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CIVIL SERVICE COMMISSION, petitioner, vs. JOSE J.

vs. JOSE J. shoved her towards the door causing her to stumble, her both hands
LUCAS, respondent. protected her face from smashing upon the door.

DECISION Mr. Lucas, bent on literally throwing the affiant out of the office,
grabbed her the second time while she attempted to regain her posture
PARDO, J.: after being pushed the first time. x x x while doing all this, Mr. Lucas
shouted at the affiant, saying, labas, huwag ka nang papasok dito kahit
The petition for review on certiorari before the Court assails the kailan.[4]
decision of the Court of Appeals[1] which set aside the resolution of the
Civil Service Commission[2] and reinstated that of the Board of On June 8, 1992, the Board of Personnel Inquiry, DA, issued a
Personnel Inquiry (BOPI for brevity), Office of the Secretary, summons requiring respondent to answer the complaint, not to file a
Department of Agriculture,[3] suspending respondent for one month, for motion to dismiss, within five (5) days from receipt. On June 17, 1992,
simple misconduct. respondent Lucas submitted a letter to Jose P. Nitullano, assistant
head, BOPI, denying the charges. According to Lucas, he did not touch
To provide a factual backdrop of the case, a recital of the facts is the thigh of complainant Linatok, that what transpired was that he
necessary. accidentally brushed Linatoks leg when he reached for his shoes and
that the same was merely accidental and he did not intend nor was
On May 26, 1992, Raquel P. Linatok, an assistant information there malice when his hand got in contact with Linatoks leg.
officer at the Agricultural Information Division, Department of
Agriculture (DA for brevity), filed with the office of the Secretary, DA, an On May 31, 1993, after a formal investigation by the BOPI, DA, the
affidavit-complaint against respondent Jose J. Lucas, a photographer board issued a resolution finding respondent guilty of simple
of the same agency, for misconduct. misconduct[5] and recommending a penalty of suspension for one (1)
month and one (1) day. The Secretary of Agriculture approved the
Raquel described the incident in the following manner: recommendation.

While standing before a mirror, near the office door of Jose J. Lucas, In due time, respondent appealed the decision to the Civil Service
Raquel noticed a chair at her right side which Mr. Jose Lucas, at that Commission (CSC). On July 7, 1994, the CSC issued a resolution
very instant used to sit upon. Thereafter, Mr. Lucas bent to reach for finding respondent guilty of grave misconduct and imposing on him
his shoe. At that moment she felt Mr. Lucas hand touching her thigh the penalty of dismissal from the service.[6] Respondent moved for
and running down his palm up to her ankle. She was shocked and reconsideration but the CSC denied the motion.
suddenly faced Mr. Lucas and admonished him not to do it again or
she will kick him. But Lucas touched her again and so she hit Mr. Then, respondent appealed to the Court of Appeals. On October
Lucas. Suddenly Mr. Lucas shouted at her saying lumabas ka na at 29, 1996, the Court of Appeals promulgated its decision setting aside
huwag na huwag ka nang papasok dito kahit kailan A verbal exchange the resolution of the CSC and reinstating the resolution of the BOPI,
then ensued and respondent Lucas grabbed Raquel by the arm and DA, stating thus: It is true that the Civil Service Act does not define
grave
and simple misconduct. There is, however, no question that these As well stated by the Court of Appeals, there is an existing
offenses fall under different categories.This is clear from a perusal of guideline of the CSC distinguishing simple and grave misconduct. In
memorandum circular No. 49-89 dated August 3, 1989 (also known as the case of Landrito vs. Civil Service Commission, we held that in
the guidelines in the application of penalties in administrative cases) grave misconduct as distinguished from simple misconduct, the
itself which classifies administrative offenses into three: grave, less elements of corruption, clear intent to violate the law or flagrant
grave and light offenses. The charge of grave misconduct falls under disregard of established rule, must be manifest,
[10]
the classification of grave offenses while simple misconduct is whichis obviously lacking in respondents case. Respondent
classified as a less grave offense. The former is punishable by maintains that as he was charged with simple misconduct, the CSC
dismissal while the latter is punishable either by suspension (one deprived him of his right to due process by convicting him of grave
month and one day to six months), if it is the first offense; or by misconduct.
dismissal, if it is the second. Thus, they should be treated as separate
and distinct offenses.[7] We sustain the ruling of the Court of Appeals [11] that: (a) a basic
requirement of due process is that a person must be duly informed of
The Court of Appeals further ruled that a basic requirement of due the charges against him[12] and that (b) a person can not be convicted
process on the other hand is that a person must be duly informed of of a crime with which he was not charged.[13]
the charges against him (Felicito Sajonas vs. National Labor Relations
Commission, 183 SCRA 182). In the instant case however, Lucas Administrative proceedings are not exempt from basic and
came to know of the modification of the charge against him only when fundamental procedural principles, such as the right to
he received notice of the resolution dismissing him from the service.[8] due process in investigations and hearings.[14]

Hence, this petition. The right to substantive and procedural due process is applicable
in administrative proceedings.[15]
The issues are (a) whether respondent Lucas was denied due
process when the CSC found him guilty of grave misconduct on a Of course, we do not in any way condone respondents act. Even
charge of simple misconduct, and (b) whether the act complained of in jest, he had no right to touch complainants leg. However, under the
constitutes grave misconduct. circumstances, such act is not constitutive of grave misconduct, in the
absence of proof that respondent was maliciously motivated. We note
Petitioner anchors its position on the view that the formal charge that respondent has been in the service for twenty (20) years and this
against a respondent in an administrative case need not be drafted is his first offense.
with the precision of an information in a criminal prosecution. It is
sufficient that he is apprised of the substance of the charge IN VIEW WHEREOF, the Court hereby DENIES the petition
against him; what is controlling is the allegation of the acts complained for review on certiorari and AFFIRMS the decision of the Court of
of, and not the designation of the offense.[9] Appeals in CA-G. R. SP No. 37137.

We deny the petition. No costs.

SO ORDERED.
On May 31, 2000, respondent filed with the Court of Appeals [5] a
petition for certiorari and prohibition with temporary restraining order
and writ of preliminary injunction questioning the order of preventive
suspension issued by petitioner Ombudsman.

After due proceedings, on August 14, 2000, the Court of Appeals


promulgated its decision[6] annulling and setting aside the order of
preventive suspension against respondent for having been issued by
the Ombudsman in grave abuse of discretion.

On October 06, 2000, the Court of Appeals denied a motion for


reconsideration filed by the Solicitor General.
Ombudsman ANIANO A. DESIERTO, Customs Commissioner
RENATO A. AMPIL and Captain DOMINGO S. DOCTOR, Hence, this petition.[7]
JR., petitioners, vs. RONNIE C. SILVESTRE, respondent.
The Facts
DECISION
On January 26, 2000, elements of Task Force Aduana headed by
PARDO, J.: petitioner Doctor conducted an entrapment operation in a case of
bribery involving Atty. Redempto C. Somera, Hearing Officer, Law
The Case Division, Bureau of Customs, Manila, and Indian nationals who had
pending cases of seizure with the former.
The petition is one for review on certiorari[1] seeking to set aside
(a) the decision of the Court of Appeals [2] nullifying the preventive After the pay-off materialized, petitioner Doctor announced the
suspension order issued by petitioner Ombudsman; and (b) the entrapment and then arrested Atty. Somera and two (2) Indian
resolution[3] denying petitioners motion for reconsideration. nationals, namely, Murli Tejoomal Mohrani and Kumar Rupchand
Khiatani, for violation of Article 210 of the Revised Penal Code. As a
The Ombudsman issued an order of preventive suspension[4] in consequence, the Task Force filed with the Regional Trial Court,
connection with the administrative charges for grave misconduct, Manila, charges of bribery, violation of R. A. No. 3019, and corruption
dishonesty and conduct prejudicial to the best interest of the service of public officials against them.
that Task Force Aduana filed with the Office of the Ombudsman against
respondent Ronnie C. Silvestre and Atty. Redempto Somera. Likewise, the Task Force filed with the Ombudsman administrative
charges for grave misconduct, dishonesty and conduct prejudicial to
On February 14, 2000, respondent filed with the Ombudsman a the best interest of the service against respondent Ronnie C. Silvestre
motion for the lifting of the order of preventive suspension. However, and Atty. Somera.
on April 03, 2000, the Ombudsman denied the motion.
The Issue
The issue is whether the Ombudsman has authority to suspend evidence, the basic rule that mere allegation is not evidence cannot be
from office respondent Ronnie C. Silvestre indefinitely on the basis of disregarded.
the administrative complaint filed with his office showing that evidence
of guilt is strong. We are, therefore inclined to believe the defense of respondent
SILVESTRE, that what was discussed between him, respondent
The Courts Ruling SOMERA and Atty. DOCTOR on January 20, 2000, was the legal issue
on the continued detention of some kitchen wares which were not
We need not resolve the issue presented. We dismiss the covered by the Warrant of Seizure and Detention (WSD). This, in light
petition. It has become moot. of subsequent Order of the District Collector of the Port of Manila dated
March 2, 2000, releasing the said kitchen wares which were indeed,
On February 14, 2001, the Ombudsman dismissed the not covered by the Warrant of Seizure and Detention (WSD) x x x
administrative charges against respondent. In dismissing the charges,
the Ombudsman categorically ruled as follows: Worthy of note also is the DECISION of the Court of Appeals in CA-G.
R. SP No. 58958 dated August 14, 2000 entitled RONNIE C.
It is another story, however, as regards respondent SILVESTRE. In SILVESTRE vs. OMBUDSMAN ANIANO A. DESIERTO, (pages 253 to
implicating respondent SILVESTRE in the instant case, Atty. DOCTOR 254, Records) where in granting the petition for certiorari and
stated in his AFFIDAVIT OF ARREST AND COMPLAINT, the following: prohibition involving the preventive suspension order on respondent
SILVESTRE, the said appellate court stated, thus:
6. That after the hearing of the case (S.I. No. 00-005) on January 20,
2000, ATTY. SOMERA approached me and invited me to the room of xxx xxx xxx
ATTY. RONNIE SILVESTRE (herein petitioner), Head of the Law
Department of the Port of Manila wherein the duo convinced me to While the above DECISION may not necessarily be controlling in the
cooperate with them in the withdrawal of the complaint and its eventual resolution of the merits of the instant case insofar as it pertains to
dismissal; respondent SILVESTRE, we cannot help but note its relevancy
inasmuch as practically no other evidence was presented by the
7. That I did not commit myself to their proposition to drop the case but complainant, other than his AFFIDAVIT OF ARREST AND
I just continued talking with them with the plan in mind to report the COMPLAINT to support the charge against respondent SILVESTRE.
same to LT. GEN. JOSE T. CALIMLIM, Task Force Commander of Needless to state, this is also the very same and only evidence
Presidential Anti-Smuggling Task Force ADUANA; presented before the Court of Appeals which rendered the aforequoted
DECISION.
Except this bare allegation of the complainant, however, practically no
other evidence was ever presented to substantiate the charge against WHEREFORE, the Court hereby DISMISSES the petition for
respondent SILVESTRE. At this point, it may be noted that well settled mootness.
is the rule that within the field of administrative law, while strict rules of
evidence are not applicable to quasi-judicial proceedings, No costs.
nevertheless, in adducing evidence constitutive of substantial
SO ORDERED.
(1) That in the elections of September 17, 1935, the petitioner,
Jose A. Angara, and the respondents, Pedro Ynsua, Miguel
Castillo and Dionisio Mayor, were candidates voted for the
position of member of the National Assembly for the first district
of the Province of Tayabas;

(2) That on October 7, 1935, the provincial board of


canvassers, proclaimed the petitioner as member-elect of the
National Assembly for the said district, for having received the
most number of votes;

(3) That on November 15, 1935, the petitioner took his oath of
G.R. No. L-45081 July 15, 1936
office;

JOSE A. ANGARA, petitioner,


(4) That on December 3, 1935, the National Assembly in
vs.
session assembled, passed the following resolution:
THE ELECTORAL COMMISSION, PEDRO YNSUA, MIGUEL
CASTILLO, and DIONISIO C. MAYOR,respondents. [No. 8]

Godofredo Reyes for petitioner. RESOLUCION CONFIRMANDO LAS ACTAS DE


Office of the Solicitor General Hilado for respondent Electoral AQUELLOS DIPUTADOS CONTRA QUIENES NO SE
Commission. HA PRESENTADO PROTESTA.
Pedro Ynsua in his own behalf.
No appearance for other respondents. Se resuelve: Que las actas de eleccion de los
Diputados contra quienes no se hubiere presentado
LAUREL, J.: debidamente una protesta antes de la adopcion de la
presente resolucion sean, como por la presente, son
This is an original action instituted in this court by the petitioner, Jose
aprobadas y confirmadas.
A. Angara, for the issuance of a writ of prohibition to restrain and
prohibit the Electoral Commission, one of the respondents, from taking Adoptada, 3 de diciembre, 1935.
further cognizance of the protest filed by Pedro Ynsua, another
respondent, against the election of said petitioner as member of the (5) That on December 8, 1935, the herein respondent Pedro
National Assembly for the first assembly district of the Province of Ynsua filed before the Electoral Commission a "Motion of
Tayabas. Protest" against the election of the herein petitioner, Jose A.
Angara, being the only protest filed after the passage of
The facts of this case as they appear in the petition and as admitted by Resolutions No. 8 aforequoted, and praying, among other-
the respondents are as follows: things, that said respondent be declared elected member of the
National Assembly for the first district of Tayabas, or that the The application of the petitioner sets forth the following grounds for the
election of said position be nullified; issuance of the writ prayed for:

(6) That on December 9, 1935, the Electoral Commission (a) That the Constitution confers exclusive jurisdiction upon the
adopted a resolution, paragraph 6 of which provides: electoral Commission solely as regards the merits of contested
elections to the National Assembly;
6. La Comision no considerara ninguna protesta que no
se haya presentado en o antes de este dia. (b) That the Constitution excludes from said jurisdiction the
power to regulate the proceedings of said election contests,
(7) That on December 20, 1935, the herein petitioner, Jose A. which power has been reserved to the Legislative Department
Angara, one of the respondents in the aforesaid protest, filed of the Government or the National Assembly;
before the Electoral Commission a "Motion to Dismiss the
Protest", alleging (a) that Resolution No. 8 of Dismiss the (c) That like the Supreme Court and other courts created in
Protest", alleging (a) that Resolution No. 8 of the National pursuance of the Constitution, whose exclusive jurisdiction
Assembly was adopted in the legitimate exercise of its relates solely to deciding the merits of controversies submitted
constitutional prerogative to prescribe the period during which to them for decision and to matters involving their internal
protests against the election of its members should be organization, the Electoral Commission can regulate its
presented; (b) that the aforesaid resolution has for its object, proceedings only if the National Assembly has not availed of its
and is the accepted formula for, the limitation of said period; primary power to so regulate such proceedings;
and (c) that the protest in question was filed out of the
prescribed period; (d) That Resolution No. 8 of the National Assembly is,
therefore, valid and should be respected and obeyed;
(8) That on December 27, 1935, the herein respondent, Pedro
Ynsua, filed an "Answer to the Motion of Dismissal" alleging (e) That under paragraph 13 of section 1 of the ordinance
that there is no legal or constitutional provision barring the appended to the Constitution and paragraph 6 of article 7 of the
presentation of a protest against the election of a member of Tydings-McDuffie Law (No. 127 of the 73rd Congress of the
the National Assembly after confirmation; United States) as well as under section 1 and 3 (should be
sections 1 and 2) of article VIII of the Constitution, this
(9) That on December 31, 1935, the herein petitioner, Jose A. Supreme Court has jurisdiction to pass upon the fundamental
Angara, filed a "Reply" to the aforesaid "Answer to the Motion question herein raised because it involves an interpretation of
of Dismissal"; the Constitution of the Philippines.

(10) That the case being submitted for decision, the Electoral On February 25, 1936, the Solicitor-General appeared and filed an
Commission promulgated a resolution on January 23, 1936, answer in behalf of the respondent Electoral Commission interposing
denying herein petitioner's "Motion to Dismiss the Protest." the following special defenses:
(a) That the Electoral Commission has been created by the (a) That at the time of the approval of the rules of the Electoral
Constitution as an instrumentality of the Legislative Department Commission on December 9, 1935, there was no existing law
invested with the jurisdiction to decide "all contests relating to fixing the period within which protests against the election of
the election, returns, and qualifications of the members of the members of the National Assembly should be filed; that in fixing
National Assembly"; that in adopting its resolution of December December 9, 1935, as the last day for the filing of protests
9, 1935, fixing this date as the last day for the presentation of against the election of members of the National Assembly, the
protests against the election of any member of the National Electoral Commission was exercising a power impliedly
Assembly, it acted within its jurisdiction and in the legitimate conferred upon it by the Constitution, by reason of its quasi-
exercise of the implied powers granted it by the Constitution to judicial attributes;
adopt the rules and regulations essential to carry out the power
and functions conferred upon the same by the fundamental law; (b) That said respondent presented his motion of protest before
that in adopting its resolution of January 23, 1936, overruling the Electoral Commission on December 9, 1935, the last day
the motion of the petitioner to dismiss the election protest in fixed by paragraph 6 of the rules of the said Electoral
question, and declaring itself with jurisdiction to take Commission;
cognizance of said protest, it acted in the legitimate exercise of
its quasi-judicial functions a an instrumentality of the Legislative (c) That therefore the Electoral Commission acquired
Department of the Commonwealth Government, and hence jurisdiction over the protest filed by said respondent and over
said act is beyond the judicial cognizance or control of the the parties thereto, and the resolution of the Electoral
Supreme Court; Commission of January 23, 1936, denying petitioner's motion to
dismiss said protest was an act within the jurisdiction of the
(b) That the resolution of the National Assembly of December 3, said commission, and is not reviewable by means of a writ of
1935, confirming the election of the members of the National prohibition;
Assembly against whom no protest had thus far been filed,
could not and did not deprive the electoral Commission of its (d) That neither the law nor the Constitution requires
jurisdiction to take cognizance of election protests filed within confirmation by the National Assembly of the election of its
the time that might be set by its own rules: members, and that such confirmation does not operate to limit
the period within which protests should be filed as to deprive
(c) That the Electoral Commission is a body invested with the Electoral Commission of jurisdiction over protest filed
quasi-judicial functions, created by the Constitution as an subsequent thereto;
instrumentality of the Legislative Department, and is not an
"inferior tribunal, or corporation, or board, or person" within the (e) That the Electoral Commission is an independent entity
purview of section 226 and 516 of the Code of Civil Procedure, created by the Constitution, endowed with quasi-judicial
against which prohibition would lie. functions, whose decision are final and unappealable;

The respondent Pedro Ynsua, in his turn, appeared and filed an ( f ) That the electoral Commission, as a constitutional creation,
answer in his own behalf on March 2, 1936, setting forth the following is not an inferior tribunal, corporation, board or person, within
as his special defense: the terms of sections 226 and 516 of the Code of Civil
Procedure; and that neither under the provisions of sections 1 vehemence of counsel were we not to pass upon the question of
and 2 of article II (should be article VIII) of the Constitution and jurisdiction squarely presented to our consideration.
paragraph 13 of section 1 of the Ordinance appended thereto
could it be subject in the exercise of its quasi-judicial functions The separation of powers is a fundamental principle in our system of
to a writ of prohibition from the Supreme Court; government. It obtains not through express provision but by actual
division in our Constitution. Each department of the government has
(g) That paragraph 6 of article 7 of the Tydings-McDuffie Law exclusive cognizance of matters within its jurisdiction, and is supreme
(No. 127 of the 73rd Congress of the united States) has no within its own sphere. But it does not follow from the fact that the three
application to the case at bar. powers are to be kept separate and distinct that the Constitution
intended them to be absolutely unrestrained and independent of each
The case was argued before us on March 13, 1936. Before it was other. The Constitution has provided for an elaborate system of checks
submitted for decision, the petitioner prayed for the issuance of a and balances to secure coordination in the workings of the various
preliminary writ of injunction against the respondent Electoral departments of the government. For example, the Chief Executive
Commission which petition was denied "without passing upon the under our Constitution is so far made a check on the legislative power
merits of the case" by resolution of this court of March 21, 1936. that this assent is required in the enactment of laws. This, however, is
subject to the further check that a bill may become a law
There was no appearance for the other respondents. notwithstanding the refusal of the President to approve it, by a vote of
two-thirds or three-fourths, as the case may be, of the National
The issues to be decided in the case at bar may be reduced to the Assembly. The President has also the right to convene the Assembly in
following two principal propositions: special session whenever he chooses. On the other hand, the National
Assembly operates as a check on the Executive in the sense that its
1. Has the Supreme Court jurisdiction over the Electoral consent through its Commission on Appointments is necessary in the
Commission and the subject matter of the controversy upon the appointments of certain officers; and the concurrence of a majority of
foregoing related facts, and in the affirmative, all its members is essential to the conclusion of treaties. Furthermore,
in its power to determine what courts other than the Supreme Court
2. Has the said Electoral Commission acted without or in shall be established, to define their jurisdiction and to appropriate
excess of its jurisdiction in assuming to the cognizance of the funds for their support, the National Assembly controls the judicial
protest filed the election of the herein petitioner notwithstanding department to a certain extent. The Assembly also exercises the
the previous confirmation of such election by resolution of the judicial power of trying impeachments. And the judiciary in turn, with
National Assembly? the Supreme Court as the final arbiter, effectively checks the other
departments in the exercise of its power to determine the law, and
We could perhaps dispose of this case by passing directly upon the hence to declare executive and legislative acts void if violative of the
merits of the controversy. However, the question of jurisdiction having Constitution.
been presented, we do not feel justified in evading the issue. Being a
case prim impressionis, it would hardly be consistent with our sense But in the main, the Constitution has blocked out with deft strokes and
of duty to overlook the broader aspect of the question and leave it in bold lines, allotment of power to the executive, the legislative and
undecided. Neither would we be doing justice to the industry and the judicial departments of the government. The overlapping and
interlacing of functions and duties between the several departments, constitutional boundaries, it does not assert any superiority over the
however, sometimes makes it hard to say just where the one leaves off other departments; it does not in reality nullify or invalidate an act of
and the other begins. In times of social disquietude or political the legislature, but only asserts the solemn and sacred obligation
excitement, the great landmarks of the Constitution are apt to be assigned to it by the Constitution to determine conflicting claims of
forgotten or marred, if not entirely obliterated. In cases of conflict, the authority under the Constitution and to establish for the parties in an
judicial department is the only constitutional organ which can be called actual controversy the rights which that instrument secures and
upon to determine the proper allocation of powers between the several guarantees to them. This is in truth all that is involved in what is termed
departments and among the integral or constituent units thereof. "judicial supremacy" which properly is the power of judicial review
under the Constitution. Even then, this power of judicial review is
As any human production, our Constitution is of course lacking limited to actual cases and controversies to be exercised after full
perfection and perfectibility, but as much as it was within the power of opportunity of argument by the parties, and limited further to the
our people, acting through their delegates to so provide, that constitutional question raised or the very lis mota presented. Any
instrument which is the expression of their sovereignty however attempt at abstraction could only lead to dialectics and barren legal
limited, has established a republican government intended to operate questions and to sterile conclusions unrelated to actualities. Narrowed
and function as a harmonious whole, under a system of checks and as its function is in this manner, the judiciary does not pass upon
balances, and subject to specific limitations and restrictions provided in questions of wisdom, justice or expediency of legislation. More than
the said instrument. The Constitution sets forth in no uncertain that, courts accord the presumption of constitutionality to legislative
language the restrictions and limitations upon governmental powers enactments, not only because the legislature is presumed to abide by
and agencies. If these restrictions and limitations are transcended it the Constitution but also because the judiciary in the determination of
would be inconceivable if the Constitution had not provided for a actual cases and controversies must reflect the wisdom and justice of
mechanism by which to direct the course of government along the people as expressed through their representatives in the executive
constitutional channels, for then the distribution of powers would be and legislative departments of the governments of the government.
mere verbiage, the bill of rights mere expressions of sentiment, and the
principles of good government mere political apothegms. Certainly, the But much as we might postulate on the internal checks of power
limitation and restrictions embodied in our Constitution are real as they provided in our Constitution, it ought not the less to be remembered
should be in any living constitution. In the United States where no that, in the language of James Madison, the system itself is not "the
express constitutional grant is found in their constitution, the chief palladium of constitutional liberty . . . the people who are authors
possession of this moderating power of the courts, not to speak of its of this blessing must also be its guardians . . . their eyes must be ever
historical origin and development there, has been set at rest by popular ready to mark, their voice to pronounce . . . aggression on the authority
acquiescence for a period of more than one and a half centuries. In our of their constitution." In the Last and ultimate analysis, then, must the
case, this moderating power is granted, if not expressly, by clear success of our government in the unfolding years to come be tested in
implication from section 2 of article VIII of our constitution. the crucible of Filipino minds and hearts than in consultation rooms
and court chambers.
The Constitution is a definition of the powers of government. Who is to
determine the nature, scope and extent of such powers? The In the case at bar, the national Assembly has by resolution (No. 8) of
Constitution itself has provided for the instrumentality of the judiciary December 3, 1935, confirmed the election of the herein petitioner to
as the rational way. And when the judiciary mediates to allocate the said body. On the other hand, the Electoral Commission has by
resolution adopted on December 9, 1935, fixed said date as the last constitutional government, the framers of our constitution adopted the
day for the filing of protests against the election, returns and American type where the written constitution is interpreted and given
qualifications of members of the National Assembly, notwithstanding effect by the judicial department. In some countries which have
the previous confirmation made by the National Assembly as aforesaid. declined to follow the American example, provisions have been
If, as contended by the petitioner, the resolution of the National inserted in their constitutions prohibiting the courts from exercising the
Assembly has the effect of cutting off the power of the Electoral power to interpret the fundamental law. This is taken as a recognition
Commission to entertain protests against the election, returns and of what otherwise would be the rule that in the absence of direct
qualifications of members of the National Assembly, submitted after prohibition courts are bound to assume what is logically their function.
December 3, 1935, then the resolution of the Electoral Commission of For instance, the Constitution of Poland of 1921, expressly provides
December 9, 1935, is mere surplusage and had no effect. But, if, as that courts shall have no power to examine the validity of statutes (art.
contended by the respondents, the Electoral Commission has the sole 81, chap. IV). The former Austrian Constitution contained a similar
power of regulating its proceedings to the exclusion of the National declaration. In countries whose constitutions are silent in this respect,
Assembly, then the resolution of December 9, 1935, by which the courts have assumed this power. This is true in Norway, Greece,
Electoral Commission fixed said date as the last day for filing protests Australia and South Africa. Whereas, in Czechoslovakia (arts. 2 and 3,
against the election, returns and qualifications of members of the Preliminary Law to constitutional Charter of the Czechoslovak
National Assembly, should be upheld. Republic, February 29, 1920) and Spain (arts. 121-123, Title IX,
Constitutional of the Republic of 1931) especial constitutional courts
Here is then presented an actual controversy involving as it does a are established to pass upon the validity of ordinary laws. In our case,
conflict of a grave constitutional nature between the National Assembly the nature of the present controversy shows the necessity of a final
on the one hand, and the Electoral Commission on the other. From the constitutional arbiter to determine the conflict of authority between two
very nature of the republican government established in our country in agencies created by the Constitution. Were we to decline to take
the light of American experience and of our own, upon the judicial cognizance of the controversy, who will determine the conflict? And if
department is thrown the solemn and inescapable obligation of the conflict were left undecided and undetermined, would not a void be
interpreting the Constitution and defining constitutional boundaries. thus created in our constitutional system which may be in the long run
The Electoral Commission, as we shall have occasion to refer prove destructive of the entire framework? To ask these questions is to
hereafter, is a constitutional organ, created for a specific purpose, answer them. Natura vacuum abhorret, so must we avoid exhaustion
namely to determine all contests relating to the election, returns and in our constitutional system. Upon principle, reason and authority, we
qualifications of the members of the National Assembly. Although the are clearly of the opinion that upon the admitted facts of the present
Electoral Commission may not be interfered with, when and while case, this court has jurisdiction over the Electoral Commission and the
acting within the limits of its authority, it does not follow that it is beyond subject mater of the present controversy for the purpose of determining
the reach of the constitutional mechanism adopted by the people and the character, scope and extent of the constitutional grant to the
that it is not subject to constitutional restrictions. The Electoral Electoral Commission as "the sole judge of all contests relating to the
Commission is not a separate department of the government, and election, returns and qualifications of the members of the National
even if it were, conflicting claims of authority under the fundamental Assembly."
law between department powers and agencies of the government are
necessarily determined by the judiciary in justifiable and appropriate Having disposed of the question of jurisdiction, we shall now proceed
cases. Discarding the English type and other European types of to pass upon the second proposition and determine whether the
Electoral Commission has acted without or in excess of its jurisdiction The first step towards the creation of an independent tribunal for the
in adopting its resolution of December 9, 1935, and in assuming to purpose of deciding contested elections to the legislature was taken by
take cognizance of the protest filed against the election of the herein the sub-committee of five appointed by the Committee on
petitioner notwithstanding the previous confirmation thereof by the Constitutional Guarantees of the Constitutional Convention, which sub-
National Assembly on December 3, 1935. As able counsel for the committee submitted a report on August 30, 1934, recommending the
petitioner has pointed out, the issue hinges on the interpretation of creation of a Tribunal of Constitutional Security empowered to hear
section 4 of Article VI of the Constitution which provides: legislature but also against the election of executive officers for whose
election the vote of the whole nation is required, as well as to initiate
"SEC. 4. There shall be an Electoral Commission composed of three impeachment proceedings against specified executive and judicial
Justice of the Supreme Court designated by the Chief Justice, and of officer. For the purpose of hearing legislative protests, the tribunal was
six Members chosen by the National Assembly, three of whom shall be to be composed of three justices designated by the Supreme Court
nominated by the party having the largest number of votes, and three and six members of the house of the legislature to which the contest
by the party having the second largest number of votes therein. The corresponds, three members to be designed by the majority party and
senior Justice in the Commission shall be its Chairman. The Electoral three by the minority, to be presided over by the Senior Justice unless
Commission shall be the sole judge of all contests relating to the the Chief Justice is also a member in which case the latter shall
election, returns and qualifications of the members of the National preside. The foregoing proposal was submitted by the Committee on
Assembly." It is imperative, therefore, that we delve into the origin and Constitutional Guarantees to the Convention on September 15, 1934,
history of this constitutional provision and inquire into the intention of with slight modifications consisting in the reduction of the legislative
its framers and the people who adopted it so that we may properly representation to four members, that is, two senators to be designated
appreciate its full meaning, import and significance. one each from the two major parties in the Senate and two
representatives to be designated one each from the two major parties
The original provision regarding this subject in the Act of Congress of in the House of Representatives, and in awarding representation to the
July 1, 1902 (sec. 7, par. 5) laying down the rule that "the assembly executive department in the persons of two representatives to be
shall be the judge of the elections, returns, and qualifications of its designated by the President.
members", was taken from clause 1 of section 5, Article I of the
Constitution of the United States providing that "Each House shall be Meanwhile, the Committee on Legislative Power was also preparing its
the Judge of the Elections, Returns, and Qualifications of its own report. As submitted to the Convention on September 24, 1934
Members, . . . ." The Act of Congress of August 29, 1916 (sec. 18, par. subsection 5, section 5, of the proposed Article on the Legislative
1) modified this provision by the insertion of the word "sole" as follows: Department, reads as follows:
"That the Senate and House of Representatives, respectively, shall be
the sole judges of the elections, returns, and qualifications of their The elections, returns and qualifications of the members of
elective members . . ." apparently in order to emphasize the exclusive either house and all cases contesting the election of any of their
the Legislative over the particular case s therein specified. This court members shall be judged by an Electoral Commission,
has had occasion to characterize this grant of power to the Philippine constituted, as to each House, by three members elected by
Senate and House of Representatives, respectively, as "full, clear and the members of the party having the largest number of votes
complete" (Veloso vs. Boards of Canvassers of Leyte and Samar therein, three elected by the members of the party having the
[1919], 39 Phil., 886, 888.)
second largest number of votes, and as to its Chairman, one Mr. VENTURA. Mr. President, we have a doubt here as to the
Justice of the Supreme Court designated by the Chief Justice. scope of the meaning of the first four lines, paragraph 6, page
11 of the draft, reading: "The elections, returns and
The idea of creating a Tribunal of Constitutional Security with qualifications of the Members of the National Assembly and all
comprehensive jurisdiction as proposed by the Committee on cases contesting the election of any of its Members shall be
Constitutional Guarantees which was probably inspired by the Spanish judged by an Electoral Commission, . . ." I should like to ask
plan (art. 121, Constitution of the Spanish Republic of 1931), was soon from the gentleman from Capiz whether the election and
abandoned in favor of the proposition of the Committee on Legislative qualification of the member whose elections is not contested
Power to create a similar body with reduced powers and with specific shall also be judged by the Electoral Commission.
and limited jurisdiction, to be designated as a Electoral Commission.
The Sponsorship Committee modified the proposal of the Committee Mr. ROXAS. If there is no question about the election of the
on Legislative Power with respect to the composition of the Electoral members, there is nothing to be judged; that is why the word
Commission and made further changes in phraseology to suit the "judge" is used to indicate a controversy. If there is no question
project of adopting a unicameral instead of a bicameral legislature. The about the election of a member, there is nothing to be
draft as finally submitted to the Convention on October 26, 1934, reads submitted to the Electoral Commission and there is nothing to
as follows: be determined.

