Requisites for Validity of Administrative Rules and Regulations Despite resistance from petitioners, the blood testing proceeded.
itioners, the blood testing proceeded. The horses, whose owners
G.R. No. 175220 February 12, 2009
WILLIAM C. DAGAN, CARLOS H. REYES, NARCISO MORALES, BONIFACIO MANTILLA,
CESAR AZURIN, WEITONG LIM, MA. TERESA TRINIDAD, MA. CARMELITA
FLORENTINO, Petitioners,
vs.
PHILIPPINE RACING COMMISSION, MANILA JOCKEY CLUB, INC., and PHILIPPINE
RACING CLUB, INC.,Respondents.
DECISION
TINGA, J.:
The subject of this petition for certiorari is the decision1 of the Court of Appeals in CA-G.R. SP
No. 95212, affirming in toto the judgment2 of the Regional Trial Court of Makati in Civil Case No.
04-1228.
The controversy stemmed from the 11 August 2004 directive3 issued by the Philippine Racing
Commission (Philracom) directing the Manila Jockey Club, Inc. (MJCI) and Philippine Racing
Club, Inc. (PRCI) to immediately come up with their respective Clubs’ House Rule to address
Equine Infectious Anemia (EIA)4 problem and to rid their facilities of horses infected with EIA.
Said directive was issued pursuant to Administrative Order No. 55 dated 28 March 1994 by the
Department of Agriculture declaring it unlawful for any person, firm or corporation to ship, drive,
or transport horses from any locality or place except when accompanied by a certificate issued
by the authority of the Director of the Bureau of Animal Industry (BAI).6
In compliance with the directive, MJCI and PRCI ordered the owners of racehorses stable in their
establishments to submit the horses to blood sampling and administration of the Coggins Test to
determine whether they are afflicted with the EIA virus. Subsequently, on 17 September 2004,
Philracom issued copies of the guidelines for the monitoring and eradication of EIA.7
Petitioners and racehorse owners William Dagan (Dagan), Carlos Reyes, Narciso Morales,
Bonifacio Montilla, Cezar Azurin, Weitong Lim, Ma. Teresa Trinidad and Ma. Carmelita
Florentino refused to comply with the directive. First, they alleged that there had been no prior
consultation with horse owners. Second, they claimed that neither official guidelines nor
regulations had been issued relative to the taking of blood samples. And third, they asserted that
no documented case of EIA had been presented to justify the undertaking.8
refused to comply were banned from the races, were removed from the actual day of race,
prohibited from renewing their licenses or evicted from their stables.
When their complaint went unheeded, the racehorse owners lodged a complaint before the
Office of the President (OP) which in turn issued a directive instructing Philracom to investigate
the matter.
For failure of Philracom to act upon the directive of the OP, petitioners filed a petition for
injunction with application for the issuance of a temporary restraining order (TRO). In an
order9 dated 11 November 2004, the trial court issued a TRO.
Dagan refused to comply with the directives because, according to him, the same are unfair as
there are no implementing rules on the banning of sick horses from races. Consequently, his
horses were evicted from the stables and transferred to an isolation area. He also admitted that
three of his horses had been found positive for EIA.10
Confronted with two issues, namely: whether there were valid grounds for the issuance of a writ
of injunction and whether respondents had acted with whim and caprice in the implementation of
the contested guideline, the trial court resolved both queries in the negative.
The trial court found that most racehorse owners, except for Dagan, had already subjected their
racehorses to EIA testing. Their act constituted demonstrated compliance with the contested
guidelines, according to the trial court. Hence, the acts sought to be enjoined had been rendered
moot and academic.
With respect to the subject guidelines, the trial court upheld their validity as an exercise of police
power, thus:
The Petitioner’s submission that the subject guidelines are oppressive and hence confiscatory of
proprietary rights is likewise viewed by this Court to be barren of factual and legal support. The
horseracing industry, needless to state, is imbued with public interest deserving of utmost
concern if not constant vigilance. The Petitioners do not dispute this. It is because of this basic
fact that respondents are expected to police the concerned individuals and adopt measures that
will promote and protect the interests of all the stakeholders starting from the moneyed horse-
owners, gawking bettors down to the lowly maintainers of the stables. This is a clear and valid
exercise of police power with the respondents acting for the State. Participation in the business
of horseracing is but a privilege; it is not a right. And no clear acquiescence to this postulation
can there be than the Petitioners' own undertaking to abide by the rules and conditions issued
and imposed by the respondents as specifically shown by their contracts of lease with MCJI.11 1avv phi 1
Petitioners appealed to the Court of Appeals. In its Decision dated 27 October 2006, the
appellate court affirmed in toto the decision of the trial court.
The appellate court upheld the authority of Philracom to formulate guidelines since it is vested
with exclusive jurisdiction over and control of the horse-racing industry per Section 8 of
Presidential Decree (P.D.) No. 8. The appellate court further pointed out that P.D. No. 420 also
endows Philracom with the power to prescribe additional rules and regulations not otherwise
inconsistent with the said presidential decree12 and to perform such duties and exercise all
powers incidental or necessary to the accomplishment of its aims and objectives.13 It similarly
concluded that the petition for prohibition should be dismissed on the ground of mootness in light
of evidence indicating that petitioners had already reconsidered their refusal to have their horses
tested and had, in fact, subsequently requested the administration of the test to the horses.14
Aggrieved by the appellate court’s decision, petitioners filed the instant certiorari
petition15 imputing grave abuse of discretion on the part of respondents in compelling petitioners
to subject their racehorses to blood testing.
In their amended petition,16 petitioners allege that Philracom’s unsigned and undated
implementing guidelines suffer from several infirmities. They maintain that the assailed
guidelines do not comply with due process requirements. Petitioners insist that racehorses
already in the MJCI stables were allowed to be so quartered because the individual horse
owners had already complied with the Philracom regulation that horses should not bear any
disease. There was neither a directive nor a rule that racehorses already lodged in the stables of
the racing clubs should again be subjected to the collection of blood samples preparatory to the
conduct of the EIA tests,17petitioners note. Thus, it came as a surprise to horse owners when told
about the administration of a new Coggins Tests on old horses since the matter had not been
taken up with them.18 No investigation or at least a summary proceeding was conducted
affording petitioners an opportunity to be heard.19 Petitioners also aver that the assailed
guidelines are ultra vires in that the sanctions imposed for refusing to submit to medical
examination are summary eviction from the stables or arbitrary banning of participation in the
races, notwithstanding the penalties prescribed in the contract of lease.20
In its Comment,21 the PRCI emphasizes that it merely obeyed the terms of its franchise and
abided by the rules enacted by Philracom.22 For its part, Philracom, through the Office of the
Solicitor-General (OSG), stresses that the case has become moot and academic since most of
petitioners had complied with the guidelines by subjecting their race horses to EIA testing. The
horses found unafflicted with the disease were eventually allowed to join the races.23 Philracom
also justified its right under the law to regulate horse racing.24 MJCI adds that Philracom need
not delegate its rule-making power to the former since MJCI’s right to formulate its internal rules
is subsumed under the franchise granted to it by Congress.25
In their Reply,26 petitioners raise for the first time the issue that Philracom had unconstitutionally
delegated its rule-making power to PRCI and MJCI in issuing the directive for them to come up
with club rules. In response to the claim that respondents had merely complied with their duties
under their franchises, petitioners counter that the power granted to PRCI and MJCI under their
respective franchises is limited to: (1) the construction, operation and maintenance of racetracks;
(2) the establishment of branches for booking purposes; and (3) the conduct of horse races.
It appears on record that only Dagan had refused to comply with the orders of respondents.
Therefore, the case subsists as regards Dagan.
Petitioners essentially assail two issuances of Philracom; namely: the Philracom directive27 and
the subsequent guidelines addressed to MJCI and PRCI.
The validity of an administrative issuance, such as the assailed guidelines, hinges on
compliance with the following requisites:
1. Its promulgation must be authorized by the legislature;
2. It must be promulgated in accordance with the prescribed procedure;
3. It must be within the scope of the authority given by the legislature;
4. It must be reasonable.28
All the prescribed requisites are met as regards the questioned issuances. Philracom’s authority
is drawn from P.D. No. 420. The delegation made in the presidential decree is valid. Philracom
did not exceed its authority. And the issuances are fair and reasonable.
The rule is that what has been delegated cannot be delegated, or as expressed in the Latin
maxim: potestas delegate non delegare potest. This rule is based upon the ethical principle that
such delegated power constitutes not only a right but a duty to be performed by the delegate by
the instrumentality of his own judgment acting immediately upon the matter of legislation and not
through the intervening mind of another.29 This rule however admits of recognized
exceptions30 such as the grant of rule-making power to administrative agencies. They have been
granted by Congress with the authority to issue rules to regulate the implementation of a law
entrusted to them. Delegated rule-making has become a practical necessity in modern
governance due to the increasing complexity and variety of public functions.31
However, in every case of permissible delegation, there must be a showing that the delegation
itself is valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be
executed, carried out, or implemented by the delegate; and (b) fixes a standard—the limits of
which are sufficiently determinate and determinable—to which the delegate must conform in the
performance of his functions. A sufficient standard is one which defines legislative policy, marks
its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the
circumstances under which the legislative command is to be effected.32
P.D. No. 420 hurdles the tests of completeness and standards sufficiency.
Philracom was created for the purpose of carrying out the declared policy in Section 1 which is
"to promote and direct the accelerated development and continued growth of horse racing not
only in pursuance of the sports development program but also in order to insure the full
exploitation of the sport as a source of revenue and employment." Furthermore, Philracom was
granted exclusive jurisdiction and control over every aspect of the conduct of horse racing,
including the framing and scheduling of races, the construction and safety of race tracks, and the
security of racing. P.D. No. 420 is already complete in itself.
Section 9 of the law fixes the standards and limitations to which Philracom must conform in the
performance of its functions, to wit:
Section 9. Specific Powers. Specifically, the Commission shall have the power:
a. To enforce all laws, decrees and executive orders relating to horse-racing that are not
expressly or implied repealed or modified by this Decree, including all such existing rules
and regulations until otherwise modified or amended by the Commission;
b. To prescribe additional rules and regulations not otherwise inconsistent with this
Decree;
c. To register race horses, horse owners or associations or federations thereof, and to
regulate the construction of race tracks and to grant permit for the holding of races;
d. To issue, suspend or revoke permits and licenses and to impose or collect fees for the
issuance of such licenses and permits to persons required to obtain the same;
e. To review, modify, approve or disapprove the rules and regulations issued by any
person or entity concerning the conduct of horse races held by them;
f. To supervise all such race meeting to assure integrity at all times. It can order the
suspension of any racing event in case of violation of any law, ordinance or rules and
regulations;
g. To prohibit the use of improper devices, drugs, stimulants or other means to enhance
or diminish the speed of horse or materially harm their condition;
h. To approve the annual budget of the omission and such supplemental budgets as may
be necessary;
i. To appoint all personnel, including an Executive Director of the Commission, as it may
be deem necessary in the exercise and performance of its powers and duties; and
j. To enter into contracts involving obligations chargeable to or against the funds of the
Commission. (Emphasis supplied)
Clearly, there is a proper legislative delegation of rule-making power to Philracom. Clearly too,
for its part Philracom has exercised its rule-making power in a proper and reasonable manner.
More specifically, its discretion to rid the facilities of MJCI and PRCI of horses afflicted with EIA
is aimed at preserving the security and integrity of horse races.
Petitioners also question the supposed delegation by Philracom of its rule-making powers to
MJCI and PRCI.
There is no delegation of power to speak of between Philracom, as the delegator and MJCI and
PRCI as delegates. The Philracom directive is merely instructive in character. Philracom had
instructed PRCI and MJCI to "immediately come up with Club’s House Rule to address the
problem and rid their facilities of horses infected with EIA." PRCI and MJCI followed-up when
they ordered the racehorse owners to submit blood samples and subject their race horses to
blood testing. Compliance with the Philracom’s directive is part of the mandate of PRCI and
MJCI under Sections 133 of R.A. No. 795334 and Sections 135 and 236 of 8407.37
As correctly proferred by MJCI, its duty is not derived from the delegated authority of Philracom
but arises from the franchise granted to them by Congress allowing MJCI "to do and carry out all
such acts, deeds and things as may be necessary to give effect to the foregoing."38 As justified
by PRCI, "obeying the terms of the franchise and abiding by whatever rules enacted by
Philracom is its duty."39
More on the second, third and fourth requisites.
As to the second requisite, petitioners raise some infirmities relating to Philracom’s guidelines.
They question the supposed belated issuance of the guidelines, that is, only after the collection
of blood samples for the Coggins Test was ordered. While it is conceded that the guidelines
were issued a month after Philracom’s directive, this circumstance does not render the directive
nor the guidelines void. The directive’s validity and effectivity are not dependent on any
supplemental guidelines. Philracom has every right to issue directives to MJCI and PRCI with
respect to the conduct of horse racing, with or without implementing guidelines.
Petitioners also argue that Philracom’s guidelines have no force and effect for lack of publication
and failure to file copies with the University of the Philippines (UP) Law Center as required by
law.
As a rule, the issuance of rules and regulations in the exercise of an administrative agency of its
quasi-legislative power does not require notice 7and hearing.40 In Abella, Jr. v. Civil Service
Commission,41 this Court had the occasion to rule that prior notice and hearing are not essential
to the validity of rules or regulations issued in the exercise of quasi-legislative powers since there
is no determination of past events or facts that have to be established or ascertained.42
The third requisite for the validity of an administrative issuance is that it must be within the limits
of the powers granted to it. The administrative body 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.43
The assailed guidelines prescribe the procedure for monitoring and eradicating EIA. These
guidelines are in accord with Philracom’s mandate under the law to regulate the conduct of
horse racing in the country.
Anent the fourth requisite, the assailed guidelines do not appear to be unreasonable or
discriminatory. In fact, all horses stabled at the MJCI and PRCI’s premises underwent the same
procedure. The guidelines implemented were undoubtedly reasonable as they bear a reasonable
relation to the purpose sought to be accomplished, i.e., the complete riddance of horses infected
with EIA.
It also appears from the records that MJCI properly notified the racehorse owners before the test
was conducted.44Those who failed to comply were repeatedly warned of certain consequences
and sanctions.
Furthermore, extant from the records are circumstances which allow respondents to determine
from time to time the eligibility of horses as race entries. The lease contract executed between
petitioner and MJC contains a proviso reserving the right of the lessor, MJCI in this case, the
right to determine whether a particular horse is a qualified horse. In addition, Philracom’s rules
and regulations on horse racing provide that horses must be free from any contagious disease or
illness in order to be eligible as race entries.
All told, we find no grave abuse of discretion on the part of Philracom in issuing the contested
guidelines and on the part MJCI and PRCI in complying with Philracom’s directive.
WHEREFORE, the petition is DISMISSED. Costs against petitioner William Dagan.
SO ORDERED.
G.R. No. 151908 August 12, 2003
SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION
(PILTEL), petitioners,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent.
x---------------------------------------------------------x
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.
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.
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;
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 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. Q-00-42221 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.
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.
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 CA-G.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 quo granting 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-in-
intervention 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.
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.
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 non-delegability 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 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 SO ORDERED.
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 Davide, Jr., C.J., Vit
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality
of the Government.27

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: G.R. No. 116422 November 4, 1996

