G.R. No.

160367

December 18, 2009

EVELYN S. CABUNGCAL, ELVIRA J. CANLAS, MARIANITA A. BULANAN, REMEDIOS S. DE JESUS, and NUNILON J. MABINI, Petitioners, vs. SONIA R. LORENZO, in her capacity as Municipal Mayor of San Isidro, Nueva Ecija, CECILIO DE GUZMAN, Vice Mayor, CESARIO LOPEZ, JR., EMILIO PACSON, BONIFACIO CACERES, JR., NAPOLEON OCAMPO, MARIO CRUZ, PRISCILA REYES, ROLANDO ESQUIVEL, and CRISENCIANO CABLAO in their capacity as members of the Sangguniang Bayan of San Isidro, Nueva Ecija, and EDUARDO N. JOSON IV, Vice Governor, BELLA AURORA A. DULAY, BENJAMIN V. MORALES, CHRISTOPHER L. VILLAREAL, JOSE T. DEL MUNDO, SOLITA C. SANTOS, RENATO C. TOMAS, JOSE BERNARDO V. YANGO, IRENEO S. DE LEON, NATHANIEL B. BOTE, RUDY J. DE LEON, RODOLFO M. LOPEZ, MA. LOURDES C. LAHOM, and JOSE FRANCIS STEVEN M. DIZON, in their capacity as members of the Sangguniang Panlalawigan of the Province of Nueva Ecija, Respondents. DECISION DEL CASTILLO, J.: As a rule, judicial intervention is allowed only after exhaustion of administrative remedies. This principle goes hand-in-hand with the doctrine of primary jurisdiction, which precludes courts from resolving, in the first instance, controversies falling under the jurisdiction of administrative agencies. Courts recognize that administrative agencies are better equipped to settle factual issues within their specific field of expertise because of their special skills and technical knowledge. For this reason, a premature invocation of the courts judicial power is often struck down, unless it can be shown that the case falls under any of the applicable exceptions. Assailed in this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court are the March 20, 2003 Decision2 of the Court of Appeals (CA) dismissing petitioners petition for lack of merit and its October 6, 2003 Resolution3 denying the motion for reconsideration. Factual Antecedents On July 9, 2001, the Sangguniang Bayan of San Isidro, Nueva Ecija, issued Resolution No. 27 s. 20014 declaring the reorganization of all offices of the municipal government. On July 23, 2001, the Resolution was approved by the Sangguniang Panlalawigan via Resolution No. 154 s. 2001.5 Thereafter, on November 12, 2001, the Sangguniang Bayan passed Resolution No. 80 s. 2001,6 approving and adopting the proposed new staffing pattern of the municipal government. On November 26, 2001, theSangguniang Panlalawigan approved the same through Resolution No. 299 s. 2001.7 On December 21, 2001, the Municipal Mayor of San Isidro, Nueva Ecija, herein respondent Sonia R. Lorenzo, issued a memorandum8 informing all employees of the municipal government that, pursuant to the reorganization, all positions were deemed vacant and that all employees must file their respective applications for the newly created positions listed in the approved staffing pattern on or before January 10, 2002. Otherwise, they would not be considered for any of the newly created positions. Proceedings before the Court of Appeals Instead of submitting their respective applications, petitioners, on January 17, 2002, filed with the CA a Petition for Prohibition and Mandamus with application for issuance of Writ of Preliminary Injunction and Restraining Order.9They alleged that they were permanent employees of the Rural Health Unit of the Municipality of San Isidro, Nueva Ecija, with the corresponding salary grade and date of employment:10 Name Position Salary Grade 16 Date of employment

