G.R. No.

119761 August 29, 1996

COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS
and FORTUNE TOBACCO CORPORATION,respondents.

and signed into law, on 14 June 1993, by the President of

the Philippines. The new law became effective on 03 July
1993. It amended Section 142(c)(1) of the National Internal
Revenue Code ("NIRC") to read; as follows:
Sec. 142. Cigars and Cigarettes.
xxx xxx xxx

VITUG, J.:p
The Commissioner of Internal Revenue ("CIR") disputes the
decision, dated 31 March 1995, of respondent Court of
Appeals 1 affirming the 10th August 1994 decision and the 11th
October 1994 resolution of the Court of Tax Appeals 2("CTA") in
C.T.A. Case No. 5015, entitled "Fortune Tobacco Corporation vs.
Liwayway Vinzons-Chato in her capacity as Commissioner of
Internal Revenue."
The facts, by and large, are not in dispute.
Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the
manufacture of different brands of cigarettes.
On various dates, the Philippine Patent Office issued to the
corporation separate certificates of trademark registration over
"Champion," "Hope," and "More" cigarettes. In a letter, dated 06
January 1987, of then Commissioner of Internal Revenue
Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of the
Presidential Commission on Good Government, "the initial position
of the Commission was to classify 'Champion,' 'Hope,' and 'More' as
foreign brands since they were listed in the World Tobacco Directory
as belonging to foreign companies. However, Fortune Tobacco
changed the names of 'Hope' to 'Hope Luxury' and 'More' to
'Premium More,' thereby removing the said brands from the foreign
brand category. Proof was also submitted to the Bureau (of Internal
Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco
Corporation register and therefore a local brand." 3 Ad
Valorem taxes were imposed on these brands, 4 at the following
rates:
BRAND AD VALOREM TAX RATE
E.O. 22 and E.O. 273 RA 6956
06-23-86 07-25-87 06-18-90
07-01-86 01-01-88 07-05-90
Hope Luxury M. 100's
Sec. 142, (c), (2) 40% 45%
Hope Luxury M. King
Sec. 142, (c), (2) 40% 45%
More Premium M. 100's
Sec. 142, (c), (2) 40% 45%
More Premium International
Sec. 142, (c), (2) 40% 45%
Champion Int'l. M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20%

(c) Cigarettes packed by machine. There shall

be levied, assessed and collected on cigarettes
packed by machine a tax at the rates prescribed
below based on the constructive manufacturer's
wholesale price or the actual manufacturer's
wholesale price, whichever is higher:
(1) On locally manufactured cigarettes which
are currently classified and taxed at fifty-five
percent (55%) or the exportation of which is not
authorized by contract or otherwise, fifty-five
(55%) provided that the minimum tax shall not be
less than Five Pesos (P5.00) per pack.
(2) On other locally manufactured cigarettes,
forty-five percent (45%) provided that the
minimum tax shall not be less than Three Pesos
(P3.00) per pack.
xxx xxx xxx
When the registered manufacturer's wholesale
price or the actual manufacturer's wholesale
price whichever is higher of existing brands of
cigarettes, including the amounts intended to
cover the taxes, of cigarettes packed in twenties
does not exceed Four Pesos and eighty
centavos (P4.80) per pack, the rate shall be
twenty percent (20%). 7 (Emphasis supplied)
About a month after the enactment and two (2)
days before the effectivity of RA 7654, Revenue
Memorandum Circular No. 37-93 ("RMC 37-93"), was
issued by the BIR the full text of which expressed:
REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
3
REVENUE MEMORANDUM CIRCULAR NO. 37-93
SUBJECT: Reclassification of Cigarettes Subject
to Excise Tax
TO: All Internal Revenue Officers and Others
Concerned.

A bill, which later became Republic Act ("RA") No.

7654, 6 was enacted, on 10 June 1993, by the legislature

In view of the issues raised on whether "HOPE,"

"MORE" and "CHAMPION" cigarettes which are
locally manufactured are appropriately
considered as locally manufactured cigarettes
bearing a foreign brand, this Office is compelled
to review the previous rulings on the matter.

Section 142 (c)(1) National Internal Revenue

Code, as amended by R.A. No. 6956, provides:
On locally manufactured
cigarettes bearing a foreign
brand, fifty-five percent (55%)
Provided, That this rate shall
apply regardless of whether
or not the right to use or title
to the foreign brand was sold
or transferred by its owner to
the local manufacturer.
Whenever it has to be
determined whether or not a
cigarette bears a foreign
brand, the listing of brands
manufactured in foreign
countries appearing in the
current World Tobacco
Directory shall govern.
Under the foregoing, the test for imposition of the
55% ad valorem tax on cigarettes is that the
locally manufactured cigarettes bear a foreign
brand regardless of whether or not the right to
use or title to the foreign brand was sold or
transferred by its owner to the local
manufacturer. The brand must be originally
owned by a foreign manufacturer or producer. If
ownership of the cigarette brand is, however, not
definitely determinable, ". . . the listing of brands
manufactured in foreign countries appearing in
the current World Tobacco Directory shall govern.
. . ."
"HOPE" is listed in the World Tobacco Directory
as being manufactured by (a) Japan Tobacco,
Japan and (b) Fortune Tobacco, Philippines.
"MORE" is listed in the said directory as being
manufactured by: (a) Fills de Julia Reig, Andorra;
(b) Rothmans, Australia; (c) RJR-Macdonald
Canada; (d) Rettig-Strenberg, Finland; (e)
Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g)
Rothmans, New Zealand; (h) Fortune Tobacco,
Philippines; (i) R.J. Reynolds, Puerto Rico; (j)
R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l)
R.J. Reynolds, Switzerland; and (m) R.J.
Reynolds, USA. "Champion" is registered in the
said directory as being manufactured by (a)
Commonwealth Bangladesh; (b) Sudan, Brazil;
(c) Japan Tobacco, Japan; (d) Fortune Tobacco,
Philippines; (e) Haggar, Sudan; and (f) Tabac
Reunies, Switzerland.
Since there is no showing who among the abovelisted manufacturers of the cigarettes bearing the
said brands are the real owner/s thereof, then it
follows that the same shall be considered foreign
brand for purposes of determining the ad
valorem tax pursuant to Section 142 of the
National Internal Revenue Code. As held in BIR
Ruling No. 410-88, dated August 24, 1988, "in
cases where it cannot be established or there is
dearth of evidence as to whether a brand is
foreign or not, resort to the World Tobacco
Directory should be made."

In view of the foregoing, the aforesaid brands of

cigarettes, viz: "HOPE," "MORE" and
"CHAMPION" being manufactured by Fortune
Tobacco Corporation are hereby considered
locally manufactured cigarettes bearing a foreign
brand subject to the 55% ad valorem tax on
cigarettes.
Any ruling inconsistent herewith is revoked or
modified accordingly.

On 02 July 1993, at about 17:50 hours, BIR Deputy

Commissioner Victor A. Deoferio, Jr., sent via telefax a
copy of RMC 37-93 to Fortune Tobacco but it was
addressed to no one in particular. On 15 July 1993,
Fortune Tobacco received, by ordinary mail, a certified
xerox copy of RMC 37-93.
In a letter, dated 19 July 1993, addressed to the appellate
division of the BIR, Fortune Tobacco requested for a
review, reconsideration and recall of RMC 37-93. The
request was denied on 29 July 1993. The following day, or
on 30 July 1993, the CIR assessed Fortune Tobacco
for ad valorem tax deficiency amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for
review with the CTA. 8
On 10 August 1994, the CTA upheld the position of
Fortune Tobacco and adjudged:
WHEREFORE, Revenue Memorandum Circular
No. 37-93 reclassifying the brands of
cigarettes, viz: "HOPE," "MORE" and
"CHAMPION" being manufactured by Fortune
Tobacco Corporation as locally manufactured
cigarettes bearing a foreign brand subject to the
55% ad valorem tax on cigarettes is found to be
defective, invalid and unenforceable, such that
when R.A. No. 7654 took effect on July 3, 1993,
the brands in question were not CURRENTLY
CLASSIFIED AND TAXED at 55% pursuant to
Section 1142(c)(1) of the Tax Code, as amended
by R.A. No. 7654 and were therefore still
classified as other locally manufactured
cigarettes and taxed at 45% or 20% as the case
may be.
Accordingly, the deficiency ad valorem tax
assessment issued on petitioner Fortune
Tobacco Corporation in the amount of
P9,598,334.00, exclusive of surcharge and
interest, is hereby canceled for lack of legal
basis.
Respondent Commissioner of Internal Revenue
is hereby enjoined from collecting the deficiency
tax assessment made and issued on petitioner in
relation to the implementation of RMC No. 37-93.
SO ORDERED. 9

In its resolution, dated 11 October 1994, the CTA

dismissed for lack of merit the motion for reconsideration.
The CIR forthwith filed a petition for review with the Court
of Appeals, questioning the CTA's 10th August 1994
decision and 11th October 1994 resolution. On 31 March
1993, the appellate court's Special Thirteenth Division
affirmed in all respects the assailed decision and
resolution.
In the instant petition, the Solicitor General argues: That
I. RMC 37-93 IS A RULING
OR OPINION OF THE
COMMISSIONER OF
INTERNAL REVENUE
INTERPRETING THE
PROVISIONS OF THE TAX
CODE.
II. BEING AN
INTERPRETATIVE RULING
OR OPINION, THE
PUBLICATION OF RMC 3793, FILING OF COPIES
THEREOF WITH THE UP
LAW CENTER AND PRIOR
HEARING ARE NOT
NECESSARY TO ITS
VALIDITY, EFFECTIVITY
AND ENFORCEABILITY.
III. PRIVATE RESPONDENT
IS DEEMED TO HAVE BEEN
NOTIFIED OR RMC 37-93
ON JULY 2, 1993.
IV. RMC 37-93 IS NOT
DISCRIMINATORY SINCE IT
APPLIES TO ALL LOCALLY
MANUFACTURED
CIGARETTES SIMILARLY
SITUATED AS "HOPE,"
"MORE" AND "CHAMPION"
CIGARETTES.
V. PETITIONER WAS NOT
LEGALLY PROSCRIBED
FROM RECLASSIFYING
"HOPE," "MORE" AND
"CHAMPION" CIGARETTES
BEFORE THE EFFECTIVITY
OF R.A. NO. 7654.
VI. SINCE RMC 37-93 IS AN
INTERPRETATIVE RULE,
THE INQUIRY IS NOT INTO
ITS VALIDITY, EFFECTIVITY
OR ENFORCEABILITY BUT
INTO ITS CORRECTNESS
OR PROPRIETY; RMC 37-93
IS CORRECT. 10
In fine, petitioner opines that RMC 37-93 is merely an
interpretative ruling of the BIR which can thus become

effective without any prior need for notice and hearing, nor
publication, and that its issuance is not discriminatory
since it would apply under similar circumstances to all
locally manufactured cigarettes.
The Court must sustain both the appellate court and the
tax court.
Petitioner stresses on the wide and ample authority of the
BIR in the issuance of rulings for the effective
implementation of the provisions of the National Internal
Revenue Code. Let it be made clear that such authority of
the Commissioner is not here doubted. Like any other
government agency, however, the CIR may not disregard
legal requirements or applicable principles in the exercise
of its quasi-legislative powers.
Let us first distinguish between two kinds of administrative
issuances a legislative rule and aninterpretative rule.
In Misamis Oriental Association of Coco Traders,
Inc., vs. Department of Finance Secretary, 11 the Court
expressed:
. . . a legislative rule is in the nature of
subordinate legislation, designed to implement a
primary legislation by providing the details
thereof . In the same way that laws must have
the benefit of public hearing, it is generally
required that before a legislative rule is adopted
there must be hearing. In this connection, the
Administrative Code of 1987 provides:
Public Participation. If not otherwise required
by law, an agency shall, as far as practicable,
publish or circulate notices of proposed rules and
afford interested parties the opportunity to submit
their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order
shall be valid unless the proposed rates shall
have been published in a newspaper of general
circulation at least two (2) weeks before the first
hearing thereon.
(3) In case of opposition, the rules on contested
cases shall be observed.
In addition such rule must be published. On the
other hand, interpretative rules are designed to
provide guidelines to the law which the
administrative agency is in charge of enforcing. 12
It should be understandable that when an administrative
rule is merely interpretative in nature, its applicability
needs nothing further than its bare issuance for it gives no
real consequence more than what the law itself has
already prescribed. When, upon the other hand, the
administrative rule goes beyond merely providing for the
means that can facilitate or render least cumbersome the
implementation of the law but substantially adds to or
increases the burden of those governed, it behooves the
agency to accord at least to those directly affected a
chance to be heard, and thereafter to be duly informed,

before that new issuance is given the force and effect of

law.

Memorandum Circulars and

Revenue Memorandum
Orders bearing on internal
revenue tax rules and
regulations.

A reading of RMC 37-93, particularly considering the

circumstances under which it has been issued, convinces
us that the circular cannot be viewed simply as a corrective
measure (revoking in the process the previous holdings of
past Commissioners) or merely as construing Section
142(c)(1) of the NIRC, as amended, but has, in fact and
most importantly, been made in order to place "Hope
Luxury," "Premium More" and "Champion" within the
classification of locally manufactured cigarettes bearing
foreign brands and to thereby have them covered by RA
7654. Specifically, the new law would have its amendatory
provisions applied to locally manufactured cigarettes
which at the time of its effectivity were not so classified as
bearing foreign brands. Prior to the issuance of the
questioned circular, "Hope Luxury," "Premium More," and
"Champion" cigarettes were in the category of locally
manufactured cigarettes not bearing foreign brand subject
to 45% ad valorem tax. Hence, without RMC 37-93, the
enactment of RA 7654, would have had no new tax rate
consequence on private respondent's products. Evidently,
in order to place "Hope Luxury," "Premium More," and
"Champion" cigarettes within the scope of the amendatory
law and subject them to an increased tax rate, the now
disputed RMC 37-93 had to be issued. In so doing, the BIR
not simply intrepreted the law; verily, it legislated under its
quasi-legislative authority. The due observance of the
requirements of notice, of hearing, and of publication
should not have been then ignored.

Nothing on record could tell us that it was either impossible

or impracticable for the BIR to observe and comply with
the above requirements before giving effect to its
questioned circular.

Indeed, the BIR itself, in its RMC 10-86, has observed and
provided:

Not insignificantly, RMC 37-93 might have likewise

infringed on uniformity of taxation.

RMC NO. 10-86

Effectivity of Internal Revenue Rules and
Regulations
It has been observed that one of the problem
areas bearing on compliance with Internal
Revenue Tax rules and regulations is lack or
insufficiency of due notice to the tax paying
public. Unless there is due notice, due
compliance therewith may not be reasonably
expected. And most importantly, their strict
enforcement could possibly suffer from legal
infirmity in the light of the constitutional provision
on "due process of law" and the essence of the
Civil Code provision concerning effectivity of
laws, whereby due notice is a basic requirement
(Sec. 1, Art. IV, Constitution; Art. 2, New Civil
Code).
In order that there shall be a just enforcement of
rules and regulations, in conformity with the basic
element of due process, the following procedures
are hereby prescribed for the drafting, issuance
and implementation of the said Revenue Tax
Issuances:
(1) This Circular shall apply
only to (a) Revenue
Regulations; (b) Revenue
Audit Memorandum Orders;
and (c) Revenue

(2) Except when the law

otherwise expressly provides,
the aforesaid internal revenue
tax issuances shall not begin
to be operative until after due
notice thereof may be fairly
presumed.
Due notice of the said
issuances may be fairly
presumed only after the
following procedures have
been taken;
xxx xxx xxx
(5) Strict compliance with the
foregoing procedures is
enjoined. 13

Article VI, Section 28, paragraph 1, of the 1987

Constitution mandates taxation to be uniform and
equitable. Uniformity requires that all subjects or objects of
taxation, similarly situated, are to be treated alike or put on
equal footing both in privileges and liabilities. 14 Thus, all
taxable articles or kinds of property of the same class must
be taxed at the same rate 15 and the tax must operate with
the same force and effect in every place where the subject
may be found.
Apparently, RMC 37-93 would only apply to "Hope Luxury,"
"Premium More" and "Champion" cigarettes and, unless
petitioner would be willing to concede to the submission of
private respondent that the circular should, as in fact my
esteemed colleague Mr. Justice Bellosillo so expresses in
his separate opinion, be considered adjudicatory in nature
and thus violative of due process following the Ang
Tibay 16 doctrine, the measure suffers from lack of
uniformity of taxation. In its decision, the CTA has keenly
noted that other cigarettes bearing foreign brands have not
been similarly included within the scope of the circular,
such as
1. Locally manufactured by ALHAMBRA
INDUSTRIES, INC.
(a) "PALM TREE" is listed as
manufactured by office of
Monopoly, Korea (Exhibit "R")

2. Locally manufactured by LA SUERTE CIGAR

and CIGARETTE COMPANY
(a) "GOLDEN KEY" is listed
being manufactured by United
Tobacco, Pakistan (Exhibit
"S")
(b) "CANNON" is listed as
being manufactured by Alpha
Tobacco, Bangladesh (Exhibit
"T")
3. Locally manufactured by LA PERLA
INDUSTRIES, INC.
(a) "WHITE HORSE" is listed
as being manufactured by
Rothman's, Malaysia (Exhibit
"U")
(b) "RIGHT" is listed as being
manufactured by SVENSKA,
Tobaks, Sweden (Exhibit "V1")
4. Locally manufactured by MIGHTY
CORPORATION
(a) "WHITE HORSE" is listed
as being manufactured by
Rothman's, Malaysia (Exhibit
"U-1")
5. Locally manufactured by STERLING
TOBACCO CORPORATION
(a) "UNION" is listed as being
manufactured by Sumatra
Tobacco, Indonesia and
Brown and Williamson, USA
(Exhibit "U-3")
(b) "WINNER" is listed as
being manufactured by Alpha
Tobacco, Bangladesh;
Nangyang, Hongkong; Joo
Lan, Malaysia; Pakistan
Tobacco Co., Pakistan;
Premier Tobacco, Pakistan
and Haggar, Sudan (Exhibit
"U-4"). 17

also listed in the World Tobacco Directory . . .

Why were these brand not reclassified at 55 if
your want to give a level playing filed to foreign
manufacturers?
MS. CHATO. Mr. Chairman, in fact, we have
already prepared a Revenue Memorandum
Circular that was supposed to come after RMC
No. 37-93 which have really named specifically
the list of locally manufactured cigarettes bearing
a foreign brand for excise tax purposes and
includes all these brands that you mentioned at
55 percent except that at that time, when we had
to come up with this, we were forced to study the
brands of Hope, More and Champion because
we were given documents that would indicate the
that these brands were actually being claimed or
patented in other countries because we went by
Revenue Memorandum Circular 1488 and we
wanted to give some rationality to how it came
about but we couldn't find the rationale there.
And we really found based on our own
interpretation that the only test that is given by
that existing law would be registration in the
World Tobacco Directory. So we came out with
this proposed revenue memorandum circular
which we forwarded to the Secretary of Finance
except that at that point in time, we went by the
Republic Act 7654 in Section 1 which amended
Section 142, C-1, it said, that on locally
manufactured cigarettes which are currently
classified and taxed at 55 percent. So we were
saying that when this law took effect in July 3
and if we are going to come up with this revenue
circular thereafter, then I think our action would
really be subject to question but we feel that . . .
Memorandum Circular Number 37-93 would
really cover even similarly situated brands. And
in fact, it was really because of the study, the
short time that we were given to study the matter
that we could not include all the rest of the other
brands that would have been really classified as
foreign brand if we went by the law itself. I am
sure that by the reading of the law, you would
without that ruling by Commissioner Tan they
would really have been included in the definition
or in the classification of foregoing brands. These
brands that you referred to or just read to us and
in fact just for your information, we really came
out with a proposed revenue memorandum
circular for those brands. (Emphasis supplied)
(Exhibit "FF-2-C," pp. V-5 TO V-6, VI-1 to VI-3).
xxx xxx xxx

The court quoted at length from the transcript of the

hearing conducted on 10 August 1993 by the Committee
on Ways and Means of the House of Representatives; viz:
THE CHAIRMAN. So you have specific
information on Fortune Tobacco alone. You don't
have specific information on other tobacco
manufacturers. Now, there are other brands
which are similarly situated. They are locally
manufactured bearing foreign brands. And may I
enumerate to you all these brands, which are

MS. CHATO. . . . But I do agree with you now

that it cannot and in fact that is why I felt that we .
. . I wanted to come up with a more extensive
coverage and precisely why I asked that revenue
memorandum circular that would cover all those
similarly situated would be prepared but because
of the lack of time and I came out with a study of
RA 7654, it would not have been possible to
really come up with the reclassification or the
proper classification of all brands that are listed

there. . .(emphasis supplied) (Exhibit "FF-2d,"

page IX-1)
xxx xxx xxx
HON. DIAZ. But did you not consider that there
are similarly situated?
MS. CHATO. That is precisely why, Sir, after we
have come up with this Revenue Memorandum
Circular No. 37-93, the other brands came about
the would have also clarified RMC 37-93 by I
was saying really because of the fact that I was
just recently appointed and the lack of time, the
period that was allotted to us to come up with the
right actions on the matter, we were really caught
by the July 3 deadline. But in fact, We have
already prepared a revenue memorandum
circular clarifying with the other . . . does not yet,
would have been a list of locally manufactured
cigarettes bearing a foreign brand for excise tax
purposes which would include all the other
brands that were mentioned by the Honorable
Chairman. (Emphasis supplied) (Exhibit "FF-2-d,"
par. IX-4). 18
All taken, the Court is convinced that the hastily promulgated RMC
37-93 has fallen short of a valid and effective administrative
issuance.
WHEREFORE, the decision of the Court of Appeals, sustaining that
of the Court of Tax Appeals, is AFFIRMED. No costs.
SO ORDERED.

September 20, 2004 Resolution of the Court of Appeals (CA) in CAG.R. SP No. 78749 and CA-G.R. SP No.78290.1
The Facts
Petitioners Theron V. Lacson (Lacson), Jaime R. Millan (Millan) and
Bernardo T. Viray (Viray) were non-presidential appointees and
career service officials of respondent Philippine Estates
Authority (PEA), holding the positions of Deputy General Manager
for Finance, Legal and Administration; Assistant General Manager;
and Department General Manager, respectively.2
On October 3, 2002, Sulficio O. Tagud (Tagud) filed a complaintaffidavit with the Office of the Ombudsman (Ombudsman) accusing
petitioners Lacson, Millan and Viray for overpricing,
by P600,000,000.00, the contract for the construction of the Central
Boulevard Project (the Project), otherwise known as the President
Diosdado Macapagal Boulevard.3
Acting on the complaint, the Ombudsman proceeded with the
investigation of both the criminal and the administrative aspects of
the case.4 The criminal case, docketed as OMB-C-C-02-0667-J and
entitled "Sulficio O. Tagud Jr., et al. v. Ernesto Villareal, et al.,"
charged petitioners for committing an act in violation of Republic Act
(R.A.) No. 7080. The administrative case, docketed as OMB-C-A02-0523-K, on the other hand, charged them with Dishonesty,
Serious Misconduct and Acts Inimical to the Interest of the Public
Service in violation of Section 52A (1), (3) and (20) of the Uniform
Rules on Administrative Cases.5
Meanwhile, on October 14, 2002, the Presidential Anti-Graft
Commission (PAGC) requested the Ombudsman for authority to
conduct administrative disciplinary proceedings against the
petitioners and other individuals involved in the Project. 6
In its Letter-Reply dated October 17, 2002, 7 the Ombudsman
responded in the following manner:

G.R. Nos. 165399 and 165475

May 30, 2011

THERON V. LACSON, Petitioner,

vs.
THE HON. EXECUTIVE SECRETARY, THE PRESIDENTIAL ANTIGRAFT COMMISSION, PUBLIC ESTATES AUTHORITY, and
TEODORICO C. TAGUINOD, in his capacity as General Manager
and Chief Executive Officer of the Public Estates
Authority, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. Nos. 165404 and 165489
JAIME R. MILLAN and BERNARDO T. VIRAY, Petitioners,
vs.
THE HON. EXECUTIVE SECRETARY, THE PRESIDENTIAL ANTIGRAFT COMMISSION, and the PUBLIC ESTATES
AUTHORITY, Respondents.
DECISION
MENDOZA, J.:
These are consolidated petitions for review on certiorari under Rule
45 seeking to set aside the June 8, 2004 Decision and the

This has reference to your letter dated 14 October 2002 requesting

for authority to conduct administrative disciplinary proceedings
against the presidential appointees at the Public Estates Authority
(PEA) named respondents in the case involving the construction of
the President Diosdado Macapagal Boulevard (PDMB). It is our
humble view that the authority is not necessary.
The Office takes the opportunity to confirm the fact that the case
filed with this Office on 3 October 2002, involving the subject
controversy, is criminal in nature. It now bears the docket number
OMB-C-C-02-0667-J, entitled "Sulficio Tagud, Jr., et al. versus
Ernest Villareal, et al." The basic complaint has not been further
docketed as an administrative case. Thus, the same did not
preclude the subsequent filing with the PAGC of an
administrative complaint against the concerned PEA officials.
[Emphasis supplied]
Subsequently, on November 12, 2002, a formal complaint was filed
by the Investigation Office of PAGC charging several employees of
PEA, including petitioners, with acts and/or omissions contrary to:
(1) Item 1B2 of the Implementing Rules and Regulations (IRR) of
Presidential Decree (P.D.) No. 1594, as amended; (2) Section 3(i),
(g) and (e) of R.A. No. 3019, as amended; (3) Article 217 of the
Revised Penal Code in relation to R.A. No. 3019, as amended; (4)
Articles 8.1 and 8.2 of the Construction Agreement signed on April
10, 2000 between PEA and J.D. Legaspi Construction; and (5)
Section 46 (a) and (b) of Executive Order (E.O.) No. 292, as

amended, in particular Item (B), Nos. 3, 4 and 27, in relation to R.A.

No. 3019, as amended.8

Executive Officer. This motion, however, was denied on August 20,

2003.20

On the same date, PAGC issued an order requiring petitioners to file

their counter-affidavit/verified answer (not a motion to dismiss or
motion for bill of particulars) within a non-extendible period of 10
days from receipt of the order. Preliminary conference was set on
November 22, 2002.9

On August 25, 2003, Ernesto L. Enriquez (Enriquez) and Lacson

filed a petition for certiorari and prohibition under Rule 65 with the
CA, which was docketed as CA G.R. SP No. 78749.21 Said petition,
however, was later consolidated with CA G.R. SP No. 78290 upon
motion of the Office of the Solicitor General (OSG). But, before the
consolidation of the mentioned petitions, writs of preliminary
injunction were issued.22 The writs, dated August 6, 2003 in CA G.R.
SP No. 78290 and September 16, 2003 in CA G.R. SP No. 78749,
temporarily enjoined the respondents from implementing the
dismissal orders.23

During the preliminary conference, petitioners raised several

jurisdictional issues, particularly the following: the absence of
certification of non-forum shopping in the complaint; the primary
jurisdiction of the Ombudsman to investigate them; the lack of
jurisdiction of PAGC over the complaint against them considering
that they were not presidential appointees and there was no
allegation that they had conspired with the presidential appointees
who were charged with them; the futility of any investigation by
PAGC as the same would have no bearing on the case filed with the
Ombudsman; and the fatally defective complaint which was not
based on personal knowledge of the complainant who, as an officer
of PAGC, was merely a nominal party and was never privy to the
project subject of the investigation.10
PAGC directed petitioners to file their memoranda to formalize their
arguments.11
On November 28, 2002, PAGC issued a resolution recommending
the dismissal of petitioners from PEA with the imposition of the
corresponding accessory penalties of forfeiture of retirement
benefits and disqualification from employment in the government. 12
In a letter dated December 16, 2002, the Office of the President,
through the Executive Secretary, informed the PEA Chairman and
Members of the Board that the President approved the
recommendation of PAGC in its November 28, 2002 Resolution
dismissing the petitioners from PEA and imposing upon them the
accessory penalties of forfeiture of retirement benefits and
disqualification from employment in the government service, and
directed them to take the necessary actions to effect the instructions
of the President. 13
On December 18, 2002, petitioners received a notice dated
December 4, 2002 informing them that PAGC had resolved their
case and that the records therein had been forwarded to the Office
of the President. It also advised the petitioners that any inquiry
relative thereto should be addressed to the said office.14
After securing a copy of the PAGC Resolution, petitioners Millan and
Viray, together with Manuel R. Beria, Jr.(Beria) filed a motion for
reconsideration15 dated January 2, 2003 with the Office of the
President assailing the November 28, 2002 Resolution and
Recommendation of the PAGC.
This motion was not acted upon.16
On July 25, 2003, PEA dismissed the petitioners. They received
their copies of the notice of dismissal on July 28, 2003.17
Aggrieved, Beria, Millan and Viray filed their Petition for Certiorari
and Prohibition under Rule 65 with the CA on July 30, 2003, which
was docketed as CA G.R. SP No. 78290.18
Lacson, on the other hand, filed a motion for reconsideration of the
dismissal order19 in a letter dated August 11, 2003 addressed to
Teodorico C. Taguinod (Taguinod), PEA General Manager and Chief

Finally, in a consolidated decision dated June 29, 2004, the CA

dismissed the consolidated petitions.24
On July 5, 2004 and July 22, 2004, Lacson in CA-G.R. SP No.
78749 and Beria, Millan and Viray in CA-G.R. SP No. 78290, filed
their respective motions for reconsideration.25 Unfortunately for
petitioners, both motions were denied in a resolution dated
September 20, 2004.26
Hence, these petitions.
Upon motion of the OSG, on behalf of respondents Executive
Secretary and PAGC, the Court issued a resolution ordering the
consolidation of the petitions in G.R. Nos. 165404 and 165489 with
the petitions in G.R. Nos. 165399 and 165475.27
ISSUES
In their respective petitions for review, petitioners assigned the
following errors, to wit:
I.
Respondents erred when they issued the questioned
memoranda and ordered the dismissal of Petitioners
allegedly on the basis of the recommendation of the
respondent PAGC, in that:
A. Under the constitution and the laws applicable, it is the
ombudsman which has the jurisdiction to investigate and
recommend the dismissal of career service officers such
as petitioners herein.
B. it is the Ombudsman who has primary jurisdiction over
the investigation and removal of Petitioners and not
Respondent PAGC.
C. Executive Order No. 12, series of 2002, which grants
Respondent PAGC the authority to investigate and
recommend the dismissal of public officers and employees
within the civil service who are non-presidential appointees
as petitioners herein is unconstitutional and invalid for
being contrary to law.
D. The direct action of Respondents in dismissing the
PetitionerS from the service without the head of
respondent PEA having conducted any investigation at all
is contrary to law.
II.

Respondents erred in dismissing the Petitioners from Respondent

PEA and public office in that:
a. Petitioners dismissal was violative of their right to due
process of law, petitioners having been deprived of a
formal investigation which they are entitled to under the
rules of procedure of the ombudsman and the uniform
rules on administrative cases in the civil service.
b. The Petitioners dismissal was violative of their right to
security of tenure as they were terminated from service
upon a mere presidential directive.
iii.
Respondents engaged in prohibited forum shopping by the filing of
multiple administrative complaints against Petitioners for the same
cause; hence, the instant charge against petitioners should be
dismissed.28
These alleged errors in G.R. Nos. 165399 and 165475 and G.R.
Nos. 165404 and 165489 can be categorized into two principal
issues:
(1) Whether it is the Ombudsman who should conduct the
investigation on the charge of overpricing of the Project
against petitioners; and
(2) Whether the Court can still review the dismissal
ordered by PEA.
THE COURTS RULING
The Ombudsman has concurrent jurisdiction with similarly
authorized agencies
Petitioners argue that because they are not presidential appointees,
it is only the Ombudsman which has jurisdiction over them.
In this regard, the petitioners are not correct. The Court has
repeatedly ruled that the power of the Ombudsman to investigate
offenses involving public officials is not exclusive, but is concurrent
with other similarly authorized agencies of the government in
relation to the offense charged. 29 Therefore, with respect to
petitioners, the Ombudsman may share its authority to conduct an
investigation concerning administrative charges against them with
other agencies.
At any rate, this issue is already moot and academic as the
Ombudsman has terminated its investigation of petitioners. This can
be gleaned from the certified true copies of the Ombudsmans May
30, 2008 Decision as well as the July 3, 2008 Review and
Recommendation which the petitioners submitted in compliance with
the November 22, 2010 Resolution requiring them to inform the
Court of the status of their cases before the Ombudsman. It appears
therefrom that the Ombudsman dismissed the administrative case
against the petitioners because the charges had already been
passed upon by PAGC.30
Having been dismissed by PEA, petitioners should have appealed to
the Civil Service Commission

by the Office of the President to implement the PAGC

recommendations, still the undeniable fact is that the dismissal of
petitioners was actually made and effected by PEA.
Granting that PEA committed an error, whether substantial or
procedural, petitioners should have appealed to the Civil Service
Commission (CSC), pursuant to Section 47, Chapter 6, Title I, Book
V of E.O. No. 292 (The Administrative Code of 1987), to wit:
(1) The Commission shall decide upon appeal all
administrative disciplinary cases involving the
imposition of a penalty of suspension for more than
thirty days, or fine in an amount exceeding thirty days'
salary, demotion in rank or salary or transfer, removal
or dismissal from office. A complaint may be filed directly
with the Commission by a private citizen against a
government official or employee in which case it may hear
and decide the case or it may deputize any department or
agency or official or group of officials to conduct the
investigation. The results of the investigation shall be
submitted to the Commission with recommendation as to
the penalty to be imposed or other action to be taken.
(2) The Secretaries and heads of agencies and
instrumentalities, provinces, cities and municipalities shall
have jurisdiction to investigate and decide matters
involving disciplinary action against officers and employees
under their jurisdiction. Their decisions shall be final in
case the penalty imposed is suspension for not more than
thirty days or fine in an amount not exceeding thirty days'
salary. In case the decision rendered by a bureau or office
head is appealable to the Commission, the same may be
initially appealed to the department and finally to the
Commission and pending appeal, the same shall be
executory except when the penalty is removal, in which
case the same shall be executory only after confirmation
by the Secretary concerned."[Emphasis Supplied]
It is only after appealing the case to the CSC that it can be elevated
to the CA via a petition for review under Rule 43 of the Rules of
Court. From there, said case can be appealed to the Court through a
petition for review on certiorari under Rule 45.
Unfortunately, petitioners chose the wrong remedy. Instead of
appealing their dismissal by the PEA to the CSC, they chose to
question it before the CA.
For their failure to appeal to the proper forum, the decision of the
PEA dismissing them has become final and executory. It should be
emphasized that "the right to appeal is a statutory right and the party
who seeks to avail himself of the same must comply with the
requirements of the law. Failure to do so, the right to appeal is
lost."31
As petitioners dismissal has become final and executory, the Court
no longer has the power to review and act on the matter.
There was no violation of petitioners right to due process and
security of tenure
Even granting that this Court can still review the PEA action to
terminate the petitioners, they have not shown that their right to due
process and security of tenure was violated.

