THIRD DIVISION NATIONAL POWER CORPORATION, Petitioner, G.R. No. 176006 Present: CORONA, J., Chairperson, VELASCO, JR.

, PERALTA, BERSAMIN* and MENDOZA, JJ.

- versus -

PINATUBO COMMERCIAL, represented by ALFREDO A. DY, Respondent.

Promulgated:

March 26, 2010 x---------------------------------------------------x DECISION CORONA, J.:

The National Power Corporation (NPC)[1] questions the decision dated June 30, 2006 rendered by the Regional Trial Court (RTC) of Mandaluyong City, Branch 213 declaring items 3 and 3.1 of NPC Circular No. 99-75

unconstitutional. The dispositive portion of the decision provides:

WHEREFORE then, in view of the foregoing, judgment is hereby rendered declaring item[s] 3 and 3.1 of NAPOCOR Circular No. 99-75, which [allow] only partnerships or corporations that directly use aluminum as the raw material in producing finished products either purely or partly out of aluminum, to participate in the bidding for the disposal of ACSR wires as unconstitutional for being violative of substantial due process and the equal protection clause of the

Constitution as well as for restraining competitive free trade and commerce. The claim for attorneys fees is denied for lack of merit. No costs. SO ORDERED.[2]

NPC also assails the RTC resolution dated November 20, 2006 denying its motion for reconsideration for lack of merit.[3] In this petition, NPC poses the sole issue for our review:
WHETHER OR NOT THE RTC GRAVELY ERRED WHEN IT DECLARED ITEMS 3 AND 3.1 OF NAPOCOR CIRCULAR NO. 9975 AS UNCONSTITUTIONAL FOR BEING VIOLATIVE OF SUBSTANTIAL DUE PROCESS AND THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION AS WELL AS FOR RESTRAINING COMPETITIVE FREE TRADE AND COMMERCE.[4]

NPC Circular No. 99-75[5] dated October 8, 1999 set the guidelines in the disposal of scrap aluminum conductor steel-reinforced or ACSRs in order to decongest and maintain good housekeeping in NPC installations and to generate additional income for NPC." Items 3 and 3.1 of the circular provide:
3. QUALIFIED BIDDERS 3.1 Qualified bidders envisioned in this circular are partnerships or corporations that directly use aluminum as the raw material in producing finished products either purely or partly out of aluminum, or their duly appointed representatives. These bidders may be based locally or overseas.[6]

In April 2003, NPC published an invitation for the pre-qualification of bidders for the public sale of its scrap ACSR[7]cables. Respondent Pinatubo Commercial, a trader of scrap materials such as copper, aluminum, steel and other ferrous and non-ferrous materials, submitted a pre-qualification form to NPC. Pinatubo, however, was informed in a letter dated April 29, 2003 that its application for pre-qualification had been denied.[8] Petitioner asked for reconsideration but NPC denied it.[9]

Pinatubo then filed a petition in the RTC for the annulment of NPC Circular No. 99-75, with a prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction.[10] Pinatubo argued that the circular was unconstitutional as it violated the due process and equal protection clauses of the Constitution, and ran counter to the government policy of competitive public bidding.[11] The RTC upheld Pinatubos position and declared items 3 and 3.1 of the circular unconstitutional. The RTC ruled that it wasviolative of substantive due process because, while it created rights in favor of third parties, the circular had not been published. It also pronounced that the circular violated the equal protection clause since it favored manufacturers and processors of aluminum scrap vis--vis dealers/traders in the purchase of aluminum ACSR cables from NPC. Lastly, the

RTC found that the circular denied traders the right to exercise their business and restrained free competition inasmuch as it allowed only a certain sector to participate in the bidding.[12]

In this petition, NPC insists that there was no need to publish the circular since it was not of general application. It was addressed only to particular persons or class of persons, namely the disposal committees, heads of offices, regional and all other officials involved in the disposition of ACSRs. NPC also contends that there was a substantial distinction between manufacturers and traders of aluminum scrap materials specially viewed in the light of RA 7832.[13] According to NPC, by limiting the prospective bidders to manufacturers, it could easily monitor the market of its scrap ACSRs. There was rampant fencing of stolen NPC wires. NPC likewise maintains that traders were not prohibited from participating in the prequalification as long as they had a tie-up with a manufacturer.[14] The questions that need to be resolved in this case are:
(1) (2) whether NPC Circular No. 99-75 must be published; and whether items 3 and 3.1 of NPC Circular No. 99-75 (a) (b) violated the equal protection clause of the Constitution and restrained free trade and competition.

Taada v. Tuvera[15] stressed the need for publication in order for statutes and administrative rules and regulations to have binding force and effect, viz.:

x x x 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.[16]

Taada, however, qualified that:

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.[17] (emphasis ours)

In this case, NPC Circular No. 99-75 did not have to be published since it was merely an internal rule or regulation. It did not purport to enforce or implement an existing law but was merely a directive issued by the NPC President to his subordinates to regulate the proper and efficient disposal of scrap ACSRs to qualified bidders. Thus, NPC Circular No. 99-75 defined the responsibilities of the different NPC personnel in the disposal, pre-qualification, bidding and award of scrap ACSRS.[18] It also provided for the deposit of a proposal bond to be submitted by bidders, the approval of the award, mode of payment and release of awarded scrap ACSRs.[19] All these guidelines were addressed to the NPC

personnel involved in the bidding and award of scrap ACSRs. It did not, in any way, affect the rights of the public in general or of any other person not involved in the bidding process. Assuming it affected individual rights, it did so only remotely, indirectly and incidentally. Pinatubos argument that items 3 and 3.1 of NPC Circular No. 99-75 deprived it of its right to bid or that these conferred such right in favor of a third person is erroneous. Bidding, in its comprehensive sense, means making an offer or an invitation to prospective contractors whereby the government manifests its intention to invite proposals for the purchase of supplies, materials and equipment for official business or public use, or for public works or repair. [20] Bidding rules may specify other conditions or require that the bidding process be subjected to certain reservations or qualifications.[21] Since a bid partakes of the nature of an offer to contract with the government,[22] the government agency involved may or may not accept it. Moreover, being the owner of the property subject of the bid, the government has the power to determine who shall be its recipient, as well as under what terms it may be awarded. In this sense, participation in the bidding process is a privilege inasmuch as it can only be exercised under existing criteria imposed by the government itself. As such, prospective bidders, including Pinatubo, cannot claim any demandable right to take part in it if they fail to meet

these criteria. Thus, it has been stated that under the traditional form of property ownership, recipients of privileges or largesse from the government cannot be said to have property rights because they possess no traditionally recognized proprietary interest therein.[23]

Also,

as

the

discretion

to

accept

or

reject

bids

and

award it is

contracts is of such wide latitude, courts will not interfere,

unless

apparent that such discretion is exercised arbitrarily, or used as a shield to a fraudulent award. The exercise of that discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best be discharged by the concerned government agencies, not by the courts. Courts will not interfere with executive or legislative discretion exercised within those boundaries. Otherwise, they stray into the realm of policy decisionmaking.[24]

Limiting qualified bidders in this case to partnerships or corporations that directly use aluminum as the raw material in producing finished products made purely or partly of aluminum was an exercise of discretion by the NPC. Unless the discretion was exercised arbitrarily or used as a subterfuge for fraud, the Court will not interfere with the exercise of such discretion.

This brings to the fore the next question: whether items 3 and 3.1 of NPC Circular No. 99-75 violated 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 which is enjoyed by other persons or other classes in the same place and in like circumstances.[25] The guaranty of the equal protection of the laws is not violated by a legislation based on a reasonable classification.[26] The equal protection clause, therefore, does not preclude classification of individuals who may be accorded different treatment under the law as long as the classification is reasonable and not arbitrary.[27]

Items 3 and 3.1 met the standards of a valid classification. Indeed, as juxtaposed by the RTC, the purpose of NPC Circular No. 99-75 was to dispose of the ACSR wires.[28] As stated by Pinatubo, it was also meant to earn income for the government.[29]Nevertheless, the disposal and revenue-generating objective of the circular was not an end in itself and could not bar NPC from imposing conditions for the proper disposition and ultimately, the legitimate use of the scrap ACSR wires. In giving preference to direct manufacturers and producers, it was the intent of NPC to support RA 7832, which penalizes the theft of ACSR in excess of 100 MCM.[30] The difference in treatment between direct manufacturers

and producers, on one hand, and traders, on the other, was rationalized by NPC as follows:
x x x NAPOCOR can now easily monitor the market of its scrap ACSR wires and verify whether or not a persons possession of such materials is legal or not; and consequently, prosecute under R.A. 7832, those whose possession, control or custody of such material is unexplained. This is based upon the reasonable presumption that if the buyer were a manufacturer or processor, the scrap ACSRs end with him as the latter uses it to make finished products; but if the buyer were a trader, there is greater probability that the purchased materials may pass from one trader to another. Should traders without tie-up to manufacturers or processors of aluminum be allowed to participate in the bidding, the ACSRs bidded out to them will likely co-mingle with those already proliferating in the illegal market. Thus, great difficulty shall be encountered by NAPOCOR and/or those authorities tasked to implement R.A. 7832 in determining whether or not the ACSRs found in the possession, control and custody of a person suspected of theft [of] electric power transmission lines and materials are the fruit of the offense defined in Section 3 of R.A. 7832.[31]

Items 3 and 3.1 clearly did not infringe on the equal protection clause as these were based on a reasonable classification intended to protect, not the right of any business or trade but the integrity of government property, as well as promote the objectives of RA 7832. Traders like Pinatubo could not claim similar treatment as direct manufacturers/processors especially in the light of their failure to negate the rationale behind the distinction.

Finally, items 3 and 3.1 of NPC Circular No. 99-75 did not restrain free trade or competition.

Pinatubo contends that the condition imposed by NPC under items 3 and 3.1 violated the principle of competitiveness advanced by RA 9184 (Government Procurement Reform Act) which states:
SEC. 3. Governing Principles on Government Procurement. All procurement of the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units, shall, in all cases, be governed by these principles: xxx (b) Competitiveness by extending equal opportunity to enable private contracting parties who are eligible and qualified to participate in public bidding. (emphasis ours)

The foregoing provision imposed the precondition that the contracting parties should be eligible and qualified. It should be emphasized that the bidding process was not a free-for-all where any and all interested parties, qualified or not, could take part. Section 5(e) of RA 9184 defines competitive bidding as a method of procurement which is open to participation by any interested party and which consists of the following processes: advertisement, pre-bid

conference, eligibility screening of prospective bidders, receipt and opening of bids, evaluation of bids, post-qualification, and award of contract x x x. The law categorically mandates that prospective bidders are subject to eligibility screening,

and as earlier stated, bidding rules may specify other conditions or order that the bidding process be subjected to certain reservations or qualifications.[32] Thus, in its pre-qualification guidelines issued for the sale of scrap ACSRs, the NPC reserved the right to pre-disqualify any applicant who did not meet the requirements for prequalification.[33] Clearly, the competitiveness policy of a bidding process presupposes the eligibility and qualification of a contestant; otherwise, it defeats the principle that only responsible and qualified bidders can bid and be awarded government contracts.[34] Our free enterprise system is not based on a market of pure and unadulterated competition where the State pursues a strict hands-off policy and follows the let-the-devil-devour-the-hindmost rule.[35]

Moreover, the mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition.[36] While the Constitution enshrines free enterprise as a policy, it nonetheless reserves to the government the power to intervene whenever necessary to promote the general welfare.[37] In the present case, the unregulated disposal and sale of scrap ACSR wires will hamper the governments effort of curtailing the pernicious practice of trafficking stolen government property. This is an evil sought to be prevented by RA 7832 and

certainly, it was well within the authority of the NPC to prescribe conditions in order to prevent it.

WHEREFORE, the petition is hereby GRANTED. The decision of the Regional Trial Court of Mandaluyong City, Branch 213 dated June 30, 2006 and resolution dated November 20, 2006 are REVERSED and SET ASIDE. Civil Case No. MC-03-2179 for the annulment of NPC Circular No. 99-75 is hereby DISMISSED. SO ORDERED.

RENATO C. CORONA Associate Justice Chairperson

WE CONCUR:

PRESBITERO J. VELASCO, JR. Associate Justice

DIOSDADO M. PERALTA Associate Justice

LUCAS P. BERSAMIN Associate Justice

JOSE CATRAL MENDOZA Associate Justice

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 133250 May 6, 2003

FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents. RESOLUTION CARPIO, J.: For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed by respondent Amari Coastal Bay Development Corporation ("Amari" for brevity) on September 13, 2002; (2) Motion to Set Case for Hearing on Oral Argument filed by Amari on August 20, 2002; (3) Motion for Reconsideration and Supplement to Motion for Reconsideration filed by Amari on July 26, 2002 and August 20, 2002, respectively; (4) Motion for Reconsideration and Supplement to Motion for Reconsideration filed by respondent Public Estates Authority ("PEA" for brevity) on July 26, 2002 and August 8, 2002, respectively; and (5) Motion for Reconsideration and/or Clarification filed by the Office of the Solicitor General on July 25, 2002. Petitioner Francisco I. Chavez filed on November 13, 2002 his Consolidated Opposition to the main and supplemental motions for reconsideration. To recall, the Courts decision of July 9, 2002 ("Decision" for brevity) on the instant case states in its summary: We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws. 2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man. 3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. 4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article

XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio. Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that Justice Carpio, before his appointment to the Court, wrote in his Manila Times column of July 1, 1997, "I have always maintained that the law requires the public bidding of reclamation projects." Justice Carpio, then a private law practitioner, also stated in the same column, "The Amari-PEA reclamation contract is legally flawed because it was not bid out by the PEA." Amari claims that because of these statements Justice Carpio should inhibit himself "on the grounds of bias and prejudgment" and that the instant case should be "re-deliberated" after being assigned to a new ponente. The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came after Justice Carpio had already rendered his opinion on the merits of the case. The rule is that a motion to inhibit must be denied if filed after a member of the Court had already given an opinion on the merits of the case,1 the rationale being that "a litigant cannot be permitted to speculate upon the action of the Court xxx (only to) raise an objection of this sort after a decision has been rendered." Second, as can be readily gleaned from the summary of the Decision quoted above, the absence of public bidding is not one of the ratio decidendi of the Decision which is anchored on violation of specific provisions of the Constitution. The absence of public bidding was not raised as an issue by the parties. The absence of public bidding was mentioned in the Decision only to complete the discussion on the law affecting reclamation contracts for the guidance of public officials. At any rate, the Office of the Solicitor General in its Motion for Reconsideration concedes that the absence of public

bidding in the disposition of the Freedom Islands rendered the Amended JVA null and void.2 Third, judges and justices are not disqualified from participating in a case just because they have written legal articles on the law involved in the case. As stated by the Court in Republic v. Cocofed,3 The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not disqualify him, in the same manner that jurists will not be disqualified just because they may have given their opinions as textbook writers on the question involved in a case. Besides, the subject and title of the column in question was "The CCP reclamation project" and the column referred to the Amari-PEA contract only in passing in one sentence. Amaris motion to set the case for oral argument must also be denied since the pleadings of the parties have discussed exhaustively the issues involved in the case. The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We shall consider in this Resolution only the new arguments raised by respondents. In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to apply prospectively, not retroactively to cover the Amended JVA. Amari argues that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached, citing De Agbayani v. PNB,4 thus: x x x. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to

what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, - with respect to particular relations, individual and corporate, and particular conduct, private and official." This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. x x x. xxx x x x That before the decision they were not constitutionally infirm was admitted expressly. There is all the more reason then to yield assent to the now prevailing principle that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. Amari now claims that "assuming arguendo that Presidential Decree Nos. 1084 and 1085, and Executive Order Nos. 525 and 654 are inconsistent with the 1987 Constitution, the limitation imposed by the Decision on these decrees and executive orders should only be applied prospectively from the finality of the Decision."

Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested rights. Amari maintains that the new doctrine embodied in the Decision cannot apply retroactively on those who relied on the old doctrine in good faith, citing Spouses Benzonan v. Court of Appeals,5 thus: At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines." But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine and acted on the faith thereof. There may be special cases where weighty considerations of equity and social justice will warrant a retroactive application of doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and orphans. In the present petitions, however, we find no such equitable considerations. Not only did the private respondent apply for free agricultural land when he did not need it and he had no intentions of applying it to the noble purposes behind the law, he would now repurchase for only P327,995.00, the property purchased

by the petitioners in good faith for P1,650,000.00 in 1979 and which, because of improvements and the appreciating value of land must be worth more than that amount now. The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase the disputed lot given to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot be revived by relying on the 1988 case of Belisario. The right of petitioners over the subject lot had already become vested as of that time and cannot be impaired by the retroactive application of the Belisario ruling. Amaris reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the prevailing law or doctrine at the time of the signing of the Amended JVA was that a private corporation could acquire alienable lands of the public domain, and the Decision annulled the law or reversed this doctrine. Obviously, this is not the case here. Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public domain. But since the effectivity of the 1973 Constitution, private corporations were banned from holding, except by lease, alienable lands of the public domain. The 1987 Constitution continued this constitutional prohibition. The prevailing law before, during and after the signing of the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. The Decision has not annulled or in any way changed the law on this matter. The Decision, whether made retroactive or not, does not change the law since the Decision merely reiterates the law that prevailed since the effectivity of the 1973 Constitution. Thus, De Agbayani, which refers to a law that is invalidated by a decision of the Court, has no application to the instant case. Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled by a subsequent decision which

adopts a new doctrine. In the instant case, there is no previous doctrine that is overruled by the Decision. Since the case of Manila Electric Company v. Judge Castro-Bartolome,6 decided on June 29, 1982, the Court has applied consistently the constitutional provision that private corporations cannot hold, except by lease, alienable lands of the public domain. The Court reiterated this in numerous cases, and the only dispute in the application of this constitutional provision is whether the land in question had already become private property before the effectivity of the 1973 Constitution.7 If the land was already private land before the 1973 Constitution because the corporation had possessed it openly, continuously, exclusively and adversely for at least thirty years since June 12, 1945 or earlier, then the corporation could apply for judicial confirmation of its imperfect title. But if the land remained public land upon the effectivity of the 1973 Constitution, then the corporation could never hold, except by lease, such public land. Indisputably, the Decision does not overrule any previous doctrine of the Court. The prevailing doctrine before, during and after the signing of the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. This is one of the two main reasons why the Decision annulled the Amended JVA. The other main reason is that submerged areas of Manila Bay, being part of the sea, are inalienable and beyond the commerce of man, a doctrine that has remained immutable since the Spanish Law on Waters of 1886. Clearly, the Decision merely reiterates, and does not overrule, any existing judicial doctrine. Even on the characterization of foreshore lands reclaimed by the government, the Decision does not overrule existing law or doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea and its foreshore areas have always been part of the public domain. And since the enactment of Act No. 1654 on May 18, 1907 until the effectivity of the 1973 Constitution, statutory law never allowed foreshore lands reclaimed by the government to be sold to private corporations. The 1973 and 1987 Constitution enshrined and expanded the ban to include any alienable land of the public domain.

