SECOND DIVISION

G.R. No. 162994 September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A.

TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.

RESOLUTION

TINGA, J.:

Confronting the Court in this petition is a novel question, with constitutional overtones,
involving the validity of the policy of a pharmaceutical company prohibiting its
employees from marrying employees of any competitor company.

This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2

Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome

Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson
had undergone training and orientation.

Thereafter, Tecson signed a contract of employment which stipulates, among others,

that he agrees to study and abide by existing company rules; to disclose to management
any existing or future relationship by consanguinity or affinity with co-employees or
employees of competing drug companies and should management find that such
relationship poses a possible conflict of interest, to resign from the company.

The Employee Code of Conduct of Glaxo similarly provides that an employee is expected
to inform management of any existing or future relationship by consanguinity or affinity
with co-employees or employees of competing drug companies. If management
perceives a conflict of interest or a potential conflict between such relationship and the
employee’s employment with the company, the management and the employee will
explore the possibility of a "transfer to another department in a non-counterchecking
position" or preparation for employment outside the company after six months.

Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-
Camarines Norte sales area.

Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of

Astra Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astra’s Branch
Coordinator in Albay. She supervised the district managers and medical representatives
of her company and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District
Manager regarding the conflict of interest which his relationship with Bettsy might
engender. Still, love prevailed, and Tecson married Bettsy in September 1998.

In January 1999, Tecson’s superiors informed him that his marriage to Bettsy gave rise
to a conflict of interest. Tecson’s superiors reminded him that he and Bettsy should
decide which one of them would resign from their jobs, although they told him that they
wanted to retain him as much as possible because he was performing his job well.

Tecson requested for time to comply with the company policy against entering into a
relationship with an employee of a competitor company. He explained that Astra,
Bettsy’s employer, was planning to merge with Zeneca, another drug company; and
Bettsy was planning to avail of the redundancy package to be offered by Astra. With
Bettsy’s separation from her company, the potential conflict of interest would be
eliminated. At the same time, they would be able to avail of the attractive redundancy
package from Astra.

In August 1999, Tecson again requested for more time resolve the problem. In
September 1999, Tecson applied for a transfer in Glaxo’s milk division, thinking that
since Astra did not have a milk division, the potential conflict of interest would be
eliminated. His application was denied in view of Glaxo’s "least-movement-possible"
policy.

In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del
Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was
denied.

Tecson sought Glaxo’s reconsideration regarding his transfer and brought the matter to
Glaxo’s Grievance Committee. Glaxo, however, remained firm in its decision and gave
Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the
transfer order and continued acting as medical representative in the Camarines Sur-
Camarines Norte sales area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was
not issued samples of products which were competing with similar products
manufactured by Astra. He was also not included in product conferences regarding such
products.

Because the parties failed to resolve the issue at the grievance machinery level, they
submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of
one-half (½) month pay for every year of service, or a total of ₱50,000.00 but he
declined the offer. On November 15, 2000, the National Conciliation and Mediation Board
(NCMB) rendered its Decision declaring as valid Glaxo’s policy on relationships between
its employees and persons employed with competitor companies, and affirming Glaxo’s
right to transfer Tecson to another sales territory.

Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.

On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for
Review on the ground that the NCMB did not err in rendering its Decision. The appellate
court held that Glaxo’s policy prohibiting its employees from having personal
relationships with employees of competitor companies is a valid exercise of its
management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate court’s Decision, but the
motion was denied by the appellate court in its Resolution dated March 26, 2004.5

Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in
affirming the NCMB’s finding that the Glaxo’s policy prohibiting its employees from
marrying an employee of a competitor company is valid; and (ii) the Court of Appeals
also erred in not finding that Tecson was constructively dismissed when he was
transferred to a new sales territory, and deprived of the opportunity to attend products
seminars and training sessions.6

Petitioners contend that Glaxo’s policy against employees marrying employees of

competitor companies violates the equal protection clause of the Constitution because it
creates invalid distinctions among employees on account only of marriage. They claim
that the policy restricts the employees’ right to marry.7

They also argue that Tecson was constructively dismissed as shown by the following
circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales
area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3)
he was excluded from attending seminars and training sessions for medical
representatives, and (4) he was prohibited from promoting respondent’s products which
were competing with Astra’s products.8

In its Comment on the petition, Glaxo argues that the company policy prohibiting its
employees from having a relationship with and/or marrying an employee of a competitor
company is a valid exercise of its management prerogatives and does not violate the
equal protection clause; and that Tecson’s reassignment from the Camarines Norte-
Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area
does not amount to constructive dismissal.9

Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical
products, it has a genuine interest in ensuring that its employees avoid any activity,
relationship or interest that may conflict with their responsibilities to the company. Thus,
it expects its employees to avoid having personal or family interests in any competitor
company which may influence their actions and decisions and consequently deprive
Glaxo of legitimate profits. The policy is also aimed at preventing a competitor company
from gaining access to its secrets, procedures and policies.10

It likewise asserts that the policy does not prohibit marriage per se but only proscribes
existing or future relationships with employees of competitor companies, and is therefore
not violative of the equal protection clause. It maintains that considering the nature of
its business, the prohibition is based on valid grounds.11

According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra, posed a real and
potential conflict of interest. Astra’s products were in direct competition with 67% of the
products sold by Glaxo. Hence, Glaxo’s enforcement of the foregoing policy in Tecson’s
case was a valid exercise of its management prerogatives. 12 In any case, Tecson was
given several months to remedy the situation, and was even encouraged not to resign
but to ask his wife to resign form Astra instead.13

Glaxo also points out that Tecson can no longer question the assailed company policy
because when he signed his contract of employment, he was aware that such policy was
stipulated therein. In said contract, he also agreed to resign from respondent if the
management finds that his relationship with an employee of a competitor company
would be detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecson’s reassignment to another sales area and his exclusion
from seminars regarding respondent’s new products did not amount to constructive
dismissal.

It claims that in view of Tecson’s refusal to resign, he was relocated from the Camarines
Sur-Camarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur
sales area. Glaxo asserts that in effecting the reassignment, it also considered the
welfare of Tecson’s family. Since Tecson’s hometown was in Agusan del Sur and his wife
traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to
the Butuan City sales area would be favorable to him and his family as he would be
relocating to a familiar territory and minimizing his travel expenses.15

In addition, Glaxo avers that Tecson’s exclusion from the seminar concerning the new
anti-asthma drug was due to the fact that said product was in direct competition with a
drug which was soon to be sold by Astra, and hence, would pose a potential conflict of
interest for him. Lastly, the delay in Tecson’s receipt of his sales paraphernalia was due
to the mix-up created by his refusal to transfer to the Butuan City sales area (his
paraphernalia was delivered to his new sales area instead of Naga City because the
supplier thought he already transferred to Butuan).16

The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals
erred in ruling that Glaxo’s policy against its employees marrying employees from
competitor companies is valid, and in not holding that said policy violates the equal
protection clause of the Constitution; (2) Whether Tecson was constructively dismissed.

The Court finds no merit in the petition.

The stipulation in Tecson’s contract of employment with Glaxo being questioned by

petitioners provides:

10. You agree to disclose to management any existing or future relationship you
may have, either by consanguinity or affinity with co-employees or employees of
competing drug companies. Should it pose a possible conflict of interest in
management discretion, you agree to resign voluntarily from the Company as a
matter of Company policy.

…17

The same contract also stipulates that Tescon agrees to abide by the existing company
rules of Glaxo, and to study and become acquainted with such policies.18 In this regard,
the Employee Handbook of Glaxo expressly informs its employees of its rules regarding
conflict of interest:

1. Conflict of Interest

Employees should avoid any activity, investment relationship, or interest that

may run counter to the responsibilities which they owe Glaxo Wellcome.

Specifically, this means that employees are expected:

a. To avoid having personal or family interest, financial or otherwise, in

any competitor supplier or other businesses which may consciously or
 unconsciously influence their actions or decisions and thus deprive Glaxo
Wellcome of legitimate profit.

b. To refrain from using their position in Glaxo Wellcome or knowledge of

Company plans to advance their outside personal interests, that of their
relatives, friends and other businesses.

c. To avoid outside employment or other interests for income which would

impair their effective job performance.

d. To consult with Management on such activities or relationships that may

lead to conflict of interest.

1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity

with co-employees of competing drug companies are expected to disclose such
relationship to the Management. If management perceives a conflict or potential
conflict of interest, every effort shall be made, together by management and the
employee, to arrive at a solution within six (6) months, either by transfer to
another department in a non-counter checking position, or by career preparation
toward outside employment after Glaxo Wellcome. Employees must be prepared
for possible resignation within six (6) months, if no other solution is feasible. 19

No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxo’s
policy prohibiting an employee from having a relationship with an employee of a
competitor company is a valid exercise of management prerogative.

Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors, especially
so that it and Astra are rival companies in the highly competitive pharmaceutical
industry.

The prohibition against personal or marital relationships with employees of competitor

companies upon Glaxo’s employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. In laying
down the assailed company policy, Glaxo only aims to protect its interests against the
possibility that a competitor company will gain access to its secrets and procedures.

That Glaxo possesses the right to protect its economic interests cannot be denied. No
less than the Constitution recognizes the right of enterprises to adopt and enforce such a
policy to protect its right to reasonable returns on investments and to expansion and
growth.20 Indeed, while our laws endeavor to give life to the constitutional policy on
social justice and the protection of labor, it does not mean that every labor dispute will
be decided in favor of the workers. The law also recognizes that management has rights
which are also entitled to respect and enforcement in the interest of fair play. 21

As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business

confidentiality and protect a competitive position by even-handedly disqualifying from
jobs male and female applicants or employees who are married to a competitor.
Consequently, the court ruled than an employer that discharged an employee who was
married to an employee of an active competitor did not violate Title VII of the Civil
Rights Act of 1964.23 The Court pointed out that the policy was applied to men and
women equally, and noted that the employer’s business was highly competitive and that
gaining inside information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the
Constitution as petitioners erroneously suggest. It is a settled principle that the
commands of the equal protection clause are addressed only to the state or those acting
under color of its authority.24 Corollarily, it has been held in a long array of U.S.
Supreme Court decisions that the equal protection clause erects no shield against merely
private conduct, however, discriminatory or wrongful.25 The only exception occurs when
the state29 in any of its manifestations or actions has been found to have become
entwined or involved in the wrongful private conduct.27 Obviously, however, the
exception is not present in this case. Significantly, the company actually enforced the
policy after repeated requests to the employee to comply with the policy. Indeed, the
application of the policy was made in an impartial and even-handed manner, with due
regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its
employee handbook, it is clear that Glaxo does not impose an absolute prohibition
against relationships between its employees and those of competitor companies. Its
employees are free to cultivate relationships with and marry persons of their own
choosing. What the company merely seeks to avoid is a conflict of interest between the
employee and the company that may arise out of such relationships. As succinctly
explained by the appellate court, thus:

The policy being questioned is not a policy against marriage. An employee of the
company remains free to marry anyone of his or her choosing. The policy is not
aimed at restricting a personal prerogative that belongs only to the individual.
However, an employee’s personal decision does not detract the employer from
exercising management prerogatives to ensure maximum profit and business
success. . .28

The Court of Appeals also correctly noted that the assailed company policy which forms
part of respondent’s Employee Code of Conduct and of its contracts with its employees,
such as that signed by Tescon, was made known to him prior to his employment.
Tecson, therefore, was aware of that restriction when he signed his employment contract
and when he entered into a relationship with Bettsy. Since Tecson knowingly and
voluntarily entered into a contract of employment with Glaxo, the stipulations therein
have the force of law between them and, thus, should be complied with in good
faith."29 He is therefore estopped from questioning said policy.

The Court finds no merit in petitioners’ contention that Tescon was constructively
dismissed when he was transferred from the Camarines Norte-Camarines Sur sales area
to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was excluded
from attending the company’s seminar on new products which were directly competing
with similar products manufactured by Astra. Constructive dismissal is defined as a
quitting, an involuntary resignation resorted to when continued employment becomes
impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in
pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.30 None of these conditions are present in the instant case.
The record does not show that Tescon was demoted or unduly discriminated upon by
reason of such transfer. As found by the appellate court, Glaxo properly exercised its
management prerogative in reassigning Tecson to the Butuan City sales area:

. . . In this case, petitioner’s transfer to another place of assignment was merely

in keeping with the policy of the company in avoidance of conflict of interest, and
thus valid…Note that [Tecson’s] wife holds a sensitive supervisory position as
Branch Coordinator in her employer-company which requires her to work in close
coordination with District Managers and Medical Representatives. Her duties
include monitoring sales of Astra products, conducting sales drives, establishing
 and furthering relationship with customers, collection, monitoring and managing
Astra’s inventory…she therefore takes an active participation in the market war
characterized as it is by stiff competition among pharmaceutical companies.
Moreover, and this is significant, petitioner’s sales territory covers Camarines Sur
and Camarines Norte while his wife is supervising a branch of her employer in
Albay. The proximity of their areas of responsibility, all in the same Bicol Region,
renders the conflict of interest not only possible, but actual, as learning by one
spouse of the other’s market strategies in the region would be inevitable.
[Management’s] appreciation of a conflict of interest is therefore not merely
illusory and wanting in factual basis…31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which

involved a complaint filed by a medical representative against his employer drug
company for illegal dismissal for allegedly terminating his employment when he refused
to accept his reassignment to a new area, the Court upheld the right of the drug
company to transfer or reassign its employee in accordance with its operational demands
and requirements. The ruling of the Court therein, quoted hereunder, also finds
application in the instant case:

By the very nature of his employment, a drug salesman or medical representative

is expected to travel. He should anticipate reassignment according to the
demands of their business. It would be a poor drug corporation which cannot
even assign its representatives or detail men to new markets calling for opening
or expansion or to areas where the need for pushing its products is great. More
so if such reassignments are part of the employment contract. 33

As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo
gave Tecson several chances to eliminate the conflict of interest brought about by his
relationship with Bettsy. When their relationship was still in its initial stage, Tecson’s
supervisors at Glaxo constantly reminded him about its effects on his employment with
the company and on the company’s interests. After Tecson married Bettsy, Glaxo gave
him time to resolve the conflict by either resigning from the company or asking his wife
to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ
because of his satisfactory performance and suggested that he ask Bettsy to resign from
her company instead. Glaxo likewise acceded to his repeated requests for more time to
resolve the conflict of interest. When the problem could not be resolved after several
years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from
that handled by his wife for Astra. Notably, the Court did not terminate Tecson from
employment but only reassigned him to another area where his home province, Agusan
del Sur, was included. In effecting Tecson’s transfer, Glaxo even considered the welfare
of Tecson’s family. Clearly, the foregoing dispels any suspicion of unfairness and bad
faith on the part of Glaxo.34

WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.

Footnotes

1
Penned by Associate Justice Rosmari D. Carandang and concurred in by Justices
Conrado M. Vasquez, Jr. and Mercedes Gozo-Dadole. Rollo,pp. 22-32.
2
Duncan Association of Detailman-PTGWO and Pedro A. Tecson, petitioners, v.
Glaxo Wellcome Philippines, Inc., respondent.

3
Now Astra Zeneca Pharmaceuticals, Inc.

4
Rollo, pp. 28-32.

5
Id. at 55.

6
Id. at 9.

7
Id. at 9-11.

8
Id. at 14-17.

9
Id. at 96-112.

10
Id. at 99-100.

11
Id. at 101-102.

12
Id. at 102-103.

13
Id. at 102-104.

14
Id. at 104-105.

15
Id. at 64.

16
Id. at 106-110.

17
See Decision of the Court of Appeals; Rollo, pp. 23-24.

18
Item No. 6 of Tecson’s employment contract cited by the Court of Appeals in its
Decision, Id.

19
Excerpt of Glaxo’s Employee Handbook, Annex "A" of respondent’s
Comment, Id. at 114.

20
Section 3, Article XIII of the Constitution provides:

The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production
and the right of enterprises to reasonable returns on investments, and to
expansion and growth.

21
Sta. Catalina College v. National Labor Relations Commission, G.R. No. 144483,
November 19, 2003.

22
Emory v. Georgia Hospital Service Association (1971), DC Ga., 4 CCH EPD ¶
7785, 4 BNA FEP Cas 891, affd (CA5) 446 F2d 897, 4 CCH EPD ¶ 7786; Cited 45
Am Jr 2d Sec. 469.
23
42 USCS §§2000e–2002e–17. Title VII prohibits certain employers,
employment agencies, labor organizations, and joint labor-management training
committees from discriminating against applicants and employees on the basis of
race or color, religion, sex, national origin, or opposition to discriminatory
practices.

There is no similar legislation in the Philippines.

24
Avery v. Midland County, 390 US 474, 20 L. Ed 2d 45, 88 S Ct 1114, on
remand (Tex) 430 SW2d 487; Cooper v. Aaron, 358 US 1, 3 L Ed 2d 5, 78 S Ct
1401.

25
District of Columbia v. Carter, 409 US 418, 34 L.Ed.2d 613, 93 S. Ct. 602, 35
L.Ed.2d 694, 93 S. Ct. 1411; Moose Lodge No. 107 v. Irvis, 407 US 163, 32
L.Ed.2d 627, 92 S. Ct. 1965; United States v. Price, 383 US 787, 16 L.Ed. 2d
267, 86 S. Ct. 1152; Burton v. Wilmington Parking Authority, 365 US 715, 6
L.Ed.2d 45, 81 S. Ct. 856; Shelley v. Kraemer, 334 US 1, 92 L.Ed.1161, 68 S. Ct.
836, 3 ALR2d 441; United States v. Classic, 313 US 299, 85 L.Ed 1368, 61 S. Ct.
1031, 86 L.Ed 565, 62 S. Ct. 51; Nixon v. Condon, 286 US 73, 76 L.Ed. 984, 52
S. Ct. 484, 88 ALR 458; Iowa-Des Moines Nat. Bank v. Bennet, 284 US 239, 76
L.Ed 265, 52 S. Ct. 133; Corrigan v. Buckley, 271 US 323, 70 L.Ed. 969, 46 S. Ct.
521; U.S. ¾Adickes v. S. H. Kress & Co., N.Y., 90 S. Ct. 1598, 398 U.S. 144, 26
L. Ed. 2d 142.

26
The equal protection clause contained in the Fourteenth Amendment of the
U.S. Constitution is a restriction on the state governments and operates
exclusively upon them. It does not extend to authority exercised by the
Government of the United States. 16 A Am Jur 2d §742.

27
Gilmore v. Montgomery, 417 US 556, 41 L Ed 2d 304, 94 S Ct 2416; Evans v.
Newton, 382 US 296, 15 L Ed 2d 373, 86 S Ct 486; Anderson v. Martin, 375 US
399, 11 L Ed 2d 430, 84 S Ct 454; Peterson v. Greenville, 373 US 244, 10 L Ed
2d 323, 83 S Ct 1119; Burton v. Wilmington Parking Authority, supra note 25.

28
Decision of the Court of Appeals, Rollo, p. 28.

29
Article 1159, Civil Code. See National Sugar Trading and/or the Sugar
Regulatory Administration v. Philippine National Bank, G.R. No. 151218, January
18, 2003, 396 SCRA 528; Pilipinas Hino, Inc. v. Court of Appeals, G.R. No.
126570, August 18, 2000, 338 SCRA 355.

30
Leonardo v. National Labor Relations Commission, et al., G.R. Nos. 125303,
and 126937, June 16, 2000, 333 SCRA 589.

31
Rollo, pp. 30-31.

32
G.R. No. L-76959, October 12, 1987, 154 SCRA 713.

33
Id. at 719.

34
Decision of the Court of Appeals, Rollo, pp. 24-27.
 EN BANC

G.R. No. 161872 April 13, 2004

REV. ELLY CHAVEZ PAMATONG, ESQUIRE, petitioner,

vs.
COMMISSION ON ELECTIONS, respondent.

RESOLUTION

TINGA, J.:

Petitioner Rev. Elly Velez Pamatong filed his Certificate of Candidacy for President on
December 17, 2003. Respondent Commission on Elections (COMELEC) refused to give
due course to petitioner’s Certificate of Candidacy in its Resolution No. 6558 dated
January 17, 2004. The decision, however, was not unanimous since Commissioners
Luzviminda G. Tancangco and Mehol K. Sadain voted to include petitioner as they
believed he had parties or movements to back up his candidacy.

On January 15, 2004, petitioner moved for reconsideration of Resolution No.

6558. Petitioner’s Motion for Reconsideration was docketed as SPP (MP) No. 04-001. The
COMELEC, acting on petitioner’s Motion for Reconsideration and on similar motions filed
by other aspirants for national elective positions, denied the same under the aegis
of Omnibus Resolution No. 6604 dated February 11, 2004. The COMELEC declared
petitioner and thirty-five (35) others nuisance candidates who could not wage a
nationwide campaign and/or are not nominated by a political party or are not supported
by a registered political party with a national constituency. Commissioner Sadain
maintained his vote for petitioner. By then, Commissioner Tancangco had retired.

In this Petition For Writ of Certiorari, petitioner seeks to reverse the resolutions which
were allegedly rendered in violation of his right to "equal access to opportunities for
public service" under Section 26, Article II of the 1987

Constitution,1 by limiting the number of qualified candidates only to those who can afford
to wage a nationwide campaign and/or are nominated by political parties. In so doing,
petitioner argues that the COMELEC indirectly amended the constitutional provisions on
the electoral process and limited the power of the sovereign people to choose their
leaders. The COMELEC supposedly erred in disqualifying him since he is the most
qualified among all the presidential candidates, i.e., he possesses all the constitutional
and legal qualifications for the office of the president, he is capable of waging a national
campaign since he has numerous national organizations under his leadership, he also
has the capacity to wage an international campaign since he has practiced law in other
countries, and he has a platform of government. Petitioner likewise attacks the validity
of the form for the Certificate of Candidacy prepared by the COMELEC. Petitioner claims
that the form does not provide clear and reasonable guidelines for determining the
qualifications of candidates since it does not ask for the candidate’s bio-data and his
program of government.

First, the constitutional and legal dimensions involved.

Implicit in the petitioner’s invocation of the constitutional provision ensuring "equal

access to opportunities for public office" is the claim that there is a constitutional right to
run for or hold public office and, particularly in his case, to seek the presidency. There is
none. What is recognized is merely a privilege subject to limitations imposed by law.
Section 26, Article II of the Constitution neither bestows such a right nor elevates the
privilege to the level of an enforceable right. There is nothing in the plain language of
the provision which suggests such a thrust or justifies an interpretation of the sort.

The "equal access" provision is a subsumed part of Article II of the Constitution, entitled
"Declaration of Principles and State Policies." The provisions under the Article are
generally considered not self-executing,2 and there is no plausible reason for according a
different treatment to the "equal access" provision. Like the rest of the policies
enumerated in Article II, the provision does not contain any judicially enforceable
constitutional right but merely specifies a guideline for legislative or executive
action.3 The disregard of the provision does not give rise to any cause of action before
the courts.4

An inquiry into the intent of the framers5 produces the same determination that the
provision is not self-executory. The original wording of the present Section 26, Article II
had read, "The State shall broaden opportunities to public office and prohibit public
dynasties."6 Commissioner (now Chief Justice) Hilario Davide, Jr. successfully brought
forth an amendment that changed the word "broaden" to the phrase "ensure equal
access," and the substitution of the word "office" to "service." He explained his proposal
in this wise:

I changed the word "broaden" to "ENSURE EQUAL ACCESS TO" because what is
important would be equal access to the opportunity. If you broaden, it would
necessarily mean that the government would be mandated to create as
many offices as are possible to accommodate as many people as are also
possible. That is the meaning of broadening opportunities to public service. So,
in order that we should not mandate the State to make the government
the number one employer and to limit offices only to what may be
necessary and expedient yet offering equal opportunities to access to it,
I change the word "broaden."7 (emphasis supplied)

Obviously, the provision is not intended to compel the State to enact positive measures
that would accommodate as many people as possible into public office. The approval of
the "Davide amendment" indicates the design of the framers to cast the provision as
simply enunciatory of a desired policy objective and not reflective of the imposition of a
clear State burden.

Moreover, the provision as written leaves much to be desired if it is to be regarded as

the source of positive rights. It is difficult to interpret the clause as operative in the
absence of legislation since its effective means and reach are not properly defined.
Broadly written, the myriad of claims that can be subsumed under this rubric appear to
be entirely open-ended.8 Words and phrases such as "equal access," "opportunities," and
"public service" are susceptible to countless interpretations owing to their inherent
impreciseness. Certainly, it was not the intention of the framers to inflict on the people
an operative but amorphous foundation from which innately unenforceable rights may be
sourced.
As earlier noted, the privilege of equal access to opportunities to public office may be
subjected to limitations. Some valid limitations specifically on the privilege to seek
elective office are found in the provisions9 of the Omnibus Election Code on "Nuisance
Candidates" and COMELEC Resolution No. 6452 10 dated December 10, 2002 outlining the
instances wherein the COMELEC may motu proprio refuse to give due course to or cancel
a Certificate of Candidacy.

As long as the limitations apply to everybody equally without discrimination, however,

the equal access clause is not violated. Equality is not sacrificed as long as the burdens
engendered by the limitations are meant to be borne by any one who is minded to file a
certificate of candidacy. In the case at bar, there is no showing that any person is
exempt from the limitations or the burdens which they create.

Significantly, petitioner does not challenge the constitutionality or validity of Section 69

of the Omnibus Election Code and COMELEC Resolution No. 6452 dated 10 December
2003. Thus, their presumed validity stands and has to be accorded due weight.

Clearly, therefore, petitioner’s reliance on the equal access clause in Section 26, Article
II of the Constitution is misplaced.

The rationale behind the prohibition against nuisance candidates and the disqualification
of candidates who have not evinced a bona fide intention to run for office is easy to
divine. The State has a compelling interest to ensure that its electoral exercises are
rational, objective, and orderly. Towards this end, the State takes into account the
practical considerations in conducting elections. Inevitably, the greater the number of
candidates, the greater the opportunities for logistical confusion, not to mention the
increased allocation of time and resources in preparation for the election. These practical
difficulties should, of course, never exempt the State from the conduct of a mandated
electoral exercise. At the same time, remedial actions should be available to alleviate
these logistical hardships, whenever necessary and proper. Ultimately, a disorderly
election is not merely a textbook example of inefficiency, but a rot that erodes faith in
our democratic institutions. As the United States Supreme Court held:

[T]here is surely an important state interest in requiring some preliminary

showing of a significant modicum of support before printing the name of a
political organization and its candidates on the ballot – the interest, if no other, in
avoiding confusion, deception and even frustration of the democratic [process]. 11

The COMELEC itself recognized these practical considerations when it

promulgated Resolution No. 6558 on 17 January 2004, adopting the study Memorandum
of its Law Department dated 11 January 2004. As observed in the COMELEC’s Comment:

There is a need to limit the number of candidates especially in the case of

candidates for national positions because the election process becomes a mockery
even if those who cannot clearly wage a national campaign are allowed to run.
Their names would have to be printed in the Certified List of Candidates, Voters
Information Sheet and the Official Ballots. These would entail additional costs to
the government. For the official ballots in automated counting and canvassing of
votes, an additional page would amount to more or less FOUR HUNDRED FIFTY
MILLION PESOS (₱450,000,000.00).

xxx[I]t serves no practical purpose to allow those candidates to continue if they

cannot wage a decent campaign enough to project the prospect of winning, no
matter how slim.12
The preparation of ballots is but one aspect that would be affected by allowance of
"nuisance candidates" to run in the elections. Our election laws provide various
entitlements for candidates for public office, such as watchers in every polling
place,13 watchers in the board of canvassers,14 or even the receipt of electoral
contributions.15Moreover, there are election rules and regulations the formulations of
which are dependent on the number of candidates in a given election.

Given these considerations, the ignominious nature of a nuisance candidacy becomes

even more galling. The organization of an election with bona fide candidates standing is
onerous enough. To add into the mix candidates with no serious intentions or capabilities
to run a viable campaign would actually impair the electoral process. This is not to
mention the candidacies which are palpably ridiculous so as to constitute a one-note
joke. The poll body would be bogged by irrelevant minutiae covering every step of the
electoral process, most probably posed at the instance of these nuisance candidates. It
would be a senseless sacrifice on the part of the State.

Owing to the superior interest in ensuring a credible and orderly election, the State could
exclude nuisance candidates and need not indulge in, as the song goes, "their trips to
the moon on gossamer wings."

The Omnibus Election Code and COMELEC Resolution No. 6452 are cognizant of the
compelling State interest to ensure orderly and credible elections by excising
impediments thereto, such as nuisance candidacies that distract and detract from the
larger purpose. The COMELEC is mandated by the Constitution with the administration of
elections16 and endowed with considerable latitude in adopting means and methods that
will ensure the promotion of free, orderly and honest elections.17 Moreover, the
Constitution guarantees that only bona fide candidates for public office shall be free from
any form of harassment and discrimination.18 The determination of bona fidecandidates
is governed by the statutes, and the concept, to our mind is, satisfactorily defined in the
Omnibus Election Code.

Now, the needed factual premises.

However valid the law and the COMELEC issuance involved are, their proper application
in the case of the petitioner cannot be tested and reviewed by this Court on the basis of
what is now before it. The assailed resolutions of the COMELEC do not direct the Court to
the evidence which it considered in determining that petitioner was a nuisance
candidate. This precludes the Court from reviewing at this instance whether the
COMELEC committed grave abuse of discretion in disqualifying petitioner, since such a
review would necessarily take into account the matters which the COMELEC considered
in arriving at its decisions.

Petitioner has submitted to this Court mere photocopies of various documents

purportedly evincing his credentials as an eligible candidate for the presidency. Yet this
Court, not being a trier of facts, can not properly pass upon the reproductions as
evidence at this level. Neither the COMELEC nor the Solicitor General appended any
document to their respective Comments.

The question of whether a candidate is a nuisance candidate or not is both legal and
factual. The basis of the factual determination is not before this Court. Thus, the remand
of this case for the reception of further evidence is in order.

A word of caution is in order. What is at stake is petitioner’s aspiration and offer to serve
in the government. It deserves not a cursory treatment but a hearing which conforms to
the requirements of due process.
As to petitioner’s attacks on the validity of the form for the certificate of candidacy,
suffice it to say that the form strictly complies with Section 74 of the Omnibus Election
Code. This provision specifically enumerates what a certificate of candidacy should
contain, with the required information tending to show that the candidate possesses the
minimum qualifications for the position aspired for as established by the Constitution and
other election laws.

IN VIEW OF THE FOREGOING, COMELEC Case No. SPP (MP) No. 04-001 is hereby
remanded to the COMELEC for the reception of further evidence, to determine the
question on whether petitioner Elly Velez Lao Pamatong is a nuisance candidate as
contemplated in Section 69 of the Omnibus Election Code.

The COMELEC is directed to hold and complete the reception of evidence and report its
findings to this Court with deliberate dispatch.

SO ORDERED.

Davide, Jr., Puno, Vitug*, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-

Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., and Azcuna,
JJ., concur.

Footnotes

* On Official Leave.

1
Sec. 26. The State shall guarantee equal access to opportunities for public
service, and prohibit political dynasties as may be defined by law.

2
See Basco v. PAGCOR, G.R. No. 91649, May 14, 1991, 197 SCRA 52, 68;
Kilosbayan, Inc. v. Morato, G.R. No. 118910, 246 SCRA 540, 564. "A provision
which lays down a general principle, such as those found in Art. II of the 1987
Constitution, is usually not self-executing." Manila Prince Hotel v. GSIS, G.R. No.
122156, 3 February 1997, 267 SCRA 408, 431. "Accordingly, [the Court has] held
that the provisions in Article II of our Constitution entitled "Declaration of
Principles and State Policies" should generally be construed as mere statements
of principles of the State." Justice Puno, dissenting, Manila Prince Hotel v.
GSIS, Id. at 474.

3
See Kilosbayan Inc. v. Morato, G.R. No. 118910, 16 November 1995, 250 SCRA
130, 138. Manila Prince Hotel v. GSIS, supra note 2 at 436.

4
Kilosbayan, Inc. v. Morato, supra note 2.

5
"A searching inquiry should be made to find out if the provision is intended as a
present enactment, complete in itself as a definitive law, or if it needs future
legislation for completion and enforcement. The inquiry demands a micro-analysis
and the context of the provision in question." J. Puno, dissenting, Manila Prince
Hotel v. GSIS, supra note 2.

6
J. Bernas, The Intent of the 1986 Constitution Writers (1995), p. 148.

7
IV Records of Proceedings and Debates, 1986 Constitutional Commission 945.
8
See J. Feliciano, concurring, Oposa v. Factoran, Jr., G.R. No. 101083, 30 July
1993, 224 SCRA 792, 815.

9
Section 69. Nuisance Candidates. — The Commission may, motu proprio or
upon a verified petition of an interested party, refuse to give due course or cancel
a certificate of candidacy if it is shown that said certificate has been filed to put
the election process in mockery or disrepute or to cause confusion among the
voters by the similarity of the names of the registered candidates or by other
circumstances or acts which clearly demonstrate that the candidate has no bona
fide intention to run for the office for which the certificate of candidacy has been
filed and thus prevent a faithful determination of the true will of the electorate.

10
SEC. 6. Motu Proprio Cases. — The Commission may, at any time before the
election, motu proprio refuse to give due course to or cancel a certificate of
candidacy of any candidate for the positions of President, Vice-President, Senator
and Party-list:

I. The grounds:

a. Candidates who, on the face of their certificate of candidacy, do

not possess the constitutional and legal qualifications of the office
to which they aspire to be elected;

b. Candidate who, on the face of said certificate, filed their

certificate of candidacy to put the election process in mockery or
disrepute;

c. Candidates whose certificate of candidacy could cause confusion

among the voters by the similarity of names and surnames with
other candidates; and

d. Candidates who have no bona fide intention to run for the office
for which the certificate of candidacy had been filed or acts that
clearly demonstrate the lack of such bona fide intention, such as:

d.1 Candidates who do not belong to or are not nominated

by any registered political party of national constituency;

d.2 Presidential, Vice-Presidential [candi-dates] who do not

present running mates for vice-president, respectively, nor
senatorial candidates;

d.3 Candidates who do not have a platform of government

and are not capable of waging a nationwide campaign.

11
Jenness v. Fortson, 403 U.S. 431 (1971).

12
Rollo, pp. 469.

13
See Section 178, Omnibus Election Code, as amended.

14
See Section 239, Omnibus Election Code, as amended.

15
See Article XI, Omnibus Election Code, as amended.
16
See Section 2(1), Article IX, Constitution.

17
Sanchez v. COMELEC, 199 Phil. 617 (1987), citing Cauton v. COMELEC, L-
25467, 27 April 1967, 19 SCRA 911.

18
See Section 9, Article IX, Constitution.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 88637 September 7, 1989

CONGRESSMAN ENRIQUE T. GARCIA, Second District of Bataan, petitioner,

vs.
THE BOARD OF INVESTMENTS, THE DEPARTMENT OF TRADE AND INDUSTRY,
BATAAN PETROCHEMICAL CORPORATION and PILIPINAS SHELL
CORPORATION, respondents.

GRIÑO-AQUINO, J.:

In this petition for certiorari and prohibition with a prayer for preliminary injunction, the
petitioner, as congressman for the second district of Bataan, assails the approval by the
Board of Investments (BOI) and the Department of Trade and Industry (DTI) of the
amended application for registration of the Bataan Petrochemical Corporation, which
seeks to transfer the site of its petrochemical complex from Bataan, the original situs of
choice, to the province of Batangas.

Since the case presents purely legal issues, and the subject of the controversy vitally
affects the economic interests of the country which should not pend for too long, the
Court, after hearing the parties' extensive oral and written arguments on the petitioner's
application for preliminary injunction, believes that it may now decide the merits of the
petition as well.

Proclamation No. 361 dated March 6, 1968, as amended by Proclamation No. 630 dated
November 29, 1969, reserved a 388-hectare parcel of land of the public domain located
at Lamao, Limay, Bataan for "industrial estate purposes," in line with the State policy of
promoting and rationalizing the industrialization of the Philippines. P.D. No. 1803, dated
January 16, 1981, enlarged the area by 188 hectares, making it a total of 576 hectares,
reserved for the Petrochemical Industrial Zone under the administration, management
and ownership of the Philippine National Oil Company (PNOC).

The Bataan Refining Corporation (BRC for short) is a wholly government-owned

corporation, located in Bataan. It produces 60% of the national output of naphtha.

Taiwanese investors in a petrochemical project formed the Bataan Petrochemical

Corporation (BPC) and applied with BOI for registration as a new domestic producer of
petrochemicals. Its application specified Bataan as the plant site. One of the terms and
conditions for the registration of the project was the use of "naphtha cracker" and
"naphtha" as feedstock or fuel for its petrochemical plant. The petrochemical project was
to be a joint venture with PNOC. BPC was issued a Certificate of Registration on February
24, 1988 by BOI.

BPC was accorded pioneer status and was given fiscal and other incentives by BOI, like,
(1) exemptions from tax on raw materials, (2) repatriation of the entire proceeds of
liquidation of investments in currency originally made and at the exchange rate obtaining
at the time of repatriation; and (3) remittance of earnings on investments. As additional
incentive, the House of Representatives approved a bill introduced by the petitioner,
Congressman Garcia, eliminating the 48% ad valorem tax on naphtha if and when it
would be used as raw material in the petrochemical plant. The chairman of BPC, Tomas
T.N. Hsi, profusely welcomed the bill, stating:

This project is aiming at a boon not only to the province of Bataan, but to
the country of the Philippines in general. It will support the development
of the Philippine petrochemical industry by providing an ability to compete
in the world market for manufactured petrochemical derivatives such as
polyethylene and polypropylene products . . . (p. 7, Rollo.)