Despite the claim of petitioners that the decision to dismiss them

was upon orders of the President or upon undue pressure exerted

Petitioners argue that they were denied due process because their
order of dismissal was not accompanied by any justification from the
PEA Board of Directors who merely relied on the findings of PAGC.

(5) The decision must be rendered on the evidence

presented at the hearing, or at least contained in the
record and disclosed to the parties affected;

This argument, however, deserves scant consideration.

(6) The tribunal must act on its own independent

consideration of the law and facts of the controversy, and
not simply accept the view of a subordinate in arriving at a
decision; and

As conversely pointed out by respondents, petitioners cannot claim

that their dismissal was unattended by the requisite due process
because they were given the opportunity to be heard in the course
of PAGCs investigation.
Indeed, as career service officers, the petitioners enjoy security of
tenure as guaranteed under the 1987 Constitution.32 This is further
reiterated in Section 36(a) of P.D. No. 807, otherwise known as the
Civil Service Decree of the Philippines, which clearly provides that
"no officer or employee in the Civil Service shall be suspended or
dismissed except for cause as provided by law and after due
process."
The tenurial protection accorded to a civil servant is a guaranty of
both procedural and substantive due process. Procedural due
process requires that the dismissal, when warranted, be effected
only after notice and hearing. On the other hand, substantive due
process requires, among others, that the dismissal be for legal
cause, which must relate to and effect the administration of the office
of which the concerned employee is a member of and must be
restricted to something of a substantial nature directly affecting the
rights and interests of the public.33
Nevertheless, the right to security of tenure is not tantamount to
immunity from dismissal. Petitioners cannot seek absolute protection
from this constitutional provision. As long as their dismissal is for a
legal cause and the requirements of due process were met, the law
will not prevent their removal from office.
Per records of the case, the exercise of disciplinary action against
petitioners was justified because (1) they committed acts punishable
under the anti-graft laws; and (2) their conduct was prejudicial to the
best interest of the service.34 Thus, their removal from office was for
a legal cause.
Anent the alleged failure of respondents to observe due process,
well-established is the rule that the essence of due process in
administrative proceedings is the opportunity to explain ones side or
seek a reconsideration of the action or ruling complained of, and to
submit any evidence he may have in support of his defense. 35 The
demands of due process are sufficiently met when the parties are
given the opportunity to be heard before judgment is rendered.36 In
the landmark case of Ang Tibay v. Court of Industrial Relations,37 this
Court laid down the cardinal and primary rights to be observed and
respected in administrative proceedings:
(1) The right to a hearing which includes the right of the
party interested or affected to present his own case and
submit evidence in support thereof;
(2) The tribunal must consider the evidence presented;
(3) The decision must have some evidence to support a
finding or conclusion;
(4) The evidence must be substantial (that is, such
relevant evidence as a reasonable mind accepts as
adequate to support a conclusion);

(7) The tribunal should, in all controversial questions,

render its decision in such a manner that the parties to the
proceeding can know the various issues involved and the
reasons for the decisions rendered.38
In this regard, petitioners actively participated in the proceedings
before PAGC where they were afforded the opportunity to explain
their actions through their memoranda. The essence of due process
is the right to be heard and this evidently was afforded to them.
Thus, petitioners assertion that their dismissal was unattended by
the requisite due process cannot be sustained.1avvphi1
In sum, the removal from office of petitioners was valid. PEA
dismissed them for cause and in accordance with the requisites of
due process. Petitioners, as PEA officers and employees, are under
the disciplining authority of the PEA Board, pursuant to Section 11 of
P.D. No. 1084, the Charter of the Public Estates Authority,39 which
states that:
Section 11. Appointment, control and discipline of personnel. The
Board, upon recommendation of the General Manager of the
Authority, shall appoint the officers and employees of the Authority
and its subsidiaries; fix their compensation, allowances and benefits,
their working hours and such other conditions of employment as it
may deem proper; grant them leaves of absence under such
regulations as it may promulgate; discipline and/or remove them for
cause; and establish and maintain a recruitment and merit system
for the Authority and its affiliates and subsidiaries. (Emphases
supplied)
At any rate, as earlier stated, as the petitioners did not appeal the
decision of the PEA to dismiss them to the CSC, it has become final
and executory and the Court can no longer review it.
WHEREFORE, the petitions are DENIED.
SO ORDERED.
likewise require the presentation of evidence from the parties. Verily,
the conclusion in one proceeding would amount to the adjudication
of the merits on the other that is, a favorable ruling from the LMB
would have virtually removed any and all existing "clouds" from the
petitioners titles to the subject property; in the same vein, a
declaration of the indefeasibility of TCT Nos. 131918 and 131919
would preempt any ruling of the LMB on the matter.
Indeed, the underlying principle of litis pendentia is the theory that a
party is not allowed to vex another more than once regarding the
same subject matter and for the same cause of action. This theory is
founded on the public policy that the same subject matter should not
be the subject of controversy in court more than once in order that
possible conflicting judgments may be avoided, for the sake of the
stability of the rights and status of persons.31The RTC of Muntinlupa
City, Branch 205, recognized this doctrine when it dismissed SP
Civil Action No. 02-237 to avoid the possibility of two contradictory
decisions on the question of the validity of the subject titles.

In any case, should the petitioner disagree with the ruling of the
LMB, it is not precluded from taking the matter up to with the courts
of law.
Fourth. To determine whether a party violated the rule against forum
shopping, the test applied is whether the elements of litis
pendentia are present or whether a final judgment in one case will
amount to res judicata in another.32 Considering our pronouncement
that the requisites of litis pendentia barred the filing of SP Civil
Action No. 02-237, the RTC correctly dismissed the same on the
additional ground of forum shopping.
WHEREFORE, considering the foregoing, the petition is DENIED for
lack of merit. The Order of the Regional Trial Court of Muntinlupa
City, Branch 205, dismissing SP Civil Action No. 02-237 on the
ground of litis pendentia and forum shopping, is AFFIRMED.

predecessors-in-interest for the lots, and ordered all those in privity

with them (specifically including the petitioner) to vacate the lots and
to remove their improvements thereon. The DENR Secretary
affirmed on February 7, 1989 the Bureau of Lands December 4,
1985 decision. Recourse to the Office of the President (OP) had
been unavailing, and the DENR Regional Office No. 2 issued on
December 10, 1996 and June 6, 2000 alias writs of execution
pursuant to the OPs decision.
The DENR Regional Office No. 2, through Regional Executive
Director Alfredo S. Pascual (respondent), moved to dismiss the
complaint for failure to state a cause of action. It argued that the
petitioner had no legal right or title to file the complaint since the final
and executory Bureau of Lands December 4, 1985 decision ruled
that the petitioner was not entitled to possess the lots.
THE RTC"s RULING

SO ORDERED.

G.R. No. 169272

July 11, 2012

NATIONAL SPIRITUAL ASSEMBLY OF THE BAHA'IS OF THE

PHILIPPINES, represented by its Secretary General, Petitioner,
vs.
ALFREDO S. PASCUAL, in his capacity as the Regional
Executive Director, Department of Environmental and Natural
Resources, Regional Office No. 32, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by the National
Spiritual Assembly of the Bahais of the Philippines (petitioner) to
assail the December 29, 2004 decision2 and the June 28, 2005
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 66186.
The CA decision set aside the June 20, 2001 order4 of the Regional
Trial Court (RTC) of Santiago City, Branch 36, in Civil Case No. 362931 and dismissed the petitioners complaint for quieting of title.
The CA resolution denied the petitioners subsequent motion for
reconsideration.
FACTUAL BACKGROUND
On December 11, 2000, the petitioner filed a complaint with the RTC
for "quieting of title, injunction, annulment of alias writ of execution,
with prayer for temporary restraining order, preliminary prohibitory
injunction, and damages" against Silverio Songcuan and/or his
heirs, the Secretary of the Department of Environment and Natural
Resources (DENR), and the Regional Executive Director of the
DENR, Regional Office No. 2, Tuguegarao, Cagayan.5
The petitioner alleged that it is the lawful and absolute owner of two
(2) parcels of land, known as Cadastral Lot Nos. 3 and 361, together
with the two-storey building thereon, situated in Victory Sur,
Santiago City, acquired through a sale in 1967 from Armando Valdez
and Emma Valdez, respectively, who, in turn, acquired ownership
from Marcelina Ordoo. The petitioner had been in open, continuous
and adverse possession for a period of more than thirty (30) years,
and a cloud exists on its title because of an invalid December 4,
1985 decision of the Bureau of Lands.6 This invalid decision rejected
the miscellaneous sales applications of the petitioners

In its June 20, 2001 order, the RTC denied the motion to dismiss,
finding that the Bureau of Lands December 4, 1985 decision was
not yet final and executory since the OPs ruling on the appeal was
"unavailable."7
The respondent elevated his case to the CA via a Rule 65 petition
for certiorari, questioning the propriety of the RTCs denial of his
motion to dismiss.
THE CAs RULING
In its December 29, 2004 decision, the CA set aside the RTCs order
and dismissed the complaint for quieting of title for failure to state a
cause of action. It found that the respondents admission of the
Bureau of Lands adverse December 4, 1985 decision precluded the
respondents claim over the lots. The Bureau of Lands decision,
being final and executory, is binding and conclusive upon the
petitioner. Even assuming that the OPs ruling on the appeal was still
"unavailable," the RTC should have dismissed the complaint for
prematurity; an action to quiet title is not the proper remedy from an
adverse decision issued by an administrative agency in the exercise
of its quasi-judicial function.8
When the CA denied9 on June 28, 2005 the motion for
reconsideration that followed, the petitioner filed the present petition.
THE PETITION
The petitioner argues that the complaint sufficiently stated a cause
of action when it alleged that the petitioner is in open, exclusive,
continuous, public and uninterrupted possession of the lots for more
than thirty (30) years in the concept of an owner, and that the
December 4, 1985 decision of the Bureau of Lands is invalid since
the lots ceased to be public land upon the petitioners open,
exclusive, continuous, public and uninterrupted possession of the
lots for more than thirty (30) years in the concept of an owner,
pursuant to The Director of Lands v. IAC.10
THE CASE FOR THE RESPONDENT
The respondent submits that the petitioner has no cause of action
because the Bureau of Lands December 4, 1985 decision is final,
precluding whatever ownership rights the petitioner may have had
on the lots; the petitioner had slept on its rights when it failed to
initiate the proper judicial remedies against the ruling; the doctrine of
primary jurisdiction disallowed the judicial determination of the lots
ownership since the qualification of applicants in miscellaneous

10

sales applications, as well as the identity of public lands, was

subject to the Bureau of Lands technical determination.

from being cast upon plaintiffs rights, interest or title to

said property;

THE ISSUE

10. This so-called cloud is that Decision/Order issued by

the Bureau of Lands dated December 4, 1985, the
dispositive [portion] of which reads as follows:

The issue in this case is whether the CA committed a reversible

error in finding that the RTC committed a grave abuse of discretion
in not dismissing the petitioners complaint for quieting of title for
failure to state a cause of action.
OUR RULING
The petition lacks merit as the CA committed no reversible
error in its ruling.
A cause of action is the act or omission by which a party violates a
right of another.
A complaint states a cause of action when it contains three essential
elements: (1) a right in favor of the plaintiff by whatever means and
whatever law it arises; (2) the correlative obligation of the defendant
to respect such right; and (3) the act or omission of the defendant
violates the right of the plaintiff. If any of these elements is absent,
the complaint becomes vulnerable to a motion to dismiss on the
ground of failure to state a cause of action.11
"Failure to state a cause of action refers to the insufficiency of
allegation in the pleading. In resolving a motion to dismiss based on
the failure to state a cause of action only the facts alleged in the
complaint must be considered. The test is whether the court can
render a valid judgment on the complaint based on the facts alleged
and the prayer asked for."12
Under Articles 47613 and 47714 of the Civil Code, there are two (2)
indispensable requisites in an action to quiet title: (1) that the plaintiff
or complainant has a legal or an equitable title to or interest in the
real property subject of the action; and (2) that a deed, claim,
encumbrance or proceeding is claimed to be casting cloud on his
title.
In the present case, the complaint alleges that:
3. Plaintiff has been in open, exclusive, continuous, public
and uninterrupted possession in the concept of owner of
the above-mentioned Lots 3 and 361 for more than thirty
(30) years since the time plaintiff bought said lots in 1967
until the present. That plaintiff bought the above-mentioned
lots both on February 6, 1967 from the following vendors:
Armando Valdez (for Lot 3) and Emma Valdez (for Lot
361). x x x;
xxxx
9. The reason why plaintiff is filing this case for quieting of
title with prayer for restraining order and/or injunction
(preliminary and later on permanent) is due to the fact that
there exists a cloud on the plaintiffs ownership and/or title
over Lots 3 and 361 by reason of a document, record,
claim, encumbrance, or proceeding which is apparently
valid or effective, but is in truth and in fact invalid,
ineffective, voidable and/or unenforceable and may be
prejudicial to plaintiffs ownership, rights and/or title. Hence
this action to remove such cloud or prevent such cloud

"WHEREFORE, the Miscellaneous Sales Application Nos.

V-65683, V-75134 and (II-2) 1047 of
Marcelina Ordoo, Armando Valdez and Ricardo Gonzaga
are hereby rejected forfeiting in favor of the government
any amount paid on account thereof. Respondents
Marcelina Ordoo, Armando Valdez, and Dionisio
Gonzaga and all those in privity with them including the
National Spiritual Assembly of the Bahais shall, within
sixty (60) days from receipt of a copy hereof, vacate Lots
3, 360 and 361 of Ccs-116 and remove their improvements
thereon. One District Land Officer concerned shall
thereafter take control and administration of the
aforementioned lot until such time that the same can be
disposed of in accordance with law. Protestant Silverio
Songcuan shall file his appropriate public land application
for Lot 361, Ccs-116 immediately upon the finality of this
order."
xxxx
11. A Motion for Reconsideration was filed on the
aforementioned Decision, but the same was denied in an
Order dated June 30, 1986. x x x;
12. Both the December 4, 1985 Decision and the Order
dated June 30, 1986 were appealed by herein plaintiff to
the Office of the Secretary of the DENR. However, the
appeal was dismissed and the Decision and Order
appealed from [were] affirmed in a Decision dated
February 7, 1989. x x x. That Ricardo Gonzagas recourse
to the Office of the President was likewise unavailing;
13. Subsequently Alias Writs of Execution were issued
pursuant to the above Decision, one such writ is dated
December 10, 1996, while the other one is dated June 6,
2000. x x x;
xxxx
PRAYER
WHEREFORE, it is respectfully prayed of this Honorable Court, after
due notice and hearing to issue judgment:
1. Declaring the plaintiff to be the true and lawful x x x
possessor of Lots 3 and 361 all situated in Victory Sur,
Santiago City;
] to be null and void and having no effect whatsoever as far
as plaintiffs rights of possession, ownership over Lots 3
and 361.2. Declaring defendants claims, documents or
proceedings particularly the above quoted Decision and
subsequent Writs of Execution issued by the DENR and/or
Bureau of Lands [15

11

From these allegations, we find it clear that the petitioner no longer

had any legal or equitable title to or interest in the lots.1wphi1 The
petitioners status as possessor and owner of the lots had been
settled in the final and executory December 4, 1985 decision of the
Bureau of Lands that the DENR Secretary and the OP affirmed on
appeal. Thus, the petitioner is not entitled to the possession and
ownership of the lots.
Jurisprudence teaches us that the decisions and orders of
administrative agencies, such as the Bureau of Lands, rendered
pursuant to their quasi-judicial authority, upon finality, have the force
and binding effect of a final judgment within the purview of the
doctrine of res judicata.16

SO ORDERED.
G.R. No. 173840

April 25, 2012

SAMAR II ELECTRIC COOPERATIVE, INC. (SAMELCO II) AND

ITS BOARD OF DIRECTORS, composed of DEBORAH T.
MARCO (Immediate Past President), ATTY. MEDINO L. ACUBA,
ENGR. MANUEL C. OREJOLA, ALFONSO F. QUILAPIO, RAUL
DE GUZMAN and PONCIANO R. ROSALES (General Manager
and Ex OfficioDirector), Petitioners,
vs.
ANANIAS D. SELUDO, JR., Respondent.
DECISION

The foundation principle upon which the doctrine rests is that the
parties ought not to be permitted to litigate the same issue more
than once; that x x x a right or fact [that] has been judicially tried and
determined by a [tribunal or] court of competent jurisdiction x x x
should be conclusive upon the parties and those in privity with them
in law or estate[, so long as it remains unreversed].17
Accordingly, the petitioner is now barred from challenging the validity
of the final and executory Bureau of Lands December 4, 1985
decision.

PERALTA, J.:
Assailed in the present petition for review on certiorari under Rule 45
of the Rules of Court are the Decision1 and Resolution2 dated
January 26, 2006 and July 12, 2006, respectively, of the Court of
Appeals (CA) in CA-G.R. CEB SP No. 01175. The CA Decision
dismissed petitioners' petition for certiorari and affirmed the Orders
of the Regional Trial Court (RTC) of Calbiga, Samar, Branch 33,
dated May 6, 2005 and September 15, 2005, while the CA
Resolution denied petitioners' Motion for Reconsideration.

WE CONCUR:
ANTONIO T. CARPIO
Senior Associate Justice
Chairperson
JOSE PORTUGAL PEREZ
Associate Justice

MARIA LOURDES P.A.

SERENO
Associate Justice

BIENVENIDO L. REYES
Associate Justice
C E R T I F I C ATI O N
I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer
or the opinion or the Court's Division.
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296, The Judiciary Act of 1948, as amended)
Indeed, a final and executory decision can only be annulled by a
petition to annul it on the ground of extrinsic fraud and lack of
jurisdiction, or by a petition for relief from a final order or judgment
under Rule 38 of the Revised Rules of Court.18 We find it significant
that the petitioner filed no such petition; instead, it filed an action to
quiet title to assail the allegedly invalid final and executory
December 4, 1985 decision of the Bureau of Lands. Well-settled is
the rule that once a judgment becomes final and executory, it can no
longer be disturbed, altered or modified in any respect, except to
correct clerical errors or to make nunc pro tunc entries. Nothing
further can be done to a final judgment except to execute it. 19 "The
prevailing party should not be denied the fruits of his victory by some
subterfuge devised by the losing party."20 In sum, in this case, the
petitioner opted for the wrong remedy and must now suffer for it.
WHEREFORE, we hereby DENY the petition for lack of merit, and
AFFIRM the December 29, 2004 decision and the June 28, 2005
resolution of the Court of Appeals in CA-G.R. SP No. 66186.
Costs against the petitioner.

Herein petitioner Samar II Electric Cooperative, Inc. (SAMELCO II)

was organized under the provisions of Presidential Decree (P.D.)
No. 269, otherwise known as the "National Electrification
Administration Decree," as amended by P.D. No. 1645. The
individual petitioners are members of SAMELCO II's Board of
Directors. Respondent was also a member of the SAMELCO II
Board of Directors having been elected thereto in 2002 and whose
term of office expired in May 2005.
The antecedent facts, as summarized by the CA, are as follows:
As members of the Board of Directors (BOD) of the petitioner Samar
II Electric Cooperative, Inc. (SAMELCO II), an electric cooperative
providing electric service to all members-consumers in all
municipalities within the Second Congressional District of the
Province of Samar, individual petitioners passed Resolution No. 5
[Series] of 2005 on January 22, 2005.
The said resolution disallowed the private respondent to attend
succeeding meetings of the BOD effective February 2005 until the
end of his term as director. The same resolution also disqualified
him for one (1) term to run as a candidate for director in the
upcoming district elections.
Convinced that his rights as a director of petitioner SAMELCO II had
been curtailed by the subject board resolution, private respondent
filed an Urgent Petition for Prohibition against petitioner SAMELCO
II, impleading individual petitioners as directors thereof, in the
Regional Trial Court (RTC) in Calbiga, Samar. The case was
docketed as Special Civil Case No. C-2005-1085 and was raffled to
Branch 33 of the said court x x x.
In his petition, private respondent prayed for the nullification of
Resolution No. 5, [Series] of 2005, contending that it was issued
without any legal and factual bases. He likewise prayed that a
temporary restraining order (TRO) and/or a writ of preliminary
injunction be issued to enjoin the individual petitioners from
enforcing the assailed board resolution.

12

Granting private respondent's prayer for a TRO, the public

respondent issued one, effective for seventy-two (72) hours which
effectivity was later on extended for another seventeen (17) days.
In their answer to the petition for prohibition, individual petitioners
raised the affirmative defense of lack of jurisdiction of the RTC over
the subject matter of the case. Individual petitioners assert that,
since the matter involved an electric cooperative, SAMELCO II,
primary jurisdiction is vested on the National Electrification
Administration (NEA).
In her assailed Order dated May 6, 2005, [the RTC judge] sustained
the jurisdiction of the court over the petition for prohibition and
barred the petitioners and/or their representatives from enforcing
Resolution No. 5 [Series] of 2005.
x x x3
Petitioners filed a motion for reconsideration, but the same was
denied by the RTC in its September 15, 2005 Order.
Petitioners then elevated the case to the CA via a special civil action
for certiorari, imputing grave abuse of discretion on the part of the
RTC in issuing its assailed Orders.
On January 26, 2006, the CA rendered its Decision dismissing
petitioners' petition for certiorari and affirming the assailed Orders of
the RTC.
Petitioners filed a motion for reconsideration, but it was denied by
the CA in its July 12, 2006 Resolution.
Hence, the instant petition with the following assigned errors:
(1)
IN ITS INTERPRETATION AND APPLICATION OF THE DOCTRINE
OF PRIMARY JURISDICTION, THE HONORABLE COURT OF
APPEALS COMMITTED LEGAL ERRORS IN LIMITING THE
DOCTRINE TO "CERTAIN MATTERS IN CONTROVERSIES
INVOLVING SPECIALIZED DISPUTES" AND IN UPHOLDING THE
JURISDICTION OF THE TRIAL COURT OVER THE URGENT
PETITION FOR PROHIBITION FILED BY RESPONDENT SELUDO
ON THE GROUND THAT THE ISSUES RAISED THEREIN "DO
NOT REQUIRE THE TECHNICAL EXPERTISE OF THE NEA"
(2)
THE HONORABLE COURT OF APPEALS, IN SUSTAINING THE
JURISDICTION OF THE TRIAL COURT, COMMITTED AN ERROR
OF LAW BY HOLDING THAT "A PERUSAL OF THE LAW
CREATING THE NEA DISCLOSES THAT THE NEA WAS NOT
GRANTED THE POWER TO HEAR AND DECIDE CASES
INVOLVING THE VALIDITY OF BOARD RESOLUTIONS
UNSEATING ANY MEMBER OF THE BOARD OF DIRECTORS"
AND THAT "NEITHER WAS IT GRANTED JURISDICTION OVER
PETITIONS FOR CERTIORARI, PROHIBITION OR MANDAMUS."
(3)
THE HONORABLE COURT OF APPEALS COMMITTED AN
ERROR OF LAW WHEN IT SUSTAINED THE JURISDICTION OF
[THE] TRIAL COURT OVER THE PETITION FOR PROHIBITION
DESPITE THE EXISTENCE OF APPEAL OR OTHER PLAIN,

SPEEDY AND ADEQUATE REMEDY AVAILABLE TO THEREIN

PETITIONER SELUDO.4
In their first assigned error, petitioners contend that the CA erred in
interpreting the doctrine of primary jurisdiction in a very limited
sense. Petitioners aver that in a number of cases, this Court applied
the doctrine of primary jurisdiction even in cases where the issues
involved do not require the technical expertise of administrative
bodies.
Petitioners also argue, in their second assignment of error, that it is
wrong for the CA to rule that there is nothing under the law creating
the National Electrification Administration (NEA), which grants the
said administrative body the power to ascertain the validity of board
resolutions unseating any member of the Board of Directors of an
electric cooperative. Citing the provisions of P.D. Nos. 269 and
1645, petitioners aver that the NEA is empowered to determine the
validity of resolutions passed by electric cooperatives.
In their third assigned error, petitioners assert that respondent is
precluded from filing a petition for prohibition considering that, under
the applicable laws, it has an adequate remedy in the ordinary
course of law.
The Court finds the petition meritorious. As the assigned errors are
interrelated, the Court will discuss them jointly.
Section 10, Chapter II of P.D. No. 269, as amended by Section 5 of
P.D. No. 1645, provides:
Section 5. Section 10, Chapter II of Presidential Decree No. 269 is
hereby amended to read as follows:
Section 10. Enforcement Powers and Remedies. In the exercise
of its power of supervision and control over electric
cooperatives and other borrower, supervised or controlled
entities, the NEA is empowered to issue orders, rules and
regulations and motu proprio or upon petition of third parties,
to conduct investigations, referenda and other similar actions
in all matters affecting said electric cooperatives and other
borrower, or supervised or controlled entities.
If the electric cooperative concerned or other similar entity fails after
due notice to comply with NEA orders, rules and regulations and/or
decisions, or with any of the terms of the Loan Agreement, the NEA
Board of Administrators may avail of any or all of the following
remedies:
x x x x.
(e) Take preventive and/or disciplinary measures including
suspension and/or removal and replacement of any or all of the
members of the Board of Directors, officers or employees of the
Cooperative, other borrower institutions or supervised or controlled
entities as the NEA Board of Administrators may deem fit and
necessary and to take any other remedial measures as the law or
the Loan Agreement may provide.
x x x x (Emphasis supplied.)
In addition, Subsection (a), Section 24, Chapter III of P.D. No. 269,
as amended by Section 7 of P.D. No. 1645, states:

13

Section 7. Subsection (a), Section 24, Chapter III of Presidential

Decree No. 269 is hereby amended to read as follows:
Section 24. Board of Directors. (a) The Management of a
Cooperative shall be vested in its Board, subject to the
supervision and control of NEA which shall have the right to be
represented and to participate in all Board meetings and
deliberations and to approve all policies and resolutions.
The composition, qualifications, the manner of elections and filling of
vacancies, the procedures for holding meetings and other similar
provisions shall be defined in the by-laws of the Cooperative subject
to NEA policies, rules and regulations.
x x x. (Emphasis supplied.)
A comparison of the original provisions of Sections 10 and 24 of P.D.
No. 269 and the amendatory provisions under Sections 5 and 7 of
P.D. No. 1645 would readily show that the intention of the framers of
the amendatory law is to broaden the powers of the NEA.
A clear proof of such expanded powers is that, unlike P.D. No. 269,
P.D. No. 1645 expressly provides for the authority of the NEA to
exercise supervision and control over electric cooperatives. In
administrative law, supervision means overseeing or the power or
authority of an officer to see that subordinate officers perform their
duties.5 If the latter fail or neglect to fulfill them, the former may take
such action or step as prescribed by law to make them perform their
duties.6 Control, on the other hand, means the power of an officer to
alter or modify or nullify or set aside what a subordinate officer had
done in the performance of his duties and to substitute the judgment
of the former for that of the latter.7 Section 38 (1), Chapter 7, Book 4
of Executive Order No. 292, otherwise known as the Administrative
Code of 1987 provides, thus:
Supervision and control shall include the authority to act directly
whenever a specific function is entrusted by law or regulation to a
subordinate; direct the performance of duty; restrain the
commission of acts; review, approve, reverse or modify acts
and decisions of subordinate officials or units; determine
priorities in the execution of plans and programs; and prescribe
standards, guidelines, plans and programs x x x. (Emphasis
supplied.)
The Court, therefore, finds it erroneous on the part of the CA to rule
that the doctrine of primary jurisdiction does not apply in the present
case. It is true that the RTC has jurisdiction over the petition for
prohibition filed by respondent.8 However, the basic issue in the
present case is not whether the RTC has jurisdiction over the
petition for prohibition filed by respondent; rather, the issue is who
between the RTC and the NEA has primary jurisdiction over the
question of the validity of the Board Resolution issued by SAMELCO
II. A careful reading of the above-quoted provisions of P.D. No. 1645
clearly show that, pursuant to its power of supervision and control,
the NEA is granted the authority to conduct investigations and other
similar actions as well as to issue orders, rules and regulations with
respect to all matters affecting electric cooperatives. Certainly, the
matter as to the validity of the resolution issued by the Board of
Directors of SAMELCO II, which practically removed respondent
from his position as a member of the Board of Directors and further
disqualified him to run as such in the ensuing election, is a matter
which affects the said electric cooperative and, thus, comes within
the ambit of the powers of the NEA as expressed in Sections 5 and
7 of P.D. No. 1645.

In this regard, the Court agrees with petitioners' argument that to

sustain the petition for prohibition filed by respondent with the RTC
would constitute an unnecessary intrusion into the NEA's power of
supervision and control over electric cooperatives.
Based on the foregoing discussions, the necessary conclusion that
can be arrived at is that, while the RTC has jurisdiction over the
petition for prohibition filed by respondent, the NEA, in the exercise
of its power of supervision and control, has primary jurisdiction to
determine the issue of the validity of the subject resolution.
It may not be amiss to reiterate the prevailing rule that the doctrine
of primary jurisdiction applies where a claim is originally cognizable
in the courts and comes into play whenever enforcement of the
claim requires the resolution of issues which, under a regulatory
scheme, has been placed within the special competence of an
administrative agency.9 In such a case, the court in which the claim
is sought to be enforced may suspend the judicial process pending
referral of such issues to the administrative body for its view or, if the
parties would not be unfairly disadvantaged, dismiss the case
without prejudice.10
Corollary to the doctrine of primary jurisdiction is the principle of
exhaustion of administrative remedies.1wphi1 The Court, in a long
line of cases,11 has held that before a party is allowed to seek the
intervention of the courts, it is a pre-condition that he avail himself of
all administrative processes afforded him. Hence, if a remedy within
the administrative machinery can be resorted to by giving the
administrative officer every opportunity to decide on a matter that
comes within his jurisdiction, then such remedy must be exhausted
first before the courts power of judicial review can be sought.12 The
premature resort to the court is fatal to ones cause of
action.13 Accordingly, absent any finding of waiver or estoppel, the
case may be dismissed for lack of cause of action.14
The doctrine of exhaustion of administrative remedies is based on
practical and legal reasons.15 The availment of administrative
remedy entails lesser expenses and provides for a speedier
disposition of controversies.16Furthermore, the courts of justice, for
reasons of comity and convenience, will shy away from a dispute
until the system of administrative redress has been completed and
complied with, so as to give the administrative agency concerned
every opportunity to correct its error and dispose of the case. 17
True, the doctrines of primary jurisdiction and exhaustion of
administrative remedies are subject to certain exceptions, to wit: (a)
where there is estoppel on the part of the party invoking the
doctrine; (b) where the challenged administrative act is patently
illegal, amounting to lack of jurisdiction; (c) where there is
unreasonable delay or official inaction that will irretrievably prejudice
the complainant; (d) where the amount involved is relatively so small
as to make the rule impractical and oppressive; (e) where the
question involved is purely legal and will ultimately have to be
decided by the courts of justice; (f) where judicial intervention is
urgent; (g) where the application of the doctrine may cause great
and irreparable damage; (h) where the controverted acts violate due
process; (i) where the issue of non-exhaustion of administrative
remedies has been rendered moot; (j) where there is no other plain,
speedy and adequate remedy; (k) where strong public interest is
involved; and (l) in quo warranto proceedings.18
Respondent, however, failed to show that the instant case falls
under any of the above-enumerated exceptions. While respondent
alleged in his Urgent Petition for Prohibition that the subject
resolution was issued with grave abuse of discretion and in violation
of his right to due process, mere allegation of arbitrariness will not

14

suffice to vest in the trial court the power that has been specifically
granted by law to special government agencies.19Moreover, the
issues raised in the petition for prohibition, particularly the issue of
whether or not there are valid grounds to disallow respondent from
attending SAMELCO's Board meetings and to disqualify him from
running for re-election as a director of the said Board, are not purely
legal questions. Instead, they involve a determination of factual
matters which fall within the competence of the NEA to ascertain.

less, covered by Transfer Certificate of Title (TCT) No. 12768,

issued by the Register of Deeds for Mandaluyong City.

Finally, the Court agrees with petitioners' contention that the

availability of an administrative remedy via a complaint filed before
the NEA precludes respondent from filing a petition for prohibition
before the court. It is settled that one of the requisites for a writ of
prohibition to issue is that there is no plain, speedy and adequate
remedy in the ordinary course of law.20 In order that prohibition will
lie, the petitioner must first exhaust all administrative
remedies.21 Thus, respondent's failure to file a complaint before the
NEA prevents him from filing a petition for prohibition before the
RTC.

[Private respondent] MEGAWORLD thereafter secured the

necessary clearances, licenses and permits for the condominium
project, including: (1) a CLV, issued on October 25, 1994, and a
Development Permit, issued on November 11, 1994, both by the
[public respondent] HLURB; (2) an ECC, issued on March 15, 1995,
by the Department of Environment and Natural Resources (DENR);
(3) a Building Permit, issued on February 3, 1995, by the Office of
the Building Official of Mandaluyong City; and (4) a Barangay
Clearance dated September 29, 1994, from the office of the
Barangay Chairman of Addition Hills.

WHEREFORE, the instant petition is GRANTED. The questioned

Decision and Resolution of the Court of Appeals dated January 26,
2006 and July 12, 2006, respectively, as well as the Orders of the
Regional Trial Court of Calbiga, Samar, Branch 33, dated May 6,
2005 and September 15, 2005, are REVERSED and SET ASIDE. A
new judgment is entered DISMISSING the Urgent Petition for
Prohibition (Special Civil Action No. C-2005-1085) filed by
respondent Ananias D. Seludo, Jr.