There are, of course, decisions of the Court which, while recognizing a violation of the law or Constitution, hold that the sale or transfer of the land may no longer be invalidated because of "weighty considerations of equity and social justice."8 The invalidation of the sale or transfer may also be superfluous if the purpose of the statutory or constitutional ban has been achieved. But none of these cases apply to Amari. Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen.9 Similarly, where the alien who buys the land subsequently acquires Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved.10 In short, the law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party. In the instant case, however, Amari has not transferred the Freedom Islands, or any portion of it, to any qualified party. In fact, Amari admits that title to the Freedom Islands still remains with PEA.11 The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned under the principle of res judicata, provided the requisites for res judicata are present.12 Under this principle, the courts and the parties are bound by a prior final decision, otherwise there will be no end to litigation. As the Court declared in Toledo-Banaga v. Court of Appeals,13 "once a judgement has become final and executory, it can no longer be disturbed no matter how erroneous it may be." In the instant case, there is no prior final decision adjudicating the Freedom Islands to Amari. There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even before the filing of this petition, two Senate Committees14 had already approved on September 16, 1997 Senate

Committee Report No. 560. This Report concluded, after a wellpublicized investigation into PEAs sale of the Freedom Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the attendant risks, including the annulment of the Amended JVA. Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom Islands. Amari states that it has paid PEA only P300,000,000.0015 out of the P1,894,129,200.00 total reimbursement cost agreed upon in the Amended JVA. Moreover, Amari does not claim to have even initiated the reclamation of the 592.15 hectares of submerged areas covered in the Amended JVA, or to have started to construct any permanent infrastructure on the Freedom Islands. In short, Amari does not claim to have introduced any physical improvement or development on the reclamation project that is the subject of the Amended JVA. And yet Amari claims that it had already spent a "whopping P9,876,108,638.00" as its total development cost as of June 30, 2002.16 Amari does not explain how it spent the rest of the P9,876,108,638.00 total project cost after paying PEA P300,000,000.00. Certainly, Amari cannot claim to be an innocent purchaser in good faith and for value. In its Supplement to Motion for Reconsideration, PEA claims that it is "similarly situated" as the Bases Conversion Development Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the Metro Manila military camps and other military reservations. PEAs comparison is incorrect. The Decision states as follows: As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands

become private lands. In the hands of the government agency tasked and authorized to dispose of alienable or disposable lands of the public domain, these lands are still public, not private lands. PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of Department of Environment and Natural Resources ("DENR" for brevity) as the government agency charged with leasing or selling all reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and selling functions of DENR, reclaimed foreshore lands are public lands in the same manner that these same lands would have been public lands in the hands of DENR. BCDA is an entirely different government entity. BCDA is authorized by law to sell specificgovernment lands that have long been declared by presidential proclamations as military reservations for use by the different services of the armed forces under the Department of National Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is general and national. BCDA holds government lands that have been granted to end-user government entities the military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as the government agency "primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government." In Laurel v. Garcia,17 cited in the Decision, the Court ruled that land devoted to public use by the Department of Foreign Affairs, when no longer needed for public use, may be declared patrimonial property for sale to private parties provided there is a law authorizing such act. Well-settled is the doctrine that public land granted to an end-user government agency for a specific public use may subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer

needed for defense or military purposes and reclassifies such lands as patrimonial property for sale to private parties. Government owned lands, as long they are patrimonial property, can be sold to private parties, whether Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are patrimonial property18 which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial property in the hands of the public or municipal corporation. Once converted to patrimonial property, the land may be sold by the public or municipal corporation to private parties, whether Filipino citizens or qualified private corporations. We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as DENR with respect to reclaimed foreshore lands, thus: To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong. This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even individuals acquiring hundreds, if not thousands, of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private lands. This will result in corporations

amassing huge landholdings never before seen in this country creating the very evil that the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands. The 1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition. Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged areas is "enormous" and "it would be difficult for PEA to accomplish such project without the participation of private corporations."19 The Decision does not bar private corporations from participating in reclamation projects and being paid for their services in reclaiming lands. What the Decision prohibits, following the explicit constitutional mandate, is for private corporations to acquire reclaimed lands of the public domain. There is no prohibition on the directors, officers and stockholders of private corporations, if they are Filipino citizens, from acquiring at public auction reclaimed alienable lands of the public domain. They can acquire not more than 12 hectares per individual, and the land thus acquired becomes private land. Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper proceedings, on a quantum meruit basis, whatever Amari may have incurred in implementing the Amended JVA prior to its declaration of nullity. WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED with FINALITY. The Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on Oral Argument are likewise DENIED. SO ORDERED. Davide, Jr., C.J., Vitug, Panganiban, Quisumbing, Austria- Martinez, Carpio-Morales, and Callejo, Sr., JJ., concur. Bellosillo, J., please see separate opinion, concurring and dissenting.

Puno, J., please see separate opinion. Ynares-Santiago, and Sandoval-Gutierrez, JJ., please see dissenting opinion. Corona, J., I dissent. Azcuna, J., I take no part.
EN BANC G.R. No. 167622 (Gregorio V. Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc. and Renato A. Vergel de Dios)

Promulgated:

January 25, 2011 x-----------------------------------------------------------------------------------------x

DISSENTING OPINION

VELASCO, JR., J.:

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if Labor had not first existed. Labor is superior to capital, and deserves much the higher consideration.

Abraham Lincoln

Prefatory Statement

At the outset, it has to be made clear that the instant petition applies solely to petitioner Tongko with respect to his relationship with Manulife as the latters Regional Manager of Metro North Region and not to ordinary underwriters of different insurance companies claiming to be totaling 45,000 in the Philippines. In view of the facts and circumstances peculiar only to Tongkos case, the disposition in the instant petition is pro hac vice in line with the previous rulings of this Court that the determination of an employer-employee relationship shall be on a caseto-case basis.[1]

There is, therefore, no reason to conclude that the November 7, 2008 Decision of this Court was meant to indiscriminately classify all insurance agents as employees of their respective insurance companies. Nowhere in the Decision was such a conclusion made or espoused. To reiterate, it was specifically stated in the Decision that Tongko, given his administrative duties as a manager of Manulife, and not any other insurance agent in the Philippines, was an employee. As in every case involving the determination of whether or not an employeremployee relationship obtains, it must be established in each case that the alleged employer exercises control over the means and methods employed by the worker in achieving a set objective. Only then can such relationship be said to exist.

In a Letter dated December 16, 2008, the Joint Foreign Chambers of the Philippines implored this Court to reverse its November 7, 2008 Decision on the stated ground that it is a case of judicial legislation that impairs the obligations of

commercial contracts and interferes with established business models and practices. The Chambers conclusion, sad to state, was based on the erroneous premise that the Decision was a blanket declaration that all agents or underwriters are considered employees of the insurance company.

The Philippine Life Insurance Association, Inc., through its then President Gregorio D. Mercado, also wrote a letter dated January 12, 2009 reiterating the concerns of the Joint Foreign Chambers of the Philippines. In the letter, Mercado states:

Thus, with the recent Decision of the Honorable Supreme Court, generalizing the code of conduct as an indication of control over the means and method of an employee, PLIA is alarmed that the floodgates would open to unscrupulous claimants and leave PLIAs member companies vulnerable to a multitude of law suits from agents who shall insist on benefits that only employees enjoy. Such a scenario would certainly cripple PLIAs member insurance companies, as their time and resources would be devoted to fending off unscrupulous claims instead of focusing on improving themselves to serve the interests of the public.

Mercado goes on to imply that the finality of the November 7, 2008 Decision would spell the end of the insurance industry.

The grim scenario depicted in Mercados letter and the unmistakable veiled threats implied therein are uncalled for.

The November 7, 2008 Decision, to reiterate, applies only to Tongko in light of the circumstances attendant in his case. Certainly, his situation is unique from most other agents considering that he was promoted initially to Unit Manager, then to Branch Manager and, eventually, Regional Manager. By this fact alone, the Decision cannot be applicable to all other agents in thePhilippines. Furthermore, the Decision was reached considering the totality of all relevant matters underpinning and/or governing the professional relationship of Tongko and Manulife, not only the Code of Conduct, or certain duties only. All the factors mentioned in the Decision contributed to the conclusion that at the time that Tongko was dismissed, he was an employee of Manulife. And it will only be in the far off possibility that a completely identical case is presented that the findings therein would apply.

Additionally, in line with the Courts ruling in the November 7, 2008 Decision that Tongko became an employee after his designation as a manager of Manulife, any backwages for illegal dismissal should only correspond to his income, bonuses and other benefits that were appurtenant to his designation as a manager. Under Tongkos Career Agents Agreement, he was entitled to commissions, production bonus and persistency income. Thus, the basis for backwages would only be his management overrides and other bonuses relative to his position as manager.

The Case

For the consideration of the Court is the Motion for Reconsideration dated July 28, 2010, filed by petitioner Gregorio V. Tongko. Tongko seeks the reversal of our June 29, 2010 Resolution which dismissed the instant petition finding that

Tongko was not an employee of Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife). The Resolution reversed the Courts November 17, 2008 Decision. The Facts For clarity, the facts of the case are hereby reiterated: Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life insurance business. Renato A. Vergel De Dios (De Dios) was, during the period material, its President and Chief Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977 by virtue of a Career Agents Agreement[2] (Agreement) he executed with Manulife.

In the Agreement, it is provided that:

It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed or interpreted as creating an employer-employee relationship between the Company and the Agent.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due or to become due to the Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the Company to the Agent for servicing, subject to

subsequent confirmation of receipt of payment by the Company as evidenced by an Official Receipt issued by the Company directly to the policyholder.

xxxx

14. TERMINATION

The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver, extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall be construed for any previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party fifteen (15) days notice in writing. This Agreement shall similarly terminate forthwith upon the death of the Agent.

In cases of termination, including the Agents death, the Agent and/or his estate, executors or administrators, heirs, assignees or successors-in-interest, as the case may be, shall remain liable to the Company for all the Agents obligations and indebtedness due the Company arising from law or this Agreement.

In 1983, Tongko was named as a Unit Manager in Manulifes Sales Agency Organization. In 1990, he became a Branch Manager. He was thereafter promoted to Regional Manager. As the Court of Appeals (CA) found, Tongkos gross earnings from his work at Manulife as a Regional Manager, consisting of commissions, persistency income, and management overrides, may be summarized as follows:

January to December 10, 2002 2001 2000 1999 1998 1997 -

P 865,096.07 6,214,737.11 8,003,180.38 6,797,814.05 4,805,166.34 2,822,620.00[3]

The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional sales management level. Relative thereto, De Dios addressed a letter dated November 6, 2001[4] to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De Dios stated:

The first step to transforming Manulife into a big league player has been very clear - to increase the number of agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the organization. Since then, however, substantial changes have taken place in the organization, as these have been influenced by developments both from within and without the company.

xxxx

The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers meeting earlier last month when Kevin OConnor, SVP - Agency, took to the floor to determine from our senior agency leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had presented information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.

While discussions, in general, were positive other than for certain comments from your end which were perceived to be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-one), it was not clear that we were proceeding in the same direction.

Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused as to the directions the company was taking. For this reason, I sought a meeting

with everyone in your management team, including you, to clear the air, so to speak.

This note is intended to confirm the items that were discussed at the said Metro North Regions Sales Managers meeting held at the 7/F Conference room last 18 October.

xxxx

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we have been discussing these past few weeks, i.e., Manulifes goal to become a major agency-led distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily delegated. This assistant should be so chosen as to complement

your skills and help you in the areas where you feel may not be your cup of tea.

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The above could solve this problem.

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining groups.

xxxx

The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you. But you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We are meeting tough

challenges next year and I would want everybody on board. Any resistance or holding back by anyone will be dealt with accordingly.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,[5] terminating Tongkos services, thus:

It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between yourself and SVP Kevin OConnor, some of them with me, as well as group meetings with your Sales Managers, all these efforts have failed in helping you align your directions with Managements avowed agency growth policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter.

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the National Labor Relations Commission (NLRC) against Manulife for illegal dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter Marita V. Padolina.

In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios gave him specific directives on how to manage

his area of responsibility in the latters letter dated November 6, 2001. He further claimed that Manulife exercised control over him as follows:

Such control was certainly exercised by respondents over the herein complainant. It was Manulife who hired, promoted and gave various assignments to him. It was the company who set objectives as regards productions, recruitment, training programs and all activities pertaining to its business. Manulife prescribed a Code of Conduct which would govern in minute detail all aspects of the work to be undertaken by employees, including the sales process, the underwriting process, signatures, handling of money, policyholder service, confidentiality, legal and regulatory requirements and grounds for termination of employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt as to who was in control. The subsequent termination letter dated 18 December 2001 again established in no uncertain terms the authority of the herein respondents to control the employees of Manulife. Plainly, the respondents wielded control not only as to the ends to be achieved but the ways and means of attaining such ends.[6]

Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)[7] and Great Pacific Life Assurance Corporation v. NLRC,[8] which Tongko claimed to be similar to the instant case.

Tongko further claimed that his dismissal was without basis and that he was not afforded due process. He also cited the Manulife Code of Conduct by which his actions were controlled by the company.

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,[9] in which it alleged that Tongko is not its employee, and that it did not

exercise control over him. Thus, Manulife claimed that the NLRC has no jurisdiction over the case.

In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an employer-employee relationship. Padolina found that applying the four-fold test in determining the existence of an employer-employee relationship, none was found in the instant case. The dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for lack of jurisdiction, there being no employer-employee relationship between the parties.

SO ORDERED.

Tongko appealed the arbiters Decision to the NLRC which reversed the same and rendered a Decision dated September 27, 2004 finding Tongko to have been illegally dismissed.

The NLRCs First Division, while finding an employer-employee relationship between Manulife and Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios and wrote:

The above-mentioned letter shows the extent to which respondents controlled complainants manner and means of doing his work and achieving the goals set by respondents. The letter shows how respondents concerned themselves with the manner complainant

managed the Metro North Region as Regional Sales Manager, to the point that respondents even had a say on how complainant interacted with other individuals in the Metro North Region. The letter is in fact replete with comments and criticisms on how complainant carried out his functions as Regional Sales Manager.

More importantly, the letter contains an abundance of directives or orders that are intended to directly affect complainants authority and manner of carrying out his functions as Regional Sales Manager.[10]

Additionally, the NLRC also ruled that:

Further evidence of *respondents+ control over complainant can be found in the records of the case. [These] are the different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Manulife Financial Code of Conduct Agreement, which serve as the foundations of the power of control wielded by respondents over complainant that is further manifested in the different administrative and other tasks that he is required to perform. These codes of conduct corroborate and reinforce the display of respondents power of control in their 06 November 2001 Letter to complainant.[11]

The fallo of the September 27, 2004 NLRC Decision reads:

WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find complainant to be a regular employee of respondent Manulife and that he was illegally dismissed from employment by respondents.

In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as above set forth. Respondent Manulife is further ordered to pay complainant backwages from the time he was dismissed on 02 January 2002 up to the finality of this decision also as indicated above.

xxxx

All other claims are hereby dismissed for utter lack of merit.

From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First Division in a Resolution dated December 16, 2004.[12]

Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued the assailed Decision dated March 29, 2005, finding the absence of an employer-employee relationship between the parties and deeming the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while again applying the four-fold test. The CA found that Manulife did not exercise control over Tongko that would render the latter an employee of Manulife. The dispositive portion reads:

WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for accordingly GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December 16, 2004 of the National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are hereby ANNULLED

and SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter Marita V. Padolina is hereby REINSTATED.

Hence, Tongko filed a petition with this Court raising the following issues: (1) whether Tongko was an employee of Manulife; and (2) whether Tongko was illegally dismissed.

In the November 17, 2010 Decision, this Court ruled that Tongko was an employee of Manulife and was illegally dismissed. Applying the four-fold test, the Court found sufficient indicia of employment to conclude that Manulife and Tongko had an employer-employee relationship. Thus, the Court further ruled that because there was no just or valid cause for the termination of Tongkos employment, he was therefore illegally dismissed. Manulife appealed such Decision to the Court en banc which reversed the same in a June 29, 2010 Resolution. In the Resolution, the Court used the intent of the parties as well as the established insurance industry practices to conclude that the control required by the labor code to be present to establish an employeremployee relationship between Manulife and Tongko was not present. It was further ruled that there was no other concrete evidence to establish that Tongko was an employee of Manulife. Thereafter, Tongko filed the instant motion for reconsideration of the Resolution. The motion for reconsideration must be granted. Labor laws, not the Insurance Code or the Corporation Code, shall prevail in the instant case

Manufacturers Life Insurance Co. (Phils.), Inc. is part of a Canada-based multinational financial company claiming to be the largest life insurance company in North America having 3,000 employees and 25,000 agents.[13] On the other hand, Tongko is but a single Filipino agent/manager of Manulife. It is but just, it is but right, that the Court, interpret the relationship between Tongko and Manulife as one of employment under labor laws and to uphold his constitutionally protected rights as an employee, to security of tenure and an entitlement to monetary award should such right is infringed. And this constitutionallyguaranteed right cannot be diminished, let alone undermined, by a mere contract, or however the parties choose to call their true working relationship.[14]Neither, to stress, may the employer-employee relationship, if one exists, be subverted by the manner and form of remuneration or earnings being paid or received,[15] i.e., fixed or on commission basis, or the method of calculating the same.

The controversy in this case arose from the fact that, initially, Tongko executed a Career Agents Agreement whereby he became an agent of Manulife. As such agent, Manulife did not control the means and methods for accomplishing his assigned objective of canvassing life insurance applications. It is, therefore submitted that when he was exclusively an agent of Manulife, he was not the latters employee. The evidence, however, will reveal that he was later on promoted to the positions of unit, branch and regional manager. The evidence will also show that he, similar to his colleagues, was assigned other duties and responsibilities aside from those enumerated under the Agreement. And there lies the crux of the problem. There is now an ambiguity as to the true relationship between Manulife and Tongko. Moreover, it is now unclear as to what law, labor laws, corporation code, insurance code or civil code, should be applied to the two parties.

Jurisprudence teaches that, given the doubt as to the applicable law in the instant case, labor law shall govern. The Constitution acknowledges the reality that capital and labor often do not deal on equal grounds, requiring the state to protect labor from abuse. To level the playing field, the framers of the Constitution incorporated two (2) provisions therein to safeguard the employees right to security of tenure and enhance protection to employees rights and welfare:

ARTICLE II DECLARATION OF PRINCIPLES AND STATE POLICIES PRINCIPLES

STATE POLICIES

Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.

ARTICLE XIII SOCIAL JUSTICE AND HUMAN RIGHTS

LABOR

Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. (Emphasis supplied.)

In the Civil Code, it is provided in Articles 1700 and 1702 thereof that:

Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.

Article 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. (Emphasis supplied.)

Verily, the mandate of this Court is to ensure that the provisions of the Constitution are carried out. The Court has the responsibility to ensure that the

rights of labor, as guaranteed by the Constitution, are actually enjoyed by the workers. Thus, in several cases, the Court has repeatedly resolved doubts as to the relationship between parties as that of employment, that which is most favorable to labor. The Court, in a slew of cases, has consistently ruled that when there is doubt as to the law to be applied in a case with an allegation of an employeremployee relationship, labor laws and jurisprudence shall apply. Consider: 1. In Social Security System v. Court of Appeals,[16] the Court was faced with the conflicting claims of the workers and the proprietor on the issue of whether an employer-employee relationship exists. Romeo Carreon and Quality Tobacco Corporation (QTC) entered into an agreement whereby Carreon would allegedly purchase and sell QTCs products. Carreon claims that he was an employee of QTC while QTC claims that Carreon is an independent contractor. In the agreement, Carreon was referred to as a vendee of QTCs products. Their relationship would therefore be covered by the Civil Code provisions on sales.[17] However, in view of the complaint of Carreon praying for SSS benefits on the claim that he is an employee of QTC, there arose the question as to which law should applythe Civil Code or the Labor Code and jurisprudence. The Court applied the jurisprudence in labor cases and used the four-fold test to determine the existence of an employer-employee relationship. The Court stated:
The issue raised by the petitioner before this Court is the very same issue resolved by the Court of Appeals-that is, whether or not Romeo Carreon is an employee or an independent contractor under the contract aforequoted. Corollary thereto the question as to whether or not the Mafinco case is applicable to this case was raised by the parties. The Court took cognizance of the fact that the question of whether or not an employer-employee relationship exists in a certain situation continues to bedevil the courts. Some businessmen with the aid of lawyers have tried to avoid the bringing about of an employer-employee relationship in some of their enterprises because that juridical relation

spawns obligations connected with workmens compensation, social security, medicare, minimum wage, termination pay and unionism. For this reason, in order to put the issue at rest, this Court has laid down in a formidable line of decisions the elements to be generally considered in determining the existence of an employeremployee relationship, as follows: a) selection and engagement of the employee; b) the payment of wages; c) the power of dismissal; and d) the employers power to control the employee with respect to the means and method by-which the work is to be accomplished. The last which is the so-called control test is the most important element (Brotherhood Labor Unity Movement of the Phils. vs. Zamora, 147 SCRA 49 [1987]; Dy Ke Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco Trading Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security System vs. Court of Appeals, 37 SCRA 579 [1971]). Applying the control test, that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and method by which the same is to be accomplished, the question of whether or not there is an employer-employee relationship for purposes of the Social Security Act has been settled in this jurisdiction in the case of Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In other words, where the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the result of his effort, the relationship of employer-employee does not exist. (SSS vs. Court of Appeals, 30 SCRA 210 [1969]). (Emphasis supplied.)