However, in February 1989, A. T. Chong, chairman of USI Far East Corporation, the
major investor in BPC personally delivered to Trade Secretary Jose Concepcion a letter
dated January 25, 1989, advising him of BPC's desire to amend the original registration
certificate of its project by changing the job site from Limay, Bataan, to Batangas (Annex
F, p. 51, Rollo). News of the shift was published by one of the major Philippine dailies
which disclosed that the cause of the relocation of the project is the insurgency and
unstable labor situation in Bataan. The presence in Batangas of a huge liquefied
petroleum gas (LPG) depot owned by the Pilipinas Shell Corporation was another
consideration.

The congressmen of Bataan vigorously opposed the transfer of the proposed

petrochemical plant to Batangas. At a conference of the Taiwanese investors with
President Aquino and her Secretary of Defense and Chief of Staff of the Army, the
President expressed her preference that the Bataan petrochemical plant be established
in Bataan.

However, despite speeches in the Senate and in the House opposing the transfer of the
project to Batangas, BPC filed in the BOI on April 11, 1989 a request for "approval of an
amendment of its investment application ... for establishing a petrochemical complex in
the Philippines." (Annex F, p. 51, Rollo.) The amendments consisted of. (1) increasing
the investment amount from US$220 million to US$320 million; (2) increasing the
production capacity of its naphtha cracker, polyetheylene plant and polypropylene plant;
(3) changing the feedstock from naphtha only to "naphtha and/or liquefied petroleum
gas;" (4) transferring the job site from Limay, Bataan to Batangas (Annex F, p. 51,
Rollo).

Senator Ernesto Maceda, Antonio Francisco, vice-president and general manager of the
Bataan Refining Corporation, Congressman Felicito C. Payumo of the lst District of
Bataan, herein petitioner Congressman Enrique Garcia of the Second District, the
provincial Governor of Bataan, the League of Mayors and various civic and professional
organizations all opposed the transfer of the project to Batangas (pp. 10, 11, 12, Rollo;
Annex Q, p. 81, Rollo).

On May 4, 1989, petitioner addressed a letter to Secretary Concepcion of the

Department of Trade and Industry (DTI), through BOI vice-chairman and manager
Tomas Alcantara, requesting for "a copy of the amendment reportedly submitted by
Taiwanese investors, to their original application for the installation of the Bataan
Petrochemical Plant, as well as the original application itself together with any and all
attachments to said original application and the amendment thereto." (Annex K, p. 70,
Rollo.)

On May 21, 1989, BOI vice-chairman Alcantara informed petitioner that the Taiwanese
investors declined to give their consent to the release of the documents requested
(Annex O).
On May 25, 1989, the BOI approved the revision of the registration of BPC's
petrochemical project (Annex S, p. 84, Rollo).

On June 26, 1989, petitioner filed a petition for certiorari and prohibition in this Court,
with a prayer for preliminary injunction, alleging that the BOI and DTI gravely abused
their discretion:

(a) in not observing due process in approving without a hearing, the revisions in the
registration of the BPC's petrochemical project;

(b) in refusing to furnish the petitioner with copies of BPC's application for registration
and its supporting papers in violation of the Government's policy of transparency;

(c) in approving the change in the site of BPC's petrochemical plant from Bataan to
Batangas in violation of PD Nos. 949 and 1803 which establishes Lamao, Limay, Bataan
as the "petrochemical industrial zone;"

(d) in approving the change in feedstock from naphtha only, to naphtha and/or lpg; and

(e) in showing gross partiality for BPC.

This Court is not concerned with the economic, social, and political aspects of this case
for it does not possess the necessary technology and scientific expertise to determine
whether the transfer of the proposed BPC petrochemical complex from Bataan to
Batangas and the change of fuel from naphtha only to "naphtha and/or LPG" will be best
for the project and for our country. This Court is not about to delve into the economics
and politics of this case. It is concerned simply, with the alleged violation of due process
and the alleged extra limitation of power and discretion on the part of the public
respondents in approving the transfer of the project to Batangas without giving due
notice and an opportunity to be heard to the vocal opponents of that move.

The Omnibus Investments Code of 1987 (Executive Order No. 226) of July 16, 1987
expressly declares it to be the policy of the State "to accelerate the sound development
of the national economy ... by encouraging private Filipino and foreign investments in
industry, agriculture, forestry, mining, tourism and other sectors of the economy." For
this purpose, the Code mandates the holding of "consultations with affected communities
whenever necessary" (Art. 2, subpar. 2 of the Omnibus Investments Code).
Correspondingly, Art. 33 provides that: whenever necessary, the Board, through the
People's Economic Councils, shall consult the communities affected on the acceptability
of locating the registered enterprise within their community."

The Code also requires the "publication of applications for registration," hence, the
payment of publication and other necessary fees ... prior to the processing and approval
of such applications (Art. 7, subpar. 3, Omnibus Investments Code).

As provided by the law, the BPC's application for registration as a "new export producer
of ethylene, polyethylene and polypropylene was published in the "Philippine Daily
Inquirer" issue of December 21, 1987. The notice invited "any person with valid
objections to or pertinent comments on the above-mentioned application ... (to file)
his/her comments/objections in writing with the BOI within one (1) week from the date
of this publication" (Annex 1, public respondent's Comment).

Since the BPC's amended application (particularly the change of location from Bataan to
Batangas) was in effect a new application, it should have been published so that
whoever may have any objection to the transfer may be heard. The BOI's failure to
publish such notice and to hold a hearing on the amended application deprived the
oppositors, like the petitioner, of due process and amounted to a grave abuse of
discretion on the part of the BOI.

There is no merit in the public respondents' contention that the petitioner has "no legal
interest" in the matter of the transfer of the BPC petrochemical plant from the province
of Bataan to the province of Batangas. The provision in the Investments Code requiring
publication of the investor's application for registration in the BOI is implicit recognition
that the proposed investment or new industry is a matter of public concern on which the
public has a right to be heard. And, when the BOI approved BPC's application to
establish its petrochemical plant in Limay, Bataan, the inhabitants of that province,
particularly the affected community in Limay, and the petitioner herein as the duly
elected representative of the Second District of Bataan acquired an interest in the
project which they have a right to protect. Their interest in the establishment of the
petrochemical plant in their midst is actual, real, and vital because it win affect not only
their economic life but even the air they will breathe.

Hence, they have a right to be heard or "be consulted" on the proposal to transfer it to
another site for the Investments Code does require that the "affected communities"
should be consulted. While this Court may not require BOI to decide that controversy in
a particular way, we may require the Board to comply with the law and its own rules and
regulations prescribing such notice and hearing.

This Court in the cases of Tañada vs. Tuvera, 136 SCRA 27 and Legaspi vs. Civil Service
Commission, 150 SCRA 530, has recognized a citizen's interest and personality to
procure the enforcement of a public duty and to bring an action to compel the
performance of that duty. In this case, what the petitioner seeks is for the Board of
Investments to hold a hearing where he may present evidence in support of his
opposition to the BPC's amended application for registration (which amounts to a new
application) since one of the effects of the amendment is to change the site of its
petrochemical plant from Bataan to Batangas.

The petitioner's request for xerox copies of certain documents flied by BPC together with
its original application, and its amended application for registration with BOI, may not be
denied, as it is the constitutional right of a citizen to have access to information on
matters of public concern under Article III, Section 7 of the 1987 Constitution. The
confidentiality of the records on BPC's applications is not absolute for Article 81 of the
Omnibus Investments Code provides that they may be disclosed "upon the consent of
the applicant, or on orders of a court of competent jurisdiction.' As a matter of fact, a
xerox copy of BPC's position paper dated April 10, 1989, in support of its request for the
transfer of its petrochemical plant to Batangas, has been submitted to this Court as
Annex A of its memorandum.

However, just as the confidentiality of an applicant's records in the BOI is not absolute,
neither is the petitioner's right of access to them unlimited. The Constitution does not
open every door to any and all information. "Under the Constitution, access to official
records, papers, etc. is subject to limitations as may be provided by law (Art. III, Sec. 7,
second sentence). The law may exempt certain types of information from public scrutiny
(Legaspi vs. Civil Service Commission, 150 SCRA 530). The trade secrets and
confidential, commercial and financial information of the applicant BPC, and matters
affecting national security are excluded from the privilege.

At the oral argument on the petitioner's application for a preliminary action on July 4,
1989, the Court was informed that if the BOI will hold a hearing on the BPC's amended
application, the petitioner will be able to present his evidence in opposition to the
transfer of the project to Batangas within a period of one week. After such hearing, the
BOI shall render its decision which the petitioner may appeal to the President as
provided in Article 36 of the Investments Code. Her decision will be final and
unappealable.

WHEREFORE, the petition for certiorari is granted. The Board of Investments is ordered:
(1) to publish the amended application for registration of the Bataan Petrochemical
Corporation, (2) to allow the petitioner to have access to its records on the original and
amended applications for registration, as a petrochemical manufacturer, of the
respondent Bataan Petrochemical Corporation, excluding, however, privileged papers
containing its trade secrets and other business and financial information, and (3) to set
for hearing the petitioner's opposition to the amended application in order that he may
present at such hearing all the evidence in his possession in support of his opposition to
the transfer of the site of the BPC petrochemical plant to Batangas province. The hearing
shall not exceed a period of ten (10) days from the date fixed by the BOI, notice of
which should be served by personal service to the petitioner through counsel, at least
three (3) days in advance. The hearings may be held from day to day for a period of ten
(10) days without postponements. The petition for a writ of prohibition or preliminary
injunction is denied. No costs.

SO ORDERED.

Narvasa, Gutierrez, Jr., Cruz, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Medialdea and
Regalado, JJ., concur.

Fernan, C.J., Paras, and Feliciano, JJ., took no part.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

On 17 December 1987, a group of Taiwanese investors, doing business under the name
of Bataan Petrochemical Corporation (BPC), filed with the Board of Investments (BOI) an
application for registration as a new export producer of petrochemicals. The notice of
application was duly published in the Philippine Daily Inquirer on 21 December 1987. The
application, as submitted, specified that the amount of the investment for the
establishment of a petrochemical complex in the Philippines was $220 million and that
the plant was to be located in Bataan using 41 naphta as feedstock.

On 14 January 1988, after compliance with other legal requirements, the BOI approved
the application, and issued the corresponding Certificate of Registration on 24 February
1988. BPC was accorded pioneer status and became entitled to the incentives provided
for in the Omnibus Investments Code.

In February 1989, BPC sought to amend its application by proposing the change of plant
site from Bataan to Batangas and the feedstock from "naphta only" to "naphta and/or
LPG," and increasing its investment to $320 million making the project the single biggest
foreign investment in the Philippines to date.

On 11 April 1989, BPC formally asked the BOI for approval of the proposed
amendments. Petitioner, the legislative representative of the Second District of Bataan,
opposed the change of the plant site in a privilege speech before Congress. He also sent
letters to the BOI and the Department of Trade and Industry setting forth his objections
to the transfer. In a hearing conducted by the Senate Committee on Ways and Means,
petitioner appeared and expounded on his position.

On 25 May 1989, the BOI approved the revisions to the registered petrochemical project.
Earlier, or on 21 May 1989, citing Article 81 of the Omnibus Investments Code of 1987,
the BOI denied petitioner's request for a copy of the revisions submitted by the investors
because the latter had declined to give their consent to the disclosure.

On 27 May 1989, a meeting was called by President Aquino in Malacanang to discuss the
transfer of the project site. Present at the meeting were BOI officials, the petitioner and
the other Congressman from Bataan. Petitioner requested the President to reconsider
the BOI decision approving the transfer. On 24 June 1989, the President again called a
meeting with the Bataan Congressmen, the Governor, and the Mayors of the province.
She asked the Bataan officials to withdraw their objections to the transfer of the plant
site to Batangas, lest the investors pack up and leave for, after all, Batangas is also in
the Philippines and some of the "downstream" industries which would spring from a
petrochemical complex may later be located in Bataan. The Bataan officials agreed to
drop their objections, except for petitioner who instituted this Petition for certiorari and
Prohibition before this Court (p. 11, Opposition by public respondents).

In his Petition, petitioner alleges that the BOI committed grave abuse of discretion and
denied him due process when it approved, without a hearing, the amendments to the
registration of the BPC petrochemical project; when it denied petitioner's request for a
copy of the amendments; and when it approved the change of the plant site and
feedstock of the plant.

As stated in the majority opinion, the Court is not concerned with the economic, social
and political aspects of the case.

In ruling in favor of petitioner, the majority faults the BOI with grave abuse of discretion
and has ordered it (1) to publish the amended application for registration; (2) to allow
petitioner to have access to its records on the original and amended applications for
registration, excluding trade secrets; and (3) to set for hearing petitioner's opposition to
the amended application.

With all due respect, I find no grave abuse of discretion on the part of BOI, nor denial by
it to petitioner of due process.

As regards publication, Article 54 of the Omnibus Investments Code provides:

Art. 54. Publication and Posting of Notices. — Immediately after the

application has been given due course by the Board, the Secretary of the
Board or any official designated by the Board shall require the applicant to
publish the notice of the action of the Board thereon at his expense once
in a newspaper of general circulation in the province or city where the
applicant has its principal office, and post copies of said notice in
conspicuous places, in the once of the Board or in the building where said
office is located; setting forth in such copies the name of the applicant, the
business in which it is engaged or proposes to engage or invest, and such
other data and information as may be required by the Board. No approval
or certificate shall be valid without the publication and posting of notices
as herein provided. (Italics supplied)

Clearly, it is not the application itself that is required to be published but notice of the
action of the Board plus the specified data. Thus, the Notice of Publication, which
appeared in the Inquirer, simply read:
 Notice is hereby given that the application of BATAAN PETROCHEMICAL
CORPORATION ... for registration with the Board of Investments under
Book I of the Omnibus Investment Code of 1987, otherwise known as
Executive Order No. 226 as new export producer of ethylene, polyethylene
and polypropylene has been officially accepted on December 17, 1987 and
is currently being processed.

Any person with valid objections to or pertinent comments on the above-

mentioned application may file his/her comments/objections in writing
with the BOI within one (1) week from the date of this publication.

Let this notice be published at the expense of the applicant

... (Annex "1," Opposition).

Absent the requirement of publication of the application itself, there should be no need
either to publish the amendments to the application. The statement in the majority
opinion that the amended application is considered a new application does not find
support in the Omnibus Investments Code. After all the amendment did not change the
essence or nature of the petrochemical project but only the site, and the feedstock.

Specially significant, too, is the fact that the confidentiality of applications is specifically
provided for in the Omnibus Investments Code. Thus:

Art. 81. Confidentiality of Applications. — All applications and their

supporting documents filed under this Code shall be confidential and shall
not be disclosed to any person, except with the consent of the applicant or
on orders of a court of competent jurisdiction.

Considering that all applications and their supporting documents are confidential and are
not to be disclosed to any person, it follows that amendments thereto should also be
considered confidential and need no publication.

Which brings us to the second part of the majority disposition requiring BOI to allow
petitioner to have access to its records.

If BOI did not furnish petitioner with copy of the original application and amendments
thereto, it was because it had received a reply from the project proponents "advising us
not to release the subject documents in view of the sensitive information contained
therein which includes the accumulation of the proponents' business experience and
know-how" (Annex "O," Petition). No grave abuse of discretion can be attributed to the
BOI, therefore, for not acceding to petitioner's request that he be furnished with copies
of the original application with its amendments and attachments (Annex "K," Petition).

Of course, pursuant to Article 81 of the Omnibus Investments Code, the Court, as it does
now, can order the BOI to allow petitioner to have access to its records on the original
and amended applications for registration.

There seems to be no longer any necessity therefor, however. Attached to public

respondent's Opposition is BPC's Position Paper, dated 10 April 1989, wherein BPC
discoursed on the significant benefits to be achieved by the transfer and why "using LPG
as alternative feedstock will be very advantageous to the project (Annex "2" Opposition)
In addition, petitioner already has in his possession: (a) the approval by the BOI of the
BPC application for registration, which includes the pre-registration and registration
conditions (Annex "A," Petition); (b) the post- registration specific terms and conditions,
which the BOI imposed for the project (Annex "B," ibid.); (c) the BPC letter to the BOI
requesting approval of the amendment of its investment application for registration for
the establishment of a petrochemical complex in the Philippines (Annex "F," ibid.); and
(d) the approval by the BOI on 25 May 1989 of the revisions to the project, subject to
additional conditions (Annex "S," ibid.). Moreover, in the Supplemental Opposition filed
by BPC it has attached a summary of the considerations that guided it in proposing the
amendments. Virtually all the data petitioner needs, therefore, are now of record.

The majority ruling also requires the BOI to set for hearing petitioner's opposition to the
amended application so that he may present at such hearing all the evidence in his
possession in support of his opposition to the transfer of the site of the project to
Batangas.

The Omnibus Investments Code, however, does not require the BOI to hold hearings
before approving applications for registration or amendments thereto. In fact, hearings
would contravene Codal provisions on confidentiality. Article 7, paragraph 4, cited in the
majority opinion neither supports the necessity of hearings. It reads:

Art. 7. Powers and Duties of the Board

xxx xxx xxx

(4) After due hearing, decide controversies concerning the implementation

of this Code that may arise between registered enterprises or investors
therein and government agencies, within thirty (30) days after the
controversy has been submitted for decision: ...

In other words, due hearing is required only in connection with controversies between
registered enterprises or investors therein and government agencies concerning the
implementation of the Omnibus Investments Code. It does not speak at all of a hearing
on applications for registration or amendments thereto.

Additionally, Article 34 of the Omnibus Investments Code, in providing that applications

not acted upon by the Board within twenty (20) days from official acceptance thereof
shall be considered automatically approved implies that a hearing is not at all
indispensable in the matter of registration of enterprises. The intention of the law to
make BOI proceedings non-adversarial and as expeditious as possible consistent with
the Codal policy to encourage investments, is clearly discernible.

Besides, a hearing, as ordained, will serve no practical purpose for petitioner has already
fully presented his case, the BOI has given it due consideration and has acted
accordingly. This is concretely shown by the following exchange of communications:

(1) In his letter to the Secretary of Trade and lndustry, who is concurrently Chairman of
the Board of Investments, petitioner "reiterate(d)" his "most vehement protest against
the maneuver to transfer the Bataan Petrochemical project from Bataan to Batangas
which, if successful, would greatly prejudice not only the people of Bataan, but more
importantly, our country and government" (Annex 'E," Petition);

(2) Petitioner's letter, dated 2 May 1989, to the Secretary of Trade and Industry
protested the latter's "official position that 'The final choice (of site) is still with the
proponent (the Taiwanese), who would, in the final analysis, provide the funding or risk
capital for the project"' (Annex "J," ibid.);
(3) Attached to said communication was petitioner's letter, dated 24 April 1989,
addressed to the Senate Committee on Ways and Means giving fourteen (14) reasons
why the project should not be transferred to Batangas (Annex "I," ibid.);

(4) The reply-letter of the BOI to petitioner, dated 11 May 1989, took exception to
petitioner's claim that the BOI and the DTI, by not vigorously opposing the transfer, had
violated the Constitution, the Omnibus Investments Code and P.D. 949 as amended by
PD 1803, and urged petitioner not to proceed with his planned court action as it would
only serve to "discourage foreign investors and derail efforts at economic recovery"
(Annex "M," ibid.);

(5) Petitioner's letter to the BOI of 16 May 1989 rebutted point by point the arguments
in the BOI letter of 11 May 1989 and argued that "PD No. 949, as amended by P. D. No.
1803, as well as related issuances, have chosen Bataan as the site of the petrochemical
project" (Annex "N," ibid.);

(6) Petitioner's letter to the BOI of 29 May 1989 formalized his "motion for
reconsideration of the BOI "decision' approving the transfer of the project from Bataan to
Batangas, and contended that President Aquino had set it aside (Annex "P," ibid.);

(7) Petitioner's follow-up letter to the BOI, dated 19 June 1989, claimed that the BOI
decision to approve the transfer of the project had, in effect, been reversed by the
President herself and that the BOI should "refrain from taking any step to execute said
defunct decision" (Annex "Q," ibid.);

(8) In the BOI letter of 21 June 1989 to petitioner, the former denied that there had
been a reversal by the President of the BOI decision; and that, as far as petitioner's
motion for reconsideration of the BOI decision is concerned, "since you are not
submitting any new cause of action for BOI to reconsider its decision, we believe that we
have sufficiently answered the questions you have raised in your letter dated 2 May
1989, which has been replied to by the Managing Head of the BOI on 11 May 1989"
(Annex "R," ibid.).

All told, there can be no question that petitioner has been fully heard on his original
petition to the BOI to disapprove the transfer of the project site and on his motion for
reconsideration. No further purpose will be served by setting petitioner's opposition for
hearing.

Neither do I think that "affected communities' have a right to be consulted, as opined by

the majority. The provision pertinent thereto reads:

Art. 33. Application. — Applications shall be filed with the Board, recorded
in a registration book and the date appearing therein and stamped on the
application shall be considered the date of official acceptance.

Whenever necessary, the Board, through the People's Economic Councils,

shall consult the communities affected on the acceptability of locating the
registered enterprise within their community.

In other words, the requirement on consultation is qualified by the phrase "whenever

necessary." The clear implication is that the BOI may dispense with such consultations if
it believes that it can decide applications for registration by itself without consultation.

In fine, it is my view that the BOI did not commit any grave abuse of discretion in
approving the amendments to BPC's application. Nor had it failed to observe due process
in approving the same without a formal hearing, petitioner having, in fact, been fully
heard. The matter of determining whether the transfer of the plant site and change of
feedstock will be best for the project and the country lies with the BOI as the
administrative body specifically tasked with such matters. It is well-settled that absent a
clear, manifest and grave abuse of discretion amounting to want of jurisdiction, the
decision and findings of an administrative agency on matters falling within its
competence will not be disturbed by the Courts Sagun vs. People's Homesite and
Housing Corp., G.R. No. 44738, June 22, 1988, 162 SCRA 411) as the same fans within
that agency's special knowledge and expertise gained by it from handling the specific
matters falling under its jurisdiction (Mapa vs. Arroyo et al., G.R. No. 78565, July 5,
1989).

I vote, therefore, for the dismissal of the petition for lack of merit, which dismissal
should be immediately executory. The holding of hearings will serve no purpose other
than unnecessarily delay the implementation of the Philippines' biggest foreign project,
representing a major step towards industrialization. Further delay can only produce a
chilling effect on foreign investments in the country.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

On 17 December 1987, a group of Taiwanese investors, doing business under the name
of Bataan Petrochemical Corporation (BPC), filed with the Board of Investments (BOI) an
application for registration as a new export producer of petrochemicals. The notice of
application was duly published in the Philippine Daily Inquirer on 21 December 1987. The
application, as submitted, specified that the amount of the investment for the
establishment of a petrochemical complex in the Philippines was $220 million and that
the plant was to be located in Bataan using 41 naphta as feedstock.

On 14 January 1988, after compliance with other legal requirements, the BOI approved
the application, and issued the corresponding Certificate of Registration on 24 February
1988. BPC was accorded pioneer status and became entitled to the incentives provided
for in the Omnibus Investments Code.

In February 1989, BPC sought to amend its application by proposing the change of plant
site from Bataan to Batangas and the feedstock from "naphta only" to "naphta and/or
LPG," and increasing its investment to $320 million making the project the single biggest
foreign investment in the Philippines to date.

On 11 April 1989, BPC formally asked the BOI for approval of the proposed
amendments. Petitioner, the legislative representative of the Second District of Bataan,
opposed the change of the plant site in a privilege speech before Congress. He also sent
letters to the BOI and the Department of Trade and Industry setting forth his objections
to the transfer. In a hearing conducted by the Senate Committee on Ways and Means,
petitioner appeared and expounded on his position.

On 25 May 1989, the BOI approved the revisions to the registered petrochemical project.
Earlier, or on 21 May 1989, citing Article 81 of the Omnibus Investments Code of 1987,
the BOI denied petitioner's request for a copy of the revisions submitted by the investors
because the latter had declined to give their consent to the disclosure.
On 27 May 1989, a meeting was called by President Aquino in Malacanang to discuss the
transfer of the project site. Present at the meeting were BOI officials, the petitioner and
the other Congressman from Bataan. Petitioner requested the President to reconsider
the BOI decision approving the transfer. On 24 June 1989, the President again called a
meeting with the Bataan Congressmen, the Governor, and the Mayors of the province.
She asked the Bataan officials to withdraw their objections to the transfer of the plant
site to Batangas, lest the investors pack up and leave for, after all, Batangas is also in
the Philippines and some of the "downstream" industries which would spring from a
petrochemical complex may later be located in Bataan. The Bataan officials agreed to
drop their objections, except for petitioner who instituted this Petition for certiorari and
Prohibition before this Court (p. 11, Opposition by public respondents).

In his Petition, petitioner alleges that the BOI committed grave abuse of discretion and
denied him due process when it approved, without a hearing, the amendments to the
registration of the BPC petrochemical project; when it denied petitioner's request for a
copy of the amendments; and when it approved the change of the plant site and
feedstock of the plant.

As stated in the majority opinion, the Court is not concerned with the economic, social
and political aspects of the case.

In ruling in favor of petitioner, the majority faults the BOI with grave abuse of discretion
and has ordered it (1) to publish the amended application for registration; (2) to allow
petitioner to have access to its records on the original and amended applications for
registration, excluding trade secrets; and (3) to set for hearing petitioner's opposition to
the amended application.

With all due respect, I find no grave abuse of discretion on the part of BOI, nor denial by
it to petitioner of due process.

As regards publication, Article 54 of the Omnibus Investments Code provides:

Art. 54. Publication and Posting of Notices. — Immediately after the

application has been given due course by the Board, the Secretary of the
Board or any official designated by the Board shall require the applicant to
publish the notice of the action of the Board thereon at his expense once
in a newspaper of general circulation in the province or city where the
applicant has its principal office, and post copies of said notice in
conspicuous places, in the once of the Board or in the building where said
office is located; setting forth in such copies the name of the applicant, the
business in which it is engaged or proposes to engage or invest, and such
other data and information as may be required by the Board. No approval
or certificate shall be valid without the publication and posting of notices
as herein provided. (Italics supplied)

Clearly, it is not the application itself that is required to be published but notice of the
action of the Board plus the specified data. Thus, the Notice of Publication, which
appeared in the Inquirer, simply read:

Notice is hereby given that the application of BATAAN PETROCHEMICAL

CORPORATION ... for registration with the Board of Investments under
Book I of the Omnibus Investment Code of 1987, otherwise known as
Executive Order No. 226 as new export producer of ethylene, polyethylene
and polypropylene has been officially accepted on December 17, 1987 and
is currently being processed.
 Any person with valid objections to or pertinent comments on the above-
mentioned application may file his/her comments/objections in writing
with the BOI within one (1) week from the date of this publication.

Let this notice be published at the expense of the applicant

... (Annex "1," Opposition).

Absent the requirement of publication of the application itself, there should be no need
either to publish the amendments to the application. The statement in the majority
opinion that the amended application is considered a new application does not find
support in the Omnibus Investments Code. After all the amendment did not change the
essence or nature of the petrochemical project but only the site, and the feedstock.

Specially significant, too, is the fact that the confidentiality of applications is specifically
provided for in the Omnibus Investments Code. Thus:

Art. 81. Confidentiality of Applications. — All applications and their

supporting documents filed under this Code shall be confidential and shall
not be disclosed to any person, except with the consent of the applicant or
on orders of a court of competent jurisdiction.

Considering that all applications and their supporting documents are confidential and are
not to be disclosed to any person, it follows that amendments thereto should also be
considered confidential and need no publication.

Which brings us to the second part of the majority disposition requiring BOI to allow
petitioner to have access to its records.

If BOI did not furnish petitioner with copy of the original application and amendments
thereto, it was because it had received a reply from the project proponents "advising us
not to release the subject documents in view of the sensitive information contained
therein which includes the accumulation of the proponents' business experience and
know-how" (Annex "O," Petition). No grave abuse of discretion can be attributed to the
BOI, therefore, for not acceding to petitioner's request that he be furnished with copies
of the original application with its amendments and attachments (Annex "K," Petition).

Of course, pursuant to Article 81 of the Omnibus Investments Code, the Court, as it does
now, can order the BOI to allow petitioner to have access to its records on the original
and amended applications for registration.

There seems to be no longer any necessity therefor, however. Attached to public

respondent's Opposition is BPC's Position Paper, dated 10 April 1989, wherein BPC
discoursed on the significant benefits to be achieved by the transfer and why "using LPG
as alternative feedstock will be very advantageous to the project (Annex "2" Opposition)
In addition, petitioner already has in his possession: (a) the approval by the BOI of the
BPC application for registration, which includes the pre-registration and registration
conditions (Annex "A," Petition); (b) the post- registration specific terms and conditions,
which the BOI imposed for the project (Annex "B," ibid.); (c) the BPC letter to the BOI
requesting approval of the amendment of its investment application for registration for
the establishment of a petrochemical complex in the Philippines (Annex "F," ibid.); and
(d) the approval by the BOI on 25 May 1989 of the revisions to the project, subject to
additional conditions (Annex "S," ibid.). Moreover, in the Supplemental Opposition filed
by BPC it has attached a summary of the considerations that guided it in proposing the
amendments. Virtually all the data petitioner needs, therefore, are now of record.
The majority ruling also requires the BOI to set for hearing petitioner's opposition to the
amended application so that he may present at such hearing all the evidence in his
possession in support of his opposition to the transfer of the site of the project to
Batangas.

The Omnibus Investments Code, however, does not require the BOI to hold hearings
before approving applications for registration or amendments thereto. In fact, hearings
would contravene Codal provisions on confidentiality. Article 7, paragraph 4, cited in the
majority opinion neither supports the necessity of hearings. It reads:

Art. 7. Powers and Duties of the Board

xxx xxx xxx

(4) After due hearing, decide controversies concerning the implementation

of this Code that may arise between registered enterprises or investors
therein and government agencies, within thirty (30) days after the
controversy has been submitted for decision: ...

In other words, due hearing is required only in connection with controversies between
registered enterprises or investors therein and government agencies concerning the
implementation of the Omnibus Investments Code. It does not speak at all of a hearing
on applications for registration or amendments thereto.

Additionally, Article 34 of the Omnibus Investments Code, in providing that applications

not acted upon by the Board within twenty (20) days from official acceptance thereof
shall be considered automatically approved implies that a hearing is not at all
indispensable in the matter of registration of enterprises. The intention of the law to
make BOI proceedings non-adversarial and as expeditious as possible consistent with
the Codal policy to encourage investments, is clearly discernible.

Besides, a hearing, as ordained, will serve no practical purpose for petitioner has already
fully presented his case, the BOI has given it due consideration and has acted
accordingly. This is concretely shown by the following exchange of communications:

(1) In his letter to the Secretary of Trade and lndustry, who is concurrently Chairman of
the Board of Investments, petitioner "reiterate(d)" his "most vehement protest against
the maneuver to transfer the Bataan Petrochemical project from Bataan to Batangas
which, if successful, would greatly prejudice not only the people of Bataan, but more
importantly, our country and government" (Annex 'E," Petition);

(2) Petitioner's letter, dated 2 May 1989, to the Secretary of Trade and Industry
protested the latter's "official position that 'The final choice (of site) is still with the
proponent (the Taiwanese), who would, in the final analysis, provide the funding or risk
capital for the project"' (Annex "J," ibid.);

(3) Attached to said communication was petitioner's letter, dated 24 April 1989,
addressed to the Senate Committee on Ways and Means giving fourteen (14) reasons
why the project should not be transferred to Batangas (Annex "I," ibid.);

(4) The reply-letter of the BOI to petitioner, dated 11 May 1989, took exception to
petitioner's claim that the BOI and the DTI, by not vigorously opposing the transfer, had
violated the Constitution, the Omnibus Investments Code and P.D. 949 as amended by
PD 1803, and urged petitioner not to proceed with his planned court action as it would
only serve to "discourage foreign investors and derail efforts at economic recovery"
(Annex "M," ibid.);

(5) Petitioner's letter to the BOI of 16 May 1989 rebutted point by point the arguments
in the BOI letter of 11 May 1989 and argued that "PD No. 949, as amended by P. D. No.
1803, as well as related issuances, have chosen Bataan as the site of the petrochemical
project" (Annex "N," ibid.);

(6) Petitioner's letter to the BOI of 29 May 1989 formalized his "motion for
reconsideration of the BOI "decision' approving the transfer of the project from Bataan to
Batangas, and contended that President Aquino had set it aside (Annex "P," ibid.);

(7) Petitioner's follow-up letter to the BOI, dated 19 June 1989, claimed that the BOI
decision to approve the transfer of the project had, in effect, been reversed by the
President herself and that the BOI should "refrain from taking any step to execute said
defunct decision" (Annex "Q," ibid.);

(8) In the BOI letter of 21 June 1989 to petitioner, the former denied that there had
been a reversal by the President of the BOI decision; and that, as far as petitioner's
motion for reconsideration of the BOI decision is concerned, "since you are not
submitting any new cause of action for BOI to reconsider its decision, we believe that we
have sufficiently answered the questions you have raised in your letter dated 2 May
1989, which has been replied to by the Managing Head of the BOI on 11 May 1989"
(Annex "R," ibid.).

All told, there can be no question that petitioner has been fully heard on his original
petition to the BOI to disapprove the transfer of the project site and on his motion for
reconsideration. No further purpose will be served by setting petitioner's opposition for
hearing.

Neither do I think that "affected communities' have a right to be consulted, as opined by

the majority. The provision pertinent thereto reads:

Art. 33. Application. — Applications shall be filed with the Board, recorded
in a registration book and the date appearing therein and stamped on the
application shall be considered the date of official acceptance.

Whenever necessary, the Board, through the People's Economic Councils,

shall consult the communities affected on the acceptability of locating the
registered enterprise within their community.

In other words, the requirement on consultation is qualified by the phrase "whenever

necessary." The clear implication is that the BOI may dispense with such consultations if
it believes that it can decide applications for registration by itself without consultation.

In fine, it is my view that the BOI did not commit any grave abuse of discretion in
approving the amendments to BPC's application. Nor had it failed to observe due process
in approving the same without a formal hearing, petitioner having, in fact, been fully
heard. The matter of determining whether the transfer of the plant site and change of
feedstock will be best for the project and the country lies with the BOI as the
administrative body specifically tasked with such matters. It is well-settled that absent a
clear, manifest and grave abuse of discretion amounting to want of jurisdiction, the
decision and findings of an administrative agency on matters falling within its
competence will not be disturbed by the Courts Sagun vs. People's Homesite and
Housing Corp., G.R. No. 44738, June 22, 1988, 162 SCRA 411) as the same fans within
that agency's special knowledge and expertise gained by it from handling the specific
matters falling under its jurisdiction (Mapa vs. Arroyo et al., G.R. No. 78565, July 5,
1989).

I vote, therefore, for the dismissal of the petition for lack of merit, which dismissal
should be immediately executory. The holding of hearings will serve no purpose other
than unnecessarily delay the implementation of the Philippines' biggest foreign project,
representing a major step towards industrialization. Further delay can only produce a
chilling effect on foreign investments in the country.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 92024 November 9, 1990

CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,

vs.
THE BOARD OF INVESTMENTS, THE DEPARTMENT OF TRADE AND INDUSTRY,
LUZON PETROCHEMICAL CORPORATION, and PILIPINAS SHELL
CORPORATION, respondents.

Abraham C. La Vina for petitioner.

Sycip, Salazar, Hernandez & Gatmaitan for Luzon Petrochemical Corporation.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for Pilipinas Shell Petroleum
Corporation.

GUTIERREZ, JR., J.:

This is a petition to annul and set aside the decision of the Board of Investments
(BOI)/Department of Trade and Industry (DTI) approving the transfer of the site of the
proposed petrochemical plant from Bataan to Batangas and the shift of feedstock for that
plant from naphtha only to naphtha and/or liquefied petroleum gas (LPG).

This petition is a sequel to the petition in G.R. No. 88637 entitled "Congressman Enrique
T. Garcia v. the Board of Investments", September 7, 1989, where this Court issued a
decision, ordering the BOI as follows:

WHEREFORE, the petition for certiorari is granted. The Board of

Investments is ordered: (1) to publish the amended application for
registration of the Bataan Petrochemical Corporation, (2) to allow the
petitioner to have access to its records on the original and amended
applications for registration, as a petrochemical manufacturer, of the
respondent Bataan Petrochemical Corporation, excluding, however,
privileged papers containing its trade secrets and other business and
financial information, and (3) to set for hearing the petitioner's opposition
to the amended application in order that he may present at such hearing
all the evidence in his possession in support of his opposition to the
transfer of the site of the BPC petrochemical plant to Batangas province.
The hearing shall not exceed a period of ten (10) days from the date fixed
by the BOI, notice of which should be served by personal service to the
petitioner through counsel, at least three (3) days in advance. The
hearings may be held from day to day for a period of ten (10) days
without postponements. The petition for a writ of prohibition or
preliminary injunction is denied. No costs. (Rollo, pages 450-451)

However, acting on the petitioner's motion for partial reconsideration asking that we rule
on the import of P.D. Nos. 949 and 1803 and on the foreign investor's claim of right of
final choice of plant site, in the light of the provisions of the Constitution and the
Omnibus Investments Code of 1987, this Court on October 24, 1989, made the
observation that P.D. Nos. 949 and 1803 "do not provide that the Limay site should be
the only petrochemical zone in the country, nor prohibit the establishment of a
petrochemical plant elsewhere in the country, that the establishment of a petrochemical
plant in Batangas does not violate P.D. No. 949 and P.D. No. 1803.

