ADMIN LAW CASES SET 7

G.R. No. 22911 September 23, 1924 It is likewise elementary law that mandamus may issue to correct abuse of discretion, if the
RAMON BLANCO, ET AL., petitioners, vs. THE BOARD OF MEDICAL EXAMINERS, THE case is otherwise proper. But here, the record discloses that the Secretary of the Interior
SECRETARY-TREASURER OF THE BOARD OF MEDICAL EXAMINERS, and THE did not exercise the power granted to him with manifest injustice, or with gross abuse.
SECRETARY OF THE INTERIOR, respondents. Quite otherwise.

Fifteen participants in the last medical examinations, in a complaint in mandamus, ask the The manly course for the petitioners to pursue, the wholesome remedy at their command,
court to order the Secretary of the Interior to confirm the final results of the examinations. is to submit anew to examinations free from all hint of carelessness, collusion, or fraud.
The Attorney-General on behalf of the respondents has filed an answer. The petitioners, in
turn, have demurred to the answer. The complaint is dismissed with costs. So ordered.

The petitioners, along with other qualified persons, took the examination prescribed by law
for a physician's certificate on May 13 to 16, 1924, and apparently passed the same. The
Board of Medical Examiners thereupon submitted the final results of the examinations to
the Department Head for confirmation. But the Secretary of the Interior held the matter in
abeyance, pending the outcome of an investigation conducted by the Under-Secretary of
the Interior. The finding of the special investigator was that the questions on the subjects
of the medical examinations held on May 13 to May 16, 1924, had leaked out before said
dates. Following the recommendation of the Under-Secretary, the Secretary of the Interior
annulled the results of the examinations.

The last paragraph of section 776 of the Medical Law, as found in the Administrative Code,
and as last amended by section 10 of Act No. 3111, provides that "The results of all
examinations (medical), including the average and grades obtained by each applicant,
shall be submitted for confirmation to the Department Head (the Secretary of the Interior)
and made known to the respective candidates within one month after the date of the
examination." Is this official duty discretionary or ministerial in nature?

It is elementary law that the writ of mandamus will not issue to control or review the
exercise of discretion of a public officer. Where the law imposes upon a public officer the
right and duty to exercise judgment, in reference to any matter to which he is called upon
to act, it is his judgment that is to be exercised and not that of the court. ". . . If the law
imposes a duty upon a public officer, and gives him the right to decide how or when the
duty shall be performed, such duty is discretionary and not ministerial. . . ."
(Lamb vs. Phipps [1912], 22 Phil., 456; Gonzales vs. Board of Pharmacy [1911], 20 Phil.,
367; Code of Civil Procedure, sec. 515; Mechem on Public Officers, pp. 631-633.)

Under the plain terms of the Medical law, it is the discretionary duty of the Secretary of the
Interior to confirm or not to confirm to confirm or, as in this instance, to annul the
report of the medical examiners. To hold that the Secretary of the Interior must in all cases
confirm, shutting his eyes to any irregularity, no matter how glaring, would convert him
into an automatic rubber stamp for imprinting the requisite approval. That the Department
Secretary who appoints the members of the Board of Medical Examiners, who has the
Board under his administrative supervision, and who has the power of confirmation of the
report of the Board, cannot do more than perform the clerical duty of approving the results
of the examinations, under any and all circumstances, is too specious an argument to
merit serious consideration.

1

G.R. No. 167324 July 17, 2007
TONDO MEDICAL CENTER EMPLOYEES ASSOCIATION, RESEARCH INSTITUTE FOR
TROPICAL MEDICINE EMPLOYEES ASSOCIATION, NATIONAL ORTHOPEDIC
WORKERS UNION, DR. JOSE R. REYES MEMORIAL HOSPITAL EMPLOYEES UNION,
SAN LAZARO HOSPITAL EMPLOYEES ASSOCIATION, ALLIANCE OF HEALTH
WORKERS, INC., HEALTH ALLIANCE FOR DEMOCRACY, COUNCIL FOR HEALTH
DEVELOPMENT, NETWORK OPPOSED TO PRIVATIZATION, COMMUNITY MEDICINE
DEVELOPMENT FOUNDATION INC., PHILIPPINE SOCIETY OF SANITARY ENGINEERS
INC., KILUSANG MAYO UNO, GABRIELA, KILUSANG MAGBUBUKID NG PILIPINAS,
KALIPUNAN NG DAMAYAN NG MGA MARALITA, ELSA O. GUEVARRA, ARCADIO B.
GONZALES, JOSE G. GALANG, DOMINGO P. MANAY, TITO P. ESTEVES, EDUARDO P.
GALOPE, REMEDIOS M. YSMAEL, ALFREDO BACUATA, EDGARDO J. DAMICOG,
REMEDIOS M. MALTU AND REMEGIO S. MERCADO, Petitioners, vs. THE COURT OF
APPEALS, EXECUTIVE SECRETARY ALBERTO G. ROMULO, SECRETARY OF HEALTH
MANUEL M. DAYRIT, SECRETARY OF BUDGET AND MANAGEMENT EMILIA T.
BONCODIN, Respondents.
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision,1promulgated by the Court of Appeals on 26 November 2004, denying a petition
for the nullification of the Health Sector Reform Agenda (HSRA) Philippines 1999-2004 of
the Department of Health (DOH); and Executive Order No. 102, "Redirecting the Functions
and Operations of the Department of Health," which was issued by then President Joseph
Ejercito Estrada on 24 May 1999.
Prior hereto, petitioners originally filed a Petition for Certiorari, Prohibition and Mandamus
under Rule 65 of the 1997 Revised Rules of Civil Procedure before the Supreme Court on 15
August 2001. However, the Supreme Court, in a Resolution dated 29 August 2001, referred
the petition to the Court of Appeals for appropriate action.
HEALTH SECTOR REFORM AGENDA (HSRA)
In 1999, the DOH launched the HSRA, a reform agenda developed by the HSRA Technical
Working Group after a series of workshops and analyses with inputs from several
consultants, program managers and technical staff possessing the adequate expertise and
experience in the health sector. It provided for five general areas of reform: (1) to provide
fiscal autonomy to government hospitals; (2) secure funding for priority public health
programs; (3) promote the development of local health systems and ensure its effective
performance; (4) strengthen the capacities of health regulatory agencies; and (5) expand
the coverage of the National Health Insurance Program (NHIP). 2
Petitioners questioned the first reform agenda involving the fiscal autonomy of government
hospitals, particularly the collection of socialized user fees and the corporate restructuring
of government hospitals. The said provision under the HSRA reads:
ADMIN LAW CASES SET 7
Provide fiscal autonomy to government hospitals. Government hospitals must be allowed
to collect socialized user fees so they can reduce the dependence on direct subsidies from
the government. Their critical capacities like diagnostic equipment, laboratory facilities and
medical staff capability must be upgraded to effectively exercise fiscal autonomy. Such
investment must be cognizant of complimentary capacity provided by public-private
networks. Moreover such capacities will allow government hospitals to supplement priority
public health programs. Appropriate institutional arrangement must be introduced such as
allowing them autonomy towards converting them into government corporations without
compromising their social responsibilities. As a result, government hospitals are expected
to be more competitive and responsive to health needs.
Petitioners also assailed the issuance of a draft administrative order issued by the DOH,
dated 5 January 2001, entitled "Guidelines and Procedure in the Implementation of the
Corporate Restructuring of Selected DOH Hospitals to Achieve Fiscal Autonomy, and
Managerial Flexibility to Start by January 2001;" 3 and Administrative Order No. 172 of the
DOH, entitled "Policies and Guidelines on the Private Practice of Medical and Paramedical
Professionals in Government Health Facilities," 4 dated 9 January 2001, for imposing an
added burden to indigent Filipinos, who cannot afford to pay for medicine and medical
services.5
Petitioners alleged that the implementation of the aforementioned reforms had resulted in
making free medicine and free medical services inaccessible to economically
disadvantaged Filipinos. Thus, they alleged that the HSRA is void for being in violation of
the following constitutional provisions:6
ART. III, SEC. 1. No person shall be deprived of life, liberty or property without due process
of law, nor shall any person be denied the equal protection of the law.
ART II, SEC. 5. The maintenance of peace and order, the protection of life, liberty, and
property, and the promotion of the general welfare are essential for the enjoyment of all
the people of the blessings of democracy.
ART II, SEC. 9. The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through
policies that provide adequate social services, promote full employment, a rising standard
of living and an improved quality of life for all.
ART II, SEC. 10. The State shall promote social justice in all phases of national
development.
ART II, SEC. 11. The State values the dignity of every human person and guarantees full
respect for human rights.
2

ART II, SEC. 13. The State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual and social well-being x x x.
ART II, SEC. 18. The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.
ART XV, SEC. 1. The State recognizes the Filipino family as the foundation of the nation.
Accordingly, it shall strengthen its solidarity and actively promote its total development.
ART XV, SEC. 3. The State shall defend:
xxxx
(2) the right of children to assistance, including proper care and nutrition, and special
protection from all forms of neglect, abuse, cruelty, exploitation and other conditions
prejudicial to their development.
xxxx
ART XIII, SEC. 14. The State shall protect working women by providing safe and healthful
working conditions, taking into account their maternal functions, and such facilities and
opportunities that will enhance their welfare and enable them to realize their full potential
in the service of the nation.
ART II, SEC. 15. The State shall protect and promote the right to health of the people and
instill health consciousness among them.
ART XIII, SEC. 11. The State shall adopt an integrated and comprehensive approach to
health development which shall endeavor to make essential goods, health and other social
services available to all people at affordable cost. There shall be priority for the needs of
the underprivileged sick, elderly, disabled, women, and children. The State shall endeavor
to provide free medical care to paupers.
EXECUTIVE ORDER NO. 102
On 24 May 1999, then President Joseph Ejercito Estrada issued Executive Order No. 102,
entitled "Redirecting the Functions and Operations of the Department of Health," which
provided for the changes in the roles, functions, and organizational processes of the DOH.
Under the assailed executive order, the DOH refocused its mandate from being the sole
provider of health services to being a provider of specific health services and technical
assistance, as a result of the devolution of basic services to local government units. The
provisions for the streamlining of the DOH and the deployment of DOH personnel to
regional offices and hospitals read:
ADMIN LAW CASES SET 7
Sec. 4. Preparation of a Rationalization and Streamlining Plan. In view of the functional and
operational redirection in the DOH, and to effect efficiency and effectiveness in its
activities, the Department shall prepare a Rationalization and Streamlining Plan (RSP)
which shall be the basis of the intended changes. The RSP shall contain the following:
a) the specific shift in policy directions, functions, programs and
activities/strategies;
b) the structural and organizational shift, stating the specific functions and
activities by organizational unit and the relationship of each units;
c) the staffing shift, highlighting and itemizing the existing filled and unfilled
positions; and
d) the resource allocation shift, specifying the effects of the streamline set-up on
the agency budgetary allocation and indicating where possible, savings have been
generated.
The RSP shall [be] submitted to the Department of Budget and Management for approval
before the corresponding shifts shall be affected (sic) by the DOH Secretary.
Sec. 5. Redeployment of Personnel. The redeployment of officials and other personnel on
the basis of the approved RSP shall not result in diminution in rank and compensation of
existing personnel. It shall take into account all pertinent Civil Service laws and rules.
Section 6. Funding. The financial resources needed to implement the Rationalization and
Streamlining Plan shall be taken from funds available in the DOH, provided that the total
requirements for the implementation of the revised staffing pattern shall not exceed
available funds for Personnel Services.
Section 7. Separation Benefits. Personnel who opt to be separated from the service as a
consequence of the implementation of this Executive Order shall be entitled to the benefits
under existing laws. In the case of those who are not covered by existing laws, they shall
be entitled to separation benefits equivalent to one month basic salary for every year of
service or proportionate share thereof in addition to the terminal fee benefits to which
he/she is entitled under existing laws.
Executive Order No. 102 was enacted pursuant to Section 17 of the Local Government
Code (Republic Act No. 7160), which provided for the devolution to the local government
units of basic services and facilities, as well as specific health-related functions and
responsibilities.7
Petitioners contended that a law, such as Executive Order No. 102, which effects the
reorganization of the DOH, should be enacted by Congress in the exercise of its legislative
3

function. They argued that Executive Order No. 102 is void, having been issued in excess
of the Presidents authority.8
Moreover, petitioners averred that the implementation of the Rationalization and
Streamlining Plan (RSP) was not in accordance with law. The RSP was allegedly
implemented even before the Department of Budget and Management (DBM) approved it.
They also maintained that the Office of the President should have issued an administrative
order to carry out the streamlining, but that it failed to do so. 9
Furthermore, petitioners Elsa O. Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P.
Manay, Eduardo P. Galope, Remedios M. Ysmael, Alfredo U. Bacuata and Edgardo J.
Damicog, all DOH employees, assailed the validity of Executive Order No. 102 on the
ground that they were likely to lose their jobs, and that some of them were suffering from
the inconvenience of having to travel a longer distance to get to their new place of work,
while other DOH employees had to relocate to far-flung areas. 10
Petitioners also pointed out several errors in the implementation of the RSP. Certain
employees allegedly suffered diminution of compensation, 11 while others were supposedly
assigned to positions for which they were neither qualified nor suited. 12 In addition, new
employees were purportedly hired by the DOH and appointed to positions for which they
were not qualified, despite the fact that the objective of the ongoing streamlining was to
cut back on costs.13 It was also averred that DOH employees were deployed or transferred
even during the three-month period before the national and local elections in May
2001,14 in violation of Section 2 of the Republic Act No. 7305, also known as "Magna Carta
for Public Health Workers." 15 Petitioners, however, failed to identify the DOH employees
referred to above, much less include them as parties to the petition.
The Court of Appeals denied the petition due to a number of procedural defects, which
proved fatal: 1) Petitioners failed to show capacity or authority to sign the certification of
non-forum shopping and the verification; 2) Petitioners failed to show any particularized
interest for bringing the suit, nor any direct or personal injury sustained or were in the
immediate danger of sustaining; 3) the Petition, brought before the Supreme Court on 15
August 1999, was filed out of time, or beyond 60 days from the time the reorganization
methods were implemented in 2000; and 4) certiorari, Prohibition and Mandamus will not
lie where the President, in issuing the assailed Executive Order, was not acting as a
tribunal, board or officer exercising judicial or quasi-judicial functions.
In resolving the substantial issues of the case, the Court of Appeals ruled that the HSRA
cannot be declared void for violating Sections 5, 9, 10, 11, 13, 15, 18 of Article II; Section 1
of Article III; Sections 11 and 14 of Article XIII; and Sections 1 and 3(2) of Article XV, all of
the 1987 Constitution, which directly or indirectly pertain to the duty of the State to protect
and promote the peoples right to health and well-being. It reasoned that the
aforementioned provisions of the Constitution are not self-executing; they are not judicially
enforceable constitutional rights and can only provide guidelines for legislation.
ADMIN LAW CASES SET 7
Moreover, the Court of Appeals held that the petitioners assertion that Executive Order
No. 102 is detrimental to the health of the people cannot be made a justiciable issue. The
question of whether the HSRA will bring about the development or disintegration of the
health sector is within the realm of the political department.
Furthermore, the Court of Appeals decreed that the President was empowered to issue
Executive Order No. 102, in accordance with Section 17 Article VII of the 1987 Constitution.
It also declared that the DOH did not implement Executive Order No. 102 in bad faith or
with grave abuse of discretion, as alleged by the petitioners, as the DOH issued
Department Circular No. 275-C, Series of 2000, which created the different committees
tasked with the implementation of the RSP, only after both the DBM and Presidential
Committee on Effective Governance (PCEG) approved the RSP on 8 July 2000 and 17 July
2000, respectively.1avvphi1
Petitioners filed with the Court of Appeals a Motion for Reconsideration of the Decision
rendered on 26 November 2004, but the same was denied in a Resolution dated 7 March
2005.
Hence, the present petition, where the following issues are raised:
I.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING
THAT ANY QUESTION ON THE WISDOM AND EFFICACY OF THE HEALTH SECTOR
REFORM AGENDA IS NOT A JUSTICIABLE CONTROVERSY AND THAT THE
CONSTITUTIONAL PROVISIONS PROTECTING THE HEALTH OF THE FILIPINO PEOPLE
ARE NOT JUDICIALLY ENFORCEABLE;
II.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING
THAT PETITIONERS COMPLAINT THAT EXECUTIVE ORDER NO. 102 IS DETRIMENTAL
TO THE FILIPINO IS LIKEWISE NOT A JUSTICIABLE CONTROVERSY AND THAT THE
PRESIDENT HAS THE AUTHORITY TO ISSUE SAID ORDER; AND
III.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
UPHOLDING TECHNICALITIES OVER AND ABOVE THE ISSUES OF TRANSCENDENTAL
IMPORTANCE RAISED IN THE PETITION BELOW. 16
The Court finds the present petition to be without merit.
4

Petitioners allege that the HSRA should be declared void, since it runs counter to the
aspiration and ideals of the Filipino people as embodied in the Constitution. 17 They claim
that the HSRAs policies of fiscal autonomy, income generation, and revenue enhancement
violate Sections 5, 9, 10, 11, 13, 15 and 18 of Article II, Section 1 of Article III; Sections 11
and 14 of Article XIII; and Sections 1 and 3 of Article XV of the 1987 Constitution. Such
policies allegedly resulted in making inaccessible free medicine and free medical services.
This contention is unfounded.
As a general rule, the provisions of the Constitution are considered self-executing, and do
not require future legislation for their enforcement. For if they are not treated as self-
executing, the mandate of the fundamental law can be easily nullified by the inaction of
Congress.18 However, some provisions have already been categorically declared by this
Court as non self-executing.
In Tanada v. Angara,19 the Court specifically set apart the sections found under Article II of
the 1987 Constitution as non self-executing and ruled that such broad principles need
legislative enactments before they can be implemented:
By its very title, Article II of the Constitution is a "declaration of principles and state
policies." x x x. These principles in Article II are not intended to be self-executing principles
ready for enforcement through the courts. They are used by the judiciary as aids or as
guides in the exercise of its power of judicial review, and by the legislature in its enactment
of laws.
In Basco v. Philippine Amusement and Gaming Corporation, 20 this Court declared that
Sections 11, 12, and 13 of Article II; Section 13 of Article XIII; and Section 2 of Article XIV of
the 1987 Constitution are not self-executing provisions. In Tolentino v. Secretary of
Finance,21 the Court referred to Section 1 of Article XIII and Section 2 of Article XIV of the
Constitution as moral incentives to legislation, not as judicially enforceable rights. These
provisions, which merely lay down a general principle, are distinguished from other
constitutional provisions as non self-executing and, therefore, cannot give rise to a cause
of action in the courts; they do not embody judicially enforceable constitutional rights. 22
Some of the constitutional provisions invoked in the present case were taken from Article II
of the Constitution -- specifically, Sections 5, 9, 10, 11, 13, 15 and 18 -- the provisions of
which the Court categorically ruled to be non self-executing in the aforecited case of
Taada v. Angara.23
Moreover, the records are devoid of any explanation of how the HSRA supposedly violated
the equal protection and due process clauses that are embodied in Section 1 of Article III of
the Constitution. There were no allegations of discrimination or of the lack of due process
in connection with the HSRA. Since they failed to substantiate how these constitutional
guarantees were breached, petitioners are unsuccessful in establishing the relevance of
this provision to the petition, and consequently, in annulling the HSRA.
ADMIN LAW CASES SET 7
In the remaining provisions, Sections 11 and 14 of Article XIII and Sections 1 and 3 of
Article XV, the State accords recognition to the protection of working women and the
provision for safe and healthful working conditions; to the adoption of an integrated and
comprehensive approach to health; to the Filipino family; and to the right of children to
assistance and special protection, including proper care and nutrition. Like the provisions
that were declared as non self-executory in the cases of Basco v. Philippine Amusement
and Gaming Corporation24 and Tolentino v. Secretary of Finance, 25 they are mere
statements of principles and policies. As such, they are mere directives addressed to the
executive and the legislative departments. If unheeded, the remedy will not lie with the
courts; but rather, the electorates displeasure may be manifested in their votes.
The rationale for this is given by Justice Dante Tinga in his Separate Opinion in the case of
Agabon v. National Labor Relations Commission26 :
x x x However, to declare that the constitutional provisions are enough to guarantee the
full exercise of the rights embodied therein, and the realization of the ideals therein
expressed, would be impractical, if not unrealistic. The espousal of such view presents the
dangerous tendency of being overbroad and exaggerated. x x x Subsequent legislation is
still needed to define the parameters of these guaranteed rights. x x x Without specific and
pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to
approximate at least the aims of the Constitution.
The HSRA cannot be nullified based solely on petitioners bare allegations that it violates
the general principles expressed in the non self-executing provisions they cite herein.
There are two reasons for denying a cause of action to an alleged infringement of broad
constitutional principles: basic considerations of due process and the limitations of judicial
power.27
Petitioners also claim that Executive Order No. 102 is void on the ground that it was issued
by the President in excess of his authority. They maintain that the structural and functional
reorganization of the DOH is an exercise of legislative functions, which the President
usurped when he issued Executive Order No. 102. 28 This line of argument is without basis.
This Court has already ruled in a number of cases that the President may, by executive or
administrative order, direct the reorganization of government entities under the Executive
Department.29 This is also sanctioned under the Constitution, as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have
control of all executive departments, bureaus and offices." Section 31, Book III, Chapter 10
of Executive Order No. 292, also known as the Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office - The President,
subject to the policy in the Executive Office and in order to achieve simplicity, economy
and efficiency, shall have continuing authority to reorganize the administrative structure of
the Office of the President. For this purpose, he may take any of the following actions:
5

(1) Restructure the internal organization of the Office of the President Proper,
including the immediate offices, the Presidential Special Assistants/Advisers
System and the Common Staff Support System, by abolishing consolidating or
merging units thereof or transferring functions from one unit to another;
(2) Transfer any function under the Office of the President to any other Department
or Agency as well as transfer functions to the Office of the President from other
Departments or Agencies; and
(3) Transfer any agency under the Office of the President to any other department
or agency as well as transfer agencies to the Office of the President from other
Departments or agencies.
In Domingo v. Zamora,30 this Court explained the rationale behind the Presidents
continuing authority under the Administrative Code to reorganize the administrative
structure of the Office of the President. The law grants the President the power to
reorganize the Office of the President in recognition of the recurring need of every
President to reorganize his or her office "to achieve simplicity, economy and efficiency." To
remain effective and efficient, it must be capable of being shaped and reshaped by the
President in the manner the Chief Executive deems fit to carry out presidential directives
and policies.
The Administrative Code provides that the Office of the President consists of the Office of
the President Proper and the agencies under it. 31 The agencies under the Office of the
President are identified in Section 23, Chapter 8, Title II of the Administrative Code:
Sec. 23. The Agencies under the Office of the President.The agencies under the Office of
the President refer to those offices placed under the chairmanship of the President, those
under the supervision and control of the President, those under the administrative
supervision of the Office of the President, those attached to it for policy and program
coordination, and those that are not placed by law or order creating them under any
specific department. (Emphasis provided.)
Section 2(4) of the Introductory Provisions of the Administrative Code defines the term
"agency of the government" as follows:
Agency of the Government refers to any of the various units of the Government, including
a department, bureau, office, instrumentality, or government-owned or controlled
corporation, or a local government or a distinct unit therein.
Furthermore, the DOH is among the cabinet-level departments enumerated under Book IV
of the Administrative Code, mainly tasked with the functional distribution of the work of the
President.32 Indubitably, the DOH is an agency which is under the supervision and control
of the President and, thus, part of the Office of the President. Consequently, Section 31,
ADMIN LAW CASES SET 7
Book III, Chapter 10 of the Administrative Code, granting the President the continued
authority to reorganize the Office of the President, extends to the DOH.
The power of the President to reorganize the executive department is likewise recognized
in general appropriations laws. As early as 1993, Sections 48 and 62 of Republic Act No.
7645, the "General Appropriations Act for Fiscal Year 1993," already contained a provision
stating that:
Sec. 48. Scaling Down and Phase Out of Activities Within the Executive Branch.The heads
of departments, bureaus and offices and agencies are hereby directed to identify their
respective activities which are no longer essential in the delivery of public services and
which may be scaled down, phased out, or abolished, subject to civil service rules and
regulations. x x x. Actual scaling down, phasing out, or abolition of activities shall be
effected pursuant to Circulars or Orders issued for the purpose by the Office of the
President. (Emphasis provided.)
Sec. 62. Unauthorized Organizational Changes. Unless otherwise created by law or directed
by the President of the Philippines, no organizational unit or changes in key positions in
any department or agency shall be authorized in their respective organizational structures
and be funded form appropriations by this Act.
Again, in the year when Executive Order No. 102 was issued, "The General Appropriations
Act of Fiscal Year 1999" (Republic Act No. 8745) conceded to the President the power to
make any changes in any of the key positions and organizational units in the executive
department thus:
Sec. 77. Organized Changes. Unless otherwise provided by law or directed by the President
of the Philippines, no changes in key positions or organizational units in any department or
agency shall be authorized in their respective organizational structures and funded from
appropriations provided by this Act.
Clearly, Executive Order No. 102 is well within the constitutional power of the President to
issue. The President did not usurp any legislative prerogative in issuing Executive Order
No. 102. It is an exercise of the Presidents constitutional power of control over the
executive department, supported by the provisions of the Administrative Code, recognized
by other statutes, and consistently affirmed by this Court.
Petitioners also pointed out several flaws in the implementation of Executive Order No.
102, particularly the RSP. However, these contentions are without merit and are insufficient
to invalidate the executive order.
The RSP was allegedly implemented even before the DBM approved it. The facts show
otherwise. It was only after the DBM approved the Notice of Organization, Staffing and
Compensation Action on 8 July 2000, 33 and after the Presidential Committee on Effective
Governance (PCEG) issued on 17 July 2000 Memorandum Circular No. 62, 34 approving the
6

RSP, that then DOH Secretary Alberto G. Romualdez issued on 28 July 2000 Department
Circular No. 275-C, Series of 2000, 35 creating the different committees to implement the
RSP.
Petitioners also maintain that the Office of the President should have issued an
administrative order to carry out the streamlining, but that it failed to do so. Such objection
cannot be given any weight considering that the acts of the DOH Secretary, as an alter ego
of the President, are presumed to be the acts of the President. The members of the Cabinet
are subject at all times to the disposition of the President since they are merely his alter
egos.36Thus, their acts, performed and promulgated in the regular course of business, are,
unless disapproved by the President, presumptively acts of the President. 37 Significantly,
the acts of the DOH Secretary were clearly authorized by the President, who, thru the
PCEG, issued the aforementioned Memorandum Circular No. 62, sanctioning the
implementation of the RSP.
Petitioners Elsa Odonzo Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P. Manay,
Eduardo P. Galope, Remedios M. Ysmael, Alfredo U. Bacuata, and Edgardo Damicog, all
DOH employees, assailed the validity of Executive Order No. 102 on the ground that they
were likely to lose their jobs, and that some of them were suffering from the inconvenience
of having to travel a longer distance to get to their new place of work, while other DOH
employees had to relocate to far-flung areas.
In several cases, this Court regarded reorganizations of government units or departments
as valid, for so long as they are pursued in good faiththat is, for the purpose of economy
or to make bureaucracy more efficient. 38 On the other hand, if the reorganization is done
for the purpose of defeating security of tenure or for ill-motivated political purposes, any
abolition of position would be invalid. None of these circumstances are applicable since
none of the petitioners were removed from public service, nor did they identify any action
taken by the DOH that would unquestionably result in their dismissal. The reorganization
that was pursued in the present case was made in good faith. The RSP was clearly
designed to improve the efficiency of the department and to implement the provisions of
the Local Government Code on the devolution of health services to local governments.
While this Court recognizes the inconvenience suffered by public servants in their
deployment to distant areas, the executive departments finding of a need to make health
services available to these areas and to make delivery of health services more efficient and
more compelling is far from being unreasonable or arbitrary, a determination which is well
within its authority. In all, this Court finds petitioners contentions to be insufficient to
invalidate Executive Order No. 102.
Without identifying the DOH employees concerned, much less including them as parties to
the petition, petitioners went on identifying several errors in the implementation of
Executive Order No. 102. First, they alleged that unidentified DOH employees suffered from
a diminution of compensation by virtue of the provision on Salaries and Benefits found in
Department Circular No. 312, Series of 2000, issued on 23 October 2000, which reads:
ADMIN LAW CASES SET 7
2. Any employee who was matched to a position with lower salary grade (SG) shall not
suffer a reduction in salary except where his/her current salary is higher than the
maximum step of the SG of the new position, in which case he/she shall be paid the salary
corresponding to the maximum step of the SG of the new position. RATA shall no longer be
received, if employee was matched to a Non-Division Chief Position.
Incidentally, the petition shows that none of the petitioners, who are working in the DOH,
were entitled to receive RATA at the time the petition was filed. Nor was it alleged that they
suffered any diminution of compensation. Secondly, it was claimed that certain unnamed
DOH employees were matched with unidentified positions for which they were supposedly
neither qualified nor suited. New employees, again unnamed and not included as parties,
were hired by the DOH and appointed to unidentified positions for which they were
purportedly not qualified, despite the fact that the objective of the ongoing streamlining
was to cut back on costs. Lastly, unspecified DOH employees were deployed or transferred
during the three-month period before the national and local elections in May 2001, in
violation of Section 2 of the Republic Act No. 7305, also known as "Magna Carta for Public
Health Workers."
Petitioners allegations are too general and unsubstantiated by the records for the Court to
pass upon. The persons involved are not identified, details of their appointments and
transfers such as position, salary grade, and the date they were appointed - are not
given; and the circumstances which attended the alleged violations are not specified.
Even granting that these alleged errors were adequately proven by the petitioners, they
would still not invalidate Executive Order No. 102. Any serious legal errors in laying down
the compensation of the DOH employees concerned can only invalidate the pertinent
provisions of Department Circular No. 312, Series of 2000. Likewise, any questionable
appointments or transfers are properly addressed by an appeal process provided under
Administrative Order No. 94, series of 2000; 39 and if the appeal is meritorious, such
appointment or transfer may be invalidated. The validity of Executive Order No. 102 would,
nevertheless, remain unaffected. Settled is the rule that courts are not at liberty to declare
statutes invalid, although they may be abused or misabused, and may afford an
opportunity for abuse in the manner of application. The validity of a statute or ordinance is
to be determined from its general purpose and its efficiency to accomplish the end desired,
not from its effects in a particular case.40
In a number of cases,41 the Court upheld the standing of citizens who filed suits, wherein
the "transcendental importance" of the constitutional question justified the granting of
relief. In spite of these rulings, the Court, in Domingo v. Carague, 42 dismissed the petition
when petitioners therein failed to show any present substantial interest. It demonstrated
how even in the cases in which the Court declared that the matter of the case was of
transcendental importance, the petitioners must be able to assert substantial interest.
Present substantial interest, which will enable a party to question the validity of the law,
requires that a party sustained or will sustain direct injury as a result of its
enforcement.43 It is distinguished from a mere expectancy or future, contingent,
subordinate, or inconsequential interest.44
7
 ADMIN LAW CASES SET 7
In the same way, the Court, in Telecommunications & Broadcast Attorneys of the
Philippines, Inc. v. Comelec, 45ruled that a citizen is allowed to raise a constitutional
question only when he can show that he has personally suffered some actual or threatened
injury as a result of the allegedly illegal conduct of the government; the injury is fairly
traceable to the challenged action; and the injury is likely to be redressed by a favorable
action. This case likewise stressed that the rule on constitutional questions which are of
transcendental importance cannot be invoked where a partys substantive claim is without
merit. Thus, a partys standing is determined by the substantive merit of his case or a
preliminary estimate thereof. After a careful scrutiny of the petitioners substantive claims,
this Court finds that the petitioners miserably failed to show any merit to their claims.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the
assailed Decision of the Court of Appeals, promulgated on 26 November 2004, declaring
both the HSRA and Executive Order No. 102 as valid. No costs. SO ORDERED.

8

G.R. No. 47800. December 2, 1940
MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No. 648;
DELEGATION OF LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF PUBLIC WORKS AND
SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS TO PROMULGATE RULES AND
REGULATIONS. The provisions of section 1 of Commonwealth Act No. 648 do not confer
legislative power upon the Director of Public Works and the Secretary of Public Works and
Communications. The authority therein conferred upon them and under which they
promulgated the rules and regulations now complained of is not to determine what public
policy demands but merely to carry out the legislative policy laid down by the National
Assembly in said Act, to wit, "to promote safe transit upon, and avoid obstructions on,
roads and streets designated as national roads by acts of the National Assembly or by
executive orders of the President of the Philippines" and to close them temporarily to any
or all classes of traffic "whenever the condition of the road or the traffic thereon makes
such action necessary or advisable in the public convenience and interest." The delegated
power, if at all, therefore, is not the determination of what the law shall be, but merely the
ascertainment of the facts and circumstances upon which the application of said law is to
be predicated. To promulgate rules and regulations on the use of national roads and to
determine when and how long a national road should be closed to traffic, in view of the
condition of the road or the traffic thereon and the requirements of public convenience and
interest, is an administrative function which cannot be directly discharged by the National
Assembly. It must depend on the discretion of some other government official to whom is
confided the duty of determining whether the proper occasion exists for executing the law.
But it cannot be said that the exercise of such discretion is the making of the law.
2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY.
Commonwealth Act No. 548 was passed by the National Assembly in the exercise of the
paramount police power of the state. Said Act, by virtue of which the rules and regulations
complained of were promulgated, aims to promote safe transit upon and avoid
obstructions on national roads, in the interest and convenience of the public. In enacting
said law, therefore, the National Assembly was prompted by considerations of public
convenience and welfare. It was inspired by a desire to relieve congestion of traffic, which
is, to say the least, a menace to public safety. Public welfare, then, lies at the bottom of the
enactment of said law, and the state in order to promote the general welfare may interfere
with personal liberty, with property, and with business and occupations. Persons and
property may be subjected to all kinds of restraints and burdens, in order to secure the
general comfort, health, and prosperity of the state (U.S. v. Gomer Jesus, 31 Phil., 218). To
this fundamental aim of our Government the rights of the individual are subordinated.
Liberty is a blessing without which life is a misery, but liberty should not be made to
prevail over authority because then society will fall into anarchy. Neither should authority
be made to prevail over liberty because then the individual will fall into slavery. The citizen
should achieve the required balance of liberty and authority in his mind through education
and, personal discipline, so that there may be established the resultant equilibrium, which
means peace and order and happiness for all. The moment greater authority is conferred
upon the government, logically so much is withdrawn from the residuum of liberty which
resides in the people. The paradox lies in the fact that the apparent curtailment of liberty is
precisely the very means of insuring its preservation.
ADMIN LAW CASES SET 7
3. ID.; ID.; SOCIAL JUSTICE. Social justice is "neither communism, nor despotism, nor
atomism, nor anarchy," but the humanization of laws and the equalization of social and
economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated. Social justice means the promotion of the
welfare of all the people, the adoption by the Government of measures calculated to insure
economic stability of all the competent elements of society, through the maintenance of a
proper economic and social equilibrium in the interrelations of the members of the
community, constitutionally, through the adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the existence of all
governments on the time-honored principle of salus populi est suprema lex. Social justice,
therefore, must be founded on the recognition of the necessity of interdependence among
divers and diverse units of a society and of the protection that should be equally and
evenly extended to all groups as a combined force in our social and economic life,
consistent with the fundamental and paramount objective of the state of promoting the
health, comfort, and quiet of all persons, and of bringing about "the greatest good to the
greatest number."
Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought
before this court this petition for a writ of prohibition against the respondents, A. D.
Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as Director of
Public Works; Sergio Bayan, as Acting Secretary of Public Works and Communications;
Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of
Police of Manila.
It is alleged in the petition that the National Traffic Commission, in its resolution of July 17,
1940, resolved to recommend to the Director of Public Works and to the Secretary of Public
Works and Communications that animal-drawn vehicles be prohibited from passing along
Rosario Street extending from Plaza Calderon de la Barca to Dasmarias Street, from 7:30
a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending
from the railroad crossing at Antipolo Street to Echague Street, from 7 a.m. to 11 p.m.,
from a period of one year from the date of the opening of the Colgante Bridge to traffic;
that the Chairman of the National Traffic Commission, on July 18, 1940 recommended to
the Director of Public Works the adoption of the measure proposed in the resolution
aforementioned, in pursuance of the provisions of Commonwealth Act No. 548 which
authorizes said Director of Public Works, with the approval of the Secretary of Public Works
and Communications, to promulgate rules and regulations to regulate and control the use
of and traffic on national roads; that on August 2, 1940, the Director of Public Works, in his
first indorsement to the Secretary of Public Works and Communications, recommended to
the latter the approval of the recommendation made by the Chairman of the National
Traffic Commission as aforesaid, with the modification that the closing of Rizal Avenue to
traffic to animal-drawn vehicles be limited to the portion thereof extending from the
railroad crossing at Antipolo Street to Azcarraga Street; that on August 10, 1940, the
Secretary of Public Works and Communications, in his second indorsement addressed to
the Director of Public Works, approved the recommendation of the latter that Rosario
Street and Rizal Avenue be closed to traffic of animal-drawn vehicles, between the points
and during the hours as above indicated, for a period of one year from the date of the
opening of the Colgante Bridge to traffic; that the Mayor of Manila and the Acting Chief of
Police of Manila have enforced and caused to be enforced the rules and regulations thus
9

adopted; that as a consequence of such enforcement, all animal-drawn vehicles are not
allowed to pass and pick up passengers in the places above-mentioned to the detriment
not only of their owners but of the riding public as well.
It is contended by the petitioner that Commonwealth Act No. 548 by which the Director of
Public Works, with the approval of the Secretary of Public Works and Communications, is
authorized to promulgate rules and regulations for the regulation and control of the use of
and traffic on national roads and streets is unconstitutional because it constitutes an
undue delegation of legislative power. This contention is untenable. As was observed by
this court in Rubi v. Provincial Board of Mindoro (39 Phil, 660, 700), "The rule has nowhere
been better stated than in the early Ohio case decided by Judge Ranney, and since
followed in a multitude of cases, namely: The true distinction therefore is between the
delegation of power to make the law, which necessarily involves a discretion as to what it
shall be, and conferring an authority or discretion as to its execution, to be exercised under
and in pursuance of the law. The first cannot be done; to the latter no valid objection can
be made. (Cincinnati, W. & Z. R. Co. v. Commrs. Clinton County, 1 Ohio St., 88.)
Discretion, as held by Chief Justice Marshall in Wayman v. Southard (10 Wheat., 1) may be
committed by the Legislature to an executive department or official. The Legislature may
make decisions of executive departments or subordinate officials thereof, to whom it has
committed the execution of certain acts, final on questions of fact. (U.S. v. Kinkead, 248
Fed., 141.) The growing tendency in the decisions is to give prominence to the necessity
of the case.
Section 1 of Commonwealth Act No. 548 reads as follows:
"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and streets
designated as national roads by acts of the National Assembly or by executive orders of
the President of the Philippines, the Director of Public Works, with the approval of the
Secretary of Public Works and Communications, shall promulgate the necessary rules and
regulations to regulate and control the use of and traffic on such roads and streets. Such
rules and regulations, with the approval of the President, may contain provisions
controlling or regulating the construction of buildings or other structures within a
reasonable distance from along the national roads. Such roads may be temporarily closed
to any or all classes of traffic by the Director of Public Works and his duly authorized
representatives whenever the condition of the road or the traffic thereon makes such
action necessary or advisable in the public convenience and interest, or for a specified
period, with the approval of the Secretary of Public Works and Communications."cralaw
virtua1aw library
The above provisions of law do not confer legislative power upon the Director of Public
Works and the Secretary of Public Works and Communications. The authority therein
conferred upon them and under which they promulgated the rules and regulations now
complained of is not to determine what public policy demands but merely to carry out the
legislative policy laid down by the National Assembly in said Act, to wit, "to promote safe
transit upon and avoid obstructions on, roads and streets designated as national roads by
acts of the National Assembly or by executive orders of the President of the Philippines"
and to close them temporarily to any or all classes of traffic "whenever the condition of the
road or the traffic makes such action necessary or advisable in the public convenience and
interest." The delegated power, if at all, therefore, is not the determination of what the law
ADMIN LAW CASES SET 7
shall be, but merely the ascertainment of the facts and circumstances upon which the
application of said law is to be predicated. To promulgate rules and regulations on the use
of national roads and to determine when and how long a national road should be closed to
traffic, in view of the condition of the road or the traffic thereon and the requirements of
public convenience and interest, is an administrative function which cannot be directly
discharged by the National Assembly. It must depend on the discretion of some other
government official to whom is confided the duty of determining whether the proper
occasion exists for executing the law. But it cannot be said that the exercise of such
discretion is the making of the law. As was said in Lockes Appeal (72 Pa. 491): "To assert
that a law is less than a law, because it is made to depend on a future event or act, is to
rob the Legislature of the power to act wisely for the public welfare whenever a law is
passed relating to a state of affairs not yet developed, or to things future and impossible to
fully know." The proper distinction the court said was this: "The Legislature cannot
delegate its power to make the law; but it can make a law to delegate a power to
determine some fact or state of things upon which the law makes, or intends to make, its
own action depend. To deny this would be to stop the wheels of government. There are
many things upon which wise and useful legislation must depend which cannot be known
to the law-making power, and, must, therefore, be a subject of inquiry and determination
outside of the halls of legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmea, G.R. Nos. 46076 and 46077, promulgated
June 12, 1939, and in Pangasinan Transportation v. The Public Service Commission, G.R.
No. 47065, promulgated June 26, 1940, this Court had occasion to observe that the
principle of separation of powers has been made to adapt itself to the complexities of
modern governments, giving rise to the adoption, within certain limits, of the principle of
"subordinate legislation," not only in the United States and England but in practically all
modern governments. Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulations, and the increased difficulty of
administering the laws, the rigidity of the theory of separation of governmental powers
has, to a large extent, been relaxed by permitting the delegation of greater powers by the
legislative and vesting a larger amount of discretion in administrative and executive
officials, not only in the execution of the laws, but also in the promulgation of certain rules
and regulations calculated to promote public interest.
The petitioner further contends that the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an
unlawful interference with legitimate business or trade and abridge the right to personal
liberty and freedom of locomotion. Commonwealth Act No. 548 was passed by the National
Assembly in the exercise of the paramount police power of the state.
Said Act, by virtue of which the rules and regulations complained of were promulgated,
aims to promote safe transit upon and avoid obstructions on national roads, in the interest
and convenience of the public. In enacting said law, therefore, the National Assembly was
prompted by considerations of public convenience and welfare. It was inspired by a desire
to relieve congestion of traffic. which is, to say the least, a menace to public safety. Public
welfare, then, lies at the bottom of the enactment of said law, and the state in order to
promote the general welfare may interfere with personal liberty, with property, and with
business and occupations. Persons and property may be subjected to all kinds of restraints
and burdens, in order to secure the general comfort, health, and prosperity of the state
(U.S. v. Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights
10
 ADMIN LAW CASES SET 7
of the individual are subordinated. Liberty is a blessing without which life is a misery, but
liberty should not be made to prevail over authority because then society will fall into
anarchy. Neither should authority be made to prevail over liberty because then the
individual will fall into slavery. The citizen should achieve the required balance of liberty
and authority in his mind through education and personal discipline, so that there may be
established the resultant equilibrium, which means peace and order and happiness for all.
The moment greater authority is conferred upon the government, logically so much is
withdrawn from the residuum of liberty which resides in the people. The paradox lies in the
fact that the apparent curtailment of liberty is precisely the very means of insuring its
preservation.

The scope of police power keeps expanding as civilization advances. As was said in the
case of Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), "the right to exercise the
police power is a continuing one, and a business lawful today may in the future, because of
the changed situation, the growth of population or other causes, become a menace to the
public health and welfare, and be required to yield to the public good." And in People v.
Pomar (46 Phil., 440), it was observed that "advancing civilization is bringing within the
police power of the state today things which were not thought of as being within such
power yesterday. The development of civilization, the rapidly increasing population, the
growth of public opinion, with an increasing desire on the part of the masses and of the
government to look after and care for the interests of the individuals of the state, have
brought within the police power many questions for regulation which formerly were not so
considered.

The petitioner finally avers that the rules and regulations complained of infringe upon the
constitutional precept regarding the promotion of social justice to insure the well-being and
economic security of all the people. The promotion of social justice, however, is to be
achieved not through a mistaken sympathy towards any given group. Social justice is
"neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of
laws and the equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated. Social justice
means the promotion of the welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the competent elements of society,
through the maintenance of a proper economic and social equilibrium in the interrelations
of the members of the community, constitutionally, through the adoption of measures
legally justifiable, or extra-constitutionally, through the exercise of powers underlying the
existence of all governments on the time-honored principle of salus populi est suprema
lex.

Social justice, therefore, must be founded on the recognition of the necessity of

interdependence among divers and diverse units of a society and of the protection that
should be equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest
good to the greatest number."

In view of the foregoing, the writ of prohibition prayed for is hereby denied, with costs
against the petitioner. So ordered.

11

G.R. No. 196425 July 24, 2012
PROSPERO A. PICHAY, JR., Petitioner, vs. OFFICE OF THE DEPUTY EXECUTIVE
SECRETARY FOR LEGAL AFFAIRS INVESTIGATIVE AND ADJUDICATORY DIVISION,
HON. PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary, and HON.
CESAR V. PURISIMA, in his capacity as Secretary of Finance, and as an ex-officio
member of the Monetary Board, Respondents.
The Case
This is a Petition for Certiorari and Prohibition with a prayer for the issuance of a temporary
restraining order, seeking to declare as unconstitutional Executive Order No. 13, entitled,
"Abolishing the Presidential Anti-Graft Commission and Transferring Its Investigative,
Adjudicatory and Recommendatory Functions to the Office Of The Deputy Executive
Secretary For Legal Affairs, Office of the President", 1 and to permanently prohibit
respondents from administratively proceeding against petitioner on the strength of the
assailed executive order.
The Facts
On April 16, 2001, then President Gloria Macapagal-Arroyo issued Executive Order No. 12
(E.O. 12) creating the Presidential Anti-Graft Commission (PAGC) and vesting it with the
power to investigate or hear administrative cases or complaints for possible graft and
corruption, among others, against presidential appointees and to submit its report and
recommendations to the President. Pertinent portions of E.O. 12 provide:
Section 4. Jurisdiction, Powers and Functions.
(a) x x x xxx xxx
(b) The Commission, acting as a collegial body, shall have the authority to investigate or
hear administrative cases or complaints against all presidential appointees in the
government and any of its agencies or instrumentalities xxx
xxx xxx xxx
xxx xxx xxx
Section 8. Submission of Report and Recommendations. After completing its investigation
or hearing, the Commission en banc shall submit its report and recommendations to the
President. The report and recommendations shall state, among others, the factual findings
and legal conclusions, as well as the penalty recommend (sic) to be imposed or such other
action that may be taken."
ADMIN LAW CASES SET 7
On November 15, 2010, President Benigno Simeon Aquino III issued Executive Order No. 13
(E.O. 13), abolishing the PAGC and transferring its functions to the Office of the Deputy
Executive Secretary for Legal Affairs (ODESLA), more particularly to its newly-established
Investigative and Adjudicatory Division (IAD). The full text of the assailed executive order
reads:
EXECUTIVE ORDER NO. 13
ABOLISHING THE PRESIDENTIAL ANTI-GRAFT COMMISSION AND TRANSFERRING ITS
INVESTIGATIVE, ADJUDICATORY AND RECOMMENDATORY FUNCTIONS TO THE OFFICE OF
THE DEPUTY EXECUTIVE SECRETARY FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT
WHEREAS, this administration has a continuing mandate and advocacy to fight and
eradicate corruption in the different departments, bureaus, offices and other government
agencies and instrumentalities;
WHEREAS, the government adopted a policy of streamlining the government bureaucracy
to promote economy and efficiency in government;
WHEREAS, Section VII of the 1987 Philippine Constitution provides that the President shall
have control of all the executive departments, bureaus and offices;
WHEREAS, Section 31 Chapter 10, Title III, Book III of Executive Order 292 (Administrative
Code of 1987) provides for the continuing authority of the President to reorganize the
administrative structure of the Office of the President;
WHEREAS, Presidential Decree (PD) No. 1416 (Granting Continuing Authority to the
President of the Philippines to Reorganize the National Government), as amended by PD
1722, provides that the President of the Philippines shall have continuing authority to
reorganize the administrative structure of the National Government and may, at his
discretion, create, abolish, group, consolidate, merge or integrate entities, agencies,
instrumentalities and units of the National Government, as well as, expand, amend,
change or otherwise modify their powers, functions and authorities;
WHEREAS, Section 78 of the General Provisions of Republic Act No. 9970 (General
Appropriations Act of 2010) authorizes the President of the Philippines to direct changes in
the organizational units or key positions in any department or agency;
NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the Philippines, by virtue of the
powers vested in me by law, do hereby order the following:
12

SECTION 1. Declaration of Policy. It is the policy of the government to fight and eradicate
graft and corruption in the different departments, bureaus, offices and other government
agencies and instrumentalities.
The government adopted a policy of streamlining the government bureaucracy to promote
economy and efficiency in the government.
SECTION 2. Abolition of Presidential Anti-Graft Commission (PAGC). To enable the Office of
the President (OP) to directly investigate graft and corrupt cases of Presidential appointees
in the Executive Department including heads of government-owned and controlled
corporations, the
Presidential Anti-Graft Commission (PAGC) is hereby abolished and their vital functions and
other powers and functions inherent or incidental thereto, transferred to the Office of the
Deputy Executive Secretary for Legal Affairs (ODESLA), OP in accordance with the
provisions of this Executive Order.
SECTION 3. Restructuring of the Office of the Deputy Executive Secretary for Legal Affairs,
OP. In addition to the Legal and Legislative Divisions of the ODESLA, the Investigative and
Adjudicatory Division shall be created.
The newly created Investigative and Adjudicatory Division shall perform powers, functions
and duties mentioned in Section 2 hereof, of PAGC.
The Deputy Executive Secretary for Legal Affairs (DESLA) will be the recommending
authority to the President, thru the Executive Secretary, for approval, adoption or
modification of the report and recommendations of the Investigative and Adjudicatory
Division of ODESLA.
SECTION 4. Personnel Who May Be Affected By the Abolition of PAGC. The personnel who
may be affected by the abolition of the PAGC shall be allowed to avail of the benefits
provided under existing laws if applicable. The Department of Budget and Management
(DBM) is hereby ordered to release the necessary funds for the benefits of the employees.
SECTION 5. Winding Up of the Operation and Disposition of the Functions, Positions,
Personnel, Assets and Liabilities of PAGC. The winding up of the operations of PAGC
including the final disposition or transfer of their functions, positions, personnel, assets and
liabilities as may be necessary, shall be in accordance with the applicable provision(s) of
the Rules and Regulations Implementing EO 72 (Rationalizing the Agencies Under or
Attached to the Office of the President) dated March 15, 2002. The winding up shall be
implemented not later than 31 December 2010.
The Office of the Executive Secretary, with the assistance of the Department of Budget and
Management, shall ensure the smooth and efficient implementation of the dispositive
actions and winding-up of the activities of PAGC.
ADMIN LAW CASES SET 7
SECTION 6. Repealing Clause. All executive orders, rules, regulations and other issuances
or parts thereof, which are inconsistent with the provisions of this Executive Order, are
hereby revoked or modified accordingly.
SECTION 7. Effectivity. This Executive Order shall take effect immediately after its
publication in a newspaper of general circulation.
On April 6, 2011, respondent Finance Secretary Cesar V. Purisima filed before the IAD-
ODESLA a complaint affidavit2 for grave misconduct against petitioner Prospero A. Pichay,
Jr., Chairman of the Board of Trustees of the Local Water Utilities Administration (LWUA), as
well as the incumbent members of the LWUA Board of Trustees, namely, Renato Velasco,
Susana Dumlao Vargas, Bonifacio Mario M. Pena, Sr. and Daniel Landingin, which arose
from the purchase by the LWUA of Four Hundred Forty-Five Thousand Three Hundred
Seventy Seven (445,377) shares of stock of Express Savings Bank, Inc.
On April 14, 2011, petitioner received an Order 3 signed by Executive Secretary Paquito N.
Ochoa, Jr. requiring him and his co-respondents to submit their respective written
explanations under oath. In compliance therewith, petitioner filed a Motion to Dismiss Ex
Abundante Ad Cautelam manifesting that a case involving the same transaction and
charge of grave misconduct entitled, "Rustico B. Tutol, et al. v. Prospero Pichay, et al.", and
docketed as OMB-C-A-10-0426-I, is already pending before the Office of the Ombudsman.
Now alleging that no other plain, speedy and adequate remedy is available to him in the
ordinary course of law, petitioner has resorted to the instant petition for certiorari and
prohibition upon the following grounds:
I. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE LEGISLATURE
TO CREATE A PUBLIC OFFICE.
II. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE LEGISLATURE
TO APPROPRIATE FUNDS.
III. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF CONGRESS TO
DELEGATE QUASI-JUDICIAL POWERS TO ADMINISTRATIVE AGENCIES.
IV. E.O. 13 IS UNCONSTITUTIONAL FOR ENCROACHING UPON THE POWERS OF THE
OMBUDSMAN.
V. E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE GUARANTEE OF DUE
PROCESS.
VI. E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE EQUAL PROTECTION
CLAUSE.
13

Our Ruling
In assailing the constitutionality of E.O. 13, petitioner asseverates that the President is not
authorized under any existing law to create the Investigative and Adjudicatory Division,
Office of the Deputy Executive Secretary for Legal Affairs (IAD-ODESLA) and that by
creating a new, additional and distinct office tasked with quasi-judicial functions, the
President has not only usurped the powers of congress to create a public office,
appropriate funds and delegate quasi-judicial functions to administrative agencies but has
also encroached upon the powers of the Ombudsman. Petitioner avers that the
unconstitutionality of E.O. 13 is also evident when weighed against the due process
requirement and equal protection clause under the 1987 Constitution.
The contentions are unavailing.
The President has Continuing Authority to Reorganize the Executive Department under E.O.
292.
Section 31 of Executive Order No. 292 (E.O. 292), otherwise known as the Administrative
Code of 1987, vests in the President the continuing authority to reorganize the offices
under him in order to achieve simplicity, economy and efficiency. E.O. 292 sanctions the
following actions undertaken for such purpose:
(1)Restructure the internal organization of the Office of the President Proper,
including the immediate Offices, the Presidential Special Assistants/Advisers
System and the Common Staff Support System, by abolishing, consolidating, or
merging units thereof or transferring functions from one unit to another;
(2)Transfer any function under the Office of the President to any other Department
or Agency as well as transfer functions to the Office of the President from other
Departments and Agencies; and
(3)Transfer any agency under the Office of the President to any other Department
or Agency as well as transfer agencies to the Office of the President from other
departments or agencies.4
In the case of Buklod ng Kawaning EIIB v. Zamora 5 the Court affirmed that the President's
authority to carry out a reorganization in any branch or agency of the executive
department is an express grant by the legislature by virtue of E.O. 292, thus:
But of course, the list of legal basis authorizing the President to reorganize any department
or agency in the executive branch does not have to end here. We must not lose sight of the
very source of the power that which constitutes an express grant of power. Under Section
31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of
1987), "the President, subject to the policy of the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have the continuing authority to reorganize the
ADMIN LAW CASES SET 7
administrative structure of the Office of the President." For this purpose, he may transfer
the functions of other Departments or Agencies to the Office of the President. (Emphasis
supplied)
And in Domingo v. Zamora, 6 the Court gave the rationale behind the President's continuing
authority in this wise:
The law grants the President this power in recognition of the recurring need of every
President to reorganize his office "to achieve simplicity, economy and efficiency." The
Office of the President is the nerve center of the Executive Branch. To remain effective and
efficient, the Office of the President must be capable of being shaped and reshaped by the
President in the manner he deems fit to carry out his directives and policies. After all, the
Office of the President is the command post of the President. (Emphasis supplied)
Clearly, the abolition of the PAGC and the transfer of its functions to a division specially
created within the ODESLA is properly within the prerogative of the President under his
continuing "delegated legislative authority to reorganize" his own office pursuant to E.O.
292.
Generally, this authority to implement organizational changes is limited to transferring
either an office or a function from the Office of the President to another Department or
Agency, and the other way around.7
Only Section 31(1) gives the President a virtual freehand in dealing with the internal
structure of the Office of the President Proper by allowing him to take actions as extreme
as abolition, consolidation or merger of units, apart from the less drastic move of
transferring functions and offices from one unit to another. Again, in Domingo v.
Zamora8 the Court noted:
However, the President's power to reorganize the Office of the President under Section 31
(2) and (3) of EO 292 should be distinguished from his power to reorganize the Office of the
President Proper. Under Section 31 (1) of EO 292, the President can reorganize the Office of
the President Proper by abolishing, consolidating or merging units, or by transferring
functions from one unit to another. In contrast, under Section 31 (2) and (3) of EO 292, the
President's power to reorganize offices outside the Office of the President Proper but still
within the Office of the
President is limited to merely transferring functions or agencies from the Office of the
President to Departments or Agencies, and vice versa.
The distinction between the allowable organizational actions under Section 31(1) on the
one hand and Section 31 (2) and (3) on the other is crucial not only as it affects
employees' tenurial security but also insofar as it touches upon the validity of the
reorganization, that is, whether the executive actions undertaken fall within the limitations
prescribed under E.O. 292. When the PAGC was created under E.O. 12, it was composed of
14

a Chairman and two (2) Commissioners who held the ranks of Presidential Assistant II and
I, respectively,9 and was placed directly "under the Office of the President." 10 On the other
hand, the ODESLA, to which the functions of the PAGC have now been transferred, is an
office within the Office of the President Proper. 11 Since both of these offices belong to the
Office of the President Proper, the reorganization by way of abolishing the PAGC and
transferring its functions to the ODESLA is allowable under Section 31 (1) of E.O. 292.
Petitioner, however, goes on to assert that the President went beyond the authority
granted by E.O. 292 for him to reorganize the executive department since his issuance of
E.O. 13 did not merely involve the abolition of an office but the creation of one as well. He
argues that nowhere in the legal definition laid down by the Court in several cases does a
reorganization include the act of creating an office.
The contention is misplaced.
The Reorganization Did not Entail the Creation of a New, Separate and Distinct Office.
The abolition of the PAGC did not require the creation of a new, additional and distinct
office as the duties and functions that pertained to the defunct anti-graft body were simply
transferred to the ODESLA, which is an existing office within the Office of the President
Proper. The reorganization required no more than a mere alteration of the administrative
structure of the ODESLA through the establishment of a third division the Investigative
and Adjudicatory Division through which ODESLA could take on the additional functions it
has been tasked to discharge under E.O. 13. In Canonizado v. Aguirre, 12 We ruled that
Reorganization takes place when there is an alteration of the existing structure of
government offices or units therein, including the lines of control, authority and
responsibility between them. It involves a reduction of personnel, consolidation of offices,
or abolition thereof by reason of economy or redundancy of functions.
The Reorganization was Pursued in Good Faith.
A valid reorganization must not only be exercised through legitimate authority but must
also be pursued in good faith. A reorganization is said to be carried out in good faith if it is
done for purposes of economy and efficiency. 13It appears in this case that the streamlining
of functions within the Office of the President Proper was pursued with such purposes in
mind.
In its Whereas clauses, E.O. 13 cites as bases for the reorganization the policy dictates of
eradicating corruption in the government and promoting economy and efficiency in the
bureaucracy. Indeed, the economical effects of the reorganization is shown by the fact that
while Congress had initially appropriated P22 Million for the PAGC's operation in the 2010
annual budget,14 no separate or added funding of such a considerable amount was ever
required after the transfer of the PAGC functions to the IAD-ODESLA.
ADMIN LAW CASES SET 7
Apparently, the budgetary requirements that the IAD-ODESLA needed to discharge its
functions and maintain its personnel would be sourced from the following year's
appropriation for the President's Offices under the General Appropriations Act of
2011.15 Petitioner asseverates, however, that since Congress did not indicate the manner
by which the appropriation for the Office of the President was to be distributed, taking
therefrom the operational funds of the IAD-ODESLA would amount to an illegal
appropriation by the President. The contention is without legal basis.
There is no usurpation of the legislative power to appropriate public funds.
In the chief executive dwell the powers to run government. Placed upon him is the power
to recommend the budget necessary for the operation of the Government, 16 which implies
that he has the necessary authority to evaluate and determine the structure that each
government agency in the executive department would need to operate in the most
economical and efficient manner. 17 Hence, the express recognition under Section 78 of R.A.
9970 or the General Appropriations Act of 2010 of the Presidents authority to "direct
changes in the organizational units or key positions in any department or agency." The
aforecited provision, often and consistently included in the general appropriations laws,
recognizes the extent of the Presidents power to reorganize the executive offices and
agencies under him, which is, "even to the extent of modifying and realigning
appropriations for that purpose."18
And to further enable the President to run the affairs of the executive department, he is
likewise given constitutional authority to augment any item in the General Appropriations
Law using the savings in other items of the appropriation for his office. 19 In fact, he is
explicitly allowed by law to transfer any fund appropriated for the different departments,
bureaus, offices and agencies of the Executive Department which is included in the
General Appropriations Act, to any program, project or activity of any department, bureau
or office included in the General Appropriations Act or approved after its enactment. 20
Thus, while there may be no specific amount earmarked for the IAD-ODESLA from the total
amount appropriated by Congress in the annual budget for the Office of the President, the
necessary funds for the IAD-ODESLA may be properly sourced from the President's own
office budget without committing any illegal appropriation. After all, there is no usurpation
of the legislature's power to appropriate funds when the President simply allocates the
existing funds previously appropriated by Congress for his office.
The IAD-ODESLA is a fact-finding and recommendatory body not vested with quasi-judicial
powers.
Petitioner next avers that the IAD-ODESLA was illegally vested with judicial power which is
reserved to the Judicial Department and, by way of exception through an express grant by
the legislature, to administrative agencies. He points out that the name Investigative and
Adjudicatory Division is proof itself that the IAD-ODESLA wields quasi-judicial power.
15

The argument is tenuous. As the OSG aptly explained in its Comment, while the term
21
"adjudicatory" appears part of its appellation, the IAD-ODESLA cannot try and resolve
cases, its authority being limited to the conduct of investigations, preparation of reports
and submission of recommendations. E.O. 13 explicitly states that the IAD-ODESLA shall
"perform powers, functions and duties xxx, of PAGC." 22
Under E.O. 12, the PAGC was given the authority to "investigate or hear administrative
cases or complaints against all presidential appointees in the government" 23 and to
"submit its report and recommendations to the President." 24 The IAD-ODESLA is a fact-
finding and recommendatory body to the President, not having the power to settle
controversies and adjudicate cases. As the Court ruled in Cario v. Commission on Human
Rights,25 and later reiterated in Biraogo v. The Philippine Truth Commission: 26
Fact-finding is not adjudication and it cannot be likened to the judicial function of a court of
justice, or even a quasi-judicial agency or office. The function of receiving evidence and
ascertaining therefrom the facts of a controversy is not a judicial function. To be considered
as such, the act of receiving evidence and arriving at factual conclusions in a controversy
must be accompanied by the authority of applying the law to the factual conclusions to the
end that the controversy may be decided or determined authoritatively, finally and
definitively, subject to such appeals or modes of review as may be provided by law.
The President's authority to issue E.O. 13 and constitute the IAD-ODESLA as his fact-finding
investigator cannot be doubted. After all, as Chief Executive, he is granted full control over
the Executive Department to ensure the enforcement of the laws. Section 17, Article VII of
the Constitution provides:
Section 17. The President shall have control of all the executive departments, bureaus and
offices. He shall ensure that the laws be faithfully executed.
The obligation to see to it that laws are faithfully executed necessitates the corresponding
power in the President to conduct investigations into the conduct of officials and
employees in the executive department.27
The IAD-ODESLA does not encroach upon the powers and duties of the Ombudsman.
Contrary to petitioner's contention, the IAD-ODESLA did not encroach upon the
Ombudsman's primary jurisdiction when it took cognizance of the complaint affidavit filed
against him notwithstanding the earlier filing of criminal and administrative cases involving
the same charges and allegations before the Office of the Ombudsman. The primary
jurisdiction of the Ombudsman to investigate and prosecute cases refers to criminal cases
cognizable by the Sandiganbayan and not to administrative cases. It is only in the exercise
of its primary jurisdiction that the Ombudsman may, at any time, take over the
investigation being conducted by another investigatory agency. Section 15 (1) of R.A. No.
6770 or the Ombudsman Act of 1989, empowers the Ombudsman to
ADMIN LAW CASES SET 7
(1)Investigate and prosecute on its own or on complaint by any person, any act or
omission of any public officer or employee, office or agency, when such act or omission
appears to be illegal, unjust, improper or inefficient. It has primary jurisdiction over cases
cognizable by the Sandiganbayan and, in the exercise of its primary jurisdiction, it may
take over, at any stage, from any investigatory agency of government, the investigation of
such cases. (Emphasis supplied)
Since the case filed before the IAD-ODESLA is an administrative disciplinary case for grave
misconduct, petitioner may not invoke the primary jurisdiction of the Ombudsman to
prevent the IAD-ODESLA from proceeding with its investigation. In any event, the
Ombudsman's authority to investigate both elective and appointive officials in the
government, extensive as it may be, is by no means exclusive. It is shared with other
similarly authorized government agencies.28
While the Ombudsman's function goes into the determination of the existence of probable
cause and the adjudication of the merits of a criminal accusation, the investigative
authority of the IAD- ODESLA is limited to that of a fact-finding investigator whose
determinations and recommendations remain so until acted upon by the President. As
such, it commits no usurpation of the Ombudsman's constitutional duties.
Executive Order No. 13 Does Not Violate Petitioner's Right to Due Process and the Equal
Protection of the Laws.
Petitioner goes on to assail E.O. 13 as violative of the equal protection clause pointing to
the arbitrariness of limiting the IAD-ODESLA's investigation only to presidential appointees
occupying upper-level positions in the government. The equal protection of the laws is a
guaranty against any form of undue favoritism or hostility from the government. 29 It is
embraced under the due process concept and simply requires that, in the application of
the law, "all persons or things similarly situated should be treated alike, both as to rights
conferred and responsibilities imposed."30 The equal protection clause, however, is not
absolute but subject to reasonable classification so that aggrupations bearing substantial
distinctions may be treated differently from each other. This we ruled in Farinas v.
Executive Secretary,31 wherein we further stated that
The equal protection of the law clause is against undue favor and individual or class
privilege, as well as hostile discrimination or the oppression of inequality. It is not intended
to prohibit legislation which is limited either in the object to which it is directed or by
territory within which it is to operate. It does not demand absolute equality among
residents; it merely requires that all persons shall be treated alike, under like
circumstances and conditions both as to privileges conferred and liabilities enforced. The
equal protection clause is not infringed by legislation which applies only to those persons
falling within a specified class, if it applies alike to all persons within such class, and
reasonable grounds exist for making a distinction between those who fall within such class
and those who do not. (Emphasis supplied)
16

Presidential appointees come under the direct disciplining authority of the President. This
proceeds from the well settled principle that, in the absence of a contrary law, the power
to remove or to discipline is lodged in the same authority on which the power to appoint is
vested.32 Having the power to remove and/or discipline presidential appointees, the
President has the corollary authority to investigate such public officials and look into their
conduct in office.33 Petitioner is a presidential appointee occupying the high-level position
of Chairman of the LWUA. Necessarily, he comes under the disciplinary jurisdiction of the
President, who is well within his right to order an investigation into matters that require his
informed decision.
There are substantial distinctions that set apart presidential appointees occupying upper-
level positions in government from non-presidential appointees and those that occupy the
lower positions in government. In Salumbides v. Office of the Ombudsman, 34 we had ruled
extensively on the substantial distinctions that exist between elective and appointive
public officials, thus:
Substantial distinctions clearly exist between elective officials and appointive officials. The
former occupy their office by virtue of the mandate of the electorate. They are elected to
an office for a definite term and may be removed therefrom only upon stringent conditions.
On the other hand, appointive officials hold their office by virtue of their designation
thereto by an appointing authority. Some appointive officials hold their office in a
permanent capacity and are entitled to security of tenure while others serve at the
pleasure of the appointing authority.
ADMIN LAW CASES SET 7
failure to submit his explanation despite notice defeats his subsequent claim of denial of
due process.
Finally, petitioner doubts that the IAD-ODESLA can lawfully perform its duties as an
impartial tribunal, contending that both the IAD-ODESLA and respondent Secretary
Purisima are connected to the President. The mere suspicion of partiality will not suffice to
invalidate the actions of the IAD-ODESLA. Mere allegation is not equivalent to proof. Bias
and partiality
cannot be presumed.38 Petitioner must present substantial proof to show that the lAD-ODES
LA had unjustifiably sided against him in the conduct of the investigation. No such
evidence has been presented as to defeat the presumption of regularity m the
performance of the fact-finding investigator's duties. The assertion, therefore, deserves
scant consideration.
Every law has in its favor the presumption of constitutionality, and to justify its
nullification, there must be a clear and unequivocal breach of the Constitution, not a
doubtful and argumentative one.39 Petitioner has failed to discharge the burden of proving
the illegality of E.O. 13, which IS indubitably a valid exercise of the President's continuing
authority to reorganize the Office of the President.
WHEREFORE, premises considered, the petition IS hereby DISMISSED.