Thereafter, construction of the condominium project began, but on

June 30, 1995, the plaintiff-appellee AHMCSO filed a complaint
before the Regional Trial Court of Pasig City, Branch 158, docketed
as Civil Case No. 65171, for yo (sic) annul the Building Permit, CLV,
ECC and Development Permit granted to MEGAWORLD; to prohibit
the issuance to MEGAWORLD of Certificate of Registration and
License to Sell Condominium Units; and to permanently enjoin local
and national building officials from issuing licenses and permits to
MEGAWORLD.

Sometime in 1994, [private respondent] MEGAWORLD

conceptualized the construction of a residential condominium
complex on the said parcel of land called the Wack-Wack Heights
Condominium consisting of a cluster of six (6) four-storey buildings
and one (1) seventeen (17) storey tower.

SO ORDERED.
G.R. No. 175039

April 18, 2012

ADDITION HILLS MANDALUYONG CIVIC & SOCIAL

ORGANIZATION, INC., Petitioner,
vs.
MEGAWORLD PROPERTIES & HOLDINGS, INC., WILFREDO I.
IMPERIAL, in his capacity as Director, NCR, and HOUSING AND
LAND USE REGULATORY BOARD, DEPARTMENT OF NATURAL
RESOURCES,Respondents.
DECISION

On July 20, 1995, [private respondent] MEGAWORLD filed a Motion

to Dismiss the case for lack of cause of action and that jurisdiction
over the case was with the [public respondent] HLURB and not with
the regular courts.
On July 24, 1994, the RTC denied the motion to dismiss filed by
[private respondent] MEGAWORLD.
On August 3, 1995, [private respondent] MEGAWORLD filed its
Answer.
On November 15, 1995, pre-trial was commenced.

LEONARDO-DE CASTRO, J.:

Thereafter, trial on the merits ensued.4

This is a petition for review on certiorari under Rule 45 of the 1997

Rules of Civil Procedure of the Decision1 dated May 16, 2006 as
well as the Resolution2 dated October 5, 2006 of the Court of
Appeals in CA-G.R. CV No. 63439, entitled "ADDITION HILLS
MANDALUYONG CIVIC & SOCIAL ORGANIZATION INC. vs.
MEGAWORLD PROPERTIES & HOLDINGS, INC., WILFREDO I.
IMPERIAL in his capacity as Director, NCR, and HOUSING AND
LAND USE REGULATORY BOARD, DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES." In effect, the
appellate courts issuances reversed and set aside the
Decision3 dated September 10, 1998 rendered by the Regional Trial
Court (RTC) of Pasig City, Branch 158 in Civil Case No. 65171.

The trial court rendered a Decision dated September 10, 1998 in

favor of petitioner, the dispositive portion of which reads:

The facts of this case, as narrated in the assailed May 16, 2006
Decision of the Court of Appeals, are as follows:
[Private respondent] MEGAWORLD was the registered owner of a
parcel of land located along Lee Street, Barangay Addition Hills,
Mandaluyong City with an area of 6,148 square meters, more or

WHEREFORE, in view of the foregoing, the Certificate of Locational

Viability, the Development Permit and the Certificate of Registration
and License to Sell Condominium Units, all issued by defendant
Wilfredo I. Imperial, National Capital Region Director of the Housing
and Land Use Regulatory Boad (HLURB-NCR) are all declared void
and of no effect. The same goes for the Building Permit issued by
defendant Francisco Mapalo of Mandaluyong City. In turn, defendant
Megaworld Properties and Holdings Inc. is directed to rectify its
Wack Wack Heights Project for it to conform to the requirements of
an R-2 zone of Mandaluyong City and of the Metro Manila Zoning
Ordinance 81-01.
Costs against these defendants.5
Private respondent appealed to the Court of Appeals which issued
the assailed May 16, 2006 Decision which reversed and set aside

15

the aforementioned trial court ruling, the dispositive portion of which

reads:
WHEREFORE, premises considered, the September 10, 1998
Decision of the Regional Trial Court of Pasig City, Branch 158,
rendered in Civil Case No. 65171 is hereby REVERSED and SET
ASIDE and a new one entered DISMISSING the complaint.6
As can be expected, petitioner moved for reconsideration; however,
the Court of Appeals denied the motion in its assailed October 5,
2006 Resolution.

VARIANCE TO REQUIREMENTS OF METRO

MANILA COMMISSION ORDINANCE NO. 8101.
2. WHETHER OR NOT THE TRIAL COURT
ERRED IN HOLDING THAT THE PROJECT DID
NOT MEET THE REQUIREMENTS OF
SECTION 3(B), ARTICLE VII OF METRO
MANILA COMMISSION ORDINANCE NO. 81-01
TO QUALIFY FOR AN EXCEPTION OR
DEVIATION.

Hence, the petitioner filed the instant petition and submitted the
following issues for consideration:

B. WHETHER OR NOT THE TRIAL COURT ERRED IN

HOLDING THAT THE DEVELOPMENT PERMIT WAS
IMPROPERLY AND IRREGULARLY ISSUED.

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT

FOUND THAT PETITIONER FAILED TO EXHAUST
ADMINISTRATIVE REMEDIES BEFORE SEEKING JUDICIAL
INTERVENTION FROM THE COURTS.

C. WHETHER OR NOT THE TRIAL COURT ERRED IN

HOLDING THAT THE PROJECT DEPRIVES THE
ADJACENT PROPERTIES OF AIR.9

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT

FOUND THAT THE CASE FILED BEFORE AND DECIDED BY THE
REGIONAL TRIAL COURT OF PASIG, BRANCH 158, DOES NOT
FALL UNDER ANY ONE OF THE EXCEPTIONS TO THE RULE ON
EXHAUSTION OF ADMINISTRATIVE REMEDIES.
WHETHER OR NOT THE COURT OF APPEALS (The Court)
ERRED WHEN IT FOUND THAT PETITIONER FAILED TO
EXHAUST ADMINISTRATIVE REMEDIES BEFORE SEEKING
JUDICIAL INTERVENTION FROM THE COURTS.
WHETHER OR NOT THE COURT OF APPEALS (The Court)
ERRED WHEN IT CONCLUDED THAT THE HLURB HAD
JURISDICTION OVER ACTIONS TO ANNUL CERTIFICATES OF
LOCATIONAL VIABILITY AND DEVELOPMENT PERMITS.7
On the other hand, private respondent put forth the following issues
in its Memorandum8:
I
WHETHER OR NOT THE PETITION FOR REVIEW IS FATALLY
DEFECTIVE FOR BEING IMPROPERLY VERIFIED.
II
WHETHER OR NOT THE COURT OF APPEALS CORRECTLY
ANNULLED AND SET ASIDE THE TRIAL COURTS DECISION
AND DISMISSED THE COMPLAINT FOR PETITIONERS FAILURE
TO EXHAUST ADMINISTRATIVE REMEDIES.
III
WHETHER OR NOT THE DECISION OF THE TRIAL COURT IS
CONTRARY TO LAW AND THE FACTS.
A. WHETHER OR NOT THE TRIAL COURT ERRED IN
HOLDING THAT THE CLV WAS IMPROPERLY AND
IRREGULARLY ISSUED.
1. WHETHER OR NOT THE TRIAL COURT
ERRED IN HOLDING THAT HLURB HAS NO
POWER TO GRANT AN EXCEPTION OR

We find the petition to be without merit.

At the outset, the parties in their various pleadings discuss issues,
although ostensibly legal, actually require the Court to make findings
of fact. It is long settled, by law and jurisprudence, that the Court is
not a trier of facts.10Therefore, the only relevant issue to be resolved
in this case is whether or not the remedy sought by the petitioner in
the trial court is in violation of the legal principle of the exhaustion of
administrative remedies.
We have consistently declared that the doctrine of exhaustion of
administrative remedies is a cornerstone of our judicial system. The
thrust of the rule is that courts must allow administrative agencies to
carry out their functions and discharge their responsibilities within
the specialized areas of their respective competence. The rationale
for this doctrine is obvious. It entails lesser expenses and provides
for the speedier resolution of controversies. Comity and
convenience also impel courts of justice to shy away from a dispute
until the system of administrative redress has been completed. 11
In the case of Republic v. Lacap,12 we expounded on the doctrine of
exhaustion of administrative remedies and the related doctrine of
primary jurisdiction in this wise:
The general rule is that before a party may seek the intervention of
the court, he should first avail of all the means afforded him by
administrative processes. The issues which administrative agencies
are authorized to decide should not be summarily taken from them
and submitted to a court without first giving such administrative
agency the opportunity to dispose of the same after due
deliberation.
Corollary to the doctrine of exhaustion of administrative remedies is
the doctrine of primary jurisdiction; that is, courts cannot or will not
determine a controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to the resolution of that
question by the administrative tribunal, where the question demands
the exercise of sound administrative discretion requiring the special
knowledge, experience and services of the administrative tribunal to
determine technical and intricate matters of fact.13
It is true that the foregoing doctrine admits of exceptions, such that
in Lacap, we also held:

16

Nonetheless, the doctrine of exhaustion of administrative remedies

and the corollary doctrine of primary jurisdiction, which are based on
sound public policy and practical considerations, are not inflexible
rules. There are many accepted exceptions, such as: (a) where
there is estoppel on the part of the party invoking the doctrine; (b)
where the challenged administrative act is patently illegal,
amounting to lack of jurisdiction; (c) where there is unreasonable
delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively small so as
to make the rule impractical and oppressive; (e) where the question
involved is purely legal and will ultimately have to be decided by the
courts of justice; (f) where judicial intervention is urgent; (g) when its
application may cause great and irreparable damage; (h) where the
controverted acts violate due process; (i) when the issue of nonexhaustion of administrative remedies has been rendered moot; (j)
when there is no other plain, speedy and adequate remedy; (k)
when strong public interest is involved; and, (l) in quo warranto
proceedings. x x x.14
Upon careful consideration of the parties contentions, we find that
none of the aforementioned exceptions exist in the case at bar.
What is apparent, however, is that petitioner unjustifiably failed to
exhaust the administrative remedies available with the Housing and
Land Use Regulatory Board (HLURB) before seeking recourse with
the trial court. Under the rules of the HLURB which were then in
effect, particularly Sections 4 and 6 of HLURB Resolution No. R391, Series of 1987 (Adopting the 1987 Rules of Procedure of the
Housing and Land Use Regulatory Board),15 a complaint to annul
any permit issued by the HLURB may be filed before the Housing
and Land Use Arbiter (HLA). Therefore, petitioners action to annul
the Certificate of Locational Viability (CLV) and the Development
Permit issued by the HLURB on October 25, 1994 and November
11, 1994, respectively, in favor of private respondent for its WackWack Heights Condominium Project should have been properly filed
before the HLURB instead of the trial court.
We quote with approval the Court of Appeals discussion of this
matter:
In the case at bar, plaintiff-appellee AHMCSO failed to exhaust the
available administrative remedies before seeking judicial
intervention via a petition for annulment. The power to act as
appellate body over decisions and actions of local and regional
planning and zoning bodies and deputized official of the board was
retained by the HLURB and remained unaffected by the devolution
under the Local Government Code.
Under Section 5 of Executive Order No. 648, series of 1981, the
Human Settlement Regulatory Commission (HSRC) later renamed
as Housing and Land Use Regulatory Board (HLURB), pursuant to
Section 1(c) of Executive Order No. 90, series of 1986, has the
power to:
f) Act as the appellate body on decisions and actions of local and
regional planning and zoning bodies of the deputized officials of the
Commission, on matters arising from the performance of these
functions.
In fact, Section 4 of E.O. No. 71 affirms the power of the HLURB to
review actions of local government units on the issuance of permits

Sec. 4. If in the course of evaluation of application for registration

and licensing of projects within its jurisdiction, HLURB finds that a

local government unit has overlooked or mistakenly applied a certain

law, rule or standard in issuing a development permit, it shall
suspend action with a corresponding advice to the local government
concerned, so as to afford it an opportunity to take appropriate
action thereon. Such return and advice must likewise be effected
within a period of thirty (30) days from receipt by HLURB of the
application.
Moreover, Section 18 and 19 of HSRC Administrative Order No. 20
provides:
Section 18. Oppossition to Application. Opposition to application
shall be considered as a complaint, the resolution of which shall be
a prerequisite to any action on the application. Complaints and other
legal processes shall be governed by the Rules of Procedure of the
Commission, and shall have the effect of suspending the
application.
Section 19. Complaints/Opposition Filed After the Issuance of
Locational Clearance.1wphi1 Temporary issuance of locational
permit or land transaction approval shall be acted upon by the Office
that issued the same. Such complaint shall not automatically
suspend the locational clearance, temporary use permit,
development permit or land transaction approval unless an order
issued by the commission to that effect.
The appropriate provisions of the Rules of Procedure governing
hearings before the Commission shall be applied in the resolution of
said complaint as well as any motion for reconsideration that may be
filed thereto, provided that if the complaint is directed against the
certificate of zoning compliance issued by the deputized zoning
administrator, the same shall be acted upon the Commissioner in
Charge for adjudication.
Under the rules of the HLURB then prevailing at the time this case
was filed, a complaint to annul any permit issued by the HLURB
may be filed before the Housing and Land Use Arbiter
(HLA). The decision of the HLA may be brought to the Board of
Commissioners by Petition for Certiorari and the decision of
the Board of Commissioners [is] appealable to the Office of the
President.16(Citations omitted; emphases supplied.)
It does not escape the attention of the Court that in its Reply,
petitioner admitted that it had a pending complaint with the HLURB
involving private respondents the Development Permit, the
Certificate of Registration and License to Sell Condominium Units,
aside from complaints with the Building Official of the Municipality
(now City) of Mandaluyong and the MMDA, when it instituted its
action with the trial court. As discussed earlier, a litigant cannot go
around the authority of the concerned administrative agency and
directly seek redress from the courts. Thus, when the law provides
for a remedy against a certain action of an administrative board,
body, or officer, relief to the courts can be made only after
exhausting all remedies provided therein. It is settled that the nonobservance of the doctrine of exhaustion of administrative remedies
results in lack of cause of action, which is one of the grounds in the
Rules of Court justifying the dismissal of the complaint. 17
In view of the foregoing discussion, we find it unnecessary to resolve
the other issues raised by the parties.
To conclude, it is our view that the Court of Appeals committed no
reversible error in setting aside the trial court decision and
dismissing said complaint.

17

WHEREFORE, premises considered, the petition is

hereby DENIED. The assailed Decision dated May 16, 2006 and the
Resolution dated October 5, 2006 of the Court of Appeals in CAG.R. CV No. 63439 are AFFIRMED.

On 27 January 1967, Celestino, for himself and as attorney-in-fact of

the other registered claim-owners, assigned their 57 mining claims
to petitioner.12

SO ORDERED.
G.R. No. 183573

In 1966, herein petitioner Dizon Copper-Silver Mines, Inc. was

organized.10 Among its incorporators were Celestino and his son,
herein respondent Dr. Luis D. Dizon.11

July 16, 2012

DIZON COPPER SILVER MINES, INC., Petitioner,

vs.
DR. LUIS D. DIZON, Respondent.
DECISION
PEREZ, J.:
For review1 are the Decision2 dated 9 May 2008 and
Resolution3 dated 1 July 2008 of the Court of Appeals in CA-G.R.
SP No. 99947. In the assailed decision, the Court of Appeals
declared as void ab initio petitioners applications for Mineral
Production Sharing Agreements (MPSA) but held as valid a similar
application of the respondent. The decision was a reversal of the
ruling4 of the Office of the President (OP) in O.P. Case No. 06-C-113
and a reinstatement of the previous orders5 issued by the Secretary
of the Department of Environment and Natural Resources (DENR).
The decretal portion of the decision of the appellate court
accordingly reads:6
WHEREFORE, the petition is GRANTED. The assailed decision
dated December 4, 2006 and resolution dated June 20, 2007 of the
Office of the President are hereby REVERSED and SET ASIDE. The
orders dated December 29, 2005 and February 14, 2006 issued by
the Secretary of the Department of Environment and Natural
Resources are REINSTATED.
The antecedents are as follows:
The 57 Mining Claims
On 13 November 1935, Celestino M. Dizon (Celestino) filed with the
Office of the Mining Recorder,7 Declarations of Location8 over fiftyseven (57) mining claims in San Marcelino, Zambales. The 57
mining claims, with an aggregate area of 513 hectares, were thereby
recorded in the following manner:9
1. Twenty-nine (29) mining claims were registered in the
name of Celestino.
2. Twelve (12) mining claims were registered in the name
of Maria D. Dizon, the wife of
3. Eleven (11) mining claims were registered in the name
of Helen D. Dizon, a daughter of Celestino.
4. Three (3) mining claims were registered in the name of
the heirs of Eustaquio L. Dizon, who was the father of
Celestino.
5. Two (2) mining claims were registered in the name of
the heirs of Tiburcia M. Dizon, who was the mother of
Celestino.

On 6 September 1975, petitioner entered into an Operating

Agreement13 with Benguet Corporation14 (Benguet). In such
agreement, petitioner authorized Benguet to, among others,
"explore, equip, develop and operate" the 57 mining claims.15
In 1977, Celestino died.
In 1978, the 57 mining claims became the subject of a mining lease
application16 with the Bureau of Mines.17Consequently, on 1
February 1980, the government issued five (5) Mining Lease
Contracts (MLCs) covering six (6) out of the 57 mining claims. They
are:18
1. MLC No. MRD-211 issued in favor of the heirs of
Celestino;
2. MLC No. MRD-212 issued in favor of the heirs of
Celestino;
3. MLC No. MRD-213 issued in favor of Maria D. Dizon;
4. MLC No. MRD-219 issued in favor of Helen D. Dizon;
5. MLC No. MRD-222 issued in favor of the heirs of
Celestino.
The MLCs were issued for a term of twenty-five (25) years, or up to
31 January 2005.19
The MPSA Applications
On 4 July 1991, Benguet filed an MPSA application with the
DENR.20 The application, designated as MPSA-P-III-16,21 seeks to
place all existing mining claims and interests then operated by
Benguet under production sharing agreements in line with Executive
Order No. 279 of 25 July 1987.22 Specifically, MPSA-P-III-16 covers
the following mining interests:23
1. Forty-two (42) mining claims24 of the Sagittarius Alpha
Realty Corporation;
2. Two (2) prospecting permits over two (2) parcels of
land25 of the Camalca Mining Corporation; and
3. The remaining 51 mining claims of petitioner are not
under MLCs.
On 3 March 1995, Republic Act No. 7942, or the Philippine Mining
Act of 1995, was enacted.
On 12 December 1997, Benguet and petitioner terminated their
Operating Agreement. In 2004, Benguet assigned MPSA-P-III-16 in
favor of the latter.26 On 22 October 2004, the DENR Mines and
Geosciences Bureau (MGB) Regional Office III signified its

18

acquiescence and recorded MPSA-P-III-16 in the name of

petitioner.27
On 16 December 2004, petitioner sent a letter to the DENR MGB
Regional Office III, requesting the said office to include the 6 mining
claims under MLCs in MPSA-P-III-16.28 On 4 January 2005, the
DENR MGB Regional Office III informed29 the petitioner of its
approval of the request and manifested that the 6 mining claims
under the MLCs will now be included in MPSA-P-III-16.

On 14 February 2006, the DENR Acting Secretary issued an

Order45 denying petitioners motion for reconsideration. The motion
for reconsideration of the petitioner was dismissed for being moot
and academic, on account of the fact that on the day before such
motion was filed, or on 17 January 2006, the DENR already
approved MPSA-P-III-05-05 and a full-fledged MPSA, designated as
MPSA No. 227-2006-III,46 was already issued in favor of the
respondent.47
Petitioner promptly filed an appeal48 to the Office of the President.

Despite the pendency of MPSA-P-III-16, petitioner nonetheless filed

with the DENR another MPSA application on 31 January 2005. This
time, petitioners application was designated as MPSA-P-III-030530 and covers all 57 of its mining claims, inclusive of the 6 under
MLCs.31
On 28 February 2005, respondent filed with the DENR his MPSA-PIII-05-0532an MPSA application covering 281.9544 hectares of
mineral location in San Marcelino, Zambales. It includes the 6
mining claims under MLCs.33
Subsequently, the DENR MGB Regional Office III verified that
several areas applied for by respondent in MPSA-P-III-05-05
overlaps with those in petitioners MPSA-P-III-16 and MPSA-III-0505.34
The DENR Orders
On 29 December 2005, the DENR Secretary issued an
Order35 declaring petitioners MPSA-P-III-16 and MPSA-P-III-03-05
void ab initio. In contrast, the order held respondents MPSA-P-III05-05 as a valid MPSA application worthy of due course.36 The
dispositive portion of the order thus reads:37
WHEREFORE, in view of the foregoing considerations, Benguet
Corporation MPSA-III-P-16 [sic] application and Dizon Copper Silver
Mines Incorporated Application MP-P-III-03-05 [sic] are declared, as
they are, declared VOID AB-INITIO, while Dr. Luis D. Dizons MA-PIII-05-05 [sic] (APSA-0001389-III) is hereby, as it is declared VALID
and EXISTING and can be given due course, subject to strict
compliance with the provision of the Philippine Mining Act of 1995
and its Implementing Rules and Regulations.
In nullifying petitioners applications, the DENR Secretary echoed
the findings of the DENR MGB Regional Office III that:
1. With respect to MPSA-P-III-16. Benguet has no
personality to file MPSA-P-III-16.38 Benguet, by itself, has
no legal personality to file such application because it is a
mere operator of petitioner.39 Moreover, MPSA-P-III-16
was denied area status and clearance by the Forest
Management Services of DENR Region III.40
2. With respect to MPSA-P-III-03-05. MPSA-P-III-03-05
was filed at a time when several areas included therein
were still closed to mining applications.41 Such areas refer
to those subject to the MLCs that, as it turned out, were
not yet expired when MPSA-P-III-03-05 was filed.42
On 17 January 2006, petitioner filed before the DENR a Motion for
Reconsideration43 of the 29 December 2005 order. Petitioner also
submitted a Supplemental Motion for Reconsideration44 on 31
January 2006.

The OP Ruling
On appeal, the OP completely reversed the DENR Secretary. In its
Decision49 dated 4 December 2006, the OP: (1) overturned the 29
December 2005 and 14 February 2006 orders of the DENR
Secretary, (2) cancelled the approval of MPSA-P-III-05-05 into
MPSA No. 227-2006-III, and (3) revived petitioners MPSA-P-III-0305 for further re-evaluation by the DENR. The fallo of the OP ruling
reads:50
WHEREFORE, premises considered, the DENR Order dated
December 29, 2005 declaring MPSA-P-III-16 and MA-P-III-03-05
void ab initio and declaring MA-P-III-05-05 as valid and existing, and
the DENR ORDER dismissing DCSMIs petitioners motion for
reconsideration, are hereby REVERSED and SET ASIDE. The
issuance of MPSA No. 227-2006-III in favor of Dr. Dizon respondent
is likewise SET ASIDE. The Mineral Production Agreement
Application of DCMI petitioner, denominated as MA-P-III-03-05, is
hereby REMANDED to the DENR for REEVALUATION if the same
is compliant with the requirements of the law.
Aggrieved, respondent appealed51 to the Court of Appeals.
The Decision of the Court of Appeals and This Petition
As earlier intimated, the Court of Appeals reversed the ruling of the
OP and reinstated the 29 December 2005 and 14 February 2006
Orders of the DENR Secretary.52 In doing so, the appellate court
substantially agreed with the findings of the DENR.
Hence, the present appeal53 raising the core issue of whether the
Court of Appeals erred in reinstating the 29 December 2005 and 4
February 2006 Orders of the DENR Secretary.
The petitioner, for its part, would like this Court to answer in the
affirmative. Petitioner maintains that MPSA-P-III-16 and MPSA-P-III03-05 were valid MPSA applications.54 In support thereof, petitioner
contradicts the findings of the DENR, as concurred in by the Court of
Appeals, and argues that:
1. Benguet has the personality to file MPSA-P-III-16.55 The
authority of Benguet to file mining applications on behalf of
petitioner is justified by
a. Sections 1.01(b), 1.03, 7.01(j) and 9.04 of the
Operating Agreement between petitioner and
Benguet:
i. Section 1.01(b)56 gives Benguet
authority for the "acquisition of other
real rights xxx."

19

ii. Section 1.0357 grants Benguet

authority to "apply for patent or lease
and/or patent or lease surveys" with
respect to the 57 mining claims.
iii. Section 7.01(j)58 gives Benguet
authority to "xxx enter into contracts,
agreements xxx."
iv. Section 9.0459 constitutes Benguet
as attorney-in-fact of petitioner,
authorized "to prepare, execute,
amend, correct, supplement and
register any document relating to or
affecting" the 57 mining claims "which
may be necessary to be executed,
amended, corrected, supplemented,
filed or registered."
b. Letter dated 14 June 1991 of petitioner to
Benguet,60 which was appended in MPSA-P-III16. In the said letter, petitioner, thru its then
president Mr. Juvencio D. Dizon, signified its
conformity with the proposal of Benguet to file a
production sharing agreement application
covering the 57 mining claims.61
2. Benguet, by submitting the complete requirements for
an MPSA application in MPSA-P-III-16, fully complied with
the requirements of Sections 112 and 113 of Republic Act
No. 7942.62
Thus, petitioner still has the preferential right over any
other similar applicants to pursue the area covered by the
subject 57 mining claims.63
3. While MPSA-P-III-03-05 was filed during the
subsistence of the MLCs, such fact does not suffice to
totally nullify said application. The claims under the MLCs,
which are supposedly not open to mining applications, all
but occupy only a small portion of the area covered in
MPSA-P-III-03-05.64
Petitioner also accuses the DENR Secretary of "hastily" approving
MPSA-P-III-05-05 into MPSA No. 227-2006-III.65Petitioner alleges
that MPSA-P-III-05-05 was approved despite non- compliance by
the respondent with the "mandatory" requirements under Sections
37 and 38 of the Implementing Rules and Regulations (IRR) of
Republic Act No. 7942.66

1. x x x.
2. The application for clearance was denied two times by
the Technical Director of the Forest Management Service
of DENR Region III which is the "Government Agency
concerned" with the authority in the regions which has
jurisdiction over the applied for as far as Forest
management is concern [sic]. The first denial was on
November 9, 1998 and the second on February 25, 1999.
3. The area is within both a "DENR Project Area" The
President Ramon Magsaysay Reforestation Project of
CENRO Olongapo; and, "The Southern Zambales Forest
Reserve established under Republic Act No. 3092" with
the latter encompassing most of the entire area of the
MPSA application. (Emphasis supplied).
Verily, the DENR Secretary excluded "most of the entire area"
originally covered by MPSA-P-III-16 as closed to mining applications
for being within the "President Ramon Magsaysay Reforestation
Project of CENROOlongapo" and "The Southern Zambales Forest
Reserve."69 The Memorandum, as the Court takes it, effectively
leaves the mining claims of petitioner as the only point of contention
left in MPSA-P-III-16.
Now, to the issue at hand.
As can be culled from the facts, Benguet filed MPSA-P-III-16 in
order to place the mining claims and interests operated by it, which
includes those of the petitioner, under MPSAs. The application, in
effect, seeks to enforce a right70 belonging to holders of existing
mining claims and others interests to enter into mineral agreements
with the government. As mere operator, therefore, Benguet cannot
file MPSA-P-III-16 in its name without authorization from the holders
of the mining claims and interests included therein.
Petitioner argues in favor of the validity of MPSA-P-III-16, at least
insofar as its mining claims are concerned, on the assertion that it
duly authorized Benguet to file the application under their Operating
Agreement and its Letter dated 14 June 1991. 71
We are not convinced.
First. It must be clarified at the outset that the inclusion of the 6
mining claims under MLCs in MPSA-P-III-16 is not valid. The
records of this case are definite that the MLCs covering 6 of the

MPSA-P-III-16 is Not a Valid MPSA Application

subject claims were actually issued by the government in the names

of Maria Dizon, Helen Dizon and the heirs of Celestinonot in favor
of the petitioner.72 Hence, such mining leases could not be included
in MPSA-P-III-16 for possible conversion into MPSAs without
securing the individual consent of the recognized lessees thereof.
Needless to state, authorization by the petitioner in connection with
the mining claims covered by the MLCs, if there was any, would not
be material.

Before discussing the merits of MPSA-P-III-16 as an MPSA

application, it is significant to point out that as of 22 December 2005,
the DENR Secretary had already issued a
Memorandum67 sustaining the denial by the Forest Management
Service of DENR Region III to issue an area status and clearance
for MPSA-P-III-16. Among the reasons set forth by the DENR in
refusing to issue such clearance were: 68

Second. With respect to the remaining 51 mining claims not under

MLCs, this Court finds absolutely nothing in the Operating
Agreement between petitioner and Benguet that can reasonably be
construed as giving the latter authority to file an MPSA application
thereon. After perusal of the records, this Court finds that the
provisions of the Operating Agreement relied upon by petitioner in
arguing otherwise, were taken out of context:

OUR RULING
We deny the appeal.

20

1. Benguets authority "to acquire real rights" under

Section 1.01(b) is actually limited only to such rights "as
indicated in the Development Program" of the Operating
Agreement.73 Unfortunately, an MPSA was never shown to
have been contemplated by, much less included in, such
Development Program.
2. Section 1.03 only grants Benguet authority to "apply for
patent or lease and/or patent or lease surveys."74However,
as will be discussed below, a mining patent, lease or any
survey thereof is substantially different from an MPSA.
3. Section 7.01(j), on the other hand, premises the
authority of Benguet to "enter into contracts, agreements"
on Section 7.03 of the Operating Agreement that actually
requires prior authorization from petitioner in the event the
former enters into any "major contracts."75 An MPSA may
be considered as falling under the term "major contracts"
for the simple reason that it will re-define the very relations
between the owners of the existing mining claims and the
government with respect to such claims.
In connection with the foregoing, the Letter dated 14 June
1991, appended in MPSA-P-III-16, cannot be considered
as valid authorization from petitioner. There was no
showing that the board of directors of petitioner approved
of Benguets proposal to file an MPSA application.
4. Neither can Section 9.04, which constituted Benguet as
attorney-in-fact of petitioner, be construed as sufficient
authorization. The said section confines the authority of
Benguet "to prepare, execute, amend, correct, supplement
and register any document"relating to the 57 mining
claims, only to those documents "necessary to carry out
the intents and purposes" of the Operating Agreement.76
Entering into MPSAs, however, could not have been included in the
"intents and purposes" of the Operating Agreement. It must be
pointed out that the Operating Agreement was executed way back in
1975, during which Presidential Decree No. 463 still governed
mining operations in the country. Presidential Decree No. 463, as
previous mining laws before it, sanctioned a system of exploitation
of natural resources based on "license, concession or
lease."77 MPSAs, on the other hand, deviate drastically from this
system.
An MPSA is one of the mineral agreements innovated by the 1987
Constitution by which the State takes on a broader and more
dynamic role in the exploration, development and utilization of the
countrys mineral resources.78 By such agreements, the government
does not become a mere licensor, concessor or lessor of mining
resourcesbut actually assumes "full control and supervision" in the
exploration, development and utilization of the concerned mining
claims in consonance with Section 2, Article XII of the
Constitution.79 The policy introduced by the 1987 Constitution,
therefore, represents a significant shift in the hitherto existing
relations between the government and mining claimants. This
considerable change in the former system of mining leases under
previous mining laws, in turn, makes it difficult for this Court to
fathom that petitioner and Benguet contemplated the execution of
MPSAs as part of their Operating Agreement. To hold otherwise,
would simply stretch the limits of reason and human foresight.
Accordingly, this Court agrees with the finding of the DENR and the
Court of Appeals that MPSA-P-III-16 was filed by Benguet without

any valid authorization and, therefore, cannot be considered as a

valid MPSA application.
Effect of the Invalidity of MPSA-P-III-16
In order to fully understand the effect of the invalidity of MPSA-P-III16 on the mining claims of the petitioner and its rights thereto, the
relevant provisions of Republic Act No. 7942 as well as its IRR must
be considered.
In so far as the 6 mining claims under MLCs are concerned, Section
112 of Republic Act No. 7942 applies. The provision provides for the
non-impairment and continued recognition of existing valid mining
leases, which means that the subject leases will remain valid until
their expiration, i.e. on 31 January 2005.80
On the other hand, the 51 mining claims not covered by MLCs are
subject to Section 113 of Republic Act No. 7942. The said section
gives "holders of existing mining claims, lease or quarry
applications" with "preferential rights to enter into any mode of
mineral agreement with the government" within two (2) years from
the promulgation of the rules and regulations implementing said
law.81
Section 113 was further clarified by Section 273 of the IRR82 of
Republic Act No. 7942 and by DENR Memorandum Order (M.O.)
No. 97-07. The pertinent provisions of DENR M.O. 97-07 states:
Section 4. Date of Deadline Under Sections 272 and 273 of the IRR
Consistent with pertinent national policy, the September 13, 1997
deadline under Section 272 of the IRR and the September 14, 1997
deadline under Section 273 of the IRR, which fall on a Saturday and
Sunday, respectively, shall be imposed on September 15, 1997.
xxxx
Section 8. Claimants/Applicants Required to File Mineral Agreement
Only holders of mining claims and lease/quarry applications filed
prior to the effectivity of the Act which are valid and existing as
defined in Section 5 hereof who have not filed any Mineral
Agreement applications over areas covered by such mining claims
and lease/quarry applications are required to file Mineral Agreement
applications pursuant to Section 273 of the IRR on or before
September 15, 1997; Provided, that the holder of such a mining
claim or lease/quarry application involved in a mining dispute/ease
shall instead file on or before said deadline a Letter of Intent to file
the necessary Mineral Agreement application; Provided, further,
That if the mining claim or lease/quarry application is not determined
to be invalid in the dispute/case, the claimant or applicant shall have
thirty (30) days from the final resolution of the dispute/case to filed
the necessary Mineral Agreement application; Provided, finally, that
failure by the claimant or applicant to file the necessary Mineral
Agreement application within said thirty (30)-day period shall result
in the abandonment of such claim or application, after which, any
area covered by the same shall be opened for Mining Applications.
Holders of such valid and existing mining claims and lease/quarry
applications who had filed or been granted applications other than
those for Mineral Agreements prior to September 15, 1997 shall
have until such date to file/convert to Mineral Agreement
applications, otherwise, such previously filed or granted applications
shall be cancelled. (Emphasis and underscoring supplied).

