general principles cases

7/28/2019 General Principles Cases

1/37

ADMINISTRATIVE LAW GENERAL PRINCIPLES PUP-COLLEGE OF LAW

1

ANTONIO A. MECANOvs. COMMISSION ON AUDIT, G.R. No. 103982 December 11, 1992

Antonio A. Mecano, through a petition for certiorari, seeks to nullify the decision of the Commission on Audit (COA, for brevity)embodied in its 7th Indorsement, dated January 16, 1992, denying his claim for reimbursement under Section 699 of the RevisedAdministrative Code (RAC), as amended, in the total amount of P40,831.00.

Petitioner is a Director II of the National Bureau of Investigation (NBI). He was hospitalized for cholecystitis from March 26,1990 to April 7, 1990, on account of which he incurred medical and hospitalization expenses, the total amount of which he isclaiming from the COA.

On May 11, 1990, in a memorandum to the NBI Director, Alfredo S. Lim (Director Lim, for brevity), he requested reimbursementfor his expenses on the ground that he is entitled to the benefits under Section 699 1of the RAC, the pertinent provisions ofwhich read:

Sec. 699.Allowances in case of injury, death, or sickness incurred in performance of duty. When a personin the service of the national government of a province, city, municipality or municipal district is so injured inthe performance of duty as thereby to receive some actual physical hurt or wound, the proper Head ofDepartment may direct that absence during any period of disability thereby occasioned shall be on full pay,though not more than six months, and in such case he may in his discretion also authorize the payment of themedical attendance, necessary transportation, subsistence and hospital fees of the injured person. Absence inthe case contemplated shall be charged first against vacation leave, if any there be.

xxx xxx xxx

In case of sickness caused by or connected directly with the performance of some act in the line of duty, theDepartment head may in his discretion authorize the payment of the necessary hospital fees.

Director Lim then forwarded petitioner's claim, in a 1st Indorsement dated June 22, 1990, to the Secretary of Justice, along withthe comment, bearing the same date, of Gerarda Galang, Chief, LED of the NBI, "recommending favorable action thereof".Finding petitioner's illness to be service-connected, the Committee on Physical Examination of the Department of Justicefavorably recommended the payment of petitioner's claim.

However, then Undersecretary of Justice Silvestre H. Bello III, in a 4th Indorsement dated November 21, 1990, returnedpetitioner's claim to Director Lim, having considered the statements of the Chairman of the COA in its 5th Indorsement dated 19September 1990, to the effect that the RAC being relied upon was repealed by the Administrative Code of 1987.

Petitioner then re-submitted his claim to Director Lim, with a copy of Opinion No. 73, S. 1991 2dated April 26, 1991 of thenSecretary of Justice Franklin M. Drilon (Secretary Drilon, for brevity) stating that "the issuance of the Administrative Code didnot operate to repeal or abregate in its entirety the Revised Administrative Code, including the particular Section 699 of thelatter".

On May 10, 1991, Director Lim, under a 5th Indorsement transmitted anew Mecano's claim to then Undersecretary Bello forfavorable consideration. Under a 6th Indorsement, dated July 2, 1991, Secretary Drilon forwarded petitioner's claim to the COAChairman, recommending payment of the same. COA Chairman Eufemio C. Domingo, in his 7th Indorsement of January 16,1992, however, denied petitioner's claim on the ground that Section 699 of the RAC had been repealed by the AdministrativeCode of 1987, solely for the reason that the same section was not restated nor re-enacted in the Administrative Code of 1987. Hecommented, however, that the claim may be filed with the Employees' Compensation Commission, considering that the illness ofDirector Mecano occurred after the effectivity of the Administrative Code of 1987.

Eventually, petitioner's claim was returned by Undersecretary of Justice Eduardo Montenegro to Director Lim under a 9th

Indorsement dated February 7, 1992, with the advice that petitioner "elevate the matter to the Supreme Court if he so desires".

On the sole issue of whether or not the Administrative Code of 1987 repealed or abrogated Section 699 of the RAC, this petitionwas brought for the consideration of this Court.

Petitioner anchors his claim on Section 699 of the RAC, as amended, and on the aforementioned Opinion No. 73, S. 1991 ofSecretary Drilon. He further maintains that in the event that a claim is filed with the Employees' Compensation Commission, assuggested by respondent, he would still not be barred from filing a claim under the subject section. Thus, the resolution ofwhether or not there was a repeal of the Revised Administrative Code of 1917 would decide the fate of petitioner's claim forreimbursement.


2/37


2

The COA, on the other hand, strongly maintains that the enactment of the Administrative Code of 1987 (Exec. Order No. 292)operated to revoke or supplant in its entirety the Revised Administrative Code of 1917. The COA claims that from the "whereas"clauses of the new Administrative Code, it can be gleaned that it was the intent of the legislature to repeal the old Code.Moreover, the COA questions the applicability of the aforesaid opinion of the Secretary of Justice in deciding the matter. Lastly,the COA contends that employment-related sickness, injury or death is adequately covered by the Employees' CompensationProgram under P.D. 626, such that to allow simultaneous recovery of benefits under both laws on account of the samecontingency would be unfair and unjust to the Government.

The question of whether a particular law has been repealed or not by a subsequent law is a matter of legislative intent. The

lawmakers may expressly repeal a law by incorporating therein a repealing provision which expressly and specifically cites theparticular law or laws, and portions thereof, that are intended to be repealed. 3A declaration in a statute, usually in its repealingclause, that a particular and specific law, identified by its number or title, is repealed is an express repeal; all others are impliedrepeals. 4

In the case of the two Administrative Codes in question, the ascertainment of whether or not it was the intent of the legislature tosupplant the old Code with the new Code partly depends on the scrutiny of the repealing clause of the new Code. This provisionis found in Section 27, Book VII (Final Provisions) of the Administrative Code of 1987 which reads:

Sec. 27.Repealing Clause. All laws, decrees, orders, rules and regulations, or portions thereof, inconsistentwith this Code are hereby repealed or modified accordingly.

The question that should be asked is: What is the nature of this repealing clause? It is certainly not an express repealing clausebecause it fails to identify or designate the act or acts that are intended to be repealed. 5Rather, it is an example of a general

repealing provision, as stated in Opinion No. 73, S. 1991. It is a clause which predicates the intended repeal under the conditionthat substantial conflict must be found in existing and prior acts. The failure to add a specific repealing clause indicates that theintent was not to repeal any existing law, unless an irreconcilable inconcistency and repugnancy exist in the terms of the new andold laws. 6This latter situation falls under the category of an implied repeal.

Repeal by implication proceeds on the premise that where a statute of later date clearly reveals an intention on the part of thelegislature to abrogate a prior act on the subject, that intention must be given effect. 7Hence, before there can be a repeal, theremust be a clear showing on the part of the lawmaker that the intent in enacting the new law was to abrogate the old one. Theintention to repeal must be clear and manifest; 8otherwise, at least, as a general rule, the later act is to be construed as acontinuation of, and not a substitute for, the first act and will continue so far as the two acts are the same from the time of thefirst enactment. 9

There are two categories of repeal by implication. The first is where provisions in the two acts on the same subject matter are inan irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one. The second is if

the later act covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate to repeal the earlierlaw. 10

Implied repeal by irreconcilable inconsistency takes place when the two statutes cover the same subject matter; they are soclearly inconsistent and incompatible with each other that they cannot be reconciled or harmonized; and both cannot be giveneffect, that is, that one law cannot be enforced without nullifying the other. 11

Comparing the two Codes, it is apparent that the new Code does not cover nor attempt to cover the entire subject matter of theold Code. There are several matters treated in the old Code which are not found in the new Code, such as the provisions onnotaries public, the leave law, the public bonding law, military reservations, claims for sickness benefits under Section 699, andstill others.