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 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.
AVELINA B. CONTE and LETICIA BOISER-PALMA, petitioners,
vs.
COMMISSION ON AUDIT (COA), respondent.
PANGANIBAN, J.:
Are the benefits provided for under Social Security System Resolution No. 56 to be
considered simply as "financial assistance" for retiring employees, or does such scheme
constitute a supplementary retirement plan proscribed by Republic Act No. 4968?
The foregoing question is addressed by this Court in resolving the instant petition
for certiorari which seeks to reverse and set aside Decision No. 94-
1261 dated March 15, 1994 of respondent Commission on Audit, which denied
petitioners' request for reconsideration of its adverse ruling disapproving claims for
financial assistance under SSS Resolution No. 56.
The Facts
Petitioners Avelina B. Conte and Leticia Boiser-Palma were former employees of the
Social Security System (SSS) who retired from government service on May 9, 1990 and
September 13, 1992, respectively. They availed of compulsory retirement benefits under
Republic Act No. 660.2
In addition to retirement benefits provided under R.A. 660, petitioners also claimed SSS
"financial assistance" benefits granted under SSS Resolution No. 56, series of 1971.
A brief historical backgrounder is in order. SSS Resolution No. 56,3 approved on January
21, 1971, provides financial incentive and inducement to SSS employees qualified to
retire to avail of retirement benefits under RA 660 as amended, rather than the
retirement benefits under RA 1616 as amended, by giving them "financial assistance"
equivalent in amount to the difference between what a retiree would have received under
RA 1616, less what he was entitled to under RA 660. The said SSS Resolution No. 56
states:
RESOLUTION NO. 56
WHEREAS, the retirement benefits of SSS employees are provided for under
Republic Acts 660 and 1616 as amended;.
WHEREAS, SSS employees who are qualified for compulsory retirement at age
65 or for optional retirement at a lower age are entitled to either the life annuity
under R.A. 660, as amended, or the gratuity under R.A. 1616, as amended;
WHEREAS, a retirement benefit to be effective must be a periodic income as
close as possible to the monthly income that would have been due to the retiree
during the remaining years of his life were he still employed;
WHEREAS, the life annuity under R.A. 660, as amended, being closer to the
monthly income that was lost on account of old age than the gratuity under R.A.
1616, as amended, would best serve the interest of the retiree;
WHEREAS, it is the policy of the Social Security Commission to promote and to
protect the interest of all SSS employees, with a view to providing for their well-
being during both their working and retirement years;
WHEREAS, the availment of life annuities built up by premiums paid on behalf of
SSS employees during their working years would mean more savings to the
SSS;
WHEREAS, it is a duty of the Social Security Commission to effect savings in
every possible way for economical and efficient operations;
WHEREAS, it is the right of every SSS employee to choose freely and voluntarily
the benefit he is entitled to solely for his own benefit and for the benefit of his
family;
NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees who are
simultaneously qualified for compulsory retirement at age 65 or for optional
retirement at a lower age be encouraged to avail for themselves the life annuity
under R.A. 660, as amended;
RESOLVED, FURTHER, That SSS employees who availed themselves of the
said life annuity, in appreciation and recognition of their long and faithful service,
be granted financial assistance equivalent to the gratuity plus return of
contributions under R.A. 1616, as amended, less the five year guaranteed
annuity under R.A. 660, as amended;
RESOLVED, FINALLY, That the Administrator be authorized to act on all
applications for retirement submitted by SSS employees and subject to
availability of funds, pay the corresponding benefits in addition to the money
value of all accumulated leaves. (emphasis supplied)
Long after the promulgation of SSS Resolution No. 56, respondent Commission on Audit
(COA) issued a ruling, captioned as "3rd Indorsement" dated July 10, 1989,4 disallowing
in audit "all such claims for financial assistance under SSS Resolution No. 56", for the
reason that: —
. . . the scheme of financial assistance authorized by the SSS is similar to those
separate retirement plan or incentive/separation pay plans adopted by other
government corporate agencies which results in the increase of benefits beyond
what is allowed under existing retirement laws. In this regard, attention . . . is
invited to the view expressed by the Secretary of Budget and Management dated
February 17, 1988 to the COA General Counsel against the proliferation of
retirement plans which, in COA Decision No. 591 dated August 31, 1988, was
concurred in by this Commission. . . .
Accordingly, all such claims for financial assistance under SSS Resolution No. 56
dated January 21, 1971 should be disallowed in audit. (emphasis supplied)
Despite the aforequoted ruling of respondent COA, then SSS Administrator Jose L.
Cuisia, Jr. nevertheless wrote5 on February 12, 1990 then Executive Secretary Catalino
Macaraig, Jr., seeking "presidential authority for SSS to continue implementing its
Resolution No. 56 dated January 21, 1971 granting financial assistance to its qualified
retiring employees".
However, in a letter-reply dated May 28, 1990,6 then Executive Secretary Macaraig
advised Administrator Cuisia that the Office of the President "is not inclined to favorably
act on the herein request, let alone over-rule the disallowance by COA" of such claims,
because, aside from the fact that decisions, order or actions of the COA in the exercise
of its audit functions are appealable to the Supreme Court7 pursuant to Sec. 50 of PD
1445, the benefits under said Res. 56, though referred to as "financial assistance",
constituted additional retirement benefits, and the scheme partook of the nature of a
supplementary pension/retirement plan proscribed by law.
The law referred to above is RA 4968 (The Teves Retirement Law), which took effect
June 17, 1967 and amended CA 186 (otherwise known as the Government Service
Insurance Act, or the GSIS Charter), making Sec. 28 (b) of the latter act read as follows:
(b) Hereafter, no insurance or retirement plan for officers or employees shall be
created by employer. All supplementary retirement or pension plans heretofore in
force in any government office. agency or instrumentality or corporation owned or
controlled by the government, are hereby declared in operative or abolished;
Provided, That the rights of those who are already eligible to retire there under
shall not be affected." (emphasis supplied)
On January 12, 1993, herein petitioners filed with respondent COA their "letter-
appeal/protest"8 seeking reconsideration of COA's ruling of July 10, 1989 disallowing
claims for financial assistance under Res. 56.
On November 15, 1993, petitioner Conte sought payment from SSS of the benefits under
Res. 56. On December 9, 1993, SSS Administrator Renato C. Valencia denied9 the
request in consonance with the previous disallowance by respondent COA, but assured
petitioner that should the COA change its position, the SSS will resume the grant of
benefits under said Res. 56.
On March 15, 1994, respondent COA rendered its COA Decision No. 94-126 denying
petitioners' request for reconsideration.
Thus this petition for certiorari under Rule 65 of the Rules of Court.
The Issues
The issues10 submitted by petitioners may be simplified and restated thus: Did public
respondent abuse its discretion when it disallowed in audit petitioners' claims for benefits
under SSS Res. 562?
Petitioners argue that the financial assistance under Res. 56 is not a retirement plan
prohibited by RA 4968, and that Res. 56 provides benefits different from and "aside from"
what a retiring SSS employee would be entitled to under RA 660. Petitioners contend
that it "is a social amelioration and economic upliftment measure undertaken not only for
the benefit of the SSS but more so for the welfare of its qualified retiring employees." As
such, it "should be interpreted in a manner that would give the . . . most advantage to the
recipient — the retiring employees whose dedicated, loyal, lengthy and faithful service to
the agency of government is recognized and amply rewarded — the rationale for the
financial assistance plan." Petitioners reiterate the argument in their letter dated January
12, 1993 to COA that:
Motivation can be in the form of financial assistance, during their stay in the
service or upon retirement, as in the SSS Financial Assistance Plan. This is so,
because Government has to have some attractive remuneration programs to
encourage well-qualified personnel to pursue a career in the government service,
rather than in the private sector or in foreign countries . . .
A more developmental view of the financial institutions' grant of certain forms of
financial assistance to its personnel, we believe, would enable government
administrators to see these financial forms of remuneration as contributory to the
national developmental efforts for effective and efficient administration of the
personnel programs in different institutions.11
The Court's Ruling
Petitioners' contentions are not supported by law. We hold that Res. 56 constitutes a
supplementary retirement plan.
A cursory examination of the preambular clauses and provisions of Res. 56 provides a
number of clear indications that its financial assistance plan constitutes a supplemental
retirement/pension benefits plan. In particular, the fifth preambular clause which provides
that "it is the policy of the Social Security Commission to promote and to protect the
interest of all SSS employees, with a view to providing for their well-being duringboth
their working and retirement years", and the wording of the resolution itself which states
"Resolved, further, that SSS employees who availed themselves of the said life annuity
(under RA 660), in appreciation and recognition of their long and faithful service, be
granted financial assistance . . . can only be interpreted to mean that the benefit being
granted is none other than a kind of amelioration to enable the retiring employee to enjoy
(or survive) his retirement years and a reward for his loyalty and service. Moreover, it is
plain to see that the grant of said financial assistance is inextricably linked with and
inseparable from the approval of retirement benefits under RA 660, i.e., that availment of
said financial assistance under Res. 56 may not be done independently of but only in
conjunction with the availment of retirement benefits under RA 660, and that the former
is in augmentation or supplementation of the latter benefits.
Likewise, then SSS Administrator Cuisia's historical overview of the origins and purpose
of Res. 56 is very instructive and sheds much light on the controversy:12
Resolution No. 56, . . ., applies where a retiring SSS employee is qualified to
claim under either RA 660 (pension benefit, that is, 5 year lump sum pension and
after 5 years, lifetime pension), or RA 1616 (gratuity benefit plus return of
contribution), at his option. The benefits under RA 660 are entirely payable by
GSIS while those under RA 1616 are entirely shouldered by SSS except the
return of contribution by GSIS.
 Resolution No. 56 came about upon observation that qualified SSS employees
have invariably opted to retire under RA 1616 instead of RA 660 because the
total benefit under the former is much greater than the 5-year lump sum under
the latter. As a consequence, the SSS usually ended up virtually paying the
entire retirement benefit, instead of GSIS which is the main insurance carrier for
government employees. Hence, the situation has become so expensive for SSS
that a study of the problem became inevitable.
As a result of the study and upon the recommendation of its Actuary, the SSS
Management recommended to the Social Security Commission that retiring
employees who are qualified to claim under either RA 660 or 1616 should be
"encouraged" to avail for themselves the life annuity under RA 660, as amended,
with the SSS providing a "financial assistance" equivalent to the difference
between the benefit under RA 1616 (gratuity plus return of contribution) and the
5-year lump sum pension under RA 660.
The Social Security Commission, as the policy-making body of the SSS
approved the recommendation in line with its mandate to "insure the efficient,
honest and economical administration of the provisions and purposes of this Act.
(Section 3 (c) of the Social Security Law).
Necessarily, the situation was reversed with qualified SSS employees opting to
retire under RA No. 660 or RA 1146 instead of RA 1616, resulting in substantial
savings for the SSS despite its having to pay "financial assistance".
Until Resolution No. 56 was questioned by COA. (emphasis part of original text;
emphasis ours).
Although such financial assistance package may have been instituted for noble, altruistic
purposes as well as from self-interest and a desire to cut costs on the part of the SSS,
nevertheless, it is beyond any dispute that such package effectively constitutes a
supplementary retirement plan. The fact that it was designed to equalize the benefits
receivable from RA 1616 with those payable under RA 660 and make the latter program
more attractive, merely confirms the foregoing finding.
That the Res. 56 package is labelled "financial assistance" does not change its essential
nature. Retirement benefits are, after all, a form of reward for an employee's loyalty and
service to the employer, and are intended to help the employee enjoy the remaining
years of his life, lessening the burden of worrying about his financial support or
upkeep.13 On the other hand, a pension partakes of the nature of "retained wages" of the
retiree for a dual purpose: to entice competent people to enter the government service,
and to permit them to retire from the service with relative security, not only for those who
have retained their vigor, but more so for those who have been incapacitated by illness
or accident.14
Is SSS Resolution No. 56 then within the ambit of and thus proscribed by Sec. 28 (b) of
CA 186 as amended by RA 4968?
We answer in the affirmative. Said Sec. 28 (b) as amended by RA 4968 in no uncertain
terms bars the creation of any insurance or retirement plan — other than the GSIS — for
government officers and employees, in order to prevent the undue and inequitous
proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said provision
of law and is therefore invalid, void and of no effect. No ignore this and rule otherwise
would be tantamount to permitting every other government office or agency to put up its
own supplementary retirement benefit plan under the guise of such "financial
assistance".
We are not unmindful of the laudable purposes for promulgating Res. 56, and the
positive results it must have had, not only in reducing costs and expenses on the part of
the SSS in connection with the pay-out of retirement benefits and gratuities, but also in
improving the quality of life for scores of retirees. But it is simply beyond dispute that the
SSS had no authority to maintain and implement such retirement plan, particularly in the
face of the statutory prohibition. The SSS cannot, in the guise of rule-making, legislate or
amend laws or worse, render them nugatory.
It is doctrinal that in case of conflict between a statute and an administrative order, the
former must prevail.15A rule or regulation must conform to and be consistent with the
provisions of the enabling statute in order for such rule or regulation to be valid.16 The
rule-making power of a public administrative body is a delegated legislative power, which
it may not use either to abridge the authority given it by the Congress or the Constitution
or to enlarge its power beyond the scope intended. Constitutional and statutory
provisions control with respect to what rules and regulations may be promulgated by
such a 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.17 Though well-settled is the
rule that retirement laws are liberally interpreted in favor of the retiree,18 nevertheless,
there is really nothing to interpret in either RA 4968 or Res. 56, and correspondingly, the
absence of any doubt as to the ultra-vires nature and illegality of the disputed resolution
constrains us to rule against petitioners.
As a necessary consequence of the invalidity of Res. 56, we can hardly impute abuse of
discretion of any sort to respondent Commission for denying petitioners' request for
reconsideration of the 3rd Indorsement of July 10, 1989. On the contrary, we hold that
public respondent in its assailed Decision acted with circumspection in denying
petitioners claim. It reasoned thus:
After a careful evaluation of the facts herein obtaining, this Commission finds the
instant request to be devoid of merit. It bears stress that the financial assistance
contemplated under SSS Resolution No. 56 is granted to SSS employees who
opt to retire under R.A. No. 660. In fact, by the aggrieved parties' own admission
(page 2 of the request for reconsideration dated January 12, 1993), it is a
financial assistance granted by the SSS management to its employees. in
addition to the retirement benefits under Republic Act. No. 660." (underscoring
supplied for emphasis) There is therefore no question, that the said financial
assistance partakes of the nature of a retirement benefit that has the effect of
modifying existing retirement laws particularly R.A. No. 660.
Petitioners also asseverate that the scheme of financial assistance under Res. 56 may
be likened to the monetary benefits of government officials and employees who are paid,
over and above their salaries and allowances as provided by statute, an
additional honorarium in varying amounts. We find this comparison baseless and
misplaced. As clarified by the Solicitor General:19
Petitioners' comparison of SSS Resolution No. 56 with the "honoraria" given to
government officials and employees of the "National Prosecution Service of the
Department of Justice", Office of the Government Corporate Counsel and even in
the "Office of the Solicitor General" is devoid of any basis. The monetary benefits
or "honoraria" given to these officials or employees are categorized as travelling
and/or representation expenses which are incurred by them in the course of
handling cases, attending court/administrative hearings, or performing other field
work. These monetary benefits are given upon rendition of service while the
"financial benefits" under SSS Resolution No. 56 are given upon retirement from
service.
In a last-ditch attempt to convince this Court that their position is tenable, petitioners
invoke equity. They "believe that they are deserving of justice and equity in their quest
for financial assistance under SSS Resolution No. 56, not so much because the SSS is
one of the very few stable agencies of government where no doubt this recognition and
reputation is earned . . . but more so due to the miserable scale of compensation granted
to employees in various agencies to include those obtaining in the SSS."20
We must admit we sympathize with petitioners in their financial predicament as a result
of their misplaced decision to avail of retirement benefits under RA 660, with the false
expectation that "financial assistance" under the disputed Res. 56 will also materialize.
Nevertheless, this Court has always held that equity, which has been aptly described as
"justice outside legality," is applied only in the absence of, and never against, statutory
law or judicial rules of procedure.21 In this case, equity cannot be applied to give validity
and effect to Res. 56, which directly contravenes the clear mandate of the provisions of
RA 4968.
Likewise, we cannot but be aware that the clear imbalance between the benefits
available under RA 660 and those under RA 1616 has created an unfair situation for it
has shifted the burden of paying such benefits from the GSIS (the main insurance carrier
of government employees) to the SSS. Without the corrective effects of Res. 56, all
retiring SSS employees without exception will be impelled to avail of benefits under RA
1616. The cumulative effect of such availments on the financial standing and stability of
the SSS is better left to actuarians. But the solution or remedy for such situation can be
provided only by Congress. Judicial hands cannot, on the pretext of showing concern for
the welfare of government employees, bestow equity contrary to the clear provisions of
law.
Nevertheless, insofar as herein petitioners are concerned, this Court cannot just sit back
and watch as these two erstwhile government employees, who after spending the best
parts of their lives in public service have retired hoping to enjoy their remaining years,
face a financially dismal if not distressed future, deprived of what should have been due
them by way of additional retirement benefits, on account of a bureaucratic boo-boo
improvidently hatched by their higher-ups. It is clear to our mind that petitioners applied
for benefits under RA 660 only because of the incentives offered by Res. 56, and
that absent such incentives, they would have without fall availed of RA 1616 instead. We
likewise have no doubt that petitioners are simply innocent bystanders in this whole
bureaucratic rule-making/financial scheme-making drama, and that therefore, to the
extent possible, petitioners ought not be penalized or made to suffer as a result of the
subsequently determined invalidity of Res. 56, the promulgation and implementation of
which they had nothing to do with.
And here is where "equity" may properly be invoked: since "SSS employees who are
qualified for compulsory retirement at age 65 or for optional retirement at a lower age are
entitled to either the life annuity under R.A. 660, as amended, or the gratuity under R.A.
1616, as amended",22 it appears that petitioners, being qualified to avail of benefits under
RA 660, may also readily qualify under RA 1616. It would therefore not be misplaced to
enjoin the SSS to render all possible assistance to petitioners for the prompt processing
and approval of their applications under RA 1616, and in the meantime, unless barred by
existing regulations, to advance to petitioners the difference between the amounts due
under RA 1616, and the amounts they already obtained, if any, under RA 660.
WHEREFORE, the petition is hereby DISMISSED for lack of merit, there having been no
grave abuse of discretion on the part of respondent Commission. The assailed Decision
of public respondent is AFFIRMED, and SSS Resolution No. 56 is hereby declared
ILLEGAL, VOID AND OF NO EFFECT. The SSS is hereby urged to assist petitioners
and facilitate their applications under RA 1616, and to advance to them, unless barred by
 existing regulations, the corresponding amounts representing the difference between the
two benefits programs. No costs.
SO ORDERED.
Penal Rules and Regulations
G.R. No. L-44291 August 15, 1936
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.
AUGUSTO A. SANTOS, defendant-appellee.
Office of the Solicitor-General Hilado for appellant.
Arsenio Santos for appellee.
VILLA-REAL, J.:
This case is before us by virtue of an appeal taken by the prosecuting attorney from the order of
the Court of First Instance of Cavite which reads as follows:
ORDER
When this case was called for trial for the arraignment, counsel for the accused
appeared stating that in view of the ruling laid down by this court in criminal case No.
6785 of this court, holding that the penalty applicable is under section 83 of Act No. 4003
which falls within the original jurisdiction of the justice of the peace court he requests that
the case be remanded to the justice of the peace court of Cavite which conducted the
preliminary investigation, so that the latter may try it, being within its original jurisdiction.
We agree that it falls within the jurisdiction of the corresponding justice of the peace
court, but it being alleged in the information that the infraction was committed within the
waters of the Island of Corregidor, the competent justice of the peace court is that of
Corregidor, not Cavite.
Wherefore, we decree the dismissal of this case, cancelling the bond filed by the
accused, with costs de oficio, without prejudice to the filing by the prosecuting attorney of
a new information in the justice of the peace court of Corregidor, if he so deems
convenient. It is so ordered.
In support of his appeal the appellant assigns as the sole alleged error committed by the court a
quo its having dismissed the case on the ground that it does not fall within its original jurisdiction.
On June 18, 1930, the provincial fiscal of Cavite filed against the accused -appellee Augusta A.
Santos an information which reads as follows:
The undersigned Provincial Fiscal accuses Augusta A. Santos of violation of section 28
of Fish and Game Administrative Order No. 2 and penalized by section 29 thereof
committed as follows:
That on or about April 29, 1935, within 1,500 yards north of Cavalry Point, Corregidor
Island, Province of Cavite, P.I., the said accused Augusta A. Santos, the registered
owner of two fishing motor boats Malabon IIand Malabon III, did then and there willfully,
unlawfully and criminally have his said boats, manned and operated by his fishermen,
fish, loiter and anchor without permission from the Secretary of Agriculture and
Commerce within three (3) kilometers from the shore line of the Island of Corregidor over
which the naval and military authorities of the United States exercise jurisdiction.
Contrary to law.
Cavite, Cavite, June 18, 1935.
Section 28 of Administrative Order No. 2 relative to fish and game, issued by the Secretary of
Agriculture and Commerce, provides as follows:
28. Prohibited fishing areas. — No boats licensed in accordance with the provisions of
Act No. 4003 and this order to catch, collect, gather, take, or remove fish and other sea
products from Philippine waters shall be allowed to fish, loiter, or anchor within 3
kilometers of the shore line of islands and reservations over which jurisdiction is
exercised by naval or military authorities of the United States, particularly Corregidor,
Pulo Caballo, La Monja, El Fraile, and Carabao, and all other islands and detached rocks
lying between Mariveles Reservation on the north side of the entrance to Manila Bay and
Calumpan Point Reservation on the south side of said entrance: Provided, That boats
not subject to license under Act No. 4003 and this order may fish within the areas
mentioned above only upon receiving written permission therefor, which permission may
be granted by the Secretary of Agriculture and Commerce upon recommendation of the
military or naval authorities concerned.
A violation of this paragraph may be proceeded against under section 45 of the Federal
Penal Code.
The above quoted provisions of Administrative, Order No. 2 were issued by the then Secretary of
Agriculture and Natural Resources, now Secretary of Agriculture and Commerce, by virtue of the
authority vested in him by section 4 of Act No. 4003 which reads as follows:
SEC. 4. Instructions, orders, rules and regulations. — The Secretary of Agriculture and
Natural Resources shall from time to time issue such instructions, orders, rules and
regulations consistent with this Act, as may be necessary and proper to carry into effect
the provisions thereof and for the conduct of proceedings arising under such provisions.
The herein accused and appellee Augusto A. Santos is charged with having ordered his
fishermen to manage and operate the motor launches Malabon II and Malabon Ill registered in
his name and to fish, loiter and anchor within three kilometers of the shore line of the Island of
Corregidor over which jurisdiction is exercised by naval and military authorities of the United
States, without permission from the Secretary of Agriculture and Commerce.
These acts constitute a violation of the conditional clause of section 28 above quoted, which
reads as follows:
Provided, That boats not subject to license under Act No. 4003 and this order may fish
within the areas mentioned above (within 3 kilometers of the shore line of islands and
reservations over which jurisdiction is exercised by naval and military authorities of the
United States, particularly Corregidor) only upon receiving written permission therefor,
which permission may be granted by the Secretary of Agriculture and Commerce upon
recommendation of the military and naval authorities of concerned. (Emphasis supplied.)
Act No. 4003 contains no similar provision prohibiting boats not subject to license from fishing
within three kilometers of the shore line of islands and reservations over which jurisdiction is
exercised by naval and military authorities of the United States, without permission from the
Secretary of Agriculture and Commerce upon recommendation of the military and naval
authorities concerned. Inasmuch as the only authority granted to the Secretary of Agriculture and
Commerce, by section 4 of Act No. 4003, is to issue from time to time such instructions, orders,
rules, and regulations consistent with said Act, as may be necessary and proper to carry into
effect the provisions thereof and for the conduct of proceedings arising under such provisions;
and inasmuch as said Act No. 4003, as stated, contains no provisions similar to those contained
in the above quoted conditional clause of section 28 of Administrative Order No. 2, the
conditional clause in question supplies a defect of the law, extending it. This is equivalent to
legislating on the matter, a power which has not been and cannot be delegated to him, it being
exclusively reserved to the then Philippine Legislature by the Jones Law, and now to the
National Assembly by the Constitution of the Philippines. Such act constitutes not only an excess
of the regulatory power conferred upon the Secretary of Agriculture and Commerce, but also an
exercise of a legislative power which he does not have, and therefore said conditional clause is
null and void and without effect (12 Corpus Juris, 845; Rubi vs. Provincial Board of Mindoro, 39
Phil., 660; U.S. vs. Ang Tang Ho, 43 Phil., 1; U.S. vs. Barrias, 11 Phil., 327).
For the foregoing considerations, we are of the opinion and so hold that the conditional clause of
section 28 of Administrative Order No. 2. issued by the Secretary of Agriculture and Commerce,
is null and void and without effect, as constituting an excess of the regulatory power conferred
upon him by section 4 of Act No. 4003 and an exercise of a legislative power which has not been
and cannot be delegated to him.
Wherefore, inasmuch as the facts with the commission of which Augusto A. Santos is charged
do not constitute a crime or a violation of some criminal law within the jurisdiction of the civil
courts, the information filed against him is dismissed, with the costs de oficio. So ordered.
G.R. No. L-6791 March 29, 1954
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
QUE PO LAY, defendant-appellant.
Prudencio de Guzman for appellant.
First Assistant Solicitor General Ruperto Kapunan, Jr., and Solicitor Lauro G. Marquez for
appellee.
MONTEMAYOR, J.:
Que Po Lay is appealing from the decision of the Court of First Instance of Manila, finding him
guilty of violating Central Bank Circular No. 20 in connection with section 34 of Republic Act No.
265, and sentencing him to suffer six months imprisonment, to pay a fine of P1,000 with
subsidiary imprisonment in case of insolvency, and to pay the costs.
The charge was that the appellant who was in possession of foreign exchange consisting of U.S.
dollars, U.S. checks and U.S. money orders amounting to about $7,000 failed to sell the same to
the Central Bank through its agents within one day following the receipt of such foreign
exchange as required by Circular No. 20. the appeal is based on the claim that said circular No.
20 was not published in the Official Gazette prior to the act or omission imputed to the appellant,
and that consequently, said circular had no force and effect. It is contended that Commonwealth
Act. No., 638 and Act 2930 both require said circular to be published in the Official Gazette, it
being an order or notice of general applicability. The Solicitor General answering this contention
says that Commonwealth Act. No. 638 and 2930 do not require the publication in the Official
Gazette of said circular issued for the implementation of a law in order to have force and effect.
We agree with the Solicitor General that the laws in question do not require the publication of the
circulars, regulations and notices therein mentioned in order to become binding and effective. All
that said two laws provide is that laws, resolutions, decisions of the Supreme Court and Court of
Appeals, notices and documents required by law to be of no force and effect. In other words,
said two Acts merely enumerate and make a list of what should be published in the Official
Gazette, presumably, for the guidance of the different branches of the Government issuing
same, and of the Bureau of Printing.
However, section 11 of the Revised Administrative Code provides that statutes passed by
Congress shall, in the absence of special provision, take effect at the beginning of the fifteenth
day after the completion of the publication of the statute in the Official Gazette. Article 2 of the
new Civil Code (Republic Act No. 386) equally provides that laws shall take effect after fifteen
days following the completion of their publication in the Official Gazette, unless it is otherwise
provided. It is true that Circular No. 20 of the Central Bank is not a statute or law but being
issued for the implementation of the law authorizing its issuance, it has the force and effect of
law according to settled jurisprudence. (See U.S. vs. Tupasi Molina, 29 Phil., 119 and authorities
cited therein.) Moreover, as a rule, circulars and regulations especially like the Circular No. 20 of
the Central Bank in question which prescribes a penalty for its violation should be published
before becoming effective, this, on the general principle and theory that before the public is
bound by its contents, especially its penal provisions, a law, regulation or circular must first be
published and the people officially and specifically informed of said contents and its penalties.
Our Old Civil code, ( Spanish Civil Code of 1889) has a similar provision about the effectivity of
laws, (Article 1 thereof), namely, that laws shall be binding twenty days after their promulgation,
and that their promulgation shall be understood as made on the day of the termination of the
publication of the laws in the Gazette. Manresa, commenting on this article is of the opinion that
the word "laws" include regulations and circulars issued in accordance with the same. He says:
El Tribunal Supremo, ha interpretado el articulo 1. del codigo Civil en Sentencia de 22 de
Junio de 1910, en el sentido de que bajo la denominacion generica de leyes, se
comprenden tambien los Reglamentos, Reales decretos, Instrucciones, Circulares y
Reales ordenes dictadas de conformidad con las mismas por el Gobierno en uso de su
potestad. Tambien el poder ejecutivo lo ha venido entendiendo asi, como lo prueba el
hecho de que muchas de sus disposiciones contienen la advertencia de que empiezan a
regir el mismo dia de su publicacion en la Gaceta, advertencia que seria perfectamente
inutil si no fuera de aplicacion al caso el articulo 1.o del Codigo Civil. (Manresa, Codigo
Civil Español, Vol. I. p. 52).
In the present case, although circular No. 20 of the Central Bank was issued in the year 1949, it
was not published until November 1951, that is, about 3 months after appellant's conviction of its
violation. It is clear that said circular, particularly its penal provision, did not have any legal effect
and bound no one until its publication in the Official Gazzette or after November 1951. In other
words, appellant could not be held liable for its violation, for it was not binding at the time he was
found to have failed to sell the foreign exchange in his possession thereof.
But the Solicitor General also contends that this question of non-publication of the Circular is
being raised for the first time on appeal in this Court, which cannot be done by appellant.
Ordinarily, one may raise on appeal any question of law or fact that has been raised in the court
below and which is within the issues made by the parties in their pleadings. (Section 19, Rule 48
of the Rules of Court). But the question of non-publication is fundamental and decisive. If as a
matter of fact Circular No. 20 had not been published as required by law before its violation, then
in the eyes of the law there was no such circular to be violated and consequently appellant
committed no violation of the circular or committed any offense, and the trial court may be said to
have had no jurisdiction. This question may be raised at any stage of the proceeding whether or
not raised in the court below.
In view of the foregoing, we reverse the decision appealed from and acquit the appellant, with
costs de oficio
G.R. No. L-32166 October 18, 1977
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant,
vs.
HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA,
GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO DEL
ROSARIO, accused-appellees.
Office of the Solicitor General for appellant.
Rustics F. de los Reyes, Jr. for appellees.
AQUINO, J.:
têñ .£îhqwâ£
This is a case involving the validity of a 1967 regulation, penalizing electro fishing in fresh water
fisheries, promulgated by the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries under the old Fisheries Law and the law creating the Fisheries
Commission.
On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and
Carlito del Rosario were charged by a Constabulary investigator in the municipal court of Sta.
Cruz, Laguna with having violated Fisheries Administrative Order No. 84-1.
It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted to
electro fishing in the waters of Barrio San Pablo Norte, Sta. Cruz by "using their own motor
banca, equipped with motor; with a generator colored green with attached dynamo colored gray
or somewhat white; and electrocuting device locally known as sensored with a somewhat
webbed copper wire on the tip or other end of a bamboo pole with electric wire attachment which
was attached to the dynamo direct and with the use of these devices or equipments catches fish
thru electric current, which destroy any aquatic animals within its cuffed reach, to the detriment
and prejudice of the populace" (Criminal Case No. 5429).
Upon motion of the accused, the municipal court quashed the complaint. The prosecution
appealed. The Court of First Instance of Laguna affirmed the order of dismissal (Civil Case No.
SC-36). The case is now before this Court on appeal by the prosecution under Republic Act No.
5440.
The lower court held that electro fishing cannot be penalize because electric current is not an
obnoxious or poisonous substance as contemplated in section I I of the Fisheries Law and that it
is not a substance at all but a form of energy conducted or transmitted by substances. The lower
court further held that, since the law does not clearly prohibit electro fishing, the executive and
judicial departments cannot consider it unlawful.
As legal background, it should be stated that section 11 of the Fisheries Law prohibits "the use of
any obnoxious or poisonous substance" in fishing.
Section 76 of the same law punishes any person who uses an obnoxious or poisonous
substance in fishing with a fine of not more than five hundred pesos nor more than five
thousand, and by imprisonment for not less than six months nor more than five years.
It is noteworthy that the Fisheries Law does not expressly punish .electro fishing."
Notwithstanding the silence of the law, the Secretary of Agriculture and Natural Resources, upon
the recommendation of the Commissioner of Fisheries, promulgated Fisheries Administrative
Order No. 84 (62 O.G. 1224), prohibiting electro fishing in all Philippine waters. The order is
quoted below: ñé+ .£ªw ph!1
SUBJECT: PROHIBITING ELECTRO FISHING IN ALL WATERS ñé+.£ªw ph!1
OF THE PHILIPPINES.
Pursuant to Section 4 of Act No. 4003, as amended, and Section 4 of R.A. No. 3512, the
following rules and regulations regarding the prohibition of electro fishing in all waters of the
Philippines are promulgated for the information and guidance of all concerned. ñé+.£ªw ph!1
SECTION 1. — Definition. — Words and terms used in this Order 11
construed as follows:
(a) Philippine waters or territorial waters of the Philippines' includes all
waters of the Philippine Archipelago, as defined in the t between the
United States and Spain, dated respectively the tenth of December,
eighteen hundred ninety eight and the seventh of November, nineteen
hundred. For the purpose of this order, rivers, lakes and other bodies of
fresh waters are included.
(b) Electro Fishing. — Electro fishing is the catching of fish with the use of
electric current. The equipment used are of many electrical devices which
may be battery or generator-operated and from and available source of
electric current.
(c) 'Persons' includes firm, corporation, association, agent or employee.
(d) 'Fish' includes other aquatic products.
SEC. 2. — Prohibition. — It shall be unlawful for any person to engage in
electro fishing or to catch fish by the use of electric current in any portion
of the Philippine waters except for research, educational and scientific
purposes which must be covered by a permit issued by the Secretary of
Agriculture and Natural Resources which shall be carried at all times.
SEC. 3. — Penalty. — Any violation of the provisions of this
Administrative Order shall subject the offender to a fine of not exceeding
five hundred pesos (P500.00) or imprisonment of not extending six (6)
months or both at the discretion of the Court.
SEC. 4. — Repealing Provisions. — All administrative orders or parts
thereof inconsistent with the provisions of this Administrative Order are
hereby revoked.
SEC. 5. — Effectivity. — This Administrative Order shall take effect six
(60) days after its publication in the Office Gazette.
On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the
recommendation of the Fisheries Commission, issued Fisheries Administrative Order No. 84-1,
amending section 2 of Administrative Order No. 84, by restricting the ban against electro fishing
to fresh water fisheries (63 O.G. 9963).
Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed by the
amendatory order to read as follows: "in fresh water fisheries in the Philippines, such as rivers,
lakes, swamps, dams, irrigation canals and other bodies of fresh water."
The Court of First Instance and the prosecution (p. 11 of brief) assumed that electro fishing is
punishable under section 83 of the Fisheries Law (not under section 76 thereof), which provides
that any other violation of that law "or of any rules and regulations promulgated thereunder shall
subject the offender to a fine of not more than two hundred pesos (P200), or in t for not more
than six months, or both, in the discretion of the court."
That assumption is incorrect because 3 of the aforequoted Administrative Order No. 84 imposes
a fm of not exceeding P500 on a person engaged in electro fishing, which amount the 83. It
seems that the Department of Fisheries prescribed their own penalty for swift fishing which
penalty is less than the severe penalty imposed in section 76 and which is not Identified to the at
penalty imposed in section 83.
Had Administrative Order No. 84 adopted the fighter penalty prescribed in on 83, then the crime
of electro fishing would be within the exclusive original jurisdiction of the inferior court (Sec. 44
[f], Judiciary Law; People vs. Ragasi, L-28663, September 22,
We have discussed this pre point, not raised in the briefs, because it is obvious that the crime of
electro fishing which is punishable with a sum up to P500, falls within the concurrent original
jurisdiction of the inferior courts and the Court of First instance (People vs. Nazareno, L-40037,
April 30, 1976, 70 SCRA 531 and the cases cited therein).
And since the instant case was filed in the municipal court of Sta. Cruz, Laguna, a provincial
capital, the order of d rendered by that municipal court was directly appealable to the Court, not
to the Court of First Instance of Laguna (Sec. 45 and last par. of section 87 of the Judiciary Law;
Esperat vs. Avila, L-25992, June 30, 1967, 20 SCRA 596).
It results that the Court of First Instance of Laguna had no appellate jurisdiction over the case. Its
order affirming the municipal court's order of dismissal is void for lack of motion. This appeal
shall be treated as a direct appeal from the municipal court to this Court. (See People vs. Del
Rosario, 97 Phil. 67).
In this appeal, the prosecution argues that Administrative Orders Nos. 84 and 84-1 were not
issued under section 11 of the Fisheries Law which, as indicated above, punishes fishing by
means of an obnoxious or poisonous substance. This contention is not well-taken because, as
already stated, the Penal provision of Administrative Order No. 84 implies that electro fishing is
penalized as a form of fishing by means of an obnoxious or poisonous substance under section
11.
The prosecution cites as the legal sanctions for the prohibition against electro fishing in fresh
water fisheries (1) the rule-making power of the Department Secretary under section 4 of the
Fisheries Law; (2) the function of the Commissioner of Fisheries to enforce the provisions of the
Fisheries Law and the regulations Promulgated thereunder and to execute the rules and
regulations consistent with the purpose for the creation of the Fisheries Commission and for the
development of fisheries (Sec. 4[c] and [h] Republic Act No. 3512; (3) the declared national
policy to encourage, Promote and conserve our fishing resources (Sec. 1, Republic Act No.
3512), and (4) section 83 of the Fisheries Law which provides that "any other violation of" the
Fisheries Law or of any rules and regulations promulgated thereunder "shall subject the offender
to a fine of not more than two hundred pesos, or imprisonment for not more than six months, or
both, in the discretion of the court."
As already pointed out above, the prosecution's reference to section 83 is out of place because
the penalty for electro fishing under Administrative order No. 84 is not the same as the penalty
fixed in section 83.
We are of the opinion that the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries exceeded their authority in issuing Fisheries Administrative Orders
Nos. 84 and 84-1 and that those orders are not warranted under the Fisheries Commission,
Republic Act No. 3512.
The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro
fishing is not banned under that law, the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries are powerless to penalize it. In other words, Administrative Orders
Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any legal basis.
Had the lawmaking body intended to punish electro fishing, a penal provision to that effect could
have been easily embodied in the old Fisheries Law.
That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing; (2)
unlawful fishing in deepsea fisheries; (3) unlawful taking of marine molusca, (4) illegal taking of
sponges; (5) failure of licensed fishermen to report the kind and quantity of fish caught, and (6)
other violations.
Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84, in
punishing electro fishing, does not contemplate that such an offense fails within the category of
"other violations" because, as already shown, the penalty for electro fishing is the penalty next
lower to the penalty for fishing with the use of obnoxious or poisonous substances, fixed in
section 76, and is not the same as the penalty for "other violations" of the law and regulations
fixed in section 83 of the Fisheries Law.
The lawmaking body cannot delegate to an executive official the power to declare what acts
should constitute an offense. It can authorize the issuance of regulations and the imposition of
the penalty provided for in the law itself. (People vs. Exconde 101 Phil. 11 25, citing 11 Am. Jur.
965 on p. 11 32).
Originally, Administrative Order No. 84 punished electro fishing in all waters. Later, the ban
against electro fishing was confined to fresh water fisheries. The amendment created the
impression that electro fishing is not condemnable per se. It could be tolerated in marine waters.
That circumstances strengthens the view that the old law does not eschew all forms of electro
fishing.
However, at present, there is no more doubt that electro fishing is punishable under the Fisheries
Law and that it cannot be penalized merely by executive revolution because Presidential Decree
No. 704, which is a revision and consolidation of all laws and decrees affecting fishing and
fisheries and which was promulgated on May 16, 1975 (71 O.G. 4269), expressly punishes
electro fishing in fresh water and salt water areas.
That decree provides: ñé+.£ªwph!1
SEC. 33. — Illegal fishing, dealing in illegally caught fish or
fishery/aquatic products. — It shall he unlawful for any person to catch,
take or gather or cause to be caught, taken or gathered fish or
fishery/aquatic products in Philippine waters with the use of explosives,
obnoxious or poisonous substance, or by the use of electricity as defined
in paragraphs (1), (m) and (d), respectively, of Section 3 hereof: ...
The decree Act No. 4003, as amended, Republic Acts Nos. 428, 3048, 3512 and 3586,
Presidential Decrees Nos. 43, 534 and 553, and all , Acts, Executive Orders, rules and
regulations or parts thereof inconsistent with it (Sec. 49, P. D. No. 704).
The inclusion in that decree of provisions defining and penalizing electro fishing is a clear
recognition of the deficiency or silence on that point of the old Fisheries Law. It is an admission
that a mere executive regulation is not legally adequate to penalize electro fishing.
Note that the definition of electro fishing, which is found in section 1 (c) of Fisheries
Administrative Order No. 84 and which is not provided for the old Fisheries Law, is now found in
section 3(d) of the decree. Note further that the decree penalty electro fishing by "imprisonment
from two (2) to four (4) years", a punishment which is more severe than the penalty of a time of
not excluding P500 or imprisonment of not more than six months or both fixed in section 3 of
Fisheries Administrative Order No. 84.
An examination of the rule-making power of executive officials and administrative agencies and,
in particular, of the Secretary of Agriculture and Natural Resources (now Secretary of Natural
Resources) under the Fisheries Law sustains the view that he ex his authority in penalizing
electro fishing by means of an administrative order.
Administrative agent are clothed with rule-making powers because the lawmaking body finds it
impracticable, if not impossible, to anticipate and provide for the multifarious and complex
situations that may be encountered in enforcing the law. All that is required is that the regulation
should be germane to the defects and purposes of the law and that it should conform to the
standards that the law prescribes (People vs. Exconde 101 Phil. 1125; Director of Forestry vs.
Muñ;oz, L-24796, June 28, 1968, 23 SCRA 1183, 1198; Geukeko vs. Araneta, 102 Phil. 706,
712).
The lawmaking body cannot possibly provide for all the details in the enforcement of a particular
statute (U.S. vs. Tupasi Molina, 29 Phil. 119, 125, citing U.S. vs. Grimaud 220 U.S. 506;
Interprovincial Autobus Co., Inc. vs. Coll. of Internal Revenue, 98 Phil. 290, 295-6).
The grant of the rule-making power to administrative agencies is a relaxation of the principle of
separation of powers and is an exception to the nondeleption of legislative, powers.
Administrative regulations or "subordinate legislation calculated to promote the public interest
are necessary because of "the growing complexity of modem life, the multiplication of the
subjects of governmental regulations, and the increased difficulty of administering the law"
Calalang vs. Williams, 70 Phil. 726; People vs. Rosenthal and Osmeñ;a, 68 Phil. 328).
Administrative regulations adopted under legislative authority by a particular department must be
in harmony with the provisions of the law, and should be for the sole purpose of carrying into
effect its general provisions. By such regulations, of course, the law itself cannot be extended.
(U.S. vs. Tupasi Molina, supra). An administrative agency cannot amend an act of Congress
(Santos vs. Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of the d of Administrators, L-
25619, June 30, 1970, 33 SCRA 585; Manuel vs. General Auditing Office, L-28952, December
29, 1971, 42 SCRA 660; Deluao vs. Casteel, L-21906, August 29, 1969, 29 SCRA 350).
The rule-making power must be confined to details for regulating the mode or proceeding to
carry into effect the law as it his been enacted. The power cannot be extended to amending or
expanding the statutory requirements or to embrace matters not covered by the statute. Rules
that subvert the statute cannot be sanctioned. (University of Santo Tomas vs. Board of Tax A 93
Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see of Internal Revenue vs.
Villaflor 69 Phil. 319, Wise & Co. vs. Meer, 78 Phil. 655, 676; Del March vs. Phil. Veterans
Administrative, L-27299, June 27, 1973, 51 SCRA 340, 349).
There is no question that the Secretary of Agriculture and Natural Resources has rule-making
powers. Section 4 of the Fisheries law provides that the Secretary "shall from time to time issue
instructions, orders, and regulations consistent" with that law, "as may be and proper to carry
into effect the provisions thereof." That power is now vested in the Secretary of Natural
Resources by on 7 of the Revised Fisheries law, Presidential December No. 704.
Section 4(h) of Republic Act No. 3512 empower the Co of Fisheries "to prepare and execute
upon the approval of the Secretary of Agriculture and Natural Resources, forms instructions,
rules and regulations consistent with the purpose" of that enactment "and for the development of
fisheries."
Section 79(B) of the Revised Administrative Code provides that "the Department Head shall
have the power to promulgate, whenever he may see fit do so, all rules, regulates, orders,
memorandums, and other instructions, not contrary to law, to regulate the proper working and
harmonious and efficient administration of each and all of the offices and dependencies of his
Department, and for the strict enforcement and proper execution of the laws relative to matters
under the jurisdiction of said Department; but none of said rules or orders shall prescribe
penalties for the violation thereof, except as expressly authorized by law."
Administrative regulations issued by a Department Head in conformity with law have the force of
law (Valerie vs. Secretary of culture and Natural Resources, 117 Phil. 729, 733; Antique
Sawmills, Inc. vs. Zayco, L- 20051, May 30, 1966, 17 SCRA 316). As he exercises the rule-
making power by delegation of the lawmaking body, it is a requisite that he should not transcend
the bound demarcated by the statute for the exercise of that power; otherwise, he would be
improperly exercising legislative power in his own right and not as a surrogate of the lawmaking
body.
Article 7 of the Civil Code embodies the basic principle that administrative or executive acts,
orders and regulations shall be valid only when they are not contrary to the laws or the
Constitution."
As noted by Justice Fernando, "except for constitutional officials who can trace their competence
to act to the fundamental law itself, a public office must be in the statute relied upon a grant of
power before he can exercise it." "department zeal may not be permitted to outrun the authority
conferred by statute." (Radio Communications of the Philippines, Inc. vs. Santiago, L-29236,
August 21, 1974, 58 SCRA 493, 496-8).
"Rules and regulations when promulgated in pursuance of the procedure or authority conferred
upon the administrative agency by law, partake of the nature of a statute, and compliance
therewith may be enforced by a penal sanction provided in the law. This is so because statutes
are usually couched in general terms, after expressing the policy, purposes, objectives, remedies
and sanctions intended by the legislature. The details and the manner of carrying out the law are
oftentimes left to the administrative agency entrusted with its enforcement. In this sense, it has
been said that rules and regulations are the product of a delegated power to create new or
additional legal provisions that have the effect of law." The rule or regulation should be within the
scope of the statutory authority granted by the legislature to the administrative agency. (Davis,
Administrative Law, p. 194, 197, cited in Victories Milling Co., Inc. vs. Social Security
Commission, 114 Phil. 555, 558).
In case of discrepancy between the basic law and a rule or regulation issued to implement said
law, the basic law prevails because said rule or regulation cannot go beyond the terms and
provisions of the basic law (People vs. Lim, 108 Phil. 1091).
This Court in its decision in the Lim case, supra, promulgated on July 26, 1960, called the
attention of technical men in the executive departments, who draft rules and regulations, to the
importance and necessity of closely following the legal provisions which they intend to implement
so as to avoid any possible misunderstanding or confusion.
The rule is that the violation of a regulation prescribed by an executive officer of the government
in conformity with and based upon a statute authorizing such regulation constitutes an offense
and renders the offender liable to punishment in accordance with the provisions of the law (U.S.
vs. Tupasi Molina, 29 Phil. 119, 124).
In other words, a violation or infringement of a rule or regulation validly issued can constitute a
crime punishable as provided in the authorizing statute and by virtue of the latter (People vs.
Exconde 101 Phil. 1125, 1132).
It has been held that "to declare what shall constitute a crime and how it shall be punished is a
power vested exclusively in the legislature, and it may not be delegated to any other body or
agency" (1 Am. Jur. 2nd, sec. 127, p. 938; Texas Co. vs. Montgomery, 73 F. Supp. 527).
In the instant case the regulation penalizing electro fishing is not strictly in accordance with the
Fisheries Law, under which the regulation was issued, because the law itself does not expressly
punish electro fishing.
The instant case is similar to People vs. Santos, 63 Phil. 300. The Santos case involves section
28 of Fish and Game Administrative Order No. 2 issued by the Secretary of Agriculture and
Natural Resources pursuant to the aforementioned section 4 of the Fisheries Law.
Section 28 contains the proviso that a fishing boat not licensed under the Fisheries Law and
under the said administrative order may fish within three kilometers of the shoreline of islands
and reservations over which jurisdiction is exercised by naval and military reservations
authorities of the United States only upon receiving written permission therefor, which permission
may be granted by the Secretary upon recommendation of the military or naval authorities
concerned. A violation of the proviso may be proceeded against under section 45 of the Federal
Penal Code.
Augusto A. Santos was prosecuted under that provision in the Court of First Instance of Cavite
for having caused his two fishing boats to fish, loiter and anchor without permission from the
Secretary within three kilometers from the shoreline of Corrigidor Island.
This Court held that the Fisheries Law does not prohibit boats not subject to license from fishing
within three kilometers of the shoreline of islands and reservations over which jurisdiction is
exercised by naval and military authorities of the United States, without permission from the
Secretary of Agriculture and Natural Resources upon recommendation of the military and naval
authorities concerned.
As the said law does not penalize the act mentioned in section 28 of the administrative order, the WHEREFORE, the lower court's decision of June 9, 1970 is set aside for lack of appellate
promulgation of that provision by the Secretary "is equivalent to legislating on the matter, a jurisdiction and the order of dismissal rendered by the municipal court of Sta. Cruz, Laguna in
power which has not been and cannot be delegated to him, it being expressly reserved" to the Criminal Case No. 5429 is affirmed. Costs de oficio.
lawmaking body. "Such an act constitutes not only an excess of the regulatory power conferred
upon the Secretary but also an exercise of a legislative power which he does not have, and SO ORDERED.
therefore" the said provision "is null and void and without effect". Hence, the charge against
Santos was dismiss.