Evelyn S. Cabungcal

Dentist II

April 4, 1983

Elvira J. Canlas Marianita A. Bulanan Remedios S. De Jesus Nunilon J. Mabini

Nurse III Midwife III Dental Aide Sanitation Inspector I

16 11 4 6

December 19, 1978 May 21, 1981 June 6, 1989 January 2, 1990

Respondents Sonia R. Lorenzo, Cecilio De Guzman, Cesario Lopez, Jr., Emilio Pacson, Bonifacio Caceres, Jr., Napoleon Ocampo, Mario Cruz, Priscila Reyes, Rolando Esquivel, and Crisenciano Cablao were sued in their capacity as Mayor, as Vice Mayor, and as members of the Sangguniang Bayan respectively, of San Isidro, Nueva Ecija. On the other hand, respondents Eduardo N. Joson IV, Bella Aurora A. Dulay, Benjamin V. Morales, Christopher L. Villareal, Jose T. Del Mundo, Solita C. Santos, Renato C. Tomas, Jose Bernardo V. Yango, Ireneo S. De Leon, Nathaniel B. Bote, Rudy J. De Leon, Rodolfo M. Lopez, Ma. Lourdes C. Lahom, and Jose Francis Steven M. Dizon were sued in their capacity as Vice Governor and as members of the Sangguniang Panlalawigan,respectively. Petitioners sought to prohibit respondents from implementing the reorganization of the municipal government of San Isidro, Nueva Ecija, under Resolution Nos. 27 and 80 s. 2001 of the Sangguniang Bayan. They likewise prayed for the nullification of said Resolutions. While the case was pending, respondent Mayor Sonia R. Lorenzo issued a letter terminating the services of those who did not re-apply as well as those who were not selected for the new positions effective April 21, 2002.11 On March 20, 2003, the CA rendered a Decision dismissing the petition for lack of merit. It ruled: Going through the arguments of the parties, we find respondents contentions to be more in line with existing laws and jurisprudence. It cannot be denied that indeed, petitioners severance from employment is a sad tale to tell; however, petitioners allegation of grave abuse of discretion on the part of public respondents particularly Mayor Lorenzo, can hardly be justified. The assailed acts of respondents are clearly authorized under Section 76 of the Local Government Code of 1991 as quoted above. xxxx Culled from the records of the case, the reorganization of the municipal government of San Isidro yielded an organization structure suitable for a 4th class municipality, which created savings in an estimated amount of more or less Four Million pesos (P4,000,000.00), which can be used for implementation of other local projects for delivery of basic services and additional benefits for its employees. As shown by the respondents, the original plantilla x x x of one hundred and thirty one (131) [positions] has been trimmed down to eighty-eight (88) [positions] under the new staffing pattern. Thus, We find plausible the [claim] of respondents about budgetary [savings], comparing the old with new staffing pattern, in that: Prior to the reorganization, this LGU had a budget appropriation of P18,322,933.00 for personal services [including enterprise workers] leaving a measly sum of [sic] P4,127,703.00 as revolving fund for the whole year. With the advent of the new staffing pattern, more tha[n] P7,000,000.00 can be channeled by this LGU for its plans and programs. Under Section 325 of the Local Government Code, LGUs are limited by law to appropriate only forty five percent [45%] in case of first to third class LGUs or fifty five percent [55%] in case of fourth to fifth class municipalities of their annual income for personal services. The LGU of San Isidro being a fourth class municipality has certainly exceeded the 55% appropriation limit under the Local Government Code because for the year 2000 alone, [P16,787,961.00, or roughly 78% of its annual income of P22,450,636.00, have already been allocated to personal services. That certainly is] way above the ceiling allowed by Section 325 of the Local Government Code. xxxx

Verily, there was no bad faith on the part of respondents when they chose to follow the recommendations of the management committee, [to create] a new staffing pattern [thereby generating savings] to provide more basic services [and] livelihood projects x x x. xxxx Valid reasons had been shown by respondents which support the reorganization of the municipal government of San Isidro. No personal or political motives having been shown to be involved in this strongly assailed reorganization of the Municipality of San Isidro, petitioners, therefore, had miserably failed to show and prove to this Court that respondents violated R.A. No. 7305 (Magna Carta of Health Workers).
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We must point out that good faith is presumed. It is incumbent upon the petitioners to prove that the reorganization being implemented in the Municipality of San Isidro is tainted with bad faith. Absent any showing that respondents acted with grave abuse of discretion amounting to lack or excess of jurisdiction in the passage and implementation of Resolution Nos. 27 and 80, this petition must fail.
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Finally, respondents were correct when they stated that the extraordinary writ of mandamus is not applicable in this case because the act being sought by petitioners to be done is discretionary and not a ministerial duty. In other words, mandamus lies only to compel the performance, x x x of a ministerial duty, but not to compel the performance of a discretionary duty. Since grave abuse of discretion is not evident in this case, the exceptional remedy of mandamus is unavailable. x x x WHEREFORE, in view of all the foregoing and finding that the assailed Resolution No. 27 dated July 9, 2001 and Resolution No. 80 dated November 12, 2001 were not issued by respondents with grave abuse of discretion amounting to lack or excess of jurisdiction, the instant appeal [sic] is DENIED DUE COURSE and, accordingly, DISMISSED for lack of merit. The validity of the assailed resolutions, being in accordance with law and jurisprudence, is UPHELD. SO ORDERED.12 Petitioners moved for a reconsideration13 which was denied by the CA in its October 6, 2003 Resolution. Hence, petitioners availed of this recourse. Petitioners Arguments Petitioners contend that the March 20, 2003 Decision and October 6, 2003 Resolution of the CA were not in accordance with Republic Act (RA) No. 6656, otherwise known as "An Act to Protect the Security of Tenure of Civil Service Officers and Employees in the Implementation of Government Reorganization", specifically Section 214thereof and RA 7305, otherwise known as the "Magna Carta of Health Workers". Respondents Argument Respondents, for their part, argue that petitioners separation from service was a result of a valid reorganization done in accordance with law and in good faith. Both parties filed their memoranda.15 Thereafter, in a Resolution16 dated August 6, 2008, we required the parties to submit supplemental memoranda discussing therein their respective positions on the issue of jurisdiction. Issues 1) Whether petitioners automatic resort to the Court of Appeals is proper. 2) Whether the case falls under the exceptions to the rule on exhaustion of administrative remedies. Our Ruling Petitioners recourse should have been with the Civil Service Commission and not with the Court of Appeals Section 2 (1) and Section 3, Article IX-B of the Constitution provide 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. Corollary thereto, Section 4 of CSC Memorandum Circular No. 19-99, states that: 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. (Emphasis supplied) Pursuant to the foregoing provisions, 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.17 In this case, petitioners are former local government employees whose services were terminated due to the reorganization of the municipal government under Resolution Nos. 27 and 80 of the Sangguniang Bayan of San Isidro, Nueva Ecija. Considering that they belong to the civil service, the CSC has jurisdiction over their separation from office. Even the laws upon which petitioners anchor their claim vest jurisdiction upon the CSC. Under RA 6656 and RA 7305, which were cited by the petitioners in their petition, it is the CSC which determines whether an employees dismissal or separation from office was carried out in violation of the law or without due process. Accordingly, it is also the CSC which has the power to reinstate or reappoint an unlawfully dismissed or terminated employee. Quoted hereunder are Section 9 of RA 6656 and Section 8 of RA 7305: SECTION 9. All officers and employees who are found by the Civil Service Commission to have been separated in violation of the provisions of this Act, shall be ordered reinstated or reappointed as the case may be without loss of seniority and shall be entitled to full pay for the period of separation. Unless also separated for cause, all officers and employees, who have been separated pursuant to reorganization shall, if entitled thereto, be paid the appropriate separation pay and retirement and other benefits under existing laws within ninety (90) days from the date of the effectivity of their separation or from the date of the receipt of the resolution of their appeals as the case may be: Provided, That application for clearance has been filed and no action thereon has been made by the corresponding department or agency. Those who are not entitled to said benefits shall be paid a separation gratuity in the amount equivalent to one (1) month salary for every year of service. Such separation pay and retirement benefits shall have priority of payment out of the savings of the department or agency concerned. (Emphasis supplied) xxxx SECTION 8. Security of Tenure. In case of regular employment of public health workers, their services shall not be terminated except for cause provided by law and after due process: Provided, That if a public health worker is found by the Civil Service Commission to be unjustly dismissed from work, he/she shall be entitled to reinstatement without loss of seniority rights and to his/her back wages with twelve percent (12%) interest computed from the time his/her compensation was withheld from him/her up to the time of reinstatement. (Emphasis supplied) All told, we hold that it is the CSC which has jurisdiction over appeals from personnel actions taken by respondents against petitioners as a result of reorganization. Consequently, petitioners resort to the CA was premature. The jurisdiction lies with the CSC and not with the appellate court. The case does not fall under any of the exceptions to the rule on exhaustion of administrative remedies

