EN BANC

[G.R. No. 116422. November 4, 1996]

AVELINA B. CONTE and LETICIA BOISER-PALMA, petitioners, vs. COMMISSION ON AUDIT (COA), respondent.

D E C I S I O N

PANGANIBAN, J.:

Are the benefits provided for under Social Security System Resolution No. 56 to be considered simply as financial assistance for retiring employees, or does such scheme constitute a supplementary retirement plan proscribed by Republic Act No. 4968?

The foregoing question is addressed by this Court in resolving the instant petition for certiorari which seeks to reverse and set aside Decision No. 94-126[1]dated March 15, 1994 of respondent Commission on Audit, which denied petitioners request for reconsideration of its adverse ruling disapproving claims for financial assistance under SSS Resolution No. 56.

The Facts

Petitioners Avelina B. Conte and Leticia Boiser-Palma were former employees of the Social Security System (SSS) who retired from government service on May 9, 1990 andSeptember 13, 1992, respectively. They availed of compulsory retirement benefits under Republic Act No. 660.[2]

In addition to retirement benefits provided under R.A. 660, petitioners also claimed SSS financial assistance benefits granted under SSS Resolution No. 56, series of 1971.

A brief historical backgrounder is in order. SSS Resolution No. 56,[3] approved on January 21, 1971, provides financial incentive and inducement to SSS employees qualified to retire to avail of retirement benefits under RA 660 as amended, rather than the retirement benefits under RA 1616 as amended, by giving them financial assistance equivalent in amount to the difference between what a retiree would have received under RA 1616, less what he was entitled to under RA 660. The said SSS Resolution No. 56 states:

RESOLUTION NO. 56

WHEREAS, the retirement benefits of SSS employees are provided for under Republic Acts 660 and 1616 as amended;

WHEREAS, SSS employees who are qualified for compulsory retirement at age 65 or for optional retirement at a lower age are entitled to either the life

annuity under R.A. 660, as amended, or the gratuity under R.A. 1616, as amended;

WHEREAS, a retirement benefit to be effective must be a periodic income as close as possible to the monthly income that would have been due to the retiree during the remaining years of his life were he still employed;

WHEREAS, the life annuity under R.A. 660, as amended, being closer to the monthly income that was lost on account of old age than the gratuity under R.A. 1616, as amended, would best serve the interest of the retiree;

WHEREAS, it is the policy of the Social Security Commission to promote and to protect the interest of all SSS employees, with a view to providing for their well-being during both their working and retirement years;

WHEREAS, the availment of life annuities built up by premiums paid on behalf of SSS employees during their working years would mean more savings to the SSS;

WHEREAS, it is a duty of the Social Security Commission to effect savings in every possible way for economical and efficient operations;

WHEREAS, it is the right of every SSS employee to choose freely and voluntarily the benefit he is entitled

to solely for his own benefit and for the benefit of his family;

NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees who are simultaneously qualified for compulsory retirement at age 65 or for optional retirement at a lower age be encouraged to avail for themselves the life annuity under R.A. 660, as amended;

RESOLVED, FURTHER, That SSS employees who availed themselves of the said life annuity, in appreciation and recognition of their long and faithful service, be granted financial assistance equivalent to the gratuity plus return of contributions under R.A. 1616, as amended, less the five year guaranteed annuity under R.A. 660, as amended;

RESOLVED, FINALLY, That the Administrator be authorized to act on all applications for retirement submitted by SSS employees and subject to availability of funds, pay the corresponding benefits in addition to the money value of all accumulated leaves. (underscoring supplied)

Long after the promulgation of SSS Resolution No. 56, respondent Commission on Audit (COA) issued a ruling, captioned as 3rd Indorsement dated July 10, 1989,[4] disallowing in audit all such claims for financial assistance under SSS Resolution No. 56, for the reason that: --

x x x the scheme of financial assistance authorized by the SSS is similar to those separate retirement plan or incentive/separation pay plans adopted by other government corporate agencies which results in the increase of benefits beyond what is allowed under existing retirement laws. In this regard, attention x x x is invited to the view expressed by the Secretary of Budget and Management dated February 17, 1988 to the COA General Counsel against the proliferation of retirement plans which, in COA Decision No. 591 dated August 31, 1988, was concurred in by this Commission. x x x.

Accordingly, all such claims for financial assistance under SSS Resolution No. 56 dated   January 21, 1971   should be disallowed in audit . (underscoring supplied)

Despite the aforequoted ruling of respondent COA, then SSS Administrator Jose L. Cuisia, Jr. nevertheless wrote[5] on February 12, 1990 then Executive Secretary Catalino Macaraig, Jr., seeking presidential authority for SSS to continue implementing its Resolution No. 56 dated January 21, 1971 granting financial assistance to its qualified retiring employees.

However, in a letter-reply dated May 28, 1990,[6] then Executive Secretary Macaraig advised Administrator Cuisia that the Office of the President is not inclined to favorably act on the herein request, let alone overrule the disallowance by COA of such

claims, because, aside from the fact that decisions, order or actions of the COA in the exercise of its audit functions are appealable to the Supreme Court[7] pursuant to Sec. 50 of PD 1445, the benefits under said Res. 56, though referred to as financial assistance, constituted additional retirement benefits, and the scheme partook of the nature of a supplementary pension/retirement plan proscribed by law.

The law referred to above is RA 4968 (The Teves Retirement Law), which took effect June 17, 1967 and amended CA 186 (otherwise known as the Government Service Insurance Act, or the GSIS Charter), making Sec. 28 (b) of the latter act read as follows:

(b) Hereafter, no insurance or retirement plan for officers or employees shall be created by employer. All supplementary retirement or pension plans heretofore in force in any government office, agency or instrumentality or corporation owned or controlled by the government, are hereby declared inoperative or abolished; Provided, That the rights of those who are already eligible to retire thereunder shall not be affected. (underscoring supplied)

On January 12, 1993, herein petitioners filed with respondent COA their letter-appeal/protest[8] seeking reconsideration of COAs ruling of July 10, 1989 disallowing claims for financial assistance under Res. 56.

On November 15, 1993, petitioner Conte sought payment from SSS of the benefits under Res. 56. On December 9, 1993, SSS Administrator Renato C. Valencia denied[9] the request in consonance with the previous disallowance by respondent COA, but assured petitioner that should the COA change its position, the SSS will resume the grant of benefits under said Res. 56.

On March 15, 1994, respondent COA rendered its COA Decision No. 94-126 denying petitioners request for reconsideration.

Thus this petition for certiorari under Rule 65 of the Rules of Court.

The Issues

The issues[10] submitted by petitioners may be simplified and re-stated thus: Did public respondent abuse its discretion when it disallowed in audit petitioners claims for benefits under SSS Res. 56?

Petitioners argue that the financial assistance under Res. 56 is not a retirement plan prohibited by RA 4968, and that Res. 56 provides benefits different from and aside from what a retiring SSS employee would be entitled to under RA 660. Petitioners contend that it is a social amelioration and economic upliftment measure undertaken not only for the benefit of the SSS but more so for the welfare of its qualified retiring employees. As such, it should be interpreted

in a manner that would give the x x x most advantage to the recipient -- the retiring employees whose dedicated, loyal, lengthy and faithful service to the agency of government is recognized and amply rewarded -- the rationale for the financial assistance plan. Petitioners reiterate the argument in their letter dated January 12, 1993 to COA that:

Motivation can be in the form of financial assistance, during their stay in the service or upon retirement, as in the SSS Financial Assistance Plan. This is so, because Government has to have some attractive remuneration programs to encourage well-qualified personnel to pursue a career in the government service, rather than in the private sector or in foreign countries ...

A more developmental view of the financial institutions grant of certain forms of financial assistance to its personnel, we believe, would enable government administrators to see these financial forms of remuneration as contributory to the national developmental efforts for effective and efficient administration of the personnel programs in different institutions.[11]

The Courts Ruling

Petitioners contentions are not supported by law. We hold that Res. 56 constitutes a supplementary retirement plan.

A cursory examination of the preambular clauses and provisions of Res. 56 provides a number of clear indications that its financial assistance plan constitutes a supplemental retirement/pension benefits plan. In particular, the fifth preambular clause which provides that it is the policy of the Social Security Commission to promote and to protect the interest of all SSS employees, with a view to providing for their well-being during both their working and retirement years, and the wording of the resolution itself which states Resolved, further, that SSS employees who availed themselves of the said life annuity (under RA 660), in appreciation and recognition of their long and faithful service, be granted financial assistance x x x can only be interpreted to mean that the benefit being granted is none other than a kind of amelioration to enable the retiring employee to enjoy (or survive) his retirement years and a reward for his loyalty and service. Moreover, it is plain to see that the grant of said financial assistance is inextricably linked with and inseparable from the application for and approval of retirement benefits under RA 660, i.e., that availment of said financial assistance under Res. 56 may not be done independently of but only in conjunction with the availment of retirement benefits under RA 660, and that the former is in augmentation or supplementation of the latter benefits.

Likewise, then SSS Administrator Cuisias historical overview of the origins and purpose of Res. 56 is very instructive and sheds much light on the controversy:[12]

Resolution No. 56, x x x, applies where a retiring SSS employee is qualified to claim under either RA 660 (pension benefit, that is, 5 year lump sum pension and after 5 years, life time pension), or RA 1616 (gratuity benefit plus return of contribution), at his option. The benefits under RA 660 are entirely payable by GSIS while those under RA 1616 are entirely shouldered by SSS except the return of contribution by GSIS.

Resolution No. 56 came about upon observation that qualified SSS employees have invariably opted to retire under RA 1616 instead of RA 660 because the total benefit under the former is much greater than the 5-year lump sum under the latter. As a consequence, the SSS usually ended up virtually paying the entire retirement benefit, instead of GSIS which is the main insurance carrier for government employees. Hence, the situation has become so expensive for SSS that a study of the problem became inevitable.

As a result of the study and upon the recommendation of its Actuary, the SSS Management recommended to the Social Security Commission that retiring employees who are qualified to claim under either RA 660 or 1616 should be encouraged to avail for themselves the life annuity under RA 660, as

amended, with the SSS providing a financial assistance equivalent to the difference between the benefit under RA 1616 (gratuity plus return of contribution) and the 5-year lump sum pension under RA 660.

The Social Security Commission, as the policy-making body of the SSS approved the recommendation in line with its mandate to insure the efficient, honest and economical administration of the provisions and purposes of this Act. (Section 3 (c) of the Social Security Law).

Necessarily, the situation was reversed with qualified SSS employees opting to retire under RA No. 660 or RA 1146 instead of RA 1616, resulting in substantial savings for the SSS despite its having to pay financial assistance.

Until Resolution No. 56 was questioned by COA. (underscoring part of original text; italics ours)

Although such financial assistance package may have been instituted for noble, altruistic purposes as well as from self-interest and a desire to cut costs on the part of the SSS, nevertheless, it is beyond any dispute that such package effectively constitutes a supplementary retirement plan. The fact that it was designed to equalize the benefits receivable from RA 1616 with those payable under RA 660 and make the latter program more attractive, merely confirms the foregoing finding.

That the Res. 56 package is labelled financial assistance does not change its essential nature. Retirement benefits are, after all, a form of reward for an employees loyalty and service to the employer, and are intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying about his financial support or upkeep.[13] On the other hand, a pension partakes of the nature of retained wages of the retiree for a dual purpose: to entice competent people to enter the government service, and to permit them to retire from the service with relative security, not only for those who have retained their vigor, but more so for those who have been incapacitated by illness or accident.[14]

Is SSS Resolution No. 56 then within the ambit of and thus proscribed by Sec. 28 (b) of CA 186 as amended by RA 4968?

We answer in the affirmative. Said Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or retirement plan -- other than the GSIS -- for government officers and employees, in order to prevent the undue and inequitous proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said provision of law and is therefore invalid, void and of no effect. To ignore this and rule otherwise would be tantamount to permitting every other government office or agency to put up its own supplementary retirement benefit plan under the guise of such financial assistance.

We are not unmindful of the laudable purposes for promulgating Res. 56, and the positive results it must have had, not only in reducing costs and expenses on the part of the SSS in connection with the pay-out of retirement benefits and gratuities, but also in improving the quality of life for scores of retirees. But it is simply beyond dispute that the SSS had no authority to maintain and implement such retirement plan, particularly in the face of the statutory prohibition. The SSS cannot, in the guise of rule-making, legislate or amend laws or worse, render them nugatory.

It is doctrinal that in case of conflict between a statute and an administrative order, the former must prevail.[15] A rule or regulation must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be valid.[16] The rule-making power of a public administrative body is a delegated legislative power, which it may not use either to abridge the authority given it by the Congress or the Constitution or to enlarge its power beyond the scope intended. Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by such a body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute.[17] Though well-settled is the rule that retirement laws

are liberally interpreted in favor of the retiree,[18] nevertheless, there is really nothing to interpret in either RA 4968 or Res. 56, and correspondingly, the absence of any doubt as to the ultra-vires nature and illegality of the disputed resolution constrains us to rule against petitioners.

As a necessary consequence of the invalidity of Res. 56, we can hardly impute abuse of discretion of any sort to respondent Commission for denying petitioners request for reconsideration of the 3rd Indorsement of July 10, 1989. On the contrary, we hold that public respondent in its assailed Decision acted with circumspection in denying petitioners claim. It reasoned thus:

After a careful evaluation of the facts herein obtaining, this Commission finds the instant request to be devoid of merit. It bears stress that the financial assistance contemplated under SSS Resolution No. 56 is granted to SSS employees who opt to retire under R.A. No. 660. In fact, by the aggrieved parties own admission (page 2 of the request for reconsideration dated January 12, 1993), it is a financial assistance granted by the SSS management to its employees, in addition to the retirement benefits under Republic Act No. 660. (underscoring supplied for emphasis) There is therefore no question, that the said financial assistance partakes of the nature of a retirement benefit that has the effect of modifying existing retirement laws particularly R.A. No. 660.

Petitioners also asseverate that the scheme of financial assistance under Res. 56 may be likened to the monetary benefits of government officials and employees who are paid, over and above their salaries and allowances as provided by statute, an additional honorarium in varying amounts. We find this comparison baseless and misplaced. As clarified by the Solicitor General:[19]

Petitioners comparison of SSS Resolution No. 56 with the honoraria given to government officials and employees of the National Prosecution Service of the Department of Justice, Office of the Government Corporate Counsel and even in the Office of the Solicitor General is devoid of any basis. The monetary benefits or honoraria given to these officials or employees are categorized as travelling and/or representation expenses which are incurred by them in the course of handling cases, attending court/administrative hearings, or performing other field work. These monetary benefits are given upon rendition of service while the financial benefits under SSS Resolution No. 56 are given upon retirement from service.

In a last-ditch attempt to convince this Court that their position is tenable, petitioners invoke equity. They believe that they are deserving of justice and equity in their quest for financial assistance under SSS Resolution No. 56, not so much because the SSS is one of the very few stable agencies of government where no doubt this recognition and

reputation is earned x x x but more so due to the miserable scale of compensation granted to employees in various agencies to include those obtaining in the SSS.[20]

We must admit we sympathize with petitioners in their financial predicament as a result of their misplaced decision to avail of retirement benefits under RA 660, with the false expectation that financial assistance under the disputed Res. 56 will also materialize. Nevertheless, this Court has always held that equity, which has been aptly described as justice outside legality, is applied only in the absence of, and never against, statutory law or judicial rules of procedure.[21] In this case, equity cannot be applied to give validity and effect to Res. 56, which directly contravenes the clear mandate of the provisions of RA 4968.

Likewise, we cannot but be aware that the clear imbalance between the benefits available under RA 660 and those under RA 1616 has created an unfair situation for it has shifted the burden of paying such benefits from the GSIS (the main insurance carrier of government employees) to the SSS. Without the corrective effects of Res. 56, all retiring SSS employees without exception will be impelled to avail of benefits under RA 1616. The cumulative effect of such availments on the financial standing and stability of the SSS is better left to actuarians.But the solution or remedy for such situation can be provided only by Congress. Judicial hands cannot, on the pretext of showing concern for the welfare of government

employees, bestow equity contrary to the clear provisions of law.

Nevertheless, insofar as herein petitioners are concerned, this Court cannot just sit back and watch as these two erstwhile government employees, who after spending the best parts of their lives in public service have retired hoping to enjoy their remaining years, face a financially dismal if not distressed future, deprived of what should have been due them by way of additional retirement benefits, on account of a bureaucratic boo-boo improvidently hatched by their higher-ups. It is clear to our mind that petitioners applied for benefits under RA 660 only because of the incentives offered by Res. 56, and that absent such incentives, they would have without fail availed of RA 1616 instead. We likewise have no doubt that petitioners are simply innocent bystanders in this whole bureaucratic rule-making/financial scheme-making drama, and that therefore, to the extent possible, petitioners ought not be penalized or made to suffer as a result of the subsequently determined invalidity of Res. 56, the promulgation and implementation of which they had nothing to do with.

And here is where equity may properly be invoked: since SSS employees who are qualified for compulsory retirement at age 65 or for optional retirement at a lower age are entitled to either the life annuity under R.A. 660, as amended, or the gratuity under R.A. 1616, as amended,[22] it appears that petitioners, being qualified to avail of benefits under RA 660, may also readily qualify under RA 1616. It

would therefore not be misplaced to enjoin the SSS to render all possible assistance to petitioners for the prompt processing and approval of their applications under RA 1616, and in the meantime, unless barred by existing regulations, to advance to petitioners the difference between the amounts due under RA 1616, and the amounts they already obtained, if any, under RA 660.