21

Per the above-cited provisions of DENR M.O. No. 97-07, holders of

existing mining claims or lease/quarry applications have only until
the 15th of September 1997 to file an appropriate mineral
agreement application in the exercise of their "preferential rights to
enter into mineral agreements with the government" involving their
claims. DENR M.O. No. 97-07 also provides that failure of the said
holders to exercise such preferential right is deemed an
abandonment of their existing mining claims or applications.
In the instant case, MPSA-P-III-16 was the only MPSA application
that was filed before the mandatory deadline. Aside from it,
petitioner filed no other valid MPSA application covering its mining
claims before 15 September 1997.
Given the foregoing, it becomes clear that a finding of invalidity of
MPSA-P-III-16 has a profound effect on petitioners rights as to the
51 mining claims not covered by MLCs:
First. The invalidity of MPSA-P-III-16 necessarily meant that
petitioner was not able to validly exercise its preferential rights under
Section 113 of Republic Act No. 7942. As a result, petitioner
is already deemed to have abandoned its mining claims as of 15
September 1997.
Second. The assignment of MPSA-P-III-16 in favor of petitioner has
also been rendered of no consequence. Such assignment was
made by Benguet, and then approved by the DENR, only in
2004which is well beyond the 15 September 1997 deadline.83 At
that time, petitioner had already lost any legal vested interest it had
in the subject mining claims.
Third. Petitioners MPSA-P-III-03-05, filed on 31 January 2005, is
considered as a new application insofar as the subject 51 mining
claims are concerned. Petitioner thereby enjoys no preference
regarding the said applications approval.
We now come to the final issue raised.
MPSA-P-III-05-05 over MPSA-P-III-03-05
Petitioner next argues that the Court of Appeals erred in sustaining
the DENRs approval of respondents MPSA-P-III-05-05 into MPSA
No. 227-2006-III.84 Petitioner alleges that the appellate court failed to
recognize that the DENR Secretary had adopted a "hasty"
procedure in assessing the merits of respondents MPSA-P-III-05-05
and had approved the same without requiring the latter to comply
with Sections 37 and 38 of the IRR of Republic Act No. 7942. 85
Petitioner thus asks this Court to set aside MPSA No. 227-2006-III
and to order the DENR to instead make a re-evaluation of its own
application, MPSA-P-III-03-05.86

Anent the issue regarding the approval of MPSA-P-III-05-05, it must

be emphasized herein that under Republic Act No. 7942, the DENR
Secretary has been conferred with the exclusive and primary
jurisdiction to approve mineral agreements, such as MPSAs.89 In the
seminal case Celestial Nickel Mining Exploration Corporation v.
Macroasia Corporation, this Court described such function as purely
administrative in nature and one that is fully within the DENR
Secretarys competence and discretion.1wphi1 Concededly, it is
the DENR Secretary, thru the MGB, who is in the best position to
determine to whom mineral agreements are granted.90
Accordingly, the doctrine of primary jurisdiction finds application to
the case at bench. Celestial captures the doctrine in the context of
mining applications in this wise:
Settled is the rule that the courts will defer to the decisions of the
administrative offices and agencies by reason of their expertise and
experience in the matters assigned to them pursuant to the doctrine
of primary jurisdiction. Administrative decisions on matter within the
jurisdiction of administrative bodies are to be respected and can only
be set aside on proof of grave abuse of discretion, fraud, or error of
law. Unless it is shown that the then DENR Secretary has acted in a
wanton, whimsical, or oppressive manner, giving undue advantage
to a party or for an illegal consideration and similar reasons, this
Court cannot look into or review the wisdom of the exercise of such
discretion.91 (Emphasis supplied).
In the case at bench, this Court finds no such arbitrariness on the
part of the DENR Secretary in approving respondents MPSA-P-III05-05 at the expense of petitioners MPSA-P-III-03-05. Contrary to
the allegations of petitioner, there was never any "hasty" approval of
MPSA-P-III-05-05. The records attest that the approval of MPSA-PIII-05-05 by the DENR Secretary came a full ten (10) months after
such application was filed92 and was, in fact, based from the
evaluation of the DENR MGB Regional Office III that petitioners
MPSA-P-III-03-05 was filed at a time when the 6 mining claims
covered therein were still under subsisting MLCs in favor of the
Dizons93 and, hence, still closed to mining applications.94
In choosing to act favorably on MPSA-P-III-05-05, the DENR
Secretary merely exercised its rightful discretion to determine who
among competing mining applicants is more qualified for a mining
agreement. This consideration, aside from the fact that petitioners
MPSA-P-III-03-05 covers areas still closed to mining applications
when it was filed, underscores the reasonableness of the orders of
the DENR Secretary. This Court finds itself heavy-handed to disturb
them.
WHEREFORE, the instant petition is DENIED. The appealed
Decision dated 9 May 2008 and Resolution dated 1 July 2008 of the
Court of Appeals in CA-G.R. SP No. 99947 are hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.

We are not persuaded.

To begin with, petitioners postulation that respondent did not comply
with Sections 37 and 38 of the IRR of Republic Act No.
7942,87 raises a factual issue that was never raised in the
proceedings a quo. The procedural norm is that factual issues are
barred in appeals by certiorari, with more reason if such issues are
only being raised for the first time before this Court.88

G.R. No. 163123. April 15, 2005

PHILIPPINE HEALTH INSURANCE CORPORATION, Petitioners,
vs.

22

CHINESE GENERAL HOSPITAL AND MEDICAL

CENTER, Respondents.
DECISION
CORONA, J.:
Before us is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the March 29, 2004 decision1 of the Court of
Appeals, the dispositive portion of which read:
FOR THE FOREGOING DISQUISITIONS, the petition
is GRANTED, the Philippine Health Insurance Corporation2 is
hereby ordered to give due course to petitioners, Chinese General
Hospital and Medical Center, claims for the period from 1989 to
1992, amounting to FOURTEEN MILLION TWO HUNDRED
NINETY ONE THOUSAND FIVE HUNDRED SIXTY EIGHT PESOS
and 71/100 PESOS (P14,291,568.71).3
The facts, as culled by the Court of Appeals, follow.
On February 14, 1995, Republic Act No. 7875, otherwise known as
"An Act Instituting a National Health Insurance Program for all
Filipinos and Establishing the Philippine Health Insurance
Corporation For the Purpose," was approved and signed into law. As
its guiding principle, it is provided in Section 2 thereof, thus:
"Section 2. Declaration of Principles and Policies. Section 11,
Article XIII of the Constitution of the Republic of the Philippines
declares that the state shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make
essential goods, health and other social services available to all the
people at affordable cost. Priority for the needs of the
underprivileged, sick, elderly, disabled, women, and children should
be recognized. Likewise, it shall be the policy of the State to provide
free medical care to paupers.
Prior to the enactment of R.A. 7875. CGH4 had been an accredited
health care provider under the Philippine Medical Care Commission
(PMCC), more popularly known as Medicare. As defined by R.A.
7875, a health care provider refers to a health care institution, which
is duly licensed and accredited devoted primarily to the maintenance
and operation of facilities for health promotion, prevention,
diagnosis, treatment and care of individuals suffering from illness,
disease, injury, disability or deformity, or in need of obstetrical or
other medical and nursing care.5
As such, petitioner6 filed its Medicare claims with the Social Security
System (SSS), which, together with the Government Service
Insurance System (GSIS), administered the Health Insurance Fund
of the PMMC. Thus, petitioner filed its claim from 1989 to 1992 with
the SSS, amounting to EIGHT MILLION ONE HUNDRED TWO
THOUSAND SEVEN HUNDRED EIGHTY-TWO and 10/100
(P8,102,782.10). Its application for the payment of its claim with the
SSS was overtaken by the passage of R.A. 7875, which in Section
51 and 52, provides:
SECTION 51. Merger. Within sixty (60) days from the
promulgation of the implementing rules and regulations, all functions
and assets of the Philippine Medical Care Commission shall be
merged with those of the Corporation (PHILHEALTH) without need
of conveyance, transfer or assignment. The PMCC shall thereafter
cease to exist.

The liabilities of the PMCC shall be treated in accordance with

existing laws and pertinent rules and regulations. xxx
SECTION 52. Transfer of Health Insurance Funds of the SSS and
GSIS. The Health Insurance Funds being administered by the
SSS and GSIS shall be transferred to the Corporation within sixty
(60) days from the promulgation of the implementing rules and
regulations. The SSS and GSIS shall, however, continue to perform
Medicare functions under contract with the Corporation until such
time that such functions are assumed by the Corporation xxx.
Being the successor of the PMCC, PHILHEALTH, in compliance
with the mandate of R.A. 7875,7 promulgated the rules and
regulations implementing said act, Section 52 of which provides:
SECTION 52. Fee for Service Guidelines on Claims Payment. xxx
b. All claims for payment of services rendered shall be filed within
sixty (60) calendar days from the date of discharge of the patient.
Otherwise, the claim shall be barred from payment except if the
delay in the filing of thee claim is due to natural calamities and other
fortuitous events. If the claim is sent through mail, the date of the
mailing as stamped by the post office of origin shall be considered
as the date of the filing.
If the delay in the filing is due to natural calamities or other fortuitous
events, the health care provider shall be accorded an extension
period of sixty (60) calendar days.
If the delay in the filing of the claim is caused by the health care
provider, and the Medicare benefits had already been deducted, the
claim will not be paid. If the claim is not yet deducted, it will be paid
to the member chargeable to the future claims of the health care
provider.
Instead of giving due course to petitioners claims totaling to EIGHT
MILLION ONE HUNDRED TWO THOUSAND SEVEN HUNDRED
EIGHTY-TWO and 10/100 (P8,102,782.10), only ONE MILLION
THREE HUNDRED SIXTY-FIVE THOUSAND FIVE HUNDRED
FIFTY-SIX and 32/100 Pesos (1,365,556.32) was paid to petitioner,
representing its claims from 1989 to 1992 (sic).
Petitioner again filed its claims representing services rendered to its
patients from 1998 to 1999, amounting to SEVEN MILLION FIVE
HUNDRED FIFTY FOUR THOUSAND THREE HUNDRED FORTY
TWO and 93/100 Pesos (P7,554,342.93). For being allegedly filed
beyond the sixty (60) day period allowed by the implementing rules
and regulations, Section 52 thereof, petitioners claims were denied
by the Claims Review Unit of Philhealth in its letter dated January
14, 200, thus:
"xxx
This pertains to your three hundred seventy three Philhealth
medicare claims (373) which were primarily denied by Claims
Processing Department for late filing and for which you made an
appeal to this office. We regret to inform you that after thorough
evaluation of your claims, [your] 361 medicare claims were DENIED,
due to the fact that the claims were filed 5 to 16 months after
discharge. However, the remaining medicare claims have been
forwarded to Claims Processing Department (CPD) for payment.
SECTION 52 (B) Rule 52 (B) Rule VIII of the Implementing Rules
and Regulations of 7875 provides that all claims for payment of
services rendered shall be filed within sixty (60) days from the day
of discharge of the patient. However, Philhealth Circular No, 31-A,

23

series of 1998, state that all claims pending with Philhealth as of

September 15, 1998 and claims with discharge dates from
September to December 31, 1998 are given one hundred twenty
(120) days from the date of discharge to file their claim. In as much
as we would like to grant your request for reconsideration, the
Corporation could no longer extend the period of filing xxx.

The state policy in creating a national health insurance program is to

grant discounted medical coverage to all citizens, with priority to the
needs of the underprivileged, sick, elderly, disabled, women and
children, and free medical care to paupers9.

Petitioners claim was denied with finality by PHILHEALTH in its

assailed decision dated June 6, 2000.

a) provide all citizens of the Philippines with the mechanism to gain

financial access to health services;

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

Court of Appeals ordered herein petitioner Philippine Health
Insurance Corporation (Philhealth) to pay the claims in the amount
of Fourteen Million Two Hundred Ninety-one Thousand Five
Hundred Sixty-eight Pesos and 71/100 (P14,291,568.71), principally
on the ground of liberal application of the 60-day rule under Section
52 of RA 7875s Implementing Rules and Regulations. According to
the Court of Appeals:

b) create the National Health Insurance Program to serve as the

means to help the people pay for the health services;

The avowed policy in the creation of a national health program is, as

provided in Section 11, Article XIII of the 1987 Constitution, to adopt
an integrated and comprehensive approach to health development
which shall endeavor to make essential goods, health and other
social services available to all people at affordable cost. To assist
the state in pursuing this policy, hospitals and medical institutions
such as herein petitioner are accredited to provide health care. It is
true, as aptly stated by the OGCC, that petitioner was not required
by the government to take part in its program, it did so voluntarily.
But the fact that the government did not "twist" petitioners arm, so to
speak, to participate does not make petitioners participation in the
program less commendable, considering that at rate PHILHEALTH
is denying claims of health care givers, it is more risky rather than
providential for health care givers to take part in the governments
health program.
It is Our firmly held view that the policy of the state in creating a
national health insurance program would be better served by
granting the instant petition. Thus, it is noteworthy to mention that
health care givers are threatening to "boycott" PHILHEALTH,
reasoning that the claims approved by PHILHEALTH are not
commensurate to the services rendered by them to its members.
Thus, how can these accredited health care givers be encouraged to
serve an increasing number of members when they end up on the
losing end of this venture. We must admit that the costs of operating
these medical institutions cannot be taken lightly. They must also
earn a modicum amount of profit in order to operate properly.
Again, it is trite to emphasize that essentially, the purpose of the
national health insurance program is to provide members immediate
medical care with the least amount of cash expended. Thus, with
PHILHEALTH, members/patients need only to present their card to
prove their membership and the accredited health care giver is
mandated by law to provide the necessary medical assistance, said
health care giver shouldering the PHILHEALTH part of the bill.
However, it is the members/patients who bear the brunt. Thus, they
are made to shoulder the PHILHEALTH part of the bill, and the
refund thereof is subject to whether or not the claims of the health
care providers are approved by PHILHEALTH. This is blatantly
contrary to the very purpose for which the National Health Insurance
Program was created.8
xxxxxxxxx

The very same policy was adopted in RA 787510 which sought to:

c) prioritize and accelerate the provision of health services to all

Filipinos, especially that segment of the population who cannot
afford such services; and
d) establish the Philippine Health Insurance Corporation that will
administer the program at central and local levels.11
To assist the state in pursuing the aforementioned policy, health
institutions were granted the privilege of applying for accreditation as
health care providers.12 Respondent Chinese General Hospital and
Medical Center (CGH) was one of those which received such
accreditation.
Under the rules promulgated by the Philhealth Board pursuant to RA
7875, any claim for payment of services rendered (to a patient) shall
be filed within sixty (60) calendar days from the date of discharge of
the patient. Otherwise, the claim is barred.13
But before a claim is filed with petitioner Philhealth for services
already rendered, an accredited health care provider like respondent
CGH is required to:
a. accomplish a Philhealth claim form;
b. accomplish an itemized list of the medicines administered to and
medical supplies used by the patient concerned, indicating therein
the quality, unit, price and total price corresponding thereto;
c. require the patient concerned and his/her employer to accomplish
and submit a Philhealth member/employer certification;
d. in case the patient gave birth, require her to submit a certified true
copy of the childs birth certificate;
e. in case the patient died, require the immediate relatives to submit
a certified true copy of the deceaseds death certificate; and
f. in case a members dependent is hospitalized for which the
member seeks coverage, require the member to submit proof of
relationship to the patient and to execute an affidavit of support. 14
Apart from the foregoing requirements which often necessitate
securing documents from other government offices, and the fact that
most patients are unable to immediately accomplish and submit the
required documents, an accredited health care provider like CGH
has to contend with an average of about a thousand members
and/or dependents seeking medical treatment for various illnesses
per month.

We agree.

24

Under these circumstances, it is unreasonable to expect respondent

CGH to comply 100% of the time with the prescribed 60-day rule of
Philhealth. Despite the prescribed standard procedures, respondent
has no assurance of the members prompt submission of the
required documents. This factor is completely beyond its control.
There will always be delay not attributable to respondent.
The unreasonably strict implementation of the 60-day rule, without
regard to the causes of delay beyond respondents control, will be
counter-productive to the long-term effectiveness of the NHIP.
Instead of placing a premium on participation in the Program,
Philhealth punishes an accredited health provider like CGH by
refusing to pay its claims for services already rendered. Under these
circumstances, no accredited provider will gamble on honoring
claims with delayed supporting papers no matter how meritorious
knowing that reimbursement from Philhealth will not be
forthcoming.
This Court will not hesitate, whenever necessary, to allow a liberal
implementation of the rules and regulations of an administrative
agency in cases where their unjustifiably rigid enforcement will result
in a deprivation of legal rights. In this case, respondent had already
rendered the services for which it was filing its claims. Technicalities
should not be allowed to defeat respondents right to be reimbursed,
specially since petitioners charter itself guarantees such
reimbursement.
A careful reading of RA 7875 shows that the law itself does not
provide for any specific period within which to file claims. We can
safely presume therefore that the period for filing was not per se the
principal concern of the legislature. More important than mere
technicalities is the realization of the state policy to provide
Philhealth members with the requisite medical care at the least
possible cost. Truly, nothing can be more disheartening than to see
the Acts noble objective frustrated by the overly stringent application
of technical rules.
The fact is that it was not RA 7875 itself but Section 52 of its
Implementing Rules and Regulations which established the 60-day
cut-off for the filing of claims.
While it is doctrinal in administrative law that the rules and
regulations of administrative bodies interpreting the law they are
entrusted to enforce have the force of law15, these issuances are by
no means iron-clad norms. Administrative bodies themselves can
and have in fact "bent the rules" for reasons of public interest. On
September 15, 1998, for instance, petitioner issued Philhealth
Circular No. 31-A:16
IN ORDER to allow members of the National Health Insurance
Program (NHIP) sufficient time to complete all documents to support
their medical care claims, Philhealth is temporarily suspending the
sixty (60)-day reglementary period for filing claims.
While Section 52 (b), Rule VIII of the Implementing Rules and
Regulations of R.A. 7875 provides that all claims for payment of
services shall be filed within 60 calendar days from the day of
discharge of a patient, there is a need to extend this period to
minimize the incidence of late filing due to members personal
difficulties and circumstances beyond their control. (emphasis
ours)
And then again, on April 20, 1999, Philhealth Circular No. 50 was
issued:

TO MINIMIZE the incidence of late filing of claims due to

members personal difficulties in preparing the needed
documents, Philhealth is extending the period for filing of
claims xxx (emphasis ours)
The above circulars indubitably recognized the necessity of
extending the 60-day period because of the difficulties encountered
by members in completing the required documents, often due to
circumstances beyond their control. Petitioner appeared to be well
aware of the problems encountered by its members in complying
with the 60-day rule. Furthermore, implicit in the wording of the
circulars was the cognition of the fact that the fault was not always
attributable to the health care providers like CGH but to the
members themselves.
Delay on the part of members is an ordinary occurrence. There is no
need to make a mountain out of a molehill as far as this particular
point is concerned. To this day, members continue to encounter
delay in submitting their documents. There was therefore no
compelling reason for the exacting and meticulous enforcement of
the rule when, in at least two instances, petitioner itself implemented
it liberally and on the same ground that it was using against
respondent.
Petitioner likewise contends that respondent failed to exhaust
administrative remedies before resorting to judicial intervention. We
disagree.
Under the doctrine of exhaustion of administrative remedies, an
administrative decision must first be appealed to the administrative
superiors at the highest level before it may be elevated to a court of
justice for review.
This doctrine, however, is a relative one and its flexibility is
conditioned on the peculiar circumstances of a case.17There are a
number of instances when the doctrine has been held to be
inapplicable. Among the established exceptions are:
1) when the question raised is purely legal;
2) when the administrative body is in estoppel;
3) when the act complained of is patently illegal;
4) when there is urgent need for judicial intervention;
5) when the claim involved is small;
6) when irreparable damage will be suffered;
7) when there is no other plain, speedy and adequate remedy;
8) when strong public interest is involved;
9) when the subject of the controversy is private land;
10) in quo warranto proceedings.18
As explained by the appellate court:
It is Our view that the instant case falls as one of the exceptions,
concerning as it does public interest. As mentioned earlier, although
they were not made parties to the instant case, the rights of millions

25

of Filipinos who are members of PHILHEALTH and who obviously

rely on it for their health care, are considered, nonetheless, parties
to the present case. This Court is mandated herein to take
conscious and detailed consideration of the interplay of the interests
of the state, the health care giver and the members. With these in
mind, We hold that the greater interest of the greater number of
people, mostly members of PHILHEALTH, is paramount.
Furthermore, when the representatives of herein petitioner met with
Dr. Enrique Zalamea, PHILHEALTHs President and Chief Executive
Officer, he informed them that, in lieu of protest to be filed directly
with him, the representatives could make representations with the
Office of the President, which petitioner did to no avail, considering
that the formal protest filed was referred back by the Office of the
President to Dr. Zalamea. Being then the head of PHILHEALTH, and
expected to have an intimate knowledge of the law and the rules
creating the National Health Insurance Program, under which
PHILHEALTH was created, he instructed herein petitioner to pursue
a remedy not sanctioned by the rules and not in accord with the rule
of exhaustion of administrative remedies. In so doing, PHILHEALTH
is deemed estopped from assailing the instant petition for failure to
exhaust administrative remedies when PHILHEALTH itself, through
its president, does not subscribe to it.19
There is no need to belabor the fact that the baseless denial of
respondents claims will be gravely disturbing to the health care
industry, specially the providers whose claims will be unpaid. The
unfortunate reality is that there are today some health care providers
who admit numbers for treatment and/or confinement yet require
them to pay the portion which ought to be shouldered by Philhealth.
A refund is made only if their claim is first paid, due to the
apprehension of not being reimbursed. Simply stated, a member
cannot avail of his benefits under the NHIP at the time he needs it
most.
We cannot turn a deaf ear to respondents plea for fairness which
essentially demands that its claims for services already rendered be
honored as the National Health Insurance Program law intended.
WHEREFORE, the assailed decision of the Court of Appeals is
hereby AFFIRMED. Petitioner is hereby ordered to pay respondents
claims representing services rendered to its members from 1989 to
1992.
No costs.
SO ORDERED.
G.R. No. 151908

YNARES-SANTIAGO, J.:
Pursuant to its rule-making and regulatory powers, the National
Telecommunications Commission (NTC) issued on June 16, 2000
Memorandum Circular No. 13-6-2000, promulgating rules and
regulations on the billing of telecommunications services. Among its
pertinent provisions are the following:
(1) The billing statements shall be received by the
subscriber of the telephone service not later than 30 days
from the end of each billing cycle. In case the statement is
received beyond this period, the subscriber shall have a
specified grace period within which to pay the bill and the
public telecommunications entity (PTEs) shall not be
allowed to disconnect the service within the grace period.
(2) There shall be no charge for calls that are diverted to a
voice mailbox, voice prompt, recorded message or similar
facility excluding the customer's own equipment.
(3) PTEs shall verify the identification and address of each
purchaser of prepaid SIM cards. Prepaid call cards and
SIM cards shall be valid for at least 2 years from the date
of first use. Holders of prepaid SIM cards shall be given 45
days from the date the prepaid SIM card is fully consumed
but not beyond 2 years and 45 days from date of first use
to replenish the SIM card, otherwise the SIM card shall be
rendered invalid. The validity of an invalid SIM card,
however, shall be installed upon request of the customer at
no additional charge except the presentation of a valid
prepaid call card.
(4) Subscribers shall be updated of the remaining value of
their cards before the start of every call using the cards.
(5) The unit of billing for the cellular mobile telephone
service whether postpaid or prepaid shall be reduced from
1 minute per pulse to 6 seconds per pulse. The authorized
rates per minute shall thus be divided by 10. 1
The Memorandum Circular provided that it shall take effect 15 days
after its publication in a newspaper of general circulation and three
certified true copies thereof furnished the UP Law Center. It was
published in the newspaper, The Philippine Star, on June 22,
2000.2 Meanwhile, the provisions of the Memorandum Circular
pertaining to the sale and use of prepaid cards and the unit of billing
for cellular mobile telephone service took effect 90 days from the
effectivity of the Memorandum Circular.

August 12, 2003

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO

TELEPHONE CORPORATION (PILTEL), petitioners,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION
(NTC), respondent.
x---------------------------------------------------------x

On August 30, 2000, the NTC issued a Memorandum to all cellular

mobile telephone service (CMTS) operators which contained
measures to minimize if not totally eliminate the incidence of stealing
of cellular phone units. The Memorandum directed CMTS operators
to:
a. strictly comply with Section B(1) of MC 13-6-2000
requiring the presentation and verification of the identity
and addresses of prepaid SIM card customers;

G.R. No. 152063 August 12, 2003

GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS
CO., INC. (ISLACOM), petitioners,
vs.
COURT OF APPEALS (The Former 6th Division) and the
NATIONAL TELECOMMUNICATIONS COMMISSION,respondents.

b. require all your respective prepaid SIM cards dealers to

comply with Section B(1) of MC 13-6-2000;
c. deny acceptance to your respective networks prepaid
and/or postpaid customers using stolen cellphone units or
cellphone units registered to somebody other than the

26

applicant when properly informed of all information relative

to the stolen cellphone units;
d. share all necessary information of stolen cellphone units
to all other CMTS operators in order to prevent the use of
stolen cellphone units; and
e. require all your existing prepaid SIM card customers to
register and present valid identification cards.3
This was followed by another Memorandum dated October 6, 2000
addressed to all public telecommunications entities, which reads:
This is to remind you that the validity of all prepaid cards
sold on 07 October 2000 and beyond shall be valid for at
least two (2) years from date of first use pursuant to MC
13-6-2000.
In addition, all CMTS operators are reminded that all SIM
packs used by subscribers of prepaid cards sold on 07
October 2000 and beyond shall be valid for at least two (2)
years from date of first use. Also, the billing unit shall be on
a six (6) seconds pulse effective 07 October 2000.
For strict compliance.4
On October 20, 2000, petitioners Isla Communications Co., Inc. and
Pilipino Telephone Corporation filed against the National
Telecommunications Commission, Commissioner Joseph A.
Santiago, Deputy Commissioner Aurelio M. Umali and Deputy
Commissioner Nestor C. Dacanay, an action for declaration of nullity
of NTC Memorandum Circular No. 13-6-2000 (the Billing Circular)
and the NTC Memorandum dated October 6, 2000, with prayer for
the issuance of a writ of preliminary injunction and temporary
restraining order. The complaint was docketed as Civil Case No. Q00-42221 at the Regional Trial Court of Quezon City, Branch 77. 5
Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no
jurisdiction to regulate the sale of consumer goods such as the
prepaid call cards since such jurisdiction belongs to the Department
of Trade and Industry under the Consumer Act of the Philippines;
that the Billing Circular is oppressive, confiscatory and violative of
the constitutional prohibition against deprivation of property without
due process of law; that the Circular will result in the impairment of
the viability of the prepaid cellular service by unduly prolonging the
validity and expiration of the prepaid SIM and call cards; and that the
requirements of identification of prepaid card buyers and call
balance announcement are unreasonable. Hence, they prayed that
the Billing Circular be declared null and void ab initio.

Subsequently, after hearing petitioners' application for preliminary

injunction as well as respondent's motion to dismiss, the trial court
issued on November 20, 2000 an Order, the dispositive portion of
which reads:
WHEREFORE, premises considered, the defendants'
motion to dismiss is hereby denied for lack of merit. The
plaintiffs' application for the issuance of a writ of
preliminary injunction is hereby granted. Accordingly, the
defendants are hereby enjoined from implementing NTC
Memorandum Circular 13-6-2000 and the NTC
Memorandum, dated October 6, 2000, pending the
issuance and finality of the decision in this case. The
plaintiffs and intervenors are, however, required to file a
bond in the sum of FIVE HUNDRED THOUSAND PESOS
(P500,000.00), Philippine currency.
SO ORDERED.8
Defendants filed a motion for reconsideration, which was denied in
an Order dated February 1, 2001. 9
Respondent NTC thus filed a special civil action for certiorari and
prohibition with the Court of Appeals, which was docketed as CAG.R. SP. No. 64274. On October 9, 2001, a decision was rendered,
the decretal portion of which reads:
WHEREFORE, premises considered, the instant petition
for certiorari and prohibition is GRANTED, in that, the
order of the court a quo denying the petitioner's motion to
dismiss as well as the order of the court a quogranting the
private respondents' prayer for a writ of preliminary
injunction, and the writ of preliminary injunction issued
thereby, are hereby ANNULLED and SET ASIDE. The
private respondents' complaint and complaint-inintervention below are hereby DISMISSED, without
prejudice to the referral of the private respondents'
grievances and disputes on the assailed issuances of the
NTC with the said agency.
SO ORDERED.10
Petitioners' motions for reconsideration were denied in a Resolution
dated January 10, 2002 for lack of merit.11
Hence, the instant petition for review filed by Smart and Piltel, which
was docketed as G.R. No. 151908, anchored on the following
grounds:
A.

Soon thereafter, petitioners Globe Telecom, Inc and Smart

Communications, Inc. filed a joint Motion for Leave to Intervene and
to Admit Complaint-in-Intervention.6 This was granted by the trial
court.
On October 27, 2000, the trial court issued a temporary restraining
order enjoining the NTC from implementing Memorandum Circular
No. 13-6-2000 and the Memorandum dated October 6, 2000.7
In the meantime, respondent NTC and its co-defendants filed a
motion to dismiss the case on the ground of petitioners' failure to
exhaust administrative remedies.

THE HONORABLE COURT OF APPEALS GRAVELY

ERRED IN HOLDING THAT THE NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC) AND
NOT THE REGULAR COURTS HAS JURISDICTION
OVER THE CASE.
B.
THE HONORABLE COURT OF APPEALS ALSO
GRAVELY ERRED IN HOLDING THAT THE PRIVATE
RESPONDENTS FAILED TO EXHAUST AN AVAILABLE
ADMINISTRATIVE REMEDY.

27

C.
THE HONORABLE COURT OF APPEALS ERRED IN
NOT HOLDING THAT THE BILLING CIRCULAR ISSUED
BY THE RESPONDENT NTC IS UNCONSTITUTIONAL
AND CONTRARY TO LAW AND PUBLIC POLICY.
D.
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PRIVATE RESPONDENTS FAILED
TO SHOW THEIR CLEAR POSITIVE RIGHT TO
WARRANT THE ISSUANCE OF A WRIT OF
PRELIMINARY INJUNCTION.12
Likewise, Globe and Islacom filed a petition for review, docketed as
G.R. No. 152063, assigning the following errors:
1. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE THE DOCTRINES OF
PRIMARY JURISDICTION AND EXHAUSTION OF
ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE
THE INSTANT CASE IS FOR LEGAL NULLIFICATION
(BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS
OF LAW) OF A PURELY ADMINISTRATIVE REGULATION
PROMULGATED BY AN AGENCY IN THE EXERCISE OF
ITS RULE MAKING POWERS AND INVOLVES ONLY
QUESTIONS OF LAW.
2. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE THE DOCTRINE ON
EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES
NOT APPLY WHEN THE QUESTIONS RAISED ARE
PURELY LEGAL QUESTIONS.
3. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE THE DOCTRINE OF
EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES
NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS
COMPLETE AND EFFECTIVE, WHEN THERE IS NO
OTHER REMEDY, AND THE PETITIONER STANDS TO
SUFFER GRAVE AND IRREPARABLE INJURY.
4. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE PETITIONERS IN FACT
EXHAUSTED ALL ADMINISTRATIVE REMEDIES
AVAILABLE TO THEM.
5. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED IN ISSUING ITS QUESTIONED
RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA
HAVE A CLEAR RIGHT TO AN INJUNCTION.13
The two petitions were consolidated in a Resolution dated February
17, 2003.14
On March 24, 2003, the petitions were given due course and the
parties were required to submit their respective memoranda. 15
We find merit in the petitions.
Administrative agencies possess quasi-legislative or rule-making
powers and quasi-judicial or administrative adjudicatory powers.
Quasi-legislative or rule-making power is the power to make rules

and regulations which results in delegated legislation that is within

the confines of the granting statute and the doctrine of nondelegability and separability of powers.16
The rules and regulations that administrative agencies promulgate,
which are the product of a delegated legislative power to create new
and additional legal provisions that have the effect of law, should be
within the scope of the statutory authority granted by the legislature
to the administrative agency. It is required that the regulation be
germane to the objects and purposes of the law, and be not in
contradiction to, but in conformity with, the standards prescribed by
law.17 They must conform to and be consistent with the provisions of
the enabling statute in order for such rule or regulation to be valid.
Constitutional and statutory provisions control with respect to what
rules and regulations may be promulgated by an administrative
body, as well as with respect to what fields are subject to regulation
by it. It may not make rules and regulations which are inconsistent
with the provisions of the Constitution or a statute, particularly the
statute it is administering or which created it, or which are in
derogation of, or defeat, the purpose of a statute. In case of conflict
between a statute and an administrative order, the former must
prevail.18
Not to be confused with the quasi-legislative or rule-making power of
an administrative agency is its quasi-judicial or administrative
adjudicatory power. This is the power to hear and determine
questions of fact to which the legislative policy is to apply and to
decide in accordance with the standards laid down by the law itself
in enforcing and administering the same law. The administrative
body exercises its quasi-judicial power when it performs in a judicial
manner an act which is essentially of an executive or administrative
nature, where the power to act in such manner is incidental to or
reasonably necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their quasi-judicial
functions, the administrative officers or bodies are required to
investigate facts or ascertain the existence of facts, hold hearings,
weigh evidence, and draw conclusions from them as basis for their
official action and exercise of discretion in a judicial nature.19
In questioning the validity or constitutionality of a rule or regulation
issued by an administrative agency, a party need not exhaust
administrative remedies before going to court. This principle applies
only where the act of the administrative agency concerned was
performed pursuant to its quasi-judicial function, and not when the
assailed act pertained to its rule-making or quasi-legislative power.
In Association of Philippine Coconut Dessicators v. Philippine
Coconut Authority,20 it was held:
The rule of requiring exhaustion of administrative remedies before a
party may seek judicial review, so strenuously urged by the Solicitor
General on behalf of respondent, has obviously no application here.
The resolution in question was issued by the PCA in the exercise of
its rule- making or legislative power. However, only judicial review of
decisions of administrative agencies made in the exercise of their
quasi-judicial function is subject to the exhaustion doctrine.
Even assuming arguendo that the principle of exhaustion of
administrative remedies apply in this case, the records reveal that
petitioners sufficiently complied with this requirement. Even during
the drafting and deliberation stages leading to the issuance of
Memorandum Circular No. 13-6-2000, petitioners were able to
register their protests to the proposed billing guidelines. They
submitted their respective position papers setting forth their
objections and submitting proposed schemes for the billing
circular.21 After the same was issued, petitioners wrote successive
letters dated July 3, 200022 and July 5, 2000,23 asking for the

28

suspension and reconsideration of the so-called Billing Circular.

