1. G.R. No. L-63915 April 24, 1985 e] Executive Orders Nos.
e] Executive Orders Nos.: 411, 413, 414, 427, 429-454, 457- 471, 474-492, 494-507, 509-510, 522,
LORENZO M. TAÑADA, ABRAHAM F. SARMIENTO, and MOVEMENT OF ATTORNEYS
FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. [MABINI], petitioners,
vs.
HON. JUAN C. TUVERA, in his capacity as Executive Assistant to the President, HON.
JOAQUIN VENUS, in his capacity as Deputy Executive Assistant to the President ,
MELQUIADES P. DE LA CRUZ, in his capacity as Director, Malacañang Records Office, and
FLORENDO S. PABLO, in his capacity as Director, Bureau of Printing, respondents.
ESCOLIN, J.:
Invoking the people's right to be informed on matters of public concern, a right recognized in Section
6, Article IV of the 1973 Philippine Constitution, 1 as well as the principle that laws to be valid and
enforceable must be published in the Official Gazette or otherwise effectively promulgated, petitioners
seek a writ of mandamus to compel respondent public officials to publish, and/or cause the publication
in the Official Gazette of various presidential decrees, letters of instructions, general orders,
proclamations, executive orders, letter of implementation and administrative orders.
Specifically, the publication of the following presidential issuances is sought:
a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64, 103, 171, 179, 184, 197, 200, 234, 265, 286, 298,
303, 312, 324, 325, 326, 337, 355, 358, 359, 360, 361, 368, 404, 406, 415, 427, 429, 445, 447, 473,
486, 491, 503, 504, 521, 528, 551, 566, 573, 574, 594, 599, 644, 658, 661, 718, 731, 733, 793, 800,
802, 835, 836, 923, 935, 961, 1017-1030, 1050, 1060-1061, 1085, 1143, 1165, 1166, 1242, 1246, 1250,
1278, 1279, 1300, 1644, 1772, 1808, 1810, 1813-1817, 1819-1826, 1829-1840, 1842-1847.
b] Letter of Instructions Nos.: 10, 39, 49, 72, 107, 108, 116, 130, 136, 141, 150, 153, 155, 161, 173,
180, 187, 188, 192, 193, 199, 202, 204, 205, 209, 211-213, 215-224, 226-228, 231-239, 241-245, 248,
251, 253-261, 263-269, 271-273, 275-283, 285-289, 291, 293, 297-299, 301-303, 309, 312-315, 325,
327, 343, 346, 349, 357, 358, 362, 367, 370, 382, 385, 386, 396-397, 405, 438-440, 444- 445, 473,
486, 488, 498, 501, 399, 527, 561, 576, 587, 594, 599, 600, 602, 609, 610, 611, 612, 615, 641, 642,
665, 702, 712-713, 726, 837-839, 878-879, 881, 882, 939-940, 964,997,1149-1178,1180-1278.
c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63, 64 & 65.
d] Proclamation Nos.: 1126, 1144, 1147, 1151, 1196, 1270, 1281, 1319-1526, 1529, 1532, 1535, 1538,
1540-1547, 1550-1558, 1561-1588, 1590-1595, 1594-1600, 1606-1609, 1612-1628, 1630-1649, 1694-
1695, 1697-1701, 1705-1723, 1731-1734, 1737-1742, 1744, 1746-1751, 1752, 1754, 1762, 1764-1787,
1789-1795, 1797, 1800, 1802-1804, 1806-1807, 1812-1814, 1816, 1825-1826, 1829, 1831-1832, 1835-
1836, 1839-1840, 1843-1844, 1846-1847, 1849, 1853-1858, 1860, 1866, 1868, 1870, 1876-1889, 1892,
1900, 1918, 1923, 1933, 1952, 1963, 1965-1966, 1968-1984, 1986-2028, 2030-2044, 2046-2145,
2147-2161, 2163-2244.
524-528, 531-532, 536, 538, 543-544, 549, 551-553, 560, 563, 567-568, 570, 574, 593, 594, 598-604,
609, 611- 647, 649-677, 679-703, 705-707, 712-786, 788-852, 854-857.
f] Letters of Implementation Nos.: 7, 8, 9, 10, 11-22, 25-27, 39, 50, 51, 59, 76, 80-81, 92, 94, 95, 107,
120, 122, 123.
g] Administrative Orders Nos.: 347, 348, 352-354, 360- 378, 380-433, 436-439.
The respondents, through the Solicitor General, would have this case dismissed outright on the ground
that petitioners have no legal personality or standing to bring the instant petition. The view is submitted
that in the absence of any showing that petitioners are personally and directly affected or prejudiced by
the alleged non-publication of the presidential issuances in question 2 said petitioners are without the
requisite legal personality to institute this mandamus proceeding, they are not being "aggrieved parties"
within the meaning of Section 3, Rule 65 of the Rules of Court, which we quote:
SEC. 3. Petition for Mandamus.—When any tribunal, corporation, board or person unlawfully neglects
the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or
station, or unlawfully excludes another from the use a rd enjoyment of a right or office to which such
other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law,
the person aggrieved thereby may file a verified petition in the proper court alleging the facts with
certainty and praying that judgment be rendered commanding the defendant, immediately or at some
other specified time, to do the act required to be done to Protect the rights of the petitioner, and to pay
the damages sustained by the petitioner by reason of the wrongful acts of the defendant.
Upon the other hand, petitioners maintain that since the subject of the petition concerns a public right
and its object is to compel the performance of a public duty, they need not show any specific interest
for their petition to be given due course.
The issue posed is not one of first impression. As early as the 1910 case of Severino vs. Governor
General, 3 this Court held that while the general rule is that "a writ of mandamus would be granted to a
private individual only in those cases where he has some private or particular interest to be subserved,
or some particular right to be protected, independent of that which he holds with the public at large,"
and "it is for the public officers exclusively to apply for the writ when public rights are to be subserved
[Mithchell vs. Boardmen, 79 M.e., 469]," nevertheless, "when the question is one of public right and
the object of the mandamus is to procure the enforcement of a public duty, the people are regarded as
the real party in interest and the relator at whose instigation the proceedings are instituted need not
show that he has any legal or special interest in the result, it being sufficient to show that he is a citizen
and as such interested in the execution of the laws [High, Extraordinary Legal Remedies, 3rd ed., sec.
431].
Thus, in said case, this Court recognized the relator Lope Severino, a private individual, as a proper
party to the mandamus proceedings brought to compel the Governor General to call a special election
for the position of municipal president in the town of Silay, Negros Occidental. Speaking for this
Court, Mr. Justice Grant T. Trent said:
 We are therefore of the opinion that the weight of authority supports the proposition
that the relator is a proper party to proceedings of this character when a public right
is sought to be enforced. If the general rule in America were otherwise, we think that
it would not be applicable to the case at bar for the reason 'that it is always dangerous
to apply a general rule to a particular case without keeping in mind the reason for the
rule, because, if under the particular circumstances the reason for the rule does not
exist, the rule itself is not applicable and reliance upon the rule may well lead to
error'
No reason exists in the case at bar for applying the general rule insisted upon by
counsel for the respondent. The circumstances which surround this case are different
from those in the United States, inasmuch as if the relator is not a proper party to
these proceedings no other person could be, as we have seen that it is not the duty of
the law officer of the Government to appear and represent the people in cases of this
character.
The reasons given by the Court in recognizing a private citizen's legal personality in the
aforementioned case apply squarely to the present petition. Clearly, the right sought to be enforced by
petitioners herein is a public right recognized by no less than the fundamental law of the land. If
petitioners were not allowed to institute this proceeding, it would indeed be difficult to conceive of any
other person to initiate the same, considering that the Solicitor General, the government officer
generally empowered to represent the people, has entered his appearance for respondents in this case.
Respondents further contend that publication in the Official Gazette is not a sine qua non requirement
for the effectivity of laws where the laws themselves provide for their own effectivity dates. It is thus
submitted that since the presidential issuances in question contain special provisions as to the date they
are to take effect, publication in the Official Gazette is not indispensable for their effectivity. The point
stressed is anchored on Article 2 of the Civil Code:
Art. 2. Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided, ...
The interpretation given by respondent is in accord with this Court's construction of said article. In a
long line of decisions,4 this Court has ruled that publication in the Official Gazette is necessary in those
cases where the legislation itself does not provide for its effectivity date-for then the date of
publication is material for determining its date of effectivity, which is the fifteenth day following its
publication-but not when the law itself provides for the date when it goes into effect.
Respondents' argument, however, is logically correct only insofar as it equates the effectivity of laws
with the fact of publication. Considered in the light of other statutes applicable to the issue at hand, the
conclusion is easily reached that said Article 2 does not preclude the requirement of publication in the
Official Gazette, even if the law itself provides for the date of its effectivity. Thus, Section 1 of
Commonwealth Act 638 provides as follows:
Section 1. There shall be published in the Official Gazette [1] all important
legisiative acts and resolutions of a public nature of the, Congress of the Philippines;
[2] all executive and administrative orders and proclamations, except such as have no
general applicability; [3] decisions or abstracts of decisions of the Supreme Court
and the Court of Appeals as may be deemed by said courts of sufficient importance
to be so published; [4] such documents or classes of documents as may be required
so to be published by law; and [5] such documents or classes of documents as the
President of the Philippines shall determine from time to time to have general
applicability and legal effect, or which he may authorize so to be published. ...
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. As the Supreme Court of Spain ruled: "Bajo la denominacion generica de leyes, se
comprenden tambien los reglamentos, Reales decretos, Instrucciones, Circulares y Reales ordines
dictadas de conformidad con las mismas por el Gobierno en uso de su potestad. 5
The very first clause of Section I of Commonwealth Act 638 reads: "There shall be published in the
Official Gazette ... ." The word "shall" used therein imposes upon respondent officials an imperative
duty. That duty must be enforced if the Constitutional right of the people to be informed on matters of
public concern is to be given substance and reality. The law itself makes a list of what should be
published in the Official Gazette. Such listing, to our mind, leaves respondents with no discretion
whatsoever as to what must be included or excluded from such publication.
The publication of all presidential issuances "of a public nature" or "of general applicability" is
mandated by law. Obviously, presidential decrees that provide for fines, forfeitures or penalties for
their violation or otherwise impose a burden or. the people, such as tax and revenue measures, fall
within this category. Other presidential issuances which apply only to particular persons or class of
persons such as administrative and executive orders need not be published on the assumption that they
have been circularized to all concerned. 6
It is needless to add that the publication of presidential issuances "of a public nature" or "of general
applicability" is a requirement of due process. It is a rule of law that before a person may be bound by
law, he must first be officially and specifically informed of its contents. As Justice Claudio Teehankee
said in Peralta vs. COMELEC 7:
 In a time of proliferating decrees, orders and letters of instructions which all form matters nor the texts of these PDs can be ascertained since no copies thereof are available. But
part of the law of the land, the requirement of due process and the Rule of Law whatever their subject matter may be, it is undisputed that none of these unpublished PDs has ever
demand that the Official Gazette as the official government repository promulgate been implemented or enforced by the government. In Pesigan vs. Angeles, 11 the Court, through Justice
and publish the texts of all such decrees, orders and instructions so that the people Ramon Aquino, ruled that "publication is necessary to apprise the public of the contents of [penal]
may know where to obtain their official and specific contents. regulations and make the said penalties binding on the persons affected thereby. " The cogency of this
holding is apparently recognized by respondent officials considering the manifestation in their
The Court therefore declares that presidential issuances of general application, which have not been comment that "the government, as a matter of policy, refrains from prosecuting violations of criminal
published, shall have no force and effect. Some members of the Court, quite apprehensive about the laws until the same shall have been published in the Official Gazette or in some other publication, even
possible unsettling effect this decision might have on acts done in reliance of the validity of those though some criminal laws provide that they shall take effect immediately.
presidential decrees which were published only during the pendency of this petition, have put the
question as to whether the Court's declaration of invalidity apply to P.D.s which had been enforced or WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all unpublished
implemented prior to their publication. The answer is all too familiar. In similar situations in the past presidential issuances which are of general application, and unless so published, they shall have no
this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. binding force and effect.
Baxter Bank 8 to wit:
SO ORDERED.
The courts below have proceeded on the theory that the Act of Congress, having
been found to be unconstitutional, was not a law; that it was inoperative, conferring
no rights and imposing no duties, and hence affording no basis for the challenged
decree. Norton v. Shelby County, 118 U.S. 425, 442; Chicago, 1. & L. Ry. Co. v.
Hackett, 228 U.S. 559, 566. It is quite clear, however, that such broad statements as
to the effect of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to such a determination, is an
operative fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the subsequent
ruling as to invalidity may have to be considered in various aspects-with respect to
particular conduct, private and official. Questions of rights claimed to have become
vested, of status, of prior determinations deemed to have finality and acted upon
accordingly, of public policy in the light of the nature both of the statute and of its
previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal and it
is manifest from numerous decisions that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified.

Consistently with the above principle, this Court in Rutter vs. Esteban  9 sustained the right of a party
under the Moratorium Law, albeit said right had accrued in his favor before said law was declared
unconstitutional by this Court.

Similarly, the implementation/enforcement of presidential decrees prior to their publication in the

Official Gazette is "an operative fact which may have consequences which cannot be justly ignored.
The past cannot always be erased by a new judicial declaration ... that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified."

