QUASI-LEGISLATIVE POWERS (Case Digests)

A. In General

1. THE PEOPLE OF THE PHILIPPINES vs. HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA, GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO DEL ROSARIO, G.R. No. L-32166, October 18, 1977 Parties:

Plaintiff-appellant: THE PEOPLE OF THE PHILIPPINESAccused-appellees: HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA, GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO DEL ROSARIO

Ponente: AQUINO, J.

Facts:

On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the recommendation of the Fisheries Commission, issued Fisheries Administrative Order No. 84-1, amending section 2 of Administrative Order No. 84, by restricting the ban against electro fishing to fresh water fisheries. Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed by the amendatory order to read as follows: "in fresh water fisheries in the Philippines, such as rivers, lakes, swamps, dams, irrigation canals and other bodies of fresh water."

On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and Carlito del Rosario were charged by a Constabulary investigator in the municipal court of Sta. Cruz, Laguna with having violated Fisheries Administrative Order No. 84-1. It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted to electro fishing in the waters of Barrio San Pablo Norte, Sta. Cruz.

Upon motion of the accused, the municipal court quashed the complaint. The prosecution appealed. The Court of First Instance of Laguna affirmed the order of dismissal. The case is now before this Court on appeal by the prosecution under Republic Act No. 5440.

The lower court held that electro fishing cannot be penalize because electric current is not an obnoxious or poisonous substance as contemplated in section I of the Fisheries Law and that it is not a substance at all but a form of energy conducted or transmitted by substances. The lower court further held that, since the law does not clearly prohibit electro fishing, the executive and judicial departments cannot consider it unlawful.

It is noteworthy that the Fisheries Law does not expressly punish “electro fishing" Notwithstanding the silence of the law, the Secretary of Agriculture and Natural Resources, upon the recommendation of the Commissioner of Fisheries, promulgated Fisheries Administrative Order No. 84 prohibiting electro fishing in all Philippine waters.

In this appeal, the prosecution cites as the legal sanctions for the prohibition against electro fishing in fresh water fisheries (1) the rule-making power of the Department Secretary under section 4 of the Fisheries Law; (2) the function of the Commissioner of Fisheries to enforce the provisions of the Fisheries Law and the regulations Promulgated thereunder and to execute the rules and regulations consistent with the purpose for the creation of the Fisheries Commission and for the development of fisheries; (3) the declared national policy to encourage, Promote and conserve our fishing resources, and (4) section 83 of the Fisheries Law which provides that "any other violation of" the Fisheries Law or of any rules and regulations promulgated thereunder "shall subject the offender to a fine of not more than two hundred pesos, or imprisonment for not more than six months, or both, in the discretion of the court."

Issue:

WON the Fisheries Administrative Order promulgated by the Secretary of Agriculture and Natural Resources was valid.

Ruling:

We are of the opinion that the Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries exceeded their authority in issuing Fisheries Administrative Orders Nos. 84 and 84-1 and that those orders are not warranted under the Fisheries Commission, Republic Act No. 3512.

The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro fishing is not banned under that law, the Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries are powerless to penalize it. In other words, Administrative Orders Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any legal basis.

That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing; (2) unlawful fishing in deepsea fisheries; (3) unlawful taking of marine molusca, (4) illegal taking of sponges; (5) failure of licensed fishermen to report the kind and quantity of fish caught, and (6) other violations.

Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84, in punishing electro fishing, does not contemplate that such an offense fails within the category of "other violations" because, the penalty for electro fishing is the penalty next lower to the penalty for fishing with the use of obnoxious or poisonous substances, fixed in section 76, and is not the same as the penalty for "other violations" of the law and regulations fixed in section 83 of the Fisheries Law.

However, at present, there is no more doubt that electro fishing is punishable under the Fisheries Law and that it cannot be penalized merely by executive revolution because Presidential Decree No. 704, which is a revision and consolidation of all laws and decrees affecting fishing and fisheries and which was promulgated on May 16, 1975, expressly punishes electro fishing in fresh water and salt water areas.

The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it his been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned.

Administrative regulations issued by a Department Head in conformity with law have the force of law As he exercises the rule-making power by delegation of the lawmaking body, it is a requisite that he should not transcend the bound demarcated by the statute for the exercise of that power; otherwise, he would be improperly exercising legislative power in his own right and not as a surrogate of the lawmaking body.

A penal statute is strictly construed. While an administrative agency has the right to make ranks and regulations to carry into effect a law already enacted, that power should not be confused with the power to enact a criminal statute. An administrative agency can have only the administrative or policing powers expressly or by necessary implication conferred upon it.

WHEREFORE, the lower court's decision of June 9, 1970 is set aside for lack of appellate jurisdiction and the order of dismissal rendered by the municipal court of Sta. Cruz.

Principle involved:

Limitations of Rule-Making authority for Quasi-legislative Agencies

2. SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL) vs. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), G.R. No. 151908, August 12, 2003

Parties:Petitioners: SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL)Respondent: NATIONAL TELECOMMUNICATIONS COMMISSION (NTC)

Ponente: YNARES-SANTIAGO, J.

Facts:

Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission (NTC) issued Memorandum Circular No. 13-6-2000, promulgating rules and regulations on the billing of telecommunications services. On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which contained measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. This was followed by another Memorandum dated October 6, 2000 addressed to all public telecommunications entities, which reads:

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

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

On October 20, 2000, petitioners ISLACOM and PILTEL filed against the NTC, Commissioner Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing Circular) and the NTC Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction and temporary restraining order at the Regional Trial Court of Quezon City, Branch 77.

Petitioners Islacom and Piltel alleged, that the NTC has no jurisdiction to regulate the sale of consumer goods such as the prepaid call cards since such jurisdiction belongs to the Department of Trade and Industry under the Consumer Act of the Philippines; that the Billing Circular is oppressive, confiscatory and violative of the constitutional prohibition against deprivation

of property without due process of law; that the Circular will result in the impairment of the viability of the prepaid cellular service by unduly prolonging the validity and expiration of the prepaid SIM and call cards; and that the requirements of identification of prepaid card buyers and call balance announcement are unreasonable. Hence, they prayed that the Billing Circular be declared null and void ab initio. Globe Telecom and Smart filed a joint Motion for Leave to Intervene which was granted by the trial court. On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from implementing Memorandum Circular No. 13-6-2000 and the Memorandum dated October 6, 2000.

In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the ground of petitioners' failure to exhaust administrative remedies. Subsequently, the trial court denied the defendant’s motion to dismiss. Defendants filed a motion for reconsideration, which was denied in an Order dated February 1, 2001.

Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of Appeals, which was granted and annulled the injunction issued by the lower court.

Petitioners' motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack of merit. Hence, the instant petition for review filed by Smart and Piltel.

Issues:

1. WON Respondent court erred in holding respondents failed to exhaust administrative remedy.2. WON NTC has Jurisdiction over the case.3. WON the Billing Circular issued by NTC is unconstitutional.

Ruling:

1ST ISSSUE – Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and separability of powers.

The rules and regulations should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and be not in contradiction to, but in conformity with, the standards prescribed by law.17 They must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be valid. The

administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it.

In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power.

Even assuming that the principle of exhaustion of administrative remedies applies in this case, the records reveal that petitioners sufficiently complied with this requirement. Petitioners were able to register their protests to the proposed billing guidelines. They submitted their respective position papers setting forth their objections and submitting proposed schemes for the billing circular. After the same was issued, petitioners wrote successive letters dated July 3, 2000 and July 5, 2000, asking for the suspension and reconsideration of the so-called Billing Circular. This was taken by petitioners as a clear denial of the requests contained in their previous letters, thus prompting them to seek judicial relief.

2ND ISSSUE – In like manner, the doctrine of primary jurisdiction applies only where the administrative agency exercises its quasi-judicial or adjudicatory function. The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court.

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

3RD ISSSUE – In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-making power. As such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the constitutionality and validity of the said issuances. Hence, the Regional Trial Court has jurisdiction to hear and decide the case. The Court of Appeals erred in setting aside the orders of the trial court and in dismissing the case.

WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE.

Principle Involved: Doctrine of Administrative Exhaustion

B. Delegation of Legislative Power

1. COMPANIA GENERAL DE TABACOS DE FILIPINAS vs. THE BOARD OF PUBLIC UTILITY COMMISSIONERS, G.R. No. L-11216, March 6, 1916

Parties:Petitioner: COMPANIA GENERAL DE TABACOS DE FILIPINASRespondent: THE BOARD OF PUBLIC UTILITY COMMISSIONERS

Ponente: MORELAND, J.

Facts:

COMPANIA GENERAL DE TABACOS DE FILIPINAS is a foreign corporation organized under the laws of Spain and engaged in business in the Philippine Islands as a common carrier of passengers and merchandise by water: On June 7, 1915, the Board of Public Utility Commissioners issued and caused to be served an order to show cause why they should not be required to present detailed annual reports respecting its finances and operations respecting the vessels owned and operated by it, in the form and containing the matters indicated by the model attached to the petition.

They are ordered to present annually on or before March first of each year a detailed report of finances and operations of such vessels as are operated by it as a common carrier within the Philippine Islands, in the form and containing the matters indicated in the model of annual report which accompanied the order to show cause herein.

COMPANIA GENERAL DE TABACOS DE FILIPINAS denied the authority of the board to require the report asked for on the ground that the provision of Act No. 2307 relied on by said board as authority for such requirement was, if construed as conferring such power, invalid as constituting an unlawful attempt on the part of the Legislature to delegate legislative power to the board. It is cumbersome and unnecessarily prolix and that the preparation of the same would entail an immense amount of clerical work."

Issue:

1. Whether or not it is constitutional to require COMPANIA GENERAL DE TABACOS DE FILIPINAS to pass a detailed report to the Board of Public Utility Commissioners of the Philippine Islands.

2. Whether the power to require the detailed report is strictly legislative, or administrative, or merely relates to the execution of the law.

Ruling:

The section of Act No. 2307 under which the Board of Public Utility Commissioners relies for its authority, so far as pertinent to the case at hand, reads as follows:

Sec. 16. The Board shall have power, after hearing, upon notice, by order in writing, to require every public utility as herein defined: (e) To furnish annually a detailed report of finances and operations, in such form and containing such matters as the Board may from time to time by order prescribe.

The statute which authorizes a Board of Public Utility Commissioners to require detailed reports from public utilities, leaving the nature of the report, the contents thereof, the general lines which it shall follow, the principle upon which it shall proceed, indeed, all other matters whatsoever, to the exclusive discretion of the board, is not expressing its own will or the will of the State with respect to the public utilities to which it refers.

Such a provision does not declare, or set out, or indicate what information the State requires, what is valuable to it, what it needs in order to impose correct and just taxation, supervision or control, or the facts which the State must have in order to deal justly and equitably with such public utilities and to require them to deal justly and equitably with the State. The Legislature seems simply to have authorized the Board of Public Utility Commissioners to require what information the board wants. It would seem that the Legislature, by the provision in question, delegated to the Board of Public Utility Commissioners all of its powers over a given subject-matter in a manner almost absolute, and without laying down a rule or even making a suggestion by which that power is to be directed, guided or applied.

The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made.

The Supreme Court held that there was no delegation of legislative power, it said: The Congress may not delegate its purely legislative powers to a commission, but, having laid down the general rules of action under which a commission shall proceed, it may require of that commission the application of such rules to particular situations and the investigation of facts, with a view to making orders in a particular matter within the rules laid down by the Congress.

In section 20 (of the Commerce Act), Congress has authorized the commission to require annual reports. The act itself prescribes in detail what those reports shall contain. In other words, Congress has laid down general rules for the guidance of the Commission, leaving to it merely the carrying out of details in the exercise of the power so conferred. This, we think, is not a delegation of legislative authority.

In the case at bar the provision complained of does not law "down the general rules of action under which the commission shall proceed." nor does it itself prescribe in detail what those reports shall contain. Practically everything is left to the judgment and discretion of the Board of Public Utility Commissioners, which is unrestrained as to when it shall act, why it shall act, how it shall act, to what extent it shall act, or what it shall act upon.

The Legislature, by the provision in question, has abdicated its powers and functions in favor of the Board of Public Utility Commissioners with respect to the matters therein referred to, and that such Act is in violation of the Act of Congress of July 1, 1902. The Legislature, by the provision referred to, has not asked for the information which the State wants but has authorized and board to obtain the information which the board wants.

The order appealed from is set aside and the cause is returned to the Board of Public Utility Commissioners with instructions to dismiss the proceeding.

2. THE PEOPLE OF THE PHILIPPINE ISLANDS and HONGKONG & SHANGHAI BANKING CORPORATION vs. JOSE O. VERA, Judge of the Court of First Instance of Manila, and MARIANO CU UNJIENG, G.R. No. L-45685, November 16, 1937

Parties:Petitioners: THE PEOPLE OF THE PHILIPPINE ISLANDS and HONGKONG & SHANGHAI BANKING CORPORATIONRespondents: JOSE O. VERA, Judge of the Court of First Instance of Manila, and MARIANO CU UNJIENG

Ponente: LAUREL, J.

Facts:

Cu Unjieng was convicted by the trial court in Manila. He filed for reconsideration which was elevated to the SC and the SC remanded the appeal to the lower court for a new trial. While awaiting new trial, he appealed for probation alleging that the he is innocent of the crime he was convicted of. Judge Tuason of the Manila CFI directed the appeal to the Insular Probation Office. The IPO denied the application. However, Judge Vera upon another request by petitioner allowed the petition to be set for hearing. The City

Prosecutor countered alleging that Vera has no power to place Cu Unjieng under probation because it is in violation of Sec. 11 Act No. 4221 which provides that the act of Legislature granting provincial boards the power to provide a system of probation to convicted person. Nowhere in the law is stated that the law is applicable to a city like Manila because it is only indicated therein that only provinces are covered. And even if Manila is covered by the law it is unconstitutional because Sec 1 Art 3 of the Constitution provides equal protection of laws. The said law provides absolute discretion to provincial boards and this also constitutes undue delegation of power. Further, the said probation law may be an encroachment of the power of the executive to provide pardon because providing probation, in effect, is granting freedom, as in pardon.

Issue:

Whether or not there is undue delegation of power.

