Republic of the Philippines

SUPREME COURT
Manila

making a down payment of US$100,000.00. He further alleged

that petitioners in-laws who were living in California had a poor
credit standing due to a number of debts and they could not have
purchased such an expensive property for petitioner and his
wife. Private respondent accused petitioner of amassing wealth
from lahar funds and other public works projects.

THIRD DIVISION
G.R. No. 149335

July 1, 2003

Private respondent attached to his letter-complaint the following

documents:

EDILLO C. MONTEMAYOR, petitioner,

vs.
LUIS BUNDALIAN, RONALDO B. ZAMORA, Executive
Secretary, Office of the President, AND GREGORIO R.
VIGILAR, Secretary, Department of Public Works and
Highways (DPWH), respondents.

a) a copy of a Grant Deed, dated May 27, 1993, where spouses

David and Judith Tedesco granted the subject property to
petitioner and his wife;
b) a copy of the Special Power of Attorney (SPA) executed by
petitioner and his wife in California appointing petitioners
sister-in-law Estela D. Fajardo as their attorney-in-fact, to
negotiate and execute all documents and requirements to
complete the purchase of the subject property; and,

PUNO, J.:
In this petition for review on certiorari, petitioner EDILLO C.
MONTEMAYOR assails the Decision of the Court of Appeals,
dated April 18, 2001, affirming the decision of the Office of the
President in Administrative Order No. 12 ordering petitioners
dismissal as Regional Director of the Department of Public
Works and Highways (DPWH) for unexplained wealth.

c) an excerpt from the newspaper column of Lito A. Catapusan

in the Manila Bulletin, entitled "Beatwatch," where it was
reported that a low-ranking, multimillionaire DPWH employee,
traveled to Europe and the U.S. with his family, purchased an
expensive house in California, appointed a woman through an
SPA to manage the subject property and had hidden and
unexplained wealth in the Philippines and in the U.S.

Petitioners dismissal originated from an unverified lettercomplaint, dated July 15, 1995, addressed by private respondent
LUIS BUNDALIAN to the Philippine Consulate General in San
Francisco, California, U.S.A. Private respondent accused
petitioner, then OIC-Regional Director, Region III, of the
DPWH, of accumulating unexplained wealth, in violation of
Section 8 of Republic Act No. 3019. Private respondent charged
that in 1993, petitioner and his wife purchased a house and lot at
907 North Bel Aire Drive, Burbank, Los Angeles, California,
ADMIN LAW

Accordingly, the letter-complaint and its attached documents

were indorsed by the Philippine Consulate General of San
Francisco, California, to the Philippine Commission Against
Graft and Corruption (PCAGC)1 for investigation. Petitioner,
represented by counsel, submitted his counter-affidavit before

the PCAGC alleging that the real owner of the subject property
was his sister-in-law Estela Fajardo. Petitioner explained that in
view of the unstable condition of government service in 1991,
his wife inquired from her family in the U.S. about their possible
emigration to the States. They were advised by an immigration
lawyer that it would be an advantage if they had real property in
the U.S. Fajardo intimated to them that she was interested in
buying a house and lot in Burbank, California, but could not do
so at that time as there was a provision in her mortgage contract
prohibiting her to purchase another property pending full
payment of a real estate she earlier acquired in Palmdale, Los
Angeles. Fajardo offered to buy the Burbank property and put
the title in the names of petitioner and his wife to support their
emigration plans and to enable her at the same time to
circumvent the prohibition in her mortgage contract.

allegedly issued by his sister-in-law to pay for the house and lot
in Burbank, California. When the PCAGC requested the Deputy
Ombudsman for Luzon to furnish it with copies of petitioners
SALN from 1992-1994, it was informed that petitioner failed to
file his SALN for those years.
After the investigation, the PCAGC, in its Report to the Office
of the President, made the following findings: Petitioner
purchased a house and lot in Burbank, California, for
US$195,000.00 (or P3.9M at the exchange rate prevailing in
1993). The sale was evidenced by a Grant Deed. The PCAGC
concluded that the petitioner could not have been able to afford
to buy the property on his annual income of P168,648.00 in
1993 as appearing on his Service Record. It likewise found
petitioners explanation as unusual, largely unsubstantiated,
unbelievable and self-serving. The PCAGC noted that instead of
adducing evidence, petitioners counsel exerted more effort in
filing pleadings and motion to dismiss on the ground of forum
shopping. It also took against petitioner his refusal to submit his
SALN and ITR despite the undertaking made by his counsel
which raised the presumption that evidence willfully suppressed
would be adverse if produced. The PCAGC concluded that as
petitioners acquisition of the subject property was manifestly
out of proportion to his salary, it has been unlawfully acquired.
Thus, it recommended petitioners dismissal from service
pursuant to Section 8 of R.A. No. 3019.

Petitioner likewise pointed out that the charge against him was
the subject of similar cases filed before the Ombudsman.2 He
attached to his counter-affidavit the Consolidated Investigation
Report3 of the Ombudsman dismissing similar charges for
insufficiency of evidence.
From May 29, 1996 until March 13, 1997, the PCAGC
conducted its own investigation of the complaint. While
petitioner participated in the proceedings and submitted various
pleadings and documents through his counsel, private
respondent-complainant could not be located as his Philippine
address could not be ascertained. In the course of the
investigation, the PCAGC repeatedly required petitioner to
submit his Statement of Assets, Liabilities and Net Worth
(SALN), Income Tax Returns (ITRs) and Personal Data Sheet.
Petitioner ignored these directives and submitted only his
Service Record. He likewise adduced in evidence the checks

ADMIN LAW

On August 24, 1998, the Office of the President, concurring with

the findings and adopting the recommendation of the PCAGC,
issued Administrative Order No. 12,4 ordering petitioners
dismissal from service with forfeiture of all government
benefits.

Petitioners Motion for Reconsideration was denied. His appeal

to the Court of Appeals was likewise dismissed.5

participating in the proceedings before it. He was duly

represented by counsel. He filed his counter-affidavit, submitted
documentary evidence, attended the hearings, moved for a
reconsideration of Administrative Order No. 12 issued by the
President and eventually filed his appeal before the Court of
Appeals. His active participation in every step of the
investigation effectively removed any badge of procedural
deficiency, if there was any, and satisfied the due process
requirement. He cannot now be allowed to challenge the
procedure adopted by the PCAGC in the investigation.8

Hence, this petition for review where petitioner raises the

following issues for resolution: first, whether he was denied due
process in the investigation before the PCAGC; second, whether
his guilt was proved by substantial evidence; and, third, whether
the earlier dismissal of similar cases before the Ombudsman
rendered the administrative case before the PCAGC moot and
academic.

Neither can we sustain petitioners contention that the charge

against him was unsupported by substantial evidence as it was
contained in an unverified complaint. The lack of verification of
the administrative complaint and the non-appearance of the
complainant at the investigation did not divest the PCAGC of its
authority to investigate the charge of unexplained wealth. Under
Section 3 of Executive Order No. 151 creating the PCAGC,
complaints involving graft and corruption may be filed before it
in any form or manner against presidential appointees in the
executive department. Indeed, it is not totally uncommon that a
government agency is given a wide latitude in the scope and
exercise of its investigative powers. The Ombudsman, under the
Constitution, is directed to act on any complaint likewise filed in
any form and manner concerning official acts or omissions. The
Court Administrator of this Court investigates and takes
cognizance of, not only unverified, but even anonymous
complaints filed against court employees or officials for
violation of the Code of Ethical Conduct. This policy has been
adopted in line with the serious effort of the government to
minimize, if not eradicate, graft and corruption in the service.

On the issue of due process, petitioner submits that the PCAGC

committed infractions of the cardinal rules of administrative due
process when it relied on Bundalians unverified lettercomplaint. He gripes that his counter-affidavit should have been
given more weight as the unverified complaint constitutes
hearsay evidence. Moreover, petitioner insists that in ruling
against him, the PCAGC failed to respect his right to confront
and cross-examine the complainant as the latter never appeared
in any of the hearings before the PCAGC nor did he send a
representative therein.
We find no merit in his contentions. The essence of due process
in administrative proceedings is the opportunity to explain ones
side or seek a reconsideration of the action or ruling complained
of. As long as the parties are given the opportunity to be heard
before judgment is rendered, the demands of due process are
sufficiently met.6In the case at bar, the PCAGC exerted efforts to
notify the complainant of the proceedings but his Philippine
residence could not be located.7 Be that as it may, petitioner
cannot argue that he was deprived of due process because he
failed to confront and cross-examine the complainant. Petitioner
voluntarily submitted to the jurisdiction of the PCAGC by

ADMIN LAW

It is well to remember that in administrative proceedings,

technical rules of procedure and evidence are not strictly

applied. Administrative due process cannot be fully equated with
due process in its strict judicial sense for it is enough that the
party is given the chance to be heard before the case against him
is decided.9 This was afforded to the petitioner in the case at bar.
On the second issue, there is a need to lay down the basic
principles in administrative investigations. First, the burden is on
the complainant to prove by substantial evidence the allegations
in his complaint.10 Substantial evidence is more than a mere
scintilla of evidence. It means such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion, even if other minds equally reasonable might
conceivably opine otherwise.11 Second, in reviewing
administrative decisions of the executive branch of the
government, the findings of facts made therein are to be
respected so long as they are supported by substantial evidence.
Hence, it is not for the reviewing court to weigh the conflicting
evidence, determine the credibility of witnesses, or otherwise
substitute its judgment for that of the administrative agency with
respect to the sufficiency of evidence. Third, administrative
decisions in matters within the executive jurisdiction can only be
set aside on proof of gross abuse of discretion, fraud, or error of
law. These principles negate the power of the reviewing court to
re-examine the sufficiency of the evidence in an administrative
case as if originally instituted therein, and do not authorize the
court to receive additional evidence that was not submitted to the
administrative agency concerned.12

payment for the amortizations of the property. His evidence,

however, likewise fail to convince us. First, the record is bereft
of evidence to prove the alleged internal arrangement petitioner
entered into with Fajardo. He did not submit her affidavit to the
investigating body nor did she testify before it regarding her
ownership of the Burbank property. Second, the checks allegedly
issued by Fajardo to pay for the monthly amortizations on the
property have no evidentiary weight as Fajardos mere issuance
thereof cannot prove petitioners non-ownership of the property.
Fajardo would naturally issue the checks as she was appointed
by petitioner as attorney-in-fact and the latter would naturally
course through her the payments for the Burbank property.
Third, petitioners own evidence contradict his position. We
cannot reconcile petitioners denial of ownership of the property
with the loan statement13 he adduced showing that he obtained a
loan from the World Savings and Loan Association for
$195,000.00 on June 23, 1993 to finance the acquisition of the
property. Then, three (3) years later, on May 30, 1996, petitioner
and his wife executed a Quitclaim Deed 14 donating the Burbank
property to his sisters-in-law Estela and Rose Fajardo allegedly
to prove his non-ownership of the property. It is obvious that the
Quitclaim Deed is a mere afterthought, having been executed
only after a complaint for unexplained wealth was lodged
against petitioner. Why the Quitclaim Deed included Rose
Fajardo when it was only Estela Fajardo who allegedly owned
the property was not explained on the record. Petitioners
evidence failed to clarify the issue as it produced, rather than
settled, more questions.

In the case at bar, petitioner admitted that the subject property

was in his name. However, he insisted that it was his sister-inlaw Estela Fajardo who paid for the property in installments. He
submitted as proof thereof the checks issued by Fajardo as

Petitioner admitted that the Grant Deed over the property was in
his name. He never denied the existence and due execution of
the Grant Deed and the Special Power of Attorney he conferred
to Estela Fajardo with respect to the acquisition of the Burbank

ADMIN LAW

property. With these admissions, the burden of proof was shifted

to petitioner to prove non-ownership of the property. He cannot
now ask this Court to remand the case to the PCAGC for
reception of additional evidence as, in the absence of any errors
of law, it is not within the Courts power to do so. He had every
opportunity to adduce his evidence before the PCAGC.

SO ORDERED.
Panganiban, Sandoval-Gutierrez, Corona, and Carpio Morales,
JJ., concur.

Lastly, we cannot sustain petitioners stance that the dismissal of

similar charges against him before the Ombudsman rendered the
administrative case against him before the PCAGC moot and
academic. To be sure, the decision of the Ombudsman does not
operate as res judicata in the PCAGC case subject of this review.
The doctrine of res judicata applies only to judicial or quasijudicial proceedings, not to the exercise of administrative
powers.15 Petitioner was investigated by the Ombudsman for his
possible criminal liability for the acquisition of the Burbank
property in violation of the Anti-Graft and Corrupt Practices Act
and the Revised Penal Code. For the same alleged misconduct,
petitioner, as a presidential appointee, was investigated by the
PCAGC by virtue of the administrative power and control of the
President over him. As the PCAGCs investigation of petitioner
was administrative in nature, the doctrine of res judicata finds
no application in the case at bar.

G.R. No. 149335

July 1, 2003
EDILLO C. MONTEMAYOR vs. LUIS BUNDALIAN
FACTS: An unverified letter-complaint was addressed by
private respondent LUIS BUNDALIAN to the Philippine
Consulate General accusing petitioner, then OIC-Regional
Director of the DPWH, of accumulating unexplained wealth, in
violation of Section 8 of Republic Act No. 3019. Private
respondent charged among others that petitioner and his wife
purchased a house and lot in Los Angeles, California and that
petitioners in-laws who were living in California had a poor
credit standing due to a number of debts they could not have
purchased such an expensive property for petitioner and his
wife. Private respondent also accused petitioner of amassing
wealth from lahar funds and other public works projects.

Thus, we find that the Court of Appeals correctly sustained

petitioners dismissal from service as the complaint and its
supporting documents established that he acquired a property
whose value is disproportionate to his income in the government
service, unless he has other sources of income which he failed to
reveal. His liability was proved by substantial evidence.

The PCAGC conducted its own investigation of the complaint.

Petitioner fully participated in the proceedings. After the
investigation, the PCAGC found that petitioner purchased a

IN VIEW WHEREOF, the petition is DISMISSED. No costs.

ADMIN LAW

house and lot in California, for US$195,000.00 evidenced by a

Grant Deed. The body concluded that the petitioner could not
have been able to afford to buy the property on his annual
income of P168,648.00 as appearing on his Service Record. The
PCAGC concluded that as petitioners acquisition of the subject
property was manifestly out of proportion to his salary, it has
been unlawfully acquired. Thus, it recommended petitioners
dismissal from service pursuant to Section 8 of R.A. No. 3019.

Appeals. His active participation in every step of the

investigation effectively removed any badge of procedural
deficiency, if there was any, and satisfied the due process
requirement. He cannot now be allowed to challenge the
procedure adopted by the PCAGC in the investigation.
It is well to remember that in administrative proceedings,
technical rules of procedure and evidence are not strictly
applied. Administrative due process cannot be fully equated with
due process in its strict judicial sense for it is enough that the
party is given the chance to be heard before the case against him
is decided. This was afforded to the petitioner in the case at bar.

The Office of the President, concurring with the findings and

adopting the recommendation of the PCAGC, issued
Administrative Order No. 12,4 ordering petitioners dismissal
from service with forfeiture of all government benefits.
ISSUE: Whether or not petitioner was denied due process in the
investigation before the PCAGC
HELD: NO. The essence of due process in administrative
proceedings is the opportunity to explain ones side or seek a
reconsideration of the action or ruling complained of. As
long as the parties are given the opportunity to be heard
before judgment is rendered, the demands of due process are
sufficiently met. In the case at bar, the PCAGC exerted efforts
to notify the complainant of the proceedings but his Philippine
residence could not be located. Be that as it may, petitioner
cannot argue that he was deprived of due process because he
failed to confront and cross-examine the complainant. Petitioner
voluntarily submitted to the jurisdiction of the PCAGC by
participating in the proceedings before it. He was duly
represented by counsel. He filed his counter-affidavit, submitted
documentary evidence, attended the hearings, moved for a
reconsideration of Administrative Order No. issued by the
President and eventually filed his appeal before the Court of

ADMIN LAW

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 150947

July 15, 2003

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MICHEL J. LHUILLIER PAWNSHOP, INC., respondent.

DAVIDE, JR., C.J.:

This RMO was clarified by Revenue Memorandum Circular

(RMC) No. 43-91 on 27 May 1991, which reads:

Are pawnshops included in the term lending investors for the

purpose of imposing the 5% percentage tax under then Section
116 of the National Internal Revenue Code (NIRC) of 1977, as
amended by Executive Order No. 273?

1. RM[O] 15-91 dated March 11, 1991.

This Circular subjects to the 5% lending investors tax the gross
income of pawnshops pursuant to Section 116 of the Tax Code,
and it thus revokes BIR Ruling No[]. 6-90, and VAT Ruling Nos.
22-90 and 67-90. In order to have a uniform cut-off date, avoid
unfairness on the part of tax- payers if they are required to pay
the tax on past transactions, and so as to give meaning to the
express provisions of Section 246 of the Tax Code, pawnshop
owners or operators shall become liable to the lending investors
tax on their gross income beginning January 1, 1991. Since the
deadline for the filing of percentage tax return (BIR Form No.
2529A-0) and the payment of the tax on lending investors
covering the first calendar quarter of 1991 has already lapsed,
taxpayers are given up to June 30, 1991 within which to pay the
said tax without penalty. If the tax is paid after June 30, 1991,
the corresponding penalties shall be assessed and computed from
April 21, 1991.

Petitioner Commissioner of Internal Revenue (CIR) filed the

instant petition for review to set aside the decision1 of 20
November 2001 of the Court of Appeals in CA G.R. SP No.
62463, which affirmed the decision of 13 December 2000 of the
Court of Tax Appeals (CTA) in CTA Case No. 5690 cancelling
the assessment issued against respondent Michel J. Lhuillier
Pawnshop, Inc. (hereafter Lhuillier) in the amount of
P3,360,335.11 as deficiency percentage tax for 1994, inclusive
of interest and surcharges.
The facts are as follows:
On 11 March 1991, CIR Jose U. Ong issued Revenue
Memorandum Order (RMO) No. 15-91 imposing a 5% lending
investors tax on pawnshops; thus:

Since pawnshops are considered as lending investors effective

January 1, 1991, they also become subject to documentary stamp
taxes prescribed in Title VII of the Tax Code. BIR Ruling No.
325-88 dated July 13, 1988 is hereby revoked.

A restudy of P.D. [No.] 114 shows that the principal activity of

pawnshops is lending money at interest and incidentally
accepting a "pawn" of personal property delivered by the pawner
to the pawnee as security for the loan.(Sec. 3, Ibid). Clearly, this
makes pawnshop business akin to lending investors business
activity which is broad enough to encompass the business of
lending money at interest by any person whether natural or
juridical. Such being the case, pawnshops shall be subject to the
5% lending investors tax based on their gross income pursuant
to Section 116 of the Tax Code, as amended.

ADMIN LAW

On 11 September 1997, pursuant to these issuances, the Bureau

of Internal Revenue (BIR) issued Assessment Notice No. 81-PT13-94-97-9-118 against Lhuillier demanding payment of
deficiency percentage tax in the sum ofP3,360,335.11 for 1994
inclusive of interest and surcharges.

On 3 October 1997, Lhuillier filed an administrative protest with

the Office of the Revenue Regional Director contending that (1)
neither the Tax Code nor the VAT Law expressly imposes 5%
percentage tax on the gross income of pawnshops; (2)
pawnshops are different from lending investors, which are
subject to the 5% percentage tax under the specific provision of
the Tax Code; (3) RMO No. 15-91 is not implementing any
provision of the Internal Revenue laws but is a new and
additional tax measure on pawnshops, which only Congress
could enact; (4) RMO No. 15-91 impliedly amends the Tax Code
and is therefore taxation by implication, which is proscribed by
law; and (5) RMO No. 15-91 is a "class legislation" because it
singles out pawnshops among other lending and financial
operations.

inaction may appeal to the Court of Tax Appeals within thirty

(30) days from receipt of the said decision, or from the lapse of
the one hundred eighty (180)-day period; otherwise, the decision
shall become final, executory and demandable.

On 12 October 1998, Deputy BIR Commissioner Romeo S.

Panganiban issued Warrant of Distraint and/or Levy No. 81-04398 against Lhuilliers property for the enforcement and payment
of the assessed percentage tax.

For Lhuilliers failure to appear on the scheduled date of

hearing, the CTA denied the motion for the issuance of a writ of
preliminary injunction. However, on Lhuilliers motion for
reconsideration, said denial was set aside and a hearing on the
motion for the issuance of a writ of preliminary injunction was
set.

The case was docketed as CTA Case No. 5690.

On 19 November 1998, the CIR filed with the CTA a motion to
dismiss Lhuilliers petition on the ground that it did not state a
cause of action, as there was no action yet on the protest.
Lhuillier opposed the motion to dismiss and moved for the
issuance of a writ of preliminary injunction praying that the BIR
be enjoined from enforcing the warrant of distraint and levy.

Its protest having been unacted upon, Lhuillier, in a letter dated

3 March 1998, elevated the matter to the CIR. Still, the protest
was not acted upon by the CIR. Thus, on 11 November 1998,
Lhuillier filed a "Notice and Memorandum on Appeal" with the
Court of Tax Appeals invoking Section 228 of Republic Act No.
8424, otherwise known as the Tax Reform Act of 1997, which
provides:

On 30 June 1999, after due hearing, the CTA denied the CIRs
motion to dismiss and granted Lhuilliers motion for the
issuance of a writ of preliminary injunction.
On 13 December 2000, the CTA rendered a decision declaring
(1) RMO No. 15-91 and RMC No. 43-91 null and void insofar
as they classify pawnshops as lending investors subject to 5%
percentage tax; and (2) Assessment Notice No. 81-PT-13-94-979-118 as cancelled, withdrawn, and with no force and effect.2

Section 228. Protesting of Assessment.

If the protest is denied in whole or in part, or is not acted upon
within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or

ADMIN LAW

Dissatisfied, the CIR filed a petition for review with the Court of
8

Appeals praying that the aforesaid decision be reversed and set

aside and another one be rendered ordering Lhuillier to pay the
5% lending investors tax for 1994 with interests and surcharges.

income in addition to their fixed annual taxes. Accordingly,

during the period from April 1982 up to December 1990, the
CIR consistently ruled that a pawnshop is not a lending investor
and should not therefore be required to pay percentage tax on its
gross income.

Upon due consideration of the issues presented by the parties in

their respective memoranda, the Court of Appeals affirmed the
CTA decision on 20 November 2001.

Lhuillier likewise asserts that RMO No. 15-91 and RMC No. 4391 are not implementing rules but are new and additional tax
measures, which only Congress is empowered to enact. Besides,
they are invalid because they have never been published in the
Official Gazette or any newspaper of general circulation.

The CIR is now before this Court via this petition for review on
certiorari, alleging that the Court of Appeals erred in holding
that pawnshops are not subject to the 5% lending investors tax.
He invokes then Section 116 of the Tax Code, which imposed a
5% percentage tax on lending investors. He argues that the legal
definition of lending investors provided in Section 157 (u) of the
Tax Code is broad enough to include pawnshop operators.
Section 3 of Presidential Decree No. 114 states that the principal
business activity of a pawnshop is lending money; thus, a
pawnshop easily falls under the legal definition of lending
investors. RMO No. 15-91 and RMC No. 43-91, which subject
pawnshops to the 5% lending investors tax based on their gross
income, are valid. Being mere interpretations of the NIRC, they
need not be published. Lastly, the CIR invokes the case of
Commissioner of Internal Revenue vs. Agencia Exquisite of
Bohol, Inc.,3 where the Court of Appeals Special Fourteenth
Division ruled that a pawnshop is subject to the 5% lending
investors tax.4

Lhuillier further points out that pawnshops are strictly regulated

by the Central Bank pursuant to P.D. No. 114, otherwise known
as The Pawnshop Regulation Act. On the other hand, there is no
special law governing lending investors. Due to the wide
differences between the two, pawnshops had never been
considered as lending investors for tax purposes. In fact, in
1994, Congress passed House Bill No. 11197, 5 which attempted
to amend Section 116 of the NIRC, as amended, to include
owners of pawnshops as among those subject to percentage tax.
However, the Senate Bill and the subsequent Bicameral
Committee version, which eventually became the E-VAT Law,
did not incorporate such proposed amendment.
Lastly, Lhuillier argues that following the maxim in statutory
construction "expressio unius est exclusio alterius," it was not
the intention of the Legislature to impose percentage taxes on
pawnshops because if it were so, pawnshops would have been
included as among the businesses subject to the said tax.
Inasmuch as revenue laws impose special burdens upon
taxpayers, the enforcement of such laws should not be extended
by implication beyond the clear import of the language used.

Lhuillier, on the other hand, maintains that before and after the
amendment of the Tax Code by E.O. No. 273, which took effect
on 1 January 1988, pawnshops and lending investors were
subjected to different tax treatments. Pawnshops were required
to pay an annual fixed tax of only P1,000, while lending
investors were subject to a 5% percentage tax on their gross

ADMIN LAW

We are therefore called upon to resolve the issue of whether

pawnshops are subject to the 5% lending investors tax.
Corollary to this issue are the following questions: (1) Are RMO
No. 15-91 and RMC No. 43-91 valid? (2) Were they issued to
implement Section 116 of the NIRC of 1977, as amended? (3)
Are pawnshops considered "lending investors" for the purpose
of the imposition of the lending investors tax? (4) Is publication
necessary for the validity of RMO No. 15-91 and RMC No. 4391.

specifically included. Thus, the question is whether pawnshops

are considered lending investors for the purpose of imposing
percentage tax.
We rule in the negative.
Incidentally, we observe that both parties, as well as the Court of
Tax Appeals and the Court of Appeals, refer to the National
Internal Revenue Code as the Tax Code. They did not specify
whether the provisions they cited were taken from the NIRC of
1977, as amended, or the NIRC of 1986, as amended. For clarity,
it must be pointed out that the NIRC of 1977 as renumbered and
rearranged by E.O. No. 273 is a later law than the NIRC of
1986, as amended by P.D. Nos. 1991, 1994, 2006 and 2031. The
citation of the specific Code is important for us to determine the
intent of the law.

RMO No. 15-91 and RMC No. 43-91 were issued in accordance
with the power of the CIR to make rulings and opinions in
connection with the implementation of internal revenue laws,
which was bestowed by then Section 245 of the NIRC of 1977,
as amended by E.O. No. 273.6 Such power of the CIR cannot be
controverted. However, the CIR cannot, in the exercise of such
power, issue administrative rulings or circulars not consistent
with the law sought to be applied. Indeed, administrative
issuances must not override, supplant or modify the law, but
must remain consistent with the law they intend to carry out.
Only Congress can repeal or amend the law.7

Under Section 157(u) of the NIRC of 1986, as amended, the

term lending investor includes "all persons who make a practice
of lending money for themselves or others at interest." A
pawnshop, on the other hand, is defined under Section 3 of P.D.
No. 114 as "a person or entity engaged in the business of lending
money on personal property delivered as security for loans and
shall be synonymous, and may be used interchangeably, with
pawnbroker or pawn brokerage."

The CIR argues that both issuances are mere rules and
regulations implementing then Section 116 of the NIRC, as
amended, which provided:
SEC. 116. Percentage tax on dealers in securities; lending
investors. - Dealers in securities and lending investors shall pay
a tax equivalent to six (6) per centum of their gross income.
Lending investors shall pay a tax equivalent to five (5%) percent
of their gross income.

While it is true that pawnshops are engaged in the business of

lending money, they are not considered "lending investors" for
the purpose of imposing the 5% percentage taxes for the
following reasons:

It is clear from the aforequoted provision that pawnshops are not

First. Under Section 192, paragraph 3, sub-paragraphs (dd) and

(ff), of the NIRC of 1977, prior to its amendment by E.O. No.

ADMIN LAW

10

273, as well as Section 161, paragraph 2, sub-paragraphs (dd)

and (ff), of the NIRC of 1986, pawnshops and lending investors
were subjected to different tax treatments; thus:

Sec. 175. Percentage tax on dealers in securities, lending

investors. -- Dealers in securities shall pay a tax equivalent to six
(6%) percent of their gross income. Lending investors shall pay
a tax equivalent to five (5%) percent of their gross income. (As
amended by P.D. No. 1739, P.D. No. 1959 and P.D. No. 1994).

(3) Other Fixed Taxes. The following fixed taxes shall be

collected as follows, the amount stated being for the whole year,
when not otherwise specified:

We note that the definition of lending investors found in Section

157 (u) of the NIRC of 1986 is not found in the NIRC of 1977,
as amended by E.O. No. 273, where Section 116 invoked by the
CIR is found. However, as emphasized earlier, both the NIRC of
1986 and the NIRC of 1977 dealt with pawnshops and lending
investors differently. Verily then, it was the intent of Congress to
deal with both subjects differently. Hence, we must likewise
interpret the statute to conform with such legislative intent.

.
(dd) Lending investors
1. In chartered cities and first class municipalities, one thousand
pesos;

Third. Section 116 of the NIRC of 1977, as amended by E.O.

