G.R. No. 95832 August 10, 1992
MAYNARD R. PERALTA, petitioner,
vs.
CIVIL SERVICE COMMISSION, respondent.
Tranquilino F. Meris Law Office for petitioner.
PADILLA, J.:
Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department of
Trade and Industry (DTI). His appointment was classified as "Reinstatement/Permanent".
Before said appointment, he was working at the Philippine Cotton Corporation, a
government-owned and controlled corporation under the Department of Agriculture.
On 8 December 1989, petitioner received his initial salary, covering the period from 25
September to 31 October 1989. Since he had no accumulated leave credits, DTI deducted
from his salary the amount corresponding to his absences during the covered period, namely,
29 September 1989 and 20 October 1989, inclusive of Saturdays and Sundays. More
specifically, the dates of said absences for which salary deductions were made, are as
follows:
1. 29 September 1989 — Friday
Petitioner then sent a latter dated 20 February 1990 addressed to Civil Service Commission
(CSC) Chairman Patricia A. Sto. Tomas raising the following question:
Is an employee who was on leave of absence without pay on a day before
or on a day time immediately preceding a Saturday, Sunday or Holiday,
also considered on leave of absence without pay on such Saturday,
Sunday or Holiday?1
Petitioner in his said letter to the CSC Chairman argued that a reading of the General Leave
Law as contained in the Revised Administrative Code, as well as the old Civil Service Law
(Republic Act No. 2260), the Civil Service Decree (Presidential Decree No. 807), and the Civil
Service Rules and Regulation fails to disclose a specific provision which supports the CSC rule
at issue. That being the case, the petitioner contented that he cannot be deprived of his pay
or salary corresponding to the intervening Saturdays, Sundays or Holidays (in the factual
situation posed), and that the withholding (or deduction) of the same is tantamount to a
deprivation of property without due process of law.
On 25 May 1990, respondent Commission promulgated Resolution No. 90-497, ruling that
the action of the DTI in deducting from the salary of petitioner, a part thereof corresponding
to six (6) days (September 29, 30, October 1, 20, 21, 22, 1989) is in order. 2 The CSC stated
that:
In a 2nd Indorsement dated February 12, 1965 of this Commission, which
embodies the policy on leave of absence without pay incurred on a Friday
and Monday, reads:
2. 30 September 1989 — Saturday
3. 01 October 1989 — Sunday
4. 20 October 1989 — Friday
5. 21 October 1989 — Saturday
6. 22 October 1989 — Sunday
Petitioner sent a memorandum to Amando T. Alvis (Chief, General Administrative Service) on
15 December 1989 inquiring as to the law on salary deductions, if the employee has no leave
credits.
Amando T. Alvis answered petitioner's query in a memorandum dated 30 January 1990 citing
Chapter 5.49 of the Handbook of Information on the Philippine Civil Service which states that
"when an employee is on leave without pay on a day before or on a day immediately
preceding a Saturday, Sunday or Holiday, such Saturday, Sunday, or Holiday shall also be
without pay (CSC, 2nd Ind., February 12, 1965)."
Mrs. Rosalinda Gonzales is not entitled to payment of
salary corresponding to January 23 and 24, 1965,
Saturday and Sunday, respectively, it appearing that
she was present on Friday, January 22, 1965 but was
on leave without pay beginning January 25, the
succeeding Monday. It is the view of this Office that
an employee who has no more leave credit in his favor
is not entitled to the payment of salary on Saturdays,
Sundays or holidays unless such non-working days
occur within the period of service actually rendered.
(Emphasis supplied)
The rationale for the above ruling which applies only to those employees
who are being paid on monthly basis, rests on the assumption that having
been absent on either Monday or Friday, one who has no leave credits,
could not be favorably credited with intervening days had the same been
working days. Hence, the above policy that for an employee on leave
without pay to be entitled to salary on Saturdays, Sundays or holidays,
the same must occur between the dates where the said employee
actually renders service. To rule otherwise would allow an employee who
is on leave of absent (sic) without pay for a long period of time to be
entitled to payment of his salary corresponding to Saturdays, Sundays or
holidays. It also discourages the employees who have exhausted their
leave credits from absenting themselves on a Friday or Monday in order
to have a prolonged weekend, resulting in the prejudice of the
government and the public in general. 3
Petitioner filed a motion for reconsideration and in Resolution No. 90-797, the respondent
Commission denied said motion for lack of merit. The respondent Commission in explaining
its action held:
The Primer on the Civil Service dated February 21, 1978, embodies the
Civil Service Commission rulings to be observed whenever an employee of
the government who has no more leave credits, is absent on a Friday
and/or a Monday is enough basis for the deduction of his salaries
corresponding to the intervening Saturdays and Sundays. What the
Commission perceived to be without basis is the demand of Peralta for
the payment of his salaries corresponding to Saturdays and Sundays
when he was in fact on leave of absence without pay on a Friday prior to
the said days. A reading of Republic Act No. 2260 (sic) does not show that
a government employee who is on leave of absence without pay on a day
before or immediately preceding Saturdays, Sunday or legal holiday is
entitled to payment of his salary for said days. Further, a reading of
Senate Journal No. 67 dated May 4, 1960 of House Bill No. 41 (Republic
Act No. 2625) reveals that while the law excludes Saturdays, Sundays and
holidays in the computation of leave credits, it does not, however,
include a case where the leave of absence is without pay. Hence, applying
the principle of inclusio unius est exclusio alterius, the claim of Peralta has
no merit. Moreover, to take a different posture would be in effect giving
more premium to employees who are frequently on leave of absence
without pay, instead of discouraging them from incurring further absence
without
pay. 4
Petitioner's motion for reconsideration having been denied, petitioner filed the present
petition.
What is primarily questioned by the petitioner is the validity of the respondent Commission's
policy mandating salary deductions corresponding to the intervening Saturdays, Sundays or
Holidays where an employee without leave credits was absent on the immediately preceding
working day.
During the pendency of this petition, the respondent Commission promulgated Resolution
No. 91-540 dated 23 April 1991 amending the questioned policy, considering that employees
paid on a monthly basis are not required to work on Saturdays, Sunday or Holidays. In said
amendatory Resolution, the respondent Commission resolved "to adopt the policy that when
an employee, regardless of whether he has leave credits or not, is absent without pay on day
immediately preceding or succeeding Saturday, Sunday or holiday, he shall not be considered
absent on those days." Memorandum Circular No. 16 Series of 1991 dated 26 April 1991, was
also issued by CSC Chairman Sto. Tomas adopting and promulgating the new policy and
directing the Heads of Departments, Bureaus and Agencies in the national and local
governments, including government-owned or controlled corporations with original charters,
to oversee the strict implementation of the circular.
Because of these developments, it would seem at first blush that this petition has become
moot and academic since the very CSC policy being questioned has already been amended
and, in effect, Resolutions No. 90-497 and 90-797, subject of this petition for certiorari, have
already been set aside and superseded. But the issue of whether or not the policy that had
been adopted and in force since 1965 is valid or not, remains unresolved. Thus, for reasons of
public interest and public policy, it is the duty of the Court to make a formal ruling on the
validity or invalidity of such questioned policy.
The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the Commissioner of Civil
Service the following powers and duties:
Sec. 16 (e) with the approval by the President to prescribe, amend and
enforce suitable rules and regulations for carrying into effect the
provisions of this Civil Service Law, and the rules prescribed pursuant to
the provisions of this law shall become effective thirty days after
publication in the Official Gazette;
xxx xxx xxx
(k) To perform other functions that properly belong to a central
personnel agency. 5
Pursuant to the foregoing provisions, the Commission promulgated the herein challenged
policy. Said policy was embodied in a 2nd Indorsement dated 12 February 1965 of the
respondent Commission involving the case of a Mrs. Rosalinda Gonzales. The respondent
Commission ruled that an employee who has no leave credits in his favor is not entitled to
the payment of salary on Saturdays, Sundays or Holidays unless such non-working days occur
within the period of service actually rendered. The same policy is reiterated in the Handbook
of Information on the Philippine Civil Service. 6 Chapter Five on leave of absence provides
that:
5.51. When intervening Saturday, Sunday or holiday considered as leave
without pay — when an employee is on leave without pay on a day
before or on a day immediately preceding a Saturday, Sunday or holiday,
such Saturday, Sunday or holiday shall also be without pay. (CSC, 2nd
Ind., Feb. 12, 1965).
It is likewise illustrated in the Primer on the Civil Service 7 in the section referring to
Questions and Answers on Leave of Absences, which states the following:
27. How is leave of an employee who has no more leave credits
computed if:
Sec. 285-A. In addition to the vacation leave provided
in the two preceding sections each employee or
laborer, whether permanent or temporary, of the
national government, the provincial government, the
government of a chartered city, of a municipality or
municipal district in any regularly and specially
organized province, other than those mentioned in
Section two hundred sixty-eight, two hundred
seventy-one and two hundred seventy-four hereof,
shall be entitled to fifteen days of sick leave for each
year of service with full pay, exclusive of Saturdays,
Sundays and holidays: Provided, That such sick leave
will be granted by the President, Head of Department
or independent office concerned, or the chief of
office in case of municipal employees, only on
account of sickness on the part of the employee or
laborer concerned or of any member of his
immediate family.
(1) he is absent on aFriday and the following Monday?
(2) if he is absent on Friday but reports to work the following Monday?
(3) if he is absent on a Monday but present the preceding Friday?
- (1) He is considered on leave without pay for 4 days covering Friday to
Monday;
- (2) He is considered on leave without pay for 3 days from Friday to
Sunday;
- (3) He is considered on leave without pay for 3 days from Saturday to
Monday.
When an administrative or executive agency renders an opinion or issues a statement of
policy, it merely interprets a pre-existing law; and the administrative interpretation of the
law is at best advisory, for it is the courts that finally determine what the law means. 8 It has
also been held that interpretative regulations need not be published. 9
In promulgating as early as 12 February 1965 the questioned policy, the Civil Service
Commission interpreted the provisions of Republic Act No. 2625 (which took effect on 17
June 1960) amending the Revised Administrative Code, and which stated as follows:
Sec. 1. Sections two hundred eighty-four and two hundred eighty-five-A
of the Administrative Code, as amended, are further amended to read as
follows:
The Civil Service Commission in its here questioned Resolution No. 90-797 construed R.A.
2625 as referring only to government employees who have earned leave credits against
which their absences may be charged with pay, as its letters speak only of leaves of absence
with full pay. The respondent Commission ruled that a reading of R.A. 2625 does not show
that a government employee who is on leave of absence without pay on a day before or
immediately preceding a Saturday, Sunday or legal holiday is entitled to payment of his salary
for said days.
Administrative construction, if we may repeat, is not necessarily binding upon the courts.
Action of an administrative agency may be disturbed or set aside by the judicial department
if there is an error of law, or abuse of power or lack of jurisdiction or grave abuse of
discretion clearly conflicting with either the letter or the spirit of a legislative enactment. 10
We find this petition to be impressed with merit.
Sec. 284. After at least six months' continues (sic)
faithful, and satisfactory service, the President or
proper head of department, or the chief of office in
the case of municipal employees may, in his
discretion, grant to an employee or laborer, whether
permanent or temporary, of the national
government, the provincial government, the
government of a chartered city, of a municipality, of a
municipal district or of government-owned or
controlled corporations other than those mentioned
in Section two hundred sixty-eight, two hundred
seventy-one and two hundred seventy-four hereof,
fifteen days vacation leave of absence with full pay,
exclusive of Saturdays, Sundays and holidays, for each
calendar year of service.
As held in Hidalgo vs. Hidalgo: 11
. . . . where the true intent of the law is clear that calls for the application
of the cardinal rule of statutory construction that such intent or spirit
must prevail over the letter thereof, for whatever is within the spirit of a
statute is within the statute, since adherence to the letter would result in
absurdity, injustice and contradictions and would defeat the plain and
vital purpose of the statute.
The intention of the legislature in the enactment of R.A. 2625 may be gleaned from, among
others, the sponsorship speech of Senator Arturo M. Tolentino during the second reading of
House Bill No. 41 (which became R.A. 2625). He said:
The law actually provides for sick leave and vacation leave of 15 days
each year of service to be with full pay. But under the present law, in
computing these periods of leaves, Saturday, Sunday and holidays are
included in the computation so that if an employee should become sick
and absent himself on a Friday and then he reports for work on a
Tuesday, in the computation of the leave the Saturday and Sunday will be
included, so that he will be considered as having had a leave of Friday,
Saturday, Sunday and Monday, or four days.
The purpose of the present bill is to exclude from the computation of the
leave those days, Saturdays and Sundays, as well as holidays, because
actually the employee is entitled not to go to office during those days.
And it is unfair and unjust to him that those days should be counted in
the computation of leaves. 12
With this in mind, the construction by the respondent Commission of R.A. 2625 is not in
accordance with the legislative intent. R.A. 2625 specifically provides that government
employees are entitled to fifteen (15) days vacation leave of absence with full pay and fifteen
(15) days sick leave with full pay, exclusive of Saturdays, Sundays and Holidays in both cases.
Thus, the law speaks of the granting of a right and the law does not provide for a distinction
between those who have accumulated leave credits and those who have exhausted their
leave credits in order to enjoy such right. Ubi lex non distinguit nec nos distinguere
debemus. The fact remains that government employees, whether or not they have
accumulated leave credits, are not required by law to work on Saturdays, Sundays and
Holidays and thus they can not be declared absent on such non-working days. They cannot
be or are not considered absent on non-working days; they cannot and should not be
deprived of their salary corresponding to said non-working days just because they were
absent without pay on the day immediately prior to, or after said non-working days. A
different rule would constitute a deprivation of property without due process.
Furthermore, before their amendment by R.A. 2625, Sections 284 and 285-A of the Revised
Administrative Code applied to all government employee without any distinction. It follows
that the effect of the amendment similarly applies to all employees enumerated in Sections
284 and 285-A, whether or not they have accumulated leave credits.
As the questioned CSC policy is here declared invalid, we are next confronted with the
question of what effect such invalidity will have. Will all government employees on a monthly
salary basis, deprived of their salaries corresponding to Saturdays, Sundays or legal holidays
(as herein petitioner was so deprived) since 12 February 1965, be entitled to recover the
amounts corresponding to such non-working days?
The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it confers no
rights; it imposes no duties; it affords no protection; it creates no office; it is in legal
contemplation as inoperative as though it had never been passed. 13
But, as held in Chicot County Drainage District vs. Baxter State
Bank:14
. . . . It is quite clear, however, that such broad statements as to the effect
of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to such
determination is an operative fact and may have consequences which
cannot always be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity
may have to be considered in various aspects — with respect to
particular relations, individual and corporate; and particular conduct,
private and official.
To allow all the affected government employees, similarly situated as petitioner herein, to
claim their deducted salaries resulting from the past enforcement of the herein invalidated
CSC policy, would cause quite a heavy financial burden on the national and local
governments considering the length of time that such policy has been effective. Also,
administrative and practical considerations must be taken into account if this ruling will have
a strict restrospective application. The Court, in this connection, calls upon the respondent
Commission and the Congress of the Philippines, if necessary, to handle this problem with
justice and equity to all affected government employees.
It must be pointed out, however, that after CSC Memorandum Circular No. 16 Series of 1991
— amending the herein invalidated policy — was promulgated on 26 April 1991, deductions
from salaries made after said date in contravention of the new CSC policy must be restored
to the government employees concerned.
WHEREFORE, the petition is GRANTED, CSC Resolutions No. 90-497 and 90-797 are declared
NULL and VOID. The respondent Commission is directed to take the appropriate action so
that petitioner shall be paid the amounts previously but unlawfully deducted from his
monthly salary as above indicated. No costs.
SO ORDERED.
Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Bidin, Griño-Aquino, Medialdea, Regalado,
Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.
G.R. No. 102549 August 10, 1992
EDWIN B. JAVELLANA, petitioner,
vs.
DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT AND LUIS T. SANTOS,
SECRETARY, respondents.
provisions of MC 80-18, there is a need to amend said Memorandum
Circular to substantially conform to the pertinent provisions of Circular
No. 9-A.
xxx xxx xxx
C. Practice of Profession
Reyes, Lozada and Sabado for petitioner.
GRIÑO-AQUINO, J.:
This petition for review on certiorari involves the right of a public official to engage in the
practice of his profession while employed in the Government.
Attorney Erwin B. Javellana was an elected City Councilor of Bago City, Negros Occidental. On
October 5, 1989, City Engineer Ernesto C. Divinagracia filed Administrative Case No. C-10-90
against Javellana for: (1) violation of Department of Local Government (DLG) Memorandum
Circular No. 80-38 dated June 10, 1980 in relation to DLG Memorandum Circular No. 74-58
and of Section 7, paragraph b, No. 2 of Republic Act No. 6713, otherwise known as the "Code
of Conduct and Ethical Standards for Public Officials and Employees," and (2) for oppression,
misconduct and abuse of authority.
Divinagracia's complaint alleged that Javellana, an incumbent member of the City Council or
Sanggunian Panglungsod of Bago City, and a lawyer by profession, has continuously engaged
in the practice of law without securing authority for that purpose from the Regional Director,
Department of Local Government, as required by DLG Memorandum Circular No. 80-38 in
relation to DLG Memorandum Circular No. 74-58 of the same department; that on July 8,
1989, Javellana, as counsel for Antonio Javiero and Rolando Catapang, filed a case against
City Engineer Ernesto C. Divinagracia of Bago City for "Illegal Dismissal and Reinstatement
with Damages" putting him in public ridicule; that Javellana also appeared as counsel in
several criminal and civil cases in the city, without prior authority of the DLG Regional
Director, in violation of DLG Memorandum Circular No. 80-38 which provides:
MEMORANDUM CIRCULAR NO. 80-38
TO ALL: PROVINCIAL GOVERNORS, CITY AND MUNICIPALITY
MAYORS, KLGCD REGIONAL DIRECTORS AND ALL CONCERNED
SUBJECT: AMENDING MEMORANDUM CIRCULAR NO. 80-18 ON
SANGGUNIAN SESSIONS, PER DIEMS, ALLOWANCES, STAFFING
AND OTHER RELATED MATTERS
In view of the issuance or Circular No. 5-A by the Joint Commission on
Local Government Personnel Administration which affects certain
The Secretary (now Minister) of Justice in an Opinion No. 46 Series of
1973 stated inter alia that "members of local legislative bodies, other
than the provincial governors or the mayors, do not keep regular office
hours." "They merely attend meetings or sessions of the provincial board
or the city or municipal council" and that provincial board members are
not even required "to have an office in the provincial building."
Consequently, they are not therefore to required to report daily as other
regular government employees do, except when they are delegated to
perform certain administrative functions in the interest of public service
by the Governor or Mayor as the case may be. For this reason, they may,
therefore, be allowed to practice their professions provided that in so
doing an authority . . . first be secured from the Regional Directors
pursuant to Memorandum Circular No. 74-58, provided, however, that no
government personnel, property, equipment or supplies shall be utilized
in the practice of their professions. While being authorized to practice
their professions, they should as much as possible attend regularly any
and all sessions, which are not very often, of their Sanggunians for which
they were elected as members by their constituents except in very
extreme cases, e.g., doctors who are called upon to save a life. For this
purpose it is desired that they always keep a calendar of the dates of the
sessions, regular or special of their Sanggunians so that conflicts of
attending court cases in the case of lawyers and Sanggunian sessions can
be avoided.
As to members of the bar the authority given for them to practice their
profession shall always be subject to the restrictions provided for in
Section 6 of Republic Act 5185. In all cases, the practice of any profession
should be favorably recommended by the Sanggunian concerned as a
body and by the provincial governors, city or municipal mayors, as the
case may be. (Emphasis ours, pp. 28-30, Rollo.)
On August 13, 1990, a formal hearing of the complaint was held in Iloilo City in which the
complainant, Engineer Divinagracia, and the respondent, Councilor Javellana, presented their
respective evidence.
Meanwhile, on September 10, 1990, Javellana requested the DLG for a permit to continue his
practice of law for the reasons stated in his letter-request. On the same date, Secretary
Santos replied as follows:
1st Indorsement
September 10, 1990
Respectfully returned to Councilor Erwin B. Javellana, Bago City, his
within letter dated September 10, 1990, requesting for a permit to
continue his practice of law for reasons therein stated, with this
information that, as represented and consistent with law, we interpose
no objection thereto, provided that such practice will not conflict or tend
to conflict with his official functions.
Constitution and existing laws, the following shall constitute prohibited
acts and transactions of any public officials . . . and are hereby declared
to be unlawful: . . . (b) Public Officials . . . during their incumbency shall
not: (1) . . . accept employment as officer, employee, consultant, counsel,
broker, agent, trustee or nominee in any private enterprise regulated,
supervised or licensed by their office unless expressly allowed by law; (2)
Engage in the private practice of their profession unless authorized by the
Constitution or law, provided that such practice will not conflict or tend
to conflict with their official functions: . . .
xxx xxx xxx
L
U
Under Memorandum
I
Circular No. 17 of the Office of the President dated
September 4, 1986,
S
the authority to grant any permission, to accept
private employment
T
in any capacity and to exercise profession, to any
government official
.
shall be granted by the head of the Ministry
(Department) or
S agency in accordance with Section 12, Rule XVIII of the
Revised Civil Service
A
Rules, which provides, in part, that:
N
T
No officer shall engage directly in any . . . vocation or
O profession . . . without a written permission from the
S
head of the Department: Provided, that this
S
prohibition will be absolute in the case of those
e officers . . . whose duties and responsibilities require
c
that their entire time be at the disposal of the
r
Government: Provided, further, That if an employee is
e granted permission to engage in outside activities,
t
the time so devoted outside of office should be fixed
a
by the Chief of the agency to the end that it will not
r
impair in anyway the efficiency of the officer or
y
employee . . . subject to any additional conditions
.
which the head of the office deems necessary in each
particular case in the interest of the service, as
expressed in the various issuances of the Civil Service
Commission.