The rule on exhaustion of administrative remedies provides that a party must exhaust all administrative remedies to give the administrative agency an opportunity to decide the matter and to prevent unnecessary and premature resort to the courts.18 This, however, is not an ironclad rule as it admits of exceptions,19 viz: 1. when there is a violation of due process; 2. when the issue involved is purely a legal question; 3. when the administrative action is patently illegal amounting to lack or excess of jurisdiction; 4. when there is estoppel on the part of the administrative agency concerned; 5. when there is irreparable injury; 6. when the respondent is a department secretary whose acts as an alter ego of the President bears the implied and assumed approval of the latter; 7. when to require exhaustion of administrative remedies would be unreasonable; 8. when it would amount to a nullification of a claim; 9. when the subject matter is a private land in land case proceedings; 10. when the rule does not provide a plain, speedy and adequate remedy; and 11. when there are circumstances indicating the urgency of judicial intervention. The instant case does not fall under any of the exceptions. Petitioners filing of a petition for mandamus and prohibition with the CA was premature. It bears stressing that the remedies of mandamus and prohibition may be availed of only when there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law.20 Moreover, being extraordinary remedies, resort may be had only in cases of extreme necessity where the ordinary forms of procedure are powerless to afford relief.21 Thus, instead of immediately filing a petition with the CA, petitioners should have first brought the matter to the CSC which has primary jurisdiction over the case.22 Thus, we find that the CA correctly dismissed the petition but not the grounds cited in support thereof. The CA should have dismissed the petition for nonexhaustion of administrative remedies.23 Considering our above findings, we find no cogent reason to resolve the other issues raised by the petitioners in their petition. WHEREFORE, the instant petition is DENIED. The March 20, 2003 Decision of the Court of Appeals dismissing the petition and its October 6, 2003 Resolution denying the motion for reconsideration are AFFIRMED but on the ground that petitioners failed to exhaust the administrative remedies available to them. SO ORDERED. G.R. No. L-46585 February 8, 1988 DR. ANGELA V. GINSON, petitioner, vs. MUNICIPALITY OF MURCIA AND MUNICIPAL MAYOR OF MURCIA AND HONORABLE COURT OF APPEALS,respondents. SARMIENTO, J.: Before us is the recurring issue of dismissal of a government employee and challenges presented against its validity. The facts, as found by the trial court, 1 are as follows: On February 16, 1968, or 44 days after defendant Mayor Baldomero de la Rama assumed office as the Municipal Mayor of Murcia, Negros Occidental, he wrote a letter to plaintiff terminating her services as Municipal Dentist of Murcia, Negros Occidental effective

February 18, 1968. (Exh. "B"). Said letter was received by the plaintiff on February 16, 1968. Said letter reads as follows: Please be informed that effective February 16, 1968, your service is hereby terminated, due to lack of funds. (SGD.) BALDOMERO DE LA RAMA Municipal Mayor
Plaintiff, prior and up to the time she was dismissed, had been continuously, faithfully and efficiently performing her duties as Municipal Dentist of the Municipality of Murcia since August 1, 1964, and was receiving a salary of P200.00 per month. On the very day she was discharged, plaintiff immediately went to the defendant Municipal Mayor Baldomero de la Rama and pleaded that she be reinstated to the service on the ground that her tenure of office is covered by Civil Service Law and that she cannot be removed or suspended except for cause, but defendant de la Rama blatantly refused to reinstate her. Instead she was told and challenged to go to Court and to file a case against him and the Municipality. 2