Moreover, the COA failed to demonstrate that the provisions of the two Codes on the matter of the subject claim are in anirreconcilable conflict. In fact, there can be no such conflict because the provision on sickness benefits of the nature being

claimed by petitioner has not been restated in the Administrative Code of 1987. However, the COA would have Us consider thatthe fact that Section 699 was not restated in the Administrative Code of 1987 meant that the same section had been repealed. Itfurther maintained that to allow the particular provisions not restated in the new Code to continue in force argues against theCode itself. The COA anchored this argument on the whereas clause of the 1987 Code, which states:

WHEREAS, the effectiveness of the Government will be enhanced by a new Administrative Code whichincorporate in a unified documentthe major structural, functional and procedural principles and rules ofgovernance; and

xxx xxx xxx


3/37


3

It argues, in effect, that what is contemplated is only one Code the Administrative Code of 1987. This contention is untenable.

The fact that a later enactment may relate to the same subject matter as that of an earlier statute is not of itself sufficient to causean implied repeal of the prior act, since the new statute may merely be cumulative or a continuation of the old one. 12What isnecessary is a manifest indication of legislative purpose to repeal. 13

We come now to the second category of repeal the enactment of a statute revising or codifying the former laws on the wholesubject matter. This is only possible if the revised statute or code was intended to cover the whole subject to be a complete andperfect system in itself. It is the rule that a subsequent statute is deemed to repeal a prior law if the former revises the whole

subject matter of the former statute. 14 When both intent and scope clearly evidence the idea of a repeal, then all parts andprovisions of the prior act that are omitted from the revised act are deemed repealed. 15 Furthermore, before there can be animplied repeal under this category, it must be the clear intent of the legislature that the later act be the substitute to the prioract. 16

According to Opinion No. 73, S. 1991 of the Secretary of Justice, what appears clear is the intent to cover only those aspects ofgovernment that pertain to administration, organization and procedure, understandably because of the many changes thattranspired in the government structure since the enactment of the RAC decades of years ago. The COA challenges the weight thatthis opinion carries in the determination of this controversy inasmuch as the body which had been entrusted with theimplementation of this particular provision has already rendered its decision. The COA relied on the rule in administrative lawenunciated in the case ofSison vs.Pangramuyen 17 that in the absence of palpable error or grave abuse of discretion, the Courtwould be loathe to substitute its own judgment for that of the administrative agency entrusted with the enforcement andimplementation of the law. This will not hold water. This principle is subject to limitations. Administrative decisions may bereviewed by the courts upon a showing that the decision is vitiated by fraud, imposition or mistake. 18 It has been held that

Opinions of the Secretary and Undersecretary of Justice are material in the construction of statutes in pari materia.19

Lastly, it is a well-settled rule of statutory construction that repeals of statutes by implication are not favored. 20The presumptionis against inconsistency and repugnancy for the legislature is presumed to know the existing laws on the subject and not to haveenacted inconsistent or conflicting statutes. 21

This Court, in a case, explains the principle in detail as follows: "Repeals by implication are not favored, and will not be decreedunless it is manifest that the legislature so intended. As laws are presumed to be passed with deliberation with full knowledge ofall existing ones on the subject, it is but reasonable to conclude that in passing a statute it was not intended to interfere with orabrogate any former law relating to some matter, unless the repugnancy between the two is not only irreconcilable, but also clearand convincing, and flowing necessarily from the language used, unless the later act fully embraces the subject matter of theearlier, or unless the reason for the earlier act is beyond peradventure renewed. Hence, every effort must be used to make all actsstand and if, by any reasonable construction, they can be reconciled, the later act will not operate as a repeal of the earlier. 22

Regarding respondent's contention that recovery under this subject section shall bar the recovery of benefits under theEmployees' Compensation Program, the same cannot be upheld. The second sentence of Article 173, Chapter II, Title II (dealingon Employees' Compensation and State Insurance Fund), Book IV of the Labor Code, as amended by P.D. 1921, expresslyprovides that "the payment of compensation under this Title shall not bar the recovery of benefits as provided for in Section 699of the Revised Administrative Code . . . whose benefits are administered by the system (meaning SSS or GSIS) or by otheragencies of the government."

WHEREFORE, premises considered, the Court resolves to GRANT the petition; respondent is hereby ordered to give due courseto petitioner's claim for benefits. No costs.

PRIMITIVO LEVERIZA, FE LEVERIZA, PARUNGAO & ANTONIO C. VASCOvs. INTERMEDIATE APPELLATECOURT, MOBIL OIL PHILIPPINES & CIVIL AERONAUTICS ADMINISTRATION,G.R. No. L-66614 January 25,1988

This is a Petition for Review on certiorari seeking the reversal of the decision of the Intermediate Appellate Court, ThirdDivision * dated February 29, 1984 in AC-G.R. No. CV No. 61705 entitledMobil Oil Philippines, Inc., plaintiff-appellee vs.Primitivo Leveriza Parungao, Antonio C. Vasco and Civil Aeronautics Administration, defendants-appellants; PrimitiveLeveriza, Fe Leveriza Parungao and Antonio C. Leveriza, cross-defendant, affirming in totothe decision of the trial court datedApril 6, 1976.

As found by the trial court and adopted by the Intermediate Appellate Court, the facts of this case are as follows:

Around three contracts of lease resolve the basic issues in the instant case. These three contracts are asfollows:


4/37


4

First Contract. For purposes of easy reference and brevity, this contract shall be referred to hereinafter asContract A. This is a "CONTRACT OF LEASE", executed between the REPUBLIC OF THE PHILIPPINES,represented by Defendant CIVIL AERONAUTICS ADMINISTRATION, as lessor, and ROSARIO C.LEVERIZA, as lessee, on April 2, 1965, over a certain parcel of land at the MIA area, consisting ofapproximately 4,502 square meters, at a monthly rental of P450.20, for a period of 25 years, (Exhibit "A",Exhibit "I-Leverizas", Exhibit "I-CAA").

Second Contracts.For purposes of easy references and brevity, this contract shall be referred to hereinafteras Contract B. This is a "LEASE AGREEMENT", executed between ROSARIO C. LEVERIZA, as lessor, and

Plaintiff MOBIL OIL PHILIPPINES, INC., as lessee on May 21, 1965, over 3,000 square meters of that SAMEParcel of land subject of Contract A above mentioned, at a monthly rental of P1,500.00, for a period of 25years (Exhibit 'B', Exhibit 4-Leverizas' ).

Third Contract.For purposes of easy reference and brevity, this contract shall be referred to hereinafter asContract C. This is a "LEASE AGREEMENT", executed between Defendant CIVIL AERONAUTICSADMINISTRATION, as lessor, and plaintiff MOBIL OIL PHILIPPINES, INC., as lessee, on June 1, 1968 overthat SAME parcel of land (Lot A, on plan being a portion of Parcel, Psu 2031), containing an area of 3,000square meters more or less, at a monthly rental of P.25 per square meter for the second 200 square meters,and P.20 per square meter for the rest, for a period of 29 (sic) years. (Exhibit "C").

There is no dispute among the parties that the subject matter of the three contracts of lease above mentioned,Contract A, Contract B, and Contract C, is the same parcel of land, with the noted difference that while inContract A, the area leased is 4,502 square meters, in Contract B and Contract C, the area has been reduced to

3,000 square meters. To summarize:

Contract A a lease contract of April 2, 1965 between the Republic of the Philippines,represented by Defendant Civil Aeronautics Administration and Rosario C. Leveriza over aparcel of land containing an area of 4,502 square meters, for 25 years.