(p. 60, Rollo.)
On September 21, 1991, Secretary Luis T. Santos issued Memorandum Circular No. 90-81
setting forth guidelines for the practice of professions by local elective officials as follows:
TO: All Provincial Governors, City and Municipal
Mayors, Regional Directors and All Concerned.
SUBJECT: Practice of Profession and Private
Employment of Local Elective Officials
Section 7 of Republic Act No. 6713 (Code of Conduct and Ethical
Standards for Public Officials and Employees), states, in part, that "In
addition to acts and omission of public officials . . . now prescribed in the
Conformably with the foregoing, the following guidelines are to be
observed in the grant of permission to the practice of profession and to
the acceptance of private employment of local elective officials, to wit:
1) The permission shall be granted by the Secretary of
Local Government;
2) Provincial Governors, City and Municipal Mayors
whose duties and responsibilities require that their
entire time be at the disposal of the government in
conformity with Sections 141, 171 and 203 of the
Local Government Code (BP 337), are prohibited to
engage in the practice of their profession and to
accept private employment during their incumbency:
3) Other local elective officials may be allowed to
practice their profession or engage in private
employment on a limited basis at the discretion of the
Secretary of Local Government, subject to existing
laws and to the following conditions:
a) That the time so devoted
outside of office hours should be
fixed by the local chief executive
concerned to the end that it will
not impair in any way the
efficiency of the officials
concerned;
b) That no government time,
personnel, funds or supplies shall
be utilized in the pursuit of one's
profession or private
employment;
c) That no conflict of interests
between the practice of profession
or engagement in private
employment and the official
duties of the concerned official
shall arise thereby;
d) Such other conditions that the
Secretary deems necessary to
impose on each particular case, in
the interest of public service.
(Emphasis supplied, pp. 3132, Rollo.)
On March 25, 1991, Javellana filed a Motion to Dismiss the administrative case against him
on the ground mainly that DLG Memorandum Circulars Nos. 80-38 and 90-81 are
unconstitutional because the Supreme Court has the sole and exclusive authority to regulate
the practice of law.
In an order dated May 2, 1991, Javellana's motion to dismiss was denied by the public
respondents. His motion for reconsideration was likewise denied on June 20, 1991.
Five months later or on October 10, 1991, the Local Government Code of 1991 (RA 7160) was
signed into law, Section 90 of which provides:
Sec. 90. Practice of Profession. — (a) All governors, city and municipal
mayors are prohibited from practicing their profession or engaging in any
occupation other than the exercise of their functions as local chief
executives.
(b) Sanggunian members may practice their professions, engage in any
occupation, or teach in schools except during session hours: Provided,
That sanggunian members who are members of the Bar shall not:
(1) Appear as counsel before any court in any civil
case wherein a local government unit or any office,
agency, or instrumentality of the government is the
adverse party;
(2) Appear as counsel in any criminal case wherein an
officer or employee of the national or local
government is accused of an offense committed in
relation to his office;
(3) Collect any fee for their appearance in
administrative proceedings involving the local
government unit of which he is an official; and
(4) Use property and personnel of the Government
except when the sanggunian member concerned is
defending the interest of the Government.
(c) Doctors of medicine may practice their profession even during official
hours of work only on occasions of emergency: Provided, That the
officials concerned do not derive monetary compensation therefrom.
(Emphasis ours.)
Administrative Case No. C-10-90 was again set for hearing on November 26, 1991. Javellana
thereupon filed this petition for certiorari praying that DLG Memorandum Circulars Nos. 8038 and 90-81 and Section 90 of the new Local Government Code (RA 7160) be declared
unconstitutional and null void because:
(1) they violate Article VIII, Section 5 of the 1987 Constitution, which provides:
Sec. 5. The Supreme Court shall have the following powers:
xxx xxx xxx
(5) Promulgate rules concerning the protection and enforcement of
constitutional rights, pleading, practice, and procedure in all courts, the
admission to the practice of law, the Integrated Bar, and legal assistance
to the underprivileged. Such rules shall provide a simplified and
inexpensive procedure for the speedy disposition of cases, shall be
uniform for all courts of the same grade, and shall not diminish, increase,
or modify substantive rights. Rules of procedure of special courts
and quasi-judicial bodies shall remain effective unless disapproved by the
Supreme Court.
(2) They constitute class legislation, being discriminatory against the legal and medical
professions for only sanggunian members who are lawyers and doctors are restricted in the
exercise of their profession while dentists, engineers, architects, teachers, opticians,
morticians and others are not so restricted (RA 7160, Sec. 90 [b-1]).
In due time, the Solicitor General filed his Comment on the petition and the petitioner
submitted a Reply. After deliberating on the pleadings of the parties, the Court resolved to
dismiss the petition for lack of merit.
As a matter of policy, this Court accords great respect to the decisions and/or actions of
administrative authorities not only because of the doctrine of separation of powers but also
for their presumed knowledgeability and expertise in the enforcement of laws and
regulations entrusted to their jurisdiction (Santiago vs. Deputy Executive Secretary, 192 SCRA
199, citing Cuerdo vs. COA, 166 SCRA 657). With respect to the present case, we find no
grave abuse of discretion on the part of the respondent, Department of Interior and Local
Government (DILG), in issuing the questioned DLG Circulars Nos. 80-30 and 90-81 and in
denying petitioner's motion to dismiss the administrative charge against him.
In the first place, complaints against public officers and employees relating or incidental to
the performance of their duties are necessarily impressed with public interest for by express
constitutional mandate, a public office is a public trust. The complaint for illegal dismissal
filed by Javiero and Catapang against City Engineer Divinagracia is in effect a complaint
against the City Government of Bago City, their real employer, of which petitioner Javellana
is a councilman. Hence, judgment against City Engineer Divinagracia would actually be a
judgment against the City Government. By serving as counsel for the complaining employees
and assisting them to prosecute their claims against City Engineer Divinagracia, the petitioner
violated Memorandum Circular No. 74-58 (in relation to Section 7[b-2] of RA 6713)
prohibiting a government official from engaging in the private practice of his profession, if
such practice would represent interests adverse to the government.
Petitioner's contention that Section 90 of the Local Government Code of 1991 and DLG
Memorandum Circular No. 90-81 violate Article VIII, Section 5 of the Constitution is
completely off tangent. Neither the statute nor the circular trenches upon the Supreme
Court's power and authority to prescribe rules on the practice of law. The Local Government
Code and DLG Memorandum Circular No. 90-81 simply prescribe rules of conduct for public
officials to avoid conflicts of interest between the discharge of their public duties and the
private practice of their profession, in those instances where the law allows it.
Section 90 of the Local Government Code does not discriminate against lawyers and doctors.
It applies to all provincial and municipal officials in the professions or engaged in any
occupation. Section 90 explicitly provides that sanggunian members "may practice their
professions, engage in any occupation, or teach in schools expect during session hours." If
there are some prohibitions that apply particularly to lawyers, it is because of all the
professions, the practice of law is more likely than others to relate to, or affect, the area of
public service.
WHEREFORE, the petition is DENIED for lack of merit. Costs against the petitioner.
SO ORDERED.
[G.R. No. 119761. August 29, 1996]
Hope Luxury M. 100's
Sec. 142, (c), (2) 40% 45%
Hope Luxury M. King
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON. COURT OF APPEALS, HON.
COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION, respondents.
Sec. 142, (c), (2) 40% 45%
More Premium M. 100's
DECISION
VITUG, J.:
The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March
1995, of respondent Court of Appeals[1] affirming the 10th August 1994 decision and the 11th
October 1994 resolution of the Court of Tax Appeals[2] ("CTA") in C.T.A. Case No. 5015, entitled
"Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her capacity as Commissioner of
Internal Revenue."
The facts, by and large, are not in dispute.
Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of
different brands of cigarettes.
On various dates, the Philippine Patent Office issued to the corporation separate
certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. In a
letter, dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan,
Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government, "the
initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign
brands since they were listed in the World Tobacco Directory as belonging to foreign
companies.However, Fortune Tobacco changed the names of 'Hope' to Hope Luxury' and
'More' to 'Premium More,' thereby removing the said brands from the foreign brand
category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion'
was an original Fortune Tobacco Corporation register and therefore a local brand." [3] Ad
Valorem taxes were imposed on these brands,[4] at the following rates:
"BRAND AD VALOREM TAX RATE
E.O. 22
06-23-86
07-01-86 and E.O. 273
07-25-87
01-01-88 RA 6956
Sec. 142, (c), (2) 40% 45%
More Premium International
Sec. 142, (c), (2) 40% 45%
Champion Int'l. M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20%"[5]
A bill, which later became Republic Act ("RA") No. 7654, [6] was enacted, on 10 June 1993,
by the legislature and signed into law, on 14 June 1993, by the President of the Philippines.The
new law became effective on 03 July 1993. It amended Section 142(c)(1) of the National
Internal Revenue Code ("NIRC") to read; as follows:
"SEC. 142. Cigars and Cigarettes. "x x x x x x x x x.
"(c) Cigarettes packed by machine. - There shall be levied, assessed and collected on
cigarettes packed by machine a tax at the rates prescribed below based on the constructive
manufacturer's wholesale price or the actual manufacturer's wholesale price, whichever is
higher:
"(1) On locally manufactured cigarettes which are currently classified and taxed at fifty-five
percent (55%) or the exportation of which is not authorized by contract or otherwise, fiftyfive (55%) provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack.
06-18-90
07-05-90
"(2). On other locally manufactured cigarettes, forty-five percent (45%) provided that the
minimum tax shall not be less than Three Pesos (P3.00) per pack.
"x x x x x x x x x.
"When the registered manufacturer's wholesale price or the actual manufacturer's wholesale
price whichever is higher of existing brands of cigarettes, including the amounts intended to
cover the taxes, of cigarettes packed in twenties does not exceed Four Pesos and eighty
centavos (P4.80) per pack, the rate shall be twenty percent (20%)."[7] (Italics supplied.)
About a month after the enactment and two (2) days before the effectivity of RA 7654,
Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full text
of which expressed:
"REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
"'HOPE' is listed in the World Tobacco Directory as being manufactured by (a) Japan Tobacco,
Japan and (b) Fortune Tobacco, Philippines. 'MORE' is listed in the said directory as being
manufactured by: (a) Fills de Julia Reig, Andorra; (b) Rothmans, Australia; (c) RJR-Macdonald,
Canada; (d) Rettig-Strenberg, Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g)
Rothmans, New Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j)
R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J.
Reynolds, USA. 'Champion' is registered in the said directory as being manufactured by (a)
Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune Tobacco,
Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies, Switzerland.
"Since there is no showing who among the above-listed manufacturers of the cigarettes
bearing the said brands are the real owner/s thereof, then it follows that the same shall be
considered foreign brand for purposes of determining the ad valorem tax pursuant to Section
142 of the National Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August
24, 1988, 'in cases where it cannot be established or there is dearth of evidence as to
whether a brand is foreign or not, resort to the World Tobacco Directory should be made.'
July 1, 1993
SUBJECT : Reclassification of Cigarettes Subject to Excise Tax
"In view of the foregoing, the aforesaid brands of cigarettes, viz: 'HOPE,' 'MORE' and
'CHAMPION' being manufactured by Fortune Tobacco Corporation are hereby considered
locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on
cigarettes.
TO : All Internal Revenue Officers and Others Concerned.
"Any ruling inconsistent herewith is revoked or modified accordingly.
REVENUE MEMORANDUM CIRCULAR NO. 37-93
"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION' cigarettes which
are locally manufactured are appropriately considered as locally manufactured cigarettes
bearing a foreign brand, this Office is compelled to review the previous rulings on the matter.
"Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956, provides:
"'On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%)
Provided, That this rate shall apply regardless of whether or not the right to use or title to the
foreign brand was sold or transferred by its owner to the local manufacturer. Whenever it
has to be determined whether or not a cigarette bears a foreign brand, the listing of brands
manufactured in foreign countries appearing in the current World Tobacco Directory shall
govern."
"Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that
the locally manufactured cigarettes bear a foreign brand regardless of whether or not the
right to use or title to the foreign brand was sold or transferred by its owner to the local
manufacturer. The brand must be originally owned by a foreign manufacturer or producer. If
ownership of the cigarette brand is, however, not definitely determinable, 'x x x the listing of
brands manufactured in foreign countries appearing in the current World Tobacco Directory
shall govern. x x x'
(S
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)
LI
W
AY
W
AY
VI
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CH
AT
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er"
On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr.,
sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in
particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy
of RMC 37-93.
"II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF RMC 37-93,
FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND PRIOR HEARING ARE NOT
NECESSARY TO ITS VALIDITY, EFFECTIVITY AND ENFORCEABILITY.
In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune
Tobacco, requested for a review, reconsideration and recall of RMC 37-93. The request was
denied on 29 July 1993. The following day, or on 30 July 1993, the CIR assessed Fortune
Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.
"III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 37-93 ON JULY 2,
1993.
On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. [8]
On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged:
"WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of
cigarettes, viz: `HOPE,' `MORE' and `CHAMPION' being manufactured by Fortune Tobacco
Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad
valorem tax on cigarettes is found to be defective, invalid and unenforceable, such that when
R.A. No. 7654 took effect on July 3, 1993, the brands in question were not CURRENTLY
CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)(1) of the Tax Code, as amended
by R.A. No. 7654 and were therefore still classified as other locally manufactured cigarettes
and taxed at 45% or 20% as the case may be.
"Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune Tobacco
Corporation in the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby
canceled for lack of legal basis.
IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY MANUFACTURED
CIGARETTES SIMILARLY SITUATED AS 'HOPE,' 'MORE' AND 'CHAMPION' CIGARETTES.
"V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING HOPE, MORE AND
CHAMPION CIGARETTES BEFORE THE EFFECTIVITY OF R.A. NO. 7654.
VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO ITS VALIDITY,
EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS OR PROPRIETY; RMC 37-93 IS
CORRECT." [10]
In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR
which can thus become effective without any prior need for notice and hearing, nor
publication, and that its issuance is not discriminatory since it would apply under similar
circumstances to all locally manufactured cigarettes.
The Court must sustain both the appellate court and the tax court.
"Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the
deficiency tax assessment made and issued on petitioner in relation to the implementation of
RMC No. 37-93.
Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings
for the effective implementation of the provisions of the National Internal Revenue Code. Let
it be made clear that such authority of the Commissioner is not here doubted. Like any other
government agency, however, the CIR may not disregard legal requirements or applicable
principles in the exercise of its quasi-legislative powers.
"SO ORDERED." [9]
Let us first distinguish between two kinds of administrative issuances - a legislative rule
and an interpretative rule.
In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for
reconsideration.
In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance
Secretary, [11] the Court expressed:
The CIR forthwith filed a petition for review with the Court of Appeals, questioning the
CTA's 10th August 1994 decision and 11th October 1994 resolution. On 31 March 1993, the
appellate court's Special Thirteenth Division affirmed in all respects the assailed decision and
resolution.
"x x x a legislative rule is in the nature of subordinate legislation, designed to implement a
primary legislation by providing the details thereof. In the same way that laws must have the
benefit of public hearing, it is generally required that before a legislative rule is adopted there
must be hearing. In this connection, the Administrative Code of 1987 provides:
In the instant petition, the Solicitor General argues: That "I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL REVENUE
INTERPRETING THE PROVISIONS OF THE TAX CODE.
"Public Participation. - If not otherwise required by law, an agency shall, as far as practicable,
publish or circulate notices of proposed rules and afford interested parties the opportunity to
submit their views prior to the adoption of any rule.
"(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall
have been published in a newspaper of general circulation at least two (2) weeks before the
first hearing thereon.
"(3) In case of opposition, the rules on contested cases shall be observed.
"In addition such rule must be published. On the other hand, interpretative rules are
designed to provide guidelines to the law which the administrative agency is in charge of
enforcing." [12]
It should be understandable that when an administrative rule is merely interpretative in
nature, its applicability needs nothing further than its bare issuance for it gives no real
consequence more than what the law itself has already prescribed. When, upon the other
hand, the administrative rule goes beyond merely providing for the means that can facilitate
or render least cumbersome the implementation of the law but substantially adds to or
increases the burden of those governed, it behooves the agency to accord at least to those
directly affected a chance to be heard, and thereafter to be duly informed, before that new
issuance is given the force and effect of law.
A reading of RMC 37-93, particularly considering the circumstances under which it has
been issued, convinces us that the circular cannot be viewed simply as a corrective measure
(revoking in the process the previous holdings of past Commissioners) or merely as construing
Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made
in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of
locally manufactured cigarettes bearing foreign brands and to thereby have them covered by
RA 7654. Specifically, the new law would have its amendatory provisions applied to locally
manufactured cigarettes which at the time of its effectivity were not so classified as bearing
foreign brands. Prior to the issuance of the questioned circular, "Hope Luxury," "Premium
More," and "Champion" cigarettes were in the category of locally manufactured
cigarettes notbearing foreign brand subject to 45% ad valorem tax. Hence, without RMC 3793, the enactment of RA 7654, would have had no new tax rate consequence on private
respondent's products. Evidently, in order to place "Hope Luxury," "Premium More," and
"Champion" cigarettes within the scope of the amendatory law and subject them to an
increased tax rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not
simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due
observance of the requirements of notice, of hearing, and of publication should not have been
then ignored.
Indeed, the BIR itself, in its RMC 10-86, has observed and provided:
"RMC NO. 10-86
Effectivity of Internal Revenue Rules and Regulations
"It has been observed that one of the problem areas bearing on compliance with Internal
Revenue Tax rules and regulations is lack or insufficiency of due notice to the tax paying
public. Unless there is due notice, due compliance therewith may not be reasonably
expected. And most importantly, their strict enforcement could possibly suffer from legal
infirmity in the light of the constitutional provision on `due process of law' and the essence of
the Civil Code provision concerning effectivity of laws, whereby due notice is a basic
requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).
"In order that there shall be a just enforcement of rules and regulations, in conformity with
the basic element of due process, the following procedures are hereby prescribed for the
drafting, issuance and implementation of the said Revenue Tax Issuances:
"(1). This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit
Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum
Orders bearing on internal revenue tax rules and regulations.
"(2). Except when the law otherwise expressly provides, the aforesaid internal revenue tax
issuances shall not begin to be operative until after due notice thereof may be fairly
presumed.
"Due notice of the said issuances may be fairly presumed only after the following procedures
have been taken:
"xxx xxx xxx
"(5). Strict compliance with the foregoing procedures is enjoined." [13]
Nothing on record could tell us that it was either impossible or impracticable for the BIR to
observe and comply with the above requirements before giving effect to its questioned
circular.
Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.
Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be
uniform and equitable. Uniformity requires that all subjects or objects of taxation, similarly
situated, are to be treated alike or put on equal footing both in privileges and
liabilities.[14] Thus, all taxable articles or kinds of property of the same class must be taxed at
the same rate[15] and the tax must operate with the same force and effect in every place where
the subject may be found.
Apparently, RMC 37-93 would only apply to "Hope Luxury," Premium More" and
"Champion" cigarettes and, unless petitioner would be willing to concede to the submission of
private respondent that the circular should, as in fact my esteemed colleague Mr. Justice
Bellosillo so expresses in his separate opinion, be considered adjudicatory in nature and thus
violative of due process following the Ang Tibay[16] doctrine, the measure suffers from lack of
uniformity of taxation. In its decision, the CTA has keenly noted that other cigarettes bearing
foreign brands have not been similarly included within the scope of the circular, such as "1. Locally manufactured by ALHAMBRA INDUSTRIES, INC.
(a) `PALM TREE' is listed as manufactured by office of Monopoly, Korea (Exhibit `R')
"2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY
(a) `GOLDEN KEY' is listed being manufactured by United Tobacco, Pakistan (Exhibit `S')
(b) `CANNON' is listed as being manufactured by Alpha Tobacco, Bangladesh (Exhibit `T')
"3. Locally manufactured by LA PERLA INDUSTRIES, INC.
(a) `WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit `U')
(b) `RIGHT' is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit `V-1')
revenue circular thereafter, then I think our action would really be subject to questionbut we
feel that . . . Memorandum Circular Number 37-93 would really cover even similarly situated
brands. And in fact, it was really because of the study, the short time that we were given to
study the matter that we could not include all the rest of the other brands that would have
been really classified as foreign brand if we went by the law itself. I am sure that by the
reading of the law, you would without that ruling by Commissioner Tan they would really
have been included in the definition or in the classification of foregoing brands. These brands
that you referred to or just read to us and in fact just for your information, we really came
out with a proposed revenue memorandum circular for those brands. (Italics supplied)
"4. Locally manufactured by MIGHTY CORPORATION
"Exhibit 'FF-2-C', pp. V-5 TO V-6, VI-1 to VI-3).
(a) 'WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit 'U-1')
"x x x x x x x x x.
"5. Locally manufactured by STERLING TOBACCO CORPORATION
(a) UNION' is listed as being manufactured by Sumatra Tobacco, Indonesia and Brown and
Williamson, USA (Exhibit 'U-3')
(b) WINNER' is listed as being manufactured by Alpha Tobacco, Bangladesh; Nanyang,
Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier Tobacco, Pakistan and
Haggar, Sudan (Exhibit 'U-4')." [17]
"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is why I felt that
we . . . I wanted to come up with a more extensive coverage and precisely why I asked that
revenue memorandum circular that would cover all those similarly situated would be
prepared but because of the lack of time and I came out with a study of RA 7654, it would not
have been possible to really come up with the reclassification or the proper classification of all
brands that are listed there. x x x' (italics supplied) (Exhibit 'FF-2d', page IX-1)
"x x x x x x x x x.
The court quoted at length from the transcript of the hearing conducted on 10 August 1993 by
the Committee on Ways and Means of the House of Representatives; viz:
"THE CHAIRMAN. So you have specific information on Fortune Tobacco alone. You don't have
specific information on other tobacco manufacturers. Now, there are other brands which are
similarly situated.They are locally manufactured bearing foreign brands. And may I
enumerate to you all these brands, which are also listed in the World Tobacco Directory x x
x. Why were these brands not reclassified at 55 if your want to give a level playing field to
foreign manufacturers?
"MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue Memorandum
Circular that was supposed to come after RMC No. 37-93 which have really named specifically
the list of locally manufactured cigarettes bearing a foreign brand for excise tax purposes and
includes all these brands that you mentioned at 55 percent except that at that time, when we
had to come up with this, we were forced to study the brands of Hope, More and Champion
because we were given documents that would indicate the that these brands were actually
being claimed or patented in other countries because we went by Revenue Memorandum
Circular 1488 and we wanted to give some rationality to how it came about but we couldn't
find the rationale there. And we really found based on our own interpretation that the only
test that is given by that existing law would be registration in the World Tobacco
Directory. So we came out with this proposed revenue memorandum circular which we
forwarded to the Secretary of Finance except that at that point in time, we went by the
Republic Act 7654 in Section 1 which amended Section 142, C-1, it said, that on locally
manufactured cigarettes which are currently classified and taxed at 55 percent. So we were
saying that when this law took effect in July 3 and if we are going to come up with this
"HON. DIAZ. But did you not consider that there are similarly situated?
"MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue
Memorandum Circular No. 37-93, the other brands came about the would have also clarified
RMC 37-93 by I was saying really because of the fact that I was just recently appointed and
the lack of time, the period that was allotted to us to come up with the right actions on the
matter, we were really caught by the July 3 deadline.But in fact, We have already prepared a
revenue memorandum circular clarifying with the other . . . does not yet, would have been a
list of locally manufactured cigarettes bearing a foreign brand for excise tax purposes which
would include all the other brands that were mentioned by the Honorable Chairman. (Italics
supplied) (Exhibit 'FF-2-d,' par. IX-4)."18
All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short
of a valid and effective administrative issuance.
WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax
Appeals, is AFFIRMED. No costs.
SO ORDERED.
Republic of the Philippines
Supreme Court
Manila
CMO 27-2003 further provided for the proper procedure for protest or Valuation and
Classification Review Committee (VCRC) cases. Under this procedure, the release of the articles
that were the subject of protest required the importer to post a cash bond to cover the tariff
SECOND DIVISION
COMMISSIONER OF CUSTOMS and the
DISTRICT COLLECTOR OF THE PORT OF
SUBIC,
Petitioners,
G.R. No. 179579
differential.[6]
A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed
a Petition for Declaratory Relief[7] with the Regional Trial Court (RTC) of Las Pias City. It
Present:
CARPIO, J., Chairperson,
BRION,
PEREZ,
SERENO, and
REYES, JJ.
- versus -
Promulgated:
HYPERMIX FEEDS CORPORATION,
Respondent.
February 1, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
SERENO, J.:
anticipated the implementation of the regulation on its imported and perishable Chinese
milling wheat in transit from China.[8] Respondent contended that CMO 27-2003 was issued
without following the mandate of the Revised Administrative Code on public participation,
prior notice, and publication or registration with the University of the Philippines Law Center.
Respondent also alleged that the regulation summarily adjudged it to be a feed grade
supplier without the benefit of prior assessment and examination; thus, despite having
imported food grade wheat, it would be subjected to the 7% tariff upon the arrival of the
shipment, forcing them to pay 133% more than was proper.
Furthermore, respondent claimed that the equal protection clause of the
Constitution was violated when the regulation treated non-flour millers differently from flour
millers for no reason at all.
Before us is a Petition for Review under Rule 45,[1] assailing the Decision[2] and the
Resolution[3] of the Court of Appeals (CA), which nullified the Customs Memorandum Order
(CMO) No. 27-2003[4] on the tariff classification of wheat issued by petitioner Commissioner of
Customs.
Lastly, respondent asserted that the retroactive application of the regulation was
confiscatory in nature.
On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective
The antecedent facts are as follows:
for twenty (20) days from notice.[9]
On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003.
Petitioners thereafter filed a Motion to Dismiss.[10] They alleged that: (1) the RTC did
Under the Memorandum, for tariff purposes, wheat was classified according to the following:
not have jurisdiction over the subject matter of the case, because respondent was asking for a
(1) importer or consignee; (2) country of origin; and (3) port of discharge. [5] The regulation
judicial determination of the classification of wheat; (2) an action for declaratory relief was
provided an exclusive list of corporations, ports of discharge, commodity descriptions and
improper; (3) CMO 27-2003 was an internal administrative rule and not legislative in nature;
countries of origin. Depending on these factors, wheat would be classified either as food grade
and (4) the claims of respondent were speculative and premature, because the Bureau of
or feed grade. The corresponding tariff for food grade wheat was 3%, for feed grade, 7%.
Customs (BOC) had yet to examine respondents products. They likewise opposed the
application for a writ of preliminary injunction on the ground that they had not inflicted any
injury through the issuance of the regulation; and that the action would be contrary to the rule
Hence, this Petition.
that administrative issuances are assumed valid until declared otherwise.
Petitioners raise the following issues for the consideration of this Court:
On 28 February 2005, the parties agreed that the matters raised in the application
for preliminary injunction and the Motion to Dismiss would just be resolved together in the
main case. Thus, on 10 March 2005, the RTC rendered its Decision[11] without having to resolve
the application for preliminary injunction and the Motion to Dismiss.
I.
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE
WHICH IS NOT IN ACCORD WITH THE LAW AND PREVAILING
JURISPRUDENCE.
II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE
TRIAL COURT HAS JURISDICTION OVER THE CASE.
The trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition is GRANTED
and the subject Customs Memorandum Order 27-2003 is declared INVALID
and OF NO FORCE AND EFFECT. Respondents Commissioner of Customs,
the District Collector of Subic or anyone acting in their behalf are to
immediately cease and desist from enforcing the said Customs
Memorandum Order 27-2003.
SO ORDERED.[12]
The RTC held that it had jurisdiction over the subject matter, given that the issue
raised by respondent concerned the quasi-legislative powers of petitioners. It likewise stated
that a petition for declaratory relief was the proper remedy, and that respondent was the
The Petition has no merit.
We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
Who may file petition. Any person interested under a deed, will,
contract or other written instrument, or whose rights are affected by a
statute, executive order or regulation, ordinance, or any other
governmental regulation may, before breach or violation thereof, bring an
action in the appropriate Regional Trial Court to determine any question
of construction or validity arising, and for a declaration of his rights or
duties, thereunder.
proper party to file it. The court considered that respondent was a regular importer, and that
the latter would be subjected to the application of the regulation in future transactions.
The requirements of an action for declaratory relief are as follows: (1) there must be
a justiciable controversy; (2) the controversy must be between persons whose interests are
With regard to the validity of the regulation, the trial court found that petitioners
adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy;
had not followed the basic requirements of hearing and publication in the issuance of CMO
and (4) the issue involved must be ripe for judicial determination.[15] We find that the Petition
27-2003. It likewise held that petitioners had substituted the quasi-judicial determination of
filed by respondent before the lower court meets these requirements.
the commodity by a quasi-legislative predetermination.[13] The lower court pointed out that a
classification based on importers and ports of discharge were violative of the due process
by petitioner Commissioner of Customs. In Smart Communications v. NTC,[16] we held:
rights of respondent.
Dissatisfied with the Decision of the lower court, petitioners appealed to the CA,
raising the same allegations in defense of CMO
27-2003.[14]
The appellate court, however,
dismissed the appeal. It held that, since the regulation affected substantial rights of petitioners
and other importers, petitioners should have observed the requirements of notice, hearing
and publication.
First, the subject of the controversy is the constitutionality of CMO 27-2003 issued
The determination of whether a specific rule or set of rules
issued by an administrative agency contravenes the law or the constitution
is within the jurisdiction of the regular courts. Indeed, the Constitution
vests the power of judicial review or the power to declare a law, treaty,
international or executive agreement, presidential decree, order,
instruction, ordinance, or regulation in the courts, including the regional
trial courts. This is within the scope of judicial power, which includes the
authority of the courts to determine in an appropriate action the validity
of the acts of the political departments. Judicial power includes the duty
of the courts of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine whether or not
there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the
Government. (Emphasis supplied)
Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v. Department of
Finance Secretary,[17] we said:
xxx [A] legislative rule is in the nature of subordinate legislation,
designed to implement a primary legislation by providing the details
thereof. xxx
In addition such rule must be published. On the other hand, interpretative
rules are designed to provide guidelines to the law which the
administrative agency is in charge of enforcing.
Accordingly, in considering a legislative rule a court is free to
make three inquiries: (i) whether the rule is within the delegated
authority of the administrative agency; (ii) whether it is reasonable;
and (iii) whether it was issued pursuant to proper procedure. But the
court is not free to substitute its judgment as to the desirability or wisdom
of the rule for the legislative body, by its delegation of administrative
judgment, has committed those questions to administrative judgments
and not to judicial judgments. In the case of an interpretative rule, the
inquiry is not into the validity but into the correctness or propriety of the
rule. As a matter of power a court, when confronted with an interpretative
rule, is free to (i) give the force of law to the rule; (ii) go to the opposite
extreme and substitute its judgment; or (iii) give some intermediate
degree of authoritative weight to the interpretative rule. (Emphasis
supplied)
Second, the controversy is between two parties that have adverse interests.
Petitioners are summarily imposing a tariff rate that respondent is refusing to pay.
Third, it is clear that respondent has a legal and substantive interest in the
implementation of CMO 27-2003. Respondent has adequately shown that, as a regular
importer of wheat, on 14 August 2003, it has actually made shipments of wheat from China to
Subic. The shipment was set to arrive in December 2003. Upon its arrival, it would be subjected
to the conditions of CMO 27-2003. The regulation calls for the imposition of different tariff
rates, depending on the factors enumerated therein. Thus, respondent alleged that it would
be made to pay the 7% tariff applied to feed grade wheat, instead of the 3% tariff on food
grade wheat. In addition, respondent would have to go through the procedure under CMO 272003, which would undoubtedly toll its time and resources. The lower court correctly pointed
out as follows:
xxx As noted above, the fact that petitioner is precisely into the
business of importing wheat, each and every importation will be
subjected to constant disputes which will result into (sic) delays in the
delivery, setting aside of funds as cash bond required in the CMO as well
as the resulting expenses thereof. It is easy to see that business
uncertainty will be a constant occurrence for petitioner. That the sums
involved are not minimal is shown by the discussions during the hearings
conducted as well as in the pleadings filed. It may be that the petitioner
can later on get a refund but such has been foreclosed because the
Collector of Customs and the Commissioner of Customs are bound by their
own CMO. Petitioner cannot get its refund with the said agency. We
believe and so find that Petitioner has presented such a stake in the
outcome of this controversy as to vest it with standing to file this
petition.[18] (Emphasis supplied)
Finally, the issue raised by respondent is ripe for judicial determination, because
litigation is inevitable[19] for the simple and uncontroverted reason that respondent is not
included in the enumeration of flour millers classified as food grade wheat importers. Thus, as
the trial court stated, it would have to file a protest case each time it imports food grade wheat
and be subjected to the 7% tariff.
It is therefore clear that a petition for declaratory relief is the right remedy given the
circumstances of the case.
Considering that the questioned regulation would affect the substantive rights of
respondent as explained above, it therefore follows that petitioners should have applied the
pertinent provisions of Book VII, Chapter 2 of the Revised Administrative Code, to wit:
Section 3. Filing. (1) Every agency shall file with the University of
the Philippines Law Center three (3) certified copies of every rule adopted
by it. Rules in force on the date of effectivity of this Code which are not
filed within three (3) months from that date shall not thereafter be the
bases of any sanction against any party of persons.
xxx xxx xxx
Section 9. Public Participation. - (1) If not otherwise required by
law, an agency shall, as far as practicable, publish or circulate notices of
proposed rules and afford interested parties the opportunity to submit
their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless
the proposed rates shall have been published in a newspaper of general
circulation at least two (2) weeks before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be
observed.
Going now to the content of CMO 27-3003, we likewise hold that it is
unconstitutional for being violative of the equal protection clause of the Constitution.
The equal protection clause means that no person or class of persons shall be
deprived of the same protection of laws enjoyed by other persons or other classes in the same
place in like circumstances. Thus, the guarantee of the equal protection of laws is not violated
if there is a reasonable classification. For a classification to be reasonable, it must be shown
that (1) it rests on substantial distinctions; (2) it is germane to the purpose of the law; (3) it is
When an administrative rule is merely interpretative in nature, its applicability needs
nothing further than its bare issuance, for it gives no real consequence more than what the
not limited to existing conditions only; and (4) it applies equally to all members of the same
class.[22]
law itself has already prescribed. When, on the other hand, the administrative rule goes
beyond merely providing for the means that can facilitate or render least cumbersome the
Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how
implementation of the law but substantially increases the burden of those governed, it
the quality of wheat is affected by who imports it, where it is discharged, or which country it
behooves the agency to accord at least to those directly affected a chance to be heard, and
came from.
thereafter to be duly informed, before that new issuance is given the force and effect of law.[20]
Likewise, in Taada v. Tuvera,[21] we held:
The clear object of the above-quoted provision is to give the
general public adequate notice of the various laws which are to regulate
their actions and conduct as citizens.Without such notice and publication,
there would be no basis for the application of the maxim ignorantia legis
non excusat. It would be the height of injustice to punish or otherwise
burden a citizen for the transgression of a law of which he had no notice
whatsoever, not even a constructive one.
Perhaps at no time since the establishment of the Philippine
Republic has the publication of laws taken so vital significance that at this
time when the people have bestowed upon the President a power
heretofore enjoyed solely by the legislature. While the people are kept
abreast by the mass media of the debates and deliberations in the Batasan
Pambansa and for the diligent ones, ready access to the legislative records
no such publicity accompanies the law-making process of the
President. Thus, without publication, the people have no means of
knowing what presidential decrees have actually been promulgated,
much less a definite way of informing themselves of the specific contents
and texts of such decrees. (Emphasis supplied)
Thus, on the one hand, even if other millers excluded from CMO 27-2003 have
imported food grade wheat, the product would still be declared as feed grade wheat, a
classification subjecting them to 7% tariff. On the other hand, even if the importers listed under
CMO 27-2003 have imported feed grade wheat, they would only be made to pay 3% tariff, thus
depriving the state of the taxes due. The regulation, therefore, does not become
disadvantageous to respondent only, but even to the state.
It is also not clear how the regulation intends to monitor more closely wheat
importations and thus prevent their misclassification. A careful study of CMO 27-2003 shows
that it not only fails to achieve this end, but results in the opposite. The application of the
regulation forecloses the possibility that other corporations that are excluded from the list
import food grade wheat; at the same time, it creates an assumption that those who meet the
criteria do not import feed grade wheat. In the first case, importers are unnecessarily
burdened to prove the classification of their wheat imports; while in the second, the state
carries that burden.
Petitioner Commissioner of Customs also went beyond his powers when the
Because petitioners failed to follow the requirements enumerated by the Revised
Administrative Code, the assailed regulation must be struck down.
regulation limited the customs officers duties mandated by Section 1403 of the Tariff and
Customs Law, as amended. The law provides:
Section 1403. Duties of Customs Officer Tasked to Examine,
Classify, and Appraise Imported Articles. The customs officer tasked to
examine, classify, and appraise imported articles shall determine whether
the packages designated for examination and their contents are in
accordance with the declaration in the entry, invoice and other pertinent
documents and shall make return in such a manner as to indicate
whether the articles have been truly and correctly declared in the entry
as regard their quantity, measurement, weight, and tariff classification
and not imported contrary to law. He shall submit samples to the
laboratory for analysis when feasible to do so and when such analysis is
necessary for the proper classification, appraisal, and/or admission into
the Philippines of imported articles.
Likewise, the customs officer shall determine the unit of
quantity in which they are usually bought and sold, and appraise the
imported articles in accordance with Section 201 of this Code.
Failure on the part of the customs officer to comply with his
duties shall subject him to the penalties prescribed under Section 3604 of
this Code.
The provision mandates that the customs officer must first assess and determine the
classification of the imported article before tariff may be imposed. Unfortunately, CMO 232007 has already classified the article even before the customs officer had the chance to
examine it. In effect, petitioner Commissioner of Customs diminished the powers granted by
the Tariff and Customs Code with regard to wheat importation when it no longer required the
customs officers prior examination and assessment of the proper classification of the wheat.
It is well-settled that rules and regulations, which are the product of a delegated
power to create new and additional legal provisions that have the effect of law, should be
within the scope of the statutory authority granted by the legislature to the administrative
agency. It is required that the regulation be germane to the objects and purposes of the law;
and that it be not in contradiction to, but in conformity with, the standards prescribed by
law.[23]
In summary, petitioners violated respondents right to due process in the issuance of
CMO 27-2003 when they failed to observe the requirements under the Revised Administrative
Code. Petitioners likewise violated respondents right to equal protection of laws when they
provided for an unreasonable classification in the application of the regulation. Finally,
petitioner Commissioner of Customs went beyond his powers of delegated authority when the
regulation limited the powers of the customs officer to examine and assess imported articles.
WHEREFORE, in view of the foregoing, the Petition is DENIED.
SO ORDERED.
.R. No. L-16704
March 17, 1962
VICTORIAS MILLING COMPANY, INC., petitioner-appellant,
vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.
Ross, Selph and Carrascoso for petitioner-appellant.
Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.
BARRERA, J.:
On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the
following tenor: .
Effective November 1, 1958, all Employers in computing the premiums due the
System, will take into consideration and include in the Employee's remuneration all
bonuses and overtime pay, as well as the cash value of other media of
remuneration. All these will comprise the Employee's remuneration or earnings,
upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum
of P500 for any one month.
Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel,
wrote the Social Security Commission in effect protesting against the circular as contradictory
to a previous Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and
bonus in the computation of the employers' and employees' respective monthly premium
contributions, and submitting, "In order to assist your System in arriving at a
proper interpretationof the term 'compensation' for the purposes of" such computation,
their observations on Republic Act 1161 and its amendment and on the general
interpretation of the words "compensation", "remuneration" and "wages". Counsel further
questioned the validity of the circular for lack of authority on the part of the Social Security
Commission to promulgate it without the approval of the President and for lack of
publication in the Official Gazette.
Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a
rule or regulation that needed the approval of the President and publication in the Official
Gazette to be effective, but a mere administrative interpretation of the statute, a mere
statement of general policy or opinion as to how the law should be construed.
Not satisfied with this ruling, petitioner comes to this Court on appeal.
The single issue involved in this appeal is whether or not Circular No. 22 is a rule or
regulation, as contemplated in Section 4(a) of Republic Act 1161 empowering the Social
Security Commission "to adopt, amend and repeal subject to the approval of the President
such rules and regulations as may be necessary to carry out the provisions and purposes of
this Act."
There can be no doubt that there is a distinction between an administrative rule or
regulation and an administrative interpretation of a law whose enforcement is entrusted to
an administrative body. When an administrative agency promulgates rules and regulations, it
"makes" a new law with the force and effect of a valid law, while when it renders an opinion
or gives a statement of policy, it merely interprets a pre-existing law (Parker, Administrative
Law, p. 197; Davis, Administrative Law, p. 194). Rules and regulations when promulgated in
pursuance of the procedure or authority conferred upon the administrative agency by law,
partake of the nature of a statute, and compliance therewith may be enforced by a penal
sanction provided in the law. This is so because statutes are usually couched in general
terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by
the legislature. The details and the manner of carrying out the law are often times left to the
administrative agency entrusted with its enforcement. In this sense, it has been said that
rules and regulations are the product of a delegated power to create new or additional legal
provisions that have the effect of law. (Davis, op. cit., p. 194.) .
A rule is binding on the courts so long as the procedure fixed for its promulgation is followed
and its scope is within the statutory authority granted by the legislature, even if the courts
are not in agreement with the policy stated therein or its innate wisdom (Davis, op. cit., 195197). On the other hand, administrative interpretation of the law is at best merely advisory,
for it is the courts that finally determine what the law means.
Circular No. 22 in question was issued by the Social Security Commission, in view of the
amendment of the provisions of the Social Security Law defining the term "compensation"
contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment, reads as
follows: .
(f) Compensation — All remuneration for employment include the cash value of
any remuneration paid in any medium other than cash except (1) that part of the
remuneration in excess of P500 received during the month; (2) bonuses,
allowances or overtime pay; and (3) dismissal and all other payments which the
employer may make, although not legally required to do so.
Republic Act No. 1792 changed the definition of "compensation" to:
(f) Compensation — All remuneration for employment include the cash value of
any remuneration paid in any medium other than cash except that part of the
remuneration in excess of P500.00 received during the month.
It will thus be seen that whereas prior to the amendment, bonuses, allowances, and
overtime pay given in addition to the regular or base pay were expressly excluded, or
exempted from the definition of the term "compensation", such exemption or exclusion was
deleted by the amendatory law. It thus became necessary for the Social Security Commission
to interpret the effect of such deletion or elimination. Circular No. 22 was, therefore, issued
to apprise those concerned of the interpretation or understanding of the Commission, of the
law as amended, which it was its duty to enforce. It did not add any duty or detail that was
not already in the law as amended. It merely stated and circularized the opinion of the
Commission as to how the law should be construed. 1äwphï1.ñët
The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by
appellant, does not support its contention that the circular in question is a rule or regulation.
What was there said was merely that a regulation may be incorporated in the form of a
circular. Such statement simply meant that the substance and not the form of a regulation is
decisive in determining its nature. It does not lay down a general proposition of law that any
circular, regardless of its substance and even if it is only interpretative, constitutes a rule or
regulation which must be published in the Official Gazette before it could take effect.
The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to
the present case, because the penalty that may be incurred by employers and employees if
they refuse to pay the corresponding premiums on bonus, overtime pay, etc. which the
employer pays to his employees, is not by reason of non-compliance with Circular No. 22, but
for violation of the specific legal provisions contained in Section 27(c) and (f) of Republic Act
No. 1161.