WHEREFORE, the petition is hereby DISMISSED for lack of merit, there having been no grave abuse of discretion on the part of respondent Commission. The assailed Decision of public respondent is AFFIRMED, and SSS Resolution No. 56 is hereby declared ILLEGAL, VOID AND OF NO EFFECT. The SSS is hereby urged to assist petitioners and facilitate their applications under RA 1616, and to advance to them, unless barred by existing regulations, the corresponding amounts representing the difference between the two benefits programs. No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME 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.:p

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 del Castillo, Apolinario Esber were, among others, named respondents, 6 the latter filed separate answers, opted 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 G.R. No. 95445, supra. The ACT also filed a similar petition before the Supreme Court . . . docketed as G.R. No. 95590." 9 Both 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 of the mass leave of MPSTA teachers, (and) with which causes they (CHR complainants) sympathize." 12 The Commission 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 and resolve the case on the merits with or without respondents counter affidavit." 18 It held that the "striking 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.

The Commission was created by the 1987 Constitution as an independent office. 23 Upon its constitution, it succeeded 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 toinvestigate 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 official probe . . .: to conduct an official inquiry." 27 The purpose of investigation, of course, is to discover, 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 pass judgment on: settle judicially: . . . act as judge." 30 And "adjudge" means "to decide or rule upon as a 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.

Indeed, the Secretary of Education has, as above narrated, already taken cognizance of the issues and resolved them, 33 and it 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.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 153310             March 2, 2004

MEGAWORLD GLOBUS ASIA, INC., petitioner, vs.DSM CONSTRUCTION AND DEVELOPMENT CORPORATION and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.

D E C I S I O N

TINGA, J.:

Before this Court is a Petition for Review on Certiorari assailing the Decision dated February 14, 2002, of the Court of Appeals in CA G.R. SP No. 67432,1 which affirmed the Decision2 of the Construction Industry Arbitration Commission (CIAC)3 dated September 8, 2001, in CIAC Case No. 22-2000 finding petitioner Megaworld Globus Asia, Inc., liable to DSM Construction in the amount of P62,760,558.49.

The antecedents are as follows:

Relative to the construction of a condominium project called "The Salcedo Park," located at H.V. dela Costa

St., Salcedo Village, Makati City, the project owner, Megaworld, entered into three separate contracts with DSM Construction, namely: (1) Contract for Architectural Finishing Works; (2) Contract for Interior Finishing Works; and (3) Contract for Supply and Installation of Kitchen Cabinets and Closets. The total contract price, which was initially placed at P300 Million, was later reduced to P240 Million when the items for kitchen cabinets and walk-in closets were deleted.4 The contracts also contain a stipulation for Retention Money, which is a portion of the total contract price (usually, as in this case, 10%) set aside by the project owner from all approved billings and retained for a certain period to guarantee the performance by the contractor of all corrective works during the defect-liability period which, in this case, is twelve months from the issuance of the Taking Over Certificate of Works.5

The Letter of Award for Architectural Finishing Works provides that the period for commencement and completion shall be twelve months, from August 1, 1997 to July 31, 1998. However, on February 21, 2000, representatives of both Megaworld and DSM Construction entered into an Interim Agreement whereby they agreed on a new schedule of the turnover of units from the 26th floor to the 40th floor, which was the last of the contracted works.6The consideration agreed upon in the Interim Agreement was P53,000,000.00. Of this amount, P3,000,000.00 was to be released immediately while five (5) equal installments

of P7,000,000.00 were to be released depending on the turn-over of units from the 26th floor to the 40th floor. The remaining amount of P15,000,000.00 of theP53,000,000.00 consisted of half of the retention money.7

Because of the differences that arose from the billings, DSM Construction filed on August 21, 2002, a Complaintbefore the CIAC for compulsory arbitration, claiming payment of P97,743,808.33 for the outstanding balance of the three construction contracts, variation works, labor escalation, preliminaries loss and expense, earned retention money, interests, and attorney’s fees.8 DSM Construction alleged that it already commenced the finishing works on the existing 12 floors on August 1, 1997, instead of waiting for the entire 40-floor structure to be completed. At one time, DSM Construction worked with other contractors whose work often depended on, interfered or conflicted with said contractors. Delay by a trade contractor would start a chain reaction by delaying or putting off other works.9

Interposing mainly the defense of delay in the turn-over of units and the poor quality of work of DSM Construction, Megaworld filed its Answer and made a counter-claim for loss of profits, liquidated damages, costs of take-over and rectification works, administration expenses, interests, attorney’s fees and cost of arbitration in the total amount of P85,869,870.28.10

Prudential Guarantee and Assurance, Inc. (PGAI), which issued a Performance Bond to guarantee Megaworld’s contractual obligation on the project, was impleaded by Megaworld as a third-party respondent.11

On March 28, 2001, the parties signed before the members of the Arbitral Tribunal the Terms of Reference12(TOR) where they setforth their admitted facts,13 respective documentary evidence,14 summary of claims15 and issues to be resolved by the tribunal.16 After presenting their evidence in the form of affidavits of witnesses,17 the parties submitted their respective memoranda/draft decisions.18

On October 19, 2001, the Arbitral Tribunal promulgated its Decision dated September 28, 2001, awardingP62,760,558.49 to DSM Construction and P9,473,799.46 to Megaworld.19

Megaworld filed a Petition for Review under Rule 43 of the Rules of Civil Procedure before the Court of Appeals. It faulted the Arbitral Tribunal for finding that DSM Construction achieved a 95.56% level of accomplishment as of February 14, 2000; for absolving DSM Corporation of the consequences of the alleged delay in the performance of its work; and for ruling that DSM Construction had complied with the contractual requirements for filing requests for extension. Megaworld likewise questioned the sufficiency of evidence to justify the awards for liquidated damages; the balance of the contract price;

the balance of amounts payable on account of the Interim Agreementof February 21, 2000; the amount of P6,596,675.55 for variation orders; the amount of P29,380,902.35 as reimbursement for preliminaries/loss and expense; the amount of P413,041.52 for labor escalation costs; and the balance of the retention money in the amount of P14,700,000.00 despite its award of P11,820,000.00 under the February 21, 2000, Interim Agreement. Finally, Megaworld claimed that the Arbitral Tribunal erred in denying its claim for liquidated damages, expenses incurred for the cost of take-over work, administrative expenses, and its recourse against PGAI and for limiting its recovery for rectification work to only P9,197,863.55.20

On February 14, 2002, the Court of Appeals promulgated its Decision21 affirming that of the Arbitral Tribunal. The court pointed out that only questions of law may be raised before it on appeal from an award of the CIAC.22 That pronouncement notwithstanding, the Court of Appeals proceeded to review the decision of the Arbitral Tribunal and found the same to be amply supported by evidence.23

Megaworld sought reconsideration of the Court of Appeals’ Decision arguing, among other things, that the appellate court ignored the ruling in Metro Construction, Inc. v. Chatham Properties24 that the review of the CIAC award may involve either questions of fact, law, or both fact and law.

The Court of Appeals denied the motion for reconsideration in its Resolution25 dated April 25, 2002. While acknowledging that the findings of fact of the CIAC may be questioned in line with Metro Construction,26 the appellate court stressed that the tribunal’s decision is not devoid of factual or evidentiary support.

Megaworld elevated the case to this Court through the present Petition, advancing the following grounds, viz:

I

THE COURT OF APPEALS IN EFFECT REFUSED TO HEED THE RULE LAID DOWN BY THIS Honorable Court in the Metro Construction, INC. vs. Chatham properties, inc. case when it dismissed mgai’s petition despite the grave questions of both fact and law brought before it by the petitioner.

II

the finding of the appellate court that the decision was based on substantial evidence adduced by both parties sans any review of the record or of attachments of dsm is fatally wrong, such finding being merely an adoption of the tribunal’s decision which, as earlier pointed out, was not supported by competent, credible and admissible evidence.

III

the court of appeals seriously erred in giving blanket approval of all the unfounded claims and conclusions of the ciac arbitral tribunal’s SEPTEMBER 28, 2001 decision to the detriment of petitioner’s cardinal right to due process, particularly to its right to administrative due process.

IV

the findings and conclusions made by a highly partisan ciac arbitral tribunal have no basis on the evidence on record. hence, the exception to the rule that only questions of law may be brought to the honorable court is applicable in the case AT bar.27

Although Megaworld, at the outset,28 intimates that the case involves grave questions of both fact and law, a cursory reading of the Petition reveals that, except for the amorphous advertence to administrative due process, the alleged errors fundamentally involve only questions of fact. Megaworld’s plea for the Court to pass upon the findings of facts of the Arbitral Tribunal, which were upheld by the appellate court, must perforce fail.

To jumpstart its bid, Megaworld exploits the Court of Appeals’ pronouncement in the assailed decision that only questions of law may be raised before it from an award of the CIAC. The appellate court did so, Megaworld continues, in evident disregard of Metro Construction.29

Under Section 19 of Executive Order No. 1008,30 the CIAC’s arbitral award "shall be final and inappealable except on questions of law which shall be appealable to the Supreme Court." In Metro Construction, however, this Court held that, with the modification of E.O. No. 1008 by subsequent laws and issuances,31 decisions of the CIAC may be appealed to the Court of Appeals not only on questions of law but also on questions of fact and mixed questions of law and fact.

Of such subsequent laws and issuances, only Section 1,32 Rule 43 of the 1997 Rules of Civil Procedure expressly mentions the CIAC. While an argument may be made that procedural rules cannot modify substantive law, adding in support thereof that Section 1, Rule 43 has increased the jurisdiction of the Court of Appeals by expanding the scope of review of CIAC awards, or that it contravenes the rationale for arbitration, extant from the record is the fact that no party raised such argument. Consequently, the matter need not be delved into.

In any case, the attack against the merits of the Court of Appeals’ Decision must fail. Although Metro Constructionmay have been unbeknownst to the appellate court when it promulgated its Decision, the fact remains that, as noted therein,33 it reviewed the findings of facts of the CIAC and ruled that the findings are amply supported by the evidence.

The Court of Appeals is presumed to have reviewed the case based on the Petition and its annexes, and weighed them against the Comment of DSM Construction and the Decision of the Arbitral Tribunal to arrive at the conclusion that the said Decision is based on substantial evidence. In administrative or quasi-judicial bodies like the CIAC, a fact may be established if supported by substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.34

The tenability of the assailed Decision is clear from the following discussion of the arguments raised by Megaworld before the Court of Appeals which significantly are the same arguments it has raised before this Court.

Issue of Accomplishment Level

Megaworld contested the finding of 95.56% level of accomplishment by the Arbitral Tribunal, alleging that the receipts DSM Construction issued for payments under the Interim Agreement show that the latter only achieved 90% accomplishment up to the 31st floor while the 32nd to the 34th floors were only 60% completed.35 Megaworld insisted, therefore, that the level of accomplishment was nowhere near 90%.

DSM Construction countered that Megaworld, in claiming a level of accomplishment of only 90%, contradicted its own Project Manager, TCGI,36 which

came up with a different percentage of accomplishment that are notably higher than Megaworld’s computation.37

In resolving this issue, the Arbitral Tribunal relied on the computation of Davis Langdon & Seah (DLS), the project’s independent surveyor,38 which found the level of accomplishment as of February 14, 2000, to be 95.56%. DLS’s computation is recited in Exhibit "NN",39 thus:

Architectural Finishing :40

The 24th Progress Billing evaluated by DLS covering the period November 15, 1999 to December 15, 1999 over the Contract Price for Architectural Finishing Works.

Php213,658,888.7741Php223,456,756.6842

Kitchen Cabinets & Bedroom Closets:43

The 9th Progress Billing evaluated by DLS covering the period December 1, 1999 to December 9, 1999 over the contract price for Kitchen Cabinet and Bedroom Closet.

Php26,228,091.7344Php28,556,915.1745

Interior Finishing Works:46

The 13th Progress Billing evaluated by DLS covering the period January 8, 2000 to

Php49,383,114.6747Php50,685,416.5548

February 7, 2000 for the Interior Finishing Works over the contract price for Interior Finishing Work.

Php213,658,888.77 +

Php26,228,091.72 +

Php49,383,114.67 =

289,270,295.17=95.56%

Php223,456,756.68

Php 28,556,915.17

Php50,685,416.55

302,699,097.40

Clearly, thus, CIAC’s finding that the level of accomplishment of DSM Construction as of February 12, 2002, stood at 95.56% was affirmed by the Court of Appeals because it is supported by substantial evidence.

The Court of Appeals also noted that the Arbitral Tribunal did not give due course to all of DSM Construction’s claims. Indeed, the Arbitral Tribunal rejected the construction company’s demand for payment for subsequent works done after February 12, 2000, because Exhibit "OO," on which DSM

Construction’s demand was based, does not bear any mark that it had been received by Megaworld. Thus, the Arbitral Tribunal concluded that subsequent works up to September 22, 2000, when DSM Construction supposedly stopped working on the project, had not been established.49

This Court observes that between the two contrasting claims of Megaworld and DSM Construction on the percentage of work accomplishment, the Arbitral Tribunal instead accorded weight to the assessment of DLS which is the project surveyor. Apart from being reasonable, DLS’s evaluation is impartial. Thus, as correctly pointed out by the Arbitral Tribunal, DLS rejected DSM Construction’s 99% accomplishment claim when it limited its evaluation to only 95.56%.

Issues of Delay and Liquidated Damages

Next, Megaworld attributed the delay in the completion of the construction project solely to DSM Construction. The latter countered that among the causes of delay was the lack of coordination among trade contractors and the absence of a general contractor.50 Although the contract purportedly contains a provision for the coordination of trade contractors, the lack of privity among them prevented coordination such that DSM Construction could not require compliance on the part of the other trade contractors.

The Arbitral Tribunal decided this question by turning to Section 2.01 of the General Conditions of the Contract, which states:

2.01 SITE, ACCESS & WORKS

The Contractor shall accept the Site as found on the date for possession and at their own expense clear the site of any debris which may have been left by the preceding occupants/contractors.

The Arbitral Tribunal held that Section 2.01 presupposes that on the date of possession by DSM Construction of the work premises, the preceding contractor had already left the same.51 The tribunal explained that the delay incurred by other trade contractors also resulted in the delay of the work of DSM Construction.

It also pointed out that under Section 5.3 (1)52 of the Interim Agreement,53 Megaworld is required to complete and turn over to DSM Construction preceding works for the latter to complete their works in accordance with the Revised Work Schedule. Section 5.3 (1), the Arbitral Tribunal noted, even allows DSM Construction to recover losses incurred on account of the standby time of DSM’s personnel/manpower or workers mobilized while Megaworld is not ready to turn over the preceding works. The Arbitral Tribunal further held that, in accordance with Section 5.3 (2)54 of the Interim Agreement, DSM Construction was entitled to an

extension of time corresponding to the number of days of delay reckoned from the time the preceding work item or area should have been turned over to DSM Construction. Consequently, such delay, which is not exclusively imputable to DSM Construction, negates the claim for liquidated damages by Megaworld.55

In affirming the Arbitral Tribunal’s disposition of the issues of delay and payment of liquidated damages, the appellate court noted that the Arbitral Tribunal narrated the claims and defenses of both DSM Construction and Megaworld before making an evaluation thereof and arriving at its conclusion.56 Clearly, the evidence and arguments were carefully weighed to justify the said disposition.

The Tribunal’s finding that the project had already been delayed even before DSM Construction commenced its work is borne out by the evidence. In his letter, Exhibit X-2,57 Project Management Consultant Eduardo C. Arrojado, conceded that the previous contractors had delayed the project, at the same time faulting DSM Construction for incurring its own delay. Furthermore, the work of DSM Construction pertaining as it did to the architectural and interior finishing stages as well as the supply and installation of kitchen cabinets and closets, obviously related to the final details and completion stage of the project. Thus, commencement of its task had to depend on the turn over of the complete work of the prior contractors. Hence, the delay of the previous

contractors resulted in the delay of DSM Construction’s work.

Issues of the Contract Price Balance and Retention Money

Megaworld also questioned the Arbitral Tribunal’s awards of P7,129,825.19 corresponding to the balance of the contract price, and P11,820,000.00 pursuant to the Interim Agreement.58 Megaworld alleged that DSM Construction was no longer entitled to the balance of the contract price and the retention money after the latter received payments pursuant to the Interim Agreement in the amounts of P5,444,553.18 for the 26th to the 28thfloors, another P5,444,553.18 for the 29th to the 31st floors at a 90% completion rate, and P4,161,818.18 for the 32nd to the 34th floors which were 60% completed. Megaworld also contended that since it spent more money to complete the scope of work of DSM Construction, the latter was no longer entitled to any of the balance.