(6) The elections, returns and qualifications of the Members of Mr. VENTURA. But does that carry the idea also that the
the National Assembly and all cases contesting the election of Electoral Commission shall confirm also the election of those
any of its Members shall be judged by an Electoral whose election is not contested?
Commission, composed of three members elected by the party
having the largest number of votes in the National Assembly, Mr. ROXAS. There is no need of confirmation. As the
three elected by the members of the party having the second gentleman knows, the action of the House of Representatives
largest number of votes, and three justices of the Supreme confirming the election of its members is just a matter of the
Court designated by the Chief Justice, the Commission to be rules of the assembly. It is not constitutional. It is not necessary.
presided over by one of said justices. After a man files his credentials that he has been elected, that
is sufficient, unless his election is contested.
During the discussion of the amendment introduced by Delegates
Labrador, Abordo, and others, proposing to strike out the whole Mr. VENTURA. But I do not believe that that is sufficient, as we
subsection of the foregoing draft and inserting in lieu thereof the have observed that for purposes of the auditor, in the matter of
following: "The National Assembly shall be the soled and exclusive election of a member to a legislative body, because he will not
judge of the elections, returns, and qualifications of the Members", the authorize his pay.
following illuminating remarks were made on the floor of the
Convention in its session of December 4, 1934, as to the scope of the Mr. ROXAS. Well, what is the case with regards to the
said draft: municipal president who is elected? What happens with
regards to the councilors of a municipality? Does anybody
xxx xxx xxx confirm their election? The municipal council does this: it makes
a canvass and proclaims in this case the municipal council Mr. CINCO. Under this paragraph, may not the Electoral
proclaims who has been elected, and it ends there, unless Commission, at its own instance, refuse to confirm the elections
there is a contest. It is the same case; there is no need on the of the members."
part of the Electoral Commission unless there is a contest. The
first clause refers to the case referred to by the gentleman from Mr. ROXAS. I do not think so, unless there is a protest.
Cavite where one person tries to be elected in place of another
who was declared elected. From example, in a case when the Mr. LABRADOR. Mr. President, will the gentleman yield?
residence of the man who has been elected is in question, or in
case the citizenship of the man who has been elected is in THE PRESIDENT. The gentleman may yield, if he so desires.
question.
Mr. ROXAS. Willingly.
However, if the assembly desires to annul the power of the
commission, it may do so by certain maneuvers upon its first Mr. LABRADOR. Does not the gentleman from Capiz believe
meeting when the returns are submitted to the assembly. The that unless this power is granted to the assembly, the assembly
purpose is to give to the Electoral Commission all the powers on its own motion does not have the right to contest the
exercised by the assembly referring to the elections, returns election and qualification of its members?
and qualifications of the members. When there is no contest,
there is nothing to be judged. Mr. ROXAS. I have no doubt but that the gentleman is right. If
this draft is retained as it is, even if two-thirds of the assembly
Mr. VENTURA. Then it should be eliminated. believe that a member has not the qualifications provided by
law, they cannot remove him for that reason.
Mr. ROXAS. But that is a different matter, I think Mr. Delegate.
Mr. LABRADOR. So that the right to remove shall only be
Mr. CINCO. Mr. President, I have a similar question as that retained by the Electoral Commission.
propounded by the gentleman from Ilocos Norte when I arose a
while ago. However I want to ask more questions from the Mr. ROXAS. By the assembly for misconduct.
delegate from Capiz. This paragraph 6 on page 11 of the draft
cites cases contesting the election as separate from the first Mr. LABRADOR. I mean with respect to the qualifications of the
part of the sections which refers to elections, returns and members.
qualifications.
Mr. ROXAS. Yes, by the Electoral Commission.
Mr. ROXAS. That is merely for the sake of clarity. In fact the
cases of contested elections are already included in the phrase Mr. LABRADOR. So that under this draft, no member of the
"the elections, returns and qualifications." This phrase "and assembly has the right to question the eligibility of its
contested elections" was inserted merely for the sake of clarity. members?
Mr. ROXAS. Before a member can question the eligibility, he la Comision Electoral se limitaran solamente a los casos en
must go to the Electoral Commission and make the question que haya habido protesta contra las actas." Before the
before the Electoral Commission. amendment of Delegate Labrador was voted upon the following
interpellation also took place:
Mr. LABRADOR. So that the Electoral Commission shall decide
whether the election is contested or not contested. El Sr. CONEJERO. Antes de votarse la enmienda, quisiera

Mr. ROXAS. Yes, sir: that is the purpose. El Sr. PRESIDENTE. Que dice el Comite?

Mr. PELAYO. Mr. President, I would like to be informed if the El Sr. ROXAS. Con mucho gusto.
Electoral Commission has power and authority to pass upon
the qualifications of the members of the National Assembly El Sr. CONEJERO. Tal como esta el draft, dando tres miembros
even though that question has not been raised. a la mayoria, y otros tres a la minoria y tres a la Corte
Suprema, no cree Su Seoria que esto equivale
Mr. ROXAS. I have just said that they have no power, because practicamente a dejar el asunto a los miembros del Tribunal
they can only judge. Supremo?

In the same session, the first clause of the aforesaid draft reading "The El Sr. ROXAS. Si y no. Creemos que si el tribunal o la
election, returns and qualifications of the members of the National Commission esta constituido en esa forma, tanto los miembros
Assembly and" was eliminated by the Sponsorship Committee in de la mayoria como los de la minoria asi como los miembros de
response to an amendment introduced by Delegates Francisco, la Corte Suprema consideraran la cuestion sobre la base de
Ventura, Vinzons, Rafols, Lim, Mumar and others. In explaining the sus meritos, sabiendo que el partidismo no es suficiente para
difference between the original draft and the draft as amended, dar el triunfo.
Delegate Roxas speaking for the Sponsorship Committee said:
El Sr. CONEJERO. Cree Su Seoria que en un caso como
xxx xxx xxx ese, podriamos hacer que tanto los de la mayoria como los de
la minoria prescindieran del partidismo?
Sr. ROXAS. La diferencia, seor Presidente, consiste
solamente en obviar la objecion apuntada por varios El Sr. ROXAS. Creo que si, porque el partidismo no les daria el
Delegados al efecto de que la primera clausula del draft que triunfo.
dice: "The elections, returns and qualifications of the members
of the National Assembly" parece que da a la Comision xxx xxx xxx
Electoral la facultad de determinar tambien la eleccion de los
miembros que no ha sido protestados y para obviar esa The amendment introduced by Delegates Labrador, Abordo and others
dificultad, creemos que la enmienda tien razon en ese sentido, seeking to restore the power to decide contests relating to the election,
si enmendamos el draft, de tal modo que se lea como sigue: returns and qualifications of members of the National Assembly to the
"All cases contesting the election", de modo que los jueces de
National Assembly itself, was defeated by a vote of ninety-eight (98) When the foregoing draft was submitted for approval on February 8,
against fifty-six (56). 1935, the Style Committee, through President Recto, to effectuate the
original intention of the Convention, agreed to insert the phrase "All
In the same session of December 4, 1934, Delegate Cruz (C.) sought contests relating to" between the phrase "judge of" and the words "the
to amend the draft by reducing the representation of the minority party elections", which was accordingly accepted by the Convention.
and the Supreme Court in the Electoral Commission to two members
each, so as to accord more representation to the majority party. The The transfer of the power of determining the election, returns and
Convention rejected this amendment by a vote of seventy-six (76) qualifications of the members of the legislature long lodged in the
against forty-six (46), thus maintaining the non-partisan character of legislative body, to an independent, impartial and non-partisan tribunal,
the commission. is by no means a mere experiment in the science of government.

As approved on January 31, 1935, the draft was made to read as Cushing, in his Law and Practice of Legislative Assemblies (ninth
follows: edition, chapter VI, pages 57, 58), gives a vivid account of the
"scandalously notorious" canvassing of votes by political parties in the
(6) All cases contesting the elections, returns and qualifications disposition of contests by the House of Commons in the following
of the Members of the National Assembly shall be judged by an passages which are partly quoted by the petitioner in his printed
Electoral Commission, composed of three members elected by memorandum of March 14, 1936:
the party having the largest number of votes in the National
Assembly, three elected by the members of the party having the 153. From the time when the commons established their right
second largest number of votes, and three justices of the to be the exclusive judges of the elections, returns, and
Supreme Court designated by the Chief Justice, the qualifications of their members, until the year 1770, two modes
Commission to be presided over by one of said justices. of proceeding prevailed, in the determination of controverted
elections, and rights of membership. One of the standing
The Style Committee to which the draft was submitted revised it as committees appointed at the commencement of each session,
follows: was denominated the committee of privileges and elections,
whose functions was to hear and investigate all questions of
SEC. 4. There shall be an Electoral Commission composed of this description which might be referred to them, and to report
three Justices of the Supreme Court designated by the Chief their proceedings, with their opinion thereupon, to the house,
Justice, and of six Members chosen by the National Assembly, from time to time. When an election petition was referred to this
three of whom shall be nominated by the party having the committee they heard the parties and their witnesses and other
largest number of votes, and three by the party having the evidence, and made a report of all the evidence, together with
second largest number of votes therein. The senior Justice in their opinion thereupon, in the form of resolutions, which were
the Commission shall be its chairman. The Electoral considered and agreed or disagreed to by the house. The other
Commission shall be the sole judge of the election, returns, and mode of proceeding was by a hearing at the bar of the house
qualifications of the Members of the National Assembly. itself. When this court was adopted, the case was heard and
decided by the house, in substantially the same manner as by a
committee. The committee of privileges and elections although
a select committee. The committee of privileges and elections judge in a kind of judicial capacity between the competitors,
although a select committee was usually what is called an open enlist themselves as parties in the contention, and take upon
one; that is to say, in order to constitute the committee, a themselves the partial management of the very business, upon
quorum of the members named was required to be present, but which they should determine with the strictest impartiality."
all the members of the house were at liberty to attend the
committee and vote if they pleased. 155. It was to put an end to the practices thus described, that
Mr. Grenville brought in a bill which met with the approbation of
154. With the growth of political parties in parliament questions both houses, and received the royal assent on the 12th of April,
relating to the right of membership gradually assumed a 1770. This was the celebrated law since known by the name of
political character; so that for many years previous to the year the Grenville Act; of which Mr. Hatsell declares, that it "was one
1770, controverted elections had been tried and determined by of the nobles works, for the honor of the house of commons,
the house of commons, as mere party questions, upon which and the security of the constitution, that was ever devised by
the strength of contending factions might be tested. Thus, for any minister or statesman." It is probable, that the magnitude of
Example, in 1741, Sir Robert Walpole, after repeated attacks the evil, or the apparent success of the remedy, may have led
upon his government, resigned his office in consequence of an many of the contemporaries of the measure to the information
adverse vote upon the Chippenham election. Mr. Hatsell of a judgement, which was not acquiesced in by some of the
remarks, of the trial of election cases, as conducted under this leading statesmen of the day, and has not been entirely
system, that "Every principle of decency and justice were confirmed by subsequent experience. The bill was objected to
notoriously and openly prostituted, from whence the younger by Lord North, Mr. De Grey, afterwards chief justice of the
part of the house were insensibly, but too successfully, induced common pleas, Mr. Ellis, Mr. Dyson, who had been clerk of the
to adopt the same licentious conduct in more serious matters, house, and Mr. Charles James Fox, chiefly on the ground, that
and in questions of higher importance to the public welfare." Mr. the introduction of the new system was an essential alteration
George Grenville, a distinguished member of the house of of the constitution of parliament, and a total abrogation of one
commons, undertook to propose a remedy for the evil, and, on of the most important rights and jurisdictions of the house of
the 7th of March, 1770, obtained the unanimous leave of the commons.
house to bring in a bill, "to regulate the trial of controverted
elections, or returns of members to serve in parliament." In his As early as 1868, the House of Commons in England solved the
speech to explain his plan, on the motion for leave, Mr. problem of insuring the non-partisan settlement of the controverted
Grenville alluded to the existing practice in the following terms: elections of its members by abdicating its prerogative to two judges of
"Instead of trusting to the merits of their respective causes, the the King's Bench of the High Court of Justice selected from a rota in
principal dependence of both parties is their private interest accordance with rules of court made for the purpose. Having proved
among us; and it is scandalously notorious that we are as successful, the practice has become imbedded in English
earnestly canvassed to attend in favor of the opposite sides, as jurisprudence (Parliamentary Elections Act, 1868 [31 & 32 Vict. c. 125]
if we were wholly self-elective, and not bound to act by the as amended by Parliamentary Elections and Corrupt Practices Act.
principles of justice, but by the discretionary impulse of our own 1879 [42 & 43 Vict. c. 75], s. 2; Corrupt and Illegal Practices
inclinations; nay, it is well known, that in every contested Preventions Act, 1883 [46 & 47 Vict. c. 51;, s. 70; Expiring Laws
election, many members of this house, who are ultimately to Continuance Act, 1911 [1 & 2 Geo. 5, c. 22]; Laws of England, vol. XII,
p. 408, vol. XXI, p. 787). In the Dominion of Canada, election contests Commission, p. 25 et seq.), the experiment has at least abiding
which were originally heard by the Committee of the House of historical interest.
Commons, are since 1922 tried in the courts. Likewise, in the
Commonwealth of Australia, election contests which were originally The members of the Constitutional Convention who framed our
determined by each house, are since 1922 tried in the High Court. In fundamental law were in their majority men mature in years and
Hungary, the organic law provides that all protests against the election experience. To be sure, many of them were familiar with the history
of members of the Upper House of the Diet are to be resolved by the and political development of other countries of the world. When ,
Supreme Administrative Court (Law 22 of 1916, chap. 2, art. 37, par. therefore, they deemed it wise to create an Electoral Commission as a
6). The Constitution of Poland of March 17, 1921 (art. 19) and the constitutional organ and invested it with the exclusive function of
Constitution of the Free City of Danzig of May 13, 1922 (art. 10) vest passing upon and determining the election, returns and qualifications
the authority to decide contested elections to the Diet or National of the members of the National Assembly, they must have done so not
Assembly in the Supreme Court. For the purpose of deciding only in the light of their own experience but also having in view the
legislative contests, the Constitution of the German Reich of July 1, experience of other enlightened peoples of the world. The creation of
1919 (art. 31), the Constitution of the Czechoslovak Republic of the Electoral Commission was designed to remedy certain evils of
February 29, 1920 (art. 19) and the Constitution of the Grecian which the framers of our Constitution were cognizant. Notwithstanding
Republic of June 2, 1927 (art. 43), all provide for an Electoral the vigorous opposition of some members of the Convention to its
Commission. creation, the plan, as hereinabove stated, was approved by that body
by a vote of 98 against 58. All that can be said now is that, upon the
The creation of an Electoral Commission whose membership is approval of the constitutional the creation of the Electoral Commission
recruited both from the legislature and the judiciary is by no means is the expression of the wisdom and "ultimate justice of the people".
unknown in the United States. In the presidential elections of 1876 (Abraham Lincoln, First Inaugural Address, March 4, 1861.)
there was a dispute as to the number of electoral votes received by
each of the two opposing candidates. As the Constitution made no From the deliberations of our Constitutional Convention it is evident
adequate provision for such a contingency, Congress passed a law on that the purpose was to transfer in its totality all the powers previously
January 29, 1877 (United States Statutes at Large, vol. 19, chap. 37, exercised by the legislature in matters pertaining to contested elections
pp. 227-229), creating a special Electoral Commission composed of of its members, to an independent and impartial tribunal. It was not so
five members elected by the Senate, five members elected by the much the knowledge and appreciation of contemporary constitutional
House of Representatives, and five justices of the Supreme Court, the precedents, however, as the long-felt need of determining legislative
fifth justice to be selected by the four designated in the Act. The contests devoid of partisan considerations which prompted the people,
decision of the commission was to be binding unless rejected by the acting through their delegates to the Convention, to provide for this
two houses voting separately. Although there is not much of a moral body known as the Electoral Commission. With this end in view, a
lesson to be derived from the experience of America in this regard, composite body in which both the majority and minority parties are
judging from the observations of Justice Field, who was a member of equally represented to off-set partisan influence in its deliberations was
that body on the part of the Supreme Court (Countryman, the Supreme created, and further endowed with judicial temper by including in its
Court of the United States and its Appellate Power under the membership three justices of the Supreme Court.
Constitution [Albany, 1913] Relentless Partisanship of Electoral
The Electoral Commission is a constitutional creation, invested with the intended to be remedied by the framers of our Constitution. The power
necessary authority in the performance and execution of the limited to regulate on the part of the National Assembly in procedural matters
and specific function assigned to it by the Constitution. Although it is will inevitably lead to the ultimate control by the Assembly of the entire
not a power in our tripartite scheme of government, it is, to all intents proceedings of the Electoral Commission, and, by indirection, to the
and purposes, when acting within the limits of its authority, an entire abrogation of the constitutional grant. It is obvious that this result
independent organ. It is, to be sure, closer to the legislative department should not be permitted.
than to any other. The location of the provision (section 4) creating the
Electoral Commission under Article VI entitled "Legislative Department" We are not insensible to the impassioned argument or the learned
of our Constitution is very indicative. Its compositions is also significant counsel for the petitioner regarding the importance and necessity of
in that it is constituted by a majority of members of the legislature. But respecting the dignity and independence of the national Assembly as a
it is a body separate from and independent of the legislature. coordinate department of the government and of according validity to
its acts, to avoid what he characterized would be practically an
The grant of power to the Electoral Commission to judge all contests unlimited power of the commission in the admission of protests against
relating to the election, returns and qualifications of members of the members of the National Assembly. But as we have pointed out
National Assembly, is intended to be as complete and unimpaired as if hereinabove, the creation of the Electoral Commission carried with
it had remained originally in the legislature. The express lodging of that it ex necesitate rei the power regulative in character to limit the time
power in the Electoral Commission is an implied denial of the exercise with which protests intrusted to its cognizance should be filed. It is a
of that power by the National Assembly. And this is as effective a settled rule of construction that where a general power is conferred or
restriction upon the legislative power as an express prohibition in the duty enjoined, every particular power necessary for the exercise of the
Constitution (Ex parte Lewis, 45 Tex. Crim. Rep., 1; State vs.Whisman, one or the performance of the other is also conferred (Cooley,
36 S.D., 260; L.R.A., 1917B, 1). If we concede the power claimed in Constitutional Limitations, eight ed., vol. I, pp. 138, 139). In the
behalf of the National Assembly that said body may regulate the absence of any further constitutional provision relating to the procedure
proceedings of the Electoral Commission and cut off the power of the to be followed in filing protests before the Electoral Commission,
commission to lay down the period within which protests should be therefore, the incidental power to promulgate such rules necessary for
filed, the grant of power to the commission would be ineffective. The the proper exercise of its exclusive power to judge all contests relating
Electoral Commission in such case would be invested with the power to the election, returns and qualifications of members of the National
to determine contested cases involving the election, returns and Assembly, must be deemed by necessary implication to have been
qualifications of the members of the National Assembly but subject at lodged also in the Electoral Commission.
all times to the regulative power of the National Assembly. Not only
would the purpose of the framers of our Constitution of totally It is, indeed, possible that, as suggested by counsel for the petitioner,
transferring this authority from the legislative body be frustrated, but a the Electoral Commission may abuse its regulative authority by
dual authority would be created with the resultant inevitable clash of admitting protests beyond any reasonable time, to the disturbance of
powers from time to time. A sad spectacle would then be presented of the tranquillity and peace of mind of the members of the National
the Electoral Commission retaining the bare authority of taking Assembly. But the possibility of abuse is not argument against the
cognizance of cases referred to, but in reality without the necessary concession of the power as there is no power that is not susceptible of
means to render that authority effective whenever and whenever the abuse. In the second place, if any mistake has been committed in the
National Assembly has chosen to act, a situation worse than that creation of an Electoral Commission and in investing it with exclusive
jurisdiction in all cases relating to the election, returns, and Assembly passed its resolution of December 3, 1935, confirming the
qualifications of members of the National Assembly, the remedy is election of the petitioner to the National Assembly, the Electoral
political, not judicial, and must be sought through the ordinary Commission had not yet met; neither does it appear that said body had
processes of democracy. All the possible abuses of the government actually been organized. As a mater of fact, according to certified
are not intended to be corrected by the judiciary. We believe, however, copies of official records on file in the archives division of the National
that the people in creating the Electoral Commission reposed as much Assembly attached to the record of this case upon the petition of the
confidence in this body in the exclusive determination of the specified petitioner, the three justices of the Supreme Court the six members of
cases assigned to it, as they have given to the Supreme Court in the the National Assembly constituting the Electoral Commission were
proper cases entrusted to it for decision. All the agencies of the respectively designated only on December 4 and 6, 1935. If Resolution
government were designed by the Constitution to achieve specific No. 8 of the National Assembly confirming non-protested elections of
purposes, and each constitutional organ working within its own members of the National Assembly had the effect of limiting or tolling
particular sphere of discretionary action must be deemed to be the time for the presentation of protests, the result would be that the
animated with the same zeal and honesty in accomplishing the great National Assembly on the hypothesis that it still retained the
ends for which they were created by the sovereign will. That the incidental power of regulation in such cases had already barred the
actuations of these constitutional agencies might leave much to be presentation of protests before the Electoral Commission had had time
desired in given instances, is inherent in the perfection of human to organize itself and deliberate on the mode and method to be
institutions. In the third place, from the fact that the Electoral followed in a matter entrusted to its exclusive jurisdiction by the
Commission may not be interfered with in the exercise of its legitimate Constitution. This result was not and could not have been
power, it does not follow that its acts, however illegal or contemplated, and should be avoided.
unconstitutional, may not be challenge in appropriate cases over which
the courts may exercise jurisdiction. From another angle, Resolution No. 8 of the National Assembly
confirming the election of members against whom no protests had
But independently of the legal and constitutional aspects of the present been filed at the time of its passage on December 3, 1935, can not be
case, there are considerations of equitable character that should not construed as a limitation upon the time for the initiation of election
be overlooked in the appreciation of the intrinsic merits of the contests. While there might have been good reason for the legislative
controversy. The Commonwealth Government was inaugurated on practice of confirmation of the election of members of the legislature at
November 15, 1935, on which date the Constitution, except as to the the time when the power to decide election contests was still lodged in
provisions mentioned in section 6 of Article XV thereof, went into effect. the legislature, confirmation alone by the legislature cannot be
The new National Assembly convened on November 25th of that year, construed as depriving the Electoral Commission of the authority
and the resolution confirming the election of the petitioner, Jose A. incidental to its constitutional power to be "the sole judge of all contest
Angara was approved by that body on December 3, 1935. The protest relating to the election, returns, and qualifications of the members of
by the herein respondent Pedro Ynsua against the election of the the National Assembly", to fix the time for the filing of said election
petitioner was filed on December 9 of the same year. The pleadings do protests. Confirmation by the National Assembly of the returns of its
not show when the Electoral Commission was formally organized but it members against whose election no protests have been filed is, to all
does appear that on December 9, 1935, the Electoral Commission met legal purposes, unnecessary. As contended by the Electoral
for the first time and approved a resolution fixing said date as the last Commission in its resolution of January 23, 1936, overruling the motion
day for the filing of election protest. When, therefore, the National of the herein petitioner to dismiss the protest filed by the respondent
Pedro Ynsua, confirmation of the election of any member is not matter of formality, after the time fixed by its rules for the filing of
required by the Constitution before he can discharge his duties as such protests had already expired, each house passed a resolution
member. As a matter of fact, certification by the proper provincial board confirming or approving the returns of such members against whose
of canvassers is sufficient to entitle a member-elect to a seat in the election no protests had been filed within the prescribed time. This was
national Assembly and to render him eligible to any office in said body interpreted as cutting off the filing of further protests against the
(No. 1, par. 1, Rules of the National Assembly, adopted December 6, election of those members not theretofore contested (Amistad vs.
1935). Claravall [Isabela], Second Philippine Legislature, Record First
Period, p. 89; Urguello vs. Rama [Third District, Cebu], Sixth Philippine
Under the practice prevailing both in the English House of Commons Legislature; Fetalvero vs. Festin [Romblon], Sixth Philippine
and in the Congress of the United States, confirmation is neither Legislature, Record First Period, pp. 637-640;
necessary in order to entitle a member-elect to take his seat. The Kintanar vs. Aldanese [Fourth District, Cebu], Sixth Philippine
return of the proper election officers is sufficient, and the member-elect Legislature, Record First Period, pp. 1121, 1122; Aguilar vs. Corpus
presenting such return begins to enjoy the privileges of a member from [Masbate], Eighth Philippine Legislature, Record First Period, vol.
the time that he takes his oath of office (Laws of England, vol. 12, pp. III, No. 56, pp. 892, 893). The Constitution has repealed section 18 of
331. 332; vol. 21, pp. 694, 695; U. S. C. A., Title 2, secs. 21, 25, 26). the Jones Law. Act No. 3387, section 478, must be deemed to have
Confirmation is in order only in cases of contested elections where the been impliedly abrogated also, for the reason that with the power to
decision is adverse to the claims of the protestant. In England, the determine all contest relating to the election, returns and qualifications
judges' decision or report in controverted elections is certified to the of members of the National Assembly, is inseparably linked the
Speaker of the House of Commons, and the House, upon being authority to prescribe regulations for the exercise of that power. There
informed of such certificate or report by the Speaker, is required to was thus no law nor constitutional provisions which authorized the
enter the same upon the Journals, and to give such directions for National Assembly to fix, as it is alleged to have fixed on December 3,
confirming or altering the return, or for the issue of a writ for a new 1935, the time for the filing of contests against the election of its
election, or for carrying into execution the determination as members. And what the National Assembly could not do directly, it
circumstances may require (31 & 32 Vict., c. 125, sec. 13). In the could not do by indirection through the medium of confirmation.
United States, it is believed, the order or decision of the particular
house itself is generally regarded as sufficient, without any actual Summarizing, we conclude:
alternation or amendment of the return (Cushing, Law and Practice of
Legislative Assemblies, 9th ed., sec. 166). (a) That the government established by the Constitution follows
fundamentally the theory of separation of power into the
Under the practice prevailing when the Jones Law was still in force, legislative, the executive and the judicial.
each house of the Philippine Legislature fixed the time when protests
against the election of any of its members should be filed. This was (b) That the system of checks and balances and the
expressly authorized by section 18 of the Jones Law making each overlapping of functions and duties often makes difficult the
house the sole judge of the election, return and qualifications of its delimitation of the powers granted.
members, as well as by a law (sec. 478, Act No. 3387) empowering
each house to respectively prescribe by resolution the time and (c) That in cases of conflict between the several departments
manner of filing contest in the election of member of said bodies. As a and among the agencies thereof, the judiciary, with the
Supreme Court as the final arbiter, is the only constitutional ( j) That the avowed purpose in creating the Electoral
mechanism devised finally to resolve the conflict and allocate Commission was to have an independent constitutional organ
constitutional boundaries. pass upon all contests relating to the election, returns and
qualifications of members of the National Assembly, devoid of
(d) That judicial supremacy is but the power of judicial review in partisan influence or consideration, which object would be
actual and appropriate cases and controversies, and is the frustrated if the National Assembly were to retain the power to
power and duty to see that no one branch or agency of the prescribe rules and regulations regarding the manner of
government transcends the Constitution, which is the source of conducting said contests.
all authority.
(k) That section 4 of article VI of the Constitution repealed not
(e) That the Electoral Commission is an independent only section 18 of the Jones Law making each house of the
constitutional creation with specific powers and functions to Philippine Legislature respectively the sole judge of the
execute and perform, closer for purposes of classification to the elections, returns and qualifications of its elective members, but
legislative than to any of the other two departments of the also section 478 of Act No. 3387 empowering each house to
governments. prescribe by resolution the time and manner of filing contests
against the election of its members, the time and manner of
(f ) That the Electoral Commission is the sole judge of all notifying the adverse party, and bond or bonds, to be required,
contests relating to the election, returns and qualifications of if any, and to fix the costs and expenses of contest.
members of the National Assembly.
(l) That confirmation by the National Assembly of the election is
(g) That under the organic law prevailing before the present contested or not, is not essential before such member-elect
Constitution went into effect, each house of the legislature was may discharge the duties and enjoy the privileges of a member
respectively the sole judge of the elections, returns, and of the National Assembly.
qualifications of their elective members.
(m) That confirmation by the National Assembly of the election
(h) That the present Constitution has transferred all the powers of any member against whom no protest had been filed prior to
previously exercised by the legislature with respect to contests said confirmation, does not and cannot deprive the Electoral
relating to the elections, returns and qualifications of its Commission of its incidental power to prescribe the time within
members, to the Electoral Commission. which protests against the election of any member of the
National Assembly should be filed.
(i) That such transfer of power from the legislature to the
Electoral Commission was full, clear and complete, and carried We hold, therefore, that the Electoral Commission was acting within
with it ex necesitate rei the implied power inter alia to prescribe the legitimate exercise of its constitutional prerogative in assuming to
the rules and regulations as to the time and manner of filing take cognizance of the protest filed by the respondent Pedro Ynsua
protests. against the election of the herein petitioner Jose A. Angara, and that
the resolution of the National Assembly of December 3, 1935 can not
in any manner toll the time for filing protests against the elections,
returns and qualifications of members of the National Assembly, nor Damiana Arcega. The parcels of land have a total area of 972,047
prevent the filing of a protest within such time as the rules of the square meters with the following description:
Electoral Commission might prescribe.
TRANSFER CERTIFICATE OF TITLE (TCT) No. AREA (hectares)
In view of the conclusion reached by us relative to the character of the
Electoral Commission as a constitutional creation and as to the scope T-86402 12.5718 He
and extent of its authority under the facts of the present controversy, T-86448 48.3062 He
we deem it unnecessary to determine whether the Electoral
T-86449 36.3267 A
Commission is an inferior tribunal, corporation, board or person within
the purview of sections 226 and 516 of the Code of Civil Procedure.
Upon acquisition thereof, respondent manifested his voluntary offer to
sell the properties to the Department of Agrarian Reform (DAR) for
The petition for a writ of prohibition against the Electoral Commission is
coverage under Republic Act (R.A.) No. 6657, the Comprehensive
hereby denied, with costs against the petitioner. So ordered.
Agrarian Reform Law (CARL). Respondents assessment value of the
properties was P45,000.00 per hectare.