Our resolution skirted the issue of whether the investor given the initial inducements and
other circumstances surrounding its first choice of plant site may change it simply
because it has the final choice on the matter. The Court merely ruled that the petitioner
appears to have lost interest in the case by his failure to appear at the hearing that was
set by the BOI after receipt of the decision, so he may be deemed to have waived the
fruit of the judgment. On this ground, the motion for partial reconsideration was denied.

A motion for reconsideration of said resolution was filed by the petitioner asking that we
resolve the basic issue of whether or not the foreign investor has the right of final choice
of plant site; that the non-attendance of the petitioner at the hearing was because the
decision was not yet final and executory; and that the petitioner had not therefor waived
the right to a hearing before the BOI.

In the Court's resolution dated January 17, 1990, we stated:

Does the investor have a "right of final choice" of plant site? Neither under
the 1987 Constitution nor in the Omnibus Investments Code is there such
a 'right of final choice.' In the first place, the investor's choice is subject to
processing and approval or disapproval by the BOI (Art. 7, Chapter II,
Omnibus Investments Code). By submitting its application and amended
application to the BOI for approval, the investor recognizes the sovereign
prerogative of our Government, through the BOI, to approve or disapprove
the same after determining whether its proposed project will be feasible,
desirable and beneficial to our country. By asking that his opposition to
the LPC's amended application be heard by the BOI, the petitioner likewise
acknowledges that the BOI, not the investor, has the last word or the
"final choice" on the matter.

Secondly, as this case has shown, even a choice that had been approved
by the BOI may not be 'final', for supervening circumstances and changes
in the conditions of a place may dictate a corresponding change in the
choice of plant site in order that the project will not fail. After all, our
country will benefit only when a project succeeds, not when it fails. (Rollo,
pp. 538-539)

Nevertheless, the motion for reconsideration of the petitioner was denied.

A minority composed of Justices Melencio-Herrera, Gancayco, Sarmiento and

this ponente voted to grant the motion for reconsideration stating that the hearing set
by the BOI was premature as the decision of the Court was not yet final and executory;
that as contended by the petitioner the Court must first rule on whether or not the
investor has the right of final choice of plant site for if the ruling is in the affirmative, the
hearing would be a useless exercise; that in the October 19, 1989 resolution, the Court
while upholding validity of the transfer of the plant site did not rule on the issue of who
has the final choice; that they agree with the observation of the majority that "the
investor has no final choice either under the 1987 Constitution or in the Omnibus
Investments Code and that it is the BOI who decides for the government" and that the
plea of the petitioner should be granted to give him the chance to show the justness of
his claim and to enable the BOI to give a second hard look at the matter.
Thus, the herein petition which relies on the ruling of the Court in the resolution of
January 17, 1990 in G.R. No. 88637 that the investor has no right of final choice under
the 1987 Constitution and the Omnibus Investments Code.

Under P.D. No. 1803 dated January 16, 1981, 576 hectares of the public domain located
in Lamao, Limay, Bataan were reserved for the Petrochemical Industrial Zone under the
administration, management, and ownership of the Philippine National Oil Company
(PNOC).

The Bataan Refining Corporation (BRC) is a wholly government owned corporation,

located at Bataan. It produces 60% of the national output of naphtha.

Taiwanese investors in a petrochemical project formed the Bataan Petrochemical

Corporation (BPC) and applied with BOI for registration as a new domestic producer of
petrochemicals. Its application specified Bataan as the plant site. One of the terms and
conditions for registration of the project was the use of "naphtha cracker" and "naphtha"
as feedstock or fuel for its petrochemical plant. The petrochemical plant was to be a joint
venture with PNOC. BPC was issued a certificate of registration on February 24, 1988 by
BOI.

BPC was given pioneer status and accorded fiscal and other incentives by BOI, like: (1)
exemption from taxes on raw materials, (2) repatriation of the entire proceeds of
liquidation investments in currency originally made and at the exchange rate obtaining at
the time of repatriation; and (3) remittance of earnings on investments. As additional
incentive, the House of Representatives approved a bill introduced by the petitioner
eliminating the 48% ad valoremtax on naphtha if and when it is used as raw materials in
the petrochemical plant. (G.R. No. 88637, September 7, 1989, pp. 2-3. Rollo, pp. 441-
442)

However, in February, 1989, A.T. Chong, chairman of USI Far East Corporation, the
major investor in BPC, personally delivered to Trade Secretary Jose Concepcion a letter
dated January 25, 1989 advising him of BPC's desire to amend the original registration
certification of its project by changing the job site from Limay, Bataan, to Batangas. The
reason adduced for the transfer was the insurgency and unstable labor situation, and the
presence in Batangas of a huge liquefied petroleum gas (LPG) depot owned by the
Philippine Shell Corporation.

The petitioner vigorously opposed the proposal and no less than President Aquino
expressed her preference that the plant be established in Bataan in a conference with
the Taiwanese investors, the Secretary of National Defense and The Chief of Staff of the
Armed Forces.

Despite speeches in the Senate and House opposing the Transfer of the project to
Batangas, BPC filed on April 11, 1989 its request for approval of the amendments. Its
application is as follows: "(l) increasing the investment amount from US $220 million to
US $320 million; (2) increasing the production capacity of its naphtha cracker,
polythylene plant and polypropylene plant; (3) changing the feedstock from naphtha
only to "naphtha and/or liquefied petroleum gas;" and (4) transferring the job site from
Limay, Bataan, to Batangas. (Annex B to Petition; Rollo, p. 25)

Notwithstanding opposition from any quarters and the request of the petitioner
addressed to Secretary Concepcion to be furnished a copy of the proposed amendment
with its attachments which was denied by the BOI on May 25, 1989, BOI approved the
revision of the registration of BPC's petrochemical project. (Petition, Annex F; Rollo, p.
32; See pp. 4 to 6, Decision in G.R. No. 88637; supra.)
BOI Vice-Chairman Tomas I. Alcantara testifying before the Committee on Ways and
Means of the Senate asserted that:

The BOI has taken a public position preferring Bataan over Batangas as
the site of the petrochemical complex, as this would provide a better
distribution of industries around the Metro Manila area. ... In advocating
the choice of Bataan as the project site for the petrochemical complex, the
BOI, however, made it clear, and I would like to repeat this that the BOI
made it clear in its view that the BOI or the government for that matter
could only recomend as to where the project should be located. The BOI
recognizes and respect the principle that the final chouce is still with the
proponent who would in the final analysis provide the funding or risk
capital for the project. (Petition, P. 13; Annex D to the petition)

This position has not been denied by BOI in its pleadings in G.R. No. 88637 and in the
present petition.

Section 1, Article VIII of the 1987 Constitution provides:

SECTION 1. The judicial power shall be vested in one Supreme Court and
in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the Government.

There is before us an actual controversy whether the petrochemical plant should remain
in Bataan or should be transferred to Batangas, and whether its feedstock originally of
naphtha only should be changed to naphtha and/or liquefied petroleum gas as the
approved amended application of the BPC, now Luzon Petrochemical Corporation (LPC),
shows. And in the light of the categorical admission of the BOI that it is the investor who
has the final choice of the site and the decision on the feedstock, whether or not it
constitutes a grave abuse of discretion for the BOI to yield to the wishes of the investor,
national interest notwithstanding.

We rule that the Court has a constitutional duty to step into this controversy and
determine the paramount issue. We grant the petition.

First, Bataan was the original choice as the plant site of the BOI to which the BPC
agreed. That is why it organized itself into a corporation bearing the name Bataan. There
is available 576 hectares of public land precisely reserved as the petrochemical zone in
Limay, Bataan under P.D. No. 1803. There is no need to buy expensive real estate for
the site unlike in the proposed transfer to Batangas. The site is the result of careful
study long before any covetous interests intruded into the choice. The site is ideal. It is
not unduly constricted and allows for expansion. The respondents have not shown nor
reiterated that the alleged peace and order situation in Bataan or unstable labor situation
warrant a transfer of the plant site to Batangas. Certainly, these were taken into account
when the firm named itself Bataan Petrochemical Corporation. Moreover, the evidence
proves the contrary.

Second, the BRC, a government owned Filipino corporation, located in Bataan produces
60% of the national output of naphtha which can be used as feedstock for the plant in
Bataan. It can provide the feedstock requirement of the plant. On the other hand, the
country is short of LPG and there is need to import the same for use of the plant in
Batangas. The local production thereof by Shell can hardly supply the needs of the
consumers for cooking purposes. Scarce dollars will be diverted, unnecessarily, from
vitally essential projects in order to feed the furnaces of the transferred petrochemical
plant.

Third, naphtha as feedstock has been exempted by law from the ad valorem tax by the
approval of Republic Act No. 6767 by President Aquino but excluding LPG from
exemption from ad valorem tax. The law was enacted specifically for the petrochemical
industry. The policy determination by both Congress and the President is clear. Neither
BOI nor a foreign investor should disregard or contravene expressed policy by shifting
the feedstock from naphtha to LPG.

Fourth, under Section 10, Article XII of the 1987 Constitution, it is the duty of the State
to "regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities." The development of
a self-reliant and independent national economy effectively controlled by Filipinos is
mandated in Section 19, Article II of the Constitution.

In Article 2 of the Omnibus Investments Code of 1987 "the sound development of the
national economy in consonance with the principles and objectives of economic
nationalism" is the set goal of government.

Fifth, with the admitted fact that the investor is raising the greater portion of the capital
for the project from local sources by way of loan which led to the so-called "petroscam
scandal", the capital requirements would be greatly minimized if LPC does not have to
buy the land for the project and its feedstock shall be limited to naphtha which is
certainly more economical, more readily available than LPG, and does not have to be
imported.

Sixth, if the plant site is maintained in Bataan, the PNOC shall be a partner in the
venture to the great benefit and advantage of the government which shall have a
participation in the management of the project instead of a firm which is a huge
multinational corporation.

In the light of all the clear advantages manifest in the plant's remaining in Bataan,
practically nothing is shown to justify the transfer to Batangas except a near-absolute
discretion given by BOI to investors not only to freely choose the site but to transfer it
from their own first choice for reasons which remain murky to say the least.

And this brings us to a prime consideration which the Court cannot rightly ignore.

Section 1, Article XII of the Constitution provides that:

xxx xxx xxx

The State shall promote industrialization and full employment based on

sound agricultural development and agrarian reform, through industries
that make full and efficient use of human and natural resources, and which
are competitive in both domestic and foreign markets. However, the State
shall protect Filipino enterprises against unfair foreign competition and
trade practices.

xxx xxx xxx

Every provision of the Constitution on the national economy and patrimony is infused
with the spirit of national interest. The non-alienation of natural resources, the State's
full control over the development and utilization of our scarce resources, agreements
with foreigners being based on real contributions to the economic growth and general
welfare of the country and the regulation of foreign investments in accordance with
national goals and priorities are too explicit not to be noticed and understood.

A petrochemical industry is not an ordinary investment opportunity. It should not be

treated like a garment or embroidery firm, a shoe-making venture, or even an assembler
of cars or manufacturer of computer chips, where the BOI reasoning may be accorded
fuller faith and credit. The petrochemical industry is essential to the national interest. In
other ASEAN countries like Indonesia and Malaysia, the government superintends the
industry by controlling the upstream or cracker facility.

In this particular BPC venture, not only has the Government given unprecedented favors,
among them:

(1) For an initial authorized capital of only P20 million, the Central Bank
gave an eligible relending credit or relending facility worth US $50 million
and a debt to swap arrangement for US $30 million or a total
accommodation of US $80 million which at current exchange rates is
around P2080 million.

(2) A major part of the company's capitalization shall not come from
foreign sources but from loans, initially a Pl Billion syndicated loan, to be
given by both government banks and a consortium of Philippine private
banks or in common parlance, a case of 'guiniguisa sa sariling manteca.'

(3) Tax exemptions and privileges were given as part of its 'preferred
pioneer status.'

(4) Loan applications of other Philippine firms will be crowded out of the
Asian Development Bank portfolio because of the petrochemical firm's
massive loan request. (Taken from the proceedings before the Senate Blue
Ribbon Committee).

but through its regulatory agency, the BOI, it surrenders even the power to make a
company abide by its initial choice, a choice free from any suspicion of unscrupulous
machinations and a choice which is undoubtedly in the best interests of the Filipino
people.

The Court, therefore, holds and finds that the BOI committed a grave abuse of discretion
in approving the transfer of the petrochemical plant from Bataan to Batangas and
authorizing the change of feedstock from naphtha only to naphtha and/or LPG for the
main reason that the final say is in the investor all other circumstances to the contrary
notwithstanding. No cogent advantage to the government has been shown by this
transfer. This is a repudiation of the independent policy of the government expressed in
numerous laws and the Constitution to run its own affairs the way it deems best for the
national interest.

One can but remember the words of a great Filipino leader who in part said he would not
mind having a government run like hell by Filipinos than one subservient to foreign
dictation. In this case, it is not even a foreign government but an ordinary investor
whom the BOI allows to dictate what we shall do with our heritage.
WHEREFORE, the petition is hereby granted. The decision of the respondent Board of
Investments approving the amendment of the certificate of registration of the Luzon
Petrochemical Corporation on May 23, 1989 under its Resolution No. 193, Series of
1989, (Annex F to the Petition) is SET ASIDE as NULL and VOID. The original certificate
of registration of BPC' (now LPC) of February 24, 1988 with Bataan as the plant site and
naphtha as the feedstock is, therefore, ordered maintained.

SO ORDERED.

Cruz, Gancayco, Padilla, Bidin, Sarmiento and Medialdea, JJ., concur.

Fernan, C.J., Paras, JJ., took no part.

Feliciano, J., is on leave.

Separate Opinions

GRIÑO-AQUINO, J., dissenting Opinion:

This is the petitioner's second petition for certiorari and prohibition with application for a
temporary restraining order or preliminary injunction against the respondents Board of
Investments (BOI), Department of Trade and Industry (DTI), the Luzon Petrochemical
Corporation (LPC), formerly Bataan Petrochemical Corporation, and Pilipinas Shell
Corporation (SHELL) on the transfer of the LPC petrochemical plant site from Bataan to
Batangas. The first case was docketed in this Court as G.R. No. 88637 and was decided
on September 7, 1989. Consistent with my opinion in the first case, I vote once more to
deny the petition.

The petitioner filed this second petition supposedly "upon the authority and strength" of
this Court's statement in its Resolution of January 9, 1990 in G.R. No. 88637 that the
foreign investor (LPC) does not have a right of final choice of plant site because its
choice is subject to approval or disapproval by the BOI (p. 3, Rollo). Ergo, the BOI has
the "final choice."

Petitioner contends that since the BOI had earlier approved Bataan as the plant site of
the LPG petrochemical complex, and of "naphtha only" as the feedstock, that approval
was "final" and may not be changed. Hence, the BOI allegedly abused its discretion: (1)
in approving the transfer of the LPC's plant site from Bataan to Batangas (in spite of the
BOI's initial preference for Bataan) "upon the false and unlawful thesis that the foreign
investor has the right of final choice by plant site" (p. 13, Rollo), and (2) in allowing the
LPC to shift feedstock from naphtha only, to naphtha and/or LPG, despite the
disadvantages of using LPG. Petitioner prays the Court to annul the BOI's action and
prohibit LPC from transferring its plant site to Batangas and shifting feedstock to
naphtha and/ or LPG (p. 22, Rollo).

The petition is not well-taken. There is no provision in the 1987 Investments Code
prohibiting the amendment of the investor's application for registration of its project,
such as, in this case, its plant site, the feedstock to be used, and the capitalization of the
project.

Neither does the law prohibit the BOI from approving the amended application.
Since the investor may amend its application and the BOI may approve or disapprove
the amendments, when may the BOI be deemed to have made a "final choice" regarding
those aspects of the project which have been changed?

Only the BOI or the Chief Executive is competent to answer that question, for the matter
of choosing an appropriate site for the investor's project is a political and economic
decision which, under our system of separation of powers, only the executive branch, as
implementor of policy formulated by the legislature (in this case, the policy of
encouraging and inviting foreign investments into our country), is empowered to make.
It is not for this Court to determine what is, or should be, the BOI's "final choice" of
plant site and feedstock, for, as we said in our decision in G.R. No. 88637:

This Court ... does not possess the necessary technology and scientific
expertise to detail e whether the transfer of the proposed BPC (now LPC)
petrochemical complex from Bataan to Batangas and the change of fuel
from 'naphtha only to naphtha and/or LPG' will be best for the project and
for our country. This Court is not about to delve into the economics and
politics of this case. It is concerned simply with the alleged violation of due
process and the alleged extra limitation of power and discretion on the
part of the public respondents in approving the transfer of the project to
Batangas without giving due notice and an opportunity to be heard to the
vocal opponents of that move." (pp. 445-446, Rollo of G.R. No. 88637.)

Although we did say in our decision in G.R. No. 88637 that the BOI, not the foreign
investor, has the right of "final choice" of plant site for the LPC project, the Court would
be overstepping the bounds of its jurisdiction were it to usurp the prerogative of the BOI
to make that choice or change it.

The petitioner's contention that the BOI abused its discretion in approving the transfer of
the LPC plant site to Batangas because the BOI, in effect, yielded to the investor's
choice, is not well taken. The record shows that the BOI approved the transfer because
"the BOI recognizes the justification given by the proponent of the project (p. 30, Rollo).
The fact that the petitioner disagrees with the BOI's decision does not make it wrong.
The petitioner's recourse against the BOI's action is by an appeal to the President (Sec.
36, 1987 Investments Code), not to this Court.

This Court, in the exercise of its judicial power, may review and annul executive as well
as legislative actions when they clash with the Constitution or with existing laws, or
when any branch or instrumentality of the Government has acted with grave abuse of
discretion amounting to lack or excess of jurisdiction (Sec. 1, Art. VIII, 1987
Constitution) but the Court may not do more than that. It may not make the decisions
that the executive should have made nor pass the laws that the legislature should have
passed. Not even the much publicized "petroscam" involving the financial arrangements
(not the issue in this case) for the LPC project would justify the intervention of this court
in a matter that pertains to the exclusive domain of the executive department. The court
does not have a panacea for all the ills that afflict our country nor a solution for every
problem that besets it.

Did the BOI gravely abuse its discretion in approving the LPC's amended application for
registration of its petrochemical project to warrant the intervention of this Court? Grave
abuse of discretion implies such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction (Abad Santos vs. Prov. of Tarlac, 67 Phil. 480; Alafriz
vs. Nable, 70 Phil. 278).

In light of the LPC's justifications for the transfer of its project site and the shift from one
kind of feedstock to two, we are not prepared to hold that the BOI's decision to approve
the changes was the product of a capricious and arbitrary exercise of judgment on its
part, despite the seemingly impressive arguments of the petitioner showing the
advantages of establishing the petrochemical plant in Bataan and of using naphtha only
as feedstock. We are not prepared to substitute the judgment of the BOI on this matter
with one crafted by this Court.

With regard to the scandalously liberal financial accommodations that local banks have
allegedly agreed to grant to the LPC (the so-called "petroscam") to enable it to raise a
major part of its capital requirements from local sources (hence, a betrayal of the
people's expectation that foreign investors will bring in foreign exchange to finance their
projects in this country) it is significant that the petitioner has not led an outcry for the
disapproval and cancellation of the project on this score. Apparently, the petitioner is not
seriously disturbed by the moral implications of the "scam" provided the petrochemical
plant is set up in Bataan.

The decision of the BOI to allow the transfer of the LPC petrochemical project to
Batangas and shift feedstock from naphtha only to naphtha and/or LPG, may appear to
the petitioner to be extremely unwise and inadvisable, but the Court may not, for that
reason annul the BOI's action or prohibit it from acting on a matter that lies within its
particular sphere of competence, for the Court is not a judge of the wisdom and
soundness of the actions of the two other co-equal branches of the Government, but
only of their legality and constitutionality.

WHEREFORE, I vote to deny the petition for certiorari and prohibition for lack of merit.

Melencio-Herrera, Narvasa and Regalado, JJ., concur.

MELENCIO-HERRERA, J., dissenting:

Consistent with my dissent in G.R. No. 88637, the first petition, I concur in the dissent
herein of Mme. Justice Aquino and merely wish to add that in its Decision, the majority
has actually imposed its own views on matters falling within the competence of a policy-
making body of the Government. It decided upon the wisdom of the transfer of the site
of the proposed project (pp. 8-9); the reasonableness of the feedstock to be used (pp.
8-9); the undesirability of the capitalization aspect of the project (p. 10), and injected its
own concept of the national interest as regards the establishment of a basic industry of
strategic importance to the country (p. 13).

It is true that the judicial power embodied in Article VIII of the 1987 Constitution speaks
of the duty of Courts of justice to determine whether or not there has been grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. By no means, however, does it vest in the Courts the
power to enter the realm of policy considerations under the guise of the commission of
grave abuse of discretion.

But this is exactly what the majority Decision has resulted in. It has made a sweeping
policy determination and has unwittingly transformed itself into what might be termed a
"government by the Judiciary," something never intended by the framers of the
Constitution when they provided for separation of powers among the three co-equal
branches of government and excluded the Judiciary from policy-making.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 101273 July 3, 1992

CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,

vs.
THE EXECUTIVE SECRETARY, THE COMMISSIONER OF CUSTOMS, THE NATIONAL
ECONOMIC AND DEVELOPMENT AUTHORITY, THE TARIFF COMMISSION, THE
SECRETARY OF FINANCE, and THE ENERGY REGULATORY BOARD, respondents.

FELICIANO, J.:

On 27 November 1990, the President issued Executive Order No. 438 which imposed, in
addition to any other duties, taxes and charges imposed by law on all articles imported
into the Philippines, an additional duty of five percent (5%) ad valorem. This additional
duty was imposed across the board on all imported articles, including crude oil and other
oil products imported into the Philippines. This additional duty was subsequently
increased from five percent (5%) ad valorem to nine percent (9%) ad valorem by the
promulgation of Executive Order No. 443, dated 3 January 1991.

On 24 July 1991, the Department of Finance requested the Tariff Commission to initiate
the process required by the Tariff and Customs Code for the imposition of a specific levy
on crude oil and other petroleum products, covered by HS Heading Nos. 27.09, 27.10
and 27.11 of Section 104 of the Tariff and Customs Code as amended. Accordingly, the
Tariff Commission, following the procedure set forth in Section 401 of the Tariff and
Customs Code, scheduled a public hearing to give interested parties an opportunity to be
heard and to present evidence in support of their respective positions.

Meantime, Executive Order No. 475 was issued by the President, on 15 August 1991
reducing the rate of additional duty on all imported articles from nine percent (9%) to
five percent (5%) ad valorem, except in the cases of crude oil and other oil products
which continued to be subject to the additional duty of nine percent (9%) ad valorem.

Upon completion of the public hearings, the Tariff Commission submitted to the
President a "Report on Special Duty on Crude Oil and Oil Products" dated 16 August
1991, for consideration and appropriate action. Seven (7) days later, the President
issued Executive Order No. 478, dated 23 August 1991, which levied (in addition to the
aforementioned additional duty of nine percent (9%) ad valorem and all other
existing ad valorem duties) a special duty of P0.95 per liter or P151.05 per barrel of
imported crude oil and P1.00 per liter of imported oil products.

In the present Petition for Certiorari, Prohibition and Mandamus, petitioner assails the
validity of Executive Orders Nos. 475 and 478. He argues that Executive Orders Nos. 475
and 478 are violative of Section 24, Article VI of the 1987 Constitution which provides as
follows:
 Sec. 24: All appropriation, revenue or tariff bills, bills authorizing increase
of the public debt, bills of local application, and private bills shall originate
exclusively in the House of Representatives, but the Senate may propose
or concur with amendments.

He contends that since the Constitution vests the authority to enact revenue bills
in Congress, the President may not assume such power by issuing Executive
Orders Nos. 475 and 478 which are in the nature of revenue-generating
measures.

Petitioner further argues that Executive Orders No. 475 and 478 contravene Section 401
of the Tariff and Customs Code, which Section authorizes the President, according to
petitioner, to increase, reduce or remove tariff duties or to impose additional
duties only when necessary to protect local industries or products but not for the
purpose of raising additional revenue for the government.

Thus, petitioner questions first the constitutionality and second the legality of Executive
Orders Nos. 475 and 478, and asks us to restrain the implementation of those Executive
Orders. We will examine these questions in that order.

Before doing so, however, the Court notes that the recent promulgation of Executive
Order No. 507 did not render the instant Petition moot and academic. Executive Order
No. 517 which is dated 30 April 1992 provides as follows:

Sec. 1. Lifting of the Additional Duty. — The additional duty in the nature
of ad valorem imposed on all imported articles prescribed by the
provisions of Executive Order No. 443, as amended, is
hereby lifted; Provided, however, that the selected articles covered by HS
Heading Nos. 27.09 and 27.10 of Section 104 of the Tariff and Customs
Code, as amended, subject of Annex "A" hereof, shall continue to be
subject to the additional duty of nine (9%) percent ad valorem.

Under the above quoted provision, crude oil and other oil products continue to be
subject to the additional duty of nine percent (9%) ad valorem under Executive
Order No. 475 and to the special duty of P0.95 per liter of imported crude oil and
P1.00 per liter of imported oil products under Executive Order No. 478.

Turning first to the question of constitutionality, under Section 24, Article VI of the
Constitution, the enactment of appropriation, revenue and tariff bills, like all other bills
is, of course, within the province of the Legislative rather than the Executive
Department. It does not follow, however, that therefore Executive Orders Nos. 475 and
478, assuming they may be characterized as revenue measures, are prohibited to the
President, that they must be enacted instead by the Congress of the Philippines. Section
28(2) of Article VI of the Constitution provides as follows:

(2) The Congress may, by law, authorize the President to fix within
specified limits, and subject to such limitations and restrictions as it may
impose, tariff rates, import and export quotas, tonage and wharfage dues,
and other duties or imposts within the framework of the national
development program of the Government. (Emphasis supplied)

There is thus explicit constitutional permission 1 to Congress to authorize the President

"subject to such limitations and restrictions is [Congress] may impose" to fix "within
specific limits" "tariff rates . . . and other duties or imposts . . ."
The relevant congressional statute is the Tariff and Customs Code of the Philippines, and
Sections 104 and 401, the pertinent provisions thereof. These are the provisions which
the President explicitly invoked in promulgating Executive Orders Nos. 475 and 478.
Section 104 of the Tariff and Customs Code provides in relevant part:

Sec. 104. All tariff sections, chapters, headings and subheadings and the
rates of import duty under Section 104 of Presidential Decree No. 34 and
all subsequent amendments issued under Executive Orders and
Presidential Decrees are hereby adopted and form part of this Code.

There shall be levied, collected, and paid upon all imported articles the
rates of duty indicated in the Section under this section except as
otherwise specifically provided for in this Code: Provided, that, the
maximum rate shall not exceed one hundred per cent ad valorem.

The rates of duty herein provided or subsequently fixed pursuant to

Section Four Hundred One of this Code shall be subject to periodic
investigation by the Tariff Commission and may be revised by the
President upon recommendation of the National Economic and
Development Authority.

xxx xxx xxx

(Emphasis supplied)

Section 401 of the same Code needs to be quoted in full:

Sec. 401. Flexible Clause. —

a. In the interest of national economy, general welfare and/or national

security, and subject to the limitations herein prescribed, the President,
upon recommendation of the National Economic and Development
Authority (hereinafter referred to as NEDA), is hereby empowered: (1) to
increase, reduce or remove existing protective rates of import
duty (including any necessary change in classification). The existing rates
may be increased or decreased but in no case shall the reduced rate of
import duty be lower than the basic rate of ten (10) per cent ad valorem,
nor shall the increased rate of import duty be higher than a maximum of
one hundred (100) per cent ad valorem; (2) to establish import quota or
to ban imports of any commodity, as may be necessary; and (3) to impose
an additional duty on all imports not exceeding ten (10) per cent ad
valorem, whenever necessary; Provided, That upon periodic investigations
by the Tariff Commission and recommendation of the NEDA, the President
may cause a gradual reduction of protection levels granted in Section One
hundred and four of this Code, including those subsequently granted
pursuant to this section.

b. Before any recommendation is submitted to the President by the NEDA

pursuant to the provisions of this section, except in the imposition of an
additional duty not exceeding ten (10) per cent ad valorem, the
Commission shall conduct an investigation in the course of which they
shall hold public hearings wherein interested parties shall be afforded
reasonable opportunity to be present, produce evidence and to be heard.
The Commission shall also hear the views and recommendations of any
government office, agency or instrumentality concerned. The Commission
 shall submit their findings and recommendations to the NEDA within thirty
(30) days after the termination of the public hearings.

c. The power of the President to increase or decrease rates of import duty

within the limits fixed in subsection "a" shall include the authority to
modify the form of duty. In modifying the form of duty, the
corresponding ad valorem or specific equivalents of the duty with respect
to imports from the principal competing foreign country for the most
recent representative period shall be used as bases.

d. The Commissioner of Customs shall regularly furnish the Commission a

copy of all customs import entries as filed in the Bureau of Customs. The
Commission or its duly authorized representatives shall have access to,
and the right to copy all liquidated customs import entries and other
documents appended thereto as finally filed in the Commission on Audit.

e. The NEDA shall promulgate rules and regulations necessary to carry out
the provisions of this section.

f. Any Order issued by the President pursuant to the provisions of this

section shall take effect thirty (30) days after promulgation, except in the
imposition of additional duty not exceeding ten (10) per cent ad
valorem which shall take effect at the discretion of the President.
(Emphasis supplied)

Petitioner, however, seeks to avoid the thrust of the delegated authorizations found in
Sections 104 and 401 of the Tariff and Customs Code, by contending that the President
is authorized to act under the Tariff and Customs Code only "to protect local industries
and products for the sake of the national economy, general welfare and/or national
security." 2 He goes on to claim that:

E.O. Nos. 478 and 475 having nothing to do whatsoever with the
protection of local industries and products for the sake of national
economy, general welfare and/or national security. On the contrary, they
work in reverse, especially as to crude oil, an essential product which we
do not have to protect, since we produce only minimal quantities and have
to import the rest of what we need.

These Executive Orders are avowedly solely to enable the government to

raise government finances, contrary to Sections 24 and 28 (2) of Article VI
of the Constitution, as well as to Section 401 of the Tariff and Customs
Code. 3 (Emphasis in the original)

The Court is not persuaded. In the first place, there is nothing in the language of either
Section 104 or of 401 of the Tariff and Customs Code that suggest such a sharp and
absolute limitation of authority. The entire contention of petitioner is anchored on just
two (2) words, one found in Section 401 (a)(1): "existingprotective rates of import
duty," and the second in the proviso found at the end of Section 401
(a): "protection levels granted in Section 104 of this Code . . . . " We believe that the
words "protective" and ''protection" are simply not enough to support the very broad and
encompassing limitation which petitioner seeks to rest on those two (2) words.

In the second place, petitioner's singular theory collides with a very practical fact of
which this Court may take judicial notice — that the Bureau of Customs which
administers the Tariff and Customs Code, is one of the two (2) principal traditional
generators or producers of governmental revenue, the other being the Bureau of
Internal Revenue. (There is a third agency, non-traditional in character, that generates
lower but still comparable levels of revenue for the government — The Philippine
Amusement and Games Corporation [PAGCOR].)

In the third place, customs duties which are assessed at the prescribed tariff rates are
very much like taxes which are frequently imposed for both revenue-raising and for
regulatory purposes. 4 Thus, it has been held that "customs duties" is "the name given
to taxes on the importation and exportation of commodities, the tariff or tax assessed
upon merchandise imported from, or exported to, a foreign country." 5 The levying of
customs duties on imported goods may have in some measure the effect of protecting
local industries — where such local industries actually exist and are producing
comparable goods. Simultaneously, however, the very same customs duties inevitably
have the effect of producing governmental revenues. Customs duties like internal
revenue taxes are rarely, if ever, designed to achieve one policy objective only. Most
commonly, customs duties, which constitute taxes in the sense of exactions the proceeds
of which become public funds 6 — have either or both the generation of revenue and the
regulation of economic or social activity as their moving purposes and frequently, it is
very difficult to say which, in a particular instance, is the dominant or principal objective.
In the instant case, since the Philippines in fact produces ten (10) to fifteen percent
(15%) of the crude oil consumed here, the imposition of increased tariff rates and a
special duty on imported crude oil and imported oil products may be seen to
have some "protective" impact upon indigenous oil production. For the effective, price of
imported crude oil and oil products is increased. At the same time, it cannot be gainsaid
that substantial revenues for the government are raised by the imposition of such
increased tariff rates or special duty.

In the fourth place, petitioner's concept which he urges us to build into our constitutional
and customs law, is a stiflingly narrow one. Section 401 of the Tariff and Customs Code
establishes general standards with which the exercise of the authority delegated by that
provision to the President must be consistent: that authority must be exercised in "the
interest of national economy, general welfare and/or national security." Petitioner,
however, insists that the "protection of local industries" is the only permissible objective
that can be secured by the exercise of that delegated authority, and that therefore
"protection of local industries" is the sum total or the alpha and the omega of "the
national economy, general welfare and/or national security." We find it extremely
difficult to take seriously such a confined and closed view of the legislative standards and
policies summed up in Section 401. We believe, for instance, that the protection of
consumers, who after all constitute the very great bulk of our population, is at the very
least as important a dimension of "the national economy, general welfare and national
security" as the protection of local industries. And so customs duties may be reduced or
even removed precisely for the purpose of protecting consumers from the high prices
and shoddy quality and inefficient service that tariff-protected and subsidized local
manufacturers may otherwise impose upon the community.

It seems also important to note that tariff rates are commonly established and the
corresponding customs duties levied and collected upon articles and goods which are not
found at all and not produced in the Philippines. The Tariff and Customs Code is replete
with such articles and commodities: among the more interesting examples
are ivory (Chapter 5, 5.10); castoreum or musk taken from the beaver (Chapter 5,
5.14); Olives (Chapter 7, Notes); truffles or European fungi growing under the soil on
tree roots (Chapter 7, Notes); dates (Chapter 8, 8.01); figs (Chapter 8,
8.03); caviar (Chapter 16, 16.01); aircraft (Chapter 88, 88.0l); special diagnostic
instruments and apparatus for human medicine and surgery (Chapter 90, Notes); X-ray
generators; X-ray tubes;
X-ray screens, etc. (Chapter 90, 90.20); etc. In such cases, customs duties may be seen
to be imposed either for revenue purposes purely or perhaps, in certain cases, to
discourage any importation of the items involved. In either case, it is clear that customs
duties are levied and imposed entirely apart from whether or not there are any
competing local industries to protect.

Accordingly, we believe and so hold that Executive Orders Nos. 475 and 478 which may
be conceded to be substantially moved by the desire to generate additional public
revenues, are not, for that reason alone, either constitutionally flawed, or legally infirm
under Section 401 of the Tariff and Customs Code. Petitioner has not successfully
overcome the presumptions of constitutionality and legality to which those Executive
Orders are entitled. 7

The conclusion we have reached above renders it unnecessary to deal with petitioner's
additional contention that, should Executive Orders Nos. 475 and 478 be declared
unconstitutional and illegal, there should be a roll back of prices of petroleum products
equivalent to the "resulting excess money not be needed to adequately maintain the Oil
Price Stabilization Fund (OPSF)." 8

WHEREFORE, premises considered, the Petition for Certiorari, Prohibition

and Mandamus is hereby DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Paras, Padilla, Bidin, Griño-Aquino, Medialdea,
Regalado, Davide, Jr., Romero, Nocon and Bellosilo, JJ., concur.

Footnotes

1 This provision also existed in substantially identical terms in the 1973

Constitution (Article VIII, Section 17[2]), and the 1935 Constitution
(Article VI, Section 22[2]).

2 Petition, p. 11; Rollo, p. 12; underlining in the original.

3 Rollo, pp. 13-14.

4 Lutz v. Araneta, 98 Phil. 148 (1955); Republic v. Bacolod-Murcia Milling

Co., Inc., et al., 17 SCRA 632 (1966); Progressive Development Corp. v.
Quezon City, 172 SCRA 629 (1989).

5 U.S. v. Sischo, 262 Fed. 1001 (1919); Flint v. Stone Tracey Company,
220 US 107 (1910); Keller-Dorian Corp. v. Commissioner of Internal
Revenue, 153 F 2d 1006 (1946). The close affinity of "customs duties" and
"taxes" was stressed almost a century ago in the following excerpt from
Pollock v. Farmers' Loan and Trust Company (158 US 601; 39 Law Ed.
1108 [1895]):

"Cooley, on Taxation, p. 3, says that the word 'duty' ordinarily 'means an

indirect tax, imposed on the importation, exportation, or consumption of
goods;' having 'a broader meaning than custom, which is a duty imposed
on imports or exports;' that 'the term impost also signifies any tax, tribute
or duty, but it is seldom applied to any but the indirect taxes. An excise
duty is an inland impost, levied upon articles of manufacture or sale, and
also upon licenses to pursue certain trades or to deal in certain
commodities." (Emphasis partly in the original and partly supplied)
6 Compania General de Tabacos de Filipinas v. City of Manila, et al., 118
Phil. 380 (1963).

7 National Waterworks and Sewerage Authority v. Reyes, 22 SCRA 905

(1968); See also: Victoriano v. Elizalde Rope Workers' Union, 59 SCRA 54
(1974); Ermita-Malate Hotel and Motel Operators Association Inc. v. City
Mayor of Manila, 20 SCRA 849 (1967).

8 Rollo, pp. 14-16.

 SPECIAL FIRST DIVISION

G.R. No. 124293 January 31, 2005

J.G. SUMMIT HOLDINGS, INC., petitioner,

vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and
Members; ASSET PRIVATIZATION TRUST; and PHILYARDS HOLDINGS,
INC., respondents.