Ruling:

The act of granting probation is not the same as pardon. In fact it is limited and is in a way an imposition of penalty. There is undue delegation of power because there is no set standard provided by Congress on how provincial boards must act in carrying out a system of probation. The provincial boards are given absolute discretion which is violative of the constitution and the doctrine of the non delegability of power. Further, it is a violation of equity so protected by the constitution. The challenged section of Act No. 4221 in section 11 which reads as follows: This Act shall apply only in those provinces in which the respective provincial boards have provided for the salary of a probation officer at rates not lower than those now provided for provincial fiscals. Said probation officer shall be appointed by the Secretary of Justice and shall be subject to the direction of the Probation Office. This only means that only provinces that can provide appropriation for a probation officer may have a system of probation within their locality. This would mean to say that convicts in provinces where no probation officer is instituted may not avail of their right to probation.

3. RESTITUTO YNOT vs. INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER, INTEGRATED NATIONAL POLICE, BAROTAC NUEVO, ILOILO and THE REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION IV, ILOILO CITY, G.R. No. 74457, March 20, 1987

Parties: Petitioner: Restituto YnotRespondents: INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER, INTEGRATED NATIONAL POLICE, BAROTAC NUEVO, ILOILO and THE REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION IV, ILOILO CITY

Ponente: CRUZ, J.

Facts:

In 1980, President Ferdinand Marcos issued Executive Order No. 626-A prohibiting the transportation and slaughtering of carabaos.

Ynot transported six carabaos in a pump boat from Masbate to Iloilo on January 13, 1984, when they were confiscated by the police station commander of Barotac Nuevo, Iloilo, for violation of the above measure. The petitioner sued for recovery, and the Regional Trial Court of Iloilo City issued a writ of replevin upon his filing of a supersedeas bond of P12,000.00. After considering the merits of the case, the court sustained the confiscation of the carabaos and, since they could no longer be produced, ordered the confiscation of the bond. The court also declined to rule on the constitutionality of the executive order, as raise by the petitioner, for lack of authority and also for its presumed validity. Ynot appealed to the IAC which upheld the decision of the RTC. Ynot appealed to the SC with the following contentions:

1. EO 626-A is unconstitutional as it authorizes outright confiscation of the carabao or carabeef being transported across provincial boundaries;2. Penalty is invalid because it is imposed without according the owner a right to be heard before a competent and impartial court guaranteed by due process;3. The measure should not have been presumed and so sustained, as constitutional;4. There is an improper exercise of legislative power.

Issue:

Whether or not E.O. 626-A is unconstitutional.

Ruling:

Yes. The challenged measure is an invalid exercise of the police power because the method employed to conserve the carabaos is not reasonably necessary to the purpose of the law and, worse, is unduly oppressive. Due process is violated because the owner of the property confiscated is denied the right to be heard in his defense and is immediately condemned and punished. The conferment on the administrative authorities of the power to adjudge the guilt of the supposed offender is a clear encroachment on judicial functions and militates against the doctrine of separation of powers. There is, finally, also an invalid delegation of legislative powers to the officers mentioned therein who are granted unlimited discretion in the distribution of the properties arbitrarily taken.

Principles:

Police power: To justify the State in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals.

But while conceding that the amendatory measure has the same lawful subject as the original executive order, we cannot say with equal certainty that it complies with the second requirement, viz., that there be a lawful method. We note that to strengthen the original measure, Executive Order No. 626-A imposes an absolute ban not on the slaughter of the carabaos but on their movement, providing that "no carabao regardless of age, sex, physical condition or purpose (sic) and no carabeef shall be transported from one province to another." The object of the prohibition escapes us. The reasonable connection between the means employed and the purpose sought to be achieved by the questioned measure is missing.

We do not see how the prohibition of the inter-provincial transport of carabaos can prevent their indiscriminate slaughter, considering that they can be killed anywhere, with no less difficulty in one province than in another. Obviously, retaining the carabaos in one province will not prevent their slaughter there, any more than moving them to another province will make it easier to kill them there. As for the carabeef, the prohibition is made to apply to it as otherwise, so says executive order, it could be easily circumvented by simply killing the animal. Perhaps so. However, if the movement of the live animals for the purpose of preventing their slaughter cannot be prohibited, it should follow that there is no reason either to prohibit their transfer as, not to be flippant dead meat.

Due process: The executive order defined the prohibition, convicted the petitioner and immediately imposed punishment, which was carried out forthright. The measure struck at once and pounced upon the petitioner without giving him a chance to be heard, thus denying him the centuries-old guaranty of elementary fair play. It has already been remarked that there are occasions when notice and hearing may be validly dispensed with notwithstanding the usual requirement for these minimum guarantees of due process. It is also conceded that summary action may be validly taken in administrative proceedings as procedural due process is not necessarily judicial only. In the exceptional cases accepted, however. there is a justification for the omission of the right to a previous hearing, to wit, the immediacy of the problem sought to be corrected and the urgency of the need to correct it.

In the case before us, there was no such pressure of time or action calling for the petitioner's peremptory treatment. The properties involved were not even inimical per se as to require their instant destruction. There certainly was no reason why the offense prohibited by the executive order should not have been proved first in a court of justice, with the accused being accorded all the rights safeguarded to him under the Constitution

Encroachment of judicial functions: Executive Order No. 626-A is penal in nature, the violation thereof should have been pronounced not by the police only but by a court of justice, which alone would have had the authority to impose the prescribed penalty, and only after trial and conviction of the accused.

Invalid delegation of legislative power: We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall "be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos." The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the said officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a "roving commission," a wide and sweeping authority that is not "canalized within banks that keep it from overflowing," in short, a clearly profligate and therefore invalid delegation of legislative powers.

4. EMMANUEL PELAEZ vs. THE AUDITOR GENERAL, G.R. No. L-23825, December 24, 1965

Parties:Petitioner: EMMANUEL PELAEZRespondent: THE AUDITOR GENERAL

Ponente: CONCEPCION, J.

Facts:

From Sept 04 to Oct 29, 1964, the President (Marcos) issued executive orders creating 33 municipalities – this is purportedly in pursuant to Sec 68 of the

Revised Administrative Code which provides that the President of the Philippines may by executive order define the boundary, or boundaries, of any province, sub-province, municipality, [township] municipal district or other political subdivision, and increase or diminish the territory comprised therein, may divide any province into one or more subprovinces. The VP Emmanuel Pelaez and a taxpayer filed a special civil action to prohibit the auditor general from disbursing funds to be appropriated for the said municipalities. Pelaez claims that the EOs are unconstitutional. He said that Sec 68 of the RAC has been impliedly repealed by Sec 3 of RA 2370 which provides that barrios may “not be created or their boundaries altered nor their names changed” except by Act of Congress or of the corresponding provincial board “upon petition of a majority of the voters in the areas affected” and the “recommendation of the council of the municipality or municipalities in which the proposed barrio is situated.” Pelaez argues, accordingly: “If the President, under this new law, cannot even create a barrio, can he create a municipality which is composed of several barrios, since barrios are units of municipalities?” The Auditor General countered that only barrios are barred from being created by the President. Municipalities are exempt from the bar and that t a municipality can be created without creating barrios. Existing barrios can just be placed into the new municipality. This theory overlooks, however, the main import of Pelaez’ argument, which is that the statutory denial of the presidential authority to create a new barrio implies a negation of the bigger power to create municipalities, each of which consists of several barrios.

Issue:

Whether or not Congress has delegated the power to create barrios to the President by virtue of Sec 68 of the RAC.

Ruling:

Although Congress may delegate to another branch of the government the power to fill in the details in the execution, enforcement or administration of a law, it is essential, to forestall a violation of the principle of separation of powers, that said law: (a) be complete in itself — it must set forth therein the policy to be executed, carried out or implemented by the delegate — and (b) fix a standard — the limits of which are sufficiently determinate or determinable — to which the delegate must conform in the performance of his functions. Indeed, without a statutory declaration of policy, the delegate would, in effect, make or formulate such policy, which is the essence of every law; and, without the aforementioned standard, there would be no means to determine, with reasonable certainty, whether the delegate has acted within or beyond the scope of his authority.

In the case at bar, the power to create municipalities is eminently legislative in character not administrative.

5. EASTERN SHIPPING LINES, INC. vs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, G.R. No. 76633, October 18, 1988

Parties:Petitioner: EASTERN SHIPPING LINES, INC.Respondents: PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO

Ponente: CRUZ, J.

Facts:

Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the complaint was cognizable not by the POEA but by the Social Security System and should have been filed against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after considering the position papers of the parties ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits and P12,000.00 for burial expenses. The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas Employment Administration (POEA) for the death of her husband. The decision is challenged by the petitioner on the principal ground that the POEA had no jurisdiction over the case as the husband was not an overseas worker.

The petitioner, as owner of the vessel, argued that the complaint was cognizable not by the POEA but by the Social Security System and should have been filed against the State Fund Insurance. The POEA nevertheless assumed jurisdiction and after considering the position papers of the parties ruled in favour of the complainant.

Issue:

Whether or not the validity of Memorandum Circular No. 2 itself as violative of the principle of non-delegation of legislative power.

Ruling:

No. Memorandum Circular No. 2 is an administrative regulation. The model contract prescribed thereby has been applied in a significant number of the cases without challenge by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as

there is a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment Administration, mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices."

GENERAL RULE: Non-delegation of powers; exception: It is true that legislative discretion as to the substantive contents of the law cannot be delegated. What can be delegated is the discretion to determine how the law may be enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate.

Two Tests of Valid Delegation of Legislative Power There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz, the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is to enforce it. Under the sufficient standard test, there must be adequate guidelines or stations in the law to map out the boundaries of the delegate’s authority and prevent the delegation from running riot. Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. The delegation of legislative power has become the rule and its non-delegation the exception.

Rationale for Delegation of Legislative Power:The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected to reasonably comprehend. Specialization even in legislation has become necessary. Too many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious, not tosay, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields.

Power of Subordinate Legislation:The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the “power of subordinate legislation.” With this power, administrative bodies may implement the broad policies laid down in statute by

“filling in” the details which the Congress may not have the opportunity or competence to provide. Memorandum Circular No. 2 is one such administrative regulation. Administrative agencies are vested with two basic powers, the quasi-legislative and quasi- judicial. The first enables them to promulgate implementing rules and regulations, and the second enables them to interpret and apply such regulations.

6. ROMEO F. EDU, in his capacity as Land Transportation Commissioner vs. HON. VICENTE G. ERICTA in his capacity as Judge of the Court of First Instance of Rizal, Br. XVIII, Quezon City, and TEDDY C. GALO, G.R. No. L-32096, October 24, 1970

Parties:Petitioner: ROMEO F. EDU, in his capacity as Land Transportation CommissionerRespondents: HON. VICENTE G. ERICTA in his capacity as Judge of the Court of First Instance of Rizal, Br. XVIII, Quezon City, and TEDDY C. GALO

Ponente: FERNANDO, J.

Facts:

Petitioner Romeo Edu, the Land Transportation Commissioner issued Administrative Order No. 2, which took effect on April 17, 1990, which provides as follows:

“No motor vehicles of whatever style, kind, make, class or denomination shall be registered if not equipped with reflectors. Such reflectors shall either be factory built-in-reflector commercial glass reflectors, reflection tape or luminous paint. The luminosity shall have an intensity to be maintained visible and clean at all times such that if struck by a beam of light shall be visible 100 meters away at night.” Then came a section on dimensions, placement and color. As to dimensions the following is provided for: “Glass reflectors- not less than 3 inches in diameter or not less than 3 inches square; Reflectorized tape- at least 3 inches wide and 12 inches long. The painted or taped area may be bigger at the discretion of the vehicle owner. Provision is then made as to how such reflectors are to be placed, installed, pasted or painted. There is the further requirement that in addition to such reflectors there shall be installed, pasted or painted four reflectors on each side of the motor vehicle parallel to those installed, pasted or painted in front and those in the rear end of the body thereof. The color required of each reflectors, whether built-in, commercial glass, reflectorized tape or reflectorized paint placed in

the front part of any motor vehicle shall be amber or yellow and those placed on the sides and in the rear shall all be red.

“Non compliance with the requirements contained in this Order shall be sufficient cause to refuse registration of the motor vehicle affected and if already registered, its registration maybe suspended in pursuance of the provisions of Section 16 or RA 4136; Provided, however, that in the case of the violation of Section 1(a) and (b) and paragraph (8) Section 3 hereof, a fine of not less than ten nor more than fifty pesos shall be imposed. It is not be lost sight of that under Republic Act no. 4136, of which the Reflector Law is an amendment, petitioner, as the Land Transportation Commissioner, may, with the approval of the Secretary of Public Works and Communication, issue rules and regulations for its implementation for as long as they do not conflict with its provision. It is likewise an express provision of the above statute that for a violation of any of its provisions or regulations promulgated pursuant thereto a fine of not less than P10 nor less than P50 could be imposed.

Respondent Galo on his behalf and that of other motorist filed on May 20, 1970 a suit for certiorari and prohibition with preliminary injunction assailing the validity of the challenged Act as an invalid exercise of the police power, for being violative of the due process clause. This he followed on May 28, 1970 with a manifestation wherein he sought as an alternative remedy that, in the event that respondent Judge Ericta would hold said statute constitutional, Administrative Order No. 2 of the Land Transportation Commissioner, now petitioner, implementing such legislation be nullified as an undue exercise of legislative power. There was a hearing on the plea for the issuance of writ of preliminary injunction held on May 27, 1970 where both parties were duly represented, but no evidence was presented. The next day, on May 28, 1970, respondent Judge ordered the issuance of preliminary injunction directed against the enforcement of such administrative order.

Issue:

WON there has been undue delegation of legislative power which as a result of such Administrative Order issued in furtherance of the delegated power is null and void.

Ruling:

It is a fundamental principle flowing from the doctrine of separation of powers that Congress may not delegate its legislative power to the two other branches of government, subject to the exception that local governments may over local affairs participate in its exercise. What cannot be delegated is the authority under the Constitution to make laws and to alter and repeal them; the test is the

completeness of the statute in all its terms and provisions when it leaves the hands of the legislature. To determine whether or not there is an undue delegation of legislative power the inquiry must be directed to the scope and definiteness of the measure enacted. The legislature does not abdicate its functions when it describes what job must be done, who is to do it, and what is the scope of his authority. For a complex economy, that may indeed be the only way in which the legislative process can go forward. A distinction has rightfully been made between delegation of power to make the laws which necessarily involves a discretion as to what it shall be, which constitutionally may not be done, and delegation of authority or discretion as to its execution to exercised under and in pursuance of the law, to which no valid objection call be made. The Constitution is thus not to be regarded as denying the legislature the necessary resources of flexibility and practicability.

To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lay down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel. A standard thus defines legislative policy, marks its limits, its maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations.