No. 273, subjects to percentage tax dealers in securities and
lending investors only. There is no mention of pawnshops.
Under the maxim expressio unius est exclusio alterius, the
mention of one thing implies the exclusion of another thing not
mentioned. Thus, if a statute enumerates the things upon which
it is to operate, everything else must necessarily and by
implication be excluded from its operation and effect. 9 This rule,
as a guide to probable legislative intent, is based upon the rules
of logic and natural workings of the human mind.10

2. In second and third class municipalities, five hundred pesos;

3. In fourth and fifth class municipalities and municipal districts,
two hundred fifty pesos: Provided, That lending investors who
do business as such in more than one province shall pay a tax of
one thousand pesos.
.
(ff) Pawnshops, one thousand pesos (underscoring ours)

Fourth. The BIR had ruled several times prior to the issuance of
RMO No. 15-91 and RMC 43-91 that pawnshops were not
subject to the 5% percentage tax imposed by Section 116 of the
NIRC of 1977, as amended by E.O. No. 273. This was even
admitted by the CIR in RMO No. 15-91 itself. Considering that
Section 116 of the NIRC of 1977, as amended, was practically
lifted from Section 175 of the NIRC of 1986, as amended, and

Second. Congress never intended pawnshops to be treated in the

same way as lending investors. Section 116 of the NIRC of
1977, as renumbered and rearranged by E.O. No. 273, was
basically lifted from Section 175 8 of the NIRC of 1986, which
treated both tax subjects differently. Section 175 of the latter
Code read as follows:

ADMIN LAW

11

there being no change in the law, the interpretation thereof

should not have been altered.

Section 21 of the same law provides that the law shall take effect
fifteen (15) days after its complete publication in the Official
Gazette or in at least two (2) national newspapers of general
circulation whichever comes earlier. R.A. No. 7716 was
published in the Official Gazette on 1 August 1994 12; in the
Journal and Malaya newspapers, on 12 May 1994; and in the
Manila Bulletin, on 5 June 1994. Thus, R.A. No. 7716 is deemed
effective on 27 May 1994.

It may not be amiss to state that, as pointed out by the

respondent, pawnshops was sought to be included as among
those subject to 5% percentage tax by House Bill No. 11197 in
1994. Section 13 thereof reads:
Section 13. Section 116 of the National Internal Revenue Code,
as amended, is hereby further amended to read as follows:

Since Section 116 of the NIRC of 1977, which breathed life on

the questioned administrative issuances, had already been
repealed, RMO 15-91 and RMC 43-91, which depended upon it,
are deemed automatically repealed. Hence, even granting that
pawnshops are included within the term lending investors, the
assessment from 27 May 1994 onward would have no leg to
stand on.

"SEC. 116. Percentage tax on dealers in securities; lending

investors;
OWNERS
OF
PAWNSHOPS;
FOREIGN
CURRENCY DEALERS AND/OR MONEY CHANGERS.
Dealers in securities shall pay a tax equivalent to Six (6%) per
centum of their gross income. Lending investors, OWNERS OF
PAWNSHOPS AND FOREIGN CURRENCY DEALERS
AND/OR MONEY CHANGERS shall pay a tax equivalent to
Five (5%) percent of their gross income."

Adding to the invalidity of the RMC No. 43-91 and RMO No.
15-91 is the absence of publication. While the rule-making
authority of the CIR is not doubted, like any other government
agency, the CIR may not disregard legal requirements or
applicable principles in the exercise of quasi-legislative powers.

If pawnshops were covered within the term lending investor,

there would have been no need to introduce such amendment to
include owners of pawnshops. At any rate, such proposed
amendment was not adopted. Instead, the approved bill which
became R.A. No. 771611 repealed Section 116 of NIRC of 1977,
as amended, which was the basis of RMO No. 15-91 and RMC
No. 43-91; thus:

Let us first distinguish between two kinds of administrative

issuances: the legislative rule and the interpretative rule. A
legislative rule is in the nature of subordinate legislation,
designed to implement a primary legislation by providing the
details thereof. An interpretative rule, on the other hand, is
designed to provide guidelines to the law which the
administrative agency is in charge of enforcing.13

SEC. 20. Repealing Clauses. -- The provisions of any special

law relative to the rate of franchise taxes are hereby expressly
repealed. Sections 113, 114 and 116 of the National Internal
Revenue Code are hereby repealed.

ADMIN LAW

In Misamis Oriental Association of Coco Traders, Inc. vs.

Department of Finance Secretary,14 this Tribunal ruled:

12

 In the same way that laws must have the benefit of public
hearing, it is generally required that before a legislative rule is
adopted there must be hearing. In this connection, the
Administrative Code of 1987 provides:

process the previous rulings of past Commissioners. Specifically,

they would have been amendatory provisions applicable to
pawnshops. Without these disputed CIR issuances, pawnshops
would not be liable to pay the 5% percentage tax, considering
that they were not specifically included in Section 116 of the
NIRC of 1977, as amended. In so doing, the CIR did not simply
interpret the law. The due observance of the requirements of
notice, hearing, and publication should not have been ignored.

Public Participation. - If not otherwise required by law, an

agency shall, as far as practicable, publish or circulate notices of
proposed rules and afford interested parties the opportunity to
submit their views prior to the adoption of any rule.

There is no need for us to discuss the ruling in CA-G.R. SP No.

59282 entitled Commissioner of Internal Revenue v. Agencia
Exquisite of Bohol Inc., which upheld the validity of RMO No.
15-91 and RMC No. 43-91. Suffice it to say that the judgment in
that case cannot be binding upon the Supreme Court because it
is only a decision of the Court of Appeals. The Supreme Court,
by tradition and in our system of judicial administration, has the
last word on what the law is; it is the final arbiter of any
justifiable controversy. There is only one Supreme Court from
whose decisions all other courts should take their bearings.16

(2) In the fixing of rates, no rule or final order shall be valid

unless the proposed rates shall have been published in a
newspaper of general circulation at least two weeks before the
first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be
observed.
In addition, such rule must be published.

In view of the foregoing, RMO No. 15-91 and RMC No. 43-91
are hereby declared null and void. Consequently, Lhuillier is not
liable to pay the 5% lending investors tax.

When an administrative rule is merely interpretative in nature,

its applicability needs nothing further than its bare issuance, for
it gives no real consequence more than what the law itself has
already prescribed. When, on the other hand, the administrative
rule goes beyond merely providing for the means that can
facilitate or render least cumbersome the implementation of the
law but substantially increases the burden of those governed, it
behooves the agency to accord at least to those directly affected
a chance to be heard, and thereafter to be duly informed, before
that new issuance is given the force and effect of law.15

WHEREFORE, the petition is hereby DISMISSED for lack of

merit. The decision of the Court of Appeals of 20 November
2001 in CA-G.R. SP No. 62463 is AFFIRMED.
SO ORDERED.
Vitug, Ynarez-Santiago, Carpio, and Azcuna, JJ., concur.

RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply
as implementing rules or corrective measures revoking in the
ADMIN LAW

13

5% lending investors tax on pawnshops. It held that the principal

activity of pawnshops is lending money at interest and
incidentally accepting personal property as security for the loan.
Since pawnshops are considered as lending investors effective,
they also become subject to documentary stamp taxes.
On 1997, the Bureau of Internal Revenue (BIR) issued an
Assessment Notice against Lhuillier demanding payment of
deficiency percentage.
Lhuillier filed an administrative protest with the Office of the
Revenue Regional Director contending that neither the Tax Code
nor the VAT Law expressly imposes 5% percentage tax on the
gross income of pawnshops; that pawnshops are different from
lending investors, which are subject to the 5% percentage tax
under the specific provision of the Tax Code; that RMO No. 1591 is not implementing any provision of the Internal Revenue
laws but is a new and additional tax measure on pawnshops,
which only Congress could enact, and that it impliedly amends
the Tax Code, and that it is a class legislation as it singles out
pawnshops.
On 1998, the BIR issued Warrant of Distraint and/or Levy
against Lhuilliers property for the enforcement and payment of
the assessed percentage tax.
When Lhuiller's protest was not acted upon, they elevated it to
the CIR which was also not acted upon. Lhuiller filed a Notice
and Memo on Appeal with the CTA.
On 2000, the CTA held the the RMOs were void and that the
Assessment Notice should be cancelled.
The CIR filed a motion for review with the CA which only
affirmed the CTA's decision thus this case in bar.

COMMISSIONER OF INTERNAL REVENUE v. MICHEL

J. LHUILLIER PAWNSHOP, INC. G.R. No. 150947. July 15,
2003
FACTS:

ISSUE: Whether pawnshops included in the term lending

investors for the purpose of imposing the 5% percentage tax
under the NIRC.

On 1991, the CIR issued Revenue Memorandum Order (RMO)

No. 15-91, which was clarified by RMO No. 43-91 imposing a

ADMIN LAW

14

RULING:

4. The BIR had ruled several times prior to the issuance of the
RMOs that pawnshops were not subject to the 5% percentage tax
imposed by Section 116 of the NIRC of 1977. As Section 116 of
the NIRC of 1977 was practically lifted from Section 175 of the
NIRC of 1986, and there being no change in the law, the
interpretation thereof should not have been altered.

No.
The held that even though the RMOs No were issued in
accordance with the power of the CIR, they cannot issue
administrative rulings or circulars not consistent with the law
sought to be applied. It should remain consistent with the law
they intend to carry out. Only Congress can repeal or amend the
law.
In the NIRC, the term lending investor includes all persons who
make a practice of lending money for themselves or others at
interest. A pawnshop, on the other hand, is defined under Section
3 of P.D. No. 114 as a person or entity engaged in the business of
lending money on personal property delivered as security for
loans.
While it is true that pawnshops are engaged in the business of
lending money, they are not considered lending investors for the
purpose of imposing the 5% percentage taxes citing the
following reasons:
1. Pawnshops and lending investors were subjected to different
tax treatments as per the NIRC.
2. Congress never intended pawnshops to be treated in the same
way as lending investors.
3. Section 116 of the NIRC of 1977, as amended by E.O. No.
273, subjects to percentage tax dealers in securities and lending
investors only. There is no mention of pawnshops.

ADMIN LAW

15

Culture and Sports is a ranking cabinet member who heads the

Department of Education, Culture and Sports of the Office of the
President of the Philippines.
On February 21, 1987, the Task Force on Private Higher
Education created by the Department of Education, Culture and
Sports (hereinafter referred to as the DECS) submitted a report
entitled "Report and Recommendations on a Policy for Tuition
and Other School Fees." The report favorably recommended to
the DECS the following courses of action with respect to the
Government's policy on increases in school fees for the
schoolyear 1987 to 1988

Republic of the Philippines

SUPREME COURT
Manila

(1) Private schools may be allowed to increase its total school

fees by not more than 15 per cent to 20 per cent without the need
for the prior approval of the DECS. Schools that wish to increase
school fees beyond the ceiling would be subject to the discretion
of the DECS;

EN BANC
G.R. No. 78385 August 31, 1987
PHILIPPINE CONSUMERS FOUNDATION, INC., petitioner,
vs.
THE SECRETARY OF EDUCATION, CULTURE AND
SPORTS, respondent.

(2) Any private school may increase its total school fees in
excess of the ceiling, provided that the total schools fees will not
exceed P1,000.00 for the schoolyear in the elementary and
secondary levels, and P50.00 per academic unit on a semestral
basis for the collegiate level. 1

GANCAYCO, J.:

The DECS took note of the report of the Task Force and on the
basis of the same, the DECS, through the respondent Secretary
of Education, Culture and Sports (hereinafter referred to as the
respondent Secretary), issued an Order authorizing, inter alia,
the 15% to 20% increase in school fees as recommended by the
Task Force. The petitioner sought a reconsideration of the said
Order, apparently on the ground that the increases were too high.
2 Thereafter, the DECS issued Department Order No. 37 dated

This is an original Petition for prohibition with a prayer for the

issuance of a writ of preliminary injunction.
The record of the case discloses that the herein petitioner
Philippine Consumers Foundation, Inc. is a non-stock, non-profit
corporate entity duly organized and existing under the laws of
the Philippines. The herein respondent Secretary of Education,

ADMIN LAW

16

April 10, 1987 modifying its previous Order and reducing the
increases to a lower ceiling of 10% to 15%, accordingly. 3
Despite this reduction, the petitioner still opposed the increases.
On April 23, 1987, the petitioner, through counsel, sent a
telegram to the President of the Philippines urging the
suspension of the implementation of Department Order No. 37.
4 No response appears to have been obtained from the Office of
the President.

Secretary submitted a Comment on the Petition. 7 The

respondent Secretary maintains, inter alia, that the increase in
tuition and other school fees is urgent and necessary, and that the
assailed Department Order is not arbitrary in character. In due
time, the petitioner submitted a Reply to the Comment. 8
Thereafter, We considered the case submitted for resolution.
After a careful examination of the entire record of the case, We
find the instant Petition devoid of merit.

Thus, on May 20, 1987, the petitioner, allegedly on the basis of

the public interest, went to this Court and filed the instant
Petition for prohibition, seeking that judgment be rendered
declaring the questioned Department Order unconstitutional. The
thrust of the Petition is that the said Department Order was
issued without any legal basis. The petitioner also maintains that
the questioned Department Order was issued in violation of the
due process clause of the Constitution in asmuch as the
petitioner was not given due notice and hearing before the said
Department Order was issued.

We are not convinced by the argument that the power to regulate

school fees "does not always include the power to increase" such
fees. Section 57 (3) of Batas Pambansa Blg. 232, otherwise
known as The Education Act of 1982, vests the DECS with the
power to regulate the educational system in the country, to wit:
SEC. 57. Educations and powers of the Ministry. The Ministry
shall:
xxx xxx xxx

In support of the first argument, the petitioner argues that while

the DECS is authorized by law to regulate school fees in
educational institutions, the power to regulate does not always
include the power to increase school fees. 5

(3) Promulgate rules and regulations necessary for the

administration, supervision and regulation of the educational
system in accordance with declared policy.

Regarding the second argument, the petitioner maintains that

students and parents are interested parties that should be
afforded an opportunity for a hearing before school fees are
increased. In sum, the petitioner stresses that the questioned
Order constitutes a denial of substantive and procedural due
process of law.

xxx xxx xxx 9

Section 70 of the same Act grants the DECS the power to issue
rules which are likewise necessary to discharge its functions and
duties under the law, to wit:
SEC. 70. Rule-making Authority. The Minister of Education

Complying with the instructions of this Court, 6 the respondent

ADMIN LAW

17

and Culture, charged with the administration and enforcement of

this Act, shall promulgate the necessary implementing rules and
regulations.

Is Department Order No. 37 issued by the DECS in the exercise

of its legislative function? We believe so. The assailed
Department Order prescribes the maximum school fees that may
be charged by all private schools in the country for schoolyear
1987 to 1988. This being so, prior notice and hearing are not
essential to the validity of its issuance.

In the absence of a statute stating otherwise, this power includes

the power to prescribe school fees. No other government agency
has been vested with the authority to fix school fees and as such,
the power should be considered lodged with the DECS if it is to
properly and effectively discharge its functions and duties under
the law.

This observation notwithstanding, there is a failure on the part of

the petitioner to show clear and convincing evidence of such
arbitrariness. As the record of the case discloses, the DECS is
not without any justification for the issuance of the questioned
Department Order. It would be reasonable to assume that the
report of the Task Force created by the DECS, on which it based
its decision to allow an increase in school fees, was made
judiciously. Moreover, upon the instance of the petitioner, as it
so admits in its Petition, the DECS had actually reduced the
original rates of 15% to 20% down to 10% to 15%, accordingly.
Under the circumstances peculiar to this case, We cannot
consider the assailed Department Order arbitrary.

We find the remaining argument of the petitioner untenable. The

petitioner invokes the due process clause of the Constitution
against the alleged arbitrariness of the assailed Department
Order. The petitioner maintains that the due process clause
requires that prior notice and hearing are indispensable for the
Department Order to be validly issued.
We disagree.

Under the Rules of Court, it is presumed that official duty has

been regularly performed. 10 In the absence of proof to the
contrary, that presumption prevails. This being so, the burden of
proof is on the party assailing the regularity of official
proceedings. In the case at bar, the petitioner has not
successfully disputed the presumption.

The function of prescribing rates by an administrative agency

may be either a legislative or an adjudicative function. If it were
a legislative function, the grant of prior notice and hearing to the
affected parties is not a requirement of due process. As regards
rates prescribed by an administrative agency in the exercise of
its quasi-judicial function, prior notice and hearing are essential
to the validity of such rates. When the rules and/or rates laid
down by an administrative agency are meant to apply to all
enterprises of a given kind throughout the country, they may
partake of a legislative character. Where the rules and the rates
imposed apply exclusively to a particular party, based upon a
finding of fact, then its function is quasi-judicial in character. 9a

ADMIN LAW

We commend the petitioner for taking the cudgels for the public,
especially the parents and the students of the country. Its zeal in
advocating the protection of the consumers in its activities
should be lauded rather than discouraged. But a more convincing
case should be made out by it if it is to seek relief from the
courts some time in the future. Petitioner must establish that

18

respondent acted without or in excess of her jurisdiction; or with

grave abuse of discretion, and there is no appeal or any other
plain, speedy, and adequate remedy in the ordinary course of law
before the extraordinary writ of prohibition may issue. 11

Education Culture and Sports, 153 SCRA 622

This Court, however, does not go to the extent of saying that it

gives its judicial imprimatur to future increases in school fees.
The increases must not be unreasonable and arbitrary so as to
amount to an outrageous exercise of government authority and
power. In such an eventuality, this Court will not hesitate to
exercise the power of judicial review in its capacity as the
ultimate guardian of the Constitution.

When the rules and/or rates laid down by an administrative

agency are meant to apply to all enterprises of a given kind
throughout the country, they may partake of a legislative
character. Where the rules and the rates imposed apply
exclusively to a particular party, based upon a finding of fact,
then its function is quasi-judicial in character.

WHEREFORE, in view of the foregoing, the instant Petition for

prohibition is hereby DISMISSED for lack of merit. We make
no pronouncement as to costs.

Requirements for Valid Exercise

SO ORDERED.

Q: How is jurisdiction determined?

A: Jurisdiction is conferred by law and by the Constitution.
Thus, in order to determine who has jurisdiction to take
cognizance of a case, one only needs to look at the law whether
or not it confers jurisdiction on the body.

QUASI-LEGISLATIVE v. QUASI-JUDICIAL:

(1) Jurisdiction

Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera,

Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin, Sarmiento
and Cortes, JJ., concur.

Q: How do you resolve a conflict of jurisdiction between a

quasi-judicial body and the court?
A: First, determine what the controversy is all about. Is the
plaintiff questioning whether an administrative body has a
certain power? Or is he questioning how said power was
exercised? In the first, the particular law creating the body must
be considered in order to determine whether or not the
administrative body has authority. If the law has been entrusted
to that body for its implementation and such law vests authority
in said body, then it has jurisdiction. Upon the other hand, if the

Quasi-judicial power distinguished from judicial power

and quasi-legislative power
Philippine Consumers Foundation, Inc. vs. Secretary of

ADMIN LAW

19

power to prescribe school fees. No other government agency has

been vested with the authority to fix school fees and as such, the
power should be considered lodged with the DECS.

case puts in issue, not whether the body has authority, but the
questionable manner it is exercised, then the courts have
jurisdiction to determine whether or not in the exercise of such
powers rights and obligations have been impaired.

PHIL. CONSUMERS FOUNDATION INC V SECRETARY OF

EDUCATION
Philippine Consumers Foundation, Inc. vs. Sec. of Education,
Culture and Sports,

FACTS: In 1987, the Task Force on Private Higher Education

submitted a report, which favorably recommended to the DECS
courses of action with respect to the Government's policy on increases
in school fees for SY 1987-1988.

G.R. No. 78385 August 31, 1987

(Admin Law, quasi-legislative power,)

On this basis, the Secretary of DECS issued an order authorizing a

15-20% increase in school fees as recommended by the Task Force.
Philippine Consumers Foundation Inc (PCFI) opposed the order on the
ground that the increases were too high. DECS issued Dept Order No.
37 reducing the increases to a lower ceiling of 10-15%. Again, PCFI
opposed.

Facts: The DECS, as recommended by the Task Force on Private

Higher Education and through respondent Secretary issued Dep Order
No. 37, a modification of a previous Department Order, authorizing
the 10% to 15% increase in school fees. Petitioner opposed and
alleged in a petition that said order was issued without any legal basis
arguing that authority of DECS to regulate school fees does not
always include the power to increase the same.

ISSUE

Sec. 57 (3) of BP Blg. 232 (The Education Act of 1982), vests the
DECS with the power to regulate the educational system; and Sec. 70
of the same act grants the DECS the power to issue rules which are
likewise necessary to discharge its functions and duties under the law.

W/N DECS has the power to prescribe school fees

HELD
YES. In the absence of a statute stating otherwise, this power includes
the power to prescribe school fees. No other government agency has
been vested with the authority to fix school fees and as such, the
power should be considered lodged with the DECS if it is to properly
and effectively discharge its functions and duties under the law.

The respondent Secretary maintains that the increase in tuition and

other school fees is urgent and necessary.
Issue: WON the fixing of school fees through department order by
DECS is a valid delegation of legislative power.

The function of prescribing rates by an administrative agency may be

either a legislative or an adjudicative function. If it were a legislative
function, the grant of prior notice and hearing to the affected parties is
not a requirement of due process. As regards rates prescribed by an

Held: Yes. Power granted to the educational department to regulate

the educational system includes the power to prescribe school fees. In
the absence of a statue stating otherwise, this power include the

ADMIN LAW

20

administrative agency in the exercise of its quasi-judicial function, prior

notice and hearing are essential to the validity of such rates. When the
rules and/or rates laid down by an administrative agency are meant to
apply to all enterprises of a given kind throughout the country, they
may partake of a legislative character. Where the rules and the rates
imposed apply exclusively to a particular party, based upon a finding of
fact, then its function is quasi-judicial in character.

THE DEPARTMENT OF JUSTICE (LEO DACERA,

SUSAN F. DACANAY, EDNA A. VALENZUELA AND
SEBASTIAN F. CAPONONG, JR.), CIDG-PNPP/DIRECTOR EDUARDO MATILLANO, and HON.
OMBUDSMAN SIMEON V. MARCELO, respondents.

Is Department Order No. 37 issued by the DECS in the exercise of its

legislative function? YES.

DECISION

The assailed Department Order prescribes the maximum school fees

that may be charged by all private schools in the country for SY 1987
to 1988.

AUSTRIA-MARTINEZ, J.:

This being so, prior notice and hearing are not essential to the validity
of its issuance.

On August 4, 2003, an affidavit-complaint was filed with the

Department of Justice (DOJ) by respondent CIDG-PNP/P
Director Eduardo Matillano. It reads in part:

2. After a thorough investigation, I found that a crime of coup

d'etat was indeed committed by military personnel who occupied
Oakwood on the 27th day of July 2003 and Senator Gregorio
"Gringo"Honasan, II

Republic of the Philippines

SUPREME COURT
Manila

3.
4. The said crime was committed as follows:

EN BANC
G.R. No. 159747

4.1 On June 4, 2003, at on or about 11 p.m., in a house located in

San Juan, Metro Manila, a meeting was held and presided by
Senator Honasan. Attached as Annex "B" is the affidavit of
Perfecto Ragil and made an integral part of this complaint.

April 13, 2004

GREGORIO B. HONASAN II, petitioner,

vs.
THE PANEL OF INVESTIGATING PROSECUTORS OF

ADMIN LAW

21

4.8 In the early morning of July 27, 2003, Capt. Gerardo

Gambala, for and in behalf of the military rebels occupying
Oakwood, made a public statement aired on nation television,
stating their withdrawal of support to the chain of command of
the AFP and the Government of President Gloria Macapagal
Arroyo and they are willing to risk their lives in order to achieve
the National Recovery Agenda of Sen. Honasan, which they
believe is the only program that would solve the ills of
society. . . . (Emphasis supplied).

o'clock in the evening of June 4, 2003 in a house located

somewhere in San Juan, Metro Manila;
6. That upon arrival we were given a document consisting of
about 3-4 pages containing discussion of issues and concerns
within the framework of NRP and we were likewise served with
dinner;
7. That while we were still having dinner at about past 11 o'clock
in the evening, Sen. Gregorio "Gringo" Honasan arrived together
with another fellow who was later introduced as Capt. Turingan;

The Sworn Statement of AFP Major Perfecto Ragil referred to

by PNP/P Director Matillano is quoted verbatim, to wit:

8. That after Sen. Honasan had taken his dinner, the meeting
proper started presided by Sen. Honasan;

1. That I am a member of the Communication Electronics and

Information Systems Services, Armed Forces of the Philippines
with the rank of Major;

9. That Sen. Honasan discussed the NRP, the graft and

corruption in the government including the military institution,
the judiciary, the executive branch and the like;

2. That I met a certain Captain Gary Alejano of the Presidential

Security Guard (PSG) during our Very Important Person (VIP)
Protection Course sometime in last week of March 2003;

10. That the discussion concluded that we must use force,

violence and armed struggle to achieve the vision of NRP. At
this point, I raised the argument that it is my belief that reforms
will be achieved through the democratic processes and not thru
force and violence and/or armed struggle. Sen. Honasan
countered that "we will never achieve reforms through the
democratic processes because the people who are in power will
not give up their positions as they have their vested interests to
protect." After a few more exchanges of views, Sen. Honasan
appeared irritated and asked me directly three (3) times: "In ka
ba o out?" I then asked whether all those present numbering 30
people, more or less, are really committed, Sen. Honasan
replied: "Kung kaya nating pumatay sa ating mga kalaban, kaya
din nating pumatay sa mga kasamahang magtataksil." I decided

3. That sometime in May 2003, Captain Alejano gave me a copy

of the pamphlet of the National Recovery Program (NRP) and
told me that: "Kailangan ng Bansa ng taong kagaya mo na
walang bahid ng corruption kaya basahin mo ito (referring to
NRP) pamphlet. I took the pamphlet but never had the time to
read it;
4. That sometime in the afternoon of June 4, 2003, Captain
Alejano invited me to join him in a meeting where the NRP
would be discussed and that there would be a special guest;
5. That Capt. Alejano and I arrived at the meeting at past 9
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22

not to pursue further questions;

15. That after the rites, the meeting was adjourned and we left
the place;

11. That in the course of the meeting, he presented the plan of

action to achieve the goals of NRP, i.e., overthrow of the
government under the present leadership thru armed revolution
and after which, a junta will be constituted and that junta will
run the new government. He further said that some of us will
resign from the military service and occupy civilian positions in
the new government. He also said that there is urgency that we
implement this plan and that we would be notified of the next
activities.

16. That I avoided Captain Alejano after that meeting but I was
extra cautious that he would not notice it for fear of my life due
to the threat made by Senator HONASAN during the meeting on
June 4, 2003 and the information relayed to me by Captain
Alejano that their group had already deeply established their
network inside the intelligence community;
17. That sometime in the first week of July 2003, Captain
Alejano came to see me to return the rifle that he borrowed and
told me that when the group arrives at the Malacaang
Compound for "D-DAY", my task is to switch off the telephone
PABX that serves the Malacaang complex. I told him that I
could not do it. No further conversation ensued and he left;

12. That after the discussion and his presentation, he explained

the rites that we were to undergo-some sort of "blood compact".
He read a prayer that sounded more like a pledge and we all
recited it with raised arms and clenched fists. He then took a
knife and demonstrated how to make a cut on the left upper
inner arm until it bleeds. The cut was in form of the letter "I" in
the old alphabet but was done in a way that it actually looked
like letter "H". Then, he pressed his right thumb against the
blood and pressed the thumb on the lower middle portion of the
copy of the Prayer. He then covered his thumb mark in blood
with tape. He then pressed the cut on his left arm against the
NRP flag and left mark of letter "I" on it. Everybody else
followed;

18. That on Sunday, July 27, 2003, while watching the

television, I saw flashed on the screen Lieutenant Antonio
Trillanes, Captain Gerardo Gambala, Captain Alejano and some
others who were present during the June 4 th meeting that I
attended, having a press conference about their occupation of the
Oakwood Hotel. I also saw that the letter "I" on the arm bands
and the banner is the same letter "I" in the banner which was
displayed and on which we pressed our wound to leave the
imprint of the letter "I";

13. That when my turn came, I slightly made a cut on my upper

inner arm and pricked a portion of it to let it bleed and I
followed what Senator HONASAN did;

19. That this Affidavit is being executed in order to attest the

veracity of the foregoing and in order to charge SENATOR
GREGORIO
"GRINGO"
HONASAN,
Capt.
FELIX
TURINGAN, Capt. GARY ALEJANO, Lt. ANTONIO
TRILLANES, Capt. GERARDO GAMBALA and others for
violation of Article 134-A of the Revised Penal Code for the

14. That I did not like to participate in the rites but I had the fear
for my life with what Senator HONASAN said that "kaya
nating pumatay ng kasamahan";

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23

offense of "coup d'etat". (Emphasis supplied)

additional affidavits/evidence and to afford respondents ample

opportunity to controvert the same, respondents, thru counsel are
hereby directed to file their respective counter-affidavits and
controverting evidence on or before September 23, 2003.1

The affidavit-complaint is docketed as I.S. No. 2003-1120 and

the Panel of Investigating Prosecutors of the Department of
Justice (DOJ Panel for brevity) sent a subpoena to petitioner for
preliminary investigation.

