101, the petitioners allege
that the BOT acted without jurisdiction in taking cognizance of
the petitions for legalization and awarding special permits to
the private respondents.
Presidential Decree No. 101 vested in the Board of
Transportation the power, among others "To grant special
permits of limited term for the operation of public utility motor
vehicles as may, in the judgment of the Board, be necessary to
replace or convert clandestine operators into legitimate and
responsible operators." (Section 1, PD 101)
Citing, however, Section 4 of the Decree which provides:
SEC. 4. Transitory Provision. Six months
after the promulgation of this Decree, the
Board of Transportation, the Bureau of
Transportation, The Philippine Constabulary,
the city and municipal forces, and the
provincial and city fiscals shall wage a
concerted and relentless drive towards the
total elimination and punishment of all
clandestine and unlawful operators of public
utility motor vehicles."
the petitioners argue that neither the Board of Transportation
chairman nor any member thereof had the power, at the time
the petitions were filed (i.e. in 1977), to legitimize clandestine
operations under PD 101 as such power had been limited to a
period of six (6) months from and after the promulgation of the
Decree on January 17, 1973. They state that, thereafter, the
power lapses and becomes functus officio.
To reinforce their stand, the petitioners refer to certain
provisions of the Rules and Regulations implementing PD 101
issued by respondent Board, Letter of Instructions No. 379, and
BOT Memorandum Circular No. 76-25 (a). In summary, these
rules provide inter alia that (1) only applications for special
permits for "colorum" or "kabit" operators filed before July 17,
1973 shall be accepted and processed (Secs. 3 and 16 (c), BOTLTC-HPG Joint Regulations Implementing PD 101, pp. 33 and
47, Rollo); (2) Every provisional authority given to any taxi

operator shall be cancelled immediately and no provisional

authority shall thereafter be issued (par. 6, Letter of Instructions
No. 379, issued March 10, 1976, p. 58, Rollo); (3) Effective
immediately, no provisional authorities on applications for
certificates of public convenience shall be granted or existing
provisional authorities on new applications extended to,
among others, taxi denominations in Metro Manila (BOT
Memorandum Circular No. 75-25 (a), August 30, 1976, p. 64,
Rollo); (4) All taxis authorized to operate within Metro Manila
shall obtain new special permits from the BOT, which permits
shall be the only ones recognized within the area (par. 8, LOI
No. 379, supra); and (5) No bonafide applicant may apply for
special permit to operate, among others, new taxicab services,
and, no application for such new service shall be accepted for
filing or processed by any LTC agency or granted under these
regulations by any LTC Regional Office until after it shall have
announced its program of development for these types of
public motor vehicles (Sec. 16d, BOT-LTC-HPG Joint
Regulations, p. 47, Rollo).
The petitioners raise the following issues:
I. WHETHER OR NOT THE BOARD OF
TRANSPORTATION HAS THE POWER TO
GRANT PROVISIONAL PERMITS TO OPERATE
DESPITE THE BAN THEREON UNDER LETTER
OF INSTRUCTIONS NO. 379;
II. WHETHER OR NOT THE BOARD OF
TRANSPORTATION HAS THE POWER TO
LEGALIZE, AT THIS TIME, CLANDESTINE AND
UNLAWFUL TAXICAB OPERATIONS UNDER
SECTION 1, P.D. 101; AND
III. WHETHER OR NOT THE PROCEDURE
BEING FOLLOWED BY THE BOARD IN THE
CASES IN QUESTION SATISFIES THE
PROCEDURAL DUE PROCESS
REQUIREMENTS. (p. 119, Rollo)
We need not pass upon the first issue raised anent the grant of
provisional authority to respondents. Considering that the
effectivity of the provisional permits issued to the respondents
was expressly limited to June 30, 1977, as evidenced by the
BOT orders granting the same (Annexes G, H, I and J among
others) and Memorandum Circular No. 77-4 dated January 20,
1977 (p. 151, Rollo), implementing paragraph 6 of LOI 379
(ordering immediate cancellation of all provisional authorities
issued to taxicab operators, supra), which provides:
5. After June 30, 1977, all provisional
authorities are deemed cancelled, even if
hearings on the main application have not
been terminated.
the issue is MOOT and ACADEMIC. Only the issue on
legalization remains under consideration.