From the report submitted to the Court by the Clerk of Court, it appears that of the presidential decrees
sought by petitioners to be published in the Official Gazette, only Presidential Decrees Nos. 1019 to
1030, inclusive, 1278, and 1937 to 1939, inclusive, have not been so published. 10 Neither the subject
2. G.R. No. L-66653 June 19, 1986
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
BURROUGHS LIMITED AND THE COURT OF TAX APPEALS, respondents.
Sycip, Salazar, Feliciano & Hernandez Law Office for private respondent.
PARAS, J.:
Petition for certiorari to review and set aside the Decision dated June 27, 1983 of respondent Court of
Tax Appeals in its C.T.A. Case No. 3204, entitled "Burroughs Limited vs. Commissioner of Internal
Revenue" which ordered petitioner Commissioner of Internal Revenue to grant in favor of private
respondent Burroughs Limited, tax credit in the sum of P172,058.90, representing erroneously
overpaid branch profit remittance tax.
Burroughs Limited is a foreign corporation authorized to engage in trade or business in the Philippines
through a branch office located at De la Rosa corner Esteban Streets, Legaspi Village, Makati, Metro
Manila.
Sometime in March 1979, said branch office applied with the Central Bank for authority to remit to its
parent company abroad, branch profit amounting to P7,647,058.00. Thus, on March 14, 1979, it paid
the 15% branch profit remittance tax, pursuant to Sec. 24 (b) (2) (ii) and remitted to its head office the
amount of P6,499,999.30 computed as follows:
Amount applied for remittance................................ P7,647,058.00
Deduct: 15% branch profit
remittance tax ..............................................1,147,058.70
Net amount actually remitted.................................. P6,499,999.30
Claiming that the 15% profit remittance tax should have been computed on the basis of the amount
actually remitted (P6,499,999.30) and not on the amount before profit remittance tax (P7,647,058.00),
private respondent filed on December 24, 1980, a written claim for the refund or tax credit of the
amount of P172,058.90 representing alleged overpaid branch profit remittance tax, computed as
follows:
Profits actually remitted .........................................P6,499,999.30
Remittance tax rate .......................................................15%
Branch profit remittance tax-
due thereon ......................................................P 974,999.89
Branch profit remittance
tax paid .............................................................Pl,147,058.70
Less: Branch profit remittance
tax as above computed................................................. 974,999.89
Total amount refundable........................................... P172,058.81
On February 24, 1981, private respondent filed with respondent court, a petition for review, docketed
as C.T.A. Case No. 3204 for the recovery of the above-mentioned amount of P172,058.81.
On June 27, 1983, respondent court rendered its Decision, the dispositive portion of which reads—
ACCORDINGLY, respondent Commission of Internal Revenue is hereby ordered to grant a tax credit
in favor of petitioner Burroughs Limited the amount of P 172,058.90. Without pronouncement as to
costs.
SO ORDERED.
Unable to obtain a reconsideration from the aforesaid decision, petitioner filed the instant petition
before this Court with the prayers as herein earlier stated upon the sole issue of whether the tax base
upon which the 15% branch profit remittance tax shall be imposed under the provisions of section
24(b) of the Tax Code, as amended, is the amount applied for remittance on the profit actually remitted
after deducting the 15% profit remittance tax. Stated differently is private respondent Burroughs
Limited legally entitled to a refund of the aforementioned amount of P172,058.90.
We rule in the affirmative. The pertinent provision of the National Revenue Code is Sec. 24 (b) (2) (ii)
which states:
Sec. 24. Rates of tax on corporations....
(b) Tax on foreign corporations. ...
 (2) (ii) Tax on branch profits remittances. Any profit remitted abroad by a branch to
its head office shall be subject to a tax of fifteen per cent (15 %) ...
In a Bureau of Internal Revenue ruling dated January 21, 1980 by then Acting Commissioner of
Internal Revenue Hon. Efren I. Plana the aforequoted provision had been interpreted to mean that "the
tax base upon which the 15% branch profit remittance tax ... shall be imposed...(is) the profit actually
remitted abroad and not on the total branch profits out of which the remittance is to be made. " The
said ruling is hereinbelow quoted as follows:
In reply to your letter of November 3, 1978, relative to your query as to the tax base
upon which the 15% branch profits remittance tax provided for under Section 24 (b)
(2) of the 1977 Tax Code shall be imposed, please be advised that the 15% branch
profit tax shall be imposed on the branch profits actually remitted abroad and not on
the total branch profits out of which the remittance is to be made.
Please be guided accordingly.
Applying, therefore, the aforequoted ruling, the claim of private respondent that it made an
overpayment in the amount of P172,058.90 which is the difference between the remittance tax actually
paid of Pl,147,058.70 and the remittance tax that should have been paid of P974,999,89, computed as
follows
Profits actually remitted......................................... P6,499,999.30
Remittance tax rate.............................................................. 15%
Remittance tax due................................................... P974,999.89
is well-taken. As correctly held by respondent Court in its assailed decision-
Respondent concedes at least that in his ruling dated January 21, 1980 he held that
under Section 24 (b) (2) of the Tax Code the 15% branch profit remittance tax shall
be imposed on the profit actually remitted abroad and not on the total branch profit
out of which the remittance is to be made. Based on such ruling petitioner should
have paid only the amount of P974,999.89 in remittance tax computed by taking the
15% of the profits of P6,499,999.89 in remittance tax actually remitted to its head
office in the United States, instead of Pl,147,058.70, on its net profits of
P7,647,058.00. Undoubtedly, petitioner has overpaid its branch profit remittance tax
in the amount of P172,058.90.
Petitioner contends that respondent is no longer entitled to a refund because Memorandum Circular
No. 8-82 dated March 17, 1982 had revoked and/or repealed the BIR ruling of January 21, 1980. The
said memorandum circular states—
Considering that the 15% branch profit remittance tax is imposed and collected at
source, necessarily the tax base should be the amount actually applied for by the
branch with the Central Bank of the Philippines as profit to be remitted abroad.
Petitioner's aforesaid contention is without merit. What is applicable in the case at bar is still the
Revenue Ruling of January 21, 1980 because private respondent Burroughs Limited paid the branch
profit remittance tax in question on March 14, 1979. Memorandum Circular No. 8-82 dated March 17,
1982 cannot be given retroactive effect in the light of Section 327 of the National Internal Revenue
Code which provides-
Sec. 327. Non-retroactivity of rulings. Any revocation, modification, or reversal of
any of the rules and regulations promulgated in accordance with the preceding
section or any of the rulings or circulars promulgated by the Commissioner shag not
be given retroactive application if the revocation, modification, or reversal will be
prejudicial to the taxpayer except in the following cases (a) where the taxpayer
deliberately misstates or omits material facts from his return or in any document
required of him by the Bureau of Internal Revenue; (b) where the facts subsequently
gathered by the Bureau of Internal Revenue are materially different from the facts on
which the ruling is based, or (c) where the taxpayer acted in bad faith. (ABS-CBN
Broadcasting Corp. v. CTA, 108 SCRA 151-152)
The prejudice that would result to private respondent Burroughs Limited by a retroactive application of
Memorandum Circular No. 8-82 is beyond question for it would be deprived of the substantial amount
of P172,058.90. And, insofar as the enumerated exceptions are concerned, admittedly, Burroughs
Limited does not fall under any of them.
WHEREFORE, the assailed decision of respondent Court of Tax Appeals is hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Digest:
Tax Case Digest: Commissioner of Internal Revenue vs Burroughs Limited and the Court of Tax
Appeals GR No L-66653 June 19, 1986
Commissioner of Internal Revenue vs Burroughs Limited and the Court of Tax Appeals 
GR No L-66653                   June 19, 1986
Facts:
Burroughs Limited is a foreign corporation authorized to engage in trade or business in the Philippines
through a branch office located at De la Rosa corner Esteban Streets, Legaspi Village, Makati, Metro
Manila. Claiming that the 15% profit remittance tax should have been computed on the basis of the
amount actually remitted (P6,499,999.30) and not on the amount before profit remittance tax
(P7,647,058.00), private respondent filed on December 24, 1980, a written claim for the refund or tax
credit of the amount of P172,058.90 representing alleged overpaid branch profit remittance tax.
Issue:
Whether or not Burroughs is entitled to any tax credit.
Whether or not Memorandum Circular No. 8-82 should be given a retroactive effect?
Ruling:
Yes. Respondent concedes at least that in his ruling dated January 21, 1980 he held that under Section
24 (b) (2) of the Tax Code the 15% branch profit remittance tax shall be imposed on the profit actually
remitted abroad and not on the total branch profit out of which the remittance is to be made. Based on
such ruling petitioner should have paid only the amount of P974,999.89 in remittance tax computed by
taking the 15% of the profits of P6,499,999.89 in remittance tax actually remitted to its head office in
the United States, instead of Pl,147,058.70, on its net profits of P7,647,058.00. Undoubtedly, petitioner
has overpaid its branch profit remittance tax in the amount of P172,058.90.
Petitioner contends that respondent is no longer entitled to a refund because Memorandum Circular
No. 8-82 dated March 17, 1982 had revoked and/or repealed the BIR ruling of January 21, 1980. The
said memorandum circular states—
Considering that the 15% branch profit remittance tax is imposed and collected at source, necessarily
the tax base should be the amount actually applied for by the branch with the Central Bank of the
Philippines as profit to be remitted abroad.
No. What is applicable in the case at bar is still the Revenue Ruling of January 21, 1980 because
private respondent Burroughs Limited paid the branch profit remittance tax in question on March 14,
1979. Memorandum Circular No. 8-82 dated March 17, 1982 cannot be given retroactive effect in the
light of Section 327 of the National Internal Revenue Code which provides-
Sec. 327. Non-retroactivity of rulings. Any revocation, modification, or reversal of any of the rules and
regulations promulgated in accordance with the preceding section or any of the rulings or circulars
promulgated by the Commissioner shag not be given retroactive application if the revocation,
modification, or reversal will be prejudicial to the taxpayer except in the following cases (a) where the
taxpayer deliberately misstates or omits material facts from his return or in any document required of
him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of
Internal Revenue are materially different from the facts on which the ruling is based, or (c) where the
taxpayer acted in bad faith. (ABS-CBN Broadcasting Corp. v. CTA, 108 SCRA 151-152)
The prejudice that would result to private respondent Burroughs Limited by a retroactive application of
Memorandum Circular No. 8-82 is beyond question for it would be deprived of the substantial amount
of P172,058.90. And, insofar as the enumerated exceptions are concerned, admittedly, Burroughs
Limited does not fall under any of them.
3. G.R. No. 157286             June 16, 2006
THE PUBLIC SCHOOLS DISTRICT SUPERVISORS ASSOCIATION (PSDSA) vs.
HON. EDILBERTO C. DE JESUS, Department Secretary, THE DEPARTMENT OF
EDUCATION, and THE DEPARTMENT OF BUDGET AND MANAGEMENT,
CALLEJO, SR., J.:
This is a Petition for Prohibition with prayer for temporary restraining order and/or preliminary
injunction filed by the Public Schools District Supervisor Association (PSDSA) seeking to declare as
unconstitutional Rule IV, Section 4.3; Rule V, Sections 5.1 and the second paragraph of Section 5.2;
and Rule VI, Section 6.2, paragraph 11 of Department of Education Order No. 1, Series of 2003. The
petition likewise seeks to compel, by way of a writ of mandamus, the Department of Education,
Culture, and Sports (DECS) and the Department of Budget and Management (DBM) to upgrade the
salary grade level of the district supervisors from Salary Grade (SG) 19 to SG 24.
The Antecedents
Ever since the Department of Education (DepEd)1 was founded decades ago, its management had been
so centralized in the Manila office. Schools in the national, regional, and division levels merely
followed and implemented the orders and memoranda issued by the Education Secretary. Due to the
evolution of the learning process and the onset of information technology, there was a need for a
radical change in the governance of the DepEd. Thus, a study on how to improve the management of
the Department was conducted, and one of the proposals was the abolition of the office of the district
supervisor.
Then Senator Tessie Aquino-Oreta, the Chairman of the Committee on Education, authored Senate Bill
No. 2191, the thrust of which was to change the existing management style and focus on the schools
where the teaching-learning process occurs. The bill was intended to highlight shared governance in
the different levels in the DECS hierarchy and establish authority, accountability, and responsibility for
achieving higher learning outcomes. While the governance of basic education would begin at the
national level, the field offices (regions, divisions, schools, and learning centers) would translate the
policy into programs, projects, and services to fit local needs.2 The national level was likewise to be
tasked to define the roles and responsibilities of, and provide resources to the field offices which would
implement educational programs, projects, and services in communities they serve. 3 At the forefront
would be the DepEd Secretary, vested with the overall authority and supervision over the operations of
the department on the national, regional, division, and schools district level. 4
Republic Act No. 9155, otherwise known as the "Governance of Basic Education Act 2001," became a
law on August 11, 2001, in accordance with Section 27(1), Article VI of the Constitution. Under the
law, each regional office shall have a director, an assistant director, and an office staff for program
promotion and support, planning, administrative and fiscal services. 5 The regional director was given
the authority to hire, place and evaluate all employees in the regional office except for the position of
assistant director,6 as well as the authority, accountability, and responsibility to determine the
organization component of the divisions and districts, and approve the staffing pattern of all employees
therein;7 evaluate all division superintendents and assistant division superintendents in the region; 8 and
other functions as may be assigned by the proper authorities.9
A division, on the other hand, is headed by a schools division superintendent with the following
responsibilities, among others: to supervise the operations of all public and private elementary,
secondary, and integrated schools, and learning centers;10 to hire, place and evaluate all division
supervisors and schools district supervisors as well as all employees in the divisions, both teaching and
non-teaching personnel, including school heads, except for the assistant division superintendent; 11 and
perform other functions as may be assigned by proper authorities.12
The office of the schools district supervisor has been retained under the law. Each district is headed by
a school district supervisor and an office staff for program promotion. However, the responsibilities of
the schools district supervisor are limited to the following: (1) providing professional and instructional
advice and support to the school heads and teachers/facilitators of schools and learning centers in the
district or cluster thereof; (2) curricula supervision; and (3) performing such other functions as may be
assigned by proper authorities. The schools district supervisors have no administrative, management,
control or supervisory functions over the schools and learning centers within their respective districts. 13
On the school level, an Elementary School Principal (ESP) was designated as school head for all public
elementary schools; and a Secondary School Principal (SSP) for high schools or a cluster thereof. 14 The
ESP and the SSP serve as both instructional leaders and administrative managers with the following
authority, accountability and responsibility:
(7) Administering and managing all personnel, physical, and fiscal resources of the school;
(8) Recommending the staffing complement of the school based on its needs;
(9) Encouraging staff development;
xxxx
(11) Accepting donations, gifts, bequests, and grants for the purpose of upgrading
teachers’/learning facilitators’ competencies, improving and expanding school facilities, and
providing instructional materials and equipment. Such donations or grants must be reported to
the appropriate district supervisors and division superintendents; and
(12) Performing such other functions as may be assigned by proper authorities.15
Under Section 14 of the law, the DepEd Secretary is mandated to "promulgate the implementing rules
and regulations within ninety (90) days after the approval of the Act, provided that the principle of
shared governance shall be fully implemented within two (2) years" after such approval.
Before the DepEd could issue the appropriate implementing rules and regulations, petitioner sought the
legal assistance of the Integrated Bar of the Philippines (IBP) National Committee on Legal Aid to
make representations for the resolution of the following administrative issues:
1. Restoration of the functions, duties, responsibilities, benefits, prerogatives, and position
level of Public Schools District Supervisors.
2. Upgrading of Salary Grade level of Public Schools District Supervisors from Salary Grade
Level 19 to Salary Grade Level 24 under DBM Circular No. 36, otherwise known as the
Compensation and Position Classification Rules and Regulation.16
In a Letter dated March 1, 2002 addressed to then DepEd Secretary Raul Roco, the IBP stated that, per
its review of the documents submitted by the PSDSA, it found the latter’s position valid and legal, to
wit:
First: The basis for the abolition of the position of District Supervisors under the Attrition Law and
DECS Department Order No. 110, Series of 1991 is no longer valid and rendered moot and academic
due to issuance of DECS Department Order No. 22, Series of 1996 and the passage by Congress of the
Philippines of Republic Act No. 9155, otherwise known as the Basic Education Governance Act of
2000. Under R.A. 9155, school districts are mandated to be maintained and responsibilities of Public
School’s Districts Supervisors have been clearly defined.
Second: There is a clear case of discrimination of grant of salaries and benefits to District Supervisors
compared to salaries and benefits received by the School Principals – which position is lower in the
hierarchy of positions as prepared by the Department of Education and the Department of Budget and
Management. School Principals and District Supervisors enjoy the same level of Salary Grade even if
the latter position is considered as a promotion and enjoys a higher level of position than that of the
position of School Principals.17
The PSDSA thus requested the DepEd Secretary to call an immediate consultation with the district
supervisors nationwide through a convention, and their valid inputs be considered in formulating the
rules and regulations to be urged by the DepEd. However, the Secretary failed to reply. Thus, the IBP
reiterated the concerns raised by the PSDSA in a Letter18 to the DepEd dated April 15, 2002.
On January 6, 2003, DepEd Secretary Edilberto C. De Jesus issued DECS Office Order No. 1, which
constitutes the Implementing Rules and Regulations (IRR) of R.A. No. 9155. Sections 4.1 to 4.3, Rule
IV of the IRR provide:
SECTION 4.1. The Schools Division Superintendent. – A division shall consist of a province or city
which shall have a schools division superintendent. There shall be at least one assistant schools
division superintendent and office staff for programs promotion, planning, administrative, fiscal, legal,
ancillary, and other support services.
SECTION 4.2. Authority, Accountability, and Responsibility of the Schools Division Superintendent.
– Consistent with the national educational policies, plans, and standards, the schools division
superintendents shall have authority, accountability, and responsibility for the following:
1) Developing and implementing division education development plans;
2) Planning and managing the effective and efficient performance of all personnel, physical,
and fiscal resources of the division, including professional staff development;
3) Hiring, placing, and evaluating all division supervisors and schools district supervisors as
well as all employees in the division, both teaching and non-teaching personnel, including
school heads, except for the assistant division superintendents;
4) Monitoring the utilization of funds provided by the national government and the local
government units to the schools and learning centers;
5) Ensuring compliance of quality standards for basic education programs and for this purpose
strengthening the role of division supervisors as subject area specialists;
6) Promoting awareness of, and adherence by, all schools and learning centers to accreditation
standards prescribed by the Secretary of Education;
7) Supervising the operations of all public and private elementary, secondary, and integrated
schools, and learning centers; and
8) Performing such other functions as may be assigned by the Secretary and/or Regional
Director.
SECTION 4.3. Appointing and Disciplinary Authority of the Schools Division Superintendent. – The
schools district superintendent shall appoint the division supervisors and school district supervisors as
well as all employees in the division, both teaching and non-teaching personnel, including school
heads, except for the assistant schools division superintendent, subject to the civil service laws, rules
and regulations, and the policies and guidelines to be issued by the Secretary of Education for the
purpose.
The schools division superintendent shall have disciplinary authority only over the non-teaching
personnel under his jurisdiction.
Such exercise of disciplinary authority by the schools division superintendent over the non-teaching
personnel shall be subject to the civil service laws, rules and regulations, and procedures and
guidelines to be issued by the Secretary of Education relative to this matter.
The Regional Director shall continue exercising disciplinary authority over the teaching personnel
insofar as the latter are covered by specific and exclusive disciplinary provisions under the Magna
Carta for Public School Teachers (R.A. No. 4670).19
Sections 5.1 and 5.2, Rule V of the IRR, in turn, provide:
SECTION 5.1. The Schools District Supervisor. – A school district shall have a school district
supervisor and office staff for program promotion.
The schools district supervisor shall primarily perform staff functions and shall not exercise
administrative supervision over school principals, unless specifically authorized by the proper
authorities. The main focus of his/her functions shall be instructional and curricula supervision aimed
at raising academic standards at the school level.
The schools district supervisor shall be specifically responsible for:
1) Providing professional and instructional advice and support to the school heads and
teachers/facilitators of schools and learning centers in the district or cluster thereof;
2) Curricula supervision; and
3) Performing such other functions as may be assigned by the Secretary, Regional Directors,
and Schools Division Superintendents where they belong.
The schools district supervisor being mentioned in this section shall refer to a public schools district
supervisor.
SECTION 5.2. The School District. – A school district already existing at the time of the passage of
this Act shall be maintained. However, an additional school district may be established by the regional
director based on criteria set by the Secretary and on the recommendation of the schools division
superintendent. For this purpose, the Secretary of Education shall set standards and formulate criteria
as basis of the Regional Directors of the establishment of an additional school district. 20
On March 13, 2003, the PSDSA, the national organization of about 1,800 public school district
supervisors of the DepEd, in behalf of its officers and members, filed the instant petition for
prohibition and mandamus, alleging that:
I. THE ACT OF THE DEPARTMENT OF EDUCATION IN REMOVING PETITIONERS’
ADMINISTRATIVE SUPERVISION OVER ELEMENTARY SCHOOLS AND ITS PRINCIPALS
(SCHOOL HEADS) WITHIN HIS/HER DISTRICT AND CONVERTING HIS/HER
ADMINISTRATIVE FUNCTION TO THAT OF PERFORMING STAFF FUNCTION FOR THE
DIVISION OFFICE PER SECTION 5.1 RULE V OF THE IMPLEMENTING RULES AND
REGULATIONS OF REPUBLIC ACT 9155 (DEPED ORDER NO. 1, SERIES OF 2003) IS A
GROSS VIOLATION OF REPUBLIC ACT 9155 – THE GOVERNANCE OF BASIC EDUCATION
ACT OF 2001.
II. THE IMPLEMENTING RULES AND REGULATION OF REPUBLIC ACT 9155 AS
PROMULGATED UNDER DEPED ORDER NO. 1, SERIES OF 2003 EXPANDED THE LAW
AND INCLUDED PROVISIONS WHICH ARE DIAMETRICALLY OPPOSED TO THE LETTER
AND SPIRIT OF THE SUBJECT LAW.
III. THE DOWNGRADING OF SALARY GRADE LEVEL OF THE PUBLIC SCHOOLS DISTRICT
SUPERVISOR OR THE NEGLECT OR REFUSAL OF THE DEPARTMENT OF EDUCATION
AND THE DEPARTMENT OF BUDGET AND MANAGEMENT TO UPGRADE THE SALARY
GRADE LEVEL OF PUBLIC SCHOOLS DISTRICT TO A RESPECTABLE LEVEL OF SALARY
GRADE HIGHER THAN THAT OF THE PRINCIPALS – DESPITE CLEAR INTENTION OF R.A.
9155 TO RETAIN THE POSITION OF PSDS IN THE HIERARCHY OF ADMINISTRATIVE
MANAGERS AND OFFICERS OF THE DEPARTMENT OF EDUCATION – IS
UNCONSTITUTIONAL AND ILLEGAL.21
Petitioners maintain that the questioned provisions of the IRR are invalid because they "extended or
expanded and modified" the provisions of R.A. No. 9155. They argue that the said law should be read
in harmony with other "existing educational laws" which it did not specifically repeal, such as Batas
Pambansa Blg. 232, otherwise known as "The Education Act of 1982," as amended by R.A. No. 7798;
R.A. No. 4670, otherwise known as the "Magna Charta for Public School Teachers"; and R.A. No.
7784 captioned "An Act to Strengthen Teacher Education in the Philippines by Establishing Centers of
Excellence, Creating a Teacher Education Council for the Purpose, Appropriating Funds Therefore,
and for Other Purposes."
Petitioners assert that under Section 7(D) of R.A. No. 9155, the district offices of the DepEd are
intended as field offices where the district supervisors can assist the ESPs and teachers/learning
facilitators within their district as experienced educational managers. Thus, the district supervisors
were not divested of the inherent administrative functions to manage and oversee the schools within
their respective districts, including their subordinates. They emphasize that the law provides an "office
staff for program promotion" in the school districts, which would be of no use if the office has no
administrative supervision over schools within its respective districts.
Petitioners assert that under the IRR, the schools district supervisors primarily perform staff functions
and shall not exercise administrative supervision over school principals, unless specifically authorized
by the proper authorities. Thus, under the IRR, the exercise of administrative supervision over school
principals was made discretionary and subject to the whims and caprices of "the proper authorities."
The logical inference of this provision, petitioners aver, is that the administrative supervisory powers
can be withdrawn from a district supervisor without any reason at all, a provision which has no basis in
the enabling law.
Petitioners further contend that the DepEd has no authority to incorporate its plan of downgrading the
position of district supervisor, that is, from being an administrator of a particular district office to a
position performing a staff function, to exercise administrative supervision over the school principals
only when specifically authorized by proper authorities. Petitioners insist that respondent Education
Secretary was focused on removing the level of management in the district office, such that the IRR
empower school heads (principals) to have administrative and instructional supervision of school or
cluster of schools, while supervision of all public and private elementary, secondary, and integrated
schools and learning centers was given to the division office.
Petitioners further insist that respondent Education Secretary failed to consider the fact that R.A. No.
9155 strengthened the district office as a mid-level administrative field office of the DepEd. The law
even mandates to allow the district supervisor to have an office staff for program promotion in the
district office. Apart from the current administrative functions inherent in the district office, DECS
Service Manual 2000 vested additional specific functions to the district offices, to provide professional
and instructional advice and support to the school heads and teachers/facilitators of schools and
learning centers in the district, as well as curricula supervision.
Petitioners posit that R.A. No. 9155 did not, in anyway, allow or authorize the reorganization of the
entire DepEd; it never reduced the position, rank, classification, and salary grade level of district
supervisors, nor abolished the district offices which are responsible for the administration and
management of elementary schools within its jurisdiction. It did not remove from the district
supervisors the function of administrative supervision over schools within their respective areas. In
fact, petitioners insist, what the law did was to give the district supervisor additional responsibility of
providing professional and instructional advice and support to the school heads and
teachers/facilitators of schools and learning centers in the district or cluster thereof.
Petitioners point out that under Section 4.3, paragraph (b), Rule IV of the IRR, the schools division
superintendent was given the power to appoint the division supervisors and schools district supervisor
and other employees subject to civil service laws, rules, and regulations, and the policies and
guidelines to be issued by the Secretary of Education for the purpose. On the other hand, the school
division superintendent shall have disciplinary authority only over the non-teaching personnel under
his jurisdiction. Such exercise of disciplinary authority by the schools division superintendent over the
non-teaching personnel shall be subject to civil service laws, rules, and regulations, and procedures and
guidelines to be issued by the Secretary of Education relative to this matter. The regional director shall
continue exercising disciplinary authority over the teaching personnel in so far as the latter are covered
by specific and exclusive disciplinary provisions under the Magna Carta for Public School Teachers
(R.A. 4670).
Petitioners posit that this grant of disciplining authority to the regional director for teaching personnel
who commit violations of laws, rules, and regulations is definitely not provided for in R.A. No. 9155.
The division superintendent was given the power not only to hire and appoint the division supervisors,
district supervisors, school heads, or principals as well as employees in the division, both teaching and
non-teaching positions. However, when it comes to disciplining officers and teaching personnel who
commit infractions or violations of law, rules, and regulations of the DepEd, the exercise of such
disciplining authority is lodged in the hands of the regional director. Petitioners point out that the
power to hire teachers is in the hands of the division superintendent; principles of administrative rules
and procedure provide that the authority to hire and appoint carries with it the authority to discipline
and fire the hired and appointed personnel particularly if the law is silent thereon. Since the division
superintendent has the authority to hire teaching personnel within its division, he/she should also take
the responsibility of disciplining erring teachers and employees. If the set-up of placing the power of
hiring and power to discipline or fire an errant personnel is separated or divided between two offices of
the DepEd, the proliferation of "palakasan" or "bata-bata" system will flourish, to the detriment of the
public education system and public service.
Petitioners also point out that under Section 7(E)(11) of R.A. No. 9155, school heads are authorized to
accept gifts, donations, bequests, and grants for the purpose of upgrading teacher’s/learning
facilitator’s competencies, improving and expanding school facilities and providing instructional
materials and equipment, which, in turn, shall be reported to the appropriate district supervisors and
division superintendents. However, under Section 6.2(11), Rule VI of the IRR, on the authority,
accountability, and responsibility of school heads, district supervisors were deleted as one of the
administrative officers to whom such reporting is to be made. Petitioners conclude that to the extent
that the division superintendents are not mandated to report donations and grants to district supervisors,
the IRR is void.
On their plea for mandamus, petitioners pray that the Court compel the DepEd and the DBM to
upgrade their present salary grade. They claim that the position of an ESP is already classified as SG
21, which is higher by two grades than that of district supervisors, SG 19. Considering their higher
position in the department’s pecking order, vis-à-vis that of the ESPs, petitioners opine that to rectify
the present grade-level distortion, their salary grade should be upgraded to SG 24.22
For its part, the Office of the Solicitor General (OSG) avers that a perusal of Section 7(D) of R.A. No.
9155 shows that the district supervisor has limited responsibilities, and that the power to exercise
administrative supervision over the ESPs is not covered by any of those responsibilities. The Education
Secretary is the disciplining authority in the DepEd, with the regional directors acting as the
disciplining authority in their respective regions.
As to petitioners’ gripe that the IRR deleted district supervisors from among those school heads who
should report when "[a]ccepting donations, gifts, bequests, and grants for the purpose of upgrading
teachers’/learning facilitators’ competencies, improving and expanding school facilities, and providing
instructional materials and equipment," the OSG avers that this reportorial function is "directory" and
merely for "convenience."
Anent petitioners’ grievance on their alleged stagnant salary grade level, the OSG points out that the
same is "already provided for under FY 2003 GAA, [thus], petitioners’ complaint against the non-
increase of their SG level is already moot and academic." The OSG also emphasizes that the upgrading
of the ESP’s salary grade over the petitioners is not violative of petitioners’ right to equal protection of
the law, since "district supervisors and ESPs are not similarly situated."
In reply, petitioners contend that the upgrading of the salary grade level of district supervisors to SG 21
is an admission by the DepEd and by the DBM of the validity of their demand to increase their salary
grade to a respectable SG 24.
The petition is partially granted.
It must be stressed that the power of administrative officials to promulgate rules in the implementation
of a statute is necessarily limited to what is provided for in the legislative enactment. 23 The
implementing rules and regulations of a law cannot extend the law or expand its coverage, as the
power to amend or repeal a statute is vested in the legislature. 24 It bears stressing, however, that
administrative bodies are allowed under their power of subordinate legislation to implement the broad
policies laid down in a statute by "filling in" the details. All that is required is that the regulation be
germane to the objectives and purposes of the law; that the regulation does not contradict but conforms
with the standards prescribed by law.25 Moreover, 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.26 The rationale for this rule relates not only to the
emergence of the multifarious needs of a modern or modernizing society and the establishment of
diverse administrative agencies for addressing and satisfying those needs; it also relates to the
accumulation of experience and growth of specialized capabilities by the administrative agency
charged with implementing a particular statute.27
We have reviewed the IRR and find that Section 4.3 of Rule IV, and Sections 5.1 and 5.2 of Rule V are
valid. The provisions merely reiterate and implement the related provisions of R.A. No. 9155. Under
the law, a division superintendent has the authority and responsibility to hire, place, and evaluate all
division supervisors and district supervisors as well as all employees in the division, both teaching and
non-teaching personnel, including school heads.28 A school head is a person responsible for the
administrative and instructional supervision of the schools or cluster of schools.29 The division
superintendent, on the other hand, supervises the operation of all public and private elementary,
secondary, and integrated schools and learning centers.30
Administrative supervision means "overseeing or the power or authority of an officer to see that their
subordinate officers perform their duties. If the latter fails or neglects to fulfill them, the former may
take such action or steps as prescribed by law to make them perform their duties." 31
A plain reading of the law will show that the schools district supervisors have no administrative
supervision over the school heads; their responsibility is limited to those enumerated in Section 7(D) of
R.A. No. 9155, to wit:
(1) Providing professional and instructional advice and support to the school heads and
teachers/facilitators of schools and learning centers in the district or cluster thereof;
(2) Curricula supervision; and
(3) Performing such other functions as may be assigned by proper authorities.
As gleaned from the Senate deliberations on Senate Bill No. 2191, the district supervisors were
divested of any administrative supervision over elementary and public high schools. The Senate
resolved to vest the same in the division superintendents, and the Lower House concurred. Senator
Rene Cayetano proposed that the traditional function of the school supervisors of exercising
administrative supervision over the elementary and public high schools be maintained. However,
Senator Tessie Aquino-Oreta, the Chairperson of the Senate Committee on Education and the Sponsor Senator Aquino-Oreta:
of the Bill, objected to such proposal:
Mr. President, may I just explain. There are two school supervisors. One is for the academic function
The President: and the other is for the administrative function. As such, if these two supervisors will dictate to the
principals, then our thrust in reducing the level of bureaucracy might not be met. Also, the thrust of this
Why do we not say AND SHALL NOT BE INCLUDED? governance bill really is to flesh out the importance of the school as the heart of education here. In that
heart, we have the teacher, the student, and the school head.
Senator Cayetano:
What we are trying to do here is to bring to the forefront the school itself. In fact, right now, there is a
Yes, better yet, Mr. President. I thank the Chair for that amendment. move in the DECS to do away with the school supervisor in charge of administrative and leave that
function to the principal. If the principal, the school head will be dictated upon by these two school
supervisors, we might not be able to achieve what we want to do here – putting to the forefront the
The President: school itself. Meaning, putting to the forefront the school head, the teacher, and the student.

All right. Can we approve that? The sponsor accepts the amendment, I assume. Senator Cayetano:

Senator Aquino-Oreta: Mr. President, I would like to thank the sponsor for that enlightenment. That is precisely my point.

Yes, Mr. President. Not too long ago, I was a speaker before the school supervisors all over the land. One of the points that
they complained about was, in most cases, their job to supervise school principals is now being
The President: removed or have been removed simply because – and I may be inaccurate here – the Japanese
government – I know it is a foreign government that funded a study of the organizational setup of the
Is there any objection from the floor? (Silence) There being none, the amendment is approved. DECS – has recommended the abolition of school supervisors.

Senator Cayetano:
Thank you, Mr. President.
In line 17, it ends with the conjunction "and." I would like to propose an amendment by inserting a
new paragraph (b). This is, of course, the duties and responsibilities of schools district supervisors. It is
to SUPERVISE SCHOOL PRINCIPALS IN THE DISTRICT, because right now, this is exactly their
job.
This is the reason this representation would like to ensure that the traditional function of the school
supervisors, among which is to supervise school principals, remain as such. What is good for the
Japanese education is not necessarily good for the Philippines. This representation knows that this is
precisely one of the complaints of the school supervisors.
The lady sponsor admitted that, indeed, there is an effort to phase out the school supervisors. That is
precisely my point, Mr. President. I do not want the school supervisors to be phased out simply
because a foreign government which funded the study of our education has suggested it.

Again, the reality is, there are efforts to minimize, if not remove, the principal function of school The President:
supervisors, which is to supervise school principals in the district. I just want it to be there to ensure
that their primary functions remain as such. What does the sponsor say?

Therefore, what appears as paragraph (b) in line 18 will now be subparagraph (c). Senator Aquino-Oreta:

The President: Mr. President, actually, it is not Japanese. It is an ADB proposal to the DECS. The DECS had a study
made on how to improve the management order of the DECS. That was one of the proposals. They
What does the sponsor say? gave three proposals. One of them was to take out the school supervisors.
But precisely, Mr. President, we are not doing that, we are not taking them out. What we are saying is Yes, Mr. President.
for the school supervisor to focus on the curriculum because in the administration of the affairs of the
school, we are saying that the principal knows best how to administer or how to run the school better. The President:
And so, we are saying here that school supervisors will be there contrary to the view of that ADB
study. We will maintain them, but the focus of the school supervisors will be on the curriculum of the – the antecedent for that is, "The schools district supervisor shall be responsible for."
schools.
Senator Cayetano:
Senator Cayetano:
That is right, Mr. President. Supervision, yes.
Mr. President, again I thank the lady senator. But again let us look at who supervisors of schools are.
Supervisors of schools once upon a time were all school principals. They rose from the ranks, that is
why they are fully aware of the administrative as well as the instructional capability of the principals The President:
now who are under them. To remove their right to supervise, – now it is the ADB, I am correct, the
lady senator is correct because as I said I was not sure – to remove this traditional function would What does the sponsor say?
really render the supervisors practically without anything to do. That is why they are now being
justified that henceforth there will be no principals that will be promoted as school supervisors because Senator Aquino-Oreta:
when the school supervisors reach the age of retirement and retire, no principals shall be promoted to
that level. But these school supervisors now, Mr. President, were once upon a time in their professional Mr. President, may I have one minute?
lives principals, and they know best how the schools should be run – administratively and
instructionally. That is the reason for that, Mr. President.
SUSPENSION OF SESSION

The President:
Senator Tatad:
What does the sponsor say?
Mr. President, I move that we suspend the session for one minute.

Senator Cayetano:
The President:
So, may I ask the sponsor to accept this, Mr. President.
Is there any objection? (Silence) There being none, the session is suspended for one minute.

Senator Aquino-Oreta:
It was 5:33 p.m.
Mr. President, what was the amendment?
RESUMPTION OF SESSION

Senator Cayetano:
At 5:43 p.m., the session was resumed.
To insert a new paragraph, paragraph (b) in line 18, which states: SUPERVISE SCHOOL
The President:
PRINCIPALS IN THE DISTRICT.
The session is resumed.
The President:
SUSPENSION OF CONSIDERATION OF S. NO. 2191
May I suggest, THE SUPERVISION OF SCHOOL PRINCIPALS IN THE DISTRICT, because –
Senator Tatad:
Senator Cayetano:
Mr. President, we are still trying to find a way out of these conflicting points of view on the role of the Senator Cayetano:
supervisor. To allow the parties to have a little more time to work on this, I move that we suspend
consideration of Senate Bill No. 2191. (Underscoring supplied)32 Just that, Mr. President.

When the session resumed, Senator Cayetano no longer pursued his proposed amendment, and moved Senator Tatad:
instead that the same be amended to read "Curricula Supervision." The Senate approved the proposal
of the Senator: Put a semicolon (;).

The President: Senator Cayetano:

The session is resumed. Senator Cayetano is recognized. And because of that, line 18 which is paragraph (b), should now be paragraph (c).

CAYETANO AMENDMENT The President:

Senator Cayetano: What does the sponsor say?

Thank you, Mr. President. Senator Aquino-Oreta:

With the permission of the lady senator, after consulting her and the Majority Leader, I would like to
propose an amendment by rewording the original amendment I was proposing last night. The reworded
proposed amendment would be like this: CURRICULA SUPERVISION.
The President:
That would be on what page?
Senator Cayetano:
That would be on page 10, line 17, as a new paragraph (b).
The amendment is accepted, Mr. President. (Underscoring supplied)33
Thus, under R.A. No. 9155, administrative supervision over school heads is not one of those
responsibilities conferred on district supervisors.
It is a settled rule of statutory construction that the express mention of one person, thing, act, or
consequence excludes all others. This rule is expressed in the familiar maxim expressio 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. The rule proceeds from the premise that the
legislature would not have made specified enumerations in a statute had the intention been not to
restrict its meaning and to confine its terms to those expressly mentioned.34