2. In Cosmopolitan Funeral Homes, Inc. v. Maalat,[18] Cosmopolitan Funeral Homes, Inc. engaged the services of Noli Maalat as a supervisor to handle the solicitation of mortuary arrangements, sales and collections. Maalat was dimissed after having committed violations of the companys policies. He filed a complaint for illegal dismissal and nonpayment of commissions. Cosmopolitan argues that there is no employer-employee relationship between it and Maalat, the latter being an independent contractor. The Court ruled that:

In determining whether a person who performs work for another is the latter's employee or an independent contractor, the prevailing test is the right of control test. Under this test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.

The Court did not consider the provisions of the Civil Code on a Contract for a Piece of Work[19] in determining the relationship between the parties. Instead, it used the labor law concept, the control test, to determine such relationship. 3. The Court in Algon Engineering Construction Corporation v. National Labor Relations Commission[20] did not consider the Civil Code provisions on lease when it ruled upon the existence of an employer-employee relationship. In that case, from March 1, 1983 to May 10, 1985, Algon was in the process of completing the Lucena Talacogon Project in Del Monte, Talacogon, Agusan del Sur. Jose Espinosas house is located near that project site. Thus, throughout that same period of time, Espinosa allowed petitioner Algon to use his house and the grounds adjacent thereto as a parking and storage place for the latters heavy equipment. However, Espinosa also claims in addition thereto that there existed an employment contract between himself and petitioner Algon which, he insisted, hired him as a watchman to guard the heavy equipment parked in other leased house spaces in Libtong, Talacogon, Agusan del Sur. The Court ruled therein that:
No particular evidence is required to prove the existence of an employer-employee relationship. All that is necessary is to show that the employer is capable of exercising control over the employee. In labor disputes, it suffices that there be a casual connection between the claim asserted and the employer-employee relations. The elements of an employer-employee relationship are: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) employers own power to control employees conduct. Control of the employees conduct is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. In the case at bar, there is no doubt that petitioner exercises control over

Espinosas conduct, as shown by the fact that, rather than address the loss of batteries as a breach of the purported contract of lease, the memorandum instead emphasized the company rules and regulations and the fact that Espinosa was on duty at the time of the said loss. Moreover, the petitioners act of transferring Espinosa to the day shift clearly shows its treatment of Espinosa as an employee, and not as a landlord. Thus, an employer-employee relationship exists where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such an end. (Emphasis supplied.)

4. Even when faced with the contention that the relationship between two parties was in the nature of a lawyer-client relationship, the Court, in Equitable Banking Corporation v. National Labor Relations Commission,[21] still employed the control test, a strictly labor law concept, to determine the existence of an employer-employee relationship. There, Ricardo L. Sadac was engaged in 1981 as Equitables Vice-President for the legal department and as its General Counsel. In 1989, nine (9) lawyers of the legal department issued a letter-petition to the chairperson of the board of the bank accusing private respondent of abusive conduct, inefficiency, mismanagement, ineffectiveness and indecisiveness. Later, the lawyers threatened to resign en masse if Sadac was not relieved as the head of the legal department. After a formal investigation of the charges, Sadac was advised that he would be substituted as the banks legal counsel. Sadac charged the bank with illegal dismissal. The bank in turn denied the existence of an employeremployee relationship between it and Sadac. The Court stated in its Decision that:
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal, and (4) the power to control the employee's conduct, with the control test generally assuming primacy in the overall consideration. The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential, in other words, for the employer to actually supervise the performance of duties of the employee; it is enough that the former has the right to wield the power. (Emphasis supplied.)

5. In Lazaro v. Social Security Commission,[22] Rosalina M. Laudato was a sales supervisor of Royal Star Marketing, the proprietor of which was Angelito L. Lazaro. Laudato claimed that the company failed to report her and remit her contributions as an employee, to the Social Security System (SSS). Denying that Laudato was a sales supervisor of Royal Star Marketing, Lazaro claimed that the former was only a sales agent earning on a commission basis. He added that Laudato did not maintain definite hours of work and therefore could not be considered as an employee of Royal Star Marketing. The Court, in determining the true relationship of the parties, did not apply the provisions of the Civil Code on agency. Rather, the labor law concept of the control test was applied to determine the relationship of the parties. The Court ruled therein that:
Lazaros arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by way of commission does not preclude the establishment of an employeremployee relationship. In Grepalife v. Judico, the Court upheld the existence of an employer-employee relationship between the insurance company and its agents, despite the fact that the compensation that the agents on commission received was not paid by the company but by the investor or the person insured. The relevant factor remains, as stated earlier, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee. In Cosmopolitan Funeral Homes, Inc. v. Maalat, the employer similarly denied the existence of an employer-employee relationship, as the claimant according to it, was a supervisor on commission basis who did not observe normal hours of work. This

Court declared that there was an employer-employee relationship, noting that *the+ supervisor, although compensated on commission basis, [is] exempt from the observance of normal hours of work for his compensation is measured by the number of sales he makes.

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents of the company, and thus was subject to the control of management as to how she implements its policies and its end results. x x x (Emphasis supplied.)

6. While in Dealco Farms, Inc. v. National Labor Relations Commission (5th Division),[23] the Court declared the workers as employees of Dealco farms and not independent contractors. There, Albert Caban and Chiquito Bastida were hired by Dealco as escorts or comboys for the transit of live cattle from General Santos City to Manila in 1993. Sometime 1999, Caban and Bastida were summarily replaced. Thus, they filed a case for illegal dismissal. Dealco claimed that Caban and Bastida were in fact independent contractors hired by the buyers of the cattle who arranged for the transport thereof to Manila. The Court again did not take into consideration provisions of the Civil Code on Contracts for a Piece of Work and instead used the four-fold test to determine the true nature of the parties relationship. The Court ruled: Regrettably, upon an evaluation of the merits of the petition, we do not find cause to disturb the findings of the Labor Arbiter, affirmed by the NLRC, which are supported by substantial evidence.
The well-entrenched rule is that factual findings of administrative or quasi-judicial bodies, which are deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality, and bind the Court when supported by substantial evidence. Section 5, Rule 133 defines substantial evidence as

that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in labor cases. We may take cognizance of and resolve factual issues only when the findings of fact and conclusions of law of the Labor Arbiter are inconsistent with those of the NLRC and the CA. In the case at bench, both the Labor Arbiter and the NLRC were one in their conclusion that respondents were not independent contractors, but employees of petitioner. In determining the existence of an employer-employee relationship between the parties, both the Labor Arbiter and the NLRC examined and weighed the circumstances against the four-fold test which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to control the employees conduct, or the so-called control test. Of the four, the power of control is the most important element. More importantly, the control test merely calls for the existence of the right to control, and not necessarily the exercise thereof. xxxx We reject petitioners self-serving contention. Having failed to substantiate its allegation on the relationship between the parties, we stick to the settled rule in controversies between a laborer and his master that doubts reasonably arising from the evidence should be resolved in the formers favor. The policy is reflected in no less than the Constitution, Labor Code and Civil Code. (Emphasis supplied.)

7. Similarly, in South Davao Development Company, Inc. v. Gamo,[24] the Court refused to apply the provisions of the Civil Code on Contract for a Piece of Work to a copra maker contractor and instead used the control test to determine the workers relationship with the company. South Davao Development Company was the operator of a coconut and mango farm in San Isidro, Davao Oriental and Inawayan/Baracatan, Davao del Sur. Sometime in August 1963, the company hired respondent Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, Gamo was appointed as a copra maker contractor. Ernesto Belleza, Carlos

Rojas, Maximo Malinao were all employees in petitioners coconut farm, while respondents Felix Terona, Virgilio Cosep, Maximo Tolda, and Nelson Bagaan were assigned to petitioners mango farm. All of the abovenamed respondents (copra workers) were later transferred by petitioner to Gamo as the latters copraceros. The Court ruled in that case that the workers must be considered as employees of the company as the latter exercised control over the workers as evidenced by its power to transfer the copra workers as its employees to that of Gamo:
In this case, it was in the exercise of its power of control when petitioner corporation transferred the copra workers from their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner corporation put Gamo in charge of the copra workers although under a different payment scheme. Thus, it is clear that an employer-employee relationship has existed between petitioner corporation and respondents since the beginning and such relationship did not cease despite their reassignments and the change of payment scheme. (Emphasis supplied.)

8. While in Abante v. Lamadrid Bearing & Parts Corp.,[25] despite the allegation that the worker was a commission salesman, the Court still used the four-fold test to determine the existence of an employer-employee relationship. The worker, Empermaco B. Abante, Jr., was employed by respondent company Lamadrid Bearing and Parts Corporation sometime in June 1985 as a salesman earning a commission of 3% of the total paid-up sales covering the whole area of Mindanao. Sometime in 2001, Abante was informed by his customers that Lamadrid had issued a letter informing them that Abante was no longer their salesman. Thereafter, Abante filed a case against Lamadrid for illegal dismissal. Lamadrid, for its part, argued that Abante was not its employee but rather a freelance salesman on commission basis. The Court ruled therein:

We are called upon to resolve the issue of whether or not petitioner, as a commission salesman, is an employee of respondent

corporation.To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most important. The so-called control test is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end. (Emphasis supplied.)

Verily, based on the above-mentioned sample of numerous cases, the Court has invariably applied labor laws and doctrines, particularly the four-fold and control test, over Civil Code provisions, to determine the relationship of parties where an employer-employee relationship is alleged, without regard to the industry or otherwise alleged relationship of the parties. The Court cannot now deviate from established precedents. The four-fold test must be used to determine whether Tongko was an employee of Manulife or not, and not the Insurance Code or Civil Code as claimed by Manulife.

Using the Four-Fold Test, Manulife exercised control over Tongko

As a matter of long and settled jurisprudence, the following are elements, constituting the four-fold test, usually considered in determining existence of an employer-employee relationship: (a) the selection of employee; (b) the payment of wages; (c) the power of dismissal; and (d)

the the the the

power to control the employees conduct, with the control test being the most crucial[26] or generally assuming primacy in the overall consideration.[27]

In Meteoro v. Creative Creatures, Inc.,[28] the Court stated that in the determination of the existence of an employer-employee relationship, any competent and relevant evidence may be considered, to wit:

To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship, there is need to examine evidentiary matters. The following elements constitute the reliable yardstick to determine such relationship: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to prove the relationship may be admitted.Identification cards, cash vouchers, social security registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee status. These pieces of evidence are readily available, as they are in the possession of either the employee or the employer; and they may easily be looked into by the labor inspector (in the course of inspection) when confronted with the question of the existence or absence of an employer-employee relationship.

Some businessmen, however, try to avoid an employer-employee relationship from arising in their enterprises, because that juridical relation spawns obligations connected with workmens compensation, social security, medicare, termination pay, and unionism. Thus, in addition to the above-mentioned documents, other pieces of evidence are considered in ascertaining the true nature of the parties

relationship. This is especially true in determining the element of control. The most important index of an employer-employee relationship is the so-called control test, that is, whether the employer controls or has reserved the right to control the employee, not only as to the result of the work to be done, but also as to the means and methods by which the same is to be accomplished. (Emphasis supplied.)

The NLRC, taking stock of the affidavits of petitioners fellow insurance managers therein detailing their duties, had concluded that petitioner was an employee of Manulife. Indeed, the duties, responsibilities and undertakings of these insurance managers are strikingly similar to those of Ernesto and Rodrigo Ruiz, as set forth in the Decision in Great Pacific Life Assurance Corporation v. NLRC.[29] There, the Court decreed that the brothers Ruiz were employees of Grepalife. The reasons behind the declaration need no belaboring. Suffice it to state that vis--vis the Ruizes in Grepalife, Manulife had control of the means and methods employed by the petitioner in the performance of his work as a manager of Manulife. Following the stare decisis rule, there seems to be no rhyme or reason to withhold from herein petitioner the benefits accruing from an employer-employee relationship.

Thus, in the Courts November 7, 2008 Decision, finding that Tongko was Manulifes employee, it was ruled that:

More importantly, Manulifes evidence establishes the fact that Tongko was tasked to perform administrative duties that establishes his employment with Manulife.

In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached affidavits of its agents purportedly to support its claim that Tongko, as a Regional Sales Manager, did not perform any administrative functions. An examination of these affidavits would, however, prove the opposite.

In an Affidavit dated April 28, 2003, John D. Chua, a Regional Sales Manager of Manulife, stated:

4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager (RSM) for Metro South Region pursuant to an Agency Contract. As such RSM, I have the following functions:

1. Refer and recommend prospective agents to Manulife 2. Coach agents to become productive 3. Regularly meet with, and coordinate activities of agents affiliated to my region.

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 2003 that:

3. In January 1997, I was assigned as a Branch Manager (BM) of Manulife for the Metro North Sector;

4. As such BM, I render the following services:

a. Refer and recommend prospective agents to Manulife; b. Train and coordinate activities of other commission agents; c. Coordinate activities of Agency Managers who, in turn, train and coordinate activities of other commission agents; d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and recruitment goals; and e. Sell the various products of Manulife to my personal clients.

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 2003 that:

3. In 1977, I was assigned as a Unit Manager (UM) of North Peaks Unit, North Star Branch, Metro North Region;

4. As such UM, I render the following services:

a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products and who will be part of my Unit; b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling activities, making sure that their respective sales targets are met;

c. To conduct periodic training sessions for my agents to further enhance their sales skills. d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on-one evaluation and analysis of particular accounts. e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales activities and encouraging them to be involved in company and industry activities. f. To provide opportunities for professional growth to my agents by encouraging them to be a member of the LUCAP (Life Underwriters Association of the Philippines).

A comparison of the above functions and those contained in the Agreement with those cited in Great Pacific Life Assurance Corporation reveals a striking similarity that would more than support a similar finding as in that case. Thus, there was an employer-employee relationship between the parties. (Emphasis supplied.)

In comparison, in Great Pacific Life Corporation v. NLRC (Grepalife),[30] the Court stated:

Furthermore, it cannot be gainsaid that Grepalife had control over private respondents performance as well as the result of their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly account, record and document the companys funds spot-check andaudit the work of the zone supervisors, conserve

the companys business in the district through reinstatements, follow up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the debit agents under him, conserve company property through reinstatements, undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents. (Emphasis supplied.)

A close scrutiny of the duties and responsibilities of the Manulife managers with those of the Ruizes would show a striking similarity that cannot be denied. More so, taking the aggregate of the evidence presented in this case, a just and objective mind cannot but conclude that, as in Grepalife, the Manulife managers are also employees of Manulife.

In Equitable Banking Corporation,[31] the Court ruled:

The NLRC, in the instant case, based its finding that there existed an employer-employee relationship between petitioner bank and private respondent on these factual settings:

It was complainants understanding with respondent Morales that he would be appointed and assigned to the Legal Department as vice President with the same salary, privileges

and benefits granted by the respondent bank to its ranking senior officers. He was not hired as lawyer on a retainership basis but as an officer of the bank.

Thus, the complainant was given an appointment as Vice President, Legal Department, effective August 1, 1981, with a monthly salary of P8,000.00, monthly allowance of P4,500.00, and the usual two months Christmas bonus based on basic salary likewise enjoyed by the other officers of the bank.

Then, as part of the ongoing organization of the Legal Department, the position of General Counsel of the bank was created and extended to the complainant. In addition to his duties as Vice President of the bank, the complainants duties and responsibilities were so defined as to prove that he was a bank officer working under the supervision of the President and the Board of Directors of the respondent bank.

In his more than eight years employment with the respondent bank, the complainant was given the usual payslips to evidence his monthly gross compensation. The respondent bank, as employer, withheld taxes due to the Bureau of Internal Revenue from the complainants salary as employee. Moreover, the bank enrolled the complainant as its employee under the Social Security System and Medicare programs. The complainant contributed to the bank Employees Provident Fund.

When the respondent bank changed its payroll accounting system in September 1988 by appointing SGV & Co. to handle it and Far East Bank & Trust Company to pay the

salaries and other benefits of Equitable Banking Corporation officers, the complainant was included as one of corporate officers. Specifically, that there were eleven Far East Bank and Trust Company credit memos starting October 13, 1988 up to September 13, 1989 received by the complainant from FBTC crediting his salary and Christmas bonus to his account with FBTC per instruction of the respondent bank.

In as much as the complainant and the lawyers in the Legal Department were receiving salaries and other benefits as other bank officers and employees, the attorneys fees, documentary and notarial fees earned in the exercise of their profession as in-house lawyers were not given to or even shared with them, instead all were credited to the income of the bank. In 1987 and 1988, the complainant and his subordinate lawyers were able to generate by way of attorneys fees, documentary and notarial fees a total income of P973,028.00 for the bank(s) benefit. In turn, the respondent bank shouldered the professional tax and Integrated Bar of the Philippines dues of the complainant and his subordinate lawyers. Further proofs that there existed employer-employee relationship between the respondent bank and the complainant are the following, to wit:

(1) Complainants monthly attendance, like those of other bank officers, was recorded by the Chief Security Officer and reported to the Office of the President with copy of the report furnished to the bank Personnel and HRD Department.

(2) Complainant was authorized by the President to sign for and in behalf of the bank contracts covering

legal services of lawyers to be retained by the respondent bank for its branches on periodical retainership basis.

(3) Complainant participated as part of management in annual Management Planning Conferences which started in 1986 on objective-setting and long-range planning in response to the requirement of the rapidly changing environment.

(4) Respondent bank extended to complainant the benefit (of) a car plan like any other qualified senior officer of the bank.

(5) Respondent bank since 1982 continuously reported and included the complainant as one of its senior officers in its statements of financial condition holding the position of Vice President. These bank statements have been distributed and circularized to the public, including bank clients and government entities.

(6) Complainant, like other bank officers, prepared his biographical data for submission to the Central Bank after his assumption of duties in 1981. Thereafter, and pursuant to the regulations of the Central Bank, he has been required to update annually his biographical data."

It would virtually be foolhardy to so challenge the NLRC as having committed grave abuse of discretion in coming up with its above

findings. Just to the contrary, NLRC appears to have been rather exhaustive in its examination of this particular question (existence or absence of an employer-employee relationship between the parties). Substantial evidence, which is the quantum of evidence required to establish a fact in cases before administrative and quasijudicial bodies, connotes merely that amount of relevant evidence which a reasonable mind might accept to be adequate in justifying a conclusion. (Emphasis supplied.)

Here, by virtue of designating Tongko initially as a Unit Manager and later on as a Regional Manager, Manulife must be deemed as having considered Tongko as an officer of the company. Furthermore, Tongko has been involved in Manulifes manpower development programs. Thus, just as in Equitable Banking Corporation, Tongko must be considered as an employee of Manulife.