This is to adhere to the recognition given expression by Justice Laurel in a decision announced not long after the Constitution came into force and effect that the principle of non-delegation "has been made to adapt itself the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of "subordinate legislation" not only in the United States and England but in practically all modern governments." 44 He continued: "Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency toward the delegation of greater powers by the legislature and toward the approval of the practice by the courts." 45 Consistency with the conceptual approach requires the reminder that what is delegated is authority non-legislative in character, the completeness of the statute when it leaves the hands of Congress being assumedWHEREFORE, the writs of certiorari and prohibition prayed for are granted, the orders of May 28, 1970 of respondent Judge for the issuance of a writ of preliminary injunction, the writ of preliminary injunction of June 1, 1970 and his order of June 9, 1970 denying reconsideration are annulled and set aside. Respondent Judge is likewise directed to dismiss the petition for certiorari and prohibition filed by respondent Teddy C. Galo, there being no cause of action as the Reflector Law and Administrative Order No. 2 of petitioner have not been shown to be tainted by invalidity. Without pronouncement as to costs.

7. RODOLFO S. BELTRAN, doing business under the name and style, OUR LADY OF FATIMA BLOOD BANK, FELY G. MOSALE, doing business under the name and style, MOTHER SEATON BLOOD BANK; PEOPLE’S BLOOD BANK, INC.; MARIA VICTORIA T. VITO, M.D., doing business under the name and style, AVENUE BLOOD BANK; JESUS M. GARCIA, M.D., doing business under the name and style, HOLY REDEEMER BLOOD BANK, ALBERT L. LAPITAN, doing business under the name and style, BLUE CROSS BLOOD TRANSFUSION SERVICES; EDGARDO R. RODAS, M.D., doing business under the name and style, RECORD BLOOD BANK, in their individual capacities and for and in behalf of PHILIPPINE ASSOCIATION OF BLOOD BANKS vs. THE SECRETARY OF HEALTH, G.R. No. 133640, November 25, 2005

Parties:Petitioners: RODOLFO S. BELTRAN, FELY G. MOSALE, PEOPLE’S BLOOD BANK, INC., MARIA VICTORIA T. VITO, M.D., JESUS M. GARCIA, M.D., ALBERT L. LAPITAN, EDGARDO R. RODAS, M.D.,Respondent: THE SECRETARY OF HEALTH

Ponente: AZCUNA, J.

Facts:

In January of 1994, the New Tropical Medicine Foundation, with the assistance of the U.S. Agency for International Development (USAID) released its final report of a study on the Philippine blood banking system entitled “Project to Evaluate the Safety of the Philippine Blood Banking System.” It was revealed that of the blood units collected in 1992, 64.4% were supplied by commercial blood banks, 14.5% by the PNRC, 13.7% by government hospital-based blood banks, and 7.4% by private hospital-based blood banks; showing that the Philippines heavily relied on commercial sources of blood. It was further found, among other things, that blood sold by persons to blood commercial banks are three times more likely to have any of the four (4) tested infections or blood transfusion transmissible diseases, namely, malaria, syphilis, Hepatitis B and Acquired Immune Deficiency Syndrome(AIDS) than those donated to PNRC.

Republic Act No. 7719 or the National Blood Services Act of 1994 was then enacted into law on April 2, 1994. The Act seeks to provide an adequate supply of safe blood by promoting voluntary blood donation and by regulating blood banks in the country. One of the provisions of the said act was the phasing out of commercial blood banks within 2 years from its effectivity.

Petitioners, comprising the majority of the Board of Directors of the Philippine Association of Blood Banks assail the constitutionality of RA 7719 on the ground among others that it violates the equal protection clause for irrationally discriminating against free standing blood banks in a manner which is not germane to the purpose of the law.

Issue:

WON R.A. 7719 violates the petitioner’s right to equal protection of the law.

Ruling:

No. Class legislation, discriminating against some and favoring others is prohibited but classification on a reasonable basis and not made arbitrarily or capriciously is permitted. The classification, however, to be reasonable: a) must be based on substantial distinctions which make real differences; b) must be germane to the purpose of the law; c) must not be limited to existing conditions only; and d) must apply equally to each member of the class.

We deem the classification to be valid and reasonable for the following:

One, it was based on substantial distinctions. The former operates for purely humanitarian reasons and as a medical service while the latter is motivated by profit. Also, while the former wholly encourages voluntary blood donation, the latter treats blood as sale of commodity.

Two, the classification, and the consequent phase out of commercial blood banks is germane to the purpose of the law, that is, to provide the nation with an adequate supply of safe blood by promoting voluntary blood donation and treating blood transfusion as a humanitarian or medical service rather than a commodity. This necessarily involves the phase out of commercial blood banks based on the fact that they operate as a business enterprise, and they source their blood supply from paid blood donors who are considered unsafe compared to voluntary blood donors as shown by USAID-sponsored study on the Philippine blood banking system.

Three, the legislature intended for the general application of the law. Its enactment was not solely to address the peculiar circumstances of the situation nor was it intended to apply only to the existing conditions.

Lastly, the law applies equally to all commercial blood banks without exception.

8. SERGIO I. CARBONILLA, EMILIO Y. LEGASPI IV, and ADONAIS Y. REJUSO vs. BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES, CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS, FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS

INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, and THAI INTERNATIONAL AIRWAYS, G.R. No. 193247, September 14, 2011

Parties:Petitioners: SERGIO I. CARBONILLA, EMILIO Y. LEGASPI IV, and ADONAIS Y. REJUSORespondents: BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES, CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS, FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, and THAI INTERNATIONAL AIRWAYS

Ponente: CARPIO, J.

Facts:

The Bureau of Customs issued Customs Administrative Order No. 1-2005 (CAO 1-2005) amending CAO 7-92.6 The Department of Finance approved CAO 1-2005 on 9 February 2006. CAO 7-92 and CAO 1-2005 were promulgated pursuant to Section 3506 in relation to Section 608 of the Tariff and Customs Code of the Philippines (TCCP)Petitioners Office of the President, et al. alleged that prior to the amendment of CAO 7-92, the BOC created on 23 April 2002 a committee to review the overtime pay of Customs personnel in Ninoy Aquino International Airport (NAIA) and to propose its adjustment from the exchange rate of P25 to US$1 to the then exchange rate of P55 to US$1. The Office of the President, et al. alleged that for a period of more than two years from the creation of the committee, several meetings were conducted with the agencies concerned, including respondent Board of Airlines Representatives (BAR), to discuss the proposed rate adjustment that would be embodied in an Amendatory Customs Administrative Order. On the other hand, BAR alleged that it learned of the proposed increase in the overtime rates only sometime in 2004 and only through unofficial reports.

On 23 August 2004, BAR wrote a letter addressed to Edgardo L. De Leon, Chief, Bonded Warehouse Division, BOC-NAIA, informing the latter of its objection to the proposed increase in the overtime rates. BAR further requested for a meeting to discuss the matter.BAR wrote the Secretary of Finance on 31 January 2005 and 21 February 2005 reiterating its concerns against the issuance of CAO 1-2005. In a letter dated 3

March 2005, the Acting District Collector of BOC informed BAR that the Secretary of Finance already approved CAO 1-2005 on 9 February 2005. As such, the increase in the overtime rates became effective on 16 March 2005. BAR still requested for an audience with the Secretary of Finance which was granted on 12 October 2005. The BOC then sent a letter to BAR’s member airlines demanding payment of overtime services to BOC personnel in compliance with CAO 1-2005. The BAR’s member airlines refused and manifested their intention to file a petition with the Commissioner of Customs and/or the Secretary of Finance to suspend the implementation of CAO 1-2005. In a letter dated 31 August 2006, Undersecretary Gaudencio A. Mendoza, Jr. (Usec. Mendoza), Legal and Revenue Operations Group, Department of Finance informed BAR, through its Chairman Felix J. Cruz (Cruz), that they “find no valid ground to disturb the validity of CAO 1-2005, much less to suspend its implementation or effectivity” and that its implementation effective 16 March 2005 is legally proper. In separate letters both dated 4 December 2006, Cruz requested the Office of the President and the Office of the Executive Secretary to review the decision of Usec. Mendoza. Cruz manifested the objection of the International Airlines operating in the Philippines to CAO 1-2005. On 13 December 2006, Deputy Executive Secretary Manuel B. Gaite (Deputy Exec. Sec. Gaite) issued an Order requiring BAR to pay its appeal fee and submit an appeal memorandum within 15 days from notice. BAR paid the appeal fee and submitted its appeal memorandum on 19 January 2007. The Court of Appeals ruled that Section 8, Article IX(B) of the Constitution prohibits an appointive public officer or employee from receiving additional, double or indirect compensation, unless specifically authorized by law. The Court of Appeals ruled that Section 3506 of the TCCP only authorized payment of additional compensation for overtime work, and thus, the payment of traveling and meal allowances under CAO 7-92 and CAO 1-2005 are unconstitutional and could not be enforced against BAR members.

Issue:

Whether the Court of Appeals committed a reversible error in declaring Section 3506 of the TCCP, CAO 7-92, and CAO 1-2005 unenforceable against BAR.

Ruling:

BAR’s argument has no merit.

We do not agree with the Court of Appeals in excluding airline companies, aircraft owners, and operators from the coverage of Section 3506 of the TCCP. The term “other persons served” refers to all other persons served by the BOC employees. Airline companies, aircraft owners, and operators are among other persons served by the BOC employees. As pointed out by the OSG, the processing of embarking and disembarking from aircrafts of passengers, as well as their baggages and cargoes, forms part of the BOC functions. BOC employees

who serve beyond the regular office hours are entitled to overtime pay for the services they render. The Court of Appeals ruled that, applying the principle of ejusdem generis, airline companies, aircraft owners, and operators are not in the same category as importers and shippers because an importer “brings goods to the country from a foreign country and pays custom duties” while a shipper is “one who ships goods to another; one who engages the services of a carrier of goods; one who tenders goods to a carrier for transportation.” However, airline passengers pass through the BOC to declare whether they are bringing goods that need to be taxed. The passengers cannot leave the airport of entry without going through the BOC. Clearly, airline companies, aircraft owners, and operators are among the persons served by the BOC under Section 3506 of the TCCP. The overtime pay of BOC employees may be paid by any of the following: (1) all the taxpayers in the country; (2) the airline passengers; and (3) the airline companies which are expected to pass on the overtime pay to passengers. If the overtime pay is taken from all taxpayers, even those who do not travel abroad will shoulder the payment of the overtime pay. If the overtime pay is taken directly from the passengers or from the airline companies, only those who benefit from the overtime services will pay for the services rendered. Here, Congress deemed it proper that the payment of overtime services shall be shouldered by the “other persons served” by the BOC, that is, the airline companies. This is a policy decision on the part of Congress that is within its discretion to determine. Such determination by Congress is not subject to judicial review. We do not agree with the Court of Appeals that Section 3506 of the TCCP failed the completeness and sufficient standard tests. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate, the only thing he will have to do is to enforce it. The second test requires adequate guidelines or limitations in the law to determine the boundaries of the delegate’s authority and prevent the delegation from running riot. Contrary to the ruling of the Court of Appeals, Section 3506 of the TCCP complied with these requirements. The law is complete in itself that it leaves nothing more for the BOC to do: it gives authority to the Collector to assign customs employees to do overtime work; the Commissioner of Customs fixes the rates; and it provides that the payments shall be made by the importers, shippers or other persons served. Section 3506 also fixed the standard to be followed by the Commissioner of Customs when it provides that the rates shall not be less than that prescribed by law to be paid to employees of private enterprise. Contrary to the ruling of the Court of Appeals, BOC employees rendering overtime services are not receiving double compensation for the overtime pay, travel and meal allowances provided for under CAO 7-92 and CAO 1-2005. Section 3506 provides that the rates shall not be less than that prescribed by law to be paid to employees of private enterprise. The overtime pay, travel and meal allowances are payment for additional work rendered after regular office hours and do not constitute double compensation prohibited under Section 8, Article IX(B) of the 1987 Constitution as they are in fact authorized by law or Section 3506 of the TCCP. BAR raises the alleged failure of BOC to publish the required notice of public

hearing and to conduct public hearings to give all parties the opportunity to be heard prior to the issuance of CAO 1-2005 as required under Section 9(2), Chapter I, Book VII of the Administrative Code of the Philippines. Section 9(2) provides:

Sec. 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule. (2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at least 2 weeks before the first hearing thereon.(3) In cases of opposition, the rules on contested cases shall be observed.

The BOC created a committee to re-evaluate the proposed increase in the rate of overtime pay and for two years, several meetings were conducted with the agencies concerned to discuss the proposal. BAR and the Airline Operators Council participated in these meetings and discussions.

Hence, BAR cannot claim that it was denied due process in the imposition of the increase of the overtime rate. CAO 1-2005 was published in the Manila Standard, a newspaper of general circulation in the Philippines on 18 February 2005 and while it was supposed to take effect on 5 March 2005, or 15 days after its publication, the BOC-NAIA still deferred BAR’s compliance until 16 March 2005.

WHEREFORE, we DENY the petition in G.R. No. 193247. We GRANT the petition in G.R. No. 194276 and SET ASIDE the 9 July 2009 Decision and 26 October 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 103250. Petitioner Bureau of Customs is DIRECTED to implement CAO 1-2005 immediately.

C. Kinds of Administrative Rules and Regulations

1. BPI LEASING CORPORATION vs. THE HONORABLE COURT OF APPEALS, COURT OF TAX APPEAL AND COMMISSIONER OF INTERNAL REVENUE, G.R. No. 127624, November 18, 2003

Parties:Petitioner: BPI LEASING CORPORATIONRespondents: THE HONORABLE COURT OF APPEALS, COURT OF TAX APPEAL AND COMMISSIONER OF INTERNAL REVENUE

Ponente: AZCUNA, J.

Facts:

For the calendar year 1986, BPI Leasing Corporation, Inc. (BLC) paid the Commissioner of Internal Revenue (CIR) a total of P1,139,041.49 representing 4% "contractor’s percentage tax" then imposed by Section 205 of the National Internal Revenue Code (NIRC), based on its gross rentals from equipment leasing for the said year amounting to P27,783,725.42.

On November 10, 1986, the CIR issued RR 19-86. Section 6.2 thereof provided that finance and leasing companies registered under Republic Act 5980 shall be subject to gross receipt tax of 5%-3%-1% on actual income earned. This means that companies registered under Republic Act 5980, such as BLC, are not liable for "contractor’s percentage tax" under Section 205 but are, instead, subject to "gross receipts tax" under Section 260 (now Section 122) of the NIRC. Since BLC had earlier paid the aforementioned "contractor’s percentage tax," it re-computed its tax liabilities under the "gross receipts tax" and arrived at the amount of P361,924.44. BLC filed a claim for a refund with the CIR for the amount of P777,117.05, representing the difference between the P1,139,041.49 it had paid as "contractor’s percentage tax" and P361,924.44 it should have paid for "gross receipts tax."