The President: It is not surprising that Senator Aquino-Oreta maintained her position that district supervisors should
not have administrative control or even supervision over ESPs and SSPs. As early as 1990, the DECS
And how will it read? had adopted the policy that, effective January 1, 1991, the positions of district supervisors and division
supervisors would be gradually phased out by not filling-up these positions as they become
Senator Cayetano: vacant.35 On September 17, 1991, then DECS Secretary Isidro Cariño issued DECS Order No. 110,
Series of 1991, declaring that, to foster better considerations and articulation of progress in the
elementary level, all elementary school principals shall report directly to the school division
CURRICULA SUPERVISION. superintendents. In his Order dated June 22, 1994, then DECS Secretary Armand V. Fabella declared
that DECS Order No. 110 shall remain in effect, with the recommendation that, in order to facilitate
The President: the phase-out of district supervisor positions, incumbent district supervisors were encouraged to
transfer to vacant division supervisor positions, provided they meet the qualification standards for such
Just that? positions.36 For his part, in his DECS Order No. 22, Series of 1996, DECS Secretary Ricardo T. Gloria
restored the district supervisor positions but only on a selective basis and subject to the following
guidelines:
 a) Schools superintendents, with the concurrence/approval of their regional directors, may
have the option to restore the position in selected districts after a careful evaluation of need.
For this purpose, the number of schools and their geographical location and distance for
effective monitoring, the availability of regular transportation, urban-rural setting, etc., should
be considered in the decision.
b) The role of the district supervisor as an instructional leader and resource for teachers, rather
than merely as an administrative supervisor, should be emphasized in their functions and
duties.
c) In the event of restoration and appointment of the position in a particular district, the school
superintendent shall ensure that the system of field supervision previous to the issuance of
DECS Orders No. 110, s. 1991 and No. 41, s. 1994 shall, likewise, be restored.
Correspondingly, the designation of coordinating principals in affected districts shall be
withdrawn.
d) Should a division office opt not to restore some or all district supervisor positions, the
funds for such positions may be used to create new positions or upgrade existing positions,
subject to the approval of the Department of Budget and Management.
e) Considering that a number of vacated district supervisor positions in some divisions may
have been converted to other positions and/or otherwise phased out since 1991, appointments
of district supervisors shall be issued by regional directors only upon verification from the
Department of Budget and Management that the said position may be filled.
It is enjoined that regional directors and schools superintendents shall exert special effort to ensure that
the implementation of this Order shall be harmonious and conducive to field supervision.37
Under DECS Order No. 36, Series of 1998 issued by DECS Secretary Erlinda C. Pefianco, the
positions of district supervisors were restored to their original status as a supervisory level in the DECS
administrative hierarchy subject to the following guidelines:
1.1 The positions of Education and District Supervisors are hereby restored to their original status as a
supervisory level in the DECS administrative hierarchy, subject to the following guidelines:
1.1.1 The functions of a district supervisor as an instructional leader and resource person for
teachers should be emphasized.
In the event of restoration and appointment of public schools district supervisor, the designation of the
coordinating principal shall be withdrawn.
Appointment of district supervisors shall be issued by regional directors only upon verification from
the Department of Budget and Management that the positions still exist since a number of vacated
district supervisor positions in some divisions may have been converted to other positions and/or
otherwise phased out since 1991.38
However, as already stated, the Senate resolved to maintain the positions of district supervisors but
limited their responsibilities only to those enumerated in Section 7(D) of R.A. No. 9155 to conform to
the basic thrust and objectives of the law. Far from strengthening the office of the district supervisors
as a mid-head field office of the DepEd, the law limited the authority and responsibility attached to
such position.
While it is true that the district supervisor is given a support staff for program promotion, it cannot
thereby be implied that he/she likewise has administrative supervision over ESPs and SSPs. Such a
construction has no basis in law and in fact. Indeed, such a construction of the statute defeats the very
purpose of the law.
It is a basic precept that the intent of the legislature is the controlling factor in the interpretation of the
statute. The particular words, clauses, and phrases should not be studied as detached and isolated
expression, but the whole and every part of the statute must be considered in fixing the meaning of any
of its parts and in order to produce a harmonious whole.39
Besides, Congress enumerated the duties and responsibilities of a district supervisor. Congress would
not have made specific enumerations in a statute if it had the intention not to restrict or limit its
meaning and confine its terms only to those expressly enumerated. Courts may not, in the guise of
interpretation, enlarge the scope of a statute and include situations not provided nor intended by
Congress.40
The submission of the OSG, that the schools district supervisors have the administrative supervision
over school heads, is more in accord with the law, to wit:
Section 7 of RA 9155, on School District Level, pertinently provides that "a school district shall have a
school district supervisor and an office staff for program promotion," and that the schools district
supervisor shall be responsible for: (1) "(p)roviding professional and instructional advice and support
to the school heads and teachers/facilitators of schools and learning centers in the district [or] cluster
thereof;" (2) "(c)urricula supervision;" and, (3) "(p)erforming such other functions as may be assigned
by the proper authorities."
A perusal of Section 7 shows that the District Supervisor has limited responsibilities, and that the
power to exercise administrative supervision over the ESPs is not covered by responsibility nos. 1 and
2. Neither is that power covered by the directive that the District Supervisor shall have an office staff
for program promotion. The only logical conclusion, therefore, that can be derived from the aforesaid
enumeration of responsibilities is that the District Supervisor may only exercise administrative
supervision over ESPs when such function is assigned by proper authorities. And, since the DepEd
Secretary specifically declared through the IRR of RA 9155, that the District Supervisor shall not
exercise administrative supervision over the ESPs, unless otherwise authorized, petitioners cannot
complain against the said declaration. On this score, it is settled that the intent of the statute is the law
(Philippine National Bank v. Office of the President, 252 SCRA 5 [1996]). In the absence of legislative
intent to the contrary, words and phrases used in a statute should be given their plain, ordinary and
common usage meaning (Mustang Lumber, Inc. v. Court of Appeals, 257 SCRA 430 [1996]).
Needless to say, Section 7, on Division Level, further provides that the School Division Superintendent
shall have authority, accountability and responsibility for, among others, "(s)upervising the operation
of all public and private elementary, secondary and integrated schools, and learning centers." To claim,
therefore, that the District Supervisor has administrative supervision over the ESPs would also violate
the above-quoted provision.41
The Court likewise declares that the last paragraph of Section 4.3 of the IRR, stating that the regional
director shall continue exercising disciplinary authority over the teaching personnel insofar as the latter
are covered by specific and exclusive disciplinary provisions under R.A. No. 4670 ("Magna Carta for
Public School Teachers") does not contravene R.A. No. 9155. Indeed, the IRR merely reiterates the
DECS Rules of Procedure, DECS Order No. 33, issued on March 30, 1999 by the DepEd Secretary,
and R.A. No. 4670 which was approved on June 18, 1966, and pursuant to Section 7, Chapter II, Book
IV of the 1987 Administrative Code, which provides that the DepEd Secretary is empowered to
a. Promulgate rules and regulations necessary to carry out department objectives, policies,
functions, plans, programs, and projects; and
b. Promulgate administrative issuances necessary for the efficient administration of the offices
under the Secretary and for execution of the laws relative thereto.
Additionally, the IRR was issued by the DepEd Secretary pursuant to Section 7(A)(1) of R.A. No.
9155, which mandates that the Secretary formulate national educational policies and enhance the
employment status, professional competence, welfare, and working conditions of all the DepEd
personnel.42
We agree that R.A. No. 9155 does not provide who has disciplinary authority over the teaching
personnel of the DepEd. However, under Section 3, Chapter III of DECS Order No. 33, Series of 1999,
otherwise known as the 1999 DECS Rules of Procedure, the disciplining authority in the DECS is the
DepEd Secretary, with the regional directors acting as such in their respective regions except those
appointed by the President.43
The officers and employees referred to in the Rules of Procedure include teachers who, under R.A. No.
4670, shall mean:
x x x all persons engaged in classroom teaching, in any level of instruction, on full-time basis,
including guidance counselors, school librarians, industrial arts, or vocational instructors, and all other
persons performing supervisory and/or administrative functions in all schools, colleges and universities
operated by the Government or its political subdivisions; but shall not include school nurses, school
physicians, school dentists, and other school employees.
A division superintendent of schools is not a disciplining authority over teachers, whether under R.A.
No. 4670 or under the DECS Rules of Procedure. In fact, under Section 2, Chapter VII of such Rules
of Procedure, a division superintendent is a chairperson of the investigating committee over formal
complaints filed against such teachers:
a) When the respondent is an elementary or secondary school teacher, head teacher, principal, district
supervisor/chair/coordinator or Education Supervisor I –
(1) The schools division superintendent or his or her duly authorized representative, as
chairperson;
(2) The duly authorized representative of the school, district, or division teacher’s
organization, as member; and
(3) The division supervisor for elementary or secondary education where the respondent
belongs, as member.
The foregoing rule is based on Section 9 of R.A. No. 4670 which reads:
Sec. 9. Administrative Charges. Administrative charges against a teacher shall be heard initially by a
committee composed of the corresponding School Superintendent of the Division or a duly authorized
representative who should, at least, have the rank of a division supervisor, where the teacher belongs,
as chairman, a representative of the local or, in its absence, any existing provincial or national teacher’s
organization and a supervisor of the Division, the last two to be designated by the Director of Public
Schools. The committee shall submit its findings and recommendations to the Director of Public
Schools within thirty days from the termination of the hearings: Provided, however, That where the
school superintendent is the complainant or an interested party, all the members of the committee shall
be appointed by the Secretary of Education.
Anent the issue on reporting of acceptance of donations, Section 7(E)(11) of R.A. No. 9155 provides:
(11) Accepting donations, gifts, bequests, and grants for the purpose of upgrading teachers’/learning
facilitators’ competencies, improving and expanding school facilities, and providing instructional
materials and equipment. Such donations or grants must be reported to the appropriate district
supervisors and division superintendents. (emphasis supplied)
However, Section 6.2(11), Rule VI of the IRR provides that:
(11) Accepting donations, gifts, bequests, and grants in accordance with existing laws and policy of the
Department for the purpose of upgrading teachers’/learning facilitators’ competencies, improving and
expanding school facilities, and providing instructional materials and equipment. Such donations or
grants must be reported to the division superintendents. (emphasis supplied)
We agree with petitioners’ contention that, under the law, donations and grants must be reported to the
appropriate district supervisors and not only to the division superintendents. The use in the law of the
word "must" is an expression of the mandatory nature of the reporting of donations and grants to
district supervisors. The reason for the provision is that such grants and donations which are intended
to upgrade teachings/learning facilitators’ competencies, improve and expand school facilities, and
provide instructional materials and equipment will assist the school district supervisors in the
performance of their duties and responsibilities under Section 7(D) of R.A. No. 9155, and submit
appropriate recommendations to the proper administrative officers.
On petitioner’s plaint of the failure of respondents to upgrade their salary grade level to at most SG 21,
and for the issuance of the writ of mandamus mandating respondents to increase their salary grade
from SG 19 to 24, the same is premature.
There is no showing in the petition that, before filing their petition, petitioners sought an adjustment of
level of their salary grade from SG 19 to SG 21 before respondents or the Civil Service Commission.
Section 17 of Presidential Decree No. 985, as amended by Section 14 of R.A. No. 6758, otherwise
known as the Salary Standardization Law, provides:
Sec. 17. Powers and Functions. – The Budget Commission (now Department of Budget and
Management), principally through the OCPC (now CPCB, Compensation and Position Classification
Board) shall, in addition to those provided under other Sections of this Decree, have the following
powers and functions:
a. Administer the compensation and position classification system established herein and revise it as
necessary;
xxxx
f. Certify classification actions and changes in class or grade of positions whenever the facts warrant,
such certification to be binding on administrative, certifying, payroll, disbursing, accounting and
auditing officers of the national government and government-owned or controlled corporations and
financial institutions.
Sections 10 and 11 of R.A. No. 9155 provide:
SEC. 10. The Secretary of Education and the Secretary of Budget and Management shall, within ninety
(90) days from the approval of this Act, jointly promulgate the guidelines on the allocation,
distribution, and utilization of resources provided by the national government for the field offices,
taking into consideration the uniqueness of the working conditions of the teaching service.
The Secretary of the Department of Education shall ensure that resources appropriated for the field
offices are adequate and that resources for school personnel, school desks, and textbooks and other
instructional materials intended are allocated directly and released immediately by the Department of
Budget and Management to said offices.
SEC. 11. The Secretary of the Department of Education, subject to civil service laws and regulations,
shall issue appropriate personnel policy rules and regulations that will best meet the requirements of
the teaching profession taking into consideration the uniqueness of the working conditions of the
teaching service.
And insofar as the salary system for teaching positions is concerned, Section 14 provides:
SEC. 14. The Salary System for Teaching Position. – The salary grade of a teacher shall be determined
in accordance with the following:
a. The Teachers’ Preparation Pay Schedule shall be prepared by the Commission in
consultation with the Department of Education and Culture. Under this system, the teacher's
academic or educational preparation, teaching experience in both private and public schools,
and extra-curricular activities for professional growth, shall be considered in pursuance of the
principle of 'equal pay for equal training and experience.'
xxxx
d. The Budget Commission, in coordination and consultation with the Department of
Education and Culture and the Civil Service Commission may, when future needs require,
modify, change or otherwise improve on the salary system herein established for the teaching
and closely related occupations, any change that may be made as provided herein shall
become part of the implementing rules of this Decree to be issued by the Budget Commission
upon prior approval by the President.
Moreover, the issue of whether or not respondents should be compelled to adjust upwards the salary
grade of petitioners to SG 21 has become moot and academic, because, on November 3, 2003, the
DepEd and the DBM issued Joint Circular No. 1, Series of 2003 containing the guidelines in the
implementation of the Salary Upgrading for District and Education Supervisors, to wit:
4.0 GUIDELINES
4.1 To maintain the previous salary grade relationships under RA No. 6758 among the PSDS
and ES I, on the one hand, and Elementary School Principal (ESP) IV and Secondary School
Principal (SSP) II, on the other hand, and to preserve the consistency in the salary grade
relationships of said positions, the following are hereby authorized:
4.1.1 Upgrading of the PSDS and ES I positions from SG-19 to SG-20 in July 2003
and to SG-21 in July 2004;
4.1.2 Upgrading of the ES II positions by two (2) salary grades from SG-20 to SG-21
in July 2003 and to SG-22 in July 2004;
 4.1.3 A one-step salary adjustment to incumbents of ES III positions starting July
2003 and another one-step salary adjustment starting July 2004;
4.1.4 A one-step salary adjustment to incumbents of CES positions starting July 2003
and another one-step salary adjustment starting July 2004.
4.2 Attached herewith is Annex A containing the summary of the guidelines for the salary
upgrading of positions authorized herein.
5.0 SALARY RULES
5.1 For purposes of the salary upgrading herein authorized, the basic salary of the employee
concerned shall be adjusted as follows:
5.1.1 Effective July 1, 2003 – at the same salary step of his assigned salary grade as
of June 30, 2003 (Illustrative Example A) adopting the Salary Schedule prescribed
under National Budget Circular (NBC) No. 474 (Annex B);
5.1.2 Effective July 1, 2004 – at the same salary step of his assigned salary grade as
of June 30, 2004 (Illustrative Example A) adopting the Salary Schedule prescribed
under National Budget Circular (NBC) No. 474 (Annex B).
5.2 The transition allowance as defined in 3.2 being received by the PSDS and ES, if any,
shall be considered as advance entitlement of the salary increase herein authorized.
(Illustrative Examples B and C)
5.3 No step adjustment shall be granted to incumbents of positions whose salary already falls
at or exceeds the maximum step (eighth step) of the salary grade allocation of their positions.
(Illustrative Example D)
5.4 The herein salary increases shall be effected through the issuance of a Notice of Salary
Adjustment (NOSA) by the duly authorized official. (Annex C)
6.0 FUNDING SOURCE
The amounts necessary to implement the salary adjustments authorized herein shall be charged against
the Nationwide lump sum appropriation for the purpose amounting to fifty million pesos (P50,000,000)
in the DepEd’s budget in RA 9206, the CY 2003 General Appropriations Act. For CY 2004, the same
shall be charged against the lump sum appropriation for the purpose that may be included in the 2004
budget.
7.0 POST-AUDIT
Any salary adjustment paid under this Circular shall be subject to post-audit by the DBM – ROs
concerned. Any payments thereof which are not in accordance herewith shall be adjusted accordingly.
8.0 CONTRIBUTIONS
The salary adjustments authorized herein are subject to the mandatory requirements for life and
retirement premiums, and health insurance premiums.
9.0 SAVING CLAUSE
Conflicts arising from the implementation of the provisions of this Circular shall be resolved by the
Department of Education, upon prior consultation with the Department of Budget and Management.
10.0 EFFECTIVITY
This Circular Letter shall take effect on July 1, 2003.
IN VIEW OF ALL THE FOREGOING, the petition for prohibition is PARTIALLY GRANTED. Joint
Circular No. 1, Series of 2003 is declared valid, except Section 6.2(11), Rule VI thereof which
provides that "donations or grants shall be reported only to the division superintendents." Such
donations or grants must also be reported to the appropriate school district supervisors, as mandated by
Republic Act No. 9155. Petitioners’ prayer for the issuance of a writ of mandamus is DENIED for lack
of merit. No costs.
SO ORDERED.
Digest:
Petitioner: The Public Schools District Supervisors Association (PSDSA), with its officers and
members
Respondents: Hon. Edilberto C. De Jesus, Department Secretary, DepEd, and The Department Of
Budget And Management
Doctrine: The power of administrative officials to promulgate rules in the implementation of a statute
is necessarily limited to what is provided for in the legislative enactment. The implementing rules and
regulations of a law cannot extend the law or expand its coverage, as the power to amend or repeal a
statute is vested in the legislature.
CALLEJO, SR., J.:
SUMMARY:
RA 9155
 enacted to change the governance of DepEd due to the evolutio of learning process
 Enacted to improve the managemebt of DepEd
 retained the position of the petitioners as district supervisors with limited responsibilities :
1. providing professional and instructional advice and support to the school heads and
teachers/facilitators of schools and learning centers in the district or cluster thereof;
2. curricula supervision; and
3. performing such other functions as may be assigned by proper authorities.
PSDSA
 originally has the admin supervision over the elem and public high schools over their
jurisdiction (with respect to both affairs/admin of the schools and curriculum)
 contend that the IRR implemented by DepEd expanded and modified the provisions of RA
9155, particularly:
1. limiting the admin supervision of the district supervisors (petitioners); and
2. the donations, gifts (sec 6.2(11) of IRR) was a modification of RA 9155 as such report must be
reported to them as district supervisors and not only to division superintendent (rulling is the last
part of the digest)
FACTS
 Ever since DepEd was founded, its management had been so centralized in the Manila office.
Schools in the national, regional, and division levels merely followed and implemented the orders
and memoranda issued by the Education Secretary. Due to the evolution of the learning process and
the onset of information technology, there was a need for a radical change in the governance of the
DepEd. Thus, a study on how to improve the management of the Department was conducted, and
one of the proposals was the abolition of the office of the district supervisor.
 Then Senator Tessie Aquino-Oreta, the Chairman of the Committee on Education, authored
Senate Bill No. 2191, the thrust of which was to change the existing management style and focus on
the schools where the teaching-learning process occurs. The bill was intended to highlight shared
governance in the different levels in the DECS hierarchy and establish authority, accountability, and
responsibility for achieving higher learning outcomes.
 RA 9155 (Governance of Basic Education Act of 2001) became a law in accordance with Sec.
27(1), Art. VI of the Constitution. Under the law, each regional office shall have a director, an
assistant director, and an office staff for program promotion and support, planning, administrative
and fiscal services.
 The office of the schools district supervisor has been retained under the law. Each district is
headed by a school district supervisor and an office staff for program promotion. However, the
responsibilities of the schools district supervisor were limited.
 The schools district supervisors have no administrative, management, control or supervisory
functions over the schools and learning centers within their respective districts.
 Under Sec. 14 of the law, the DepEd Secretary is mandated to “promulgate the implementing
rules and regulations within 90 days after the approval of the Act, provided that the principle of
shared governance shall be fully implemented within 2 years” after such approval.
 Before the DepEd could issue the appropriate implementing rules and regulations, PSDSA
sought the legal assistance of the Integrated Bar of the Philippines (IBP) National Committee on
Legal Aid to make representations for the resolution of the following administrative issues:
1. Restoration of the functions, duties, responsibilities, benefits, prerogatives, and position level
of Public Schools District Supervisors.
2. Upgrading of Salary Grade level of Public Schools District Supervisors from Salary Grade
Level 19 to Salary Grade Level 24 under DBM Circular No. 36, otherwise known as the
Compensation and Position Classification Rules and Regulation.
 PSDSA thus requested the DepEd Secretary to call an immediate consultation with the district
supervisors nationwide through a convention, and their valid inputs be considered in formulating the
rules and regulations to be urged by the DepEd. However, the Secretary failed to reply.
 DepEd Secretary Edilberto C. De Jesus thereafter issued DECS Office Order No. 1 which
constitutes the Implementing Rules and Regulations of RA 9155.
 PSDSA led a petition for prohibition and mandamus with SC.
Contentions of the PETITIONERS (PSDSA):
 IRR of RA 9155 expanded and modified provisions which are diametrically opposed to
the letter and spirit of the subject law. They argue that the said law should be read in harmony
with the existing educational laws.
 The act of the DepEd in removing the petitioners’ administrative supervision over elementary
schools and its principals within his/her district and converting his/her administrative function to
that of performing staff for the division is a gross violation of RA 9155;
 Ultimately, petitioners allege that by the implementation of the IRR they are stripped of their
administrative functions.
Contentions of the Private RESPONDENT (SolGen):
 7(D) of R.A. No. 9155 shows that the district supervisor has limited responsibilities, and that
the power to exercise administrative supervision over the ESPs is not covered by any of those
responsibilities. The Education Secretary is the disciplining authority in the DepEd, with the
regional directors acting as the disciplining authority in their respective regions.
 As to petitioners’ gripe that the IRR deleted district supervisors from among those school
heads who should report when “[a]ccepting donations, gifts, bequests, and grants x x x” the OSG
avers that this reportorial function is “directory” and merely for “convenience.”
ISSUE: Whether the IRR extended RA 9155. – NO
RULING:
Administrative bodies are allowed to implement policies.
 It must be stressed that the power of administrative officials to promulgate rules in the
implementation of a statute is necessarily limited to what is provided for in the legislative
enactment. The implementing rules and regulations of a law  cannot extend the law or expand its
coverage, as the power to amend or repeal a statute is vested in the legislature.
 It bears stressing, however, that administrative bodies are allowed under their power of
subordinate legislation to implement the broad policies laid down in a statute by “ filling in” the
details. All that is required is that the regulation be germane to the objectives and purposes of the
law; that the regulation does not contradict but conforms with the standards prescribed by law.
 Moreover, 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. The rationale for this rule relates not only to the emergence of the
 multifarious needs of a modern or modernizing society and the establishment of diverse
administrative agencies for addressing and satisfying those needs; it also relates to the accumulation
of experience and growth of specialized capabilities by the administrative agency charged with
implementing a particular statute.
Disposition: IN VIEW OF ALL THE FOREGOING, the petition for prohibition is PARTIALLY
GRANTED. Joint Circular No. 1, Series of 2003 is declared valid, except Section 6.2(11), Rule VI
thereof which provides that “donations or grants shall be reported only to the division
superintendents.” Such donations or grants must also be reported to the appropriate school district
supervisors, as mandated by Republic Act No. 9155. Petitioners’ prayer for the issuance of a writ of
mandamus is DENIED for lack of merit. No costs. SO ORDERED.
4. G.R. No. 77372 April 29, 1988
LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER R.
REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA,
ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R. RIMANDO, petitioner,
vs.
COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent.
Balgos & Perez Law Offices for petitioners.
The Solicitor General for respondents.
GANCAYCO, J.:
Is the Regional Trial Court of the same category as the Professional Regulation Commission so that it
cannot pass upon the validity of the administrative acts of the latter? Can this Commission lawfully
prohibit the examiness from attending review classes, receiving handout materials, tips, or the like
three (3) days before the date of the examination? Theses are the issues presented to the court by this
petition for certiorari to review the decision of the Court of Appeals promulagated on January 13,
1987, in CA-G.R. SP No. 10598, * declaring null and void the other dated Ocober 21, 1986 issued by
the Regional Trial Court of Manila, Branch 32 in Civil Case No. 86-37950 entitled " Lupo L.
Lupangco, et al. vs. Professional Regulation Commission."
The records shows the following undisputed facts:
On or about October 6, 1986, herein respondent Professional Regulation Commission (PRC) issued
Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those applying for
admission to take the licensure examinations in accountancy. The resolution embodied the following
pertinent provisions:
No examinee shall attend any review class, briefing, conference or the like conducted
by, or shall receive any hand-out, review material, or any tip from any school,
college or university, or any review center or the like or any reviewer, lecturer,
instructor official or employee of any of the aforementioned or similars institutions
during the three days immediately proceeding every examination day including
examination day.
Any examinee violating this instruction shall be subject to the sanctions prescribed
by Sec. 8, Art. III of the Rules and Regulations of the Commission. 1
On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure examinations in
accountancy schedule on October 25 and November 2 of the same year, filed on their own behalf of all
others similarly situated like them, with the Regional Trial Court of Manila, Branch XXXII, a
complaint for injuction with a prayer with the issuance of a writ of a preliminary injunction against
respondent PRC to restrain the latter from enforcing the above-mentioned resolution and to declare the
same unconstitution.
Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the lower court had
no jurisdiction to review and to enjoin the enforcement of its resolution. In an Order of October 21,
1987, the lower court declared that it had jurisdiction to try the case and enjoined the respondent
commission from enforcing and giving effect to Resolution No. 105 which it found to be
unconstitutional.
Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of Appeals a
petition for the nullification of the above Order of the lower court. Said petiton was granted in the
Decision of the Court of Appeals promulagated on January 13, 1987, to wit:
WHEREFORE, finding the petition meritorious the same is hereby GRANTED and
the other dated October 21, 1986 issued by respondent court is declared null and
void. The respondent court is further directed to dismiss with prejudice Civil Case
No. 86-37950 for want of jurisdiction over the subject matter thereof. No cost in this
instance.
SO ORDERED. 2
Hence, this petition.
The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction to
entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its basis its
conclusion that the Professional Regulation Commission and the Regional Trial Court are co-equal
bodies. Thus it held —
That the petitioner Professional Regulatory Commission is at least a co-equal body
with the Regional Trial Court is beyond question, and co-equal bodies have no power
to control each other or interfere with each other's acts. 3
To strenghten its position, the Court of Appeals relied heavily on National Electrification
Administration vs. Mendoza,  4 which cites Pineda vs. Lantin  5 and Philippine Pacific Fishing, Inc. vs.
Luna, 6 where this Court held that a Court of First Instance cannot interfere with the orders of the
Securities and Exchange Commission, the two being co-equal bodies.
After a close scrutiny of the facts and the record of this case,
We rule in favor of the petitioner.
The cases cited by respondent court are not in point. It is glaringly apparent that the reason why this
Court ruled that the Court of First Instance could not interfere with the orders of the Securities and
Exchange Commission was that this was so provided for by the law. In Pineda vs. Lantin, We
explained that whenever a party is aggrieved by or disagree with an order or ruling of the Securities
and Exchange Commission, he cannot seek relief from courts of general jurisdiction since under the
Rules of Court and Commonwealth Act No. 83, as amended by Republic Act No. 635, creating and
setting forth the powers and functions of the old Securities and Exchange Commission, his remedy is
to go the Supreme Court on a petition for review. Likewise, in Philippine Pacific Fishing Co., Inc. vs.
Luna, it was stressed that if an order of the Securities and Exchange Commission is erroneous, the
appropriate remedy take is first, within the Commission itself, then, to the Supreme Court as mandated
in Presidential Decree No. 902-A, the law creating the new Securities and Exchange Commission.
Nowhere in the said cases was it held that a Court of First Instance has no jurisdiction over all other
government agencies. On the contrary, the ruling was specifically limited to the Securities and
Exchange Commission.
The respondent court erred when it place the Securities and Exchange Commission and the
Professional Regulation Commsision in the same category. As alraedy mentioned, with respect to the
Securities and Exchange Commission, the laws cited explicitly provide with the procedure that need be
taken when one is aggrieved by its order or ruling. Upon the other hand, there is no law providing for
the next course of action for a party who wants to question a ruling or order of the Professional
Regulation Commission. Unlike Commonwealth Act No. 83 and Presidential Decree No. 902-A, there
is no provision in Presidential Decree No. 223, creating the Professional Regulation Commission, that
orders or resolutions of the Commission are appealable either to the Court of Appeals or to theSupreme
Court. Consequently, Civil Case No. 86-37950, which was filed in order to enjoin the enforcement of a
resolution of the respondent Professional Regulation Commission alleged to be unconstitutional,
should fall within the general jurisdiction of the Court of First Instance, now the Regional Trial Court. 7
What is clear from Presidential Decree No. 223 is that the Professional Regulation Commission is
attached to the Office of the President for general direction and coordination. 8 Well settled in our
jurisprudence is the view that even acts of the Office of the President may be reviewed by the Court of
First Instance (now the Regional Trial Court). In Medalla vs. Sayo, 9 this rule was thoroughly
propounded on, to wit:
In so far as jurisdiction of the Court below to review by certiorari decisions and/or
resolutions of the Civil Service Commission and of the residential Executive
Asssistant is concerned, there should be no question but that the power of judicial
review should be upheld. The following rulings buttress this conclusion:
The objection to a judicial review of a Presidential act arises from
a failure to recognize the most important principle in our system of
government, i.e., the separation of powers into three co-equal
departments, the executives, the legislative and the judicial, each
supreme within its own assigned powers and duties. When a
presidential act is challenged before the courts of justice, it is not to
be implied therefrom that the Executive is being made subject and
subordinate to the courts. The legality of his acts are under judicial
review, not because the Executive is inferior to the courts, but
because the law is above the Chief Executive himself, and the
courts seek only to interpret, apply or implement it (the law). A
judicial review of the President's decision on a case of an employee
decided by the Civil Service Board of Appeals should be viewed in
this light and the bringing of the case to the Courts should be
governed by the same principles as govern the jucucial review of
all administrative acts of all administrative officers. 10
Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here, "the
Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93
under the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for
injunction was filed with the Court of First Instance of Lanao del Norte because, allegedly, the
enforcement of the circular would impair some contracts already entered into by public school
teachers. It was the contention of petitioner therein that "the Court of First Instance is not empowered
to amend, reverse and modify what is otherwise the clear and explicit provision of the memorandum
circular issued by the Executive Office which has the force and effect of law." In resolving the issue,
We held:
... We definitely state that respondent Court lawfully acquired jurisdiction in Civil
Case No. II-240 (8) because the plaintiff therein asked the lower court for relief, in
the form of injunction, in defense of a legal right (freedom to enter into contracts) . . .
..
Hence there is a clear infringement of private respondent's constitutional right to
enter into agreements not contrary to law, which might run the risk of being violated
by the threatened implementation of Executive Office Memorandum Circular No. 93,
dated February 5, 1968, which prohibits, with certain exceptions, cashiers and
disbursing officers from honoring special powers of attorney executed by the payee
employees. The respondent Court is not only right but duty bound to take cognizance
of cases of this nature wherein a constitutional and statutory right is allegedly
infringed by the administrative action of a government office. Courts of first Instance
have original jurisdiction over all civil actions in which the subject of the litigation
is not capable of pecuniary estimation (Sec. 44, Republic Act 296, as
amended). 12 (Emphasis supplied.)
In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance has the
authority to decide on the validity of a city tax ordinance even after its validity had been contested
before the Secretary of Justice and an opinion thereon had been rendered.
In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the respondent
Professional Regulation Commission, should be exempted from the general jurisdiction of the
Regional Trial Court.
Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P. Blg. 129, it is
the Court of Appeals which has jurisdiction over the case. The said law provides:
SEC. 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:
xxx xxx xxx
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders, or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the provisions
of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of
the fourth paragraph of Section 17 of the Judiciary Act of 1948.
The contention is devoid of merit.
In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided for in
Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which resulted from
proceedings wherein the administrative body involved exercised its quasi-judicial functions. In Black's
Law Dictionary, quasi-judicial is defined as a term applied to the action, discretion, etc., of public
administrative officers or bodies required to investigate facts, or ascertain the existence of facts, hold
hearings, and draw conclusions from them, as a basis for their official action, and to exercise discretion
of a judicial nature. To expound thereon, quasi-judicial adjudication would mean a determination of
rights, privileges and duties resulting in a decision or order which applies to a specific
situation . 14 This does not cover rules and regulations of general applicability issued by the
administrative body to implement its purely administrative policies and functions like Resolution No.
105 which was adopted by the respondent PRC as a measure to preserve the integrity of licensure
examinations.
The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer. 15 In this case,
the issue presented was whether or not the Court of First Instance had jurisdiction over a case
involving an order of the Commission on Elections awarding a contract to a private party which
originated from an invitation to bid. The said issue came about because under the laws then in force,
final awards, judgments, decisions or orders of the Commission on Elections fall within the exclusive
jurisdiction of the Supreme Court by way of certiorari. Hence, it has been consistently held that "it is
the Supreme Court, not the Court of First Instance, which has exclusive jurisdiction to review on
certiorari final decisions, orders, or rulings of the Commission on Elections relative to the conduct of
elections and the enforcement of election laws." 16
As to whether or not the Court of First Instance had jurisdiction in saidcase, We said:
We are however, far from convinced that an order of the COMELEC awarding a
contract to a private party, as a result of its choice among various proposals
submitted in response to its invitation to bid comes within the purview of a "final
order" which is exclusively and directly appealable to this court on certiorari. What
is contemplated by the term "final orders, rulings and decisions, of the COMELEC
reviewable by certiorari by the Supreme Court as provided by law are those rendered
in actions or proceedings before the COMELEC and taken cognizance of by the said
body in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis
supplied.)
xxx xxx xxx
We agree with petitioner's contention that the order of the Commission granting the
award to a bidder is not an order rendered in a legal controversy before it wherein the
parties filed their respective pleadings and presented evidence after which the
questioned order was issued; and that this order of the commission was issued
pursuant to its authority to enter into contracts in relation to election purposes. In
short, the COMELEC resolution awarding the contract in favor of Acme was not
issued pursuant to its quasi-judicial functions but merely as an incident of its
inherent administrative functions over the conduct of elections, and hence, the said
resolution may not be deemed as a "final order reviewable by certiorari by the
Supreme Court. Being non-judicial in character, no contempt order may be imposed
by the COMELEC from said order, and no direct and exclusive appeal by certiorari
to this Tribunal lie from such order. Any question arising from said order may be
well taken in an ordinary civil action before the trial courts. (Emphasis supplied.) 17
One other case that should be mentioned in this regard is Salud vs. Central Bank of the
Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under Section 9,
paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only to the Intermediate
Appellate Court. Thus:
The Central Bank and its Liquidator also postulate, for the very first time, that the
Monetary Board is among the "quasi-judicial ... boards" whose judgments are within
the exclusive appellate jurisdiction of the IAC; hence, it is only said Court, "to the
exclusion of the Regional Trial Courts," that may review the Monetary Board's
resolutions. 19
Anent the posture of the Central Bank, We made the following pronouncement:
The contention is utterly devoid of merit. The IAC has no appellate jurisdiction over
resolution or orders of the Monetary Board. No law prescribes any mode of appeal
from the Monetary Board to the IAC. 20
In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain Civil Case
No. 86-37950 and enjoin the respondent PRC from enforcing its resolution.
Although We have finally settled the issue of jurisdiction, We find it imperative to decide once and for
all the validity of Resolution No. 105 so as to provide the much awaited relief to those who are and
will be affected by it.
Of course, We realize that the questioned resolution was adopted for a commendable purpose which is
"to preserve the integrity and purity of the licensure examinations." However, its good aim cannot be a
cloak to conceal its constitutional infirmities. On its face, it can be readily seen that it is unreasonable
in that an examinee cannot even attend any review class, briefing, conference or the like, or receive
any hand-out, review material, or any tip from any school, collge or university, or any review center
or the like or any reviewer, lecturer, instructor, official or employee of any of the aforementioned or
similar institutions . ... 21
The unreasonableness is more obvious in that one who is caught committing the prohibited acts even
without any ill motives will be barred from taking future examinations conducted by the respondent
PRC. Furthermore, it is inconceivable how the Commission can manage to have a watchful eye on
each and every examinee during the three days before the examination period.
It is an aixiom in administrative law that administrative authorities should not act arbitrarily and
capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be
reasonable and fairly adapted to the end in view. If shown to bear no reasonable relation to the
purposes for which they are authorized to be issued, then they must be held to be invalid. 22
Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to
liberty guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees as
to how they should prepare themselves for the licensure examinations. They cannot be restrained from
taking all the lawful steps needed to assure the fulfillment of their ambition to become public
accountants. They have every right to make use of their faculties in attaining success in their
endeavors. They should be allowed to enjoy their freedom to acquire useful knowledge that will
promote their personal growth. As defined in a decision of the United States Supreme Court:
The term "liberty" means more than mere freedom from physical restraint or the
bounds of a prison. It means freedom to go where one may choose and to act in such
a manner not inconsistent with the equal rights of others, as his judgment may dictate
for the promotion of his happiness, to pursue such callings and vocations as may be
most suitable to develop his capacities, and giv to them their highest enjoyment. 23
Another evident objection to Resolution No. 105 is that it violates the academic freedom of the schools
concerned. Respondent PRC cannot interfere with the conduct of review that review schools and
centers believe would best enable their enrolees to meet the standards required before becoming a full
fledged public accountant. Unless the means or methods of instruction are clearly found to be
inefficient, impractical, or riddled with corruption, review schools and centers may not be stopped
from helping out their students. At this juncture, We call attention to Our pronouncement
in Garcia vs. The Faculty Admission Committee, Loyola School of Theology, 24 regarding academic
freedom to wit:
... It would follow then that the school or college itself is possessed of such a right. It
decides for itself its aims and objectives and how best to attain them. It is free from
outside coercion or interference save possibly when the overriding public welfare
calls for some restraint. It has a wide sphere of autonomy certainly extending to the
choice of students. This constitutional provision is not to be construed in a niggardly
manner or in a grudging fashion.
Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages in
the licensure examinations will be eradicated or at least minimized. Making the examinees suffer by
depriving them of legitimate means of review or preparation on those last three precious days-when
they should be refreshing themselves with all that they have learned in the review classes and
preparing their mental and psychological make-up for the examination day itself-would be like
uprooting the tree to get ride of a rotten branch. What is needed to be done by the respondent is to find
out the source of such leakages and stop it right there. If corrupt officials or personnel should be
terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines to
be observed by examiners should be set up and if violations are committed, then licenses should be
suspended or revoked. These are all within the powers of the respondent commission as provided for in
Presidential Decree No. 223. But by all means the right and freedom of the examinees to avail of all
legitimate means to prepare for the examinations should not be curtailed.
In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court of Appeals
in CA-G.R. SP No. 10591 and another judgment is hereby rendered declaring Resolution No. 105 null
and void and of no force and effect for being unconstitutional. This decision is immediately executory.
No costs. SO ORDERED.
5. [G.R. No. 76759. March 22, 1990.]
RAMON A. GONZALES, Petitioner, v. LAND BANK OF THE PHILIPPINES and COURT OF
APPEALS, Respondents.
Ramon A. Gonzales for and in his own behalf.
Manuel P. Tiaoqui and Florencio S. Jimenez for respondent Land Bank of the Philippines.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; STIPULATION OF FACTS; OMISSIONS THEREIN
JUSTIFIED THE FILING OF AN APPEAL BEFORE THE APPELLATE COURT. — The existence
of a stipulation of facts between the parties does not automatically mean that the parties agreed on all
the facts considering that stipulations may be total or partial. In this instance, it was merely partial. A
perusal of the aforementioned Stipulation and Supplemental Stipulation of Facts dated July 29, 1985
and September 10, 1985, respectively, readily reveals that the same do not contain a complete or
sufficient picture of the circumstances among the parties and that certain vital matters are left out in
said stipulations, i.e., the significant policy of the Land Bank to issue its bonds directly and only in the
name of the landowners; and the fact that there are different stages in the release of payments under the
operation land transfer program with each stage having different requirements that have to be complied
with by the landowner in order to be entitled to payment under a land transfer claim. In view of these
omissions in the Stipulations, the remedy of appeal before the appellate court resorted to by respondent
bank and assailed by petitioner is proper because it involved not only pure questions of law but mixed
questions of law and fact.
2. CIVIL LAW; CONTRACTS; ASSIGNMENT OF RIGHTS; SUBJECT TO RULES AND
RESTRICTIONS IMPOSED BY ADMINISTRATIVE BODIES EMPOWER TO INTERPRET THE
LAW WHICH THEY ARE ENTRUSTED TO ENFORCE. — Petitioner relying on the provisions of
Article 1311 of the Civil Code, maintains that by virtue of said deed, he stepped into the shoes of his
assignor and acquired all the rights of the latter and it was error on the part of the appellate court to
find that the aforesaid Deed of Assignment is not effective to authorize the Land Bank of the
Philippines to issue the Land Bank Bonds in the name of petitioner upon compliance with the
remaining six (6) requirements for the first release thereof. There is indeed no question that petitioner
stepped into the shoes of his assignor, the defendant corporation. But petitioner overlooked the fact that
when the corporation assigned its rights to him under Land Transfer Claim No. 82-757, the same was
subject to the rules and restrictions imposed by respondent Land Bank on the matter of assignment of
rights. In the promulgation of said rules and regulations, the Land Bank relied on the provisions of
Section 76, R.A. 3844 as amended by P.D. 251. The act of assignment could not operate to erase liens
or restrictions burdening the right assigned. The assignee cannot, after all, acquire a greater right than
that pertaining to the assignor, [PNB v. General Acceptance and Finance Corporation, Et Al., G.R. No.
30751, May 24, 1988, 161 SCRA 449]. Thus, when Ramos Plantation Company, Inc. assigned its
rights, title and interest in Land Transfer Claim No. 82-757 for the amount of P400,000.00 in favor of
petitioner Ramon A. Gonzales, the latter acquired the same subject to the restrictions on assignment of
rights embodied in Resolution No. 75-68 dated February 25, 1975 passed by the Board of respondent
Land Bank of the Philippines. It is an elementary rule in administrative law that administrative
regulations and policies enacted by administrative bodies to interpret the law which they are entrusted
to enforce have the force of law and entitled to great respect. They have in their favor a presumption of
legality. [Espanol v. Chairman, PVA, 137 SCRA 315 (1986)]
DECISION
FERNAN, J.:
This petition for review on certiorari seeks to reverse and set aside the December 2, 1986 decision of
the Court of Appeals, reversing the decision of that trial court and in effect denying the direct issuance
of Land Bank bonds in the name of herein petitioner as assignee thereof.
On the strength of a Deed of Assignment executed on August 8, 1981 by Ramos Plantation Company,
Inc. (hereafter referred to as the corporation) through its president, Antonio Vic Zulueta, assigning its
rights under Land Transfer Claim No. 82-757 unto petitioner Ramon A. Gonzales, the latter filed an
action before the Regional Trial Court of Manila, Branch LI entitled "Ramon A. Gonzales, Plaintiff, v.
Land Bank of the Philippines and Ramos Plantation Company, Inc., defendants" docketed as Civil
Case No. 84-24461 to compel public respondent Land Bank of the Philippines to issue Land Bank
Bonds for the amount of P400,000.00 in the name of petitioner instead of in the name of the aforesaid
corporation as the original and registered owner of the property covered by Transfer Certificate of Title
No. T-28755 situated in La Suerte, Malang, North Cotabato with a total area of 251.4300 hectares,
which had been brought under the land transfer program of the government.chanroblesvirtualawlibrary
Defendant corporation was declared in default for failure to file its answer within the reglementary
period while defendant Land Bank filed an answer alleging that the complaint states no cause of action
since there is no privity of contract between plaintiff and itself and that it deals only with the
landowner whose land was subjected to operation land transfer of the government under Presidential
Decree No. 27 in order to save time and effort in ascertaining the identities of additional claimants.
At the pre-trial, the parties submitted a Stipulation of Facts dated July 29, 1985 (subsequently
supplemented on September 10, 1985) praying that judgment be rendered on the basis thereof. In the
aforesaid stipulation dated July 29, 1985, the following admissions and submissions were made: the
execution of the Deed of Assignment; the fact that the corporation’s president, Antonio Vic Zulueta,
wrote defendant bank requesting the latter to issue the payment for the real property covered by TCT
No. T-28755 through Land Bank Bonds amounting to P400,000.00 in the name of petitioner by virtue
of the Deed of Assignment with the Board Resolution attached to said letter; that on June 30, 1982,
defendant bank through its manager, Mr. Ceferino A. Pacio of the Land Transfer Operation
Department, wrote back informing the Ramos Plantation, Inc. that it has approved its Land Transfer
Claim No. 82-757 in the aggregate amount of P565,717.50 payment of which is subject to the
submission and or accomplishment of the requirements of defendant bank; that said corporation failed
to comply with nine (9) of the requirements of defendant bank as contained in Annexes "C-1" and "C-
2." 1
On the other hand, the aforesaid Supplemental Stipulation of Facts dated September 10, 1985 provided
that out of the 9 requirements for the first release in Annex "C-1" of the stipulation of facts dated July
29, 1984, only 6 requirements have not been complied with. 2
In a decision dated October 15, 1985, 3 the lower court found the plaintiff entitled to the issuance of
the Land Bank bonds, stating thus:jgc:chanrobles.com.ph
"WHEREFORE, defendant Land Bank of the Philippines is hereby ordered to issue in the name of
Ramon A. Gonzales P400,000.00 worth of land bank bonds deducted from the P509,000.00 Land Bank
bonds payable to Ramos Plantation Company, Inc. under claim No. 82-757 with the directive to the
defendant land-owner Ramos Plantation Company, Inc. to comply with the six (6) requirements listed
in paragraph 1 of the Supplemental Stipulation of Facts dated September 10, 1985. No pronouncement
as to costs." 4
Defendant-appellant Land Bank of the Philippines filed an appeal before respondent Court of Appeals
resulting in the reversal of the trial court’s decision and the dismissal of the complaint filed therein on
the ground that even if there was compliance with the remaining six (6) requirements by defendant
Ramos Plantation, Inc. still, the Land Bank bonds will have to be issued in the name of the said
corporation and not to plaintiff-appellee. It is only thereafter that Ramos Plantation Co., Inc. may
indorse the same to plaintiff. 5
Petitioner now comes to Us on appeal by certiorari to set aside the decision of respondent appellate
court with these arguments: that respondent Court of Appeals acted without jurisdiction in resolving
the appeal inspite of the motion to certify this case to the Supreme Court; that respondent Court of
Appeals palpably erred in finding that the Deed of Assignment is not effective to authorize LBP to
issue the Land Bank Bonds in the name of petitioner; that respondent Court of Appeals palpably erred
in holding that petitioner is not entitled to P400,000.00 worth of Land Bank Bonds upon compliance
with the remaining six (6) requirements for the first release thereof.chanrobles virtual lawlibrary
We reduce the issues to two: whether the appellate court had jurisdiction to entertain the appeal of
respondent Land Bank; and whether respondent Land Bank can be compelled to issue Land Bank
bonds in the name of petitioner by virtue of the Deed of Assignment executed by the landowner-
assignor Ramos Plantation Company, Inc. in favor of petitioner.
On the issue of lack of jurisdiction, petitioner vigorously asserts that since the trial court rendered
judgment on the basis of the stipulation of facts submitted by the parties, the appeal from such a
decision can only raise questions of law and therefore, respondent Land Bank should have gone
directly to the Supreme Court on a petition for certiorari.
We do not fully subscribe to petitioner’s contention, for as correctly observed by the Solicitor General,
the existence of a stipulation of facts between the parties does not automatically mean that the parties
agreed on all the facts considering that stipulations may be total or partial. 6 In this instance, it was
merely partial.chanrobles law library : red
A perusal of the aforementioned Stipulation and Supplemental Stipulation of Facts dated July 29, 1985
and September 10, 1985, respectively, readily reveals that the same do not contain a complete or
sufficient picture of the circumstances among the parties and that certain vital matters are left out in
said stipulations, i.e., the significant policy of the Land Bank to issue its bonds directly and only in the
name of the landowners; and the fact that there are different stages in the release of payments under the
operation land transfer program with each stage having different requirements that have to be complied
with by the landowner in order to be entitled to payment under a land transfer claim. In view of these
omissions in the Stipulations, the remedy of appeal before the appellate court resorted to by respondent
bank and assailed by petitioner is proper because it involved not only pure questions of law but mixed
questions of law and fact.
On the more substantive issue of whether public respondent Land Bank may be compelled to honor the
subject deed of assignment, it will be noted that respondent bank in denying the issuance of the bond in
the name of the petitioner-assignee was guided by Resolution No. 75-68 entitled "PROPER PARTIES
TO RECEIVE LAND TRANSFER PAYMENT’ promulgated purposely to govern, among others, the
issuance of Land Bank Bonds to assignees by virtue of Deeds of Assignment.
Thereunder the Land Bank can only issue bonds in the name of the assignor-landowner. It is only after
the issuance of bonds in the landowner’s name that he shall be required to make the necessary
indorsement of the bonds to his assignee. This is in consonance with the Land Bank’s policy to deal
primarily with the landowners in order to save time and effort in ascertaining the identities of
claimants. 7
However, petitioner relying on the provisions of Article 1311 of the Civil Code, 8 maintains that by
virtue of said deed, he stepped into the shoes of his assignor and acquired all the rights of the latter and
it was error on the part of the appellate court to find that the aforesaid Deed of Assignment is not
effective to authorize the Land Bank of the Philippines to issue the Land Bank Bonds in the name of
petitioner upon compliance with the remaining six (6) requirements for the first release
thereof.chanroblesvirtualawlibrary
There is indeed no question that petitioner stepped into the shoes of his assignor, the defendant
corporation. But petitioner overlooked the fact that when the corporation assigned its rights to him
under Land Transfer Claim No. 82-757, the same was subject to the rules and restrictions imposed by
respondent Land Bank on the matter of assignment of rights.
In the promulgation of said rules and regulations, the Land Bank relied on the provisions of Section 76,
R.A. 3844 as amended by P.D. 251, which specifically provides:jgc:chanrobles.com.ph
"Sec. 76. Issuance of Bonds. . . . The Board of Directors shall have the power to prescribe rules and
regulations for the issuance, reissuance, servicing, placement and redemption of the bonds herein
authorized to be issued as well as the registration of such bonds at the request of the holders
thereof."cralaw virtua1aw library
The act of assignment could not operate to erase liens or restrictions burdening the right assigned. The
assignee cannot, after all, acquire a greater right than that pertaining to the assignor. 9
Thus, when Ramos Plantation Company, Inc. assigned its rights, title and interest in Land Transfer
Claim No. 82-757 for the amount of P400,000.00 in favor of petitioner Ramon A. Gonzales, the latter
acquired the same subject to the restrictions on assignment of rights embodied in Resolution No. 75-68
dated February 25, 1975 10 passed by the Board of respondent Land Bank of the Philippines, the
pertinent provision of which reads:jgc:chanrobles.com.ph
"4. In Assignment of Rights entered into by landowners vesting upon the Assignee the right to receive
full or partial payment from the Land Bank pursuant to land transfer, the same, if found valid in form
and substance, shall be recognized by the Land Bank. Whenever practicable, Land Bank bonds issued
therefor must be made payable to the Assignor-Landowner who shall be required to make the
necessary indorsement of said bonds to the Assignee. In case the cash portion is the one assigned, the
check in payment thereof shall be issued to the original landowner who shall be required to make the
indorsement to the Assignee. Thus, for record purposes, it will appear that payment was directly to the
landowner concerned and who, by reason of the Assignment, has caused the necessary indorsement of
the bonds and/or check, as the case may be, to the Assignee." chanrobles.com : virtual law library
It is an elementary rule in administrative law that administrative regulations and policies enacted by
administrative bodies to interpret the law which they are entrusted to enforce have the force of law and
entitled to great respect. They have in their favor a presumption of legality. 11
This Court is in total agreement with respondent appellate court’s finding that it must be the Ramos
Plantation Company, Inc. which should comply with all the requirements imposed by respondent bank
to effect the release of payments under land transfer claims because of the restriction that the bonds
will only be released in the name of the landowner-assignor corporation which may thereafter indorse
the same to petitioner. In fact, in the decision of the trial court, Ramos Plantation Company, Inc. was
directed to comply with the six (6) requirements 12 listed in paragraph 1 of the Supplemental
Stipulation of Facts dated September 10, 1985. Since no appeal was taken by Ramos Plantation
Company, Inc. from said decision, said directive has become final and executory.chanrobles virtual
lawlibrary
However, the decision of the appellate court dismissing the complaint of petitioner had the effect of
reversing said directive, thereby leaving petitioner without legal authority to compel Ramos Plantation
Company, Inc. to comply with the requirements of the Land Bank for the release of the bonds and
thereafter to endorse the same to petitioner as assignee thereof. The decision of the appellate court
should therefore be, as it is hereby, modified accordingly.
WHEREFORE, the decision of the appellate court is hereby MODIFIED. The directive to Ramos
Plantation Company, Inc. contained in the lower court’s decision is reinstated. Ramos Plantation
Company, Inc. is ordered to comply within thirty (30) days from notice with the six (6) requirements
listed in paragraph 1 of the Supplemental Stipulation of Facts dated September 10, 1985, and as soon
as the bonds are released in its name, to immediately endorse the same to petitioner as assignee
thereof.chanrobles.com : virtual law library
SO ORDERED.
Digest:
RAMON A. GONZALES v. LAND BANK OF PHILIPPINES, GR NO. 76759, 1990-03-22
Facts:
executed on August 8, 1981
On the strength of a Deed of Assignment executed on August 8, 1981 by Ramos Plantation Company,
Inc. (hereafter referred to as the corporation) through its president, Antonio Vic Zulueta, assigning its
rights under Land Transfer Claim No. 82-757 unto petitioner Ramon A.
Gonzales, the latter filed an action before the Regional Trial Court of Manila, Branch LI entitled
"Ramon A. Gonzales, plaintiff, vs. Land Bank of the Philippines and Ramos Plantation Company, Inc.,
defendants" docketed as Civil Case No. 84-24461 to compel public... respondent Land Bank of the
Philippines to issue Land Bank Bonds for the amount of P400,000.00 in the name of petitioner instead
of in the name of the aforesaid corporation as the original and registered owner of the property covered
by Transfer Certificate of Title No. T-28755... situated in La Suerte, Malang, North Cotabato with a
total area of 251,4300 hectares, which had been brought under the land transfer program of the
government.
defendant Land Bank filed an answer alleging that the complaint states no cause of action since there is
no privity of contract between plaintiff and itself and that... it deals only with the landowner whose
land was subjected to operation land transfer of the government under Presidential Decree No. 27 in
order to save time and effort in ascertaining the identities of additional claimants.
In a decision dated October 15, 1985,[3] the lower court found the plaintiff entitled to the issuance of
the Land Bank bonds,... Land Bank of the Philippines filed an appeal before respondent Court of
Appeals resulting in the reversal of the trial court's decision and the dismissal of the complaint filed
therein on the ground that even if there was compliance with the remaining six (6)... requirements by
defendant Ramos Plantation, Inc. still, the Land Bank bonds will have to be issued in the name of the
said corporation and not to plaintiff-appellee.  It is only thereafter that Ramos Plantation Co., Inc. may
indorse the same to plaintiff.
Issues:
whether respondent Land Bank can be compelled to issue Land Bank bonds in the name of petitioner
by virtue of the Deed of Assignment executed by... the landowner-assignor
Ruling:
We do not fully subscribe to petitioner's contention, for as correctly observed by the Solicitor General,
the existence of a stipulation of facts between the parties does not automatically mean that the parties
agreed on all the facts considering that stipulations may be total... or partial.[6] In this instance, it was
merely partial.
A perusal of the aforementioned Stipulation and Supplemental Stipulation of Facts... reveals that the
same do not contain a complete or sufficient picture of the circumstances among the parties and that
certain vital... matters are left out in said stipulations, i.e., the significant policy of the Land Bank to
issue its bonds directly and only in the name of the landowners; and the fact that there are different
stages in the release of payments under the operation land transfer program with... each stage having
different requirements that have to be complied with by the landowner in order to be entitled to
payment under a land transfer claim.  In view of these omissions in the Stipulations, the remedy of
appeal before the appellate court resorted to by respondent... bank and assailed by petitioner is proper
because it involved not only pure questions of law but mixed questions of law and fact.
On the more substantive issue of whether public respondent Land Bank may be compelled to honor the
subject deed of assignment, it will be noted that respondent bank in denying the issuance of the bond in
the name of the petitioner-assignee was guided by Resolution No. 75-68... entitled "PROPER
PARTIES TO RECEIVE LAND TRANSFER PAYMENT" promulgated purposely to govern, among
others, the issuance of Land Bank Bonds to assignees by virtue of Deeds of Assignment.
Thereunder the Land Bank can only issue bonds in the name of the assignor-landowner.
However, petitioner... maintains that by virtue of said deed, he stepped into the shoes of his assignor
and acquired all the rights of the latter
There is indeed no question that petitioner stepped into the shoes of his assignor, the defendant
corporation.  But petitioner overlooked the fact that when the corporation assigned its rights to him...
the same was subject to the rules... and restrictions, imposed by respondent Land Bank on the matter of
assignment of rights.
The act of assignment could not operate to erase liens or restrictions burdening the right assigned.  The
assignee cannot, after all, acquire a greater right than that pertaining to the assignor.
It is an elementary rule in administrative law that administrative regulations and policies enacted by
administrative bodies to interpret the law which they are entrusted to enforce have the force of law and
are entitled to great respect.  They have in their favor a... presumption of legality.[11]

