Admin Law Nov 21 2015

ADMIN LAW NOV 21 2015 1
G.R. No. 4349
September 24, 1908
THE
UNITED
vs.
ANICETO BARRIAS, defendant-appellant.
STATES, plaintiff-appellee,
By sections 1, 2, and 3 of Act No. 1136, passed April 29, 1904, the Collector of
Customs is authorized to license craft engaged in the lighterage or other exclusively
harbor business of the ports of the Islands, and, with certain exceptions, all vessels
engaged in lightering are required to be so licensed. Sections 5 and 8 read as follows:
appellant.
SEC. 5. The Collector of Customs for the Philippine Islands is hereby

authorized, empowered, and directed to promptly make and publish suitable
rules and regulations to carry this law into effect and to regulate the business
herein licensed.
In the Court of First Instance of the city of Manila the defendant was charged within a
violation of paragraphs 70 and 83 of Circular No. 397 of the Insular Collector of
Customs, duly published in the Official Gazette and approved by the Secretary of
Finance and Justice.1 After a demurrer to the complaint of the lighter Maude, he was
moving her and directing her movement, when heavily laden, in the Pasig River, by
bamboo poles in the hands of the crew, and without steam, sail, or any other external
power. Paragraph 70 of Circular No. 397 reads as follows:
SEC. 8. Any person who shall violate the provisions of this Act, or of any rule
or regulation made and issued by the Collector of Customs for the Philippine
Islands, under and by authority of this Act, shall be deemed guilty of a
misdemeanor, and upon conviction shall be punished by imprisonment for
not more than six months, or by a fine of not more than one hundred dollars,
United States currency, or by both such fine and imprisonment, at the
discretion of the court; Provided, That violations of law may be punished
either by the method prescribed in section seven hereof, or by that
prescribed in this section or by both.
Ortigas
&
Fisher
Attorney-General Araneta for appellee.
for
TRACEY, J.:
No heavily loaded casco, lighter, or other similar craft shall be permitted to

move in the Pasig River without being towed by steam or moved by other
adequate power.
Paragraph 83 reads, in part, as follows:
For the violation of any part of the foregoing regulations, the persons
offending shall be liable to a fine of not less than P5 and not more than
P500, in the discretion of the court.
Under this statute, which was not referred to on the argument, or in the original briefs,
there is no difficulty in sustaining the regulation of the Collector as coming within the
terms of section 5. Lighterage, mentioned in the Act, is the very business in which this
vessel was engaged, and when heavily laden with hemp she was navigating the
Pasig River below the Bridge of Spain, in the city of Manila. This spot is near the
mouth of the river, the docks whereof are used for the purpose of taking on and
discharging freight, and we entertain no doubt that it was in right sense a part of the
harbor, without having recourse to the definition of paragraph 8 of Customs
Administrative Circular No. 136, which reads as follows:
In this court, counsel for the appellant attacked the validity of paragraph 70 on two
grounds: First that it is unauthorized by section 19 of Act No. 355; and, second, that if
the acts of the Philippine Commission bear the interpretation of authorizing the
Collector to promulgate such a law, they are void, as constituting an illegal delegation
of legislative power.
The limits of a harbor for the purpose of licensing vessels as herein

prescribed (for the lighterage and harbor business) shall be considered to
include its confluent navigable rivers and lakes, which are navigable during
any season of the year.
The Attorney-General does not seek to sustain the conviction but joins with the
counsel for the defense in asking for the discharge of the prisoner on the first ground
stated by the defense, that the rule of the Collector cited was unauthorized and illegal,
expressly passing over the other question of the delegation of legislative power.
The necessity confiding to some local authority the framing, changing, and enforcing
of harbor regulations is recognized throughout the world, as each region and each a
harbor requires peculiar use more minute than could be enacted by the central
lawmaking power, and which, when kept within the proper scope, are in their nature
police regulations not involving an undue grant of legislative power.

The complaint in this instance was framed with reference, as its authority, to sections
311 and 319 [19 and 311] at No. 355 of the Philippine Customs Administrative Acts,
as amended by Act Nos. 1235 and 1480. Under Act No. 1235, the Collector is not
only empowered to make suitable regulations, but also to "fix penalties for violation
thereof," not exceeding a fine of P500.
used was a mere matter of detail. The regulation was in execution of, or
supplementary to, but not in conflict with the law itself. . . .
In Massachusetts it has been decided that the legislature may delegate to the
governor and counsel the power to make pilot regulations. (Martin vs. Witherspoon et
al., 135 Mass. 175).
This provision of the statute does, indeed, present a serious question.

One of the settled maxims in constitutional law is, that the power conferred
upon the legislature to make laws can not be delegated by that department
to any body or authority. Where the sovereign power of the State has located
the authority, there it must remain; only by the constitutional agency alone
the laws must be made until the constitution itself is changed. The power to
whose judgment, wisdom, and patriotism this high prerogative has been
intrusted can not relieve itself of the responsibility by choosing other
agencies upon which the power shall be developed, nor can its substitutes
the judgment, wisdom, and patriotism and of any other body for those to
which alone the people have seen fit to confide this sovereign trust.
(Cooley's Constitutional limitations, 6th ed., p. 137.)
This doctrine is based on the ethical principle that such a 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. In the case of the United States vs. Breen (40 Fed.
Phil. Rep. 402), an Act of Congress allowing the Secretary of War to make such rules
and regulations as might be necessary to protect improvements of the Mississipi
River, and providing that a violation thereof should constitute a misdemeanor, was
sustained on the ground that the misdemeanor was declared not under the delegated
power of the Secretary of War, but in the Act of Congress, itself. So also was a grant
to him of power to prescribe rules for the use of canals. (U.S. vs. Ormsbee, 74 Fed.
Rep. 207.) but a law authorizing him to require alteration of any bridge and to impose
penalties for violations of his rules was held invalid, as vesting in him upon a power
exclusively lodged in Congress (U.S. vs. Rider, 50 Fed. Rep., 406.) The subject is
considered and some cases reviewed by the Supreme Court of the United States, in
re Kollock (165 U.S. 526), which upheld the law authorizing a commissioner of
internal revenue to designate and stamps on oleomargarine packages, an improper
use of which should thereafter constitute a crime or misdemeanor, the court saying (p.
533):
The criminal offense is fully and completely defined by the Act and the
designation by the Commissioner of the particular marks and brands to be
In the case of The Board of Harbor Commissioners of the Port of Eureka vs.
Excelsior Redwood Company (88 Cal. 491), it was ruled that harbor commissioners
can not impose a penalty under statues authorizing them to do so, the court saying:
Conceding that the legislature could delegate to the plaintiff the authority to
make rules and regulation with reference to the navigation of Humboldt Bay,
the penalty for the violation of such rules and regulations is a matter purely
in the hands of the legislature.
Having reached the conclusion that Act No. 1136 is valid, so far as sections 5 and 8
are concerned, and is sufficient to sustain this prosecution, it is unnecessary that we
should pass on the questions discussed in the briefs as to the extend and validity of
the other acts. The reference to them in the complaint is not material, as we have
frequently held that where an offense is correctly described in the complaint an
additional reference to a wrong statute is immaterial.
We are also of the opinion that none of the subsequent statutes cited operate to
repeal the aforesaid section Act No. 1136.
So much of the judgment of the Court of First Instance as convicts the defendant of a
violation of Acts Nos. 355 and 1235 is hereby revoked and is hereby convicted of a
misdemeanor and punished by a fine of 25 dollars, with costs of both instances. So
ordered.

ascertainment of the facts and circumstances upon which the application of said law
is to be predicated. To promulgate rules and regulations on the use of national roads
and to determine when and how long a national road should be closed to traffic, in
view of the condition of the road or the traffic thereon and the requirements of public
convenience and interest, is an administrative function which cannot be directly
discharged by the National Assembly. It must depend on the discretion of some other
government official to whom is confided the duty of determining whether the proper
occasion exists for executing the law. But it cannot be said that the exercise of such
discretion
is
the
making
of
the
law.
FIRST
DIVISION
[G.R.
No.
47800.
December
2,
1940.]
MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.