The CTA dismissed the petition and denied BLC’s claim of refund and held that RR 19-86, may only be applied prospectively such that it only covers all leases written on or after January 1, 1987. The CTA ruled that, since BLC’s rental income was all received prior to 1986, it follows that this was derived from lease transactions prior to January 1, 1987, and hence, not covered by the RR.

A motion for reconsideration of the CTA’s decision was filed, but was denied. BLC then appealed the case to the Court of Appeals. BLC submits that the Court of Appeals and the CTA erred in not ruling that RR 19-86 may be applied retroactively so as to allow BLC’s claim for a refund of P777,117.05.

Respondents, on the other hand, maintain that the provision on the date of effectivity of RR 19-86 is clear and unequivocal, leaving no room for interpretation on its prospective application.

Issues:1. WON RR 19-86 is legislative or interpretative in nature.2. WON RR 19-86 is prospective or retroactive in nature. 3. WON BPI failed to meet the quantum of evidence required in refund cases.

RULE:

1ST ISSUE – BLC attempts to convince the Court that RR 19-86 is legislative rather than interpretative in character and hence, should retroact to the date of effectivity of the law it seeks to interpret. A legislative rule is in the matter of

subordinate legislation, designed to implement a primary legislation by providing the details thereof. An interpretative rule, on the other hand, is designed to provide guidelines to the law which the administrative agency is in charge of enforcing. The Court finds the questioned RR to be legislative in nature. Section 1 of RR 19-86 plainly states that it was promulgated pursuant to Section 277 of the NIRC (now Section 244), an express grant of authority to the Secretary of Finance to promulgate all needful rules and regulations for the effective enforcement of the provisions of the NIRC. Verily, it cannot be disputed that RR 19-86 was issued pursuant to the rule-making power of the Secretary of Finance, thus making it legislative, and not interpretative as alleged by BLC.

BLC further posits that, it is invalid for want of due process as no prior notice, publication and public hearing attended the issuance thereof. To support its view, BLC cited CIR v. Fortune Tobacco, et al., wherein the Court nullified a revenue memorandum circular which reclassified certain cigarettes and subjected them to a higher tax rate, holding it invalid for lack of notice, publication and public hearing. In this case, RR 19-86 would be beneficial to the taxpayers as they are subjected to lesser taxes. Petitioner, in fact, is invoking RR 19-86 as the very basis of its claim for refund. If it were invalid, then petitioner all the more has no right to a refund.

2ND ISSUE – The Court now resolves whether its application should be prospective or retroactive. Statutes, including administrative rules and regulations, operate prospectively only, unless the legislative intent to the contrary is manifest by express terms or by necessary implication. In the present case, there is no indication that the RR may operate retroactively. Furthermore, there is an express provision stating that it "shall take effect on January 1, 1987," and that it "shall be applicable to all leases written on or after the said date." Thus, BLC is not in a position to invoke the provisions of RR 19-86 for lease rentals it received prior to January 1, 1987.

3RD ISSUE – Tax refunds are in the nature of tax exemptions. As such, these are to be strictly construed against the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption and he must be able to justify his claim by the clearest grant under Constitutional or statutory law, and he cannot be permitted to rely upon vague implications. Nothing that BLC has raised justifies a tax refund.

WHEREFORE, the petition for review is hereby DENIED, and the assailed decision and resolution of the Court of Appeals are AFFIRMED. No pronouncement as to costs. SO ORDERED.

Principles involved: Legislative or Interpretative nature of Statute; Prospective or Retroactive effect of Ordinances

2. COMMISSIONER OF INTERNAL REVENUE vs. HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION, (Bellosillo’s Separate Opinion), G.R. No. 119761 August 29, 1996

Parties:Petitioner: COMMISSIONER OF INTERNAL REVENUERespondents: HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION

Ponente: VITUG, J.

Facts:

The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March 1995, of respondent Court of Appeals 1 affirming the 10th August 1994 decision and the 11th October 1994 resolution of the Court of Tax Appeals 2 ("CTA") in C.T.A. Case No. 5015, entitled "Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her capacity as Commissioner of Internal Revenue.Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes.

On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. In a letter, dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government, "the initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco Corporation register and therefore a local brand.

A bill, which later became Republic Act ("RA") No. 7654, 6 was enacted, on 10 June 1993, by the legislature and signed into law, on 14 June 1993, by the President of the Philippines. The new law became effective on 03 July 1993. It amended Section 142(c)(1) of the National Internal Revenue Code ("NIRC"):(1) On locally manufactured cigarettes which are currently classified and taxed at fifty-five percent (55%) or the exportation of which is not authorized by contract or otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack.(2) On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum tax shall not be less than Three Pesos (P3.00) per pack.

About a month after the enactment and two (2) days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR.

Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that the locally manufactured cigarettes bear a foreign brand regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. The brand must be originally owned by a foreign manufacturer or producer. If ownership of the cigarette brand is, however, not definitely determinable, ". . . the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern. . . ."

In view of the foregoing, the aforesaid brands of cigarettes, viz: "HOPE," "MORE" and "CHAMPION" being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes.

On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93.

In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune Tobacco requested for a review, reconsideration and recall of RMC 37-93. The request was denied on 29 July 1993. The following day, or on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.

On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged:

WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz: "HOPE," "MORE" and "CHAMPION" being manufactured by Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still classified as other locally manufactured cigarettes and taxed at 45% or 20% as the case may be.

CA affirmed CTA decision.

Issue:

Whether or not BIR RMC 37-93 is valid.

Ruling:

The Court must sustain both the appellate court and the tax court.

Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings for the effective implementation of the provisions of the National Internal Revenue Code. Let it be made clear that such authority of the Commissioner is not here doubted. Like any other government agency, however, the CIR may not disregard legal requirements or applicable principles in the exercise of its quasi-legislative powers.

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

A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654. Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes which at the time of its effectivity were not so classified as bearing foreign brands. Prior to the issuance of the questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax. Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on private respondent's products. Evidently, in order to place "Hope Luxury," "Premium More," and "Champion"cigarettes within the scope of the amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply intrepreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored.

D. Requisites for Validity

1. HON. EXECUTIVE SECRETARY, HON. SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONE vs. SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON, UNITED AUCTIONEERS, INC., represented by its President DOMINIC SYTIN, and MICROVAN, INC., represented by its President MARIANO C. SONON, G.R. No. 164171, February 20, 2006

Parties:Petitioners: HON. EXECUTIVE SECRETARY, HON. SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONERespondents: SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON, UNITED AUCTIONEERS, INC., represented by its President DOMINIC SYTIN, and MICROVAN, INC., represented by its President MARIANO C. SONON

Ponente: YNARES-SANTIAGO, J.

Facts:

On December 12, 2002, President Gloria Macapagal-Arroyo, through Executive Secretary Alberto G. Romulo, issued EO 156, entitled "Providing for a comprehensive industrial policy and directions for the motor vehicle development program and its implementing guidelines." The challenged provision states:

3.1 The importation into the country, inclusive of the Freeport, of all types of used motor vehicles is prohibited, except for the following: (See full text case.)

Consequently, three actions for declaratory relief were filed by Southwing Heavy Industries, Inc., Subic Integrated Macro Ventures Corp. and Motor Vehicle Importers Association of Subic Bay Freeport, Inc. praying that judgment be rendered declaring Article 2, Section 3.1 of EO 156 unconstitutional and illegal.The RTC rendered Summary Judgment declaring that Article 2, Section 3.1 of EO 156 constitutes unlawful usurpation of legislative power vested by the Constitution with the Congress and that the proviso is contrary to the mandate

of Republic Act 7227 or the Bases Conversion and Development Act of 1992 which allows the free flow of goods and capital within the Freeport.

The petitioner appealed in the CA but was denied on the ground of lack of statutory basis for the President to issue the same. It held that the prohibition on the importation of use of motor vehicles is an exercise of police power vested on the legislature and absent any enabling law, the exercise thereof by the President through an executive issuance is void.

Issue:

WON Article 2, Section 3.1 of EO 156 is a valid exercise of the President’s quasi-legislative power.

Ruling:

YES. SC ruled that Police power is inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals, and general welfare of society. It is lodged primarily with the legislature. By virtue of a valid delegation of legislative power, it may also be exercised by the President and administrative boards, as well as the lawmaking bodies on all municipal levels, including the barangay. Such delegation confers upon the President quasi-legislative power which may be defined as the authority delegated by the law-making body to the administrative body to adopt rules and regulations intended to carry out the provisions of the law and implement legislative policy.

To be valid, an administrative issuance, such as an executive order, must comply with the following requisites:(1) Its promulgation must be authorized by the legislature;(2) It must be promulgated in accordance with the prescribed procedure;(3) It must be within the scope of the authority given by the legislature; and(4) It must be reasonable.

Contrary to the conclusion of the Court of Appeals, EO 156 actually satisfied the first requisite of a valid administrative order. It has both constitutional and statutory bases.

Anent the second requisite, that is, that the order must be issued or promulgated in accordance with the prescribed procedure, it is necessary that the nature of the administrative issuance is properly determined. As in the enactment of laws, the general rule is that, the promulgation of administrative issuances requires previous notice and hearing, the only exception being where the legislature itself requires it and mandates that the regulation shall be based on certain facts as determined at an appropriate investigation.23 This exception pertains to the issuance of legislative rules as distinguished from interpretative

rules which give no real consequence more than what the law itself has already prescribed;24 and are designed merely to provide guidelines to the law which the administrative agency is in charge of enforcing.25 A legislative rule, on the other hand, is in the nature of subordinate legislation, crafted to implement a primary legislation.

In the instant case, EO 156 is obviously a legislative rule as it seeks to implement or execute primary legislative enactments intended to protect the domestic industry by imposing a ban on the importation of a specified product not previously subject to such prohibition.

Taking our bearings from the foregoing discussions, we hold that the importation ban runs afoul the third requisite for a valid administrative order. To be valid, an administrative issuance must not be ultra vires or beyond the limits of the authority conferred. It must not supplant or modify the Constitution, its enabling statute and other existing laws, for such is the sole function of the legislature which the other branches of the government cannot usurp.

In the instant case, the subject matter of the laws authorizing the President to regulate or forbid importation of used motor vehicles, is the domestic industry. EO 156, however, exceeded the scope of its application by extending the prohibition on the importation of used cars to the Freeport, which RA 7227, considers to some extent, a foreign territory. The domestic industry which the EO seeks to protect is actually the "customs territory" which is defined under the Rules and Regulations Implementing RA 7227, as follows:

"the portion of the Philippines outside the Subic Bay Freeport where the Tariff and Customs Code of the Philippines and other national tariff and customs laws are in force and effect."

The prohibition is an invalid modification of RA 7227. Indeed, when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in the instant case, the issuance becomes void, not only for being ultra vires, but also for being unreasonable.

This brings us to the fourth requisite. It is an axiom 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 secure the end in view. If shown to bear no reasonable relation to the purposes for which they were authorized to be issued, then they must be held to be invalid.

There is no doubt that the issuance of the ban to protect the domestic industry is a reasonable exercise of police power. The deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an

urgent national concern that needs to be swiftly addressed by the President. In the exercise of delegated police power, the executive can therefore validly proscribe the importation of these vehicles.

The problem, however, lies with respect to the application of the importation ban to the Freeport. The Court finds no logic in the all encompassing application of the assailed provision to the Freeport which is outside the customs territory. As long as the used motor vehicles do not enter the customs territory, the injury or harm sought to be prevented or remedied will not arise. The application of the law should be consistent with the purpose of and reason for the law. Ratione cessat lex, et cessat lex. When the reason for the law ceases, the law ceases. It is not the letter alone but the spirit of the law also that gives it life.

In sum, the Court finds that Article 2, Section 3.1 of EO 156 is void insofar as it is made applicable to the presently secured fenced-in former Subic Naval Base area. Pursuant to the separability clause of EO 156, Section 3.1 is declared valid insofar as it applies to the customs territory or the Philippine territory outside the presently secured fenced-in former Subic Naval Base area, used motor vehicles that come into the Philippine territory via the secured fenced-in former Subic Naval Base area may be stored, used or traded therein, or exported out of the Philippine territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in former Subic Naval Base area.

2. WILLIAM C. DAGAN, CARLOS H. REYES, NARCISO MORALES, BONIFACIO MANTILLA, CESAR AZURIN, WEITONG LIM, MA. TERESA TRINIDAD, MA. CARMELITA FLORENTINO vs. PHILIPPINE RACING COMMISSION, MANILA JOCKEY CLUB, INC., and PHILIPPINE RACING CLUB, INC., G.R. No. 175220, February 12, 2009

Parties:Petitioners: WILLIAM C. DAGAN, CARLOS H. REYES, NARCISO MORALES, BONIFACIO MANTILLA, CESAR AZURIN, WEITONG LIM, MA. TERESA TRINIDAD, MA. CARMELITA FLORENTINORespondents: PHILIPPINE RACING COMMISSION, MANILA JOCKEY CLUB, INC., and PHILIPPINE RACING CLUB, INC.

Ponente: TINGA, J.

Facts:

PHILRACOM issued a directive requiring MJCI and PRCI to come up with their Clubs’ House Rule to address the Equine Infectious Anemia (EIA) problem and to rid their facilities of horses infected it. Said directive was issued pursuant to Administrative Order No. 55 by the Department of Agriculture declaring it unlawful for any person, firm or corporation to ship, drive, or transport horses from any locality or place except when accompanied by a certificate issued by

the authority of the Director of the Bureau of Animal Industry (BAI). Thus, MJCI and PRCI ordered the owners of racehorses stable in their establishments to submit the horses to blood sampling and administration of the Coggins Test to determine if they are infected. Subsequently, Philracom issued copies of the guidelines for the monitoring and eradication of EIA. Despite resistance from petitioners, the blood testing proceeded. The horses, whose owners refused to comply were banned from the races, were removed from the actual day of race, prohibited from renewing their licenses or evicted from their stables.

Issue:

Whether or not PHILRACOM had unconstitutionally delegated its rule-making power to PRCI and MJCI in issuing the directive for them to come up with club rules.

Ruling:

No. PETITION is DISMISSED. The court finds no grave abuse of discretion on the part of Philracom in issuing the contested guidelines and on the part MJCI and PRCI in complying with Philracom’s directive.

