G.R. No.
85439 January 13, 1992 On 2 September 1985, the Municipal Government of Muntinlupa (hereinafter, Municipality), Metro Manila,
KILUSANG BAYAN SA PAGLILINGKOD NG MGA MAGTITINDA NG BAGONG PAMILIHANG BAYAN
NG MUNTINLUPA, INC. (KBMBPM), TERESITA A. FAJARDO, NADYESDA B. PONSONES, MA. FE V.
BOMBASE, LOIDA D. LUCES, MARIO S. FRANCISCO, AMADO V. MANUEL and ROLANDO G.
GARCIA, incumbent members of the Board, AMADO G. PEREZ and MA. FE V. BOMBASE, incumbent
General Manager and Secretary-Treasurer, respectively, petitioners, vs. HON. CARLOS G.
DOMINGUEZ, Secretary of Agriculture, Regional Director of Region IV of the Department of
Agriculture ROGELIO P. MADRIAGA, RECTO CORONADO and Municipal Mayor IGNACIO R. BUNYE,
both in his capacity as Municipal Mayor of Muntinlupa, Metro Manila and as Presiding Officer of
Sangguniang Bayan ng Muntinglupa, and JOHN DOES, respondents.
G.R. No. 91927 January 13, 1992
IGNACIO R. BUNYE, JAIME R. FRESNEDI, CARLOS G. TENSUAN, VICTOR E. AGUINALDO,
ALEJANDRO I. MARTINEZ, EPIFANIO A. ESPELETA, REY E. BULAY, LUCIO B. CONSTANTINO,
ROMAN E. NIEFES, NEMESIO O. MOZO, ROGER SMITH, RUFINO B. JOAQUIN, NOLASCO I. DIAZ,
RUFINO IBE and NESTOR SANTOS, petitioners, vs. THE SANDIGANBAYAN, THE OMBUDSMAN and
ROGER C. BERBANO, Special Prosecutor III, respondents.
Jose O. Villanueva and Roberto B. Romanillos for petitioners in G.R. No. 85439. Alampay & Manhit Law
Offices for petitioners in G.R. No. 91927.
DAVIDE, JR., J.:
These cases have been consolidated because they are closely linked with each other as to factual
antecedents and issues.
The first case, G.R. No. 85439 (hereinafter referred to as the Kilusang Bayan case), questions the validity of
the order of 28 October 1988 of then Secretary of Agriculture Hon. Carlos G. Dominguez which ordered: (1)
the take-over by the Department of Agriculture of the management of the petitioner Kilusang Bayan sa
Paglilingkod Ng Mga Magtitinda ng Bagong Pamilihang Bayan ng Muntilupa, Inc. (KBMBPM) pursuant to the
Department's regulatory and supervisory powers under Section 8 of P.D. No. 175, as amended, and Section
4 of Executive Order No. 13, (2) the creation of a Management Committee which shall assume the
management of KBMBPM upon receipt of the order, (3) the disbandment of the Board of Directors, and (4)
the turnover of all assets, properties and records of the KBMBPM the Management Committee.
The second case. G.R. No. 91927 (hereinafter referred to as the Bunye case), seeks the nullification of the
Resolution of 4 January 1990 of the Sandiganbayan admitting the Amended Information against petitioners
in Criminal Case No. 13966 and denying their motion to order or direct preliminary investigation, and its
Resolution of 1 February 1990 denying the motion to reconsider the former.
The procedural and factual antecedents are not disputed.
thru its then Mayor Santiago Carlos, Jr., entered into a contract with the KILUSANG BAYAN SA
PAGLILINGKOD NG MGA MAGTITINDA SA BAGONG PAMILIHANG BAYAN NG MUNTINLUPA, INC.
(KBMBPM) represented by its General Manager, Amado Perez, for the latter's management and operation
of the new Muntinlupa public market. The contract provides for a twenty-five (25) year term commencing on
2 September 1985, renewable for a like period, unless sooner terminated and/or rescinded by mutual
agreement of the parties, at a monthly consideration of Thirty-Five Thousand Pesos (P35,000) to be paid by
the KBMBPM within the first five (5) days of each month which shall, however, be increased by ten percent
(10%) each year during the first five (5) years only.
The KBMBPM is a service cooperative organized by and composed of vendors occupying the New
Muntinlupa Public Market in Alabang, Muntinlupa, Metro Manila pursuant to Presidential Decree No. 175 and
Letter of Implementation No. 23; its articles of incorporation and by-laws were registered with the then Office
of the Bureau of Cooperatives Development (thereafter the Bureau of Agricultural Cooperatives
Development or BACOD and now the Cooperative Development Authority).
Following his assumption into office as the new mayor succeeding Santiago Carlos, Jr., petitioner Ignacio
Bunye, claiming to be particularly scandalized by the "virtual 50-year term of the agreement, contrary to the
provision of Section 143, paragraph 3 of Batas Pambansa Blg. 337," and the "patently inequitable rental,"
directed a review of the aforesaid contract. He sought opinions from both the Commission on Audit and the
Metro Manila Commission (MMC) on the validity of the instrument. In separate letters, these agencies urged
that appropriate legal steps be taken towards its rescission. The letter of Hon. Elfren Cruz of the MMC even
granted the Municipality authority "to take the necessary legal steps for the cancellation/recission of the
above cited contract and make representations with KBMBPM for the immediate transfer/takeover of the
possession, management and operation of the New Muntinlupa Market to the Municipal Government of
Muntinlupa."
Consequently, upon representations made by Bunye with the Municipal Council, the latter approved on 1
August 1988 Resolution No. 45 abrogating the contract. To implement this resolution, Bunye, together with
his co-petitioners and elements of the Capital Command of the Philippine Constabulary, proceeded, on 19
August 1986, to the public market and announced to the general public and the stallholders thereat that the
Municipality was taking over the management and operation of the facility, and that the stallholders should
henceforth pay their market fees to the Municipality, thru the Market Commission, and no longer to the
KBMBPM.
On 22 August 1988, the KBMBPM filed with Branch 13 of the Regional Trial Court of Makati a complaint for
breach of contract, specific performance and damages with prayer for a writ of preliminary injunction against
the Municipality and its officers, which was docketed as Civil Case No. 88-1702. The complaint was
premised on the alleged illegal take-over of the public market effected "in excess of his (Bunye's) alleged
authority" and thus "constitutes breach of contract and duty as a public official."
The writ applied for having been denied, 7 the KBMBPM officers resisted the attempts of Bunye and
company to complete the take-over; they continued holding office in the KBS building, under their respective
official capacities. The matter having been elevated to this Court by way of certiorari, We remanded the
same to the Court of Appeals which docketed it as C.A.-G.R. No. L-16930.
On 26 August 1988, Amado Perez filed with the Office of the Ombudsman a letter-complaint charging Bunye
and his co-petitioners with oppression, harassment, abuse of authority and violation of the Anti-Graft and
Corrupt Practices Act for taking over the management and operation of the public market from KBMBPM. 11
In a subpoena dated 7 October 1988, prosecutor Mothalib C. Onos of the Office of the Special Prosecutor
directed Bunye and his co-petitioners to submit within ten (10) days from receipt thereof counter-affidavits,
affidavits of their witnesses and other supporting documents. The subpoena and letter-complaint were
received on 12 October 1988.
On 20 October 1988, two (2) days before the expiration of the period granted to file said documents, Bunye,
et al. filed by mail an urgent motion for extension of "at least fifteen (15) days from October 22, 1988" within
which to comply with the subpoena.
Thereafter, the following transpired which subsequently gave rise to these petitions:
G.R. No.  85439
In the early morning of 29 October 1988, a Saturday, respondent Madriaga and Coronado, allegedly
accompanied by Mayor Bunye and the latters' heavily armed men, both in uniform and in civilian clothes,
together with other civilians, namely: Romulo Bunye II, Alfredo Bunye, Tomas Osias, Reynaldo Camilon,
Benjamin Taguibao, Benjamin Bulos and other unidentified persons, allegedly through force, violence and
intimidation, forcibly broke open the doors of the offices of petitioners located at the second floor of the KBS
Building, new Muntinlupa Public Market, purportedly to serve upon petitioners the Order of respondent
Secretary of Agriculture dated 28 October 1988, and to implement the same, by taking over and assuming
the management of KBMBPM, disbanding the then incumbent Board of Directors for that purpose and
excluding and prohibiting the General Manager and the other officers from exercising their lawful functions
as such. 14 The Order of the Secretary reads as follows:
ORDER
WHEREAS, the KILUSANG BAYAN SA PAGLILINGKOD NG MGA MAGTITINDA NG
BAGONG PAMILIHANG BAYAN NG MUNTINLUPA, INC., (KBMBPM), Alabang,
Muntinlupa, Metro Manila is a Cooperative registered under the provisions of Presidential
Decree No. 175, as amended;
WHEREAS, the Department of Agriculture is empowered to regulate and supervise
cooperatives registered under the provisions of Presidential Decree No. 175, as amended;
WHEREAS, the general membership of the KBMBPM has petitioned the Department of
Agriculture for assistance in the removal of the members of the Board of Directors who
were not elected by the general membership of said cooperative;
WHEREAS, the on-going financial and management audit of the Department of
Agriculture auditors show (sic) that the management of the KBMBPM is not operating that
cooperative in accordance with PD. 175, LOI No. 23, the Circulars issued by DA/BACOD
and the provisions of the by-laws of KBMBPM;
WHEREAS, the interest of the public so demanding it is evident and urgently necessary
that the KBMBPM MUST BE PLACED UNDER MANAGEMENT TAKE-OVER of the
Department of Agriculture in order to preserve the financial interest of the members of the
cooperative and to enhance the cooperative development program of the government;
WHEREAS, it is ordered that the Department of Agriculture in the exercise of its regulatory
and supervisory powers under Section 8 of PD 175, as amended, and Section 4 of
Executive Order No. 113, take over the management of KBMBPM under the following
directives:
1. THAT a Management Committee is hereby created composed of the
following:
a) Reg. Dir. or OIC RD — DA Region IV
b) Atty. Rogelio P. Madriaga — BACOD
c) Mr. Recto Coronado — KBMBPM
d) Mrs. Nadjasda Ponsones — KBMBPM
e) One (1) from the Municipal Government of Muntinlupa to be
designated by the Sangguniang Pambayan ng Muntinlupa;
2. THAT the Management Committee shall, upon receipt of this Order,
assume the management of KBMBPM;
3. THAT the present Board of Directors is hereby disbanded and the
officers and Manager of the KBMBPM are hereby directed to turn over
all assets, properties and records of the KBMBPM to the Management
Committee herein created;
4. THAT the Management Committee is hereby empowered to
promulgate rules of procedure to govern its workings as a body;
5. THAT the Management Committee shall submit to the undersigned
thru the Director of BACOD monthly reports on the operations of
KBMBPM;
6. THAT the Management Committee shall call a General Assembly of
all registered members of the KBMBPM within Ninety (90) days from
 date of this Order to decide such matters affecting the KBMBPM,
including the election of a new set of Board of Director (sic).
This Order takes effect immediately and shall continue to be in force until the members of
the Board of Directors shall have been duly elected and qualified.
Done this 28th day of October, 1988 at Quezon City.
As claimed by petitioners, the Order served on them was not written on the stationary of the Department,
does not bear its seal and is a mere xerox copy.
The so-called petition upon which the Order is based appears to be an unverified petition dated 10 October
1988 signed, according to Mayor Bunye, by 371 members of the KBMBPM.
On 2 November 1988, petitioners filed the petition in this case alleging, inter alia, that:
(a) Respondent Secretary acted without or in excess of jurisdiction in issuing the Order for
he arrogated unto himself a judicial function by determining the alleged guilt of petitioners
on the strength of a mere unverified petition; the disbandment of the Board of Directors
was done without authority of law since under Letter of Implementation No. 23, removal of
officers, directors or committee members could be done only by the majority of the
members entitled to vote at an annual or special general assembly and only after an
opportunity to be heard at said assembly.
(b) Respondent Secretary acted in a capricious, whimsical, arbitrary and despotic manner,
so patent and gross that it amounted to a grave abuse of discretion.
(c) The Order is a clear violation of the By-Laws of KBMBPM and is likewise illegal and
unlawful for it allows or tolerates the violation of the penal provisions under paragraph (c),
Section 9 of P.D. No. 175.
(d) The Order is a clear violation of the constitutional right of the individual petitioners to be
heard. 17
They pray that upon the filing of the petition, respondents, their agents, representatives or persons acting on
their behalf be ordered to refrain, cease and desist from enforcing and implementing the questioned Order or
from excluding the individual petitioners from the exercise of their rights as such officers and, in the event
that said acts sought to be restrained were already partially or wholly done, to immediately restore the
management and operation of the public market to petitioners, order respondents to vacate the premises
and, thereafter, preserve the status quo; and that, finally, the challenged Order be declared null and void.
In the Resolution of 9 October 1988, We required the respondents to Comment on the petition. Before any
Comment could be filed, petitioners filed on 2 January 1989 an Urgent Ex-Parte  Motion praying that
respondent Atty. Rogelio Madriaga, who had assumed the position of Chairman of the Management
Committee, be ordered to stop and/or cancel the scheduled elections of the officers of the KBMBPM on 6
January 1989 and, henceforth, desist from scheduling any election of officers or Members of the Board of
Directors thereof until further orders on the Court. The elections were, nevertheless, held and a new board of
directors was elected. So, on 19 January 1989, petitioners filed a supplemental motion praying that
respondent Madriaga and the "newly elected Board of Directors be ordered to cease and desist from
assuming, performing or exercising powers as such, and/or from removing or replacing the counsels of
petitioners as counsels for KBMBPM and for Atty. Fernando Aquino, Jr., to cease and desist from unduly
interfering with the affairs and business of the cooperative."
Respondent Bunye, by himself, filed his Comment on 23 January 1989. He denies the factual allegations in
the petition and claims that petitioners failed to exhaust administrative remedies. A reply thereto was filed by
petitioners on 7 February 1989.
Respondent Recto Coronado filed two (2) Comments. The first was filed on 6 February 1989 by his counsel,
Atty. Fernando Aquino, Jr., and the second, which is for both him and Atty. Madriaga, was filed by the latter
on 10 February 1989.
On 20 February 1989, petitioners filed a Reply to the first Comment of Coronado and an Ex-Parte Motion for
the immediate issuance of a cease and desist order 26 praying that the so-called new directors and officers of
KBMBPM, namely: Tomas M. Osias, Ildefonso B. Reyes, Paulino Moldez, Fortunato M. Medina, Aurora P.
del Rosario, Moises Abrenica, and Lamberto Casalla, be ordered to immediately cease and desist from filing
notices of withdrawals or motions to dismiss cases filed by the Cooperative now pending before the courts,
administrative offices and the Ombudsman and Tanodbayan, and that if such motions or notices were
already filed, to immediately withdraw and desist from further pursuing the same until further orders of this
Court. The latter was precipitated by the Resolution No. 19 of the "new" board of directors withdrawing all
cases filed by its predecessors against Bunye, et al., and more particularly the following cases: (a) G.R. No.
85439 (the instant petition), (b) Civil Case No. 88-1702, (c) OSP Case No. 88-2110 before the Ombudsman,
(d) IBP Case No. 88-0119 before the Tanodbayan, and Civil Case No. 88-118 for Mandamus.
On 1 March 1989, We required the Solicitor General to file his Comment to the petition and the urgent
motion for the immediate issuance of a cease and desist order. 
A motion to dismiss the instant petition was filed on 30 March 1989. On 19 April 1989, We resolved to
dismiss the case and consider it closed and terminated. 30 Thereupon, after some petitioners filed a motion
for clarification and reconsideration, We set aside the dismissal order and required the new directors to
comment on the Opposition to Motion to Dismiss filed by the former.
The new board, on 14 June 1989, prayed that its Manifestation of 6 June 1989 and Opposition dated 9 June
1989, earlier submitted it response to petitioners' motion for reconsideration of the order dismissing the
instant petition, be treated as its Comment. Both parties then continued their legal fencing, serving several
pleadings on each other.
In Our Resolution of 9 August 1989, We gave the petition due course and required the parties to submit their
respective Memoranda.
On 14 August 1989, petitioners filed an urgent ex-parte motion for the immediate issuance of a cease and
desist order 34 in view of the new board's plan to enter into a new management contract; the motion was
noted by this Court on 23 August 1989. A second ex-parte motion, noted on 18 October 1989, was filed on
19 September 1989 asking this court to consider the "Invitation to pre-qualify and bid" for a new contract
published by respondent Bunye.
In a belated Comment for the respondent Secretary of Agriculture filed on 22 September 1989, the Office of
the Solicitor General asserts that individual petitioners, who were not allegedly elected by the members or
duly designated by the BACOD Director, have no right or authority to file this case; the assailed Order of the
Secretary was issued pursuant to P.D. No. 175, more particularly Section 8 thereof which authorizes him
"(d) to suspend the operation or cancel the registration of any cooperative after hearing and when in its
judgment and based on findings, such cooperative is operating in violation of this Decree, rules and
regulations, existing laws as well as the by-laws of the cooperative itself;" the Order is reasonably necessary
to correct serious flaws in the cooperative and provide interim measures until election of regular members to
the board and officers thereof; the elections conducted on 6 January 1989 are valid; and that the motion to
dismiss filed by the new board of directors binds the cooperative. It prays for the dismissal of the petition.
Respondent Secretary of Agriculture manifested on 22 September 1989 that he is adopting the Comment
submitted by the Office of the Solicitor General as his memorandum; petitioners and respondents Coronado
and Madriaga filed their separate Memoranda on 6 November 1989; while the new board of directors
submitted its Memorandum on 11 December 1989.
The new KBMBPM board submitted additional pleadings on 16 February 1990 which it deemed relevant to
the issues involved herein. Reacting, petitioners filed a motion to strike out improper and inadmissible
pleadings and annexes and sought to have the pleaders cited for contempt. Although We required
respondents to comment, the latter did not comply.
Nevertheless, a manifestation was filed by the same board on 25 February 1991 informing this Court of the
holding, on 9 January 1991, of its annual general assembly and election of its board of directors for 1991. It
then reiterates the prayer that the instant petition be considered withdrawn and dismissed. Petitioners filed a
counter manifestation alleging that the instant petition was already given due course on 9 August 1989. In its
traverse to the counter manifestation, the new board insists that it "did not derive authority from the October
28, 1988 Order, the acts of the Management Committee, nor (sic) from the elections held in (sic) January 6,
1989," but rather from the members of the cooperative who elected them into office during the elections.
Petitioners filed a rejoinder asserting that the election of new directors is not a supervening event
independent of the main issue in the present petition and that to subscribe to the argument that the issues in
the instant petition became moot with their assumption into office is to reward a wrong done.
G. R.  NO. 91927
Petitioners claim that without ruling on their 20 October 1988 motion for an extension of at least 15 days
from 22 October 1988 within which to file their counter-affidavits, which was received by the Office of the
Special Prosecutor on 3 November 1988, Special Prosecutor Onos promulgated on 11 November 1988 a
Resolution finding the evidence on hand sufficient to establish a  prima facie  case against respondents
(herein petitioners) and recommending the filing of the corresponding information against them before the
Sandiganbayan. Petitioners also claim that they submitted their counter-affidavits on 9 November 1988.
In their motion dated 2 December 1988, petitioners move for a reconsideration of the above
Resolution, which was denied by Onos in his 18 January 1989 Order. The information against the petitioners
was attached to this order.
Upon submission of the records for his approval, the Ombudsman issued a first indorsement on 4 April 1989
referring to "Judge Gualberto J. de la Llana, Acting Director , IEO/RSSO, this Office, the within records of
OSP Case No. 88-02110 . . .  for further preliminary investigation . . ." 
Thereafter, on 28 April 1989, Bunye and company received a subpoena from de la Llana requiring them to
appear before the latter on 25 April 1989, 47 submit a report and file comment. After being granted an
extension, Bunye and company submitted their comment on 18 May 1989. 
On 22 August 1989, de la Llana recommended the filing of an information for violation of section 3 (e) of the
Anti-Graft and Corrupt Practices Act. 49 The case was referred to special prosecuting officer Jose Parentela,
Jr. who, in his Memorandum 50 to the Ombudsman through the Acting Special Prosecutor, likewise urged
that an information be filed against herein petitioners. On 3 October 1989, the Ombudsman signed his
conformity to the Memorandum and approved the 18 January information prepared by Onos, which was then
filed with the Sandiganbayan.
Consequently, Bunye, et al. were served arrest warrants issued by the Sandiganbayan. Detained at the NBI
on 9 October 1989, they claim to have discovered only then the existence of documents recommending and
approving the filing of the complaint and a memorandum by special prosecutor Bernardita G. Erum
proposing the dismissal of the same. 
Arraignment was set for 18 October 1989.
However, on 14 October 1989, petitioners filed with the Sandiganbayan an "Omnibus Motion to Remand to
the Office of the Ombudsman; to Defer Arraignment and to Suspend Proceedings." 
Subsequently, through new counsel, petitioners filed on 17 October 1989 a Consolidated Manifestation and
Supplemental Motion 54 praying, inter alia, for the quashal of the information on the ground that they were
deprived of their right to a preliminary investigation and that the information did not charge an offense.
The Sandiganbayan issued an order on 18 October 1989 deferring arraignment and directing the parties to
submit their respective memoranda, which petitioners complied with on 2 November 1989. On 16 November
1989, special Prosecutor Berbano filed a motion to admit amended information.
On 17 November 1989, the Sandiganbayan handed down a Resolution denying for lack of merit the
Omnibus Motion to Remand the Case To The Office of the Ombudsman, to Defer Arraignment and to
Suspend Proceedings. Petitioners then filed a motion to order a preliminary investigation on the basis of the
introduction by the amended information of new, material and substantive allegations, which the special
prosecutor opposed, 60 thereby precipitating a rejoinder filed by petitioners. 61
On 4 January 1990, the Sandiganbayan handed down a Resolution admitting the Amended Information and
denying the motion to direct preliminary investigation. Their motion to reconsider this Resolution having been
denied in the Resolution of 1 February 1990, petitioners filed the instant petition on 12 February 1990.
Petitioners claim that respondent Sandiganbayan acted without or in excess of jurisdiction or with manifest
grave abuse of discretion amounting to lack of jurisdiction in denying petitioners their right to preliminary
investigation and in admitting the Amended Information.
They then pray that: (a) the 4 January and 1 February 1990 Resolutions of the Sandiganbayan, admitting
the amended information and denying the motion for reconsideration, respectively, be annulled; (b) a writ be
issued enjoining the Sandiganbayan from proceeding further in Criminal Case No. 13966; and (c)
respondents be enjoined from pursuing further actions in the graft case.
We required the respondents to Comment on the petition.
On 21 February 1990, petitioners' counsel filed a motion to drop Epifanio Espeleta and Rey E. Dulay as
petitioners, 64 and in the Comment they filed on 30 March 1990, in compliance with Our Resolution of 1
March 1990, they state that they do not interpose any objection to the motion.
On 20 March 1990, the Office of the Solicitor General moved that it be excused from filing comment for the
respondents as it cannot subscribe to the position taken by the latter with respect to the questions of law
involved. 65 We granted this motion in the resolution of 8 May 1990.
Respondent Berbano filed his comment on 10 September 1991 and petitioners replied on 20 December
1990; Berbano subsequently filed a Rejoinder thereto on 11 January 1991. 66 The Sandiganbayan then filed
a manifestation proposing that it be excused from filing comment as its position on the matters in issue is
adequately stated in the resolutions sought to be annulled. On 7 March 1991, We resolved to note the
manifestation and order the instant petition consolidated with G.R. No. 85439.
The present dispute revolves around the validity of the antecedent proceedings which led to the filing of the
original information on 18 January 1989 and the amended information afterwards.
THE ISSUES AND THEIR RESOLUTION
1. G.  R. No.  85439.
As adverted to in the introductory portion of this Decision, the principal issue in G.R. No. 85439 is the validity
of the 28 October 1988 Order of respondent Secretary of Agriculture. The exordium of said Order unerringly
indicates that its basis is the alleged petition of the general membership of the KBMBPM requesting the
Department for assistance "in the removal of the members of the Board of Directors who were not elected by
the general membership" of the cooperative and that the "ongoing financial and management audit of the
Department of Agriculture auditors show (sic) that the management of the KBMBPM is not operating that
cooperative in accordance with P.D. 175, LOI 23, the Circulars issued by DA/BACOD and the provisions and
by-laws of KBMBPM." It is also professed therein that the Order was issued by the Department "in the
exercise of its regulatory and supervisory powers under Section 8 of P.D. 175, as amended, and Section 4
of Executive Order No. 113."
Respondents challenge the personality of the petitioners to bring this action, set up the defense of non-
exhaustion of administrative remedies, and assert that the Order was lawfully and validly issued under the
above decree and Executive Order.
We find merit in the petition and the defenses interposed do not persuade Us.
Petitioners have the personality to file the instant petition and ask, in effect, for their reinstatement as
Section 3, Rule 65 of the Rules of Court, defining an action for mandamus, permits a person who has been
excluded from the use and enjoyment of a right or office to which he is entitled, to file suit.  68 Petitioners, as
ousted directors of the KBMBPM, are questioning precisely the act of respondent Secretary in disbanding
the board of directors; they then pray that this Court restore them to their prior stations.
As to failure to exhaust administrative remedies, the rule is well-settled that this requirement does not apply
where the respondent is a department secretary whose acts, as an alter ego of the President, bear the
implied approval of the latter, unless actually disapproved by him. 69 This doctrine of qualified political
agency ensures speedy access to the courts when most needed. There was no need then to appeal the
decision to the office of the President; recourse to the courts could be had immediately. Moreover, the
doctrine of exhaustion of administrative remedies also yields to other exceptions, such as when the question
involved is purely legal, as in the instant case, or where the questioned act is patently illegal, arbitrary or
oppressive. Such is the claim of petitioners which, as hereinafter shown, is correct.
And now on the validity of the assailed Order.
Regulation 34 of Letter of Implementation No. 23 (implementing P.D. No. 175) provides the procedure for
the removal of directors or officers of cooperatives, thus:
An elected officer, director or committee member may be removed by a vote of majority of
the members entitled to vote at an annual or special general assembly. The person
involved shall have an opportunity to be heard.
A substantially identical provision, found in Section 17, Article III of the KBMBPM's by-laws, reads:
Sec. 17. Removal of Directors and Committee Members. — Any elected director or
committee member may be removed from office for cause by a majority vote of the
members in good standing present at the annual or special general assembly called for
the purpose after having been given the opportunity to be heard at the assembly.
Under the same article are found the requirements for the holding of both the annual general assembly and
a special general assembly.
Indubitably then, there is an established procedure for the removal of directors and officers of cooperatives.
It is likewise manifest that the right to due process is respected by the express provision on the opportunity
to be heard. But even without said provision, petitioners cannot be deprived of that right.
The procedure was not followed in this case. Respondent Secretary of Agriculture arrogated unto himself the
power of the members of the KBMBPM who are authorized to vote to remove the petitioning directors and
officers. He cannot take refuge under Section 8 of P.D. No. 175 which grants him authority to supervise and
regulate all cooperatives. This section does not give him that right.
An administrative officer has only such powers as are expressly granted to him and those necessarily
implied in the exercise thereof. These powers should not be extended by implication beyond what may to
necessary for their just and reasonable execution.
Supervision and control include only the authority to: (a) act directly whenever a specific function is entrusted
by law or regulation to a subordinate; (b) direct the performance of duty; restrain the commission of acts; (c)
review, approve, reverse or modify acts and decisions of subordinate officials or units; (d) determine
priorities in the execution of plans and programs; and (e) prescribe standards, guidelines, plans and
programs. Specifically, administrative supervision is limited to the authority of the department or its
equivalent to: (1) generally oversee the operations of such agencies and insure that they are managed
effectively, efficiently and economically but without interference with day-to-day activities; (2) require the
submission of reports and cause the conduct of management audit, performance evaluation and inspection
to determine compliance with policies, standards and guidelines of the department; (3) take such action as
may be necessary for the proper performance of official functions, including rectification of violations, abuses
and other forms of mal-administration; (4) review and pass upon budget proposals of such agencies but may
not increase or add to them.  disbanded, there was a number of directors whose terms would have expired the next year (1989) and a
The power to summarily disband the board of directors may not be inferred from any of the foregoing as both
P.D. No. 175 and the by-laws of the KBMBPM explicitly mandate the manner by which directors and officers
are to be removed. The Secretary should have known better than to disregard these procedures and rely on
a mere petition by the general membership of the KBMBPM and an on-going audit by Department of
Agriculture auditors in exercising a power which he does not have, expressly or impliedly. We cannot
concede to the proposition of the Office of the Solicitor General that the Secretary's power under paragraph
(d), Section 8 of P.D. No. 175 above quoted to suspend the operation or cancel the registration of any
cooperative includes the "milder authority of suspending officers and calling for the election of new officers."
Firstly, neither suspension nor cancellation includes the take-over and ouster of incumbent directors and
officers, otherwise the law itself would have expressly so stated. Secondly, even granting that the law
intended such as postulated, there is the requirement of a hearing. None was conducted.
Likewise, even if We grant, for the sake of argument, that said power includes the power to disband the
board of directors and remove the officers of the KBMBPM, and that a hearing was not expressly required in
the law, still the Order can be validly issued only after giving due process to the affected parties, herein
petitioners.
Due process is guaranteed by the Constitution and extends to administrative proceedings. In the landmark
case of  Ang Tibay vs. Court of Industrial Relations, this Court, through Justice Laurel, laid down the cardinal
primary requirements of due process in administrative proceedings, foremost of which is the right to a
hearing, which includes the right to present one's case and submit evidence in support thereof. The need for
notice and the opportunity to be heard is the heart of procedural due process, be it in either judicial or
administrative proceedings. 77 Nevertheless, a plea of a denial of procedural due process does not lie where
a defect consisting in an absence of notice of hearing was thereafter cured by the aggrieved party himself as
when he had the opportunity to be heard on a subsequent motion for reconsideration. This is consistent with
the principle that what the law prohibits is not the absence of previous notice but the absolute absence
thereof and lack of an opportunity to be heard.
In the instant case, there was no notice of a hearing on the alleged petition of the general membership of the
KBMBPM; there was, as well, not even a semblance of a hearing. The Order was based solely on an alleged
petition by the general membership of the KBMBPM. There was then a clear denial of due process. It is
most unfortunate that it was done after democracy was restored through the peaceful people revolt at EDSA
and the overwhelming ratification of a new Constitution thereafter, which preserves for the generations to
come the gains of that historic struggle which earned for this Republic universal admiration.
If there were genuine grievances against petitioners, the affected members should have timely raise these
issues in the annual general assembly or in a special general assembly. Or, if such a remedy would be futile
for some reason or another, judicial recourse was available.
Be that as it may, petitioners cannot, however, be restored to their positions. Their terms expired in 1989,
thereby rendering their prayer for reinstatement moot and academic. Pursuant to Section 13 of the by-laws,
during the election at the first annual general assembly after registration, one-half plus one (4) of the
directors obtaining the highest number of votes shall serve for two years, and the remaining directors (3) for
one year; thereafter, all shall be elected for a term of two years. Hence, in 1988, when the board was
number whose terms would have expired two years after (1990). Reversion to the status quo preceding 29
October 1988 would not be feasible in view of this turn of events. Besides, elections were held in 1990 and
1991. 79 The affairs of the cooperative are presently being managed by a new board of directors duly elected
in accordance with the cooperative's by-laws.
2. G.  R. No.  91927.
The right of an accused to a preliminary investigation is not among the rights guaranteed him in the Bill of
Rights. As stated in  Marcos, et al. vs.  Cruz, "the preliminary investigation in criminal cases is not a creation
of the Constitution; its origin is statutory and it exists and the right thereto can be invoked when so
established and granted by law. It is so specifically granted by procedural law. If not waived, absence thereof
may amount to a denial of due process. However, lack of preliminary investigation is not a ground to quash
or dismiss a complaint or information. Much less does it affect the court's jurisdiction. In  People
vs.  Casiano, this Court ruled:
Independently of the foregoing, the absence of such investigation [preliminary] did not
impair the validity of the information or otherwise render it defective. Much less did it affect
the jurisdiction of the court of first instance over the present case. Hence, had the
defendant-appellee been entitled to another preliminary investigation, and had his plea of
not guilty upon arraignment not implied a waiver of said right, the court of first instance
should have, either conducted such preliminary investigation, or ordered the Provincial
 Fiscal to make it, in pursuance of section 1687 of the Revised Administrative Code (as
amended by Republic Act No. 732), or remanded the record for said investigation to the
justice of the peace court, instead of dismissing the case as it did in the order appealed
from.
This doctrine was thereafter reiterated or affirmed in several case.  issued and comments were asked to be submitted, which petitioners did, but only after a further extension of
In the instant case, even if it is to be conceded for argument's sake that there was in fact no preliminary
investigation, the Sandiganbayan, per  Doromal vs. Sandiganbayan, "should merely suspend or hold in
abeyance proceedings upon the questioned Amended Information and remand the case to the Office of the
Ombudsman for him to conduct a preliminary investigation."
It is Our view, however, that petitioners were not denied the right to preliminary investigation. They,
nevertheless, insist that the preliminary investigation conducted by the Office of the Special Prosecutor
existed more in form than in substance. This is anchored on the failure by prosecutor Onos to consider the
counter-affidavits filed by petitioners. The same sin of omission is ascribed to Acting Director de la Llana
who purportedly failed to consider the comments submitted by the petitioners pursuant to a subpoena dated
13 April 1989. The failure of special prosecutor Berbano to conduct a preliminary investigation before
amending the information is also challenged.
It is finally urged that the Sandiganbayan completely disregarded the "glaring anomaly that on its face the
Information filed by the Office of the Special Prosecutor" was prepared and subscribed on 18 January 1989,
while the records indicate that the preliminary investigation was concluded on 3 October 1989.
In his Comment, respondent Berbano dispassionately traces the genesis of the criminal information filed
before the Sandiganbayan. His assessment that a preliminary investigation sufficient in substance and
manner was conducted prior to the filing of the information reflects the view of the Sandiganbayan,
maintained in both the 17 November 1989 and 4 January 1990 resolutions, that there was compliance with
the requirements of due process.
Petitioners were provided a reasonable period within which to submit their counter-affidavits; they did not
avail of the original period; they moved for an extension of at least fifteen (15) days from 22 October 1988.
Despite the urgency of its nature, the motion was sent by mail. The extension prayed for was good up to 6
November 1988. But, as admitted by them, they filed the Counter-Affidavits only on 9 November 1988. Yet,
they blamed prosecutor Onos for promulgating the 11 November 1989 Resolution and for, allegedly, not
acting on the motion. Petitioners then should not lay the blame on Onos; they should blame themselves for
presuming that the motion would be granted.
This notwithstanding, petitioners were able to file a Motion for Reconsideration on 13 December 1988
requesting that the reviewing prosecutor consider the belatedly filed documents; thus, there is the
recommendation of prosecutor Bernardita Erum calling for the dismissal of the charges on 2 March 1989,
which, however, was not sustained upon subsequent review. The Sandiganbayan, in its 17 November 1989
Resolution, succinctly summed up the matter when it asserted that "even granting, for the sake of argument,
that prosecutor Onos . . . failed to consider accused-movants' counter-affidavits, such defect was cured
when
a "Motion for Reconsideration" was filed, and which . . . de la Llana took into account upon review."
It may not then be successfully asserted that the counter-affidavits were not considered by the Ombudsman
in approving the information. Perusal of the factual antecedents reveals that a second investigation was
conducted upon the "1st Indorsement" of the Ombudsman of 4 April 1989. As a result, subpoenas were
fifteen (15) days from the expiration of the original deadline. From this submission the matter underwent
further review.
Moreover, in the 18 January 1989 Order of prosecutor Onos, there was an ample discussion of the defenses
raised by the petitioners in their counter-affidavits, thus negating the charge that the issues raised by them
were not considered at all.
It is indisputable that the respondents were not remiss in their duty to afford the petitioners the opportunity to
contest the charges thrown their way. Due process does not require that the accused actually file his
counter-affidavits before the preliminary investigation is deemed completed. All that is required is that he be
given the opportunity to submit such if he is so minded.
In any event, petitioners did in fact, although belatedly, submit their counter-affidavits and as a result thereof,
the prosecutors concerned considered them in subsequent reviews of the information, particularly in the re-
investigation ordered by the Ombudsman.
And now, as to the protestation of lack of preliminary investigation prior to the filing of the Amended
Information. The prosecution may amend the information without leave of court before arraignment, and
such does not prejudice the accused. Reliance on the pronouncements in Doromal vs.  Sandiganbayan is
misplaced as what obtained therein was the preparation of an entirely new information as contrasted with
mere amendments introduced in the amended information, which also charges petitioners with violating
Section 3 (e) of the Anti-Graft Law.
In Gaspar vs. Sandiganbayan, We held that there is no rule or law requiring the Tanodbayan to conduct
another preliminary investigation of a case under review by it. On the contrary, under P.D. No. 911, in
relation to Rule 12, Administrative Order No. VII, the Tanodbayan may, upon review, reverse the findings of
the investigator and thereafter "where he finds a prima facie case, to cause the filing of an information in
court against the respondent, based on the same sworn statements or evidence submitted, without the
necessity of conducting another preliminary investigation."
Respondent Sandiganbayan did not then commit any grave abuse of discretion in respect to its Resolutions
of 4 January 1990 and 1 February 1990. The petition then must fail.
CONCLUSION
WHEREFORE, judgment is hereby rendered: (1) GRANTING the petition in G.R. No. 85439; declaring null
and void the challenged Order of 28 October 1988 of the respondent Secretary of Agriculture; but denying,
for having become moot and academic, the prayer of petitioners that they be restored to their positions in the
KBMBPM; (2) DISMISSING, for lack of merit, the petition in G.R. No. 91927.
No pronouncement as to costs. IT IS SO ORDERED.
G.R. No. 4349            September 24,
1908
THE UNITED STATES, plaintiff-appellee, vs. ANICETO BARRIAS, defendant-appellant.
Ortigas & Fisher for appellant. Attorney-General Araneta for appellee.
TRACEY, J.:
In the Court of First Instance of the city of Manila the defendant was charged within a violation of paragraphs
70 and 83 of Circular No. 397 of the Insular Collector of Customs, duly published in the Official Gazette and
approved by the Secretary of Finance and Justice.1 After a demurrer to the complaint of the lighter Maude,
he was moving her and directing her movement, when heavily laden, in the Pasig River, by bamboo poles in
the hands of the crew, and without steam, sail, or any other external power. Paragraph 70 of Circular No.
397 reads as follows:
No heavily loaded casco, lighter, or other similar craft shall be permitted to move in the Pasig River
without being towed by steam or moved by other adequate power.
Paragraph 83 reads, in part, as follows:
For the violation of any part of the foregoing regulations, the persons offending shall be liable to a
fine of not less than P5 and not more than P500, in the discretion of the court.
In this court, counsel for the appellant attacked the validity of paragraph 70 on two grounds: First that it is
unauthorized by section 19 of Act No. 355; and, second, that if the acts of the Philippine Commission bear
the interpretation of authorizing the Collector to promulgate such a law, they are void, as constituting an
illegal delegation of legislative power.
The Attorney-General does not seek to sustain the conviction but joins with the counsel for the defense in
asking for the discharge of the prisoner on the first ground stated by the defense, that the rule of the
Collector cited was unauthorized and illegal, expressly passing over the other question of the delegation of
legislative power.
By sections 1, 2, and 3 of Act No. 1136, passed April 29, 1904, the Collector of Customs is authorized to
license craft engaged in the lighterage or other exclusively harbor business of the ports of the Islands, and,
with certain exceptions, all vessels engaged in lightering are required to be so licensed. Sections 5 and 8
read as follows:
SEC. 5. The Collector of Customs for the Philippine Islands is hereby authorized, empowered, and
directed to promptly make and publish suitable rules and regulations to carry this law into effect and
to regulate the business herein licensed.
SEC. 8. Any person who shall violate the provisions of this Act, or of any rule or regulation made
and issued by the Collector of Customs for the Philippine Islands, under and by authority of this Act,
shall be deemed guilty of a misdemeanor, and upon conviction shall be punished by imprisonment
for not more than six months, or by a fine of not more than one hundred dollars, United States
currency, or by both such fine and imprisonment, at the discretion of the court; Provided, That
violations of law may be punished either by the method prescribed in section seven hereof, or by
that prescribed in this section or by both.
Under this statute, which was not referred to on the argument, or in the original briefs, there is no difficulty in
sustaining the regulation of the Collector as coming within the terms of section 5. Lighterage, mentioned in
the Act, is the very business in which this vessel was engaged, and when heavily laden with hemp she was
navigating the Pasig River below the Bridge of Spain, in the city of Manila. This spot is near the mouth of the
river, the docks whereof are used for the purpose of taking on and discharging freight, and we entertain no
doubt that it was in right sense a part of the harbor, without having recourse to the definition of paragraph 8
of Customs Administrative Circular No. 136, which reads as follows:
The limits of a harbor for the purpose of licensing vessels as herein prescribed (for the lighterage
and harbor business) shall be considered to include its confluent navigable rivers and lakes, which
are navigable during any season of the year.
The necessity confiding to some local authority the framing, changing, and enforcing of harbor regulations is
recognized throughout the world, as each region and each a harbor requires peculiar use more minute than
could be enacted by the central lawmaking power, and which, when kept within the proper scope, are in their
nature police regulations not involving an undue grant of legislative power.
The complaint in this instance was framed with reference, as its authority, to sections 311 and 319 [19 and
311] at No. 355 of the Philippine Customs Administrative Acts, as amended by Act Nos. 1235 and 1480.
Under Act No. 1235, the Collector is not only empowered to make suitable regulations, but also to "fix
penalties for violation thereof," not exceeding a fine of P500.
This provision of the statute does, indeed, present a serious question.
One of the settled maxims in constitutional law is, that the power conferred upon the legislature to
make laws can not be delegated by that department to any body or authority. Where the sovereign
power of the State has located the authority, there it must remain; only by the constitutional agency
alone the laws must be made until the constitution itself is changed. The power to whose judgment,
wisdom, and patriotism this high prerogative has been intrusted can not relieve itself of the
responsibility by choosing other agencies upon which the power shall be developed, nor can its
substitutes the judgment, wisdom, and patriotism and of any other body for those to which alone
the people have seen fit to confide this sovereign trust. (Cooley's Constitutional limitations, 6th ed.,
p. 137.)
This doctrine is based on the ethical principle that such a delegated power constitutes not only a right but a
duty to be performed by the delegate by the instrumentality of his own judgment acting immediately upon the
matter of legislation and not through the intervening mind of another. In the case of the United
States vs. Breen (40 Fed. Phil. Rep. 402), an Act of Congress allowing the Secretary of War to make such
rules and regulations as might be necessary to protect improvements of the Mississipi River, and providing
that a violation thereof should constitute a misdemeanor, was sustained on the ground that the
misdemeanor was declared not under the delegated power of the Secretary of War, but in the Act of
Congress, itself. So also was a grant to him of power to prescribe rules for the use of canals.
(U.S. vs. Ormsbee, 74 Fed. Rep. 207.) but a law authorizing him to require alteration of any bridge and to
impose penalties for violations of his rules was held invalid, as vesting in him upon a power exclusively
lodged in Congress (U.S. vs. Rider, 50 Fed. Rep., 406.) The subject is considered and some cases reviewed
by the Supreme Court of the United States, in re Kollock (165 U.S. 526), which upheld the law authorizing a
commissioner of internal revenue to designate and stamps on oleomargarine packages, an improper use of
which should thereafter constitute a crime or misdemeanor, the court saying (p. 533):