Maximo
Calalang
in
his
own
behalf.
Solicitor General Ozaeta and Assistant Solicitor General Amparo for

respondents
Williams,
Fragante
and
Bayan
City
Fiscal
Mabanag
for
the
other
respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; CONSTITUTIONALITY OF COMMONWEALTH ACT No.
648; DELEGATION OF LEGISLATIVE POWER; AUTHORITY OF DIRECTOR OF
PUBLIC WORKS AND SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS
TO PROMULGATE RULES AND REGULATIONS. The provisions of section 1 of
Commonwealth Act No. 648 do not confer legislative power upon the Director of
Public Works and the Secretary of Public Works and Communications. The authority
therein conferred upon them and under which they promulgated the rules and
regulations now complained of is not to determine what public policy demands but
merely to carry out the legislative policy laid down by the National Assembly in said
Act, to wit, "to promote safe transit upon, and avoid obstructions on, roads and streets
designated as national roads by acts of the National Assembly or by executive orders
of the President of the Philippines" and to close them temporarily to any or all classes
of traffic "whenever the condition of the road or the traffic thereon makes such action
necessary or advisable in the public convenience and interest." The delegated power,
if at all, therefore, is not the determination of what the law shall be, but merely the
2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY.

Commonwealth Act No. 548 was passed by the National Assembly in the exercise
of the paramount police power of the state. Said Act, by virtue of which the rules and
regulations complained of were promulgated, aims to promote safe transit upon and
avoid obstructions on national roads, in the interest and convenience of the public. In
enacting said law, therefore, the National Assembly was prompted by considerations
of public convenience and welfare. It was inspired by a desire to relieve congestion of
traffic, which is, to say the least, a menace to public safety. Public welfare, then, lies
at the bottom of the enactment of said law, and the state in order to promote the
general welfare may interfere with personal liberty, with property, and with business
and occupations. Persons and property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and prosperity of the state
(U.S. v. Gomer Jesus, 31 Phil., 218). To this fundamental aim of our Government the
rights of the individual are subordinated. Liberty is a blessing without which life is a
misery, but liberty should not be made to prevail over authority because then society
will fall into anarchy. Neither should authority be made to prevail over liberty because
then the individual will fall into slavery. The citizen should achieve the required
balance of liberty and authority in his mind through education and, personal discipline,
so that there may be established the resultant equilibrium, which means peace and
order and happiness for all. The moment greater authority is conferred upon the
government, logically so much is withdrawn from the residuum of liberty which resides
in the people. The paradox lies in the fact that the apparent curtailment of liberty is
precisely
the
very
means
of
insuring
its
preservation.
3. ID.; ID.; SOCIAL JUSTICE. Social justice is "neither communism, nor
despotism, nor atomism, nor anarchy," but the humanization of laws and the
equalization of social and economic forces by the State so that justice in its rational
and objectively secular conception may at least be approximated. Social justice
means the promotion of the welfare of all the people, the adoption by the Government
of measures calculated to insure economic stability of all the competent elements of
society, through the maintenance of a proper economic and social equilibrium in the
interrelations of the members of the community, constitutionally, through the adoption
of measures legally justifiable, or extra-constitutionally, through the exercise of
powers underlying the existence of all governments on the time-honored principle of
salus populi est suprema lex. Social justice, therefore, must be founded on the
recognition of the necessity of interdependence among divers and diverse units of a
society and of the protection that should be equally and evenly extended to all groups
as a combined force in our social and economic life, consistent with the fundamental

and paramount objective of the state of promoting the health, comfort, and quiet of all
persons, and of bringing about "the greatest good to the greatest number."
DECISION
LAUREL, J.:
Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila,

brought before this court this petition for a writ of prohibition against the respondents,
A. D. Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as
Director of Public Works; Sergio Bayan, as Acting Secretary of Public Works and
Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan
Dominguez,
as
Acting
Chief
of
Police
of
Manila.
It is alleged in the petition that the National Traffic Commission, in its resolution of
July 17, 1940, resolved to recommend to the Director of Public Works and to the
Secretary of Public Works and Communications that animal-drawn vehicles be
prohibited from passing along Rosario Street extending from Plaza Calderon de la
Barca to Dasmarias Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30
p.m.; and along Rizal Avenue extending from the railroad crossing at Antipolo Street
to Echague Street, from 7 a.m. to 11 p.m., from a period of one year from the date of
the opening of the Colgante Bridge to traffic; that the Chairman of the National Traffic
Commission, on July 18, 1940 recommended to the Director of Public Works the
adoption of the measure proposed in the resolution aforementioned, in pursuance of
the provisions of Commonwealth Act No. 548 which authorizes said Director of Public
Works, with the approval of the Secretary of Public Works and Communications, to
promulgate rules and regulations to regulate and control the use of and traffic on
national roads; that on August 2, 1940, the Director of Public Works, in his first
indorsement to the Secretary of Public Works and Communications, recommended to
the latter the approval of the recommendation made by the Chairman of the National
Traffic Commission as aforesaid, with the modification that the closing of Rizal
Avenue to traffic to animal-drawn vehicles be limited to the portion thereof extending
from the railroad crossing at Antipolo Street to Azcarraga Street; that on August 10,
1940, the Secretary of Public Works and Communications, in his second indorsement
addressed to the Director of Public Works, approved the recommendation of the latter
that Rosario Street and Rizal Avenue be closed to traffic of animal-drawn vehicles,
between the points and during the hours as above indicated, for a period of one year
from the date of the opening of the Colgante Bridge to traffic; that the Mayor of Manila
and the Acting Chief of Police of Manila have enforced and caused to be enforced the
rules and regulations thus adopted; that as a consequence of such enforcement, all
animal-drawn vehicles are not allowed to pass and pick up passengers in the places
above-mentioned to the detriment not only of their owners but of the riding public as
well.
It is contended by the petitioner that Commonwealth Act No. 548 by which the
Director of Public Works, with the approval of the Secretary of Public Works and
Communications, is authorized to promulgate rules and regulations for the regulation
and control of the use of and traffic on national roads and streets is unconstitutional
because it constitutes an undue delegation of legislative power. This contention is
untenable. As was observed by this court in Rubi v. Provincial Board of Mindoro (39
Phil, 660, 700), "The rule has nowhere been better stated than in the early Ohio case
decided by Judge Ranney, and since followed in a multitude of cases, namely: The
true distinction therefore is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring an 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. (Cincinnati, W. & Z.
R. Co. v. Commrs. Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief
Justice Marshall in Wayman v. Southard (10 Wheat., 1) may be committed by the
Legislature to an executive department or official. The Legislature may make
decisions of executive departments or subordinate officials thereof, to whom it has
committed the execution of certain acts, final on questions of fact. (U.S. v. Kinkead,
248 Fed., 141.) The growing tendency in the decisions is to give prominence to the
necessity
of
the
case."cralaw
virtua1aw
library
Section 1 of Commonwealth Act No. 548 reads as follows:jgc:chanrobles.com.ph
"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and
streets designated as national roads by acts of the National Assembly or by executive
orders of the President of the Philippines, the Director of Public Works, with the
approval of the Secretary of Public Works and Communications, shall promulgate the
necessary rules and regulations to regulate and control the use of and traffic on such
roads and streets. Such rules and regulations, with the approval of the President, may
contain provisions controlling or regulating the construction of buildings or other
structures within a reasonable distance from along the national roads. Such roads
may be temporarily closed to any or all classes of traffic by the Director of Public
Works and his duly authorized representatives whenever the condition of the road or
the traffic thereon makes such action necessary or advisable in the public
convenience and interest, or for a specified period, with the approval of the Secretary
of
Public
Works
and
Communications."cralaw
virtua1aw
library
The above provisions of law do not confer legislative power upon the Director of
Public Works and the Secretary of Public Works and Communications. The authority
therein conferred upon them and under which they promulgated the rules and
regulations now complained of is not to determine what public policy demands but
merely to carry out the legislative policy laid down by the National Assembly in said
Act, to wit, "to promote safe transit upon and avoid obstructions on, roads and streets
designated as national roads by acts of the National Assembly or by executive orders
of the President of the Philippines" and to close them temporarily to any or all classes
of traffic "whenever the condition of the road or the traffic makes such action
necessary or advisable in the public convenience and interest." The delegated power,
if at all, therefore, is not the determination of what the law shall be, but merely the
ascertainment of the facts and circumstances upon which the application of said law
is to be predicated. To promulgate rules and regulations on the use of national roads
and to determine when and how long a national road should be closed to traffic, in