While in Aboitiz Haulers, Inc. v. Damapatoi,[32] Dimapatoi and several other individuals worked as checkers in Mega Warehouse, which Aboitiz Haulers, Inc. owned. Aboitiz claimed that the complaining workers are not its employees, but rather, of Grigio Security Agency and General Services (Grigio), a manpower agency that supplies security guards, checkers and stuffers. It allegedly entered into a Written Contract of Service with Grigio in 1994. The workers services were terminated by Aboitiz on the pretext that its contract with Grigio had already expired. In this case, the Court found that Aboitiz was the employer of the workers exercising control over them:

Petitioners allegation that Grigio retained control over the respondents by providing supervisors to monitor the performance of the respondents cannot be given much weight. Instead of exercising their own discretion or referring the matter to the officers of Grigio, Grigios supervisors were obligated to refer to petitioners supervisors

any discrepancy in the performance of the respondents with their specified duties. The Written Contract of Services provided that:

5.c. That the GRIGIO personnel, supervisors, shall perform the following:

particularly

the

The Supervisor for the warehouse operation shall monitor the performance and productivity of all the checkers, jacklifters, stuffers/strippers, forklift operators, drivers, and helpers. He shall coordinate with AHIs supervisors regarding the operations at the Warehouse to ensure safety at the place of work.

He shall see to it that the cargoes are not overlanded, shortlanded, delivered at a wrong destination, or misdelivered to consignees port of destination. Any discrepancy shall be reported immediately to AHIs Logistic Manager, Mr. Andy Valeroso.

The control exercised by petitioners supervisors over the performance of respondents was to such extent that petitioners Warehouse Supervisor, Roger Borromeo, confidently gave an evaluation of the performance of respondent Monaorai Dimapatoi, who likewise felt obliged to obtain such Certification from Borromeo.

Petitioners control over the respondents is evident. And it is this right to control the employee, not only as to the result of the work to be done, but also as to the means and methods by which the same is to be accomplished, that constitutes the most important index of the existence of the employer-employee relationship. (Emphasis supplied.)

With this case, it becomes apparent that supervision and monitoring is sufficient to establish control that is evidence of an employer-employee relationship. Such control would, therefore, be even more evident in the instant case considering that Tongko himself was tasked to supervise and monitor the activities of Manulife agents. Moreover, it may be gleaned from the records of the case that Tongko reported to Manulife with regard the performance of his agents. It was not, as if, Tongko was left alone to supervise, and perhaps, discipline such agents. Tongko must be deemed as an employee of Manulife.

In fact, in Lazaro,[33] the Court ruled that a Sales Supervisor was considered an employee as she oversaw and supervised the sales agents of the company:

Lazaros arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by way of commission does not preclude the establishment of an employeremployee relationship. In Grepalife v. Judico, the Court upheld the existence of an employer-employee relationship between the insurance company and its agents, despite the fact that the compensation that the agents on commission received was not paid by the company but by the investor or the person insured. The relevant factor remains, as stated earlier, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee. In Cosmopolitan Funeral Homes, Inc. v. Maalat, the

employer similarly denied the existence of an employer-employee relationship, as the claimant according to it, was a supervisor on commission basis who did not observe normal hours of work. This Court declared that there was an employer-employee relationship, noting that [the] supervisor, although compensated on commission basis, [is] exempt from the observance of normal hours of work for his compensation is measured by the number of sales he makes.

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents of the company, and thus was subject to the control of management as to how she implements its policies and its end results. x x x

The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial evidence. The SSC examined the cash vouchers issued by Royal Star to Laudato, calling cards of Royal Star denominating Laudato as a Sales Supervisor of the company, and Certificates of Appreciation issued by Royal Star to Laudato in recognition of her unselfish and loyal efforts in promoting the company. On the other hand, Lazaro has failed to present any convincing contrary evidence, relying instead on his bare assertions. The Court of Appeals correctly ruled that petitioner has not sufficiently shown that the SSCs ruling was not supported by substantial evidence.

A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of Teresita Lazaro, General Manager of Royal Star, directing that no commissions were to be given on all main office sales from walk-in customers and enjoining salesmen and sales supervisors to observe this new policy. The Memorandum evinces

the fact that, contrary to Lazaros claim, Royal Star exercised control over its sales supervisors or agents such as Laudato as to the means and methods through which these personnel performed their work. (Emphasis supplied.)

Tongko was held out as an officer of Manulife by Manulife itself, being tagged as its Manager. He was tasked to supervise the insurance agents of Manulife. Clearly, the Lazaro case must apply to Tongko and he must be considered an employee of Manulife.

Furthermore, the letter of De Dios itself also contained several indicia of control. To reiterate, it was stated in the letter that:

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we have been discussing these past few weeks, i.e., Manulifes goal to become a major agency-led distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency growth.

xxxx

I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you feel may not be your cup of tea.

You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The above could solve this problem.

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining groups. (Emphasis supplied.)

The goal of Manulife was to become an agency-driven insurance company. If Tongko were indeed not an employee of Manulife, the company would not set the means and methods to achieve such goal. As long as Tongko was able to recruit the set number of agents, there would be no reason for Manulife to terminate his services as an independent contractor. However, that is not the

case here. It may be gleaned from the letter that De Dios is directing Tongko to clamor more actively his peers and his agents to recruit other agents. It was not sufficient that Tongko, by himself, recruit agents. This directive certainly shows that Manulife sought to prescribe the means and methods to achieve its goal.

De Dios further ordered Tongko to hire at his expense an assistant on whom he can unload you of much of the routine tasks which can be easily delegated. There is no other way to classify this order but as an intrusion into the means and methods of achieving the companys goals.

In the letter, Tongko was also informed that his area of responsibility was going to be reduced. In Megascope General Services v. National Labor Relations Commission,[34] between February 15, 1977 and January 1, 1989, petitioner contracted the services of several individuals as gardeners, helpers and maintenance workers. These workers were deployed at the National Power Corporation in Bagac, Bataan. Except for Gener J. del Rosario whose employment ended on April 30, 1989, the work of the other workers ceased on January 31, 1991. Consequently, private respondents filed a complaint for illegal dismissal, underpayment of salaries, nonpayment of five-day service incentive leave credits and holiday pay against petitioner with the NLRC. The Court ruled therein that the company exercised control over the workers that would establish an employeremployee relationship when it reassigned the workers from one workplace to another:

Private respondents were selected and hired by petitioner which assigned them to the NPC housing village in Bagac and in Km. 168, Morong, Bataan. They drew their salaries from petitioner which eventually dismissed them. Petitioners control over private respondents was manifest in its power to assign and pull them out of

clients at its own discretion. Power of control refers merely to the existence of the power and not to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee. It is enough that the former has the right to wield the power.

In South Davao Development Company, Inc.,[35] the Court ruled that the workers must be considered as employees of the company as the latter exercised control over the means and methods employed by the workers to achieve their objective, as evidenced by its power to transfer the copra workers as its employees to that of Gamo:

In this case, it was in the exercise of its power of control when petitioner corporation transferred the copra workers from their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner corporation put Gamo in charge of the copra workers although under a different payment scheme. Thus, it is clear that an employer-employee relationship has existed between petitioner corporation and respondents since the beginning and such relationship did not cease despite their reassignments and the change of payment scheme.

Similarly, in the instant case, by limiting the area of responsibility of Tongko, this is akin to a transfer or reassignment, an exercise of control by Manulife over Tongko that must necessarily determine the existence of an employer-employee relationship.

On the same issue, Justice Carpio-Morales added in her Dissenting Opinion to the June 29, 2010 Resolution that:

More significantly, in the succeeding Insular Life case, the Court found the following indicators material in finding the presence of control in cases involving insurance managers:

Exclusivity of service, control of assignments and removal of agents under private respondents unit, collection of premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner. x x x

The ponencia concludes that *a+ll these are obviously absent in petitioners case. The facts show otherwise, however. On top of the exclusive service rendered to respondent, which AFP Mutual Benefit Association, Inc. v. NLRC instructs to be not controlling, other factors were present. Petitioner established no agency of his own as the Metro North Region to which he was assigned remained intact even after his ties with respondent were severed. Respondent provided and furnished company facilities, equipments and materials for petitioner at respondents Makatioffice. Respondents control of assignments was evident from its act of removing the North Star Branch from petitioners scope of the Metro North Region, on which a memo to spell this matter out in greater detail was advised to be issued shortly thereafter. Respondent reserved to impose other improvements in the region after manifesting its intention to closely follow the region. Respondents managers, like petitioner, could only refer and recommend to respondent prospective agents who would be part of their respective units. In other words, respondent had the last say on the composition and structure of the sales unit or region of petitioner. Respondent, in fact, even devised the deployment of an Agency

Development Officer in the region to contribute towards the manpower development work x x x as part of our agency growth campaign.

Such an arrangement leads to no other conclusion than that respondent exercised the type of control of an employer, thereby wiping away the perception that petitioner was only a lead agent as viewed by the ponencia. Even respondent sees otherwise when it rebuked petitioner that *y+ou (petitioner) may have excelled in the past as an agent but, to this date, you still carry the mindset of a senior agent. Insofar as his management functions were concerned, petitioner was no longer considered a senior agent.

Furthermore, while this Court has already ruled that Article 280 of the Labor Code may not be used to prove the existence of an employer-employee relationship when the same is denied,[36] the fact that the work of the alleged independent contractor is usually necessary or desirable in the usual business or trade of the employer would establish a management structure that would mean that Tongko was Manulifes employee.

Such element of control, however, was only present in the administrative duties imposed upon Tongko when he was a manager of Manulife. The Agreement, as well as other the evidence presented, does not show the control necessary to establish an employer-employee relationship while Tongko was just an agent of Manulife. Hence, it is emphasized that it was only upon the imposition of such administrative duties that Tongko was an employee of Manulife and only the consequent change in his remunerations should be considered as his salary. This would consist of his persistency income and management overrides only and not his commissions as an agent.

The majority would seem to suggest that the notion of control as understood in the Labor Code and as applied in labor relations cases differs from the concept of control that governs the relationship between an insurance company and its agents. InGrepalife and in the earlier Insular life Assurance Co. Ltd. v. NLRC (4th Division) (Insular Life),[37] it was distinctly noted that the Court did not posit the dichotomy presently parlayed by the majority. Consider the following excerpts from Insular Life:

Exclusivity of service, control of assignments and removal of agents under private respondents unit, collection of premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner.

Similarly, Justice Carpio-Morales, in the same Dissenting Opinion, wrote:

The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations.

It bears pointing out that Tongko cannot be considered as an independent contractor of Manulife. There is no evidence to establish such a scenario. In Television and Production Exponents, Inc. v. Servaa,[38] the Court enumerates the requirements for a worker to be considered an independent contractor:

Aside from possessing substantial capital or investment, a legitimate job contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof. TAPE failed to establish that respondent is an independent contractor. As found by the Court of Appeals:

We find the annexes submitted by the private respondents insufficient to prove that herein petitioner is indeed an independent contractor. None of the above conditions exist in the case at bar. Private respondents failed to show that petitioner has substantial capital or investment to be qualified as an independent contractor. They likewise failed to present a written contract which specifies the performance of a specified piece of work, the nature and extent of the work and the term and duration of the relationship between herein petitioner and private respondent TAPE.

Here, the records are bereft of any evidence to establish that Tongko had substantial capital or investment to be qualified as an independent contractor.

Tongko being allowed the privilege to canvas insurance applications is not contrary to his employment status

The majority described petitioner as a lead insurance agent, at best, the change in his designationfrom unit manager to branch manager and then to regional sales managerbeing merely reflective of the increase in the number of agents under his guidance as well as the increase in the area of operation. Tongko, so the majority suggests, never rose to the level of Manulifes employee, as he did not even present copies of his managerial appointment to prove the fact that his agency relationship changed in the sense that Manulife controlled the means and methods of his work. The majority posits that even though the other managers of Manulife admitted to having duties and responsibilities other than those contained in a Career Agents Agreement, Tongko could not have been anything other than an agent.

With due respect, I beg to disagree with this posture.

It may be stated, as a general proposition, that an insurance agentwho usually sells insurance at his convenience following his own selling methods and who, for the most part, is governed by a set of rules[39] the company promulgates to guide its commission agents in selling its policies that they may not run afoul of the lawis not an employee. But as explained for reasons stated in my Dissent to the June 29, 2010 Resolution, Manulife, upon the petitioners appointment as manager, exercised effective control not only over the results of his work, but also over the means and methods by which it is to be accomplished. For sure, petitioner, while acting as Manulifes unit or branch manager, was allowed to sell insurance policies. And there is nothing absurd, let alone novel about an employee of an insurance company being given the privilege to solicit insurance.

In two (2) cases, the Court has already ruled that an individual may be an employee of an insurance agency while concurrently being allowed to sell insurance policies for the same company. In the Insular Life case,[40] Insular

Assurance Co., Ltd. (Insular) entered into an agency contract with Pantaleon de los Reyes authorizing the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid compensation in the form of commissions. Later, on March 1, 1993, the same parties entered into another contract where de los Reyes was appointed as Acting Unit Manager. The duties and responsibilities of de los Reyes included the recruitment, training, organization and development within his designated territory of a sufficient number of qualified, competent and trustworthy underwriters, and to supervise and coordinate the sales efforts of the underwriters in the active solicitation of new business and in the furtherance of the agencys assigned goals. We also stated that:

Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the companys conservation program, i.e., preservation and maintenance of existing insurance policies, and to accept moneys duly receipted on agents receipts provided the same were turned over to the company. As long as he was unit manager in an acting capacity, De los Reyes was prohibited from working for other life insurance companies or with the government. He could not also accept a managerial or supervisory position in any firm doing business in the Philippines without the written consent of petitioner.

Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by petitioner on 18 November 1993 that his services were terminated effective 18 December 1993. On 7 March 1994 he filed a complaint before the Labor Arbiter on the ground that he was illegally dismissed and that he was not paid his salaries and separation pay. (Emphasis supplied.)

The fact that de los Reyes concurrently acted as an agent, selling insurance for Insular, and as an acting Unit Manager, did not prevent the Court from ruling that de los Reyes was Insulars employee.

Similarly, in the Grepalife case,[41] the brothers Rodrigo and Ernesto Ruiz entered into agency agreements with Great Pacific Life Assurance Corporation (Grepalife) for the former to sell the latters insurance policies. They started out as trainee agents and later promoted to Zone Supervisor and District Manager, respectively. Describing the brothers duties, the Court ruled:

x x x [T]heir work at the time of their dismissal as zone supervisor and district manager are necessary and desirable to the usual business of the insurance company. They were entrusted with supervisory, sales and other functions to guard Grepalifes business interests and to bring in more clients to the company, and even with administrative functions to ensure that all collections, reports and data are faithfully brought to the company.

Upon the foregoing factual setting, the Court ruled that the brothers Ruiz are employees of Grepalife, the latter exercising control over the means and methods employed by them to reach their objective.

Clearly, the fact that an individual acts as an agent of an insurance company is irrelevant to the issue of whether the individual is an employee of the company. The Court has already recognized the reality that an employee of an insurance company may, at the same time, be an agent and allowed to act as such.

It may be, as asserted, that petitioner was unable to adduce in evidence copies of his management contracts specifying his overall duties and responsibilities as manager. But then, a management contract, for purposes of determining the relationship between the worker and the employer, is simply evidence to support a conclusion either way. Such document, or the absence thereof, would not influence the conclusion on the issue of employment. The presence of a management contract would merely simplify the issue as to the duties and responsibilities of the employee concerned as they would then be clearly defined. Moreover, other evidence, like the letter of De Dios, may be considered to support the contention that he was an employee of Manulife and prove his duties and responsibilities as such.

It may not be remiss to point out that Tongko was dismissed from his employment with Manulife for his failure to recruit sufficient numbers of agents. As was explained in the November 7, 2008 Decision:

The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional sales management level. Relative thereto, De Dios addressed a letter dated November 6, 2001 to Tongko regarding an October 18, 2001 Metro North Sales Managers Meeting. In the letter, De Dios stated: The first step to transforming Manulife into a big league player has been very clear to increase the number of agents to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the organization. Since then, however, substantial changes have taken place in the organization, as these have been influenced by developments both from within and without the company.

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, terminating Tongkos services, thus:

It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between yourself and SVP Kevin O Connor, some of them with me, as well as group meetings with your Sales Managers, all these efforts have failed in helping you align your directions with Managements avowed agency growth policy.

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter.

And yet, the recruitment of agents is not among the duties and responsibilities that were designated to Tongko in the Agreement. And while there may not have been another contract to supersede the Agreement that was presented as evidence, the facts of the case bear out that Tongko was assigned various other duties and responsibilities that were not included therein.

Manulifes decision not to execute a management contract with petitioner was well within its prerogative. However, the bare fact of Manulife and petitioner not having executed a management contract, if this were the case, did not reduce the petitioner to a mere lead agent. While there was perhaps no written management contract whence petitioners duties and undertaking as unit/branch

manager may easily be fleshed out prefatory to determining if an employeremployee relationship with Manulife did exist, other evidence was adduced to show such duties and responsibilities. For one, in his letter[42] of November 6, 2001, respondent De Dios addressed petitioner as sales manager. And as I wrote in my Dissent to the June 29, 2010 Resolution, it is difficult to imagine that Manulife did not issue promotional appointments to petitioner as unit manager, branch manager, and eventually regional sales manager. Sound management practice simply requires an appointment for any upward personnel movement, particularly when additional functions and the corresponding increase in compensation are involved. Then, too, the adverted affidavits of the managers of Manulife as to the duties and responsibilities of a unit manager, such as petitioner, point to the conclusion that these managers were employees of Manulife, applying the four-fold test.

Any lingering doubt that petitioner was, by virtue of the management appointment, under Manulifes employ should be laid to rest by its virtual admission made in its Motion for Reconsideration dated December 3, 2008 that petitioner was dismissed for a just and lawful cause: gross and habitual neglect of duties, inefficiency and willful disobedience of the lawful orders of Manulife, to wit:

5.4. And yet, until the November 7 Decision, Respondents never thought for one moment that Petitioner was Manulifes employee. All the agreements executed with him, his flexible hours, his unsupervised choice of clients and method of selling the products, his ability to take leave anytime, his separate business expenses, his own declarations in his tax return, Respondent Manulifes non-contribution of SSS premiums for him, his non-existence in the company plantilla, Respondent Manulifes withholding from him of creditable income tax,

all consistently showed that Respondent Manulifes belief was singular in the existence of independent contractorship.

x x x x.

5.7. And yet, respondent Manulife did indeed substantially comply with the requirements for lawful dismissal of a regular employee, assuming arguendo that petitioner is one. He was dismissed for a just and lawful cause for gross disobedience of the lawful orders of Respondent Manulife. Respondents presented an abundance of evidence demonstrating how termination happened only after failure to meet company goals, after all remedial efforts to correct the inefficiency of Petitioner failed and after Petitioner, as found by the CA, created dissension in Respondent Manulife when he refused to accept the need for improvement in his area and continued to spread the bile of discontent and rebellion that he had generated among the other agents.

Notably, in the termination letter of Manulife that was addressed to Tongko, no mention is made of any valid cause for the termination of his services. No mention was made of any particular rule that Tongko violated leading to his separation. Evidently, Tongkos termination of employment was without cause. In an apparent about face, Manulife now claims that it had a valid cause for the termination of Tongkos services.

While the Court allows the presentation of inconsistent defenses, Manulifes argumentation on this point would destroy its position that Tongko is not its employee. Manulife is essentially pointing out the facts that would show that it abided by the requirements of the Labor Code on the dismissal of an

employee. Article 282, paragraphs (a) and (b), of the Labor Code requires the presence of valid grounds for the legal dismissal of an employee:

Article 282. Termination by employer. An employer may terminate an employment for any of the following just causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

Stated differently, such requirements are only required of employers with regard to their employees. Manulife had no reason to comply with this provision of law if it did not consider Tongko as an employee. Therefore, the question is begged as to why Manulife deemed it necessary to comply with such provision of law. There is an implied admission that Tongko was Manulifes employee.