On the other hand, DSM Construction argued that the award was justified in view of the failure of Megaworld to controvert the amount of P7,129,825.19 included in the Account Overview of DLS. DSM Construction also emphasized that it was not claiming the entire P53 Million under the Interim Agreement but only the amount corresponding to the actual work done. Even based on DLS’s computation, a total of P11,820,000.00 of retention money is still unpaid

out of the 50% agreed to be released under the Interim Agreement (P15,000,000.00 lessP3,180,000.00 retention money or P11,820,000.00 for the paid billings).59

The Arbitral Tribunal ruled that the balance claimed under the three contracts was based on what DSM Construction had actually accomplished less the payments it had previously received. Considering that the remaining works which were performed by another trade contractor, Deticio and Isabedra Builders, were paid directly by Megaworld, no other cost for work accomplished in the Interim Agreement is due DSM Construction except the retention money of P11,820,000.00.60

The Court of Appeals affirmed the award of the Arbitral Tribunal regarding the balance of the contract price ofP7,129,825.19 and the retention money of P11,820,000.00 to DSM Construction. The Court of Appeals noted that the Arbitral Tribunal again narrated the claims and defenses of both DSM Construction and Megaworld before arriving at its conclusion. The appellate court further stated that the mere fact that the tribunal did not award the whole amount claimed by DSM Construction (P12,820,000.00) and instead awarded only P11,820,000.00 belies Megaworld’s allegation that the tribunal adopted "hook, line and sinker" DSM Construction’s claims.61

This Court finds the award of the balance of the contract price of P7,129,825.20 justified in view of DLS’ explanation in Exhibit MM-362 that the amount of P7,129,825.20 represented the unpaid billing for architectural, interior and kitchen billings before Megaworld and DSM Construction drafted the Interim Agreement.

Issue of Variation Works

Megaworld also disputed before the Court of Appeals the P6,686,675.5563 award by the Arbitral Tribunal for variation works. Variation works consist of the addition, omission or alteration to the kind, quality or quantity of the works.64 DSM Construction originally claimed a total of P26,208,639.00 for variation works done but, of this claim, the Arbitral Tribunal only awarded P6,686,675.55 in line with the evaluation of DLS.

Megaworld conceded that DSM Construction performed additional works to the extent of P5,036,252.81. However, Megaworld claimed that since it incurred expenses when it hired another trade contractor to take over the works left uncompleted by DSM Construction, the latter lost its right to claim such amount especially since DSM Construction did not comply with the documentation when claiming variation works.65

DSM Construction asserted that the Arbitral Tribunal, in fact, should have awarded P26,208,639.00 instead

of limiting the award to only P6,686,675.55 because it was not even disputed that variation works were performed. It also contended that it cannot be faulted for the lack of documentation because the fault lay on Megaworld’s project manager who failed to forward the variation orders to DLS.66

The Arbitral Tribunal ruled in favor of DSM Construction, holding that there was enough evidence to prove that the contractor made a request for change or variation orders. The Arbitral Tribunal also found the testimony of Engineer Eduardo C. Arrojado convincing, factual and balanced despite Megaworld’s attempt to discredit him. However, while the amount claimed for variation works was P26,208,639.00, the Arbitral Tribunal limited the awarded to only P6,686,675.5567 since a closer scrutiny of the other items indicated that some works were not performed.68

The appellate court upheld the award of the Arbitral Tribunal because the award was based not only on the documentary exhibits prepared by DLS but on the testimony of Engineer Eduardo C. Arrojado, as well.69

This Court is convinced that payments for variation works is due. Undoubtedly, variation works were performed by DSM Construction. This was confirmed by Engineer Eduardo C. Arrojado who testified that he recommended the payment for substantial additional works to DSM Construction. He further stated that since time was of the essence in the completion of the

project, there were variation orders which were performed without the prior approval of the owner. However, he explained that this was a common construction practice. Finally, he stated that he agreed with the evaluation of DLS.70

The testimony justified the Arbitral Tribunal’s reliance on the evaluation made by DLS which limited the claim for variation works to P6,596,675.55.

Issue of Preliminaries/Loss and Expense

Megaworld also disputed the award of P29,380,902.35 for preliminaries/losses and expense.

The provision for preliminaries/loss and expense in the contract assumes a direct loss and/or expense incurred in the regular progress of work for which the contractor would not be reimbursed under any other provision of the contract.71 DSM Construction’s claim for preliminaries/loss and expense in the amount of P36,603,192.82 covered the loss and expense incurred on payroll, equipment rental, materials and site clearing on account of such factors as delay in the execution of the works for causes not attributable to DSM Construction.72

Megaworld refused to recognize DSM Construction’s claim because the latter allegedly failed to comply with Clause 6.16 of the Conditions of Contract, which imposes a two-month deadline for submission of

claims for preliminaries reckoned from "the happening of the event giving rise to the loss and expense."73 DSM Construction, however, argued that the documentary evidence shows that out of the four claims for preliminaries, only one (Exhibit MM-5 with an evaluation of P17,552,722.47), covering the period August 1, 1998 to April 1999, was submitted beyond the two-months requirement.74 DSM Construction also pointed out that the two-month requirement for this claim was waived by Megaworld through DLS when the latter recognized the validity of claims by coming up with an evaluation of P17,552,722.47 for the period covered in Exhibit MM-5.75

The Arbitral Tribunal ruled that DSM Construction was entitled to extended preliminaries considering that delay was not attributable to DSM Construction. The Arbitral Tribunal observed that Megaworld did not present evidence to refute the claim for extended preliminaries which were previously evaluated by DLS. However, after assessing the two previous evaluations by DLS, the tribunal ruled that the claims for hauling and disposal and cleaning and clearing of debris should not be included in the extended preliminaries. Hence, the Arbitral Tribunal reduced the amount of P44,051.62 from the claim of P2,655,879.89 per Exhibit "MM-7," and P3,883,309.54 from the claim of P5,651,235.24 per Exhibit "MM-8," such amounts being unnecessary.76

The appellate court affirmed the award, stressing the fact that the Arbitral Tribunal denied some of the claims which it did not find valid.77

DSM Construction’s entitlement to the payment for preliminaries was explained by Engineer Eduardo C. Arrojado to be the necessary result of the extension of the contract between DSM Construction and Megaworld.78 Notably, majority of the claims of DSM Construction was reduced by the Arbitral Tribunal on the basis of Exhibit MM-479 or the Summary of Variation Order Status Report prepared by DLS.

Although the Arbitral Tribunal ruled that DSM Construction was entitled to claim for preliminaries, the award was not based on the claim of DSM Construction but on the evaluation made by DLS.

The foregoing disquisition adequately shows that the evidence on record supports the findings of facts of the Arbitral Tribunal on which the Court of Appeals based its decision. In fact, although not all the exhibits in the Arbitral Tribunal were presented before the Court of Appeals, the record of the appellate court contains the operative facts and the substance of said exhibits, thus enabling the intelligent disposition of the issues presented before it. This Court went over all the records, including the exhibits, to ascertain whether the appellate court missed any crucial point. It did not.

The alleged undue favor accorded by the Arbitral Tribunal to DSM Construction is belied by the fact that the Arbitral Tribunal did not grant all of DSM Construction’s claims. In majority of DSM Construction’s claims, the Arbitral Tribunal awarded amounts lower than what DSM Construction demanded. The Arbitral Tribunal also granted some of Megaworld’s claims.80

Neither did the Court of Appeals merely "swallow hook, line and sinker" the award of the Arbitral Tribunal. While the appellate court affirmed the decision of the Arbitral Tribunal, it also ruled in favor of Megaworld when it limited DSM Construction’s lien to only six units instead of all the condominium units to which DSM was entitled under the Contract, rationalizing that the P62 Million award can be covered by the value of the six units of the condominium project.81

Considering that the computations, as well as the propriety of the awards of the Arbitral Tribunal, are unquestionably factual issues that have been discussed and ruled upon by Arbitral Tribunal and affirmed by the Court of Appeals, we cannot depart from such findings. Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the Court of Appeals.82

Megaworld, however, adamantly contends that the present case constitutes an exception to the above rule because: (1) there is grave abuse of discretion in the appreciation of facts; (2) the judgment is premised on misapprehension of facts; and, (3) the findings of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on record.83

We disagree. None of these flaws appear in this case. Grave abuse of discretion means the capricious or whimsical exercise of judgment that is so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.84 No abuse of discretion was established by Megaworld. On the contrary, what is apparent is Megaworld’s effort to attribute grave abuse of discretion to the Arbitral Tribunal simply because of the unfavorable judgment against it. Megaworld’s assertion that there was misapprehension of facts and that the evidence is insufficient to support the decision is also untenable. TheDecisions of the Arbitral Tribunal and the Court of Appeals adequately explain the reasons therefor and are supported by substantial evidence.

Likewise unmeritorious is Megaworld’s assertion that it was deprived of administrative due process. The Arbitral Tribunal considered the arguments and the evidence submitted by both parties. That it accorded

greater weight to DSM Construction’s evidence, by itself, does not constitute a denial of due process.

WHEREFORE, the Petition is DENIED. The Decision dated February 14, 2001, of the Court of Appeals is AFFIRMED. The Temporary Restraining Order issued by this Court on July 12, 2002, is hereby LIFTED. Costs against Petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 148318             November 22, 2004

NATIONAL POWER CORPORATION, petitioner, vs.HON. ROSE MARIE ALONZO-LEGASTO, as Presiding Judge, RTC of Quezon City, Branch 99, JOSE MARTINEZ, Deputy Sheriff, RTC of Quezon City, CARMELO V. SISON, Chairman, Arbitration Board, and FIRST UNITED CONSTRUCTORS CORPORATION, respondents.

D E C I S I O N

TINGA, J.:

National Power Corporation (NPC) filed the instant Petition for Review1 dated July 19, 2001, assailing the Decision2 of the Court of Appeals dated May 28, 2001 which affirmed with modification the Order3 and Writ of Execution4 respectively dated May 22, 2000 and June 9, 2000 issued by the Regional Trial Court. In its assailed Decision, the appellate court declared respondent First United Constructors Corporation (FUCC) entitled to just compensation for blasting works it undertook in relation to a contract for the construction of power facilities it entered into with petitioner. The Court of Appeals, however, deleted the award for attorney's fees having found no basis therefor.

The facts culled from the Decision of the Court of Appeals are undisputed:

On April 14, 1992, NPC and FUCC entered into a contract for the construction of power facilities (civil works) – Schedule 1 – 1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Cawayan area) and Schedule 1A – 1x20 MW Bacon-Manito II Modular Geothermal Power Plant (Botong area) in Bacon, Sorsogon (BACMAN II). The total contract price for the two schedules is P108,493,966.30, broken down as follows:

SCHEDULE

1 – Cawayan area P 52,081,421.00

1A – Botong area P 56,412,545.30

P 108,493,966.30

Appended with the Contract is the contract price schedule which was submitted by the respondent FUCC during the bidding. The price for grading excavation was P76.00 per cubic meter.

Construction activities commenced in August 1992. In the latter part of September 1992 and after excavating 5.0 meters above the plant elevation, FUCC requested NPC that it be allowed to blast to the design grade of 495 meters above sea level as its dozers and rippers could no longer excavate. It further requested that it be paid P1,346.00 per cubic meter similar to the rate of NPC's project in Palinpinon.

While blasting commenced on October 6, 1992, NPC and FUCC were discussing the propriety of an extra work order and if such is in order, at what price should FUCC be paid.

Sometime in March 1993, NPC Vice President for Engineering Construction, Hector Campos, created a task force to review FUCC's blasting works. The technical task force recommended

that FUCC be paid P458.07 per cubic meter as such being the price agreed upon by FUCC.

The matter was further referred to the Department of Public [W]orks and Highways (DPWH), which in a letter dated May 19, 1993, recommended the price range of P500.00 to P600.00 per cubic meter as reasonable. It further opined that the price of P983.75 per cubic meter proposed by Lauro R. Umali, Project Manager of BACMAN II was high. A copy of the DPWH letter is attached as Annex "C", FUCC's Exhibit EEE-Arbitration.

In a letter dated June 28, 1993, FUCC formally informed NPC that it is accepting the proposed price of P458.07 per cubic meter. A copy of the said letter is attached as Annex "D", FUCC's Exhibit L Arbitration.

In the meantime, by March 1993, the works in Botong area were in considerable delay. By May 1993, civil works in Botong were kept at a minimum until on November 1, 1993, the entire operation in the area completely ceased and FUCC abandoned the project.

Several written and verbal warnings were given by NPC to FUCC. On March 14, 1994, NPC's Board of Directors passed Resolution No. 94-63 approving the recommendation of

President Francisco L. Viray to take over the contract. President Viray's recommendation to take over the project was compelled by the need to stave-off huge pecuniary and non-monetary losses, namely:

(a) Generation loss estimated to be at P26,546,400/month;

(b) Payment of steam penalties to PNOC-EDC the amount estimated to be at P10,206,048.00/month;

(c) Payment of liquidated damages due to the standby of electromechanical contractor;

(d) Loss of guaranteed protection (warranties) of all delivered plant equipment and accessories as Mitsubishi Corporation, electromechanical contractor, will not be liable after six months of delivery.

To prevent NPC from taking over the project, on March 28, 1994, FUCC filed an action for Specific Performance and Damages with Preliminary Injunction and Temporary Restraining Order before Branch 99, Regional Trial Court, Quezon City.

Under paragraph 19 of its Complaint, FUCC admitted that it agreed to pay the price of P458.07 per cubic meter.

On April 5, 1994, Judge de Guzman issued a temporary restraining order and on April 21, 1994, the trial court resolved to grant the application for issuance of a writ of preliminary injunction.

On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for Temporary Restraining Order and Preliminary Injunction before the First Division of the Court of Appeals asserting that no injunction may issue against any government projects pursuant to Presidential Decree 1818.

On July 8, 1994, the Court of Appeals through then Associate Justice Bernardo Pardo issued a temporary restraining order and on October 20, 1994, the said court rendered a Decision granting NPC's Petition for Certiorari and setting aside the lower court's Order dated April 21, 1994 and the Writ of Preliminary Injunction dated May 5, 1994.

However, notwithstanding the dissolution by the Court of Appeals of the said injunction, on July 15, 1995, FUCC filed a Complaint before the Office of the Ombudsman against several NPC employees for alleged violation of

Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act. Together with the complaint was an Urgent Ex-Parte Motion for the issuance of a cease and [d]esist [o]rder to restrain NPC and other NPC officials involved in the BACMAN II project from canceling and/or from taking over FUCC's contract for civil works of said project.

Then on November 16, 1994, FUCC filed before the Supreme Court a Petition for Review assailing the Decision of the Court of [A]ppeals dated October 20, 1994. In its Comment, NPC raised the issue that FUCC resorted to forum shopping as it applied for a cease and desist order before the National Ombudsman despite the dissolution of the injunction by the Court of Appeals.

Pending the petition filed by FUCC before the Supreme Court, on April 20, 1995 the NPC and FUCC entered into a Compromise Agreement.

Under the Compromise Agreement, the parties agreed on the following:

1. Defendant shall process and pay the undisputed unpaid billings of Plaintiff in connection with the entire project fifteen (15) days after a reconciliation of accounts by both Plaintiff and

Defendant or thirty (30) days from the date of approval of this Compromise Agreement by the Court whichever comes first. Both parties agree to submit and include those accounts which could not be reconciled among the issues to be arbitrated as hereunder provided;

2. Plaintiff accepts and acknowledges that Defendant shall have the right to proceed with the works by re-bidding or negotiating the project immediately upon the signing of herein Compromise Agreement;

3. This Compromise Agreement shall serve as the Supplemental Agreement for payment of plaintiff's blasting works at the Botong site;

4. Upon approval of this Compromise Agreement by the Court or Plaintiff's receipt of payment of this undisputed unpaid billings from Defendant whichever comes first, the parties shall immediately file a Joint Manifestation and Motion for the withdrawal of the following Plaintiff's petition from the Supreme Court, Plaintiff's Complaint from the National Ombudsman, the

Complaint and Amended Complaint from the RTC, Br. 99 of Quezon City;

5. Upon final resolution of the Arbitration, as hereunder prescribed, the parties shall immediately execute the proper documents mutually terminating Plaintiff's contract for the civil works of the BACMAN II Project (Contract No. Sp90DLM-918 (I & A);

6. Such mutual termination of Plaintiff's contract shall have the following effects and/or consequences: (a) the construction works of Plaintiff at the Kawayan and Bolong sites, at its present stage of completion, shall be accepted and/or deemed to have been accepted by defendant; (b) Plaintiff shall have no more obligation to Defendant in respect of the BACMAN II Project except as provided in clause (e) below; (c) Defendant shall release all retention moneys of plaintiff within a maximum period of thirty (30) days from the date of final Resolution of the Arbitration; (d) no retention money shall thenceforth be withheld by Defendant in its payment to Plaintiff under this Compromise Agreement, and (e) Plaintiff shall put up a one-year guaranty bond for its completed civil

works at the Kawayan site, retroactive to the date of actual use of the plant by defendant;

7. Plaintiff's blasting works claims and other unresolved claims, as well as the claims of damages of both parties shall be settled through a two stage process to wit:

STAGE 1

7.1 Plaintiff and Defendant shall execute and sign this Compromise Agreement which they will submit for approval by this Court. Under this Compromise Agreement both parties agree that:

xxx xxx

STAGE 2

7.1 The parties shall submit for arbitration to settle: (a) the price of blasting, (b) both parties' claims for damages, delays, interests, and (c) all other unresolved claims of both parties, including the exact volume of blasted rocks;

7.2 The arbitration shall be through a three-member commission to be appointed by the Honorable Court. Each party shall nominate one member. The Chairman of the Arbitration Board shall be [a] person mutually acceptable to both parties, preferably from the academe;

7.3 The parties shall likewise agree upon the terms under which the arbitrable issues shall be referred to the Arbitration Board. The terms of reference shall form part of the Compromise Agreement and shall be submitted by the parties to the Honorable Court within a period of seven (7) days from the signing of the Compromise Agreement;

7.4 The Arbitration Board shall have a non-extendible period of three (3) months within which to complete the arbitration process and submit its Decision to the Honorable Court;

7.5 The parties agree that the Decision of the Arbitration Board shall be final and executory;

7.6 By virtue of this Compromise Agreement, except as herein provided, the parties shall mutually waive, forgo and dismiss all of their other claims and/or counterclaim in this case. Plaintiff and defendant warrant that after approval by the Court of this Compromise Agreement neither party shall file Criminal or Administrative cases or suits against each other or its Board or member of its officials on grounds arising from the case.