SO ORDERED.
xxxx

An election is the embodiment of the popular will, perhaps the purest expression of the
sovereign power of the people.1wphi1 It involves the choice or selection of candidates to
public office by popular vote. Considering that elected officials are put in office by their
constituents for a definite term, x x x complete deference is accorded to the will of the
electorate that they be served by such officials until the end of the term for which they
were elected. In contrast, there is no such expectation insofar as appointed officials are
concerned. (Emphasis supplied)

Also, contrary to petitioner's assertions, his right to due process was not violated when the
IAD-ODESLA took cognizance of the administrative complaint against him since he was
given sufficient opportunity to oppose the formal complaint filed by Secretary Purisima. In
administrative proceedings, the filing of charges and giving reasonable opportunity for the
person so charged to answer the accusations against him constitute the minimum
requirements of due process,35 which simply means having the opportunity to explain ones
side.36 Hence, as long as petitioner was given the opportunity to explain his side and
present evidence, the requirements of due process are satisfactorily complied with
because what the law abhors is an absolute lack of opportunity to be heard. 37 The records
show that petitioner was issued an Order requiring him to submit his written explanation
under oath with respect to the charge of grave misconduct filed against him. His own

17

G.R. No. 137489 May 29, 2002
COOPERATIVE DEVELOPMENT AUTHORITY, petitioner, vs. DOLEFIL AGRARIAN
REFORM BENEFICIARIES COOPERATIVE, INC., ESMERALDO A. DUBLIN, ALICIA
SAVAREZ, EDNA URETA, ET AL., respondents.
At the core of the instant petition for review on certiorari of the Decision 1 of the Court of
Appeals, 13th Division, in CA-G.R. SP. No. 47933 promulgated on September 9, 1998 and its
Resolution2 dated February 9, 1999 is the issue of whether or not petitioner Cooperative
Development Authority (CDA for brevity) is vested with quasi-judicial authority to
adjudicate intra-cooperative disputes.
The record shows that sometime in the later part of 1997, the CDA received from certain
members of the Dolefil Agrarian Reform Beneficiaries Cooperative, Inc. (DARBCI for
brevity), an agrarian reform cooperative that owns 8,860 hectares of land in Polomolok,
South Cotabato, several complaints alleging mismanagement and/or misappropriation of
funds of DARBCI by the then incumbent officers and members of the board of directors of
the cooperative, some of whom are herein private respondents.
Acting on the complaints docketed as CDA-CO Case No. 97-011, CDA Executive Director
Candelario L. Verzosa, Jr. issued an order 3 dated December 8, 1997 directing the private
respondents to file their answer within ten (10) days from receipt thereof.
Before the private respondents could file their answer, however, CDA Administrator Alberto
P. Zingapan issued on December 15, 1997 an order, 4 upon the motion of the complainants
in CDA-CO Case No. 97-011, freezing the funds of DARBCI and creating a management
committee to manage the affairs of the said cooperative.
On December 18, 1991, the private respondents filed a Petition for Certiorari 5 with a prayer
for preliminary injunction, damages and attorneys fees against the CDA and its officers
namely: Candelario L. Verzosa, Jr. and Alberto P. Zingapan, including the DOLE Philippines
Inc. before the Regional Trial Court (RTC for brevity) of Polomolok, South Cotabato, Branch
39. The petition which was docketed as SP Civil Case No. 25, primarily questioned the
jurisdiction of the CDA to resolve the complaints against the private respondents,
specifically with respect to the authority of the CDA to issue the "freeze order" and to
create a management committee that would run the affairs of DARBCI.
On February 24, 1998, CDA Chairman Jose C. Medina, Jr. issued an order 6 in CDA-CO Case
No. 97-011 placing the private respondents under preventive suspension, hence, paving
the way for the newly-created management committee 7 to assume office on March 10,
1998.
On March 27, 1998, the RTC of Polomolok, South Cotabato, Branch 39, issued a temporary
restraining order8(TRO), initially for seventy-two (72) hours and subsequently extended to
twenty (20) days, in an Order dated March 31, 1998. The temporary restraining order, in
effect, directed the parties to restore status quo ante, thereby enabling the private
respondents to reassume the management of DARBCI.
ADMIN LAW CASES SET 7
The CDA questioned the propriety of the temporary restraining order issued by the RTC of
Polomolok, South Cotabato on March 27, 1998 through a petition for certiorari before the
Court of Appeals, 12th Division, which was docketed as CA-G.R. SP No. 47318.
On April 21, 1998, the Court of Appeals, 12 th Division, issued a temporary restraining
order9 in CA-G.R. SP No. 47318 enjoining the RTC of Polomolok, South Cotabato, Branch 39,
from enforcing the restraining order which the latter court issued on March 27, 1998, and
ordered that the proceedings in SP Civil Case No. 25 be held in abeyance.1wphi1.nt
Consequently, the CDA continued with the proceedings in CDA-CO Case No. 97-011. On
May 26, 1998 CDA Administrator Arcadio S. Lozada issued a resolution 10 which directed the
holding of a special general assembly of the members of DARBCI and the creation of an ad
hoc election committee to supervise the election of officers and members of the board of
directors of DARBCI scheduled on June 14, 1998.
The said resolution of the CDA, issued on May 26, 1998 prompted the private respondents
to file on June 8, 1998 a Petition for Prohibition 11 with a prayer for preliminary mandatory
injunction and temporary restraining order with the Court of Appeals, 13 th Division, which
was docketed as CA-G.R. SP No. 47933. On June 10, 1998, the appellate court issued a
resolution12 restraining the CDA and its administrator, Arcadio S. Lozada, the three (3)
members of the ad hoc election committee or any and all persons acting in their behalf
from proceeding with the election of officers and members of the board of directors of
DARBCI scheduled on June 14, 1998.
Incidentally, on the same date that the Court of Appeals issued a temporary restraining
order in CA-G.R. SP No. 47933 on June 10, 1998, a corporation by the name of Investa Land
Corporation (Investa for brevity) which allegedly executed a "Lease Agreement with Joint
Venture" with DARBCI filed a petition 13 with the RTC of Polomolok, South Cotabato, Branch
39, docketed as SP Civil Case No. 28, essentially seeking the annulment of orders and
resolutions issued by the CDA in CDA-CO Case No. 97-011 with a prayer for temporary
restraining order and preliminary injunction. On the following day, June 11, 1998, the trial
court issued a temporary restraining order 14 enjoining the respondents therein from
proceeding with the scheduled special general assembly and the elections of officers and
members of the board of directors of DARBCI on June 14, 1998. Thereafter, it also issued a
writ of preliminary injunction.
With the issuance of the two (2) restraining orders by the Court of Appeals, 13 th Division,
and the RTC of Polomolok, South Cotabato, Branch 39, on June 10 and 11, 1998,
respectively, the scheduled special general assembly and the election of officers and
members of the board of directors of DARBCI on June 14, 1998 did not take place.
Nevertheless, on July 12, 1998, the majority of the 7,511 members of DARBCI, on their own
initiative, convened a general assembly and held an election of the members of the board
of directors and officers of the cooperative, thereby effectively replacing the private
respondents. Hence, the private respondents filed a Twin Motions for Contempt of Court
and to Nullify Proceedings15 with the Court of Appeals in CA-G.R. SP No. 47933.
18

On September 9, 1998 the Court of Appeals, 13 Division, promulgated its subject
th
appealed Decision16 granting the petition in CA-G.R. SP No. 47933, the dispositive portion
of which reads:
Wherefore, the foregoing considered, the Petition is hereby GRANTED. The Orders
of the respondent Cooperative Development Authority in CDA-CO case No. 97-011
dated 08 December 1997, 15 December 1997, 26 January 1998, 24 February 1998,
03 March 1998, and the Resolution dated 26 May 1998, are hereby declared NULL
AND VOID and of no legal force and effect.
Further, the respondents are hereby ORDERED to perpetually CEASE AND DESIST
from taking any further proceedings in CDA-CO Case No. 97-011.
Lastly, the respondent CDA is hereby ORDERED to REINSTATE the Board of
Directors of DARBCI who were ousted by virtue of the questioned Orders, and to
RESTORE the status quo prior to the filing of CDA-CO Case No. 97-011.
SO ORDERED.
The CDA filed a motion for reconsideration 17 of the Decision in CA-G.R. SP No. 47933 but it
was denied by the Court of Appeals in its assailed Resolution 18 dated February 9, 1999,
thus:
WHEREFORE, the Motion for Reconsideration is hereby DENIED for being patently
without merit.
MOREOVER, acting on petitioners Twin Motion, and in view of the Decision in this
case dated 09, September 1998, the tenor of which gives it legal effect nunc pro
tunc. We therefore hold the 12 July 1998 election of officers, the resolutions passed
during the said assembly, and the subsequent oath-taking of the officers elected
therein, and all actions taken during the said meeting, being in blatant defiance of
a valid restraining order issued by this Court, to be NULL AND VOID AB INITIO AND
OF NO LEGAL FORCE AND EFFECT.
FURTHERMORE, the private respondents are hereby given thirty (30) days from
receipt of this Resolution within which to explain in writing why they should not be
held in contempt of this Court for having openly defied the restraining order dated
10 July 1998. The Hon. Jose C. Medina of the CDA is given a like period to explain in
writing why he should not be cited in contempt for having administered the oath of
the "Board of Officers" pending the effectivity of the restraining order. The
respondent Arcadio S. Lozada, Administrator of the CDA, is likewise given the same
period to explain why he should not be held in contempt for issuing a resolution on
21 July 1998 validating the proceedings of the assembly, and another resolution on
28 August 1998 confirming the election of the officers thereof.
SO ORDERED.
ADMIN LAW CASES SET 7
Hence, the instant petition 19
for review which raises the following assignments of error:
I
THE HONORABLE COURT OF APPEALS, IN NULLIFYING THE ORDERS AND
RESOLUTIONS OF THE COOPERATIVE DEVELOPMENT AUTHORITY IN CDA CO CASE
NO. 97-011, DECIDED A QUESTION OF SUBSTANCE THAT IS NOT IN ACCORD WITH
LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT.
II
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE RULE ON
FORUM-SHOPPING.
III
THE HONORABLE COURT OF APPEALS ERRED IN RENDERING A DECISION ON THE
BASIS OF PURE CONJECTURES AND SURMISES AND HAS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS WHICH CALL FOR AN
EXERCISE OF THIS HONORABLE COURTS SUPERVISION.
Petitioner CDA claims that it is vested with quasi-judicial authority to adjudicate
cooperative disputes in view of its powers, functions and responsibilities under Section 3 of
Republic Act No. 6939.20 The quasi-judicial nature of its powers and functions was
confirmed by the Department of Justice, through the then Acting Secretary of Justice
Demetrio G. Demetria, in DOJ Opinion No. 10, Series of 1995, which was issued in response
to a query of the then Chairman Edna E. Aberina of the CDA, to wit:
Applying the foregoing, the express powers of the CDA to cancel certificates of
registration of cooperatives for non-compliance with administrative requirements
or in cases of voluntary dissolution under Section 3(g), and to mandate and
conciliate disputes within a cooperative or between cooperatives under Section 8
of R.A. No. 6939, may be deemed quasi-judicial in nature.
The reason is that in the performance of its functions such as cancellation of
certificate of registration, it is necessary to establish non-compliance or violation of
administrative requirement. To do so, there arises an indispensable need to hold
hearings, investigate or ascertain facts that possibly constitute non-compliance or
violation and, based on the facts investigated or ascertained, it becomes
incumbent upon the CDA to use its official discretion whether or not to cancel a
cooperatives certificate of registration, thus, clearly revealing the quasi-judicial
nature of the said function. When the CDA acts as a conciliatory body pursuant to
Section 8 of R.A. No. 6939, it in effect performs the functions of an arbitrator.
Arbitrators are by the nature of their functions act in quasi-judicial capacity xxx.
The quasi-judicial nature of the foregoing functions is bolstered by the provisions of
Sections 3(o) of R.A. No. 6939 which grants CDA on (sic) the exercise of other
19

functions as may be necessary to implement the provisions of cooperative laws,
the power to summarily punish for direct contempt any person guilty of
misconduct in the presence thereof who seriously interrupts any hearing or inquiry
with a fine or imprisonment prescribed therein, a power usually granted to make
effective the exercise of quasi-judicial functions.21
Likewise, the Office of the President, through the then Deputy Executive Secretary, Hon.
Leonardo A. Quisumbing, espoused the same view in the case of Alberto Ang, et al. v. The
Board of Directors, Metro Valenzuela Transport Services Cooperative, Inc., O.P. Case No.
51111, when it declared and ruled that:
Concededly, Section 3(o) of R.A. No. 6939 and Article 35(4) of R.A. 6938, may not
be relied upon by the CDA as authority to resolve internal conflicts of cooperatives,
they being general provisions. Nevertheless, this does not preclude the CDA from
resolving the instant case. The assumption of jurisdiction by the CDA on matters
which partake of cooperative disputes is a logical, necessary and direct
consequence of its authority to register cooperatives. Before a cooperative can
acquire juridical personality, registration thereof is a condition sine qua non, and
until and unless the CDA issues a certificate of registration under its official seal,
any cooperative for that matter cannot be considered as having been legally
constituted. To our mind, the grant of this power impliedly carries with it the
visitorial power to entertain cooperative conflicts, a lesser power compared to its
authority to cancel registration certificates when, in its opinion, the cooperative
fails to comply with some administrative requirements (Sec. 2(g), R.A. No.
6939). Evidently, respondents-appellants claim that the CDA is limited to
conciliation and mediation proceedings is bereft of legal basis. Simply stated, the
CDA, in the exercise of such other function and in keeping with the mandate of
the law, could render the decisions and/or resolutions as long as they pertain to
the internal affairs of the public service cooperative, such as the rights and
privileges of its members, the rules and procedures for meetings of the general
assembly, Board of Directors and committees, election and qualifications of
officers, directors and committee members, and allocation and distribution of
surpluses.22
The petitioner avers that when an administrative agency is conferred with quasi-judicial
powers and functions, such as the CDA, all controversies relating to the subject matter
pertaining to its specialization are deemed to be covered within the jurisdiction of said
administrative agency. The courts will not interfere in matters which are addressed to the
sound discretion of government agencies entrusted with the regulation of activities
undertaken upon their special technical knowledge and training.
The petitioner added that the decision in the case of CANORECO v. Hon. Ruben D.
Torres,23 affirmed the adjudicatory powers and functions of CDA contrary to the view held
by the Court of Appeals, when the Supreme Court upheld therein the ruling of the CDA
annulling the election of therein respondents Norberto Ochoa, et al. as officers of the
Camarines Norte Electric Cooperative.
Petitioner CDA also claims that herein private respondents are guilty of forum-shopping by
filing cases in three (3) different fora seeking the same relief. Petitioner pointed out that
ADMIN LAW CASES SET 7
private respondents originally filed a petition with a prayer for preliminary injunction dated
December 17, 1997 before the RTC of Polomolok, South Cotabato which was docketed as
SP Civil Case No. 25. Subsequently, the same private respondents filed another petition
with a prayer for preliminary injunction with the Court of Appeals, 13 th Division, docketed
as CA-G.R. SP No. 47933. Thereafter, Investa, also represented by the same counsel of
private respondents, Atty. Reni Dublin, filed another case with the RTC of Polomolok, South
Cotabato, docketed as SP Civil Case No. 28, likewise praying, among others, for the
issuance of preliminary injunction and an application for a temporary restraining order. In
effect, petitioner was confronted with three (3) TROs issued in three (3) separate actions
enjoining it from enforcing its orders and resolutions in CDA-CO Case No. 97-011.
In their Comment,24 private respondents contend that the instant petition for review
on certiorari filed by CDA Administrator Alberto Zingapan should be dismissed and struck
down as a mere scrap of paper for lack of authority to file the same from the Office of the
Solicitor General and for having been filed without approval from the Board of
Administrators of CDA.
The private respondents also contend that, contrary to the claim of the petitioner, the
powers, functions and responsibilities of the CDA show that it was merely granted
regulatory or supervisory powers over cooperatives in addition to its authority to mediate
and conciliate between parties involving the settlement of cooperative disputes.
Private respondents denied that they are guilty of forum-shopping. They clarified that the
case filed with the RTC of Polomolok, South Cotabato, Branch 39, docketed as SP Civil Case
No. 25, was a petition for certiorari. On the other hand, the case that they filed with the
Court of Appeals, 13th Division, docketed therein as CA-G.R. SP No. 47933, was a petition
for prohibition to stop the holding of a special general assembly and the election of a new
set of DARBCI officers on June 14, 1998 as ordered by the petitioner CDA on May 26, 1998,
which events have not yet occurred at the time the petition for certiorari was filed by the
private respondents with the RTC of Polomolok, South Cotabato, Branch 39.
Private respondents also denied that the filing by Investa of the petition for the declaration
of nullity of the orders and resolutions of petitioner CDA, with a prayer for temporary
restraining order with the RTC of Polomolok, South Cotabato, docketed therein as SP Civil
Case No. 28, constituted forum-shopping on their part. They pointed out that Investa has a
separate juridical personality from DARBCI and that, contrary to the claim of petitioner
CDA, the former is not represented by the lawyer of the private respondents.
By way of reply,25 petitioner claims that Atty. Rogelio P. Madriaga was properly deputized,
among other lawyers, as Special Attorney by the Office of the Solicitor General to represent
the CDA in the instant petition pursuant to the letter 26 of Assistant Solicitor General Carlos
N. Ortega addressed to CDA Chairman Jose C. Medina, Jr. dated April 8, 1999. Likewise, the
filing of the instant petition was an official act of CDA Administrator Alberto P. Zingapan
who was duly appointed by the CDA Board of Administrators as chairman of the Oversight
Committee on Legal Matters per Resolution No. 201, S-1998. 27
Meanwhile, on March 26, 1999, certain persons alleging to be incumbent officers and
members of the board of directors of DARBCI filed a motion to intervene in the instant
20

petition which was granted by this Court per its Resolution dated July 7, 1999. In the
28
same resolution, this Court required both petitioner CDA and the private respondents in
this case to file their respective comments to the petition-in-intervention within ten (10)
days from notice, but both parties failed to comply to do so up to the present.
We note that the instant petition for review on certiorari suffers from a basic infirmity for
lack of the requisite imprimatur from the Office of the Solicitor General, hence, it is
dismissible on that ground. The general rule is that only the Solicitor General can bring or
defend actions on behalf of the Republic of the Philippines and that actions filed in the
name of the Republic, or its agencies and instrumentalities for that matter, if not initiated
by the Solicitor General, will be summarily dismissed. 29
The authority of the Office of the Solicitor General to represent the Republic of the
Philippines, its agencies and instrumentalities, is embodied under Section 35(1), Chapter
12, Title III, Book IV of the Administrative Code of 1987 which provides that:
SEC. 35. Powers and Functions.The Office of the Solicitor General shall represent
the Government of the Philippines, its agencies and instrumentalities and its
officials and agents in any litigation, proceeding, investigation or matter requiring
the services of lawyers. When authorized by the President or head of the office
concerned, it shall also represent government owned or controlled corporations.
The Office of the Solicitor General shall constitute the law office of the Government
and, as such, shall discharge duties requiring the services of lawyers. It shall have
the following specific powers and functions:
(1) Represent the Government in the Supreme Court and the Court of
Appeals in all criminal proceedings; represent the Government and its
officers in the Supreme Court, Court of Appeals, and all other courts or
tribunals in all civil actions and special proceedings in which the
Government or any officer thereof in his official capacity is a party.
The import of the above-quoted provision of the Administrative Code of 1987 is to impose
upon the Office of the Solicitor General the duty to appear as counsel for the Government,
its agencies and instrumentalites and its officials and agents before the Supreme Court,
the Court of Appeals, and all other courts and tribunals in any litigation, proceeding,
investigation or matter requiring the services of a lawyer. Its mandatory character was
emphasized by this Court in the case of Gonzales v. Chavez,30 thus:
It is patent that the intent of the lawmaker was to give the designated official, the
Solicitor General, in this case, the unequivocal mandate to appear for the
government in legal proceedings. Spread out in the laws creating the office is the
discernible intent which may be gathered from the term "shall", which is invariably
employed, from Act No. 136 (1901) to the more recent Executive Order No. 292
(1987).
xxx xxx xxx
ADMIN LAW CASES SET 7
The decision of this Court as early as 1910 with respect to the duties of the
Attorney-General well applies to the Solicitor General under the facts of the
present case. The Court then declared:
In this jurisdiction, it is the duty of the Attorney General to perform the
duties imposed upon him by law and he shall prosecute all causes, civil
and criminal, to which the Government of the Philippine Islands, or any
officer thereof, in his official capacity, is a party xxx.
xxx xxx xxx
The Court is firmly convinced that considering the spirit and the letter of the law,
there can be no other logical interpretation of Sec. 35 of the Administrative Code
than that it is, indeed, mandatory upon the OSG to "represent the Government of
the Philippines, its agencies and instrumentalities and its officials and agents in
any litigation, proceeding, investigation or matter requiring the services of a
lawyer."
As an exception to the general rule, the Solicitor General, in providing legal representation
for the government, is empowered under Section 35(8), Chapter 12, Title III, Book IV of the
Administrative Code of 1987 to "deputize legal officers of government departments,
bureaus, agencies and offices to assist the Solicitor General and appear or represent the
Government in cases involving their respective offices, brought before the courts and
exercise supervision and control over such legal officers with respect to such cases."
Petitioner claims that its counsel of record, Atty. Rogelio P. Madriaga, was deputized by the
Solicitor General to represent the CDA in the instant petition. To prove its claim, the
petitioner attached to its Reply to the Comment dated January 31, 2000, a photocopy of
the alleged deputation letter31 from the Office of the Solicitor General signed by Hon.
Carlos N. Ortega, Assistant Solicitor General, addressed to CDA Chairman Jose C. Medina,
Jr.
A close scrutiny of the alleged deputation letter from the Office of the Solicitor General
shows, however, that said counsel for the petitioner was only "authorized to appear as
counsel in all civil cases in the lower courts (RTCs and MTCs) wherein the CDA is a party-
litigant". Likewise, the same letter appears to be dated April 8, 1999 while the Petition for
Review on Certiorari filed by the petitioner was dated February 26, 1999. Clearly then,
when the petition was filed with this Court on March 3, 1999, Atty. Rogelio P. Madriaga was
not yet deputized by the Office of the Solicitor General to represent the CDA.
Even on the assumption that the alleged letter from the Office of the Solicitor General was
intended to validate or ratify the authority of counsel to represent the petitioner in this
case, the same contains certain conditions, one of which is that petitioner "shall submit to
the Solicitor General, for review, approval and signature, all important pleadings and
motions, including motions to withdraw complaints or appeals, as well as compromise
agreements." Significantly, one of the major pleadings filed subsequently by the petitioner
in this case namely, the Reply to the Respondents Comment on the Petition dated January
31, 2000, does not have any indication that the same was previously submitted to the
21

Office of the Solicitor General for review or approval, much less bear the requisite
signature of the Solicitor General as required in the alleged deputation letter.
Nonetheless, in view of the novelty of the main issue raised in this petition concerning the
nature and scope of jurisdiction of the CDA in the settlement of cooperative disputes as
well as the long standing legal battle involving the management of DARBCI between two
(2) opposing factions that inevitably threatens the very existence of one of the countrys
major cooperatives, this Court has decided to act on and determine the merits of the
instant petition.
Section 3 of R.A. No. 6939 enumerates the powers, functions and responsibilities of the
CDA, thus:
SEC. 3. Powers, Functions and Responsibilities.The Authority shall have the
following powers, functions and responsibilities:
(a) Formulate, adopt and implement integrated and comprehensive plans and
programs on cooperative development consistent with the national policy on
cooperatives and the overall socio-economic development plan of the Government;
(b) Develop and conduct management and training programs upon request of
cooperatives that will provide members of cooperatives with the entrepreneurial
capabilities, managerial expertise, and technical skills required for the efficient
operation of their cooperatives and inculcate in them the true spirit of
cooperativism and provide, when necessary, technical and professional assistance
to ensure the viability and growth of cooperatives with special concern for agrarian
reform, fishery and economically depressed sectors;
(c) Support the voluntary organization and consensual development of activities
that promote cooperative movements and provide assistance to wards upgrading
managerial and technical expertise upon request of the cooperatives concerned;
(d) Coordinate the effects of the local government units and the private sector in
the promotion, organization, and development of cooperatives;
(e) Register all cooperatives and their federations and unions, including their
division, merger, consolidation, dissolution or liquidation. It shall also register the
transfer of all or substantially all of their assets and liabilities and such other
matters as may be required by the Authority;
(f) Require all cooperatives, their federations and unions to submit their annual
financial statements, duly audited by certified public accountants, and general
information sheets;
(g) Order the cancellation after due notice and hearing of the cooperatives
certificate of registration for non-compliance with administrative requirements and
in cases of voluntary dissolution;
ADMIN LAW CASES SET 7
(h) Assist cooperatives in arranging for financial and other forms of assistance
under such terms and conditions as are calculated to strengthen their viability and
autonomy;
(i) Establish extension offices as may be necessary and financially viable to
implement this Act. Initially, there shall be extension offices in the Cities of
Dagupan, Manila, Naga, Iloilo, Cebu, Cagayan de Oro and Davao;
(j) Impose and collect reasonable fees and charges in connection with the
registration of cooperatives;
(k) Administer all grants and donations coursed through the Government for
cooperative development, without prejudice to the right of cooperatives to directly
receive and administer such grants and donations upon agreement with the
grantors and donors thereof;
(l) Formulate and adopt continuing policy initiatives consultation with the
cooperative sector through public hearing;
(m) Adopt rules and regulations for the conduct of its internal operations;
(n) Submit an annual report to the President and Congress on the state of the
cooperative movement;
(o) Exercise such other functions as may be necessary to implement the provisions
of the cooperative laws and, in the performance thereof, the Authority may
summarily punish for direct contempt any person guilty of misconduct in the
presence of the Authority which seriously interrupts any hearing or inquiry with a
fine of not more than five hundred pesos (P500.00) or imprisonment of not more
than ten (10) days, or both. Acts constituting indirect contempt as defined under
Rule 71 of the Rules of Court shall be punished in accordance with the said Rule.
It is a fundamental rule in statutory construction that when the law speaks in clear and
categorical language, there is no room for interpretation, vacillation or equivocation there
is only room for application.32 It can be gleaned from the above-quoted provision of R.A.
No. 6939 that the authority of the CDA is to discharge purely administrative functions
which consist of policy-making, registration, fiscal and technical assistance to cooperatives
and implementation of cooperative laws. Nowhere in the said law can it be found any
express grant to the CDA of authority to adjudicate cooperative disputes. At most, Section
8 of the same law provides that "upon request of either or both parties, the Authority shall
mediate and conciliate disputes with a cooperative or between cooperatives" however,
with a restriction "that if no mediation or conciliation succeeds within three (3) months
from request thereof, a certificate of non-resolution shall be issued by the commission
prior to the filing of appropriate action before the proper courts". Being an administrative
agency, the CDA has only such powers as are expressly granted to it by law and those
which are necessarily implied in the exercise thereof. 33
22

Petitioner CDA, however, insists that its authority to conduct hearings or inquiries and the
express grant to it of contempt powers under Section 3, paragraphs (g) and (o) of R. A. No.
6939, respectively, necessarily vests upon the CDA quasi-judicial authority to adjudicate
cooperative disputes. A review of the records of the deliberations by both chambers of
Congress prior to the enactment of R.A. No. 6939 provides a definitive answer that the CDA
is not vested with quasi-judicial authority to adjudicate cooperative disputes. During the
house deliberations on the then House Bill No. 10787, the following exchange transpired:
MR. AQUINO (A.). The response of the sponsor is not quite clear to this humble
Representation. Let me just point out other provisions under this particular section,
which to the mind of this humble Representation appear to provide this proposed
Authority with certain quasi-judicial functions. Would I be correct in this
interpretation of paragraphs (f) and (g) under this section which state that among
the powers of the Authority are:
To administer the dissolution, disposal of assets and settlement of liabilities
of any cooperative that has been found to be inoperable, inactive or
defunct.
To make appropriate action on cooperatives found to be in violation of any
provision
It appears to the mind of this humble Representation that the proposed Authority
may be called upon to adjudicate in these particular instances. Is it therefore
vested with quasi-judicial authority?
MR. ROMUALDO. No, Mr. Speaker. We have to resort to the courts, for instance, for
the dissolution of cooperatives. The Authority only administers once a cooperative
is dissolved. It is also the CDA which initiates actions against any group of persons
that may use the name of a cooperative to its advantage, that is, if the word
"cooperative" is merely used by it in order to advance its intentions, Mr. Speaker.
MR. AQUINO (A.). So, is the sponsor telling us that the adjudication will have to be
left to the courts of law?
MR. ROMUALDO. To the courts, Mr. Speaker.34
xxx xxx xxx
MR. ADASA. One final question, Mr. Speaker. On page 4, line 33, it seems that one
of the functions given to the Cooperative Development Authority is to recommend
the filing of legal charges against any officer or member of a cooperative accused
of violating the provisions of this Act, existing laws and cooperative by-laws and
other rules and regulations set forth by the government. Would this not conflict
with the function of the prosecuting fiscal?
ADMIN LAW CASES SET 7
MR. ROMUALDO. No, it will be the provincial fiscal that will file the case. The
Authority only recommends the filing of legal charges, that is, of course, after
preliminary investigation conducted by the provincial fiscal or the prosecuting arm
of the government.
MR. ADASA. Does the Gentleman mean to say that the Cooperative Development
Authority can take the place of the private complainant or the persons who are the
offended party if the latter would not pursue the case?
MR. ROMULDO. Yes, Mr. Speaker. The Authority can initiate even the filing of the
charges as embraced and defined on line 33 of page 4 of this proposed bill. 35
xxx xxx xxx
MR. CHIONGBIAN. xxx. Under the same section, line 28, subparagraph (g) says that
the Authority can take appropriate action on cooperatives found to be violating any
provision of this Act, existing laws and cooperative by-laws, and other rules and
regulations set forth by the government by way of withdrawal of Authority
assistance, suspension of operation or cancellation of accreditation.
My question is: If a cooperative, whose officers are liable for wrongdoing, is found
violating any of the provisions of this Act, are we going to sacrifice the existence of
that cooperative just because some of the officers have taken advantage of their
positions and misused some of the funds? It would be very unfair for the Authority
to withdraw its assistance at the expense of the majority. It is not clear as to what
the liabilities of the members of these cooperatives are.
xxx xxx xxx
MR. ROMUALDO. Mr. Speaker, before this action may be taken by the Authority,
there will be due process. However, this provision is applicable in cases where the
cooperative as a whole violated the provisions of this Act as well as existing laws.
In this case, punitive actions may be taken against the cooperative as a body.
With respect to the officials, if they themselves should be punished, then Section
(h) of this chapter provides that legal charges shall be filed by the Cooperative
Development Authority.36
In like manner, the deliberations on Senate Bill No. 485, which was the counterpart of
House Bill No. 10787, yield the same legislative intent not to grant quasi-judicial authority
to the CDA as shown by the following discussions during the period of amendments:
SEN. ALVAREZ. On page 3, between lines 5 and 6, if I may, insert the following as
one of the powers: CONDUCT INQUIRIES, STUDIES, HEARINGS AND
INVESTIGATIONS AND ISSUE ORDERS, DECISIONS AND CIRCULARS AS MAY BE
NECESSARY TO IMPLEMENT ALL LAWS, RULES AND REGULATIONS RELATING TO
COOPERATIVES. THE AGENCY MAY SUMMARILY PUNISH FOR CONTEMPT BY A FINE
23

OF NOT MORE THAN TWO HUNDRED PESOS (P200.00) OR IMPRISONMENT NOT
EXCEEDING TEN (10) DAYS, OR BOTH, ANY PERSONS GUILTY OF SUCH
MISCONDUCT IN THE PRESENCE OF THE AGENCY WHICH SERIOUSLY INTERRUPTS
ANY HEARING OR INVESTIGATION, INCLUDING WILFULL FAILURE OR REFUSAL,
WITHOUT JUST CAUSE, COMPLY WITH A SUMMONS, SUBPOENA, SUBPOENA DUCES
TECUM, DECISION OR ORDER, RULE OR REGULATION, OR, BEING PRESENT AT A
HEARING OR INVESTIGATION, REFUSES TO BE SWORN IN AS A WITNESS OR TO
ANSWER QUESTIONS OR TO FURNISH INFORMATION REQUIRED BY THE AGENCY.
THE SHERIFF AND/OR POLICE AGENCIES OF THE PLACE WHERE THE HEARING OR
INVESTIGATION IS CONDUCTED SHALL, UPON REQUEST OF THE AGENCY, ASSIST IT
TO ENFORCE THE PENALTY.
THE PRESIDENT. That is quite a long amendment. Does the Gentleman have a
written copy of his amendment, so that the Members will have an opportunity to
go over it and examine its implications?
Anyway, why do we not hold in abeyance the proposed amendment? Do we have
that?
xxx xxx xxx
SEN. ALVAREZ. Mr. President, this is almost an inherent power of a registering body.
With the tremendous responsibility that we have assigned to the Authority or the
agencyfor it to be able to function and discharge its mandateit will need this
authority.1wphi1.nt
SEN. AQUINO. Yes, Mr. President, conceptually, we do not like the agency to have
quasi-judicial powers. And, we are afraid that if we empower the agency to conduct
inquiries, studies, hearings and investigations, it might interfere in the autonomous
character of cooperatives. So, I am sorry Mr. President, we dont accept the
amendment.37
The decision to withhold quasi-judicial powers from the CDA is in accordance with the
policy of the government granting autonomy to cooperatives. It was noted that in the past
75 years cooperativism failed to flourish in the Philippines. Of the 23,000 cooperatives
organized under P.D. No. 175, only 10 to 15 percent remained operational while the rest
became dormant. The dismal failure of cooperativism in the Philippines was attributed
mainly to the stifling attitude of the government toward cooperatives. While the
government wished to help, it invariably wanted to control. 38 Also, in its anxious efforts to
push cooperativism, it smothered cooperatives with so much help that they failed to
develop self-reliance. As one cooperative expert put it, "The strong embrace of
government ends with a kiss of death for cooperatives." 39
But then, acknowledging the role of cooperatives as instruments of national development,
the framers of the 1987 Constitution directed Congress under Article XII, Section 15 thereof
to create a centralized agency that shall promote the viability and growth of cooperatives.
Pursuant to this constitutional mandate, the Congress approved on March 10, 1990
Republic Act No. 6939 which is the organic law creating the Cooperative Development
ADMIN LAW CASES SET 7
Authority. Apparently cognizant of the errors in the past, Congress declared in an
unequivocal language that the state shall "maintain the policy of non-interference in the
management and operation of cooperatives."40
After ascertaining the clear legislative intent underlying R.A. No. 6939, effect should be
given to it by the judiciary. 41 Consequently, we hold and rule that the CDA is devoid of any
quasi-judicial authority to adjudicate intra-cooperative disputes and more particularly
disputes as regards the election of the members of the Board of Directors and officers of
cooperatives. The authority to conduct hearings or inquiries and the power to hold any
person in contempt may be exercised by the CDA only in the performance of its
administrative functions under R.A. No. 6939.
The petitioners reliance on the case of CANORECO is misplaced for the reason that the
central issue raised therein was whether or not the Office of the President has the authority
to supplant or reverse the resolution of an administrative agency, specifically the CDA, that
had long became final and on which issue we ruled in the negative. In fact, this Court
declared in the said case that the CDA has no jurisdiction to adjudicate intra-cooperative
disputes thus:42
xxx xxx xxx
Obviously there was a clear case of intra-cooperative dispute. Article 121 of the
Cooperative Code is explicit on how the dispute should be resolved; thus:
ART. 121. Settlement of Disputes. Disputes among members, officers, directors,
and committee members, and intra-cooperative disputes shall, as far as
practicable, be settled amicably in accordance with the conciliation or mediation
mechanisms embodied in the by-laws of the cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled in
a court of competent jurisdiction.
Complementing this Article is Section 8 of R.A. No. 6939, which provides:
SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties,
the [CDA] shall mediate and conciliate disputes with the cooperative or between
cooperatives: Provided, That if no mediation or conciliation succeeds within three
(3) months from request thereof, a certificate of non-resolution shall be issued by
the request thereof, a certificate of non-resolution shall be issued by the
commission prior to the filing of appropriate action before the proper courts.
Likewise, we do not find any merit in the allegation of forum-shopping against the private
respondents. Forum-shopping exists where the elements of litis pendentia are present or
where a final judgment in one case will amount to res judicata in the other.43 The requisites
for the existence of litis pendentia, in turn, are (1) identity of parties or at least such
representing the same interest in both actions; (2) identity of rights asserted as prayed for,
the relief being founded on the same facts; and (3) the identity in both cases is such that
24

the judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata to the other case.44
While there may be identity of parties between SP Civil Case No. 25 filed with the RTC of
Polomolok, South Cotabato, Branch 39, and CA-G.R. SP No. 47933 before the Court of
Appeals, 13th Division, the two (2) other requisites are not present. The Court of Appeals
correctly observed that the case filed with the RTC of Polomolok, South Cotabato was a
petition for certiorari assailing the orders of therein respondent CDA for having been
allegedly issued without or in excess of jurisdiction. On the other hand, the case filed with
the Court of Appeals was a petition for prohibition seeking to restrain therein respondent
from further proceeding with the hearing of the case. Besides, the filing of the petition for
prohibition with the Court of Appeals was necessary after the CDA issued the Order dated
May 26, 1998 which directed the holding of a special general assembly for purposes of
conducting elections of officers and members of the board of DARBCI after the Court of
Appeals, 12th Division, in CA-G.R. SP No. 47318 issued a temporary restraining order
enjoining the proceedings in Special Civil Case No. 25 and for the parties therein to
maintain the status quo. Under the circumstances, the private respondents could not seek
immediate relief before the trial court and hence, they had to seek recourse before the
Court of Appeals via a petition for prohibition with a prayer for preliminary injunction to
forestall the impending damage and injury to them in view of the order issued by the
petitioner on May 26, 1998.
The filing of Special Civil Case No. 28 with the RTC of Polomolok, South Cotabato does not
also constitute forum-shopping on the part of the private respondents. Therein petitioner
Investa, which claims to have a subsisting lease agreement and a joint venture with
DARBCI, is an entity whose juridical personality is separate and distinct from that of private
respondent cooperative or herein individual private respondents and that they have totally
different interests in the subject matter of the case. Moreover, it was incorrect for the
petitioner to charge the private respondents with forum-shopping partly based on its
erroneous claim that DARBCI and Investa were both represented by the same counsel. A
charge of forum-shopping may not be anchored simply on the fact that the counsel for
different petitioners in two (2) cases is one and the same. 45 Besides, a review of the
records of this case shows that the counsel of record of Investa in Special Civil Case No. 28
is a certain Atty. Ignacio D. Debuque, Jr. and not the same counsel representing the private
respondents.46
Anent the petition-in-intervention, the intervenors aver that the Resolution of the Court of
Appeals dated February 9, 1999 in CA-G.R. SP No. 47933 denying the motion for
reconsideration of herein petitioner CDA also invalidated the election of officers and
members of the board of directors of DARBCI held during the special general assembly on
July 12, 1998, thus adversely affecting their substantial rights including their right to due
process. They claim that the object of the order issued by the appellate court on June 10,
1998 was to restrain the holding of the general assembly of DARBCI as directed in the
order of CDA Administrator Arcadio Lozada dated May 26, 1998. In compliance with the
said order of the Court of Appeals, no general assembly was held on June 14, 1998.
However, due to the grave concern over the alleged tyrannical administration and
unmitigated abuses of herein private respondents, the majority of the members of DARBCI,
on their own initiative and in the exercise of their inherent right to assembly under the law
and the 1987 Constitution, convened a general assembly on July 12, 1998. On the said
ADMIN LAW CASES SET 7
occasion, the majority of the members of DARBCI unanimously elected herein petitioners-
in-intervention as new officers and members of the board of directors of DARBCI, 47 and
thereby resulting in the removal of the private respondents from their positions in DARBCI.
Petitioners-in-intervention pointed out that the validity of the general assembly held on July
12, 1998 was never raised as an issue in CA-G.R. SP No. 47933. The petitioners-in-
intervention were not even ordered by the Court of Appeals to file their comment on the
"Twin Motions For Contempt of Court and to Nullify Proceedings" filed by the private
respondents on July 29, 1998.
As earlier noted, the Court of Appeals issued a temporary restraining order 48 in CA-G.R. SP
No. 47933 on June 10, 1998, the pertinent portion of which reads:
Meanwhile, respondents or any and all persons acting in their behalf and stead are
temporarily restrained from proceeding with the election of officers and members
of the board of directors of the Dolefil Agrarian Reform Beneficiaries Cooperative,
Inc. scheduled on June 14, 1998 and or any other date thereafter.
It was also noted that as a consequence of the temporary restraining order issued by the
appellate court, the general assembly and the election of officers and members of the
board of directors of DARBCI, pursuant to the resolution issued by CDA Administrator
Arcadio S. Lozada, did not take place as scheduled on June 14, 1998. However, on July 12,
1998 the majority of the members of DARBCI, at their own initiative, held a general
assembly and elected a new set of officers and members of the board of directors of the
cooperative which resulted in the ouster of the private respondents from their posts in the
said cooperative.
The incident on July 12, 1998 prompted herein private respondents to file their Twin
Motions for Contempt of Court and to Nullify Proceedings on July 26, 1998. The twin
motions prayed, among others, that after due notice and hearing, certain personalities,
including the petitioners-in-intervention, be cited in indirect contempt for their
participation in the subject incident and for the nullification of the election on July 12, 1998
for being illegal, contrary to the by-laws of the cooperative and in defiance of the injunctive
processes of the appellate court.
On September 9, 1998, the Court of Appeals, 13 th Division, rendered a Decision in CA-G.R.
SP No. 47933 which declared the CDA devoid of quasi-judicial jurisdiction to settle the
dispute in CDA-CO Case No. 97-011 without however, taking any action on the "Twin
Motions for Contempt of Court and to Nullify Proceedings" filed by the private respondents.
As it turned out, it was only in its Resolution dated February 9, 1999 denying petitioners
motion for reconsideration of the Decision in CA-G.R. SP No. 47933 that the Court of
Appeals, 13th Division, acted on the "Twin Motions for Contempt of Court and to Nullify
Proceedings" by declaring as null and void the election of the petitioners-in-intervention on
July 12, 1998 as officers and members of the board of directors of DARBCI.
We find, however, that the action taken by the Court of Appeals, 13 th Division, on the "Twin
Motions for Contempt of Court and to Nullify Proceedings" insofar as it nullified the election
of the officers and members of the Board of Directors of DARBCI, violated the constitutional
25
 ADMIN LAW CASES SET 7
right of the petitioners-in-intervention to due process. The requirement of due process is
satisfied if the following conditions are present, namely: (1) there must be a court or
tribunal clothed with judicial power to hear and determine the matter before it; (2)
jurisdiction must be lawfully acquired over the person of the defendant or over the
property which is the subject of the proceedings; (3) the defendant must be given an
opportunity to be heard; and (4) judgment must be rendered upon lawful hearing. 49The
appellate court should have first required the petitioners-in-intervention to file their
comment or opposition to the said "Twin Motions For Contempt Of Court And to Nullify
Proceedings" which also refers to the elections held during the general assembly on July
12, 1998. It was precipitate for the appellate court to render judgment against the
petitioners-in-intervention in its Resolution dated February 9, 1999 without due notice and
opportunity to be heard. Besides, the validity of the general assembly held on July 12,
1998 was not raised as an issue in CA-G.R. SP No. 47933.1wphi1.nt

WHEREFORE, judgment is hereby rendered as follows:

1. The petition for review on certiorari is hereby DENIED for lack of merit. The
orders, resolutions, memoranda and any other acts rendered by petitioner
Cooperative Development Authority in CDA-CO Case No. 97-011 are hereby
declared null and void ab initio for lack of quasi-judicial authority of petitioner to
adjudicate intra-cooperative disputes; and the petitioner is hereby ordered to
cease and desist from taking any further proceedings therein; and

2. In the interest of justice, the dispositive portion of the Resolution of the Court of
Appeals, dated February 9, 1999, in CA-G.R. SP No. 47933, insofar as it nullified the
elections of the members of the Board of Directors and Officers of DARBCI held
during the general assembly of the DARBCI members on July 12, 1998, is
hereby SET ASIDE.

No pronouncement as to costs.

SO ORDERED.

26

G.R. No. L-45839 June 1, 1988
RUFINO MATIENZO, GODOFREDO ESPIRITU, DIOSCORRO FRANCO, AND LA SUERTE
TRANSPORTATION CORPORATION, petitioners, vs. HON. LEOPOLDO M. ABELLERA,
ACTING CHAIRMAN OF THE BOARD OF TRANSPORTATION, HON. GODOFREDO Q.
ASUNCION, MEMBER OF THE BOARD OF TRANSPORTATION, ARTURO DELA CRUZ,
MS TRANSPORTATION CO., INC., NEW FAMILIA TRANSPORTATION CO., ROBERTO
MOJARES, ET AL., respondents.
This is a petition for certiorari and prohibition, with application for preliminary injunction,
seeking the annulment and inhibition of the grant or award of provisional permits or
special authority by the respondent Board of Transportation (BOT) to respondent taxicab
operators, for the operation and legalization of "excess taxicab units" under certain
provisions of Presidential Decree No. 101 "despite the lapse of the power to do so
thereunder," and "in violation of other provisions of the Decree, Letter of Instructions No.
379 and other relevant rules of the BOT."
The petitioners and private respondents are all authorized taxicab operators in Metro
Manila. The respondents, however, admittedly operate "colorum" or "kabit" taxicab units.
On or about the second week of February, 1977, private respondents filed their petitions
with the respondent Board for the legalization of their unauthorized "excess" taxicab units
citing Presidential Decree No. 101, promulgated on January 17, 1973, "to eradicate the
harmful and unlawful trade of clandestine operators, by replacing or allowing them to
become legitimate and responsible operators." Within a matter of days, the respondent
Board promulgated its orders setting the applications for hearing and granting applicants
provisional authority to operate their "excess taxicab units" for which legalization was
sought. Thus, the present petition.
Opposing the applications and seeking to restrain the grant of provisional permits or
authority, as well as the annulment of permits already granted under PD 101, the
petitioners allege that the BOT acted without jurisdiction in taking cognizance of the
petitions for legalization and awarding special permits to the private respondents.
Presidential Decree No. 101 vested in the Board of Transportation the power, among others
"To grant special permits of limited term for the operation of public utility motor vehicles as
may, in the judgment of the Board, be necessary to replace or convert clandestine
operators into legitimate and responsible operators." (Section 1, PD 101)
Citing, however, Section 4 of the Decree which provides:
SEC. 4. Transitory Provision. Six months after the promulgation of this Decree,
the Board of Transportation, the Bureau of Transportation, The Philippine
Constabulary, the city and municipal forces, and the provincial and city fiscals shall
wage a concerted and relentless drive towards the total elimination and
punishment of all clandestine and unlawful operators of public utility motor
vehicles."
ADMIN LAW CASES SET 7
the petitioners argue that neither the Board of Transportation chairman nor any member
thereof had the power, at the time the petitions were filed (i.e. in 1977), to legitimize
clandestine operations under PD 101 as such power had been limited to a period of six (6)
months from and after the promulgation of the Decree on January 17, 1973. They state
that, thereafter, the power lapses and becomes functus officio.
To reinforce their stand, the petitioners refer to certain provisions of the Rules and
Regulations implementing PD 101 issued by respondent Board, Letter of Instructions No.
379, and BOT Memorandum Circular No. 76-25 (a). In summary, these rules provide inter
alia that (1) only applications for special permits for "colorum" or "kabit" operators filed
before July 17, 1973 shall be accepted and processed (Secs. 3 and 16 (c), BOT-LTC-HPG
Joint Regulations Implementing PD 101, pp. 33 and 47, Rollo); (2) Every provisional
authority given to any taxi operator shall be cancelled immediately and no provisional
authority shall thereafter be issued (par. 6, Letter of Instructions No. 379, issued March 10,
1976, p. 58, Rollo); (3) Effective immediately, no provisional authorities on applications for
certificates of public convenience shall be granted or existing provisional authorities on
new applications extended to, among others, taxi denominations in Metro Manila (BOT
Memorandum Circular No. 75-25 (a), August 30, 1976, p. 64, Rollo); (4) All taxis authorized
to operate within Metro Manila shall obtain new special permits from the BOT, which
permits shall be the only ones recognized within the area (par. 8, LOI No. 379, supra); and
(5) No bonafide applicant may apply for special permit to operate, among others, new
taxicab services, and, no application for such new service shall be accepted for filing or
processed by any LTC agency or granted under these regulations by any LTC Regional
Office until after it shall have announced its program of development for these types of
public motor vehicles (Sec. 16d, BOT-LTC-HPG Joint Regulations, p. 47, Rollo).
The petitioners raise the following issues:
I. WHETHER OR NOT THE BOARD OF TRANSPORTATION HAS THE POWER TO GRANT
PROVISIONAL PERMITS TO OPERATE DESPITE THE BAN THEREON UNDER LETTER OF
INSTRUCTIONS NO. 379;
II. WHETHER OR NOT THE BOARD OF TRANSPORTATION HAS THE POWER TO
LEGALIZE, AT THIS TIME, CLANDESTINE AND UNLAWFUL TAXICAB OPERATIONS
UNDER SECTION 1, P.D. 101; AND
III. WHETHER OR NOT THE PROCEDURE BEING FOLLOWED BY THE BOARD IN THE
CASES IN QUESTION SATISFIES THE PROCEDURAL DUE PROCESS REQUIREMENTS.
(p. 119, Rollo)
We need not pass upon the first issue raised anent the grant of provisional authority to
respondents. Considering that the effectivity of the provisional permits issued to the
respondents was expressly limited to June 30, 1977, as evidenced by the BOT orders
granting the same (Annexes G, H, I and J among others) and Memorandum Circular No. 77-
4 dated January 20, 1977 (p. 151, Rollo), implementing paragraph 6 of LOI 379 (ordering
immediate cancellation of all provisional authorities issued to taxicab operators, supra),
which provides:
27

5. After June 30, 1977, all provisional authorities are deemed cancelled, even if
hearings on the main application have not been terminated.
the issue is MOOT and ACADEMIC. Only the issue on legalization remains under
consideration.
Justifying its action on private respondent's applications, the respondent Board emphasizes
public need as the overriding concern. It is argued that under PD 101, it is the fixed policy
of the State "to eradicate the harmful and unlawful trade of clandestine operators by
replacing or allowing them to become legitimate and responsible ones" (Whereas clause,
PD 101). In view thereof, it is maintained that respondent Board may continue to grant to
"colorum" operators the benefits of legalization under PD 101, despite the lapse of its
power, after six (6) months, to do so, without taking punitive measures against the said
operators.
Indeed, a reading of Section 1, PD 101, shows a grant of powers to the respondent Board
to issue provisional permits as a step towards the legalization of colorum taxicab
operations without the alleged time limitation. There is nothing in Section 4, cited by the
petitioners, to suggest the expiration of such powers six (6) months after promulgation of
the Decree. Rather, it merely provides for the withdrawal of the State's waiver of its right
to punish said colorum operators for their illegal acts. In other words, the cited section
declares when the period of moratorium suspending the relentless drive to eliminate illegal
operators shall end. Clearly, there is no impediment to the Board's exercise of jurisdiction
under its broad powers under the Public Service Act to issue certificates of public
convenience to achieve the avowed purpose of PD 101 (Sec. 16a, Public Service Act, Nov.
7, 1936).
It is a settled principle of law that in determining whether a board or commission has a
certain power, the authority given should be liberally construed in the light of the purposes
for which it was created, and that which is incidentally necessary to a full implementation
of the legislative intent should be upheld as being germane to the law. Necessarily, too,
where the end is required, the appropriate means are deemed given (Martin,
Administrative Law, 1979, p. 46). Thus, as averred by the respondents:
... [A]ll things considered, the question is what is the best for the interest of the
public. Whether PD 101 has lost its effectiveness or not, will in no way prevent this
Board from resolving the question in the same candor and spirit that P.D. 101 and
LOI 379 were issued to cope with the multifarious ills that plague our transport
system. ... (Emphasis supplied) (pp. 91-92, Rollo)
This, the private respondents appreciate, as they make reference to PD 101, merely to cite
the compassion with which colorum operators were dealt with under the law. They state
that it is "in the same vein and spirit that this Honorable Board has extended the Decree of
legalization to the operatives of the various PUJ and PUB services along legislative
methods," that respondents pray for authorization of their colorum units in actual
operation in Metro Manila (Petitions for Legalization, Annexes E & F, par. 7, pp. 65-79,
Rollo).
ADMIN LAW CASES SET 7
Anent the petitioners' reliance on the BOT Rules and Regulations Implementing PD 101 as
well as its Memorandum Circular No. 76-25(a), the BOT itself has declared:
In line with its duty to rationalize the transport industry, the Board shall. from time
to time, re- study the public need for public utilities in any area in the Philippines
for the purpose of re- evaluating the policies. (p. 64, Rollo)
Thus, the respondents correctly argue that "as the need of the public changes and
oscillates with the trends of modern life, so must the Memo Orders issued by respondent
jibe with the dynamic and flexible standards of public needs. ... Respondent Board is not
supposed to 'tie its hands' on its issued Memo Orders should public interest demand
otherwise" (Answer of private respondents, p. 121, Rollo).
The fate of the private respondent's petitions is initially for the Board to determine. From
the records of the case, acceptance of the respondent's applications appears to be a
question correctly within the discretion of the respondent Board to decide. As a rule, where
the jurisdiction of the BOT to take cognizance of an application for legalization is settled,
the Court enjoins the exercise thereof only when there is fraud, abuse of discretion or error
of law. Furthermore, the court does not interfere, as a rule, with administrative action prior
to its completion or finality . It is only after judicial review is no longer premature that we
ascertain in proper cases whether the administrative findings are not in violation of law,
whether they are free from fraud or imposition and whether they find substantial support
from the evidence.
Finally, with respect to the last issue raised by the petitioners alleging the denial of due
process by respondent Board in granting the provisional permits to the private respondents
and in taking cognizance of their applications for legalization without notice and hearing,
suffice it to say that PD 101 does not require such notice or hearing for the grant of
temporary authority . The provisional nature of the authority and the fact that the primary
application shall be given a full hearing are the safeguards against its abuse. As to the
applications for legalization themselves, the Public Service Act does enjoin the Board to
give notice and hearing before exercising any of its powers under Sec. 16 thereof.
However, the allegations that due process has been denied are negated by the hearings
set by the Board on the applications as expressed in its orders resolving the petitions for
special permits (Annexes G, H, I, pp. 80-102, Rollo).
The Board stated:
The grounds involved in the petition are of first impression. It cannot resolve the
issue ex-parte. It needs to hear the views of other parties who may have an
interest, or whose interest may be affected by any decision that this Board may
take.
The Board therefore, decides to set the petition for hearing.
xxx xxx xxx
28
 ADMIN LAW CASES SET 7
As to the required notice, it is impossible for the respondent Board to give personal notice
to all parties who may be interested in the matter, which parties are unknown to it. Its
aforementioned order substantially complies with the requirement. The petitioners having
been able to timely oppose the petitions in question, any lack of notice is deemed cured.