The criminal offense is fully and completely defined by the Act and the designation by the
Commissioner of the particular marks and brands to be used was a mere matter of detail. The
regulation was in execution of, or supplementary to, but not in conflict with the law itself. . . .

In Massachusetts it has been decided that the legislature may delegate to the governor and counsel the
power to make pilot regulations. (Martin vs. Witherspoon et al., 135 Mass. 175).

In the case of The Board of Harbor Commissioners of the Port of Eureka vs. Excelsior Redwood
Company (88 Cal. 491), it was ruled that harbor commissioners can not impose a penalty under statues
authorizing them to do so, the court saying:

Conceding that the legislature could delegate to the plaintiff the authority to make rules and
regulation with reference to the navigation of Humboldt Bay, the penalty for the violation of such
rules and regulations is a matter purely in the hands of the legislature.

Having reached the conclusion that Act No. 1136 is valid, so far as sections 5 and 8 are concerned, and is
sufficient to sustain this prosecution, it is unnecessary that we should pass on the questions discussed in the
briefs as to the extend and validity of the other acts. The reference to them in the complaint is not material,
as we have frequently held that where an offense is correctly described in the complaint an additional
reference to a wrong statute is immaterial.

We are also of the opinion that none of the subsequent statutes cited operate to repeal the aforesaid section
Act No. 1136.

So much of the judgment of the Court of First Instance as convicts the defendant of a violation of Acts Nos.
355 and 1235 is hereby revoked and is hereby convicted of a misdemeanor and punished by a fine of 25
dollars, with costs of both instances. So ordered.
 of any hydraulic power project was to be decided by the NPC Board.  The provision on tax exemption in
6

relation to the issuance of the NPC bonds was neither amended nor deleted.

On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the bond's
principal and interest in "gold coins" but adding that payment could be made in United States dollars.  The 7

provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.
G.R. No. 88291 June 8,
1993 On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to
guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans.  He 8

was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and
ERNESTO M. MACEDA, petitioner, vs. HON. CATALINO MACARAIG, JR., in his capacity as Executive Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives  and for the9

Secretary, Office of the President, HON. VICENTE JAYME, ETC., ET AL., respondents. reconstruction and development of the economy of the country.   It was expressly stated that:
10

Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation. Siguion Reyna, Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges,
Montecillo & Ongsiako for Caltex. contributions and restrictions of the Republic of the Philippines, its provinces, cities and
municipalities. 
11

NOCON, J.:
On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other
Just like lightning which does strike the same place twice in some instances, this matter of indirect tax types of indebtedness, aside from indebtedness incurred by flotation of bonds.   As to the pertinent tax
12

exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second exemption provision, the law stated as follows:
time. Unfazed by the Decision We promulgated on May 31, 1991  petitioner Ernesto Maceda asks this Court
1

to reconsider said Decision. Lest We be criticized for denying due process to the petitioner. We have To facilitate payment of its indebtedness, the National Power Corporation shall be exempt
decided to take a second look at the issues. In the process, a hearing was held on July 9, 1992 where all from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the
parties presented their respective arguments. Etched in this Court's mind are the paradoxical claims by both Philippines, its provinces, cities and municipalities. 
13

petitioner and private respondents that their respective positions are for the benefit of the Filipino people.
On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the
I President of the Philippines was authorized to negotiate, contract and guarantee loans with the Export-
Import Bank of of Washigton, D.C., U.S.A., or any other international financial institution.   The tax provision
14

A Chronological review of the relevant NPC laws, specially with respect to its tax exemption provisions, at for repayment of these loans, as stated in R.A. No. 357, was not amended.
the risk of being repetitious is, therefore, in order.
On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate
On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a taxes. As enacted, the law states as follows:
public corporation, mainly to develop hydraulic power from all water sources in the Philippines.  The sum of
2

P250,000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the To facilitate payment of its indebtedness, the National Power Corporation shall be exempt
NPC and conducting its preliminary work.  The main source of funds for the NPC was the flotation of bonds
3
from all taxes, except real property tax, and from all duties, fees, imposts, charges, and
in the capital markets  and these bonds
4
restrictions of the Republic of the Philippines, its provinces, cities, and municipalities.
15

. . . issued under the authority of this Act shall be exempt from the payment of all taxes by On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by the
the Commonwealth of the Philippines, or by any authority, branch, division or political increased indebtedness   should bear the National Economic Council's stamp of approval. The tax
16

subdivision thereof and subject to the provisions of the Act of Congress, approved March exemption provision related to the payment of this total indebtedness was not amended nor deleted.
24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon
the face of said bonds. . . . .
5

On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was
authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357.   The tax 17