view of the condition of the road or the traffic thereon and the requirements of public
convenience and interest, is an administrative function which cannot be directly
discharged by the National Assembly. It must depend on the discretion of some other
government official to whom is confided the duty of determining whether the proper
occasion exists for executing the law. But it cannot be said that the exercise of such
discretion is the making of the law. As was said in Lockes Appeal (72 Pa. 491): "To
assert that a law is less than a law, because it is made to depend on a future event or
act, is to rob the Legislature of the power to act wisely for the public welfare whenever
a law is passed relating to a state of affairs not yet developed, or to things future and
impossible to fully know." The proper distinction the court said was this: "The
Legislature cannot delegate its power to make the law; but it can make a law to
delegate a power to determine some fact or state of things upon which the law
makes, or intends to make, its own action depend. To deny this would be to stop the
wheels of government. There are many things upon which wise and useful legislation
must depend which cannot be known to the law-making power, and, must, therefore,
be a subject of inquiry and determination outside of the halls of legislation." (Field v.
Clark,
143
U.
S.
649,
694;
36
L.
Ed.
294.)
In the case of People v. Rosenthal and Osmea, G.R. Nos. 46076 and 46077,
promulgated June 12, 1939, and in Pangasinan Transportation v. The Public Service
Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to
observe that the principle of separation of powers has been made to adapt itself to
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. Accordingly, with the growing
complexity of modern life, the multiplication of the subjects of governmental
regulations, and the increased difficulty of administering the laws, the rigidity of the
theory of separation of governmental powers has, to a large extent, been relaxed by
permitting the delegation of greater powers by the legislative and vesting a larger
amount of discretion in administrative and executive officials, not only in the execution
of the laws, but also in the promulgation of certain rules and regulations calculated to
promote
public
interest.
The petitioner further contends that the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an
unlawful interference with legitimate business or trade and abridge the right to
personal liberty and freedom of locomotion. Commonwealth Act No. 548 was passed
by the National Assembly in the exercise of the paramount police power of the state.
Said Act, by virtue of which the rules and regulations complained of were
promulgated, aims to promote safe transit upon and avoid obstructions on national
roads, in the interest and convenience of the public. In enacting said law, therefore,
the National Assembly was prompted by considerations of public convenience and
welfare. It was inspired by a desire to relieve congestion of traffic. which is, to say the
least, a menace to public safety. Public welfare, then, lies at the bottom of the
enactment of said law, and the state in order to promote the general welfare may
interfere with personal liberty, with property, and with business and occupations.
Persons and property may be subjected to all kinds of restraints and burdens, in order
to secure the general comfort, health, and prosperity of the state (U.S. v. Gomez
Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the
individual are subordinated. Liberty is a blessing without which life is a misery, but
liberty should not be made to prevail over authority because then society will fall into
anarchy. Neither should authority be made to prevail over liberty because then the
individual will fall into slavery. The citizen should achieve the required balance of
liberty and authority in his mind through education and personal discipline, so that
there may be established the resultant equilibrium, which means peace and order and
happiness for all. The moment greater authority is conferred upon the government,
logically so much is withdrawn from the residuum of liberty which resides in the
people. The paradox lies in the fact that the apparent curtailment of liberty is precisely
the
very
means
of
insuring
its
preservation.
The scope of police power keeps expanding as civilization advances. As was said in
the case of Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), "the right to
exercise the police power is a continuing one, and a business lawful today may in the
future, because of the changed situation, the growth of population or other causes,
become a menace to the public health and welfare, and be required to yield to the
public good." And in People v. Pomar (46 Phil., 440), it was observed that "advancing
civilization is bringing within the police power of the state today things which were not
thought of as being within such power yesterday. The development of civilization, the
rapidly increasing population, the growth of public opinion, with an increasing desire
on the part of the masses and of the government to look after and care for the
interests of the individuals of the state, have brought within the police power many
questions for regulation which formerly were not so considered."cralaw virtua1aw
library
The petitioner finally avers that the rules and regulations complained of infringe upon
the constitutional precept regarding the promotion of social justice to insure the wellbeing and economic security of all the people. The promotion of social justice,
however, is to be achieved not through a mistaken sympathy towards any given
group. Social justice is "neither communism, nor despotism, nor atomism, nor
anarchy," but the humanization of laws and the equalization of social and economic
forces by the State so that justice in its rational and objectively secular conception
may at least be approximated. Social justice means the promotion of the welfare of all
the people, the adoption by the Government of measures calculated to insure
economic stability of all the competent elements of society, through the maintenance
of a proper economic and social equilibrium in the interrelations of the members of
the community, constitutionally, through the adoption of measures legally justifiable,
or extra-constitutionally, through the exercise of powers underlying the existence of all
governments on the time-honored principle of salus populi est suprema lex.
Social justice, therefore, must be founded on the recognition of the necessity of
interdependence among divers and diverse units of a society and of the protection
that should be equally and evenly extended to all groups as a combined force in our
social and economic life, consistent with the fundamental and paramount objective of
the state of promoting the health, comfort, and quiet of all persons, and of bringing
about "the greatest good to the greatest number."cralaw virtua1aw library

In view of the foregoing, the writ of prohibition prayed for is hereby denied, with costs
against the petitioner. So ordered.
respect to the business of common carrier which holds such a peculiar relation to the
public interest that there is superinduced upon it the right of public regulation when
private properties are affected with public interest, hence, they cease to be juris
privati only. When, therefore, one devotes his property to a use in which the public
has an interest, he, in effect grants to the public an interest in that use, and must
submit to the control by the public for the common good, to the extent of the interest
he has thus created. 1
An abdication of the licensing and regulatory government agencies of their functions
as the instant petition seeks to show, is indeed lamentable. Not only is it an unsound
administrative policy but it is inimical to public trust and public interest as well.
G.R. No. 115381 December 23, 1994

KILUSANG
MAYO
UNO
LABOR
CENTER, petitioner,
vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND
REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION
OF THE PHILIPPINES, respondents.
Potenciano A. Flores for petitioner.
Robert Anthony C. Sison, Cesar B. Brillantes and Jose Z. Galsim for private
respondent.
Jose F. Miravite for movants.
KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose service are
essential to the general public. They are enterprises which specially cater to the
needs of the public and conduce to their comfort and convenience. As such, public
utility services are impressed with public interest and concern. The same is true with
The instant petition for certiorari assails the constitutionality and validity of certain
memoranda, circulars and/or orders of the Department of Transportation and
Communications (DOTC) and the Land Transportation Franchising and Regulatory
Board LTFRB) 2 which, among others, (a) authorize provincial bus and jeepney
operators to increase or decrease the prescribed transportation fares without
application therefor with the LTFRB and without hearing and approval thereof by said
agency in violation of Sec. 16(c) of Commonwealth Act No. 146, as amended,
otherwise known as the Public Service Act, and in derogation of LTFRB's duty to fix
and determine just and reasonable fares by delegating that function to bus operators,
and (b) establish a presumption of public need in favor of applicants for certificates of
public convenience (CPC) and place on the oppositor the burden of proving that there
is no need for the proposed service, in patent violation not only of Sec. 16(c) of CA
146, as amended, but also of Sec. 20(a) of the same Act mandating that fares should
be "just and reasonable." It is, likewise, violative of the Rules of Court which places
upon each party the burden to prove his own affirmative allegations. 3 The offending
provisions contained in the questioned issuances pointed out by petitioner, have
resulted in the introduction into our highways and thoroughfares thousands of old and
smoke-belching buses, many of which are right-hand driven, and have exposed our
consumers to the burden of spiraling costs of public transportation without hearing
and due process.
The following memoranda, circulars and/or orders are sought to be nullified by the
instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990
relative to the implementation of a fare range scheme for provincial bus services in
the
country;
(b)
DOTC
Department
Order
No.
92-587, dated March 30, 1992, defining the policy framework on the regulation of
transport services; (c) DOTC Memorandum dated October 8, 1992, laying down rules
and procedures to implement Department Order No. 92-587; (d) LTFRB
Memorandum Circular No. 92-009, providing implementing guidelines on the DOTC

Department Order No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case
No. 94-3112.
Finding the implementation of the fare range scheme "not legally feasible," Remedios
A.S. Fernando submitted the following memorandum to Oscar M. Orbos on July 24,
1990, to wit:
The relevant antecedents are as follows:

On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum
Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing
provincial bus operators to charge passengers rates within a range of 15% above and
15% below the LTFRB official rate for a period of one (1) year. The text of the
memorandum order reads in full:
One of the policy reforms and measures that is in line with the
thrusts and the priorities set out in the Medium-Term Philippine
Development Plan (MTPDP) 1987 1992) is the liberalization of
regulations in the transport sector. Along this line, the Government
intends to move away gradually from regulatory policies and make
progress towards greater reliance on free market forces.
Based on several surveys and observations, bus companies are
already charging passenger rates above and below the official fare
declared by LTFRB on many provincial routes. It is in this context
that some form of liberalization on public transport fares is to be
tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately
publicize a fare range scheme for all provincial bus routes in
country (except those operating within Metro Manila). Transport
Operators shall be allowed to charge passengers within a range of
fifteen percent (15%) above and fifteen percent (15%) below the
LTFRB official rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared
by LTFRB in coordination with the DOTC Planning Service.
The implementation of the said fare range scheme shall start on 6
August 1990.
For compliance. (Emphasis ours.)
With reference to DOTC Memorandum Order No. 90-395 dated 26