We find, therefore, that Circular No. 22 purports merely to advise employers-members of the
System of what, in the light of the amendment of the law, they should include in determining
the monthly compensation of their employees upon which the social security contributions
should be based, and that such circular did not require presidential approval and publication
in the Official Gazette for its effectivity.
It hardly need be said that the Commission's interpretation of the amendment embodied in
its Circular No. 22, is correct. The express elimination among the exemptions excluded in the
old law, of all bonuses, allowances and overtime pay in the determination of the
"compensation" paid to employees makes it imperative that such bonuses and overtime pay
must now be included in the employee's remuneration in pursuance of the amendatory law.
It is true that in previous cases, this Court has held that bonus is not demandable because it
is not part of the wage, salary, or compensation of the employee. But the question in the
instant case is not whether bonus is demandable or not as part of compensation, but
whether, after the employer does, in fact, give or pay bonus to his employees, such bonuses
shall be considered compensation under the Social Security Act after they have been
received by the employees. While it is true that terms or words are to be interpreted in
accordance with their well-accepted meaning in law, nevertheless, when such term or word
is specifically defined in a particular law, such interpretation must be adopted in enforcing
that particular law, for it can not be gainsaid that a particular phrase or term may have one
meaning for one purpose and another meaning for some other purpose. Such is the case that
is now before us. Republic Act 1161 specifically defined what "compensation" should mean
"For the purposes of this Act". Republic Act 1792 amended such definition by deleting same
exemptions authorized in the original Act. By virtue of this express substantial change in the
phraseology of the law, whatever prior executive or judicial construction may have been
given to the phrase in question should give way to the clear mandate of the new law.
IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs
against appellant. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon
and De Leon, JJ., concur.
[G.R. No. 163448. March 08, 2005]
NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his capacity as Regional
Director, NFA Regional Office No. 1, San Juan, La Union, petitioners, vs. MASADA
SECURITY AGENCY, INC., represented by its Acting President & General Manager,
COL. EDWIN S. ESPEJO (RET.), respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review under Rule 45 of the Rules of Court is the February 12,
2004 decision[1] of the Court of Appeals in CA-G.R. CV No. 76677, which dismissed the appeal
filed by petitioner National Food Authority (NFA) and its April 30, 2004 resolution denying
petitioners motion for reconsideration.
The antecedent facts show that on September 17, 1996, respondent MASADA Security
Agency, Inc., entered into a one year[2] contract[3] to provide security services to the various
offices, warehouses and installations of NFA within the scope of the NFA Region I, comprised
of the provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the
expiration of said contract, the parties extended the effectivity thereof on a monthly basis
under same terms and condition.[4]
Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage
orders mandating increases in the daily wage rate. Accordingly, respondent requested NFA for
a corresponding upward adjustment in the monthly contract rate consisting of the increases
in the daily minimum wage of the security guards as well as the corresponding raise in their
overtime pay, holiday pay, 13th month pay, holiday and rest day pay. It also claimed increases
in Social Security System (SSS) and Pag-ibig premiums as well as in the administrative costs and
margin. NFA, however, granted the request only with respect to the increase in the daily wage
by multiplying the amount of the mandated increase by 30 days and denied the same with
respect to the adjustments in the other benefits and remunerations computed on the basis of
the daily wage.
Respondent sought the intervention of the Office of the Regional Director, Regional
Office No. I, La Union, as Chairman of the Regional Tripartite Wages and Productivity Board
and the DOLE Secretary through the Executive Director of the National Wages and Productivity
Commission. Despite the advisory[5] of said offices sustaining the claim of respondent that the
increase mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the
RTWPB is not limited to the daily pay, NFA maintained its stance that it is not liable to pay the
corresponding adjustments in the wage related benefits of respondents security guards.
On May 4, 2001, respondent filed with the Regional Trial Court of Quezon, City, Branch
83, a case for recovery of sum of money against NFA. Docketed as Civil Case No. Q-01-43988,
the complaint[6] sought reimbursement of the following amounts allegedly paid by respondent
to the security guards, to wit: P2,949,302.84, for unpaid wage related benefits brought about
by the effectivity of Wage Order Nos. RB 1-05 and RB CAR-04;[7] RB 1-06 and RB CAR-05;[8] RB
1-07 and RB CAR-06;[9] and P975,493.04 for additional cost and margin, plus interest. It also
prayed for damages and litigation expenses.[10]
In its answer with counterclaim,[11] NFA denied that respondent paid the security guards
their wage related benefits and that it shouldered the additional costs and margin arising from
the implementation of the wage orders. It admitted, however, that it heeded respondents
request for adjustment only with respect to increase in the minimum wage and not with
respect to the other wage related benefits. NFA argued that respondent cannot demand an
adjustment on said salary related benefits because it is bound by their contract expressly
limiting NFAs obligation to pay only the increment in the daily wage.
At the pre-trial, the only issue raised was whether or not respondent is entitled to
recover from NFA the wage related benefits of the security guards.[12]
On September 19, 2002, the trial court rendered a decision [13] in favor of respondent
holding that NFA is liable to pay the security guards wage related benefits pursuant to RA 6727,
because the basis of the computation of said benefits, like overtime pay, holiday pay, SSS and
Pag-ibig premium, is the increased minimum wage. It also found NFA liable for the
consequential adjustments in administrative costs and margin. The trial court absolved
defendant Juanito M. David having been impleaded in his official capacity as Regional Director
of NFA Regional Office No. 1, San Juan, La Union. The dispositive portion thereof, reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff MASADA Security Agency, Inc.,
and against defendant National Food Authority ordering said defendant to make the
corresponding adjustment in the contract price in accordance with the increment mandated
under the various wage orders, particularly Wage Order Nos. RBI-05, RBCAR-04, RBI-06,
RBCAR-05, RBI-07 and RBCAR-06 and to pay plaintiff the amounts representing the
adjustments in the wage-related benefits of the security guards and consequential increase
in its administrative cost and margin upon presentment by plaintiff of the corresponding
voucher claims.
Plaintiffs claims for damages and attorneys fees and defendants counterclaim for damages
are hereby DENIED.
Defendant Juanito M. David is hereby absolved from any liability.
SO ORDERED.[14]
NFA appealed to the Court of Appeals but the same was dismissed on February 12, 2004.
The appellate court held that the proper recourse of NFA is to file a petition for review under
Rule 45 with this Court, considering that the appeal raised a pure question of law.
Nevertheless, it proceeded to discuss the merits of the case for purposes of academic
discussion and eventually sustained the ruling of the trial court that NFA is under obligation to
pay the administrative costs and margin and the wage related benefits of the respondents
security guards.[15]
On April 30, 2004, the Court of
reconsideration.[16] Hence, the instant petition.
Appeals
denied
NFAs
motion
for
The issue for resolution is whether or not the liability of principals in service contracts
under Section 6 of RA 6727 and the wage orders issued by the Regional Tripartite Wages and
Productivity Board is limited only to the increment in the minimum wage.
At the outset, it should be noted that the proper remedy of NFA from the adverse
decision of the trial court is a petition for review under Rule 45 directly with this Court because
the issue involved a question of law. However, in the interest of justice we deem it wise to
overlook the procedural technicalities if only to demonstrate that despite the procedural
infirmity, the instant petition is impressed with merit.[17]
RA 6727[18] (Wage Rationalization Act), which took effect on July 1, 1989,[19] declared it
a policy of the State to rationalize the fixing of minimum wages and to promote productivityimprovement and gain-sharing measures to ensure a decent standard of living for the workers
and their families; to guarantee the rights of labor to its just share in the fruits of production;
to enhance employment generation in the countryside through industrial dispersal; and to
allow business and industry reasonable returns on investment, expansion and growth.[20]
In line with its declared policy, RA 6727, created the National Wages and Productivity
Commission (NWPC),[21] vested, inter alia, with the power to prescribe rules and guidelines for
the determination of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels;[22] and the Regional Tripartite Wages and Productivity Boards
(RTWPB) which, among others, determine and fix the minimum wage rates applicable in their
respective region, provinces, or industries therein and issue the corresponding wage orders,
subject to the guidelines issued by the NWPC.[23] Pursuant to its wage fixing authority, the
RTWPB issue wage orders which set the daily minimum wage rates.[24]
SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers
and employees in the private sector, whether agricultural or non-agricultural, shall be
increased by twenty-five pesos (P25) per day (Emphasis supplied)
The term wage as used in Section 6 of RA 6727 pertains to no other than the statutory
minimum wage which is defined under the Rules Implementing RA 6727 as the lowest wage
rate fixed by law that an employer can pay his worker.[26] The basis thereof under Section 7 of
the same Rules is the normal working hours, which shall not exceed eight hours a day. Hence,
the prescribed increases or the additional liability to be borne by the principal under Section 6
of RA 6727 is the increment or amount added to the remuneration of an employee for an 8hour work.
Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to
certain matters, it may not, by interpretation or construction, be extended to others. [27] Since
the increase in wage referred to in Section 6 pertains to the statutory minimum wage as
defined herein, principals in service contracts cannot be made to pay the corresponding wage
increase in the overtime pay, night shift differential, holiday and rest day pay, premium pay
and other benefits granted to workers. While basis of said remuneration and benefits is the
statutory minimum wage, the law cannot be unduly expanded as to include those not stated
in the subject provision.
Payment of the increases in the wage rate of workers is ordinarily shouldered by the
employer. Section 6 of RA 6727, however, expressly lodged said obligation to the principals or
indirect employers in construction projects and establishments providing security, janitorial
and similar services. Substantially the same provision is incorporated in the wage orders issued
by the RTWPB.[25] Section 6 of RA 6727, provides:
The settled rule in statutory construction is that if the statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without interpretation. This plain
meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index
of intention) rests on the valid presumption that the words employed by the legislature in a
statute correctly express its intention or will and preclude the court from construing it
differently. The legislature is presumed to know the meaning of the words, to have used words
advisedly, and to have expressed its intent by use of such words as are found in the
statute. Verba legis non est recedendum, or from the words of a statute there should be no
departure.[28]
SEC. 6. In the case of contracts for construction projects and for security, janitorial and
similar services, the prescribed increases in the wage rates of the workers shall be borne by
the principals or clients of the construction/service contractors and the contract shall be
deemed amended accordingly. In the event, however, that the principal or client fails to pay
the prescribed wage rates, the construction/service contractor shall be jointly and severally
liable with his principal or client. (Emphasis supplied)
The presumption therefore is that lawmakers are well aware that the word wage as used
in Section 6 means the statutory minimum wage. If their intention was to extend the obligation
of principals in service contracts to the payment of the increment in the other benefits and
remuneration of workers, it would have so expressly specified. In not so doing, the only logical
conclusion is that the legislature intended to limit the additional obligation imposed on
principals in service contracts to the payment of the increment in the statutory minimum
wage.
NFA claims that its additional liability under the aforecited provision is limited only to
the payment of the increment in the statutory minimum wage rate, i.e., the rate for a regular
eight (8) hour work day.
The contention is meritorious.
In construing the word wage in Section 6 of RA 6727, reference must be had to Section
4 (a) of the same Act. It states:
The general rule is that construction of a statute by an administrative agency charged
with the task of interpreting or applying the same is entitled to great weight and respect. The
Court, however, is not bound to apply said rule where such executive interpretation, is clearly
erroneous, or when there is no ambiguity in the law interpreted, or when the language of the
words used is clear and plain, as in the case at bar. Besides, administrative interpretations are
at best advisory for it is the Court that finally determines what the law means. [29] Hence, the
interpretation given by the labor agencies in the instant case which went as far as
supplementing what is otherwise not stated in the law cannot bind this Court.
It is not within the province of this Court to inquire into the wisdom of the law for indeed,
we are bound by the words of the statute.[30] The law is applied as it is. At any rate, the interest
of the employees will not be adversely affected if the obligation of principals under the subject
provision will be limited to the increase in the statutory minimum wage. This is so because all
remuneration and benefits other than the increased statutory minimum wage would be
shouldered and paid by the employer or service contractor to the workers concerned. Thus, in
the end, all allowances and benefits as computed under the increased rate mandated by RA
6727 and the wage orders will be received by the workers.
Moreover, the law secures the welfare of the workers by imposing a solidary liability on
principals and the service contractors. Under the second sentence of Section 6 of RA 6727, in
the event that the principal or client fails to pay the prescribed wage rates, the service
contractor shall be held solidarily liable with the former. Likewise, Articles 106, 107 and 109 of
the Labor Code provides:
ART. 106. Contractor or Subcontractor. Whenever an employer enters into contract with
another person for the performance of the formers work, the employees of the contractor
and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this
Code.
In the event that the contractor or subcontractor fails to pay the wage of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly employed
by him.
ART. 107. Indirect Employer. The provisions of the immediately preceding Article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work, task,
job or project.
ART. 109. Solidary Liability. The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For purposes of determining the
extent of their civil liability under this Chapter, they shall be considered as direct employers.
Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into
stipulations increasing the liability of the principal. So long as the minimum obligation of the
principal, i.e., payment of the increased statutory minimum wage is complied with, the Wage
Rationalization Act is not violated.
In the instant case, Article IV.4 of the service contract provides:
IV.4. In the event of a legislated increase in the minimum wage of security guards and/or in
the PADPAO rate, the AGENCY may negotiate for an adjustment in the contract price. Any
adjustment shall be applicable only to the increment, based on published and circulated
rates and not on mere certification.[31]
In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:
3. For purposes of wage adjustments, consider only the rate based on the wage
Order issued by the Regional Tripartite Wage Productivity Board (RTWPB).
Unless otherwise provided in the Wage Order issued by the RTWPB, the wage
adjustment shall be limited to the increment in the legislated minimum
wage;[32]
The parties therefore acknowledged the application to their contract of the wage orders
issued by the RTWPB pursuant to RA 6727. There being no assumption by NFA of a greater
liability than that mandated by Section 6 of the Act, its obligation is limited to the payment of
the increased statutory minimum wage rates which, as admitted by respondent, had already
been satisfied by NFA.[33] Under Article 1231 of the Civil Code, one of the modes of
extinguishing an obligation is by payment. Having discharged its obligation to respondent, NFA
no longer have a duty that will give rise to a correlative legal right of respondent. The latters
complaint for collection of remuneration and benefits other than the increased minimum wage
rate, should therefore be dismissed for lack of cause of action.
The same goes for respondents claim for administrative cost and margin. Considering
that respondent failed to establish a clear obligation on the part of NFA to pay the same as
well as to substantiate the amount thereof with documentary evidence, the claim should be
denied.
WHEREFORE, the petition is GRANTED. The February 12, 2004 decision and the April 30,
2004 resolution of the Court of Appeals which dismissed petitioner National Food Authoritys
appeal and motion for reconsideration, respectively, in CA-G.R. CV No. 76677, are REVERSED
and SET ASIDE. The complaint filed by respondent MASADA Security Agency, Inc., docketed as
Civil Case No. Q-01-43988, before the Regional Trial Court of Quezon, City, Branch 83, is
ordered DISMISSED.
SO ORDERED.
Davide Jr., C.J., (Chairman), Quisumbing, Carpio and Azcuna, JJ., concur.
SECOND DIVISION
[G.R. No. 126999. August 30, 2000]
SGMC REALTY CORPORATION, petitioner, vs. OFFICE OF THE PRESIDENT (OP),
RIDGEVIEW REALTY CORPORATION, SM INVESTMENTS CORPORATION, MULTIREALTY DEVELOPMENT CORP., HENRY SY SR., HENRY SY JR., HANS T. SY, MARY
UY TY and VICTOR LIM, respondents.
RESOLUTION
QUISUMBING, J.:
In this special civil action for certiorari, petitioner seeks to set aside the
decision[1] of public respondent rendered on June 18, 1996, in OP Case No. 95-L6333, and its order[2] dated October 1, 1996, denying the motion for
reconsideration.
The records disclose that on March 29, 1994, petitioner filed before the Housing
and Land Use Regulatory Board (HLURB) a complaint for breach of contract,
violation of property rights and damages against private respondents. After the
parties filed their pleadings and supporting documents, the arbiter rendered a
decision dismissing petitioners complaint as well as private respondents
counterclaim.
Petitioner then filed a petition for review with the Board of Commissioners of the
HLURB which, however, dismissed said petition. On October 23, 1995, petitioner
received a copy of said decision of the Board of Commissioners. On November 20,
1995, petitioner filed an appeal with public respondent. After the parties filed their
memorandum, they filed their respective draft decisions as ordered by public
respondent.
On June 18, 1996, public respondent, without delving into the merits of the case,
rendered the assailed decision which reads:
"IN VIEW OF THE FOREGOING, the appeal is hereby DISMISSED for being
filed out of time.
"SO ORDERED."[3]
Petitioner seasonably filed a motion for reconsideration which was denied.
Undaunted, petitioner filed the instant petition, alleging that public respondent
committed grave abuse of discretion amounting to lack or excess of jurisdiction:
[I]
IN HOLDING THAT THE PERIOD TO APPEAL FROM THE HOUSING AND
LAND USE REGULATORY BOARD TO THE OFFICE OF THE PRESIDENT IS
FIFTEEN (15) DAYS AND NOT THIRTY (30) DAYS AS MANDATED IN THE
1994 RULES OF PROCEDURE ADOPTED BY THE HOUSING AND LAND USE
REGULATORY BOARD, AN ADMINISTRATIVE AGENCY UNDER THE
SUPERVISION AND CONTROL OF PUBLIC RESPONDENT OFFICE OF THE
PRESIDENT.
[II]
IN DISREGARDING THE 1994 RULES OF PROCEDURE OF THE HOUSING
AND LAND USE REGULATORY BOARD WITHOUT DECLARING THE SAME
ILLEGAL AND/OR INVALID, AND IN DISREGARDING THE WELLESTABLISHED DOCTRINE OF LIBERAL CONSTRUCTION OF THE
ADMINISTRATIVE RULES OF PROCEDURE IN ORDER TO PROMOTE THEIR
OBJECT AND TO ASSIST THE PARTIES IN CLAIMING JUST, SPEEDY AND
INEXPENSIVE DETERMINATION OF THEIR RESPECTIVE CLAIMS AND
DEFENSES.[4]
The fundamental issue for resolution is whether or not public respondent
committed grave abuse of discretion in ruling that the reglementary period within
which to appeal the decision of HLURB to public respondent is fifteen days.
Petitioner contends that the period of appeal from the HLURB to the Office of the
President is thirty (30) days from receipt by the aggrieved party of the decision
appealed from in accordance with Section 27 of the 1994 Rules of Procedure of
HLURB and Section 1 of Administrative Order No. 18, series of 1987, of the Office of
the President.
However, we find petitioners contention bereft of merit, because of its reliance on
a literal reading of cited rules without correlating them to current laws as well as
presidential decrees on the matter.
Section 27 of the 1994 HLURB Rules of Procedure provides as follows:
"Section 27. Appeal to the Office of the President. --- Any party may,
upon notice to the Board and the other party, appeal the decision of the
Board of Commissioners or its division to the Office of the President
within thirty (30) days from receipt thereof pursuant to and in
accordance with Administrative Order No. 18, of the Office of the
President dated February 12, 1987. Decision of the President shall be
final subject only to review by the Supreme Court on certiorari or on
questions of law."[5]
On the other hand, Administrative Order No. 18, series of 1987, issued by public
respondent reads:
"Section 1. Unless otherwise governed by special laws, an appeal to the
Office of the President shall be taken within thirty (30) days from receipt
by the aggrieved party of the decision/resolution/order complained of or
appealed from."[6]
As pointed out by public respondent, the aforecited administrative order allows
aggrieved party to file its appeal with the Office of the President within thirty (30)
days from receipt of the decision complained of. Nonetheless, such thirty-day
period is subject to the qualification that there are no other statutory periods of
appeal applicable. If there are special laws governing particular cases which provide
for a shorter or longer reglementary period, the same shall prevail over the thirtyday period provided for in the administrative order. This is in line with the rule in
statutory construction that an administrative rule or regulation, in order to be
valid, must not contradict but conform to the provisions of the enabling law.[7]
We note that indeed there are special laws that mandate a shorter period of fifteen
(15) days within which to appeal a case to public respondent. First, Section 15 of
Presidential Decree No. 957 provides that the decisions of the National Housing
Authority (NHA) shall become final and executory after the lapse of fifteen (15)
days from the date of receipt of the decision. Second, Section 2 of Presidential
Decree No. 1344 states that decisions of the National Housing Authority shall
become final and executory after the lapse of fifteen (15) days from the date of its
receipt. The latter decree provides that the decisions of NHA is appealable only to
the Office of the President. Further, we note that the regulatory functions of NHA
relating to housing and land development has been transferred to Human
Settlements Regulatory Commission, now known as HLURB.[8] Thus, said
presidential issuances providing for a reglementary period of appeal of fifteen days
apply in this case. Accordingly, the period of appeal of thirty (30) days set forth in
Section 27 of HLURB 1994 Rules of Procedure no longer holds true for being in
conflict with the provisions of aforesaid presidential decrees. For it is axiomatic
that administrative rules derive their validity from the statute that they are
intended to implement. Any rule which is not consistent with statute itself is null
and void.[9]
In this case, petitioner received a copy of the decision of HLURB on October 23,
1995. Considering that the reglementary period to appeal is fifteen days, petitioner
has only until November 7, 1995, to file its appeal. Unfortunately, petitioner filed
its appeal with public respondent only on November 20, 1995 or twenty-eight days
from receipt of the appealed decision, which is obviously filed out of time.
As the appeal filed by petitioner was not taken within the reglementary period, the
prescriptive period for perfecting an appeal continues to run. Consequently, the
decision of the HLURB became final and executory upon the lapse of fifteen days
from receipt of the decision. Hence, the decision became immutable; it can no
longer be amended nor altered by public respondent. Accordingly, inasmuch as the
timely perfection of an appeal is a jurisdictional requisite, public respondent has no
more authority to entertain the petitioners appeal. Otherwise, any amendment or
alteration made which substantially affects the final and executory judgment would
be null and void for lack of jurisdiction.[10]
Thus, in this case public respondent cannot be faulted of grave abuse of discretion
in ruling that the period of appeal is fifteen days and in forthrightly dismissing
petitioners appeal as the same was clearly filed out of time.