The following excerpts appearing in my Dissent to the June 29, 2010 Resolution are self-explanatory:

At this juncture, the Court notes that Manulife has changed its stance on the issue of illegal dismissal. In its Position Paper with Motion to Dismiss filed before the Labor Arbiter, in its Motion for Reconsideration (Re: Decision dated 27 September 2004) dated October 11, 2004 filed before the NLRC, and in its Comment dated August 5,

2006 filed before the Court, Manulife had consistently assumed the posture that the dismissal of petitioner was a proper exercise of termination proviso under the Career Agents Agreement. In this motion, however, Manulife, in a virtual acknowledgment of petitioner being its employee, contends that the petitioner was dismissed for a just and lawful cause for gross and habitual neglect of duties, inefficiency and willful disobedience of the lawful orders. Manulife adds that:

Respondents presented an abundance of evidence demonstrating how termination happened only after failure to meet company goals, after all remedial efforts to correct the inefficiency of Petitioner failed and after Petitioner, as found by the CA, created dissension in Respondent Manulife when he refused to accept the need for improvement in his area and continued to spread the bile of discontent and rebellion that he had generated among the other agents.

In all, I submit that petitioners peculiar circumstances as unit manager, branch manager and ultimately regional sales manager of Manulife, with the exclusivity feature of his engagement and his duties as such manager, indicate, at the very least, a prima facieexistence of an employer-employee relationship, following the control test. And given the bias of the Constitution,[43] Labor Code[44] and Civil Code[45] in favor of labor, any doubt as to the existence of such relationship occasioned by the lack of evidence should be resolved in favor of petitioner and of employment. In this regard, I hark back anew to what the Court emphatically said in Dealco Farms, Inc. v. National Labor Relations Commission:

Having failed to substantiate its allegations on the relationship between the parties, we stick to the settled rule in controversies between a laborer and his master that doubts reasonably arising from the evidence should be resolved in the formers favor.[46]

As in Dealco Farms, the sympathies of the Court in this case should be easy and clear. The flip-flopping of the lower tribunals and the change in the Courts own stand lucidly show the ambiguity and doubt in the application of the labor laws to the instant case. As such, the Court is duty-bound to resolve such doubts in favor of the employee, Tongko.

Tongko was illegally dismissed

Having established that Tongko was indeed an employee of Manulife when he was a manager thereof, the next question is whether the dismissal was illegal.

This must be answered in the affirmative.

In the NLRC and the CA, Manulife alleged that Tongko was validly dismissed for gross and habitual neglect of duties, inefficiency, as well as willful disobedience of the lawful orders of Manulife. Evidently, such dismissal was due to Tongkos failure to recruit the required number of agents from his area of responsibility.

To reiterate, two (2) of the alleged grounds for the dismissal of Tongko fall under Art. 282, paragraphs (a) and (b) of the Labor Code:

Article 282. Termination by employer. An employer may terminate an employment for any of the following just causes: (b) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(c) Gross and habitual neglect by the employee of his duties;

On the other hand, inefficiency as a ground for termination of employment is equated with gross and habitual neglect, as the Court explained in St. Lukes Medical Center, Incorporated v. Fadrigo:[47]

Gross inefficiency is closely related to gross neglect, for both involve specific acts of omission on the part of the employee resulting in damage to the employer or to his business. As a just cause for an employees dismissal, inefficiency or neglect of duty must not only be gross but also habitual. Thus, a single or isolated act of negligence does not constitute a just cause for the dismissal of the employee. (Emphasis supplied.)

In cases of termination of employment for just causes, the Court has repeatedly held that the burden rests on the employer to justify such dismissal. Art. 277, paragraph (b) of the Labor Code states:

Article. 277. Miscellaneous provisions. x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. The Secretary of the Department of Labor and Employment may suspend the effects of the termination pending resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor and Employment before whom such dispute is pending that the termination may cause a serious labor dispute or is in implementation of a mass lay-off. (Emphasis supplied.)

Thus, the Court has ruled in Caltex (Philippines), Inc. v. Agad[48] that:

In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. When there is no showing of a clear, valid, and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal and the burden is on

the employer to prove that the termination was for a valid or authorized cause.

The quantum of proof which the employer must discharge is substantial evidence. An employees dismissal due to serious misconduct and loss of trust and confidence must be supported by substantial evidence. Substantial evidence is that amount of relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise.

While in Lima Land, Inc. v. Cuevas,[49] the Court ruled:

Well-settled is the rule that the essence of due process is simply an opportunity to be heard or, as applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling complained of.

Moreover, in dismissing an employee, the employer has the burden of proving that the former worker has been served two notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is sought, and (2) the other to inform him of his employers decision to dismiss him. The first notice must state that dismissal is sought for the act or omission charged against the employee, otherwise, the notice cannot be considered sufficient compliance with the rules.

The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, were violated and/or which among the grounds under Article 282 is being charged against the employees.

Manulife has failed to overcome such burden. Willful disobedience, to justify termination from employment, must comply with the following requirements, as enunciated in Areno v. SkyCable PCC-Baguio,[50] to wit:

As a just cause for dismissal of an employee under Article 282 of the Labor Code, willful disobedience of the employers lawful orders requires the concurrence of two elements: (1) the employees assailed conduct must have been willful, i.e., characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge.

Neglect of duty, to be a valid ground for termination of employment must also conform to the following requirements, as stated in Benjamin v. Amellar Corporation:[51]

It bears stressing in dismissing an employee for gross and habitual neglect of duties, the negligence should not merely be gross. It should also be habitual. There being nothing in the records to identify what specific duties Anabel violated and whether the violations were gross and habitual, any discussion herein is an exercise in futility.

Here, Manulife has failed to identify the rule and the standards by which Tongkos acts were considered unsatisfactory. There were no set criteria for determining the sufficiency of Tongkos recruitment efforts. Moreover, Tongkos acts were not proved to be willful or gross and habitual as defined by the abovecited jurisprudence. Absent proof establishing such factors, Manulife cannot be considered to have discharged the burden required to prove that the just cause for termination of employment was indeed present. In fact, at the time Tongkos services were terminated, his area was not the last in agent recruitment. As such, Tongkos dismissal smacks of arbitrariness.

Informal communications violate the principle of sub judice

On a final note, the Court received and set for agenda four (4) letters in relation to the instant case: (1) Letter of Tongko dated November 30, 2005;[52] (2) the aforementioned letter of the Joint Foreign Chambers of the Philippines dated December 16, 2008;[53] (3) Letter of Gregorio Mercado, President of the Philippine Life Insurance Association, Inc. dated January 12, 2009;[54]and (4) Letter of Tongko dated March 25, 2009,[55] propounding their positions on the case. At that point in

time, the case had not yet become final and executory, hence, sub judice. In Romero v. Estrada,[56] the Court expounded on this principle, to wit:

The sub judice rule restricts comments and disclosures pertaining to judicial proceedings to avoid prejudging the issue, influencing the court, or obstructing the administration of justice. A violation of the sub judice rule may render one liable for indirect contempt under Sec. 3(d), Rule 71 of the Rules of Court. The rationale for the rule adverted to is set out in Nestle Philippines v. Sanchez:

[I]t is a traditional conviction of civilized society everywhere that courts and juries, in the decision of issues of fact and law should be immune from every extraneous influence; that facts should be decided upon evidence produced in court; and that the determination of such facts should be uninfluenced by bias, prejudice or sympathies.

The principle of sub judice is a two-way street. Inasmuch as the parties and other interested individuals should refrain from trying to influence the courts, the court itself should also be on guard against such attempts. The Court should, therefore, be wary from accepting and putting on record, papers and documents not officially filed with it. Such submissions have the appearance of influencing the Court despite the latters determined objectivity and must be avoided. To illustrate, the November 7, 2008 Decision of this Court was decided in favor of Tongko with only one (1) dissent. However, in the July 29, 2010 Resolution, the original Decision was reversed in favor of Manulife by the Court en banc, with only two (2) dissents. The above-mentioned letters were received by the Court after November 7, 2008 but before July 29, 2010. While the letters themselves may not have actually swayed the members of the Court, the appearance of impropriety should be avoided. To reiterate, when the parties submitted the

aforementioned letters, the case had not yet become final and executory, they had sufficient remedies under the Rules of Court for redress. There was no reason for the parties to have submitted such letters and for this Court to have taken cognizance thereof and to set the same for agenda.

To reiterate, the declaration that Tongko is an employee of Manulife, having performed administrative functions as its manager, cannot be applied to insurance agents in general. Any finding of an employer-employee relationship shall always be on a case-to-case basis. The instant case is no exception. Any fear that the grant of Tongkos motion for reconsideration shall render all insurance agents in the country as employees of insurance companies is badly misplaced.

WHEREFORE, I vote to grant Tongkos Motion for Reconsideration dated July 28, 2010, to annul and set aside the June 29, 2010, and to reinstate the November 7, 2008 Decision with modification on the amount of backwages to which Tongko shall be entitled. As thus modified and subject to the qualifications defined in the Dissenting Opinion to the June 29, 2010, petitioner should be awarded backwages, to be computed as the monthly average of his management overrides, as well as other bonuses and benefits, corresponding to the period he was serving Manulife as unit, branch and eventually regional sales manager.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 163072 April 2, 2009

MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, vs. CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, Respondents. DECISION CARPIO, J.: This is a petition for review on certiorari1 of the Decision2 dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. The Facts Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Paraaque City. On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. MIAAs real property tax delinquency for its real properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows: TAX DECL TAXAB ALE RATIO YEAR N A71997-

TAX DUE

PENALTY

TOTAL

243,522,855.

123,351,728.

366,874,583.18

1832001 08346 A719921832001 05224 A719921912001 00843 A719921912001 00140 A719921912001 00139 A719921832001 05409 A719921832001 05410 A719921832001 05413 A719921832001 05412 A719921832001 05411 A719921832001 05245

00 113,582,466. 00 54,454,800.0 0 1,632,960.00

18 71,159,414.9 8 34,115,932.2 0 1,023,049.44

184,741,880.98

88,570,732.20

2,656,009.44

6,068,448.00 59,129,520.0 0 20,619,720.0 0 7,908,240.00 18,441,981.2 0 109,946,736. 00 7,440,000.00

3,801,882.85 37,044,644.2 8 12,918,254.5 8 4,954,512.36 11,553,901.1 3 68,881,630.1 3 4,661,160.00

9,870,330.85

96,174,164.28

33,537,974.58

12,862,752.36

29,995,882.33

178,828,366.13

12,101,160.00

GRAND TOTAL

P642,747,726 P373,466,110 P1,016,213,836 .20 .13 .33

On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid. On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay from imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties. On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition. The Court of Appeals Ruling The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including governmentowned or controlled corporations, except local water districts, cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals and educational institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon the effectivity of the Local Government Code. The Issue

The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax. The Courts Ruling The petition is meritorious. In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the Local Government Code which read: SECTION 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, nonstock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code. SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person; (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and environment protection. Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code. The Court of Appeals held that as a government-owned corporation, MIAAs tax exemption under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992. In Manila International Airport Authority v. Court of Appeals 6 (2006 MIAA case), this Court already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Paraaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands and buildings located in Paraaque City. The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case involved airport lands and buildings located in Paraaque City while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court held: To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or nonstock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability.

MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides: Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridgesconstructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.7 (Emphasis in the original) The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes x x x government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a

"government-owned or controlled corporation." Obviously, the term government "instrumentality" is broader than the term "governmentowned or controlled corporation." Section 2(10) provides: SEC. 2. General Terms Defined. x x x (10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the Introductory Provisions of the Administrative Code of 1987: SEC. 2. General Terms Defined. x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. The fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation."

A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case: A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. x x x Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. xxx MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation. Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes.

MIAA, a public utility, is organized to operate an international and domestic airport for public use. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. x x x When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."9 Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.10 Under Section 133(o)11of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties. Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real property tax under Section 234(a) of the Local Government Code. However, under the same provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to real

property tax.12 In this case, only those portions of the NAIA Pasay properties which are leased to taxable persons like private parties are subject to real property tax by the City of Pasay. WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the Manila International Airport Authority EXEMPT from real property tax imposed by the City of Pasay. We declare VOID all the real property tax assessments, including the final notices of real property tax delinquencies, issued by the City of Pasay on the NAIA Pasay properties of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties. No costs. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice LEONARDO A. QUISUMBING Associate Justice MA. ALICIA AUSTRIAMARTINEZ Associate Justice CONCHITA CARPIO MORALES CONSUELO YNARESSANTIAGO Associate Justice RENATO C. CORONA Associate Justice DANTE O. TINGA Associate Justice

Associate Justice MINITA V. CHICO-NAZARIO Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice ARTURO D. BRION Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice TERESITA J. LEONARDODE CASTRO Associate Justice DIOSDADO M. PERALTA Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. REYNATO S. PUNO Chief Justice

Footnotes
1

Under Rule 45 of the 1997 Rules of Civil Procedure.

Penned by Associate Justice Ruben T. Reyes (now retired Supreme Court Justice) with Associate Justices Remedios Salazar-Fernando and Edgardo F. Sundiam, concurring.
3

Providing for a Revision of Executive Order No. 778 Creating the Manila International Airport Authority, Transferring Existing Assets of the Manila International Airport to the Authority, and Vesting the Authority with Power to Administer and Operate the Manila International Airport.

Section 3 of EO 903 reads: SEC. 3. Creation of the Manila International Airport Authority. There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, that any subsidiary that may be organized shall have the prior approval of the President. The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through the sale or through any other mode unless specifically approved by the President of the Philippines.

Section 22 of EO 903 reads: SEC. 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other property, movable and immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority.

G.R. No. 155650, 20 July 2006, 495 SCRA 591. Id. at 644-645.

Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 reads: SEC. 2. General Terms Defined. x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.
Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 94237 February 26, 1997 BUILDING CARE CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FIRST DIVISION, and ROGELIO RODIL, respondents.

PANGANIBAN, J.:

In dismissing this petition, the Court reiterates the well-entrenched doctrines that (1) a motion for reconsideration, as a rule, is an indispensable precondition to the filing of a petition for certiorari, and (2) findings of facts of the National Labor Relations Commission (NLRC), affirming those of the Labor Arbiter, are binding upon the Supreme Court. This petition for certiorari under Rule 65 of the Rules of Court seeks to annul the Decision 1 promulgated on May 9, 1990, of the First Division 2 of public respondent in NLRC Case No. NCR-00-04-01605-88 which affirmed the decision of Labor Arbiter Quintin C. Mendoza. The dispositive portion of the affirmed decision of the Labor Arbiter reads: 3 WHEREFORE, decision is hereby rendered for the complainant declaring his suspension and dismissal illegal and ordering the respondent to reinstate him plus backwages from time his (sic) dismissal at the adjusted rate under R.A. 6640 and retaining whatever seniority rights in the job he has (sic) plus his legal holidays pay of P1,178.00 and differential pay of P369.40 and attorney's fees of not more than ten (10%) of the total award. The Facts The facts found by public respondent are as follows: 4 Complainant (herein private respondent) alleged that his wages, 13th month pay and service incentive leave pay were unpaid; that he was not paid for work rendered during legal holidays; that on February 11, 1988, he was suspended for one week by his supervisor, H. Silvestre, for no apparent reason; that the suspension was illegal because of the absence of just cause and respondent's (herein petitioner) non-compliance with the requirements of due process; that thereafter, he was not given any assignment, despite repeated follow-ups, summarized as follows: Date Person Approached Result 2-19-88 Supervisor H. Silvestre Required complainant to return (on) 2-20-88 2-20-88 FEBTC Worked for one pay (should be day); no time card & pay 2-23-88 Mr. Adriatico Referred to Silvestre not given work 2-23-88 Mr. Barbosa, FEBTC Told to go home; promise(d) to talk to Silvestre

2-24-88 H. Silvestre/Mr. Adriatico Scolded; not given work 2-26-88 Supervisor Ms. Carol Told to return the following day 2-27-88 Supervisors Not given work Silvestre/Ms. Carol 2-29-88 Silvestre Not given work 3-04-88 Supervisors Silvestre, No results Viray, Melanie 3-23-88 Silvestre No results 3-25-88 Ms. Malig Promised to ask supervisors what happened 3-28 & 29-88 Ms. Malig Told supervisors not around 4-04-88 Ms. Malig Informed he would no longer be given Work. Respondent contended that complainant was paid his wages and holiday pay in accordance with law; that it was unable to comply with R.A. 6640 immediately because of its client's delay in approving the adjusted contract rates; that it was ready to pay complainant P369.40 representing salary differentials from December 14, 1987 to February 11, 1988; that on February 9, 1988, FEBTC complained that complainant's area of responsibility was improperly cleaned; that complainant was twice instructed to report to respondent's night shift supervisor, but on both times, he failed to do so; that because of such defiance, he was verbally warned that drastic disciplinary action would be taken against him should he persist in failing to report as directed; that on February 11, 1988, the assistant supervisor erroneously noted on the logbook that complainant was being suspended; that the suspension was not carried out as complainant was allowed to work the following day, as shown by his daily time record; that he was advised to report to respondent's office the following day; that, instead, complainant took a long absence without leave starting on February 12, 1988; that he showed up at respondent's office only on March 28, 1988; that he was required to submit a written explanation of his long absence without leave, frequent absences in the post and deteriorating performance; that complainant wrote that he failed to report because his supervisor suspended him for no apparent reason; that he was told that an investigation of his alleged suspension would

be conducted and, in view of the forthcoming non-working holidays, advised to report on April 4, 1988; that, in the meantime, respondent's supervisor reported that FEBTC had indicated that it would no longer accept complainant; that complainant was advised of FEBTC's decision on April 4, 1988; that for humanitarian reasons, complainant was advised that he was going to be temporarily assigned as reliever at respondent's office while there was no available post in its other clients; that complainant requested for a week-long leave, allegedly because he had to bring his family to Quezon Province; that complainant again failed to report for work on April 18, 1988; that he was sent a letter advising him to report to respondent's office; that he never went back to respondent's office; but instead, filed the instant case. Complainant maintained that he did his work properly; that he was absent from January 18-22 (1988) because he was sick, and he duly advised respondent of his sickness; that he was absent from February 1-8 (1988) because he had to take care of his wife who was sick, as shown by her medical certificate; that he was absent again for one week starting February 12, 1988 because he was illegally suspended; that thereafter, he was never given another assignment, contrary to respondent's untruthful averments; that he was denied due process of law by respondent; that respondent may have sent him a letter after April 4, 1988, but it was too late because he had already instituted the instant case. Respondent submitted the affidavits of Wendel Viray, Hernani Silvestre and Germel Villamor, its over-all Supervisor and janitor, respectively, stating that instead of implementing the suspension, complainant was transferred from the night shift to the day shift; that complainant requested to be returned to the night shift, but his request was not granted; that he was given a chance to work at respondent's office, but he failed to report there as instructed. (Citations omitted). Hence, on April 19, 1988, private respondent filed with the Arbitration Branch of the NLRC a complaint for illegal dismissal, underpayment and non-payment of legal holiday pay against petitioner. At the initial hearing, private respondent was offered reinstatement, but he insisted on being paid his backwages because of his alleged unjustified dismissal. Petitioner did not agree. Thus, after the parties submitted their respective position papers and other documentary evidence, the Labor Arbiter issued a decision in favor of private respondent. 5 The Issue Petitioner raises a single issue in its petition, to wit: 6 With all due respects to the Hon. National Labor Relations Commission, First Division, petitioner submits that in affirming the decision of the Hon. Labor Arbiter and (in) dismissing petitioner's appeal, public respondent committed grave abuse of discretion and acted arbitrarily and capriciously as the questioned (Decision) is contrary to law and evidence.