Contract B a lease contract (in effect a sublease) of May 21, 1965 between defendantRosario C. Leveriza and plaintiff Mobil Oil Philippines, Inc. over the same parcel of land, butreduced to 3,000 square meters for 25 years; and

Contract Ca lease contract of June 1, 1968 between defendant Civil AeronauticsAdministration and plaintiff Mobil Oil Philippines, Inc., over the same parcel of land, butreduced to 3,000 square meters, for 25 years.

It is important to note, for a clear understanding of the issues involved, that it appears that defendant CivilAeronautics Administration as LESSOR, leased the same parcel of land, for durations of time that overlappedto two lessees, to wit: (1) Defendant Rosario C. Leveriza, and that plaintiff Mobil Oil Philippines, Inc., asLESSEE, leased the same parcel of land from two lessors, to wit: (1) defendant Rosario C. Leveriza and (2)defendant Civil Aeronautics Administration, Inc., for durations of time that also overlapped.

For purposes of brevity defendant Civil Aeronautics Administration shall be referred to hereinafter asdefendant CAA.

Rosario C. Leveriza, the lessee in Contract A and the lessor in Contract B, is now deceased. This is the reasonwhy her successor-in-interest, her heirs, are sued, namely: Defendants Primitive Leveriza, her secondhusband, (now also deceased), Fe Leveriza Parungao, her daughter by her second husband, and Antonio C.Vasco, her son by her first husband. For purposes of brevity, these defendants shall be referred to hereinafteras Defendants Leveriza.

Plaintiff Mobil Oil Philippines, Inc., shall be referred to hereinafter simply as the Plaintiff. (pp. 95-99, Recordon Appeal).

Plaintiff in this case seeks the rescission or cancellation of Contract A and Contract B on the ground thatContract A from which Contract B is derived and depends has already been cancelled by the defendant CivilAeronautics Administration and maintains that Contract C with the defendant CAA is the only valid andsubsisting contract insofar as the parcel of land, subject to the present litigation is concerned. On the otherhand, defendants Leverizas' claim that Contract A which is their contract with CAA has never been legallycancelled and still valid and subsisting; that it is Contract C between plaintiff and defendant CAA which shouldbe declared void.


5/37


5

Defendant CAA asserts that Exhibit "A" is still valid and subsisting because its cancellation by GuillermoJurado was ineffective and asks the court to annul Contract A because of the violation committed by defendantLeveriza in leasing the parcel of land to plaintiff by virtue of Contract B without the consent of defendant CAA.Defendant CAA further asserts that Contract C not having been approved by the Director of Public Works andCommunications is not valid. ...

xxx xxx xxx

After trial, the lower court render judgment on April 6, 1976 the dispositive part of which reads:

WHEREFORE, after having thus considered the evidence of all the parties, testimonial and documentary, andtheir memoranda and reply-memoranda, this Court hereby renders judgment:

1. Declaring Contract A as having been validly cancelled on June 28, 1966, and has thereforeceased to have any effect as of that date;

2. Declaring that Contract B has likewise ceased to have any effect as of June 28, 1966because of the cancellation of Contract A;

3. Declaring that Contract C was validly entered into on June 1, 1968, and that it is still validand subsisting;

4. Ordering defendant CAA to refund to defendants Leverizas the amount of P32,189.30with 6% per annum until fully paid;

5. Ordering defendants Leverizas to refund to plaintiff the amount of P48,000.00 with 6%interest per annum until fully paid;

6. Dismissing defendants Leverizas' four counterclaims against plaintiff;

7. Dismissing defendants Leverizas' cross-claim against defendant CAA;

8. Dismissing defendant CAA's counterclaim against plaintiff;

9. Dismissing defendant CAA's counterclaim against defendant Leverizas.

No pronouncements as to costs.

On June 2, 1976, defendant Leveriza filed a motion for new trial on the ground of newly discovered evidence, lack of jurisdictionof the court over the case and lack of evidentiary support of the decision which was denied in the order of November 12,1976(Rollo, p. 17).

On July 27, 1976, the CAA filed a Motion for Reconsideration, averring that because the lot lease was properly registered in thename of the Republic of the Philippines, it was only the President of the Philippines or an officer duly designated by him whocould execute the lease contract pursuant to Sec. 567 of the Revised Administrative Code; that the Airport General Manager hasno authority to cancel Contract A, the contract entered into between the CAA and Leveriza, and that Contract C between the CAAand Mobil was void for not having been approved by the Secretary of Public Works and Communications. Said motion washowever denied on November 12, 1976 (Rollo, p. 18).

On appeal, the Intermediate Appellate Court, being in full accord with the trial court, rendered a decision on February 29, 1984,the dispositive part of which reads:

WHEREFORE, finding no reversible error in the decision of the lower court dated April 6, 1976, the same ishereby affirmed in toto.

Hence, this petition.

The petitioners raised the following assignment of errors:


6/37


6

I

THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR OF THECIVIL AERONAUTICS ADMINISTRATION (CAA) HAD THE STATUTORY AUTHORITY TO LEASE, EVENWITHOUT APPROVAL OF THE THEN SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, REALPROPERTY BELONGING TO THE REPUBLIC OF THE PHILIPPINES.

II

THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR OF THECIVIL AERONAUTICS ADMINISTRATION HAD STATUTORY AUTHORITY, WITHOUT THE APPROVALOF THE THEN SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, TO CANCEL A LEASECONTRACT OVER REAL PROPERTY OWNED BY THE REPUBLIC OF THE PHILIPPINES, WHICHCONTRACT WAS APPROVED, AS REQUIRED BY LAW, BY THE SECRETARY.

III

THE INTERMEDIATE APPELLATE COURT ERRED WHEN IT RULED THAT THE CONTRACT OFSUBLEASE (CONTRACT B) ENTERED INTO BETWEEN PETITIONERS' PREDECESSOR-IN-INTERESTAND RESPONDENT MOBIL OIL PHILIPPINES, INC. WAS WITHOUT THE CONSENT OF THEADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION.

The petition is devoid of merit.

There is no dispute that Contract "A" at the time of its execution was a valid contract. The issue therefore is whether or not saidcontract is still subsisting after its cancellation by CAA on the ground of a sublease executed by petitioners with Mobil OilPhilippines without the consent of CAA and the execution of another contract of lease between CAA and Mobil Oil Philippines(Contract "C").

Petitioners contend that Contract "A" is still subsisting because Contract "B" is a valid sublease and does not constitute a groundfor the cancellation of Contract "A", while Contract "C", a subsequent lease agreement between CAA and Mobil Oil Philippines isnull and void, for lack of approval by the Department Secretary. Petitioners anchor their position on Sections 567 and 568 of theRevised Administrative Code which require among others, that subject contracts should be executed by the President of thePhilippines or by an officer duly designated by him, unless authority to execute the same is by law vested in some other officer(Petition, Rollo, pp. 15-16).

At the other extreme, respondent Mobil Oil Philippines asserts that Contract "A" was validly cancelled on June 28, 1966 and sowas Contract "B" which was derived therefrom. Accordingly, it maintains that Contract "C" is the only valid contract insofar asthe parcel of land in question is concerned and that approval of the Department Head is not necessary under Section 32 (par. 24)of the Republic Act 776 which expressly vested authority to enter into such contracts in the Administrator of CAA (Comment;Rollo, p. 83).

On its part, respondent Civil Aeronautics Administration took the middle ground with its view that Contract "A" is stillsubsisting as its cancellation is ineffective without the approval of the Department Head but said contract is not enforceablebecause of petitioners' violation of its terms and conditions by entering into Contract "B" of sublease without the consent of CAA.The CAA further asserts that Contract "C" not having been approved by the Secretary of Public Works and Communications, isnot valid (Rollo, p. 43). However, in its comment filed with the Supreme Court, the CAA made a complete turnabout adoptingthe interpretation and ruling made by the trial court which was affirmed by the Intermediate Appellate Court (Court of Appeals),that the CAA Administrator has the power to execute the deed or contract of lease involving real properties under itsadministration belonging to the Republic of the Philippines without the approval of the Department Head as clearly provided inSection 32, paragraph (24) of Republic Act 776.