June 1990 which the LTFRB received on 19 July 1990, directing the
Board "to immediately publicize a fare range scheme for all
provincial bus routes in the country (except those operating within
Metro Manila)" that will allow operators "to charge passengers
within a range of fifteen percent (15%) above and fifteen percent
(15%) below the LTFRB official rate for a period of one year" the
undersigned is respectfully adverting the Secretary's attention to
the following for his consideration:
1. Section 16(c) of the Public Service Act
prescribes the following for the fixing and
determination of rates (a) the rates to be
approved should be proposed by public service
operators; (b) there should be a publication and
notice to concerned or affected parties in the
territory affected; (c) a public hearing should be
held for the fixing of the rates; hence,
implementation of the proposed fare range
scheme on August 6 without complying with the
requirements of the Public Service Act may not
be legally feasible.
2. To allow bus operators in the country to charge
fares fifteen (15%) above the present LTFRB
fares in the wake of the devastation, death and
suffering caused by the July 16 earthquake will
not be socially warranted and will be politically
unsound; most likely public criticism against the
DOTC and the LTFRB will be triggered by the
untimely motu propio implementation of the
proposal by the mere expedient of publicizing the
fare range scheme without calling a public
hearing, which scheme many as early as during
the Secretary's predecessor know through
newspaper reports and columnists' comments to
be Asian Development Bank and World Bank
inspired.

3. More than inducing a reduction in bus fares by
fifteen percent (15%) the implementation of the
proposal will instead trigger an upward
adjustment in bus fares by fifteen percent (15%)
at a time when hundreds of thousands of people
in Central and Northern Luzon, particularly in
Central Pangasinan, La Union, Baguio City,
Nueva Ecija, and the Cagayan Valley are
suffering from the devastation and havoc caused
by the recent earthquake.
4. In lieu of the said proposal, the DOTC with its
agencies involved in public transportation can
consider measures and reforms in the industry
that will be socially uplifting, especially for the
people in the areas devastated by the recent
earthquake.
In view of the foregoing considerations, the undersigned
respectfully suggests that the implementation of the proposed fare
range scheme this year be further studied and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of
the Philippines, Inc. (PBOAP) filed an application for fare rate increase. An acrossthe-board increase of eight and a half centavos (P0.085) per kilometer for all types of
provincial buses with a minimum-maximum fare range of fifteen (15%) percent over
and below the proposed basic per kilometer fare rate, with the said minimummaximum fare range applying only to ordinary, first class and premium class buses
and a fifty-centavo (P0.50) minimum per kilometer fare for aircon buses, was sought.
On December 6, 1990, private respondent PBOAP reduced its applied proposed fare
to an across-the-board increase of six and a half (P0.065) centavos per kilometer for
ordinary buses. The decrease was due to the drop in the expected price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and Perla
C. Bautista alleging that the proposed rates were exorbitant and unreasonable and
that the application contained no allegation on the rate of return of the proposed
increase in rates.
On December 14, 1990, public respondent LTFRB rendered a decision granting the
fare rate increase in accordance with the following schedule of fares on a straight
computation method, viz:
AUTHORIZED FARES
LUZON
MIN. OF 5 KMS. SUCCEEDING KM.
REGULAR
STUDENT P1.15 P0.28
P1.50
P0.37
REGULAR
P1.60
STUDENT
P1.20
FIRST
CLASS
LUZON
VISAYAS/
MINDANAO
PREMIERE
CLASS
LUZON
VISAYAS/
MINDANAO P0.405
P0.375
P0.285
KM.)
P0.385
VISAYAS/MINDANAO
(PER
(PER
P0.395
KM.)
P0.395
AIRCON (PER KM.) P0.415. 4

On March 30, 1992, then Secretary of the Department of Transportation and
Communications Pete Nicomedes Prado issued Department Order No.
92-587 defining the policy framework on the regulation of transport services. The full
text of the said order is reproduced below in view of the importance of the provisions
contained therein:
WHEREAS, Executive Order No. 125 as amended, designates the
Department of Transportation and Communications (DOTC) as the
primary policy, planning, regulating and implementing agency on
transportation;
WHEREAS, to achieve the objective of a viable, efficient, and
dependable transportation system, the transportation regulatory
agencies under or attached to the DOTC have to harmonize their
decisions and adopt a common philosophy and direction;
WHEREAS, the government proposes to build on the successful
liberalization measures pursued over the last five years and bring

the transport sector nearer to a balanced longer term regulatory
framework;
NOW, THEREFORE, pursuant to the powers granted by laws to the
DOTC, the following policies and principles in the economic
regulation of land, air, and water transportation services are hereby
adopted:
1. Entry into and exit out of the industry. Following the
Constitutional dictum against monopoly, no franchise holder shall
be permitted to maintain a monopoly on any route. A minimum of
two franchise holders shall be permitted to operate on any route.
The requirements to grant a certificate to operate, or certificate of
public convenience, shall be: proof of Filipino citizenship, financial
capability, public need, and sufficient insurance cover to protect the
riding public.
In determining public need, the presumption of need for a service
shall be deemed in favor of the applicant. The burden of proving
that there is no need for a proposed service shall be with the
oppositor(s).
In the interest of providing efficient public transport services, the
use of the "prior operator" and the "priority of filing" rules shall be
discontinued. The route measured capacity test or other similar
tests of demand for vehicle/vessel fleet on any route shall be used
only as a guide in weighing the merits of each franchise application
and not as a limit to the services offered.
Where there are limitations in facilities, such as congested road
space in urban areas, or at airports and ports, the use of demand
management measures in conformity with market principles may be
considered.
The right of an operator to leave the industry is recognized as a
business decision, subject only to the filing of appropriate notice
and following a phase-out period, to inform the public and to
minimize disruption of services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from
government controls. Passenger fares shall also be deregulated,
except for the lowest class of passenger service (normally third
class passenger transport) for which the government will fix
indicative or reference fares. Operators of particular services may
fix their own fares within a range 15% above and below the
indicative or reference rate.
Where there is lack of effective competition for services, or on
specific routes, or for the transport of particular commodities,
maximum mandatory freight rates or passenger fares shall be set
temporarily by the government pending actions to increase the level
of competition.
For unserved or single operator routes, the government shall
contract such services in the most advantageous terms to the
public and the government, following public bids for the services.
The advisability of bidding out the services or using other kinds of
incentives on such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a
matter of policy, the government shall not engage in special
financing and incentive programs, including direct subsidies for fleet
acquisition and expansion. Only when the market situation warrants
government intervention shall programs of this type be considered.
Existing programs shall be phased out gradually.
The Land Transportation Franchising and Regulatory Board, the
Civil Aeronautics Board, the Maritime Industry Authority are hereby
directed to submit to the Office of the Secretary, within forty-five
(45) days of this Order, the detailed rules and procedures for the
Implementation of the policies herein set forth. In the formulation of
such rules, the concerned agencies shall be guided by the most
recent studies on the subjects, such as the Provincial Road
Passenger Transport Study, the Civil Aviation Master Plan, the
Presidential Task Force on the Inter-island Shipping Industry, and
the Inter-island Liner Shipping Rate Rationalization Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of Transportation
and Communications Jesus B. Garcia, Jr. issued a memorandum to the Acting

Chairman of the LTFRB suggesting swift action on the adoption of rules and
procedures to implement above-quoted Department Order No. 92-587 that laid down
deregulation and other liberalization policies for the transport sector. Attached to the
said memorandum was a revised draft of the required rules and procedures covering
(i) Entry Into and Exit Out of the Industry and (ii) Rate and Fare Setting, with
comments and suggestions from the World Bank incorporated therein. Likewise,
resplendent from the said memorandum is the statement of the DOTC Secretary that
the adoption of the rules and procedures is a pre-requisite to the approval of the
Economic Integration Loan from the World Bank. 5
On February 17, 1993, the LTFRB issued Memorandum Circular
No. 92-009 promulgating the guidelines for the implementation of DOTC Department
Order No. 92-587. The Circular provides, among others, the following challenged
portions:
2. Fare systems for aircon buses are liberalized to cover first class
and premier services.
xxx xxx xxx
(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the
deregulation policy of the DOTC allowing provincial bus operators to collect plus 20%
and minus 25% of the prescribed fare without first having filed a petition for the
purpose and without the benefit of a public hearing, announced a fare increase of
twenty (20%) percent of the existing fares. Said increased fares were to be made
effective on March 16, 1994.
xxx xxx xxx
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares.
IV. Policy Guidelines on the Issuance of Certificate of Public