The DAR, through petitioner Land Bank of the Philippines (LBP),


G.R. No. 176410 September 1, 2010
assessed the properties and offered to purchase only 57.2047
LAND BANK OF THE PHILIPPINES, Petitioner, hectares out of the 97.2047 hectares voluntarily offered for sale by
vs. respondent. The excluded area (40 hectares) fell under the exemptions
CONRADO O. COLARINA, Respondent. and exclusions provided in Section 103 of the CARL, i.e., all lands with
eighteen percent (18%) slope and over. In addition, the LBP assigned
DECISION the following values to the properties:

NACHURA, J.: TCT No. Covered Area Excluded Area


T-86402 6.5718 6
Before us is a petition for review on certiorari assailing the Decision of
the Court of Appeals (CA) in CA-G.R. CV No. 68476,1 which affirmed T-86448 28.3062 20
the decision of the Regional Trial Court (RTC), Branch 3, Legazpi City, T-86449 22.3267 14
Albay, sitting as a Special Agrarian Court (SAC) in Agrarian Case No.
95-01.2 As the LBPs assessment and valuation of the properties was
unacceptable to, and rejected by, respondent, he elevated the
The facts are simple. determination of just compensation of the properties to the Provincial
Agrarian Reform Adjudicator (PARAD). Unfortunately for respondent,
Respondent Conrado O. Colarina is the registered owner of three (3) the PARAD affirmed the valuation set forth by the LBP.
parcels of agricultural land which he acquired from their former owner,
Disappointed with the low valuation by petitioner and the DAR, Second witness Carlito M. Oliva, x x x testified that in several
respondent filed a Complaint4 before the RTC, Branch 3, Legazpi, instances, he was deputized by the Honorable Court under RTC BR.
Albay, for the judicial determination of just compensation. 26 to chair the commission in the determination of the fair market value
of properties subject for payment by the government. That the
In refutation, petitioner filed its Answer,5 denied the material allegations properties involved in this case is composed of three parcels. [T-
in the Complaint, and alleged that it had correctly assessed and 86402] is situated at Barangay Herrera, Ligao, Albay which contains an
valuated the subject properties consistent with R.A. No. 6657 and DAR area of 12.5718 has.; [T-86449] is also situated in the same Barangay
Administrative Order (AO) No. 6, Series of 1992. with an area of 36.3267 has.; [a]nd [T-86448] is situated at Barangay
Amtic, Ligao, Albay with an area of 48.3062 has or a total of 97.2047
During pre-trial, LBP manifested that the subject properties may be has. Upon Mr. Colarinas request, he conducted an investigation and
reassessed and revaluated based on the new guidelines set forth in ocular inspection on the subject properties and made a narrative report
DAR A.O. No. 11, Series of 1994. Intent on finding a common ground relative thereto. That his recommendation as the reasonable market
between petitioner and respondent and to amicably settle the case, the value of the properties is at P49,201.148/ha or a total of P4,788,415.20
SAC ordered the revaluation. The new valuations of the LBP were: using the productivity approach since the subject property is mostly
agricultural. That the actual area planted to coconuts is about 43.84%;
TCT No. Old Valuation New Valuation banana plants is 7.79%; corn land is 1.14%; homelots is 0.50% and
4.97% cogonal, while 5% is non-arable.
T-86402 P 46,045.60 P51,762.90 at
P7,876.5178/ha.
xxxx
T-86448 P208,144.33 P259,525.41 at
P9,168.50/ha. Armel Alcantara testified that x x x before, he was the Division Chief of
the Claim, Processing and Payment Division (CPPD) [of the LBP]. As
T-86449 P154,394.22 P217,223.60 at
such, he conducts review of claim folders covered by P.D. No. 27, E.O.
P9,729.3196/ha.6
No. 228 and R.A. No. 6657, most specifically the claim folders under
voluntary offer to sell and compulsory acquisition claim folders. That he
The foregoing valuation was still rejected by respondent. Hence, trial
valued the subject lands owned by [respondent] based on AO No. 11
ensued. To support his Complaint and valuation of the subject
S. of 1996. Pursuant to the Hon. Courts order dated November 14,
properties, respondent presented in evidence his own testimony and
1996. For TCT No. 86448, the area covered is 28.3062 has. [o]ut of
that of Carlito M. Oliva (Oliva), then Assistant Provincial Assessor of
48.3062 has. Because some portion of the property is hilly and
Camarines Sur and President of the Camarines Chapter of the
mountainous and underdeveloped which exceeded the 18% limit set
National Real Estate Association.
forth under Sec. 10 of RA 6657. This lot is planted to corn, peanut and
cogonal. The corn land is 13 has., peanut land is .25 has., cogonal is
As for petitioner, it presented the testimonies of Armel Alcantara
15.0562 has.; the excluded portion which is mountainous and about
(Alcantara), Chief of the Landowners Assistance Division of the LBP,
25% slope totals 20 has. The factor considered by Land Bank is under
and Melchor Balmaceda, officer of LBP, Sipocot Branch.
Formula No. 2 which is the Capitalized Net Income (CNI) x 90% and
the market value per Tax declaration wherein they get the remaining
The SAC summarized the testimonies of the witnesses as follows:
10%. The CNI was taken from the average gross production based on
the field investigation report multiplied by the selling price from the properties. Said data were compared with the record of the Municipal
Department of Agriculture municipal data, arriving at a total CNI agriculturist and other officers. That the valuation of the property was
of P10,291.67 per ha. The market value per Tax declaration was based based under AO No. 11 existing at the time of the valuation of the
on the third classification as furnished to Land Bank by the Municipal property as of November 19, 1996.
Assessors office. The total MVPT as computed by Land Bank
is P14,193.22, so, 10% of which is P1,419.32. After computing the CNI Melchor Balmaceda testified that at present he is an officer of Land
and the MVPT, he applied the applicable formula which is CNI x 90% Bank of the Philippines, Sipocot Branch but before, he was connected
and the MVPT x 10%. The CNI total is P9,262.5 and the MV with Land Bank VO, Legazpi City Branch as Agrarian Affairs Specialist.
is P1,419.32. Summing up the total amount of the two factors, the As such, he conducts ocular inspection on the properties covered by
value per ha. Arrived at for corn land is P10,681.82 per ha. Multiply it the CARP, and gathers information relative to land valuation. That
by 13 has. For corn land, the total amount is P3,535.66. For peanut sometime in 1991, he together with DAR personnel and BARC
land, the total amount is P3,535.66 and for cogonal where they used Chairman and caretakers of the property conducted an ocular
the market value per tax declaration multiplied by 2. the total inspection in question in the name of Damian Arcega, the former owner
is P117,126.09. Therefore, the total valuation of this 28.3062 has. of the property, which property consisted of 3 parcels. That in
portion of the property acquired by the government is P259,525.41. connection thereto, they made a written report that the property is
generally mountainous and majority is planted to coconut. A portion is
For Title No. 86449, 22.3267 has. out of 36.3267 has. [i]s carpable. planted to corn and minimal portion is planted to peanut and there is
The 14 has. [w]as excluded because this falls under the hilly and also a portion which is cogonal where there is no product. That all the
mountainous portion which is about 18% slope. Applying the same areas are carpable. That they gather data information from government
rules and regulations, the total valuation for this property agencies and they compute the net income of the properties based on
is P217,223.60. the produce.7

For Title No. 86402, the area covered is 6.5718 has. [o]ut of 12.5718 Thereafter, the SAC rendered a decision reconciling the conflicting
has. The area of 6 has. is excluded for it falls above 18% slope. evidence of the parties. The SAC followed the formula of the LBP and
Applying again the same rules and regulations, the total valuation for its land use classification of the subject properties; the appraisal report
the 6.5718 has. [a]cquired by the government is P51,762.90. on the valuation thereof. It disposed of the case, to wit:

That there are several valuations/formulas provided for under RA 6657 To reconcile the conflicting figures both prayed for by [respondent] and
and the Land Bank follows the applicable formula as reflected in the [petitioner] Land Bank as the computation of the value of the properties
field investigation report. Therefore, their basis in determining which to be paid to the [respondent], taking into account all the factors in
factors will be applied are the result of the field investigation report. determining just compensation and considering that the taking of
After determining the existence of the property, the DAR, Land Bank private agricultural properties under Agrarian Reform Law is a special
and the other agencies concerned conducted an ocular inspection of kind of eminent domain which is revolutionary in character, the primary
the property being offered for sale under CARP or covered by the goal of which is to grant land to the landless and the need for high
CARP. The data in-put were gathered in the field including the number production, the just compensation for the lots subject matter of this
of fruit bearing trees also determined. The production data was also case, using the value in the [respondents] appraisal report and the
taken and a survey was being conducted in the field on adjacent
land use of the properties as classified by the Land Bank, are as Computation:
follows:
P5,270.00/has x 15.0562 has
1) TCT No. T-86448 carpable area 28.3062 has. = P79,346.17

Land Use: Total:

A) Corn land Corn land -

Area = 13.0000 has. Peanut -


Cogonal -
Value/Ha = P52,700/has (Per Appraisal
Report)

Computation:
2) TCT No. T-86449 carpable area 22.3267 has.
P52,700/ha x 13.0000 has
= P685,100.00 Land Use:

B) Peanut A) Corn land

Area = .2500 Value/Ha = P52,700.00/ha (Per Appraisal


Report)
Value/Ha = P60,000/has (Per Appraisal
Report) Area = 15.000 has

Computation: Computation:

P60,000.00/has x .2500 has P52,700.00/has. x 15.0000 has


= P15,000.00 = P790,500.00

C) Cogonal B) Cogon:

Area = 15.0562 has. Value/ha = P5,270/ha (Per Appraisal


Report)
Value/Ha = P5,270 (Per Appraisal
Report) Area = 7.3267 has
Computation: P5,270/ha x 3.5718 has
= P18,823.28
P5,270/ha x 7.3267 has
= P38,611.7 Total:

Total: Corn land =


Cogonal =
Corn land -
Cogon -
Total =

Based on the foregoing computation, the just compensation for 1) TCT


3) TCT No. T-86402 carpable area 6.5718 has No. T-86448 with a carpable area of 28.3062 has. is fixed
at P779,446.17; 2) TCT No. T-86449 with a carpable area of 22.3267
Land Use: has. is fixed at P829,111.70; and for 3) TCT No. T-86402 with a
carpable area of 6.5718 has. is fixed at P18,823.38.
A) Corn land
Thus, the overall valuation of the property is as follows:
Value/ha = P52,700/ha (Per Appraisal
Report) TCT No. T-86648 P 779,446.17

Area = 3.0000 has TCT No. T-86649 829,111.70


TCT No. T-86402 176,923.38
Computation:

TOTAL P1,785,481.25
P52,700/has x 3.0000 has
= P158,100 ===========

B) Cogonal WHEREFORE, [petitioner LBP] is ordered to pay [respondent]


Conrado Colarina the total sum of ONE MILLION SEVEN HUNDRED
Value/ha = P5,270/ha (Per Appraisal EIGHTY FIVE THOUSAND FOUR HUNDRED EIGHTY ONE PESOS
Report) AND TWENTY FIVE CENTAVOS (P1,785,481.25) in case or in bond or
in any other mode of payment under Section 18 of RA 6657 otherwise
Area = 3.5718 has known as the Comprehensive Agrarian Reform Law, at the option of
the landowner.
Computation:
SO ORDERED.8
Still dissatisfied with the valuation of just compensation for the subject As pointed out by petitioner, our ruling in Land Bank of the Philippines
properties, both parties appealed to the CA. The appellate court v. Sps. Banal11 is definitive on the factors to be considered, and the
affirmed the ruling of the SAC, to wit: formula utilized, for the determination of just compensation:

WHEREFORE, premises considered, the August 7, 2000 Decision of To begin with, under Section 1 of Executive Order No. 405 (1990), the
the Regional Trial Court of Lega[z]pi City, Albay, Branch 3, in Agrarian Landbank is charged "primarily" with "the determination of the land
Case No. 95-01, is hereby AFFIRMED. valuation and compensation for all private lands suitable for agriculture
under the Voluntary Offer to Sell or Compulsory Acquisition
SO ORDERED.9 arrangement" For its part, the DAR relies on the determination of the
land valuation and compensation by the Landbank.
Adamant on the accuracy of its computation, petitioner appeals to this
Court, positing the following issues: xxxx

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS A party who disagrees with the decision of the DAR adjudicator may
ERRORS OF LAW IN THE FOLLOWING INSTANCES: bring the matter to the RTC designated as a Special Agrarian Court
"for final determination of just compensation."
I.
In the proceedings before the RTC, it is mandated to apply the Rules
WHEN IT AFFIRMED THE REGIONAL TRIAL COURT OF LEGA[Z]PI of Court and, on its own initiative or at the instance of any of the
CITY, BRANCH 3 DECISION DATED AUGUST 7, 2000 WHICH parties, "appoint one or more commissioners to examine, investigate
AWARDED P1,785,481.25 AS JUST COMPENSATION FOR THE and ascertain facts relevant to the dispute, including the valuation of
FIFTY-SEVEN-HECTARE PROPERTY, AS THE SAID DECISION properties, and to file a written report thereof x x x." In determining just
FAILED TO CONFORM TO THIS HONORABLE COURTS RULING IN compensation, the RTC is required to consider several factors
"LAND BANK OF THE PHILIPPINES V. SPOUSES VICENTE BANAL enumerated in Section 17 of R.A. 6657, as amended, thus:
AND LEONIDES ARENAS-BANAL" (G.R. NO. 143276).
"Sec. 17. Determination of Just Compensation. In determining just
II. compensation, the cost of acquisition of the land, the current value of
like properties, its nature, actual use and income, the sworn valuation
WHEN IT TREATED THE TAKING OF AGRICULTURAL LANDS FOR by the owner, the tax declarations, and the assessment made by
AGRARIAN REFORM PURPOSES AS AN ORDINARY government assessors shall be considered. The social and economic
EXPROPRIATION OF PRIVATE PROPERTY FOR PUBLIC USE.10 benefits contributed by the farmers and the farmworkers and by the
Government to the property, as well as the non-payment of taxes or
We impale the foregoing into the singular issue of whether the lower loans secured from any government financing institution on the said
courts computation of just compensation for the subject properties is land, shall be considered as additional factors to determine its
correct. valuation."

We answer in the negative and find the petition impressed with merit.
These factors have been translated into a basic formula in DAR A.3 When both the CS and CNI are not present
Administrative Order No. 6, Series of 1992, as amended by DAR and only MV is applicable, the formula shall be:
Administrative Order No. 11, Series of 1994, issued pursuant to the
DARs rule-making power to carry out the object and purposes of R.A. LV = MV x 2
6657, as amended.
In no case shall the value of the land using the formula
Subsequent rulings of the Court uniformly parleyed that Section 17 of MV x 2 exceed the lowest value of land within the same
R.A. No. 6657 has been translated into a formula by the DAR through estate under consideration or within the same barangay
A.O. No. 6, Series of 1992, as amended by A.O. No. 11, Series of or municipality (in that order) approved by LBP within
1994:12 one (1) year from receipt of claimfolder.

A. There shall be one basic formula for the valuation of lands xxxx
covered by [Voluntary Offer to Sell] or [Compulsory Acquisition]
regardless of the date of offer or coverage of the claim: A.6 The basic formula in the grossing-up of valuation
inputs such as LOs Offer, Sales Transaction (ST),
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) Acquisition Cost (AC), Market Value Based on Mortgage
(MVM) and Market Value per Tax Declaration (MV) shall
Where: LV = Land Value be:

CNI = Capitalized Net Income


Grossed-up Valuation = Valuation input x Regional Co
CS = Comparable Sales Input Price Index (RCPI) Adjustme
MV = Market Value per Tax Declaration
The RCPI Adjustment Factor shall refer to the ratio of
The above formula shall be used if all the three factors RCPI for the month issued by the National Statistics
are present, relevant, and applicable. Office as of the date when the claimfolder (CF) was
received by LBP from DAR for processing or, in its
A.1 When the CS factor is not present and CNI absence, the most recent available RCPI for the month
and MV are applicable, the formula shall be: issued prior to the date of receipt of CF from DAR and
the RCPI for the month as of the
LV = (CNI x 0.9) + (MV x 0.1) date/effectivity/registration of the valuation input.
Expressed in equation form:
A.2 When the CNI factor is not present, and CS
and MV are applicable, the formula shall be: RCPI Adjustment = for the Month as of the Date o
Factor Claimfolder by LBP from DAR
LV = (CS x 0.9) + (MV x 0.1) recent RCPI for the Month Iss
the Date of RCPI Receipt of C
RCPI for the Month Issued as of the DAR and LBP shall continue to conduct joint
Date/Effectivity/Registration of the industry studies to establish the applicable N
Valuation Input for each crop covered under CARP.

B. Capitalized Net Income (CNI) This shall refer to the .12 = Capitalization Rate
difference between the gross sales (AGP x SP) and total cost of
operations (CO) capitalized at 12%. xxxx

Expressed in equation form: C. CS shall refer to any one or the average of all the applicable
sub-factors, namely, ST, AC and MVM:
CNI = (AGP x SP) - CO
Where: ST = Sales Transactions as defined under Item C
.12
AC = Acquisition Cost as defined under Item C.3
Where: CNI = Capitalized Net Income
MVM = Market Value Based on Mortgage as define
AGP = Latest available 12-month's gross production under Item C.4
immediately preceding the date of offer in case of
VOS or date of notice of coverage in case of CA.
xxxx
SP = The average of the latest available 12-months
selling prices prior to the date of receipt of the D. In the computation of Market Value per Tax Declaration
claimfolder by LBP for processing, such prices to (MV), the most recent Tax Declaration (TD) and Schedule of
be secured from the Department of Agriculture Unit Market Value (SMV) issued prior to receipt of claimfolder
(DA) and other appropriate regulatory bodies or, by LBP shall be considered. The Unit Market Value (UMV) shall
in their absence, from the Bureau of Agricultural be grossed up from the date of its effectivity up to the date of
Statistics. If possible, SP data shall be gathered receipt of claimfolder by LBP from DAR for processing, in
from the barangay or municipality where the accordance with item II.A.A.6.
property is located. In the absence thereof, SP
may be secured within the province or region. In Land Bank of the Philippines v. Celada,13 we declared:
CO = Cost of Operations
While SAC is required to consider the acquisition cost of the land, the
current value of like properties, its nature, actual use and income, the
Whenever the cost of operations could not be
sworn valuation by the owner, the tax declaration and the assessments
obtained or verified, an assumed net income rate
made by the government assessors to determine just compensation, it
(NIR) of 20% shall be used. Landholdings planted
is equally true that these factors have been translated into a basic
to coconut which are productive at the time of
formula by the DAR pursuant to its rule-making power under Section
offer/coverage shall continue to use the 70% NIR.
49 of RA No. 6657. As the government agency principally tasked to loans secured from any government financing institution on the said
implement the agrarian reform program, it is the DARs duty to issue land, shall be considered as additional factors to determine its
rules and regulations to carry out the object of the law. DAR AO No. 5, valuation."
s. of 1998 precisely "filled in the details" of Section 17, RA No. 6657 by
providing a basic formula by which the factors mentioned therein may These factors have been translated into a basic formula in [DAR AO 6-
be taken into account. The SAC was at no liberty to disregard the 92], as amended by [DAR AO 11-94], issued pursuant to the DARs
formula which was devised to implement the said provision. rule-making power to carry out the object and purposes of R.A. 6657,
as amended.
It is elementary that rules and regulations issued by administrative
bodies to interpret the law which they are entrusted to enforce, have The formula stated in [DAR AO 6-92], as amended, is as follows:
the force of law, and are entitled to great respect. Administrative
issuances partake of the nature of a statute and have in their favor a "LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
presumption of legality. As such, courts cannot ignore administrative
LV = Land Value
issuances especially when, as in this case, its validity was not put in
issue. Unless an administrative order is declared invalid, courts have CNI = Capitalized Net Income
no option but to apply the same. CS = Comparable Sales

In the same vein, Land Bank of the Philippines v. Lim14 did not depart MV = Market Value per Tax Declaration
from the previous rulings and explicitly affirmed the mandatory nature
of Section 17 of RA No. 6657 and DAR A.O. No. 6092, as amended by The above formula shall be used if all the three factors are present,
DAR A.O. No. 11-94: relevant and applicable.

In Land Bank of the Philippines v. Spouses Banal, this Court A.1 When the CS factor is not present and CNI and MV are
underscored the mandatory nature of Section 17 of RA 6657 and DAR applicable, the formula shall be:
AO 6-92, as amended by DAR AO 11-94, viz.:
LV = (CNI x 0.9) + (MV x 0.1)
"In determining just compensation, the RTC is required to consider
several factors enumerated in Section 17 of R.A. 6657, as amended, xxxx
thus:
While the determination of just compensation involves the
"Sec. 17. Determination of Just Compensation. In determining just exercise of judicial discretion, however, such discretion must be
compensation, the cost of acquisition of the land, the current value of discharged within the bounds of the law. Here, the RTC
like properties, its nature, actual use and income, the sworn valuation wantonly disregarded R.A. 6657, as amended, and its
by the owner, the tax declarations, and the assessment made by implementing rules and regulations. ([DAR AO 6-92], as
government assessors shall be considered. The social and economic amended by [DAR AO 11-94]).
benefits contributed by the farmers and the farmworkers and by the
Government to the property, as well as the non-payment of taxes or xxxx
WHEREFORE, x x x. Civil Case No. 6806 is REMANDED to MV = Market Value per Tax Declaration
the RTC x x x. The trial judge is directed to observe strictly the
procedures specified above in determining the proper valuation The above formula shall be used if all three factors are
of the subject property. present, relevant and applicable.

The recent case of Heirs of Lorenzo and Carmen Vidad and Agvid A1. When the CS factor is not present and CNI
Construction Co., Inc. v. Land Bank of the Philippines15 is most and MV are applicable, the formula shall be:
propinquity on the same point:
LV = (CNI x 0.9) + (MV x 0.1)
LBPs valuation of lands covered by the CARP Law is considered only
as an initial determination, which is not conclusive, as it is the RTC, A2. When the CNI factor is not present, and CS
sitting as a SAC, that could make the final determination of just and MV are applicable, the formula shall be:
compensation, taking into consideration the factors enumerated in
Section 17 of RA 6657 and the applicable DAR regulations. LBPs LV = (CS x 0.9) + (MV x 0.1)
valuation has to be substantiated during an appropriate hearing before
it could be considered sufficient in accordance with Section 17 of RA A3. When both the CS and CNI are not present
6657 and the DAR regulations. and only MV is applicable, the formula shall be:

In Land Bank of the Philippines v. Celada, the Court ruled that the LV = MV x 2
factors enumerated under Section 17 of RA 6657 had already been
translated into a basic formula by the DAR pursuant to its rule-making In no case shall the value of idle land using the formula
power under Section 49 of RA 6657. Thus, the Court held that the MV x 2 exceed the lowest value of land within the same
formula outlined in DAR AO No. 5, series of 1998, should be applied in estate under consideration or within the same barangay
computing just compensation. DAR AO No. 5, series of 1998, provides: or municipality (in that order) approved by LBP within
one (1) year from receipt of claimfolder.
A. There shall be one basic formula for the valuation of lands
covered by VOS or CA: In Land Bank of the Philippines v. Spouses Banal, we
remanded the case to the SAC for further reception of evidence
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) because the trial court based its valuation upon a different
formula and did not conduct any hearing for the reception of
Where: evidence.

LV = Land Value The mandatory application of the aforementioned guidelines in


determining just compensation has been reiterated recently
CNI = Capitalized Net Income in Land Bank of the Philippines v. Lim and Land Bank of the
Philippines v. Heirs of Eleuterio Cruz, where we also ordered
CS = Comparable Sales the remand of the cases to the SAC for the determination of
just compensation strictly in accordance with the applicable A For the coconut land, the valuation I arrived at for the coconut
DAR regulations.16 land is the amount of P45,300.00 per hectare. That is the
market value of the 4th class coconut land and the
The factors for the determination of just compensation in Section 17 of improvements already, sir.
R.A. No. 6657, and consequently converted into a formula in A.O. No.
6, Series of 1992, as amended by A.O. No. 11, Series of 1994, is Q What about the banana lands?
mandatory. Land Bank of the Philippines v. Sps. Banal,17 as affirmed by
our subsequent rulings, did not equivocate. A The valuation is P70,800.00 per hectare, that is the valuation
of the land, 4th class banana land including already the
We note that A.O. No. 6, Series of 1992 (as amended by A.O. No. 11, improvements.
Series of 1994) has been superseded by A.O. No. 5, Series of 1998.
However, A.O. No. 5, Series of 1998, is not applicable to the present Q Why did you conclude this high valuation of banana lands?
case as the subject properties were assessed and valued prior to its
effectivity. A Considering that I have compressed all these banana in
every hectare, I have a reason to believe that it is a 4th class
A perusal of the records of this case readily reveals the Claims banana land. And in a 4th class banana land, the price per kilo
Valuation and Processing Form18 accomplished by petitioner when it is only P15.00 to P30.00 per kilo. The effective number of
reassessed and revaluated the subject properties. The document bananas per hectare is only 600 clusters considering that this is
follows the required formula for valuation of properties under A.O. No. the productivity for a 4th class banana land. The produce
6, Series of 1992, as amended by A.O. No. 11, Series of 1994. In fact, annually of 4,000 kilos is very minimal. So at P15.00 per kilo, I
even the RTC used the formula of petitioner to compute just arrived at a valuation of P60,000.00 per hectare. The appraisal,
compensation based on petitioners findings on land use of the subject on the other hand, for taxation purposes, we just state there the
properties. However, the RTC, as well as the CA, was gravely area actually being planted to bananas not considering the
mistaken in using respondents valuation of the properties contained in clusters of bananas in one hectare. Banana plantation with this
Olivas appraisal report, i.e., P52,700.00/ha.1avvphi1 kind of clusters will cost more than this if it will be properly
fertilized by the owner. So this banana land is only a 4th class
We note that Olivas appraisal report did not attach pertinent banana land and is about 7.5764 hectares of the subject
documents thereto, considering that, as he had testified, he used the property with only 4,000 to 8,000 kilos of banana fruits annually.
productivity approach:
[Counsel of defendant DAR]
Q Mr. Witness [Oliva] you said that you gave the valuation of
the coconut land in that property of Mr. Colarina. What is your Q What about the corn land area?
valuation to the coconut land per hectare?
A I valued it at P52,700.00 per hectare, sir.
WITNESS:
Q What is your basis?
A I have also here on page 5 of my report. I have classified the Q So do you have the data where you based the valuation?
subject portion as a second class corn land. With a production
of 101 to 150 cavans per hectare per year and the price of corn A That was the result of my actual interview with the farmers
which is P420.00 per cavan, I arrived at a valuation of P52,700 and traders.
per hectare, sir.
xxxx
xxxx
Q How much is the valuation you gave to this rootcrops area?
Q But that is not the data established by the [DAR]?
A The subject portion was classified by me as a 3rd class
A That is why I made a separate actual investigation. I made rootcrop land and so I valued it at P60,000.00 per hectare, sir.
personal interviews with the farmers and so we arrived at this
production. Q Do you mean to tell this honorable court that this rootcrops
land, the banana land and corn land are distinct areas separate
Q So your basis is the information which you gathered from the from each other?
farmers?
A I apprised this honorable court that I appraised this property
A Considering the kind of soil of the property planted by the not exactly on what is being produced in the area. I considered
farmers to corn, we will have to arrive at this productivity, sir. the land itself, the classification of the land, the boundaries
there but some are "ogacon" (lazy) to cultivate this property.
Q Did you inquire about the government support price of corn Because I am also an agriculturist and I also have a lot which is
per kilo? planted to this kind of plants and I know what will be the actual
produce of the CROPS [inserted in the TSN] with a certain kind
A The government support price is at P7.00 or P8.00 per kilo, of land. If we consider the actual produce, it is very low.
sir. Because we are "ogacon" (lazy). What I am very much
concerned is the kind of the land and then I asked them if we
Q Did you get that from the National Food Authority? will have to cultivate the property properly, how much are we
going to expect.
A I got this from the [C]hinese traders because I want to arrive
at the open market valuation. I am not prone to adopt the Q Do you mean to impress to us that while you conducted the
government price as I was deputized by Mr. Colarina ocular inspection, there were area which were not cultivated?
[respondent] to appraise his property independently, not as an
assessor but as a private appraiser from the open market. And I A When I conducted the ocular inspection, I was able to classify
know that this is still subject for review by the honorable court. an area of around 4.8 hectares which has no value at all, sir.

xxxx xxxx
Q So you had the ocular inspection without anybody from the In stark contrast is the valuation made by witness Alcantara:
government or from the barangay going with you?
Q Mr. Witness, what rule is followed by Land Bank in arriving at
A Nobody but I told the barangay captain of the place that we the valuation as contained in this exhibit?
will be going there for an ocular inspection and from the
barangay captain, we have learned that that there is a A The guidelines followed by Land Bank: properties valued
subdivision for sale which is adjoining the subject properties for under Administrative Order No. 11 Series of 1996 based on the
that much amount also. Honorable Courts Order dated November 14, 1996.

xxxx Q In Exh. "1," how many hectares were valued for the
contemplated acquisition of the property?
[On questioning by the SAC]
A The area for acquisition under Title No. 86448 is 28.3062
A (Perusing the report submitted by the Land Bank of the hectares.
Philippines). This is a very low valuation, your honor.
Q x x x Will you please explain why only a total of 28.3062
Q Why? [hectares] was computed in the valuation of the property?

A Considering that I did not take into consideration the A Some portion of the property is hilly and mountainous which
valuation that was done by the Assessors Office to the exceeded the 18% limit set forth under Section 10 of R.A. 6657.
schedule of value because as an assessor, in gathering data, Said portions of land were mountainous and undeveloped and
we have to base the valuation of every kind of property. It takes therefore excluded from acquisition under existing guidelines.
us a hard time to consolidate all these things because, first of
all, one, the comparative sales approach, for example, your Q What is the basis of said exclusion from coverage?
honor, we seldom find the consideration in a certain sale that is
the true and actual selling price perhaps because of the A Section 10 of R.A. 6657.
implementation of the capital gains tax of the Bureau of Internal
Revenue. Most of them are under valued. Now, that is why I Q Will you please explain to us the character, land use and
based my valuation from the actual procedure. First of all I condition of this particular land as described in Exh. "1"?
considered the kind of land thereon and thereby considered
also the different kinds of perennial trees or plants and based A The property which contains an area of 48.3062 hectares per
on the actual interviews I conducted with the farmers, I arrived title is planted to corn, peanut and a large portion is cogonal.
at the actual produce where I based my computation not really The corn land is 13 hectares, peanut land is .25 hectares and
considering the assessors value because it is only for taxation the cogonal is 15.0562 hectares. A hilly portion which is about
purposes. Nowhere in the Philippines that the government 18% slope and a mountainous portion which is about 25%
assessments are reliable.19 slope totals 20 hectares. This portion is the excluded one.
Q Will you please tell this Honorable Court what factors were by 2, the total is P117,126.09. Therefore, the total valuation of
considered by Land Bank in arriving at the valuation of the this 28.3062 portion of the property acquired by the government
property? is P259,525.41.

A The factor considered by Land Bank is under Formula No. 2 xxxx


which is the capitalized net income (CNI) x 90% and the market
value per tax declaration wherein we get the remaining 10%. A The total area acquired for Title No. 86449 is 22.3267
hectares out of 36.267 hectares per title.
Q There appears a computation for the CNI. Will you please
explain how the total value was arrived at? Q What is the basis of your exclusion of the 14 hectares?

A CNI for corn was taken from the average gross production A This 14 hectares fall also under the hilly and mountainous
based on the field investigation report multiplied by the selling portion which is about 18% slope.
price from the Department of Agriculture municipal data,
arriving at a total CNI of P10,291.67 per hectare. Q x x x [D]id you apply the same rules and regulations covered
by such valuation? Did you apply the same factors?
Q What about the computation for the market value per tax
declaration (MVPT)? Will you explain how the total valuation for A Yes.
the MVPT was arrived at?
Q What is the total?
A The market value per tax declaration was based on the third
classification as furnished to Land Bank by the Municipal A The total valuation for this property [TCT No. 86449]
Assessors Office. The total MVPT as computed by Land Bank is P217,223.60.
is P14,193.22, so, 10% of which is P1,419.32.
xxxx
Q Now, after computing the CNI and the MVPT, what steps did
you undertake to arrive at the total valuation of the property? Q Lastly, in Exh. "3", will you please tell us what is the area
acquired for coverage under CARP?
A We applied the applicable formula which is the CNI x 90%
and the MVPT x 10%. The CNI total is P9,262.5 and the market A The area acquired is 6.5718 hectares out of 12.5718 has.
value is P1,419.32. Summing up the total amount of the two
factors, the value per hectare arrived at for corn land Q What is the area excluded for valuation?
is P10,681.82 per hectare. So, if we will apply the amount
arrived at for the value per hectare of corn, P10,681.82 x 13 A The area excluded for valuation falling above 18% slope is 6
has. for corn land, the total is P138,863.66. The for peanut hectares.
land, the total amount is P3,535.66 and for the cogonal land
where we used the market value per tax declaration multiplied
Q x x x [D]id you still adopt the same rules and regulations in Q Last question Mr. Witness, the total valuation of the subject
computing the valuation? property is as of what point of time?

A The same. A The valuation of the property was based under Administrative
Order No. 11 existing at the time of the valuation of the
Q What is the total valuation [for TCT No. 86402]? property.