These letters were not acted upon until October 6, 2000, when
respondent NTC issued the second assailed Memorandum
implementing certain provisions of the Billing Circular. This was
taken by petitioners as a clear denial of the requests contained in
their previous letters, thus prompting them to seek judicial relief.
In like manner, the doctrine of primary jurisdiction applies only where
the administrative agency exercises its quasi-judicial or adjudicatory
function. Thus, in cases involving specialized disputes, the practice
has been to refer the same to an administrative agency of special
competence pursuant to the doctrine of primary jurisdiction. The
courts will not determine a controversy involving a question which is
within the jurisdiction of the administrative tribunal prior to the
resolution of that question by the administrative tribunal, where the
question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the
administrative tribunal to determine technical and intricate matters of
fact, and a uniformity of ruling is essential to comply with the
premises of the regulatory statute administered. The objective of the
doctrine of primary jurisdiction is to guide a court in determining
whether it should refrain from exercising its jurisdiction until after an
administrative agency has determined some question or some
aspect of some question arising in the proceeding before the court.
It applies where the claim is originally cognizable in the courts and
comes into play whenever enforcement of the claim requires the
resolution of issues which, under a regulatory scheme, has been
placed within the special competence of an administrative body; in
such case, the judicial process is suspended pending referral of
such issues to the administrative body for its view.24
However, where what is assailed is the validity or constitutionality of
a rule or regulation issued by the administrative agency in the
performance of its quasi-legislative function, the regular courts have
jurisdiction to pass upon the same. The determination of whether a
specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the
regular courts. Indeed, the Constitution vests the power of judicial
review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction,
ordinance, or regulation in the courts, including the regional trial
courts.25 This is within the scope of judicial power, which includes
the authority of the courts to determine in an appropriate action the
validity of the acts of the political departments.26 Judicial power
includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government. 27

defense the constitutionality of a law he is charged with

violating and of the proceedings taken against him,
particularly as they contravene the Bill of Rights. Moreover,
Article X, Section 5(2), of the Constitution vests in the
Supreme Court appellate jurisdiction over final judgments
and orders of lower courts in all cases in which the
constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is
in question.29
In their complaint before the Regional Trial Court, petitioners averred
that the Circular contravened Civil Code provisions on sales and
violated the constitutional prohibition against the deprivation of
property without due process of law. These are within the
competence of the trial judge. Contrary to the finding of the Court of
Appeals, the issues raised in the complaint do not entail highly
technical matters. Rather, what is required of the judge who will
resolve this issue is a basic familiarity with the workings of the
cellular telephone service, including prepaid SIM and call cards
and this is judicially known to be within the knowledge of a good
percentage of our population and expertise in fundamental
principles of civil law and the Constitution.
Hence, the Regional Trial Court has jurisdiction to hear and decide
Civil Case No. Q-00-42221. The Court of Appeals erred in setting
aside the orders of the trial court and in dismissing the case.
WHEREFORE, in view of the foregoing, the consolidated petitions
are GRANTED. The decision of the Court of Appeals in CA-G.R. SP
No. 64274 dated October 9, 2001 and its Resolution dated January
10, 2002 are REVERSED and SET ASIDE. The Order dated
November 20, 2000 of the Regional Trial Court of Quezon City,
Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This
case is REMANDED to the court a quo for continuation of the
proceedings.
SO ORDERED.
G.R. No. 156109

November 18, 2004

KHRISTINE REA M. REGINO, Assisted and Represented by

ARMANDO REGINO, petitioner,
vs.
PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY,
RACHELLE A. GAMUROT and ELISSA BALADAD, respondents.

In the case at bar, the issuance by the NTC of Memorandum

Circular No. 13-6-2000 and its Memorandum dated October 6, 2000
was pursuant to its quasi-legislative or rule-making power. As such,
petitioners were justified in invoking the judicial power of the
Regional Trial Court to assail the constitutionality and validity of the
said issuances. In Drilon v. Lim,28 it was held:

DECISION

PANGANIBAN, J.:
We stress at the outset that the lower court had jurisdiction
to consider the constitutionality of Section 187, this
authority being embraced in the general definition of the
judicial power to determine what are the valid and binding
laws by the criterion of their conformity to the fundamental
law. Specifically, B.P. 129 vests in the regional trial courts
jurisdiction over all civil cases in which the subject of the
litigation is incapable of pecuniary estimation, even as the
accused in a criminal action has the right to question in his

Upon enrolment, students and their school enter upon a reciprocal

contract. The students agree to abide by the standards of academic
performance and codes of conduct, issued usually in the form of
manuals that are distributed to the enrollees at the start of the
school term. Further, the school informs them of the itemized fees
they are expected to pay. Consequently, it cannot, after the
enrolment of a student, vary the terms of the contract. It cannot
require fees other than those it specified upon enrolment.

29

The Case
Before the Court is a Petition for Review under Rule 45,1 seeking to
nullify the July 12, 20022 and the November 22, 20023 Orders of the
Regional Trial Court (RTC) of Urdaneta City, Pangasinan (Branch
48) in Civil Case No. U-7541. The decretal portion of the first
assailed Order reads:
"WHEREFORE, the Court GRANTS the instant motion to
dismiss for lack of cause of action."4
The second challenged Order denied petitioner's Motion for
Reconsideration.

In granting respondents' Motion to Dismiss, the trial court noted that

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

The Facts
Petitioner Khristine Rea M. Regino was a first year computer
science student at Respondent Pangasinan Colleges of Science and
Technology (PCST). Reared in a poor family, Regino went to college
mainly through the financial support of her relatives. During the
second semester of school year 2001-2002, she enrolled in logic
and statistics subjects under Respondents Rachelle A. Gamurot and
Elissa Baladad, respectively, as teachers.
In February 2002, PCST held a fund raising campaign dubbed the
"Rave Party and Dance Revolution," the proceeds of which were to
go to the construction of the school's tennis and volleyball courts.
Each student was required to pay for two tickets at the price of P100
each. The project was allegedly implemented by recompensing
students who purchased tickets with additional points in their test
scores; those who refused to pay were denied the opportunity to
take the final examinations.
Financially strapped and prohibited by her religion from attending
dance parties and celebrations, Regino refused to pay for the
tickets. On March 14 and March 15, 2002, the scheduled dates of
the final examinations in logic and statistics, her teachers -Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly
disallowed her from taking the tests. According to petitioner,
Gamurot made her sit out her logic class while her classmates were
taking their examinations. The next day, Baladad, after announcing
to the entire class that she was not permitting petitioner and another
student to take their statistics examinations for failing to pay for their
tickets, allegedly ejected them from the classroom. Petitioner's pleas
ostensibly went unheeded by Gamurot and Baladad, who
unrelentingly defended their positions as compliance with PCST's
policy.
On April 25, 2002, petitioner filed, as a pauper litigant, a
Complaint5 for damages against PCST, Gamurot and Baladad. In
her Complaint, she prayed for P500,000 as nominal damages;
P500,000 as moral damages; at least P1,000,000 as exemplary
damages; P250,000 as actual damages; plus the costs of litigation
and attorney's fees.
On May 30, 2002, respondents filed a Motion to Dismiss6 on the
ground of petitioner's failure to exhaust administrative remedies.
According to respondents, the question raised involved the
determination of the wisdom of an administrative policy of the PCST;
hence, the case should have been initiated before the proper
administrative body, the Commission of Higher Education (CHED).
In her Comment to respondents' Motion, petitioner argued that prior
exhaustion of administrative remedies was unnecessary, because
her action was not administrative in nature, but one purely for
damages arising from respondents' breach of the laws on human
relations. As such, jurisdiction lay with the courts.
On July 12, 2002, the RTC dismissed the Complaint for lack of
cause of action.
Ruling of the Regional Trial Court

In her Memorandum, petitioner raises the following issues for our

consideration:
"Whether or not the principle of exhaustion of
administrative remedies applies in a civil action exclusively
for damages based on violation of the human relation
provisions of the Civil Code, filed by a student against her
former school.
"Whether or not there is a need for prior declaration of
invalidity of a certain school administrative policy by the
Commission on Higher Education (CHED) before a former
student can successfully maintain an action exclusively for
damages in regular courts.
"Whether or not the Commission on Higher Education
(CHED) has exclusive original jurisdiction over actions for
damages based upon violation of the Civil Code provisions
on human relations filed by a student against the school."9
All of the foregoing point to one issue -- whether the doctrine of
exhaustion of administrative remedies is applicable. The Court,
however, sees a second issue which, though not expressly raised by
petitioner, was impliedly contained in her Petition: whether the
Complaint stated sufficient cause(s) of action.
The Court's Ruling
The Petition is meritorious.
First Issue:
Exhaustion of Administrative Remedies
Respondents anchored their Motion to Dismiss on petitioner's
alleged failure to exhaust administrative remedies before resorting to
the RTC. According to them, the determination of the controversy
hinge on the validity, the wisdom and the propriety of PCST's
academic policy. Thus, the Complaint should have been lodged in
the CHED, the administrative body tasked under Republic Act No.
7722 to implement the state policy to "protect, foster and promote
the right of all citizens to affordable quality education at all levels
and to take appropriate steps to ensure that education is accessible
to all."10
Petitioner counters that the doctrine finds no relevance to the
present case since she is praying for damages, a remedy beyond
the domain of the CHED and well within the jurisdiction of the
courts.11
Petitioner is correct. First, the doctrine of exhaustion of
administrative remedies has no bearing on the present case. In
Factoran Jr. v. CA,12 the Court had occasion to elucidate on the
rationale behind this doctrine:

30

"The doctrine of exhaustion of administrative remedies is

basic. Courts, for reasons of law, comity, and convenience,
should not entertain suits unless the available
administrative remedies have first been resorted to and the
proper authorities have been given the appropriate
opportunity to act and correct their alleged errors, if any,
committed in the administrative forum. x x x.13"
Petitioner is not asking for the reversal of the policies of PCST.
Neither is she demanding it to allow her to take her final
examinations; she was already enrolled in another educational
institution. A reversal of the acts complained of would not adequately
redress her grievances; under the circumstances, the consequences
of respondents' acts could no longer be undone or rectified.
Second, exhaustion of administrative remedies is applicable when
there is competence on the part of the administrative body to act
upon the matter complained of.14 Administrative agencies are not
courts; they are neither part of the judicial system, nor are they
deemed judicial tribunals.15 Specifically, the CHED does not have
the power to award damages.16 Hence, petitioner could not have
commenced her case before the Commission.
Third, the exhaustion doctrine admits of exceptions, one of which
arises when the issue is purely legal and well within the jurisdiction
of the trial court.17 Petitioner's action for damages inevitably calls for
the application and the interpretation of the Civil Code, a function
that falls within the jurisdiction of the courts.18
Second Issue:
Cause of Action
Sufficient Causes of Action Stated in the Allegations in the
Complaint
As a rule, every complaint must sufficiently allege a cause of action;
failure to do so warrants its dismissal.19 A complaint is said to assert
a sufficient cause of action if, admitting what appears solely on its
face to be correct, the plaintiff would be entitled to the relief prayed
for. Assuming the facts that are alleged to be true, the court should
be able to render a valid judgment in accordance with the prayer in
the complaint.20
A motion to dismiss based on lack of cause of action hypothetically
admits the truth of the alleged facts. In their Motion to Dismiss,
respondents did not dispute any of petitioner's allegations, and they
admitted that "x x x the crux of plaintiff's cause of action is the
determination of whether or not the assessment of P100 per ticket is
excessive or oppressive."21 They thereby premised their prayer for
dismissal on the Complaint's alleged failure to state a cause of
action. Thus, a reexamination of the Complaint is in order.
The Complaint contains the following factual allegations:
"10. In the second week of February 2002, defendant
Rachelle A. Gamurot, in connivance with PCST, forced
plaintiff and her classmates to buy or take two tickets each,
x x x;
"11. Plaintiff and many of her classmates objected to the
forced distribution and selling of tickets to them but the
said defendant warned them that if they refused [to] take or
pay the price of the two tickets they would not be allowed
at all to take the final examinations;
"12. As if to add insult to injury, defendant Rachelle A.
Gamurot bribed students with additional fifty points or so in
their test score in her subject just to unjustly influence and
compel them into taking the tickets;

"13. Despite the students' refusal, they were forced to take

the tickets because [of] defendant Rachelle A. Gamurot's
coercion and act of intimidation, but still many of them
including the plaintiff did not attend the dance party
imposed upon them by defendants PCST and Rachelle A.
Gamurot;
"14. Plaintiff was not able to pay the price of her own two
tickets because aside form the fact that she could not
afford to pay them it is also against her religious practice
as a member of a certain religious congregation to be
attending dance parties and celebrations;
"15. On March 14, 2002, before defendant Rachelle A.
Gamurot gave her class its final examination in the subject
'Logic' she warned that students who had not paid the
tickets would not be allowed to participate in the
examination, for which threat and intimidation many
students were eventually forced to make payments:
"16. Because plaintiff could not afford to pay, defendant
Rachelle A. Gamurot inhumanly made plaintiff sit out the
class but the defendant did not allow her to take her final
examination in 'Logic;'
"17. On March 15, 2002 just before the giving of the final
examination in the subject 'Statistics,' defendant Elissa
Baladad, in connivance with defendants Rachelle A.
Gamurot and PCST, announced in the classroom that she
was not allowing plaintiff and another student to take the
examination for their failure and refusal to pay the price of
the tickets, and thenceforth she ejected plaintiff and the
other student from the classroom;
"18. Plaintiff pleaded for a chance to take the examination
but all defendants could say was that the prohibition to
give the examinations to non-paying students was an
administrative decision;
"19. Plaintiff has already paid her tuition fees and other
obligations in the school;
"20. That the above-cited incident was not a first since
PCST also did another forced distribution of tickets to its
students in the first semester of school year 2001-2002; x
x x " 22
The foregoing allegations show two causes of action; first, breach of
contract; and second, liability for tort.
Reciprocity of the
School-Student Contract
In Alcuaz v. PSBA,23 the Court characterized the relationship
between the school and the student as a contract, in which "a
student, once admitted by the school is considered enrolled for one
semester."24 Two years later, in Non v. Dames II,25 the Court
modified the "termination of contract theory" in Alcuaz by holding
that the contractual relationship between the school and the student
is not only semestral in duration, but for the entire period the latter
are expected to complete it."26 Except for the variance in the period
during which the contractual relationship is considered to subsist,
both Alcuaz and Non were unanimous in characterizing the schoolstudent relationship as contractual in nature.
The school-student relationship is also reciprocal. Thus, it has
consequences appurtenant to and inherent in all contracts of such
kind -- it gives rise to bilateral or reciprocal rights and obligations.
The school undertakes to provide students with education sufficient
to enable them to pursue higher education or a profession. On the
other hand, the students agree to abide by the academic
requirements of the school and to observe its rules and
regulations.27

31

The terms of the school-student contract are defined at the moment

of its inception -- upon enrolment of the student. Standards of
academic performance and the code of behavior and discipline are
usually set forth in manuals distributed to new students at the start
of every school year. Further, schools inform prospective enrollees
the amount of fees and the terms of payment.
In practice, students are normally required to make a down payment
upon enrollment, with the balance to be paid before every
preliminary, midterm and final examination. Their failure to pay their
financial obligation is regarded as a valid ground for the school to
deny them the opportunity to take these examinations.
The foregoing practice does not merely ensure compliance with
financial obligations; it also underlines the importance of major
examinations. Failure to take a major examination is usually fatal to
the students' promotion to the next grade or to graduation.
Examination results form a significant basis for their final grades.
These tests are usually a primary and an indispensable requisite to
their elevation to the next educational level and, ultimately, to their
completion of a course.
Education is not a measurable commodity. It is not possible to
determine who is "better educated" than another. Nevertheless, a
student's grades are an accepted approximation of what would
otherwise be an intangible product of countless hours of study. The
importance of grades cannot be discounted in a setting where
education is generally the gate pass to employment opportunities
and better life; such grades are often the means by which a
prospective employer measures whether a job applicant has
acquired the necessary tools or skills for a particular profession or
trade.
Thus, students expect that upon their payment of tuition fees,
satisfaction of the set academic standards, completion of academic
requirements and observance of school rules and regulations, the
school would reward them by recognizing their "completion" of the
course enrolled in.
The obligation on the part of the school has been established in
Magtibay v. Garcia,28 Licup v. University of San Carlos29 and Ateneo
de Manila University v. Garcia,30 in which the Court held that, barring
any violation of the rules on the part of the students, an institution of
higher learning has a contractual obligation to afford its students a
fair opportunity to complete the course they seek to pursue.
We recognize the need of a school to fund its facilities and to meet
astronomical operating costs; this is a reality in running it. Crystal v.
Cebu International School31 upheld the imposition by respondent
school of a "land purchase deposit" in the amount of P50,000 per
student to be used for the "purchase of a piece of land and for the
construction of new buildings and other facilities x x x which the
school would transfer [to] and occupy after the expiration of its lease
contract over its present site."
The amount was refundable after the student graduated or left the
school. After noting that the imposition of the fee was made only
after prior consultation and approval by the parents of the students,
the Court held that the school committed no actionable wrong in
refusing to admit the children of the petitioners therein for their
failure to pay the "land purchase deposit" and the 2.5 percent
monthly surcharge thereon.
In the present case, PCST imposed the assailed revenue-raising
measure belatedly, in the middle of the semester. It exacted the
dance party fee as a condition for the students' taking the final
examinations, and ultimately for its recognition of their ability to
finish a course. The fee, however, was not part of the school-student
contract entered into at the start of the school year. Hence, it could
not be unilaterally imposed to the prejudice of the enrollees.
Such contract is by no means an ordinary one. In Non, we stressed
that the school-student contract "is imbued with public interest,

considering the high priority given by the Constitution to education

and the grant to the State of supervisory and regulatory powers over
all educational institutions."32 Sections 5 (1) and (3) of Article XIV of
the 1987 Constitution provide:
"The State shall protect and promote the right of all
citizens to quality education at all levels and shall take
appropriate steps to make such declaration accessible to
all.
"Every student has a right to select a profession or course
of study, subject to fair, reasonable and equitable
admission and academic requirements."
The same state policy resonates in Section 9(2) of BP 232,
otherwise known as the Education Act of 1982:
"Section 9. Rights of Students in School. In addition to
other rights, and subject to the limitations prescribed by
law and regulations, students and pupils in all schools shall
enjoy the following rights:
xxx

xxx

xxx

(2) The right to freely choose their field of study

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

32

Generally, liability for tort arises only between parties not otherwise
bound by a contract. An academic institution, however, may be held
liable for tort even if it has an existing contract with its students,
since the act that violated the contract may also be a tort. We ruled
thus in PSBA vs. CA,34 from which we quote:
"x x x A perusal of Article 2176 [of the Civil Code] shows
that obligations arising from quasi-delicts or tort, also
known as extra-contractual obligations, arise only between
parties not otherwise bound by contract, whether express
or implied. However, this impression has not prevented this
Court from determining the existence of a tort even when
there obtains a contract. In Air France v. Carrascoso (124
Phil. 722), the private respondent was awarded damages
for his unwarranted expulsion from a first-class seat
aboard the petitioner airline. It is noted, however, that the
Court referred to the petitioner-airline's liability as one
arising from tort, not one arising form a contract of
carriage. In effect, Air France is authority for the view that
liability from tort may exist even if there is a contract, for
the act that breaks the contract may be also a tort. x x x
This view was not all that revolutionary, for even as early
as 1918, this Court was already of a similar mind. In
Cangco v. Manila Railroad (38 Phil. 780), Mr. Justice
Fisher elucidated thus: 'x x x. When such a contractual
relation exists the obligor may break the contract under
such conditions that the same act which constitutes a
breach of the contract would have constituted the source
of an extra-contractual obligation had no contract existed
between the parties.'
"Immediately what comes to mind is the chapter of the
Civil Code on Human Relations, particularly Article 21 x x
x."35
Academic Freedom
In their Memorandum, respondents harp on their right to "academic
freedom." We are not impressed. According to present
jurisprudence, academic freedom encompasses the independence
of an academic institution to determine for itself (1) who may teach,
(2) what may be taught, (3) how it shall teach, and (4) who may be
admitted to study.36 In Garcia v. the Faculty Admission Committee,
Loyola School of Theology,37 the Court upheld the respondent
therein when it denied a female student's admission to theological
studies in a seminary for prospective priests. The Court defined the
freedom of an academic institution thus: "to decide for itself aims
and objectives and how best to attain them x x x free from outside
coercion or interference save possibly when overriding public
welfare calls for some restraint."38
In Tangonan v. Pao,39 the Court upheld, in the name of academic
freedom, the right of the school to refuse readmission of a nursing
student who had been enrolled on probation, and who had failed her
nursing subjects. These instances notwithstanding, the Court has
emphasized that once a school has, in the name of academic
freedom, set its standards, these should be meticulously observed
and should not be used to discriminate against certain
students.40 After accepting them upon enrollment, the school cannot
renege on its contractual obligation on grounds other than those
made known to, and accepted by, students at the start of the school
year.
In sum, the Court holds that the Complaint alleges sufficient causes
of action against respondents, and that it should not have been
summarily dismissed. Needless to say, the Court is not holding
respondents liable for the acts complained of. That will have to be
ruled upon in due course by the court a quo.
WHEREFORE, the Petition is hereby GRANTED, and the assailed
Orders REVERSED. The trial court is DIRECTED to reinstate the
Complaint and, with all deliberate speed, to continue the
proceedings in Civil Case No. U-7541. No costs.

SO ORDERED.
G.R. No. 139492

November 19, 2002

LAGUNA CATV NETWORK, INC., petitioner,

vs.
HON. ALEX E. MARAAN, Regional Director, Region IV, Dept. of
Labor and Employment (DOLE),
ENRICO SAGMIT, Acting Deputy Sheriff, DOLE Region IV,
PEDRO IGNACIO, DIOMEDES CASTRO, FE ESPERANZA
CANDILLA, RUBEN LAMINA, JR.,
JOEL PERSIUNCULA, ALVINO PRUDENTE, JOEL RAYMUNDO,
REGIE ROCERO,
LINDA RODRIGUEZ, JOHN SELUDO, ALBERTO REYES, and
ANACLETA VALOIS, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
On March 3, 1998, private respondents Pedro Ignacio, Diomedes
Castro, Fe Esperanza Candilla, Ruben Lamina, Jr., Joel
Persiuncula, Alvino Prudente, Joel Raymundo, Regie Rocero, Linda
Rodriguez, John Seludo, Alberto Reyes and Anacleta Valois filed
with the Department of Labor and Employment, Regional Office No.
IV (DOLE Region IV), separate complaints for underpayment of
wages and non-payment of other employee benefits.1Impleaded as
respondent was their employer, Laguna CATV Network, Inc.
(Laguna CATV).
Private respondents filed their separate complaints pursuant to
Article 128 of the Labor Code, as amended by Republic Act No.
7730,2 which provides:
"Article 128. Visitorial and enforcement powers. - (a) The Secretary
of Labor or his duly authorized representatives, including labor
regulation officers, shall have access to employers records and
premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any
employee and investigate any fact, condition or matter which may be
necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law, wage order or rules
and regulations issued pursuant thereto.
"(b) x x x
"An order issued by the duly authorized representative of
the Secretary of Labor and Employment under this article may
be appealed to the latter. In case said order involves a monetary
award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Secretary of Labor and Employment
in the amount equivalent to the monetary award in the order
appealed from. (emphasis added)
"x x x."
On April 1, 1998, DOLE Region IV conducted an inspection within
the premises of Laguna CATV and found that the latter violated the
laws on payment of wages and other benefits. Thereupon, DOLE
Region IV requested Laguna CATV to correct its violations but the
latter refused, prompting Regional Director Alex E. Maraan to set the
case for summary investigation.3 Thereafter, he issued an Order
dated August 19, 19984 directing Laguna CATV to pay the
concerned employees the sum of Two Hundred Sixty-One

33

Thousand, Nine and 19/100 (P261,009.19) Pesos representing their

unpaid claims, within 10 days from notice, and to submit proof of
payment within the same period. Forthwith, Laguna CATV filed a
motion for reconsideration.5
In view of Laguna CATVs failure to comply with the Order directing it
to pay the unpaid claims of its employees, DOLE Regional Director
Maraan issued a writ of execution on January 29, 19996 ordering
Sheriff Enrico Sagmit to collect in cash from Laguna CATV the
amount specified in the writ or, in lieu thereof, to attach its goods
and chattels or those of its owner, Dr. Bernardino Bailon. Sheriff
Sagmit subsequently levied on Dr. Bailons L300 van and garnished
his bank deposits.
On March 2, 1999, Laguna CATV and Dr. Bailon, in his personal
capacity, filed a motion to quash the writ of execution, notice of levy
and sale on execution and garnishment of bank deposits,7 alleging
that the writ was premature because Laguna CATVs motion for
reconsideration of the Order dated August 19, 1998 has not yet
been resolved by Regional Director Maraan. On April 21, 1999, he
issued an Order8 denying the motion to quash the writ of execution,
stating inter alia, that Laguna CATV failed to perfect its appeal of the
August 19, 1998 Order because it did not comply with the
mandatory requirement of posting a bond equivalent to the monetary
award ofP261,009.19; and that the writ of execution dated January
29, 1999 should be considered as an "overt denial" of Laguna
CATVs motion for reconsideration.9
Instead of appealing to the Secretary of Labor, Laguna CATV filed
with the Court of Appeals a motion for extension of time to file a
petition for review.10 Laguna CATV was of the view that an appeal to
the Secretary of Labor "would be an exercise in futility considering
that the said appeal will be filed with the Regional Office and it will
surely be disapproved."11
On May 13, 1999, the Court of Appeals issued a
Resolution12 denying Laguna CATVs motion for extension and
dismissing the case. The Appellate Court found, among others, that
it failed to exhaust administrative remedies.
Laguna CATV filed a motion for reconsideration but was denied by
the Court of Appeals in its Resolution dated July 22, 1999.13 Hence,
it filed the instant petition for review on certiorari. 14
Specifically, petitioner contends that the Court of Appeals erred in
denying its motion for extension and in dismissing the case.
Private respondents, in their comment on the petition, claim that the
assailed Orders of DOLE Region IV have become final and
executory for petitioners failure to appeal to the Secretary of Labor.
The petition lacks merit. The Court of Appeals was correct in holding
that petitioner failed to exhaust all administrative remedies.
As provided under Article 128 of the Labor Code, as amended,
earlier quoted, an order issued by the duly authorized representative
of the Secretary of Labor may be appealed to the latter. Thus,
petitioner should have first appealed to the Secretary of Labor
instead of filing with the Court of Appeals a motion for extension of
time to file a petition for review.
Courts, for reasons of law, comity and convenience, should not
entertain suits unless the available administrative remedies have
first been resorted to and the proper authorities have been given an
appropriate opportunity to act and correct their alleged errors, if any,

committed in the administrative forum.15 Observance of this doctrine

is a sound practice and policy. As succinctly explained by this Court
in Carale vs. Abarintos:16
"It (the doctrine of exhaustion of administrative remedies) ensures
an orderly procedure which favors a preliminary sifting process,
particularly with respect to matters peculiarly within the competence
of the administrative agency, avoidance of interference with
functions of the administrative agency by withholding judicial action
until the administrative process had run its course, and prevention of
attempts to swamp the courts by a resort to them in the first
instance."17
This Court, in a long line of cases, has consistently held that if a
remedy within the administrative machinery can still be resorted to
by giving the administrative officer concerned every opportunity to
decide on a matter that comes within his jurisdiction, then such
remedy should be exhausted first before the courts judicial power
can be sought.18 The party with an administrative remedy must not
merely initiate the prescribed administrative procedure to obtain
relief but also pursue it to its appropriate conclusion before seeking
judicial intervention in order to give the administrative agency an
opportunity to decide the matter itself correctly and prevent
unnecessary and premature resort to the court.19 The underlying
principle of the rule rests on the presumption that the administrative
agency, if afforded a complete chance to pass upon the matter will
decide the same correctly.20 Therefore, petitioner should have
completed the administrative process by appealing the questioned
Orders to the Secretary of Labor.
Although this Court has allowed certain exceptions to the doctrine of
exhaustion of administrative remedies, such as:
1) when there is a violation of due process;
2) when the issue involved is a purely legal question;
3) when the administrative action is patently illegal
amounting to lack or excess of jurisdiction;
4) when there is estoppel on the part of the administrative
agency concerned;
5) when there is irreparable injury;
6) when the respondent is a Department Secretary whose
acts as an alter ego of the President bears the implied and
assumed approval of the latter;
7) when to require exhaustion of administrative remedies
would be unreasonable;
8) when it would amount to a nullification of a claim;
9) when the subject matter is a private land in land case
proceedings;
10) when the rule does not provide a plain, speedy,
adequate remedy;
11) when there are circumstances indicating the urgency of
judicial intervention;
12) when no administrative review is provided by law;

34

13) where the rule of qualified political agency applies; and

14) when the issue of non-exhaustion of administrative
remedies has been rendered moot,21
petitioner fails to show that the instant case falls under any of the
exceptions. Its contention that an appeal to the Secretary of Labor
would be futile as "it will surely be disapproved," is purely conjectural
and definitely misplaced.
In the recent case of Republic of the Philippines vs. Express
Telecommunication Co.,22 this Court held that "the premature
invocation of the courts intervention is fatal to ones cause of
action." Accordingly, absent any finding of waiver, estoppel, or any of
the exceptions to the doctrine of exhaustion of administrative
remedies, the case is susceptible of dismissal for lack of cause of
action.23

Southern Tagalog Electric Cooperatives, Inc. (ASTEC). PRESCO is

a member of the Central Luzon Electric Cooperatives Association,
Inc. (CLECA). Petitioners are engaged in the distribution of
electricity "on a non-profit basis for the mutual benefit of its
members and patrons."6
On 8 December 1994, R.A. No. 7832 was enacted. The law
imposed a cap on the recoverable rate of system loss7 that may be
charged by rural electric cooperatives to their consumers. Section
10 of R.A. No. 7832 provides:
Section 10. Rationalization of System Losses by Phasing out
Pilferage Losses as Component Thereof. There is hereby
established a cap on the recoverable rate of system losses as
follows:
xxxx
(b) For rural electric cooperatives:

WHEREFORE, the instant petition for review is DENIED.

(i) Twenty-two percent (22%) at the end of the

first year following the effectivity of this Act;

SO ORDERED.
G.R. No. 192117

(ii) Twenty percent (20%) at the end of the

second year following the effectivity of this Act;

September 18, 2012

(iii) Eighteen percent (18%) at the end of the third

year following the effectivity of this Act;

ASSOCIATION OF SOUTHERN TAGALOG ELECTRIC

COOPERATIVES, INC. (ASTEC), BATANGAS I ELECTRIC
COOPERATIVE, INC. (BATELEC I), QUEZON I ELECTRIC
COOPERATIVE, INC. (QUEZELCO I), and QUEZON II ELECTRIC
COOPERATIVE, INC. (QUEZELCO II), Petitioners,
vs.
ENERGY REGULATORY COMMISSION, Respondent.

(iv) Sixteen percent (16%) at the end of the

fourth year following the effectivity of this Act; and
(v) Fourteen percent (14%) at the end of the fifth
year following the effectivity of this Act.

x-----------------------x
G.R. No. 192118
CENTRAL LUZON ELECTRIC COOPERATIVES ASSOCIATION,
INC. (CLEA) and PAMPANGA RURAL ELECTRIC SERVICE
COOPERATIVE, INC. (PRESCO), Petitioners,
vs.
ENERGY REGULATORY COMMISSION, Respondent.

Provided, That the ERB is hereby authorized to determine at the end

of the fifth year following the effectivity of this Act, and as often as is
necessary, taking into account the viability of rural electric
cooperatives and the interest of the consumers, whether the caps
herein or theretofore established shall be reduced further which
shall, in no case, be lower than nine percent (9%) and accordingly
fix the date of the effectivity of the new caps.
xxxx

DECISION
CARPIO, J.:
The Case
This is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Court. The petition assails the 23 December 2008
Decision2 and 26 April 2010 Resolution3 of the Court of Appeals in
the consolidated cases, including CA-G.R. SP Nos. 99249 and
99253.4 The Court of Appeals affirmed the Orders of the Energy
Regulatory Commission (ERC) directing various rural electric
cooperatives to refund their over-recoveries arising from the
implementation of the Purchased Power Adjustment (PPA) Clause
under Republic Act (R.A.) No. 7832 or the Anti-Electricity and
Electric Transmission Lines/Materials Pilferage Act of 1994.
The Facts
Petitioners Batangas I Electric Cooperative, Inc. (BATELEC I),
Quezon I Electric Cooperative, Inc. (QUEZELCO I), Quezon II
Electric Cooperative, Inc. (QUEZELCO II) and Pampanga Rural
Electric Service Cooperative, Inc. (PRESCO) are rural electric
cooperatives established under Presidential Decree (P.D.) No. 269
or the National Electrification Administration Decree.5 BATELEC I,
QUEZELCO I and QUEZELCO II are members of the Association of

The Implementing Rules and Regulations (IRR) of R.A. No. 7832

required every rural electric cooperative to file with the Energy
Regulatory Board (ERB), on or before 30 September 1995, an
application for approval of an amended PPA Clause incorporating
the cap on the recoverable rate of system loss to be included in its
schedule of rates.8 Section 5, Rule IX of the IRR of R.A. No. 7832
provided for the following guiding formula for the amended PPA
Clause:
Section 5. Automatic Cost Adjustment Formula.
xxxx
The automatic cost adjustment of every electric cooperative shall be
guided by the following formula:
Purchased Power Adjustment Clause
A
(PPA) =

-E
B-(C + D)

Where:

35

A = Cost of electricity purchased and generated for the previous

month

3. Monthly Financial and Statistical Report (MFSRs) not yet

forwarded to ERB from January 1995 onward

B=

4. Sample bills for the month subject to confirmation for different

types of customers.