The validity of an administrative issuance, such as the assailed guidelines, hinges on compliance with the following requisites:1. Its promulgation must be authorized by the legislature;2. It must be promulgated in accordance with the prescribed procedure;3. It must be within the scope of the authority given by the legislature;4. It must be reasonable.

All the prescribed requisites are met as regards the questioned issuances. Philracom’s authority is drawn from P.D. No. 420. The delegation made in the presidential decree is valid. Philracom did not exceed its authority. And the issuances are fair and reasonable.

The rule is that what has been delegated cannot be delegated, or as expressed in the Latin maxim: potestas delegate non delegare potest. This rule is based upon the ethical principle that such delegated power constitutes not only a right but a duty to be performed by the delegate by the instrumentality of his own judgment acting immediately upon the matter of legislation and not through the intervening mind of another. This rule however admits of recognized exceptions such as the grant of rule-making power to administrative agencies. They have been granted by Congress with the authority to issue rules to regulate the implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in modern governance due to the increasing complexity and variety of public functions.

However, in every case of permissible delegation, there must be a showing that the delegation itself is valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the delegate; and (b) fixes a standard—the limits of which are sufficiently determinate and determinable—to which the delegate must conform in the performance of his functions. A sufficient standard is one which defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected.

Philracom was created for the purpose of carrying out the declared policy in Section 1 which is "to promote and direct the accelerated development and continued growth of horse racing not only in pursuance of the sports development program but also in order to insure the full exploitation of the sport as a source of revenue and employment." Furthermore, Philracom was granted exclusive jurisdiction and control over every aspect of the conduct of horse racing, including the framing and scheduling of races, the construction and safety of race tracks, and the security of racing. P.D. No. 420 is already complete in itself.

Section 9 of the law fixes the standards and limitations to which Philracom must conform in the performance of its functions. Clearly, there is a proper legislative delegation of rule-making power to Philracom. Clearly too, for its part Philracom has exercised its rule-making power in a proper and reasonable manner. More specifically, its discretion to rid the facilities of MJCI and PRCI of horses afflicted with EIA is aimed at preserving the security and integrity of horse races

As to the supposed delegation by Philracom of its rule-making powers to MJCI and PRCI, there is no delegation of power to speak of between Philracom, as the delegator and MJCI and PRCI as delegates. The Philracom directive is merely instructive in character. Philracom had instructed PRCI and MJCI to "immediately come up with Club’s House Rule to address the problem and rid their facilities of horses infected with EIA." PRCI and MJCI followed-up when they ordered the racehorse owners to submit blood samples and subject their race horses to blood testing. Compliance with the Philracom’s directive is part of the mandate of PRCI and MJCI under Sections 1 of R.A. No. 7953 and Sections 1 and 2 of 8407.

As correctly proferred by MJCI, its duty is not derived from the delegated authority of Philracom but arises from the franchise granted to them by Congress allowing MJCI "to do and carry out all such acts, deeds and things as may be necessary to give effect to the foregoing."As justified by PRCI, "obeying the terms of the franchise and abiding by whatever rules enacted by Philracom is its duty.

As to the second requisite, petitioners raise some infirmities relating to Philracom’s guidelines. They question the supposed belated issuance of the guidelines, that is, only after the collection of blood samples for the Coggins Test was ordered. While it is conceded that the guidelines were issued a month after Philracom’s directive, this circumstance does not render the directive nor the guidelines void. The directive’s validity and effectivity are not dependent on any supplemental guidelines. Philracom has every right to issue directives to MJCI and PRCI with respect to the conduct of horse racing, with or without implementing guidelines.

As a rule, the issuance of rules and regulations in the exercise of an administrative agency of its quasi-legislative power does not require notice and hearing. In Abella, Jr. v. Civil Service Commission, this Court had the occasion to rule that prior notice and hearing are not essential to the validity of rules or regulations issued in the exercise of quasi-legislative powers since there is no determination of past events or facts that have to be established or ascertained.The third requisite for the validity of an administrative issuance is that it must be within the limits of the powers granted to it. The administrative body 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.

The assailed guidelines prescribe the procedure for monitoring and eradicating EIA. These guidelines are in accord with Philracom’s mandate under the law to regulate the conduct of horse racing in the country.

Anent the fourth requisite, the assailed guidelines do not appear to be unreasonable or discriminatory. In fact, all horses stabled at the MJCI and PRCI’s premises underwent the same procedure. The guidelines implemented were undoubtedly reasonable as they bear a reasonable relation to the purpose sought to be accomplished, i.e., the complete riddance of horses infected with EIA.

It also appears from the records that MJCI properly notified the racehorse owners before the test was conducted. Those who failed to comply were repeatedly warned of certain consequences and sanctions.

Furthermore, extant from the records are circumstances which allow respondents to determine from time to time the eligibility of horses as race entries. The lease contract executed between petitioner and MJC contains a proviso reserving the right of the lessor, MJCI in this case, the right to determine whether a particular horse is a qualified horse. In addition, Philracom’s rules and regulations on horse racing provide that horses must be free from any contagious disease or illness in order to be eligible as race entries.

E. Fact-finding and Rate-Fixing

1. PRIMITIVO LOVINA, and NELLY MONTILLA vs. HON. FLORENCIO MORENO, as Secretary of Public Works and Communications, and BENJAMIN YONZON, G.R. No. L-17821, November 29, 1963

Parties:Petitioners: PRIMITIVO LOVINA, and NELLY MONTILLARespondents: HON. FLORENCIO MORENO, as Secretary of Public Works and Communications, and BENJAMIN YONZON

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

Facts:

Numerous residents of Macabebe, Pampanga complained that appellees had blocked the "Sapang Bulati", a navigable river in the same municipality and asked that the obstructions be ordered removed, under the provisions of Republic Act No. 2056. After notice and hearing to the parties, the said Secretary of Public Works and Communications found the constructions to be a public nuisance in navigable waters, and ordered the land owners, spouses Lovina, to remove five (5) closures of Sapang Bulati. After receipt of the decision, the appellees filed a petition in CFI of Manila to restrain the Secretary from enforcing his decision. The trial court, after due hearing, granted a permanent injunction. It held that Republic Act No. 2056 is unconstitutional and that Sapang Bulati is not a navigable river but a private stream.

The appellees’ contention is that Republic Act No. 2056 is unconstitutional because it invests the Secretary of Public Works and Communications with sweeping, unrestrained, final and unappealable authority to pass upon the issues of whether a river or stream is public and navigable, whether a dam encroaches upon such waters and is constitutive as a public nuisance, and whether the law applies to the state of facts, thereby Constituting an alleged unlawful delegation of judicial power to the Secretary of Public Works and Communications.

Issue:

Whether or not there is an unlawful delegation of judicial power.

Ruling:

The contentions of the appellees are not tenable. R.A. 2056 merely empowers the Secretary to remove unauthorized obstructions or encroachments upon

public streams, constructions that no private person was anyway entitled to make, because the bed of navigable streams is public property, and ownership thereof is not acquirable by adverse possession. It is true that the exercise of the Secretary's power under the Act necessarily involves the determination of some questions of fact, such as the existence of the stream and its previous navigable character; but these functions, whether judicial or quasi-judicial, are merely incidental to the exercise of the power granted by law to clear navigable streams of unauthorized obstructions or encroachments, and authorities are clear that they are, validly conferable upon executive officials provided the party affected is given opportunity to be heard, as is expressly required by Republic Act No. 2056, section 2.The mere fact that an officer is required by law to inquire the existence of certain facts and to apply the law thereto in order to determine what his official conduct shall be and the fact that these acts may affect private, rights do not constitute an exercise of judicial powers. Accordingly, a statute may give to non-judicial officers the power to declare the existence of facts which call into operation its provisions, and similarly may grant to commissioners and other subordinate officer, power to ascertain and determine appropriate facts as a basis for procedure in the enforcement of particular laws. It is noteworthy that Republic Act 2605 authorizes removal of the unauthorized dikes either as "public nuisances or as prohibited constructions" on public navigable streams, and those of appellees clearly are in the latter class. In fine, it is held that Republic Act No. 2056 does not constitute an unlawful delegation of judicial power to the Secretary of Public Works; that the findings of fact of the Secretary of Public Works under Republic Act No. 2056should be respected in the absence of illegality, error of law, fraud, or imposition, so long as the said, findings are supported by substantial evidence submitted to him. The decision appealed from is reversed, and the writs of injunction issued therein are annulled and set aside.

2. VIGAN ELECTRIC LIGHT COMPANY, INC. vs. THE PUBLIC SERVICE COMMISSION, G.R. No. L-19850, January 30, 1964

Parties:Petitioner: VIGAN ELECTRIC LIGHT COMPANY, INC.Respondent: THE PUBLIC SERVICE COMMISSION

Ponente: CONCEPCION, J.

Facts:

This is an original action for certiorari to annul an order of respondent Public Service Commission ordering the reduction of rates of Vigan Electric Light Co. PSC averred that Vigan Electric making a net operating profit in excess of the allowable return of 12% on its invested capital, and that it is in the public interest and in consonance with Section 3of Republic Act No. 3043 that reduction of its rates to the extent of its excess revenue be put into effect

immediately. Vigan Electric contended that the reduction of rate is unconstitutional because it has been ordered without notice and hearing, thus issued without due process of law. In defense, PSC maintains that rate-fixing is a legislative function; that legislative or rule-making powers may constitutionally be exercised without previous notice of hearing; and that the decision in Ang Tibay vs. Court of Industrial Relations(69 Phil., 635) — in which we held that such notice and hearing are essential to the validity of a decision of the Public Service Commission — is not in point because, unlike the order complained of — which respondent claims to be legislative in nature — the Ang Tibay case referred to a proceeding involving the exercise of judicial functions.

Issue:

Whether or not the Congress validly delegated legislative power to the PSC.

Ruling:

No. Congress has not delegated, and cannot delegate legislative powers to the Public Service Commission. Consistently with the principle of separation of powers, which underlies our constitutional system, legislative powers may not be delegated except to local governments, and only to matters purely of local concern. However, Congress may delegate to administrative agencies of the government the power to supply the details in the execution or enforcement of a policy laid down by it which is complete in itself. Such law is not deemed complete unless it lays down a standard or pattern sufficiently fixed or determinate, or, at least, determinable without requiring another legislation, to guide the administrative body concerned in the performance of its duty to implement or enforce said Policy. Otherwise, there would be no reasonable means to ascertain whether or not said body has acted within the scope of its authority, and, as a consequence, the power of legislation would eventually be exercised by a branch of the Government other than that in which it is lodged by the Constitution, in violation, not only of the allocation of powers therein made, but, also, of the principle of separation of powers. Although the rule-making power and even the power to fix rates— when such rules and/or rates are meant to apply to all enterprises of a given kind throughout the Philippines — may partake of a legislative character, such is not the nature of the order complained of. Indeed, the same applies exclusively to petitioner herein. What is more, it is predicated upon the finding of fact — based upon a report submitted by the General Auditing Office — that petitioner is making a profit of more than 12% of its invested capital, which is denied by petitioner. Obviously, the latter is entitled to cross-examine the maker of said report, and to introduce evidence to disprove the contents thereof and/or explain or complement the same, as well as to refute the conclusion drawn therefrom by the respondent. In other words, in making said finding of fact, respondent performed a function partaking of a quasi-judicial character the valid exercise of which demands previous notice and hearing.

3. PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION vs. JOSE LUIS A. ALCUAZ, as NTC Commissioner, and NATIONAL TELECOMMUNICATIONS COMMISSION, G.R. No. 84818, December 18, 1989

Parties:Petitioner: PHILIPPINE COMMUNICATIONS SATELLITE CORPORATIONRespondents: JOSE LUIS A. ALCUAZ, as NTC Commissioner, and NATIONAL TELECOMMUNICATIONS COMMISSION

Ponente: REGALADO, J.

Facts:

PHILCOMSAT was granted "a franchise to establish, construct, maintain and operate in the Philippines, at such places as the grantee may select, station or stations and associated equipment and facilities for international satellite communications." Under this franchise, it was likewise granted the authority to "construct and operate such ground facilities as needed to deliver telecommunications services from the communications satellite system and ground terminal or terminals.

The satellite services thus provided by petitioner enable said international carriers to serve the public with indispensable communication services, such as overseas telephone, telex, facsimile, telegrams, high speed data, live television in full color, and television standard conversion from European to American or vice versa.

Under Section 5 of Republic Act No. 5514, petitioner was exempt from the jurisdiction of the then Public Service Commission, now respondent NTC. However, pursuant to Executive Order No. 196 issued on June 17, 1987, petitioner was placed under the jurisdiction, control and regulation of respondent NTC, including all its facilities and services and the fixing of rates. Implementing said Executive Order No. 196, respondents required petitioner to apply for the requisite certificate of public convenience and necessity covering its facilities and the services it renders, as well as the corresponding authority to charge rates therefor.

Consequently, under date of September 9, 1987, petitioner filed with respondent NTC an application 4 for authority to continue operating and maintaining the same facilities it has been continuously operating and maintaining since 1967, to continue providing the international satellite communications services it has likewise been providing since 1967, and to charge the current rates applied for in rendering such services. Pending hearing, it also applied for a provisional authority so that it can continue to operate and

maintain the above mentioned facilities, provide the services and charge therefor the aforesaid rates therein applied for.

On September 16, 1987, petitioner was granted a provisional authority to continue operating its existing facilities, to render the services it was then offering, and to charge the rates it was then charging. This authority was valid for six (6) months from the date of said order. 5 When said provisional authority expired on March 17, 1988, it was extended for another six (6) months, or up to September 16, 1988.

The NTC order now in controversy had further extended the provisional authority of the petitioner for another six (6) months, counted from September 16, 1988, but it directed the petitioner to charge modified reduced rates through a reduction of fifteen percent (15%) on the present authorized rates. Respondent Commissioner ordered said reduction on the following ground:

The Commission in its on-going review of present service rates takes note that after an initial evaluation by the Rates Regulation Division of the Common Carriers Authorization Department of the financial statements of applicant, there is merit in a REDUCTION in some of applicant's rates, subject to further reductions, should the Commission finds (sic) in its further evaluation that more reduction should be effected either on the basis of a provisional authorization or in the final consideration of the case. 

Issue:

Petitioner is in effect questioning the constitutionality of Executive Orders Nos. 546 and 196 on the ground that the same do not fix a standard for the exercise of the power therein conferred.