The trial court held for the petitioner and directed the private respondents to reinstate her in office and to pay back salaries and attorney's fees. On appeal, the respondent Court 3 found that the respondent municipality's financial condition arising from an alleged overdraft incurred during the year, warranted the dismissal, held the same to be justified, and rendered a reversal. The issue that confronts us, then, is one of fact: Whether or not the respondent municipality's state of finances justifies the challenged dismissal. The general rule is that the findings of fact of the Court of Appeals are controlling on this Court. 4 The rule is, however, subject to recognized exceptions, viz: (1) when the findings of the Court of appeals are grounded entirely on speculation, surmise, and conjecture; (2) the inference made is manifestly mistaken; (3) the Court of Appeals committed a grave abuse of discretion; (4) its judgment is based on a misapprehension of facts; (5) it went beyond the issues of the case and its findings contravene the admissions of the parties; (6) its findings of fact are contrary to those of the trial court; (7) the same are conclusions without citations of specific evidence; (8) the facts set forth in the appellant's brief are not disputed by the appellee; and (9) when the findings of fact of the Court of Appeals are not supported by the evidence or contradicted by the evidence on record. 5 We find serious contradictions characterizing the findings of the lower and the respondent courts, a development that compels us to resort to the records ourselves. In the process, we are constrained to reject the respondent Court's findings. Accordingly, we sustain the trial court, and hold for the petitioner. The Court is convinced that the respondent municipality was financially capable of continued support to the petitioner in office. There is evidence, to begin with, that at the time the petitioner was discharged, the Murcia treasury had existing funds to cover her salary for the month of February, 1968, and for the succeeding months as well, until June, 1968. 6 As of February, 1968 therefore, the Municipality of Murcia had no justifiable reason to plead insolvency. At that time, it had no excuse to effect the questioned dismissal. There is likewise evidence that for the fiscal year 1968-1969, the respondent municipality approved an annual budget of P270,000.00, more than double its budget of Pl54,910.00 for the fiscal year 1967-1968, or an increase of P115,090.00. We agree with the lower court that if the respondent municipality were truly in dire financial straits, "the natural tendency is that there will be a decrease in the appropriations for the ensuing fiscal year. 7 As found furthermore by this trial court, the respondent municipality had, in the same period, approved salary increases to some thirty-one employees. 8 This, again, negates its claims of bankruptcy. There is evidence, finally, that the Municipality of Murcia had extended new items and appointments to a total of six employees at the time the petitioner was removed from the office. 9 These actuations, in our opinion, are inconsistent with pretexts of insolvency.

In the premises, we reject the municipality's reliance on its alleged overdraft of P50,000.00 that allegedly led to the dismissal now assailed. We likewise dismiss its contention that the petitioner was not removed from her position but that the termination of her services was the inevitable consequence of the abolition of her item as municipal dentist. 10 The existence of the alleged P50,000,00-deficit was never sufficiently proven. Moreover, if this were the case, it raises disturbing inquiries. For instance, why the salary and budget increases, and the new appointments? It is true that abolition of office neither means removal nor separation from office and is not covered by the protection of the security of tenure clause of the Constitution. 11 This principle, however, carries with it a caveat: That the abolition is done in good faith. 12 Good faith, regrettably, is wanting in this case. The respondents' measures subsequent to the petitioner's dismissal are, rather, indicative of bad faith. In Cruz vs. Primicias Jr., we held:
The claim of economy effectuated through the reorganization is belied by the fact that while 72 positions were abolished, 50 of these were actually vacant. Only 22 stations were occupied at the time of the reorganization, carrying total emoluments of P25,538.71 per semester of which P6,120.00 per semester corresponds to the five remaining petitioners (Answer, Exh. 3-C). As against these 22 positions suppressed by the reorganization (Executive Order No. 2),28 new positions were simultaneously created, with a compensation of P87,600.00 per annum, P43,800.00 per semester, for confidential personnel in the office of the Governor (Exh. Order No. 2, par. d). In addition, a Provincial Attorney and his staff (p. 2), and a Personnel Division five members, importing P13,380.00 per semester were set up. Thus, against the suppressed items of P25,538.71, new items carrying a total appropriation of P57,180.00 per semester (or P114,360.00 annually) were created, in addition to P8,000.00 for casual laborers at the discretion of the Governor. Where the economy was the same excuse advanced by the preceding administration when it attempted to eliminate civil service eligibles upon its coming into power (Ocampo, et al. vs. Duque, supra). 13

a holding we reiterate herein. The findings of the respondent Court are moreover in contravention with its own findings in the case of the four policemen the respondents had dismissed on the same occasion. 14 In that case, the respondent court itself dismissed the municipality's pleas of bankruptcy. To say otherwise with respect to this case is indeed, to take inconsistent positions. While the Court of appeals, sitting as a division, is not bound to take judicial notice of decisions of another division, the decision (in G.R. No. 50058-R) was duly brought to the attention of the respondent Court (eighth division), and there was no reason for its obduracy. In sum, we declare the pretended abolition of the dentist's clinic of the Municipality of Murcia to be in fact a flimsy excuse to justify the dismissal of the petitioner, contrary to security of tenure protection of the Constitution, and is hence, null and void. Considering, however, the lapse of time spanning almost twenty years since this controversy rose, and considering the probability that the petitioner might have, in the interim, acquired a new employment, we are constrained to grant her the payment of back salaries equivalent to five (5) years without deduction or qualification. 15 We likewise order her reinstatement, subject to the condition that she has not obtained any other employment, as Murcia municipal dentist or any position for which she is qualified by reason of civil service eligibility, and subject to the requisites of age and physical fitness. 16 We finally, the award of attorney's fees by the lower court in the sum of P1,000.00. The private respondents' liability are declared to be joint and solidary. WHEREFORE, the Petition is GRANTED. The Decision appealed from is REVERSED and SET ASIDE, and a new one is hereby entered, ordering the private respondents, the Municipality of Murcia, Negros Occidental, and the Municipal Mayor of Murcia, to: 1. REINSTATE the petitioner as municipal dentist of the Municipality of Murcia, Negros Occidental, or to any position for which she is qualified pursuant to the Civil Service Law and other rules;