A The total valuation for Title No. 86402 for the 6.5718 hectares xxxx
acquired by the government is P51,762.90.
COURT:
xxxx
When was that?
Q Are there any guidelines under the law which limits or defines
what can be used in the valuation of the property under the WINTNESS:
CARP?
November 19, 1996.20
A There are several valuations/formulas provided for under R.A.
6657 and Land Bank follows the applicable formula as reflected Clearly from the foregoing, the valuation of the subject properties by
in the field investigation report. Therefore, our basis in petitioner was based on data gathered by DAR and contained in its
determining which factors will be applied are the result of the Field Investigation Report.21 The data correctly reflected actual use and
field investigation report. produce of the subject properties and did not factor in potential use as
what respondents appraiser did. In fact, we note that the data obtained
Q Will you please tell this Honorable Court what particular by Oliva was based on his unofficial surveys of farmers and Chinese
activities are to be taken for the purpose of being able to value traders. Oliva readily dismisses government valuation as unreliable
the property? without proffering evidence to support his statement. This explains the
big discrepancy in Olivas Appraisal Report and petitioners valuation.
A After determining the existence of the property, the DAR,
Land Bank and other agencies concerned conduct an ocular While we commend respondent in readily participating in the
inspection of the property being offered for sale under CARP or governments agrarian reform program, our previous rulings preclude
covered by the CARP. The data in-put were gathered in the us from validating the valuation of the subject properties proffered to,
field including the number of fruit bearing trees, they were also and affirmed by, the SAC. The government cannot be forced to
determined. The production data is also taken and a survey is purchase land which it finds no need for, regardless of Olivas
being conducted in the field on adjacent properties. Said data unschooled opinion. Considering respondents belief that the
were being compared with the record of the Municipal properties are worth more than the
agriculturist and other officers.
valuation made by the DAR, he can proceed to develop the land Value/Ha = P7,779.26/ha
excluded by the DAR from expropriation into its potential use as
assessed by Oliva. Computation:

Thus, replacing the valuation of the subject properties pursuant to the P7,779.26/ha x 15.0562 has
determination of petitioner where the LV was pegged using the formula = P117,126.09
{CNI x 90%} + {MV x 2}, we arrive at a different amount:
Total:
1) TCT No. T-86448 carpable area 28.3062 has.
Corn land -
Land Use:
Peanut -
A) Corn land Cogonal -

Area = 13.0000 has.

Value/Ha = P10,681.82/ha
2) TCT No. T-86449 carpable area 22.3267 has.
Computation:
Land Use:
P10,681.82/ha x 13.0000 has
A) Corn land
= P138,863.66

Value/Ha = P10,681.82/ha
B) Peanut

Area = 15.00 has


Area = .2500

Computation:
Value/Ha = P14,142.65/ha

P10,681.82/ha x 15.0000 has


Computation:
= P160,227.30
P14,142.65/ha x .2500 has = P3,535.66
B) Cogon:
C) Cogonal
Value/ha = P7,779.26/ha
Area = 15.0562 has.
Area = 7.3267 has
Computation: P7,779.26/ha x 3.5718 has
= P27,785.96
P7,779.26/ha x 7.3267 has
= P56,996.30 Total:

Total: Corn land -


Cogonal =
Corn land -
Cogon - Total =

TCT No. T-86448 -


TCT No. T-86449
3) TCT No. T-86402 carpable area 6.5718 has TCT No. T-86402

Land Use:
TOTAL
A) Corn land

Value/ha = P7,992.31/ha WHEREFORE, the petition is hereby GRANTED. The Decision of the
Court of Appeals in CA-G.R. CV No. 68476 and the decision of the
Area = 3.0000 has Regional Trial Court, Branch 3, Legazpi City, Albay, in Agrarian Case
No. 95-01 are REVERSED and SET ASIDE. Petitioner Land Bank of
Computation the Philippines is hereby ordered to pay respondent Conrado O.
Colarina the following amounts:
P7,992.31/ha x 3.0000 has
= P23,976.94 1. P259,525.41 for 28.3062 hectares of TCT No. 86448;

B) Cogonal 2. P217,223.60 for 22.3267 hectares of TCT No. 86449; and

Value/ha = P7,779.26/ha 3. P51,762.90 for 6.5718 hectares of TCT No. 86402.

Area = 3.5718 has Petitioner shall pay twelve percent (12%) interest per annum from
finality of this judgment until complete satisfaction thereof.
Computation:
SO ORDERED.
G.R. No. L-67784 February 28, 1986

MABUHAY TEXTILE MILLS CORPORATION, petitioner,


vs.
MINISTER ROBERTO V. ONGPIN, ALFREDO PIO DE RODA, JR.,
EDGARDO L. TORDESILLAS, RAMON J. FAROLAN, GARMENTS
AND TEXTILE EXPORT BOARD AND THE INTERMEDIATE
APPELLATE COURT,respondents.

GUTIERREZ, JR., J.:


This petition for certiorari seeks to annul the decision of the b. Assorted textile piece goods for
Intermediate Appellate Court dated January 6, 1984 which upheld the blouses, shirts and dresses were found
cancellation of petitioner's export quota allocations and the suspension midway through the containers.
of its officers even as it set aside the basis of such cancellation and
suspension on the ground of violation of due process. 3. The estimated value of the actual contents of the 2
containers is P2.5 Million.
Petitioner Mabuhay Textile Mills Corporation (Mabuhay) is a
corporation engaged in the garments and textile import business for The Bureau of Customs conducted an investigation pursuant to the
the last twenty-seven years. Among the government requirements for above initial findings. On July 25, 1983, it rendered a decision
engaging in this type of business are the export quota allocations absolving the petitioner from any irregularity relative to the subject
issued by the respondent Garments and Textile Export Board. shipment in the initial findings. It ruled:

Sometime in 1982, the Board granted export quota allocations for 1983 xxx xxx xxx
to the petitioner. These export quotas have been granted annually to
the petitioner since 1976. They are automatically renewed every year During the hearing, it was shown that Mr. James Dy,
provided the grantee has utilized its quotas during the previous years. Executive Vice-President of Mabuhay contacted the
shipper in Japan, Daiwa Trading Co., Ltd. demanding
On March 2, 1983, the petitioner received a letter from the Board explanation for the textile contents of the shipment and
informing it that its 1983 export quota allocations were revoked the shipper answered that those (sic) was an
effective February, 1983. Furthermore, its major stockholders and interchange in the loading of the materials destined for
officers were also distinguished from engaging in business activities Manila and another shipment destined for Indonesia
involving garment and textile exports. The decision of the Board was (Exh. "O" and Stipulation No. 9).
based on the following initial findings of the Bureau of Customs, to wit:
Subsequently, Mr. Dy wrote another letter to the Chief,
1. Two 40-footer containers declared to consist of 210 CIID (Exh. "P") enclosing therewith two letters from
bales of acrylic staple fiber weighing 48.211 kgs. with a Daiwa Trading Co., Ltd. dated February 21, 1983 and
value (including taxes and duties) of P1,240,857.00 February 25, 1983 explaining the supposed
arrived from Kobe, Japan on 12 February 1983 on interchanging of the materials destined for Manila and
board the S/S Breadeverette. that destined for Indonesia (Exhs. "P-1" and "P-2"); a
copy of a Bill of Lading of Samudera Indonesia Shipping
2. Examination of the shipment reveals the following Line for the S/S 'OCEAN PRIMA' purportedly covering
150 crate piece goods consigned to 'P.T. GADING AJU
a. About 100 bales of acrylic staple fibers DJAZA JL 'of Jakarta (Exhs. "P.3" & "J-A"); a photo of an
were found in the first half of the invoice addressed to 'P.T. GADING AJU DJAZA JL'
containers; and containing a detailed description of assorted
design/color of the fabrics and their corresponding
values (Exh, " P-4 " and " 5-B ") and a photocopy of a
Packing List (Exh. "P-5" also "5-C") containing the letters addressed to the claimant (Exhs. "P1" and "P-2"
description and yardage of the fabrics mentioned in the also Exhs. "4" & "5") alleged that there was an inter
aforementioned invoice. The aforementioned change of materials in the shipment to the claimant and
photocopies of the shipping documents were sent by another shipment consigned to a customer in Indonesia.
DAIWA TRADING CO., LTD., to Mabuhay for purposes Also sent to the claimant by Daiwa were photocopies of
of explaining the alleged interchanging of the materials a Bill of Lading (Exh. "P-3"); and Invoice (Exh. "P-4")
in the two shipments and which Mabuhay, through its and a packing list (Exh. "P-5") supposedly covering a
Executive Vice-Presidents, submitted to the CIID. shipment of piece goods consigned to 'P.T. GADING
AJU DJAZA JL' which the claimant forthwith submitted
Thereafter, through a series of communications with to the CIID. Later, in the letter dated March 14, 1983,
customs authorities in Jakarta and a personal inspection addressed to the Claimant, the shipper admitted its
in Jakarta by the Commissioner of Customs, while he culpability in claimant interchanging the shipments (Exh.
was there, it was discovered that no such containers "8"). Thereafter, the Claimant filed a suit against the
with Nos. ICSU-4868538 and ICSU-5219207 containing shipper for the damages caused to it by the latter's
110 bales of acrylic staple fiber was on board the action and petitioned for the issuance of a Writ of
'OCEAN PRIMA' and that Bill of Lading No. CJ-4 covers Preliminary Attachment (Exh. "7" to "7-6").
a shipment of steel sheets (Exh. "O-4 "; Exhs. "R" to "R-
2") thus debunking the claim of interchanged shipments A careful scrutiny of the facts and the circumstances
by DAIWA TRADING CO., LTD. attendant to the case show that the Mabuhay Textile
Mills have no participation in the irregularity relative to
The claimant, on the other hand, showed during the the subject shipment. The same was exported to the
hearing that it opened a letter of credit for the Philippines under a 'Shipper's Load and Count Bill of
importation of 42,000 kilos of Acryhc Staple Fiber C8 3D Lading (Exh. " l-A") which means that it was the shipper
V64 at US$1.6 per kilo (Exh. "1") based on a Pro Forma who was responsible for putting the contents inside the
Invoice of Daiwa Trading Co., Ltd. (Exh. "l-A"). Upon container. The spurious documents (Exhs. "P-3", "P-4"
receipt of the shipping documents, i.e., the Invoice (Exh. and "P-5") came from the shipper, Daiwa Trading Co.,
"D"); the Packing List (Exh. "C") and the Bill of Lading Ltd. and were forwarded by Mabuhay to the Bureau of
(Exh. "B" also Exh. "1") wherein it is indicated that the Customs for checking and evaluation. Lastly, and most
shipment was Shipper's Load & Count' (Exh. "1-A"), the important, Daiwa Trading Co., Ltd., in a letter to
same were given to its broker in line with its used Mabuhay dated March 14, 1983 (Exh. "l") admitted that
business practice, for the purpose of filing the import its staff was responsible for the story about the
entry. supposed mix-up with the alleged shipment to
Indonesia.
When the claimant received information that the
shipment contained fabrics which it did not import, an However, good faith should not be isolated alone on the
explanation was required from the shipper, DAIWA part of importer/consignee, but it should be proven also
TRADING CORPORATION, LTD. The latter, in two on the part of the supplier/exporter. It should be
reckoned that in matter of importation there are two On the basis of such decision, the petitioner, on August 10, 1983,
primary personalities involved, the supplier and the moved to reconsider the revocation of its export quota allocations and
importer. The supplier in order to maintain his credibility the disqualification of its officers from the export business. As the
to his client/importer, should exercise an utmost care Board failed to reply to such a request, two similar letters were sent by
and extreme caution in shipping orders of his importer the petitioner on September 13, and 23, 1983 respectively. Again, the
otherwise there is always the risk of losing huge amount Board did not reply.
of investment capital by his importers which ultimately
produce tremendous damages on the part of the Finally on September 26 and 29, 1983, two letters were respectively
importer similar to the instant case. He must maintain sent by the Board to the petitioner informing the latter that it had
his honest relationship to his importers. Within the referred petitioner's letters to the Commissioner of Customs for
contemplation of the Customs Code, the defense of the comment.
importer of good faith must be mutually tie up with the
supplier. A good faith of the importer does not in anyway On October 14, 1983, the Commissioner of Customs responded
offset the damage committed by the supplier/exporter through a letter-comment addressed to the Board stating the following:
for it is crystal clear on the provision of Section 2530 (1)
3, 4 of the Tariff and Customs Code, the liability of the xxx xxx xxx
exporter is explicit, thus:
Kindly be informed that seizure proceedings are
xxx xxx xxx proceedings instituted against the articles or goods.
Whenever a decision is rendered in a seizure
(3) On the strength of a false documents or affidavit proceeding, it is final and conclusive as to the goods but
executed by the owner, importer, exporter or consignee not as to the persons involved therein where another
concerning the importation of such articles; proceeding is necessary. Hence, any findings made in a
seizure proceeding, with respect to the culpability or
(4) On the strength of a false invoice or other non-culpability of the persons involved, cannot be
documents executed by the owner, importer, exporteror considered binding as to affect the judgment that may
consignee concerning the importation or exportation of be rendered in another. Seizure proceedings cannot
such articles; make a final and conclusive pronouncement as to the
guilt or innocence of persons.
If Mabuhay is prejudiced by such actions, its recourse is
against the exporter by way of damages and other On October 19, 1983, petitioner filed an action for prohibition and
remedies provided by law, as in fact, Mabuhay have so injunction with preliminary injunction and restraining order against the
done by filling of the corresponding complaint against Board. On October 24, 1983, the trial court issued a restraining order
the exporter and petitioning for the issuance of the directing the Board and its officials to desist and to stop from
necessary Writ of Attachment. implementing the decision revoking the petitioner's export quota
allocations and from disqualifying its principal stockholder and officers
xxx xxx xxx from engaging in the textile and garment export business.
The Board moved to reconsider but the same was denied. On involved; that due notice and opportunity to be heard be
November 14, 1983, the lower court issued a writ of preliminary given; that the procedure at the hearing be consistent
injunction. This, notwithstanding, the next day, the Board denied with the essentials of a fair trial; and that the
petitioner's request for reinstatement "on the basis of the above letter proceedings be conducted in such a way that there will
(the letter of the Commissioner of Customs dated October 14, 1983) be opportunity for a court to determine whether the
and for the reason that no new issues had been presented to warrant applicable rules of law and procedure were observed.
the reinstatement. " (42 Am. Jur. p. 451, cited by Neptali Gonzales, p. 183,
Philippine Constitutional Law).
After hearing, the trial court rendered judgment in favor of the
petitioner, and among others directed the Board to issue to the The Board appealed the decision to the Intermediate Appellate Court.
petitioner within two days from service of the writ, Textile Export
Clearances Nos. 23292, 22583 and 14321, and to issue the pertinent On January 4, 1984, the appellate court modified the trial court's
clearances with respect to the textile export shipments of the petitioner decision. It affirmed all the findings of fact of the court and held that the
after filing of the required papers and documents. In its decision, the petitioner was denied due process by the Board when it cancelled the
trial court stated: export quota allocations. It set aside the letters of the Board dated
March 2, 1983 and November 14, 1983. However, the appellate court
The summary revocation of the export quotas and ordered the Board to give the petitioner and its officers due hearing to
export authorizations issued in favor of the petitioner determine whether or not any of its rules and regulations had been
without hearing violates not only the above-mentioned violated as to warrant the imposition of any penalty against them. Until
provisions of the Rules and Regulations of the such hearings were held, the petitioner's export quota allocations were
respondent board but also the 'due process of law' to remain cancelled and its officers suspended. This modification is
clause of the Constitution of the Philippines to the effect now the subject of this petition.
that 'no person shall be deprived of life, liberty, or
property without due process of law, nor shall any The petitioner contends that the appellate court committed grave
person be denied equal protection of the laws.' (Article abuse of discretion when it ordered a new hearing to be conducted
IV, Sec. 1, New Constitution). According to Daniel unnecessarily since even without controverting evidence, the evidence
Webster in the Dartmouth College case, due process is on record relied upon by the Board failed miserably to measure up to
the equivalent of the law; a law which hears before it the requisite of "substantial evidence. "
condemns, which proceeds upon inquiry and renders
judgment only after trial. The meaning is that every This contention has no merit.
citizen shall hold his life, liberty, property, and
immunities under the protection of the general rules Executive Order No. 823 provides, among others:
which govern society. (cited in Philippine Constitutional
Law, p. 168 by Neptali Gonzales, 1975 ed.) The GTEB shall have the following powers and
functions:
Administrative due process requires that there be an
impartial tribunal constituted to determine the right
h. In case of violations of its rules and regulations, the discretion to conduct a proper hearing to determine the petitioner's
cancel or suspend quota allocations, export culpability or non-culpability. It does not have to rely on the findings of
authorizations and licences for the operation of bonded other agencies to discharge this function.
garment manufacturing warehouses. (Sec. 2[h] Exec.
Order No. 823 amended Sec. 3[h] of Exec. Order No. In its second assignment of error, the petitioner maintains that the
537). appellate court erred in allowing the implementation of the orders of
the respondent Board when such orders were set aside for having
Likewise, under its Rules and Regulations, said Executive Order been issued without a hearing.
provides:
There is merit in this contention.
Rules and Regulations:
The appellate court should have reversed and set aside the
Section III. Penalties.- Any act or misrepresentation or cancellation of petitioner's export quota allocations and the suspension
violation of these Rules and Regulations shall, after due of its officers since the very bases of these measures were set aside
hearing, constitute sufficient ground for the imposition of because of lack of due process. As the trial court correctly pointed out:
a fine of not more than ten per cent (10%) of the gross
FOB value of the goods exported or for a total or partial It is worthwhile to note that the basis of the revocation of
forfeiture of the offender's Export Quota, Export the export quotas and export authorizations issued in
Authorization and Export License and permit or favor of the petitioner was based on the initial findings of
temporary disqualification from enjoying the privilege to the Bureau of Customs regarding certain shipments but
export under all Agreements on textiles, without subsequently the acting collector of customs of the port
prejudice to any liabilities under other applicable laws. of Manila, Mr. Bienvenido P. Alano, Jr., cleared the
(Sec. III, Part 111, Rules and Regulations). petitioner of any wrongdoing and declared that it had no
participation in the irregularities relative to the subject
It is clear from the above provisions that the respondent Board is the shipments. (Decision dated July 25, 1983, Exhibit "A").
body charged with the function of granting export quota allocations, The decision of the acting collector of customs of the
issuing licenses to operate bonded warehouses and revoking or port of Manila became final on August 18, 1983. The
cancelling the same. Correspondingly, it is also authorized to conduct basis of the revocation has, therefore, become
hearings to determine whether or not violations have been committed ineffective and unenforceable so that the revocation has
by the grantee .The Board acted arbitrarily when, after acting solely no more leg to stand on.
upon the initial findings of the Bureau of Customs, it issued the
questioned order but once the basis for its action proved non-existent, The petitioner has shown by its evidence and the
it refused to lift its erroneous and unfounded order. allegations of its verified petition that it is entitled to the
reliefs demanded and the whole or part of such reliefs
However, since the Board has reason to believe that the petitioner consists in restraining the commission or continuance of
might have violated its rules and regulations in connection with the the acts complained of and that great or irreparable
importation of materials for the petitioner's garment industry then it has injury would result to the petitioner before the trial or
termination of this case. It has been shown by the Appeals, 89 SCRA 240 and Baguio Country Club
evidence presented during the hearing for the issuance Corporation v. National Labor Relations Commission,
of the writs of preliminary injunction prayed for by the 118 SCRA 557).
petitioner that foreign companies with whom the
petitioner have entered into contracts regarding its Equally important are the requisites of due process in administrative
export business like Itoman (U.S.A.) Inc., New York, proceedings reiterated in the case of Halili v. Court of Industrial
N.Y., and the C. ITOH and Co., Ltd. Tokyo, Japan, have Relations, (136 SCRA 112, 131):
threatened to cancel their contracts with the petitioner
and to sue the latter for damages if it cannot comply xxx xxx xxx
with its commitments to them (Exhs. "I" and "J"), thereby
showing that the petitioner would suffer great and . . . It is a settled rule that in administrative proceedings,
irreparable injury if the injunctions prayed for will not be or cases coming before administrative tribunals
granted. Aside from this, the 700 employees and exercising quasi-judicial powers, due process requires
workers of the petitioner will be practically jobless and not only notice and hearing, but also the consideration
they and their families will suffer greatly for the duration by the administrative tribunal of the evidence presented;
of this case if the injuctions will not be granted. the existence of evidence to support the decision; its
substantiality; a decision based thereon or at least
To hold that there was a violation of petitioner's right to due process but contained in the record and disclosed to the parties,
at the same time sustain the end results of such violation would be such decision by the administrative tribunal resting on
tantamount to denying the right to due process just the same. Indeed, its own independent consideration of the law and facts
the importance of this right which is guaranteed by the Constitution of the controversy; and such decision acquainting the
cannot be stressed strongly enough. In the case of Bacus v. Ople, (132 parties with the various issues involved and the reasons
SCRA 690, 704), we ruled: therefor (Ang Tibay v. Court, 69 Phil. 635, cited on p. 84,
Philippine Constitutional Law, Fernando, 1984 ed.)
The principle of due process furnishes a standard to
which governmental action should conform in order to In the case at bar, the petitioner was never given the chance to present
impress it with the stamp of validity. Fidelity to such its side before its export quota allocations were revoked and its officers
standard must of necessity be the overriding concern of suspended. While it is true that such allocations as alleged by the
government agencies exercising quasi-judicial Board are mere privileges which it can revoke and cancel as it may
functions. Although a speedy administration of action deem fit, these privileges have been accorded to petitioner for so long
implies a speedy trial, speed is not the chief objective of that they have become impressed with property rights especially since
a trial. Respect for the rights of all parties and the not only do these privileges determine the continued existence of the
requirements of procedural due process equally apply in petitioner with assets of over P80,000,000.00 but also the livelihood of
proceedings before administrative agencies with quasi- some 700 workers who are employed by the petitioner and their
judicial perspective in administrative decision making families. As the appellate court correctly pointed out:
and for maintaining the vision which led to the creation
of the administrative office. (Citing Amberto V. Court of xxx xxx xxx
. . . This reliance on the 'right privilege' dichotomy has knew why its export quota allocations had been cancelled was the
long been denigrated by leading lights in administrative initial findings of the Bureau of Customs which were made the sole
law as 'too crude for consistent application' by courts. basis by the Board for such cancellation. It is only but logical that
Indeed, considering the total topography of this case, petitioner would only touch on this issue and nothing else. Thus, such
the resort to the right-privilege distinction is too feeble a request for reinstatement and the subsequent denial by the Board can
refutation of the fact that there has been a disregard of hardly be considered a motion for reconsideration that "cured" the non-
the due process requirement of the Constitution by the observance of due process. Again, as pointed out by the appellate
petitioner Board. For the irrefutable fact is that the court:
private respondent has long been granted its
export allocations on their basis, valuable contracts Nor are We persuaded by the proposition that the
calling for textile export shipments have been concluded subsequent requests for restoration of its export
between the private respondent and foreign corporation. allocations made by the private respondent cured the
Stated otherwise, these export allocations can not due process deficiency on the part of the Board. The
anymore be categorized as mere 'privilege' but are requests for restoration rest on the allegation of the
already impressed with property rights of the private private respondent and its principal officers that they
respondent, They cannot be arbitrarily revoked without had no hand in the illicit importation of the apprehended
causing a collision with the constitutional call that there shipment. The allegation is buttressed by the decision
must be due process before anybody can be denied his itself of the Acting Collector of Customs of the Port of
right to property. Manila holding that '. . . a careful scrutiny of the facts
and the circumstance attendant to the case show that
Neither can the petitioner's request for reinstatement be considered as the Mabuhay Textile Mills have no participation in the
substantial compliance with the due process requirement so much so irregularity relative to the subject shipment.' It may be
that any defect in the initial cancellation of the export quota allocations technically true that this statement does not settle the
by the Board is deemed to have been cured by petitioner's request for criminal culpability of the private respondent and its
reinstatement; an action which is alleged by the Board as being officers for as pointed out by petitioner Brig. Gen.
tantamount to a motion for reconsideration. Ramon Farolan, Acting Commissioner of Customs, a
decision in a seizure proceedings is'. . final and
It should be noted that no reply was given by the Board when petitioner conclusive as to the goods but not as to the
requested for reinstatement of its allocations until an action for persons involved therein where another proceeding is
injunction was filed by petitioner. Only then did the Board deny necessary.' But this all the more sharpens the need for a
petitioner's request on the basis of the letter of the Commissioner of real hearing where the private respondent and its
Customs that his findings were not conclusive as to the persons officers should be given a fair opportunity to establish
involved therein and on the ground that no new issues were presented their innocence-a factual issue that cannot be resolved
by herein petitioner. by mere resolution of its requests for reinstatement on
the basis of in. formation known to the Board but
How can petitioner present any "new issues" when it was never given unknown to the private respondent such as the
the chance by the Board? Furthermore, the only reason the petitioner exchange of communications between petitioner
Farolan and the Director General of Customs of
Indonesia. Indeed even in judicial proceedings, the
irreducible rule is that the dismissal of an action upon a
motion to dismiss constitutes a denial of due process of
law if from a consideration of the pleadings it appears
that there are issues of fact which cannot be decided
without a trial of the case on the merits. In quasi-judicial
proceedings, the counterpart rule is that where
an adjudicative fact is at issue, a trial-type hearing ought
to be held. (Londoner v. Denver, 210 US 373, 386, 28 S.
Ct. 708, 714, 52 L. ed. 1103 119081).

While there is no controlling and precise definition of due process, the


guidelines laid down in the Ang Tibay v. Court case, supra, and all
subsequent cases reiterating the same furnish an unavoidable
standard to which government action must conform in order that any
deprivation of life, liberty, and property, in each appropriate case, may
be valid. (See Eastern Broadcasting Corporation v. Dans, Jr., 137
SCRA 628).

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is


GRANTED and the decision of the appellate court dated January 6,
1984 and its order of June 6, 1984 are SET ASIDE. The respondent
Board is hereby ordered to conduct a hearing where the petitioner is
accorded due process to determine whether or not the petitioner has G.R. No. 70054 December 11, 1991
violated any of its rules and regulations. Pending such hearing, and to
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,
maintain the status quo ante of the parties, the Board is directed to
vs.
issue Textile Export Clearances in favor of the petitioner without
THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES,
prejudice to the revocation of the same if the petitioner is found to be
JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B.
guilty of any such violation. No costs.
AURELLANO and RAMON V. TIAOQUI, respondents.
SO ORDERED.
G.R. No. 68878 December 11, 1991

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner,


vs.
HON. INTERMEDIATE APPELLATE COURT and CELESTINA S. PHILIPPINES, JOSE B. FERNANDEZ, JR., CARLOTA P.
PAHIMUNTUNG, assisted by her husband,respondents. VALENZUELA, ARNULFO B. AURELLANO AND RAMON
TIAOQUI, respondents.
G.R. No. 77255-58 December 11, 1991
G.R. No. 81303 December 11, 1991
TOP MANAGEMENT PROGRAMS CORPORATION AND PILAR
DEVELOPMENT CORPORATION, petitioners, PILAR DEVELOPMENT CORPORATION, petitioner
vs. vs.
THE COURT OF APPEALS, The Executive Judge of the Regional COURT OF APPEALS, HON. MANUEL M. COSICO, in his capacity
Trial Court of Cavite, Ex-Officio Sheriff REGALADO E. EUSEBIO, as Presiding Judge of Branch 136 of the Regional Trial Court of
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. Makati, CENTRAL BANK OF THE PHILIPPINES AND CARLOTA P.
VALENZUELA AND SYCIP, SALAZAR, HERNANDEZ AND VALENZUELA,respondents.
GATMAITAN, respondents.
G.R. No. 81304 December 11, 1991
G.R. No. 78766 December 11, 1991
BF HOMES DEVELOPMENT CORPORATION, petitioner,
EL GRANDE CORPORATION, petitioner, vs.
vs. THE COURT OF APPEALS, CENTRAL BANK AND CARLOTA P.
THE COURT OF APPEALS, THE EXECUTIVE JUDGE of The VALENZUELA, respondents.
Regional Trial Court and Ex-Officio Sheriff REGALADO E.
EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, G.R. No. 90473 December 11, 1991
CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, FELICIANO
AND HERNANDEZ, respondents. EL GRANDE DEVELOPMENT CORPORATION, petitioner,
vs.
G.R. No. 78767 December 11, 1991 THE COURT OF APPEALS, THE EXECUTIVE JUDGE of the
Regional Trial Court of Cavite, CLERK OF COURT and Ex-Officio
METROPOLIS DEVELOPMENT CORPORATION, petitioner, Sheriff ADORACION VICTA, BANCO FILIPINO SAVINGS AND
vs. MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP,
COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, SALAZAR, HERNANDEZ AND GATMAITAN, respondents.
JOSE B. FERNANDEZ, JR., CARLOTA P. VALENZUELA, ARNULFO
AURELLANO AND RAMON TIAOQUI, respondents. Panganiban, Benitez, Barinaga & Bautista Law Offices collaborating
counsel for petitioner.
G.R. No. 78894 December 11, 1991
Florencio T. Domingo, Jr. and Crisanto S. Cornejo for intervenors.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner
vs.
COURT OF APPEALS, THE CENTRAL BANK OF THE
MEDIALDEA, J.:p Petitioners Top Management Programs Corporation (Top Management
for brevity) and Pilar Development Corporation (Pilar Development for
This refers to nine (9) consolidated cases concerning the legality of the brevity) are corporations engaged in the business of developing
closure and receivership of petitioner Banco Filipino Savings and residential subdivisions.
Mortgage Bank (Banco Filipino for brevity) pursuant to the order of
respondent Monetary Board. Six (6) of these cases, namely, G.R. Nos. Top Management obtained a loan of P4,836,000 from Banco Filipino
68878, 77255-68, 78766, 81303, 81304 and 90473 involve the as evidenced by a promissory note dated January 7, 1982 payable in
common issue of whether or not the liquidator appointed by the three years from date. The loan was secured by real estate mortgage
respondent Central Bank (CB for brevity) has the authority to in its various properties in Cavite. Likewise, Pilar Development
prosecute as well as to defend suits, and to foreclose mortgages for obtained loans from Banco Filipino between 1982 and 1983 in the
and in behalf of the bank while the issue on the validity of the principal amounts of P6,000,000, P7,370,000 and P5,300,000 with
receivership and liquidation of the latter is pending resolution in G.R. maturity dates on December 28, 1984, January 5, 1985 and February
No. 7004. Corollary to this issue is whether the CB can be sued to fulfill 16, 1984, respectively. To secure the loan, Pilar Development
financial commitments of a closed bank pursuant to Section 29 of the mortgaged to Banco Filipino various properties in Dasmarias, Cavite.
Central Bank Act. On the other hand, the other three (3) cases,
namely, G.R. Nos. 70054, which is the main case, 78767 and 78894 all On January 25, 1985, the Monetary Board issued a resolution finding
seek to annul and set aside M.B. Resolution No. 75 issued by Banco Filipino insolvent and unable to do business without loss to its
respondents Monetary Board and Central Bank on January 25, 1985. creditors and depositors. It placed Banco Filipino under receivership of
Carlota Valenzuela, Deputy Governor of the Central Bank.

On March 22, 1985, the Monetary Board issued another resolution


The antecedent facts of each of the nine (9) cases are as follows: placing the bank under liquidation and designating Valenzuela as
liquidator. By virtue of her authority as liquidator, Valenzuela appointed
G.R No. 68878 the law firm of Sycip, Salazar, et al. to represent Banco Filipino in all
litigations.
This is a motion for reconsideration, filed by respondent Celestina
Pahimuntung, of the decision promulgated by thisCourt on April 8, On March 26, 1985, Banco Filipino filed the petition for certiorari in
1986, granting the petition for review on certiorari and reversing the G.R. No. 70054 questioning the validity of the resolutions issued by the
questioned decision of respondent appellate court, which annulled the Monetary Board authorizing the receivership and liquidation of Banco
writ of possession issued by the trial court in favor of petitioner. Filipino.

The respondent-movant contends that the petitioner has no more In a resolution dated August 29, 1985, this Court in G.R. No. 70054
personality to continue prosecuting the instant case considering that resolved to issue a temporary restraining order, effective during the
petitioner bank was placed under receivership since January 25, 1985 same period of 30 days, enjoining the respondents from executing
by the Central Bank pursuant to the resolution of the Monetary Board. further acts of liquidation of the bank; that acts such as receiving
collectibles and receivables or paying off creditors' claims and other
G.R. Nos. 77255-58 transactions pertaining to normal operations of a bank are not
enjoined. The Central Bank is ordered to designate a comptroller for of the closure and liquidation of Banco Filipino is still pending with this
Banco Filipino. Court in G.R. 70054.

