Araneta v Gatmaitan SALVADOR A. ARANETA v. THE HON. MAGNO S. GATMAITAN. G.R. Nos.
L-8895
Facts:
The President issued E.O 22 - prohibiting the use of trawls in San Miguel Bay, and
the E.O 66 and 80 as amendments to EO 22, as a response for the general clamor
among the majority of people living in the coastal towns of San Miguel Bay that the
said resources of the area are in danger of major depletion because of the effects of
trawl fishing. A group of Otter trawl operators filed a complaint for injunction to restrain
the Secretary of Agriculture and Natural Resources from enforcing the said E.O. and
to declare E.O 22 as null and void.
Issue:
W/N E.O 22, 60 and 80 were valid, for the issuance thereof was not in the exercise of
legislative powers unduly delegated to the Pres.
Held:
VALID! Congress provided under the Fisheries Act that a.) it is unlawful to take or
catch fry or fish eggs in the waters of the Phil and b.) it authorizes Sec. of Agriculture
and Nat. Resources to provide regulations/ restrictions as may be deemed necessary.
The Act was complete in itself and leaves it to the Sec. to carry into effect its
legislative intent. The Pres. did nothing but show an anxious regard for the welfare of
the inhabitants and dispose of issues of gen. concern w/c were in consonance and
strict conformity with law.
Distinction bet:
Delegation of Power to Legislate - involves discretion of what law shall be
Execution of Law authority or discretion as to its execution has to be exercised
under and in pursuance of law.
and L-9191. April 30, 1957.
FACTS:
The President issued EO 22 - prohibiting the use of trawls in San Miguel Bay, and the
EO 66 and 80 as amendments to EO 22, as a response for the general clamor among
the majority of people living in the coastal towns of San Miguel Bay that the said
resources of the area are in danger of major depletion because of the effects of trawl
fishing.
A group of Otter trawl operators took the matter to the court by filing a complaint for
injunction and/or declaratory relief with preliminary injunction with the Court of First
Instance of Manila, docketed as Civil Case No. 24867, praying that a writ of
preliminary injunction be issued to restrain the Secretary of Agriculture and Natural
Resources and the Director of Fisheries from enforcing said executive order; to
declare the same null and void, and for such other relief as may be just and equitable
in the premises.
ISSUE:
Whether Executive Orders Nos. 22, 66 and 80 were valid, for the issuance thereof
was not in the exercise of legislative powers unduly delegated to the President.
RULING:
Yes. As already held by this Court, the true distinction between delegation of the
power to legislate and the conferring of authority or discretion as to the execution of
law consists in that the former necessary involves a discretion as to what the law shall
be, while in the latter the authority or discretion as to its execution has to be exercised
under and in pursuance of the law. The first cannot be done; to the latter no valid
objection can be made.
In the case of U. S. vs. Ang Tang Ho, 43 Phil. 1, We also held, the power to delegate -
the Legislature cannot delegate legislative power to enact any law. If Act No. 2868 is
a law unto itself, and it does nothing more than to authorize the Governor-General to
make rules and regulations to carry it into effect, then the Legislature created the law.
There is no delegation of power and it is valid. On the other hand, if the act within
itself does not define a crime and is not complete, and some legislative act remains to
be done to make it a law or a crime, the doing of which is vested in the Governor-
General, the act is delegation of legislative power, is unconstitutional and void.
Congress provided under the Fisheries Act that a.) it is unlawful to take or catch fry or
fish eggs in the waters of the Philippines and b.) it authorizes Sec. of Agriculture and
Natural Resources to provide regulations/ restrictions as may be deemed necessary.
The Act was complete in itself and leaves it to the Sec. to carry into effect its
legislative intent. The President did nothing but show an anxious regard for the
welfare of the inhabitants and dispose of issues of general concern which were in
consonance and strict conformity with law.