2. PAY unto her back pay equivalent to five (5) years based on her latest salary scale. Costs against the private respondents. This Decision is IMMIDIATELY EXECUTORY. SO ORDERED.
[G.R. No. 137621.August 8, 2001] HAGONOY VENDORS ASSN. vs. MUNICIPALITY OF HAGONOY, BULACAN FIRST DIVISION Gentlemen: Quoted hereunder, for your information, is a resolution of this Court dated AUG 8, 2001. G.R. No. 137621 (Hagonoy Market Vendors Association vs. The Municipality of Hagonoy, Bulacan.) For a full and proper disposition of the issues at bar, the Court resolves to require the parties to submit their respective Memorandum within fifteen (15) days from receipt hereof. Their Statement of Facts should answer the following questions, viz: 1. When was Kautusan Blg. 28 (series of 1996) approved by the municipal mayor of Hagonoy, Bulacan? 2. Where exactly was the subject ordinance posted? 3. Was the local treasurer furnished with a copy of Kautusan Blg. 28? If so, when? 4. Was the ordinance submitted to the Provincial Board of Bulacan for approval? If so, when? Was the ordinance approved by the Provincial Board? If so, when? 5. When did the ordinance take effect? 6. When was the ordinance actually implemented? The parties are directed to discuss in detail their respective position on: 1. Whether or not the Sanggunian complied with the procedure required by law in enacting Kautusan Blg. 28; 2. The constitutional issues raised against the ordinance, viz: a) whether or not Ordinance No. 28 violated Section 6c.04 of the 1993 Municipal Revenue Code and Section 191 of the Local Government Code when it increased the market stall rentals; b) whether or not the subject ordinance violated the principle of uniformity of taxation when the increased tax was enforced only at the stalls in the old and new public markets and exempted from its coverage Pamilihang Dating Munisipyo and Pamilihang Gabaldon. Very truly yours, (Sgd.) VIRGINIA ANCHETA-SORIANO Clerk of Court

G.R. No. 156252

June 27, 2006

COCA-COLA BOTTLERS PHILIPPINES, INC., Petitioner, vs. CITY OF MANILA, LIBERTY M. TOLEDO City Treasurer and JOSEPH SANTIAGO Chief, Licensing Division, Respondents. DECISION CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Order1 of the Regional Trial Court (RTC) of Manila, Branch 21, dated 8 May 2002, dismissing petitioners Petition for Injunction, and the Order2 dated 5 December 2002, denying petitioners Motion for Reconsideration. Petitioner Coca-Cola Bottlers Philippines, Inc. is a corporation engaged in the business of manufacturing and selling beverages and maintains a sales office located in the City of Manila. On 25 February 2000, the City Mayor of Manila approved Tax Ordinance No. 7988, otherwise known as "Revised Revenue Code of the City of Manila" repealing Tax Ordinance No. 7794 entitled, "Revenue Code

of the City of Manila." Tax Ordinance No. 7988 amended certain sections of Tax Ordinance No. 7794 by increasing the tax rates applicable to certain establishments operating within the territorial jurisdiction of the City of Manila, including herein petitioner. Aggrieved by said tax ordinance, petitioner filed a Petition3 before the Department of Justice (DOJ), against the City of Manila and its Sangguniang Panlungsod, invoking Section 187 4 of the Local Government Code of 1991 (Republic Act No. 7160). Said Petition questions the constitutionality or legality of Section 21 of Tax Ordinance No. 7988. According to petitioner: Section 21 of the Old Revenue Code of the City of Manila (Ordinance No. 7794, as amended) was reproduced verbatim as Section 21 under the new Ordinance except for the last paragraph thereof which reads: "PROVIDED, that all registered businesses in the City of Manila that are already paying the aforementioned tax shall be exempted from payment thereof", which was deleted; that said deletion would, in effect, impose additional business tax on businesses, including herein petitioner, that are already subject to business tax under the other sections, specifically Sec. 14, of the New Revenue Code of the City of Manila, which imposition, petitioner claims, "is beyond or exceeds the limitation on the taxing power of the City of Manila under Sec. 143 (h) of the LGC of 1991; and that deletion is a palpable and manifest violation of the Local Government Code of 1991, and the clear mandate of Article X, Sec. 5 of the 1987 Constitution, hence Section 21 is "illegal and unconstitutional." On 17 August 2000, then DOJ Secretary Artemio G. Tuquero issued a Resolution declaring Tax Ordinance No. 7988 null and void and without legal effect, the pertinent portions of which read: After a judicious scrutiny of the records of this case, in the light of the pertinent provisions of the Local Government Code of 1991, this Department finds for the petitioner. The Local Government Code of 1991 provides: "Section 188. Publication of Tax Ordinances and Revenue Measures. Within ten (10) days after their approval, certified true copies of all provincial, city and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation; Provided, however, that in provinces, cities, and municipalities where there are no newspapers or local circulations the same may be posted in at least two (2) conspicuous and publicly accessible places." (R.A. No. 7160) (stress supplied) Upon the other hand, the Rules and Regulations Implementing the Local Government Code of 1991, insofar as pertinent, mandates: "Art. 277. Publication of Tax Ordinances and Revenue Measures. (a) within ten (10) days after their approval, certified true copies of all provincial, city and municipal tax ordinances or revenue measures shall be published in full for three (3) consecutive days in a newspaper of local circulation provided that in provinces, cities and municipalities where there are no newspapers of local circulation, the same may be posted in at least two (2) conspicuous and publicly accessible places. If the tax ordinances or revenue measure contains penal provisions as authorized under Art. 279 of this Rule, the gist of such tax ordinance or revenue measure shall be published in a newspaper of general circulation within the province, posting of such ordinance or measure shall be made in accessible and conspicuous public places in all municipalities and cities of the province to which the sanggunian enacting the ordinance or revenue measure belongs. xxx xxx xxx." (emphasis ours) It is clear from the above-quoted provisions of R.A. No. 7160 and its implementing rules that the requirement of publication is MANDATORY and leaves no choice. The use of the word "shall" in both provisions is imperative, operating to impose a duty that may be enforced (Soco v. Militante, 123 SCRA 160, 167; Modern Coach Corp. v. Faver 173 SE 2d 497, 499). Its essence is simply to inform the people and the entities who may likely be affected, of the existence of the tax measure. It bears emphasis, that, strict observance of the said procedural requirement is the only safeguard against any unjust and unreasonable exercise of the taxing powers by ensuring that the