Subsequently, Top Management failed to pay its loan on the due date. G.R. No. 78766
Hence, the law firm of Sycip, Salazar, et al. acting as counsel for
Banco Filipino under authority of Valenzuela as liquidator, applied for Petitioner El Grande Development Corporation (El Grande for brevity)
extra-judicial foreclosure of the mortgage over Top Management's is engaged in the business of developing residential subdivisions. It
properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of was extended by respondent Banco Filipino a credit accommodation to
Cavite issued a notice of extra-judicial foreclosure sale of the finance its housing program. Hence, petitioner was granted a loan in
properties on December 16, 1985. the amount of P8,034,130.00 secured by real estate mortgages on its
various estates located in Cavite.
On December 9, 1985, Top Management filed a petition for injunction
and prohibition with the respondent appellate court docketed as CA- On January 15, 1985, the Monetary Board forbade Banco Filipino to do
G.R. SP No. 07892 seeking to enjoin the Regional Trial Court of business, placed it under receivership and designated Deputy
Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al. from Governor Carlota Valenzuela as receiver. On March 22, 1985, the
proceeding with foreclosure sale. Monetary Board confirmed Banco Filipino's insolvency and designated
the receiver Carlota Valenzuela as liquidator.
Similarly, Pilar Development defaulted in the payment of its loans. The
law firm of Sycip, Salazar, et al. filed separate applications with the ex- When petitioner El Grande failed to pay its indebtedness to Banco
officio sheriff of the Regional Trial Court of Cavite for the extra-judicial Filipino, the latter thru its liquidator, Carlota Valenzuela, initiated the
foreclosure of mortgage over its properties. foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite.
Subsequently, on March 31, 1986, the ex-officio sheriff issued the
Hence, Pilar Development filed with the respondent appellate court a notice of extra-judicial sale of the mortgaged properties of El Grande
petition for prohibition with prayer for the issuance of a writ of scheduled on April 30, 1986.
preliminary injunction docketed as CA-G.R SP Nos. 08962-64 seeking
to enjoin the same respondents from enforcing the foreclosure sale of In order to stop the public auction sale, petitioner El Grande filed a
its properties. CA-G.R. SP Nos. 07892 and 08962-64 were petition for prohibition with the Court of Appeals alleging that
consolidated and jointly decided. respondent Carlota Valenzuela could not proceed with the foreclosure
of its mortgaged properties on the ground that this Court in G.R. No.
On October 30, 1986, the respondent appellate court rendered a 70054 issued a resolution dated August 29, 1985, which restrained
decision dismissing the aforementioned petitions. Carlota Valenzuela from acting as liquidator and allowed Banco Filipino
to resume banking operations only under a Central Bank comptroller.
Hence, this petition was filed by the petitioners Top Management and
Pilar Development alleging that Carlota Valenzuela, who was On March 2, 1987, the Court of Appeals rendered a decision
appointed by the Monetary Board as liquidator of Banco Filipino, has dismissing the petition.
no authority to proceed with the foreclosure sale of petitioners'
properties on the ground that the resolution of the issue on the validity
Hence this petition for review on certiorari was filed alleging that the G.R. No. 81304
respondent court erred when it held in its decision that although
Carlota P. Valenzuela was restrained by this Honorable Court from On July 9, 1985, petitioner BF Homes Incorporated (BF Homes for
exercising acts in liquidation of Banco Filipino Savings & Mortgage brevity) filed an action with the trial court to compel the Central Bank to
Bank, she was not legally precluded from foreclosing the mortgage restore petitioner's; financing facility with Banco Filipino.
over the properties of the petitioner through counsel retained by her for
the purpose. The Central Bank filed a motion to dismiss the action. Petitioner BF
Homes in a supplemental complaint impleaded as defendant Carlota
G.R. No. 81303 Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank.

On November 8, 1985, petitioner Pilar Development Corporation (Pilar On April 8, 1985, petitioner filed a second supplemental complaint to
Development for brevity) filed an action against Banco Filipino, the which respondents filed a motion to dismiss.
Central Bank and Carlota Valenzuela for specific performance,
docketed as Civil Case No. 12191. It appears that the former On July 9, 1985, the trial court granted the motion to dismiss the
management of Banco Filipino appointed Quisumbing & Associates as supplemental complaint on the grounds (1) that plaintiff has no
counsel for Banco Filipino. On June 12, 1986 the said law firm filed an contractual relation with the defendants, and (2) that the Intermediate
answer for Banco Filipino which confessed judgment against Banco Appellate Court in a previous decision in AC-G.R. SP. No. 04609 had
Filipino. stated that Banco Filipino has been ordered closed and placed under
receivership pending liquidation, and thus, the continuation of the
On June 17, 1986, petitioner filed a second amended complaint. The facility sued for by the plaintiff has become legally impossible and the
Central Bank and Carlota Valenzuela, thru the law firm Sycip, Salazar, suit has become moot.
Hernandez and Gatmaitan filed an answer to the complaint.
The order of dismissal was appealed by the petitioner to the Court of
On June 23, 1986, Sycip, et al., acting for all the defendants including Appeals. On November 4, 1987, the respondent appellate court
Banco Filipino moved that the answer filed by Quisumbing & dismissed the appeal and affirmed the order of the trial court.
Associates for defendant Banco Filipino be expunged from the records.
Despite opposition from Quisumbing & Associates, the trial court Hence, this petition for review on certiorari was filed, alleging that the
granted the motion to expunge in an order dated March 17, 1987. respondent court erred when it found that the private respondents
Petitioner Pilar Development moved to reconsider the order but the should not be the ones to respond to the cause of action asserted by
motion was denied. the petitioner and the petitioner did not have any cause of action
against the respondents Central Bank and Carlota Valenzuela.
Petitioner Pilar Development filed with the respondent appellate court a
petition for certiorari and mandamus to annul the order of the trial G.R. No. 90473
court. The Court of Appeals rendered a decision dismissing the
petition. A petition was filed with this Court but was denied in a Petitioner El Grande Development Corporation (El Grande for brevity)
resolution dated March 22, 1988. Hence, this instant motion for obtained a loan from Banco Filipino in the amount of P8,034,130.00,
reconsideration. secured by a mortgage over its five parcels of land located in Cavite
which were covered by Transfer Certificate of Title Nos. T-82187, T- augmented with a P3 billion credit line under M.B. Resolution No. 934
109027, T-132897, T-148377, and T-79371 of the Registry of Deeds of dated July 27, 1984.
Cavite.
On the same date, respondent Board issued M.B. Resolution No. 955
When Banco Filipino was ordered closed and placed under placing petitioner bank under conservatorship of Basilio Estanislao. He
receivership in 1985, the appointed liquidator of BF, thru its counsel was later replaced by Gilberto Teodoro as conservator on August 10,
Sycip, Salazar, et al. applied with the ex-officio sheriff of the Regional 1984. The latter submitted a report dated January 8, 1985 to
Trial Court of Cavite for the extrajudicial foreclosure of the mortgage respondent Board on the conservatorship of petitioner bank, which
constituted over petitioner's properties. On March 24, 1986, the ex- report shall hereinafter be referred to as the Teodoro report.
officio sheriff issued a notice of extrajudicial foreclosure sale of the
properties of petitioner. Subsequently, another report dated January 23, 1985 was submitted to
the Monetary Board by Ramon Tiaoqui, Special Assistant to the
Thus, petitioner filed with the Court of Appeals a petition for prohibition Governor and Head, SES Department II of the Central Bank, regarding
with prayer for writ of preliminary injunction to enjoin the respondents the major findings of examination on the financial condition of petitioner
from foreclosing the mortgage and to nullify the notice of foreclosure. BF as of July 31, 1984. The report, which shall be referred to herein as
the Tiaoqui Report contained the following conclusion and
On June 16, 1989, respondent Court of Appeals rendered a decision recommendation:
dismissing the petition.
The examination findings as of July 31, 1984, as shown
Not satisfied with the decision, petitioner filed the instant petition for earlier, indicate one of insolvency and illiquidity and
review on certiorari. further confirms the above conclusion of the
Conservator.
G.R. No. 70054
All the foregoing provides sufficient justification for
Banco Filipino Savings and Mortgage Bank was authorized to operate forbidding the bank from engaging in banking.
as such under M.B. Resolution No. 223 dated February 14, 1963. It
commenced operations on July 9, 1964. It has eighty-nine (89) Foregoing considered, the following are recommended:
operating branches, forty-six (46) of which are in Manila, with more
than three (3) million depositors. 1. Forbid the Banco Filipino Savings &
Mortgage Bank to do business in the
As of July 31, 1984, the list of stockholders showed the major Philippines effective the beginning of
stockholders to be: Metropolis Development Corporation, Apex office January 1985, pursuant to Sec. 29
Mortgage and Loans Corporation, Filipino Business Consultants, Tiu of R.A No. 265, as amended;
Family Group, LBH Inc. and Anthony Aguirre.
2. Designate the Head of the
Petitioner Bank had an approved emergency advance of P119.7 million Conservator Team at the bank, as
under M.B. Resolution No. 839 dated June 29, 1984. This was Receiver of Banco Filipino Savings &
Mortgage Bank, to immediately take Department II as recited in his memorandum dated
charge of the assets and liabilities, as January 23, 1985, that the Banco Filipino Savings &
expeditiously as possible collect and Mortgage Bank is insolvent and that its continuance in
gather all the assets and administer the business would involve probable loss to its depositors
same for the benefit of all the creditors, and creditors, and in pursuance of Sec. 29 of RA 265,
and exercise all the powers necessary for as amended, the Board decided:
these purposes including but not limited
to bringing suits and foreclosing 1. To forbid Banco Filipino Savings and
mortgages in the name of the bank. Mortgage Bank and all its branches to do
business in the Philippines;
3. The Board of Directors and the
principal officers from Senior Vice 2. To designate Mrs. Carlota P.
Presidents, as listed in the attached Valenzuela, Deputy Governor as
Annex "A" be included in the watchlist of Receiver who is hereby directly vested
the Supervision and Examination Sector with jurisdiction and authority to
until such time that they shall have immediately take charge of the bank's
cleared themselves. assets and liabilities, and as
expeditiously as possible collect and
4. Refer to the Central Bank's Legal gather all the assets and administer the
Department and Office of Special same for the benefit of its creditors,
Investigation the report on the findings on exercising all the powers necessary for
Banco Filipino for investigation and these purposes including but not limited
possible prosecution of directors, officers, to, bringing suits and foreclosing
and employees for activities which led to mortgages in the name of the bank;
its insolvent position. (pp- 61-62, Rollo)
3. To designate Mr. Arnulfo B. Aurellano,
On January 25, 1985, the Monetary Board issued the assailed MB Special Assistant to the Governor, and
Resolution No. 75 which ordered the closure of BF and which further Mr. Ramon V. Tiaoqui, Special Assistant
provides: to the Governor and Head, Supervision
and Examination Sector Department II,
After considering the report dated January 8, 1985 of as Deputy Receivers who are likewise
the Conservator for Banco Filipino Savings and hereby directly vested with jurisdiction
Mortgage Bank that the continuance in business of the and authority to do all things necessary
bank would involve probable loss to its depositors and or proper to carry out the functions
creditors, and after discussing and finding to be true the entrusted to them by the Receiver and
statements of the Special Assistant to the Governor and otherwise to assist the Receiver in
Head, Supervision and Examination Sector (SES) carrying out the functions vested in the
Receiver by law or Monetary Board In view of the foregoing and considering that the
Resolutions; condition of the banking institution continues to be one
of insolvency, i.e., its realizable assets are insufficient to
4. To direct and authorize Management meet all its liabilities and that the bank cannot resume
to do all other things and carry out all business with safety to its depositors, other creditors
other measures necessary or proper to and the general public, it is recommended that:
implement this Resolution and to
safeguard the interests of depositors, 1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to
creditors and the general public; and paragraph 3, Sec. 29 of RA No. 265, as amended;

5. In consequence of the foregoing, to 2. The Legal Department, through the Solicitor General, be authorized
terminate the conservatorship over to file in the proper court a petition for assistance in th liquidation of the
Banco Filipino Savings and Mortgage Bank;
Bank. (pp. 10-11, Rollo, Vol. I)
3. The Statutory Receiver be designated as the Liquidator of said
On February 2, 1985, petitioner BF filed a complaint docketed as Civil bank; and
Case No. 9675 with the Regional Trial Court of Makati to set aside the
action of the Monetary Board placing BF under receivership. 4. Management be instructed to inform the stockholders of Banco
Filipino Savings & Mortgage Bank of the Monetary Board's decision
On February 28, 1985, petitioner filed with this Court the instant liquidate the Bank. (p. 167, Rollo, Vol. I)
petition for certiorari and mandamus under Rule 65 of the Rules of
Court seeking to annul the resolution of January 25, 1985 as made On July 23, 1985, petitioner filed a motion before this Court praying
without or in excess of jurisdiction or with grave abuse of discretion, to that a restraining order or a writ of preliminary injunction be issued to
order respondents to furnish petitioner with the reports of examination enjoin respondents from causing the dismantling of BF signs in its
which led to its closure and to afford petitioner BF a hearing prior to main office and 89 branches. This Court issued a resolution on August
any resolution that may be issued under Section 29 of R.A. 265, also 8, 1985 ordering the issuance of the aforesaid temporary restraining
known as Central Bank Act. order.

On March 19, 1985, Carlota Valenzuela, as Receiver and Arnulfo On August 20, 1985, the case was submitted for resolution.
Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino
submitted their report on the receivership of BF to the Monetary Board, In a resolution dated August 29, 1985, this Court Resolved direct the
in compliance with the mandate of Sec. 29 of R.A. 265 which provides respondents Monetary Board and Central Bank hold hearings at which
that the Monetary Board shall determine within sixty (60) days from the petitioner should be heard, and terminate such hearings and
date of receivership of a bank whether such bank may be submit its resolution within thirty (30) days. This Court further resolved
reorganized/permitted to resume business or ordered to be liquidated. to issue a temporary restraining order enjoining the respondents from
The report contained the following recommendation: executing further acts of liquidation of a bank. Acts such as receiving
collectibles and receivables or paying off creditors' claims and other
transactions pertaining to normal operations of a bank were no The aforementioned resolution had ordered a healing on the reports
enjoined. The Central Bank was also ordered to designate comptroller that led respondents to order petitioner's closure and its alleged pre-
for the petitioner BF. This Court also ordered th consolidation of Civil planned liquidation. This Court noted that during the referral hearing
Cases Nos. 8108, 9676 and 10183 in Branch 136 of the Regional Trial however, a different scheme was followed. Respondents merely
Court of Makati. submitted to the commissioner their findings on the examinations
conducted on petitioner, affidavits of the private respondents relative to
However, on September 12, 1985, this Court in the meantime the findings, their reports to the Monetary Board and several other
suspended the hearing it ordered in its resolution of August 29, 1985. documents in support of their position while petitioner had merely
submitted objections to the findings of respondents, counter-affidavits
On October 8, 1985, this Court submitted a resolution order ing Branch of its officers and also documents to prove its claims. Although the
136 of the Regional Trial Court of Makati the presided over by Judge records disclose that both parties had not waived cross-examination of
Ricardo Francisco to conduct the hear ing contemplated in the their deponents, no such cross-examination has been conducted. The
resolution of August 29, 1985 in the most expeditious manner and to reception of evidence in the form of affidavits was followed throughout,
submit its resolution to this Court. until the commissioner submitted his report and recommendations to
the Court. This Court also held that the documents pertinent to the
In the Court's resolution of February 19, 1987, the Court stated that the resolution of the instant petition are the Teodoro Report, Tiaoqui
hearing contemplated in the resolution of August 29, 1985, which is to Report, Valenzuela, Aurellano and Tiaoqui Report and the supporting
ascertain whether substantial administrative due process had been documents which were made as the bases by the reporters of their
observed by the respondent Monetary Board, may be expedited by conclusions contained in their respective reports. This Court also
Judge Manuel Cosico who now presides the court vacated by Judge Resolved in its resolution to re-open the referral hearing that was
Ricardo Francisco, who was elevated to the Court of Appeals, there terminated after Judge Cosico had submitted his report and
being no legal impediment or justifiable reason to bar the former from recommendation with the end in view of allowing petitioner to complete
conducting such hearing. Hence, this Court directed Judge Manuel its presentation of evidence and also for respondents to adduce
Cosico to expedite the hearing and submit his report to this Court. additional evidence, if so minded, and for both parties to conduct the
required cross-examination of witnesses/deponents, to be done within
On February 20, 1988, Judge Manuel Cosico submitted his report to a period of three months. To obviate all doubts on Judge Cosico's
this Court with the recommendation that the resolutions of respondents impartiality, this Court designated a new hearing commissioner in the
Monetary Board and Central Bank authorizing the closure and person of former Judge Consuelo Santiago of the Regional Trial Court,
liquidation of petitioner BP be upheld. Makati, Branch 149 (now Associate Justice of the Court of Appeals).

On October 21, 1988, petitioner BF filed an urgent motion to reopen Three motions for intervention were filed in this case as follows: First,
hearing to which respondents filed their comment on December 16, in G.R. No. 70054 filed by Eduardo Rodriguez and Fortunate M. Dizon,
1988. Petitioner filed their reply to respondent's comment of January stockholders of petitioner bank for and on behalf of other stockholders
11, 1989. After having deliberated on the grounds raised in the of petitioner; second, in G.R. No. 78894, filed by the same
pleadings, this Court in its resolution dated August 3, 1989 declared stockholders, and, third, again in G.R. No. 70054 by BF Depositors'
that its intention as expressed in its resolution of August 29, 1985 had Association and others similarly situated. This Court, on March 1,
not been faithfully adhered to by the herein petitioner and respondents. 1990, denied the aforesaid motions for intervention.
On January 28, 1991, the hearing commissioner, Justice Consuelo 2. That consequently, BF's closure on
Santiago of the Court of Appeals submitted her report and January 25, 1985, not having satisfied
recommendation (to be hereinafter called, "Santiago Report") on the the requirements prescribed under Sec.
following issues stated therein as follows: 29 of RA 265, as amended, was null and
void.
l) Had the Monetary Board observed the
procedural requirements laid down in 3. That accordingly, by way of correction,
Sec. 29 of R.A. 265, as amended to BF should be allowed to re-open subject
justify th closure of the Banco Filipino to such laws, rules and regulations that
Savings and Mortgage Bank? apply to its situation.

2) On the date of BF's closure (January Respondents thereafter filed a motion for leave to file objections to the
25, 1985) was its condition one of Santiago Report. In the same motion, respondents requested that the
insolvency or would its continuance in report and recommendation be set for oral argument before the Court.
business involve probable loss to its On February 7, 1991, this Court denied the request for oral argument
depositors or creditors? of the parties.

The commissioner after evaluation of the evidence presented found On February 25, 1991, respondents filed their objections to the
and recommended the following: Santiago Report. On March 5, 1991, respondents submitted a motion
for oral argument alleging that this Court is confronted with two
1. That the TEODORO and TIAOQUI conflicting reports on the same subject, one upholding on all points the
reports did not establish in accordance Monetary Board's closure of petitioner, (Cosico Report dated February
with See. 29 of the R.A. 265, as 19, 1988) and the other (Santiago Report dated January 25, 1991)
amended, BF's insolvency as of July 31, holding that petitioner's closure was null and void because petitioner's
1984 or that its continuance in business insolvency was not clearly established before its closure; and that such
thereafter would involve probable loss to a hearing on oral argrument will therefore allow the parties to directly
its depositors or creditors. On the confront the issues before this Court.
contrary, the evidence indicates that BF
was solvent on July 31, 1984 and that on On March 12, 1991 petitioner filed its opposition to the motion for oral
January 25, 1985, the day it was closed, argument. On March 20, 1991, it filed its reply to respondents'
its insolvency was not clearly objections to the Santiago Report.
established;
On June 18, 1991, a hearing was held where both parties were heard
on oral argument before this Court. The parties, having submitted their
respective memoranda, the case is now submitted for decision.

G.R. No. 78767


On February 2, 1985, Banco Filipino filed a complaint with the trial Hence this petition was filed by Metropolis Development Corporation
court docketed as Civil Case No. 9675 to annul the resolution of the questioning the decision of the respondent appellate court.
Monetary Board dated January 25, 1985, which ordered the closure of
the bank and placed it under receivership. G.R. No. 78894

On February 14, 1985, the Central Bank and the receivers filed a On February 2, 1985, a complaint was filed with the trial court in the
motion to dismiss the complaint on the ground that the receivers had name of Banco Filipino to annul the resolution o the Monetary Board
not authorized anyone to file the action. In a supplemental motion to dated January 25, 1985 which ordered the closure of Banco Filipino
dismiss, the Central Bank cited the resolution of this Court dated and placed it under receivership. The receivers appointed by the
October 15, 1985 in G.R. No. 65723 entitled, "Central Bank et al. v. Monetary Board were Carlota Valenzuela, Arnulfo Aurellano and
Intermediate Appellate Court" whereby We held that a complaint Ramon Tiaoqui.
questioning the validity of the receivership established by the Central
Bank becomes moot and academic upon the initiation of liquidation On February 14, 1985, the Central Bank and the receiver filed a motion
proceedings. to dismiss the complaint on the ground that the receiver had not
authorized anyone to file the action.
While the motion to dismiss was pending resolution, petitioner herein
Metropolis Development Corporation (Metropolis for brevity) filed a On March 22, 1985, the Monetary Board placed the bank under
motion to intervene in the aforestated civil case on the ground that as a liquidation and designated Valenzuela as liquidator and Aurellano and
stockholder and creditor of Banco Filipino, it has an interest in the Tiaoqui as deputy liquidators.
subject of the action.
The Central Bank filed a supplemental motion to dismiss which was
On July 19, 1985, the trial court denied the motion to dismiss and also denied. Hence, the latter filed a petition for certiorari with the
denied the motion for reconsideration of the order later filed by Central respondent appellate court to set aside the order of the trial court
Bank. On June 5, 1985, the trial court allowed the motion for denying the motion to dismiss. On March 17, 1986, the respondent
intervention. appellate court granted the petition and dismissed the complaint of
Banco Filipino with the trial court.
Hence, the Central Bank and the receivers of Banco Filipino filed a
petition for certiorari with the respondent appellate court alleging that Thus, this petition for certiorari was filed with the petitioner contending
the trial court committed grave abuse of discretion in not dismissing that a bank which has been closed and placed under receivership by
Civil Case No. 9675. the Central Bank under Section 29 of RA 265 could file suit in court in
its name to contest such acts of the Central Bank, without the
On March 17, 1986, the respondent appellate court rendered a authorization of the CB-appointed receiver.
decision annulling and setting aside the questioned orders of the trial
court, and ordering the dismissal of the complaint filed by Banco After deliberating on the pleadings in the following cases:
Filipino with the trial court as well as the complaint in intervention of
petitioner Metropolis Development Corporation. 1. In G.R. No. 68878, the respondent's
motion for reconsideration;
2. In G.R. Nos. 77255-58, the petition, appropriate court to collect and recover a counts and assets of such
comment, reply, rejoinder and sur- institution or defend any action ft against the institution.
rejoinder;
When the issue on the validity of the closure and receivership of Banco
2. In G.R. No. 78766, the petition, Filipino bank was raised in G.R. No. 70054, pendency of the case did
comment, reply and rejoinder; not diminish the powers and authority of the designated liquidator to
effectuate and carry on the a ministration of the bank. In fact when We
3. In G.R. No. 81303, the petitioner's adopted a resolute on August 25, 1985 and issued a restraining order
motion for reconsideration; to respondents Monetary Board and Central Bank, We enjoined me
further acts of liquidation. Such acts of liquidation, as explained in Sec.
4. In G.R.No. 81304, the petition, 29 of the Central Bank Act are those which constitute the conversion of
comment and reply; the assets of the banking institution to money or the sale, assignment
or disposition of the s to creditors and other parties for the purpose of
5. Finally, in G.R. No. 90473, the petition paying debts of such institution. We did not prohibit however acts a as
comment and reply. receiving collectibles and receivables or paying off credits claims
and other transactions pertaining to normal operate of a bank. There is
We find the motions for reconsideration in G.R. Nos. 68878 and 81303 no doubt that the prosecution of suits collection and the foreclosure of
and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 mortgages against debtors the bank by the liquidator are among the
devoid of merit. usual and ordinary transactions pertaining to the administration of a
bank. their did Our order in the same resolution dated August 25, 1985
Section 29 of the Republic Act No. 265, as amended known as the for the designation by the Central Bank of a comptroller Banco Filipino
Central Bank Act, provides that when a bank is forbidden to do alter the powers and functions; of the liquid insofar as the management
business in the Philippines and placed under receivership, the person of the assets of the bank is concerned. The mere duty of the
designated as receiver shall immediately take charge of the bank's comptroller is to supervise counts and finances undertaken by the
assets and liabilities, as expeditiously as possible, collect and gather liquidator and to d mine the propriety of the latter's expenditures
all the assets and administer the same for the benefit of its creditors, incurred behalf of the bank. Notwithstanding this, the liquidator is
and represent the bank personally or through counsel as he may retain empowered under the law to continue the functions of receiver is
in all actions or proceedings for or against the institution, exercising all preserving and keeping intact the assets of the bank in substitution of
the powers necessary for these purposes including, but not limited its former management, and to prevent the dissipation of its assets to
to, bringing and foreclosing mortgages in the name of the bank. If the the detriment of the creditors of the bank. These powers and functions
Monetary Board shall later determine and confirm that banking of the liquidator in directing the operations of the bank in place of the
institution is insolvent or cannot resume business safety to depositors, former management or former officials of the bank include the retaining
creditors and the general public, it shall, public interest requires, order of counsel of his choice in actions and proceedings for purposes of
its liquidation and appoint a liquidator who shall take over and continue administration.
the functions of receiver previously appointed by Monetary Board. The
liquid for may, in the name of the bank and with the assistance counsel Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the
as he may retain, institute such actions as may necessary in the liquidator by himself or through counsel has the authority to bring
actions for foreclosure of mortgages executed by debtors in favor of acts in excess of authority or jurisdiction, as well as to correct manifest
the bank. In G.R. No. 81303, the liquidator is likewise authorized to abuses of discretion committed by the officer or tribunal involved.
resist or defend suits instituted against the bank by debtors and
creditors of the bank and by other private persons. Similarly, in G.R. The law applicable in the determination of these issues is Section 29 of
No. 81304, due to the aforestated reasons, the Central Bank cannot be Republic Act No. 265, as amended, also known as the Central Bank
compelled to fulfill financial transactions entered into by Banco Filipino Act, which provides:
when the operations of the latter were suspended by reason of its
closure. The Central Bank possesses those powers and functions only SEC. 29. Proceedings upon insolvency. Whenever,
as provided for in Sec. 29 of the Central Bank Act. upon examination by the head of the appropriate
supervising or examining department or his examiners
While We recognize the actual closure of Banco Filipino and the or agents into the condition of any bank or non-bank
consequent legal effects thereof on its operations, We cannot uphold financial intermediary performing quasi-banking
the legality of its closure and thus, find the petitions in G.R. Nos. functions, it shall be disclosed that the condition of the
70054, 78767 and 78894 impressed with merit. We hold that the same is one of insolvency, or that its continuance in
closure and receivership of petitioner bank, which was ordered by business would involve probable loss to its depositors or
respondent Monetary Board on January 25, 1985, is null and void. creditors, it shall be the duty of the department head
concerned forthwith, in writing, to inform the Monetary
It is a well-recognized principle that administrative and discretionary Board of the facts. The Board may, upon finding the
functions may not be interfered with by the courts. In general, courts statements of the department head to be true, forbid the
have no supervising power over the proceedings and actions of the institution to do business in the Philippines and
administrative departments of the government. This is generally true designate an official of the Central Bank or a person of
with respect to acts involving the exercise of judgment or discretion, recognized competence in banking or finance, as
and findings of fact. But when there is a grave abuse of discretion receiver to immediately take charge of its assets and
which is equivalent to a capricious and whimsical exercise of judgment liabilities, as expeditiously as possible collect and gather
or where the power is exercised in an arbitrary or despotic manner, all the assets and administer the same for the benefit's
then there is a justification for the courts to set aside the administrative of its creditors, and represent the bank personally or
determination reached (Lim, Sr. v. Secretary of Agriculture and Natural through counsel as he may retain in all actions or
Resources, L-26990, August 31, 1970, 34 SCRA 751) proceedings for or against the institution, exercising all
the powers necessary for these purposes including, but
The jurisdiction of this Court is called upon, once again, through these not limited to, bringing and foreclosing mortgages in the
petitions, to undertake the delicate task of ascertaining whether or not name of the bank or non-bank financial intermediary
an administrative agency of the government, like the Central Bank of performing quasi-banking functions.
the Philippines and the Monetary Board, has committed grave abuse of
discretion or has acted without or in excess of jurisdiction in issuing the The Monetary Board shall thereupon determine within
assailed order. Coupled with this task is the duty of this Court not only sixty days whether the institution may be reorganized or
to strike down acts which violate constitutional protections or to nullify otherwise placed in such a condition so that it may be
administrative decisions contrary to legal mandates but also to prevent permitted to resume business with safety to its
depositors and creditors and the general public and the assets of the banking institutions or non-bank
shall prescribe the conditions under which such financial intermediary performing quasi-banking function
resumption of business shall take place as well as the to money or sell, assign or otherwise dispose of the
time for fulfillment of such conditions. In such case, the same to creditors and other parties for the purpose of
expenses and fees in the collection and administration paying the debts of such institution and he may, in the
of the assets of the institution shall be determined by name of the bank or non-bank financial intermediary
the Board and shall be paid to the Central Bank out of performing quasi-banking functions and with the
the assets of such institution. assistance of counsel as he may retain, institute such
actions as may be necessary in the appropriate court to
If the Monetary Board shall determine and confirm collect and recover accounts and assets of such
within the said period that the bank or non-bank institution or defend any action filed against the
financial intermediary performing quasi-banking institution: Provided, However, That after having
functions is insolvent or cannot resume business with reasonably established all claims against the institution,
safety to its depositors, creditors, and the general the liquidator may, with the approval of the court, effect
public, it shall, if the public interest requires, order its partial payments of such claims for assets of the
liquidation, indicate the manner of its liquidation and institution in accordance with their legal priority.
approve a liquidation plan which may, when warranted,
involve disposition of any or all assets in consideration The assets of an institution under receivership or
for the assumption of equivalent liabilities. The liquidator liquidation shall be deemed in custodia legis in the
designated as hereunder provided shall, by the Solicitor hands of the receiver or liquidator and shall from the
General, file a petition in the regional trial court reciting moment of such receivership or liquidation, be exempt
the proceedings which have been taken and praying the from any order of garnishment, levy, attachment,
assistance of the court in the liquidation of such orexecution.
institutions. The court shall have jurisdiction in the same
proceedings to assist in the adjudication of the disputed The provisions of any law to the contrary
claims against the bank or non-bank financial notwithstanding, the actions of the Monetary Board
intermediary performing quasi-banking functions and in under this Section, Section 28-A, an the second
the enforcement of individual liabilities of the paragraph of Section 34 of this Act shall be final an
stockholders and do all that is necessary to preserve executory, and can be set aside by a court only if there
the assets of such institutions and to implement the is convince proof, after hearing, that the action is plainly
liquidation plan approved by the Monetary Board. The arbitrary and made in bad faith: Provided, That the
Monetary Board shall designate an official of the Central same is raised in an appropriate pleading filed by the
bank or a person of recognized competence in banking stockholders of record representing the majority of th
or finance, as liquidator who shall take over and capital stock within ten (10) days from the date the
continue the functions of the receiver previously receiver take charge of the assets and liabilities of the
appointed by the Monetary Board under this Section. bank or non-bank financial intermediary performing
The liquidator shall, with all convenient speed, convert quasi-banking functions or, in case of conservatorship
or liquidation, within ten (10) days from receipt of notice Specifically, the basic question to be resolved in G.R. Nos. 70054,
by the said majority stockholders of said bank or non- 78767 and 78894 is whether or not the Central Bank and the Monetary
bank financial intermediary of the order of its placement Board acted arbitrarily and in bad faith in finding and thereafter
under conservatorship o liquidation. No restraining order concluding that petitioner bank is insolvent, and in ordering its closure
or injunction shall be issued by an court enjoining the on January 25, 1985.
Central Bank from implementing its actions under this
Section and the second paragraph of Section 34 of this As We have stated in Our resolution dated August 3, 1989, the
Act in th absence of any convincing proof that the action documents pertinent to the resolution of these petitions are the
of the Monetary Board is plainly arbitrary and made in Teodoro Report, Tiaoqui Report, and the Valenzuela, Aurellano and
bad faith and the petitioner or plaintiff files a bond, Tiaoqui Report and the supporting documents made as bases by the
executed in favor of the Central Bank, in an amount be supporters of their conclusions contained in their respective reports.
fixed by the court. The restraining order or injunction We will focus Our study and discussion however on the Tiaoqui Report
shall be refused or, if granted, shall be dissolved upon and the Valenzuela, Aurellano and Tiaoqui Report. The former
filing by the Central Bank of a bond, which shall be in recommended the closure and receivership of petitioner bank while the
the form of cash or Central Bank cashier's check, in an latter report made the recommendation to eventually place the
amount twice the amount of the bond of th petitioner or petitioner bank under liquidation. This Court shall likewise take into
plaintiff conditioned that it will pay the damages which consideration the findings contained in the reports of the two
the petitioner or plaintiff may suffer by the refusal or the commissioners who were appointed by this Court to hold the referral
dissolution of the injunction. The provisions of Rule 58 hearings, namely the report by Judge Manuel Cosico submitted
of the New Rules of Court insofar as they are applicable February 20, 1988 and the report submitted by Justice Consuelo
and not inconsistent with the provision of this Section Santiago on January 28, 1991.
shall govern the issuance and dissolution of the re
straining order or injunction contemplated in this There is no question that under Section 29 of the Central Bank Act, the
Section. following are the mandatory requirements to be complied with before a
bank found to be insolvent is ordered closed and forbidden to do
xxx xxx xxx business in the Philippines: Firstly, an examination shall be conducted
by the head of the appropriate supervising or examining department or
Based on the aforequoted provision, the Monetary Board may order his examiners or agents into the condition of the bank; secondly, it shall
the cessation of operations of a bank in the Philippine and place it be disclosed in the examination that the condition of the bank is one of
under receivership upon a finding of insolvency or when its insolvency, or that its continuance in business would involve probable
continuance in business would involve probable loss its depositors or loss to its depositors or creditors; thirdly, the department head
creditors. If the Monetary Board shall determine and confirm within concerned shall inform the Monetary Board in writing, of the facts; and
sixty (60) days that the bank is insolvent or can no longer resume lastly, the Monetary Board shall find the statements of the department
business with safety to its depositors, creditors and the general public, head to be true.
it shall, if public interest will be served, order its liquidation.
Anent the first requirement, the Tiaoqui report, submitted on January
23, 1985, revealed that the finding of insolvency of petitioner was
based on the partial list of exceptions and findings on the regular bank funds were made indirectly available to several
examination of the bank as of July 31, 1984 conducted by the entities within the group; and the unhealth financial
Supervision and Examination Sector II of the Central Bank of the status of these firms in which the bank was additionally
PhilippinesCentral Bank (p. 1, Tiaoqui Report). exposed through new funds or refinancing
accommodation including accrued interest.
On December 17, 1984, this list of exceptions and finding was
submitted to the petitioner bank (p. 6, Tiaoqui Report) This was Queried in the impact of these clean loans, on the bank
attached to the letter dated December 17, 1984, of examiner-in-charge solvency Mr. Dizon (BF Executive Vice President)
Dionisio Domingo of SES Department II of the Central Bank to Teodoro intimated that, collectively these corporations have large
Arcenas, president of petitione bank, which disclosed that the undeveloped real estate properties in the suburbs which
examination of the petitioner bank as to its financial condition as of July can be made answerable for the unsecured loans a well
31, 1984 was not yet completed or finished on December 17, 1984 as the Central Bank's credit accommodations. A formal
when the Central Bank submitted the partial list of findings of reply of the bank would still be forthcoming. (pp. 58-
examination to th petitioner bank. The letter reads: 59, Rollo, Vol. I; emphasis ours)

