G.R. No.

135945 March 7, 2001
THE UNITED RESIDENTS OF DOMINICAN HILL, INC., represented by its
President RODRIGO S. MACARIO, SR., petitioner,
vs.
COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS, represented by its
Commissioner, RUFINO V. MIJARES; MARIO PADILAN, PONCIANO BASILAN,
HIPOLITO ESLAVA, WILLIAM LUMPISA, PACITO MOISES, DIONISIO ANAS, NOLI
DANGLA, NAPOLEON BALESTEROS, ELSIE MOISES, SEBIO LACWASAN, BEN
FLORES, DOMINGO CANUTAB, MARCELINO GABRIANO, TINA TARNATE,
ANDREW ABRAZADO, DANNY LEDDA, FERNANDO DAYAO, JONATHAN DE LA
PENA, JERRY PASSION, PETER AGUINSOD, and LOLITA DURAN, respondents.
DE LEON, JR., J.:
all its assets, programs and projects, were transferred to the Presidential
Management Staff (PMS).2
On October 18, 1988, the PMS received an application from petitioner
UNITED RESIDENTS OF DOMINICAN HILL, INC. (UNITED, for brevity), a
community housing association composed of non-real property owning
residents of Baguio City, to acquire a portion of the Dominican Hills property.
On February 2, 1990, PMS Secretary Elfren Cruz referred the application to
the HOME INSURANCE GUARANTY CORPORATION (HIGC). HIGC consented to
act as originator for UNITED.3 Accordingly, on May 9, 1990, a Memorandum
of Agreement was signed by and among the PMS, the HIGC, and UNITED. The
Memorandum of Agreement called for the PMS to sell the Dominican Hills
property to HIGC which would, in turn, sell the same to UNITED. The parties
agreed on a selling price of P75.00 per square meter.

Before us is a petition for prohibition and declaratory relief seeking the
annulment of a status quo order1 dated September 29, 1998 issued by the
public respondent Commission on the Settlement of Land Problems (COSLAP,
for brevity) in COSLAP Case No. 98-253.
The facts are:
The property being fought over by the parties is a 10.36-hectare property in
Baguio City called Dominican Hills, formerly registered in the name of
Diplomat Hills, Inc. It appeared that the property was mortgaged to the
United Coconut Planters Bank (UCPB) which eventually foreclosed the
mortgage thereon and acquired the same as highest bidder. On April 11,
1983, it was donated to the Republic of the Philippines by UCPB through its
President, Eduardo Cojuangco. The deed of donation stipulated that
Dominican Hills would be utilized for the "priority programs, projects,
activities in human settlements and economic development and
governmental purposes" of the Ministry of Human Settlements.
On December 12, 1986, the then President Corazon C. Aquino issued
Executive Order No. 85 abolishing the Office of Media Affairs and the Ministry
of Human Settlements. All agencies under the latter's supervision as well as
Thus, on June 12, 1991, HIGC sold 2.48 hectares of the property to UNITED.
The deed of conditional sale provided that ten (10) per cent of the purchase
price would be paid upon signing, with the balance to be amortized within
one year from its date of execution. After UNITED made its final payment on
January 31, 1992, HIGC executed a Deed of Absolute Sale dated July 1, 1992.
Petitioner alleges that sometime in 1993, private respondents entered the
Dominican Hills property allocated to UNITED and constructed houses
thereon. Petitioner was able to secure a demolition order from the city
mayor.4
Unable to stop the razing of their houses, private respondents, under the
name DOMINICAN HILL BAGUIO RESIDENTS HOMELESS ASSOCIATION
(ASSOCIATION, for brevity) filed an action5 for injunction docketed as Civil
Case No. 3316-R, in the Regional Trial Court of Baguio City, Branch 4. Private
respondents were able to obtain a temporary restraining order but their
prayer for a writ of preliminary injunction was later denied in an Order dated
March 18, 1996.6
While Civil Case No. 3316-R was pending, the ASSOCIATION, this time
represented by the Land Reform Beneficiaries Association, Inc.
(BENEFICIARIES, for brevity), filed Civil Case No. 3382-R before Branch 61 of

1
the same court. The complaint7 prayed for damages, injunction and
annulment of the said Memorandum of Agreement between UNITED and
HIGC. Upon motion of UNITED, the trial court in an Order dated May 27, 1996
dismissed Civil Case No. 3382-R.8 The said Order of dismissal is currently on
appeal with the Court of Appeals.9
Demolition Order No. 1-96 was subsequently implemented by the Office of
the City Mayor and the City Engineer's Office of Baguio City. However,
petitioner avers that private respondents returned and reconstructed the
demolished structures.
To forestall the re-implementation of the demolition order, private
respondents filed on September 29, 1998 a petition10 for annulment of
contracts with prayer for a temporary restraining order, docketed as COSLAP
Case No. 98-253, in the Commission on the Settlement of Land Problems
(COSLAP) against petitioner, HIGC, PMS, the City Engineer's Office, the City
Mayor, as well as the Register of Deeds of Baguio City. On the very same day,
public respondent COSLAP issued the contested order requiring the parties
to maintain the status quo.
Without filing a motion for reconsideration from the aforesaid status quo
order, petitioner filed the instant petition questioning the jurisdiction of the
COSLAP.
The issues we are called upon to resolve are:
1 On March 19, 1971, Executive Order No. 305 was issued reconstituting the
IS THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP]
CREATED UNDER EXECUTIVE ORDER NO. 561 BY THE OFFICE OF THE
PHILIPPINES [sic] EMPOWERED TO HEAR AND TRY A PETITION FOR
ANNULMENT OF CONTRACTS WITH PRAYER FOR A TEMPORARY
RESTRAINING ORDER AND THUS, ARROGATE UNTO ITSELF THE POWER TO
ISSUE STATUS QUO ORDER AND CONDUCT A HEARING THEREOF [sic]?
2
ASSUMING THAT THE COMMISSION ON THE SETTLEMENT OF LAND
PROBLEMS [COSLAP] HAS JURISDICTION ON THE MATTER, IS IT EXEMPTED
FROM OBSERVING A CLEAR CASE OF FORUM SHOPPING ON THE PART OF THE
PRIVATE RESPONDENTS?
To the extent that the instant case is denominated as one for declaratory
relief, we initially clarify that we do not possess original jurisdiction to
entertain such petitions.11 Such is vested in the Regional Trial Courts.12
Accordingly, we shall limit our review to ascertaining if the proceedings
before public respondent COSLAP are without or in excess, of its jurisdiction.
In this wise, a recounting of the history of the COSLAP may provide useful
insights into the extent of its powers and functions.
The COSLAP was created by virtue of Executive Order No. 561 dated
September 21, 1979. Its forerunner was the Presidential Action Committee
on Land Problems (PACLAP) founded on July 31, 1970 by virtue of Executive
Order No. 251. As originally conceived, the committee was tasked "to
expedite and coordinate the investigation and resolution of land disputes,
streamline and shorten administrative procedures, adopt bold and decisive
measures to solve land problems, and/or recommend other solutions." It was
given the power to issue subpoenas duces tecum and ad testificandum and
to call upon any department, office, agency or instrumentality of the
government, including government owned or controlled corporations and
local government units, for assistance in the performance of its functions. At
the time, the PACLAP did not exercise quasi-judicial functions.
PACLAP.13 The committee was given exclusive jurisdiction over all cases
involving public lands and other lands of the public domain and accordingly
was tasked:
1. To investigate, coordinate, and resolve expeditiously land disputes,
streamline administrative procedures, and in general, to adopt bold and
decisive measures to solve problems involving public lands and lands of the
public domain;
2
2. To coordinate and integrate the activities of all government agencies
having to do with public lands or lands of the public domain;
3. To study and review present policies as embodied in land laws and
administrative rules and regulations, in relation to the needs for land of the
agro-industrial sector and small farmers, with the end in view to evolving and
recommending new laws and policies and establishing priorities in the grant
of public land, and the simplification of processing of land applications in
order to relieve the small man from the complexities of existing laws, rules
and regulations;
4. To evolve and implement a system for the speedy investigation and
resolution of land disputes;
5. To receive all complaints of settlers and small farmers, involving
public lands or other lands of the public domain;
6. To look into the conflicts between Christians and non-Christians,
between corporations and small settlers and farmers; cause the speedy
settlement of such conflicts in accordance with priorities or policies
established by the Committee; and
7. To perform such other functions as may be assigned to it by the
President.
Thereafter, the PACLAP was reorganized pursuant to Presidential Decree No.
832 dated November 27, 1975.14 Its jurisdiction was revised thus:
xxx xxx xxx
2. Refer for immediate action any land problem or dispute brought to
the attention of the PACLAP, to any member agency having jurisdiction
thereof: Provided, that when the Executive Committee decides to act on a
case, its resolution, order or decision thereon, shall have the force and effect
of a regular administrative resolution, order or decision, and shall be binding
upon the parties therein involved and upon the member agency having
jurisdiction thereof;
xxx xxx xxx
Notably, the said Presidential Decree No. 832 did not contain any provision
for judicial review of the resolutions, orders or decisions of the PACLAP.
On September 21, 1979, the PACLAP was abolished and its functions
transferred to the present Commission on the Settlement of Land Problems
by virtue of Executive Order No. 561. This reorganization, effected in line with
Presidential Decree No. 1416, brought the COSLAP directly under the Office
of the President.15 It was only at this time that a provision for judicial review
was made from resolutions, orders or decisions of the said agency, as
embodied in section 3(2) thereof, to wit:
Powers and functions. — The Commission shall have the following powers
and functions:
1. Coordinate the activities, particularly the investigation work, of the
various government offices and agencies involved in the settlement of land
problems or disputes, and streamline administrative procedures to relieve
small settlers and landholders and members of cultural minorities of the
expense and time-consuming delay attendant to the solution of such
problems or disputes;
2. Refer and follow-up for immediate action by the agency having
appropriate jurisdiction any land problem or dispute referred to the
Commission: Provided, that the Commission may, in the following cases,
assume jurisdiction and resolve land problems or disputes which are critical
and explosive in nature considering, for instance, the large number of the
parties involved, the presence or emergence of social tension or unrest, or
other similar critical situations requiring immediate action:
(a) Between occupants/squatters and pasture lease agreement holders
or timber concessionaires;
(b) Between occupants/squatters and government reservation grantees;
3
(c) Between occupants/squatters and public land claimants or
applicants;
(d) Petitions for classification, release and/or subdivision of lands of the
public domain; and
(e) Other similar land problems of grave urgency and magnitude.
The Commission shall promulgate such rules of procedure as will insure
expeditious resolution and action on the above cases. The resolution, order
or decision of the Commission on any of the foregoing cases shall have the
force and effect of a regular administrative resolution, order or decision and
shall be binding upon the parties therein and upon the agency having
jurisdiction over the same. Said resolution, order or decision shall become
final and executory within thirty (30) days from its promulgation and shall be
appealable by certiorari only to the Supreme Court.
xxx xxx xxx
In the performance of its functions and discharge of its duties, the
Commission is authorized, through the Commission, to issue subpoena and
subpoena duces tecum for the appearance of witnesses and the production
of records, books and documents before it. It may also call upon any ministry,
office, agency or instrumentality of the National Government, including
government-owned or controlled corporations, and local governments for
assistance. This authority is likewise, conferred upon the provincial offices as
may be established pursuant to Section 5 of this Executive Order.
In Bañaga v. Commission on the Settlement of Land Problems,16 we
characterized the COSLAP's jurisdiction as being general in nature, as follows:
Petitioners also contend in their petition that the COSLAP itself has no
jurisdiction to resolve the protest and counter-protest of the parties because
its power to resolve land problems is confined to those cases "which are
critical and explosive in nature."
This contention is devoid of merit. It is true that Executive Order No. 561
provides that the COSLAP may take cognizance of cases which are "critical
and explosive in nature considering, for instance, the large number of parties
involved, the presence or emergence of social tension or unrest, or other
similar critical situations requiring immediate action." However, the use of
the word "may" does not mean that the COSLAP's jurisdiction is merely
confined to the above mentioned cases. The provisions of the said Executive
Order are clear that the COSLAP was created as a means of providing a more
effective mechanism for the expeditious settlement of land problems in
general, which are frequently the source of conflicts among settlers,
landowners and cultural minorities. Besides, the COSLAP merely took over
from the abolished PACLAP whose functions, including its jurisdiction, power
and authority to act on, decide and resolve land disputes (Sec. 2, P.D. No. 832)
were all assumed by it. The said Executive Order No. 561 containing said
provision, being enacted only on September 21, 1979, cannot affect the
exercise of jurisdiction of the PACLAP Provincial Committee of Koronadal on
September 29, 1978. Neither can it affect the decision of the COSLAP which
merely affirmed said exercise of jurisdiction.
Given the facts of the case, it is our view that the COSLAP is not justified in
assuming jurisdiction over the controversy. As matters stand, it is not the
judiciary's place to question the wisdom behind a law;17 our task is to
interpret the law. We feel compelled to observe, though, that by reason of
the ambiguous terminology employed in Executive Order No. 561, the power
to assume jurisdiction granted to the COSLAP provides an ideal breeding
ground for forum shopping, as we shall explain subsequently. Suffice it to
state at this stage that the COSLAP may not assume jurisdiction over cases
which are already pending in the regular courts.
The reason is simple. Section 3(2) of Executive Order 561 speaks of any
resolution, order or decision of the COSLAP as having the "force and effect of
a regular administrative resolution, order or decision." The qualification
places an unmistakable emphasis on the administrative character of the
COSLAP's determination, amplified by the statement that such resolutions,
orders or decisions "shall be binding upon the parties therein and upon the
agency having jurisdiction over the same." An agency is defined by statute as
"any of the various units of the Government, including a department, bureau,
4
office, instrumentality, or government-owned or controlled corporation, or a
local government or a distinct unit therein."18 A department, on the other
hand, "refers to an executive department created by law."19 Whereas, a
bureau is understood to refer "to any principal subdivision of any
department."20 In turn, an office "refers, within the framework of
governmental organization, to any major functional unit of a department or
bureau including regional offices. It may also refer to any position held or
occupied by individual persons, whose functions are defined by law or
regulation."21 An instrumentality is deemed to refer "to any agency of the
National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds and enjoying operational
autonomy, usually through a charter. This term includes regulatory agencies,
chartered institutions and government-owned or controlled corporations."22
Applying the principle in statutory construction of ejusdem generis, i.e.,
"where general words follow an enumeration or persons or things, by words
of a particular and specific meaning, such general words are not to be
construed in their widest extent, but are to be held as applying only to
persons or things of the same kind or class as those specifically
mentioned,"23 section 3(2) of Executive Order 561 patently indicates that the
COSLAP's dispositions are binding on administrative or executive agencies.
The history of the COSLAP itself bolsters this view. Prior enactments
enumerated its member agencies among which it was to exercise a
coordinating function.
The COSLAP discharges quasi-judicial functions:
"Quasi-judicial function" is a term which applies to the actions, discretion,
etc. of public administrative officers or bodies, who are required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action and to exercise
discretion of a judicial nature."24
However, it does not depart from its basic nature as an administrative agency,
albeit one that exercises quasi-judicial functions. Still, administrative agencies
are not considered courts; they are neither part of the judicial system nor are
they deemed judicial tribunals.25 The doctrine of separation of powers
observed in our system of government reposes the three (3) great powers
into its three (3) branches — the legislative, the executive, and the judiciary
— each department being co-equal and coordinate, and supreme in its own
sphere. Accordingly, the executive department may not, by its own fiat,
impose the judgment of one of its own agencies, upon the judiciary. Indeed,
under the expanded jurisdiction of the Supreme Court, it is empowered "to
determine whether or not there has been grave abuse of discretion
amounting to lack of or excess of jurisdiction on the part of any branch or
instrumentality of the Government."26
There is an equally persuasive reason to grant the petition. As an additional
ground for the annulment of the assailed status quo order of COSLAP, UNITED
accuses private respondents of engaging in forum shopping. Forum shopping
exists when a party "repetitively avail[s] of several judicial remedies in
different courts, simultaneously or successively, all substantially founded on
the same transactions and the same essential facts and circumstances, and
all raising substantially the same issues either pending in, or already resolved
adversely by some other court."27 In this connection, Supreme Court
Administrative Circular No. 04-94 dated February 8, 1994 provides:
Revised Circular No. 28-91, dated February 8, 1994, applies to and governs
the filing of petitions in the Supreme Court and the Court of Appeals and is
intended to prevent the multiple filing of petitions or complaints involving
the same issues in other tribunals or agencies as a form of forum shopping.
Complementary thereto and for the same purpose, the following
requirements, in addition to those in pertinent provisions of the Rules of
Court and existing circulars, shall be strictly complied with in the filing of
complaints, petitions, applications or other initiatory pleadings in all courts
and agencies other than the Supreme Court and the Court of Appeals and
shall be subject to the sanctions provided hereunder.
1. The plaintiff, petitioner, applicant or principal part seeking relief in
the complaint, petition, application or other initiatory pleading shall certify
under oath in such original pleading, or in a sworn certification annexed
thereto and simultaneously filed therewith, to the truth of the following facts
and undertakings: (a) he has not theretofore commenced any other action or
5
proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no
such action or proceedings is pending in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (c) if there is any such action or
proceeding which is either pending or may have been terminated, he must
state the status thereof; and (d) if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme Court,
the Court of Appeals or any other tribunal or agency, he undertakes to report
that fact within five (5) days therefrom to the court or agency wherein the
original pleading and sworn certification contemplated herein have been
filed.
The complaint and other initiatory pleadings referred to and subject of this
Circular are the original civil complaint, counterclaim, cross-claim, third
(fourth, etc.) party complaint, or complaint-in-intervention, petition, or
application wherein a party asserts his claim for relief.
2. Any violation of this Circular shall be a cause for the dismissal of the
complaint, petition, application or other initiatory pleading, upon motion and
after hearing. However, any clearly willful and deliberate forum shopping by
any other party and his counsel through the filing of multiple complaints or
other initiatory pleadings to obtain favorable action shall be a ground for the
summary dismissal thereof and shall constitute contempt of court.
Furthermore, the submission of a false certification or non-compliance with
the undertakings therein, as provided in Paragraph 1 hereof, shall constitute
indirect contempt of court, without prejudice to disciplinary proceedings
against the counsel and the filing of a criminal action against the part.
[emphasis supplied]
xxx xxx xxx
The said Administrative Circular's use of the auxiliary verb "shall" imports "an
imperative obligation . . . inconsistent with the idea of discretion."28 Hence,
compliance therewith is mandatory.29
It bears stressing that there is a material distinction between the requirement
of submission of the certification against forum shopping from the
undertakings stated therein. Accordingly,
x x x [f]ailure to comply with this requirement cannot be excused by the fact
that plaintiff is not guilty of forum shopping. The Court of Appeals, therefore,
erred in concluding that Administrative Circular No. 04-94 did not apply to
private respondent's case merely because her complaint was not based on
petitioner's cause of action. The Circular applies to any complaint, petition,
application, or other initiatory pleading, regardless of whether the party filing
it has actually committed forum shopping. Every party filing a complaint or
any other initiatory pleading is required to swear under oath that he has not
committed nor will he commit forum shopping. Otherwise, we would have an
absurd situation where the parties themselves would be the judge of whether
their actions constitute a violation of said Circular, and compliance therewith
would depend on their belief that they might or might not have violated the
requirement. Such interpretation of the requirement would defeat the very
purpose of Circular 04-94.
Indeed, compliance with the certification against forum shopping is separate
from, and independent of, the avoidance of forum shopping itself. Thus,
there is a difference in the treatment — in terms of imposable sanctions —
between failure to comply with the certification requirement and violation of
the prohibition against forum shopping. The former is merely a cause for the
dismissal, without prejudice, of the complaint or initiatory pleading, while the
latter is a ground for summary dismissal thereof and constitutes direct
contempt.30
A scrutiny of the pleadings filed before the trial courts and the COSLAP
sufficiently establishes private respondents' propensity for forum shopping.
We lay the premise that the certification against forum shopping must be
executed by the plaintiff or principal party, and not by his counsel.31 Hence,
one can deduce that the certification is a peculiar personal representation on
the part of the principal party, an assurance given to the court or other
tribunal that there are no other pending cases involving basically the same
parties, issues and causes of action. In the case at bar, private respondents'
litany of omissions range from failing to submit the required certification
6
against forum shopping to filing a false certification, and then to forum
shopping itself. First, the petition filed before the COSLAP conspicuously
lacked a certification against forum shopping. Second, it does not appear
from the record that the ASSOCIATION informed Branch 4 of the Regional
Trial Court of Baguio City before which Civil Case No. 3316-R was pending,
that another action, Civil Case No. 3382-R, was filed before Branch 61 of the
same court. Another group of homeless residents of Dominican Hill, the LAND
REFORM BENEFICIARIES ASSOCIATION, INC. initiated the latter case. The
aforesaid plaintiff, however, does not hesitate to admit that it filed the
second case in representation of private respondent, as one of its affiliates.
In the same manner, the certification against forum shopping accompanying
the complaint in Civil Case No. 3382-R does not mention the pendency of Civil
Case No. 3316-R. In fact, the opposite assurance was given, that there was no
action pending before any other tribunal. Another transgression is that both
branches of the trial court do not appear to have been notified of the filing of
the subject COSLAP Case No. 98-253.
It is evident from the foregoing facts that private respondents, in filing
multiple petitions, have mocked our attempts to eradicate forum shopping
and have thereby upset the orderly administration of justice. They sought
recourse from three (3) different tribunals in order to obtain the writ of
injunction they so desperately desired. "The willful attempt by private
respondents to obtain a preliminary injunction in another court after it failed
to acquire the same from the original court constitutes grave abuse of the
judicial process."32
In this connection, we expounded on forum shopping in Viva Productions, Inc.
v. Court of Appeals33 that:
Private respondent's intention to engage in forum shopping becomes
manifest with undoubted clarity upon the following considerations. Notably,
if not only to ensure the issuance of an injunctive relief, the significance of
the action for damages before the Makati court would be nil. What damages
against private respondent would there be to speak about if the Parañaque
court already enjoins the performance of the very same act complained of in
the Makati court? Evidently, the action for damages is premature if not for
the preliminary injunctive relief sought. Thus, we find grave abuse of
discretion on the part of the Makati court, being a mere co-equal of the
Parañaque court, in not giving due deference to the latter before which the
issue of the alleged violation of the sub-judice rule had already been raised
and submitted. In such instance, the Makati court, if it was wary of dismissing
the action outrightly under Administrative Circular No. 04-94, should have, at
least, ordered the consolidation of its case with that of the Parañaque court,
which had first acquired jurisdiction over the related case x x x, or it should
have suspended the proceedings until the Parañaque court may have ruled
on the issue x x x.
xxx xxx xxx
Thus, while we might admit that the causes of action before the Makati court
and the Parañaque court are distinct, and that private respondent cannot
seek civil indemnity in the contempt proceedings, the same being in the
nature of criminal contempt, we nonetheless cannot ignore private
respondent's intention of seeking exactly identical reliefs when it sought the
preliminary relief of injunction in the Makati court. As earlier indicated, had
private respondent been completely in good faith there would have been no
hindrance in filing the action for damages with the regional trial court of
Parañaque and having it consolidated with the contempt proceedings before
Branch 274, so that the same issue on the alleged violation of the sub judice
rule will not have to be passed upon twice, and there would be no possibility
of having two courts of concurrent jurisdiction making two conflicting
resolutions.
Yet from another angle, it may be said that when the Parañaque court
acquired jurisdiction over the said issue, it excluded all other courts of
concurrent jurisdiction from acquiring jurisdiction over the same. To hold
otherwise would be to risk instances where courts of concurrent jurisdiction
might have conflicting orders. This will create havoc and result in an
extremely disordered administration of justice. Therefore, even on the
assumption that the Makati court may acquire jurisdiction over the subject
matter of the action for damages, without prejudice to the application of
Administrative Circular No. 04-94, it cannot nonetheless acquire jurisdiction
over the issue of whether or not petitioner has violated the sub judice rule.
At best, the Makati court may hear the case only with respect to the alleged
7
injury suffered by private respondent after the Parañaque court shall have pronouncement on Civil Case No. 3382-R, the dismissal of which was elevated
ruled favorably on the said issue. on appeal to the Court of Appeals where it is still pending.