Hence, Senator Gregorio B. Honasan II filed the herein petition

for certiorari under Rule 65 of the Rules of Court against the
DOJ Panel and its members, CIDG-PNP-P/Director Eduardo
Matillano and Ombudsman Simeon V. Marcelo, attributing grave
abuse of discretion on the part of the DOJ Panel in issuing the
aforequoted Order of September 10, 2003 on the ground that the
DOJ has no jurisdiction to conduct the preliminary investigation.

On August 27, 2003, petitioner, together with his counsel,

appeared at the DOJ. He filed a Motion for Clarification
questioning DOJ's jurisdiction over the case, asserting that since
the imputed acts were committed in relation to his public office,
it is the Office of the Ombudsman, not the DOJ, that has the
jurisdiction to conduct the corresponding preliminary
investigation; that should the charge be filed in court, it is the
Sandiganbayan, not the regular courts, that can legally take
cognizance of the case considering that he belongs to the group
of public officials with Salary Grade 31; and praying that the
proceedings be suspended until final resolution of his motion.

Respondent Ombudsman, the Office of Solicitor General in

representation of respondents DOJ Panel, and Director Matillano
submitted their respective comments.
The Court heard the parties in oral arguments on the following
issues:

Respondent Matillano submitted his comment/opposition thereto

and petitioner filed a reply.

1) Whether respondent Department of Justice Panel of

Investigators has jurisdiction to conduct preliminary
investigation over the charge of coup d'etat against petitioner;

On September 10, 2003, the DOJ Panel issued an Order, to wit:

On August 27, 2003, Senator Gregorio B. Honasan II filed
through counsel a "Motion to Clarify Jurisdiction". On
September 1, 2003, complainant filed a Comment/Opposition to
the said motion.

2) Whether Ombudsman-DOJ Circular No. 95-001 violates the

Constitution and Republic Act No. 6770 or Ombudsman Act of
1989; and
3) Whether respondent DOJ Panel of Investigators committed
grave abuse of discretion in deferring the resolution of the
petitioner's motion to clarify jurisdiction considering the claim
of the petitioner that the DOJ Panel has no jurisdiction to
conduct preliminary investigation.

The motion and comment/opposition are hereby duly noted and

shall be passed upon in the resolution of this case.
In the meantime, in view of the submission by complainant of
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24

After the oral arguments, the parties submitted their respective

memoranda. The arguments of petitioner are:

1. The DOJ has jurisdiction to conduct the preliminary

investigation on petitioner pursuant to Section 3, Chapter I, Title
III, Book IV of the Revised Administrative Code of 1987 in
relation to P.D. No. 1275, as amended by P.D. No. 1513.

1. The Office of the Ombudsman has jurisdiction to conduct the

preliminary investigation over all public officials, including
petitioner.

2. Petitioner is charged with a crime that is not directly nor

intimately related to his public office as a Senator. The factual
allegations in the complaint and the supporting affidavits are
bereft of the requisite nexus between petitioner's office and the
acts complained of.

2. Respondent DOJ Panel is neither authorized nor deputized

under OMB-DOJ Joint Circular No. 95-001 to conduct the
preliminary investigation involving Honasan.

3. The challenge against the constitutionality of the OMB-DOJ

Joint Circular, as a ground to question the jurisdiction of the
DOJ over the complaint below, is misplaced. The jurisdiction of
the DOJ is a statutory grant under the Revised Administrative
Code. It is not derived from any provision of the joint circular
which embodies the guidelines governing the authority of both
the DOJ and the Office of the Ombudsman to conduct
preliminary investigation on offenses charged in relation to
public office.

3. Even if deputized, the respondent DOJ Panel is still without

authority since OMB-DOJ Joint Circular No. 95-001 is ultra
vires for being violative of the Constitution, beyond the powers
granted to the Ombudsman by R.A. 6770 and inoperative due to
lack of publication, hence null and void.
4. Since petitioner is charged with coup de 'etat in relation to his
office, it is the Office of the Ombudsman which has the
jurisdiction to conduct the preliminary investigation.

4. Instead of filing his counter-affidavit, petitioner opted to file a

motion to clarify jurisdiction which, for all intents and purposes,
is actually a motion to dismiss that is a prohibited pleading
under Section 3, Rule 112 of the Revised Rules of Criminal
Procedure. The DOJ Panel is not required to act or even
recognize it since a preliminary investigation is required solely
for the purpose of determining whether there is a sufficient
ground to engender a well founded belief that a crime has been
committed and the respondent is probably guilty thereof and
should be held for trial. The DOJ panel did not outrightly reject
the motion of petitioner but ruled to pass upon the same in the
determination of the probable cause; thus, it has not violated any

5. The respondent DOJ Panel gravely erred in deferring the

resolution of petitioner's Motion to Clarify Jurisdiction since the
issue involved therein is determinative of the validity of the
preliminary investigation.
6. Respondent DOJ Panel gravely erred when it resolved
petitioner's Motion in the guise of directing him to submit
Counter-Affidavit and yet refused and/or failed to perform its
duties to resolve petitioner's Motion stating its legal and factual
bases.
The arguments of respondent DOJ Panel are:
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25

law or rule or any norm of discretion.

4. The Joint Circular which is an internal arrangement between

the DOJ and the Office of the Ombudsman need not be
published since it neither contains a penal provision nor does it
prescribe a mandatory act or prohibit any under pain or penalty.
It does not regulate the conduct of persons or the public, in
general.

The arguments of respondent Ombudsman are:

1. The DOJ Panel has full authority and jurisdiction to conduct
preliminary investigation over the petitioner for the reason that
the crime of coup d'etat under Article No. 134-A of the Revised
Penal Code (RPC) may fall under the jurisdiction of the
Sandiganbayan only if the same is committed "in relation to
office" of petitioner, pursuant to Section 4, P.D. No. 1606, as
amended by R.A. No. 7975 and R.A. No. 8249.

The Court finds the petition without merit.

The authority of respondent DOJ Panel is based not on the
assailed OMB-DOJ Circular No. 95-001 but on the provisions of
the 1987 Administrative Code under Chapter I, Title III, Book
IV, governing the DOJ, which provides:

2. Petitioner's premise that the DOJ Panel derives its authority to

conduct preliminary investigation over cases involving public
officers solely from the OMB-DOJ Joint Circular No. 95-001 is
misplaced because the DOJ's concurrent authority with the OMB
to conduct preliminary investigation of cases involving public
officials has been recognized in Sanchez vs. Demetriou (227
SCRA 627 [1993]) and incorporated in Section 4, Rule 112 of
the Revised Rules of Criminal Procedure.

Sec. 1. Declaration of policy - It is the declared policy of the

State to provide the government with a principal law agency
which shall be both its legal counsel and prosecution arm;
administer the criminal justice system in accordance with the
accepted processes thereof consisting in the investigation of the
crimes, prosecution of offenders and administration of the
correctional system;

3. Petitioner's assertion that the Joint Circular is ultra vires and

the DOJ cannot be deputized by the Ombudsman en masse but
must be given in reference to specific cases has no factual or
legal basis. There is no rule or law which requires the
Ombudsman to write out individualized authorities to deputize
prosecutors on a per case basis. The power of the Ombudsman to
deputize DOJ prosecutors proceeds from the Constitutional grant
of power to request assistance from any government agency
necessary to discharge its functions, as well as from the statutory
authority to so deputize said DOJ prosecutors under Sec. 31 of
RA 6770.

ADMIN LAW

Sec. 3. Powers and Functions - To accomplish its mandate, the

Department shall have the following powers and functions:

(2) Investigate the commission of crimes, prosecute offenders

and administer the probation and correction system;
(Emphasis supplied)
and Section 1 of P.D. 1275, effective April 11, 1978, to wit:

26

and Mabanag vs. Lopez Vito.2

SECTION 1. Creation of the National Prosecution Service;

Supervision and Control of the Secretary of Justice. There is
hereby created and established a National Prosecution Service
under the supervision and control of the Secretary of Justice, to
be composed of the Prosecution Staff in the Office of the
Secretary of Justice and such number of Regional State
Prosecution Offices, and Provincial and City Fiscal's Offices as
are hereinafter provided, which shall be primarily responsible
for the investigation and prosecution of all cases involving
violations of penal laws. (Emphasis supplied)

The Court is not convinced. Paragraph (1) of Section 13, Article

XI of the Constitution, viz:
SEC. 13. The Office of the Ombudsman shall have the following
powers, functions, and duties:
1. Investigate on its own, or on complaint by any person, any act
or omission of any public official, employee, office or agency,
when such act or omission appears to be illegal, unjust,
improper, or inefficient.

Petitioner claims that it is the Ombudsman, not the DOJ, that has
the jurisdiction to conduct the preliminary investigation under
paragraph (1), Section 13, Article XI of the 1987 Constitution,
which confers upon the Office of the Ombudsman the power to
investigate on its own, or on complaint by any person, any act
or omission of any public official, employee, office or agency,
when such act or omission appears to be illegal, unjust,
improper, or inefficient. Petitioner rationalizes that the 1987
Administrative Code and the Ombudsman Act of 1989 cannot
prevail over the Constitution, pursuant to Article 7 of the Civil
Code, which provides:

does not exclude other government agencies tasked by law to

investigate and prosecute cases involving public officials. If it
were the intention of the framers of the 1987 Constitution, they
would have expressly declared the exclusive conferment of the
power to the Ombudsman. Instead, paragraph (8) of the same
Section 13 of the Constitution provides:
(8) Promulgate its rules of procedure and exercise such other
powers or perform such functions or duties as may be provided
by law.

Article 7. Laws are repealed only by subsequent ones, and their

violation or non-observance shall not be excused by disuse, or
custom or practice to the contrary.

Accordingly, Congress enacted R.A. 6770, otherwise known as

"The Ombudsman Act of 1989." Section 15 thereof provides:

When the courts declare a law to be inconsistent with the

Constitution, the former shall be void and the latter shall govern.

Sec. 15. Powers, Functions and Duties. - The Office of the

Ombudsman shall have the following powers, functions and
duties:

Administrative or executive acts, orders and regulations shall be

valid only when they are not contrary to the laws or the
Constitution.

ADMIN LAW

(1) Investigate and prosecute on its own or on complaint by any

27

person, any act or omission of any public officer or employee,

office or agency, when such act or omission appears to be illegal,
unjust, improper or inefficient. It has primary jurisdiction
over cases cognizable by the Sandiganbayan and, in the
exercise of this primary jurisdiction, it may take over, at any
stage, from any investigatory agency of the government, the
investigation of such cases.

The power to investigate or conduct a preliminary

investigation on any Ombudsman case may be exercised by
an investigator or prosecutor of the Office of the
Ombudsman, or by any Provincial or City Prosecutor or
their assistance, either in their regular capacities or as
deputized Ombudsman prosecutors.
The prosecution of cases cognizable by the Sandiganbayan
shall be under the direct exclusive control and supervision of
the Office of the Ombudsman. In cases cognizable by the
regular Courts, the control and supervision by the Office of
the Ombudsman is only in Ombudsman cases in the sense
defined above. The law recognizes a concurrence of
jurisdiction between the Office of the Ombudsman and other
investigative agencies of the government in the prosecution
of cases cognizable by regular courts. (Emphasis supplied)

. (Emphasis supplied)
Pursuant to the authority given to the Ombudsman by the
Constitution and the Ombudsman Act of 1989 to lay down its
own rules and procedure, the Office of the Ombudsman
promulgated Administrative Order No. 8, dated November 8,
1990, entitled, Clarifying and Modifying Certain Rules of
Procedure of the Ombudsman, to wit:

It is noteworthy that as early as 1990, the Ombudsman had

properly differentiated the authority to investigate cases from the
authority to prosecute cases. It is on this note that the Court will
first dwell on the nature or extent of the authority of the
Ombudsman to investigate cases. Whence, focus is directed to
the second sentence of paragraph (1), Section 15 of the
Ombudsman Act which specifically provides that the
Ombudsman has primary jurisdiction over cases cognizable by
the Sandiganbayan, and, in the exercise of this primary
jurisdiction, it may take over, at any stage, from any
investigating agency of the government, the investigation of
such cases.

A complaint filed in or taken cognizance of by the Office of the

Ombudsman charging any public officer or employee including
those in government-owned or controlled corporations, with an
act or omission alleged to be illegal, unjust, improper or
inefficient is an Ombudsman case. Such a complaint may be the
subject of criminal or administrative proceedings, or both.
For purposes of investigation and prosecution, Ombudsman
cases involving criminal offenses may be subdivided into two
classes, to wit: (1) those cognizable by the Sandiganbayan,
and (2) those falling under the jurisdiction of the regular
courts. The difference between the two, aside from the
category of the courts wherein they are filed, is on the
authority to investigate as distinguished from the authority
to prosecute, such cases.

ADMIN LAW

That the power of the Ombudsman to investigate offenses

involving public officers or employees is not exclusive but is
concurrent with other similarly authorized agencies of the

28

government such as the provincial, city and state prosecutors has

long been settled in several decisions of the Court.

that the Ombudsman may take over at any stage of such

investigation in the exercise of his primary jurisdiction.4
(Emphasis supplied)

In Cojuangco, Jr. vs. Presidential Commission on Good

Government, decided in 1990, the Court expressly declared:

A little over a month later, the Court, in Deloso vs. Domingo,5

pronounced that the Ombudsman, under the authority of Section
13 (1) of the 1987 Constitution, has jurisdiction to investigate
any crime committed by a public official, elucidating thus:

A reading of the foregoing provision of the Constitution does not

show that the power of investigation including preliminary
investigation vested on the Ombudsman is exclusive.3

As protector of the people, the office of the Ombudsman has the

power, function and duty to "act promptly on complaints filed in
any form or manner against public officials" (Sec. 12) and to
"investigate x x x any act or omission of any public official x x x
when such act or omission appears to be illegal, unjust, improper
or inefficient." (Sec. 13[1].) The Ombudsman is also empowered
to "direct the officer concerned," in this case the Special
Prosecutor, "to take appropriate action against a public official x
x x and to recommend his prosecution" (Sec. 13[3]).

Interpreting the primary jurisdiction of the Ombudsman under

Section 15 (1) of the Ombudsman Act, the Court held in said
case:
Under Section 15 (1) of Republic Act No. 6770 aforecited, the
Ombudsman has primary jurisdiction over cases cognizable by
the Sandiganbayan so that it may take over at any stage from any
investigatory agency of the government, the investigation of
such cases. The authority of the Ombudsman to investigate
offenses involving public officers or employees is not
exclusive but is concurrent with other similarly authorized
agencies of the government. Such investigatory agencies
referred to include the PCGG and the provincial and city
prosecutors and their assistants, the state prosecutors and
the judges of the municipal trial courts and municipal circuit
trial court.

The clause "any [illegal] act or omission of any public official"

is broad enough to embrace any crime committed by a public
official. The law does not qualify the nature of the illegal act or
omission of the public official or employee that the Ombudsman
may investigate. It does not require that the act or omission be
related to or be connected with or arise from, the performance of
official duty. Since the law does not distinguish, neither should
we.

In other words the provision of the law has opened up the

authority to conduct preliminary investigation of offenses
cognizable by the Sandiganbayan to all investigatory
agencies of the government duly authorized to conduct a
preliminary investigation under Section 2, Rule 112 of the
1985 Rules of Criminal Procedure with the only qualification

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The reason for the creation of the Ombudsman in the 1987

Constitution and for the grant to it of broad investigative
authority, is to insulate said office from the long tentacles of
officialdom that are able to penetrate judges' and fiscals' offices,
and others involved in the prosecution of erring public officials,

29

and through the exertion of official pressure and influence,

quash, delay, or dismiss investigations into malfeasances and
misfeasances committed by public officers. It was deemed
necessary, therefore, to create a special office to investigate all
criminal complaints against public officers regardless of whether
or not the acts or omissions complained of are related to or arise
from the performance of the duties of their office. The
Ombudsman Act makes perfectly clear that the jurisdiction of
the Ombudsman encompasses "all kinds of malfeasance,
misfeasance, and non-feasance that have been committed by any
officer or employee as mentioned in Section 13 hereof, during
his tenure of office" (Sec. 16, R.A. 6770).

and prosecute any illegal act or omission of any public official,

the authority of the Ombudsman to investigate is merely a
primary and not an exclusive authority, thus:
The Ombudsman is indeed empowered under Section 15,
paragraph (1) of RA 6770 to investigate and prosecute any
illegal act or omission of any public official. However as we
held only two years ago in the case of Aguinaldo vs. Domagas,8
this authority "is not an exclusive authority but rather a shared or
concurrent authority in respect of the offense charged."
Petitioners finally assert that the information and amended
information filed in this case needed the approval of the
Ombudsman. It is not disputed that the information and amended
information here did not have the approval of the Ombudsman.
However, we do not believe that such approval was necessary at
all. In Deloso v. Domingo, 191 SCRA 545 (1990), the Court
held that the Ombudsman has authority to investigate charges of
illegal acts or omissions on the part of any public official, i.e.,
any crime imputed to a public official. It must, however, be
pointed out that the authority of the Ombudsman to
investigate "any [illegal] act or omission of any public
official" (191 SCRA 550) is not an exclusive authority but
rather a shared or concurrent authority in respect of the
offense charged, i.e., the crime of sedition. Thus, the noninvolvement of the office of the Ombudsman in the present case
does not have any adverse legal consequence upon the authority
of the panel of prosecutors to file and prosecute the information
or amended information.

.........
Indeed, the labors of the constitutional commission that created
the Ombudsman as a special body to investigate erring public
officials would be wasted if its jurisdiction were confined to the
investigation of minor and less grave offenses arising from, or
related to, the duties of public office, but would exclude those
grave and terrible crimes that spring from abuses of official
powers and prerogatives, for it is the investigation of the latter
where the need for an independent, fearless, and honest
investigative body, like the Ombudsman, is greatest.6
At first blush, there appears to be conflicting views in the rulings
of the Court in the Cojuangco, Jr. case and theDeloso case.
However, the contrariety is more apparent than real. In
subsequent cases, the Court elucidated on the nature of the
powers of the Ombudsman to investigate.

In fact, other investigatory agencies of the government such

as the Department of Justice in connection with the charge of
sedition, and the Presidential Commission on Good

In 1993, the Court held in Sanchez vs. Demetriou, that while it

may be true that the Ombudsman has jurisdiction to investigate

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30

Government, in ill gotten wealth cases, may conduct the

investigation.9 (Emphasis supplied)

'(a) Exclusive original jurisdiction in all cases involving:

...

In Natividad vs. Felix,10 a 1994 case, where the petitioner

municipal mayor contended that it is the Ombudsman and not
the provincial fiscal who has the authority to conduct a
preliminary investigation over his case for alleged Murder, the
Court held:

(2) Other offenses or felonies committed by public officers and

employees in relation to their office, including those employed
in government-owned or controlled corporation, whether simple
or complexed with other crimes, where the penalty prescribed by
law is higher thatprision correccional or imprisonment for six
(6) years, or a fine of P6,000: PROVIDED, HOWEVER, that
offenses or felonies mentioned in this paragraph where the
penalty prescribed by law does not exceed prision correccional
or imprisonment for six (6) years or a fine of P6,000 shall be
tried by the proper Regional Trial Court, Metropolitan Trial
Court, Municipal Trial Court and Municipal Circuit Trial Court."

The Deloso case has already been re-examined in two cases,

namely Aguinaldo vs. Domagas andSanchez vs. Demetriou.
However, by way of amplification, we feel the need for tracing
the history of the legislation relative to the jurisdiction of
Sandiganbayan since the Ombudsman's primary jurisdiction is
dependent on the cases cognizable by the former.
In the process, we shall observe how the policy of the law, with
reference to the subject matter, has been in a state of flux.

A perusal of the aforecited law shows that two requirements

must concur under Sec. 4 (a) (2) for an offense to fall under the
Sandiganbayan's jurisdiction, namely: the offense committed by
the public officer must be in relation to his office and the penalty
prescribed be higher then prision correccional or imprisonment
for six (6) years, or a fine of P6,000.00.11

These laws, in chronological order, are the following: (a) Pres.

Decree No. 1486, -- the first law on the Sandiganbayan; (b) Pres.
Decree No. 1606 which expressly repealed Pres. Decree No.
1486; (c) Section 20 of Batas Pambansa Blg. 129; (d) Pres.
Decree No. 1860; and (e) Pres. Decree No. 1861.

Applying the law to the case at bench, we find that although the
second requirement has been met, the first requirement is
wanting. A review of these Presidential Decrees, except Batas
Pambansa Blg. 129, would reveal that the crime committed by
public officers or employees must be "in relation to their office"
if it is to fall within the jurisdiction of the Sandiganbayan. This
phrase which is traceable to Pres. Decree No. 1468, has been
retained by Pres. Decree No. 1861 as a requirement before the
Ombudsman can acquire primary jurisdiction on its power to
investigate.

The latest law on the Sandiganbayan, Sec. 1 of Pres. Decree No.

1861 reads as follows:
"SECTION 1. Section 4 of Presidential Decree No. 1606 is
hereby amended to read as follows:
'SEC. 4. Jurisdiction. The Sandiganbayan shall exercise:

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31

It cannot be denied that Pres. Decree No. 1861 is in pari

materia to Article XI, Sections 12 and 13 of the 1987
Constitution and the Ombudsman Act of 1989 because, as
earlier mentioned, the Ombudsman's power to investigate is
dependent on the cases cognizable by the Sandiganbayan.
Statutes are in pari materia when they relate to the same
person or thing or to the same class of persons or things, or
object, or cover the same specific or particular subject
matter.

in relation to their office.

In summation, the Constitution, Section 15 of the Ombudsman
Act of 1989 and Section 4 of the Sandiganbayan Law, as
amended, do not give to the Ombudsman exclusive jurisdiction
to investigate offenses committed by public officers or
employees. The authority of the Ombudsman to investigate
offenses involving public officers or employees is concurrent
with other government investigating agencies such as provincial,
city and state prosecutors. However, the Ombudsman, in the
exercise of its primary jurisdiction over cases cognizable by the
Sandiganbayan, may take over, at any stage, from any
investigating agency of the government, the investigation of
such cases.

It is axiomatic in statutory construction that a statute must

be interpreted, not only to be consistent with itself, but also
to harmonize with other laws on the same subject matter, as
to form a complete, coherent and intelligible system. The
rule is expressed in the maxim, "interpretare et concordare
legibus est optimus interpretandi," or every statute must be so
construed and harmonized with other statutes as to form a
uniform system of jurisprudence. Thus, in the application
and interpretation of Article XI, Sections 12 and 13 of the
1987 Constitution and the Ombudsman Act of 1989, Pres.
Decree No. 1861 must be taken into consideration. It must be
assumed that when the 1987 Constitution was written, its
framers had in mind previous statutes relating to the same
subject matter. In the absence of any express repeal or
amendment, the 1987 Constitution and the Ombudsman Act
of 1989 are deemed in accord with existing statute,
specifically, Pres. Decree No. 1861.12 (Emphasis supplied)

In other words, respondent DOJ Panel is not precluded from

conducting any investigation of cases against public officers
involving violations of penal laws but if the cases fall under the
exclusive jurisdiction of the Sandiganbayan, then respondent
Ombudsman may, in the exercise of its primary jurisdiction take
over at any stage.
Thus, with the jurisprudential declarations that the Ombudsman
and the DOJ have concurrent jurisdiction to conduct preliminary
investigation, the respective heads of said offices came up with
OMB-DOJ Joint Circular No. 95-001 for the proper guidelines
of their respective prosecutors in the conduct of their
investigations, to wit:

R.A. No. 8249 which amended Section 4, paragraph (b) of the

Sandiganbayan Law (P.D. 1861) likewise provides that for other
offenses, aside from those enumerated under paragraphs (a) and
(c), to fall under the exclusive jurisdiction of the Sandiganbayan,
they must have been committed by public officers or employees

ADMIN LAW

OMB-DOJ JOINT CIRCULAR NO. 95-001

Series of 1995

32

TO:
ALL
GRAFT
INVESTIGATION/SPECIAL
PROSECUTION OFFICERS OF THE OFFICE OF THE
OMBUDSMAN

Concerns were expressed on unnecessary delays that could be

caused by discussions on jurisdiction between the OFFICE OF
THE OMBUDSMAN and the department of justice, and by
procedural conflicts in the filing of complaints against public
officers and employees, the conduct of preliminary
investigations, the preparation of resolutions and informations,
and the prosecution of cases by provincial and city prosecutors
and their assistants as deputized prosecutors of the ombudsman.

ALL REGIONAL STATE PROSECUTORS AND THEIR

ASSISTANTS, PROVINCIAL/CITY PROSECUTORS AND
THEIR ASSISTANTS, STATE PROSECUTORS AND
PROSECUTING ATTORNEYS OF THE DEPARTMENT OF
JUSTICE.

Recognizing the concerns, the office of the ombudsman and the

department of justice, in a series of consultations, have agreed
on the following guidelines to be observed in the investigation
and prosecution of cases against public officers and employees:

SUBJECT: HANDLING COMPLAINTS FILED AGAINST

PUBLIC OFFICERS AND EMPLOYEES, THE CONDUCT OF
PRELIMINARY INVESTIGATION, PREPARATION OF
RESOLUTIONS
AND
INFORMATIONS
AND
PROSECUTION OF CASES BY PROVINCIAL AND CITY
PROSECUTORS AND THEIR ASSISTANTS.

1. Preliminary investigation and prosecution of offenses

committed by public officers and employees in relation to office
whether cognizable by the sandiganbayan or the regular courts,
and whether filed with the office of the ombudsman or with the
office of the provincial/city prosecutor shall be under the control
and supervision of the office of the ombudsman.

x------------------------------------------------------------------------------------------------------x
In a recent dialogue between the OFFICE OF THE
OMBUDSMAN and the DEPARTMENT OF JUSTICE,
discussion centered around the latest pronouncement of the
supreme court on the extent to which the ombudsman may call
upon the government prosecutors for assistance in the
investigation and prosecution of criminal cases cognizable by his
office and the conditions under which he may do so. Also
discussed was Republic Act No. 7975 otherwise known as "an
act to strengthen the functional and structural organization of the
sandiganbayan, amending for the purpose presidential decree no.
1606, as amended" and its implications on the jurisdiction of the
office of the Ombudsman on criminal offenses committed by
public officers and employees.

ADMIN LAW

2. Unless the Ombudsman under its Constitutional mandate

finds reason to believe otherwise, offenses not in relation to
office and cognizable by the regular courts shall be investigated
and prosecuted by the office of the provincial/city prosecutor,
which shall rule thereon with finality.
3. Preparation of criminal information shall be the responsibility
of the investigating officer who conducted the preliminary
investigation. Resolutions recommending prosecution together
with the duly accomplished criminal informations shall be
forwarded to the appropriate approving authority.

33

4. Considering that the office of the ombudsman has jurisdiction

over public officers and employees and for effective monitoring
of all investigations and prosecutions of cases involving public
officers and employees, the office of the provincial/city
prosecutor shall submit to the office of the ombudsman a
monthly list of complaints filed with their respective offices
against public officers and employees.

(a) Provincial or City Prosecutors and their assistants;

(b) Judges of the Municipal Trial Courts and Municipal Circuit
Trial Courts;
(c) National and Regional State Prosecutors; and
(d) Other officers as may be authorized by law.

Manila, Philippines, October 5, 1995.

(signed)

Their authority to conduct preliminary investigation shall

include all crimes cognizable by the proper court in their
respective territorial jurisdictions.

(signed)

SEC. 4. Resolution of investigating prosecutor and its review. If the investigating prosecutor finds cause to hold the respondent
for trial, he shall prepare the resolution and information, He shall
certify under oath in the information that he, or as shown by the
record, an authorized officer, has personally examined the
complainant and his witnesses; that there is reasonable ground to
believe that a crime has been committed and that the accused is
probably guilty thereof; that the accused was informed of the
complaint and of the evidence submitted against him; and that he
was given an opportunity to submit controverting evidence.
Otherwise, he shall recommend the dismissal of the complaint.

TEOFISTO T. GUINGONA, JR. ANIANO A. DESIERTO

Secretary
Ombudsman
Department of Justice
Office of the Ombudsman

A close examination of the circular supports the view of the

respondent Ombudsman that it is just an internal agreement
between the Ombudsman and the DOJ.
Sections 2 and 4, Rule 112 of the Revised Rules on Criminal
Procedure on Preliminary Investigation, effective December 1,
2000, to wit:
SEC. 2. Officers
investigations-

authorized

to

conduct

Within five (5) days from his resolution, he shall forward the
record of the case to the provincial or city prosecutor or chief
state prosecutor, or to the Ombudsman or his deputy in cases
of offenses cognizable by the Sandiganbayan in the exercise
of its original jurisdiction. They shall act on the resolution
within ten (10) days from their receipt thereof and shall
immediately inform the parties of such action.

preliminary

The following may conduct preliminary investigations:

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34

No complaint or information may be filed or dismissed by an

investigating prosecutor without the prior written authority
or approval of the provincial or city prosecutor or chief state
prosecutor or the Ombudsman or his deputy.

records and their resolutions to the Ombudsman or his

deputy for appropriate action. Also, the prosecutor cannot
dismiss the complaint without the prior written authority of the
Ombudsman or his deputy, nor can the prosecutor file an
Information with the Sandiganbayan without being deputized by,
and without prior written authority of the Ombudsman or his
deputy.