In connection with the regular examination of your Clearly, Tiaoqui based his report on an incomplete examination of
institution a of July 31, 1984, we are submitting herewith petitioner bank and outrightly concluded therein that the latter's
a partial list of our exceptions/findings for your financial status was one of insolvency or illiquidity. He arrived at the
comments. said conclusion from the following facts: that as of July 31, 1984, total
capital accounts consisting of paid-in capital and other capital accounts
Please be informed that we have not yet officially such as surplus, surplus reserves and undivided profits aggregated
terminated our examination (tentatively scheduled last P351.8 million; that capital adjustments, however, wiped out the capital
December 7, 1984) and that we are still awaiting for the accounts and placed the bank with a capital deficiency amounting to
unsubmitted replies to our previous letters requests. P334.956 million; that the biggest adjustment which contributed to the
Moreover, other findings/ observations are still being deficit is the provision for estimated losses on accounts classified as
summarized including the classification of loans and doubtful and loss which was computed at P600.4 million pursuant to
other risk assets. These shall be submitted to you in due the examination. This provision is also known as valuation reserves
time (p. 810, Rollo, Vol. III; emphasis ours). which was set up or deducted against the capital accounts of the bank
in arriving at the latter's financial condition.
It is worthy to note that a conference was held on January 21, 1985 at
the Central Bank between the officials of the latter an of petitioner Tiaoqui however admits the insufficiency and unreliability of the
bank. What transpired and what was agreed upon during the findings of the examiner as to the setting up of recommended valuation
conference was explained in the Tiaoqui report. reserves from the assets of petitioner bank. He stated:

... The discussion centered on the substantial exposure The recommended valuation reserves as bases for
of the bank to the various entities which would have a determining the financial status of the bank would need
relationship with the bank; the manner by which some to be discussed with the bank, consistent with standard
examination procedure, for which the bank would in turn The actuation of the Monetary Board in closing petitioner bank on
reply. Also, the examination has not been officially January 25, 1985 barely four days after a conference with the latter on
terminated. (p. 7. Tiaoqui report; p. 59, Rollo, Vol. I) the examiners' partial findings on its financial position is also violative
of what was provided in the CB Manual of Examination Procedures.
In his testimony in the second referral hearing before Justice Santiago, Said manual provides that only after the examination is concluded,
Tiaoqui testified that on January 21, 1985, he met with officers of should a pre-closing conference led by the examiner-in-charge be held
petitioner bank to discuss the advanced findings and exceptions made with the officers/representatives of the institution on the
by Mr. Dionisio Domingo which covered 70%-80% of the bank's loan findings/exception, and a copy of the summary of the
portfolio; that at that meeting, Fortunato Dizon (BF's Executive Vice findings/violations should be furnished the institution examined so that
President) said that as regards the unsecured loans granted to various corrective action may be taken by them as soon as possible (Manual of
corporations, said corporations had large undeveloped real estate Examination Procedures, General Instruction, p. 14). It is hard to
properties which could be answerable for the said unsecured loans understand how a period of four days after the conference could be a
and that a reply from BF was forthcoming, that he (Tiaoqui) however reasonable opportunity for a bank to undertake a responsive and
prepared his report despite the absence of such reply; that he corrective action on the partial list of findings of the examiner-in-
believed, as in fact it is stated in his report, that despite the meeting on charge.
January 21, 1985, there was still a need to discuss the recommended
valuation reserves of petitioner bank and; that he however, did not wait We recognize the fact that it is the responsibility of the Central Bank of
anymore for a discussion of the recommended valuation reserves and the Philippines to administer the monetary, banking and credit system
instead prepared his report two days after January 21, 1985 (pp. 3313- of the country and that its powers and functions shall be exercised by
3314, Rollo). the Monetary Board pursuant to Rep. Act No. 265, known as the
Central Bank Act. Consequently, the power and authority of the
Records further show that the examination of petitioner bank was Monetary Board to close banks and liquidate them thereafter when
officially terminated only when Central Bank Examination-charge public interest so requires is an exercise of the police power of the
Dionisio Domingo submitted his final report of examination on March state. Police power, however, may not be done arbitratrily or
4,1985. unreasonably and could be set aside if it is either capricious,
discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial
It is evident from the foregoing circumstances that the examination of due process and equal protection clauses of the Constitution
contemplated in Sec. 29 of the CB Act as a mandatory requirement (Central Bank v. Court of Appeals, Nos. L-50031-32, July 27, 1981, 106
was not completely and fully complied with. Despite the existence of SCRA 143).
the partial list of findings in the examination of the bank, there were still
highly significant items to be weighed and determined such as the In the instant case, the basic standards of substantial due process
matter of valuation reserves, before these can be considered in the were not observed. Time and again, We have held in several cases,
financial condition of the bank. It would be a drastic move to conclude that the procedure of administrative tribunals must satisfy the
prematurely that a bank is insolvent if the basis for such conclusion is fundamentals of fair play and that their judgment should express a
lacking and insufficient, especially if doubt exists as to whether such well-supported conclusion.
bases or findings faithfully represent the real financial status of the
bank.
In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 As to the concept of whether the bank is solvent or not, the
Phil. 635, this Court laid down several cardinal primary rights which respondents contend that under the Central Bank Manual of
must be respected in a proceeding before an administrative body. Examination Procedures, Central Bank examiners must recommend
valuation reserves, when warranted, to be set up or deducted against
However, as to the requirement of notice and hearing, Sec. 29 of RA the corresponding asset account to determine the bank's true condition
265 does not require a previous hearing before the Monetary Board or net worth. In the case of loan accounts, to which practically all the
implements the closure of a bank, since its action is subject to judicial questioned valuation reserves refer, the manual provides that:
scrutiny as provided for under the same law (Rural Bank of Bato v.
IAC, G.R. No. 65642, October 15, 1984, Rural Bank v. Court of 1. For doubtful loans, or loans the ultimate collection of which is
Appeals, G.R. 61689, June 20, 1988,162 SCRA 288). doubtful and in which a substantial loss is probable but not yet
definitely ascertainable as to extent, valuation reserves of fifty per cent
Notwithstanding the foregoing, administrative due process does not (50%) of the accounts should be recommended to be set up.
mean that the other important principles may be dispensed with,
namely: the decision of the administrative body must have something 2. For loans classified as loss, or loans regarded by the examiner as
to support itself and the evidence must be substantial. Substantial absolutely uncollectible or worthless, valuation reserves of one
evidence is more than a mere scintilla. It means such relevant hundred percent (100%) of the accounts should be recommended to
evidence as a reasonable mind might accept as adequate to support a be set up (p. 8, Objections to Santiago report).
conclusion (Ang Tibay vs. CIR, supra). Hence, where the decision is
merely based upon pieces of documentary evidence that are not The foregoing criteria used by respondents in determining the financial
sufficiently substantial and probative for the purpose and conclusion condition of the bank is based on Section 5 of RA 337, known as the
they are presented, the standard of fairness mandated in the due General Banking Act which states:
process clause is not met. In the case at bar, the conclusion arrived at
by the respondent Board that the petitioner bank is in an illiquid Sec. 5. The following terms shall be held to be
financial position on January 23, 1985, as to justify its closure on synonymous and interchangeable:
January 25, 1985 cannot be given weight and finality as the report
itself admits the inadequacy of its basis to support its conclusion. ... f. Unimpaired Capital and Surplus, "Combined capital
accounts," and "Net worth," which terms shall mean for
The second requirement provided in Section 29, R.A. 265 before a the purposes of this Act, the total of the "unimpaired
bank may be closed is that the examination should disclose that the paid-in capital, surplus, and undivided profits net of such
condition of the bank is one of insolvency. valuation reserves as may be required by the Central
Bank."

There is no doubt that the Central Bank Act vests authority upon the
Central Bank and Monetary Board to take charge and administer the
monetary and banking system of the country and this authority
includes the power to examine and determine the financial condition of
banks for purposes provided for by law, such as for the purpose of
closure on the ground of insolvency stated in Section 29 of the Central statement of condition to be used by examiners as guide in the
Bank Act. But express grants of power to public officers should be examination of banks. The format enumerates the items which will
subjected to a strict interpretation, and will be construed as conferring compose the assets and liabilities of a bank. Assets include cash and
those powers which are expressly imposed or necessarily implied those due from banks, loans, discounts and advances, fixed assets
(Floyd Mechem, Treatise on the Law of Public Offices and Officers, p. and other property owned or acquired and other miscellaneous assets.
335). The amount of loans, discounts and advances to be stated in the
statement of condition as provided for in the manual is computed after
In this case, there can be no clearer explanation of the concept of deducting valuation reserves when deemed necessary. On the other
insolvency than what the law itself states. Sec. 29 of the Central Bank hand, liabilities are composed of demand deposits, time and savings
Act provides that insolvency under the Act, shall be understood to deposits, cashier's, manager's and certified checks, borrowings, due to
mean that "the realizable assets of a bank or a non-bank financial head office, branches; and agencies, other liabilities and deferred
intermediary performing quasi-banking functions as determined by the credits (Manual of Examination Procedure, p. 9). The amounts stated
Central Bank are insufficient to meet its liabilities." in the balance sheets or statements of condition including the
computation of valuation reserves when justified, are based however,
Hence, the contention of the Central Bank that a bank's true financial on the assumption that the bank or company will continue in business
condition is synonymous with the terms "unimpaired capital and indefinitely, and therefore, the networth shown in the statement is in no
surplus," "combined capital accounts" and net worth after deducting sense an indication of the amount that might be realized if the bank or
valuation reserves from the capital, surplus and unretained earnings, company were to be liquidated immediately (Prentice Hall
citing Sec. 5 of RA 337 is misplaced. Encyclopedic Dictionary of Business Finance, p. 48). Further, based on
respondents' submissions, the allowance for probable losses on loans
Firstly, it is clear from the law that a solvent bank is one in which its and discounts represents the amount set up against current
assets exceed its liabilities. It is a basic accounting principle that operations to provide for possible losses arising from non-collection of
assets are composed of liabilities and capital. The term "assets" loans and advances, and this account is also referred to as valuation
includes capital and surplus" (Exley v. Harris, 267 p. 970, 973, 126 reserve (p. 9, Objections to Santiago report). Clearly, the statement of
Kan., 302). On the other hand, the term "capital" includes common and condition which contains a provision for recommended valuation
preferred stock, surplus reserves, surplus and undivided profits. reserves should not be used as the ultimate basis to determine the
(Manual of Examination Procedures, Report of Examination on solvency of an institution for the purpose of termination of its
Department of Commercial and Savings Banks, p. 3-C). If valuation operations.
reserves would be deducted from these items, the result would merely
be the networth or the unimpaired capital and surplus of the bank Respondents acknowledge that under the said CB manual, CB
applying Sec. 5 of RA 337 but not the total financial condition of the examiners must recommend valuation reserves, when warranted, to be
bank. set up against the corresponding asset account (p. 8, Objections to
Santiago report). Tiaoqui himself, as author of the report
Secondly, the statement of assets and liabilities is used in balance recommending the closure of petitioner bank admits that the valuation
sheets. Banks use statements of condition to reflect the amounts, reserves should still be discussed with the petitioner bank in
nature and changes in the assets and liabilities. The Central Bank compliance with standard examination procedure. Hence, for the
Manual of Examination Procedures provides a format or checklist of a Monetary Board to unilaterally deduct an uncertain amount as
valuation reserves from the assets of a bank and to conclude finding expertise of the Central Bank and the Monetary Board.
therefrom without sufficient basis that the bank is insolvent, would be Notwithstanding the fact that the figures arrived at by the respondent
totally unjust and unfair. Board as to assets and liabilities do not truly indicate their realizable
value as they were merely based on book value, We will however, take
The test of insolvency laid down in Section 29 of the Central Bank Act a look at the figures presented by the Tiaoqui Report in concluding
is measured by determining whether the realizable assets of a bank insolvency as of July 31, 1984 and at the figures presented by the CB
are leas than its liabilities. Hence, a bank is solvent if the fair cash authorized deputy receiver and by the Valenzuela, Aurellano and
value of all its assets, realizable within a reasonable time by a Tiaoqui Report which recommended the liquidation of the bank by
reasonable prudent person, would equal or exceed its total liabilities reason of insolvency as o January 25,1985.
exclusive of stock liability; but if such fair cash value so realizable is
not sufficient to pay such liabilities within a reasonable time, the bank is The Tiaoqui report dated January 23, 1985, which was based on partial
insolvent. (Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661). Stated in examination findings on the bank's condition as of July 31, 1984, states
other words, the insolvency of a bank occurs when the actual cash that total liabilities of P5,282.1 million exceeds total assets of P4,947.2
market value of its assets is insufficient to pay its liabilities, not million after deducting from the assets valuation reserves of P612.2
considering capital stock and surplus which are not liabilities for such million. Since, as We have explained in our previous discussion that
purpose (Exley v. Harris, 267 p. 970, 973,126 Kan. 302; Alexander v. valuation reserves can not be legally deducted as there was no truthful
Llewellyn, Mo. App., 70 S.W. 2n 115,117). and complete evaluation thereof as admitted by the Tiaoqui report
itself, then an adjustment of the figures win show that the liabilities of
In arriving at the computation of realizable assets of petitioner bank, P5,282.1 million will not exceed the total assets which will amount to
respondents used its books which undoubtedly are not reflective of the P5,559.4 if the 612.2 million allotted to valuation reserves will not be
actual cash or fair market value of its assets. This is not the proper deducted from the assets. There can be no basis therefore for both the
procedure contemplated in Sec. 29 of the Central Bank Act. Even the conclusion of insolvency and for the decision of the respondent Board
CB Manual of Examination Procedures does not confine examination to close petitioner bank and place it under receivership.
of a bank solely with the determination of the books of the bank. The
latter is part of auditing which should not be confused with Concerning the financial position of the bank as of January 25, 1985,
examination. Examination appraises the soundness of the institution's the date of the closure of the bank, the consolidated statement of
assets, the quality and character of management and determines the condition thereof as of the aforesaid date shown in the Valenzuela,
institution's compliance with laws, rules and regulations. Audit is a Aurellano and Tiaoqui report on the receivership of petitioner bank,
detailed inspection of the institution's books, accounts, vouchers, dated March 19, 1985, indicates that total liabilities of 4,540.84 million
ledgers, etc. to determine the recording of all assets and liabilities. does not exceed the total assets of 4,981.53 million. Likewise, the
Hence, examination concerns itself with review and appraisal, while consolidated statement of condition of petitioner bank as of January
audit concerns itself with verification (CB Manual of Examination 25, 1985 prepared by the Central Bank Authorized Deputy Receiver
Procedures, General Instructions, p. 5). This Court however, is not in Artemio Cruz shows that total assets amounting to P4,981,522,996.22
the position to determine how much cash or market value shall be even exceeds total liabilities amounting to P4,540,836,834.15. Based
assigned to each of the assets and liabilities of the bank to determine on the foregoing, there was no valid reason for the Valenzuela,
their total realizable value. The proper determination of these matters Aurellano and Tiaoqui report to finally recommend the liquidation of
by using the actual cash value criteria belongs to the field of fact- petitioner bank instead of its rehabilitation.
We take note of the exhaustive study and findings of the Cosico report assets which are defined as acceptable by by a
on the petitioner bank's having engaged in unsafe, unsound and concurrent vote of at least five members of the
fraudulent banking practices by the granting of huge unsecured loans Monetary Board. While such advances are outstanding,
to several subsidiaries and related companies. We do not see, the debtor institution may not expand the total volume of
however, that this has any material bearing on the validity of the its loans or investments without the prior authorization
closure. Section 34 of the RA 265, Central Bank Act empowers the of the Monetary Board.
Monetary Board to take action under Section 29 of the Central Bank
Act when a bank "persists in carrying on its business in an unlawful or The Central Bank may, at its discretion, likewise grant
unsafe manner." There was no showing whatsoever that the bank had advances to banking institutions, even during normal
persisted in committing unlawful banking practices and that the periods, for the purpose of assisting a bank in a
respondent Board had attempted to take effective action on the bank's precarious financial condition or under serious financial
alleged activities. During the period from July 27, 1984 up to January pressures brought about by unforeseen events, or
25, 1985, when petitioner bank was under conservatorship no official of events which, though foreseeable, could not be
the bank was ever prosecuted, suspended or removed for any prevented by the bank concerned. Provided, however,
participation in unsafe and unsound banking practices, and neither was That the Monetary Board has ascertained that the bank
the entire management of the bank replaced or substituted. In fact, in is not insolvent and has clearly realizable assets to
her testimony during the second referral hearing, Carlota Valenzuela, secure the advances. Provided, further, That a
CB Deputy Governor, testified that the reason for petitioner bank's concurrent vote of at least five members of the
closure was not unsound, unsafe and fraudulent banking practices but Monetary Board is obtained. (Emphasis ours)
the alleged insolvency position of the bank (TSN, August 3, 1990, p.
3316, Rollo, Vol. VIII). The first paragraph of the aforequoted provision contemplates a
situation where the whole banking community is confronted with
Finally, another circumstance which point to the solvency of petitioner financial and economic crisis giving rise to serious and widespread
bank is the granting by the Monetary Board in favor of the former a confusion among the public, which may eventually threaten and
credit line in the amount of P3 billion along with the placing of petitioner gravely prejudice the stability of the banking system. Here, the
bank under conservatorship by virtue of M.B. Resolution No. 955 dated emergency or financial confusion involves the whole banking
July 27, 1984. This paved the way for the reopening of the bank on community and not one bank or institution only. The second situation
August 1, 1984 after a self-imposed bank holiday on July 23, 1984. on the other hand, provides for a situation where the Central Bank
grants a loan to a bank with uncertain financial condition but not
On emergency loans and advances, Section 90 of RA 265 provides insolvent.
two types of emergency loans that can be granted by the Central Bank
to a financially distressed bank: As alleged by the respondents, the following are the reasons of the
Central Bank in approving the resolution granting the P3 billion loan to
Sec. 90. ... In periods of emergency or of imminent petitioner bank and the latter's reopening after a brief self-imposed
financial panic which directly threaten monetary and banking holiday:
banking stability, the Central Bank may grant banking
institutions extraordinary advances secured by any
WHEREAS, the closure by Banco Filipino Savings and even granted financial support to the latter and placed it under
Mortgage Bank of its Banking offices on its own initiative conservatorship, such actuation means that petitioner bank could still
has worked serious hardships on its depositors and has be saved from its financial distress by adequate aid and management
affected confidence levels in the banking system reform, which was required by Central Bank's duty to maintain the
resulting in a feeling of apprehension among depositors stability of the banking system and the preservation of public
and unnecessary deposit withdrawals; confidence in it (Ramos v. Central Bank, No. L-29352, October 4,
1971, 41 SCRA 565).
WHEREAS, the Central Bank is charged with the
function of administering the banking system; In view of the foregoing premises, We believe that the closure of the
petitioner bank was arbitrary and committed with grave abuse of
WHEREAS, the reopening of Banco Filipino would discretion. Granting in gratia argumenti that the closure was based on
require additional credit resources from the Central justified grounds to protect the public, the fact that petitioner bank was
Bank as well as an independent management suffering from serious financial problems should not automatically lead
acceptable to the Central Bank; to its liquidation. Section 29 of the Central Bank provides that a closed
bank may be reorganized or otherwise placed in such a condition that
WHEREAS, it is the desire of the Central Bank to rapidly it may be permitted to resume business with safety to its depositors,
diffuse the uncertainty that presently exists; creditors and the general public.

... (M.B. Min. No. 35 dated July 27, 1984 cited in We are aware of the Central Bank's concern for the safety of Banco
Respondents' Objections to Santiago Report, p. 26; p. Filipino's depositors as well as its creditors including itself which had
3387, Rollo, Vol. IX; Emphasis ours). granted substantial financial assistance up to the time of the latter's
closure. But there are alternatives to permanent closure and liquidation
A perusal of the foregoing "Whereas" clauses unmistakably show that to safeguard those interests as well as those of the general public for
the clear reason for the decision to grant the emergency loan to the failure of Banco Filipino or any bank for that matter may be viewed
petitioner bank was that the latter was suffering from financial distress as an irreversible decline of the country's entire banking system and
and severe bank "run" as a result of which it closed on July 23, 1984 ultimately, it may reflect on the Central Bank's own viability. For one
and that the release of the said amount is in accordance with the thing, the Central Bank and the Monetary Board should exercise strict
Central Bank's full support to meet Banco Filipino's depositors' supervision over Banco Filipino. They should take all the necessary
withdrawal requirements (Excerpts of minutes of meeting on MB Min. steps not violative of the laws that will fully secure the repayment of the
No. 35, p. 25, Rollo, Vol. IX). Nothing therein shows that an total financial assistance that the Central Bank had already granted or
extraordinary emergency situation exists affecting most banks, not only would grant in the future.
as regards petitioner bank. This Court thereby finds that the grant of
the said emergency loan was intended from the beginning to fall under ACCORDINGLY, decision is hereby rendered as follows:
the second paragraph of Section 90 of the Central Bank Act, which
could not have occurred if the petitioner bank was not solvent. Where 1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and
notwithstanding knowledge of the irregularities and unsafe banking the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 are
practices allegedly committed by the petitioner bank, the Central Bank DENIED;
2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED
and the assailed order of the Central Bank and the Monetary Board
dated January 25, 1985 is hereby ANNULLED AND SET ASIDE. The
Central Bank and the Monetary Board are ordered to reorganize
petitioner Banco Filipino Savings and Mortgage Bank and allow the
latter to resume business in the Philippines under the comptrollership
of both the Central Bank and the Monetary Board and under such
conditions as may be prescribed by the latter in connection with its
reorganization until such time that petitioner bank can continue in
business with safety to its creditors, depositors and the general public.

SO ORDERED.

OFFICE OF THE OMBUDSMAN, G.R. No. 175573


Petitioner,
CORONA, C.J.,
CARPIO,*
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
versus PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,**
VILLARAMA, JR.,
PEREZ,
MENDOZA and charge, and in case of conviction where the penalty
SERENO, JJ. imposed is public censure or reprimand, suspension of
JOEL S. SAMANIEGO,[1] not more than one month, or a fine equivalent to one
Respondent. month salary, the decision shall be final, executory and
Promulgated: unappealable. In all other cases, the decision may be
appealed to the Court of Appeals on a verified petition
October 5, 2010 for review under the requirements and conditions set
x-------------------------------------------------- forth in Rule 43 of the Rules of Court, within fifteen (15)
x days from receipt of the written Notice of the Decision or
Order denying the motion for reconsideration.
RESOLUTION
CORONA, C.J.: An appeal shall not stop the decision from
This is a resolution of the second motion for partial being executory. In case the penalty is suspension
reconsideration filed by petitioner Office of the Ombudsman to our or removal and the respondent wins such appeal, he
decision dated September 11, 2008,[2]particularly our pronouncement shall be considered as having been under
with respect to the stay of the decision of the Ombudsman during the preventive suspension and shall be paid the salary
pendency of an appeal: and such other emoluments that he did not receive
Following Office of the Ombudsman v. Laja, we by reason of the suspension or removal.
hold that the mere filing by respondent of an appeal
sufficed to stay the execution of the joint decision A decision of the Office of the Ombudsman
against him. Respondents prayer for the issuance of a in administrative cases shall be executed as a
writ of a preliminary injunction (for purposes of staying matter of course. The Office of the Ombudsman shall
the execution of the decision against him) was therefore ensure that the decision shall be strictly enforced and
a superfluity. The execution of petitioners joint decision properly implemented. The refusal or failure by any
against respondent should be stayed during the officer without just cause to comply with an order of the
pendency of CA-G.R. SP No. 89999. Office of the Ombudsman to remove, suspend, demote,
fine, or censure shall be a ground for disciplinary action
against such officer. (emphasis supplied)
We reconsider.

The Ombudsmans decision imposing the penalty of suspension


Section 7, Rule III of the Rules of Procedure of the Office of the for one year is immediately executory pending appeal.[4] It cannot be
Ombudsman,[3] as amended by Administrative Order No. 17 dated stayed by the mere filing of an appeal to the CA. This rule is similar to
September 15, 2003, provides: that provided under Section 47 of the Uniform Rules on Administrative
Cases in the Civil Service.
SEC. 7. Finality and execution of
decision. Where the respondent is absolved of the
In the case of In the Matter to Declare in Contempt of Court is not governed by any specific provision in the Rules of Procedure of
Hon. Simeon A. Datumanong, Secretary of the DPWH,[5] we held: the Office of the Ombudsman.[7] Here, Section 7, Rule III of the Rules
of Procedure of the Office of the Ombudsman, as amended, is
The Rules of Procedure of the Office of the categorical, an appeal shall not stop the decision from being executory.
Ombudsman are clearly procedural and no vested right
of the petitioner is violated as he is considered Moreover, Section 13 (8), Article XI of the Constitution
preventively suspended while his case is on appeal. authorizes the Office of the Ombudsman to promulgate its own rules of
Moreover, in the event he wins on appeal, he shall be procedure. In this connection, Sections 18 and 27 of the Ombudsman
paid the salary and such other emoluments that he did Act of 1989[8] also provide that the Office of the Ombudsman has the
not receive by reason of the suspension or removal. power to promulgate its rules of procedure for the effective exercise or
Besides, there is no such thing as a vested interest in performance of its powers, functions and duties and to amend or
an office, or even an absolute right to hold office. modify its rules as the interest of justice may require. For the CA to
Excepting constitutional offices which provide for special issue a preliminary injunction that will stay the penalty imposed by the
immunity as regards salary and tenure, no one can be Ombudsman in an administrative case would be to encroach on the
said to have any vested right in an office. rule-making powers of the Office of the Ombudsman under the
Constitution and RA 6770 as the injunctive writ will render nugatory the
Following the ruling in the above cited case, this Court, provisions of Section 7, Rule III of the Rules of Procedure of the Office
in Buencamino v. Court of Appeals,[6] upheld the resolution of the CA of the Ombudsman.
denying Buencaminos application for preliminary injunction against the
immediate implementation of the suspension order against him. The Clearly, Section 7, Rule III of the Rules of Procedure of the
Court stated therein that the CA did not commit grave of discretion in Office of the Ombudsman supersedes the discretion given to the CA in
denying petitioners application for injunctive relief because Section 7, Section 12,[9] Rule 43 of the Rules of Court when a decision of the
Rule III of the Rules of Procedure of the Office of the Ombudsman was Ombudsman in an administrative case is appealed to the CA. The
amended by Administrative Order No. 17 dated September 15, 2003. provision in the Rules of Procedure of the Office of the Ombudsman
that a decision is immediately executory is a special rule that prevails
over the provisions of the Rules of Court. Specialis derogat
Respondent cannot successfully rely on Section 12, Rule 43 of generali. When two rules apply to a particular case, that which was
the Rules of Court which provides: specially designed for the said case must prevail over the other.[10]

SEC. 12. Effect of appeal The appeal shall WHEREFORE, the second motion for partial reconsideration is
not stay the award, judgment, final order or hereby GRANTED. Our decision dated September 11, 2008
resolution sought to be reviewed unless the is MODIFIED insofar as it declared that the imposition of the penalty is
Court of Appeals shall direct otherwise upon stayed by the filing and pendency of CA-G.R. SP No. 89999. The
such terms as it may deem just. decision of the Ombudsman is immediately executory pending appeal
and may not be stayed by the filing of the appeal or the issuance of an
In the first place, the Rules of Court may apply to cases in the injunctive writ.
Office of the Ombudsman suppletorily only when the procedural matter
SO ORDERED.

REPUBLIC OF THE PHILIPPINES THRU: THE PRESIDENTIAL


COMMISSION ON GOOD GOVERNMENT (PCGG), AFP ANTI-
GRAFT BOARD, COL. ERNESTO A. PUNSALANG and PETER T.
TABANG, Petitioners, v. HON. EUTROPIO MIGRINO, as Presiding
Judge, Regional Trial Court, NCJR, Branch 151, Pasig, Metro
Manila and TROADIO TECSON, Respondents.

The Solicitor General, for Petitioners.

Pacifico B. Advincula for Private Respondent.

DECISION
CORTES, J.: 31, 1987 [Annex "B", Petition]. Private respondent requested, and was
granted, several postponements, but was unable to produce his
supporting evidence because they were allegedly in the custody of his
This case puts in issue the authority of the Presidential Commission on bookkeeper who had gone abroad.
Good Government (PCGG), through the New Armed Forces of the
Philippines Anti-Graft Board (hereinafter referred to as the "Board"), to Just the same, the Board proceeded with its investigation and
investigate and cause the prosecution of petitioner, a retired military submitted its resolution, dated June 30, 1988, recommending that
officer, for violation of Republic Acts Nos. 3019 and 1379. private respondent be prosecuted and tried for violation of Rep. Act No.
3019, as amended, and Rep. Act No. 1379, as amended.chanrobles
Assailed by the Republic in this petition for certiorari, prohibition and/or lawlibrary : rednad
mandamus with prayer for the issuance of a writ of preliminary
injunction and/or temporary restraining order are the orders of The case was set for preliminary investigation by the PCGG. Private
respondent judge in Civil Case No. 57092 Branch 151 of the Regional respondent moved to dismiss the case on the following grounds: (1)
Trial Court of Pasig, Metro Manila: (1) dated June 23, 1989, denying that the PCGG has no jurisdiction over his person; (2) that the action
petitioners Motion to Dismiss and Opposition, and (2) dated June 26, against him under Rep. Act No. 1379 has already prescribed; (3) that
1989, granting private respondents application for the issuance of a E.O. No. 14, insofar as it suspended the provisions of Rep. Act No.
writ of preliminary injunction. Thus, the petition seeks the annulment of 1379 on prescription of actions, was inapplicable to his case; and (4)
the two orders, the issuance of an injunction to enjoin respondent that having retired from the AFP on May 9, 1984, he was now beyond
judge from proceeding with Civil Case No. 57092 and, finally, the the reach of Rep. Act No. 3019. The Board opposed the motion to
dismissal of the case before the trial court. dismiss.