Total Kwh purchased and generated for the previous month

C = The actual system loss but not to exceed the maximum

recoverable rate of system loss in Kwh plus actual company use in
Kwhrs but not to exceed 1% of total Kwhrs purchased and
generated
D=

Kwh consumed by subsidized consumers

E = Applicable base cost of power equal to the amount

incorporated into their basic rate per Kwh
In compliance with the IRR of R.A. No. 7832, various associations of
rural electric cooperatives throughout the Philippines filed on behalf
of their members applications for approval of amended PPA
Clauses. On 8 February 1996, ASTEC filed on behalf of its members
(including BATELEC I, QUEZELCO I and QUEZELCO II) a verified
petition for the approval of the amended PPA Clause. The verified
petition of ASTEC was docketed as ERB Case No. 96-35.9 On 9
February 1996, CLECA also filed on behalf of its members (including
PRESCO) a verified petition for the approval of the amended PPA
Clause. The verified petition of CLECA was docketed as ERB Case
No. 96-37.10
The ERB issued Orders on 19 February 199711 and 25 April
199712 provisionally authorizing the petitioners and the other rural
electric cooperatives to use and implement the following PPA
formula, subject to review, verification and confirmation by the ERB:
A
(PPA) =

-E
B-(C + CI + D)

Where:
A = Cost of Electricity purchased and generated for the previous
month less amount recovered from pilferages, if any
B=

Thereafter, (from February 1997 and onward) all electric

cooperatives are hereby directed to submit on or before the 20th day
of the current month, their implementation of the PPA formula of the
previous month for the same purposes as indicated above.13

Total Kwh purchased and generated for the previous month

On 8 June 2001, R.A. No. 9136 or the Electric Power Industry

Reform Act of 2001 (EPIRA) was enacted. Section 38 of the EPIRA
abolished the ERB, and created the Energy Regulatory Commission
(ERC). The ERC is an independent and quasi-judicial regulatory
body mandated to "promote competition, encourage market
development, ensure customer choice and penalize abuse of market
power in the restructured electricity industry."14 The powers and
functions of the ERB not inconsistent with the provisions of the
EPIRA were transferred to the ERC, together with the applicable
funds and appropriations, records, equipment, property and
personnel of the ERB.15
As a result, ERB Case No. 96-35 involving ASTEC and its members
(including BATELEC I, QUEZELCO I and QUEZELCO II) was
renamed and renumbered as ERC Case No. 2001-338.16 ERB Case
No. 96-37 involving CLECA and its members (including PRESCO)
was also renamed and renumbered as ERC Case No. 2001340.17The records further show that these two cases were
consolidated, together with the other cases previously consolidated
with then ERB Case No. 96-35.18
Subsequently, the ERC issued an Order dated 17 June 2003. The
ERC noted therein "that the PPA formula which was approved by the
ERB was silent on whether the calculation of the cost of electricity
purchased and generated in the formula should be gross or net of
discounts."19 The cost of electricity is computed at "gross" if the
discounts extended by the power supplier to the rural electric
cooperative are not passed on to end-users, while the cost of
electricity is computed at "net" if the discounts are passed on to endusers.20 The ERC ruled:
To attain uniformity in the implementation of the PPA formulae, the
Commission has resolved that:

C = Actual system loss but not to exceed themaximum

recoverable rate of system loss in Kwh

1. In the confirmation of past PPAs, the power cost shall still be

based on "gross"; and

C1 = Actual company use in Kwhrs but not to exceed 1% of total

Kwhrs purchased and generated

2. In the confirmation of future PPAs, the power cost shall be based

on "net".

D=

Relative thereto, petitioners are directed to implement their

respective PPA using the power cost based on net at the next billing
cycle upon receipt of this Order until such time that their respective
rates have already been unbundled.

Kwh consumed by subsidized consumers

E = Applicable base cost of power equal to the amount

incorporated into their basic rate per Kwh
The ERB further directed petitioners to submit relevant documents
regarding the monthly implementation of the PPA formula for review,
verification and confirmation. The Orders dated 19 February 1997
and 25 April 1997 commonly provide:
Accordingly, all electric cooperatives are hereby directed to submit
to the Board within ten (10) days from notice hereof their monthly
implementation of the PPA formula from the February, 1996 to
January, 1997 for the Boards review, verification and confirmation.
The submission should include the following documents:
1. PPA computation following the formula provided above
2. Monthly NPC bill or such other power bill purchased or generated
not yet forwarded to ERB from January 1995 onward

Petitioners are hereby directed to submit to the Commission on or

before the 20th day of the following month, their implementation of
the PPA formula for review, verification and confirmation by the
Commission.21
On 29 March 2004, the ERC issued an Order in the consolidated
cases resolving the motions for reconsideration filed by several rural
electric cooperatives. In the said Order, the ERC explained the
general framework of the new PPA confirmation scheme to be
adopted by the regulatory body. The ERC stated:
Majority of the issues raised in the motions for reconsideration can
be properly addressed by the new PPA confirmation scheme to be
adopted by this Commission. Under this scheme, the electric
cooperatives shall be allowed to collect/refund the true cost of power
due them vis-a-vis the amount already collected from their end-

36

users. In turn, the end-users shall only be charged the true cost of
power consumed.
The Commission recognizes that the electric cooperatives
implemented their PPA in the manner by which majority of them
were implementing the same. Thus, they had no alternative but to
adopt the most recent available data for the respective billing
months which were based on estimates due to time lag differences.
Under the new scheme, the actual data for the billing month shall be
adopted as they are available at the time the verification is
undertaken.
In this regard, all the other issues raised by the electric cooperatives
shall be properly addressed in the confirmation of their respective
PPAs.22
Several rural electric cooperatives subsequently filed motions for
clarification and/or reconsideration with respect to the ERCs
process of computation and confirmation of the PPA. The rural
electric cooperatives advanced the following allegations:
1. They are non-profit organizations and their rate components do
not include any possible extra revenue except the discounts; and
2. They are burdened with expenses in their continuing expansion
programs of rural electrification to the remotest barangays and sitios
of their respective franchise areas and could not give any benefit or
incentive to their employees.23
On 14 January 2005, the ERC issued an Order addressing the
motions for clarification and/or reconsideration filed by the rural
electric cooperatives. In the said Order, the ERC expounded on the
general framework of the new PPA confirmation scheme. The ERC
stated that "the new PPA scheme creates a venue where both the
electric cooperatives can recover and the end-users can be charged
the true cost of power."24 The ERC stressed that "the purchased
power cost is a pass through cost to customers and as such, the
same should be revenue neutral."25In other words, rural electric
cooperatives should only recover from their members and patrons
the actual cost of power purchased from power suppliers.26
In the same Order, the ERC clarified certain aspects of the new PPA
confirmation scheme. With respect to the data to be utilized in the
confirmation of the PPA, the ERC stated:
All electric cooperatives were directed to implement the PPA in the
manner the then Energy Regulatory Board (ERB) had prescribed. In
calculating their respective PPAs, the electric cooperatives had no
alternative but to adopt the most available data for the respective
billing months, i.e. the previous month, due to time lag differences.
Under the new PPA confirmation scheme, the actual data for the
billing month shall be adopted primarily because they reflect the true
cost of power, they are available at the time the confirmation is
undertaken and they have already been charged to the end-users.
Thus, the new PPA scheme creates a venue where both the electric
cooperatives can recover and the end-users can be charged the true
cost of power. There will also be proper matching of revenue and
cost.27
As regards the cap on the recoverable rate of system loss, the ERC
explained:
The caps on the recoverable system loss provided in R.A. 7832
were established to encourage distribution utilities to operate
efficiently. Since the PPA is merely a cost recovery mechanism, the
electric cooperatives are not supposed to earn revenue nor suffer
losses therefrom. To allow them to adopt the caps even in cases
where the system losses are actually lower would be contrary to the
underlying principle of a recovery mechanism.28
Finally, with respect to the Prompt Payment Discount (PPD)
extended by power suppliers to rural electric cooperatives, the ERC
reiterated that rural electric cooperatives should only recover the

actual costs of purchased power.29 Thus, any discounts extended to

rural electric cooperatives must necessarily be extended to endusers by charging only the "net" cost of purchased power.
In light of the foregoing clarifications, the ERC outlined the following
directives in the said Order:
A. The computation and confirmation of the PPA prior to the
Commissions Order dated June 17, 2003 shall be based on the
approved PPA formula;
B. The computation and confirmation of the PPA after the
Commissions Order dated June 17, 2003 shall be based on the
power cost "net" of discount; and
C. If the approved PPA formula is silent on the terms of discount, the
computation and confirmation of the PPA shall be based on the
power cost at "gross", subject to the submission of proofs that said
discounts are being extended to the end-users.30
Subsequently, the ERC issued the following Orders:
1. 22 March 2006 Order in ERC Case No. 2001-338 regarding the
monthly PPA implementation of BATELEC I;
2. 16 February 2007 Order in ERC Case No. 2001-338 regarding
the monthly PPA implementation of QUEZELCO I;
3. 7 December 2005 Order in ERC Case No. 2001-338 regarding
the monthly PPA implementation of QUEZELCO II; and
4. 27 March 2006 Order in ERC Case No. 2001-340 regarding the
monthly PPA implementation of PRESCO.
In the said Orders, the ERC clarified its policy on the PPA
confirmation scheme previously adopted in its Order dated 14
January 2005. For the distribution utilities to recover only the actual
costs of purchased power, the ERC stated the following principles
governing the treatment of the PPD granted by power suppliers to
distribution utilities including rural electric cooperatives:
I. The over-or-under recovery will be determined by comparing the
Allowable Power Cost with the Distribution Utilitys Actual Revenue
(AR) billed to end-users.
II. Calculation of the Allowable Power Cost as prescribed in the PPA
Formula:
a. For a Distribution Utility which PPA formula explicitly provides the
manner by which discounts availed from the power supplier/s shall
be treated, the allowable power cost will be computed based on the
specific provision of the formula, which may either be at "net" or
"gross"; and
b. For a Distribution Utility which PPA formula is silent in terms of
discounts, the allowable power cost will be computed at "net" of
discounts availed from the power supplier/s, if there is any.
III. Calculation of the Distribution Utilitys Actual Revenues/Actual
Amount Billed to End-users.
a. On Actual PPA Computed at Net of Discounts Availed from Power
Supplier/s:
a.1. If a Distribution Utility bills at net of discounts availed from the
power supplier/s (i.e. Gross power cost minus discounts from power
supplier/s) and the Distribution Utility is not extending discounts to
end-users, the actual revenue should be equal to the allowable
power cost; and

37

a.2. If a Distribution Utility bills at net of discounts availed from the

power supplier/s (i.e. Gross power cost minus discounts from power
supplier/s) and the Distribution Utility is extending discounts to endusers, the discount extended to end-users will be added back to
actual revenue.
b. On Actual PPA Computed at Gross
b.1. If a Distribution Utility bills at gross (i.e. Gross power cost not
reduced by discounts from power supplier/s) and the Distribution
Utility is extending discounts to end-users, the actual revenue will be
calculated as: Gross Power Revenue less Discounts extended to
end-users. The result will then be compared to the allowable power
cost; and
b.2. If a Distribution Utility bills at gross (i.e. Gross power cost not
reduced by discounts from power supplier/s) and the distribution
utility is not extending discounts to end-users, the actual revenue will
be taken as is which shall be compared to the allowable power cost.
IV. In calculating the Distribution Utilitys actual revenues, in no case
shall the amount of discounts extended to end-users be higher than
the discounts availed by the Distribution Utility from its power
supplier/s.31
The ERC then directed petitioners to refund their respective overrecoveries to end-users arising from the implementation of the PPA
Clause under R.A. No. 7832 and its IRR, as follows:
1. 22 March 2006 Order32
In the Order dated 22 March 2006, the ERC evaluated the monthly
PPA implementation of BATELEC I covering the period from
February 1996 to September 2004. The verification and confirmation
of the PPA implementation was based on the monthly
implementation reports, documents and information submitted by
BATELEC I in compliance with the Order dated 19 February 1997
issued by the ERB. The ERC determined that there were overrecoveries amounting to Fifty Nine Million Twenty One Thousand
Nine Hundred Five Pesos (P 59,021,905.00) equivalent to
P0.0532/kWh. The ERC outlined the following bases for the overrecoveries:
1. For the period August 1998 to May 1999, NPC made an
erroneous reading on BATELEC Is meter which resulted to the
application of PPA charges at higher sales volume vis-a-vis those
utilized in the PPA computation. The system loss adopted in the PPA
formula was the running average of the preceding twelve (12)
months, which is the period when the erroneous meter reading had
not yet occurred. As a result, the PPA formulas denominator which
represents the sales volume was lower than the actual sales for the
period when the PPA was implemented and the impact of the
different "E" (basic charge power cost component) on the said
period resulted to a net over-recovery of PhP38,317,933.00;
2. For the period July 2003 to August 2004, BATELEC I erroneously
added back the Power Act Reduction amounting to
PhP 20,565,981.00 to its total power cost; and
3. The new grossed-up factor mechanism adopted by the
Commission which provided a true-up mechanism that allows the
distribution utilities to recover the actual cost of purchased power.33
The ERC confirmed the PPA of BATELEC I covering the period from
February 1996 to September 2004, and directed BATELEC I "to
refund the amount of P0.0532/kWh starting on the next billing cycle
from receipt of this Order until such time that the full amount shall
have been refunded."34
2. 16 February 2007 Order35

In the Order dated 16 February 2007, the ERC evaluated the

monthlyPPA implementation of QUEZELCO I for the period from
January 1999 to April 2004. QUEZELCO I previously submitted its
monthly implementation reports, documents and information for
review, verification and confirmation pursuant to the Order dated 19
February 1997 issued by the ERB. The ERC determined that there
were over-recoveries amounting to Twenty Million Twenty Seven
Thousand Five Hundred Fifty Two Pesos (P 20,027,552.00)
equivalent to P0.0486/kWh. The ERC outlined the following bases
for the over-recoveries:
1. For the period July 2003 to April 2004, QUEZELCO Is power cost
was not reduced by the PPD availed from its suppliers resulting to
an over-recovery of PhP 8,457,824.00;
2. QUEZELCO I failed to comply with the Implementing Rules and
Regulations (IRR) of Republic Act No. 7832 x x x which provides
that the pilferage recoveries should be deducted from the total
purchased power cost used in the PPA computation. Thus,
QUEZELCO Is actual PPA should have been reduced by the
pilferage recoveries amounting to PhP 580,855.00;
3. QUEZELCO I failed to reflect the power cost adjustments on its
PPA as a result of the billing adjustments of NPC under the Credit
Memo for the month of June 2003 amounting to PhP4,210,855.00;
4. QUEZELCO Is power supply agreement with Camarines Norte
Electric Cooperative, Inc. (CANORECO) was not approved by the
Commission. Thus, the Commission pegged CANORECOs power
cost at NPCs total average rate which resulted to an over-recovery
of PhP 849,324.00;
5. In computing its PPA, QUEZELCO I included the subsidized
consumptions of 2,051,753 kWh which resulted to an over-recovery
of PhP 1,611,036.00;
6. The new grossed-up factor mechanism adopted by the
Commission which provides a true-up mechanism to allow the DUs
to recover the actual costs of purchased power.36
The PPA of QUEZELCO I for the period of January 1999 to April
2004 was confirmed by the ERC. In light of the over-recovery,
QUEZELCO I was directed "to refund the amount of P0.0486/kWh
starting the next billing cycle from receipt of this Order until such
time that the full amount shall have been refunded."37
3. 7 December 2005 Order38
In the Order dated 7 December 2005, the ERC reviewed and
verified the monthly PPA implementation of QUEZELCO II covering
the period from January 2000 to November 2003, based on the
monthly implementation reports, documents and information
submitted by the rural electric cooperative. The ERC established
that there were over-recoveries amounting to Five Million Two
Hundred Forty Eight Thousand Two Hundred Eighty Two Pesos
(P 5,248,282.00) equivalent to P0.1000/kWh.
The bases of the over-recoveries are as follows:
1. QUEZELCO II treated the penalty on excess/below contracted
demand in April 2000 as a discount;
2. For the period May 2000 to November 2000, QUEZELCO II
overstated its power cost due to accounts payable for fuel oil
consumption from November 1999 to June 2000;
3. The new grossed-up factor scheme adopted by the Commission
which provided a different result vis-a-vis the originally approved
formula; and

38

4. The Purchased Power Cost was reduced by the Prompt Payment

Discount availed from the power suppliers.39

99267,48 99269,49 99270,50 99271,51 99272,52 99273,53 99323,54 9946

2,55 99782,56 100671,57 and 100822.58

The ERC confirmed the PPA of QUEZELCO II for the period of

January 2000 to November 2003, and directed QUEZELCO II "to
refund the amount of P0.1000/kWh starting on the next billing cycle
from receipt of this Order until such time that the full amount shall
have been refunded."40

The rural electric cooperatives similarly raised the following issues in

the consolidated cases:
1. Whether the system loss caps prescribed under Section 10 of
R.A. 7832 are arbitrary and violative of the non-impairment clause,
therefore, invalid and unconstitutional;

4. 27 March 2006 Order41

In the Order dated 27 March 2006, the ERC evaluated the monthly
PPA implementation of PRESCO covering the period of February
1996 to June 2004. PRESCO previously submitted its monthly PPA
implementation reports, documents and information for review,
verification and confirmation pursuant to the Order dated 25 April
1997 issued by the ERB. The ERC determined that there were overrecoveries amounting to Eighteen Million Four Hundred Thirty Eight
Thousand Nine Hundred Six Pesos (P 18,438,906.00) equivalent to
P0.1851/kWh. The over-recoveries were based on the following:
1. In its PPA computation, PRESCO excluded its subsidized
consumers in the components of the kWh sales despite that these
consumers where being charged with PPA;
2. Since PRESCO sources its power from the National Power
Corporation (NPC) and Angeles Power Incorporated (API), the
Commission used PRESCOs actual power cost from API for the
years 1998, 1999 (except August), 2000, 2001 and 2002 (January to
April only) being lower than NPCs rate. However, for the years 2002
(May to December), 2003 and 2004, the Commission applied NPCs
rate being lower than API. x x x x
3. For the period February 1996 to April 1999, PRESCO utilized the
1.4 multiplier scheme which is roughly equivalent to 29% system
loss which resulted to an over-recovery of PhP 5,701,173.00; and
4. The Commission computed PRESCOs allowable power cost at
"net" of the Power Factor Discount (PFD) and Prompt Payment
Discount (PPD) availed from NPC at PhP 2,185,812.00. PRESCO
did not extend the discounts to the end users. Thus, the
Commission considered PRESCOs actual revenue. 42
The ERC confirmed the PPA of PRESCO for the period of February
1996 to June 2004, and directed PRESCO "to refund the amount of
P0.1851/kWh starting the next billing cycle from receipt of this Order
until such time that the full amount shall have been refunded."43
Petitioners thereafter filed their respective motions for
reconsideration of the foregoing Orders. On 9 May 2007, the ERC
issued Orders denying the motions for reconsideration filed by the
petitioners.44
On 28 June 2007, BATELEC I, QUEZELCO I and QUEZELCO II
filed with the Court of Appeals a Petition for Review under Rule 43 of
the Rules of Court, assailing the 22 March 2006 Order, 16 February
2007 Order and 7 December 2005 Order of the ERC directing the
rural electric cooperatives to refund their respective over-recoveries.
The petition also assailed the 9 May 2007 Orders of the ERC
denying the motions for reconsideration of BATELEC I, QUEZELCO
I and QUEZELCO II. The case was docketed as CA-G.R. SP No.
99249. On the same date, PRESCO also filed with the Court of
Appeals a Petition for Review under Rule 43 of the Rules of Court,
assailing the 27 March 2006 Order of the ERC directing the rural
electric cooperative to refund its over-recoveries. The petition
likewise assailed the 9 May 2007 Order of the ERC denying the
motion for reconsideration of PRESCO. The case was docketed as
CA-G.R. SP No. 99253. The Court of Appeals subsequently
consolidated these cases with the petitions filed by other rural
electric cooperatives and their associations in relation to the refund
of their respective over-recoveries. The consolidated cases include
CA-G.R. SP Nos. 99249, 99250,45 99251,46 99252,47 99253,

2. Whether the system loss caps should still be imposed even after
the effectivity of R.A. 9136;
3. Whether the ERC may validly issue rules and regulations for the
implementation of the provisions of R.A. No. 7832 by way of Orders
or Decisions with retroactive effect;
4. Whether petitioners were denied due process of law by the nondisclosure and non-issuance of guidelines or rules in the
implementation of the alleged "Gross Up Factor Mechanism" in the
"confirmation process";
5. Whether the ERC observed the proper issuance of orders and
resolutions;
6. Whether the denial of petitioners motions for reconsideration of
the assailed Orders with only one Commissioner affixing his
signature thereto is valid;
7. Whether the ERC has legal and factual bases to charge
petitioners with over-recoveries and to order the refund thereof for
having (1) implemented an "E" that is different from that imposed in
the ERB formula and (2) used the multiplier scheme originally
approved by the NEA;
8. Whether the prompt payment discount and other discounts
extended to petitioners by their power supplier, the NPC, may validly
be refunded to the consumers;
9. Whether the alleged over-recoveries were arrived at without
giving petitioners the opportunity to be heard.59
The Ruling of the Court of Appeals
In its 23 December 2008 Decision, the Court of Appeals denied the
petitions for review of the rural electric cooperatives, and affirmed
the Orders of the ERC directing the various rural electric
cooperatives to refund their respective over-recoveries. At the
outset, the Court of Appeals stated that "to the extent that the
administrative agency has not been arbitrary or capricious in the
exercise of its power, the time-honored principle is that courts should
not interfere."60
With respect to the constitutionality of Section 10 of R.A. No. 7832,
the Court of Appeals ruled that the challenge amounts to a collateral
attack that is prohibited by public policy.61
With regard to the imposition of the system loss caps after the
effectivity of the EPIRA, the Court of Appeals recognized the
amendment to Section 10 of R.A. No. 7832. Section 43 (f) of the
EPIRA provides that "the cap on the recoverable rate of system
losses prescribed in Section 10 of Republic Act No. 7832, is hereby
amended and shall be replaced by caps which shall be determined
by the ERC based on load density, sales mix, cost of service,
delivery voltage and other technical considerations it may
promulgate." The Court of Appeals, however, stated:
While the EPIRA had already specifically amended the system loss
caps mandated under Section 10 of R.A. No. 7832, respondent ERC
still had to go through the tedious process of determining the
technical considerations in order to come up with the rate-setting

39

methodology that shall promote the efficiency of distribution utilities

as envisioned by the law. Before they could be replaced, however,
the caps used in the ERB formula remain, as asserted by the OSG.
For this reason, petitioners cannot insist that the reinforcement of
said system loss caps be discontinued after the passage of the
EPIRA on June 8, 2001. In fact, as already stated, it was only in
October, 2004 that respondent ERC was able to promulgate the
AGRA or the Automatic Adjustment of Generation Rates and System
Loss Rates by Distribution Utilities, which could effectively replace
the PPA. Thus, for the periods covered by the ERC confirmation
(February 1996 to September 2004), respondent ERC did not abuse
its discretion in using the system loss caps in the ERB formula. 62
The Court of Appeals likewise rejected the contention of petitioners
that the ERC issued rules and regulations for the implementation of
the provisions of R.A. No. 7832 by way of orders or decisions with
retroactive effect. According to the Court of Appeals, the
confirmation process of the ERC encompassed PPA implementation
periods after the effectivity of R.A. No. 7832, particularly from
February 1996 to September 2004.63 Thus, the Court of Appeals
concluded that there was no retroactive application of the law.
The Court of Appeals further rejected the claim of denial of due
process. The Court of Appeals ruled:
Petitioners likewise failed to show to Our satisfaction that the
guidelines contained in the assailed Orders of respondent ERC went
beyond merely providing for the means that can facilitate or render
less cumbersome the implementation of the law. Interpretative rules
give no real consequence more than what the law itself has already
prescribed, and are designed merely to provide guidelines to the law
which the administrative agency is in charge of enforcing.64
As regards the validity of the denial of petitioners motions for
reconsideration, the Court of Appeals noted that the Orders
specifically indicated that the signature of the Commissioner was
"FOR AND BY AUTHORITY OF THE COMMISSION."65 The Court of
Appeals stated that the ERC examined the motions for
reconsideration as a collegial body.66 It further emphasized that the
interests of substantial justice prevail over the strict application of
technical rules.67
The Court of Appeals further ruled that the ERC had legal and
factual bases in charging petitioners with over-recoveries. The Court
of Appeals stated:
Prior to the enactment of R.A. No. 7832, petitioners used the
Multiplier Scheme implemented by the NEA [National Electrification
Administration] to recover incremental costs in the power purchased
from NPC the sole agency authorized to generate electric power
before the enactment of the EPIRA and consequent system losses
that are not included in their respective approved basic rates. With
the use of multipliers ranging from 1.2 to 1.4, depending on their
actual system losses, petitioners were allowed to automatically
adjust their rates when cost of power purchased from NPC changes,
thus:
1.2 Multiplier For ECs with system loss of 15%
and below;
1.3 Multiplier For ECs with system loss ranging
from 16% to 22%; and
1.4 Multiplier For ECs with system loss ranging
from 23% and above.
The NEA likewise approved the inclusion in the basic rates of a
separate item for Loss Levy Charge for those electric cooperatives
(ECs) whose loan covenants with financial institutions such as the
Asian Development Bank (ADB) limit their recoverable system loss
to 15%.

Thus, petitioners charged their consumers "System Loss Levy" for

system losses in excess of 15%.
Petitioners admitted having continued to use the pricing
mechanisms authorized by the NEA even after the passage of R.A.
No. 7832, which repealed the same. Needless to say, the use of
said mechanisms allowed the recovery of system losses beyond the
caps set by the said law. Petitioners cannot, therefore, successfully
argue that respondent ERC had no basis in charging them of overrecoveries as a result of their failure to comply with the law.68
With respect to the PPD and other discounts extended by power
suppliers, the Court of Appeals emphasized that rural electric
cooperatives may only recover the actual cost of purchased power.
The Court of Appeals stated:
No error can likewise be attributed to respondent ERC in directing
the implementation of the respective PPA of the petitioners using the
power cost net of discounts. As held in the case of National Power
Corporation vs. Philippine Electric Plant Owners Associaton
(PEPOA), Inc., discounts are not amounts paid or charged for the
sale of electricity, but are reductions in rates. Moreover, We
emphasized here that rate fixing calls for a technical examination
and specialized review of specific details which the courts are illequipped to enter, hence, such matters are primarily entrusted to the
administrative or regulating authority. Towards this end, the
administrative agency, respondent ERC in this case, possesses the
power to issue rules and regulations to implement the statute which
it is tasked to enforce, and whatever is incidentally necessary to a
full implementation of the legislative intent should be upheld as
germane to the law. Respondent ERC is mandated to prescribe a
rate-setting methodology "in the public interest" and "to promote
efficiency", hence its goal of fixing purchased power at actual cost
should be upheld.69
The Court of Appeals further rejected the claim that petitioners were
deprived of the opportunity to be heard. The Court of Appeals gave
credence to the assertion of the Office of the Solicitor General that
"petitioners were allowed to justify their PPA charges through the
documents that they were required to file; that the technical staff of
the ERC conducted exit conferences with petitioners
representatives to discuss preliminary figures and they were
authorized to go over the working papers to check out inaccuracies;
and that petitioners were allowed to file their respective motions for
reconsideration after the issuance of the PPA confirmation Orders."70
The rural electric cooperatives thereafter filed their respective
motions for reconsideration of the 23 December 2008 Decision of
the Court of Appeals. In its 26 April 2010 Resolution, the Court of
Appeals denied the motions for reconsideration. The Court of
Appeals observed that the issues raised in the motions for
reconsideration were "mere reiterations" of the issues addressed in
the 23 December 2008 Decision.71 The Court of Appeals further
stated:
Nonetheless, We find that the following disquisition of the Office of
the Solicitor General amply supports the affirmance of the assailed
Decision, thus:
"12. Notably, respondent did not impose rules to set new rates,
rather, it merely confirmed whether petitioners have faithfully
complied with the requirements of recoveries under the provisionally
approved PPA formula. There is therefore nothing new or novel
about the confirmation policies of respondent as to give any
occasion to retroactivity.
13. Equally significant, it should be underscored that from the
beginning, petitioners authority to recover their losses based on the
PPA formula were PROVISIONAL, that is, the authority granted to
petitioners for recoveries and the mode of its implementation is
subject to further reconfirmation by respondent ERC. The erstwhile
ERB earlier allowed electric cooperatives to implement their PPA
based on the PPA formula that the ERB provisionally approved. As
spelled out in the Order of approval, however, such authorization

40

was provisional and temporary, that is, it is subject to regulation and

post hoc review, verification and confirmation by the ERB.
xxx

invalid for lack of publication, non-submission to the U.P. Law

Center, and its retroactive application.
The Ruling of the Court

14. By its very nature, the PPA confirmation process is a post hoc
review of charges already implemented. It is therefore crystal clear
from the approval of the application of the PPA that such
authorization was conditioned on subsequent review by the
regulating body. Thus, the Order did not only approve the
implementation of the PPA but also (a) directed the electric
cooperatives to submit their monthly implementation of the PPA
formula for the boards review, verification and confirmation; and (b)
directed the Commission on Audit to cause an audit of all the
accounts and other records of all the electric cooperatives to aid the
Board in the determination of rates.
15. That the electric cooperatives were allowed to implement their
PPA after the provisional approval of the PPA formula did not divest
the regulator of the power to determine the reasonableness of the
said charges or the electric cooperatives entitlement thereto. Such
power necessarily includes the power to adopt such policies as
would assist the regulator in its determination of the
reasonableness of such PPA charges implemented by electric
cooperatives. The implementation was provisionally approved and
subject to the changes that the regulator can make, in the exercise
of its rate-setting authority and subject to the reasonableness
standard under the law x x x."
Suffice to state that with regard to rate-determination, the
government is not hidebound to apply any particular method or
formula. What is a just and reasonable rate cannot be fixed by any
immutable method or formula. In other words, no public utility has
the vested right to any particular method of valuation. The
administrative agency is not duty bound to apply any one particular
formula or method simply because the same method has been
previously used and applied.
The issues on the alleged retroactive application and denial of due
process had been adequately addressed in the Decision dated
December 23, 2008. We reiterate that the periods covered by the
ERC confirmation subject of the petitions, spanning from February
1996 to September 2004, fell after the effectivity of R.A. No. 7832,
the constitutionality of which petitioners continue, albeit erroneously,
to assail in the instant motions. With respect to the alleged lack of
trial-type hearing, it is settled that the essence of due process in
administrative proceedings is merely the opportunity to explain ones
side or to seek reconsideration of the action or ruling complained of.
Where an opportunity to be heard is accorded, as in this case, there
is no denial of due process. Neither was there a need for the
assailed Orders of the ERC to be published as petitioners so
adamantly insist. As pointed out by the OSG, said Orders did not
create a new obligation, impose a new duty, or attach a new
disability on the electric cooperatives. They merely clarified the
policy guidelines adopted in the implementation of the PPA. As We
have said, interpretative rules give no real consequence more than
what the law itself has already prescribed.72
Hence, this instant petition filed by BATELEC I, QUEZELCO I,
QUEZELCO II and PRESCO.
The Issues
Petitioners raise the following issues:
1. Whether the policy guidelines issued by the ERC on the treatment
of discounts extended by power suppliers are ineffective and invalid
for lack of publication, non-submission to the University of the
Philippines (U.P.) Law Center, and their retroactive application; and
2. Whether the grossed-up factor mechanism implemented by the
ERC in the computation of the over-recoveries is ineffective and

The petition is partly meritorious.