Where the investigating prosecutor recommends the dismissal of

the complaint but his recommendation is disapproved by the
provincial or city prosecutor or chief state prosecutor or the
Ombudsman or his deputy on the ground that a probable cause
exists, the latter may, by himself file the information against the
respondent, or direct another assistant prosecutor or state
prosecutor to do so without conducting another preliminary
investigation.

Next, petitioner contends that under OMB-Joint Circular No. 95001, there is no showing that the Office of the Ombudsman has
deputized the prosecutors of the DOJ to conduct the preliminary
investigation of the charge filed against him.
We find no merit in this argument. As we have lengthily
discussed, the Constitution, the Ombudsman Act of 1989,
Administrative Order No. 8 of the Office of the Ombudsman, the
prevailing jurisprudence and under the Revised Rules on
Criminal Procedure, all recognize and uphold the concurrent
jurisdiction of the Ombudsman and the DOJ to conduct
preliminary investigation on charges filed against public officers
and employees.

If upon petition by a proper party under such rules as the

Department of Justice may prescribe or motu proprio, the
Secretary of Justice reverses or modifies the resolution of the
provincial or city prosecutor or chief state prosecutor, he shall
direct the prosecutor concerned either to file the corresponding
information
without
conducting
another
preliminary
investigation, or to dismiss or move for dismissal of the
complaint or information with notice to the parties. The same
Rule shall apply in preliminary investigations conducted by the
officers of the Office of the Ombudsman. (Emphasis supplied)

To reiterate for emphasis, the power to investigate or conduct

preliminary investigation on charges against any public officers
or employees may be exercised by an investigator or by any
provincial or city prosecutor or their assistants, either in their
regular capacities or as deputized Ombudsman prosecutors. The
fact that all prosecutors are in effect deputized Ombudsman
prosecutors under the OMB-DOJ Circular is a mere superfluity.
The DOJ Panel need not be authorized nor deputized by the
Ombudsman to conduct the preliminary investigation for
complaints filed with it because the DOJ's authority to act as the
principal law agency of the government and investigate the

confirm the authority of the DOJ prosecutors to conduct

preliminary investigation of criminal complaints filed with them
for offenses cognizable by the proper court within their
respective territorial jurisdictions, including those offenses
which come within the original jurisdiction of the
Sandiganbayan; but with the qualification that in offenses falling
within the original jurisdiction of the Sandiganbayan, the
prosecutor shall, after their investigation, transmit the

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35

commission of crimes under the Revised Penal Code is derived

from the Revised Administrative Code which had been held in
the Natividad case13 as not being contrary to the Constitution.
Thus, there is not even a need to delegate the conduct of the
preliminary investigation to an agency which has the jurisdiction
to do so in the first place. However, the Ombudsman may assert
its primary jurisdiction at any stage of the investigation.

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. (at page 454. emphasis supplied)

Petitioner's contention that OMB-DOJ Joint Circular No. 95-001

is ineffective on the ground that it was not published is not
plausible. We agree with and adopt the Ombudsman's
dissertation on the matter, to wit:

OMB-DOJ Joint Circular No. 95-001 is merely an internal

circular between the DOJ and the Office of the Ombudsman,
outlining authority and responsibilities among prosecutors of the
DOJ and of the Office of the Ombudsman in the conduct of
preliminary investigation. OMB-DOJ Joint Circular No. 95-001
DOES NOT regulate the conduct of persons or the public, in
general.

Petitioner appears to be of the belief, although NOT founded on

a proper reading and application of jurisprudence, that OMBDOJ Joint Circular No. 95-001, an internal arrangement between
the DOJ and the Office of the Ombudsman, has to be published.

Accordingly, there is no merit to petitioner's submission that

OMB-DOJ Joint Circular No. 95-001 has to be published.14

As early as 1954, the Honorable Court has already laid down the
rule in the case of People vs. Que Po Lay, 94 Phil. 640 (1954)
that only circulars and regulations which prescribe a penalty for
its violation should be published before becoming effective, this,
on the general principle and theory that before the public is
bound by its contents, especially its penal provision, a law,
regulation or circular must first be published and the people
officially and specifically informed of said contents and its
penalties: said precedent, to date, has not yet been modified or
reversed. OMB-DOJ Joint Circular No. 95-001 DOES NOT
contain any penal provision or prescribe a mandatory act or
prohibit any, under pain or penalty.

Petitioner insists that the Ombudsman has jurisdiction to conduct

the preliminary investigation because petitioner is a public
officer with salary Grade 31 so that the case against him falls
exclusively within the jurisdiction of the Sandiganbayan.
Considering the Court's finding that the DOJ has concurrent
jurisdiction to investigate charges against public officers, the fact
that petitioner holds a Salary Grade 31 position does not by itself
remove from the DOJ Panel the authority to investigate the
charge of coup d'etat against him.
The question whether or not the offense allegedly committed by
petitioner is one of those enumerated in the Sandiganbayan Law
that fall within the exclusive jurisdiction of the Sandiganbayan
will not be resolved in the present petition so as not to pre-empt

What is more, in the case of Tanada v. Tuvera, 146 SCRA 453

(1986), the Honorable Court ruled that:

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36

the result of the investigation being conducted by the DOJ Panel

as to the questions whether or not probable cause exists to
warrant the filing of the information against the petitioner; and
to which court should the information be filed considering the
presence of other respondents in the subject complaint.

statutory provision, by and large, is a restatement of the

constitutional grant to the Ombudsman of the power to
investigate and prosecute "any act or omission of any public
officer or employee, office or agency, when such act or omission
appears to be illegal x x x."4

WHEREFORE, the petition for certiorari is DISMISSED for

lack of merit.

The Panel of Investigating Prosecutors of the Department of

Justice, in taking cognizance of the preliminary investigation on
charges of coup d'etat against petitioner Gregorio Honasan,
relies on OMB-DOJ Circular No. 95-001. That joint circular
must be understood as being merely a working arrangement
between the Office of the Ombudsman (OMB) and the
Department of Justice (DOJ) that must not be meant to be such a
blanket delegation to the DOJ as to generally allow it to conduct
preliminary investigation over any case cognizable by the OMB.

SO ORDERED.
SEPARATE OPINION
VITUG, J.:
Preliminary investigation is an initial step in the indictment of an
accused; it is a substantive right, not merely a formal or a
technical requirement,1 which an accused can avail himself of in
full measure. Thus, an accused is entitled to rightly assail the
conduct of an investigation that does not accord with the law. He
may also question the jurisdiction or the authority of the person
or agency conducting that investigation and, if bereft of such
jurisdiction or authority, to demand that it be undertaken strictly
in conformity with the legal prescription.2

While Section 31 of Republic Act No. 6770 states that the

Ombudsman may "designate or deputize any fiscal, state
prosecutor or lawyer in the government service to act as special
investigator or prosecutor to assist in the investigation and
prosecution of certain cases," the provision cannot be assumed,
however, to be an undefined and broad entrustment of authority.
If it were otherwise, it would be unable to either withstand the
weight of burden to be within constitutional parameters or the
proscription against undue delegation of powers. The deputized
fiscal, state prosecutor or government lawyer must in each
instance be named; the case to which the deputized official is
assigned must be specified; and the investigation must be
conducted under the supervision and control of the Ombudsman.
The Ombudsman remains to have the basic responsibility, direct
or incidental, in the investigation and prosecution of such cases.

The Ombudsman is empowered3 to, among other things,

investigate and prosecute on its own or on complaint by any
person, any act or omission of any public officer or employee,
office or agency, when such act or omission appears to be illegal,
unjust, improper or inefficient. It has primary jurisdiction over
cases cognizable by the Sandiganbayan and, in the exercise of
this primary jurisdiction, it may, at any stage, take over from any
agency of Government the investigation of such cases. This
ADMIN LAW

The Sandiganbayan law5 grants to the Sandiganbayan exclusive

37

original jurisdiction over offenses or felonies, whether simple or

complexed with other crimes, committed by the public officials,
including members of Congress, in relation to their office. The
crime of coup d'etat, with which petitioner, a member of the
Senate, has been charged, is said to be closely linked to his
"National Recovery Program," a publication which encapsules
the bills and resolutions authored or sponsored by him on the
senate floor. I see the charge as being then related to and bearing
on his official function.

committed the offense in relation to his office as Senator. It

reasoned that since petitioner committed the felonious acts, as
alleged in the complaint, not in connection with or in relation to
his public office, it is the DOJ, and not the Office of the
Ombudsman, which is legally tasked to conduct the preliminary
investigation.
In light of the peculiar circumstances prevailing in the instant
case and in consideration of the policies relied upon by the
Majority, specifically, the Sandiganbayan Law and Republic Act
No. 6770 (The Ombudsman Act of 1989), I submit that the
posture taken by the Majority seriously deviates from and
renders nugatory the very intent for which the laws were
enacted.

On the above score, I vote to grant the petition.

DISSENTING OPINION

The crime of coup d'etat, if committed by members of Congress

or by a public officer with a salary grade above 27, falls within
the exclusive original jurisdiction of the Sandiganbayan. Section
4 of P.D. 1606, as amended, provides:

YNARES-SANTIAGO, J.:
The first question to answer is which court has jurisdiction to try
a Senator who is accused of coup d'etat. Behind the simple issue
is a more salient question - Should this Court allow an all too
restrictive and limiting interpretation of the law rather than take
a more judicious approach of interpreting the law by the spirit,
which vivifies, and not by the letter, which killeth?

Sec. 4. Jurisdiction.- The Sandiganbayan shall exercise

exclusive original jurisdiction in all cases involving:
a. Violations of Republic Act No. 3019, as amended, otherwise
known as the Anti-Graft and Corrupt Practices Act, Republic Act
No. 1379, and Chapter II, Section 2, Title VII, Book II of the
Revised Penal Code, where one or more of the accused are
officials occupying the following positions in the government,
whether in a permanent, acting or interim capacity, at the time of
the commission of the offense:

The elemental thrust of the Majority view is that the Department

of Justice (DOJ), not the Office of the Ombudsman, has the
jurisdiction to investigate the petitioner, a Senator, for the crime
of coup d'etatpursuant to Section 4 of Presidential Decree No.
1606 as amended by Republic Act No. 8249 (Sandiganbayan
Law). The Majority maintains that since the crime for which
petitioner is charged falls under Section 4, paragraph (b) of the
Sandiganbayan Law, it is imperative to show that petitioner
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xxxxxxxxx

38

(2) Members of Congress and officials thereof classified as

Grade "27" and up under the Compensation and Position
Classification Act of 1989;

the Sandiganbayan.
As worded, the Sandiganbayan Law requires that for a felony,
coup d'etat in this case, to fall under the exclusive jurisdiction of
the Sandiganbayan, two requisites must concur, namely: (1) that
the public officer or employee occupies the position
corresponding to Salary Grade 27 or higher; and (2) that the
crime is committed by the public officer or employee in relation
to his office. Applying the law to the case at bar, the Majority
found that although the first requirement has been met, the
second requirement is wanting. I disagree.

x x x x x x x x x.
In the case of Lacson v. Executive Secretary,1 we clarified the
exclusive original jurisdiction of the Sandiganbayan pursuant to
Presidential Decree ("PD") No. 1606, as amended by Republic
Act ("RA") Nos. 7975 and 8249, and made the following
definitive pronouncements:

Following its definition, coup d'etat can only be committed by

members of the military or police or holding any public office or
employment, with or without civilian support. Article 134-A of
the Revised Penal Code states:

Considering that herein petitioner and intervenors are being

charged with murder which is a felony punishable under Title
VIII of the Revised Penal Code, the governing provision on the
jurisdictional offense is not paragraph but paragraph b, Section 4
of R.A. 8249. This paragraph b pertains to "other offenses or
felonies whether simple or complexed with other crimes
committed by the public officials and employees mentioned in
subsection a of [Section 4, R.A. 8249] in relation to their office."
The phrase "other offenses or felonies" is too broad as to include
the crime of murder, provided it was committed in relation to the
accused's official functions. Thus, under said paragraph b, what
determines the Sandiganbayan's jurisdiction is the official
position or rank of the offender that is, whether he is one of
those public officers or employees enumerated in paragraph a of
Section 4. The offenses mentioned in paragraphs a, b and c of
the same Section 4 do not make any reference to the criminal
participation of the accused public officer as to whether he is
charged as a principal, accomplice or accessory. In enacting R.A.
8249, the Congress simply restored the original provisions of
P.D. 1606 which does not mention the criminal participation of
the public officer as a requisite to determine the jurisdiction of

ADMIN LAW

Article 134-A. Coup d'etat. How committed. The crime of

coup d'etat is a swift attack accompanied by violence,
intimidation, threat, strategy or stealth, directed against duly
constituted authorities of the Republic of the Philippines, or any
military camp or installation, communications network, public
utilities or other facilities needed for the exercise and continued
possession of power, singly or simultaneously carried out
anywhere in the Philippines by any person or persons, belonging
to the military or police or holding any public office or
employment, with or without civilian support or participation for
the purpose of seizing or diminishing state power.
A coup consists mainly of the military personnel and public
officers and employees seizing the controlling levers of the state,
which is then used to displace the government from its control of
the remainder. As defined, it is a swift attack directed against the

39

duly constituted authorities or vital facilities and installations to

seize state power. It is therefore inherent in coup d'etat that the
crime be committed "in relation to" the office of a public officer
or employee. The violence, intimidation, threat, strategy or
stealth which are inherent in the crime can only be accomplished
by those who possess a degree of trust reposed on such person in
that position by the Republic of the Philippines. It is by
exploiting this trust that the swift attack can be made. Since the
perpetrators take advantage of their official positions, it follows
that coup d'etat can be committed only through acts directly or
intimately related to the performance of official functions, and
the same need not be proved since it inheres in the very nature of
the crime itself.

laws. They can perform such other functions, which are, strictly
speaking, not within the ambit of the traditional legislative
powers, for instance, to canvass presidential elections, give
concurrence to treaties, to propose constitutional amendments as
well as oversight functions. As an incident thereto and in
pursuance thereof, members of Congress may deliver privilege
speeches, interpellations, or simply inform and educate the
public in respect to certain proposed legislative measures.
The complaint alleges that the meeting on June 4, 2003 of the
alleged coup plotters involved a discussion on the issues and
concerns within the framework of the National Recovery
Program (NRP), a bill which petitioner authored in the Senate.
The act of the petitioner in ventilating the ails of the society and
extolling the merits of the NRP is part of his duties as legislator
not only to inform the public of his legislative measures but also,
as a component of the national leadership, to find answers to the
many problems of our society. One can see therefore that
Senator Honasan's acts were "in relation to his office."

It is contended by public respondent that the crime of coup

d'etat cannot be committed "in relation" to petitioner's office,
since the performance of legislative functions does not include
its commission as part of the job description. To accommodate
this reasoning would be to render erroneous this Court's ruling in
People v. Montejo2 that "although public office is not an element
of the crime of murder in [the] abstract," the facts in a particular
case may show that ". . . the offense therein charged is intimately
connected with [the accuseds'] respective offices and was
perpetrated while they were in the performance, though
improper or irregular, of their official functions." Simply put, if
murder can be committed in the performance of official
functions, so can the crime of coup d'etat.

It is true that not every crime committed by a high-ranking

public officer falls within the exclusive original jurisdiction of
the Sandiganbayan. It is also true that there is no public office or
employment that includes the commission of a crime as part of
its job description. However, to follow this latter argument
would mean that there would be no crime falling under Section
4, paragraph (b) PD No. 1606, as amended. This would be an
undue truncation of the Sandiganbayan's exclusive original
jurisdiction and contrary to the plain language of the provision.

The Ombudsman is wrong when he says that legislative function

is only "to make laws, and to alter and repeal them." The
growing complexity of our society and governmental structure
has so revolutionized the powers and duties of the legislative
body such that its members are no longer confined to making

ADMIN LAW

Only by a reasonable interpretation of the scope and breadth of

the term "offense committed in relation to [an accused's] office"
in light of the broad powers and functions of the office of

40

Senator, can we subserve the very purpose for which the

Sandiganbayan and the Office of the Ombudsman were created.

much vulnerable to outside pressure. Contrarily, a more liberal

approach would bring the case to be investigated and tried by
specialized Constitutional bodies and, thus ensure the integrity
of the judicial proceedings.

The raison d' etre for the creation of the Office of the
Ombudsman in the 1987 Constitution and for the grant of its
broad investigative authority, is to insulate said office from the
long tentacles of officialdom that are able to penetrate judges'
and fiscals' offices, and others involved in the prosecution of
erring public officials, and through the exertion of official
pressure and influence, quash, delay, or dismiss investigations
into malfeasances, and misfeasances committed by public
officers.3

Second, the "primary jurisdiction" of the Office of the

Ombudsman to conduct the preliminary investigation of an
offense within the exclusive original jurisdiction of the
Sandiganbayan operates as a mandate on the Office of the
Ombudsman, especially when the person under investigation is a
member of Congress. The Ombudsman's refusal to exercise such
authority, relegating the conduct of the preliminary investigation
of I.S. No. 2003-1120 to the respondent Investigating Panel
appointed by the Department of Justice ("DOJ") under DOJ
Department Order No. 279, s. 2003, is a dereliction of a duty
imposed by no less than the Constitution.

In similar vein, the Constitution provides for the creation of the

Sandiganbayan to attain the highest norms of official conduct
required of public officers and employees. It is a special court
that tries cases involving public officers and employees that fall
within specific salary levels. Thus, section 4 of the
Sandiganbayan Law makes it a requirement that for offenses to
fall under the exlusive jurisdiction of the Sandiganbayan, the
public officer involved must occupy a position equivalent to
Salary Grade 27 or higher. This salary grade requirement is not a
product of whim or an empty expression of fancy, but a way to
ensure that offenses which spring from official abuse will be
tried by a judicial body insulated from official pressure and
unsusceptible to the blandishments, influence and intimidation
from those who seek to subvert the ends of justice.

Insofar as the investigation of said crimes is concerned, I submit

that the same belongs to the primary jurisdiction of the
Ombudsman. R.A. No. 6770 or the Ombudsman Act of 1989,
empowers the Ombudsman to conduct the investigation of cases
involving illegal acts or omissions committed by any public
officer or employee. Section 15, paragraph (1) of the
Ombudsman Act of 1989 provides:
SECTION 15. Powers, Functions and Duties. The Office of
the Ombudsman shall have the following powers, functions and
duties:

If we were to give our assent to respondent's restrictive

interpretation of the term "in relation to his office," we would be
creating an awkward situation wherein a powerful member of
Congress will be investigated by the DOJ which is an adjunct of
the executive department, and tried by a regular court which is

ADMIN LAW

1. Investigate and prosecute on its own or on complaint by any

person, any act or omission of any public officer or employee,
office or agency, when such act or omission appears to be illegal,
unjust, improper or inefficient. It has primary jurisdiction over

41

cases cognizable by the Sandiganbayan and, in the exercise of

this primary jurisdiction, it may take over, at any stage, from any
investigatory agency of Government, the investigation of such
cases; x x x.4

Section 15 of RA 6770 gives the Ombudsman primary

jurisdiction over cases cognizable by the Sandiganbayan. The
law defines such primary jurisdiction as authorizing the
Ombudsman "to take over, at any stage, from any investigatory
agency of the government, the investigation of such cases." The
grant of this authority does not necessarily imply the exclusion
from its jurisdiction of cases involving public officers and
employees cognizable by other courts. The exercise by the
Ombudsman of his primary jurisdiction over cases cognizable by
the Sandiganbayan is not incompatible with the discharge of his
duty to investigate and prosecute other offenses committed by
public officers and employees. Indeed, it must be stressed that
the powers granted by the legislature to the Ombudsman are
very broad and encompass all kinds of malfeasance, misfeasance
and non-feasance committed by public officers and employees
during their tenure of office.

In Uy v. Sandiganbayan,5 the extent and scope of the jurisdiction

of the Office of the Ombudsman to conduct investigations was
described as:
The power to investigate and to prosecute granted by law to the
Ombudsman is plenary and unqualified. It pertains to any act or
omission of any public officer or employee when such act or
omission appears to be illegal, unjust, improper or inefficient.
The law does not make a distinction between cases cognizable
by the Sandiganbayan and those cognizable by regular courts. It
has been held that the clause "any illegal act or omission of any
public official" is broad enough to embrace any crime
committed by a public officer or employee.

"Primary Jurisdiction" usually refers to cases involving

specialized disputes where the practice is to refer the same to an
administrative agency of special competence in observance of
the doctrine of primary jurisdiction. This Court has said that it
cannot or will not determine a controversy involving a question
which is within the jurisdiction of the administrative tribunal
before the question is resolved by the administrative tribunal,
where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and
intricate matters of fact, and a uniformity of ruling is essential to
comply with the premises of the regulatory statute administered.7
The objective of the doctrine of primary jurisdiction is "to guide
a court in determining whether it should refrain from exercising
its jurisdiction until after an administrative agency has
determined some question or some aspect of some question

The reference made by RA 6770 to cases cognizable by the

Sandiganbayan, particularly in Section 15 (1) giving the
Ombudsman primary jurisdiction over cases cognizable by the
Sandiganbayan, and Section 11 (4) granting the Special
Prosecutor the power to conduct preliminary investigation and
prosecute criminal cases within the jurisdiction of the
Sandiganbayan, should not be construed as confining the scope
of the investigatory and prosecutory power of the Ombudsman
to such cases.
The "primary jurisdiction" of the Office of the Ombudsman in
cases cognizable by the Sandiganbayan was reiterated in Laurel
v. Desierto:6

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42

arising in the proceeding before the court."8 It applies where a

claim is originally cognizable in the courts and comes into play
whenever enforcement of the claim requires the resolution of
issues which, under a regulatory scheme, has been placed within
the special competence of an administrative body; in such case,
the judicial process is suspended pending referral of such issues
to the administrative body for its view.9

endowed the Ombudsman with such power to make him a more

active and effective agent of the people in ensuring
accountability n public office. A review of the development of
our Ombudsman laws reveals this intent.
These pronouncements are in harmony with the constitutional
mandate of he Office of the Ombudsman, as expressed in Article
XI of the Constitution.

Where the concurrent authority is vested in both the Department

of Justice and the Office of the Ombudsman, the doctrine of
primary jurisdiction should operate to restrain the Department of
Justice from exercising its investigative authority if the case will
likely be cognizable by the Sandiganbayan. In such cases, the
Office of the Ombudsman should be the proper agency to
conduct the preliminary investigation over such an offense, it
being vested with the specialized competence and undoubted
probity to conduct the investigation.

SECTION 12. The Ombudsman and his Deputies, as protectors

of the people, shall act promptly on complaints filed in any form
or manner against public officials or employees of the
Government, or any agency, subdivision or instrumentality
thereof, including government-owned or controlled corporations,
and shall, in appropriate cases, notify the complainants of the
actions taken and the result thereof. (Underscoring supplied.)
SECTION 13. The Office of the Ombudsman shall have the
following powers, functions, and duties:

The urgent need to follow the doctrine is more heightened in this

case where the accused is a member of Congress. The DOJ is
under the supervision and control of the Office of the President;
in effect, therefore, the investigation would be conducted by the
executive over a member of a co-equal branch of government. It
is precisely for this reason that the independent constitutional
Office of the Ombudsman should conduct the preliminary
investigation. Senator Honasan is a member of the political
opposition. His right to a preliminary investigation by a fair and
uninfluenced body is sacred and should not be denied. As we
stated in the Uy case:

(1) Investigate on its own, or on complaint by any person, any

act or omission of any public official, employee, office or
agency, when such act or omission appears to be illegal, unjust,
improper, or inefficient. x x x.
Coupled with these provisions, Section 13 of the Ombudsman
Act of 1989 provides:
SECTION 13. Mandate. The Ombudsman and his Deputies, as
protectors of the people, shall act promptly on complaints filed
in any form or manner against officers or employees of the
Government, or of any subdivision, agency or instrumentality
thereof, including government-owned or controlled corporations,

The prosecution of offenses committed by public officers and

employees is one of the most important functions of the
Ombudsman. In passing RA 6770, the Congress deliberately

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43

and enforce their administrative, civil and criminal liability in

every case where the evidence warrants in order to promote
efficient service by the Government to the people. (Underscoring
supplied)

It is an established principle that an act no matter how offensive,

destructive, or reprehensible, is not a crime unless it is defined,
prohibited, and punished by law. The prosecution and
punishment of any criminal offense are necessarily
circumscribed by the specific provision of law which defines it.

The Constitution and the Ombudsman Act of 1989 both mention,

unequivocally, that the Office of the Ombudsman has the duty
and mandate to act on the complaints filed against officers or
employees of the Government. It is imperative that this duty be
exercised in order to make real the role of the Office of the
Ombudsman as a defender of the people's interest specially in
cases like these which have partisan political taint.

Article 134-A of the Revised Penal Code defines coup d'etat,

thus:
"Article 134-A. Coup d'etat. How committed. The crime of
coup d'etat is a swift attack accompanied by violence,
intimidation, threat, strategy or stealth, directed against duly
constituted authorities of the Republic of the Philippines, or any
military camp or installation, communications networks, public
utilities or other facilities needed for the exercise and continued
possession of power, singly or simultaneously carried out
anywhere in the Philippines by any person or persons, belonging
to the military or police or holding any public office or
employment with or without civilian support or participation for
the purpose of seizing or diminishing state power."

For the foregoing reasons, I vote to GRANT the petition.

DISSENTING OPINION
SANDOVAL-GUTIERREZ, J.:

There is no question that Senator Honasan, herein petitioner,

holds a high public office. If he is charged with coup d'etat, it
has to be in his capacity as a public officer committing the
alleged offense in relation to his public office.

I am constrained to dissent from the majority opinion for the

following reasons: (1) it evades the consequence of the statutory
definition of the crime of coup d'etat; (2) it violates the principle
of stare decisis without a clear explanation why the established
doctrine has to be re-examined and reversed; and (3) it trivializes
the importance of two constitutional offices the Ombudsman
and the Senate and in the process, petitioner's right to due
process has been impaired.

The complaint filed with the Department of Justice alleges the

events supposedly constituting the crime of coup d'etat, thus:
1. On 04 June 2003, Senator Honasan presided over a meeting
held "somewhere in San Juan, Metro Manila."

2. After dinner, Senator Honasan, as presiding officer, "discussed

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44

the NRP (National Recovery Program), the graft and corruption

in the government, including the military institutions, the
judiciary, the executive department, and the like."

of the Sandiganbayan as follows:

"SECTION 4. Jurisdiction. The Sandiganbayan shall exercise
exclusive original jurisdiction in all cases involving:

3. "The discussion concluded that we must use force, violence

and armed struggle to achieve the vision of NRP. x x x Senator
Honasan countered that 'we will never achieve reforms through
the democratic processes because the people who are in power
will not give up their positions as they have their vested interests
to protect.' x x x Senator Honasan replied 'kung kaya nating
pumatay sa ating mga kalaban, kaya din nating pumatay sa mga
kasamahang magtataksil.' x x x."

"a. Violations of Republic No. 3019, as amended, otherwise

known as the Anti-Graft and Corrupt Practices Act, Republic Act
No. 1379, and Chapter II, Section 2, Title VII, Book II of the
Revised Penal Code, where one or more of the accused are
officials occupying the following positions in the government,
whether in a permanent, acting or interim capacity, at the time of
the commission of the offense:

4. In the course of the meeting, Senator Honasan presented the

plan of action to achieve the goals of the NRP, i.e., overthrow of
the government under the present leadership thru armed
revolution and after which, a junta will be constituted to run the
new government.

(1) Officials of the executive branch occupying the positions of

regional director and higher, otherwise classified as Grade '27'
and higher, of the Compensations and Position Classification Act
of 1989 (Republic Act No. 67 58), specifically including:
(a) Provincial governors, vice-governors, members of the
Sangguniang Panlalawigan, and provincial treasurers , assessors,
engineers, and other provincial department heads;

5. The crime of coup d'etat was committed on 27 July 2003 by

military personnel who occupied Oakwood. Senator Honasan
and various military officers, one member of his staff, and
several John Does and Jane Does were involved in the Oakwood
incident.

(b) City mayors, vice-mayors, members of the Sangguniang

Panlungsod, city treasurers, assessors, engineers, and other city
department heads;

The above allegations determine whether or not petitioner

committed the alleged crime as a public officer "in relation to his
office." If it was in relation to his office, the crime falls under the
exclusive original jurisdiction of the Sandiganbayan. It is the
Ombudsman who has the primary jurisdiction to investigate
and prosecute the complaint for coup d'etat, thus:

(c) Officials of the diplomatic service occupying the position of

consul and higher;
(d) Philippine Army and air force colonels, naval captains, and
all officers of higher rank;

Section 4 of P.D. No. 1606, as amended, defines the jurisdiction

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45

(e) Officers of the Philippine National Police while occupying

the position of provincial director and those holding the rank of
senior superintendent or higher;

with Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986."