WHEREFORE. the petition is hereby DISMISSED for lack of merit. The questioned orders of
the then Board of Transportation are AFFIRMED.

SO ORDERED.

29

G.R. No. 135808 October 6, 2008
SECURITIES AND EXCHANGE COMMISSION, petitioner, vs. INTERPORT RESOURCES
CORPORATION, MANUEL S. RECTO, RENE S. VILLARICA, PELAGIO RICALDE,
ANTONIO REINA, FRANCISCO ANONUEVO, JOSEPH SY and SANTIAGO TANCHAN,
JR., respondents.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 20 August 1998, rendered by the Court of Appeals in C.A.-G.R. SP No.
37036, enjoining petitioner Securities and Exchange Commission (SEC) from taking
cognizance of or initiating any action against the respondent corporation Interport
Resources Corporation (IRC) and members of its board of directors, respondents Manuel S.
Recto, Rene S. Villarica, Pelagio Ricalde, Antonio Reina, Francisco Anonuevo, Joseph Sy and
Santiago Tanchan, Jr., with respect to Sections 8, 30 and 36 of the Revised Securities Act. In
the same Decision of the appellate court, all the proceedings taken against the
respondents, including the assailed SEC Omnibus Orders of 25 January 1995 and 30 March
1995, were declared void.
The antecedent facts of the present case are as follows.
On 6 August 1994, the Board of Directors of IRC approved a Memorandum of Agreement
with Ganda Holdings Berhad (GHB). Under the Memorandum of Agreement, IRC acquired
100% or the entire capital stock of Ganda Energy Holdings, Inc. (GEHI), 2 which would own
and operate a 102 megawatt (MW) gas turbine power-generating barge. The agreement
also stipulates that GEHI would assume a five-year power purchase contract with National
Power Corporation. At that time, GEHI's power-generating barge was 97% complete and
would go on-line by mid-September of 1994. In exchange, IRC will issue to GHB 55% of the
expanded capital stock of IRC amounting to 40.88 billion shares which had a total par value
of P488.44 million.3
On the side, IRC would acquire 67% of the entire capital stock of Philippine Racing Club,
Inc. (PRCI). PRCI owns 25.724 hectares of real estate property in Makati. Under the
Agreement, GHB, a member of the Westmont Group of Companies in Malaysia, shall
extend or arrange a loan required to pay for the proposed acquisition by IRC of PRCI. 4
IRC alleged that on 8 August 1994, a press release announcing the approval of the
agreement was sent through facsimile transmission to the Philippine Stock Exchange and
the SEC, but that the facsimile machine of the SEC could not receive it. Upon the advice of
the SEC, the IRC sent the press release on the morning of 9 August 1994. 5
The SEC averred that it received reports that IRC failed to make timely public disclosures of
its negotiations with GHB and that some of its directors, respondents herein, heavily traded
IRC shares utilizing this material insider information. On 16 August 1994, the SEC Chairman
issued a directive requiring IRC to submit to the SEC a copy of its aforesaid Memorandum
of Agreement with GHB. The SEC Chairman further directed all principal officers of IRC to
appear at a hearing before the Brokers and Exchanges Department (BED) of the SEC to
ADMIN LAW CASES SET 7
explain IRC's failure to immediately disclose the information as required by the Rules on
Disclosure of Material Facts.6
In compliance with the SEC Chairman's directive, the IRC sent a letter dated 16 August
1994 to the SEC, attaching thereto copies of the Memorandum of Agreement. Its directors,
Manuel Recto, Rene Villarica and Pelagio Ricalde, also appeared before the SEC on 22
August 1994 to explain IRC's alleged failure to immediately disclose material information
as required under the Rules on Disclosure of Material Facts. 7
On 19 September 1994, the SEC Chairman issued an Order finding that IRC violated the
Rules on Disclosure of Material Facts, in connection with the Old Securities Act of 1936,
when it failed to make timely disclosure of its negotiations with GHB. In addition, the SEC
pronounced that some of the officers and directors of IRC entered into transactions
involving IRC shares in violation of Section 30, in relation to Section 36, of the Revised
Securities Act.8
Respondents filed an Omnibus Motion, dated 21 September 1994, which was superseded
by an Amended Omnibus Motion, filed on 18 October 1994, alleging that the SEC had no
authority to investigate the subject matter, since under Section 8 of Presidential Decree
No. 902-A,9 as amended by Presidential Decree No. 1758, jurisdiction was conferred upon
the Prosecution and Enforcement Department (PED) of the SEC. Respondents also claimed
that the SEC violated their right to due process when it ordered that the respondents
appear before the SEC and "show cause why no administrative, civil or criminal sanctions
should be imposed on them," and, thus, shifted the burden of proof to the respondents.
Lastly, they sought to have their cases tried jointly given the identical factual situations
surrounding the alleged violation committed by the respondents. 10
Respondents also filed a Motion for Continuance of Proceedings on 24 October 1994,
wherein they moved for discontinuance of the investigations and the proceedings before
the SEC until the undue publicity had abated and the investigating officials had become
reasonably free from prejudice and public pressure.11
No formal hearings were conducted in connection with the aforementioned motions, but on
25 January 1995, the SEC issued an Omnibus Order which thus disposed of the same in this
wise:12
WHEREFORE, premised on the foregoing considerations, the Commission resolves
and hereby rules:
1. To create a special investigating panel to hear and decide the instant case in
accordance with the Rules of Practice and Procedure Before the Prosecution and
Enforcement Department (PED), Securities and Exchange Commission, to be
composed of Attys. James K. Abugan, Medardo Devera (Prosecution and
Enforcement Department), and Jose Aquino (Brokers and Exchanges Department),
30

which is hereby directed to expeditiously resolve the case by conducting
continuous hearings, if possible.
2. To recall the show cause orders dated September 19, 1994 requiring the
respondents to appear and show cause why no administrative, civil or criminal
sanctions should be imposed on them.
3. To deny the Motion for Continuance for lack of merit.
Respondents filed an Omnibus Motion for Partial Reconsideration, 13 questioning the
creation of the special investigating panel to hear the case and the denial of the Motion for
Continuance. The SEC denied reconsideration in its Omnibus Order dated 30 March 1995. 14
The respondents filed a petition before the Court of Appeals docketed as C.A.-G.R. SP No.
37036, questioning the Omnibus Orders dated 25 January 1995 and 30 March
1995.15 During the proceedings before the Court of Appeals, respondents filed a
Supplemental Motion16 dated 16 May 1995, wherein they prayed for the issuance of a writ
of preliminary injunction enjoining the SEC and its agents from investigating and
proceeding with the hearing of the case against respondents herein. On 5 May 1995, the
Court of Appeals granted their motion and issued a writ of preliminary injunction, which
effectively enjoined the SEC from filing any criminal, civil or administrative case against
the respondents herein.17
On 23 October 1995, the SEC filed a Motion for Leave to Quash SEC Omnibus Orders so
that the case may be investigated by the PED in accordance with the SEC Rules and
Presidential Decree No. 902-A, and not by the special body whose creation the SEC had
earlier ordered.18
The Court of Appeals promulgated a Decision 19 on 20 August 1998. It determined that
there were no implementing rules and regulations regarding disclosure, insider trading, or
any of the provisions of the Revised Securities Acts which the respondents allegedly
violated. The Court of Appeals likewise noted that it found no statutory authority for the
SEC to initiate and file any suit for civil liability under Sections 8, 30 and 36 of the Revised
Securities Act. Thus, it ruled that no civil, criminal or administrative proceedings may
possibly be held against the respondents without violating their rights to due process and
equal protection. It further resolved that absent any implementing rules, the SEC cannot
be allowed to quash the assailed Omnibus Orders for the sole purpose of re-filing the same
case against the respondents.20
The Court of Appeals further decided that the Rules of Practice and Procedure Before the
PED, which took effect on 14 April 1990, did not comply with the statutory requirements
contained in the Administrative Code of 1997. Section 8, Rule V of the Rules of Practice and
Procedure Before the PED affords a party the right to be present but without the right to
cross-examine witnesses presented against him, in violation of Section 12(3), Chapter 3,
Book VII of the Administrative Code. 21
ADMIN LAW CASES SET 7
In the dispositive portion of its Decision, dated 20 August 1998, the Court of Appeals ruled
that22:
WHEREFORE, [herein petitioner SEC's] Motion for Leave to Quash SEC Omnibus
Orders is hereby DENIED. The petition for certiorari, prohibition and mandamus
is GRANTED. Consequently, all proceedings taken against [herein respondents] in
this case, including the Omnibus Orders of January 25, 1995 and March 30, 1995
are declared null and void. The writ of preliminary injunction is hereby made
permanent and, accordingly, [SEC] is hereby prohibited from taking
cognizance or initiating any action, be they civil, criminal, or administrative
against [respondents] with respect to Sections 8 (Procedure for Registration), 30
(Insider's duty to disclose when trading) and 36 (Directors, Officers and Principal
Stockholders) in relation to Sections 46 (Administrative sanctions) 56 (Penalties) 44
(Liabilities of Controlling persons) and 45 (Investigations, injunctions and
prosecution of offenses) of the Revised Securities Act and Section 144 (Violations
of the Code) of the Corporation Code. (Emphasis provided.)
The SEC filed a Motion for Reconsideration, which the Court of Appeals denied in a
Resolution23 issued on 30 September 1998.
Hence, the present petition, which relies on the following grounds 24:
I
THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONER'S MOTION FOR
LEAVE TO QUASH THE ASSAILED SEC OMNIBUS ORDERS DATED JANUARY 25 AND
MARCH 30, 1995.
II
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE IS NO STATUTORY
AUTHORITY WHATSOEVER FOR PETITIONER SEC TO INITIATE AND FILE ANY SUIT BE
THEY CIVIL, CRIMINAL OR ADMINISTRATIVE AGAINST RESPONDENT CORPORATION
AND ITS DIRECTORS WITH RESPECT TO SECTION 30 (INSIDER'S DUTY TO
DISCOLSED [sic] WHEN TRADING) AND 36 (DIRECTORS OFFICERS AND PRINCIPAL
STOCKHOLDERS) OF THE REVISED SECURITIES ACT; AND
III
THE COURT OF APPEALS ERRED WHEN IT RULED THAT RULES OF PRACTICE AND
PROSECUTION BEFORE THE PED AND THE SICD RULES OF PROCEDURE ON
ADMINISTRATIVE ACTIONS/PROCEEDINGS25 ARE INVALID AS THEY FAIL TO COMPLY
WITH THE STATUTORY REQUIREMENTS CONTAINED IN THE ADMINISTRATIVE CODE
OF 1987.
31

The petition is impressed with merit.
Before discussing the merits of this case, it should be noted that while this case was
pending in this Court, Republic Act No. 8799, otherwise known as the Securities Regulation
Code, took effect on 8 August 2000. Section 8 of Presidential Decree No. 902-A, as
amended, which created the PED, was already repealed as provided for in Section 76 of the
Securities Regulation Code:
SEC. 76. Repealing Clause. - The Revised Securities Act (Batas Pambansa Blg. 178),
as amended, in its entirety, and Sections 2, 4 and 8 of Presidential Decree 902-A,
as amended, are hereby repealed. All other laws, orders, rules and regulations, or
parts thereof, inconsistent with any provision of this Code are hereby repealed or
modified accordingly.
Thus, under the new law, the PED has been abolished, and the Securities Regulation Code
has taken the place of the Revised Securities Act.
The Court now proceeds with a discussion of the present case.
I. Sctions 8, 30 and 36 of the Revised Securities Act do not require the
enactment of implementing rules to make them binding and effective.
The Court of Appeals ruled that absent any implementing rules for Sections 8, 30 and 36 of
the Revised Securities Act, no civil, criminal or administrative actions can possibly be had
against the respondents without violating their right to due process and equal protection,
citing as its basis the case Yick Wo v. Hopkins.26 This is untenable.
In the absence of any constitutional or statutory infirmity, which may concern Sections 30
and 36 of the Revised Securities Act, this Court upholds these provisions as legal and
binding. It is well settled that every law has in its favor the presumption of validity. Unless
and until a specific provision of the law is declared invalid and unconstitutional, the same
is valid and binding for all intents and purposes. 27 The mere absence of implementing rules
cannot effectively invalidate provisions of law, where a reasonable construction that will
support the law may be given. In People v. Rosenthal,28 this Court ruled that:
In this connection we cannot pretermit reference to the rule that "legislation should
not be held invalid on the ground of uncertainty if susceptible of any reasonable
construction that will support and give it effect. An Act will not be declared
inoperative and ineffectual on the ground that it furnishes no adequate means to
secure the purpose for which it is passed, if men of common sense and reason can
devise and provide the means, and all the instrumentalities necessary for its
execution are within the reach of those intrusted therewith." (25 R.C.L., pp. 810,
811)
ADMIN LAW CASES SET 7
In Garcia v. Executive Secretary, the Court underlined the importance of the presumption
29
of validity of laws and the careful consideration with which the judiciary strikes down as
invalid acts of the legislature:
The policy of the courts is to avoid ruling on constitutional questions and to
presume that the acts of the political departments are valid in the absence of a
clear and unmistakable showing to the contrary. To doubt is to sustain. This
presumption is based on the doctrine of separation of powers which enjoins upon
each department a becoming respect for the acts of the other departments. The
theory is that as the joint act of Congress and the President of the Philippines, a
law has been carefully studied and determined to be in accordance with the
fundamental law before it was finally enacted.
The necessity for vesting administrative authorities with power to make rules and
regulations is based on the impracticability of lawmakers' providing general regulations for
various and varying details of management. 30 To rule that the absence of implementing
rules can render ineffective an act of Congress, such as the Revised Securities Act, would
empower the administrative bodies to defeat the legislative will by delaying the
implementing rules. To assert that a law is less than a law, because it is made to depend
on a future event or act, is to rob the Legislature of the power to act wisely for the public
welfare whenever a law is passed relating to a state of affairs not yet developed, or to
things future and impossible to fully know. 31 It is well established that administrative
authorities have the power to promulgate rules and regulations to implement a given
statute and to effectuate its policies, provided such rules and regulations conform to the
terms and standards prescribed by the statute as well as purport to carry into effect its
general policies. Nevertheless, it is undisputable that the rules and regulations cannot
assert for themselves a more extensive prerogative or deviate from the mandate of the
statute.32Moreover, where the statute contains sufficient standards and an unmistakable
intent, as in the case of Sections 30 and 36 of the Revised Securities Act, there should be
no impediment to its implementation.
The reliance placed by the Court of Appeals in Yick Wo v. Hopkins33 shows a glaring error. In
the cited case, this Court found unconstitutional an ordinance which gave the board of
supervisors authority to refuse permission to carry on laundries located in buildings that
were not made of brick and stone, because it violated the equal protection clause and was
highly discriminatory and hostile to Chinese residents and not because the standards
provided therein were vague or ambiguous.
This Court does not discern any vagueness or ambiguity in Sections 30 and 36 of the
Revised Securities Act, such that the acts proscribed and/or required would not be
understood by a person of ordinary intelligence.
Section 30 of the Revised Securities Act
Section 30 of the Revised Securities Act reads:
32

Sec. 30. Insider's duty to disclose when trading. - (a) It shall be unlawful for
an insider to sell or buy a security of the issuer, if he knows a fact of special
significance with respect to the issuer or the security that is not generally
available, unless (1) the insider proves that the fact is generally available or (2) if
the other party to the transaction (or his agent) is identified, (a) the insider proves
that the other party knows it, or (b) that other party in fact knows it from the
insider or otherwise.
(b) "Insider" means (1) the issuer, (2) a director or officer of, or a person
controlling, controlled by, or under common control with, the issuer, (3) a person
whose relationship or former relationship to the issuer gives or gave him access to
a fact of special significance about the issuer or the security that is not generally
available, or (4) a person who learns such a fact from any of the foregoing insiders
as defined in this subsection, with knowledge that the person from whom he learns
the fact is such an insider.
(c) A fact is "of special significance" if (a) in addition to being material it would be
likely, on being made generally available, to affect the market price of a security to
a significant extent, or (b) a reasonable person would consider it especially
important under the circumstances in determining his course of action in the light
of such factors as the degree of its specificity, the extent of its difference from
information generally available previously, and its nature and reliability.
(d) This section shall apply to an insider as defined in subsection (b) (3) hereof only
to the extent that he knows of a fact of special significance by virtue of his being
an insider.
The provision explains in simple terms that the insider's misuse of nonpublic and
undisclosed information is the gravamen of illegal conduct. The intent of the law is the
protection of investors against fraud, committed when an insider, using secret information,
takes advantage of an uninformed investor. Insiders are obligated to disclose material
information to the other party or abstain from trading the shares of his corporation. This
duty to disclose or abstain is based on two factors: first, the existence of a relationship
giving access, directly or indirectly, to information intended to be available only for a
corporate purpose and not for the personal benefit of anyone; and second, the inherent
unfairness involved when a party takes advantage of such information knowing it is
unavailable to those with whom he is dealing.34
In the United States (U.S.), the obligation to disclose or abstain has been traditionally
imposed on corporate "insiders," particularly officers, directors, or controlling stockholders,
but that definition has since been expanded.35 The term "insiders" now includes persons
whose relationship or former relationship to the issuer gives or gave them access to a fact
of special significance about the issuer or the security that is not generally available, and
one who learns such a fact from an insider knowing that the person from whom he learns
the fact is such an insider. Insiders have the duty to disclose material facts which are
known to them by virtue of their position but which are not known to persons with whom
ADMIN LAW CASES SET 7
they deal and which, if known, would affect their investment judgment. In some cases,
however, there may be valid corporate reasons for the nondisclosure of material
information. Where such reasons exist, an issuer's decision not to make any public
disclosures is not ordinarily considered as a violation of insider trading. At the same time,
the undisclosed information should not be improperly used for non-corporate purposes,
particularly to disadvantage other persons with whom an insider might transact, and
therefore the insider must abstain from entering into transactions involving such
securities.36
Respondents further aver that under Section 30 of the Revised Securities Act, the SEC still
needed to define the following terms: "material fact," "reasonable person," "nature
and reliability" and "generally available." 37In determining whether or not these terms
are vague, these terms must be evaluated in the context of Section 30 of the Revised
Securties Act. To fully understand how the terms were used in the aforementioned
provision, a discussion of what the law recognizes as a fact of special significance is
required, since the duty to disclose such fact or to abstain from any transaction is imposed
on the insider only in connection with a fact of special significance.
Under the law, what is required to be disclosed is a fact of "special significance" which
may be (a) a material fact which would be likely, on being made generally available, to
affect the market price of a security to a significant extent, or (b) one which a reasonable
person would consider especially important in determining his course of action with regard
to the shares of stock.
(a) Material Fact - The concept of a "material fact" is not a new one. As early as 1973, the
Rules Requiring Disclosure of Material Facts by Corporations Whose Securities Are Listed In
Any Stock Exchange or Registered/Licensed Under the Securities Act, issued by the SEC on
29 January 1973, explained that "[a] fact is material if it induces or tends to induce or
otherwise affect the sale or purchase of its securities." Thus, Section 30 of the Revised
Securities Act provides that if a fact affects the sale or purchase of securities, as well as its
price, then the insider would be required to disclose such information to the other party to
the transaction involving the securities. This is the first definition given to a "fact of special
significance."
(b.1) Reasonable Person - The second definition given to a fact of special significance
involves the judgment of a "reasonable person." Contrary to the allegations of the
respondents, a "reasonable person" is not a problematic legal concept that needs to be
clarified for the purpose of giving effect to a statute; rather, it is the standard on which
most of our legal doctrines stand. The doctrine on negligence uses the discretion of the
"reasonable man" as the standard.38 A purchaser in good faith must also take into account
facts which put a "reasonable man" on his guard. 39 In addition, it is the belief of the
reasonable and prudent man that an offense was committed that sets the criteria for
probable cause for a warrant of arrest.40 This Court, in such cases, differentiated the
reasonable and prudent man from "a person with training in the law such as a prosecutor
or a judge," and identified him as "the average man on the street," who weighs facts and
circumstances without resorting to the calibrations of our technical rules of evidence of
33

which his knowledge is nil. Rather, he relies on the calculus of common sense of which all
reasonable men have in abundance. 41 In the same vein, the U.S. Supreme Court similarly
determined its standards by the actual significance in the deliberations of a "reasonable
investor," when it ruled in TSC Industries, Inc. v. Northway, Inc., 42 that the determination of
materiality "requires delicate assessments of the inferences a reasonable shareholder'
would draw from a given set of facts and the significance of those inferences to him."
(b.2) Nature and Reliability - The factors affecting the second definition of a "fact of
special significance," which is of such importance that it is expected to affect the judgment
of a reasonable man, were substantially lifted from a test of materiality pronounced in the
case In the Matter of Investors Management Co., Inc. 43:
Among the factors to be considered in determining whether information is material
under this test are the degree of its specificity, the extent to which it differs from
information previously publicly disseminated, and its reliability in light of its nature
and source and the circumstances under which it was received.
It can be deduced from the foregoing that the "nature and reliability" of a significant fact in
determining the course of action a reasonable person takes regarding securities must be
clearly viewed in connection with the particular circumstances of a case. To enumerate all
circumstances that would render the "nature and reliability" of a fact to be of special
significance is close to impossible. Nevertheless, the proper adjudicative body would
undoubtedly be able to determine if facts of a certain "nature and reliability" can influence
a reasonable person's decision to retain, sell or buy securities, and thereafter explain and
justify its factual findings in its decision.
(c) Materiality Concept - A discussion of the "materiality concept" would be relevant to
both a material fact which would affect the market price of a security to a significant
extent and/or a fact which a reasonable person would consider in determining his or her
cause of action with regard to the shares of stock. Significantly, what is referred to in our
laws as a fact of special significance is referred to in the U.S. as the "materiality concept"
and the latter is similarly not provided with a precise definition. In Basic v. Levinson,44 the
U.S. Supreme Court cautioned against confining materiality to a rigid formula, stating thus:
A bright-line rule indeed is easier to follow than a standard that requires the
exercise of judgment in the light of all the circumstances. But ease of application
alone is not an excuse for ignoring the purposes of the Securities Act and
Congress' policy decisions. Any approach that designates a single fact or
occurrence as always determinative of an inherently fact-specific finding such as
materiality, must necessarily be overinclusive or underinclusive.
Moreover, materiality "will depend at any given time upon a balancing of both the
indicated probability that the event will occur and the anticipated magnitude of the event
in light of the totality of the company activity." 45 In drafting the Securities Act of 1934, the
U.S. Congress put emphasis on the limitations to the definition of materiality:
ADMIN LAW CASES SET 7
Although the Committee believes that ideally it would be desirable to have
absolute certainty in the application of the materiality concept, it is its view that
such a goal is illusory and unrealistic. The materiality concept is judgmental in
nature and it is not possible to translate this into a numerical formula.
The Committee's advice to the [SEC] is to avoid this quest for certainty
and to continue consideration of materiality on a case-by-case basis as
disclosure problems are identified." House Committee on Interstate and
Foreign Commerce, Report of the Advisory Committee on Corporate Disclosure to
the Securities and Exchange Commission, 95th Cong., 1st Sess., 327 (Comm.Print
1977). (Emphasis provided.)46
(d) Generally Available - Section 30 of the Revised Securities Act allows the insider the
defense that in a transaction of securities, where the insider is in possession of facts of
special significance, such information is "generally available" to the public. Whether
information found in a newspaper, a specialized magazine, or any cyberspace media be
sufficient for the term "generally available" is a matter which may be adjudged given the
particular circumstances of the case. The standards cannot remain at a standstill. A
medium, which is widely used today was, at some previous point in time, inaccessible to
most. Furthermore, it would be difficult to approximate how the rules may be applied to the
instant case, where investigation has not even been started. Respondents failed to allege
that the negotiations of their agreement with GHB were made known to the public through
any form of media for there to be a proper appreciation of the issue presented.
Section 36(a) of the Revised Securities Act
As regards Section 36(a) of the Revised Securities Act, respondents claim that the term
"beneficial ownership" is vague and that it requires implementing rules to give effect to the
law. Section 36(a) of the Revised Securities Act is a straightforward provision that imposes
upon (1) a beneficial owner of more than ten percent of any class of any equity security or
(2) a director or any officer of the issuer of such security, the obligation to submit a
statement indicating his or her ownership of the issuer's securities and such changes in his
or her ownership thereof. The said provision reads:
Sec. 36. Directors, officers and principal stockholders. - (a) Every person who
is directly or indirectly the beneficial owner of more than ten per centum of any
[class] of any equity security which is registered pursuant to this Act, or who is [a]
director or an officer of the issuer of such security, shall file, at the time of the
registration of such security on a securities exchange or by the effective date of a
registration statement or within ten days after he becomes such a beneficial
owner, director or officer, a statement with the Commission and, if such security is
registered on a securities exchange, also with the exchange, of the amount of all
equity securities of such issuer of which he is the beneficial owner, and within ten
days after the close of each calendar month thereafter, if there has been a change
in such ownership during such month, shall file with the Commission, and if such
security is registered on a securities exchange, shall also file with the exchange, a
statement indicating his ownership at the close of the calendar month and such
34

changes in his ownership as have occurred during such calendar month. (Emphasis
provided.)
Section 36(a) refers to the "beneficial owner." Beneficial owner has been defined in the
following manner:
[F]irst, to indicate the interest of a beneficiary in trust property (also called
"equitable ownership"); and second, to refer to the power of a corporate
shareholder to buy or sell the shares, though the shareholder is not registered in
the corporation's books as the owner. Usually, beneficial ownership is distinguished
from naked ownership, which is the enjoyment of all the benefits and privileges of
ownership, as against possession of the bare title to property. 47
Even assuming that the term "beneficial ownership" was vague, it would not affect
respondents' case, where the respondents are directors and/or officers of the corporation,
who are specifically required to comply with the reportorial requirements under Section
36(a) of the Revised Securities Act. The validity of a statute may be contested only by one
who will sustain a direct injury as a result of its enforcement. 48
Sections 30 and 36 of the Revised Securities Act were enacted to promote full disclosure in
the securities market and prevent unscrupulous individuals, who by their positions obtain
non-public information, from taking advantage of an uninformed public. No individual
would invest in a market which can be manipulated by a limited number of corporate
insiders. Such reaction would stifle, if not stunt, the growth of the securities market. To
avert the occurrence of such an event, Section 30 of the Revised Securities Act prevented
the unfair use of non-public information in securities transactions, while Section 36 allowed
the SEC to monitor the transactions entered into by corporate officers and directors as
regards the securities of their companies.
In the case In the Matter of Investor's Management Co.,49 it was cautioned that "the broad
language of the anti-fraud provisions," which include the provisions on insider trading,
should not be "circumscribed by fine distinctions and rigid classifications." The ambit of
anti-fraud provisions is necessarily broad so as to embrace the infinite variety of deceptive
conduct.50
In Tatad v. Secretary of Department of Energy,51 this Court brushed aside a contention,
similar to that made by the respondents in this case, that certain words or phrases used in
a statute do not set determinate standards, declaring that:
Petitioners contend that the words "as far as practicable," "declining" and "stable"
should have been defined in R.A. No. 8180 as they do not set determinate and
determinable standards. This stubborn submission deserves scant consideration.
The dictionary meanings of these words are well settled and cannot confuse men
of reasonable intelligence. x x x. The fear of petitioners that these words will result
in the exercise of executive discretion that will run riot is thus groundless. To be
ADMIN LAW CASES SET 7
sure, the Court has sustained the validity of similar, if not more general standards
in other cases.
Among the words or phrases that this Court upheld as valid standards were "simplicity and
dignity,"52 "public interest,"53 and "interests of law and order."54
The Revised Securities Act was approved on 23 February 1982. The fact that the Full
Disclosure Rules were promulgated by the SEC only on 24 July 1996 does not render
ineffective in the meantime Section 36 of the Revised Securities Act. It is already
unequivocal that the Revised Securities Act requires full disclosure and the Full Disclosure
Rules were issued to make the enforcement of the law more consistent, efficient and
effective. It is equally reasonable to state that the disclosure forms later provided by the
SEC, do not, in any way imply that no compliance was required before the forms were
provided. The effectivity of a statute which imposes reportorial requirements cannot be
suspended by the issuance of specified forms, especially where compliance therewith may
be made even without such forms. The forms merely made more efficient the processing of
requirements already identified by the statute.
For the same reason, the Court of Appeals made an evident mistake when it ruled that no
civil, criminal or administrative actions can possibly be had against the respondents in
connection with Sections 8, 30 and 36 of the Revised Securities Act due to the absence of
implementing rules. These provisions are sufficiently clear and complete by themselves.
Their requirements are specifically set out, and the acts which are enjoined are
determinable. In particular, Section 8 55 of the Revised Securities Act is a straightforward
enumeration of the procedure for the registration of securities and the particular matters
which need to be reported in the registration statement thereof. The Decision, dated 20
August 1998, provides no valid reason to exempt the respondent IRC from such
requirements. The lack of implementing rules cannot suspend the effectivity of these
provisions. Thus, this Court cannot find any cogent reason to prevent the SEC from
exercising its authority to investigate respondents for violation of Section 8 of the Revised
Securities Act.
II. The right to cross-examination is not absolute and cannot be demanded
during investigative proceedings before the PED.
In its assailed Decision dated 20 August 1998, the Court of Appeals pronounced that the
PED Rules of Practice and Procedure was invalid since Section 8, Rule V 56 thereof failed to
provide for the parties' right to cross-examination, in violation of the Administrative Code
of 1987 particularly Section 12(3), Chapter 3, Book VII thereof. This ruling is incorrect.
Firstly, Section 4, Rule I of the PED Rules of Practice and Procedure, categorically stated
that the proceedings before the PED are summary in nature:
Section 4. Nature of Proceedings - Subject to the requirements of due process,
proceedings before the "PED" shall be summary in nature not necessarily adhering
35

to or following the technical rules of evidence obtaining in the courts of law. The
Rules of Court may apply in said proceedings in suppletory character whenever
practicable.
Rule V of the PED Rules of Practice and Procedure further specified that:
Section 5. Submission of Documents - During the preliminary conference/hearing,
or immediately thereafter, the Hearing Officer may require the parties to
simultaneously submit their respective verified position papers accompanied by all
supporting documents and the affidavits of their witnesses, if any which shall take
the place of their direct testimony. The parties shall furnish each other with copies
of the position papers together with the supporting affidavits and documents
submitted by them.
Section 6. Determination of necessity of hearing. - Immediately after the
submission by the parties of their position papers and supporting documents, the
Hearing Officer shall determine whether there is a need for a formal hearing. At
this stage, he may, in his discretion, and for the purpose of making such
determination, elicit pertinent facts or information, including documentary
evidence, if any, from any party or witness to complete, as far as possible, the
facts of the case. Facts or information so elicited may serve as basis for his
clarification or simplifications of the issues in the case. Admissions and stipulation
of facts to abbreviate the proceedings shall be encouraged.
Section 7. Disposition of Case. If the Hearing Officer finds no necessity of further
hearing after the parties have submitted their position papers and supporting
documents, he shall so inform the parties stating the reasons therefor and shall
ask them to acknowledge the fact that they were so informed by signing the
minutes of the hearing and the case shall be deemed submitted for resolution.
As such, the PED Rules provided that the Hearing Officer may require the parties to submit
their respective verified position papers, together with all supporting documents and
affidavits of witnesses. A formal hearing was not mandatory; it was within the discretion of
the Hearing Officer to determine whether there was a need for a formal hearing. Since,
according to the foregoing rules, the holding of a hearing before the PED is discretionary,
then the right to cross-examination could not have been demanded by either party.
Secondly, it must be pointed out that Chapter 3, Book VII of the Administrative Code,
entitled "Adjudication," does not affect the investigatory functions of the agencies. The law
creating the PED, Section 8 of Presidential Decree No. 902-A, as amended, defines the
authority granted to the PED, thus:
SEC. 8. The Prosecution and Enforcement Department shall have, subject to the
Commission's control and supervision, the exclusive authority to investigate,
on complaint or motu proprio, any act or omission of the Board of
ADMIN LAW CASES SET 7
Directors/Trustees of corporations, or of partnerships, or of other associations, or of
their stockholders, officers or partners, including any fraudulent devices, schemes
or representations, in violation of any law or rules and regulations administered
and enforced by the Commission; to file and prosecute in accordance with law
and rules and regulations issued by the Commission and in appropriate cases, the
corresponding criminal or civil case before the Commission or the proper court or
body upon prima facie finding of violation of any laws or rules and regulations
administered and enforced by the Commission; and to perform such other powers
and functions as may be provided by law or duly delegated to it by the
Commission. (Emphasis provided.)
The law creating PED empowers it to investigate violations of the rules and regulations
promulgated by the SEC and to file and prosecute such cases. It fails to mention any
adjudicatory functions insofar as the PED is concerned. Thus, the PED Rules of Practice and
Procedure need not comply with the provisions of the Administrative Code on adjudication,
particularly Section 12(3), Chapter 3, Book VII.
In Cario v. Commission on Human Rights,57 this Court sets out the distinction between
investigative and adjudicative functions, thus:
"Investigate," commonly understood, means to examine, explore, inquire or delve
or probe into, research on, study. The dictionary definition of "investigate" is "to
observe or study closely; inquire into systematically: "to search or inquire into" xx
to subject to an official probe xx: to conduct an official inquiry." The purpose of an
investigation, of course is to discover, to find out, to learn, obtain information.
Nowhere included or intimated is the notion of settling, deciding or resolving a
controversy involved in the facts inquired into by application of the law to the facts
established by the inquiry.
The legal meaning of "investigate" is essentially the same: "(t)o follow up step by
step by patient inquiry or observation. To trace or track; to search into; to examine
and inquire into with care and accuracy; to find out by careful inquisition;
examination; the taking of evidence; a legal inquiry;" "to inquire; to make an
investigation," "investigation" being in turn described as "(a)n administrative
function, the exercise of which ordinarily does not require a hearing. 2 Am J2d Adm
L Sec. 257; xx an inquiry, judicial or otherwise, for the discovery and collection of
facts concerning a certain matter or matters."
"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate,
judge, decide, determine, resolve, rule on, settle. The dictionary defines the term
as "to settle finally (the rights and duties of parties to a court case) on the merits
of issues raised: xx to pass judgment on: settle judicially: xx act as judge." And
"adjudge" means "to decide or rule upon as a judge or with judicial or quasi-judicial
powers: xx to award or grant judicially in a case of controversy x x x."
36

In a legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To
determine finally. Synonymous with adjudge in its strictest sense;" and "adjudge" means:
"To pass on judicially, to decide, settle, or decree, or to sentence or condemn. x x x Implies
a judicial determination of a fact, and the entry of a judgment."
There is no merit to the respondent's averment that the sections under Chapter 3, Book VII
of the Administrative Code, do not distinguish between investigative and adjudicatory
functions. Chapter 3, Book VII of the Administrative Code, is unequivocally entitled
"Adjudication."
Respondents insist that the PED performs adjudicative functions, as enumerated under
Section 1(h) and (j), Rule II; and Section 2(4), Rule VII of the PED Rules of Practice and
Procedure:
Section 1. Authority of the Prosecution and Enforcement Department - Pursuant to
Presidential Decree No. 902-A, as amended by Presidential Decree No. 1758, the
Prosecution and Enforcement Department is primarily charged with the following:
xxxx
(h) Suspends or revokes, after proper notice and hearing in accordance with these
Rules, the franchise or certificate of registration of corporations, partnerships or
associations, upon any of the following grounds:
1. Fraud in procuring its certificate of registration;
2. Serious misrepresentation as to what the corporation can do or is doing to the
great prejudice of or damage to the general public;
3. Refusal to comply or defiance of any lawful order of the Commission restraining
commission of acts which would amount to a grave violation of its franchise;
xxxx
(j) Imposes charges, fines and fees, which by law, it is authorized to collect;
xxxx
Section 2. Powers of the Hearing Officer. The Hearing Officer shall have the
following powers:
xxxx
ADMIN LAW CASES SET 7
4. To cite and/or declare any person in direct or indirect contempt in accordance
with pertinent provisions of the Rules of Court.
Even assuming that these are adjudicative functions, the PED, in the instant case,
exercised its investigative powers; thus, respondents do not have the requisite standing to
assail the validity of the rules on adjudication. A valid source of a statute or a rule can only
be contested by one who will sustain a direct injury as a result of its enforcement. 58 In the
instant case, respondents are only being investigated by the PED for their alleged failure to
disclose their negotiations with GHB and the transactions entered into by its directors
involving IRC shares. The respondents have not shown themselves to be under any
imminent danger of sustaining any personal injury attributable to the exercise of
adjudicative functions by the SEC. They are not being or about to be subjected by the PED
to charges, fees or fines; to citations for contempt; or to the cancellation of their certificate
of registration under Section 1(h), Rule II of the PED Rules of Practice and Procedure.
To repeat, the only powers which the PED was likely to exercise over the respondents were
investigative in nature, to wit:
Section 1. Authority of the Prosecution and Enforcement Department - Pursuant to
Presidential Decree No. 902-A, as amended by Presidential Decree No. 1758, the
Prosecution and Enforcement Department is primarily charged with the following:
xxxx
b. Initiates proper investigation of corporations and partnerships or persons, their
books, records and other properties and assets, involving their business
transactions, in coordination with the operating department involved;
xxxx
e. Files and prosecutes civil or criminal cases before the Commission and other
courts of justice involving violations of laws and decrees enforced by the
Commission and the rules and regulations promulgated thereunder;
f. Prosecutes erring directors, officers and stockholders of corporations and
partnerships, commercial paper issuers or persons in accordance with the
pertinent rules on procedures;
The authority granted to the PED under Section 1(b), (e), and (f), Rule II of the PED Rules of
Practice and Procedure, need not comply with Section 12, Chapter 3, Rule VII of the
Administrative Code, which affects only the adjudicatory functions of administrative
bodies. Thus, the PED would still be able to investigate the respondents under its rules for
their alleged failure to disclose their negotiations with GHB and the transactions entered
into by its directors involving IRC shares.
37

This is not to say that administrative bodies performing adjudicative functions are required
to strictly comply with the requirements of Chapter 3, Rule VII of the Administrative Code,
particularly, the right to cross-examination. It should be noted that under Section 2.2 of
Executive Order No. 26, issued on 7 October 1992, abbreviated proceedings are prescribed
in the disposition of administrative cases:
2. Abbreviation of Proceedings. All administrative agencies are hereby directed to
adopt and include in their respective Rules of Procedure the following provisions:
xxxx
2.2 Rules adopting, unless otherwise provided by special laws and without
prejudice to Section 12, Chapter 3, Book VII of the Administrative Code of 1987,
the mandatory use of affidavits in lieu of direct testimonies and the preferred use
of depositions whenever practicable and convenient.
As a consequence, in proceedings before administrative or quasi-judicial bodies, such as
the National Labor Relations Commission and the Philippine Overseas Employment Agency,
created under laws which authorize summary proceedings, decisions may be reached on
the basis of position papers or other documentary evidence only. They are not bound by
technical rules of procedure and evidence. 59 In fact, the hearings before such agencies do
not connote full adversarial proceedings.60 Thus, it is not necessary for the rules to require
affiants to appear and testify and to be cross-examined by the counsel of the adverse
party. To require otherwise would negate the summary nature of the administrative or
quasi-judicial proceedings.61 In Atlas Consolidated Mining and Development Corporation v.
Factoran, Jr.,62 this Court stated that:
[I]t is sufficient that administrative findings of fact are supported by evidence, or
negatively stated, it is sufficient that findings of fact are not shown to be
unsupported by evidence. Substantial evidence is all that is needed to support an
administrative finding of fact, and substantial evidence is "such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion."
In order to comply with the requirements of due process, what is required, among other
things, is that every litigant be given reasonable opportunity to appear and defend his
right and to introduce relevant evidence in his favor.63
ADMIN LAW CASES SET 7
As a rule, an absolute repeal of a penal law has the effect of depriving the court of
its authority to punish a person charged with violation of the old law prior to its
repeal. This is because an unqualified repeal of a penal law constitutes a legislative
act of rendering legal what had been previously declared as illegal, such that the
offense no longer exists and it is as if the person who committed it never did so.
There are, however, exceptions to the rule. One is the inclusion of a saving clause
in the repealing statute that provides that the repeal shall have no effect on
pending actions. Another exception is where the repealing act reenacts the
former statute and punishes the act previously penalized under the old law. In such
instance, the act committed before the reenactment continues to be an offense in
the statute books and pending cases are not affected, regardless of whether the
new penalty to be imposed is more favorable to the accused. (Emphasis provided.)
In the present case, a criminal case may still be filed against the respondents despite the
repeal, since Sections 8, 65 12,66 26,67 2768 and 2369 of the Securities Regulations Code
impose duties that are substantially similar to Sections 8, 30 and 36 of the repealed
Revised Securities Act.
Section 8 of the Revised Securities Act, which previously provided for the registration of
securities and the information that needs to be included in the registration statements,
was expanded under Section 12, in connection with Section 8 of the Securities Regulations
Code. Further details of the information required to be disclosed by the registrant are
explained in the Amended Implementing Rules and Regulations of the Securities
Regulations Code, issued on 30 December 2003, particularly Sections 8 and 12 thereof.
Section 30 of the Revised Securities Act has been reenacted as Section 27 of the Securities
Regulations Code, still penalizing an insider's misuse of material and non-public
information about the issuer, for the purpose of protecting public investors. Section 26 of
the Securities Regulations Code even widens the coverage of punishable acts, which intend
to defraud public investors through various devices, misinformation and omissions.
Section 23 of the Securities Regulations Code was practically lifted from Section 36(a) of
the Revised Securities Act. Both provisions impose upon (1) a beneficial owner of more
than ten percent of any class of any equity security or (2) a director or any officer of the
issuer of such security, the obligation to submit a statement indicating his or her
ownership of the issuer's securities and such changes in his or her ownership thereof.

Clearly, the legislature had not intended to deprive the courts of their authority to punish a
III. The Securities Regulations Code did not repeal Sections 8, 30 and 36 of the
person charged with violation of the old law that was repealed; in this case, the Revised
Revised Securities Act since said provisions were reenacted in the new law.
Securities Act.

The Securities Regulations Code absolutely repealed the Revised Securities Act. While the
IV. The SEC retained the jurisdiction to investigate violations of the Revised
absolute repeal of a law generally deprives a court of its authority to penalize the person
Securities Act, reenacted in the Securities Regulations Code, despite the
charged with the violation of the old law prior to its appeal, an exception to this rule comes
abolition of the PED.
about when the repealing law punishes the act previously penalized under the old law. The
Court, in Benedicto v. Court of Appeals, sets down the rules in such instances:64

38

Section 53 of the Securities Regulations Code clearly provides that criminal complaints for
violations of rules and regulations enforced or administered by the SEC shall be referred to
the Department of Justice (DOJ) for preliminary investigation, while the SEC nevertheless
retains limited investigatory powers. 70 Additionally, the SEC may still impose the
appropriate administrative sanctions under Section 54 of the aforementioned law. 71
In Morato v. Court of Appeals,72 the cases therein were still pending before the PED for
investigation and the SEC for resolution when the Securities Regulations Code was
enacted. The case before the SEC involved an intra-corporate dispute, while the subject
matter of the other case investigated by the PED involved the schemes, devices, and
violations of pertinent rules and laws of the company's board of directors. The enactment
of the Securities Regulations Code did not result in the dismissal of the cases; rather, this
Court ordered the transfer of one case to the proper regional trial court and the SEC to
continue with the investigation of the other case.
The case at bar is comparable to the aforecited case. In this case, the SEC already
commenced the investigative proceedings against respondents as early as 1994.
Respondents were called to appear before the SEC and explain their failure to disclose
pertinent information on 14 August 1994. Thereafter, the SEC Chairman, having already
made initial findings that respondents failed to make timely disclosures of their
negotiations with GHB, ordered a special investigating panel to hear the case. The
investigative proceedings were interrupted only by the writ of preliminary injunction issued
by the Court of Appeals, which became permanent by virtue of the Decision, dated 20
August 1998, in C.A.-G.R. SP No. 37036. During the pendency of this case, the Securities
Regulations Code repealed the Revised Securities Act. As in Morato v. Court of Appeals, the
repeal cannot deprive SEC of its jurisdiction to continue investigating the case; or the
regional trial court, to hear any case which may later be filed against the respondents.
V. The instant case has not yet prescribed.
Respondents have taken the position that this case is moot and academic, since any
criminal complaint that may be filed against them resulting from the SEC's investigation of
this case has already prescribed.73 They point out that the prescription period applicable to
offenses punished under special laws, such as violations of the Revised Securities Act, is
twelve years under Section 1 of Act No. 3326, as amended by Act No. 3585 and Act No.
3763, entitled "An Act to Establish Periods of Prescription for Violations Penalized by
Special Acts and Municipal Ordinances and to Provide When Prescription Shall Begin to
Act."74 Since the offense was committed in 1994, they reasoned that prescription set in as
early as 2006 and rendered this case moot. Such position, however, is incongruent with
the factual circumstances of this case, as well as the applicable laws and jurisprudence.
It is an established doctrine that a preliminary investigation interrupts the prescription
period.75 A preliminary investigation is essentially a determination whether an offense has
been committed, and whether there is probable cause for the accused to have committed
an offense:
ADMIN LAW CASES SET 7
A preliminary investigation is merely inquisitorial, and it is often the only means of
discovering the persons who may be reasonably charged with a crime, to enable
the fiscal to prepare the complaint or information. It is not a trial of the case on the
merits and has no purpose except that of determining whether a crime has been
committed or whether there is probable cause to believe that the accused is guilty
thereof.76
Under Section 45 of the Revised Securities Act, which is entitled Investigations, Injunctions
and Prosecution of Offenses, the Securities Exchange Commission (SEC) has the authority
to "make such investigations as it deems necessary to determine whether any person has
violated or is about to violate any provision of this Act XXX." After a finding that a person
has violated the Revised Securities Act, the SEC may refer the case to the DOJ for
preliminary investigation and prosecution.
While the SEC investigation serves the same purpose and entails substantially similar
duties as the preliminary investigation conducted by the DOJ, this process cannot simply
be disregarded. In Baviera v. Paglinawan, 77 this Court enunciated that a criminal complaint
is first filed with the SEC, which determines the existence of probable cause, before a
preliminary investigation can be commenced by the DOJ. In the aforecited case, the
complaint filed directly with the DOJ was dismissed on the ground that it should have been
filed first with the SEC. Similarly, the offense was a violation of the Securities Regulations
Code, wherein the procedure for criminal prosecution was reproduced from Section 45 of
the Revised Securities Act. 78 This Court affirmed the dismissal, which it explained thus:
The Court of Appeals held that under the above provision, a criminal complaint for
violation of any law or rule administered by the SEC must first be filed with the
latter. If the Commission finds that there is probable cause, then it should refer the
case to the DOJ. Since petitioner failed to comply with the foregoing procedural
requirement, the DOJ did not gravely abuse its discretion in dismissing his
complaint in I.S. No. 2004-229.
A criminal charge for violation of the Securities Regulation Code is a specialized
dispute. Hence, it must first be referred to an administrative agency of special
competence, i.e., the SEC. Under the doctrine of primary jurisdiction, courts will not
determine a controversy involving a question within the jurisdiction of the
administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the specialized knowledge and expertise of said
administrative tribunal to determine technical and intricate matters of fact. The
Securities Regulation Code is a special law. Its enforcement is particularly vested in
the SEC. Hence, all complaints for any violation of the Code and its implementing
rules and regulations should be filed with the SEC. Where the complaint is criminal
in nature, the SEC shall indorse the complaint to the DOJ for preliminary
investigation and prosecution as provided in Section 53.1 earlier quoted.
We thus agree with the Court of Appeals that petitioner committed a fatal
procedural lapse when he filed his criminal complaint directly with the DOJ. Verily,
39

no grave abuse of discretion can be ascribed to the DOJ in dismissing petitioner's
complaint.
The said case puts in perspective the nature of the investigation undertaken by the SEC,
which is a requisite before a criminal case may be referred to the DOJ. The Court declared
that it is imperative that the criminal prosecution be initiated before the SEC, the
administrative agency with the special competence.
It should be noted that the SEC started investigative proceedings against the respondents
as early as 1994. This investigation effectively interrupted the prescription period.
However, said proceedings were disrupted by a preliminary injunction issued by the Court
of Appeals on 5 May 1995, which effectively enjoined the SEC from filing any criminal, civil,
or administrative case against the respondents herein. 79 Thereafter, on 20 August 1998,
the appellate court issued the assailed Decision in C.A. G.R. SP. No. 37036 ordering that the
writ of injunction be made permanent and prohibiting the SEC from taking cognizance of
and initiating any action against herein respondents. The SEC was bound to comply with
the aforementioned writ of preliminary injunction and writ of injunction issued by the Court
of Appeals enjoining it from continuing with the investigation of respondents for 12 years.
Any deviation by the SEC from the injunctive writs would be sufficient ground for contempt.
Moreover, any step the SEC takes in defiance of such orders will be considered void for
having been taken against an order issued by a court of competent jurisdiction.
An investigation of the case by any other administrative or judicial body would likewise be
impossible pending the injunctive writs issued by the Court of Appeals. Given the ruling of
this Court in Baviera v. Paglinawan,80 the DOJ itself could not have taken cognizance of the
case and conducted its preliminary investigation without a prior determination of probable
cause by the SEC. Thus, even presuming that the DOJ was not enjoined by the Court of
Appeals from conducting a preliminary investigation, any preliminary investigation
conducted by the DOJ would have been a futile effort since the SEC had only started with
its investigation when respondents themselves applied for and were granted an injunction
by the Court of Appeals.
Moreover, the DOJ could not have conducted a preliminary investigation or filed a criminal
case against the respondents during the time that issues on the effectivity of Sections 8,
30 and 36 of the Revised Securities Act and the PED Rules of Practice and Procedure were
still pending before the Court of Appeals. After the Court of Appeals declared the
aforementioned statutory and regulatory provisions invalid and, thus, no civil, criminal or
administrative case may be filed against the respondents for violations thereof, the DOJ
would have been at a loss, as there was no statutory provision which respondents could be
accused of violating.
Accordingly, it is only after this Court corrects the erroneous ruling of the Court of Appeals
in its Decision dated 20 August 1998 that either the SEC or DOJ may properly conduct any
kind of investigation against the respondents for violations of Sections 8, 30 and 36 of the
Revised Securities Act. Until then, the prescription period is deemed interrupted.
ADMIN LAW CASES SET 7
To reiterate, the SEC must first conduct its investigations and make a finding of probable
cause in accordance with the doctrine pronounced in Baviera v. Paglinawan. 81 In this case,
the DOJ was precluded from initiating a preliminary investigation since the SEC was halted
by the Court of Appeals from continuing with its investigation. Such a situation leaves the
prosecution of the case at a standstill, and neither the SEC nor the DOJ can conduct any
investigation against the respondents, who, in the first place, sought the injunction to
prevent their prosecution. All that the SEC could do in order to break the impasse was to
have the Decision of the Court of Appeals overturned, as it had done at the earliest
opportunity in this case. Therefore, the period during which the SEC was prevented from
continuing with its investigation should not be counted against it. The law on the
prescription period was never intended to put the prosecuting bodies in an impossible bind
in which the prosecution of a case would be placed way beyond their control; for even if
they avail themselves of the proper remedy, they would still be barred from investigating
and prosecuting the case.
Indubitably, the prescription period is interrupted by commencing the proceedings for the
prosecution of the accused. In criminal cases, this is accomplished by initiating the
preliminary investigation. The prosecution of offenses punishable under the Revised
Securities Act and the Securities Regulations Code is initiated by the filing of a complaint
with the SEC or by an investigation conducted by the SEC motu proprio. Only after a
finding of probable cause is made by the SEC can the DOJ instigate a preliminary
investigation. Thus, the investigation that was commenced by the SEC in 1995, soon after
it discovered the questionable acts of the respondents, effectively interrupted the
prescription period. Given the nature and purpose of the investigation conducted by the
SEC, which is equivalent to the preliminary investigation conducted by the DOJ in criminal
cases, such investigation would surely interrupt the prescription period.
VI. The Court of Appeals was justified in denying SEC's Motion for Leave to
Quash SEC Omnibus Orders dated 23 October 1995.
The SEC avers that the Court of Appeals erred when it denied its Motion for Leave to Quash
SEC Omnibus Orders, dated 23 October 1995, in the light of its admission that the PED had
the sole authority to investigate the present case. On this matter, this Court cannot agree
with the SEC.
In the assailed decision, the Court of Appeals denied the SEC's Motion for Leave to Quash
SEC Omnibus Orders, since it found other issues that were more important than whether or
not the PED was the proper body to investigate the matter. Its refusal was premised on its
earlier finding that no criminal, civil, or administrative case may be filed against the
respondents under Sections 8, 30 and 36 of the Revised Securities Act, due to the absence
of any implementing rules and regulations. Moreover, the validity of the PED Rules on
Practice and Procedure was also raised as an issue. The Court of Appeals, thus, reasoned
that if the quashal of the orders was granted, then it would be deprived of the opportunity
to determine the validity of the aforementioned rules and statutory provisions. In addition,
the SEC would merely pursue the same case without the Court of Appeals having
determined whether or not it may do so in accordance with due process requirements.
40
 ADMIN LAW CASES SET 7
Absent a determination of whether the SEC may file a case against the respondents based
on the assailed provisions of the Revised Securities Act, it would have been improper for
the Court of Appeals to grant the SEC's Motion for Leave to Quash SEC Omnibus Orders.

In all, this Court rules that no implementing rules were needed to render effective Sections
8, 30 and 36 of the Revised Securities Act; nor was the PED Rules of Practice and Procedure
invalid, prior to the enactment of the Securities Regulations Code, for failure to provide
parties with the right to cross-examine the witnesses presented against them. Thus, the
respondents may be investigated by the appropriate authority under the proper rules of
procedure of the Securities Regulations Code for violations of Sections 8, 30, and 36 of the
Revised Securities Act.82

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. This Court hereby
REVERSES the assailed Decision of the Court of Appeals promulgated on 20 August 1998 in
CA-G.R. SP No. 37036 and LIFTS the permanent injunction issued pursuant thereto. This
Court further DECLARES that the investigation of the respondents for violations of
Sections 8, 30 and 36 of the Revised Securities Act may be undertaken by the proper
authorities in accordance with the Securities Regulations Code. No costs.

SO ORDERED.