taxpayers are notified through publication of the existence of the measure, and are therefore able to voice out their views or objections to the said measure. For, after all, taxes are obligatory exactions or enforced contributions corollary to taking of property. xxxx In the case at bar, respondents, by its failure to file their comments and present documentary evidence to show that the mandatory requirement of law on publication, among other things, has been met, may be deemed to have waived its right to controvert or dispute the documentary evidence submitted by petitioner which indubitably show that subject tax ordinance was published only once, i.e., on the May 22, 2000 issue of the Philippine Post. Clearly, therefore, herein respondents failed to satisfy the requirement that said ordinance shall be published for three (3) consecutive days as required by law. xxxx In view of the foregoing, we find it unnecessary to pass upon the other issues raised by the petitioner. WHEREFORE, premises considered, Tax Ordinance No. 7988 of the City of Manila is hereby declared NULL and VOID and WITHOUT LEGAL EFFECT for having been enacted in contravention of the provisions of the Local Government Code of 1991 and its implementing rules and regulations.5 The City of Manila failed to file a Motion for Reconsideration nor lodge an appeal of said Resolution, thus, said Resolution of the DOJ Secretary declaring Tax Ordinance No. 7988 null and void has lapsed into finality. On 16 November 2000, Atty. Leonardo A. Aurelio wrote the Bureau of Local Government Finance (BLGF) requesting in behalf of his client, Singer Sewing Machine Company, an opinion on whether the Office of the City Treasurer of Manila has the right to enforce Tax Ordinance No. 7988 despite the Resolution, dated 17 August 2000, of the DOJ Secretary. Acting on said letter, the BLGF Executive Director issued an Indorsement on 20 November 2000 ordering the City Treasurer of Manila to "cease and desist" from enforcing Tax Ordinance No. 7988. According to the BLGF: In the attached Resolution dated August 17, 2000 of the Department of Justice, it is stated that "x x x Ordinance No. 7988 of the City of Manila is hereby declared NULL AND VOID AND WITHOUT LEGAL EFFECT for having been enacted in contravention of the provisions of the Local Government Code of 1991 and its implementing rules and regulations." xxxx In view thereof, that Office is hereby instructed to cease and desist from implementing the aforementioned Manila Tax Ordinance No. 7988, inviting attention to Section 190 of the Local Government Code (LGC) of 1991, quoted hereunder: "Section 190. Attempt to Enforce Void or Suspended Tax Ordinances and Revenue Measures.- The enforcement of any tax ordinance or revenue measures after due notice of the disapproval or suspension thereof shall be sufficient ground to administrative disciplinary action against the local officials and employees responsible therefore." Be guided accordingly.6 Despite the Resolution of the DOJ declaring Tax Ordinance No. 7988 null and void and the directive of the BLGF that respondents cease and desist from enforcing said tax ordinance, respondents continued to assess petitioner business tax for the year 2001 based on the tax rates prescribed under Tax Ordinance No. 7988. Thus, petitioner filed a Complaint with the RTC of Manila, Branch 21, on 17 January 2001, praying that respondents be enjoined from implementing the aforementioned tax ordinance. On 28 November 2001, the RTC of Manila, Branch 21, rendered a Decision in favor of petitioner, the decretal portion of which states: The defendants did not follow the procedure in the enactment of Tax Ordinance No. 7988. The Court agrees with plaintiffs contention that the ordinance should first be published for three (3) consecutive days in a newspaper of local circulation aside from the posting of the same in at least four (4) conspicuous public places.