RESOLUTION

PUNO, J.:

For resolution before this Court are two motions filed by the petitioner, J.G. Summit
Holdings, Inc. for reconsideration of our Resolution dated September 24, 2003 and to
elevate this case to the Court En Banc. The petitioner questions the Resolution which
reversed our Decision of November 20, 2000, which in turn reversed and set aside a
Decision of the Court of Appeals promulgated on July 18, 1995.

I. Facts

The undisputed facts of the case, as set forth in our Resolution of September 24, 2003,
are as follows:

On January 27, 1997, the National Investment and Development Corporation (NIDC), a
government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki
Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which subsequently became the
Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NIDC
and KAWASAKI will contribute ₱330 million for the capitalization of PHILSECO in the
proportion of 60%-40% respectively. One of its salient features is the grant to the
parties of the right of first refusal should either of them decide to sell, assign or
transfer its interest in the joint venture, viz:

1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS
[PHILSECO] to any third party without giving the other under the same terms the right
of first refusal. This provision shall not apply if the transferee is a corporation owned or
controlled by the GOVERNMENT or by a KAWASAKI affiliate.

On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to
the Philippine National Bank (PNB). Such interests were subsequently transferred to the
National Government pursuant to Administrative Order No. 14. On December 8, 1986,
President Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and
possession of, conserve, manage and dispose of non-performing assets of the National
Government. Thereafter, on February 27, 1987, a trust agreement was entered into
between the National Government and the APT wherein the latter was named the trustee
of the National Government's share in PHILSECO. In 1989, as a result of a quasi-
reorganization of PHILSECO to settle its huge obligations to PNB, the National
Government's shareholdings in PHILSECO increased to 97.41% thereby reducing
KAWASAKI's shareholdings to 2.59%.

In the interest of the national economy and the government, the COP and the APT
deemed it best to sell the National Government's share in PHILSECO to private entities.
After a series of negotiations between the APT and KAWASAKI, they agreed that the
latter's right of first refusal under the JVA be "exchanged" for the right to top by five
percent (5%) the highest bid for the said shares. They further agreed that KAWASAKI
would be entitled to name a company in which it was a stockholder, which could exercise
the right to top. On September 7, 1990, KAWASAKI informed APT that Philyards
Holdings, Inc. (PHI)1 would exercise its right to top.

At the pre-bidding conference held on September 18, 1993, interested bidders were
given copies of the JVA between NIDC and KAWASAKI, and of the Asset Specific Bidding
Rules (ASBR) drafted for the National Government's 87.6% equity share in PHILSECO.
The provisions of the ASBR were explained to the interested bidders who were notified
that the bidding would be held on December 2, 1993. A portion of the ASBR reads:

1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the
National Government's equity in PHILSECO consisting of 896,869,942 shares of stock
(representing 87.67% of PHILSECO's outstanding capital stock), which will be sold as a
whole block in accordance with the rules herein enumerated.

xxx xxx xxx

2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both
the APT Board of Trustees and the Committee on Privatization (COP).

2.1 APT reserves the right in its sole discretion, to reject any or all bids.

3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price
set for the National Government's 87.67% equity in PHILSECO is PESOS: ONE BILLION
THREE HUNDRED MILLION (₱1,300,000,000.00).

xxx xxx xxx

6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular
meeting following the bidding, for the purpose of determining whether or not it should be
endorsed by the APT Board of Trustees to the COP, and the latter approves the same.
The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS]
Holdings, Inc., that the highest bid is acceptable to the National Government. Kawasaki
Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of
thirty (30) calendar days from the date of receipt of such advice from APT within which
to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the
highest bid plus five (5%) percent thereof.

6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise
their "Option to Top the Highest Bid," they shall so notify the APT about such exercise of
their option and deposit with APT the amount equivalent to ten percent (10%) of the
highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in
paragraph 6.0 above. APT will then serve notice upon Kawasaki Heavy Industries, Inc.
and/or [PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they shall
have a period of ninety (90) days from the receipt of the APT's notice within which to
pay the balance of their bid price.

6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to
exercise their "Option to Top the Highest Bid" within the thirty (30)-day period, APT will
declare the highest bidder as the winning bidder.

xxx xxx xxx

12.0 The bidder shall be solely responsible for examining with appropriate care these
rules, the official bid forms, including any addenda or amendments thereto issued during
the bidding period. The bidder shall likewise be responsible for informing itself with
respect to any and all conditions concerning the PHILSECO Shares which may, in any
manner, affect the bidder's proposal. Failure on the part of the bidder to so examine and
inform itself shall be its sole risk and no relief for error or omission will be given by APT
or COP. . . .

At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc. 2 submitted a
bid of Two Billion and Thirty Million Pesos (₱2,030,000,000.00) with an acknowledgment
of KAWASAKI/[PHILYARDS'] right to top, viz:

4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days
to act on APT's recommendation based on the result of this bidding. Should the COP
approve the highest bid, APT shall advise Kawasaki Heavy Industries, Inc. and/or its
nominee, [PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the National
Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall
then have a period of thirty (30) calendar days from the date of receipt of such advice
from APT within which to exercise their "Option to Top the Highest Bid" by offering a bid
equivalent to the highest bid plus five (5%) percent thereof.

As petitioner was declared the highest bidder, the COP approved the sale on December
3, 1993 "subject to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings,
Inc. to top JGSMI's bid by 5% as specified in the bidding rules."

On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to
top its bid on the grounds that: (a) the KAWASAKI/PHI consortium composed of
KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the
ASBR because the last four (4) companies were the losing bidders thereby circumventing
the law and prejudicing the weak winning bidder; (b) only KAWASAKI could exercise the
right to top; (c) giving the same option to top to PHI constituted unwarranted benefit to
a third party; (d) no right of first refusal can be exercised in a public bidding or auction
sale; and (e) the JG Summit consortium was not estopped from questioning the
proceedings.

On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the
purchase price of the subject bidding. On February 7, 1994, the APT notified petitioner
that PHI had exercised its option to top the highest bid and that the COP had approved
the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock
Purchase Agreement. Consequently, petitioner filed with this Court a Petition for
Mandamus under G.R. No. 114057. On May 11, 1994, said petition was referred to the
Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of
merit. It ruled that the petition for mandamus was not the proper remedy to question
the constitutionality or legality of the right of first refusal and the right to top that was
exercised by KAWASAKI/PHI, and that the matter must be brought "by the proper party
in the proper forum at the proper time and threshed out in a full blown trial." The Court
of Appeals further ruled that the right of first refusal and the right to top are prima facie
legal and that the petitioner, "by participating in the public bidding, with full knowledge
of the right to top granted to KAWASAKI/[PHILYARDS] is…estopped from questioning the
validity of the award given to [PHILYARDS] after the latter exercised the right to top and
had paid in full the purchase price of the subject shares, pursuant to the ASBR."
Petitioner filed a Motion for Reconsideration of said Decision which was denied on March
15, 1996. Petitioner thus filed a Petition for Certiorari with this Court alleging grave
abuse of discretion on the part of the appellate court.

On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that
the Court of Appeals erred when it dismissed the petition on the sole ground of the
impropriety of the special civil action of mandamus because the petition was also one of
certiorari. It further ruled that a shipyard like PHILSECO is a public utility whose
capitalization must be sixty percent (60%) Filipino-owned. Consequently, the right to top
granted to KAWASAKI under the Asset Specific Bidding Rules (ASBR) drafted for the sale
of the 87.67% equity of the National Government in PHILSECO is illegal — not only
because it violates the rules on competitive bidding — but more so, because it allows
foreign corporations to own more than 40% equity in the shipyard. It also held that
"although the petitioner had the opportunity to examine the ASBR before it participated
in the bidding, it cannot be estopped from questioning the unconstitutional, illegal and
inequitable provisions thereof." Thus, this Court voided the transfer of the national
government's 87.67% share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the
right of JG Summit, as the highest bidder, to take title to the said shares, viz:

WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed
Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE.
Petitioner is ordered to pay to APT its bid price of Two Billion Thirty Million Pesos
(₱2,030,000,000.00), less its bid deposit plus interests upon the finality of this Decision.
In turn, APT is ordered to:

(a) accept the said amount of ₱2,030,000,000.00 less bid deposit and interests
from petitioner;

(b) execute a Stock Purchase Agreement with petitioner;

(c) cause the issuance in favor of petitioner of the certificates of stocks

representing 87.6% of PHILSECO's total capitalization;

(d) return to private respondent PHGI the amount of Two Billion One Hundred
Thirty-One Million Five Hundred Thousand Pesos (₱2,131,500,000.00); and

(e) cause the cancellation of the stock certificates issued to PHI.

SO ORDERED.

In separate Motions for Reconsideration, respondents submit[ted] three basic issues for
x x x resolution: (1) Whether PHILSECO is a public utility; (2) Whether under the 1977
JVA, KAWASAKI can exercise its right of first refusal only up to 40% of the total
capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI
violates the principles of competitive bidding.3 (citations omitted)

In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents.
On the first issue, we held that Philippine Shipyard and Engineering Corporation
(PHILSECO) is not a public utility, as by nature, a shipyard is not a public utility 4 and
that no law declares a shipyard to be a public utility.5 On the second issue, we found
nothing in the 1977 Joint Venture Agreement (JVA) which prevents Kawasaki Heavy
Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring more than 40% of
PHILSECO’s total capitalization.6 On the final issue, we held that the right to top granted
to KAWASAKI in exchange for its right of first refusal did not violate the principles of
competitive bidding.7

On October 20, 2003, the petitioner filed a Motion for Reconsideration 8 and a Motion to
Elevate This Case to the Court En Banc.9 Public respondents Committee on Privatization
(COP) and Asset Privatization Trust (APT), and private respondent Philyards Holdings,
Inc. (PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.’s (JG Summit’s)
Motion for Reconsideration and Motion to Elevate This Case to the Court En Banc on
January 29, 2004 and February 3, 2004, respectively.

II. Issues

Based on the foregoing, the relevant issues to resolve to end this litigation are the
following:

1. Whether there are sufficient bases to elevate the case at bar to the Court en
banc.

2. Whether the motion for reconsideration raises any new matter or cogent
reason to warrant a reconsideration of this Court’s Resolution of September 24,
2003.

Motion to Elevate this Case to the

Court En Banc

The petitioner prays for the elevation of the case to the Court en banc on the following
grounds:

1. The main issue of the propriety of the bidding process involved in the present
case has been confused with the policy issue of the supposed fate of the shipping
industry which has never been an issue that is determinative of this case. 10

2. The present case may be considered under the Supreme Court Resolution
dated February 23, 1984 which included among en banc cases those involving a
novel question of law and those where a doctrine or principle laid down by the
Court en banc or in division may be modified or reversed.11

3. There was clear executive interference in the judicial functions of the Court
when the Honorable Jose Isidro Camacho, Secretary of Finance, forwarded to
Chief Justice Davide, a memorandum dated November 5, 2001, attaching a copy
of the Foreign Chambers Report dated October 17, 2001, which matter was
placed in the agenda of the Court and noted by it in a formal resolution dated
November 28, 2001.12

Opposing J.G. Summit’s motion to elevate the case en banc, PHILYARDS points out the
petitioner’s inconsistency in previously opposing PHILYARDS’ Motion to Refer the Case
to the Court En Banc. PHILYARDS contends that J.G. Summit should now be estopped
from asking that the case be referred to the Court en banc. PHILYARDS further contends
that the Supreme Court en banc is not an appellate court to which decisions or
resolutions of its divisions may be appealed citing Supreme Court Circular No. 2-89
dated February 7, 1989.13 PHILYARDS also alleges that there is no novel question of law
involved in the present case as the assailed Resolution was based on well-settled
jurisprudence. Likewise, PHILYARDS stresses that the Resolution was merely an outcome
of the motions for reconsideration filed by it and the COP and APT and is "consistent with
the inherent power of courts to ‘amend and control its process and orders so as to make
them conformable to law and justice.’ (Rule 135, sec. 5)"14 Private respondent belittles
the petitioner’s allegations regarding the change in ponente and the alleged executive
interference as shown by former Secretary of Finance Jose Isidro Camacho’s
memorandum dated November 5, 2001 arguing that these do not justify a referral of the
present case to the Court en banc.

In insisting that its Motion to Elevate This Case to the Court En Banc should be granted,
J.G. Summit further argued that: its Opposition to the Office of the Solicitor General’s
Motion to Refer is different from its own Motion to Elevate; different grounds are invoked
by the two motions; there was unwarranted "executive interference"; and the change
in ponente is merely noted in asserting that this case should be decided by the Court en
banc.15

We find no merit in petitioner’s contention that the propriety of the bidding process
involved in the present case has been confused with the policy issue of the fate of the
shipping industry which, petitioner maintains, has never been an issue that is
determinative of this case. The Court’s Resolution of September 24, 2003 reveals a clear
and definitive ruling on the propriety of the bidding process. In discussing whether the
right to top granted to KAWASAKI in exchange for its right of first refusal violates the
principles of competitive bidding, we made an exhaustive discourse on the rules and
principles of public bidding and whether they were complied with in the case at bar.16This
Court categorically ruled on the petitioner’s argument that PHILSECO, as a shipyard, is a
public utility which should maintain a 60%-40% Filipino-foreign equity ratio, as it was a
pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding
industry which was beyond avoidance.17

We reject petitioner’s argument that the present case may be considered under the
Supreme Court Resolution dated February 23, 1984 which included among en banc cases
those involving a novel question of law and those where a doctrine or principle laid down
by the court en banc or in division may be modified or reversed. The case was resolved
based on basic principles of the right of first refusal in commercial law and estoppel in
civil law. Contractual obligations arising from rights of first refusal are not new in this
jurisdiction and have been recognized in numerous cases. 18 Estoppel is too known a civil
law concept to require an elongated discussion. Fundamental principles on public bidding
were likewise used to resolve the issues raised by the petitioner. To be sure, petitioner
leans on the right to top in a public bidding in arguing that the case at bar involves a
novel issue. We are not swayed. The right to top was merely a condition or a reservation
made in the bidding rules which was fully disclosed to all bidding parties. In Bureau
Veritas, represented by Theodor H. Hunermann v. Office of the President, et
al., 19 we dealt with this conditionality, viz:

x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al.,
(L-18751, 28 April 1962, 4 SCRA 1245), that in an "invitation to bid, there is a
condition imposed upon the bidders to the effect that the bidding shall be
subject to the right of the government to reject any and all bids subject to its
discretion. In the case at bar, the government has made its choice and unless
an unfairness or injustice is shown, the losing bidders have no cause to
complain nor right to dispute that choice. This is a well-settled doctrine in this
jurisdiction and elsewhere."

The discretion to accept or reject a bid and award contracts is vested in the Government
agencies entrusted with that function. The discretion given to the authorities on this
matter is of such wide latitude that the Courts will not interfere therewith, unless it is
apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil.
486 [1960]). x x x The exercise of this discretion is a policy decision that necessitates
prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best
be discharged by the Government agencies concerned, not by the Courts. The role of the
Courts is to ascertain whether a branch or instrumentality of the Government has
transgressed its constitutional boundaries. But the Courts will not interfere with
executive or legislative discretion exercised within those boundaries. Otherwise, it strays
into the realm of policy decision-making.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside
the award of a contract made by a government entity. Grave abuse of discretion implies
a capricious, arbitrary and whimsical exercise of power (Filinvest Credit Corp. v.
Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The
abuse of discretion must be so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform a duty enjoined by law, as to act at all in
contemplation of law, where the power is exercised in an arbitrary and despotic manner
by reason of passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-
40867, 26 July 1988, 163 SCRA 489).

The facts in this case do not indicate any such grave abuse of discretion on the part of
public respondents when they awarded the CISS contract to Respondent SGS. In the
"Invitation to Prequalify and Bid" (Annex "C," supra), the CISS Committee made an
express reservation of the right of the Government to "reject any or all bids or
any part thereof or waive any defects contained thereon and accept an offer
most advantageous to the Government." It is a well-settled rule that where
such reservation is made in an Invitation to Bid, the highest or lowest bidder,
as the case may be, is not entitled to an award as a matter of right (C & C
Commercial Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the lowest
Bid or any Bid may be rejected or, in the exercise of sound discretion, the award may be
made to another than the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing
43 Am. Jur., 788). (emphases supplied)1awphi1.nét

Like the condition in the Bureau Veritas case, the right to top was a condition imposed
by the government in the bidding rules which was made known to all parties. It was a
condition imposed on all bidders equally, based on the APT’s exercise of its
discretion in deciding on how best to privatize the government’s shares in
PHILSECO. It was not a whimsical or arbitrary condition plucked from the ether and
inserted in the bidding rules but a condition which the APT approved as the best way the
government could comply with its contractual obligations to KAWASAKI under the JVA
and its mandate of getting the most advantageous deal for the government. The right to
top had its history in the mutual right of first refusal in the JVA and was reached by
agreement of the government and KAWASAKI.

Further, there is no "executive interference" in the functions of this Court by the mere
filing of a memorandum by Secretary of Finance Jose Isidro Camacho. The memorandum
was merely "noted" to acknowledge its filing. It had no further legal significance. Notably
too, the assailed Resolution dated September 24, 2003 was decided
unanimously by the Special First Division in favor of the respondents.

Again, we emphasize that a decision or resolution of a Division is that of the Supreme

Court20 and the Court en banc is not an appellate court to which decisions or resolutions
of a Division may be appealed.21

For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.

Motion for Reconsideration

Three principal arguments were raised in the petitioner’s Motion for Reconsideration.
First, that a fair resolution of the case should be based on contract law, not on policy
considerations; the contracts do not authorize the right to top to be derived from the
right of first refusal.22 Second, that neither the right of first refusal nor the right to top
can be legally exercised by the consortium which is not the proper party granted such
right under either the JVA or the Asset Specific Bidding Rules (ASBR).23 Third, that the
maintenance of the 60%-40% relationship between the National Investment and
Development Corporation (NIDC) and KAWASAKI arises from contract and from the
Constitution because PHILSECO is a landholding corporation and need not be a public
utility to be bound by the 60%-40% constitutional limitation.24

On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not
been able to show compelling reasons to warrant a reconsideration of the Decision of the
Court.25 PHILYARDS denies that the Decision is based mainly on policy considerations
and points out that it is premised on principles governing obligations and contracts and
corporate law such as the rule requiring respect for contractual stipulations, upholding
rights of first refusal, and recognizing the assignable nature of contracts rights.26 Also,
the ruling that shipyards are not public utilities relies on established case law and
fundamental rules of statutory construction. PHILYARDS stresses that KAWASAKI’s right
of first refusal or even the right to top is not limited to the 40% equity of the latter. 27 On
the landholding issue raised by J.G. Summit, PHILYARDS emphasizes that this is a non-
issue and even involves a question of fact. Even assuming that this Court can take
cognizance of such question of fact even without the benefit of a trial, PHILYARDS opines
that landholding by PHILSECO at the time of the bidding is irrelevant because what is
essential is that ultimately a qualified entity would eventually hold PHILSECO’s real
estate properties.28 Further, given the assignable nature of the right of first refusal, any
applicable nationality restrictions, including landholding limitations, would not affect the
right of first refusal itself, but only the manner of its exercise.29 Also, PHILYARDS argues
that if this Court takes cognizance of J.G. Summit’s allegations of fact regarding
PHILSECO’s landholding, it must also recognize PHILYARDS’ assertions that PHILSECO’s
landholdings were sold to another corporation.30 As regards the right of first refusal,
private respondent explains that KAWASAKI’s reduced shareholdings (from 40% to
2.59%) did not translate to a deprivation or loss of its contractually granted right of first
refusal.31 Also, the bidding was valid because PHILYARDS exercised the right to top and
it was of no moment that losing bidders later joined PHILYARDS in raising the purchase
price.32

In cadence with the private respondent PHILYARDS, public respondents COP and APT
contend:

1. The conversion of the right of first refusal into a right to top by 5% does not
violate any provision in the JVA between NIDC and KAWASAKI.

2. PHILSECO is not a public utility and therefore not governed by the

constitutional restriction on foreign ownership.

3. The petitioner is legally estopped from assailing the validity of the proceedings
of the public bidding as it voluntarily submitted itself to the terms of the ASBR
which included the provision on the right to top.

4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI

and the fact that PHILYARDS formed a consortium to raise the required amount
to exercise the right to top the highest bid by 5% does not violate the JVA or the
ASBR.
 5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of
lands does not apply to PHILSECO because as admitted by petitioner itself,
PHILSECO no longer owns real property.

6. Petitioner’s motion to elevate the case to the Court en banc is baseless and
would only delay the termination of this case.33

In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments
of the public and private respondents in this wise:

1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with

losing bidders through the exercise of a right to top, which is contrary to law and
the constitution is null and void for being violative of substantive due process and
the abuse of right provision in the Civil Code.

a. The bidders[’] right to top was actually exercised by losing bidders.

b. The right to top or the right of first refusal cannot co-exist with a
genuine competitive bidding.

c. The benefits derived from the right to top were unwarranted.

2. The landholding issue has been a legitimate issue since the start of this case
but is shamelessly ignored by the respondents.

a. The landholding issue is not a non-issue.

b. The landholding issue does not pose questions of fact.

c. That PHILSECO owned land at the time that the right of first refusal was
agreed upon and at the time of the bidding are most relevant.

d. Whether a shipyard is a public utility is not the core issue in this case.

3. Fraud and bad faith attend the alleged conversion of an inexistent right of first
refusal to the right to top.

a. The history behind the birth of the right to top shows fraud and bad
faith.

b. The right of first refusal was, indeed, "effectively useless."

4. Petitioner is not legally estopped to challenge the right to top in this case.

a. Estoppel is unavailing as it would stamp validity to an act that is

prohibited by law or against public policy.

b. Deception was patent; the right to top was an attractive nuisance.

c. The 10% bid deposit was placed in escrow.

J.G. Summit’s insistence that the right to top cannot be sourced from the right of first
refusal is not new and we have already ruled on the issue in our Resolution of
September 24, 2003. We upheld the mutual right of first refusal in the JVA.34 We also
ruled that nothing in the JVA prevents KAWASAKI from acquiring more than 40% of
PHILSECO’s total capitalization.35 Likewise, nothing in the JVA or ASBR bars the
conversion of the right of first refusal to the right to top. In sum, nothing new and of
significance in the petitioner’s pleading warrants a reconsideration of our ruling.

Likewise, we already disposed of the argument that neither the right of first refusal nor
the right to top can legally be exercised by the consortium which is not the proper party
granted such right under either the JVA or the ASBR. Thus, we held:

The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group,
Insular Life Assurance, Mitsui and ICTSI), has joined PHILYARDS in the latter's effort to
raise ₱2.131 billion necessary in exercising the right to top is not contrary to law, public
policy or public morals. There is nothing in the ASBR that bars the losing bidders from
joining either the winning bidder (should the right to top is not exercised) or
KAWASAKI/PHI (should it exercise its right to top as it did), to raise the purchase price.
The petitioner did not allege, nor was it shown by competent evidence, that the
participation of the losing bidders in the public bidding was done with fraudulent intent.
Absent any proof of fraud, the formation by [PHILYARDS] of a consortium is legitimate in
a free enterprise system. The appellate court is thus correct in holding the petitioner
estopped from questioning the validity of the transfer of the National Government's
shares in PHILSECO to respondent.36

Further, we see no inherent illegality on PHILYARDS’ act in seeking funding from parties
who were losing bidders. This is a purely commercial decision over which the State
should not interfere absent any legal infirmity. It is emphasized that the case at bar
involves the disposition of shares in a corporation which the government sought to
privatize. As such, the persons with whom PHILYARDS desired to enter into business
with in order to raise funds to purchase the shares are basically its business. This is in
contrast to a case involving a contract for the operation of or construction of a
government infrastructure where the identity of the buyer/bidder or financier constitutes
an important consideration. In such cases, the government would have to take utmost
precaution to protect public interest by ensuring that the parties with which it is
contracting have the ability to satisfactorily construct or operate the infrastructure.

On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding
company, KAWASAKI could exercise its right of first refusal only up to 40% of the shares
of PHILSECO due to the constitutional prohibition on landholding by corporations with
more than 40% foreign-owned equity. It further argues that since KAWASAKI already
held at least 40% equity in PHILSECO, the right of first refusal was inutile and as such,
could not subsequently be converted into the right to top. 37 Petitioner also asserts that,
at present, PHILSECO continues to violate the constitutional provision on landholdings as
its shares are more than 40% foreign-owned.38 PHILYARDS admits that it may have
previously held land but had already divested such landholdings.39 It contends, however,
that even if PHILSECO owned land, this would not affect the right of first refusal but only
the exercise thereof. If the land is retained, the right of first refusal, being a property
right, could be assigned to a qualified party. In the alternative, the land could be
divested before the exercise of the right of first refusal. In the case at bar, respondents
assert that since the right of first refusal was validly converted into a right to top, which
was exercised not by KAWASAKI, but by PHILYARDS which is a Filipino corporation (i.e.,
60% of its shares are owned by Filipinos), then there is no violation of the
Constitution.40 At first, it would seem that questions of fact beyond cognizance by this
Court were involved in the issue. However, the records show that PHILYARDS admits
it had owned land up until the time of the bidding.41 Hence, the only issue is
whether KAWASAKI had a valid right of first refusal over PHILSECO shares
under the JVA considering that PHILSECO owned land until the time of the
bidding and KAWASAKI already held 40% of PHILSECO’s equity.
We uphold the validity of the mutual rights of first refusal under the JVA between
KAWASAKI and NIDC. First of all, the right of first refusal is a property right of PHILSECO
shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them
to purchase the shares of their co-shareholder before they are offered to a third
party. The agreement of co-shareholders to mutually grant this right to each
other, by itself, does not constitute a violation of the provisions of the
Constitution limiting land ownership to Filipinos and Filipino corporations. As
PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first refusal can be
validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio.
This transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent
proof of any fraudulent intent. The transfer could be made either to a nominee or such
other party which the holder of the right of first refusal feels it can comfortably do
business with. Alternatively, PHILSECO may divest of its landholdings, in which case
KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECO’s
equity. In fact, it can even be said that if the foreign shareholdings of a
landholding corporation exceeds 40%, it is not the foreign stockholders’
ownership of the shares which is adversely affected but the capacity of the
corporation to own land – that is, the corporation becomes disqualified to own land.
This finds support under the basic corporate law principle that the corporation and its
stockholders are separate juridical entities. In this vein, the right of first refusal over
shares pertains to the shareholders whereas the capacity to own land pertains to the
corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of
their right of first refusal. No law disqualifies a person from purchasing shares in a
landholding corporation even if the latter will exceed the allowed foreign
equity, what the law disqualifies is the corporation from owning land. This is the
clear import of the following provisions in the Constitution:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may
enter into co-production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five years, and under
such terms and conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water
power, beneficial use may be the measure and limit of the grant.

xxx xxx xxx

Section 7. Save in cases of hereditary succession, no private lands shall be

transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.42(emphases supplied)

The petitioner further argues that "an option to buy land is void in itself (Philippine
Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The right of first refusal granted to
KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced
from the right of first refusal, is also void."43 Contrary to the contention of petitioner, the
case of Lui She did not that say "an option to buy land is void in itself," for we ruled as
follows:

x x x To be sure, a lease to an alien for a reasonable period is valid. So is an

option giving an alien the right to buy real property on condition that he is
granted Philippine citizenship. As this Court said in Krivenko vs. Register of
Deeds:

[A]liens are not completely excluded by the Constitution from the use of lands for
residential purposes. Since their residence in the Philippines is temporary, they may be
granted temporary rights such as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.

But if an alien is given not only a lease of, but also an option to buy, a piece of
land, by virtue of which the Filipino owner cannot sell or otherwise dispose of
his property, this to last for 50 years, then it becomes clear that the
arrangement is a virtual transfer of ownership whereby the owner divests
himself in stages not only of the right to enjoy the land (jus possidendi, jus
utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus
disponendi) — rights the sum total of which make up ownership. It is just as if
today the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which ownership is made
up are consolidated in an alien. And yet this is just exactly what the parties in this case
did within this pace of one year, with the result that Justina Santos'[s] ownership of her
property was reduced to a hollow concept. If this can be done, then the Constitutional
ban against alien landholding in the Philippines, as announced in Krivenko vs. Register
of Deeds, is indeed in grave peril.44 (emphases supplied; Citations omitted)

In Lui She, the option to buy was invalidated because it amounted to a virtual transfer
of ownership as the owner could not sell or dispose of his properties. The contract in Lui
She prohibited the owner of the land from selling, donating, mortgaging, or
encumbering the property during the 50-year period of the option to buy. This is not so
in the case at bar where the mutual right of first refusal in favor of NIDC and KAWASAKI
does not amount to a virtual transfer of land to a non-Filipino. In fact, the case at bar
involves a right of first refusal over shares of stock while the Lui She case involves
an option to buy the land itself. As discussed earlier, there is a distinction between
the shareholder’s ownership of shares and the corporation’s ownership of land arising
from the separate juridical personalities of the corporation and its shareholders.

We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO
continues to violate the Constitution as its foreign equity is above 40% and yet owns
long-term leasehold rights which are real rights.45It cites Article 415 of the Civil
Code which includes in the definition of immovable property, "contracts for public works,
and servitudes and other real rights over immovable property."46 Any existing
landholding, however, is denied by PHILYARDS citing its recent financial
statements.47 First, these are questions of fact, the veracity of which would require
introduction of evidence. The Court needs to validate these factual allegations based on
competent and reliable evidence. As such, the Court cannot resolve the questions they
pose. Second, J.G. Summit misreads the provisions of the Constitution cited in its own
pleadings, to wit:

29.2 Petitioner has consistently pointed out in the past that private respondent is not a
60%-40% corporation, and this violates the Constitution x x x The violation continues to
this day because under the law, it continues to own real property…

xxx xxx xxx

32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973
Constitution (the JVA was signed in 1977), provided:
"Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain."

32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.

32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the
public domain are corporations at least 60% of which is owned by Filipino citizens (Sec.
22, Commonwealth Act 141, as amended). (emphases supplied)

As correctly observed by the public respondents, the prohibition in the Constitution

applies only to ownership of land.48 It does not extend to immovable or real
property as defined under Article 415 of the Civil Code.Otherwise, we would have
a strange situation where the ownership of immovable property such as trees, plants and
growing fruit attached to the land49 would be limited to Filipinos and Filipino corporations
only.

III.

WHEREFORE, in view of the foregoing, the petitioner’s Motion for Reconsideration is

DENIED WITH FINALITY and the decision appealed from is AFFIRMED. The Motion to
Elevate This Case to the Court En Banc is likewise DENIED for lack of merit.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Tinga, JJ., concur.

Footnotes

1
Also referred to in this Resolution as "PHILYARDS."

2
Also referred to as J G Summit.

3
Resolution promulgated on September 24, 2003, pp. 2 – 10.

4
Id. at 10 – 13.

5
Id. at 14 – 22.

6
Id. at 22 – 25.

7
Id. at 26 – 32.

8
Rollo, p. 1854.

9
Rollo, p. 1876.

10
J.G. Summit’s Motion to Elevate this Case to the Court En Banc dated October
17, 2003, p. 3; Rollo, p. 1878.

11
Id.

12
Id.
13
2. A decision or resolution of a Division of the Court, when concurred in by a
majority of its Members who actually took part in the deliberations on the issues
in a case and voted thereon, and in no case without the concurrence of at least
three of such Members, is a decision or resolution of the Supreme Court (Section
4[3], Article VIII, 1987 Constitution).

3. The Court en banc is not an Appellate Court to which decisions or

resolutions of a Division may be appealed.

xxx xxx xxx

5. A resolution of the Division denying a party’s motion for referral to the

Court en banc of any Division case, shall be final and not appealable to the
Court en banc.

6. When a decision or resolution is referred by a Division to the Court en

banc, the latter may, in the absence of sufficiently important reasons,
decline to take cognizance of the same, in which case, the decision or
resolution shall be returned to the referring Division.

7. No motion for reconsideration of the action of the Court en

banc declining to take cognizance of a referral by a Division, shall be
entertained.

14
PHILYARDS’ Comment dated February 3, 2004, pp. 26-27; Rollo, pp. 1996-
1997.

15
J.G. Summit’s Consolidated Comment dated March 8, 2004.

16
Resolution dated September 24, 2003, pp. 26-32.

17
Id., pp. 10-22.

18
See Bastida and Ysmael & Co., Inc. v. Dy Buncio & Co., Inc., 93 Phil. 195
(1953); Garcia v. Burgos , 291 SCRA 546 (1998); Sadhwani v. CA , 281 SCRA 75
(1997); Parañaque Kings Enterprises, Incorporated v. CA , 268 SCRA 727
(1997); Polytechnic University of the Philippines v. CA , 368 SCRA 691 (2001);
and Guzman, Bocaling & Co. v. Bonnevie, 206 SCRA 668 (1992).

19
G.R. No. 101678, February 3, 1992, 205 SCRA 705.
20
Sec. 4(3), Art. VIII, Constitution.
21
Supreme Court Circular No. 2-89, February 7, 1989.
22
J.G. Summit’s Motion for Reconsideration dated October 17, 2003, pp. 8-9;
Rollo, pp. 1861-1862.
23
Id. at 10-13; Rollo, pp. 1863-1866.
24
Id. at 13-19; Rollo, pp. 1866-1872.
25
PHILYARDS’ Comment dated February 3, 2004, p. 1; Rollo, p. 1971.
26
Id. at 2; Rollo, p. 1972.
27
Id. at 5; Rollo, p. 1975.
28
Id. at 9; Rollo, p. 1979.
29
Id. at 12; Rollo, p. 1982.
30
Id.
31
Id. at 14; Rollo, p. 1984.
32
Id. at 19; Rollo, p. 1989.
33
COP and APT’s Comment dated January 14, 2004, pp. 14-15; Rollo, pp. 1927-
1928.
34
Resolution dated September 24, 2003, pp. 23-24.
35
Id. at 22.
36
Resolution dated September 24, 2003, pp. 31-32.
37
J.G. Summit’s Consolidated Reply dated March 11, 2004, p. 14; Rollo, p. 2109.
38
Id.
39
PHILYARDS’ Manifestation and Comment dated June 26, 2002, p. 10; Rollo, p.
1334.
40
PHILYARDS’ Comment dated February 3, 2004, pp. 8-16; Rollo, pp. 1978-
1986.
41
PHILYARDS’ Manifestation and Comment dated June 26, 2002, p. 10; Rollo, p.
1334.
42
Constitution, Article XII, National Economy and Patrimony.
43
J.G. Summit’s Consolidated Comment dated March 8, 2004, p. 17; Rollo, p.
2112.
44
Philippine Banking Corporation v. Lui She, No. L-17587, September 12, 1967,
21 SCRA 52.
45
J.G. Summit’s Motion for Reconsideration dated October 17, 2003, p. 14; Rollo,
p. 1867.
46
Id. at 15; Rollo, p. 1868.
47
PHILYARDS’ Manifestation and Comment dated June 26, 2002, p. 10; Rollo, p.
1334.
48
COP and APT’s Comment dated January 14, 2004, p. 36; Rollo, p. 1949.
49
Art. 415(2), Civil Code.
 EN BANC

[A.M. No. 90-11-2697-CA. June 29, 1992.]

LETTER OF ASSOCIATE JUSTICE REYNATO S. PUNO of the Court of Appeals

dated 14 November 1990.

RESOLUTION

PADILLA, J.:

Petitioner Associate Justice Reynato S. Puno, a member of the Court of Appeals,

wrote a letter dated 14 November 1990 addressed to this Court, seeking the
correction of his seniority ranking in the Court of Appeals.