41
 ADMIN LAW CASES SET 7

G.R. NO. 160422 July 5, 2010

METRO ELECTRIC COMPANY (MERALCO), Petitioner vs. SPS. EDITO and FELICIDAD Our Inspection Office has referred to us for appropriate action the following finding(s) of
CHUA, and JOSEFINA PAQUEO, Respondents. our service inspectors and meter laboratory technicians after your metering installation at
the above address was inspected on OCTOBER 31, 1996:

1. THE TERMINAL SEAL WAS MISSING.

Manila Electric Company (MERALCO or petitioner) assails in this petition for review
2. THE SEALING WIRE OF THE ERB AND MERALCO LEAD COVER SEALS WAS CUT.
on certiorari[1] the decision of the Court of Appeals (CA or appellate court), dated October
3. THE 1000TH, 100TH AND 10TH DIAL POINTERS OF THE REGISTER WERE OUT OF
20, 2003,[2] in CA-G.R. SP No. 77034, affirming with modification the March 26, 2003
ALIGNMENT.
decision of the Regional Trial Court (RTC) of Quezon City, Branch 82, in Civil Case No. Q-97-
30503.[3]
Given the above condition(s) and in accordance with the rules implementing Republic Act
7832, you are billed the amount of P183,983.66 (rate charge of P179,353.26 and energy
The affirmed RTC decision ordered the petitioner to restore the electric power connection
tax of P4,630.40). Furthermore, the company is now allowed to collect Surcharges as a
of spouses Edito and Felicidad Chua (Chuas) at their residence, and awarded P300,000.00
penalty for all Violation of Contract cases apprehended effective January 17, 1995, which
as moral damages. The CA affirmed the restoration of electric power connection but
would be collected later.
reduced the awarded moral damages to P100,000.00.
This is a formal demand upon you to pay the above stated amount at this office within ten
BACKGROUND FACTS
days from your receipt of this letter; if no settlement is made within the given grace
period, your service shall be disconnected and the necessary criminal or civil action
The facts, as found by the RTC and affirmed by the CA, are summarized below.
initiated against you for violation of Republic Act 7832. [10]
MERALCO is a utility company engaged in the business of sale and distribution of electricity
The Chuas refused to pay as demanded. On January 24, 1997, MERALCO returned to their
within its franchise area. The Chuas are the beneficial users at their residence of electric
residence and removed Meter No. 33RZN80082, thereby disconnecting their electric
service provided by MERALCO, registered under the name of respondent Josefina Paqueo
supply.
with Account Number 05091-4038-14. MERALCO installed an electric meter with number
Co. No. 33 SPN 46170 in front of the Chuas home to record the Chuas electric
On February 5, 1997, MERALCO sent the Chuas another demand letter stating that it had
consumption. The meter was in a concrete post outside the Chuas perimeter fence.[4]
re-evaluated the Chuas case based on field findings and the documents they furnished,
and reduced the amount they had to pay from P183,983.66 to P71,737.49.[11]
From June 11, 1996 to September 11, 1996, the Chuas consumed between 231 to 269
kilowatt hours of electricity per month, with their corresponding monthly electric bills
On March 11, 1997, the Chuas filed a complaint for mandamus and damages, [12] praying
ranging from P747.84 to P887.27. In October 1996, the Chuas were surprised to receive an
that they be granted a preliminary mandatory injunction to compel MERALCO to restore
electricity bill for the amount of P4,906.87 for the period of September 11 to October 11,
the electrical connection to their residence. The Chuas also asked the court to award them
1996 (September 1996 bill). According to this bill, they consumed 1,297 kilowatt hours for
moral and exemplary damages, attorneys fees, and litigation expenses.
this one month period, or approximately 553% higher than their previous monthly bill.
[5]
Alarmed by the significant increase, Florence Chua (the Chuas daughter) went to the
After trial, the RTC rendered its decision, whose dispositive portion states:
MERALCO office to question the bill. Florence paid the bill under protest to avoid
disconnection.
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs
and against the defendant ordering the latter as follows:
On October 31, 1996, MERALCO responded to the Chuas complaint by sending a
representative, Francisco Jose Albano, to their residence to inspect the electric
1) To restore to plaintiffs at their residence at #9 Hukvet St., Area
meter. Albano filed a Meter/Socket Inspection Report stating that he replaced the old
I, Veterans Village, Quezon City their electric power connection and/or services;
meter[6] and installed a new one[7] because the old meters terminal seal was missing, the
2) To pay the plaintiffs the sum of P300,000.00 as and by way of moral damages;
cover seal was broken, and the meter had a broken sealing wire.[8]
3) To pay the plaintiffs the sum of P30,000.00 as and by way of attorneys fees;
4) To pay the cost of suit.
The Chuas were billed based on the new meter and its readings from October 11,
1996 to January 24, 1997, with an average usage ranging from 227 to 254 kilowatt hours,
SO ORDERED.[13]
with corresponding monthly electric bills ranging from P700.00 to P800.00.[9]
MERALCO appealed the trial courts decision to the CA.
On January 3, 1997, the Chuas received a letter from MERALCO, stating that:

42

The CA affirmed the RTC decision. The appellate court confirmed that the meter had
[14]
been tampered, but found that the tampering was mitigated by the Chuas voluntary act of
going to MERALCO to report the possible defect in their meter. The voluntary act, according
to the court, constituted good faith as MERALCO would not have discovered the defects in
the meter if the Chuas had not reported the matter.
The appellate court also noted that while Section 6 of Republic Act No. 7832 (RA 7832), or
the Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994, allows
MERALCO to immediately disconnect electric service, it may only do so when the owner of
the house has either been caught in flagrante delicto in any of the acts constituting prima
facie evidence of illegal use, or has been discovered a second time in any of the
enumerated circumstances. In the Chuas case, they were not caught in flagrante delicto as
they in fact reported the defect in their meter. This was the first instance, too, that
MERALCO had discovered any tampering in the Chuas meter. Under these circumstances,
the appellate court concluded that MERALCO had no legal right to disconnect the Chuas
electrical service.
While upholding the RTCs factual findings, the CA modified the RTC decision by reducing
the awarded moral damages from P300,000.00 to P100,000.00.
THE PETITION
MERALCO filed the present petition, raising the following arguments: [15]
I. The CA erred in ruling that MERALCO had no right to disconnect the electric
service of the Chuas.
II. MERALCO is entitled to collect the differential billing of P183,983.66.
III. Even assuming that MERALCO had no right to disconnect the Chuas electric
service, they are nevertheless not entitled to moral damages in the absence of evidence of
damages they sustained.
MERALCO points out that it did not immediately disconnect electric service to the Chuas. It
first sent several demand letters explaining the meter tampering and demanding payment
for the billed differential in the sum of P183,983.66. It was only after the Chuas refused to
pay the differential billing that MERALCO disconnected their electric service.
Additionally, MERALCO contends that based on Section 9 of RA 7832, no writs of injunction
shall be issued by any court against any private electric utility exercising its right and
authority to disconnect electric service unless there is prima facie evidence that the
disconnection was made with evident bad faith or grave abuse of authority. Since the
Chuas failed to prove MERALCOs evident bad faith in disconnecting their electric service,
they are not entitled to an injunctive writ.
MERALCO further posits that the deliberate manipulation of the dial pointers prevented the
full and correct billing of the electric energy actually delivered to and consumed by the
Chuas. The differential billing represents the monetary equivalent of the electricity used by
the Chuas but not registered by the meter.
Lastly, MERALCO maintains that even if it had no right to disconnect the Chuas electric
service, the Chuas nevertheless are not entitled to moral damages. The Chuas did not
ADMIN LAW CASES SET 7
sustain damages after the disconnection since they sourced their electric supply from
another electric meter within the premises.
THE COURTS RULING
We deny the petition for lack of merit.
Prima facie evidence of
illegal use of electricity
MERALCO claims that the meter tampering in this case stands undisputed in the evidence
on record. Under RA 7832, the law presumes that the person benefited by the unlawful use
of electricity is the perpetrator of the meter tampering. Thus, no need arose for MERALCO
to prove that the Chuas actually tampered with their meter; pursuant to Section 4 of RA
7832, Meralco had the right to immediately disconnect the Chuas electric service.
We find MERALCOs position legally incorrect. Essential to the resolution of this issue
is Section 4 of RA 7832, which reads:
SEC. 4. Prima Facie Evidence.
(a) The presence of any of the following circumstances shall constitute prima
facie evidence of illegal use of electricity, as defined in this Act, by the person benefited
thereby, and shall be the basis for: (1) the immediate disconnection by the electric utility
to such person after due notice, x x x
(iv) The presence of a tampered, broken, or fake seal on the meter, or mutilated, altered,
or tampered meter recording chart or graph or computerized chart, graph, or log.
xxx
(viii) x x x Provided, however, That the discovery of any of the foregoing circumstances, in
order to constitute prima facie evidence, must be personally witnessed and attested to by
an officer of the law or a duly authorized representative of the Energy Regulatory
Board (ERB).
To reiterate, the discovery of a tampered, broken, or fake seal on the meter shall only
constitute prima facie evidence of illegal use of electricity by the person who benefits from
the illegal use if such discovery is personally witnessed and attested to by an officer of the
law or a duly authorized representative of the Energy Regulatory Board (ERB). With
such prima facie evidence, MERALCO is within its rights to immediately disconnect the
electric service of the consumer after due notice.
Section 1, Rule III of the Rules and Regulations Implementing RA 7832 (IRR) defines an
officer of the law as one who, by direct supervision of law or by election or by appointment
by competent authority, is charged with the maintenance of public order and the
protection and security of life and property, such as barangay captain, barangay chairman,
barangay councilman, barangay leader, officer or member of Barangay Community
Brigades, barangay policeman, PNP policeman, municipal councilor, municipal mayor and
provincial fiscal.
43

The importance of having an authorized government representative present during an
inspection was highlighted during the Senate deliberations on RA 7832 when Senator John
H. Osmea, the laws author, explained:
Mr. President, if a utility like MERALCO finds certain circumstances or situations which are
listed in Section 2 of this bill to be prima facie evidence, I think they should be prudent
enough to bring in competent authority, either the police or the NBI, to verify or
substantiate their finding. If they were to summarily proceed to disconnect on the basis of
their findings and later on there would be a court case and the customer or the user would
deny the existence of what is listed in Section 2, then they could be in a lot of trouble. [16]
We emphasized the significance of this requirement in Sps. Quisumbing v. MERALCO,
[17]
when we said:
The presence of government agents who may authorize immediate disconnections go into
the essence of due process. Indeed, we cannot allow respondent to act virtually as
prosecutor and judge in imposing the penalty of disconnection due to alleged meter
tampering. That would not sit well in a democratic country. After all, Meralco is a monopoly
that derives its power from the government. Clothing it with unilateral authority to
disconnect would be equivalent to giving it a license to tyrannize its hapless customers. [18]
After thoroughly examining the records of this case, we find no proof that MERALCO ever
complied with the required presence of an officer of the law. In his testimony, Albanonever
mentioned that he was accompanied by an authorized government representative during
the inspection. As evident from the Meter/Socket Inspection Report, only Albanoinspected
the Chuas electric meter; no evidence shows that he was accompanied by anyone else.
Most telling of all, MERALCO does not even allege in its submissions with this Court that an
ERB representative or an officer of the law ever accompanied its representative during the
inspection of the Chuas electric meter.
We note, too, that while MERALCO claimed in its Answer that an ERB representative was
present and witnessed the testing of the Chuas electric meter at the MERALCO laboratory,
[19]
it never once identified this ERB representative. MERALCO did not allege in either the
present petition or in the Memorandum it filed with this Court that an ERB representative
witnessed the laboratory testing of the Chuas electric meter. The Meter Verification Report,
[20]
the document that contains the results of the laboratory testing, was also not signed by
either an ERB representative or by any officer of the law.
For lack of any evidence showing that a government representative personally witnessed
and attested to the discovery of the Chuas tampered electric meter, no supporting prima
facie evidence can be invoked for the immediate disconnection of the Chuas electric
service pursuant to Section 4 of RA 7832.
Consumer not the proper witness to inspection
ADMIN LAW CASES SET 7
Rule III, Section 1 of the IRR provides: In order to constitute prima facie evidence, the
discovery of any of the circumstances enumerated in Section 1 hereof, must be personally
witnessed and attested to by the consumer concerned or a duly authorized ERB
representative or any officer of the law, as the case may be.
We hold the view, however, that the inclusion of the phrase by the consumer concerned in
the IRR is invalid because it is in excess of what the law being implemented provides. As
RA 7832 stands, only the presence of an authorized government agent, either an officer of
the law or an authorized representative of the ERB, during the MERALCO inspection
would allow any of the circumstances enumerated in Section 4 of RA 7832 to be
considered prima facie evidence of illegal use of electricity by the benefited party. The law
does not include the consumer or the consumers representative in this enumeration.
In legal contemplation, the ERBs inclusion of the phrase by the consumer concerned in
Rule III, Section 1 of the IRR expanded the clear wording of the law and violated the
recognized principle that an administrative agencys rule-making power is confined to filling
in the gaps and the necessary details in carrying into effect the law as enacted; rule-
making cannot extend, amend, or expand statutory requirements or embrace matters not
covered by the law being implemented. Administrative regulations must always be in
harmony with the provisions of the law because any resulting discrepancy between the two
will always be resolved in favor of the basic law. [21] In the present case, the consumer
cannot in any way be considered to be in the same classification as the named
government representatives so that his or her presence can be a substitute for the
presence of these representatives.
For this reason, even if Florence Chua, the Chuas daughter, acknowledged that she
witnessed Albanos examination of the electric meter outside their house so that she signed
the Meter/Socket Inspection Report, her presence did not characterize the discovered
broken meter seal as prima facie evidence of illegal use of electricity justifying immediate
disconnection.
Legal requirements for authority
to disconnect electricity
Section 6 of RA 7832 provides another mandatory requirement before MERALCO can
immediately disconnect a consumers electric service. The provision reads:
SEC. 6. Disconnection of Electric Service. - The private electric utility or rural electric
cooperative concerned shall have the right and authority to disconnect immediately the
electric service after serving the written notice or warning to the effect, without the need
of a court or administrative order, and deny restoration of the same, when the owner of the
house or establishment concerned or someone acting in his behalf shall have been
caught en flagrante delicto doing any of the acts enumerated in section 4 (a) hereof, or
when any of the circumstances so enumerated shall have been discovered for the second
time: Provided, That in the second case, a written notice or warning shall have been issued
upon the first discovery: Provided, further, That the electric service shall not be
immediately disconnected or shall be immediately restored upon the deposit of the
amount representing the differential billing by the person denied the service, with the
private electric utility or the rural cooperative concerned or with the competent court as
the case may be: Provided, furthermore, That if the court finds that illegal use of electricity
44

has not been committed by the same person, the amount deposited shall be credited
against future billings, with legal interest thereon chargeable against the private utility or
rural electric cooperative, and the utility or cooperative shall be made to immediately pay
such person double the value of the payment or deposit with legal interest, which amount
shall likewise be creditable against immediate future billings, without prejudice to any
criminal, civil or administrative action that such person may be entitled to file under
existing laws, rules and regulations: Provided, finally, That if the court finds the same
person guilty of such illegal use of electricity, he shall, upon final judgment, be made to
pay the electric utility or the rural electric cooperative concerned double the value of the
estimated electricity illegally used which is referred to in this section as differential billing.
In other words, MERALCO is authorized to immediately disconnect the electric service of its
consumers without the need of a court or administrative order when: (a) the consumer, or
someone acting in his behalf, is caught in flagrante delicto in any of the acts enumerated
in Section 4 of RA 7832; or (b) when any of the circumstances constituting prima
facie evidence of illegal use of electricity is discovered for the second time.
In flagrante delicto means [i]n the very act of committing the crime. [22] To be caught in
flagrante delicto, therefore, necessarily implies positive identification by an eyewitness or
eyewitnesses to the act of tampering so that there is direct evidence of culpability, or that
which proves the fact in dispute without the aid of any inference or presumption. [23]
In the present case, however, MERALCO presented no proof that it ever caught the Chuas,
or anyone acting in the Chuas behalf, in the act of tampering with their electric meter. As
correctly observed by the CA, the Chuas could not have been caught in flagrante
delicto committing the tampering since in the first place, they were the ones who reported
the defect in their meter. Moreover, the presence of a broken cover seal, broken sealing
wire, and a missing terminal seal, is not enough to declare the Chuas in flagrante
delicto tampering with the electric meter. As the basic complaint for mandamus alleged,
without any serious refutation from the petitioner, the electric meter is in a concrete post
outside of the Chuas perimeter fence; hence, in a location accessible to the public. We
note, too, that MERALCO did not present any evidence that it caught the Chuas committing
any of the acts constituting prima facie evidence of illegal use of electricity for the second
time.
In view of MERALCOs failure to comply with both Section 4 and Section 6 of RA 7832,
MERALCO obviously had no authority to immediately disconnect the Chuas electric service.
Writ of Mandatory Injunction
On the validity of the injunctive writ the lower court issued in the Chuas favor, MERALCO
submits that the Chuas were not entitled to an injunctive writ since it had a right, under
the law, to automatically disconnect the latters electric service. Furthermore, Section 9 of
RA 7832 prohibits courts from issuing injunctions or restraining orders against electric
utilities from disconnecting service unless the consumer proves that the electric utility
acted with evident bad faith in disconnecting the electric service. This cited provision
states:
ADMIN LAW CASES SET 7
Section 9. Restriction on the Issuance of Restraining Orders or Writs of Injunction. No writ
of injunction or restraining order shall be issued by any court against any private electric
utility or rural electric cooperative exercising the right and authority to disconnect electric
service as provided in this Act, unless there is prima facie evidence that the disconnection
was made with evident bad faith or grave abuse of authority.
We have fully discussed above why MERALCO was not in the position under RA 7832 to
immediately disconnect the Chuas electric service. We add that while electricity is
property[24] whose enjoyment, as a
general rule, the owner may extend or deny to others, [25] electricity is not an ordinary kind
of property that a service provider may grant or withhold to consumers at will. Electricity is
a basic necessity whose generation and distribution is imbued with public interest, and its
provider is a public utility subject to strict regulation by the State in the exercise of police
power.[26] In view of the serious consequences resulting from immediate disconnection of
electric service, the law provides strict requisites that MERALCO must follow before it can
be granted authority to undertake instant disconnection of electric service due to its
consumers. In view of MERALCOs dominance over its market and its customers and the
latters relatively weak bargaining position as against MERALCO, and in view too of the
serious consequences and hardships a customer stands to suffer upon service
disconnection, MERALCOs failure to strictly observe these legal requirements can be
equated to the bad faith or abuse of right[27] that the law speaks of.
Under the circumstances, we cannot but conclude that MERALCO abused its superior and
dominant position as well as the authority granted to it by law as a service provider when it
persisted in disconnecting the Chuas electric service. Hence, the general prohibition
against the issuance of a restraining order or an injunction under Section 9 of RA 7832
cannot apply. Rather, what must prevail is the exception: an injunction can issue when a
disconnection has been attended by bad faith or grave abuse of authority.
As to whether the Chuas are entitled to a writ of mandatory injunction, we rule in the
affirmative. An injunctive writ issues only upon a showing that: a) the applicant possesses
a clear and unmistakable right; b) there is a material and substantial invasion of such right;
and c) there is urgent and permanent necessity for an injunctive writ to prevent serious
damage.[28]
In the present case, the Chuas have established that they are paying MERALCO customers.
In the absence of the prima facie evidence required by Section 4 and by the requirements
of Section 6 of RA 7832 that the Chuas tampered with their electric meter, and in light as
well of the merits of the Chuas case as discussed below, the Chuas have an unmistakable
right to be provided with continuous power supply a right MERALCO obviously invaded
when it cut off the Chuas electric service. Electricity being what it is and has been in
modern day living, an urgent and permanent need exists to prevent MERALCO from cutting
off the Chuas electric service under the circumstances that gave rise to the present
dispute. Accordingly, we uphold the RTC and CA decisions ordering MERALCO to
immediately restore the Chuas electric service.
Differential billing
45

MERALCO further asserts that the Chuas should be made to pay the differential billing for
the electricity that they actually consumed but which was not reflected on their electric
bills due to the tampered electric meter. Since the prima facie presumption afforded by
Section 4 of RA 7832 does not apply, it falls upon MERALCO to first prove that the Chuas
actually manipulated the dial pointers on their meter before it can hold them accountable
for the differential billing. The circumstances discussed below, however, cast serious doubt
on the allegation and assumption that the Chuas ever tampered with their electric meter.
First, we stress once again that the Chuas themselves requested MERALCO to inspect their
meter for possible defects after they received their unusually high September 1996 bill;
the Chuas themselves were instrumental in discovering the tampered condition of their
electric meter. Had the Chuas been guilty of tampering as MERALCO assumed, they would
not have drawn attention to themselves by reporting the problem with their meter; as the
beneficial users of the electric service, they would have been MERALCOs main suspects
once the tampering came to light. We thus find it highly illogical for the Chuas to be guilty
of actual tampering given their actions on record on the discovery of the tampered
condition of their meter.
Second, we observe that based on the Chuas billing record, no discernable difference
exists between the Chuas electric bills before and after MERALCO had replaced their
tampered meter. The Chuas consumed between 231 to 269 kilowatt hours of electricity per
month from June 11, 1996 to September 11, 1996, with their corresponding monthly
electric bills ranging from P747.84 to P887.27. (Their long-term usage record is further
reflected in the appropriate footnoted table below.) The following usage record is
undisputed after MERALCO installed a new meter to replace the tampered one.
Date Kilowatt hours Amount Paid (pesos)
October 1996 1,297 4,906.87
November 227 781.86
December 228 806.19
January 1997 254 898.89
January 24, 1997 96 331.04
Tampering with the electric meter is committed by the consumer to prevent the meter
from registering the correct amount of electric consumed; thus, while using the same
regular power supply, they are billed for less than what they actually consumed. Tampering
affects only the registered usage as reflected in the electric meter, not the amount of
electricity actually used,
assuming a more or less uniform monthly usage of electricity. [29] Stated otherwise, when an
electric meter is tampered, the recorded consumption is less than the electricity actually
used. Consequently, when a tampered electric meter is replaced, assuming the same
amount of monthly rate of usage, the new electric meter will register the increased use of
electricity that had previously been concealed by the tampered meter. [30]
If the Chuas had truly tampered with their electric meter, it stands to reason that after
MERALCO replaced the tampered electric meter with a new one, the Chuas electric bills
would have gone up to reflect the electricity they were actually consuming. That the Chuas
monthly electric consumption remained virtually unchanged even after the defective
electric meter had been replaced strongly disproves the contentions that the Chuas
tampered with their electric meter and that the Chuas electric meter registered less than
the electricity they had actually consumed. Given the surrounding circumstance, the
ADMIN LAW CASES SET 7
sequence of events, and the electric meter readings, i.e., the exposed location of the
Chuas electric meter, the long-term consumption record shown below, the unusual upward
spike of the meter reading in September 1996, the inspection and the replacement by a
new electric meter, and the continued readings consistent with the readings prior to the
September 1996 spike, it would not be surprising if the tampering of the seals came
immediately before September 1996 and were made by parties other than the Chuas for
their own reasons. To be sure, the Chuas would not have tampered with their own meter to
increase their meter reading.
Aside from the doubtful veracity of the allegation and assumption that the Chuas tampered
with their meter, we also consider that MERALCO did not provide any factual or legal basis
for its differential billing. Section 6 of RA 7832 supplies the manner by which a public utility
can compute the differential billing.
SEC. 6. Disconnection of Electric Service. x x x
For purposes of this Act, differential billing shall refer to the amount to be charged to the
person concerned for the unbilled electricity illegally consumed by him as determined
through the use of methodologies which utilize, among other, as basis for determining the
amount of monthly electric consumption in kilowatt-hours to be billed either: (a) the
highest recorded monthly consumption within the five-year billing period preceding the
time of the discovery, (b) the estimated monthly consumption as per the report of load
inspection conducted during the time of the discovery, (c) the higher consumption
between the average consumption before or after the highest drastic drop in consumption
within the five year billing period preceding the discovery, (d) the highest recorded
monthly consumption within four (4) months after the time of discovery, or (e) the result of
the ERB test during the time of discovery and, as basis for determining the period to be
recovered by the differential billing, either: (1) the time when the electric service of the
person concerned recorded an abrupt or abnormal drop in consumption, or (2) when there
was change in his service connection such as a change in his service connection such as a
change of meter, change of seal or reconnection, or in the absence thereof, a maximum of
sixty (60) billing months, up to the time of discovery: Provided, however, That such period
shall, in no case, be less than one (1) year preceding the date of discovery of the illegal
use of electricity.
According to MERALCOs witness, Enrique Katipunan, the period affected by the Chuas
tampered electric meter was from August 17, 1992 to October 11, 1996 (affected period).
[31]
In line with the fundamental rule that the burden of evidence lies with the person who
asserts the affirmative allegation,[32] MERALCO thus carried the burden to prove that the
Chuas electric meter had been tampered with as early as August 17, 1992.
Significantly, while Katipunan stated that he studied the Chuas billing history to establish
the affected period from August 17, 1992 to October 11, 1996,[33] we find conspicuously
absent from his testimony any statement explaining how he established this four-year
period as the period affected by the tampered electric meter. Katipunan did not mention
any abrupt or abnormal drop in the Chuas electric consumption, nor did he identify
anything suspicious in the Chuas billing history that would lead him to conclude that the
tampering began on August 17, 1992. All we have to rely on is Katipunans assurance that
46

the Chuas electric meter existed in a tampered state for this whole four-year period. This
testimony, however, is uncorroborated by evidence.
We are not unaware that MERALCO used the Chuas September 1996 bill to compute the
differential billing the same bill that the Chuas protested with Meralco for being
extraordinarily high. While Section 6 of RA 7832 does allow MERALCO to use the
consumers highest recorded monthly consumption as the basis to compute the differential
billing, still, Meralco after examining the Chuas records for the past four years [34] should
have noticed that the September 1996 bill was truly unusual. As seen from their billing
history, while the Chuas consistently consumed no more than 300 kilowatt hours of
electricity every month for the past four years, in their September bill, their usage
dramatically spiked to 1,297 kilowatt hours, or a difference of more than 400%. Even more
telling is that after MERALCO replaced the alleged tampered electric meter, the Chuas
continued to consume the same amount of electricity they had consumed prior to the
September 1996 bill.
Given the strange circumstances surrounding the September 1996 bill, MERALCO should
have exercised prudence and employed another method to compute the Chuas differential
billing, such as using the estimated monthly consumption based on a load inspection
report. At the very least, MERALCO should have exerted efforts to investigate the Chuas
complaint regarding the sudden increase in their electric bill, especially considering the
Chuas claim that they had not done anything new or used any additional appliances during
the period covered by the September 1996 bill. [35] We find it significant that nothing in the
record suggests that MERALCO even attempted to study, or even tried to explain, the
sudden surge in the Chuas September 1996 bill.
We highlight another important point to consider - that MERALCO sent the Chuas another
letter dated February 5, 1997, where it reduced the Chuas differential billing
from P183,983.66 to P71,737.49.[36] While MERALCO admitted the existence of this letter in
the proceedings before the lower courts, it chose to ignore the existence of this February 5,
1997 letter in its submissions with this Court; instead, in the Petition and Memorandum it
filed with this Court, MERALCO reverted to its demand that the Chuas pay the original
differential billing of P183,983.66. This unexplained and inconsistent MERALCO posture
further strengthens our doubts on to the legitimacy and correctness of the Chuas
differential billing.
MERALCO is duty bound to explain to its customers the basis for arriving at any given
billing, particularly in cases of unregistered consumptions. Otherwise, consumers will stand
piteously at the public utilitys mercy. [37] Courts cannot and will not in any way blindly grant
a public utilitys claim for differential billing if there is no sufficient evidence to prove
entitlement.[38] As MERALCO has failed to substantiate its claim for the differential billing,
we rule that the Chuas cannot be held to account for the billed amount.
MERALCO guilty of inexcusable negligence
Apart from lacking factual or legal basis, another reason for us not to hold the Chuas
accountable for MERALCOs differential billing is our previous ruling in Ridjo Tape &
Chemical Corp. v. CA,[39] where we said:
ADMIN LAW CASES SET 7
It has been held that notice of a defect need not be direct and express; it is enough that
the same had existed for such a length of time that it is reasonable to presume that it had
been detected, and the presence of a conspicuous defect which has existed for a
considerable length of time will create a presumption of constructive notice
thereof. Hence, MERALCOs failure to discover the defect, if any, considering the length of
time, amounts to inexcusable negligence. Furthermore, we need not belabor the point that
as a public utility, MERALCO has the obligation to discharge its functions with utmost care
and diligence.
Accordingly, we are left with no recourse but to conclude that this is a case of negligence
on the part of MERALCO for which it must bear the consequences. Its failure to make the
necessary repairs and replacement of the defective electric meter installed within the
premises of petitioners was obviously the proximate cause of the instant dispute between
the parties.
Indeed, if an unusual electric consumption was not reflected in the statements of account
of petitioners, MERALCO, considering its technical knowledge and vast experience in
providing electric service, could have easily verified any possible error in the meter
reading. In the absence of such a mistake, the electric meters themselves should be
inspected for possible defects or breakdowns and forthwith repaired and, if necessary,
replaced. x x x
The rationale behind this ruling is that public utilities should be put on notice, as a
deterrent, that if they completely disregard their duty of keeping their electric meters in
serviceable condition, they run the risk of forfeiting, by reason of their negligence,
amounts originally due from their customers. Certainly, we cannot sanction a situation
wherein the defects in the electric meter are allowed to continue indefinitely until suddenly
the public utilities concerned demand payment for the unrecorded electricity utilized when,
in the first place, they should have remedied the situation immediately. If we turn a blind
eye on MERALCOs omission, it may encourage negligence on the part of public utilities, to
the detriment of the consuming public.[40]
While Ridjo involved a defective meter, we have, on occasion, applied this same doctrine
to cases that involved allegations of meter tampering. In both Manila Electric Company v.
Macro Textile Mills, Corp.[41] and Davao Light & Power Co., Inc. v. Opena,[42] we faulted the
electric companies involved for not immediately inspecting the electric meters after they
noted a sudden drop in the consumers registered electric consumption. Since, in both
cases, the public utility companies allowed several years to lapse before deciding to
conduct an inspection of the electric meters, we ruled that they were both negligent and
consequently barred them from collecting their claims of differential billing against the
consumers.
With these rulings in mind, we held in MERALCO v. Wilcon Builders Supply, Inc.[43] that the
use of the words defect and defective in Ridjo does not restrict the inexcusable negligence
doctrine to cases of mechanical defects in installed electric meters. We said:
The Ridjo doctrine simply states that the public utility has the imperative duty to make a
reasonable and proper inspection of its apparatus and equipment to ensure that they do
not malfunction. Its failure to discover the defect, if any, considering the length of time,
47

amounts to inexcusable negligence; its failure to make the necessary repairs and replace
the defective electric meter installed within the consumers premises limits the latters
liability. The use of the words defect and defective in the above-cited case does not restrict
the application of the doctrine to cases of mechanical defects in the installed electric
meters. A more plausible interpretation is to apply the rule on negligence whether the
defect is inherent, intentional or unintentional, which therefore covers tampering,
mechanical defects and mistakes in the computation of the consumers billing. [44]
The production and distribution of electricity is a highly technical business undertaking. In
conducting its operation, it is only logical for a public utility, such as MERALCO, to employ
mechanical devices and equipment for the orderly pursuit of its business. [45] MERALCO has
the imperative duty to make a reasonable and proper inspection of its apparatus and
equipment to ensure that they do not malfunction, and the due diligence to discover and
repair defects therein. Failure to perform such duties constitutes negligence. [46]
True, consumers who tamper with their electric meter do so surreptitiously to avoid being
detected by the public utility providing the service; hence, at first glance, it may seem
unreasonable for us to chastise MERALCO for not detecting the alleged tampering sooner.
However, what stands out in this case is the sheer length of time that the Chuas electric
meter allegedly existed in a tampered state without being discovered by MERALCO if
indeed the electric meter had been defective since 1992. If we presume MERALCOs
findings to be correct, MERALCO discovered the broken seals in the Chuas meter
after more than four years (from August 1992 to October 1996), and only because the
Chuas reported a possible defect with their electric meter to the public utility company.
Aside from the long period of time involved, we also underscore the fact that the alleged
tampering in this case did not require special training or knowledge to be detected.
Certainly, the missing terminal seal, the broken cover seal, and the broken sealing wire of
the meter[47] are visible to the naked eye and would have caught the attention of
MERALCOs personnel in the course of their meter readings.
ADMIN LAW CASES SET 7
Considering the manner MERALCO disconnected the Chuas electric service, we find the
award of moral damages proper. Apart from the havoc wreaked on the Chuas daily lives
when MERALCO abruptly and without legal basis cut off their electricity, the removal of the
electric meter also caused the Chuas extreme social humiliation and embarrassment as
they were subjected to speculations in their neighborhood of being power thieves. As Mrs.
Felicidad Chua testified, she suffered sleepless nights and felt serious anxiety after the
removal of their electric meter came to the attention of the barangay. In fact, she even
had to consult a doctor for this anxiety. [49] Thus, even if the Chuas did subsequently obtain
their electricity from another source,[50] the damage to the Chuas reputation and social
standing had already been done.
However, moral damages, which are left largely to the sound discretion of the courts,
should be granted in reasonable amounts, considering the attendant facts and
circumstances.[51] Moral damages, though incapable of pecuniary estimation, are designed
to compensate the claimant for actual injury suffered and not to impose a penalty. [52]As
prevailing jurisprudence[53] deems the award of moral damages in the amount
of P100,000.00 appropriate in cases where MERALCO wrongfully disconnected electric
service, we uphold the CA ruling, reducing the moral damages awarded from P300,000.00
to P100,000.00.
WHEREFORE, the petition is hereby DENIED. The assailed decision of the Court of Appeals
dated October 20, 2003 in CA-G.R. SP No. 77034 is AFFIRMED in toto.
SO ORDERED.

As in Ridjo, we take judicial notice that during this long period of time, MERALCOs
personnel had the opportunity to inspect and examine the Chuas electric meter for the
purpose of determining the monthly dues payable. Even if MERALCO did not conduct these
regular monthly inspections, we find it reasonable to expect that within this four-year
period, MERALCO would, at the very least, annually examine the electric meter to verify its
condition and to determine the accuracy of its readings if ordinary examination shows
defects as in the case of the Chuas meter. That it failed to do so constitutes negligence on
its part, and bars it from collecting its claim for differential billing.

On the issue of moral damages

Article 32 of the Civil Code provides that moral damages are proper when the rights of
individuals, including the right against deprivation of property without due process of law,
are violated. Jurisprudence has established the following requisites for the award of moral
damages: (1) there is an injury whether physical, mental, or psychological clearly
sustained by the claimant; (2) there is a culpable act or omission factually established; (3)
the wrongful act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) the award of damages is predicated on any of the cases
stated in Article 2219 of the Civil Code.[48]

48

G.R. No. 77372 April 29, 1988
LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER R.
REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA,
ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R.
RIMANDO, petitioner, vs. COURT OF APPEALS and PROFESSIONAL REGULATION
COMMISSION, respondent.
Is the Regional Trial Court of the same category as the Professional Regulation Commission
so that it cannot pass upon the validity of the administrative acts of the latter? Can this
Commission lawfully prohibit the examiness from attending review classes, receiving
handout materials, tips, or the like three (3) days before the date of the examination?
Theses are the issues presented to the court by this petition for certiorari to review the
decision of the Court of Appeals promulagated on January 13, 1987, in CA-G.R. SP No.
10598, * declaring null and void the other dated Ocober 21, 1986 issued by the Regional
Trial Court of Manila, Branch 32 in Civil Case No. 86-37950 entitled " Lupo L. Lupangco, et
al. vs. Professional Regulation Commission."
The records shows the following undisputed facts:
On or about October 6, 1986, herein respondent Professional Regulation Commission (PRC)
issued Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those
applying for admission to take the licensure examinations in accountancy. The resolution
embodied the following pertinent provisions:
No examinee shall attend any review class, briefing, conference or the like
conducted by, or shall receive any hand-out, review material, or any tip from any
school, college or university, or any review center or the like or any reviewer,
lecturer, instructor official or employee of any of the aforementioned or similars
institutions during the three days immediately proceeding every examination day
including examination day.
Any examinee violating this instruction shall be subject to the sanctions prescribed
by Sec. 8, Art. III of the Rules and Regulations of the Commission. 1
On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure
examinations in accountancy schedule on October 25 and November 2 of the same year,
filed on their own behalf of all others similarly situated like them, with the Regional Trial
Court of Manila, Branch XXXII, a complaint for injuction with a prayer with the issuance of a
writ of a preliminary injunction against respondent PRC to restrain the latter from enforcing
the above-mentioned resolution and to declare the same unconstitution.
Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the
lower court had no jurisdiction to review and to enjoin the enforcement of its resolution. In
an Order of October 21, 1987, the lower court declared that it had jurisdiction to try the
ADMIN LAW CASES SET 7
case and enjoined the respondent commission from enforcing and giving effect to
Resolution No. 105 which it found to be unconstitutional.
Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of
Appeals a petition for the nullification of the above Order of the lower court. Said petiton
was granted in the Decision of the Court of Appeals promulagated on January 13, 1987, to
wit:
WHEREFORE, finding the petition meritorious the same is hereby GRANTED and the
other dated October 21, 1986 issued by respondent court is declared null and void.
The respondent court is further directed to dismiss with prejudice Civil Case No. 86-
37950 for want of jurisdiction over the subject matter thereof. No cost in this
instance. SO ORDERED. 2
Hence, this petition.
The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction
to entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its
basis its conclusion that the Professional Regulation Commission and the Regional Trial
Court are co-equal bodies. Thus it held
That the petitioner Professional Regulatory Commission is at least a co-equal body
with the Regional Trial Court is beyond question, and co-equal bodies have no
power to control each other or interfere with each other's acts. 3
To strenghten its position, the Court of Appeals relied heavily on National Electrification
Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing,
Inc. vs. Luna, 6 where this Court held that a Court of First Instance cannot interfere with the
orders of the Securities and Exchange Commission, the two being co-equal bodies.
After a close scrutiny of the facts and the record of this case,
We rule in favor of the petitioner.
The cases cited by respondent court are not in point. It is glaringly apparent that the
reason why this Court ruled that the Court of First Instance could not interfere with the
orders of the Securities and Exchange Commission was that this was so provided for by the
law. In Pineda vs. Lantin, We explained that whenever a party is aggrieved by or disagree
with an order or ruling of the Securities and Exchange Commission, he cannot seek relief
from courts of general jurisdiction since under the Rules of Court and Commonwealth Act
No. 83, as amended by Republic Act No. 635, creating and setting forth the powers and
functions of the old Securities and Exchange Commission, his remedy is to go the Supreme
Court on a petition for review. Likewise, in Philippine Pacific Fishing Co., Inc. vs. Luna, it
was stressed that if an order of the Securities and Exchange Commission is erroneous, the
appropriate remedy take is first, within the Commission itself, then, to the Supreme Court
49

as mandated in Presidential Decree No. 902-A, the law creating the new Securities and
Exchange Commission. Nowhere in the said cases was it held that a Court of First Instance
has no jurisdiction over all other government agencies. On the contrary, the ruling was
specifically limited to the Securities and Exchange Commission.
The respondent court erred when it place the Securities and Exchange Commission and the
Professional Regulation Commsision in the same category. As alraedy mentioned, with
respect to the Securities and Exchange Commission, the laws cited explicitly provide with
the procedure that need be taken when one is aggrieved by its order or ruling. Upon the
other hand, there is no law providing for the next course of action for a party who wants to
question a ruling or order of the Professional Regulation Commission. Unlike
Commonwealth Act No. 83 and Presidential Decree No. 902-A, there is no provision in
Presidential Decree No. 223, creating the Professional Regulation Commission, that orders
or resolutions of the Commission are appealable either to the Court of Appeals or to
theSupreme Court. Consequently, Civil Case No. 86-37950, which was filed in order to
enjoin the enforcement of a resolution of the respondent Professional Regulation
Commission alleged to be unconstitutional, should fall within the general jurisdiction of the
Court of First Instance, now the Regional Trial Court. 7
What is clear from Presidential Decree No. 223 is that the Professional Regulation
Commission is attached to the Office of the President for general direction and
coordination. 8 Well settled in our jurisprudence is the view that even acts of the Office of
the President may be reviewed by the Court of First Instance (now the Regional Trial Court).
In Medalla vs. Sayo, 9 this rule was thoroughly propounded on, to wit:
In so far as jurisdiction of the Court below to review by certiorari decisions and/or
resolutions of the Civil Service Commission and of the residential Executive
Asssistant is concerned, there should be no question but that the power of judicial
review should be upheld. The following rulings buttress this conclusion:
The objection to a judicial review of a Presidential act arises from a failure
to recognize the most important principle in our system of government,
i.e., the separation of powers into three co-equal departments, the
executives, the legislative and the judicial, each supreme within its own
assigned powers and duties. When a presidential act is challenged before
the courts of justice, it is not to be implied therefrom that the Executive is
being made subject and subordinate to the courts. The legality of his acts
are under judicial review, not because the Executive is inferior to the
courts, but because the law is above the Chief Executive himself, and the
courts seek only to interpret, apply or implement it (the law). A judicial
review of the President's decision on a case of an employee decided by the
Civil Service Board of Appeals should be viewed in this light and the
bringing of the case to the Courts should be governed by the same
principles as govern the jucucial review of all administrative acts of all
administrative officers. 10
ADMIN LAW CASES SET 7
Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here,
"the Executive Office"' of the Department of Education and Culture issued Memorandum
Order No. 93 under the authority of then Secretary of Education Juan Manuel. As in this
case, a complaint for injunction was filed with the Court of First Instance of Lanao del Norte
because, allegedly, the enforcement of the circular would impair some contracts already
entered into by public school teachers. It was the contention of petitioner therein that "the
Court of First Instance is not empowered to amend, reverse and modify what is otherwise
the clear and explicit provision of the memorandum circular issued by the Executive Office
which has the force and effect of law." In resolving the issue, We held:
... We definitely state that respondent Court lawfully acquired jurisdiction in Civil
Case No. II-240 (8) because the plaintiff therein asked the lower court for relief, in
the form of injunction, in defense of a legal right (freedom to enter into contracts) .
....
Hence there is a clear infringement of private respondent's constitutional right to
enter into agreements not contrary to law, which might run the risk of being
violated by the threatened implementation of Executive Office Memorandum
Circular No. 93, dated February 5, 1968, which prohibits, with certain exceptions,
cashiers and disbursing officers from honoring special powers of attorney executed
by the payee employees. The respondent Court is not only right but duty bound to
take cognizance of cases of this nature wherein a constitutional and statutory right
is allegedly infringed by the administrative action of a government office. Courts of
first Instance have original jurisdiction over all civil actions in which the subject of
the litigation is not capable of pecuniary estimation (Sec. 44, Republic Act 296, as
amended). 12 (Emphasis supplied.)
In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance
has the authority to decide on the validity of a city tax ordinance even after its validity had
been contested before the Secretary of Justice and an opinion thereon had been rendered.
In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the
respondent Professional Regulation Commission, should be exempted from the general
jurisdiction of the Regional Trial Court.
Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P.
Blg. 129, it is the Court of Appeals which has jurisdiction over the case. The said law
provides:
SEC. 9. Jurisdiction. The Intermediate Appellate Court shall exercise:
xxx xxx xxx
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders, or awards of Regional Trial Courts and quasi-judicial agencies,
50

instrumentalities, boards or commissions, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the
provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
The contention is devoid of merit.
In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided
for in Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which
resulted from proceedings wherein the administrative body involved exercised its quasi-
judicial functions. In Black's Law Dictionary, quasi-judicial is defined as a term applied to
the action, discretion, etc., of public administrative officers or bodies required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions
from them, as a basis for their official action, and to exercise discretion of a judicial nature.
To expound thereon, quasi-judicial adjudication would mean a determination of rights,
privileges and duties resulting in a decision or order which applies to a specific
situation . 14 This does not cover rules and regulations of general applicability issued by the
administrative body to implement its purely administrative policies and functions like
Resolution No. 105 which was adopted by the respondent PRC as a measure to preserve
the integrity of licensure examinations.
The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer. In 15
this case, the issue presented was whether or not the Court of First Instance had
jurisdiction over a case involving an order of the Commission on Elections awarding a
contract to a private party which originated from an invitation to bid. The said issue came
about because under the laws then in force, final awards, judgments, decisions or orders of
the Commission on Elections fall within the exclusive jurisdiction of the Supreme Court by
way of certiorari. Hence, it has been consistently held that "it is the Supreme Court, not the
Court of First Instance, which has exclusive jurisdiction to review on certiorari final
decisions, orders, or rulings of the Commission on Elections relative to the conduct of
elections and the enforcement of election laws." 16
As to whether or not the Court of First Instance had jurisdiction in saidcase, We said:
We are however, far from convinced that an order of the COMELEC awarding a
contract to a private party, as a result of its choice among various proposals
submitted in response to its invitation to bid comes within the purview of a "final
order" which is exclusively and directly appealable to this court on certiorari. What
is contemplated by the term "final orders, rulings and decisions, of the COMELEC
reviewable by certiorari by the Supreme Court as provided by law are those
rendered in actions or proceedings before the COMELEC and taken cognizance of
by the said body in the exercise of its adjudicatory or quasi-judicial powers.
(Emphasis supplied.)
xxx xxx xxx
ADMIN LAW CASES SET 7
We agree with petitioner's contention that the order of the Commission granting
the award to a bidder is not an order rendered in a legal controversy before it
wherein the parties filed their respective pleadings and presented evidence after
which the questioned order was issued; and that this order of the commission was
issued pursuant to its authority to enter into contracts in relation to election
purposes. In short, the COMELEC resolution awarding the contract in favor of Acme
was not issued pursuant to its quasi-judicial functions but merely as an incident of
its inherent administrative functions over the conduct of elections, and hence, the
said resolution may not be deemed as a "final order reviewable by certiorari by the
Supreme Court. Being non-judicial in character, no contempt order may be
imposed by the COMELEC from said order, and no direct and exclusive appeal by
certiorari to this Tribunal lie from such order. Any question arising from said order
may be well taken in an ordinary civil action before the trial courts. (Emphasis
supplied.) 17
One other case that should be mentioned in this regard is Salud vs. Central Bank of the
Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under
Section 9, paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only
to the Intermediate Appellate Court. Thus:
The Central Bank and its Liquidator also postulate, for the very first time, that the
Monetary Board is among the "quasi-judicial ... boards" whose judgments are
within the exclusive appellate jurisdiction of the IAC; hence, it is only said Court,
"to the exclusion of the Regional Trial Courts," that may review the Monetary
Board's resolutions. 19
Anent the posture of the Central Bank, We made the following pronouncement:
The contention is utterly devoid of merit. The IAC has no appellate jurisdiction over
resolution or orders of the Monetary Board. No law prescribes any mode of appeal
from the Monetary Board to the IAC. 20
In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain
Civil Case No. 86-37950 and enjoin the respondent PRC from enforcing its resolution.
Although We have finally settled the issue of jurisdiction, We find it imperative to decide
once and for all the validity of Resolution No. 105 so as to provide the much awaited relief
to those who are and will be affected by it.
Of course, We realize that the questioned resolution was adopted for a commendable
purpose which is "to preserve the integrity and purity of the licensure examinations."
However, its good aim cannot be a cloak to conceal its constitutional infirmities. On its
face, it can be readily seen that it is unreasonable in that an examinee cannot even attend
any review class, briefing, conference or the like, or receive any hand-out, review material,
or any tip from any school, collge or university, or any review center or the like or any
51

reviewer, lecturer, instructor, official or employee of any of the aforementioned or similar
institutions . ... 21
The unreasonableness is more obvious in that one who is caught committing the prohibited
acts even without any ill motives will be barred from taking future examinations conducted
by the respondent PRC. Furthermore, it is inconceivable how the Commission can manage
to have a watchful eye on each and every examinee during the three days before the
examination period.
It is an aixiom in administrative law that administrative authorities should not act
arbitrarily and capriciously in the issuance of rules and regulations. To be valid, such rules
and regulations must be reasonable and fairly adapted to the end in view. If shown to bear
no reasonable relation to the purposes for which they are authorized to be issued, then
they must be held to be invalid. 22
ADMIN LAW CASES SET 7
Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged
leakages in the licensure examinations will be eradicated or at least minimized. Making the
examinees suffer by depriving them of legitimate means of review or preparation on those
last three precious days-when they should be refreshing themselves with all that they have
learned in the review classes and preparing their mental and psychological make-up for
the examination day itself-would be like uprooting the tree to get ride of a rotten branch.
What is needed to be done by the respondent is to find out the source of such leakages
and stop it right there. If corrupt officials or personnel should be terminated from their loss,
then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by
examiners should be set up and if violations are committed, then licenses should be
suspended or revoked. These are all within the powers of the respondent commission as
provided for in Presidential Decree No. 223. But by all means the right and freedom of the
examinees to avail of all legitimate means to prepare for the examinations should not be
curtailed.

In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court of
Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the
Appeals in CA-G.R. SP No. 10591 and another judgment is hereby rendered declaring
examinees' right to liberty guaranteed by the Constitution. Respondent PRC has no
Resolution No. 105 null and void and of no force and effect for being unconstitutional. This
authority to dictate on the reviewees as to how they should prepare themselves for the
decision is immediately executory. No costs. SO ORDERED.
licensure examinations. They cannot be restrained from taking all the lawful steps needed
to assure the fulfillment of their ambition to become public accountants. They have every
right to make use of their faculties in attaining success in their endeavors. They should be
allowed to enjoy their freedom to acquire useful knowledge that will promote their personal
growth. As defined in a decision of the United States Supreme Court:

The term "liberty" means more than mere freedom from physical restraint or the
bounds of a prison. It means freedom to go where one may choose and to act in
such a manner not inconsistent with the equal rights of others, as his judgment
may dictate for the promotion of his happiness, to pursue such callings and
vocations as may be most suitable to develop his capacities, and giv to them their
highest enjoyment. 23

Another evident objection to Resolution No. 105 is that it violates the academic freedom of
the schools concerned. Respondent PRC cannot interfere with the conduct of review that
review schools and centers believe would best enable their enrolees to meet the standards
required before becoming a full fledged public accountant. Unless the means or methods
of instruction are clearly found to be inefficient, impractical, or riddled with corruption,
review schools and centers may not be stopped from helping out their students. At this
juncture, We call attention to Our pronouncement in Garcia vs. The Faculty Admission
Committee, Loyola School of Theology, 24 regarding academic freedom to wit:

... It would follow then that the school or college itself is possessed of such a right.
It decides for itself its aims and objectives and how best to attain them. It is free
from outside coercion or interference save possibly when the overriding public
welfare calls for some restraint. It has a wide sphere of autonomy certainly
extending to the choice of students. This constitutional provision is not to be
construed in a niggardly manner or in a grudging fashion.
52

G.R. No. 164527 August 15, 2007
FRANCISCO I. CHAVEZ, Petitioner, vs. NATIONAL HOUSING AUTHORITY, R-II
BUILDERS, INC., R-II HOLDINGS, INC., HARBOUR CENTRE PORT TERMINAL, INC.,
and MR. REGHIS ROMERO II, Respondents.
In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining Order
and/or Writ of Preliminary Injunction under Rule 65, petitioner, in his capacity as taxpayer,
seeks:
to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993 between
the National Housing Authority and R-II Builders, Inc. and the Smokey Mountain
Development and Reclamation Project embodied therein; the subsequent amendments to
the said JVA; and all other agreements signed and executed in relation thereto including,
but not limited to the Smokey Mountain Asset Pool Agreement dated 26 September 1994
and the separate agreements for Phase I and Phase II of the Projectas well as all other
transactions which emanated therefrom, for being UNCONSTITUTIONAL and INVALID;
to enjoin respondentsparticularly respondent NHAfrom further implementing and/or
enforcing the said project and other agreements related thereto, and from further deriving
and/or enjoying any rights, privileges and interest therefrom x x x; and
to compel respondents to disclose all documents and information relating to the project
including, but not limited to, any subsequent agreements with respect to the different
phases of the project, the revisions over the original plan, the additional works incurred
thereon, the current financial condition of respondent R-II Builders, Inc., and the
transactions made respecting the project.1
The Facts
On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. (MO)
1612 approving and directing the implementation of the Comprehensive and Integrated
Metropolitan Manila Waste Management Plan (the Plan). The Metro Manila Commission, in
coordination with various government agencies, was tasked as the lead agency to
implement the Plan as formulated by the Presidential Task Force on Waste Management
created by Memorandum Circular No. 39. A day after, on March 2, 1988, MO 161-A 3 was
issued, containing the guidelines which prescribed the functions and responsibilities of
fifteen (15) various government departments and offices tasked to implement the Plan,
namely: Department of Public Works and Highway (DPWH), Department of Health (DOH),
Department of Environment and Natural Resources (DENR), Department of Transportation
and Communication, Department of Budget and Management, National Economic and
Development Authority (NEDA), Philippine Constabulary Integrated National Police,
Philippine Information Agency and the Local Government Unit (referring to the City of
Manila), Department of Social Welfare and Development, Presidential Commission for
Urban Poor, National Housing Authority (NHA), Department of Labor and Employment,
Department of Education, Culture and Sports (now Department of Education), and
Presidential Management Staff.
ADMIN LAW CASES SET 7
Specifically, respondent NHA was ordered to "conduct feasibility studies and develop low-
cost housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost
housing projects."4 On the other hand, the DENR was tasked to "review and evaluate
proposed projects under the Plan with regard to their environmental impact, conduct
regular monitoring of activities of the Plan to ensure compliance with environmental
standards and assist DOH in the conduct of the study on hospital waste management." 5
At the time MO 161-A was issued by President Aquino, Smokey Mountain was a wasteland
in Balut, Tondo, Manila, where numerous Filipinos resided in subhuman conditions,
collecting items that may have some monetary value from the garbage. The Smokey
Mountain dumpsite is bounded on the north by the Estero Marala, on the south by the
property of the National Government, on the east by the property of B and I Realty Co., and
on the west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain low-
cost housing project which resulted in the formulation of the "Smokey Mountain
Development Plan and Reclamation of the Area Across R-10" or the Smokey Mountain
Development and Reclamation Project (SMDRP; the Project). The Project aimed to convert
the Smokey Mountain dumpsite into a habitable housing project, inclusive of the
reclamation of the area across R-10, adjacent to the Smokey Mountain as the enabling
component of the project.6 Once finalized, the Plan was submitted to President Aquino for
her approval.
On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957)
was enacted.7 Its declared policy under Section 1 is "[t]o recognize the indispensable role
of the private sector as the main engine for national growth and development and provide
the most appropriate favorable incentives to mobilize private resources for the purpose."
Sec. 3 authorized and empowered "[a]ll government infrastructure agencies, including
government-owned and controlled corporations and local government units x x x to enter
into contract with any duly pre-qualified private contractor for the financing, construction,
operation and maintenance of any financially viable infrastructure facilities through the
build-operate-transfer or build and transfer scheme."
RA 6957 defined "build-and-transfer" scheme as "[a] contractual arrangement whereby the
contractor undertakes the construction, including financing, of a given infrastructure
facility, and its turnover after the completion to the government agency or local
government unit concerned which shall pay the contractor its total investment expended
on the project, plus reasonable rate of return thereon." The last paragraph of Sec. 6 of the
BOT Law provides that the repayment scheme in the case of "land reclamation or the
building of industrial estates" may consist of "[t]he grant of a portion or percentage of the
reclaimed land or industrial estate built, subject to the constitutional requirements with
respect to the ownership of lands."
On February 10, 1992, Joint Resolution No. 03 8 was passed by both houses of Congress.
Sec. 1 of this resolution provided, among other things, that:
53

Section 1. There is hereby approved the following national infrastructure projects for
implementation under the provisions of Republic Act No. 6957 and its implementing rules
and regulations:
xxxx
(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and
related facilities;
xxxx
(k) Land reclamation, dredging and other related development facilities;
(l) Industrial estates, regional industrial centers and export processing zones including
steel mills, iron-making and petrochemical complexes and related infrastructure and
utilities;
xxxx
(p) Environmental and solid waste management-related facilities such as collection
equipment, composting plants, incinerators, landfill and tidal barriers, among others; and
(q) Development of new townsites and communities and related facilities.
This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the
approval of all national infrastructure projects by the Congress.
On January 17, 1992, President Aquino proclaimed MO 415 approving and directing the
9
implementation of the SMDRP. Secs. 3 and 4 of the Memorandum Order stated:
Section 3. The National Housing Authority is hereby directed to implement the Smokey
Mountain Development Plan and Reclamation of the Area Across R-10 through a private
sector joint venture scheme at the least cost to the government.
Section 4. The land area covered by the Smokey Mountain dumpsite is hereby conveyed to
the National Housing Authority as well as the area to be reclaimed across R-10. (Emphasis
supplied.)
In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of
proposals regarding the technical feasibility of reclamation, while the DENR was directed to
(1) facilitate titling of Smokey Mountain and of the area to be reclaimed and (2) assist in
the technical evaluation of proposals regarding environmental impact statements. 10
ADMIN LAW CASES SET 7
In the same MO 415, President Aquino created an Executive Committee (EXECOM) to
oversee the implementation of the Plan, chaired by the National Capital Region-Cabinet
Officer for Regional Development (NCR-CORD) with the heads of the NHA, City of Manila,
DPWH, PEA, Philippine Ports Authority (PPA), DENR, and Development Bank of the
Philippines (DBP) as members.11 The NEDA subsequently became a member of the
EXECOM. Notably, in a September 2, 1994 Letter, 12 PEA General Manager Amado
Lagdameo approved the plans for the reclamation project prepared by the NHA.
In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM) was
created composed of the technical representatives of the EXECOM "[t]o assist the NHA in
the evaluation of the project proposals, assist in the resolution of all issues and problems in
the project to ensure that all aspects of the development from squatter relocation, waste
management, reclamation, environmental protection, land and house construction meet
governing regulation of the region and to facilitate the completion of the project." 13
Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid for
the right to become NHAs joint venture partner in the implementation of the SMDRP. The
notices were published in newspapers of general circulation on January 23 and 26 and
February 1, 14, 16, and 23, 1992, respectively. Out of the thirteen (13) contractors who
responded, only five (5) contractors fully complied with the required pre-qualification
documents. Based on the evaluation of the pre-qualification documents, the EXECOM
declared the New San Jose Builders, Inc. and R-II Builders, Inc. (RBI) as the top two
contractors.14
Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and
Financing Plan) of the top two (2) contractors in this manner:
(1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;
(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the
Housing Construction and Reclamation;
(3) The DENR evaluated Technical Proposals on Waste Management and Disposal
by conducting the Environmental Impact Analysis; and
(4) The NHA and the City of Manila evaluated the socio-economic benefits
presented by the proposals.
On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the
Philippines.
On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to
approve the R-II Builders, Inc. (RBI) proposal which garnered the highest score of 88.475%.
54

Subsequently, the EXECOM made a Project briefing to President Ramos. As a result,
President Ramos issued Proclamation No. 3915 on September 9, 1992, which reads:
WHEREAS, the National Housing Authority has presented a viable conceptual plan to
convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the
reclamation of the area across Road Radial 10 (R-10) adjacent to the Smokey Mountain as
the enabling component of the project;
xxxx
These parcels of land of public domain are hereby placed under the administration and
disposition of the National Housing Authority to develop, subdivide and dispose to qualified
beneficiaries, as well as its development for mix land use (commercial/industrial) to
provide employment opportunities to on-site families and additional areas for port-related
activities.
In order to facilitate the early development of the area for disposition, the Department of
Environment and Natural Resources, through the Lands and Management Bureau, is
hereby directed to approve the boundary and subdivision survey and to issue a special
patent and title in the name of the National Housing Authority, subject to final survey and
private rights, if any there be. (Emphasis supplied.)
On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture
Agreement with RBI "[s]ubject to final review and approval of the Joint Venture Agreement
by the Office of the President."16
On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement 17 (JVA) for the
development of the Smokey Mountain dumpsite and the reclamation of the area across R-
10 based on Presidential Decree No. (PD) 757 18 which mandated NHA "[t]o undertake the
physical and socio-economic upgrading and development of lands of the public domain
identified for housing," MO 161-A which required NHA to conduct the feasibility studies and
develop a low-cost housing project at the Smokey Mountain, and MO 415 as amended by
MO 415-A which approved the Conceptual Plan for Smokey Mountain and creation of the
EXECOM and TECHCOM. Under the JVA, the Project "involves the clearing of Smokey
Mountain for eventual development into a low cost medium rise housing complex and
industrial/commercial site with the reclamation of the area directly across [R-10] to act as
the enabling component of the Project."19 The JVA covered a lot in Tondo, Manila with an
area of two hundred twelve thousand two hundred thirty-four (212,234) square meters and
another lot to be reclaimed also in Tondo with an area of four hundred thousand (400,000)
square meters.
The Scope of Work of RBI under Article II of the JVA is as follows:
a) To fully finance all aspects of development of Smokey Mountain and reclamation
of no more than 40 hectares of Manila Bay area across Radial Road 10.
ADMIN LAW CASES SET 7
b) To immediately commence on the preparation of feasibility report and detailed
engineering with emphasis to the expedient acquisition of the Environmental
Clearance Certificate (ECC) from the DENR.
c) The construction activities will only commence after the acquisition of the ECC,
and
d) Final details of the contract, including construction, duration and delivery
timetables, shall be based on the approved feasibility report and detailed
engineering.
Other obligations of RBI are as follows:
2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed
Engineering as approved by the Office of the President. All costs and expenses for
hiring technical personnel, date gathering, permits, licenses, appraisals,
clearances, testing and similar undertaking shall be for the account of the [RBI].
2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units
complete with basic amenities such as plumbing, electrical and sewerage facilities
within the temporary housing project as staging area to temporarily house the
squatter families from the Smokey Mountain while development is being
undertaken. These temporary housing units shall be turned over to the [NHA] for
disposition.
2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units
on the leveled Smokey Mountain complete with basic utilities and amenities, in
accordance with the plans and specifications set forth in the Final Report approved
by the [NHA]. Completed units ready for mortgage take out shall be turned over by
the [RBI] to NHA on agreed schedule.
2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across
[R-10] as contained in Proclamation No. 39 as the enabling component of the
project and payment to the [RBI] as its asset share.
2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to
complete all herein development works to be undertaken on a phase to phase
basis in accordance with the work program stipulated therein.
The profit sharing shall be based on the approved pre-feasibility report submitted to the
EXECOM, viz:
For the developer (RBI):
55

1. To own the forty (40) hectares of reclaimed land.
2. To own the commercial area at the Smokey Mountain area composed of 1.3
hectares, and
3. To own all the constructed units of medium rise low cost permanent housing
units beyond the 3,500 units share of the [NHA].
For the NHA:
1. To own the temporary housing consisting of 3,500 units.
2. To own the cleared and fenced incinerator site consisting of 5 hectares situated
at the Smokey Mountain area.
3. To own the 3,500 units of permanent housing to be constructed by [RBI] at the
Smokey Mountain area to be awarded to qualified on site residents.
4. To own the Industrial Area site consisting of 3.2 hectares, and
5. To own the open spaces, roads and facilities within the Smokey Mountain area.
In the event of "extraordinary increase in labor, materials, fuel and non-recoverability of
total project expenses,"20the OP, upon recommendation of the NHA, may approve a
corresponding adjustment in the enabling component.
The functions and responsibilities of RBI and NHA are as follows:
For RBI:
4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis to the
expedient acquisition, with the assistance of the [NHA] of Environmental Compliance
Certificate (ECC) from the Environmental Management Bureau (EMB) of the [DENR].
Construction shall only commence after the acquisition of the ECC. The Environment
Compliance Certificate (ECC) shall form part of the FINAL REPORT.
The FINAL REPORT shall provide the necessary subdivision and housing plans, detailed
engineering and architectural drawings, technical specifications and other related and
required documents relative to the Smokey Mountain area.
With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to
develop the same in a manner that it deems necessary to recover the [RBIs] investment,
subject to environmental and zoning rules.
ADMIN LAW CASES SET 7
4.02 Finance the total project cost for land development, housing construction and
reclamation of the PROJECT.
4.03 Warrant that all developments shall be in compliance with the requirements of the
FINAL REPORT.
4.04 Provide all administrative resources for the submission of project accomplishment
reports to the [NHA] for proper evaluation and supervision on the actual implementation.
4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to
the PROJECT, from the owners of the adjacent lots for access road, water, electrical power
connections and drainage facilities.
4.06 Provide temporary field office and transportation vehicles (2 units), one (1) complete
set of computer and one (1) unit electric typewriter for the [NHAs] field personnel to be
charged to the PROJECT.
For the NHA:
4.07 The [NHA] shall be responsible for the removal and relocation of all squatters within
Smokey Mountain to the Temporary Housing Complex or to other areas prepared as
relocation areas with the assistance of the [RBI]. The [RBI] shall be responsible in releasing
the funds allocated and committed for relocation as detailed in the FINAL REPORT.
4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of all
necessary permits, licenses, appraisals, clearances and accreditations for the PROJECT
subject to existing laws, rules and regulations.
4.09 The [NHA] shall inspect, evaluate and monitor all works at the Smokey Mountain and
Reclamation Area while the land development and construction of housing units are in
progress to determine whether the development and construction works are undertaken in
accordance with the FINAL REPORT. If in its judgment, the PROJECT is not pursued in
accordance with the FINAL REPORT, the [NHA] shall require the [RBI] to undertake
necessary remedial works. All expenses, charges and penalties incurred for such remedial,
if any, shall be for the account of the [RBI].
4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x x
4.11 Handle the processing and documentation of all sales transactions related to its
assets shares from the venture such as the 3,500 units of permanent housing and the
allotted industrial area of 3.2 hectares.
4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be
deducted from the proceeds due to the [NHA].
56