6. G.R. No. 103533 December 15, 1998
MANILA JOCKEY CLUB, INC. AND PHILIPPINE RACING CLUB, INC., petitioners,
vs.
THE COURT OF APPEALS AND PHILIPPINE RACING COMMISSION, respondents.
QUISUMBING, J.:
This is a Petition for Review on Certiorari seeking the reversal of the decision1 of the Court of
Appeals in CA-G.R. SP No. 25251 dated September 17, 1991 and the resolution2 dated January 8,
1992, which denied the motion for reconsideration. At issue here is the control and disposition of
"breakages" 3 in connection with the conduct of horse-racing.
The pertinent facts on record are as follows:
On June 18, 1948, Congress approved Republic Act No. 309, entitled "An Act to Regulate Horse-
Racing in the Philippines." This Act consolidated all existing laws and amended inconsistent
provisions relative to horse racing. It provided for the distribution of gross receipts from the sale
of betting tickets, but is silent on the allocation of so-called "breakages." Thus the practice,
according to the petitioners, was to use the "breakages" for the anti-bookies drive and other
sales promotions activities of the horse racing clubs.
On October 23, 1992, petitioners, Manila Jockey Club, Inc. (MJCI) and Philippine Racing Club,
Inc. (PRCI), were granted franchises to operate and maintain race tracks for horse racing in the
City of Manila and the Province of Rizal by virtue of Republic Act Nos. 6631 and 6632,
respectively, and allowed to hold horse races, with bets, on the following dates:
. . . Saturdays, Sundays and official holidays of the year, excluding Thursday and Fridays of the
Holy Week, June twelfth, commonly known as Independence Day, Election Day and December
thirtieth, commonly known as Rizal Day.
. . . Saturday, Sundays, and official holiday of the year, except on those official holidays where
the law expressly provides that no horse races are to be held. The grantee may also conduct races
on the eve of any public holiday to start not earlier than five-thirty (5:30) o'clock in the afternoon
but not to exceed five days a year
(Sec. 5 of R.A. 6631)
(Sec. 7 of R.A. 6632)
Said laws carried provisions on the allocation of "breakages" to beneficiaries as follows:
Provincial or city hospitals 25%
Rehabilitation of drug addicts 25% 50%
For the benefit of Philippine
Amateur Athletes Federation 50% 25%
Charitable institutions 25%
On March 20, 1974, Presidential Decree No. 420 was issued creating the Philippine Racing
Commission (PHILRACOM), giving it exclusive jurisdiction and control over every aspect of the
conduct of horse racing, including the framing and scheduling of races. 6 By virtue of this power,
the PHILRACOM authorized the holding of races on Wednesdays starting on December 22,
1976.7
In connection with the new schedule of races, petitioners made a joint query regarding the
ownership of breakages accumulated during Wednesday races. In response to the query,
PHILRACOM rendered its opinion in a letter dated September 20, 1978. It declared that the
breakages belonged to the racing clubs concerned, to wit:
We find no further need to dissect the provisions of P.D. 420 to come to a legal
conclusion. As can be clearly seen from the foregoing discussion and based on
the established precedents, there can be no doubt that the breakage of
Wednesday races shall belong to the racing club concerned. 8
Consequently, the petitioners allocated the proceeds of breakages for their own business
purpose:
Thereafter, PHILRACOM authorized the holding of races on Thursdays from November 15,
1984 to December 31, 1984 and on Tuesdays since January 15, 1985 up to the present. These
mid-week races are in addition to those days specifically mentioned in R.A. 6631 and R.A. 6632.
Likewise, petition allocated the breakages from these races for their own uses.
On December 16, 1986 President Corazon Aquino amended certain provisions Sec. 4 of R.A.
8631 and Sec. 6 of R.A. 6632 through Executive Orders No. 88 and 89. Under these Executive
Orders, breakages were allocated to beneficiaries, as follows:
Rehabilitation of drug addicts 25% 50%
For the benefit of Philippine
Racing Commission 50% 25%
Charitable institutions 25%
On April 23, 1987, PHILRACOM itself addressed a query to the Office of the President asking
which agency is entitled to dispose of the proceeds of the "breakages" derived from the Tuesday
and Wednesday races.
In a letter dated May 21, 1987, the Office of the President, through then Deputy Executive
Secretary Catalino Macaraig, Jr., replied that "the disposition of the breakages rightfully
belongs to PHILRACOM, not only those derived from the Saturday, Sunday and holiday races,
but also from the Tuesday and Wednesday races in accordance with the distribution scheme
prescribed in said Executive Orders". 11
Controversy arose when herein respondent PHILRACOM, sent a series of demand letters to
petitioners MJCI and PRCI, requesting its share in the "breakages" of mid-week-races and
proof of remittances to other legal beneficiaries as provided under the franchise laws. On June 8,
1987, PHILRACOM sent a letter of demand to petitioners MJCI and PRCI asking them to remit
PHILRACOM's share in the "breakages" derived from the Tuesday, Wednesday and Thursday
races in this wise:
x x x           x x x          x x x
Pursuant to Board Resolution dated December 21, 1986, and Executive Order
Nos. 88 and 89 series of 1986, and the authority given by the Office of the
President dated May 21, 1987, please remit to the Commission the following:
1) PHILRACOM's share in the breakages derived
from Wednesday racing for the period starting December 22,
1976 up to the December 31, 1986.
2) PHILRACOM's share in the breakages derived from
Thursday racing for the period starting November 15, 1984 up
to December 31, 1984; and
3) PHILRACOM's share in the breakages derived from
Tuesday racing for the period starting January 15, 1985 up to
December, 1986.
4) Kindly furnish the Commission with the breakdown
of all breakages derived from Tuesday, Thursdays and
Wednesdays racing that you have remitted to the legal
beneficiaries. 12
On June 16, 1987, petitioners MJCI and PRCI sought reconsideration 13 of the May 21, 1987
opinion of then Deputy Executive Secretary Macaraig, but the same was denied by the Office of
the President in its letter dated April 11, 1988. 14
On April 25, 1988, PHILRACOM wrote another letter 15 to the petitioners MJCI and PRCI
seeking the remittance of its share in the breakages. Again, on June 13, 1990, PHILRACOM
reiterated its previous demand embodied in its letter of April 25, 1 988. 16
Petitioners ignored said demand. Instead, they filed a Petition for Declaratory Relief before the
Regional Trial Court, Branch 150 of Makati, on the ground that there is a conflict between the
previous opinion of PHILRACOM dated September 20, 1978 and the present position of
PHILRACOM, as declared and affirmed by the Office of the President in its letters dated May
21, 1987 and April 11, 1988. Petitioners averred that there was an "actual controversy" between
the parties, which should be resolved.
On March 11, 1991, the trial court rendered judgment, disposing as follows:
WHEREFORE, and in view of all the foregoing considerations, the Court
hereby declares and decides as follows:
a) Executive Orders Nos. 88 and 89 do not and cannot cover
the disposition and allocation of mid-week races, particularly
those authorized to be held during Tuesdays, Wednesdays and
those which are not authorized under Republic Acts 6631 and
6632; and
b) The ownership by the Manila Jockey Club, Inc. and the
Philippine Racing Club, Inc. of the breakages they derive from
mid-week races shall not be disturbed, with the reminder that
the breakages should be strictly and wholly utilized for the
purpose for which ownership thereof has been vested upon said
racing entities.
SO ORDERED. 17
Dissatisfied, respondent PHILRACOM filed a Petition for Certiorari with prayer for the
issuance of a writ of preliminary injunction before this Court, raising the lone question of
whether or not E.O. Nos. 88 and 89 cover breakages derived from the mid-week races. However,
we referred the case to the Court of Appeals, which eventually reversed the decision of the trial
court, and ruled as follows:
x x x           x x x          x x x
The decision on the part of PHILRACOM to authorize additional racing days
had the effect of widening the scope of Section 5 of RA 6631 and Section 7 of RA
6632. Consequently, private respondents derive their privilege to hold races on
the designated days not only their franchise acts but also from the order issued
by the PHILRACOM. No provision of law became inconsistent with the passage
of the Order granting additional racing days. Neither was there a special
provision set to govern those mid-week races. The reason is simple. There was
no need for any new provisions because there are enough general provisions to
cover them. The provisions on the disposition and allocation of breakages being
general in character apply to breakages derived on any racing day. 18
 x x x           x x x          x x x
WHEREFORE, based on the foregoing analysis and interpretation of the laws
in question, the judgment of the trial court is hereby SET ASIDE. Decision is
hereby rendered:
1. declaring Section 4 of RA 6631 as amended by E.O. 89 and Section 6 of RA
6632 as amended by E.O. 88 to cover the disposition and allocation of breakages
derived on all races conducted by private respondents on any racing day,
whether as provided for under Section 4 of RA 6631 or Section 6 of RA 6632 or
as ordered by PHILRACOM in the exercise of its powers under P.D. 420;
2. ordering private respondent to remit to PHILRACOM its share under E.O.
88 and E.O. 89 derived from races held on Tuesday, Wednesdays, Thursday as
authorized by PHILRACOM.
SO ORDERED. 19
Petitioners filed a motion for reconsideration, but it was denied for lack of merit, with
respondent Court of Appeals further declaring that:
x x x           x x x          x x x
In so far as the prospective application of Executive Orders Nos. 88 and 89 is
concerned. We have no disagreement with the respondents. Since
PHILRACOM became the beneficiary of the breakages only upon effectivity of
Executive Order Nos. 88 and 89, it is therefore entitled to such breakages from
December 16, 1986 when said Executive Orders were issued. However, we do
not concede that respondents are entitled to breakages prior to December 16,
1986 because it is clear that the applicable laws from 1976 to December 16, 1986
were R.A. 6631 and R.A. 6632, which specifically apportion the breakages to
specified beneficiaries among which was the PAAF, a government agency. Since
respondents admit that PHILRACOM (Petitioner) was merely placed in lieu of
PAAF as beneficiary/recipient of breakages, then whatever breakages was due
to PAAF as one of the beneficiaries under R.A. Nos. 6631 and 6632 accrued to
or should belong to PHILRACOM as successor to the defunct PAAF.
Finding the Motion for Reconsideration without merit, and for reasons
indicated, the Motion is denied.
SO ORDERED. 20
Consequent to the aforequoted adverse decision, petitioners MJCI and PRCI filed this petition
for review under Rule 45.
The main issue brought by the parties for the Court's resolution is: Who are the rightful
beneficiaries of the breakages derived from mid-week races? This issue also carries an ancillary
question: assuming PHILRACOM is entitled to the mid-week breakages under the law, should
the petitioners remit the money from the time the mid-week races started, or only upon the
promulgation of E.O. Nos. 88 and 89?
Petitioners assert that franchise laws should be construed to apply the distribution scheme
specifically and exclusively to the racing days enumerated in Sec. 5 of R.A. 6631, and Sec. 7 of
R.A. 6632. They claim that disposition of breakages under these laws should be limited to races
conducted on "all Saturdays, Sundays, and official holidays of the year, except, on those official
holidays where the law expressly provides that no horse races are to be held", hence, there is no
doubt that the breakages of Wednesday races shall belong to the racing clubs concerned. 21 They
even advance the view that "where a statute by its terms is expressly limited to certain matters, it
may not by interpretation or construction be extended to other matters" 22
However, respondent PHILRACOM contends that R.A. Nos. 6631 and 6632 are laws intended
primarily to grant petitioners their respective franchises to construct, operate, and maintain a
race track for horse racing. 23 When PHILRACOM added mid-week races, the franchises given
to the petitioners remained the same. Logically, what applies to races authorized under Republic
Act Nos. 6631 and 6632 should also apply to races additionally authorized by PHILRACOM,
namely mid-week races, because these are general provisions which apply general rues and
procedures governing the operation of the races. Consequently, if the authorized racing days are
extended, these races must therefore be governed by the same rules and provisions generally
provided therein.
We find petitioners' position on the main issue lacking in merit and far from persuasive.
Franchise laws are privileges 24 conferred by the government on corporations to do that "which
does not belong to the citizens of the country generally by common right". 25 As a rule, a
franchise springs from contracts between the sovereign power and the private corporation for
purposes of individual advantage as well as public benefit. 26 Thus, a franchise partakes of a
double nature and character. 27 In so far as it affects or concerns the public, it is public juris and
subject to governmental control. 28 The legislature may prescribe the conditions and terms upon
which it may be held, and the duty of grantee to the public exercising it. 29
As grantees of a franchise, petitioners derive their existence from the same. Petitioners'
operations are governed by all existing rules relative to horse racing provided they are not
inconsistent with each other and could be reasonably harmonized. Therefore, the applicable laws
are R.A. 309, as amended, R.A. 6631 and 6632, as amended by E.O. 88 and 89, P.D. 420 and the
orders issued PHILRACOM. Consequently, every statute should be construed in such a way that
will harmonize it with existing laws. This principle is expressed in the legal maxim "interpretare
et concordare leges legibus est optimus interpretandi", that is, to interpret and to do it in such a
way as to harmonize laws with laws is the best method of interpretation. 30
A reasonable reading of the horse racing laws favors the determination that the entities
enumerated in the distribution scheme provided under R.A. Nos. 6631 and 6632, as amended by
Executive Orders 88 and 89, are the rightful beneficiaries of breakages from mid-week races.
Petitioners should therefore remit the proceeds of breakages to those benefactors designated by
the aforesaid laws.
The holding of horse races on Wednesdays is in addition to the existing schedule of races
authorized by law. Since this new schedule became part of R.A. 6631 and 6632 the set of
procedures in the franchise laws applicable to the conduct of horse racing business must likewise
be applicable to Wednesday or other mid-week races. A fortiori, the granting of the mid-week
races does not require another legislative act to reiterate the manner of allocating the proceeds of
betting tickets. Neither does the allocation of breakages under the same provision need to be
isolated to construe another distribution scheme. No law can be viewed in a condition of isolation
or as the beginning of a new legal system. 31 A supplemental law becomes an addition to the
existing statutes, or a section thereof; and its effect is not to change in any way the provisions of
the latter but merely to extend the operation thereof, or give additional power to enforce its
provisions, as the case may be. In enacting a particular statute, legislators are presumed to have
full knowledge and to taken full cognizance of the existing laws on the same subject or those
relating thereto.
Proceeding to the subsidiary issue, the period for the remittance of breakages to the beneficiaries
should have commenced from the time PHILRACOM authorized the holding of mid-week races
because R.A. Nos. 6631 and 6632 were ready in effect then. The petitioners contend that they
cannot be held retroactively liable to respondent PHILRACOM for breakages prior to the
effectivity of E.O. Nos. 88 and 89. They assert that the real intent behind E.O. Nos. 88 and 89 was
to favor the respondent PHILRACOM anew with the benefits which formerly had accrued in
favor of Philippine Amateur Athletic Federation (PAAF). They opine that since laws operate
prospectively unless the legislator intends to give them retroactive effect, the accrual of these
breakages should start on December 16, 1986, the date of effectivity of E.O. Nos. 88 and
89. 32 Now, even if one of the benefactors of breakages, the PAAF, as provided by R.A. 6631 and
6632 had ceased operation, it is still not proper for the petitioners to presume that they were
entitled to PAAF's share. When the petitioners mistakenly appropriated the breakages for
themselves, they became the implied trustees for those legally entitled to the proceeds. This is in
consonance with Article 1456 of the Civil Code, which provides that:
Art. 1456 — If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.
The petitioners should have properly set aside amount for the defunct PAAF, until an alternative
beneficiary was designated, which as subsequently provided for by Executive Order Nos. 88 and
89, is PHILRACOM:
x x x           x x x          x x x
Secs. 2 — All the cash balances and accumulated amounts corresponding to the
share of the Philippine Amateur Athletic Federation/Ministry of Youth and
Sports Development, pursuant to Section 6 of Republic Act No. 6632, not
remitted by the Philippine Racing Club, Inc./Manila Jockey Club Inc., are
hereby transferred to the Philippine Racing Commission to be constituted into a
TRUST FUND to be used exclusively for the payment of additional prizes for
races sponsored by the Commission and for necessary outlays and other
expenses relative to horse-breeding activities of the National Stud Farm. . . . . . .
[E.O. No. 88]
x x x           x x x          x x x
Sec. 2. Any provision of law to the contrary notwithstanding, all cash balances
and accumulated amounts corresponding to the share of the Philippine
Amateur Athletic Federation/Ministry of Youth and Sports Development,
pursuant to Republic Act No. 6631, not remitted by the Manila Jockey Club,
Inc., are hereby constituted into a TRUST FUND to be used exclusively for the
payment of additional prizes for races sponsored by the Philippine Racing
Commission and for the necessary capital outlays and other expenses relative to
horse-breeding activities of the National Stud Farm. . . . . . . . [E.O. No. 89]
While herein petitioners might have relied on a prior opinion issued by an administrative body,
the well-entrenched principle is that the State could not be estopped by a mistake committed by
its officials or agents. 33 Well-settled also is the rule that the erroneous application of the law by
public officers does not prevent a subsequent correct application of the law. 34 Although there
was an initial interpretation of the law by PHILRACOM, a court of law could not be precluded
from setting that interpretation aside if later on it is shown to be inappropriate.
Moreover, the detrimental consequences of depriving the city hospitals and other institutions of
the funds needed for rehabilitation of drug dependents and other patients are all too obvious. It
goes without saying that the allocation of breakages in favor of said institutions is a policy
decision in pursuance of social development goals worthy of judicial approbation.
Nor could we be oblivious to the reality that horse racing although authorized by law is still a
form of gambling. Gambling is essentially antagonistic to the aims of enhancing national
productivity and self-reliance. 35 For this reason, legislative franchises impose limitations on
horse racing and betting. Petitioner's contention that a gambling franchise is a public contract
protected by the Constitutional provision on non-impairment of contract could not be left
unqualified. For as well said in Lim vs. Pacquing: 36
. . . it should be remembered that a franchise is not in the strict sense a simple
contract but rather it is, more importantly, a mere privilege specially in matters
which are within the government's power to regulate and even prohibit through
the exercise of the police power. Thus, a gambling franchise is always subject to
the exercise of police power for the public welfare. 37
That is why we need to stress anew that a statute which authorizes a gambling activity or
business should be strictly construed, and every reasonable doubt be resolved so as to limit
rather than expand the powers and rights claimed by franchise holders under its authority. 38