Ruling:

The order in question which was issued by respondent Alcuaz no doubt contains all the attributes of a quasi-judicial adjudication. Foremost is the fact that said order pertains exclusively to petitioner and to no other. Further, it is premised on a finding of fact, although patently superficial, that there is merit in a reduction of some of the rates charged- based on an initial evaluation of petitioner's financial statements-without affording petitioner the benefit of an explanation as to what particular aspect or aspects of the financial statements warranted a corresponding rate reduction. No rationalization was offered nor were the attending contingencies, if any, discussed, which prompted respondents to impose as much as a fifteen percent (15%) rate reduction. It is not far-fetched to assume that petitioner could be in a better position to rationalize its rates vis-a-vis the viability of its business requirements. The rates it charges result from an exhaustive and detailed study it conducts of the multi-

faceted intricacies attendant to a public service undertaking of such nature and magnitude. We are, therefore, inclined to lend greater credence to petitioner's ratiocination that an immediate reduction in its rates would adversely affect its operations and the quality of its service to the public considering the maintenance requirements, the projects it still has to undertake and the financial outlay involved. Notably, petitioner was not even afforded the opportunity to cross-examine the inspector who issued the report on which respondent NTC based its questioned order.

At any rate, there remains the categorical admission made by respondent NTC that the questioned order was issued pursuant to its quasi-judicial functions. It, however, insists that notice and hearing are not necessary since the assailed order is merely incidental to the entire proceedings and, therefore, temporary in nature. This postulate is bereft of merit.

While respondents may fix a temporary rate pending final determination of the application of petitioner, such rate-fixing order, temporary though it may be, is not exempt from the statutory procedural requirements of notice and hearing, as well as the requirement of reasonableness. Assuming that such power is vested in NTC, it may not exercise the same in an arbitrary and confiscatory manner. Categorizing such an order as temporary in nature does not perforce entail the applicability of a different rule of statutory procedure than would otherwise be applied to any other order on the same matter unless otherwise provided by the applicable law

The applicable statutory provision is Section 16(c) of the Public Service Act which provides:

Section 16. Proceedings of the Commission, upon notice and hearing the Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary.

4. PHILIPPINE INTERISLAND SHIPPING ASSOCIATION OF THE PHILIPPINES, CONFERENCE OF INTERISLAND SHIPOWNERS AND OPERATORS, UNITED PETROLEUM TANKER OPERATORS ASSOCIATION OF THE PHILIPPINES, LIGHTERAGE ASSOCIATION OF THE PHILIPPINES and PILOTAGE INTEGRATED SERVICES CORPORATION vs. COURT OF APPEALS, UNITED HARBOR PILOTS' ASSOCIATION OF THE PHILIPPINES, INC. and MANILA PILOTS' ASSOCIATION, G.R. No. 100481, January 22, 1997

Parties:Petitioners: PHILIPPINE INTERISLAND SHIPPING ASSOCIATION OF THE PHILIPPINES, CONFERENCE OF INTERISLAND SHIPOWNERS AND OPERATORS, UNITED PETROLEUM TANKER OPERATORS ASSOCIATION OF THE PHILIPPINES, LIGHTERAGE ASSOCIATION OF

THE PHILIPPINES and PILOTAGE INTEGRATED SERVICES CORPORATIONRespondents: COURT OF APPEALS, UNITED HARBOR PILOTS' ASSOCIATION OF THE PHILIPPINES, INC. and MANILA PILOTS' ASSOCIATION

Ponente: MENDOZA, J.

Facts:

Private respondent United Harbor Pilots' Association of the Philippines, Inc. (UHPAP) is the umbrella organization of various groups rendering pilotage service in different ports of the Philippines. The service consists of navigating a vessel from a specific point, usually about two (2) miles off shore, to an assigned area at the pier and vice versa. When a vessel arrives, a harbor pilot takes over the ship from its captain to maneuver it to a berth in the port, and when it departs, the harbor pilot also maneuvers it up to a specific point off shore. The setup is required by the fact that each port has peculiar topography with which a harbor pilot is presumed to be more familiar than a ship captain.

The Philippine Ports Authority (PPA) is the government agency which regulates pilotage.

On February 3, 1986, shortly before the presidential elections, President Ferdinand E. Marcos, responding to the clamor of harbor pilots for an increase in pilotage rates, issued Executive Order No. 1088, PROVIDING FOR UNIFORM AND MODIFIED RATES FOR PILOTAGE SERVICES RENDERED TO FOREIGN AND COASTWISE VESSELS IN ALL PRIVATE AND PUBLIC PORTS. The executive order increased substantially the rates of the existing pilotage fees previously fixed by the PPA.

However, the PPA refused to enforce the executive order on the ground that it had been drawn hastily and without prior consultation: that its enforcement would create disorder in the ports as the operators and owners of the maritime vessels had expressed opposition to its implementation; and that the increase in pilotage, as mandated by it, was exorbitant and detrimental to port operations.

The UHPAP then announced its intention to implement E.O. No. 1088 effective November 16, 1986. This in turn drew a warning from the PPA that disciplinary sanctions would be applied to those who would charge rates under E.O. No. 1088. The PPA instead issued Memorandum Circular No. 43-86, fixing pilotage fees at rates lower than those provided in E.O. No. 1088.

On February 26, 1988, the PPA issued Administrative Order No. 02-88, entitled IMPLEMENTING GUIDELINES ON OPEN PILOTAGE SERVICE. The PPA announced in its order that it was leaving to the contracting parties, i.e., the

shipping lines and the pilots, the fixing of mutually acceptable rates for pilotage services, thus abandoning the rates fixed by it (PPA) under Memorandum Circular No. 43-86, as well as those provided in E.O. No. 1088. The administrative order provided:

Sec. 3. Terms/Conditions on Pilotage Service. — The shipping line or vessel's agent/representative and the harbor pilot/firm chosen by the former shall agree between themselves, among others, on what pilotage service shall be performed, the use of tugs and their rates, taking into consideration the circumstances stated in Section 12 of PPA AO No. 03-85, and such other conditions designed to ensure the safe movement of the vessel in pilotage areas/grounds.

Issue:

Whether Executive Order No. 1088 is valid and petitioners are bound to obey it.

Ruling:

Petitioners contend that E.O. No. 1088 was merely an administrative issuance of then President Ferdinand E. Marcos and, as such, it could be superseded by an order of the PPA. They argue that to consider E.O. No. 1088 a statute would be to deprive the PPA of its power under its charter to fix pilotage rates.

The contention has no merit. The fixing of rates is essentially a legislative power. 10 Indeed, the great battle over the validity of the exercise of this power by administrative agencies was fought in the 1920s on the issue of undue delegation precisely because the power delegated was legislative. The growing complexity of modern society, the multiplication of the subjects of governmental regulations and the increased difficulty of administering the laws made the creation of administrative agencies and the delegation to them of legislative power necessary.

There is no basis for petitioners' argument that rate fixing is merely an exercise of administrative power, that if President Marcos had power to revise the rates previously fixed by the PPA through the issuance of E.O. No. 1088, the PPA could in turn revise those fixed by the President, as the PPA actually did in A.O. No. 43-86, which fixed lower rates of pilotage fees, and even entirely left the fees to be paid for pilotage to the agreement of the parties to a contract. The orders previously issued by the PPA were in the nature of subordinate legislation, promulgated by it in the exercise of delegated power. As such these could only be amended or revised by law, as the President did by E.O. No. 1088.

It is not an answer to say that E.O. No. 1088 should not be considered a statute because that would imply the withdrawal of power from the PPA. What determines whether an act is a law or an administrative issuance is not its form

but its nature. Here, as we have already said, the power to fix the rates of charges for services, including pilotage service, has always been regarded as legislative in character.

Nor is there any doubt of the power of the then President to fix rates. On February 3, 1986, when he issued E.O. No. 1088, President Marcos was authorized under Amendment No. 6 of the 1973 Constitution to exercise legislative power, just as he was under the original 1973 Constitution, when he issued P.D. No. 857 which created the PPA, endowing it with the power to regulate pilotage service in Philippine ports. Although the power to fix rates for pilotage had been delegated to the PPA, it became necessary to rationalize the rates of charges fixed by it through the imposition of uniform rates. That is what the President did in promulgating E.O. No. 1088. As the President could delegate the ratemaking power to the PPA, so could he exercise it in specific instances without thereby withdrawing the power vested by P.D. No. 857, §20(a) in the PPA "to impose, fix, prescribe, increase or decrease such rates, charges or fees . . . for the services rendered by the Authority or by any private organization within a Port District."

It is worthy to note that E.O. No. 1088 provides for adjusted pilotage service rates without withdrawing the power of the PPA to impose, prescribe, increase or decrease rates, charges or fees. The reason is because E.O. No. 1088 is not meant simply to fix new pilotage rates. Its legislative purpose is the "rationalization of pilotage service charges, through the imposition of uniform and adjusted rates for foreign and coastwise vessels in all Philippine ports."

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

Parties:Petitioner: PHILIPPINE CONSUMERS FOUNDATION, INC.Respondent: THE SECRETARY OF EDUCATION, CULTURE AND SPORTS

Ponente: GANCAYCO, J.

Facts:

This is an original Petition for prohibition with a prayer for the issuance of a writ of preliminary injunction.

The record of the case discloses that the herein petitioner Philippine Consumers Foundation, Inc. is a non-stock, non-profit corporate entity duly organized and existing under the laws of the Philippines. The herein respondent Secretary of Education, Culture and Sports is a ranking cabinet member who heads the

Department of Education, Culture and Sports of the Office of the President of the Philippines.

On February 21, 1987, the Task Force on Private Higher Education created by the Department of Education, Culture and Sports (hereinafter referred to as the DECS) submitted a report entitled "Report and Recommendations on a Policy for Tuition and Other School Fees." The report favorably recommended to the DECS the following courses of action with respect to the Government's policy on increases in school fees for the schoolyear 1987 to 1988 —(1) Private schools may be allowed to increase its total school fees by not more than 15 per cent to 20 per cent without the need for the prior approval of the DECS. Schools that wish to increase school fees beyond the ceiling would be subject to the discretion of the DECS;(2) Any private school may increase its total school fees in excess of the ceiling, provided that the total schools fees will not exceed P1,000.00 for the school year in the elementary and secondary levels, and P50.00 per academic unit on a semestral basis for the collegiate level. 1

The DECS took note of the report of the Task Force and on the basis of the same, the DECS, through the respondent Secretary of Education, Culture and Sports (hereinafter referred to as the respondent Secretary), issued an Order authorizing, inter alia, the 15% to 20% increase in school fees as recommended by the Task Force. The petitioner sought a reconsideration of the said Order, apparently on the ground that the increases were too high. 2 Thereafter, the DECS issued Department Order No. 37 dated April 10, 1987 modifying its previous Order and reducing the increases to a lower ceiling of 10% to 15%, accordingly. 3 Despite this reduction, the petitioner still opposed the increases. On April 23, 1987, the petitioner, through counsel, sent a telegram to the President of the Philippines urging the suspension of the implementation of Department Order No. 37. 4 No response appears to have been obtained from the Office of the President.

Thus, on May 20, 1987, the petitioner, allegedly on the basis of the public interest, went to this Court and filed the instant Petition for prohibition, seeking that judgment be rendered declaring the questioned Department Order unconstitutional. The thrust of the Petition is that the said Department Order was issued without any legal basis. The petitioner also maintains that the questioned Department Order was issued in violation of the due process clause of the Constitution in as much as the petitioner was not given due notice and hearing before the said Department Order was issued.

Issue:

Whether or not the fixing of school fees through department order by DECS is a valid delegation of legislative power.

Ruling:

After a careful examination of the entire record of the case, We find the instant Petition devoid of merit.

We are not convinced by the argument that the power to regulate school fees "does not always include the power to increase" such fees. Section 57 (3) of Batas Pambansa Blg. 232, otherwise known as The Education Act of 1982, vests the DECS with the power to regulate the educational system in the country, to wit:

SEC. 57. Educations and powers of the Ministry. The Ministry shall:xxx xxx xxx(3) Promulgate rules and regulations necessary for the administration, supervision and regulation of the educational system in accordance with declared policy.xxx xxx xxx 9

Section 70 of the same Act grants the DECS the power to issue rules which are likewise necessary to discharge its functions and duties under the law, to wit:

SEC. 70. Rule-making Authority. — The Minister of Education and Culture, charged with the administration and enforcement of this Act, shall promulgate the necessary implementing rules and regulations.

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

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

We disagree.

The function of prescribing rates by an administrative agency may be either a legislative or an adjudicative function. If it were a legislative function, the grant of prior notice and hearing to the affected parties is not a requirement of due process. As regards rates prescribed by an administrative agency in the exercise of its quasi-judicial function, prior notice and hearing are essential to the validity of such rates. When the rules and/or rates laid down by an administrative agency are meant to apply to all enterprises of a given kind

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

Is Department Order No. 37 issued by the DECS in the exercise of its legislative function? We believe so. The assailed Department Order prescribes the maximum school fees that may be charged by all private schools in the country for school year 1987 to 1988. This being so, prior notice and hearing are not essential to the validity of its issuance.

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

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

We commend the petitioner for taking the cudgels for the public, especially the parents and the students of the country. Its zeal in advocating the protection of the consumers in its activities should be lauded rather than discouraged. But a more convincing case should be made out by it if it is to seek relief from the courts some time in the future. Petitioner must establish that respondent acted without or in excess of her jurisdiction; or with grave abuse of discretion, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law before the extraordinary writ of prohibition may issue.

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

F. Construction and Administrative Interpretation

1. VICTORIAS MILLING COMPANY, INC. vs. SOCIAL SECURITY COMMISSION, G.R. No. L-16704, March 17, 1962

Parties:Petitioner-appellant: VICTORIAS MILLING COMPANY, INC.Respondent-appellee: SOCIAL SECURITY COMMISSION

Ponente: BARRERA, J.

Facts:

On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following tenor:

“Effective November 1, 1958, all Employers in computing the premiums due the System, will take into consideration and include in the Employee's remuneration all bonuses and overtime pay, as well as the cash value of other media of remuneration. All these will comprise the Employee's remuneration or earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum of P500 for any one month.”

Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote the Social Security Commission in effect protesting against the circular as contradictory to a previous Circular No. 7 expressly excluding overtime pay and bonus in the computation of the employers' and employees' respective monthly premium contributions, and submitting, "In order to assist your System in arriving at a proper interpretation of the term 'compensation' for the purposes of" such computation, their observations on Republic Act No. 1161 (Social Security Law) and its amendment and on the general interpretation of the words "compensation", "remuneration" and "wages". Counsel further questioned the validity of the circular for lack of authority on the part of the Social Security Commission to promulgate it without the approval of the President and for lack of publication in the Official Gazette.