The Compromise Agreement was subsequently approved by the Court on May 24, 1995.

The case was subsequently referred by the parties to the arbitration board pursuant to their Compromise Agreement. On December 9, 1999 the Arbitration Board rendered its ruling the dispositive portion of which states:

WHEREFORE, claimant is hereby declared entitled to an award of P118,681,328.28 as just compensation for blasting works, plus ten percent (10%) thereof for attorney's fees and expenses of litigation.

Considering that payment in the total amount of P36,550,000.00 had previously been made, respondent is hereby ordered to pay claimant the remaining sum of P82,131,328.28 for attorney's fees and expenses of litigation.

Pursuant to the Compromise Agreement approved by this Honorable Court, the parties have agreed that the decision of the Arbitration Board shall be final and executory.

SO ORDERED.

On December 10, 1999 plaintiff FUCC filed a Motion for Execution while defendant NPC filed a Motion to Vacate Award by the Arbitration Board on December 20, 1999.

On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto issued an order the dispositive portion of which states:

"WHEREFORE, the Arbitration Award issued by the Arbitration Board is hereby APPROVED and the Motion for Execution filed by plaintiff hereby GRANTED. The Motion to Vacate

Award filed by defendant is hereby DENIED for lack of merit.

Accordingly, let a writ of execution be issued to enforce the Arbitration Award.

SO ORDERED."5 (Bracketed words supplied)

NPC went to the Court of Appeals on the lone issue of whether respondent judge acted with grave abuse of discretion in issuing the Order dated May 22, 2000 and directing the issuance of a Writ of Execution.

In its assailed Decision, the appellate court declared that the court a quo did not commit grave abuse of discretion considering that the Arbitration Board acted pursuant to its powers under the Compromise Agreement and that its award has factual and legal bases.

The Court of Appeals gave primacy to the court-approved Compromise Agreement entered into by the parties and concluded that they intended the decision of the arbitration panel to be final and executory. Said the court:

For one, what the price agreed to be submitted for arbitration are pure issues of fact (i.e., the price of blasting; both parties' claims for damages, delay, interests and all other unresolved claims of both parties, including the exact volume of blasted rocks). Also, the

manner by which the Arbitration Board was formed and the terms under which the arbitrable issues were referred to said Board are specified in the agreement. Clearly, the parties had left to the Arbitration Board the final adjudication of their remaining claims and waived their right to question said Decision of the Board. Hence, they agreed in clear and unequivocal terms in the Compromise Agreement that said Decision would be immediately final and executory. Plaintiff relied upon this stipulation in complying with its various obligations under the agreement. To allow defendant to now go back on its word and start questioning the Decision would be grossly unfair considering that the latter was also a party to the Compromise Agreement entered into part of which dealt with the creation of the Arbitration Board.6

The appellate court likewise held that petitioner failed to present evidence to prove its claim of bias and partiality on the part of the Chairman of the Arbitration Board, Mr. Carmelo V. Sison (Mr. Sison).

Further, the Court of Appeals found that blasting is not part of the unit price for grading and structural excavation provided for in the contract for the BACMAN II Project, and that there was no perfected contract between the parties for an extra work order for blasting. Nonetheless, since FUCC relied on the representation of petitioner's officials that the extra

work order would be submitted to its Board of Directors for approval and that the blasting works would be paid, the Court of Appeals ruled that FUCC is entitled to just compensation on grounds of equity and promissory estoppel.

Anent the issue of just compensation, the appellate court took into account the estimate prepared by a certain Mr. Lauro R. Umali (Mr. Umali), Project Manager of the BACMAN II Project, which itemized the various costs involved in blasting works and came up with P1,310.82 per cubic meter, consisting of the direct cost for drilling, blasting excavation, stockpiling and hauling, and a 30% mark up for overhead, contractor's tax and contingencies. This estimate was later changed to P983.75 per cubic meter to which FUCC agreed. The Court of Appeals, however, held that just compensation should cover only the direct costs plus 10% for overhead expenses. Thus, it declared that the amount of P763.007 per cubic meter is sufficient. Since the total volume of blasted rocks as computed by Dr. Benjamin Buensuceso, Jr.8 of the U.P. College of Engineering is 97,032.16 cubic meters, FUCC is entitled to the amount of P74,035,503.50 as just compensation.

Although the Court of Appeals adjudged FUCC entitled to interest,9 the dispositive portion of the assailed Decision10 did not provide for the payment of interest. Moreover, the award of attorney's fees was deleted as there was no legal and factual ground for its imposition.

Petitioner, represented by the Office of the Solicitor General in the instant Petition, rehashes its submissions before the Court of Appeals. It claims that the appellate court failed to pass upon the following issues:

1. The Chairman of the Arbitration Board showed extreme bias in prejudging the case.

2. The Chairman of the Arbitration Board greatly exceeded his powers when he mediated for settlement in the court of arbitration proceedings.

3. The Chairman of the Arbitration Board committed serious irregularity in hastily convening the Board in two days, which thereafter released its report.

4. The Arbitration Board Committed manifest injustice prejudicial to petitioner based on the following:

a. It rendered an award based on equity despite the mandatory provision of the law.

b. The Board's decision to justify that equity applies herein despite the fact that FUCC never submitted its own actual costs for blasting and PHESCO, INC., the succeeding contractor, did

not employ blasting but used ordinary excavation method at P75.59 per cubic meter which is approximately the same unit price of plaintiff (FUCC).

c. It gravely erred when the Board claimed that an award of just compensation must be given to respondent FUCC for what it has actually spent and yet instead of using as basis P458.07 which is the price agreed upon by FUCC, it chose an estimate made by an NPC employee.

d. It gravely erred when it relied heavily on the purported letter of NPC Project Manager Lauro R. Umali, when the same has not been identified nor were the handwritten entries in Annex ii established to be made by him.

5. The Arbitration Board gravely erred in computing interest at 12% and from the time of plaintiff's extrajudicial claim despite the fact that herein case is an action for specific performance and not for payment of loan or forbearance of money, and despite the fact that it has resolved that there was no perfected contract and there was no bad faith on the part of defendant.

6. On June 25, 2000, NPC discovered the Sub-Contract Agreement of FUCC with a unit price of only P430/per cubic meter.11 [Emphasis in the original]

Specifically, petitioner asserts that Mr. Sison exhibited bias and prejudgment when he exhorted it to pay FUCC for the blasting works after concluding that the latter was allowed to blast. Moreover, Mr. Sison allegedly attempted to mediate the conflict between the parties in violation of Section 20,12 paragraph 2 of Republic Act No. 876 (R.A. 876) otherwise known as the Arbitration Law. Petitioner also questions the abrupt manner by which the decision of the Arbitration Board was released.

Petitioner avers that FUCC's claim for blasting works was not approved by authorized officials in accordance with Presidential Decree No. 1594 (P.D. 1594) and its implementing rules which specifically require the approval of the extra work by authorized officials before an extra work order may be issued in favor of the contractor. Thus, it should not be held liable for the claim. If at all, only the erring officials should be held liable. Further, FUCC did not present evidence to prove the actual expenses it incurred for the blasting works. What the Arbitration Board relied upon was the memorandum of Mr. Umali which was neither identified or authenticated during the arbitration proceedings nor marked as evidence for FUCC. Moreover, the figures indicated in Mr. Umali's

memorandum were allegedly mere estimates and were recommendatory at most.

Petitioner likewise claims that its succeeding contractor, Phesco, Inc. (Phesco), was able to excavate the same rock formation without blasting.

Finally, it asserts that the award of P763.00 per cubic meter has no factual and legal basis as the sub-contract between FUCC and its blasting sub-contractor, Dynamic Blasting Specialists of the Philippines (Dynamic), was only P430.00 per cubic meter.

In its Comment13 dated October 15, 2001, FUCC points out that petitioner's arguments are exactly the same as the ones it raised before the Arbitration Board, the trial court and the Court of Appeals. Moreover, in the Compromise Agreement between the parties, petitioner committed to abide by the decision of the Arbitration Board. It should not now be allowed to question the decision.

FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one of the members of the Arbitration Board, was nominated by petitioner itself. If there was any irregularity in its proceedings such as the bias and prejudgment petitioner imputes upon Mr. Sison, Atty. Samonte would have complained. As it is, Atty. Samonte concurred in the decision of the Arbitration Board and dissented only as to the award of attorney's fees.

As regards the issue of interest, FUCC claims that the case involves forbearance of money and not a claim for damages for breach of an obligation in which case interest on the amount of damages awarded may be imposed at the rate of six percent (6%) per annum.

Finally, FUCC asserts that its sub-contract agreement with Dynamic is not newly-discovered evidence. Petitioner's lawyers allegedly had a copy of the sub-contract in their possession. In any event, the unit price of P430.00 per cubic meter appearing in the sub-contract represents only a fraction of the costs incurred by FUCC for the blasting works.

Petitioner filed a Reply14 dated March 18, 2002 reiterating its earlier submissions.

The parties in the present case mutually agreed to submit to arbitration the settlement of the price of blasting, the parties' claims for damages, delay and interests and all other unresolved claims including the exact volume of blasted rocks.15 They further mutually agreed that the decision of the Arbitration Board shall be final and immediately executory.16

A stipulation submitting an ongoing dispute to arbitration is valid. As a rule, the arbitrator's award cannot be set aside for mere errors of judgment either as to the law or as to the facts. Courts are generally without power to amend or overrule merely because of disagreement with matters of law or facts determined by the arbitrators. They will not review the

findings of law and fact contained in an award, and will not undertake to substitute their judgment for that of the arbitrators. A contrary rule would make an arbitration award the commencement, not the end, of litigation. Errors of law and fact, or an erroneous decision on matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an arbitration award is, thus, more limited than judicial review of a trial.17

However, an arbitration award is not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040 of the Civil Code18 applicable to both compromises and arbitrations are obtaining, the arbitrators' award may be annulled or rescinded.19 Additionally, judicial review of an arbitration award is warranted when the complaining party has presented proof of the existence of any of the grounds for vacating, modifying or correcting an award outlined under Sections 24 and 25 of R.A. 876, viz:

Section 24. Grounds for vacating an award. — In any of the following cases, the court must make an order vacating the award upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made.

When an award is vacated, the court, in its discretion, may direct a new hearing either before the same arbitrators or before a new arbitrator or arbitrators to be chosen in the

manner provided in the submission or contract for the selection of the original arbitrator or arbitrators, and any provision limiting the time in which the arbitrators may make a decision shall be deemed applicable to the new arbitration to commence from the date of the court's order.

Where the court vacates an award, costs not exceeding fifty pesos and disbursements may be awarded to the prevailing party and the payment thereof may be enforced in like manner as the payment of costs upon the motion in an action.

Section 25. Grounds for modifying or correcting an award. — In any one of the following cases, the court must make an order modifying or correcting the award, upon the application of any party to the controversy which was arbitrated:

(a) Where there was an evident miscalculation of figures, or an evident mistake in the description of any person, thing or property referred to in the award; or

(b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted; or

(c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioner's report, the defect could have been amended or disregarded by the court.

The order may modify and correct the award so as to effect the intent thereof and promote justice between the parties.

In this case, petitioner does not specify which of the foregoing grounds it relies upon for judicial review. Petitioner avers that "if and when the factual circumstances referred to in the provisions aforementioned are present, judicial review of the award is warranted."20 From its presentation of issues, however, it appears that the alleged evident partiality of Mr. Sison is singled out as a ground to vacate the board's decision.

We note, however, that the Court of Appeals found that petitioner did not present any proof to back up its claim of evident partiality on the part of Mr. Sison. Its averments to the effect that Mr. Sison was biased and had prejudged the case do not suffice to establish evident partiality. Neither does the fact that a party was disadvantaged by the decision of the arbitration committee prove evident partiality.21

According to the appellate court, "[p]etitioner was never deprived of the right to present evidence nor

was there any showing that the Board showed signs of any bias in favor of FUCC. As correctly found by the trial court, this Court cannot find its way to support petitioner's contention that there was evident partiality in the assailed Award of the Arbitrator in favor of the respondent because the conclusion of the Board, which the Court found to be well-founded, is fully supported by substantial evidence."22

There is no reason to depart from this conclusion.

However, we take exception to the arbitrators' determination that based on promissory estoppel per se or alone, FUCC is entitled to just compensation for blasting works for the reasons discussed hereunder.

Section 9 of P.D. No. 1594, entitled Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts, provides:

SECTION 9. Change Order and Extra Work Order.—A change order or extra work order may be issued only for works necessary for the completion of the project and, therefore, shall be within the general scope of the contract as bid[ded] and awarded. All change orders and extra work orders shall be subject to the approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be.

The pertinent portions of the Implementing Rules and Regulations of P.D. 1594 provide:

CI - Contract Implementation:

These Provisions Refer to Activities During Project Construction, i.e., After Contract Award Until Completion, Except as May Otherwise be Specifically Referred to Provisions Under Section II. IB - Instructions to Bidders.

CI 1 - Variation Orders - Change Order/Extra Work Order/Supplemental Agreement

4. An Extra Work Order may be issued by the implementing official to cover the introduction of new work items after the same has been found to strictly comply with Section CI-1-1 and approved by the appropriate official if the amount of the Extra Work Order is within the limits of the former's authority to approve original contracts and under the following conditions:

a. Where there are additional works needed and necessary for the completion, improvement or protection of the project which were not included as items of work in the original contract.

b. Where there are subsurface or latent physical conditions at the site differing materially from those indicated in the contract.

c. Where there are duly unknown physical conditions at the site of an unusual nature differing materially from those ordinarily encountered and generally recognized as inherent in the work or character provided for in the contract.

d. Where there are duly approved construction drawings or any instruction issued by the implementing office/agency during the term of contract which involve extra cost.

…

6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra Work Orders if the aggregate amount exceeds 25% of the escalated original contract price. All change orders/extra work orders beyond 100% of the escalated original contract cost shall be subject to public bidding except where the works involved are inseparable from the original scope of the project in which case negotiation with the incumbent contractor may be allowed, subject to approval by the appropriate authorities.

7. Any Variation Order (Change Order, Extra Work Order or Supplemental Agreement) shall be subject to the escalation formula used to adjust the original contract price less the cost of mobilization. In claiming for any Variation Order, the contractor shall, within seven (7) calendar days after such work has been commenced or after the circumstances leading to such condition(s) leading to the extra cost, and within 28 calendar days deliver a written communication giving full and detailed particulars of any extra cost in order that it may be investigated at that time. Failure to provide either of such notices in the time stipulated shall constitute a waiver by the contractor for any claim. The preparation and submission of Change Orders, Extra Work Orders or Supplemental Agreements are as follows:

a. If the Project Engineer believes that a Change Order, Extra Work Order or Supplemental Agreement should be issued, he shall prepare the proposed Order or Supplemental Agreement accompanied with the notices submitted by the contractor, the plans therefore, his computations as to the quantities of the additional works involved per item indicating the specific stations where such works are needed, the date of his inspections and investigations thereon, and the log book thereof, and a detailed estimate

of the unit cost of such items of work, together with his justifications for the need of such Change Order, Extra Work Order or Supplemental Agreement, and shall submit the same to the Regional Director of office/agency/corporation concerned.

b. The Regional Director concerned, upon receipt of the proposed Change Order, Extra Work Order or Supplemental Agreement shall immediately instruct the technical staff of the Region to conduct an on-the-spot investigation to verify the need for the work to be prosecuted. A report of such verification shall be submitted directly to the Regional Director concerned.

c. The Regional Director concerned after being satisfied that such Change Order, Extra Work Order or Supplemental Agreement is justified and necessary, shall review the estimated quantities and prices and forward the proposal with the supporting documentation to the head of office/agency/corporation for consideration.

d. If, after review of the plans, quantities and estimated unit cost of the items of work involved, the proper office/agency/corporation committee empowered to review and evaluate Change Orders, Extra Work Orders or Supplemental Agreements recommends

approval thereof, the head of office/agency/corporation, believing the Change Order, Extra Work Order or Supplemental Agreement to be in order, shall approve the same. The limits of approving authority for any individual, and the aggregate of, Change Orders, Extra Work Orders or Supplemental Agreements for any project of the head of office/agency/corporation shall not be greater than those granted for an original project.