A penal statute is strictly construed. While an administrative agency has the right to make ranks
and regulations to carry into effect a law already enacted, that power should not be confused Force and Effect of Administrative Rules and Regulations
with the power to enact a criminal statute. An administrative agency can have only the
administrative or policing powers expressly or by necessary implication conferred upon it.
(Glustrom vs. State, 206 Ga. 734, 58 Second 2d 534; See 2 Am. Jr. 2nd 129-130).
G.R. No. 95832 August 10, 1992
Where the legislature has delegated to executive or administrative officers and boards authority
to promulgate rules to carry out an express legislative purpose, the rules of administrative MAYNARD R. PERALTA, petitioner,
officers and boards, which have the effect of extending, or which conflict with the authority vs.
granting statute, do not represent a valid precise of the rule-making power but constitute an CIVIL SERVICE COMMISSION, respondent.
attempt by an administrative body to legislate (State vs. Miles, Wash. 2nd 322, 105 Pac. 2nd 51).
Tranquilino F. Meris Law Office for petitioner.
In a prosecution for a violation of an administrative order, it must clearly appear that the order is
one which falls within the scope of the authority conferred upon the administrative body, and the
order will be scrutinized with special care. (State vs. Miles supra).
PADILLA, J.:
The Miles case involved a statute which authorized the State Game Commission "to adopt,
promulgate, amend and/or repeal, and enforce reasonable rules and regulations governing Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department of Trade
and/or prohibiting the taking of the various classes of game. and Industry (DTI). His appointment was classified as "Reinstatement/Permanent". Before said
appointment, he was working at the Philippine Cotton Corporation, a government-owned and
Under that statute, the Game Commission promulgated a rule that "it shall be unlawful to offer, controlled corporation under the Department of Agriculture.
pay or receive any reward, prize or compensation for the hunting, pursuing, taking, killing
or displaying of any game animal, game bird or game fish or any part thereof." On 8 December 1989, petitioner received his initial salary, covering the period from 25
September to 31 October 1989. Since he had no accumulated leave credits, DTI deducted from
Beryl S. Miles, the owner of a sporting goods store, regularly offered a ten-down cash prize to his salary the amount corresponding to his absences during the covered period, namely, 29
the person displaying the largest deer in his store during the open for hunting such game September 1989 and 20 October 1989, inclusive of Saturdays and Sundays. More specifically,
animals. For that act, he was charged with a violation of the rule Promulgated by the State Game the dates of said absences for which salary deductions were made, are as follows:
Commission.
1. 29 September 1989 — Friday
It was held that there was no statute penalizing the display of game. What the statute penalized
was the taking of game. If the lawmaking body desired to prohibit the display of game, it could 2. 30 September 1989 — Saturday
have readily said so. It was not lawful for the administrative board to extend or modify the
statute. Hence, the indictment against Miles was quashed. The Miles case is similar to this case.
3. 01 October 1989 — Sunday
 4. 20 October 1989 — Friday
5. 21 October 1989 — Saturday
6. 22 October 1989 — Sunday
Petitioner sent a memorandum to Amando T. Alvis (Chief, General Administrative Service) on 15
December 1989 inquiring as to the law on salary deductions, if the employee has no leave
credits.
Amando T. Alvis answered petitioner's query in a memorandum dated 30 January 1990 citing
Chapter 5.49 of the Handbook of Information on the Philippine Civil Service which states that
"when an employee is on leave without pay on a day before or on a day immediately preceding a
Saturday, Sunday or Holiday, such Saturday, Sunday, or Holiday shall also be without pay (CSC,
2nd Ind., February 12, 1965)."
Petitioner then sent a latter dated 20 February 1990 addressed to Civil Service Commission
(CSC) Chairman Patricia A. Sto. Tomas raising the following question:
Is an employee who was on leave of absence without pay on a day before or on
a day time immediately preceding a Saturday, Sunday or Holiday, also
considered on leave of absence without pay on such Saturday, Sunday or
Holiday?1
Petitioner in his said letter to the CSC Chairman argued that a reading of the General Leave Law
as contained in the Revised Administrative Code, as well as the old Civil Service Law (Republic
Act No. 2260), the Civil Service Decree (Presidential Decree No. 807), and the Civil Service
Rules and Regulation fails to disclose a specific provision which supports the CSC rule at issue.
That being the case, the petitioner contented that he cannot be deprived of his pay or salary
corresponding to the intervening Saturdays, Sundays or Holidays (in the factual situation posed),
and that the withholding (or deduction) of the same is tantamount to a deprivation of property
without due process of law.
On 25 May 1990, respondent Commission promulgated Resolution No. 90-497, ruling that the
action of the DTI in deducting from the salary of petitioner, a part thereof corresponding to six (6)
days (September 29, 30, October 1, 20, 21, 22, 1989) is in order. 2 The CSC stated that:
In a 2nd Indorsement dated February 12, 1965 of this Commission, which
embodies the policy on leave of absence without pay incurred on a Friday and
Monday, reads:
Mrs. Rosalinda Gonzales is not entitled to payment of salary
corresponding to January 23 and 24, 1965, Saturday and
Sunday, respectively, it appearing that she was present on
Friday, January 22, 1965 but was on leave without pay beginning
January 25, the succeeding Monday. It is the view of this Office
that an employee who has no more leave credit in his favor is not
entitled to the payment of salary on Saturdays, Sundays or
holidays unless such non-working days occur within the period of
service actually rendered. (Emphasis supplied)
The rationale for the above ruling which applies only to those employees who are
being paid on monthly basis, rests on the assumption that having been absent on
either Monday or Friday, one who has no leave credits, could not be favorably
credited with intervening days had the same been working days. Hence, the
above policy that for an employee on leave without pay to be entitled to salary on
Saturdays, Sundays or holidays, the same must occur between the dates where
the said employee actually renders service. To rule otherwise would allow an
employee who is on leave of absent (sic) without pay for a long period of time to
be entitled to payment of his salary corresponding to Saturdays, Sundays or
holidays. It also discourages the employees who have exhausted their leave
credits from absenting themselves on a Friday or Monday in order to have a
prolonged weekend, resulting in the prejudice of the government and the public
in general. 3
Petitioner filed a motion for reconsideration and in Resolution No. 90-797, the respondent
Commission denied said motion for lack of merit. The respondent Commission in explaining its
action held:
The Primer on the Civil Service dated February 21, 1978, embodies the Civil
Service Commission rulings to be observed whenever an employee of the
government who has no more leave credits, is absent on a Friday and/or a
Monday is enough basis for the deduction of his salaries corresponding to the
intervening Saturdays and Sundays. What the Commission perceived to be
without basis is the demand of Peralta for the payment of his salaries
corresponding to Saturdays and Sundays when he was in fact on leave of
absence without pay on a Friday prior to the said days. A reading of Republic Act
No. 2260 (sic) does not show that a government employee who is on leave of
absence without pay on a day before or immediately preceding Saturdays,
Sunday or legal holiday is entitled to payment of his salary for said days. Further,
a reading of Senate Journal No. 67 dated May 4, 1960 of House Bill No. 41
(Republic Act No. 2625) reveals that while the law excludes Saturdays, Sundays
and holidays in the computation of leave credits, it does not, however, include a
case where the leave of absence is without pay. Hence, applying the principle
of inclusio unius est exclusio alterius, the claim of Peralta has no merit.
Moreover, to take a different posture would be in effect giving more premium to
employees who are frequently on leave of absence without pay, instead of
 discouraging them from incurring further absence without Pursuant to the foregoing provisions, the Commission promulgated the herein challenged policy.
pay. 4 Said policy was embodied in a 2nd Indorsement dated 12 February 1965 of the respondent
Commission involving the case of a Mrs. Rosalinda Gonzales. The respondent Commission
Petitioner's motion for reconsideration having been denied, petitioner filed the present petition. ruled that an employee who has no leave credits in his favor is not entitled to the payment of
salary on Saturdays, Sundays or Holidays unless such non-working days occur within the period
What is primarily questioned by the petitioner is the validity of the respondent Commission's of service actually rendered. The same policy is reiterated in the Handbook of Information on the
policy mandating salary deductions corresponding to the intervening Saturdays, Sundays or Philippine Civil Service. 6 Chapter Five on leave of absence provides that:
Holidays where an employee without leave credits was absent on the immediately preceding
working day. 5.51. When intervening Saturday, Sunday or holiday considered as leave without
pay — when an employee is on leave without pay on a day before or on a day
During the pendency of this petition, the respondent Commission promulgated Resolution No. immediately preceding a Saturday, Sunday or holiday, such Saturday, Sunday or
91-540 dated 23 April 1991 amending the questioned policy, considering that employees paid on holiday shall also be without pay. (CSC, 2nd Ind., Feb. 12, 1965).
a monthly basis are not required to work on Saturdays, Sunday or Holidays. In said amendatory
Resolution, the respondent Commission resolved "to adopt the policy that when an employee, It is likewise illustrated in the Primer on the Civil Service 7 in the section referring to Questions
regardless of whether he has leave credits or not, is absent without pay on day immediately and Answers on Leave of Absences, which states the following:
preceding or succeeding Saturday, Sunday or holiday, he shall not be considered absent on
those days." Memorandum Circular No. 16 Series of 1991 dated 26 April 1991, was also issued 27. How is leave of an employee who has no more leave credits computed if:
by CSC Chairman Sto. Tomas adopting and promulgating the new policy and directing the
Heads of Departments, Bureaus and Agencies in the national and local governments, including (1) he is absent on a Friday and
government-owned or controlled corporations with original charters, to oversee the strict the following Monday?
implementation of the circular.
(2) if he is absent on Friday but
Because of these developments, it would seem at first blush that this petition has become moot reports to work the following
and academic since the very CSC policy being questioned has already been amended and, in Monday?
effect, Resolutions No. 90-497 and 90-797, subject of this petition for certiorari, have already
been set aside and superseded. But the issue of whether or not the policy that had been (3) if he is absent on a Monday but
adopted and in force since 1965 is valid or not, remains unresolved. Thus, for reasons of public present the preceding Friday?
interest and public policy, it is the duty of the Court to make a formal ruling on the validity or
invalidity of such questioned policy.
- (1) He is considered on leave
without pay for 4 days covering
The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the Commissioner of Civil Service Friday to Monday;
the following powers and duties:
- (2) He is considered on leave
Sec. 16 (e) with the approval by the President to prescribe, amend and enforce without pay for 3 days from Friday
suitable rules and regulations for carrying into effect the provisions of this Civil to Sunday;
Service Law, and the rules prescribed pursuant to the provisions of this law shall
become effective thirty days after publication in the Official Gazette;
- (3) He is considered on leave
without pay for 3 days from
xxx xxx xxx Saturday to Monday.