RUFINO O. ESLAO, in his capacity as President of Pangasinan State University
vs. COMMISSION ON AUDIT
RULING:
PSU entered into a Memorandum of Agreement ("MOA") with the DENR for
the evaluation of eleven (11) government reforestation operations in Pangasinan. The
evaluation project was part of the commitment of the Asian Development Bank
("ADB") under the ADB/OECF Forestry Sector Program Loan to the Republic of the
Philippines and was one among identical project agreements entered into by the
DENR with sixteen (16) other state universities. A notice to proceed with the review
and evaluation of the eleven (11) reforestation operations was issued by the DENR to
PSU. The latter complied with this notice and did proceed.
Per advice of the PSU Auditor-in-Charge with respect to the payment of
honoraria and per diems of PSU personnel engaged in the review and evaluation
project, PSU Vice President for Research and Extension and Assistant Project
Director Victorino P. Espero requested the Office of the President, PSU, to have the
University's Board of Regents ("BOR") confirm the appointments or designations of
involved PSU personnel including the rates of honoraria and per diems corresponding
to their specific roles and functions. The BOR approved the MOA, PSU issued
Voucher representing the amount of P70,375.00 for payment of honoraria to PSU
personnel engaged in the project. Later, however, the approved honoraria rates were
found to be somewhat higher than the rates provided for in the guidelines of National
Compensation Circular ("NCC") No. 53. Accordingly, the amounts were adjusted
downwards to conform to NCC No. 53. Adjustments were made by deducting
amounts from subsequent disbursements of honoraria. By June 1989, NCC No. 53
was being complied with.
Bonifacio Icu, COA resident auditor at PSU, alleging that there were excess
payments of honoraria, issued a "Notice of Disallowance" disallowing P64,925.00
from the amount of P70,375.00 stated in Voucher. The resident auditor based his
action on the premise that Compensation Policy Guidelines ("CPG") No. 80-4, dated
7 August 1980, issued by the Department of Budget and Management which provided
for lower rates than NCC No. 53 dated 21 June 1988, also issued by the Department
of Budget and Management, was the schedule for honoraria and per diems applicable
to work done under the MOA of 9 December 1988 between the PSU and the DENR. A
letter was sent by PSU Vice President and Assistant Project Director Espero to the
Chairman of the COA requesting reconsideration of the action of its resident auditor.
In the meantime, the Department of Budget and Management ("DBM"), upon request
by PSU, issued a letter clarifying that the basis for the project's honoraria should not
be CPG No. 80-4 which pertains to locally funded projects but rather NCC No. 53
which pertains to foreign-assisted projects. A copy of this clarification was sent to the
COA upon request by PSU.
COA denied reconsideration of the decision of its resident auditor. The COA
ruled that CPG. No. 80-4 is the applicable guideline in respect of the honoraria as
CPG No. 80-4 does not distinguish between projects locally funded and projects
funded or assisted with monies of foreign-origin. PSU President Eslao sent a letter
requesting reconsideration of COA Decision No. 1547 (1990) alleging that (a) COA
had erred in applying CPG No. 80-4 and not NCC No. 53 as the project was foreign-
assisted and (b) the decision was discriminatory honoraria based on NCC No. 53
having been approved and granted by COA resident auditors in two (2) other state
universities engaged in the same reforestation project. PSU then submitted to the
COA (a) a certification from the DENR to the effect that the DENR evaluation project
was foreign- assisted and (b) the letter of the DBM. COA denied reconsideration. In
the meantime, the DENR informed petitioner of its acceptance of the PSU final
reports on the review and evaluation of the government reforestation projects.
Subsequently, honoraria for the period from January 1989 to January 1990 were
disbursed in accordance with NCC No. 53. A Certificate of Settlement and Balances
was then issued by the COA resident auditor of PSU showing disallowance of alleged
excess payment of honoraria which petitioner was being required to return. The
instant Petition prays that COA Decision Nos. 1547 (1990) and 2571 (1992) be set
aside.
RULING:
The COA apparently does not agree with the policy basis of NCC No. 53 in
relation to CPG No. 80-4 since COA argues that loan proceeds regardless of source
eventually become public funds for which the government is accountable. The result
would be that any provisions under any [foreign] loan agreement should be
considered locally-funded. We do not consider that the COA is, under its
constitutional mandate, authorized to substitute its own judgment for any applicable
law or administrative regulation with the wisdom or propriety of which, however, it
does not agree, at least not before such law or regulation is set aside by the
authorized agency of government i.e., the courts as unconstitutional or illegal
and void. The COA, like all other government agencies, must respect the presumption
of legality and constitutionality to which statutes and administrative regulations are
entitled until such statute or regulation is repealed or amended, or until set aside in an
appropriate case by a competent court (and ultimately this Court).
Finally, we turn to petitioner's claim for moral damages and reimbursement
of legal expenses. We consider that this claim cannot be granted as petitioner has
failed to present evidence of bad faith or tortious intent warranting an award thereof.
The presumption of regularity in the performance of duty must be accorded to
respondent COA; its action should be seen as its effort to exercise (albeit erroneously,
in the case at bar) its constitutional power and duty in respect of uses of government
funds and properties.
Hence, the petition for Certiorari is GRANTED. COA Decisions Nos. 1547
and 2571, respectively dated 18 September 1990 and 16 November 1992, are SET
ASIDE. The instant evaluation project being a Foreign-Assisted Project, the following
PSU personnel involved in the project shall be paid according to the Budget Estimate
schedule of the MOA as aligned with NCC No. 53:
Eslao vs. Commission on Audit, 236 SCRA 161 (1994)
COA, under its constitutional mandate, is not authorized to substitute its own
judgment for any applicable law or administrative regulation with the wisdom or
propriety of which, however, it does not agree, at least not before such law or
regulation is set aside by the authorized agency of government i.e., the courts as
unconstitutional or illegal and void. The COA, like all other government agencies,
must respect the presumption of legality and constitutionality to which statutes and
administrative regulations are entitled until such statute or regulation is repealed or
amended, or until set aside in appropriate case by a competent court and ultimately
the Supreme Court.
BPI V. CA; G.R. No. 127624 November 18, 2003
PARTIES:
BPI LEASING CORPORATION petitioner,
THE HONORABLE COURT OF APPEALS, COURT OF TAX APPEAL AND
COMMISSIONER OF
INTERNAL REVENUE respondents.
PONENTE: AZCUNA, J.:
FACTS:
For the calendar year 1986, BPI Leasing Corporation, Inc. (BLC) paid the
Commissioner of Internal Revenue (CIR) a total of P1,139,041.49 representing 4%
"contractors percentage tax" then imposed by Section 205 of the National Internal
Revenue Code (NIRC), based on its gross rentals from equipment leasing for the said
year amounting to P27,783,725.42.
On November 10, 1986, the CIR issued RR 19-86. Section 6.2 thereof provided that
finance and leasing companies registered under Republic Act 5980 shall be subject to
gross receipt tax of 5%-3%-1% on actual income earned. This means that companies
registered under Republic Act 5980, such as BLC, are not liable for "contractors
percentage tax" under Section 205 but are, instead, subject to "gross receipts tax"
under Section 260 (now Section 122) of the NIRC. Since BLC had earlier paid the
aforementioned "contractors percentage tax," it re-computed its tax liabilities under
the "gross receipts tax" and arrived at the amount of P361,924.44. BLC filed a claim
for a refund with the CIR for the amount of P777,117.05, representing the difference
between the P1,139,041.49 it had paid as "contractors percentage tax" and
P361,924.44 it should have paid for "gross receipts tax."
The CTA dismissed the petition and denied BLCs claim of refund and held that RR
19-86, may only be applied prospectively such that it only covers all leases written on
or after January 1, 1987. The CTA ruled that, since BLCs rental income was all
received prior to 1986, it follows that this was derived from lease transactions prior to
January 1, 1987, and hence, not covered by the RR.
A motion for reconsideration of the CTAs decision was filed, but was denied. BLC
then appealed the case to the Court of Appeals. BLC submits that the Court of
Appeals and the CTA erred in not ruling that RR 19-86 may be applied retroactively
so as to allow BLCs claim for a refund of P777,117.05.
Respondents, on the other hand, maintain that the provision on the date of effectivity
of RR 19-86 is clear and unequivocal, leaving no room for interpretation on its
prospective application.
ISSUES:
WON RR 19-86 is legislative or interpretative in nature.
WON RR 19-86 is prospective or retroactive in nature.
WON BPI failed to meet the quantum of evidence required in refund cases.
RULE:
1ST ISSUE BLC attempts to convince the Court that RR 19-86 is legislative
rather than interpretative in character and hence, should retroact to the date
of effectivity of the law it seeks to interpret. A legislative rule is in the matter
of subordinate legislation, designed to implement a primary legislation by
providing the details thereof. An interpretative rule, on the other hand, is
designed to provide guidelines to the law which the administrative agency is
in charge of enforcing. The Court finds the questioned RR to be legislative in
nature. Section 1 of RR 19-86 plainly states that it was promulgated
pursuant to Section 277 of the NIRC (now Section 244), an express grant of
authority to the Secretary of Finance to promulgate all needful rules and
regulations for the effective enforcement of the provisions of the NIRC.
Verily, it cannot be disputed that RR 19-86 was issued pursuant to the rule-
making power of the Secretary of Finance, thus making it legislative, and not
interpretative as alleged by BLC.
BLC further posits that, it is invalid for want of due process as no prior
notice, publication and public hearing attended the issuance thereof. To
support its view, BLC cited CIR v. Fortune Tobacco, et al., wherein the Court
nullified a revenue memorandum circular which reclassified certain
cigarettes and subjected them to a higher tax rate, holding it invalid for lack
of notice, publication and public hearing. In this case, RR 19-86 would be
beneficial to the taxpayers as they are subjected to lesser taxes. Petitioner,
in fact, is invoking RR 19-86 as the very basis of its claim for refund. If it
were invalid, then petitioner all the more has no right to a refund.
2ND ISSUE The Court now resolves whether its application should be
prospective or retroactive. Statutes, including administrative rules and
regulations, operate prospectively only, unless the legislative intent to the
contrary is manifest by express terms or by necessary implication. In the
present case, there is no indication that the RR may operate retroactively.
Furthermore, there is an express provision stating that it "shall take effect on
January 1, 1987," and that it "shall be applicable to all leases written on or
after the said date." Thus, BLC is not in a position to invoke the provisions of
RR 19-86 for lease rentals it received prior to January 1, 1987.
3RD ISSUE Tax refunds are in the nature of tax exemptions. As such, these
are to be strictly construed against the person or entity claiming the
exemption. The burden of proof is upon him who claims the exemption and
he must be able to justify his claim by the clearest grant under Constitutional
or statutory law, and he cannot be permitted to rely upon vague
implications. Nothing that BLC has raised justifies a tax refund.
WHEREFORE, the petition for review is hereby DENIED, and the assailed
decision and resolution of the Court of Appeals are AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
PRINCIPLES INVOLVED: Legislative or Interpretive nature of Statute
Prospective or Retroactive effect of Ordinances
Peralta v. Civil Service Commission [G.R. No. 95832. August 10, 1992]
FACTS
Pursuant to Civil Service Act of 1959 (R.A. No. 2260) which conferred upon the
Commissioner of Civil Service to prescribe, amend and enforce suitable rules and
regulations for carrying into effect the provisions of this Civil Service Law, the
Commission interpreted provisions of Republic Act No. 2625 amending the Revised
Administrative Code and adopted a policy that when an employee who was on leave
of absence without pay on a day before or on a day time immediately preceding a
Saturday, Sunday or Holiday, he is also considered on leave of absence without pay
on such Saturday, Sunday or Holiday. Petitioner Peralta, affected by the said policy,
questioned the said administrative interpretation.
ISSUES
Whether or not the Civil Service Commissions interpretative construction is:
(1) valid and constitutional.
(2) binding upon the courts.
RULING
(1) NO. The construction by the respondent Commission of R.A. 2625 is not
in accordance with the legislative intent. R.A. 2625 specifically provides that
government employees are entitled to leaves of absence with full pay exclusive of
Saturdays, Sundays and Holidays. The law speaks of the granting of a right and
the law does not provide for a distinction between those who have accumulated
leave credits and those who have exhausted their leave credits in order to enjoy
such right. Ubi lex non distinguit nec nos distinguere debemus.The fact remains
that government employees, whether or not they have accumulated leave credits,
are not required by law to work on Saturdays, Sundays and Holidays and thus
they can not be declared absent on such non-working days. They cannot be or
are not considered absent on non-working days; they cannot and should not be
deprived of their salary corresponding to said non-working days just because they
were absent without pay on the day immediately prior to, or after said non-working
days. A different rule would constitute a deprivation of property without due
process.
(2) NO. Administrative construction, is not necessarily binding upon the
courts. Action of an administrative agency may be disturbed or set aside by the
judicial department if there is an error of law, or abuse of power or lack of
jurisdiction or grave abuse of discretion clearly conflicting with either the letter or
the spirit of a legislative enactment. When an administrative or executive agency
renders an opinion or issues a statement of policy, it merely interprets a pre-
existing law; and the administrative interpretation of the law is at best advisory, for
it is the courts that finally determine what the law means.
The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it
confers no rights; it imposes no duties; it affords no protection; it creates no office; it is
in legal contemplation as inoperative as though it had never been passed.
But, as held in Chicot County Drainage District vs. Baxter State Bank:
. . . . 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 such determination is an operative fact and may have
consequences which cannot always 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.
To allow all the affected government employees, similarly situated as petitioner
herein, to claim their deducted salaries resulting from the past enforcement of the
herein invalidated CSC policy, would cause quite a heavy financial burden on the
national and local governments considering the length of time that such policy has
been effective. Also, administrative and practical considerations must be taken into
account if this ruling will have a strict restrospective application. The Court, in this
connection, calls upon the respondent Commission and the Congress of the
Philippines, if necessary, to handle this problem with justice and equity to all affected
government employees.
When an administrative or executive agency renders an opinion or issues a statement
of policy, it merely interprets a pre-existing law; and the administrative
interpretation of the law is at best advisory, for it is the courts that finally
determine what the law means. It has also been held that interpretative regulations
need not be published.
What is primarily questioned by the petitioner is the validity of the respondent
Commissions policy mandating salary deductions corresponding to the intervening
Saturdays, Sundays or Holidays where an employee without leave credits was absent
on the immediately preceding working day.
When an administrative or executive agency renders an opinion or issues a statement
of policy, it merely interprets a pre-existing law; and the administrative interpretation
of the law is at best advisory, for it is the courts that finally determine what the law
means.
It has also been held that interpretative regulations need not be published.
 Administrative construction, if we may repeat, is not necessarily binding upon the
courts action of an administrative agency may be disturbed or set aside by the judicial
department if there is an error of law, or abuse of power or lack of jurisdiction or grave
abuse of discretion clearly conflicting with either the letter or the spirit of a legislative
enactment.
PERALTA vs. CIVIL SERVICE COMMISSION
212 SCRA 425, G.R. No. 95832, August 10, 1992
Facts:
Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department
of Trade and Industry (DTI). His appointment was classified as
"Reinstatement/Permanent". 120889 petitioner received his initial salary, covering the
period from September to October 1989. Since he had no accumulated leave credits,
DTI deducted from his salary the amount corresponding to his absences during the
covered period, inclusive of Saturdays and Sundays.
Thus, the law speaks of the granting of a right and the law does not provide for a
distinction between those who have accumulated leave credits and those who have
exhausted their leave credits in order to enjoy such right. The fact remains that
government employees, whether or not they have accumulated leave credits, are not
required by law to work on Saturdays, Sundays and Holidays and thus they can not
be declared absent on such non-working days. They cannot be or are not considered
absent on non-working days; they cannot and should not be deprived of their salary
corresponding to said non-working days just because they were absent without pay
on the day immediately prior to, or after said non-working days. A different rule would
constitute a deprivation of property without due process.
Furthermore, before their amendment by R.A. 2625, Sections 284 and 285-A of the
Revised Administrative Code applied to all government employee without any
distinction. It follows that the effect of the amendment similarly applies to all
employees enumerated in Sections 284 and 285-A, whether or not they have
accumulated leave credits.
The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it
confers no rights; it imposes no duties; it affords no protection; it creates no office; it is
in legal contemplation as inoperative as though it had never been passed.