Convenience.
On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the
petition for lack of merit. The dispositive portion reads:
The issuance of a Certificate of Public Convenience is determined

by public need. The presumption of public need for a service shall
be deemed in favor of the applicant, while burden of proving that
there is no need for the proposed service shall be the oppositor'(s).
xxx xxx xxx
PREMISES CONSIDERED, this Board after considering the

arguments of the parties, hereby DISMISSES FOR LACK OF
MERIT the petition filed in the above-entitled case. This petition in
this case was resolved with dispatch at the request of petitioner to
enable it to immediately avail of the legal remedies or options it is
entitled under existing laws.
V. Rate and Fare Setting
SO ORDERED. 6
The control in pricing shall be liberalized to introduce price

competition complementary with the quality of service, subject to
prior notice and public hearing. Fares shall not be provisionally
authorized without public hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or minus 15
per cent for provincial buses and jeepneys shall be widened to 20%
and -25% limit in 1994 with the authorized fare to be replaced by
an indicative or reference rate as the basis for the expanded fare
range.
Hence, the instant petition for certiorari with an urgent prayer for issuance of a
temporary restraining order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining,
prohibiting and preventing respondents from implementing the bus fare rate increase
as well as the questioned orders and memorandum circulars. This meant that
provincial bus fares were rolled back to the levels duly authorized by the LTFRB prior
to March 16, 1994. A moratorium was likewise enforced on the issuance of franchises
for the operation of buses, jeepneys, and taxicabs.
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by
respondent LTFRB to provincial bus operators to set a fare range of plus or minus

fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (25%) percent, over and above the existing authorized fare without having to file a
petition for the purpose, is unconstitutional, invalid and illegal. Second, the
establishment of a presumption of public need in favor of an applicant for a proposed
transport service without having to prove public necessity, is illegal for being violative
of the Public Service Act and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon the
issues raised by the petitioner, questions the wisdom and the manner by which the
instant petition was filed. It asserts that the petitioner has no legal standing to sue or
has no real interest in the case at bench and in obtaining the reliefs prayed for.
In their Comment filed by the Office of the Solicitor General, public respondents
DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner
does not have the standing to maintain the instant suit. They further claim that it is
within DOTC and LTFRB's authority to set a fare range scheme and establish a
presumption of public need in applications for certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has
the standing to sue.
The requirement of locus standi inheres from the definition of judicial power. Section 1
of Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable
and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government.
In Lamb v. Phipps, 7 we ruled that judicial power is the power to hear and decide
causes pending between parties who have the right to sue in the courts of law and
equity. Corollary to this provision is the principle of locus standi of a party litigant. One
who is directly affected by and whose interest is immediate and substantial in the
controversy has the standing to sue. The rule therefore requires that a party must
show a personal stake in the outcome of the case or an injury to himself that can be
redressed by a favorable decision so as to warrant an invocation of the court's

jurisdiction and to justify the exercise of the court's remedial powers in his behalf. 8
In the case at bench, petitioner, whose members had suffered and continue to suffer
grave and irreparable injury and damage from the implementation of the questioned
memoranda, circulars and/or orders, has shown that it has a clear legal right that was
violated and continues to be violated with the enforcement of the challenged
memoranda, circulars and/or orders. KMU members, who avail of the use of buses,
trains and jeepneys everyday, are directly affected by the burdensome cost of
arbitrary increase in passenger fares. They are part of the millions of commuters who
comprise the riding public. Certainly, their rights must be protected, not neglected nor
ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this court
is ready to brush aside this barren procedural infirmity and recognize the legal
standing of the petitioner in view of the transcendental importance of the issues
raised. And this act of liberality is not without judicial precedent. As early as
theEmergency Powers Cases, this Court had exercised its discretion and waived the
requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto
Guingona, Jr., et al., 9 we ruled in the same lines and enumerated some of the cases
where the same policy was adopted, viz:
. . . A party's standing before this Court is a procedural technicality
which it may, in the exercise of its discretion, set aside in view of
the importance of the issues raised. In the landmark Emergency
Powers Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No.
L-2756
(Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas);
G.R. No. L-3055 (Guerrero v. Commissioner of Customs); and G.R.
No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368
(1949)], this Court brushed aside this technicality because "the
transcendental importance to the public of these cases demands
that they be settled promptly and definitely, brushing aside, if we
must, technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L2621)." Insofar as taxpayers' suits are concerned, this Court had
declared that it "is not devoid of discretion as to whether or not it
should be entertained," (Tan v. Macapagal, 43 SCRA 677, 680
[1972]) or that it "enjoys an open discretion to entertain the same or
not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
xxx xxx xxx

In line with the liberal policy of this Court on locus standi, ordinary
taxpayers, members of Congress, and even association of planters,
and
non-profit civic organizations were allowed to initiate and prosecute
actions before this court to question the constitutionality or validity
of laws, acts, decisions, rulings, or orders of various government
agencies or instrumentalities. Among such cases were those
assailing the constitutionality of (a) R.A. No. 3836 insofar as it
allows retirement gratuity and commutation of vacation and sick
leave to Senators and Representatives and to elective officials of
both Houses of Congress (Philippine Constitution Association, Inc.
v. Gimenez, 15 SCRA 479 [1965]); (b) Executive Order No. 284,
issued by President Corazon C. Aquino on 25 July 1987, which
allowed members of the cabinet, their undersecretaries, and
assistant secretaries to hold other government offices or positions
(Civil Liberties Union v. Executive Secretary, 194 SCRA 317
[1991]); (c) the automatic appropriation for debt service in the
General Appropriations Act (Guingona v. Carague, 196 SCRA 221
[1991]; (d) R.A. No. 7056 on the holding of desynchronized
elections (Osmea v. Commission on Elections, 199 SCRA 750
[1991]); (e) P.D. No. 1869 (the charter of the Philippine Amusement
and Gaming Corporation) on the ground that it is contrary to
morals, public policy, and order (Basco v. Philippine Amusement
and Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975,
establishing the Philippine National Police. (Carpio v. Executive
Secretary, 206 SCRA 290 [1992]).
Other cases where we have followed a liberal policy
regarding locus standi include those attacking the validity or legality
of (a) an order allowing the importation of rice in the light of the
prohibition imposed by R.A. No. 3452 (Iloilo Palay and Corn
Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D.
Nos. 991 and 1033 insofar as they proposed amendments to the
Constitution and P.D. No. 1031 insofar as it directed the COMELEC
to supervise, control, hold, and conduct the referendum-plebiscite
on 16 October 1976 (Sanidad v. Commission on Elections, supra);
(c) the bidding for the sale of the 3,179 square meters of land at
Roppongi, Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA
797 [1990]); (d) the approval without hearing by the Board of
Investments of the amended application of the Bataan
Petrochemical Corporation to transfer the site of its plant from
Bataan to Batangas and the validity of such transfer and the shift of
feedstock from naphtha only to naphtha and/or liquefied petroleum
gas (Garcia v. Board of Investments, 177 SCRA 374 [1989]; Garcia