I.
Petitioners assail the validity of the 22 March 2006 Order,73 16
February 2007 Order,74 7 December 2005 Order,75and 27 March
2006 Order76 of the ERC directing the refund of over-recoveries for
having been issued pursuant to ineffective and invalid policy
guidelines. Petitioners assert that the policy guidelines on the
treatment of discounts extended by power suppliers are ineffective
and invalid for lack of publication, non-submission to the U.P. Law
Center, and their retroactive application.
Publication is a basic postulate of procedural due process. The
purpose of publication is to duly inform the public of the contents of
the laws which govern them and regulate their activities.77 Article 2
of the Civil Code, as amended by Section 1 of Executive Order No.
200, states that "laws shall take effect after fifteen days following the
completion of their publication either in the Official Gazette or in a
newspaper of general circulation in the Philippines, unless it is
otherwise provided." Section 18, Chapter 5, Book I of Executive
Order No. 292 or the Administrative Code of 1987 similarly provides
that "[l]aws shall take effect after fifteen (15) days following the
completion of their publication in the Official Gazette or in a
newspaper of general circulation, unless it is otherwise provided."
Procedural due process demands that administrative rules and
regulations be published in order to be effective.78In Taada v.
Tuvera, this Court articulated the fundamental requirement of
publication, thus:
We hold therefore that all statutes, including those of local
application and private laws, shall be published as a condition for
their effectivity, which shall begin fifteen days after publication unless
a different effectivity date is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders
promulgated by the President in the exercise of legislative powers
whenever the same are validly delegated by the legislature or, at
present, directly conferred by the Constitution. Administrative rules
and regulations must also be published if their purpose is to enforce
or implement existing law pursuant also to a valid
delegation.79(Boldfacing supplied)
There are, however, several exceptions to the requirement of
publication. First, an interpretative regulation does not require
publication in order to be effective.80 The applicability of an
interpretative regulation "needs nothing further than its bare
issuance for it gives no real consequence more than what the law
itself has already prescribed."81 It "adds nothing to the law" and
"does not affect the substantial rights of any person."82 Second, a
regulation that is merely internal in nature does not require
publication for its effectivity.83 It seeks to regulate only the personnel
of the administrative agency and not the general public.84 Third, a
letter of instruction issued by an administrative agency concerning
rules or guidelines to be followed by subordinates in the
performance of their duties does not require publication in order to
be effective.85
The policy guidelines of the ERC on the treatment of discounts
extended by power suppliers are interpretative regulations. The
policy guidelines merely interpret R.A. No. 7832 and its IRR,
particularly on the computation of the cost of purchased power. The
policy guidelines did not modify, amend or supplant the IRR.
The policy guidelines were first enunciated by the ERC in its 17
June 2003 Order. In the said Order, the ERC explained that the cost
of electricity purchased and generated is computed at "gross" if the

41

discounts extended by the power supplier are not passed on to endusers, while the cost of electricity is computed at "net" if the
discounts are passed on to end-users.86
The ERC subsequently issued its 14 January 2005 Order. It
emphasized therein that rural electric cooperatives should only
recover the actual costs of purchased power.87 Any discounts
extended to rural electric cooperatives must therefore be extended
to end-users by charging only the "net" cost of purchased power.
The ERC issued the following directives in the said Order:
A. The computation and confirmation of the PPA prior to the
Commissions Order dated June 17, 2003 shall be based on the
approved PPA formula;
B. The computation and confirmation of the PPA after the
Commissions Order dated June 17, 2003 shall be based on the
power cost "net" of discount; and
C. If the approved PPA formula is silent on the terms of discount, the
computation and confirmation of the PPA shall be based on the
power cost at "gross", subject to the submission of proofs that said
discounts are being extended to the end-users.88
The ERC thereafter clarified its policy guidelines in the 22 March
2006 Order, 16 February 2007 Order, 7 December 2005 Order and
27 March 2006 Order. The ERC outlined the following principles
governing the treatment of the PPD extended by power suppliers to
distribution utilities including rural electric cooperatives:

end-users. The result will then be compared to the allowable power

cost; and
b.2. If a Distribution Utility bills at gross (i.e. Gross power cost not
reduced by discounts from power supplier/s) and the distribution
utility is not extending discounts to end-users, the actual revenue will
be taken as is which shall be compared to the allowable power cost.
IV. In calculating the Distribution Utilitys actual revenues, in no case
shall the amount of discounts extended to end-users be higher than
the discounts availed by the Distribution Utility from its power
supplier/s.89
The above-stated policy guidelines of the ERC on the treatment of
discounts merely interpret the cost of purchased power as a
component of the PPA formula provided in Section 5, Rule IX of the
IRR of R.A. No. 7832. The cost of purchased power is denominated
as the variable "A" in the numerator of the PPA formula, particularly:
Section 5. Automatic Cost Adjustment Formula.
xxxx
The automatic cost adjustment of every electric cooperative shall be
guided by the following formula:
Purchased Power Adjustment Clause
A

I. The over-or-under recovery will be determined by comparing the

Allowable Power Cost with the Distribution Utilitys Actual Revenue
(AR) billed to end-users.
II. Calculation of the Allowable Power Cost as prescribed in the PPA
Formula:
a. For a Distribution Utility which PPA formula explicitly provides the
manner by which discounts availed from the power supplier/s shall
be treated, the allowable power cost will be computed based on the
specific provision of the formula, which may either be at "net" or
"gross"; and
b. For a Distribution Utility which PPA formula is silent in terms of
discounts, the allowable power cost will be computed at "net" of
discounts availed from the power supplier/s, if there is any.

(PPA) =

Where:
A = Cost of electricity purchased and generated for the previous
month
B=

a. On Actual PPA Computed at Net of Discounts Availed from Power

Supplier/s:
a.1. If a Distribution Utility bills at net of discounts availed from the
power supplier/s (i.e. Gross power cost minus discounts from power
supplier/s) and the distribution utility is not extending discounts to
end-users, the actual revenue should be equal to the allowable
power cost; and
a.2. If a Distribution Utility bills at net of discounts availed from the
power supplier/s (i.e. Gross power cost minus discounts from power
supplier/s) and the distribution utility is extending discounts to endusers, the discount extended to end-users will be added back to
actual revenue.
b. On Actual PPA Computed at Gross
b.1. If a Distribution Utility bills at gross (i.e. Gross power cost not
reduced by discounts from power supplier/s) and the distribution
utility is extending discounts to end-users, the actual revenue will be
calculated as: Gross Power Revenue less Discounts extended to

Total Kwh purchased and generated for the previous month

C = The actual system loss but not to exceed the maximum

recoverable rate of system loss in Kwh plus actual company use in
Kwhrs but not to exceed 1% of total Kwhrs purchased and
generated
D=

III. Calculation of the Distribution Utilitys Actual Revenues/Actual

Amount Billed to End-users.

-E
B-(C + D)

Kwh consumed by subsidized consumers

E = Applicable base cost of power equal to the amount

incorporated into their basic rate per Kwh (Boldfacing supplied)
The cost of purchased power expressed as the variable "A" in the
numerator of the PPA formula is plain and unambiguous. Websters
Third New International Dictionary defines the term "cost" as "an
item of outlay incurred in the operation of a business enterprise (as
for the purchase of raw materials, labor, services, supplies) including
the depreciation and amortization of capital assets."90 Blacks Law
Dictionary defines the term "cost" as "the amount paid or charged for
something; price or expenditure."91 When the policy guidelines of the
ERC directed the exclusion of discounts extended by power
suppliers in the computation of the cost of purchased power, the
guidelines merely affirmed the plain and unambiguous meaning of
"cost" in Section 5, Rule IX of the IRR of R.A. No. 7832. "Cost" is an
item of outlay, and must therefore exclude discounts since these are
"not amounts paid or charged for the sale of electricity, but
are reductions in rates."92
Furthermore, the policy guidelines of the ERC uphold and preserve
the nature of the PPA formula. The nature of the PPA formula
precludes an interpretation that includes discounts in the
computation of the cost of purchased power. The PPA formula is an
adjustment mechanism the purpose of which is purely for the

42

recovery of cost. In National Association of Electricity Consumers for

Reforms (NASECORE) v. Energy Regulatory Commission,93 this
Court noted the explanation of the ERC on the nature and purpose
of an adjustment mechanism:
It is clear from the foregoing that "escalator" or "tracker" or any other
similar automatic adjustment clauses are merely cost recovery or
cost "flow-through" mechanisms; that what they purport to cover are
operating costs only which are very volatile and unstable in nature
and over which the utility has no control; and that the use of the said
clauses is deemed necessary to enable the utility to make the
consequent adjustments on the billings to its customers so that
ultimately its rate of return would not be quickly eroded by the
escalations in said costs of operation. The total of all rate
adjustments should not operate to increase overall rate of return for
a particular utility company above the basic rates approved in the
last previous rate case (Re Adjustment Clause in Telephone Rate
Schedules, 3 PUR 4th 298, N.J. Bd. of Pub. Util.Commrs., 1973.
Affirmed 66 N.J. 476, 33 A.2d 4, 8 PUR 4th 36, N.J.,1975). 94
Rural electric cooperatives cannot therefore incorporate in the PPA
formula costs that they did not incur. Consumers must not shoulder
the gross cost of purchased power; otherwise, rural electric
cooperatives will unjustly profit from discounts extended to them by
power suppliers. In the Consolidated Comment of the ERC, the
Solicitor General correctly pointed out:
34.4. Second, the ERCs PPA confirmation policies were in
consonance with the rule that electric cooperatives may only recover
costs to the extent of the amount they actually incurred in the
purchase of electricity. The PPA remained to be the difference
between the electric cooperatives actual allowable power costs as
translated to PhP/kWh and the electric cooperatives approved Basic
Rate. This was also how the Cost Adjustment Formula was defined
in the IRR of R.A. No. 7832.
34.5. Contrary to petitioners assertions, therefore, the policy did not
deviate from the ERBs provisionally-approved PPA formula but
merely implemented the policy set out in R.A. No. 7832, that is, it is
strictly for the purpose of cost recovery only. Obviously, if the PPA is
computed without factoring the discounts given by power suppliers
to electric cooperatives, electric cooperatives will impermissibly
retain or even earn from the implementation of the PPA. 95
Thus, the policy guidelines of the ERC on the treatment of discounts
extended by power suppliers "give no real consequence more than
what the law itself has already prescribed."96 Publication is not
necessary for the effectivity of the policy guidelines.
As interpretative regulations, the policy guidelines of the ERC on the
treatment of discounts extended by power suppliers are also not
required to be filed with the U.P. Law Center in order to be effective.
Section 4, Chapter 2, Book VII of the Administrative Code of 1987
requires every rule adopted by an agency to be filed with the U.P.
Law Center to be effective. However, in Board of Trustees of the
Government Service Insurance System v. Velasco,97this Court
pronounced that "not all rules and regulations adopted by every
government agency are to be filed with the UP Law
Center."98 Interpretative regulations and those merely internal in
nature are not required to be filed with the U.P. Law
Center.99 Paragraph 9 (a) of the Guidelines for Receiving and
Publication of Rules and Regulations Filed with the U.P. Law
Center100 states:
9. Rules and Regulations which need not be filed with the U.P. Law
Center, shall, among others, include but not be limited to, the
following:
a. Those which are interpretative regulations and those merely
internal in nature, that is, regulating only the personnel of the
Administrative agency and not the public.

Petitioners further assert that the policy guidelines are invalid for
having been applied retroactively. According to petitioners, the ERC
applied the policy guidelines to periods of PPA implementation prior
to the issuance of its 14 January 2005 Order.101 In Republic v.
Sandiganbayan,102 this Court recognized the basic rule "that no
statute, decree, ordinance, rule or regulation (or even policy) shall
be given retrospective effect unless explicitly stated so."103 A law is
retrospective if it "takes away or impairs vested rights acquired
under existing laws, or creates a new obligation and imposes a new
duty, or attaches a new disability, in respect of transactions or
consideration already past."104
The policy guidelines of the ERC on the treatment of discounts
extended by power suppliers are not retrospective. The policy
guidelines did not take away or impair any vested rights of the rural
electric cooperatives. The usage and implementation of the PPA
formula were provisionally approved by the ERB in its Orders dated
19 February 1997105 and 25 April 1997.106 The said Orders
specifically stated that the provisional approval of the PPA formula
was subject to review, verification and confirmation by the ERB.
Thus, the rural electric cooperatives did not acquire any vested
rights in the usage and implementation of the provisionally approved
PPA formula.
Furthermore, the policy guidelines of the ERC did not create a new
obligation and impose a new duty, nor did it attach a new disability.
As previously discussed, the policy guidelines merely interpret R.A.
No. 7832 and its IRR, particularly on the computation of the cost of
purchased power.The policy guidelines did not modify, amend or
supplant the IRR.
II.
Petitioners further assail the validity of the 22 March 2006 Order, 16
February 2007 Order, 7 December 2005 Order and 27 March 2006
Order of the ERC directing the refund of over-recoveries for having
been issued pursuant to an ineffective and invalid grossed-up factor
mechanism. Petitioners claim that the grossed-up factor mechanism
implemented by the
ERC in the review, verification and confirmation of the PPA is
ineffective and invalid for lack of publication, non-submission to the
U.P. Law Center, and its retroactive application.
It does not appear from the records that the grossed-up factor
mechanism was published or submitted to the U.P. Law Center. The
ERC did not dispute the claim of petitioners that the grossed-up
factor mechanism was not published, nor did the ERC dispute the
claim that the grossed-up factor mechanism was not disclosed to the
rural electric cooperatives prior to the review, verification and
confirmation of the PPA.107 The 22 March 2006 Order and 16
February 2007 Order merely stated that one of the bases of the
over-recoveries was "the new grossed-up factor mechanism
adopted by the Commission which provided a true-up mechanism
that allows the distribution utilities to recover the actual cost of
purchased power."108 The 7 December 2005 Order similarly stated
that one of the bases of the over-recoveries was "the new grossedup factor scheme adopted by the Commission which provided a
different result vis-a-vis the originally approved formula."109 The ERC
did not explain or disclose in the said Orders any details regarding
the grossed-up factor mechanism.
Based on the records, the first instance wherein the ERC disclosed
the details of the grossed-up factor mechanism was in its comments
filed with the Court of Appeals in CA-G.R. SP Nos. 99249 and 99253
on 1 August 2008 and 9 October 2007, respectively.110 The ERC
reiterated the details of the grossed-up factor mechanism in its
Consolidated Comment filed with this Court on 28 February
2011.111 The ERC illustrated the application of the grossed-up factor
mechanism in the following manner:
Given:

43

Kwh Purchased 100,000 Kwh

Cost of Purchased Power PhP 300,000.00
Kwh Sales 89,000 Kwh
Coop Use 1,000 Kwh
System Loss 10% or 10,000 Kwh
Kwh Sales + Coop Use
Gross-Up Factor =
Kwh Purchased (1-% System Loss)
89,000+1,000
Gross-up Factor =
100,000 (1-10%)
90,000
Gross-up Factor =

any amount collected under the PPA that exceeds the Recoverable
Cost computed under the grossed-up factor mechanism shall be
refunded to the consumers.117 The Recoverable Cost computed
under the grossed-up factor mechanism is "the maximum allowable
cost to be recovered from the electric cooperatives customers for a
given month."118 In effect, the PPA alone does not serve as the
variable rate to be collected from the consumers. The PPA formula
and the grossed-up factor mechanism will both have to be observed
and applied in the implementation of the PPA.
Furthermore, the grossed-up factor mechanism accounts for a
variable that is not included in the five variables of the PPA formula.
In particular, the grossed-up factor mechanism accounts for the
amount of power sold in proportion to the amount of power
purchased by a rural electric cooperative, expressed as the GrossUp Factor. It appears that the Gross-Up Factor limits the
Recoverable Cost by allowing recovery of the Cost of Purchased
Power only in proportion to the amount of power sold. This is shown
by integrating the formula of the Gross-Up Factor with the formula of
the Recoverable Cost, thus:

=1
90,000

The Gross-up Factor, which in this illustration is equivalent to 1, will

be used in determining the recoverable power cost of an electric
cooperative, such that:

The grossed-up factor mechanism consists of the following

formulas:
Kwh Sales + Coop Use
Gross-Up Factor =
Kwh Purchased (1-% System Loss)

Recoverable Cost = Gross-Up Factor x Cost of Purchased Power

Recoverable Cost = 1 x PhP 300,000.00 = PhP 300,000.00112
(Boldfacing supplied)
In its Consolidated Comment, the ERC stated that the PPA
"captures the incremental cost in purchased and generated
electricity plus recoverable system loss in excess of what had
already been included as power cost component in the electric
cooperatives basic rates."113 On the other hand, the grossed-up
factor mechanism is a "mathematical calculation that ensures that
the electric cooperatives are able to recover costs incurred from
electricity purchased and generated plus system loss components
within allowable limits."114 The ERC proceeded to explain the
relationship between the PPA and the grossed-up factor mechanism
thus:
20.2 This gross-up factor mechanism did not modify the PPA
formula or state how the PPA is to be computed. The recoverable
amount derived from applying the gross-up factor is still the
maximum allowable cost to be recovered from the electric
cooperatives customers for a given month. If the PPA collected
exceeded the recoverable cost, the difference should be refunded
back to the consumers.115
This Court agrees with the ERC that the grossed-up factor
mechanism "did not modify the PPA formula or state how the PPA is
to be computed."116 However, the grossed-up factor mechanism
amends the IRR of R.A. No. 7832 as it serves as an additional
numerical standard that must be observed and applied by rural
electric cooperatives in the implementation of the PPA. While the
IRR explains, and stipulates, the PPA formula, the IRR neither
explains nor stipulates the grossed-up factor mechanism. The
reason is that the grossed-up factor mechanism is admittedly "new"
and provides a "different result," having been formulated only after
the issuance of the IRR.
The grossed-up factor mechanism is not the same as the PPA
formula provided in the IRR of R.A. No. 7832. Neither is the
grossed-up factor mechanism subsumed in any of the five variables
of the PPA formula. Although both the grossed-up factor mechanism
and the PPA formula account for system loss and use of electricity
by cooperatives, they serve different quantitative purposes.
The grossed-up factor mechanism serves as a threshold amount to
which the PPA formula is to be compared. According to the ERC,

Recoverable Cost = Gross-Up Factor x Cost of Purchased

Power
Integrating the above-stated formulas will result in the following
formula:
Kwh Sales + Coop Use
Recoverable Cost
=
Kwh Purchased (1-% System
Loss)

x Cost of
Purchased
Power

On the other hand, the PPA formula provided in the IRR of R.A. No.
7832 does not account for the amount of power sold. It accounts for
the amount of power purchased and generated, expressed as the
variable "B" in the following PPA formula:
Purchased Power Adjustment Clause
A
(PPA) =

-E
B-(C + D)
Where:
A = Cost of electricity purchased and
generated for the previous month
B = Total Kwh purchased and generated for
the previous month
C = The actual system loss but not to exceed
the maximum recoverable rate of system loss in
Kwh plus actual company use in Kwhrs but not to
exceed 1% of total Kwhrs purchased and
generated
D=

Kwh consumed by subsidized consumers

E = Applicable base cost of power equal to the

amount incorporated into their basic rate per
Kwh119 (Boldfacing supplied)

44

In light of these, the grossed-up factor mechanism does not merely

interpret R.A. No. 7832 or its IRR.1wphi1 It is also not merely
internal in nature. The grossed-up factor mechanism amends the
IRR by providing an additional numerical standard that must be
observed and applied in the implementation of the PPA. The
grossed-up factor mechanism is therefore an administrative rule that
should be published and submitted to the U.P. Law Center in order
to be effective.
As previously stated, it does not appear from the records that the
grossed-up factor mechanism was published and submitted to the
U.P. Law Center. Thus, it is ineffective and may not serve as a basis
for the computation of over-recoveries. The portions of the overrecoveries arising from the application of the mechanism are
therefore invalid.
Furthermore, the application of the grossed-up factor mechanism to
periods of PPA implementation prior to its publication and disclosure
renders the said mechanism invalid for having been applied
retroactively. The grossed-up factor mechanism imposes an
additional numerical standard that clearly "creates a new obligation
and imposes a new duty x x x in respect of transactions or
consideration already past."120
Rural electric cooperatives cannot be reasonably expected to
comply with and observe the grossed-up factor mechanism without
its publication. This Court recognizes that the mechanism aims to
reflect the actual cost of purchased power for the benefit of
consumers. However, this objective must at all times be balanced
with the viability of rural electric cooperatives. The ERB itself made
the following observation regarding the operational and economic
condition of rural electric cooperatives in its Order dated 19
February 1997:
Electric cooperatives are created under Presidential Decree No. 269
in the nature of non-profit organizations. Thus, they do not have the
funds they can dispose of to meet their future emergency obligations
and operational needs. They are not entitled return on their
investment as their rates are based on cash flow methodology.
Hence, if the appropriate rate level x x x to keep them going or
viable, shall not be provided, the finances and operations of the said
cooperatives will be jeopardized which ultimately will result in
inefficient electric service to their respective customers or worse
shut down when they fail to pay the sources of their electricity like
(National Power Corporation) and their loans to the NEA.121
Administrative compliance with due process requirements cultivates
a regulatory environment characterized by predictability and stability.
These characteristics ensure that rural electric cooperatives are
given the opportunity to achieve efficiency, and that ultimately,
consumers have access to reliable services and affordable electric
rates.
WHEREFORE, we PARTY GRANT the petition and rule that the
grossed-up factor mechanism is INEFFECTIVEand INVALID. We
further rule that the portions of the over-recoveries that may have
arisen from the application of the grossed-up factor mechanism in
the 22 March 2006 Order, 16 February 2007 Order, 7 December
2005 Order and 27 March 2006 Order of the Energy Regulatory
Commission are INVALID. Respondent Energy Regulatory
Commission is DIRECTED to compute the portions of the overrecoveries arising from the application of the grossed-up factor
mechanism and to implement the collection of any amount
previously refunded by petitioner to their respective consumers on
the basis of the grossed-up factor mechanism. The 23 December
2008 Decision and 26 April 2010 Resolution of the Court of Appeals
are hereby MODIFIED accordingly.
SO ORDERED.
G.R. No. 176162

October 9, 2012

CIVIL SERVICE COMMISSION, Petitioner,

vs.
COURT OF APPEALS, DR. DANTE G. GUEV ARRA and ATTY.
AUGUSTUS F. CEZAR, Respondents.
x-----------------------x
G.R. No. 178845
ATTY. HONESTO L. CUEVA, Petitioner,
vs.
COURT OF APPEALS, DR. DANTE G. GUEV ARRA and ATTY.
AUGUSTUS F. CEZAR, Respondents.
DECISION
MENDOZA, J.:
These are consolidated petitions for review under Rule 45 of the
Revised Rules of Civil Procedure assailing the December 29, 2006
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 95293,
entitled "Dr. Dante G. Guevarra and Atty. Augustus Cezar v. Civil
Service Commission and Atty. Honesto L. Cueva."
The Facts
Respondents Dante G. Guevarra (Guevarra) and Augustus F. Cezar
(Cezar) were the Officer-in-Charge/President and the Vice President
for Administration, respectively, of the Polytechnic University of the
Philippines (PUP)2 in 2005.
On September 27, 2005, petitioner Honesto L. Cueva (Cueva), then
PUP Chief Legal Counsel, filed an administrative case against
Guevarra and Cezar for gross dishonesty, grave misconduct,
falsification of official documents, conduct prejudicial to the best
interest of the service, being notoriously undesirable, and for
violating Section 4 of Republic Act (R.A.) No. 6713.3 Cueva charged
Guevarra with falsification of a public document, specifically the
Application for Bond of Accountable Officials and Employees of the
Republic of the Philippines, in which the latter denied the existence
of his pending criminal and administrative cases. As the head of the
school, Guevarra was required to be bonded in order to be able to
engage in financial transactions on behalf of PUP.4 In his Application
for Bond of Accountable Officials and Employees of the Republic of
the Philippines (General Form No. 58-A), he answered Question No.
11 in this wise:
11. Do you have any criminal or administrative records? NO. If so,
state briefly the nature thereof NO.5
This was despite the undisputed fact that, at that time, both
Guevarra and Cezar admittedly had 17 pending cases for violation
of Section 3(e) of R.A. No. 3019 before the Sandiganbayan.6 Cezar,
knowing fully well that both he and Guevarra had existing cases
before the Sandiganbayan, endorsed and recommended the
approval of the application.7
The respondents explained that they believed "criminal or
administrative records" to mean final conviction in a criminal or
administrative case.8 Thus, because their cases had not yet been
decided by the Sandiganbayan, they asserted that Guevarra
responded to Question No. 11 in General Form No. 58-A correctly
and in good faith.9

45

On March 24, 2006, the Civil Service Commission (CSC) issued

Resolution No. 06052110 formally charging Guevarra with
Dishonesty and Cezar with Conduct Prejudicial to the Best Interest
of the Service after a prima facie finding that they had committed
acts punishable under the Civil Service Law and Rules.
Subsequently, the respondents filed their Motion for Reconsideration
and Motion to Declare Absence of Prima Facie Case11 praying that
the case be suspended immediately and that the CSC declare a
complete absence of a prima facie case against them. Cueva, on
the other hand, filed an Urgent Ex-Parte Motion for the Issuance of
Preventive Suspension12 and an Omnibus Motion13 seeking the
issuance of an order of preventive suspension against Guevarra and
Cezar and the inclusion of the following offenses in the formal
charge against them: Grave Misconduct, Falsification of Official
Document, Conduct Prejudicial to the Best Interest of the Service,
Being Notoriously Undesirable, and Violation of Section 4 of R.A.
No. 6713.
In Resolution No. 061141, dated June 30, 2006,14 the CSC denied
the motion for reconsideration filed by the respondents for being a
non-responsive pleading, akin to a motion to dismiss, which was a
prohibited pleading under Section 16 of the Uniform Rules on
Administrative Cases in the Civil Service Commission. 15 It also
denied Cuevas motion to include additional charges against the
respondents. The CSC, however, placed Guevarra under preventive
suspension for ninety (90) days, believing it to be necessary
because, as the officer-in-charge of PUP, he was in a position to
unduly influence possible witnesses against him.
Aggrieved, Guevarra and Cezar filed a petition for certiorari and
prohibition before the CA essentially questioning the jurisdiction of
the CSC over the administrative complaint filed against them by
Cueva. On December 29, 2006, the CA rendered its Decision
granting the petition and nullifying and setting aside the questioned
resolutions of the CSC for having been rendered without jurisdiction.
According to the CA, Section 47, Chapter 7, Subtitle A, Title I, Book
V of Executive Order No. 292 (The Administrative Code of 1987),
the second paragraph of which states that heads of agencies and
instrumentalities "shall have jurisdiction to investigate and decide
matters involving disciplinary action against officers and employees
under their jurisdiction," bestows upon the Board of Regents the
jurisdiction to investigate and decide matters involving disciplinary
action against respondents Guevarra and Cezar. In addition, the CA
noted that the CSC erred in recognizing the complaint filed by
Cueva, reasoning out that the latter should have exhausted all
administrative remedies by first bringing his grievances to the
attention of the PUP Board of Regents.
Hence, these petitions.
THE ISSUE

cases filed directly with it against officials of a chartered state

university.
The Courts Ruling
The petitions are meritorious.
Both CSC and Cueva contend that because the CSC is the central
personnel agency of the government, it has been expressly granted
by Executive Order (E.O.) No. 292 the authority to assume original
jurisdiction over complaints directly filed with it. The CSC explains
that under the said law, it has appellate jurisdiction over all
administrative disciplinary proceedings and original jurisdiction over
complaints against government officials and employees filed before
it by private citizens.16 Accordingly, the CSC has concurrent original
jurisdiction, together with the PUP Board of Regents, over the
administrative case against Guevarra and Cezar and it can take
cognizance of a case filed directly with it, despite the fact that the
Board of Regents is the disciplining authority of university
employees.
Respondents Guevarra and Cezar, on the other hand, fully adopted
the position of the CA in its questioned decision and propounded the
additional argument that the passage of R.A. No. 8292 has
effectively removed from the CSC the authority to hear and decide
on cases filed directly with it.
CSC has jurisdiction over cases
filed directly with it, regardless of
who initiated the complaint
The CSC, as the central personnel agency of the government, has
the power to appoint and discipline its officials and employees and
to hear and decide administrative cases instituted by or brought
before it directly or on appeal.17 Section 2(1), Article IX(B) of the
1987 Constitution defines the scope of the civil service:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters.
By virtue of Presidential Decree (P.D.) No. 1341,18 PUP became a
chartered state university, thereby making it a government-owned or
controlled corporation with an original charter whose employees are
part of the Civil Service and are subject to the provisions of E.O. No.
292.19
The parties in these cases do not deny that Guevarra and Cezar are
government employees and part of the Civil Service. The
controversy, however, stems from the interpretation of the
disciplinary jurisdiction of the CSC as specified in Section 47,
Chapter 7, Subtitle A, Title I, Book V of E.O. No. 292:

In G.R. No. 176162, petitioner CSC raises the sole issue of:
Whether or not the Civil Service Commission has original
concurrent jurisdiction over administrative cases falling under
the jurisdiction of heads of agencies.
The same issue is among those raised by petitioner Cueva in G.R.
No. 178845.
The Court agrees that the only question which must be addressed in
this case is whether the CSC has jurisdiction over administrative

SECTION 47. Disciplinary Jurisdiction. (1) The Commission shall

decide upon appeal all administrative disciplinary cases involving
the imposition of a penalty of suspension for more than thirty days,
or fine in an amount exceeding thirty days salary, demotion in rank
or salary or transfer, removal or dismissal from office. A complaint
may be filed directly with the Commission by a private citizen
against a government official or employee in which case it may hear
and decide the case or it may deputize any department or agency or
official or group of officials to conduct the investigation. The results
of the investigation shall be submitted to the Commission with
recommendation as to the penalty to be imposed or other action to
be taken.

46

(2) The Secretaries and heads of agencies and instrumentalities,

provinces, cities and municipalities shall have jurisdiction to
investigate and decide matters involving disciplinary action against
officers and employees under their jurisdiction. Their decisions shall
be final in case the penalty imposed is suspension for not more than
thirty days or fine in an amount not exceeding thirty days salary. In
case the decision rendered by a bureau or office head is appealable
to the Commission, the same may be initially appealed to the
department and finally to the Commission and pending appeal, the
same shall be executory except when the penalty is removal, in
which case the same shall be executory only after confirmation by
the Secretary concerned. [Emphases and underscoring supplied]

effectively divest CSC of its original jurisdiction, albeit shared,

provided by law. Moreover, it is clearly unreasonable as it would be
tantamount to disenfranchising government employees by removing
from them an alternative course of action against erring public
officials.

While in its assailed decision, the CA conceded that paragraph one

of the same provision abovequoted allows the filing of a complaint
directly with the CSC, it makes a distinction between a complaint
filed by a private citizen and that of an employee under the
jurisdiction of the disciplining authority involved. The CA resolved
that because Cueva was then the Dean of the College of Law and
the Chief Legal Counsel of PUP when he filed the complaint with the
CSC, he was under the authority of the PUP Board of Regents.
Thus, it is the Board of Regents which had exclusive jurisdiction
over the administrative case he initiated against Guevarra and
Cezar.

In the case of Camacho v. Gloria,23 the Court stated that "under E.O.
No. 292, a complaint against a state university official may be filed
with either the universitys Board of Regents or directly with the Civil
Service Commission."24 It is important to note that the Court did not
interpret the Administrative Code as limiting such authority to
exclude complaints filed directly with it by a member of the civil
service.

The Court finds itself unable to sustain the reading of the

CA.
The issue is not novel.
The understanding by the CA of Section 47, Chapter 7, Subtitle A,
Title I, Book V of E.O. No. 292 which states that "a complaint may
be filed directly with the Commission by a private citizen against a
government official or employee" is that the CSC can only take
cognizance of a case filed directly before it if the complaint was
made by a private citizen.
The Court is not unaware of the use of the words "private citizen" in
the subject provision and the plain meaning rule of statutory
construction which requires that when the law is clear and
unambiguous, it must be taken to mean exactly what it says. The
Court, however, finds that a simplistic interpretation is not in keeping
with the intention of the statute and prevailing jurisprudence. It is a
well-established rule that laws should be given a reasonable
interpretation so as not to defeat the very purpose for which they
were passed. As such, "a literal interpretation is to be rejected if it
would be unjust or lead to absurd results."20 In Secretary of Justice
v. Koruga,21 the Court emphasized this principle and cautioned us on
the overzealous application of the plain meaning rule:
The general rule in construing words and phrases used in a statute
is that in the absence of legislative intent to the contrary, they should
be given their plain, ordinary, and common usage meaning.
However, a literal interpretation of a statute is to be rejected if it will
operate unjustly, lead to absurd results, or contract the evident
meaning of the statute taken as a whole. After all, statutes should
receive a sensible construction, such as will give effect to the
legislative intention and so as to avoid an unjust or an absurd
conclusion. Indeed, courts are not to give words meanings that
would lead to absurd or unreasonable consequences.22
A literal interpretation of E.O. 292 would mean that only private
citizens can file a complaint directly with the CSC. For administrative
cases instituted by government employees against their fellow public
servants, the CSC would only have appellate jurisdiction over those.
Such a plain reading of the subject provision of E.O. 202 would

There is no cogent reason to differentiate between a complaint filed

by a private citizen and one filed by a member of the civil service,
especially in light of Section 12(11), Chapter 3, Subtitle A, Title I,
Book V of the same E.O. No. 292 which confers upon the CSC the
power to "hear and decide administrative cases instituted by or
brought before it directly or on appeal" without any qualification.