On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the initial provision related to the repayment of these loans was not amended nor deleted.
operations of the NPC and reiterating the provision of the flotation of bonds as soon as the first construction
On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31, 2000.    All 18
laws or provisions of laws and executive orders contrary to said R.A. No. 2058 were expressly repealed.  19
On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock
corporation with an authorized capital stock of P100,000,000.00 divided into 1,000.000 shares having a par
value of P100.00 each, with said capital stock wholly subscribed to by the Government.   No tax exemption
20
was incorporated in said Act.
On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to
P250,000,000.00 with the increase to be wholly subscribed by the Government.   No tax provision was
21
incorporated in said Act.
On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to
P300,000,000.00, the increase to be wholly subscribed by the Government. No tax provision was
incorporated in said Act. 
22
On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as
amended. Declared as primary objectives of the nation were:
Declaration of Policy. — Congress hereby declares that (1) the comprehensive
development, utilization and conservation of Philippine water resources for all beneficial
uses, including power generation, and (2) the total electrification of the Philippines through
the development of power from all sources to meet the needs of industrial development
and dispersal and the needs of rural electrification are primary objectives of the nation
which shall be pursued coordinately and supported by all instrumentalities and agencies of
the government, including the financial institutions. 
23
Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority to incur
Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign Loans).
As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows:
The bonds issued under the authority of this subsection shall be exempt from the payment
of all taxes by the Republic of the Philippines, or by any authority, branch, division or
political subdivision thereof which facts shall be stated upon the face of said bonds. . . .  24
As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as follows:
The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of any loan,
credit or indebtedeness incurred under this Act, shall also be exempt from all taxes, fees,
imposts, other charges and restrictions, including import restrictions, by the Republic of
the Philippines, or any of its agencies and political subdivisions. 
25
A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the non-
profit character and tax exemptions of NPC as follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment, as well as excess revenues from its operation, for expansion. To enable the
Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation is
hereby declared exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees in
any court or administrative proceedings in which it may be a party, restrictions and duties
to the Republic of the Philippines, its provinces, cities, and municipalities and other
government agencies and instrumentalities;
(b) From all income taxes, franchise taxes and realty taxes to be paid to the National
Government, its provinces, cities, municipalities and other government agencies and
instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax, and wharfage
fees on import of foreign goods required for its operations and projects; and
(d) From all taxes, duties, fees, imposts and all other charges its provinces, cities,
municipalities and other government agencies and instrumentalities, on all petroleum
products used by the Corporation in the generation, transmission, utilization, and sale of
electric power. 26
On November 7, 1972, Presidential Decree No. 40 was issued declaring that the
electrification of the entire country was one of the primary concerns of the country. And in
connection with this, it was specifically stated that:
The setting up of transmission line grids and the construction of associated generation
facilities in Luzon, Mindanao and major islands of the country, including the Visayas, shall
be the responsibility of the National Power Corporation (NPC) as the authorized
implementing agency of the State.  27
xxx xxx xxx
It is the ultimate objective of the State for the NPC to own and operate as a single
integrated system all generating facilities supplying electric power to the entire area
embraced by any grid set up by the NPC.  28
On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role
under aforesaid P.D. No. 40. Its authorized capital stock was raised to P2,000,000,000.00,   its total
29
domestic indebtedness was pegged at a maximum of P3,000,000,000.00 at any one time,   and the NPC
30
was authorized to borrow a total of US$1,000,000,000.00   in foreign loans.
31
The relevant tax exemption provision for these foreign loans states as follows:
The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the proceeds
of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all
direct and indirect taxes, fees, imposts, other charges and restrictions, including import
restrictions previously and presently imposed, and to be imposed by the Republic of the
Philippines, or any of its agencies and political subdivisions.   (Emphasis supplied)
32
Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows:
(a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to the
Republic of the Philippines, its provinces, cities, municipalities and other government
agencies and instrumentalities including the taxes, duties, fees, imposts and other charges
provided for under the Tariff and Customs Code of the Philippines, Republic Act
Numbered Nineteen Hundred Thirty-Seven, as amended, and as further amended by
Presidential Decree No. 34 dated October 27, 1972, and Presidential Decree No. 69,
dated November 24, 1972, and costs and service fees in any court or administrative
proceedings in which it may be a party;
xxx xxx xxx
(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly  by the Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the
Corporation in the generation, transmission, utilization and sale of electric
power.   (Emphasis supplied)
33
On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of electricity
to its different customers.   No tax exemption provision was amended, deleted or added.
34
On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated annually
to cover the unpaid subscription of the Government in the NPC authorized capital stock, which amount
would be taken from taxes accruing to the General Funds of the Government, proceeds from loans,
issuance of bonds, treasury bills or notes to be issued by the Secretary of Finance for this particular
purpose. 35
On May 27, 1976 P.D. No. 938 was issued
(I)n view of the accelerated expansion programs for generation and transmission facilities
which includes nuclear power generation, the present capitalization of National Power
Corporation (NPC) and the ceilings for domestic and foreign borrowings are deemed
insufficient; 36
xxx xxx xxx
(I)n the application of the tax exemption provisions of the Revised Charter, the non-profit
character of NPC has not been fully utilized because of restrictive interpretation of the
taxing agencies of the government on said provisions;  37
xxx xxx xxx
(I)n order to effect the accelerated expansion program and attain the declared objective of
total electrification of the country, further amendments of certain sections of Republic Act
No. 6395, as amended by Presidential Decrees Nos. 380, 395 and 758, have become
imperative;  38
Thus NPC's capital stock was raised to P8,000,000,000.00,   the total domestic indebtedness ceiling was
39
increased to P12,000,000,000.00,   the total foreign loan ceiling was raised to US$4,000,000,000.00   and
40 41
Section 13 of R.A. No. 6395, was amended to read as follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment as well as excess revenues from its operation, for expansion. To enable the
Corporation to pay to its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation,
including its subsidiaries, is hereby declared exempt from the payment of all forms of
taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal
bonds, supersedeas bonds, in any court or administrative proceedings.  42
II
On the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and
Executive Order No. 93 (S'86).
On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to imports
as follows:
WHEREAS, importations by certain government agencies, including government-owned or
controlled corporation, are exempt from the payment of customs duties and compensating
tax; and
WHEREAS, in order to reduce foreign exchange spending and to protect domestic
industries, it is necessary to restrict and regulate such tax-free importations.
NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue
of the powers vested in me by the Constitution, and do hereby decree and order the
following:
 Sec. 1. All importations of any government agency, including government-owned or
controlled corporations which are exempt from the payment of customs duties and internal
revenue taxes, shall be subject to the prior approval of an Inter-Agency Committee which
shall insure compliance with the following conditions:
(a) That no such article of local manufacture are available in sufficient quantity and
comparable quality at reasonable prices;
(b) That the articles to be imported are directly and actually needed and will be used
exclusively by the grantee of the exemption for its operations and projects or in the
conduct of its functions; and
(c) The shipping documents covering the importation are in the name of the grantee to
whom the goods shall be delivered directly by customs authorities.
xxx xxx xxx
Sec. 3. The Committee shall have the power to regulate and control the tax-free
importation of government agencies in accordance with the conditions set forth in Section
1 hereof and the regulations to be promulgated to implement the provisions of this Decree.
Provided, however, That any government agency or government-owned or controlled
corporation, or any local manufacturer or business firm adversely affected by any decision
or ruling of the Inter-Agency Committee may file an appeal with the Office of the President
within ten days from the date of notice thereof. . . . .
xxx xxx xxx
Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all
general and special laws and decrees are hereby amended accordingly.
x x x           x x x          x x x
On July 30, 1977, P.D. 1177 was issued as it was
. . . declared the policy of the State to formulate and implement a National Budget that is
an instrument of national development, reflective of national objectives, strategies and
plans. The budget shall be supportive of and consistent with the socio-economic
development plan and shall be oriented towards the achievement of explicit objectives and
expected results, to ensure that funds are utilized and operations are conducted
effectively, economically and efficiently. The national budget shall be formulated within a
context of a regionalized government structure and of the totality of revenues and other
receipts, expenditures and borrowings of all levels of government-owned or controlled
corporations. The budget shall likewise be prepared within the context of the national long-
term plan and of a long-term budget program.  43
In line with such policy, the law decreed that
All units of government, including government-owned or controlled corporations, shall pay income taxes,
customs duties and other taxes and fees are imposed under revenues laws: provided, that organizations
otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General
Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be established by the
Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be
considered as both revenue and expenditure of the General Fund.  44
The law also declared that —
[A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are
inconsistent with the provisions of the Decree are hereby repealed and/or modified
accordingly.  45
On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino
assassination, P.D. No. 1931 was issued to reiterate that:
WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax
privileges to any government-owned or controlled corporation and all other units of
government;  46
and since there was a
. . . need for government-owned or controlled corporations and all other units of
government enjoying tax privileges to share in the requirements of development, fiscal or
otherwise, by paying the duties, taxes and other charges due from them.  47
it was decreed that:
Sec. 1. The provisions of special on general law to the contrary notwithstanding, all
exemptions from the payment of duties, taxes, fees, imposts and other charges heretofore
granted in favor of government-owned or controlled corporations including their
subsidiaries, are hereby withdrawn.
Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the
recommendation of the Fiscal Incentives Review Board created under Presidential Decree
No. 776, is hereby empowered to restore, partially or totally, the exemptions withdrawn by
Section 1 above, any applicable tax and duty, taking into account, among others, any or all
of the following:
1) The effect on the relative price levels;
2) The relative contribution of the corporation to the revenue generation effort;
 3) The nature of the activity in which the corporation is engaged in; or
4) In general the greater national interest to be served.
xxx xxx xxx
Sec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees,
executive orders, administrative orders, rules, regulations or parts thereof which are
inconsistent with this Decree are hereby repealed, amended or modified accordingly.
On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or
grant of tax exemption to other government and private entities without benefit of review by the Fiscal
Incentives Review Board, to wit:
WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and
October 14, 1984, respectively, withdrew the tax and duty exemption privileges, including
the preferential tax treatment, of government and private entities with certain exceptions,
in order that the requirements of national economic development, in terms of fiscals and
other resources, may be met more adequately;
xxx xxx xxx
WHEREAS, in addition to those tax and duty exemption privileges were restored by the
Fiscal Incentives Review Board (FIRB), a number of affected entities, government and
private, had their tax and duty exemption privileges restored or granted by Presidential
action without benefit or review by the Fiscal Incentives Review Board (FIRB);
x x x           x x x          x x x
Since it was decided that:
[A]ssistance to government and private entities may be better provided where necessary
by explicit subsidy and budgetary support rather than tax and duty exemption privileges if
only to improve the fiscal monitoring aspects of government operations.
It was thus ordered that:
Sec. 1. The Provisions of any general or special law to the contrary notwithstanding, all tax
and duty incentives granted to government and private entities are hereby withdrawn,
except:
a) those covered by the non-impairment clause of the Constitution;
b) those conferred by effective internation agreement to which the Government of the
Republic of the Philippines is a signatory;
c) those enjoyed by enterprises registered with:
(i) the Board of Investment pursuant to Presidential Decree No. 1789, as
amended;
(ii) the Export Processing Zone Authority, pursuant to Presidential
Decree No. 66 as amended;
(iii) the Philippine Veterans Investment Development Corporation
Industrial Authority pursuant to Presidential Decree No. 538, was
amended.
d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of
Instructions No. 1416;
e) those conferred under the four basic codes namely:
(i) the Tariff and Customs Code, as amended;
(ii) the National Internal Revenue Code, as amended;
(iii) the Local Tax Code, as amended;
(iv) the Real Property Tax Code, as amended;
f) those approved by the President upon the recommendation of the
Fiscal Incentives Review Board.
Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776,
as amended, is hereby authorized to:
a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;
b) revise the scope and coverage of tax and/or duty exemption that may be restored;
c) impose conditions for the restoration of tax and/or duty exemption;
d) prescribe the date of period of effectivity of the restoration of tax and/or duty exemption;
 e) formulate and submit to the President for approval, a complete system for the grant of
subsidies to deserving beneficiaries, in lieu of or in combination with the restoration of tax
and duty exemptions or preferential treatment in taxation, indicating the source of funding
therefor, eligible beneficiaries and the terms and conditions for the grant thereof taking into
consideration the international commitment of the Philippines and the necessary
precautions such that the grant of subsidies does not become the basis for countervailing
action.
Examples: Individual income tax, corporate income tax, transfer taxes (estate tax, donor's
tax), residence tax, immigration tax
b. Indirect Tax — that where the tax is imposed upon goods BEFORE reaching the
consumer who ultimately pays for it, not as a tax, but as a part of the purchase price.
Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and
the tariff and customs indirect taxes (import duties, special import tax and other dues) 
52

Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board
shall take into account any or all of the following considerations:
IV
a) the effect on relative price levels;
To simply matter, the issues raised by petitioner in his motion for reconsideration can be reduced to the
following:
b) relative contribution of the beneficiary to the revenue generation effort;
(1) What kind of tax exemption privileges did NPC have?
c) nature of the activity the beneficiary is engaged; and
(2) For what periods in time were these privileges being enjoyed?
d) in general, the greater national interest to be served.
(3) If there are taxes to be paid, who shall pay for these taxes?
xxx xxx xxx
V
Sec. 5. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with
this Executive Order are hereby repealed or modified accordingly.
Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms of
taxes etc.," in its section 10, amending Section 13, R.A. No. 6395, as amended by P.D. No. 380, does not
E.O. No. 93 (S'86) was decreed to be effective   upon the promulgation of the rules and regulations, to be
48
expressly include "indirect taxes."
issued by the Ministry of Finance.   Said rules and regulations were promulgated and published in the
49

Official Gazette
on February 23, 1987. These became effective on the 15th day after promulgation   in the Official 50 His point is not well-taken.
Gasetter,   which 15th day was March 10, 1987.
51

A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was
III to be completely tax exempt from all forms of taxes — direct and indirect.

Now to some definitions. We refer to the very simplistic approach that all would-be lawyers, learn in their NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its operations upon its
TAXATION I course, which fro convenient reference, is as follows: creation by virtue of C.A. No. 120.