(k) To perform other functions that properly belong to a central personnel When an administrative or executive agency renders an opinion or issues a statement of policy,
agency. 5 it merely interprets a pre-existing law; and the administrative interpretation of the law is at best
advisory, for it is the courts that finally determine what the law means. 8 It has also been held that
interpretative regulations need not be published. 9
In promulgating as early as 12 February 1965 the questioned policy, the Civil Service
Commission interpreted the provisions of Republic Act No. 2625 (which took effect on 17 June
1960) amending the Revised Administrative Code, and which stated as follows:
Sec. 1. Sections two hundred eighty-four and two hundred eighty-five-A of the
Administrative Code, as amended, are further amended to read as follows:
Sec. 284. After at least six months' continues (sic) faithful, and
satisfactory service, the President or proper head of department,
or the chief of office in the case of municipal employees may, in
his discretion, grant to an employee or laborer, whether
permanent or temporary, of the national government, the
provincial government, the government of a chartered city, of a
municipality, of a municipal district or of government-owned or
controlled corporations other than those mentioned in Section two
hundred sixty-eight, two hundred seventy-one and two hundred
seventy-four hereof, fifteen days vacation leave of absence with
full pay, exclusive of Saturdays, Sundays and holidays, for each
calendar year of service.
Sec. 285-A. In addition to the vacation leave provided in the two
preceding sections each employee or laborer, whether permanent
or temporary, of the national government, the provincial
government, the government of a chartered city, of a municipality
or municipal district in any regularly and specially organized
province, other than those mentioned in Section two hundred
sixty-eight, two hundred seventy-one and two hundred seventy-
four hereof, shall be entitled to fifteen days of sick leave for each
year of service with full pay, exclusive of Saturdays, Sundays and
holidays: Provided, That such sick leave will be granted by the
President, Head of Department or independent office concerned,
or the chief of office in case of municipal employees, only on
account of sickness on the part of the employee or laborer
concerned or of any member of his immediate family.
The Civil Service Commission in its here questioned Resolution No. 90-797 construed R.A. 2625
as referring only to government employees who have earned leave credits against which their
absences may be charged with pay, as its letters speak only of leaves of absence with full pay.
The respondent Commission ruled that a reading of R.A. 2625 does not show that a government
employee who is on leave of absence without pay on a day before or immediately preceding a
Saturday, Sunday or legal holiday is entitled to payment of his salary for said days.
Administrative construction, if we may repeat, is not necessarily binding upon the courts. Action
of an administrative agency may be disturbed or set aside by the judicial department if there is
an error of law, or abuse of power or lack of jurisdiction or grave abuse of discretion clearly
conflicting with either the letter or the spirit of a legislative enactment. 10
We find this petition to be impressed with merit.
As held in Hidalgo vs. Hidalgo: 11
. . . . where the true intent of the law is clear that calls for the application of the
cardinal rule of statutory construction that such intent or spirit must prevail over
the letter thereof, for whatever is within the spirit of a statute is within the statute,
since adherence to the letter would result in absurdity, injustice and
contradictions and would defeat the plain and vital purpose of the statute.
The intention of the legislature in the enactment of R.A. 2625 may be gleaned from, among
others, the sponsorship speech of Senator Arturo M. Tolentino during the second reading of
House Bill No. 41 (which became R.A. 2625). He said:
The law actually provides for sick leave and vacation leave of 15 days each year
of service to be with full pay. But under the present law, in computing these
periods of leaves, Saturday, Sunday and holidays are included in the
computation so that if an employee should become sick and absent himself on a
Friday and then he reports for work on a Tuesday, in the computation of the
leave the Saturday and Sunday will be included, so that he will be considered as
having had a leave of Friday, Saturday, Sunday and Monday, or four days.
The purpose of the present bill is to exclude from the computation of the leave
those days, Saturdays and Sundays, as well as holidays, because actually the
employee is entitled not to go to office during those days. And it is unfair and
unjust to him that those days should be counted in the computation of leaves. 12
With this in mind, the construction by the respondent Commission of R.A. 2625 is not in
accordance with the legislative intent. R.A. 2625 specifically provides that government
employees are entitled to fifteen (15) days vacation leave of absence with full pay and fifteen
(15) days sick leave with full pay, exclusive of Saturdays, Sundays and Holidays in both cases.
Thus, the law speaks of the granting of a right and the law does not provide for a distinction
between those who have accumulated leave credits and those who have exhausted their leave
credits in order to enjoy such right. Ubi lex non distinguit nec nos distinguere debemus. The fact
remains that government employees, whether or not they have accumulated leave credits, are
not required by law to work on Saturdays, Sundays and Holidays and thus they can not be
declared absent on such non-working days. They cannot be or are not considered absent on
non-working days; they cannot and should not be deprived of their salary corresponding to said
non-working days just because they were absent without pay on the day immediately prior to, or salaries made after said date in contravention of the new CSC policy must be restored to the
after said non-working days. A different rule would constitute a deprivation of property without government employees concerned.
due process.
WHEREFORE, the petition is GRANTED, CSC Resolutions No. 90-497 and 90-797 are declared
Furthermore, before their amendment by R.A. 2625, Sections 284 and 285-A of the Revised NULL and VOID. The respondent Commission is directed to take the appropriate action so that
Administrative Code applied to all government employee without any distinction. It follows that petitioner shall be paid the amounts previously but unlawfully deducted from his monthly salary
the effect of the amendment similarly applies to all employees enumerated in Sections 284 and as above indicated. No costs.
285-A, whether or not they have accumulated leave credits.
SO ORDERED.
As the questioned CSC policy is here declared invalid, we are next confronted with the question
of what effect such invalidity will have. Will all government employees on a monthly salary basis,
deprived of their salaries corresponding to Saturdays, Sundays or legal holidays (as herein
petitioner was so deprived) since 12 February 1965, be entitled to recover the amounts
corresponding to such non-working days?

The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it confers no G.R. No. 102549 August 10, 1992
rights; it imposes no duties; it affords no protection; it creates no office; it is in legal
contemplation as inoperative as though it had never been passed. 13 EDWIN B. JAVELLANA, petitioner,
vs.
But, as held in Chicot County Drainage District vs. Baxter State DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT AND LUIS T. SANTOS,
Bank:14 SECRETARY, respondents.