Moreover, as early as in the case of Hilario v. Civil Service

Commission,25 the Court interpreted Section 47, Chapter 7, Subtitle
A, Title I, Book V of E.O. No. 292 as allowing the direct filing with the
CSC by a public official of a complaint against a fellow government
employee. In the said case, Quezon City Vice-Mayor Charito Planas
directly filed with the CSC a complaint for usurpation, grave
misconduct, being notoriously undesirable, gross insubordination,
and conduct prejudicial to the best interest of the service against the
City Legal Officer of Quezon City. The CSC issued a resolution
ruling that the respondent official should not be allowed to continue
holding the position of legal officer. In a petition to the Supreme
Court, the official in question asserted that the City Mayor was the
only one who could remove him from office directly and not the
CSC. The Court upheld the decision of the CSC, citing the same
provision of the Administrative Code:
Although respondent Planas is a public official, there is nothing
under the law to prevent her from filing a complaint directly with the
CSC against petitioner. Thus, when the CSC determined that
petitioner was no longer entitled to hold the position of City Legal
Officer, it was acting within its authority under the Administrative
Code to hear and decide complaints filed before it.26 [Underscoring
supplied]
It has been argued that Hilario is not squarely in point.27 While it is
true that the circumstances present in the two cases are not
identical, a careful reading of Hilario reveals that petitioner therein
questioned the authority of the CSC to hear the disciplinary case
filed against him, alleging that the CSCs jurisdiction was only
appellate in nature. Hence, the reference to the abovequoted
passage in Hilario is very appropriate in this case as respondents
herein pose a similar query before us.
It cannot be overemphasized that the identity of the complainant is
immaterial to the acquisition of jurisdiction over an administrative
case by the CSC. The law is quite clear that the CSC may hear and
decide administrative disciplinary cases brought directly before it or
it may deputize any department or agency to conduct an
investigation.
CSC has concurrent original jurisdiction
with the Board of Regents over
administrative cases

47

The Uniform Rules on Administrative Cases in the Civil

Service28 (the Uniform Rules) explicitly allows the CSC to hear and
decide administrative cases directly brought before it:
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. [Emphases
and underscoring supplied]
The CA construed the phrase "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" to mean
that the CSC could only step in after the relevant disciplinary
authority, in this case the Board of Regents of PUP, had investigated
and decided on the charges against the respondents. Regrettably,
the CA failed to take into consideration the succeeding section of the
same rules which undeniably granted original concurrent jurisdiction
to the CSC and belied its suggestion that the CSC could only take
cognizance of cases on appeal:
Section 7. Jurisdiction of Heads of Agencies. Heads of
Departments, agencies, provinces, cities, municipalities and other
instrumentalities shall have original concurrent jurisdiction, with the
Commission, over their respective officers and
employees.29 [Emphasis supplied]
It was also argued that although Section 4 of the Uniform Rules is
silent as to who can file a complaint directly with the CSC, it cannot
be construed to authorize one who is not a private citizen to file a
complaint directly with the CSC. This is because a rule issued by a
government agency pursuant to its law-making power cannot
modify, reduce or enlarge the scope of the law which it seeks to
implement.30
Following the earlier disquisition, it can be said that the Uniform
Rules does not contradict the Administrative Code. Rather, the
former simply provides a reasonable interpretation of the latter. Such
action is perfectly within the authority of the CSC, pursuant to
Section 12(2), Chapter 3, Subtitle A, Title I, Book V of E.O. No. 292,
which gives it the power to "prescribe, amend and enforce rules and
regulations for carrying into effect the provisions of the Civil Service
Law and other pertinent laws."
Another view has been propounded that the original jurisdiction of
the CSC has been further limited by Section 5 of the Uniform Rules,
such that the CSC can only take cognizance of complaints filed
directly with it which: (1) are brought against personnel of the CSC
central office, (2) are against third level officials who are not
presidential appointees, (3) are against officials and employees, but
are not acted upon by the agencies themselves, or (4) otherwise
require direct or immediate action in the interest of justice:
Section 5. Jurisdiction of the Civil Service Commission Proper.
The Civil Service Commission Proper shall have jurisdiction over the
following cases:
A. Disciplinary

1. Decisions of the Civil Service Regional Offices brought

before it on petition for review;
2. Decisions of heads of departments, agencies,
provinces, cities, municipalities and other instrumentalities,
imposing penalties exceeding thirty days suspension or
fine in an amount exceeding thirty days salary brought
before it on appeal;
3. Complaints brought against Civil Service Commission
Proper personnel;
4. Complaints against third level officials who are not
presidential appointees;
5. Complaints against Civil Service officials and employees
which are not acted upon by the agencies and such other
complaints requiring direct or immediate action, in the
interest of justice;
6. Requests for transfer of venue of hearing on cases
being heard by Civil Service Regional Offices;
7. Appeals from the Order of Preventive Suspension; and
8. Such other actions or requests involving issues arising
out of or in connection with the foregoing enumerations.
It is the Courts position that the Uniform Rules did not supplant the
law which provided the CSC with original jurisdiction. While the
Uniform Rules may have so provided, the Court invites attention to
the cases of Civil Service Commission v. Alfonso31 and Civil Service
Commission v. Sojor,32 to be further discussed in the course of this
decision, both of which buttressed the pronouncement that the
Board of Regents shares its authority to discipline erring school
officials and employees with the CSC. It can be presumed that, at
the time of their promulgation, the members of this Court, in Alfonso
and Sojor, were fully aware of all the existing laws and applicable
rules and regulations pertaining to the jurisdiction of the CSC,
including the Uniform Rules. In fact, Sojor specifically cited the
Uniform Rules in support of its ruling allowing the CSC to take
cognizance of an administrative case filed directly with it against the
president of a state university. As the Court, in the two cases, did not
consider Section 5 of the Uniform Rules as a limitation to the original
concurrent jurisdiction of the CSC, it can be stated that Section 5 is
merely implementary. It is merely directory and not restrictive of the
CSCs powers. The CSC itself is of this view as it has vigorously
asserted its jurisdiction over this case through this petition.
The case of Alfonso33 is on all fours with the case at bench. The
case involved a complaint filed before the CSC against a PUP
employee by two employees of the same university. The CA was
then faced with the identical issue of whether it was the CSC or the
PUP Board of Regents which had jurisdiction over the administrative
case filed against the said PUP employee. The CA similarly ruled
that the CSC could take cognizance of an administrative case if the
decisions of secretaries or heads of agencies, instrumentalities,
provinces, cities and municipalities were appealed to it or if a private
citizen directly filed with the CSC a complaint against a government
official or employee. Because the complainants in the said case
were PUP employees and not private citizens, the CA held that the
CSC had no jurisdiction to hear the administrative case. It further
posited that even assuming the CSC had the authority to do so,
immediate resort to the CSC violated the doctrine of exhaustion of
administrative remedies as the complaint should have been first

48

lodged with the PUP Board of Regents to allow them the opportunity
to decide on the matter. This Court, however, reversed the said
decision and declared the following:
xxx. Admittedly, the CSC has appellate jurisdiction over disciplinary
cases decided by government departments, agencies and
instrumentalities. However, a complaint may be filed directly with the
CSC, and the Commission has the authority to hear and decide the
case, although it may opt to deputize a department or an
agency to conduct the investigation. x x x
xxx

xxx

xxx

We are not unmindful of certain special laws that allow the creation
of disciplinary committees and governing bodies in different
branches, subdivisions, agencies and instrumentalities of the
government to hear and decide administrative complaints against
their respective officers and employees. Be that as it may, we cannot
interpret the creation of such bodies nor the passage of laws such
as R.A. Nos. 8292 and 4670 allowing for the creation of such
disciplinary bodies as having divested the CSC of its inherent
power to supervise and discipline government employees, including
those in the academe. To hold otherwise would not only negate the
very purpose for which the CSC was established, i.e. to instill
professionalism, integrity, and accountability in our civil service, but
would also impliedly amend the Constitution itself.
xxx

xxx

xxx

But it is not only for this reason that Alfonsos argument must fail.
Equally significant is the fact that he had already submitted himself
to the jurisdiction of the CSC when he filed his counter-affidavit and
his motion for reconsideration and requested for a change of venue,
not from the CSC to the BOR of PUP, but from the CSC-Central
Office to the CSC-NCR. It was only when his motion was denied that
he suddenly had a change of heart and raised the question of proper
jurisdiction. This cannot be allowed because it would violate the
doctrine of res judicata, a legal principle that is applicable to
administrative cases as well. At the very least, respondents active
participation in the proceedings by seeking affirmative relief before
the CSC already bars him from impugning the Commissions
authority under the principle of estoppel by laches.
In this case, the complaint-affidavits were filed by two PUP
employees. These complaints were not lodged before the
disciplinary tribunal of PUP, but were instead filed before the CSC,
with averments detailing respondents alleged violation of civil
service laws, rules and regulations. After a fact-finding investigation,
the Commission found that a prima facie case existed against
Alfonso, prompting the Commission to file a formal charge against
the latter. Verily, since the complaints were filed directly with the
CSC, and the CSC has opted to assume jurisdiction over the
complaint, the CSCs exercise of jurisdiction shall be to the
exclusion of other tribunals exercising concurrent jurisdiction. To
repeat, it may, however, choose to deputize any department or
agency or official or group of officials such as the BOR of PUP to
conduct the investigation, or to delegate the investigation to the
proper regional office. But the same is merely permissive and not
mandatory upon the Commission.34 [Emphases and underscoring
supplied]
It has been opined that Alfonso does not apply to the case at bar
because respondent therein submitted himself to the jurisdiction of
the CSC when he filed his counter-affidavit before it, thereby

preventing him from later questioning the jurisdiction of the CSC.

Such circumstance is said to be totally absent in this case. 35
The records speak otherwise. As in Alfonso, respondents herein
submitted themselves to the jurisdiction of the CSC when they filed
their Joint Counter-Affidavit.36 It was only when their Motion for
Reconsideration and Motion to Declare Absence of Prima Facie
Case37 was denied by the CSC that they thought to put in issue the
jurisdiction of the CSC before the CA, clearly a desperate attempt to
evade prosecution by the CSC. As in Alfonso, respondents are also
estopped from questioning the jurisdiction of the CSC.
Based on all of the foregoing, the inescapable conclusion is that the
CSC may take cognizance of an administrative case filed directly
with it against an official or employee of a chartered state college or
university. This is regardless of whether the complainant is a private
citizen or a member of the civil service and such original jurisdiction
is shared with the Board of Regents of the school.
Gaoiran not applicable
In its decision, the CA relied heavily on Gaoiran v. Alcala38 to support
its judgment that it is the Board of Regents, and not the CSC, which
has jurisdiction over the administrative complaint filed against the
respondents.
A thorough study of the said case, however, reveals that it is
irrelevant to the issues discussed in the case at bench. Gaoiran
speaks of a complaint filed against a high school teacher of a statesupervised school by another employee of the same school. The
complaint was referred to the Legal Affairs Service of the
Commission on Higher Education (LAS-CHED). After a fact-finding
investigation established the existence of a prima facie case against
the teacher, the Officer-in-Charge of the Office of the Director of
LAS-CHED issued a formal charge for Grave Misconduct and
Conduct Prejudicial to the Best Interest of the Service, together with
the Order of Preventive Suspension. The newly-appointed Director
of LAS-CHED, however, dismissed the administrative complaint on
the ground that the letter-complaint was not made under oath.
Unaware of this previous resolution, the Chairman of the CHED
issued another resolution finding petitioner therein guilty of the
charges against him and dismissing him from the service. The trial
court upheld the resolution of the director of LAS-CHED but on
appeal, this was reversed by the CA, affirming the decision of the
CHED chairman removing petitioner from service. One of the issues
raised therein before this Court was whether the CA erred in
disregarding the fact that the complaint was not made under oath as
required by the Omnibus Rules Implementing Book V of E.O. 292.
In the said case, the Court concurred with the findings of the CA that
it was the formal charge issued by the LAS-CHED which constituted
the complaint, and because the same was initiated by the
appropriate disciplining authority, it need not be subscribed and
sworn to and CHED acquired jurisdiction over the case. The Court
further affirmed the authority of the heads of agencies to investigate
and decide matters involving disciplinary action against their officers
and employees. It bears stressing, at this point, that there is nothing
in the case that remotely implies that this Court meant to place upon
the Board of Regent exclusive jurisdiction over administrative cases
filed against their employees.
In fact, following the ruling in Gaoiran, it can be argued that it was
CSC Resolution No. 060521 which formally charged respondents
that constituted the complaint, and since the complaint was initiated
by the CSC itself as the disciplining authority, the CSC properly
acquired jurisdiction over the case.

49

R.A. No. 8292 is not in conflict

with E.O. No. 292.
In addition, the respondents argue that R.A. No. 8292, which
granted to the board of regents or board of trustees disciplinary
authority over school employees and officials of chartered state
colleges and universities, should prevail over the provisions of E.O.
No. 292.39 They anchor their assertion that the Board of Regents
has exclusive jurisdiction over administrative cases on Section 4 of
R.A. No. 8292,40 to wit:
Section 4. Powers and duties of Governing Boards. The governing
board shall have the following specific powers and duties in addition
to its general powers of administration and the exercise of all the
powers granted to the board of directors of a corporation under
Section 36 of Batas Pambansa Blg. 68 otherwise known as the
Corporation Code of the Philippines;
xxxx
(h) to fix and adjust salaries of faculty members and administrative
officials and employees subject to the provisions of the revised
compensation and classification system and other pertinent budget
and compensation laws governing hours of service, and such other
duties and conditions as it may deem proper; to grant them, at its
discretion, leaves of absence under such regulations as it may
promulgate, any provisions of existing law to the contrary not with
standing; and to remove them for cause in accordance with the
requirements of due process of law. [Emphasis supplied]
The respondents are mistaken.
Basic is the principle in statutory construction that interpreting and
harmonizing laws is the best method of interpretation in order to
form a uniform, complete, coherent, and intelligible system of
jurisprudence, in accordance with the legal maxim interpretare et
concordare leges legibus est optimus interpretandi modus. 41Simply
because a later statute relates to a similar subject matter as that of
an earlier statute does not result in an implied repeal of the latter.42
A perusal of the abovequoted provision clearly reveals that the same
does not indicate any intention to remove employees and officials of
state universities and colleges from the ambit of the CSC. What it
merely states is that the governing board of a school has the
authority to discipline and remove faculty members and
administrative officials and employees for cause. It neither
supersedes nor conflicts with E.O. No. 292 which allows the CSC to
hear and decide administrative cases filed directly with it or on
appeal.
In addition to the previously cited case of Alfonso, the case of The
Civil Service Commission v. Sojor43 is likewise instructive. In the said
case, this Court ruled that the CSC validly took cognizance of the
administrative complaints directly filed with it concerning violations of
civil service rules committed by a university president. This Court
acknowledged that the board of regents of a state university has the
sole power of administration over a university, in accordance with its
charter and R.A. No. 8292. With regard to the disciplining and
removal of its employees and officials, however, such authority is not
exclusive to it because all members of the civil service fall under the
jurisdiction of the CSC:
Verily, the BOR of NORSU has the sole power of administration over
the university. But this power is not exclusive in the matter of
disciplining and removing its employees and officials. Although the

BOR of NORSU is given the specific power under R.A. No. 9299 to
discipline its employees and officials, there is no showing that such
power is exclusive. When the law bestows upon a government body
the jurisdiction to hear and decide cases involving specific matters, it
is to be presumed that such jurisdiction is exclusive unless it be
proved that another body is likewise vested with the same
jurisdiction, in which case, both bodies have concurrent jurisdiction
over the matter.
All members of the civil service are under the jurisdiction of the
CSC, unless otherwise provided by law. Being a non-career civil
servant does not remove respondent from the ambit of the CSC.
Career or non-career, a civil service official or employee is within the
jurisdiction of the CSC.44[Emphases and underscoring supplied]
It has been pointed out that the case of Sojor is not applicable to the
case at bar because the distinction between a complaint filed by a
private citizen and one filed by a government employee was not
taken into consideration in the said case.45 The dissent fails to
consider that Sojor is cited in the ponencia to support the ruling that
R.A. No. 8292 is not in conflict with E.O. No. 292 and to counter
respondents flawed argument that the passage of R.A. No. 8292
granted the Board of Regents exclusive jurisdiction over
administrative cases against school employees and officials of
chartered state colleges and universities. Also noteworthy is the fact
that the complainants before the CSC in Sojor were faculty
members of a state university and were, thus, government
employees. Nevertheless, despite this, the Court allowed the CSC to
assert jurisdiction over the administrative case, proclaiming that the
power of the Board of Regents to discipline its officials and
employees is not exclusive but is concurrent with the CSC.46
The case of University of the Philippines v. Regino47 was also cited
to bolster the claim that original jurisdiction over disciplinary cases
against government officials is vested upon the department
secretaries and heads of agencies and instrumentalities, provinces,
cities and municipalities, whereas the CSC only enjoys appellate
jurisdiction over such cases.48 The interpretation therein of the
Administrative Code supposedly renders effectual the provisions of
R.A. No. 8292 and does not "deprive the governing body of the
power to discipline its own officials and employees and render inutile
the legal provisions on disciplinary measures which may be taken by
it."49
The Court respectfully disagrees. Regino is obviously inapplicable to
this case because there, the school employee had already been
found guilty and dismissed by the Board of Regents of the University
of the Philippines. Therefore, the issue put forth before this Court
was whether the CSC had appellate jurisdiction over cases against
university employees, considering the university charter which gives
it academic freedom allegedly encompassing institutional autonomy.
In contrast, no administrative case was filed before the Board of
Regents of PUP because the case was filed directly with the CSC
and so, the question here is whether the CSC has original
concurrent jurisdiction over disciplinary cases. Rationally, the quoted
portions in Regino find no application to the case at bench because
those statements were made to uphold the CSCs appellate
jurisdiction which was being contested by petitioner therein. At the
risk of being repetitive, it is hereby stressed that the authority of the
CSC to hear cases on appeal has already been established in this
case. What is in question here is its original jurisdiction over
administrative cases.
A different interpretation of the Administrative Code was suggested
in order to harmonize the provisions of R.A. No. 8292 and E.O. 292.

50

By allowing only a private citizen to file a complaint directly with the

CSC, the CSC maintains its power to review on appeal decisions of
the Board of Regents while at the same time the governing board is
not deprived of its power to discipline its officials and employees. 50

This is a petition for review on certiorari assailing the Order1 of the

Regional Trial Court (RTC) of Muntinlupa City, Branch 205,
dismissing Civil Action No. 02-237 on the ground of litis
pendentia and forum shopping.

To begin with, there is no incongruity between R.A. No. 8292 and

E.O. No. 292, as previously explained in Sojor. Moreover, the Court
fails to see how a complaint filed by a private citizen is any different
from one filed by a government employee. If the grant to the CSC of
concurrent original jurisdiction over administrative cases filed by
private citizens against public officials would not deprive the
governing bodies of the power to discipline their own officials and
employees and would not be violative of R.A. No. 8292, it is
inconceivable that a similar case filed by a government employee
would do so. Such a distinction between cases filed by private
citizens and those by civil servants is simply illogical and
unreasonable. To accede to such a mistaken interpretation of the
Administrative Code would be a great disservice to our developing
jurisprudence.1wphi1

Petitioner Sherwill Development Corporation is the registered owner

of two parcels of land in Muntinlupa, Rizal. Lot 88 is covered by
Transfer Certificate of Title (TCT) No. 1319182 consisting of 8,774
square meters, while Lot 86, with an area of 16,766 square meters,
is covered by TCT No. 131919.3 Both lots form part of the
Muntinlupa Estate, while the titles thereon were issued by the
Registry of Deeds of Rizal on September 24, 1913.

It is therefore apparent that despite the enactment of R.A. No. 8292

giving the board of regents or board of trustees of a state school the
authority to discipline its employees, the CSC still retains jurisdiction
over the school and its employees and has concurrent original
jurisdiction, together with the board of regents of a state university,
over administrative cases against state university officials and
employees.
Finally, with regard to the concern that the CSC may be
overwhelmed by the increase in number of cases filed before it
which would result from our ruling,51 it behooves us to allay such
worries by highlighting two important facts. Firstly, it should be
emphasized that the CSC has original concurrent jurisdiction shared
with the governing body in question, in this case, the Board of
Regents of PUP. This means that if the Board of Regents first takes
cognizance of the complaint, then it shall exercise jurisdiction to the
exclusion of the CSC.52 Thus, not all administrative cases will fall
directly under the CSC. Secondly, Section 47, Chapter 7, Subtitle A,
Title I, Book V of the Administrative Code affords the CSC the option
of whether to decide the case or to deputize some other department,
agency or official to conduct an investigation into the matter, thereby
considerably easing the burden placed upon the CSC.
Having thus concluded, the Court sees no need to discuss the other
issues raised in the petitions.
WHEREFORE, the petitions are GRANTED. The December 29,
2006 Decision of the Court of Appeals is
herebyREVERSED and SET ASIDE. Resolution Nos. 060521 and
061141 dated March 24, 2006 and June 30, 2006, respectively, of
the Civil Service Commission are REINSTATED.
SO ORDERED.
G.R. No. 158455

On October 16, 2002, the petitioner filed a Complaint4 for quieting of

title against respondents Sitio Sto. Nio Residents Association, Inc.
(SSNRAI), Nilda Devilleres, and the Lands Management Bureau
(LMB). The petitioner made the following allegations in its complaint:
6. Since petitioner acquired subject two (2) lots in 1984, it
has dutifully paid realty taxes thereon. A copy of its latest
tax-payment receipt is attached as Annex "E."
7. In the late 1960s and the 1970s, and up to the 1980s,
unauthorized persons, without the prior knowledge and
consent of petitioner and/or Mr. Lipio, by force, stealth and
strategy, unlawfully entered and occupied the lots covered
by TCT Nos. 131918 and 131919. Among said
unauthorized persons are members and officers
of SSNRAI, Devilleres included;
8. Said LMB Case No. 7-98 is the first step of respondents
to disturb and/or cast clouds on TCT Nos. 131918 and
131919, as in fact they are disturbing and casting clouds
over said titles. From all indications,LMB is set to
recommend to the Philippine Government, [through] the
Office of the Solicitor General (OSG), the "nullification" of
TCT Nos. 131918 and 131919 and/or the reversion thereof
to the Philippine Government, despite the fact that the
latter, sometime in 1927 or thereabout, sold and/or
disposed of subject lots, then covered by Original
Certificate of Title (OCT) No. 684, pursuant to Act No. 1120
and other pertinent laws. Petitioner is the third or fourth
transferee and buyer in good faith of the lots in question.
Certainly, its titles (TCT Nos. 131918 and 131919) have
long become indefeasible and conclusive, considering that
indefeasibility and conclusiveness of titles accrue one year
after the issuance thereof.5
As part of its prayer for relief, the petitioner prayed that a writ of
preliminary injunction be issued, ordering the LMB to cease and
desist from proceeding with the hearings in LMB Case No. 7-98, a
case pending before it where petitioners titles to the subject lots
were being questioned by the respondents SSNRAI and Nilda
Devilleres. Thus:

June 28, 2005

WHEREFORE, petitioner most respectfully prays for the following:

SHERWILL DEVELOPMENT CORPORATION, petitioner,

vs.
SITIO STO. NIO RESIDENTS ASSOCIATION, INC. and/or NILDA
DEVILLERES, and the LANDS MANAGEMENT
BUREAU, respondents.

(a) The immediate issuance of a writ of preliminary

injunction against LMB, ordering it to cease and desist
from hearing or continuing its hearing of LMB Case No. 798; thereafter, after due hearing, the issuance of another
order making said injunction permanent; and

DECISION
CALLEJO, SR., J.:

(b) The quieting of title of TCT Nos. 131918 and 131919,

and the complete removal of any and all clouds thereon,

51

and the accompanying declaration that said titles are

indefeasible and conclusive against the whole world, as in
fact they are.
Petitioner further prays for other reliefs which this Honorable Court
may deem proper to grant.6
The trial court set the hearing of the prayer of the writ of preliminary
injunction at 8:30 a.m. of November 22, 2002.7On November 6,
2002, the private respondents, through counsel, filed a Motion to
Dismiss8 the petition on the following grounds:
(a) THE PETITION ITSELF IS FATALLY DEFECTIVE AS
THE CERTIFICATE OF NON-FORUM SHOPPING DID
NOT SPECIFY AND/OR DISCLOSE THE PENDENCY OF
THE ADMINISTRATIVE CASE, LANDS MANAGEMENT
BUREAU CASE NO. 7-98;
(b) PETITIONER IS GUILTY OF FORUM-SHOPPING; and
(c) THERE IS ANOTHER ACTION PENDING BETWEEN
THE PARTIES INVOLVING THE SAME SUBJECT
MATTER AND FOR THE SAME CAUSE.
In its opposition to the motion to dismiss, the petitioner averred that
contrary to the private respondents allegations, it did disclose the
pendency of LMB Case No. 7-98 in paragraph 3 of its petition, to wit:
3. Said LMB Case No. 7-98 was filed on May 5, 1995 and is, at
present, being heard by [the] LMB thru Hearing Officer Rogelio C.
Mandar, the same Special Investigator-Designate who, on Feb. 12,
1998, wrote the LMB Director thru the Chief, Legal Division,
recommending "that an order be issued directing the Surveys
Divisions of this Office or its duly-authorized representatives to
conduct verification and relocation survey" of subject lots. In effect,
Atty. Mandar as such Hearing Officer has already prejudged the
case in favor of SSNRAI. A copy of the petition filed
by SSNRAI (minus annexes) is attached as Annex "B," and that of
Atty. Mandars letter consisting of seven (7) pages (minus annexes),
as Annex "C;"9
According to the petitioner, there was no identity of actions and
reliefs sought in the two cases. The petitioner pointed out that in
LMB Case No. 7-98, the private respondents (as the petitioners
therein) sought the declaration of the nullity of the said titles issued
in its favor, on their claim that their issuance was "highly irregular
and erroneous," and that the subject properties were not disposed of
in accordance with Act No. 1120, otherwise known as the Friar
Lands Act. On the other hand, in SP Civil Action No. 02-237, the
petitioners right of action was based on the private respondents act
of disturbing and casting clouds over TCT Nos. 131918 and 131919,
considering that such titles have long become indefeasible and
conclusive.
The motion to dismiss filed by the private respondents was
submitted for resolution on November 15, 2002.10
In its Order11 dated February 24, 2003, the trial court dismissed the
petition on the grounds of litis pendencia and forum shopping. In so
ruling, the trial court made the following ratiocination:
As alleged in the petition filed with the LMB itself, quoted elsewhere
in this order, and as shown in the copy of said petition attached to
this petition, herein petitioner is respondent therein and herein
private respondents are petitioners there. The element of identity of

parties is therefore present. The cause of action and reliefs sought

in the two sets of cases are, likewise, identical. The ultimate issue
involved in both is who between the parties has a better right to the
properties covered by TCT Nos. 131918 and 131919 which are
alleged in the LMB case to originally constitute a portion of the
Muntinlupa Friar Lands Estate titled in the name of the government.
As to the third requirement that the result of the first action is
determinative of the second, it is true here inasmuch as the Lands
Management Bureau, public respondent herein before which the
case earlier filed is pending, absorbed the functions and powers of
the Bureau of Lands (abolished by Executive Order No. 131) and is
mandated by law to implement the provisions of the Public Land Act
(Com. Act No. 141) which governs the administration and disposition
of lands commonly known as "friar lands," so an earlier recourse to it
would be an exercise of the doctrine of exhaustion of administrative
remedies, regardless of which party is successful.
It is clear from the petition that what the petitioner wants is for this
court to enjoin public respondent from proceeding with the case
before it and take over the same which it cannot and should not do.
WHEREFORE, this case is hereby dismissed on the grounds of litis
pendencia and forum shopping. No cost.
SO ORDERED.12
The petitioner filed a motion for reconsideration, which the trial court
denied in an Order13 dated May 29, 2003.
Hence, the present petition, on the following question of law:
whether or not the grounds of litis pendentia and forum shopping
insofar as SP Civil Action No. 02-237 is concerned are applicable.
The petitioner puts forth the following arguments:
1. THE GROUNDS OF "LITIS PENDENCIA AND FORUM
SHOPPING" RELIED UPON BY THE COURTA QUO IN
DISMISSING SP. CIVIL ACTION NO. 02-237 AND DENYING
PETITIONERS MOTION FOR RECONSIDERATION ARE SHAKY
AT BEST. IN FACT, THEY ARE NON-EXISTENT.14
2. MOREOVER, AS ALREADY RAISED BY PETITIONER IN ITS
REPLIES TO RESPONDENTS COMMENTS ON ITS AFORESAID
MOTION FOR RECONSIDERATION, LMB HAS NO JURISDICTION
TO TRY LMB CASE NO. 7-98 INASMUCH AS CASES LIKE THIS
FALL UNDER THE EXCLUSIVE ORIGINAL JURISDICTION OF
REGIONAL TRIAL COURTS.15
To bolster its pose that no forum shopping and litis pendentia exist,
the petitioner invokes the ruling of the Court inSilahis International
Hotel, Inc. v. NLRC, et al.,16 averring that when a party does not
pursue simultaneous remedies in fora, there is no forum shopping.
The petitioner reiterates that the issue and the causes of action in
LMB Case No. 7-98 and SP Civil Action No. 02-237 are different. It
points out that it certainly is not "a party against whom an adverse
judgment or order has been rendered in one forum"; neither has it
instituted "two or more actions or proceedings grounded on the
same cause." The petitioner further insists that the LMB has no
jurisdiction to try LMB Case No. 7-98; it is the regional trial courts
that have original jurisdiction in such cases. The petitioner points out
that the private respondents failed to file an action for nullification of
TCT Nos. 131918 and 131919 within the one-year period from the
date of issuance of the subject titles and are, therefore, barred from
questioning the said titles. The petitioner further points out that the
certificates of title under the Torrens system of registration cannot be
collaterally attacked. The petitioner concludes that the trial court

52

should not have dismissed SP Civil Action No. 02-237, but instead
should have given it due course.
The Office of the Solicitor General (OSG), for its part, points out that
the parties in both cases are identical. It further points out that LMB
Case No. 7-98 was filed as early as 1995, and that the petitioner
subsequently initiated SP Civil Action No. 02-237 obviously to
preempt the outcome of the case before the Lands Management
Bureau. Hence, the trial court correctly dismissed SP Civil Action
No. 02-237 on the ground of litis pendentia.
The OSG further contends that the determination of whether there
was a violation of the Friar Lands Act, the very issue raised in the
two cases, is well within the authority of the LMB to investigate, it
being the agency of the government charged with administrative
control over Friar Land Estates under Commonwealth Act No. 2550.
As such, according to the OSG, the LMB has primary jurisdiction
over the subject matter. The OSG points out that the petitioners
resort to the courts is premature, considering that the LMB has
primary jurisdiction over the matter.
The OSG, likewise, avers that the petitioner is guilty of violating
Section 5, Rule 7 of the Rules of Court, on certification against
forum shopping. It points out that the petitioners representative,
Roland Leslie V. Lipio, certified under oath that the petitioner "had
no knowledge of any action pending before any tribunal or agency."
It further points out that it cannot be said that the petitioner was
unaware of LMB Case No. 7-98, since it even filed an Answer
therein on July 31, 1995. To justify the dismissal of the case, the
OSG cites the ruling of the Court inRepublic v. Carmel
Development, Inc.17
The Ruling of the Court
At the outset, the Court notes that the petitioner assails an order of
dismissal issued by the RTC, with direct recourse to this Court. It
must be stressed that in so doing, the petitioner violated an
established policy, one that is necessary to prevent inordinate
demands upon the Courts time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to
prevent further overcrowding of the Courts docket.18 There is, after
all, a hierarchy of courts which is determinative of the venue of
appeals.19 This rule may be relaxed only for special and important
reasons clearly and specifically set out in the petition.20 The
petitioner should thus have filed its petition first before the Court of
Appeals, conformably with this principle of hierarchy of courts. The
Court notes that the petitioner failed to satisfactorily explain its
failure to comply with or its non-observance of judicial hierarchy.
Even upon the merits of the case, the petition at bar is still destined
to fail for the following additional reasons:
First. Contrary to the petitioners contention, at this instance, it is the
courts which should defer the exercise of jurisdiction on the matter.
Jurisdiction having been correctly assumed by the Director of Lands
over the parties conflicting claims, the case should, in accordance
with law, remain there for final adjudication.21 After all, the Director of
Lands, who is the officer charged with carrying out the provisions of
the Public Land Act, has control over the survey, classification,
lease, sale or any other form of concession or disposition and
management of the public lands, and his finding and decision as to
questions of fact, when approved by the Secretary of Agriculture and
Natural Resources (now Secretary of Environment and Natural
Resources), is conclusive.22

The power and authority of the Director of Lands were discussed in

the recent case of Republic of the Philippines v. De
Guzman.23 According to the Court, the Director of Lands does not
lose authority over the land even upon the issuance of an original
certificate of title over the same. Thus:
The authority of the Director of Lands to investigate conflicts over
public lands is derived from Section 91 of the Public Land Act. In
fact, it is not merely his right but his specific duty to conduct
investigations of alleged fraud in securing patents and the
corresponding titles thereto. While title issued on the basis of a
patent is as indefeasible as one judicially secured, such
indefeasibility is not a bar to an investigation by the Director of
Lands as to how such title had been acquired, if the purpose of such
investigation is to determine whether or not fraud had been
committed in securing such title, in order that the appropriate action
for reversion may be filed by the Government.24
As a rule then, courts have no jurisdiction to intrude upon matters
properly falling within the powers of the LMB.25
On the petitioners claim that its titles to the subject lots have been
rendered indefeasible, the pronouncement of the Court in Republic
v. Court of Appeals26 is instructive:
It is true that under Section 122 of the Land Registration Act, a
Torrens title issued on the basis of a free patent or a homestead
patent is as indefeasible as one judicially secured. And in repeated
previous decisions of this Court that indefeasibility has been
emphasized by our holding that not even the Government can file an
action for annulment, but at the same time, it has been made clear
that an action for reversion may be instituted by the Solicitor
General, in the name of the Republic of the Philippines. It is also to
the public interest that one who succeeds in fraudulently acquiring
title to a public land should not be allowed to benefit therefrom, and
the State should, therefore, have an even existing authority, thru its
duly-authorized officers, to inquire into the circumstances
surrounding the issuance of any such title, to the end that the
Republic, thru the Solicitor General or any other officer who may be
authorized by law, may file the corresponding action for the
reversion of the land involved to the public domain, subject
thereafter to disposal to other qualified persons in accordance with
law. In other words, the indefeasibility of a title over land previously
public is not a bar to an investigation by the Director of Lands as to
how such title has been acquired, if the purpose of such
investigation is to determine whether or not fraud had been
committed in securing such title in order that the appropriate action
for reversion may be filed by the Government.27
Second. The OSG correctly invoked the doctrine of primary
jurisdiction in this case. Indeed, the courts cannot and will not
resolve a controversy involving a question which is within the
jurisdiction of an administrative tribunal, especially where the
question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the
administrative tribunal to determine technical and intricate matters of
fact.28 The doctrine of primary jurisdiction applies where a claim is
originally cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which,
under a regulatory scheme, have been placed within the special
competence of an administrative body; in such case, the judicial
process is suspended pending referral of such issues to the
administrative body for its view. And in such cases, the court cannot
arrogate unto itself the authority to resolve a controversy, the
jurisdiction over which is initially lodged with an administrative body
of special competence,29 in this case, the LMB.

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Third. The trial court correctly ruled that the petitioners action was
barred by the pendency of the proceedings before the LMB. For litis
pendencia to lie, the following requisites must be satisfied:
1. Identity of parties or representation in both cases;
2. Identity of rights asserted and relief prayed for;
3. The relief must be founded on the same facts and the
same basis; and
4. Identity of the two preceding particulars should be such
that any judgment, which may be rendered in the other
action, will, regardless of which party is successful, amount
to res judicata on the action under consideration.30
To the Courts mind, these requisites are present in the instant case.
For one, the parties in the LMB case and in SP Civil Action No. 02237 are the same. There is, likewise, identity of rights asserted and
reliefs prayed for. The petition filed by the private respondents
SSNRAI and its President Devilleres before the LMB alleged that the
lots in question had been the subject of "double titling"; on the other
hand, the petition with prayer for preliminary injunction filed before
the RTC sought the declaration from the court that TCT Nos. 131918
and 131919, in the name of the petitioner, are indefeasible and
conclusive as against the whole world. The resolution of the
foregoing issue would likewise require the presentation of evidence
from the parties. Verily, the conclusion in one proceeding would
amount to the adjudication of the merits on the other that is, a
favorable ruling from the LMB would have virtually removed any and
all existing "clouds" from the petitioners titles to the subject
property; in the same vein, a declaration of the indefeasibility of TCT
Nos. 131918 and 131919 would preempt any ruling of the LMB on
the matter.

Indeed, the underlying principle of litis pendentia is the theory that a

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

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