It appears from the records that petitioner was first appointed Associate Justice of
the Court of Appeals on 20 June 1980 but took his oath of office for said position
only on 29 November 1982, after serving as Assistant Solicitor General in the Office
of the Solicitor General since 1974. 1

On 17 January 1983, the Court of Appeals was reorganized and became the
Intermediate Appellate Court pursuant to Batas Pambansa Blg. 129 entitled "An Act
Reorganizing the Judiciary. Appropriating Funds Therefor and For Other Purposes."
2 Petitioner was appointed Appellate Justice in the First Special Cases Division of
the Intermediate Appellate Court. On 7 November 1984, petitioner accepted an
appointment to be ceased to be a member of the Judiciary. 3

The aftermath of the EDSA Revolution in February 1986 brought about a

reorganization of the entire government, including the Judiciary. To effect the
reorganization of the Intermediate Appellate Court and other lower courts, a
Screening Committee was created, with the then Minister of Justice, now Senator
Neptali Gonzales as Chairman and then Solicitor General, now Philippine
Ambassador to the United Nations Sedfrey Ordoñez as Vice Chairman. President
Corazon C. Aquino, exercising legislative powers by virtue of the revolution, issued
Executive Order No. 33 to govern the aforementioned reorganization of the
Judiciary. 4

The Screening Committee recommended the return of petitioner as Associate

Justice of the new Court of Appeals and assigned him the rank of number eleven
(11) in the roster of appellate court justices. When the appointments were signed
by President Aquino on 28 July 1986, petitioner’s seniority ranking changed,
however, from number eleven (11) to number twenty six (26). 5

Petitioner now alleges that the change in his seniority ranking could only be
attributed to inadvertence for, otherwise, it would run counter to the provisions of
Section 2 of Executive Order No. 33, which reads:chanrobles virtual lawlibrary

"SECTION 2. Section 3, Chapter 1 of Batas Pambansa Blg. 129, is hereby amended

to read as follows:jgc:chanrobles.com.ph

"SEC. 2. Organization. — There is hereby created a Court of Appeals which shall

consist of a Presiding Justice and fifty Associate Justices who shall be appointed by
the President of the Philippines. The Presiding Justice shall be so designated in his
appointment and the Associate Justice shall have precedence according to the dates
of their respective appointments, or when the appointments of two or more shall
bear the same date, according to the order in which their appointments were issued
by the President. Any Member who is reappointed to the Court after rendering
service in any other position in the government shall retain the precedence to which
he was entitled under his original appointment, and his service in the Court shall,
for all intents and purpose be considered as continuous and uninterrupted." 6

Petitioner elaborates that President Aquino is presumed to have intended to comply

with her own Executive Order No. 33 so much so that the correction of the
inadvertent error would only implement the intent of the President as well as the
spirit of Executive Order No. 33 and will not provoke any kind of constitutional
confrontation (between the President and the Supreme Court). 7

Petitioner points to the case of Justice Oscar Victoriano, former Presiding Justice of
the Court of Appeals who, according to petitioner, was transferred from his position
as Justice of the Court of Appeals to the Ministry of Justice as Commissioner of Land
Registration and in 1986 was reappointed to the Court of Appeals. Petitioner states
that his (Victoriano’s) stint in the Commission of Land Registration did not
adversely affect his seniority ranking in the Court of Appeals, for, in his case,
Executive Order No. 33 was correctly applied. 8

In a resolution of the Court en banc dated 29 November 1990, the Court granted
Justice Puno’s request. 9 It will be noted that before the issuance of said resolution,
there was no written opposition to, or comment on petitioner’s aforesaid request.
The dispositive portion of the resolution reads:jgc:chanrobles.com.ph

"IN VIEW WHEREOF, the petition of Associate Justice Reynato S. Puno for correction
of his seniority ranking in the Court of Appeals is granted. The presiding Justice of
the Court of Appeals, the Honorable Rodolfo A. Nocon, is hereby directed to correct
the seniority rank of Justice Puno from number twelve (12) to number five (5). Let
copies of this Resolution be furnished the Court Administrator and the Judicial and
Bar Council for their guidance and information." 10

A motion for reconsideration of the resolution of the Court en banc dated 29

November 1990 was later filed by Associate Justices Jose C. Campos, Jr. and Luis A.
Javellana, two (2) of the Associate Justices affected by the ordered correction. They
contend that the present Court of Appeals is a new Court with fifty one (51)
members and that petitioner could not claim a reappointment to a prior court;
neither can he claim that he was returning to his former court, for the courts where
he had previously been appointed ceased to exist at the date of his last
appointment. 11

The Court en banc in a resolution dated 17 January 1992 required the petitioner to
file his comment on the motion for reconsideration of the resolution dated 29
November 1990.

In his Comment, petitioner argues that, by virtue of Executive Order No. 33 read in
relation to B.P. Blg. 129, his seniority ranking in the Court of Appeals is now
number five (5) for, though President Aquino rose to power by virtue of a
revolution, she had pledged at the issuance of Proclamation No. 3 (otherwise known
as the Freedom Constitution) that "no right provided under the unratified 1973
Constitution (shall) be absent in the Freedom Constitution." 12

Moreover, since the last sentence of Section 2 of Executive Order No. 33 virtually
re-enacted the last sentence of Sec. 3, Chapter 1 of B.P. Blg. 129, statutory
construction rules on simultaneous repeal and re-enactment mandate, according to
petitioner, the preservation and enforcement of all rights and liabilities which had
accrued under the original statute. 13 Furthermore, petitioner avers that, although
the power of appointment is executive in character and cannot be usurped by any
other branch of the Government, such power can still be regulated by the
Constitution and by the appropriate law, in this case, by the limits set by Executive
Order NO. 33 14 for the power of appointment cannot be wielded in violation of law.
15

Justices Javellana and Campos were required by the Court to file their reply to
Justice Puno’s comment on their motion for reconsideration of the resolution of the
Court en banc dated 24 January 1991.chanrobles.com:cralaw:red

In their Reply and Supplemental Reply, Associate Justices Javellana and Campos
submit that the appeal or request for correction filed by the petitioner was
addressed to the wrong party. They aver that as petitioner himself had alleged the
mistake to be an "inadvertent error" of the Office of the President, ergo, he should
have filed his request for correction also with said Office of the President and not
directly with the Supreme Court. 16 Furthermore, they point out that petitioner had
indeed filed with the Office of the President a request or petition for correction of
his ranking, (seniority) but the same was not approved such that his recourse
should have been an appropriate action before the proper court and impleading all
parties concerned. The aforesaid non-approval by the Office of the President they
argue, should be respected by the Supreme Court "not only on the basis of the
doctrine of separation of powers but also their presumed knowledge ability and
even expertise in the laws they are entrusted to enforce" 17 for it (the non-
approval) is a confirmation that petitioner’s seniority ranking at the time of his
appointment by President Aquino was, in fact, deliberate and not an "inadvertent
error" as petitioner would have the Court believe. 18

The resolution of this controversy is not a pleasant task for the Court since it
involves not only members of the next highest court of the land but persons who
are close to members of this Court. But the controversy has to be resolved. The
core issue in this case is whether the present Court of Appeals is a new court such
that it would negate any claim to precedence or seniority admittedly enjoyed by
petitioner in the Court of Appeals and Intermediate Appellate Court existing prior to
Executive Order No. 33 or whether the present Court of Appeals is merely a
continuation of the Court of Appeals and Intermediate Appellate Court existing prior
to said Executive Order No. 33.

It is the holding of the Court that the present Court of Appeals is a new entity,
different and distinct from the Court of Appeals or the Intermediate Appellate Court
existing prior to Executive Order No. 33, for it was created in the wake of the
massive reorganization launched by the revolutionary government of Corazon C.
Aquino in the aftermath of the people power (EDSA) revolution in 1986.

A resolution has been defined as "the complete overthrow of the established

government in any country or state by those who were previously subject to it" 19
or as "a sudden, radical and fundamental change in the government or political
system, usually effected with violence or at least some acts of violence." 20 In
Kelsen’s book, General Theory of Law and State, it is defined as that which "occurs
whenever the legal order of a community is nullified and replaced by a new order . .
. a way not prescribed by the first order itself." 21
It was through the February 1986 revolution, a relatively peaceful one, and more
popularly known as the "people power revolution" that the Filipino people tore
themselves away from an existing regime. This revolution also saw the
unprecedented rise to power of the Aquino government.

From the natural law point of view, the right of revolution has been defined as "an
inherent right of a people to cast out their rulers, change their policy or effect
radical reforms in their system of government or institutions by force or a general
uprising when the legal and constitutional methods of making such change have
proved inadequate or are so obstructed as to be unavailable." 22 It has been said
that "the locus of positive law-making power lies with the people of the state" and
from there is derived "the right of the people to abolish, to reform and to alter any
existing form of government without regard to the existing constitution." 23

The three (3) clauses that precede the text of the Provisional (Freedom)
Constitution, 24 read:jgc:chanrobles.com.ph

"WHEREAS, the new government under President Corazon C. Aquino was installed
through a direct exercise of the power of the Filipino people assisted by units of the
New Armed Forces of the Philippines;

"WHEREAS, the heroic action of the people was done in defiance of the provisions of
the 1973 Constitution, as amended;

"WHEREFORE, I, Corazon C. Aquino, President of the Philippines, by virtue of the

powers vested in me by the sovereign mandate of the people, do hereby
promulgate the following Provisional Constitution."25cralaw:red

These summarize the Aquino government’s position that its mandate is taken from
"a direct exercise of the power of the Filipino people." 26

Discussions and opinions of legal experts also proclaim that the Aquino government
was "revolutionary in the sense that it came into existence in defiance of the
existing legal processes" 27 and that it was a revolutionary government "instituted
by the direct action of the people and in opposition to the authoritarian values and
practices of the overthrown government." 28

A question which naturally comes to mind is whether the then existing legal order
was overthrown by the Aquino government. "A legal order is the authoritative code
of a polity. Such code consists of all the rules found in the enactments of the organs
of the polity. Where the state operates under a written constitution, its organs may
be readily determined from a reading of its provisions. Once such organs are
ascertained, it becomes an easy matter to locate their enactments. The rules in
such enactments, along with those in the constitution, comprise the legal order of
that constitutional state." 29 It is assumed that the legal order remains as a
"culture system" of the polity as long as the latter endures 30 and that a point may
be reached, however, where the legal system ceases to be operative as a whole for
it is no longer obeyed by the population nor enforced by the officials. 31

It is widely known that Mrs. Aquino’s rise to the presidency was not due to
constitutional processes; in fact, it was achieved in violation of the provisions of the
1973 Constitution as a Batasang Pambansa resolution had earlier declared Mr.
Marcos at the winner in the 1986 presidential election. 32 Thus it can be said that
the organization of Mrs. Aquino’s Government which was met by little resistance
and her control of the state evidenced by the appointment of the Cabinet and other
key officers of the administration, the departure of the Marcos Cabinet officials,
revampt of the Judiciary and the Military signalled the point where the legal system
then in effect, had ceased to be obeyed by the Filipino.

The Court holds that the Court of Appeals and Intermediate Appellate Court existing
prior to Executive Order No. 33 phased out as part of the legal system abolished by
the revolution and that the Court of Appeals established under Executive Order No.
33 was an entirely new court with appointments thereto having no relation to
earlier appointments to the abolished courts, and that the reference to precedence
in rank contained in the last sentence of Sec. 2, BP Blg. No. 129 as amended by
Executive Order No. 33 refers to prospective situations as distinguished from
retroactive ones.

But even assuming, arguendo, that Executive Order No. 33 did not abolish the
precedence or seniority ranking resulting from previous appointment to the Court of
Appeals or Intermediate Appellate Court existing prior to the 1986 revolution, it is
believed that President Aquino as head of then revolutionary government, could
disregard or set aside such precedence or seniority in ranking when she made her
appointments to the reorganized Court of Appeals in 1986.

It is to be noted that, at the time of the issuance of Executive Order No. 33,
President Aquino was still exercising the powers of a revolutionary government,
encompassing both executive and legislative powers, such that she could, if she so
desired, amend, modify or repeal any part of B.P. Blg. 129 or her own Executive
Order No. 33. It should also be remembered that the same situation was still in
force when she issued the 1986 appointments to the Court of Appeals. In other
words, President Aquino, at the time of the issuance of the 1986 appointments,
modified or disregarded the rule embodied in B.P. Blg. 129 as amended by
Executive Order No. 33, on precedence or seniority in the case of the petitioner, for
reasons known only to her. Since the appointment extended by the President to the
petitioner in 1986 for membership in the new Court of Appeals with its implicit
ranking in the roster of justices, was a valid appointment anchored on the
President’s exercise of her then revolutionary powers, it is not for the Court at this
time to question or correct that exercise.

ACCORDINGLY, the Court GRANTS the Motion for Reconsideration and the seniority
rankings of members of the Court of Appeals, including that of the petitioner, at the
time the appointments were made by the President in 1986, are recognized and
upheld.

SO ORDERED.

Paras, Griño-Aquino, Regalado, Davide, Jr. and Romero, JJ., concur.

Separate Opinions

FELICIANO, J., concurring:chanrob1es virtual 1aw library

I agree with the conclusion reached in the majority opinion written by my learned
brother, Padilla, J. In particular, I agree that the Court of Appeals established by
Executive Order No. 33 is a new court, and was not merely the old Intermediate
Appellate Court with a new label.

If one examines the provisions of B.P. Blg. 129, known as "The Judiciary
Reorganization Act of 1980," relating to the old Intermediate Appellate Court, it is
quite clear that the previously existing Court of Appeals was abolished and a new
court, denominated the Intermediate Appellate Court, was created. Thus, Section 3
of B.P. Blg. 129 reads as follows:jgc:chanrobles.com.ph

"Sec. 3. Organization. — There is hereby created an Intermediate Appellate Court

which shall consist of a Presiding Appellate Justice and forty-nine Associate
Appellate Justices who shall be appointed by the President of the Philippines. The
Presiding Appellate Justice shall be so designated in his appointment, and the
Associate Appellate Justices shall have precedence according to the dates of their
respective appointments, or when the appointments of two or more of them shall
bear the same date, according to the order in which their appointments were issued
by the President. Any member who is reappointed to the Court after rendering
service in any other position in the government shall retain the precedence to which
he was entitled under his original appointment, and his service in Court shall, to all
intents and purposes, be considered as continuous and uninterrupted." (Emphasis
supplied)

Section 44 of the same statute provided as follows:jgc:chanrobles.com.ph

"Sec. 44. Transitory provisions. — 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 office. The cases pending in the old Courts
shall be transferred to the appropriate Courts constituted pursuant to this Act,
together with the pertinent function, records, equipment, property and the
necessary personnel.

x x x

(Emphasis supplied)

Executive Order No. 33, promulgated on 28 July 1986, provided in part as

follows:jgc:chanrobles.com.ph

"Section 2. Section 3, Chapter I of Batas Pambansa Blg. 129, is hereby amended to

read as follows:chanrob1es virtual 1aw library

‘SEC. 3. Organization — There is hereby created a Court of Appeals which shall

consist of a Presiding Justice and fifty Associate Justices who shall be appointed by
the President of the Philippines. The Presiding Justice shall be so designated in his
appointment, and the Associate Justices shall have precedence according to the
dates of their respective appointments, or when the appointments of two or more of
them shall bear the same date, according to the order in which their appointments
were issued by the President. Any member who is reappointed to the Court after
rendering service in any other position in the government shall retain the
precedence to which he was entitled under his original appointment, and his service
in the Court shall, for all intents and purposes, be considered as continuous and
uninterrupted.’" (Emphasis supplied)

Although Executive Order No. 33 spoke of amending Section 3, Chapter 1 of B.P.

Blg. 129, it will be seen that what really happened was the re-enactment of said
Section 3, Chapter 1 of B.P. Blg. 129. In other words, much more happened than
simply the renaming of the old Intermediate Appellate Court into (once again) Court
of Appeals. If all that Executive Order No. 33 wanted to achieve was the relabeling
of the old Intermediate Appellate Court into the "Court of Appeals," there was no
need to amend or re-enact Section 3 of B.P. Blg. 129. For Section 8 of Executive
Order No. 33 provided as follows:jgc:chanrobles.com.ph

"SECTION 8. The terms ‘Intermediate Appellate Court, Presiding Appellate Justice

and Associate Appellate Justice(s)’ used in the Judiciary Reorganization Act of 1980
or in any other law or executive order shall hereafter mean Court of Appeals,
Presiding Justice and Associate Justice(s), respectively."cralaw virtua1aw library

Thus, President Aquino was quite free, legally speaking to appoint to the new Court
of Appeals whoever in her judgment was fit and proper for membership in that new
court in an order of precedence that she was just then establishing.chanrobles law
library

The sentence found in Section 3 of B.P. Blg. 129 as amended or re-enacted through
the medium of Section 2 of Executive Order No. 33 —

"Any Member who is reappointed to the Court after rendering service in any other
position in the government shall retain the precedence to which he was entitled
under his original appointment, and his service in the Court shall, for all intents and
purposes, be considered as continuous and uninterrupted."cralaw virtua1aw library

which my distinguished brother in the Court, Gutierrez, Jr., J., very heavily
stressed, contemplates in my submission the situation of a member of the new
Court of Appeals accepting appointment to some other department or branch of
government, outside the Judiciary, and who later receives an appointment once
again to that same Curt of Appeals. But Mr. Justice Reynato S. Puno was not in
such a situation. The last preceding appointment to the Judiciary of Mr. Justice
Reynato S. Puno was to the then Intermediate Appellate Court newly created by
B.P. Blg. 129. In 1984, he left that court to become Deputy Minister in the Ministry
of Justice. His next appointment to the Judiciary was not to the old Intermediate
Appellate Court, which by that time had passed on to history. His appointment
dated 28 July 1986, was, in my view, as already noted, to the new Court of Appeals
established by Executive Order No. 33. Thus, the last sentence of Section 3 of B.P.
Blg. 129 (before re-enactment by Executive Order No. 33) afforded no basis for a
claim to the same numerical precedence in the new Court of Appeals that he would
have been entitled to had the old Intermediate Appellate Court not gone out of
existence. It is difficult for me to understand how a claim to a particular position in
an order of precedence can be made where the court itself, to which the new
appointment is made, is a new and distinct court.

I vote to grant the Motion for Reconsideration.

BELLOSILLO, J., concurring:chanrob1es virtual 1aw library

I agree with the ponencia of Mr. Justice Padilla, so I vote to grant the motion for
reconsideration of Our Resolution of November 29, 1990. I am for respecting the
seniority ranking of the Associate Justices of the Court of Appeals at the time they
were appointed by the President on July 31, 1986.

I must admit that, like Mr. Justice Gutierrez, Jr., and Mr. Justice Padilla, it was not
easy for me to decide to participate in the deliberations in this case considering that
it involves esteemed colleagues in the Court of Appeals. As such, when subject
Resolution was promulgated, I did not react despite the proddings of well-meaning
friends. It refused to be dragged into the "fray" in deference to Justice Reynato S.
Puno who would be adversely affected. I remained firm in my resolve to stay away
from the controversy. It was to me a personal privilege so to do, which i could
waive, as I did.

But circumstances have changed; not that I no longer revere my friendship with
Justice Puno, but as a member now of this Court it has become my duty — no
longer a mere privilege, much less a right — to aid the Court in resolving this
controversy in the fairest possible way, a responsibility I find no justification to
shirk.

On August 1, 1986, at the oath-taking ceremonies for the newly-appointed

members of the Court of Appeals at Malacañang, when I noticed Justice Puno take a
seat on my right, 1 I asked him to transfer to the left where our senior justices
were assigned. I was assuming that he should be on the left because he was
appointed to the old Appellate Court ahead of me. But he showed me the list where
he appeared as No. 26, Justice Lising, No. 25, and I was No. 24. Since he appeared
perturbed with his new rank, I suggested to him to seek the help of then Justice
Secretary Neptali A. Gonzales, Chairman of the Screening Committee that
processed the appointments of the new members of the Court of Appeals, and who
was then just a meter and a half in front of us. But after talking to Secretary
Gonzales, Justice Puno returned to his original assigned seat. When I asked him
what happened, he simply shrugged his shoulders. Obviously, he failed in his bid.

We then took our oath in the order we were ranked in the list.

Some two (2) months or so later, in an En Banc session back in the Court of
Appeals, as we were seated side by side with Justice Puno, 2 I inquired again from
him as to what happened to his request with Malacañang conveyed through the
Presiding Justice for the correction of his ranking. Justice Puno told me it was not
granted.

The letter of then Presiding Justice Emilio A. Gancayco dated August 7, 1986, which
was his second in fact on the subject, addressed to Executive Secretary Joker P.
Arroyo, is enlightening and informative —

"Dear Sir:chanrob1es virtual 1aw library

In relation to my letter of August 5, 1986 informing you of the possible over-sight

in the ranking of Mr. Justice REYNATO S. PUNO in his reappointment as member of
this Court, I am furnishing you a certification of the Clerk of Court to the same
effect, and also in relation to the ranking of Messrs. Rodolfo A. Nocon and Jorge A.
Coquia who in accordance with their original appointment to this Court are more
senior than Mr. Justice Oscar R. Victoriano in the said order.

If Her Excellency President Corazon Aquino should decide to rearrange the ranking
of the incumbent justices of this Court in accordance with the provisions of Section
2, Executive Order # 33 their proper ranking should be as follows:chanrob1es
virtual 1aw library

No. 3 — Mr. Justice Rodolfo A. Nocon;

No. 4 — Mr. Justice Jorge A. Coquia;

No. 5 — Mr. Justice Oscar R. Victoriano; and

No. 11 — Mr. Justice Reynato S. Puno."cralaw virtua1aw library

While this letter perhaps did not elicit the desired response from Executive
Secretary Arroyo as his answer did not squarely settle the issue, the message is
clear, i.e., Malacañang did not grant the request for correction of what was
perceived to be a "possible oversight", even after it was twice brought to its
attention. Here I am reminded of the principle in procedure that a motion that is
not granted, especially after an unreasonable length of time, is deemed denied, and
the lapse of more than four (4) years before Justice Puno finally came to Us 3 is
reasonably unreasonable.

The letter-appointment of President Corazon C. Aquino addressed to then Chief

Justice Claudio Teehankee dated July 31, 1986, in fact categorically specifies the
order of seniority of her appointees, thus —

"Dear Mr. Chief Justice.

I have appointed the Presiding Justice and the Associate Justices of the Court of
Appeals under the following order of seniority:chanrob1es virtual 1aw library

1. Hon. Emilio A. Gancayco, Presiding Justice . . .

3. Hon. Oscar R. Victoriano, Associate Justice

4. Hon. Rodolfo A. Nocon, Associate Justice

5. Hon. Jorge A. Coquia, Associate Justice . . .

12. Hon. Jose C. Campos, Jr., Associate Justice . . .

16. Hon. Luis A. Javellana, Associate Justice . . .

26. Hon. Reynato S. Puno, Associate Justice . . ."cralaw virtua1aw library

x x x"

Considering the circumstances herein narrated, I find it difficult to yield to the

proposition that an error was committed through inadvertence by Malacañang in the
ranking of the justices appointed to the Court of Appeals on July 31, 1986.

The above-quoted letter of President Aquino also brings to focus the ranking of
Justice Oscar R. Victoriano who was junior to Justices Nocon and Coquia in the old
Court, as reflected in the letter of Presiding Justice Gancayco. However, in the letter
of the President, Justice Victoriano was ranked No. 3, while Justices Nocon and
Coquia were ranked No. 4 and No. 5, respectively. Hence, it is not accurate to say
that Justice Victoriano was reinstated to his former rank in the old Court, but was
even given a rank higher than Justices Nocon and Coquia. This "possible oversight"
was also brought to the attention of Malacañang but, like the case of Justice Puno,
no correction was made.chanrobles virtual lawlibrary

All these clearly support the view of Mr. Justice Padilla in his ponencia, as well as of
Mr. Justice Feliciano in his concurring opinion, that the present Court of Appeals is
an entirely different court, distinct from the old Intermediate Appellate Court or the
former Court of Appeals, with a new members although some were drawn from the
now defunct Intermediate Appellate Court, and that the "error" referred to by
Justice Puno could not have been only through "inadvertence" but deliberate,
otherwise, Malacañang could have readily effected the correction?

But whether the "error" was deliberate or committed through inadvertence, is Our
Court the proper venue for the correction? Can We now correct this alleged error of
the appointing authority? Worse, can We direct the Office of the President to do
what is exclusively within its prerogative?

This brings me to the final point which bothers me still further. If We sustain the
claim that the present Court of Appeals is merely a continuation of the old
Intermediate Appellate Court, or of the old Court of Appeals, then We may be
swarmed with requests not only for re-ranking but also for reinstatement of those
who were not reappointed on July 31, 1986, but against whom no charges have
been filed. For then, should they not be allowed to enjoy their security of tenure as
civil servants under the Constitution?

In the case of Justice Jorge S. Imperial, he was a member of the old Intermediate
Appellate Court who was not reappointed to the new Court of Appeals on July 31,
1986. There was no charge against him. He was later reappointed but only on
January 2, 1987. Should We also order that he be reinstated to his former rank in
the Intermediate Appellate Court? Then, We may have to dislodge some of the
present division Chairmen of the Court of Appeals to accommodate him. That would
be unsettling, disturbing, and disruptive of the present system. I do not think We
wish this to happen.

GUTIERREZ, JR., J., dissenting:chanrob1es virtual 1aw library

I regret that I have to differ from the position taken by Mr. Justice Padilla regarding
the seniority ranking of Justice Reynato S. Puno in the Court of Appeals.

I agree that the resolution of the controversy is not a pleasant one for us since it
involves persons who are close to the members of this Court. For me, the task is
particularly difficult because apart from close personal relationship, I also highly
respect the parties’ considerable talents, abilities and qualifications. I have known
Justice Jose C. Campos, Jr. since my student days and as a junior member of this
Court, I once urged his nomination for appointment to the Supreme Court even
before he started to serve in the Court of Appeals. Justice Luis A. Javellana was my
colleague in the Social Security System while Justice Reynato S. Puno and I worked
together in the Office of the Solicitor General.

I believe, however, that we can resolve the issues on the basis of the facts and the
applicable law, in the same way that we reverse or affirm the parties’ respective
ponencias disregarding personal feelings or close association.

The applicable provision of law in this case was introduced into the Judiciary Act of
1948 by Rep. Act No. 5204 on June 15, 1968 when it amended the first paragraph
of Section 24 to read:chanrob1es virtual 1aw library

x x x

"Provided, however, that any member of the Court of Appeals who has been
reappointed to that court after rendering service in any other branch of the
government shall retain the precedence to which he is entitled under his original
appointment and his service in court shall, to all intents and purposes, be
considered as continuous and uninterrupted . . ."cralaw virtua1aw library

This provision was reiterated in all subsequent repealing or amendatory acts and
continues to the present. It is found in Batas Pambansa Blg. 129, Section 3 and in
Executive Order No. 33 under President Corazon C. Aquino reorganized the Court of
Appeals.
I respectfully submit that from 1968 to 1992, there was no single moment when
this provision ceased to exist. It was never repealed and never disappeared from
the law. Everybody, including the appointing power is, of course, bound by the law.

I agree with Justice Padilla’s discussion of President Aquino’s powers in a

revolutionary government, a government revolutionary in the sense that it came
into existence in defiance of the existing legal processes.

I, however, believe that the appointments of the Justices of the Court of Appeals in
1986 were not a personal act of a revolutionary President. Far from it.

First, President Aquino’s government ceased to be revolutionary on March 25, 1986

when she promulgated Proclamation No. 3, which she called the Freedom
Constitution. Her government became a constitutional one bound by the Freedom
Constitution and the executive orders issued under its authority.

Second, one significant provision of the Freedom Constitution states that "all
elective and appointive officials and employees under the 1973 Constitution shall
continue in office until otherwise provided by proclamation or executive order or
upon the designation or appointment and qualification of their successors, if such
appointment is made within a period of one year from February 26, 1986." (Section
2, Article III, Emphasis supplied).

Third, the President implemented the above provision of the Constitution on July
28, 1986 when she issued Executive Order No. 33 which amended B.P. 129. As
earlier stated, Executive Order No. 33 reiterated verbatim the provision of B.P. No.
129 which provided for retention of precedence of a member who is reappointed
after a sting in another position in the government.

President Aquino was bound by the provisions of Executive Order No. 33 because it
is a law enacted pursuant to constitutional authority. She could no longer act as a
revolutionary President because there was a Constitution, and there were statutes
under that Constitution, in existence.

More important, Executive Order No. 33 was enacted precisely to provide for the
reorganization of the Intermediate Appellate Court into the Court of Appeals. The
President intended that every provision of Executive Order No. 33 should be
followed precisely for the purpose for which it was enacted, namely, reorganization
of the appellate court. I cannot understand the reasoning which says that all
provisions of Executive Order No. 33 must apply in the reorganization of the Court
of Appeals except the provision on retention of seniority by a reappointed member
which must be for the future only.

Even assuming that this one sentence of Executive Order No. 33 was intended to be
prospective, then the President has to follow B.P. No. 129 because Proclamation No.
3, Article IV provides:jgc:chanrobles.com.ph

"SECTION 1. All existing laws, decrees, executive orders, proclamations, letters of

instruction, implementing rules and regulations, and other executive issuances not
inconsistent with this Proclamation shall remain operative until amended, modified,
or repealed by the President or the regular legislative body to be established under
a New Constitution."cralaw virtua1aw library

For us lawyers, there is one signal feature of President Aquino’s six years in the
presidency and this is her dedicated personal observance of the rule of law. Even
when some of our decisions nullified her favorite projects, she unhesitatingly
ordered compliance with our interpretation of the law. I cannot believe that the
President would knowingly violate one provision of a law she promulgated even as
she complied with ever other provision of that same law.

Not only the law but also the facts support the correctness of our November 29,
1990 resolution.chanrobles law library : red

We stated in our resolution:jgc:chanrobles.com.ph

"Following this specific provision on seniority, the Screening Committee

recommended the return and reappointment of Justice Puno as Associate Justice of
the New Court of Appeals. He was assigned the seniority rank of number eleven
(11) following Associate Justice Vicente V. Mendoza who was given the seniority
rank of number ten (10). Unfortunately, however, due to a mistake which can only
be inadvertent, the seniority rank of Justice Puno appears to have been changed
from number eleven (11) to number twenty six (26), after the appointments in the
new Court of Appeals were signed by President Aquino. Through his letter, Justice
Puno prays for the correction of his seniority ranking alleging that he should now be
given the seniority rank of number five (5) instead of number twelve (12) in the
Court of Appeals.

We find the petition for correction of ranking by Justice Puno to be meritorious. The
mistake in the ranking of Justice Puno from number eleven (11) to number twenty
six (26) in the 1986 judicial reorganization has to be corrected, otherwise, there will
be a violation of the clear mandate of Executive Order No. 33 that ‘any member
who is reappointed to the Court after rendering service in any other position in the
government shall retain the precedence to which he was entitled under his original
appointment, and his service in the court shall, for all intents and purposes be
considered as continuous and uninterrupted.’ In fine, the executive service of
Justice Puno as Deputy Minister of Justice should not adversely affect the continuity
of his service in the judiciary upon his return and appointment thereto on July 28,1
986. Otherwise, the salutary purpose of Executive Order No. 33 which is to attract
competent members of the judiciary to serve in other branches of the government
without fear of losing their seniority status in the judiciary in the event of their
return thereto would be defeated . . ." (Res. dtd. 11-29-90, pp. 2-3)

Nobody disputes the fact that the Screening Committee headed by the then
Secretary of Justice Neptali Gonzales and a member of which was our own Justice
Leo D. Medialdea ranked Justice Reynato S. Puno as No. 11 in their
recommendation.

When the appointments came out, Mr. Puno was No. 26. This, of course, violates
not only Executive Order No. 33 but also the laws on the same subject which
preceded it.

That the President never intended to violate a key provision of law is shown in the
September 17, 1986 letter of Executive Secretary Joker P. Arroyo, appended to the
Reply submitted by Justices Campos and Javellana. The explanation
reads:jgc:chanrobles.com.ph

"17 September 1986

Hon. Emilio A. Gancayco

Presiding Justice

Court of Appeals
Manila.

Sir:chanrob1es virtual 1aw library

In reply to your enclosed letter of August 7, 1986, please be informed that the
President had nothing to do with the order of seniority. The list and order of
seniority was submitted by a screening committee and passed on to the Supreme
Court for review.

Very truly yours,

(SGD.) JOKER P. ARROYO

Executive Secretary"

When Secretary Arroyo states that the President had nothing to do with the order
or sequence of seniority, it means that she just followed the recommendations of
her own Screening Committee, which recommendations had already been reviewed
by the Supreme Court. She did not select any recommendees her own. She never
deviated from the recommendations because everybody recommended was
appointed. The change from No. 11 to No. 26 could not have been a deliberate act
of the President as she had nothing to do with the order of seniority of the Justices
she was appointing. The change could only have been an inadvertence because it
was violative not only of the law but also of the recommendations of her Screening
Committee.

There are other matters raised in the letter and reply of Justices Campos and
Javellana which have been answered by Justice Puno in his Comment. I find no
need to comment on them at this time.

I regret if my answer to the query of Justice Campos led him to be lulled into
inaction. Justice Campos called me up over the telephone inquiring about the
petition of Justice Puno before I was aware that there was such a petition. I try to
read all petitions filed with the court en banc but I do so only after they are placed
in the agenda and are in the next order of business of a particular session. My staff
never places a copy of any petition on my desk until it is entered in the agenda. It
is unfortunate that Justices Campos, Camilon, dela Fuente, Javellana, Purisima, de
Pano, and Bellosillo were not furnished copies of the letter-petition of Justice Puno
but this is for then Chief Justice Marcelo B. Fernan and Clerk of Court Atty. Daniel T.
Martinez to explain.

Justices Campos and Javellana state that "Justice Puno is 50 years old and to put
him in No. 5 will destroy the chances of those displaced by him who are older than
he to aspire for promotion."cralaw virtua1aw library

The fears of the good Justices are unfounded. Except for the Presiding Justice, a
greater number of "junior" Justices have been appointed in the past ten years to
the Supreme Court from the Court of Appeals, than the most senior Justices of that
Court. In other words, there has been more by passing of senior members than
adherence to the seniority listing. In fact, the latest nominations of the Judicial and
Bar Council for position to which Justice Bellosillo was appointed, included Justice
Campos and excluded Justices Kapunan and Puno. I understand that in the past few
vacancies in this court, Justice Campos has been nominated more often than Justice
Puno.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

Our resolution dated November 29, 1990 correcting the seniority ranking of Justice
Puno was a unanimous decision of this Court except for Mr. Justice Padilla were
discussed and fully deliberated upon. Since our resolution is based on both the facts
and the law, I see no reason why we should modify or set it aside.

I, therefore, vote to reiterate the Court’s resolution dated November 29, 1990.

Narvasa, C.J., Bidin, Medialdea and Nocon, JJ., concur.

CRUZ, J., dissenting:chanrob1es virtual 1aw library

I join Mr. Justice Gutierrez in his dissent, with these brief additional remarks.

Sec. 3 of BP 129 laid down the original precedence rule applicable to members of
the Intermediate Appellate Court. This was embodied in Sec. 2 of EO 33 without
change except as to the name of the court. The first provision was not repealed. As
Mr. Justice Feliciano points out, it was merely "re-enacted."cralaw virtua1aw library

I do not think the re-enacted rule was intended to operate prospectively only. I
believe it continues to be available to the former members of the Intermediate
Appellate Court no less than to the members of the Court of Appeals.

It is a well-known canon of construction that apparently conflicting provisions

should be harmonized whenever possible. The ponencia would instead revoke Sec.
3. of BP 129 even though Sec. 2 of EO 33 has not repealed but in fact re-enacted it.
I would reconcile the two provisions and give effect to both.

Significantly, Sec. 8 of EO 33 provides that "the term Intermediate Appellate Court .

. . shall hereafter mean Court of Appeals."cralaw virtua1aw library

Narvasa, C.J., concurs.

Endnotes:

1. Rollo, p. 10.

2. B.P. Blg. 129 was passed by the Batasang Pambansa on 10 August 1981 and
signed into law by President Ferdinand E. Marcos on 14 August 1981.

3. Rollo, p. 4.

4. Executive Order No. 33 was issued on 28 July 1986 by President Corazon C.

Aquino.

5. Rollo, p. 2.

6. Rollo, pp. 5, 5-A.

7. Ibid., p. 5-A.

8. Ibid.

9. Rollo, pp. 1-3.

10. Ibid., p. 3.

11. Ibid., p. 18.

12. Rollo, pp. 28-29. Remarks of President Corazon C. Aquino at a media briefing
announcing the promulgation of a transition Constitution (otherwise known as the
Freedom Constitution) at the Freedom Hall, Malacañang, March 25, 1986.

13. Rollo, pp. 26-27. See also Alcantara, Statutes, 1990 ed., p. 164 citing
Crawford: Statutory Construction and Agpalo, Statutory Construction, 1990 ed., p.
304 citing American Bible Society v. City of Manila, 101 Phil. 386.

14. Rollo, p. 41.

15. Ibid., p. 42.

16. Rollo, pp. 47-50.

17. Cuerdo v. Commission on Audit, 166 SCRA 657 citing Tagum Doctors
Enterprises v. Gregorio Apsay, Et Al., G.R. No. 81188, August 30, 1988.

18. Rollo, p. 49.

19. Kitlow v. Kiely, 44 F. Ed. 227, 232.

20. State v. Diamond, 202 P. 988, 991.

21. Kelsen, General Theory of Law and State (1946), p. 117.

22. H. Black, Handbook of American Constitutional Law II, 4th edition, 1927.

23. Political Rights as Political Questions. The Paradox of Luther v. Borden, 100
Harvard Law Review 1125, 1133 (1987).

24. Proclamation No. 3 (1986).

25. Ibid.

26. Proclamation No. 1 (1986) and Proclamation No. 3 (1986).

27. J. Bernas, Proclamation No. 3 with Notes by Joaquin Bernas, S.J. 3 (1986).

28. Address by U.P. President, now Senator Edgardo Angara, Bishops-

Businessmen’s Conference, March 21, 1986, 27 U.P. Gazette 28, 29.

29. Fernandez, Law and Polity: Towards a Systems Concept of Legal Validity, 46
Phil. Law Journal, 390-391 (1971).

30. Id., at 422.

31. Fernandez, supra note 29.

32. 1973 Constitution, Art. VII, Sec. 5.

BELLOSILLO, J., concurring:chanrob1es virtual 1aw library

1. As prearranged by the Protocol Officer, the newly-appointed Justices were

assigned seats according to seniority from left to right, so that when called to take
their oath they would only have to rise, move forward, turn around, and face the
President, as well as their families and friends, for their oath-taking so that
seniority ranking would automatically be observed in reverse, from right o left.

2. In En Banc sessions, even numbers are assigned consecutively on one side and
odd numbers on the other side, and Justice Puno and myself were ranked No. 26
and 24, respectively.

3. The letter-request of Justice Puno to this Court is dated November 14, 1990,
while the reply of Executive Secretary Joker P. Arroyo which did not grant the
request, is dated September 17, 1986.
U.S. Supreme Court
Cariño v. Insular Government, 212 U.S. 449 (1909)
Cariño v. Insular Government of the Philippine Islands
No. 72
Argued January 13, 1909
Decided February 23, 1909
212 U.S. 449

Syllabus

Writ of error is the general, and appeal the exceptional, method of bringing Cases to this
Court. The latter method is in the main confined to equity cases, and the former is
proper to bring up a judgment of the Supreme Court of the Philippine Islands affirming a
judgment of the Court of Land Registration dismissing an application for registration of
land.