. . . . It is quite clear, however, that such broad statements as to the effect of a Reyes, Lozada and Sabado for petitioner.
determination of unconstitutionality must be taken with qualifications. The actual
existence of a statute, prior to such determination is an operative fact and may
have consequences which cannot always be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to GRIÑO-AQUINO, J.:
invalidity may have to be considered in various aspects — with respect to
particular relations, individual and corporate; and particular conduct, private and
This petition for review on certiorari involves the right of a public official to engage in the practice
official.
of his profession while employed in the Government.
To allow all the affected government employees, similarly situated as petitioner herein, to claim
Attorney Erwin B. Javellana was an elected City Councilor of Bago City, Negros Occidental. On
their deducted salaries resulting from the past enforcement of the herein invalidated CSC policy,
October 5, 1989, City Engineer Ernesto C. Divinagracia filed Administrative Case No. C-10-90
would cause quite a heavy financial burden on the national and local governments considering
against Javellana for: (1) violation of Department of Local Government (DLG) Memorandum
the length of time that such policy has been effective. Also, administrative and practical
Circular No. 80-38 dated June 10, 1980 in relation to DLG Memorandum Circular No. 74-58 and
considerations must be taken into account if this ruling will have a strict restrospective
of Section 7, paragraph b, No. 2 of Republic Act No. 6713, otherwise known as the "Code of
application. The Court, in this connection, calls upon the respondent Commission and the
Conduct and Ethical Standards for Public Officials and Employees," and (2) for oppression,
Congress of the Philippines, if necessary, to handle this problem with justice and equity to all
misconduct and abuse of authority.
affected government employees.
Divinagracia's complaint alleged that Javellana, an incumbent member of the City Council or
It must be pointed out, however, that after CSC Memorandum Circular No. 16 Series of 1991 —
Sanggunian Panglungsod of Bago City, and a lawyer by profession, has continuously engaged
amending the herein invalidated policy — was promulgated on 26 April 1991, deductions from
in the practice of law without securing authority for that purpose from the Regional Director,
Department of Local Government, as required by DLG Memorandum Circular No. 80-38 in
relation to DLG Memorandum Circular No. 74-58 of the same department; that on July 8, 1989, dates of the sessions, regular or special of their Sanggunians so that conflicts of
Javellana, as counsel for Antonio Javiero and Rolando Catapang, filed a case against City attending court cases in the case of lawyers and Sanggunian sessions can be
Engineer Ernesto C. Divinagracia of Bago City for "Illegal Dismissal and Reinstatement with avoided.
Damages" putting him in public ridicule; that Javellana also appeared as counsel in several
criminal and civil cases in the city, without prior authority of the DLG Regional Director, in As to members of the bar the authority given for them to practice their profession
violation of DLG Memorandum Circular No. 80-38 which provides: shall always be subject to the restrictions provided for in Section 6 of Republic
Act 5185. In all cases, the practice of any profession should be favorably
MEMORANDUM CIRCULAR NO. 80-38 recommended by the Sanggunian concerned as a body and by the provincial
governors, city or municipal mayors, as the case may be. (Emphasis ours, pp.
TO ALL: PROVINCIAL GOVERNORS, CITY AND MUNICIPALITY 28-30, Rollo.)
MAYORS, KLGCD REGIONAL DIRECTORS AND ALL CONCERNED
On August 13, 1990, a formal hearing of the complaint was held in Iloilo City in which the
SUBJECT: AMENDING MEMORANDUM CIRCULAR NO. 80-18 ON complainant, Engineer Divinagracia, and the respondent, Councilor Javellana, presented their
SANGGUNIAN SESSIONS, PER DIEMS, ALLOWANCES, STAFFING respective evidence.
AND OTHER RELATED MATTERS
Meanwhile, on September 10, 1990, Javellana requested the DLG for a permit to continue his
In view of the issuance or Circular No. 5-A by the Joint Commission on Local practice of law for the reasons stated in his letter-request. On the same date, Secretary Santos
Government Personnel Administration which affects certain provisions of MC 80- replied as follows:
18, there is a need to amend said Memorandum Circular to substantially conform
to the pertinent provisions of Circular No. 9-A. 1st Indorsement
September 10, 1990
xxx xxx xxx
Respectfully returned to Councilor Erwin B. Javellana, Bago City, his within letter
C. Practice of Profession dated September 10, 1990, requesting for a permit to continue his practice of law
for reasons therein stated, with this information that, as represented and
The Secretary (now Minister) of Justice in an Opinion No. 46 Series of 1973 consistent with law, we interpose no objection thereto, provided that such
stated inter alia that "members of local legislative bodies, other than the practice will not conflict or tend to conflict with his official functions.
provincial governors or the mayors, do not keep regular office hours." "They
merely attend meetings or sessions of the provincial board or the city or
municipal council" and that provincial board members are not even required "to
have an office in the provincial building." Consequently, they are not therefore to
required to report daily as other regular government employees do, except when
they are delegated to perform certain administrative functions in the interest of
public service by the Governor or Mayor as the case may be. For this reason,
they may, therefore, be allowed to practice their professions provided that in so
doing an authority . . . first be secured from the Regional Directors pursuant to
Memorandum Circular No. 74-58, provided, however, that no government
personnel, property, equipment or supplies shall be utilized in the practice of their
professions. While being authorized to practice their professions, they should as
much as possible attend regularly any and all sessions, which are not very often,
of their Sanggunians for which they were elected as members by their
constituents except in very extreme cases, e.g., doctors who are called upon to
save a life. For this purpose it is desired that they always keep a calendar of the
 S No officer shall engage directly in any . . . vocation or profession .
e . . without a written permission from the head of the
c Department: Provided, that this prohibition will be absolute in the
r case of those officers . . . whose duties and responsibilities
e require that their entire time be at the disposal of the
t Government: Provided, further, That if an employee is granted
a permission to engage in outside activities, the time so devoted
r outside of office should be fixed by the Chief of the agency to the
y end that it will not impair in anyway the efficiency of the officer or
. employee . . . subject to any additional conditions which the head
of the office deems necessary in each particular case in the
(p. 60, Rollo.) interest of the service, as expressed in the various issuances of
the Civil Service Commission.
On September 21, 1991, Secretary Luis T. Santos issued Memorandum Circular No. 90-81
setting forth guidelines for the practice of professions by local elective officials as follows: Conformably with the foregoing, the following guidelines are to be observed in
the grant of permission to the practice of profession and to the acceptance of
TO: All Provincial Governors, City and Municipal Mayors, private employment of local elective officials, to wit:
Regional Directors and All Concerned.
1) The permission shall be granted by the Secretary of Local
SUBJECT: Practice of Profession and Private Employment of Government;
Local Elective Officials
2) Provincial Governors, City and Municipal Mayors whose duties
Section 7 of Republic Act No. 6713 (Code of Conduct and Ethical Standards for and responsibilities require that their entire time be at the disposal
Public Officials and Employees), states, in part, that "In addition to acts and of the government in conformity with Sections 141, 171 and 203
omission of public officials . . . now prescribed in the Constitution and existing of the Local Government Code (BP 337), are prohibited to
laws, the following shall constitute prohibited acts and transactions of any public engage in the practice of their profession and to accept private
officials . . . and are hereby declared to be unlawful: . . . (b) Public Officials . . employment during their incumbency:
. during their incumbency shall not: (1) . . . accept employment as officer,
employee, consultant, counsel, broker, agent, trustee or nominee in any private 3) Other local elective officials may be allowed to practice their
enterprise regulated, supervised or licensed by their office unless expressly profession or engage in private employment on a limited basis at
allowed by law; (2) Engage in the private practice of their profession unless the discretion of the Secretary of Local Government, subject to
authorized by the Constitution or law, provided that such practice will not conflict existing laws and to the following conditions:
or tend to conflict with their official functions: . . .
a) That the time so devoted outside of office hours
xxx xxx xxx should be fixed by the local chief executive
concerned to the end that it will not impair in any
Under Memorandum Circular No. 17 of the Office of the President dated way the efficiency of the officials concerned;
September 4, 1986, the authority to grant any permission, to accept private
employment in any capacity and to exercise profession, to any government b) That no government time, personnel, funds or
official shall be granted by the head of the Ministry (Department) or agency in supplies shall be utilized in the pursuit of one's
accordance with Section 12, Rule XVIII of the Revised Civil Service Rules, which profession or private employment;
provides, in part, that:
 c) That no conflict of interests between the
practice of profession or engagement in private
employment and the official duties of the
concerned official shall arise thereby;
d) Such other conditions that the Secretary deems
necessary to impose on each particular case, in
the interest of public service. (Emphasis supplied,
pp. 31-32, Rollo.)
On March 25, 1991, Javellana filed a Motion to Dismiss the administrative case against him on
the ground mainly that DLG Memorandum Circulars Nos. 80-38 and 90-81 are unconstitutional
because the Supreme Court has the sole and exclusive authority to regulate the practice of law.
In an order dated May 2, 1991, Javellana's motion to dismiss was denied by the public
respondents. His motion for reconsideration was likewise denied on June 20, 1991.
Five months later or on October 10, 1991, the Local Government Code of 1991 (RA 7160) was
signed into law, Section 90 of which provides:
Sec. 90. Practice of Profession. — (a) All governors, city and municipal mayors
are prohibited from practicing their profession or engaging in any occupation
other than the exercise of their functions as local chief executives.
(b) Sanggunian members may practice their professions, engage in any
occupation, or teach in schools except during session hours: Provided, That
sanggunian members who are members of the Bar shall not:
(1) Appear as counsel before any court in any civil case wherein
a local government unit or any office, agency, or instrumentality of
the government is the adverse party;
(2) Appear as counsel in any criminal case wherein an officer or
employee of the national or local government is accused of an
offense committed in relation to his office;
(3) Collect any fee for their appearance in administrative
proceedings involving the local government unit of which he is an
official; and
(4) Use property and personnel of the Government except when
the sanggunian member concerned is defending the interest of
the Government.
(c) Doctors of medicine may practice their profession even during official hours of
work only on occasions of emergency: Provided, That the officials concerned do
not derive monetary compensation therefrom. (Emphasis ours.)
Administrative Case No. C-10-90 was again set for hearing on November 26, 1991. Javellana
thereupon filed this petition for certiorari praying that DLG Memorandum Circulars Nos. 80-38
and 90-81 and Section 90 of the new Local Government Code (RA 7160) be declared
unconstitutional and null void because:
(1) they violate Article VIII, Section 5 of the 1987 Constitution, which provides:
Sec. 5. The Supreme Court shall have the following powers:
xxx xxx xxx
(5) Promulgate rules concerning the protection and enforcement of constitutional
rights, pleading, practice, and procedure in all courts, the admission to the
practice of law, the Integrated Bar, and legal assistance to the underprivileged.
Such rules shall provide a simplified and inexpensive procedure for the speedy
disposition of cases, shall be uniform for all courts of the same grade, and shall
not diminish, increase, or modify substantive rights. Rules of procedure of special
courts and quasi-judicial bodies shall remain effective unless disapproved by the
Supreme Court.
(2) They constitute class legislation, being discriminatory against the legal and medical
professions for only sanggunian members who are lawyers and doctors are restricted in the
exercise of their profession while dentists, engineers, architects, teachers, opticians, morticians
and others are not so restricted (RA 7160, Sec. 90 [b-1]).
In due time, the Solicitor General filed his Comment on the petition and the petitioner submitted
a Reply. After deliberating on the pleadings of the parties, the Court resolved to dismiss the
petition for lack of merit.
As a matter of policy, this Court accords great respect to the decisions and/or actions of
administrative authorities not only because of the doctrine of separation of powers but also for
their presumed knowledgeability and expertise in the enforcement of laws and regulations
entrusted to their jurisdiction (Santiago vs. Deputy Executive Secretary, 192 SCRA 199, citing
Cuerdo vs. COA, 166 SCRA 657). With respect to the present case, we find no grave abuse of
discretion on the part of the respondent, Department of Interior and Local Government (DILG), in
issuing the questioned DLG Circulars Nos. 80-30 and 90-81 and in denying petitioner's motion to
dismiss the administrative charge against him.
In the first place, complaints against public officers and employees relating or incidental to the
performance of their duties are necessarily impressed with public interest for by express
constitutional mandate, a public office is a public trust. The complaint for illegal dismissal filed by
Javiero and Catapang against City Engineer Divinagracia is in effect a complaint against the City
Government of Bago City, their real employer, of which petitioner Javellana is a councilman.
Hence, judgment against City Engineer Divinagracia would actually be a judgment against the
City Government. By serving as counsel for the complaining employees and assisting them to
prosecute their claims against City Engineer Divinagracia, the petitioner violated Memorandum
Circular No. 74-58 (in relation to Section 7[b-2] of RA 6713) prohibiting a government official
from engaging in the private practice of his profession, if such practice would represent interests
adverse to the government.
Petitioner's contention that Section 90 of the Local Government Code of 1991 and DLG
Memorandum Circular No. 90-81 violate Article VIII, Section 5 of the Constitution is completely
off tangent. Neither the statute nor the circular trenches upon the Supreme Court's power and
authority to prescribe rules on the practice of law. The Local Government Code and DLG
Memorandum Circular No. 90-81 simply prescribe rules of conduct for public officials to avoid
conflicts of interest between the discharge of their public duties and the private practice of their
profession, in those instances where the law allows it.
Section 90 of the Local Government Code does not discriminate against lawyers and doctors. It
applies to all provincial and municipal officials in the professions or engaged in any occupation.
Section 90 explicitly provides that sanggunian members "may practice their professions, engage
in any occupation, or teach in schools expect during session hours." If there are some
prohibitions that apply particularly to lawyers, it is because of all the professions, the practice of
law is more likely than others to relate to, or affect, the area of public service.
WHEREFORE, the petition is DENIED for lack of merit. Costs against the petitioner.
SO ORDERED.
HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO
CORPORATION, respondents.
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

Requirements of Notice and Hearing or Publication 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%
G.R. No. 119761 August 29, 1996 More Premium International
Sec. 142, (c), (2) 40% 45%
COMMISSIONER OF INTERNAL REVENUE, petitioner, Champion Int'l. M. 100's
vs. 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% 5

A bill, which later became Republic Act ("RA") No. 7654, 6 was enacted, on 10 June
1993, by the legislature 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 REVENUE MEMORANDUM CIRCULAR NO. 37-93

(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)
SUBJECT: Reclassification of Cigarettes Subject to Excise Tax
TO: All Internal Revenue Officers and Others Concerned.
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.