WHEREFORE, there being no reversible error, the appealed decision and the resolution of the 7. G.R. No. 111953 December 12, 1997
respondent Court of Appeals in CA-G.R. SP No. 25251, are hereby AFFIRMED, and the instant
petition is hereby DENIED for lack of merit.
HON. RENATO C. CORONA, in his capacity as Assistant Secretary for Legal Affairs, HON.
JESUS B. GARCIA, in his capacity as Acting Secretary, Department of Transportation and
Costs against petitioners. Communications, and ROGELIO A. DAYAN, in his capacity as General Manager of Philippine
Ports Authority, petitioners,
SO ORDERED. vs.
UNITED HARBOR PILOTS ASSOCIATION OF THE PHILIPPINES and MANILA PILOTS
ASSOCIATION, respondents.

ROMERO, J.:

In issuing Administrative Order No. 04-92 (PPA-AO No. 04-92), limiting the term of appointment of
harbor pilots to one year subject to yearly renewal or cancellation, did the Philippine Ports Authority
(PPA) violate respondents' right to exercise their profession and their right to due process of law?

The PPA was created on July 11, 1974, by virtue of Presidential Decree No. 505. On December 23,
1975, Presidential Decree No. 857 was issued revising the PPA's charter. Pursuant to its power of
control, regulation, and supervision of pilots and the pilotage profession,1 the PPA promulgated PPA-
AO-03-852 on March 21, 1985, which embodied the "Rules and Regulations Governing Pilotage
Services, the Conduct of Pilots and Pilotage Fees in Philippine Ports." These rules mandate, inter alia,
that aspiring pilots must be holders of pilot licenses 3 and must train as probationary pilots in outports
for three months and in the Port of Manila for four months. It is only after they have achieved
satisfactory performance4 that they are given permanent and regular appointments by the PPA
itself5 to exercise harbor pilotage until they reach the age of 70, unless sooner removed by reason of
mental or physical unfitness by the PPA General Manager. 6 Harbor pilots in every harbor district are
further required to organize themselves into pilot associations which would make available such
equipment as may be required by the PPA for effective pilotage services. In view of this mandate, pilot
associations invested in floating, communications, and office equipment. In fact, every new pilot
appointed by the PPA automatically becomes a member of a pilot association and is required to pay a
proportionate equivalent equity or capital before being allowed to assume his duties, as reimbursement
to the association concerned of the amount it paid to his predecessor.