Classifications or kinds of Taxes:
According to Persons who pay or who bear the burden:
a. Direct Tax — the where the person supposed to pay the tax really pays
it. WITHOUT transferring the burden to someone else.
When the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained were to be
completely tax exempt.
After the NPC was authorized to borrow from other sources of funds — aside issuance of bonds — it was
again specifically exempted from all types of taxes "to facilitate payment of its indebtedness." Even when the
ceilings for domestic and foreign borrowings were periodically increased, the tax exemption privileges of the
NPC were maintained.
NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as
above stated. The exemption was, however, restored by R.A. No. 6395.
Section 13, R.A. No. 6395, was very comprehensive in its enumeration of the tax exemptions allowed NPC.
Its section 13(d) is the starting point of this bone of contention among the parties. For easy reference, it is
reproduced as follows:
[T]he Corporation is hereby declared exempt:
xxx xxx xxx
(d) From all taxes, duties, fees, imposts and all other charges imposed by the Republic of
the Philippines, its provinces, cities, municipalities and other government agencies and
instrumentalities, on all petroleum products used by the Corporation in the generation,
transmission, utilization, and sale of electric power.
P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d), which now reads as follows:
xxx xxx xxx
(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or
indirectly  by the Republic of the Philippines, its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the
Corporation in the generation, transmission, utilization and sale of electric power.
(Emphasis supplied)
Then came P.D. No. 938 which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as
follows:
The Corporation shall be non-profit and shall devote all its returns from its capital
investment as well as excess revenues from its operation, for expansion. To enable the
Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation,
including its subsidiaries, is hereby declared exempt from the payment of ALL FORMS
OF taxes, duties, fees, imposts as well as costs and service fees including filing fees,
appeal bonds, supersedeas bonds, in any court or administrative proceedings. (Emphasis
supplied)
Petitioner reminds Us that:
[I]t must be borne in mind that Presidential Decree Nos. 380 and 938 were issued by one
man, acting as such the Executive and Legislative.
xxx xxx xxx
[S]ince both presidential decrees were made by the same person, it would have been very
easy for him to retain the same or similar language used in P.D. No. 380 P.D. No. 938 if
his intention were to preserve the indirect tax exemption of NPC.
Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his fault were.
It should be noted that section 13, R.A. No. 6395, provided for tax exemptions for the following items:
13(a) : court or administrative proceedings;
13(b) : income, franchise, realty taxes;
13(c) : import of foreign goods required for its operations and projects;
13(d) : petroleum products used in generation of electric power.
P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,", included
13(a) under the "as well as" clause and added PNOC subsidiaries as qualified for tax exemptions.
This is the only conclusion one can arrive at if he has read all the NPC laws in the order of enactment or
issuance as narrated above in part I hereof. President Marcos must have considered all the NPC statutes
from C.A. No. 120 up to its latest amendments, P.D. No. 380, P.D. No. 395 and P.D. No. 759, AND came
up   with a very simple Section 13, R.A. No. 6395, as amended by P.D. No. 938.
55
One common theme in all these laws is that the NPC must be able to pay its indebtedness   which, as of
56
P.D. No. 938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign
loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be
achieved.
By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be remembered that to pay the
government share in its capital stock P.D. No. 758 was issued mandating that P200 Million would be
appropriated annually to cover the said unpaid subscription of the Government in NPC's authorized capital
stock. And significantly one of the sources of this annual appropriation of P200 million is TAX MONEY
accruing to the General Fund of the Government. It does not stand to reason then that former President
Marcos would order P200 Million to be taken partially or totally from tax money to be used to pay the
Government subscription in the NPC, on one hand, and then order the NPC to pay all its indirect taxes, on
the other.
The above conclusion that then President Marcos lumped up Sections 13 (b), 13 (c) and (d) into the phrase
"All FORMS OF" is supported by the fact that he did not do the same for the tax exemption provision for the
foreign loans to be incurred.
The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395, reads as follows:
 The loans, credits and indebtedness contracted under this subsection and the payment of
the principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials and supplies by the Corporation, paid from the proceeds of any loan,
credit or indebtedness incurred under this Act, shall also be exempt from all taxes, fees,
imposts, other charges and restrictions, including import restrictions, by the Republic of
the Philippines, or any of its agencies and political subdivisions. 57
The same was amended by P.D. No. 380 as follows:
The loans, credits and indebtedness contracted this subsection and the payment of the
principal, interest and other charges thereon, as well as the importation of machinery,
equipment, materials, supplies and services, by the Corporation, paid from the proceeds
of any loan, credit or indebtedness incurred under this Act, shall also be exempt from
all direct and indirect taxes, fees, imposts, other charges and restrictions, including import
restrictions  previously and presently imposed, and to be imposed by the Republic of the
Philippines, or any of its agencies and political subdivisions.   (Emphasis supplied)
58
P.D. No. 938 did not amend the same   and so the tax exemption provision in Section 8 (b), R.A. No. 6395,
59
as amended by P.D. No. 380, still stands. Since the subject matter of this particular Section 8 (b) had to do
only with loans and machinery imported, paid for from the proceeds of these foreign loans, THERE WAS NO
OTHER SUBJECT MATTER TO LUMP IT UP WITH, and so, the tax exemption stood as is — with the
express mention of "direct and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege
extended to "taxes, fees, imposts, other charges . . . to be imposed" in the future  — surely, an indication that
the lawmakers wanted the NPC to be exempt from ALL FORMS of taxes — direct and indirect.
It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and indirect
taxes under P.D. No. 938.
VI
Five (5) years on into the now discredited New Society, the Government decided to rationalize government
receipts and expenditures by formulating and implementing a National Budget.   The NPC, being a
60
government owned and controlled corporation had to be shed off its tax exemption status privileges under
P.D. No. 1177. It was, however, allowed to ask for a subsidy from the General Fund in the exact amount of
taxes/duties due.
Actually, much earlier, P.D. No. 882 had already repealed NPC's tax-free importation privileges. It allowed,
however, NPC to appeal said repeal with the Office of the President and to avail of tax-free importation
privileges under its Section 1, subject to the prior approval of an Inter-Agency Committed created by virtue of
said P.D. No. 882. It is presumed that the NPC, being the special creation of the State, was allowed to
continue its tax-free importations.
This Court notes that petitioner brought to the attention of this Court, the matter of the abolition of NPC's tax
exemption privileges by P.D. No. 1177   only in his Common Reply/Comment to private Respondents'
61
"Opposition" and "Comment" to Motion for Reconsideration, four (4) months AFTER the motion for
Reconsideration had been filed. During oral arguments heard on July 9, 1992, he proceeded to discuss this
tax exemption withdrawal as explained by then Secretary of Justice Vicente Abad Santos in opinion No. 133
(S '77).   A careful perusal of petitioner's senate Blue Ribbon Committee Report No. 474, the basis of the
62
petition at bar, fails to yield any mention of said P.D. No. 1177's effect on NPC's tax exemption
privileges.   Applying by analogy Pulido vs. Pablo,   the court declares that the matter of P.D. No. 1177
63 64
abolishing NPC's tax exemption privileges was not seasonably invoked   by the petitioner.
65
Be that as it may, the Court still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption
privileges as this statute has been reiterated twice in P.D. No. 1931. The express repeal of tax privileges of
any government-owned or controlled corporation (GOCC). NPC included, was reiterated in the fourth
whereas clause of P.D. No. 1931's preamble. The subsidy provided for in Section 23, P.D. No. 1177, being
inconsistent with Section 2, P.D. No. 1931, was deemed repealed as the Fiscal Incentives Revenue Board
was tasked with recommending the partial or total restoration of tax exemptions withdrawn by Section 1,
P.D. No. 1931.
The records before Us do not indicate whether or not NPC asked for the subsidy contemplated in Section
23, P.D. No. 1177. Considering, however, that under Section 16 of P.D. No. 1177, NPC had to submit to the
Office of the President its request for the P200 million mandated by P.D. No. 758 to be appropriated
annually by the Government to cover its unpaid subscription to the NPC authorized capital stock and that
under Section 22, of the same P.D. No. NPC had to likewise submit to the Office of the President its internal
operating budget for review due to capital inputs of the government (P.D. No. 758) and to the national
government's guarantee of the domestic and foreign indebtedness of the NPC, it is clear that NPC was
covered by P.D. No. 1177.
There is reason to believe that NPC availed of subsidy granted to exempt GOCC's that suddenly found
themselves having to pay taxes. It will be noted that Section 23, P.D. No. 1177, mandated that the Secretary
of Finance and the Commissioner of the Budget had to establish the necessary procedure to accomplish the
tax payment/tax subsidy scheme of the Government. In effect, NPC, did not put any cash to pay any tax as it
got from the General Fund the amounts necessary to pay different revenue collectors for the taxes it had to
pay.
In his memorandum filed July 16, 1992, petitioner submits:
[T]hat with the enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty and
tax exemptions, whether direct or indirect. And so there was nothing to be withdrawn or to
be restored under P.D. No. 1931, issued on June 11, 1984. This is evident from sections 1
and 2 of said P.D. No. 1931, which reads:
"Section 1. The provisions of special or general law to the contrary
notwithstanding, all exemptions from the payment of duties, taxes, fees,
imports and other charges heretofore granted in favor of government-
owned or controlled corporations including their subsidiaries are hereby
withdrawn."
Sec. 2. The President of the Philippines and/or the Minister of Finance,
upon the recommendation of the Fiscal Incentives Review Board
 created under P.D. No. 776, is hereby empowered to restore partially or
totally, the exemptions withdrawn by section 1 above. . . .
Hence, P.D. No. 1931 did not have any effect or did it change NPC's status. Since it had
already lost all its tax exemptions privilege with the issuance of P.D. No. 1177 seven (7)
years earlier or on July 30, 1977, there were no tax exemptions to be withdrawn by section
1 which could later be restored by the Minister of Finance upon the recommendation of the
FIRB under Section 2 of P.D. No. 1931. Consequently, FIRB resolutions No. 10-85, and 1-
86, were all illegally and validly issued since FIRB acted beyond their statutory authority
by creating and not merely restoring the tax exempt status of NPC. The same is true for
FIRB Res. No. 17-87 which restored NPC's tax exemption under E.O. No. 93 which
likewise abolished all duties and tax exemptions but allowed the President upon
recommendation of the FIRB to restore those abolished.
The Court disagrees.
Applying by analogy the weight of authority that:
When a revised and consolidated act re-enacts in the same or substantially the same
terms the provisions of the act or acts so revised and consolidated, the revision and
consolidation shall be taken to be a continuation of the former act or acts, although the
former act or acts may be expressly repealed by the revised and consolidated act; and all
rights
and liabilities under the former act or acts are preserved and may be enforced.  66
the Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the first half of Section 23, P.D.
No. 1177, on withdrawal of tax exemption privileges of all GOCC's said Section 1, P.D. No. 1931 was
deemed to be a continuation of the first half of Section 23, P.D. No. 1177, although the second half of
Section 23, P.D. No. 177, on the subsidy scheme for former tax exempt GOCCs had been expressly
repealed by Section 2 with its institution of the FIRB recommendation of partial/total restoration of tax
exemption privileges.
The NPC tax privileges withdrawn by Section 1. P.D. No. 1931, were, therefore, the same NPC tax
exemption privileges withdrawn by Section 23, P.D. No. 1177. NPC could no longer obtain a subsidy for the
taxes it had to pay. It could, however, under P.D. No. 1931, ask for a total restoration of its tax exemption
privileges, which, it did, and the same were granted under FIRB Resolutions Nos. 10-85   and 1-86   as
67 68
approved by the Minister of Finance.
Consequently, contrary to petitioner's submission, FIRB Resolutions Nos. 10-85 and 1-86 were both legally
and validly issued by the FIRB pursuant to P.D. No. 1931. FIRB did not created NPC's tax exemption status
but merely restored it. 
69
Some quarters have expressed the view that P.D. No. 1931 was illegally issued under the now rather
infamous Amendment No. 6   as there was no showing that President Marcos' encroachment on legislative
70
prerogatives was justified under the then prevailing condition that he could legislate "only if the Batasang
Pambansa 'failed or was unable to act inadequately on any matter that in his judgment required immediate
action' to meet the 'exigency'. 
71
Actually under said Amendment No. 6, then President Marcos could issue decrees not only when the Interim
Batasang Pambansa failed or was unable to act adequately on any matter for any reason that in his
(Marcos') judgment required immediate action, but also when there existed a grave emergency or a threat or
thereof. It must be remembered that said Presidential Decree was issued only around nine (9) months after
the Philippines unilaterally declared a moratorium on its foreign debt payments   as a result of the economic
72
crisis triggered by loss of confidence in the government brought about by the Aquino assassination. The
Philippines was then trying to reschedule its debt payments.   One of the big borrowers was the
73
NPC   which had a US$ 2.1 billion white elephant of a Bataan Nuclear Power Plant on its back.   From all
74 75
indications, it must have been this grave emergency of a debt rescheduling which compelled Marcos to
issue P.D. No. 1931, under his Amendment 6 power.  76
The rule, therefore, that under the 1973 Constitution "no law granting a tax exemption shall be passed
without the concurrence of a majority of all the members of the Batasang Pambansa"   does not apply as
77
said P.D. No. 1931 was not passed by the Interim Batasang Pambansa but by then President Marcos under
His Amendment No. 6 power.
P.D. No. 1931 was, therefore, validly issued by then President Marcos under his Amendment No. 6
authority.
Under E.O No. 93 (S'86) NPC's tax exemption privileges were again clipped by, this time, President Aquino.
Its section 2 allowed the NPC to apply for the restoration of its tax exemption privileges. The same was
granted under FIRB Resolution No. 17-87   dated June 24, 1987 which restored NPC's tax exemption
78
privileges effective, starting March 10, 1987, the date of effectivity of E.O. No. 93 (S'86).
FIRB Resolution No. 17-87 was approved by the President on October 5, 1987.   There is no indication,
79
however, from the records of the case whether or not similar approvals were given by then President Marcos
for FIRB Resolutions Nos. 10-85 and 1- 86. This has led some quarters to believe that a "travesty of justice"
might have occurred when the Minister of Finance approved his own recommendation as Chairman of the
Fiscal Incentives Review Board as what happened in Zambales Chromate vs. Court of Appeals   when the 80
Secretary of Agriculture and Natural Resources approved a decision earlier rendered by him when he was
the Director of Mines,   and in Anzaldo vs. Clave   where Presidential Executive Assistant Clave affirmed,
81 82
on appeal to Malacañang, his own decision as Chairman of the Civil Service Commission.  83
Upon deeper analysis, the question arises as to whether one can talk about "due process" being violated
when FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of Finance when the same were
recommended by him in his capacity as Chairman of the Fiscal Incentives Review Board.  84
In Zambales Chromite and Anzaldo, two (2) different parties were involved: mining groups and scientist-
doctors, respectively. Thus, there was a need for procedural due process to be followed.
In the case of the tax exemption restoration of NPC, there is no other comparable entity — not even a single
public or private corporation — whose rights would be violated if NPC's tax exemption privileges were to be
restored. While there might have been a MERALCO before Martial Law, it is of public knowledge that the
MERALCO generating plants were sold to the NPC in line with the State policy that NPC was to be the State
implementing arm for the electrification of the entire country. Besides, MERALCO was limited to Manila and
its environs. And as of 1984, there was no more MERALCO — as a producer of electricity — which could
have objected to the restoration of NPC's tax exemption privileges.
It should be noted that NPC was not asking to be granted tax exemption privileges for the first time. It was
just asking that its tax exemption privileges be restored. It is for these reasons that, at least in NPC's case,
the recommendation and approval of NPC's tax exemption privileges under FIRB Resolution Nos. 10-85 and
1-86, done by the same person acting in his dual capacities as Chairman of the Fiscal Incentives Review
Board and Minister of Finance, respectively, do not violate procedural due process.
While as above-mentioned, FIRB Resolution No. 17-87 was approved by President Aquino on October 5,
1987, the view has been expressed that President Aquino, at least with regard to E.O. 93 (S'86), had no
authority to sub-delegate to the FIRB, which was allegedly not a delegate of the legislature, the power
delegated to her thereunder.
A misconception must be cleared up.
When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and Legislative
powers. Thus, there was no power delegated to her, rather it was she who was delegating her power. She
delegated it to the FIRB, which, for purposes of E.O No. 93 (S'86), is a delegate of the legislature. Clearly,
she was not sub-delegating her power.
And E.O. No. 93 (S'86), as a delegating law, was complete in itself — it set forth the policy to be carried
out   and it fixed the standard to which the delegate had to conform in the performance of his
85
functions,   both qualities having been enunciated by this Court in Pelaez vs. Auditor General. 
86 87
Thus, after all has been said, it is clear that the NPC had its tax exemption privileges restored from June 11,
1984 up to the present.
VII
The next question that projects itself is — who pays the tax?
The answer to the question could be gleamed from the manner by which the Commissaries of the Armed
Forces of the Philippines sell their goods.
By virtue of P.D. No. 83,   veterans, members of the Armed of the Philippines, and their defendants but
88
groceries and other goods free of all taxes and duties if bought from any AFP Commissaries.
In practice, the AFP Commissary suppliers probably treat the unchargeable specific, ad valorem and other
taxes on the goods earmarked for AFP Commissaries as an added cost of operation and distribute it over
the total units of goods sold as it would any other cost. Thus, even the ordinary supermarket buyer probably
pays for the specific, ad valorem  and other taxes which theses suppliers do not charge the AFP
Commissaries.  89
IN MUCH THE SAME MANNER, it is clear that private respondents-oil companies have to absorb the taxes
they add to the bunker fuel oil they sell to NPC.
It should be stated at this juncture that, as early as May 14, 1954, the Secretary of Justice renders an
opinion,   wherein he stated and We quote:
90
xxx xxx xxx
Republic Act No. 358 exempts the National Power Corporation from "all taxes, duties,
fees, imposts, charges, and restrictions of the Republic of the Philippines and its
provinces, cities, and municipalities." This exemption is broad enough to include all taxes,
whether direct or indirect, which the National Power Corporation may be required to pay,
such as the specific tax on petroleum products. That it is indirect or is of no amount
[should be of no moment], for it is the corporation that ultimately pays it. The view which
refuses to accord the exemption because the tax is first paid by the seller disregards
realities and gives more importance to form than to substance. Equity and law always
exalt substance over from.
xxx xxx xxx
Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as
knowledge that many impositions taxpayers have to pay are in the nature of indirect taxes.
To limit the exemption granted the National Power Corporation to direct taxes
notwithstanding the general and broad language of the statue will be to thwrat the
legislative intention in giving exemption from all forms of taxes and impositions without
distinguishing between those that are direct and those that are not. (Emphasis supplied)
In view of all the foregoing, the Court rules and declares that the oil companies which supply bunker fuel oil
to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect
taxation, the economic burden of such taxation is expected to be passed on through the channels of
commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted from
both direct and indirect taxation, the NPC must beheld exempted from absorbing the economic burden of
indirect taxation. This means, on the one hand, that the oil companies which wish to sell to NPC absorb all
or part of the economic burden of the taxes previously paid to BIR, which could they shift to NPC if NPC did
not enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to
pay the part of the "normal" purchase price of bunker fuel oil which represents all or part of the taxes
previously paid by the oil companies to BIR. If NPC nonetheless purchases such oil from the oil companies
— because to do so may be more convenient and ultimately less costly for NPC than NPC itself importing
and hauling and storing the oil from overseas — NPC is entitled to be reimbursed by the BIR for that part of
the buying price of NPC which verifiably represents the tax already paid by the oil company-vendor to the
BIR.
It should be noted at this point in time that the whole issue of who WILL pay these indirect taxes HAS BEEN
RENDERED moot and academic by E.O. No. 195 issued on June 16, 1987 by virtue of which the ad
valorem  tax rate on bunker fuel oil was reduced to ZERO (0%) PER CENTUM. Said E.O. no. 195 reads as
follows:
EXECUTIVE ORDER NO. 195
AMENDING PARAGRAPH (b) OF SECTION 128 OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED BY REVISING THE EXCISE TAX RATES OF
CERTAIN PETROLEUM PRODUCTS.
xxx xxx xxx
Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as amended,
is hereby amended to read as follows:
Par. (b) — For products subject to ad valorem  tax only:
PRODUCT AD VALOREM TAX RATE
1. . . .
2. . . .
3. . . .
4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or less
the same generating power 0%
xxx xxx xxx
Sec. 3. This Executive Order shall take effect immediately.
Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen hundred
and eighty-seven. (Emphasis supplied)
The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going to bear
the economic burden of the ad valorem  taxes. What this Court will now dispose of are petitioner's complaints
that some indirect tax money has been illegally refunded by the Bureau of Internal Revenue to the NPC and
that more claims for refunds by the NPC are being processed for payment by the BIR.
A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC last
July 7, 1986 for P58.020.110.79 which were for "erroneously paid specific and ad valorem  taxes during the
period from October 31, 1984 to April 27, 1985.   Petitioner asks Us to declare this Tax Credit Memo illegal
91
as the PNC did not have indirect tax exemptions with the enactment of P.D. No. 938. As We have already
ruled otherwise, the only questions left are whether NPC Is entitled to a tax refund for the tax component of
the price of the bunker fuel oil purchased from Caltex (Phils.) Inc. and whether the Bureau of Internal
Revenue properly refunded the amount to NPC.
After P.D. No. 1931 was issued on June 11, 1984 withdrawing the tax exemptions of all GOCCs — NPC
included, it was only on May 8, 1985 when the BIR issues its letter authority to the NPC authorizing it to
withdraw tax-free bunker fuel oil from the oil companies pursuant to FIRB Resolution No. 10-85.   Since the
92
tax exemption restoration was retroactive to June 11, 1984 there was a need. therefore, to recover said
amount as Caltex (PhiIs.) Inc. had already paid the BIR the specific and ad valorem taxes on the bunker oil it
sold NPC during the period above indicated and had billed NPC correspondingly.   It should be noted that
93
the NPC, in its letter-claim dated September 11, 1985 to the Commissioner of the Bureau of Internal
Revenue DID NOT CATEGORICALLY AND UNEQUIVOCALLY STATE that itself paid the P58.020,110.79
as part of the bunker fuel oil price it purchased from Caltex (Phils) Inc. 
94
The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National Internal
Revenue Code of 1977, as amended which reads as follows:
Sec. 230. Recover of tax erroneously or illegally collected. — No suit or proceeding shall
be maintained in any court for the recovery of any national internal revenue tax hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged to have been
excessive or in any Manner wrongfully collected. until a claim for refund or credit has been
duly filed with the Commissioner; but such suit or proceeding may be maintained, whether
or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be begun after the expiration of two years
from the date of payment of the tax or penalty regardless of any supervening cause that
may arise after payment; Provided, however, That the Commissioner may, even without a
written claim therefor, refund or credit any tax, where on the face of the return upon which
payment was made, such payment appears clearly, to have been erroneously paid.
x x x           x x x          x x x
Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985,   the Commissioner correctly
95
issued the Tax Credit Memo in view of NPC's indirect tax exemption.
Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for
P410.580,000.00 which represents specific and ad valorem taxes paid by the oil companies to the BIR from
June 11, 1984 to the early part of 1986.  96
A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when the
alleged claim for a P410,580,000.00 tax refund was filed. It is only stated In paragraph No. 2 of the Deed of
Assignment   executed by and between NPC and Caltex (Phils.) Inc., as follows:
97
 That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal
Revenue amounting to P442,887,716.16. P58.020,110.79 of which is due to Assignor's oil
purchases from the Assignee (Caltex [Phils.] Inc.)
Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from
refunding said amount because of Our ruling that NPC has both direct and indirect tax exemption privileges.
Neither can We order the BIR to refund said amount to NPC as there is no pending petition for review
on certiorari  of a suit for its collection before Us. At any rate, at this point in time, NPC can no longer file any
suit to collect said amount EVEN IF lt has previously filed a claim with the BIR because it is time-barred
under Section 230 of the National Internal Revenue Code of 1977. as amended, which states:
In any case, no such suit or proceeding shall be begun after the expiration of two years
from the date of payment of the tax or penalty REGARDLESS of any supervening cause
that may arise after  payment. . . . (Emphasis supplied)
The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for
the amount of P410,580,000.00 had been made on said date. it is clear that more than two (2) years had
already elapsed from said date. At the same time, We should note that there is no legal obstacle to the BIR
granting, even without a suit by NPC, the tax credit or refund claimed by NPC, assuming that NPC's claim
had been made seasonably, and assuming the amounts covered had actually been paid previously by the oil
companies to the BIR.
WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby DENIED
for lack of merit and the decision of this Court promulgated on May 31, 1991 is hereby AFFIRMED.
SO ORDERED.
G.R. No. 76633 October 18, 1988
EASTERN SHIPPING LINES, INC., petitioner, vs. PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL
BASAR and KATHLEEN D. SACO, respondents.
Jimenea, Dala & Zaragoza Law Office for petitioner. The Solicitor General for public respondent. Dizon Law
Office for respondent Kathleen D. Saco.
CRUZ, J.:
The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas
Employment Administration (POEA) for the death of her husband. The decision is challenged by the
petitioner on the principal ground that the POEA had no jurisdiction over the case as the husband was not
an overseas worker.
Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in Tokyo,
Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and Memorandum
Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the complaint was
cognizable not by the POEA but by the Social Security System and should have been filed against the State
Insurance Fund. The POEA nevertheless assumed jurisdiction and after considering the position papers of
the parties ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits and
P12,000.00 for burial expenses.
The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal on the
ground of non-exhaustion of administrative remedies.
Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations Commission,
on the theory inter alia that the agency should be given an opportunity to correct the errors, if any, of its
subordinates. This case comes under one of the exceptions, however, as the questions the petitioner is
raising are essentially questions of law. 1 Moreover, the private respondent himself has not objected to the
petitioner's direct resort to this Court, observing that the usual procedure would delay the disposition of the
case to her prejudice.
The Philippine Overseas Employment Administration was created under Executive Order No. 797,
promulgated on May 1, 1982, to promote and monitor the overseas employment of Filipinos and to protect
their rights. It replaced the National Seamen Board created earlier under Article 20 of the Labor Code in
1974. Under Section 4(a) of the said executive order, the POEA is vested with "original and exclusive
jurisdiction over all cases, including money claims, involving employee-employer relations arising out of or
by virtue of any law or contract involving Filipino contract workers, including seamen." These cases,
according to the 1985 Rules and Regulations on Overseas Employment issued by the POEA, include
"claims for death, disability and other benefits" arising out of such employment. 2
The petitioner does not contend that Saco was not its employee or that the claim of his widow is not
compensable. What it does urge is that he was not an overseas worker but a 'domestic employee and
consequently his widow's claim should have been filed with Social Security System, subject to appeal to the
Employees Compensation Commission.
We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas employee
of the petitioner at the time he met with the fatal accident in Japan in 1985.
Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as
"employment of a worker outside the Philippines, including employment on board vessels plying international
waters, covered by a valid contract. 3 A contract worker is described as "any person working or who has
worked overseas under a valid employment contract and shall include seamen" 4 or "any person working
overseas or who has been employed by another which may be a local employer, foreign employer, principal
or partner under a valid employment contract and shall include seamen." 5 These definitions clearly apply to
Vitaliano Saco for it is not disputed that he died while under a contract of employment with the petitioner and
alongside the petitioner's vessel, the M/V Eastern Polaris, while berthed in a foreign country. 6
It is worth observing that the petitioner performed at least two acts which constitute implied or tacit
recognition of the nature of Saco's employment at the time of his death in 1985. The first is its submission of
its shipping articles to the POEA for processing, formalization and approval in the exercise of its regulatory
power over overseas employment under Executive Order NO. 797. 7 The second is its payment 8 of the
contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was
created by P.D. No. 1694 "for the purpose of providing social and welfare services to Filipino overseas
workers."
Significantly, the office administering this fund, in the receipt it prepared for the private respondent's
signature, described the subject of the burial benefits as "overseas contract worker Vitaliano Saco." 9 While
this receipt is certainly not controlling, it does indicate, in the light of the petitioner's own previous acts, that
the petitioner and the Fund to which it had made contributions considered Saco to be an overseas
employee.
The petitioner argues that the deceased employee should be likened to the employees of the Philippine Air
Lines who, although working abroad in its international flights, are not considered overseas workers. If this
be so, the petitioner should not have found it necessary to submit its shipping articles to the POEA for
processing, formalization and approval or to contribute to the Welfare Fund which is available only to
overseas workers. Moreover, the analogy is hardly appropriate as the employees of the PAL cannot under
the definitions given be considered seamen nor are their appointments coursed through the POEA.
The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA
pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This circular
prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring
of Filipino seamen for overseas employment. A similar contract had earlier been required by the National
Seamen Board and had been sustained in a number of cases by this Court. 10 The petitioner claims that it
had never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the
first place, it should have done so as required by the circular, which specifically declared that "all parties to
the employment of any Filipino seamen on board any ocean-going vessel are advised to adopt and use this
employment contract effective 01 February 1984 and to desist from using any other format of employment
contract effective that date." In the second place, even if it had not done so, the provisions of the said
circular are nevertheless deemed written into the contract with Saco as a postulate of the police power of the
State. 11
But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of
non-delegation of legislative power. It contends that no authority had been given the POEA to promulgate
the said regulation; and even with such authorization, the regulation represents an exercise of legislative
discretion which, under the principle, is not subject to delegation.
The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797,
reading as follows:
... The governing Board of the Administration (POEA), as hereunder provided shall
promulgate the necessary rules and regulations to govern the exercise of the adjudicatory
functions of the Administration (POEA).
Similar authorization had been granted the National Seamen Board, which, as earlier observed, had itself
prescribed a standard shipping contract substantially the same as the format adopted by the POEA.
The second challenge is more serious as it is true that legislative discretion as to the substantive contents of
the law cannot be delegated. What can be delegated is the discretion to determine how the law may be
enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the legislature.
This prerogative cannot be abdicated or surrendered by the legislature to the delegate. Thus, in Ynot v.
Intermediate Apellate Court 12 which annulled Executive Order No. 626, this Court held:
We also mark, on top of all this, the questionable manner of the disposition of the
confiscated property as prescribed in the questioned executive order. It is there authorized
that the seized property shall be distributed to charitable institutions and other similar
institutions as the Chairman of the National Meat Inspection Commission may see fit, in
the case of carabaos.' (Italics supplied.) The phrase "may see fit" is an extremely
generous and dangerous condition, if condition it is. It is laden with perilous opportunities
for partiality and abuse, and even corruption. One searches in vain for the usual standard
and the reasonable guidelines, or better still, the limitations that the officers must observe
when they make their distribution. There is none. Their options are apparently boundless.
Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they
be chosen? Only the officers named can supply the answer, they and they alone may
choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there
is here a 'roving commission a wide and sweeping authority that is not canalized within
banks that keep it from overflowing,' in short a clearly profligate and therefore invalid
delegation of legislative powers.
There are two accepted tests to determine whether or not there is a valid delegation of legislative power,  viz,
the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its
terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he
will have to do is enforce it. 13 Under the sufficient standard test, there must be adequate guidelines or
stations in the law to map out the boundaries of the delegate's authority and prevent the delegation from
running riot. 14
Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not
allowed to step into the shoes of the legislature and exercise a power essentially legislative.
The principle of non-delegation of powers is applicable to all the three major powers of the Government but
is especially important in the case of the legislative power because of the many instances when its
delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by
the authorities to which they legally certain. In the case of the legislative power, however, such occasions
have become more and more frequent, if not necessary. This had led to the observation that the delegation
of legislative power has become the rule and its non-delegation the exception.
The reason is the increasing complexity of the task of government and the growing inability of the legislature
to cope directly with the myriad problems demanding its attention. The growth of society has ramified its
activities and created peculiar and sophisticated problems that the legislature cannot be expected
reasonably to comprehend. Specialization even in legislation has become necessary. To many of the
problems attendant upon present-day undertakings, the legislature may not have the competence to provide
the required direct and efficacious, not to say, specific solutions. These solutions may, however, be
expected from its delegates, who are supposed to be experts in the particular fields assigned to them.
The reasons given above for the delegation of legislative powers in general are particularly applicable to
administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems,
the national legislature has found it more and more necessary to entrust to administrative agencies the
authority to issue rules to carry out the general provisions of the statute. This is called the "power of
subordinate legislation."
With this power, administrative bodies may implement the broad policies laid down in a statute by "filling in'
the details which the Congress may not have the opportunity or competence to provide. This is effected by
their promulgation of what are known as supplementary regulations, such as the implementing rules issued
by the Department of Labor on the new Labor Code. These regulations have the force and effect of law.
Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby
has been applied in a significant number of the cases without challenge by the employer. The power of the
POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is
a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable
in the executive order itself which, in creating the Philippine Overseas Employment Administration,
mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices."
Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public interest" in People
v. Rosenthal  15 "justice and equity" in Antamok Gold Fields v. CIR 16 "public convenience and welfare"
in Calalang v. Williams  17 and "simplicity, economy and efficiency" in Cervantes v. Auditor General, 18 to
mention only a few cases. In the United States, the "sense and experience of men" was accepted in Mutual
Film Corp. v. Industrial Commission, 19 and "national security" in Hirabayashi v. United States. 20
It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42
since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social Security System. In
addition, as already observed, she also received a P5,000.00 burial gratuity from the Welfare Fund for
Overseas Workers. These payments will not preclude allowance of the private respondent's claim against
the petitioner because it is specifically reserved in the standard contract of employment for Filipino seamen
under Memorandum Circular No. 2, Series of 1984, that—
Section C. Compensation and Benefits.—
1. In case of death of the seamen during the term of his Contract, the employer shall pay
his beneficiaries the amount of:
a. P220,000.00 for master and chief engineers
b. P180,000.00 for other officers, including radio operators and master
electrician
c. P 130,000.00 for ratings.
2. It is understood and agreed that the benefits mentioned above shall be separate and
distinct from, and will be in addition to whatever benefits which the seaman is entitled to
under Philippine laws. ...
3. ...
c. If the remains of the seaman is buried in the Philippines, the owners
shall pay the beneficiaries of the seaman an amount not exceeding
P18,000.00 for burial expenses.
The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the National
Seamen Board on July 12,1976, providing an follows:
Income Benefits under this Rule Shall be Considered Additional Benefits.—
All compensation benefits under Title II, Book Four of the Labor Code of the Philippines
(Employees Compensation and State Insurance Fund) shall be granted, in addition to
whatever benefits, gratuities or allowances that the seaman or his beneficiaries may be
entitled to under the employment contract approved by the NSB. If applicable, all benefits
under the Social Security Law and the Philippine Medicare Law shall be enjoyed by the
seaman or his beneficiaries in accordance with such laws.
The above provisions are manifestations of the concern of the State for the working class, consistently with
the social justice policy and the specific provisions in the Constitution for the protection of the working class
and the promotion of its interest.
One last challenge of the petitioner must be dealt with to close t case. Its argument that it has been denied
due process because the same POEA that issued Memorandum Circular No. 2 has also sustained and
applied it is an uninformed criticism of administrative law itself. Administrative agencies are vested with two
basic powers, the quasi-legislative and the quasi-judicial. The first enables them to promulgate implementing
rules and regulations, and the second enables them to interpret and apply such regulations. Examples
abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its
own circulars, the Securities and Exchange Commission on its own rules, as so too do the Philippine Patent
Office and the Videogram Regulatory Board and the Civil Aeronautics Administration and the Department of
Natural Resources and so on ad infinitum on their respective administrative regulations. Such an
arrangement has been accepted as a fact of life of modern governments and cannot be considered violative
of due process as long as the cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay
v. Court of Industrial Relations  21 are observed.
Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of the
private respondent, in line with the express mandate of the Labor Code and the principle that those with less
in life should have more in law.
When the conflicting interests of labor and capital are weighed on the scales of social justice, the heavier
influence of the latter must be counter-balanced by the sympathy and compassion the law must accord the
underprivileged worker. This is only fair if he is to be given the opportunity and the right to assert and defend
his cause not as a subordinate but as a peer of management, with which he can negotiate on even plane.
Labor is not a mere employee of capital but its active and equal partner.
WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary restraining order
dated December 10, 1986 is hereby LIFTED. It is so ordered.
G.R. No. 111812 May 31,
1995
DIONISIO M. RABOR, petitioner, vs. CIVIL SERVICE COMMISSION, respondent.
FELICIANO, J.:
Petitioner Dionisio M. Rabor is a Utility Worker in the Office of the Mayor, Davao City. He entered the
government service as a Utility worker on 10 April 1978 at the age of 55 years.
Sometime in May 1991,1 Alma, D. Pagatpatan, an official in the Office of the Mayor of Davao City, advised
Dionisio M. Rabor to apply for retirement, considering that he had already reached the age of sixty-eight (68)
years and seven (7) months, with thirteen (13) years and one (1) month of government service. Rabor
responded to this advice by exhibiting a "Certificate of Membership"2 issued by the Government Service
Insurance System ("GSIS") and dated 12 May 1988. At the bottom of this "Certificate of Membership" is a
typewritten statement of the following tenor: "Service extended to comply 15 years service reqts." This
statement is followed by a non-legible initial with the following date "2/28/91."
Thereupon, the Davao City Government, through Ms. Pagatpatan, wrote to the Regional Director of the Civil
Service Commission, Region XI, Davao City ("CSRO-XI"), informing the latter of the foregoing and
requesting advice "as to what action [should] be taken on this matter."
In a letter dated 26 July 1991, Director Filemon B. Cawad of CSRO-XI advised Davao City Mayor Rodrigo R.
Duterte as follows:
Please be informed that the extension of services of Mr. Rabor is contrary to M.C. No. 65
of the Office of the President, the relevant portion of which is hereunder quoted:
Officials and employees who have reached the compulsory retirement
age of 65 years shall not be retained the service, except for extremely
meritorious reasons in which case the retention shall not exceed six (6)
months.
IN VIEW WHEREFORE, please be advised that the services of Mr. Dominador [M.] Rabor
as Utility Worker in that office, is already non-extend[i]ble.3
Accordingly, on 8 August l991, Mayor Duterte furnished a copy of the 26 July 1991 letter of Director Cawad
to Rabor and advised him "to stop reporting for work effective August 16, 1991."4
Petitioner Rabor then sent to the Regional Director, CSRO-XI, a letter dated 14 August 1991, asking for
extension of his services in the City Government until he "shall have completed the fifteen (15) years service
[requirement] in the Government so that [he] could also avail of the benefits of the retirement laws given to
employees of the Government." The extension he was asking for was about two (2) years. Asserting that he
was "still in good health and very able to perform the duties and functions of [his] position as Utility Worker,"
Rabor sought "extension of [his] service as an exception to Memorandum Circular No. 65 of the Office of the
President."5 This request was denied by Director Cawad on 15 August 1991.
Petitioner Rabor next wrote to the Office of the President on 29 January 1992 seeking reconsideration of the
decision of Director Cawad, CSRO-XI. The Office of the President referred Mr. Rabor's letter to the
Chairman of the Civil Service Commission on 5 March 1992.
In its Resolution No. 92-594, dated 28 April 1992, the Civil Service Commission dismissed the appeal of Mr.
Rabor and affirmed the action of Director Cawad embodied in the latter's letter of 26 July 1991. This
Resolution stated in part:
 In his appeal, Rabor requested that he be allowed to continue rendering services as Utility
Worker in order to complete the fifteen (15) year service requirement under P.D. 1146.
CSC Memorandum Circular No. 27, s. 1990 provides, in part:
1. Any request for extension of service of compulsory retirees to
complete the fifteen years service requirement for retirement shall be
allowed only to permanent appointees in the career service who are
regular members of the Government Service Insurance System (GSIS)
and shall be granted for a period of not exceeding one (1) year.
Considering that as early as October 18, 1988, Rabor was already due for retirement, his
request for further extension of service cannot be given due course. 6 (Emphasis in the
original)
On 28 October 1992, Mr. Rabor sought reconsideration of Resolution No. 92-594 of the Civil Service
Commission this time invoking the Decision of this Court in Cena v. Civil Service Commission.7 Petitioner
also asked for reinstatement with back salaries and benefits, having been separated from the government
service effective 16 August 1991. Rabor's motion for reconsideration was denied by the Commission.
Petitioner Rabor sent another letter dated 16 April 1993 to the Office of the Mayor, Davao City, again
requesting that he be allowed to continue rendering service to the Davao City Government as Utility Worker
in order to complete the fifteen (15) years service requirement under P.D. No. 1146. This request was once
more denied by Mayor Duterte in a letter to petitioner dated 19 May 1993. In this letter, Mayor Duterte
pointed out that, under Cena grant of the extension of service was discretionary on the part of the City
Mayor, but that he could not grant the extension requested. Mayor Duterte's letter, in relevant part, read:
The matter was referred to the City Legal Office and the Chairman of the Civil Service
Commission, in the advent of the decision of the Supreme Court in the Cena vs. CSC, et
al. (G.R. No. 97419 dated July 3, 1992), for legal opinion. Both the City Legal Officer and
the Chairman of the Civil Service Commission are one in these opinion that extending you
an appointment in order that you may be able to complete the fifteen-year service
requirement is discretionary [on the part of] the City Mayor.
Much as we desire to extend you an appointment but circumstances are that we can no
longer do so. As you are already nearing your 70th birthday may no longer be able to
perform the duties attached to your position. Moreover, the position you had vacated was
already filled up.
We therefore regret to inform you that we cannot act favorably on your
request.8 (Emphases supplied)
At this point, Mr. Rabor decided to come to this Court. He filed a Letter/Petition dated 6 July 1993 appealing
from Civil Service Resolution No. 92-594 and from Mayor Duterte's letter of 10 May 1993.
The Court required petitioner Rabor to comply with the formal requirements for instituting a special civil
action of certiorari to review the assailed Resolution of the Civil Service Commission. In turn, the
Commission was required to comment on petitioner's Letter/Petition.9 The Court subsequently noted
petitioner's Letter of 13 September 1993 relating to compliance with the mentioned formal requirements and
directed the Clerk of Court to advise petitioner to engage the services of counsel or to ask for legal
assistance from the Public Attorney's Office (PAO). 10
The Civil Service Commission, through the Office of the Solicitor General, filed its comment on 16 November
1993. The Court then resolved to give due course to the Petition and required the parties to file memoranda.
Both the Commission and Mr. Rabor (the latter through PAO counsel) did so.
In this proceeding, petitioner Rabor contends that his claim falls squarely within the ruling of this Court
in Cena v. Civil Service Commission. 11
Upon the other hand, the Commission seeks to distinguish this case from Cena. The Commission, through
the Solicitor General, stressed that in Cena, this Court had ruled that the employer agency, the Land
Registration Authority of the Department of Justice, was vested with discretion to grant to Cena the
extension requested by him. The Land Registration Authority had chosen not to exercise its discretion to
grant or deny such extension. In contrast, in the instant case, the Davao City Government did exercise its
discretion on the matter and decided to deny the extension sought by petitioner Rabor for legitimate
reasons.
While the Cena decision is barely three (3) years old, the Court considers that it must reexamine the doctrine
of Cena and the theoretical and policy underpinnings thereof. 12
We start by recalling the factual setting of Cena.
Gaudencio Cena was appointed Registrar of the Register of Deeds of Malabon, Metropolitan Manila, on 16
July 1987. He reached the compulsory retirement age of sixty-five (65) years on 22 January 1991. By the
latter date, his government service would have reached a total of eleven (11) years, nine (9) months and six
(6) days. Before reaching his 65th birthday, Cena requested the Secretary of Justice, through the
Administrator of the Land Registration Authority ("LRA") that he be allowed to extend his service to complete
the fifteen-year service requirement to enable him to retire with the full benefit of an Old-Age Pension under
Section 11 (b) of P.D. No. 1146. If Cena's request were granted, he would complete fifteen (15) years of
government service on 15 April 1994, at the age of sixty-eight (68) years.
The LRA Administrator sought a ruling from the Civil Service Commission on whether or not Cena's request
could be granted considering that Cena was covered by Civil Service Memorandum No. 27, Series of 1990.
On 17 October 1990, the Commission allowed Cena a one (1) year extension of his service from 22 January
1991 to 22 January 1992 under its Memorandum Circular No. 27. Dissatisfied, Cena moved for
reconsideration, without success. He then came to this Court, claiming that he was entitled to an extension
of three (3) years, three (3) months and twenty-four (24) days to complete the fifteen-year service
requirement for retirement with full benefits under Section 11 (b) of P.D. No. 1146.
This Court granted Cena' s petition in its Decision of 3 July 1992. Speaking through Mr. Justice Medialdea,
the Court held that a government employee who has reached the compulsory retirement age of sixty-five
(65) years, but at the same time has not yet completed fifteen (15) years of government service required
under Section 11 (b) of P.D. No. 1146 to qualify for the Old-Age Pension Benefit, may be granted an
extension of his government service for such period of time as may be necessary to "fill up" or comply with
the fifteen (15)-year service requirement. The Court also held that the authority to grant the extension was a
discretionary one vested in the head of the agency concerned. Thus the Court concluded:
Accordingly, the Petition is GRANTED. The Land Registration Authority (LRA) and
Department of Justice has the discretion to allow  petitioner Gaudencio Cena to extend his
11 years, 9 months and 6 days of government to complete the fifteen-year service so that
he may retire with full benefits under Section 11, paragraph (b) of P.D. 1146. 13 (Emphases
supplied)
The Court reached the above conclusion primarily on the basis of the "plain and ordinary meaning" of
Section 11 (b) of P.D. No. 1146. Section 11 may be quoted in its entirety:
Sec. 11 Conditions for Old-Age Pension. — (a) Old-Age Pension shall be paid to a
member who
(1) has at least fifteen (15) years of service;
(2) is at least sixty (60) years of age; and
(3) is separated from the service.
(b) unless the service is extended by appropriate authorities, retirement shall be
compulsory for an employee at sixty-five-(65) years of age with at least fifteen (15) years
of service; Provided, that if he has less than fifteen (15) years of service, he shall he
allowed to continue in the service to completed the fifteen (15) years. (Emphases
supplied)
The Court went on to rely upon the canon of liberal construction which has often been invoked in respect of
retirement statutes:
Being remedial in character, a statute granting a pension or establishing [a] retirement
plan should be liberally construed and administered in favor of persons intended to be
benefitted thereby. The liberal approach aims to achieve the humanitarian purposes of the
law in order that efficiency, security and well-being of government employees may be
enhanced.14 (Citations omitted)
While Section 11 (b) appeared cast in verbally unqualified terms, there were (and still are) two (2)
administrative issuances which prescribe limitations on the extension of service that may be granted to an
employee who has reached sixty-five (65) years of age.
The first administrative issuance is Civil Service Commission Circular No. 27, Series of 1990, which should
be quoted in its entirety:
TO : ALL HEADS OF DEPARTMENTS, BUREAUS AND AGENCIES OF THE
NATIONAL/LOCAL GOVERNMENTS INCLUDING GOVERNMENT- OWNED AND/OR
CONTROLLED CORPORATIONS WITH ORIGINAL CHARTERS.
SUBJECT : Extension of Service of Compulsory Retiree to Complete the Fifteen Years of
Service Requirement for Retirement Purposes.
Pursuant to CSC Resolution No. 90-454 dated May 21, 1990, the Civil Service
Commission hereby adopts and promulgates the following policies and guidelines in the
extension of services of compulsory retirees to complete the fifteen years of service
requirement for retirement purposes:
1. Any request for the extension of service of compulsory retirees to
complete the fifteen (15) years of service requirement for retirement
shall be allowed only to permanent appointees in the career service who
are regular members of the Government Service Insurance System
(GSIS), and shall be granted for a period not exceeding one (1) year.
2. Any request for the extension of service of compulsory retiree to
complete the fifteen (15) years of service requirement for retirement who
entered the government service at 57 years of age or over upon prior
grant of authority to appoint him or her, shall no longer be granted.
3. Any request for the extension of service to complete the fifteen (15)
years of service requirement of retirement shall be filled not later than
three (3) years prior to the date of compulsory retirement.
4. Any request for the extension of service of a compulsory retiree who
meets the minimum number of years of service for retirement purposes
may be granted for six (6) months only with no further extension.
This Memorandum Circular shall take effect immediately. (Emphases supplied)
The second administrative issuance — Memorandum Circular No. 65 of the Office of the President, dated 14
June 1988 — provides:
xxx xxx xxx
 WHEREAS, this Office has been. receiving requests for reinstatement and/or retention in
the service of employees who have reached the compulsory retirement age of 65 years,
despite the strict conditions provided for in Memorandum Circular No. 163, dated March 5,
1968, as amended.
WHEREAS, the President has recently adopted a policy to adhere more strictly to the law
providing for compulsory retirement age of 65 years and, in extremely meritorious cases,
to limit the service beyond the age of 65 years to six (6) months only.
WHEREFORE, the pertinent provision of Memorandum Circular No. 163 or on the
retention in the service of officials or employees who have reached the compulsory
retirement age of 65 years, is hereby amended to read as follows:
Officials or employees who have reached the compulsory retirement
age of 65 years shall not  be retained in the service, except for
extremely meritorious reasons in which case the retention shall not
exceed six (6) months.
All heads of departments, bureaus, offices and instrumentalities of the government
including government-owned or controlled corporations, are hereby enjoined to require
their respective offices to strictly comply with this circular.
This Circular shall take effect immediately.
By authority of the President
(Sgd.)
CATALINO MACARAIG, JR.
Executive Secretary
Manila, June 14, 1988.15 (Emphasis supplied)
Medialdea, J. resolved the challenges posed by the above two (2) administrative regulations by, firstly,
considering as invalid Civil Service Memorandum No. 27 and, secondly, by interpreting the Office of the
President's Memorandum Circular No. 65 as inapplicable to the case of Gaudencio T. Cena.
We turn first to the Civil Service Commission's Memorandum Circular No. 27. Medialdea, J.  wrote:
The Civil Service Commission Memorandum Circular No. 27 being in the nature of an
administrative regulation, must be governed by the principle that administrative regulations
adopted under legislative authority by a particular department must be in harmony with the
provisions of the law, and should be for the sole purpose of carrying into effect its general
provisions (People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450;
Teoxon v. Members of the Board of Administrators, L-25619, June 30, 1970, 33 SCRA
585; Manuel v. General Auditing Office, L-28952, December 29, 1971, 42 SCRA 660;
Deluao v. Casteel, L-21906, August 29, 1969, 29 SCRA 350). . . . . The rule on limiting to
one the year the extension of service  of an employee who has reached the compulsory
retirement age of sixty-five (65) years, but has less than fifteen (15) years of service under
Civil Service Memorandum Circular No. 27, S. 1990, cannot  likewise be accorded validity
because it has no relationship or connection with any provision of P.D. 1146 supposed to
be carried into effect. The rule was an addition to or extension of the law, not merely a
mode of carrying it into effect. The Civil Service Commission has no power to supply
perceived omissions in P.D. 1146. 16 (Emphasis supplied)
It will be seen that Cena, in striking down Civil Service Commission Memorandum No. 27, took a very
narrow view on the question of what subordinate rule-making by an administrative agency is permissible and
valid. That restrictive view must be contrasted with this Court's earlier ruling in People v. Exconde, 17 where
Mr. Justice J.B.L. Reyes said:
It is well established in this jurisdiction that, while the making of laws is a non-delegable
activity that corresponds exclusively to Congress, nevertheless, the latter may
constitutionally delegate authority and promulgate rules and regulations to implement a
given legislation and effectuate its policies, for the reason that the legislature often finds it
impracticable (if not impossible) to anticipate and provide for the multifarious and complex
situations that may be met in carrying the law into effect. All that is required is that the
regulation should be germane to the objects and purposes of the law; that the regulation
be not in contradiction with it, but conform to standards that the law
prescribes.18 (Emphasis supplied)
In Tablarin v. Gutierrez, 19 the Court, in sustaining the validity of a MECS Order which established passing a
uniform admission test called the National Medical Admission Test (NMAT) as a prerequisite for eligibility for
admission into medical schools in the Philippines, said:
The standards set for subordinate legislation in the exercise of rule making authority by an
administrative agency  like the Board of Medical Education are necessarily broad and
highly abstract. As explained by then Mr. Justice Fernando in Edu v. Ericta (35 SCRA 481
[1970]) —
The standards may be either expressed or implied. If the former, the
non-delegation objection is easily met. The Standard though does not
have to be spelled out specifically. It could be implied from the policy
and purpose of the act considered as a whole. In the Reflector Law,
clearly the legislative objective is public safety. What is sought to be
attained in Calalang v. William is "safe transit upon the roads."
We believe and so hold that the necessary standards are set forth in Section 1 of the 1959
Medical Act: "the standardization and regulation of medical education" and in Section 5 (a)
and 7 of the same Act, the body of the statute itself, and that these considered together
are sufficient compliance with the requirements of the non-delegation principle.20 (Citations
omitted; emphasis partly in the original and partly supplied)
In Edu v. Ericta, 21 then Mr. Justice Fernando stressed the abstract and very general nature of the standards
which our Court has in prior case law upheld as sufficient for purposes of compliance with the requirements
for validity of subordinate or administrative rule-making:
This Court has considered as sufficient standards, "public welfare," (Municipality of
Cardona v. Municipality of Binangonan, 36 Phil. 547 [1917]); "necessary in the interest of
law and order," (Rubi v. Provincial Board, 39 Phil. 660 [1919]); "public interest," (People v.
Rosenthal, 68 Phil. 328 [1939]); and "justice and equity and substantial merits of the
case," (International Hardwood v. Pangil Federation of Labor, 17 Phil. 602
[1940]). 22 (Emphasis supplied)
Clearly, therefore, Cena when it required a considerably higher degree of detail in the statute to be
implemented, went against prevailing doctrine. It seems clear that if the governing or enabling statute is
quite detailed and specific to begin with, there would be very little need (or occasion) for implementing
administrative regulations. It is, however, precisely the inability of legislative bodies to anticipate all (or
many) possible detailed situations in respect of any relatively complex subject matter, that makes
subordinate, delegated rule-making by administrative agencies so important and unavoidable. All that may
be reasonably; demanded is a showing that the delegated legislation consisting of administrative regulations
are germane to the general purposes projected by the governing or enabling statute. This is the test that is
appropriately applied in respect of Civil Service Memorandum Circular No. 27, Series of 1990, and to this
test we now turn.
We consider that the enabling statute that should appropriately be examined is the present Civil Service law
— found in Book V, Title I, Subtitle A, of Executive Order No. 292 dated 25 July 1987, otherwise known as
the Administrative Code of 1987 — and not alone P.D. No. 1146, otherwise known as the "Revised
Government Service Insurance Act of 1977." For the matter of extension of service of retirees who have
reached sixty-five (65) years of age is an area that is covered by both statutes and not alone by Section 11
(b) of P.D. 1146. This is crystal clear from examination of many provisions of the present civil service law.
Section 12 of the present Civil Service law set out in the 1987 Administrative Code provides, in relevant part,
as follows:
Sec. 12 Powers and Functions. — The [Civil Service] Commission shall have the following
powers and functions:
xxx xxx xxx
(2) Prescribe, amend and enforce rules and regulations for carrying into effect the
provisions of the Civil Service Law and other pertinent laws;
(3) Promulgate  policies, standards and guidelines for the Civil Service and adopt plans
and programs to promote economical, efficient and effective personnel administration in
the government;
xxx xxx xxx
(10) Formulate, administer and evaluate programs relative to the development and
retention of a qualified and competent work force in the public service;
xxx xxx xxx
(14) Take appropriate action on all appointments and other personnel matters in the Civil
Service including extension of service beyond retirement age;
xxx xxx xxx
(17) Administer the retirement program for government officials and employees, and
accredit government services and evaluate qualifications for retirement;
xxx xxx xxx
(19) Perform all functions properly belonging to a central personnel agency and such
other functions as may be provided by law. (Emphasis supplied)
It was on the bases of the above quoted provisions of the 1987 Administrative Code that the Civil Service
Commission promulgated its Memorandum Circular No. 27. In doing so, the Commission was acting as "the
central personnel agency of the government empowered to promulgate policies, standards and guidelines
for efficient, responsive and effective personnel administration in the government." 23 It was also discharging
its function of "administering the retirement program for government officials and employees" and of
"evaluat[ing] qualifications for retirement."
In addition, the Civil Service Commission is charged by the 1987 Administrative Code with providing
leadership and assistance "in the development and retention of qualified and efficient work force  in the Civil
Service" (Section 16 [10]) and with the "enforcement of  the constitutional and statutory provisions, relative to
retirement and the regulation for the effective implementation of the retirement of government officials and
employees" (Section 16 [14]).
We find it very difficult to suppose that the limitation of permissible extensions of service after an employee
has reached sixty-five (65) years of age has no reasonable relationship or is not germane to the foregoing
provisions of the present Civil Service Law. The physiological and psychological processes associated with
ageing in human beings are in fact related to the efficiency and quality of the service that may be expected
from individual persons. The policy considerations which guided the Civil Service Commission in limiting the
maximum extension of service allowable for compulsory retirees, were summarized by Griño-Aquino, J. in
her dissenting opinion in Cena:
Worth pondering also are the points raised by the Civil Service Commission that extending
the service of compulsory retirees for longer than one (1) year would: (1) give a  premium
to late-comers in the government service and in effect discriminate against those who
enter the service at a younger age; (2) delay the promotion of the latter and of next-in-rank
employees; and (3) prejudice the chances for employment of qualified young civil service
applicants who have already passed the various government examination but must wait
 for jobs to be vacated by "extendees" who have long passed the mandatory retirement
age but are enjoying extension of their government service to complete 15 years so they
may qualify for old-age pension. 24 (Emphasis supplied).
Cena  laid heavy stress on the interest of retirees or would be retirees, something that is, in itself, quite
appropriate. At the same time, however, we are bound to note that there should be countervailing stress on
the interests of the employer agency and of other government employees as a whole. The results flowing
from the striking down of the limitation established in Civil Service Memorandum Circular No. 27 may well be
"absurd and inequitable," as suggested by Mme. Justice Griño-Aquino in her dissenting opinion. An
employee who has rendered only three (3) years of government service at age sixty-five (65) can have his
service extended for twelve (12) years and finally retire at the age of seventy-seven (77). This reduces the
significance of the general principle of compulsory retirement at age sixty-five (65) very close to the
vanishing point.
The very real difficulties posed by the Cena doctrine for rational personnel administration and management
in the Civil Service, are aggravated when Cena is considered together with the case of Toledo v. Civil
Service Commission. 25 Toledo involved the provisions of Rule III, Section 22, of the Civil Service Rules on
Personnel Action and Policies (CSRPAP) which prohibited the appointment of persons fifty-seven (57) years
old or above in government service without prior approval of the Civil Service Commission. Civil Service
Memorandum Circular No. 5, Series of 1983 provided that a person fifty-seven (57) years of age may be
appointed to the Civil Service provided that the exigencies of the government service so required and
provided that the appointee possesses special qualifications not possessed by other officers or employees in
the Civil Service and that the vacancy cannot be filled by promotion of qualified officers or employees of the
Civil Service. Petitioner Toledo was appointed Manager of the Education and Information Division of the
Commission on Elections when he was almost fifty-nine (59) years old. No authority for such appointment
had been obtained either from the President of the Philippines or from the Civil Service Commission and the
Commission found that the other conditions laid down in Section 22 of Rule III, CSRPAP, did not exist. The
Court nevertheless struck down Section 22, Rule III on the same exceedingly restrictive view of permissible
administrative legislation that Cena relied on.26
service; this discretion is, nevertheless, to be exercised conformably with the provisions of Civil Service
Memorandum Circular No. 27, Series of 1990.
We do not believe it necessary to deal specifically with Memorandum Circular No. 65 of the Office of the
President dated 14 June 1988. It will be noted from the text quoted supra (pp. 11-12) that the text itself of
Memorandum Circular No. 65 (and for that matter, that of Memorandum Circular No. 163, also of the Office
of the President, dated 5 March 1968) 27 does not  purport to apply only  to officers or employees who have
reached the age of sixty-five (65) years and who have at least fifteen (l5) years of government service. We
noted earlier that Cena interpreted Memorandum Circular No. 65 as referring only to officers and employees
who have both reached the compulsory retirement age of sixty-five (65) and completed the fifteen (15) years
of government service. Cena  so interpreted this Memorandum Circular precisely because Cena had
reached the conclusion that employees who have reached sixty-five (65) years of age, but who have less
than fifteen (15) years of government service, may be allowed such extension of service as may be needed
to complete fifteen (15) years of service. In other words, Cena read Memorandum Circular No. 65 in such a
way as to comfort with Cena's own conclusion reached without regard to that Memorandum Circular. In view
of the conclusion that we today reached in the instant case, this last ruling of Cena  is properly regarded as
merely orbiter.
We also do not believe it necessary to determine whether Civil Service Memorandum Circular No. 27 is fully
compatible with Office of the President's Memorandum Circular No. 65; this question must be reserved for
detailed analysis in some future justiciable case.
Applying now the results of our reexamination of Cena  to the instant case, we believe and so hold that Civil
Service Resolution No. 92-594 dated 28 April 1992 dismissing the appeal of petitioner Rabor and affirming
the action of CSRO-XI Director Cawad dated 26 July 1991, must be upheld and affirmed.
ACCORDINGLY, for all the foregoing, the Petition for Certiorari is hereby DISMISSED for lack of merit. No
pronouncement as to costs.