The controversy traces its roots to the order of then PCGG Chairman In a resolution dated February 8, 1989, the PCGG denied the motion to
Jovito R. Salonga, dated May 13, 1986, which created the New Armed dismiss for lack of merit. Private respondent moved for reconsideration
Forces of the Philippines Anti-Graft Board. The Board was created to but this was denied by the PCGG in a resolution dated March 8, 1989.
"investigate the unexplained wealth and corrupt practices of AFP Private respondent was directed to submit his counter-affidavit and
personnel, both retired and in active service." The order further stated other controverting evidence on March 20, 1989 at 2:00 p.m.
that" [t]he Board shall be primarily charged with the task of
investigating cases of alleged violations of the Anti-Graft and Corrupt On March 13, 1989, private respondent filed a petition for prohibition
Practices Act (Republic Act No. 3019, as amended) and shall make the with preliminary injunction with the Regional Trial Court in Pasig, Metro
necessary recommendations to appropriate government agencies and Manila. The case was docketed as Case No. 57092 and raffled to
instrumentalities with respect to the action to be taken thereon based Branch 151, respondent judges court. Petitioner filed a motion to
on its findings."cralaw virtua1aw library dismiss and opposed the application for the issuance of a writ of
preliminary injunction on the principal ground that the Regional Trial
Acting on information received by the Board, which indicated the Court had no jurisdiction over the Board, citing the case of PCGG v.
acquisition of wealth beyond his lawful income, private respondent Lt. Pea, G.R. No. 77663, April 12, 1988, 159 SCRA 556. Private
Col. Troadio Tecson (ret.) was required by the Board to submit his respondent opposed the motion to dismiss. Petitioner replied to the
explanation/comment together with his supporting evidence by October opposition.
26, 1989 ENJOINING PETITIONERS FROM INVESTIGATING AND
On June 23, 1989, respondent judge denied petitioners motion to PROSECUTING PRIVATE RESPONDENT FOR VIOLATION OF
dismiss. On June 26, 1989, respondent judge granted the application REPUBLIC ACT NO. 3019, OTHERWISE KNOWN AS ANTI-GRAFT
for the issuance of a writ of preliminary injunction, enjoining petitioners AND CORRUPT PRACTICES ACT AND REPUBLIC ACT NO. 1379,
from investigating or prosecuting private respondent under Rep. Acts OTHERWISE KNOWN AS AN ACT FOR THE FORFEITURE OF
Nos. 3019 and 1379 upon the filing of a bond in the amount of Twenty UNLAWFULLY ACQUIRED PROPERTY [Rollo, p. 19].
Thousand Pesos (P20,000.00).
As to the first issue, petitioner contends that following the ruling of the
Hence, the instant petition. Court in PCGG v. Pea the Board, being a creation and/or extension of
the PCGG, is beyond the jurisdiction of the Regional Trial Court. On
On August 29, 1989, the Court issued a restraining order enjoining the second issue, petitioner strongly argues that the private
respondent judge from enforcing his orders dated June 23, 1989 and respondents case falls within the jurisdiction of the PCGG.
June 26, 1989 and from proceeding with Civil Case No. 57092.
The pivotal issue is the second one. On this point, private respondents
Private respondent filed his comment, to which petitioners filed a reply. position is as follows:chanrob1es virtual 1aw library
A rejoinder to the reply was filed by private Respondent. The Court
gave due course to the petition and the parties filed their memoranda. 1. . . . he is not one of the subordinates contemplated in Executive
Thereafter, the case was deemed submitted. Orders 1 , 2 , 14 and 14-A as the alleged illegal acts being imputed to
him, that of alleged amassing wealth beyond his legal means while
The issues raised in the petition are as follows:chanrob1es virtual 1aw Finance Officer of the Philippine Constabulary, are acts of his own
library alone, not connected with his being a crony, business associate, etc. or
subordinate as the petition does not allege so. Hence the PCGG has
I. no jurisdiction to investigate him.

If indeed private respondent amassed wealth beyond his legal means,


WHETHER OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS the procedure laid down by Rep. Act 1379 as already pointed out
DISCRETION OR ACTED WITHOUT OR IN EXCESS OF before be applied. And since, he has been separated from the
JURISDICTION IN ASSUMING JURISDICTION OVER AND government more than four years ago, the action against him under
INTERFERING WITH THE ORDERS AND FUNCTIONS OF THE Republic Act 1379 has already prescribed.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT.
2. . . . no action can be filed anymore against him now under Republic
II. Act 1379 for recovery of unexplained wealth for the reason that he has
retired more than four years ago.

WHETHER, OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS 3. . . . The order creating the AFP Anti-Graft Board (Annex "A",
DISCRETION OR ACTED WITHOUT OR IN EXCESS OF Petition) is null and void. Nowhere in Executive Orders 1, 2, 14 and 14-
JURISDICTION IN ISSUING THE ASSAILED ORDER DATED JUNE A is there any authority given to the commission, its chairman and
members, to create Boards or bodies to be invested with powers E.O. No. 2 freezes "all assets and properties in the Philippines in which
similar to the powers invested with the commission .. [Comment, pp. 6- former President Marcos and/or his wife, Mrs. Imelda Romualdez
7; Rollo, pp. 117-118]. Marcos, their close relatives, subordinates, business associates,
dummies, agents, or nominees have any interest or
1. The most important question to be resolved in this case is whether participation."cralaw virtua1aw library
or not private respondent may be investigated and caused to be
prosecuted by the Board, an agency of the PCGG, for violation of Rep. Applying the rule in statutory construction known as ejusdem generis,
Acts Nos. 3019 and 1379. According to petitioners, the PCGG has the that is
power to investigate and cause the prosecution of private respondent
because he is a "subordinate" of former President Marcos. They cite [W]here general words follow an enumeration of persons or things, by
the PCGGs jurisdiction over words of a particular and specific meaning, such general words are not
to be construed in their widest extent, but are to be held as applying
(a) The recovery of all ill-gotten wealth accumulated by former only to persons or things of the same kind or class as those specifically
President Ferdinand E. Marcos, his immediate family, relatives, mentioned [Smith, Bell & Co., Ltd. v. Register of Deeds of Davao, 96
subordinates and close associates, whether located in the Philippines Phil. 53, 58 (1954), citing Black on Interpretation of Laws, 2nd Ed.,
or abroad, including the takeover or sequestration of all business 203].
enterprises and entities owned or controlled by them, during his
administration, directly or through nominees, by taking undue the term "subordinate" as used in E.O. Nos. 1 and 2 would refer to one
advantage of their public office and/or using their powers, authority, who enjoys a close association or relation with former Pres. Marcos
influence, connections or relationship. [E.O. No. 1, sec. 2.]. and/or his wife, similar to the immediate family member, relative, and
close associate in E.O. No. 1 and the close relative, business
Undoubtedly, the alleged unlawful accumulation of wealth was done associate, dummy, agent, or nominee in E.O. No. 2.
during the administration of Pres. Marcos. However, what has to be
inquired into is whether or not private respondent acted as a Thus, as stated by the Court in Bataan Shipyard & Engineering Co.,
"subordinate" of Pres. Marcos within the contemplation of E.O. No. 1, Inc. v. PCGG, G.R. No. 75885, May 27, 1987, 150 SCRA 181, 205-
the law creating the PCGG, when he allegedly unlawfully acquired the 206.
properties.
The situations envisaged and sought to be governed [by Proclamation
A close reading of E. O. No. 1 and related executive orders will readily No. 3 and E.O. Nos. 1, 2 and 14] are self-evident, these
show what is contemplated within the term "subordinate."cralaw being:chanrob1es virtual 1aw library
virtua1aw library
1) that" (i)ll gotten properties (were) amassed by the leaders and
The Whereas Clauses of E. O. No. 1 express the urgent need to supporters of the previous regime" ;
recover the ill-gotten wealth amassed by former President Ferdinand
E. Marcos, his immediate family, relatives, and close associates both a) more particularly, that" (i)ll-gotten wealth (was) accumulated by
here and abroad. former President Ferdinand E. Marcos, his immediate family, relatives,
subordinates, and close associates, . . . located in the Philippines or
abroad, xx (and) business enterprises and entities (came to be) owned any public officer. Under Rep. Act No. 1379 (An Act Declaring Forfeited
or controlled by them, during . . . (the Marcos) administration, directly in Favor of the State Any Property Found to Have Been Unlawfully
or through nominees, by taking undue advantage of their public office Acquired By Any Public Officer or Employee and Providing for the
and/or using their powers, authority, influence, connections or Procedure Therefor), whenever any public officer or employee has
relationship;" acquired during his incumbency an amount of property which is
manifestly out of proportion to his salary as such public officer or
b) otherwise stated, that "there are assets and properties pertaining to employee and to his other lawful income and the income from
former President Ferdinand E. Marcos, and/or his wife Mrs. Imelda legitimately acquired property, said property shall be presumed prima
Romualdez Marcos, their close relatives, subordinates, business facie to have been unlawfully acquired [Sec. 2]. The Solicitor General
associates, dummies, agents or nominees which had been or were shall file the petition and prosecute the case in behalf of the Republic,
acquired by them directly or indirectly, through or as a result of the after preliminary investigation by the provincial or city prosecutor [Ibid].
improper or illegal use of funds or properties owned by the
Government of the Philippines or any of its branches, instrumentalities, Moreover, the record shows that private respondent was being
enterprises, banks or financial institutions, or by taking undue investigated for unlawfully acquired wealth under Rep. Acts Nos. 3019
advantage of their office, authority, influence, connections or and 1379, and not under E.O. Nos. 1, 2, 14 and 14-A.
relationship, resulting in their unjust enrichment and causing grave
damage and prejudice to the Filipino people and the Republic of the Since private respondent was being investigated by the PCGG through
Philippines" ; the AFP Anti-Graft Board it would have been presumed that this was
under Rep. Acts Nos. 3019 and 1379 in relation to E.O. Nos. 1, 2, 14
c) that "said assets and properties are in the form of bank accounts, and 14-A. But the record itself belies this presumption:chanrob1es
deposits, trust accounts, shares of stocks, buildings, shopping centers, virtual 1aw library
condominiums, mansions, residences, estates, and other kinds of real
and personal properties in the Philippines and in various countries of (a) The letter of the chairman of the AFP Anti-Graft Board to private
the world;" and. respondent, dated October 16, 1987, states: "This letter is in
connection with the alleged information received by the AFP Anti-Graft
2) that certain "business enterprises and properties (were) taken over Board indicating your acquisition of wealth beyond legal means of
by the government of the Marcos Administration or by entities or income in violation of Rep. Act No. 3019 known as the Anti-Graft and
persons close to former President Marcos." [Footnotes deleted]. Corrupt Practices Act." [Rollo, p. 39].

It does not suffice, as in this case, that the respondent is or was a (b) The Resolution dated June 30, 1988 of the Board categorically
government official or employee during the administration of former states:chanrob1es virtual 1aw library
Pres. Marcos. There must be a prima facie showing that the
respondent unlawfully accumulated wealth by virtue of his close I. PRELIMINARY STATEMENT:chanrob1es virtual 1aw library
association or relation with former Pres. Marcos and/or his wife. This is
so because otherwise the respondents case will fall under existing This refers to the case against Col Troadio B. Tecson PC (Ret) for
general laws and procedures on the matter. Rep. Act No. 3019, the alleged unexplained wealth pursuant to R.A. 3019, as amended,
Anti-Graft and Corrupt Practices Act, penalizes the corrupt practices of otherwise known as Anti-Graft and Corrupt Practices Act and R.A.
1379, as amended, otherwise known as the "Act for Forfeiture of difference of P90,000.00 went to the syndicate.
Unlawfully Acquired Property." [Rollo, p. 43].
. . . Boy Tanyag, bookkeeper in Col. Tecsons office took care of the
The resolution alleges that private respondent unlawfully accumulated work.
wealth by taking advantage of his office as Finance Officer of the
Philippine Constabulary. No attempt is made in the Boards resolution . . . In the liquidation of the altered cash advance amount, names of
to link him or his accumulation of wealth to former Pres. Marcos and/or persons found in the Metropolitan Manila Telephone Directory with
his wife. fictitious addresses appeared as recipients or payees. Leonor and Boy
got their shares on commission basis of the looted amount while the
(c) The letter of the Board chairman to the chairman of the PCGG, greater part went to Col. Tecson. [Rollo, pp. 184-185.].
dated July 28, 1988, is clear:chanrob1es virtual 1aw library
Clearly, this alleged unlawful accumulation of wealth is not that
Respectfully transmitted herewith for the prosecution before the contemplated in E.O. Nos. 1, 2, 14 and 14-A.
Sandiganbayan is the case folder of COLONEL TROADIO TECSON
(Ret) who after preliminary investigation of the case by the Board, 2. It will not do to cite the order of the PCGG Chairman, dated May 13,
found a prima facie evidence against subject officer for violating 1986, creating the Board and authorizing it to investigate the
Section 8, R.A. 3019, as amended by BP 195, otherwise known as the unexplained wealth and corrupt practices of AFP personnel, both
Anti-Graft and Corrupt Practices Act and R.A. 1379, otherwise known retired and in active service, to support the contention that PCGG has
as an Act for the Forfeiture of Unlawfully Acquired Property." [Rollo, p. jurisdiction over the case of private Respondent. The PCGG cannot do
46]. more than what it was empowered to do. Its powers are limited. Its task
is limited to the recovery of the ill-gotten wealth of the Marcoses, their
Moreover, from the allegations of petitioner in its memorandum, it relatives and cronies. The PCGG cannot, through an order of its
would appear that private respondent accumulated his wealth for his chairman, grant itself additional powers powers not contemplated in
own account. Petitioner quoted the letter of Ignacio Datahan, a retired its enabling law.
PC sergeant, to General Fidel Ramos, the material portion of which
reads:chanrob1es virtual 1aw library 3. Petitioner assails the trial courts cognizance of the petition filed by
private Respondent. Particularly, petitioner argues that the trial court
. . . After an official in the military unit received an Allotment Advice the cannot acquire jurisdiction over the PCGG. This matter has already
same signed a cash advance voucher, let us say in the amount of been settled in Pea, supra, where the Court ruled that those who wish
P5,000.00. Without much ado, outright, Col. Tecson paid the amount. to question or challenge the PCGGs acts or orders must seek
The official concerned was also made to sign the receipt portion on the recourse in the Sandiganbayan, which is vested with exclusive and
voucher the amount of which was left blank. Before the voucher is original jurisdiction. The Sandiganbayans decisions and final orders
passed for routine processing by Mrs. Leonor Cagas, clerk of Col. are in turn subject to review on certiorari exclusively by this Court.
Tecson and its facilitator, the maneuver began. The amount on the face [Ibid, at pp. 564-565].
of the cash advance voucher is altered or superimposed. The original
amount of P5,000.00 was now made say, P95,000.00. So it was The ruling in Pea was applied in PCGG v. Aquino, G.R. No. 77816,
actually the amount of P95,000.00 that appeared on the records. The June 30, 1988, 163 SCRA 363, Soriano III v. Yuson, G.R. No. 74910
(and five other cases), August 10, 1988, 164 SCRA 226 and Olaguer v. ordinary case falling under Rep. Acts Nos. 3019 and 1379, as in the
RTC, NCJR, Br. 48, G.R. No. 81385, February 21, 1989, 170 SCRA case at bar. E.O. Nos. 1, 2, 14 and 14-A did not envision the PCGG as
478, among others, to enjoin the regional trial courts from interfering the investigator and prosecutor of all unlawful accumulations of wealth.
with the actions of the PCGG. The PCGG was created for a specific and limited purpose, as we have
explained earlier, and necessarily its powers must be construed with
Respondent judge clearly acted without or in excess of his jurisdiction this in mind.
when he took cognizance of Civil Case No. 57092 and issued the writ
of preliminary injunction against the PCGG. 6. n his pleadings, private respondent contends that he may no longer
be prosecuted because of prescription. He relies on section 2 of Rep.
4. Thus, we are confronted with a situation wherein the PCGG acted in Act No. 1379 which provides that" [t]he right to file such petition [for
excess of its jurisdiction and, hence, may be enjoined from doing so, forfeiture of unlawfully acquired wealth] shall prescribe within four
but the court that issued the injunction against the PCGG has not been years from the date of resignation, dismissal or separation or expiration
vested by law with jurisdiction over it and, thus, the injunction issued of the term of the officer or employee concerned." He retired on May 9,
was null and void. 1984, or more than six (6) years ago. However, it must be pointed out
that section 2 of Rep. Act No. 1379 should be deemed amended or
The nullification of the assailed order of respondent judge issuing the repealed by Article XI, section 15 of the 1987 Constitution which
writ of preliminary injunction is therefore in order. Likewise, respondent provides that" [t]he right of the State to recover properties unlawfully
judge must be enjoined from proceeding with Civil Case No. 57092. acquired by public officials or employees, from them or from their
nominees or transferees, shall not be barred by prescription, laches, or
But in view of the patent lack of authority of the PCGG to investigate estoppel." Considering that sec. 2 of Rep. Act No. 1379 was deemed
and cause the prosecution of private respondent for violation of Rep. amended or repealed before the prescriptive period provided therein
Acts Nos. 3019 and 1379, the PCGG must also be enjoined from had lapsed insofar as private respondent is concerned, we cannot say
proceeding with the case, without prejudice to any action that may be that he had already acquired a vested right that may not be prejudiced
taken by the proper prosecutory agency. The rule of law mandates that by a subsequent enactment.
an agency of government be allowed to exercise only the powers
granted it. Moreover, to bar the Government from recovering ill-gotten wealth
would result in the validation or legitimization of the unlawful
5. The pronouncements made above should not be taken to mean that acquisition, a consequence at variance with the clear intent of Rep. Act
the PCGGs creation of the AFP Anti-Graft Board is a nullity and that No. 1379, which provides:chanrobles virtual lawlibrary
the PCGG has no authority to investigate and cause the prosecution of
members and former members of the Armed Forces of the Philippines SEC. 11. Laws on prescription. The laws concerning acquisitive
for violations of Rep. Acts Nos. 3019 and 1379. The PCGG may prescription and limitation of actions cannot be invoked by, nor shall
investigate and cause the prosecution of active and retired members of they benefit the respondent, in respect to any property unlawfully
the AFP for violations of Rep. Acts Nos. 3019 and 1379 only in relation acquired by him.
to E.O. Nos. 1, 2, 14 and 14-A, i.e., insofar as they involve the
recovery of the ill-gotten wealth of former Pres. Marcos and his family Thus, we hold that the appropriate prosecutory agencies, i.e., the city
and "cronies." But the PCGG would not have jurisdiction over an or provincial prosecutor and the Solicitor General under sec. 2 of Rep.
Act No. 1379, may still investigate the case and file the petition for the
forfeiture of unlawfully acquired wealth against private respondent, now
a private citizen. (On the other hand, as regards respondents for
violations of Rep. Acts Nos. 3019 and 1379 who are still in the
government service, the agency granted the power to investigate and
prosecute them is the Office of the Ombudsman [Rep. Act No. 6770]).
Under Presidential Decree No. 1606, as amended, and Batas
Pambansa Blg. 195 violations of Rep. Acts Nos. 3019 and 1379 shall
be tried by the Sandiganbayan.

7. The Court hastens to add that this decision is without prejudice to


the prosecution of private respondent under the pertinent provisions of
the Revised Penal Code and other related penal laws.

WHEREFORE, the order of respondent judge dated June 26, 1989 in


Civil Case No. 57092 is NULLIFIED and SET ASIDE. Respondent
judge is ORDERED to dismiss Civil Case No. 57092. The temporary
restraining order issued by the Court on August 29, 1989 is MADE
PERMANENT. The PCGG is ENJOINED from proceeding with the
investigation and prosecution of private respondent in I.S. No. 37,
without prejudice to his investigation and prosecution by the
appropriate prosecutory agency.
G.R. No. 109703 July 5, 1994
SO ORDERED.
REALTY EXCHANGE VENTURE CORPORATION AND/OR
MAGDIWANG, REALTY CORPORATION, petitioner,
vs.
LUCINA S. SENDINO and the OFFICE OF THE EXECUTIVE
SECRETARY, Office of the President, Malacaang,
Manila, respondents.

Siruelo, Muyco & Associates Law Office for petitioner.

Sisenando Villaluz, Jr. for private respondent.


KAPUNAN, J.: 4. To pay complainant exemplary damages in the sum
of P10,000.00 to set an example and to avoid a
Private respondent Lucina C. Sendino entered into a reservation repetition of such illegal and unsound business
agreement with Realty Exchange Venture, Inc. (REVI) for a 120-square practices of the respondent. 6
meter lot in Raymondville Subdivision in Sucat, Paranaque for
P307,800.00 as its purchase price. 1 She paid P1,000.00 as partial This petition was amended on August 17, 1990 by impleading
reservation fee on January 15, 1989 and completed payment of this petitioners Magdiwang Realty Corporation (MRC) which appeared to
fee on January 20, 1989 by paying P4,000.00. 2 be the registered owner of the subject lot as per TCT No. 76023.

On July 18, 1989, private respondent paid REVI P16,600.00 as full On April 3, 1991 the HLURB, whose authority to hear and decide the
downpayment on the purchase price. 3However, she was advised by complaint was challenged by REVI in its answer, 7 rendered its
REVI to change her co-maker, which she agreed, asking for an judgment in favor of private respondent and ordered petitioners to
extension of one month to do so. continue with the sale of the house and lot and to pay private
respondent P5,000 as moral damages, P5,000 as exemplary damages
For alleged non-compliance with the requirement of submission of the and P6,000 as attorney's fees and costs of the suit. 8 An appeal from
appropriate documents under the terms of the original this decision was taken to the HLURB OAALA Arbiter, which affirmed
agreement, 4 REVI, through its Vice-President for Marketing, informed the Board's decision. The decision of the OAALA Arbiter was appealed
respondent of the cancellation of the contract on the 31st of July to the Office of the President, herein public respondent.
1989. 5
On January 7, 1993, the public respondent rendered its decision
On April 20, 1990, private respondent filed a complaint for Specific dismissing the petitioners' appeal. Motion for reconsideration of the
Performance against REVI with the office of Appeals, Adjudication and decision was denied by the public respondent on January 26, 1993.
Legal Affairs (OAALA) of the Housing and Land Use Regulatory Board Consequently petitioners come before this Court, in this petition, which
(HLURB) asking that respondent be ordered: the Court resolves to treat as a petition for certiorari, raising the
following issues:
1. To comply and continue with the sale of the house
and lot, Block 4, Lot 17 at the Raymondville Subdivision, I
Sucat Road, Paranaque, Metro Manila;
PUBLIC RESPONDENT COMMITTED SERIOUS
2. To pay complainant actual, nominal and moral ERROR IN DECLARING THAT THE HOUSING AND
damages, the amount of which will be proved in the LAND USE REGULATORY BOARD HAS QUASI-
hearing; JUDICIAL FUNCTIONS, NOTWITHSTANDING
ABSENCE OF EXPRESS GRANT BY EXECUTIVE
3. To pay complainant attorney's fee in the sum of ORDER NO. 90 OF DECEMBER 17, 1986 WHICH
P10,000.00; CREATED IT. AND EVEN IF THE HLURB HAS QUASI-
JUDICIAL FUNCTIONS, PUBLIC RESPONDENT
LIKEWISE SERIOUSLY ERRED IN DECLARING THAT
THE BOARD OF COMMISSIONERS IS ALLOWED TO proceedings without objecting to or raising the procedural infirmity, they
SIT IN A DECISION TO RENDER JUDGMENT AND TO were certainly estopped from raising it on appeal before the Office of
DELEGATE ITS QUASI-JUDICIAL AUTHORITY TO A the President and before this Court.
SUBORDINATE OFFICE.
Proceeding to the principal issues raised by the petitioner, while E.O.
II 85 dated 12 December 1986 abolished the Ministry of Human
Settlements (MHS), it is patently clear from a reading of its provisions
PUBLIC RESPONDENT GRAVELY ABUSED ITS that the said executive order did not abolish the Human Settlements
DISCRETION IN DECLARING THAT THE LOT Regulatory Commission (HSRC) which continued to exercise its
SUBJECT OF THE CONTRACT SOUGHT TO BE powers and functions even after the Ministry of Human Settlements
ENFORCED IS PARAPHERNAL DESPITE ADMISSION ceased to exist. In spite of the Aquino Government's stated intention of
OF ITS CONJUGAL NATURE. eradicating what it considered the vestiges of the previous regime, it
was not its intention to create a vacuum by abolishing those juridical
III entities, agencies, corporations, etc., attached to or supervised by the
MHS, which performed vital administrative functions. Pertinently,
PUBLIC RESPONDENT GRAVELY ABUSED ITS Section 3 of E.O. 85 mandates that:
DISCRETION IN DECLARING THAT ONLY NOTARIAL
NOTICE OF RESCISSION MAY VALIDLY CANCEL A . . . The final disposition and final organizational
RESERVATION AGREEMENT PURSUANT TO alignment or attachment of the juridical entities,
REPUBLIC ACT NO. 6552. agencies, corporations and councils attached to, or
under the administrative supervision of the MHS
As the first and third issues raised by the petitioners strike at the core including their respective existing projects,
of the case at bench, this Court deems it appropriate to initially dispose appropriations and other assets shall be subject to
of the issue of private respondent's capacity to bring her complaint subsequent enactments by the President.
before the HLURB-OAALA.
Pursuant to this provision therefore, the President subsequently issued
It is settled that rules of procedure are as a matter of course construed Executive Order No. 90, series of 1986, recognizing the Human
liberally in proceedings before administrative bodies. 9 In the instant Settlements Regulatory Commission (renamed the HLURB) as one of
case, the original suit for specific performance and damages was filed the principal housing agencies of the government. Prior to this,
by the private respondent with the HLURB-OAALA, an administrative Executive Order No. 648 in 1981 transferred all the functions of the
body not hamstrung by the strict procedural technicalities of the Rules National Housing Authority (pursuant to Presidential Decrees Nos. 957,
of Court. Under the circumstances, it was certainly appropriate for the 1216 and 1344) to the Human Settlements Regulatory Commission
HLURB-OAALA to have acted on the substantive questions relating to (HSRC) consolidating all regulatory functions relating to land use and
the validity of petitioners' unilateral rescission of the contract without housing development in a single entity. 10 Being the
unduly concerning itself with a mere procedural slip, the non-joinder of sole regulatory body for housing and land development, the renamed
private petitioner's husband in the original complaint before the body, the HLURB, 11 would have been reduced to a functionally sterile
HLURB. Moreover, since petitioners participated in the administrative entity if, as the petitioner contends, it lacked the powers exercised by
its predecessor which included the power to settle disputes concerning C. Cases involving specific performance
land use and housing development and acquisition. Moreover, this of contractual and statutory obligations
Court has had the occasion to definitively rule on the question as to filed by buyers of subdivision lot or
whether or not the Housing and Land Use Regulatory Board could condominium unit against the owner,
exercise the same quantum of judicial or quasi-judicial powers developer, dealer, broker or
possessed by the HSRC under the Ministry of Human Settlements in salesman. (Emphasis Ours)
the exercise of its regulatory functions when it held, in United Housing
Corporation vs. Hon. Dayrit 12 that: This is reinforced by section 8 of EO 648 (otherwise
known as the Charter of the Human Settlements
As explicitly provided by law, jurisdiction over actions for Regulatory Commission) which took effect on February
specific performance of contractual and statutory 7, 1981, thus:
obligations filed by buyers of subdivision lot or
condominium unit against the owner or developer, is Sec. 8. Transfer of Functions. The Regulatory
vested exclusively in the HSRC, Section 1 of PD 1344, functions of the National Housing Authority pursuant to
in no uncertain terms, provides: Presidential Decree Nos. 957, 1216, 1344 and other
related laws are hereby transferred to the Human
Sec. 1. In the exercise of its functions to regulate real Settlements Regulatory Commission. . . . Among the
estate trade and business and in addition to its powers regulatory functions are . . . (11) Hear and decide cases
provided for in Presidential Decree No. 957, the of unsound real estate business practices, claims
National Housing Authority shall have exclusive involving refund filed against project owners,
jurisdiction to hear and decide cases of the following developers, dealers, brokers, or salesmen and cases
nature: of specific performance(Emphasis Ours).