Section 15 of Republic Act 6770, or the Ombudsman Act of
1989, provides:

(f) City and provincial prosecutors and their assistants, and

officials and prosecutors in the Office of the Ombudsman and
special prosecutor;

"1) Investigate and prosecute on its own or on complaint by any

person, any act or omission of any public officer or employee,
office or agency, when such act or omission appears to be illegal,
unjust, improper or inefficient. It has primary jurisdiction over
cases cognizable by the Sandiganbayan and, in the exercise of
his primary jurisdiction, it may take over, at any stage, from any
investigatory agency of Government, the investigation of such
cases; x x x" (Emphasis supplied)

(g) Presidents, directors or trustees, or managers of governmentowned or controlled corporations, state universities or
educational institutions or foundations;
(2) Members of Congress or officials thereof classified as Grade
'27' and up under the Compensation and Position Classification
Act of 1989;

Under the above provisions, what determines the

Sandiganbayan's jurisdiction is the official position or rank of
the offender, that is, whether he is one of those public officers
enumerated therein.

(3) Members of the judiciary without prejudice to the provisions

of the Constitution;

Petitioner, being a Senator, occupies a government position

higher than Grade 27 of the Compensation and Position
Classification Act of 1989. In fact, he holds the third highest
position and rank in the Government. At the apex, the President
stands alone. At the second level, we have the Vice-President,
Speaker of the House, Senate President and Chief Justice.
Clearly, he is embraced in the above provisions.

(4) Chairman and members of the Constitutional Commissions,

without prejudice to the provisions of the Constitution;
(5) All other national and local officials classified as Grade '27'
or higher under the Compensation and Position Classification
Act of 1989.
"b. Other offenses or felonies whether simple or complexed
with other crimes committed by the public officials and
employees mentioned in Subsection a of this section in
relation to their office.

Following the doctrine of "primary jurisdiction," it is the

Ombudsman who should conduct the preliminary investigation
of the charge of coup d'etat against petitioner. The DOJ should
refrain from exercising such function.

"c. Civil and criminal cases filed pursuant to and in connection

ADMIN LAW

The crux of the jurisdiction of the DOJ lies in the meaning of "in
46

In Deloso vs. Domingo3, where the Governor of Zambales and

his military and police escorts ambushed the victims who were
passing by in a car, we held that the multiple murders were
committed in relation to public office. In Cunanan vs. Arceo4,
the mayor ordered his co-accused to shoot the victims. We ruled
that the murder was in relation to public office. In Alarilla vs.
Sandiganbayan5, the town mayor aimed a gun and threatened to
kill a councilor of the municipality during a public hearing. We
concluded that the grave threats were in relation to the mayor's
office. Following these precedents, I am convinced that
petitioner's discourse on his National Recovery Program is in
relation to his office.

relation to their office."

The respondents start their discussion of "in relation to public
office" with a peculiar presentation. They contend that the duties
of a Senator are to make laws, to appropriate, to tax, to
expropriate, to canvass presidential elections, to declare the
existence of a state war, to give concurrence to treaties and
amnesties, to propose constitutional amendments, to impeach, to
investigate in aid of legislation, and to determine the Senate
rules of proceedings and discipline of its members. They
maintain that the "alleged acts done to overthrow the incumbent
government and authorities by arms and with violence" cannot
be qualified as "acts reminiscent of the discharge of petitioner's
legislative duties as Senator."1

III

The allegations in the complaint and in the pleadings of the DOJ,

the Solicitor General, and the Ombudsman (who is taking their
side) charging petitioner with coup d'etat show hat he was
engaged in a discussion of his National Recovery Program
(NRP), corruption in government, and the need for reform. The
NRP is a summary of what he has introduced and intended to
introduce into legislation by Congress. There is no doubt,
therefore, that the alleged coup d'etat was committed in relation
to the performance of his official duty as a Senator.

The respondents state that the DOJ is vested with jurisdiction to

conduct all investigations and prosecution of allcrimes. They
cite PD 1275, as amended by PD 1513, and the Revised
Administrative Code of 1987 as the source of this plenary
power.
While the DOJ has a broad general jurisdiction over crimes
found in the Revised Penal Code and special laws, however, this
jurisdiction is not plenary or total. Whenever the Constitution or
statute vests jurisdiction over the investigation and prosecution
of certain crimes in an office, the DOJ has no jurisdiction over
those crimes. In election offenses, the Constitution vests the
power to investigate and prosecute in the Commission on
Elections.6In crimes committed by public officers in relation to
their office, the Ombudsman is given by both the Constitution
and the statute the same power of investigation and prosecution. 7
These powers may not be exercised by the DOJ.

II
The ponencia is a departure or reversion from established
doctrine. Under the principle of stare decisis, the Court should,
for the sake of certainty, apply a conclusion reached in one case
to decisions which follow, if the facts are substantially similar.
As stated in Santiago vs. Valenzuela2, stare decisi et non quieta
movere. Stand by the decisions and disturb not what is settled.

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47

The DOJ cannot pretend to have investigatory and prosecutorial

powers above those of the Ombudsman. The Ombudsman is a
constitutional officer with a rank equivalent to that of an
Associate Justice of this Court. The respondent's Prosecution
Office investigates and prosecutes all kinds of offenses from
petty crimes, like vagrancy or theft, to more serious crimes, such
as those found in the Revised Penal Code. The Ombudsman, on
the other hand, prosecutes offenses in relation to public office
committed by public officers with the rank and position
classification of Grade 27 or higher. It is a special kind of
jurisdiction which excludes general powers of other prosecutory
offices.

Petitioner further raises a due process question. He accuses the

DOJ of bias, partiality, and prejudgment. He states that he has
absolutely no chance of being cleared by the respondent DOJ
panel because it has already decided, before any presentation of
proof, that he must be charged and arrested without bail.

I agree with the petitioner that a becoming sense of courtesy,

respect, and propriety requires that the constitutional officer
should conduct the preliminary investigation and prosecution of
the complaint against him and not a fifth assistant city
prosecutor or even a panel of prosecutors from the DOJ National
Prosecution Service.

In Conjuangco vs. PCGG,9 we held that there is a denial of due

process where the PCGG showed "marked bias" in handling the
investigation. In Salonga vs. Cruz Pao,10 where the preliminary
investigation was tainted by bias and partiality, we emphasized
the right of an accused to be free, not only from arbitrary arrest
and punishment but also from unwarranted and biased
prosecution.

As stated by the petitioner, there are precedents to the effect that

where bias exists, jurisdiction has to be assumed by a more
objective office. In Panlilio vs. Sandiganbayan,8 we recognized
that the PCGG has the authority to investigate the case, yet we
ordered the transfer of the case to the Ombudsman because of
the PCGG's "marked bias" against the petitioner.

I do not believe that a mere agreement, such as OMB-DOJ Joint

Circular No. 95-001, can fully transfer the prosecutory powers
of the Ombudsman to the DOJ without need for deputization in
specific cases. As stated by the petitioner, the DOJ cannot be
given a roving commission or authority to investigate and
prosecute cases falling under the Ombudsman's powers anytime
the DOJ pleases without any special and explicit deputization.
On this point, I agree with Justice Jose C. Vitug that the Joint
Circular must be understood as a mere working arrangement
between the Office of the Ombudsman and the DOJ that must
not be meant to be such a blanket delegation to the DOJ as to
generally allow it to conduct preliminary investigation over any
case cognizable by the Ombudsman.

ADMIN LAW

The petitioner's pleadings show the proofs of alleged bias. They

may be summarized as follows:
First, on July 27, 2003 when the Oakwood incident was just
starting, DILG Secretary Lina and National Security Adviser
Roilo Golez went on a media barrage accusing petitioner of
complicity without a shred of evidence.
Second, petitioner was approached by Palace emissaries,
Velasco, Defensor, Tiglao, and Afable to help defuse the incident
and ask mutineers to surrender. Then the request was distorted to
make it appear that he went there to save his own skin.

48

Third, even before any charge was filed, officials of the DOJ
were on an almost daily media program prematurely proclaiming
petitioner's guilt. How can the DOJ conduct an impartial and fair
investigation when it has already found him guilty?
Fourth, petitioner was given five days to answer Matillano's
complaint but later on, it was shortened to three days.

Prosecutors, like Caesar's wife, must be beyond suspicion.

Where the test of the cold neutrality required of them cannot be
met, they must yield to another office especially where their
jurisdiction is under question. The tenacious insistence of
respondents in handling the investigation of the case and their
unwillingness to transfer it to the Ombudsman in the face of
their questionable jurisdiction are indications of marked bias.

Fifth, petitioner filed a 30 page Reply but the DOJ Order was
issued at once, or only after two days, or on Sept. 10, 2003. The
Order did not discuss the Reply, but perfunctorily glossed over
and disregarded it.

WHEREFORE, I vote to GRANT the petition and to order the

Department of Justice to refrain from conducting preliminary
investigation of the complaint for coup d'etat against petitioner
for lack of jurisdiction.

The petitioner states that the DOJ is constitutionally and

factually under the control of the President. He argues that:
"No questionable prosecution of an opposition Senator who has
declared himself available for the Presidency would be initiated
without the instigation, encouragement or approval of officials at
the highest levels of the Administration. Justice requires that the
Ombudsman, an independent constitutional office, handle the
investigation and prosecution of this case. The DOJ cannot act
fairly and independently in this case. In fact, all of the actions
the DOJ has taken so far have been marked by bias, hounding
and persecution.

Gregorio Honasan II petitioner vs. The Panel

Investigating Prosecutors Of the Department of Justice
G.R.No. 159747 April 13,2004

Lessons Applicable: Rule on Interpretative Regulations

(persons), Powers of the Ombudsman (consti), concurrent
jurisdiction of the Ombudsman and the DOJ to conduct
preliminary investigation (consti)

And finally, the charges laid against Senator Honasan are

unfounded concoctions of fertile imaginations. The petitioner
had no role in the Oakwood mutiny except the quell and pacify
the angry young men fighting for a just cause. Inspiration
perhaps, from his National Recovery Program, but no marching
orders whatsoever."

ADMIN LAW

of

Law Applicable: Section 13, Article XI of the Constitution, Art.

2 Civil Code
Facts:

49

August 4, 2003: CIDG-PNP/P Director Edguardo Matillano

filed an affidavit-complaint with the Department of Justice
(DOJ) which contains the following in part:
o

magtataksil.
o

July 27, 2003: crime of coup d etat was committed by

military personnel who occupied Oakwood and Senator
Gregorio Gringo Honasan, II

o On or about 11 p.m. June 4,2003: A meeting was held and

presided by Senator Honasan in a house located in San
Juan, Metro Manila

August 27, 2003: Senator Honasan appeared with counsel at the

DOJ to file a a Motion for Clarification questioning DOJ's
jurisdiction over the case since the imputed acts were committed
in relation to his public office by a group of public officials with
Salary Grade 31 which should be handled by the Office of the
Ombudsman and the Sandiganbayan

o Early morning of July 27, 2003: Capt. Gerardo Gambala,

in behalf of the military rebels occupying Oakwood,
made a public statement aired on national television,
stating their withdrawal of support to the chain of
command of the AFP and the Government of President
Gloria Macapagal Arroyo. Willing to risk their lives to
achieve the National Recovery Agenda (NRA) of Senator
Honasan which they believe is the only program that
would solve the ills of society.

Senator Honasan then filed a petition for certiorari under Rule

65 of the Rules of Court against the DOJ Panel and its members,
CIDG-PNP-P/Director Eduardo Matillano and Ombudsman
Simeon V. Marcelo, attributing grave abuse of discretion on the
part of the DOJ Panel in issuing the aforequoted Order of
September 10, 2003 directing him to file his respective counteraffidavits and controverting evidence on the ground that the DOJ
has no jurisdiction to conduct the preliminary investigation

Sworn statement of AFP Major Perfecto Ragil stated that:

o

June 4, 2003 about 11 pm: Senator Gregorio Gringo

Honasan arrived with Capt. Turinga to hold the NRP
meeting where they concluded the use of force, violence
and armed struggle to achieve the vision of NRP where a
junta will be constituted which will run the new
government. They had a blood compact and that he only
participated due to the threat made by Senator Honasan
when he said Kung kaya nating pumatay sa ating mga
kalaban, kaya din nating pumatay sa mga kasamahang

ADMIN LAW

July 27, 2003: He saw on TV that Lieutenant Antonio

Trillanes, Captain Gerardo Gambala, Captain Alejano
and some others who were present during the NRP
meeting he attended, having a press conference about
their occupation of the Oakwood Hotel. He saw that the
letter "I" on the arm bands and the banner is the same
letter "I" in the banner is the same as their blood compact
wound.

Issues:
1. Whether in regards to Ombudsman-DOJ Circular no. 95-001,
the office of the Ombudsman should deputize the prosecutors of
50

the DOJ to conduct the preliminary investigation.

3 The Constitution, The Ombudsman Act of 1989,

Administrative order no. 8 of the office of the Ombudsman.
The prevailing jurisprudence and under the Revised Rules on
Criminal Procedure, All recognize and uphold the concurrent
jurisdiction of the Ombudsman and the DOJ to conduct
preliminary investigation on charges filed against public
officers and employees.

2. Whether the Ombudsman-DOJ Joint Circular no. 95-001 is

ineffective on the ground that it was not published
3. Whether the Ombudsman has jurisdiction to conduct the
preliminary investigation because the petitioner is a public
officer with salary grade 31 (Grade 27 or Higher) thereby falling
within the jurisdiction of the Sandigan Bayan.

4 The DOJ Panel need not be authorized nor deputized by

the Ombudsman to conduct the preliminary investigation for
complaints filed with it because the DOJ's authority to act as
the principal law agency of the government and investigate
the commission of crimes under the Revised Penal Code is
derived from the Revised Administrative Code which had
been held in the Natividad case13 as not being contrary to
the Constitution. Thus, there is not even a need to delegate
the conduct of the preliminary investigation to an agency
which has the jurisdiction to do so in the first place.
However, the Ombudsman may assert its primary
jurisdiction at any stage of the investigation.

Held: Wherefore, the petition for certiorari is DISMISSED for

lack of merit
1. No.Ombudsman cases involving criminal offenses may be
subdivided into two classes, to wit: (1) those cognizable by
the Sandiganbayan, and (2) those falling under the
jurisdiction of the regular courts. The difference between the
two, aside from the category of the courts wherein they are
filed, is on the authority to investigate as distinguished from
the authority to prosecute

2. No. In the case of People vs. Que Po Lay, 94 Phil. 640 (1954).
The only circulars and regulations which prescribe a penalty
for its violation should be published before becoming
effective.

1 The power to investigate or conduct a preliminary

investigation on any Ombudsman case may be exercised by
an investigator or prosecutor of the Office of the
Ombudsman, or by any Provincial or City Prosecutor or their
assistance, either in their regular capacities or as deputized
Ombudsman prosecutors.

In the case of Taada V. Tuvera, 146 Scra 453 (1986), The

Honorable Court rules that:
o 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

2 Circular supports the view of the respondent

Ombudsman that it is just an internal agreement between the
Ombudsman and the DOJ

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51

called letters of instructions issued by the

administrative superiors concerning the rules on
guidelines to be followed by their subordinates in
performance of their duties.
OMB-DOJ Joint Circulars no. 95-001 is merely an internal
circular between the DOJ and the office of the Ombudsman,
Outlining authority and responsibilities among prosecutors of
the DOJ and of the office of the Ombudsman in the conduct of
preliminary investigation. It does not regulate the conduct of
persons or the public, in general.
3. No. Whether or not the offense is within exclusive jurisdiction
or not will not resolve the present petition so as not to preempt the result of the investigation conducted by the DOJ
Panel.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-14283

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52

November 29, 1960

GIL BALBUNA, ET AL., petitioners-appellants,

vs.
THE HON. SECRETARY OF EDUCATION, ET AL.,
respondents-appellees.

also involving Jehovah's Witnesses, and assailing, on practically

identical grounds, the validity of the same Department Order
above-mentioned. This Court discerns no reasons for changing
its stand therein, where we said:

K. V. Faylona and Juan B. Soliven for appellants.

Office of the Solicitor General Edilberto Barot and Solicitor
Ceferino Padua for appellees.

In conclusion, we find and hold that the Filipino flag is not an

image that requires religious veneration; rather, it is a symbol of
the Republic of the Philippines, of sovereignty, an emblem of
freedom, liberty and national unity; that the flag salute is not a
religious ceremony but an act and profession of love and
allegiance and pledge of loyalty to the fatherland which the flag
stands for; that by the authority of the Legislature of the
Secretary of Education was duly authorized to promulgate
Department Order No. 8, series of 1955; that the requirement of
observance of the flag ceremony, or salute provided for in said
Department Order No. 8 does not violate the Constitutional
provisions about freedom of religion and exercise of religion;
that compliance with the non-discriminatory and reasonable
rules and regulations and school discipline, including observance
of the flag ceremony, is a prerequisite to attendance in public
schools; and that for failure and refusal to participate in the flag
ceremony, petitioners were properly excluded and dismissed
from the public school they were attending.

REYES, J.B.L., J.:

Appeal by members of the "Jehovah's Witnesses" from a
decision of the Court of First Instance of Capiz, dated June 23,
1958, dismissing their petition for prohibition and mandamus
against the Secretary of Education and the other respondents.
The action was brought to enjoin the enforcement of Department
Order No. 8, s. 1955, issued by the Secretary of Education,
promulgating rules and regulations for the conduct of the
compulsory flag ceremony in all schools, as provided in
Republic Act No. 1265. Petitioners appellants assail the validity
of the above Department Order, for it allegedly denies them
freedom of worship and of speech guaranteed by the Bill of
Rights; that it denies them due process of law and the equal
protection of the laws; and that it unduly restricts their rights in
the upbringing of their children. Since the brief for the
petitioners-appellants assails Republic Act No. 1265 only as
construed and applied, the issue ultimately boils down the
validity of Department Order No. 8, s. 1955, which promulgated
the rules and regulations for the implementation of the law.

However, in their memorandum, petitioners-appellants raise the

new issue that that Department Order No. 8 has no binding force
and effect, not having been published in the Official Gazette as
allegedly required by Commonwealth Act 638, Article 2 of the
New Civil Code, and Section 11 of the Revised Administrative
Code. We see no merit in this contention. The assailed
Department Order, being addressed only to the Directors of
Public and Private Schools, and educational institutions under
their supervision, can not be said to be of general application.

This case, therefore, is on all fours with Gerona, et al., vs.

Secretary of Education, et al., 106 Phil., 2; 57 Off. Gaz., (5) 820,

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53

Moreover, as observed in People vs. QuePo Lay, 94 Phil., 640;

50 Off. Gaz., (10) 4850 (affirmed in Lim Hoa Ting vs. Central
Bank, 104 Phil., 573; 55 Off. Gaz., [6] 1006),

supra,
... for their failure or refusal to obey school regulations about the
flag salute, they were not being prosecuted. Neither were they
being criminally prosecuted under threat of penal sanction. If
they choose not to obey the flag salute regulation, they merely
lost the benefits of public education being maintained at the
expense of their fellow citizens, nothing more. Having elected
not to comply with the regulations about the flag salute, they
forfeited their right to attend public schools.

the laws in question (Commonwealth Act 638 and Act 2930) do

not require the publication of the circulars, regulations or notices
therein mentioned in order to become binding and effective. All
that said two laws provide is that laws, regulations, decisions of
the Supreme Court and Court of Appeals, notices and documents
required by law to be published shall be published in the Official
Gazette but said two laws do not say that unless so published
they will be of no force and effect. In other words, said two acts
merely enumerate and make a list of what should be published in
the Official Gazette, presumably, for the guidance of the
different branches of the government issuing the same, and of
the Bureau of Printing.

Finally, appellants contend that Republic Act No. 1265 is

unconstitutional and void for being an undue delegations of
legislative power, "for its failure to lay down any specific and
definite standard by which the Secretary of Education may be
guided in the preparation of those rules and regulations which he
has been authorized to promulgate." With this view we again
disagree. Sections 1 and 2 of the Act read as follows:

It is true, as held in the above cases, that pursuant to Article 2 of

the New Civil Code and Section 11 of the Revised
Administrative Code, statutes or laws shall take effect fifteen
days following the completion of their publication in the Official
Gazette, unless otherwise provided. It is likewise true that
administrative rules and regulations, issued to implement a law,
have the force of law. Nevertheless, the cases cited above
involved circulars of the Central Bank which provided for
penalties for violations thereof and that was the primary factor
that influenced the rationale of those decisions. In the case at
bar, Department Order No. 8 does not provide any penalty
against those pupils or students refusing to participate in the flag
ceremony or otherwise violating the provisions of said order.
Their expulsion was merely the consequence of their failure to
observe school discipline which the school authorities are bound
to maintain. As observed in Gerona vs. Secretary of Education,

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Section 1. All educational institutions shall henceforth, observed

daily flag ceremony, which shall be simple and dignified and
shall include the playing or singing of the Philippine National
Anthem.
Section 2. The Secretary of Education is hereby authorized and
directed to issue or cause to be issued rules and regulations for
the proper conduct of the flag ceremony herein provide.
In our opinion, the requirements above-quoted constitute an
adequate standard, to wit, simplicity and dignity of the flag
ceremony and the singing of the National Anthem specially
when contrasted with other standards heretofore upheld by the
Courts: "public interest"(People vs. Rosenthal, 68 Phil. 328);

54

"public welfare" (Municipality of Cardona vs. Binangonan, 36

Phil. 547); Interest of law and order"(Rubi vs. Provincial Board,
39 Phil., 669; justice and equity and the substantial merits of the
case" (Int. Hardwood vs. Pagil Federation of Labor, 70 Phil.
602); or "adequate and efficient instruction" (P.A.C.U. vs.
Secretary of Education, 97 Phil., 806; 51 Off. Gaz., 6230). That
the Legislature did not specify the details of the flag ceremony is
no objection to the validity of the statute, for all that is required
of it is the laying down of standards and policy that will limit the
discretion of the regulatory agency. To require the statute to
establish in detail the manner of exercise of the delegated power
would be to destroy the administrative flexibility that the
delegation is intended to achieve.

ceremony in all schools.

2. The facts are the same with the Gerona case. It allegedly
denies them freedom of worship and of speech, however, new
issues have been raised this time such as:
a. the department order has no binding force and effect, not
having been published in the Official Gazette; and
b. it is an undue delegation of legislative power
3. The petition was dismissed. Hence, appeal to the SC.
ISSUE/S:

Wherefore, the decision appealed from is affirmed. Costs against

petitioner-appellants.

1. Does it violate freedom of worship and speech?

2. Is it in accordance with the requirements of publication?
3. Is it unconstitutional for being an undue delegation of
legislative power?

Paras, C.J., Padilla, Bautista Angelo, Labrador, Barrera,

Gutierrez David, Paredes, and Dizon, JJ., concur.

RULING:
BALBUNA, ET AL. vs. THE HON. SEC. OF EDUCATION G.R.
No. L-14283 November 29, 1960
REYES, J.B.L., J.
EN BANC

1. Issue on freedom of worship and speech. No.

a. the court maintains that the Filipino flag is not an image that
requires religious veneration; rather, it is a symbol of the
Republic of the Philippines, of sovereignty, an emblem of
freedom, liberty and national unity;

FACTS:
1. Members of the Jehovas Witnesses filed a petition for
prohibition and mandamus before the CFI of Capiz against the
Sec. of Education, et al. It was to prevent the enforcement of
Dept. Order No. 8 issued pursuant to RA 1265 promulgating
rules and regulations for the conduct of the compulsory flag
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b. that the flag salute is not a religious ceremony but an act and
profession of love and allegiance and pledge of loyalty to the
fatherland which the flag stands for;

55

c. that compliance with the non-discriminatory and reasonable

rules and regulations is a prerequisite to attendance in public
schools; and that for failure and refusal to participate in the flag
ceremony, petitioners were properly excluded and dismissed
from the public school they were attending.

they merely lost the benefits of public education being

maintained at the expense of their fellow citizens, nothing more
and having elected not to comply, they forfeited their right to
attend public schools.
3. Issue on undue delegation of legislative power. No.

2. Issue on publication. Yes.

a. the requirements in Sections 1 and 2 of the department order
constitute an adequate standard, to wit, simplicity and dignity of
the flag ceremony and the singing of the National Anthem.

a. Commonwealth Act 638 and Act 2930 do not require the

publication of the circulars, regulations or notices therein
mentioned in order to become binding and effective;

b. that the Legislature did not specify the details of the flag
ceremony is no objection to the validity of the statute, for all that
is required of it is the laying down of standards and policy that
will limit the discretion of the regulatory agency;

b. said two acts merely enumerate and make a list of what

should be published in the Official Gazette, presumably, for the
guidance of the different branches of the government issuing the
same, and of the Bureau of Printing.

c. to require the statute to establish in detail the manner of

exercise of the delegated power would be to destroy the
administrative flexibility that the delegation is intended to
achieve.

c. while it is true that statutes or laws shall take effect fifteen

days after publication in the Official Gazette and it is also true
that administrative rules and regulations have the force of law,
the primary factor for this rationale is that such statutes provided
for penalties for violations thereof.
d. in the case at bar, Department Order No. 8 does not provide
any penalty against those pupils or students refusing to
participate in the flag ceremony or otherwise violating the
provisions of said order; their expulsion was merely the
consequence of their failure to observe school discipline which
the school authorities are bound to maintain.
e. for their failure or refusal to obey school regulations about the
flag salute, they were not being prosecuted under threat of penal
sanction; if they choose not to obey the flag salute regulation,
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56

Constitution vests that power not only in the Supreme Court but
in all Regional Trial Courts.
The principle is relevant in this petition for review on certiorari
of the Decision1 of the Court of Appeals (CA) affirming with
modification that of the RTC in Makati City,2 finding petitioner
Planters Products, Inc. (PPI) liable to private respondent
Fertiphil Corporation (Fertiphil) for the levies it paid under
Letter of Instruction (LOI) No. 1465.
The Facts
Petitioner PPI and private respondent Fertiphil are private
corporations incorporated under Philippine laws.3 They are both
engaged in the importation and distribution of fertilizers,
pesticides and agricultural chemicals.

Republic of the Philippines

SUPREME COURT
Manila

On June 3, 1985, then President Ferdinand Marcos, exercising

his legislative powers, issued LOI No. 1465 which provided,
among others, for the imposition of a capital recovery
component (CRC) on the domestic sale of all grades of
fertilizers in the Philippines.4 The LOI provides:

THIRD DIVISION
G.R. No. 166006

March 14, 2008

PLANTERS PRODUCTS, INC., Petitioner,

vs.
FERTIPHIL CORPORATION, Respondent.

3. The Administrator of the Fertilizer Pesticide Authority to

include in its fertilizer pricing formula a capital contribution
component of not less than P10 per bag. This capital
contribution shall be collected until adequate capital is raised to
make PPI viable. Such capital contribution shall be applied by
FPA to all domestic sales of fertilizers in the Philippines. 5
(Underscoring supplied)

DECISION
REYES, R.T., J.:
THE Regional Trial Courts (RTC) have the authority and
jurisdiction to consider the constitutionality of statutes,
executive orders, presidential decrees and other issuances. The

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Pursuant to the LOI, Fertiphil paid P10 for every bag of fertilizer
it sold in the domestic market to the Fertilizer and Pesticide
57

Authority (FPA). FPA then remitted the amount collected to the

Far East Bank and Trust Company, the depositary bank of PPI.
Fertiphil paid P6,689,144 to FPA from July 8, 1985 to January
24, 1986.6

defendant Planters Product, Inc., ordering the latter to pay the

former:
1) the sum of P6,698,144.00 with interest at 12% from the time
of judicial demand;

After the 1986 Edsa Revolution, FPA voluntarily stopped the

imposition of the P10 levy. With the return of democracy,
Fertiphil demanded from PPI a refund of the amounts it paid
under LOI No. 1465, but PPI refused to accede to the demand.7

2) the sum of P100,000 as attorneys fees;

3) the cost of suit.

Fertiphil filed a complaint for collection and damages 8 against

FPA and PPI with the RTC in Makati. It questioned the
constitutionality of LOI No. 1465 for being unjust,
unreasonable, oppressive, invalid and an unlawful imposition
that amounted to a denial of due process of law.9 Fertiphil
alleged that the LOI solely favored PPI, a privately owned
corporation, which used the proceeds to maintain its monopoly
of the fertilizer industry.

SO ORDERED.11
Ruling that the imposition of the P10 CRC was an exercise of
the States inherent power of taxation, the RTC invalidated the
levy for violating the basic principle that taxes can only be
levied for public purpose, viz.:
It is apparent that the imposition of P10 per fertilizer bag sold in
the country by LOI 1465 is purportedly in the exercise of the
power of taxation. It is a settled principle that the power of
taxation by the state is plenary. Comprehensive and supreme, the
principal check upon its abuse resting in the responsibility of the
members of the legislature to their constituents. However, there
are two kinds of limitations on the power of taxation: the
inherent limitations and the constitutional limitations.