Although a province may be excepted from the operation of Act No. 926 of 1903 of the
Philippine Commission which provides for the registration and perfecting of new titles,
one who actually owns property in such province is entitled to registration under Act No.
496 of 1902, which applies to the whole archipelago.

While, in legal theory and as against foreign nations, sovereignty is absolute, practically
it is a question of strength and of varying degree, and it is for a new sovereign to decide
how far it will insist upon theoretical relations of the subject to the former sovereign and
how far it will recognize actual facts.

Page 212 U. S. 450

The acquisition of the Philippines was not for the purpose of acquiring the lands occupied
by the inhabitants, and under the Organic Act of July 1, 1902, c. 1369, 32 Stat. 691,
providing that property rights are to be administered for the benefit of the inhabitants,
one who actually owned land for many years cannot be deprived of it for failure to
comply with certain ceremonies prescribed either by the acts of the Philippine
Commission or by Spanish law.

The Organic Act of the Philippines made a bill of rights embodying safeguards of the
Constitution, and, like the Constitution, extends those safeguards to all.

Every presumption of ownership is in favor of one actually occupying land for many
years, and against the government which seeks to deprive him of it, for failure to comply
with provisions of a subsequently enacted registration act.

Title by prescription against the crown existed under Spanish law in force in the
Philippine Islands prior to their acquisition by the United States, and one occupying land
in the Province of Benguet for more than fifty years before the Treaty of Paris is entitled
to the continued possession thereof.

7 Phil. 132 reversed.

The facts are stated in the opinion.

Page 212 U. S. 455

U.S. Supreme Court

Cariño v. Insular Government, 212 U.S. 449 (1909)

Cariño v. Insular Government of the Philippine Islands

No. 72

Argued January 13, 1909

Decided February 23, 1909

212 U.S. 449

ERROR TO THE SUPREME COURT OF THE PHILIPPINE ISLANDS

Syllabus

Writ of error is the general, and appeal the exceptional, method of bringing Cases to this
Court. The latter method is in the main confined to equity cases, and the former is
proper to bring up a judgment of the Supreme Court of the Philippine Islands affirming a
judgment of the Court of Land Registration dismissing an application for registration of
land.

Although a province may be excepted from the operation of Act No. 926 of 1903 of the
Philippine Commission which provides for the registration and perfecting of new titles,
one who actually owns property in such province is entitled to registration under Act No.
496 of 1902, which applies to the whole archipelago.

While, in legal theory and as against foreign nations, sovereignty is absolute, practically
it is a question of strength and of varying degree, and it is for a new sovereign to decide
how far it will insist upon theoretical relations of the subject to the former sovereign and
how far it will recognize actual facts.

Page 212 U. S. 450

The acquisition of the Philippines was not for the purpose of acquiring the lands occupied
by the inhabitants, and under the Organic Act of July 1, 1902, c. 1369, 32 Stat. 691,
providing that property rights are to be administered for the benefit of the inhabitants,
one who actually owned land for many years cannot be deprived of it for failure to
comply with certain ceremonies prescribed either by the acts of the Philippine
Commission or by Spanish law.

The Organic Act of the Philippines made a bill of rights embodying safeguards of the
Constitution, and, like the Constitution, extends those safeguards to all.

Every presumption of ownership is in favor of one actually occupying land for many
years, and against the government which seeks to deprive him of it, for failure to comply
with provisions of a subsequently enacted registration act.

Title by prescription against the crown existed under Spanish law in force in the
Philippine Islands prior to their acquisition by the United States, and one occupying land
in the Province of Benguet for more than fifty years before the Treaty of Paris is entitled
to the continued possession thereof.
7 Phil. 132 reversed.

The facts are stated in the opinion.

Page 212 U. S. 455

MR. JUSTICE HOLMES delivered the opinion of the Court.

This was an application to the Philippine Court of Land Registration for the registration of
certain land. The application was granted by the court on March 4, 1904. An appeal was
taken to the Court of First Instance of the Province of Benguet on behalf of the
government of the Philippines, and also on behalf of the United States, those
governments having taken possession of the property for public and military purposes.
The Court of First Instance found the facts and dismissed the application upon grounds
of law. This judgment was affirmed by the supreme court, 7 Phil. 132, and the case then
was brought here by writ of error.

The material facts found are very few. The applicant and plaintiff in error is an Igorot of
the Province of Benguet, where the land lies. For more than fifty years before the Treaty
of

Page 212 U. S. 456

Paris, April 11, 1899, as far back as the findings go, the plaintiff and his ancestors had
held the land as owners. His grandfather had lived upon it, and had maintained fences
sufficient for the holding of cattle, according to the custom of the country, some of the
fences, it seems, having been of much earlier date. His father had cultivated parts and
had used parts for pasturing cattle, and he had used it for pasture in his turn. They all
had been recognized as owners by the Igorots, and he had inherited or received the land
from his father in accordance with Igorot custom. No document of title, however, had
issued from the Spanish Crown, and although, in 1893-1894 and again in 1896-1897, he
made application for one under the royal decrees then in force, nothing seems to have
come of it, unless, perhaps, information that lands in Benguet could not be conceded
until those to be occupied for a sanatorium, etc., had been designated -- a purpose that
has been carried out by the Philippine government and the United States. In 1901, the
plaintiff filed a petition, alleging ownership, under the mortgage law, and the lands were
registered to him, that process, however, establishing only a possessory title, it is said.

Before we deal with the merits, we must dispose of a technical point. The government
has spent some energy in maintaining that this case should have been brought up by
appeal, and not by writ of error. We are of opinion, however, that the mode adopted was
right. The proceeding for registration is likened to bills in equity to quiet title, but it is
different in principle. It is a proceeding in rem under a statute of the type of the Torrens
Act, such as was discussed in Tyler v. Court of Registration, 175 Mass. 71. It is nearer to
law than to equity, and is an assertion of legal title; but we think it unnecessary to put it
into either pigeon hole. A writ of error is the general method of bringing cases to this
Court, an appeal the exception, confined to equity in the main. There is no reason for
not applying the general rule to this case. Ormsby v. Webb, 134 U. S. 47, 134 U. S.
65; Campbell v. Porter, 162 U. S. 478; Metropolitan R. Co. v. District of Columbia, 195
U. S. 322.

Page 212 U. S. 457

Another preliminary matter may as well be disposed of here. It is suggested that, even if
the applicant have title, he cannot have it registered, because the Philippine
Commission's Act No. 926, of 1903, excepts the Province of Benguet among others from
its operation. But that act deals with the acquisition of new titles by homestead entries,
purchase, etc., and the perfecting of titles begun under the Spanish law. The applicant's
claim is that he now owns the land, and is entitled to registration under the Philippine
Commission's Act No. 496, of 1902, which established a court for that purpose with
jurisdiction "throughout the Philippine Archipelago," § 2, and authorized in general terms
applications to be made by persons claiming to own the legal estate in fee simple, as the
applicant does. He is entitled to registration if his claim of ownership can be maintained.

We come, then, to the question on which the case was decided below -- namely,
whether the plaintiff owns the land. The position of the government, shortly stated, is
that Spain assumed, asserted, and had title to all the land in the Philippines except so
far as it saw fit to permit private titles to be acquired; that there was no prescription
against the Crown, and that, if there was, a decree of June 25, 1880, required
registration within a limited time to make the title good; that the plaintiff's land was not
registered, and therefore became, if it was not always, public land; that the United
States succeeded to the title of Spain, and so that the plaintiff has no rights that the
Philippine government is bound to respect.

If we suppose for the moment that the government's contention is so far correct that the
Crown of Spain in form asserted a title to this land at the date of the Treaty of Paris, to
which the United States succeeded, it is not to be assumed without argument that the
plaintiff's case is at an end. It is true that Spain, in its earlier decrees, embodied the
universal feudal theory that all lands were held from the Crown, and perhaps the general
attitude of conquering nations toward people not recognized as entitled to the treatment
accorded to those

Page 212 U. S. 458

in the same zone of civilization with themselves. It is true also that, in legal theory,
sovereignty is absolute, and that, as against foreign nations, the United States may
assert, as Spain asserted, absolute power. But it does not follow that, as against the
inhabitants of the Philippines, the United States asserts that Spain had such power.
When theory is left on one side, sovereignty is a question of strength, and may vary in
degree. How far a new sovereign shall insist upon the theoretical relation of the subjects
to the head in the past, and how far it shall recognize actual facts, are matters for it to
decide.

The Province of Benguet was inhabited by a tribe that the Solicitor General, in his
argument, characterized as a savage tribe that never was brought under the civil or
military government of the Spanish Crown. It seems probable, if not certain, that the
Spanish officials would not have granted to anyone in that province the registration to
which formerly the plaintiff was entitled by the Spanish laws, and which would have
made his title beyond question good. Whatever may have been the technical position of
Spain, it does not follow that, in the view of the United States, he had lost all rights and
was a mere trespasser when the present government seized his land. The argument to
that effect seems to amount to a denial of native titles throughout an important part of
the island of Luzon, at least, for the want of ceremonies which the Spaniards would not
have permitted and had not the power to enforce.

The acquisition of the Philippines was not like the settlement of the white race in the
United States. Whatever consideration may have been shown to the North American
Indians, the dominant purpose of the whites in America was to occupy the land. It is
obvious that, however stated, the reason for our taking over the Philippines was
different. No one, we suppose, would deny that, so far as consistent with paramount
necessities, our first object in the internal administration of the islands is to do justice to
the natives, not to exploit their country for private gain. By the Organic Act of July 1,
1902, c. 1369, § 12, 32 Stat. 691, all the property and rights acquired there by the

Page 212 U. S. 459

United States are to be administered "for the benefit of the inhabitants thereof." It is
reasonable to suppose that the attitude thus assumed by the United States with regard
to what was unquestionably its own is also its attitude in deciding what it will claim for
its own. The same statute made a bill of rights, embodying the safeguards of the
Constitution, and, like the Constitution, extends those safeguards to all. It provides that

"no law shall be enacted in said islands which shall deprive any person of life, liberty, or
property without due process of law, or deny to any person therein the equal protection
of the laws."

§ 5. In the light of the declaration that we have quoted from § 12, it is hard to believe
that the United States was ready to declare in the next breath that "any person" did not
embrace the inhabitants of Benguet, or that it meant by "property" only that which had
become such by ceremonies of which presumably a large part of the inhabitants never
had heard, and that it proposed to treat as public land what they, by native custom and
by long association -- one of the profoundest factors in human thought -- regarded as
their own.

It is true that, by § 14, the government of the Philippines is empowered to enact rules
and prescribe terms for perfecting titles to public lands where some, but not all, Spanish
conditions had been fulfilled, and to issue patents to natives for not more than sixteen
hectares of public lands actually occupied by the native or his ancestors before August
13, 1898. But this section perhaps might be satisfied if confined to cases where the
occupation was of land admitted to be public land, and had not continued for such a
length of time and under such circumstances as to give rise to the understanding that
the occupants were owners at that date. We hesitate to suppose that it was intended to
declare every native who had not a paper title a trespasser, and to set the claims of all
the wilder tribes afloat. It is true again that there is excepted from the provision that we
have quoted as to the administration of the property and rights acquired by the United
States such land and property as shall be designated by the President for military or
other reservations,

Page 212 U. S. 460

as this land since has been. But there still remains the question what property and rights
the United States asserted itself to have acquired.

Whatever the law upon these points may be, and we mean to go no further than the
necessities of decision demand, every presumption is and ought to be against the
government in a case like the present. It might, perhaps, be proper and sufficient to say
that when, as far back as testimony or memory goes, the land has been held by
individuals under a claim of private ownership, it will be presumed to have been held in
the same way from before the Spanish conquest, and never to have been public land.
Certainly, in a case like this, if there is doubt or ambiguity in the Spanish law, we ought
to give the applicant the benefit of the doubt. Whether justice to the natives and the
import of the organic act ought not to carry us beyond a subtle examination of ancient
texts, or perhaps even beyond the attitude of Spanish law, humane though it was, it is
unnecessary to decide. If, in a tacit way, it was assumed that the wild tribes of the
Philippines were to be dealt with as the power and inclination of the conqueror might
dictate, Congress has not yet sanctioned the same course as the proper one "for the
benefit of the inhabitants thereof."
If the applicant's case is to be tried by the law of Spain, we do not discover such clear
proof that it was bad by that law as to satisfy us that he does not own the land. To begin
with, the older decrees and laws cited by the counsel for the plaintiff in error seem to
indicate pretty clearly that the natives were recognized as owning some lands,
irrespective of any royal grant. In other words, Spain did not assume to convert all the
native inhabitants of the Philippines into trespassers, or even into tenants at will. For
instance, Book 4, Title 12, Law 14 of the Recopilacion de Leyes de las Indias, cited for a
contrary conclusion in Valenton v. Murciano,3 Phil. 537, while it commands viceroys and
others, when it seems proper, to call for the exhibition of grants, directs them to confirm
those who hold by good grants or justa prescripcion. It is true that it

Page 212 U. S. 461

begins by the characteristic assertion of feudal overlordship and the origin of all titles in
the King or his predecessors. That was theory and discourse. The fact was that titles
were admitted to exist that owed nothing to the powers of Spain beyond this recognition
in their books.

Prescription is mentioned again in the royal cedula of October 15, 1754, cited in 3 Phil.
546:

"Where such possessors shall not be able to produce title deeds, it shall be sufficient if
they shall show that ancient possession, as a valid title by prescription."

It may be that this means possession from before 1700; but, at all events, the principle
is admitted. As prescription, even against Crown lands, was recognized by the laws of
Spain, we see no sufficient reason for hesitating to admit that it was recognized in the
Philippines in regard to lands over which Spain had only a paper sovereignty.

The question comes, however, on the decree of June 25, 1880, for the adjustment of
royal lands wrongfully occupied by private individuals in the Philippine Islands. This
begins with the usual theoretic assertion that, for private ownership, there must have
been a grant by competent authority; but instantly descends to fact by providing that,
for all legal effects, those who have been in possession for certain times shall be deemed
owners. For cultivated land, twenty years, uninterrupted, is enough. For uncultivated,
thirty. Art. 5. So that, when this decree went into effect, the applicant's father was
owner of the land by the very terms of the decree. But, it is said, the object of this law
was to require the adjustment or registration proceedings that it described, and in that
way to require everyone to get a document of title or lose his land. That purpose may
have been entertained, but it does not appear clearly to have been applicable to all. The
regulations purport to have been made "for the adjustment of royal lands wrongfully
occupied by private individuals." (We follow the translation in the government's brief.) It
does not appear that this land ever was royal land or wrongfully occupied. In Article 6, it
is provided that

"interested parties not included within the two preceding

Page 212 U. S. 462

articles [the articles recognizing prescription of twenty and thirty years] may legalize
their possession, and thereby acquire the full ownership of the said lands, by means of
adjustment proceedings, to be conducted in the following manner."

This seems, by its very terms, not to apply to those declared already to be owners by
lapse of time. Article 8 provides for the case of parties not asking an adjustment of the
lands of which they are unlawfully enjoying the possession, within one year, and
threatens that the treasury "will reassert the ownership of the state over the lands," and
will sell at auction such part as it does not reserve. The applicant's possession was not
unlawful, and no attempt at any such proceedings against him or his father ever was
made. Finally, it should be noted that the natural construction of the decree is confirmed
by the report of the council of state. That report puts forward as a reason for the
regulations that, in view of the condition of almost all property in the Philippines, it is
important to fix its status by general rules on the principle that the lapse of a fixed
period legalizes completely all possession, recommends in two articles twenty and thirty
years, as adopted in the decree, and then suggests that interested parties not included
in those articles may legalize their possession and acquire ownership by adjustment at a
certain price.

It is true that the language of Articles 4 and 5 attributes title to those "who may prove"
possession for the necessary time, and we do not overlook the argument that this means
may prove in registration proceedings. It may be that an English conveyancer would
have recommended an application under the foregoing decree, but certainly it was not
calculated to convey to the mind of an Igorot chief the notion that ancient family
possessions were in danger, if he had read every word of it. The words "may prove"
(acrediten), as well, or better, in view of the other provisions, might be taken to mean
when called upon to do so in any litigation. There are indications that registration was
expected from all, but none sufficient to show that, for want of it, ownership actually
gained would be lost.

Page 212 U. S. 463

The effect of the proof, wherever made, was not to confer title, but simply to establish it,
as already conferred by the decree, if not by earlier law. The royal decree of February
13, 1894, declaring forfeited titles that were capable of adjustment under the decree of
1880, for which adjustment had not been sought, should not be construed as a
confiscation, but as the withdrawal of a privilege. As a matter of fact, the applicant never
was disturbed. This same decree is quoted by the Court of Land Registration for another
recognition of the common law prescription of thirty years as still running against
alienable Crown land.

It will be perceived that the rights of the applicant under the Spanish law present a
problem not without difficulties for courts of a different legal tradition. We have deemed
it proper on that account to notice the possible effect of the change of sovereignty and
the act of Congress establishing the fundamental principles now to be observed. Upon a
consideration of the whole case, we are of opinion that law and justice require that the
applicant should be granted what he seeks, and should not be deprived of what, by the
practice and belief of those among whom he lived, was his property, through a refined
interpretation of an almost forgotten law of Spain.

Judgment reversed.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 2869 March 25, 1907

MATEO CARIÑO, petitioner-appellant,

vs.
THE INSULAR GOVERNMENT, respondent-appellee.

Coudert Brothers for appellant.

Office of the Solicitor-General Araneta for appellee.

ARELLANO, C.J.:

Mateo Cariño, the appellant herein, on the 23d of February, 1904, filed his petition in the
Court of Land Registration praying that there be granted to him title to a parcel of land
consisting of 40 hectares, 1 are, and 13 centares, and situated in the town of Baguio,
Province of Benguet, together with a house erected thereon and constructed of wood and
roofed with rimo, and bounded as follows: On the north, in lines running 1,048 metes
and 20 decimeters with the lands of Sepa Cariño, H. Phelps Whitmarsh, and Calsi; on the
east, in lines running 991 meters and 50 decimeters with the land of Kuidno, Esteban
Gonzales, and of the Civil Government; on the south, in lines of 115 meters and 60
decimeters, with the lands of Talaca; and on the west, in lines running 982 meters and
20 decimeters, with the lands of Sisco Cariño and Mayengmeng.

By order of the court the hearing of this petition, No. 561, and that of Antonio Rebollo
and Vicente Valpiedad filed under No. 834, were heard together for the reason that the
latter petition claimed a small portion of land included in the parcel set out in the former
petition.

The Insular Government opposed the granting of these petitions, alleging that the whole
parcel of land is public property of the Government and that the same was never
acquired in any manner or through any title of egresionfrom the State.

After trial, and the hearing of documentary and oral proof, the court of Land Registration
rendered its judgment in these terms:

Therefore the court finds that Cariño and his predecessors have not possessed
exclusively and adversely any part of the said property prior to the date on which
Cariño constructed the house now there — that is to say, for the years 1897 and
1898, and Cariño held possession for some years afterwards of but a part of the
property to which he claims title. Both petitions are dismissed and the property in
question is adjudged to be public land. (Bill of exceptions, p. 15.)

The conclusions arrived at the set forth in definite terms in the decision of the court
below are the following:

From the testimony given by Cariño as well as from that of several of the
witnesses for the Government it is deduced, that in or about the year 1884 Cariño
erected and utilized as a domicile a house on the property situated to the north of
that property now in question, property which, according to the plan attached
to expediente No. 561, appears to be property belonging to Donaldson Sim; that
 during the year 1893 Cariño sold said house to one Cristobal Ramos, who in turn
sold the same to Donaldson Sim, moving to and living on the adjoining property,
which appears on the plan aforesaid to be the property of H. Phelps Whitmarsh, a
place where the father and the grandfather of his wife, that is to say, Ortega and
Minse, had lived . . ..

In or about the years 1898 Cariño abandoned the property of Whitmarsh and
located on the property described in the plan attached to expediente No. 561,
having constructed a house thereon in which he now lives, and which house is
situated in the center of the property, as is indicated on the plan; and since which
time he has undoubtedly occupied some portion of the property now claimed by
him. (Bill of exceptions, pp. 11 and 12.)

1. Therefore it is evident that this court can not decree the registration of all of the
superficial extension of the land described in the petition and as appears on the plan
filed herein, such extension containing 40 hectares, 1 are, and 13 centares, inasmuch as
the documentary evidence accompanying the petition is conclusive proof against the
petitioners; this documentary proof consists of a possessory information under date of
March 7, 1901, and registered on the 11th day of the same month and year; and,
according to such possessory information, the land therein described contains an
extension of only 28 hectares limited by "the country road to the barrio of Pias," a road
appearing on the plan now presented and cutting the land, as might be said, in half, or
running through its center from north to south, a considerable extension of land
remaining on the other side of the said road, the west side, and which could not have
been included in the possessory information mentioned.

2. As has been shown during the trial of this case, this land, of which mention is made in
said possessory information, and upon which is situated the house now actually occupied
by the petitioner, all of which is set forth as argument as to the possession in the
judgment, is "used for pasture and sowing," and belongs to the class called public lands.

3. Under the express provisions of law, a parcel of land, being of common origin,
presumptively belonged to the State during its sovereignty, and, in order to perfect the
legitimate acquisition of such land by private persons, it was necessary that the
possession of the same pass from the State. And there is no evidence or proof of title
of egresionof this land from the domain of the Spanish Government, nor is there any
possessory information equivalent to title by composicion or under agreement. 4, The
possessory information filed herein is not the title to property authorized in substitution
for that of adjustment by the royal decree of February 13, 1894, this being the last law
or legal disposition of the former sovereignty applicable to the present subject-matter of
common lands: First, for the reason that the land referred to herein is not covered nor
does it come within any one of the three conditions required by article 19 of the said
royal decree, to wit, that the land has been in an uninterrupted state of cultivation
during a period of six years last past; or that the same has been possessed without
interruption during a period of twelve years and has been in a state of cultivation up to
the date of the information and during the three years immediately preceding such
information; or that such land had been possessed openly without interruption during a
period of thirty or more years, notwithstanding the land had not been cultivated; nor is it
necessary to refer to the testimony given by the two witnesses to the possessory
information for the following reason: Second, because the possessory information
authorized by said royal decree or last legal disposition of the Spanish Government, as
title or for the purpose of acquiring actual proprietary right, equivalent to that of
adjustment with the Spanish Government and required and necessary at all times until
the publication of said royal decree was limited in time to one year, in accordance with
article 21, which is as follows: " A period of one year, not to be extended, is allowed to
verify the possessory informations which are referred to in articles 19 and 20. After the
expiration of this period of the right of the cultivators and persons in possession to
obtain gratuitous title thereto lapses and the land together with full possession reverts to
the state, or, as the case may be, to the community, and the said possessors and
cultivators or their assigns would simply have rights under universal or general title of
average in the event that the land is sold within a period of five years immediately
following the cancellation. The possessors not included under this chapter can only
acquire by time the ownership and title to unappropriated or royal lands in accordance
with common law."

5. In accordance with the preceding provisions, the right that remained to Cariño, if it be
certain that he was the true possessor of the land in question, was the right of average
in case the Government or State could have sold the same within the period of five years
immediately following for example, if the denouncement of purchase had been carried
out by Felipe Zafra or any other person, as appears from the record of the trial of the
case. Aside from this right, in such event, his possession as attested in the possessory
information herein could not, in accordance with common law, go to show any right of
ownership until after the expiration of twenty years from the expiration of twenty years
from the verification and registry of the same in conformity with the provisions of article
393 of the Mortgage Law and other conditions prescribe by this law.

6. The right of possession in accordance with common law — that is to say, civil law —
remains at all times subordinate to the Spanish administrative law, inasmuch as it could
only be of force when pertaining to royal transferable or alienable lands, which condition
and the determination thereof is reversed to the government, which classified and
designated the royal alienable lands for the purpose of distinguishing them from those
lands strictly public, and from forestry lands which could at no time pass to private
ownership nor be acquired through time even after the said royal decree of February 13,
1894.

7. The advent of the new sovereignty necessarily brought a new method of dealing with
lands and particularly as to the classification and manner of transfer and acquisition of
royal or common lands then appropriated, which were thenceforth merely called public
lands, the alienation of which was reserved to the Government, in accordance with
section 12 and 13 of the act of Congress of July 1, 1902, 1 and in conformity with other
laws enacted under this act of Congress by the Philippine Commission prescribing rules
for the execution thereof, one of which is Act No. 648,2herein mentioned by the
petitioner, in connection with Act No. 627,3 which appears to be the law upon which the
petition herein is founded.

8. Section 6 of Act No. 627 admits prescription, in accordance with the provisions
contained in Act No. 190, as a basis for obtaining the right of ownership. "The petitioners
claims title under the period of prescription of ten years established by that act, as well
as by reason of his occupancy and use thereof from time immemorial." (Allegation 1.)
But said act admits such prescription for the purpose of obtaining title and ownership to
lands "not exceeding more that sixteen hectares in extent." (Sec. 6 of said act.) The land
claimed by Cariño is 40 hectares in extent, if we take into consideration his petition, or
an extension of 28 hectares, according to the possessory information, the only thing that
can be considered. Therefore, it follows that the judgment denying the petition herein
and now appealed from was strictly in accordance with the law invoked herein.

9. And of the 28 hectares of land as set out in the possessory information, one part of
same, according to the testimony of Cariño, belongs to Vicente Valpiedad, the extent of
which is not determined. From all of which it follows that the precise extent has not been
determined in the trial of this case on which judgment might be based in the event that
the judgment and title be declared in favor of the petitioner, Mateo Cariño. And we
should not lose sight of the fact that, considering the intention of Congress in granting
ownership and title to 16 hectares, that Mateo Cariño and his children have already
exceeded such amount in various acquirements of lands, all of which is shown in
different cases decided by the said Court of Land Registration, donations or gifts of land
that could only have been made efficacious as to the conveyance thereof with the
assistance of these new laws.

By reason of the findings set forth it is clearly seen that the court below did not err:

1. In finding that Mateo Cariño and those from whom he claims his right had not
possessed and claimed as owners the lands in question since time immemorial;

2. In finding that the land in question did not belong to the petitioner, but that,
on the contrary, it was the property of the Government. (Allegation 21.)

Wherefore, the judgment appealed from is affirmed with the costs of this instance
against the appellant. After the expiration of twenty days from the notification of this
decision let judgment be entered in accordance herewith, and ten days thereafter let the
case be remanded to the court from whence it came for proper action. So ordered.

Torres, Mapa, Willard, and Tracey, JJ., concur.

Johnson, J., reserves his vote.

Footnotes

1
Pub. Laws, 1056.

2
II Pub. Laws, 311.

3
II Pub Laws, 288.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 96681 December 2, 1991

HON. ISIDRO CARIÑO, in his capacity as Secretary of the Department of

Education, Culture & Sports, DR. ERLINDA LOLARGA, in her capacity as
Superintendent of City Schools of Manila, petitioners,
vs.
THE COMMISSION ON HUMAN RIGHTS, GRACIANO BUDOY, JULIETA BABARAN,
ELSA IBABAO, HELEN LUPO, AMPARO GONZALES, LUZ DEL CASTILLO, ELSA
REYES and APOLINARIO ESBER, respondents.

NARVASA, J.:

The issue raised in the special civil action of certiorari and prohibition at bar, instituted
by the Solicitor General, may be formulated as follows: where the relief sought from the
Commission on Human Rights by a party in a case consists of the review and reversal or
modification of a decision or order issued by a court of justice or government agency or
official exercising quasi-judicial functions, may the Commission take cognizance of the
case and grant that relief? Stated otherwise, where a particular subject-matter is placed
by law within the jurisdiction of a court or other government agency or official for
purposes of trial and adjudgment, may the Commission on Human Rights take
cognizance of the same subject-matter for the same purposes of hearing and
adjudication?

The facts narrated in the petition are not denied by the respondents and are hence taken
as substantially correct for purposes of ruling on the legal questions posed in the present
action. These facts, 1 together with others involved in related cases recently resolved by
this Court 2 or otherwise undisputed on the record, are hereunder set forth.

1. On September 17, 1990, a Monday and a class day, some 800 public school teachers,
among them members of the Manila Public School Teachers Association (MPSTA) and
Alliance of Concerned Teachers (ACT) undertook what they described as "mass concerted
actions" to "dramatize and highlight" their plight resulting from the alleged failure of the
public authorities to act upon grievances that had time and again been brought to the
latter's attention. According to them they had decided to undertake said "mass concerted
actions" after the protest rally staged at the DECS premises on September 14, 1990
without disrupting classes as a last call for the government to negotiate the granting of
demands had elicited no response from the Secretary of Education. The "mass actions"
consisted in staying away from their classes, converging at the Liwasang Bonifacio,
gathering in peaceable assemblies, etc. Through their representatives, the teachers
participating in the mass actions were served with an order of the Secretary of Education
to return to work in 24 hours or face dismissal, and a memorandum directing the DECS
officials concerned to initiate dismissal proceedings against those who did not comply
and to hire their replacements. Those directives notwithstanding, the mass actions
continued into the week, with more teachers joining in the days that followed. 3
Among those who took part in the "concerted mass actions" were the eight (8) private respondents herein, teachers at the Ramon
Magsaysay High School, Manila, who had agreed to support the non-political demands of the MPSTA. 4

2. For failure to heed the return-to-work order, the CHR complainants (private respondents) were administratively charged on the basis
of the principal's report and given five (5) days to answer the charges. They were also preventively suspended for ninety (90) days
"pursuant to Section 41 of P.D. 807" and temporarily replaced (unmarked CHR Exhibits, Annexes F, G, H). An investigation committee
was consequently formed to hear the charges in accordance with P.D. 807. 5

3. In the administrative case docketed as Case No. DECS 90-082 in which CHR complainants Graciano Budoy, Jr., Julieta Babaran, Luz

the latter filed separate answers, opted

del Castillo, Apolinario Esber were, among others, named respondents, 6

for a formal investigation, and also moved "for suspension of the administrative
proceedings pending resolution by . . (the Supreme) Court of their application for
issuance of an injunctive writ/temporary restraining order." But when their motion for
suspension was denied by Order dated November 8, 1990 of the Investigating
Committee, which later also denied their motion for reconsideration orally made at the
hearing of November 14, 1990, "the respondents led by their counsel staged a walkout
signifying their intent to boycott the entire proceedings." 7 The case eventually resulted
in a Decision of Secretary Cariño dated December 17, 1990, rendered after evaluation of
the evidence as well as the answers, affidavits and documents submitted by the
respondents, decreeing dismissal from the service of Apolinario Esber and the
suspension for nine (9) months of Babaran, Budoy and del Castillo. 8

4. In the meantime, the "MPSTA filed a petition for certiorari before the Regional Trial Court of Manila against petitioner (Cariño), which
was dismissed (unmarked CHR Exhibit, Annex I). Later, the MPSTA went to the Supreme Court (on certiorari, in an attempt to nullify
said dismissal, grounded on the) alleged violation of the striking teachers" right to due process and peaceable assembly docketed as

Both
G.R. No. 95445, supra. The ACT also filed a similar petition before the Supreme Court . . . docketed as G.R. No. 95590." 9

petitions in this Court were filed in behalf of the teacher associations, a few named
individuals, and "other teacher-members so numerous similarly situated" or "other
similarly situated public school teachers too numerous to be impleaded."

5. In the meantime, too, the respondent teachers submitted sworn statements dated
September 27, 1990 to the Commission on Human Rights to complain that while they
were participating in peaceful mass actions, they suddenly learned of their replacements
as teachers, allegedly without notice and consequently for reasons completely unknown
to them. 10

6. Their complaints — and those of other teachers also "ordered suspended by the . . . (DECS)," all numbering forty-two (42) — were
docketed as "Striking Teachers CHR Case No. 90775." In connection therewith the Commission scheduled a "dialogue" on October 11,
1990, and sent a subpoena to Secretary Cariño requiring his attendance therein. 11

On the day of the "dialogue," although it said that it was "not certain whether he (Sec. Cariño) received the subpoena which was served
at his office, . . . (the) Commission, with the Chairman presiding, and Commissioners Hesiquio R. Mallilin and Narciso C. Monteiro,
proceeded to hear the case;" it heard the complainants' counsel (a) explain that his clients had been "denied due process and suspended
without formal notice, and unjustly, since they did not join the mass leave," and (b) expatiate on the grievances which were "the cause

The Commission
of the mass leave of MPSTA teachers, (and) with which causes they (CHR complainants) sympathize." 12

thereafter issued an Order 13

reciting these facts and making the following disposition:

To be properly apprised of the real facts of the case and be accordingly guided in
its investigation and resolution of the matter, considering that these forty two
teachers are now suspended and deprived of their wages, which they need very
badly, Secretary Isidro Cariño, of the Department of Education, Culture and
Sports, Dr. Erlinda Lolarga, school superintendent of Manila and the Principal of
Ramon Magsaysay High School, Manila, are hereby enjoined to appear and
enlighten the Commission en banc on October 19, 1990 at 11:00 A.M. and to
bring with them any and all documents relevant to the allegations aforestated
 herein to assist the Commission in this matter. Otherwise, the Commission will
resolve the complaint on the basis of complainants' evidence.

xxx xxx xxx

7. Through the Office of the Solicitor General, Secretary Cariño sought and was granted
leave to file a motion to dismiss the case. His motion to dismiss was submitted on
November 14, 1990 alleging as grounds therefor, "that the complaint states no cause of
action and that the CHR has no jurisdiction over the case." 14

8. Pending determination by the Commission of the motion to dismiss, judgments affecting the "striking teachers" were promulgated in
two (2) cases, as aforestated, viz.:

a) The Decision dated December l7, 1990 of Education Secretary Cariño in Case No. DECS 90-082, decreeing dismissal from
the service of Apolinario Esber and the suspension for nine (9) months of Babaran, Budoy and del Castillo; 15 and

b) The joint Resolution of this Court dated August 6, 1991 in G.R. Nos. 95445 and 95590 dismissing the petitions "without
prejudice to any appeals, if still timely, that the individual petitioners may take to the Civil Service Commission on the
matters complained of," 16 and inter alia "ruling that it was prima facie lawful for petitioner Cariño to issue return-to-work
orders, file administrative charges against recalcitrants, preventively suspend them, and issue decision on those charges." 17

9. In an Order dated December 28, 1990, respondent Commission denied Sec. Cariño's motion to dismiss and required him and
Superintendent Lolarga "to submit their counter-affidavits within ten (10) days . . . (after which) the Commission shall proceed to hear

It held that the "striking

and resolve the case on the merits with or without respondents counter affidavit." 18

teachers" "were denied due process of law; . . . they should not have been replaced
without a chance to reply to the administrative charges;" there had been a violation of
their civil and political rights which the Commission was empowered to investigate; and
while expressing its "utmost respect to the Supreme Court . . . the facts before . . . (it)
are different from those in the case decided by the Supreme Court" (the reference being
unmistakably to this Court's joint Resolution of August 6, 1991 in G.R. Nos. 95445 and
95590, supra).

It is to invalidate and set aside this Order of December 28, 1990 that the Solicitor
General, in behalf of petitioner Cariño, has commenced the present action
of certiorari and prohibition.

The Commission on Human Rights has made clear its position that it does not feel bound
by this Court's joint Resolution in G.R. Nos. 95445 and 95590, supra. It has also made
plain its intention "to hear and resolve the case (i.e., Striking Teachers HRC Case No.
90-775) on the merits." It intends, in other words, to try and decide or hear and
determine, i.e., exercise jurisdiction over the following general issues:

1) whether or not the striking teachers were denied due process, and just cause exists
for the imposition of administrative disciplinary sanctions on them by their superiors;
and

2) whether or not the grievances which were "the cause of the mass leave of MPSTA
teachers, (and) with which causes they (CHR complainants) sympathize," justify their
mass action or strike.
The Commission evidently intends to itself adjudicate, that is to say, determine with
character of finality and definiteness, the same issues which have been passed upon and
decided by the Secretary of Education, Culture & Sports, subject to appeal to the Civil
Service Commission, this Court having in fact, as aforementioned, declared that the
teachers affected may take appeals to the Civil Service Commission on said matters, if
still timely.

The threshold question is whether or not the Commission on Human Rights has the
power under the Constitution to do so; whether or not, like a court of justice, 19 or even
a quasi-judicial agency, 20 it has jurisdiction or adjudicatory powers over, or the power to
try and decide, or hear and determine, certain specific type of cases, like alleged human
rights violations involving civil or political rights.

The Court declares the Commission on Human Rights to have no such power; and that it
was not meant by the fundamental law to be another court or quasi-judicial agency in
this country, or duplicate much less take over the functions of the latter.

The most that may be conceded to the Commission in the way of adjudicative power is
that it may investigate, i.e., receive evidence and make findings of fact as regards
claimed human rights violations involving civil and political rights. But fact finding is not
adjudication, and cannot be likened to the judicial function of a court of justice, or even
a quasi-judicial agency or official. The function of receiving evidence and ascertaining
therefrom the facts of a controversy is not a judicial function, properly speaking. To be
considered such, the faculty of receiving evidence and making factual conclusions in a
controversy must be accompanied by the authority of applying the law to those factual
conclusions to the end that the controversy may be decided or determined
authoritatively, finally and definitively, subject to such appeals or modes of review as
may be provided by law. 21 This function, to repeat, the Commission does not have. 22

The proposition is made clear by the constitutional provisions specifying the powers of the Commission on Human Rights.