4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for the Smokey
Mountain and Reclamation Area within 90 days upon submission of Survey returns to the
Land Management Sector. The land titles to the 40-hectare reclaimed land, the 1.3 hectare
commercial area at the Smokey Mountain area and the constructed units of medium-rise
permanent housing units beyond the 3,500 units share of the [NHA] shall be issued in the
name of the [RBI] upon completion of the project. However, the [RBI] shall have the
authority to pre-sell its share as indicated in this agreement.
The final details of the JVA, which will include the construction duration, costs, extent of
reclamation, and delivery timetables, shall be based on the FINAL REPORT which will be
contained in a Supplemental Agreement to be executed later by the parties.
The JVA may be modified or revised by written agreement between the NHA and RBI
specifying the clauses to be revised or modified and the corresponding amendments.
If the Project is revoked or terminated by the Government through no fault of RBI or by
mutual agreement, the Government shall compensate RBI for its actual expenses incurred
in the Project plus a reasonable rate of return not exceeding that stated in the feasibility
study and in the contract as of the date of such revocation, cancellation, or termination on
a schedule to be agreed upon by both parties.
As a preliminary step in the project implementation, consultations and dialogues were
conducted with the settlers of the Smokey Mountain Dumpsite Area. At the same time,
DENR started processing the application for the Environmental Clearance Certificate (ECC)
of the SMDRP. As a result however of the consultative dialogues, public hearings, the report
on the on-site field conditions, the Environmental Impact Statement (EIS) published on
April 29 and May 12, 1993 as required by the Environmental Management Bureau of DENR,
the evaluation of the DENR, and the recommendations from other government agencies, it
was discovered that design changes and additional work have to be undertaken to
successfully implement the Project.21
Thus, on February 21, 1994, the parties entered into another agreement denominated as
the Amended and Restated Joint Venture Agreement 22 (ARJVA) which delineated the
different phases of the Project. Phase I of the Project involves the construction of
temporary housing units for the current residents of the Smokey Mountain dumpsite, the
clearing and leveling-off of the dumpsite, and the construction of medium-rise low-cost
housing units at the cleared and leveled dumpsite. 23 Phase II of the Project involves the
construction of an incineration area for the on-site disposal of the garbage at the
dumpsite.24 The enabling component or consideration for Phase I of the Project was
increased from 40 hectares of reclaimed lands across R-10 to 79 hectares. 25 The revision
also provided for the enabling component for Phase II of 119 hectares of reclaimed lands
contiguous to the 79 hectares of reclaimed lands for Phase I. 26 Furthermore, the amended
contract delineated the scope of works and the terms and conditions of Phases I and II,
thus:
The PROJECT shall consist of Phase I and Phase II.
ADMIN LAW CASES SET 7
Phase I shall involve the following:
a. the construction of 2,992 units of temporary housing for the affected residents
while clearing and development of Smokey Mountain [are] being undertaken
b. the clearing of Smokey Mountain and the subsequent construction of 3,520 units
of medium rise housing and the development of the industrial/commercial site
within the Smokey Mountain area
c. the reclamation and development of a 79 hectare area directly across Radial
Road 10 to serve as the enabling component of Phase I
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform to the
emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be
reclaimed under Phase I to serve as the enabling component of Phase II.
Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from
3,500 units under the JVA.27 However, it was required to construct 3,520 medium-rise low-
cost permanent housing units instead of 3,500 units under the JVA. There was a substantial
change in the design of the permanent housing units such that a "loft shall be incorporated
in each unit so as to increase the living space from 20 to 32 square meters. The additions
and changes in the Original Project Component are as follows:
ORIGINAL CHANGES/REVISIONS
1. TEMPORARY HOUSING
Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet usable life
of 3 years, gauge 26 G.I. roofing sheets future 12 SM floor area. use as
permanent structures for factory and warehouses mixed 17 sm & 12 sm
floor area.
2. MEDIUM RISE MASS
HOUSING
Box type precast Shelter Conventional and precast component 20 square
meter concrete structures, 32 square floor area with 2.4 meter meter floor
area with loft floor height; bare type, 160 units/ (sleeping quarter) 3.6 m.
floor building. height, painted and improved
57

architectural faade, 80 units/building.
3. MITIGATING MEASURES
3.1 For reclamation work Use of clean dredgefill material below the MLLW
and SM material mixed with dredgefill above MLLW.
a. 100% use of Smokey Mountain material as dredgefill Use of
Steel Sheet Piles needed for longer depth of embedment.
b. Concrete Sheet Piles short depth of embedment
c. Silt removal approximately Need to remove more than 3.0
1.0 meter only meters of silt after sub-soil investigation. 28
These material and substantial modifications served as justifications for the
increase in the share of RBI from 40 hectares to 79 hectares of reclaimed land.
Under the JVA, the specific costs of the Project were not stipulated but under the
ARJVA, the stipulated cost for Phase I was pegged at six billion six hundred ninety-
three million three hundred eighty-seven thousand three hundred sixty-four pesos
(PhP 6,693,387,364).
In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM
submitted the ARJVA for approval by the OP. After review of said agreement, the OP
directed that certain terms and conditions of the ARJVA be further clarified or
amended preparatory to its approval. Pursuant to the Presidents directive, the
parties reached an agreement on the clarifications and amendments required to be
made on the ARJVA.
On August 11, 1994, the NHA and RBI executed an Amendment To the Amended
and Restated Joint Venture Agreement (AARJVA) 29 clarifying certain terms and
condition of the ARJVA, which was submitted to President Ramos for approval, to
wit:
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform
to the emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to
that to be reclaimed under Phase I to serve as the enabling component of
ADMIN LAW CASES SET 7
Phase II, the exact size and configuration of which shall be approved by the
SMDRP Committee30
Other substantial amendments are the following:
4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:
2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay
area directly across Radial Road 10 (R-10) to serve as payment to the DEVELOPER
as its asset share for Phase I and to develop such land into commercial area with
port facilities; provided, that the port plan shall be integrated with the Philippine
Port Authoritys North Harbor plan for the Manila Bay area and provided further,
that the final reclamation and port plan for said reclaimed area shall be submitted
for approval by the Public Estates Authority and the Philippine Ports Authority,
respectively: provided finally, that subject to par. 2.02 above, actual reclamation
work may commence upon approval of the final reclamation plan by the Public
Estates Authority.
xxxx
9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA,
and shall read as follows:
5.05. In the event this Agreement is revoked, cancelled or terminated by the AUTHORITY
through no fault of the DEVELOPER, the AUTHORITY shall compensate the DEVELOPER for
the value of the completed portions of, and actual expenditures on the PROJECT plus a
reasonable rate of return thereon, not exceeding that stated in the Cost Estimates of Items
of Work previously approved by the SMDRP Executive Committee and the AUTHORITY and
stated in this Agreement, as of the date of such revocation, cancellation, or termination, on
a schedule to be agreed upon by the parties, provided that said completed portions of
Phase I are in accordance with the approved FINAL REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August 31,
199431 increasing the proposed area for reclamation across R-10 from 40 hectares to 79
hectares,32 to wit:
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue
of the powers vested in me by the law, and as recommended by the SMDRP Executive
Committee, do hereby authorize the increase of the area of foreshore or submerged lands
of Manila Bay to be reclaimed, as previously authorized under Proclamation No. 39 (s.
1992) and Memorandum Order No. 415 (s. 1992), from Four Hundred Thousand (400,000)
square meters, more or less, to Seven Hundred Ninety Thousand (790,000) square meters,
more or less.
58

On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent
No. 3591 conveying in favor of NHA an area of 211,975 square meters covering the
Smokey Mountain Dumpsite.
In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary
Teofisto T. Guingona, Jr., approved the ARJVA as amended by the AARJVA.
On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation No.
39, conveying in favor of NHA a 401,485-square meter area.
On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation (HIGC),
now known as the Home Guaranty Corporation, and the Philippine National Bank
(PNB)33 executed the Smokey Mountain Asset Pool Formation Trust Agreement (Asset Pool
Agreement).34 Thereafter, a Guaranty Contract was entered into by NHA, RBI, and HIGC.
On June 23, 1994, the Legislature passed the Clean Air Act. 35 The Act made the
establishment of an incinerator illegal and effectively barred the implementation of the
planned incinerator project under Phase II. Thus, the off-site disposal of the garbage at the
Smokey Mountain became necessary.36
The land reclamation was completed in August 1996. 37
Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special
Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter area.
During the actual construction and implementation of Phase I of the SMDRP, the Inter-
Agency Technical Committee found and recommended to the EXECOM on December 17,
1997 that additional works were necessary for the completion and viability of the Project.
The EXECOM approved the recommendation and so, NHA instructed RBI to implement the
change orders or necessary works.38
Such necessary works comprised more than 25% of the original contract price and as a
result, the Asset Pool incurred direct and indirect costs. Based on C1 12 A of the
Implementing Rules and Regulations of PD 1594, a supplemental agreement is required for
"all change orders and extra work orders, the total aggregate cost of which being more
than twenty-five (25%) of the escalated original contract price."
The EXECOM requested an opinion from the Department of Justice (DOJ) to determine
whether a bidding was required for the change orders and/or necessary works. The DOJ,
through DOJ Opinion Nos. 119 and 155 dated August 26, 1993 and November 12, 1993,
opined that "a rebidding, pursuant to the aforequoted provisions of the implementing rules
(referring to PD 1594) would not be necessary where the change orders inseparable from
the original scope of the project, in which case, a negotiation with the incumbent
contractor may be allowed."
ADMIN LAW CASES SET 7
Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into a
supplemental agreement covering said necessary works.
On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering the
aforementioned necessary works and submitted it to the President on March 24, 1998 for
approval.
Outgoing President Ramos decided to endorse the consideration of the Supplemental
Agreement to incoming President Joseph E. Estrada. On June 30, 1998, Estrada became the
13th Philippine President.
However, the approval of the Supplemental Agreement was unacted upon for five months.
As a result, the utilities and the road networks were constructed to cover only the 79-
hectare original enabling component granted under the ARJVA. The 220-hectare extension
of the 79-hectare area was no longer technically feasible. Moreover, the financial crises
and unreliable real estate situation made it difficult to sell the remaining reclaimed lots.
The devaluation of the peso and the increase in interest cost led to the substantial increase
in the cost of reclamation.
On August 1, 1998, the NHA granted RBIs request to suspend work on the SMDRP due to
"the delay in the approval of the Supplemental Agreement, the consequent absence of an
enabling component to cover the cost of the necessary works for the project, and the
resulting inability to replenish the Asset Pool funds partially used for the completion of the
necessary works."39
As of August 1, 1998 when the project was suspended, RBI had "already accomplished a
portion of the necessary works and change orders which resulted in [RBI] and the Asset
Pool incurring advances for direct and indirect cost which amount can no longer be covered
by the 79-hectare enabling component under the ARJVA."40
Repeated demands were made by RBI in its own capacity and on behalf of the asset pool
on NHA for payment for the advances for direct and indirect costs subject to NHA
validation.
In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting the
SMDRP EXECOM and further directed it to review the Supplemental Agreement and submit
its recommendation on the completion of the SMDRP.
The reconstituted EXECOM conducted a review of the project and recommended the
amendment of the March 20, 1998 Supplemental Agreement "to make it more feasible and
to identify and provide new sources of funds for the project and provide for a new enabling
component to cover the payment for the necessary works that cannot be covered by the
79-hectare enabling component under the ARJVA."41
59

The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02 42
which approved the
modification of the Supplemental Agreement, to wit:
a) Approval of 150 hectares additional reclamation in order to make the
reclamation feasible as part of the enabling component.
b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares
based on surveys) to the SMDRP Asset Pool.
c) The inclusion in the total development cost of other additional, necessary and
indispensable infrastructure works and the revision of the original cost stated in
the Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to
PhP 2,969,134,053.13.
d) Revision in the sharing agreement between the parties.
In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and
complete the SMDRP subject to certain guidelines and directives.
After the parties in the case at bar had complied with the March 23, 2000 Memorandum,
the NHA November 9, 2000 Resolution No. 4323 approved "the conveyance of the 17-
hectare Vitas property in favor of the existing or a newly created Asset Pool of the project
to be developed into a mixed commercial-industrial area, subject to certain conditions."
On January 20, 2001, then President Estrada was considered resigned. On the same day,
President Gloria M. Arroyo took her oath as the 14th President of the Philippines.
As of February 28, 2001, "the estimated total project cost of the SMDRP has reached P8.65
billion comprising of P4.78 billion in direct cost and P3.87 billion in indirect cost," 43 subject
to validation by the NHA.
On August 28, 2001, NHA issued Resolution No. 4436 to pay for "the various necessary
works/change orders to SMDRP, to effect the corresponding enabling component consisting
of the conveyance of the NHAs Vitas Property and an additional 150-hectare reclamation
area" and to authorize the release by NHA of PhP 480 million "as advance to the project to
make the Permanent Housing habitable, subject to reimbursement from the proceeds of
the expanded enabling component."44
On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the
parties, and on February 28, 2002, the Housing and Urban Development Coordinating
Council (HUDCC) submitted the agreement to the OP for approval.
ADMIN LAW CASES SET 7
In the July 20, 2002 Cabinet Meeting, HUDCC was directed "to submit the works covered by
the PhP 480 million [advance to the Project] and the ASA to public bidding." 45 On August
28, 2002, the HUDCC informed RBI of the decision of the Cabinet.
In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the
government "to bid out the remaining works under the ASA thereby unilaterally
terminating the Project with RBI and all the agreements related thereto." RBI demanded
the payment of just compensation "for all accomplishments and costs incurred in
developing the SMDRP plus a reasonable rate of return thereon pursuant to Section 5.05 of
the ARJVA and Section 6.2 of the ASA."46
Consequently, the parties negotiated the terms of the termination of the JVA and other
subsequent agreements.
On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA)
whereby both parties agreed to terminate the JVA and other subsequent agreements, thus:
1. TERMINATION
1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit
the works covered by the P480 Million and the ASA to public bidding, the
following agreements executed by and between the NHA and the
DEVELOPER are hereby terminated, to wit:
a. Joint Venture Agreement (JVA) dated 19 March 1993
b. Amended and Restated Joint Venture Agreement (ARJVA) dated
21 February 1994
c. Amendment and Restated Joint Venture Agreement dated 11
August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated 19 November
2001.
xxxx
5. SETTLEMENT OF CLAIMS
5.1 Subject to the validation of the DEVELOPERs claims, the NHA hereby agrees to
initially compensate the Developer for the abovementioned costs as follows:
60

a. Direct payment to DEVELOPER of the amounts herein listed in the
following manner:
a.1 P250 Million in cash from the escrow account in accordance
with Section 2 herewith;
a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area
immediately after joint determination of the appraised value of the
said property in accordance with the procedure herein set forth in
the last paragraph of Section 5.3. For purposes of all payments to
be made through conveyance of real properties, the parties shall
secure from the NHA Board of Directors all documents necessary
and sufficient to effect the transfer of title over the properties to be
conveyed to RBI, which documents shall be issued within a
reasonable period.
5.2 Any unpaid balance of the DEVELOPERS claims determined after the validation
process referred to in Section 4 hereof, may be paid in cash, bonds or through the
conveyance of properties or any combination thereof. The manner, terms and
conditions of payment of the balance shall be specified and agreed upon later
within a period of three months from the time a substantial amount representing
the unpaid balance has been validated pursuant hereto including, but not limited
to the programming of quarterly cash payments to be sourced by the NHA from its
budget for debt servicing, from its income or from any other sources.
5.3 In any case the unpaid balance is agreed to be paid, either partially or totally
through conveyance of properties, the parties shall agree on which properties shall
be subject to conveyance. The NHA and DEVELOPER hereby agree to determine
the valuation of the properties to be conveyed by getting the average of the
appraisals to be made by two (2) mutually acceptable independent appraisers.
Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an
agreement with the asset pool for the development and operations of a port in the Smokey
Mountain Area which is a major component of SMDRP to provide a source of livelihood and
employment for Smokey Mountain residents and spur economic growth. A Subscription
Agreement was executed between the Asset Pool and HCPTI whereby the asset pool
subscribed to 607 million common shares and 1,143 million preferred shares of HCPTI. The
HCPTI preferred shares had a premium and penalty interest of 7.5% per annum and a
mandatory redemption feature. The asset pool paid the subscription by conveying to HCPTI
a 10-hectare land which it acquired from the NHA being a portion of the reclaimed land of
the SMDRP. Corresponding certificates of titles were issued to HCPTI, namely: TCT Nos.
251355, 251356, 251357, and 251358.
Due to HCPTIs failure to obtain a license to handle foreign containerized cargo from PPA, it
suffered a net income loss of PhP 132,621,548 in 2002 and a net loss of PhP 15,540,063 in
2003. The Project Governing Board of the Asset Pool later conveyed by way of dacion en
ADMIN LAW CASES SET 7
pago a number of HCPTI shares to RBI in lieu of cash payment for the latters work in
SMDRP.
On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition
which impleaded as respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr.
Reghis Romero II, raising constitutional issues.
The NHA reported that thirty-four (34) temporary housing structures and twenty-one (21)
permanent housing structures had been turned over by respondent RBI. It claimed that
2,510 beneficiary-families belonging to the poorest of the poor had been transferred to
their permanent homes and benefited from the Project.
The Issues
The grounds presented in the instant petition are:
I
Neither respondent NHA nor respondent R-II builders may validly reclaim foreshore and
submerged land because:
1. Respondent NHA and R-II builders were never granted any power and authority
to reclaim lands of the public domain as this power is vested exclusively with the
PEA.
2. Even assuming that respondents NHA and R-II builders were given the power
and authority to reclaim foreshore and submerged land, they were never given the
authority by the denr to do so.
II
Respondent R-II builders cannot acquire the reclaimed foreshore and submerged land areas
because:
1. The reclaimed foreshore and submerged parcels of land are inalienable public
lands which are beyond the commerce of man.
2. Assuming arguendo that the subject reclaimed foreshore and submerged parcels
of land were already declared alienable lands of the public domain, respondent R-II
builders still could not acquire the same because there was never any declaration
that the said lands were no longer needed for public use.
61

3. Even assuming that the subject reclaimed lands are alienable and no longer
needed for public use, respondent R-II builders still cannot acquire the same
because there was never any law authorizing the sale thereof.
4. There was never any public bidding awarding ownership of the subject land to
respondent R-II builders.
5. Assuming that all the requirements for a valid transfer of alienable public had
been performed, respondent R-II Builders, being private corporation is nonetheless
expresslyprohibited by the Philippine Constitution to acquire lands of the public
domain.
III
Respondent harbour, being a private corporation whose majority stocks are owned and
controlled by respondent Romeros Corporations R-II builders and R-II Holdings is
disqualified from being a transferee of public land.
IV
Respondents must be compelled to disclose all information related to the smokey
mountain development and reclamation project.
The Courts Ruling
Before we delve into the substantive issues raised in this petition, we will first deal with
several procedural matters raised by respondents.
Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the petition.
Only a person who stands to be benefited or injured by the judgment in the suit or entitled
to the avails of the suit can file a complaint or petition. 47 Respondents claim that petitioner
is not a proper party-in-interest as he was unable to show that "he has sustained or is in
immediate or imminent danger of sustaining some direct and personal injury as a result of
the execution and enforcement of the assailed contracts or agreements." 48Moreover, they
assert that not all government contracts can justify a taxpayers suit especially when no
public funds were utilized in contravention of the Constitution or a law.
We explicated in Chavez v. PCGG 49 that in cases where issues of transcendental public
importance are presented, there is no necessity to show that petitioner has experienced or
is in actual danger of suffering direct and personal injury as the requisite injury is assumed.
We find our ruling in Chavez v. PEA 50 as conclusive authority on locus standi in the case at
ADMIN LAW CASES SET 7
bar since the issues raised in this petition are averred to be in breach of the fair diffusion of
the countrys natural resources and the constitutional right of a citizen to information
which have been declared to be matters of transcendental public importance. Moreover,
the pleadings especially those of respondents readily reveal that public funds have been
indirectly utilized in the Project by means of Smokey Mountain Project Participation
Certificates (SMPPCs) bought by some government agencies.
Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court.
Whether petitioners direct recourse to this Court was proper
Respondents are one in asserting that petitioner circumvents the principle of hierarchy of
courts in his petition. Judicial hierarchy was made clear in the case of People v. Cuaresma,
thus:
There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most
certainly indicates that petitions for the issuance of extraordinary writs against first level
("inferior") courts should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals. A direct invocation of the Supreme Courts original jurisdiction to
issue these writs should be allowed only when there are special and important reasons
therefor, clearly and specifically set out in the petition. This is established policy. It is a
policy that is necessary to prevent inordinate demands upon the Courts time and
attention which are better devoted to those matters within its exclusive jurisdiction, and to
prevent further over-crowding of the Courts docket.51 x x x
The OSG claims that the jurisdiction over petitions for prohibition and mandamus is
concurrent with other lower courts like the Regional Trial Courts and the Court of Appeals.
Respondent NHA argues that the instant petition is misfiled because it does not introduce
special and important reasons or exceptional and compelling circumstances to warrant
direct recourse to this Court and that the lower courts are more equipped for factual issues
since this Court is not a trier of facts. Respondents RBI and RHI question the filing of the
petition as this Court should not be unduly burdened with "repetitions, invocation of
jurisdiction over constitutional questions it had previously resolved and settled."
In the light of existing jurisprudence, we find paucity of merit in respondents postulation.
While direct recourse to this Court is generally frowned upon and discouraged, we have
however ruled in Santiago v. Vasquez that such resort to us may be allowed in certain
situations, wherein this Court ruled that petitions for certiorari, prohibition, or mandamus,
though cognizable by other courts, may directly be filed with us if "the redress desired
cannot be obtained in the appropriate courts or where exceptional compelling
circumstances justify availment of a remedy within and calling for the exercise of [this
Courts] primary jurisdiction."521avvphi1
62

The instant petition challenges the constitutionality and legality of the SMDRP involving
several hectares of government land and hundreds of millions of funds of several
government agencies. Moreover, serious constitutional challenges are made on the
different aspects of the Project which allegedly affect the right of Filipinos to the
distribution of natural resources in the country and the right to information of a citizen
matters which have been considered to be of extraordinary significance and grave
consequence to the public in general. These concerns in the instant action compel us to
turn a blind eye to the judicial structure meant to provide an orderly dispensation of justice
and consider the instant petition as a justified deviation from an established precept.
Core factual matters undisputed
Respondents next challenge the projected review by this Court of the alleged factual issues
intertwined in the issues propounded by petitioner. They listed a copious number of
questions seemingly factual in nature which would make this Court a trier of facts. 53
We find the position of respondents bereft of merit.
For one, we already gave due course to the instant petition in our January 18, 2005
Resolution.54 In said issuance, the parties were required to make clear and concise
statements of established facts upon which our decision will be based.
Secondly, we agree with petitioner that there is no necessity for us to make any factual
findings since the facts needed to decide the instant petition are well established from the
admissions of the parties in their pleadings 55and those derived from the documents
appended to said submissions. Indeed, the core facts which are the subject matter of the
numerous issues raised in this petition are undisputed.
Now we will tackle the issues that prop up the instant petition.
Since petitioner has cited our decision in PEA as basis for his postulations in a number of
issues, we first resolve the queryis PEA applicable to the case at bar?
A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.
The Court finds that PEA is not a binding precedent to the instant petition because the
facts in said case are substantially different from the facts and circumstances in the case
at bar, thus:
(1) The reclamation project in PEA was undertaken through a JVA entered into
between PEA and AMARI. The reclamation project in the instant NHA case was
undertaken by the NHA, a national government agency in consultation with PEA
and with the approval of two Philippine Presidents;
ADMIN LAW CASES SET 7
(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and
reclaim submerged areas without public bidding on April 25, 1995. In the instant
NHA case, the NHA and RBI executed a JVA after RBI was declared the winning
bidder on August 31, 1992 as the JVA partner of the NHA in the SMDRP after
compliance with the requisite public bidding.
(3) In PEA, there was no law or presidential proclamation classifying the lands to be
reclaimed as alienable and disposal lands of public domain. In this RBI case, MO
415 of former President Aquino and Proclamation No. 39 of then President Ramos,
coupled with Special Patents Nos. 3591, 3592, and 3598, classified the reclaimed
lands as alienable and disposable;
(4) In PEA, the Chavez petition was filed before the amended JVA was executed by
PEA and AMARI.1avvphi1 In this NHA case, the JVA and subsequent amendments
were already substantially implemented. Subsequently, the Project was terminated
through a MOA signed on August 27, 2003. Almost one year later on August 5,
2004, the Chavez petition was filed;
(5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA
after the Chavez petition was filed with the Court and after Senate Committee
Report No. 560 was issued finding that the subject lands are inalienable lands of
public domain. In the instant petition, RBI and other respondents are considered to
have signed the agreements in good faith as the Project was terminated even
before the Chavez petition was filed;
(6) The PEA-AMARI JVA was executed as a result of direct negotiation between the
parties and not in accordance with the BOT Law. The NHA-RBI JVA and subsequent
amendments constitute a BOT contract governed by the BOT Law; and
(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA,
a government entity tasked to dispose of public lands under Executive Order No.
(EO) 525.56 In the NHA case, the reclaimed lands were transferred to NHA, a
government entity NOT tasked to dispose of public land and therefore said
alienable lands were converted to patrimonial lands upon their transfer to NHA. 57
Thus the PEA Decision58 cannot be considered an authority or precedent to the instant
case. The principle of stare decisis 59 has no application to the different factual setting of
the instant case.
We will now dwell on the substantive issues raised by petitioner. After a perusal of the
grounds raised in this petition, we find that most of these issues are moored on our PEA
Decision which, as earlier discussed, has no application to the instant petition. For this
reason alone, the petition can already be rejected. Nevertheless, on the premise of the
applicability of said decision to the case at bar, we will proceed to resolve said issues.
63

First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may validly reclaim
foreshore and submerged land because they were not given any power and authority to
reclaim lands of the public domain as this power was delegated by law to PEA.
Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public
domain, the Public Estates Authority (PEA), petitioner claims, is "the primary authority for
the reclamation of all foreshore and submerged lands of public domain," and relies on PEA
where this Court held:
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and on
behalf of the National Government." The same section also states that "[A]ll reclamation
projects shall be approved by the President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it with any person or
entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No. 1084, PEA
became the primary implementing agency of the National Government to reclaim
foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the
government entity "to undertake the reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests." Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal
declaration segregating reclaimed lands no longer needed for public service from those
still needed for public service.60
In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done by
PEA or through a contract executed by PEA with another person or entity but by the NHA
through an agreement with respondent RBI. Therefore, he concludes that the reclamation
is null and void.
Petitioners contention has no merit.
EO 525 reads:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the
National Government. All reclamation projects shall be approved by the President upon
recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; Provided, that, reclamation projects of
any national government agency or entity authorized under its charter shall be undertaken
in consultation with the PEA upon approval of the President. (Emphasis supplied.)
ADMIN LAW CASES SET 7
The aforequoted provision points to three (3) requisites for a legal and valid reclamation
project, viz:
(1) approval by the President;
(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:
a. by PEA
b. by any person or entity pursuant to a contract it executed with PEA
c. by the National Government agency or entity authorized under its
charter to reclaim lands subject to consultation with PEA
Without doubt, PEA under EO 525 was designated as the agency primarily responsible for
integrating, directing, and coordinating all reclamation projects. Primarily means "mainly,
principally, mostly, generally." Thus, not all reclamation projects fall under PEAs authority
of supervision, integration, and coordination. The very charter of PEA, PD 1084, 61 does not
mention that PEA has the exclusive and sole power and authority to reclaim lands of public
domain. EO 525 even reveals the exceptionreclamation projects by a national
government agency or entity authorized by its charter to reclaim land. One example is EO
405 which authorized the Philippine Ports Authority (PPA) to reclaim and develop
submerged areas for port related purposes. Under its charter, PD 857, PPA has the power
"to reclaim, excavate, enclose or raise any of the lands" vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is
primarily responsible for integrating, directing and coordinating reclamation projects, such
authority is NOT exclusive and such power to reclaim may be granted or delegated to
another government agency or entity or may even be undertaken by the National
Government itself, PEA being only an agency and a part of the National Government.
Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP.
After a scrutiny of the facts culled from the records, we find that the project met all the
three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a matter of fact, two
Philippine Presidents approved the same, namely: Presidents Aquino and Ramos. President
Aquino sanctioned the reclamation of both the SMDRP housing and commercial-industrial
sites through MO 415 (s. 1992) which approved the SMDRP under Sec. 1 and directed NHA
"x x x to implement the Smokey Mountain Development Plan and Reclamation of the Area
across R-10 through a private sector joint venture scheme at the least cost to government"
under Section 3.
64

For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which expressly
reserved the Smokey Mountain Area and the Reclamation Area for a housing project and
related commercial/industrial development.
Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which authorized the
increase of the Reclamation Area from 40 hectares of foreshore and submerged land of the
Manila Bay to 79 hectares. It speaks of the reclamation of 400,000 square meters, more or
less, of the foreshore and submerged lands of Manila Bay adjoining R-10 as an enabling
component of the SMDRP.
As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975
square meters of Smokey Mountain, Special Patent No. 3592 covering 401,485 square
meters of reclaimed land, and Special Patent No. 3598 covering another 390,000 square
meters of reclaimed land were issued by the DENR.
Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.
2. The requisite favorable endorsement of the reclamation phase was impliedly granted by
PEA. President Aquino saw to it that there was coordination of the project with PEA by
designating its general manager as member of the EXECOM tasked to supervise the
project implementation. The assignment was made in Sec. 2 of MO 415 which provides:
Section 2. An Executive Committee is hereby created to oversee the implementation of the
Plan, chaired by the NCR-CORD, with the heads of the following agencies as members: The
National Housing Authority, the City of Manila, the Department of Public Works and
Highways, the Public Estates Authority, the Philippine Ports Authority, the Department of
Environment and Natural Resources and the Development Bank of the Philippines.
(Emphasis supplied.)
The favorable recommendation by PEA of the JVA and subsequent amendments were
incorporated as part of the recommendations of the EXECOM created under MO 415. While
there was no specific recommendation on the SMDRP emanating solely from PEA, we find
that the approbation of the Project and the land reclamation as an essential component by
the EXECOM of which PEA is a member, and its submission of the SMDRP and the
agreements on the Project to the President for approval amply met the second requirement
of EO 525.
3. The third element was also presentthe reclamation was undertaken either by PEA or
any person or entity under contract with PEA or by the National Government agency or
entity authorized under its charter to reclaim lands subject to consultation with PEA. It
cannot be disputed that the reclamation phase was not done by PEA or any person or
entity under contract with PEA. However, the reclamation was implemented by the NHA, a
national government agency whose authority to reclaim lands under consultation with PEA
is derived from its charterPD 727 and other pertinent lawsRA 7279 62 and RA 6957 as
amended by RA 7718.
ADMIN LAW CASES SET 7
While the authority of NHA to reclaim lands is challenged by petitioner, we find that the
NHA had more than enough authority to do so under existing laws. While PD 757, the
charter of NHA, does not explicitly mention "reclamation" in any of the listed powers of the
agency, we rule that the NHA has an implied power to reclaim land as this is vital or
incidental to effectively, logically, and successfully implement an urban land reform and
housing program enunciated in Sec. 9 of Article XIII of the 1987 Constitution.
Basic in administrative law is the doctrine that a government agency or office has express
and implied powers based on its charter and other pertinent statutes. Express powers are
those powers granted, allocated, and delegated to a government agency or office by
express provisions of law. On the other hand, implied powers are those that can be inferred
or are implicit in the wordings of the law 63 or conferred by necessary or fair implication in
the enabling act.64 In Angara v. Electoral Commission, the Court clarified and stressed that
when a general grant of power is conferred or duty enjoined, every particular power
necessary for the exercise of the one or the performance of the other is also conferred by
necessary implication.65 It was also explicated that when the statute does not specify the
particular method to be followed or used by a government agency in the exercise of the
power vested in it by law, said agency has the authority to adopt any reasonable method
to carry out its functions.66
The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415, RA
6957, and PD 3-A,67viz:
1. NHAs power to reclaim derived from PD 757 provisions:
a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the goals
of NHA:
Section 3. Progress and Objectives. The Authority shall have the following purposes and
objectives:
xxxx
b) To undertake housing, development, resettlement or other activities as would
enhance the provision of housing to every Filipino;
c) To harness and promote private participation in housing ventures in terms of
capital expenditures, land, expertise, financing and other facilities for the
sustained growth of the housing industry. (Emphasis supplied.)
Land reclamation is an integral part of the development of resources for some of the
housing requirements of the NHA. Private participation in housing projects may also take
the form of land reclamation.
65

b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore
Development Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and Housing
Corporation (PHHC), the Presidential Assistant on Housing Resettlement Agency (PAHRA),
the Tondo Foreshore Development Authority (TFDA), the Central Institute for the Training
and Relocation of Urban Squatters (CITRUS), the Presidential Committee for Housing and
Urban Resettlement (PRECHUR), Sapang Palay Development Committee, Inter-Agency Task
Force to Undertake the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis
Oriental and all other existing government housing and resettlement agencies, task forces
and ad-hoc committees, are hereby dissolved. Their powers and functions, balance of
appropriations, records, assets, rights, and choses in action, are transferred to, vested in,
and assumed by the Authority. x x x (Emphasis supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers,
and functions. Sec. 2 provides:
Section 2. Objectives and Purposes. The Authority shall have the following purposes and
objectives:
a) To undertake all manner of activity, business or development projects for the
establishment of harmonious, comprehensive, integrated and healthy living
community in the Tondo Foreshoreland and its resettlement site;
b) To undertake and promote the physical and socio-economic amelioration of the
Tondo Foreshore residents in particular and the nation in general (Emphasis
supplied.)
The powers and functions are contained in Sec. 3, to wit:
a) To develop and implement comprehensive and integrated urban renewal
programs for the Tondo Foreshore and Dagat-dagatan lagoon and/or any other
additional/alternative resettlement site and to formulate and enforce general and
specific policies for its development which shall ensure reasonable degree of
compliance with environmental standards.
b) To prescribe guidelines and standards for the reservation, conservation and
utilization of public lands covering the Tondo Foreshore land and its resettlement
sites;
c) To construct, acquire, own, lease, operate and maintain infrastructure facilities,
housing complex, sites and services;
d) To determine, regulate and supervise the establishment and operation of
housing, sites, services and commercial and industrial complexes and any other
ADMIN LAW CASES SET 7
enterprises to be constructed or established within the Tondo Foreshore and its
resettlement sites;
e) To undertake and develop, by itself or through joint ventures with other public or
private entities, all or any of the different phases of development of the Tondo
Foreshore land and its resettlement sites;
f) To acquire and own property, property-rights and interests, and encumber or
otherwise dispose of the same as it may deem appropriate (Emphasis supplied.)
From the foregoing provisions, it is readily apparent that the TFDA has the explicit power to
develop public lands covering the Tondo foreshore land and any other additional and
alternative resettlement sites under letter b, Sec. 3 of PD 570. Since the additional and/or
alternative sites adjacent to Tondo foreshore land cover foreshore and submerged areas,
the reclamation of said areas is necessary in order to convert them into a comprehensive
and integrated resettlement housing project for the slum dwellers and squatters of Tondo.
Since the powers of TFDA were assumed by the NHA, then the NHA has the power to
reclaim lands in the Tondo foreshore area which covers the 79-hectare land subject of
Proclamations Nos. 39 and 465 and Special Patents Nos. 3592 and 3598.
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which embrace the
authority to reclaim land, thus:
Sec. 6. Powers and functions of the Authority.The Authority shall have the following
powers and functions to be exercised by the Board in accordance with its established
national human settlements plan prepared by the Human Settlements Commission:
(a) Develop and implement the comprehensive and integrated housing program provided
for in Section hereof;
xxxx
(c) Prescribe guidelines and standards for the reservation, conservation and utilization of
public lands identified for housing and resettlement;
xxxx
(e) Develop and undertake housing development and/or resettlement projects through joint
ventures or other arrangements with public and private entities;
xxxx
(k) Enter into contracts whenever necessary under such terms and conditions as it may
deem proper and reasonable;
66

(l) Acquire property rights and interests and encumber or otherwise dispose the same as it
may deem appropriate;
xxxx
(s) Perform such other acts not inconsistent with this Decree, as may be necessary to
effect the policies and objectives herein declared. (Emphasis supplied.)
The NHAs authority to reclaim land can be inferred from the aforequoted provisions. It can
make use of public lands under letter (c) of Sec. 6 which includes reclaimed land as site for
its comprehensive and integrated housing projects under letter (a) which can be
undertaken through joint ventures with private entities under letter (e). Taken together
with letter (s) which authorizes NHA to perform such other activities "necessary to effect
the policies and objectives" of PD 757, it is safe to conclude that the NHAs power to
reclaim lands is a power that is implied from the exercise of its explicit powers under Sec. 6
in order to effectively accomplish its policies and objectives under Sec. 3 of its charter.
Thus, the reclamation of land is an indispensable component for the development and
construction of the SMDRP housing facilities.
2. NHAs implied power to reclaim land is enhanced by RA 7279.
PD 757 identifies NHAs mandate to "[d]evelop and undertake housing development and/or
resettlement projects through joint ventures or other arrangements with public and private
entities."
The power of the NHA to undertake reclamation of land can be inferred from Secs. 12 and
29 of RA 7279, which provide:
Section 12. Disposition of Lands for Socialized Housing.The National Housing Authority,
with respect to lands belonging to the National Government, and the local government
units with respect to other lands within their respective localities, shall coordinate with
each other to formulate and make available various alternative schemes for the disposition
of lands to the beneficiaries of the Program. These schemes shall not be limited to those
involving transfer of ownership in fee simple but shall include lease, with option to
purchase, usufruct or such other variations as the local government units or the National
Housing Authority may deem most expedient in carrying out the purposes of this Act.
xxxx
Section 29. Resettlement.With two (2) years from the effectivity of this Act, the local
government units, in coordination with the National Housing Authority, shall implement the
relocation and resettlement of persons living in danger areas such as esteros, railroad
tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public places as
sidewalks, roads, parks, and playgrounds. The local government unit, in coordination with
the National Housing Authority, shall provide relocation or resettlement sites with basic
ADMIN LAW CASES SET 7
services and facilities and access to employment and livelihood opportunities sufficient to
meet the basic needs of the affected families. (Emphasis supplied.)
Lands belonging to the National Government include foreshore and submerged lands which
can be reclaimed to undertake housing development and resettlement projects.
3. MO 415 explains the undertaking of the NHA in SMDRP:
WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to
conduct feasibility studies and develop low-cost housing projects at the dumpsites of Metro
Manila;
WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to
convert the Smokey Mountain dumpsite into a habitable housing project inclusive of the
reclamation area across R-10 as enabling component of the Project;
WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City of
Manila and other government agencies and instrumentalities to ensure effective and
efficient implementation;
WHEREAS, the government encourages private sector initiative in the implementation of
its projects. (Emphasis supplied.)
Proceeding from these "whereas" clauses, it is unequivocal that reclamation of land in the
Smokey Mountain area is an essential and vital power of the NHA to effectively implement
its avowed goal of developing low-cost housing units at the Smokey Mountain dumpsites.
The interpretation made by no less than the President of the Philippines as Chief of the
Executive Branch, of which the NHA is a part, must necessarily command respect and
much weight and credit.
4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084 and
EO 525.
Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is
unequivocal that all government infrastructure agencies like the NHA can undertake
infrastructure or development projects using the contractual arrangements prescribed by
the law, and land reclamation is one of the projects that can be resorted to in the BOT
project implementation under the February 10, 1992 Joint Resolution No. 3 of the 8th
Congress.
From the foregoing considerations, we find that the NHA has ample implied authority to
undertake reclamation projects.
67

Even without an implied power to reclaim lands under NHAs charter, we rule that the
authority granted to NHA, a national government agency, by the President under PD 3-A
reinforced by EO 525 is more than sufficient statutory basis for the reclamation of lands
under the SMDRP.
PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law powers
on September 23, 1972. It provided that "[t]he provisions of any law to the contrary
notwithstanding, the reclamation of areas, underwater, whether foreshore or inland, shall
be limited to the National Government or any person authorized by it under the proper
contract." It repealed, in effect, RA 1899 which previously delegated the right to reclaim
lands to municipalities and chartered cities and revested it to the National
Government.68 Under PD 3-A, "national government" can only mean the Executive Branch
headed by the President. It cannot refer to Congress as it was dissolved and abolished at
the time of the issuance of PD 3-A on September 23, 1972. Moreover, the Executive Branch
is the only implementing arm in the government with the equipment, manpower,
expertise, and capability by the very nature of its assigned powers and functions to
undertake reclamation projects. Thus, under PD 3-A, the Executive Branch through the
President can implement reclamation of lands through any of its departments, agencies, or
offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA,
which was granted, among others, the power "to reclaim land, including foreshore and
submerged areas by dredging, filling or other means or to acquire reclaimed lands." The
PEAs power to reclaim is not however exclusive as can be gleaned from its charter, as the
President retained his power under PD 3-A to designate another agency to reclaim lands.
On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for
integrating, directing, and coordinating reclamation projects for and on behalf of the
National Government although other national government agencies can be designated by
the President to reclaim lands in coordination with the PEA. Despite the issuance of EO
525, PD 3-A remained valid and subsisting. Thus, the National Government through the
President still retained the power and control over all reclamation projects in the country.
The power of the National Government through the President over reclamation of areas,
that is, underwater whether foreshore or inland, was made clear in EO 543 69 which took
effect on June 24, 2006. Under EO 543, PEA was renamed the Philippine Reclamation
Authority (PRA) and was granted the authority to approve reclamation projects, a power
previously reposed in the President under EO 525. EO 543 reads:
Section 1. The power of the President to approve reclamation projects is hereby delegated
to the Philippine Reclamation Authority [formerly PEA], through its governing board,
subject to compliance with existing laws and rules and subject to the condition that
reclamation contracts to be executed with any person or entity go through public bidding.
Section 2. Nothing in the Order shall be construed as diminishing the Presidents authority
to modify, amend or nullify PRAs action.
ADMIN LAW CASES SET 7
Section 3. All executive issuances inconsistent with this Executive Order are hereby
repealed or amended accordingly. (Emphasis supplied.)
Sec. 2 of EO 543 strengthened the power of control and supervision of the President over
reclamation of lands as s/he can modify, amend, or nullify the action of PEA (now PRA).
From the foregoing issuances, we conclude that the Presidents delegation to NHA, a
national government agency, to reclaim lands under the SMDRP, is legal and valid, firmly
anchored on PD 3-A buttressed by EO 525 notwithstanding the absence of any specific
grant of power under its charter, PD 757.
Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands
Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the
authority to reclaim, they were not authorized to do so by the DENR.
Again, reliance is made on our ruling in PEA where it was held that the DENRs authority is
necessary in order for the government to validly reclaim foreshore and submerged lands.
In PEA, we expounded in this manner:
As manager, conservator and overseer of the natural resources of the State, DENR
exercises "supervision and control over alienable and disposable public lands." DENR also
exercises "exclusive jurisdiction on the management and disposition of all lands of the
public domain." Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or
in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as
alienable under Sections 6 and 7 of CA No. 141. Once DENR decides that the reclaimed
lands should be so classified, it then recommends to the President the issuance of a
proclamation classifying the lands as alienable or disposable lands of the public domain
open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr.
countersigned Special Patent No. 3517 in compliance with the Revised Administrative Code
and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under water,
while PEA is vested with the power to undertake the physical reclamation of areas under
water, whether directly or through private contractors. DENR is also empowered to classify
lands of the public domain into alienable or disposable lands subject to the approval of the
68

President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed
alienable lands of the public domain.70
Despite our finding that PEA is not a precedent to the case at bar, we find after all that
under existing laws, the NHA is still required to procure DENRs authorization before a
reclamation project in Manila Bay or in any part of the Philippines can be undertaken. The
requirement applies to PEA, NHA, or any other government agency or office granted with
such power under the law.
Notwithstanding the need for DENR permission, we nevertheless find petitioners position
bereft of merit.
The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain
Project for the following reasons:
1. Sec. 17, Art. VII of the Constitution provides that "the President shall have control of all
executive departments, bureaus and offices." The President is assigned the task of seeing
to it that all laws are faithfully executed. "Control," in administrative law, means "the
power of an officer to alter, modify, nullify or set aside what a subordinate officer has done
in the performance of his duties and to substitute the judgment of the former for that of
the latter."71
As such, the President can exercise executive power motu proprio and can supplant the act
or decision of a subordinate with the Presidents own. The DENR is a department in the
executive branch under the President, and it is only an alter ego of the latter. Ordinarily the
proposed action and the staff work are initially done by a department like the DENR and
then submitted to the President for approval. However, there is nothing infirm or
unconstitutional if the President decides on the implementation of a certain project or
activity and requires said department to implement it. Such is a presidential prerogative as
long as it involves the department or office authorized by law to supervise or execute the
Project. Thus, as in this case, when the President approved and ordered the development
of a housing project with the corresponding reclamation work, making DENR a member of
the committee tasked to implement the project, the required authorization from the DENR
to reclaim land can be deemed satisfied. It cannot be disputed that the ultimate power
over alienable and disposable public lands is reposed in the President of the Philippines
and not the DENR Secretary. To still require a DENR authorization on the Smokey Mountain
when the President has already authorized and ordered the implementation of the Project
would be a derogation of the powers of the President as the head of the executive branch.
Otherwise, any department head can defy or oppose the implementation of a project
approved by the head of the executive branch, which is patently illegal and
unconstitutional.
In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the
executive department, the President may act directly or order the said department to
undertake an activity, thus:
ADMIN LAW CASES SET 7
[A]t the apex of the entire executive officialdom is the President. Section 17, Article VII of
the Constitution specifies [her] power as Chief executive departments, bureaus and offices.
[She] shall ensure that the laws be faithfully executed. As Chief Executive, President Arroyo
holds the steering wheel that controls the course of her government. She lays down
policies in the execution of her plans and programs. Whatever policy she chooses, she has
her subordinates to implement them. In short, she has the power of control. Whenever a
specific function is entrusted by law or regulation to her subordinate, she may act directly
or merely direct the performance of a duty x x x. Such act is well within the prerogative of
her office (emphasis supplied).72
Moreover, the power to order the reclamation of lands of public domain is reposed first in
the Philippine President. The Revised Administrative Code of 1987 grants authority to the
President to reserve lands of public domain for settlement for any specific purpose, thus:
Section 14. Power to Reserve Lands of the Public and Private Domain of the Government.
(1) The President shall have the power to reserve for settlement or public use, and for
specific public purposes, any of the lands of the public domain, the use of which is not
otherwise directed by law. The reserved land shall thereafter remain subject to the specific
public purpose indicated until otherwise provided by law or proclamation. (Emphasis
supplied.)
President Aquino reserved the area of the Smokey Mountain dumpsite for settlement and
issued MO 415 authorizing the implementation of the Smokey Mountain Development
Project plus the reclamation of the area across R-10. Then President Ramos issued
Proclamation No. 39 covering the 21-hectare dumpsite and the 40-hectare
commercial/industrial area, and Proclamation No. 465 and MO 415 increasing the area of
foreshore and submerged lands of Manila Bay to be reclaimed from 40 to 79 hectares.
Having supervision and control over the DENR, both Presidents directly assumed and
exercised the power granted by the Revised Administrative Code to the DENR Secretary to
authorize the NHA to reclaim said lands. What can be done indirectly by the DENR can be
done directly by the President. It would be absurd if the power of the President cannot be
exercised simply because the head of a department in the executive branch has not acted
favorably on a project already approved by the President. If such arrangement is allowed
then the department head will become more powerful than the President.
2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired by the
NCR-CORD to oversee the implementation of the Project. The EXECOM was the one which
recommended approval of the project plan and the joint venture agreements. Clearly, the
DENR retained its power of supervision and control over the laws affected by the Project
since it was tasked to "facilitate the titling of the Smokey Mountain and of the area to be
reclaimed," which shows that it had tacitly given its authority to the NHA to undertake the
reclamation.
3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592 while
then Secretary Victor O. Ramos issued Special Patent No. 3598 that embraced the areas
covered by the reclamation. These patents conveyed the lands to be reclaimed to the NHA
69

and granted to said agency the administration and disposition of said lands for subdivision
and disposition to qualified beneficiaries and for development for mix land use
(commercial/industrial) "to provide employment opportunities to on-site families and
additional areas for port related activities." Such grant of authority to administer and
dispose of lands of public domain under the SMDRP is of course subject to the powers of
the EXECOM of SMDRP, of which the DENR is a member.
4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of
supervision and control over the lands of public domain covered by the Project.
Based on these reasons, it is clear that the DENR, through its acts and issuances, has
ratified and confirmed the reclamation of the subject lands for the purposes laid down in
Proclamations Nos. 39 and 465.
Third Issue: Whether respondent RBI can acquire reclaimed
foreshore and submerged lands considered as inalienable and
outside the commerce of man
Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and
submerged areas as these are inalienable public lands beyond the commerce of man
based on Art. 1409 of the Civil Code which provides:
Article 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public
order or public policy;
xxxx
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality
be waived.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by
the State and they cannot be alienated except for alienable agricultural lands of the public
domain. One of the States natural resources are lands of public domain which include
reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there must be a law or
presidential proclamation officially classifying these reclaimed lands as alienable and
disposable and open to disposition or concession. Absent such law or proclamation, the
ADMIN LAW CASES SET 7
reclaimed lands cannot be the enabling component or consideration to be paid to RBI as
these are beyond the commerce of man.
We are not convinced of petitioners postulation.
The reclaimed lands across R-10 were classified alienable and disposable lands of public
domain of the State for the following reasons, viz:
First, there were three (3) presidential proclamations classifying the reclaimed lands across
R-10 as alienable or disposable hence open to disposition or concession, to wit:
(1) MO 415 issued by President Aquino, of which Sec. 4 states that "[t]he land
covered by the Smokey Mountain Dumpsite is hereby conveyed to the National
Housing Authority as well as the area to be reclaimed across R-10."
The directive to transfer the lands once reclaimed to the NHA implicitly carries with
it the declaration that said lands are alienable and disposable. Otherwise, the NHA
cannot effectively use them in its housing and resettlement project.
(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed
lands were conveyed to NHA for subdivision and disposition to qualified
beneficiaries and for development into a mixed land use (commercial/industrial) to
provide employment opportunities to on-site families and additional areas for port-
related activities. Said directive carries with it the pronouncement that said lands
have been transformed to alienable and disposable lands. Otherwise, there is no
legal way to convey it to the beneficiaries.
(3) Proclamation No. 465 likewise issued by President Ramos enlarged the
reclaimed area to 79 hectares to be developed and disposed of in the
implementation of the SMDRP. The authority put into the hands of the NHA to
dispose of the reclaimed lands tacitly sustains the conversion to alienable and
disposable lands.
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on
Proclamations Nos. 39 and 465 issued by President Ramos, without doubt, classified the
reclaimed areas as alienable and disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit
declarations that the lands to be reclaimed are classified as alienable and disposable. We
find however that such conclusion is derived and implicit from the authority given to the
NHA to transfer the reclaimed lands to qualified beneficiaries.
The query is, when did the declaration take effect? It did so only after the special patents
covering the reclaimed areas were issued. It is only on such date that the reclaimed lands
70

became alienable and disposable lands of the public domain. This is in line with the ruling
in PEA where said issue was clarified and stressed:
PD No. 1085, coupled with President Aquinos actual issuance of a special patent covering
the Freedom Islands, is equivalent to an official proclamation classifying the Freedom
Islands as alienable or disposable lands of the public domain. PD No. 1085 and President
Aquinos issuance of a land patent also constitute a declaration that the Freedom Islands
are no longer needed for public service. The Freedom Islands are thus alienable or
disposable lands of the public domain, open to disposition or concession to qualified
parties.73 (Emphasis supplied.)
Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together
with Special Patent Nos. 3591, 3592, and 3598 more than satisfy the requirement in PEA
that "[t]here must be a law or presidential proclamation officially classifying these
reclaimed lands as alienable or disposable and open to disposition or concession
(emphasis supplied)."74
Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find
that RA 6957 as amended by RA 7718 provides ample authority for the classification of
reclaimed land in the SMDRP for the repayment scheme of the BOT project as alienable
and disposable lands of public domain. Sec. 6 of RA 6957 as amended by RA 7718
provides:
For the financing, construction, operation and maintenance of any infrastructure projects
undertaken through the build-operate-and transfer arrangement or any of its variations
pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in
the form of a share in the revenue of the project or other non-monetary payments, such as,
but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the
constitutional requirements with respect to the ownership of the land. (Emphasis supplied.)
While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed lands
that shall serve as payment to the project proponent have become alienable and
disposable lands and opened for disposition; nonetheless, this conclusion is necessarily
implied, for how else can the land be used as the enabling component for the Project if
such classification is not deemed made?
It may be argued that the grant of authority to sell public lands, pursuant to PEA, does not
convert alienable lands of public domain into private or patrimonial lands. We ruled in PEA
that "alienable lands of public domain must be transferred to qualified private parties, or to
government entities not tasked to dispose of public lands, before these lands can become
private or patrimonial lands (emphasis supplied)."75 To lands reclaimed by PEA or through a
contract with a private person or entity, such reclaimed lands still remain alienable lands of
public domain which can be transferred only to Filipino citizens but not to a private
corporation. This is because PEA under PD 1084 and EO 525 is tasked to hold and dispose
of alienable lands of public domain and it is only when it is transferred to Filipino citizens
that it becomes patrimonial property. On the other hand, the NHA is a government agency
ADMIN LAW CASES SET 7
not tasked to dispose of public lands under its charterThe Revised Administrative Code of
1987. The NHA is an "end-user agency" authorized by law to administer and dispose of
reclaimed lands. The moment titles over reclaimed lands based on the special patents are
transferred to the NHA by the Register of Deeds, they are automatically converted to
patrimonial properties of the State which can be sold to Filipino citizens and private
corporations, 60% of which are owned by Filipinos. The reason is obvious: if the reclaimed
land is not converted to patrimonial land once transferred to NHA, then it would be useless
to transfer it to the NHA since it cannot legally transfer or alienate lands of public domain.
More importantly, it cannot attain its avowed purposes and goals since it can only transfer
patrimonial lands to qualified beneficiaries and prospective buyers to raise funds for the
SMDRP.
From the foregoing considerations, we find that the 79-hectare reclaimed land has been
declared alienable and disposable land of the public domain; and in the hands of NHA, it
has been reclassified as patrimonial property.
Petitioner, however, contends that the reclaimed lands were inexistent prior to the three
(3) Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and hence, the
declaration that such areas are alienable and disposable land of the public domain, citing
PEA, has no legal basis.
Petitioners contention is not well-taken.
Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking into
consideration the special patents issued by the DENR demonstrates the inherent weakness
of his proposition. As was ruled in PEA cited by petitioner himself, "PD No. 1085, coupled
with President Aquinos actual issuance of a special patent covering the Freedom Islands is
equivalent to an official proclamation classifying the Freedom islands as alienable or
disposable lands of public domain." In a similar vein, the combined and collective effect of
Proclamations Nos. 39 and 465 with Special Patents Nos. 3592 and 3598 is tantamount to
and can be considered to be an official declaration that the reclaimed lots are alienable or
disposable lands of the public domain.
The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which
evidence transfer of ownership of reclaimed lands to the NHA, are official acts of the DENR
Secretary in the exercise of his power of supervision and control over alienable and
disposable public lands and his exclusive jurisdiction over the management and disposition
of all lands of public domain under the Revised Administrative Code of 1987. Special Patent
No. 3592 speaks of the transfer of Lots 1 and 2, and RI-003901-000012-D with an area of
401,485 square meters based on the survey and technical description approved by the
Bureau of Lands. Lastly, Special Patent No. 3598 was issued in favor of the NHA
transferring to said agency a tract of land described in Plan RL-00-000013 with an area of
390,000 square meters based on the survey and technical descriptions approved by the
Bureau of Lands.
71