In its Answer,10 FPA, through the Solicitor General, countered

that the issuance of LOI No. 1465 was a valid exercise of the
police power of the State in ensuring the stability of the fertilizer
industry in the country. It also averred that Fertiphil did not
sustain any damage from the LOI because the burden imposed
by the levy fell on the ultimate consumer, not the seller.
RTC Disposition

One of the inherent limitations is that a tax may be levied only

for public purposes:

On November 20, 1991, the RTC rendered judgment in favor of

Fertiphil, disposing as follows:

The power to tax can be resorted to only for a constitutionally

valid public purpose. By the same token, taxes may not be levied
for purely private purposes, for building up of private fortunes,

WHEREFORE, in view of the foregoing, the Court hereby

renders judgment in favor of the plaintiff and against the
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PPI moved for reconsideration but its motion was denied. 13 PPI
then filed a notice of appeal with the RTC but it failed to pay the
requisite appeal docket fee. In a separate but related proceeding,
this Court14 allowed the appeal of PPI and remanded the case to
the CA for proper disposition.

or for the redress of private wrongs. They cannot be levied for

the improvement of private property, or for the benefit, and
promotion of private enterprises, except where the aid is incident
to the public benefit. It is well-settled principle of constitutional
law that no general tax can be levied except for the purpose of
raising money which is to be expended for public use. Funds
cannot be exacted under the guise of taxation to promote a
purpose that is not of public interest. Without such limitation, the
power to tax could be exercised or employed as an authority to
destroy the economy of the people. A tax, however, is not held
void on the ground of want of public interest unless the want of
such interest is clear. (71 Am. Jur. pp. 371-372)

CA Decision
On November 28, 2003, the CA handed down its decision
affirming with modification that of the RTC, with the following
fallo:
IN VIEW OF ALL THE FOREGOING, the decision appealed
from is hereby AFFIRMED, subject to the MODIFICATION
that the award of attorneys fees is hereby DELETED.15

In the case at bar, the plaintiff paid the amount of P6,698,144.00

to the Fertilizer and Pesticide Authority pursuant to the P10 per
bag of fertilizer sold imposition under LOI 1465 which, in turn,
remitted the amount to the defendant Planters Products, Inc. thru
the latters depository bank, Far East Bank and Trust Co. Thus,
by virtue of LOI 1465 the plaintiff, Fertiphil Corporation, which
is a private domestic corporation, became poorer by the amount
of P6,698,144.00 and the defendant, Planters Product, Inc.,
another private domestic corporation, became richer by the
amount of P6,698,144.00.

In affirming the RTC decision, the CA ruled that the lis mota of
the complaint for collection was the constitutionality of LOI No.
1465, thus:
The question then is whether it was proper for the trial court to
exercise its power to judicially determine the constitutionality of
the subject statute in the instant case.

Tested by the standards of constitutionality as set forth in the

afore-quoted jurisprudence, it is quite evident that LOI 1465
insofar as it imposes the amount of P10 per fertilizer bag sold in
the country and orders that the said amount should go to the
defendant Planters Product, Inc. is unlawful because it violates
the mandate that a tax can be levied only for a public purpose
and not to benefit, aid and promote a private enterprise such as
Planters Product, Inc.12

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As a rule, where the controversy can be settled on other grounds,

the courts will not resolve the constitutionality of a law (Lim v.
Pacquing, 240 SCRA 649 [1995]). The policy of the courts is to
avoid ruling on constitutional questions and to presume that the
acts of political departments are valid, absent a clear and
unmistakable showing to the contrary.
However, the courts are not precluded from exercising such
power when the following requisites are obtaining in a
59

controversy before it: First, there must be before the court an

actual case calling for the exercise of judicial review. Second,
the question must be ripe for adjudication. Third, the person
challenging the validity of the act must have standing to
challenge. Fourth, the question of constitutionality must have
been raised at the earliest opportunity; and lastly, the issue of
constitutionality must be the very lis mota of the case (Integrated
Bar of the Philippines v. Zamora, 338 SCRA 81 [2000]).

disputes the court a quos findings arguing that the collections

under LOI 1465 was for the benefit of Planters Foundation,
Incorporated (PFI), a foundation created by law to hold in trust
for millions of farmers, the stock ownership of PPI.
Of the three fundamental powers of the State, the exercise of
police power has been characterized as the most essential,
insistent and the least limitable of powers, extending as it does to
all the great public needs. It may be exercised as long as the
activity or the property sought to be regulated has some
relevance to public welfare (Constitutional Law, by Isagani A.
Cruz, p. 38, 1995 Edition).

Indisputably, the present case was primarily instituted for

collection and damages. However, a perusal of the complaint
also reveals that the instant action is founded on the claim that
the levy imposed was an unlawful and unconstitutional special
assessment. Consequently, the requisite that the constitutionality
of the law in question be the very lis mota of the case is present,
making it proper for the trial court to rule on the constitutionality
of LOI 1465.16

Vast as the power is, however, it must be exercised within the

limits set by the Constitution, which requires the concurrence of
a lawful subject and a lawful method. Thus, our courts have laid
down the test to determine the validity of a police measure as
follows: (1) the interests of the public generally, as distinguished
from those of a particular class, requires its exercise; and (2) the
means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon
individuals (National Development Company v. Philippine
Veterans Bank, 192 SCRA 257 [1990]).

The CA held that even on the assumption that LOI No. 1465 was
issued under the police power of the state, it is still
unconstitutional because it did not promote public welfare. The
CA explained:
In declaring LOI 1465 unconstitutional, the trial court held that
the levy imposed under the said law was an invalid exercise of
the States power of taxation inasmuch as it violated the inherent
and constitutional prescription that taxes be levied only for
public purposes. It reasoned out that the amount collected under
the levy was remitted to the depository bank of PPI, which the
latter used to advance its private interest.

It is upon applying this established tests that We sustain the trial

courts holding LOI 1465 unconstitutional. To be sure, ensuring
the continued supply and distribution of fertilizer in the country
is an undertaking imbued with public interest. However, the
method by which LOI 1465 sought to achieve this is by no
means a measure that will promote the public welfare. The
governments commitment to support the successful
rehabilitation and continued viability of PPI, a private
corporation, is an unmistakable attempt to mask the subject

On the other hand, appellant submits that the subject statutes

passage was a valid exercise of police power. In addition, it

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60

statutes impartiality. There is no way to treat the self-interest of

a favored entity, like PPI, as identical with the general interest of
the countrys farmers or even the Filipino people in general.
Well to stress, substantive due process exacts fairness and equal
protection disallows distinction where none is needed. When a
statutes public purpose is spoiled by private interest, the use of
police power becomes a travesty which must be struck down for
being an arbitrary exercise of government power. To rule in
favor of appellant would contravene the general principle that
revenues derived from taxes cannot be used for purely private
purposes or for the exclusive benefit of private individuals.17

unpaid portion of the outstanding capital stock of Planters being

hereafter referred to as the Unpaid Capital), and subsequently
for such capital increases as may be required for the continuing
viability of Planters.
The capital recovery component shall be in the minimum
amount of P10 per bag, which will be added to the price of all
domestic sales of fertilizer in the Philippines by any importer
and/or fertilizer mother company. In this connection, the
Republic hereby acknowledges that the advances by Planters to
Planters Foundation which were applied to the payment of the
Planters shares now held in trust by Planters Foundation, have
been assigned to, among others, the Creditors. Accordingly, the
Republic, through FPA, hereby agrees to deposit the proceeds of
the capital recovery component in the special trust account
designated in the notice dated April 2, 1985, addressed by
counsel for the Creditors to Planters Foundation. Such proceeds
shall be deposited by FPA on or before the 15th day of each
month.

The CA did not accept PPIs claim that the levy imposed under
LOI No. 1465 was for the benefit of Planters Foundation, Inc., a
foundation created to hold in trust the stock ownership of PPI.
The CA stated:
Appellant next claims that the collections under LOI 1465 was
for the benefit of Planters Foundation, Incorporated (PFI), a
foundation created by law to hold in trust for millions of
farmers, the stock ownership of PFI on the strength of Letter of
Undertaking (LOU) issued by then Prime Minister Cesar Virata
on April 18, 1985 and affirmed by the Secretary of Justice in an
Opinion dated October 12, 1987, to wit:

The capital recovery component shall continue to be charged and

collected until payment in full of (a) the Unpaid Capital and/or
(b) any shortfall in the payment of the Subsidy Receivables, (c)
any carrying cost accruing from the date hereof on the amounts
which may be outstanding from time to time of the Unpaid
Capital and/or the Subsidy Receivables and (d) the capital
increases contemplated in paragraph 2 hereof. For the purpose of
the foregoing clause (c), the carrying cost shall be at such rate
as will represent the full and reasonable cost to Planters of
servicing its debts, taking into account both its peso and foreign
currency-denominated obligations." (Records, pp. 42-43)

"2. Upon the effective date of this Letter of Undertaking, the

Republic shall cause FPA to include in its fertilizer pricing
formula a capital recovery component, the proceeds of which
will be used initially for the purpose of funding the unpaid
portion of the outstanding capital stock of Planters presently
held in trust by Planters Foundation, Inc. (Planters Foundation),
which unpaid capital is estimated at approximately P206 million
(subject to validation by Planters and Planters Foundation) (such

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Appellants proposition is open to question, to say the least. The

61

LOU issued by then Prime Minister Virata taken together with

the Justice Secretarys Opinion does not preponderantly
demonstrate that the collections made were held in trust in favor
of millions of farmers. Unfortunately for appellant, in the
absence of sufficient evidence to establish its claims, this Court
is constrained to rely on what is explicitly provided in LOI 1465
that one of the primary aims in imposing the levy is to support
the successful rehabilitation and continued viability of PPI.18

HOLD IN TRUST FOR MILLIONS OF FARMERS THEIR

STOCK OWNERSHIP IN PPI CONSTITUTES A VALID
LEGISLATION PURSUANT TO THE EXERCISE OF
TAXATION AND POLICE POWER FOR PUBLIC
PURPOSES.
III
THE AMOUNT COLLECTED UNDER THE CAPITAL
RECOVERY COMPONENT WAS REMITTED TO THE
GOVERNMENT, AND BECAME GOVERNMENT FUNDS
PURSUANT TO AN EFFECTIVE AND VALIDLY ENACTED
LAW WHICH IMPOSED DUTIES AND CONFERRED
RIGHTS BY VIRTUE OF THE PRINCIPLE OF "OPERATIVE
FACT"
PRIOR
TO
ANY
DECLARATION
OF
UNCONSTITUTIONALITY OF LOI 1465.

PPI moved for reconsideration but its motion was denied. 19 It

then filed the present petition with this Court.
Issues
Petitioner PPI raises four issues for Our consideration, viz.:
I

IV

THE CONSTITUTIONALITY OF LOI 1465 CANNOT BE

COLLATERALLY ATTACKED AND BE DECREED VIA A
DEFAULT JUDGMENT IN A CASE FILED FOR
COLLECTION AND DAMAGES WHERE THE ISSUE OF
CONSTITUTIONALITY IS NOT THE VERY LIS MOTA OF
THE CASE. NEITHER CAN LOI 1465 BE CHALLENGED
BY ANY PERSON OR ENTITY WHICH HAS NO STANDING
TO DO SO.

THE PRINCIPLE OF UNJUST VEXATION (SHOULD BE

ENRICHMENT) FINDS NO APPLICATION IN THE
INSTANT CASE.20 (Underscoring supplied)
Our Ruling
We shall first tackle the procedural issues of locus standi and the
jurisdiction of the RTC to resolve constitutional issues.

II
Fertiphil has locus standi because it suffered direct injury;
doctrine of standing is a mere procedural technicality which may
be waived.

LOI 1465, BEING A LAW IMPLEMENTED FOR THE

PURPOSE OF ASSURING THE FERTILIZER SUPPLY AND
DISTRIBUTION IN THE COUNTRY, AND FOR
BENEFITING A FOUNDATION CREATED BY LAW TO
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PPI argues that Fertiphil has no locus standi to question the

constitutionality of LOI No. 1465 because it does not have a
"personal and substantial interest in the case or will sustain
direct injury as a result of its enforcement." 21 It asserts that
Fertiphil did not suffer any damage from the CRC imposition
because "incidence of the levy fell on the ultimate consumer or
the farmers themselves, not on the seller fertilizer company."22

interest" rule for private suits under Section 2, Rule 3 of the

1997 Rules of Civil Procedure.26
Recognizing that a strict application of the "direct injury" test
may hamper public interest, this Court relaxed the requirement
in cases of "transcendental importance" or with "far reaching
implications." Being a mere procedural technicality, it has also
been held that locus standi may be waived in the public
interest.27

We cannot agree. The doctrine of locus standi or the right of

appearance in a court of justice has been adequately discussed
by this Court in a catena of cases. Succinctly put, the doctrine
requires a litigant to have a material interest in the outcome of a
case. In private suits, locus standi requires a litigant to be a "real
party in interest," which is defined as "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."23

Whether or not the complaint for collection is characterized as a

private or public suit, Fertiphil has locus standi to file it.
Fertiphil suffered a direct injury from the enforcement of LOI
No. 1465. It was required, and it did pay, theP10 levy imposed
for every bag of fertilizer sold on the domestic market. It may be
true that Fertiphil has passed some or all of the levy to the
ultimate consumer, but that does not disqualify it from attacking
the constitutionality of the LOI or from seeking a refund. As
seller, it bore the ultimate burden of paying the levy. It faced the
possibility of severe sanctions for failure to pay the levy. The
fact of payment is sufficient injury to Fertiphil.

In public suits, this Court recognizes the difficulty of applying

the doctrine especially when plaintiff asserts a public right on
behalf of the general public because of conflicting public policy
issues. 24 On one end, there is the right of the ordinary citizen to
petition the courts to be freed from unlawful government
intrusion and illegal official action. At the other end, there is the
public policy precluding excessive judicial interference in
official acts, which may unnecessarily hinder the delivery of
basic public services.

Moreover, Fertiphil suffered harm from the enforcement of the

LOI because it was compelled to factor in its product the levy.
The levy certainly rendered the fertilizer products of Fertiphil
and other domestic sellers much more expensive. The harm to
their business consists not only in fewer clients because of the
increased price, but also in adopting alternative corporate
strategies to meet the demands of LOI No. 1465. Fertiphil and
other fertilizer sellers may have shouldered all or part of the levy
just to be competitive in the market. The harm occasioned on the
business of Fertiphil is sufficient injury for purposes of locus
standi.

In this jurisdiction, We have adopted the "direct injury test" to

determine locus standi in public suits. In People v. Vera,25 it was
held that a person who impugns the validity of a statute must
have "a personal and substantial interest in the case such that he
has sustained, or will sustain direct injury as a result." The
"direct injury test" in public suits is similar to the "real party in

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63

Even assuming arguendo that there is no direct injury, We find

that the liberal policy consistently adopted by this Court on locus
standi must apply. The issues raised by Fertiphil are of
paramount public importance. It involves not only the
constitutionality of a tax law but, more importantly, the use of
taxes for public purpose. Former President Marcos issued LOI
No. 1465 with the intention of rehabilitating an ailing private
company. This is clear from the text of the LOI. PPI is expressly
named in the LOI as the direct beneficiary of the levy. Worse,
the levy was made dependent and conditional upon PPI
becoming financially viable. The LOI provided that "the capital
contribution shall be collected until adequate capital is raised to
make PPI viable."

adequately pleaded in its complaint. It claims that the

constitutionality of LOI No. 1465 is the very lis mota of the case
because the trial court cannot determine its claim without
resolving the issue.30
It is settled that the RTC has jurisdiction to resolve the
constitutionality of a statute, presidential decree or an executive
order. This is clear from Section 5, Article VIII of the 1987
Constitution, which provides:
SECTION 5. The Supreme Court shall have the following
powers:
xxxx

The constitutionality of the levy is already in doubt on a plain

reading of the statute. It is Our constitutional duty to squarely
resolve the issue as the final arbiter of all justiciable
controversies. The doctrine of standing, being a mere procedural
technicality, should be waived, if at all, to adequately thresh out
an important constitutional issue.

(2) Review, revise, reverse, modify, or affirm on appeal or

certiorari, as the law or the Rules of Court may provide,final
judgments and orders of lower courts in:
(a) All cases in which the constitutionality or validity of any
treaty, international or executive agreement, law, presidential
decree, proclamation, order, instruction, ordinance, or regulation
is in question. (Underscoring supplied)

RTC may resolve constitutional issues; the constitutional issue

was adequately raised in the complaint; it is the lis mota of the
case.

In Mirasol v. Court of Appeals,31 this Court recognized the

power of the RTC to resolve constitutional issues, thus:

PPI insists that the RTC and the CA erred in ruling on the
constitutionality of the LOI. It asserts that the constitutionality of
the LOI cannot be collaterally attacked in a complaint for
collection.28 Alternatively, the resolution of the constitutional
issue is not necessary for a determination of the complaint for
collection.29

On the first issue. It is settled that Regional Trial Courts have the
authority and jurisdiction to consider the constitutionality of a
statute, presidential decree, or executive order. The Constitution
vests the power of judicial review or the power to declare a law,
treaty, international or executive agreement, presidential decree,
order, instruction, ordinance, or regulation not only in this Court,

Fertiphil counters that the constitutionality of the LOI was

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64

but in all Regional Trial Courts.32

complaint allege:

In the recent case of Equi-Asia Placement, Inc. v. Department of

Foreign Affairs,33 this Court reiterated:

6. The CRC of P10 per bag levied under LOI 1465 on domestic
sales of all grades of fertilizer in the Philippines, isunlawful,
unjust, uncalled for, unreasonable, inequitable and oppressive
because:

There is no denying that regular courts have jurisdiction over

cases involving the validity or constitutionality of a rule or
regulation issued by administrative agencies. Such jurisdiction,
however, is not limited to the Court of Appeals or to this Court
alone for even the regional trial courts can take cognizance of
actions assailing a specific rule or set of rules promulgated by
administrative bodies. Indeed, the Constitution vests the power
of judicial review or the power to declare a law, treaty,
international or executive agreement, presidential decree, order,
instruction, ordinance, or regulation in the courts, including the
regional trial courts.34

xxxx
(c) It favors only one private domestic corporation, i.e.,
defendant PPPI, and imposed at the expense and disadvantage of
the other fertilizer importers/distributors who were themselves in
tight business situation and were then exerting all efforts and
maximizing management and marketing skills to remain viable;
xxxx

Judicial review of official acts on the ground of

unconstitutionality may be sought or availed of through any of
the actions cognizable by courts of justice, not necessarily in a
suit for declaratory relief. Such review may be had in criminal
actions, as in People v. Ferrer35 involving the constitutionality of
the now defunct Anti-Subversion law, or in ordinary actions, as
in Krivenko v. Register of Deeds36 involving the constitutionality
of laws prohibiting aliens from acquiring public lands. The
constitutional issue, however, (a) must be properly raised and
presented in the case, and (b) its resolution is necessary to a
determination of the case, i.e., the issue of constitutionality must
be the very lis mota presented.37

(e) It was a glaring example of crony capitalism, a forced

program through which the PPI, having been presumptuously
masqueraded as "the" fertilizer industry itself, was the sole and
anointed beneficiary;
7. The CRC was an unlawful; and unconstitutional special
assessment and its imposition is tantamount to illegal exaction
amounting to a denial of due process since the persons of entities
which had to bear the burden of paying the CRC derived no
benefit therefrom; that on the contrary it was used by PPI in
trying to regain its former despicable monopoly of the fertilizer
industry to the detriment of other distributors and importers. 38
(Underscoring supplied)

Contrary to PPIs claim, the constitutionality of LOI No. 1465

was properly and adequately raised in the complaint for
collection filed with the RTC. The pertinent portions of the

ADMIN LAW

The constitutionality of LOI No. 1465 is also the very lis mota
of the complaint for collection. Fertiphil filed the complaint to
65

compel PPI to refund the levies paid under the statute on the
ground that the law imposing the levy is unconstitutional. The
thesis is that an unconstitutional law is void. It has no legal
effect. Being void, Fertiphil had no legal obligation to pay the
levy. Necessarily, all levies duly paid pursuant to an
unconstitutional law should be refunded under the civil code
principle against unjust enrichment. The refund is a mere
consequence of the law being declared unconstitutional. The
RTC surely cannot order PPI to refund Fertiphil if it does not
declare the LOI unconstitutional. It is the unconstitutionality of
the LOI which triggers the refund. The issue of constitutionality
is the very lis mota of the complaint with the RTC.

Police power and the power of taxation are inherent powers of

the State. These powers are distinct and have different tests for
validity. Police power is the power of the State to enact
legislation that may interfere with personal liberty or property in
order to promote the general welfare,39 while the power of
taxation is the power to levy taxes to be used for public purpose.
The main purpose of police power is the regulation of a behavior
or conduct, while taxation is revenue generation. The "lawful
subjects" and "lawful means" tests are used to determine the
validity of a law enacted under the police power.40 The power of
taxation, on the other hand, is circumscribed by inherent and
constitutional limitations.

The P10 levy under LOI No. 1465 is an exercise of the power of
taxation.

We agree with the RTC that the imposition of the levy was an
exercise by the State of its taxation power. While it is true that
the power of taxation can be used as an implement of police
power,41 the primary purpose of the levy is revenue generation.
If the purpose is primarily revenue, or if revenue is, at least, one
of the real and substantial purposes, then the exaction is properly
called a tax.42

At any rate, the Court holds that the RTC and the CA did not err
in ruling against the constitutionality of the LOI.
PPI insists that LOI No. 1465 is a valid exercise either of the
police power or the power of taxation. It claims that the LOI was
implemented for the purpose of assuring the fertilizer supply and
distribution in the country and for benefiting a foundation
created by law to hold in trust for millions of farmers their stock
ownership in PPI.

In Philippine Airlines, Inc. v. Edu,43 it was held that the

imposition of a vehicle registration fee is not an exercise by the
State of its police power, but of its taxation power, thus:
It is clear from the provisions of Section 73 of Commonwealth
Act 123 and Section 61 of the Land Transportation and Traffic
Code that the legislative intent and purpose behind the law
requiring owners of vehicles to pay for their registration is
mainly to raise funds for the construction and maintenance of
highways and to a much lesser degree, pay for the operating
expenses of the administering agency. x x x Fees may be
properly regarded as taxes even though they also serve as an

Fertiphil counters that the LOI is unconstitutional because it was

enacted to give benefit to a private company. The levy was
imposed to pay the corporate debt of PPI. Fertiphil also argues
that, even if the LOI is enacted under the police power, it is still
unconstitutional because it did not promote the general welfare
of the people or public interest.

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66

instrument of regulation.

Taxes are exacted only for a public purpose. The P10 levy is
unconstitutional because it was not for a public purpose. The
levy was imposed to give undue benefit to PPI.

Taxation may be made the implement of the state's police power

(Lutz v. Araneta, 98 Phil. 148). If the purpose is primarily
revenue, or if revenue is, at least, one of the real and substantial
purposes, then the exaction is properly called a tax. Such is the
case of motor vehicle registration fees. The same provision
appears as Section 59(b) in the Land Transportation Code. It is
patent therefrom that the legislators had in mind a regulatory tax
as the law refers to the imposition on the registration, operation
or ownership of a motor vehicle as a "tax or fee." x x x Simply
put, if the exaction under Rep. Act 4136 were merely a
regulatory fee, the imposition in Rep. Act 5448 need not be an
"additional" tax. Rep. Act 4136 also speaks of other "fees" such
as the special permit fees for certain types of motor vehicles
(Sec. 10) and additional fees for change of registration (Sec. 11).
These are not to be understood as taxes because such fees are
very minimal to be revenue-raising. Thus, they are not
mentioned by Sec. 59(b) of the Code as taxes like the motor
vehicle registration fee and chauffeurs license fee. Such fees are
to go into the expenditures of the Land Transportation
Commission as provided for in the last proviso of Sec. 61. 44
(Underscoring supplied)

An inherent limitation on the power of taxation is public

purpose. Taxes are exacted only for a public purpose. They
cannot be used for purely private purposes or for the exclusive
benefit of private persons.46 The reason for this is simple. The
power to tax exists for the general welfare; hence, implicit in its
power is the limitation that it should be used only for a public
purpose. It would be a robbery for the State to tax its citizens
and use the funds generated for a private purpose. As an old
United States case bluntly put it: "To lay with one hand, the
power of the government on the property of the citizen, and with
the other to bestow it upon favored individuals to aid private
enterprises and build up private fortunes, is nonetheless a
robbery because it is done under the forms of law and is called
taxation."47
The term "public purpose" is not defined. It is an elastic concept
that can be hammered to fit modern standards. Jurisprudence
states that "public purpose" should be given a broad
interpretation. It does not only pertain to those purposes which
are traditionally viewed as essentially government functions,
such as building roads and delivery of basic services, but also
includes those purposes designed to promote social justice.
Thus, public money may now be used for the relocation of
illegal settlers, low-cost housing and urban or agrarian reform.

The P10 levy under LOI No. 1465 is too excessive to serve a
mere regulatory purpose. The levy, no doubt, was a big burden
on the seller or the ultimate consumer. It increased the price of a
bag of fertilizer by as much as five percent. 45 A plain reading of
the LOI also supports the conclusion that the levy was for
revenue generation. The LOI expressly provided that the levy
was imposed "until adequate capital is raised to make PPI
viable."

ADMIN LAW

While the categories of what may constitute a public purpose are

continually expanding in light of the expansion of government
functions, the inherent requirement that taxes can only be
exacted for a public purpose still stands. Public purpose is the

67

heart of a tax law. When a tax law is only a mask to exact funds
from the public when its true intent is to give undue benefit and
advantage to a private enterprise, that law will not satisfy the
requirement of "public purpose."

was conditional and dependent upon PPI becoming financially

"viable." This suggests that the levy was actually imposed to
benefit PPI. The LOI notably does not fix a maximum amount
when PPI is deemed financially "viable." Worse, the liability of
Fertiphil and other domestic sellers of fertilizer to pay the levy is
made indefinite. They are required to continuously pay the levy
until adequate capital is raised for PPI.

The purpose of a law is evident from its text or inferable from

other secondary sources. Here, We agree with the RTC and that
CA that the levy imposed under LOI No. 1465 was not for a
public purpose.

Third, the RTC and the CA held that the levies paid under the
LOI were directly remitted and deposited by FPA to Far East
Bank and Trust Company, the depositary bank of PPI. 49 This
proves that PPI benefited from the LOI. It is also proves that the
main purpose of the law was to give undue benefit and
advantage to PPI.

First, the LOI expressly provided that the levy be imposed to

benefit PPI, a private company. The purpose is explicit from
Clause 3 of the law, thus:
3. The Administrator of the Fertilizer Pesticide Authority to
include in its fertilizer pricing formula a capital contribution
component of not less than P10 per bag. This capital
contribution shall be collected until adequate capital is raised to
make PPI viable. Such capital contribution shall be applied by
FPA to all domestic sales of fertilizers in the Philippines. 48
(Underscoring supplied)

Fourth, the levy was used to pay the corporate debts of PPI. A
reading of the Letter of Understanding 50 dated May 18, 1985
signed by then Prime Minister Cesar Virata reveals that PPI was
in deep financial problem because of its huge corporate debts.
There were pending petitions for rehabilitation against PPI
before the Securities and Exchange Commission. The
government guaranteed payment of PPIs debts to its foreign
creditors. To fund the payment, President Marcos issued LOI
No. 1465. The pertinent portions of the letter of understanding
read:

It is a basic rule of statutory construction that the text of a statute

should be given a literal meaning. In this case, the text of the
LOI is plain that the levy was imposed in order to raise capital
for PPI. The framers of the LOI did not even hide the insidious
purpose of the law. They were cavalier enough to name PPI as
the ultimate beneficiary of the taxes levied under the LOI. We
find it utterly repulsive that a tax law would expressly name a
private company as the ultimate beneficiary of the taxes to be
levied from the public. This is a clear case of crony capitalism.

Republic of the Philippines

Office of the Prime Minister
Manila
LETTER OF UNDERTAKING

Second, the LOI provides that the imposition of the P10 levy

ADMIN LAW

May 18, 1985

68

TO: THE BANKING AND FINANCIAL INSTITUTIONS

LISTED IN ANNEX A HERETO WHICH ARE
CREDITORS (COLLECTIVELY, THE "CREDITORS")
OF PLANTERS PRODUCTS, INC. ("PLANTERS")

2. Upon the effective date of this Letter of Undertaking, the

Republic shall cause FPA to include in its fertilizer pricing
formula a capital recovery component, the proceeds of which
will be used initially for the purpose of funding the unpaid
portion of the outstanding capital stock of Planters presently
held in trust by Planters Foundation, Inc. ("Planters
Foundation"), which unpaid capital is estimated at
approximately P206 million (subject to validation by Planters
and Planters Foundation) such unpaid portion of the outstanding
capital stock of Planters being hereafter referred to as the
"Unpaid Capital"), and subsequently for such capital increases as
may be required for the continuing viability of Planters.

Gentlemen:
This has reference to Planters which is the principal importer
and distributor of fertilizer, pesticides and agricultural chemicals
in the Philippines. As regards Planters, the Philippine
Government confirms its awareness of the following: (1) that
Planters has outstanding obligations in foreign currency and/or
pesos, to the Creditors, (2) that Planters is currently experiencing
financial difficulties, and (3) that there are presently pending
with the Securities and Exchange Commission of the Philippines
a petition filed at Planters own behest for the suspension of
payment of all its obligations, and a separate petition filed by
Manufacturers Hanover Trust Company, Manila Offshore
Branch for the appointment of a rehabilitation receiver for
Planters.

xxxx
The capital recovery component shall continue to be charged and
collected until payment in full of (a) the Unpaid Capital and/or
(b) any shortfall in the payment of the Subsidy Receivables, (c)
any carrying cost accruing from the date hereof on the amounts
which may be outstanding from time to time of the Unpaid
Capital and/or the Subsidy Receivables, and (d) the capital
increases contemplated in paragraph 2 hereof. For the purpose of
the foregoing clause (c), the "carrying cost" shall be at such rate
as will represent the full and reasonable cost to Planters of
servicing its debts, taking into account both its peso and foreign
currency-denominated obligations.