Upon its constitution, it succeeded

The Commission was created by the 1987 Constitution as an independent office. 23

and superseded the Presidential Committee on Human Rights existing at the time of the
effectivity of the Constitution. 24 Its powers and functions are the following 25

(1) Investigate, on its own or on complaint by any party, all forms of human rights violations involving civil and political
rights;

(2) Adopt its operational guidelines and rules of procedure, and cite for contempt for violations thereof in accordance with the
Rules of Court;

(3) Provide appropriate legal measures for the protection of human rights of all persons within the Philippines, as well as
Filipinos residing abroad, and provide for preventive measures and legal aid services to the underprivileged whose human
rights have been violated or need protection;

(4) Exercise visitorial powers over jails, prisons, or detention facilities;

(5) Establish a continuing program of research, education, and information to enhance respect for the primacy of human
rights;
 (6) Recommend to the Congress effective measures to promote human rights and to provide for compensation to victims of
violations of human rights, or their families;

(7) Monitor the Philippine Government's compliance with international treaty obligations on human rights;

(8) Grant immunity from prosecution to any person whose testimony or whose possession of documents or other evidence is
necessary or convenient to determine the truth in any investigation conducted by it or under its authority;

(9) Request the assistance of any department, bureau, office, or agency in the performance of its functions;

(10) Appoint its officers and employees in accordance with law; and

(11) Perform such other duties and functions as may be provided by law.

As should at once be observed, only the first of the enumerated powers and functions bears any resemblance to adjudication or
adjudgment. The Constitution clearly and categorically grants to the Commission the power to investigate all forms of human rights
violations involving civil and political rights. It can exercise that power on its own initiative or on complaint of any person. It may
exercise that power pursuant to such rules of procedure as it may adopt and, in cases of violations of said rules, cite for contempt in
accordance with the Rules of Court. In the course of any investigation conducted by it or under its authority, it may grant immunity from
prosecution to any person whose testimony or whose possession of documents or other evidence is necessary or convenient to
determine the truth. It may also request the assistance of any department, bureau, office, or agency in the performance of its functions,
in the conduct of its investigation or in extending such remedy as may be required by its findings. 26

But it cannot try and decide cases (or hear and determine causes) as courts of justice, or even quasi-judicial bodies do. To investigate is
not to adjudicate or adjudge. Whether in the popular or the technical sense, these terms have well understood and quite distinct
meanings.

"Investigate," commonly understood, means to examine, explore, inquire or delve or probe into, research on, study. The dictionary
definition of "investigate" is "to observe or study closely: inquire into systematically. "to search or inquire into: . . . to subject to an

The purpose of investigation, of course, is to discover,

official probe . . .: to conduct an official inquiry." 27

to find out, to learn, obtain information. Nowhere included or intimated is the notion of
settling, deciding or resolving a controversy involved in the facts inquired into by
application of the law to the facts established by the inquiry.

The legal meaning of "investigate" is essentially the same: "(t)o follow up step by step
by patient inquiry or observation. To trace or track; to search into; to examine and
inquire into with care and accuracy; to find out by careful inquisition; examination; the
taking of evidence; a legal inquiry;" 28 "to inquire; to make an investigation,"
"investigation" being in turn describe as "(a)n administrative function, the exercise of
which ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; . . . an inquiry,
judicial or otherwise, for the discovery and collection of facts concerning a certain matter
or matters." 29

"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine, resolve, rule on, settle. The
dictionary defines the term as "to settle finally (the rights and duties of the parties to a court case) on the merits of issues raised: . . . to

And "adjudge" means "to decide or rule upon as a

pass judgment on: settle judicially: . . . act as judge." 30

judge or with judicial or quasi-judicial powers: . . . to award or grant judicially in a case

of controversy . . . ." 31
In the legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To determine finally. Synonymous with adjudge in
its strictest sense;" and "adjudge" means: "To pass on judicially, to decide, settle or decree, or to sentence or condemn. . . . Implies a
judicial determination of a fact, and the entry of a judgment." 32

Hence it is that the Commission on Human Rights, having merely the power "to investigate," cannot and should not "try and resolve on
the merits" (adjudicate) the matters involved in Striking Teachers HRC Case No. 90-775, as it has announced it means to do; and it
cannot do so even if there be a claim that in the administrative disciplinary proceedings against the teachers in question, initiated and
conducted by the DECS, their human rights, or civil or political rights had been transgressed. More particularly, the Commission has no
power to "resolve on the merits" the question of (a) whether or not the mass concerted actions engaged in by the teachers constitute
and are prohibited or otherwise restricted by law; (b) whether or not the act of carrying on and taking part in those actions, and the
failure of the teachers to discontinue those actions, and return to their classes despite the order to this effect by the Secretary of
Education, constitute infractions of relevant rules and regulations warranting administrative disciplinary sanctions, or are justified by the
grievances complained of by them; and (c) what where the particular acts done by each individual teacher and what sanctions, if any,
may properly be imposed for said acts or omissions.

These are matters undoubtedly and clearly within the original jurisdiction of the Secretary of Education, being within the scope of the
disciplinary powers granted to him under the Civil Service Law, and also, within the appellate jurisdiction of the Civil Service
Commission.

and it
Indeed, the Secretary of Education has, as above narrated, already taken cognizance of the issues and resolved them, 33

appears that appeals have been seasonably taken by the aggrieved parties to the Civil
Service Commission; and even this Court itself has had occasion to pass upon said
issues. 34

Now, it is quite obvious that whether or not the conclusions reached by the Secretary of Education in disciplinary cases are correct and
are adequately based on substantial evidence; whether or not the proceedings themselves are void or defective in not having accorded
the respondents due process; and whether or not the Secretary of Education had in truth committed "human rights violations involving
civil and political rights," are matters which may be passed upon and determined through a motion for reconsideration addressed to the
Secretary Education himself, and in the event of an adverse verdict, may be reviewed by the Civil Service Commission and eventually
the Supreme Court.

The Commission on Human Rights simply has no place in this scheme of things. It has no business intruding into the jurisdiction and
functions of the Education Secretary or the Civil Service Commission. It has no business going over the same ground traversed by the
latter and making its own judgment on the questions involved. This would accord success to what may well have been the complaining
teachers' strategy to abort, frustrate or negate the judgment of the Education Secretary in the administrative cases against them which
they anticipated would be adverse to them.

This cannot be done. It will not be permitted to be done.

In any event, the investigation by the Commission on Human Rights would serve no useful purpose. If its investigation should result in
conclusions contrary to those reached by Secretary Cariño, it would have no power anyway to reverse the Secretary's conclusions.
Reversal thereof can only by done by the Civil Service Commission and lastly by this Court. The only thing the Commission can do, if it
concludes that Secretary Cariño was in error, is to refer the matter to the appropriate Government agency or tribunal for assistance;
that would be the Civil Service Commission. 35
It cannot arrogate unto itself the appellate jurisdiction of
the Civil Service Commission.
WHEREFORE, the petition is granted; the Order of December 29, 1990 is ANNULLED and
SET ASIDE, and the respondent Commission on Human Rights and the Chairman and
Members thereof are prohibited "to hear and resolve the case (i.e., Striking Teachers
HRC Case No. 90-775) on the merits."

SO ORDERED.

Melencio-Herrera, Cruz, Feliciano, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr.

and Romero, JJ, concur.

Separate Opinions

GUTIERREZ, JR., J., concurring:

I concur in the result. The teachers are not to be blamed for exhausting all means to
overcome the Secretary's arbitrary act of not reinstating them.

PARAS, J., concurring:

I concur with the brilliant and enlightening decision of Chief Justice Andres R. Narvasa

I wish to add however that the Commission on Human Rights should concern itself in this
case and in many other similar cases:

(1) not only with the human rights of striking teachers but also the human rights
of students and their parents;

(2) not only with the human rights of the accused but also the human rights of
the victims and the latter's families;

(3) not only with the human rights of those who rise against the government but
also those who defend the same;

(4) not only the human rights of striking laborers but also those who as a
consequence of strikes may be laid off because of financial repercussions.

The defense of human rights is not a monopoly of a government agency (such as the
Commission on Human Rights) nor the monopoly of a group of lawyers defending so-
called "human rights' but the responsibility of ALL AGENCIES (governmental or private)
and of ALL LAWYERS, JUDGES, and JUSTICES.

Finally, the Commission should realize that while there are "human rights", there are
also corresponding "human obligations."

PADILLA, J., dissenting:

I vote to dismiss the petition for the same reasons stated in my earlier separate opinion
filed in this case.
# Separate Opinions

GUTIERREZ, JR., J., concurring:

I concur in the result. The teachers are not to be blamed for exhausting all means to
overcome the Secretary's arbitrary act of not reinstating them.

PARAS, J., concurring:

I concur with the brilliant and enlightening decision of Chief Justice Andres R. Narvasa

I wish to add however that the Commission on Human Rights should concern itself in this
case and in many other similar cases:

(1) not only with the human rights of striking teachers but also the human rights
of students and their parents;

(2) not only with the human rights of the accused but also the human rights of
the victims and the latter's families;

(3) not only with the human rights of those who rise against the government but
also those who defend the same;

(4) not only the human rights of striking laborers but also those who as a
consequence of strikes may be laid off because of financial repercussions.

The defense of human rights is not a monopoly of a government agency (such as the
Commission on Human Rights) nor the monopoly of a group of lawyers defending so-
called "human rights' but the responsibility of ALL AGENCIES (governmental or private)
and of ALL LAWYERS, JUDGES, and JUSTICES.

Finally, the Commission should realize that while there are "human rights", there are
also corresponding "human obligations."

PADILLA, J., dissenting:

I vote to dismiss the petition for the same reasons stated in my earlier separate opinion
filed in this case.

Footnotes

1 Rollo, pp. 6-13.

2 G.R. No. 95445 (Manila Public School Teachers Association, et al. v.

Hon. Perfecto Laguio, Jr., etc., et al) and G.R. No. 95590 (Alliance of
Concerned Teachers [ACT], et al. v. Hon. Isidro Cariño, etc., et al.).

3 (Joint) Resolution, G.R. Nos. 95445 and 95590, prom. Aug. 6, 1991, pp.
3-4.
4 Rollo, p. 7.

5 Id., p. 7.

6 Also impleaded as respondents were other teachers, Adelaida dela

Cruz, Ma. Teresa Rizardo, Rita Atabelo and Digna Operiano (Rollo, p. 77).

7 Rollo, pp. 77-78.

8 Id., pp. 77-81.

9 Id., pp. 7-8, and 47-50 (Annex "I," petition: Decision of Judge Perfecto
A.S. Laguio in Civil Case No. 90-54468 of the RTC of Manila [Branch 18]
entitled Manila Public School Teachers Association, et al. v. Hon. Isidro
Cariño and Hon. Erlinda Lolarga).

10 Id., pp. 8; 51-52 (Annex J, Petition: Pinagsamang Sinumpaang

Salaysay of 7 affiants including respondents Budoy, Babaran, and del
Castillo), and 53-54 (Annex K, petition: sworn statement given by
Apolinario Esber under questioning by Nicanor S. Agustin, CHR).

11 Id., p. 56: Order in Striking Teachers CHR Case No. 90-775, 1st par., p.
1.

12 Id., 1st and 2nd pars., p. 1.

13 Id., pp, 56-57.

14 Id., pp, 11-58-76 (Annex M, petition).

15 SEE footnote 8 and related text, supra.

16 SEE footnote 3, supra.

17 Rollo, p. 11.

18 Id., pp. 12-13.

19 Including Regional Trial Courts designated and acting as Special

Agrarian Courts, and the Court of Tax Appeals. SEE Supreme Court
Circular No. 1-91 eff. April 1, 1991.

20 Vested with judicial authority or quasi-judicial powers are such

agencies, boards or officers like the Securities & Exchange Commission,
Land Registration Authority, Social Security Commission, Civil
Aeronautics Board, Bureau of Patents, Trademarks and Technology
Transfer, National Electrification Administration, Energy Regulatory
Board, National Telecommunications Commission, Department of
Agrarian Reform, Government Service Insurance System, Employees'
Compensation Commission, Philippine Atomic Energy
Commission. SEE Circular No. 1-91, supra. Also possessed of quasi-
judicial authorities are department heads and heads of office under the
Civil Service Law, and the Ombudsman.
21 The nature of a "judicial function" was inter alia described in Republic
of the Philippines (PCGG) v. Sandiganbayan, et al., G.R. No. 90478 as
follows: "The resolution of controversies is, as everyone knows,
the raison d'etre of courts. This essential function is accomplished
by first, the ascertainment of all the material and relevant facts from the
pleadings and from the evidence adduced by the parties,
and second after that determination of the facts has been completed, by
the application of the law thereto to the end that the controversy may be
settled authoritatively, definitively and finally."

. . . "It may be said generally that the exercise of judicial functions is to

determine what the law is, and what the legal rights of parties are, with
respect to a matter in controversy; and whenever an officer is clothed
with that authority, and undertakes to determine those questions, he
acts judicially." . . . Mun. Council of Lemery v. Prov. Board of Batangas,
56 Phil. 260, 270, citing State ex rel. Boards of Commrs. v. Dunn, 86
Minn. 301, 304.

It has been held that a special civil action of certiorari "would not lie to
challenge action of the "Integrity Board" set up by Executive

Order No. 318 of May 25, 1950, because that board, like the later
Presidential Complaints and Action Commission, was not invested with
judicial functions but only with power to investigate charges of graft and
corruption in office and to submit the record, together with findings and
recommendations, to the President." Ruperto v. Torres G.R. No. L-8785,
Feb. 25, 1957 (Unrep., 100 Phil. 1098) (Rep. of the Phil. Digest, Vol.
1, Certiorari, Sec. 22, p. 430).

Ballentine's Law Dictionary, 3rd Ed., treating of "jurisdiction" in relation

to a criminal case, states it to be "the power of a court to inquire into the
fact, to apply the law, and to declare the punishment, in a regular course
of judicial proceeding . . ." In Black's Law Dictionary 5th Ed., "adjudge" is
defined as: "To pass on judicially, to decide, settle or decree, or to
sentence or condemn. . . . Implies a judicial determination of a fact, and
the entry of a judgment (emphasis supplied).

22 A distinguished Member of the Constitutional Commission that drew

up the 1987 Constitution, Fr. Joaquin Bernas, S.J., citing the
Commission's official records, states that the "principal function of the
Commission (on Human Rights) is investigatory. In fact, in terms of law
enforcement, this pretty much is the limit of its function. Beyond
investigation, it will have to rely on the Justice Department which has
full control over prosecutions. Thus, under Section 18 (9) it can only
request assistance from executive offices." (Bernas, The Constitution of
the Republic of the Philippines, a Commentary,1988 ed., Vol. II p. 503/).

23 Art. XIII, Sec. 17. (1).

24 Id., Sec. 17. (3).

25 Id., Sec. 18.

26 E.g.: the prosecution of persons guilty of crimes, or institution of civil

or administrative proceedings; exercise of visitorial powers over jails,
prisons, or detention facilities; the submission of recommendations to
the Congress of measures to promote human rights provide for
compensation to victims of violations thereof, etc.

27 Webster's Third New International Dictionary. The Oxford English

Dictionary (2d ed., 1961) definition is: "To search or inquire into; to
examine (a matter) systematically or in detail; to make an inquiry or
examination into." The American College Encyclopedic Dictionary (1959
ed.) defines (a) "investigate" as "to search or examine into the
particulars of; examine in detail;" and (b) "investigation," an act or
process of investigating; a searching inquiry in order to ascertain facts; a
detailed or careful examination.

28 Black's Law Dictionary, 5th ed.

29 Ballentine's Law Dictionary, 3rd Ed.

30 Webster's Third New International Dictionary. The Oxford English

Dictionary (2d ed., 1961) definition is "To adjudge; to award; "to give
something controverted to one of the litigants, by a sentence or decision.
. . . To try and determine judicially; to pronounce by sentence of court. . .
. To sit in judgment and pronounce sentence; to act as a judge, or court
of judgment."

31 Id., the Oxford English Dictionary (2d ed., 1961) definition is "To
settle, determine, or decide judicially; to adjudicate upon; . . . To
pronounce or decree by judicial sentence . . . To award judicially; to
grant, bestow, or impose by judicial sentence . . . ."

32 Black's Law Dictionary, 5th ed.; in Ballentine's Law Dictionary,

"adjudicate" is defined as: "To give judgment; to render or award
judgment," and "adjudge" as: "To give judgment; to decide, to
sentence." In Bouvier's Law Dictionary Third Revision (8th Ed.),
"adjudication" is defined as "A judgment; giving or pronouncing
judgment in a case. Determination in the exercise of judicial power."

33 SEE footnotes 6 to 8, and 15, and related text, supra.

34 SEE footnotes 16 and 17 related text, supra.

35 SEE footnote 26, supra.

 SECOND DIVISION

[G.R. NO. 154490 : September 19, 2006]

SPOUSES ROMULO and GUILLERMA CUBA, Petitioners, v. MANUEL V. CUENCO,

JR., Respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari assailing the
Decision1 dated January 30, 2002 of the Court of Appeals in CA-G.R. SP No. 54695.

The facts are:

Manuel Cuenco, Jr., respondent, is the registered owner of several parcels of agricultural
land located in Barangay Looc, Sibulan, Negros Oriental he inherited from his deceased
parents, Manuel Cuenco, Sr. and Milagros Veloso Cuenco. They are Lots Nos. 3529,
3530, 3533, 3534, 3535, and 3576 consisting of five (5) hectares covered by Transfer
Certificates of Title Nos. T-31768-A, T-31765-A, T-31770, T-31766, T-31768, and T1-
31769, respectively. These lots are primarily planted to coconuts and bananas and have
been tenanted since the 1960s. Rosendo Lastimoso was the original tenant. Before he
died, respondent's mother, Milagros Cuenco, designated Guillerma Cuba and her
husband Romulo Cuba, herein petitioners, as the new tenants. Petitioners then
constructed their residential house on a portion of Lot No. 3533. After the death of his
mother, respondent sent a letter to petitioners authorizing them to continue tending Lot
No. 3533.

Later, however, the tenurial relationship between respondent and petitioners had been
strained, prompting respondent to file with the Regional Agrarian Reform Adjudication
Board, Department of Agrarian Reform (DAR), Cebu City a complaint for declaration of
non-tenancy, ejectment, and accounting of farm income against petitioners, docketed as
RARAD Case No. VII-39-NO-99. Respondent prayed that petitioners be ordered to vacate
the landholding they are tilling.

Respondent also filed with the Municipal Trial Court (MTC), Sibulan, Negros Oriental a
complaint for unlawful detainer against petitioners, docketed as Civil Case No. 431.
Respondent alleged that he has allowed petitioners to construct their house on a portion
of Lot No. 3533 on condition that they will peacefully vacate the area should he need the
same; that at present he is in need of the land; and that despite his demands,
petitioners refused to vacate the same, thus, he is constrained to file the complaint for
illegal detainer against them. It is this case which led to the instant controversy.

In their answer to respondent's complaint, petitioners averred that they are legitimate
tenants; that respondent filed the complaint because he wanted to designate spouses
Joventino and Victoria Abo2 to replace them; and that the MTC has no jurisdiction over
Civil Case No. 431 as it involves an agrarian dispute.

In an Order3 dated May 17, 1999, the MTC dismissed respondent's complaint for lack of
jurisdiction, holding that it involves an agrarian controversy which falls within the
jurisdiction of the Department of Agrarian Reform Adjudication Board (DARAB).

On appeal, the Regional Trial Court (RTC), Branch 44, Dumaguete City rendered its
Decision4 dated July 15, 1999 affirming the MTC Order.
Respondent then filed with the Court of Appeals a Petition for Review assailing the RTC
Decision, docketed therein as CA-G.R. SP No. 54695.

Meanwhile, on September 10, 1999, the DARAB handed down its Decision in RARAD
Case No. VII-39-NO-99 in favor of petitioners. It enjoined respondent from disturbing
petitioners' peaceful possession of the land they have been cultivating.

Going back to the illegal detainer case, on January 30, 2002, the Court of Appeals
rendered its Decision in CA-G.R. SP No. 54695 in favor of respondent, reversing the RTC
Decision and holding that respondent's complaint does not involve an agrarian
controversy, hence, the MTC has jurisdiction over it.

The Court of Appeals found that the disputed property is residential, not agricultural, as
evidenced by these two documents: (1) a Certification dated August 12, 1999 issued by
the Provincial Assessor of Negros Oriental stating that Lot No. 3533 has been classified
as residential by the Municipal Assessor of Sibulan; and (2) a Certification dated June 4,
1999 issued by the Office of the Zoning Administrator, Housing and Land Use Regulatory
Board stating that both the Sangguniang Bayan of Sibulan and the Sangguniang
Panlalawigan of Negros Oriental approved the reclassification of Lot No. 3533 from
agricultural to residential land.

Petitioners filed a motion for reconsideration but it was denied by the Court of Appeals in
its Resolution5 dated July 22, 2002.

Hence, the instant petition.

The sole issue here is whether or not respondent's complaint for illegal detainer against
petitioners involving their home lot is an agrarian dispute.

The petition is meritorious.

We agree with the Court of Appeals that indeed the jurisdiction of a tribunal, including a
quasi-judicial agency, over the subject matter of a complaint or petition is determined by
the allegations therein. However, in determining jurisdiction, it is not only the nature
of the issues or questions that is the subject of the controversy that should be
determined, but also the status or relationship of the parties.6 Thus, if the issues
between the parties are intertwined with the resolution of an issue within the exclusive
jurisdiction of the DARAB, such dispute must be addressed and resolved by the
DARAB.7 Section 50 of Republic Act No. 66578 provides:

SEC. 50. Quasi-Judicial Powers of the DAR. - The DAR is hereby vested with primary
jurisdiction to determine and adjudicate agrarian reform matters and shall have
exclusive original jurisdiction over all matters involving the implementation of
agrarian reform, except those falling under the exclusive jurisdiction of the
Department of Agriculture (DA) and the Department of Environment and Natural
Resources (DENR). (Underscoring supplied)cralawlibrary

In Vda. de Tangub v. Court of Appeals,9 we held that the jurisdiction of the DAR
concerns the (1) determination and adjudication of all matters involving implementation
of agrarian reform; (2) resolution of agrarian conflicts and land-tenure related problems;
and (3) approval or disapproval of the conversion, restructuring or readjustment of
agricultural lands into residential, commercial, industrial, and other non-agricultural
uses. The DAR, in turn, exercises this jurisdiction through its adjudicating arm, the
DARAB.10
Again, in Monsanto v. Serna,11 we ruled that the DARAB exercises primary jurisdiction,
both original and appellate, to determinate and adjudicate all agrarian disputes,
controversies, matters or incidents involving the implementation of agrarian laws and
their implementing rules and regulations. Section 3 of Republic Act No. 6657 defines an
"agrarian dispute" as follows:

(f) Agrarian Dispute refers to any controversy relating to tenurial arrangements,

whether leasehold, tenancy, stewardship or otherwise over lands devoted to agriculture,
including disputes concerning farmworkers' associations or representation of persons in
negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of
such tenurial arrangements.

It includes any controversy relating to compensation of lands acquired under this Act and
other terms and conditions of transfer of ownership from landowners to farmworkers,
tenants and other agrarian reform beneficiaries, whether the disputants stand in the
proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and
lessee.

We hold that the Court of Appeals erred in holding that respondent's complaint for illegal
detainer does not involve an agrarian dispute.

Records show that respondent does not deny the existence of a tenancy relationship
between him and petitioners over Lot No. 3533. In fact, he invoked the jurisdiction of
the DARAB in RARAD Case No. VII-39-NO-99. It bears reiterating that this case pertains
to respondent's complaint for declaration of non-tenancy, ejectment, and accounting of
farm income involving the subject property against petitioners filed with the RARAD in
Cebu City. In this case, the DARAB declared petitioners as tenants and enjoined
respondent from disturbing them in their peaceful occupation and cultivation of Lot No.
3533.

We note that respondent categorically states in his complaint that petitioners

constructed a residential house on the disputed portion of Lot No. 3533. On this point,
Section 22 (3) of Republic Act No. 1199,12 as amended by Republic Act No. 2263, is
relevant, thus:

xxx

(3) The tenant shall have the right to demand for a home lot suitable for dwelling with
an area of not more than 3 percent of the area of his landholding provided that it does
not exceed one thousand square meters and that it shall be located at a convenient and
suitable place within the land of the landholder to be designated by the latter where the
tenant shall construct his dwelling and may raise vegetables, poultry, pigs and other
animals and engage in minor industries, the products of which shall accrue to the tenant
exclusively. The tenant's dwelling shall not be removed from the lot already
assigned to him by the landholder, except as provided in section twenty-six,
unless there is a severance of the tenancy relationship between them as
provided under section nine, or unless the tenant is ejected for cause and only after the
expiration of forty-five days following such severance of relationship or dismissal for
cause.

The grant of a home lot to an agricultural tenant is further provided for in Section 24 of
Republic Act No. 3844,13 as amended by Republic Act No. 6389, which states that "the
agricultural lessee shall have the right to continue in the exclusive possession and
enjoyment of any home lot he may have upon the effectivity of this Code, which shall be
considered as included in the leasehold." Significantly, we have held that tenants are
entitled to a home lot as an incident of their tenancy rights.14
Clearly, Civil Case No. 431 is an action by the landowner to oust his tenant from the
latter's home lot. We thus rule that the dispute is agrarian in nature falling within the
jurisdictional domain of the DARAB. This is in line with the doctrine of primary
jurisdiction which precludes the regular courts from resolving a controversy over which
jurisdiction has been lodged with an administrative body of special competence.15

WHEREFORE, we GRANT the instant petition. The assailed Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 54695 are REVERSED. The Decision dated July
15, 1999 of the Regional Trial Court, Branch 44, Dumaguete City in Civil Case No. 12492
is REINSTATED. Costs against respondent.

SO ORDERED.

Puno, Chairperson, Corona, Azcuna, Garcia, JJ., concur.

Endnotes:

1
Penned by Associate Justice Amelita G. Tolentino and concurred in by Associate Justice
Conrado M. Vasquez, Jr., and Associate Justice Andres B. Reyes, Jr., Rollo, pp. 85-93.

2
Another daughter of the late Rosendo Lastimoso and sister of Guillerma Cuba.

3
Rollo, pp. 56-57.

4
Id., pp. 80-83.

5
Rollo, p. 133.

6
Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz, G.R. No. 162890,
November 23, 2005, 475 SCRA 743, citing Vesagas v. Court of Appeals, 371 SCRA 508
(2001).

7
Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz,
id., citing Monsanto v. Zerna, 371 SCRA 664 (2001).

8
The Comprehensive Agrarian Reform Law.

9
G.R. No. UDK-9854, December 3, 1990, 191 SCRA 885.

10
Martillano v. Court of Appeals, G.R. No. 148277, June 29, 2004, 433 SCRA 195.

11
G.R. No. 142501, December 7, 2001, 371 SCRA 664.

12
The Agricultural Tenancy Act.

13
The Agricultural Land Reform Code.

14
Palele v. Court of Appeals, G.R. No. 138289, July 31, 2001, 362 SCRA 141, 150,
citing Cruz v. Court of Appeals, 129 SCRA 223 (1984).

15
Bautista v. Mag-isa Vda. de Villena, G.R. No. 152564, September 13, 2004, 438 SCRA
259.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-56180 October 16, 1986

ATENEO DE MANILA UNIVERSITY, petitioner,

vs.
COURT OF APPEALS, and SPOUSES ROMEO G. GUANZON and TERESITA
REGALADO, respondents.

Ernesto P. Pangalangan for petitioner.

Mirano, Mirano & Associates for private respondents.

GUTIERREZ, JR., J.:

In a letter-complaint dated December 13, 1967 addressed to Rev. William Welsh S.J.,
Dean of Men, Dean of Resident Students, and Chairman of the Board of Discipline,
College of Arts and Sciences, Ateneo de Manila, Carmelita Mateo, a waitress in the
cafeteria of Cervini Hall inside the university campus charged Juan Ramon Guanzon, son
of private respondents Romeo Guanzon and Teresita Regalado, and a boarder and first
year student of the university with unbecoming conduct committed on December 12,
1967 at about 5:15 in the evening at the Cervini Hall's cafeteria, as follows:

xxx xxx xxx

Mr. Guanzon, a boarder at Cervini who I think comes from Bacolod, was
asking for "siopao." I was at the counter and I told him that the "siopao"
had still to be heated and asked him to wait for a while. Then Mr. Guanzon
started mumbling bad words directed to me, in the hearing presence of
other boarders. I asked him to stop cursing, and he told me that was none
of my business. Since he seemed impatient, I was going to give back his
money without any contempt. (sic) He retorted that he did not like to
accept the money. He got madder and started to curse again. Then he
threatened to strike me with his fist. I tried to avoid this. But then he
actually struck me in my left temple. Before he could strike again, his
fellow boarders held him and Dr. Bella and Leyes coaxed him to stop; I got
hold of a bottle so I could dodge him. It was then that Fr. Campbell
arrived. The incident was hidden from Fr. Campbell by the boarders. I
could not tell him myself as I had gone into the kitchen crying because I
was hurt.

The university conducted an investigation of the slapping incident. On the basis of the
investigation results, Juan Ramon was dismissed from the university.

The dismissal of Juan Ramon triggered off the filing of a complaint for damages by his
parents against the university in the then Court of First Instance of Negros Occidental at
Bacolod City. The complaint states that Juan Ramon was expelled from school without
giving him a fair trial in violation of his right to due process and that they are prominent
and well known residents of Bacolod City, with the unceremonious expulsion of their son
causing them actual, moral, and exemplary damages as well as attorney's fees.

In its answer, the university denied the material allegations of the complaint and
justified the dismissal of Juan Ramon on the ground that his unbecoming behavior is
contrary to good morals, proper decorum, and civility, that such behavior subjected him
as a student to the university's disciplinary regulations' action and sanction and that the
university has the sole prerogative and authority at any time to drop from the school a
student found to be undesirable in order to preserve and maintain its integrity and
discipline so indispensable for its existence as an institution of learning.

After due trial, the lower court found for the Guanzons and ordered the university to pay
them P92.00 as actual damages; P50,000.00 as moral damages; P5,000.00 as
attorney's fees and to pay the costs of the suit.

Upon appeal to the Court of Appeals by the university, the trial court's decision was
initially reversed and set aside. The complaint was dismissed.

However, upon motion for reconsideration filed by the Guanzons, the appellate court
reversed its decision and set it aside through a special division of five. In the resolution
issued by the appellate court, the lower court's decision was reinstated. The motion for
reconsideration had to be referred to a special division of five in view of the failure to
reach unanimity on the resolution of the motion, the vote of the regular division having
become 2 to 1.

The petitioner now asks us to review and reverse the resolution of the division of five on
the following grounds:

ONE

THE RESOLUTION OF THE DIVISION OF FIVE COMMITTED A SERIOUS AND

GRAVE ERROR OF LAW IN RULING THAT PRIVATE RESPONDENTS WERE
NOT AFFORDED DUE PROCESS IN THE DISCIPLINE CASE AGAINST THEIR
SON, JUAN RAMON GUANZON.

TWO

THE RESOLUTION OF THE DIVISION OF FIVE ERRONEOUSLY RULED THAT

THE RESORT TO JUDICIAL REMEDY BY PRIVATE RESPONDENTS DID NOT
VIOLATE THE RULE ON FINALITY OF ADMINISTRATION ACTION OR
EXHAUSTION OF ADMINISTRATIVE REMEDIES.

THREE

THE FINDING AND CONCLUSIONS OF THE RESOLUTION OF THE DIVISION

OF FIVE ARE TAINTED WITH GRAVE ABUSE OF DISCRETION, OR ARE
CONFLICTING, OR CONTRARY TO THE EVIDENCE IN THE CASE.

In reversing its own decision, the appellate court relied heavily on the findings of the
Director of Private Schools affirmed by the Minister of Education and the findings of the
lower Court to the effect that due process of law was not observed by the petitioner
when it dismissed the private respondents' son Juan Ramon. The resolution invoked the
rule that findings of facts by administrative officers in matters falling within their
competence will not generally be reviewed by the courts, as well as the principle that
findings of facts of the trial court are entitled to great weight and should not be
disturbed on appeal.

The conclusions of the Court of Appeals in its split decision are not sustained by the facts
on record.

The statement regarding the finality given to factual findings of trial courts and
administrative tribunals is correct if treated as a general principle. The general principle,
however, is subject to well established exceptions.

We disregard the factual findings of trial courts when-(l) the conclusion is a finding
grounded on speculations, surmises, and conjectures; (2) the inferences made are
manifestly mistaken, absurd, or impossible; (3) there is a grave abuse of discretion; (4)
there is a misapprehension of facts; and (5) the court, in arriving at its findings, went
beyond the issues of the case and the same are contrary to the admissions of the parties
or the evidence presented. (Gomez v. Intermediate Appellate Court, 135 SCRA 620;
Republic v. Court of Appeals, 132 SCRA 514; Carolina Industries, Inc. v. CMS Stock
Brokerage, Inc., 97 SCRA 734; and Bacayo v. Genato, 135 SCRA 668).

A similar rule applies to administrative agencies.

By reason of their special knowledge and expertise gained from the handling of specific
matters falling under their respective jurisdictions, we ordinarily accord respect if not
finality to factual findings of administrative tribunals. However, there are exceptions to
this rule and judicial power asserts itself whenever the factual findings are not supported
by evidence; where the findings are vitiated by fraud, imposition, or collusion; where the
procedure which led to the factual findings is irregular; when palpable errors are
committed; or when a grave abuse of discretion, arbitrariness, or capriciousness is
manifest. (International Hardwood and Veneer Co., of the Philippines v. Leogardo, 117
SCRA 967; Baguio Country Club Corporation v. National Labor Relations Commission,
118 SCRA 557; Sichangco v. Commissioner of Immigration, 94 SCRA 61; and Eusebio v.
Sociedad Agricola de Balarin, 16 SCRA 569).

The Court of Appeals ruled that Juan Ramon Guanzon was not accorded due process. We
fail to see what, in the records, made the respondent court reverse its earlier and correct
finding that there was due process.

The original decision, penned by then Associate and now Presiding Justice Emilio A.
Gancayco reviews the facts on record to show that the procedures in the expulsion case
were fair, open, exhaustive, and adequate.

The decision states:

First, after the slapping incident which happened on December 12, 1967,
Fr. Welsh in his capacity as Chairman of the Board of Discipline upon
receipt of the letter-complaint (Exh. 2) of Carmelita Mateo conducted a
preliminary inquiry by interviewing the companions and friends of Juan
Ramon Guanzon who were also at the cafeteria. They confirmed the
incident in question. (Exhs. 5, 6, 7 and 9).

Second, Fr. Welsh, finding that there was probable cause against Mr.
Guanzon, prepared a memorandum to the members of the Board of
Discipline dated December 16, 1967 (Exh. 8) and delivered a copy each to
Fr. Francisco Perez, Dr. Amada Capawan, Mr. Piccio and Dr. Reyes.
Third, on December 14, 1967, Mr. Guanzon was fully informed of the
accusation against him when Fr. Welsh read the letter-complaint of
Carmelita Mateo and he admitted the truth of the charge. (tsn., pp. 38-39,
May 9, 1970; Exh. 4).

Fourth, Fr. Welsh also sent separate letters to Rev. Antonio Cuna, Student
Counselor of the College of Arts and Sciences dated December 18, 1967
and Rev. James Culligan, Director of Guidance of the College of Arts and
Sciences dated December 18, 1967 seeking any information for guidance
in the action of the Board of Discipline regarding the case of Mr. Guanzon.
(Exhs. 10-11)

Fifth, notice of the meeting of the Board of Discipline set on December 19,
1967 was posted at the Bulletin Board of the College of Arts and Sciences
and also at Dormitory Halls (tsn., pp. 21-22, July 21, 1970) The Secretary
of the Dean of Discipline personally notified Mr. Guanzon of the meeting of
the Board on December 19, 1967, he was told to seek the help of his
guardians, parents and friends including the student counsellors in the
residence halls and College of Arts and Sciences. (tsn., p. 18, July 21,
1970)

Sixth, despite notice of the Board of Discipline on December 19, 1967, Mr.
Guanzon did not care to inform his parents or guardian knowing fully well
the seriousness of the offense he had committed and instead he spoke for
himself and admitted to have slapped Carmelita Mateo. He then asked that
he be excused as he wanted to catch the boat for Bacolod City for the
Christmas vacation.

Seventh, the decision of the Board of Discipline was unanimous in

dropping from the rolls of students Mr. Guanzon (Exh. 12) which was
elevated to the office of the Dean of Arts and Sciences, Rev. Joseph A.
Galdon, who after a review of the case found no ground to reverse the
decision of the Board of Discipline. (Exh. 13) The case was finally elevated
to the President of the Ateneo University who sustained the decision of the
Board of Discipline (Exh. 21-A, p. 6) A motion for reconsideration was filed
by the President of the Student Council in behalf of Mr. Guanzon (Exh. 15)
but the same was denied by the President of the University.

Eighth, when the decision of the Board of Discipline was about to be

carried out, Mr. Guanzon voluntarily applied for honorable dismissal. He
went around to the officials of the university to obtain his clearance and
this was approved on January 8, 1968. (Exh. 3, tsn., p. 58, May 6, 1970)

Ninth, Mr. Romeo Guanzon, father of Juan Ramon Guanzon arranged for
full and complete refund of his tuition fee for the entire second semester
of the school year 1967-68. Juan Ramon was never out of school. He was
admitted at the De la Salle College of Bacolod City and later transferred to
another Jesuit School.

From the above proceedings that transpired it can not be said that Juan
Ramon Guanzon was denied due proems of law. On the contrary, we find
that he was given the full opportunity to be heard to be fully informed of
the charge against him and to be confronted of the witnesses face to face.
And since he chose to remain silent and did not bother to inform his
parents or guardian about the disciplinary action taken against him by the
 defendant university, neither he nor his parents should find reason to
complain.

xxx xxx xxx

When the letter-complaint was read to Juan Ramon, he admitted the altercation with the
waitress and his slapping her on the face. Rev. Welsh did not stop with the admission.
He interviewed Eric Tagle, Danny Go, Roberto Beriber, and Jose Reyes, friends of Juan
Ramon who were present during the incident.