xxxx WHEREFORE, premises considered, judgment is hereby rendered declaring the injunction permanent. Defendants are enjoined from implementing Tax Ordinance No. 7988. The bond posted by the plaintiff is hereby CANCELLED.7 During the pendency of the said case, the City Mayor of Manila approved on 22 February 2001 Tax Ordinance No. 8011 entitled, "An Ordinance Amending Certain Sections of Ordinance No. 7988." Said tax ordinance was again challenged by petitioner before the DOJ through a Petition questioning the legality of the aforementioned tax ordinance on the grounds that (1) said tax ordinance amends a tax ordinance previously declared null and void and without legal effect by the DOJ; and (2) said tax ordinance was likewise not published upon its approval in accordance with Section 188 of the Local Government Code of 1991. On 5 July 2001, then DOJ Secretary Hernando Perez issued a Resolution declaring Tax Ordinance No. 8011 null and void and legally not existing. According to the DOJ Secretary: After a careful examination/evaluation of the records of this case and applying the pertinent provisions of the Local Government Code of 1991, this Department finds the instant petition of Coca-Cola Bottlers, Philippines, Inc. meritorious. It bears stress, at the outset, that the subject ordinance was passed and approved by the respondents principally to amend Ordinance No. 7988 which was earlier nullified by this Department in its Resolution Dated August 17, 2000, also at the instance of the herein petitioner. x x x xxxx x x x [T]he only logical conclusion, therefore, is that Ordinance No. 8011, subject herein, is also null and void, it being a mere amendatory ordinance of Ordinance No. 7988 which, as earlier stated, had been nullified by this Department. An invalid or unconstitutional law or ordinance does not, in legal contemplation, exist (Manila Motors Co., Inc. vs. Flores, 99 Phil. 738). Where a statute which has been amended is invalid, nothing, in effect, has been amended. As held in People vs. Lim, 108 Phil. 1091: "If an order or law sought to be amended is invalid, then it does not legally exist. There would be no occasion or need to amend it; x x x" (at p. 1097) Instead of amending Ordinance No. 7988, herein respondent should have enacted another tax measure which strictly complies with the requirements of law, both procedural and substantive. The passage of the assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any way, does not legally exist. xxxx WHEREFORE, premises considered, Tax Ordinance No. 8011 is hereby declared NULL and VOID and LEGALLY NOT EXISTING.8 Respondents Motion for Reconsideration of the Resolution of the DOJ was subsequently denied in a Resolution,9dated 12 March 2002. The City of Manila appealed the DOJ Resolution, dated 12 March 2002, denying its Motion for Reconsideration of the Resolution nullifying Tax Ordinance No. 8011 before the RTC of Manila, Branch 17, but the same was dismissed for lack of jurisdiction in an Order, dated 2 December 2002. According to the trial court: From whatever angle the recourse of herein petitioners was viewed, either from the standpoint of Section 1, Rule 43, or Section 1 and the last sentence of the second paragraph of Section 4, Rule 65 of the 1997 Rules of Civil Procedure, the conclusion was inevitable that petitioners remedial measure from dispositions of the Secretary of Justice should have been ventilated before the next judicial plane. x x x Accordingly, by reason of the foregoing premises, Civil Case No. 02-103372 for "Certiorari" is DISMISSED. Consequently, respondents appealed the foregoing Order, dated 2 December 2002, via a Petition for Review on Certiorari to the Supreme Court docketed as G.R. No. 157490. However, said appeal was dismissed in our Resolution, dated 23 June 2003, the dispositive of which reads:

Pursuant to Rule 45 and other related provisions of the 1997 Rules of Civil Procedure as amended governing appeals by certiorari to the Supreme Court, only petitions which are accompanied by or which comply strictly with the requirements specified therein shall be entertained. On the basis thereof, the Court resolves to DENY the instant petition for review on certiorari of the orders of the Regional Trial Court, Manila, Branch 17 dated December 2, 2002 and March 7, 2003 for the late filing as the petition was filed beyond the reglementary period of fifteen (15) days fixed in Sec. 2, Rule 45 in relation to Sec. 5(a), Rule 56. The omnibus motion of petitioners for reconsideration of the resolution of April 23, 2003 which denied the motion for an extension of time to file a petition is DENIED for lack of merit. Respondents Motion for Reconsideration was subsequently denied in a Resolution, dated 11 August 2003, in which the Court resolved as follows: Acting on the motion of petitioners for reconsideration of the resolution of June 23, 2003 which denied the petition for review on certiorari and considering that there is no compelling reason to warrant a modification of this Courts resolution, the Court resolves to DENY reconsideration with FINALITY. Meanwhile, on the basis of the enactment of Tax Ordinance No. 8011, the City of Manila filed a Motion for Reconsideration with the RTC of Manila, Branch 21, of its Decision, dated 28 November 2001, which the court a quo granted in the herein assailed Order dated 8 May 2002, the full text of which reads: Considering that Ordinance No. 7988 (Amended Revenue Code of the City of Manila) has already been amended by Ordinance No. 8011 entitled "An Ordinance Amending Certain Sections of Ordinance No. 7988" approved by the City Mayor of Manila on February 22, 2001, let the above-entitled case be as it is hereby DISMISSED. Without pronouncement as to costs."10 Petitioners Motion for Reconsideration of the abovequoted Order was denied by the trial court in the second challenged Order, dated 5 December 2002; hence the instant Petition. The case at bar revolves around the sole pivotal issue of whether or not Tax Ordinance No. 7988 is null and void and of no legal effect. However, respondents, in their Comment and Memorandum, raise the procedural issue of whether or not the instant Petition has complied with the requirements of the 1997 Rules on Civil Procedure; thus, the Court resolves to first pass upon this issue before tackling the substantial matters involved in this case. Respondents insist that the instant Petition raises questions of fact that are proscribed under Rule 45 of the 1997 Rules of Civil Procedure which states that Petitions for Certiorari before the Supreme Court shall raise only questions of law. We do not agree. There is a question of fact when doubt or controversy arises as to the truth or falsity of the alleged facts, when there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom is correct is a question of law. 11 A thorough reading of the Petition will reveal that petitioner does not present an issue in which we are called to rule on the truth or falsity of any fact alleged in the case. Furthermore, the resolution of whether or not the court a quo erred in dismissing petitioners case in light of the enactment of Tax Ordinance No. 8011, allegedly amending Tax Ordinance No. 7988, does not necessitate an incursion into the facts attending the case. Contrarily, it is respondents who actually raise questions of fact before us. While accusing petitioner of raising questions of fact, respondents, in the same breath, proceeded to allege that the RTC of Manila, Branch 21, in its Decision, dated 28 November 2001, failed to take into account the evidence presented by respondents allegedly proving that Tax Ordinance No. 7988 was published for four times in a newspaper of general circulation in accordance with the requirements of law. A determination of whether or not the trial court erred in concluding that Tax Ordinance No. 7988 was indeed published for four times in a newspaper of general circulation would clearly involve a calibration of the probative value of the evidence presented by respondents to prove such allegation. Therefore, said issue is a question of fact which this Court, not being a trier of facts, will decline to pass upon. Respondents also point out that the Petition was not properly verified and certified because Nelson Empalmado, the Vice President for Tax and Financial Services of Coca-Cola Bottlers Philippines, Inc. who verified the subject Petition was not duly authorized to file said Petition. Respondents assert that nowhere in the attached Secretarys Certificate can it be found the authority of Nelson Empalmado to institute the instant Petition. Thus, there being a lack of proper verification, respondents contend that the Petition must