In connection with the foregoing, the Republic of the Philippines

(the "Republic") confirms that it considers and continues to
consider Planters as a major fertilizer distributor. Accordingly,
for and in consideration of your expressed willingness to
consider and participate in the effort to rehabilitate Planters, the
Republic hereby manifests its full and unqualified support of the
successful rehabilitation and continuing viability of Planters, and
to that end, hereby binds and obligates itself to the creditors and
Planters, as follows:

REPUBLIC OF THE PHILIPPINES

By:

xxxx

ADMIN LAW

(signed)
CESAR E. A. VIRATA

69

Prime Minister and Minister of Finance51

ensuring the continued supply and distribution of fertilizer in the

country is an undertaking imbued with public interest. However,
the method by which LOI 1465 sought to achieve this is by no
means a measure that will promote the public welfare. The
governments commitment to support the successful
rehabilitation and continued viability of PPI, a private
corporation, is an unmistakable attempt to mask the subject
statutes impartiality. There is no way to treat the self-interest of
a favored entity, like PPI, as identical with the general interest of
the countrys farmers or even the Filipino people in general.
Well to stress, substantive due process exacts fairness and equal
protection disallows distinction where none is needed. When a
statutes public purpose is spoiled by private interest, the use of
police power becomes a travesty which must be struck down for
being an arbitrary exercise of government power. To rule in
favor of appellant would contravene the general principle that
revenues derived from taxes cannot be used for purely private
purposes or for the exclusive benefit of private individuals.
(Underscoring supplied)

It is clear from the Letter of Understanding that the levy was

imposed precisely to pay the corporate debts of PPI. We cannot
agree with PPI that the levy was imposed to ensure the stability
of the fertilizer industry in the country. The letter of
understanding and the plain text of the LOI clearly indicate that
the levy was exacted for the benefit of a private corporation.
All told, the RTC and the CA did not err in holding that the levy
imposed under LOI No. 1465 was not for a public purpose. LOI
No. 1465 failed to comply with the public purpose requirement
for tax laws.
The LOI is still unconstitutional even if enacted under the police
power; it did not promote public interest.
Even if We consider LOI No. 1695 enacted under the police
power of the State, it would still be invalid for failing to comply
with the test of "lawful subjects" and "lawful means."
Jurisprudence states the test as follows: (1) the interest of the
public generally, as distinguished from those of particular class,
requires its exercise; and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals.52

The general rule is that an unconstitutional law is void; the

doctrine of operative fact is inapplicable.
PPI also argues that Fertiphil cannot seek a refund even if LOI
No. 1465 is declared unconstitutional. It banks on the doctrine of
operative fact, which provides that an unconstitutional law has
an effect before being declared unconstitutional. PPI wants to
retain the levies paid under LOI No. 1465 even if it is
subsequently declared to be unconstitutional.

For the same reasons as discussed, LOI No. 1695 is invalid

because it did not promote public interest. The law was enacted
to give undue advantage to a private corporation. We quote with
approval the CA ratiocination on this point, thus:

We cannot agree. It is settled that no question, issue or argument

will be entertained on appeal, unless it has been raised in the
court a quo.53 PPI did not raise the applicability of the doctrine

It is upon applying this established tests that We sustain the trial

courts holding LOI 1465 unconstitutional.1awphil To be sure,
ADMIN LAW

70

accused in double jeopardy57 or would put in limbo the acts done

by a municipality in reliance upon a law creating it.58

of operative fact with the RTC and the CA. It cannot belatedly
raise the issue with Us in order to extricate itself from the dire
effects of an unconstitutional law.

Here, We do not find anything iniquitous in ordering PPI to

refund the amounts paid by Fertiphil under LOI No. 1465. It
unduly benefited from the levy. It was proven during the trial
that the levies paid were remitted and deposited to its bank
account. Quite the reverse, it would be inequitable and unjust not
to order a refund. To do so would unjustly enrich PPI at the
expense of Fertiphil. Article 22 of the Civil Code explicitly
provides that "every person who, through an act of performance
by another comes into possession of something at the expense of
the latter without just or legal ground shall return the same to
him." We cannot allow PPI to profit from an unconstitutional
law. Justice and equity dictate that PPI must refund the amounts
paid by Fertiphil.

At any rate, We find the doctrine inapplicable. The general rule

is that an unconstitutional law is void. It produces no rights,
imposes no duties and affords no protection. It has no legal
effect. It is, in legal contemplation, inoperative as if it has not
been passed.54 Being void, Fertiphil is not required to pay the
levy. All levies paid should be refunded in accordance with the
general civil code principle against unjust enrichment. The
general rule is supported by Article 7 of the Civil Code, which
provides:
ART. 7. Laws are repealed only by subsequent ones, and their
violation or non-observance shall not be excused by disuse or
custom or practice to the contrary.

WHEREFORE, the petition is DENIED. The Court of Appeals

Decision dated November 28, 2003 is AFFIRMED.

When the courts declare a law to be inconsistent with the

Constitution, the former shall be void and the latter shall govern.

SO ORDERED.
RUBEN T. REYES
Associate Justice

The doctrine of operative fact, as an exception to the general

rule, only applies as a matter of equity and fair play. 55 It nullifies
the effects of an unconstitutional law by recognizing that the
existence of a statute prior to a determination of
unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot
always be erased by a new judicial declaration.56
The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on those who
have relied on the invalid law. Thus, it was applied to a criminal
case when a declaration of unconstitutionality would put the

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71

Planters Products Inc vs Fertiphil Corp G.R. No. 166006

March 14, 2008

exercise of the taxation power of the state. While it is true that

the power to tax can be used as an implement of police power,
the primary purpose of the levy was revenue generation. If the
purpose is primarily revenue, or if revenue is, at least, one of the
real and substantial purposes, then the exaction is properly called
a tax. Police power and the power of taxation are inherent
powers of the State. These powers are distinct and have different
tests for validity. Police power is the power of the State to enact
legislation that may interfere with personal liberty or property in
order to promote the general welfare, while the power of
taxation is the power to levy taxes to be used for public purpose.
The main purpose of police power is the regulation of a behavior
or conduct, while taxation is revenue generation. The "lawful
subjects" and"lawful means" tests are used to determine the
validity of a law enacted under the police power. The power of
taxation, on the other hand, is circumscribed by inherent and
constitutional limitations.

FACTS: Petitioner PPI and respondent Fertiphil are private

corporations incorporated under Philippine laws, both engaged
in the importation and distribution of fertilizers, pesticides and
agricultural chemicals.Marcos issued Letter of Instruction (LOI)
1465, imposing a capital recovery component of Php10.00 per
bag of fertilizer. The levy was to continue until adequate capital
was raised to make PPI financially viable. Fertiphil remitted to
the Fertilizer and Pesticide Authority (FPA), which was then
remitted thed epository bank of PPI. Fertiphil paid P6,689,144 to
FPA from 1985 to 1986. After the 1986 Edsa Revolution, FPA
voluntarily stopped the imposition of the P10 levy. Fertiphil
demanded from PPI a refund of the amount it remitted, however
PPI refused. Fertiphil filed a complaint for collection and
damages, questioning the constitutionality of LOI 1465,
claiming that it was unjust,unreasonable, oppressive, invalid and
an unlawful imposition that amounted to a denial of due
process.PPI argues that Fertiphil has no locus standi to question
the constitutionality of LOI No. 1465 because it does not have a
"personal and substantial interest in the case or will sustain
direct injury as a result of its enforcement." It asserts that
Fertiphil did not suffer any damage from the imposition
because"incidence of the levy fell on the ultimate consumer or
the farmers themselves, not on the seller fertilizer company.
ISSUE: Whether or not Fertiphil has locus standi to question the
constitutionality of LOI No. 1465.What is the power of taxation?
RULING: Fertiphil has locus standi because it suffered direct
injury; doctrine of standing is a mere procedural technicality
which may be waived.The imposition of the levy was an

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72

YNARES-SANTIAGO, J.:
Pursuant to its rule-making and regulatory powers, the National
Telecommunications Commission (NTC) issued on June 16,
2000 Memorandum Circular No. 13-6-2000, promulgating rules
and regulations on the billing of telecommunications services.
Among its pertinent provisions are the following:

Republic of the Philippines

SUPREME COURT
Manila

(1) The billing statements shall be received by the subscriber of

the telephone service not later than 30 days from the end of each
billing cycle. In case the statement is received beyond this
period, the subscriber shall have a specified grace period within
which to pay the bill and the public telecommunications entity
(PTEs) shall not be allowed to disconnect the service within the
grace period.

FIRST DIVISION
G.R. No. 151908

August 12, 2003

SMART COMMUNICATIONS, INC. (SMART) and

PILIPINO TELEPHONE CORPORATION (PILTEL),
petitioners,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION
(NTC), respondent.

(2) There shall be no charge for calls that are diverted to a voice
mailbox, voice prompt, recorded message or similar facility
excluding the customer's own equipment.
(3) PTEs shall verify the identification and address of each
purchaser of prepaid SIM cards. Prepaid call cards and SIM
cards shall be valid for at least 2 years from the date of first use.
Holders of prepaid SIM cards shall be given 45 days from the
date the prepaid SIM card is fully consumed but not beyond 2
years and 45 days from date of first use to replenish the SIM
card, otherwise the SIM card shall be rendered invalid. The
validity of an invalid SIM card, however, shall be installed upon
request of the customer at no additional charge except the
presentation of a valid prepaid call card.

x---------------------------------------------------------x
G.R. No. 152063 August 12, 2003
GLOBE TELECOM, INC. (GLOBE) and ISLA
COMMUNICATIONS CO., INC. (ISLACOM), petitioners,
vs.
COURT OF APPEALS (The Former 6th Division) and the
NATIONAL TELECOMMUNICATIONS COMMISSION,
respondents.

ADMIN LAW

(4) Subscribers shall be updated of the remaining value of their

cards before the start of every call using the cards.

73

(5) The unit of billing for the cellular mobile telephone service
whether postpaid or prepaid shall be reduced from 1 minute per
pulse to 6 seconds per pulse. The authorized rates per minute
shall thus be divided by 10.1

d. share all necessary information of stolen cellphone units to all

other CMTS operators in order to prevent the use of stolen
cellphone units; and
e. require all your existing prepaid SIM card customers to
register and present valid identification cards.3

The Memorandum Circular provided that it shall take effect 15

days after its publication in a newspaper of general circulation
and three certified true copies thereof furnished the UP Law
Center. It was published in the newspaper, The Philippine Star,
on June 22, 2000.2 Meanwhile, the provisions of the
Memorandum Circular pertaining to the sale and use of prepaid
cards and the unit of billing for cellular mobile telephone service
took effect 90 days from the effectivity of the Memorandum
Circular.

This was followed by another Memorandum dated October 6,

2000 addressed to all public telecommunications entities, which
reads:
This is to remind you that the validity of all prepaid cards sold
on 07 October 2000 and beyond shall be valid for at least two
(2) years from date of first use pursuant to MC 13-6-2000.

On August 30, 2000, the NTC issued a Memorandum to all

cellular mobile telephone service (CMTS) operators which
contained measures to minimize if not totally eliminate the
incidence of stealing of cellular phone units. The Memorandum
directed CMTS operators to:

In addition, all CMTS operators are reminded that all SIM packs
used by subscribers of prepaid cards sold on 07 October 2000
and beyond shall be valid for at least two (2) years from date of
first use. Also, the billing unit shall be on a six (6) seconds pulse
effective 07 October 2000.

a. strictly comply with Section B(1) of MC 13-6-2000 requiring

the presentation and verification of the identity and addresses of
prepaid SIM card customers;

For strict compliance.4

On October 20, 2000, petitioners Isla Communications Co., Inc.
and Pilipino Telephone Corporation filed against the National
Telecommunications Commission, Commissioner Joseph A.
Santiago, Deputy Commissioner Aurelio M. Umali and Deputy
Commissioner Nestor C. Dacanay, an action for declaration of
nullity of NTC Memorandum Circular No. 13-6-2000 (the
Billing Circular) and the NTC Memorandum dated October 6,
2000, with prayer for the issuance of a writ of preliminary
injunction and temporary restraining order. The complaint was
docketed as Civil Case No. Q-00-42221 at the Regional Trial

b. require all your respective prepaid SIM cards dealers to

comply with Section B(1) of MC 13-6-2000;
c. deny acceptance to your respective networks prepaid and/or
postpaid customers using stolen cellphone units or cellphone
units registered to somebody other than the applicant when
properly informed of all information relative to the stolen
cellphone units;

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74

Court of Quezon City, Branch 77.5

dispositive portion of which reads:

Petitioners Islacom and Piltel alleged, inter alia, that the NTC
has no jurisdiction to regulate the sale of consumer goods such
as the prepaid call cards since such jurisdiction belongs to the
Department of Trade and Industry under the Consumer Act of
the Philippines; that the Billing Circular is oppressive,
confiscatory and violative of the constitutional prohibition
against deprivation of property without due process of law; that
the Circular will result in the impairment of the viability of the
prepaid cellular service by unduly prolonging the validity and
expiration of the prepaid SIM and call cards; and that the
requirements of identification of prepaid card buyers and call
balance announcement are unreasonable. Hence, they prayed
that the Billing Circular be declared null and void ab initio.

WHEREFORE, premises considered, the defendants' motion to

dismiss is hereby denied for lack of merit. The plaintiffs'
application for the issuance of a writ of preliminary injunction is
hereby granted. Accordingly, the defendants are hereby enjoined
from implementing NTC Memorandum Circular 13-6-2000 and
the NTC Memorandum, dated October 6, 2000, pending the
issuance and finality of the decision in this case. The plaintiffs
and intervenors are, however, required to file a bond in the sum
of FIVE HUNDRED THOUSAND PESOS (P500,000.00),
Philippine currency.
SO ORDERED.8
Defendants filed a motion for reconsideration, which was denied
in an Order dated February 1, 2001.9

Soon thereafter, petitioners Globe Telecom, Inc and Smart

Communications, Inc. filed a joint Motion for Leave to
Intervene and to Admit Complaint-in-Intervention.6 This was
granted by the trial court.

Respondent NTC thus filed a special civil action for certiorari

and prohibition with the Court of Appeals, which was docketed
as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was
rendered, the decretal portion of which reads:

On October 27, 2000, the trial court issued a temporary

restraining order enjoining the NTC from implementing
Memorandum Circular No. 13-6-2000 and the Memorandum
dated October 6, 2000.7

WHEREFORE, premises considered, the instant petition for

certiorari and prohibition is GRANTED, in that, the order of the
court a quo denying the petitioner's motion to dismiss as well as
the order of the court a quo granting the private respondents'
prayer for a writ of preliminary injunction, and the writ of
preliminary injunction issued thereby, are hereby ANNULLED
and SET ASIDE. The private respondents' complaint and
complaint-in-intervention below are hereby DISMISSED,
without prejudice to the referral of the private respondents'
grievances and disputes on the assailed issuances of the NTC

In the meantime, respondent NTC and its co-defendants filed a

motion to dismiss the case on the ground of petitioners' failure to
exhaust administrative remedies.
Subsequently, after hearing petitioners' application for
preliminary injunction as well as respondent's motion to dismiss,
the trial court issued on November 20, 2000 an Order, the

ADMIN LAW

75

with the said agency.

D.

SO ORDERED.10

THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING THAT THE PRIVATE RESPONDENTS FAILED
TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT
THE ISSUANCE OF A WRIT OF PRELIMINARY
INJUNCTION.12

Petitioners' motions for reconsideration were denied in a

Resolution dated January 10, 2002 for lack of merit.11
Hence, the instant petition for review filed by Smart and Piltel,
which was docketed as G.R. No. 151908, anchored on the
following grounds:

Likewise, Globe and Islacom filed a petition for review,

docketed as G.R. No. 152063, assigning the following errors:
1. THE HONORABLE COURT OF APPEALS SO GRAVELY
ERRED BECAUSE THE DOCTRINES OF PRIMARY
JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE
REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS
FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL
INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY
ADMINISTRATIVE REGULATION PROMULGATED BY AN
AGENCY IN THE EXERCISE OF ITS RULE MAKING
POWERS AND INVOLVES ONLY QUESTIONS OF LAW.

A.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED
IN
HOLDING
THAT THE
NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC) AND NOT
THE REGULAR COURTS HAS JURISDICTION OVER THE
CASE.
B.

2. THE HONORABLE COURT OF APPEALS SO GRAVELY

ERRED BECAUSE THE DOCTRINE ON EXHAUSTION OF
ADMINISTRATIVE REMEDIES DOES NOT APPLY WHEN
THE QUESTIONS RAISED ARE PURELY LEGAL
QUESTIONS.

THE HONORABLE COURT OF APPEALS ALSO GRAVELY

ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS
FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE
REMEDY.
C.

3. THE HONORABLE COURT OF APPEALS SO GRAVELY

ERRED BECAUSE THE DOCTRINE OF EXHAUSTION OF
ADMINISTRATIVE REMEDIES DOES NOT APPLY WHERE
THE ADMINISTRATIVE ACTION IS COMPLETE AND
EFFECTIVE, WHEN THERE IS NO OTHER REMEDY, AND
THE PETITIONER STANDS TO SUFFER GRAVE AND

THE HONORABLE COURT OF APPEALS ERRED IN NOT

HOLDING THAT THE BILLING CIRCULAR ISSUED BY
THE RESPONDENT NTC IS UNCONSTITUTIONAL AND
CONTRARY TO LAW AND PUBLIC POLICY.

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76

IRREPARABLE INJURY.

purposes of the law, and be not in contradiction to, but in

conformity with, the standards prescribed by law.17 They must
conform to and be consistent with the provisions of the enabling
statute in order for such rule or regulation to be valid.
Constitutional and statutory provisions control with respect to
what rules and regulations may be promulgated by an
administrative body, as well as with respect to what fields are
subject to regulation by it. It may not make rules and regulations
which are inconsistent with the provisions of the Constitution or
a statute, particularly the statute it is administering or which
created it, or which are in derogation of, or defeat, the purpose
of a statute. In case of conflict between a statute and an
administrative order, the former must prevail.18

4. THE HONORABLE COURT OF APPEALS SO GRAVELY

ERRED BECAUSE PETITIONERS IN FACT EXHAUSTED
ALL ADMINISTRATIVE REMEDIES AVAILABLE TO
THEM.
5. THE HONORABLE COURT OF APPEALS SO GRAVELY
ERRED IN ISSUING ITS QUESTIONED RULINGS IN THIS
CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR
RIGHT TO AN INJUNCTION.13
The two petitions were consolidated in a Resolution dated
February 17, 2003.14

Not to be confused with the quasi-legislative or rule-making

power of an administrative agency is its quasi-judicial or
administrative adjudicatory power. This is the power to hear and
determine questions of fact to which the legislative policy is to
apply and to decide in accordance with the standards laid down
by the law itself in enforcing and administering the same law.
The administrative body exercises its quasi-judicial power when
it performs in a judicial manner an act which is essentially of an
executive or administrative nature, where the power to act in
such manner is incidental to or reasonably necessary for the
performance of the executive or administrative duty entrusted to
it. In carrying out their quasi-judicial functions, the
administrative officers or bodies are required to investigate facts
or ascertain the existence of facts, hold hearings, weigh
evidence, and draw conclusions from them as basis for their
official action and exercise of discretion in a judicial nature.19

On March 24, 2003, the petitions were given due course and the
parties were required to submit their respective memoranda.15
We find merit in the petitions.
Administrative agencies possess quasi-legislative or rule-making
powers and quasi-judicial or administrative adjudicatory powers.
Quasi-legislative or rule-making power is the power to make
rules and regulations which results in delegated legislation that
is within the confines of the granting statute and the doctrine of
non-delegability and separability of powers.16
The rules and regulations that administrative agencies
promulgate, which are the product of a delegated legislative
power to create new and additional legal provisions that have the
effect of law, should be within the scope of the statutory
authority granted by the legislature to the administrative agency.
It is required that the regulation be germane to the objects and
ADMIN LAW

In questioning the validity or constitutionality of a rule or

regulation issued by an administrative agency, a party need not

77

exhaust administrative remedies before going to court. This

principle applies only where the act of the administrative agency
concerned was performed pursuant to its quasi-judicial function,
and not when the assailed act pertained to its rule-making or
quasi-legislative power. In Association of Philippine Coconut
Dessicators v. Philippine Coconut Authority,20 it was held:

In like manner, the doctrine of primary jurisdiction applies only

where the administrative agency exercises its quasi-judicial or
adjudicatory function. Thus, in cases involving specialized
disputes, the practice has been to refer the same to an
administrative agency of special competence pursuant to the
doctrine of primary jurisdiction. The courts will not determine a
controversy involving a question which is within the jurisdiction
of the administrative tribunal prior to the resolution of that
question by the administrative tribunal, where the question
demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the
administrative tribunal to determine technical and intricate
matters of fact, and a uniformity of ruling is essential to comply
with the premises of the regulatory statute administered. The
objective of the doctrine of primary jurisdiction is to guide a
court in determining whether it should refrain from exercising its
jurisdiction until after an administrative agency has determined
some question or some aspect of some question arising in the
proceeding before the court. It applies where the claim is
originally cognizable in the courts and comes into play
whenever enforcement of the claim requires the resolution of
issues which, under a regulatory scheme, has been placed within
the special competence of an administrative body; in such case,
the judicial process is suspended pending referral of such issues
to the administrative body for its view.24

The rule of requiring exhaustion of administrative remedies

before a party may seek judicial review, so strenuously urged by
the Solicitor General on behalf of respondent, has obviously no
application here. The resolution in question was issued by the
PCA in the exercise of its rule- making or legislative power.
However, only judicial review of decisions of administrative
agencies made in the exercise of their quasi-judicial function is
subject to the exhaustion doctrine.
Even assuming arguendo that the principle of exhaustion of
administrative remedies apply in this case, the records reveal
that petitioners sufficiently complied with this requirement.
Even during the drafting and deliberation stages leading to the
issuance of Memorandum Circular No. 13-6-2000, petitioners
were able to register their protests to the proposed billing
guidelines. They submitted their respective position papers
setting forth their objections and submitting proposed schemes
for the billing circular.21 After the same was issued, petitioners
wrote successive letters dated July 3, 2000 22 and July 5, 2000,23
asking for the suspension and reconsideration of the so-called
Billing Circular. These letters were not acted upon until October
6, 2000, when respondent NTC issued the second assailed
Memorandum implementing certain provisions of the Billing
Circular. This was taken by petitioners as a clear denial of the
requests contained in their previous letters, thus prompting them
to seek judicial relief.

ADMIN LAW

However, where what is assailed is the validity or

constitutionality of a rule or regulation issued by the
administrative agency in the performance of its quasi-legislative
function, the regular courts have jurisdiction to pass upon the
same. The determination of whether a specific rule or set of rules
issued by an administrative agency contravenes the law or the
constitution is within the jurisdiction of the regular courts.

78

Indeed, the Constitution vests the power of judicial review or the

power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or
regulation in the courts, including the regional trial courts. 25 This
is within the scope of judicial power, which includes the
authority of the courts to determine in an appropriate action the
validity of the acts of the political departments. 26 Judicial power
includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the
Government.27

Court appellate jurisdiction over final judgments and orders of

lower courts in all cases in which the constitutionality or validity
of any treaty, international or executive agreement, law,
presidential decree, proclamation, order, instruction, ordinance,
or regulation is in question.29
In their complaint before the Regional Trial Court, petitioners
averred that the Circular contravened Civil Code provisions on
sales and violated the constitutional prohibition against the
deprivation of property without due process of law. These are
within the competence of the trial judge. Contrary to the finding
of the Court of Appeals, the issues raised in the complaint do not
entail highly technical matters. Rather, what is required of the
judge who will resolve this issue is a basic familiarity with the
workings of the cellular telephone service, including prepaid
SIM and call cards and this is judicially known to be within
the knowledge of a good percentage of our population and
expertise in fundamental principles of civil law and the
Constitution.

In the case at bar, the issuance by the NTC of Memorandum

Circular No. 13-6-2000 and its Memorandum dated October 6,
2000 was pursuant to its quasi-legislative or rule-making power.
As such, petitioners were justified in invoking the judicial power
of the Regional Trial Court to assail the constitutionality and
validity of the said issuances. In Drilon v. Lim,28 it was held:

Hence, the Regional Trial Court has jurisdiction to hear and

decide Civil Case No. Q-00-42221. The Court of Appeals erred
in setting aside the orders of the trial court and in dismissing the
case.

We stress at the outset that the lower court had jurisdiction to

consider the constitutionality of Section 187, this authority being
embraced in the general definition of the judicial power to
determine what are the valid and binding laws by the criterion of
their conformity to the fundamental law. Specifically, B.P. 129
vests in the regional trial courts jurisdiction over all civil cases
in which the subject of the litigation is incapable of pecuniary
estimation, even as the accused in a criminal action has the right
to question in his defense the constitutionality of a law he is
charged with violating and of the proceedings taken against him,
particularly as they contravene the Bill of Rights. Moreover,
Article X, Section 5(2), of the Constitution vests in the Supreme

ADMIN LAW

WHEREFORE, in view of the foregoing, the consolidated

petitions are GRANTED. The decision of the Court of Appeals
in CA-G.R. SP No. 64274 dated October 9, 2001 and its
Resolution dated January 10, 2002 are REVERSED and SET
ASIDE. The Order dated November 20, 2000 of the Regional
Trial Court of Quezon City, Branch 77, in Civil Case No. Q-0042221 is REINSTATED. This case is REMANDED to the court
a quo for continuation of the proceedings.

79

SO ORDERED.

Quasi-judicial or administrative adjudicatory power is the power

to hear and determine questions of fact to which the legislative
policy is to apply and to decide in accordance with the standards
laid down by law itself in enforcing and administering the same
law. In carrying out their quasi-judicial functions, the
administrative officers or bodies are required to investigate facts
or ascertain the existence of facts, hold hearings, weigh
evidence, and draw conclusions from them for their official
action and exercise of discretion in a judicial.

Davide, Jr., C.J., Vitug, and Carpio, JJ., concur.

Azcuna, J., took no part.
QUASI-LEGISLATIVE & QUASI-JUDICIAL POWERS;
RULE ON EXHAUSTION OF ADMINISTRATIVE
REMEDIES;
DOCTRINE
OF
PRIMARY
JURISDICTION;WHEN APPLICABLE
SMART COMMUNICATIONS, INC. ET AL. V.
NATIONAL TELECOMMUNICATIONS COMMISSION
(NTC)
G.R. 151908, August 12, 2003

2. The determination of whether a specific rule or set of rules

issued by an administrative body contravenes the law or the
constitution is within the judicial power as defined by the
Constitution which is the duty of the Courts of justice to settle
actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not
there haw been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or
instrumentality of the Government. The NTC circular was
issued pursuant to its quasi-legislative or rule-making power.
Hence, the action must be filed directly with the regular courts
without requiring exhaustion of administrative remedies.

Facts: The NTC issued Billing Circular 13-6-2000 which

promulgated rules and regulations on the billing of
telecommunications services. Petitioners filed with the RTC a
petition to declare the circular as unconstitutional. A motion to
dismiss was filed by the NTC on the ground of petitioners to
exhaust administrative remedies. The RTC denied the motion to
dismiss but on certiorari, the CA reversed RTC.
Held: 1. Administrative bodies had (a) quasi-legislative or rulemaking powers and (b) quasi-judicial or administrative
adjudicatory powers. Quasi-legislative or rule-making power is
the power to make rules and regulations which results in
delegated legislation that is within the confines of the granting
statute and the doctrine of non-delegability and separability of
powers. To be valid, such rules and regulations must conform to,
and be consistent with, the provisions of enabling statute.

ADMIN LAW

3. Where the act of administrative agency was performed

pursuant to its quasi-judicial function, exhaustion of
administrative remedy is required, before going to court.
4. The doctrine of primary jurisdiction applies only where the
administrative agency exercises its quasi-judicial or adjudicatory
function. Thus, in cases involving specialized disputes, the same
must be referred to an administrative agency of special
80

have jurisdiction to pass upon the same. The determination of

whether a specific rule or set of rules issued by an administrative
agency contravenes the law or the constitution is within the jurisdiction
of the regular courts. Indeed, the Constitution vests the power of
judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order,instruction, ordinance,
or regulation in the courts, including the regional trial courts.This is
within the scope of judicial power, which includes the authority of the
courts to determine in an appropriate action the validity of the acts of
the political departments. Judicial power includes the duty of the
courts of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government.

competence pursuant to the doctrine of primary jurisdiction. This

doctrine of primary jurisdiction applies where the claim requires
the resolution of issues which, under a regulatory scheme, has
been placed within the special competence of an administrative
body. In such case, the judicial process is suspended pending
referral of such issues to the administrative body for its view.