The issue narrows down to whether or not there is a valid ground for the cancellation of Contract "A."

Contract "A" was entered into by CAA as the lessor and the Leverizas as the lessee specifically "for the purpose of operating andmanaging a gasoline station by the latter, to serve vehicles going in and out of the airport."

As regards prior consent of the lessor to the transfer of rights to the leased premises, the provision of paragraph 7 of saidContract reads in full:


7/37


7

7. The Party of the Second part may transfer her rights to the leased premises but in such eventuality, theconsent of the Party of the First Part shall first be secured. In any event, such transfer of rights shall have torespect the terms and conditions of this agreement.

Paragraph 8 provides the sanction for the violation of the above-mentioned terms and conditions of the contract. Said paragraphreads:

8. Failure on the part of the Party of the Second Part to comply with the terms and conditions herein agreedupon shall be sufficient for revocation of this contract by the Party of the First Part without need of judicial

demand.

It is not disputed that the Leverizas (lessees) entered into a contract of sublease (Contract "B") with Mobil Oil Philippineswithout the consent of CAA (lessor). The cancellation of the contract was made in a letter dated June 28, 1966 of Guillermo P.Jurado, Airport General Manager of CAA addressed to Rosario Leveriza, as follows:

(Letterhead)

June 28, 1966

Mrs. Rosario LeverizaManila International Airport

Madam:

It has been found out by the undersigned that you have sublet the property of the CAAleased to you and by virtue of this, your lease contract is hereby cancelled because of theviolation of the stipulations of the contract. I would like to inform you that even withouthaving sublet the said property the said contract would have been cancelled as per attachedcommunication.

Very truly yours,

For the Director:

(Sgd.) Illegible

(Typed)

GUILLERMO P. JURADOAirport General Manager

Respondent Leverizas and the CAA assailed the validity of such cancellation, claiming that the Airport General Manager had nolegal authority to make the cancellation. They maintain that it is only the Secretary of Public Works and Communications, actingfor the President, or by delegation of power, the Director of Civil Aeronautics Administration who could validly cancel thecontract. They do admit, however, and it is evident from the records that the Airport General Manager signed "For the Director."Under the circumstances, there is no question that such act enjoys the presumption of regularity, not to mention theunassailable fact that such act was subsequently affirmed or ratified by the Director of the CAA himself (Record on Appeal, pp.108-110).

Petitioners argue that cancelling or setting aside a contract approved by the Secretary is, in effect, repealing an act of the

Secretary which is beyond the authority of the Administrator.

Such argument is untenable. The terms and conditions under which such revocation or cancellation may be made, have alreadybeen specifically provided for in Contract "A" which has already been approved by the Department Head, It is evident that in theimplementation of aforesaid contract, the approval of said Department Head is no longer necessary if not redundant.

It is further contended that even granting that such cancellation was effective, a subsequent billing by the AccountingDepartment of the CAA has in effect waived or nullified the rescission of Contract "A."

It will be recalled that the questioned cancellation of Contract "A" was among others, mainly based on the violation of its termsand conditions, specifically, the sublease of the property by the lessee without the consent of the lessor.


8/37


8

The billing of the petitioners by the Accounting Department of the CAA if indeed it transpired, after the cancellation of Contract"A" is obviously an error. However, this Court has already ruled that the mistakes of government personnel should not affectpublic interest. InSan Mauricio Mining Company v. Ancheta (105 SCRA 391, 422), it has been held that as a matter of lawrooted in the protection of public interest, and also as a general policy to protect the government and the people, errors ofgovernment personnel in the performance of their duties should never deprive the people of the right to rectify such error andrecover what might be lost or be bartered away in any actuation, deal or transaction concerned. In the case at bar, the lowercourt in its decision which has been affirmed by the Court of Appeals, ordered the CAA to refund to the petitioners the amount ofrentals which was not due from them with 6% interest per annum until fully paid.

Petitioners further assail the interpretation of Contract "A", claiming that Contract "B" was a mere sublease to respondent MobilOil Philippines, Inc. and requires no prior consent of CAA to perfect the same. Citing Article 1650 of the Civil Code, they assertthat the prohibition to sublease must be expressed and cannot be merely implied or inferred (Rollo, p. 151).

As correctly found by the Court of Appeals, petitioners in asserting the non- necessity for a prior consent interprets the firstsentence of paragraph 7 of Contract "A" to refer to an assignment of lease under Article 1649 of the Civil Code and not to a meresublease. A careful scrutiny of said paragraph of Contract "A" clearly shows that it speaks of transfer of rights of Rosario Leverizato the leased premises and not to assignment of the lease (Rollo, pp. 48-49).

Petitioners likewise argued that it was contemplated by the parties to Contract "A" that Mobil Oil Philippines would be the ownerof the gasoline station it would construct on the leased premises during the period of the lease, hence, it is understood that itmust be given a right to use and occupy the lot in question in the form of a sub-lease (Rollo, p. 152).

In Contract "A", it was categorically stated that it is the lessee (petitioner) who will manage and operate the gasoline station. The

fact that Mobil Oil was mentioned in that contract was clearly not intended to give approval to a sublease between petitionersand said company but rather to insure that in the arrangements to be made between them, it must be understood that after theexpiration of the lease contract, whatever improvements have been constructed in the leased premises shall be relinquished toCAA. Thus, this Court held that "the primary and elementary rule of construction of documents is that when the words orlanguage thereof is clear and plain or readily understandable by any ordinary reader thereof, there is absolutely no room forinterpretation or construction anymore." (San Mauricio Mining Company v. Ancheta, supra).

Finally, petitioners contend that the administrator of CAA cannot execute without approval of the Department Secretary, a validcontract of lease over real property owned by the Republic of the Philippines, citing Sections 567 and 568 of the RevisedAdministrative Code, which provide as follows:

SEC. 567.Authority of the President of the Philippines to execute contracts relative to real property. Whenthe Republic of the Philippines is party to a deed conveying the title to real property or is party to any leaseor other contract relating to real property belonging to said government, said deed or contract shall be

executed on behalf of said government by the President of the Philippines or by an officer duly designated byhim, unless authority to execute the same is by law expressly vested in some other officer. (Emphasis supplied)

SEC. 568.Authority of national officials to make contract. Written contracts not within the purview of thepreceding section shall, in the absence of special provision, be executed, with the approval of the properDepartment Head, by the Chief of the Bureau or Office having control of the appropriation against which thecontract would create a charge; or if there is no such chief, by the proper Department Head himself or thePresident of the Philippines as the case may require.

On the other hand, respondent CAA avers that the CAA Administrator has the authority to lease real property belonging to theRepublic of the Philippines under its administration even without the approval of the Secretary of Public Works andCommunications, which authority is expressly vested in it by law, more particularly Section 32 (24) of Republic Act 776, whichreads:

Sec. 32.Powers and Duties of the Administrator.Subject to the general control and supervision of theDepartment Head, the Administrator shall have, among others, the following powers and duties:

xxx xxx xxx

(24) To administer, operate, manage, control, maintain and develop the Manila International Airport and allgovernment aerodromes except those controlled or operated by the Armed Forces of the Philippines includingsuch power and duties as: ... (b) to enter into, make and execute contracts of any kind with any person, firm, orpublic or private corporation or entity; (c) to acquire, hold, purchase, or lease any personal or real property;right of ways, and easements which may be proper or necessary: Provided, that no real property thus acquired


9/37


9

and any other real property of the Civil Aeronautics Administration shall be sold without the approval of thePresident of the Philippines. ...