About a month after the enactment and two (2) days before the effectivity of RA 7654, Under the foregoing, the test for imposition of the 55% ad valorem tax on
Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full cigarettes is that the locally manufactured cigarettes bear a foreign brand
text of which expressed: 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
REPUBLIKA NG PILIPINAS
cigarette brand is, however, not definitely determinable, ". . . the listing of brands
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
 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 above-listed 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.
(SGD)
LIWAYWA
Y
VINZONS-
CHATO
Commissio
ner
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 37-93, 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 an interpretative 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.
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.
Indeed, the BIR itself, in its RMC 10-86, has observed and provided:
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
Memorandum Circulars and Revenue Memorandum Orders
bearing on internal revenue tax rules and regulations.
(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
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.
Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.
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 "V-1")
 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
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
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
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.
Kapunan, J., concurs.
Separate Opinions
BELLOSILLO, J.: separate opinion:
RA 7654 was enacted by Congress on 10 June 1993, signed into law by the President on 14
June 1993, and took effect 3 July 1993. It amended partly Sec. 142, par. (c), of the National
Internal Revenue Code (NIRC) to read —
Sec. 142. Cigars and cigarettes. — . . . . (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 percent (55%) provided that the minimum tax shall not be less
than Five Pesos (P5.00) per pack (emphasis supplied).
(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.
Prior to the effectivity of RA 7654, cigarette brands Hope Luxury, Premium
More and Champion were considered local brands subjected to an ad valorem tax at the rate of
20-45%. However, on 1 July 1993 or two (2) days before RA 7654 took effect, petitioner
Commissioner of Internal Revenue issued RMC 37-93 reclassifying
"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." 1 RMC 37-93 in effect subjected Hope Luxury, Premium
More and Champion cigarettes to the provisions of Sec. 142, par. (c), subpar. (1), NIRC, as
amended by RA 7654, imposing upon these cigarette brands an ad valorem tax of "fifty-five
percent (55%) provided that the minimum tax shall not be less than Five Pesos (P5.00) per
pack."
On 2 July 1993, Friday, at about five-fifty in the afternoon, or a few hours before the effectivity of
RA 7654, a copy of RMC 37-93 with a cover letter signed by Deputy Commissioner Victor A.
Deoferio of the Bureau of Internal Revenue was sent by facsimile to the factory of respondent
corporation in Parang, Marikina, Metro Manila. It appears that the letter together with a copy of
RMC 37-93 did not immediately come to the knowledge of private respondent as it was
addressed to no one in particular. It was only when the reclassification of respondent
corporation's cigarette brands was reported in the column of Fil C. Sionil in Business Bulletin on
4 July 1993 that the president of respondent corporation learned of the matter, prompting him to
inquire into its veracity and to request from petitioner a copy of RMC 37-93. On 15 July 1993
respondent corporation received by ordinary mail a certified machine copy of RMC 37-93.
Respondent corporation sought a review, reconsideration and recall of RMC 37-93 but was
forthwith denied by the Appellate Division of the Bureau of Internal Revenue. As a consequence,
on 30 July 1993 private respondent was assessed an ad valorem tax deficiency amounting to
P9,598,334.00. Respondent corporation went to the Court of Tax Appeals (CTA) on a petition for
review.
On 10 August 1994, after due hearing, the CTA found the petition meritorious and ruled —
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 . . . . 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 cancelled for lack
of legal basis. 2
The CTA held that petitioner Commissioner of Internal Revenue failed to observe due
process of law in issuing RMC 37-93 as there was no prior notice and hearing, and that
RMC 37-93 was in itself discriminatory. The motion to reconsider its decision was denied
by the CTA for lack of merit. On 31 March 1995 respondent Court of Appeals affirmed in
toto the decision of the CTA. 3 Hence, the instant petition for review.
Petitioner now submits through the Solicitor General that RMC 37-93 reclassifying Hope
Luxury, Premium More and Champion as locally manufactured cigarettes bearing brands is
merely an interpretative ruling which needs no prior notice and hearing as held in Misamis
Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary. 4 It maintains that
neither is the assailed revenue memorandum circular discriminatory as it merely "lays down the
test in determining whether or not a locally manufactured cigarette bears a foreign brand using
(only) the cigarette brands Hope, More and Champion as specific examples." 5
Respondent corporation on the other hand contends that RMC 37-93 is not a mere interpretative
ruling but is adjudicatory in nature where prior notice and hearing are mandatory, and
that Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary on
which the Solicitor General relies heavily is not applicable. Respondent Fortune Tobacco
Corporation also argues that RMC 37-93 discriminates against its cigarette brands since those of
its competitors which are similarly situated have not been reclassified.
The main issues before us are (a) whether RMC 37-93 is merely an interpretative rule the
issuance of which needs no prior notice and hearing, or an adjudicatory ruling which calls for the
twin requirements of prior notice and hearing, and, (b) whether RMC 37-93 is discriminatory in
nature.
A brief discourse on the powers and functions of administrative bodies may be instructive.
Administrative agencies posses 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.
Interpretative rule, one of the three (3) types of quasi-legislative or rule making powers of an
administrative agency (the other two being supplementary or detailed legislation, and contingent
legislation), is promulgated by the administrative agency to interpret, clarify or explain statutory
regulations under which the administrative body operates. The purpose or objective of an
interpretative rule is merely to construe the statute being administered. It purports to do no more
than interpret the statute. Simply, the rule tries to say what the statute means. Generally, it refers
to no single person or party in particular but concerns all those belonging to the same class
which may be covered by the said interpretative rule. It need not be published and neither is a
hearing required since it is issued by the administrative body as an incident of its power to
enforce the law and is intended merely to clarify statutory provisions for proper observance by
the people. In Tañada v. Tuvera, 6 this Court expressly said that "[i]interpretative regulations . . . .
need not be published."
Quasi-judicial or administrative adjudicatory power on the other hand is the power of the
administrative agency to adjudicate the rights of persons before it. It 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. 7 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. 8 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. Since rights of specific persons are affected it is
elementary that in the proper exercise of quasi-judicial power due process must be observed in
the conduct of the proceedings.
The importance of due process cannot be underestimated. Too basic is the rule that no person
shall be deprived of life, liberty or property without due process of law. Thus when an
administrative proceeding is quasi-judicial in character, notice and fair open hearing are
essential to the validity of the proceeding. The right to reasonable prior notice and hearing
embraces not only the right to present evidence but also the opportunity to know the claims of
the opposing party and to meet them. The right to submit arguments implies that opportunity
otherwise the right may as well be considered impotent. And those who are brought into contest
with government in a quasi-judicial proceeding aimed at the control of their activities are entitled
to be fairy advised of what the government proposes and to be heard upon its proposal before it
issues its final command.
There are cardinal primary rights which must be respected in administrative proceedings. The
landmark case of Ang Tibay v. The Court of Industrial Relations 9 enumerated these rights: (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 something to support itself; (4) the evidence must be
substantial; (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; (6) the tribunal or any of its
judges must act on its or his own independent consideration of the law and facts of the
controversy, and not simply accept the views of a subordinate in arriving at a decision; and, (7)
the tribunal should in all controversial questions render its decision in such manner that the
parties to the proceeding may know the various issues involved and the reasons for the decision
rendered.
In determining whether RMC No. 37-93 is merely an interpretative rule which requires no prior
notice and hearing, or an adjudicatory rule which demands the observance of due process, a
close examination of RMC 37-93 is in order. Noticeably, petitioner Commissioner of Internal
Revenue at first interprets Sec. 142, par. (c), subpar. (1), of the NIRC, as amended, by citing the
law and clarifying or explaining what it means —
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 . . ."
Then petitioner makes a factual finding by declaring that Hope (Luxury),
(Premium) More and Champion are manufactured by other foreign manufacturers —
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.
From this finding, petitioner thereafter formulates an inference that since it cannot be determined
who among the manufacturers are the real owners of the brands in question, then these
cigarette brands should be considered foreign brands —
Since there is no showing who among the above-listed 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."
Finally, petitioner caps RMC 37-93 with a disposition specifically directed at respondent
corporation reclassifying its cigarette brands as locally manufactured bearing foreign brands —
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.
It is evident from the foregoing that in issuing RMC 37-93 petitioner Commissioner of Internal
Revenue was exercising her quasi-judicial or administrative adjudicatory power. She cited and
interpreted the law, made a factual finding, applied the law to her given set of facts, arrived at a
conclusion, and issued a ruling aimed at a specific individual. Consequently prior notice and
hearing are required. It must be emphasized that even the text alone of RMC 37-93 implies that
reception of evidence during a hearing is appropriate if not necessary since it invokes BIR Ruling
No. 410-88, dated August 24, 1988, which provides that "in cases where it cannot be established
or there is dearth of evidence as to whether a brand is foreign or not . . . ." Indeed, it is difficult to
determine whether a brand is foreign or not if it is not established by, or there is dearth of,
evidence because no hearing has been called and conducted for the reception of such evidence.
In fine, by no stretch of the imagination can RMC 37-93 be considered purely as an interpretative
rule — requiring no previous notice and hearing and simply interpreting, construing, clarifying or
explaining statutory regulations being administered by or under which the Bureau of Internal
Revenue operates.
It is true that both RMC 47-91 in Misamis Oriental Association of Coco Traders v. Department of
Finance Secretary, and RMC 37-93 in the instant case reclassify certain products for purposes of
taxation. But the similarity between the two revenue memorandum circulars ends there. For in
properly determining whether a revenue memorandum circular is merely an interpretative rule or
an adjudicatory rule, its very tenor and text, and the circumstances surrounding its issuance will
have no to be considered.
We quote RMC 47-91 promulgated 11 June 1991 —
Revenue Memorandum Circular No. 47-91
SUBJECT : Taxability of Copra
TO : All Revenue Officials and Employees and Others Concerned.
For the information and guidance of all officials and employees and others
concerned, quoted hereunder in its entirety is VAT Ruling No. 190-90 dated
August 17, 1990:
COCOFED MARKETING RESEARCH CORPORATION
6th Floor Cocofed Building
144 Amorsolo Street
Legaspi Village, Makati mm
Metro Manila issi
one
Attention: r of
Ms. Esmyrna Inte
E. Reyes rnal
Vice President — Re
Finance ven
ue
Sirs:
As a clarification, this is the present and official stand of this Office unless sooner
This has reference to your letter dated January 16, 1990 wherein revoked or amended. All revenue officials and employees are enjoined to give
you represented that inspite of your VAT registration of your this Circular as wide a publicity as possible.
copra trading company, you are supposed to be exempt from
VAT on the basis of BIR Ruling dated January 8, 1988 which (Sg
considered copra as an agricultural food product in its original d.)
state. In this connection, you request for a confirmation of your JO
opinion as aforestated. SE
U.
In reply, please be informed that copra, being an agricultural non- ON
food product, is exempt from VAT only if sale is made by the G
primary producer pursuant to Section 103 (a) of the Tax Code, as Co
amended. Thus as a trading company and a subsequent seller, mm
your sale of copra is already subject to VAT pursuant to Section issi
9(b) (1) of Revenue Regulations 5-27. one
r of
Inte
This revokes VAT Ruling Nos. 009-88 and 279-88.
rnal
Re
Ver ven
y ue
trul
y
Quite obviously, the very text of RMC 47-91 itself shows that it is merely an interpretative rule as
you
it simply quotes a VAT Ruling and reminds those concerned that the ruling is the present and
rs,
official stand of the Bureau of Internal Revenue. Unlike in RMC 37-93 where petitioner
Commissioner manifestly exercised her quasi-judicial or administrative adjudicatory power, in
(Sg RMC 47-91 there were no factual findings, no application of laws to a given set of facts, no
d.) conclusions of law, and no dispositive portion directed at any particular party.
JO
SE
Another difference is that in the instant case, the issuance of the assailed revenue memorandum
U.
circular operated to subject the taxpayer to the new law which was yet to take effect, while
ON
in Misamis, the disputed revenue memorandum circular was issued simply to restate and then
G
clarify the prevailing position and ruling of the administrative agency, and no new law yet to take
Co
effect was involved. It merely interpreted an existing law which had already been in effect for
some time and which was not set to be amended. RMC 37-93 is thus prejudicial to private
respondent alone.
A third difference, and this likewise resolves the issue of discrimination, is that RMC 37-93 was
ostensibly issued to subject the cigarette brands of respondent corporation to a new law as it
was promulgated two days before the expiration of the old law and a few hours before the
effectivity of the new law. That RMC 37-93 is particularly aimed only at respondent corporation
and its three (3) cigarette brands can be seen from the dispositive portion of the assailed
revenue memorandum circular —
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.
Thus the argument of the Solicitor General that RMC 37-93 is not discriminatory as "[i]t merely
lays down the test in determining whether or not a locally manufactured cigarette bears a foreign
brand using the cigarette brands Hope, More and Champion as specific examples," cannot be
accepted, much less sustained. Without doubt, RMC 37-93 has a tremendous effect on
respondent corporation — and solely on respondent corporation — as its deficiency ad
valorem tax assessment on its removals of Hope, Luxury, Premium More,
and Champion cigarettes for six (6) hours alone, i.e., from six o'clock in the evening of 2 July
1993 which is presumably the time respondent corporation was supposed to have received the
facsimile message sent by Deputy Commissioner Victor A. Deoferio, until twelve o'clock midnight
upon the effectivity of the new law, was already P9,598,334.00. On the other hand, RMC 47-91
was issued with no purpose except to state and declare what has been the official stand of the
administrative agency on the specific subject matter, and was indiscriminately directed
to all copra traders with no particular individual in mind.
That petitioner Commissioner of Internal Revenue is an expert in her filed is not attempted to be
disputed; hence, we do not question the wisdom of her act in reclassifying the cigarettes. Neither
do we deny her the exercise of her quasi-legislative or quasi-judicial powers. But most certainly,
by constitutional mandate, the Court must check the exercise of these powers and ascertain
whether petitioner has gone beyond the legitimate bounds of her authority.
In the final analysis, the issue before us in not the expertise, the authority to promulgate rules, or
the wisdom of petitioner as Commissioner of Internal Revenue is reclassifying the cigarettes of
private respondents. It is simply the faithful observance by government by government of the
basic constitutional right of a taxpayer to due process of law and equal protection of the laws.
This is what distresses me no end — the manner and the circumstances under which the
cigarettes of private respondent were reclassified and correspondingly taxed under RMC 37-93,
and adjudicatory rule which therefore requires reasonable notice and hearing before its
issuance. It should not be confused with RMC 47-91, which is a mere interpretative rule.
In the earlier case of G.R. No. 119322, which practically involved the same opposing interests, I
also voted to uphold the constitutional right of the taxpayer concerned to due process and equal
protection of the laws. By a vote of 3-2, that view prevailed. In sequela, we in the First Division
who constituted the majority found ourselves unjustly drawn into the vortex of a nightmarish
episode. The strong ripples whipped up by my opinion expressed therein — and of the majority
— have yet to varnish when we are again in the imbroglio of a similar dilemma. The unpleasant
experience should be reason enough to simply steer clear of this controversy and surf on a
pretended loss of judicial objectivity. Such would have been an easy way out, a gracious exit, so
to speak, albeit lame. But to camouflage my leave with a sham excuse would be to turn away
from a professional vow I keep at all times; I would not be true to myself, and to the people I am
committed to serve. Thus, as I have earlier expressed, if placed under similar circumstances in
some future time, I shall have to brave again the prospect of another vilification and a tarnished
image if only to show proudly to the whole world that under the present dispensation judicial
independence in our country is a true component of our democracy.
In fine, I am greatly perturbed by the manner RMC No. 37-93 was issued as well as the effect of
such issuance. For it cannot be denied that the circumstances clearly demonstrate that it was
hastily issued — without prior notice and hearing, and singling out private respondent alone —
when two days before a new tax law was to take effect petitioner reclassified and taxed the
cigarette brands of private respondent at a higher rate. Obviously, this was to make it appear
that even before the anticipated date of effectivity of the statute — which was undeniably priorly
known to petitioner — these brands were already currently classified and taxed at fifty-five
percent (55%), thus shoving them into the purview of the law that was to take effect two days
after!
For sure, private respondent was not properly informed before the issuance of the questioned
memorandum circular that its cigarette brands Hope Luxury, Premium More and Champion were
being reclassified and subjected to a higher tax rate. Naturally, the result would be to lose
financially because private respondent was still selling its cigarettes at a price based on the old,
lower tax rate. Had there been previous notice and hearing, as claimed by private respondent, it
could have very well presented its side, either by opposing the reclassification, or by acquiescing
thereto but increasing the price of its cigarettes to adjust to the higher tax rate. The
reclassification and the ensuing imposition of a tax rate increase therefore could not be anything
but confiscatory if we are also to consider the claim of private respondent that the new tax is
even higher than the cost of its cigarettes.
Accordingly, I vote to deny the petition.
HERMOSISIMA, JR., J.: dissenting
Private respondent Fortune Tobacco Corporation in the instant case disputes its liability for
deficiency ad valorem excise taxes on its removals of "Hope," "More," and "Champion"
cigarettes from 6:00 p.m. to 12:00 midnight of July 2, 1993, in the total amount of P9,598,334.00.
It claims that the circular, upon which the assessment was based and made, is defective, invalid
and unenforceable for having been issued without notice and hearing and in violation of the
equal protection clause guaranteed by the Constitution.
The majority upholds these claims of private respondent, convinced that the Circular in question,
in the first place, did not give prior notice and hearing, and so, it could not have been valid and
effective. It proceeds to affirm the factual findings of the Court of Tax Appeals, which findings
were considered correct by respondent Court of Appeals, to the effect that the petitioner
Commissioner of Internal Revenue had indeed blatantly failed to comply with the said twin
requirements of notice and hearing, thereby rendering the issuance of the questioned Circular to
be in violation of the due process clause of the Constitution. It is also its dominant opinion that
the questioned Circular discriminates against private respondent Fortune Tobacco Corporation
insofar as it seems to affect only its "Hope," "More," and "Champion" cigarettes, to the exclusion
of other cigarettes apparently of the same kind or classification as these cigarettes manufactured
by private respondent.
With all due respect, I disagree with the majority in its disquisition of the issues and its resulting
conclusions.
Section 245 of the National Internal Revenue Code,
as amended, empowers the Commissioner of Internal
Revenue to issue the questioned Circular
Section 245 of the National Internal Revenue Code, as amended, provides:
Sec. 245. Authority of Secretary of Finance to promulgate rules and regulations.
— The Secretary of Finance, upon recommendation of the Commissioner, shall
promulgate all needful rules and regulations for the effective enforcement of the
provisions of this Code . . . without prejudice to the power of the Commissioner of
Internal Revenue to make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including rulings on the
classification of articles for sales tax and similar purposes.
The subject of the questioned Circular is the reclassification of cigarettes subject to excise taxes.
It was issued in connection with Section 142 (c) (1) of the National Internal Revenue Code, as
amended, which imposes ad valorem excise taxes on locally manufactured cigarettes bearing a
foreign brand. The same provision prescribes the ultimate criterion that determines which
cigarettes are to be considered "locally manufactured cigarettes bearing a foreign brand." It
provides:
. . . 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.
There is only one World Tobacco Directory for a given current year, and the same is
mandated by law to be the BIR Commissioner's controlling basis for determining whether
or not a particular locally manufactured cigarette is one bearing a foreign brand. In so
making a determination, petitioner should inquire into the entries in the World Tobacco
Directory for the given current year and shall be held bound by such entries therein. She
is not required to subject the results of her inquiries to feedback from the concerned
cigarette manufacturers, and it is doubtlessly not desirable nor managerially sound to
court dispute thereon when the law does not, in the first place, require debate or hearing
thereon. Petitioner may make such a determination because she is the Chief Executive
Officer of the administrative agency that is the Bureau of Internal Revenue in which are
vested quasi-legislative powers entrusted to it by the legislature in recognition of its more
encompassing and unequalled expertise in the field of taxation.
The vesture of quasi-legislative and quasi-judicial powers in administrative
bodies is not unconstitutional, unreasonable and oppressive. It has been
necessitated by "the growing complexity of the modern society" (Solid Homes,
Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative bodies are
necessary to help in the regulation of society's ramified activities. "Specialized in
the particular field assigned to them, they can deal with the problems thereof with
more expertise and dispatch than can be expected from the legislature or the
courts of justice" . . . 1
Statutorily empowered to issue rulings or opinions embodying the proper determination in
respect to classifying articles, including cigarettes, for purposes of tax assessment and
collection, petitioner was acting well within her prerogatives when she issued the questioned
Circular. And in the exercise of such prerogatives under the law, she has in her favor the
presumption of regular performance of official duty which must be overcome by clearly
persuasive evidence of stark error and grave abuse of discretion in order to be overturned and
disregarded.
It is irrelevant that the Court of Tax Appeals makes much of the effect of the passing of Republic
Act No. 7654 2 on petitioner's power to classify cigarettes. Although the decisions assailed and
sought to be reviewed, as well as the pleadings of private respondent, are replete with alleged
admissions of our legislators to the effect that the said Act was intended to freeze the current
classification of cigarettes and make the same an integral part of the said Act, certainly the
repeal, if any, of petitioner's power to classify cigarettes must be reckoned from the effectivity of
the said Act and not before. Suffice it to say that indisputable is the plain fact that the questioned
Circular was issued on July 1, 1993, while the said Act took effect on July 3, 1993.
The contents of the questioned circular have not
been proven to be erroneous or illegal as to render
issuance thereof an act of grave abuse of
discretion on the part of petitioner Commissioner
Prior to the effectivity of R.A. No. 7654, Section 142 (c) (1) of the National Internal Revenue
Code, as amended, levies the following ad valorem taxes on cigarettes in accordance with their
predetermined classifications as established by the Commissioner of Internal Revenue:
. . . based on the manufacturer's registered wholesale price:
(1) 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.
(2) Other locally manufactured cigarettes, forty five percent (45%).
xxx xxx xxx
Prior to the issuance of the questioned Circular, assessed against and paid by private
respondent as ad valorem excise taxes on their removals of "Hope," "More," and "Champion"
cigarettes were amounts based on paragraph (2) above, i.e., the tax rate made applicable on the
said cigarettes was 45% at the most. The reason for this is that apparently, petitioner's
predecessors have all made determinations to the effect that the said cigarettes were to be
considered "other locally manufactured cigarettes" and not "locally manufactured cigarettes
bearing a foreign brand." Even petitioner, until her issuance of the questioned Circular, adhered
to her predecessors' determination as to the proper classification of the above-mentioned
cigarettes for purposes of ad valorem excise taxes. Apparently, the past determination that the
said cigarettes were to be classified as "other locally manufactured cigarettes" was based on
private respodnent's convenient move of changing the names of "Hope" to "Hope Luxury" and
"More" to "Premium More." It also submitted proof that "Champion" was an original Fortune
Tobacco Corporation register and, therefore, a local brand. Having registered these brands with
the Philippine Patent Office and with corresponding evidence to the effect, private respondent
paid ad valorem excise taxes computed at the rate of not more than 45% which is the rate
applicable to cigarettes considered as locally manufactured brands.
How these past determinations pervaded notwithstanding their erroneous basis is only tempered
by their innate quality of being merely errors in interpretative ruling, the formulation of which does
not bind the government. Advantage over such errors may precipitously be withdrawn from those
who have been benefiting from them once the same have been discovered and rectified.
Petitioner correctly emphasizes that:
. . . the registration of said brands in the name of private respondent is proof only
that it is the exclusive owner thereof in the Philippines; it does not necessarily
follow, however, that it is the exclusive owner thereof in the whole world.
Assuming arguendo that private respondent is the exclusive owner of said
brands in the Philippines, it does not mean that they are local. Otherwise, they
would not have been listed in the WTD as international brands manufactured by
different entities in different countries. Moreover, it cannot be said that the brands
registered in the names of private respondent are not the same brands listed in
the WTD because private respondent is one of the manufacturers of said brands
listed in the WTD. 3
Private respondent attempts to cast doubt on the determination made by petitioner in the
questioned Circular that Japan is a manufacturer of "Hope" cigarettes. Private respondent's own
inquiry into the World Tobacco Directory reveals that Japan is not a manufacturer of "Hope"
cigarettes. In pointing this out, private respondent concludes that the entire Circular is erroneous
and makes such error the principal proof of its claim that the nature of the determination
embodied in the questioned Circular requires a hearing on the facts and a debate on the
applicable law. Such a determination is adjudicatory in nature and, therefore, requires notice and
hearing. Private respondent is, however, apparently only eager to show error on the part of
petitioner for acting with grave abuse of discretion. Private respondent conveniently forgets that
petitioner, equipped with the expertise in taxation, recognized in that expertise by the legislature
that vested in her the power to make rules respecting classification of articles for taxation
purposes, and presumed to have regularly exercised her prerogatives within the scope of her
statutory power to issue determinations specifically under Section 142 (c) (1) in relation to
Section 245 of the National Internal Revenue Code, as amended, simply followed the law as she
understood it. Her task was to determine which cigarette brands were foreign, and she was
directed by the law to look into the World Tobacco Directory. Foreign cigarette brands were
legislated to be taxed at higher rates because of their more extensive public exposure and
international reputation; their competitive edge against local brands may easily be checked by
imposition of higher tax rates. Private respondent makes a mountain of the mole hill
circumstance that "Hope" is listed, not as being "manufactured" by Japan but as being "used" by
Japan. Whether manufactured or used by Japan, however, "Hope" remains a cigarette brand
that can not be said to be limited to local manufacture in the Philippines. The undeniable fact is
that it is a foreign brand the sales in the Philippines of which are greatly boosted by its
international exposure and reputation. The petitioner was well within her prerogatives, in the
exercise of her rule-making power, to classify articles for taxation purposes, to interpret the laws
which she is mandated to administer. In interpreting the same, petitioner must, in general, be
guided by the principles underlying taxation, i.e., taxes are the lifeblood of Government, and
revenue laws ought to be interpreted in favor of the Government, for Government can not survive
without the funds to underwrite its varied operational expenses in pursuit of the welfare of the
society which it serves and protects.
Private respondent claims that its business will be destroyed by the imposition of additional ad
valorem taxes as a result of the effectivity of the questioned Circular. It claims that under the
vested rights theory, it cannot now be made to pay higher taxes after having been assessed for
less in the past. Of course private respondent will trumpet its losses, its interests, after all, being
its sole concern. What private respondent fails to see is the loss of revenue by the Government
which, because of erroneous determinations made by its past revenue commissioners, collected
lesser taxes than what it was entitled to in the first place. It is every citizen's duty to pay the
correct amount of taxes. Private respondent will not be shielded by any vested rights, for there
are not vested rights to speak of respecting a wrong construction of the law by administrative
officials, and such wrong interpretation does not place the Government in estoppel to correct or
overrule the same. 4
The Questioned Circular embodies an interpretative
ruling of petitioner Commissioner which as such does
not require notice and hearing
As one of the public offices of the Government, the Bureau of Internal Revenue, through its
Commissioner, has grown to be a typical administrative agency vested with a fusion of different
governmental powers: the power to investigate, initiate action and control the range of
investigation, the power to promulgate rules and regulations to better carry out statutory policies,
and the power to adjudicate controversies within the scope of their activities. 5 In the realm of
administrative law, we understand that such an empowerment of administrative agencies was
evolved in response to the needs of a changing society. This development arose as the need for
broad social control over complex conditions and activities became more and more pressing,
and such complexity could no longer be dealt with effectivity and directly by the legislature or the
judiciary. The theory which underlies the empowerment of administrative agencies like the
Bureau of Internal Revenue, is that the issues with which such agencies deal ought to be
decided by experts, and not be a judge, at least not in the first instance or until the facts have
been sifted and arranged. 6
One of the powers of administrative agencies like the Bureau of Internal Revenue, is the power
to make rules. The necessity for vesting administrative agencies with this power stems from the
impracticability of the lawmakers providing general regulations for various and varying details
pertinent to a particular legislation. 7
The rules that administrative agencies may promulgate may either be legislative or interpretative.
The former is a form of subordinate legislation whereby the administrative agency is acting in a
legislative capacity, supplementing the statute, filling in the details, pursuant to a specific
delegation of legislative power. 8
Interpretative rules, on the other hand, are "those which purport to do no more than interpret the
statute being administered, to say what it means." 9
There can be no doubt that there is a distinction between an administrative rule
or regulation and an administrative interpretation of a law whose enforcement is
entrusted to an administrative body. When an administrative agency promulgates
rules and regulations, it "makes" a new law with the force and effect of a valid
law, while when it renders an opinion or gives a statement of policy, it merely
interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis
Administrative Law, p. 194). Rules and regulations when promulgated in
pursuance of the procedure or authority conferred upon the administrative
agency by law, partake of the nature of a statute, and compliance therewith may
be enforced by a penal sanction provided in the law. This is so because statutes
are usually couched in general terms, after expressing the policy, purposes,
objectives, remedies and sanctions intended by the legislature. The details and
the manner of carrying out the law are often times left to the administrative
agency entrusted with its enforcement. In this sense, it has been said that rules
and regulations are the product of a delegated power to create new or additional
legal provisions that have the effect of law. (Davis, op. cit. p. 194.)
A rule is binding on the courts as long as the procedure fixed for its promulgation
is followed and its scope is within the statutory authority granted by the
legislature, even if the courts are not in agreement with the policy stated therein
or its innate wisdom (Davis, op. cit. pp. 195-197). On the other hand,
administrative interpretation of the law is at best merely advisory, for it is the
courts that finally determine what the law means. 10
"Whether a given statutory delegation authorizes legislative or interpretative regulations depends
upon whether the statute places specific 'sanctions' behind the regulations authorized, as for
example, by making it a criminal offense to disobey them, or by making conformity with their
provisions a condition of the exercise of legal privileges." 11 This is because interpretative
regulations are by nature simply statutory interpretations, which have behind them no statutory
sanction. Such regulations, whether so expressly authorized by statute or issued only as an
incident of statutory administration, merely embody administrative findings of law which are
always subject to judicial determination as to whether they are erroneous or not, even when their
issuance is authorized by statute.
The questioned Circular has undisputedly been issued by petitioner in pursuance of her rule-
making powers under Section 245 of the National Internal Revenue Code, as amended.
Exercising such powers, petitioner re-classified "Hope," "More" and "Champion" cigarettes as
locally manufactured cigarettes bearing foreign brands. The re-classification, as previously
explained, is the correct interpretation of Section 142 (c) (1) of the said Code. The said legal
provision is not accompanied by any penal sanction, and no detail had to be filled in by
petitioner. The basis for the classification of cigarettes has been provided for by the legislature,
and all petitioner has to do, on behalf of the government agency she heads, is to proceed to
make the proper determination using the criterion stipulated by the lawmaking body. In making
the proper determination, petitioner gave it a liberal construction consistent with the rule that
revenue laws are to be construed in favor of the Government whose survival depends on the
contributions that taxpayers give to the public coffers that finance public services and other
governmental operations.
The Bureau of Internal Revenue which petitioner heads, is the government agency charged with
the enforcement of the laws pertinent to this case and so, the opinion of the Commissioner of
Internal Revenue, in the absence of a clear showing that it is plainly wrong, is entitled to great
weight. Private respondent claims that its rights under previous interpretations of Section 142 (c)
(1) may not abruptly be cut by a new interpretation of the said section, but precisely the said
section is subject to various and changing construction, and hence, any ruling issued by
petitioner thereon is necessarily interpretative and not legislative. Private respondent insists that
the questioned circular is adjudicatory in nature because it determined the rights of private
respondent in a controversy involving his tax liability. It also asseverates that the questioned
circular involved administrative action that is particular and immediate, thereby rendering it
subject to the requirements of notice and hearing in compliance with the due process clause of
the Constitution.
We find private respondent's arguments to be rather strained.
Petitioner made a determination as to the classification of cigarettes as mandated by the
aforecited provisions in the National Internal Revenue Code, as amended. Such determination
was an interpretation by petitioner of the said legal provisions. If in the course of making the
interpretation and embodying the same in the questioned circular which the petitioner
subsequently issued after making such a determination, private respondent's cigarettes
products, by their very nature of being foreign brands as evidenced by their enlistment in the
World Tobacco Directory, which is the controlling basis for the proper classification of cigarettes
as stipulated by the law itself, have come to be classified as locally manufactured cigarettes
bearing foreign brands and as such subject to a tax rate higher than what was previously
imposed thereupon based on past rulings of other revenue commissioners, such a situation is
simply a consequence of the performance by petitioner of here duties under the law. No
adjudication took place, much less was there any controversy ripe for adjudication. The natural
consequences of making a classification in accordance with law may not be used by private
respondent in arguing that the questioned circular is in fact adjudicatory in nature. Such an
exercise in driving home a point is illogical as it is fallacious and misplaced.
Private respondent concedes that under general rules of administrative law, "a ruling which is
merely 'interpretative' in character may not require prior notice to affected parties before its
issuance as well as a hearing" and "for this reason, in most instances, interpretative regulations
are not given the force of law." 12 Indeed, "interpretative regulations and those merely internal in
nature
. . . need not be published." 13 And it is now settled that only legislative regulations and not
interpretative rulings must have the benefit of public
hearing. 14
Because (1) the questioned circular merely embodied an interpretation or a way of reading and
giving meaning to Section 142 (c) (1) of the National Internal Revenue Code, as amended; (2)
petitioner did not fill in any details in the aforecited section but only classified cigarettes on the
basis of the World Tobacco Directory in the light of the paramount principle of construing
revenue laws in favor of the Government to the end that Government collects as much tax
money as it is entitled to in order to fulfill its public purposes for the general good of its citizens;
(3) no penal sanction is provided in the aforecited section that was construed by petitioner in the
questioned circular; and (4) a similar circular declassifying copra from being an agricultural food
to non-food product for purposes of the value added tax laws, resulting in the revocation of an
exemption previously enjoyed by copra traders, has been ruled by us to be merely an
interpretative ruling and not a legislative, much less, an adjudicatory, action on the part of the
revenue commissioner, 15 this Court must not be blind to the fact that the questioned Circular is
indeed an interpretative ruling not subject to notice and hearing.
Neither is the questioned Circular tainted by a
violation of the equal protection clause under the
Constitution
Private respondent anchors its claim of violation of its equal protection rights upon the too
obvious fact that only its cigarette brands, i.e., "Hope," "More" and "Champion," are mentioned in
the questioned circular. Because only the cigarettes that they manufacture are enumerated in
the questioned circular, private respondent proceeded to attack the same as being
discriminatory against it. On the surface, private respondent seems to have a point there. A
scrutiny of the questioned Circular, however, will show that it is undisputedly one of general
application for all cigarettes that are similarly situated as private respondent's brands. The new
interpretation of Section 142 (1) (c) has been well illustrated in its application upon private
respondent's brands, which illustration is properly a subject of the questioned Circular.
Significantly, indicated as the subject of the questioned circular is the "reclassification of
cigarettes subject to excise taxes." The reclassification resulted in the foregrounding of private
respondent's cigarette brands, which incidentally is largely due to the controversy spawned no
less by private respondent's own action of conveniently changing its brand names to avoid falling
under a classification that would subject it to higher ad valorem tax rates. This caused then
Commissioner Bienvenido Tan to depart from his initial determination that private respondent's
cigarette brands are foreign brands. The consequent specific mention of such brands in the
questioned Circular, does not change the fact that the questioned Circular has always been
intended for and did cover, all cigarettes similarly situated as "Hope," "More" and "Champion."
Petitioner is thus correct in stating that:
 . . . RMC 37-93 is not discriminatory. It lays down the test in determining whether
or not a locally manufactured cigarette bears a foreign brand using the cigarette
brands "Hope," More and "Champion" as specific examples. Such test applies to
all locally manufactured cigarette brands similarly situated as the cigarette
brands aforementioned. While it is true that only "Hope," "More" and "Champion"
cigarettes are actually determined as locally manufactured cigarettes bearing a
foreign brand, RMC 37-93 does not state that ONLY cigarettes fall under such
classification to the exclusion of other cigarettes similarly situated. Otherwise
stated, RMC 37-93 does not exclude the coverage of other cigarettes similarly
situated. Otherwise stated, RMC 37-93 does not exclude the coverage of other
cigarettes similarly situated as locally manufactured cigarettes bearing a foreign
brand. Hence, in itself, RMC 37-93 is not discriminatory. 16
Both the respondent Court of Appeals and the Court of Tax Appeals held that the questioned
Circular reclassifying "Hope," "More" and "Champion" cigarettes, is defective, invalid and
unenforceable and has rendered the assessment against private respondent of deficiency ad
valorem excise taxes to be without legal basis. The majority agrees with private respondent and
respondent Courts. As the foregoing opinion chronicles the fatal flaws in private respondent's
arguments, it becomes more apparent that the questioned Circular is in fact a valid and
subsisting interpretative ruling that the petitioner had power to promulgate and enforce.
WHEREFORE, I vote to grant the petition and set aside the decisions of the Court of Tax
Appeals and the Court of Appeals, respectively, and to reinstate the decision of petitioner
Commissioner of Internal Revenue denying private respondent's request for a review,
reconsideration and recall of Revenue Memorandum Circular No. 37-93 dated July 1, 1993.
Padilla, J., concurs.
G.R. No. 179579 February 1, 2012
COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF
SUBIC, Petitioners,
vs.
HYPERMIX FEEDS CORPORATION, Respondent.
DECISION
SERENO, J.:
Before us is a Petition for Review under Rule 45,1 assailing the Decision2 and the Resolution3 of
the Court of Appeals (CA), which nullified the Customs Memorandum Order (CMO) No. 27-
20034 on the tariff classification of wheat issued by petitioner Commissioner of Customs.
The antecedent facts are as follows:
On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under the
Memorandum, for tariff purposes, wheat was classified according to the following: (1) importer or
consignee; (2) country of origin; and (3) port of discharge.5 The regulation provided an exclusive
list of corporations, ports of discharge, commodity descriptions and countries of origin.
Depending on these factors, wheat would be classified either as food grade or feed grade. The
corresponding tariff for food grade wheat was 3%, for feed grade, 7%.
CMO 27-2003 further provided for the proper procedure for protest or Valuation and
Classification Review Committee (VCRC) cases. Under this procedure, the release of the articles
that were the subject of protest required the importer to post a cash bond to cover the tariff
differential.6
A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed a Petition
for Declaratory Relief7 with the Regional Trial Court (RTC) of Las Piñas City. It anticipated the
implementation of the regulation on its imported and perishable Chinese milling wheat in transit
from China.8 Respondent contended that CMO 27-2003 was issued without following the
mandate of the Revised Administrative Code on public participation, prior notice, and publication
or registration with the University of the Philippines Law Center.
Respondent also alleged that the regulation summarily adjudged it to be a feed grade supplier
without the benefit of prior assessment and examination; thus, despite having imported food
grade wheat, it would be subjected to the 7% tariff upon the arrival of the shipment, forcing them
to pay 133% more than was proper.
Furthermore, respondent claimed that the equal protection clause of the Constitution was
violated when the regulation treated non-flour millers differently from flour millers for no reason at
all.
Lastly, respondent asserted that the retroactive application of the regulation was confiscatory in
nature.
On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective for twenty
(20) days from notice.9
Petitioners thereafter filed a Motion to Dismiss.10 They alleged that: (1) the RTC did not have
jurisdiction over the subject matter of the case, because respondent was asking for a judicial
determination of the classification of wheat; (2) an action for declaratory relief was improper; (3)
CMO 27-2003 was an internal administrative rule and not legislative in nature; and (4) the claims
of respondent were speculative and premature, because the Bureau of Customs (BOC) had yet
to examine respondent’s products. They likewise opposed the application for a writ of preliminary
injunction on the ground that they had not inflicted any injury through the issuance of the
regulation; and that the action would be contrary to the rule that administrative issuances are
assumed valid until declared otherwise.
On 28 February 2005, the parties agreed that the matters raised in the application for preliminary
injunction and the Motion to Dismiss would just be resolved together in the main case. Thus, on
10 March 2005, the RTC rendered its Decision11 without having to resolve the application for
preliminary injunction and the Motion to Dismiss.
The trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition is GRANTED and the subject Customs
Memorandum Order 27-2003 is declared INVALID and OF NO FORCE AND EFFECT.
Respondents Commissioner of Customs, the District Collector of Subic or anyone acting in their
behalf are to immediately cease and desist from enforcing the said Customs Memorandum
Order 27-2003.
SO ORDERED.12
The RTC held that it had jurisdiction over the subject matter, given that the issue raised by
respondent concerned the quasi-legislative powers of petitioners. It likewise stated that a petition
for declaratory relief was the proper remedy, and that respondent was the proper party to file it.
The court considered that respondent was a regular importer, and that the latter would be
subjected to the application of the regulation in future transactions.
With regard to the validity of the regulation, the trial court found that petitioners had not followed
the basic requirements of hearing and publication in the issuance of CMO 27-2003. It likewise
held that petitioners had "substituted the quasi-judicial determination of the commodity by a
quasi-legislative predetermination."13 The lower court pointed out that a classification based on
importers and ports of discharge were violative of the due process rights of respondent.
Dissatisfied with the Decision of the lower court, petitioners appealed to the CA, raising the same
allegations in defense of CMO 27-2003.14 The appellate court, however, dismissed the appeal. It
held that, since the regulation affected substantial rights of petitioners and other importers,
petitioners should have observed the requirements of notice, hearing and publication.
Hence, this Petition.
Petitioners raise the following issues for the consideration of this Court:
I. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE WHICH IS
NOT IN ACCORD WITH THE LAW AND PREVAILING JURISPRUDENCE.
II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE TRIAL
COURT HAS JURISDICTION OVER THE CASE.
The Petition has no merit.
We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
Who may file petition. – Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and
for a declaration of his rights or duties, thereunder.
The requirements of an action for declaratory relief are as follows: (1) there must be a justiciable
controversy; (2) the controversy must be between persons whose interests are adverse; (3) the
party seeking declaratory relief must have a legal interest in the controversy; and (4) the issue
involved must be ripe for judicial determination.15 We find that the Petition filed by respondent
before the lower court meets these requirements.
First, the subject of the controversy is the constitutionality of CMO 27-2003 issued by petitioner
Commissioner of Customs. In Smart Communications v. NTC,16 we held:
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. 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. 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. (Emphasis supplied)
Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance
Secretary,17 we said:
xxx [A] legislative rule is in the nature of subordinate legislation, designed to implement a primary
legislation by providing the details thereof. xxx
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.
Accordingly, in considering a legislative rule a court is free to make three inquiries: (i) whether
the rule is within the delegated authority of the administrative agency; (ii) whether it is
reasonable; and (iii) whether it was issued pursuant to proper procedure. But the court is not free
to substitute its judgment as to the desirability or wisdom of the rule for the legislative body, by its
delegation of administrative judgment, has committed those questions to administrative
judgments and not to judicial judgments. In the case of an interpretative rule, the inquiry is not
into the validity but into the correctness or propriety of the rule. As a matter of power a court,
when confronted with an interpretative rule, is free to (i) give the force of law to the rule; (ii) go to
the opposite extreme and substitute its judgment; or (iii) give some intermediate degree of
authoritative weight to the interpretative rule. (Emphasis supplied)
Second, the controversy is between two parties that have adverse interests. Petitioners are
summarily imposing a tariff rate that respondent is refusing to pay.
Third, it is clear that respondent has a legal and substantive interest in the implementation of
CMO 27-2003. Respondent has adequately shown that, as a regular importer of wheat, on 14
August 2003, it has actually made shipments of wheat from China to Subic. The shipment was
set to arrive in December 2003. Upon its arrival, it would be subjected to the conditions of CMO
27-2003. The regulation calls for the imposition of different tariff rates, depending on the factors
enumerated therein. Thus, respondent alleged that it would be made to pay the 7% tariff applied
to feed grade wheat, instead of the 3% tariff on food grade wheat. In addition, respondent would
have to go through the procedure under CMO 27-2003, which would undoubtedly toll its time
and resources. The lower court correctly pointed out as follows:
xxx As noted above, the fact that petitioner is precisely into the business of importing wheat,
each and every importation will be subjected to constant disputes which will result into (sic)
delays in the delivery, setting aside of funds as cash bond required in the CMO as well as the
resulting expenses thereof. It is easy to see that business uncertainty will be a constant
occurrence for petitioner. That the sums involved are not minimal is shown by the discussions
during the hearings conducted as well as in the pleadings filed. It may be that the petitioner can
later on get a refund but such has been foreclosed because the Collector of Customs and the
Commissioner of Customs are bound by their own CMO. Petitioner cannot get its refund with the
said agency. We believe and so find that Petitioner has presented such a stake in the outcome
of this controversy as to vest it with standing to file this petition.18 (Emphasis supplied)
Finally, the issue raised by respondent is ripe for judicial determination, because litigation is
inevitable19 for the simple and uncontroverted reason that respondent is not included in the
enumeration of flour millers classified as food grade wheat importers. Thus, as the trial court
stated, it would have to file a protest case each time it imports food grade wheat and be
subjected to the 7% tariff.
It is therefore clear that a petition for declaratory relief is the right remedy given the
circumstances of the case.
Considering that the questioned regulation would affect the substantive rights of respondent as
explained above, it therefore follows that petitioners should have applied the pertinent provisions
of Book VII, Chapter 2 of the Revised Administrative Code, to wit:
Section 3. Filing. – (1) Every agency shall file with the University of the Philippines Law Center
three (3) certified copies of every rule adopted by it. Rules in force on the date of effectivity of
this Code which are not filed within three (3) months from that date shall not thereafter be the
bases of any sanction against any party of persons.
xxx xxx xxx
Section 9. Public Participation. - (1) 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.
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, on 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 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.20
Likewise, in Tañada v. Tuvera,21 we held:
The clear object of the above-quoted provision is to give the general public adequate notice of
the various laws which are to regulate their actions and conduct as citizens. Without such notice
and publication, there would be no basis for the application of the maxim "ignorantia legis non
excusat." It would be the height of injustice to punish or otherwise burden a citizen for the
transgression of a law of which he had no notice whatsoever, not even a constructive one.
Perhaps at no time since the establishment of the Philippine Republic has the publication of laws
taken so vital significance that at this time when the people have bestowed upon the President a
power heretofore enjoyed solely by the legislature. While the people are kept abreast by the
mass media of the debates and deliberations in the Batasan Pambansa – and for the diligent
ones, ready access to the legislative records – no such publicity accompanies the law-making
process of the President. Thus, without publication, the people have no means of knowing what
presidential decrees have actually been promulgated, much less a definite way of informing
themselves of the specific contents and texts of such decrees. (Emphasis supplied)
Because petitioners failed to follow the requirements enumerated by the Revised Administrative
Code, the assailed regulation must be struck down.
Going now to the content of CMO 27-3003, we likewise hold that it is unconstitutional for being
violative of the equal protection clause of the Constitution.
The equal protection clause means that no person or class of persons shall be deprived of the
same protection of laws enjoyed by other persons or other classes in the same place in like
circumstances. Thus, the guarantee of the equal protection of laws is not violated if there is a
reasonable classification. For a classification to be reasonable, it must be shown that (1) it rests
on substantial distinctions; (2) it is germane to the purpose of the law; (3) it is not limited to
existing conditions only; and (4) it applies equally to all members of the same class.22
Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality
of wheat is affected by who imports it, where it is discharged, or which country it came from.
Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food
grade wheat, the product would still be declared as feed grade wheat, a classification subjecting
them to 7% tariff. On the other hand, even if the importers listed under CMO 27-2003 have
imported feed grade wheat, they would only be made to pay 3% tariff, thus depriving the state of
the taxes due. The regulation, therefore, does not become disadvantageous to respondent only,
but even to the state.
It is also not clear how the regulation intends to "monitor more closely wheat importations and
thus prevent their misclassification." A careful study of CMO 27-2003 shows that it not only fails
to achieve this end, but results in the opposite. The application of the regulation forecloses the
possibility that other corporations that are excluded from the list import food grade wheat; at the
same time, it creates an assumption that those who meet the criteria do not import feed grade
wheat. In the first case, importers are unnecessarily burdened to prove the classification of their
wheat imports; while in the second, the state carries that burden.
Petitioner Commissioner of Customs also went beyond his powers when the regulation limited
the customs officer’s duties mandated by Section 1403 of the Tariff and Customs Law, as
amended. The law provides:
Section 1403. – Duties of Customs Officer Tasked to Examine, Classify, and Appraise Imported
Articles. – The customs officer tasked to examine, classify, and appraise imported articles shall
determine whether the packages designated for examination and their contents are in
accordance with the declaration in the entry, invoice and other pertinent documents and shall
make return in such a manner as to indicate whether the articles have been truly and correctly
declared in the entry as regard their quantity, measurement, weight, and tariff classification and
not imported contrary to law. He shall submit samples to the laboratory for analysis when
feasible to do so and when such analysis is necessary for the proper classification, appraisal,
and/or admission into the Philippines of imported articles.
Likewise, the customs officer shall determine the unit of quantity in which they are usually bought
and sold, and appraise the imported articles in accordance with Section 201 of this Code.
Failure on the part of the customs officer to comply with his duties shall subject him to the
penalties prescribed under Section 3604 of this Code. 1âw phi1
The provision mandates that the customs officer must first assess and determine the
classification of the imported article before tariff may be imposed. Unfortunately, CMO 23-2007
has already classified the article even before the customs officer had the chance to examine it. In
effect, petitioner Commissioner of Customs diminished the powers granted by the Tariff and
Customs Code with regard to wheat importation when it no longer required the customs officer’s
prior examination and assessment of the proper classification of the wheat.
It is well-settled that rules and regulations, which are the product of a delegated 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 that it be not in contradiction
to, but in conformity with, the standards prescribed by law.23
In summary, petitioners violated respondent’s right to due process in the issuance of CMO 27-
2003 when they failed to observe the requirements under the Revised Administrative Code.
Petitioners likewise violated respondent’s right to equal protection of laws when they provided for
an unreasonable classification in the application of the regulation. Finally, petitioner
Commissioner of Customs went beyond his powers of delegated authority when the regulation
limited the powers of the customs officer to examine and assess imported articles.
WHEREFORE, in view of the foregoing, the Petition is DENIED.
SO ORDERED.
Construction of Administrative Rules and Regulations