Petitioner alleges that the labor arbiter relied only on complainant's affidavit. Public respondent failed to consider that the Labor Arbiter gave very little or no probative value to evidence adduced by petitioner, both documentary and testimonial. Petitioner further claims that both public respondent and the Labor Arbiter missed the antecedent and most important issue of whether or not private respondent had really been dismissed by petitioner. 7According to petitioner, the employer is tasked with the burden of proving just cause for dismissal but "the primary burden of proving the fact of dismissal itself rests upon the complaining employee." 8 Petitioner states that even if it is assumed that private respondent was dismissed, there were just causes for the termination of his service, 9 the conduct of private respondent was inconsistent with proper subordination. 10 Petitioner alleges too that private respondent failed to prove that he had not been paid amounts corresponding to the legal holidays; and there being no merit to private respondent's complaint, attorney's fees should not be awarded either. 11 Public respondent in affirming the decision of the labor arbiter reasoned as follows:
12

Contrary to respondent's (herein petitioner) argument on appeal, the burden of proof in dismissal cases is borne by the employer, who has to prove the existence of a just cause (Asphalt & Cement Pavers, Inc. vs. Leogardo, Jr., 162 SCRA 312). This is even more true if, like the respondent, the employer puts up the defense of abandonment. The rule is that the defense of abandonment should be proved (Penaflor vs. NLRC, 120 SCRA 68; Polymedic General Hospital vs. NLRC, 134 SCRA 420). We have perused the entire records, and We are inclined to conclude that respondent's theory of abandonment has not been sufficiently proven. Complainant's (herein private respondent) claim that he was suspended for no apparent reason for one week is borne out by the logbook entry for February 11, 1988 and by his letter-explanation dated March 28, 1988. It should also be noted that complainant stood pat on this claim throughout the entire proceedings. On the other hand, respondent, in its position paper filed on July 13, 1988, simply contended that complainant failed, without prior leave, to report for work despite respondent's repeated instructions. In the affidavits submitted on September 21, 1988, three of respondent's employees averred that complainant was transferred to the day shift and he quit his job because he was against such transfer. This is an entirely new twist which did not appear in the memoranda and logbook entries earlier submitted by respondent, nor even in its position paper. For this reason, said averment appears to be an after-thought, which cannot be given much weight. xxx xxx xxx

Finally, We find no compelling reason to disturb the award of holiday pay amounting to P1,178.00 and salary differentials amounting to P369.40. If respondent had really paid complainant holiday pay, it could easily have presented its payrolls, which constitute the best proof of payment. These are necessarily in the possession of respondent, so complainant cannot be blamed for their non-production. Moreover, respondent admitted its failure to comply with the wage increase mandated by R.A. 6640. (Citations omitted). The Court's Ruling The contention of petitioner is without merit. We totally support the Decision of the National Labor Relations Commission. At the outset, we note that the petition suffers from a procedural defect that warrants its outright dismissal. Petitioner prematurely acted. It did not file a motion for reconsideration with public respondent before availing of the special civil action of certiorari. This premature action constitutes a fatal infirmity as ruled in a catena of cases, most recently in the case of Interorient Maritime Enterprises, Inc., et al., vs. National Labor Relations Commission, et al. 13 in this wise: . . .The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law against the acts of public respondent. In the instant case, the plain and adequate remedy expressly provided by the law was a motion for reconsideration of the assailed decision, based on palpable or patent errors, to be made under oath and filed within ten (10) calendar days from receipt of the questioned decision. (T)he filing of such a motion is intended to afford public respondent an opportunity to correct any actual or fancied error attributed to it by way of a re-examination of the legal and factual aspects of the case. Petitioner's inaction or negligence under the circumstances is tantamount to a deprivation of the right and opportunity of the respondent Commission to cleanse itself of an error unwittingly committed or to vindicate itself of an act unfairly imputed. ... . . . And for failure to avail of the correct remedy expressly provided by law, petitioner has permitted the subject Resolution to become final and executory after the lapse of the ten day period within which to file such motion for reconsideration. On the merits, petitioner wants this Court to determine if private respondent was really dismissed. This is a question of fact which cannot be raised in a petition for certiorari under Rule 65.
It should be noted, in the first place, that the instant petition is a special civil action for certiorari under Rule 65 of the Revised Rules of Court. An extraordinary remedy, its use is available only and restrictively in truly exceptional cases those wherein the action of an inferior court, board or officer performing judicial or quasi-judicial acts is

challenged for being wholly void on grounds of jurisdiction. The sole office of the writ of certiorariis the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction. It does not include correction of public respondent NLRC's evaluation of the evidence and factual findings 14 based thereon, which are generally accorded not only great respect but even finality.

The recitation of facts evidently shows that public respondent did not rely only on the evidence presented by private respondent. All the evidence presented for or against the position of private respondent have been duly considered in arriving at its conclusion.
Both the Labor Arbiter and the respondent NLRC gave credence to the evidence of the private respondent that he was illegally dismissed. We are not free to tamper with their calibration of the weight of evidence in the absence of a clear showing that it is arbitrary 15 and bereft of any rational basis.

Indeed if petitioner wanted to prove its payment of holiday pays and salary differentials, it could have easily presented proofs of such monetary benefits. But it did not. It had failed to comply with the mandate of the law. As public respondent ruled, the burden of proof in this regard belongs to the employer not to the employee. We also sustain the award of attorney's fees. "It is settled that in actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney's fees." 16 WHEREFORE, premises considered, the Petition is DISMISSED and the assailed Decision is AFFIRMED. Double costs against petitioner. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 152752 January 19, 2005

INOCELIA S. AUTENCIO, petitioner, vs. City Administrator, RODEL M. MAARA and The CITY OF COTABATO, respondents. DECISION PANGANIBAN, J.: The essence of due process in administrative proceedings is simply the opportunity to explain ones side or to seek a reconsideration of the action or ruling complained of. Furthermore, the counsels actions and mistakes on procedural matters bind the client. On the other hand, the complainants manifestations or representations on questions of law do not bind the decision makers or the courts.

The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the September 12, 2001 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 56061. The dispositive portion of the Decision reads as follows: "WHEREFORE, premises considered, the instant petition is dismissed for lack of merit and the assailed resolution of the CSC is affirmed in its entirety."3 Petitioner also assails the February 8, 2000 CA Resolution4 denying her Motion for Reconsideration. The Facts The CA summarized the facts in this manner: "On December 27, 1996, City Administrator Rodel M. Maara lodged a complaint against petitioner Inocelia S. Autencio with the Office of the City Mayor for dishonesty and misconduct in office. The complaint alleged that on the third week of October 1996, Riza Bravo, an employee of the City Assessors Office charged with the preparation of the payroll of casual employees, changed the September 1996 payroll prepared by her upon the order of petitioner. The first prepared payroll for the said month reflected five (5) days attendance of seven (7) casual employees. It was made to appear in the second prepared payroll that the seven casual employees worked for the whole month of September. Despite the fact that the seven casual employees rendered services only for five days for the month of September and two weeks for the month of October 1996, the petitioner directed them to prepare and reflect in their respective daily time records full attendance for the months in question. The petitioner told them that one-half of their salaries for the month of September 1996 will be deducted as their contributions for the Christmas party of their office and that this matter will be a surprise for the regular employees and must be kept secret among themselves. "Mrs. Bravo personally collected the salaries of the seven casual employees from the City Treasury Office upon instruction of the petitioner on October 28, 1996, and distributed to them only one-half of their salary and gave the remainder to the petitioner. "Pending investigation of the administrative complaint, on January 2, 1997, petitioner was preventively suspended for a period of ninety (90) days. "After x x x hearing, the Office for Legal Services of the City of Cotabato, on June 30, 1997, issued a resolution/decision which was approved by the City Mayor Ludovico D. Badoy, declaring the petitioner guilty of misconduct in office for allowing irregularities to happen which led to illegal payment of salaries to casuals. However, as regards to the charge of dishonesty, the same was found wanting due to insufficiency of evidence. A penalty of forced resignation with forfeiture of retirement benefits except for earned leave accumulated before the filing of the complaint was imposed.
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"The petitioner appealed the said resolution to the Civil Service Commission (CSC). On June 9, 1998, the CSC issued Resolution No. 981413 modifying the decision of the City Mayor to grave misconduct and imposed on her the penalty of dismissal for cause with all its accessories. Petitioner moved for reconsideration but the CSC on September 21, 1999 issued Resolution No. 99-2135 denying the same."5 In her Motion for Reconsideration of CSC Resolution No. 98-1413, petitioner alleged that she had waived her right to present her evidence at a formal hearing and agreed to submit the case for resolution, only because of the manifestation of the complainant and the hearing officer that she could be held liable only for the lesser offense of simple negligence. On September 21, 1999, the CSC issued Resolution No. 99-2135 denying her Motion. According to the CSC, regardless of whether she agreed to submit the case for resolution, the fact remains that she caused the changes in the payroll of the seven casuals and made it appear that they had worked for the full month of September. Raising the issues of whether she was denied due process and whether the penalty imposed by the CSC was "harsh," petitioner elevated the case to the CA. On September 12, 2001, the CA affirmed the CSC Resolutions. Petitioner filed a Motion for reconsideration, appending thereto the Manifestation of incumbent Cotabato City Mayor Datu Muslimin G. Sema. The mayor stated therein that, based on the records, petitioner had been misled into waiving her right to a formal hearing; and that he had no objection to the reopening of the case. On February 8, 2002, the CA denied reconsideration. Ruling of the Court of Appeals Ruling that petitioner had not been denied due process, the CA reasoned that "the requirements of due process are satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy." Petitioner was given this opportunity -records show that she was informed of the formal charges against her; she was able to file her Answer as well as documents evidencing her claim; and she was represented by a lawyer during the pre-hearing conference. The CA said that "[t]he failure of petitioner and her counsel to take full advantage of the opportunity to be heard does not change the fact that they were accorded such opportunity." One may be heard not only through oral argument but also through pleadings. The CA likewise held that the penalty imposed by the CSC was not "harsh." It affirmed the CSCs finding that the evidence had sufficiently shown her grave misconduct in allowing the irregularities leading to the illegal payment of salaries to casuals. Pursuant to the Omnibus Rules Implementing Book V of the Administrative Code of 1987, the commensurate penalty for such serious offense is dismissal from the service. Hence, this Petition.6 Issue The lone issue raised by petitioner in her Memorandum involves a pure question of law:

"x x x [W]as the petitioner deprived of substantial due process?" The Courts Ruling The Petition is devoid of merit. Lone Issue: Denial of Substantial Due Process Petitioner insists that she waived her right to a formal hearing, only because she was made to believe that she would be liable for the lesser offense of simple negligence. She relies emphatically on the Manifestation of the incumbent city mayor of Cotabato stating that an injustice was committed against her because she had been deceived to the point that she waived her right to present evidence. According to her, this Manifestation constituted a judicial admission that the present counsel of the city government did not object to, and that the appellate court should have taken into consideration. We find no merit in petitioners contention. The legal presumption is that official duty has been duly performed.7Government officials are presumed to have regularly performed their functions;8 and strong evidence is necessary to rebut this presumption.9 The Manifestation is insufficient to overturn this principle. It contains mere conclusions, not statements of fact. In the court -- not the witnesses or the parties -- lies the duty of drawing legal conclusions from the evidence presented. Significantly, the author of the Manifestation was not the city mayor10 at the time the investigation of petitioners case was conducted. How could he have known about the alleged misrepresentation? Petitioner did not explain. Fraud is never presumed; it must be established by clear and convincing evidence.11 In the present case, apart from the Manifestation, there is no clear evidence of fraud. While respondents counsel did not object to the admission of the Manifestation, the leeway to consider and assess its probative value12 nonetheless lay in the appellate court. In her original appeal to the CSC, petitioner did not raise the issue of respondents alleged misrepresentation, which had allegedly induced her to agree to submit the case for resolution without any formal hearing. Instead, she merely questioned the harshness of the penalty imposed by the City Government. Failure to invoke a defense within the prescribed period constitutes a waiver thereof.13 Defenses not invoked below cannot be raised on appeal.14 In waiving the presentation of evidence in a formal hearing, the counsel of petitioner might have believed in the futility of resisting the charge; thus, he opted to waive her right to present evidence. That he allegedly relied on respondents statement that she could be held liable only for the lesser offense of simple negligence was a risk he took on her behalf. It is jurisprudentially settled that mistakes of counsel as to argumentation, the relevancy or irrelevancy of a certain evidence or the introduction thereof are -- among others -- all mistakes of procedure that bind the client.15

At this point, we stress that complaints against public officers and employees relating or incidental to, or in connection with, the performance of their duties are necessarily impressed with public interest.16 The need to maintain the faith and confidence of the people in the government demands that the proceedings in administrative cases should not be made to depend on the whims and caprices of complainants.17 Administrative proceedings are akin to criminal prosecutions in the sense that no compromise may be entered into between the parties as regards the penal sanction. Complainants are not vested with the power of removal or suspension. That prerogative belongs to the proper government officials. Moreover, in a real sense, complainants in administrative cases are just witnesses.18 Therefore, regardless of their desistance or representations, courts will not desist from imposing the appropriate disciplinary sanction, if the evidence so warrants.19 If administrative actions are made to depend upon the whim or will of complainants, the disciplining authorities and the courts would be stripped of their prerogative.20 We agree with the CA that petitioner was afforded due process. On the formal charge against her, she had received sufficient information which, in fact, enabled her to prepare her defense. She filed her Answer controverting the charges against her and submitted Affidavits of personnel in the Assessors Office to support her claim of innocence. A prehearing conference was conducted by the legal officer, during which she -- assisted by her counsel -- had participated. Finally, she was able to appeal the ruling of City Mayor Badoy to the CSC, and then to the CA. In administrative cases, a fair and reasonable opportunity to explain ones side suffices to meet the requirements of due process.21 A formal or trial-type hearing is not always necessary.22 For the purpose of ascertaining the truth, an investigation will be conducted, during which technical rules applicable to judicial proceedings need not always be adhered to.23 And where the party has the opportunity to appeal or seek reconsideration of the action or ruling complained of, defects in procedural due process may be cured.24 Finally, settled is the rule in our jurisdiction that the findings of fact of an administrative agency must be respected, so long as they are supported by substantial evidence.25 It is not the task of this Court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the latter in respect of the sufficiency of evidence.26 In any event, the Decisions of the CSC and the Court of Appeals finding petitioner guilty of the administrative charge prepared against her are supported by substantial evidence. WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.
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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 129401

February 2, 2001

FELIPE SEVILLE in his capacity as judicial administrator of the estate of JOAQUIN ORTEGA and/or FELIPE SEVILLE, EMILIA ESTRADA, MARIA S. TEUDER, MA. ISABEL SEVILLE, MA. TERESITA LICARDO, FRANCISCO SEVILLE, RAMON O. SEVILLE, JOSE MARIE SEVILLE, GEMMA ALVAREZ-ASAYAS, ANNABELLE ALVAREZGONZALES, SYLVIA ALVAREZ-LIOK, ADOLFO O. ALVAREZ JR., DIANA ALVAREZDABON, MARIA SALVADOR O. POLANCOS and JOAQUIN ORTEGA II as successorsin-interest of JOAQUIN ORTEGA and his estate, petitioners, vs. NATIONAL DEVELOPMENT COMPANY, LEYTE SAB-A BASIN DEVELOPMENT AUTHORITY, PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION, LEPANTO CONSOLIDATED MINING CO., PHILIPPINE PHOSPHATE FERTIUZER CORPORATION, CALIXTRA YAP and REGISTER OF DEEDS OF LEYTE,respondents. PANGANIBAN, J.: Unless a public land is shown to have been reclassified as alienable or actually alienated by the State to a private person, that piece of land remains part of the public domain. Hence, occupation thereof, however long, cannot ripen into ownership. The Case Before us is a Petition for Review on Certiorari assailing the November 29, 1996 Decision of the Court of Appeals1(CA), as well as the May 19, 1997 CA Resolution2 denying the Motion for Reconsideration. The dispositive part of the CA Decision reads as follows: "WHEREFORE, the appealed decision is REVERSED and SET ASIDE. Another judgment is hereby rendered dismissing the complaint. The counterclaims of appellants are denied. Costs against plaintiffs-appellees."3 The Facts The appellate court narrated the undisputed facts in this manner: "1. By virtue of Presidential Decree No. 625, Leyte Sab-A Basin Development Authority (LSBDA) was created to integrate government and private sector efforts for a planned development and balanced growth of the Sab-a Basin in the [P]rovince of Leyte, empowered to acquire real property in the successful prosecution of its business. Letter of Instruction No. 962 authorized LSBDA to acquire privately-owned lands circumscribed in the Leyte Industrial Development Estate (LIDE) by way of negotiated sales with the landowners. "2. On June 14, 1980, [Respondent] Calixtra Yap sold to LSBDA Lot No. 057 SWO 08-000047 consisting of 464,920 square meters, located at Barangay Sto. Rosario, Isabel, Leyte, covered under Tax Declarations Nos. 3181, 3579, 3425, 1292 and 4251 under the name of said vendor.
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"3. On June 1, 1982, appellant LSBDA fired a Miscellaneous Sales Application with the Bureau of Lands covering said lot together with other lots acquired by LSBDA with an aggregate area of '442,7508 square meters.' "4. After due notice and investigation conducted by the Bureau of Lands, Miscellaneous Sales Patent No. 9353 was issued in the name of [Respondent] LSBDA on the basis of which Original Certificate of Title No. P-28131 was transcribed in the Registration Book for the [P]rovince of Leyte on August 12, 1983 in the name of [Respondent] LSBDA. On December 14, 1989, LSBDA assigned all its rights over the subject property to its [Co-respondent] National Development Company (NOC) as a result of which a new Transfer Certificate of Title "vas issued on March 2, 1990 by the Registry of Deeds for the Province of Northern Leyte in the name of NDC. The subject property was leased to [Respondents] Philippine Associated Smelting & Refining Corporation (PASAR), Philippine Phosphate Fertilizer Corporation (PHILPHOS) and Lepanto Consolidated Mining Co., Inc. (LEPANTO). "5. On November 29, 1988, the Estate of Joaquin Ortega represented by judicial administrator Felipe Seville filed with the Regional Trial Court (Branch 12) of Ormoc City, a complaint for recovery of real property, rentals and damages against the above-named [respondents] which complaint was later on amended on May 11, 1990. [Respondents] filed their respective Answers. After trial, the trial court rendered judgment the dispositive portion of which reads as follows: 'WHEREFORE, [a] decision is hereby rendered for [petitioners] and against [respondents]. '1. The Deed of Sale executed by Calixtra Yap on June 14, 1980 in favor of LSBDA, (Exhibit PP and 25) conveying the subject property to said LSBDA is declared NULL and VOID ab initio; '2. The intestate estate of JOAQUIN ORTEGA is declared the owner in fee simple of the 735,333 square meters real property subject of the present action and defendant NDC is ordered to segregate the same area from OCT P-28131 and CONVEY the same to the Estate of Joaquin Ortega; '3. Upon the segregation of the 735,333 square meters from OCT No. P28131 the Register of Deeds of the Province of Leyte is ordered to issue 8 new title to the said portion in the name of the Intestate Estate of Joaquin Ortega; '4. [Respondents] LSBDA, NDC, PASAR, are ordered to pay jointly and severally to [petitioners] the sum of FOUR MILLION SEVEN HUNDRED EIGHTY FOUR THOUSAND EIGHT HUNDRED FORTY SIX PESOS (P4,784,846.00) as rentals due from 1979 to the present, plus accrued interest pursuant to par. 2 of the Lease Contract between NDC and PASAR. (Exhibit 54)

'5. [Respondents] LSBDA, NDC, and PHILPHOS are also ordered to pay jointly and severally [petitioners] the sum of TWO MILLION EIGHTY SIX THOUSAND THREE HUNDRED NINETY EIGHT PESOS AND SIXTY CENTAVOS (P2,086,398.60) as accrued rentals of PHILPHOS from 1979 to present, plus the accrued interest for non-payment pursuant to paragraph 2 of the same Lease Contract cited above; '6. [Respondents] are ordered to pay jointly and severally [petitioners] P200,000.00 as indemnity for the value of the ancestral home; '7. [Respondents] are also ordered to pay jointly and severally [petitioners] the sum of P250,000.00 as reimbursement for attorney's fees and the further sum of P50,000.00 as expenses for litigation; '8. Finally, [petitioners] and [respondents] are ordered to sit down together and discuss the possibility of a compromise agreement on how the improvements introduced on the landholding subject of the present suit should be disposed of and for the parties to submit to this Court a joint manifestation relative thereto. In the absence of any such compromise agreement, such improvements shall be disposed of pursuant to Article 449 of the New Civil Code. 'Costs against [respondents]. 'SO ORDERED.'"4 Ruling of the Court of Appeals Citing the Regalian doctrine that lands not appearing to be privately owned are presumed to be part of the public domain, the CA held that, first, there was no competent evidence to prove that the property in question was private in character. Second, possession thereof, no matter how long, would not ripen into ownership, absent any showing that the land had been classified as alienable. Third, the property had been untitled before the issuance of the Miscellaneous Sales Patent in favor of LSBDA. Fourth, petitioners were guilty of laches, because they had failed to apply for the judicial confirmation of their title, if they had any. Fifth, there was no evidence of bad faith on "the part of LSBDA in dealing with Yap regarding the property. Hence, this Petition.5 The Issues In their Memorandum, petitioners submit the following issues for the consideration of the Court:6 "A. Whether or not the sale by Calixtra Yap of the Estate of the Late Joaquin Ortega in favor of LSBDA was null and void.