When one combines the doctrine of Toledo with the ruling in Cena, very strange results follow. Under these SO ORDERED.
combined doctrines, a person sixty-four (64) years of age may be appointed to the government service and
one (1) year later may demand extension of his service for the next fourteen (14) years; he would retire at
age seventy-nine (79). The net effect is thus that the general statutory policy of compulsory retirement at
sixty-five (65) years is heavily eroded and effectively becomes unenforceable. That general statutory policy
may be seen to embody the notion that there should be a certain minimum turn-over in the government
service and that opportunities for government service should be distributed as broadly as possible, specially
to younger people, considering that the bulk of our population is below thirty (30) years of age. That same
general policy also reflects the life expectancy of our people which is still significantly lower than the life
expectancy of, e.g., people in Northern and Western Europe, North America and Japan.

Our conclusion is that the doctrine of Cena should be and is hereby modified to this extent: that Civil Service
Memorandum Circular No. 27, Series of 1990, more specifically paragraph (1) thereof, is hereby declared
valid and effective. Section 11 (b) of P.D. No. 1146 must, accordingly, be read together with Memorandum
Circular No. 27. We reiterate, however, the holding in Cena that the head of the government agency
concerned is vested with discretionary authority to allow or disallow extension of the service of an official or
employee who has reached sixty-five (65) years of age without completing fifteen (15) years of government