The conduct of the survey, the preparation of the survey plan, the computation of the
technical description, and the processing and preparation of the special patent are matters
within the technical area of expertise of administrative agencies like the DENR and the
Land Management Bureau and are generally accorded not only respect but at times even
finality.76 Preparation of special patents calls for technical examination and a specialized
review of calculations and specific details which the courts are ill-equipped to undertake;
hence, the latter defer to the administrative agency which is trained and knowledgeable on
such matters.77
Subsequently, the special patents in the name of the NHA were submitted to the Register
of Deeds of the City of Manila for registration, and corresponding certificates of titles over
the reclaimed lots were issued based on said special patents. The issuance of certificates
of titles in NHAs name automatically converts the reclaimed lands to patrimonial
properties of the NHA. Otherwise, the lots would not be of use to the NHAs housing
projects or as payment to the BOT contractor as the enabling component of the BOT
contract. The laws of the land have to be applied and interpreted depending on the
changing conditions and times. Tempora mutantur et legis mutantur in illis (time changes
and laws change with it). One such law that should be treated differently is the BOT Law
(RA 6957) which brought about a novel way of implementing government contracts by
allowing reclaimed land as part or full payment to the contractor of a government project
to satisfy the huge financial requirements of the undertaking. The NHA holds the lands
covered by Special Patents Nos. 3592 and 3598 solely for the purpose of the SMDRP
undertaken by authority of the BOT Law and for disposition in accordance with said special
law. The lands become alienable and disposable lands of public domain upon issuance of
the special patents and become patrimonial properties of the Government from the time
the titles are issued to the NHA.
As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:
It is true that, once a patent is registered and the corresponding certificate of title is
issued, the land covered by them ceases to be part of the public domain and becomes
private property, and the Torrens Title issued pursuant to the patent becomes indefeasible
upon the expiration of one year from the date of issuance of such patent. 78
The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr., 79 Heirs of Carlos
Alcaraz v. Republic,80 and the more recent case of Doris Chiongbian-Oliva v. Republic of the
Philippines.81 Thus, the 79-hectare reclaimed land became patrimonial property after the
issuance of certificates of titles to the NHA based on Special Patents Nos. 3592 and 3598.
One last point. The ruling in PEA cannot even be applied retroactively to the lots covered
by Special Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39-hectare reclaimed
land). The reclamation of the land under SMDRP was completed in August 1996 while the
PEA decision was rendered on July 9, 2002. In the meantime, subdivided lots forming parts
of the reclaimed land were already sold to private corporations for value and separate
titles issued to the buyers. The Project was terminated through a Memorandum of
Agreement signed on August 27, 2003. The PEA decision became final through the
ADMIN LAW CASES SET 7
November 11, 2003 Resolution. It is a settled precept that decisions of the Supreme Court
can only be applied prospectively as they may prejudice vested rights if applied
retroactively.
In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective
application of its decisions based on considerations of equity and fair play, thus:
At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended
was that enunciated in Monge and Tupas cited above. The petitioners Benzonan and
respondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of the
Civil Code "judicial decisions applying or interpreting the laws of the Constitution shall form
a part of the legal system of the Philippines." But while our decisions form part of the law
of the land, they are also subject to Article 4 of the Civil Code which provides that "laws
shall have no retroactive effect unless the contrary is provided." This is expressed in the
familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The
rationale against retroactivity is easy to perceive. The retroactive application of a law
usually divests rights that have already become vested or impairs the obligations of
contract and hence, is unconstitutional.
The same consideration underlies our rulings giving only prospective effect to decisions
enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974]
"x x x when a doctrine of this Court is overruled and a different view is adopted, the new
doctrine should be applied prospectively and should not apply to parties who had relied on
the old doctrine and acted on the faith thereof.82
Fourth Issue: Whether respondent RBI can acquire reclaimed
lands when there was no declaration that said lands are no
longer needed for public use
Petitioner Chavez avers that despite the declaration that the reclaimed areas are alienable
lands of the public domain, still, the reclamation is flawed for there was never any
declaration that said lands are no longer needed for public use.
We are not moved by petitioners submission.
Even if it is conceded that there was no explicit declaration that the lands are no longer
needed for public use or public service, there was however an implicit executive
declaration that the reclaimed areas R-10 are not necessary anymore for public use or
public service when President Aquino through MO 415 conveyed the same to the NHA
partly for housing project and related commercial/industrial development intended for
disposition to and enjoyment of certain beneficiaries and not the public in general and
partly as enabling component to finance the project.
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President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the
reclaimed lands of the Smokey Mountain project are no longer required for public use or
service, thus:
These parcels of land of public domain are hereby placed under the administration and
disposition of the National Housing Authority to develop, subdivide and dispose to qualified
beneficiaries, as well as its development for mix land use (commercial/industrial) to
provide employment opportunities to on-site families and additional areas for port related
activities. (Emphasis supplied.)
While numerical count of the persons to be benefited is not the determinant whether the
property is to be devoted to public use, the declaration in Proclamation No. 39 undeniably
identifies only particular individuals as beneficiaries to whom the reclaimed lands can be
sold, namelythe Smokey Mountain dwellers. The rest of the Filipinos are not qualified;
hence, said lands are no longer essential for the use of the public in general.
In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing
the area to be reclaimed from forty (40) hectares to seventy-nine (79) hectares, elucidating
that said lands are undoubtedly set aside for the beneficiaries of SMDRP and not the public
declaring the power of NHA to dispose of land to be reclaimed, thus: "The authority to
administer, develop, or dispose lands identified and reserved by this Proclamation and
Proclamation No. 39 (s.1992), in accordance with the SMDRP, as enhance, is vested with
the NHA, subject to the provisions of existing laws." (Emphasis supplied.)
MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use
of the reclaimed areas for public use or service as the Project cannot be successfully
implemented without the withdrawal of said lands from public use or service. Certainly, the
devotion of the reclaimed land to public use or service conflicts with the intended use of
the Smokey Mountain areas for housing and employment of the Smokey Mountain
scavengers and for financing the Project because the latter cannot be accomplished
without abandoning the public use of the subject land. Without doubt, the presidential
proclamations on SMDRP together with the issuance of the special patents had effectively
removed the reclaimed lands from public use.
More decisive and not in so many words is the ruling in PEA which we earlier cited, that "PD
No. 1085 and President Aquinos issuance of a land patent also constitute a declaration
that the Freedom Islands are no longer needed for public service." Consequently, we ruled
in that case that the reclaimed lands are "open to disposition or concession to qualified
parties."83
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special
patents have classified the reclaimed lands as alienable and disposable and open to
disposition or concession as they would be devoted to units for Smokey Mountain
beneficiaries. Hence, said lands are no longer intended for public use or service and shall
form part of the patrimonial properties of the State under Art. 422 of the Civil Code. 84 As
ADMIN LAW CASES SET 7
discussed a priori, the lands were classified as patrimonial properties of the NHA ready for
disposition when the titles were registered in its name by the Register of Deeds.
Moreover, reclaimed lands that are made the enabling components of a BOT infrastructure
project are necessarily reclassified as alienable and disposable lands under the BOT Law;
otherwise, absurd and illogical consequences would naturally result. Undoubtedly, the BOT
contract will not be accepted by the BOT contractor since there will be no consideration for
its contractual obligations. Since reclaimed land will be conveyed to the contractor
pursuant to the BOT Law, then there is an implied declaration that such land is no longer
intended for public use or public service and, hence, considered patrimonial property of the
State.
Fifth Issue: Whether there is a law authorizing sale of
reclaimed lands
Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no
law authorizing their sale. He argues that unlike PEA, no legislative authority was granted
to the NHA to sell reclaimed land.
This position is misplaced.
Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the
NHA is not empowered by any law to sell reclaimed land, thus:
Section 60. Any tract of land comprised under this title may be leased or sold, as the case
may be, to any person, corporation or association authorized to purchase or lease public
lands for agricultural purposes. The area of the land so leased or sold shall be such as
shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably
necessary for the purposes for which such sale or lease if requested and shall in no case
exceed one hundred and forty-four hectares: Provided, however, That this limitation shall
not apply to grants, donations, transfers, made to a province, municipality or branch or
subdivision of the Government for the purposes deemed by said entities conducive to the
public interest; but the land so granted donated or transferred to a province, municipality,
or branch or subdivision of the Government shall not be alienated, encumbered, or
otherwise disposed of in a manner affecting its title, except when authorized by Congress;
Provided, further, That any person, corporation, association or partnership disqualified
from purchasing public land for agricultural purposes under the provisions of this Act, may
lease land included under this title suitable for industrial or residential purposes, but the
lease granted shall only be valid while such land is used for the purposes referred to.
(Emphasis supplied.)
Reliance on said provision is incorrect as the same applies only to "a province, municipality
or branch or subdivision of the Government." The NHA is not a government unit but a
government corporation performing governmental and proprietary functions.
73

In addition, PD 757 is clear that the NHA is empowered by law to transfer properties
acquired by it under the law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the following
powers and functions to be exercised by the Boards in accordance with the established
national human settlements plan prepared by the Human Settlements Commission:
xxxx
(k) Enter into contracts whenever necessary under such terms and conditions as it may
deem proper and reasonable;
(l) Acquire property rights and interests, and encumber or otherwise dispose the same as it
may deem appropriate (Emphasis supplied.)
Letter (l) is emphatic that the NHA can acquire property rights and interests and encumber
or otherwise dispose of them as it may deem appropriate. The transfer of the reclaimed
lands by the National Government to the NHA for housing, commercial, and industrial
purposes transformed them into patrimonial lands which are of course owned by the State
in its private or proprietary capacity. Perforce, the NHA can sell the reclaimed lands to any
Filipino citizen or qualified corporation.
Sixth Issue: Whether the transfer of reclaimed lands to RBI
was done by public bidding
Petitioner also contends that there was no public bidding but an awarding of ownership of
said reclaimed lands to RBI. Public bidding, he says, is required under Secs. 63 and 67 of
CA 141 which read:
Section 63. Whenever it is decided that lands covered by this chapter are not needed for
public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce
for authority to dispose of the same. Upon receipt of such authority, the Director of Lands
shall give notice by public advertisement in the same manner as in the case of leases or
sales of agricultural public land, that the Government will lease or sell, as the case may be,
the lots or blocks specified in the advertisement, for the purpose stated in the notice and
subject to the conditions specified in this chapter.
xxxx
Section 67. The lease or sale shall be made through oral bidding; and adjudication shall be
made to the highest bidder. However, where an applicant has made improvements on the
land by virtue of a permit issued to him by competent authority, the sale or lease shall be
made by sealed bidding as prescribed in section twenty-six of this Act, the provisions of
ADMIN LAW CASES SET 7
which shall be applied whenever applicable. If all or part of the lots remain unleased or
unsold, the Director of Lands shall from time to time announce in the Official Gazette or in
any other newspapers of general circulation, the lease of sale of those lots, if necessary.
He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands
were conveyed to RBI by negotiated contract and not by public bidding as required by law.
This stand is devoid of merit.
There is no doubt that respondent NHA conducted a public bidding of the right to become
its joint venture partner in the Smokey Mountain Project. Notices or Invitations to Bid were
published in the national dailies on January 23 and 26, 1992 and February 1, 14, 16, and
23, 1992. The bidding proper was done by the Bids and Awards Committee (BAC) on May
18, 1992. On August 31, 1992, the Inter-Agency Techcom made up of the NHA, PEA, DPWH,
PPA, DBP, and DENR opened the bids and evaluated them, resulting in the award of the
contract to respondent RBI on October 7, 1992.
On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994, said
JVA was amended and restated into the ARJVA. On August 11, 1994, the ARJVA was again
amended. On September 7, 1994, the OP approved the ARJVA and the amendments to the
ARJVA. From these factual settings, it cannot be gainsaid that there was full compliance
with the laws and regulations governing public biddings involving a right, concession, or
property of the government.
Petitioner concedes that he does not question the public bidding on the right to be a joint
venture partner of the NHA, but the absence of bidding in the sale of alienable and
disposable lands of public domain pursuant to CA 141 as amended.
Petitioners theory is incorrect.
Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by
the Director of Lands of alienable and disposable lands of public domain. This is not
present in the case at bar. The lands reclaimed by and conveyed to the NHA are no longer
lands of public domain. These lands became proprietary lands or patrimonial properties of
the State upon transfer of the titles over the reclaimed lands to the NHA and hence outside
the ambit of CA 141. The NHA can therefore legally transfer patrimonial land to RBI or to
any other interested qualified buyer without any bidding conducted by the Director of
Lands because the NHA, unlike PEA, is a government agency not tasked to sell lands of
public domain. Hence, it can only hold patrimonial lands and can dispose of such lands by
sale without need of public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding "when
government property has become unserviceable for any cause or is no longer needed." It
appears from the Handbook on Property and Supply Management System, Chapter 6, that
reclaimed lands which have become patrimonial properties of the State, whose titles are
74

conveyed to government agencies like the NHA, which it will use for its projects or
programs, are not within the ambit of Sec. 79. We quote the determining factors in the
Disposal of Unserviceable Property, thus:
Determining Factors in the Disposal of Unserviceable Property
Property, which can no longer be repaired or reconditioned;
Property whose maintenance costs of repair more than outweigh the benefits and
services that will be derived from its continued use;
Property that has become obsolete or outmoded because of changes in
technology;
Serviceable property that has been rendered unnecessary due to change in the
agencys function or mandate;
Unused supplies, materials and spare parts that were procured in excess of
requirements; and
Unused supplies and materials that [have] become dangerous to use because of
long storage or use of which is determined to be hazardous. 85
Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in
question are very much needed by the NHA for the Smokey Mountain Project because
without it, then the projects will not be successfully implemented. Since the reclaimed
lands are not unserviceable properties and are very much needed by NHA, then Sec. 79 of
PD 1445 does not apply.
More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like
reclaimed lands transferred to a government agency like the NHA which has entered into a
BOT contract with a private firm. The reason is obvious. If the patrimonial property will be
subject to public bidding as the only way of disposing of said property, then Sec. 6 of RA
6957 on the repayment scheme is almost impossible or extremely difficult to implement
considering the uncertainty of a winning bid during public auction. Moreover, the
repayment scheme of a BOT contract may be in the form of non-monetary payment like
the grant of a portion or percentage of reclaimed land. Even if the BOT partner participates
in the public bidding, there is no assurance that he will win the bid and therefore the
payment in kind as agreed to by the parties cannot be performed or the winning bid prize
might be below the estimated valuation of the land. The only way to harmonize Sec. 79 of
PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as inapplicable to BOT
contracts involving patrimonial lands. The law does not intend anything impossible (lex
non intendit aliquid impossibile).
ADMIN LAW CASES SET 7
Seventh Issue: Whether RBI, being a private corporation,
is barred by the Constitution to acquire lands of public domain
Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the
1987 Constitution from acquiring lands of public domain.
Petitioners proposition has no legal mooring for the following reasons:
1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid
"a portion as percentage of the reclaimed land" subject to the constitutional
requirement that only Filipino citizens or corporations with at least 60% Filipino
equity can acquire the same. It cannot be denied that RBI is a private corporation,
where Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is
valid and constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by
said proclamations were converted to alienable and disposable lands of public
domain. When the titles to the reclaimed lands were transferred to the NHA, said
alienable and disposable lands of public domain were automatically classified as
lands of the private domain or patrimonial properties of the State because the NHA
is an agency NOT tasked to dispose of alienable or disposable lands of public
domain. The only way it can transfer the reclaimed land in conjunction with its
projects and to attain its goals is when it is automatically converted to patrimonial
properties of the State. Being patrimonial or private properties of the State, then it
has the power to sell the same to any qualified personunder the Constitution,
Filipino citizens as private corporations, 60% of which is owned by Filipino citizens
like RBI.
3. The NHA is an end-user entity such that when alienable lands of public domain
are transferred to said agency, they are automatically classified as patrimonial
properties. The NHA is similarly situated as BCDA which was granted the authority
to dispose of patrimonial lands of the government under RA 7227. The nature of
the property holdings conveyed to BCDA is elucidated and stressed in the May 6,
2003 Resolution in Chavez v. PEA, thus:
BCDA is an entirely different government entity. BCDA is authorized by law to sell specific
government lands that have long been declared by presidential proclamations as military
reservations for use by the different services of the armed forces under the Department of
National Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is
general and national. BCDA holds government lands that have been granted to end-user
government entitiesthe military services of the armed forces. In contrast, under
Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity,
but as the government agency "primarily responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf of the National Government."
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x x x Well-settled is the doctrine that public land granted to an end-user government
agency for a specific public use may subsequently be withdrawn by Congress from public
use and declared patrimonial property to be sold to private parties. R.A. No. 7227 creating
the BCDA is a law that declares specific military reservations no longer needed for defense
or military purposes and reclassifies such lands as patrimonial property for sale to private
parties.
Government owned lands, as long as they are patrimonial property, can be sold to private
parties, whether Filipino citizens or qualified private corporations. Thus, the so-called Friar
Lands acquired by the government under Act No. 1120 are patrimonial property which
even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of
the public domain if sold or transferred to a public or municipal corporation for a monetary
consideration become patrimonial property in the hands of the public or municipal
corporation. Once converted to patrimonial property, the land may be sold by the public or
municipal corporation to private parties, whether Filipino citizens or qualified private
corporations.86 (Emphasis supplied.)
The foregoing Resolution makes it clear that the SMDRP was a program adopted by the
Government under Republic Act No. 6957 (An Act Authorizing the Financing, Construction,
Operation and Maintenance of Infrastructure Projects by the Private Sector, and For Other
Purposes), as amended by RA 7718, which is a special law similar to RA 7227. Moreover,
since the implementation was assigned to the NHA, an end-user agency under PD 757 and
RA 7279, the reclaimed lands registered under the NHA are automatically classified as
patrimonial lands ready for disposition to qualified beneficiaries.
The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a
private corporation, is disqualified from being a transferee of public land. What was
transferred to HCPTI is a 10-hectare lot which is already classified as patrimonial property
in the hands of the NHA. HCPTI, being a qualified corporation under the 1987 Constitution,
the transfer of the subject lot to it is valid and constitutional.
Eighth Issue: Whether respondents can be compelled to disclose
all information related to the SMDRP
Petitioner asserts his right to information on all documents such as contracts, reports,
memoranda, and the like relative to SMDRP.
Petitioner asserts that matters relative to the SMDRP have not been disclosed to the public
like the current stage of the Project, the present financial capacity of RBI, the complete list
of investors in the asset pool, the exact amount of investments in the asset pool and other
similar important information regarding the Project.
He prays that respondents be compelled to disclose all information regarding the SMDRP
and furnish him with originals or at least certified true copies of all relevant documents
ADMIN LAW CASES SET 7
relating to the said project including, but not limited to, the original JVA, ARJVA, AARJVA,
and the Asset Pool Agreement.
This relief must be granted.
The right of the Filipino people to information on matters of public concern is enshrined in
the 1987 Constitution, thus:
ARTICLE II
xxxx
SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public interest.
ARTICLE III
SEC. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to official
acts, transactions, or decisions, as well as to government research data used as basis for
policy development, shall be afforded the citizen, subject to such limitations as may be
provided by law.
In Valmonte v. Belmonte, Jr., this Court explicated this way:
[A]n essential element of these freedoms is to keep open a continuing dialogue or process
of communication between the government and the people. It is in the interest of the State
that the channels for free political discussion be maintained to the end that the
government may perceive and be responsive to the peoples will. Yet, this open dialogue
can be effective only to the extent that the citizenry is informed and thus able to formulate
its will intelligently. Only when the participants in the discussion are aware of the issues
and have access to information relating thereto can such bear fruit. 87
In PEA, this Court elucidated the rationale behind the right to information:
These twin provisions of the Constitution seek to promote transparency in policy-making
and in the operations of the government, as well as provide the people sufficient
information to exercise effectively other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the government does not disclose its
official acts, transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials "at all times x x x accountable to the
people," for unless citizens have the proper information, they cannot hold public officials
accountable for anything. Armed with the right information, citizens can participate in
76

public discussions leading to the formulation of government policies and their effective
implementation. An informed citizenry is essential to the existence and proper functioning
of any democracy.88
Sec. 28, Art. II compels the State and its agencies to fully disclose "all of its transactions
involving public interest." Thus, the government agencies, without need of demand from
anyone, must bring into public view all the steps and negotiations leading to the
consummation of the transaction and the contents of the perfected contract. 89Such
information must pertain to "definite propositions of the government," meaning official
recommendations or final positions reached on the different matters subject of negotiation.
The government agency, however, need not disclose "intra-agency or inter-agency
recommendations or communications during the stage when common assertions are still in
the process of being formulated or are in the exploratory stage." The limitation also covers
privileged communication like information on military and diplomatic secrets; information
affecting national security; information on investigations of crimes by law enforcement
agencies before the prosecution of the accused; information on foreign relations,
intelligence, and other classified information.
It is unfortunate, however, that after almost twenty (20) years from birth of the 1987
Constitution, there is still no enabling law that provides the mechanics for the compulsory
duty of government agencies to disclose information on government transactions.
Hopefully, the desired enabling law will finally see the light of day if and when Congress
decides to approve the proposed "Freedom of Access to Information Act." In the meantime,
it would suffice that government agencies post on their bulletin boards the documents
incorporating the information on the steps and negotiations that produced the agreements
and the agreements themselves, and if finances permit, to upload said information on their
respective websites for easy access by interested parties. Without any law or regulation
governing the right to disclose information, the NHA or any of the respondents cannot be
faulted if they were not able to disclose information relative to the SMDRP to the public in
general.
The other aspect of the peoples right to know apart from the duty to disclose is the duty to
allow access to information on matters of public concern under Sec. 7, Art. III of the
Constitution. The gateway to information opens to the public the following: (1) official
records; (2) documents and papers pertaining to official acts, transactions, or decisions;
and (3) government research data used as a basis for policy development.
Thus, the duty to disclose information should be differentiated from the duty to permit
access to information. There is no need to demand from the government agency disclosure
of information as this is mandatory under the Constitution; failing that, legal remedies are
available. On the other hand, the interested party must first request or even demand that
he be allowed access to documents and papers in the particular agency. A request or
demand is required; otherwise, the government office or agency will not know of the desire
of the interested party to gain access to such papers and what papers are needed. The
duty to disclose covers only transactions involving public interest, while the duty to allow
access has a broader scope of information which embraces not only transactions involving
ADMIN LAW CASES SET 7
public interest, but any matter contained in official communications and public documents
of the government agency.
We find that although petitioner did not make any demand on the NHA to allow access to
information, we treat the petition as a written request or demand. We order the NHA to
allow petitioner access to its official records, documents, and papers relating to official
acts, transactions, and decisions that are relevant to the said JVA and subsequent
agreements relative to the SMDRP.
Ninth Issue: Whether the operative fact doctrine applies to the instant petition
Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case
because it is an equitable doctrine which could not be used to countenance an inequitable
result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the various
agreements implementing the SMDRP is an operative fact that can no longer be disturbed
or simply ignored, citing Rieta v. People of the Philippines. 90
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is
stated that a legislative or executive act, prior to its being declared as unconstitutional by
the courts, is valid and must be complied with, thus:
As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern. Administrative or
executive acts, orders and regulations shall be valid only when they are not contrary to the
laws of the Constitution." It is understandable why it should be so, the Constitution being
supreme and paramount. Any legislative or executive act contrary to its terms cannot
survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however
be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity
such challenged legislative or executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an appropriate case, declares its
invalidity, it is entitled to obedience and respect. Parties may have acted under it and may
have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act was
in operation and presumed to be valid in all respects. It is now accepted as a doctrine that
prior to its being nullified, its existence as a fact must be reckoned with. This is merely to
reflect awareness that precisely because the judiciary is the governmental organ which has
the final say on whether or not a legislative or executive measure is valid, a period of time
may have elapsed before it can exercise the power of judicial review that may lead to a
77

declaration of nullity. It would be to deprive the law of its quality of fairness and justice
then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute,
prior to such a determination [of unconstitutionality], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects, with respect to particular relations, individual and corporate,
and particular conduct, private and official." This language has been quoted with approval
in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. An even
more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez
v. Cuerva and Co.91 (Emphasis supplied.)
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Governments order of suspension, as we
have no reason to do so, much less retroactively apply such nullification to deprive private
respondent of a compelling and valid reason for not filing the leave application. For as we
have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy
upon past acts or omissions done in reliance thereof. Consequently, the existence of a
statute or executive order prior to its being adjudged void is an operative fact to which
legal consequences are attached. It would indeed be ghastly unfair to prevent private
respondent from relying upon the order of suspension in lieu of a formal leave
application.92 (Emphasis supplied.)
The principle was further explicated in the case of Rieta v. People of the Philippines, thus:
In similar situations in the past this Court had taken the pragmatic and realistic course set
forth in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been
found to be unconstitutional, was not a law; that it was inoperative, conferring no rights
and imposing no duties, and hence affording no basis for the challenged decree. x x x It is
quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute,
prior to [the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects with respect to particular conduct, private and official.
Questions of rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in the light of the
nature both of the statute and of its previous application, demand examination. These
questions are among the most difficult of those which have engaged the attention of
courts, state and federal, and it is manifest from numerous decisions that an all-inclusive
statement of a principle of absolute retroactive invalidity cannot be justified.
ADMIN LAW CASES SET 7
In the May 6, 2003 Resolution in Chavez v. PEA, we ruled that De Agbayani94 is not
93
applicable to the case considering that the prevailing law did not authorize private
corporations from owning land. The prevailing law at the time was the 1935 Constitution as
no statute dealt with the same issue.
In the instant case, RA 6957 was the prevailing law at the time that the joint venture
agreement was signed. RA 6957, entitled "An Act Authorizing The Financing, Construction,
Operation And Maintenance Of Infrastructure Projects By The Private Sector And For Other
Purposes," which was passed by Congress on July 24, 1989, allows repayment to the
private contractor of reclaimed lands. 95 Such law was relied upon by respondents, along
with the above-mentioned executive issuances in pushing through with the Project. The
existence of such law and issuances is an "operative fact" to which legal consequences
have attached. This Court is constrained to give legal effect to the acts done in consonance
with such executive and legislative acts; to do otherwise would work patent injustice on
respondents.
Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases, the
transfer of land, although illegal or unconstitutional, will not be invalidated on
considerations of equity and social justice. However, in that case, we did not apply the
same considering that PEA, respondent in said case, was not entitled to equity principles
there being bad faith on its part, thus:
There are, moreover, special circumstances that disqualify Amari from invoking equity
principles. Amari cannot claim good faith because even before Amari signed the Amended
JVA on March 30, 1999, petitioner had already filed the instant case on April 27, 1998
questioning precisely the qualification of Amari to acquire the Freedom Islands. Even
before the filing of this petition, two Senate Committees had already approved on
September 16, 1997 Senate Committee Report No. 560. This Report concluded, after a
well-publicized investigation into PEAs sale of the Freedom Islands to Amari, that the
Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the
Amended JVA knowing and assuming all the attendant risks, including the annulment of the
Amended JVA.96
Such indicia of bad faith are not present in the instant case. When the ruling in PEA was
rendered by this Court on July 9, 2002, the JVAs were all executed. Furthermore, when
petitioner filed the instant case against respondents on August 5, 2004, the JVAs were
already terminated by virtue of the MOA between the NHA and RBI. The respondents had
no reason to think that their agreements were unconstitutional or even questionable, as in
fact, the concurrent acts of the executive department lent validity to the implementation of
the Project. The SMDRP agreements have produced vested rights in favor of the slum
dwellers, the buyers of reclaimed land who were issued titles over said land, and the
agencies and investors who made investments in the project or who bought SMPPCs.
These properties and rights cannot be disturbed or questioned after the passage of around
ten (10) years from the start of the SMDRP implementation. Evidently, the "operative fact"
principle has set in. The titles to the lands in the hands of the buyers can no longer be
invalidated.
78

The Courts Dispositions
Based on the issues raised in this petition, we find that the March 19, 1993 JVA between
NHA and RBI and the SMDRP embodied in the JVA, the subsequent amendments to the JVA
and all other agreements signed and executed in relation to it, including, but not limited to,
the September 26, 1994 Smokey Mountain Asset Pool Agreement and the agreement on
Phase I of the Project as well as all other transactions which emanated from the Project,
have been shown to be valid, legal, and constitutional. Phase II has been struck down by
the Clean Air Act.
With regard to the prayer for prohibition, enjoining respondents particularly respondent
NHA from further implementing and/or enforcing the said Project and other agreements
related to it, and from further deriving and/or enjoying any rights, privileges and interest
from the Project, we find the same prayer meritless.
Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:
Sec. 2. Petition for prohibition.When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are
without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered commanding the respondent to desist from further proceedings in
the action or matter specified therein, or otherwise granting such incidental reliefs as law
and justice may require.
It has not been shown that the NHA exercised judicial or quasi-judicial functions in relation
to the SMDRP and the agreements relative to it. Likewise, it has not been shown what
ministerial functions the NHA has with regard to the SMDRP.
A ministerial duty is one which is so clear and specific as to leave no room for the exercise
of discretion in its performance. It is a duty which an officer performs in a given state of
facts in a prescribed manner in obedience to the mandate of legal authority, without
regard to the exercise of his/her own judgment upon the propriety of the act done. 97
Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA
and other related agreements, certainly does not involve ministerial functions of the NHA
but instead requires exercise of judgment. In fact, Item No. 4 of the MOA terminating the
JVAs provides for validation of the developers (RBIs) claims arising from the termination of
the SMDRP through the various government agencies. 98 Such validation requires the
exercise of discretion.
ADMIN LAW CASES SET 7
In addition, prohibition does not lie against the NHA in view of petitioners failure to avail
and exhaust all administrative remedies. Clear is the rule that prohibition is only available
when there is no adequate remedy in the ordinary course of law.
More importantly, prohibition does not lie to restrain an act which is already a fait
accompli. The "operative fact" doctrine protecting vested rights bars the grant of the writ
of prohibition to the case at bar. It should be remembered that petitioner was the Solicitor
General at the time SMDRP was formulated and implemented. He had the opportunity to
question the SMDRP and the agreements on it, but he did not. The moment to challenge
the Project had passed.
On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents to
disclose all documents and information relating to the project, including, but not limited to,
any subsequent agreements with respect to the different phases of the Project, the
revisions of the original plan, the additional works incurred on the Project, the current
financial condition of respondent RBI, and the transactions made with respect to the
project. We earlier ruled that petitioner will be allowed access to official records relative to
the SMDRP. That would be adequate relief to satisfy petitioners right to the information
gateway.
WHEREFORE, the petition is partially granted.
The prayer for a writ of prohibition is DENIED for lack of merit.
The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow
access to petitioner to all public documents and official records relative to the SMDRP
including, but not limited to, the March 19, 1993 JVA between the NHA and RBI and
subsequent agreements related to the JVA, the revisions over the original plan, and the
additional works incurred on and the transactions made with respect to the Project.
No costs.
SO ORDERED.
79

G.R. No. 161811 April 12, 2006
THE CITY OF BAGUIO, MAURICIO DOMOGAN, and ORLANDO
GENOVE, Petitioners, vs. FRANCISCO NIO, JOSEFINA NIO, EMMANUEL NIO, and
EURLIE OCAMPO, Respondents.
The Bureau of Lands awarded on May 13, 1966 to Narcisa A. Placino (Narcisa) a parcel of
land identified as Lot No. 10 (the lot) located at Saint Anthony Road, Dominican-Mirador
Barangay, Baguio City.
Francisco Nio (Nio), one of the herein respondents, who has been occupying the lot,
contested the award by filing a Petition Protest on December 23, 1975 before the Bureau of
Lands. The Director of Lands dismissed the Petition Protest by Order of November 11,
1976. Nio appealed the dismissal all the way to the Supreme Court but he did not
succeed.
The decision of the Director of Lands dated November 11, 1976 having become final and
executory,1 the then-Executive Director of the Department of Environment and Natural
Resources-Cordillera Autonomous Region (DENR-CAR), on petition of Narcisa, issued an
Order of Execution dated February 1, 1993 directing the Community Environment and
Natural Resources Office (CENRO) Officer to enforce the decision "by ordering Petitioner
Nio and those acting in his behalf to refrain from continuously occupying the area and
remove whatever improvements they may have introduced thereto."2
Attempts to enforce the Order of Execution failed, prompting Narcisa to file a complaint for
ejectment before the Baguio City Municipal Trial Court in Cities (MTCC). The MTCC
dismissed Narcisas complaint, however, by Order 3of August 7, 1996.
Narcisas counsel, Atty. Edilberto Claravall (Atty. Claravall), later petitioned the DENR-CAR
for the issuance of a Special Order authorizing the City Sheriff of Baguio, the City Police
Station, and the Demolition Team of the City Government to demolish or remove the
improvements on the lot introduced by Nio. The DENR-CAR denied the petition, citing lack
of jurisdiction over the City Sheriff of Baguio, the City Police Station, and the Demolition
Team of the City Government. The DENR-CAR also invoked Section 14 (now Section 10 (d))
of Rule 39 of the Rules of Court.4
Atty. Claravall thereupon moved to have the Order of Execution previously issued by the
DENR-CAR amended, which was granted. As amended, the Order of Execution addressed to
the CENRO Officer read:
WHEREFORE, pursuant to the provisions of Section 1844 of the Revised Administrative
Code as amended by Act No. 3077, you are hereby enjoined to enforce the aforementioned
order, with the assistance upon request of the City Sheriff of Baguio City, the Demolition
Team of Baguio City and the Baguio City Police Station, by Ordering Petitioner Nio and
those acting in his behalf to refrain from continuously occupying the area and remove
ADMIN LAW CASES SET 7
whatever improvements they may have introduced thereto. SO
ORDERED.5 (Emphasis and underscoring supplied)
The DENR-CENRO, together with the Demolition Team of Baguio City and the Baguio City
police, desisted, however, in their earlier attempt to enforce the Amended Order of
Execution.6
On July 16, 1997, the Demolition Team of Baguio City headed by Engineer Orlando Genove
and the Baguio City Police, on orders of then Baguio City Police Officer-In-Charge (OIC)
Donato Bacquian, started demolishing the houses of Nio and his herein co-respondents. 7
The demolition was, however, temporarily stopped upon the instructions of DENR-CENR
Officer Guillermo Fianza, who later advised Nio that the DENR-CENRO would implement
the Amended Order of Execution on August 4, 1997. 8
Nio and his wife Josefina Nio thereupon filed a Petition 9 for Certiorari and Prohibition with
Prayer for Temporary Restraining Order before the Regional Trial Court (RTC) of Baguio City
against Guillermo Fianza, Teofilo Olimpo of the DENR-CENRO, Mayor Mauricio Domogan
(hereafter petitioner), Atty. Claravall, Engr. Orlando Genove (hereafter petitioner), Rolando
Angara, and Police Officer Donato Bacquian challenging the Amended Order of Execution
issued by the DENR-CENRO.1avvphil.net
The Nio spouses later filed an Amended Petition 10 by impleading Emmanuel Nio and
Eurlie Ocampo as therein co-petitioners and the City of Baguio (hereafter petitioner) and
Narcisa as therein additional respondents, and further praying for damages.
Branch 6 of the Baguio RTC dismissed the petition of Nio et al. (hereafter respondents) for
lack of merit.11Respondents Motion for Reconsideration12 having been denied, they filed a
Petition for Review13 under Rule 42 of the Rules before the Court of Appeals.
By Decision14 of December 11, 2002, the Court of Appeals granted the Petition for Review,
holding that Sec. 10(d) of Rule 39 of the Rules reading:
SEC. 10. Execution of judgments for specific act.
(d) Removal of improvements on property subject of execution. When the property
subject of the execution contains improvements constructed or planted by the judgment
obligor or his agent, the officer shall not destroy, demolish or remove said improvements
except upon special order of the court, issued upon motion of the judgment obligee after
due hearing and after the former has failed to remove the same within a reasonable time
fixed by the court. (Underscoring supplied)
applies.
80

Thus disposed the appellate court:
WHEREFORE, the instant appeal is hereby GRANTED and the Orders dated September 24,
1997 and November 23, 1998 are hereby SET ASIDE. Public respondent City Mayor
Mauricio Domogan thru the Demolition Team and City Engineers Office are hereby ordered
to cease and desist from enforcing the amended order of execution issued by Oscar N.
Hamada, Regional Executive Director of the Department of Environmental and Natural
Resources, concerning the demolition or removal of the structures made by petitioners
until private respondent applied for a special order abovementioned with the proper
court.1avvphil.net SO ORDERED.15 (Underscoring supplied)
Respondents filed before the appellate court an Ex-Parte Motion for Reconsideration 16 on
January 9, 2003, alleging that some of the reliefs they prayed for in their petition were left
unacted upon.17 Petitioners too filed a Motion for Reconsideration 18 on January 28, 2003,
raising the following grounds:
1. THE HONORABLE COURT FAILED TO CONSIDER THAT THE CITY MAYOR HAS THE POWER
TO ORDER THE DEMOLITION OF ILLEGALLY-BUILT STRUCTURES;
2. THE HONORABLE COURT GRAVELY ERRED IN GIVING DUE COURSE TO THE PETITION FOR
REVIEW;
3. THE HONORABLE COURT MISAPPLIED SEC. 10 (d), RULE 39 of the RULES OF
COURT.19(Underscoring supplied)
In support of the first ground, petitioners raised before the appellate court, in their Motion
for Reconsideration, for the first time, the power of the City Mayor to validly order the
demolition of a structure constructed without a building permit pursuant to Sec. 455(b)
3(vi) of the Local Government Code of 1991 in relation to the National Building Code of the
Philippines.
Alleging that respondents built their house without the required entry and building permits,
petitioners argued that the City Mayor may order the demolition of a house without a
special court order.20
The Court of Appeals denied both parties motions for reconsideration by Resolution 21 of
December 17, 2003.
Hence, the present petition of the City of Baguio, Mayor Domogan (now a Congressman),
and Orlando Genove, faulting the appellate court:
1. IN RULING THAT A SPECIAL COURT ORDER IS NEEDED FOR THE DEMOLITION OF
RESPONDENTS STRUCTURES;
ADMIN LAW CASES SET 7
2. IN APPLYING SEC. 10(d) RULE 39 OF THE RULES OF COURT IN THIS CASE;
3. IN ENTERTAINING RESPONDENTS PETITION FOR REVIEW. 22
The petition fails. While it is noted that respondents appeal to the Court of Appeals was
erroneously brought under Rule 42 of the Rules of Court, instead of under Rule 41, the RTC
having rendered the questioned decision in the exercise of its original, not appellate,
jurisdiction, this Court overlooks the error in view of the merits of respondents case. 23
Petitioners contention that the enforcement of the Amended Order of Execution does not
need a hearing and court order which Sec. 10(d) of Rule 39 of the Rules of Court requires
does not lie. That an administrative agency which is clothed with quasi-judicial functions
issued the Amended Order of Execution is of no moment, since the requirement in Sec. 10
(d) of Rule 39 of the Rules of Court echoes the constitutional provision that "no person shall
be deprived of life, liberty or property without due process of law, nor shall any person be
denied the equal protection of the laws."24
Antipolo Realty Corporation v. National Housing Authority teaches:
In general, the quantum of judicial or quasi-judicial powers which an administrative agency
may exercise is defined in the enabling act of such agency. In other words, the extent to
which an administrative entity may exercise such powers depends largely, if not wholly, on
the provisions of the statute creating or empowering such agency.25 (Underscoring
supplied)
There is, however, no explicit provision granting the Bureau of Lands (now the Land
Management Bureau) or the DENR (which exercises control over the Land Management
Bureau) the authority to issue an order of demolition 26 which the Amended Order of
Execution, in substance, is.
Indeed, [w]hile the jurisdiction of the Bureau of Lands is confined to the determination of
the respective rights of rival claimants to public lands or to cases which involve the
disposition of public lands, the power to determine who has the actual, physical
possession or occupation or the better right of possession over public lands
remains with the courts.
The rationale is evident. The Bureau of Lands does not have the wherewithal to police
public lands. Neither does it have the means to prevent disorders or breaches of peace
among the occupants. Its power is clearly limited to disposition and alienation and while it
may decide disputes over possession, this is but in aid of making the proper awards. The
ultimate power to resolve conflicts of possession is recognized to be within the
legal competence of the civil courts and its purpose is to extend protection to
the actual possessors and occupants with a view to quell social
unrest.27 (Emphasis added)
81
 ADMIN LAW CASES SET 7
Consequently, this Court held: 28

x x x the power to order the sheriff to remove improvements and turn over the
possession of the land to the party adjudged entitled thereto, belongs only to
the courts of justice and not to the Bureau of Lands.29 (Emphasis and underscoring
supplied)

In fine, it is the court sheriff which is empowered to remove improvements introduced by

respondents on, and turn over possession of, the lot to Narcisa.

Petitioners invocation of the City Mayors authority under Sec. 455(b) 3(vi) of the Local
Government Code to order the demolition or removal of an illegally constructed house,
building, or structure within the period prescribed by law or ordinance and their allegation
that respondents structures were constructed without building permits 30 were not raised
before the trial court. Petitioners having, for the first time, invoked said section of the Local
Government Code and respondents lack of building entry permits in their Motion for
Reconsideration of the Court of Appeals decision, it was correctly denied of merit, 31 it
being settled that matters, theories or arguments not brought out in the proceedings below
will ordinarily not be considered by a reviewing court as they cannot be raised for the first
time on appeal.32

WHEREFORE, the petition is DISMISSED. The questioned Decision and Resolution of the
Court of Appeals are AFFIRMED. No pronouncement as to costs. SO ORDERED.

82

A.M. No. P-92-695 December 7, 1994
CYNTHIA A. FLORENDO, complainant, vs. EXEQUIEL ENRILE, respondent.
In a sworn letter-complaint filed with the Office of the Court Administrator on 17 March
1992, the complainant charged the respondent deputy sheriff of the Municipal Trial Court in
Cities (MTCC) at Cabanatuan City with the failure to enforce a writ of demolition
notwithstanding his collection and receipt of P5,200.00. She averred that she was the
plaintiff in Civil Cases Nos. 9241 to 9249, all for ejectment, and that in a joint decision
rendered on 22 June 1987 by Branch 2 of the MTCC 1 the defendants were ordered to
vacate the premises and to surrender the possession thereof to the complainant. The
defendants appealed this decision to the Regional Trial Court (RTC) which in a joint decision
of 18 August 1989 2 affirmed it in toto. On 19 January 1990, the MTCC issued a writ of
execution. 3
The writ was assigned to the respondent for implementation. In view of the refusal of the
defendants to vacate the premises, the complainant asked for the issuance of a writ of
demolition, which the court granted pursuant to its order of 21 March 1990. 4 On 27 June
1990, it denied the defendant's motion for extension of time to execute the writ of
demolition. 5 For the service and implementation of the writ of demolition, the respondent
asked and received from the complainant and her lawyer the total sum of P5,200.00
purportedly as sheriff's fee. 6 The respondent issued no official receipt for this amount. His
acknowledgment of the partial payment of P2,700.00 appears on the stationery of the
complainant's lawyer, Atty. Edgardo G. Villarin, while that for the other payment of P500.00
is handwritten on the stationery of the Office of the City Legal Officer, who is the same
Atty. Edgardo G. Villarin. The other payment of P2,000.00 was by check drawn by the
complainant's counsel.
The respondent did not execute the writ of demolition despite the receipt of P5,200.00. The
complainant's lawyer then wrote a letter to the respondent on 8 November 1990
demanding that the latter implement the writ of demolition or return the aforesaid sum
within ten days from receipt of the letter, otherwise the matter would be brought up to this
Court. 7 Since nothing was done by the respondent, the complainant filed this complaint.
She asked that the respondent be dismissed from the service.
On 25 May 1992, we required the respondent to comment on the letter-complaint.
In his comment (denominated as an answer) dated 16 June 1992, the respondent did not
deny the charge that he collected P5,200.00 as sheriff's fee; however, he specifically
denied the allegation that he did not implement the writ of execution and the writ of
demolition. He claimed that he "returned to the defendants for several times to advice [sic]
them to vacate the said place," but since they did not, he advised the complainant's
counsel to file a motion for the issuance of a writ of demolition. When he received the writ
of demolition, he served it on the defendants on 25 July 1990; the latter requested an
extension of thirty days. He then prepared a return of service dated 25 July 1990. 8 Then,
after the expiration of the extended period, he again approached the defendants on 4
September 1990 to make them vacate the premises. However, he was threatened by them
ADMIN LAW CASES SET 7
that if he would enforce the writ of demolition something would happen, i.e.,
"magkamatayan muna." He then prepared the return of service on the said date. 9 The writ
was thus unsatisfied. It appears, however, that these returns dated 25 July 1990 and 4
September 1990 were filed with the MTCC only on 29 May 1991 and 6 June 1991,
respectively.
He further claimed that on 8 July 1991, Judge Romeo Mauricio of the MTCC referred to Mr.
Arsenio S. Vicencio, Clerk of Court IV and Ex-Officio Sheriff of the MTCC, the respondent's
return of service of 4 September 1990 for comment. 10 In his compliance of 15 July
1991, 11 Mr. Vicencio informed Judge Mauricio that the threat on the respondent's life was
"real, and it will be very risky for him to implement" it, and requested that a new deputy
sheriff be assigned to enforce the writ. Pursuant to this request, Judge Mauricio sent a
formal request to the Presiding Judge of Branch I of the MTCC of Cabanatuan City asking
that deputy sheriff Teodoro Pineda be assigned to implement the writ of demolition. 12
This case was referred to the Executive Judge of the RTC in Cabanatuan City for
investigation, report and recommendation.
In his Report and Recommendation dated 4 March 1994, but transmitted to this Court only
on 6 June 1994, Executive Judge Johnson L. Ballutay narrates the several instances that the
case was set for hearing and the postponements thereof because of the respondent's plea
for time to secure the services of counsel or because of his non-appearance. Judge Ballutay
recommends:
PREMISES CONSIDERED, and taking into account the stubborn attitude of the
respondent of not engaging the services of counsel to facilitate the early
termination of the investigation, it is respectfully recommended that in addition to
the suspension for one (1) year without pay and to return to the complainant the
P5,200.00, a suspension without pay for six (6) months be imposed upon the
respondent.
In the resolution of 8 August 1994, we referred the Report and Recommendation of Judge
Ballutay to the Office of the Court Administrator for evaluation, report and
recommendation.
In its Memorandum of 23 September 1994, the Office of the Court Administrator finds that:
An exhaustive study of the evidence on record shows a considerable amount of
Neglect of Duty on the part of respondent. He should have coordinated with the
counsel of the complainant and/or caused the citation of the defiant defendants for
contempt of court when they resisted the implementation of the writ. Moreover, he
should have requested for additional sheriff and/or police assistance for the proper
and immediate implementation of the subject writs, but he did not. For a long
period time, the complainants have been deprived of their constitutional right to a
speedy administration of justice considering that the Decision sought to be
83

enforced was issued in 1989 yet, all because of the negligence of herein
respondent.
In the case of Active Wood Products, Inc. vs. IAC, 183 SCRA 671, the Court declares
that sheriffs must implement or execute the decision of the court without delay to
prevent injury or damage to the winning party and so as not to prejudice said party
of obtaining speedy justice.
Respondent did not also conduct himself in an upright and professional manner as
the judiciary code of ethics require [sic], particularly in his getting the amount of
P5,200.00 in installment basis from the respondent.
This Court, speaking through Justice Regalado, in the case of Anonuevo vs.
Pempena (Administrative Matter No. P-93-795) promulgated on July 18, 1994,
enunciates: "It is an abhorrent and anomalous practice for a sheriff to demand
fees in excess of those lawfully allowed. This Court has emphasized time and
again, that the conduct and behaviour of everyone connected with an office
charged with the dispensation of justice, from the presiding judge to the sheriff
down to the lowliest clerk should be circumscribed with the heavy burden of
responsibility. Their conduct at all times, must be characterized with propriety and
decorum, but above all else, must be above and beyond suspicion," for every
employee should be an example of integrity, uprightness and honesty (Valenton, et
al. vs.
Melgar A.M. No. P-92-698, March 3, 1993, 219 SCRA 372).
It then recommends:
WHEREFORE, considering all the foregoing, it is respectfully recommended to the
Honorable Court that respondent be imposed a FINE equivalent to his one (1)
month salary payable within ten (10) days upon notice, taking into account that (a)
he was not totally remiss in his duties but also exerted efforts to execute the writs;
(b) he even went to the extent of approaching the City Mayor for relocation of the
defendants; and (c) the complainant herself is in conformity to the dismissal of the
complaint; and (2) to RETURN the total amount of P5,200.00 to the complainant,
without interest, within twenty (20) days from notice hereof, with a STERN
WARNING that the repetition of similar offense will be dealt with more severely.
We do not agree with the penalty recommended by Judge Ballutay or the Office of the
Court Administrator. Both are, especially that of the latter, grossly inadequate in the light
of the gravity of the administrative offenses committed by the respondent. Moreover, the
former's recommendation of an additional penalty of suspension for six months on account
of the "stubborn attitude of the respondent of not engaging the services of counsel to
facilitate the early termination of the investigation" is improper. The records disclose that
Judge Ballutay was very accommodating to the parties. No less than fifteen scheduled
hearings were cancelled or postponed and despite admonitions that he would proceed with
the hearing regardless of the absence of counsel, he never did.
ADMIN LAW CASES SET 7
Having been delegated by this Court the authority to investigate the case and to submit
his report and recommendation, he should have, upon deliberate failure of the respondent
to engage the services of counsel, allowed the complainant to present ex-parte her
evidence and, upon the non-appearance of the respondent on any of the scheduled dates
of hearing, considered him to have waived the presentation of his evidence. As we see it
then, Judge Ballutay is not entirely without blame for the delay in the termination of the
investigation of this case.
It must be stressed that administrative cases involving misconduct, nonfeasance,
misfeasance, or malfeasance in office of officers and employees in the judiciary are of
paramount public interest as the respondents are involved in the administration of justice,
a sacred and solemn task. Such cases must be resolved with reasonable dispatch to clear
the name of the innocent and to punish forthwith the guilty whose stay in office, prolonged
by delay, could further tarnish the image of and diminish the public's faith in the judiciary.
We cannot likewise give weight to the circumstances relied upon by the Office of the Court
Administrator to mitigate the respondent's liability. As hereinafter noted, he is guilty of
grave misconduct, gross dishonesty, serious dereliction or neglect of duty, gross
inefficiency or incompetence, and conduct prejudicial to the best interest of the service.
That the complainant "is in conformity to the dismissal of the complaint" can by no means
be considered a mitigating circumstance as it is offensive to the postulate that a complaint
for misconduct, malfeasance, or misfeasance against a public officer or employee cannot
just be withdrawn at any time by the complainant and that the need to maintain the faith
and confidence of the people in the Government and its agencies and instrumentalities
demands the proceedings in such cases should not be made to depend on the whims and
caprices of the complainants who are, in a real sense, only witnesses therein. 13 In this
case, the conformity of the complainant, found in the motion to dismiss dated 8 February
1994 14 and signed by the counsel for the complainant, is based on the ground that the
respondent had already "fully implemented the writ of execution." That motion to dismiss
was not, and correctly so, granted by Judge Ballutay. On the contrary, on 4 March 1994 he
made his Report and Recommendation.
The respondent never denied that he received the sum of P5,200.00 from the complainant
in connection with the writ of demolition. He did not issue any official receipt for the
amount received. At the time the writ of demolition was placed on his hands for
implementation, the basic amount that the complainant had to pay was only P8.00
pursuant to paragraph (g), Section 7, Rule 141 of the Rules of Court. This was later
increased to P100.00 per this Court's en banc resolution of 4 September 1990. 15 There
are, of course, other sheriff's expenses that prevailing parties have to pay for the service
or implementation of court processes, or the safeguarding of property levied upon,
attached or seized, including kilometrage, guard's fees, warehousing and similar charges,
in an amount to be estimated by the sheriff. However, the approval of the court thereof is
needed and upon such approval, the amount shall be deposited by the interested party
with the clerk of court and ex-officio sheriff, who shall disburse the same to the deputy
sheriff assigned to effect the process, subject to liquidation within the same period for
rendering a return of the process. Any unspent amount shall be refunded to the party
84

making the deposit. A full report shall be submitted by the deputy sheriff assigned with his
return. 16
In the instant case, the respondent did not make any report on the amount he received
from the complainant nor did he issue an official receipt therefor. It is then obvious that he
asked for the amount not as lawful fees alone but as a consideration for the performance
of his duty. Any portion of the P5,200.00 then in excess of the lawful fees allowed by the
Rules of Court is an unlawful exaction which makes the respondent liable for grave
misconduct and gross dishonesty.
The records further disclose that the respondent's returns of service dated 25 July
1990 17 and 24 September 1990 18 were filed by him only on 29 May 1991 and 6 June 1991,
respectively, with the MTCC, which issued the writ of demolition. Either the respondent
correctly dated the returns, in which case there was a deliberate and unreasonable delay in
their filing with the court, or he antedated them to make it appear that he prepared it well
within the period provided for by the Rules of Court. Section 11 of Rule 39 thereof provides
that a writ of execution should be returned at any time not less than ten days nor more
than sixty days after its receipt by the sheriff who must set forth in writing on its back the
whole of his proceedings by virtue thereof and file it with the clerk or judge to be preserved
with the other papers in the case. 19 As the court personnel primarily responsible for the
speedy and efficient service of all court processes and writs originating from his court, 20 it
was the respondent's duty to immediately implement the writ of demolition. The Manual
for Clerks of
Court 21 provides:
ADMIN LAW CASES SET 7
sheriffs or law enforcement authorities, or filed the appropriate criminal complaint against
the defendants who had threatened him. Instead of doing so, he filed his returns only after
several months had lapsed.
For such nonfeasance and misfeasance, the respondent is guilty of serious dereliction or
neglect of duty, gross inefficiency or incompetence, and conduct prejudicial to the best
interest of the service.
Time and again, this Court has stressed that the conduct and behavior of everyone
connected with the dispensation of justice from the presiding judge to the lowliest clerk
should be circumscribed with the heavy burden of responsibility. They must at all times not
only observe propriety and decorum, they must also be above suspicion. 23
WHEREFORE, for grave misconduct, gross dishonesty, serious dereliction or neglect of
duty, gross incompetence or inefficiency, and conduct prejudicial to the best interest of the
service, respondent EXEQUIEL ENRILE, Deputy Sheriff of the Municipal Trial Court in Cities
of Cabanatuan City, is ordered DISMISSED from the service with forfeiture of all benefits
and with prejudice to re-employment in any branch of service of the Government, including
government-owned or controlled corporations.
This decision is immediately executory.
SO ORDERED.

2. Duty of sheriff as to execution of process. When a writ is placed in the hands

of the sheriff, it is his duty in the absence of instructions, to proceed with
reasonable celerity and promptness to execute it in accordance with its
mandate. . . . He has no discretion whether to execute it or not.

Section E(4) of the Manual also provides:

4. All sheriffs and deputy sheriffs shall submit a report to the Judge concerned on
the action taken on all writs and processes assigned to them within ten (10) days
from receipt of said process or writ. Said report shall form part of the records of the
case.

The duty imposed upon the sheriff to execute the writ is ministerial, not directory. A purely
ministerial act or duty is one which an officer or tribunal performs in a given state of facts,
in a prescribed manner, in obedience to the mandate of the legal authority, without regard
to the exercise of his own judgment upon the propriety or impropriety of the act done. 22

The respondent's explanation that he was not able to implement the writ of demolition
because he was threatened with death by the defendants is unacceptable. If that were
true, he should have either reported it to the MTCC and requested the assistance of other

85

G.R. No. 88550 April 18, 1990
INDUSTRIAL ENTERPRISES, INC., petitioner, vs. THE HON. COURT OF APPEALS,
MARINDUQUE MINING & INDUSTRIAL CORPORATION, THE HON. GERONIMO
VELASCO in his capacity as Minister of Energy and PHILIPPINE NATIONAL
BANK, respondents.
This petition seeks the review and reversal of the Decision of respondent Court of Appeals
in CA-G.R. CV No. 12660, 1 which ruled adversely against petitioner herein.
Petitioner Industrial Enterprises Inc. (IEI) was granted a coal operating contract by the
Government through the Bureau of Energy Development (BED) for the exploration of two
coal blocks in Eastern Samar. Subsequently, IEI also applied with the then Ministry of
Energy for another coal operating contract for the exploration of three additional coal
blocks which, together with the original two blocks, comprised the so-called "Giporlos
Area."
IEI was later on advised that in line with the objective of rationalizing the country's over-all
coal supply-demand balance . . . the logical coal operator in the area should be the
Marinduque Mining and Industrial Corporation (MMIC), which was already developing the
coal deposit in another area (Bagacay Area) and that the Bagacay and Giporlos Areas
should be awarded to MMIC (Rollo, p. 37). Thus, IEI and MMIC executed a Memorandum of
Agreement whereby IEI assigned and transferred to MMIC all its rights and interests in the
two coal blocks which are the subject of IEI's coal operating contract.
Subsequently, however, IEI filed an action for rescission of the Memorandum of Agreement
with damages against MMIC and the then Minister of Energy Geronimo Velasco before the
Regional Trial Court of Makati, Branch 150, 2alleging that MMIC took possession of the
subject coal blocks even before the Memorandum of Agreement was finalized and
approved by the BED; that MMIC discontinued work thereon; that MMIC failed to apply for a
coal operating contract for the adjacent coal blocks; and that MMIC failed and refused to
pay the reimbursements agreed upon and to assume IEI's loan obligation as provided in
the Memorandum of Agreement (Rollo, p. 38). IEI also prayed that the Energy Minister be
ordered to approve the return of the coal operating contract from MMIC to petitioner, with
a written confirmation that said contract is valid and effective, and, in due course, to
convert said contract from an exploration agreement to a development/production or
exploitation contract in IEI's favor.
Respondent, Philippine National Bank (PNB), was later impleaded as co-defendant in an
Amended Complaint when the latter with the Development Bank of the Philippines effected
extra-judicial foreclosures on certain mortgages, particularly the Mortgage Trust
Agreement, dated 13 July 1981, constituted in its favor by MMIC after the latter defaulted
in its obligation totalling around P22 million as of 15 July 1984. The Court of Appeals
eventually dismissed the case against the PNB (Resolution, 21 September 1989).
Strangely enough, Mr. Jesus S. Cabarrus is the President of both IEI and MMIC.
ADMIN LAW CASES SET 7
In a summary judgment, the Trial Court ordered the rescission of the Memorandum of
Agreement, declared the continued efficacy of the coal operating contract in favor of IEI;
ordered the reversion of the two coal blocks covered by the coal operating contract;
ordered BED to issue its written affirmation of the coal operating contract and to
expeditiously cause the conversion thereof from exploration to development in favor of IEI;
directed BED to give due course to IEI's application for a coal operating contract; directed
BED to give due course to IEI's application for three more coal blocks; and ordered the
payment of damages and rehabilitation expenses (Rollo, pp. 9-10).
In reversing the Trial Court, the Court of Appeals held that the rendition of the summary
judgment was not proper since there were genuine issues in controversy between the
parties, and more importantly, that the Trial Court had no jurisdiction over the action
considering that, under Presidential Decree No. 1206, it is the BED that has the power to
decide controversies relative to the exploration, exploitation and development of coal
blocks (Rollo, pp. 43-44).
Hence, this petition, to which we resolved to give due course and to decide.
Incidentally, the records disclose that during the pendency of the appeal before the
Appellate Court, the suit against the then Minister of Energy was dismissed and that, in the
meantime, IEI had applied with the BED for the development of certain coal blocks.
The decisive issue in this case is whether or not the civil court has jurisdiction to hear and
decide the suit for rescission of the Memorandum of Agreement concerning a coal
operating contract over coal blocks. A corollary question is whether or not respondent
Court of Appeals erred in holding that it is the Bureau of Energy Development (BED) which
has jurisdiction over said action and not the civil court.
While the action filed by IEI sought the rescission of what appears to be an ordinary civil
contract cognizable by a civil court, the fact is that the Memorandum of Agreement sought
to be rescinded is derived from a coal-operating contract and is inextricably tied up with
the right to develop coal-bearing lands and the determination of whether or not the
reversion of the coal operating contract over the subject coal blocks to IEI would be in line
with the integrated national program for coal-development and with the objective of
rationalizing the country's over-all coal-supply-demand balance, IEI's cause of action was
not merely the rescission of a contract but the reversion or return to it of the operation of
the coal blocks. Thus it was that in its Decision ordering the rescission of the Agreement,
the Trial Court, inter alia, declared the continued efficacy of the coal-operating contract in
IEI's favor and directed the BED to give due course to IEI's application for three (3) IEI more
coal blocks. These are matters properly falling within the domain of the BED.
For the BED, as the successor to the Energy Development Board (abolished by Sec. 11, P.D.
No. 1206, dated 6 October 1977) is tasked with the function of establishing a
comprehensive and integrated national program for the exploration, exploitation, and
development and extraction of fossil fuels, such as the country's coal resources; adopting a
coal development program; regulating all activities relative thereto; and undertaking by
86

itself or through service contracts such exploitation and development, all in the interest of
an effective and coordinated development of extracted resources.
Thus, the pertinent sections of P.D. No. 1206 provide:
Sec. 6. Bureau of Energy Development. There is created in the Department a
Bureau of Energy Development, hereinafter referred to in this Section as the
Bureau, which shall have the following powers and functions, among others:
a. Administer a national program for the encouragement, guidance, and whenever
necessary, regulation of such business activity relative to the exploration,
exploitation, development, and extraction of fossil fuels such as petroleum, coal, . .
. and knowledge of the proper administrative bodies because technical matters or intricate
The decisions, orders, resolutions or actions of the Bureau may be appealed to the
Secretary whose decisions are final and executory unless appealed to the
President. (Emphasis supplied.)
That law further provides that the powers and functions of the defunct Energy
Development Board relative to the implementation of P.D. No. 972 on coal exploration and
development have been transferred to the BED, provided that coal operating contracts
including the transfer or assignment of interest in said contracts, shall require the approval
of the Secretary (Minister) of Energy (Sec. 12, P.D. No. 1206).
Sec. 12. . . . the powers and functions transferred to the Bureau of Energy
Development are:
xxx xxx xxx
ii. The following powers and functions of the Energy Development Board under PD
No. 910 . . .
(1) Undertake by itself or through other arrangements, such as service contracts,
the active exploration, exploitation, development, and extraction of energy
resources . . .
(2) Regulate all activities relative to the exploration, exploitation, development,
and extraction of fossil and nuclear fuels . . .
(P.D. No. 1206) (Emphasis supplied.)
P.D. No. 972 also provides:
ADMIN LAW CASES SET 7
Sec. 8. Each coal operating contract herein authorized shall . . . be executed by the
Energy Development Board.
Considering the foregoing statutory provisions, the jurisdiction of the BED, in the first
instance, to pass upon any question involving the Memorandum of Agreement between IEI
and MMIC, revolving as its does around a coal operating contract, should be sustained.
In recent years, it has been the jurisprudential trend to apply the doctrine of primary
jurisdiction in many cases involving matters that demand the special competence of
administrative agencies. It may occur that the Court has jurisdiction to take cognizance of
a particular case, which means that the matter involved is also judicial in character.
However, if the case is such that its determination requires the expertise, specialized skills
questions of facts are involved, then relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts even though the matter is within
the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies
"where a claim is originally cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which, under a regulatory
scheme, have been placed within the special competence of an administrative body, in
such case the judicial process is suspended pending referral of such issues to the
administrative body for its view" (United States v. Western Pacific Railroad Co., 352 U.S. 59,
Emphasis supplied).
Clearly, the doctrine of primary jurisdiction finds application in this case since the question
of what coal areas should be exploited and developed and which entity should be granted
coal operating contracts over said areas involves a technical determination by the BED as
the administrative agency in possession of the specialized expertise to act on the matter.
The Trial Court does not have the competence to decide matters concerning activities
relative to the exploration, exploitation, development and extraction of mineral resources
like coal. These issues preclude an initial judicial determination. It behooves the courts to
stand aside even when apparently they have statutory power to proceed in recognition of
the primary jurisdiction of an administrative agency.
One thrust of the multiplication of administrative agencies is that the interpretation
of contracts and the determination of private rights thereunder is no longer a
uniquely judicial function, exercisable only by our regular courts (Antipolo Realty
Corp. vs. National Housing Authority, 153 SCRA 399, at 407).
The application of the doctrine of primary jurisdiction, however, does not call for the
dismissal of the case below. It need only be suspended until after the matters within the
competence of the BED are threshed out and determined. Thereby, the principal purpose
behind the doctrine of primary jurisdiction is salutarily served.
Uniformity and consistency in the regulation of business entrusted to an
administrative agency are secured, and the limited function of review by the
judiciary are more rationally exercised, by preliminary resort, for ascertaining and
87
 ADMIN LAW CASES SET 7
interpreting the circumstances underlying legal issues, to agencies that are better
equipped than courts by specialization, by insight gained through experience, and
by more flexible procedure (Far East Conference v. United States, 342 U.S. 570).

With the foregoing conclusion arrived at, the question as to the propriety of the summary
judgment rendered by the Trial Court becomes unnecessary to resolve.

WHEREFORE, the Court Resolved to DENY the petition. No costs.

SO ORDERED.