G.R. No. L-16704 March 17, 1962
VICTORIAS MILLING COMPANY, INC., petitioner-appellant,
vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.
Ross, Selph and Carrascoso for petitioner-appellant.
Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.
BARRERA, J.:
On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following
tenor: .
Effective November 1, 1958, all Employers in computing the premiums due the
System, will take into consideration and include in the Employee's remuneration
all bonuses and overtime pay, as well as the cash value of other media of
remuneration. All these will comprise the Employee's remuneration or earnings,
upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum
of P500 for any one month.
Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote
the Social Security Commission in effect protesting against the circular as contradictory to a
previous Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in
the computation of the employers' and employees' respective monthly premium contributions,
and submitting, "In order to assist your System in arriving at a proper interpretationof the term
'compensation' for the purposes of" such computation, their observations on Republic Act 1161
and its amendment and on the general interpretation of the words "compensation",
"remuneration" and "wages". Counsel further questioned the validity of the circular for lack of
authority on the part of the Social Security Commission to promulgate it without the approval of
the President and for lack of publication in the Official Gazette.
Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a
rule or regulation that needed the approval of the President and publication in the Official
Gazette to be effective, but a mere administrative interpretation of the statute, a mere statement
of general policy or opinion as to how the law should be construed.
Not satisfied with this ruling, petitioner comes to this Court on appeal.
The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation,
as contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security
Commission "to adopt, amend and repeal subject to the approval of the President such rules and
regulations as may be necessary to carry out the provisions and purposes of this Act."
There can be no doubt that there is a distinction between an administrative rule or regulation and
an administrative interpretation of a law whose enforcement is entrusted to an administrative
body. When an administrative agency promulgates rules and regulations, it "makes" a new law
with the force and effect of a valid law, while when it renders an opinion or gives a statement of
policy, it merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis,
Administrative Law, p. 194). Rules and regulations when promulgated in pursuance of the
procedure or authority conferred upon the administrative agency by law, partake of the nature of
a statute, and compliance therewith may be enforced by a penal sanction provided in the law.
This is so because statutes are usually couched in general terms, after expressing the policy,
purposes, objectives, remedies and sanctions intended by the legislature. The details and the
manner of carrying out the law are often times left to the administrative agency entrusted with its
enforcement. In this sense, it has been said that rules and regulations are the product of a
delegated power to create new or additional legal provisions that have the effect of law.
(Davis, op. cit., p. 194.) .
A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and
its scope is within the statutory authority granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom (Davis, op. cit., 195-197). On the
other hand, administrative interpretation of the law is at best merely advisory, for it is the courts
that finally determine what the law means.
Circular No. 22 in question was issued by the Social Security Commission, in view of the
amendment of the provisions of the Social Security Law defining the term "compensation"
contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment, reads as
follows: .
(f) Compensation — All remuneration for employment include the cash value of
any remuneration paid in any medium other than cash except (1) that part of the
remuneration in excess of P500 received during the month; (2) bonuses,
allowances or overtime pay; and (3) dismissal and all other payments which the
employer may make, although not legally required to do so.
Republic Act No. 1792 changed the definition of "compensation" to:
(f) Compensation — All remuneration for employment include the cash value of
any remuneration paid in any medium other than cash except that part of the
remuneration in excess of P500.00 received during the month.
It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime
pay given in addition to the regular or base pay were expressly excluded, or exempted from the
definition of the term "compensation", such exemption or exclusion was deleted by the
amendatory law. It thus became necessary for the Social Security Commission to interpret the
effect of such deletion or elimination. Circular No. 22 was, therefore, issued to apprise those
concerned of the interpretation or understanding of the Commission, of the law as amended,
which it was its duty to enforce. It did not add any duty or detail that was not already in the law as
amended. It merely stated and circularized the opinion of the Commission as to how the law
should be construed. 1äw phï1.ñët
The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by
appellant, does not support its contention that the circular in question is a rule or regulation.
What was there said was merely that a regulation may be incorporated in the form of a circular.
Such statement simply meant that the substance and not the form of a regulation is decisive in
determining its nature. It does not lay down a general proposition of law that any circular,
regardless of its substance and even if it is only interpretative, constitutes a rule or regulation
which must be published in the Official Gazette before it could take effect.
The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the
present case, because the penalty that may be incurred by employers and employees if they
refuse to pay the corresponding premiums on bonus, overtime pay, etc. which the employer pays
to his employees, is not by reason of non-compliance with Circular No. 22, but for violation of the
specific legal provisions contained in Section 27(c) and (f) of Republic Act No. 1161.
We find, therefore, that Circular No. 22 purports merely to advise employers-members of the
System of what, in the light of the amendment of the law, they should include in determining the
monthly compensation of their employees upon which the social security contributions should be
based, and that such circular did not require presidential approval and publication in the Official
Gazette for its effectivity.
It hardly need be said that the Commission's interpretation of the amendment embodied in its
Circular No. 22, is correct. The express elimination among the exemptions excluded in the old
law, of all bonuses, allowances and overtime pay in the determination of the "compensation"
paid to employees makes it imperative that such bonuses and overtime pay must now be
included in the employee's remuneration in pursuance of the amendatory law. It is true that in
previous cases, this Court has held that bonus is not demandable because it is not part of the
wage, salary, or compensation of the employee. But the question in the instant case is not
whether bonus is demandable or not as part of compensation, but whether, after the employer
does, in fact, give or pay bonus to his employees, such bonuses shall be considered
compensation under the Social Security Act after they have been received by the employees.
While it is true that terms or words are to be interpreted in accordance with their well-accepted
meaning in law, nevertheless, when such term or word is specifically defined in a particular law,
such interpretation must be adopted in enforcing that particular law, for it can not be gainsaid
that a particular phrase or term may have one meaning for one purpose and another meaning for
some other purpose. Such is the case that is now before us. Republic Act 1161 specifically
defined what "compensation" should mean "For the purposes of this Act". Republic Act 1792
amended such definition by deleting same exemptions authorized in the original Act. By virtue of
this express substantial change in the phraseology of the law, whatever prior executive or judicial
construction may have been given to the phrase in question should give way to the clear
mandate of the new law.
IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs
against appellant. So ordered.
G.R. No. 163448. March 08, 2005
NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his capacity as Regional
Director, NFA Regional Office No. 1, San Juan, La Union, Petitioners,
vs.
MASADA SECURITY AGENCY, INC., represented by its Acting President & General
Manager, COL. EDWIN S. ESPEJO (RET.), Respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review under Rule 45 of the Rules of Court is the February 12, 2004
decision1 of the Court of Appeals in CA-G.R. CV No. 76677, which dismissed the appeal filed by
petitioner National Food Authority (NFA) and its April 30, 2004 resolution denying petitioner’s
motion for reconsideration.
The antecedent facts show that on September 17, 1996, respondent MASADA Security Agency,
Inc., entered into a one year2 contract3 to provide security services to the various offices,
warehouses and installations of NFA within the scope of the NFA Region I, comprised of the
provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the expiration of
said contract, the parties extended the effectivity thereof on a monthly basis under same terms
and condition.4
Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage orders
mandating increases in the daily wage rate. Accordingly, respondent requested NFA for a
corresponding upward adjustment in the monthly contract rate consisting of the increases in the
daily minimum wage of the security guards as well as the corresponding raise in their overtime
pay, holiday pay, 13th month pay, holiday and rest day pay. It also claimed increases in Social
Security System (SSS) and Pag-ibig premiums as well as in the administrative costs and margin.
NFA, however, granted the request only with respect to the increase in the daily wage by
multiplying the amount of the mandated increase by 30 days and denied the same with respect
to the adjustments in the other benefits and remunerations computed on the basis of the daily
wage.
Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I,
La Union, as Chairman of the Regional Tripartite Wages and Productivity Board and the DOLE
Secretary through the Executive Director of the National Wages and Productivity Commission.
Despite the advisory5 of said offices sustaining the claim of respondent that the increase
mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is
not limited to the daily pay, NFA maintained its stance that it is not liable to pay the
corresponding adjustments in the wage related benefits of respondent’s security guards.
On May 4, 2001, respondent filed with the Regional Trial Court of Quezon, City, Branch 83, a
case for recovery of sum of money against NFA. Docketed as Civil Case No. Q-01-43988, the
complaint6 sought reimbursement of the following amounts allegedly paid by respondent to the
security guards, to wit: P2,949,302.84, for unpaid wage related benefits brought about by the
effectivity of Wage Order Nos. RB 1-05 and RB CAR-04;7 RB 1-06 and RB CAR-05;8 RB 1-07
and RB CAR-06;9 and P975,493.04 for additional cost and margin, plus interest. It also prayed
for damages and litigation expenses.10
In its answer with counterclaim,11 NFA denied that respondent paid the security guards their
wage related benefits and that it shouldered the additional costs and margin arising from the
implementation of the wage orders. It admitted, however, that it heeded respondent’s request for
adjustment only with respect to increase in the minimum wage and not with respect to the other
wage related benefits. NFA argued that respondent cannot demand an adjustment on said
salary related benefits because it is bound by their contract expressly limiting NFA’s obligation to
pay only the increment in the daily wage.
At the pre-trial, the only issue raised was whether or not respondent is entitled to recover from
NFA the wage related benefits of the security guards.12
On September 19, 2002, the trial court rendered a decision13 in favor of respondent holding that
NFA is liable to pay the security guards’ wage related benefits pursuant to RA 6727, because the
basis of the computation of said benefits, like overtime pay, holiday pay, SSS and Pag-ibig
premium, is the increased minimum wage. It also found NFA liable for the consequential
adjustments in administrative costs and margin. The trial court absolved defendant Juanito M.
David having been impleaded in his official capacity as Regional Director of NFA Regional Office
No. 1, San Juan, La Union. The dispositive portion thereof, reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff MASADA Security Agency, Inc.,
and against defendant National Food Authority ordering said defendant to make the
corresponding adjustment in the contract price in accordance with the increment mandated
under the various wage orders, particularly Wage Order Nos. RBI-05, RBCAR-04, RBI-06,
RBCAR-05, RBI-07 and RBCAR-06 and to pay plaintiff the amounts representing the
adjustments in the wage-related benefits of the security guards and consequential increase in its
administrative cost and margin upon presentment by plaintiff of the corresponding voucher
claims.
Plaintiff’s claims for damages and attorney’s fees and defendants counterclaim for damages are
hereby denied.
Defendant Juanito M. David is hereby absolved from any liability.
SO ORDERED.14
NFA appealed to the Court of Appeals but the same was dismissed on February 12, 2004. The
appellate court held that the proper recourse of NFA is to file a petition for review under Rule 45
with this Court, considering that the appeal raised a pure question of law. Nevertheless, it
proceeded to discuss the merits of the case for "purposes of academic discussion" and
eventually sustained the ruling of the trial court that NFA is under obligation to pay the
administrative costs and margin and the wage related benefits of the respondent’s security
guards.15
On April 30, 2004, the Court of Appeals denied NFA’s motion for reconsideration.16 Hence, the
instant petition.
The issue for resolution is whether or not the liability of principals in service contracts under
Section 6 of RA 6727 and the wage orders issued by the Regional Tripartite Wages and
Productivity Board is limited only to the increment in the minimum wage.
At the outset, it should be noted that the proper remedy of NFA from the adverse decision of the
trial court is a petition for review under Rule 45 directly with this Court because the issue
involved a question of law. However, in the interest of justice we deem it wise to overlook the
procedural technicalities if only to demonstrate that despite the procedural infirmity, the instant
petition is impressed with merit.17
RA 672718 (Wage Rationalization Act), which took effect on July 1, 1989,19 declared it a policy of
the State to rationalize the fixing of minimum wages and to promote productivity-improvement
and gain-sharing measures to ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in the fruits of production; to enhance
employment generation in the countryside through industrial dispersal; and to allow business
and industry reasonable returns on investment, expansion and growth.20
In line with its declared policy, RA 6727, created the National Wages and Productivity
Commission (NWPC),21vested, inter alia, with the power to prescribe rules and guidelines for the
determination of appropriate minimum wage and productivity measures at the regional, provincial
or industry levels;22 and the Regional Tripartite Wages and Productivity Boards (RTWPB) which,
among others, determine and fix the minimum wage rates applicable in their respective region,
provinces, or industries therein and issue the corresponding wage orders, subject to the
guidelines issued by the NWPC.23 Pursuant to its wage fixing authority, the RTWPB issue wage
orders which set the daily minimum wage rates.24
Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer.
Section 6 of RA 6727, however, expressly lodged said obligation to the principals or indirect
employers in construction projects and establishments providing security, janitorial and similar
services. Substantially the same provision is incorporated in the wage orders issued by the
RTWPB.25 Section 6 of RA 6727, provides:
SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar
services, the prescribed increases in the wage rates of the workers shall be borne by the
principals or clients of the construction/service contractors and the contract shall be deemed
amended accordingly. In the event, however, that the principal or client fails to pay the
prescribed wage rates, the construction/service contractor shall be jointly and severally liable
with his principal or client. (Emphasis supplied)
NFA claims that its additional liability under the aforecited provision is limited only to the payment
of the increment in the statutory minimum wage rate, i.e., the rate for a regular eight (8) hour
work day.
The contention is meritorious.
In construing the word "wage" in Section 6 of RA 6727, reference must be had to Section 4 (a) of
the same Act. It states:
SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers
and employees in the private sector, whether agricultural or non-agricultural, shall be increased
by twenty-five pesos (P25) per day … (Emphasis supplied)
The term "wage" as used in Section 6 of RA 6727 pertains to no other than the "statutory
minimum wage" which is defined under the Rules Implementing RA 6727 as the lowest wage
rate fixed by law that an employer can pay his worker.26 The basis thereof under Section 7 of the
same Rules is the normal working hours, which shall not exceed eight hours a day. Hence, the
prescribed increases or the additional liability to be borne by the principal under Section 6 of RA
6727 is the increment or amount added to the remuneration of an employee for an 8-hour work.
Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to certain
matters, it may not, by interpretation or construction, be extended to others.27 Since the increase
in wage referred to in Section 6 pertains to the "statutory minimum wage" as defined herein,
principals in service contracts cannot be made to pay the corresponding wage increase in the
overtime pay, night shift differential, holiday and rest day pay, premium pay and other benefits
granted to workers. While basis of said remuneration and benefits is the statutory minimum
wage, the law cannot be unduly expanded as to include those not stated in the subject provision.
The settled rule in statutory construction is that if the statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without interpretation. This plain
meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index
of intention) rests on the valid presumption that the words employed by the legislature in a
statute correctly express its intention or will and preclude the court from construing it differently.
The legislature is presumed to know the meaning of the words, to have used words advisedly,
and to have expressed its intent by use of such words as are found in the statute. Verba legis
non est recedendum, or from the words of a statute there should be no departure.28
The presumption therefore is that lawmakers are well aware that the word "wage" as used in
Section 6 means the statutory minimum wage. If their intention was to extend the obligation of
principals in service contracts to the payment of the increment in the other benefits and
remuneration of workers, it would have so expressly specified. In not so doing, the only logical
conclusion is that the legislature intended to limit the additional obligation imposed on principals
in service contracts to the payment of the increment in the statutory minimum wage.
The general rule is that construction of a statute by an administrative agency charged with the
task of interpreting or applying the same is entitled to great weight and respect. The Court,
however, is not bound to apply said rule where such executive interpretation, is clearly
erroneous, or when there is no ambiguity in the law interpreted, or when the language of the
words used is clear and plain, as in the case at bar. Besides, administrative interpretations are at
best advisory for it is the Court that finally determines what the law means.29 Hence, the
interpretation given by the labor agencies in the instant case which went as far as supplementing
what is otherwise not stated in the law cannot bind this Court.
It is not within the province of this Court to inquire into the wisdom of the law for indeed, we are
bound by the words of the statute.30 The law is applied as it is. At any rate, the interest of the
employees will not be adversely affected if the obligation of principals under the subject provision
will be limited to the increase in the statutory minimum wage. This is so because all
remuneration and benefits other than the increased statutory minimum wage would be
shouldered and paid by the employer or service contractor to the workers concerned. Thus, in
the end, all allowances and benefits as computed under the increased rate mandated by RA
6727 and the wage orders will be received by the workers.
Moreover, the law secures the welfare of the workers by imposing a solidary liability on principals
and the service contractors. Under the second sentence of Section 6 of RA 6727, in the event
that the principal or client fails to pay the prescribed wage rates, the service contractor shall be
held solidarily liable with the former. Likewise, Articles 106, 107 and 109 of the Labor Code
provides:
ART. 106. Contractor or Subcontractor. – Whenever an employer enters into contract with
another person for the performance of the former’s work, the employees of the contractor and of
the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wage of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly employed by him.
… substantiate the amount thereof with documentary evidence, the claim should be denied.
ART. 107. Indirect Employer. – The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work, task, job or project.
ART. 109. Solidary Liability. – The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For purposes of determining the
extent of their civil liability under this Chapter, they shall be considered as direct employers.
Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into
stipulations increasing the liability of the principal. So long as the minimum obligation of the
principal, i.e., payment of the increased statutory minimum wage is complied with, the Wage
Rationalization Act is not violated.
In the instant case, Article IV.4 of the service contract provides:
IV.4. In the event of a legislated increase in the minimum wage of security guards and/or in the
PADPAO rate, the AGENCY may negotiate for an adjustment in the contract price. Any
adjustment shall be applicable only to the increment, based on published and circulated rates
and not on mere certification.31
In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:
3. For purposes of wage adjustments, consider only the rate based on the wage Order issued by
the Regional Tripartite Wage Productivity Board (RTWPB). Unless otherwise provided in the
Wage Order issued by the RTWPB, the wage adjustment shall be limited to the increment in the
legislated minimum wage;32
The parties therefore acknowledged the application to their contract of the wage orders issued
by the RTWPB pursuant to RA 6727. There being no assumption by NFA of a greater liability
than that mandated by Section 6 of the Act, its obligation is limited to the payment of the
increased statutory minimum wage rates which, as admitted by respondent, had already been
satisfied by NFA.33 Under Article 1231 of the Civil Code, one of the modes of extinguishing an
obligation is by payment. Having discharged its obligation to respondent, NFA no longer have a
duty that will give rise to a correlative legal right of respondent. The latter’s complaint for
collection of remuneration and benefits other than the increased minimum wage rate, should
therefore be dismissed for lack of cause of action.
The same goes for respondent’s claim for administrative cost and margin. Considering that
respondent failed to establish a clear obligation on the part of NFA to pay the same as well as to
WHEREFORE, the petition is GRANTED. The February 12, 2004 decision and the April 30, 2004
resolution of the Court of Appeals which dismissed petitioner National Food Authority’s appeal
and motion for reconsideration, respectively, in CA-G.R. CV No. 76677, are REVERSED and
SET ASIDE. The complaint filed by respondent MASADA Security Agency, Inc., docketed as
Civil Case No. Q-01-43988, before the Regional Trial Court of Quezon, City, Branch 83, is
ordered DISMISSED.
SO ORDERED.
G.R. No. 126999 August 30, 2000
SGMC REALTY CORPORATION, petitioner,
vs.
OFFICE OF THE PRESIDENT (OP), RIDGEVIEW REALTY CORPORATION, SM
INVESTMENTS CORPORATION, MULTI-REALTY DEVELOPMENT CORP., HENRY SY SR.,
HENRY SY JR., HANS T. SY, MARY UY TY and VICTOR LIM, respondents.
RESOLUTION
QUISUMBING, J.:
In this special civil action for certiorari, petitioner seeks to set aside the decision1 of public
respondent rendered on June 18, 1996, in OP Case No. 95-L-6333, and its order2 dated October
1, 1996, denying the motion for reconsideration.
The records disclose that on March 29, 1994, petitioner filed before the Housing and Land Use
Regulatory Board (HLURB) a complaint for breach of contract, violation of property rights and
damages against private respondents. After the parties filed their pleadings and supporting
documents, the arbiter rendered a decision dismissing petitioner's complaint as well as private
respondents' counterclaim. 1âwphi1.nêt
Petitioner then filed a petition for review with the Board of Commissioners of the HLURB which,
however, dismissed said petition. On October 23, 1995, petitioner received a copy of said
decision of the Board of Commissioners. On November 20, 1995, petitioner filed an appeal with
public respondent. After the parties filed their memorandum, they filed their respective draft
decisions as ordered by public respondent.
On June 18, 1996, public respondent, without delving into the merits of the case, rendered the
assailed decision which reads:
"IN VIEW OF THE FOREGOING, the appeal is hereby DISMISSED for being filed out of
time.
"SO ORDERED."3
Petitioner seasonably filed a motion for reconsideration which was denied. Undaunted, petitioner
filed the instant petition, alleging that public respondent committed grave abuse of discretion
amounting to lack or excess of jurisdiction:
[I]
. . . IN HOLDING THAT THE PERIOD TO APPEAL FROM THE HOUSING AND LAND
USE REGULATORY BOARD TO THE OFFICE OF THE PRESIDENT IS FIFTEEN (15)
DAYS AND NOT THIRTY (30) DAYS AS MANDATED IN THE 1994 RULES OF
PROCEDURE ADOPTED BY THE HOUSING AND LAND USE REGULATORY BOARD,
AN ADMINISTRATIVE AGENCY UNDER THE SUPERVISION AND CONTROL OF
PUBLIC RESPONDENT OFFICE OF THE PRESIDENT.
[II]
. . . IN DISREGARDING THE 1994 RULES OF PROCEDURE OF THE HOUSING AND
LAND USE REGULATORY BOARD WITHOUT DECLARING THE SAME ILLEGAL
AND/OR INVALID, AND IN DISREGARDING THE WELL-ESTABLISHED DOCTRINE
OF LIBERAL CONSTRUCTION OF THE ADMINISTRATIVE RULES OF PROCEDURE
IN ORDER TO PROMOTE THEIR OBJECT AND TO ASSIST THE PARTIES IN
CLAIMING JUST, SPEEDY AND INEXPENSIVE DETERMINATION OF THEIR
RESPECTIVE CLAIMS AND DEFENSES.4
The fundamental issue for resolution is whether or not public respondent committed grave abuse
of discretion in ruling that the reglementary period within which to appeal the decision of HLURB
to public respondent is fifteen days.
Petitioner contends that the period of appeal from the HLURB to the Office of the President is
thirty (30) days from receipt by the aggrieved party of the decision appealed from in accordance
with Section 27 of the 1994 Rules of Procedure of HLURB and Section 1 of Administrative Order
No. 18, series of 1987, of the Office of the President.
However, we find petitioner's contention bereft of merit, because of its reliance on a literal
reading of cited rules without correlating them to current laws as well as presidential decrees on
the matter.
Section 27 of the 1994 HLURB Rules of Procedure provides as follows:
"Section 27. Appeal to the Office of the President. — Any party may, upon notice to the
Board and the other party, appeal the decision of the Board of Commissioners or its
division to the Office of the President within thirty (30) days from receipt thereof pursuant
to and in accordance with Administrative Order No. 18, of the Office of the President
dated February 12, 1987. Decision of the President shall be final subject only to review
by the Supreme Court on certiorari or on questions of law."5
On the other hand, Administrative Order No. 18, series of 1987, issued by public respondent
reads:
"Section 1. Unless otherwise governed by special laws, an appeal to the Office of the
President shall be taken within thirty (30) days from receipt by the aggrieved party of the
decision/resolution/order complained of or appealed from."6
As pointed out by public respondent, the aforecited administrative order allows aggrieved party
to file its appeal with the Office of the President within thirty (30) days from receipt of the decision
complained of. Nonetheless, such thirty-day period is subject to the qualification that there are
no other statutory periods of appeal applicable. If there are special laws governing particular
cases which provide for a shorter or longer reglementary period, the same shall prevail over the
thirty-day period provided for in the administrative order. This is in line with the rule in statutory
construction that an administrative rule or regulation, in order to be valid, must not contradict but
conform to the provisions of the enabling law.7
We note that indeed there are special laws that mandate a shorter period of fifteen (15) days
within which to appeal a case to public respondent. First, Section 15 of Presidential Decree No.
957 provides that the decisions of the National Housing Authority (NHA) shall become final and
executory after the lapse of fifteen (15) days from the date of receipt of the decision. Second,
Section 2 of Presidential Decree No. 1344 states that decisions of the National Housing
Authority shall become final and executory after the lapse of fifteen (15) days from the date of its
receipt. The latter decree provides that the decisions of NHA is appealable only to the Office of
the President. Further, we note that the regulatory functions of NHA relating to housing and land
development has been transferred to Human Settlements Regulatory Commission, now known
as HLURB.8 Thus, said presidential issuances providing for a reglementary period of appeal of
fifteen days apply in this case. Accordingly, the period of appeal of thirty (30) days set forth in
Section 27 of HLURB 1994 Rules of Procedure no longer holds true for being in conflict with the
provisions of aforesaid presidential decrees. For it is axiomatic that administrative rules derive
their validity from the statute that they are intended to implement. Any rule which is not
consistent with statute itself is null and void.9
In this case, petitioner received a copy of the decision of HLURB on October 23,
1995. Considering that the reglementary period to appeal is fifteen days, petitioner has only until
1âwphi1
issue writs of certiorari, this concurrence is not to be taken as an unrestrained freedom of choice
concerning the court to which application for the writ will be directed. There is after all a hierarchy
of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a
general determinant of the appropriate forum for petitions for the extraordinary writs.13A direct
invocation of the Supreme Court's original jurisdiction to issue these extraordinary writs is
allowed only when there are special and important reasons therefor, clearly and specifically set
out in the petition.14
WHEREFORE, the instant petition is DISMISSED for utter lack of merit. Costs against petitioner.
SO ORDERED.