v. Board of Investments, 191 SCRA 288 [1990]); (e) the decisions,
orders, rulings, and resolutions of the Executive Secretary,
Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs, and the Fiscal Incentives Review Board
exempting the National Power Corporation from indirect tax and
duties (Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders
of the Energy Regulatory Board of 5 and 6 December 1990 on the
ground that the hearings conducted on the second provisional
increase in oil prices did not allow the petitioner substantial crossexamination; (Maceda v. Energy Regulatory Board, 199 SCRA 454
[1991]); (g) Executive Order No. 478 which levied a special duty of
P0.95 per liter of imported oil products (Garcia v. Executive
Secretary, 211 SCRA 219 [1992]); (h) resolutions of the
Commission on Elections concerning the apportionment, by district,
of the number of elective members of Sanggunians (De Guia vs.
Commission on Elections, 208 SCRA 420 [1992]); and (i)
memorandum orders issued by a Mayor affecting the Chief of
Police of Pasay City (Pasay Law and Conscience Union, Inc. v.
Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA
275 [1975]), this Court, despite its unequivocal ruling that the
petitioners therein had no personality to file the petition, resolved
nevertheless to pass upon the issues raised because of the farreaching implications of the petition. We did no less in De Guia v.
COMELEC (Supra) where, although we declared that De Guia
"does not appear to have locus standi, a standing in law, a personal
or substantial interest," we brushed aside the procedural infirmity
"considering the importance of the issue involved, concerning as it
does the political exercise of qualified voters affected by the
apportionment, and petitioner alleging abuse of discretion and
violation of the Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 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:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls, charges,
classifications, or schedules thereof, as well as commutation,
mileage kilometrage, and other special rates which shall be
imposed, observed, and followed thereafter by any public
service: Provided, That the Commission may, in its discretion,
approve rates proposed by public services provisionally and without
necessity of any hearing; but it shall call a hearing thereon within
thirty days thereafter, upon publication and notice to the concerns
operating in the territory affected: Provided, further, That in case the
public service equipment of an operator is used principally or
secondarily for the promotion of a private business, the net profits
of said private business shall be considered in relation with the
public service of such operator for the purpose of fixing the rates.
(Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated to the defunct
Public Service Commission the power of fixing the rates of public services.
Respondent LTFRB, the existing regulatory body today, is likewise vested
with the same under Executive Order No. 202 dated June 19, 1987. Section
5(c) of the said executive order authorizes LTFRB "to determine, prescribe,
approve and periodically review and adjust, reasonable fares, rates and
other related charges, relative to the operation of public land transportation
services provided by motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order
to adapt to the increasing complexity of modern life. As subjects for governmental
regulation multiply, so does the difficulty of administering the laws. Hence,
specialization even in legislation has become necessary. Given the task of
determining
sensitive
and
delicate
matters
as
route-fixing and rate-making for the transport sector, the responsible regulatory body
is entrusted with the power of subordinate legislation. With this authority, an
administrative body and in this case, the LTFRB, may implement broad policies laid
down in a statute by "filling in" the details which the Legislature may neither have time
or competence to provide. However, nowhere under the aforesaid provisions of law
are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that
power to a common carrier, a transport operator, or other public service.
In the case at bench, the authority given by the LTFRB to the provincial bus operators
to set a fare range over and above the authorized existing fare, is illegal and invalid
as it is tantamount to an undue delegation of legislative authority. Potestas delegata
non delegari potest. What has been delegated cannot be delegated. This doctrine is
based on the ethical principle that such a delegated power constitutes not only a right
but a duty to be performed by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another. 10 A further delegation of
such power would indeed constitute a negation of the duty in violation of the trust
reposed in the delegate mandated to discharge it directly. 11 The policy of allowing the
provincial bus operators to change and increase their fares at will would result not
only to a chaotic situation but to an anarchic state of affairs. This would leave the
riding public at the mercy of transport operators who may increase fares every hour,
every day, every month or every year, whenever it pleases them or whenever they
deem it "necessary" to do so. In Panay Autobus Co. v. Philippine Railway
Co., 12 where respondent Philippine Railway Co. was granted by the Public Service
Commission the authority to change its freight rates at will, this Court categorically
declared that:
In our opinion, the Public Service Commission was not authorized
by law to delegate to the Philippine Railway Co. the power of
altering its freight rates whenever it should find it necessary to do
so in order to meet the competition of road trucks and autobuses,
or to change its freight rates at will, or to regard its present rates as
maximum rates, and to fix lower rates whenever in the opinion of
the Philippine Railway Co. it would be to its advantage to do so.
The mere recital of the language of the application of the Philippine
Railway Co. is enough to show that it is untenable. The Legislature
has delegated to the Public Service Commission the power of fixing
the rates of public services, but it has not authorized the Public
Service Commission to delegate that power to a common carrier or
other public service. The rates of public services like the Philippine
Railway Co. have been approved or fixed by the Public Service
Commission, and any change in such rates must be authorized or
approved by the Public Service Commission after they have been
shown to be just and reasonable. The public service may, of
course, propose new rates, as the Philippine Railway Co. did in
case No. 31827, but it cannot lawfully make said new rates
effective without the approval of the Public Service Commission,

and the Public Service Commission itself cannot authorize a public
service to enforce new rates without the prior approval of said rates
by the commission. The commission must approve new rates when
they are submitted to it, if the evidence shows them to be just and
reasonable, otherwise it must disapprove them. Clearly, the
commission cannot determine in advance whether or not the new
rates of the Philippine Railway Co. will be just and reasonable,
because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for
permission to change its freight rates at will. It may change them
every day or every hour, whenever it deems it necessary to do so in
order to meet competition or whenever in its opinion it would be to
its advantage. Such a procedure would create a most
unsatisfactory state of affairs and largely defeat the purposes of the
public service law. 13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded
fare. If transport operators will be authorized to impose and collect an additional
amount equivalent to 20% over and above the authorized fare over a period of time,
this will unduly prejudice a commuter who will be made to pay a fare that has been
computed in a manner similar to those of compounded bank interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus
operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary
buses. At the same time, they were allowed to impose and collect a fare range of plus
or minus 15% over the authorized rate. Thus P0.37 centavo per kilometer authorized
fare plus P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42
centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05)
centavo increase per kilometer in 1994, then, the base or reference for computation
would have to be P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators
will exercise their authority to impose an additional 20% over and above the
authorized fare, then the fare to be collected shall amount to P0.56 (that is, P0.47
authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect, commuters will
be continuously subjected, not only to a double fare adjustment but to a compounding
fare as well. On their part, transport operators shall enjoy a bigger chunk of the pie.
Aside from fare increase applied for, they can still collect an additional amount by
virtue of the authorized fare range. Mathematically, the situation translates into the
following:
Year** LTFRB
rate***
kilometer
authorized
Fare Range
collected
Fare
1990
P0.37
15%
(P0.05)
1994
P0.42
+
0.05
=
0.47
20%
(P0.09)
1998
P0.56
+
0.05
=
0.61
20%
(P0.12)
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
to
be
per
P0.42
P0.56
P0.73
Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive
government function that requires dexterity of judgment and sound discretion with the
settled goal of arriving at a just and reasonable rate acceptable to both the public
utility and the public. Several factors, in fact, have to be taken into consideration
before a balance could be achieved. A rate should not be confiscatory as would place
an operator in a situation where he will continue to operate at a loss. Hence, the rate
should enable public utilities to generate revenues sufficient to cover operational
costs and provide reasonable return on the investments. On the other hand, a rate
which is too high becomes discriminatory. It is contrary to public interest. A rate,
therefore, must be reasonable and fair and must be affordable to the end user who
will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-reaching
effects on millions of commuters, government must not relinquish this important
function in favor of those who would benefit and profit from the industry. Neither
should the requisite notice and hearing be done away with. The people, represented
by reputable oppositors, deserve to be given full opportunity to be heard in their
opposition to any fare increase.
The present administrative procedure, 14 to our mind, already mirrors an orderly and
satisfactory arrangement for all parties involved. To do away with such a procedure
and allow just one party, an interested party at that, to determine what the rate should
be, will undermine the right of the other parties to due process. The purpose of a
hearing is precisely to determine what a just and reasonable rate is. 15 Discarding
such procedural and constitutional right is certainly inimical to our fundamental law
and to public interest.
On the presumption of public need.
A certificate of public convenience (CPC) is an authorization granted by the LTFRB
for the operation of land transportation services for public use as required by law.
Pursuant to Section 16(a) of the Public Service Act, as amended, the following
requirements must be met before a CPC may be granted, to wit: (i) the applicant must