88

G.R. No. 194024 April 25, 2012
PHILIP L. GO, PACIFICO Q. LIM and ANDREW Q. LIM Petitioners, vs. DISTINCTION
PROPERTIES DEVELOPMENT AND CONSTRUCTION, INC. Respondent.
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure assailing the March 17, 2010 Decision 1 and October 7, 2010 Resolution 2 of
the Court of Appeals (CA) in CA-G.R. SP No. 110013 entitled "Distinction Properties
Development & Construction, Inc. v. Housing Land Use Regulatory Board (NCR), Philip L.
Go, Pacifico Q. Lim and Andrew Q. Lim."
Factual and Procedural Antecedents:
Philip L. Go, Pacifico Q. Lim and Andrew Q. Lim (petitioners) are registered individual
owners of condominium units in Phoenix Heights Condominium located at H. Javier/Canley
Road, Bo. Bagong Ilog, Pasig City, Metro Manila.
Respondent Distinction Properties Development and Construction, Inc. (DPDCI) is a
corporation existing under the laws of the Philippines with principal office at No. 1020 Soler
Street, Binondo, Manila. It was incorporated as a real estate developer, engaged in the
development of condominium projects, among which was the Phoenix Heights
Condominium.
In February 1996, petitioner Pacifico Lim, one of the incorporators and the then president
of DPDCI, executed a Master Deed and Declaration of Restrictions (MDDR)3 of Phoenix
Heights Condominium, which was filed with the Registry of Deeds. As the developer, DPDCI
undertook, among others, the marketing aspect of the project, the sale of the units and the
release of flyers and brochures.
Thereafter, Phoenix Heights Condominium Corporation (PHCC) was formally organized and
incorporated. Sometime in 2000, DPDCI turned over to PHCC the ownership and possession
of the condominium units, except for the two saleable commercial units/spaces:
1. G/F Level BAS covered by Condominium Certificate of Title (CCT) No. 21030
utilized as the PHCCs administration office, and
2. G/F Level 4-A covered by CCT No. PT-27396/C-136-II used as living quarters by
the building administrator.
Although used by PHCC, DPDCI was assessed association dues for these two units.
Meanwhile, in March 1999, petitioner Pacifico Lim, as president of DPDCI, filed
an Application for Alteration of Plan 4 pertaining to the construction of 22 storage units in
the spaces adjunct to the parking area of the building. The application, however, was
disapproved as the proposed alteration would obstruct light and ventilation.
ADMIN LAW CASES SET 7
In August 2004, through its Board, PHCC approved a settlement offer from DPDCI for the
5
set-off of the latters association dues arrears with the assignment of title over CCT Nos.
21030 and PT-27396/C-136-II and their conversion into common areas. Thus, CCT Nos. PT-
43400 and PT-43399 were issued by the Registrar of Deeds of Pasig City in favor of PHCC in
lieu of the old titles. The said settlement between the two corporations likewise included
the reversion of the 22 storage spaces into common areas. With the conformity of PHCC,
DPDCIs application for alteration (conversion of unconstructed 22 storage units and units
GF4-A and BAS from saleable to common areas) was granted by the Housing and Land Use
Regulatory Board (HLURB).6
In August 2008, petitioners, as condominium unit-owners, filed a complaint 7 before the
HLURB against DPDCI for unsound business practices and violation of the MDDR. The case
was docketed as REM- 080508-13906. They alleged that DPDCI committed
misrepresentation in their circulated flyers and brochures as to the facilities or amenities
that would be available in the condominium and failed to perform its obligation to comply
with the MDDR.
In defense, DPDCI denied that it had breached its promises and representations to the
public concerning the facilities in the condominium. It alleged that the brochure attached
to the complaint was "a mere preparatory draft" and not the official one actually
distributed to the public, and that the said brochure contained a disclaimer as to the
binding effect of the supposed offers therein. Also, DPDCI questioned the petitioners
personality to sue as the action was a derivative suit.
After due hearing, the HLURB rendered its decision 8 in favor of petitioners. It held as invalid
the agreement entered into between DPDCI and PHCC, as to the alteration or conversion of
the subject units into common areas, which it previously approved, for the reason that it
was not approved by the majority of the members of PHCC as required under Section 13 of
the MDDR. It stated that DPDCIs defense, that the brochure was a mere draft, was against
human experience and a convenient excuse to avoid its obligation to provide the facility of
the project. The HLURB further stated that the case was not a derivative suit but one which
involved contracts of sale of the respective units between the complainants and DPDCI,
hence, within its jurisdiction pursuant to Section 1, Presidential Decree (P.D.) No. 957 (The
Subdivision and Condominium Buyers Protective Decree), as amended. The decretal
portion of the HLURB decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Ordering respondent to restore/provide proper gym facilities, to restore the
hallway at the mezzanine floor.
2. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS
as illegal, and consequently, and ordering respondent to continue paying the
condominium dues for these units, with interest and surcharge.
89

3. Ordering the Respondent to pay the sum of Php998,190.70, plus interests and
surcharges, as condominium dues in arrears and turnover the administration office
to PHCC without any charges pursuant to the representation of the respondent in
the brochures it circulated to the public with a corresponding credit to
complainants individual shares as members of PHCC entitled to such refund or
reimbursements.
4. Ordering the Respondent to refund to the PHCC the amount of Php1,277,500.00,
representing the cost of the deep well, with interests and surcharges with a
corresponding credit to complainants individual shares as members of PHCC
entitled to such refund or reimbursements.
ADMIN LAW CASES SET 7
Finally, the CA held that the rule on exhaustion of administrative remedies could be
relaxed. Appeal was not a speedy and adequate remedy as jurisdictional questions were
continuously raised but ignored by the HLURB. In the present case, however, "[t]he bottom
line is that the challenged decision is one that had been rendered in excess of jurisdiction,
if not with grave abuse of discretion amounting to lack or excess of jurisdiction." 13
Petitioners filed a motion for reconsideration 14 of the said decision. The motion, however,
was denied by the CA in its Resolution dated October 7, 2010.
Hence, petitioners interpose the present petition before this Court anchored on the
following

5. Ordering the Respondent to pay the complainants moral and exemplary GROUNDS
damages in the amount of P 10,000.00 and attorneys fees in the amount
of P 10,000.00.
(1)

All other claims and counterclaims are hereby dismissed accordingly.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE HLURB HAS NO
JURISDICTION OVER THE INSTANT CASE;
IT IS SO ORDERED.9
(2)
Aggrieved, DPDCI filed with the CA its Petition for Certiorari and Prohibition 10 dated August
11, 2009, on the ground that the HLURB decision was a patent nullity constituting an act
THE COURT OF APPEALS ALSO ERRED IN FINDING THAT PHCC IS AN INDISPENSABLE
without or beyond its jurisdiction and that it had no other plain, speedy and adequate
PARTY WHICH WARRANTED THE DISMISSAL OF THE CASE BY REASON OF IT NOT
remedy in the course of law.
HAVING BEEN IMPLEADED IN THE CASE;

On March 17, 2010, the CA rendered the assailed decision which disposed of the case in
(3)
favor of DPDCI as follows:

THE COURT OF APPEALS HAS LIKEWISE ERRED IN RELAXING THE RULE ON

WHEREFORE, in view of the foregoing, the petition is GRANTED. Accordingly, the
NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES BY DECLARING THAT
assailed Decision of the HLURB in Case No. REM-0800508-13906 is ANNULLED and SET
THE APPEAL MAY NOT BE A SPEEDY AND ADEQUATE REMEDY WHEN
ASIDE and a new one is entered DISMISSING the Complaint a quo.
JURISDICTIONAL QUESTIONS WERE CONTINUOUSLY RAISED BUT IGNORED
BY THE HLURB; and
IT IS SO ORDERED.11
(4)
The CA ruled that the HLURB had no jurisdiction over the complaint filed by petitioners as
the controversy did not fall within the scope of the administrative agencys authority under
THAT FINALLY, THE COURT A QUO ALSO ERRED IN NOT GIVING DUE
P.D. No. 957. The HLURB not only relied heavily on the brochures which, according to the
RESPECT OR EVEN FINALITY TO THE FINDINGS OF THE HLURB. 15
CA, did not set out an enforceable obligation on the part of DPDCI, but also erroneously
cited Section 13 of the MDDR to support its finding of contractual violation.
Petitioners contend that the HLURB has jurisdiction over the subject matter of this case.
Their complaint with the HLURB clearly alleged and demanded specific performance upon
The CA held that jurisdiction over PHCC, an indispensable party, was neither acquired nor
DPDCI of the latters contractual obligation under their individual contracts to provide a
waived by estoppel. Citing Carandang v. Heirs of De Guzman,12 it held that, in any event,
back-up water system as part of the amenities provided for in the brochure, together with
the action should be dismissed because the absence of PHCC, an indispensable party,
an administration office, proper gym facilities, restoration of a hallway, among others. They
rendered all subsequent actuations of the court void, for want of authority to act, not only
point out that the violation by DPDCI of its obligations enumerated in the said complaint
as to the absent parties but even as to those present.
90

squarely put their case within the ambit of Section 1, P.D. No. 957, as amended,
enumerating the cases that are within the exclusive jurisdiction of the HLURB. Likewise,
petitioners argue that the case was not a derivative suit as they were not suing for and in
behalf of PHCC. They were suing, in their individual capacities as condominium unit buyers,
their developer for breach of contract. In support of their view that PHCC was not an
indispensable party, petitioners even quoted the dispositive portion of the HLURB decision
to show that complete relief between or among the existing parties may be obtained
without the presence of PHCC as a party to this case. Petitioners further argue that DPDCIs
petition before the CA should have been dismissed outright for failure to comply with
Section 1, Rule XVI of the 2004 Rules of Procedure of the HLURB providing for an appeal to
the Board of Commissioners by a party aggrieved by a decision of a regional officer.
DPDCI, in its Comment,16 strongly objects to the arguments of petitioners and insists that
the CA did not err in granting its petition. It posits that the HLURB has no jurisdiction over
the complaint filed by petitioners because the controversies raised therein are in the
nature of "intra-corporate disputes." Thus, the case does not fall within the jurisdiction of
the HLURB under Section 1, P.D. No. 957 and P.D. No. 1344. According to DPDCI, petitioners
sought to address the invalidation of the corporate acts duly entered and executed by
PHCC as a corporation of which petitioners are admittedly members of, and not the acts
pertaining to their ownership of the units. Such being the case, PHCC should have been
impleaded as a party to the complaint. Its non-inclusion as an indispensable party warrants
the dismissal of the case. DPDCI further avers that the doctrine of exhaustion is
inapplicable inasmuch as the issues raised in the petition with the CA are purely legal; that
the challenged administrative act is patently illegal; and that the procedure of the HLURB
does not provide a plain, speedy and adequate remedy and its application may cause
great and irreparable damage. Finally, it claims that the decision of the HLURB Arbiter has
not attained finality, the same having been issued without jurisdiction.
Essentially, the issues to be resolved are: (1) whether the HLURB has jurisdiction over the
complaint filed by the petitioners; (2) whether PHCC is an indispensable party; and (3)
whether the rule on exhaustion of administrative remedies applies in this case.
The petition fails.
Basic as a hornbook principle is that jurisdiction over the subject matter of a case is
conferred by law and determined by the allegations in the complaint which comprise a
concise statement of the ultimate facts constituting the plaintiff's cause of action. The
nature of an action, as well as which court or body has jurisdiction over it, is determined
based on the allegations contained in the complaint of the plaintiff, irrespective of whether
or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.
The averments in the complaint and the character of the relief sought are the ones to be
consulted. Once vested by the allegations in the complaint, jurisdiction also remains
vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein.17 Thus, it was ruled that the jurisdiction of the HLURB to hear
and decide cases is determined by the nature of the cause of action, the subject matter or
property involved and the parties.18
ADMIN LAW CASES SET 7
Generally, the extent to which an administrative agency may exercise its powers depends
largely, if not wholly, on the provisions of the statute creating or empowering such
agency.19 With respect to the HLURB, to determine if said agency has jurisdiction over
petitioners cause of action, an examination of the laws defining the HLURBs jurisdiction
and authority becomes imperative. P.D. No. 957, 20 specifically Section 3, granted the
National Housing Authority (NHA) the "exclusive jurisdiction to regulate the real estate
trade and business." Then came P.D. No. 1344 21 expanding the jurisdiction of the NHA (now
HLURB), as follows:
SECTION 1. In the exercise of its functions to regulate the real estate trade and business
and in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority shall have exclusive jurisdiction to hear and decide cases of the
following nature:
(a) Unsound real estate business practices;
(b) Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and
(c) Cases involving specific performance of contractual and statutory obligations
filed by buyers of subdivision lot or condominium unit against the owner,
developer, dealer, broker or salesman.
This provision must be read in light of the laws preamble, which explains the reasons for
enactment of the law or the contextual basis for its interpretation. 22 A statute derives its
vitality from the purpose for which it is enacted, and to construe it in a manner that
disregards or defeats such purpose is to nullify or destroy the law. 23 P.D. No. 957, as
amended, aims to protect innocent subdivision lot and condominium unit buyers against
fraudulent real estate practices.24
The HLURB is given a wide latitude in characterizing or categorizing acts which may
constitute unsound business practice or breach of contractual obligations in the real estate
trade. This grant of expansive jurisdiction to the HLURB does not mean, however, that all
cases involving subdivision lots or condominium units automatically fall under its
jurisdiction. The CA aptly quoted the case of Christian General Assembly, Inc. v.
Ignacio,25 wherein the Court held that:
The mere relationship between the parties, i.e., that of being subdivision owner/developer
and subdivision lot buyer, does not automatically vest jurisdiction in the HLURB. For an
action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the
nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have
consistently held that the concerned administrative agency, the National Housing Authority
(NHA) before and now the HLURB, has jurisdiction over complaints aimed at compelling the
91

subdivision developer to comply with its contractual and statutory obligations. 26
[Emphases
supplied]
In this case, the complaint filed by petitioners alleged causes of action that apparently are
not cognizable by the HLURB considering the nature of the action and the reliefs sought. A
perusal of the complaint discloses that petitioners are actually seeking to nullify and
invalidate the duly constituted acts of PHCC - the April 29, 2005 Agreement 27 entered into
by PHCC with DPDCI and its Board Resolution 28 which authorized the acceptance of the
proposed offsetting/settlement of DPDCIs indebtedness and approval of the conversion of
certain units from saleable to common areas. All these were approved by the HLURB.
Specifically, the reliefs sought or prayers are the following:
1. Ordering the respondent to restore the gym to its original location;
2. Ordering the respondent to restore the hallway at the second floor;
3. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS
as illegal, and consequently, ordering respondent to continue paying the
condominium dues for these units, with interest and surcharge;
4. Ordering the respondent to pay the sum of PHP998,190.70, plus interest and
surcharges, as condominium dues in arrears and turnover the administration office
to PHCC without any charges pursuant to the representation of the respondent in
the brochures it circulated to the public;
5. Ordering the respondent to refund to the PHCC the amount of PHP1,277,500.00,
representing the cost of the deep well, with interests and surcharges;
6. Ordering the respondent to pay the complainants moral/exemplary damages in
the amount of PHP100,000.00; and
7. Ordering the respondent to pay the complainant attorneys fees in the amount
of PHP100,000.00, and PHP3,000.00 for every hearing scheduled by the Honorable
Office.29
As it is clear that the acts being assailed are those of PHHC, this case cannot prosper for
failure to implead the proper party, PHCC.
An indispensable party is defined as one who has such an interest in the controversy or
subject matter that a final adjudication cannot be made, in his absence, without injuring or
affecting that interest.30 In the recent case of Nagkakaisang Lakas ng Manggagawa sa
Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines Corporation,31 the Court had the occasion
to state that:
ADMIN LAW CASES SET 7
Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final
determination can be had of an action shall be joined as plaintiffs or defendants." If there is
a failure to implead an indispensable party, any judgment rendered would have no
effectiveness. It is "precisely when an indispensable party is not before the court (that) an
action should be dismissed. The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent
parties but even to those present." The purpose of the rules on joinder of indispensable
parties is a complete determination of all issues not only between the parties themselves,
but also as regards other persons who may be affected by the judgment. A decision valid
on its face cannot attain real finality where there is want of indispensable
parties.32 (Underscoring supplied)
Similarly, in the case of Plasabas v. Court of Appeals, 33 the Court held that a final decree
would necessarily affect the rights of indispensable parties so that the Court could not
proceed without their presence. In support thereof, the Court in Plasabas cited the
following authorities, thus:
"The general rule with reference to the making of parties in a civil action requires the
joinder of all indispensable parties under any and all conditions, their presence being a
sine qua non of the exercise of judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348) For
this reason, our Supreme Court has held that when it appears of record that there are other
persons interested in the subject matter of the litigation, who are not made parties to the
action, it is the duty of the court to suspend the trial until such parties are made either
plaintiffs or defendants. (Pobre, et al. v. Blanco, 17 Phil. 156). x x x Where the petition
failed to join as party defendant the person interested in sustaining the proceeding in the
court, the same should be dismissed. x x x When an indispensable party is not before the
court, the action should be dismissed. (People, et al. v. Rodriguez, et al., G.R. Nos. L-14059-
62, September 30, 1959) (sic)
"Parties in interest without whom no final determination can be had of an action shall be
joined either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The burden of
procuring the presence of all indispensable parties is on the plaintiff. (39 Amjur [sic] 885).
The evident purpose of the rule is to prevent the multiplicity of suits by requiring the
person arresting a right against the defendant to include with him, either as co-plaintiffs or
as co-defendants, all persons standing in the same position, so that the whole matter in
dispute may be determined once and for all in one litigation. (Palarca v. Baginsi, 38 Phil.
177, 178).
From all indications, PHCC is an indispensable party and should have been impleaded,
either as a plaintiff or as a defendant, 34 in the complaint filed before the HLURB as it would
be directly and adversely affected by any determination therein. To belabor the point, the
causes of action, or the acts complained of, were the acts of PHCC as a corporate body.
Note that in the judgment rendered by the HLURB, the dispositive portion in particular,
DPDCI was ordered (1) to pay P 998,190.70, plus interests and surcharges, as
condominium dues in arrears and turnover the administration office to PHCC; and (2) to
refund to PHCC P 1,277,500.00, representing the cost of the deep well, with interests and
92

surcharges. Also, the HLURB declared as illegal the agreement regarding the conversion of
the 22 storage units and Units GF4-A and BAS, to which agreement PHCC was a party.
Evidently, the cause of action rightfully pertains to PHCC. Petitioners cannot exercise the
same except through a derivative suit. In the complaint, however, there was no allegation
that the action was a derivative suit. In fact, in the petition, petitioners claim that their
complaint is not a derivative suit. 35 In the cited case of Chua v. Court of Appeals,36 the
Court ruled:
For a derivative suit to prosper, it is required that the minority stockholder suing for and on
behalf of the corporation must allege in his complaint that he is suing on a derivative
cause of action on behalf of the corporation and all other stockholders similarly situated
who may wish to join him in the suit. It is a condition sine qua non that the corporation be
impleaded as a party because not only is the corporation an indispensable party, but it is
also the present rule that it must be served with process. The judgment must be made
binding upon the corporation in order that the corporation may get the benefit of the suit
and may not bring subsequent suit against the same defendants for the same cause of
action. In other words, the corporation must be joined as party because it is its cause of
action that is being litigated and because judgment must be a res adjudicata against it.
(Underscoring supplied)
Without PHCC as a party, there can be no final adjudication of the HLURBs judgment. The
CA was, thus, correct in ordering the dismissal of the case for failure to implead an
indispensable party.
To justify its finding of contractual violation, the HLURB cited a provision in the MDDR, to
wit:
Section 13. Amendment. After the corporation shall have been created, organized and
operating, this MDDR may be amended, in whole or in part, by the affirmative vote of Unit
owners constituting at least fifty one (51%) percent of the Unit shares in the Project at a
meeting duly called pursuant to the Corporation By Laws and subject to the provisions of
the Condominium Act.
This citation, however, is misplaced as the above-quoted provision pertains to the
amendment of the MDDR. It should be stressed that petitioners are not asking for any
change or modification in the terms of the MDDR. What they are really praying for is a
declaration that the agreement regarding the alteration/conversion is illegal. Thus, the
Court sustains the CAs finding that:
ADMIN LAW CASES SET 7
There was nothing in the records to suggest that DPDCI sought the amendment of a part or
the whole of such MDDR. The cited section is somewhat consistent only with the principle
that an amendment of a corporations Articles of Incorporation must be assented to by the
stockholders holding more than 50% of the shares. The MDDR does not contemplate, by
such provision, that all corporate acts ought to be with the concurrence of a majority of the
unit owners.37
Moreover, considering that petitioners, who are members of PHCC, are ultimately
challenging the agreement entered into by PHCC with DPDCI, they are assailing, in effect,
PHCCs acts as a body corporate. This action, therefore, partakes the nature of an "intra-
corporate controversy," the jurisdiction over which used to belong to the Securities and
Exchange Commission (SEC), but transferred to the courts of general jurisdiction or the
appropriate Regional Trial Court (RTC), pursuant to Section 5b of P.D. No. 902-A, 38 as
amended by Section 5.2 of Republic Act (R.A.) No. 8799.39
An intra-corporate controversy is one which "pertains to any of the following relationships:
(1) between the corporation, partnership or association and the public; (2) between the
corporation, partnership or association and the State in so far as its franchise, permit or
license to operate is concerned; (3) between the corporation, partnership or association
and its stockholders, partners, members or officers; and (4) among the stockholders,
partners or associates themselves."40
Based on the foregoing definition, there is no doubt that the controversy in this case is
essentially intra-corporate in character, for being between a condominium corporation and
its members-unit owners. In the recent case of Chateau De Baie Condominium Corporation
v. Sps. Moreno,41 an action involving the legality of assessment dues against the
condominium owner/developer, the Court held that, the matter being an intra-corporate
dispute, the RTC had jurisdiction to hear the same pursuant to R.A. No. 8799.
As to the alleged failure to comply with the rule on exhaustion of administrative remedies,
the Court again agrees with the position of the CA that the circumstances prevailing in this
case warranted a relaxation of the rule.
The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial
system.1wphi1 The thrust of the rule is that courts must allow administrative agencies to
carry out their functions and discharge their responsibilities within the specialized areas of
their respective competence.42 It has been held, however, that the doctrine of exhaustion
of administrative remedies and the doctrine of primary jurisdiction are not ironclad rules. In
the case of Republic of the Philippines v. Lacap,43 the Court enumerated the numerous
exceptions to these rules, namely: (a) where there is estoppel on the part of the party
invoking the doctrine; (b) where the challenged administrative act is patently illegal,
amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction
that will irretrievably prejudice the complainant; (d) where the amount involved is
relatively so small as to make the rule impractical and oppressive; (e) where the question
involved is purely legal and will ultimately have to be decided by the courts of justice; (f)
where judicial intervention is urgent; (g) where the application of the doctrine may cause
93
 ADMIN LAW CASES SET 7
great and irreparable damage; (h) where the controverted acts violate due process; (i)
where the issue of non-exhaustion of administrative remedies has been rendered moot; (j)
where there is no other plain, speedy and adequate remedy; (k) where strong public
interest is involved; and (l) in quo warranto proceedings. 44 [Underscoring supplied]

The situations (b) and (e) in the foregoing enumeration obtain in this case.

The challenged decision of the HLURB is patently illegal having been rendered in excess of
jurisdiction, if not with grave abuse of discretion amounting to lack or excess of
jurisdiction. Also, the issue on jurisdiction is purely legal which will have to be decided
ultimately by a regular court of law. As the Court wrote in Vigilar v. Aquino:45

It does not involve an examination of the probative value of the evidence presented by the
parties. There is a question of law when the doubt or difference arises as to what the law is
on a certain state of facts, and not as to the truth or the falsehood of alleged facts. Said
question at best could be resolved only tentatively by the administrative authorities. The
final decision on the matter rests not with them but with the courts of justice. Exhaustion
of administrative remedies does not apply, because nothing of an administrative nature is
to be or can be done. The issue does not require technical knowledge and experience but
one that would involve the interpretation and application of law.

Finally, petitioners faulted the CA in not giving respect and even finality to the findings of
fact of the HLURB. Their reliance on the case of Dangan v. NLRC,46 reiterating the well-
settled principles involving decisions of administrative agencies, deserves scant
consideration as the decision of the HLURB in this case is manifestly not supported by law
and jurisprudence.

Petitioners, therefore, cannot validly invoke DPDCIs failure to fulfill its obligation on the
basis of a plain draft leaflet which petitioners were able to obtain, specifically Pacifico Lim,
having been a president of DPDCI. To accord petitioners the right to demand compliance
with the commitment under the said brochure is to allow them to profit by their own act.
This, the Court cannot tolerate.

In sum, inasmuch as the HLURB has no jurisdiction over petitioners complaint, the Court
sustains the subject decision of the CA that the HLURB decision is null and void ab
initio. This disposition, however, is without prejudice to any action that the parties may
rightfully file in the proper forum.

WHEREFORE, the petition is DENIED.

SO ORDERED.

94

G.R. No. 148106 July 17, 2006
EURO-MED LABORATORIES, PHIL., INC., represented by LEONARDO H.
TORIBIO, petitioner, vs. THE PROVINCE OF BATANGAS, represented by its
Governor, HON. HERMILANDO I. MANDANAS, respondent.
Before the Court is a petition for review on certiorari 1 assailing, on pure questions of law,
the March 7 and May 16, 2001 orders of the Regional Trial Court (RTC) of Batangas City 2 in
Civil Case No. 5300.
Civil Case No. 5300 was a complaint for sum of money 3 filed by petitioner Euro-Med
Laboratories, Phil., Inc. against respondent Province of Batangas. The pertinent portions of
the complaint read:
3. On several occasions, particularly from the period of 19 August 1992 to 11 August 1998,
defendant [respondent here], thru its various authorized representatives of the
government hospitals identified and listed below, purchased various Intravenous Fluids
(IVF) products from the plaintiff [petitioner here], with an unpaid balance of Four Hundred
Eighty Seven Thousand Six Hundred Sixty-Two Pesos and Eighty Centavos (P487,662.80),
as of 28 February 1998, broken down as follows: x x x x which purchases were evidenced
by invoices duly received and signed by defendants authorized representatives, upon
delivery of the merchandise listed in said invoices.
4. Under the terms and conditions of the aforesaid invoices, defendant agreed and
covenanted to pay plaintiff, without need of demand, its obligations in the above-
enumerated invoices on various terms indicated therein.
5. Plaintiff made several demands for defendant to pay its accountabilities, including
setting up several dialogues with plaintiffs representatives, but these proved fruitless.
6. Despite repeated demands by plaintiff for defendant to pay and settle its unpaid and
outstanding accounts under the aforementioned invoices, said defendant has failed and
still fails to comply therewith.4
In its answer,5 respondent admitted most of the allegations in the complaint, denying only
those relating to the unpaid balance supposedly still due petitioner. Respondent alleged
that some payments it had already made were not reflected in the computation set forth in
the complaint and that it was continuously exerting genuine and earnest efforts "to find
out the true and actual amount owed."6 Pre-trial and trial followed.
At the conclusion of petitioners presentation of evidence, respondent filed a motion to
dismiss7 the complaint on the ground that the primary jurisdiction over petitioners money
claim was lodged with the Commission on Audit (COA). Respondent pointed out that
petitioners claim, arising as it did from a series of procurement transactions with the
province, was governed by the Local Government Code provisions and COA rules and
regulations on supply and property management in local governments. Respondent argued
ADMIN LAW CASES SET 7
that the case called for a determination of whether these provisions and rules were
complied with, and that was within the exclusive domain of COA to make.
Finding the motion to be well-taken, the RTC issued on March 7, 2001 an order 8 dismissing
petitioners complaint without prejudice to the filing of the proper money claim with the
COA. In a subsequent order dated May 16, 2001, 9 the RTC denied petitioners motion for
reconsideration. Hence, this petition.
The resolution of this case turns on whether it is the COA or the RTC which has primary
jurisdiction to pass upon petitioners money claim against the Province of Batangas. We
rule that it is the COA which does. Therefore, we deny the petition.
The doctrine of primary jurisdiction holds that if a case is such that its determination
requires the expertise, specialized training and knowledge of an administrative body, relief
must first be obtained in an administrative proceeding before resort to the courts is had
even if the matter may well be within their proper jurisdiction. 10 It applies where a claim is
originally cognizable in the courts and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed
within the special competence of an administrative agency. In such a case, the court in
which the claim is sought to be enforced may suspend the judicial process pending referral
of such issues to the administrative body for its view 11 or, if the parties would not be
unfairly disadvantaged, dismiss the case without prejudice. 12
This case is one over which the doctrine of primary jurisdiction clearly held sway for
although petitioners collection suit for P487,662.80 was within the jurisdiction of the
RTC,13 the circumstances surrounding petitioners claim brought it clearly within the ambit
of the COAs jurisdiction.
First, petitioner was seeking the enforcement of a claim for a certain amount of money
against a local government unit. This brought the case within the COAs domain to pass
upon money claims against the government or any subdivision thereof under Section 26 of
the Government Auditing Code of the Philippines:14
The authority and powers of the Commission [on Audit] shall extend to and comprehend all
matters relating to x x x x the examination, audit, and settlement of all debts and claims of
any sort due from or owing to the Government or any of its subdivisions, agencies, and
instrumentalities. x x x x.
The scope of the COAs authority to take cognizance of claims is circumscribed, however,
by an unbroken line of cases holding statutes of similar import to mean
only liquidated claims, or those determined or readily determinable from vouchers,
invoices, and such other papers within reach of accounting officers. 15 Petitioners claim was
for a fixed amount and although respondent took issue with the accuracy of petitioners
summation of its accountabilities, the amount thereof was readily determinable from the
95
 ADMIN LAW CASES SET 7
receipts, invoices and other documents. Thus, the claim was well within the COAs
jurisdiction under the Government Auditing Code of the Philippines.

Second, petitioners money claim was founded on a series of purchases for the medical
supplies of respondents public hospitals. Both parties agreed that these transactions were
governed by the Local Government Code provisions on supply and property
management16 and their implementing rules and regulations promulgated by the
COA17 pursuant to Section 383 of said Code. 18 Petitioners claim therefore involved
compliance with applicable auditing laws and rules on procurement. Such matters are not
within the usual area of knowledge, experience and expertise of most judges but within the
special competence of COA auditors and accountants. Thus, it was but proper, out of
fidelity to the doctrine of primary jurisdiction, for the RTC to dismiss petitioners complaint.

Petitioner argues, however, that respondent could no longer question the RTCs jurisdiction
over the matter after it had filed its answer and participated in the subsequent
proceedings. To this, we need only state that the court may raise the issue of primary
jurisdiction sua sponte and its invocation cannot be waived by the failure of the parties to
argue it as the doctrine exists for the proper distribution of power between judicial and
administrative bodies and not for the convenience of the parties. 19

WHEREFORE, the petition is hereby DENIED. The March 7, and May 16, 2001 orders of
the Regional Trial Court of Batangas City are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

96

G.R. No. 175039 April 18, 2012
ADDITION HILLS MANDALUYONG CIVIC & SOCIAL ORGANIZATION,
INC., Petitioner, vs. MEGAWORLD PROPERTIES & HOLDINGS, INC., WILFREDO I.
IMPERIAL, in his capacity as Director, NCR, and HOUSING AND LAND USE
REGULATORY BOARD, DEPARTMENT OF NATURAL RESOURCES, Respondents.
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure
of the Decision1 dated May 16, 2006 as well as the Resolution 2 dated October 5, 2006 of
the Court of Appeals in CA-G.R. CV No. 63439, entitled "ADDITION HILLS MANDALUYONG
CIVIC & SOCIAL ORGANIZATION INC. vs. MEGAWORLD PROPERTIES & HOLDINGS, INC.,
WILFREDO I. IMPERIAL in his capacity as Director, NCR, and HOUSING AND LAND USE
REGULATORY BOARD, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES." In
effect, the appellate courts issuances reversed and set aside the Decision 3 dated
September 10, 1998 rendered by the Regional Trial Court (RTC) of Pasig City, Branch 158 in
Civil Case No. 65171.
The facts of this case, as narrated in the assailed May 16, 2006 Decision of the Court of
Appeals, are as follows:
[Private respondent] MEGAWORLD was the registered owner of a parcel of land located
along Lee Street, Barangay Addition Hills, Mandaluyong City with an area of 6,148 square
meters, more or less, covered by Transfer Certificate of Title (TCT) No. 12768, issued by the
Register of Deeds for Mandaluyong City.
Sometime in 1994, [private respondent] MEGAWORLD conceptualized the construction of a
residential condominium complex on the said parcel of land called the Wack-Wack
Heights Condominium consisting of a cluster of six (6) four-storey buildings and one (1)
seventeen (17) storey tower.
[Private respondent] MEGAWORLD thereafter secured the necessary clearances, licenses
and permits for the condominium project, including: (1) a CLV, issued on October 25, 1994,
and a Development Permit, issued on November 11, 1994, both by the [public respondent]
HLURB; (2) an ECC, issued on March 15, 1995, by the Department of Environment and
Natural Resources (DENR); (3) a Building Permit, issued on February 3, 1995, by the Office
of the Building Official of Mandaluyong City; and (4) a Barangay Clearance dated
September 29, 1994, from the office of the Barangay Chairman of Addition Hills.
Thereafter, construction of the condominium project began, but on June 30, 1995, the
plaintiff-appellee AHMCSO filed a complaint before the Regional Trial Court of Pasig City,
Branch 158, docketed as Civil Case No. 65171, for yo (sic) annul the Building Permit, CLV,
ECC and Development Permit granted to MEGAWORLD; to prohibit the issuance to
MEGAWORLD of Certificate of Registration and License to Sell Condominium Units; and to
permanently enjoin local and national building officials from issuing licenses and permits to
MEGAWORLD.
ADMIN LAW CASES SET 7
On July 20, 1995, [private respondent] MEGAWORLD filed a Motion to Dismiss the case for
lack of cause of action and that jurisdiction over the case was with the [public respondent]
HLURB and not with the regular courts.
On July 24, 1994, the RTC denied the motion to dismiss filed by [private respondent]
MEGAWORLD.
On August 3, 1995, [private respondent] MEGAWORLD filed its Answer.
On November 15, 1995, pre-trial was commenced.
Thereafter, trial on the merits ensued.4
The trial court rendered a Decision dated September 10, 1998 in favor of petitioner, the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing, the Certificate of Locational Viability, the
Development Permit and the Certificate of Registration and License to Sell Condominium
Units, all issued by defendant Wilfredo I. Imperial, National Capital Region Director of the
Housing and Land Use Regulatory Boad (HLURB-NCR) are all declared void and of no effect.
The same goes for the Building Permit issued by defendant Francisco Mapalo of
Mandaluyong City. In turn, defendant Megaworld Properties and Holdings Inc. is directed to
rectify its Wack Wack Heights Project for it to conform to the requirements of an R-2 zone
of Mandaluyong City and of the Metro Manila Zoning Ordinance 81-01.
Costs against these defendants.5
Private respondent appealed to the Court of Appeals which issued the assailed May 16,
2006 Decision which reversed and set aside the aforementioned trial court ruling, the
dispositive portion of which reads:
WHEREFORE, premises considered, the September 10, 1998 Decision of the Regional Trial
Court of Pasig City, Branch 158, rendered in Civil Case No. 65171 is hereby REVERSED and
SET ASIDE and a new one entered DISMISSING the complaint. 6
As can be expected, petitioner moved for reconsideration; however, the Court of Appeals
denied the motion in its assailed October 5, 2006 Resolution.
Hence, the petitioner filed the instant petition and submitted the following issues for
consideration:
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT FOUND THAT PETITIONER
FAILED TO EXHAUST ADMINISTRATIVE REMEDIES BEFORE SEEKING JUDICIAL INTERVENTION
FROM THE COURTS.
97

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT FOUND THAT THE CASE FILED
BEFORE AND DECIDED BY THE REGIONAL TRIAL COURT OF PASIG, BRANCH 158, DOES NOT
FALL UNDER ANY ONE OF THE EXCEPTIONS TO THE RULE ON EXHAUSTION OF
ADMINISTRATIVE REMEDIES.
WHETHER OR NOT THE COURT OF APPEALS (The Court) ERRED WHEN IT FOUND THAT
PETITIONER FAILED TO EXHAUST ADMINISTRATIVE REMEDIES BEFORE SEEKING JUDICIAL
INTERVENTION FROM THE COURTS.
WHETHER OR NOT THE COURT OF APPEALS (The Court) ERRED WHEN IT CONCLUDED THAT
THE HLURB HAD JURISDICTION OVER ACTIONS TO ANNUL CERTIFICATES OF LOCATIONAL
VIABILITY AND DEVELOPMENT PERMITS.7
On the other hand, private respondent put forth the following issues in its Memorandum 8:
I is a cornerstone of our judicial system. The thrust of the rule is that courts must allow
WHETHER OR NOT THE PETITION FOR REVIEW IS FATALLY DEFECTIVE FOR BEING
IMPROPERLY VERIFIED.
II
WHETHER OR NOT THE COURT OF APPEALS CORRECTLY ANNULLED AND SET ASIDE THE
TRIAL COURTS DECISION AND DISMISSED THE COMPLAINT FOR PETITIONERS FAILURE TO
EXHAUST ADMINISTRATIVE REMEDIES.
III
WHETHER OR NOT THE DECISION OF THE TRIAL COURT IS CONTRARY TO LAW AND THE
FACTS.
A. WHETHER OR NOT THE TRIAL COURT ERRED IN HOLDING THAT THE CLV WAS
IMPROPERLY AND IRREGULARLY ISSUED.
1. WHETHER OR NOT THE TRIAL COURT ERRED IN HOLDING THAT HLURB
HAS NO POWER TO GRANT AN EXCEPTION OR VARIANCE TO
REQUIREMENTS OF METRO MANILA COMMISSION ORDINANCE NO. 81-01.
2. WHETHER OR NOT THE TRIAL COURT ERRED IN HOLDING THAT THE
PROJECT DID NOT MEET THE REQUIREMENTS OF SECTION 3(B), ARTICLE VII
OF METRO MANILA COMMISSION ORDINANCE NO. 81-01 TO QUALIFY FOR
AN EXCEPTION OR DEVIATION.
ADMIN LAW CASES SET 7
B. WHETHER OR NOT THE TRIAL COURT ERRED IN HOLDING THAT THE
DEVELOPMENT PERMIT WAS IMPROPERLY AND IRREGULARLY ISSUED.
C. WHETHER OR NOT THE TRIAL COURT ERRED IN HOLDING THAT THE PROJECT
DEPRIVES THE ADJACENT PROPERTIES OF AIR. 9
We find the petition to be without merit.
At the outset, the parties in their various pleadings discuss issues, although ostensibly
legal, actually require the Court to make findings of fact. It is long settled, by law and
jurisprudence, that the Court is not a trier of facts. 10Therefore, the only relevant issue to be
resolved in this case is whether or not the remedy sought by the petitioner in the trial
court is in violation of the legal principle of the exhaustion of administrative remedies.
We have consistently declared that the doctrine of exhaustion of administrative remedies
administrative agencies to carry out their functions and discharge their responsibilities
within the specialized areas of their respective competence. The rationale for this doctrine
is obvious. It entails lesser expenses and provides for the speedier resolution of
controversies. Comity and convenience also impel courts of justice to shy away from a
dispute until the system of administrative redress has been completed. 11
In the case of Republic v. Lacap,12 we expounded on the doctrine of exhaustion of
administrative remedies and the related doctrine of primary jurisdiction in this wise:
The general rule is that before a party may seek the intervention of the court, he should
first avail of all the means afforded him by administrative processes. The issues which
administrative agencies are authorized to decide should not be summarily taken from
them and submitted to a court without first giving such administrative agency the
opportunity to dispose of the same after due deliberation.
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of
primary jurisdiction; that is, courts cannot or will not determine a controversy involving a
question which is within the jurisdiction of the administrative tribunal prior to the resolution
of that question by the administrative tribunal, where the question demands the exercise
of sound administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate matters of
fact.13
It is true that the foregoing doctrine admits of exceptions, such that in Lacap, we also held:
Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary
doctrine of primary jurisdiction, which are based on sound public policy and practical
considerations, are not inflexible rules. There are many accepted exceptions, such as: (a)
where there is estoppel on the part of the party invoking the doctrine; (b) where the
98

challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where
there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively small so as to make the rule
impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; (f) where judicial intervention is
urgent; (g) when its application may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) when the issue of non-exhaustion of
administrative remedies has been rendered moot; (j) when there is no other plain, speedy
and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto
proceedings. x x x.14
Upon careful consideration of the parties contentions, we find that none of the
aforementioned exceptions exist in the case at bar.
What is apparent, however, is that petitioner unjustifiably failed to exhaust the
administrative remedies available with the Housing and Land Use Regulatory Board
(HLURB) before seeking recourse with the trial court. Under the rules of the HLURB which
were then in effect, particularly Sections 4 and 6 of HLURB Resolution No. R-391, Series of
1987 (Adopting the 1987 Rules of Procedure of the Housing and Land Use Regulatory
Board),15 a complaint to annul any permit issued by the HLURB may be filed before the
Housing and Land Use Arbiter (HLA). Therefore, petitioners action to annul the Certificate
of Locational Viability (CLV) and the Development Permit issued by the HLURB on October
25, 1994 and November 11, 1994, respectively, in favor of private respondent for its Wack-
Wack Heights Condominium Project should have been properly filed before the HLURB
instead of the trial court.
We quote with approval the Court of Appeals discussion of this matter:
In the case at bar, plaintiff-appellee AHMCSO failed to exhaust the available administrative
remedies before seeking judicial intervention via a petition for annulment. The power to
act as appellate body over decisions and actions of local and regional planning and zoning
bodies and deputized official of the board was retained by the HLURB and remained
unaffected by the devolution under the Local Government Code.
Under Section 5 of Executive Order No. 648, series of 1981, the Human Settlement
Regulatory Commission (HSRC) later renamed as Housing and Land Use Regulatory Board
(HLURB), pursuant to Section 1(c) of Executive Order No. 90, series of 1986, has the power
to:
f) Act as the appellate body on decisions and actions of local and regional planning and
zoning bodies of the deputized officials of the Commission, on matters arising from the
performance of these functions.
In fact, Section 4 of E.O. No. 71 affirms the power of the HLURB to review actions of local
government units on the issuance of permits
ADMIN LAW CASES SET 7
Sec. 4. If in the course of evaluation of application for registration and licensing of
projects within its jurisdiction, HLURB finds that a local government unit has overlooked or
mistakenly applied a certain law, rule or standard in issuing a development permit, it shall
suspend action with a corresponding advice to the local government concerned, so as to
afford it an opportunity to take appropriate action thereon. Such return and advice must
likewise be effected within a period of thirty (30) days from receipt by HLURB of the
application.
Moreover, Section 18 and 19 of HSRC Administrative Order No. 20 provides:
Section 18. Oppossition to Application. Opposition to application shall be considered as a
complaint, the resolution of which shall be a prerequisite to any action on the application.
Complaints and other legal processes shall be governed by the Rules of Procedure of the
Commission, and shall have the effect of suspending the application.
Section 19. Complaints/Opposition Filed After the Issuance of Locational
Clearance.1wphi1 Temporary issuance of locational permit or land transaction approval
shall be acted upon by the Office that issued the same. Such complaint shall not
automatically suspend the locational clearance, temporary use permit, development
permit or land transaction approval unless an order issued by the commission to that
effect.
The appropriate provisions of the Rules of Procedure governing hearings before the
Commission shall be applied in the resolution of said complaint as well as any motion for
reconsideration that may be filed thereto, provided that if the complaint is directed against
the certificate of zoning compliance issued by the deputized zoning administrator, the
same shall be acted upon the Commissioner in Charge for adjudication.
Under the rules of the HLURB then prevailing at the time this case was filed, a complaint
to annul any permit issued by the HLURB may be filed before the Housing and
Land Use Arbiter (HLA). The decision of the HLA may be brought to the Board of
Commissioners by Petition for Certiorari and the decision of the Board of
Commissioners [is] appealable to the Office of the President.16(Citations omitted;
emphases supplied.)
It does not escape the attention of the Court that in its Reply, petitioner admitted that it
had a pending complaint with the HLURB involving private respondents the Development
Permit, the Certificate of Registration and License to Sell Condominium Units, aside from
complaints with the Building Official of the Municipality (now City) of Mandaluyong and the
MMDA, when it instituted its action with the trial court. As discussed earlier, a litigant
cannot go around the authority of the concerned administrative agency and directly seek
redress from the courts. Thus, when the law provides for a remedy against a certain action
of an administrative board, body, or officer, relief to the courts can be made only after
exhausting all remedies provided therein. It is settled that the non-observance of the
doctrine of exhaustion of administrative remedies results in lack of cause of action, which
is one of the grounds in the Rules of Court justifying the dismissal of the complaint. 17
99
 ADMIN LAW CASES SET 7
In view of the foregoing discussion, we find it unnecessary to resolve the other issues
raised by the parties.

To conclude, it is our view that the Court of Appeals committed no reversible error in
setting aside the trial court decision and dismissing said complaint.

WHEREFORE, premises considered, the petition is hereby DENIED. The assailed Decision
dated May 16, 2006 and the Resolution dated October 5, 2006 of the Court of Appeals in
CA-G.R. CV No. 63439 are AFFIRMED.

SO ORDERED.

100

G.R. No. 174143 November 28, 2011
SPOUSES RICARDO HIPOLITO, JR. and LIZA HIPOLITO, Petitioners, vs. TERESITA
CINCO, CARLOTA BALDE CINCO and ATTY. CARLOS CINCO, Respondents.
Findings of fact by administrative agencies are generally accorded great respect, if not
finality, by the courts1 by reason of the special knowledge and expertise of said
administrative agencies over matters falling under their jurisdiction.
Challenged in this Petition for Review on Certiorari 2 are the May 19, 2006 Decision 3 and
August 15, 2006 Resolution4 of the Court of Appeals (CA) in CA-G.R. SP No. 89783 which
dismissed petitioners Petition for Review and denied their Motion for Reconsideration
respectively. Said assailed CA Decision which affirmed the February 28, 2005 Resolution 5 of
the Office of the President (OP), in O.P. Case No. 04-F-262, states, viz:
In fine, we hold that public respondent Office of the President, in affirming the resolution of
the Secretary of the DPWH which sustained the resolution and the demolition order of the
OBO, committed no grave abuse of discretion, the same being supported by evidence and
having been issued in accordance with law and jurisprudence.
WHEREFORE, the petition is DISMISSED. The assailed Resolution dated February 28, 2005
of the Office of the President of the Philippines, issued through the Deputy Executive
Secretary for Legal Affairs in O.P. Case No. 04-F-262, is AFFIRMED.
SO ORDERED.6
Petitioners beseech this Court to reverse and set aside said Decision and consequently, to
alter a string of consistent Resolutions issued by the OP in the said O.P. Case No. F-262, the
Secretary of the Department of Public Works and Highways (DPWH) in NBC Case No. 17-03-
I-MLA,7 and the Office of the Building Official (OBO) of the City of Manila in NBC Case No.
NG-2002-06.8
Factual Antecedents
Petitioner-spouses Ricardo Hipolito, Jr. and Liza Hipolito (petitioners) allege that on June 15,
1989, Edeltrudis Hipolito y Mariano (Edeltrudis) 9 entered into an agreement10 with
Francisco Villena11 (now deceased) to rent a portion of the property located at 2176 Nakar
Street, San Andres Bukid, Manila and to construct an apartment-style building adjacent to
the existing house thereon. The contract was for a period of 20 years. Pursuant to the
agreement, Edeltrudis built a three-storey apartment building without securing a building
permit. Petitioners inherited the apartment building upon the death of Edeltrudis.
In 2002 or 13 years after the execution of the agreement, petitioners and the heirs of
Francisco Villena, all residing in the property, were informed that respondent Atty. Carlos D.
Cinco (Atty. Cinco) acquired the subject property through a deed of sale sometime in 1976.
ADMIN LAW CASES SET 7
On June 17, 2002, herein respondents Atty. Cinco, Teresita Cinco and Dr. Carlota Balde
Cinco (respondents) filed with the OBO a verified request 12 for structural inspection of an
old structure located at 2176 Nakar Street, San Andres Bukid, Manila.
Acting on the request, Building Inspector Engineer Leonardo B. Rico (Engr. Rico) conducted
an initial inspection. In his memorandum Engr. Rico reported that two old and dilapidated
buildings made of wooden materials were found in the premises and recommended that
the matter be referred to the Committee on Buildings (Committee) for further appropriate
action and disposition.
Deemed as a petition for condemnation/abatement pursuant to the National Building Code
(NBC) and its Implementing Rules and Regulations, the verified request of the respondents
was referred to the Committee for Hearing/ Investigation.
With prior notices to the parties and the tenants, three hearings were subsequently held
from August 12, 2002 to September 20, 2002 for purposes of resolving the focal issue of
"the structural stability, architectural presentability, electrical and fire safety aspect to
determine [whether] or not the subject buildings are still safe for continued
occupancy."13 On September 20, 2002, Victoria Villena, wife and heir of Francisco Villena
and owner of one of the two buildings, filed a counter manifestation questioning
respondents personality to file the petition for condemnation, and refuting the technical
evaluation reports of Engr. Rico and respondents commissioned engineer. Whereupon, the
Committee was constrained to schedule an ocular inspection of the subject buildings on
October 7, 2002. A report on the ocular inspection conducted was thereafter submitted
through a Memorandum14 dated October 8, 2002, which states:
x x x The subject structure is a 3-storey at the rear portion and Two (2)[-] storey at the
front made up of wooden materials with G.I. sheet roofings.
II. Findings:
1. Corrugated G.I. sheet roofings and its accessories incurred extensive
deterioration/[dilapidation] due to weathering.
2. Ceiling boards [bulging] attributed to water leaks from defective roofing.
3. Exterior and interior wooden boards deteriorated.
4. Doors/windows including its jambs deteriorated/[dilapidated].
5. No provisions of firewall on the sides abutting private lot.
6. Rafters, purlins, and girts deteriorated due to neglect of maintenance.
101

7. Vibrations were felt on the wooden flooring when exerting wt. An indication that
its support suffered [material] fatigue due to wear and tear and termite infestation.
8. Wooden columns incurred deterioration/[dilapidation] due to weathering and
termite infestation.
9. Open wiring installation/fire hazard.
10. With notices of condemned installation No. 2K3-62042 EPM issued by OIC, City
Electrical Division, DEPW.
ADMIN LAW CASES SET 7
Such sorry condition of said structures exist to the extent that remedial/ rehabilitation
which is no longer practical and economical as it would entail/ necessitate a total overdone
thereof [sic].
WHEREFORE, premises considered the Committee on Buildings and in consonance with the
findings of the OIC, City Electrical Division DEPW the subject buildings are hereby found
and declared Dangerous and Ruinous and strongly recommending the issuance of the
corresponding Demolition Order in pursuance of Section[s] 214 and 215 of the National
Building Code and Rule VII and VIII of its Implementing Rules and Regulations further
directing the tenants/ occupants thereat to vacate the premises within fifteen (15) days
from receipt hereof to pave the way for its peaceful and orderly [d]emolition activity.

11. Inadequate water supply and drainage system.

SO ORDERED.

12. Outmoded T & G due to neglect of maintenance.

A Demolition Order16 addressed to the respondents was accordingly issued on even date
with petitioners and their tenants duly furnished with a copy thereof.
13. Inadequate sanitary/plumbing installation.
Petitioners thus appealed17 to the DPWH.
III. RECOMMENDATION:
Ruling of the Department of Public Works and Highways
From the foregoing, the subject buildings [appear] to have incurred extensive
deterioration/[dilapidation] [attributed] mainly to long weather exposure, poor
In their appeal, petitioners prayed for the reversal of the Resolution of the OBO and for the
maintenance and termite infestation on its architectural and structural components by 60-
setting aside of the Demolition Order on the ground that same were anomalously issued.
80% which constitutes an Architectural eyesore, structurally unsafe as well as fire and
They likewise contended that respondents petition for condemnation was actually an
electrical hazard thereby endangering the life, safety, health and welfare [of] the general
attempt to circumvent their rights as builders in good faith. Petitioners prayed for a
public specifically the tenants thereat, hence, it is strongly recommended that the subject
separate inspection of the two buildings by an impartial body.
building be declared dangerous and ruinous in pursuance of Sec. 214 and 215 and Rules
VII and Rule VIII of the Implementing Rules and Regulations of P.D. 1096.
Thus, another ocular inspection was conducted by the Inspectorate Team of the DPWH to
determine the actual physical condition of the subject buildings. The Inspectorate Team
Ruling of the Office of the Building Official
reported thus:

In a Resolution15 dated March 26, 2003, the OBO declared the buildings dangerous and
ruinous, and recommended their demolition, to wit:
xxxx
There are two (2) Buildings/Structures subject of this appeal. For proper identification of
the two (2) Storey Residential Building located at front No. 2176 Nakar Street, San Andres
Bukid, is designated as Building I while the Three (3) Storey Residential Building located at
the rear portion is designated as [B]uilding 2.

On the basis of the ocular inspection report submitted by the Committee on Buildings and Building 1
the findings of the OIC, City Electrical Division DEPW which form part of this resolution, it
appearing that the subject structures incurred an extensive degree of
Building I is pre-war vintage (t)wo (2)[-](s)torey structure generally made of wooden
[dilapidation]/deterioration by 60-80% attributed mainly to long weather exposure, termite
materials. Corrugated G.I. roofing sheets and its accessories are extensively corroded and
infestation and neglect of maintenance on its architectural and structural component
deteriorated due to long existence, weather exposure and improper maintenance. Gutters
which constitute architectural eyesore, structurally unsafe as well as electrical hazards
and [down spouts] are already missing. Interior and exterior wooden board partitions are
thereby endangering the life, health property and welfare of the general public particularly
deteriorated by about eighty percent (80%). Roof eaves and media agues are deteriorated
the tenants thereat [sic].
and some wooden members are ready to collapse. Doors and windows including [their]
jambs are deteriorated by about eighty percent (80%). Wooden stair[s] leading to second
102

floor is rotten and deteriorated due to long existence and termite infestation. Wooden
board floorings are sagging and vibration can be felt when walking on it. Plywood ceiling
boards are deteriorated by about eighty percent (80%).
The wooden roof framing parts such as rafters, purlins, and girts are rotten. Majority of the
wooden posts are termite infested and deteriorated. The wooden beams and floor joists are
noted to have incurred deterioration. Vibration is felt at the second floor wooden flooring
when walked upon, an indication that its wooden structural supports show signs of material
fatigue due to wear and tear and termite infestation. Structural components of the
structure were observed to have deteriorated by about seventy five percent (75%).
Sanitary/Plumbing fixtures and systems within the building are noted outmoded,
inadequate and not properly maintained. Inadequate water supply and drainage system
within the building is noted. The comfort room is useable and functioning but is not
properly ventilated and unsanitary.
The electrical wiring insulation shows sign of brittleness due to excessive exposure to
ambient heat, moisture and time element. Excessive octopus connections and dangling of
wires/extensions [sic] cords are observed. Some switches and convenience outlets are
detached and defective. Junction/pullboxes are not properly covered thus exposing
electrical wiring connections. Some electrical wiring installations are attached to
deteriorated parts of the building. The electrical wiring installations are already old, not
properly maintained and inadequate to conform to the rules and regulations of the
Philippine Electrical Code (PEC).
Building 2
Building 2 is a three (3)[-](s)torey structure located at the back of the Building I, and the
usage is purely for residential purposes. The building is constructed [out] of wooden
materials, corrugated G.I. roofing sheets and plain G.I. sheets for its accessories. The said
building was constructed sometime in 1989, however, the construction is not in
accordance with the standard and the requirements of the National Building Code (PD
1096). Corrugated G.I. roofing sheets are corroded and deterioration is about seventy
percent (70%). [Down spouts] and gutters are no longer in place. Interior and exterior
wooden board sidings have incurred about sixty percent (60%) deterioration. Some rooms
have no proper ventilation due to excessive partitioning. Eaves [have] no ceiling. Wooden
board floorings are sagging and vibration is felt when walked upon due to undersized
wooden framing. Substandard ceiling height. Plywood ceiling boards are bulging. No fire
resistive wall provided between the two buildings.
As to the Structural, Sanitary/Plumbing and Electrical aspects, Building 2 has the same
findings as in Building I.
From the foregoing, it appears that the subject building attained a degree of dilapidation
that repair works are no longer practical and economical to undertake.
ADMIN LAW CASES SET 7
Therefore, it is recommended that the Demolition Order issued by the OBO, Manila be
sustained.18
On May 19, 2004, the Secretary of the DPWH rendered a Resolution 19 dismissing the appeal
of the petitioners for lack of merit and affirming the Resolution of the OBO and the
issuance of the Demolition Order.
In the same Resolution, the Secretary of the DPWH opined:
xxxx
In condemnation proceedings of dangerous and ruinous building pursuant to the National
Building Code (NBC) and its Implementing Rules and Regulations (IRR), the authority of the
Building Official is confined to the assessment of the physical condition of the building
sought to be condemned and abated, and depending on the degree of its deterioration and
dilapidation, to issue appropriate order, taking into consideration the welfare and safety
not only of its occupants, but the public in general as well. Corollary thereto, said official is
mandated under the Code, even in the absence of a petitioner or complainant, to motu
propio initiate condemnation proceedings of reported dangerous and ruinous buildings. The
inclusion thereof of the 3-storey building which appellant claims to have been built by
Ediltrudis Villena on the subject property in the hearing/investigation of the case was
within the bounds of the duties and responsibilities of the OBO. In the said proceedings, the
Building Official shall not delve on issues affecting contract involving the property or of the
building subject of the case or of lessee-lessor relationship, since those are matters within
the competence of the court to pass upon.
Appellants allegation that inspection of the premises was done without their participation
and [that they were] not given the chance to engage the services of an engineer deserves
scant consideration. Records revealed that appellants who actively participated in the
proceedings of the case were duly furnished with copies of appellees petition for
condemnation and the technical evaluation report of their (appellees) commissioned
engineer, and were enjoined to submit their counter technical report. They however failed
to comply. Appellants who at the same time are residents of the building subject of the
proceedings could have easily participated or hire[d] an engineer to represent them in the
inspection conducted by the Committee on Buildings on the premises as they were duly
notified about it and of which they signified their conformity during the hearing on
September 20, 2002. x x x20
Undaunted, petitioners filed an appeal21 with the OP.
Ruling of the Office of the President
Before the OP, the petitioners asserted that the findings of the DPWH Inspectorate Team is
erroneous and that they are builders in good faith. However, the OP found no reversible
103

error to justify the reversal or modification of the DPWH Resolution, and thus resolved to
dismiss the appeal in a Resolution22 dated February 28, 2005.
The OP likewise subsequently denied with finality petitioners Motion
Reconsideration23 in an Order24 dated April 25, 2005.
Aggrieved, petitioners filed a Petition for Review 25
with the CA.
Ruling of the Court of Appeals
Before the CA, petitioners again raised the issues they advanced before the administrative
bodies, particularly the issue regarding the ownership of the lot vis--vis their right as
builders in good faith.
However, the CA dismissed the petition for review and affirmed the OP Resolution without
addressing the issue of ownership. Petitioners filed a Motion for Reconsideration 26 but same
was denied in a Resolution 27 dated August 15, 2006 for being a mere rehash or repetition
of the issues raised in the petition.
Unwilling to concede, petitioners now come before this Court by way of Petition for Review
on Certiorari under Rule 45 of the Rules of Court.
Issues
Petitioners raise the following issues:
A.
WHETHER x x x THE COURT OF APPEALS ERRED IN AFFIRMING THE RESOLUTION OF
THE ADMINISTRATIVE AUTHORITIES SUSTAINING THE RECOMMENDATIONS OF THE
OFFICE OF THE BUILDING OFFICIAL OF MANILA.
B.
WHETHER x x x THE OFFICE OF THE BUILDING OFFICIAL GRAVELY ERRED IN NOT
OBSERVING THE CARDINAL PRIMARY RIGHTS/DUE PROCESS REQUIREMENTS IN THE
CONDUCT OF THE HEARING AND IN THE CONTENTS OF THE INSPECTION REPORT
SUBMITTED BY THE INSPECTION TEAM INCLUDING THE RESOLUTION OF THE OBO.
C.
ADMIN LAW CASES SET 7
WHETHER x x x [THE] OFFICE OF THE BUILDING OFFICIAL (OBO) OF MANILA
OVERSTEPPED THE BOUNDS OF ITS AUTHORITY IN NOT APPLYING ARTICLE 482 AND
ARTICLES 694 TO 707 OF THE NEW CIVIL CODE IN IMPLEMENTING THE PROVISIONS
for OF SECTION 215 OF THE BUILDING CODE P.D. 1096 IN THIS CASE.
D.
WHETHER x x x THE PETITIONER[S] OR THEIR PREDECESSOR IN INTEREST [ARE]/IS
A BUILDER IN GOOD FAITH OF THE 3[-]STOREY APARTMENT BUILDING LOCATED AT
THE REAR PORTION OF THE PROPERTY AND REFERRED TO AS BLDG. 2.
E.
WHETHER x x x THE ACTION FOR EXTRAJUDICIAL ABATEMENT OF NUISANCE IS
PROPER IN THIS CASE.28
Our Ruling
The petition lacks merit.
At the outset, "[i]t bears stressing that in a petition for review on certiorari [under Rule 45
of the Rules of Court], the scope of this Courts judicial review of decisions of the [CA] is
generally confined only to errors of law, and questions of fact are not entertained." 29 The
Supreme Court is not a trier of facts and it is not duty-bound to analyze and weigh again
the evidence considered in the proceedings below.30 More so, this Court is not duty-bound
to analyze and weigh evidence pertaining to factual issues which have not been subject of
any proper proceedings below. "Well-entrenched and settled is the rule that points of law,
theories, issues and arguments not brought to the attention of the trial court adequately
and on time need not be, and ordinarily will not be, considered by a reviewing court as
they cannot be raised for the first time on appeal." 31 The determination of who owns the
subject property, the authenticity of the evidence of both parties, and whether petitioners
are builders in good faith are questions of fact, the resolution of which requires the
examination of evidence that should be ventilated in a separate action brought before a
proper forum.
As correctly stated by the Secretary of the DPWH in its Resolution, 32 the administrative
agencies jurisdiction in this case is confined to the assessment of the physical condition of
the building sought to be condemned and the issuance of the appropriate order relative
thereto. Issues affecting contract involving the property or of the buildings subject of the
case are not within their competence to rule upon. Lest this Court becomes a court of first
instance instead of a court of last resort, we decline to act on matters that have not run
the proper legal course.
Nevertheless, we note that petitioners purported right to occupy the property has already
ended two years ago when the 20-year period of the lease agreement expired in year
104

2009. There being no provision in the contract, tacit or otherwise, for renewal or extension
of the lease, petitioners no longer have basis to keep hold of Building 2. Hence, the
determination of whether petitioners are builders in good faith is no longer necessary.
As to the other issues, suffice it to say that they boil down to the question of whether the
issuance of the OBO Resolution and Demolition Order was proper, and whether the CA
erred when it affirmed the Resolutions of the OP and the Secretary of the DPWH, which in
turn, likewise affirmed the said OBO Resolution.
A Building Official has the authority to order the condemnation and demolition of buildings
which are found to be in a dangerous or ruinous condition.
"[I]t is unquestionable that the Building Official has the authority to order the
condemnation and demolition of buildings which are found to be in a dangerous or ruinous
condition."33 This authority emanates from Sections 214 and 215 of the National Building
Code (Presidential Decree [P.D.] No. 1096) which provides:
Section 214. Dangerous and Ruinous Buildings or Structures
Dangerous buildings are those which are herein declared as such or are structurally unsafe
or not provided with safe egress, or which constitute a fire hazard, or are otherwise
dangerous to human life, or which in relation to existing use, constitute a hazard to safety
or health or public welfare because of inadequate maintenance, dilapidation,
obsolescence, or abandonment; or which otherwise contribute to the pollution of the site or
the community to an intolerable degree.
Section 215. Abatement of Dangerous Buildings
When any building or structure is found or declared to be dangerous or ruinous, the
Building Official shall order its repair, vacation or demolition depending upon the degree of
danger to life, health, or safety. This is without prejudice to further action that may be
taken under the provisions of Articles 482 and 694 to 707 of the Civil Code of the
Philippines.
There is, therefore, no question as to the authority of the OBO to render the challenged
issuances. Here, the Building Official was authorized to issue the questioned Demolition
Order in view of his finding that the disputed structures are dangerous and ruinous
buildings within the purview of P.D. No. 1096, in relation to its Implementing Rules and
Regulations. Correspondingly, no irregularity in the process in which the resolution and
demolition order were issued is evident. As found by the CA, the records show that the
OBO issued the resolution and Demolition Order only after ocular inspections and hearings
were conducted. Notably, the Inspectorate Team of the DPWH came up with the same
conclusion as the OBO when it conducted its own ocular inspection of the premises, that is
both Buildings 1 and 2 had structural, sanitary, plumbing and electrical defects of up to
80%.34
ADMIN LAW CASES SET 7
What is more, contrary to the position of the petitioners that the provisions of the Civil
Code on abatement of nuisances should have been applied in their case, the fact that the
buildings in question could also constitute nuisances under the Civil Code does not
preclude the Building Official from issuing the assailed Demolition Order. As provided by
P.D. No. 1096, the authority of the Building Official to order the repair, vacation or
demolition, as the case may be, is without prejudice to further action that may be
undertaken under the relevant provisions of the Civil Code. 35
The position taken by petitioners that the OBO is duty-bound to first order the repair of
ruinous and dangerous buildings is erroneous. Petitioners, in their Memorandum, 36 quoted
Section 215 of the National Building Code, thus:
Section 215. Abatement of Dangerous Buildings
When any building or structure is found or declared to be dangerous or ruinous, the
Building Official shall order its repair, vacation or demolition depending upon the degree of
danger to life, health, or safety. This is without prejudice to further action that may be
taken under the provisions of Articles 482 and 694 to 707 of the Civil Code of the
Philippines.37
A careful reading of the provision shows that it does not require the OBO to take actions in
the same order or sequence that Section 215 enumerates them. Instead, it authorizes the
Building Official to order either the repair, vacation, or demolition of the building
depending on the circumstances presented before it, particularly on the degree of danger
to life, health and safety. In the case at bench, the OBO, based on its assessment of the
buildings, deemed it necessary to recommend and order the demolition of the said
buildings, having found them dilapidated and deteriorated by up to 80%.
The Court of Appeals correctly affirmed the resolution issued by the Office of the President
Petitioners find error in the CAs reliance on the report of the OBO in affirming the
resolution of the OP. Petitioners contend that the initiation of the proceedings in the OBO
was calculated to oust them from the property and to circumvent their rights as builders in
good faith thereby making the findings and issuances of the OBO unreliable. Petitioners
thus beseech this Court to ascertain facts that have already been determined by the
administrative agencies involved and thereafter reviewed and affirmed by the CA.
We find the contention without merit.
The mandate of the OBO is to act motu proprio, or upon petition validly received, on
reported dangerous and ruinous buildings and structures that pose a threat to the life,
health and well-being of the inhabitants, and the general public. Hence, the OBO, based on
its findings, can still act on the matter pursuant to such mandate, notwithstanding
petitioners claim that respondents initiated the proceedings to circumvent their rights
under the law as builders in good faith. Otherwise stated, respondents motive in initiating
105
 ADMIN LAW CASES SET 7
the proceedings which led to the issuance of the challenged OBO Resolution and WHEREFORE, the petition is DENIED. The Decision dated May 19, 2006 and the
Demolition Order is immaterial as far as the OBO is concerned, so long as it is satisfied that Resolution dated August 15, 2006 of the Court of Appeals in CA-G.R. SP No. 89783
a building or structure is dangerous and ruinous. are AFFIRMED.