We also noted several indications of private respondents' bad faith. The
complaint filed in Civil Case No. 3316-R was prepared by the ASSOCIATION's
counsel, Atty. Conrado Villamor Catral, Jr. whereas the complaint filed in Civil
Case No. 3382-R was signed by a different lawyer, Atty. Thomas S. Tayengco.
With regard to the petition filed with the COSLAP, the same was signed by
private respondents individually. As to the latter case, we noted that the
petition itself could not have been prepared by ordinary laymen, inasmuch as
it exhibits familiarity with statutory provisions and legal concepts, and is
written in a lawyerly style.
WHEREFORE, the petition is hereby GRANTED. The status quo order dated
September 29, 1998 issued in COSLAP Case No. 98-253 by respondent
Commission On The Settlement Of Land Problems (COSLAP) is hereby SET
ASIDE; and the petition filed in COSLAP Case No. 98-253 and the complaint in
Civil Case No. 3316-R are hereby DISMISSED for lack of jurisdiction and forum
shopping. Costs against private respondents.
SO ORDERED.

In the same manner, the plaintiffs in the three (3) different cases were made
to appear as dissimilar: in Civil Case No. 3316-R, the plaintiff was
ASSOCIATION of which private respondent Mario Padilan was head, while the
plaintiff in Civil Case No. 3382-R was the BENEFICIARIES. Before the COSLAP,
private respondents themselves were the petitioners, led again by Padilan.34
Private respondents also attempted to vary their causes of action: in Civil
Case No. 3382-R and COSLAP Case No. 98-253, they seek the annulment of
the Memorandum of Agreement executed by and among UNITED, the PMS,
and HIGC as well as the transfer certificates of title accordingly issued to
petitioner. All three (3) cases sought to enjoin the demolition of private
respondents' houses.

It has been held that forum shopping is evident where the elements of litis
pendentia or res judicata are present. Private respondents' subterfuge comes
to naught, for the effects of res judicata or litis pendentia may not be avoided
by varying the designation of the parties or changing the form of the action
or adopting a different mode of presenting one's case.35

In view of the foregoing, all that remains to be done is the imposition of the
proper penalty. A party's willful and deliberate act of forum shopping is
punishable by summary dismissal of the actions filed.36 The summary
dismissal of both COSLAP Case No. 98-253 and Civil Case No. 3316-R is
therefore warranted under the premises. We shall refrain from making any

8
G.R. No. 134990 April 27, 2000
MANUEL M. LEYSON JR., petitioner,
vs.
OFFICE OF THE OMBUDSMAN, TIRSO ANTIPORDA, Chairman, UCPB and CIIF
Oil Mills, and OSCAR A. TORRALBA, President, CIIF Oil Mills, respondents.
BELLOSILLO, J.:
On 7 February 1996 International Towage and Transport Corporation (ITTC),
a domestic corporation engaged in the lighterage or shipping business,
entered into a one (1)-year contract with Legaspi Oil Company, Inc. (LEGASPI
OIL), Granexport Manufacturing Corporation (GRANEXPORT) and United
Coconut Chemicals, Inc. (UNITED COCONUT), comprising the Coconut
Industry Investment Fund (CIIF) companies, for the transport of coconut oil
in bulk through MT Transasia. The majority shareholdings of these CIIF
companies are owned by the United Coconut Planters Bank (UCPB) as
administrator of the CIIF. Under the terms of the contract, either party could
terminate the agreement provided a three (3)-month advance notice was
given to the other party. However, in August 1996, or prior to the expiration
of the contract, the CIIF companies with their new President, respondent
Oscar A. Torralba, terminated the contract without the requisite advance
notice. The CIIF companies engaged the services of another vessel, MT
Marilag, operated by Southwest Maritime Corporation.
On 11 March 1997 petitioner Manuel M. Leyson Jr., Executive Vice President
of ITTC, filed with public respondent Office of the Ombudsman a grievance
case against respondent Oscar A. Torralba. The following is a summary of the
irregularities and corrupt practices allegedly committed by respondent
Torralba: (a) breach of contract - unilateral cancellation of valid and existing
contract; (b) bad faith - falsification of documents and reports to stop the
operation of MT Transasia; (c) manipulation - influenced their insurance to
disqualify MT Transasia; (d) unreasonable denial of requirement imposed; (e)
double standards and inconsistent in favor of MT Marilag; (f) engaged and
entered into a contract with Southwest Maritime Corp. which is not the
owner of MT Marilag, where liabilities were waived and whose paid-up
capital is only P250,000.00; and, (g) overpricing in the freight rate causing
losses of millions of pesos to Cocochem.1
On 2 January 1998 petitioner charged respondent Tirso Antiporda, Chairman
of UCPB and CIIF Oil Mills, and respondent Oscar A. Torralba with violation of
The Anti-Graft and Corrupt Practices Act also before the Ombudsman
anchored on the aforementioned alleged irregularities and corrupt practices.
On 30 January 1998 public respondent dismissed the complaint based on its
finding that —
The case is a simple case of breach of contract with damages which should
have been filed in the regular court. This Office has no jurisdiction to
determine the legality or validity of the termination of the contract entered
into by CIIF and ITTC. Besides the entities involved are private corporations
(over) which this Office has no jurisdiction.2
On 4 June 1998 reconsideration of the dismissal of the complaint was denied.
The Ombudsman was unswayed in his finding that the present controversy
involved breach of contract as he also took into account the circumstance
that petitioner had already filed a collection case before the Regional Trial
Court of Manila-Br. 15, docketed as Civil Case No. 97-83354. Moreover, the
Ombudsman found that the filing of the motion for reconsideration on 31
March 1998 was beyond the inextendible period of five (5) days from notice
of the assailed resolution on 19 March 1998. 3
Petitioner now imputes grave abuse of discretion on public respondent in
dismissing his complaint. He submits that inasmuch as Philippine Coconut
Producers Federation, Inc. (COCOFED) v. PCGG4 and Republic v.
Sandiganbayan5 have declared that the coconut levy funds are public funds
then, conformably with Quimpo v. Tanodbayan,6 corporations formed and
organized from those funds or whose controlling stocks are from those funds
should be regarded as government owned and/or controlled corporations. As
in the present case, since the funding or controlling interest of the companies
being headed by private respondents was given or owned by the CIIF as
shown in the certification of their Corporate Secretary,7 it follows that they
are government owned and/or controlled corporations. Corollarily,
9
petitioner asserts that respondents Antiporda and Torralba are public officers
subject to the jurisdiction of the Ombudsman.
Petitioner alleges next that public respondent's conclusion that his complaint
refers to a breach of contract is whimsical, capricious and irresponsible
amounting to a total disregard of its main point, i. e., whether private
respondents violated The Anti-Graft and Corrupt Practices Act when they
entered into a contract with Southwest Maritime Corporation which was
grossly disadvantageous to the government in general and to the CIIF in
particular. Petitioner admits that his motion for reconsideration was filed out
of time. Nonetheless, he advances that public respondent should have
relaxed its rules in the paramount interest of justice; after all, the delay was
just a matter of days and he, a layman not aware of technicalities, personally
filed the complaint.
Private respondents counter that the CIIF companies were duly organized and
are existing by virtue of the Corporation Code. Their stockholders are private
individuals and entities. In addition, private respondents contend that they
are not public officers as defined under The Anti-Graft and Corrupt Practices
Act but are private executives appointed by the Boards of Directors of the CIIF
companies. They asseverate that petitioner's motion for reconsideration was
filed through the expert assistance of a learned counsel. They then charge
petitioner with forum shopping since he had similarly filed a case for
collection of a sum of money plus damages before the trial court.
The Office of the Solicitor General maintains that the Ombudsman approved
the recommendation of the investigating officer to dismiss the complaint
because he sincerely believed there was no sufficient basis for the criminal
indictment of private respondents.
We find no grave abuse of discretion committed by the Ombudsman.
COCOFED v. PCGG referred to in Republic v. Sandiganbayan reviewed the
history of the coconut levy funds. These funds actually have four (4) general
classes: (a) the Coconut Investment Fund created under R. A. No. 6260;8 (b)
the Coconut Consumers Stabilization Fund created under P. D. No. 276;9 (c)
the Coconut Industry Development Fund created under P. D. No. 582; 10 and,
(d) the Coconut Industry Stabilization Fund created under P. D. No. 1841. 11
The various laws relating to the coconut industry were codified in 1976. On
21 October of that year, P. D. No. 961 12 was promulgated. On 11 June 1978
it was amended by P. D. No. 1468 13 by inserting a new provision authorizing
the use of the balance of the Coconut Industry Development Fund for the
acquisition of "shares of stocks in corporations organized for the purpose of
engaging in the establishment and operation of industries . . . commercial
activities and other allied business undertakings relating to coconut and other
palm oil indust(ries)." 14 From this fund thus created, or the CIIF, shares of
stock in what have come to be known as the "CIIF companies" were
purchased.
We then stated in COCOFED that the coconut levy funds were raised by the
State's police and taxing powers such that the utilization and proper
management thereof were certainly the concern of the Government. These
funds have a public character and are clearly affected with public interest.
Quimpo v. Tanodbayan involved the issue as to whether PETROPHIL was a
government owned or controlled corporation the employees of which fell
within the jurisdictional purview of the Tanodbayan for purposes of The Anti-
Graft and Corrupt Practices Act. We upheld the jurisdiction of the
Tanodbayan on the ratiocination that —
While it may be that PETROPHIL was not originally "created" as a
government-owned or controlled corporation, after it was acquired by PNOC,
which is a government-owned or controlled corporation, PETROPHIL became
a subsidiary of PNOC and thus shed-off its private status. It is now funded and
owned by the government as, in fact, it was acquired to perform functions
related to government programs and policies on oil, a vital commodity in the
economic life of the nation. It was acquired not temporarily but as a
permanent adjunct to perform essential government or government-related
functions, as the marketing arm of the PNOC to assist the latter in selling and
distributing oil and petroleum products to assure and maintain an adequate
and stable domestic supply.
But these jurisprudential rules invoked by petitioner in support of his claim
that the CIIF companies are government owned and/or controlled
10
corporations are incomplete without resorting to the definition of
"government owned or controlled corporation" contained in par. (13), Sec. 2,
Introductory Provisions of the Administrative Code of 1987, i. e., any agency
organized as a stock or non-stock corporation vested with functions relating
to public needs whether governmental or proprietary in nature, and owned
by the Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at least
fifty-one (51) percent of its capital stock. The definition mentions three (3)
requisites, namely, first, any agency organized as a stock or non-stock
corporation; second, vested with functions relating to public needs whether
governmental or proprietary in nature; and, third, owned by the Government
directly or through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fifty-one (51)
percent of its capital stock.
because the cause of action herein, i. e., violation of The Anti-Graft and
Corrupt Practices Act, is different from the cause of action in the case pending
before the trial court which is collection of a sum of money plus damages.
WHEREFORE, the petition is DISMISSED. The Resolution of public respondent
Office of the Ombudsman of 30 January 1998 which dismissed the complaint
of petitioner Manuel M. Leyson Jr., as well as its Order of 4 June 1998 denying
his motion for reconsideration, is AFFIRMED. Costs against
petitioner.1âwphi1.nêt
SO ORDERED.

In the present case, all three (3) corporations comprising the CIIF companies
were organized as stock corporations.1âwphi1 The UCPB-CIIF owns 44.10%
of the shares of LEGASPI OIL, 91.24% of the shares of GRANEXPORT, and
92.85% of the shares of UNITED COCONUT. 15 Obviously, the below 51%
shares of stock in LEGASPI OIL removes this firm from the definition of a
government owned or controlled corporation. Our concern has thus been
limited to GRANEXPORT and UNITED COCONUT as we go back to the second
requisite. Unfortunately, it is in this regard that petitioner failed to
substantiate his contentions. There is no showing that GRANEXPORT and/or
UNITED COCONUT was vested with functions relating to public needs
whether governmental or proprietary in nature unlike PETROPHIL in Quimpo.
The Court thus concludes that the CIIF companies are, as found by public
respondent, private corporations not within the scope of its jurisdiction.

With the foregoing conclusion, we find it unnecessary to resolve the other

issues raised by petitioner.