Subsequently, then PPA General Manager Rogelio A. Dayan issued PPA-AO No. 04-927 on July 15,
1992, whose avowed policy was to "instill effective discipline and thereby afford better protection to
the port users through the improvement of pilotage services." This was implemented by providing
therein that "all existing regular appointments which have been previously issued either by the Bureau
of Customs or the PPA shall remain valid up to 31 December 1992 only" and that "all appointments to
harbor pilot positions in all pilotage districts shall, henceforth, be only for a term of one (1) year from
date of effectivity subject to yearly renewal or cancellation by the Authority after conduct of a rigid
evaluation of performance."
On August 12, 1992, respondents United Harbor Pilots Association and the Manila Pilots Association,
through Capt. Alberto C. Compas, questioned PPA-AO No. 04-92 before the Department of
Transportation and Communication, but they were informed by then DOTC Secretary Jesus B. Garcia
that "the matter of reviewing, recalling or annulling PPA's administrative issuances lies exclusively
with its Board of Directors as its governing body."
Meanwhile, on August 31, 1992, the PPA issued Memorandum Order No. 08-928 which laid down the
criteria or factors to be considered in the reappointment of harbor pilot, viz.: (1) Qualifying
Factors:9 safety record and physical/mental medical exam report and (2) Criteria for
Evaluation:10 promptness in servicing vessels, compliance with PPA Pilotage Guidelines, number of
years as a harbor pilot, average GRT of vessels serviced as pilot, awards/commendations as harbor
pilot, and age.
Respondents reiterated their request for the suspension of the implementation of PPA-AO No. 04-92,
but Secretary Garcia insisted on his position that the matter was within the jurisdiction of the Board of
Directors of the PPA. Compas appealed this ruling to the Office of the President (OP), reiterating his
arguments before the DOTC.
On December 23, 1992, the OP issued an order directing the PPA to hold in abeyance the
implementation of PPA-AO No. 04-92. In its answer, the PPA countered that said administrative order
was issued in the exercise of its administrative control and supervision over harbor pilots under Section
6-a (viii), Article IV of P.D. No. 857, as amended, and it, along with its implementing guidelines, was
intended to restore order in the ports and to improve the quality of port services.
On March 17, 1993, the OP, through then Assistant Executive Secretary for Legal Affairs Renato C.
Corona, dismissed the appeal/petition and lifted the restraining order issued earlier. 11 He concluded that
PPA-AO No. 04-92 applied to all harbor pilots and, for all intents and purposes, was not the act of
Dayan, but of the PPA, which was merely implementing Section 6 of P.D. No. 857, mandating it "to
control, regulate and supervise pilotage and conduct of pilots in any port district."
On the alleged unconstitutionality and illegality of PPA-AO No. 04-92 and its implementing
memoranda and circulars, Secretary Corona opined that:
The exercise of one's profession falls within the constitutional guarantee against wrongful
deprivation of, or interference with, property rights without due process. In the limited
context of this case. PPA-AO 04-92 does not constitute a wrongful interference with, let alone
a wrongful deprivation of, the property rights of those affected thereby. As may be noted, the
issuance aims no more than to improve pilotage services by limiting the appointment to
harbor pilot positions to one year, subject to renewal or cancellation after a rigid evaluation of
the appointee's performance.
PPA-AO 04-92 does not forbid, but merely regulates, the exercise by harbor pilots of their
profession in PPA's jurisdictional area. (Emphasis supplied)
Finally, as regards the alleged "absence of ample prior consultation" before the issuance of the
administrative order, Secretary Corona cited Section 26 of P.D. No. 857, which merely requires the
PPA to consult with "relevant Government agencies." Since the PPA Board of Directors is composed
of the Secretaries of the DOTC, the Department of Public Works and Highways, the Department of
Finance, and the Department of Environment and Natural Resources, as well as the Director-General
of the National Economic Development Agency, the Administrator of the Maritime Industry Authority
(MARINA), and the private sector representative who, due to his knowledge and expertise, was
appointed by the President to the Board, he concluded that the law has been sufficiently complied with
by the PPA in issuing the assailed administrative order.
Consequently, respondents filed a petition for certiorari, prohibition and injunction with prayer for the
issuance of a temporary restraining order and damages, before Branch 6 of the Regional Trial Court of
Manila, which was docketed as Civil Case No. 93-65673. On September 6, 1993, the trial court
rendered the following judgment:12
WHEREFORE, for all the foregoing, this Court hereby rules that:
1. Respondents (herein petitioners) have acted excess jurisdiction and with grave abuse of
discretion and in a capricious, whimsical and arbitrary manner in promulgating PPA
Administrative Order 04-92 including all its implementing Memoranda, Circulars and Orders;
2. PPA Administrative Order 04-92 and its implementing Circulars and Orders are declared
null and void;
3. The respondents are permanently enjoined from implementing PPA Administrative Order
04-92 and its implementing Memoranda, Circulars and Orders.
No costs.
SO ORDERED.
The court a quo pointed out that the Bureau of Customs, the precursor of the PPA, recognized pilotage
as a profession and, therefore, a property right under Callanta v. Carnation Philippines, Inc.13 Thus,
abbreviating the term within which that privilege may be exercised would be an interference with the
property rights of the harbor pilots. Consequently, any "withdrawal or alteration" of such property right
must be strictly made in accordance with the constitutional mandate of due process of law. This was
apparently not followed by the PPA when it did not conduct public hearings prior to the issuance of
PPA-AO No. 04-92; respondents allegedly learned about it only after its publication in the newspapers.
From this decision, petitioners elevated their case to this Court on certiorari.
After carefully examining the records and deliberating on the arguments of the parties, the Court is
convinced that PPA-AO No. 04-92 was issued in stark disregard of respondents' right against
deprivation of property without due process of law. Consequently, the instant petition must be denied.
Section 1 of the Bill of Rights lays down what is known as the "due process clause" of the
Constitution, viz.:
Sec. 1. No person shall be deprived of life, liberty, or property without due process of law, . . .
In order to fall within the aegis of this provision, two conditions must concur, namely, that there is a
deprivation and that such deprivation is done without proper observance of due process. When one
speaks of due process of law, however, a distinction must be made between matters of procedure and
matters of substance. In essence, procedural due process "refers to the method or manner by which the
law is enforced," while substantive due process "requires that the law itself, not merely the procedures
by which the law would be enforced, is fair, reasonable, and just."14 PPA-AO No. 04-92 must be
examined in light of this distinction.
Respondents argue that due process was not observed in the adoption of PPA-AO No. 04-92 allegedly
because no hearing was conducted whereby "relevant government agencies" and the pilots themselves
could ventilate their views. They are obviously referring to the procedural aspect of the enactment.
Fortunately, the Court has maintained a clear position in this regard, a stance it has stressed in the
recent case of Lumiqued v. Hon. Exevea,15 where it declared that "(a)s long as a party was given the
opportunity to defend his interests in due course, he cannot be said to have been denied due process of
law, for this opportunity to be heard is the very essence of due process. Moreover, this constitutional
mandate is deemed satisfied if a person is granted an opportunity to seek reconsideration of the action
or ruling complained of."
In the case at bar, respondents questioned PPA-AO No. 04-92 no less than four times16 before the
matter was finally elevated to this Tribunal. Their arguments on this score, however, fail to persuade.
While respondents emphasize that the Philippine Coast Guard, "which issues the licenses of pilots after
administering the pilots' examinations," was not consulted,17 the facts show that the MARINA, which
took over the licensing function of the Philippine Coast Guard, was duly represented in the Board of
Directors of the PPA. Thus, petitioners correctly argued that, there being no matters of naval defense
involved in the issuance of the administrative order, the Philippine Coast Guard need not be
consulted.18
Neither does the fact that the pilots themselves were not consulted in any way taint the validity of the
administrative order. As a general rule, notice and hearing, as the fundamental requirements of
procedural due process, are essential only when an administrative body exercises its quasi-
judicial function. In the performance of its executive or legislative functions, such as issuing rules and
regulations, an administrative body need not comply with the requirements of notice and hearing. 19
Upon the other hand, it is also contended that the sole and exclusive right to the exercise of harbor
pilotage by pilots is a settled issue. Respondents aver that said right has become vested and can only be
"withdrawn or shortened" by observing the constitutional mandate of due process of law. Their
argument has thus shifted from the procedural to one of substance. It is here where PPA-AO No. 04-92
fails to meet the condition set by the organic law.
There is no dispute that pilotage as a profession has taken on the nature of a property right. Even
petitioner Corona recognized this when he stated in his March 17, 1993, decision that "(t)he exercise of
one's profession falls within the constitutional guarantee against wrongful deprivation of, or
interference with, property rights without due process."20 He merely expressed the opinion the "(i)n the
limited context of this case, PPA-AO 04-92 does not constitute a wrongful interference with, let alone
a wrongful deprivation of, the property rights of those affected thereby, and that "PPA-AO 04-95 does
not forbid, but merely regulates, the exercise by harbor pilots of their profession." As will be presently
demonstrated, such supposition is gravely erroneous and tends to perpetuate an administrative order
which is not only unreasonable but also superfluous.
Pilotage, just like other professions, may be practiced only by duly licensed individuals. Licensure is
"the granting of license especially to practice a profession." It is also "the system of granting licenses
(as for professional practice) in accordance with establishment standards." 21 A license is a right or
permission granted by some competent authority to carry on a business or do an act which, without
such license, would be illegal.22
Before harbor pilots can earn a license to practice their profession, they literally have to pass through
the proverbial eye of a needle by taking, not one but five examinations, each followed by actual
training and practice. Thus, the court a quo observed:
Petitioners (herein respondents) contend, and the respondents (herein petitioners) do not deny,
the here (sic) in this jurisdiction, before a person can be a harbor pilot, he must pass five (5)
government professional examinations, namely, (1) For Third Mate and after which he must
work, train and practice on board a vessel for at least a year; (2) For Second Mate and after
which he must work, train and practice for at least a year; (3) For Chief Mate and after which
he must work, train and practice for at least a year; (4) For a Master Mariner and after which
he must work as Captain of vessel for at least two (2) years to qualify for an examination to be
a pilot; and finally, of course, that given for pilots.
Their license is granted in the form of an appointment which allows them to engage in pilotage until
they retire at the age 70 years. This is a vested right. Under the terms of PPA-AO No. 04-92, "(a)ll
existing regular appointments which have been previously issued by the Bureau of Customs or the PPA
shall remain valid up to 31 December 1992 only," and "(a)ll appointments to harbor pilot positions in
all pilotage districts shall, henceforth, be only for a term of one (1) year from date of effectivity subject
to renewal or cancellation by the Authority after conduct of a rigid evaluation of performance."
It is readily apparent that PPA-AO No. 04-92 unduly restricts the right of harbor pilots to enjoy their
profession before their compulsory retirement. In the past, they enjoyed a measure of security knowing
that after passing five examinations and undergoing years of on-the-job training, they would have a
license which they could use until their retirement, unless sooner revoked by the PPA for mental or
physical unfitness. Under the new issuance, they have to contend with an annual cancellation of their
license which can be temporary or permanent depending on the outcome of their performance
evaluation. Veteran pilots and neophytes alike are suddenly confronted with one-year terms which ipso
facto expire at the end of that period. Renewal of their license is now dependent on a "rigid evaluation
of performance" which is conducted only after the license has already been cancelled. Hence, the use
of the term "renewal." It is this pre-evaluation cancellation which primarily makes PPA-AO No. 04-92
unreasonable and constitutionally infirm. In a real sense, it is a deprivation of property without due
process of law.
The Court notes that PPA-AO No. 04-92 and PPA-MO No. 08-92 are already covered by PPA-AO No.
03-85, which is still operational. Respondents are correct in pointing out that PPA-AO No. 04-92 is a
"surplusage"23 and, therefore, an unnecessary enactment. PPA-AO 03-85 is a comprehensive order
setting forth the "Rules and Regulations Governing Pilotage Services, the Conduct of Pilots and
Pilotage Fees in Philippine Ports." It provides, inter alia, for the qualification, appointment,
performance evaluation, disciplining and removal of harbor pilots — matters which are duplicated in
PPA-AO No. 04-92 and its implementing memorandum order. Since it adds nothing new or
substantial, PPA-AO No. 04-92 must be struck down.
Finally, respondents' insinuation that then PPA General Manager Dayan was responsible for the
issuance of the questioned administrative order may have some factual basis; after all, power and
authority were vested in his office to propose rules and regulations. The trial court's finding of
animosity between him and private respondents might likewise have a grain of truth. Yet the number of
cases filed in court between private respondents and Dayan, including cases which have reached this
Court, cannot certainly be considered the primordial reason for the issuance of PPA-AO No. 04-92. In
the absence of proof to the contrary, Dayan should be presumed to have acted in accordance with law
and the best of professional motives. In any event, his actions are certainly always subject to scrutiny
by higher administrative authorities.
WHEREFORE, the instant petition is hereby DISMISSED and the assailed decision of the court a
quo dated September 6, 1993, in Civil Case No. 93-65673 is AFFIRMED. No pronouncement as to
costs.
SO ORDERED.
Digest:
Facts:
The PPA was created... on July 11, 1974,... by virtue of Presidential Decree No. 505.
On December 23, 1975, Presidential Decree No. 857 was issued revising the PPA's charter.
Pursuant to its power of control, regulation, and supervision of pilots and the pilotage profession,... [1]
the PPA promulgated PPA-AO-03-85 [2] on March 21, 1985, which embodied the "Rules and
Regulations Governing Pilotage Services, the Conduct of Pilots and Pilotage Fees in Philippine Ports."
These rules mandate, inter alia, that... aspiring pilots must be holders of pilot licenses [3] and must
train as probationary pilots in outports for three months and in the Port of Manila for four months.
It is only after they have achieved satisfactory performance [4] that... they are given permanent and
regular appointments by the PPA itself [5] to exercise harbor pilotage until they reach the age of 70,
unless sooner removed by reason of mental or physical unfitness by the PPA General Manager.
Subsequently, then PPA General Manager Rogelio A. Dayan issued PPA-AO No. 04-92... whose
avowed policy was to "instill effective discipline and thereby afford better protection to the port users
through the improvement of pilotage... services."... and that "all appointments to harbor pilot positions
in all... pilotage districts shall, henceforth, be only for a term of one (1) year from date of effectivity
subject to yearly renewal or cancellation by the Authority after conduct of a rigid evaluation of
performance."
On August 12, 1992, respondents United Harbor Pilots Association and the Manila Pilots Association,
through Capt. Alberto C. Compas, questioned PPA-AO No. 04-92 before the Department of
Transportation and Communication... n March 17, 1993, the OP, through then Assistant Executive
Secretary for Legal Affairs Renato C. Corona, dismissed the appeal/petition and lifted the restraining
order issued earlier.
On the alleged unconstitutionality and illegality of PPA-AO No. 04-92 and its implementing
memoranda and circulars, Secretary Corona opined that:
"The exercise of one's profession falls within the constitutional guarantee against wrongful deprivation
of, or interference with, property rights without due process. In the limited context of this case, PPA-
AO 04-92 does not constitute a wrongful interference with,... let alone a wrongful deprivation of, the
property rights of those affected thereby. As may be noted, the issuance aims no more than to improve
pilotage services by limiting the appointment to harbor pilot positions to one year, subject to renewal
or cancellation after a rigid... evaluation of the appointee's performance.
Issues:
Respondents (herein petitioners) have acted in excess of jurisdiction and with grave abuse of discretion
and in a capricious, whimsical and arbitrary manner in promulgating PPA Administrative Order 04-92
including all its implementing Memoranda, Circulars and Orders;
Ruling:
The court a quo pointed out that the Bureau of Customs, the precursor of the PPA, recognized pilotage
as a profession and, therefore, a property right under Callanta v. Carnation Philippines, Inc.
Consequently, any "withdrawal or alteration" of such property right must be strictly made in
accordance with the constitutional mandate of due process of law.
This was apparently not... followed by the PPA when it did not conduct public hearings prior to the
issuance of PPA-AO No. 04-92; respondents allegedly learned about it only after its publication in the
newspapers.
After carefully examining the records and deliberating on the arguments of the parties, the Court is
convinced that PPA-AO No. 04-92 was issued in stark disregard of respondents' right against
deprivation of property without due process of law. Consequently, the instant petition... must be
denied.
SECTION 1. No person shall be deprived of life, liberty, or property without due process of law, x x
x."
In order to fall within the aegis of this provision, two conditions must concur, namely, that there is a
deprivation and that such deprivation is done without proper observance of due process. When one
speaks of due process of law, however, a distinction must be made between... matters of procedure and
matters of substance. In essence, procedural due process "refers to the method or manner by which the
law is enforced," while substantive due process "requires that the law itself, not merely the procedures
by which the law would be enforced, is fair,... reasonable, and just." [14] PPA-AO No. 04-92 must be
examined in light of this distinction.
Respondents argue that due process was not observed in the adoption of PPA-AO No. 04-92 allegedly
because no hearing was conducted whereby "relevant government agencies" and the pilots themselves
could ventilate their views. They are obviously referring to the procedural aspect... of the enactment.
Neither does the fact that the pilots themselves were not consulted in any way taint the validity of the
administrative order. As a general rule, notice and hearing, as the fundamental requirements of
procedural due process, are essential only when an administrative body... exercises its quasi-judicial
function. In the performance of its executive or legislative functions, such as issuing rules and
regulations, an administrative body need not comply with the requirements of notice and hearing.
There is no dispute that pilotage as a profession has taken on the nature of a property right.
A license is a right or permission granted by some competent authority to carry on a business or do an
act which, without such license, would be illegal.
8. G.R. No. L-36130 January 17, 1985
LA SUERTE CIGAR AND CIGARETTE FACTORY, BATAAN CIGAR AND CIGARETTE
FACTORY, INC., LA PERLA INDUSTRIES, INC., PIONEER TOBACCO CORPORATION,
INSULAR-YEBANA TOBACCO CORPORATION, LAS BUENAS FABRICA DE
CIGARILLOS, INC., LA DICHA CIGAR & CIGARETTE FACTORY, CONSOLIDATED
TOBACCO INDUSTRIES OF THE PHILIPPINES, INC., LA CAMPANA FABRICA DE
TABACOS, INC., ASSOCIATED ANGLO-AMERICAN TOBACCO CORPORATION,
FORTUNE TOBACCO CORPORATION, BAGUMBUHAY CIGAR AND CIGARETTE
FACTORY, STANDARD CIGARETTE MANUFACTURING CO., INC., and D.L. TERUEL
TOBACCO CO., INC., petitioners,
vs.
COURT OF TAX APPEALS and HON. MISAEL P. VERA, in his capacity as Commissioner of
Internal Revenue, respondents.
G.R. No. L-36131 January 17, 1985
ALHAMBRA INDUSTRIES, INC., LA FLOR DE LA ISABELA, INCORPORADA and
COLUMBIA TOBACCO COMPANY, INC., petitioners,
vs.
COURT OF TAX APPEALS and HON. MISAEL P. VERA, in his capacity as Commissioner of
Internal Revenue, respondents.
Jose Arañas for petitioners.
The Solicitor General for respondents,
CUEVAS, J.:
Petition for Review on certiorari of the decisions 1 of the Court of Tax Appeals in CTA Cases Nos.
2048 and 2031, denying petitioners' claims for the refund of P1,606,509.83 imposed and collected by
respondent Commissioner of Internal Revenue as tobacco inspection fees on cigars and cigarettes
manufactured for domestic sale and/or consumption.
These two cases were heard jointly by the Court of Tax Appeals the parties being represented by one
and the same counsel and involving as they do, the same legal issues. The amounts involved are not
disputed.
On August 22, 1967, respondent Commissioner of Internal Revenue issued Memorandum Circular No.
30-67 2 requiring the inspection of (a) all locally produced leaf tobacco and partially manufactured
tobacco intended for domestic sale, for factory use or for export; (b) all manufactured products of
tobacco contemplated in Sec. 194(m) of the Tax Code intended for domestic sale; and (c) all imported
foreign leaf tobacco and partially manufactured tobacco for domestic sale or factory use, and the
collection of the corresponding inspection fees.
Pursuant to said Memorandum respondent collected from petitioners, over the latter's vehement
protests, the following inspection fees:
(a) 199,632.19 during the period from September 1967 to April 1969, in CTA Case
No. 2031;
(b) 1,406,877.64 during the period from September 1967 to August 1969, in CTA
Case No. 2048.
Petitioners in two separate cases, sought the refund of the aforementioned inspection fees collected
from them CTA Case No. 2031 was submitted by petitioners for summary judgment. In a decision
dated November 28, 1970, CTA denied the claim for the refund of the amount of P199,632.19.
Before the finality of the said decision, however, petitioners moved for a reconsideration thereby
praying that in case of a denial, CTA Case No. 2031 be reopened for the reception of evidence in
support of their argument that there was no inspection made by the BIR nor were inspection labels
affixed to the boxes and packages containing the cigars and cigarettes which would warrant the
imposition and collection of the disputed tobacco inspection fees.
On September 28, 1971, the CTA granted petitioners' motion to reopen but denied the motion for
reconsideration. Said court likewise ordered that CTA Cases Nos. 2048 and 2031 be heard jointly.
After hearing, the CTA on December 15, 1972 denied both claims.
Petitioners contend that the CTA erred:
I Sec. 6. The Commissioner of Internal Revenue shall have the power and it shall be
IN REACHING A CONCLUSION CONTRARY TO PETITIONERS' POSITION
THAT INSPECTION FEES COLLECTED FROM THEM BY RESPONDENT ON
THE CIGARS AND CIGARETTES MANUFACTURED BY THEM FOR
DOMESTIC SALE OR CONSUMPTION WERE SO COLLECTED ILLEGALLY
AND HENCE, SHOULD BE REFUNDED TO THEM;
II
IN REFUSING TO HOLD THAT RESPONDENT COMMISSIONER'S REVENUE
MEMORANDUM CIRCULAR WHICH PURPORTS TO DECLARE
PETITIONERS LIABLE FOR THE AFORESAID INSPECTION FEES, AND IN
VIRTUE OF WHICH, THE SAID FEES WERE COLLECTED, IS WITHOUT
ANY BINDING FORCE AND EFFECT ON THE LATTER, BECAUSE OF THE
ADMITTED FACT THAT IT IS NOT A REGULATION PROMULGATED BY
THE SECRETARY OF FINANCE, AS REQUIRED BY SECTION 4(j) AND 338
OF THE NIRC, AND FURTHER, BECAUSE OF THE EQUALLY ADMITTED
FACT THAT IT HAS NEVER BEEN PUBLISHED IN THE OFFICIAL
GAZETTE, AS REQUIRED NOT ONLY BY ART. 2 OF THE CIVIL CODE, BUT
ALSO BY SEC. 79(b) OF THE REVISED ADMINISTRATIVE CODE;
III
IN DISREGARDING THE FACT BORNE OUT BY UNDISPUTED EVIDENCE
THAT NO INSPECTION OF THE CIGARS AND CIGARETTES
AFOREMENTIONED WAS ACTUALLY CONDUCTED FOR WHICH REASON
NO COLLECTION OF INSPECTION FEES WAS LEGALLY WARRANTED; and
IV
IN FAILING TO HOLD THAT THE PROVISIONS OF THE TOBACCO
INSPECTION LAW (SEC. 6[c]) UNDER WHICH THE SAID REVENUE
MEMORANDUM CIRCULAR PURPORTS TO DECLARE PETITIONERS'
CIGAR AND CIGARETTES FOR DOMESTIC SALE OR CONSUMPTION
SUBJECT TO INSPECTION AND THE PAYMENT OF INSPECTION FEES,
REFER ALONE TO LEAF TOBACCO FOR DOMESTIC SALE OR FACTORY
USE, NOT TO CIGARS AND CIGARETTES FOR DOMESTIC CONSUMPTION,
AND HENCE, THE SAID MEMORANDUM CIRCULAR IS ULTRA VIRES AND
VOID.
Section 6(c) of Act 2613 (Tobacco Inspection Law), before its amendment by Republic Act No. 3 1,
provides:
his duty: ...
xxx xxx xxx
(c) To require, whenever it shall be deemed expedient, the inspection of and affixture
of inspection labels to tobacco removed from the province before such removal or to
tobacco for domestic sale or factory use.
As amended, (by RA 31) said Section 6, Republic Act No. 31 (October 1, 1946) now reads:
 Sec. 6. The Commissioner of Internal Revenue shall have the power and it shall be
his duty:
xxx xxx xxx
(c) To require, whenever it shall be deemed expedient, the inspection of and affixture
of inspection labels to tobacco removed from province of its origin to another or
other provinces before such removal or to tobacco for domestic sale or factory use.
(Emphasis supplied)
The amendatory bill (House Bill No. 735) which later on became Republic Act No. 31, carried the
following explanatory note:
EXPLANATORY NOTE
Under Section 6 of the Tobacco Inspection Law (Act No. 2613), the Collector of
Internal Revenue is authorized to promulgate rules relative to the classification,
marking and packaging of leaf tobacco for domestic sale or for exportation in order
to insure the use of leaf tobacco of good quality and its handling under sanitary
conditions. Section 1 of the attached bill seeks to extend this regulatory power of the
Collector of Internal Revenue to leaf tobacco intended for factory use.
xxx xxx xxx
xxx xxx xxx
Under the present law only leaf and manufactured tobacco for export to the United
States are subject to inspection. Under the proposed amendment, the standard type
and packing of all leaf and manufactured tobacco for export to any foreign country
will come under the regulatory power of the Collector of Internal Revenue.
(Emphasis supplied)
It was petitioners' contention that the amendatory portion reading "or to tobacco for domestic sale or
factory use" in Sec. 6(c) of Act 2613, refers to leaf tobacco whether for local sale or factory use and
does not include cigars and cigarettes for domestic sale or consumption.
We do not agree.
Prior to the amendment of said Act, Sec. 6 and 7 thereof, already covered the inspection of leaf
tobacco, partially manufactured tobacco or local sale and leaf tobacco and its products for export. If the
intention of Congress was to apply the amendment to those items already covered by Act 2613, then
the word "leaf" should have been easily included to modify the term "tobacco". The omission of the
word "leaf" is a clear indication that Congress intended to include within the purview of the law a new
item; namely, manufactured tobacco products for domestic sale and imported tobacco for factory use.
As aptly held by the CTA:
xxx xxx xxx
Petitioners' contention that the phrase 'tobacco for domestic sale' refers to leaf
tobacco alone is restrictive, misleading, and against sound statutory construction.
Webster's New International Dictionary 2nd Edition, p. 2653 defines tobacco as the
leaves of the tobacco plant, prepared by drying and various manufacturing processes,
and use either for smoking or chewing, or as snuff, or the manufactured products
from tobacco leave smoking or chewing tobacco cigar cigarette etc. collectively
From the above definition, it is clear that the word "tobacco" refers both to leaf and
manufactured tobacco such as cigars, and cigarettes It is to be noted that either
Section 6(c) of Act No. 2613 or the amendatory law does not make a distinction as to
the meaning of the word "tobacco". Since our la g body used the word tobacco in the
general sense without any qualification, this Court is powerless to give it a restrictive
meaning.
xxx xxx xxx
If Congress of the Philippines really intended to restrict the meaning of the word
'tobacco' under Republic Act No. 31, which took effect on October 1, 1946, in order
to limit the scope of the term tobacco under the law originally passed in 1916 and its
implementing Regulations Nos. 17 and 47, it could have easily inserted the word
"leaf" to modify "tobacco" contained in the amendatory law. An examination of
Sections 6(a), 6(b) and 7, supra, reveals that, if our lawmaking body intended to limit
the coverage of said sections to either leaf or manufactured tobacco, it qualified the
word 'tobacco' with such antecedent words. In Section 6(c) of Act 2613, as amended,
no such qualification was made by Congress, thereby showing the broad scope and
meaning of the word tobacco. For the Court to adopt petitioners' construction that
tobacco means 'leaf tobacco' would be engaging in unauthorized judicial legislation
by rewriting the law and inserting words and phrases not found in it.
xxx xxx xxx
Settled is the rule that where the law does not distinguish, we should not distinguish. 3
The validity and efficacy of Revenue Memorandum Circular No. 30-67 is now being assailed by
petitioners on the ground that it is not a regulation promulgated by the Secretary of Finance (now
Minister of Finance) and that it has never been published in the Official Gazette as required by the
Civil Code and the Revised Administrative Code.
As herein earlier mentioned, the word "leaf", although used to modify the term "tobacco" only in the
Explanatory Note to then House Bill No. 735 was omitted when the Bill was signed into law (RA 31).
However, when General Circular No. V-27 dated October 29, 1946 was issued by then Collector of
Internal Revenue Bibiano L. Meer to implement the provisions of Sections 6, 7 and 14 of Act 2613
(Tobacco Inspection Law), the word "leaf" was erroneously included therein, causing damage to the
financial stability of the Government as the inspection fees due on cigars and cigarettes for domestic
sale and imported leaf and partially manufactured tobacco for factory use were not collected for more
than twenty (20) years. Such error was only discovered when an Assistant Chief of the Tobacco
Inspection Service of the BIR appeared in a public hearing of the Joint Legislative-Executive Tax
Commission. As a result thereof, the Philippine Tobacco Board, a policy making body of the National
Government on Tobacco Authority, adopted Resolution No. 2-67 interpreting the phrase "tobacco for
domestic sale" as referring to wholesale disposal of tobacco products by cigar and cigarettes factories
to its dealers while the phrase "tobacco for factory use" meant "imported leaf tobacco" intended for use
by cigar and cigarette factories in the manufacture of tobacco products. The approval of this Resolution
on May 31, 1967 prompted respondent Commissioner to promulgate Memorandum Circular No. 30-67
which was approved by then Secretary of Finance Eduardo Z. Romualdez and the effectivity of which
is specifically dated September 1, 1967 and not contingent on its publication in the Official Gazette.
Thus, the assailed Revenue Memorandum Circular was issued to rectify the error in General Circular
No. V-27 and to interpret the phrase "tobacco for domestic sale or factory use" with the view of
arresting huge losses of tobacco inspection fees which were not collected and imposed since the said
Circular (No. V-27) took effect. Furthermore, the questioned Revenue Memorandum Circular was also
issued to apprise those concerned of the construction and interpretation which should be accorded to
Act No. 2613, as amended, and which respondent is duty bound to enforce. It is an opinion on how the
law should be construed and there was no attempt whatsoever to enlarge or restrict the meaning of the
law.
The basis for the issuance of said Memorandum Circular was so stated in Resolution No. 2-67 of the
Tobacco Board, wherein petitioners as members of the Manila Tobacco Association, Inc. were duly
represented, the pertinent portions of which read:
xxx xxx xxx
WHEREAS, tills original recommendation of Mr. Hernandez was perfectly in
accordance with eating law, more particularly Sec. 1 of Republic Act No. 31 which
took effect since September 25, 1946, but perhaps thru oversight by the former
Commissioners and officers of the Tobacco Inspection Service the property and
legality of effecting the inspection of tobacco products for local sales and imported
leaf tobacco for factory use might have overlooked resulting in huge losses of
tobacco inspection fees ... (Emphasis supplied)
As admitted by counsel for petitioners, the latter were each furnished with a copy of the Revenue
Memorandum Circular in question and the purpose of the law, that is to inform or notify those who
may be affected, has been substantially complied with. Since it was further admitted by petitioners that
said Memorandum is but a "Memorandum Circular for purposes of the internal administration of the
BIR and not a regulation within the contemplation of Sections 4 and 338 of the NIRC and Section
79(b) of the Revised Administrative Code", said circular needs no publication in the Official Gazette as
erroneously argued by the petitioners.
Section 79(b) of the Revised Administrative Code so provides:
Chiefs, of bureaus or offices, may, however, be authorized to promulgate circulars or
information or instructions for the government of the officers and employees in the
interior administration of the business of each bureau or office, and in such case said
circular shall not be required to be published.
When an administrative agency renders an opinion by means of a circular or Memorandum, it merely
interprets a pre-existing law, and no publication is necessary for its validity. 4 Construction by an
executive branch of government of a particular law although not binding upon courts must be given
weight as the construction come from the branch of the government called upon to implement the
law. 5
The promulgation of Revenue Memorandum Circular No. 30-67 being in accordance with the Revised
Administrative Code, having been issued by the Commissioner of Internal Revenue with the approval
of the Secretary (now Minister) of Finance for the implementation of the Tobacco Inspection Law, has
therefore the force and effect of law.
Tobacco Inspection fees are undoubtedly National Internal Revenue taxes, they being one of the
miscellaneous taxes provided for under the Tax Code. Section 228 (formerly Section 302) of Chapter
VII of the Code specifically provides for the collection and manner of payment of the said inspection
fees. It is within the power and duty of the Commissioner to collect the same, even without inspection,
should tobacco products be removed clandestinely or surreptitiously from the establishment of the
wholesaler, manufacturer or redrying plant and from the customs custody in case of imported leaf
tobacco. Errors, omissions or flaws committed by BIR inspectors and representatives while in the
performance of their duties cannot be set up as estoppel nor estop the Government from collecting a
tax legally due. 6 Tobacco inspection fees are levied and collected for purposes of regulation and
control and also as a source of revenue since fifty percentum (50%) of said fees shall accrue to the
Tobacco Inspection Fee Fund created by Sec. 12 of Act No. 2613, as amended and the other fifty
percentum to the Cultural Center of the Philippines. (Sec. 88, Chapter VII, NIRC)
Under the circumstances, a refund of the tobacco inspection fees collected from petitioners is not
legally warranted.
As disclosed by the records, the party-litigants agreed that Mr. Vicente Chua's, (Production Manager of
La Suerte Cigar & Cigarette Factory) testimony shall be considered as the Procedure of inspection
followed in all factories of petitioners, thus: 7
... before the cigarettes were removed from the factory, they were invoiced by the
revenue agents assigned there to check on the number of cases of cigarettes to be
removed; revenue agents checked the quantity of cigarettes manufactured, quantity
 of cigarettes removed, strip stamps affixed; and early in the morning before the start
of the operation, the revenue agents checked the cigarette bobbins strip stamps and
saw to it that cigarettes removed were properly recorded in the books.
From the testimonies of other witnesses for petitioners, it was shown that revenue agents and tobacco
inspectors "saw to it that an raw materials for use in the manufacture of the finished products were duly
recorded; and in the process of manufacture, all tobacco products found unfit for sales were segregated
by the factory employees thru the supervision of the revenue agents."
The CTA held that the foregoing belie petitioners' assertions that no actual inspection was conducted to
justify the collection of the tobacco inspection fees. The findings of the Tax Court are duly supported
by evidence. We find no cogent reason to disturb the same. They are therefore binding on this Court.
Accordingly, the petition for review is hereby DISMISSED. Costs against petitioners.
SO ORDERED.
—
 including tobacco refuse or all other tobacco which has been cut, split, twisted, or pressed and
iscapable of being smoked without further industrial processing.Stemmed leaf tobacco is subject to the
specific tax under Section 141(b). It is a partially prepared tobacco. Theremoval of the stem or midrib
from the leaf tobacco makes the resulting stemmed leaf tobacco a prepared orpartially prepared
tobacco.Despite the differing definitions for "stemmed leaf tobacco" under revenue regulations, the
onus of proving thatstemmed leaf tobacco is not subject to the specific tax lies with the cigarette
manufacturers. Taxation is the rule,exemption is the exception.PEN:The power of taxation is
inherently legislative and may be imposed or revoked only by the legislature. This plenarypower of
taxation cannot be delegated by Congress to any other branches of government or private
persons,unless its delegation is authorized by the Constitution itself.However, it is well settled that
the power to fill in the details and manner as to the enforcement andadministration of a law may be
delegated to various specialized administrative agencies. The delegation oflegislative power has
become the rule and its non-delegation the exception. The reason is the increasingcomplexity of
modern life and may technical fields of government functions coupled by growing inability
of thelegislature to cope directly with the many problems demanding its attention

Digest:

FACTS:
 Petitioners are domestic corporations engaged in the production and manufacture of cigars
andcigarettes. They import leaf tobacco from foreign sources and purchase locally produced leaf
tobacco to be usedin the manufacture of cigars and cigarettes.La Suerte was assessed by the BIR for
excise tax deficiency amounting to more than 34 million pesos. LaSuerte protested invoking the Tax
Code which allows the sale of stemmed leaf tobacco as raw material by onemanufacturer directly to
another without payment of the excise tax. However, the CIR insisted that stemmed leaftobacco is
subject to excise tax "unless there is an express grant of exemption from [the] payment of tax."La
Suerte petitioned for review before the CTA which cancelled the assessment. The CIR appealed to
theCA which reversed the CTA. The CIR invoked a revenue regulation (RR) which limits the
exemption from paymentof specific tax on stemmed leaf tobacco to sales transactions between
manufacturers classified as L-7 permittees.
ISSUES:
 WON stemmed leaf tobacco subject to excise (specific) tax?
HELD:
 Yes, excise taxes on domestic products shall be paid by the manufacturer or producer before[the]
removal [ofthose products] from the place of production." "It does not matter to what use the article[s]
subject to tax is put;the excise taxes are still due, even though the articles are removed merely for
storage in some other place and arenot actually sold or consumed. The excise tax based on weight,
volume capacity or any other physical unit of
measurement is referred to as “specific tax”.
 When tobacco is harvested and processed either by hand or by machine, all its products become
subject to specifictax. Section 141 reveals the legislative policy to tax all forms of manufactured
tobacco
—
 in contrast to rawtobacco leaves