Worth mentioning, just days prior to the promulgation of the assailed decision of
public respondent, the HLURB adopted on June 10, 1996, its 1996 Rules of
Procedure. Significantly, Section 2, Rule XVIII of said rules provides that any party
may, upon notice to the HLURB and the other party, appeal a decision rendered by
the Board of Commissioners en banc or by one of its divisions to the Office of the
President within fifteen (15) calendar days from receipt thereof in accordance with
P.D. 1344 and A.O. 18, series of 1987.[11] Apparently, the amendment was made
pursuant to the pronouncements of public respondent in earlier cases[12] it decided
that appeals to the Office of the President from the decision of HLURB should be
filed within fifteen (15) days from receipt thereof. At present therefore, decisions
rendered by HLURB is appealable to the Office of the President within fifteen (15)
calendar days from receipt thereof.
Finally, we find that the instant petition ought not to have been directly filed with
this Court. For while we have concurrent jurisdiction with the Regional Trial Courts
and the Court of Appeals to issue writs of certiorari, this concurrence is not to be
taken as an unrestrained freedom of choice concerning the court to which
application for the writ will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and should also serve as a
general determinant of the appropriate forum for petitions for the extraordinary
writs.[13] A direct invocation of the Supreme Courts original jurisdiction to issue
these extraordinary writs is allowed only when there are special and important
reasons therefor, clearly and specifically set out in the petition.[14]
WHEREFORE, the instant petition is DISMISSED for utter lack of merit. Costs against
petitioner.
SO ORDERED.
G.R. No. 159694
January 27, 2006
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
AZUCENA T. REYES, Respondent.
x -- -- -- -- -- -- -- -- -- -- -- -- -- x
G.R. No. 163581
January 27, 2006
AZUCENA T. REYES, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
Letter of Authority No. 132963 for the regular investigation of the estate tax case. Azucena T.
Reyes (or ‘[Reyes]’), one of the decedent’s heirs, received the Letter of Authority on March
14, 1997.
"On February 12, 1998, the Chief, Assessment Division, Bureau of Internal Revenue (or ‘BIR’),
issued a preliminary assessment notice against the estate in the amount of P14,580,618.67.
On May 10, 1998, the heirs of the decedent (or ‘heirs’) received a final estate tax assessment
notice and a demand letter, both dated April 22, 1998, for the amount of P14,912,205.47,
inclusive of surcharge and interest.
"On June 1, 1998, a certain Felix M. Sumbillo (or ‘Sumbillo’) protested the assessment [o]n
behalf of the heirs on the ground that the subject property had already been sold by the
decedent sometime in 1990.
"On November 12, 1998, the Commissioner of Internal Revenue (or ‘[CIR]’) issued a
preliminary collection letter to [Reyes], followed by a Final Notice Before Seizure dated
December 4, 1998.
PANGANIBAN, CJ.:
Under the present provisions of the Tax Code and pursuant to elementary due process,
taxpayers must be informed in writing of the law and the facts upon which a tax assessment
is based; otherwise, the assessment is void. Being invalid, the assessment cannot in turn be
used as a basis for the perfection of a tax compromise.
The Case
Before us are two consolidated1 Petitions for Review2 filed under Rule 45 of the Rules of
Court, assailing the August 8, 2003 Decision3 of the Court of Appeals (CA) in CA-GR SP No.
71392. The dispositive portion of the assailed Decision reads as follows:
"WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Tax Appeals is
ANNULLED and SET ASIDE without prejudice to the action of the National Evaluation Board
on the proposed compromise settlement of the Maria C. Tancinco estate’s tax liability."4
The Facts
The CA narrated the facts as follows:
"On July 8, 1993, Maria C. Tancinco (or ‘decedent’) died, leaving a 1,292 square-meter
residential lot and an old house thereon (or ‘subject property’) located at 4931 Pasay Road,
Dasmariñas Village, Makati City.
"On the basis of a sworn information-for-reward filed on February 17, 1997 by a certain
Raymond Abad (or ‘Abad’), Revenue District Office No. 50 (South Makati) conducted an
investigation on the decedent’s estate (or ‘estate’). Subsequently, it issued a Return
Verification Order. But without the required preliminary findings being submitted, it issued
"On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate,
followed on February 11, 1999 by Notices of Levy on Real Property and Tax Lien against it.
"On March 2, 1999, [Reyes] protested the notice of levy. However, on March 11, 1999, the
heirs proposed a compromise settlement of P1,000,000.00.
"In a letter to [the CIR] dated January 27, 2000, [Reyes] proposed to pay 50% of the basic tax
due, citing the heirs’ inability to pay the tax assessment. On March 20, 2000, [the CIR]
rejected [Reyes’s] offer, pointing out that since the estate tax is a charge on the estate and
not on the heirs, the latter’s financial incapacity is immaterial as, in fact, the gross value of
the estate amounting to P32,420,360.00 is more than sufficient to settle the tax liability.
Thus, [the CIR] demanded payment of the amount of P18,034,382.13 on or before April 15,
2000[;] otherwise, the notice of sale of the subject property would be published.
"On April 11, 2000, [Reyes] again wrote to [the CIR], this time proposing to pay 100% of the
basic tax due in the amount of P5,313,891.00. She reiterated the proposal in a letter dated
May 18, 2000.
"As the estate failed to pay its tax liability within the April 15, 2000 deadline, the Chief,
Collection Enforcement Division, BIR, notified [Reyes] on June 6, 2000 that the subject
property would be sold at public auction on August 8, 2000.
"On June 13, 2000, [Reyes] filed a protest with the BIR Appellate Division. Assailing the
scheduled auction sale, she asserted that x x x the assessment, letter of demand[,] and the
whole tax proceedings against the estate are void ab initio. She offered to file the
corresponding estate tax return and pay the correct amount of tax without surcharge [or]
interest.
"Without acting on [Reyes’s] protest and offer, [the CIR] instructed the Collection
Enforcement Division to proceed with the August 8, 2000 auction sale. Consequently, on
June 28, 2000, [Reyes] filed a [P]etition for [R]eview with the Court of Tax Appeals (or ‘CTA’),
docketed as CTA Case No. 6124.
"On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of Preliminary Injunction
or Status Quo Order, which was granted by the CTA on July 26, 2000. Upon [Reyes’s] filing of
a surety bond in the amount of P27,000,000.00, the CTA issued a [R]esolution dated August
16, 2000 ordering [the CIR] to desist and refrain from proceeding with the auction sale of the
subject property or from issuing a [W]arrant of [D]istraint or [G]arnishment of [B]ank
[A]ccount[,] pending determination of the case and/or unless a contrary order is issued.
"[The CIR] filed a [M]otion to [D]ismiss the petition on the grounds (i) that the CTA no longer
has jurisdiction over the case[,] because the assessment against the estate is already final
and executory; and (ii) that the petition was filed out of time. In a [R]esolution dated
November 23, 2000, the CTA denied [the CIR’s] motion.
"On March 9, 2001, the CTA denied [Reyes’s] motion, prompting her to file a Motion for
Reconsideration Ad Cautelam. In a [R]esolution dated April 10, 2001, the CTA denied the
[M]otion for [R]econsideration with the suggestion that[,] for an orderly presentation of her
case and to prevent piecemeal resolutions of different issues, [Reyes] should file a
[S]upplemental [P]etition for [R]eview[,] setting forth the new issue of whether there was
already a perfected compromise.
"On May 2, 2001, [Reyes] filed a Supplemental Petition for Review with the CTA, followed on
June 4, 2001 by its Amplificatory Arguments (for the Supplemental Petition for Review),
raising the following issues:
‘1. Whether or not an offer to compromise by the [CIR], with the acquiescence by the
Secretary of Finance, of a tax liability pending in court, that was accepted and paid by the
taxpayer, is a perfected and consummated compromise.
‘2. Whether this compromise is covered by the provisions of Section 204 of the Tax Code
(CTRP) that requires approval by the BIR [NEB].’
"During the pendency of the [P]etition for [R]eview with the CTA, however, the BIR issued
Revenue Regulation (or ‘RR’) No. 6-2000 and Revenue Memorandum Order (or ‘RMO’) No.
42-2000 offering certain taxpayers with delinquent accounts and disputed assessments an
opportunity to compromise their tax liability.
"Answering the Supplemental Petition, [the CIR] averred that an application for compromise
of a tax liability under RR No. 6-2000 and RMO No. 42-2000 requires the evaluation and
approval of either the NEB or the Regional Evaluation Board (or ‘REB’), as the case may be.
"On November 25, 2000, [Reyes] filed an application with the BIR for the compromise
settlement (or ‘compromise’) of the assessment against the estate pursuant to Sec. 204(A) of
the Tax Code, as implemented by RR No. 6-2000 and RMO No. 42-2000.
"On June 14, 2001, [Reyes] filed a Motion for Judgment on the Pleadings; the motion was
granted on July 11, 2001. After submission of memoranda, the case was submitted for
[D]ecision.
"On December 26, 2000, [Reyes] filed an Ex-Parte Motion for Postponement of the hearing
before the CTA scheduled on January 9, 2001, citing her pending application for compromise
with the BIR. The motion was granted and the hearing was reset to February 6, 2001.
"On June 19, 2002, the CTA rendered a [D]ecision, the decretal portion of which pertinently
reads:
"On January 29, 2001, [Reyes] moved for postponement of the hearing set on February 6,
2001, this time on the ground that she had already paid the compromise amount
of P1,062,778.20 but was still awaiting approval of the National Evaluation Board (or ‘NEB’).
The CTA granted the motion and reset the hearing to February 27, 2001.
"On February 19, 2001, [Reyes] filed a Motion to Declare Application for the Settlement of
Disputed Assessment as a Perfected Compromise. In said motion, she alleged that [the CIR]
had not yet signed the compromise[,] because of procedural red tape requiring the initials of
four Deputy Commissioners on relevant documents before the compromise is signed by the
[CIR]. [Reyes] posited that the absence of the requisite initials and signature[s] on said
documents does not vitiate the perfected compromise.
"Commenting on the motion, [the CIR] countered that[,] without the approval of the NEB,
[Reyes’s] application for compromise with the BIR cannot be considered a perfected or
consummated compromise.
‘WHEREFORE, in view of all the foregoing, the instant [P]etition for [R]eview is hereby
DENIED. Accordingly, [Reyes] is hereby ORDERED to PAY deficiency estate tax in the amount
of Nineteen Million Five Hundred Twenty Four Thousand Nine Hundred Nine and 78/100
(P19,524,909.78), computed as follows:
xxxxxxxxx
‘[Reyes] is likewise ORDERED to PAY 20% delinquency interest on deficiency estate tax due
of P17,934,382.13 from January 11, 2001 until full payment thereof pursuant to Section
249(c) of the Tax Code, as amended.’
"In arriving at its decision, the CTA ratiocinated that there can only be a perfected and
consummated compromise of the estate’s tax liability[,] if the NEB has approved [Reyes’s]
application for compromise in accordance with RR No. 6-2000, as implemented by RMO No.
42-2000.
"Anent the validity of the assessment notice and letter of demand against the estate, the CTA
stated that ‘at the time the questioned assessment notice and letter of demand were issued,
the heirs knew very well the law and the facts on which the same were based.’ It also
observed that the petition was not filed within the 30-day reglementary period provided
under Sec. 11 of Rep. Act No. 1125 and Sec. 228 of the Tax Code." 5
The foregoing issues can be simplified as follows: first, whether the assessment against the
estate is valid; and, second, whether the compromise entered into is also valid.
The Court’s Ruling
The Petition is unmeritorious.
Ruling of the Court of Appeals
In partly granting the Petition, the CA said that Section 228 of the Tax Code and RR 12-99
were mandatory and unequivocal in their requirement. The assessment notice and the
demand letter should have stated the facts and the law on which they were based;
otherwise, they were deemed void.6 The appellate court held that while administrative
agencies, like the BIR, were not bound by procedural requirements, they were still required
by law and equity to observe substantive due process. The reason behind this requirement,
said the CA, was to ensure that taxpayers would be duly apprised of -- and could effectively
protest -- the basis of tax assessments against them.7Since the assessment and the demand
were void, the proceedings emanating from them were likewise void, and any order
emanating from them could never attain finality.
First Issue:
Validity of the Assessment Against the Estate
The second paragraph of Section 228 of the Tax Code12 is clear and mandatory. It provides as
follows:
"Sec. 228. Protesting of Assessment. -xxxxxxxxx
The appellate court added, however, that it was premature to declare as perfected and
consummated the compromise of the estate’s tax liability. It explained that, where the basic
tax assessed exceeded P1 million, or where the settlement offer was less than the prescribed
minimum rates, the National Evaluation Board’s (NEB) prior evaluation and approval were
the conditio sine qua non to the perfection and consummation of any compromise.8Besides,
the CA pointed out, Section 204(A) of the Tax Code applied to all compromises, whether
government-initiated or not.9 Where the law did not distinguish, courts too should not
distinguish.
"The taxpayers shall be informed in writing of the law and the facts on which the assessment
is made: otherwise, the assessment shall be void."
Hence, this Petition.10
First, RA 8424 has already amended the provision of Section 229 on protesting an
assessment. The old requirement of merely notifying the taxpayer of the CIR’s findings was
changed in 1998 to informing the taxpayer of not only the law, but also of the facts on which
an assessment would be made; otherwise, the assessment itself would be invalid.
The Issues
In GR No. 159694, petitioner raises the following issues for the Court’s consideration:
"I.
In the present case, Reyes was not informed in writing of the law and the facts on which the
assessment of estate taxes had been made. She was merely notified of the findings by the
CIR, who had simply relied upon the provisions of former Section 22913 prior to its
amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.
It was on February 12, 1998, that a preliminary assessment notice was issued against the
estate. On April 22, 1998, the final estate tax assessment notice, as well as demand letter,
was also issued. During those dates, RA 8424 was already in effect. The notice required under
the old law was no longer sufficient under the new law.
Whether petitioner’s assessment against the estate is valid.
"II.
Whether respondent can validly argue that she, as well as the other heirs, was not aware of
the facts and the law on which the assessment in question is based, after she had opted to
propose several compromises on the estate tax due, and even prematurely acting on such
proposal by paying 20% of the basic estate tax due."11
To be simply informed in writing of the investigation being conducted and of the
recommendation for the assessment of the estate taxes due is nothing but a perfunctory
discharge of the tax function of correctly assessing a taxpayer. The act cannot be taken to
mean that Reyes already knew the law and the facts on which the assessment was based. It
does not at all conform to the compulsory requirement under Section 228. Moreover, the
Letter of Authority received by respondent on March 14, 1997 was for the sheer purpose of
investigation and was not even the requisite notice under the law.
The procedure for protesting an assessment under the Tax Code is found in Chapter III of
Title VIII, which deals with remedies. Being procedural in nature, can its provision then be
applied retroactively? The answer is yes.
The general rule is that statutes are prospective. However, statutes that are remedial, or that
do not create new or take away vested rights, do not fall under the general rule against the
retroactive operation of statutes.14 Clearly, Section 228 provides for the procedure in case an
assessment is protested. The provision does not create new or take away vested rights. In
both instances, it can surely be applied retroactively. Moreover, RA 8424 does not state,
either expressly or by necessary implication, that pending actions are excepted from the
operation of Section 228, or that applying it to pending proceedings would impair vested
rights.
Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is of no
moment, considering that it merely implements the law.
A tax regulation is promulgated by the finance secretary to implement the provisions of the
Tax Code.15 While it is desirable for the government authority or administrative agency to
have one immediately issued after a law is passed, the absence of the regulation does not
automatically mean that the law itself would become inoperative.
At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the
taxpayer must be informed of both the law and facts on which the assessment was based.
Thus, the CIR should have required the assessment officers of the Bureau of Internal Revenue
(BIR) to follow the clear mandate of the new law. The old regulation governing the issuance
of estate tax assessment notices ran afoul of the rule that tax regulations -- old as they were - should be in harmony with, and not supplant or modify, the law.16
It may be argued that the Tax Code provisions are not self-executory. It would be too wide a
stretch of the imagination, though, to still issue a regulation that would simply require tax
officials to inform the taxpayer, in any manner, of the law and the facts on which an
assessment was based. That requirement is neither difficult to make nor its desired results
hard to achieve.
Moreover, an administrative rule interpretive of a statute, and not declarative of certain
rights and corresponding obligations, is given retroactive effect as of the date of the
effectivity of the statute.17 RR 12-99 is one such rule. Being interpretive of the provisions of
the Tax Code, even if it was issued only on September 6, 1999, this regulation was to retroact
to January 1, 1998 -- a date prior to the issuance of the preliminary assessment notice and
demand letter.
228 of the Tax Code and the pertinent provisions of RR 12-85, the latter cannot stand
because it cannot go beyond the provision of the law. The law must still be followed, even
though the existing tax regulation at that time provided for a different procedure. The
regulation then simply provided that notice be sent to the respondent in the form
prescribed, and that no consequence would ensue for failure to comply with that form.
Fourth, petitioner violated the cardinal rule in administrative law that the taxpayer be
accorded due process. Not only was the law here disregarded, but no valid notice was sent,
either. A void assessment bears no valid fruit.
The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly
with tax collection without first establishing a valid assessment is evidently violative of the
cardinal principle in administrative investigations: that taxpayers should be able to present
their case and adduce supporting evidence.19 In the instant case, respondent has not been
informed of the basis of the estate tax liability. Without complying with the unequivocal
mandate of first informing the taxpayer of the government’s claim, there can be no
deprivation of property, because no effective protest can be made.20 The haphazard shot at
slapping an assessment, supposedly based on estate taxation’s general provisions that are
expected to be known by the taxpayer, is utter chicanery.
Even a cursory review of the preliminary assessment notice, as well as the demand letter
sent, reveals the lack of basis for -- not to mention the insufficiency of -- the gross figures and
details of the itemized deductions indicated in the notice and the letter. This Court cannot
countenance an assessment based on estimates that appear to have been arbitrarily or
capriciously arrived at. Although taxes are the lifeblood of the government, their assessment
and collection "should be made in accordance with law as any arbitrariness will negate the
very reason for government itself."21
Fifth, the rule against estoppel does not apply. Although the government cannot be estopped
by the negligence or omission of its agents, the obligatory provision on protesting a tax
assessment cannot be rendered nugatory by a mere act of the CIR .
Tax laws are civil in nature.22 Under our Civil Code, acts executed against the mandatory
provisions of law are void, except when the law itself authorizes the validity of those
acts.23 Failure to comply with Section 228 does not only render the assessment void, but also
finds no validation in any provision in the Tax Code. We cannot condone errant or
enterprising tax officials, as they are expected to be vigilant and law-abiding.
Second Issue:
Validity of Compromise
Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax Code.
No doubt, Section 228 has replaced Section 229. The provision on protesting an assessment
has been amended. Furthermore, in case of discrepancy between the law as amended and its
implementing but old regulation, the former necessarily prevails.18 Thus, between Section
It would be premature for this Court to declare that the compromise on the estate tax
liability has been perfected and consummated, considering the earlier determination that the
assessment against the estate was void. Nothing has been settled or finalized. Under Section
204(A) of the Tax Code, where the basic tax involved exceeds one million pesos or the
settlement offered is less than the prescribed minimum rates, the compromise shall be
subject to the approval of the NEB composed of the petitioner and four deputy
commissioners.
Finally, as correctly held by the appellate court, this provision applies to all compromises,
whether government-initiated or not. Ubi lex non distinguit, nec nos distinguere debemos.
Where the law does not distinguish, we should not distinguish.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 175451
April 13, 2007
ROSARIO L. DADULO, Petitioner,
vs.
THE HON. COURT OF APPEALS, OFFICE OF THE OMBUDSMAN, HON. FELICIANO BELMONTE,
JR., in his capacity as City Mayor of Quezon City and GLORIA PATANGUI, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition is the July 20, 2006 Decision1 of the Court of Appeals in CA-G.R. SP
No. 89909, affirming the March 4, 2003 Decision2 of the Office of the Ombudsman in OMB-CA-02-0470-J, which found petitioner Rosario Dadulo guilty of conduct prejudicial to the best
interest of the service and imposed upon her the penalty of six months suspension.
On September 26, 2002, private respondent Gloria Patangui (Patangui) filed before the Office
of the Ombudsman an administrative complaint against petitioner Rosario Dadulo, Barangay
Chairperson of Barangay Payatas A, Quezon City; and against Barangay Security Development
Officers (BSDOs) Edgar Saraga and Rogelio Dumadigo; and Deputy BSDO Efren Pagabao.
Patangui declared in her Salaysay ng Pagrereklamo3 that at around 4:30 in the afternoon of
September 22, 2002, while she was out of their house, petitioner and the said BSDOs stole
several galvanized iron sheets, lumber, and rolled plain iron sheets from her backyard. The
incident was purportedly witnessed by Patangui’s two daughters who saw two men cart
away the items upon the orders of a woman who was standing nearby. A BSDO on duty told
Patangui that it was petitioner who ordered the seizure of the subject construction materials.
The same information was relayed to her by a certain Elsie Castillejos. The following day,
Patangui found out that some of the galvanized iron sheets taken from her backyard were
utilized in building the new barangay outpost. She recognized said items because she is
familiar with the campaign stickers still posted on the galvanized iron sheets.
In her Sinumpaang Salaysay,4 Jessica, 9 year old daughter of Patangui, stated that while she
was playing in their yard, two men seized their construction materials upon the orders of a
woman. The following day, she pointed to a BSDO wearing a black jacket as one of those who
took the construction materials. Upon inquiry, said man was identified as Edgar Saraga.
Jessica later learned from their neighbors and from her mother that the woman who was
standing near their house and giving orders to the BSDOs, was petitioner Rosario Dadulo.