A brief note on private respondents' charge of forum shopping. Executive

Secretary v. Gordon 16 is instructive that forum shopping consists of filing
multiple suits involving the same parties for the same cause of action, either
simultaneously or successively, for the purpose of obtaining a favorable
judgment. It is readily apparent that the present charge will not prosper

11

FIRST DIVISION
[G.R. No. 86695. September 3, 1992.]
MARIA ELENA MALAGA, doing business under the name B.E. CONSTRUCTION;
JOSIELEEN NAJARRO, doing business under the name BEST BUILT
CONSTRUCTION; JOSE N. OCCEÑA, doing business under the name THE FIRM
OF JOSE N. OCCEÑA; and the ILOILO BUILDERS CORPORATION, Petitioners, v.
MANUEL R. PENACHOS, JR., ALFREDO MATANGGA, ENRICO TICAR AND
TERESITA VILLANUEVA, in their respective capacities as Chairman and
Members of the Pre-qualification Bids and Awards Committee (PBAC)-
BENIGNO PANISTANTE, in his capacity as President of Iloilo State College of
Fisheries, as well as in their respective personal capacities; and HON.
LODRIGIO L. LEBAQUIN, Respondents.
Salas, Villareal & Velasco, for Petitioners.
Virgilio A. Sindico for Respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; GOVERNMENT INSTRUMENTALITY, DEFINED.
— The 1987 Administrative Code defines a government instrumentality as
follows: Instrumentality refers to any agency of the National Government,
not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy,
usually through a charter. This term includes regulatory agencies, chartered
institutions, and government-owned or controlled corporations. (Sec. 2 (5)
Introductory Provisions).
2. ID.; CHARTERED INSTITUTION; DEFINED; APPLICATION IN CASE AT
BAR. — The 1987 Administrative Code describes a chartered institution thus:
Chartered institution — refers to any agency organized or operating under a
special charter, and vested by law with functions relating to specific
constitutional policies or objectives. This term includes the state universities
and colleges, and the monetary authority of the state. (Sec. 2 (12)
Introductory Provisions). It is clear from the above definitions that ISCOF is a
chartered institution and is therefore covered by P.D. 1818. There are also
indications in its charter that ISCOF is a government instrumentality. First, it
was created in pursuance of the integrated fisheries development policy of
the State, a priority program of the government to effect the socio-economic
life of the nation. Second, the Treasurer of the Republic of the Philippines
shall also be the ex-officio Treasurer of the state college with its accounts and
expenses to be audited by the Commission on Audit or its duly authorized
representative. Third, heads of bureaus and offices of the National
Government are authorized to loan or transfer to it, upon request of the
president of the state college, such apparatus, equipment, or supplies and
even the services of such employees as can be spared without serious
detriment to public service. Lastly, an additional amount of P1.5M had been
appropriated out of the funds of the National Treasury and it was also
decreed in its charter that the funds and maintenance of the state college
would henceforth be included in the General Appropriations Law.
(Presidential Decree No. 1523)
3. ID.; PROHIBITION OF ANY COURT FROM ISSUING INJUNCTION IN
CASES INVOLVING INFRASTRUCTURE PROJECTS OF GOVERNMENT (P.D.
1818); POWER OF THE COURTS TO RESTRAIN APPLICATION. — In the case of
12
Datiles and Co. v. Sucaldito, (186 SCRA 704) this Court interpreted a similar
prohibition contained in P.D. 605, the law after which P.D. 1818 was
patterned. It was there declared that the prohibition pertained to the
issuance of injunctions or restraining orders by courts against administrative
acts in controversies involving facts or the exercise of discretion in technical
cases. The Court observed that to allow the courts to judge these matters
would disturb the smooth functioning of the administrative machinery.
Justice Teodoro Padilla made it clear, however, that on issues definitely
outside of this dimension and involving questions of law, courts could not be
prevented by P.D. No. 605 from exercising their power to restrain or prohibit
administrative acts. We see no reason why the above ruling should not apply
to P.D. 1818. There are at least two irregularities committed by PBAC that
justified injunction of the bidding and the award of the project.
4. ID.; POLICIES AND GUIDELINES PRESCRIBED FOR GOVERNMENT
INFRASTRUCTURE (PD 1594); RULES IMPLEMENTING THEREOF, NOT
SUFFICIENTLY COMPLIED WITH IN CASE AT BAR. — Under the Rules
Implementing P.D. 1594, prescribing policies and guidelines for government
infrastructure contracts, PBAC shall provide prospective bidders with the
Notice to Pre-qualification and other relevant information regarding the
proposed work. Prospective contractors shall be required to file their ARC-
Contractors Confidential Application for Registration & Classifications & the
PRE-C2 Confidential Pre-qualification Statement for the Project (prior to the
amendment of the rules, this was referred to as Pre-C1) not later than the
deadline set in the published Invitation to Bid, after which date no PRE-C2
shall be submitted and received. Invitations to Bid shall be advertised for at
least three times within a reasonable period but in no case less than two
weeks in at least two newspapers of general circulations. (IB 13 1.2-19,
Implementing Rules and Regulations of P.D. 1594 as amended) PBAC
advertised the pre-qualification deadline as December 2, 1988, without
stating the hour thereof, and announced that the opening of bids would be
at 3 o’clock in the afternoon of December 12, 1988. This scheduled was
changed and a notice of such change was merely posted at the ISCOF bulletin
board. The notice advanced the cut-off time for the submission of pre-
qualification documents to 10 o’clock in the morning of December 2, 1988,
and the opening of bids to 1 o’clock in the afternoon of December 12, 1988.
The new schedule caused the pre-disqualification of the petitioners as
recorded in the minutes of the PBAC meeting held on December 6, 1988.
While it may be true that there were fourteen contractors who were pre-
qualified despite the change in schedule, this fact did not cure the defect of
the irregular notice. Notably, the petitioners were disqualified because they
failed to meet the new deadline and not because of their expired licenses.
(B.E. & Best Built’s licenses were valid until June 30, 1989. [Ex. P & O
respectively: both were marked on December 28, 1988]) We have held that
where the law requires a previous advertisement before government
contracts can be awarded, non-compliance with the requirement will, as a
general rule, render the same void and of no effect. (Caltex Phil. v. Delgado
Bros., 96 Phil. 368) The fact that an invitation for bids has been communicated
to a number of possible bidders is not necessarily sufficient to establish
compliance with the requirements of the law if it is shown that other possible
bidders have not been similarly notified.
5. ID.; ID.; ID.; PURPOSE THEREOF; CASE AT BAR. — The purpose of the
rules implementing P.D. 1594 is to secure competitive bidding and to prevent
favoritism, collusion and fraud in the award of these contracts to the
detriment of the public. This purpose was defeated by the irregularities
committed by PBAC. It has been held that the three principles in public
bidding are the offer to the public, an opportunity for competition and a basis
for exact comparison of bids. A regulation of the matter which excludes any
of these factors destroys the distinctive character of the system and thwarts
the purpose of its adoption. (Hannan v. Board of Education, 25 Okla. 372) In
the case at bar, it was the lack of proper notice regarding the pre-qualification
requirement and the bidding that caused the elimination of petitioners B.E.
and Best Built. It was not because of their expired licenses, as private
respondents now claim. Moreover, the plans and specifications which are the
contractors’ guide to an intelligent bid, were not issued on time, thus
defeating the guaranty that contractors be placed on equal footing when they
submit their bids. The purpose of competitive bidding is negated if some
contractors are informed ahead of their rivals of the plans and specifications
that are to be the subject of their bids.
6. ID.; ID.; ID.; EFFECT OF NON-COMPLIANCE THEREOF. — It has been
held in a long line of cases that a contract granted without the competitive
bidding required by law is void, and the party to whom it is awarded cannot
13
benefit from it. It has not been shown that the irregularities committed by
PBAC were induced by or participated in by any of the contractors. Hence,
liability shall attach only to the private respondents for the prejudice
sustained by the petitioners as a result of the anomalies described above.
7. CIVIL LAW; NOMINAL DAMAGES; AWARD THEREOF, WHEN
AVAILABLE. — As there is no evidence of the actual loss suffered by the
petitioners, compensatory damage may not be awarded to them. Moral
damages do not appear to be due either. Even so, the Court cannot close its
eyes to the evident bad faith that characterized the conduct of the private
respondents, including the irregularities in the announcement of the bidding
and their efforts to persuade the ISCOF president to award the project after
two days from receipt of the restraining order and before they moved to lift
such order. For such questionable acts, they are liable in nominal damages at
least in accordance with Article 2221 of the Civil Code, which states: Art.
2221. Nominal damages are adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant may be vindicated or,
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him. These damages are to be assessed against the private
respondents in the amount of P10,000.00 each, to be paid separately for each
of petitioners B.E. Construction and Best Built Construction.
DECISION
CRUZ, J.:
This controversy involves the extent and applicability of P.D. 1818, which
prohibits any court from issuing injunctions in cases involving infrastructure
projects of the government.chanrobles.com.ph : virtual law library
The facts are not disputed.
The Iloilo State College of Fisheries (henceforth ISCOF) through its Pre-
qualification, Bids and Awards Committee (henceforth PBAC) caused the
publication in the November 25, 26, 28, 1988 issues of the Western Visayas
Daily an Invitation to Bid for the construction of the Micro Laboratory Building
at ISCOF. The notice announced that the last day for the submission of pre-
qualification requirements (PRE C-1) ** was December 2, 1988, and that the
bids would be received and opened on December 12, 1988, 3 o’clock in the
afternoon. 1
Petitioners Maria Elena Malaga and Josieleen Najarro, respectively doing
business under the name of the B.E. Construction and Best Built Construction,
submitted their pre-qualification documents at two o’clock in the afternoon
of December 2, 1988. Petitioner Jose Occeña submitted his own PRE-C1 on
December 5, 1988. All three of them were not allowed to participate in the
bidding because their documents were considered late, having been
submitted after the cut-off time of ten o’clock in the morning of December 2,
1988.
On December 12, 1988, the petitioners filed a complaint with the Regional
Trial Court of Iloilo against the chairman and members of PBAC in their official
and personal capacities. The plaintiffs claimed that although they had
submitted their PRE-C1 on time, the PBAC refused without just cause to
accept them. As a result, they were not included in the list of pre-qualified
bidders, could not secure the needed plans and other documents, and were
unable to participate in the scheduled bidding.
In their prayer, they sought the resetting of the December 12, 1988 bidding
and the acceptance of their PRE-C1 documents. They also asked that if the
bidding had already been conducted, the defendants be directed not to
award the project pending resolution of their complaint.
On the same date, Judge Lodrigio L. Lebaquin issued a restraining order
prohibiting PBAC from conducting the bidding and awarding the project. 2
On December 16, 1988, the defendants filed a motion to lift the restraining
order on the ground that the Court was prohibited from issued restraining
orders, preliminary injunctions and preliminary mandatory injunctions by
P.D. 1818.chanroblesvirtualawlibrary
14
The decree reads pertinently as follows:chanrob1es virtual 1aw library
Section 1. No Court in the Philippines shall have jurisdiction to issue any
restraining order, preliminary injunction, or preliminary infrastructure
project, or a mining, fishery, forest or other natural resource development
project of the government, or any public utility operated by the government,
including among others public utilities for the transport of the goods and
commodities, stevedoring and arrastre contracts, to prohibit any person or
persons, entity or government official from proceeding with, or continuing
the execution or implementation of any such project, or the operation of such
public utility, or pursuing any lawful activity necessary for such execution,
implementation or operation.
The movants also contended that the question of the propriety of a
preliminary injunction had become moot and academic because the
restraining order was received late, at 2 o’clock in the afternoon of December
12, 1988, after the bidding had been conducted and closed at eleven thirty in
the morning of that date.
In their opposition of the motion, the plaintiffs argued against the
applicability of P.D. 1818, pointing out that while ISCOF was a state college, it
had its own charter and separate existence and was not part of the national
government or of any local political subdivision. Even if P.D. 1818 were
applicable, the prohibition presumed a valid and legal government project,
not one tainted with anomalies like the project at bar.
They also cited Filipinas Marble Corp. v. IAC, 3 where the Court allowed the
issuance of a writ of preliminary injunction despite a similar prohibition found
in P.D. 385. The Court therein stated that:chanrob1es virtual 1aw library
The government, however, is bound by basic principles of fairness and
decency under the due process clauses of the Bill of Rights. P.D. 385 was
never meant to protect officials of government-lending institutions who take
over the management of a borrower corporation, lead that corporation to
bankruptcy through mismanagement or misappropriation of its funds, and
who, after ruining it, use the mandatory provisions of the decree to avoid the
consequences of their misleads (p. 188, Emphasis supplied).
On January 2, 1989, the trial court lifted the restraining order and denied the
petition for preliminary injunction. It declared that the building sought to be
construed at the ISCOF was an infrastructure project of the government
falling within the coverage of P.D. 1818. Even if it were not, the petition for
the issuance of a writ of preliminary injunction would still fail because the
sheriff’s return showed that PBAC was served a copy of the restraining order
after the bidding sought to be restrained had already been held.
Furthermore, the members of the PBAC could not be restrained from
awarding the project because the authority to do so was lodged in the
President of the ISCOF, who was not a party to the case. 4
In the petition now before us, it is reiterated that P.D. 1818 does not cover
the ISCOF because of its separate and distinct corporate personality. It is also
stressed again that the prohibition under P.D. 1818 could not apply to the
present controversy because the project was vitiated with irregularities, to
wit:chanrobles.com : virtual law library
1. The invitation to bid as published fixed the deadline of submission of
pre-qualification document on December 2, 1988 without indicating any
time, yet after 10:00 o’clock of the given late, the PBAC already refused to
accept petitioners’ documents.
2. The time and date of bidding was published as December 12, 1988 at
3:00 p.m. yet it was held at 10:00 o’clock in the morning.
3. Private respondents, for the purpose of inviting bidders to
participate, issued a mimeographed "Invitation to Bid" form, which by law
(P.D. 1594 and Implementing Rules, Exh. B-1) is to contain the particulars of
the project subject of bidding for the purpose of.
(i) enabling bidders to make an intelligent and accurate bids;
(ii) for PBAC to have a uniform basis for evaluating the bids;
(iii) to prevent collusion between a bidder and the PBAC, by opening to
all the particulars of a project.
15

Additionally, the Invitation to Bid prepared by the respondents and the
Itemized Bill of Quantities therein were left blank. 5 And although the project
in question was a "Construction," the private respondents used an Invitation
to Bid form for "Materials." 6
The petitioners also point out that the validity of the writ of preliminary
injunction had not yet become moot and academic because even if the bids
had been opened before the restraining order was issued, the project itself
had not yet been awarded. The ISCOF president was not an indispensable
party because the signing of the award was merely a ministerial function
which he could perform only upon the recommendation of the Award
Committee. At any rate, the complaint had already been duly amended to
include him as a party defendant.
In their Comment, the private respondents maintain that since the members
of the board of trustees of the ISCOF are all government officials under
Section 7 of P.D. 1523 and since the operations and maintenance of the ISCOF
are provided for in the General Appropriations Law, it is should be considered
a government institution whose infrastructure project is covered by P.D.
1818.
Regarding the schedule for pre-qualification, the private respondents insist
that PBAC posted on the ISCOF bulletin board an announcement that the
deadline for the submission of pre-qualifications documents was at 10 o’clock
of December 2, 1988, and the opening of bids would be held at 1 o’clock in
the afternoon of December 12, 1988. As of ten o’clock in the morning of
December 2, 1988, B.E. construction and Best Built construction had filed only
their letters of intent. At two o’clock in the afternoon, B.E., and Best Built filed
through their common representative, Nenette Garuello, their pre-
qualification documents which were admitted but stamped "submitted late."
The petitioners were informed of their disqualification on the same date, and
the disqualification became final on December 6, 1988. Having failed to take
immediate action to compel PBAC to pre-qualify them despite their notice of
disqualification, they cannot now come to this Court to question the binding
proper in which they had not participated.
In the petitioners’ Reply, they raise as an additional irregularity the violation
of the rule that where the estimate project cost is from P1M to P5M, the
issuance of plans, specifications and proposal book forms should made thirty
days before the date of bidding. 7 They point out that these forms were
issued only on December 2, 1988, and not at the latest on November 12,
1988, the beginning of the 30-day period prior to the scheduled bidding.
In their Rejoinder, the private respondents aver that the documents of B.E.
and Best Built were received although filed late and were reviewed by the
Award Committee, which discovered that the contractors had expired
licenses. B.E.’s temporary certificate of Renewal of Contractor’s License was
valid only until September 30, 1988, while Best Built’s license was valid only
up to June 30, 1988.chanrobles lawlibrary : rednad
The Court has considered the arguments of the parties in light of their
testimonial and documentary evidence and the applicable laws and
jurisprudence. It finds for the petitioners.
The 1987 Administrative Code defines a government instrumentality as
follows:chanrob1es virtual 1aw library
Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions
or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered
institutions, and government-owned or controlled corporations. (Sec. 2 (5)
Introductory Provisions).
The same Code describes a chartered institution thus:chanrob1es virtual 1aw
library
Chartered institution — refers to any agency organized or operating under a
special charter, and vested by law with functions relating to specific
constitutional policies or objectives. This term includes the state universities
and colleges, and the monetary authority of the state. (Sec. 2 (12)
Introductory Provisions).
16