Smart Communications vs NTC G.R. No. 151908 12 August 2003

Facts: Petitioners Isla Communications Co., Inc. and Pilipino
Telephone Corporation filed against the National Telecommunications
Commission, an action for declaration of nullity of NTC Memorandum
Circular No. 13-6-2000 (the Billing Circular). Petitioners allege that the
NTC has no jurisdiction to regulate the sale of consumer goods such
as the prepaid call cards since such jurisdiction belongs to the
Department of Trade and Industry under the Consumer Act of the
Philippines; that the Billing Circular is oppressive, confiscatory and
violative of the constitutional prohibition against deprivation of property
without due process of law; that the Circular will result in the
impairment of the viability of the prepaid cellular service by unduly
prolonging the validity and expiration of the prepaid SIM and call
cards; and that the requirements of identification of prepaid card
buyers and call balance announcement are unreasonable.Hence, they
prayed that the Billing Circular be declared null and void ab initio.

Not to be confused with the quasi-legislative or rule-making power of

an administrative agency is its quasi-judicial or administrative
adjudicatory power.This is the power to hear and determine questions
of fact to which the legislative policy is to apply and to decide in
accordance with the standards laid down by the law itself in enforcing
and administering the same law.
The administrative body exercises its quasi-judicial power when it
performs in a judicial manner an act which is essentially of an
executive or administrative nature, where the power to act in such
manner is incidental to or reasonably necessary for the performance
of the executive or administrative duty entrusted to it. In carrying out
their quasi-judicial functions, the administrative officers or bodies are
required to investigate facts or ascertain the existence of facts, hold
hearings,weigh evidence, and draw conclusions from them as basis
for their official action and exercise of discretion in a judicial nature.

Issue :WON the RTC has jurisdiction over the case

Held: Petitions are granted. The issuance by the NTC of Memorandum
Circular No. 13-6-2000 and its Memorandum dated October 6, 2000
was pursuant to its quasi-legislative or rule-making power. As such,
petitioners were justified in invoking the judicial power of the Regional
Trial Court to assail the constitutionality and validity of the said
issuances. What is assailed is the validity or constitutionality of a
rule or regulation issued by the administrative agency in the
performance of its quasi-legislative function, the regular courts

ADMIN LAW

Republic of the Philippines

SUPREME COURT

81

SECOND DIVISION

investigators from its Quality Control and Inspection

Department (QCID) and Security Division to conduct
surveillance operations in the area. On August 2, 1994, Vidal
Busa, a radio technician, was caught in flagrante delicto while
monitoring an illegally connected overseas call using the radio
facilities of the companys Clark-TMC Radio Room.3

G.R. Nos. 164684-85 November 11, 2005

PHILIPPINE
LONG
DISTANCE
COMPANY, INC., Petitioner,
vs.
ANTONIO Q. TIAMSON, Respondent.

TELEPHONE

The QCID, likewise, requested the Switching Network Division

at PLDTs Sampaloc National Toll Center to print the CAMA4
tape recording of all long distance calls originating from the
PLDT Clark Exchange Traffic
for the period of July 29 to August 2, 1994. The printout
revealed that a total of 469 fraudulent overseas and local calls
were connected and completed at the PLDT Clark-TMC Radio
Room for the said period. Three overseas calls to Saudi Arabia
made on August 1, 1994 were imputed to Tiamson who appeared
to be on duty from 10:00 p.m. to 6:00 a.m.5

DECISION
CALLEJO, SR., J.:
Being questioned in this petition for review on certiorari is the
Decision1 of the Court of Appeals (CA) dated April 16, 2004 in
CA-G.R. SP Nos. 51855 and 52247, and the Resolution dated
July 27, 2004 denying the motion for reconsideration thereof.

The QCID conducted its initial investigation on August 2, 1994,

where Busa readily admitted his involvement in the illegal
connection of overseas calls. In his sworn statement, he
specifically named Arnel Cayanan, his Shift Supervisor, Antonio
Tiamson and Paul Cruzada, both radio technicians, as the other
employees actively engaged in the illegal practice. He stated that
he knew about this because whenever he would relieve them
from their tour of duty, he would see that the circuit was
engaged.6

On April 16, 1986, the Philippine Long Distance Telephone

Company, Inc. (PLDT) employed Antonio Q. Tiamson as a
Radio Technician II (JG4). He was assigned at the companys
North Luzon Toll Network Division, Clark Transmission
Maintenance Center (Clark-TMC) in Pampanga. After the
expiration of the probationary period, he was extended regular
appointment for the same position.
In a Letter2 dated July 29, 1994, Anthony Dy Dee, the President
of the Angeles City Telephone System and Datelcom
Corporation, informed PLDT of his complaint against its
employees assigned in Clark-TMC, stating therein that he
suspected them to be in cohorts with the local subscribers in
effecting illegal overseas calls. Acting on the letter-complaint,
PLDT immediately dispatched a team of inspectors and
ADMIN LAW

On August 3, 1994, during a confrontation between Busa and

Tiamson, the former reiterated his earlier statement that the latter
was involved in the illegal act of connecting overseas calls.7 For
his part, Tiamson admitted that he knew how to make an
overseas call using the companys radio equipment and that he

82

learned how to do so through hands-on experimentation and

intensive reading of operating manuals. He, however, denied
having actually made an illegal connection of overseas calls. He
declared that he knew of the wrongdoings of Busa and even
disconnected the latters overseas telephone calls whenever he
(Tiamson) was on duty. Tiamson claimed that he failed to report
the actuations of Busa because the latter was his supervisor and
was afraid to antagonize him.8

scam was complained and notified by Mr. A. Dy to Mrs. B. G.

Gendrano Clark Exchange Division Head on July 26, 1994.
3. The complainant requested assistance to NBI and PLDT QCI
to apprehend the personnel responsible for the illegal
connection.
4. A clue was provided by Mr. Anthony Dy that the illegal
overseas call was coming from Clark-TMC through taped and
equipment monitoring.

On August 5, 1994, there was another confrontation proceeding

between Busa, Tiamson, Cruzada and Cayanan. In their sworn
statements, Busa and Cruzada testified that, sometimes when
they relieve Cayanan from his duty, they would discover an
illegal connection and an on-going conversation in the line.9
Tiamson maintained that he disconnected the illegal calls of
Busa, while Cayanan implicated his subordinates.

5. In the QCI investigation, you were implicated by your fellow

Radio Technician Mr. Vidal C. Busa as involved in the case. You
admitted you know how to operate the Lenkurt 26600 Signalling
Test Set to initiate a call but denied doing it for personal gain or
interest but you failed to report the anomaly to your superior as
one of your supervisors was involved in the fraudulent case.

The QCID recommended that administrative action for serious

misconduct be instituted against the said employees.
Consequently, the company issued to Tiamson an Inter-Office
Memorandum dated August 12, 1994, charging him with
violation of the companys disciplinary rules and regulations. He
was, likewise, required to explain within 72 hours why he should
not be dismissed, thus:

The acts described above are in violation of the Companys rules

and regulations and is punishable with dismissal from the
service.
In view of the above, please explain in writing within 72 hours
from receipt hereof why you should not be dismissed from the
service for the acts described above. You may elect to be heard if
you so desire. 10

Investigation of the complaint indicated hereunder disclosed

that:

Meanwhile, Tiamson was placed under preventive suspension on

August 16, 1994.11

1. Complainant Mr. Anthony Dy, President DATELCOM

Corp.

On August 18, 1994, Tiamson submitted his written explanation

denying any participation in the illegal activities at PLDTs
Clark-TMC. He averred that Busas statement against him was

2. The decrease of toll revenue for DATELCOM

Angeles/Mabalacat Exchange due to fraudulent overseas call

ADMIN LAW

83

SO ORDERED.14

malicious and untrue and that he was the one relieving Busa
from his tour of duty and not the other way around. He insisted
that on August 1, 1994, his tour of duty was from 6:00 a.m. to
10:00 p.m.12

The Labor Arbiter declared that the complainant could not have
made any illegal connection on August 1, 1994 from 10:00 p.m.
to 6:00 a.m. because he was off-duty.

PLDT found his explanation unsatisfactory and inadequate in

substance. Thus, it issued an Inter-Office Memo13dated October
5, 1994, terminating Tiamsons employment effective October 7,
1994 on the ground of serious misconduct and/or fraud.

PLDT elevated the case to the National Labor Relations

Commission (NLRC). On August 31, 1998, the NLRC ruled that
while there was just cause for Tiamsons dismissal, the penalty
of dismissal was too harsh. Hence, the NLRC ordered that
Tiamson be reinstated to his former position without loss of
seniority rights, but without backwages.15

Tiamson filed a complaint against PLDT for illegal suspension,

illegal dismissal, damages and other monetary claims, docketed
as NLRC Case No. RAB-III-07-6414-95.

Both parties moved to reconsider the decision, but the NLRC

denied the motions for lack of merit.16

The Labor Arbiter resolved the case in favor of Tiamson:

WHEREFORE, premises considered, judgment is hereby
rendered declaring respondent PLDT guilty of illegal dismissal
and it is hereby ordered to reinstate complainant to his former
position without loss of seniority rights and with full backwages
reckoned from the date of his dismissal up to his actual or
payroll reinstatement at the option of the respondent, which as of
this date is in the amount of Three Hundred Seventy-Two
Thousand Eight Hundred Twenty-Five and 32/100
(P372,825.32) Pesos.

PLDT filed a petition for certiorari before the CA, assailing the
NLRCs order of reinstatement despite a categorical finding that
Tiamson was guilty of illegal connection of overseas calls. The
petition was docketed as CA-G.R. SP No. 51855. Tiamson filed
a similar petition, assailing the deletion of the award of
backwages and attorneys fees. This was docketed as CA-G.R.
SP No. 52247. The CA, thereafter, ordered the consolidation of
the two petitions.
On April 16, 2004, the CA reinstated the decision of the Labor
Arbiter, thus:

Further, respondent is ordered to pay complainant attorneys fee

in the amount of Thirty-Seven Thousand Two Hundred EightyTwo and 53/100 (P37,282.53) Pesos.

WHEREFORE, the petition by the PLDT under CA-G.R. SP

No. 51855 is DENIED DUE COURSE and DISMISSEDwhile
the petition by Antonio Tiamson under CA-G.R. SP No. 52247 is
GIVEN DUE COURSE and GRANTED, and the Decision
dated October 15, 1997 of the Labor Arbiter which was set aside

The claims for moral and exemplary damages are dismissed for
lack of evidence.

ADMIN LAW

84

by the NLRC, is herebyREINSTATED in its fullness and

without modifications.

evidence to prove that the respondent was involved in the illegal

connection of overseas calls. The petitioner avers that the CA
erred in holding that Busas sworn statement was not credible.
According to the CA, it would have been impossible for Busa to
see the respondent making an illegal connection since his tour of
duty preceded that of the respondent. The petitioner, however,
asserts that there was a rotation of the employees tour of duty
such that, at times, it was Busa who would take over from the
respondent; hence, Busa had the occasion to personally see the
respondent connecting illegal calls. In support of this, the
petitioner proffers the copy of logbook entries from July 13 to
August 3, 1994, which was attached to its Memorandum of
Appeal filed with the NLRC. The logbook shows that on several
occasions, it was Busa who took over from the respondent.22

SO ORDERED.17
The CA held that Busas sworn statement was not worthy of
credence, a mere afterthought, the contents of which were
seriously flawed. The appellate court found it difficult to believe
Busas assertion that, on several occasions when he came to
relieve the respondent, a circuit was in use which the latter
would turn off before leaving. In this regard, the appellate court
noted that Busas work shift preceded that of the respondent,
such that it would be impossible for him to see the respondent
make an illegal connection.18

The petitioner further asserts that the respondent failed to show

that Busa was actuated and impelled by improper motive and
bad faith in executing his sworn statement.23 The records show
that Busa, from the very start, had categorically and
unequivocally named the respondent as one of those engaged in
the illegal connection of overseas calls.24 Moreover, Busas
sworn statement had been corroborated by the printout of the
CAMA tapes (which disclosed that during the respondents
August 1, 1994 duty, three fraudulent calls to Saudi Arabia were
illegally made),25 as well as Cayanans sworn statement
implicating the respondent.26

The CA likewise opined that the respondent was denied due

process when he was not apprised of nor given the opportunity
to confute the charge that during his duty on August 1, 1994,
three overseas calls to Saudi Arabia were recorded in the CAMA
tape.19
The petitioner timely filed a motion for reconsideration, which
the CA denied in its Resolution20 dated July 27, 2004.
The petitioner now comes before this Court, alleging that:
THE COURT OF APPEALS COMMITTED SERIOUS
ERROR IN REINSTATING THE DECISION OF THE
ARBITER A QUO AS SAID DECISION WAS NOT IN
ACCORD WITH LAW AND CONTRARY TO THE
EVIDENCE ON RECORD.21

The petitioner submits that the respondents offense was serious

in character and merits the penalty of dismissal from
employment. It contends that the respondent was accorded the
full measure of due process before he was dismissed: he was
given a notice which apprised him of the charge against him and
required him to explain why he should not be dismissed, and

The petitioner submits that it has presented more than substantial

ADMIN LAW

85

later, a notice of termination. The petitioner claims that the

Labor Code simply requires that the employee be given a written
notice containing a statement of the causes of termination. It
insists that the printout of the recording of the CAMA tapes
showing that three illegal connections were made on August 1,
1994 is a mere evidentiary matter that need not be mentioned in
the notice.27

failure to do so would necessarily mean that the dismissal was

illegal.33 The employers case succeeds or fails on the strength of
its evidence and not on the weakness of the employees defense.
If doubt exists between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of
the latter.34 Moreover, the quantum of proof required in
determining the legality of an employees dismissal is only
substantial evidence. Substantial evidence is more than a mere
scintilla of evidence or relevant evidence as a reasonable mind
might accept as adequate to support a conclusion, even if other
minds, equally reasonable, might conceivably opine otherwise.35

For his part, the respondent avers that Busas statement was
uncorroborated and hearsay for lack of cross-examination. He
insists that Busa could not have seen him make illegal
connections since the latters shift came before his.28

In this case, the appellate court ruled for respondent Tiamson,

ratiocinating as follows:

The petitioner replies that an affidavit may be admissible even if

the witness is not presented during trial because technical rules
are not strictly followed in proceedings before the Labor Arbiter
and the NLRC.29

The issues posed by both parties involve the evaluation of the

findings of facts by the agencies a quo. While the general rule is
that factual issues could not be properly raised and considered in
a petition for certiorari, it however admits of this exception that
a disharmony between the factual findings of the Labor Arbiter
and those of the NLRC opens the door to review thereof by the
Supreme Court (Asuncion vs. National Labor Relations
Commission, 362 SCRA 56), including, of course, the Court of
Appeals.

The petition has no merit.

It is a settled rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their
respective jurisdictions, are generally accorded not only respect
but even finality.30 Moreover, in a petition for review on
certiorari under Rule 45, the Supreme Court reviews only errors
of law and not errors of facts. 31 However, where there is
divergence in the findings and conclusions of the NLRC, on the
one hand, from those of the Labor Arbiter and the Court of
Appeals, on the other, the Court is constrained to examine the
evidence.32

The crux of both petitions is whether the NLRC with its findings
quoted below, was correct in setting aside the disposition of the
Labor Arbiter:
We disagree that respondent failed to present evidence linking
complainant to the illegal connection scam. As pointed out by
the respondent, co-employee Busa and Cayanan in the course of
their investigation implicated complainants participation in

In termination cases, the burden of proof rests upon the

employer to show that the dismissal is for just and valid cause;

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illegal overseas connection. Complainant also failed to refute

respondents evidence that on August 1, 1994, while he was on
duty, three (3) overseas calls to Saudi Arabia were recorded in
cama tape (Annex 4, p. 30, records).

August 1, 1994 while he was on duty, three (3) overseas calls to

Saudi Arabia were recorded in the cama tape. This was not
indicated in the memorandum sent to him on August 12, 1994,
the full text of which reads:

However, we consider the penalty of dismissal too harsh

considering that respondent imposed a sixty (60)-day suspension
on Paul Cruzada, a co-employee of complainant who submitted
(sic) culpability. For where a lesser punitive penalty would
suffice, the supreme penalty of dismissal should be visited
(Almira vs. B.F. Goodrich, 58 SCRA 120). Under the
circumstances, reinstatement but without backwages is
appropriate (pp. 39-40, Rollo)

August 12, 1994

TO : MR. ANTONIO Q. TIAMSON Radio Tech II Clark TMC
FROM : Division Head, North Luzon Toll Network
SUBJECT: ADMINISTRATIVE CASE
---------------------------------------------

Our review of the records reveals that among the three

employees who issued sworn statements, namely, Busa, Cayanan
and Cruzada, it was only Busa who directly implicated Tiamson
and it was done inexplicably only in his second sworn statement.
It does not inspire credence as it comes as an afterthought and
the contents are seriously flawed on material points. Looming
large is the claim of Busa that on several occasions when he
came to relieve Tiamson, he observed that his circuit was logged
on and in use, and Tiamson would then put it off before leaving.
This is a canard because the shift of Busa was from 1:00 p.m. to
6:00 a.m. and of course ahead of the 6:00 a.m. to 2:00 p.m. shift
of Tiamson who came in as his reliever. Their tours of duty was
in the converse order of what Busa claimed, and so he spoke
with a forked tongue when he stated that Tiamson at the
preceding shift had his circuit logged on and switched this off
when he left.

Investigation of the complaint indicated hereunder disclosed

that:
1. Complainant Mr. Anthony Dy, President DATELCOM Corp.
2. The decrease of toll revenue for DATELCOM
Angeles/Mabalacat Exchange due to fraudulent overseas call
scam was complained and notified by Mr. A. Dy to Mrs. H. G.
Gendrano Clark Exchange Division Head on July 26, 1994.
3. The complainant requested assistance to NBI and PLDT QCI
to apprehend the personnel responsible for the illegal
connection.
4. A clue was provided by Mr. Anthony Dy that the illegal
overseas call was coming from Clark-TMC through taped and
equipment monitoring.

A no less important point is the undisputed fact that Tiamson

was not given the opportunity to confute the charge that on

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87

5. In the QCI investigation, you were implicated by your fellow

Radio Technician Mr. Vidal C. Busa as involved in the case. You
admitted you know how to operate the Lenkurt 26600 Signalling
Test Set to initiate a call but denied doing it for personal gain or
interest but you failed to report the anomaly to your superior as
one of your supervisors was involved in the fraudulent case.

underlining supplied).Procedural due process requires that the

employer serve the employees to be dismissed two (2) written
notices before the termination of their employment is effected:
(a) the first, to apprise them of the particular acts or omission
for which their dismissal is sought; and (b) second, to inform
them of the decision of the employer that they are being
dismissed (Perpetual Help Credit Cooperative, Inc. vs. Faburada,
366 SCRA 693; underlining supplied). The Labor Arbiter,
therefore, was correct in ruling that Tiamson was indeed illegally
dismissed from his employment.36

The acts described above are in violation of the Companys rules

and regulations and is punishable with dismissal from the
service.

The petitioner maintains that contrary to the findings and

conclusions of the appellate court, it has established through
substantial evidence that there was just cause for the
respondents dismissal. To bolster such contention, the petitioner
adduces the following documentary evidences: (1) the sworn
statements of Vidal Busa specifically implicating the respondent;

In view of the above, please explain in writing within 72 hours

from receipt hereof why you should not be dismissed from the
service for the acts described above. You may elect to be heard if
you so desire.
Please be informed also that you will be placed under preventive
suspension which will take effect on August 16, 1994 pending
resolution of the case.

(2) the sworn statement of Arnel Cayanan; and (3) the printout
of the CAMA tape, recording the unauthorized overseas calls
originating from Clark-TMC during the respondents tour of
duty.

If no written explanation is received from you within the said

period of 72 hours, this case will be decided on the basis of the
evidence on hand. (p. 227, Rollo)

The respondent disputes the admissibility of Busas sworn

statements for being hearsay since the latter was not presented
for cross-examination. This argument, however, is not
persuasive because the rules of evidence are not strictly observed
in proceedings before administrative bodies like the NLRC
where decisions may be reached on the basis of position papers
only.37

(SGD.)
ARMANDO A. ABESAMIS
Procedural due process requires that an employee be apprised
of the charge against him, given reasonable time to answer the
same, allowed ample opportunity to be heard and defend
himself, and assisted by a representative if the employee so
desires (Concorde Hotel vs. Court of Appeals, 362 SCRA 583;
ADMIN LAW

The Court agrees with the contentions of the respondent and the
findings and rulings of the CA.

88

The petitioner indeed failed to adduce substantial evidence to

prove that the dismissal of the respondent was for a just cause.
In his first sworn statement, Busa implicated the respondent in
the illegal connections of overseas calls in this manner:

former likewise made the following statements:

T 3 - Ayon sa iyo, ginagawa rin ni Mr. Tiamson ang magkukunekta ng mga illegal na tawag overseas sa pamamagitan ng
pag-gamit ng inyong Radio Equipment. Tama ba ito?

T 25 - Bukod sa iyo, sinu-sino pa sa mga kasamahan mo ang

tinuruan ni Mr. Cayanan ng sistemang ito?

S - Tama po, Sir.

S - Sina Antonio Tiamson at Paul Cruzada na pawang mga

Radio Technicians din.

T 4 - Paano mo nalaman na ginagawa rin ni Mr. Tiamson ito?

T 26 - Ang ibig mo sabihin, ginagawa din nina Mr. Tiamson at

Cruzada

S - Dahil nakikita ko siyang nagkukunekta at ilang beses ko ring

nadatnan kapag nag-relyebo kami na gumagana ang circuit na
ang ibig sabihin ay may nag-uusap. At bago siya aalis ay
inilalagay niya sa normal position ang linyang ginamit niya.

ang magpa-patch ng mga tawag sa abroad o overseas?

T 5 - Kailan pa ito gingawa ni Mr. Tiamson kung natatandaan
mo pa?

S - Opo.
T 27 - Paano mo naman nasisiguro ito?

S - Sa natatandaan ko ginagawa niya ito magmula noong 1992

pa.

S - Nakikita ko po.
T 6 - Ayon pa rin sa iyo, alam din ni Mr. Tiamson na ginagawa
rin ni Mr. Cayanan itong mga illegal activities na ito. Paano mo
nasabi na alam ni Mr. Tiamson itong ginagawa ni Mr. Cayanan

T 28 - Paano mo naman nakita samantalang magka-iba ang tour

of duty

S - Kasi magkakasama kami at kaming apat lang nina Mr.

Cayanan, Mr.Tiamson, Mr. Cruzada at ako ang nakaka-alam
niyang operation na iyan.39

ninyo?
S - Pag nag-relyebo kami ay naaabutan kong naka-engage ang
circuit at pag tinanong ko ay sinasabi nga nilang may tawag sila
at kasalukuyang nag-uusap ang magkabilang parties.38

On the other hand, during the confrontation among all four

employees implicated in the matter, Cayanan testified that he
was aware that his "subordinates" were engaged in illegal

During the confrontation between Busa and the respondent, the

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activities. However, he failed to specifically mention who these

subordinates were.40

administrative actions:
It is true that administrative and quasi-judicial bodies like the
NLRC are not bound by the technical rules of procedure in the
adjudication of cases. However, this procedural rule should not
be construed as a license to disregard certain fundamental
evidentiary rules. While the rules of evidence prevailing in the
courts of law or equity are not controlling in proceedings before
the NLRC, the evidence presented before it must at least have a
modicum of admissibility for it to be given some probative value.
46

Although admissible in evidence, affidavits being self-serving

must be received with caution. This is because the adverse party
is not afforded any opportunity to test their veracity.41 By
themselves, generalized and pro forma affidavits cannot
constitute relevant evidence which a reasonable mind may
accept as adequate.42 There must be some other relevant
evidence to corroborate such affidavits.
On this point, the petitioner submits that the printout of the
CAMA tapes corroborated Busas sworn statement. A perusal of
the printout, however, shows that it is not authenticated by the
proper officer of the company. Moreover, the name of the
respondent and the other annotations in the said printout are
handwritten and unsigned.

The decisions of this Court, while adhering to a liberal view in

the conduct of proceedings before administrative agencies, have
nonetheless consistently required some proof of authenticity or
reliability as a condition for the admission of documents. 47
Absent any such proof of authenticity, the printout of the CAMA
tape should be considered inadmissible, hence, without any
probative weight.

The ruling in Asuncion v. National Labor Relations

Commission43 is instructive on how such document should be
treated. In that case, the employer submitted a handwritten
listing and computer printouts to establish the charges against
the employee. The handwritten listing was not signed, and while
there was a computer-generated listing, the entries of time and
other annotations therein were also handwritten and unsigned.
The Court ruled that the handwritten listing and unsigned
computer printouts were unauthenticated, hence, unreliable.
Mere self-serving evidence (of which the listing and printouts
are of that nature) should be rejected as evidence without any
rational probative value even in administrative proceedings.44

To conclude, the petitioner has not established by substantial

evidence that there was just cause for the respondents
termination from his employment. The sworn statements of Busa
and Cayanan alone are not sufficient to establish that the
respondent was guilty of serious misconduct. In light of such
finding, there is no need to delve into whether or not the
respondent was afforded due process when he was dismissed by
the petitioner.
WHEREFORE, premises considered, the petition is DENIED
DUE COURSE. The Decision of the Court of Appeals dated
April 16, 2004, and its Resolution dated July 27, 2004 in CAG.R. SP Nos. 51855 and 52247 are AFFIRMED.

Thus, in Uichico v. National Labor Relations Commission,45 the

Court elucidated the extent of the liberality of procedure in

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PLDT vs. Tiamson, G.R. No. 164684-85, Nov. 11, 2005

Labor Law Labor Relations Termination of Employment

Twin Notice Rule

FACTUAL FINDINGS BINDING UPON COURTS:

Grounds for Termination Substantial Evidence

It is a settled rule that factual findings of labor officials, who are

deemed to have acquired expertise in matters within their
respective jurisdictions, are generally accorded not only respect
but even finality. Moreover, in a petition for review on certiorari
under Rule 45, the Supreme Court reviews only errors of law
and not errors of facts. However, where there is divergence in
the findings and conclusions of the NLRC, on the one hand,
from those of the Labor Arbiter and the Court of Appeals, on the
other, the Court is constrained to examine the evidence.

Antonio Tiamson was a radio technician at PLDT (Philippine

Long Distance Telephone Company, Inc.). In 1994, PLDT
discovered that there were some illegal long distance calls being
made by employees. Tiamson and his workmates were
summoned. One employee named Vidal Busa admitted to the
wrongdoings but he implicated his other workmates including
Tiamson. PLDT then made the investigation formal and Busa
was made to submit an affidavit containing his earlier story;
notices were sent to the employees to explain; an investigation
was done; and later termination notices were sent. Among those
terminated was Tiamson.

BURDEN OF PROOF:
In termination cases, the burden of proof rests upon the
employer to show that the dismissal is for just and valid cause;
failure to do so would necessarily mean that the dismissal was
illegal. The employers case succeeds or fails on the strength of
its evidence and not on the weakness of the employees defense.
If doubt exists between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of
the latter. Moreover, the quantum of proof required in
determining the legality of an employees dismissal is only
substantial evidence. Substantial evidence is more than a mere
scintilla of evidence or relevant evidence as a reasonable mind
might accept as adequate to support a conclusion, even if other
minds, equally reasonable, might conceivably opine otherwise.

Tiamson later sued PLDT for illegal dismissal as he claimed the

twin notice rule was not fully complied with.
ISSUE: Whether or not Tiamson was denied due process.
HELD: Yes. In termination cases, the burden of proof rests upon
the employer to show that the dismissal is for just and valid
cause; failure to do so would necessarily mean that the dismissal
was illegal. The employers case succeeds or fails on the
strength of its evidence and not on the weakness of the
employees defense. If doubt exists between the evidence
presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter. Moreover, the
quantum of proof required in determining the legality of an
employees dismissal is only substantial evidence. Substantial
evidence is more than a mere scintilla of evidence or relevant

474 SCRA 761 Political Law Constitutional Law Due

Process; Private Entities Procedural Due Process

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evidence as a reasonable mind might accept as adequate to

support a conclusion, even if other minds, equally reasonable,
might conceivably opine otherwise.

termination of their employment is effected: (a) the first, to

apprise them of the particular acts or omission for which their
dismissal is sought; and (b) second, to inform them of the
decision of the employer that they are being dismissed. Again, in
this case, the first notice was not fully complied with hence,
Tiamson was illegally dismissed by PLDT.

In this case, it appears that although Tiamson was sent a first

notice (asking him to explain his side) and then a second notice
(termination notice) and he was also invited in a confrontation
with the management, still, the win notice rule was not fully
complied with. The records show that Busa and his other
workmates submitted affidavits that did not implicate Tiamson.
However, Busa was made to submit a second affidavit which
now impliacted Tiamson which is quite irregular and
inconsistent this would already create doubt in a reasonable
mind as to whether or not Tiamson really committed the
wrongdoing.
Records further show that PLDT based its termination of
Tiamsons services on the ground that Busa witnessed Tiamson
after the latter allegedly just finished making illegal long
distance calls. This allegation by Busa was never communicated
to Tiamson (as shown by the records). Hence, Tiamson was
never notified of the charges against him in short, the first
notice sent to Tiamson was incomplete as to the charges against
him.
Procedural due process requires that an employee be apprised of
the charge against him, given reasonable time to answer the
same, allowed ample opportunity to be heard and defend
himself, and assisted by a representative if the employee so
desires.
Procedural due process requires that the employer serve the
employees to be dismissed two (2) written notices before the

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