CI 3 - Conditions under which Contractor is to Start Work under Variation Orders and Receive Payments

1. Under no circumstances shall a contractor proceed to commence work under any Change Order, Extra Work Order or Supplemental Agreement unless it has been approved by the Secretary or his duly authorized representative. Exceptions to the preceding rule are the following:

a. The Regional Director, or its equivalent position in agencies/offices/corporations without plantilla position for the same, may, subject to the availability of funds, authorize the immediate start of work under any Change or Extra Work Order under any or all of the following conditions:

(1) In the event of an emergency where the prosecution of the work is urgent to avoid detriment to public service, or damage to life and/or property; and/or

(2) When time is of the essence; provided, however, that such approval is valid on work done up to the point where the cumulative increase in value of work on the project which has not yet been duly fully approved does not exceed five percent (5%) of the adjusted original contract price, or P500,000 whichever is less; provided, further, that immediately after the start of work, the corresponding Change/Extra Work Order shall be prepared and submitted for approval in accordance with the above rules herein set. Payments for works satisfactorily accomplished on any Change/Extra Work Order may be made only after approval of the same by the Secretary or his duly authorized representative.

b. For a Change/Extra Work Order involving a cumulative amount exceeding five percent (5%) of the original contract price or original adjusted contract price no work thereon may be commenced unless said Change/Extra Work Order has been approved by the Secretary or his duly authorized representative. [Emphasis supplied]

It is petitioner's submission, and FUCC does not deny, that the claim for payment of blasting works in Botong alone was approximately P170,000,000.00, a figure which far exceeds the original contract price of P80,000,000.00 for two (2) project sites. Under the foregoing implementing rules, for an extra work order which exceeds 5% of the original contract price, no blasting work may be commenced without the approval of the Secretary or his duly authorized representative. Moreover, the procedure for the preparation and approval of the extra work order outlined under Contract Implementation (CI) 1(7) above should have been complied with. Accordingly, petitioner's officials should not have authorized the commencement of blasting works nor should FUCC have proceeded with the same.

The following events, culled from the decision of the Arbitration Board and the assailed Decision, are made the bases for the finding of promissory estoppel on the part of petitioner:

1. After claimant [respondent herein] encountered what it claimed to be massive hard rock formation (Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 41-42; Testimony of witness Lataquin, 28 November 1996, pp. 2-3; 20-23; Exh. "JJJ" and sub-markings) and informed respondent [petitioner herein] about it, respondent's own geologists went to the Botong site to investigate and confirmed the rock formation and

recommended blasting (Cf. Memorandum of Mr. Petronilo E. Pana, Acting Manager of the Geoscience Services Department and the report of the geologists who conducted the site investigation; Exhs. "F" and "F-1").

2. Claimant asked for clearance to blast the rock formation to the design grade (Letter dated 28 September 1992; Exh. "UU"). The engineers of respondent at the project site advised claimant to proceed with its suggested method of extraction (Order/Instruction given by Mr. Reuel R. Declaro and Mr. Francis A. Paderna dated 29 September 1992; Exh. "C").

3. Claimant requested that the intended blasting works be confirmed as extra work order by responsible officials of respondent directly involved in the BACMAN II Project (i.e., then BACMAN II Project Manager, Mr. Lauro R. Umali and Mr. Angelito G. Senga, Section Chief, Civil Engineering Design of respondent's Design Department which bidded the project). These officials issued verbal instructions to the effect: (a) that claimant could blast the rock formation down to the design grade of 495 masl; (b) that said blasting works would be an extra work order; and (c) that claimant would be paid for said blasting works using the price per cubic meter for similar blasting works at Palinpinon, or at P1,346.00 per cubic meter.

4. Claimant sent two (2) confirmatory letters to respondent, both addressed to its President, one dated 30 September 1992, and sent through Mr. Angelito Senga, Chief Civil Design – Thermal, the other dated 02 October 1992, and sent through Mr. Lauro R. Umali, Project Manager–BacMan II (Exhs. "D" and "E"; Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 43-49). The identical letters read:

We wish to confirm your instruction for us to proceed with the blasting of the Botong Plant site to the design grade pending issuance of the relevant variation order. This is to avoid delay in the implementation of this critical project due to the urgent need to blast rocks on the plant site.

We are confirming further your statement that the said blasting works is an extra work order and that we will be paid using the price established in your Palinpinon contract with Phesco.

Thank you for your timely action and we look forward to the immediate issuance of the extra work order.

We are now mobilizing equipment and manpower for the said work and hope to start blasting next week.

5. Respondent received the letters but did not reply thereto nor countermand the earlier instructions given to claimant to proceed with the blasting works. The due execution and authenticity of these letters (Exhs. "D-1" and "E-1") and the fact of receipt (Exhs. "D-2" and "E-2") were duly proved by claimant (Testimony of witness Dumaliang, TSN, 28 October 1996, 43-49).

6. In mid-October 1992, three (3) Vice-Presidents of respondent visited the project site and were informed of claimant's blasting activities. While respondent claims that one of the Vice-Presidents, Mr. Rodrigo Falcon, raised objections to claimant's blasting works as an extra work order, they instructed claimant to speed up the works because of the power crisis then hounding the country. Stipulation no. 24 of the Joint Stipulation of Facts of the parties which reads: "24. In mid-October 1992, three (3) Vice-Presidents of respondent, namely: Mr. Hector N. Campos, Sr., of Engineering Construction, Mr. C.A. Pastoral of Engineering Design, and Mr. Rodrigo P. Falcon, visited the project site and were likewise apprised of claimant's blasting activities. They never complained about the blasting works, much less ordered its cessation. In fact, no official of respondent ever ordered that the blasting works be stopped."

7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice President of Engineering Construction, instructed Mr. Fernando A. Magallanes then Manager of the Luzon Engineering Projects Department, to evaluate claimant's blasting works and to submit his recommendations on the proper price therefor. In a memorandum dated 17 November 1992 (Exh. "G" and sub-markings), Mr. Magallanes confirmed that claimant's blasting works was an extra work order and recommended that it be paid at the price for similar blasting works at Palinpinon, or at P1,346.00 per cubic meter. Mr. Campos concurred with the findings and recommendations of Mr. Magallanes and instructed Mr. Lauro R. Umali, then Project Manager of BacMan II, to implement the same as shown by his instructions scribbled on the memorandum.

8. Mr. Umali and the project team prepared proposed Extra Work Order No. 2 – Blasting (Exh. "DDD" – Memorandum of Mr. Umali to Mr. Campos dated 20 January 1993 forwarding proposed Extra Work Order No. 2), recommending a price of P983.75 per cubic meter for claimant's blasting works. Claimant agreed to this price (Testimony of witness Dumaliang, 7 November 1996, p. 48).

9. On 19 February 1993, claimant brought the matter of its unpaid blasting works to the attention of the then NPC Chairman [also Secretary of the Department of Energy then] Delfin L. Lazaro during a meeting with the multi-sectoral task force monitoring the implementation of power plant projects, who asked then NPC President Pablo B. Malixi what he was doing about the problem. President Malixi thereafter convened respondent's vice-presidents and ordered them to quickly document the variation order and pay claimant. The vice-president, and specifically Mr. Campos, pledged that the variation order for claimant's blasting works would be submitted for the approval of the NPC Board during the first week of March 1993. Claimant thereafter sent respondent a letter dated 22 February 1993 (Ex. "K") to confirm this pledge (Testimony of witness Dumaliang, 7 November 1996, pp. 28-30).

10. Mr. Campos created a task force (i.e., the Technical Task Force on the Study and Review of Extra Work Order No. 2; Exh. "FFF") to review claimant's blasting works. After several meetings with the task force, claimant agreed to the lower price of P458.07 per cubic meter, in exchange for quick payment (Testimony of witness Dumaliang, 7 November 1996, p. 30).

11. However, no variation order was issued and no payment came, although it appears from two (2) radiograms sent by Mr. Campos to Mr. Paderna at the project site that the variation order was being processed and that payment to claimant was forthcoming (Exhs. "AAA" and "BBB").

12. Respondent asked the Department of Public Works and Highways (DPWH) about the standard prices for blasting in the projects of the DPWH. The DPWH officially replied to respondent's query in a letter dated 19 May 1993 but the task force still failed to seek Board approval for claimant's variation order. The task force eventually recommended that the issue of grading excavation and structural excavation and the unit prices therefor be brought into voluntary arbitration (Testimony of witness Dumaliang, 7 November 1996, pp. 30-57).

13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC President, who proposed that claimant accept the price of P458.07 per cubic meter for its blasting works with the balance of its claim to be the subject of arbitration. Claimant accepted the offer and sent the letter dated 28 September 1993 (Exh. "O") to formalize said acceptance. However, no variation order was issued and the

promised payment never came. (Testimony of witness Dumaliang, 7 November 1996, p. 58).

14. After some time, claimant met Mr. Viray on 19 October 1993 at the project site, and with some NPC officers in attendance, particularly Mr. Gilberto A. Pastoral, Vice-President for Engineering Design, who was instructed by Mr. Viray to prepare the necessary memorandum (i.e., that claimant would be paid P458.07 per cubic meter with the balance of its claim to be the subject of arbitration) for the approval of the NPC Board. Claimant formalized what transpired during this meeting in its letter to Mr. Pastoral dated 22 October 1993 (Exhibit "R"). But no action was taken by Mr. Pastoral and no variation order was issued by respondent (Testimony of witness Dumaliang, 7 November 1996, pp. 57-58).23 [Emphasis supplied and bracketed words]

Promissory estoppel "may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice."24 Promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the court can understand

the obligation assumed and enforce the promise according to its terms.25

In the present case, the foregoing events clearly evince that the promise that the blasting works would be paid was predicated on the approval of the extra work order by petitioner's Board. Even FUCC acknowledged that the blasting works should be an extra work order and requested that the extra work order be confirmed as such and approved by the appropriate officials. Notably, even as the extra work order allegedly promised to it was not yet forthcoming, FUCC commenced blasting.

The alleged promise to pay was therefore conditional and up to this point, promissory estoppel cannot be established as the basis of petitioner's liability especially in light of P.D. 1594 and its implementing rules of which both parties are presumed to have knowledge. In Mendoza v. Court of Appeals, supra, we ruled that "[a] cause of action for promissory estoppel does not lie where an alleged oral promise was conditional, so that reliance upon it was not reasonable. It does not operate to create liability where it does not otherwise exist."

Petitioner's argument that it is not bound by the acts of its officials who acted beyond the scope of their authority in allowing the blasting works is correct. Petitioner is a government agency with a juridical personality separate and distinct from the government. It is not a mere agency of the

government but a corporate entity performing proprietary functions. It has its own assets and liabilities and exercises corporate powers, including the power to enter into all contracts, through its Board of Directors.

In this case, petitioner's officials exceeded the scope of their authority when they authorized FUCC to commence blasting works without an extra work order properly approved in accordance with P.D. 1594. Their acts cannot bind petitioner unless it has ratified such acts or is estopped from disclaiming them.26

However, the Compromise Agreement entered into by the parties, petitioner being represented by its President, Mr. Guido Alfredo A. Delgado, acting pursuant to its Board Resolution No. 95-54 dated April 3, 1995, is a confirmatory act signifying petitioner's ratification of all the prior acts of its officers. Significantly, the parties agreed that "[t]his Compromise Agreement shall serve as the Supplemental Agreement for the payment of plaintiff's blasting works at the Botong site"27 in accordance with CI 1(6) afore-quoted. In other words, it is primarily by the force of this Compromise Agreement that the Court is constrained to declare FUCC entitled to payment for the blasting works it undertook.

Moreover, since the blasting works were already rendered by FUCC and accepted by petitioner and in the absence of proof that the blasting was done gratuitously, it is but equitable that petitioner should

make compensation therefor, pursuant to the principle that no one should be permitted to enrich himself at the expense of another.28

This brings us to the issue of just compensation.

The parties proposed in the terms of reference jointly submitted to the Arbitration Board that should FUCC be adjudged entitled to just compensation for its blasting works, the price therefor should be determined based on the payment for blasting works in similar projects of FUCC and the amount it paid to its blasting subcontractor.29They agreed further that "the price of the blasting at the Botong site . . . shall range from Defendant's position of P76.00 per cubic meter as per contract to a maximum of P1,144.00"30

Petitioner contends that the Arbitration Board, trial court and the appellate court unduly relied on the memorandum of Mr. Umali which was allegedly not marked as an exhibit. We note, however, that this memorandum actually forms part of the record of the case as Exhibit "DDD."31 Moreover, both the Arbitration Board and the Court of Appeals found that Mr. Umali's proposal is the best evidence on record as it is supported by detailed cost estimates that will serve as basis to determine just compensation.

While the Arbitration Board found that FUCC did not present evidence showing the amount it paid to its blasting sub-contractor, it did present testimony to the effect that it incurred other costs and expenses on top

of the actual blasting cost. Hence, the amount of P430.00 per cubic meter indicated in FUCC's Contract of Agreement with Dynamic is not controlling.

Moreover, FUCC presented evidence showing that in two (2) other projects where blasting works were undertaken, petitioner paid the contractors P1,346 per cubic meter for blasting and disposal of solid rocks in the Palinpinon project and P1,144.51 per cubic meter for rock excavation in the Hermosa Balintawak project. Besides, while petitioner claims that in a contract with Wilper Construction for the construction of the Tayabas sub-station, the price agreed for blasting was only P96.13, petitioner itself did not present evidence in support of this claim.32

Parenthetically, the point raised by petitioner that its subsequent contractor, Phesco, did not undertake blasting works in excavating the same rock formation is extraneous and irrelevant. The fact is that petitioner allowed FUCC to blast and undertook to pay for the blasting works.

At this point, we hearken to the rule that the findings of the Arbitration Board, affirmed by the trial court and the Court of Appeals and supported as they are by substantial evidence, should be accorded not only respect but finality.33 Accordingly, the amount of P763.00 per cubic meter fixed by the Arbitration Board and affirmed by the appellate court as just compensation should stand.

As regards the issue of interest, while the appellate court declared in the body of its Decision "that interest which would represent the cost of the money spent be imposed on the money actually spent by claimant for the blasting works,"34 there is no pronouncement as to the payment of interest in the dispositive portion of the Decision even as it specifically deleted the award of attorney's fees.

Despite its knowledge of the appellate court's omission, FUCC did not file a motion for reconsideration or appeal from its Decision. In failing to do so, FUCC allowed the Decision to become final as to it.

In Edwards v. Arce,35 we ruled that in a case decided by a court, the true judgment of legal effect is that entered by the clerk of said court pursuant to the dispositive part of its decision. The only portion of the decision that may be the subject of execution is that which is ordained or decreed in the dispositive portion. Whatever may be found in the body of the decision can only be considered as part of the reasons or conclusions of the court and serve only as guides to determine the ratio decidendi.36

Even so, the Court allows a judgment which had become final and executory to be clarified when there is an ambiguity caused by an omission or mistake in the dispositive portion of the decision.37 In Reinsurance Company of the Orient, Inc. v. Court of Appeals,38 we held:

In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the Court applying the above doctrine said:

"xxx We clarify, in other words, what we did affirm. What is involved here is not what is ordinarily regarded as a clerical error in the dispositive part of the decision of the Court of First Instance, which type of error is perhaps best typified by an error in arithmetical computation. At the same time, what is involved here is not a correction of an erroneous judgment or dispositive portion of a judgment. What we believe is involved here is in the nature of an inadvertent omission on the part of the Court of First Instance (which should have been noticed by private respondent's counsel who had prepared the complaint), of what might be described as a logical follow-through of something set forth both in the body of the decision and in the dispositive portion thereof: the inevitable follow-through, or translation into, operational or behavioral terms, of the annulment of the Deed of Sale with Assumption of Mortgage, from which petitioners' title or claim of title embodied in TCT 133153 flows." (Italics supplied)39

In this case, the omission of the award of interest was obviously inadvertent. Correction is therefore in order. However, we do not agree with the Arbitration Board

that the interest should be computed at 12%. Since the case does not involve a loan or forbearance of money, goods or credit and court judgments thereon, the interest due shall be computed at 6% per annum computed from the time the claim was made in 1992 as determined by the Arbitration Board and in accordance with Articles 2209 and 1169 of the Civil Code. The actual base for the computation of legal interest shall be on the amount finally adjudged.40 Further, when the judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.41

WHEREFORE, the petition is GRANTED in part. The appealed decision is MODIFIED in that the amount of P74,035,503.50 shall earn legal interest of six percent (6%) from 1992. A twelve percent (12%) interest, in lieu of six percent (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 77372 April 29, 1988

LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER R. REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA, ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R. RIMANDO, petitioner, vs.COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent.

Balgos & Perez Law Offices for petitioners.

The Solicitor General for respondents.

 

GANCAYCO, J.:

Is the Regional Trial Court of the same category as the Professional Regulation Commission so that it cannot pass upon the validity of the administrative acts of the latter? Can this Commission lawfully

prohibit the examiness from attending review classes, receiving handout materials, tips, or the like three (3) days before the date of the examination? Theses are the issues presented to the court by this petition for certiorari to review the decision of the Court of Appeals promulagated on January 13, 1987, in CA-G.R. SP No. 10598, * declaring null and void the other dated Ocober 21, 1986 issued by the Regional Trial Court of Manila, Branch 32 in Civil Case No. 86-37950 entitled " Lupo L. Lupangco, et al. vs. Professional Regulation Commission."

The records shows the following undisputed facts:

On or about October 6, 1986, herein respondent Professional Regulation Commission (PRC) issued Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those applying for admission to take the licensure examinations in accountancy. The resolution embodied the following pertinent provisions:

No examinee shall attend any review class, briefing, conference or the like conducted by, or shall receive any hand-out, review material, or any tip from any school, college or university, or any review center or the like or any reviewer, lecturer, instructor official or employee of any of the aforementioned or similars institutions during the three days immediately proceeding every

examination day including examination day.

Any examinee violating this instruction shall be subject to the sanctions prescribed by Sec. 8, Art. III of the Rules and Regulations of the Commission. 1

On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure examinations in accountancy schedule on October 25 and November 2 of the same year, filed on their own behalf of all others similarly situated like them, with the Regional Trial Court of Manila, Branch XXXII, a complaint for injuction with a prayer with the issuance of a writ of a preliminary injunction against respondent PRC to restrain the latter from enforcing the above-mentioned resolution and to declare the same unconstitution.

Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the lower court had no jurisdiction to review and to enjoin the enforcement of its resolution. In an Order of October 21, 1987, the lower court declared that it had jurisdiction to try the case and enjoined the respondent commission from enforcing and giving effect to Resolution No. 105 which it found to be unconstitutional.

Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of Appeals a petition for the nullification of the above Order of the

lower court. Said petiton was granted in the Decision of the Court of Appeals promulagated on January 13, 1987, to wit:

WHEREFORE, finding the petition meritorious the same is hereby GRANTED and the other dated October 21, 1986 issued by respondent court is declared null and void. The respondent court is further directed to dismiss with prejudice Civil Case No. 86-37950 for want of jurisdiction over the subject matter thereof. No cost in this instance.

SO ORDERED. 2

Hence, this petition.

The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction to entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its basis its conclusion that the Professional Regulation Commission and the Regional Trial Court are co-equal bodies. Thus it held —

That the petitioner Professional Regulatory Commission is at least a co-equal body with the Regional Trial Court is beyond question, and co-equal bodies have no power to control each

other or interfere with each other's acts. 3

To strenghten its position, the Court of Appeals relied heavily on National Electrification Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing, Inc. vs. Luna, 6 where this Court held that a Court of First Instance cannot interfere with the orders of the Securities and Exchange Commission, the two being co-equal bodies.

After a close scrutiny of the facts and the record of this case,

We rule in favor of the petitioner.

The cases cited by respondent court are not in point. It is glaringly apparent that the reason why this Court ruled that the Court of First Instance could not interfere with the orders of the Securities and Exchange Commission was that this was so provided for by the law. In Pineda vs. Lantin, We explained that whenever a party is aggrieved by or disagree with an order or ruling of the Securities and Exchange Commission, he cannot seek relief from courts of general jurisdiction since under the Rules of Court and Commonwealth Act No. 83, as amended by Republic Act No. 635, creating and setting forth the powers and functions of the old Securities and Exchange Commission, his remedy is to go the Supreme Court on a petition for review. Likewise,

in Philippine Pacific Fishing Co., Inc. vs. Luna, it was stressed that if an order of the Securities and Exchange Commission is erroneous, the appropriate remedy take is first, within the Commission itself, then, to the Supreme Court as mandated in Presidential Decree No. 902-A, the law creating the new Securities and Exchange Commission. Nowhere in the said cases was it held that a Court of First Instance has no jurisdiction over all other government agencies. On the contrary, the ruling was specifically limited to the Securities and Exchange Commission.

The respondent court erred when it place the Securities and Exchange Commission and the Professional Regulation Commsision in the same category. As alraedy mentioned, with respect to the Securities and Exchange Commission, the laws cited explicitly provide with the procedure that need be taken when one is aggrieved by its order or ruling. Upon the other hand, there is no law providing for the next course of action for a party who wants to question a ruling or order of the Professional Regulation Commission. Unlike Commonwealth Act No. 83 and Presidential Decree No. 902-A, there is no provision in Presidential Decree No. 223, creating the Professional Regulation Commission, that orders or resolutions of the Commission are appealable either to the Court of Appeals or to theSupreme Court. Consequently, Civil Case No. 86-37950, which was filed in order to enjoin the enforcement of a resolution of the respondent Professional Regulation Commission alleged to be unconstitutional, should fall

within the general jurisdiction of the Court of First Instance, now the Regional Trial Court. 7

What is clear from Presidential Decree No. 223 is that the Professional Regulation Commission is attached to the Office of the President for general direction and coordination. 8 Well settled in our jurisprudence is the view that even acts of the Office of the President may be reviewed by the Court of First Instance (now the Regional Trial Court). In Medalla vs. Sayo, 9 this rule was thoroughly propounded on, to wit:

In so far as jurisdiction of the Court below to review by certiorari decisions and/or resolutions of the Civil Service Commission and of the residential Executive Asssistant is concerned, there should be no question but that the power of judicial review should be upheld. The following rulings buttress this conclusion:

The objection to a judicial review of a Presidential act arises from a failure to recognize the most important principle in our system of government, i.e., the separation of powers into three co-equal

departments, the executives, the legislative and the judicial, each supreme within its own assigned powers and duties. When a presidential act is challenged before the courts of justice, it is not to be implied therefrom that the Executive is being made subject and subordinate to the courts. The legality of his acts are under judicial review, not because the Executive is inferior to the courts, but because the law is above the Chief Executive himself, and the courts seek only to interpret, apply or implement it (the law). A judicial review of the President's decision on a case of an employee decided by the Civil Service Board of Appeals should be viewed in this light and the bringing of the case

to the Courts should be governed by the same principles as govern the jucucial review of all administrative acts of all administrative officers. 10

Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here, "the Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93 under the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for injunction was filed with the Court of First Instance of Lanao del Norte because, allegedly, the enforcement of the circular would impair some contracts already entered into by public school teachers. It was the contention of petitioner therein that "the Court of First Instance is not empowered to amend, reverse and modify what is otherwise the clear and explicit provision of the memorandum circular issued by the Executive Office which has the force and effect of law." In resolving the issue, We held:

... We definitely state that respondent Court lawfully acquired jurisdiction in Civil Case No. II-240 (8) because the plaintiff therein asked the lower court for relief, in the form of injunction, in defense of a legal right (freedom to enter into contracts) . . . . .

Hence there is a clear infringement of private respondent's constitutional right to enter into agreements not contrary to law, which might run the risk of being violated by the threatened implementation of Executive Office Memorandum Circular No. 93, dated February 5, 1968, which prohibits, with certain exceptions, cashiers and disbursing officers from honoring special powers of attorney executed by the payee employees. The respondent Court is not only right but duty bound to take cognizance of cases of this nature wherein a constitutional and statutory right is allegedly infringed by the administrative action of a government office. Courts of first Instance have original jurisdiction over all civil actions in which the subject of the litigation is not capable of pecuniary estimation (Sec. 44, Republic Act 296, as amended). 12 (Emphasis supplied.)

In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance has the authority to decide on the validity of a city tax ordinance even after its validity had been contested before the Secretary of Justice and an opinion thereon had been rendered.

In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the respondent Professional Regulation Commission, should be exempted from the general jurisdiction of the Regional Trial Court.

Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P. Blg. 129, it is the Court of Appeals which has jurisdiction over the case. The said law provides:

SEC. 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The contention is devoid of merit.

In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided for in Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which resulted from proceedings wherein the administrative body involved exercised its quasi-judicial functions. In Black's Law Dictionary, quasi-judicial is defined as a term applied to the action, discretion, etc., of public administrative officers or bodies required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their official action, and to exercise discretion of a judicial nature. To expound thereon, quasi-judicialadjudication would mean a determination of rights, privileges and duties resulting in a decision or order which applies to a specific situation . 14 This does not cover rules and regulations of general applicability issued by the administrative body to implement its purely administrative policies and functions like Resolution No. 105 which was adopted by the respondent PRC as a measure to preserve the integrity of licensure examinations.

The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer. 15 In this case, the issue presented was whether or not the Court of First Instance had jurisdiction over a case involving an order of the Commission on Elections awarding a contract to a private party which originated from an invitation to bid. The said issue came about because under the laws then in force, final awards, judgments, decisions or orders of the Commission on

Elections fall within the exclusive jurisdiction of the Supreme Court by way of certiorari. Hence, it has been consistently held that "it is the Supreme Court, not the Court of First Instance, which has exclusive jurisdiction to review on certiorari final decisions, orders, or rulings of the Commission on Elections relative to the conduct of elections and the enforcement of election laws."16

As to whether or not the Court of First Instance had jurisdiction in saidcase, We said:

We are however, far from convinced that an order of the COMELEC awarding a contract to a private party, as a result of its choice among various proposals submitted in response to its invitation to bid comes within the purview of a "final order" which is exclusively and directly appealable to this court on certiorari. What is contemplated by the term "final orders, rulings and decisions, of the COMELEC reviewable by certiorari by the Supreme Court as provided by law are those rendered in actions or proceedings before the COMELEC and taken cognizance of by the said body in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis supplied.)

xxx xxx xxx

We agree with petitioner's contention that the order of the Commission granting the award to a bidder is not an order rendered in a legal controversy before it wherein the parties filed their respective pleadings and presented evidence after which the questioned order was issued; and that this order of the commission was issued pursuant to its authority to enter into contracts in relation to election purposes. In short, the COMELEC resolution awarding the contract in favor of Acme was not issued pursuant to its quasi-judicial functions but merely as an incident of its inherent administrative functions over the conduct of elections, and hence, the said resolution may not be deemed as a "final order reviewable by certiorari by the Supreme Court. Being non-judicial in character, no contempt order may be imposed by the COMELEC from said order, and no direct and exclusive appeal by certiorari to this Tribunal lie from such order. Any question arising from said order may be well taken in an ordinary civil action before the trial courts. (Emphasis supplied.) 17

One other case that should be mentioned in this regard is Salud vs. Central Bank of the Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under Section 9, paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only to the Intermediate Appellate Court. Thus:

The Central Bank and its Liquidator also postulate, for the very first time, that the Monetary Board is among the "quasi-judicial ... boards" whose judgments are within the exclusive appellate jurisdiction of the IAC; hence, it is only said Court, "to the exclusion of the Regional Trial Courts," that may review the Monetary Board's resolutions. 19

Anent the posture of the Central Bank, We made the following pronouncement:

The contention is utterly devoid of merit. The IAC has no appellate jurisdiction over resolution or orders of the Monetary Board. No law prescribes any mode of appeal from the Monetary Board to the IAC. 20

In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain Civil Case No. 86-37950 and enjoin the respondent PRC from enforcing its resolution.

Although We have finally settled the issue of jurisdiction, We find it imperative to decide once and for all the validity of Resolution No. 105 so as to provide the much awaited relief to those who are and will be affected by it.

Of course, We realize that the questioned resolution was adopted for a commendable purpose which is "to preserve the integrity and purity of the licensure examinations." However, its good aim cannot be a cloak to conceal its constitutional infirmities. On its face, it can be readily seen that it is unreasonable in that an examinee cannot even attend any review class, briefing, conference or the like, or receive any hand-out, review material, or any tip from any school, collge or university, or any review center or the like or any reviewer, lecturer, instructor, official or employee of any of the aforementioned or similar institutions . ... 21

The unreasonableness is more obvious in that one who is caught committing the prohibited acts even without any ill motives will be barred from taking future examinations conducted by the respondent PRC. Furthermore, it is inconceivable how the Commission can manage to have a watchful eye on

each and every examinee during the three days before the examination period.

It is an aixiom in administrative law that administrative authorities should not act arbitrarily and capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be reasonable and fairly adapted to the end in view. If shown to bear no reasonable relation to the purposes for which they are authorized to be issued, then they must be held to be invalid. 22

Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to liberty guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees as to how they should prepare themselves for the licensure examinations. They cannot be restrained from taking all the lawful steps needed to assure the fulfillment of their ambition to become public accountants. They have every right to make use of their faculties in attaining success in their endeavors. They should be allowed to enjoy their freedom to acquire useful knowledge that will promote their personal growth. As defined in a decision of the United States Supreme Court:

The term "liberty" means more than mere freedom from physical restraint or the bounds of a prison. It means freedom to go where one may choose and to act in such a manner not

inconsistent with the equal rights of others, as his judgment may dictate for the promotion of his happiness, to pursue such callings and vocations as may be most suitable to develop his capacities, and giv to them their highest enjoyment. 23

Another evident objection to Resolution No. 105 is that it violates the academic freedom of the schools concerned. Respondent PRC cannot interfere with the conduct of review that review schools and centers believe would best enable their enrolees to meet the standards required before becoming a full fledged public accountant. Unless the means or methods of instruction are clearly found to be inefficient, impractical, or riddled with corruption, review schools and centers may not be stopped from helping out their students. At this juncture, We call attention to Our pronouncement in Garcia vs. The Faculty Admission Committee, Loyola School of Theology, 24 regarding academic freedom to wit:

... It would follow then that the school or college itself is possessed of such a right. It decides for itself its aims and objectives and how best to attain them. It is free from outside coercion or interference save possibly when the overriding public welfare calls for some restraint. It has a wide sphere of autonomy certainly extending to the

choice of students. This constitutional provision is not to be construed in a niggardly manner or in a grudging fashion.

Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer by depriving them of legitimate means of review or preparation on those last three precious days-when they should be refreshing themselves with all that they have learned in the review classes and preparing their mental and psychological make-up for the examination day itself-would be like uprooting the tree to get ride of a rotten branch. What is needed to be done by the respondent is to find out the source of such leakages and stop it right there. If corrupt officials or personnel should be terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by examiners should be set up and if violations are committed, then licenses should be suspended or revoked. These are all within the powers of the respondent commission as provided for in Presidential Decree No. 223. But by all means the right and freedom of the examinees to avail of all legitimate means to prepare for the examinations should not be curtailed.

In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court of Appeals in

CA-G.R. SP No. 10591 and another judgment is hereby rendered declaring Resolution No. 105 null and void and of no force and effect for being unconstitutional. This decision is immediately executory. No costs.

SO ORDERED.

THIRD DIVISION

[G.R. No. 116033. February 26, 1997]

ALFREDO L. AZARCON, petitioner, vs. SANDIGANBAYAN, PEOPLE OF THE PHILIPPINES and JOSE C. BATAUSA, respondents.

D E C I S I O N

PANGANIBAN, J.:

Does the Sandiganbayan have jurisdiction over a private individual who is charged with malversation of public funds as a principal after the said individual had been designated by the Bureau of Internal Revenue as a custodian of distrained property? Did such accused become a public officer and therefore subject to the graft courts jurisdiction as a consequence of such designation by the BIR?

These are the main questions in the instant petition for review of respondent Sandiganbayans Decision[1] in Criminal Case No. 14260 promulgated on March 8, 1994, convicting petitioner of malversation of public funds and property, and

Resolution[2] dated June 20, 1994, denying his motion for new trial or reconsideration thereof.

The Facts

Petitioner Alfredo Azarcon owned and operated an earth-moving business, hauling dirt and ore.[3] His services were contracted by the Paper Industries Corporation of the Philippines (PICOP) at its concession in Mangagoy, Surigao del Sur. Occasionally, he engaged the services of sub-contractors like Jaime Ancla whose trucks were left at the formers premises.[4] From this set of circumstances arose the present controversy.

x x x It appears that on May 25, 1983, a Warrant of Distraint of Personal Property was issued by the Main Office of the Bureau of Internal Revenue (BIR) addressed to the Regional Director (Jose Batausa) or his authorized representative of Revenue Region 10, Butuan City commanding the latter to distraint the goods, chattels or effects and other personal property of Jaime Ancla, a sub-contractor of accused Azarcon and, a delinquent taxpayer. The Warrant of Garnishment was issued to accused Alfredo Azarcon ordering him to transfer, surrender, transmit and/or remit to BIR the property in his possession owned by taxpayer Ancla. The Warrant of Garnishment was received by accused Azarcon on June 17, 1985.[5]

Petitioner Azarcon, in signing the Receipt for Goods, Articles, and Things Seized Under Authority of the National Internal Revenue, assumed the undertakings specified in the receipt the contents of which are reproduced as follows:

(I), the undersigned, hereby acknowledge to have received from Amadeo V. San Diego, an Internal Revenue Officer, Bureau of Internal Revenue of the Philippines, the following described goods, articles, and things:

Kind of property --- Isuzu dump truckMotor number --- E120-229598Chassis No. --- SPZU50-1772440Number of CXL --- 6Color --- BlueOwned By --- Mr. Jaime Ancla

the same having been this day seized and left in (my) possession pending investigation by the Commissioner of Internal Revenue or his duly authorized representative. (I) further promise that (I) will faithfully keep, preserve, and, to the best of (my) ability, protect said goods, articles, and things seized from defacement, demarcation, leakage, loss, or destruction in any manner; that (I) will neither alter nor remove, nor permit others to alter or remove or dispose of the same in any manner without the express authority of the Commissioner of Internal Revenue; and that (I) will produce and deliver all of said goods, articles, and things upon the order of any

court of the Philippines, or upon demand of the Commissioner of Internal Revenue or any authorized officer or agent of the Bureau of Internal Revenue.[6]

Subsequently, Alfredo Azarcon wrote a letter dated November 21, 1985 to the BIRs Regional Director for Revenue Region 10 B, Butuan City stating that

x x x while I have made representations to retain possession of the property and signed a receipt of the same, it appears now that Mr. Jaime Ancla intends to cease his operations with us. This is evidenced by the fact that sometime in August, 1985 he surreptitiously withdrew his equipment from my custody. x x x In this connection, may I therefore formally inform you that it is my desire to immediately relinquish whatever responsibilities I have over the above-mentioned property by virtue of the receipt I have signed. This cancellation shall take effect immediately. x x x .[7]

Incidentally, the petitioner reported the taking of the truck to the security manager of PICOP, Mr. Delfin Panelo, and requested him to prevent this truck from being taken out of the PICOP concession. By the time the order to bar the trucks exit was given, however, it was too late.[8]

Regional Director Batausa responded in a letter dated May 27, 1986, to wit:

An analysis of the documents executed by you reveals that while you are (sic) in possession of the

dump truck owned by JAIME ANCLA, you voluntarily assumed the liabilities of safekeeping and preserving the unit in behalf of the Bureau of Internal Revenue. This is clearly indicated in the provisions of the Warrant of Garnishment which you have signed, obliged and committed to surrender and transfer to this office. Your failure therefore, to observe said provisions does not relieve you of your responsibility.[9]