Remarkably, both the DPWH and the OP found no irregularities in the manner that officials SO ORDERED.
of the OBO performed their duties and in coming up with its Resolution and Demolition
Order. This conclusion was affirmed by the CA when it resolved the petition before it.

We find no error on the part of the CA when it relied on the findings of fact of the OBO and
the other administrative bodies. As correctly stated by the CA in its Decision:

The powers granted by law, particularly the National Building Code to the Building Official
regarding demolition of buildings are executive and administrative in nature. It is a well-
recognized principle that purely administrative and discretionary functions may not be
interfered with by the courts. In general, courts have no supervising power over the
proceedings and actions of the administrative departments of the government. This is
generally true with respect to acts involving the exercise of judgment or discretion and
findings of fact. The established exception to the rule is where the issuing authority has
gone beyond its statutory authority, exercised unconstitutional powers or clearly acted
arbitrarily and without regard to his duty or with grave abuse of discretion. None of these
obtains in the case at bar. (Citations omitted.)38

"By reason of the special knowledge and expertise of said administrative agencies over
matters falling under their jurisdiction, they are in a better position to pass judgment
thereon; thus, their findings of fact in that regard are generally accorded great respect, if
not finality, by the courts."39 Such findings must be respected as long as they are
supported by substantial evidence, even if such evidence is not overwhelming or even
preponderant.40 It is not the task of the appellate court to once again weigh the evidence
submitted before and passed upon by the administrative body and to substitute its own
judgment regarding sufficiency of evidence.41

Similarly, this Court will not disturb these factual findings absent compelling reasons to do
so.1wphi1 This Court, in numerous occasions, has cited exceptions to the general rule
that it is not a trier of facts. None of the said exceptions is present in this case. The
conclusion reached by the administrative agencies involved after thoroughly conducting
their ocular inspections and hearings and considering all pieces of evidence presented
before them, which finding was affirmed by the CA, must now be regarded with great
respect and finality by this Court.

We take this opportunity to inform petitioners that the appellate court cannot be expected
to actually perform the inspection itself for purposes of validating the findings of the
administrative bodies. Reliance on findings of fact of the lower courts or, in this case,
administrative bodies, does not mean that the appellate court does not conduct its own
review. In fact, the appellate court painstakingly studies every piece of document that
comes into its hands, putting together every piece of the puzzle to come up with the whole
picture of the controversy brought before it. That is no easy task.
106

G.R. No. 162784 June 22, 2007
NATIONAL HOUSING AUTHORITY, petitioner, vs. SEGUNDA ALMEIDA, COURT OF
APPEALS, and RTC of SAN PEDRO, LAGUNA, BR. 31, respondents.
This is a Petition for Review on Certiorari under Rule 45 filed by the National Housing
Authority (NHA) against the Court of Appeals, the Regional Trial Court of San Pedro Laguna,
Branch 31, and private respondent Segunda Almeida.
On June 28, 1959, the Land Tenure Administration (LTA) awarded to Margarita Herrera
several portions of land which are part of the Tunasan Estate in San Pedro, Laguna. The
award is evidenced by an Agreement to Sell No. 3787. 1 By virtue of Republic Act No. 3488,
the LTA was succeeded by the Department of Agrarian Reform (DAR). On July 31, 1975, the
DAR was succeeded by the NHA by virtue of Presidential Decree No. 757. 2 NHA as the
successor agency of LTA is the petitioner in this case.
The records show that Margarita Herrera had two children: Beatriz Herrera-Mercado (the
mother of private respondent) and Francisca Herrera. Beatriz Herrera-Mercado
predeceased her mother and left heirs.
Margarita Herrera passed away on October 27, 1971.3
On August 22, 1974, Francisca Herrera, the remaining child of the late Margarita Herrera
executed a Deed of Self-Adjudication claiming that she is the only remaining relative, being
the sole surviving daughter of the deceased. She also claimed to be the exclusive legal
heir of the late Margarita Herrera.
The Deed of Self-Adjudication was based on a Sinumpaang Salaysay dated October 7,
1960, allegedly executed by Margarita Herrera. The pertinent portions of which are as
follows:
SINUMPAANG SALAYSAY
SA SINO MAN KINAUUKULAN;
Akong si MARGARITA HERRERA, Filipina, may 83 taong gulang, balo, kasalukuyang
naninirahan at tumatanggap ng sulat sa Nayon ng San Vicente, San Pedro Laguna,
sa ilalim ng panunumpa ay malaya at kusang loob kong isinasaysay at pinagtitibay
itong mga sumusunod:
1. Na ako ay may tinatangkilik na isang lagay na lupang tirikan (SOLAR), tumatayo
sa Nayon ng San Vicente, San Pedro, Laguna, mayroong PITONG DAAN AT
PITUMPU'T ISANG (771) METRONG PARISUKAT ang laki, humigit kumulang, at
makikilala sa tawag na Lote 17, Bloke 55, at pag-aari ng Land Tenure
Administration;
ADMIN LAW CASES SET 7
2. Na ang nasabing lote ay aking binibile, sa pamamagitan ng paghuhulog sa Land
Tenure Administration, at noong ika 30 ng Julio, 1959, ang Kasunduang sa Pagbibile
(AGREEMENT TO SELL No. 3787) ay ginawa at pinagtibay sa Lungsod ng Maynila,
sa harap ng Notario Publico na si G. Jose C. Tolosa, at lumalabas sa kaniyang Libro
Notarial bilang Documento No. 13, Pagina No. 4; Libro No. IV, Serie ng 1959;
3. Na dahilan sa ako'y matanda na at walang ano mang hanap buhay, ako ay
nakatira at pinagsisilbihan nang aking anak na si Francisca Herrera, at ang
tinitirikan o solar na nasasabi sa unahan ay binabayaran ng kaniyang sariling
cuarta sa Land Tenure Administration;
4. Na alang-alang sa nasasaysay sa unahan nito, sakaling ako'y bawian na ng Dios
ng aking buhay, ang lupang nasasabi sa unahan ay aking ipinagkakaloob sa nasabi
kong anak na FRANCISCA HERRERA, Filipina, nasa katamtamang gulang, kasal kay
Macario Berroya, kasalukuyang naninirahan at tumatanggap ng sulat sa Nayong ng
San Vicente, San Pedro Laguna, o sa kaniyang mga tagapagmana at;
5. Na HINIHILING KO sa sino man kinauukulan, na sakaling ako nga ay bawian na
ng Dios ng aking buhay ay KILALANIN, IGALANG at PAGTIBAYIN ang nilalaman sa
pangalan ng aking anak na si Francisca Herrera ang loteng nasasabi sa unahan.
SA KATUNAYAN NG LAHAT, ako ay nag-didiit ng hinlalaki ng kanan kong kamay sa
ibaba nito at sa kaliwang gilid ng unang dahon, dito sa Lungsod ng Maynila,
ngayong ika 7 ng Octubre, 1960.4
The said document was signed by two witnesses and notarized. The witnesses signed at
the left-hand side of both pages of the document with the said document having 2 pages in
total. Margarita Herrera placed her thumbmark5 above her name in the second page and at
the left-hand margin of the first page of the document.
The surviving heirs of Beatriz Herrera-Mercado filed a case for annulment of the Deed of
Self-Adjudication before the then Court of First Instance of Laguna, Branch 1 in Binan,
Laguna (now, Regional Trial Court Branch 25). The case for annulment was docketed as
Civil Case No. B-1263.6
On December 29, 1980, a Decision in Civil Case No. B-1263 (questioning the Deed of Self-
Adjudication) was rendered and the deed was declared null and void. 7
During trial on the merits of the case assailing the Deed of Self-Adjudication, Francisca
Herrera filed an application with the NHA to purchase the same lots submitting therewith a
copy of the "Sinumpaang Salaysay" executed by her mother. Private respondent Almeida,
as heir of Beatriz Herrera-Mercado, protested the application.
In a Resolution8 dated February 5, 1986, the NHA granted the application made by
Francisca Herrera, holding that:
107

From the evidence of the parties and the records of the lots in question, we
gathered the following facts: the lots in question are portions of the lot awarded
and sold to the late Margarita Herrera on July 28, 1959 by the defunct Land Tenure
Administration; protestant is the daughter of the late Beatriz Herrera Mercado who
was the sister of the protestee; protestee and Beatriz are children of the late
Margarita Herrera; Beatriz was the transferee from Margarita of Lot Nos. 45, 46, 47,
48 and 49, Block 50; one of the lots transferred to Beatriz, e.g. Lot 47, with an area
of 148 square meters is in the name of the protestant; protestant occupied the lots
in question with the permission of the protestee; protestee is a resident of the
Tunasan Homesite since birth; protestee was born on the lots in question;
protestee left the place only after marriage but resided in a lot situated in the
same Tunasan Homesite; her (protestee) son Roberto Herrera has been occupying
the lots in question; he has been there even before the death of the late Margarita
Herrera; on October 7, 1960, Margarita Herrera executed a "Sinumpaang
Salaysay" whereby she waived or transferred all her rights and interest
over the lots in question in favor of the protestee; and protestee had paid
the lots in question in full on March 8, 1966 with the defunct Land Tenure
Administration.
This Office finds that protestee has a better preferential right to purchase the lots in
question.9
Private respondent Almeida appealed to the Office of the President. 10 The NHA Resolution
was affirmed by the Office of the President in a Decision dated January 23, 1987. 11
On February 1, 1987, Francisca Herrera died. Her heirs executed an extrajudicial
settlement of her estate which they submitted to the NHA. Said transfer of rights was
approved by the NHA.12 The NHA executed several deeds of sale in favor of the heirs of
Francisca Herrera and titles were issued in their favor. 13 Thereafter, the heirs of Francisca
Herrera directed Segunda Mercado-Almeida to leave the premises that she was occupying.
Feeling aggrieved by the decision of the Office of the President and the resolution of the
NHA, private respondent Segunda Mercado-Almeida sought the cancellation of the titles
issued in favor of the heirs of Francisca. She filed a Complaint on February 8, 1988, for
"Nullification of Government Lot's Award," with the Regional Trial Court of San Pedro,
Laguna, Branch 31.
In her complaint, private respondent Almeida invoked her forty-year occupation of the
disputed properties, and re-raised the fact that Francisca Herrera's declaration of self-
adjudication has been adjudged as a nullity because the other heirs were disregarded. The
defendant heirs of Francisca Herrera alleged that the complaint was barred by laches and
that the decision of the Office of the President was already final and executory. 14 They also
contended that the transfer of purchase of the subject lots is perfectly valid as the same
was supported by a consideration and that Francisca Herrera paid for the property with the
use of her own money.15 Further, they argued that plaintiff's occupation of the property was
by mere tolerance and that they had been paying taxes thereon. 16
ADMIN LAW CASES SET 7
The Regional Trial Court issued an Order dated June 14, 1988 dismissing the case for lack
of jurisdiction.17 The Court of Appeals in a Decision dated June 26, 1989 reversed and held
that the Regional Trial Court had jurisdiction to hear and decide the case involving "title
and possession to real property within its jurisdiction." 18The case was then remanded for
further proceedings on the merits.
A pre-trial was set after which trial ensued.
On March 9, 1998, the Regional Trial Court rendered a Decision setting aside the resolution
of the NHA and the decision of the Office of the President awarding the subject lots in favor
of Francisca Herrera. It declared the deeds of sale executed by NHA in favor of Herrera's
heirs null and void. The Register of Deeds of Laguna, Calamba Branch was ordered to
cancel the Transfer Certificate of Title issued. Attorney's fees were also awarded to private
respondent.
The Regional Trial Court ruled that the "Sinumpaang Salaysay" was not an assignment of
rights but a disposition of property which shall take effect upon death. It then held that the
said document must first be submitted to probate before it can transfer property.
Both the NHA and the heirs of Francisca Herrera filed their respective motions for
reconsideration which were both denied on July 21, 1998 for lack of merit. They both
appealed to the Court of Appeals. The brief for the heirs of Francisca Herrera was denied
admission by the appellate court in a Resolution dated June 14, 2002 for being a "carbon
copy" of the brief submitted by the NHA and for being filed seventy-nine (79) days late.
On August 28, 2003, the Court of Appeals affirmed the decision of the Regional Trial Court,
viz:
There is no dispute that the right to repurchase the subject lots was awarded to
Margarita Herrera in 1959. There is also no dispute that Margarita executed a
"Sinumpaang Salaysay" on October 7, 1960. Defendant NHA claims that the
"Sinumpaang Salaysay" is, in effect, a waiver or transfer of rights and interest over
the subject lots in favor of Francisca Herrera. This Court is disposed to believe
otherwise. After a perusal of the "Sinumpaang Salaysay" of Margarita Herrera, it
can be ascertained from its wordings taken in their ordinary and grammatical
sense that the document is a simple disposition of her estate to take effect after
her death. Clearly the Court finds that the "Sinumpaang Salaysay" is a will of
Margarita Herrera. Evidently, if the intention of Margarita Herrera was to merely
assign her right over the lots to her daughter Francisca Herrera, she should have
given her "Sinumpaang Salaysay" to the defendant NHA or to Francisca Herrera for
submission to the defendant NHA after the full payment of the purchase price of
the lots or even prior thereto but she did not. Hence it is apparent that she
intended the "Sinumpaang Salaysay" to be her last will and not an assignment of
rights as what the NHA in its resolution would want to make it appear. The
intention of Margarita Herrera was shared no less by Francisca Herrera who after
the former's demise executed on August 22, 1974 a Deed of Self-Adjudication
108

claiming that she is her sole and legal heir. It was only when said deed was
questioned in court by the surviving heirs of Margarita Herrera's other daughter,
Beatriz Mercado, that Francisca Herrera filed an application to purchase the subject
lots and presented the "Sinumpaang Salaysay" stating that it is a deed of
assignment of rights.19
The Court of Appeals ruled that the NHA acted arbitrarily in awarding the lots to the heirs
of Francisca Herrera. It upheld the trial court ruling that the "Sinumpaang Salaysay" was
not an assignment of rights but one that involved disposition of property which shall take
effect upon death. The issue of whether it was a valid will must first be determined by
probate.
Petitioner NHA elevated the case to this Court.
Petitioner NHA raised the following issues:
A. WHETHER OR NOT THE RESOLUTION OF THE NHA AND THE DECISION OF THE
OFFICE OF THE PRESIDENT HAVE ATTAINED FINALITY, AND IF SO, WHETHER OR
NOT THE PRINCIPLE OF ADMINISTRATIVE RES JUDICATA BARS THE COURT FROM
FURTHER DETERMINING WHO BETWEEN THE PARTIES HAS PREFERENTIAL RIGHTS
FOR AWARD OVER THE SUBJECT LOTS;
B. WHETHER OR NOT THE COURT HAS JURISDICTION TO MAKE THE AWARD ON THE
SUBJECT LOTS; AND
C. WHETHER OR NOT THE AWARD OF THE SUBJECT LOTS BY THE NHA IS
ARBITRARY.
We rule for the respondents.
Res judicata is a concept applied in review of lower court decisions in accordance with the
hierarchy of courts. But jurisprudence has also recognized the rule of administrative res
judicata: "the rule which forbids the reopening of a matter once judicially determined by
competent authority applies as well to the judicial and quasi-judicial facts of public,
executive or administrative officers and boards acting within their jurisdiction as to the
judgments of courts having general judicial powers . . . It has been declared that whenever
final adjudication of persons invested with power to decide on the property and rights of
the citizen is examinable by the Supreme Court, upon a writ of error or a certiorari, such
final adjudication may be pleaded as res judicata."20 To be sure, early jurisprudence were
already mindful that the doctrine of res judicata cannot be said to apply exclusively to
decisions rendered by what are usually understood as courts without unreasonably
circumscribing the scope thereof and that the more equitable attitude is to allow extension
of the defense to decisions of bodies upon whom judicial powers have been conferred.
ADMIN LAW CASES SET 7
In Ipekdjian Merchandising Co., Inc. v. Court of Tax Appeals,21 the Court held that
the rule prescribing that "administrative orders cannot be enforced in the courts in the
absence of an express statutory provision for that purpose" was relaxed in favor of quasi-
judicial agencies.
In fine, it should be remembered that quasi-judicial powers will always be subject to true
judicial powerthat which is held by the courts. Quasi-judicial power is defined as that
power of adjudication of an administrative agency for the "formulation of a final
order."22 This function applies to the actions, discretion and similar acts of public
administrative officers or bodies who are required to investigate facts, or ascertain the
existence of facts, hold hearings, and draw conclusions from them, as a basis for their
official action and to exercise discretion of a judicial nature. 23 However, administrative
agencies are not considered courts, in their strict sense. The doctrine of separation of
powers reposes the three great powers into its three (3) branchesthe legislative, the
executive, and the judiciary. Each department is co-equal and coordinate, and supreme in
its own sphere. Accordingly, the executive department may not, by its own fiat, impose the
judgment of one of its agencies, upon the judiciary. Indeed, under the expanded
jurisdiction of the Supreme Court, it is empowered to "determine whether or not there has
been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government." 24 Courts have an expanded role under
the 1987 Constitution in the resolution of societal conflicts under the grave abuse clause of
Article VIII which includes that duty to check whether the other branches of government
committed an act that falls under the category of grave abuse of discretion amounting to
lack or excess of jurisdiction.25
Next, petitioner cites Batas Pambansa Blg. 129 or the Judiciary Reorganization Act of
198026 where it is therein provided that the Intermediate Appellate Court (now, Court of
Appeals) shall exercise the "exclusive appellate jurisdiction over all final judgments,
decisions, resolutions, orders or awards, of the Regional Trial Courts and Quasi-Judicial
agencies, instrumentalities, boards or commissions, except those falling within the
jurisdiction of the Supreme Court in accordance with the Constitution" 27 and contends
that the Regional Trial Court has no jurisdiction to rule over awards made by the NHA.
Well-within its jurisdiction, the Court of Appeals, in its decision of August 28, 2003, already
ruled that the issue of the trial court's authority to hear and decide the instant case has
already been settled in the decision of the Court of Appeals dated June 26, 1989 (which
has become final and executory on August 20, 1989 as per entry of judgment dated
October 10, 1989).28 We find no reason to disturb this ruling. Courts are duty-bound to put
an end to controversies. The system of judicial review should not be misused and abused
to evade the operation of a final and executory judgment. 29 The appellate court's decision
becomes the law of the case which must be adhered to by the parties by reason of policy. 30
Next, petitioner NHA contends that its resolution was grounded on meritorious grounds
when it considered the application for the purchase of lots. Petitioner argues that it was the
daughter Francisca Herrera who filed her application on the subject lot; that it considered
the respective application and inquired whether she had all the qualifications and none of
109

the disqualifications of a possible awardee. It is the position of the petitioner that private
respondent possessed all the qualifications and none of the disqualifications for lot award
and hence the award was not done arbitrarily.
The petitioner further argues that assuming that the "Sinumpaang Salaysay" was a will, it
could not bind the NHA.31 That, "insofar as [the] NHA is concerned, it is an evidence that
the subject lots were indeed transferred by Margarita Herrera, the original awardee, to
Francisca Herrera was then applying to purchase the same before it."32
We are not impressed. When the petitioner received the "Sinumpaang Salaysay," it should
have noted that the effectivity of the said document commences at the time of death of
the author of the instrument; in her words "sakaling ako'y bawian na ng Dios ng aking
buhay" Hence, in such period, all the interests of the person should cease to be hers and
shall be in the possession of her estate until they are transferred to her heirs by virtue of
Article 774 of the Civil Code which provides that:
Art. 774. Succession is a mode of acquisition by virtue of which the property,
rights and obligations to the extent of the value of the inheritance, of a person
are transmitted through his death to another or others either by his will
or by operation of law.33
By considering the document, petitioner NHA should have noted that the original applicant
has already passed away. Margarita Herrera passed away on October 27, 1971. 34 The NHA
issued its resolution35 on February 5, 1986. The NHA gave due course to the application
made by Francisca Herrera without considering that the initial applicant's death would
transfer all her property, rights and obligations to the estate including whatever interest
she has or may have had over the disputed properties. To the extent of the interest that
the original owner had over the property, the same should go to her estate. Margarita
Herrera had an interest in the property and that interest should go to her estate upon her
demise so as to be able to properly distribute them later to her heirsin accordance with a
will or by operation of law.
ADMIN LAW CASES SET 7
When the original buyer died, the NHA should have considered the estate of the decedent
as the next "person"39likely to stand in to fulfill the obligation to pay the rest of the
purchase price. The opposition of other heirs to the repurchase by Francisca Herrera should
have put the NHA on guard as to the award of the lots. Further, the Decision in the said
Civil Case No. B-1263 (questioning the Deed of Self-Adjudication) which rendered the deed
therein null and void40 should have alerted the NHA that there are other heirs to the
interests and properties of the decedent who may claim the property after a testate or
intestate proceeding is concluded. The NHA therefore acted arbitrarily in the award of the
lots.
We need not delve into the validity of the will. The issue is for the probate court to
determine. We affirm the Court of Appeals and the Regional Trial Court which noted that it
has an element of testamentary disposition where (1) it devolved and transferred property;
(2) the effect of which shall transpire upon the death of the instrument maker. 41
IN VIEW WHEREOF, the petition of the National Housing Authority is DENIED. The
decision of the Court of Appeals in CA-G.R. No. 68370 dated August 28, 2003, affirming the
decision of the Regional Trial Court of San Pedro, Laguna in Civil Case No. B-2780 dated
March 9, 1998, is hereby AFFIRMED.
No cost.
SO ORDERED.

The death of Margarita Herrera does not extinguish her interest over the property.
Margarita Herrera had an existing Contract to Sell 36 with NHA as the seller. Upon Margarita
Herrera's demise, this Contract to Sell was neither nullified nor revoked. This Contract to
Sell was an obligation on both partiesMargarita Herrera and NHA. Obligations are
transmissible.37 Margarita Herrera's obligation to pay became transmissible at the time of
her death either by will or by operation of law.

If we sustain the position of the NHA that this document is not a will, then the interests of
the decedent should transfer by virtue of an operation of law and not by virtue of a
resolution by the NHA. For as it stands, NHA cannot make another contract to sell to other
parties of a property already initially paid for by the decedent. Such would be an act
contrary to the law on succession and the law on sales and obligations. 38

110

G.R. No. 191787 June 22, 2015
MACARIO CATIPON, JR., Petitioner, vs. JEROME JAPSON, Respondent.
This Petition for Review on Certiorari 1 seeks to set aside the December 11, 2009
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 94426 affirming the July 6, 2005
Decision3 of the Civil Service Commission-Cordillera Administrative Region (CSC-CAR) in
CAR-05-034DC, as well as its March 17, 2010 Resolution 4 denying petitioner's Motion for
Reconsideration.5
Factual Antecedents
The facts are as follows:
Petitioner Macario U. Catipon, Jr. is the holder of a Bachelor's Degree in Commerce from the
Baguio Colleges Foundation. When applying for graduation, he was allowed to join the
graduation ceremonies despite a deficiency of 1.5 units in Military Science, pursuant to a
school policy allowing students with deficiencies of not more than 12 units to be included
in the list of graduates. However, a restriction came after, which is, that the deficiency
must be cured before the student can be considered a graduate.
In 1985, petitioner found employment with the Social Security System (SSS) in Bangued,
Abra. Sometime in September 1993, the personnel head of the SSS in Bangued, Abra
informed petitioner that the Civil Service Commission was conducting a Career Service
Professional Examination (CSPE) in October of the same year. Petitioner filed an application
to take the examination, believing that the CSC still allowed CSPE applicants to substitute
the length of their government service for any academic deficiency which they may have.
However, the above-mentioned policy of the CSC had been discontinued since January
1993 pursuant to Civil Service Commission Memorandum Circular No. 42, Series of 1991
and Office Memo. No. 63, Series of 1992.
Nevertheless, petitioner took the CSPE tests on October 17, 1993 and obtained a rating of
80.52%. Eventually, petitioner was promoted to Senior Analyst and Officer-in-Charge
Branch Head of the SSS at Bangued, Abra. In October 1995, he finally eliminated his
deficiency of 1.5 units in Military Science.
On March 10, 2003, respondent Jerome Japson, a former Senior Member Services
Representative of SSS Bangued, filed a letter-complaint with the Civil Service Commission-
CAR Regional Director, alleging that petitioner made deliberate false entries in his CSPE
application, specifically, that he obtained his college degree in 1993 when actually he
graduated in 1995 only, after removing his deficiency of 1.5 units in Military Education.
Also, that petitioner was not qualified to take the CSPE examination in 1993 since he was
not yet then a graduate of a four-year college course, contrary to the entry in his
application form.
ADMIN LAW CASES SET 7
After preliminary investigation, petitioner was charged with Dishonesty, Falsification of
Official documents, Grave Misconduct and Conduct Prejudicial to the Best Interest of the
Service by the CSC-CAR.6
Respondents Letter-Complaint7 against petitioner was docketed as CSC Disciplinary
Administrative Case No. BB-03-006.
In his Answer,8 petitioner essentially pleaded good faith, lack of malice, and honest
mistake. He maintained that at the time of his application to take the CSPE, he was of the
honest belief that the policy of the CSC that any deficiency in the applicants educational
requirement may be substituted by his length of service was still subsisting.
On July 6, 2005, the CSC-CAR, through Director IV Atty. Lorenzo S. Danipog, rendered a
Decision9 containing the following pronouncements:
Clearly, respondent Catipon is not without any fault under the foregoing circumstances.
The only issue now left is with respect to the particular offense for which Catipon may be
held responsible. Respondent Catipon is charged (with) four offenses: Dishonesty,
Falsification of Official Documents, Grave Misconduct and Conduct Prejudicial to the Best
Interest of the Service.
The key document allegedly falsified in this case is the Application Form x x x of
respondent Catipon for the purpose of taking the CS Professional Examination scheduled
on October 17, 1993. Close and careful perusal of the said application form reveals that
most of the entries filled up by respondent are typewritten. The only entries handwritten
by respondent are those corresponding to "Year Graduated" and "School Where Graduated"
which were answered by Macario with "1984" and "BCF" respectively. Another handwritten
entry is with respect to "Degree Finished", the handwritten "BSC" entry, however, was just
superimposed on the typewritten "Commerce".
The fact that majority of the entries or data in the application form is typewritten suggests
that the said application form was consciously drafted and meticulously prepared before its
actual submission to the CSC for processing. They are relevant and material entries or data
sought from respondent. It is worth emphasizing however that the pre-drafted application
form, considering the typewritten entries, shows respondents confusion on how to make
entries thereat. Respondent answered both the IF YES column and IF NO column
corresponding to the question "Are you a college graduate" in Item 8. x x x
xxxx
The manner that Item 8 was filled up by respondent Catipon shows lack of deliberate intent
to defraud the government. He manifested in his application his uncertainty on how to take
the fact that he only lacks 1.5 units Military Science to be conferred a graduate status, vis-
-vis the CSC policy on educational requirement. Though the entry "undergrad" was
erased, the CSC employee who processed the application would have doubted the
111

truthfulness and authenticity of respondents entries in Item 8 of the Application Form, and
thus the educational status of Macario. x x x
xxxx
Catipon had tried to show the real state of the matter regarding his educational attainment
as can be deduced from the manner he answered Item No. 8 in the application form. This
may be taken as good faith, which will serve to mitigate any liability incurred by
respondent Catipon. The premeditated intent to deceive or willfully distort the facts in this
case is not present. The acts of Catipon do not even show blatant disregard of an
established rule or a clear intent to violate the law if at all, there was attempt to reveal the
truth to the examination division processing the application.
xxxx
With [regard] to the eligibility earned by respondent Macario in view of his passing the
October 17, 1993 Career Service Professional Examination, the same needs to be revoked
being the fruit of a poisonous tree, so to speak. Paragraph 2 of Sec. 6, Rule II, Omnibus
Rules Implementing Book V of Executive Order No. 292 states:
Provided that when an applica[nt] for examination is found to have x x x intentionally
made any false statement of any material fact in his application, x x x the Commission
shall invalidate such examination x x x.
With the foregoing, respondent Macario U. Catipon, Jr., Senior Analyst and OIC Branch
Head, Social Security System, Bangued, Abra, is hereby exonerated of the charges
Dishonesty, Falsification of Official Documents and Grave Misconduct. However,
respondent is found guilty of Conduct Prejudicial to the Best Interest of the Service.
Under the Uniform Rules on Administrative Cases in the Civil Service, the imposable
penalty on the first offense of Conduct Prejudicial to the Best Interest of the Service is
suspension of six months and one day to one year.
Under Section 53 of the same Rules, good faith is enumerated as one mitigating
circumstance. Thus, respondent Macario Catipon, Jr. is hereby meted a penalty of six
months and one day suspension, without pay, which is the minimum period of the penalty
attached to the offense committed. The Career Service Professional eligibility of
respondent is also ordered revoked, without prejudice however to retaking of the said
examination. Thus, Catipon, after serving suspension herein provided should not be
allowed to go back to his current position without CS Professional eligibility. Consequently,
in case respondent Catipon fails to retake or pass CSPE, after serving his suspension, he
may be demoted to any available position that fits his subprofessional eligibility. 10
Petitioner moved for reconsideration,11 but the CSC-CAR sustained its judgment in a March
23, 2006 Decision,12which contained the following pronouncement:
ADMIN LAW CASES SET 7
Catipon also asserted that in view of his exoneration of Dishonesty, Falsification of Official
Documents and Grave Misconduct, there is no longer any basis to hold respondent guilty of
Conduct Prejudicial to the Best Interest of the Service. This contention is without legal
basis. In the case of Philippine Retirement Authority vs. Rupa 363 SCRA 480, the Honorable
Supreme Court held as follows:
Under the Civil Service laws and rules, there is no description of what specific acts
constitute the grave offense of Conduct Prejudicial to the Best Interest of the Service.
As alluded to previously in Decision No. CAR-05-034DC, Catipon is not without fault under
the circumstances. To completely exonerate respondent would be inequitable and
iniquitous considering the totality of events surrounding this case. Though there was no
deliberate intent to falsify or to make dishonest entry in the Application Form as deduced
from the manner that the said form was accomplished, the fact that there was indeed such
dishonest or false entry in the CSPE Application Form is undisputedly established. In view
of such an established fact, the integrity of the Civil Service Examination, particularly the
CSPE has been blemished which is sufficient to constitute Conduct Prejudicial to the
Interest of the Service.13
Ruling of the Court of Appeals
In a Petition for Review docketed with the CA as CA-G.R. SP No. 94426, petitioner prayed
for injunctive relief and the reversal of the above CSC-CAR decision. He argued that the
CSC-CAR incorrectly found him guilty of conduct prejudicial to the best interest of the
service when he has been declared innocent of the charges of dishonesty, falsification of
official documents, and grave misconduct; that while the Supreme Court has held that
making false entries in public documents may be considered as conduct prejudicial to the
best interest of the service, such act must be accompanied by deliberate intent or a willful
desire to defy or disregard established rules or norms in the service; 14 and that with the
finding that he merely committed an innocent mistake in filling up the application form for
the CSPE, he may not be found guilty of conduct prejudicial to the best interest of the
service.
On December 11, 2009, the CA rendered the assailed Decision denying the petition,
decreeing thus:
WHEREFORE, in view of the foregoing, the instant petition is DENIED for lack of merit. The
Decision [sic] of the Civil Service Commission-Cordillera Administrative Region dated July 6,
2005 and March 23, 2006 is [sic] AFFIRMED.
SO ORDERED.15
The CA held that instead of filing a petition for review directly with it, petitioner should
have interposed an appeal with the Civil Service Commission (CSC), pursuant to Sections
5(A)(1),43 and 49 of the CSC Uniform Rules on Administrative Cases; 16 that by filing a
112

petition directly with it, petitioner violated the doctrine of exhaustion of administrative
remedies; that petitioners case is not exceptional as would exempt it from the application
of the doctrine; that per the ruling in Bayaca v. Judge Ramos, 17 the absence of deliberate
intent or willful desire to defy or disregard established rules or norms in the service does
not preclude a finding of guilt for conduct prejudicial to the best interest of the service; and
that petitioner did not act with prudence and care, but instead was negligent, in the filling
up of his CSPE application form and in failing to verify beforehand the requirements for the
examination.
Petitioner moved for reconsideration, but the CA stood its ground. Hence, the instant
recourse. Issues
Petitioner raises the following issues for resolution:
(A)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN IT FAILED
TO REALIZE THAT GIVEN THE IMMEDIATE EFFECT OF THE SUSPENSION IMPOSED BY THE
CIVIL SERVICE COMMISSION-CORDILLERA ADMINISTRATIVE REGION AGAINST THE
PETITIONER, HE WAS JUSTIFIED IN SEEKING JUDICIAL RECOURSE BEFORE (THE COURT OF
APPEALS);
(B)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN IT
MISAPPLIEDIN THE ABOVE-ENTITLED CASE THE RULE ON PRIOR EXHAUSTION OF
ADMINISTRATIVE REMEDIES;
(C)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN IT FAILED
TO CONSIDER THAT THE PETITIONER ACTED IN GOOD FAITH AND THIS NEGATES GUILT FOR
CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE. 18
Petitioners Arguments
In his Petition and Reply 19 seeking a reversal of the assailed CA dispositions and,
consequently, exoneration from the charge of conduct prejudicial to the best interest of the
service, petitioner argues that he was constrained to file the petition for review with the CA
as his decreed six-month suspension was imminent as a consequence of the executory
nature of the CSC-CAR decision; that immediate judicial intervention was necessary to
"prevent serious injury and damage" to him, which is why his CA petition included a prayer
for injunctive relief; that the doctrine of exhaustion of administrative remedies should not
have been applied strictly in his case, given the special circumstance that his suspension
would mean loss of his only source of income; 20 that he should be completely exonerated
ADMIN LAW CASES SET 7
from the charges against him, since conduct prejudicial to the best interest of the service
must be accompanied by deliberate intent or a willful desire to defy or disregard
established rules or norms in the service which is absent in his case; and that his career
service professional eligibility should not be revoked in the interest of justice and in the
spirit of the policy which promotes and preserves civil service eligibility.
Respondents Arguments
In his Comment21 seeking denial of the petition, respondent counters that completion of all
the academic requirements and not merely attendance at graduation rites confers the
necessary degree which qualifies a student to take the CSPE; that petitioners claim that he
is a graduate as of 1984 is belied by his Transcript of Records 22 and other pieces of
evidence submitted, which reflect the date of his graduation as October 1995 or after
completion of his 1.5-unit deficiency in Military Science; that petitioner cannot claim to
suffer irreparable injury or damage as a result of the CSC-CARs Decision, which is valid
and binding; that the revocation of petitioners eligibility is only proper, since he was then
not qualified when he took the CSPE; that the CSC-CAR was correct in finding that
petitioners act compromised the image and integrity of the civil service, which justified
the imposition of a corresponding penalty; that this Court in the Rupa case made it clear
that the act of making false entries in public documents constitutes conduct prejudicial to
the best interest of the service, a grave offense punishable by suspension for six months
and one day to one year for the first offense, and dismissal for the second offense; and
that indeed, petitioner violated the doctrines of primary jurisdiction and exhaustion of
administrative remedies when he proceeded directly to the CA, instead of filing an appeal
with the CSC.
Our Ruling
The Court denies the Petition.
Our fundamental law, particularly Sections 2 (1) and 3 of Article IX-B, state that
Section 2. (1) The civil service embraces all branches, subdivisions, instrumentalities and
agencies of the Government, including government-owned or controlled corporations with
original charters.
Section 3. The Civil Service Commission, as the central personnel agency of the
Government, shall establish a career service and adopt measures to promote morale,
efficiency, integrity, responsiveness, progressiveness, and courtesy in the civil service. It
shall strengthen the merit and rewards system, integrate all human resources
development programs for all levels and ranks, and institutionalize a management climate
conducive to public accountability. It shall submit to the President and the Congress an
annual report on its personnel programs.
113

Thus, "the CSC, as the central personnel agency of the Government, has jurisdiction over
disputes involving the removal and separation of all employees of government branches,
subdivisions, instrumentalities and agencies, including government-owned or controlled
corporations with original charters. Simply put, it is the sole arbiter of controversies
relating to the civil service."23
In line with the above provisions of the Constitution and its mandate as the central
personnel agency of government and sole arbiter of controversies relating to the civil
service, the CSC adopted Memorandum Circular No. 19, series of 1999 (MC 19), or the
Revised Uniform Rules on Administrative Cases in the Civil Service, which the CA cited as
the basis for its pronouncement. Section 4 thereof provides:
Section 4. Jurisdiction of the Civil Service Commission. The Civil Service Commission
shall hear and decide administrative cases instituted by, or brought before it, directly or on
appeal, including contested appointments, and shall review decisions and actions of its
offices and of the agencies attached to it.
Except as otherwise provided by the Constitution or by law, the Civil Service Commission
shall have the final authority to pass upon the removal, separation and suspension of all
officers and employees in the civil service and upon all matters relating to the conduct,
discipline and efficiency of such officers and employees.
As pointed out by the CA, pursuant to Section 5(A)(1) of MC 19, the Civil Service
Commission Proper, or Commission Proper, shall have jurisdiction over decisions of Civil
Service Regional Offices brought before it on petition for review. And under Section 43,
"decisions of heads of departments, agencies, provinces, cities, municipalities and other
instrumentalities imposing a penalty exceeding thirty days suspension or fine in an amount
exceeding thirty days salary, may be appealed to the Commission Proper within a period of
fifteen days from receipt thereof."24 "Commission Proper" refers to the Civil Service
Commission-Central Office.25
It is only the decision of the Commission Proper that may be brought to the CA on petition
for review, under Section 50 of MC 19, which provides thus:
Section 50. Petition for Review with the Court of Appeals. A party may elevate a decision
of the Commission before the Court of Appeals by way of a petition for review under Rule
43 of the 1997 Revised Rules of Court.26
Thus, we agree with the CAs conclusion that in filing his petition for review directly with it
from the CSC-CAR Regional Director, petitioner failed to observe the principle of exhaustion
of administrative remedies. As correctly stated by the appellate court, non-exhaustion of
administrative remedies renders petitioners CA petition premature and thus dismissible.
The doctrine of exhaustion of administrative remedies requires that "before a party is
allowed to seek the intervention of the court, he or she should have availed himself or
ADMIN LAW CASES SET 7
herself of all the means of administrative processes afforded him or her. Hence, if resort to
a remedy within the administrative machinery can still be made by giving the
administrative officer concerned every opportunity to decide on a matter that comes
within his or her jurisdiction, then such remedy should be exhausted first before the court's
judicial power can be sought.1wphi1 The premature invocation of the intervention of the
court is fatal to ones cause of action. The doctrine of exhaustion of administrative
remedies is based on practical and legal reasons. The availment of administrative remedy
entails lesser expenses and provides for a speedier disposition of controversies.
Furthermore, the courts of justice, for reasons of comity and convenience, will shy away
from a dispute until the system of administrative redress has been completed and
complied with, so as to give the administrative agency concerned every opportunity to
correct its error and dispose of the case." 27 Indeed, the administrative agency concerned
in this case the Commission Proper is in the "best position to correct any previous error
committed in its forum."28
The CA is further justified in refusing to take cognizance of the petition for review, as "[t]he
doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the
authority to resolve a controversy the jurisdiction over which is initially lodged with an
administrative body of special competence." 29 When petitioners recourse lies in an appeal
to the Commission Proper in accordance with the procedure prescribed in MC 19, the CA
may not be faulted for refusing to acknowledge petitioner before it.
We likewise affirm the CAs pronouncement that petitioner was negligent in filling up his
CSPE application form and in failing to verify beforehand the specific requirements for the
CSPE examination. Petitioners claim of good faith and absence of deliberate intent or
willful desire to defy or disregard the rules relative to the CSPE is not a defense as to
exonerate him from the charge of conduct prejudicial to the best interest of the service;
under our legal system, ignorance of the law excuses no one from compliance
therewith.30 Moreover, petitioner as mere applicant for acceptance into the professional
service through the CSPE cannot expect to be served on a silver platter; the obligation to
know what is required for the examination falls on him, and not the CSC or his colleagues
in office. As aptly ruled by the appellate court:
In Bacaya31 v. Ramos, the Supreme Court found respondent judge guilty of both negligence
and conduct prejudicial to the best interest of the service when he issued an arrest warrant
despite the deletion of the penalty of imprisonment imposed on an accused in a particular
criminal case. Respondent judge in the said case claimed that the issuance of the warrant
was a mistake, done in good faith and that it has been a practice in his office for the Clerk
of Court to study motions and that he would simply sign the prepared order. The Supreme
Court rejected his defense and stated that negligence is the failure to observe such care as
a reasonably prudent and careful person would use under ordinary circumstances. An act
of the will is necessary for deliberate intent to exist; such is not necessary in an act of
negligence.
Here, petitioner failed to verify the requirements before filing his application to take the
CSPE exam. He simply relied on his prior knowledge of the rules, particularly, that he could
114
 ADMIN LAW CASES SET 7
substitute his deficiency in Military Science with the length of his government service. He service. "Assumption of public office is impressed with the paramount public interest that
37

cannot lay blame on the personnel head of the SSS-Bangued, Abra, who allegedly did not requires the highest standards of ethical conduct. A person aspiring for public office must
inform him of the pertinent rules contained in Civil Service Memorandum Circular No. 42, observe honesty, candor, and faithful compliance with the law. Nothing less is expected." 38
Series of 1991. For, [if] he were truly a reasonably prudent and careful person, petitioner
himself should have verified from the CSC the requirements imposed on prospective WHEREFORE, the Petition is DENIED. The December 11, 2009 Decision and March 17, 2010
examinees. In so doing, he would certainly have been informed of the new CSC policy Resolution of the Court of Appeals in CA-G.R. SP No. 94426 are AFFIRMED.
disallowing substitution of ones length of government service for academic deficiencies.
Neither should petitioner have relied on an unnamed Civil Service employees advice since
SO ORDERED.
it was not shown that the latter was authorized to give information regarding the
examination nor that said employee was competent and capable of giving correct
information. His failure to verify the actual CSPE requirements which a reasonably prudent
and careful person would have done constitutes negligence. Though his failure was not a
deliberate act of the will, such is not necessary in an act of negligence and, as in Bacaya,
negligence is not inconsistent with a finding of guilt for conduct prejudicial to the best
interest of the service.32

The corresponding penalty for conduct prejudicial to the best interest of the service may
be imposed upon an erring public officer as long as the questioned act or conduct taints
the image and integrity of the office; and the act need not be related to or connected with
the public officers official functions. Under our civil service laws, there is no concrete
description of what specific acts constitute conduct prejudicial to the best interest of the
service, but the following acts or omissions have been treated as such: misappropriation of
public funds; abandonment of office; failure to report back to work without prior notice;
failure to safe keep public records and property; making false entries in public documents;
falsification of court orders; a judges act of brandishing a gun, and threatening the
complainants during a traffic altercation; a court interpreters participation in the execution
of a document conveying complainants property which resulted in a quarrel in the latters
family; selling fake Unified Vehicular Volume Program exemption cards to his officemates
during office hours; a CA employees forging of receipts to avoid her private contractual
obligations; a Government Service Insurance System (GSIS) employees act of repeatedly
changing his IP address, which caused network problems within his office and allowed him
to gain access to the entire GSIS network, thus putting the system in a vulnerable state of
security;33 a public prosecutors act of signing a motion to dismiss that was not prepared
by him, but by a judge; 34 and a teachers act of directly selling a book to her students in
violation of the Code of Ethics for Professional Teachers. 35 In petitioners case, his act of
making false entries in his CSPE application undoubtedly constitutes conduct prejudicial to
the best interest of the service; the absence of a willful or deliberate intent to falsify or
make dishonest entries in his application is immaterial, for conduct grossly prejudicial to
the best interest of the service "may or may not be characterized by corruption or a willful
intent to violate the law or to disregard established rules." 36

Finally, the Court cannot consider petitioner's plea that "in the interest of justice and in the
spirit of the policy which promotes and preserves civil service eligibility," his career service
professional eligibility should not be revoked. The act of using a fake or spurious civil
service eligibility for one's benefit not only amounts to violation of the civil service
examinations or CSPE; it also results in prejudice to the government and the public in
general. It is a transgression of the law which has no place in the public
115

G.R. No. 158253 March 2, 2007
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL
TREASURER, Petitioner, vs. CARLITO LACAP, doing business under the name and
style CARWIN CONSTRUCTION AND CONSTRUCTION SUPPLY, Respondent
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court assailing the Decision1 dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R.
CV No. 56345 which affirmed with modification the Decision 2 of the Regional Trial Court,
Branch 41, San Fernando, Pampanga (RTC) in Civil Case No. 10538, granting the complaint
for Specific Performance and Damages filed by Carlito Lacap (respondent) against the
Republic of the Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated
January 27, 1992. Respondent, doing business under the name and style Carwin
Construction and Construction Supply (Carwin Construction), was pre-qualified together
with two other contractors. Since respondent submitted the lowest bid, he was awarded
the contract for the concreting of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract
Agreement was executed by respondent and petitioner. 4 On September 25, 1992, District
Engineer Rafael S. Ponio issued a Notice to Proceed with the concreting
of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the works, made advances for
the purchase of the materials and payment for labor costs. 6
On October 29, 1992, personnel of the Office of the District Engineer of San Fernando,
Pampanga conducted a final inspection of the project and found it 100% completed in
accordance with the approved plans and specifications. Accordingly, the Office of the
District Engineer issued Certificates of Final Inspection and Final Acceptance. 7
Thereafter, respondent sought to collect payment for the completed project. 8 The DPWH
prepared the Disbursement Voucher in favor of petitioner. 9 However, the DPWH withheld
payment from respondent after the District Auditor of the Commission on Audit (COA)
disapproved the final release of funds on the ground that the contractors license of
respondent had expired at the time of the execution of the contract. The District Engineer
sought the opinion of the DPWH Legal Department on whether the contracts of Carwin
Construction for various Mount Pinatubo rehabilitation projects were valid and effective
although its contractors license had already expired when the projects were contracted. 10
In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal
Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as
the Contractors License Law, does not provide that a contract entered into after the
license has expired is void and there is no law which expressly prohibits or declares void
such contract, the contract is enforceable and payment may be paid, without prejudice to
any appropriate administrative liability action that may be imposed on the contractor and
the government officials or employees concerned. 11
ADMIN LAW CASES SET 7
In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH
Legal Department on whether Carwin Construction should be paid for works accomplished
despite an expired contractors license at the time the contracts were executed. 12
In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal
Department, recommended that payment should be made to Carwin Construction,
reiterating his earlier legal opinion. 13 Despite such recommendation for payment, no
payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and
Damages against petitioner before the RTC.14
On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed
a Motion to Dismiss the complaint on the grounds that the complaint states no cause of
action and that the RTC had no jurisdiction over the nature of the action since respondent
did not appeal to the COA the decision of the District Auditor to disapprove the claim. 15
Following the submission of respondents Opposition to Motion to Dismiss, 16 the RTC issued
an Order dated March 11, 1996 denying the Motion to Dismiss. 17 The OSG filed a Motion for
Reconsideration18 but it was likewise denied by the RTC in its Order dated May 23, 1996. 19
On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of
administrative remedies and the doctrine of non-suability of the State. 20
Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion
of which reads as follows:
WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in
favor of the plaintiff and against the defendant, ordering the latter, thru its District
Engineer at Sindalan, San Fernando, Pampanga, to pay the following:
a) P457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay
Pare, Candaba, Pampanga plus interest at 12% from demand until fully paid; and
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay the contract price since it has
accepted the completed project and enjoyed the benefits thereof; to hold otherwise would
be to overrun the long standing and consistent pronouncement against enriching oneself
at the expense of another.22
116

Dissatisfied, petitioner filed an appeal with the CA. On April 28, 2003, the CA rendered its
23
Decision sustaining the Decision of the RTC. It held that since the case involves the
application of the principle of estoppel against the government which is a purely legal
question, then the principle of exhaustion of administrative remedies does not apply; that
by its actions the government is estopped from questioning the validity and binding effect
of the Contract Agreement with the respondent; that denial of payment to respondent on
purely technical grounds after successful completion of the project is not countenanced
either by justice or equity.
The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion
of which reads:
WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that
the interest shall be six percent (6%) per annum computed from June 21, 1995.
SO ORDERED. 24
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF
ACTION AGAINST PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO RESOLVE
RESPONDENTS MONEY CLAIM AGAINST THE GOVERNMENT. 25
Petitioner contends that respondents recourse to judicial action was premature since the
proper remedy was to appeal the District Auditors disapproval of payment to the COA,
pursuant to Section 48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as
the Government Auditing Code of the Philippines; that the COA has primary jurisdiction to
resolve respondents money claim against the government under Section 2(1), 26 Article IX
of the 1987 Constitution and Section 2627 of P.D. No. 1445; that non-observance of the
doctrine of exhaustion of administrative remedies and the principle of primary jurisdiction
results in a lack of cause of action.
Respondent, on the other hand, in his Memorandum 28 limited his discussion to Civil Code
provisions relating to human relations. He submits that equity demands that he be paid for
the work performed; otherwise, the mandate of the Civil Code provisions relating to human
relations would be rendered nugatory if the State itself is allowed to ignore and circumvent
the standard of behavior it sets for its inhabitants.
The present petition is bereft of merit.
ADMIN LAW CASES SET 7
The general rule is that before a party may seek the intervention of the court, he should
first avail of all the means afforded him by administrative processes. 29 The issues which
administrative agencies are authorized to decide should not be summarily taken from
them and submitted to a court without first giving such administrative agency the
opportunity to dispose of the same after due deliberation. 30
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of
primary jurisdiction; that is, courts cannot or will not determine a controversy involving a
question which is within the jurisdiction of the administrative tribunal prior to the resolution
of that question by the administrative tribunal, where the question demands the exercise
of sound administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate matters of
fact.31
Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary
doctrine of primary jurisdiction, which are based on sound public policy and practical
considerations, are not inflexible rules. There are many accepted exceptions, such as: (a)
where there is estoppel on the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where
there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively small so as to make the rule
impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; 32 (f) where judicial intervention is
urgent; (g) when its application may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) when the issue of non-exhaustion of
administrative remedies has been rendered moot; 33 (j) when there is no other plain, speedy
and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto
proceedings.34 Exceptions (c) and (e) are applicable to the present case.
Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and
1994 that payment to a contractor with an expired contractors license is proper,
respondent remained unpaid for the completed work despite repeated demands. Clearly,
there was unreasonable delay and official inaction to the great prejudice of respondent.
Furthermore, whether a contractor with an expired license at the time of the execution of
its contract is entitled to be paid for completed projects, clearly is a pure question of law. It
does not involve an examination of the probative value of the evidence presented by the
parties. There is a question of law when the doubt or difference arises as to what the law is
on a certain state of facts, and not as to the truth or the falsehood of alleged facts. 35Said
question at best could be resolved only tentatively by the administrative authorities. The
final decision on the matter rests not with them but with the courts of justice. Exhaustion
of administrative remedies does not apply, because nothing of an administrative nature is
to be or can be done.36 The issue does not require technical knowledge and experience but
one that would involve the interpretation and application of law.
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Thus, while it is undisputed that the District Auditor of the COA disapproved respondents
claim against the Government, and, under Section 48 37 of P.D. No. 1445, the administrative
remedy available to respondent is an appeal of the denial of his claim by the District
Auditor to the COA itself, the Court holds that, in view of exceptions (c) and (e) narrated
above, the complaint for specific performance and damages was not prematurely filed and
within the jurisdiction of the RTC to resolve, despite the failure to exhaust administrative
remedies. As the Court aptly stated in Rocamora v. RTC-Cebu (Branch VIII): 38
The plaintiffs were not supposed to hold their breath and wait until the Commission on
Audit and the Ministry of Public Highways had acted on the claims for compensation for the
lands appropriated by the government. The road had been completed; the Pope had come
and gone; but the plaintiffs had yet to be paid for the properties taken from them. Given
this official indifference, which apparently would continue indefinitely, the private
respondents had to act to assert and protect their interests. 39
On the question of whether a contractor with an expired license is entitled to be paid for
completed projects, Section 35 of R.A. No. 4566 explicitly provides:
SEC. 35. Penalties. Any contractor who, for a price, commission, fee or wage, submits or
attempts to submit a bid to construct, or contracts to or undertakes to construct, or
assumes charge in a supervisory capacity of a construction work within the purview of this
Act, without first securing a license to engage in the business of contracting in this
country; or who shall present or file the license certificate of another, give false evidence
of any kind to the Board, or any member thereof in obtaining a certificate or license,
impersonate another, or use an expired or revoked certificate or license, shall be deemed
guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a fine of not less
than five hundred pesos but not more than five thousand pesos. (Emphasis supplied)
The "plain meaning rule" or verba legis in statutory construction is that if the statute is
clear, plain and free from ambiguity, it must be given its literal meaning and applied
without interpretation.40 This rule derived from the maxim Index animi sermo est (speech is
the index of intention) rests on the valid presumption that the words employed by the
legislature in a statute correctly express its intention or will and preclude the court from
construing it differently. The legislature is presumed to know the meaning of the words, to
ADMIN LAW CASES SET 7
have used words advisedly, and to have expressed its intent by use of such words as are
found in the statute.41 Verba legis non est recedendum, or from the words of a statute
there should be no departure.42
The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void
contracts entered into by a contractor whose license had already expired. Nonetheless,
such contractor is liable for payment of the fine prescribed therein. Thus, respondent
should be paid for the projects he completed. Such payment, however, is without prejudice
to the payment of the fine prescribed under the law.
Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius
incommode debet lecupletari (no man ought to be made rich out of anothers injury)
states:
Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.
This article is part of the chapter of the Civil Code on Human Relations, the provisions of
which were formulated as "basic principles to be observed for the rightful relationship
between human beings and for the stability of the social order, x x x designed to indicate
certain norms that spring from the fountain of good conscience, x x x guides human
conduct [that] should run as golden threads through society to the end that law may
approach its supreme ideal which is the sway and dominance of justice." 43 The rules
thereon apply equally well to the Government. 44 Since respondent had rendered services to
the full satisfaction and acceptance by petitioner, then the former should be compensated
for them. To allow petitioner to acquire the finished project at no cost would undoubtedly
constitute unjust enrichment for the petitioner to the prejudice of respondent. Such unjust
enrichment is not allowed by law.
WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the
Court of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No
pronouncement as to costs. SO ORDERED.
118