November 7, 1995, to file its appeal. Unfortunately, petitioner filed its appeal with public
respondent only on November 20, 1995 or twenty-eight days from receipt of the appealed
decision, which is obviously filed out of time.

As the appeal filed by petitioner was not taken within the reglementary period, the prescriptive
period for perfecting an appeal continues to run. Consequently, the decision of the HLURB
became final and executory upon the lapse of fifteen days from receipt of the decision. Hence,
the decision became immutable; it can no longer be amended nor altered by public respondent.
Accordingly, inasmuch as the timely perfection of an appeal is a jurisdictional requisite, public
respondent has no more authority to entertain the petitioner's appeal. Otherwise, any
amendment or alteration made which substantially affects the final and executory judgment
would be null and void for lack of jurisdiction.10

Thus, in this case public respondent cannot be faulted of grave abuse of discretion in ruling that
the period of appeal is fifteen days and in forthrightly dismissing petitioner's appeal as the same
was clearly filed out of time.

Worth mentioning, just days prior to the promulgation of the assailed decision of public
respondent, the HLURB adopted on June 10, 1996, its 1996 Rules of Procedure. Significantly,
Section 2, Rule XVIII of said rules provides that any party may, upon notice to the HLURB and
the other party, appeal a decision rendered by the Board of Commissioners en banc or by one of
its divisions to the Office of the President within fifteen 15 calendar days from receipt thereof in
accordance with P.D. 1344 and A.O. 18, series of 1987.11 Apparently, the amendment was made
pursuant to the pronouncements of public respondent in earlier cases12 it decided that appeals to
the Office of the President from the decision of HLURB should be filed within fifteen (15) days
from receipt thereof. At present therefore, decisions rendered by HLURB is appealable to the
Office of the President within fifteen (15) calendar days from receipt thereof.

Finally, we find that the instant petition ought not to have been directly filed with this Court. For
while we have concurrent jurisdiction with the Regional Trial Courts and the Court of Appeals to