Thereafter, the Sandiganbayan found that

On 11 June 1986, Mrs. Marilyn T. Calo, Revenue Document Processor of Revenue Region 10 B, Butuan City, sent a progress report to the Chief of the Collection Branch of the surreptitious taking of the dump truck and that Ancla was renting out the truck to a certain contractor by the name of Oscar Cueva at PICOP (Paper Industries Corporation of the Philippines, the same company which engaged petitioners earth moving services), Mangagoy, Surigao del Sur. She also suggested that if the report were true, a warrant of garnishment be reissued against Mr. Cueva for whatever amount of rental is due from Ancla until such time as the latters tax liabilities shall be deemed satisfied. x x x However, instead of doing so, Director Batausa filed a letter-complaint against the (herein Petitioner) and Ancla on 22 January 1988, or after more than one year had elapsed from the time of Mrs. Calos report.[10]

Provincial Fiscal Pretextato Montenegro forwarded the records of the complaint x x x to the Office of the Tanodbayan on May 18, 1988. He was deputized Tanodbayan prosecutor and granted authority to conduct preliminary investigation on August 22, 1988, in a letter by Special Prosecutor Raul Gonzales approved by Ombudsman (Tanodbayan) Conrado Vasquez.[11]

Along with his co-accused Jaime Ancla, petitioner Azarcon was charged before the Sandiganbayan with the crime of malversation of public funds or property under Article 217 in relation to Article 222 of the Revised Penal Code (RPC) in the following Information[12]filed on January 12, 1990, by Special Prosecution Officer Victor Pascual:

That on or about June 17, 1985, in the Municipality of Bislig, Province of Surigao del Sur, Philippines, and within the jurisdiction of this Honorable Court, accused Alfredo L. Azarcon, a private individual but who, in his capacity as depository/administrator of property seized or deposited by the Bureau of Internal Revenue, having voluntarily offered himself to act as custodian of one Isuzu Dumptruck (sic) with Motor No. E120-22958, Chasis No. SPZU 50-1772440, and number CXL-6 and was authorized to be such under the authority of the Bureau of Internal Revenue, has become a responsible and accountable officer and said motor vehicle having been seized from Jaime C. Ancla in satisfaction of his tax liability in the total sum of EIGHTY THOUSAND EIGHT HUNDRED THIRTY

ONE PESOS and 59/100 (P80,831.59) became a public property and the value thereof as public fund, with grave abuse of confidence and conspiring and confederating with said Jaime C. Ancla, likewise, a private individual, did then and there wilfully, (sic) unlawfully and feloniously misappropriate, misapply and convert to his personal use and benefit the aforementioned motor vehicle or the value thereof in the aforestated amount, by then and there allowing accused Jaime C. Ancla to remove, retrieve, withdraw and tow away the said Isuzu Dumptruck (sic) with the authority, consent and knowledge of the Bureau of Internal Revenue, Butuan City, to the damage and prejudice of the government in the amount of P80,831.59 in a form of unsatisfied tax liability.

CONTRARY TO LAW.

The petitioner filed a motion for reinvestigation before the Sandiganbayan on May 14, 1991, alleging that: (1) the petitioner never appeared in the preliminary investigation; and (2) the petitioner was not a public officer, hence a doubt exists as to why he was being charged with malversation under Article 217 of the Revised Penal Code.[13] The Sandiganbayan granted the motion for reinvestigation on May 22, 1991.[14] After the reinvestigation, Special Prosecution Officer Roger Berbano, Sr., recommended the withdrawal of the information[15] but was overruled by the Ombudsman.[16]

A motion to dismiss was filed by petitioner on March 25, 1992 on the ground that the Sandiganbayan did not have jurisdiction over the person of the petitioner since he was not a public officer.[17] On May 18, 1992, the Sandiganbayan denied the motion.[18]

When the prosecution finished presenting its evidence, the petitioner then filed a motion for leave to file demurrer to evidence which was denied on November 16, 1992, for being without merit.[19] The petitioner then commenced and finished presenting his evidence on February 15, 1993.

The Respondent Courts Decision

On March 8, 1994, respondent Sandiganbayan[20] rendered a Decision,[21] the dispositive portion of which reads:

WHEREFORE, the Court finds accused Alfredo Azarcon y Leva GUILTY beyond reasonable doubt as principal of Malversation of Public Funds defined and penalized under Article 217 in relation to Article 222 of the Revised Penal Code and, applying the Indeterminate Sentence Law, and in view of the mitigating circumstance of voluntary surrender, the Court hereby sentences the accused to suffer the penalty of imprisonment ranging from TEN (10) YEARS and ONE (1) DAY of prision mayor in its maximum period to SEVENTEEN (17) YEARS, FOUR

(4) MONTHS and ONE (1) DAY of Reclusion Temporal.To indemnify the Bureau of Internal Revenue the amount of P80,831.59; to pay a fine in the same amount without subsidiary imprisonment in case of insolvency; to suffer special perpetual disqualification; and, to pay the costs.

Considering that accused Jaime Ancla has not yet been brought within the jurisdiction of this Court up to this date, let this case be archived as against him without prejudice to its revival in the event of his arrest or voluntary submission to the jurisdiction of this Court.

SO ORDERED.

Petitioner, through new counsel,[22] filed a motion for new trial or reconsideration on March 23, 1994, which was denied by the Sandiganbayan in its Resolution[23] dated December 2, 1994.

Hence, this petition.

The Issues

The petitioner submits the following reasons for the reversal of the Sandiganbayans assailed Decision and Resolution:

I. The Sandiganbayan does not have jurisdiction over crimes committed solely by private individuals.

II. In any event, even assuming arguendo that the appointment of a private individual as a custodian or a depositary of distrained property is sufficient to convert such individual into a public officer, the petitioner cannot still be considered a public officer because:

[A]

There is no provision in the National Internal Revenue Code which authorizes the Bureau of Internal Revenue to constitute private individuals as depositaries of distrained properties.

[B]

His appointment as a depositary was not by virtue of a direct provision of law, or by election or by appointment by a competent authority.

III. No proof was presented during trial to prove that the distrained vehicle was actually owned by the accused Jaime Ancla; consequently, the governments right to the subject property has not been established.

IV. The procedure provided for in the National Internal Revenue Code concerning the disposition of

distrained property was not followed by the B.I.R., hence the distraint of personal property belonging to Jaime C. Ancla and found allegedly to be in the possession of the petitioner is therefore invalid.

V. The B.I.R. has only itself to blame for not promptly selling the distrained property of accused Jaime C. Ancla in order to realize the amount of back taxes owed by Jaime C. Ancla to the Bureau.[24]

In fine, the fundamental issue is whether the Sandiganbayan had jurisdiction over the subject matter of the controversy. Corollary to this is the question of whether petitioner can be considered a public officer by reason of his being designated by the Bureau of Internal Revenue as a depositary of distrained property.

The Courts Ruling

The petition is meritorious.

Jurisdiction of the Sandiganbayan

It is hornbook doctrine that in order (to) ascertain whether a court has jurisdiction or not, the provisions of the law should be inquired into.[25] Furthermore, the jurisdiction of the court must appear clearly from the statute law or it will not be held to exist. It cannot be

presumed or implied.[26] And for this purpose in criminal cases, the jurisdiction of a court is determined by the law at the time of commencement of the action.[27]

In this case, the action was instituted with the filing of this information on January 12, 1990; hence, the applicable statutory provisions are those of P.D. No. 1606, as amended by P.D. No. 1861 on March 23, 1983, but prior to their amendment by R.A. No. 7975 on May 16, 1995. At that time, Section 4 of P.D. No. 1606 provided that:

SEC. 4. Jurisdiction. -- The Sandiganbayan shall exercise:

(a) Exclusive original jurisdiction in all cases involving:

(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the Revised Penal Code;

(2) Other offenses or felonies committed by public officers and employees in relation to their office, including those employed in government-owned or controlled corporations, whether simple or complexed with other crimes, where the penalty prescribed by law is higher than prision correccional or imprisonment for six (6) years, or a fine of P6,000.00: PROVIDED, HOWEVER, that offenses or felonies mentioned in this paragraph where the penalty prescribed by law does not exceed prision

correccional or imprisonment for six (6) years or a fine of P6,000.00 shall be tried by the proper Regional Trial Court, Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit Trial Court.

x x x x x x x x x

In case private individuals are charged as co-principals, accomplices or accessories with the public officers or employees, including those employed in government-owned or controlled corporations, they shall be tried jointly with said public officers and employees.

x x x x x x x x x.

The foregoing provisions unequivocally specify the only instances when the Sandiganbayan will have jurisdiction over a private individual, i.e. when the complaint charges the private individual either as a co-principal, accomplice or accessory of a public officer or employee who has been charged with a crime within its jurisdiction.

Azarcon: A Public Officer or A Private Individual?

The Information does not charge petitioner Azarcon of being a co-principal, accomplice or accessory to a public officer committing an offense under the Sandiganbayans jurisdiction.Thus, unless petitioner be proven a public officer, the

Sandiganbayan will have no jurisdiction over the crime charged. Article 203 of the RPC determines who are public officers:

Who are public officers. -- For the purpose of applying the provisions of this and the preceding titles of the book, any person who, by direct provision of the law, popular election, popular election or appointment by competent authority, shall take part in the performance of public functions in the Government of the Philippine Islands, or shall perform in said Government or in any of its branches public duties as an employee, agent, or subordinate official, of any rank or classes, shall be deemed to be a public officer.

Thus,

(to) be a public officer, one must be --

(1) Taking part in the performance of public functions in the government, or

Performing in said Government or any of its branches public duties as an employee, agent, or subordinate official, of any rank or class; and

(2) That his authority to take part in the performance of public functions or to perform public duties must be --

a. by direct provision of the law, or

b. by popular election, or

c. by appointment by competent authority.[28]

Granting arguendo that the petitioner, in signing the receipt for the truck constructively distrained by the BIR, commenced to take part in an activity constituting public functions, he obviously may not be deemed authorized by popular election. The next logical query is whether petitioners designation by the BIR as a custodian of distrained property qualifies as appointment by direct provision of law, or by competent authority.[29] We answer in the negative.

The Solicitor General contends that the BIR, in effecting constructive distraint over the truck allegedly owned by Jaime Ancla, and in requiring the petitioner Alfredo Azarcon who was in possession thereof to sign a pro forma receipt for it, effectively designated petitioner a depositary and, hence, citing U.S. vs. Rastrollo,[30] a public officer.[31] This is based on the theory that

(t)he power to designate a private person who has actual possession of a distrained property as a depository of distrained property is necessarily implied in the BIRs power to place the property of a delinquent tax payer (sic) in distraint as provided for under Sections 206, 207 and 208 (formerly Sections 303, 304 and 305) of the National Internal Revenue Code, (NIRC) x x x.[32]

We disagree. The case of U.S. vs. Rastrollo is not applicable to the case before us simply because the facts therein are not identical, similar or analogous to those obtaining here. While the cited case involved a judicial deposit of the proceeds of the sale of attached property in the hands of the debtor, the case at bench dealt with the BIRs administrative act of effecting constructive distraint over alleged property of taxpayer Ancla in relation to his back taxes, property which was received by petitioner Azarcon. In the cited case, it was clearly within the scope of that courts jurisdiction and judicial power to constitute the judicial deposit and give the depositary a character equivalent to that of a public official.[33] However, in the instant case, while the BIR had authority to require petitioner Azarcon to sign a receipt for the distrained truck, the NIRC did not grant it power to appoint Azarcon a public officer.

It is axiomatic in our constitutional framework, which mandates a limited government, that its branches and administrative agencies exercise only that power delegated to them as defined either in the Constitution or in legislation or in both.[34] Thus, although the appointing power is the exclusive prerogative of the President, x x x[35] the quantum of powers possessed by an administrative agency forming part of the executive branch will still be limited to that conferred expressly or by necessary or fair implication in its enabling act. Hence, (a)n administrative officer, it has been held, has only such powers as are expressly granted to him and those

necessarily implied in the exercise thereof.[36] Corollarily, implied powers are those which are necessarily included in, and are therefore of lesser degree than the power granted. It cannot extend to other matters not embraced therein, nor are not incidental thereto.[37] For to so extend the statutory grant of power would be an encroachment on powers expressly lodged in Congress by our Constitution.[38] It is true that Sec. 206 of the NIRC, as pointed out by the prosecution, authorizes the BIR to effect a constructive distraint by requiring any person to preserve a distrained property, thus:

x x x x x x x x x

The constructive distraint of personal property shall be effected by requiring the taxpayer or any person having possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same in any manner whatever without the express authority of the Commissioner.

x x x x x x x x x

However, we find no provision in the NIRC constituting such person a public officer by reason of such requirement. The BIRs power authorizing a private individual to act as a depositary cannot be stretched to include the power to appoint him as a public officer. The prosecution argues that Article 222 of the Revised Penal Code x x x defines the

individuals covered by the term officers under Article 217[39] x x x of the same Code.[40] And accordingly, since Azarcon became a depository of the truck seized by the BIR he also became a public officer who can be prosecuted under Article 217 x x x.[41]

The Court is not persuaded. Article 222 of the RPC reads:

Officers included in the preceding provisions. -- The provisions of this chapter shall apply to private individuals who, in any capacity whatever, have charge of any insular, provincial or municipal funds, revenues, or property and to any administrator or depository of funds or property attached, seized or deposited by public authority, even if such property belongs to a private individual.

Legislative intent is determined principally from the language of a statute. Where the language of a statute is clear and unambiguous, the law is applied according to its express terms, and interpretation would be resorted to only where a literal interpretation would be either impossible or absurd or would lead to an injustice.[42] This is particularly observed in the interpretation of penal statutes which must be construed with such strictness as to carefully safeguard the rights of the defendant x x x.[43] The language of the foregoing provision is clear. A private individual who has in his charge any of the public funds or property enumerated therein and commits any of the acts defined in any of the provisions of

Chapter Four, Title Seven of the RPC, should likewise be penalized with the same penalty meted to erring public officers. Nowhere in this provision is it expressed or implied that a private individual falling under said Article 222 is to be deemed a public officer.

After a thorough review of the case at bench, the Court thus finds petitioner Alfredo Azarcon and his co-accused Jaime Ancla to be both private individuals erroneously charged before and convicted by Respondent Sandiganbayan which had no jurisdiction over them. The Sandiganbayans taking cognizance of this case is of no moment since (j)urisdiction cannot be conferred by x x x erroneous belief of the court that it had jurisdiction.[44] As aptly and correctly stated by the petitioner in his memorandum:

From the foregoing discussion, it is evident that the petitioner did not cease to be a private individual when he agreed to act as depositary of the garnished dump truck. Therefore, when the information charged him and Jaime Ancla before the Sandiganbayan for malversation of public funds or property, the prosecution was in fact charging two private individuals without any public officer being similarly charged as a co-conspirator. Consequently, the Sandiganbayan had no jurisdiction over the controversy and therefore all the proceedings taken below as well as the Decision rendered by Respondent Sandiganbayan, are null and void for lack of jurisdiction.[45]

WHEREFORE, the questioned Resolution and Decision of the Sandiganbayan are hereby SET ASIDE and declared NULL and VOID for lack of jurisdiction. No costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-25133             September 28, 1968

S/SGT. JOSE SANTIAGO, petitioner-appellant, vs.LT. COL. CELSO ALIKPALA, ET AL., respondents-appellees.

Floro A. Sarmiento and Noe Maines for petitioner-appellant.Cuadrato Palma and the Office of the Solicitor General for respondents-appellees.

 

FERNANDO, J.:

The validity of a court-martial proceeding was challenged in the lower court on due process grounds to show lack of jurisdiction. Petitioner, a sergeant in the Philippine Army and the accused in a court-martial proceeding, through a writ of certiorari and prohibition, filed on April 17, 1963, with the lower court, sought to restrain respondents, the officers, constituting the court-martial, that was then in the process of trying petitioner for alleged violation of two provisions of the Articles of War, from continuing with the proceedings

on the ground of its being without jurisdiction. There was likewise a plea for a restraining order, during the pendency of his petition, but it was unsuccessful.

No response, either way, was deemed necessary by the then Presiding Judge of the lower court, now Justice Nicasio Yatco of the Court of Appeals, as petitioner had, in the meanwhile, been convicted by the court-martial. The lower court verdict, rendered on September 16, 1963, was one of dismissal, as in its opinion, "this case had already become moot and academic ... ."

An appeal was taken to us, the same due process objections being raised. We think that the question before us is of such import and significance that an easy avoidance through the technicality of the "moot and academic" approach hardly recommends itself. For reasons to be more fully set forth, we find that such court-martial was not lawfully convened, and, consequently, devoid of jurisdiction. Accordingly, we reverse the lower court.