9. G.R. No. 180046               April 2, 2009
REVIEW CENTER ASSOCIATION OF THE PHILIPPINES, Petitioner,
vs.
EXECUTIVE SECRETARY EDUARDO ERMITA and COMMISSION ON HIGHER
EDUCATION represented by its Chairman ROMULO L. NERI, Respondents.
CPA REVIEW SCHOOL OF THE PHILIPPINES, INC. (CPAR), PROFESSIONAL REVIEW
AND TRAINING CENTER, INC. (PRTC), ReSA REVIEW SCHOOL, INC. (ReSA), CRC-ACE
REVIEW SCHOOL, INC. (CRC-ACE) Petitioners-Intervenors.
PIMSAT COLLEGES, Respondent-Intervenor.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for prohibition and mandamus assailing Executive Order No. 566 (EO
566)1 and Commission on Higher Education (CHED) Memorandum Order No. 30, series of 2007
(RIRR).2
The Antecedent Facts
On 11 and 12 June 2006, the Professional Regulation Commission (PRC) conducted the Nursing Board
Examinations nationwide. In June 2006, licensure applicants wrote the PRC to report that handwritten
copies of two sets of examinations were circulated during the examination period among the
examinees reviewing at the R.A. Gapuz Review Center and Inress Review Center. George Cordero,
Inress Review Center’s President, was then the incumbent President of the Philippine Nurses
Association. The examinees were provided with a list of 500 questions and answers in two of the
examinations’ five subjects, particularly Tests III (Psychiatric Nursing) and V (Medical-Surgical
Nursing). The PRC later admitted the leakage and traced it to two Board of Nursing members. 3 On 19
June 2006, the PRC released the results of the Nursing Board Examinations. On 18 August 2006, the
Court of Appeals restrained the PRC from proceeding with the oath-taking of the successful examinees
set on 22 August 2006.
Consequently, President Gloria Macapagal-Arroyo (President Arroyo) replaced all the members of the
PRC’s Board of Nursing. President Arroyo also ordered the examinees to re-take the Nursing Board
Examinations.
On 8 September 2006, President Arroyo issued EO 566 which authorized the CHED to supervise the
establishment and operation of all review centers and similar entities in the Philippines.
On 3 November 2006, the CHED, through its then Chairman Carlito S. Puno (Chairman Puno),
approved CHED Memorandum Order No. 49, series of 2006 (IRR).4
In a letter dated 24 November 2006,5 the Review Center Association of the Philippines (petitioner), an
organization of independent review centers, asked the CHED to "amend, if not withdraw" the IRR
arguing, among other things, that giving permits to operate a review center to Higher Education
Institutions (HEIs) or consortia of HEIs and professional organizations will effectively abolish
independent review centers.
In a letter dated 3 January 2007,6 Chairman Puno wrote petitioner, through its President Jose Antonio
Fudolig (Fudolig), that to suspend the implementation of the IRR would be inconsistent with the
mandate of EO 566. Chairman Puno wrote that the IRR was presented to the stakeholders during a
consultation process prior to its finalization and publication on 13 November 2006. Chairman Puno
also wrote that petitioner’s comments and suggestions would be considered in the event of revisions to
the IRR.
In view of petitioner’s continuing request to suspend and re-evaluate the IRR, Chairman Puno, in a
letter dated 9 February 2007,7 invited petitioner’s representatives to a dialogue on 14 March 2007. In
accordance with what was agreed upon during the dialogue, petitioner submitted to the CHED its
position paper on the IRR. Petitioner also requested the CHED to confirm in writing Chairman Puno’s
statements during the dialogue, particularly on lowering of the registration fee from ₱400,000 to
₱20,000 and the requirement for reviewers to have five years’ teaching experience instead of five
years’ administrative experience. Petitioner likewise requested for a categorical answer to their request
for the suspension of the IRR. The CHED did not reply to the letter.
On 7 May 2007, the CHED approved the RIRR. On 22 August 2007, petitioner filed before the CHED
a Petition to Clarify/Amend Revised Implementing Rules and Regulations8 praying for a ruling:
1. Amending the RIRR by excluding independent review centers from the coverage of the
CHED;
2. Clarifying the meaning of the requirement for existing review centers to tie-up or be
integrated with HEIs, consortium or HEIs and PRC-recognized professional associations with
recognized programs, or in the alternative, to convert into schools; and
 3. Revising the rules to make it conform with Republic Act No. 7722 (RA 7722)9 limiting the
CHED’s coverage to public and private institutions of higher education as well as degree-
granting programs in post-secondary educational institutions.
On 8 October 2007, the CHED issued Resolution No. 718-200710 referring petitioner’s request to
exclude independent review centers from CHED’s supervision and regulation to the Office of the
President as the matter requires the amendment of EO 566. In a letter dated 17 October 2007,11 then
CHED Chairman Romulo L. Neri (Chairman Neri) wrote petitioner regarding its petition to be
excluded from the coverage of the CHED in the RIRR. Chairman Neri stated:
While it may be true that regulation of review centers is not one of the mandates of CHED under
Republic Act 7722, however, on September 8, 2006, Her Excellency, President Gloria Macapagal-
Arroyo, issued Executive Order No. 566 directing the Commission on Higher Education to regulate the
establishment and operation of review centers and similar entities in the entire country.
With the issuance of the aforesaid Executive Order, the CHED now is the agency that is mandated to
regulate the establishment and operation of all review centers as provided for under Section 4 of the
Executive Order which provides that "No review center or similar entities shall be established and/or
operate review classes without the favorable expressed indorsement of the CHED and without the
issuance of the necessary permits or authorizations to conduct review classes. x x x"
To exclude the operation of independent review centers from the coverage of CHED would
clearly contradict the intention of the said Executive Order No. 566.
Considering that the requests requires the amendment of Executive Order No. 566, the Commission,
during its 305th Commission Meeting, resolved that the said request be directly referred to the Office
of the President for appropriate action.
As to the request to clarify what is meant by tie-up/be integrated with an HEI, as required under the
Revised Implementing Rules and Regulations, tie-up/be integrated simply means, to be in partner with
an HEI.12 (Boldfacing and underscoring in the original)
On 26 October 2007, petitioner filed a petition for Prohibition and Mandamus before this Court
praying for the annulment of the RIRR, the declaration of EO 566 as invalid and unconstitutional, and
the prohibition against CHED from implementing the RIRR.
Dr. Freddie T. Bernal, Director III, Officer-In-Charge, Office of the Director IV of CHED, sent a
letter13 to the President of Northcap Review Center, Inc., a member of petitioner, that it had until 27
November 2007 to comply with the RIRR.1avvphi1.zw+
On 15 February 2008,14 PIMSAT Colleges (respondent-intervenor) filed a Motion For Leave to
Intervene and To Admit Comment-in-Intervention and a Comment-in-Intervention praying for the
dismissal of the petition. Respondent-intervenor alleges that the Office of the President and the CHED
did not commit any act of grave abuse of discretion in issuing EO 566 and the RIRR. Respondent-
intervenor alleges that the requirements of the RIRR are reasonable, doable, and are not designed to
deprive existing review centers of their review business. The Court granted the Motion for Leave to
Intervene and to Admit Comment-in-Intervention in its 11 March 2008 Resolution.15
On 23 April 2008, a Motion for Leave of Court for Intervention In Support of the Petition and a
Petition In Intervention were filed by CPA Review School of the Philippines, Inc. (CPAR),
Professional Review and Training Center, Inc. (PRTC), ReSA Review School, Inc. (ReSA), CRC-ACE
Review School, Inc. (CRC-ACE), all independent CPA review centers operating in Manila
(collectively, petitioners-intervenors). Petitioners-intervenors pray for the declaration of EO 566 and
the RIRR as invalid on the ground that both constitute an unconstitutional exercise of legislative
power. The Court granted the intervention in its 29 April 2008 Resolution.16
On 21 May 2008, the CHED issued CHED Memorandum Order No. 21, Series of 2008 (CMO 21, s.
2008)17 extending the deadline for six months from 27 May 2008 for all existing independent review
centers to tie-up or be integrated with HEIs in accordance with the RIRR.
In its 25 November 2008 Resolution, this Court resolved to require the parties to observe the status quo
prevailing before the issuance of EO 566, the RIRR, and CMO 21, s. 2008.
The Assailed Executive Order and the RIRR
Executive Order No. 566 states in full:
EXECUTIVE ORDER NO. 566
DIRECTING THE COMMISSION ON HIGHER EDUCATION TO REGULATE THE
ESTABLISHMENT AND OPERATION OF REVIEW CENTERS AND SIMILAR ENTITIES
WHEREAS, the State is mandated to protect the right of all citizens to quality education at all levels
and shall take appropriate steps to make education accessible to all, pursuant to Section 1, Article XIV
of the 1987 Constitution;
WHEREAS, the State has the obligation to ensure and promote quality education through the proper
supervision and regulation of the licensure examinations given through the various Boards of
Examiners under the Professional Regulation Commission;
WHEREAS, the lack of regulatory framework for the establishment and operation of review centers
and similar entities, as shown in recent events, have adverse consequences and affect public interest
and welfare;
WHEREAS, the overriding necessity to protect the public against substandard review centers and
unethical practices committed by some review centers demand that a regulatory framework for the
establishment and operation of review centers and similar entities be immediately instituted;
WHEREAS, Republic Act No. 7722, otherwise known as the Higher Education Act of 1994, created
the Commission on Higher Education, which is best equipped to carry out the provisions pertaining to
the regulation of the establishment and operation of review centers and similar entities.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, the President of the Republic of the
Philippines, by virtue of the powers vested in me by law, do hereby order:
SECTION 1. Establishment of a System of Regulation for Review Centers and
Similar Entities. The Commission on Higher Education (CHED), in consultation
with other concerned government agencies, is hereby directed to formulate a
framework for the regulation of review centers and similar entities, including but not
limited to the development and institutionalization of policies, standards, guidelines
for the establishment, operation and accreditation of review centers and similar
entities; maintenance of a mechanism to monitor the adequacy, transparency and
propriety of their operations; and reporting mechanisms to review performance and
ethical practice.
SEC. 2. Coordination and Support. The Professional Regulation Commission (PRC),
Technical Skills Development Authority (TESDA), Securities and Exchange
Commission (SEC), the various Boards of Examiners under the PRC, as well as
other concerned non-government organizations life professional societies, and
various government agencies, such as the Department of Justice (DOJ), National
Bureau of Investigation (NBI), Office of the Solicitor General (OSG), and others that
may be tapped later, shall provide the necessary assistance and technical support to
the CHED in the successful operationalization of the System of Regulation
envisioned by this Executive Order.
SEC. 3. Permanent Office and Staff. To ensure the effective implementation of the
System of Regulation, the CHED shall organize a permanent office under its
supervision to be headed by an official with the rank of Director and to be composed
of highly competent individuals with expertise in educational assessment, evaluation
and testing; policies and standards development, monitoring, legal and enforcement;
and statistics as well as curriculum and instructional materials development. The
CHED shall submit the staffing pattern and budgetary requirements to the
Department of Budget and Management (DBM) for approval.
SEC. 4. Indorsement Requirement. No review center or similar entities shall be
established and/or operate review classes without the favorable expressed
indorsement of the CHED and without the issuance of the necessary permits or
authorizations to conduct review classes. After due consultation with the
stakeholders, the concerned review centers and similar entities shall be given a
reasonable period, at the discretion of the CHED, to comply with the policies and
standards, within a period not exceeding three (3) years, after due publication of this
Executive Order. The CHED shall see to it that the System of Regulation including
the implementing mechanisms, policies, guidelines and other necessary procedures
and documentation for the effective implementation of the System, are completed
within sixty days (60) upon effectivity of this Executive Order.
SEC. 5. Funding. The initial amount necessary for the development and
implementation of the System of Regulation shall be sourced from the CHED Higher
Education Development Fund (HEDF), subject to the usual government accounting
and auditing practices, or from any applicable funding source identified by the DBM.
For the succeeding fiscal year, such amounts as may be necessary for the budgetary
requirement of implementing the System of Regulation and the provisions of this
Executive Order shall be provided for in the annual General Appropriations Act in
the budget of the CHED. Whenever necessary, the CHED may tap its Development
Funds as supplemental source of funding for the effective implementation of the
regulatory system. In this connection, the CHED is hereby authorized to create
special accounts in the HEDF exclusively for the purpose of implementing the
provisions of this Executive Order.
SEC. 6. Review and Reporting. The CHED shall provide for the periodic review
performance of review centers and similar entities and shall make a report to the
Office of the President of the results of such review, evaluation and monitoring.
SEC. 7. Separability. Any portion or provision of this Executive Order that may be
declared unconstitutional shall not have the effect of nullifying other provisions
hereof, as long as such remaining provisions can still subsist and be given effect in
their entirely.
SEC. 8. Repeal. All rules and regulations, other issuances or parts thereof, which are
inconsistent with this Executive Order, are hereby repealed or modified accordingly.
SEC. 9. Effectivity. This Executive Order shall take effect immediately upon its
publication in a national newspaper of general circulation.
DONE in the City of Manila, this 8th day of September, in the year of Our Lord, Two Thousand and
Six.
(Sgd.) Gloria Macapagal-Arroyo
By the President:
(Sgd.) Eduardo R. Ermita
Executive Secretary
The pertinent provisions of the RIRR affecting independent review centers are as follows:
Rule VII
 IMPLEMENTING GUIDELINES AND PROCEDURES
Section 1. Authority to Establish and Operate – Only CHED recognized, accredited
and reputable HEIs may be authorized to establish and operate review center/course
by the CHED upon full compliance with the conditions and requirements provided
herein and in other pertinent laws, rules and regulations. In addition, a consortium or
consortia of qualified schools and/or entities may establish and operate review
centers or conduct review classes upon compliance with the provisions of these
Rules.
Rule XIV
TRANSITORY PROVISIONS
Section 1. Review centers that are existing upon the approval of Executive Order No.
566 shall be given a grace period of up to one (1) year, to tie-up/be integrated with
existing HEIs[,] consortium of HEIs and PRC recognized Professional Associations
with recognized programs under the conditions set forth in this Order and upon
mutually acceptable covenants by the contracting parties. In the alternative, they may
convert as a school and apply for the course covered by the review subject to rules
and regulations of the CHED and the SEC with respect to the establishment of
schools. In the meantime, no permit shall be issued if there is non-compliance with
these conditions or non-compliance with the requirements set forth in these rules.
Section 2. Only after full compliance with the requirements shall a Permit be given
by the CHED to review centers contemplated under this Rule.
Section 3. Failure of existing review centers to fully comply with the above shall bar
them from existing as review centers and they shall be deemed as operating illegally
as such. In addition, appropriate administrative and legal proceedings shall be
commence[d] against the erring entities that continue to operate and appropriate
sanctions shall be imposed after due process.
The Issues
The issues raised in this case are the following:
1. Whether EO 566 is an unconstitutional exercise by the Executive of legislative
power as it expands the CHED’s jurisdiction; and
2. Whether the RIRR is an invalid exercise of the Executive’s rule-making power.
The Ruling of this Court
The petition has merit.
Violation of Judicial Hierarchy
The Office of the Solicitor General (OSG) prays for the dismissal of the petition. Among other
grounds, the OSG alleges that petitioner violated the rule on judicial hierarchy in filing the petition
directly with this Court.
This Court’s original jurisdiction to issue a writ of certiorari, prohibition, mandamus, quo warranto,
habeas corpus, and injunction is not exclusive but is concurrent with the Regional Trial Courts and the
Court of Appeals in certain cases.18 The Court has explained:
This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the
writs an absolute, unrestrained freedom of choice of the court to which application therefor will be
directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and also serves as a general determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard of that judicial hierarchy most certainly indicates that petitions
for the issuance of extraordinary writs against first level ("inferior") courts should be filed with the
Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the
Supreme Court’s original jurisdiction to issue these writs should be allowed only when there are
special and important reasons therefor, clearly and specifically set out in the petition. This is [an]
established policy. It is a policy necessary to prevent inordinate demands upon the Court’s time and
attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent
further over-crowding of the Court’s docket.19
The Court has further explained:
The propensity of litigants and lawyers to disregard the hierarchy of courts in our judicial system by
seeking relief directly from this Court must be put to a halt for two reasons: (1) it would be an
imposition upon the precious time of this Court; and (2) it would cause an inevitable and resultant
delay, intended or otherwise, in the adjudication of cases, which in some instances had to be remanded
or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to
resolve the issues because this Court is not a trier of facts. 20
The rule, however, is not absolute, as when exceptional and compelling circumstances justify the
exercise of this Court of its primary jurisdiction. In this case, petitioner alleges that EO 566 expands
the coverage of RA 7722 and in doing so, the Executive Department usurps the legislative powers of
Congress.1awphi1 The issue in this case is not only the validity of the RIRR. Otherwise, the proper
remedy of petitioner and petitioners-intervenors would have been an ordinary action for the
nullification of the RIRR before the Regional Trial Court.21 The alleged violation of the Constitution
by the Executive Department when it issued EO 566 justifies the exercise by the Court of its primary
jurisdiction over the case. The Court is not precluded from brushing aside technicalities and taking
cognizance of an action due to its importance to the public and in keeping with its duty to determine
whether the other branches of the Government have kept themselves within the limits of the
Constitution.22
OSG’s Technical Objections
The OSG alleges that the petition should be dismissed because the verification and certification of non-
forum shopping were signed only by Fudolig without the express authority of any board resolution or
power of attorney. However, the records show that Fudolig was authorized under Board Resolution
No. 3, series of 200723 to file a petition before this Court on behalf of petitioner and to execute any and
all documents necessary to implement the resolution.
The OSG also alleges that the petition should be dismissed for violation of the 2004 Rules on Notarial
Practice because Fudolig only presented his community tax certificate as competent proof of identity
before the notary public. The Court would have required Fudolig to comply with the 2004 Rules on
Notarial Practice except that Fudolig already presented his Philippine passport before the notary public
when petitioner submitted its reply to the OSG’s comment.
EO 566 Expands the Coverage of RA 7722
The OSG alleges that Section 3 of RA 7722 should be read in conjunction with Section 8, enumerating
the CHED’s powers and functions. In particular, the OSG alleges that the CHED has the power under
paragraphs (e) and (n) of Section 8 to:
(e) monitor and evaluate the performance of programs and institutions of higher learning for
appropriate incentives as well as the imposition of sanctions such as, but not limited to, diminution or
withdrawal of subsidy, recommendation on the downgrading or withdrawal of accreditation, program
termination or school closure;
(n) promulgate such rules and regulations and exercise such other powers and functions as may be
necessary to carry out effectively the purpose and objectives of this Act[.]
The OSG justifies its stand by claiming that the term "programs x x x of higher learning" is broad
enough to include programs offered by review centers.
We do not agree.
Section 3 of RA 7722 provides:
Sec. 3. Creation of Commission on Higher Education. - In pursuance of the abovementioned policies,
the Commission on Higher Education is hereby created, hereinafter referred to as the Commission.
The Commission shall be independent and separate from the Department of Education, Culture and
Sports (DECS), and attached to the Office of the President for administrative purposes only. Its
coverage shall be both public and private institutions of higher education as well as degree-
granting programs in all post-secondary educational institutions, public and private. (Emphasis
supplied)
24
Neither RA 7722 nor CHED Order No. 3, series of 1994 (Implementing Rules of RA 7722)  defines
an institution of higher learning or a program of higher learning.
"Higher education," however, is defined as "education beyond the secondary level" 25 or "education
provided by a college or university."26 Under the "plain meaning" or verba legis rule in statutory
construction, if the statute is clear, plain, and free from ambiguity, it must be given its literal meaning
and applied without interpretation.27 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.28 Hence, the term "higher education" should be taken in its ordinary sense and should be read
and interpreted together with the phrase "degree-granting programs in all post-secondary educational
institutions, public and private." Higher education should be taken to mean tertiary education or that
which grants a degree after its completion.
Further, Articles 6 and 7 of the Implementing Rules provide:
Article 6. Scope of Application. - The coverage of the Commission shall be both public and private
institutions of higher education as well as degree granting programs in all post-secondary
educational institutions, public and private.
These Rules shall apply to all public and private educational institutions offering tertiary degree
programs.
The establishment, conversion, or elevation of degree-granting institutions shall be within the
responsibility of the Commission.
Article 7. Jurisdiction. - Jurisdiction over institutions of higher learning primarily offering tertiary
degree programs shall belong to the Commission. (Emphasis supplied)
Clearly, HEIs refer to degree-granting institutions, or those offering tertiary degree or post-secondary
programs. In fact, Republic Act No. 8292 or the Higher Education Modernization Act of 1997 covers
chartered state universities and colleges. State universities and colleges primarily offer degree courses
and programs.
Sections 1 and 8, Rule IV of the RIRR define a review center and similar entities as follows:
Section 1. REVIEW CENTER. - refers to a center operated and owned by a duly authorized entity
pursuant to these Rules intending to offer to the public and/or to specialized groups whether for a fee
or for free a program or course of study that is intended to refresh and enhance the knowledge and
competencies and skills of reviewees obtained in the formal school setting in preparation for the
licensure examinations given by the Professional Regulations Commission (PRC). The term review
center as understood in these rules shall also embrace the operation or conduct of review classes or
courses provided by individuals whether for a fee or not in preparation for the licensure examinations
given by the Professional Regulations Commission.
xxx
Section 8. SIMILAR ENTITIES – the term refer to other review centers providing review or tutorial
services in areas not covered by licensure examinations given by the Professional Regulations
Commission including but not limited to college entrance examinations, Civil Service examinations,
tutorial services in specific fields like English, Mathematics and the like.
The same Rule defines a review course as follows:
Section 3. REVIEW COURSE – refers to the set of non-degree instructional program of study and/or
instructional materials/module, offered by a school with a recognized course/program requiring
licensure examination, that are intended merely to refresh and enhance the knowledge or competencies
and skills of reviewees.
The scopes of EO 566 and the RIRR clearly expand the CHED’s coverage under RA 7722. The
CHED’s coverage under RA 7722 is limited to public and private institutions of higher education
and degree-granting programs in all public and private post-secondary educational institutions.
EO 566 directed the CHED to formulate a framework for the regulation of review centers and similar
entities.
The definition of a review center under EO 566 shows that it refers to one which offers "a program or
course of study that is intended to refresh and enhance the knowledge or competencies and skills
of reviewees obtained in the formal school setting in preparation for the licensure examinations"
given by the PRC. It also covers the operation or conduct of review classes or courses provided by
individuals whether for a fee or not in preparation for the licensure examinations given by the PRC.
A review center is not an institution of higher learning as contemplated by RA 7722. It does not offer a
degree-granting program that would put it under the jurisdiction of the CHED. A review course is only
intended to "refresh and enhance the knowledge or competencies and skills of reviewees." A reviewee
is not even required to enroll in a review center or to take a review course prior to taking an
examination given by the PRC. Even if a reviewee enrolls in a review center, attendance in a review
course is not mandatory. The reviewee is not required to attend each review class. He is not required to
take or pass an examination, and neither is he given a grade. He is also not required to submit any
thesis or dissertation. Thus, programs given by review centers could not be considered "programs x x x
of higher learning" that would put them under the jurisdiction of the CHED.
Further, the "similar entities" in EO 566 cover centers providing "review or tutorial services" in areas
not covered by licensure examinations given by the PRC, which include, although not limited to,
college entrance examinations, Civil Services examinations, and tutorial services. These review and
tutorial services hardly qualify as programs of higher learning.
Usurpation of Legislative Power
The OSG argues that President Arroyo was merely exercising her executive power to ensure that the
laws are faithfully executed. The OSG further argues that President Arroyo was exercising her residual
powers under Executive Order No. 292 (EO 292),29 particularly Section 20, Title I of Book III, thus:
Section 20. Residual Powers. - Unless Congress provides otherwise, the President shall exercise such
other powers and functions vested in the President which are provided for under the laws and
which are not specifically enumerated above, or which are not delegated by the President in
accordance with law. (Emphasis supplied)1avvphi1
Section 20, Title I of Book III of EO 292 speaks of other powers vested in the President under the
law.30 The exercise of the President’s residual powers under this provision requires legislation,31 as the
provision clearly states that the exercise of the President’s other powers and functions has to be
"provided for under the law." There is no law granting the President the power to amend the
functions of the CHED. The President may not amend RA 7722 through an Executive Order without a
prior legislation granting her such power.
The President has no inherent or delegated legislative power to amend the functions of the CHED
under RA 7722. Legislative power is the authority to make laws and to alter or repeal them,32 and this
power is vested with the Congress under Section 1, Article VI of the 1987 Constitution which states:
Section 1. The legislative power shall be vested in the Congress of the Philippines which shall consist
of a Senate and a House of Representatives, except to the extent reserved to the people by the provision
on initiative and referendum.
In Ople v. Torres,33 the Court declared void, as a usurpation of legislative power, Administrative Order
No. 308 (AO 308) issued by the President to create a national identification system. AO 308 mandates
the adoption of a national identification system even in the absence of an enabling legislation. The
Court distinguished between Legislative and Executive powers, as follows:
The line that delineates Legislative and Executive power is not indistinct. Legislative power is "the
authority, under the Constitution, to make laws, and to alter and repeal them." The Constitution, as the
will of the people in their original, sovereign and unlimited capacity, has vested this power in the
Congress of the Philippines. The grant of legislative power to Congress is broad, general and
comprehensive. The legislative body possesses plenary power for all purposes of civil government.
Any power, deemed to be legislative by usage and tradition, is necessarily possessed by Congress,
unless the Constitution has lodged it elsewhere. In fine, except as limited by the Constitution, either
expressly or impliedly, legislative power embraces all subjects and extends to matters of general
concern or common interest.
While Congress is vested with the power to enact laws, the President executes the laws. The executive
power is vested in the President. It is generally defined as the power to enforce and administer laws. It
is the power of carrying the laws into practical operation and enforcing their due observance.
As head of the Executive Department, the President is the Chief Executive. He represents the
government as a whole and sees to it that all laws are enforced by the officials and employees of his
department. He has control over the executive department, bureaus and offices. This means that he has
the authority to assume directly the functions of the executive department, bureau and office, or
interfere with the discretion of its officials. Corollary to the power of control, the President also has the
duty of supervising the enforcement of laws for the maintenance of general peace and public order.
Thus, he is granted administrative power over bureaus and offices under his control to enable him to
discharge his duties effectively.
Administrative power is concerned with the work of applying policies and enforcing orders as
determined by proper governmental organs. It enables the President to fix a uniform standard of
administrative efficiency and check the official conduct of his agents. To this end, he can issue
administrative orders, rules and regulations.
x x x. An administrative order is:
"Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of
governmental operation in pursuance of his duties as administrative head shall be promulgated in
administrative orders."
An administrative order is an ordinance issued by the President which relates to specific aspects in the
administrative operation of government. It must be in harmony with the law and should be for the sole
purpose of implementing the law and carrying out the legislative policy. x x x.34
Just like AO 308 in Ople v. Torres, EO 566 in this case is not supported by any enabling law. The
Court further stated in Ople:
x x x. As well stated by Fisher: "x x x Many regulations however, bear directly on the public. It is here
that administrative legislation must be restricted in its scope and application. Regulations are not
supposed to be a substitute for the general policy-making that Congress enacts in the form of a public
law. Although administrative regulations are entitled to respect, the authority to prescribe rules and
regulations is not an independent source of power to make laws."35
Since EO 566 is an invalid exercise of legislative power, the RIRR is also an invalid exercise of the
CHED’s quasi-legislative power.
Administrative agencies exercise their quasi-legislative or rule-making power through the
promulgation of rules and regulations.36 The CHED may only exercise its rule-making power within
the confines of its jurisdiction under RA 7722. The RIRR covers review centers and similar entities
which are neither institutions of higher education nor institutions offering degree-granting programs.
Exercise of Police Power
Police power to prescribe regulations to promote the health, morals, education, good order or safety,
and the general welfare of the people flows from the recognition that salus populi est suprema lex – the
welfare of the people is the supreme law.37 Police power primarily rests with the legislature although it
may be exercised by the President and administrative boards by virtue of a valid delegation.38 Here, no
delegation of police power exists under RA 7722 authorizing the President to regulate the operations of
non-degree granting review centers.
Republic Act No. 8981 is Not the Appropriate Law
It is argued that the President of the Philippines has adequate powers under the law to regulate review
centers and this could have been done under an existing validly delegated authority, and that the
appropriate law is Republic Act No. 898139 (RA 8981). Under Section 5 of RA 8981, the PRC is
mandated to "establish and maintain a high standard of admission to the practice of all professions and
at all times ensure and safeguard the integrity of all licensure examinations." Section 7 of RA 8981
further states that the PRC shall adopt "measures to preserve the integrity and inviolability of licensure
examinations."
There is no doubt that a principal mandate of the PRC is to preserve the integrity of licensure
examinations. The PRC has the power to adopt measures to preserve the integrity and inviolability of
licensure examinations. However, this power should properly be interpreted to refer to the conduct of
the examinations. The enumeration of PRC’s powers under Section 7(e) includes among others, the
fixing of dates and places of the examinations and the appointment of supervisors and watchers. The
power to preserve the integrity and inviolability of licensure examinations should be read together with
these functions. These powers of the PRC have nothing to do at all with the regulation of review
centers.
The PRC has the power to investigate any of the members of the Professional Regulatory Boards
(PRB) for "commission of any irregularities in the licensure examinations which taint or impugn the
integrity and authenticity of the results of the said examinations."40 This is an administrative power
which the PRC exercises over members of the PRB. However, this power has nothing to do with the
regulation of review centers. The PRC has the power to bar PRB members from conducting review
classes in review centers. However, to interpret this power to extend to the power to regulate
review centers is clearly an unwarranted interpretation of RA 8981. The PRC may prohibit the
members of the PRB from conducting review classes at review centers because the PRC has
administrative supervision over the members of the PRB. However, such power does not extend to the
regulation of review centers.
Section 7(y) of RA 8981 giving the PRC the power to perform "such other functions and duties as may
be necessary to carry out the provisions" of RA 8981 does not extend to the regulation of review
centers. There is absolutely nothing in RA 8981 that mentions regulation by the PRC of review
centers.
The Court cannot likewise interpret the fact that RA 8981 penalizes "any person who manipulates or
rigs licensure examination results, secretly informs or makes known licensure examination questions
prior to the conduct of the examination or tampers with the grades in the professional licensure
examinations"41 as a grant of power to regulate review centers. The provision simply provides for the
penalties for manipulation and other corrupt practices in the conduct of the professional examinations.
The assailed EO 566 seeks to regulate not only review centers but also "similar entities." The
questioned CHED RIRR defines "similar entities" as referring to "other review centers providing
review or tutorial services in areas not covered by licensure examinations given by the PRC including
but not limited to college entrance examinations, Civil Service examinations, tutorial services in
specific fields like English, Mathematics and the like." 42 The PRC has no mandate to supervise review
centers that give courses or lectures intended to prepare examinees for licensure examinations given by
the PRC. It is like the Court regulating bar review centers just because the Court conducts the bar
examinations. Similarly, the PRC has no mandate to regulate similar entities whose reviewees will
not even take any licensure examination given by the PRC.
WHEREFORE, we GRANT the petition and the petition-in-intervention. We DECLARE Executive
Order No. 566 and Commission on Higher Education Memorandum Order No. 30, series of
2007 VOID for being unconstitutional.
SO ORDERED.
Digest:
Facts:
On 11 and 12 June 2006, the Professional Regulation Commission (PRC) conducted the Nursing Board
Examinations nationwide. In June 2006, licensure applicants wrote the PRC to report that handwritten
copies of two sets of examinations were circulated during the examination period... among the
examinees reviewing at the R.A. Gapuz Review Center and Inress Review Center.
George Cordero, Inress Review Center's President, was then the incumbent President of the Philippine
Nurses Association.
On 18 August 2006, the Court of Appeals restrained the PRC from proceeding with the oath-taking of
the successful examinees set on 22 August 2006.
Consequently, President Gloria Macapagal-Arroyo (President Arroyo) replaced all the members of the
PRC's Board of Nursing. President Arroyo also ordered the examinees to re-take the Nursing Board
Examinations.
On 8 September 2006, President Arroyo issued EO 566 which authorized the CHED to supervise the
establishment and operation of all review centers and similar entities in the Philippines.
the Review Center Association of the Philippines (petitioner), an organization of independent review
centers, asked the CHED to "amend, if not withdraw" the IRR arguing, among other things, that giving
permits to... operate a review center to Higher Education Institutions (HEIs) or consortia of HEIs and
professional organizations will effectively abolish independent review centers.
EO 566- authorized ched to supervise the establishment and operation of all review centers
In a letter dated 3 January 2007,[6] Chairman Puno wrote petitioner, through its President Jose Antonio
Fudolig (Fudolig), that to suspend the implementation of the IRR would be inconsistent with the
mandate of EO 566.
On 7 May 2007, the CHED approved the RIRR. On 22 August 2007, petitioner filed before the CHED
a Petition to Clarify/Amend Revised Implementing Rules and Regulations[8] praying for a ruling:
Amending the RIRR by excluding independent review centers from the coverage of the CHED;
Clarifying the meaning of the requirement for existing review centers to tie-up or be integrated with
HEIs, consortium or HEIs and PRC-recognized professional associations with recognized programs, or
in the alternative, to convert into schools; and
Revising the rules to make it conform with Republic Act No. 7722 (RA 7722)[9] limiting the CHED's
coverage to public and private institutions of higher education as well as degree-granting programs in
post-secondary educational institutions.
CHED was given the authority to regulate and establish review centers uner EO 566
While it may be true that regulation of review centers is not one of the mandates of CHED under
Republic Act 7722, however, on September 8, 2006, Her Excellency, President Gloria Macapagal-
Arroyo, issued Executive Order No. 566 directing the Commission on Higher
Education to regulate the establishment and operation of review centers and similar entities in the
entire country.
With the issuance of the aforesaid Executive Order, the CHED now is the agency that is mandated to
regulate the establishment and operation of all review centers as provided for under Section 4 of the
Executive Order which provides that "No review center or similar... entities shall be established and/or
operate review classes without the favorable expressed indorsement of the CHED and without the
issuance of the necessary permits or authorizations to conduct review classes. x x x"
pertinent provision of the IRR
Section 1. Authority to Establish and Operate - Only CHED recognized, accredited and reputable HEIs
may be authorized to establish and operate review center/course by the CHED upon full compliance
with the conditions and requirements provided herein and in other pertinent laws,... rules and
regulations. In addition, a consortium or consortia of qualified schools and/or entities may establish
and operate review centers or conduct review classes upon compliance with the provisions of these
Rules.
Issues:
The issues raised in this case are the following:
Whether EO 566 is an unconstitutional exercise by the Executive of legislative power as it expands the
CHED's jurisdiction; and
Whether the RIRR is an invalid exercise of the Executive's rule-making power.
Ruling:
The petition has merit.
The propensity of litigants and lawyers to disregard the hierarchy of courts in our judicial system by
seeking relief directly from this Court must be put to a halt for two reasons: (1) it would be an
imposition upon the precious time of this Court; and (2) it would... cause an inevitable and resultant
delay, intended or otherwise, in the adjudication of cases, which in some instances had to be remanded
or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to
resolve the issues because this
Court is not a trier of facts.
The rule, however, is not absolute, as when exceptional and compelling circumstances justify the
exercise of this Court of its primary jurisdiction
The alleged violation of the Constitution by the Executive Department when it issued EO 566 justifies
the exercise by the Court of its primary jurisdiction over the case. The Court is not precluded from
brushing aside technicalities and taking cognizance of an... action due to its importance to the public
and in keeping with its duty to determine whether the other branches of the Government have kept
themselves within the limits of the Constitution.
EO 566 Expands the Coverage of RA 7722
The OSG justifies its stand by claiming that the term "programs x x x of higher learning" is broad
enough to include programs offered by review centers.
We do not agree.
Section 3 of RA 7722 provides:
Sec. 3. Creation of Commission on Higher Education. - In pursuance of the abovementioned policies,
the Commission on Higher Education is hereby created, hereinafter referred to as the Commission.
The Commission shall be independent and separate from the Department of Education, Culture and
Sports (DECS), and attached to the Office of the President for administrative purposes only. Its
coverage shall be both public and private institutions of higher education as well... as degree-granting
programs in all post-secondary educational institutions, public and private. (Emphasis supplied)
Neither RA 7722 nor CHED Order No. 3, series of 1994 (Implementing Rules of RA 7722)[24]
defines an institution of higher learning or a program of higher learning.
Further, Articles 6 and 7 of the Implementing Rules provide:
Article 6. Scope of Application. - The coverage of the Commission shall be both public and private
institutions of higher education as well as degree granting programs in all post-secondary educational
institutions, public and private.
These Rules shall apply to all public and private educational institutions offering tertiary degree
programs.
The establishment, conversion, or elevation of degree-granting institutions shall be within the
responsibility of the Commission.
Clearly, HEIs refer to degree-granting institutions, or those offering tertiary degree or post-secondary
programs. In fact, Republic Act No. 8292 or the Higher Education Modernization Act of 1997 covers
chartered state universities and colleges. State universities and colleges... primarily offer degree
courses and programs.
The scopes of EO 566 and the RIRR clearly expand the CHED's coverage under RA 7722. The
CHED's coverage under RA 7722 is limited to public and private institutions of higher education and
degree-granting programs in all public and private post-secondary educational... institutions. EO 566
directed the CHED to formulate a framework for the regulation of review centers and similar entities
Usurpation of Legislative Power
The President has no inherent or delegated legislative power to amend the functions of the CHED
under RA 7722. Legislative power is the authority to make laws and to alter or repeal them,[32] and
this power is vested with the Congress under Section 1,... Article VI of the 1987 Constitution which
states:
Section 1. The legislative power shall be vested in the Congress of the Philippines which shall consist
of a Senate and a House of Representatives, except to the extent reserved to the people by the provision
on initiative and referendum.
The line that delineates Legislative and Executive power is not indistinct. Legislative power is "the
authority, under the Constitution, to make laws, and to alter and repeal them."
The Constitution, as the will of the people in their original, sovereign and... unlimited capacity, has
vested this power in the Congress of the Philippines.
Main issue relating to Art. VII
As head of the Executive Department, the President is the Chief Executive. He represents the
government as a whole and sees to it that all laws are enforced by the officials and employees of his
department. He has control over the executive department, bureaus and offices. This... means that he
has the authority to assume directly the functions of the executive department, bureau and office, or
interfere with the discretion of its officials. Corollary to the power of control, the President also has the
duty of supervising the enforcement of laws for the... maintenance of general peace and public order.
Thus, he is granted administrative power over bureaus and offices under his control to enable him to
discharge his duties effectively.
Administrative power is concerned with the work of applying policies and enforcing orders as
determined by proper governmental organs. It enables the President to fix a uniform standard of
administrative efficiency and check the official conduct of his agents. To this end, he... can issue
administrative orders, rules and regulations.
"Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of
governmental operation in pursuance of his duties as administrative head shall be promulgated in
administrative orders."
An administrative order is an ordinance issued by the President which relates to specific aspects in the
administrative operation of government. It must be in harmony with the law and should be for the sole
purpose of implementing the law and carrying out the legislative... policy. x x x.
Since EO 566 is an invalid exercise of legislative power, the RIRR is also an invalid exercise of the
CHED's quasi-legislative power.
Administrative agencies exercise their quasi-legislative or rule-making power through the
promulgation of rules and regulations.[36] The CHED may only exercise its rule-making power within
the confines of its jurisdiction under RA 7722. The RIRR covers... review centers and similar entities
which are neither institutions of higher education nor institutions offering degree-granting programs.
Exercise of Police Power
Police power primarily rests with the legislature although it may be exercised by the President and
administrative boards by virtue of a valid delegation
Here, no delegation of police power exists under RA 7722 authorizing the President... to regulate the
operations of non-degree granting review centers.
Republic Act No. 8981 is Not the Appropriate Law
There is no doubt that a principal mandate of the PRC is to preserve the integrity of licensure
examinations. The PRC has the power to adopt measures to preserve the integrity and inviolability of
licensure examinations. However, this power should properly be interpreted to... refer to the conduct of 10. G.R. No. 179579               February 1, 2012
the examinations
COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF
These powers of the PRC have nothing to do at all with the regulation of review centers. SUBIC, Petitioners,
However, this power has nothing to do with the regulation of review centers. The PRC has the power vs.
to bar PRB members from conducting review classes in review centers. However, to... interpret this HYPERMIX FEEDS CORPORATION, Respondent.
power to extend to the power to regulate review centers is clearly an unwarranted interpretation of RA
8981. DECISION