Petitioner sent a memorandum to Amando T. Alvis (Chief, General Administrative When an administrative or executive agency renders an opinion or issues a
Service) inquiring as to the law on salary deductions, if the employee has no leave statement of policy, it merely interprets a pre-existing law; and the administrative
credits. Amando T. Alvis answered petitioner's query in a memorandumciting Chapter interpretation of the law is at best advisory, for it is the courts that finally determine
5.49 of the Handbook of Information on the Philippine Civil Service which states that what the law means.
"when an employee is on leave without pay on a day before or on a day immediately
preceding a Saturday, Sunday or Holiday, such Saturday, Sunday, or Holiday shall
also be without pay.

Petitioner sent a letter addressed to CSC Chairman Patricia Sto. Tomas raising the
question: 'Is an employee who was on leave of absence without pay on a day before
or on a day time immediately preceding a Saturday, Sunday or Holiday, also
considered on leave of absence without pay on such Saturday, Sunday or Holiday?
Petitioner: he cannot be deprived of his pay or salary corresponding to the intervening
Saturdays, Sundays or Holidays (in the factual situation posed), and that the
withholding (or deduction) of the same is tantamount to a deprivation of property
without due process of law.

Respondent Commission promulgated Resolution No. 90-497, ruling that the action of
the DTI in deducting from the salary of petitioner, a part thereof corresponding to six
(6) days is in order.

Issue:
Whether or not the CSC resolution is valid.

Held:
No. The court ruled that the construction by the respondent Commission of R.A. 2625
is not in accordance with the legislative intent. R.A. 2625 specifically provides that
government employees are entitled to fifteen (15) days vacation leave of absence
with full pay and fifteen (15) days sick leave with full pay, exclusive of Saturdays,
Sundays and Holidays in both cases.

La Bugal-BLaan Tribal Association vs Ramos
GR No 127882 01 December 2004
Facts: The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act 7942 (The Philippine Mining Act of 1995); (2) its
Implementing Rules and Regulations (DENR Administrative Order [DAO] 96-40); and
(3) the Financial and Technical Assistance Agreement (FTAA) dated 30 March 1995,
executed by the government with Western Mining Corporation (Philippines), Inc.
(WMCP).
On 27 January 2004, the Court en banc promulgated its Decision, granting the
Petition and declaring the unconstitutionality of certain provisions of RA 7942, DAO
96-40, as well as of the entire FTAA executed between the government and WMCP,
mainly on the finding that FTAAs are service contracts prohibited by the 1987
Constitution. The Decision struck down the subject FTAA for being similar to service
contracts which, though permitted under the 1973 Constitution, were subsequently
denounced for being antithetical to the principle of sovereignty over our natural
resources, because they allowed foreign control over the exploitation of our natural
resources, to the prejudice of the Filipino nation.
Pursuant to Section 2 Article XII of the Constitution it effectively banned such service
contracts. Subsequently, Victor O. Ramos (Secretary, Department of Environment
and Natural Resources [DENR]), Horacio Ramos (Director, Mines and Geosciences
Bureau [MGB-DENR]), Ruben Torres (Executive Secretary), and the WMC
(Philippines) Inc. filed separate Motions for Reconsideration.
Issue: Whether or not the Court has a role in the exercise of the power of control over
the exploration, development and utilization (EDU) of our natural resources?
Decision: In contrast to express mandate of the President and Congress in the EDU
of natural resources, Article XII of the Constitution is silent on the role of the judiciary.
However, should the President and/or Congress gravely abuse their discretion in this
regard, the courts may exercise their residual duty under Article VIII. Under the
doctrine of separation of powers and due respect for co-equal and coordinate
branches of government, the Court must restrain itself from intruding into policy
matters and must allow the President and Congress maximum discretion in using the
resources of our country and in securing the assistance of foreign groups to eradicate
poverty and answer employment opportunities in the country.
The Court believes that it is not unconstitutional to allow a wide degree of discretion
to the Chief Executive in order to preserve and enhance our countrys
competitiveness in world markets. On the basis of this control standard, the Court
upholds the constitutionality of the Philippine Mining Law, its Implementing Rules and
Regulations insofar as they relate to financial and technical agreements as well as
the subject FTAA.
La Bugal-Blaan Tribal Association, Inc. Vs Ramos
G.R. No. 127882; January 27, 2004
FACTS:
This petition for prohibition and mandamus challenges the constitutionality of
Republic Act No. 7942 (The Philippine Mining Act of 1995), its implementing rules and
regulations and the Financial and Technical Assistance Agreement (FTAA) dated
March 30, 1995 by the government with Western Mining Corporation(Philippines) Inc.
(WMCP).
Accordingly, the FTAA violated the 1987 Constitution in that it is a service contract
and is antithetical to the principle of sovereignty over our natural resources, because
they allowed foreign control over the exploitation of our natural resources, to the
prejudice of the Filipino nation.
ISSUE:
What is the proper interpretation of the phrase Agreements involving Either Technical
or Financial Assistance contained in paragraph 4, Section 2, Article XII of the
Constitution.
HELD:
The Supreme Court upheld the constitutionality of the Philippine Mining Law, its
implementing rules and regulations insofar as they relate to financial and technical
agreements as well as the subject Financial and Technical Assistance Agreement.
Full control is not anathematic to day-to-day management by the contractor, provided
that the State retains the power to direct overall strategy; and to set aside, reverse or
modify plans and actions of the contractor. The idea of full control is similar to that
which is exercised by the board of directors of a private corporation, the performance
of managerial, operational, financial, marketing and other functions may be delegated
to subordinate officers or given to contractual entities, but the board retains full
residual control of the business.