It is clear from the above definitions that ISCOF is a chartered institution and
is therefore covered by P.D. 1818.
There are also indications in its charter that ISCOF is a government
instrumentality. First, it was created in pursuance of the integrated fisheries
development policy of the State, a priority program of the government of
effect the socio-economic life of the nation. Second, the Treasurer of the
Republic of the Philippines also be the ex-officio Treasurer of the state college
with its accounts and expenses to be audited by the Commission on Audit or
its duly authorized representative. Third, heads of bureaus and offices of the
National Government are authorized to loan or transfer to it, upon request
of the president of the state college, such apparatus, equipment, or supplies
and even the services of such employees as can be spared without serious
detriment to public service. Lastly, an additional amount of P1.5M had been
appropriated out of the funds of the National Treasury and it was also
decreed in its charter that the funds and maintenance of the state college
would henceforth be included in the General Appropriations Law. 8
Nevertheless, it does not automatically follow that ISCOF is covered by the
prohibition in the said decree.
In the case of Datiles and Co. v. Sucaldito, 9 this Court interpreted a similar
prohibition contained in P.D. 605, the law after which P.D. 1818 was
patterned. It was there declared that the prohibition pertained to the
issuance of injunctions or restraining orders by courts against administrative
acts in controversies involving facts or the exercise of discretion in technical
cases. The Court observed that to allow the courts to judge these matters
would disturb the smooth functioning of the administrative machinery.
Justice Teodoro Padilla made it clear, however, that on issues definitely
outside of this dimension and involving questions of law, courts could not be
prevented by P.D. No. 605 from exercising their power to restrain or prohibit
administrative acts.
We see no reason why the above ruling should not apply to P.D. 1818.
There are at least two irregularities committed by PBAC that justified
injunction of the bidding and the award of the project.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
First, PBAC set deadlines for the filing of the PRE-C1 and the opening of bids
and then changed these deadlines without prior notice to prospective
participants.
Under the Rules Implementing P.D. 1594, prescribing policies and guidelines
for government infrastructure contracts, PBAC shall provide prospective
bidders with the Notice of Pre-qualification and other relevant information
regarding the proposed work. Prospective contractors shall be required to file
their ARC-Contractors Confidential Application for Registration &
Classifications & the PRE-C2 Confidential Pre-qualification Statement for the
Project (prior to the amendment of the rules, this was referred to as PRE-C1)
not later than the deadline set in the published Invitation to Bid, after which
date no PRE-C2 shall be submitted and received. Invitations to Bid shall be
advertised for at least three times within a reasonable period but in no case
less than two weeks in at least two newspapers of general circulations. 10
PBAC advertised the pre-qualification deadline as December 2, 1988, without
stating the hour thereof, and announced that the opening of bids would be
at 3 o’clock in the afternoon of December 12, 1988. This schedule was
changed and a notice of such change was merely posted at the ISCOF bulletin
board. The notice advanced the cut-off time for the submission of pre-
qualification documents to 10 o’clock in the morning of December 2, 1988,
and the opening of bids to 1 o’clock in the afternoon of December 12, 1988.
The new schedule caused the pre-disqualification of the petitioners as
recorded in the minutes of the PBAC meeting held on December 6, 1988.
While it may be true that there were fourteen contractors who were pre-
qualified despite the change in schedule, this fact did not cure the defect of
the irregular notice. Notably, the petitioners were disqualified because they
failed to meet the new deadline and not because of their expired licenses.
***
17
We have held that where the law requires a previous advertisement before
government contracts can be awarded, non-compliance with the
requirement will, as a general rule, render the same void and of no effect 11
The facts that an invitation for bids has been communicated to a number of
possible bidders is not necessarily sufficient to establish compliance with the
requirements of the law if it is shown that other public bidders have not been
similarly notified. 12
Second, PBAC was required to issue to pre-qualified applicants the plans,
specifications and proposal book forms for the project to be bid thirty days
before the date of bidding if the estimate project cost was between P1M and
P5M. PBAC has not denied that these forms were issued only on December
2, 1988, or only ten days before the bidding scheduled for December 12,
1988. At the very latest, PBAC should have issued them on November 12,
1988, or 30 days before the scheduled bidding.
It is apparent that the present controversy did not arise from the
discretionary acts of the administrative body nor does it involve merely
technical matters. What is involved here is non-compliance with the
procedural rules on bidding which required strict observance. The purpose of
the rules implementing P.D. 1594 is to secure competitive bidding and to
prevent favoritism, collusion and fraud in the award of these contracts to the
detriment of the public. This purpose was defeated by the irregularities
committed by PBAC.chanrobles law library : red
It has been held that the three principles in public bidding are the offer to the
public, an opportunity for competition and a basis for exact comparison of
bids. A regulation of the matter which excludes any of these factors destroys
the distinctive character of the system and thwarts and purpose of its
adoption. 13
In the case at bar, it was the lack of proper notice regarding the pre-
qualification requirement and the bidding that caused the elimination of
petitioners B.E. and Best Built. It was not because of their expired licenses, as
private respondents now claim. Moreover, the plans and specifications which
are the contractors’ guide to an intelligent bid, were not issued on time, thus
defeating the guaranty that contractors be placed on equal footing when they
submit their bids. The purpose of competitive bidding is negated if some
contractors are informed ahead of their rivals of the plans and specifications
that are to be the subject of their bids.
P.D. 1818 was not intended to shield from judicial scrutiny irregularities
committed by administrative agencies such as the anomalies above
described. Hence, the challenged restraining order was not improperly issued
by the respondent judge and the writ of preliminary injunction should not
have been denied. We note from Annex Q of the private respondent’s
memorandum, however, that the subject project has already been "100%
completed as to the Engineering Standard." This fait accompli has made the
petition for a writ of preliminary injunction moot and academic.
We come now to the liabilities of the private respondents.
It has been held in a long line of cases that a contract granted without the
competitive bidding required by law is void, and the party to whom it is
awarded cannot benefit from it. 14 It has not been shown that the
irregularities committed by PBAC were induced by or participated in by any
of the contractors. Hence, liability shall attach only to the private respondents
for the prejudice sustained by the petitioners as a result of the anomalies
described above.
As there is no evidence of the actual loss suffered by the petitioners,
compensatory damage may not be awarded to them. Moral damages do not
appear to be due either. Even so, the Court cannot close its eyes to the
evident bad faith that characterized the conduct of the private respondents,
including the irregularities in the announcement of the bidding and their
efforts to persuade the ISCOF president to award the project after two days
from receipt of the restraining order and before they moved to lift such order.
For such questionable acts, they are liable in nominal damages at least in
accordance with Article 2221 of the Civil Code, which
states:jgc:chanrobles.com.ph
"Art. 2221. Nominal damages are adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant may be
18
vindicated or, recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.

These damages are to assessed against the private respondents in the

amount of P10,000.00 each, to be paid separately for each of petitioners B.E.
Construction and Best Built Construction. The other petitioner, Occeña
Builders, is not entitled to relief because it admittedly submitted its pre-
qualification documents on December 5, 1988, or three days after the
deadline.chanrobles virtual lawlibrary

WHEREFORE, judgment is hereby rendered: a) upholding the restraining

order dated December 12, 1988, as not covered by the prohibition in P.D.
1818; b) ordering the chairman and the members of the PBAC board of
trustees, namely Manuel R. Penachos, Jr., Alfredo Matangga, Enrico Ticar,
and Teresita Villanueva, to each pay separately to petitioners Maria Elena
Malaga and Josieleen Najarro nominal damages P10,000.00 each; and c)
removing the said chairman and members from the PBAC board of trustees,
or whoever among them is still incumbent therein, for their malfeasance in
office. Costs against PBAC.

Let a copy of this decision be sent to the Office of the Ombudsman.

SO ORDERED.

19
PURISIMA, J.:
These are cases for certiorari and prohibition, challenging the
constitutionality and validity of Administrative Order Nos. 29 and 268 on
various grounds.
The facts in G.R. Nos. 109406, 110642, 111494, and 112056 are undisputed,
to wit:
Petitioners are officials and employees of several government departments
and agencies who were paid incentive benefits for the year 1992, pursuant to
Executive Order No. 292 1 ("EO 292"), otherwise known as the Administrative
Code of 1987, and the Omnibus Rules Implementing Book V 2 of EO 292. On
January 19, 1993, then President Fidel V. Ramos ("President Ramos") issued
Administrative Order No. 29 ("AO 29") authorizing the grant of productivity
incentive benefits for the year 1992 in the maximum amount of P1,000.00 3
and reiterating the prohibition 4 under Section 7 5 of Administrative Order
No. 268 ("AO 268"), enjoining the grant of productivity incentive benefits
without prior approval of the President. Section 4 of AO 29 directed "[a]ll
departments, offices and agencies which authorized payment of CY 1992
Productivity Incentive Bonus in excess of the amount authorized under
Section 1 hereof [are hereby directed] to immediately cause the
return/refund of the excess within a period of six months to commence
fifteen (15) days after the issuance of this Order." In compliance therewith,
the heads of the departments or agencies of the government concerned, who
are the herein respondents, caused the deduction from petitioners' salaries
or allowances of the amounts needed to cover the alleged overpayments. To
prevent the respondents from making further deductions from their salaries
or allowances, the petitioners have come before this Court to seek relief.
In G.R. No. 119597, the facts are different but the petition poses a common
issue with the other consolidated cases. The petitioner, Association of
Dedicated Employees of the Philippine Tourism Authority ("ADEPT"), is an
association of employees of the Philippine Tourism Authority ("PTA") who
were granted productivity incentive bonus for calendar year 1992 pursuant
to Republic Act No. 6971 ("RA 6971"), otherwise known as the Productivity
Incentives Act of 1990. Subject bonus was, however, disallowed by the
Corporate Auditor on the ground that it was "prohibited under
Administrative Order No. 29 dated January 19, 1993." 6 The disallowance of
the bonus in question was finally brought on appeal to the Commission an
Audit (COA) which denied the appeal in its Decision 7 of March 6, 1995,
ratiocinating, thus:
. . . Firstly, the provisions of RA #6971 insofar as the coverage is concerned
refer to business enterprises including government owned and/or controlled
corporations performing proprietary functions.
Sec. 1a of the Supplemental Rules Implementing RA #6971 classified such
coverage as:
All business enterprises, with or without existing duly certified labor
organizations, including government owned and/or controlled corporations
performing proprietary functions which are established solely for business or
profit and accordingly excluding those created, maintained or acquired in
pursuance of a policy of the State enunciated in the Constitution, or by law
and those whose officers and employess are covered by the Civil Service.
(emphasis supplied)
The PTrA is a GOCC created in pursuance of a policy of the State, Section 9 of
Presidential Decree No. 189 states that "To implement the policies and
program of the Department (Dept. of Tourism), there is hereby created a
Philippine Tourism Authority, . . ." Likewise, Section 21 of the same decree
provides that "All officials and employees of the Authority, . . ., shall be
subject to Civil Service Law, rules and regulations, and the coverage of the
Wage and Position Classification Office.
Furthermore, although Supplemental Rules and Regulations implementing
R.A. #6971 was issued only on December 27, 1991, the law itself is clear that
it pertains to private business enterprises whose employees are covered by
the Labor Code of the Philippines, as mentioned in the following provisions:
Sec. 5. Labor Management Committee. . . . that at the reguest of any party
to the negotiation, the National Wages and Productivity Commission of the
20
Department of Labor and Employment shall provide the necessary studies, . .
..
Sec. 8. Notification. — A business enterprise which adopts a productivity
incentive program shall submit copies of the same to the National Wages and
Productivity Commission and to the Bureau of Internal Revenue for their
information and record.
Sec. 9. Disputes and Grievances. — Whenever disputes, grievances, or other
matters arise from the interpretation or implementation of the productivity
incentive program, . . . may seek the assistance of the National Conciliation
and Mediation Board of the Department of Labor and Employment for such
purpose. . . .
Therefore, considering the foregoing, the PTrA is within the "exclusion"
provision of the Implementing Rules of RA #6971 and so, it (PTrA) does not
fall within its coverage as being entitled to, the productivity incentive bonus
under RA #6971.
Secondly, Administrative Order No. 29 which is the basis for the grant of the
productivity incentive bonus/benefits for CY 1992 also explessly provides
"prohibiting payments of similar benefits in future years unless duly
authorized by the President."
Thirdly, the disallowance of the Auditor, PTrA has already been resolved
when this Commission circularized thru COA Memorandum #92-758 dated
April 3, 1992 the Supplemental to Rules implementing RA 6971 otherwise
known as the "Productivity Incentives Act of 1990." . . .
Lastly, considering the title of RA #6971, i.e. "An Act to encourage
productivity and maintain industrial peace by providing incentives to both
labor and capital", and its implementing rules and regulations prepared by
the Department of Labor and Employment and the Department of Finance,
this Office concludes that said law/regulation pertains to agencies in the
private sector whose employees are covered by the Labor Code.
With the denial of its appeal, petitioner found its way here via the petition in
G.R. No. 119597, to seek relief from the aforesaid decision of COA.
We will first resolve the issue on the applicability of RA 6971 to petitioner
ADEPT in G.R. No. 119597 before passing upon the constitutionality or validity
of Administrative Orders 29 and 268.
Sec. 3 of RA 6971, reads:
Sec. 3. Coverage. This Act shall apply to all business enterprises with or
without existing and duly recognized or certified labor organizations,
including government-owned and controlled corporations performing
proprietary functions. It shall cover all employees and workers including
casual, regular, supervisory and managerial employees. (emphasis ours)
Pursuant to Section 10 8 of RA 6971, the Secretary of Labor and Secretary of
Finance issued Supplemental Rules to Implement the said law, as follows:
Sec. 1. — Paragraph (a) Section 1, Rule II of the Rules Implementing RA 6971,
shall be amended to read as follows:
Coverage. These Rules shall apply to:
(a) All business enterprises with or without existing duly certified labor
organizations, including government-owned and controlled corporations
performing proprietary functions which are established solely for business or
profit or gain and accordingly excluding those created, maintained or
acquired in pursuance of a policy of the state, enunciated in the Constitution
or by law, and those whose officers and employees are covered by the Civil
Service. (emphasis ours)
xxx xxx xxx
Petitioner contends that the PTA is a government-owned and controlled
corporation performing proprietary function, and therefore the Secretary of
Labor and Employment and Secretary of Finance exceeded their authority in
issuing the aforestated Supplemental Rules Implementing RA 6971.
21
Government-owned and controlled corporations may perform governmental
or proprietary functions or both, depending on the purpose for which they
have been created. If the purpose, is to obtain special corporate benefits or
earn pecuniary profit, the function is proprietary. If it is in the interest of
health, safety and for the advancement of public good and welfare, affecting
the public in general, the function is governmental. 9 Powers classified as
"proprietary" are those intended for private advantage and benefit. 10
The PTA was established by Presidential Decree No. 189, as amended by
Presidential Decree No. 564 ("PD 564").
Its general purposes 11 are:
1. To implement the policies and programs of the Department of
Tourism ("Department");
2. To develop tourist zones;
3. To assist private enterprises in undertaking tourism projects;
4. To operate and maintain tourist facilities;
5. To assure rand availability for private investors in hotels and other
tourist facilities;
6. To coordinate all tourism project plans and operations.
Its specific functions and powers 12 are:
1. Planning and development of tourism projects
a. To assist the Department make a comprehensive survey of the
physical and natural tourism resources of the Philippines; to establish the
order of priority for development of said areas; to recommend to the
President the proclamation of a tourist zone; and to define and fix the
boundaries of the zone;
b. To formulate a development plan for each zone;
c. To submit to the President through the National Economic and
Development Athority for review and approval all development plans before
the same are enforced or implemented;
d. To submit to the President an Annual Progress Report;
e. To assist the Department to determine the additional capacity
requirements for various tourist facilities and services; to prepare a ten-year
Tourism Priorities Plan; to update annually the ten year Tourism Priorities
Plan.
f. To gather, collate and analyze statistical data and other pertinent
information for the effective implementation of PD 564.
2. Acquisition and disposition of lands and other assets for tourist zone
purposes
a. To acquire possession and ownership of all lands transferred to it
from other government corporations and institutions and any land having
tourism potential and earmarked in the Tourism Priorities Plans for intensive
development into a tourist zone or as a part thereof, subject to the approval
of the President.
b. To acquire by purchase, by negotiation or by condemnation
proceedings any private land within and without the tourist zones for any of
the following reasons: (a) consolidation of lands for tourist zone development
purposes, (b) prevention of land speculation in areas declared as tourist
zones, (c) acquisition of right of way to the zones, (d) protection of water shed
areas and natural assets with tourism value, and (e) for any other purpose
expressly authorized under PD 564.
c. For the purpose of providing land acquisition assistance to registered
tourism enterprises, to sell, subdivide, resell, lease, sublease, rent out, or
otherwise, to said registered tourism enterprises under sufficiently soft terms
22
for use specifically in the development of hotels, recreational facilities, and
other tourist services. 5. Project and investment promotions

d. To develop and/or subdivide any land in its name or undertake
condominium projects thereon, and sell subdivision lots or condominium
units to private persons for investment purposes.
e. To take over or transfer to a registered tourism enterprise in
accordance with law any lease on foreshore areas within a tourist zone or
adjacent thereto, in cases said areas are not being utilized in accordance with
the PTA's approved zone development plan and wherein the lessee
concerned does not agree to conform accordingly.
f. To arrange for the reclamation of any land adjacent to or adjoining a
tourist zone in coordination with appropriate government agencies.
3. Infrastructure development for tourist zone purposes
a. To contract, supervise and pay for infrastructure works and civil
works within a tourist zone owned and operated by the PTA.
b. To coordinate with appropriate government agencies the
development of infrastructure requirements supporting a tourist zone.
c. To take water from any public stream, river, creek, lake, spring, or
waterfall and to alter, straighten, obstruct or increase the flow of water in
streams.
4. Zone adminstration and control
a. To formulate and implement zoning regulations.
b. To determine and regulate the enterprises to be established within a
tourist zone.
c. To ensure, through the proper authorities concerned, the ecological
preservation, maintenance and/or rehabilitation of the common and the
public areas within a tourist zone and the environment thereof.
d. To identify and recommend to the President the preservation and/or
restoration of national monuments or preserves; to arrange for the
preservation and/or restoration of the same with appropriate government
agencies or with the private sector or with the owners themselves of said
tourist attractions; and to identify and recommend to the appropriate
authorities concerned the declaration of tourist areas and attractions as
national monuments and preserves.
a. To identify, develop, invest in, own, manage and operate such
projects as it may deem to be vital for recreation and rest but not sufficiently
attractive economically for private investment.
b. To construct hotel buildings and other tourist facilities within a
tourist zone and in turn lease such facilities to registered tourism enterprises
for operation, management and maintenance.
c. To organize, finance, invest in, manage and operate wholly-owned
subsidiary corporations.
6. Direct assistance to registered enterprises
a. To administer the tax and other incentives granted to registered
enterprises.
b. To evaluate, approve and register or reject any and all tourism
projects or enterprises established within the tourist zones.
c. To grant medium and long-term loans and/or re-lend any funds
borrowed for the purpose to duly qualified registered tourism enterprises.
d. To guarantee local and foreign borrowings of registered enterprises.
e. To provide equity investments in the form of cash and/or land.
f. To extend technical, management and financial assistance to tourism
projects.
g. To identify, contact and assist in negotiations of suitable partners for
both local and foreign investors interested in investment or participation in
the tourism industry.
h. To assist registered enterprises and prospective investors to have
their papers processed with dispatch by government offices.
7. Other powers and functions
a. To engage or retain the services of financial, management, legal,
technical, and/or project consultants from the private or government sector.
b. To have the power to succeed by its corparate name.
c. To adopt, alter, and use a corporate seal.
d. To sue and be sued under its corporate name.
e. To enter into any contracts of any kind and description.