Section 7(y) of RA 8981 giving the PRC the power to perform "such other functions and duties as may
be necessary to carry out the provisions" of RA 8981 does not extend to the regulation of review
centers. There is absolutely nothing in RA 8981 that mentions regulation by the
PRC of review centers.
Similarly, the PRC has no mandate to regulate similar entities whose reviewees will not even... take
any licensure examination given by the PRC.
WHEREFORE, we GRANT the petition and the petition-in-intervention. We DECLARE Executive
Order No. 566 and Commission on Higher Education Memorandum Order No. 30, series of 2007
VOID for being unconstitutional.
SO ORDERED.
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.
x x x           x x x          x x x
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.1âwphi1
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.
Digest:
Facts:
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 Relief[7] 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.
Issues:
discuss the propriety of an action for declaratory relief.
Ruling:
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.
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.
Finally, the issue raised by respondent is ripe for judicial determination, because litigation is
inevitable[19] 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.
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.
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.
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.
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."
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 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.
In summary, petitioners violated respondent's right to due process in the issuance of CMO 27-2003 11. G.R. No. L-52306 October 12, 1981
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 ABS-CBN BROADCASTING CORPORATION, petitioner,
unreasonable classification in the application of the regulation. Finally, petitioner Commissioner of vs.
Customs went beyond his powers of delegated authority when the regulation limited the powers of the COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL
customs officer to examine and assess imported articles. REVENUE, respondents.

MELENCIO-HERRERA, J.:

This is a Petition for Review on certiorari of the Decision of the Court of Tax Appeals in C.T.A. Case
No. 2809, dated November 29, 1979, which affirmed the assessment by the Commissioner of Internal
Revenue, dated April 16, 1971, of a deficiency withholding income tax against petitioner, ABS-CBN
Broadcasting Corporation, for the years 1965, 1966, 1967 and 1968 in the respective amounts of
P75,895.24, P99,239.18, P128,502.00 and P222, 260.64, or a total of P525,897.06.

During the period pertinent to this case, petitioner corporation was engaged in the business of
telecasting local as well as foreign films acquired from foreign corporations not engaged in trade or
business within the Philippines. for which petitioner paid rentals after withholding income tax of
30%of one-half of the film rentals.

In so far as the income tax on non-resident corporations is concerned, section 24 (b) of the National
Internal Revenue Code, as amended by Republic Act No. 2343 dated June 20, 1959, used to provide:

(b) Tax on foreign corporations.—(1) Non-resident corporations.— There shall be

levied, collected, and paid for each taxable year, in lieu of the tax imposed by the
preceding paragraph, upon the amount received by every foreign corporation not
engaged in trade or business within the Philippines, from an sources within the
Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities,
 compensations, remunerations, emoluments, or other fixed or determinable annual or
periodical gains, profits, and income, a tax equal to thirty per centum of such amount.
(Emphasis supplied)
On April 12, 1961, in implementation of the aforequoted provision, the Commissioner of Internal
Revenue issued General Circular No. V-334 reading thus:
In connection with Section 24 (b) of Tax Code, the amendment introduced by
Republic Act No. 2343, under which an income tax equal to 30% is levied upon the
amount received by every foreign corporation not engaged in trade or business
within the Philippines from all sources within this country as interest, dividends,
rents, salaries, wages, premiums, annuities, compensations, remunerations,
emoluments, or other fixed or determinable annual or periodical gains, profits, and
income, it has been determined that the tax is still imposed on income derived from
capital, or labor, or both combined, in accordance with the basic principle of income
taxation (Sec. 39, Income Tax Regulations), and that a mere return of capital or
investment is not income (Par. 5,06, 1 Mertens Law of Federal 'Taxation). Since
according to the findings of the Special Team who inquired into business of the non-
resident foreign film distributors, the distribution or exhibition right on a film is
invariably acquired for a consideration, either for a lump sum or a percentage of the
film rentals, whether from a parent company or an independent outside
producer, apart of the receipts of a non-resident foreign film distributor derived from
said film represents, therefore, a return of investment.
xxx xxx xxx
4. The local distributor should withhold 30% of one-half of the film rentals paid to
the non-resident foreign film distributor and pay the same to this office in accordance
with law unless the non- resident foreign film distributor makes a prior settlement of
its income tax liability. (Emphasis ours).
Pursuant to the foregoing, petitioner dutifully withheld and turned over to the Bureau of Internal
Revenue the amount of 30% of one-half of the film rentals paid by it to foreign corporations not
engaged in trade or business within the Philippines. The last year that petitioner withheld taxes
pursuant to the foregoing Circular was in 1968.
On June 27, 1968, Republic Act No. 5431 amended Section 24 (b) of the Tax Code increasing the tax
rate from 30 % to 35 % and revising the tax basis from "such amount" referring to rents, etc. to "gross
income," as follows:
(b) Tax on foreign corporations.—(1) Non-resident corporations.—A foreign
corporation not engaged in trade or business in the Philippines including a foreign
life insurance company not engaged in the life insurance business in the Philippines
shall pay a tax equal to thirty-five per cent of the gross income received during each
taxable year from all sources within the Philippines, as interests, dividends, rents,
royalties, salaries, wages, premiums, annuities, compensations, remunerations for
technical services or otherwise, emoluments or other fixed or determinable annual,
periodical or casual gains, profits, and income, and capital gains, Provided however,
That premiums shah not include reinsurance premiums. (Emphasis supplied)
On February 8, 1971, the Commissioner of Internal Revenue issued Revenue Memorandum Circular
No. 4-71, revoking General Circular No. V-334, and holding that the latter was "erroneous for lack of
legal basis," because "the tax therein prescribed should be based on gross income without deduction
whatever," thus:
After a restudy and analysis of Section 24 (b) of the National Internal Revenue Code,
as amended by Republic Act No. 5431, and guided by the interpretation given by tax
authorities to a similar provision in the Internal Revenue Code of the United States,
on which the aforementioned provision of our Tax Code was patterned, this Office
has come to the conclusion that the tax therein prescribed should be based on gross
income without t deduction whatever. Consequently, the ruling in General Circular
No. V-334, dated April 12, 1961, allowing the deduction of the proportionate cost of
production or exhibition of motion picture films from the rental income of non-
resident foreign corporations, is erroneous for lack of legal basis.
In view thereof, General Circular No. V-334, dated April 12, 1961, is hereby revoked
and henceforth, local films distributors and exhibitors shall deduct and withhold 35%
of the entire amount payable by them to non-resident foreign corporations, as film
rental or royalty, or whatever such payment may be denominated, without any
deduction whatever, pursuant to Section 24 (b), and pay the withheld taxes in
accordance with Section 54 of the Tax Code, as amended.
All rulings inconsistent with this Circular is likewise revoked. (Emphasis ours)
On the basis of this new Circular, respondent Commissioner of Internal Revenue issued against
petitioner a letter of assessment and demand dated April 15, 1971, but allegedly released by it and
received by petitioner on April 12, 1971, requiring them to pay deficiency withholding income tax on
the remitted film rentals for the years 1965 through 1968 and film royalty as of the end of 1968 in the
total amount of P525,897.06 computed as follows:
1965
Total amount remitted P 511,059.48
Withholding tax due thereon 153,318.00
Less: Amount already 89,000.00
assessed
 Balance P64,318.00 Total amount remitted P881,816.92

Add: 1/2% mo. int. fr. 4-16- 11,577.24 Withholding tax due 291,283.00
66 to 4-16-69 thereon

Total amount due & P 75,895.24 Less: Amount already 92,886.00

collectible assessed

Balance P198,447.00
1966
Add: 1/2% mo. int. fr. 4- 23,813.64
16-69 to 4-29-71
Total amount remitted P373,492.24
Total amount due & P222,260.44 1
Withholding tax due thereon 112,048.00
collectible
Less: Amount already 27,947.00
assessed On May 5, 1971, petitioner requested for a reconsideration and withdrawal of the assessment.
However, without acting thereon, respondent, on April 6, 1976, issued a warrant of distraint and levy
Balance 84,101.00 over petitioner's personal as well as real properties. The petitioner then filed its Petition for Review
with the Court of Tax Appeals whose Decision, dated November 29, 1979, is, in turn, the subject of
Add: 11/2%mo. int. fr. 4-16- 15,138.18 this review. The Tax Court held:
67 to 4-116-70

Total amount due & P99,239.18 For the reasons given, the Court finds the assessment issued by respondent on April
collectible 16, 1971 against petitioner in the amounts of P75,895.24, P 99,239.18, P128,502.00
and P222,260.64 or a total of P525,897.06 as deficiency withholding income tax for
the years 1965, 1966, 1967 and 1968, respectively, in accordance with law. As
1967 prayed for, the petition for review filed in this case is dismissed, and petitioner ABS-
CBN Broadcasting Corporation is hereby ordered to pay the sum of P525,897.06 to
respondent Commissioner of Internal Revenue as deficiency withholding income tax
Total amount remitted P601,160.65 for the taxable years 1965 thru 1968, plus the surcharge and interest which have
accrued thereon incident to delinquency pursuant to Section 51 (e) of the National
Withholding tax due 180,348.00
Internal Revenue Code, as amended.
thereon

Less: Amount already
assessed
Balance
Add: 1/2% mo. int. fr. 4-
16-68 to 4-16-71
Total amount due &
collectible
71,448.00 WHEREFORE, the decision appealed from is hereby affirmed at petitioner's cost.
SO ORDERED. 2
108,900.00
The issues raised are two-fold:
19,602.00
I. Whether or not respondent can apply General Circular No. 4-71 retroactively and
P128,502.00 issue a deficiency assessment against petitioner in the amount of P 525,897.06 as
deficiency withholding income tax for the years 1965, 1966, 1967 and 1968.

1968
 II. Whether or not the right of the Commissioner of Internal Revenue to assess the
deficiency withholding income tax for the year 196,5 has prescribed. 3
Upon the facts and circumstances of the case, review is warranted.
In point is Sec. 338-A (now Sec. 327) of the Tax Code. As inserted by Republic Act No. 6110 on
August 9, 1969, it provides:
Sec. 338-A. Non-retroactivity of rulings. — Any revocation, modification, or
reversal of and of the rules and regulations promulgated in accordance with the
preceding section or any of the rulings or circulars promulgated by the
Commissioner of Internal Revenue shall not be given retroactive application if the
relocation, modification, or reversal will be prejudicial to the taxpayers, except in
the following cases: (a) where the taxpayer deliberately mis-states or omits material
facts from his return or any document required of him by the Bureau of Internal
Revenue: (b) where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the ruling is based; or (c)
where the taxpayer acted in bad faith. (italics for emphasis)
It is clear from the foregoing that rulings or circulars promulgated by the Commissioner of Internal
Revenue have no retroactive application where to so apply them would be prejudicial to taxpayers. The
prejudice to petitioner of the retroactive application of Memorandum Circular No. 4-71 is beyond
question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld
taxes under General Circular No. V-334. The assessment and demand on petitioner to pay deficiency
withholding income tax was also made three years after 1968 for a period of time commencing in
1965. Petitioner was no longer in a position to withhold taxes due from foreign corporations because it
had already remitted all film rentals and no longer had any control over them when the new Circular
was issued. And in so far as the enumerated exceptions are concerned, admittedly, petitioner does not
fall under any of them.
Respondent claims, however, that the provision on non-retroactivity is inapplicable in the present case
in that General Circular No. V-334 is a nullity because in effect, it changed the law on the matter. The
Court of Tax Appeals sustained this position holding that: "Deductions are wholly and exclusively
within the power of Congress or the law-making body to grant, condition or deny; and where the
statute imposes a tax equal to a specified rate or percentage of the gross or entire amount received by
the taxpayer, the authority of some administrative officials to modify or change, much less reduce, the
basis or measure of the tax should not be read into law." 4 Therefore, the Tax Court concluded,
petitioner did not acquire any vested right thereunder as the same was a nullity.
The rationale behind General Circular No. V-334 was clearly stated therein, however: "It ha(d) been
determined that the tax is still imposed on income derived from capital, or labor, or both combined, in
accordance with the basic principle of income taxation ...and that a mere return of capital or investment
is not income ... ." "A part of the receipts of a non-resident foreign film distributor derived from said
film represents, therefore, a return of investment." The Circular thus fixed the return of capital at 50%
to simplify the administrative chore of determining the portion of the rentals covering the return of
capital." 5
Were the "gross income" base clear from Sec. 24 (b), perhaps, the ratiocination of the Tax Court could
be upheld. It should be noted, however, that said Section was not too plain and simple to understand.
The fact that the issuance of the General Circular in question was rendered necessary leads to no other
conclusion than that it was not easy of comprehension and could be subjected to different
interpretations.
In fact, Republic Act No. 2343, dated June 20, 1959, supra, which was the basis of General Circular
No. V-334, was just one in a series of enactments regarding Sec. 24 (b) of the Tax Code. Republic Act
No. 3825 came next on June 22, 1963 without changing the basis but merely adding a proviso (in bold
letters).
(b) Tax on foreign corporation.—(1) Non-resident corporations. — There shall be
levied, collected and paid for each taxable year, in lieu of the tax imposed by the
preceding paragraph, upon the amount received by every foreign corporation not
engaged in trade or business within the Philippines, from all sources within the
Philippines, as interest, dividends, rents, salaries, wages, premiums annuities,
compensations, remunerations, emoluments, or other fixed or determinable annual or
periodical gains, profits, and income, a tax equal to thirty per centum of such
amount: PROVIDED, HOWEVER, THAT PREMIUMS SHALL NOT INCLUDE
REINSURANCE PREMIUMS. (double emphasis ours).
Republic Act No. 3841, dated likewise on June 22, 1963, followed after, omitting the proviso and
inserting some words (also in bold letters).
(b) Tax on foreign corporations.—(1) Non-resident corporations.—There shall be
levied, collected and paid for each taxable year, in lieu of the tax imposed by the
preceding paragraph, upon the amount received by every foreign corporation not
engaged in trade or business within the Philippines, from all sources within the
Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities,
compensations, remunerations, emoluments, or other fixed or determinable annual or
periodical OR CASUAL gains, profits and income, AND CAPITAL GAINS, a tax
equal to thirty per centum of such amount. 6 (double emphasis supplied)
The principle of legislative approval of administrative interpretation by re-enactment clearly obtains in
this case. It provides that "the re-enactment of a statute substantially unchanged is persuasive
indication of the adoption by Congress of a prior executive construction. 7 Note should be taken of the
fact that this case involves not a mere opinion of the Commissioner or ruling rendered on a mere query,
but a Circular formally issued to "all internal revenue officials" by the then Commissioner of Internal
Revenue.
It was only on June 27, 1968 under Republic Act No. 5431, supra, which became the basis of Revenue
Memorandum Circular No. 4-71, that Sec. 24 (b) was amended to refer specifically to 35% of the
"gross income."
This Court is not unaware of the well-entrenched principle that the Government is never estopped from
collecting taxes because of mistakes or errors on the part of its
agents. 8 In fact, utmost caution should be taken in this regard. 9 But, like other principles of law, this
also admits of exceptions in the interest of justice and fairplay. The insertion of Sec. 338-A into the
National Internal Revenue Code, as held in the case of Tuason, Jr. vs. Lingad, 10 is indicative of
legislative intention to support the principle of good faith. In fact, in the United States, from where Sec.
24 (b) was patterned, it has been held that the Commissioner of Collector is precluded from adopting a
position inconsistent with one previously taken where injustice would result therefrom, 11 or where
there has been a misrepresentation to the taxpayer. 12
We have also noted that in its Decision, the Court of Tax Appeals further required the petitioner to pay
interest and surcharge as provided for in Sec. 51 (e) of the Tax Code in addition to the deficiency
withholding tax of P 525,897.06. This additional requirement is much less called for because the
petitioner relied in good faith and religiously complied with no less than a Circular issued "to all
internal revenue officials" by the highest official of the Bureau of Internal Revenue and approved by
the then Secretary of Finance. 13
With the foregoing conclusions arrived at, resolution of the issue of prescription becomes unnecessary.
WHEREFORE, the judgment of the Court of Tax Appeals is hereby reversed, and the questioned
assessment set aside. No costs.
SO ORDERED.
Digest:
Facts:
petitioner corporation was engaged in the business of telecasting local as well as foreign films acquired
from foreign corporations not engaged in trade or business within the
Philippines, for which petitioner paid rentals after withholding income tax of 30% of one-half of the
film rentals.
In so far as the income tax on non-resident corporations is concerned, section 24 (b) of the National
Internal Revenue Code
On April 12, 1961,... in implementation of the aforequoted provision... the Commissioner of Internal
Revenue... issued General Circular No. V-334
Pursuant to the foregoing, petitioner dutifully withheld and turned over to the Bureau of Internal
Revenue the amount of 30% of one-half of the film rentals paid by it to foreign corporations... not
engaged in trade or business within the Philippines.  The last year that petitioner withheld taxes
pursuant to the foregoing Circular was in
1968.
On June 27, 1968, Republic Act No. 5431 amended Section 24(b) of the Tax Code increasing the tax
rate from 30% to 35%... and revising the tax basis from
"such amount" referring to rents, etc. to "gross income,"
On February 8, 1971, the Commissioner of Internal Revenue issued Revenue Memorandum Circular
No. 4-71, revoking General Circular No. V-334, and holding that the latter was "erroneous for lack of
legal basis," because
"the tax therein prescribed should be based on gross income without deduction whatever... the tax
therein prescribed should be based on gross income without deduction... whatever.  Consequently, the
ruling in General Circular No. V-334, dated April 12, 1961, allowing the deduction of the
proportionate... cost of production or exhibition of motion picture films from the rental income of non-
resident foreign corporations, is erroneous for lack of legal basis.
General Circular No. V-334, dated April 12, 1961, is hereby revoked and henceforth, local films
distributors and exhibitors shall deduct and withhold 35% of the entire... amount payable by them to
non-resident foreign corporations, as film rental or royalty, or whatever such payment may be
denominated, without any... deduction whatever, pursuant to Section 24(b)
On the basis of this new Circular, respondent Commissioner of Internal Revenue issued against
petitioner a letter of assessment and demand... received by petitioner on April 12, 1971, requiring them
to pay deficiency withholding income tax on the remitted film rentals for the years 1965 through 1968
and film royalty as of the end of 1968
On May 5, 1971, petitioner requested for a reconsideration and withdrawal of the assessment.
However, without acting thereon, respondent, on April 6, 1976,... issued a warrant of distraint and levy
over petitioner's... properties... petitioner then filed its Petition for Review with the Court of Tax
Appeals... the Court finds the assessment issued by respondent... against petitioner... deficiency
withholding income... tax for the years 1965, 1966, 1967 and 1968... in accordance with law...
dismissed
Issues:
Whether or not respondent can apply General Circular No. 4-71 retroactively and issue a deficiency
assessment against petitioner... as deficiency withholding... income tax
Whether or not the right of the Commissioner of Internal Revenue to assess the deficiency withholding
income tax for the year 1965 has prescribed.
Ruling:
Sec. 338-A (now Sec. 327) of the Tax Code
Any revocation... of... any of the rulings or circulars promulgated by the Commissioner of Internal
Revenue shall not be given retroactive application if the revocation,... modification, or reversal will be
prejudicial to the taxpayers
It is clear from the foregoing that rulings or circulars promulgated by the Commissioner of Internal
Revenue have no retroactive application where to so apply them would be prejudicial to taxpayers. 
The prejudice to... petitioner of the retroactive application of Memorandum Circular No. 4-71 is
beyond question.  It was issued only in 1971, or three years after 1968, the last year that petitioner had
withheld taxes under General Circular No.
V-334.  The assessment and demand on petitioner to pay deficiency withholding income tax was also
made three years after 1968 for a period of time commencing in 1965.  Petitioner was no longer in a
position to... withhold taxes due from foreign corporations because it had already remitted all film
rentals and no longer had any control over them when the new Circular was issued.  And in so far as
the enumerated exceptions are concerned,... admittedly, petitioner does not fall under any of them.