G.R. No. 113926 October 23, 1996
SECURITY BANK AND TRUST COMPANY, petitioner,
vs.
REGIONAL TRIAL COURT OF MAKATI, BRANCH 61, MAGTANGGOL EUSEBIO
and LEILA VENTURA, respondents.
HERMOSISIMA, JR. J.:p
Questions of law which are of first impression are sought to be resolved in this case:
Should the rate of interest on a loan or forbearance of money, goods or credits, as
stipulated in a contract, far in excess of the ceiling prescribed under or pursuant to the
Usury Law, prevail over Section 2 of Central Bank Circular No. 905 which prescribes
that the rate of interest thereof shall continue to be 12% per annum? Do the Courts
have the discretion to arbitrarily override stipulated interest rates of promissory notes
and stipulated interest rates of promissory notes and thereby impose a 12% interest
on the loans, in the absence of evidence justifying the imposition of a higher rate?
This is a petition for review on certiorari for the purpose of assailing the decision of
Honorable Judge Fernando V. Gorospe of the Regional Trial Court of Makati, Branch
61, dated March 30, 1993, which found private respondent Eusebio liable to petitioner
for a sum of money. Interest was lowered by the court a quo from 23% per annum as
agreed upon the parties to 12% per annum.
The undisputed facts are as follows:
On April 27, 1983, private respondent Magtanggol Eusebio executed Promissory Note
No. TL/74/178/83 in favor of petitioner Security Bank and Trust Co. (SBTC) in the
total amount of One Hundred Thousand Pesos (P100,000.00) payable in six monthly
installments with a stipulated interest of 23% per annum up to the fifth installment. 1
On July 28, 1983, respondent Eusebio again executed Promissory Note No.
TL/74/1296/83 in favor of petitioner SBTC. Respondent bound himself to pay the sum
of One Hundred Thousand Pesos (P100,000.00) in six (6) monthly installments plus
23% interest per annum. 2
Finally, another Promissory Note No. TL74/1491/83 was executed on August 31, 1983
in the amount of Sixty Five Thousand Pesos (P65,000.00). Respondent agreed to pay
this note in six (6) monthly installments plus interest at the rate of 23% per annum. 3
On all the abovementioned promissory notes, private respondent Leila Ventura had
signed as co-maker. 4
Upon maturity which fell on the different dates below, the principal balance remaining
on the notes stood at:
1) PN No. TL/74/748/83 P16,665.00 as of September
1983.
2) PN No. TL/74/1296/83 P83,333.00 as of August
1983.
3) PN No. TL/74/1991/83 P65,000.00 as of August
1983.
Upon the failure and refusal of respondent Eusebio to pay the aforestated balance
payable, a collection case was filed in court by petitioner SBTC. 5 On March 30, 1993,
the court a quo rendered a judgment in favor of petitioner SBTC, the dispositive
portion which reads:
WHEREFORE, premises above-considered, and plaintiff's claim
having been duly proven, judgment is hereby rendered in favor of
plaintiff and as against defendant Eusebio who is hereby ordered
to:
1. Pay the sum of P16,655.00, plus interest of 12% per
annum starting 27 September 1983, until fully paid;
2. Pay the sum of P83,333.00, plus interest of 12% per
annum starting 28 August 1983, until fully paid;
3. Pay the sum of P65,000.00, plus interest of 12% per
annum starting 31 August 1983, until fully paid;
4. Pay the sum equivalent to 20% of the total amount due and
payable to plaintiff as and by way of attorney's fees; and to
5. Pay the costs of this suit.
SO ORDERED. 6
On August 6, 1993, a motion for partial reconsideration was filed by petitioner SBTC
contending that:
(1) the interest rate agreed upon by the parties during the signing of
the promissory notes was 23% per annum;
(2) the interests awarded should be compounded quarterly from
due date as provided in the three (3) promissory notes;
(3) defendants Leila Ventura should likewise be held liable to pay
the balance on the promissory notes since she has signed as co-
maker and as such, is liable jointly and severally with defendant
Eusebio without a need for demand upon her. 7
Consequently, an Order was issued by the court a quo denying the motion to grant
the rates of interest beyond 12%per annum; and holding defendant Leila Ventura
jointly and severally liable with co-defendants Eusebio.
Hence, this petition.
The sole issue to be settled in this petition is whether or not the 23% rate of
interest per annum agreed upon by petitioner bank and respondents is allowable and
not against the Usury Law.
We find merit in this petition.
From the examination of the records, it appears that indeed the agreed rate of interest
as stipulated on the three (3) promissory notes is 23% per annum. 8 The applicable
provision of law is the Central Bank Circular No. 905 which took effect on December
22, 1982, particularly Sections 1 and 2 which state: 9
Sec. 1. The rate of interest, including commissions, premiums, fees
and other charges, on a loan or forbearance of any money, goods
or credits, regardless of maturity and whether secured or
unsecured, that may be charged or collected by any person,
whether natural or judicial, shall not be subject to any ceiling
prescribed under or pursuant to the Usury Law, as amended.
Sec. 2. The rate of interest for the loan or forbearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of express contract as to such rate of interest, shall
continue to be twelve per cent (12%) per annum.
CB Circular 905 was issued by the Central Bank's Monetary Board pursuant to P.D.
1684 empowering them to prescribe the maximum rates of interest for loans and
certain forbearances, to wit:
Sec. 1. Section 1-a of Act No. 2655, as amended, is hereby
amended to read as follows:
Sec. 1-a. The Monetary Board is hereby authorized to prescribe the
maximum rate of interest for the loan or renewal thereof or the
forbearance of any money, goods or credits, and to change such
rate or rates whenever warranted by prevailing economic and social
conditions: Provided, That changes in such rate or rates may be
effected gradually on scheduled dates announced in advance.
In the exercise of the authority herein granted, the Monetary Board
may prescribe higher maximum rates for loans of low priority, such
as consumer loans or renewals thereof as well as such loans made
by pawnshops, finance companies and other similar credit
institutions although the rates prescribed for these institutions need
not necessarily be uniform. The Monetary Board is also authorized
to prescribed different maximum rate or rates for different types of
borrowings, including deposits and deposit substitutes, or loans of
financial intermediaries. 10
The court has ruled in the case of Philippine National Bank v. Court of Appeals 11 that:
P.D. No. 1684 and C.B. Circular No. 905 no more than allow
contracting parties to stipulate freely regarding any subsequent
adjustment in the interest rate that shall accrue on a loan or
forbearance of money, goods or credits. In fine, they can agree to
adjust, upward or downward, the interest previously stipulated.
All the promissory notes were signed in 1983 and, therefore, were already covered by
CB Circular No. 905. Contrary to the claim of respondent court, this circular did not
repeal nor in anyway amend the Usury Law but simply suspended the latter's
effectivity.
Basic is the rule of statutory construction that when the law is clear and unambiguous,
the court is left with no alternative but to apply the same according to its clear
language. As we have held in the case of Quijano v. Development Bank of the
Philippines: 12
. . . We cannot see any room for interpretation or construction in the
clear and unambiguous language of the above-quoted provision of
law. This Court had steadfastly adhered to the doctrine that its first
and fundamental duty is the application of the law according to its
express terms, interpretation being called for only when such literal
application is impossible. No process of interpretation or
construction need be resorted to where a provision of law
peremptorily calls for application. Where a requirement or condition
is made in explicit and unambiguous terms, no discretion is left to
the judiciary. It must see to it that is mandate is obeyed.
The rate of interest was agreed upon by the parties freely. Significantly, respondent
did not question that rate. It is not for respondent court a quo to change the
stipulations in the contract where it is not illegal. Furthermore, Article 1306 of the New
Civil Code provides that contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy. We find no valid reason for
the respondent court a quo to impose a 12% rate of interest on the principal balance
owing to petitioner by respondent in the presence of a valid stipulation. In a loan or
forbearance of money, the interest due should be that stipulated in writing, and in the
absence thereof, the rate shall be 12% per annum. 13 Hence, only in the absence of a
stipulation can the court impose the 12% rate of interest.
The promissory notes were signed by both parties voluntarily. Therefore, stipulations
therein are binding between them. Respondent Eusebio, likewise, did not question
any of the stipulations therein. In fact, in the Comment filed by respondent Eusebio to
this court, he chose not to question the decision and instead expressed his desire to
negotiate with the petitioner bank for "terms within which to settle his obligation." 14
IN VIEW OF THE FOREGOING, the decision of the respondent court a quo, is
hereby AFFIRMED with the MODIFICATION that the rate of interest that should be
imposed be 23% per annum.
SO ORDERED.