23
f. To own or possess personal and/or real property.
g. To make, adopt and enforce rules and regulations to execute its
powers, duties and functions.
h. To purchase, hold, and alienate shares of stock or bonds of any
corporation.
i. To collect fees or charges as may be imposed under PD 564.
j. To contract indebtedness and issue bonds.
k. To fix and collect rentals for the lease, use or occupancy of lands,
buildings, or other property owned or administered by PTA.
l. To do any and all acts and things necessary to carry out the purposes
for which the PTA is created.
Categorited in light of the foregoing provisions of law in point, PTA's
governmental functions include the first, third, fourth, and sixth of the
aforesaid general purposes. The second 13 and fifth general purposes fall
under its proprietary functions.
With respect to PTA's specific functions and powers, the first and fourth are
governmental in nature while the specific functions and powers are
proprietary in character. The second, third, sixth, and seventh specific
functions and powers can be considered partly-governmental and partly-
proprietary, considering that 2(a), 2(b), 2(c), 2(d), 2(e), 3(a), 6(c), 6(d), 6(e),
7(h), 7(j), and 7(k) are proprietary functions while 2(f), 3(b), 3(c), 6(a), 6(b),
6(f), 6(g), 6(h), 7(a), 7(b), 7(c), 7(d), 7(f), 7(g), and 7(l) are governmental
functions. The specific functions and powers treated in 7(e) and 7(i) may be
classified either as propietary or governmental, depending on the
circumstances under which they are exercised or performed.
The aforecited powers and functions of PTA are predominantly
governmental, principally geared towards the development and promotion
of tourism in the scenic Philippine archipelago. But it is irrefutable that
PTA.also performs proprietary functions, as envisaged by its charter.
Reliance on the above analysis of the functions and powers of PTA does not
suffice for the determination of whether or not it is within the coverage of RA
6971. For us to resolve the issues raised here solely on the basis of the
classification of PTA's powers and functions may lead to the rendition of
judgment repugnant to the legislative intent and to established doctrines, as
well, such as on the prohibition against government workers to strike. 14
Under RA 6971, the workers have the right to strike.
To ascertain whether PTA is within the ambit of RA 6971, there is need to find
out the legislative intent, and to refer to other provisions of RA 6971 and
other pertinent laws, that may aid the Court in ruling on the right or officials
and employees of PTA to receive bonuses under RA 8971.
Petitioner cites an entry in the journal of the House of Representatives to
buttress its submission that PTA is within the coverage of RA 6971, to wit:
Chairman Veloso: The intent of including government-owned and
controlled corporations within the coverage of the Act is the recognition of
the principle that when government goes into business, it (divests) itself of
its immunity from suit and goes down to the level of ordinary private
enterprises and subjects itself to the ordinary laws of the land just like
ordinary private enterprises. Now, when people work therefore in
government-owned or controlled corporations, it is as if they are also, just
like in the private sector, entitled to all the benefits of all laws that apply to
workers in the private sector. In my view, even including the right to organize,
bargain. . . . VELOSO (Bicameral Conference Committee on Labor and
Employment, pp. 15-16)
After a careful study, the Court is of the view, and go holds, that contrary to
petitioner's interpretation, the government-owned and controlled
corporations Mr. Chairman Veloso had in mind were government-owned and
controlled corporations incorporated under the general corporation law. This
is so because only workers in private corporations and government-owned
and controlled corporations, incorporated under the general corporation law,
have the right to bargain (collectively). Those in government corporations
with special charter, which are subject to Civil Service Laws, have no right to
bargain (collectively), except where the terms and conditions of employment
are not fixed by law 15. Their rights and duties are not comparable with those
in the private sector.
24
Since the terms and conditions of government employment are fixed by law,
government workers cannot use the same weapons employed by workers in
the private sector to secure concessions from their employers. The principle
behind labor unionism in private industry is that industrial peace cannot be
secured through compulsion by law. Relations between private employers
and their employees rest on an essentially voluntary basis. Subject to the
minimum requirements of wage laws and other labor and welfare legislation,
the terms and conditions of employment in the unionized private sector are
settled through the process of collective bargaining. In government
employment however, it is the legisleture and, where properly given
delegated power, the administrative heads of government which fix the
terms and conditions of employment. And this is effected through statutes or
administrative circulars, rules, and regulations, not through collective
bargaining agreements. (Alliance of Government Workers v. Minister of Labor
and Employment, 124 SCRA 1) (emphasis ours)
Government corporations may be created by special charters or by
incorporation under the general corporation law. Those created by special
charters are governed by the Civil Service Law while those incorporated
under the general corporation law are governed by the Labor Code. 16
The legislative intent to place only government-owned and controlled
corporations performing proprietary functions under the coverage of RA
6971 is gleanable from the other provisions of the law. For instance, section
2 17 of said law envisions "industrial peace and harmony" and "to provide
corresponding incentives to both labor and capital;" section 4 18 refers to
"representatives of labor and management," section 5 19 mentions of
"collective bargaining agent(s) of the bargaining unit(s);" section 6 20 relates
to "existing collective bargaining agreements," and "labor and management;"
section 7 21 speaks of "strike or lockout;" and section 9 22 purports to "seek
the assistance of the National Conciliation and Mediation Board of the
Department of Labor and Employment" and "include the name(s) of the
voluntary arbitrators or panel of voluntary arbitrator." All the aforecited
provisions of law apply only to private corporations and government-owned
and controlled corporations organized under the general corporation law.
Only they have collective bargaining agents, collective bargaining units,
collective bargaining agreements, and the right to strike or lockout.
To repeat, employees of government corporations created by special
charters have neither the right to strike nor the right to bargain collectively,
as defined in the Labor Code. The case of Social Security System Employees
Associalion indicates the following remedy of government workers not
allowed to strike or bargain collectively, to wit:
Government employees may, therefore, through their unions or associations,
either petition the Congress the betterment of the terms and conditions of
employment which are within the ambit of legislation or negotiate with the
appropriate government agencies for the improvement of those which are
not fixed by law. If there be any unresolved grievances, the dispute may be
referred to the Public Sector Labor-Management Council for appropriate
action. But employees in the civil service may not resort to strikes, walkouts
and other temporary work stoppages, like workers in the private sector, to
pressure the Government to accede to their demands, (supra, footnote 14,
p. 698; emphasis ours)
It is a rule in statutory construction that every part of the statute must be
interpreted with reference to the context, i.e., that every part of the statute
must be considered together with the other parts, and kept subservient to
the general intent of the whole enactment. 23 The provisions of RA 6971,
taken together, reveal the legislative intent to include only government-
owned and controlled corporations performing proprietary functions within
its coverage.
Every statute must be construed harmonized with other statutes as to form
a uniform system of jurisprudence. 24 We note Section 1, Rule X of the
Omnibus Rules Implementing Book V of EO 292, which reads:
Sec. 1. — Each department or agency of government, whether national or
local, including bureaus and agencies, state colleges and universities, and
government owned and controlled corporations with original charters, shall
establish its own Department or Agency Employee Suggestions and
Incentives Award System in accordance with these Rules and shall submit the
same to the Commission for approval. (emphasis ours)
25
It is thus evident that PTA, being a government-owned and controlled
corporation with original charter subject to Civil Service Law, Rules and
Regulations, 25 is already within the scope of an incentives award systern
under Section 1, Rule X of the Omnibus Rules Implementing EO 292 issued by
the Civil Service Commission ("Commission"). Since government-owned and
controlled corporations with original charters do have an incentive award
system, Congress enacted a law that would address the same concern of
officials and employees of government-owned and controlled corporations
incorporated under the general corporation law.
All things studiedly considered in proper perspective, the Court finds no
reversible error in the finding by respondent Commission that PTA is not
within the purview of RA 6971. As regards the promulgation of implementing
rules and regulations, it bears stressing that the "power of administrative
officials to promulgate rules in the implementation of the statute is
necessarily limited to what is provided for in the legislative enactment." 26 In
the case under scrutiny, the Supplementary Rules Implementing RA 6971
issued by the Secretary of Labor and Employment and the Secretary of
Finance accord with the intendment and provisions of RA 6971.
Consequently, not being covered by RA 6971, AO 29 applies to the petitioner.
We now tackle the common issue posited by the consolidated petitions on
the constitutionality of AO 29 and AO 268.
Petitioners contend and argue, that:
I. AO 29 AND AO 268 ARE VIOLATIVE OF THE PROVISIONS OF EO 292
AND, HENCE, NULL AND VOID.
II. AO 29 AND AO 268 UNLAWFULLY USURP THE CONSTITUTIONAL
AUTHORITY GRANTED SOLELY TO THE CIVIL SERVICE COMMISSION.
III. THE FORCED REFUND OF INCENTIVE PAY IS AN UNCONSTITUTIONAL
IMPAIRMENT OF A CONTRACTUAL OBLIGAITION.
IV. ASSUMING, FOR THE SAKE OF ARGUMENT ONLY, THAT THE GRANT
OF PRODUCTIVITY INCENTIVE BENEFITS WAS INVALID, THE SAME SHOULD BE
THE PERSONAL LIABILITY OF OFFICIALS DIRECTLY RESPONSIBLE THEREFOR IN
ACCORDANCE WITH SECTION 9 OF AO 268.
Issued by the then President Corazon Aquino ("President Aquino") on July 25,
1987 in the exercise ol her legislative powers under the 1987 Constitution, 27
EO 292, or the Administrative Code or 1987, provided for the following
incentive award system:
Sec. 31. Career and Personnel Development Plans. — Each department or
agency shall prepare a career and personnel development plan which shall
be integrated into a national plan by the Commission. Such career and
personnel development plans which shall include provisions on merit
promotions, performance evaluation, in-service training, including overseas
and local schorlarship and training grants, job rotation, suggestions and
incentive award systems, and such other provisions for employees' health,
welfare, counseling, recreation and similar services.
Sec. 35. Employee Suggestions and Incentive Award Syatem. — There shall be
established a government-wide employee suggestions and incentive awards
system which shall be administered under such rules, regulations, and
standards as maybe promulgated by the Commssion.
In accordance with rules, regulations, and standards promulgated by the
Commission, the President or the head of each department or agency is
authorized to incur whatever necessary expensesd involved in the honorary
recognition of subordinate officers and employees of the government who
by their suggestions, inventions, superior accomplishment, and other
personal efforts contribute to the efficiency, economy, or other improvement
of government operations, or who perform such other extraordinary acts or
services in the public interest in connection with, or in relations to, their
official employment.
Sec. 36. Personnel Relations. — (1) It shall be the concern of the Commission
to provide leadership and assistance in developing employee relations
programs in the department or agencies.
(2) Every Secretary or head of agency shall take all proper steps toward
the creation of an atmosphere conducive to good supervisor-employee
relations and the improvement of employee morale.
26
Pursuant to the provision of Section 12(2), 28 Chapter 3, Book V or EO 292,
the commission adopted and prescribed the Omnibus Rules Implementing
Book V of EO 292 which, among others, provide:
Sec. 1. — Each department or agency of government, whether national or
local, including bureaus and agencies, state colleges and universities, and
government owned and controlled corporations with original charters, shall
establish its own Department or Agency Employee Suggestions and
Incentives Award System in accordance with these Rules and shall submit the
same to the Commission for approval.
Sec. 2. — The System is designed to encourage creativity, innovativeness,
efficiency, integrity and productivity in the public service by recognizing and
rewarding officials and employees, individually or in groups, for their
suggestions, inventions, superior accomplishments, and other personal
efforts which contribute to the efficiency, economy, or other improvement in
government operations, or for other extraordinary acts of services in the
public interest.
Sec. 7. — The incentive awards shall consist of, though not limited to, the
following:
(c) Productivity Incentive which shall be given to an employee or group
of employees who has exceeded their targets or has incurred incremental
improvement over existing targets.
On February 21, 1992, President Aquino issued AO 268 which granted "each
official and employee of the government the productivity incentive benefits
in a maximum amount equivalent to thirty percent (30%) of his one (1) month
basic salary but in no case shall such amount be less than two thousand pesos
(P2,000.00)," 29 for those who have rendered at least one year of service as
of December 31, 1991. 30 Said AO carried the prohibition, provided in Section
7 thereof, which reads:
Sec. 7. The productivity incentive benefits herein authorized shall be
granted only for Calendar Year 1991. Accordingly, all heads of agencies,
including the governing boards of government-owned or -controlled
corporations and financial institutions, are hereby strictly prohibited from
authorizing/granting productivity incentive benefits or other allowances of
similar nature for Calendar Year 1992 and future years pending the result of
a comprehensive study being undertaken by the Office of the President in
coordination with the Civil Service Commission and the Department of
Budget and Management on the matter.
The formulation of the necessary implementing guidelines for Executive
Order No. 486 dated 8 November 1991 establishing a performance-based
incentive system for government-owned or
-controlled corporations shall likewise be included in the comprehensive
study referred to in the preceding paragraph.
On January 19, 1993, President Ramos issued AO 29 which granted
productivity incentive benefits to government employees in the maximum
amount of P1,000.00 31 for the calendar year 1992 but reiterated the
proscription under Section 7 of AO 268, thus:
Sec. 2. The prohibition prescribed under Section 7 of Administrative Order
No. 268 is hereby reiterated. Accordingly, all heads of government
offices/agencies, including government-owned and/or controlled
corporations, as well as their respective governing boards are hereby
enjoined and prohibited from authorizing/granting Productivity Incentive
Benefits or any and all similar forms of allowances/benefits without prior
approval and authorization via Administrative Order by the Office of the
President. Henceforth, anyone found violating any of the mandates in this
Order, including all officials/employees and the COA Auditor-in-Charge of
such government office/agency found to have taken part thereof, shall be
accordingly and severely dealt with in accordance with the applicable
provisions of existing penal laws.
Consequently, all administrative authorizations to grant any form of
allowances/benefits and all forms of additional compensation usually paid
outside of the prescribed basic salary under R.A. No. 6758, the Salary
Standardization Law, that are inconsistent with the legislated policy on the
matter or are not covered by any legislative action are hereby revoked.
27
The implementation of Executive Order No. 486 dated November 8, 1991, as
amended by Executive Order No. 518 dated May 29, 1992, is hereby deferred
until a more comprehensive and equitable scheme for the grant of the
benefits that can be applied government-wide is formulated by the
Department of Budget and Management.
Petitioners theorize that AO 29 and AO 268 violate EO 292 and since the latter
is a law, it prevails over executive issuances. Petitioners likewise assert that
AO 29 and AO 268 encroach upon the constitutional authority of the Civil
Service Commission to adopt measures to strengthen the merit and rewards
system and to promulgate rules, regulations and standards governing the
incentive awards system of the civil service.
The Court is not impressed with petitioners' submission. AO 29 and AO 268
were issued in the valid exercise of presidential control over the executive
departments.
In establishing a Civil Service Commission, the 1987 Constitution delineated
its function, as follows:
The Civil Service Commission, as the central personnel agency of the
Government, shall establish a career service and adopt measures to promote
morale, efficiency, integrity responsiveness, progressiveness, and courtesy in
the civil service. It shall strengthen the merit and rewards system, integrate
all human resources development programs for all levels and ranks, and
institutionalize a management climate conducive to public accountability. It
shall submit to the President and the Congress an annual report on its
personnel programs. (Section 3, Article IX, B, 1987 Constitution)
The Commission handles personnel matters of the government. As the
central personnel agency of the Government, it is tasked to formulate and
establish a system of incentives and rewards for officials and employees in
the public sector, alike.
The functions of the Commission have been decentralized to the different
departments, offices, and agencies of the government —
Sec. 1. Declaration of Policy. — The State shall insure and promote the
Constitutional mandate that appointment in the Civil Service shall be made
only according to merit and fitness; that the Civil Service Commission, as the
central personnel agency of the Government shall establish a career service,
adopt measures to promote morale, efficiency, integrity, responsiveness, and
courtesy in the civil service, strengthen the merit and rewards system,
integrate all human resources development programs for all levels and ranks,
and institutionalize a management climate conducive to public
accountability; that public office is a public trust and public officers and
employees must at all times be accountable to the people; and that personnel
functions shall be decentralized, delegating the corresponding authority to
the departments, offices and agencies where such functions can be
effectively performed. (Section 1, Chapter I, Subtitle A, Title I, EO 292)
(emphasis ours)
Specifically, implementation of the Employee Suggestions and Incentive
Award System has been decentralized to the President or to the head of each
department of agency —
Sec. 35. Employee Suggestions and Incentive Award System. — There shall be
established a government-wide employee suggestions and incentive awards
system which shall be administered under such rules, regulations, and
standards as maybe promulgated by the Commission.
In accordance with rules, regulations, and standards promulgated by the
Commission, the President or the head of each department or agency is
authorized to incur whatever necessary expenses involved in the honorary
recognition of subordinate officers and employees of the government who
by their suggestions, inventions, superior accomplishment, and other
personal efforts contribute to the efficiency, economy, or other improvement
of government operations or who perform such other extraordinary acts or
services in the public interest in connection with, or in relation to, their official
employment. (EO 292) (emphasis ours)
The President is the head of the government. Governmental power and
authority are exercised and implemented through him. His power includes
the control executive departments —
28

The president shall have control of all the executive departments, bureaus,
and offices. He shall ensure that the laws be faithfully execute. (Section 17,
Article VII, 1987 Constitution)
Control means "the power of an officer to alter or modify or set aside what a
subordinate officer had done in the performance of his duties and to
substitute the judgment of the former for that of the latter." 32 It has been
held that "[t]he President can, by virtue of his power of control, review,
modify, alter or nullify any action, or decision, of his subordinate in the
executive departments, bureaus, or offices under him. He can exercise this
power motu proprio without need of any appeal from any party." 33
When the President issued AO 29 limiting the amount of incentive benefits,
enjoining heads of government agencies from granting incentive benefits
without prior approval from him, and directing the refund of the excess over
the prescribed amount, the President was just exercising his power of control
over executive departments. This is decisively clear from the WHEREAS
CLAUSES of AO 268 and AO 29, to wit:
ADMINISTRATIVE ORDER NO. 268
WHEREAS, the Productivity incentive benefits granted by the different
agencies are of varying amounts, causing dissension/demoralization on the
part of those who had received less and those who have not yet received any
such benefit, thereby defeating the purpose for which the same should be
granted; and
WHEREAS, there exists the need to regulate the grant of the productivity
incentive benefits or other similar allowances in conformity with the policy
on standardization of compensation pursuant to Republic Act No. 6758;
ADMINISTRATIVE ORDER NO. 29
WHEREAS the faithful implementation of statutes, including the
Administrative Code of 1987 and all laws governing all forms of additional
compensation and personnel benefits is a Constitutional prerogative vested
in the President of the Philippines under Section 17, Article VII of the, 1987
Constitution;
WHEREAS, the Constitutional prerogetive includes the determination of the
rates, the timing and schedule of payment, and final authority to commit
limited resources of government for the payment of personnel incentives,
cash awards, productivity bonus, and other forms of additional compensation
and fringe benefits;
WHEREAS, some government agencies have overlooked said Constitutional
prerogative and have unilaterally granted to their respective officials and
employees incentive awards;
WHEREAS, the Offioe of the President issued Administrative Order No. 268,
dated February 21, 1992, strictly prohibiting the grant of Productivity
Incentive Bonus or other allowances of similar nature for Calender Year 1992
and future years pending the issuance of the requisite authorization by the
President;
WHEREAS, notwithstanding said prohibition some government
offices/agencies and government-owned and/or controlled corporations and
financial institutions have granted productivity incentive benefits in varying
nomenclature and amounts without the proper authorization/coordination
with the Office of the President;
WHEREAS, the unilateral and uncoordinated grant of productivity incentive
benefits gave rise to discontentment, dissatisfaction and demoralization
among government personnel who have received less or have not received
at all such benefits;
The President issued subject Administrative Orders to regulate the grant of
productivity incentive benefits and to prevent discontentment,
dissatisfaction and demoralization among government personnel by
committing limited resources of government for the equal payment of
incentives and awards. The President was only exercising his power of control
by modifying the acts of the respondents who granted incentive benefits to
their employees without appropriate clearance from the Office of the
29
President, thereby resulting in the uneven distribution of government
resources. In the view of the President, respondents did a mistake which had
to be corrected. In so acting, the President exercised a constitutionally-
protected prerogative —
The President's duty to execute the law is of constitutional origin. So, too, is
his control of all executive departments. Thus it is, that department heads are
men of his confidence. His is the power to appoint them; his, too, is the
privilege to dismiss them at pleasure. Naturally he controls and directs their
acts. Implicit then is his authority to go over, confirm, modify or reverse the
action taken by his department secretaries. In this context, it may not be said
that the President cannot rule on the correctness of a decision of a
department secretary. (Lacson-Magallanes Co., Inc. v. Paño, 21 SCRA 898)
Neither can it be said that the President encroached upon the authority of
the Commission on Civil Service to grant benefits to government personnel.
AO 29 and AO 268 did not revoke the privilege of employees to receive
incentive benefits. The same merely regulated the grant and amount thereof.
Sound management and effective utilization of financial resources of
government are basically executive functions, 34 not the Commission's.
Implicit is this recognition in EO 292, which states:
Sec. 35. Employee Suggestions and Incentive Award System. — There shall be
established a government-wide employee suggestions and incentive awards
system which shall be administered under such rules, regulations, and
standards as maybe promulgated by the Commission.
In accordance with rules, regulations and standards promulgeted by the
Commission, the President or the head of each department or agency is
authorized to incur whatever necessary expenses involved in the honorary
recognition of subordinate officers and employees of the government who
by their suggestions, inventions, superior accomplishment, and other
personal efforts contribute to the efficiency, economy, or other improvement
of government operations, or who perform such other extraordinary acts or
services in the public interest in connection with, or in relation to their official
employment. (Chapter 5, Subtitle A, Book V) (emphasis ours)
Conformably, it is "the President or the head of each department or agency
who is authorized to incur the necessary expenses involved in the honorary
recognition of subordinate officers and employees of the government." It is
not the duty of the Commission to fix the amount of the incentives. Such
function belongs to the President or his duly empowered alter ego.
Anent petitioners' contention that the forcible refund of incentive benefits is
an unconstitutional impairment of a contractual obligation, suffice it to state
that "[n]ot all contracts entered into by the government will operate as a
waiver of its non-suability; distinction must be made between its sovereign
and proprietary acts (United States of America v. Ruiz, 136 SCRA 487)." 35
The acts involved in this case are governmental. Besides, the Court is in
agreement with the Solicitor General that the incentive pay or benefit is in
the nature of a bonus which is not a demandable or enforceable obligation.
It is understood that the Judiciary, Civil Service Commission, Commission on
Audit, Commission on Elections, and Office of the Ombudsman, which enjoy
fiscal autonomy, are not covered by the amount fixed by the President. As
explained in Bengzon vs. Drilon (208 SCRA 133):
As envisioned in the Constitution, the fiscal autonomy enjoyed by the
Judiciary, the Civil Service Commission, the Commission on Audit, the
Commission on Elections, and the Office of the Ombudsman contemplates a
guarantee of full flexibility to allocate and utilize their resources with the
wisdom and dispatch that their needs require. It recognizes the power and
authority to levy, assess and collect fees, fix rates of compensation not
exceeding the highest rates authorized by law for compensation and pay
plans of the government and allocate and disburse such sums as may be
provided by law or prescribed by them in the course of the discharge of their
functions.
Fiscal autonomy means freedom from outside control. If the Supreme Court
says it needs 100 typewriters but DBM rules we need only 10 typewriters and
sends its recommendations to Congress without even informing us, the
autonomy given by the Constitution becomes an empty and illusory platitude.
30
The Judiciary, the Constitutional Commissions, and the Ombudsman must WHEREFORE, the Petitions in G.R. Nos. 109406, 110642, 111494, and 112056
have the independence and flexibility needed in the discharge of their are hereby DIMISSED, and as above ratiocinated, further deductions from the
constitutional duties. The imposition of restrictions and constraints on the salaries and allowances of petitioners are hereby ENJOINED.
manner the independent constitutional offices allocate and utilize the funds
appropriated for their operations is anathema to fiscal autonomy and In G.R. No. 119597, the assailed Decision of respondent Commission on Audit
violative not only of the express mandate of the Constitution but especially is AFFIRMED. No pronouncement as to costs.
as regards the Supreme Court, of the independence and separation of powers
upon which the entire fabric of our constitutional system is based. In the SO ORDERED.
interest of comity and cooperation, the Supreme Court, Constitutional
Commissions, and the Ombudsman have so far limited their objections to
constant reminders. We now agree with the petitioners that this grant of
autonomy should cease to be a meaningless provision.