Deputy BSDO Efren Pagabao stated in his counter-affidavit that they were directed by
petitioner to inspect the house of Patangui to verify whether she has the necessary permit in
connection with the ongoing construction in the site. He stressed that they acted with
courtesy during the said inspection.5 BSDOs Edgar Saraga and Rogelio Dumadigo added that
the complaint filed against them was fabricated and aimed to conceal that Patangui was
illegally building a structure on a land owned by the government. 6
In her counter-affidavit, petitioner denied the charge against her and declared that on
September 11, 2002, a certain Elsie Castillejos applied for a permit to construct a house
extension but was denied because the structure was intended to be built on the land owned
by the National Waterworks and Sewerage Authority (NAWASA). Nevertheless, the
construction proceeded. Petitioner inspected the site and found out that the structure is
owned by Patangui and not by Elsie Castillejos.7
Based on the affidavit of the parties, the Office of the Ombudsman rendered the assailed
Decision finding petitioner and BSDO Edgar Saraga guilty of conduct prejudicial to the best
interest of the service and imposed upon them the penalty of six months suspension. The
charges against BSDO Rogelio Dumadigo and Deputy BSDO Efren Pagabao were dismissed for
not having been identified as among those who took the construction materials of petitioner.
The dispositive portion of the decision of the Office of the Ombudsman, reads:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered finding respondents
ROSARIO DADULO and EDGAR SARAGA Guilty of Conduct Prejudicial to the Best Interest of
the Service, for which the penalty of Suspension for Six (6) Months Without Pay is hereby
recommended, pursuant to the provisions of Section 10, Rule III of Administrative Order No.
07, in relation to Section 25 of Republic Act No. 6770.
The Honorable, the Mayor, Quezon City, is hereby furnished a copy of this Decision for its
implementation in accordance with law, with the directive to inform this Office of the action
taken thereon.
SO RESOLVED.8
Only petitioner elevated the case to the Court of Appeals which affirmed the assailed
decision of the Office of the Ombudsman on July 20, 2006.9 It held that there is substantial
evidence to prove that petitioner ordered the seizure of the construction materials of
Patangui. The dispositive portion thereof, provides:
WHEREFORE, premises considered, the appealed decision of the Office of the Ombudsman in
OMB-C-A-02-0470-J is hereby AFFIRMED and the petition is DENIED.
SO ORDERED.101a\^/phi1.net
On October 26, 2006, public respondent Feliciano Belmonte, Jr. issued an Order
implementing the suspension of petitioner.11 Hence, the instant recourse with prayer for the
issuance of a temporary restraining order. On December 13, 2006, the Court issued a
Resolution enjoining the implementation of petitioner’s suspension.12
The issue for resolution is whether there is substantial evidence to show that petitioner
ordered the seizure of Patangui’s construction materials.
Administrative proceedings are governed by the "substantial evidence rule." Otherwise
stated, a finding of guilt in an administrative case would have to be sustained for as long as it
is supported by substantial evidence that the respondent has committed acts stated in the
complaint.13 Substantial evidence is more than a mere scintilla of evidence. It means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion,
even if other minds equally reasonable might conceivably opine otherwise. 14
A review of the records of the case shows that the factual findings of the Ombudsman upon
which its decision on petitioner’s administrative liability was based are supported by the
evidence on record. Petitioner and BSDO Edgar Saraga were identified as the persons who
took the construction materials. Respondent’s claim was corroborated by the testimony of
her daughter who saw the actual taking of the construction materials. Moreover, respondent
testified that the materials taken from her premises were used in the construction of the
new barangay outpost.15
On the other hand, the defense proffered by petitioner failed to rebut the charges against
her. She cannot rely on the sweeping general denial of the charges in the face of a positive
and categorical assertion made by respondent and her witness.16 Petitioner was afforded the
opportunity to disprove the charges against her but still failed to offer any plausible
explanation as to why the construction materials were in their possession, some of which
were even used in the barangay outpost. Instead, she accused private respondent of illegally
constructing a structure. However, even if the construction materials were to be used in
constructing an illegal structure, their summary seizure would still make the public officers
ordering or affecting the seizure administratively liable.
Findings of fact of the Office of the Ombudsman are conclusive when supported by
substantial evidence and are accorded due respect and weight especially when they are
affirmed by the Court of Appeals. It is only when there is grave abuse of discretion by the
Ombudsman that a review of factual findings may aptly be made. 17 In reviewing
administrative decisions, it is beyond the province of this Court to weigh the conflicting
evidence, determine the credibility of witnesses, or otherwise substitute its judgment for
that of the administrative agency with respect to the sufficiency of evidence.18 It is not the
function of this Court to analyze and weigh the parties’ evidence all over again except when
there is serious ground to believe that a possible miscarriage of justice would thereby result.
Our task in an appeal by petition for review on certiorari is limited, as a jurisdictional matter,
to reviewing errors of law that might have been committed by the Court of
Appeals.191awphi1.nét
WHEREFORE, the petition is DENIED.1awphi1.nét The Decision of the Court of Appeals in CAG.R. SP. No. 89909, affirming the March 4, 2003 Decision of the Office of the Ombudsman in
OMB-C-A-0470-J which found petitioner Rosario Dadulo guilty of conduct prejudicial to the
best interest of the service and imposed upon her the penalty of suspension for six months is
AFFIRMED.
SO ORDERED.
SO ORDERED.[4]
[G.R. No. 147096. January 15, 2002]
REPUBLIC OF THE PHILIPPINES, represented by NATIONAL TELECOMMUNICATIONS
COMMISSION, petitioner, vs. EXPRESS TELECOMMUNICATION CO., INC. and
BAYAN TELECOMMUNICATIONS CO., INC., respondents.
[G.R. No. 147210. January 15, 2002]
On June 18, 1998, the NTC issued Memorandum Circular No. 5-6-98 re-allocating five (5)
megahertz (MHz) of the radio frequency spectrum for the expansion of CMTS networks. The
re-allocated 5 MHz were taken from the following bands: 1730-1732.5 / 1825-1827.5 MHz and
1732.5-1735 / 1827.5-1830 MHz.[5]
Likewise, on March 23, 1999, Memorandum Circular No. 3-3-99 was issued by the NTC
re-allocating an additional five (5) MHz frequencies for CMTS service, namely: 1735-1737.5 /
1830-1832.5 MHz; 1737.5-1740 / 1832.5-1835 MHz; 1740-1742.5 / 1835-1837.5 MHz; and
1742.5-1745 / 1837.5-1840 MHz.[6]
On May 17, 1999, Bayantel filed an Ex-Parte Motion to Revive Case,[7] citing the
availability of new frequency bands for CMTS operators, as provided for under Memorandum
Circular No. 3-3-99.
BAYAN
TELECOMMUNICATIONS
(Bayantel),
INC., petitioner,
TELECOMMUNICATION CO., INC. (Extelcom), respondent.
vs. EXPRESS
DECISION
YNARES-SANTIAGO, J.:
On December
29,
1992,
International
Communications
Corporation
(now Bayan Telecommunications, Inc. or Bayantel) filed an application with the National
Telecommunications Commission (NTC) for a Certificate of Public Convenience or Necessity
(CPCN) to install, operate and maintain a digital Cellular Mobile Telephone System/Service
(CMTS) with prayer for a Provisional Authority (PA). The application was docketed as NTC Case
No. 92-486.[1]
Shortly thereafter, or on January 22, 1993, the NTC issued Memorandum Circular No. 41-93 directing all interested applicants for nationwide or regional CMTS to file their respective
applications before the Commission on or before February 15, 1993, and deferring the
acceptance of any application filed after said date until further orders.[2]
On May 6, 1993, and prior to the issuance of any notice of hearing by the NTC with
respect to Bayantels original application, Bayantel filed an urgent ex-parte motion to admit an
amended application.[3] On May 17, 1993, the notice of hearing issued by the NTC with respect
to this amended application was published in the Manila Chronicle. Copies of the application
as well as the notice of hearing were mailed to all affected parties. Subsequently, hearings
were conducted on the amended application. But before Bayantel could complete the
presentation of its evidence, the NTC issued an Order dated December 19, 1993 stating:
In view of the recent grant of two (2) separate Provisional Authorities in favor of ISLACOM
and GMCR, Inc., which resulted in the closing out of all available frequencies for the service
being applied for by herein applicant, and in order that this case may not remain pending for
an indefinite period of time, AS PRAYED FOR, let this case be, as it is, hereby ordered
ARCHIVED without prejudice to its reinstatement if and when the requisite frequency
becomes available.
On February 1, 2000, the NTC granted BayanTels motion to revive the latters application
and set the case for hearings on February 9, 10, 15, 17 and 22, 2000.[8] The NTC noted that the
application was ordered archived without prejudice to its reinstatement if and when the
requisite frequency shall become available.
Respondent Express Telecommunication Co., Inc. (Extelcom) filed in NTC Case No. 92486 an Opposition (With Motion to Dismiss) praying for the dismissal
of Bayantels application.[9]Extelcom argued that Bayantels motion sought the revival of an
archived application filed almost eight (8) years ago. Thus, the documentary evidence and the
allegations of respondent Bayantel in this application are all outdated and should no longer be
used as basis of the necessity for the proposed CMTS service. Moreover, Extelcom alleged that
there was no public need for the service applied for by Bayantel as the present five CMTS
operators --- Extelcom, Globe Telecom, Inc., Smart Communication, Inc., Pilipino Telephone
Corporation, and IslaCommunication Corporation, Inc. --- more than adequately addressed the
market demand, and all are in the process of enhancing and expanding their respective
networks based on recent technological developments.
Extelcom likewise contended that there were no available radio frequencies that could
accommodate a new CMTS operator as the frequency bands allocated in NTC Memorandum
Circular No. 3-3-99 were intended for and had in fact been applied for by the existing CMTS
operators. The NTC, in its Memorandum Circular No. 4-1-93, declared it its policy to defer the
acceptance of any application for CMTS. All the frequency bands allocated for CMTS use under
the NTCs Memorandum Circular No. 5-11-88 and Memorandum Circular No. 2-12-92 had
already been allocated to the existing CMTS operators. Finally, Extelcom pointed out
that Bayantel is its substantial stockholder to the extent of about 46% of its outstanding capital
stock, and Bayantels application undermines the very operations of Extelcom.
On March 13, 2000, Bayantel filed a Consolidated Reply/Comment,[10] stating that the
opposition was actually a motion seeking a reconsideration of the NTC Order reviving the
instant application, and thus cannot dwell on the material allegations or the merits of the
case. Furthermore, Extelcom cannot claim that frequencies were not available inasmuch as
the allocation and assignment thereof rest solely on the discretion of the NTC.
In the meantime, the NTC issued on March 9, 2000 Memorandum Circular No. 9-3-2000,
re-allocating the following radio frequency bands for assignment to existing CMTS operators
and to public telecommunication entities which shall be authorized to install, operate and
maintain CMTS networks, namely: 1745-1750MHz / 1840-1845MHz; 1750-1775MHz / 18451850MHz; 1765-1770MHz / 1860-1865MHz; and 1770-1775MHz / 1865-1870MHz.[11]
On May 3, 2000, the NTC issued an Order granting in favor of Bayantel a provisional
authority to operate CMTS service.[12] The Order stated in pertinent part:
On the issue of legal capacity on the part of Bayantel, this Commission has already taken
notice of the change in name of International Communications Corporation
to Bayan Telecommunications, Inc. Thus, in the Decision entered in NTC Case No. 93-284/94200 dated 19 July 1999, it was recognized that Bayan Telecommunications, Inc., was formerly
named International Communications Corp. Bayantel and ICC Telecoms, Inc. are one and the
same entity, and it necessarily follows that what legal capacity ICC Telecoms has or has
acquired is also the legal capacity that Bayantel possesses.
On the allegation that the Commission has committed an error in allowing the revival of the
instant application, it appears that the Order dated 14 December 1993 archiving the same
was anchored on the non-availability of frequencies for CMTS. In the same Order, it was
expressly stated that the archival hereof, shall be without prejudice to its reinstatement if
and when the requisite frequency becomes available. Inherent in the said Order is the
prerogative of the Commission in reviving the same, subject to prevailing conditions. The
Order of 1 February 2001, cited the availability of frequencies for CMTS, and based thereon,
the Commission, exercising its prerogative, revived and reinstated the instant
application. The fact that the motion for revival hereof was made ex-parte by the applicant is
of no moment, so long as the oppositors are given the opportunity to be later heard and
present the merits of their respective oppositions in the proceedings.
On the allegation that the instant application is already obsolete and overtaken by
developments, the issue is whether applicant has the legal, financial and technical capacity to
undertake the proposed project.The determination of such capacity lies solely within the
discretion of the Commission, through its applicable rules and regulations. At any rate,
the oppositors are not precluded from showing evidence disputing such capacity in the
proceedings at hand. On the alleged non-availability of frequencies for the proposed service
in view of the pending applications for the same, the Commission takes note that it has
issued Memorandum Circular 9-3-2000, allocating additional frequencies for CMTS. The
eligibility of existing operators who applied for additional frequencies shall be treated and
resolved in their respective applications, and are not in issue in the case at hand.
Accordingly, the Motions for Reconsideration filed by SMARTCOM and GLOBE
TELECOMS/ISLACOM and the Motion to Dismiss filed by EXTELCOM are hereby DENIED for
lack of merit.[13]
The grant of the provisional authority was anchored on the following findings:
COMMENTS:
1. Due to the operational mergers between Smart Communications, Inc. and
Pilipino Telephone Corporation (Piltel) and between Globe Telecom, Inc.
(Globe) and Isla Communications, Inc. (Islacom), free and effective
competition in the CMTS market is threatened. The fifth operator, Extelcom,
cannot provide good competition in as much as it provides service using the
analog AMPS. The GSM system dominates the market.
2. There are at present two applicants for the assignment of the frequencies in the
1.7 Ghz and 1.8 Ghz allocated to CMTS, namely Globe and Extelcom. Based on
the number of subscribers Extelcom has, there appears to be no congestion in
its network - a condition that is necessary for an applicant to be assigned
additional frequencies. Globe has yet to prove that there is congestion in its
network considering its operational merger with Islacom.
3. Based on the reports submitted to the Commission, 48% of the total number of
cities and municipalities are still without telephone service despite the more
than 3 million installed lines waiting to be subscribed.
CONCLUSIONS:
1. To ensure effective competition in the CMTS market considering the operational
merger of some of the CMTS operators, new CMTS operators must be allowed
to provide the service.
2. The re-allocated frequencies for CMTS of 3 blocks of 5 Mhz x 2 is sufficient for
the number of applicants should the applicants be qualified.
3. There is a need to provide service to some or all of the remaining cities and
municipalities without telephone service.
4. The submitted documents are sufficient to determine compliance to the
technical requirements. The applicant can be directed to submit details such
as channeling plans, exact locations of cell sites, etc. as the project
implementation progresses, actual area coverage ascertained and traffic data
are made available. Applicant appears to be technically qualified to undertake
the proposed project and offer the proposed service.
IN VIEW OF THE FOREGOING and considering that there is prima facie evidence to show that
Applicant is legally, technically and financially qualified and that the proposed service is
technically feasible and economically viable, in the interest of public service, and in order to
facilitate the development of telecommunications services in all areas of the country, as well
as to ensure healthy competition among authorized CMTS providers, let a PROVISIONAL
AUTHORITY (P.A.) be issued to Applicant BAYAN TELECOMMUNICATIONS, INC. authorizing it
to construct, install, operate and maintain a Nationwide Cellular Mobile Telephone Systems
(CMTS), subject to the following terms and conditions without prejudice to a final decision
after completion of the hearing which shall be called within thirty (30) days from grant of
authority, in accordance with Section 3, Rule 15, Part IV of the Commissions Rules of Practice
and Procedure. xxx.[14]
Extelcom filed with the Court of Appeals a petition for certiorari and
prohibition,[15] docketed as CA-G.R. SP No. 58893, seeking the annulment of the Order reviving
the application of Bayantel, the Order granting Bayantel a provisional authority to construct,
install, operate and maintain a nationwide CMTS, and Memorandum Circular No. 9-3-2000
allocating frequency bands to new public telecommunication entities which are authorized to
install, operate and maintain CMTS.
On September 13, 2000, the Court of
Decision,[16] the dispositive portion of which reads:
Appeals
rendered
the
assailed
WHEREFORE, the writs of certiorari and prohibition prayed for are GRANTED. The Orders of
public respondent dated February 1, 2000 and May 3, 2000 in NTC Case No. 92-486 are
hereby ANNULLED and SET ASIDE and the Amended Application of
respondent Bayantel is DISMISSED without prejudice to the filing of a new CMTS
application. The writ of preliminary injunction issued under our Resolution dated August 15,
2000, restraining and enjoining the respondents from enforcing the Orders dated February 1,
2000 and May 3, 2000 in the said NTC case is hereby made permanent.The Motion for
Reconsideration of respondent Bayantel dated August 28, 2000 is denied for lack of merit.
SO ORDERED.[17]
II. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE REVIVAL
OF NTC CASE NO. 92-486 ANCHORED ON A EX-PARTE MOTION TO REVIVE CASE
WAS TANTAMOUNT TO GRAVE ABUSE OF DISCRETION ON THE PART OF THE
NTC.
III. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DENIED THE MANDATE OF
THE NTC AS THE AGENCY OF GOVERNMENT WITH THE SOLE DISCRETION
REGARDING ALLOCATION OF FREQUENCY BAND TO TELECOMMUNICATIONS
ENTITIES.
IV. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE
LEGAL PRINCIPLE THAT JURISDICTION ONCE ACQUIRED CANNOT BE LOST
WHEN IT DECLARED THAT THE ARCHIVED APPLICATION SHOULD BE DEEMED
AS A NEW APPLICATION IN VIEW OF THE SUBSTANTIAL CHANGE IN THE
CIRCUMSTANCES ALLEGED IN ITS AMENDMENT APPLICATION.
V. CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF
THE BAYANTEL APPLICATION WAS A VALID ACT ON THE PART OF THE NTC
EVEN IN THE ABSENCE OF A SPECIFIC RULE ON ARCHIVING OF CASES SINCE
RULES OF PROCEDURE ARE, AS A MATTER OF COURSE, LIBERALLY CONSTRUED
IN PROCEEDINGS BEFORE ADMINISTRATIVE BODIES AND SHOULD GIVE WAY
TO THE GREATER HIERARCHY OF PUBLIC WELFARE AND PUBLIC INTEREST.
Bayantel filed a motion for reconsideration of the above decision.[18] The NTC,
represented by the Office of the Solicitor General (OSG), also filed its own motion for
reconsideration.[19]On the other hand, Extelcom filed a Motion for Partial Reconsideration,
praying that NTC Memorandum Circular No. 9-3-2000 be also declared null and void.[20]
VI. CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF
BAYANTELS APPLICATION WAS NOT VIOLATIVE OF THE SUMMARY NATURE
OF THE PROCEEDINGS IN THE NTC UNDER SEC. 3, RULE 1 OF THE NTC
REVISED RULES OF PROCEDURE.
On February 9, 2001, the Court of Appeals issued the assailed Resolution denying all of
the motions for reconsideration of the parties for lack of merit.[21]
VII. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE
ARCHIVING OF BAYANTELS APPLICATION WAS VIOLATIVE OF THE ALLEGED
DECLARED POLICY OF THE GOVERNMENT ON THE TRANSPARENCY AND
FAIRNESS OF ADMINISTRATIVE PROCESS IN THE NTC AS LAID DOWN IN SEC
4(1) OF R.A. NO. 7925.
Hence, the NTC filed the instant petition for review on certiorari, docketed as G.R. No.
147096, raising the following issues for resolution of this Court:
A. Whether or not the Order dated February 1, 2000 of the petitioner which revived the
application of respondent Bayantel in NTC Case No. 92-486 violated
respondent Extelcoms right to procedural due process of law;
B. Whether or not the Order dated May 3, 2000 of the petitioner granting
respondent Bayantel a provisional authority to operate a CMTS is in substantial compliance
with NTC Rules of Practice and Procedure and Memorandum Circular No. 9-14-90 dated
September 4, 1990.[22]
Subsequently, Bayantel also filed its petition for review, docketed as G.R. No. 147210,
assigning the following errors:
I. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE
PRINCIPLE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES WHEN IT FAILED
TO DISMISS HEREIN RESPONDENTS PETITION FOR CERTIORARI DESPITE ITS
FAILURE TO FILE A MOTION FOR RECONSIDERATION.
VIII. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE NTC
VIOLATED THE PROVISIONS OF THE CONSTITUTION PERTAINING TO DUE
PROCESS OF LAW.
IX. THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT THE MAY 3,
2000 ORDER GRANTING BAYANTEL A PROVISIONAL AUTHORITY SHOULD BE
SET ASIDE AND REVERSED.
i. Contrary to the finding of the Court of Appeals, there was no violation of the NTC
Rule that the legal, technical, financial and economic documentations in
support of the prayer for provisional authority should first be submitted.
ii. Contrary to the finding of the Court of Appeals, there was no violation of Sec. 3,
Rule 15 of the NTC Rules of Practice and Procedure that a motion must first be
filed before a provisional authority could be issued.
iii. Contrary to the finding of the Court of Appeals that a plea for provisional
authority necessitates a notice and hearing, the very rule cited by the
petitioner (Section 5, Rule 4 of the NTC Rules of Practice and Procedure)
provides otherwise.
iv. Contrary to the finding of the Court of Appeals, urgent public need is not the
only basis for the grant of a provisional authority to an applicant;
v. Contrary to the finding of the Court of Appeals, there was no violation of the
constitutional provision on the right of the public to information when the
Common Carrier Authorization Department (CCAD) prepared its evaluation
report.[23]
Considering the identity of the matters involved, this Court resolved to consolidate the
two petitions.[24]
At the outset, it is well to discuss the nature and functions of the NTC, and analyze its
powers and authority as well as the laws, rules and regulations that govern its existence and
operations.