The Board of Discipline was made up of distinguished members of the faculty-Fr.

Francisco Perez, Biology Department Chairman; Dr. Amando Capawan, a Chemistry
professor; Assistant Dean Piccio of the College; and Dr. Reyes of the same College.
There is nothing in the records to cast any doubt on their competence and impartiality
insofar as this disciplinary investigation is concerned.

Juan Ramon himself appeared before the Board of Discipline. He admitted the slapping
incident, then begged to be excused so he could catch the boat for Bacolod City. Juan
Ramon, therefore, was given notice of the proceedings; he actually appeared to present
his side; the investigating board acted fairly and objectively; and all requisites of
administrative due process were met.

We do not share the appellate court's view that there was no due process because the
private respondents, the parents of Juan Ramon were not given any notice of the
proceedings.

Juan Ramon, who at the time was 18 years of age, was already a college student,
intelligent and mature enough to know his responsibilities. In fact, in the interview with
Rev. Welsh, he even asked if he would be expelled because of the incident. He was fully
cognizant of the gravity of the offense he committed. When informed about the
December 19, 1967 meeting of the Board of Discipline, he was asked to seek advice and
assistance from his guardian and/or parents.

In the natural course of things, Juan Ramon is assumed to have reported this serious
matter to his parents. The fact that he chose to remain silent and did not inform them
about his case, not even when he went home to Bacolod City for his Christmas vacation,
was not the fault of the petitioner university.

Moreover, notwithstanding the non-participation of the private respondents, the

university, as stated earlier, undertook a fair and objective investigation of the slapping
incident.

Due process in administrative proceedings also requires consideration of the evidence

presented and the existence of evidence to support the decision (Halili v. Court of
Industrial Relations, 136 SCRA 112).

While it may be true that Carmelita Mateo was not entirely blameless for what happened
to her because she also shouted at Juan Ramon and tried to hit him with a cardboard
box top, this did not justify Juan Ramon's slapping her in the face. The evidence clearly
shows that the altercation started with Juan Ramon's utterance of the offensive language
"bilat ni bay," an Ilongo phrase which means sex organ of a woman. It was but normal
on the part of Mateo to react to the nasty remark. Moreover, Roberto Beriber, a friend of
Juan Ramon who was present during the incident told Rev. Welsh during the
investigation of the case that Juan Ramon made threatening gestures at Mateo
prompting her to pick up a cardboard box top which she threw at Juan Ramon. The
incident was in public thus adding to the humiliation of Carmelita Mateo. There was
"unbecoming conduct" and pursuant to the Rules of Discipline and Code of Ethics of the
university, specifically under the 1967-1969 Catalog containing the rules and academic
regulations (Exhibit 19), this offense constituted a ground for dismissal from the college.
The action of the petitioner is sanctioned by law. Section 107 of the Manual of
Regulations for Private Schools recognizes violation of disciplinary regulations as valid
ground for refusing re-enrollment of a student (Tangonan v. Pano, 137 SCRA 245).

Before Juan Ramon was admitted to enroll, he received (1) the College of Arts and
Sciences Handbook containing the general regulations of the school and the 1967-1969
catalog of the College of Arts and Sciences containing the disciplinary rules and academic
regulations and (2) a copy of the Rules and Regulations of the Cervini-Elizo Halls of the
petitioner university one of the provisions of which is as follows: under the title "Dining
Room"-"The kitchen help and server should always be treated with civility." Miss Mateo
was employed as a waitress and precisely because of her service to boarders, not to
mention her sex, she deserved more respect and gracious treatment.

The petitioner is correct in stating that there was a serious error of law in the appellate
court's ruling on due process.

The petitioner raises the issue of "exhaustion of administrative remedies" in view of its
pending appeal from the decision of the Ministry of Education to the President of the
Philippines. It argues that the private respondents' complaint for recovery of damages
filed in the lower court was premature.

The issue raised in court was whether or not the private respondents can recover
damages as a result of the dismissal of their son from the petitioner university. This is a
purely legal question and nothing of an administrative nature is to or can be done.
(Gonzales v. Hechanova, 9 SCRA 230; Tapales v. University of the Philippines, 7 SCRA
553; Limoico v. Board of Administrators, (PVA), 133 SCRA 43; Malabanan v. Ramonte,
129 SCRA 359). The case was brought pursuant to the law on damages provided in the
Civil Code. The jurisdiction to try the case belongs to the civil courts.

There was no need to await action from Malacañang.

This brings us to the final issue which is whether or not the private respondents are
entitled to damages. There is no basis for the recovery of damages. Juan Ramon was
afforded due process of law. The penalty is based on reasonable rules and regulations
applicable to all students guilty of the same offense. He never was out of school. Before
the decision could be implemented, Juan Ramon asked for an honorable dismissal which
was granted. He then enrolled at the De la Salle University of Bacolod City and later
transferred to another Jesuit school Moreover, his full and complete tuition fees for the
second semester were refunded through the representation of Mr. Romeo Guanzon, Juan
Ramon's father.

It is unfortunate of the parents suffered some embarrassment because of the incident.

However, their predicament arose from the misconduct of their own son who, in the
exuberance of youth and unfortunate loss of self control, did something which he must
have, later, regretted. There was no bad faith on the part of the university. In fact, the
college authorities deferred any undue action until a definitive decision had been
rendered. The whole procedure of the disciplinary process was set up to protect the
privacy of the student involved. There is absolutely no indication ot malice,. fraud, and
improper or willful motives or conduct on the part of the Ateneo de Manila University in
this case.
WHEREFORE, the instant petition is hereby GRANTED. The appellate court's resolution
dated January 26, 1981 is REVERSED and SET ASIDE. The appellate court's decision
dated March 15, 1979 is REINSTATED.

SO ORDERED.

Feria (Chairman), Fernan, Paras and Feliciano, JJ., concur.

Alampay, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 85839 October 19, 1989

EMMANUEL S. LICUP, NOEL F. TABASA, and JOEL MARC CAIRO, petitioners,

vs.
THE UNIVERSITY OF SAN CARLOS (USC), FR. RODERICK SALAZAR, JR., SVD, in
his capacity as President of USC, FR. EDUARDO R. ROCHA, SVD, in his capacity
as Chairman of Disciplinary Board of USC, respondents.

Democrito C. Barcenas for petitioners.

Julius Z. Neri for respondents.

GANCAYCO, J.:

In April, 1988 the University of San Carlos (USC) announced an increase in tuition and
other school fees by nine percent (9%) effective the first semester of the school year
1988-1989. According to the USC, the increase was necessary to enable the school to
comply with R.A. No. 6640. Under the said law, schools were required to give a
mandatory salary increase of P11.00 per day to teachers and non-academic personnel
earning below P100.00 daily.

Student leaders Emmanuel S. Licup, Noel F. Tabasa and Joel Marc Cairo were in the
forefront of the students protesting the tuition fee hike. They made a research in the
Finance Department of the USC and allegedly found out that the USC could increase the
salaries of teachers without necessarily increasing the tuition fees. The Supreme Student
Government of the University led by said three made representations with the USC
officials to reconsider their stand but they refused to roll back the tuition fees. Thus,
they led a mass protest of students. Demonstrations were held. The protesters
blockaded the entrance and exit gates for students in the university. Posters and wall
statements expressing student demands were displayed.

By reason thereof, Fr. Gregorio Favia, SVD, vice president for academic affairs, issued a
memorandum to all Deans and Chairmen of the different colleges of the USC instructing
them not to allow the student leaders to campaign against the tuition fee increase inside
the classrooms. On the other hand, President Fr. Roderick Salazar, Jr., SVD of the USC
initiated the appropriate administrative actions against several students including Licup,
Tabasa, and Cairo for alleged violation of the rules and regulations of the university and
the Bureau of Public Schools.

A Formal Inquiry Committee was created by Pres. Salazar composed of former Associate
Justice Mariano Zosa of the Court of Appeals, Dean Expedito Bugarin of the College of
Law, Dr. Aurelio Tiro, former DECS regional director, and Engineer Roger Bajarias of the
College of Engineering-all members of the faculty of the University.

The respondents-students questioned the impartiality of the said Committee and its
authority to charge them for violation of the university handbook which was allegedly
issued without consultation with the student government. Nevertheless, they submitted
themselves to the investigation after which, on November 15, 1988, the Committee
submitted a report to the Disciplinary Board, through its chairman, Fr. Eduardo R.
Rocha, SVD, finding Licup, Tabasa and Cairo guilty of the offense as charged in the
administrative complaint. 1

On November 16, 1988, Fr. Rocha wrote said three that the Board unanimously voted to
impose on them the penalty of non-readmission in the USC effective the second
semester of the academic year 1988-89 and that such decision is final. 2

On November 21, 1988, they filed an appeal and/or petition for review with the Office of
the Department of Education, Culture and Sports (DECS), Region VII, Cebu City,
pursuant to Bureau of Private Schools Memorandum No. 4, Series of 1970. 3 On the
same day, the Regional Director wrote them that said Office (DECS) had no authority
over the case and suggested instead that they file a request for reconsideration with the
USC President. 4

In the meanwhile said students were prevented from entering any of the campuses of
the University by armed security guards due to the said decision.

Believing that the filing of a Motion for reconsideration with the USC President would
serve no useful purpose as he had already pre-judged the case, Licup, Tabasa and Cairo
filed this petition for certiorari with injunction alleging that irreparable injury have been
inflicted on them as students; that what they held was a peaceful demonstration; that
while standing at the Talamban campus petitioners and some student leaders were
dragged by janitors and security guards causing injuries to petitioners; that their posters
were removed; that they were not suffering from academic deficiencies; that the
investigation conducted for alleged violation of the disciplinary regulations was done
without fairness or fair play and thereby violated the ideals of due process; that the
penalty that was imposed on them was harsh and brutal and not commensurate with the
offense allegedly committed; that the USC had violated their property rights without due
process of law. They also disputed the statement of Fr. Rocha that the decision was
unanimous when the coordinator of the student disciplinary committee Mr. Orlando
Tabasa and the student representative coming from the Supreme Student Government
were not allowed to participate in the deliberation as members of the Disciplinary Board;
that petitioners exhausted all administrative remedies and attempted to register and
enroll with the USC for the second semester but they were barred on the ground that
their expulsion was final; and that the penalty of non-readmission is tantamount to
expulsion because at said point and time, no other school or university would enroll the
petitioners. While the petitioners admit that they were barricading and blockading the
school premises during their protest action they state that there was no actual violence
that occurred. Finally, petitioners invoke their right to continue their course and to due
process.

In their comment on the petition, the respondents admitted having increased the tuition
fees by 9% but asserted that the text and guidelines on the tuition fee increases allowed
schools to increase the same up to 15% without consultation with students and parents.
Such increase was necessary, otherwise the USC could not have increased the salaries of
its employees. Respondents aver that the student demonstrations were far from peaceful
but was an illegal strike where the students utilized barricades and blockades to prevent
a great majority of the non-striking students from attending their classes; that physical
force, threat, intimidation, and destruction were employed to disrupt the classes and
prevent the non-striking students from entering the campuses; that far from denying the
rights of the students to freedom of speech and assembly, they were allowed the use of
the stadium and audio visual rooms for their meetings but they preferred to mass at the
entrances and exits of the USC to prevent non-striking students from attending their
classes; that speeches were not allowed in classrooms as it would disturb ongoing
classes and would be violative of the academic freedom likewise enjoyed by other
students; that the placing of posters indiscriminately on university walls was prohibited
as the same should have the stamp of approval of the Student Affairs Office; they deny
that the University security guards employed physical force on student demonstrators;
and they allege that some students may have been injured when they threw themselves
on the ground to prevent the school bus from entering the University campus.
Respondents also aver that the administrative charges against the students were
initiated to determine the truth and to afford the petitioners the opportunity to give their
side; that a full-dress trial was conducted where petitioners were represented by
counsel; that the members of the Formal Inquiry Committee were chosen for their
unquestionable competence and impartiality; that the University handbook was given to
the students upon enrollment and they were made to understand that they are subject
to the rules and regulations therein provided; and that, finally, the investigation was
conducted in a fair and impartial manner.

As to the Disciplinary Board they pointed out that there is a student representative in the
person of the President of the Graduate School Organization; that the Supreme Student
Government refused to send their representative to the board as they allegedly did not
want to participate "in a farce"; and that Mr. Orlando Tabasa, Coordinator of the Student
Discipline, was not invited to sit in the Board as petitioner Tabasa who was one of the
respondents is his son.

Respondents aver that the penalty of non-readmission in the second semester of the
school year 1988-89 was justified and in accordance with the rules and regulations of
the University handbook; that they were most lenient in determining the penalty that
should be imposed under the circumstances; that the act of petitioners of barricading
and blocking the university entrances and exits should have merited the outright
expulsion of petitioners but the Board decided on a less severe penalty. Respondents
deny that the substantial and constitutional rights of the petitioners have been violated.
Besides, respondents point out that petitioners Cairo and Licup had academic
deficiencies for the school year 1988-89 as follows:

CAIRO, JOEL MARC B.

1ST SEM 1988-89 FINAL GRADE

ELECTRONICS SERVICING 11

LABORATORY 1C

MACHINE FOUNDATION 1C

REWINDING & REPAIR WIRE &

WIRELESS COMMUNICATION

SYSTEM 5.0

INDUSTRIAL ELECTRONICS 1C

THERMO DYNAMICS II DR

HYDRAULIC MACHINERIES IE

ELECTRONICS SERVICING II IC
 EE LABORATORY II IC

REWINDING & REPAIR LABORATORY

CIRCUITS LABORATORY

INDUSTRIAL ELECTRONICS

LABORATORY DR

LICUP, EMMANUEL S.

1ST SEMESTER 1988-89 FINAL GRADE

PHILIPPINE LITERATURE DR

COMPUTER SCIENCE DR

RIZAL COURSE DR

HISTORY OF MODERN PHILOSOPHY IE

INTRODUCTION TO PHILOSOPHY DR" 5

They state that said academic deficiencies are sufficient in themselves to justify the non-
readmission of petitioners.

After careful evaluation of the petition, the Court finds the same to be devoid of any
merit. There can be no question that petitioners were among the leaders of the student
demonstrations arising from the increase of tuition fee of the USC aforestated. In the
course thereof, they blockaded and barricaded the entrances and exits of the University
and prevented the students from attending their classes. The demonstrations were far
from peaceful. It was, therefore, within the right of the USC to initiate the appropriate
administrative investigation of the petitioners for violation of the rules and regulations of
USC.

The investigation was conducted by a committee wherein petitioners were present and
duly represented by counsel and wherein they were able to adduce their evidence. After
the investigation, the committee submitted to the Disciplinary Board its report
recommending the non-readmission of the petitioners in the University. This
recommendation was unanimously indorsed by the Disciplinary Board and was
implemented by the University authorities.

The Court finds no cogent basis for the protestations of petitioners that they were
deprived due process of law and that the investigation conducted was far from impartial
and fair. On the contrary, what appears in the record is that the charges against
petitioners were adequately established in an appropriate investigation. The imputation
of bias and partiality is not supported by the record. The sanction that was imposed on
the petitioners for their infraction appear to be the most lenient under the University
handbook. Instead of expulsion the penalty imposed was non-readmission.

While it is true that the students are entitled to the right to pursue their education, the
USC as an educational institution is also entitled to pursue its academic freedom and in
the process has the concommitant right to see to it that this freedom is not jeopardized.
True, an institution of learning has a contractual obligation to afford its students a fair
opportunity to complete the course they seek to pursue. However, when a student
commits a serious breach of discipline or fails to maintain the required academic
standard, he forfeits his contractual right; and the court should not review the discretion
of university authorities. 6

WHEREFORE, the petition is DISMISSED for lack of merit. No costs.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

Footnotes

1 Annex C to Petition.

2 Annexes F, G, and H to Petition.

3 Annex I to Petition.

4 Annex J to Petition.

5 Page 7, Comment of respondents.

6 Magtibay vs. Garcia, 120 SCRA 370 (1983); See also Ateneo de Manila
University vs. Court of Appeals, 145 SCRA 100 (1986).
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 79237 October 18, 1988

UNIVERSITY OF SAN CARLOS and VICTORIA A. SATORRE petitioners,

vs.
COURT OF APPEALS and JENNIFER C. LEE, respondents.

J.P. Garcia & Associates for petitioners.

Florido & Associates for private respondent.

GANCAYCO, J.:

The principal issue raised in this petition is whether or not mandamus is the proper
remedy to compel a university to confer a degree with honors. The secondary question is
whether or not the refusal of that university to confer honors would constitute bad faith
so as to make it liable for damages.

Private respondent Jennifer C. Lee filed an action for mandamus with damages against
petitioners University of San Carlos and Victoria A. Satorre, docketed as Civil Case No.
R22022 in the Regional Trial Court, Branch XVIII, Cebu, asking that petitioners be
compelled to confer upon her the degree of Bachelor of Science in Commerce, major in
Accounting, cum laude, retroactive to March 28, 1982, to execute and deliver to her all
necessary credentials evidencing her graduation with honors, and to pay her moral
damages in the amount of P300,000.00, exemplary damages in the amount of
P50,000.00, and attorney's fees in the amount of P20,000.00.

After trial, the lower court rendered its Decision dated January 29, 1986, 1
the
dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff, and

accordingly, defendants University of San Carlos and Dean Victoria A.
Satorre are ordered to confer upon plaintiff, Jennifer C. Lee, the degree of
Bachelor of Science in Commerce, major in accounting, with cum
laude honors (sic), retroactive to March 28, 1982, and to execute and
deliver to plaintiff all the necessary school credentials evidencing her
graduation with such honors; and said defendants are ordered to pay
plaintiff jointly and severally the sum of P75,000 as moral damages, the
sum of P20,000 as exemplary damages, with interest thereon at 12% per
annum beginning July 22, 1982, until said amounts are fully paid: and the
sum of P15,000 as attorney's fees. The counterclaim is ordered dismissed.
Costs against defendants. 2

Petitioners appealed to the respondent Court of Appeals where the case was docketed as
CA-G.R. No. SP-09368. In a decision dated May 28, 1987, the appellate court affirmed in
toto the decision of the trial court. 3
The motion for reconsideration filed by petitioners was denied in a Resolution of the
appellate court dated July 7, 1987.4

Hence, this petition where petitioners allege as grounds thereof-

(a) A university may not be compelled by mandamus to grant graduation

honors to any student who, according to the university's standards, rules
and regulations, does not qualify for such honors; and

(b) The decision penalizing petitioners to pay excessive moral and

exemplary damages and attorney's fees is not justified by the facts and
circumstances of this case and disregards the many decisions of this
Honorable Court setting reasonable standards and limits in the award of
such damages. (P. 2, petition; p. 12, rollo)

Private respondent enrolled in the College of Architecture, University of San Carlos

(USC), during the first semester of school year 1978-79. At the end of the second
semester of that school year, she obtained a grade of "I.C." (Incomplete) in Architecture
121, and grades of "5's" (failures) in Architecture 122 and Architecture 123.

The following school year, 1979-1980, she shifted to the College of Commerce of the
USC. Some of the units she had completed when she was still an architecture student
were then carried over and credited in her new course. As a commerce student, she
obtained good grades. However, she was aware of her earlier failing grades in the
College of Architecture and that the same would be taken into consideration in the
evaluation of her overall academic performance to determine if she could graduate with
honors.

So, on December 10, 1981, she wrote 5 the Council of Deans of the USC, requesting that
her grades of 5s in Architecture 121 and Architecture 122 be disregarded in the
computation of her grade average. She wrote a similar letter to the Ministry of
Education, Culture and Sports MECS in Region VII on January 5, 1982 6 and this letter
was referred to the President of the USC for comment and return to the MECS.

In the 3rd Indorsement dated February 4, 1982, the President of the USC informed the
MECS that the university policy was that any failing grade obtained by a student in any
course would disqualify the student for honors; that to deviate from that policy would
mean injustice to students similarly situated before who were not allowed to graduate
with honors; that the bad grades given to her were justified and could not be deleted or
removed because her subjects were not "dropped" as required; that she had two failures
and one incomplete grade which became a failure upon her inaction to attend to the
incomplete grade within one year; and that while her three failures did not affect her
graduation from the College of Commerce, they nonetheless caused her disqualification
from graduating with honors. She was furnished a copy of said indorsement but she did
not ask for a reconsideration.

On March 17, 1982, when the USC President was out of town, private respondent wrote
to the USC Registrar' requesting that her failing grades be changed. The USC
Registrar 7 referred her letter to the MECS and the request for change of grades was
approved in a 4th indorsement of March 22, 1982. 8 Thus, her grade of IC in Architecture
121 was changed to "1.9" by Professor Victor Leves Jr. and the grades of "5" in
Architecture 122 and Architecture 123 were changed to "W" (Withdrawn).

On March 24, 1982, Mr. Marcelo Bacalso of MECS' Higher Education Division discovered
that the change of the grade of private respondent from "IC" to "1.9" did not have the
supporting class record required, so he wrote to MECS Supervisor Mr. Ortiz requesting
the submission of the class record. 9

On March 28, 1982, the USC held its graduation exercises, and the private respondent
graduated with the degree of Bachelor of Science in Commerce, major in Accounting,
without honors.

On March 31, 1982, the private respondent, assisted by counsel, demanded from Dean
Victoria A. Satorre that she be allowed to graduate, cum laude. 10 Dean Satorre
explained that the matter was held in abeyance pending compliance with certain
requirements of the MECS through the memo of Mr. Bacalso. 11

On May 24, 1982, Arch. Leves Jr., the teacher required to produce the class records,
reported he could not produce the same. 12 Thus, on May 27, 1982, Dean Satorre wrote
to the MECS Regional Director Aurelio Tiro asking for the revocation of the change of
grades of private respondent. 13 The request was denied as there was no positive proof
of fraud. 14

It is an accepted principle that schools of teaming are given ample discretion to

formulate rules and guidelines in the granting of honors for purposes of graduation. This
is part of academic freedom. Within the parameters of these rules, it is within the
competence of universities and colleges to determine who are entitled to the grant of
honors among the graduating students. Its discretion on this academic matter may not
be disturbed much less controlled by the courts unless there is grave abuse of discretion
in its exercise.

In this case, the petitioner's bulletin of information provides all students and all other
interested parties advise on the University policies and rules on enrollment and academic
achievements. Therein it is provided, among others, that a student may not officially
withdraw from subjects in the curriculum if he does not have the written permission of
his parents or guardian. 15 For an incomplete grade, there must be an application for
completion or removal within the period announced by the school calendar and when not
removed within one (1) year, it automatically becomes final. 16 A "DR" (Dropped) subject
which is in the same category, as a "5" disqualifies a student from receiving honors. 17 A
candidate for honors should have earned no less than 18 units per semester but a
working student should earn no less that 12 units. A failure in any subject disqualifies a
student from honors. 18 Good moral character and exemplary conduct are as important
criteria for honors as academic achievements. 19

Private respondent should know and is presumed to know those University policies and is
bound to comply therewith.

It is precisely because she knew of these rules that she exerted all efforts to have her
final grades of "5's" in Architecture 122 and Architecture 123 be disregarded in the
computation of honors. When her request was denied by the university, she did not ask
for a reconsideration thereof. Instead, in the middle part of March 1982 when the USC
President was out of town, she wrote another letter to the USC registrar asking her
failing grades be changed as above related. The matter was referred to the MECS and
the request was approved on March 22,1982.

However, when it was discovered thereafter that the change of private respondent's
grades from "IC" TO "1.9" was not supported by the corresponding class records and its
production was required the same could not be produced. There is thus no justification
for said change of grade. Moreover, the request for the change of the grade of
incomplete was not made by private respondent within one (1) year so that it became
final according to the rules.
By the same token, the change of the grades of private respondent from "5" to "W"
(Withdrawn) in Architecture 122 and Architecture 123 was without the written
permission of her parents or guardian. Indeed, it is unusual that a student who got a "5"
in a subject, as in this case, should still be allowed to withdraw from such subject.
Withdrawal from subjects is not ordinarily allowed after mid-term examination 20 much
less after a failing grade in the subject has been received.

The change of grades of private respondent is thus open to question. Obviously, private
respondent employed undue and improper pressure on the MECS authorities to approve
the change of her grades to remove all obstacle to her graduation with honors.
Petitioners' claim that the change of grades of the private respondent was attended with
fraud is not entirely misplaced. Petitioners cannot be faulted for refusing to vest the
honors demanded of them by the private respondent. One failure would have been
sufficient to disqualify her but she had one incomplete and two failures. Her only change
was to reverse her failing grades. This she accomplished thru the back door.

Nevertheless, even if she succeeded in removing her failing grades, it was still within the
sound discretion of the petitioners to determine whether private respondent was entitled
to graduate with honors. The Court finds that petitioners did not commit a grave abuse
of discretion in denying the honors sought by private respondent under the
circumstances. Indeed, the aforesaid change of grades did not automatically entitle her
to the award of honors.

Private respondent not having demonstrated that she has a clear legal right to the
honors sought, her claim for damages must necessarily fail.

WHEREFORE, the petition is GRANTED and the subject decision of the respondent court
of May 28, 1987 and its resolution of July 7, 1987, are hereby REVERSED and SET ASIDE
and another judgment is hereby rendered DISMISSING the complaint without
pronouncement as to costs.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.

Footnotes

1 Judge Mario M. Dizon was the presiding judge.

2 Page 47, Rollo.

3 Associate Justices Minerva P. Gonzaga-Reyes, Luis A. Javellana and

Pedro A. Ramirez composed the Third Division of the Court of Appeals to
which the case had been assigned.

4 Page 62, Rollo.

5 Exhibit "7."

6 Exhibit "8."

7 Exhibit 14.
8 Exhibit 13.

9 Exhibit 2.

10 Exhibit 16.

11 Exhibit 17.

12 Exhibit 4-b.

13 Exhibit 4.

14 Exhibit 18.

15 See No. 15. Bulletin of Information "Enrollment and Termination of

Enrollment." pp. 38-39, Rollo": pp. 2-4, Decision of the trial court.

16 See No. 29, supra, p. 39, Rollo; p. 4, Decision.

17 SeeNo. 30, supra, p. 40, Rollo; p. 5, Decision.

18 See No. 32(c) and (d). supra, p. 41, Rollo.

19 See No. 34, supra, p. 41, Rollo; p. 6, Decision.

20 See No. 15, supra.

 FIRST DIVISION

[G.R. NO. 170021 : September 8, 2006]

OFFICE OF THE PRESIDENT, Petitioner, v. NITA P. BUENAOBRA, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This Petition for Review under Rule 45 of the Rules of Court assails the Decision 1 of the
Court of Appeals dated May 27, 2005 in CA-G.R. SP No. 78279, which reversed and set
aside petitioner's Resolutions dated April 11, 20032 and June 26, 20033 dismissing
respondent Nita P. Buenaobra from the service. Also assailed is the Resolution 4 dated
October 3, 2005, denying petitioner's motion for reconsideration.

The following facts are undisputed:

The Office of the Ombudsman's Special Prosecution Officer filed an information against
respondent Nita P. Buenaobra, Chairman of the Komisyon sa Wikang Pilipino (KWP), with
the Sandiganbayan for violation of Section 3(e) of Republic Act (R.A.) No. 3019 for
allegedly causing undue injury to the government through gross inexcusable negligence
in connection with the unauthorized reprinting of the Diksyunaryo ng Wikang Pilipino.
The case was docketed as Criminal Case No. 26918 ("the Sandiganbayan case"). 5

Upon respondent's motion, the Sandiganbayan ordered a reinvestigation. Thereafter,

then Ombudsman Simeon Marcelo approved the recommendation for the reversal of the
probable cause finding and the withdrawal of the information filed against respondent.
Thus, a motion to withdraw the information6 was filed which the Sandiganbayan granted
in its Resolution dated April 30, 2003.7

While reinvestigation of the Sandiganbayan case was on-going, the Presidential Anti-
Graft Commission (PAGC) conducted a parallel administrative investigation ("the PAGC
case") against respondent charging her with the same acts and omissions subject of the
Sandiganbayan case. Respondent was charged with causing undue injury to the
government and giving unwarranted benefits to Merylvin Publishing House, Inc., through
gross inexcusable negligence in not taking legal action to collect the 15% royalty fee of
P3,366,250.00 approved by the KWF Board to be levied against the publisher for its
unauthorized reprinting and selling of the dictionary.8

Instead of filing her counter-affidavit/verified answer, respondent moved to dismiss the

administrative case on grounds of litis pendentia and forum shopping in view of the
pending Sandiganbayan case. The PAGC denied respondent's motion to dismiss and
recommended respondent's dismissal from the service, forfeiture of financial benefits,
and disqualification from joining the government.

On April 11, 2003, petitioner adopted PAGC's recommendation and dismissed respondent
from office.9 It held as inapplicable the doctrines of litis pendentia and forum shopping
because the Sandiganbayan case was criminal, while the PAGC case was administrative,
in nature. It also ruled that respondent was deemed to have admitted the material
averments of PAGC's complaint when she did not specifically deny them, despite an
opportunity to do so.

Respondent moved for reconsideration10 but was denied. Hence, she filed a Petition for
Review with the Court of Appeals, docketed as CA-G.R. SP No. 78279.11

The Court of Appeals granted respondent's petition in its assailed Decision dated May 27,
2005 holding that the proceedings before the PAGC were procedurally and substantially
flawed because after denying respondent's motion to dismiss, the PAGC did not give
respondent the opportunity to present evidence. Instead, it proceeded to rule on the
merits of the case. The Court of Appeals also found no evidence to prove respondent's
administrative liability in not collecting the 15% royalty fee. The dispositive portion of
the Decision reads:

WHEREFORE, premises considered, the petition is GRANTED. The assailed Resolutions

dated April [11], 2003 and June 26, 2003 are SET ASIDE. The charge/complaint against
petitioner Nita P. Buenaobra is hereby ordered DISMISSED for complete lack of evidence
against the petitioner.

SO ORDERED.12

Petitioner's motion for reconsideration was denied, hence, the instant petition.

Petitioner argues that respondent was a presidential appointee and a holder of a non-
career service position, hence, she could be removed from the service at the pleasure of
the President.

The petition lacks merit.

Republic Act (R.A.) No. 710413 creating the Commission on the Filipino Language
provides for 11 commissioners to be headed by a chairman and all appointed by the
President.14 The chairman and two commissioners shall serve full-time for a term of
seven years.

Under Section 4, Article IV, of Presidential Decree (P.D.) No. 807, or the Civil Service
Decree, positions in the civil service are classified into career service and non-career
service. Section 6 of same article describes a non-career service employee or officer as
follows:

Sec. 6. The Non-Career Service shall be characterized by (1) entrance on bases other
than those of the usual tests of merit and fitness utilized for the career service; and
(2) tenure which is limited to a period specified by law, or which is coterminous
with that of the appointing authority or subject to his pleasure, or which is limited to the
duration of a particular project for which purpose employment was made.

The Non-Career Service shall include:

xxx

3. Chairman and members of commissions and boards with fixed terms of office
and their personal or confidential staff; (Emphasis added)

xxx
Based on the foregoing, respondent who is the Chairman of the KWP is a non-career
service personnel whose tenure is limited to seven years as provided under R.A. No.
7104. Since her tenure is fixed by law, her removal from office is not at the pleasure of
the appointing authority.

We have consistently ruled that non-career service personnel enjoy security of tenure.
They may not be removed without just cause and non-observance of due process. Thus,
in Jocom v. Regalado,15 we held:

Regardless of the classification of the position held by a government employee covered

by civil service rules, be it a career or non-career position, such employee may not be
removed without just cause. An employee who belongs to the non-career service
is protected from removal or suspension without just cause and non-
observance of due process.

xxx

The constitutional and statutory guarantee of security of tenure is extended to both

those in the career and non-career service positions, and the cause under which an
employee may be removed or suspended must naturally have some relation to the
character or fitness of the officer or employee, for the discharge of the functions of his
office, or expiration of the project for which the employment was extended. (Emphasis
supplied)cralawlibrary

Moreover, there is no showing that respondent's failure to file suit to collect the royalty
fee prejudiced the government. In its assailed Resolution dated June 26, 2003, petitioner
held that there was a PAGC "categorical finding"16 of violation of Sec. 3(e) of R.A. No.
3019. However, it was a bare conclusion by the PAGC in violation of Sec. 5, Rule VII,
Part III of the PAGC New Rules of Procedure, 17 that in every case, the "Commission shall
use any and all reasonable means to ascertain the facts in each case or complaint
speedily and objectively and without regard to technicalities of law or procedure, in all
instances observing due process."

More important, Sec. 2, Rule VIII, Part IV of the PAGC rules requires that its report and
recommendation to the President "shall state, among others, the factual findings and
legal conclusions, as well as the penalty recommended to be imposed or such other
action that may be taken." PAGC concluded that respondent violated R.A. No. 3019,
without any factual findings at all.

We agree with the findings of the Court of Appeals that respondent did not give any
unwarranted benefits to Merylvin, to wit:

The act of "not taking legal action to collect" is not defined by any criminal statute as an
offense by omission per se. If it were so, a sizeable number of public officials would be
out of the government service by mere omission to take such action. But could the same
act be the basis for administrative action against an erring public official? Logically since
such an omission is not a criminal offense per se, it could be the basis of an
administrative action only if there is a positive duty to take legal action clearly imposed
upon the petitioner.

In the instant case, insofar as the criminal aspect of the case is concerned, the office of
the Ombudsman already ruled that the accused x x x "cannot be faulted if she instituted
no action to collect royalty fee from the publishing house. In fact, if she instituted such
action, the same would be unauthorized and without legal basis as there was no contract
between the KWF and the publisher." It is for this reason that the Motion to Withdraw
Information in Criminal Case No. 26918 entitled People v. Nita P. Buenaobra was granted
by the Fifth Division of the Sandiganbayan.

This lack of positive duty to take legal action on the part of the petitioner is bolstered by
the fact that KWF Board Resolution No. 2002-2 specifically disauthorized her to enter
into a contract with Merylvin Publishing House, thus, Buenaobra's inaction to collect the
15% royalty fee from said publisher was only in accord with the KWF Board of
Commissioners' decision. KWF is a collegial body and as such it acts only in accordance
with the Board's directives. In fact, much earlier, the offer to pay fifteen percent (15%)
royalty fee was referred by the KWF Board to the State Auditor for his comment and
recommendations under Resolution No. 2000-1 passed and approved on February 2,
2000.

Petitioner Buenaobra was dismissed from the service as a result of an illogical conclusion
of an unreasonable mind. Buenaobra was charged for her omission to collect from
Merylvin Publishing House but the KWF Board of Commissioners, of which the private
complainant is a member, disauthorized Buenaobra from entering into a contract with
Merylvin Publishing House (which offered the 15% royalty fee), which would have been
the basis for collection. Clearly then, as pointed out by the Office of the Ombudsman,
without such contract, there was no basis for collection. If We have to pinpoint
responsibility for non-collection, it is not because of the inaction of Buenaobra but
because of the KWF Board Resolution No. 2000-2 disauthorizing Buenaobra from
entering into a contract with Merylvin Publishing House. The sad thing is that one of the
signatories of said resolution is the private complainant KWF Commissioner Fe Aldave-
Yap, who is herself the cause of the non-collection. The filing of this complaint resulting
in the resolution of the administrative body dismissing petitioner Buenaobra from
government service is a sad commentary of the mentality of public functionaries who file
cases and those who cursorily give them due course even though the factual bases
clearly show a comedy of errors. It escapes logic and clear thinking why this complaint
against petitioner was filed and entertained in the first place. x x x.

xxx

Buenaobra did not give any unwarranted benefits, advantage or preference to the
publisher nor had she acted with manifest partiality, evident bad faith or gross
inexcusable negligence. Such being the case, it necessarily follows that the
charge/complaint against petitioner must be dismissed. 18 (Italics and emphasis in the
original)

WHEREFORE, based on the foregoing, the petition is DENIED. The Decision of the
Court of Appeals dated May 27, 2005 in CA-G.R. SP No. 78279, which reversed and set
aside the Resolutions dated April 11, 2003 and June 26, 2003 of the Office of the
President dismissing respondent Nita P. Buenaobra from the service, and its Resolution
dated October 3, 2005 denying petitioner's Motion for Reconsideration, are AFFIRMED.

SO ORDERED.

Panganiban, C.J., Chairperson, Austria-Martinez, Callejo, Sr., Chico-Nazario, JJ.,

concur.

Endnotes:
1
Rollo, pp. 39-74. Penned by Associate Justice Regalado E. Maambong and concurred in
by Associate Justices Martin S. Villarama, Jr. and Lucenito N. Tagle.

2
Id. at 83-86.

3
Id. at 87-90.

4
Id. at 111-112.

5
CA rollo, p. 650.

6
Id. at 220-221.

7
Id. at 61-66. Penned by then Presiding Justice Minita V. Chico-Nazario (now a Member
of the Supreme Court) and concurred in by Associate Justices Ma. Cristina G. Cortez-
Estrada and Diosdado M. Peralta.

8
Id. at 288.

9
Id. at 21-24.

10
Id. at 25-41.

11
Id. at 7-20.

12
Rollo, p. 73.

13
Commission on the Filipino Language Act.

14
Secs. 5 and 6, id.

15
G.R. No. 77373, August 22, 1991, 201 SCRA 73, 81-82.

16
CA rollo, p. 338.

17
Adopted under PAGC Resolution No. 05, S. 2002, approved on March 14, 2002, and
filed with the National Administrative Register on same date.

18
Rollo, pp. 143-147.