Untenable is petitioners' contention that the herein respondents be held

personally liable for the refund in question. Absent a showing of bad faith or
malice, public officers are not personally liable for damage resulting from the
performance of official duties. 36

Every public official is entitled to the presumption of good faith in the

discharge of official duties. 37 Absent any showing of bad faith or malice,
there is likewise a presumption of regularity in the performance of official
duties. 38

In upholding the constitutionality of AO 268 and AO 29, the Court reiterates

the well-entrenched doctrine that "in interpreting statutes, that which will
avoid a finding of unconstitutionality is to be preferred." 39

Considering, however, that all the parties here acted in good faith, we cannot
countenance the refund of subject incentive benefits for the year 1992, which
amounts the petitioners have already received. Indeed, no indicia of bad faith
can be detected under the attendant facts and circumstances. The officials
and chiefs of offices concerned disbursed such incentive benefits in the
honest belief that the amounts given were due to the recipients and the latter
accepted the same with gratitude, confident that they richly deserve such
benefits.

31
G.R. No. L-57883 March 12, 1982
GUALBERTO J. DE LA LLANA Presiding Judge, Branch II of the City Court of
Olongapo, ESTANISLAO L. CESA, JR., FIDELA Y. VARGAS, BENJAMIN C.
ESCOLANGO, JUANITO C. ATIENZA, MANUEL REYES ROSAPAPAN, JR.,
VIRGILIO E. ACIERTO, and PORFIRIO AGUILLON AGUILA, petitioners,
vs.
MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman,
Commission on Audit, and RICARDO PUNO, Minister of Justice, Respondents.
FERNANDO, C.J.:
This Court, pursuant to its grave responsibility of passing upon the validity of
any executive or legislative act in an appropriate cases, has to resolve the
crucial issue of the constitutionality of Batas Pambansa Blg. 129, entitled "An
act reorganizing the Judiciary, Appropriating Funds Therefor and for Other
Purposes." The task of judicial review, aptly characterized as exacting and
delicate, is never more so than when a conceded legislative power, that of
judicial reorganization, 1 may possibly collide with the time-honored principle
of the independence of the judiciary 2 as protected and safeguarded by this
constitutional provision: "The Members of the Supreme Court and judges of
inferior courts shall hold office during good behavior until they reach the age
of seventy years or become incapacitated to discharge the duties of their
office. The Supreme Court shall have the power to discipline judges of inferior
courts and, by a vote of at least eight Members, order their dismissal." 3 For
the assailed legislation mandates that Justices and judges of inferior courts
from the Court of Appeals to municipal circuit courts, except the occupants
of the Sandiganbayan and the Court of Tax Appeals, unless appointed to the
inferior courts established by such Act, would be considered separated from
the judiciary. It is the termination of their incumbency that for petitioners
justifies a suit of this character, it being alleged that thereby the security of
tenure provision of the Constitution has been ignored and disregarded,
That is the fundamental issue raised in this proceeding, erroneously entitled
Petition for Declaratory Relief and/or for Prohibition 4 considered by this
Court as an action for prohibited petition, seeking to enjoin respondent
Minister of the Budget, respondent Chairman of the Commission on Audit,
and respondent Minister of Justice from taking any action implementing
Batas Pambansa Blg. 129. Petitioners 5 sought to bolster their claim by
imputing lack of good faith in its enactment and characterizing as an undue
delegation of legislative power to the President his authority to fix the
compensation and allowances of the Justices and judges thereafter
appointed and the determination of the date when the reorganization shall
be deemed completed. In the very comprehensive and scholarly Answer of
Solicitor General Estelito P. Mendoza, 6 it was pointed out that there is no
valid justification for the attack on the constitutionality of this statute, it being
a legitimate exercise of the power vested in the Batasang Pambansa to
reorganize the judiciary, the allegations of absence of good faith as well as
the attack on the independence of the judiciary being unwarranted and
devoid of any support in law. A Supplemental Answer was likewise filed on
October 8, 1981, followed by a Reply of petitioners on October 13. After the
hearing in the morning and afternoon of October 15, in which not only
petitioners and respondents were heard through counsel but also the amici
curiae, 7 and thereafter submission of the minutes of the proceeding on the
debate on Batas Pambansa Blg. 129, this petition was deemed submitted for
decision.
The importance of the crucial question raised called for intensive and rigorous
study of all the legal aspects of the case. After such exhaustive deliberation
in several sessions, the exchange of views being supplemented by
memoranda from the members of the Court, it is our opinion and so hold that
Batas Pambansa Blg. 129 is not unconstitutional.
1. The argument as to the lack of standing of petitioners is easily
resolved. As far as Judge de la Llana is concerned, he certainly falls within the
principle set forth in Justice Laurel's opinion in People v. Vera. 8 Thus: "The
unchallenged rule is that the 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 of its enforcement." 9 The
other petitioners as members of the bar and officers of the court cannot be
considered as devoid of "any personal and substantial interest" on the
matter. There is relevance to this excerpt from a separate opinion in Aquino,
Jr. v. Commission on Elections: 10 "Then there is the attack on the standing
32
of petitioners, as vindicating at most what they consider a public right and
not protecting their rights as individuals. This is to conjure the specter of the
public right dogma as an inhibition to parties intent on keeping public officials
staying on the path of constitutionalism. As was so well put by Jaffe: 'The
protection of private rights is an essential constituent of public interest and,
conversely, without a well-ordered state there could be no enforcement of
private rights. Private and public interests are, both in substantive and
procedural sense, aspects of the totality of the legal order.' Moreover,
petitioners have convincingly shown that in their capacity as taxpayers, their
standing to sue has been amply demonstrated. There would be a retreat from
the liberal approach followed in Pascual v. Secretary of Public Works,
foreshadowed by the very decision of People v. Vera where the doctrine was
first fully discussed, if we act differently now. I do not think we are prepared
to take that step. Respondents, however, would hark back to the American
Supreme Court doctrine in Mellon v. Frothingham with their claim that what
petitioners possess 'is an interest which is shared in common by other people
and is comparatively so minute and indeterminate as to afford any basis and
assurance that the judicial process can act on it.' That is to speak in the
language of a bygone era even in the United States. For as Chief Justice
Warren clearly pointed out in the later case of Flast v. Cohen, the barrier thus
set up if not breached has definitely been lowered." 11
2. The imputation of arbitrariness to the legislative body in the
enactment of Batas Pambansa Blg. 129 to demonstrate lack of good faith
does manifest violence to the facts. Petitioners should have exercised greater
care in informing themselves as to its antecedents. They had laid themselves
open to the accusation of reckless disregard for the truth, On August 7, 1980,
a Presidential Committee on Judicial Reorganization was organized. 12 This
Executive Order was later amended by Executive Order No. 619-A., dated
September 5 of that year. It clearly specified the task assigned to it: "1. The
Committee shall formulate plans on the reorganization of the Judiciary which
shall be submitted within seventy (70) days from August 7, 1980 to provide
the President sufficient options for the reorganization of the entire Judiciary
which shall embrace all lower courts, including the Court of Appeals, the
Courts of First Instance, the City and Municipal Courts, and all Special Courts,
but excluding the Sandigan Bayan." 13 On October 17, 1980, a Report was
submitted by such Committee on Judicial Reorganization. It began with this
paragraph: "The Committee on Judicial Reorganization has the honor to
submit the following Report. It expresses at the outset its appreciation for the
opportunity accorded it to study ways and means for what today is a basic
and urgent need, nothing less than the restructuring of the judicial system.
There are problems, both grave and pressing, that call for remedial measures.
The felt necessities of the time, to borrow a phrase from Holmes, admit of no
delay, for if no step be taken and at the earliest opportunity, it is not too much
to say that the people's faith in the administration of justice could be shaken.
It is imperative that there be a greater efficiency in the disposition of cases
and that litigants, especially those of modest means — much more so, the
poorest and the humblest — can vindicate their rights in an expeditious and
inexpensive manner. The rectitude and the fairness in the way the courts
operate must be manifest to all members of the community and particularly
to those whose interests are affected by the exercise of their functions. It is
to that task that the Committee addresses itself and hopes that the plans
submitted could be a starting point for an institutional reform in the
Philippine judiciary. The experience of the Supreme Court, which since 1973
has been empowered to supervise inferior courts, from the Court of Appeals
to the municipal courts, has proven that reliance on improved court
management as well as training of judges for more efficient administration
does not suffice. I hence, to repeat, there is need for a major reform in the
judicial so stem it is worth noting that it will be the first of its kind since the
Judiciary Act became effective on June 16, 1901." 14 I t went to say: "I t does
not admit of doubt that the last two decades of this century are likely to be
attended with problems of even greater complexity and delicacy. New social
interests are pressing for recognition in the courts. Groups long inarticulate,
primarily those economically underprivileged, have found legal spokesmen
and are asserting grievances previously ignored. Fortunately, the judicially
has not proved inattentive. Its task has thus become even more formidable.
For so much grist is added to the mills of justice. Moreover, they are likewise
to be quite novel. The need for an innovative approach is thus apparent. The
national leadership, as is well-known, has been constantly on the search for
solutions that will prove to be both acceptable and satisfactory. Only thus
may there be continued national progress." 15 After which comes: "To be less
abstract, the thrust is on development. That has been repeatedly stressed —
and rightly so. All efforts are geared to its realization. Nor, unlike in the past,
was it to b "considered as simply the movement towards economic progress
33
and growth measured in terms of sustained increases in per capita income
and Gross National Product (GNP). 16 For the New Society, its implication
goes further than economic advance, extending to "the sharing, or more
appropriately, the democratization of social and economic opportunities, the
substantiation of the true meaning of social justice." 17 This process of
modernization and change compels the government to extend its field of
activity and its scope of operations. The efforts towards reducing the gap
between the wealthy and the poor elements in the nation call for more
regulatory legislation. That way the social justice and protection to labor
mandates of the Constitution could be effectively implemented." 18 There is
likelihood then "that some measures deemed inimical by interests adversely
affected would be challenged in court on grounds of validity. Even if the
question does not go that far, suits may be filed concerning their
interpretation and application. ... There could be pleas for injunction or
restraining orders. Lack of success of such moves would not, even so, result
in their prompt final disposition. Thus delay in the execution of the policies
embodied in law could thus be reasonably expected. That is not conducive to
progress in development." 19 For, as mentioned in such Report, equally of
vital concern is the problem of clogged dockets, which "as is well known, is
one of the utmost gravity. Notwithstanding the most determined efforts
exerted by the Supreme Court, through the leadership of both retired Chief
Justice Querube Makalintal and the late Chief Justice Fred Ruiz Castro, from
the time supervision of the courts was vested in it under the 1973
Constitution, the trend towards more and more cases has continued." 20 It is
understandable why. With the accelerated economic development, the
growth of population, the increasing urbanization, and other similar factors,
the judiciary is called upon much oftener to resolve controversies. Thus
confronted with what appears to be a crisis situation that calls for a remedy,
the Batasang Pambansa had no choice. It had to act, before the ailment
became even worse. Time was of the essence, and yet it did not hesitate to
be duly mindful, as it ought to be, of the extent of its coverage before
enacting Batas Pambansa Blg. 129.
3. There is no denying, therefore, the need for "institutional reforms,"
characterized in the Report as "both pressing and urgent." 21 It is worth
noting, likewise, as therein pointed out, that a major reorganization of such
scope, if it were to take place, would be the most thorough after four
generations. 22 The reference was to the basic Judiciary Act generations .
enacted in June of 1901, 23 amended in a significant way, only twice previous
to the Commonwealth. There was, of course, the creation of the Court of
Appeals in 1935, originally composed "of a Presiding Judge and ten appellate
Judges, who shall be appointed by the President of the Philippines, with the
consent of the Commission on Appointments of the National Assembly, 24 It
could "sit en banc, but it may sit in two divisions, one of six and another of
five Judges, to transact business, and the two divisions may sit at the same
time." 25 Two years after the establishment of independence of the Republic
of the Philippines, the Judiciary Act of 1948 26 was passed. It continued the
existing system of regular inferior courts, namely, the Court of Appeals,
Courts of First Instance, 27 the Municipal Courts, at present the City Courts,
and the Justice of the Peace Courts, now the Municipal Circuit Courts and
Municipal Courts. The membership of the Court of Appeals has been
continuously increased. 28 Under a 1978 Presidential Decree, there would be
forty-five members, a Presiding Justice and forty-four Associate Justices, with
fifteen divisions. 29 Special courts were likewise created. The first was the
Court of Tax Appeals in 1954, 30 next came the Court of Agrarian Relations in
1955, 31 and then in the same year a Court of the Juvenile and Domestic
Relations for Manila in 1955, 32 subsequently followed by the creation of two
other such courts for Iloilo and Quezon City in 1966. 33 In 1967, Circuit
Criminal Courts were established, with the Judges having the same
qualifications, rank, compensation, and privileges as judges of Courts of First
Instance. 34
4. After the submission of such Report, Cabinet Bill No. 42, which later
became the basis of Batas Pambansa Blg. 129, was introduced. After setting
forth the background as above narrated, its Explanatory Note continues:
"Pursuant to the President's instructions, this proposed legislation has been
drafted in accordance with the guidelines of that report with particular
attention to certain objectives of the reorganization, to wit, the attainment
of more efficiency in disposal of cases, a reallocation of jurisdiction, and a
revision of procedures which do not tend to the proper meeting out of justice.
In consultation with, and upon a consensus of, the governmental and
parliamentary leadership, however, it was felt that some options set forth in
the Report be not availed of. Instead of the proposal to confine the
jurisdiction of the intermediate appellate court merely to appellate
34
adjudication, the preference has been opted to increase rather than diminish
its jurisdiction in order to enable it to effectively assist the Supreme Court.
This preference has been translated into one of the innovations in the
proposed Bill." 35 In accordance with the parliamentary procedure, the Bill
was sponsored by the Chairman of the Committee on Justice, Human Rights
and Good Government to which it was referred. Thereafter, Committee
Report No. 225 was submitted by such Committee to the Batasang Pambansa
recommending the approval with some amendments. In the sponsorship
speech of Minister Ricardo C. Puno, there was reference to the Presidential
Committee on Judicial Reorganization. Thus: "On October 17, 1980, the
Presidential Committee on Judicial Reorganization submitted its report to the
President which contained the 'Proposed Guidelines for Judicial
Reorganization.' Cabinet Bill No. 42 was drafted substantially in accordance
with the options presented by these guidelines. Some options set forth in the
aforesaid report were not availed of upon consultation with and upon
consensus of the government and parliamentary leadership. Moreover, some
amendments to the bill were adopted by the Committee on Justice, Human
Rights and Good Government, to which The bill was referred, following the
public hearings on the bill held in December of 1980. The hearings consisted
of dialogues with the distinguished members of the bench and the bar who
had submitted written proposals, suggestions, and position papers on the bill
upon the invitation of the Committee on Justice, Human Rights and Good
Government." 36 Stress was laid by the sponsor that the enactment of such
Cabinet Bill would, firstly, result in the attainment of more efficiency in the
disposal of cases. Secondly, the improvement in the quality of justice
dispensed by the courts is expected as a necessary consequence of the easing
of the court's dockets. Thirdly, the structural changes introduced in the bill,
together with the reallocation of jurisdiction and the revision of the rules of
procedure, are designated to suit the court system to the exigencies of the
present day Philippine society, and hopefully, of the foreseeable future." 37
it may be observed that the volume containing the minutes of the
proceedings of the Batasang Pambansa show that 590 pages were devoted
to its discussion. It is quite obvious that it took considerable time and effort
as well as exhaustive study before the act was signed by the President on
August 14, 1981. With such a background, it becomes quite manifest how
lacking in factual basis is the allegation that its enactment is tainted by the
vice of arbitrariness. What appears undoubted and undeniable is the good
faith that characterized its enactment from its inception to the affixing of the
Presidential signature.
5. Nothing is better settled in our law than that the abolition of an office
within the competence of a legitimate body if done in good faith suffers from
no infirmity. The ponencia of Justice J.B.L. Reyes in Cruz v. Primicias, Jr. 38
reiterated such a doctrine: "We find this point urged by respondents, to be
without merit. No removal or separation of petitioners from the service is
here involved, but the validity of the abolition of their offices. This is a legal
issue that is for the Courts to decide. It is well-known rule also that valid
abolition of offices is neither removal nor separation of the incumbents. ...
And, of course, if the abolition is void, the incumbent is deemed never to have
ceased to hold office. The preliminary question laid at rest, we pass to the
merits of the case. As well-settled as the rule that the abolition of an office
does not amount to an illegal removal of its incumbent is the principle that,
in order to be valid, the abolition must be made in good faith." 39 The above
excerpt was quoted with approval in Bendanillo, Sr. v. Provincial Governor,
40 two earlier cases enunciating a similar doctrine having preceded it. 41 As
with the offices in the other branches of the government, so it is with the
judiciary. The test remains whether the abolition is in good faith. As that
element is conspicuously present in the enactment of Batas Pambansa Blg.
129, then the lack of merit of this petition becomes even more apparent. The
concurring opinion of Justice Laurel in Zandueta v. De la Costa 42 cannot be
any clearer. This is a quo warranto proceeding filed by petitioner, claiming
that he, and not respondent, was entitled to he office of judge of the Fifth
Branch of the Court of First Instance of Manila. There was a Judicial
Reorganization Act in 1936, 43 a year after the inauguration of the
Commonwealth, amending the Administrative Code to organize courts of
original jurisdiction known as the Courts of First Instance Prior to such
statute, petitioner was the incumbent of such branch. Thereafter, he received
an ad interim appointment, this time to the Fourth Judicial District, under the
new legislation. Unfortunately for him, the Commission on Appointments of
then National Assembly disapproved the same, with respondent being
appointed in his place. He contested the validity of the Act insofar as it
resulted in his being forced to vacate his position This Court did not rule
squarely on the matter. His petition was dismissed on the ground of estoppel.
Nonetheless, the separate concurrence of Justice Laurel in the result reached,
35
to repeat, reaffirms in no uncertain terms the standard of good faith to
preclude any doubt as to the abolition of an inferior court, with due
recognition of the security of tenure guarantee. Thus: " I am of the opinion
that Commonwealth Act No. 145 in so far as it reorganizes, among other
judicial districts, the Ninth Judicial District, and establishes an entirely new
district comprising Manila and the provinces of Rizal and Palawan, is valid and
constitutional. This conclusion flows from the fundamental proposition that
the legislature may abolish courts inferior to the Supreme Court and
therefore may reorganize them territorially or otherwise thereby
necessitating new appointments and commissions. Section 2, Article VIII of
the Constitution vests in the National Assembly the power to define,
prescribe and apportion the jurisdiction of the various courts, subject to
certain limitations in the case of the Supreme Court. It is admitted that
section 9 of the same article of the Constitution provides for the security of
tenure of all the judges. The principles embodied in these two sections of the
same article of the Constitution must be coordinated and harmonized. A
mere enunciation of a principle will not decide actual cases and controversies
of every sort. (Justice Holmes in Lochner vs. New York, 198 U.S., 45; 49 Law.
ed; 937)" 44 justice Laurel continued: "I am not insensible to the argument
that the National Assembly may abuse its power and move deliberately to
defeat the constitutional provision guaranteeing security of tenure to all
judges, But, is this the case? One need not share the view of Story, Miller and
Tucker on the one hand, or the opinion of Cooley, Watson and Baldwin on
the other, to realize that the application of a legal or constitutional principle
is necessarily factual and circumstantial and that fixity of principle is the
rigidity of the dead and the unprogressive. I do say, and emphatically,
however, that cases may arise where the violation of the constitutional
provision regarding security of tenure is palpable and plain, and that
legislative power of reorganization may be sought to cloak an
unconstitutional and evil purpose. When a case of that kind arises, it will be
the time to make the hammer fall and heavily. But not until then. I am
satisfied that, as to the particular point here discussed, the purpose was the
fulfillment of what was considered a great public need by the legislative
department and that Commonwealth Act No. 145 was not enacted purposely
to affect adversely the tenure of judges or of any particular judge. Under
these circumstances, I am for sustaining the power of the legislative
department under the Constitution. To be sure, there was greater necessity
for reorganization consequent upon the establishment of the new
government than at the time Acts Nos. 2347 and 4007 were approved by the
defunct Philippine Legislature, and although in the case of these two Acts
there was an express provision providing for the vacation by the judges of
their offices whereas in the case of Commonwealth Act No. 145 doubt is
engendered by its silence, this doubt should be resolved in favor of the valid
exercise of the legislative power." 45
6. A few more words on the question of abolition. In the above-cited
opinion of Justice Laurel in Zandueta, reference was made to Act No. 2347 46
on the reorganization of the Courts of First Instance and to Act No. 4007 47
on the reorganization of all branches of the government, including the courts
of first instance. In both of them, the then Courts of First Instance were
replaced by new courts with the same appellation. As Justice Laurel pointed
out, there was no question as to the fact of abolition. He was equally
categorical as to Commonwealth Act No. 145, where also the system of the
courts of first instance was provided for expressly. It was pointed out by
Justice Laurel that the mere creation of an entirely new district of the same
court is valid and constitutional. such conclusion flowing "from the
fundamental proposition that the legislature may abolish courts inferior to
the Supreme Court and therefore may reorganize them territorially or