There is no dispute that the Revised Administrative Code is a general law while Republic Act 776 is a speciallaw nor in the fact that the real property subject of the lease in Contract "C" is real property belonging to theRepublic of the Philippines.

Under 567 of the Revised Administrative Code, such contract of lease must be executed: (1) by the President of the Philippines,or (2) by an officer duly designated by him or (3) by an officer expressly vested by law. It is readily apparent that in the case at

bar, the Civil Aeronautics Administration has the authority to enter into Contracts of Lease for the government under the thirdcategory. Thus, as correctly ruled by the Court of Appeals, the Civil Aeronautics Administration has the power to execute thedeed or contract involving leases of real properties belonging to the Republic of the Philippines, not because it is an entity dulydesignated by the President but because the said authority to execute the same is, by law expressly vested in it.

Under the above-cited Section 32 (par. 24) of Republic Act 776, the Administrator (Director) of the Civil AeronauticsAdministration by reason of its creation and existence, administers properties belonging to the Republic of the Philippines and itis on these properties that the Administrator must exercise his vast power and discharge his duty to enter into, make and executecontract of any kind with any person, firm, or public or private corporation or entity and to acquire, hold, purchase, or lease anypersonal or real property, right of ways and easements which may be proper or necessary. The exception, however, is the sale ofproperties acquired by CAA or any other real properties of the same which must have the approval of the President of thePhilippines. The Court of appeals took cognizance of the striking absence of such proviso in the other transactions contemplatedin paragraph (24) and is convinced as we are, that the Director of the Civil Aeronautics Administration does not need the priorapproval of the President or the Secretary of Public Works and Communications in the execution of Contract "C."

In this regard, this Court, ruled that another basic principle of statutory construction mandates that general legislation must giveway to special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the specialprovisions are not applicable (Sto. Domingo v. De los Angeles, 96 SCRA 139),. that specific statute prevails over a general statute(De Jesus v. People, 120 SCRA 760) and that where two statutes are of equal theoretical application to a particular case, the onedesigned therefor specially should prevail (Wil Wilhensen, Inc. v. Baluyot, 83 SCRA 38)

WHEREFORE, the petition is DISMISSED for lack of merit and the decision of the Court of Appeals appealed from isAFFIRMED in toto.

LUZON DEVELOPMENT BANKvs.ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY.ESTER S. GARCIA in her capacity as VOLUNTARY ARBITRATOR, G.R. No. 120319 October 6, 1995

From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development Bank

Employees (ALDBE) arose an arbitration case to resolve the following issue:

Whether or not the company has violated the Collective Bargaining Agreement provision and theMemorandum of Agreement dated April 1994, on promotion.

At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S.Garcia, in her capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995. LDB, on the other hand,failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding them to do so. As of May 23, 1995 noPosition Paper had been filed by LDB.

On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows:

WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining Agreement

provision nor the Memorandum of Agreement on promotion.

Hence, this petition for certiorariand prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibither from enforcing the same.

In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the basis ofevidence and arguments presented by such parties who have bound themselves to accept the decision of the arbitrator as finaland binding.

Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary.


10/37


10

Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their right tostrike and are compelled to accept the resolution of their dispute through arbitration by a third party. 1The essence of arbitrationremains since a resolution of a dispute is arrived at by resort to a disinterested third party whose decision is final and binding onthe parties, but in compulsory arbitration, such a third party is normally appointed by the government.

Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary arbitrationclause in their collective agreement, to an impartial third person for a final and binding resolution. 2Ideally, arbitration awardsare supposed to be complied with by both parties without delay, such that once an award has been rendered by an arbitrator,nothing is left to be done by both parties but to comply with the same. After all, they are presumed to have freely chosen

arbitration as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually acceptablearbitrator who shall hear and decide their case. Above all, they have mutually agreed to de bound by said arbitrator's decision.

In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein provisions for amachinery for the resolution of grievances arising from the interpretation or implementation of the CBA or company personnelpolicies. 3For this purpose, parties to a CBA shall name and designate therein a voluntary arbitrator or a panel of arbitrators, orinclude a procedure for their selection, preferably from those accredited by the National Conciliation and Mediation Board(NCMB). Article 261 of the Labor Code accordingly provides for exclusive original jurisdiction of such voluntary arbitrator orpanel of arbitrators over (1) the interpretation or implementation of the CBA and (2) the interpretation or enforcement ofcompany personnel policies. Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction overother labor disputes.

On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following enumerated cases:

. . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusivejurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the partiesfor decision without extension, even in the absence of stenographic notes, the following cases involving allworkers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates ofpay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee

relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality ofstrikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all otherclaims, arising from employer-employee relations, including those of persons in domestic or householdservice, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompaniedwith a claim for reinstatement.

xxx xxx xxx

It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite limitedcompared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National Labor Relations

Commission (NLRC) for that matter. 4The state of our present law relating to voluntary arbitration provides that "(t)he award ordecision of the Voluntary Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of theaward or decision by the parties," 5while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory unlessappealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, ororders." 6Hence, while there is an express mode of appeal from the decision of a labor arbiter, Republic Act No. 6715 is silentwith respect to an appeal from the decision of a voluntary arbitrator.

Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the Supreme Courtitself on a petition for certiorari, 7in effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In the viewof the Court, this is illogical and imposes an unnecessary burden upon it.


11/37


11

In Volkschel Labor Union, et al. v.NLRC, et al., 8on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary arbitrators determine therights of parties; hence, their decisions have the same legal effect as judgments of a court. In Oceanic Bic Division (FFW),etal. v.Romero,et al., 9this Court ruled that "a voluntary arbitrator by the nature of her functions acts in a quasi-judicialcapacity." Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in lawthestatus of a quasi-judicial agency but independent of, and apart from, the NLRC since his decisions are not appealable to thelatter. 10

Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise:

xxx xxx xxx

(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards ofRegional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including theSecurities and Exchange Commission, the Employees Compensation Commission and the Civil ServiceCommission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with theConstitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, theprovisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourthparagraph of Section 17 of the Judiciary Act of 1948.

xxx xxx xxx

Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a "quasi-judicialinstrumentality." It may even be stated that it was to meet the very situation presented by the quasi-judicial functions of thevoluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction IndustryArbitration Commission, 11 that the broader term "instrumentalities" was purposely included in the above-quoted provision.

An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency" or "instrumentality" aresynonymous in the sense that either of them is a means by which a government acts, or by which a certain government act orfunction is performed. 13 The word "instrumentality," with respect to a state, contemplates an authority to which the statedelegates governmental power for the performance of a state function. 14 An individual person, like an administrator or executor,is a judicial instrumentality in the settling of an estate, 15 in the same manner that a sub-agent appointed by a bankruptcy court isan instrumentality of the court,16 and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state. 17

The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under theprovisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality" in the

aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does not place himwithin the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that,although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is theforerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisionsto the Court of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amendingSec. 9 of B.P. 129.

A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court ofAppeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicialagencies, boards and commissions enumerated therein.

This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure forthe appellate review of adjudications of all quasi-judicial entities 18 not expressly excepted from the coverage of Sec. 9 of B.P. 129by either the Constitution or another statute. Nor will it run counter to the legislative intendment that decisions of the NLRC be

reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntaryarbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter.

In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration Law,arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none be specified, theRegional Trial Court for the province or city in which one of the parties resides or is doing business, or in which the arbitration isheld, shall have jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made, apply tothe court having jurisdiction for an order confirming the award and the court must grant such order unless the award is vacated,modified or corrected. 19


12/37


12

In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court. Consequently, in apetition for certiorarifrom that award or decision, the Court of Appeals must be deemed to have concurrent jurisdiction with theSupreme Court. As a matter of policy, this Court shall henceforth remand to the Court of Appeals petitions of this nature forproper disposition.

ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals.

IRON AND STEEL AUTHORITYvs. THE COURT OF APPEALS and MARIA CRISTINA FERTILIZERCORPORATION, G.R. No. 102976 October 25, 1995

Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August 1973 in order,generally, to develop and promote the iron and steel industry in the Philippines. The objectives of the ISA are spelled out in thefollowing terms:

Sec. 2. Objectives The Authority shall have the following objectives:

(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export marketsfor the products of the industry;

(b) to promote the consolidation, integration and rationalization of the industry in order to increase industrycapability and viability to service the domestic market and to compete in international markets;

(c) to rationalize the marketing and distribution of steel products in order to achieve a balance betweendemand and supply of iron and steel products for the country and to ensure that industry prices and profitsare at levels that provide a fair balance between the interests of investors, consumers suppliers, and the publicat large;

(d) to promote full utilization of the existing capacity of the industry, to discourage investment in excesscapacity, and in coordination, with appropriate government agencies to encourage capital investment inpriority areas of the industry;

(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce theexcessive dependence of the country on imports of iron and steel.

The list of powers and functions of the ISA included the following:

Sec. 4.Powers and Functions. The authority shall have the following powers and functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/orlease to the companies involvedif it is shown that such use of the State's power is necessary to implement theconstruction of capacity which is needed for the attainment of the objectives of the Authority;

xxx xxx xxx

(Emphasis supplied)

P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973.1

When ISA's original termexpired on 10 October 1978, its term was extended for another ten (10) years by Executive Order No. 555 dated 31 August 1979.

The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development Corporation which is itselfan entity wholly owned by the National Government, embarked on an expansion program embracing, among other things, theconstruction of an integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority and majorindustrial project of the Government. Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by thePresident of the Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totallingabout 30.25 hectares in area) located in Iligan City, and reserving that land for the use and immediate occupancy of NSC.


13/37


13

Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-operational chemicalfertilizer plant and related facilities owned by private respondent Maria Cristina Fertilizer Corporation ("MCFC"), Letter ofInstruction (LOI), No. 1277, also dated 16 November 1982, was issued directing the NSC to "negotiate with the owners ofMCFC, for and on behalf of the Government, for the compensation of MCFC's present occupancy rights on the subject land."LOI No. 1277 also directed that should NSC and private respondent MCFC fail to reach an agreement within a period of sixty(60) days from the date of LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272 and toinitiate expropriation proceedings in respect of occupancy rights of private respondent MCFC relating to the subject public landas well as the plant itself and related facilities and to cede the same to the NSC. 2

Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983, petitioner ISA commencedeminent domain proceedings against private respondent MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying thatit (ISA) be places in possession of the property involved upon depositing in court the amount of P1,760,789.69 representing tenpercent (10%) of the declared market values of that property. The Philippine National Bank, as mortgagee of the plant facilitiesand improvements involved in the expropriation proceedings, was also impleaded as party-defendant.

On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in possessionand control of the land occupied by MCFC's fertilizer plant installation.

The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired on 11 August1988. MCFC then filed a motion to dismiss, contending that no valid judgment could be rendered against ISA which had ceasedto be a juridical person. Petitioner ISA filed its opposition to this motion.

In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the case. The dismissal

was anchored on the provision of the Rules of Court stating that "only natural or juridical persons or entities authorized by lawmay be parties in a civil case." 3 The trial court also referred to non-compliance by petitioner ISA with the requirements ofSection 16, Rule 3 of the Rules of Court. 4

Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of its term, its juridicalexistence continued until the winding up of its affairs could be completed. In the alternative, petitioner ISA urged that theRepublic of the Philippines, being the real party-in-interest, should be allowed to be substituted for petitioner ISA. In thisconnection, ISA referred to a letter from the Office of the President dated 28 September 1988 which especially directed theSolicitor General to continue the expropriation case.

The trial court denied the motion for reconsideration, stating, among other things that:

The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC, agovernment controlled private corporation engaged in private business and for profit, specially now that the

government, according to newspaper reports, is offering for sale to the public its [shares of stock] in theNational Steel Corporation in line with the pronounced policy of the present administration to disengage thegovernment from its private business ventures. 5 (Brackets supplied)

Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals affirmed the order ofdismissal of the trial court. The Court of Appeals held that petitioner ISA, "a government regulatory agency exercising sovereignfunctions," did not have the same rights as an ordinary corporation and that the ISA, unlike corporations organized under theCorporation Code, was not entitled to a period for winding up its affairs after expiration of its legally mandated term, with theresult that upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more legal authority to performgovernmental functions." The Court of Appeals went on to say that the action for expropriation could not prosper because thebasis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become ineffective as a result of thedelegate's dissolution, and could not be continued in the name of Republic of the Philippines, represented by the SolicitorGeneral:

It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to bedismissed without prejudice to the refiling of a new complaint for expropriation if the Congress sees it fit."(Emphases supplied)

At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled that theexpropriation suit was not for a public purpose, considering that the parties had not yet rested their respective cases.

In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for expropriation in itscapacity as agent of the Republic of the Philippines, the Republic, as principal of ISA, is entitled to be substituted and to be madea party-plaintiff after the agent ISA's term had expired.


14/37


14

Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further extending the term ofISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical existence of ISA," and that the authorizationissued by the Office of the President to the Solicitor General for continued prosecution of the expropriation suit could not prevailover such negative intent. It is also contended that the exercise of the eminent domain by ISA or the Republic is improper, sincethat power would be exercised "not on behalf of the National Government but for the benefit of NSC."

The principal issue which we must address in this case is whether or not the Republic of the Philippines is entitled to besubstituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is really the only issue which we mustresolve at this time.

Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:

Sec. 1. Who May Be Parties. Only natural or juridical persons or entities authorized by law may be parties ina civil action.

Under the above quoted provision, it will be seen that those who can be parties to a civil action may be broadlycategorized into two (2) groups:

(a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the onehand, or juridical person such as corporations, on the other hand; and

(b) entities authorized by law to institute actions.

Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272, as alreadynoted, contains express authorization to ISA to commence expropriation proceedings like those here involved:

Sec. 4.Powers and Functions. The Authority shall have the following powers and functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/orlease to the companies involved if it is shown that such use of the State's power is necessary to implement theconstruction of capacity which is needed for the attainment of the objectives of the Authority;

xxx xxx xxx

(Emphasis supplied)

It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds ofcontracts "for and in behalf of the Government"in the following terms:

xxx xxx xxx

(i) to negotiate, andwhen necessary, to enter into contracts for and in behalf of the government, for the bulkpurchase of materials, supplies or services for any sectors in the industry, and to maintain inventories of suchmaterials in order to insure a continuous and adequate supply thereof and thereby reduce operating costs ofsuch sector;

xxx xxx xxx

(Emphasis supplied)

Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There is, however,no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive juridical personality separate and distinctfrom that of the Government. The ISA in fact appears to the Court to be a non-incorporated agency or instrumentality of theRepublic of the Philippines, or more precisely of the Government of the Republic of the Philippines. It is common knowledgethat other agencies or instrumentalities of the Government of the Republic are cast in corporate form, that is to say,are incorporated agencies or instrumentalities, sometimes with and at other times without capital stock, and accordingly vestedwith a juridical personality distinct from the personality of the Republic. Among such incorporated agencies or instrumentalities


15/37


15

are: National Power Corporation; 6 Philippine Ports Authority; 7 National Housing Authority; 8 Philippine National OilCompany; 9Philippine National Railways; 10 Public Estates Authority; 11 Philippine Virginia Tobacco Administration, 12 and soforth. It is worth noting that the term "Authority" has been used to designate both incorporated and non-incorporated agenciesor instrumentalities of the Government.