The NTC was created pursuant to Executive Order No. 546, promulgated on July 23,
1979. It assumed the functions formerly assigned to the Board of Communications and the
Telecommunications Control Bureau, which were both abolished under the said Executive
Order. Previously, the NTCs functions were merely those of the defunct Public Service
Commission (PSC), created under Commonwealth Act No. 146, as amended, otherwise known
as the Public Service Act, considering that the Board of Communications was the successor-ininterest of the PSC. Under Executive Order No. 125-A, issued in April 1987, the NTC became an
attached agency of the Department of Transportation and Communications.
In the regulatory telecommunications industry, the NTC has the sole authority to issue
Certificates of Public Convenience and Necessity (CPCN) for the installation, operation, and
maintenance of communications facilities and services, radio communications systems,
telephone and telegraph systems. Such power includes the authority to determine the areas
of operations of applicants for telecommunications services. Specifically, Section 16 of the
Public Service Act authorizes the then PSC, upon notice and hearing, to issue Certificates of
Public Convenience for the operation of public services within the Philippines whenever the
Commission finds that the operation of the public service proposed and the authorization to
do business will promote the public interests in a proper and suitable manner. [25] The
procedure governing the issuance of such authorizations is set forth in Section 29 of the said
Act, the pertinent portion of which states:
All hearings and investigations before the Commission shall be governed by rules adopted by
the Commission, and in the conduct thereof, the Commission shall not be bound by the
technical rules of legal evidence. xxx.
In granting Bayantel the provisional authority to operate a CMTS, the NTC applied Rule
15, Section 3 of its 1978 Rules of Practice and Procedure, which provides:
Sec. 3. Provisional Relief. --- Upon the filing of an application, complaint or petition or at any
stage thereafter, the Board may grant on motion of the pleader or on its own initiative, the
relief prayed for, based on the pleading, together with the affidavits and supporting
documents attached thereto, without prejudice to a final decision after completion of the
hearing which shall be called within thirty (30) days from grant of authority asked
for. (underscoring ours)
Respondent Extelcom, however, contends that the NTC should have applied the Revised
Rules which were filed with the Office of the National Administrative Register on February 3,
1993. These Revised Rules deleted the phrase on its own initiative; accordingly, a provisional
authority may be issued only upon filing of the proper motion before the Commission.
In answer to this argument, the NTC, through the Secretary of the Commission, issued a
certification to the effect that inasmuch as the 1993 Revised Rules have not been published in
a newspaper of general circulation, the NTC has been applying the 1978 Rules.
The absence of publication, coupled with the certification by the Commissioner of the
NTC stating that the NTC was still governed by the 1978 Rules, clearly indicate that the 1993
Revised Rules have not taken effect at the time of the grant of the provisional authority
to Bayantel. The fact that the 1993 Revised Rules were filed with the
UP Law Center on February 3, 1993 is of no moment. There is nothing in the Administrative
Code of 1987 which implies that the filing of the rules with the UP Law Center is the operative
act that gives the rules force and effect. Book VII, Chapter 2, Section 3 thereof merely states:
Filing. --- (1) Every agency shall file with the University of the Philippines Law Center three (3)
certified copies of every rule adopted by it. Rules in force on the date of effectivity of this
Code which are not filed within three (3) months from the date shall not thereafter be the
basis of any sanction against any party or persons.
(2) The records officer of the agency, or his equivalent functionary, shall carry out the
requirements of this section under pain or disciplinary action.
(3) A permanent register of all rules shall be kept by the issuing agency and shall be open to
public inspection.
The National Administrative Register is merely a bulletin of codified rules and it is
furnished only to the Office of the President, Congress, all appellate courts, the National
Library, other public offices or agencies as the Congress may select, and to other persons at a
price sufficient to cover publication and mailing or distribution costs. [26] In a similar case, we
held:
This does not imply however, that the subject Administrative Order is a valid exercise of such
quasi-legislative power. The original Administrative Order issued on August 30, 1989, under
which the respondents filed their applications for importations, was not published in the
Official Gazette or in a newspaper of general circulation. The questioned Administrative
Order, legally, until it is published, is invalid within the context of Article 2 of Civil Code,
which reads:
Article 2. Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette (or in a newspaper of general circulation in
the Philippines), unless it is otherwise provided. x x x
The fact that the amendments to Administrative Order No. SOCPEC 89-08-01 were filed with,
and published by the UP Law Center in the National Administrative Register, does not cure
the defect related to the effectivity of the Administrative Order.
merely internal in nature, or those so-called letters of instructions issued by administrative
superiors concerning the rules and guidelines to be followed by their subordinates in the
performance of their duties.[30]
This Court, in Taada vs. Tuvera (G.R. No. L-63915, December 29, 1986, 146 SCRA 446) stated,
thus:
Hence, the 1993 Revised Rules should be published in the Official Gazette or in a
newspaper of general circulation before it can take effect. Even the 1993 Revised Rules itself
mandates that said Rules shall take effect only after their publication in a newspaper of general
circulation.[31] In the absence of such publication, therefore, it is the 1978 Rules that governs.
We hold therefore that all statutes, including those of local application and private laws, shall
be published as a condition for their effectivity, which shall begin fifteen days after
publication unless a different effectivity is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the
President in the exercise of legislative power or, at present, directly conferred by the
Constitution. Administrative Rules and Regulations must also be published if their purpose is
to enforce or implement existing law pursuant also to a valid delegation.
Interpretative regulations and those merely internal in nature, that is, regulating only the
personnel of the administrative agency and not the public, need not be published. Neither is
publication required of the so-called letters of instructions issued by administrative superiors
concerning the rules or guidelines to be followed by their subordinates in the performance of
their duties.
xxx
We agree that the publication must be in full or it is no publication at all since its purpose is
to inform the public of the contents of the laws.
The Administrative Order under consideration is one of those issuances which should be
published for its effectivity, since its purpose is to enforce and implement an existing law
pursuant to a valid delegation, i.e., P.D. 1071, in relation to LOI 444 and EO 133.[27]
Thus, publication in the Official Gazette or a newspaper of general circulation is a
condition sine qua non before statutes, rules or regulations can take effect. This is explicit from
Executive Order No. 200, which repealed Article 2 of the Civil Code, and which states that:
Laws shall take effect after fifteen days following the completion of their publication either in
the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is
otherwise provided.[28]
The Rules of Practice and Procedure of the NTC, which implements Section 29 of the
Public Service Act (C.A. 146, as amended), fall squarely within the scope of these laws, as
explicitly mentioned in the case Taada v. Tuvera.[29]
Our pronouncement in Taada vs. Tuvera is clear and categorical. Administrative rules and
regulations must be published if their purpose is to enforce or implement existing law
pursuant to a valid delegation.The only exceptions are interpretative regulations, those
In any event, regardless of whether the 1978 Rules or the 1993 Revised Rules should
apply, the records show that the amended application filed by Bayantel in fact included a
motion for the issuance of a provisional authority. Hence, it cannot be said that the NTC
granted the provisional authority motu proprio. The Court of Appeals, therefore, erred when
it found that the NTC issued its Order of May 3, 2000 on its own initiative. This much is
acknowledged in the Decision of the Court of Appeals:
As prayer, ICC asked for the immediate grant of provisional authority to construct, install,
maintain and operate the subject service and to charge the proposed rates and after due
notice and hearing, approve the instant application and grant the corresponding certificate of
public convenience and necessity.[32]
The Court of Appeals also erred when it declared that the NTCs Order
archiving Bayantels application was null and void. The archiving of cases is a widely accepted
measure designed to shelve cases in which no immediate action is expected but where no
grounds exist for their outright dismissal, albeit without prejudice. It saves the petitioner or
applicant from the added trouble and expense of re-filing a dismissed case. Under this scheme,
an inactive case is kept alive but held in abeyance until the situation obtains wherein action
thereon can be taken.
In the case at bar, the said application was ordered archived because of lack of available
frequencies at the time, and made subject to reinstatement upon availability of the requisite
frequency. To be sure, there was nothing irregular in the revival of the application after the
condition therefor was fulfilled.
While, as held by the Court of Appeals, there are no clear provisions in the Rules of the
NTC which expressly allow the archiving of any application, this recourse may be justified under
Rule 1, Section 2 of the 1978 Rules, which states:
Sec. 2. Scope.--- These rules govern pleadings, practice and procedure before the Board of
Communications (now NTC) in all matters of hearing, investigation and proceedings within
the jurisdiction of the Board. However, in the broader interest of justice and in order to best
serve the public interest, the Board may, in any particular matter, except it from these rules
and apply such suitable procedure to improve the service in the transaction of the public
business. (underscoring ours)
The Court of Appeals ruled that the NTC committed grave abuse of discretion when it
revived Bayantels application based on an ex-parte motion. In this regard, the pertinent
provisions of the NTC Rules:
Sec. 5. Ex-parte Motions. --- Except for motions for provisional authorization of proposed
services and increase of rates, ex-parte motions shall be acted upon by the Board only upon
showing of urgent necessity therefor and the right of the opposing party is not substantially
impaired.[33]
Likewise, the requirements of notice and publication of the application is no longer
necessary inasmuch as the application is a mere revival of an application which has already
been published earlier. At any rate, the records show that all of the five (5) CMTS operators in
the country were duly notified and were allowed to raise their respective oppositions
to Bayantelsapplication through the NTCs Order dated February 1, 2000.
Thus, in cases which do not involve either an application for rate increase or an
application for a provisional authority, the NTC may entertain ex-parte motions only where
there is an urgent necessity to do so and no rights of the opposing parties are impaired.
It should be borne in mind that among the declared national policies under Republic Act
No. 7925, otherwise known as the Public Telecommunications Policy Act of the Philippines, is
the healthy competition among telecommunications carriers, to wit:
The Court of Appeals ruled that there was a violation of the fundamental right
of Extelcom to due process when it was not afforded the opportunity to question the motion
for the revival of the application. However, it must be noted that said Order referred to a
simple revival of the archived application of Bayantel in NTC Case No. 92-426. At this stage, it
cannot be said that Extelcoms right to procedural due process was prejudiced. It will still have
the opportunity to be heard during the full-blown adversarial hearings that will follow. In fact,
the records show that the NTC has scheduled several hearing dates for this purpose, at which
all interested parties shall be allowed to register their opposition. We have ruled that there is
no denial of due process where full-blown adversarial proceedings are conducted before an
administrative body.[34] With Extelcom having fully participated in the proceedings, and
indeed, given the opportunity to file its opposition to the application, there was clearly no
denial of its right to due process.
In Zaldivar vs. Sandiganbayan (166 SCRA 316 [1988]), we held that the right to be heard does
not only refer to the right to present verbal arguments in court. A party may also be heard
through his pleadings.where opportunity to be heard is accorded either through oral
arguments or pleadings, there is no denial of procedural due process. As reiterated
in National Semiconductor (HK) Distribution, Ltd. vs. NLRC(G.R. No. 123520, June 26, 1998),
the essence of due process is simply an opportunity to be heard, or as applied to
administrative proceedings, an opportunity to explain one's side. Hence, in Navarro III
vs. Damaso (246 SCRA 260 [1995]), we held that a formal or trial-type hearing is not at all
times and not in all instances essential. Plainly, petitioner was not denied due process.[35]
Extelcom had already entered its appearance as a party and filed its opposition to the
application. It was neither precluded nor barred from participating in the hearings
thereon. Indeed, nothing, not even the Order reviving the application, bars or
prevents Extelcom and the other oppositors from participating in the hearings and adducing
evidence in support of their respective oppositions. The motion to revive could not have
possibly caused prejudice to Extelcom since the motion only sought the revival of the
application. It was merely a preliminary step towards the resumption of the hearings on the
application of Bayantel. The latter will still have to prove its capability to undertake the
proposed CMTS. Indeed, in its Order dated February 1, 2000, the NTC set several hearing dates
precisely intended for the presentation of evidence on Bayantels capability and
qualification. Notice of these hearings were sent to all parties concerned, including Extelcom.
As regards the changes in the personal circumstances of Bayantel, the same may be
ventilated at the hearings during Bayantels presentation of evidence. In fact, Extelcom was
able to raise its arguments on this matter in the Opposition (With Motion to Dismiss) anent
the re-opening and re-instatement of the application of Bayantel. Extelcom was thus heard on
this particular point.
A healthy competitive environment shall be fostered, one in which telecommunications
carriers are free to make business decisions and to interact with one another in providing
telecommunications services, with the end in view of encouraging their financial viability
while maintaining affordable rates.[36]
The NTC is clothed with sufficient discretion to act on matters solely within its
competence. Clearly, the need for a healthy competitive environment in telecommunications
is sufficient impetus for the NTC to consider all those applicants who are willing to offer
competition, develop the market and provide the environment necessary for greater public
service. This was the intention that came to light with the issuance of Memorandum Circular 93-2000, allocating new frequency bands for use of CMTS. This memorandum circular
enumerated the conditions prevailing and the reasons which necessitated its issuance as
follows:
- the international accounting rates are rapidly declining, threatening the subsidy
to the local exchange service as mandated in EO 109 and RA 7925;
- the public telecommunications entities which were obligated to install, operate
and maintain local exchange network have performed their obligations in
varying degrees;
- after more than three (3) years from the performance of the obligations only 52%
of the total number of cities and municipalities are provided with local
telephone service.
- there are mergers and consolidations among the existing cellular mobile
telephone service (CMTS) providers threatening the efficiency of competition;
- there is a need to hasten the installation of local exchange lines
in unserved areas;
- there are existing CMTS operators which are experiencing congestion in the
network resulting to low grade of service;
- the consumers/customers shall be given the freedom to choose CMTS operators
from which they could get the service.[37]
Clearly spelled out is the need to provide enhanced competition and the requirement
for more landlines and telecommunications facilities in unserved areas in the country. On both
scores, therefore, there was sufficient showing that the NTC acted well within its jurisdiction
and in pursuance of its avowed duties when it allowed the revival of Bayantels application.
We now come to the issue of exhaustion of administrative remedies. The rule is wellentrenched that a party must exhaust all administrative remedies before resorting to the
courts. The premature invocation of the intervention of the court is fatal to ones cause of
action. This rule would not only give the administrative agency an opportunity to decide the
matter by itself correctly, but would also prevent the unnecessary and premature resort to
courts.[38] In the case of Lopez v. City of Manila,[39] we held:
As a general rule, where the law provides for the remedies against the action of an
administrative board, body or officer, relief to courts can be sought only after exhausting all
remedies provided. The reason rests upon the presumption that the administrative body, if
given the chance to correct its mistake or error, may amend its decision on a given matter
and decide it properly. Therefore, where a remedy is available within the administrative
machinery, this should be resorted to before resort can be made to the courts, not only to
give the administrative agency the opportunity to decide the matter by itself correctly, but
also to prevent unnecessary and premature resort to courts.
Clearly, Extelcom violated the rule on exhaustion of administrative remedies when it
went directly to the Court of Appeals on a petition for certiorari and prohibition from the Order
of the NTC dated May 3, 2000, without first filing a motion for reconsideration. It is well-settled
that the filing of a motion for reconsideration is a prerequisite to the filing of a special civil
action for certiorari.
The general rule is that, in order to give the lower court the opportunity to correct itself, a
motion for reconsideration is a prerequisite to certiorari. It also basic that petitioner must
exhaust all other available remedies before resorting to certiorari. This rule, however, is
subject to certain exceptions such as any of the following: (1) the issues raised are purely
legal in nature, (2) public interest is involved, (3) extreme urgency is obvious or (4) special
circumstances warrant immediate or more direct action.[40]
This case does not fall under any of the recognized exceptions to this rule. Although the
Order of the NTC dated May 3, 2000 granting provisional authority to Bayantel was
immediately executory, it did not preclude the filing of a motion for reconsideration. Under
the NTC Rules, a party adversely affected by a decision, order, ruling or resolution may within
fifteen (15) days file a motion for reconsideration. That the Order of the NTC became
immediately executory does not mean that the remedy of filing a motion for reconsideration
is foreclosed to the petitioner.[41]
Furthermore, Extelcom does not enjoy the grant of any vested interest on the right to
render a public service. The Constitution is quite emphatic that the operation of a public utility
shall not be exclusive. Thus:
No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted to citizens of the Philippines or to corporations organized under the
laws of the Philippines at least sixty per centum of whose capital is owned by such citizens,
nor shall such franchise, certificate or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or right be granted except under the
condition that it shall be subject to amendment, alteration, or repeal by the Congress when
the common good so requires. xxx xxx xxx.[42]
In Radio Communications of the Phils., Inc. v. National Telecommunications
Commission,[43] we held:
It is well within the powers of the public respondent to authorize the installation by the
private respondent network of radio communications systems in Catarman, Samar and San
Jose, Mindoro. Under the circumstances, the mere fact that the petitioner possesses a
franchise to put up and operate a radio communications system in certain areas is not an
insuperable obstacle to the public respondents issuing the proper certificate to an applicant
desiring to extend the same services to those areas. The Constitution mandates that a
franchise cannot be exclusive in nature nor can a franchise be granted except that it must be
subject to amendment, alteration, or even repeal by the legislature when the common good
so requires. (Art. XII, sec. 11 of the 1986 Constitution). There is an express provision in the
petitioners franchise which provides compliance with the above mandate (RA 2036, sec. 15).
Even in the provisional authority granted to Extelcom, it is expressly stated that such
authority is not exclusive. Thus, the Court of Appeals erred when it gave due course
to Extelcomspetition and ruled that it constitutes an exception to the rule on exhaustion of
administrative remedies.
Also, the Court of Appeals erred in annulling the Order of the NTC dated May 3, 2000,
granting Bayantel a provisional authority to install, operate and maintain CMTS. The general
rule is that purely administrative and discretionary functions may not be interfered with by the
courts. Thus, in Lacuesta v. Herrera,[44] it was held:
xxx (T)he powers granted to the Secretary of Agriculture and Commerce (natural resources)
by law regarding the disposition of public lands such as granting of licenses, permits, leases
and contracts, or approving, rejecting, reinstating, or canceling applications, are all executive
and administrative in nature. It is a well recognized principle that purely administrative and
discretionary functions may not be interfered with by the courts. (Coloso vs. Board of
Accountancy, G.R. No. L-5750, April 20, 1953) In general, courts have no supervising power
over the proceedings and actions of the administrative departments of the government. This
is generally true with respect to acts involving the exercise of judgement or discretion and
findings of fact. (54 Am. Jur. 558-559) xxx.
The established exception to the rule is where the issuing authority has gone beyond its
statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without
regard to his duty or with grave abuse of discretion. [45] None of these obtains in the case at
bar.
Moreover, in petitions for certiorari, evidentiary matters or matters of fact raised in the
court below are not proper grounds nor may such be ruled upon in the proceedings. As held
in National Federation of Labor v. NLRC:[46]
At the outset, it should be noted that a petition for certiorari under Rule 65 of the Rules of
Court will prosper only if there is a showing of grave abuse of discretion or an act without or
in excess of jurisdiction on the part of the National Labor Relations Commission. It does not
include an inquiry as to the correctness of the evaluation of evidence which was the basis of
the labor official or officer in determining his conclusion. It is not for this Court to re-examine
conflicting evidence, re-evaluate the credibility of witnesses nor substitute the findings of
fact of an administrative tribunal which has gained expertise in its special field. Considering
that the findings of fact of the labor arbiter and the NLRC are supported by evidence on
record, the same must be accorded due respect and finality.
This Court has consistently held that the courts will not interfere in matters which are
addressed to the sound discretion of the government agency entrusted with the regulation of
activities coming under the special and technical training and knowledge of such agency. [47] It
has also been held that the exercise of administrative discretion is a policy decision and a
matter that can best be discharged by the government agency concerned, and not by the
courts.[48] In Villanueva v. Court of Appeals,[49] it was held that findings of fact which are
supported by evidence and the conclusion of experts should not be disturbed. This was
reiterated in Metro Transit Organization, Inc. v. National Labor Relations
Commission,[50] wherein it was ruled that factual findings of quasi-judicial bodies which have
acquired expertise because their jurisdiction is confined to specific matters are generally
accorded not only respect but even finality and are binding even upon the Supreme Court if
they are supported by substantial evidence.
Administrative agencies are given a wide latitude in the evaluation of evidence and in
the exercise of its adjudicative functions. This latitude includes the authority to take judicial
notice of facts within its special competence.
In the case at bar, we find no reason to disturb the factual findings of the NTC which
formed the basis for awarding the provisional authority to Bayantel. As found by the
NTC, Bayantelhas been granted several provisional and permanent authorities before to
operate various telecommunications services.[51] Indeed, it was established that Bayantel was
the first company to comply with its obligation to install local exchange lines pursuant to E.O.
109 and R.A. 7925. In recognition of the same, the provisional authority awarded in favor
of Bayantel to operate Local Exchange Services in Quezon City, Malabon, Valenzuela and the
entire Bicol region was made permanent and a CPCN for the said service was granted in its
favor. Prima facie evidence was likewise found showing Bayantels legal, financial and technical
capacity to undertake the proposed cellular mobile telephone service.
Likewise, the May 3, 2000 Order did not violate NTC Memorandum Circular No. 9-1490 dated September 4, 1990, contrary to the ruling of the Court of Appeals. The memorandum
circular sets forth the procedure for the issuance of provisional authority thus:
EFFECTIVE THIS DATE, and as part of the Commissions drive to streamline and fast track
action on applications/petitions for CPCN other forms of authorizations, the Commission
shall be evaluating applications/petitions for immediate issuance of provisional
authorizations, pending hearing and final authorization of an application on its merit.
For this purpose, it is hereby directed that all applicants/petitioners seeking for provisional
authorizations, shall submit immediately to the Commission, either together with their
application or in a Motion all their legal, technical, financial, economic documentations in
support of their prayer for provisional authorizations for evaluation. On the basis of their
completeness and their having complied with requirements, the Commission shall be issuing
provisional authorizations.