otherwise thereby necessitating new appointments and commissions." 48
The challenged statute creates an intermediate appellate court, 49 regional
trial courts, 50 metropolitan trial courts of the national capital region, 51 and
other metropolitan trial courts, 52 municipal trial courts in cities, 53 as well
as in municipalities, 54 and municipal circuit trial courts. 55 There is even less
reason then to doubt the fact that existing inferior courts were abolished. For
the Batasang Pambansa, the establishment of such new inferior courts was
the appropriate response to the grave and urgent problems that pressed for
solution. Certainly, there could be differences of opinion as to the
appropriate remedy. The choice, however, was for the Batasan to make, not
for this Court, which deals only with the question of power. It bears
mentioning that in Brillo v. Eñage 56 this Court, in an unanimous opinion
penned by the late Justice Diokno, citing Zandueta v. De la Costa, ruled: "La
segunda question que el recurrrido plantea es que la Carta de Tacloban ha
abolido el puesto. Si efectivamente ha sido abolido el cargo, entonces ha
quedado extinguido el derecho de recurente a ocuparlo y a cobrar el salario
36
correspodiente. Mc Culley vs. State, 46 LRA, 567. El derecho de un juez de
desempenarlo hasta los 70 años de edad o se incapacite no priva al Congreso
de su facultad de abolir, fusionar o reorganizar juzgados no constitucionales."
57 Nonetheless, such well-established principle was not held applicable to
the situation there obtaining, the Charter of Tacloban City creating a city
court in place of the former justice of the peace court. Thus: "Pero en el caso
de autos el Juzgado de Tacloban no ha sido abolido. Solo se le ha cambiado
el nombre con el cambio de forma del gobierno local." 58 The present case is
anything but that. Petitioners did not and could not prove that the challenged
statute was not within the bounds of legislative authority.
7. This opinion then could very well stop at this point. The
implementation of Batas Pambansa Blg. 129, concededly a task incumbent on
the Executive, may give rise, however, to questions affecting a judiciary that
should be kept independent. The all-embracing scope of the assailed
legislation as far as all inferior courts from the Courts of Appeals to municipal
courts are concerned, with the exception solely of the Sandiganbayan and the
Court of Tax Appeals 59 gave rise, and understandably so, to misgivings as to
its effect on such cherished Ideal. The first paragraph of the section on the
transitory provision reads: "The provisions of this Act shall be immediately
carried out in accordance with an Executive Order to be issued by the
President. The Court of Appeals, the Courts of First Instance, the Circuit
Criminal Courts, the Juvenile and Domestic Relations Courts, the Courts of
Agrarian Relations, the City Courts, the Municipal Courts, and the Municipal
Circuit Courts shall continue to function as presently constituted and
organized, until the completion of the reorganization provided in this Act as
declared by the President. Upon such declaration, the said courts shall be
deemed automatically abolished and the incumbents thereof shall cease to
hold the office." 60 There is all the more reason then why this Court has no
choice but to inquire further into the allegation by petitioners that the
security of tenure provision, an assurance of a judiciary free from extraneous
influences, is thereby reduced to a barren form of words. The amended
Constitution adheres even more clearly to the long-established tradition of a
strong executive that antedated the 1935 Charter. As noted in the work of
former Vice-Governor Hayden, a noted political scientist, President Claro M.
Recto of the 1934 Convention, in his closing address, in stressing such a
concept, categorically spoke of providing "an executive power which, subject
to the fiscalization of the Assembly, and of public opinion, will not only know
how to govern, but will actually govern, with a firm and steady hand,
unembarrassed by vexatious interferences by other departments, or by
unholy alliances with this and that social group." 61 The above excerpt was
cited with approval by Justice Laurel in Planas v. Gil. 62 Moreover, under the
1981 Amendments, it may be affirmed that once again the principle of
separation of powers, to quote from the same jurist as ponente in Angara v.
Electoral Commission, 63 "obtains not through express provision but by
actual division." 64 The president, under Article VII, shall be the head of state
and chief executive of the Republic of the Philippines." 65 Moreover, it is
equally therein expressly provided that all the powers he possessed under
the 1935 Constitution are once again vested in him unless the Batasang
Pambansa provides otherwise." 66 Article VII of the 1935 Constitution speaks
categorically: "The Executive power shall be vested in a President of the
Philippines." 67 As originally framed, the 1973 Constitution created the
position of President as the "symbolic head of state." 68 In addition, there
was a provision for a Prime Minister as the head of government exercising
the executive power with the assistance of the Cabinet 69 Clearly, a modified
parliamentary system was established. In the light of the 1981 amendments
though, this Court in Free Telephone Workers Union v. Minister of Labor 70
could state: "The adoption of certain aspects of a parliamentary system in the
amended Constitution does not alter its essentially presidential character."
71 The retention, however, of the position of the Prime Minister with the
Cabinet, a majority of the members of which shall come from the regional
representatives of the Batasang Pambansa and the creation of an Executive
Committee composed of the Prime Minister as Chairman and not more than
fourteen other members at least half of whom shall be members of the
Batasang Pambansa, clearly indicate the evolving nature of the system of
government that is now operative. 72 What is equally apparent is that the
strongest ties bind the executive and legislative departments. It is likewise
undeniable that the Batasang Pambansa retains its full authority to enact
whatever legislation may be necessary to carry out national policy as usually
formulated in a caucus of the majority party. It is understandable then why
in Fortun v. Labang 73 it was stressed that with the provision transferring to
the Supreme Court administrative supervision over the Judiciary, there is a
greater need "to preserve unimpaired the independence of the judiciary,
37
especially so at present, where to all intents and purposes, there is a fusion
between the executive and the legislative branches." 74
8. To be more specific, petitioners contend that the abolition of the
existing inferior courts collides with the security of tenure enjoyed by
incumbent Justices and judges under Article X, Section 7 of the Constitution.
There was a similar provision in the 1935 Constitution. It did not, however,
go as far as conferring on this Tribunal the power to supervise
administratively inferior courts. 75 Moreover, this Court is em powered "to
discipline judges of inferior courts and, by a vote of at least eight members,
order their dismissal." 76 Thus it possesses the competence to remove
judges. Under the Judiciary Act, it was the President who was vested with
such power. 77 Removal is, of course, to be distinguished from termination
by virtue of the abolition of the office. There can be no tenure to a non-
existent office. After the abolition, there is in law no occupant. In case of
removal, there is an office with an occupant who would thereby lose his
position. It is in that sense that from the standpoint of strict law, the question
of any impairment of security of tenure does not arise. Nonetheless, for the
incumbents of inferior courts abolished, the effect is one of separation. As to
its effect, no distinction exists between removal and the abolition of the
office. Realistically, it is devoid of significance. He ceases to be a member of
the judiciary. In the implementation of the assailed legislation, therefore, it
would be in accordance with accepted principles of constitutional
construction that as far as incumbent justices and judges are concerned, this
Court be consulted and that its view be accorded the fullest consideration.
No fear need be entertained that there is a failure to accord respect to the
basic principle that this Court does not render advisory opinions. No question
of law is involved. If such were the case, certainly this Court could not have
its say prior to the action taken by either of the two departments. Even then,
it could do so but only by way of deciding a case where the matter has been
put in issue. Neither is there any intrusion into who shall be appointed to the
vacant positions created by the reorganization. That remains in the hands of
the Executive to whom it properly belongs. There is no departure therefore
from the tried and tested ways of judicial power, Rather what is sought to be
achieved by this liberal interpretation is to preclude any plausibility to the
charge that in the exercise of the conceded power of reorganizing tulle
inferior courts, the power of removal of the present incumbents vested in this
Tribunal is ignored or disregarded. The challenged Act would thus be free
from any unconstitutional taint, even one not readily discernidble except to
those predisposed to view it with distrust. Moreover, such a construction
would be in accordance with the basic principle that in the choice of
alternatives between one which would save and another which would
invalidate a statute, the former is to be preferred. 78 There is an obvious way
to do so. The principle that the Constitution enters into and forms part of
every act to avoid any constitutional taint must be applied Nuñez v.
Sandiganbayan, 79 promulgated last January, has this relevant excerpt: "It is
true that other Sections of the Decree could have been so worded as to avoid
any constitutional objection. As of now, however, no ruling is called for. The
view is given expression in the concurring and dissenting opinion of Justice
Makasiar that in such a case to save the Decree from the direct fate of
invalidity, they must be construed in such a way as to preclude any possible
erosion on the powers vested in this Court by the Constitution. That is a
proposition too plain to be committed. It commends itself for approval." 80
Nor would such a step be unprecedented. The Presidential Decree
constituting Municipal Courts into Municipal Circuit Courts, specifically
provides: "The Supreme Court shall carry out the provisions of this Decree
through implementing orders, on a province-to-province basis." 81 It is true
there is no such provision in this Act, but the spirit that informs it should not
be ignored in the Executive Order contemplated under its Section 44. 82 Thus
Batas Pambansa Blg. 129 could stand the most rigorous test of
constitutionality. 83
9. Nor is there anything novel in the concept that this Court is called
upon to reconcile or harmonize constitutional provisions. To be specific, the
Batasang Pambansa is expressly vested with the authority to reorganize
inferior courts and in the process to abolish existing ones. As noted in the
preceding paragraph, the termination of office of their occupants, as a
necessary consequence of such abolition, is hardly distinguishable from the
practical standpoint from removal, a power that is now vested in this
Tribunal. It is of the essence of constitutionalism to assure that neither
agency is precluded from acting within the boundaries of its conceded
competence. That is why it has long been well-settled under the
constitutional system we have adopted that this Court cannot, whenever
appropriate, avoid the task of reconciliation. As Justice Laurel put it so well in
38
the previously cited Angara decision, while in the main, "the Constitution has
blocked out with deft strokes and in bold lines, allotment of power to the
executive, the legislative and the judicial departments of the government, the
overlapping and interlacing of functions and duties between the several
departments, however, sometimes makes it hard to say just where the one
leaves off and the other begins." 84 It is well to recall another classic
utterance from the same jurist, even more emphatic in its affirmation of such
a view, moreover buttressed by one of those insights for which Holmes was
so famous "The classical separation of government powers, whether viewed
in the light of the political philosophy of Aristotle, Locke, or Motesquieu or of
the postulations of Mabini, Madison, or Jefferson, is a relative theory of
government. There is more truism and actuality in interdependence than in
independence and separation of powers, for as observed by Justice Holmes
in a case of Philippine origin, we cannot lay down 'with mathematical
precision and divide the branches into water-tight compartments' not only
because 'the great ordinances of the Constitution do not establish and divide
fields of black and white but also because 'even the more specific of them are
found to terminate in a penumbra shading gradually from one extreme to the
other.'" 85 This too from Justice Tuazon, likewise expressing with force and
clarity why the need for reconciliation or balancing is well-nigh unavodiable
under the fundamental principle of separation of powers: "The constitutional
structure is a complicated system, and overlappings of governmental
functions are recognized, unavoidable, and inherent necessities of
governmental coordination." 86 In the same way that the academe has noted
the existence in constitutional litigation of right versus right, there are
instances, and this is one of them, where, without this attempt at
harmonizing the provisions in question, there could be a case of power
against power. That we should avoid.
10. There are other objections raised but they pose no difficulty.
Petitioners would characterize as an undue delegation of legislative power to
the President the grant of authority to fix the compensation and the
allowances of the Justices and judges thereafter appointed. A more careful
reading of the challenged Batas Pambansa Blg. 129 ought to have cautioned
them against raising such an issue. The language of the statute is quite clear.
The questioned provisions reads as follows: "Intermediate Appellate Justices,
Regional Trial Judges, Metropolitan Trial Judges, municipal Trial Judges, and
Municipal Circuit Trial Judges shall receive such receive such compensation
and allowances as may be authorized by the President along the guidelines
set forth in Letter of Implementation No. 93 pursuant to Presidential Decree
No. 985, as amended by Presidential Decree No. 1597." 87 The existence of a
standard is thus clear. The basic postulate that underlies the doctrine of non-
delegation is that it is the legislative body which is entrusted with the
competence to make laws and to alter and repeal them, the test being the
completeness of the statue in all its terms and provisions when enacted. As
pointed out in Edu v. Ericta: 88 "To avoid the taint of unlawful delegation,
there must be a standard, which implies at the very least that the legislature
itself determines matters of principle and lays down fundamental policy.
Otherwise, the charge of complete abdication may be hard to repel. A
standard thus defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the
circumstances under which the legislative command is to be effected. It is the
criterion by which legislative purpose may be carried out. Thereafter, the
executive or administrative office designated may in pursuance of the above
guidelines promulgate supplemental rules and regulations. The standard may
be either express or implied. If the former, the non-delegation objection is
easily met. The standard though does not have to be spelled out specifically.
It could be implied from the policy and purpose of the act considered as a
whole." 89 The undeniably strong links that bind the executive and legislative
departments under the amended Constitution assure that the framing of
policies as well as their implementation can be accomplished with unity,
promptitude, and efficiency. There is accuracy, therefore, to this observation
in the Free Telephone Workers Union decision: "There is accordingly more
receptivity to laws leaving to administrative and executive agencies the
adoption of such means as may be necessary to effectuate a valid legislative
purpose. It is worth noting that a highly-respected legal scholar, Professor
Jaffe, as early as 1947, could speak of delegation as the 'dynamo of modern
government.'" 90 He warned against a "restrictive approach" which could be
"a deterrent factor to much-needed legislation." 91 Further on this point from
the same opinion" "The spectre of the non-delegation concept need not
haunt, therefore, party caucuses, cabinet sessions or legislative chambers."
92 Another objection based on the absence in the statue of what petitioners
refer to as a "definite time frame limitation" is equally bereft of merit. They
ignore the categorical language of this provision: "The Supreme Court shall
39
submit to the President, within thirty (30) days from the date of the effectivity
of this act, a staffing pattern for all courts constituted pursuant to this Act
which shall be the basis of the implementing order to be issued by the
President in accordance with the immediately succeeding section." 93 The
first sentence of the next section is even more categorical: "The provisions of
this Act shall be immediately carried out in accordance with an Executive
Order to be issued by the President." 94 Certainly petitioners cannot be heard
to argue that the President is insensible to his constitutional duty to take care
that the laws be faithfully executed. 95 In the meanwhile, the existing inferior
courts affected continue functioning as before, "until the completion of the
reorganization provided in this Act as declared by the President. Upon such
declaration, the said courts shall be deemed automatically abolished and the
incumbents thereof shall cease to hold office." 96 There is no ambiguity. The
incumbents of the courts thus automatically abolished "shall cease to hold
office." No fear need be entertained by incumbents whose length of service,
quality of performance, and clean record justify their being named anew, 97
in legal contemplation without any interruption in the continuity of their
service. 98 It is equally reasonable to assume that from the ranks of lawyers,
either in the government service, private practice, or law professors will come
the new appointees. In the event that in certain cases a little more time is
necessary in the appraisal of whether or not certain incumbents deserve
reappointment, it is not from their standpoint undesirable. Rather, it would
be a reaffirmation of the good faith that will characterize its implementation
by the Executive. There is pertinence to this observation of Justice Holmes
that even acceptance of the generalization that courts ordinarily should not
supply omissions in a law, a generalization qualified as earlier shown by the
principle that to save a statute that could be done, "there is no canon against
using common sense in construing laws as saying what they obviously mean."
99 Where then is the unconstitutional flaw
11. On the morning of the hearing of this petition on September 8, 1981,
petitioners sought to have the writer of this opinion and Justices Ramon C.
Aquino and Ameurfina Melencio-Herrera disqualified because the first-
named was the chairman and the other two, members of the Committee on
Judicial Reorganization. At the hearing, the motion was denied. It was made
clear then and there that not one of the three members of the Court had any
hand in the framing or in the discussion of Batas Pambansa Blg. 129. They
were not consulted. They did not testify. The challenged legislation is entirely
the product of the efforts of the legislative body. 100 Their work was limited,
as set forth in the Executive Order, to submitting alternative plan for
reorganization. That is more in the nature of scholarly studies. That the
undertook. There could be no possible objection to such activity. Ever since
1973, this Tribunal has had administrative supervision over interior courts. It
has had the opportunity to inform itself as to the way judicial business is
conducted and how it may be improved. Even prior to the 1973 Constitution,
it is the recollection of the writer of this opinion that either the then Chairman
or members of the Committee on Justice of the then Senate of the Philippines
101 consulted members of the Court in drafting proposed legislation affecting
the judiciary. It is not inappropriate to cite this excerpt from an article in the
1975 Supreme Court Review: "In the twentieth century the Chief Justice of
the United States has played a leading part in judicial reform. A variety of
conditions have been responsible for the development of this role, and
foremost among them has been the creation of explicit institutional
structures designed to facilitate reform." 102 Also: "Thus the Chief Justice
cannot avoid exposure to and direct involvement in judicial reform at the
federal level and, to the extent issues of judicial federalism arise, at the state
level as well." 103
12. It is a cardinal article of faith of our constitutional regime that it is the
people who are endowed with rights, to secure which a government is
instituted. Acting as it does through public officials, it has to grant them either
expressly or impliedly certain powers. Those they exercise not for their own
benefit but for the body politic. The Constitution does not speak in the
language of ambiguity: "A public office is a public trust." 104 That is more
than a moral adjuration It is a legal imperative. The law may vest in a public
official certain rights. It does so to enable them to perform his functions and
fulfill his responsibilities more efficiently. It is from that standpoint that the
security of tenure provision to assure judicial independence is to be viewed.
It is an added guarantee that justices and judges can administer justice
undeterred by any fear of reprisal or untoward consequence. Their
judgments then are even more likely to be inspired solely by their knowledge
of the law and the dictates of their conscience, free from the corrupting
influence of base or unworthy motives. The independence of which they are
assured is impressed with a significance transcending that of a purely
40
personal right. As thus viewed, it is not solely for their welfare. The challenged aspirations and to fulfilling the hopes of the sovereign people as expressed in
legislation Thus subject d to the most rigorous scrutiny by this Tribunal, lest the Constitution. There is wisdom as well as validity to this pronouncement
by lack of due care and circumspection, it allow the erosion of that Ideal so of Justice Malcolm in Manila Electric Co. v. Pasay Transportation Company,
firmly embedded in the national consciousness There is this farther thought 109 a decision promulgated almost half a century ago: "Just as the Supreme
to consider. independence in thought and action necessarily is rooted in one's Court, as the guardian of constitutional rights, should not sanction
mind and heart. As emphasized by former Chief Justice Paras in Ocampo v. usurpations by any other department or the government, so should it as
Secretary of Justice, 105 there is no surer guarantee of judicial independence strictly confine its own sphere of influence to the powers expressly or by
than the God-given character and fitness of those appointed to the Bench. implication conferred on it by the Organic Act." 110 To that basic postulate
The judges may be guaranteed a fixed tenure of office during good behavior, underlying our constitutional system, this Court remains committed.
but if they are of such stuff as allows them to be subservient to one
administration after another, or to cater to the wishes of one litigant after WHEREFORE, the unconstitutionality of Batas Pambansa Blg. 129 not having
another, the independence of the judiciary will be nothing more than a myth been shown, this petition is dismissed. No costs.
or an empty Ideal. Our judges, we are confident, can be of the type of Lord
Coke, regardless or in spite of the power of Congress — we do not say
unlimited but as herein exercised — to reorganize inferior courts." 106 That
is to recall one of the greatest Common Law jurists, who at the cost of his
office made clear that he would not just blindly obey the King's order but "will
do what becomes [him] as a judge." So it was pointed out in the first leading
case stressing the independence of the judiciary, Borromeo v. Mariano, 107
The ponencia of Justice Malcolm Identified good judges with "men who have
a mastery of the principles of law, who discharge their duties in accordance
with law, who are permitted to perform the duties of the office undeterred
by outside influence, and who are independent and self-respecting human
units in a judicial system equal and coordinate to the other two departments
of government." 108 There is no reason to assume that the failure of this suit
to annul Batas Pambansa Blg. 129 would be attended with deleterious
consequences to the administration of justice. It does not follow that the
abolition in good faith of the existing inferior courts except the
Sandiganbayan and the Court of Tax Appeals and the creation of new ones
will result in a judiciary unable or unwilling to discharge with independence
its solemn duty or one recreant to the trust reposed in it. Nor should there
be any fear that less than good faith will attend the exercise be of the
appointing power vested in the Executive. It cannot be denied that an
independent and efficient judiciary is something to the credit of any
administration. Well and truly has it been said that the fundamental principle
of separation of powers assumes, and justifiably so, that the three
departments are as one in their determination to pursue the Ideals and