China Banking Corporation v. Members of the Board of Trustees, Home
Development Mutual Fund | Gonzaga-Reyes, J. (1999)
FACTS
China Banking Corp. (CBC) and CBC Properties and Computer Center, Inc.
(CBC-PCCI) were granted certificates of waiver due to their superior
retirement plan under Sec. 19 of PD 1752, as amended by RA 7742 (Home
Development Mutual Fund Law), which stated that:
o Employers who have their own existing provident and/or
employees-housing plan may register for annual certification for
waiver or suspension from coverage or participation in the Home
Development Mutual Fund
The HDMF Board issued an Amendment to the Rules and Regulations
Implementing RA 7742 and Revised Guidelines for filing application for
Waiver or Suspension of Fund Coverage, which stated that:
o A company must have a provident/retirement AND housing plan
superior to that provided by the Pag-IBIG Fund to be entitled to the
exemption or waiver.
CBC and CBC-PCCI filed a petition for certiorari and prohibition in the RTC
seeking to annul and declare void the Amendment and Guidelines for having
been issued in excess of jurisdiction and with grave abuse of discretion
amounting to lack of jurisdiction, in requiring both a retirement/provident plan
and an employee housing plan to be entitled to a waiver, for having
exceeded its rule making power.
RTCDismissed.
o Denial or grant of waiver was within the power and authority of the
HDMF Board.
o CBC and CBC-PCCI lost their right to appeal for their failure to
exhaust all available administrative remedies.
ISSUE/HELD
[Procedural Issue] WoN certiorari was the proper remedy.YES. There was no
need for CBC and CBC-PCCI to exhaust all available administrative remedies.
[Substantive Issue] WoN the Amendment and Guidelines issued by the HDMF
Board, in so far as it required that both a provident/retirement fund and an
employee housing plan that is superior in order to be exempted from the fund,
were in excess of its rule making power.YES. Amendment and Guidelines
were issued in excess of jurisdiction and with grave abuse of discretion for
being in excess of the HDMF Boards rule making power.
CBC and CBC-PCCI contend:
o The enabling law conditions exception upon the existence of a
provident/retirement fund and/or housing plan, not both.
HDMF Board contends:
o The use of and/or can only be used interchangeably and not
together and that the option of making of making it either both
(applying and) or any one (applying or) belongs to the board of
trustees.
RATIO
[Procedural Issue] Propriety of Certiorari
Certiorari is an appropriate remedy to question the validity of the challenged
issuances, which were alleged to have been issued in excess of jurisdiction
and with grave abuse of discretion amounting to lack of jurisdiction.
Among the exceptions to the doctrine of exhaustion of administrative
remedies:
o Where the question is purely legal, and
o Where the controverted act is patently illegal or performed without
jurisdiction or in excess of jurisdiction.
[Substantive Issue]
The use of and/or should be taken in its original signification, i.e. either
and or; e.g. an employer with a provident plan OR an employee housing
plan OR both may qualify for the exception
o The intention of the legislature in using and/or is that the words
and and or are to be used interchangeably.
o If the law intended that the employee should have only both, then it
would have used the words and instead of and/or.
The rules and regulations, which are the product of a delegated power to
create new or additional legal provisions that have the power and effect
of law, should be within the scope of the statutory authority granted by
the legislature to the administrative agency.
o Administrative regulations adopted under legislative authority must
be on harmony with the provisions of the law, and should be for the
sole purpose of carrying into effect its general provisions.
o The rule making power must be confined to details for regulating
the mode or proceeding and cannot be extended to amending or
expanding the statutory requirements or embrace matters not
covered by the statute.
DISPOSITIVE
The Amendment and Guidelines insofar as they require that an employer should have
both a provident/retirement plan superior to the benefits offered by the Fund, and a
housing plan superior to the Pag-IBIG housing loan program in order to qualify for
waiver or suspension or fund coverage are null and void.
Grego vs COMELEC
Facts: In 1981, Basco was removed as Deputy Shriff for serious misconduct in an
administrative complaint filed by a certain Tordesillas (Tordesillas ruling).
In 1988, BAsco ran and won as councillor in Manila. He was also re-elected
in 1992. However, his win in the 1992 election was questioned by another candidate
(and two more petitions) alleging Bascos ineligibility on the basis of the Tordesillas
ruling. All of these were however dismissed.
In 1995, Basco ran again and won a third and final term by emerging sixth in
a battle for six councilots. This time petitioner Grego filed with COMELEC a petition
for disqualifictation, for the suspension of Bascos proclamation and for the
declaration of Maranan (the 7th placer) instead.
During the pendency of the case filed by Grego, the Board of Canvassers
proclaimed Basco as the duly elected councillor.
Comelec 1st Division: dismissed petition of Grego.
COmelec en banc: denied MR.
Issue: (main) WON Basco should be disqualified from running for any elective
position since he had been removed from office as a result of an admin case as per
Sec 40 (b) LGC.
Subissue1: WON the provision applies retroactively to those
removed prior to its effectivity on January 1, 1992.
Subissue2: WON respondents election three times wiped away
and condoned the admin penalty against him
Subsubissue: WON the Tordessilas decision barred BAsco
from running for any elective position.
Subissue3: WON his proclamation during the pendency of the
disqualification case is void ab initio.
Subissue4: WON Maranan the 7th placer may be declared winner
instead pursuant to Sec6 RA 6646.
Held:
No. there is no legal impediment for Basco to continue in office as councillor of the 2nd
district of Manila.
1. No. General rule is that the law operates only prospectively and not
retroactively. That the provision in the code in question does not qualify the
date of a candidates removal from office and that it is couched in the past
tense does not necessarily mean that it should be applied retroactively..
there is no such intent expressly declared or clearly and necessarily implied
from the language of the code.
2. Issue being raised by petitioner is beside the point because it proceeds from
the assumption that Basco was in the first palce disqualified when he ran.
This assumption is untenable because he was not subject to any
disqualification at all under the LGC.
Subsub: the decretal portion of the Tordesillas decision prejudiced
the reinstatement of Basco to any position in the local/national
govt. under the former Civil Service Decree, the term
reinstatement referred only to appointive positions not elective
position.
3. No. the provisions and jurisprudence cited by petitioner are not applicable in
this case.
Sec20(i), RA 7166
- This refers only to avoid proclamation in relation to contested returns
and not to contested disqualifications of a candidate.
Sec6, RA 6646
- Suspension of a proclamation is merely directory and permissive as per
the use of the word may in this provision. The discretion of the
COMELEC to suspend is based on the question of won the evidence of
guilt is so strong to warrant such suspension. In this case the
COMELEC has not found any ground.
- The implementing rule of this RA found in the Comelec Rules of
Procedure should be harmonized with this mother law.
Jurisprudence cited
- All inapplicable to the factual circumstances at bar. The issues in these
cases were contested election returns, violation of BOCs ministerial
duty, and on advanced copies of the election returns. Whereas the issue
in this case is the alleged disqualification of BAsco.
4. NO. exception to the general rule that a second placer may not be declared
winner does not apply. The two elements in the Labo case are missing: 1)
one who obtained the highest number of vote is disqualified 2) notoriety of
the disqualification