There was a stipulation of facts submitted to the lower court on July 10, 1963, to the following effect: "That the arraignment of the petitioner on December 17, 1962 was for the purpose of avoiding prescription pursuant to Article of War 38 of one of the offenses with which the accused is charged since, as charged, same was allegedly committed on or about December 18, 1960; That prior to the said arraignment, no written summons or subpoena was issued addressed

to the petitioner or his counsel, informing them of said arraignment; That instead of said written summons or subpoena Col. Eladio Samson, Constabulary Staff Judge Advocate called up First Sergeant Manuel Soriano at the Headquarters II Philippine Constabulary Zone, Camp Vicente Lim, Canlubang, Laguna on December 16, 1962 by telephone with instructions to send the petitioner to HPC, Camp Crame, Quezon City, under escort, for arraignment and only for arraignment; That upon arrival in HPC, the petitioner was directed to proceed to the PC Officer's Clubhouse, where a General Court-Martial composed of the respondents, created to try the case of 'People vs. Capt. Egmidio Jose, for violation of Articles of War 96 and 97', pursuant to paragraph 10, Special Order No. 14, Headquarters Philippine Constabulary, dated 18 July 1962, ..., was to resume, as scheduled, the trial of 'People vs. Pfc. Numeriano Ohagan, for violation of Articles of War 64, 85, and 97'; That it was only at the time (December 17, 1962) that petitioner learned that he will be arraigned for alleged violation of Articles of War 85 and 97, after being informed by one of the respondents, Capt. Cuadrato Palma as Trial Judge Advocate why he was there; That prior to that arraignment on December 17, 1962 there was no special order published by the Headquarters Philippine Constabulary creating or directing the General Court-Martial composed of the respondents to arraign and try the case against the petitioner, there however was already an existing court trying another case; That the respondents relied on the first indorsement of the Acting Adjutant

General, HPC, Camp Crame, Quezon City, dated December 14, 1962 and addressed to the Trial Judge Advocate of the General Court-martial ... directing the said Trial Judge Advocate to refer the case against petitioner to the above-mentioned court, ...; That the above paragraph 10, Special Order No. 14 dated 18 July 1962, does not contain the phrase 'and such other cases which may be referred to it,' but however said orders were amended only on 8 January 1963, to include such phrase, ... ." 1

It was further stipulated that petitioner's counsel did object to his arraignment asserting that a general court-martial then convened was without jurisdiction, as there was no special order designating respondents to compose a general court-martial for the purpose of trying petitioner, as petitioner was not furnished a copy of the charge sheet prior to his arraignment as required in the Manual for Court-Martial, except on the very day thereof, and as there was no written summons or subpoena served on either the petitioner, as accused, or the counsel. Respondents, acting as the general court-martial, overruled the above objections, and the Trial Judge Advocate was then ordered to proceed to read the charges and specifications against petitioner over the vigorous objections of counsel. It was shown, likewise, in the stipulation of facts, that the case, having been postponed to February 21, 1963, petitioner's counsel had in the meanwhile complained to the Chief of Constabulary against the proceedings on the ground of its nullity, and sought to have

respondents restrained from continuing with the trial of petitioner due to such lack of jurisdiction but the Chief of Constabulary ruled that he could not act on such complaint until the records of the trial were forwarded to him for review. With such a ruling, and with the denial of two other motions by petitioner upon the court-martial being convened anew on February 21, 1963, one to invalidate his arraignment on December 17, 1962, and the other to quash the complaint based on the denial of due process and lack of jurisdiction, the present petition for certiorari and prohibition was filed with the lower court. 2

As above noted, the lower court dismissed the petition due to its belief that, petitioner having been convicted in the meanwhile, there being no restraining order, the matter had become moot and academic. As was set forth earlier, we differ, the alleged lack of jurisdiction being too serious a matter to be thus summarily ignored.

The firm insistence on the part of petitioner that the general court-martial lacks jurisdiction on due process grounds, cannot escape notice. The basic objection was the absence of a special order "designating respondents to compose a general court-martial to convene and try the case of petitioner; ... ." It was expressly stipulated that the respondents were convened to try the case of a certain Capt. Egmidio Jose and not that filed against petitioner. As a matter of fact, the opening paragraph of the stipulation of

facts made clear that he was arraigned on December 17, 1962 by respondents as a general court-martial appointed precisely to try the above Capt. Jose solely "for the purpose of avoiding prescription pursuant to Article of War 38 of one of the offenses with which the accused is charged ... ."

Is such a departure from what the law and regulations 3 prescribe offensive to the due process clause? If it were, then petitioner should be sustained in his plea for a writ of certiorari and prohibition, as clearly the denial of the constitutional right would oust respondents of jurisdiction, even on the assumption that they were vested with it originally. Our decisions to that effect are impressive for their unanimity.

In Harden v. The Director of Prisons, 4 Justice Tuason, speaking for the Court, explicitly announced that "deprivation of any fundamental or constitutional rights" justify a proceeding for habeas corpus on the ground of lack of jurisdiction. Abriol v. Homeres 5 is even more categorical. In that case, the action of a lower court, denying the accused the opportunity to present proof for his defense, his motion for dismissal failing, was held by this Court as a deprivation of his right to due process. As was made clear by the opinion of Justice Ozaeta: "No court of justice under our system of government has the power to deprive him of that right. If the accused does not waive his right to be heard but on the contrary — as in the instant case — invokes the right, and the court denies it to him, that court no longer has jurisdiction to

proceed; it has no power to sentence the accused without hearing him in his defense; and the sentence thus pronounced is void and may be collaterally attacked in a habeas corpus proceeding." 6

A recent decision rendered barely a month ago, in Chavez v. Court of Appeals, 7 is even more in point. Here, again, habeas corpus was relied upon by petitioner whose constitutional rights were not respected, but, in addition, the special civil actions of certiorari and mandamus were likewise availed of, in view of such consequent lack of jurisdiction. The stress though in the opinion of Justice Sanchez was on habeas corpus. Thus: "The course which petitioner takes is correct. Habeas corpus is a high prerogative writ. It is traditionally considered as an exceptional remedy to release a person whose liberty is illegally restrained such as when the accused's constitutional rights are disregarded. Such defect results in the absence or loss of jurisdiction and therefore invalidates the trial and the consequent conviction of the accused whose fundamental right was violated. That void judgment of conviction may be challenged by collateral attack, which precisely is the function of habeas corpus. This writ may issue even if another remedy which is less effective may be availed of by the defendant."

The due process concept rightfully referred to as "a vital and living force in our jurisprudence" calls for respect and deference, otherwise the governmental action taken suffers from a fatal infirmity. As was so

aptly expressed by the then Justice, now Chief Justice, Concepcion: "... acts of Congress, as well as those of the Executive, can deny due process only under pain of nullity, and judicial proceedings suffering from the same flaw are subject to the same sanction, any statutory provision to the contrary notwithstanding." 8

The crucial question, then, is whether such failure to comply with the dictates of the applicable law insofar as convening a valid court martial is concerned, amounts to a denial of due process. We hold that it does. There is such a denial not only under the broad standard which delimits the scope and reach of the due process requirement, but also under one of the specific elements of procedural due process.

It is to be admitted that there is no controlling and precise definition of due process which, at the most furnishes a standard to which governmental action should conform in order to impress with the stamp of validity any deprivation of life, liberty or property. A recent decision of this Court, in Ermita-Malate Hotel v. Mayor of Manila 9treated the matter thus: "It is responsiveness to the supremacy of reason, obedience to the dictates of justice. Negatively put, arbitrariness is ruled out and unfairness avoided. To satisfy the due process requirement, official action, to paraphrase Cardozo, must not outrun the bounds of reason and result in sheer oppression. Due process is thus hostile to any official action marred by lack of reasonableness. Correctly has it been identified as

freedom from arbitrariness. It is the embodiment of the sporting idea of fair play. It exacts fealty 'to those strivings for justice' and judges the act of officialdom of whatever branch 'in the light of reason drawn from considerations of fairness that reflect [democratic] traditions of legal and political thought.'"

Nor is such a reliance on the broad reach of due process the sole ground on which the lack of jurisdiction of the court-martial convened in this case could be predicated. Recently, stress was laid anew by us on the first requirement of procedural due process, namely, the existence of the court or tribunal clothed with judicial, or quasi-judicial, power to hear and determine the matter before it. 10 This is a requirement that goes back to Banco Español-Filipino v. Palanca, a decision rendered half a century ago. 11

There is the express admission in the statement of facts that respondents, as a court-martial, were not convened to try petitioner but someone else, the action taken against petitioner being induced solely by a desire to avoid the effects of prescription; it would follow then that the absence of a competent court or tribunal is most marked and undeniable. Such a denial of due process is therefore fatal to its assumed authority to try petitioner. The writ ofcertiorari and prohibition should have been granted and the lower court, to repeat, ought not to have dismissed his petition summarily.

The significance of such insistence on a faithful compliance with the regular procedure of convening court-martials in accordance with law cannot be over-emphasized. As was pointed out by Justice Tuason in Ruffy v. The Chief of Staff, Philippine Army: 12 "Courts-martial are agencies of executive character, and one of the authorities for the ordering of courts-martial has been held to be attached to the constitutional functions of the President as Commander-in-Chief, independently of legislation. (Winthrop's Military Law and Precedents, 2d Edition, p. 49.) Unlike courts of law, they are not a portion of the judiciary." Further on, his opinion continues: "Not belonging to the judicial branch of the government, it follows that courts-martial must pertain to the executive department; and they are in fact simply instrumentalities of the executive power, provided by Congress for the President as Commander-in-Chief, to aid him in properly commanding the army and navy and enforcing discipline therein, and utilized under his orders or those of his authorized military representatives." 13

It is even more indispensable, therefore, that such quasi-judicial agencies, clothed with the solemn responsibility of depriving members of the Armed Forces of their liberties, even of their lives, as a matter of fact, should be held all the more strictly bound to manifest fidelity to the fundamental concept of fairness and the avoidance of arbitrariness for which due process stands as a living vital principle. If it were otherwise, then, abuses, even if not intended,

might creep in, and the safeguards so carefully thrown about the freedom of an individual, ignored or disregarded. Against such an eventuality, the vigilance of the judiciary furnishes a shield. That is one of its grave responsibilities. Such a trust must be lived up to; such a task cannot be left undone.

WHEREFORE, the order of respondent Court of September 6, 1963, dismissing the petition for certiorari and prohibition is reversed, and the writ of certiorari and prohibition granted, annulling the proceedings as well as the decision rendered by respondents as a court-martial and perpetually restraining them from taking any further action on the matter. Without pronouncement as to costs.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-19180            October 31, 1963

NATIONAL DEVELOPMENT COMPANY, ET AL., petitioners-appellees, vs.THE COLLECTOR OF CUSTOMS OF MANILA, respondent-appellant.

Ross, Selph and Carrascoso for petitioners-appellees.Office of the Solicitor General for respondent-appellant.

BAUTISTA ANGELO, J.:

The National Development Company which is engaged in the shipping business under the name of "Philippine National Lines" is the owner of steamship "S.S. Doña Nati" whose local agent in Manila is A. V. Rocha. On August 4, 1960, the Collector of Customs sent a notice to C.F. Sharp & Company as alleged operator of the vessel informing it that said vessel was apprehended and found to have committed a violation of the customs laws and regulations in that it carried an unmanifested cargo consisting of one RCA Victor TV set 21" in violation of Section 2521 of the Tariff and Customs Code. Inserted in said notice is a

note of the following tenor: "The above article was being carried away by Dr. Basilio de Leon y Mendez, official doctor of M/S "Doña Nati" who readily admitted ownership of the same." C.F. Sharp & Company was given 48 hours to show cause why no administrative fine should be imposed upon it for said violation.

C.F. Sharp & Company, not being the agent or operator of the vessel, referred the notice to A. V. Rocha, the agent and operator thereof, who on August 8, 1960, answered the notice stating, among other things, that the television set referred to therein was not a cargo of the vessel and, therefore, was not required by law to be manifested. Rocha stated further: "If this explanation is not sufficient, we request that this case be set for investigation and hearing in order to enable the vessel to be informed of the evidence against it to sustain the charge and to present evidence in its defense."

The Collector of Customs replied to Rocha on August 9, 1960 stating that the television set in question was a cargo on board the vessel and that he does not find his explanation satisfactory enough to exempt the vessel from liability for violating Section 2521 of the Tariff and Customs Code. In said letter, the collector imposed a fine of P5,000.00 on the vessel and ordered payment thereof within 48 hours with a threat that he will deny clearance to said vessel and will issue a warrant of seizure and detention against it if the fine is not paid.

And considering that the Collector of Customs has exceeded his jurisdiction or committed a grave abuse of discretion in imposing the fine of P5,000.00 on the vessel without the benefit of an investigation or hearing as requested by A. V. Rocha, the National Development Company, as owner of the vessel, as well as A. V. Rocha as agent and operator thereof, filed the instant special civil action of certiorari with preliminary injunction before the Court of First Instance of Manila against the official abovementioned. The court, finding the petition for injunction sufficient in form and substance, issued ex parte the writ prayed for upon the filing of a bond in the amount of P5,00.00.

Respondent set up the following special defenses: (1) the court a quo has no jurisdiction to act on matters arising from violations of the Customs Law, but the Court of Tax Appeals; (2) assuming that it has, petitioners have not exhausted all available administrative remedies, one of which is to appeal to the Commissioner of Customs; (3) the requirements of administrative due process have already been complied with in that the written notice given by respondent to petitioner Rocha clearly specified the nature of the violation complained of and that the defense set up by Rocha constitute merely a legal issue which does not require further investigation; and (4) the investigation conducted by the customs authorities showed that the television set in question was unloaded by the ship's doctor without going thru the custom house as required by law and was not

declared either in the ship's manifest or in the crew declaration list.

On the basis of the stipulation of facts submitted by the parties, the court a quo rendered decision setting aside the ruling of respondent which imposes a fine of P5,000.00 on the vessel Doña Nati payable within 48 hours from receipt thereof. The court stated that said ruling appears to be unjust and arbitrary because the party affected has not been accorded the investigation it requested from the Collector of Customs.

Respondent interposed the present appeal.

When the customs authorities found that the vessel Doña Nati carried on board an unmanifested cargo consisting of one RCA Victor TV set 21" in violation of Section 2521 of the Tariff and Customs Code, respondent sent a written notice to C. F. Sharp & Company, believing it to be the operator or agent of the vessel, and when the latter referred the notice to A. V. Rocha, the real operator of the vessel, for such step as he may deem necessary to be taken the latter answered the letter stating that the television set was not cargo and so was not required by law to be manifested, and he added to his answer the following: "If this explanation is not sufficient, we request that this case be set for investigation and hearing in order to enable the vessel to be informed of the evidence against it to sustain the charge and to present evidence in its defense. "Respondent, however,

replied to this letter saying that said television was a cargo within the meaning of the law and so he does not find his explanation satisfactory and then and there imposed on the vessel a fine of P5,00.00. Respondent even went further. He ordered that said fine be paid within 48 hours from receipt with a threat that the vessel would be denied clearance and a warrant of seizure would be issued if the fine will not be paid. Considering this to be a grave abuse of discretion, petitioners commenced the present action for certiorari before the court a quo.

We find this action proper for it really appears that petitioner Rocha was not given an opportunity to prove that the television set complained of is not a cargo that needs to be manifested as required by Section 2521 of the Tariff and Customs Code. Under said section, in order that an imported article or merchandise may be considered a cargo that should be manifested it is first necessary that it be so established for the reason that there are other effects that a vessel may carry that are excluded from the requirement of the law, among which are the personal effects of the members of the crew. The fact that the set in question was claimed by the customs authorities not to be within the exception does not automatically make the vessel liable. It is still necessary that the vessel, its owner or operator, be given a chance to show otherwise. This is precisely what petitioner Rocha has requested in his letter. Not only was he denied this chance, but respondent collector immediately imposed upon the vessel the

huge fine of P5,000.00. This is a denial of the elementary rule of due process.

True it is that the proceedings before the Collector of Customs insofar as the determination of any act or irregularity that may involve a violation of any customs law or regulation is concerned, or of any act arising under the Tariff and Customs Code, are not judicial in character, but merely administrative, where the rules of procedure are generally disregarded, but even in the administrative proceedings due process should be observed because that is a right enshrined in our Constitution. The right to due process is not merely statutory. It is a constitutional right. Indeed, our Constitution provides that "No person shall be deprived of life, liberty, or property without due process of law", which clause epitomize the principle of justice which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial. That this principle applies with equal force to administrative proceedings was well elaborated upon by this Court in the Ang Tibay case as follows:

... The fact, however, that the Court of Industrial Relations may be said to be free from the rigidity of certain procedural requirements does not mean that it can, in justiciable case coming before it, entirely ignore or disregard the fundamental and essential requirements of due process in trials and investigations of an administrative character.

... There are cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. No only must there be some evidence to support a finding or conclusion, but the evidence must be substantial. The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected. The Court of Industrial Relations or any of its judges, therefore, must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the views of a subordinate in arriving at a decision. The Court of Industrial Relations should, in all controversial questions, render its decision in such a manner that the parties to the proceeding can know the various issues involved, and the reason for the decision rendered. The performance of this duty is

inseparable from the authority conferred upon it. (Ang Tibay, et al. v. The Court of Industrial Relations, et al., 40 O.G., No. 11, Supp. p. 29).

There is, therefore, no point in the contention that the court a quo has no jurisdiction over the present case because what is here involved is not whether the imposition of the fine by the Collector of Customs on the operator of the ship is correct or not but whether he acted properly in imposing said fine without first giving the operator an opportunity to be heard. Here we said that he acted improvidently and so the action taken against him is in accordance with Rule 67 of our Rules of Court.

Another point raised is that petitioners have brought this action prematurely for they have not yet exhausted all the administrative remedies available to them, one of which is to appeal the ruling to the Commissioner of Customs. This may be true, but such step we do not consider a plain, speedy or adequate remedy in the ordinary course of law as would prevent petitioners from taking the present action, for it is undisputed that respondent collector has acted in utter disregard of the principle of due process.

WHEREFORE, the decision appealed from is affirmed. No costs.