41
G.R. No. 157542 October 10, 2008
REBECCA A. BARBO, ELEONORA R. DE JESUS, and ANTONIO B. MAGTIBAY,
petitioners,
vs.
COMMISSION ON AUDIT, respondent.
DECISION
LEONARDO-DE CASTRO, J.:
By this Petition for Certiorari under Rule 64 of the Rules of Court petitioners
seek to annul or reverse COA Decision No. 2000-1331 dated May 16, 2000
and Resolution2 dated February 27, 2003 rendered by the Commission on
Audit (COA). In the said issuances, the COA affirmed its Regional Director's
1st Indorsement 3 dated June 5, 1998, which in turn affirmed Notice of
Disallowance No. 97-004 (94, 95, 96)4 dated June 30, 1997 issued by the
Special Audit Team against petitioners Rebecca A. Barbo, Eleonora R. de
Jesus, and Antonio B. Magtibay.
Petitioners are officials of the Local Water Utilities Administration (LWUA)
and designated members of the Interim Board of Directors of the San
Fernando Water District (SFWD).
On December 4, 1995 and February 12 1996, the LWUA Board of Trustees
issued Board Resolution No. 313, Series of 1995 and Board Resolution No. 39,
Series of 1996 5 respectively. These Board Resolutions authorized the Board
of Directors of SFWD to receive reimbursable allowances in the form of
Representation and Transportation Allowance (RATA), Travel Allowance, and
Extraordinary & Miscellaneous Expense (EME); Christmas Bonus; Uniform
Allowance; Rice Allowance; Medical and Dental Benefits; and Productivity
Incentive Bonus.
Pursuant to the said Board Resolutions, petitioners received EME, Rice
Allowance, Christmas Bonus, and Productivity Bonus from SFWD during the
calendar years starting 1994 until 1996.
On June 30, 1997, a Special Audit Team of COA Regional Office No. III at San
Fernando, Pampanga audited the financial accounts of SFWD for the period
covering January 1, 1994 to July 15, 1996. The COA Special Audit Team
disallowed the payment of the above-mentioned benefits and allowances
received by petitioners after the same were found to be excessive and
contrary to Sections 228, 162 and 163 of the Government Accounting and
Auditing Manual (GAAM) and to Civil Service Commission (CSC) Resolution
No. 9540736 in relation to Section 13 of Presidential Decree (PD) No. 198
(Provincial Water Utilities Act of 1973) as amended. Thus, petitioners were
directed to refund the benefits and allowances subject of the disallowance.
Petitioners appealed to the COA Regional Director raising the following
arguments:
1. That CSC Resolution No. 954073 issued in Cruz v. Cabili cannot extend to
appellants, they not having been made parties to the case;
2. That it applied to appellants, said resolution will partake the nature of an
implementing rule and regulation which is beyond CSC's jurisdiction to issue;
3. That DBM, not CSC, is the appropriate authority to rule on compensation;
4. That Christmas Bonus, Productivity Bonus, Rice Allowance, and Uniform
Allowance are not compensation;
5. That Extraordinary and Miscellaneous Expenses are not compensation but
reimbursement of expenses; and
6. That the right of water district directors and the interim general manager
to receive allowances and other benefits is appropriately recognized by
LWUA.
The Regional Director, in his First Indorsement dated June 5, 1998, affirmed
the Special Audit Team's Notice of Disallowance No. 97-004 (94, 95, 96). The
Regional Director declared that the COA Special Audit Team was correct in
citing CSC Resolution No. 954073, which resolved the case of LWUA
Employees Association for Progress (LEAP) v. Cabili and de Vera7, because the
said resolution applied on all fours to petitioners' case. In the said resolution,
the CSC held that it is illegal for any LWUA officer or employee who sits as
member of the Board of Directors of a water district to receive and collect
any additional, double, or indirect compensation from said water district,
except per diems, pursuant to Section 13 of PD No. 198, as amended.
42

From the denial of their appeal by the COA Regional Director, petitioners
elevated the matter to the COA via a petition for review.
In the herein challenged Decision dated May 16, 2000, the COA denied the
petition for review and affirmed the ruling of the COA Regional Director as
contained in its First Indorsement. The COA stressed that the Directors of
local water districts (LWDs) were prohibited from receiving compensation
other than per diems and that LWUA Board Resolution Nos. 313 and 39 were
contrary to the law which it intended to implement, specifically, Section 13
of PD No. 198, as amended. Citing the case Peralta v. Mathay,8 the COA
declared that the subject bonuses and allowances received by petitioners
constituted additional compensation or remuneration. The dispositive
portion of the decision reads:
PREMISES CONSIDERED, the instant Petition for Review of Mr. Simplicio
Belisario, et al. [herein petitioners included], is hereby denied. Accordingly,
the subject disallowances are affirmed with all officers and employees who
received the bonuses and allowances liable for their settlement together with
the officers named in the Notice of Disallowance, namely: Mr. Dionisio
Polintan, General Manager, Ms. Merlita Garcia, Finance Officer, and Ms.
Arsenia Sicat, Cashier / Property Management Supervisor. (Words in brackets
ours)
Petitioners' motion for reconsideration was denied by the COA in its
challenged Resolution dated February 27, 2003.
Thus, petitioners now come to this Court, imputing grave abuse of discretion
amounting to lack of jurisdiction on the part of the COA in issuing COA
Decision No. 2000-133 and February 27, 2003 Resolution. Specifically,
petitioners raise the following issues:
I. WHETHER OR NOT RESPONDENT HAS THE JURISDICTION TO MOTU
PROPRIO DECLARE LWUA BOARD RESOLUTION NO. 313, SERIES OF 1995, AS
AMENDED BY RESOLUTION NO. 39, SERIES OF 1996, TO BE TOTALLY IN
CONFLICT WITH SEC. 13 OF PD NO. 198, AS AMENDED.
II. WHETHER OR NOT SEC. 13, PD NO. 198, AS AMENDED, PROHIBIT
PETITIONERS' ENTITLEMENT TO RATA, EME, BONUSES AND OTHER BENEFITS
AND ALLOWANCES.
III. WHETHER OR NOT PETITIONERS ARE LIABLE TO SETTLE / REFUND THE
DISALLOWED ALLOWANCES, BONUSES AND OTHER BENEFITS RECEIVED BY
PETITIONERS.
The petition is partly meritorious.
Petitioners contend that the COA lacks jurisdiction to declare whether or not
LWUA Board Resolution Nos. 313 and 39 are consistent with Section 13 of PD
No. 198, as amended, on matters pertaining to the compensation and "other
benefits" of the Directors of the LWD. This is allegedly the function of the
courts.
The Court has already settled this issue in a myriad of cases.9 Particularly, in
Rodolfo S. de Jesus [Catbalogan Water District] v. COA,10 the Court upheld
the authority and jurisdiction of the COA to rule on the legality of the
disbursement of government funds by a water district and declared that such
power does not conflict with the jurisdiction of the courts, the DBM, and the
LWUA. Citing Section 2, Subdivision D, Article IX of the 1987 Constitution11
the Court declared that it is the mandate of the COA to audit all government
agencies, including government-owned and controlled corporations with
original charters. Indeed, the Constitution specifically vests in the COA the
authority to determine whether government entities comply with laws and
regulations in disbursing government funds, and to disallow illegal or
irregular disbursements of government funds.12 This independent
constitutional body is tasked to be vigilant and conscientious in safeguarding
the proper use of the government's, and ultimately the people's, property.13
Anent the second issue, a water district is a government-owned and
controlled corporation with a special charter since it is created pursuant to a
special law, Presidential Decree (PD) 198. It is undeniable that PD 198
expressly prohibits the grant of RATA, EME, and bonuses to members of the
board of Water Districts. Section 13 of PD 198, as amended, reads as follows:
43
Compensation. - Each director shall receive a per diem, to be determined by
the board, for each meeting of the board actually attended by him, but no
director shall receive per diems in any given month in excess of the equivalent
of the total per diems of four meetings in any given month. No director shall
receive other compensation for services to the district.
Any per diem in excess of P50 shall be subject to approval of the
Administration.
In Baybay Water District v. Commission on Audit,14 the members of the
board of Baybay Water District also questioned the disallowance by the COA
of payment of RATA, rice allowance and excessive per diems. The Court ruled
that pursuant to PD 198, members of the board of water districts cannot
receive allowances and benefits more than those allowed by PD 198.
Construing Section 13 of PD 198, in Baybay, the Court declared:
xxx Under §13 of this Decree, per diem is precisely intended to be the
compensation of members of board of directors of water districts. Indeed,
words and phrases in a statute must be given their natural, ordinary, and
commonly-accepted meaning, due regard being given to the context in which
the words and phrases are used. By specifying the compensation which a
director is entitled to receive and by limiting the amount he/she is allowed to
receive in a month, and, in the same paragraph, providing "No director shall
receive other compensation" than the amount provided for per diems, the
law quite clearly indicates that directors of water districts are authorized to
receive only the per diem authorized by law and no other compensation or
allowance in whatever form.
Section 13 of PD 198 is clear enough that it needs no interpretation. It
expressly prohibits the grant of compensation other than the payment of per
diem, thus preempting the exercise of any discretion by water districts in
paying other allowances and bonuses.
Lastly, the petitioners claim that they are not liable to settle or refund the
disallowed payments of benefits and allowances which they have received in
good faith and as de jure officers of SFWD.
While we sustain the disallowance of the above benefits by respondent COA,
however, we find that the SFWD affected personnel who received the above
mentioned benefits and privileges acted in good faith under the honest belief
that Board Resolution Nos. 313 and 39 authorized such payment. In Abanilla
v. Commission On Audit15 citing Querubin v. Regional Cluster Director, Legal
and Adjudication Office, COA Regional Office VI, Pavia, Iloilo City,16 this Court
held:
Considering, however, that all the parties here acted in good faith, we cannot
countenance the refund of subject incentive benefits for the year 1992, which
amounts the petitioners have already received. Indeed, no indicia of bad faith
can be detected under the attendant facts and circumstances. The officials
and chiefs of offices concerned disbursed such incentive benefits in the
honest belief that the amounts given were due to the recipients and the latter
accept the same with gratitude, confident that they richly deserve such
benefits.
x x x. Petitioners here received the additional allowances and bonuses in good
faith under the honest belief that LWUA Board Resolution No. 313 authorized
such payment. At the time petitioners received the additional allowances and
bonuses, the Court had not yet decided Baybay Water District. Petitioners
had no knowledge that such payment was without legal basis. Thus, being in
good faith, petitioners need not refund the allowances and bonuses they
received but disallowed by the COA.
The foregoing disquisitions were also applied to the more recent cases of De
Jesus [Metro Cariaga Water District];17 Molen [Metro Iloilo Water District];
and Magno [Mangaldan Water District].18 The same reasoning and
conclusions of the Court were reiterated in de Jesus v. CSC19 and Cabili and
de Vera v. CSC.20 We find no reason to depart from the rulings in these cases
which essentially involve the same issues as the instant case.
WHEREFORE, the instant petition is hereby PARTIALLY GRANTED. COA
Decision No. 2000-133 dated May 16, 2000 and Resolution dated February
27, 2003 are hereby AFFIRMED with the MODIFICATION that the petitioners
need not refund the benefits and allowances disallowed by the COA.
No costs.
44