Grego vs Comelec
Romero (1997)
Facts:
In 1981, SC found Humberto Basco, then Deputy Sheriff of the City Court of
Manila, guilty of serious misconduct in an administrative complaint lodged by
Nena Tordesillas. SC ordered Basco dismissed from service with forfeiture of all
retirement benefits and with prejudice to reinstatement to any position in the
national or loca government, including its agencies and instrumentalities, or
GOCCs ("Tordesillas ruling").
Subsequently, Basco ran for and won as Councilor in the Second District of the
City of Manila during the 1988 local elections.
He sought reelection in the 1992 election and won again.
However, a case for quo warranto was filed by Cenon Ronquillo (another
candidate for councilor), who alleged Basco's ineligibility to be elected councilor
on the basis of the Tordesillas ruling. Other complaints were filed before the
Office of the Ombudsman and in the DILG.
In 1995, Basco ran for the third time as councilor.
William Grego, claiming to be a registered voter of District II, City of Manila, filed
with the COMELEC a petition for disqualification, praying for Basco's
disqualification, suspension of his proclamation, and declaration of Romualdo S.
Maranan as the sixth duly elected Councilor of Manila's Second District. T
Manila BOC however proclaimed Basco as a duly elected councilor of the
Second District of Manila.
In view of the proclamation, Grego filed an urgent motion seeking to annul the
illegal proclamation.
The COMELEC dismissed the petition for disqualification ruling that the
administrative penalty imposed by the SC on Basco was wiped away and
condoned by the electorate who elected him.
Issue 1: WON Section 40 (b)1 of Republic Act No. 7160 applies retroactively to those
removed from office before it took effect on January 1, 1992.
Petitioner:
Although the Code took effect only on January 1, 1992, Section 40 (b) must
nonetheless be given retroactive effect because the provision of the law as
worded does not mention or even qualify the date of removal from office of the
candidate in order for disqualification thereunder to attach.
Hence, as long as a candidate was once removed from office due to an
administrative case, regardless of whether it took place during or prior to the
effectivity of the Code, the disqualification applies.
Since the past tense is used in enumerating the grounds for disqualification, the
provision must have also referred to removal from office occurring prior to the
effectivity of the Code
Held: NO. While the Legislature has the power to pass retroactive laws which do
not impair the obligation of contracts, or affect injuriously vested rights, it is equally
true that statutes are not to be construed as intended to have a retroactive effect so
as to affect pending proceedings, unless such intent is expressly declared or clearly
and necessarily implied from the language of the enactment. There is no provision in
the statute which would clearly indicate that the same operates retroactively.2 That the
provision of the Code in question does not qualify the date of a candidates removal
from office and that it is couched in the past tense are noy deterrents to applying the
law prospectively. The basic tenet in legal hermeneutics that laws operate only
prospectively and not retroactively. A statute, despite the generality in its language,
must not be so construed as to overreach acts, events or matters which transpired
before its passage. Lex prospicit, non respicit. The law looks forward, not backward
Issue 2: WON private respondent's election to office as City Councilor of Manila in
the 1988, 1992 and 1995 elections wipe away and condone the administrative penalty
against him, thus restoring his eligibility for public office.
Petitioner: According to Frivaldo v. COMELEC, a candidates disqualification cannot
be erased by the electorate alone through the instrumentality of the ballot.
Held: ISSUE IS IRRELEVANT. Petitioner's argument proceeds on the assumption
that he was in the first place disqualified when he ran in the three previous elections.
This assumption, of course, is untenable considering that Basco was NOT subject to
any disqualification at all under Section 40 (b) of the Local Government Code which,
as said earlier, applies only to those removed from office on or after January 1, 1992.
Petitioners' allegations that (1) Basco circumvented the Tordesillas ruling and that (2)
the term "any position" therein is broad enough to cover without distinction both
appointive and local positions merit any consideration are unmeritorious. Contrary to
petitioner's assertion, the Tordesillas decision did not bar Basco from running for any
elective position. The term used was "reinstatement." Under the former Civil Service
Decree (PD 807), the law applicable at the time Basco was administratively
1 SEC. 40, LGC. Disqualifications. - The following persons are disqualified from running for any elective local position: xxx (b)
Those removed from office as a result of an administrative case; xxx
2 Aguinaldo v COMELEC, reiterated in Reyes v COMELEC and Salalima v COMELEC.
dismissed, the term "reinstatement" had a technical meaning, referring only to an this case. Petitioner's allegation that Basco was well-known to have been disqualified
appointive position. Thus, what is contemplated by the prohibition in Tordesillas is in the small community where he ran as a candidate is purely speculative and
reinstatement to an appointive position. conjectural.

Issue 3: Is Basco's proclamation as sixth winning candidate on May 17, 1995, while
the disqualification case was still pending consideration by COMELEC void ab initio?

Petitioner: Basco violated the provisions of Section 20, paragraph (i) of Republic Act
No. 71663, Section 6 of Republic Act No. 6646 4, as well as the rulings in Duremdes v.
COMELEC, Benito v. COMELECand Aguam v. COMELEC.

Held: NO. RA 7166 Section 20(i) does not apply considering that the same refers
only to a void proclamation in relation to contested returns and NOT to contested
qualifications of a candidate.

On the other hand, RA 6646 Section 6 does not support petitioner's contention that
the Manila City BOC, should have suspended the proclamation. The use of the word
"may" indicates that the suspension of a proclamation is merely directory and
permissive in nature and operates to confer discretion. What is merely made
mandatory, according to the provision itself, is the continuation of the trial and hearing
of the action, inquiry or protest. Moreover, there is no reason why the Manila City
BOC should not have proclaimed Basco as the sixth winning City Councilor. Absent
any determination of irregularity in the election returns, as well as an order enjoining
the canvassing and proclamation of the winner, it is a mandatory and ministerial duty
of the Board of Canvassers concerned to count the votes based on such returns and
declare the result.

Finally, the cases of Duremdes, Benito and Aguam cited by petitioner are all irrelevant
and inapplicable, These three cases do not in any manner refer to void proclamations
resulting from the mere pendency of a disqualification case.

Issue 4: WON Romualdo S. Maranan, a seventh placer, be legally declared a

winning candidate

Held: NO. Basco was a duly qualified candidate. Petitioner's emphatic reference to
Labo v. COMELEC, where we laid down a possible exception to the rule that a
second placer may not be declared the winning candidate, finds no application in this
case. The exception is predicated on the concurrence of two assumptions, namely:
(1) the one who obtained the highest number of votes is disqualified; and (2) the
electorate is fully aware in fact and in law of a candidate's disqualification so as to
bring such awareness within the realm of notoriety but would nonetheless cast their
votes in favor of the ineligible candidate. Both assumptions, however, are absent in

3 Section 20, paragraph (i) of Rep. Act 7166: The board of canvassers shall not proclaim any candidate as winner unless
authorized by the Commission after the latter has ruled on the objections brought to it on appeal by the losing party. Any
proclamation made in violation hereof shall be void ab initio, unless the contested returns will not adversely affect the results of
the election.

4 Section 6 of RA 6646: Any candidate who has been declared by final judgment to be disqualified shall not be voted for, and
the votes cast for him shall not be counted. If for any reason, a candidate is not declared by final judgment before an election to
be disqualified and he is voted for and receives the winning number of votes in such election, the Court or Commission shall
continue with the trial and hearing of the action, inquiry or protest and, upon motion of the complainant or any intervenor, may
during the pendency thereof order the suspension of the proclamation of such candidate whenever the evidence of his guilt is
strong.