G.R. Nos. L-8895 and L-9191             April 30,
1957
SALVADOR A. ARANETA, ETC., ET AL., petitioners, vs. THE HON. MAGNO S. GATMAITAN, ETC., ET
AL., respondents.
EXEQUIEL SORIANO, ET AL., petitioners-appellees, vs. SALVADOR ARANETA, ETC., ET
AL., respondents-appellants.
Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista and Solicitor
Troadio T. Quiazon for petitioners. San Juan, Africa and Benedicto for respondents.
FELIX, J.:
San Miguel Bay, located between the provinces of Camarines Norte and Camarines Sur, a part of the
National waters of the Philippines with an extension of about 250 square miles and an average depth of
approximately 6 fathoms (Otter trawl explorations in Philippine waters p. 21, Exh. B), is considered as the
most important fishing area in the Pacific side of the Bicol region. Sometime in 1950, trawl 1 operators from
Malabon, Navotas and other places migrated to this region most of them settling at Sabang, Calabanga,
Camarines Sur, for the purpose of using this particular method of fishing in said bay. On account of the belief
of sustenance fishermen that the operation of this kind of gear caused the depletion of the marine resources
of that area, there arose a general clamor among the majority of the inhabitants of coastal towns to prohibit
the operation of trawls in San Miguel Bay. This move was manifested in the resolution of December 18,
1953 (Exh. F), passed by the Municipal Mayors' League condemning the operation of trawls as the cause of
the wanton destruction of the shrimp specie and resolving to petition the President of the Philippines to
regulate fishing in San Miguel Bay by declaring it closed for trawl fishing at a certain period of the year. In
another resolution dated March 27, 1954, the same League of Municipal Mayor, prayed the President to
protect them and the fish resources of San Miguel Bay by banning the operation of trawls therein (Exh. 4).
The Provincial Governor also made proper presentations to this effect and petitions in behalf of the non-trawl
fishermen were likewise presented to the President by social and civic organizations as the NAMFREL
(National Movement for Free Elections) and the COMPADRE (Committee for Philippine Action in
Development, Reconstruction and Education), recommending the cancellation of the licenses of trawl
operators after investigation, if such inquiry would substantiate the charges that the operation of said fishing
method was detrimental to the welfare of the majority of the inhabitants (Exh. 2).
In response to these pleas, the President issued on April 5, 1954, Executive Order No. 22 (50 Off. Gaz.,
1421) prohibiting the use of trawls in San Miguel Bay, but said executive order was amended by Executive
Order No. 66, issued on September 23, 1954 (50 Off. Gaz., 4037), apparently in answer to a resolution of
the Provincial Board of Camarines Sur recommending the allowance of trawl fishing during the typhoon
season only. On November 2, 1954, however, Executive Order No. 80 (50 Off. Gaz., 5198) was issued
reviving Executive Order No. 22, to take effect after December 31, 1954.
A group of Otter trawl operators took the matter to the court by filing a complaint for injunction and/or
declaratory relief with preliminary injunction with the Court of First Instance of Manila, docketed as Civil Case
No. 24867, praying that a writ of preliminary injunction be issued to restrain the Secretary of Agriculture and
Natural Resources and the Director of Fisheries from enforcing said executive order; to declare the same
null and void, and for such other relief as may be just and equitable in the premises.
The Secretary of Agriculture and Natural Resources and the Director of Fisheries, represented by the Legal
Adviser of said Department and a Special Attorney of the Office of the Solicitor General, answered the
complaint alleging, among other things, that of the 18 plaintiff (Exequiel Soriano, Teodora Donato, Felipe
Concepcion, Venancio Correa, Santo Gaviana, Alfredo General, Constancio Gutierrez, Arsenio de Guzman,
Pedro Lazaro, Porfirio Lazaro, Deljie de Leon, Jose Nepomuceno, Bayani Pingol, Claudio Salgado, Porfirio,
San Juan, Luis Sioco, Casimiro Villar and Enrique Voluntad), only 11 were issued license to operate fishing
boats for the year 1954 (Annex B, petition — L-8895); that the executive orders in question were issued
accordance with law; that the encouragement by the Bureau of Fisheries of the use of Otter trawls should
not be construed to mean that the general welfare of the public could be disregarded, and set up the
defenses that since plaintiffs question the validity of the executive orders issued by the President, then the
Secretary of Agriculture and Natural Resources and the Director of Fisheries were not the real parties in
interest; that said executive orders do not constitute a deprivation of property without due process of law,
and therefore prayed that the complaint be dismissed (Exh. B, petition, L-8895).
During the trial of the case, the Governor of Camarines Sur appearing for the municipalities of Siruma,
Tinambac, Calabanga, Cabusao and Sipocot, in said province, called the attention of the Court that the
Solicitor General had not been notified of the proceeding. To this manifestation, the Court ruled that in view
of the circumstances of the case, and as the Solicitor General would only be interested in maintaining the
legality of the executive orders sought to be impugned, section 4 of Rule 66 could be interpreted to mean
that the trial could go on and the Solicitor General could be notified before judgement is entered.
After the evidence for both parties was submitted and the Solicitor General was allowed to file his
memorandum, the Court rendered decision on February 2, 1955, the last part of which reads as follows:
The power to close any definite area of the Philippine waters, from the fact that Congress has seen
fit to define under what conditions it may be done by the enactment of the sections cited, in the
mind of Congress must be of transcendental significance. It is primarily within the fields of
legislation not of execution: for it goes far and says who can and who cannot fish in definite
territorial waters. The court cannot accept that Congress had intended to abdicate its inherent right
to legislate on this matter of national importance. To accept respondents' view would be to sanction
the exercise of legislative power by executive decrees. If it is San Miguel Bay now, it may be Davao
Gulf tomorrow, and so on. That may be done only by Congress. This being the conclusion, there is
hardly need to go any further. Until the trawler is outlawed by legislative enactment, it cannot be
banned from San Miguel Bay by executive proclamation. The remedy for respondents and
population of the coastal towns of Camarines Sur is to go to the Legislature. The result will be to
issue the writ prayed for, even though this be to strike at public clamor and to annul the orders of
the President issued in response therefor. This is a task unwelcome and unpleasant; unfortunately,
courts of justice use only one measure for both the rich and poor, and are not bound by the more
popular cause when they give judgments.
IN VIEW WHEREOF, granted; Executive Order Nos. 22, 66 and 80 are declared invalid; the
injunction prayed for is ordered to issue; no pronouncement as to costs.
Petitioners immediately filed an ex-parte motion for the issuance of a writ of injunction which was opposed
by the Solicitor General and after the parties had filed their respective memoranda, the Court issued an
order dated February 19, 1955, denying respondents' motion to set aside judgement and ordering them to
file a bond in the sum of P30,000 on or before March 1, 1955, as a condition for the non-issuance of the
injunction prayed for by petitioners pending appeal. The Solicitor General filed a motion for reconsideration
which was denied for lack of merit, and the Court, acting upon the motion for new trial filed by respondents,
issued another order on March 3, 1965, denying said motion and granting the injunction prayed for by
petitioners upon the latter's filing a bond for P30,000 unless respondents could secure a writ of preliminary
injunction from the Supreme Court on or before March 15, 1955. Respondents, therefore, brought the matter
to this Court in a petition for prohibition and certiorari with preliminary injunction, docketed as G.R. No. L-
8895, and on the same day filed a notice to appeal from the order of the lower court dated February 2, 1955,
which appeal was docketed in this Court as G.R. No. L-9191.
In the petition for prohibition and certiorari, petitioners (respondents therein) contended among other things,
that the order of, the respondent Judge requiring petitioners Secretary of Agriculture and Natural Resources
and the Director of Fisheries to post a bond in the sum of P30,000 on or before March 1, 1955, had been
issued without jurisdiction or in excess thereof, or at the very least with grave abuse of discretion, because
by requiring the bond, the Republic of the Philippines was in effect made a party defendant and therefore
transformed the suit into one against the Government which is beyond the jurisdiction of the respondent
Judge to entertain; that the failure to give the Solicitor General the opportunity to defend the validity of the
challenged executive orders resulted in the receipt of objectionable matters at the hearing; that Rule 66 of
the Rules of Court does not empower a court of law to pass upon the validity of an executive order in a
declaratory relief proceeding; that the respondent Judge did not have the power to grant the injunction as
Section 4 of Rule 39 does not apply to declaratory relief proceedings but only to injunction, receivership and
patent accounting proceedings; and prayed that a writ of preliminary injunction be issued to enjoin the
respondent Judge from enforcing its order of March 3, 1955, and for such other relief as may be deem just
and equitable in the premises. This petition was given due course and the hearing on the merits was set by
this Court for April 12, 1955, but no writ of preliminary injunction was issued.
Meanwhile, the appeal (G.R. No. L-9191) was heard on October 3, 1956, wherein respondents-appellants
ascribed to the lower court the commission of the following errors:
1. In ruling that the President has no authority to issue Executive Orders Nos. 22, 66 and 80
banning the operation of trawls in San Miguel Bay;
2. In holding that the power to declare a closed area for fishing purposes has not been delegated to
the President of the Philippines under the Fisheries Act;
3. In not considering Executive Orders Nos. 22, 66 and 80 as declaring a closed season pursuant
to Section 7, Act 4003, as amended, otherwise known as the Fisheries Act;
4. In holding that to uphold the validity of Executive Orders Nos. 22 and 80 would be to sanction the
exercise of legislative power by executive decrees;
5. In its suggestion that the only remedy for respondents and the people of the coastal towns of
Camarines Sur and Camarines Norte is to go to the Legislature; and
6. In declaring Executive Orders Nos. 22, 66 and 80 invalid and in ordering the injunction prayed for
to issue.
As Our decision in the prohibition and certiorari case (G.R. No. L-8895) would depend, in the last analysis,
on Our ruling in the appeal of the respondents in case G.R. No. L-9191, We shall first proceed to dispose of
the latter case.
It is indisputable that the President issued Executive Orders Nos. 22, 66 and 80 in response to the clamor of
the inhabitants of the municipalities along the coastline of San Miguel Bay. They read as follows:
EXECUTIVE ORDER No. 22
PROHIBITING THE USE OF TRAWLS IN SAN MIGUEL BAY
In order to effectively protect the municipal fisheries of San Miguel Bay, Camarines Norte and
Camarines Sur, and to conserve fish and other aquatic resources of the area, I, RAMON
MAGSAYSAY, President of the Philippines, by virtue of the powers vested in me by law, do hereby
order that:
1. Fishing by means of trawls (utase, otter and/or perenzella) of any kind, in the waters comprised
within San Miguel Bay, is hereby prohibited.
2. Trawl shall mean, for the purpose of this Order, a fishing net made in the form of a bag with the
mouth kept open by a device, the whole affair being towed, dragged, trailed or trawled on the
bottom of the sea to capture demersal, ground or bottom species.
3. Violation of the provisions of this Order shall subject the offender to the penalty provided under
Section 83 of Act 4993, or more than six months, or both, in the discretion of the Court.
Done in the City of Manila, this 5th day of April, nineteen hundred and fifty-four and of the
Independence of the Philippines, the eighth. (50 Off. Gaz. 1421)
EXECUTIVE ORDER No. 66
AMENDING EXECUTIVE ORDER No. 22, DATED APRIL 5, 1954, ENTITLED "PROHIBITING THE
USE OF TRAWLS IN SAN MIGUEL BAY"
By virtue of the powers voted in me by law, I, RAMON MAGSAYSAY, President of the Philippines,
do hereby amend Executive Order No. 22, dated April 5, 1954, so as to allow fishing by means of
trawls, as defined in said Executive Order, within that portion of San Miguel Bay north of a straight
line drawn from Tacubtacuban Hill in the Municipality of Tinambac, Province of Camarines Sur.
Fishing by means of trawls south of said line shall still be absolutely prohibited.
Done in the City of Manila, this 23rd day of September, in the year of our Lord, nineteen hundred
and fifty-four, and of the Independence of the Philippines, the ninth." (50 Off. Gaz. 4037).
EXECUTIVE ORDER No. 80.
FURTHER AMENDING EXECUTIVE ORDER No. 22, DATED APRIL 5, 1954, AS AMENDED BY
EXECUTIVE ORDER No. 66, DATED SEPTEMBER 23, 1954.
By virtue of the powers vested in me by law, I, RAMON MAGSAYSAY, President of the Philippines,
do hereby amend Executive Order No. 66 dated September 23, 1954, so as to allow fishing by
means of trawls, as defined in Executive Order No. 22, dated April 5, 1954, within the portion of
San Miguel Bay North of a straight line drawn from Tacubtacuban Hill in the Municipality of
Mercedes, Province of Camarines Norte to Balocbaloc Point in the Municipality of Tinambac,
Province of Camarines Sur, until December 31, 1954, only.
Thereafter, the provisions of said Executive Order No. 22 absolutely prohibiting fishing by means of
trawls in all the waters comprised within the San Miguel Bay shall be revived and given full force
and effect as originally provided therein.
Done in the City of Manila, this 2nd day of November, in the year of Our Lord, nineteen hundred
and fifty-four and of the Independence of the Philippines, the ninth. (50 Off. Gaz. 5198)
It is likewise admitted that petitioners assailed the validity of said executive orders in their petition for a writ
of injunction and/or declaratory relief filed with the Court of First Instance of Manila, and that the lower court,
upon declaring Executive Orders Nos. 22, 66 and 80 invalid, issued an order requiring the Secretary of
Agriculture and Natural Resources and the Director of Fisheries to post a bond for P30,000 if the writ of
injunction restraining them from enforcing the executive orders in question must be stayed.
The Solicitor General avers that the constitutionality of an executive order cannot be ventilated in a
declaratory relief proceeding. We find this untenable, for this Court taking cognizance of an appeal from the
decision of the lower court in the case of Hilado vs. De la Costa, et al., 83 Phil., 471, which involves the
constitutionality of another executive order presented in an action for declaratory relief, in effect accepted the
propriety of such action.
This question being eliminated, the main issues left for Our determination with respect to defendants' appeal
(G.R. No. L-9191), are:
(1) Whether the Secretary of an Executive Department and the Director of a Bureau, acting in their
capacities as such Government officials, could lawfully be required to post a bond in an action against them;
(2) Whether the President of the Philippines has authority to issue Executive Orders Nos. 22, 66 and 80,
banning the operation of trawls in San Miguel Bay, or, said in other words, whether said Executive Orders
Nos. 22, 66 and 80 were issued in accordance with law; and.
(3) Whether Executive Orders Nos. 22, 66 and 80 were valid, for the issuance thereof was not in the
exercise of legislative powers unduly delegated to the President.
Counsel for both parties presented commendable exhaustive defenses in support of their respective stands.
Certainly, these cases deserve such efforts, not only because the constitutionality of an act of a coordinate
branch in our tripartite system of Government is in issue, but also because of the number of inhabitants,
admittedly classified as "subsistence fishermen", that may be affected by any ruling that We may promulgate
herein.
I. As to the first proposition, it is an elementary rule of procedure that an appeal stays the execution of a
judgment. An exception is offered by section 4 of Rule 39 of the Rules of Court which provides that:
SEC. 4. INJUNCTION, RECEIVERSHIP AND PATENT ACCOUNTING, NOT STAYED. — Unless
otherwise ordered by the court, a judgment in an action for injunction or in a receivership action, or
a judgment or order directing an accounting in an action for infringement of letter patent, shall not
be stayed after its rendition and before an appeal is taken or during the pendency of an appeal. The
trial court, however, in its discretion, when an appeal is taken from a judgement granting, dissolving
or denying an injunction, may make an order suspending, modifying, restoring, or granting such
injunction during the pendency of an appeal, upon such terms as to bond or otherwise as it may
consider proper for the security of the rights of the adverse party.
This provision was the basis of the order of the lower court dated February 19, 1955, requiring the filing by
the respondents of a bond for P30,000 as a condition for the non-issuance of the injunction prayed for by
plaintiffs therein, and which the Solicitor General charged to have been issued in excess of jurisdiction. The
State's counsel, however, alleges that while judgment could be stayed in injunction, receivership and patent
accounting cases and although the complaint was styled "Injunction, and/or Declaratory Relief with
Preliminary Injunction", the case is necessarily one for declaratory relief, there being no allegation sufficient
to convince the Court that the plaintiffs intended it to be one for injunction. But aside from the title of the
complaint, We find that plaintiffs pray for the declaration of the nullity of Executive Order Nos. 22, 66 and 80;
the issuance of a writ of preliminary injunction, and for such other relief as may be deemed just and
equitable. This Court has already held that there are only two requisites to be satisfied if an injunction is to
issue, namely, the existence of the right sought to be protected, and that the acts against which the
injunction is to be directed are violative of said right (North Negros Sugar Co., Inc. vs. Serafin Hidalgo, 63
Phil., 664). There is no question that at least 11 of the complaining trawl operators were duly licensed to
operate in any of the national waters of the Philippines, and it is undeniable that the executive enactment's
sought to be annulled are detrimental to their interests. And considering further that the granting or refusal of
an injunction, whether temporary or permanent, rests in the sound discretion of the Court, taking into
account the circumstances and the facts of the particular case (Rodulfa vs. Alfonso, 76 Phil,, 225, 42 Off.
Gaz., 2439), We find no abuse of discretion when the trial Court treated the complaint as one for injunction
and declaratory relief and executed the judgment pursuant to the provisions of section 4 of Rule 39 of the
Rules of Court.
On the other hand, it shall be remembered that the party defendants in Civil Case No. 24867 of the Court of
First Instance of Manila are Salvador Araneta, as Secretary of Agriculture and Natural Resources, and,
Deogracias Villadolid, as Director of Fisheries, and were sued in such capacities because they were the
officers charged with duty of carrying out the statutes, orders and regulations on fishing and fisheries. In its
order of February 19, 1955, the trial court denied defendants' motion to set aside judgment and they were
required to file a bond for P30,000 to answer for damages that plaintiffs were allegedly suffering at that time,
as otherwise the injunction prayed for by the latter would be issued.
Because of these facts, We agree with the Solicitor General when he says that the action, being one against
herein petitioners as such Government officials, is essentially one against the Government, and to require
these officials to file a bond would be indirectly a requirement against the Government for as regards bonds
or damages that may be proved, if any, the real party in interest would be the Republic of the Philippines (L.
S. Moon and Co. vs. Harrison, 43 Phi., 39; Salgado vs. Ramos, 64 Phil., 724-727, and others). The reason
for this pronouncement is understandable; the State undoubtedly is always solvent (Tolentino vs. Carlos 66
Phil., 140; Government of the P. I. vs. Judge of the Court of First Instance of Iloilo, 34 Phil., 167, cited in
Joaquin Gutierrez et al. vs. Camus et al. * G.R. No. L-6725, promulgated October 30, 1954). However, as
the records show that herein petitioners failed to put up the bond required by the lower court, allegedly due
to difficulties encountered with the Auditor General's Office (giving the impression that they were willing to
put up said bond but failed to do so for reasons beyond their control), and that the orders subjects of the
prohibition and certiorari proceedings in G.R. No. L-8895, were enforced, if at all,2 in accordance with section
4 of Rule 39, which We hold to be applicable to the case at bar, the issue as to the regularity or adequacy of
requiring herein petitioners to post a bond, becomes moot and academic.
II. Passing upon the question involved in the second proposition, the trial judge extending the controversy to
the determination of which between the Legislative, and Executive Departments of the Government had "the
power to close any definite area of the Philippine waters" instead of limiting the same to the real issue raised
by the enactment of Executive Orders No. 22, 26 and 80, especially the first and the last "absolutely
prohibiting fishing by means trawls in all the waters comprised within the San Miguel Bay", ruled in favor of
Congress had not intended to abdicate its power to legislate on the matter, he maintained as stated before,
that "until the trawler is outlawed by legislative enactment, it cannot be banned from San Miguel Bay by
executive proclamation", and that "the remedy for respondents and population of the coastal towns of
Camarines Sur is to go to Legislature," and thus declared said Executive Orders Nos. 22, 66 and 80 invalid".
The Solicitor General, on the contrary, asserts that the President is empowered by law to issue the executive
enactment's in question.
Sections 6, 13 and 75 of Act No. 4003, known as the Fisheries Law, the latter two sections as amended by
section 1 of Commonwealth Act No. 471, read as follows:
SEC. 6. WORDS AND PHRASES DEFINED. —Words and terms used in this Act shall be
construed as follows:
xxx     xxx     xxx
TAKE or TAKING includes pursuing, shooting, killing, capturing, trapping, snaring, and netting fish
and other aquatic animals, and all lesser acts, such as disturbing, wounding, stupefying; or placing,
setting, drawing, or using any net or other device commonly used to take or collect fish and other
aquatic animals, whether they result in taking or not, and includes every attempt to take and every
act of assistance to every other person in taking or attempting to take or collect fish and other
aquatic animals: PROVIDED, That whenever taking is allowed by law, reference is had to taking by
lawful means and in lawful manner.
xxx     xxx     xxx
 SEC. 13. PROTECTION OF FRY OR FISH EGGS. — Except for scientific or educational purpose
or for propagation, it shall be unlawful  to take or catch fry or fish eggs and the small fish, not more
than three (3) centimeters long, known as siliniasi, in the territorial waters of the
Philippines. Towards this end, the Secretary of Agriculture and Commerce shall be authorized to
provide by regulations such restrictions as may be deemed necessary to be imposed on THE USE
OF ANY FISHING NET OR FISHING DEVICE FOR THE PROTECTION OF FRY OR FISH EGGS;
Provided, however, That the Secretary of Agriculture and Commerce shall permit the taking of
young of certain species of fish known as hipon under such restrictions as may be deemed
necessary.
SEC. 75. FISH REFUGEES AND SANCTUARIES. — Upon the recommendation of the officer or
chief of the bureau, office or service concerned, the Secretary of Agriculture and Commerce may
set aside and establish fishery reservation or fish refuges and sanctuaries to be administered in the
manner to be prescribed by him. All streams, ponds and waters within the game refuge, birds,
sanctuaries, national parks, botanical gardens, communal forest and communal pastures are
hereby declared fishing refuges and sanctuaries. It shall be unlawful for any person, to take,
destroy or kill in any of the places aforementioned, or in any manner disturb or drive away or take
therefrom, any fish fry or fish eggs.
Act No. 4003 further provides as follows:
SEC. 83. OTHER VIOLATIONS. — Any other violation of the provisions of this Act or any rules and
regulations promulgated thereunder shall subject the offender to a fine of not more than two
hundred pesos, or imprisonment for not more than six months, or both, in the discretion of the
Court.
As may be seen from the just quoted provisions, the law declares unlawful and fixes the penalty for the
taking (except for scientific or educational purposes or for propagation), destroying or killing of any fish fry or
fish eggs, and the Secretary of Agriculture and Commerce (now the Secretary of Agriculture and Natural
Resources) is authorized to promulgate regulations restricting the use of any fish net or fishing device (which
includes the net used by trawl fishermen) for the protection of fry or fish eggs, as well as to set aside and
establish fishery reservations or fish refuges and sanctuaries to be administered in the manner prescribed by
him, from which no person could lawfully take, destroy or kill in any of the places aforementioned, or in any
manner disturb or drive away or take therefrom any small or immature fish, fry or fish eggs. It is true that said
section 75 mentions certain streams, ponds and waters within the game refuges, . . . communal forest, etc.,
which the law itself declares fish refuges and sanctuaries, but this enumeration of places does not curtail the
general and unlimited power of the Secretary of Agriculture and Natural Resources in the first part of section
75, to set aside and establish fishery reservations or fish refuges and sanctuaries, which naturally include
seas or bays, like the San Miguel Bay in Camarines.
From the resolution passed at the Conference of Municipal Mayors held at Tinambac, Camarines Sur, on
December 18, 1953 (Exh. F), the following manifestation is made:
WHEREAS, the continuous operation of said trawls even during the close season as specified in
said Executive Order No. 20 caused the wanton destruction of the mother shrimps laying their eggs
and the millions of eggs laid and the inevitable extermination of the shrimps specie; in order to save
the shrimps specie from eventual extermination and in order to conserve the shrimps specie for
posterity;
In the brief submitted by the NAMFREL and addressed to the President of the Philippines (Exh. 2), in
support of the petition of San Miguel Bay fishermen (allegedly 6, 175 in number), praying that trawlers be
banned from operating in San Miguel Bay, it is stated that:
The trawls ram and destroy the fish corrals. The heavy trawl nets dig deep into the ocean bed.
They destroy the fish foods which lies below the ocean floor. Their daytime catches net millions of
shrimps scooped up from the mud. In their nets they bring up the life of the sea: algea, shell fish
and star fish . . .
The absence of some species or the apparent decline in the catch of some fishermen operating in
the bay may be due to several factors, namely: the indiscriminate catching of fry and immature
sizes of fishes, the wide-spread use of explosives inside as well as at the mouth and approaches of
the bay, and the extensive operation of  the trawls. (p.9, Report of Santos B. Rasalan, Exh. A)
Extensive Operation of Trawls: — The strenuous effect of the operations of the 17 TRAWLS of the
demersal fisheries of San Miguel Bay  is better appreciated when we consider the fact that out of its
about 850 square kilometers area, only about 350 square kilometers of 5 fathoms up could be
trawled. With their continuous operation, is greatly strained. This is shown by the fact that in view of
the non-observance of the close season from May to October, each year, majority of their catch are
immature. If their operation would continue unrestricted, the supply would be greatly depleted. (p.
11), Report of Santos B. Rasalan, Exh. A)
San Miguel Bay — can sustain 3 to 4 small trawlers  (Otter Trawl Explorations in Philippine Waters,
Research Report 25 of the Fish and Wildlife Service, United States Department of the Interior, p. 9
Exhibit B).
According to Annex A of the complaint filed in the lower court in Civil Case No. 24867 — G.R. No. L-9191
(Exh. D, p. 53 of the folder of Exhibits), the 18 plaintiffs-appellees operate 29 trawling boats, and their
operation must be in a big scale considering the investments plaintiffs have made therefore, amounting to
P387,000 (Record on Appeal, p. 16-17).
In virtue of the aforementioned provisions of law and the manifestation just copied, We are of the opinion
that with or without said Executive Orders, the restriction and banning of trawl fishing from all Philippine
waters come, under the law, within the powers of the Secretary of Agriculture and Natural Resources, who in
compliance with his duties may even cause the criminal prosecution of those who in violation of his
instructions, regulations or orders are caught fishing with trawls in the Philippine waters.
Now, if under the law the Secretary of Agriculture and Natural Resources has authority to regulate or ban the
fishing by trawl which, it is claimed, obnoxious for it carries away fish eggs and fry's which should be
preserved, can the President of the Philippines exercise that same power and authority? Section 10(1),
Article VII of the Constitution of the Philippines prescribes:
 SEC. 10 (1). The President shall have control  of all the executive departments, bureaus or offices,
exercises general supervision over all local governments as may be provided by law, and take care
that the laws be faithfully executed.
Section 63 of the Revised Administrative Code reads as follows:
SEC. 63. EXECUTIVE ORDERS AND EXECUTIVE PROCLAMATION. — Administrative acts and
commands of the President of the Philippines touching the organization or mode of operation of the
Government or rearranging or readjusting any of the district, divisions, parts or ports of the
Philippines, and all acts and commands governing the general performance of duties by public
employees or disposing of issues of general concern shall be made in executive orders.
xxx     xxx     xxx
Regarding department organization Section 74 of the Revised Administrative Code also provides that:
All executive functions of the government of the Republic of the Philippines shall be directly under
the Executive Departments subject to the supervision and control of the President of the Philippines
in matters of general policy. The Departments are established for the proper distribution of the work
of the Executive, for the performance of the functions expressly assigned to them by law, and in
order that each branch of the administration may have a chief responsible for its direction and
policy. Each Department Secretary shall assume the burden of, and responsibility for, all activities
of the Government under his control and supervision.
For administrative purposes the President of the Philippines shall be considered the Department
Head of the Executive Office.
One of the executive departments is that of Agriculture and Natural Resources which by law is placed under
the direction and control of the Secretary, who exercises its functions subject to the general supervision and
control of the President of the Philippines (Sec. 75, R. A. C.). Moreover, "executive orders, regulations,
decrees and proclamations relative to matters under the supervision or jurisdiction of a Department, the
promulgation whereof is expressly assigned by law to the President of the Philippines, shall as a general
rule, be issued upon proposition and recommendation of the respective Department" (Sec. 79-A, R.A.C.),
and there can be no doubt that the promulgation of the questioned Executive Orders was upon the
proposition and recommendation of the Secretary of Agriculture and Natural Resources and that is why said
Secretary, who was and is called upon to enforce said executive Orders, was made a party defendant in one
of the cases at bar (G.R. No. L-9191).
For the foregoing reasons We do hesitate to declare that Executive Orders Nos. 22, 66 and 80, series of
1954, of the President, are valid and issued by authority of law.
III. But does the exercise of such authority by the President constitute and undue delegation of the powers of
Congress?
As already held by this Court, the true distinction between delegation of the power to legislate and the
conferring of authority or discretion as to the execution of law consists in that the former necessary involves
a discretion as to what the law shall be, while in the latter the authority or discretion as to its execution has to
be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can
be made (Cruz vs. Youngberg, 56 Phil., 234, 239. See also Rubi, et al. vs. The Provincial Board of Mindoro,
39 Phil., 660).
In the case of U. S. vs. Ang Tang Ho, 43 Phil. 1, We also held:
THE POWER TO DELEGATE. — The Legislature cannot delegate legislative power to enact any
law. If Act No. 2868 is a law unto itself, and it does nothing more than to authorize the Governor-
General to make rules and regulations to carry it into effect, then the Legislature created the law.
There is no delegation of power and it is valid. On the other hand, if the act within itself does not
define a crime and is not complete, and some legislative act remains to be done to make it a law or
a crime, the doing of which is vested in the Governor-General, the act is delegation of legislative
power, is unconstitutional and void.
From the provisions of Act No. 4003 of the Legislature, as amended by Commonwealth Act No. 471, which
have been aforequoted, We find that Congress (a) declared it unlawful "to take or catch fry or fish eggs in
the territorial waters of the Philippines; (b) towards this end, it authorized the Secretary of Agriculture and
Natural Resources to provide by the regulations such restrictions as may be deemed necessary to be
imposed on the use of any fishing net or fishing device for the protection of fish fry or fish eggs (Sec. 13); (c)
it authorized the Secretary of Agriculture and Natural Resources to set aside and establish fishery
reservations or fish refuges and sanctuaries to be administered in the manner to be prescribed by him
and declared it unlawful for any person to take, destroy or kill in any of said places, or, in any manner disturb
or drive away or take therefrom, any fish fry or fish eggs (See. 75); and (d) it penalizes the execution of such
acts declared unlawful and in violation of this Act (No. 4003) or of any rules and regulations promulgated
thereunder, making the offender subject to a fine of not more than P200, or imprisonment for not more than
6 months, or both, in the discretion of the court (Sec. 83).
From the foregoing it may be seen that in so far as the protection of fish fry or fish egg is concerned, the
Fisheries Act is complete in itself, leaving to the Secretary of Agriculture and Natural Resources the
promulgation of rules and regulations to carry into effect the legislative intent. It also appears from the
exhibits on record in these cases that fishing with trawls causes "a wanton destruction of the mother shrimps
laying their eggs and the millions of eggs laid and the inevitable extermination of the shrimps specie" (Exh.
F), and that, "the trawls ram and destroy the fish corrals. The heavy trawl nets dig deep into the ocean bed.
They destroy the fish food which lies below the ocean floor. Their daytime catches net millions of shrimps
scooped up from the mud. In their nets they bring up the life of the sea" (Exh- 2).
In the light of these facts it is clear to Our mind that for the protection of fry or fish eggs and small and
immature fishes, Congress intended with the promulgation of Act No. 4003, to prohibit the use of any fish net
or fishing device like trawl nets that could endanger and deplete our supply of sea food, and to that end
authorized the Secretary of Agriculture and Natural Resources to provide by regulations such restrictions as
he deemed necessary in order to preserve the aquatic resources of the land. Consequently, when the
President, in response to the clamor of the people and authorities of Camarines Sur issued Executive Order
No. 80 absolutely prohibiting fishing by means of trawls in all waters comprised within the San Miguel Bay,
he did nothing but show an anxious regard for the welfare of the inhabitants of said coastal province and
dispose of issues of general concern (Sec. 63, R.A.C.) which were in consonance and strict conformity with
the law.
Wherefore, and on the strength of the foregoing considerations We render judgement, as follows:
(a) Declaring that the issues involved in case G.R. No. L-8895 have become moot, as no writ of preliminary
injunction has been issued by this Court the respondent Judge of the Court of First Instance of Manila
Branch XIV, from enforcing his order of March 3, 1955; and
(b) Reversing the decision appealed from in case G. R. No. L-9191; dissolving the writ of injunction prayed
for in the lower court by plaintiffs, if any has been actually issued by the court a quo; and declaring Executive
Orders Nos. 22, 66 and 80, series of 1954, valid for having been issued by authority of the Constitution, the
Revised Administrative Code and the Fisheries Act.
Without pronouncement as to costs. It is so ordered.
G.R. No. 166715             August 14,
2008
ABAKADA GURO PARTY LIST (formerly AASJS) 1 OFFICERS/MEMBERS SAMSON S. ALCANTARA,
ED VINCENT S. ALBANO, ROMEO R. ROBISO, RENE B. GOROSPE and EDWIN R.
SANDOVAL, petitioners, vs. HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance, HON.
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue,
and HON. ALBERTO D. LINA, in his Capacity as Commissioner of Bureau of Customs, respondents.
DECISION
CORONA, J.:
This petition for prohibition1 seeks to prevent respondents from implementing and enforcing Republic Act
(RA) 93352 (Attrition Act of 2005).
RA 9335 was enacted to optimize the revenue-generation capability and collection of the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC). The law intends to encourage BIR and BOC officials and
employees to exceed their revenue targets by providing a system of rewards and sanctions through the
creation of a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation Board
(Board).3 It covers all officials and employees of the BIR and the BOC with at least six months of service,
regardless of employment status.4
The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets for the
year, as determined by the Development Budget and Coordinating Committee (DBCC). Any incentive or
reward is taken from the fund and allocated to the BIR and the BOC in proportion to their contribution in the
excess collection of the targeted amount of tax revenue.5
The Boards in the BIR and the BOC are composed of the Secretary of the Department of Finance (DOF) or
his/her Undersecretary, the Secretary of the Department of Budget and Management (DBM) or his/her
Undersecretary, the Director General of the National Economic Development Authority (NEDA) or his/her
Deputy Director General, the Commissioners of the BIR and the BOC or their Deputy Commissioners, two
representatives from the rank-and-file employees and a representative from the officials nominated by their
recognized organization.6
Each Board has the duty to (1) prescribe the rules and guidelines for the allocation, distribution and release
of the Fund; (2) set criteria and procedures for removing from the service officials and employees whose
revenue collection falls short of the target; (3) terminate personnel in accordance with the criteria adopted by
the Board; (4) prescribe a system for performance evaluation; (5) perform other functions, including the
issuance of rules and regulations and (6) submit an annual report to Congress.7
The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to promulgate and
issue the implementing rules and regulations of RA 9335, 8 to be approved by a Joint Congressional
Oversight Committee created for such purpose.9
Petitioners, invoking their right as taxpayers filed this petition challenging the constitutionality of RA 9335, a
tax reform legislation. They contend that, by establishing a system of rewards and incentives, the law
"transform[s] the officials and employees of the BIR and the BOC into mercenaries and bounty hunters" as
they will do their best only in consideration of such rewards. Thus, the system of rewards and incentives
invites corruption and undermines the constitutionally mandated duty of these officials and employees to
serve the people with utmost responsibility, integrity, loyalty and efficiency.
Petitioners also claim that limiting the scope of the system of rewards and incentives only to officials and
employees of the BIR and the BOC violates the constitutional guarantee of equal protection. There is no
valid basis for classification or distinction as to why such a system should not apply to officials and
employees of all other government agencies.
In addition, petitioners assert that the law unduly delegates the power to fix revenue targets to the President
as it lacks a sufficient standard on that matter. While Section 7(b) and (c) of RA 9335 provides that BIR and
BOC officials may be dismissed from the service if their revenue collections fall short of the target by at least
7.5%, the law does not, however, fix the revenue targets to be achieved. Instead, the fixing of revenue
targets has been delegated to the President without sufficient standards. It will therefore be easy for the
President to fix an unrealistic and unattainable target in order to dismiss BIR or BOC personnel.
Finally, petitioners assail the creation of a congressional oversight committee on the ground that it violates
the doctrine of separation of powers. While the legislative function is deemed accomplished and completed
upon the enactment and approval of the law, the creation of the congressional oversight committee permits
legislative participation in the implementation and enforcement of the law.
In their comment, respondents, through the Office of the Solicitor General, question the petition for being
premature as there is no actual case or controversy yet. Petitioners have not asserted any right or claim that
will necessitate the exercise of this Court’s jurisdiction. Nevertheless, respondents acknowledge that public
policy requires the resolution of the constitutional issues involved in this case. They assert that the allegation
that the reward system will breed mercenaries is mere speculation and does not suffice to invalidate the law.
Seen in conjunction with the declared objective of RA 9335, the law validly classifies the BIR and the BOC
because the functions they perform are distinct from those of the other government agencies and
instrumentalities. Moreover, the law provides a sufficient standard that will guide the executive in the
implementation of its provisions. Lastly, the creation of the congressional oversight committee under the law
enhances, rather than violates, separation of powers. It ensures the fulfillment of the legislative policy and
serves as a check to any over-accumulation of power on the part of the executive and the implementing
agencies.
After a careful consideration of the conflicting contentions of the parties, the Court finds that petitioners have
failed to overcome the presumption of constitutionality in favor of RA 9335, except as shall hereafter be
discussed.
Actual Case And Ripeness
An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims
susceptible of judicial adjudication.10 A closely related requirement is ripeness, that is, the question must be
ripe for adjudication. And a constitutional question is ripe for adjudication when the governmental act being
challenged has a direct adverse effect on the individual challenging it. 11 Thus, to be ripe for judicial
adjudication, the petitioner must show a personal stake in the outcome of the case or an injury to himself
that can be redressed by a favorable decision of the Court.12
In this case, aside from the general claim that the dispute has ripened into a judicial controversy by the mere
enactment of the law even without any further overt act, 13 petitioners fail either to assert any specific and
concrete legal claim or to demonstrate any direct adverse effect of the law on them. They are unable to
show a personal stake in the outcome of this case or an injury to themselves. On this account, their petition
is procedurally infirm.
This notwithstanding, public interest requires the resolution of the constitutional issues raised by petitioners.
The grave nature of their allegations tends to cast a cloud on the presumption of constitutionality in favor of
the law. And where an action of the legislative branch is alleged to have infringed the Constitution, it
becomes not only the right but in fact the duty of the judiciary to settle the dispute.14
Accountability of
Public Officers
Section 1, Article 11 of the Constitution states:
Sec. 1. Public office is a public trust. Public officers and employees must at all times be
accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency,
act with patriotism, and justice, and lead modest lives.
Public office is a public trust. It must be discharged by its holder not for his own personal gain but for the
benefit of the public for whom he holds it in trust. By demanding accountability and service with
responsibility, integrity, loyalty, efficiency, patriotism and justice, all government officials and employees
have the duty to be responsive to the needs of the people they are called upon to serve.
Public officers enjoy the presumption of regularity in the performance of their duties. This presumption
necessarily obtains in favor of BIR and BOC officials and employees. RA 9335 operates on the basis thereof
and reinforces it by providing a system of rewards and sanctions for the purpose of encouraging the officials
and employees of the BIR and the BOC to exceed their revenue targets and optimize their revenue-
generation capability and collection.15
The presumption is disputable but proof to the contrary is required to rebut it. It cannot be overturned by
mere conjecture or denied in advance (as petitioners would have the Court do) specially in this case where it
is an underlying principle to advance a declared public policy.
Petitioners’ claim that the implementation of RA 9335 will turn BIR and BOC officials and employees into
"bounty hunters and mercenaries" is not only without any factual and legal basis; it is also purely
speculative.
A law enacted by Congress enjoys the strong presumption of constitutionality. To justify its nullification, there
must be a clear and unequivocal breach of the Constitution, not a doubtful and equivocal one. 16 To invalidate
RA 9335 based on petitioners’ baseless supposition is an affront to the wisdom not only of the legislature
that passed it but also of the executive which approved it.
Public service is its own reward. Nevertheless, public officers may by law be rewarded for exemplary and
exceptional performance. A system of incentives for exceeding the set expectations of a public office is not
anathema to the concept of public accountability. In fact, it recognizes and reinforces dedication to duty,
industry, efficiency and loyalty to public service of deserving government personnel.
In United States v. Matthews,17 the U.S. Supreme Court validated a law which awards to officers of the
customs as well as other parties an amount not exceeding one-half of the net proceeds of forfeitures in
violation of the laws against smuggling. Citing Dorsheimer v. United States,18 the U.S. Supreme Court said:
The offer of a portion of such penalties to the collectors is to stimulate and reward their zeal and
industry in detecting fraudulent attempts to evade payment of duties and taxes.
In the same vein, employees of the BIR and the BOC may by law be entitled to a reward when, as a
consequence of their zeal in the enforcement of tax and customs laws, they exceed their revenue targets. In
addition, RA 9335 establishes safeguards to ensure that the reward will not be claimed if it will be either the
fruit of "bounty hunting or mercenary activity" or the product of the irregular performance of official duties.
One of these precautionary measures is embodied in Section 8 of the law:
SEC. 8. Liability of Officials, Examiners and Employees of the BIR and the BOC. – The officials,
examiners, and employees of the [BIR] and the [BOC] who violate this Act or who are guilty of
negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary
diligence in the performance of their duties shall be held liable for any loss or injury suffered by any
business establishment or taxpayer as a result of such violation, negligence, abuse, malfeasance,
misfeasance or failure to exercise extraordinary diligence.
Equal Protection
Equality guaranteed under the equal protection clause is equality under the same conditions and among
persons similarly situated; it is equality among equals, not similarity of treatment of persons who are
classified based on substantial differences in relation to the object to be accomplished. 19 When things or
persons are different in fact or circumstance, they may be treated in law differently. In  Victoriano v. Elizalde
Rope Workers’ Union,20 this Court declared:
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the
laws upon all citizens of the [S]tate. It is not, therefore, a requirement, in order to avoid the
constitutional prohibition against inequality, that every man, woman and child should be affected
alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution does not require that things which
are different in fact be treated in law as though they were the same. The equal protection
clause does not forbid discrimination as to things that are different. It does not prohibit
legislation which is limited either in the object to which it is directed or by the territory within
which it is to operate.
The equal protection of the laws clause of the Constitution allows classification. Classification in
law, as in the other departments of knowledge or practice, is the grouping of things in speculation