A. Unsound real estate business Private respondents reliance, therefore, on sections 1


practices; and 8 of the Judiciary Reorganization Act of 1980 is
untenable. Thus, as correctly pointed out by petitioner,
B. Claims involving refund and any other section 19, paragraph 6 of said law is material to the
claims filed by subdivision lot or issue of where jurisdiction lies, and We quote:
condominium unit buyer against the
project owner, developer, dealer, broker Sec. 19. . . .
or salesman; and
(6) In all other cases not within the
exclusive jurisdiction of any court,
tribunal, persons or body exercising
judicial or quasi-judicial functions.

xxx xxx xxx


Neither can We accede to private business practices . . . and cases of specific
respondents' claim that resort to the performance." 14 Obviously, in the exercise of its powers and functions,
courts is justified under section 41 of PD the HLURB must interpret and apply contracts, determine the rights of
957 specifically under the phrase "legal the parties under these contracts, and award damages whenever
remedies that may be available to appropriate. 15 We fail to see how the HSRC which possessed
aggrieved subdivision lot buyers." jurisdiction over the actions for specific performance for contractual
and statutory obligations filed by buyers of subdivision lots against
There is no question that a statute may vest exclusive developers had suddenly lots its adjudicatory powers by the mere
original jurisdiction in an administrative agency over fiat of a change in name through E.O. 90. One thrust of the
certain disputes and controversies falling within the multiplication of administrative agencies is that the interpretation of
agency's special expertise. The constitutionality of such such contracts and agreements and the determination of private rights
grant of exclusive jurisdiction to the National Housing under these agreements is no longer a uniquely judicial function. 16 The
Authority (now Housing and Land Use Regulatory absence of any provision, express or implied, in E.O. 90, repealing
Board) over cases involving the sale of lots in those quasi-judicial powers inherited by the HSRC from the National
commercial subdivisions was upheld in Tropical Homes Housing Authority, furthermore militates against petitioners' position on
Inc. v. National Housing Authority (152 SCRA 540 the question.
[1987]) and again sustained in a later decision
in Antipolo Realty Corporation v. National Housing Going to petitioners' contention that the decision of the OAALA should
Authority (153 SCRA 399 [1987]) where We restated have been rendered by the Board of Commissioners sitting en banc,
that the National Housing Authority (now HLURB) shall we find ample authority both in the statutes and in jurisprudence-
have exclusive jurisdiction to regulate the real estate justifying the Board's act of dividing itself into divisions of three. Under
trade and business in accordance with the terms of PD Section 5 of E.O. 648 which defines the powers and duties of the
No. 957 which defines the quantum of judicial or quasi- Commission, the Board is specifically mandated to "(a)dopt rules of
judicial powers of said agency. 13 procedure for the conduct of its business" and perform such functions
necessary for the effective accomplishment of (its) above mentioned
Clearly, therefore, the HLURB properly exercised its jurisdiction over functions." Since nothing in the provisions of either E.O. 90 or E.O. 648
the case filed by the petitioners with its adjudicative body, the OAALA, denies or withholds the power or authority to delegate adjudicatory
in ordering petitioners to comply with their obligations arising from the functions to a division, we cannot see how the Board, for the purpose
Reservation Agreement. In general, the quantum of judicial or quasi- of effectively carrying out its administrative responsibilities and quasi-
judicial powers which an administrative agency may exercise is defined judicial powers as a regulatory body should be denied the power, as a
in the agency's enabling act. In view of the Court's pronouncement matter of practical administrative procedure, to constitute its
in United Housing Corporation vs. Hon. Dayrit, supra, recognizing the adjudicatory boards into various divisions. After all, the power
HLURB as the successor agency of the HSRC's powers and functions, conferred upon an administrative agency to issue rules and regulations
it therefore follows that the transfer of such functions from the NHA to necessary to carry out its functions has been held "to be an adequate
the HRSC effected by Section 8 of E.O. 648, series of 1981, thereby source of authority to delegate a particular function, unless by express
resulted in the acquisition by the HLURB of adjudicatory powers which provision of the Act or by implication it has been withheld." 17 The
included the power to "(h)ear and decide cases of unsound real estate practical necessity of establishing a procedure whereby cases are
decided by three (3) Commissioners furthermore assumes greater In fine, the HLURB-OAALA acted within the scope of its authority in
significance when one notes that the HLURB, as constituted, only has ordering petitioners to comply and continue with the sale of the house
four (4) full time commissioners and five (5) part time commissioners to and lot subject of the contract between the original parties. It cannot be
deal with all the functions, administrative, adjudicatory, or otherwise, gainsaid that the quasi-judicial functions exercised by the body are
entrusted to necessary incidents to the proper exercise of its powers and functions
it. 18 As the Office of the President noted in its February 26, 1993 under E.O. 90 and the laws enacted delineating the scope of authority
Resolution denying petitioners' Motion for Reconsideration, "it is of its Board of Commissioners. Denying the body those functions so
impossible and very impractical to gather the four (4) full time and five necessary in carrying out its power to regulate housing and land use
(5) part time commissioners (together) just to decide a case." results in its effective emasculation as an important regulatory body in
Considering that its part time commissioners act merely in an ex- an area vital to the national economy.
officio capacity, requiring a majority of the Board to sit en banc on each
and every case brought before it would result in an administrative The acute housing shortage problem has prompted thousands of
nightmare. 19 middle and lower class buyers of houses and lots and condominium
units to enter into all sorts of agreements with private housing
Finally, petitioners' assertion that RA 6552 is inapplicable in the instant developers involving all manner of installment schemes under
case because the said law does not apply to cases of reservation contracts drawn exclusively by these developers. Many of these virtual
agreements finds no merit in the case at bench in view of Section 24 of contracts of adhesion entrap innocent buyers by requiring cash
P.D. 957 which provides: deposits under reservation agreements which include, sometimes in
the fine print, default clauses guaranteeing huge monetary windfalls for
Sec. 24. Failure to Pay Installments The rights of the the developers in the event that their buyers (oftentimes for the
buyer in the event of his failure to pay the installments flimsiest of reasons) default by failing to come up with certain
due for reasons other than the failure of the owner or requirements. While the Court can take judicial notice of this pernicious
developer to develop the project shall be governed by practice, it can only hope that future legislation would address the need
Republic Act No. 6552. to protect the innocent middle or lower class home purchaser. In the
case of the individual victim, this Court can only go to the extent of
As the Solicitor General correctly pointed out, RA 6552 makes no awarding such damages as may be proper under the peculiar
distinction between "option" and "sale" 20 which, under P.D. 957 also circumstances of the cases brought before it.
includes "an exchange or attempt to sell, an option of sale or purchase,
a solicitation of a sale or an offer to sell directly." 21 This all-embracing WHEREFORE, premises considered, the petition is hereby
definition virtually includes all transactions concerning land and DISMISSED for lack of merit. Costs against petitioners.
housing acquisition, including reservation agreements. Since R.A.
6552 mandates cancellation by notarial SO ORDERED.
act among other requirements before any cancellation of a
contract may be effected, petitioners' precipitate cancellation of its
contract with private respondent without observing the conditions
imposed by the said law was invalid and improper.
G.R. No. L-25024 March 30, 1970

TEODORO C. SANTIAGO, JR. Minor, Represented by his Mother,


Mrs. Angelita C. Santiago, petitioner-appellant,
vs.
MISS JUANITA BAUTISTA, ROSALINDA ALPAS, REBECCA
MATUGAS, MILKITA INAMAC, ROMEO AGUSTIN, AIDA CAMINO,
LUNA SARMAGO, AURORA LORENA, SOLEDAD FRANCISCO and
MR. FLOR MARCELO,respondents-appellees.
Teodoro M. Santiago for petitioner-appellant. The corresponding complaint filed alleged, inter alia: that plaintiff-
petitioner Teodoro C. Santiago, Jr. is a sixth grader at the Sero
Ramon C. Carag for respondent-apellees. Elementary School in Cotabato City scheduled to be graduated on May
21st, 1965 with the honor rank of third place, which is disputed; that
the teachers of the school had been made respondents as they
compose the "Committee on the Rating of Student for Honor", whose
BARREDO, J.: grave abuse of official discretion is the subject of suit, while the other
defendants were included as Principal, District Supervisor and
Appeal from the order of the Court of First Instance of Cotabato Academic Supervisor of the school; that Teodoro Santiago, Jr. had
dismissing, on a motion to dismiss, its Civil Case No. 2012 been a consistent honor pupil from Grade I to Grade V of the Sero
for certiorari, injunction and damages on the ground that the Elementary School, while Patricia Ligat (second placer in the disputed
complaint therein states no cause of action, and from the subsequent ranking in Grade VI) had never been a close rival of petitioner before,
order of the court a quo denying the motion for the reconsideration of except in Grade V wherein she ranked third; that Santiago, Jr. had
the said order of dismissal. been prejudiced, while his closest rival had been so much benefited,
by the circumstance that the latter, Socorro Medina, was coached and
The record shows that at the time Civil Case No. 2012 was tutored during the summer vacation of 1964 by Mrs. Alpas who
commenced in the court below, appellant Teodoro Santiago, Jr. was a became the teacher of both pupils in English in Grade VI, resulting in
pupil in Grade Six at the public school named Sero Elementary School the far lead Medina obtained over the other pupil; that the committee
in Cotabato City. As the school year 1964-1965 was then about to end, referred to in this case had been illegally constituted as the same was
the "Committee On The Rating Of Students For Honor" was constituted composed of all the Grade VI teachers only, in violation of the Service
by the teachers concerned at said school for the purpose of selecting Manual for Teachers of the Bureau of Public Schools which provides
the "honor students" of its graduating class. With the school Principal, that the committee to select the honor students should be composed of
Mrs. Aurora Lorena, as chairman, and Juanita Bautista, Rosalinda all teachers in Grades V and VI; that there are direct and circumstantial
Alpas, Rebecca Matugas, Milkita Inamac, Romeo Agustin, Aida matters, which shall be proven during the trial, wherein respondents
Camino and Luna Sarmago, as members, the above-named have exercised grave abuse of discretion and irregularities, such as
committee deliberated and finally adjudged Socorro Medina, Patricia the changing of the final ratings on the grading sheets of Socorro
Ligat and Teodoro C. Santiago, Jr. as first, second and third honors, Medina and Patricia Ligat from 80% to 85%, and some teachers
respectively. The school's graduation exercises were thereafter set for giving petitioner a starting grade of 75% in Grade VI, which proves that
May 21, 1965; but three days before that date, the "third placer" there has already an intention to pull him to a much lower rank at the
Teodoro Santiago, Jr., represented by his mother, and with his father end of the school year; that several district examinations outside of
as counsel, sought the invalidation of the "ranking of honor students" teachers' daily units and other than periodical tests were given, ratings
thus made, by instituting the above-mentioned civil case in the Court of in which were heavily considered in the determination of periodical
First Instance of Cotabato, against the above-named committee ratings, whereas according to the Academic Supervisor and Acting
members along with the District Supervisor and the Academic Division Superintendent of schools of the place such district
Supervisor of the place. examinations were not advisable; that there was a unanimous
agreement and understanding among the respondent teachers to insult
and prejudice the second and third honors by rating Socorro Medina
with a perfect score, which is very unnatural; that the words "first The respondents now move to dismiss the petition for
place" in petitioner's certificate in Grade I was erased and replaced being improper and for being academic. In order to
with the words "second place", which is an instance of the unjust and resolve the motion to dismiss, the Court has carefully
discriminating abuses committed by the respondent teachers in the examined the petition to determine the sufficiency of the
disputed selection of honor pupils they made; that petitioner personally alleged cause of action constituting the special civil
appealed the matter to the School Principal, to the District Supervisor, action of certiorari.
and to the Academic Supervisor, but said officials "passed the buck to
each other" to delay his grievances, and as to appeal to higher The pertinent portions of the petition alleging 'grave
authorities will be too late, there is no other speedy and adequate abuse of discretion' are found in paragraphs 3, 4, 5, 6,
remedy under the circumstances; and, that petitioner and his parents 7, 8, 9 and 10. These allegations may be substantially
suffered mental and moral damages in the amount of P10,000.00. summarized as follows: Paragraph 3 alleges that since
They prayed the court, among others, to set aside the final list of honor grades one to six, the students closely contending for
students in Grade VI of the Sero Elementary School for that school class honors were Socorro Medina, Teodoro Santiago,
year 1964-1965, and, during the pendency of the suit, to enjoin the Jr., Dolores Dalican and Patricia Ligat.
respondent teachers from officially and formally publishing and
proclaiming the said honor pupils in Grade VI in the graduation Socorro Medina obtained first honor thrice (grades I, V
exercises the school was scheduled to hold on the 21st of May of that and VI); once second honor (grade IV), and twice third
year 1965. The injunction prayed for was denied by the lower court in place (grades II and III).
its order of May 20, 1965, the said court reasoning out that the
graduation exercises were then already set on the following day, May Teodoro Santiago, Jr. obtained first place once (grade
21, 1965, and the restraining of the same would be shocking to the IV); four times second place (grades I, II, III, and V) and
school authorities, parents, and the community who had eagerly once third place (grade VI).
looked forward to the coming of that yearly happy event. As scheduled,
the graduation exercises of the Sero Elementary School for the school Dolores Dalican obtained twice first place (grades II, III);
year 1964-1965 was held on May 21, with the same protested list of once third place (grade I).
honor students.
Patricia Ligat once third place (grade V); and once second place
Having been required by the above-mentioned order to answer the (grade VI).
petition within ten (10) days, respondents moved for the dismissal of
the case instead. Under date of May 24, 1965, they filed a motion to That as now ranked in the graduation Ligat is given
dismiss, on the grounds (1) that the action for certiorari was improper, second place while Teodoro Santiago, Jr., is given the
and (2) that even assuming the propriety of the action, the question third place only. This is the ranking now disputed by
brought before the court had already become academic. This was petitioner, Teodoro Santiago, Jr.
opposed by petitioner.
Paragraph 4 alleges that Socorro Medina was tutored in
In an order dated June 4, 1965, the motion to dismiss of respondents the summer of 1964 by Mrs. Rosalinda Alpas who
was granted, the court reasoning thus: became her English teacher in the sixth grade; that as
such, Mrs. Alpas unjustly favored Socorro against her grave abuse of discretion and there is no
rivals. appeal, nor any plain, speedy, and
adequate remedy in the ordinary course
Paragraph 5 alleges that the teachers who composed of law, a person aggrieved thereby may
the committee on honor students are all grade six file a verified petition in the proper court
teachers while the Service Manual For Teachers alleging the facts with certainty and
provides that the committee shall be composed of the praying that judgment be rendered
teachers from the fifth and sixth grades. annulling or modifying the proceedings,
as the law requires, of such tribunal,
Paragraph 6 alleges that there are direct and board or officer.'
circumstantial evidence showing the change of ratings
of Socorro Medina and Patricia Ligat from 80% to 85% 'The petition shall be accompanied by a
and the intention to junk petitioner to a lower rank. certified true copy of the judgment or
order subject thereof, together with
Paragraph 7 alleges that the giving of district copies of all pleadings and documents
examinations upon which ratings were partly based relevant and pertinent thereto.'
were not advisable.
It is striking, indeed, that this petition has not been
Paragraph 8 alleges that the teachers rated Socorro accompanied by a certified true copy of the judgment or
Medina a perfect pupil which is unnatural. order complained of, together with all pleadings and
documents which are relevant thereto, as required by
Paragraph 9 alleges that on the first grade certificate of the second, paragraph of the aforequoted rule. This
the petitioner the word "First Place" was erased and violation renders the petition extremely indefinite and
changed to "Second Place". uncertain. There is no written formal judgment or order
of respondents that is submitted for revision or
Paragraph 10 alleges that petitioner personally correction of this Court. This violation is fatal to the
appealed to the school authorities but they only 'passed petition.
the buck to each other.'
ADMINISTRATIVE REMEDIES NEGLECTED
SECOND PARAGRAPH VIOLATED
All that the petition alleges is that the petitioner
Rule 65, Section 1 of the Rules of Court provides: personally appealed to the school authorities who only
'passed the buck to each other.' This allegation does not
'Section 1. Petition for certiorari. When show that petitioner formally availed of and exhausted
any tribunal, board, or officer exercising the administrative remedies of the Department of
judicial functions, has acted without or in Education. The petition implies that this is the first
excess of its or his jurisdiction, or with formal complaint of petitioner against his teachers. The
administrative agencies of the Department of Education additional ground that the "committee on the ratings of students for
could have investigated the grievances of the petitioner honor" whose actions are here condemned by appellant is not the
with dispatch and give effective remedies, but petitioner "tribunal, board or officer exercising judicial functions" against which an
negligently abandoned them. Petitioner cannot now action for certiorari may lie under Section 1 of Rule 65.
claim that he lacked any plain, speedy and adequate
remedy. The last point raised by appellees deserves first consideration, for if
really the said committee of teachers does not fall within the category
NO GRAVE ABUSE OF DISCRETION of the tribunal, board, or officer exercising judicial
functions contemplated by Rule 65, further discussion of the issues
Allegations relating to the alleged 'grave abuse of raised by appellant may no longer be necessary. To resolve this
discretion' on the part of teachers refer to errors, problem the following tests may be employed:
mistakes, or irregularities rather than to real grave
abuse of discretion that would amount to lack of In this jurisdiction certiorari is a special civil action
jurisdiction. Mere commission of errors in the exercise instituted against 'any tribunal, board, or officer
of jurisdiction may not be corrected by means exercising judicial functions.' (Section 1, Rule 67.) A
of certiorari. judicial function is an act performed by virtue of judicial
powers; the exercise of a judicial function is the doing of
In view of the foregoing, the Court is of the opinion, and something in the nature of the action of the court (34
so holds, that the petition states no cause of action and C.J. 1182). In order that a special civil action of certiorari
should be, as it is hereby dismissed. may be invoked in this jurisdiction the following
circumstances must exist: (1) that there must be a
Upon receipt of a copy of the above-quoted order, the petitioner moved specific controversy involving rights of persons or
for the reconsideration thereof, but the same proved to be futile, hence, property and said controversy is brought before a
this appeal. tribunal, board or officer for hearing and determination
of their respective rights and obligations.
Appellant here assails the holding of the lower court that his petition
states no cause of action on the grounds discussed by the court a 'Judicial action is an adjudication upon
quo in the appealed order above-quoted (1) that the petition does the rights of parties who in general
not comply with the second paragraph of Sec. 1 of Rule 65 because it appear or are brought before the tribunal
has not been accompanied by a certified true copy of the judgment or by notice or process, and upon whose
order subject thereof, together with copies of all pleadings and claims some decision or judgment is
documents relevant and pertinent thereto; (2) that administrative rendered. It implies impartiality,
remedies were not first exhausted; and (3) that there was no grave disinterestedness, a weighing of adverse
abuse of discretion on the part of the teachers who constituted the claims, and is inconsistent with discretion
committee referred to. On the other hand, appellees maintain that the on the one hand for the tribunal must
court below did not err in dismissing the case on said grounds. Further, decide according to law and the rights of
they argue in favor of the questioned order of dismissal upon the the parties or with dictation on the
other; for in the first instance it must persons or property by arbitrating
exercise its own judgment under the law, between adversaries in specific
and not act under a mandate from controversies at the instance of a party
another power. ... The character of its thereto; the authority exercised by that
action in a given case must decide department of government which is
whether that action is judicial, ministerial, charged with the declaration of what the
or legislative, or whether it be simply that law is and its construction so far as it is
of a public agent of the country or State, written law; the authority or power vested
as in its varied jurisdictions it may by in the judges or in the courts; the
turns be each.' (In Re Saline County authority vested in some court, officer, or
Subscription, 100 Am. Dec. 337, 338, persons to hear and determine when the
cited in Southeastern Greyhound Lines v. rights of persons or property or the
Georgia Public Service Commission, 181 propriety of doing an act is the subject
S. E. 836-837.) matter of adjudication; the power
belonging to or emanating from a judge
'It may be said generally that the exercise as such; the power conferred upon a
of judicial function is to determine what public officer, involving the exercise of
the law is, and what the legal rights of judgment and discretion in the
parties are, with respect to a matter in determination of questions of right in
controversy; and whenever an officer is specific cases affecting the interest of
clothed with that authority, and persons or property, as distinguished
undertakes to determine those questions, from ministerial power or authority to
he acts judicially.' (State ex rel. Board of carry out the mandates of judicial power
Commissioners of St. Louis County, et al. or the law; the power exercised by courts
v. Dunn, 90 N. W. 772-773.) in hearing and determining cases before
them, or some matter incidental thereto,
(2) the tribunal, board or officer before whom the and of which they have jurisdiction; the
controversy is brought must have the power and power of a court to decide and
authority to pronounce judgment and render a decision pronounce a judgment; the power which
on the controversy construing and applying the laws to adjudicates upon and protects the rights
that end. and interests of individual citizens, and to
that end construes and applies the law.
'The phrase "judicial power" is not "Judicial power" implies the construction
capable of a precise definition which of laws and the adjudication of legal
would be applicable to all cases. The rights. It includes the power to hear and
term has been variously defined as the determine but not everyone who may
authority to determine the rights of hear and determine has judicial power.
The term "judicial power" does not not seems to be better indicated by the
necessarily include the power to hear nature of a thing, than its definition.'
and determine a matter that is not in the (Whealing & Elm Grove Railroad Co.
nature of a suit or action between the Appt. v. Town of Triadelphia, et al., 4
parties.' (34 C.J. 1183-1184.) . L.R.A. (N. S.) pp. 321, 328-329.)
[Emphasis supplied]1
(3) the tribunal, board or officer must pertain to that
branch of the sovereign power which belongs to the 'WHAT ARE JUDICIAL OR QUASI
judiciary, or at least, which does not belong to the JUDICIAL ACTS. It is difficult, if not
legislative or executive department. impossible, precisely to define what are
judicial or quasi judicial acts, and there is
... the distinction between legislative or considerable conflict in the decisions in
ministerial functions and judicial functions regard thereto, in connection with the law
is difficult to point out. What is a judicial as to the right to the writ of certiorari. It is
function does not depend solely upon the clear, however, that it is the nature of the
mental operation by which it is performed act to be performed, rather than of the
or the importance of the act. In solving office, board, or body which performs it,
this question, due regard must be had to that determines whether or not it is the
the organic law of the state and the discharge of a judicial or quasi-judicial
division of power of government. In the function. It is not essential that the
discharge of executive and legislative proceedings should be strictly and
duties, the exercise of discretion and technically judicial, in the sense in which
judgment of the highest order is that word is used when applied to the
necessary, and matters of the greatest courts of justice, but it is sufficient if they
weight and importance are dealt with. It is are quasi judicial. It is enough if the
not enough to make a function judicial officers act judicially in making their
that it requires discretion, deliberation, decision, whatever may be their public
thought, and judgment. It must be the character. ...' "In State ex rel. Board of
exercise of discretion and judgment Commrs. vs. Dunn (86 Minn. 301, 304),
within that subdivision of the sovereign the following statements were made:
power which belongs to the judiciary, or,
at least, which does not belong to the 'The precise line of demarkation between
legislative or executive department. If the what are judicial and what are
matter, in respect to which it is exercised, administrative or ministerial functions is
belongs to either of the two last-named often difficult to determine. The exercise
departments of government, it is not of judicial functions may involve the
judicial. As to what is judicial and what is performance of legislative or
administrative duties, and the At any rate, the situation brought before Us in this case, the seemingly
performance of administrative or one of first impression, is not without substantial parallel. In the case
ministerial duties, may, in a measure, of Felipe vs. Leuterio, etc., et al.,4 the issue presented for
involve the exercise of judicial functions. determination was whether or not the courts have the authority to
It may be said generally that the exercise reverse the award of the board of judges of an oratorical contest, and
of judicial functions is to determine what this Court declared that the judiciary has no power to reverse the
the law is, and what the legal rights of award of the board of judges of that contest and, for that matter, it
parties are, with respect to a matter in would not interfere in literary contests, beauty contests and similar
controversy; and whenever an officer is competitions. It was reasoned out thus:
clothed with that authority, and
undertakes to determine those questions, For more than thirty years oratorical tilts have been held
he acts judicially.'2 periodically by schools and colleges in this islands.
Inter-collegiate oratorical competitions are of more
It is evident, upon the foregoing authorities, that the so called recent origin. Members of this court have taken part in
committee on the rating of students for honor whose actions are them either as contestants in their school days (In the
questioned in this case exercised neither judicial nor quasi judicial College of Law, U.P. annual oratorical contest, first prize
functions in the performance of its assigned task. From the above- was awarded to Justice Montemayor in 1914 and to
quoted portions of the decision cited, it will be gleaned that before Justice Labrador in 1916), or as members of the board
tribunal board, or officer may exercise judicial or quasi judicial acts, it is of judges afterwards. They know some few verdicts did
necessary that there be a law that give rise to some specific rights of not reflect the audience's preference and that errors
persons or property under which adverse claims to such rights are have sometimes been ascribed to the award of the
made, and the controversy ensuing therefrom is brought, in turn, judges. Yet no party ever presumed to invoke judicial
before the tribunal, board or officer clothed with power and authority to intervention; for it is unwritten law in such contests that
determine what that law is and thereupon adjudicate the respective the board's decision is final and unappealable.
rights of the contending parties. As pointed out by appellees,3 however,
there is nothing on record about any rule of law that provides that when Like the ancient tournaments of the Sword, these
teachers sit down to assess the individual merits of their pupils for tournaments of the Word apply the highest tenets of
purposes of rating them for honors, such function involves the sportsmanship: finality of referee's verdict. No alibis, no
determination of what the law is and that they are therefore murmurs of protest. The participants are supposed to
automatically vested with judicial or quasi judicial functions. Worse still, join the competition to contribute to its success by
this Court has not even been appraised by appellant of the pertinent striving their utmost: the prizes are secondary.
provisions of the Service Manual of Teachers for Public Schools
appellees allegedly violated in the composition of the committee they No rights to the prizes may be asserted by the
constituted thereunder, and, in the performance of that committee's contestants, because theirs was merely the privilege to
duties. compete for the prize, and that privilege did not ripen
into a demandable right unless and until they were
proclaimed winners of the competition by the appointed who fraudulently or maliciously injured her. Not against
arbiters or referees or judges. the other judges.

Incidentally, these school activities have been imported But even were We to assume for the moment, as the court below
from the United States. We found in American apparently did, that judicial intervention might be sought in cases of
jurisprudence no litigation questioning the determination this nature, still, We are inclined to sustain the order of dismissal
of the board of judges. appealed from for failure on the part of appellant to comply with the
requirements of Section 1 of Rule 65. To be sure, the lower court's
Now, the fact that a particular action has had no holding that appellant's failure to accompany his petition with a copy of
precedent during a long period affords some reason for the judgment or order subject thereof together with copies of all
doubting the existence of the right sought to be pleadings and documents relevant and pertinent thereto "is fatal to his
enforced, especially where occasion for its assertion cause" is supported not only by the provision of that Rule but by
must have often arisen; and courts are cautious before precedents as well. In the case of Alajar, et al. vs. Court of Industrial
allowing it, being loath to establish a new legal principle Relations,5 where it was claimed by therein petitioners that the
not in harmony with the generally accepted views respondent court had acted with grave abuse of discretion in
thereon. (See C.J.S. Vol. 1, p. 1012.) estimating certain rice harvests involved in the case in terms of cavans
instead of cans, allegedly in complete disregard of the decision of the
We observe that in assuming jurisdiction over the Court of First Instance of Batangas in Expropriation Proceedings No.
matter, the respondent judge reasoned out that where 84 and of this Court in G.R. No.
there is a wrong there is a remedy and that courts of L-6191,6 and in ordering thereafter the division of the said rice harvests
first instance are courts of general jurisdiction. on the ratio of 70-30 in favor of the tenants, this Court denied the
petition for certiorari on the ground, among others, of failure on the part
The flaw in his reasoning lies in the assumption that of said petitioners to attach to their petition copies of the decisions
Imperial suffered some wrong at the hands of the board allegedly violated. Speaking thru Mr. Justice J.B.L. Reyes then, this
of judges. If at all, there was error on the part of one Court held:
judge, at most. Error and wrong do not mean the same
thing. 'Wrong' as used in the aforesaid principle is the The petition is patently without merit. In the first place, it
deprivation or violation of a right. As stated before, a is not even sufficient in form and substance to justify the
contestant has no right to the prize unless and until he issuance of the writ of certiorari prayed for. It charges
or she is declared winner by the board of referees or that the Court of Industrial Relations abused its
judges. discretion in disregarding the decision of the Court of
First Instance of Batangas in Expropriation Proceedings
Granting that Imperial suffered some loss or injury, yet No. 84 and of this Court in G.R. No. L-6191; yet it does
in law there are instances of 'damnum absque injuria'. not attach to the petition the decisions allegedly violated
This is one of them. If fraud or malice had been proven, by the Court below and point out which particular
it would be a different proposition. But then her action portion or portions thereof have been disregarded by
should be directed against the individual judge or judges the respondent Court.
The same principle was applied in the more recent case of NAWASA In view of the foregoing, the petition under consideration
vs. Municipality of Libmanan, et al.,7 wherein this Court dismissed (by is dismissed.
Resolution) the petition for certiorari and mandamus filed by the
National Waterworks and Sewerage Authority against the Court of First It might be true, as pointed out by appellant, that he received a copy of
Instance of Camarines Sur, and the municipality of Libmanan. In the the programme of the graduation exercises held by the Sero
following language, this Court emphasized the importance of Elementary School in the morning of the very day of that graduation
complying with the said requirement of Rule 65: exercises, implying that he could not have attached then a copy
thereof (to show the decision of the committee of teachers in the
While paragraph 3 of the petition speaks of the ranking of students complained of) to his petition. The stubborn fact
complaint filed by the respondent municipality with the remains, however, that appellant had known of such decision of the
respondent court for recovery of property with damages said committee of teachers much earlier, as shown by the
(Civil Case No. L-161) no copy thereof is attached to the circumstance that according to him, even before the filing of his petition
petition. with the lower court on the 19th of May, 1965, he had personally
appealed the said committee's decision with various higher authorities
Similarly, paragraph 4 of the petition mentions the of the above-named school, who merely passed the buck to each
decision rendered by the respondent court on other. Moreover, appellant mentions in his petition various other
December 10, 1965, but no copy thereof is attached to documents or papers as the Service Manual for Teachers allegedly
the petition. violated by appellees in the constitution of their committee; altered
grading sheets; and erasures in his Grade I certificate which
Again, paragraph 5 of the petition speaks of the order of appellant never bothered to attach to his petition. There could be no
default entered by the respondent court and of the doubt then that he miserably failed to comply with the requirement of
motion for reconsideration filed by petitioner in the case Rule 65 above-mentioned. With this conclusion, it is no longer
above-mentioned, but no copy of the order of default is necessary to pass upon the other two errors assigned by appellant.
attached to its petition.
FOR THE FOREGOING CONSIDERATIONS, the judgment appealed
Bearing in mind that the petition under consideration from is affirmed, with costs against appellant.
was filed for the purpose of enjoining the respondent
court from executing the decision rendered in Civil Case SPOUSES ERNESTO LIM G.R. No. 182707
No. L-161, the importance of the missing pleadings is and ZENAIDA LIM,
obvious. Petitioner, Present:
CARPIO, J., Chairperson,
Moreover, the petition is also for the purpose of securing - versus - NACHURA,
an order commanding the respondent court to approve BERSAMIN,*
either the original or the amended record on appeal filed ABAD, and
petition, but no copy of either is attached to its petition. MENDOZA, JJ.
RUBY SHELTER BUILDERS AND
REALTY DEVELOPMENT Promulgated:
CORPORATION, an attached belated motion for reconsideration. The OP denied the
Respondent. September 1, 2010 motion. On December 29, 2005 it further issued an Order declaring its
x --------------------------------------------------------------------------------------- x September 5, 2005 decision final and executory.

DECISION Notwithstanding the OPs above Order, on January 31, 2006


Ruby Shelter filed a motion for extension of time to file a petition for
ABAD, J.: review with the Court of Appeals (CA). On October 23, 2006 the Lims
moved for the issuance of a writ of execution, which the HLURB LSG
granted.
This case is about the jurisdiction of the Housing and Land Use
Regulatory Board (HLURB) over an action to compel a land developer Meanwhile, the CA gave due course to Ruby Shelters petition for
to deliver a promised title over one-fourth of a subdivided lot. review and on December 6, 2007 rendered a decision granting the
same and setting aside the OPs rulings. The CA ruled that the HLURB
The Facts and the Case had no jurisdiction over the claim of the spouses, thus, this petition.

Sometime in May 2001 petitioners Ernesto and Zenaida Lim (the Lims)
bought for P190,000.00 a 318-square meter lot that then formed part of The Issue Presented
a bigger lot[1] in Barangay Triangulo, Naga City. Respondent Ruby
Shelter Builders and Realty Development Corporation (Ruby Shelter), The sole issue presented in this case is whether or not the Lims action
the seller and owner, undertook to subdivide the lot and, upon approval falls within the jurisdiction of the HLURB.
by the Bureau of Lands, execute a deed of absolute sale in favor of the
Lims. In December 2001 Ruby Shelter delivered the deed of sale to the The Ruling of the Court
spouses with a promise to give them the title to the lot as soon as the
subdivision plan had been approved. The jurisdiction of a court or a quasi-judicial body over the subject
matter of the action is determined by the nature of the action pleaded
Ruby Shelter then caused the approval of a subdivision plan for its lot, as appearing in the allegations of the complaint.[2] But where the actual
dividing it into four, including the one sold to the Lims, identified as Lot issues are evident from the records of the case, then jurisdiction over
9-E-2-B. But, despite repeated demands, Ruby Shelter did not deliver the subject matter need not depend upon the literal assertions in the
the Lims title. Consequently, the latter filed an action against it for complaint, but on the law as applied to established facts based on the
delivery of title with damages before the HLURB. evidence that the parties presented in due course.[3]

On March 1, 2004 the HLURB Legal Services Group (LSG) rendered a Section 1 of Presidential Decree 1344[4] vests in the National Housing
decision for the Lims, which decision the HLURB Board of Authority (now HLURB) exclusive jurisdiction to hear and decide the
Commissioners affirmed. On September 5, 2005, acting on Ruby following cases: (a) unsound real estate business practices; (b) claims
Shelters appeal, the Office of the President (OP) upheld the HLURB involving refund and any other claims filed by subdivision lot or
decision, a copy of which Ruby Shelter got on September 20, 2005. On condominium unit buyer against the project owner, developer, dealer,
October 11, 2005 the latter filed a motion for leave to be allowed to file broker or salesman; and (c) cases involving specific performance of
contractual and statutory obligations filed by buyers of subdivision lot performance that the subdivision lot buyers brought against Ruby
or condominium unit against the owner, developer, dealer, broker or Shelter, a matter properly cognizable by the HLURB.
salesman.
Ruby Shelter of course claims that the transaction did not relate to a
This provision must be read in the light of the laws preamble, which land developers contractual and statutory obligations to a buyer of a
explains the reasons for enactment of the law or the contextual basis subdivision lot since the lot that the Lims bought from it did not form
for its interpretation. The laws introductory clause states that the part of a subdivision development, the size of a community. It merely
HLURB exercises regulatory authority over cases of swindling and subdivided a lot into four and sold one portion to the Lims.
fraudulent manipulations perpetrated by unscrupulous subdivision
sellers and operators, such as failure to deliver titles to the buyers or But the controlling fact is not the size of the original lot that
titles free from liens and encumbrances.[5] Ruby Shelter had subdivided but the fact that the Lims bought their
portion of that lot from a licensed land developer whose dealings on
To determine if the HLURB has jurisdiction over the complaint of the properties are regulated by the HLURB. The Lims bought their lot
spouses, the law must be interpreted as applied to the facts. Here, relying on the belief that Ruby Shelter, as licensed land developer,
Ruby Shelter never offered any excuse in refusing to deliver the title to shall abide by its duties and obligations under its contract and the laws.
the spouses other than the alleged lack of jurisdiction of that body over
the action. It did not deny the sale and its obligation to deliver the title Lastly, the CA committed a grave error in giving due course to
of the land to the spouses. Ruby Shelters petition when the OPs Decision dated September 5,
2005 had already attained finality and had become executory.
The plain fact is that the Lims bought a fourth of a parcel of
land from Ruby Shelter for P190,000.00. The parties agreed that Ruby WHEREFORE, the Court GRANTS the petition, REVERSES and
Shelter shall cause the subdivision of the lot and upon approval by the SETS ASIDE the Decision of the Court of Appeals in CA-G.R. SP
Bureau of Lands, execute the deed of sale. Subsequently, Ruby 93138 dated December 6, 2007 and its Resolution dated April 25,
Shelter gave that deed to the Lims with a promise to give the title once 2008, and REINSTATES the Decision of the Office of the President
its subdivision plan had been approved. Ruby Shelter later delivered a dated September 5, 2005 and its Order dated December 29, 2005.
copy of the approved plan to the Lims showing the segregation of the
portion they bought from the rest of the original lot. But Ruby Shelter SO ORDERED.
failed on its promise to deliver the title to the Lims, despite repeated
demands. These circumstances clearly present a case for specific

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