FORT BONIFACIO DEVELOPMENT CORPORATION (Corp.) v. COMMISSIONER
OF INTERNAL REVENUE (CIR), REGIONAL DIRECTOR, REVENUE REGION NO.
8, and CHIEF, ASSESSMENT DIVISION, REVENUE REGION NO. 8, BIR
& value-added-tax on sale of real properties. The amendment basically states that a
FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF
INTERNAL REVENUE, REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO.
44, TAGUIG and PATEROS, BUREAU OF INTERNAL REVENUE.
G.R. No. 158885 & G.R. No. 170680, 10-2-2009, EN BANC
ONE LINE: Administrative rule or regulation cannot contravene the law on
which it is based. (Sec. 4.105-1 of RR 7-95 is an administrative rule and regulation
implementing an existing law Term used in Tanada v Tuvera)
NATURE: Motion for Reconsideration of SCs Decision dated April 2, 2009 which
granted the consolidated petitions of petitioner Fort Bonifacio Development
Corporation (Corp.) where the C CIR was (1) restrained from collecting from the Corp.
the amount of P28,413,783.00 representing the transitional input tax credit due it for
the fourth quarter of 1996; and (2) directed to refund to the Corp. the amount of
P347,741,695.74 paid as output VAT for the third quarter of 1997 in light of the
persisting transitional input tax credit available to the Corp. for the said quarter, or to
issue a tax credit corresponding to such amount.
FACTS: In the April 2, 2009 Decision, which is what CIR wants to be reconsidered in
this case, the Court struck down Section 4.105-1 of RR 7-95 for being in conflict with
the law. It held that the CIR had no power to limit the meaning and coverage of the
term "goods" in Section 105 of the Old NIRC sans statutory authority or basis and
justification to make such limitation. This it did when it restricted the application of
Section 105 in the case of real estate dealers only to improvements on the real
property belonging to their beginning inventory.
ISSUES: 1. WON CIR Revenue Regulations 7-95 validly repealed Section 105 as
amended by EO 273.
2. WON CIR Revenue Regulations # 6-97 repealed CIR Revenue
Regulations # 7-95
HELD: 1. NO, admin rule and reg less than statutes 2. YES, no repealing cause does
not mean a lack of intent to repeal.
1. + EO No. 273 [1987] contains first VAT law. It amended several
provisions of the Internal Revenue Code of 1986 (Old NIRC). In anticipation of the
probable burdens of the shift to the VAT system it allowed newly VAT-registered
persons to avail of a transitional input tax credit as provided for in Section 105 of
the Old NIRC. Section 105 as amended by EO 273.
Sec. 105. Transitional Input Tax Credits. A person who becomes liable to
value-added tax or any person who elects to be a VAT-registered person
shall, subject to the filing of an inventory as prescribed by regulations, be
allowed input tax on his beginning inventory of goods, materials and supplies
equivalent to 8% of the value of such inventory or the actual value-added tax
paid on such goods, materials and supplies, whichever is higher, which shall
be creditable against the output tax.
+ RA 7716 [1996] - amended Sec. 100 of Old NIRC by imposing for the first time
10% VAT shall be imposed upon goods or properties among others. It clarified that
the term goods and properties shall mean all tangible and intangible objects which
are capable of pecuniary estimation and shall include: (A) Real properties held
primarily for sale to customers or held for lease in the ordinary course of trade or
business; xxx
However, RA 7716 did not amend the provisions of SEC 105 of the Old
NIRC, regarding transitional input tax credit.
+ RA 8424 (1997) - National Internal Revenue Code of 1997 (New NIRC) however
amended Sec. 105 specifically by Sec. 111(A) of the New NIRC The provisions on the
transitional input tax credit are now embodied in Section 111(A) of the New NIRC,
which reads:
Section 111. Transitional/Presumptive Input Tax Credits. (A) Transitional
Input Tax Credits. - A person who becomes liable to value-added tax or any
person who elects to be a VAT-registered person shall, subject to the filing of
an inventory according to rules and regulations prescribed by the Secretary
of finance, upon recommendation of the Commissioner, be allowed input tax
on his beginning inventory of goods, materials and supplies equivalent for
8% of the value of such inventory or the actual value-added tax paid on such
goods, materials and supplies, whichever is higher, which shall be creditable
against the output tax. [Emphasis SCs.]
Rule on statutory construction sections of the law cannot be interpreted apart
from each other. All of it must be considered in fixing the meaning of any of its parts in
order to produce a harmonious whole.
Rule applied - statutory definition of the term "goods or properties" leaves no room
for doubt. Sec. 100. Value-added tax on sale of goods or properties. (a) Rate and
base of tax. xxx. (1) The term goods or properties shall mean all tangible and
intangible objects which are capable of pecuniary estimation and shall include: (A)
Real properties held primarily for sale to customers or held for lease in the ordinary
course of trade or business; xxx.
Sec 100 of the Old NIRC defined the term "goods or properties" by the
unambiguous terms "real properties held primarily for sale to costumers or
held for lease in the ordinary course of business." The term "goods" as used in
Section 105 of the same code could not have a different meaning. This has been
explained in the prior Decision.
ADMINISTRATIVE RULE IN ISSUE: RR No. 7-95 is an Administrative Rule and
Regulation based upon the existing statutes Old and New NIRC. Section 4.100-1 of
which made by the BIR which includes in its enumeration of "goods or properties"
such "real properties held primarily for sale to customers or held for lease in the
ordinary course of trade or business." Said definition was taken from the very
statutory language of Section 100 of the Old NIRC.
Section 4.105-1 of RR no. 7-95 however limited this definition to
"improvements" - BIR thus not only contravened the definition of "goods" as
provided in the Old NIRC, but also the definition which the same revenue
regulation itself has provided.
2. On January 1, 1997, RR 6-97 was issued by the Commissioner of Internal
Revenue. RR 6-97 was basically a reiteration of the same Section 4.105-1 of RR 7-
95, except that the RR 6-97 deleted the following paragraph.
However, in the case of real estate dealers, the basis of the presumptive
input tax shall be the improvements, such as buildings, roads, drainage
systems, and other similar structures, constructed on or after the effectivity
of E.O. 273 (January 1, 1988).
It is clear, therefore, that under RR 6-97, the allowable transitional input tax
credit is not limited to improvements on real properties. The particular provision of RR
7-95 has effectively been repealed by RR 6-97 which is now in consonance with
Section 100 of the NIRC, insofar as the definition of real properties as goods is
concerned.
The failure to add a specific repealing clause would not necessarily
indicate that there was no intent to repeal RR 7-95. The fact that the
aforequoted paragraph was deleted created an irreconcilable inconsistency and
repugnancy between the provisions of RR 6-97 and RR 7-95.

Section 4.105-1 of RR 7-95 restricted the definition of "goods", viz:

However, in the case of real estate dealers, the basis of the presumptive
input tax shall be the improvements, such as buildings, roads, drainage
systems, and other similar structures, constructed on or after the effectivity
of EO 273 (January 1, 1988).

Par 3, Art. 7 of NCC, states that an administrative rule or regulation

cannot contravene the law on which it is based. RR 7-95 is inconsistent with
Section 105 insofar as the definition of the term "goods" is concerned.

This is already a legislative act that is beyond the authority of the CIR and
the Secretary of Finance more so when the law which the administrative rule is
contravening is also the law which it is based upon. Admin rules should not be in
contradiction to, but in conformity with, the standards prescribed by law.

RULE: In order to be valid, an administrative rule or regulation must conform, not

contradict, the provisions of the enabling law. An implementing rule or regulation
cannot modify, expand, or subtract from the law it is intended to implement. Any rule
that is not consistent with the statute itself is null and void.

Thus, RR 7-95, insofar as it restricts the definition of "goods" as basis of

transitional input tax credit under Section 105 is a nullity.