or practice because they agree with one another in certain particulars. A law is not invalid because
of simple inequality. The very idea of classification is that of inequality, so that it goes without
saying that the mere fact of inequality in no manner determines the matter of constitutionality. All
that is required of a valid classification is that it be reasonable, which means that the
classification should be based on substantial distinctions which make for real differences,
that it must be germane to the purpose of the law; that it must not be limited to existing
conditions only; and that it must apply equally to each member of the class. This Court has
held that the standard is satisfied if the classification or distinction is based on a reasonable
foundation or rational basis and is not palpably arbitrary.
In the exercise of its power to make classifications for the purpose of enacting laws over matters
within its jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not
necessary that the classification be based on scientific or marked differences of things or in their
relation. Neither is it necessary that the classification be made with mathematical nicety. Hence,
legislative classification may in many cases properly rest on narrow distinctions, for the equal
protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and
legislation is addressed to evils as they may appear.21 (emphasis supplied)
The equal protection clause recognizes a valid classification, that is, a classification that has a reasonable
foundation or rational basis and not arbitrary. 22 With respect to RA 9335, its expressed public policy is the
optimization of the revenue-generation capability and collection of the BIR and the BOC. 23 Since the subject
of the law is the revenue- generation capability and collection of the BIR and the BOC, the incentives and/or
sanctions provided in the law should logically pertain to the said agencies. Moreover, the law concerns only
the BIR and the BOC because they have the common distinct primary function of generating revenues for
the national government through the collection of taxes, customs duties, fees and charges.
The BIR performs the following functions:
Sec. 18. The Bureau of Internal Revenue. – The Bureau of Internal Revenue, which shall be
headed by and subject to the supervision and control of the Commissioner of Internal Revenue,
who shall be appointed by the President upon the recommendation of the Secretary [of the DOF],
shall have the following functions:
(1) Assess and collect all taxes, fees and charges and account for all revenues collected;
(2) Exercise duly delegated police powers for the proper performance of its functions and duties;
(3) Prevent and prosecute tax evasions and all other illegal economic activities;
(4) Exercise supervision and control over its constituent and subordinate units; and
 (5) Perform such other functions as may be provided by law.24
xxx       xxx       xxx (emphasis supplied)
On the other hand, the BOC has the following functions:
Sec. 23. The Bureau of Customs. – The Bureau of Customs which shall be headed and subject to
the management and control of the Commissioner of Customs, who shall be appointed by the
President upon the recommendation of the Secretary[of the DOF] and hereinafter referred to as
Commissioner, shall have the following functions:
(1) Collect custom duties, taxes and the corresponding fees, charges and penalties;
(2) Account for all customs revenues collected;
(3) Exercise police authority for the enforcement of tariff and customs laws;
(4) Prevent and suppress smuggling, pilferage and all other economic frauds within all ports of
entry;
(5) Supervise and control exports, imports, foreign mails and the clearance of vessels and aircrafts
in all ports of entry;
(6) Administer all legal requirements that are appropriate;
(7) Prevent and prosecute smuggling and other illegal activities in all ports under its jurisdiction;
(8) Exercise supervision and control over its constituent units;
(9) Perform such other functions as may be provided by law.25
xxx       xxx       xxx (emphasis supplied)
Both the BIR and the BOC are bureaus under the DOF. They principally perform the special function of
being the instrumentalities through which the State exercises one of its great inherent functions – taxation.
Indubitably, such substantial distinction is germane and intimately related to the purpose of the law. Hence,
the classification and treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands
of equal protection.
Undue Delegation
Two tests determine the validity of delegation of legislative power: (1) the completeness test and (2) the
sufficient standard test. A law is complete when it sets forth therein the policy to be executed, carried out or
implemented by the delegate.26 It lays down a sufficient standard when it provides adequate guidelines or
limitations in the law to map out the boundaries of the delegate’s authority and prevent the delegation from
running riot.27 To be sufficient, the standard must specify the limits of the delegate’s authority, announce the
legislative policy and identify the conditions under which it is to be implemented.28
RA 9335 adequately states the policy and standards to guide the President in fixing revenue targets and the
implementing agencies in carrying out the provisions of the law. Section 2 spells out the policy of the law:
SEC. 2. Declaration of Policy. – It is the policy of the State to optimize the revenue-generation
capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC)
by providing for a system of rewards and sanctions through the creation of a Rewards and
Incentives Fund and a Revenue Performance Evaluation Board in the above agencies for the
purpose of encouraging their officials and employees to exceed their revenue targets.
Section 4 "canalized within banks that keep it from overflowing" 29 the delegated power to the President to fix
revenue targets:
SEC. 4. Rewards and Incentives Fund. – A Rewards and Incentives Fund, hereinafter referred to
as the Fund, is hereby created, to be sourced from the collection of the BIR and the BOC in excess
of their respective revenue targets of the year, as determined by the Development Budget
and Coordinating Committee (DBCC), in the following percentages:
Excess of Collection of the Excess Percent (%) of the Excess Collection to Accrue to
the Revenue Targets the Fund
30% or below – 15%
More than 30% – 15% of the first 30% plus 20% of the remaining
excess
The Fund shall be deemed automatically appropriated the year immediately following the year
when the revenue collection target was exceeded and shall be released on the same fiscal year.
Revenue targets shall refer to the original estimated revenue collection expected of the BIR
and the BOC for a given fiscal year as stated in the Budget of Expenditures and Sources of
Financing (BESF) submitted by the President to Congress. The BIR and the BOC shall submit
to the DBCC the distribution of the agencies’ revenue targets as allocated among its revenue
districts in the case of the BIR, and the collection districts in the case of the BOC.
xxx       xxx       xxx (emphasis supplied)
Revenue targets are based on the original estimated revenue collection expected respectively of the BIR
and the BOC for a given fiscal year as approved by the DBCC and stated in the BESF submitted by the
President to Congress.30 Thus, the determination of revenue targets does not rest solely on the President as
it also undergoes the scrutiny of the DBCC.
On the other hand, Section 7 specifies the limits of the Board’s authority and identifies the conditions under
which officials and employees whose revenue collection falls short of the target by at least 7.5% may be
removed from the service:
SEC. 7. Powers and Functions of the Board. –  The Board in the agency shall have the following
powers and functions:
xxx       xxx       xxx
(b) To set the criteria and procedures for removing from service officials and employees whose
revenue collection falls short of the target by at least seven and a half percent (7.5%), with
due consideration of all relevant factors affecting the level of collection as provided in the
rules and regulations promulgated under this Act, subject to civil service laws, rules and
regulations and compliance with substantive and procedural due process: Provided, That the
following exemptions shall apply:
1. Where the district or area of responsibility is newly-created, not exceeding two years in
operation, as has no historical record of collection performance that can be used as basis
for evaluation; and
2. Where the revenue or customs official or employee is a recent transferee in the middle
of the period under consideration unless the transfer was due to nonperformance of
revenue targets or potential nonperformance of revenue targets: Provided, however, That
when the district or area of responsibility covered by revenue or customs officials or
employees has suffered from economic difficulties brought about by natural calamities
or force majeure or economic causes as may be determined by the Board, termination
shall be considered only after careful and proper review by the Board.
(c) To terminate personnel in accordance with the criteria adopted in the preceding paragraph:
Provided, That such decision shall be immediately executory: Provided, further, That the
application of the criteria for the separation of an official or employee from service under
this Act shall be without prejudice to the application of other relevant laws on accountability
of public officers and employees, such as the Code of Conduct and Ethical Standards of
Public Officers and Employees and the Anti-Graft and Corrupt Practices Act;
xxx       xxx       xxx (emphasis supplied)
Clearly, RA 9335 in no way violates the security of tenure of officials and employees of the BIR and the
BOC. The guarantee of security of tenure only means that an employee cannot be dismissed from the
service for causes other than those provided by law and only after due process is accorded the
employee.31 In the case of RA 9335, it lays down a reasonable yardstick for removal (when the revenue
collection falls short of the target by at least 7.5%) with due consideration of all relevant factors affecting the
level of collection. This standard is analogous to inefficiency and incompetence in the performance of official
duties, a ground for disciplinary action under civil service laws. 32 The action for removal is also subject to
civil service laws, rules and regulations and compliance with substantive and procedural due process.
At any rate, this Court has recognized the following as sufficient standards: "public interest," "justice and
equity," "public convenience and welfare" and "simplicity, economy and welfare." 33 In this case, the declared
policy of optimization of the revenue-generation capability and collection of the BIR and the BOC is infused
with public interest.
Separation Of Powers
Section 12 of RA 9335 provides:
SEC. 12. Joint Congressional Oversight Committee. – There is hereby created a Joint
Congressional Oversight Committee composed of seven Members from the Senate and seven
Members from the House of Representatives. The Members from the Senate shall be appointed by
the Senate President, with at least two senators representing the minority. The Members from the
House of Representatives shall be appointed by the Speaker with at least two members
representing the minority. After the Oversight Committee will have approved the implementing rules
and regulations (IRR) it shall thereafter become functus officio and therefore cease to exist.
The Joint Congressional Oversight Committee in RA 9335 was created for the purpose of approving the
implementing rules and regulations (IRR) formulated by the DOF, DBM, NEDA, BIR, BOC and CSC. On May
22, 2006, it approved the said IRR. From then on, it became functus officio and ceased to exist. Hence, the
issue of its alleged encroachment on the executive function of implementing and enforcing the law may be
considered moot and academic.
This notwithstanding, this might be as good a time as any for the Court to confront the issue of the
constitutionality of the Joint Congressional Oversight Committee created under RA 9335 (or other similar
laws for that matter).
The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the concept of congressional
oversight in Macalintal v. Commission on Elections34 is illuminating:
Concept and bases of congressional oversight
Broadly defined, the power of oversight embraces all activities undertaken by Congress to
enhance its understanding of and influence over the implementation of legislation it has
enacted. Clearly, oversight concerns post-enactment measures undertaken by Congress: (a)
to monitor bureaucratic compliance with program objectives, (b) to determine whether
agencies are properly administered, (c) to eliminate executive waste and dishonesty, (d) to
prevent executive usurpation of legislative authority, and (d) to assess executive conformity
with the congressional perception of public interest.
The power of oversight has been held to be intrinsic in the grant of legislative power itself and
integral to the checks and balances inherent in a democratic system of government. x x x x x x x x x
Over the years, Congress has invoked its oversight power with increased frequency to check the
perceived "exponential accumulation of power" by the executive branch. By the beginning of the
20th century, Congress has delegated an enormous amount of legislative authority to the executive
branch and the administrative agencies. Congress, thus, uses its oversight power to make sure that
the administrative agencies perform their functions within the authority delegated to them. x x x x x
xxxx
Categories of congressional oversight functions
The acts done by Congress purportedly in the exercise of its oversight powers may be divided
into three categories, namely: scrutiny, investigation and supervision.
a. Scrutiny
Congressional scrutiny implies a lesser intensity and continuity of attention to
administrative operations. Its primary purpose is to determine economy and efficiency of
the operation of government activities. In the exercise of legislative scrutiny, Congress
may request information and report from the other branches of government. It can give
recommendations or pass resolutions for consideration of the agency involved.
xxx       xxx       xxx
b. Congressional investigation
While congressional scrutiny is regarded as a passive process of looking at the facts that
are readily available, congressional investigation involves a more intense digging of facts.
The power of Congress to conduct investigation is recognized by the 1987 Constitution
under section 21, Article VI, xxx       xxx       xxx
c. Legislative supervision
The third and most encompassing form by which Congress exercises its oversight power is thru
legislative supervision. "Supervision" connotes a continuing and informed awareness on the part of
a congressional committee regarding executive operations in a given administrative area. While
both congressional scrutiny and investigation involve inquiry into past executive branch actions in
order to influence future executive branch performance, congressional supervision allows
Congress to scrutinize the exercise of delegated law-making authority, and permits Congress to
retain part of that delegated authority.
Congress exercises supervision over the executive agencies through its veto power. It typically
utilizes veto provisions when granting the President or an executive agency the power to
promulgate regulations with the force of law. These provisions require the President or an agency
to present the proposed regulations to Congress, which retains a "right" to approve or disapprove
any regulation before it takes effect. Such legislative veto provisions usually provide that a
proposed regulation will become a law after the expiration of a certain period of time, only if
Congress does not affirmatively disapprove of the regulation in the meantime. Less frequently, the
statute provides that a proposed regulation will become law if Congress affirmatively approves it.
Supporters of legislative veto stress that it is necessary to maintain the balance of power between
the legislative and the executive branches of government as it offers lawmakers a way to delegate
vast power to the executive branch or to independent agencies while retaining the option to cancel
particular exercise of such power without having to pass new legislation or to repeal existing law.
They contend that this arrangement promotes democratic accountability as it provides legislative
check on the activities of unelected administrative agencies. One proponent thus explains:
It is too late to debate the merits of this delegation policy: the policy is too deeply
embedded in our law and practice. It suffices to say that the complexities of modern
government have often led Congress-whether by actual or perceived necessity- to
legislate by declaring broad policy goals and general statutory standards, leaving the
choice of policy options to the discretion of an executive officer. Congress articulates
legislative aims, but leaves their implementation to the judgment of parties who may or
may not have participated in or agreed with the development of those aims. Consequently,
absent safeguards, in many instances the reverse of our constitutional scheme could be
effected: Congress proposes, the Executive disposes. One safeguard, of course, is the
legislative power to enact new legislation or to change existing law. But without some
means of overseeing post enactment activities of the executive branch, Congress would
be unable to determine whether its policies have been implemented in accordance with
legislative intent and thus whether legislative intervention is appropriate.
Its opponents, however, criticize the legislative veto as undue encroachment upon the executive
prerogatives. They urge that any post-enactment measures undertaken by the legislative
branch should be limited to scrutiny and investigation; any measure beyond that would
undermine the separation of powers guaranteed by the Constitution. They contend that
legislative veto constitutes an impermissible evasion of the President’s veto authority and intrusion
into the powers vested in the executive or judicial branches of government. Proponents counter that
legislative veto enhances separation of powers as it prevents the executive branch and
independent agencies from accumulating too much power. They submit that reporting requirements
and congressional committee investigations allow Congress to scrutinize only the exercise of
delegated law-making authority. They do not allow Congress to review executive proposals before
they take effect and they do not afford the opportunity for ongoing and binding expressions of
congressional intent. In contrast, legislative veto permits Congress to participate prospectively in
the approval or disapproval of "subordinate law" or those enacted by the executive branch pursuant
to a delegation of authority by Congress. They further argue that legislative veto "is a necessary
response by Congress to the accretion of policy control by forces outside its chambers." In an era
of delegated authority, they point out that legislative veto "is the most efficient means Congress has
yet devised to retain control over the evolution and implementation of its policy as declared by
statute."
In Immigration and Naturalization Service v. Chadha, the U.S. Supreme Court resolved the
validity of legislative veto provisions. The case arose from the order of the immigration judge
suspending the deportation of Chadha pursuant to § 244(c)(1) of the Immigration and Nationality
Act. The United States House of Representatives passed a resolution vetoing the suspension
pursuant to § 244(c)(2) authorizing either House of Congress, by resolution, to invalidate the
decision of the executive branch to allow a particular deportable alien to remain in the United
States. The immigration judge reopened the deportation proceedings to implement the House order
 and the alien was ordered deported. The Board of Immigration Appeals dismissed the alien’s
appeal, holding that it had no power to declare unconstitutional an act of Congress. The United
States Court of Appeals for Ninth Circuit held that the House was without constitutional authority to
order the alien’s deportation and that § 244(c)(2) violated the constitutional doctrine on separation
of powers.
On appeal, the U.S. Supreme Court declared § 244(c)(2) unconstitutional. But the Court shied
away from the issue of separation of powers and instead held that the provision violates the
presentment clause and bicameralism. It held that the one-house veto was essentially legislative in
purpose and effect. As such, it is subject to the procedures set out in Article I of the Constitution
requiring the passage by a majority of both Houses and presentment to the President. x x x x x x x
xx
Two weeks after the Chadha decision, the Court upheld, in memorandum decision, two lower court
decisions invalidating the legislative veto provisions in the Natural Gas Policy Act of 1978 and the
Federal Trade Commission Improvement Act of 1980. Following this precedence, lower courts
invalidated statutes containing legislative veto provisions although some of these provisions
required the approval of both Houses of Congress and thus met the bicameralism requirement of
Article I. Indeed, some of these veto provisions were not even exercised.35 (emphasis supplied)
In Macalintal, given the concept and configuration of the power of congressional oversight and considering
the nature and powers of a constitutional body like the Commission on Elections, the Court struck down the
provision in RA 9189 (The Overseas Absentee Voting Act of 2003) creating a Joint Congressional
Committee. The committee was tasked not only to monitor and evaluate the implementation of the said law
but also to review, revise, amend and approve the IRR promulgated by the Commission on Elections. The
Court held that these functions infringed on the constitutional independence of the Commission on
Elections.36
With this backdrop, it is clear that congressional oversight is not unconstitutional per se, meaning, it neither
necessarily constitutes an encroachment on the executive power to implement laws nor undermines the
constitutional separation of powers. Rather, it is integral to the checks and balances inherent in a democratic
system of government. It may in fact even enhance the separation of powers as it prevents the over-
accumulation of power in the executive branch.
However, to forestall the danger of congressional encroachment "beyond the legislative sphere," the
Constitution imposes two basic and related constraints on Congress. 37 It may not vest itself, any of its
committees or its members with either executive or judicial power. 38 And, when it exercises its legislative
power, it must follow the "single, finely wrought and exhaustively considered, procedures" specified under
the Constitution,39 including the procedure for enactment of laws and presentment.
Thus, any post-enactment congressional measure such as this should be limited to scrutiny and
investigation. In particular, congressional oversight must be confined to the following:
(1) scrutiny based primarily on Congress’ power of appropriation and the budget hearings
conducted in connection with it, its power to ask heads of departments to appear before and be
heard by either of its Houses on any matter pertaining to their departments and its power of
confirmation40 and
(2) investigation and monitoring41 of the implementation of laws pursuant to the power of Congress
to conduct inquiries in aid of legislation.42
Any action or step beyond that will undermine the separation of powers guaranteed by the Constitution.
Legislative vetoes fall in this class.
Legislative veto is a statutory provision requiring the President or an administrative agency to present the
proposed implementing rules and regulations of a law to Congress which, by itself or through a committee
formed by it, retains a "right" or "power" to approve or disapprove such regulations before they take effect.
As such, a legislative veto in the form of a congressional oversight committee is in the form of an inward-
turning delegation designed to attach a congressional leash (other than through scrutiny and investigation)
to an agency to which Congress has by law initially delegated broad powers.43 It radically changes the
design or structure of the Constitution’s diagram of power as it entrusts to Congress a direct role in
enforcing, applying or implementing its own laws.44
Congress has two options when enacting legislation to define national policy within the broad horizons of its
legislative competence.45 It can itself formulate the details or it can assign to the executive branch the
responsibility for making necessary managerial decisions in conformity with those standards.46 In the latter
case, the law must be complete in all its essential terms and conditions when it leaves the hands of the
legislature.47 Thus, what is left for the executive branch or the concerned administrative agency when it
formulates rules and regulations implementing the law is to fill up details (supplementary rule-making) or
ascertain facts necessary to bring the law into actual operation (contingent rule-making).48
Administrative regulations enacted by administrative agencies to implement and interpret the law which they
are entrusted to enforce have the force of law and are entitled to respect. 49 Such rules and regulations
partake of the nature of a statute 50 and are just as binding as if they have been written in the statute itself. As
such, they have the force and effect of law and enjoy the presumption of constitutionality and legality until
they are set aside with finality in an appropriate case by a competent court.51 Congress, in the guise of
assuming the role of an overseer, may not pass upon their legality by subjecting them to its stamp of
approval without disturbing the calculated balance of powers established by the Constitution. In exercising
discretion to approve or disapprove the IRR based on a determination of whether or not they conformed with
the provisions of RA 9335, Congress arrogated judicial power unto itself, a power exclusively vested in this
Court by the Constitution.
Considered Opinion of
Mr. Justice Dante O. Tinga
Moreover, the requirement that the implementing rules of a law be subjected to approval by Congress as a
condition for their effectivity violates the cardinal constitutional principles of bicameralism and the rule on
presentment.52
Section 1, Article VI of the Constitution 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. (emphasis supplied)
Legislative power (or the power to propose, enact, amend and repeal laws)53 is vested in Congress which
consists of two chambers, the Senate and the House of Representatives. A valid exercise of legislative
power requires the act of both chambers. Corrollarily, it can be exercised neither solely by one of the two
chambers nor by a committee of either or both chambers. Thus, assuming the validity of a legislative veto,
both a single-chamber legislative veto and a congressional committee legislative veto are invalid.
Additionally, Section 27(1), Article VI of the Constitution provides:
Section 27. (1) Every bill passed by the Congress shall, before it becomes a law, be
presented to the President. If he approves the same, he shall sign it, otherwise, he shall veto it
and return the same with his objections to the House where it originated, which shall enter the
objections at large in its Journal and proceed to reconsider it. If, after such reconsideration, two-
thirds of all the Members of such House shall agree to pass the bill, it shall be sent, together with
the objections, to the other House by which it shall likewise be reconsidered, and if approved by
two-thirds of all the Members of that House, it shall become a law. In all such cases, the votes of
each House shall be determined by yeas or nays, and the names of the members voting for or
against shall be entered in its Journal. The President shall communicate his veto of any bill to the
House where it originated within thirty days after the date of receipt thereof; otherwise, it shall
become a law as if he had signed it. (emphasis supplied)
Every bill passed by Congress must be presented to the President for approval or veto. In the absence of
presentment to the President, no bill passed by Congress can become a law. In this sense, law-making
under the Constitution is a joint act of the Legislature and of the Executive. Assuming that legislative veto is
a valid legislative act with the force of law, it cannot take effect without such presentment even if approved
by both chambers of Congress.
In sum, two steps are required before a bill becomes a law. First, it must be approved by both Houses of
Congress.54 Second, it must be presented to and approved by the President. 55 As summarized by Justice
Isagani Cruz56 and Fr. Joaquin G. Bernas, S.J.57, the following is the procedure for the approval of bills:
A bill is introduced by any member of the House of Representatives or the Senate except for some
measures that must originate only in the former chamber.
The first reading involves only a reading of the number and title of the measure and its referral by
the Senate President or the Speaker to the proper committee for study.
The bill may be "killed" in the committee or it may be recommended for approval, with or without
amendments, sometimes after public hearings are first held thereon. If there are other bills of the
same nature or purpose, they may all be consolidated into one bill under common authorship or as
a committee bill.
Once reported out, the bill shall be calendared for second reading. It is at this stage that the bill is
read in its entirety, scrutinized, debated upon and amended when desired. The second reading is
the most important stage in the passage of a bill.
The bill as approved on second reading is printed in its final form and copies thereof are distributed
at least three days before the third reading. On the third reading, the members merely register their
votes and explain them if they are allowed by the rules. No further debate is allowed.
Once the bill passes third reading, it is sent to the other chamber, where it will also undergo the
three readings. If there are differences between the versions approved by the two chambers, a
conference committee58 representing both Houses will draft a compromise measure that if ratified
by the Senate and the House of Representatives will then be submitted to the President for his
consideration.
The bill is enrolled when printed as finally approved by the Congress, thereafter authenticated with
the signatures of the Senate President, the Speaker, and the Secretaries of their respective
chambers…59
The President’s role in law-making.
The final step is submission to the President for approval. Once approved, it takes effect as law
after the required publication.60
Where Congress delegates the formulation of rules to implement the law it has enacted pursuant to sufficient
standards established in the said law, the law must be complete in all its essential terms and conditions
when it leaves the hands of the legislature. And it may be deemed to have left the hands of the legislature
when it becomes effective because it is only upon effectivity of the statute that legal rights and obligations
become available to those entitled by the language of the statute. Subject to the indispensable requisite of
publication under the due process clause, 61 the determination as to when a law takes effect is wholly the
prerogative of Congress.62 As such, it is only upon its effectivity that a law may be executed and the
executive branch acquires the duties and powers to execute the said law. Before that point, the role of the
executive branch, particularly of the President, is limited to approving or vetoing the law.63
From the moment the law becomes effective, any provision of law that empowers Congress or any of its
members to play any role in the implementation or enforcement of the law violates the principle of separation
of powers and is thus unconstitutional. Under this principle, a provision that requires Congress or its
members to approve the implementing rules of a law after it has already taken effect shall be
unconstitutional, as is a provision that allows Congress or its members to overturn any directive or ruling
made by the members of the executive branch charged with the implementation of the law.
Following this rationale, Section 12 of RA 9335 should be struck down as unconstitutional. While there may
be similar provisions of other laws that may be invalidated for failure to pass this standard, the Court refrains
from invalidating them wholesale but will do so at the proper time when an appropriate case assailing those
provisions is brought before us.64
The next question to be resolved is: what is the effect of the unconstitutionality of Section 12 of RA 9335 on
the other provisions of the law? Will it render the entire law unconstitutional? No.
Section 13 of RA 9335 provides:
SEC. 13. Separability Clause. – If any provision of this Act is declared invalid by a competent court,
the remainder of this Act or any provision not affected by such declaration of invalidity shall remain
in force and effect.
In Tatad v. Secretary of the Department of Energy,65 the Court laid down the following rules:
The general rule is that where part of a statute is void as repugnant to the Constitution, while
another part is valid, the valid portion, if separable from the invalid, may stand and be enforced.
The presence of a separability clause in a statute creates the presumption that the legislature
intended separability, rather than complete nullity of the statute. To justify this result, the valid
portion must be so far independent of the invalid portion that it is fair to presume that the legislature
would have enacted it by itself if it had supposed that it could not constitutionally enact the other.
Enough must remain to make a complete, intelligible and valid statute, which carries out the
legislative intent. x x x
The exception to the general rule is that when the parts of a statute are so mutually dependent and
connected, as conditions, considerations, inducements, or compensations for each other, as to
warrant a belief that the legislature intended them as a whole, the nullity of one part will vitiate the
rest. In making the parts of the statute dependent, conditional, or connected with one another, the
legislature intended the statute to be carried out as a whole and would not have enacted it if one
part is void, in which case if some parts are unconstitutional, all the other provisions thus
dependent, conditional, or connected must fall with them.
The separability clause of RA 9335 reveals the intention of the legislature to isolate and detach any invalid
provision from the other provisions so that the latter may continue in force and effect. The valid portions can
stand independently of the invalid section. Without Section 12, the remaining provisions still constitute a
complete, intelligible and valid law which carries out the legislative intent to optimize the revenue-generation
capability and collection of the BIR and the BOC by providing for a system of rewards and sanctions through
the Rewards and Incentives Fund and a Revenue Performance Evaluation Board.
To be effective, administrative rules and regulations must be published in full if their purpose is to enforce or
implement existing law pursuant to a valid delegation. The IRR of RA 9335 were published on May 30, 2006
in two newspapers of general circulation 66 and became effective 15 days thereafter. 67 Until and unless the
contrary is shown, the IRR are presumed valid and effective even without the approval of the Joint
Congressional Oversight Committee.
WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section 12 of RA 9335 creating a Joint
Congressional Oversight Committee to approve the implementing rules and regulations of the law is
declared UNCONSTITUTIONAL and therefore NULL and VOID. The constitutionality of the remaining
provisions of RA 9335 is UPHELD. Pursuant to Section 13 of RA 9335, the rest of the provisions remain in
force and effect. SO ORDERED.
G.R. No. 175220               February 12,
2009
WILLIAM C. DAGAN, CARLOS H. REYES, NARCISO MORALES, BONIFACIO MANTILLA, CESAR
AZURIN, WEITONG LIM, MA. TERESA TRINIDAD, MA. CARMELITA FLORENTINO, Petitioners, vs.
PHILIPPINE RACING COMMISSION, MANILA JOCKEY CLUB, INC., and PHILIPPINE RACING CLUB,
INC., Respondents.
DECISION
TINGA, J.:
The subject of this petition for certiorari is the decision 1 of the Court of Appeals in CA-G.R. SP No. 95212,
affirming in toto the judgment2 of the Regional Trial Court of Makati in Civil Case No. 04-1228.
The controversy stemmed from the 11 August 2004 directive3 issued by the Philippine Racing Commission
(Philracom) directing the Manila Jockey Club, Inc. (MJCI) and Philippine Racing Club, Inc. (PRCI) to
immediately come up with their respective Clubs’ House Rule to address Equine Infectious Anemia
(EIA)4 problem and to rid their facilities of horses infected with EIA. Said directive was issued pursuant to
Administrative Order No. 55 dated 28 March 1994 by the Department of Agriculture declaring it unlawful for
any person, firm or corporation to ship, drive, or transport horses from any locality or place except when
accompanied by a certificate issued by the authority of the Director of the Bureau of Animal Industry (BAI).6
In compliance with the directive, MJCI and PRCI ordered the owners of racehorses stable in their
establishments to submit the horses to blood sampling and administration of the Coggins Test to determine
whether they are afflicted with the EIA virus. Subsequently, on 17 September 2004, Philracom issued copies
of the guidelines for the monitoring and eradication of EIA.7
Petitioners and racehorse owners William Dagan (Dagan), Carlos Reyes, Narciso Morales, Bonifacio
Montilla, Cezar Azurin, Weitong Lim, Ma. Teresa Trinidad and Ma. Carmelita Florentino refused to comply
with the directive. First, they alleged that there had been no prior consultation with horse owners. Second,
they claimed that neither official guidelines nor regulations had been issued relative to the taking of blood
samples. And third, they asserted that no documented case of EIA had been presented to justify the
undertaking.8
Despite resistance from petitioners, the blood testing proceeded. The horses, whose owners refused to
comply were banned from the races, were removed from the actual day of race, prohibited from renewing
their licenses or evicted from their stables.
When their complaint went unheeded, the racehorse owners lodged a complaint before the Office of the
President (OP) which in turn issued a directive instructing Philracom to investigate the matter.
For failure of Philracom to act upon the directive of the OP, petitioners filed a petition for injunction with
application for the issuance of a temporary restraining order (TRO). In an order 9 dated 11 November 2004,
the trial court issued a TRO.
Dagan refused to comply with the directives because, according to him, the same are unfair as there are no
implementing rules on the banning of sick horses from races. Consequently, his horses were evicted from
the stables and transferred to an isolation area. He also admitted that three of his horses had been found
positive for EIA.10
Confronted with two issues, namely: whether there were valid grounds for the issuance of a writ of injunction
and whether respondents had acted with whim and caprice in the implementation of the contested guideline,
the trial court resolved both queries in the negative.
The trial court found that most racehorse owners, except for Dagan, had already subjected their racehorses
to EIA testing. Their act constituted demonstrated compliance with the contested guidelines, according to the
trial court. Hence, the acts sought to be enjoined had been rendered moot and academic.
With respect to the subject guidelines, the trial court upheld their validity as an exercise of police power,
thus:
The Petitioner’s submission that the subject guidelines are oppressive and hence confiscatory of proprietary
rights is likewise viewed by this Court to be barren of factual and legal support. The horseracing industry,
needless to state, is imbued with public interest deserving of utmost concern if not constant vigilance. The
Petitioners do not dispute this. It is because of this basic fact that respondents are expected to police the
concerned individuals and adopt measures that will promote and protect the interests of all the stakeholders
starting from the moneyed horse-owners, gawking bettors down to the lowly maintainers of the stables. This
is a clear and valid exercise of police power with the respondents acting for the State. Participation in the
business of horseracing is but a privilege; it is not a right. And no clear acquiescence to this postulation can
there be than the Petitioners' own undertaking to abide by the rules and conditions issued and imposed by
the respondents as specifically shown by their contracts of lease with MCJI.11
1avvphi1
Petitioners appealed to the Court of Appeals. In its Decision dated 27 October 2006, the appellate court
affirmed in toto the decision of the trial court.
The appellate court upheld the authority of Philracom to formulate guidelines since it is vested with exclusive
jurisdiction over and control of the horse-racing industry per Section 8 of Presidential Decree (P.D.) No. 8.
The appellate court further pointed out that P.D. No. 420 also endows Philracom with the power to prescribe
additional rules and regulations not otherwise inconsistent with the said presidential decree12 and to perform
such duties and exercise all powers incidental or necessary to the accomplishment of its aims and
objectives.13 It similarly concluded that the petition for prohibition should be dismissed on the ground of
mootness in light of evidence indicating that petitioners had already reconsidered their refusal to have their
horses tested and had, in fact, subsequently requested the administration of the test to the horses.14
Aggrieved by the appellate court’s decision, petitioners filed the instant certiorari petition15 imputing grave
abuse of discretion on the part of respondents in compelling petitioners to subject their racehorses to blood
testing.
In their amended petition,16 petitioners allege that Philracom’s unsigned and undated implementing
guidelines suffer from several infirmities. They maintain that the assailed guidelines do not comply with due
process requirements. Petitioners insist that racehorses already in the MJCI stables were allowed to be so
quartered because the individual horse owners had already complied with the Philracom regulation that
horses should not bear any disease. There was neither a directive nor a rule that racehorses already lodged
in the stables of the racing clubs should again be subjected to the collection of blood samples preparatory to
the conduct of the EIA tests, 17 petitioners note. Thus, it came as a surprise to horse owners when told about
the administration of a new Coggins Tests on old horses since the matter had not been taken up with
them.18 No investigation or at least a summary proceeding was conducted affording petitioners an
opportunity to be heard.19 Petitioners also aver that the assailed guidelines are ultra vires in that the
sanctions imposed for refusing to submit to medical examination are summary eviction from the stables or
arbitrary banning of participation in the races, notwithstanding the penalties prescribed in the contract of
lease.20
In its Comment,21 the PRCI emphasizes that it merely obeyed the terms of its franchise and abided by the
rules enacted by Philracom.22 For its part, Philracom, through the Office of the Solicitor-General (OSG),
stresses that the case has become moot and academic since most of petitioners had complied with the
guidelines by subjecting their race horses to EIA testing. The horses found unafflicted with the disease were
eventually allowed to join the races. 23 Philracom also justified its right under the law to regulate horse
racing.24 MJCI adds that Philracom need
not delegate its rule-making power to the former since MJCI’s right to formulate its internal rules is
subsumed under the franchise granted to it by Congress.25
In their Reply,26 petitioners raise for the first time the issue that Philracom had unconstitutionally delegated its
rule-making power to PRCI and MJCI in issuing the directive for them to come up with club rules. In
response to the claim that respondents had merely complied with their duties under their franchises,
petitioners counter that the power granted to PRCI and MJCI under their respective franchises is limited to:
(1) the construction, operation and maintenance of racetracks; (2) the establishment of branches for booking
purposes; and (3) the conduct of horse races.
It appears on record that only Dagan had refused to comply with the orders of respondents. Therefore, the
case subsists as regards Dagan.
Petitioners essentially assail two issuances of Philracom; namely: the Philracom directive27 and the
subsequent guidelines addressed to MJCI and PRCI.
The validity of an administrative issuance, such as the assailed guidelines, hinges on compliance with the
following requisites:
1. Its promulgation must be authorized by the legislature;
 2. It must be promulgated in accordance with the prescribed procedure;
3. It must be within the scope of the authority given by the legislature;
4. It must be reasonable.28
All the prescribed requisites are met as regards the questioned issuances. Philracom’s authority is drawn
from P.D. No. 420. The delegation made in the presidential decree is valid. Philracom did not exceed its
authority. And the issuances are fair and reasonable.
The rule is that what has been delegated cannot be delegated, or as expressed in the Latin maxim: potestas
delegate non delegare potest. This rule is based upon the ethical principle that such delegated power
constitutes not only a right but a duty to be performed by the delegate by the instrumentality of his own
judgment acting immediately upon the matter of legislation and not through the intervening mind of
another.29 This rule however admits of recognized exceptions30 such as the grant of rule-making power to
administrative agencies. They have been granted by Congress with the authority to issue rules to regulate
the implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in
modern governance due to the increasing complexity and variety of public functions.31
However, in every case of permissible delegation, there must be a showing that the delegation itself is valid.
It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or
implemented by the delegate; and (b) fixes a standard—the limits of which are sufficiently determinate and
determinable—to which the delegate must conform in the performance of his functions. A sufficient standard
is one which defines legislative policy, marks its limits, maps out its boundaries and specifies the public
agency to apply it. It indicates the circumstances under which the legislative command is to be effected.32
P.D. No. 420 hurdles the tests of completeness and standards sufficiency.
Philracom was created for the purpose of carrying out the declared policy in Section 1 which is "to promote
and direct the accelerated development and continued growth of horse racing not only in pursuance of the
sports development program but also in order to insure the full exploitation of the sport as a source of
revenue and employment." Furthermore, Philracom was granted exclusive jurisdiction and control over every
aspect of the conduct of horse racing, including the framing and scheduling of races, the construction and
safety of race tracks, and the security of racing. P.D. No. 420 is already complete in itself.
Section 9 of the law fixes the standards and limitations to which Philracom must conform in the performance
of its functions, to wit:
Section 9. Specific Powers. Specifically, the Commission shall have the power:
a. To enforce all laws, decrees and executive orders relating to horse-racing that are not expressly
or implied repealed or modified by this Decree, including all such existing rules and regulations until
otherwise modified or amended by the Commission;
b. To prescribe additional rules and regulations not otherwise inconsistent with this Decree;
c. To register race horses, horse owners or associations or federations thereof, and to regulate the
construction of race tracks and to grant permit for the holding of races;
d. To issue, suspend or revoke permits and licenses and to impose or collect fees for the issuance
of such licenses and permits to persons required to obtain the same;
e. To review, modify, approve or disapprove the rules and regulations issued by any person or
entity concerning the conduct of horse races held by them;
f. To supervise all such race meeting to assure integrity at all times. It can order the suspension of
any racing event in case of violation of any law, ordinance or rules and regulations;
g. To prohibit the use of improper devices, drugs, stimulants or other means to enhance or diminish
the speed of horse or materially harm their condition;
h. To approve the annual budget of the omission and such supplemental budgets as may be
necessary;
i. To appoint all personnel, including an Executive Director of the Commission, as it may be deem
necessary in the exercise and performance of its powers and duties; and
j. To enter into contracts involving obligations chargeable to or against the funds of the
Commission. (Emphasis supplied)
Clearly, there is a proper legislative delegation of rule-making power to Philracom. Clearly too, for its part
Philracom has exercised its rule-making power in a proper and reasonable manner. More specifically, its
discretion to rid the facilities of MJCI and PRCI of horses afflicted with EIA is aimed at preserving the
security and integrity of horse races.
Petitioners also question the supposed delegation by Philracom of its rule-making powers to MJCI and
PRCI.
There is no delegation of power to speak of between Philracom, as the delegator and MJCI and PRCI as
delegates. The Philracom directive is merely instructive in character. Philracom had instructed PRCI and
MJCI to "immediately come up with Club’s House Rule to address the problem and rid their facilities of
horses infected with EIA." PRCI and MJCI followed-up when they ordered the racehorse owners to submit
blood samples and subject their race horses to blood testing. Compliance with the Philracom’s directive is
part of the mandate of PRCI and MJCI under Sections 1 33 of R.A. No. 795334 and Sections 135 and 236 of
8407.37
As correctly proferred by MJCI, its duty is not derived from the delegated authority of Philracom but arises
from the franchise granted to them by Congress allowing MJCI "to do and carry out all such acts, deeds and
things as may be necessary to give effect to the foregoing." 38 As justified by PRCI, "obeying the terms of the All told, we find no grave abuse of discretion on the part of Philracom in issuing the contested guidelines and
franchise and abiding by whatever rules enacted by Philracom is its duty."39 on the part MJCI and PRCI in complying with Philracom’s directive.