Clearly, a provisional authority may be issued even pending hearing and final
determination of an application on its merits.
Finally, this Court finds that the Manifestations of Extelcom alleging forum shopping on
the part of the NTC and Bayantel are not impressed with merit. The divisions of the Supreme
Court are not to be considered as separate and distinct courts. The Supreme Court remains a
unit notwithstanding that it works in divisions. Although it may have three divisions, it is but a
single court. Actions considered in any of these divisions and decisions rendered therein are,
in effect, by the same Tribunal. The divisions of this Court are not to be considered as separate
and distinct courts but as divisions of one and the same court.[52]
Moreover, the rules on forum shopping should not be literally interpreted. We have
stated thus:
It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and applied as
to achieve the purposes projected by the Supreme Court when it promulgated that
circular. Circular No. 28-91 was designed to serve as an instrument to promote and facilitate
the orderly administration of justice and should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objection or the goal of all rules of
procedure which is to achieve substantial justice as expeditiously as possible.[53]
Even assuming that separate actions have been filed by two different parties involving
essentially the same subject matter, no forum shopping was committed as the parties did not
resort to multiple judicial remedies. The Court, therefore, directed the consolidation of the
two cases because they involve essentially the same issues. It would also prevent the absurd
situation wherein two different divisions of the same court would render altogether different
rulings in the cases at bar.
We rule, likewise, that the NTC has legal standing to file and initiate legal action in cases
where it is clear that its inaction would result in an impairment of its ability to execute and
perform its functions. Similarly, we have previously held in Civil Service Commission
v. Dacoycoy[54] that the Civil Service Commission, as an aggrieved party, may appeal the
decision of the Court of Appeals to this Court.
As correctly stated by the NTC, the rule invoked by Extelcom is Rule 65 of the Rules of
Civil Procedure, which provides that public respondents shall not appear in or file an answer
or comment to the petition or any pleading therein.[55] The instant petition, on the other hand,
was filed under Rule 45 where no similar proscription exists.
WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The
Court of Appeals Decision dated September 13, 2000 and Resolution dated February 9,
2001are REVERSED and SET ASIDE. The permanent injunction issued by the Court of Appeals is
LIFTED. The Orders of the NTC dated February 1, 2000 and May 3, 2000 are REINSTATED.No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-49774 February 24, 1981
SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner,
vs.
Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE
WORKERS UNION, respondents.
DE CASTRO, J.:
Petition for certiorari and prohibition, with preliminary injunction to review the Order 1 dated
December 19, 1978 rendered by the Deputy Minister of Labor in STF ROX Case No. 009-77
docketed as "Cagayan Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San
Miguel Corporation, " which denied herein petitioner's motion for reconsideration and
ordered the immediate execution of a prior Order 2 dated June 7, 1978.
On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed
a complaint against San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner herein,
alleging failure or refusal of the latter to include in the computation of 13th- month pay such
items as sick, vacation or maternity leaves, premium for work done on rest days and special
holidays, including pay for regular holidays and night differentials.
An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the complaint
was filed requiring herein petitioner San Miguel Corporation (Cagayan Coca-Cola Plant) "to
pay the difference of whatever earnings and the amount actually received as 13th month pay
excluding overtime premium and emergency cost of living allowance. "
Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the
Deputy Minister of Labor Amado G. Inciong issued an Order 4 dated June 7, 1978 affirming
the Order of Regional Office No. X and dismissing the appeal for lack of merit. Petitioner's
motion for reconsideration having been denied, it filed the instant petition.
On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining
respondents from enforcing the Order dated December 19, 1978.
The crux of the present controversy is whether or not in the computation of the 13th-month
pay under Presidential Decree 851, payments for sick, vacation or maternity leaves, premium
for work done on rest days and special holidays, including pay for regular holidays and night
differentials should be considered.
Public respondent's consistent stand on the matter since the effectivity of Presidential
Decree 851 is that "payments for sick leave, vacation leave, and maternity benefits, as well as
salaries paid to employees for work performed on rest days, special and regular holidays are
included in the computation of the 13th-month pay. 6 On its part, private respondent cited
innumerable past rulings, opinions and decisions rendered by then Acting Labor Secretary
Amado G. Inciong to the effect that, "in computing the mandatory bonus, the basis is the
total gross basic salary paid by the employer during the calendar year. Such gross basic salary
includes: (1) regular salary or wage; (2) payments for sick, vacation and maternity leaves; (3)
premium for work performed on rest days or holidays: (4) holiday pay for worked or
unworked regular holiday; and (5) emergency allowance if given in the form of a wage
adjustment." 7
Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and opinions,
vigorously contends that Presidential Decree 851 speaks only of basic salary as basis for the
determination of the 13th-month pay; submits that payments for sick, vacation, or maternity
leaves, night differential pay, as well as premium paid for work performed on rest days,
special and regular holidays do not form part of the basic salary; and concludes that the
inclusion of those payments in the computation of the 13th-month pay is clearly not
sanctioned by Presidential Decree 851.
The Court finds petitioner's contention meritorious.
The provision in dispute is Section 1 of Presidential Decree 851 and provides:
All employers are hereby required to pay all their employees receiving a
basic salary of not more than Pl,000 a month, regardless of the nature of
the employment, a 13th-month pay not later than December 24 of every
year.
Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851
provides:
a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary
of an employee within a calendar year
b) Basic salary shall include all remunerations on earnings paid by an
employer to an employee for services rendered but may not include costof-living allowances granted pursuant to Presidential Decree No. 525 or
Letter of Instructions No. 174, profit sharing payments and all allowances
and monetary benefits which are not considered or integrated as part of
the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is
used as the basis in the determination of his 13th-month pay. Any compensations or
remunerations which are deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525
and Letter of Instructions No. 174;
Art. 87. — overtime work. Work may be performed beyond eight hours a
day provided what the employee is paid for the overtime work, additional
compensation equivalent to his regular wage plus at least twenty-five
(25%) percent thereof.
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or
integrated as part of the regular basic salary of tile employee at the time
of the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree
851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the computation of the 13thmonth pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of
Instructions No. 174, and profit sharing payments indicate the intention to strip basic salary
of other payments which are properly considered as "fringe" benefits. Likewise, the catch-all
exclusionary phrase "all allowances and monetary benefits which are not considered or
integrated as part of the basic salary" shows also the intention to strip basic salary of any and
all additions which may be in the form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851
is even more emphatic in declaring that earnings and other remunerations which are not part
of the basic salary shall not be included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing
Presidential Decree 851 which defines basic salary to include all remunerations or
earnings paid by an employer to an employee, this cloud is dissipated in the later and more
controlling Supplementary Rules and Regulations which categorically, exclude from the
definition of basic salary earnings and other remunerations paid by employer to an
employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been
the subject of a broad inclusion is now a subject of broad exclusion. The Supplementary rules
and Regulations cure the seeming tendency of the former rules to include all remunerations
and earnings within the definition of basic salary.
The all-embracing phrase "earnings and other renumeration" which are deemed not part of
the basic salary includes within its meaning payments for sick, vacation, or maternity leaves.
Maternity premium for works performed on rest days and special holidays pays for regular
holidays and night differentials. As such they are deemed not part of the basic salary and
shall not be considered in the computation of the 13th-month they, were not so excluded, it
is hard to find any "earnings and other remunerations" expressly excluded in the
computation of the 13th-month pay. Then the exclusionary provision would prove to be Idle
and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a few
provisions:
It is clear that overtime pay is an additional compensation other than and added to the
regular wage or basic salary, for reason of which such is categorically excluded from the
definition of basic salary under the Supplementary Rules and Regulations Implementing
Presidential Decree 851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee.
It is likewise clear that prernium for special holiday which is at least 30% of the regular wage
is an additional compensation other than and added to the regular wage or basic salary. For
similar reason it shall not be considered in the computation of the 13th- month pay.
WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and December 19,
1978 are hereby set aside and a new one entered as above indicated. The Temporary
Restraining Order issued by this Court on February 14, 1979 is hereby made permanent. No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-19337
September 30, 1969
ASTURIAS SUGAR CENTRAL, INC., petitioner,
vs.
COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.
Laurea, Laurea and Associates for petitioner.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali
and Solicitor Sumilang V. Bernardo for respondents.
CASTRO, J.:
This is a petition for review of the decision of the Court of Tax Appeals of November 20,
1961, which denied recovery of the sum of P28,629.42, paid by the petitioner, under protest,
in the concept of customs duties and special import tax, as well as the petitioner's alternative
remedy to recover the said amount minus one per cent thereof by way of a drawback under
sec. 106 (b) of the Tariff and Customs Code.
The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of
centrifugal sugar for exert, the sugar so produced being placed in containers known as jute
bags. In 1957 it made two importations of jute bags. The first shipment consisting of 44,800
jute bags and declared under entry 48 on January 8, 1967, entered free of customs duties
and special import tax upon the petitioner's filing of Re-exportation and Special Import Tax
Bond no. 1 in the amounts of P25,088 and P2,464.50, conditioned upon the exportation of
the jute bags within one year from the date of importation. The second shipment consisting
of 75,200 jute bags and declared under entry 243 on February 8, 1957, likewise entered free
of customs duties and special import tax upon the petitioner's filing of Re-exportation and
Special Import Tax Bond no. 6 in the amounts of P42,112 and P7,984.44, with the same
conditions as stated in bond no. 1.
Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year
from the date of importation as containers of centrifugal sugar. Of the 75,200 jute bags
declared under entry 243, only 25,000 were exported within the said period of one year. In
other words, of the total number of imported jute bags only 33,647 bags were exported
within one year after their importation. The remaining 86,353 bags were exported after the
expiration of the one-year period but within three years from their importation.
On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd.,
requested the Commissioner of Customs for a week's extension of Re-exportation and
Special Import Tax Bond no. 6 which was to expire the following day, giving the following as
the reasons for its failure to export the remaining jute bags within the period of one year: (a)
typhoons and severe floods; (b) picketing of the Central railroad line from November 6 to
December 21, 1957 by certain union elements in the employ of the Philippine Railway
Company, which hampered normal operations; and (c) delay in the arrival of the vessel
aboard which the petitioner was to ship its sugar which was then ready for loading. This
request was denied by the Commissioner per his letter of April 15, 1958.
Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute
bags within one year from their importation, the Collector of Customs of Iloilo, on March 17,
1958, required it to pay the amount of P28,629.42 representing the customs duties and
special import tax due thereon, which amount the petitioner paid under protest.
In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner
demanded the refund of the amount it had paid, on the ground that its request for extension
of the period of one year was filed on time, and that its failure to export the jute bags within
the required one-year period was due to delay in the arrival of the vessel on which they were
to be loaded and to the picketing of the Central railroad line. Alternatively, the petitioner
asked for refund of the same amount in the form of a drawback under section 106(b) in
relation to section 105(x) of the Tariff and Customs Code.
After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960
denying the claim for refund. From his action, appeal was taken to the Commissioner of
Customs who upheld the decision of the Collector. Upon a petition for review the Court of
Tax Appeals affirmed the decision of the Commissioner of Customs.
The petitioner imputes three errors to the Court of Tax Appeals, namely:
1. In not declaring that force majeure and/or fortuitous event is a sufficient
justification for the failure of the petitioner to export the jute bags in question
within the time required by the bonds.
2. In not declaring that it is within the power of the Collector of Customs and/or the
Commissioner of Customs to extend the period of one (1) year within which the
jute bags should be exported.
3. In not declaring that the petitioner is entitled to a refund by way of a drawback
under the provisions of section 106, par. (b), of the Tariff and Customs Code.
1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested,
under the Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the
period of one year provided for in section 23 of the Act. Section 23 reads:
SEC. 23. That containers, such as casks, large metal, glass, or other receptacles
which are, in the opinion of the collector of customs, of such a character as to be
readily identifiable may be delivered to the importer thereof upon identification
and the giving of a bond with sureties satisfactory to the collector of customs in an
amount equal to double the estimated duties thereon, conditioned for the
exportation thereof or payment of the corresponding duties thereon within one
year from the date of importation, under such rules and regulations as the Insular
Collector of Customs shall provide.1
To implement the said section 23, Customs Administrative Order 389 dated December 6,
1940 was promulgated, paragraph XXVIII of which provides that "bonds for the reexportation of cylinders and other containers are good for 12 months without extension,"
and paragraph XXXI, that "bonds for customs brokers, commercial samples, repairs and those
filed to guarantee the re-exportation of cylinders and other containers are not extendible."
And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated
August 25, 1948 was issued, prescribing rules and regulations governing the importation,
exportation and identification thereof under section 23 of the Philippine Tariff Act of 1909.
Said administrative order provides:
That importation of jute bags intended for use as containers of Philippine products
for exportation to foreign countries shall be declared in a regular import entry
supported by a surety bond in an amount equal to double the estimated duties,
conditioned for the exportation or payment of the corresponding duties thereon
within one year from the date of importation.
It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec.
105(x) of the Tariff and Customs Code, while fixing at one year the period within which the
containers therein mentioned must be exported, are silent as to whether the said period may
be extended. It was surely by reason of this silence that the Bureau of Customs issued
Administrative Orders 389 and 66, already adverted to, to eliminate confusion and provide a
guide as to how it shall apply the law, 2 and, more specifically, to make officially known its
policy to consider the one-year period mentioned in the law as non-extendible.
Considering that the statutory provisions in question have not been the subject of previous
judicial interpretation, then the application of the doctrine of "judicial respect for
administrative construction," 3 would, initially, be in order.
Only where the court of last resort has not previously interpreted the statute is the rule
applicable that courts will give consideration to construction by administrative or executive
departments of the state.41awphîl.nèt
The formal or informal interpretation or practical construction of an ambiguous or
uncertain statute or law by the executive department or other agency charged with
its administration or enforcement is entitled to consideration and the highest
respect from the courts, and must be accorded appropriate weight in determining
the meaning of the law, especially when the construction or interpretation is long
continued and uniform or is contemporaneous with the first workings of the
statute, or when the enactment of the statute was suggested by such agency.5
The administrative orders in question appear to be in consonance with the intention of the
legislature to limit the period within which to export imported containers to one year,
without extension, from the date of importation. Otherwise, in enacting the Tariff and
Customs Code to supersede the Philippine Tariff Act of 1909, Congress would have amended
section 23 of the latter law so as to overrule the long-standing view of the Commissioner of
Customs that the one-year period therein mentioned is not extendible.
Implied legislative approval by failure to change a long-standing administrative
construction is not essential to judicial respect for the construction but is an
element which greatly increases the weight given such construction.6
The correctness of the interpretation given a statute by the agency charged with
administering its provision is indicated where it appears that Congress, with full
knowledge of the agency's interpretation, has made significant additions to the
statute without amending it to depart from the agency's view.7
Considering that the Bureau of Customs is the office charged with implementing and
enforcing the provisions of our Tariff and Customs Code, the construction placed by it
thereon should be given controlling weight.1awphîl.nèt
In applying the doctrine or principle of respect for administrative or practical construction,
the courts often refer to several factors which may be regarded as bases of the principle, as
factors leading the courts to give the principle controlling weight in particular instances, or as
independent rules in themselves. These factors are the respect due the governmental
agencies charged with administration, their competence, expertness, experience, and
informed judgment and the fact that they frequently are the drafters of the law they
interpret; that the agency is the one on which the legislature must rely to advise it as to the
practical working out of the statute, and practical application of the statute presents the
agency with unique opportunity and experiences for discovering deficiencies, inaccuracies, or
improvements in the statute; ... 8
If it is further considered that exemptions from taxation are not favored, 9 and that tax
statutes are to be construed in strictissimi juris against the taxpayer and liberally in favor of
the taxing authority, 10 then we are hard put to sustain the petitioner's stand that it was
entitled to an extension of time within which to export the jute bags and, consequently, to a
refund of the amount it had paid as customs duties.
In the light of the foregoing, it is our considered view that the one-year period prescribed in
section 23 of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is
mandatory.
The petitioner's argument that force majeure and/or fortuitous events prevented it from
exporting the jute bags within the one-year period cannot be accorded credit, for several
reasons. In the first place, in its decision of November 20, 1961, the Court of Tax Appeals
made absolutely no mention of or reference to this argument of the petitioner, which can
only be interpreted to mean that the court did not believe that the "typhoons, floods and
picketing" adverted to by the petitioner in its brief were of such magnitude or nature as to
effectively prevent the exportation of the jute bags within the required one-year period. In
point of fact nowhere in the record does the petitioner convincingly show that the so-called
fortuitous events or force majeure referred to by it precluded the timely exportation of the
jute bags. In the second place, assuming, arguendo, that the one-year period is extendible,
the jute bags were not actually exported within the one-week extension the petitioner
sought. The record shows that although of the remaining 86,353 jute bags 21,944 were
exported within the period of one week after the request for extension was filed, the rest of
the bags, amounting to a total of 64,409, were actually exported only during the period from
February 16 to May 24, 1958, long after the expiration of the one-week extension sought by
the petitioner. Finally, it is clear from the record that the typhoons and floods which,
according to the petitioner, helped render impossible the fulfillment of its obligation to
export within the one-year period, assuming that they may be placed in the category of
fortuitous events or force majeure, all occurred prior to the execution of the bonds in
question, or prior to the commencement of the one-year period within which the petitioner
was in law required to export the jute bags.
2. The next argument of the petitioner is that granting that Customs Administrative Order
389 is valid and binding, yet "jute bags" cannot be included in the phrase "cylinders and
other containers" mentioned therein. It will be noted, however, that the Philippine Tariff Act
of 1909 and the Tariff and Customs Code, which Administrative Order 389 seeks to
implement, speak of "containers" in general. The enumeration following the word
"containers" in the said statutes serves merely to give examples of containers and not to
specify the particular kinds thereof. Thus, sec. 23 of the Philippine Tariff Act states,
"containers such as casks large metals, glass or other receptacles," and sec. 105 (x) of the
Tariff and Customs Code mentions "large containers," giving as examples "demijohn
cylinders, drums, casks and other similar receptacles of metal, glass or other materials."
(emphasis supplied) There is, therefore, no reason to suppose that the customs authorities
had intended, in Customs Administrative Order 389 to circumscribe the scope of the word
"container," any more than the statures sought to be implemented actually intended to do.
3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue
of section 106 (b) of the Tariff and Customs Code, 11 which reads:
SEC. 106. Drawbacks: ...
b. On Articles Made from Imported Materials or Similar Domestic Materials and
Wastes Thereof. — Upon the exportation of articles manufactured or produced in
the Philippines, including the packing, covering, putting up, marking or labeling
thereof, either in whole or in part of imported materials, or from similar domestic
materials of equal quantity and productive manufacturing quality and value, such
question to be determined by the Collector of Customs, there shall be allowed a
drawback equal in amount to the duties paid on the imported materials so used, or
where similar domestic materials are used, to the duties paid on the equivalent
imported similar materials, less one per cent thereof: Provided, That the
exportation shall be made within three years after the importation of the foreign
material used or constituting the basis for drawback ... .
The petitioner argues that not having availed itself of the full exemption granted by sec.
105(x) of the Tariff and Customs Code due to its failure to export the jute bags within one
year, it is nevertheless, by authority of the above-quoted provision, entitled to a 99%
drawback of the duties it had paid, averring further that sec. 106(b) does not presuppose
immediate payment of duties and taxes at the time of importation.
The contention is palpably devoid of merit.
The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to
an importer. The first, under sec. 105 (x), gives him the privilege of importing, free from
import duties, the containers mentioned therein as long as he exports them within one year
from the date of acceptance of the import entry, which period as shown above, is not
extendible. The second, presented by sec. 106 (b), contemplates a case where import duties
are first paid, subject to refund to the extent of 99% of the amount paid, provided the
articles mentioned therein are exported within three years from importation.
It would seem then that the Government would forego collecting duties on the articles
mentioned in section 105(x) of Tariff and Customs Code as long as it is assured, by the filing
of a bond, that the same shall be exported within the relatively short period of one year from
the date of acceptance of the import entry. Where an importer cannot provide such
assurance, then the Government, under sec. 106(b) of said Code, would require payment of
the corresponding duties first. The basic purpose of the two provisions is the same, which is,
to enable a local manufacturer to compete in foreign markets, by relieving him of the
disadvantages resulting from having to pay duties on imported merchandise, thereby
building up export trade and encouraging manufacture in the country. 12 But there is a
difference, and it is this: under section 105(x) full exemption is granted to an importer who
justifies the grant of exemption by exporting within one-year. The petitioner, having opted to
take advantage of the provisions of section 105(x), may not, after having failed to comply
with the conditions imposed thereby, avoid the consequences of such failure by being
allowed a drawback under section 106(b) of the same Act without having complied with the
conditions of the latter section.
For it is not to be supposed that the legislature had intended to defeat compliance with the
terms of section 105(x) thru a refuge under the provisions of section 106(b). A construction
should be avoided which affords an opportunity to defeat compliance with the terms of a
statute. 13 Rather courts should proceed on the theory that parts of a statute may be
harmonized and reconciled with each other.
A construction of a statute which creates an inconsistency should be avoided when a
reasonable interpretation can be adopted which will not do violence to the plain words of
the act and will carry out the intention of Congress.
In the construction of statutes, the courts start with the assumption that the
legislature intended to enact an effective law, and the legislature is not to be
presumed to have done a vain thing in the enactment of a statute. Hence, it is a
general principle, embodied in the maxim, "ut res magis valeat quam pereat," that
the courts should, if reasonably possible to do so without violence to the spirit and
language of an act, so interpret the statute to give it efficient operation and effect
as a whole. An interpretation should, if possible, be avoided under which a statute
or provision being construed is defeated, or as otherwise expressed, nullified,
destroyed, emasculated, repealed, explained away, or rendered insignificant,
meaningless, inoperative, or nugatory. 14
ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed,
at petitioner's cost.
Concepcion, C.J., Dizon, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Makalintal and Sanchez, JJ., took no part.
Reyes, J.B.L., J., is on leave.