Social Security Commission ruled that Circular No. 22 is not a rule or regulation that needed the approval of the President and publication in the Official Gazette to be effective, but a mere administrative interpretation of the statute, a mere statement of general policy or opinion as to how the law should be construed.

Not satisfied with this ruling, petitioner comes to this Court on appeal.

Issue:

Whether or not Circular No. 22 is a rule or regulation, as contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission "to adopt, amend and repeal subject to the approval of the President such rules and regulations as may be necessary to carry out the provisions and purposes of this Act."

Ruling:

There is a distinction between an administrative rule or regulation and an administrative interpretation of a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations, it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it merely interprets a pre-existing law.

Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature.

A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom. On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means.

Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment of the provisions of the Social Security Law defining the term "compensation" contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment, reads as follows:

(f) Compensation — All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except (1) that part of the remuneration in excess of P500 received during the month; (2) bonuses, allowances or overtime pay; and (3) dismissal and all other payments which the employer may make, although not legally required to do so.

Republic Act No. 1792 changed the definition of "compensation" to:

(f) Compensation — All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except that part of the remuneration in excess of P500.00 received during the month.

It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay given in addition to the regular or base pay were expressly excluded, or exempted from the definition of the term "compensation", such exemption or exclusion was deleted by the amendatory law. It thus became necessary for the Social Security Commission to interpret the effect of such deletion or elimination. Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or understanding of the Commission, of the law as amended, which it was its duty to enforce. It did not add any duty or detail that was not already in the law as amended. It merely stated and circularized the opinion of the Commission as to how the law should be construed.

Circular No. 22 purports merely to advise employers-members of the System of what, in the light of the amendment of the law, they should include in determining the monthly compensation of their employees upon which the social security contributions should be based, and that such circular did not require presidential approval and publication in the Official Gazette for its effectivity.

Commission's interpretation of the amendment embodied in its Circular No. 22, is correct. The express elimination among the exemptions excluded in the old law, of all bonuses, allowances and overtime pay in the determination of the "compensation" paid to employees makes it imperative that such bonuses and overtime pay must now be included in the employee's remuneration in pursuance of the amendatory law

While it is true that terms or words are to be interpreted in accordance with their well-accepted meaning in law, nevertheless, when such term or word is specifically defined in a particular law, such interpretation must be adopted in enforcing that particular law, for it cannot be gainsaid that a particular phrase or term may have one meaning for one purpose and another meaning for some other purpose. Such is the case that is now before us. Republic Act 1161 specifically defined what "compensation" should mean "For the purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions authorized in the original Act. By virtue of this express substantial change in the phraseology of the law, whatever prior executive or judicial construction may have been given to the phrase in question should give way to the clear mandate of the new law.

The Resolution appealed from was affirmed, with costs against appellant.

Principle Involved: Administrative Interpretation of a Statute

2. TAYUG RURAL BANK vs. CENTRAL BANK OF THE PHILIPPINES, G.R. No. L-46158, November 28, 1986

Parties:Plaintiff-appellee: TAYUG RURAL BANKDefendant-appellant: CENTRAL BANK OF THE PHILIPPINES

Ponente: PARAS, J.

Facts:

Tayug Rural is a bank in Pangasinan which took out 13 loans from Central Bank in 1962 and 1963, all covered by promissory notes, amounting to P813,000.00. In late 1964, Central Bank released a circular; Memorandum Circular No. DLC-8 thru the Director of Loans and Credit. This circular all informed all rural banks that an additional 10% per annum penalty interest would be assessed on all past due loans beginning 1965. This was enforced beginning July 1965.

In 1969, the outstanding balance of Tayug was at P444,809.45. Tayug Rural filed a case in CFI Manila to recover the 10% penalty it paid up to 1968, amounting to about P16,874.97, and to restrain Central bank from further imposing the penalty.

Central Bank filed a counterclaim for the outstanding balance including the 10% penalty, stating that it was legally imposed under the Rules and Regulations Governing Rural Banks promulgated by the Monetary Board on 1958, under R.A. No. 720 (The Rural Banks' Act).

Tayug’s defense was that the counterclaim should be dismissed since the unpaid obligation of Tayug was due to Central Bank’s flexible and double standard policy of its rediscounting privileges to Tayug Rural and its subsequent arbitrary and illegal imposition of the 10% penalty. Tayug Rural contends that no such 10% penalty starting from 1965 was included in the promissory notes covering the loans.

A judgment was rendered by CFI Manila in favor of Central Bank ordering Tayug Rural Bank to pay 10% penalty in the amount of around P19,335.88 pesos for loans up to July 1969, and to pay nothing for the next remaining loans. Tayug’s claim in the case was however successful, and so Tayug was also ordered to pay P444,809.45, with interest to the Central Bank for the overdue accounts with respect to the promissory notes.

Central Bank appealed to the CA, but also lost on the ground that only a legal question had been raised in the pleadings.

The case was then raised to the SC, with each party arguing in the following manner: CFI rules that the circular’s retroactive effect on past due loans impairs the obligation of contracts and deprives Tayug Rural of property without due process of law. Central Bank reasons that Tayug Rural, despite the loans, should have known that rules and regulations authorize the Central Bank to impose additional reasonable penalties.

Issue:

Whether or not The Central Bank can validly impose the 10% penalty via Memorandum Circular No. DLC-8.

Ruling:

No. A reading of the circular and pertinent provisions, including that of R.A No. 720, shows that nowhere therein is the authority given to the Monetary Board to mete out additional penalties to the rural banks on past due accounts with the Central Bank. As said by the CFI, while the Monetary Board possesses broad supervisory powers, nonetheless, the retroactive imposition of administrative penalties cannot be taken as a measure supervisory in character. Administrative rules have the force and effect of law. There are, however, limitations in the rule-making power of administrative agencies. All that is required of administrative rules and regulations is to implement given legislation by not contradicting it and conform to the standards prescribed by law. Rules and regulations cannot go beyond the basic law. Since compliance therewith can be enforced by a penal sanction, an administrative agency cannot implement a penalty not provided in the law authorizing it, much less one that is applied retroactively.

The new clause imposing an additional penalty was not part of the promissory notes when Tayug Rural took out its loans. The law cannot be given retroactive effect. More to the point, the Monetary Board revoked the additional penalty later in 1970, which clearly shows an admission that it had no power to impose the same. The Central bank hoped to rectify the defect by revising the DLC Form later. However, Tayug Rural must pay the additional 10% in case of suit, since in the promissory notes, 10% should be paid in attorney’s fees and costs of suit and collection.

The decision of the trial court was affirmed with modification that Appellee Rural Bank is ordered to pay a sum equivalent to 10% of the outstanding balance of its past overdue accounts, but not in any case less than P500.00 as attorney's fees and costs of suit and collection.

Principle Involved: Rule-making Power of Administrative Agencies

3. PHARMACEUTICAL AND HEALTH CARE ASSOCIATION OF THE PHILIPPINES vs. HEALTH SECRETARY FRANCISCO T. DUQUE III; HEALTH UNDER SECRETARIES DR. ETHELYN P. NIETO, DR. MARGARITA M. GALON, ATTY. ALEXANDER A. PADILLA, & DR. JADE F. DEL MUNDO; and ASSISTANT SECRETARIES DR. MARIO C. VILLAVERDE, DR. DAVID J. LOZADA, AND DR. NEMESIO T. GAKO, G.R. No. 173034, October 9, 2007

Parties:Petitioner: PHARMACEUTICAL AND HEALTH CARE ASSOCIATION OF THE PHILIPPINESRespondents: HEALTH SECRETARY FRANCISCO T. DUQUE III; HEALTH UNDER SECRETARIES DR. ETHELYN P. NIETO, DR. MARGARITA M. GALON, ATTY. ALEXANDER A. PADILLA, & DR. JADE F. DEL MUNDO; and ASSISTANT SECRETARIES DR. MARIO C. VILLAVERDE, DR. DAVID J. LOZADA, AND DR. NEMESIO T. GAKO

Ponente: AUSTRIA-MARTINEZ, J.

Facts:

Named as respondents are the Health Secretary, Undersecretaries, and Assistant Secretaries of the Department of Health (DOH). For purposes of herein petition, the DOH is deemed impleaded as a co-respondent since respondents issued the questioned RIRR in their capacity as officials of said executive agency.

Executive Order No. 51 (Milk Code) was issued by President Corazon Aquino on October 28, 1986 by virtue of the legislative powers granted to the president under the Freedom Constitution. One of the preambular clauses of the Milk Code states that the law seeks to give effect to Article 112 of the International Code of Marketing of Breastmilk Substitutes (ICMBS), a code adopted by the World Health Assembly (WHA) in 1981. From 1982 to 2006, the WHA adopted several Resolutions to the effect that breastfeeding should be supported, promoted and protected, hence, it should be ensured that nutrition and health claims are not permitted for breastmilk substitutes. In 1990, the Philippines ratified the International Convention on the Rights of the Child. Article 24 of said instrument provides that State Parties should take appropriate measures to diminish infant and child mortality, and ensure that all segments of society, specially parents and children, are informed of the advantages of breastfeeding. On May 15, 2006, the DOH issued herein assailed RIRR which was to take effect on July 7, 2006.

Petitioner challenged the said order and contended that respondent officers of the DOH acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and in violation of the provisions of the Constitution in promulgating the RIRR.

On the other hand, respondents averred RIRR seeks not only to implement the Milk Code but also various international instruments which are deemed part of the law of the land. Among these international instruments are the ICMBS and Resolutions issued by World Health Agencies (WHA).

Issue:

Whether or not Administrative Order or the Revised Implementing Rules and Regulations (RIRR) issued by the Department of Health (DOH) is unconstitutional.

Ruling:

Yes, it is unconstitutional. Petition is partially granted.

Under the 1987 Constitution, international law can become part of the sphere of domestic law either by transformation or incorporation. The transformation method requires that an international law be transformed into a domestic law through a constitutional mechanism such as local legislation. The incorporation method applies when, by mere constitutional declaration, international law is deemed to have the force of domestic law.

Treaties become part of the law of the land through transformation pursuant to Article VII, Section 21 of the Constitution which provides that "No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the members of the Senate." Thus, treaties or conventional international law must go through a process prescribed by the Constitution for it to be transformed into municipal law that can be applied to domestic conflicts.

The ICMBS and WHA Resolutions are not treaties as they have not been concurred in by at least two-thirds of all members of the Senate as required under Section 21, Article VII of the 1987 Constitution.

However, the ICMBS which was adopted by the WHA in 1981 had been transformed into domestic law through local legislation, the Milk Code. Consequently, it is the Milk Code that has the force and effect of law in this jurisdiction and not the ICMBS per se.

The Milk Code is almost a verbatim reproduction of the ICMBS, but it is well to emphasize at this point that the Code did not adopt the provision in the ICMBS absolutely prohibiting advertising or other forms of promotion to the general public of products within the scope of the ICMBS. Instead, the Milk Code expressly provides that advertising, promotion, or other marketing materials may be allowed if such materials are duly authorized and approved by the Inter-Agency Committee (IAC).

Apparently, the WHA Resolution adopting the ICMBS and subsequent WHA Resolutions urging member states to implement the ICMBS are merely recommendatory and legally non-binding. Thus, unlike what has been done with the ICMBS whereby the legislature enacted most of the provisions into law which is the Milk Code, the subsequent WHA Resolutions, 30 specifically providing for exclusive breastfeeding from 0-6 months, continued breastfeeding up to 24 months, and absolutely prohibiting advertisements and promotions of breastmilk substitutes, have not been adopted as a domestic law.

As previously discussed, for an international rule to be considered as customary law, it must be established that such rule is being followed by states because they consider it obligatory to comply with such rules (opinio juris). Respondents have not presented any evidence to prove that the WHA Resolutions, although signed by most of the member states, were in fact enforced or practiced by at least a majority of the member states; neither have respondents proven that any compliance by member states with said WHA Resolutions was obligatory in nature.

Respondents failed to establish that the provisions of pertinent WHA Resolutions are customary international law that may be deemed part of the law of the land.

Consequently, legislation is necessary to transform the provisions of the WHA Resolutions into domestic law. The provisions of the WHA Resolutions cannot be considered as part of the law of the land that can be implemented by executive agencies without the need of a law enacted by the legislature.

In view of the enactment of the Milk Code which does not contain a total ban on the advertising and promotion of breastmilk substitutes, but instead, specifically creates an IAC which will regulate said advertising and promotion, it follows that a total ban policy could be implemented only pursuant to a law amending the Milk Code passed by the constitutionally authorized branch of government, the legislature.

Thus, only the provisions of the Milk Code, but not those of subsequent WHA Resolutions, can be validly implemented by the DOH through the subject RIRR.

Except Sections 4(f), 11 and 46, the rest of the provisions of the RIRR are in consonance with the objective, purpose and intent of the Milk Code, constituting reasonable regulation of an industry which affects public health and welfare and, as such, the rest of the RIRR do not constitute illegal restraint of trade nor are they violative of the due process clause of the Constitution.

4. EMILIO Y. HILADO vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, G.R. No. L-9408, October 31, 1956

Parties:Petitioner: EMILIO Y. HILADORespondents: THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX APPEALS

Ponente: Bautista, Angelo J.

Facts:

On March 1952, Petitioner filed his income tax return for 1951 and claimed the deduction of the sum of P12,837.65 from his gross income, as a loss consisting in a portion of his war damage claim pursuant to General Circular No. V-123 issued by the Collector of Internal Revenue (CIR). Said claim had been duly approved by the Philippine War Damage Commission under the Philippine Rehabilitation Act of 1946 but was not paid pursuant to a notice served upon him by said Commission stating that his claim will not be paid until the United States Congress should make further appropriation. Petitioner considered said amount as a “business asset” which he is entitled to deduct as a loss in his return for 1951. Meanwhile, on August 1952, the Secretary of Finance, through the CIR, issued General Circular No. V-139 which not only revoked and declared void his general Circular No. V- 123 but laid down the rule that losses of property which occurred during the period of World War II from fires, storms, shipwreck or other casualty, or from robbery, theft, or embezzlement are deductible in the year of actual loss or destruction of said property. As a consequence, the amount of P12,837.65 was disallowed as a deduction from the gross income of Petitioner for 1951 and the CIR demanded from him the payment of the sum of P3,546 as deficiency income tax for said year. When the petition for reconsideration filed by Petitioner was denied, he filed a petition for review with the Court of Tax Appeals (CTA). CTA rendered decision affirming the assessment made by Respondent CIR. This is an appeal from said decision.