More on the second, third and fourth requisites. WHEREFORE, the petition is DISMISSED. Costs against petitioner William Dagan.

As to the second requisite, petitioners raise some infirmities relating to Philracom’s guidelines. They SO ORDERED.
question the supposed belated issuance of the guidelines, that is, only after the collection of blood samples
for the Coggins Test was ordered. While it is conceded that the guidelines were issued a month after
Philracom’s directive, this circumstance does not render the directive nor the guidelines void. The directive’s
validity and effectivity are not dependent on any supplemental guidelines. Philracom has every right to issue
directives to MJCI and PRCI with respect to the conduct of horse racing, with or without implementing
guidelines.

Petitioners also argue that Philracom’s guidelines have no force and effect for lack of publication and failure
to file copies with the University of the Philippines (UP) Law Center as required by law.

As a rule, the issuance of rules and regulations in the exercise of an administrative agency of its quasi-
legislative power does not require notice 7and hearing. 40 In Abella, Jr. v. Civil Service Commission, 41 this
Court had the occasion to rule that prior notice and hearing are not essential to the validity of rules or
regulations issued in the exercise of quasi-legislative powers since there is no determination of past events
or facts that have to be established or ascertained.42

The third requisite for the validity of an administrative issuance is that it must be within the limits of the
powers granted to it. The administrative body may not make rules and regulations which are inconsistent
with the provisions of the Constitution or a statute, particularly the statute it is administering or which created
it, or which are in derogation of, or defeat, the purpose of a statute.43

The assailed guidelines prescribe the procedure for monitoring and eradicating EIA. These guidelines are in
accord with Philracom’s mandate under the law to regulate the conduct of horse racing in the country.

Anent the fourth requisite, the assailed guidelines do not appear to be unreasonable or discriminatory. In
fact, all horses stabled at the MJCI and PRCI’s premises underwent the same procedure. The guidelines
implemented were undoubtedly reasonable as they bear a reasonable relation to the purpose sought to be
accomplished, i.e., the complete riddance of horses infected with EIA.

It also appears from the records that MJCI properly notified the racehorse owners before the test was
conducted.44 Those who failed to comply were repeatedly warned of certain consequences and sanctions.

Furthermore, extant from the records are circumstances which allow respondents to determine from time to
time the eligibility of horses as race entries. The lease contract executed between petitioner and MJC
contains a proviso reserving the right of the lessor, MJCI in this case, the right to determine whether a
particular horse is a qualified horse. In addition, Philracom’s rules and regulations on horse racing provide
that horses must be free from any contagious disease or illness in order to be eligible as race entries.