be treated as a mere scrap of paper, which has no legal effect as declared in Section 4, Rule 7 of the 1997 Rules of Civil Procedure. An inspection of the Secretarys Certificate attached to the petition will show that Nelson Empalmado is not among those designated as representative to prosecute claims in behalf of Coca-Cola Bottlers Philippines, Inc. However, it would seem that the authority of Mr. Empalmado to file the instant Petition emanated from a Special Power of Attorney signed by Ramon V. Lapez, Jr., Associate Legal Counsel/Assistant Corporate Secretary of Coca-Cola Bottlers Philippines, Inc. and one of those named in the Secretarys Certificate as authorized to file a Petition in behalf of the corporation. A careful perusal of said Secretarys Certificate will further reveal that the persons authorized therein to represent petitioner corporation in any suit are also empowered to designate and appoint any individual as attorney-in-fact of the corporation for the prosecution of any suit. Accordingly, by virtue of the Special Power of Attorney executed by Ramon V. Lapez, Jr. authorizing Nelson Emplamado to file a Petition before the Supreme Court, the instant Petition has been properly verified, in accordance with the 1997 Rules of Civil Procedure. Having disposed of the procedural issues raised by respondents, We now come to the pivotal issue in this petition. It is undisputed from the facts of the case that Tax Ordinance No. 7988 has already been declared by the DOJ Secretary, in its Order, dated 17 August 2000, as null and void and without legal effect due to respondents failure to satisfy the requirement that said ordinance be published for three consecutive days as required by law. Neither is there quibbling on the fact that the said Order of the DOJ was never appealed by the City of Manila, thus, it had attained finality after the lapse of the period to appeal. Furthermore, the RTC of Manila, Branch 21, in its Decision dated 28 November 2001, reiterated the findings of the DOJ Secretary that respondents failed to follow the procedure in the enactment of tax measures as mandated by Section 188 of the Local Government Code of 1991, in that they failed to publish Tax Ordinance No. 7988 for three consecutive days in a newspaper of local circulation. From the foregoing, it is evident that Tax Ordinance No. 7988 is null and void as said ordinance was published only for one day in the 22 May 2000 issue of the Philippine Post in contravention of the unmistakable directive of the Local Government Code of 1991. Despite the nullity of Tax Ordinance No. 7988, the court a quo, in the assailed Order, dated 8 May 2002, went on to dismiss petitioners case on the force of the enactment of Tax Ordinance No. 8011, amending Tax Ordinance No. 7988. Significantly, said amending ordinance was likewise declared null and void by the DOJ Secretary in a Resolution, dated 5 July 2001, elucidating that "[I]nstead of amending Ordinance No. 7988, [herein] respondent should have enacted another tax measure which strictly complies with the requirements of law, both procedural and substantive. The passage of the assailed ordinance did not have the effect of curing the defects of Ordinance No. 7988 which, any way, does not legally exist." Said Resolution of the DOJ Secretary had, as well, attained finality by virtue of the dismissal with finality by this Court of respondents Petition for Review on Certiorari in G.R. No. 157490 assailing the dismissal by the RTC of Manila, Branch 17, of its appeal due to lack of jurisdiction in its Order, dated 11 August 2003. Based on the foregoing, this Court must reverse the Order of the RTC of Manila, Branch 21, dismissing petitioners case as there is no basis in law for such dismissal. The amending law, having been declared as null and void, in legal contemplation, therefore, does not exist. Furthermore, even if Tax Ordinance No. 8011 was not declared null and void, the trial court should not have dismissed the case on the reason that said tax ordinance had already amended Tax Ordinance No. 7988. As held by this Court in the case of People v. Lim,12 if an order or law sought to be amended is invalid, then it does not legally exist, there should be no occasion or need to amend it.13 WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Orders of the RTC of Manila, Branch 21, dated 8 May 2002 and 5 December 2002, respectively, are hereby REVERSED and SET ASIDE. SO ORDERED.