Fort Bonifacio v CIR
Facts:
- The Commissioner of Internal Revenue (CIR) disallowed Fort Bonifacio
Development Corporations (FBDC) presumptive input tax credit arising from
the land inventory on the basis of Revenue Regulation 7-95 (RR 7-95) and
Revenue Memorandum Circular 3-96 (RMC 3-96). Specifically, Section
4.105-1 of RR 7-95:
o Sec. 4.105-1. Transitional input tax on beginning inventories.
Taxpayers who became VAT-registered persons upon effectivity of
RA No. 7716 who have exceeded the minimum turnover of
P500,000.00 or who voluntarily register even if their turnover does
not exceed P500,000.00 shall be entitled to a presumptive input tax
on the inventory on hand as of December 31, 1995 on the
following: (a) goods purchased for resale in their present
condition; (b) materials purchased for further processing, but
which have not yet undergone processing; (c) goods which
have been manufactured by the taxpayer; (d) goods in process
and supplies, all of which are for sale or for use in the course
of the taxpayers trade or business as a VAT-registered person.
- According to sec 105 The transitional input tax shall be 8% of the value of
the inventory or actual VAT paid, whichever is higher, which amount may be
allowed as tax credit against the output tax of the VAT-registered person.
- However, in the April 2, 2009 Decision sought to be reconsidered, the Court
struck down Section 4.105-1 of RR 7-95 for being in conflict with the law. It
held that the CIR had no power to limit the meaning and coverage of the
term "goods" in Section 105 of the Old NIRC sans statutory authority or
basis and justification to make such limitation. This it did when it restricted
the application of Section 105 in the case of real estate dealers only to
improvements on the real property belonging to their beginning inventory.
o Sec. 105. Transitional Input tax Credits. A person who becomes
liable to value-added tax or any person who elects to be a VAT-
registered person shall, subject to the filing of an inventory as
prescribed by regulations, be allowed input tax on his beginning
inventory of goods, materials and supplies equivalent to 8% of
the value of such inventory or the actual value-added tax paid
on such goods, materials and supplies, whichever is higher,
which shall be creditable against the output tax.
- The term "goods or properties" by the unambiguous terms of Section 100
includes "real properties held primarily for sale to costumers or held for lease
in the ordinary course of business." Having been defined in Section 100 of
the NIRC, the term "goods" as used in Section 105 of the same code could
not have a different meaning.
Issues:
- Whether or not a Revenue Regulation may contravene the provisions of the
NIRC on the description or definition of the term goods?
Ruling:
- The rules and regulations that administrative agencies promulgate, which
are the product of a delegated legislative power to create new and additional
legal provisions that have the effect of law, should be within the scope of the
statutory authority granted by the legislature to the objects and purposes of
the law, and should not be in contradiction to, but in conformity with, the
standards prescribed by law.
- To be valid, an administrative rule or regulation must conform, not contradict,
the provisions of the enabling law. An implementing rule or regulation cannot
modify, expand, or subtract from the law it is intended to implement. Any rule
that is not consistent with the statute itself is null and void.
- While administrative agencies, such as the Bureau of Internal Revenue, may
issue regulations to implement statutes, they are without authority to limit the
 scope of the statute to less than what it provides, or extend or expand the
statute beyond its terms, or in any way modify explicit provisions of the law.
- Indeed, a quasi-judicial body or an administrative agency for that matter
cannot amend an act of Congress. Hence, in case of a discrepancy between
the basic law and an interpretative or administrative ruling, the basic law
prevails.
- To recapitulate, RR 7-95, insofar as it restricts the definition of "goods" as
basis of transitional input tax credit under Section 105 is a nullity.
G.R. No. L-32166 October 18, 1977
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant,
vs.
HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA,
GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO DEL
ROSARIO, accused-appellees.
AQUINO, J.:
Facts:
Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and Carlito
del Rosario were charged with having violated Fisheries Administrative Order No. 84-
1.
It alleged that the five accused resorted to electro fishing in the waters of Barrio San
Pablo Norte, Sta. Cruz by using their own motor banca, equipped with motor and
electrocuting device locally known as sensored with a somewhat webbed copper wire
on the tip or other end of a bamboo pole with electric wire attachment which was
attached to the dynamo direct and with the use of these devices or equipments
catches fish thru electric current, which destroy any aquatic animals within its cuffed
reach, to the detriment and prejudice of the populace.
Sec. 11 of the Fisheries Law prohibits "the use of any obnoxious or poisonous
substance" in fishing.
Section 76 of the same law punishes any person who uses an obnoxious or
poisonous substance in fishing with a fine of not more than five hundred pesos nor
more than five thousand, and by imprisonment for not less than six months or more
than five years.
It is noteworthy that the Fisheries Law does not expressly punish electro fishing.
Notwithstanding the silence of the law, the Secretary of Agriculture and Natural
Resources, upon the recommendation of the Commissioner of Fisheries, promulgated
Fisheries Administrative Order No. 84 (62 O.G. 1224), prohibiting electro fishing in all
Philippine waters
On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the
recommendation of the Fisheries Commission, issued Fisheries Administrative Order
No. 84-1, amending section 2 of Administrative Order No. 84, by restricting the ban
against electro fishing to fresh water fisheries (63 O.G. 9963).
Thus, the phrase "in any portion of the Philippine waters" found in section 2, was
changed by the amendatory order to read as follows: "in fresh water fisheries in the
Philippines, such as rivers, lakes, swamps, dams, irrigation canals and other bodies
of fresh water."
Issue: Whether or not Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries exceeded their authority in issuing Fisheries
Administrative Orders Nos. 84 and 84-1
Held:
Yes. They exceeded their authority.
The rule-making power confined to details for regulating the mode or proceeding to
carry into effect the law as it has been enacted. The power cannot be extended to
amending or expanding the statutory requirements or to embrace matters not covered
by the statute
The Fisheries Law does not expressly prohibit electro fishing .As electro fishing is not
banned under that law. Hence, the Secretary of Agriculture and Natural Resources
and the Commissioner of Fisheries are powerless to penalize it. Had the lawmaking
body intended to punish electro fishing, a penal provision to that effect could have
been easily embodied in the old Fisheries Law. Nowhere in the said law is electro
fishing specifically punished. Administrative agents are clothed with rule-making
powers because the lawmaking body finds it impracticable, if not impossible, to
anticipate and provide for the multifarious and complex situations that may be
encountered in enforcing the law. All that is required is that the regulation should be
germane to the defects and purposes of the law and that it should conform to the
standards that the law prescribes.
PEOPLE vs. MACEREN
79 SCRA 450, G.R. No. L-32166, October 18, 1977
Facts:
The respondents were charged with violating Fisheries Administrative Order No. 84-1
which penalizes electro fishing in fresh water fisheries. This was promulgated by the
Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries
under the old Fisheries Law and the law creating the Fisheries Commission. The
municipal court quashed the complaint and held that the law does not clearly prohibit
electro fishing, hence the executive and judicial departments cannot consider the
same. On appeal, the CFI affirmed the dismissal. Hence, this appeal to the SC.
Issue:
Whether or not the administrative order penalizing electro fishing is valid.
Held:
NO. The Secretary of Agriculture and Natural Resources and the Commissioner of
Fisheries exceeded their authority in issuing the administrative order. The
old Fisheries Law does not expressly prohibit electro fishing. As electro fishing is
not banned under that law, the Secretary of Agriculture and Natural Resources and
the Commissioner of Fisheries are powerless to penalize it. Had the lawmaking body
intended to punish electro fishing, a penal provision to that effect could have been
easily embodied in the old Fisheries Law. The lawmaking body cannot delegate to an
executive official the power to declare what acts should constitute an offense. It can
authorize the issuance of regulations and the imposition of the penalty provided for in
the law itself. Where the legislature has delegated to executive or administrative
officers and boards authority to promulgate rules to carry out an express legislative
purpose, the rules of administrative officers and boards, which have the effect of
extending, or which conflict with the authority granting statute, do not represent a
valid precise of the rule-making power but constitute an attempt by an administrative
body to legislate
Administrative agent are clothed with rule-making powers because the lawmaking
body finds it impracticable, if not impossible, to anticipate and provide for the
multifarious and complex situations that may be encountered in enforcing the law. All
that is required is that the regulation should be germane to the defects and purposes
of the law and that it should conform to the standards that the law prescribes.
Administrative regulations adopted under legislative authority by a particular
department must be in harmony with the provisions of the law, and should be for the
sole purpose of carrying into effect its general provisions. By such regulations, of
course, the law itself cannot be extended.
The rule-making power must be confined to details for regulating the mode or
proceeding to carry into effect the law as it has been enacted. The power cannot be
extended to amending or expanding the statutory requirements or to embrace matters
not covered by the statute. Rules that subvert the statute cannot be sanctioned.