We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. The Republic itself is abody corporate and juridical person vested with the full panoply of powers and attributes which are compendiously described as"legal personality." The relevant definitions are found in the Administrative Code of 1987:

Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or aparticular statute, require a different meaning:

(1) Government of the Republic of the Philippines refers to the corporate governmental entity through whichthe functions of government are exercised throughout the Philippines, including, save as the contrary appearsfrom the context, the various arms through which political authority is made effective in the Philippines,whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions orother forms of local government.

xxx xxx xxx

(4)Agency of the Governmentrefers to any of the various units of the Government, including a department,bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or adistinct unit therein.

xxx xxx xxx

(10)Instrumentality refers to any agency of the National Government, not integrated within the departmentframework, vested with special functions or jurisdiction by law, endowed with some if not all corporatepowers, administering special funds, and enjoying operational autonomy, usually through a charter. This termincludes regulatory agencies, chartered institutions and government-owned or controlled corporations.

xxx xxx xxx

(Emphases supplied)

When the statutory term of a non-incorporatedagency expires, the powers, duties and functions as well as the assets andliabilities of that agency revert back to, and are re-assumed by, the Republic of the Philippines, in the absence of specialprovisions of law specifying some other disposition thereof such as, e.g., devolution or transmission of such powers, duties,functions, etc. to some other identified successor agency or instrumentality of the Republic of the Philippines. When the expiringagency is an incorporatedone, the consequences of such expiry must be looked for, in the first instance, in the charter of thatagency and, by way of supplementation, in the provisions of the Corporation Code. Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets and liabilities are properly regardedas folded back into the Government of the Republic of the Philippines and hence assumed once again by the Republic, no specialstatutory provision having been shown to have mandated succession thereto by some other entity or agency of the Republic.

The procedural implications of the relationship between an agent or delegate of the Republic of the Philippines and the Republicitself are, at least in part, spelled out in the Rules of Court. The general rule is, of course, that an action must be prosecuted anddefended in the name of the real party in interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of theexpropriation proceedings, a real party in interest, having been explicitly authorized by its enabling statute to instituteexpropriation proceedings. The Rules of Court at the same time expressly recognize the role of representative parties:

Sec. 3.Representative Parties. A trustee of an expressed trust, a guardian, an executor or administrator,or a party authorized by statute may sue or be sued without joining the party for whose benefit the action ispresentedor defended; but the court may, at any stage of the proceedings, order such beneficiary to be made aparty. . . . . (Emphasis supplied)

In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or representative of theRepublic of the Philippines pursuant to its authority under P.D. No. 272. The present expropriation suit was brought on behalf ofand for the benefit of the Republic as the principal of ISA. Paragraph 7 of the complaint stated:


16/37


16

7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction andinstallation of iron and steel manufacturing facilities that are indispensable to the integration of the iron andsteel making industry which is vital to the promotion of public interest and welfare. (Emphasis supplied)

The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel Corporation,even though the latter may be an ultimate user of the properties involved should the condemnation suit be eventuallysuccessful.

From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the expropriation

proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put a little differently, the expiration ofISA's statutory term did not by itself require or justify the dismissal of the eminent domain proceedings.

It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's statutory term, wasnot a ground for dismissal of such proceedings since a party may be dropped or added by order of the court, on motion of anyparty or on the court's own initiative at any stage of the action and on such terms as are just. 13 In the instant case, the Republichas precisely moved to take over the proceedings as party-plaintiff.

InE.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court recognized that the Republic mayinitiate or participate in actions involving its agents. There the Republic of the Philippines was held to be a proper party to suefor recovery of possession of property although the "real" or registered owner of the property was the Philippine Ports Authority,a government agency vested with a separate juridical personality. The Court said:

It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal ofthe Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as itsagent. . . . 15 (Emphasis supplied)

InE.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding, asthe trial court and Court of Appeals had required, was to generate unwarranted delay and create needless repetition ofproceedings:

More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines isnot the proper party would result in needless delay in the settlement of this matter and also in derogation ofthe policy against multiplicity of suits. Such a decision would require the Philippine Ports Authority to refilethe very same complaint already proved by the Republic of the Philippines and bring back as it were to squareone. 16(Emphasis supplied)

As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines for the ISA upon theground that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of itsdelegated authority to expropriate, had become legally ineffective by reason of the expiration of the statutory term of the agent ordelegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted to the Republic of thePhilippines upon the termination of the statutory term of ISA, the question should be addressed whether fresh legislativeauthority is necessary before the Republic of the Philippines may continue the expropriation proceedings initiated by its owndelegate or agent.

While the power of eminent domain is, in principle, vested primarily in the legislative department of the government, we believeand so hold that no new legislative act is necessary should the Republic decide, upon being substituted for ISA, in fact tocontinue to prosecute the expropriation proceedings. For the legislative authority, a long time ago, enacted a continuing orstanding delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the power of eminentdomain on behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was ineffect at the time of the commencement of the present expropriation proceedings before the Iligan Regional Trial Court,provided that:

Sec. 64.Particular powers and duties of the President of the Philippines. In addition to his generalsupervisory authority, the President of the Philippines shall have such other specific powers and duties as areexpressly conferred or imposed on him by law, and also, in particular, the powers and duties set forth in thisChapter.

Among such special powers and duties shall be:

xxx xxx xxx


17/37


17

(h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of theGovernment of the Philippines; and to direct the Secretary of Justice, where such act is deemed advisable, tocause the condemnation proceedings to be begun in the court having proper jurisdiction. (Emphasissupplied)

The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in thefollowing terms:

Sec. 12.Power of eminent domain. ThePresident shalldetermine when it is necessary or advantageous to

exercise the power of eminent domain in behalf of the National Government, anddirect the Solicitor General,whenever he deems the action advisable, to institute expopriation proceedings in the proper court.(Emphasis supplied)

In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 RevisedAdministrative Codes in effect made a determination that it was necessary and advantageous to exercise the power ofeminent domain in behalf of the Government of the Republic and accordingly directed the Solicitor General to proceedwith the suit. 17

It is argued by private respondent MCFC that, because Congress after becoming once more the depository of primary legislativepower, had not enacted a statute extending the term of ISA, such non-enactment must be deemed a manifestation of a legislativedesign to discontinue or abort the present expropriation suit. We find this argument much too speculative; it rests too muchupon simple silence on the part of Congress and casually disregards the existence of Section 12 of the 1987 Administrative Codealready quoted above.

Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of "public use" or "publicpurpose" is not present in the instant case, and that the indispensable element of just compensation is also absent. We agreewith the Court of Appeals in this connection that these contentions, which were adopted and set out by the Regional Trial Courtin its order of dismissal, are premature and are appropriately addressed in the proceedings before the trial court. Thoseproceedings have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial Courtprecipitously dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution asparty-plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings should be continued inview of all the subsequent developments in the iron and steel sector of the country including, though not limited to, the partialprivatization of the NSC.

WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent that it affirmed thetrial court's order dismissing the expropriation proceedings, is hereby REVERSED and SET ASIDE and the case is REMANDEDto the court a quowhich shall allow the substitution of the Republic of the Philippines for petitioner Iron and Steel Authority and

for further proceedings consistent with this Decision. No pronouncement as to costs.

IGNACIA BALICASvs. FACT-FINDING & INTELLIGENCE BUREAU (FFIB), OFFICE OF THE OMBUDSMAN,G.R. No. 145972 March 23, 2004

This petition for review on certiorariassails the Court of Appeals decision1dated August 25, 2000 and resolution2of November13, 2000 in CA-G.R. SP No. 56386, which affirmed the Ombudsmans decision3dismissing petitioner from government servicefor gross neglect of duty in connection with the tragedy at the Cherry Hills Subdivision in Antipolo City on August 3, 1999.