"B. Whether or not the issuance of a Miscellaneous Sales Patent and an Original Certificate of Title in favor of LSBDA was valid. "C. Whether or not petitioners are guilty of laches. "D. Whether or not petitioners are entitled to the remedy of reconveyance and the damages awarded by the trial court." In the main, the Court is called upon to determine the validity of LSBDA's title. In resolving this issue, it will also ascertain whether, before the issuance of the title, the land was private or public. The Court's Ruling The Petition has no merit. Main Issue: Validity of LSBDA Petitioners argue that LSBDA's title to 73 hectares of the 402- hectare Leyte Industrial Development Estate was void, having allegedly been obtained from Calixtra Yap who had no right to it. They maintain that they acquired title to the disputed property by acquisitive prescription, because they and their predecessors in interest had been in possession of it for more than thirty years.7 Although it was the subject of settlement proceedings, petitioners further claim that Yap sold the same to LSBDA without the permission of the trial court. Disputing these contentions, respondents and the appellate court maintain that petitioners have not shown that the land had previously been classified as alienable and disposable. Absent such classification, they argue that possession of it, no matter how long, could not ripen into ownership. We agree with respondents and the appellate court. First, there was no showing that the land had been classified as alienable before the title was issued to LSBDA; hence, petitioners could not have become owners thereof through acquisitive prescription. Second, petitioners' challenge to LSBDA's title cannot be granted, because it is based on a wrong premise and amounts to a collateral attack, which is not allowed by law. Public Character of the Land Under the Regalian doctrine, all lands of the public domain belong to the State, which is the source of any asserted right to ownership of land. All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. 8 In Menguito v. Republic,9 the Court held that "[u]nless public land is shown to have been reclassified or alienated to a private person by the State, it remains part of the inalienable public domain. Indeed, 'occupation thereof in the concept of owner, no matter how long, cannot ripen into ownership and be registered as a title.' To overcome such presumption, incontrovertible

evidence must be shown by the applicant. Absent such evidence, the land sought to be registered remains inalienable." A person in open, continuous, exclusive and notorious possession of a public land for more than thirty years acquires an imperfect title thereto. That title may be the subject of judicial confirmation, pursuant to Section 48 of the Public Land Act, which provides: "SECTION 48. The following described citizens of the Philippines, occupying lands of public domain or claiming to own any such lands or an interest thereon, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims, and the issuance of a certificate of title therefor, under the Land Registration Act, to wit: xxx xxx xxx

(b) those who by themselves or through their predecessor in-interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. They shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall he entitled to a certificate of title under the provisions of this Chapter." Under Section 4 of Presidential Decree (PD) No. 1073,10 paragraph "b" of the aforecited provision applies only to alienable and disposable lands of the public domain. The provision reads: "SEC. 4. The provisions of Section 48 (b) and Section 48 (c), Chapter VIII, of the Public Land Act, are hereby amended in the sense that these provisions shall apply only to alienable and disposable lands of the public domain which have been in open, continuous, exclusive and notorious possession and occupation by the applicant himself or thru his predecessor-in-interest, under a bona fide claim of acquisition of ownership, since June 12, 1945." It should be stressed that petitioners had no certificate of title over the disputed property. Although they claim that their title was based on acquisitive prescription, they fail to present incontrovertible proof that the land had previously been classified as alienable. They simply brush aside the conclusion of the CA on this crucial point by saying that it was "without factual basis."11 Instead, they maintain that the private character of the land was evidenced by various tax declarations, Deeds of Sale, and Decisions of the trial court and even the Supreme Court.12 Petitioners' arguments are not convincing. Tax declarations are not conclusive proofs of ownership, let alone of the private character of the land. At best, they are merely "indicia of a claim of ownership."13 In Spouses Palomo v. CA,14 the Court also rejected tax declarations as proof of private ownership, absent any showing that the forest land in question had been reclassified as alienable.

Moreover, the Deeds of Sale of portions of the disputed property, which Joaquin Ortega and several vendors executed, do not prove that the land was private in character. The question remains: What was the character of the land when Ortega purchased it? Indeed, a vendee acquires only those rights belonging to the vendor. But petitioners failed to show that, at the time, the vendors were already its owners, or that the land was already classified as alienable. Also misplaced is petitioners' reliance on Ortega v. CA,15 in which the Supreme Court allegedly recognized the private character of the disputed property .In that case, the sole issue was "whether the respondent judge x x x acted in excess of jurisdiction when he converted Civil Case No. 1184-O, an action for quieting of title, declaration of nullity of sale, and annulment of tax declaration of a parcel of land, into an action for the declaration of who is the legal wife, who are the legitimate children, if any, and who are the compulsory heirs of the deceased Joaquin Ortega."16 The Court did not at all make any ruling that the property had been classified as alienable. In any event, Ortega arose from a suit for quieting of title, an action quasi in rem that was binding only between the parties.17 The present respondents as well as the Bureau of Lands, which subsequently declared that the land was public, are not bound by that ruling, because they were not impleaded therein. While petitioners refer to the trial court proceedings supposedly recognizing the private character of the disputed property, they make no claim that these cases directly involve the classification of the land, or that the Bureau of Lands is a party thereto. Clearly, the burden of proof that the land has been classified as alienable is on the claimant.18 In the present case, petitioners failed to discharge this burden. Hence, their possession of the disputed property, however long, cannot ripen into ownership. LSBDA's Title Equally unmeritorious is the argument of petitioners that the title of LSBDA is void. As earlier stated, they claim that such title was derived from Calixtra Yap, who was allegedly not the owner of the property. Petitioners assume that LSBDA, having acquired the rights of Yap, resorted to a confirmation of her imperfect title under Section 48 of the Public Land Act. This argument is devoid of factual or legal basis. Petitioners fail to consider that the title of LSBDA was based, not on the conveyance made by Yap, but on Miscellaneous Sales Patent No. 9353 issued by the director of the Bureau of Lands. In fact, after LSBDA had filed an application for patent, the Bureau of Lands conducted an investigation and found that the land was part of the public domain. After compliance with the notice and publication requirements, LSBDA acquired the property in a public auction conducted by the Bureau of Lands.19 Petitioners insist, however, that LSBDA was estopped from claiming that the land was public, because the Deed of Sale executed by Yap in its favor stipulated that "the seller is the absolute owner in fee simple of the x x x described property."20 It is scarcely necessary to address this point. To begin with, the power to classify a land as alienable belongs to the

State, not to private entities. Hence, the pronouncements of Yap or LSBDA cannot effect the reclassification of the property. Moreover, the assailed misrepresentation was made by Yap as seller. Hence, objections thereto should be raised not by petitioners but by LSBDA, the contracting party obviously aggrieved. In any case, the actions of LSBDA after Yap's conveyance demonstrated its position that the disputed land was part of the public domain. That this was so can be inferred from LSBDA's subsequent application for a Miscellaneous Sales Patent and, in a public auction, its purchase of the property from the Bureau of Lands. Indeed, Yap merely conveyed a claim, not a title which she did not have. Collateral Attack There is another reason for denying the present Petition. Petitioners insist that they "are not seeking the re-opening of a decree under the Torrens system." Supposedly, they are only "praying for the segregation of 735,333 square meters of land, or 73 hectares more or less from the OCT No. P-28131 issued to LSBDA."21 This disputation is mere quibbling over words, plain and simple. Semantics aside, petitioners are effectively seeking the modification of LSBDA's OCT, which allegedly encompassed even a parcel of land allegedly belonging to them. Hence, the present suit, purportedly filed for the "recovery of real property and damages," is tantamount to a collateral attack not sanctioned by law. Section 48 of PD 1529, the Property Registration Decree, expressly provides: "SEC. 48. Certificate not subject to collateral attack. -- A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law." It has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished, except in a direct proceeding permitted by law. Otherwise, the reliance on registered titles would be lost. 22 Moreover, the title became indefeasible and incontrovertible after the lapse of one year from the time of its registration and issuance.23 Section 32 of PD 1529 provides that "[u]pon the expiration of said period of one year, the decree of registration and the certificate of title shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or other persons responsible for the fraud." Although LSBDA's title was registered in 1983, petitioners filed the amended Complaint only in 1990. Reconveyance Petitioners also claim that the disputed property should be reconveyed to them. This cannot be allowed. Considering that the land was public before the Miscellaneous Sales Patent was issued to LSBDA, petitioners have no standing to ask for the reconveyance of the property to them. The proper remedy is an action for reversion, which may be instituted only

by the Office of the Solicitor General, pursuant to Section 101 of the Public Land Act, which reads as follows: "SEC. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the [Republic] of the Philippines." Verily, the prayer for reconveyance and, for that matter, the entire case of petitioners rest on the theory that they have acquired the property by acquisitive prescription; and that Yap, without any right or authority, sold the same to LSBDA. Conclusion In the light of our earlier disquisition, the theory has no leg to stand on. Absent any showing that the land has been classified as alienable, their possession thereof, no matter how lengthy, cannot ripen into ownership. In other words, they have not become owners of the disputed property. Moreover, LSBDA's title was derived from a Miscellaneous Sales Patent, not from Yap. Finally, petitioners cannot, by a collateral attack, challenge a certificate of title that has already become indefeasible and incontrovertible. If petitioners believe that they have been defrauded by Yap, they should seek redress, not in these proceedings, but in a proper action in accordance with law. WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioners.
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SO ORDERED. Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

FIRST DIVISION

NATIONAL POWER CORPORATION, Petitioner,

G.R. No. 159457

Present:

Panganiban, CJ,

Chairman, - versus Ynares-Santiago, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ PHILIPPINE ELECTRIC PLANT OWNERS ASSOCIATION (PEPOA), INC., Respondent. April 7, 2006 x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x Promulgated:

DECISION

PANGANIBAN, CJ:

he supply of electricity is a public service that affects national security, economic growth and public interest. To achieve coherent and effective policy formulation, coordination, implementation and monitoring within the energy sector, it became necessary to entrust in one body the regulatory functions covering the energy sector. Thus, the Energy Regulatory Board[1] (ERB) was created. The ERB was given the power to determine, fix and prescribe the rates -- including penalty charges -- of all energy providers, including the National Power Corporation (NPC).

The Case

Before us is a Petition for Review[2] under Rule 45 of the Rules of Court, assailing the March 3, 2003 Decision[3]and August 12, 2003 Resolution[4] of the Court of Appeals (CA) in CA-GR SP No. 50782. The challenged Decision disposed as follows:
WHEREFORE, the instant petition accordingly DISMISSED for lack of merit.[5]

is DENIED and

is

The assailed Resolution denied reconsideration.

The Facts

The NPC is a government-owned and -controlled corporation, existing by virtue of Commonwealth Act No. 120 and Republic Act

No. 6395. Philippine Electric Plant Owners Association (PEPOA), Inc., is a non-stock corporation composed of private electric plant operators.[6] Some members of PEPOA purchase electric power from petitioner to service power requirements in their respective franchise areas.[7]

On December 15, 1995, PEPOA filed before the ERB a Complaint[8] against the NPC for alleged unauthorized collection of rates in the guise of penalty for 1) excess consumption, double or triple the existing rates; or 2) unused consumption, as if fully availed of.[9] The penalties were being charged pursuant to the NPCs Rules on the Sale of Electricity, specifically Nos. 5 (Minimum Charges) and 6 (Penalty for Consumption in Excess of the Allowable Limit of the Contract Demand/Energy) of the Schedule of Charges.[10] The provisions read:
5.

MINIMUM CHARGES

Whenever Customers registered demand/ energy falls below the Contract Demand and/or Contract Energy, the difference shall be billed at applicable demand and/or Energy rates as if the Contract Demand and/or Energy [have] been fully availed of. Provided, that during Customers yearly maintenance of its facilities not to exceed two (2) billing periods in a year, the basis of the minimum charge on energy shall be reduced to only fifty percent (50%) of the Contract

Energy; provided further, that thirty (30) days advance written notice is given to Corporation, and that actual maintenance is subject to confirmation of Corporation.

6.

PENALTY FOR CONSUMPTION IN EXCESS OF THE ALLOWABLE LIMIT OF THE CONTRACT DEMAND/ ENERGY

Customers consumption in excess of the maximum limits set forth in the Service Specifications x x x in the Contract, shall be penalized by billing the excess demand and/or energy at a Rate Equal to Twice the unit price of the highest priced block in the rate schedule.[11]

On December 20, 1995, the ERB issued an Order[12] directing the NPC to cease and desist from collecting the penalties, pending resolution of the case. On May 12, 1998, the ERB rendered its Decision, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, the Board hereby directs respondent NPC to refund or correspondingly credit to the complainants (affected electric distribution utilities) the total amount of P28,870,497.08 corresponding to the said charges as penalties for excess consumption over the maximum allowable demand energy and consumption below the contracted demand/energy, computed as follows:

A.

Penalties Billed and Collected for Excess Consumption from:

1. 2. 3.

Angeles Electric Corp. (AEC) Visayan Electric Co., Inc. (VECO) Cagayan Electric Power and Light Co. (CEPALCO)

P 2,184,952.80 P23,471,542.00

590,515.20

B.

Penalty Billed and Collected for Below Consumption from:

4.

Tarlac Enterprises, Inc. (TEI)

P 2,623,487.08

Total Penalties Billed and Collected

P28,870,497.08 ============

However, if the payments made under protest by the affected distribution utilities to respondent NPC were passed on to the utilities customers, the reimbursements thereon should also extend to the end-users.

In the event that the affected distribution utilities have actually refunded the same to its customers, the said utilities are hereby directed to submit a report to the Board showing that an actual refund was made to their customers or end-users.

The collection/imposition of penalty for consumption in excess of the allowable unit and penalty for below consumption of the contracted demand/energy or unused energy imposed by NPC shall likewise be not applicable to electric cooperatives and all other NPC customers.

Finally, the Cease and Desist Order issued by the Board in its Order dated December 20, 1995 is hereby made permanent.[13]

The ERB denied reconsideration on January 12, 1999.[14] The NPC filed a Petition for Review with the Court of Appeals on March 3, 1999.

Ruling of the Court of Appeals

The CA found no errors of fact or law that would warrant a

reversal of the ERBs Decision. The imposition of penalties by the NPC was tantamount to an increase in rates that required authorization by the ERB, which was mandated to determine, fix and prescribe electric rates.[15] Since the latters approval had not been sought, the charges were deemed void.

Hence, this Petition.[16]

The Issues

Petitioner raises the following issues:

I.

Whether or not the Energy Regulatory Board had jurisdiction over the subject matter of imposition of penalties for contract violations.

II.

Whether or not the imposition of the penalties is an increase in power rates that requires authorization of the Energy Regulatory Board.

III.

Whether or not the discounts provided in the Contract also requires the authorization of the Energy Regulatory Board.

IV.

Whether or not the issuance of the cease and desist order without the benefit of notice and hearing is within the authority of the Energy Regulatory Board. Whether or not a temporary restraining order/preliminary injunction should be issued pending resolution of the petition for review.[17]

V.

The issues can be reduced to the following: 1) whether the ERB has jurisdiction over the subject matter of this case; and 2) whether its Cease and Desist Order is justified.
The Courts Ruling

The Petition is unmeritorious.

First Issue: Jurisdiction Over the Controversy

Petitioner contends that the jurisdiction of the ERB to fix, set and determine rates does not include the authority to overrule the imposition of penalties stipulated in the Contract of Sale and Delivery of Power.[18]

The NPC adds that only its rate-making authority was transferred to the ERB under Section 18 of RA 7638. Petitioner, however, retained its power to promulgate rules and regulations governing its operations in order to provide adequate, stable, reliable, and reasonably priced electric power.[19] In conducting its day-to-day operations, it allegedly had to regulate the system loads of its transmission lines by requiring its customers to have a contractual level and to maintain a maximum limit for the demand and the energy consumption.[20]

In effect, the NPC claims that the penalty clauses in their contracts with customers are policy matters relating to the implementation of its corporate purpose, not to the fixing of rates.

Authority to Fix Rates

To complete this decision on the present controversy, the Court needs to trace briefly petitioners rate-fixing authority.

Commonwealth Act No. 120[21] created the NPC and gave it the power to produce and sell electric power and to fix the rates and provide

for the collection of the charges for any service rendered.[22] The rates were not subject to revision by the Public Service Commission,[23] which was then the government entity that had jurisdiction over all public services.[24]

Republic Act No. 6395[25] revised the charter of the NPC, whose power to fix the rates and fees was retained, but became subject to review by the Public Service Commission.[26]

Later, Republic Act No. 7638,[27] or the Department of Energy Act of 1992, recreated the Department of Energy and reorganized the functions of some government agencies.[28] The power of the NPC to determine and fix the rates being charged its customers was transferred to the ERB in this wise:

The power of the NPC to determine, fix and prescribe the rates being charged to its customers under Section 4 of Republic Act No. 6395, as amended, x x x are hereby transferred to the Energy Regulatory Board. x x x.[29]

ERB Jurisdiction

Executive Order No. 172[30] created the ERB to provide the policy guidelines and regulatory framework for the activities and operations of the power sector.[31] The ERB was to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, marketing and distributing energy

resources.[32] Under Section 4 of the Executive Order, it was also tasked to assume the functions of the Board of Energy[33] and of the Bureau of Energy Utilization.[34]

Significantly, Republic Act No. 7638 transferred the ERBs non-price regulatory jurisdiction, powers and functions to the Department of Energy.[35]

Republic Act No. 9136,[36] the Electric Power Industry Reform Act of 2001 (EPIRA), transferred the powers of the ERB to the Energy Regulatory Commission (ERC).[37]

Rate and Rate-Fixing Defined

The crux of the controversy is whether the penalty charges imposed by the NPC are included in the term rates. Unfortunately, the pertinent laws stated above do not define rates and what is involved in rate-fixing. The Court, however, is not precluded from using other means to define these terms.