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Justifying its action on private respondent's applications, the

respondent Board emphasizes public need as the overriding
concern. It is argued that under PD 101, it is the fixed policy of
the State "to eradicate the harmful and unlawful trade of
clandestine operators by replacing or allowing them to become
legitimate and responsible ones" (Whereas clause, PD 101). In
view thereof, it is maintained that respondent Board may
continue to grant to "colorum" operators the benefits of
legalization under PD 101, despite the lapse of its power, after
six (6) months, to do so, without taking punitive measures
against the said operators.
Indeed, a reading of Section 1, PD 101, shows a grant of
powers to the respondent Board to issue provisional permits as
a step towards the legalization of colorum taxicab operations
without the alleged time limitation. There is nothing in Section
4, cited by the petitioners, to suggest the expiration of such
powers six (6) months after promulgation of the Decree.
Rather, it merely provides for the withdrawal of the State's
waiver of its right to punish said colorum operators for their
illegal acts. In other words, the cited section declares when the
period of moratorium suspending the relentless drive to
eliminate illegal operators shall end. Clearly, there is no
impediment to the Board's exercise of jurisdiction under its
broad powers under the Public Service Act to issue certificates
of public convenience to achieve the avowed purpose of PD
101 (Sec. 16a, Public Service Act, Nov. 7, 1936).
It is a settled principle of law that in determining whether a
board or commission has a certain power, the authority given
should be liberally construed in the light of the purposes for
which it was created, and that which is incidentally necessary to
a full implementation of the legislative intent should be upheld
as being germane to the law. Necessarily, too, where the end is
required, the appropriate means are deemed given (Martin,
Administrative Law, 1979, p. 46). Thus, as averred by the
respondents:
... [A]ll things considered, the question is
what is the best for the interest of the public.
Whether PD 101 has lost its effectiveness or
not, will in no way prevent this Board from
resolving the question in the same candor
and spirit that P.D. 101 and LOI 379 were
issued to cope with the multifarious ills that
plague our transport system. ... (Emphasis
supplied) (pp. 91-92, Rollo)
This, the private respondents appreciate, as they make
reference to PD 101, merely to cite the compassion with which
colorum operators were dealt with under the law. They state
that it is "in the same vein and spirit that this Honorable Board
has extended the Decree of legalization to the operatives of
the various PUJ and PUB services along legislative methods,"
that respondents pray for authorization of their colorum units
in actual operation in Metro Manila (Petitions for Legalization,
Annexes E & F, par. 7, pp. 65-79, Rollo).

Anent the petitioners' reliance on the BOT Rules and

Regulations Implementing PD 101 as well as its Memorandum
Circular No. 76-25(a), the BOT itself has declared:
In line with its duty to rationalize the
transport industry, the Board shall. from time
to time, re- study the public need for public
utilities in any area in the Philippines for the
purpose of re- evaluating the policies. (p. 64,
Rollo)
Thus, the respondents correctly argue that "as the need of the
public changes and oscillates with the trends of modern life, so
must the Memo Orders issued by respondent jibe with the
dynamic and flexible standards of public needs. ... Respondent
Board is not supposed to 'tie its hands' on its issued Memo
Orders should public interest demand otherwise" (Answer of
private respondents, p. 121, Rollo).
The fate of the private respondent's petitions is initially for the
Board to determine. From the records of the case, acceptance
of the respondent's applications appears to be a question
correctly within the discretion of the respondent Board to
decide. As a rule, where the jurisdiction of the BOT to take
cognizance of an application for legalization is settled, the
Court enjoins the exercise thereof only when there is fraud,
abuse of discretion or error of law. Furthermore, the court does
not interfere, as a rule, with administrative action prior to its
completion or finality . It is only after judicial review is no
longer premature that we ascertain in proper cases whether the
administrative findings are not in violation of law, whether they
are free from fraud or imposition and whether they find
substantial support from the evidence.
Finally, with respect to the last issue raised by the petitioners
alleging the denial of due process by respondent Board in
granting the provisional permits to the private respondents
and in taking cognizance of their applications for legalization
without notice and hearing, suffice it to say that PD 101 does
not require such notice or hearing for the grant of temporary
authority . The provisional nature of the authority and the fact
that the primary application shall be given a full hearing are the
safeguards against its abuse. As to the applications for
legalization themselves, the Public Service Act does enjoin the
Board to give notice and hearing before exercising any of its
powers under Sec. 16 thereof. However, the allegations that
due process has been denied are negated by the hearings set
by the Board on the applications as expressed in its orders
resolving the petitions for special permits (Annexes G, H, I, pp.
80-102, Rollo).
The Board stated:
The grounds involved in the petition are of
first impression. It cannot resolve the issue
ex-parte. It needs to hear the views of other
parties who may have an interest, or whose
interest may be affected by any decision that
this Board may take.

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The Board therefore, decides to set the

petition for hearing.
xxx xxx xxx
As to the required notice, it is impossible for the respondent
Board to give personal notice to all parties who may be
interested in the matter, which parties are unknown to it. Its
aforementioned order substantially complies with the
requirement. The petitioners having been able to timely
oppose the petitions in question, any lack of notice is deemed
cured.
WHEREFORE. the petition is hereby DISMISSED for lack of
merit. The questioned orders of the then Board of
Transportation are AFFIRMED.
SO ORDERED.

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