The antecedent facts as summarized in the Ombudsmans decision are as follows:

Based on the evidence adduced by the complainant, the following is the chronological series of events which led to thedevelopment of the CHS (Cherry Hills Subdivision):

August 28, 1990 Philjas Corporation, whose primary purposes, among others are: to own, develop, subdivide, marketand provide low-cost housing for the poor, was registered with the Securities and Exchange Commission (SEC).

February 19, 1991 then City Mayor Daniel S. Garcia, endorsed to the Housing and Land Use Regulatory Board(HLURB) the proposed CHS.

Thereafter, or on 07 March 1991, based on the favorable recommendations of Mayor Garcia, respondent TAN, issuedthe Preliminary Approval and Locational Clearance (PALC) for the development of CHS.
http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt1http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt1http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt2http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt2http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt2http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt3http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt3http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt3http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt2http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt1


18/37


18

On July 5, 1991, then HLURB Commissioner respondent TUNGPALAN issued Development Permit No. 91-0216 for"land development only" for the entire land area of 12.1034 hectares covered by TCT No. 35083 (now TCT 208837) andwith 1,003 saleable lots/units with project classification B.P. 220 Model A-Socialized Housing (p. 96, Records), withseveral conditions for its development.

Three (3) days thereafter or on July 8, 1991, respondent JASARENO, allowed/granted the leveling/earth-movingoperations of the development project of the area subject to certain conditions.

On November 18, 1991, then HLURB Commissioner AMADO B. DELORIA issued Certificate of Registration No. 91-11-

0576 in favor of CHS, with License to Sell No. 91-11-0592 for the 1,007 lots/units in the subdivision.

Eventually, on December 10, 1991, respondent POLLISCO issued Small Scale Mining Permit (SSMP) No. IV-316 toPhiljas to extract and remove 10,000 cu. meters of filling materials from the area where the CHS is located.

Thereafter, or on January 12, 1994, Philjas applied for a Small Scale Mining Permit (SSMP) under P.D. 1899 with theRizal Provincial Government to extract and remove 50,000 metric tons of filling materials per annum on CHS 2.8hectares.

Thus, on January 17, 1994, respondent MAGNO, informed ELIEZER I. RODRIGUEZ of Philjas that CHS is within theEIS System and as such must secure ECC from the DENR. Philjas was accordingly informed of the matter such that itapplied for the issuance of ECC from the DENR-Region IV, on February 3, 1994.

On March 12, 1994, an Inspection Report allegedly prepared by respondent BALICAS, attested by respondentRUTAQUIO and approved by respondent TOLENTINO re: field evaluation to the issuance of ECC, was submitted.

Consequently, on April 28, 1994, upon recommendations of respondent TOLENTINO, Philjas application for ECC wasapproved by respondent PRINCIPE, then Regional Executive Director, DENR under ECC-137-R1-212-94.

A Mining Field Report for SSMP dated May 10, 1994 was submitted pursuant to the inspection report prepared byrespondents CAYETANO, FELICIANO, HILADO and BURGOS, based on their inspection conducted on April 25 to 29,1994. The report recommended, among others, that the proposed extraction of materials would pose no adverse effectto the environment.

Records further disclosed that on August 10, 1994, respondent BALICAS monitored the implementation of the CHSProject Development to check compliance with the terms and conditions in the ECC. Again, on August 23, 1995, sheconducted another monitoring on the project for the same purpose. In both instances, she noted that the project was

still in the construction stage hence, compliance with the stipulated conditions could not be fully assessed, andtherefore, a follow-up monitoring is proper. It appeared from the records that this August 23, 1995 monitoringinspection was the last one conducted by the DENR.

On September 24, 1994, GOV. CASIMIRO I. YNARES, JR., approved the SSMP applied for by Philjas under SSMP No.RZL-012, allowing Philjas to extract and remove 50,000 metric tons of filling materials from the area for a period oftwo (2) years from date of its issue until September 6, 1996.4

Immediately after the tragic incident on August 3, 1999, a fact-finding investigation was conducted by the Office of theOmbudsman through its Fact-Finding and Intelligence Bureau (FFIB), which duly filed an administrative complaint with theOffice of the Ombudsman against several officials of the Housing and Land Use Regulatory Board (HLURB), Department ofEnvironment and Natural Resources (DENR), and the local government of Antipolo.

The charge against petitioner involved a supposed failure on her part to monitor and inspect the development of Cherry Hills

Subdivision, which was assumed to be her duty as DENR senior environmental management specialist assigned in the provinceof Rizal.

For her part, petitioner belied allegations that monitoring was not conducted, claiming that she monitored the development ofCherry Hills Subdivision as evidenced by three (3) monitoring reports dated March 12, 1994, August 10, 1994 and August 23,1995. She averred that she also conducted subsequent compliance monitoring of the terms and conditions of PhiljasEnvironmental Compliance Certificate (ECC) on May 19, 1997 and noted no violation thereon. She further claimed good faithand exercise of due diligence, insisting that the tragedy was a fortuitous event. She reasoned that the collapse did not occur inCherry Hills, but in the adjacent mountain eastern side of the subdivision.
http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt4http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt4http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt4http://www.lawphil.net/judjuris/juri2004/mar2004/gr_145972_2004.html#fnt4


19/37


19

On November 15, 1999, the Office of the Ombudsman rendered a decision imposing upon petitioner the supreme penalty ofdismissal from office for gross neglect of duty finding:

RESPONDENT BALICAS

Records show that she monitored and inspected the CHS [Cherry Hills Subdivision] only thrice (3), to wit:

1. Inspection Report dated 12 March 1994

2. Monitoring Report dated 10 August 1994

3. Monitoring Report dated 23 August 1995

Verily, with this scant frequency, how can respondent Balicas sweepingly claim that there was no violation of ECCcompliance and that she had done what is necessary in accordance with the regular performance of her duties. Sheherself recognized the fact that the "collapsed area is not the subdivision in question but the adjacent mountain easternside of the CHS." It is incumbent upon her to establish the same in her monitoring and inspection reports and makeobjective recommendations re: its possible adverse effect to the environment and to the residents of the CHS andnearby areas. Her defense that the position of the CHS shows the impossibility of checking the would-be adverse effectclearly established her incompetence. No expert mind is needed to know that mountains cause landslide and erosion.Cherry Hills Subdivision is a living witness to this.5

Petitioner seasonably filed a petition for review of the Ombudsmans decision with the Court of Appeals. In its decision datedAugust 25, 2000, the Court of Appeals dismissed the petition for lack of merit and affirmed the appealed decision. It found thatthe landslide was a preventable occurrence and that petitioner was guilty of gross negligence in failing to closely monitor Philjascompliance with the conditions of the ECC given the known inherent instability of the ground where the subdivision wasdeveloped. The appellate court likewise denied petitioners motion for reconsideration in its resolution dated November 13,2000.

Petitioner now comes to this Court for review on certiorari, under Rule 45 of the Rules of Civil Procedure, of the appellatecourts decision. She alleges that the Court of Appeals committed serious errors of law in affirming the Ombudsmans conclusionthat:

1 There was gross negligence on the part of petitioner Balicas in the performance of her official duties as SeniorEnvironmental Management Specialist (SEMS) of the Provincial Environment and Natural Resources Office (PENRO)Province of Rizal, DENR Region IV; and the alleged gross neglect of duty of petitioner warranted the imposition of the

extreme penalty of dismissal from the service.

2. The landslide which caused the death of several residents of the subdivision and the destruction of property is not afortuitous event and therefore preventible.6

The main issues are whether or not the Court of Appeals committed serious errors of law

general principles cases

Documents