In the absence of legislative intent to the contrary, the general rule is that words and phrases are to be given their plain, ordinary and commonusage meaning.[38] It is presumed that the lawmakers employed the words in this sense.[39]

Rate is defined as a charge, payment, or price fixed according to a ratio, scale, or standard;[40] or an amount paid or charged for a good or service.[41]

Rates are fixed on the basis of the investment amount or property value that the public utility is allowed to earn -- an amount value otherwise called rate base.[42] Property valuation is dependent on the particular circumstances and relevant facts affecting each utility.[43] After all, rate-fixing calls for a technical examination and a specialized review of specific details primarily entrusted to the administrative or regulating authority -- in the present case, the ERB.[44] There are many factors considered in ascertaining this value, such as the original cost of construction; the amount expended in permanent improvements; the amount and market value of the bonds and stock of the public utility; the present cost compared with the original cost of construction; the probable earning capacity of the property under the particular rates prescribed; and the sum required to meet operating expenses.[45] It must be noted that the government is not bound to apply any particular method or formula for determining rates.[46]

A just rate is founded on conditions that are fair and reasonable to both the public utility and the public.[47] This stipulation means that the public utility must have, as profit, a fair return on the reasonable value of the property.[48] The imposition of the maximum rates it charges cannot be confiscatory.[49] As to the public, reasonableness requires entitlement to the service at an affordable cost.[50]

Penalties as Rates

The penalties imposed by the NPC in its Rules on the Sale of Electricity are covered by the definition of rate. Minimum Charges and Penalties for Consumption in Excess of Allowable Limit are exacted from customers in relation to the sale of energy. These charges cannot be imposed without the sale of energy. Indeed, a consideration in fixing rates is the purpose for which the penalties are constituted: the regulation of the system loads of transmission lines,[51] so as to ensure the continuous operation of the public utility or to cover part of its operating expenses.

The power to determine, fix and prescribe rates being charged customers is vested in the ERB. Therefore, unless it gives prior approval,

the penalties cannot be imposed by the NPC. Without that authority, the challenged provisions in the Rules on the Sale of Electricity cannot be imposed on the electric plant operators that PEPOA represents. While petitioner may issue rules and regulations

consistent with its corporate objectives, provisions that have a bearing on the impositions of rates must be approved by the ERB.

In determining whether penalties are included in the term rates, this Court upholds the principle that the authority of a board or commission is construed in the light of the purposes for which it was created; and that whatever is incidentally necessary to a full implementation of the legislative intent should be upheld as germane to the law.[52] Jurisdiction over penalties is necessarily part of the ERBs regulatory functions; and is in line with the intent of achieving a coherent and effective policy formulation, coordination, implementation and monitoring within the energy sector.[53]

Discounts, Not Rates

Petitioner contends that if the penalties are subject to ERB approval, so too must be the discounts in the latters Rules on the Sale of Electricity.[54] The discounts allegedly affect rates and benefit electric plant operators, who must then reimburse the NPC accordingly.[55] We do not agree.

Indeed, petitioner correctly points out that because the

FIRST DIVISION

Spouses ANTHONY and PERCITA OCO, Petitioners,

G.R. No. 161298

Present:

Panganiban, CJ, Chairman, - versus Yares-Santiago, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ

VICTOR LIMBARING,

Promulgated

Respondent. January 31, 2006 x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, CJ.:

asic in procedural law is the rule that every action must be prosecuted or defended in the name of the real party in interest. In the present case, the respondent, who was not a

party to the contracts being sued upon, was not able to prove material interest in the litigation. For his failure to do so, the trial court cannot befaulted for dismissing the action to rescind the contracts. His status as trustor remained a bare allegation, as he had failed to rebut the legal presumption: that there is absence of a trust when the purchase price in a deed of sale is paid by a parent in favor of a child. Here, the prima facie presumption is that there is a gift in favor of the child. Any allegation to the contrary must be proven by clear and satisfactory evidence, a burden that was not discharged by the plaintiff.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the August 26, 2003Decision[2] and the November 25,

2003 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 69386. The challenged Decision disposed as follows:
WHEREFORE, the order dated October 2, 2000 of the Regional Trial Court, Branch 15, Ozami[s] City in Civil Case No. OZC 99-14 is hereby REVERSED. The agreement entered upon by plaintiff-appellant and defendant-appellee Percita L. Oco is hereby RESCINDED. After returning the agreed purchase amount of P60,000.00 to defendants-appellees, the Register of Deeds of Ozami[s] City shall issue the new Transfer Certificates of Title in the name of plaintiff-appellant thereby canceling the TCT Nos. T22073 and T-22072.[4]

The Facts

The pertinent facts are not disputed. Sometime in 1996, Sabas Limbaring subdivided his Lot 2325-D, covered by Transfer Certificate of Title (TCT) No. 5268, into two lots denominated as Lot Nos. 2325-D-1 and 2325-D-2.[5] He then executed in favor of Jennifer Limbaring a Deed of Sale for Lot 2325-D-2 for P60,000; and, in favor of Sarah JaneLimbaring, another Deed for Lot 2325-D-1 for P14,440. Accordingly, TCT No. 5268 was cancelled and TCT Nos. T-21921 and T-21920 were issued in the names of Jennifer and Sarah Jane, respectively.[6]

Sensing some irregularities in the transaction, Percita Oco, the daughter of Sabas Limbaring, left Puerto PrincesaCity and went to Ozamis City.[7] She then filed a case of perjury and falsification of documents against respondent, her uncle who was the father of Jennifer and Sarah Jane. During the pre-litigation conference called by City ProsecutorLuzminda Uy on July 1, 1996, the parties agreed that the two parcels of land should be reconveyed to Percita, who was to pay respondent all the expenses that had been and would be incurred to transfer the titles to her name.[8]

Respondent demanded P30,000 for the estimated expenses for documentation, capital gains, and documentary stamp taxes; registration fees for the Register of Deeds; and other incidental expenses for clearances from the Department of Agrarian Reform (DAR).[9] Percita succeeded in lowering the amount to P25,000, for which she executed an undertaking worded as follows:

I, Percita Oco, of legal age, and residing at Puerto Princesa, do hereby undertake to give the full amount of Twenty Five Thousand (P25,000.00) Pesos to my uncle Victor Limbaring after document No. 230, series of 1996; Transfer Certificate of Title No. T-21920 and Transfer Certificate of Title No. T-21921 shall have been cancelled and revoked.

Ozamis City, Philippines, July 1, 1996.[10]

Pursuant to their agreement, respondent facilitated the transfer of the titles to her from the names of his daughters. After the transfer had been effected on July 12, 1996, Percita left for Puerta Princesa on July 17, 1996, without paying the P25,000. Several demands were made, but she refused to pay. On April 6, 1999, respondent filed against Spouses Anthony and Percita Oco a Complaint for the rescission of the sales contracts, with recovery of possession and ownership of the two parcels of land.[11] Among others, he claimed 1) that he was the actual buyer of the lots, but the vendees whose names appeared on the Deeds were his daughters; 2) that he initially refused to reconvey the properties because he had paid for them with his hard-earned money, which was partly used by Sabas Limbaring for medical expenses; 3) that Percita had prepared the two Deeds of Sale, which his daughters signed despite receiving no consideration as stated in the Deeds; 4) that because she refused to pay theP25,000, the Limbaring clan held a meeting on October 26, 1996, during which it was agreed that P1,000 per month would be given to

respondent from the rentals of Sabas Limbarings house; and 5) that the agreement was not implemented, because Percita had failed to cooperate.[12]

On May 27, 1999, Spouses Oco filed a Motion to Dismiss on the ground that the plaintiff (herein respondent) was not the real party in interest.[13] In his Opposition to the Motion to Dismiss, respondent contended that he was a trustor, whose property was being held in trust by his daughters.[14] He also averred that, on the assumption that he was not the real party in interest, he was entitled to an amendment of the pleadings.[15]

On August 30, 1999, the RTC issued an Order denying the Motion to Dismiss. It ruled that evidence was required to resolve the parties respective allegations.[16]

On

October

4,

1999,

Spouses Oco filed

an

Answer

with

Counterclaim, alleging in the main: 1) that respondent had tried to secure a DAR clearance and to have a certificate of title issued in his name, but failed because Republic Act (RA) 6657 prohibited the acquisition of more than five hectares of agricultural land; 2) that through deceit and

manipulation, respondent was able to convince Sabas Limbaring to execute the two Deeds of Sale, notwithstanding the lack of any consideration; 3) that Sabas informed Percita that the agricultural land had never been sold; 4) that she refused to pay the P25,000, because the suspensive conditions stated in the Promissory Note had not been complied with; 5) that she paid for all the expenses incurred in their transaction; 6) that for her alleged failure to pay the P25,000 and for other deceits, respondent filed a criminal Complaint docketed as Criminal Case No. 2985; 7) that respondent was guilty of forum shopping for filing that case despite the institution of the civil aspect in the criminal case; 8) that respondent was not the real party in interest and had no legal standing to sue; 9) that the lots, which were acquired by Jennifer and Sarah Jane without paying any consideration, should be returned to Percita without any consideration; and 10) that the Deeds of Sale reconveying the lots acknowledged receipt of consideration.[17]

Respondent testified on his behalf. He then formally offered his exhibits.[18] After filing their Comments to Plaintiffs Formal Offer of Exhibits, Spouses Oco filed a Demurrer to Evidence, to which he filed his Opposition.[19]

On October 2, 2000, the RTC granted the demurrer and dismissed the Complaint and Counterclaim,[20] on the ground that respondent was not the real party in interest. The trial court also held that Jennifer and Sarah Jane had already acknowledged receipt of the consideration for the reconveyance of the lots. It added that the P25,000 was an independent obligation for the reimbursement of the expenses incurred for the transfer of the titles.[21]

Ruling of the Court of Appeals

The CA held that a trust relationship was created when respondent purchased the lots in favor of his daughters.[22] Thus, he was a real party in interest.

The appellate court also ruled that the P25,000 was part of the consideration for the reconveyance of the two parcels of land.[23] The CA held that, since Percita had admitted her failure to pay the amount, respondent had the right to rescind the contracts of reconveyance.[24]

The

assailed November

25,

2003 CA

Resolution

denied

reconsideration. Hence, this Petition. [25]

The Issues

Petitioners state the issues in this wise:

I. The Honorable Court of Appeals gravely erred in finding respondent the trustor of the subject properties and in declaring respondent the real party in interest for the rescission of the two deeds of absolute sale executed by Jennifer Limbaring and Sarah Jane Limbaring in favor of the petitioners.

II. The Honorable Court of Appeals gravely erred in declaring that respondent has fully complied [with] his obligation in the undertaking executed by petitioner after the ownership of the subject properties were transferred to petitioners.

III. The Honorable Court of Appeals gravely erred and gravely abused [its] discretion in ordering the rescission of the Deed of Absolute Sale executed by Jennifer Limbaring and Sarah Jane Limbaring in favor of the petitioners involving the subject properties.

IV. The Honorable Court of Appeals gravely abused [its] discretion when it ignored the pending case before the Fourth Division of the Honorable Court of Appeals with the same transaction, essential facts and circumstances in this case.[26]

The threshold issue is whether respondent, who was the plaintiff in the trial court, was a real party in interest in the suit to rescind the Deeds of Reconveyance.

The Courts Ruling

The Petition is meritorious.

Main Issue:

Real Party in Interest

Petitioners contend that respondent was not a trustor, and therefore not the real party in interest and had no legal right to institute the suit.[27] The real parties in interest were Jennifer and Sarah Jane, to whom the subject properties had been given as gifts.[28]

The controversy centers on Rule 3 of the Rules of Court, specifically an elementary rule in remedial law, which is quoted as follows:
Sec. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.

As applied to the present case, this provision has two requirements: 1) to institute an action, the plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of the real party in interest.[29] Necessarily, the purposes of this provision are 1) to prevent the prosecution of actions by persons without any right, title or interest in the case; 2) to require that the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage

litigation and keep it within certain bounds, pursuant to sound public policy.[30]

Interest within the meaning of the Rules means material interest or an interest in issue to be affected by the decree or judgment of the case, as distinguished from mere curiosity about the question involved.[31] One having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an action.[32] When the plaintiff is not the real party in interest, the case is dismissible on the ground of lack of cause of action.[33]

Action on Contracts

The parties to a contract are the real parties in interest in an action upon it, as consistently held by the Court.[34] Only the contracting parties are bound by the stipulations in the contract;[35] they are the ones who would benefit from and could violate it.[36] Thus, one who is not a party to a contract, and for whose benefit it was not expressly made, cannot maintain an action on it. One cannot do so, even if the contract performed by the contracting parties would incidentally inure to ones benefit.[37]

As an exception, parties who have not taken part in a contract may show that they have a real interest affected by its performance or annulment.[38] In other words, those who are not principally or subsidiarily obligated in a contract, in which they had no intervention, may show their detriment that could result from it.[39] Contracts pour autrui are covered by this exception.[40] In this latter instance, the law requires that the contracting parties must have clearly and deliberately conferred a favor upon a third person. A mere incidental benefit is not enough.

Action on the Contracts Presently Involved

Respondents Complaint, entitled Rescission of Contract & Recovery of Possession & Ownership of Two Parcels of Land, is clearly an action on a contract. The agreements sought to be rescinded[41] clearly show that the parties to the Deeds of Absolute Sale were Jennifer and Sarah Jane Limbaring[42] as vendors and Percita Oco as vendee. Clearly then, the action upon the contracts may -- as a rule -- be instituted only by Jennifer and Sarah Jane against Percita.

Respondent is not a real party in interest. He was not a party to the contracts and has not demonstrated anymaterial interest in their fulfillment. Evidently, the allegations in the Complaint do not show that the properties would be conveyed to him, even if Percita were to be proven to have committed a breach of the subject agreements.

Trust Relationship

To show material interest, respondent argues that a trust was created when he purchased the properties from Sabas Limbaring in favor of his daughters. As trustor, he allegedly stands to be benefited or injured by any decision in the case.[43]

Trust is the legal relationship between one person who has equitable ownership of a property and another who owns the legal title to the property.[44] The trustor is the one who establishes the trust; the beneficiary, the person for whose benefit the trust was created; and the trustee, the one in whom, by conferment of a legal title, confidence has been reposed as regards the property of the beneficiary.[45]

Trusts may be either express or implied.[46] Express trusts are those created by direct and positive acts of the parties, such as by

some writing, deed or will; or by words either expressly or impliedly evidencing an intention to create a trust. Implied trusts are those that, without being expressed, are deducible from the nature of the transaction as matters of intent; or that are super-induced in the transaction by operation of law as a matter of equity, independently of the particular intention of the parties.[47]

Respondent has presented only bare assertions that a trust was created. Noting the need to prove the existence of a trust, this Court has held thus:
As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements. While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.[48]

On this point, the Civil Code states as follows:

ART. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.

Under the last sentence of Article 1448, respondents alleged acts -paying the price of the subject properties and, in the titles, naming his children as owners -- raise the presumption that a gift was effected in their favor. Respondent failed to rebut this presumption. Absent any clear proof that a trust was created, he cannot be deemed a real party in interest.[49] That he should be deemed a trustor on the basis merely of having paid the purchase price is plainly contradicted by the presumption based on Article 1448 of the Civil Code that there is a gift in favor of the child, not a trust in favor of the parent. Other Issues

Having found that respondent is not a real party in interest, this Court deems it no longer necessary to rule on the other issues raised by petitioner.

WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution are SET ASIDE. Civil Case No. OZC99-14, entitled Victor Limbaring v. Spouses Percita L. Oco and Anthony Oco, is DISMISSED. No pronouncement as to costs. discounts affect rates, they should thus be a consideration in ratefixing. They are, however, not amounts paid or charged for the sale of electricity, but are reductions in rates.

Republic Act No. 7638 transferred the NPCs power to determine, fix and prescribe the rates being charged customers. They are charged nothing, though, when they are given discounts. Evidently, the ERBs approval of the discounts is not necessary. Second Issue:

Provisional Relief

Petitioner further challenges the ERBs December 20, 1995 Order, which directed it to cease and desist from collecting the penalties, pending resolution of the case.[56] The NPC contends that the provisional relief required notice and hearing prior to being granted, similar to the requirement of the rule on preliminary injunction under Rule 58[57] of the Rules of Court.[58] Petitioner adds that PEPOA did not submit any supporting documents or affidavits to show the great or irreparable injury that would justify the provisional relief.[59]

Authority to Grant Provisional Relief

The authority to grant provisional relief was conferred on the ERB, not under the Rules of Court but under Executive Order 172, whose pertinent provision reads:

Section 8. Authority to Grant Provisional Relief. The Board may, upon the filing of an application, petition or complaint or at any stage thereafter and without prior hearing, on the basis of supporting papers duly verified or authenticated, grant provisional relief on motion of a party in the case or on its own initiative, without prejudice to a final decision after hearing, should the Board find that

the pleadings, together with such affidavits, documents and other evidence which may be submitted in support of the motion, substantially support the provisional order: Provided, That the Board shall immediately schedule and conduct a hearing thereon within thirty (30) days thereafter, upon publication and notice to all affected parties.

This Court explained the cited provision in Citizens Alliance for Consumer Protection v. Energy Regulatory Board,[60] as follows:
x x x [ERB] is authorized in appropriate cases to grant provisional relief, whether on its own initiative or on motion of a party, either (1) upon filing of an application, petition or complaint; or (2) at any state thereafter and without need of prior hearing, subject, however, to conducting a hearing thereon within (30) days thereafter. Issuance of an order granting such provisional relief must rest upon substantial evidence and is without prejudice, however, to rendition of a final decision after hearing.[61]

Plainly, the ERB has the authority to issue provisional relief 1) upon motion or on its own initiative; 2) without notice and hearing; and 3) after the filing of an application, a petition or a complaint.

Need to Substantiate Provisional Relief

The ERB has the discretion to grant provisional relief. Section 8 of Executive Order No. 172 simply requires that its exercise of this discretion be supported by substantial evidence[62] in the form of authenticated or verified documents.[63] The reason can easily be discerned from the fact that the order is, by its nature, temporary and subject to adjustment after final hearing.[64] The silence of the law cannot be construed as granting limitless discretion to the ERB. The standard for granting provisional relief may be found in the laws creating or relating to the ERB. After all, statutes should be construed as a whole and in relation to their amendments.[65] Thus, the ERB should exercise its discretion in consideration of its mandate to ensure the quality, reliability, security and affordability of the supply of electric power.[66] Provisional relief cannot be ordered in a whimsical, arbitrary or oppressive manner.

If supported by substantial evidence, the factual finding of the ERB - an administrative body charged with a specific field of expertise -- is

conclusive and should not be disturbed.[67] Administrative bodies are given wide latitude in the evaluation of evidence, including the authority to take judicial notice of facts within their special competence.[68] Absent any proof to the contrary, the presumption is that official duty has been regularly performed.[69] Hence, the ERB is presumed to have performed its duty of studying the available evidence, prior to the issuance of the provisional relief. The ERB issued the Cease and Desist Order in recognition of the fact that end consumers would ultimately pay for the penalties imposed by the NPC.[70] It is clear that the latter did not even rebut this justification.

Factual issues may not be raised in a petition for review under Rule 45.[71] Even assuming that the present case falls under the exceptions to this rule,[72] the Court is precluded from considering the allegation that PEPOA did not submit any document or affidavit to support the latters prayer for a Cease and Desist Order. Petitioner has made only bare allegations without referring at all to the evidence.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

ARTEMIO V. PANGANIBAN Chief Justice Chairman, First Division

W E C O N C U R:

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ Associate Justice Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN Chief Justice