Issue:

1. Whether or not the Secretary of Finance acted without valid authority in revoking General Circular No. V-123 and approving in lieu thereof General Circular No. V-139.2. Whether or not a vested right can be acquired from a previous circular (Circular No. V-123) which was declared void.

Ruling:

1. No. The Secretary of Finance is vested with authority to revoke, repeal or abrogate the acts or previous rulings of his predecessor in office because the construction of a statute by those administering it is not binding on their successors if thereafter the latter become satisfied that a different construction should be given.

2. No. General Circular No. V-123, having been issued on a wrong construction of the law, cannot give rise to a vested right that can be invoked by a taxpayer. The reason is obvious: a vested right cannot spring from a wrong interpretation.

“It seems too clear for serious argument that an administrative officer cannot change a law enacted by Congress. A regulation that is merely an interpretation of the statute when once determined to have been erroneous becomes nullity. An erroneous construction of the law by the Treasury Department or the collector of internal revenue does not preclude or estop the government from collecting a tax which is legally due.” (Ben Stocker, et al., 12 B. T. A., 1351.)

“Art. 2254. — No vested or acquired right can arise from acts or omissions which are against the law or which infringe upon the rights of others.” (Article 2254, New Civil Code.)

Wherefore, the decision appealed from is affirmed without pronouncement as to costs.

5. ABS-CBN BROADCASTING CORPORATION vs. COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-52306, October 12, 1981

Parties:Petitioner: ABS-CBN BROADCASTING CORPORATIONRespondents: COURT OF TAX APPEALS and THE COMMISSIONER OF INTERNAL REVENUE

Ponente: MELENCIO-HERRERA, J.

Facts:

ABS-CBN is engaged in the business of telecasting local as well as foreign films acquired from foreign corporations not engaged in trade or business within the Philippines. The applicable law for the income tax of non-resident corporations is section 24 (b) of the National Internal Revenue Code, as amended by Republic Act No. 2343 dated June 20, 1959, which provides:

(b) Tax on foreign corporations.—(1) Non-resident corporations.— There shall be levied, collected, and paid for each taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount received by every foreign corporation not engaged in trade or business within the Philippines, from an sources within the Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, a tax equal to thirty per centum of such amount.

On April 12, 1961, in implementation of said provision, the CIR issued General Circular No. V-3349. Pursuant to the foregoing, ABS-CBN dutifully withheld and turned over to the BIR the amount of 30% of one-half of the film rentals paid by it to foreign corporations not engaged in trade or business within the Philippines. The last year that ABS-CBN withheld taxes pursuant to the foregoing Circular was in 1968.

On June 27, 1968, RA 5431 amended Section 24 (b) 10 of the Tax Code increasing the tax rate from 30% to 35% and revising the tax basis from "such amount" referring to rents, etc. to "gross income." On February 8, 1971, the CIR issued Revenue Memorandum Circular No. 4-71, revoking General Circular No. V-334, and holding that the latter was "erroneous for lack of legal basis," because "the tax therein prescribed should be based on gross income without deduction whatever. On the basis of this new Circular, CIR issued against ABS-CBN a letter of assessment and demand requiring them to pay deficiency withholding income tax on the remitted film rentals for the years 1965 through 1968 and film royalty as of the end of 1968 in the total amount of P525,897.06. Petitioner requested for a reconsideration and withdrawal of the assessment. However, without acting thereon, respondent, on April 6, 1976, issued a warrant of distraint and levy over petitioner's personal as well as real properties. The petitioner then filed its Petition for Review with the Court of Tax Appeals whose Decision, affirming the assessment made by the CIR is, in turn, the subject of this review.

Issue:

Whether or not respondent can apply General Circular No. 4-71 retroactively and issue a deficiency assessment against petitioner in the amount of P525,897.06 as deficiency withholding income tax for the year 1965 to1968.

Ruling:

No. Sec. 338-A 11 (now Sec. 327) of the Tax Code applies in this case. Rulings or circulars promulgated by the CIR have no retroactive application where to so apply them would be prejudicial to taxpayers.

The retroactive application of Memorandum Circular No. 4-71 prejudices ABS-CBN since: a) it was issued only in 1971, or 3 years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334; b) the assessment and demand on petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965; c) ABS-CBN was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and no longer had any control over them when the new Circular was issued. And in so far as the enumerated exceptions (to non-retroactivity) are concerned, ABS-CBN does not fall under any of them.

“This Court is not unaware of the well-entrenched principle that the Government is never estopped from collecting taxes because of mistakes or errors on the part of its agents. In fact, utmost caution should be taken in this regard. But, like other principles of law, this also admits of exceptions in the interest of justice and fairplay.”

WHEREFORE, the judgment of the Court of Tax Appeals is hereby reversed, and the questioned assessment set aside. No costs.

G. Penal Regulations

1. THE UNITED STATES vs. ADRIANO PANLILIO, G.R. No. L-9876, December 8, 1914

Parties:Petitioner: THE UNITED STATESRespondent: ADRIANO PANLILIO

Ponente: MORELAND, J.

Facts:

On Feb. 22, 1952, all Carabao of Panlilio was being quarantined suspecting that is suffered from dangerous communicable disease called RINDERPEST, he was informed in writing for such matter by the Dept. of Agriculture.

The servants of Panlilio took the carabao out of the corral to the adjacent area land for the purpose of working them.

D.A. Filed a case against Panlilio for violation of Sec 6 of Act 1760 and later amended to Sec 3,4 and 5 Act 1760. Taking his Carabao while under quarantine.

Issue:

1. Whether or not accused violate sec. 3,4 and 5 of Act 1760.2. Whether or not Act 1760 is a penal regulation.

Ruling:

Panlilio did not violate Sectiones 3,4 and 5 because:- no importation of animals was made;- no proof that the animals is suffering from Renderpest- it was only taken out of the corral to the adjoining land, not on highways, nor moved from one municipality to another.

The facts set forth in the information and proved on the trial does not constitute a violation of Cat 1760 as alleged in the information but it constitute a violation in Art 581 of the Penal Code sentencing him to pay a fine of seventy pesetas or 14 pesos.

2. THE PEOPLE OF THE PHILIPPINE ISLANDS vs. AUGUSTO A. SANTOS, G.R. No. L-44291, August 15, 1936

Parties:Petitioner: THE PEOPLE OF THE PHILIPPINE ISLANDSRespondent: AUGUSTO A. SANTOS

Ponente: VILLA-REAL, J.

Facts:

Augusto Santos is an owner of fishing boat Malabon II and III, who ordered his fishermen to fish, loiter and anchor with the 3km U.S. Military jurisdiction near the island of Corregidor without permission from Sec. of Agriculture and Commerce.

The fiscal filed against Augusto Santos a violation of sec. 28 Admin. Order 2; provides that boat licensed under Act 4003 are prohibited to gather, collect and catch fish and other sea products, to anchor or loiter within the 3km jurisdiction of US military authorities.

Sec 28 Admin Order 2was issued by the Sec. Of Agriculture & commerce by virtue of an authority vested in him by Sec 4 Act. 4003: that he shall issue instructions, orders, rules and regulations to carry into effect provisions in Act 4003 and conduct proceedings under such provisions.

Issue:

1. Whether or not Sec. of Agri & Commerce exercise an excess of regulatory power as vested by Sec. 4 Act 4003.2. Whether or not Sec. Of Agri & Commerce can exercise legislative power in issuing an Admin Order 2.3. Whether or not Sec. 28 of Admin Order 2 is null and void.

Ruling:

Act 4003 does not contain any conditional clause quoted in sec 28 AO 2 such clause supplies a defect if the law. In Sec 4 Act 4003 he shall issue from time to time instructions, orders, rules and regulations consistent with this the Act as may be necessary to carry into effect the provisions thereof and conduct of proceedings arising from such provisions.

Therefore such act constitutes excess regulatory power conferred to him because it is beyond the scope provisions of Act 4003.

The Secretary has no power to legislate on the matter because such power cannot be delegated to him which is exclusive for Phil. Legislature.

Therefore sec 28 is null and void.

Santos charges does not constitute a crime or a violation of some criminal law within the jurisdiction of the civil courts, information DISMISSED.

3. ANSELMO L. PESIGAN and MARCELINO L. PESIGAN vs. JUDGE DOMINGO MEDINA ANGELES, Regional Trial Court, Caloocan City Branch 129, acting for REGIONAL TRIAL COURT of Camarines Norte, now presided over by JUDGE NICANOR ORIÑO, Daet Branch 40; DRA. BELLA S. MIRANDA, ARNULFO V. ZENAROSA, ET AL., G.R. No. L-64279, April 30, 1984

Parties:Petitioners: ANSELMO L. PESIGAN and MARCELINO L. PESIGANRespondents: JUDGE DOMINGO MEDINA ANGELES, Regional Trial Court, Caloocan City Branch 129, acting for REGIONAL TRIAL COURT of Camarines Norte, now presided over by JUDGE NICANOR ORIÑO, Daet Branch 40; DRA. BELLA S. MIRANDA, ARNULFO V. ZENAROSA, ET AL.

Ponente: AQUINO, J.

Facts: Anselmo and Marcelo Pesigan transported in the evening of April 2, 1982 twenty-six carabaos and a calf from Camarines Sur with Batangas as their destination.

They were provided with three certificates: 1. a health certificate from the provincial veterinarian of Camarines Sur,

issued under the Revised Administrative Code and Presidential Decree No. 533, the Anti-Cattle Rustling Law of 1974;

2. a permit to transport large cattle issued under the authority of the provincial commander; and

3. three certificates of inspectiona. one from the Constabulary command attesting that the carabaos

were not included in the list of lost, stolen and questionable animals;

b. one from the Livestock inspector, Bureau of Animal Industry of Libmanan, Camarines Sur; and

c. one from the mayor of Sipocot.

In spite of the permit to transport and the said four certificates, the carabaos, while passing at Basud, Camarines Norte, were confiscated by the town's police station commander, and by provincial veterinarian. The confiscation was basis on the aforementioned Executive Order No. 626-A which prohibits the transportation and slaughtering of carabaos. The confiscated carabaos or carabeef were distributed to twenty-five farmers of Basud, and to a farmer from the Vinzons municipal nursery.

Issue: Whether or not E.O. No. 626-A, providing for the confiscation and forfeiture by the government of carabaos transported from one province to another, dated October 25, 1980 is enforceable before publication in the Official Gazette on June 14, 1982.

Ruling: We hold that the said executive order should not be enforced against the Pesigans on April 2, 1982 because, as already noted, it is a penal regulation published more than two months later in the Official Gazette dated June 14, 1982. It became effective only fifteen days thereafter as provided in article 2 of the Civil Code and section 11 of the Revised Administrative Code.

Principles involved: The word "laws" in article 2 of the NCC (article 1 of the old Civil Code)

includes circulars and regulations which prescribe penalties. Commonwealth Act No. 638 requires that all Presidential EOs having

general applicability should be published in the Official Gazette. It provides that “every order or document which shall prescribe a penalty shall be deemed to have general applicability and legal effect.” Indeed, the practice has always been to publish executive orders in the Gazette.

Section 551 of the Revised Administrative Code provides that even bureau "regulations and orders shall become effective only when approved by the Department Head and published in the Official Gazette or otherwise publicly promulgated".

Publication is necessary to apprise the public of the contents of the regulations and make the said penalties binding on the persons affected thereby.

Justice and fairness dictates that the public must be informed of that provision by means of publication before violators of the E.O can be bound thereby.

H. Effectivity of Rules

1. LORENZO M. TAÑADA, ABRAHAM F. SARMIENTO, and MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. (MABINI) vs. HON. JUAN C. TUVERA, in his capacity as Executive Assistant to the President, HON. JOAQUIN VENUS, in his capacity as Deputy Executive Assistant to the President, MELQUIADES P. DE LA CRUZ, ETC., ET AL., G.R. No. L-63915, December 29, 1986

Parties:Petitioners: LORENZO M. TAÑADA, ABRAHAM F. SARMIENTO, and MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. (MABINI)Respondents: HON. JUAN C. TUVERA, in his capacity as Executive

Assistant to the President, HON. JOAQUIN VENUS, in his capacity as Deputy Executive Assistant to the President, MELQUIADES P. DE LA CRUZ, ETC., ET AL.

Ponente: CRUZ, J.

Facts: Petitioners Lorenzo M. Tanada, et. al. invoked due process in demanding the disclosure of a number of Presidential Decrees which they claimed had not been published as required by Law. The government argued that while publication was necessary as a rule, it was not so when it was otherwise provided, as when the decrees themselves declared that they were to become effective immediately upon approval. The court decided on April 24, 1985 in affirming the necessity for publication of some of the decrees. The court ordered the respondents to publish in the official gazette all unpublished Presidential Issuances which are of general force and effect. The petitioners suggest that there should be no distinction between laws of general applicability and those which are not. The publication means complete publication, and that publication must be made in the official gazette. In a comment required by the Solicitor General, he claimed first that the motion was a request for an advisory opinion and therefore be dismissed. And on the clause “unless otherwise provided” in Article 2 of the new civil code meant that the publication required therein was not always imperative, that the publication when necessary, did not have to be made in the official gazette.

Issue: Whether or not publication in the Official Gazette is required for the effectivity of laws and statute.

Ruling: The Philippine Constitution does not require the publication of the laws as a pre-requisite for their effectivity; neither the publication of laws in the Official gazette as a pre-requisite for their effectivity.

Article 2 of the Civil Code provides that “laws shall take effect fifteen days following the completion of their publication on the Official Gazette, unless it is

otherwise provided” This pre-requisite does not apply to a law with a fixed provision as to when will it take effect. The intention of this provision is to give the general public enough awareness of the laws that will regulate their actions.

Commonwealth Act No. 638 does not support the proposition that for the effectivity of laws, it must be published in the Official Gazette. The said act only provides the uniform publication and distribution of the Official Gazette, only “important” legislative acts and those of “public in nature” are required to be published in the Official Gazette.

Ignorance of the law excuses no one, it is unjust if a person will be punished with a law he had no notice, that’s why laws which is public in nature shall be published in the Official gazette to protect the constitutional right of the people, to be informed on matter of public concern. For no person should be bound by law without notice. The Court declared that presidential issuances of general application which have not been published have no force and effect.

Principles involved: Article 2 of the Civil Code provides that “laws shall take effect fifteen

days following the completion of their publication on the Official Gazette, unless it is otherwise provided.”

Commonwealth Act No. 638 only provides the uniform publication and distribution of the Official Gazette, only “important” legislative acts and those of “public in nature” are required to be published in the Official Gazette.