be a citizen of the Philippines, or a corporation or co-partnership, association or jointstock company constituted and organized under the laws of the Philippines, at least
60 per centum of its stock or paid-up capital must belong entirely to citizens of the
Philippines; (ii) the applicant must be financially capable of undertaking the proposed
service and meeting the responsibilities incident to its operation; and (iii) the applicant
must prove that the operation of the public service proposed and the authorization to
do business will promote the public interest in a proper and suitable manner. It is
understood that there must be proper notice and hearing before the PSC can
exercise its power to issue a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB
Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and
contradictory policy guideline on the issuance of a CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined
by public need. The presumption of public need for a service shall
be deemed in favor of the applicant, while the burden of proving
that there is no need for the proposed service shall be the
oppositor's. (Emphasis ours).
The above-quoted provision is entirely incompatible and inconsistent with Section
16(c)(iii) of the Public Service Act which requires that before a CPC will be issued, the
applicant must prove by proper notice and hearing that the operation of the public
service proposed will promote public interest in a proper and suitable manner. On the
contrary, the policy guideline states that the presumption of public need for a public
service shall be deemed in favor of the applicant. In case of conflict between a statute
and an administrative order, the former must prevail.
By its terms, public convenience or necessity generally means something fitting or
suited to the public need. 16 As one of the basic requirements for the grant of a CPC,
public convenience and necessity exists when the proposed facility or service meets
a reasonable want of the public and supply a need which the existing facilities do not
adequately
supply.
The
existence
or
non-existence of public convenience and necessity is therefore a question of fact that
must be established by evidence, real and/or testimonial; empirical data; statistics
and such other means necessary, in a public hearing conducted for that purpose. The
object and purpose of such procedure, among other things, is to look out for, and
protect, the interests of both the public and the existing transport operators.
Verily, the power of a regulatory body to issue a CPC is founded on the condition that
after full-dress hearing and investigation, it shall find, as a fact, that the proposed
operation is for the convenience of the public. 17 Basic convenience is the primary
consideration for which a CPC is issued, and that fact alone must be consistently
borne in mind. Also, existing operators in subject routes must be given an opportunity
to offer proof and oppose the application. Therefore, an applicant must, at all times,
be required to prove his capacity and capability to furnish the service which he has
undertaken
to
render. 18 And all this will be possible only if a public hearing were conducted for that
purpose.
Otherwise stated, the establishment of public need in favor of an applicant reverses
well-settled and institutionalized judicial, quasi-judicial and administrative procedures.
It allows the party who initiates the proceedings to prove, by mere application, his
affirmative allegations. Moreover, the offending provisions of the LTFRB
memorandum circular in question would in effect amend the Rules of Court by adding
another disputable presumption in the enumeration of 37 presumptions under Rule
131, Section 5 of the Rules of Court. Such usurpation of this Court's authority cannot
be countenanced as only this Court is mandated by law to promulgate rules
concerning pleading, practice and procedure. 19
Deregulation, while it may be ideal in certain situations, may not be ideal at all in our
country given the present circumstances. Advocacy of liberalized franchising and
regulatory process is tantamount to an abdication by the government of its inherent
right to exercise police power, that is, the right of government to regulate public
utilities for protection of the public and the utilities themselves.
While we recognize the authority of the DOTC and the LTFRB to issue administrative
orders to regulate the transport sector, we find that they committed grave abuse of
discretion
in
issuing
DOTC
Department
Order
No. 92-587 defining the policy framework on the regulation of transport services and
LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines
on DOTC Department Order No. 92-587, the said administrative issuances being
amendatory and violative of the Public Service Act and the Rules of Court.
Consequently, we rule that the twenty (20%) per centum fare increase imposed by
respondent PBOAP on March 16, 1994 without the benefit of a petition and a public
hearing is null and void and of no force and effect. No grave abuse of discretion
however was committed in the issuance of DOTC Memorandum Order No. 90-395
and DOTC Memorandum dated October 8, 1992, the same being merely internal
communications between administrative officers.
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and
the challenged administrative issuances and orders, namely: DOTC Department
Order
No.
92-587,
LTFRB
Memorandum
Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are

hereby DECLARED contrary to law and invalid insofar as they affect provisions
therein (a) delegating to provincial bus and jeepney operators the authority to
increase or decrease the duly prescribed transportation fares; and (b) creating a
presumption of public need for a service in favor of the applicant for a certificate of
public convenience and placing the burden of proving that there is no need for the
proposed service to the oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE
PERMANENT insofar as it enjoined the bus fare rate increase granted under the
provisions of the aforementioned administrative circulars, memoranda and/or orders
declared invalid.
No pronouncement as to costs.
SO ORDERED.
This is a petition for certiorari and prohibition, with application for preliminary
injunction, seeking the annulment and inhibition of the grant or award of provisional
permits or special authority by the respondent Board of Transportation (BOT) to
respondent taxicab operators, for the operation and legalization of "excess taxicab
units" under certain provisions of Presidential Decree No. 101 "despite the lapse of
the power to do so thereunder," and "in violation of other provisions of the Decree,
Letter of Instructions No. 379 and other relevant rules of the BOT."
The petitioners and private respondents are all authorized taxicab operators in Metro
Manila. The respondents, however, admittedly operate "colorum" or "kabit" taxicab
units. On or about the second week of February, 1977, private respondents filed their
petitions with the respondent Board for the legalization of their unauthorized "excess"
taxicab units citing Presidential Decree No. 101, promulgated on January 17, 1973,
"to eradicate the harmful and unlawful trade of clandestine operators, by replacing or
allowing them to become legitimate and responsible operators." Within a matter of
days, the respondent Board promulgated its orders setting the applications for
hearing and granting applicants provisional authority to operate their "excess taxicab
units" for which legalization was sought. Thus, the present petition.
Opposing the applications and seeking to restrain the grant of provisional permits or
authority, as well as the annulment of permits already granted under PD 101, the
petitioners allege that the BOT acted without jurisdiction in taking cognizance of the
petitions for legalization and awarding special permits to the private respondents.
G.R. No. L-45839 June 1, 1988

RUFINO MATIENZO, GODOFREDO ESPIRITU, DIOSCORRO FRANCO, AND LA
SUERTE
TRANSPORTATION
CORPORATION, petitioners,
vs.
HON. LEOPOLDO M. ABELLERA, ACTING CHAIRMAN OF THE BOARD OF
TRANSPORTATION, HON. GODOFREDO Q. ASUNCION, MEMBER OF THE
BOARD OF TRANSPORTATION, ARTURO DELA CRUZ, MS TRANSPORTATION
CO., INC., NEW FAMILIA TRANSPORTATION CO., ROBERTO MOJARES, ET
AL.,respondents.
GUTIERREZ, JR., J.:
Presidential Decree No. 101 vested in the Board of Transportation the power, among
others "To grant special permits of limited term for the operation of public utility motor
vehicles as may, in the judgment of the Board, be necessary to replace or convert
clandestine operators into legitimate and responsible operators." (Section 1, PD 101)
Citing, however, Section 4 of the Decree which provides:
SEC. 4. Transitory Provision. Six months after the promulgation
of this Decree, the Board of Transportation, the Bureau of
Transportation, The Philippine Constabulary, the city and municipal
forces, and the provincial and city fiscals shall wage a concerted
and relentless drive towards the total elimination and punishment of
all clandestine and unlawful operators of public utility motor
vehicles."
the petitioners argue that neither the Board of Transportation chairman nor any
member thereof had the power, at the time the petitions were filed (i.e. in 1977), to
legitimize clandestine operations under PD 101 as such power had been limited to a

period of six (6) months from and after the promulgation of the Decree on January 17,
1973. They state that, thereafter, the power lapses and becomes functus officio.
To reinforce their stand, the petitioners refer to certain provisions of the Rules and
Regulations implementing PD 101 issued by respondent Board, Letter of Instructions
No. 379, and BOT Memorandum Circular No. 76-25 (a). In summary, these rules
provide inter alia that (1) only applications for special permits for "colorum" or "kabit"
operators filed before July 17, 1973 shall be accepted and processed (Secs. 3 and 16
(c), BOT-LTC-HPG Joint Regulations Implementing PD 101, pp. 33 and 47, Rollo); (2)
Every provisional authority given to any taxi operator shall be cancelled immediately
and no provisional authority shall thereafter be issued (par. 6, Letter of Instructions
No. 379, issued March 10, 1976, p. 58, Rollo); (3) Effective immediately, no
provisional authorities on applications for certificates of public convenience shall be
granted or existing provisional authorities on new applications extended to, among
others, taxi denominations in Metro Manila (BOT Memorandum Circular No. 75-25
(a), August 30, 1976, p. 64, Rollo); (4) All taxis authorized to operate within Metro
Manila shall obtain new special permits from the BOT, which permits shall be the only
ones recognized within the area (par. 8, LOI No. 379, supra); and (5) No bonafide
applicant may apply for special permit to operate, among others, new taxicab
services, and, no application for such new service shall be accepted for filing or
processed by any LTC agency or granted under these regulations by any LTC
Regional Office until after it shall have announced its program of development for
these types of public motor vehicles (Sec. 16d, BOT-LTC-HPG Joint Regulations, p.
47, Rollo).
The petitioners raise the following issues:
I. WHETHER OR NOT THE BOARD OF TRANSPORTATION HAS
THE POWER TO GRANT PROVISIONAL PERMITS TO OPERATE
DESPITE THE BAN THEREON UNDER LETTER OF
INSTRUCTIONS NO. 379;
II. WHETHER OR NOT THE BOARD OF TRANSPORTATION HAS
THE POWER TO LEGALIZE, AT THIS TIME, CLANDESTINE AND
UNLAWFUL TAXICAB OPERATIONS UNDER SECTION 1, P.D.
101; AND
III. WHETHER OR NOT THE PROCEDURE BEING FOLLOWED
BY THE BOARD IN THE CASES IN QUESTION SATISFIES THE
PROCEDURAL DUE PROCESS REQUIREMENTS. (p. 119, Rollo)
We need not pass upon the first issue raised anent the grant of provisional authority
to respondents. Considering that the effectivity of the provisional permits issued to the
respondents was expressly limited to June 30, 1977, as evidenced by the BOT orders
granting the same (Annexes G, H, I and J among others) and Memorandum Circular
No. 77-4 dated January 20, 1977 (p. 151, Rollo), implementing paragraph 6 of LOI
379 (ordering immediate cancellation of all provisional authorities issued to taxicab
operators, supra), which provides:
5. After June 30, 1977, all provisional authorities are deemed
cancelled, even if hearings on the main application have not been
terminated.
the issue is MOOT and ACADEMIC. Only the issue on legalization remains under
consideration.
Justifying its action on private respondent's applications, the respondent Board
emphasizes public need as the overriding concern. It is argued that under PD 101, it
is the fixed policy of the State "to eradicate the harmful and unlawful trade of
clandestine operators by replacing or allowing them to become legitimate and
responsible ones" (Whereas clause, PD 101). In view thereof, it is maintained that
respondent Board may continue to grant to "colorum" operators the benefits of
legalization under PD 101, despite the lapse of its power, after six (6) months, to do
so, without taking punitive measures against the said operators.
Indeed, a reading of Section 1, PD 101, shows a grant of powers to the respondent
Board to issue provisional permits as a step towards the legalization of colorum
taxicab operations without the alleged time limitation. There is nothing in Section 4,
cited by the petitioners, to suggest the expiration of such powers six (6) months after
promulgation of the Decree. Rather, it merely provides for the withdrawal of the
State's waiver of its right to punish said colorum operators for their illegal acts. In
other words, the cited section declares when the period of moratorium suspending the
relentless drive to eliminate illegal operators shall end. Clearly, there is no
impediment to the Board's exercise of jurisdiction under its broad powers under the
Public Service Act to issue certificates of public convenience to achieve the avowed
purpose of PD 101 (Sec. 16a, Public Service Act, Nov. 7, 1936).
It is a settled principle of law that in determining whether a board or commission has a
certain power, the authority given should be liberally construed in the light of the
purposes for which it was created, and that which is incidentally necessary to a full
implementation of the legislative intent should be upheld as being germane to the law.
Necessarily, too, where the end is required, the appropriate means are deemed given
(Martin, Administrative Law, 1979, p. 46). Thus, as averred by the respondents:

... [A]ll things considered, the question is what is the best for the
interest of the public. Whether PD 101 has lost its effectiveness or
not, will in no way prevent this Board from resolving the question in
the same candor and spirit that P.D. 101 and LOI 379 were issued
to cope with the multifarious ills that plague our transport system. ...
(Emphasis supplied) (pp. 91-92, Rollo)
This, the private respondents appreciate, as they make reference to PD 101, merely
to cite the compassion with which colorum operators were dealt with under the law.
They state that it is "in the same vein and spirit that this Honorable Board has
extended the Decree of legalization to the operatives of the various PUJ and PUB
services along legislative methods," that respondents pray for authorization of their
colorum units in actual operation in Metro Manila (Petitions for Legalization, Annexes
E & F, par. 7, pp. 65-79, Rollo).
Finally, with respect to the last issue raised by the petitioners alleging the denial of
due process by respondent Board in granting the provisional permits to the private
respondents and in taking cognizance of their applications for legalization without
notice and hearing, suffice it to say that PD 101 does not require such notice or
hearing for the grant of temporary authority . The provisional nature of the authority
and the fact that the primary application shall be given a full hearing are the
safeguards against its abuse. As to the applications for legalization themselves, the
Public Service Act does enjoin the Board to give notice and hearing before exercising
any of its powers under Sec. 16 thereof. However, the allegations that due process
has been denied are negated by the hearings set by the Board on the applications as
expressed in its orders resolving the petitions for special permits (Annexes G, H, I,
pp. 80-102, Rollo).
The Board stated:
Anent the petitioners' reliance on the BOT Rules and Regulations Implementing PD
101 as well as its Memorandum Circular No. 76-25(a), the BOT itself has declared:
The grounds involved in the petition are of first impression. It

cannot resolve the issue ex-parte. It needs to hear the views of
other parties who may have an interest, or whose interest may be
affected by any decision that this Board may take.
In line with its duty to rationalize the transport industry, the Board
shall. from time to time, restudy the public need for public utilities
in any area in the Philippines for the purpose of re- evaluating the
policies. (p. 64, Rollo)
The Board therefore, decides to set the petition for hearing.

xxx xxx xxx
Thus, the respondents correctly argue that "as the need of the public changes and
oscillates with the trends of modern life, so must the Memo Orders issued by
respondent jibe with the dynamic and flexible standards of public needs. ...
Respondent Board is not supposed to 'tie its hands' on its issued Memo Orders
should public interest demand otherwise" (Answer of private respondents, p. 121,
Rollo).
The fate of the private respondent's petitions is initially for the Board to determine.
From the records of the case, acceptance of the respondent's applications appears to
be a question correctly within the discretion of the respondent Board to decide. As a
rule, where the jurisdiction of the BOT to take cognizance of an application for
legalization is settled, the Court enjoins the exercise thereof only when there is fraud,
abuse of discretion or error of law. Furthermore, the court does not interfere, as a
rule, with administrative action prior to its completion or finality . It is only after judicial
review is no longer premature that we ascertain in proper cases whether the
administrative findings are not in violation of law, whether they are free from fraud or
imposition and whether they find substantial support from the evidence.
As to the required notice, it is impossible for the respondent Board to give personal
notice to all parties who may be interested in the matter, which parties are unknown to
it. Its aforementioned order substantially complies with the requirement. The
petitioners having been able to timely oppose the petitions in question, any lack of
notice is deemed cured.
WHEREFORE. the petition is hereby DISMISSED for lack of merit. The questioned
orders of the then Board of Transportation are AFFIRMED.
SO ORDERED.
G.R. No. 74457 March 20, 1987

RESTITUTO
YNOT, petitioner,
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, respondents.
Ramon A. Gonzales for petitioner.
CRUZ, J.:
The essence of due process is distilled in the immortal cry of Themistocles to
Alcibiades "Strike but hear me first!" It is this cry that the petitioner in effect repeats
here as he challenges the constitutionality of Executive Order No. 626-A.
The said executive order reads in full as follows:
WHEREAS, the President has given orders prohibiting the
interprovincial movement of carabaos and the slaughtering of
carabaos not complying with the requirements of Executive Order
No. 626 particularly with respect to age;
WHEREAS, it has been observed that despite such orders the
violators still manage to circumvent the prohibition against inter-

provincial movement of carabaos by transporting carabeef instead;
and
WHEREAS, in order to achieve the purposes and objectives of
Executive Order No. 626 and the prohibition against interprovincial
movement of carabaos, it is necessary to strengthen the said
Executive Order and provide for the disposition of the carabaos and
carabeef subject of the violation;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the
Constitution, do hereby promulgate the following:
SECTION 1. Executive Order No. 626 is hereby amended such that
henceforth, no carabao regardless of age, sex, physical condition
or purpose and no carabeef shall be transported from one province
to another. The carabao or carabeef transported in violation of this
Executive Order as amended shall be subject to confiscation and
forfeiture by the government, to be distributed to charitable
institutions and other similar institutions as the Chairman of the
National Meat Inspection Commission may ay 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.
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. 2
The petitioner appealed the decision to the Intermediate Appellate Court,* 3 which
upheld the trial court, ** and he has now come before us in this petition for review
on certiorari.
The thrust of his petition is that the executive order is unconstitutional insofar as it
authorizes outright confiscation of the carabao or carabeef being transported across
provincial boundaries. His claim is that the penalty is invalid because it is imposed
without according the owner a right to be heard before a competent and impartial
court as guaranteed by due process. He complains that the measure should not have
been presumed, and so sustained, as constitutional. There is also a challenge to the
improper exercise of the legislative power by the former President under Amendment
No. 6 of the 1973 Constitution. 4
While also involving the same executive order, the case of Pesigan v. Angeles 5 is not
applicable here. The question raised there was the necessity of the previous
publication of the measure in the Official Gazette before it could be considered
enforceable. We imposed the requirement then on the basis of due process of law. In
doing so, however, this Court did not, as contended by the Solicitor General, impliedly
affirm the constitutionality of Executive Order No. 626-A. That is an entirely different
matter.
SECTION 2. This Executive Order shall take effect immediately.

This Court has declared that while lower courts should observe a becoming modesty
in examining constitutional questions, they are nonetheless not prevented from
resolving the same whenever warranted, subject only to review by the highest
tribunal. 6 We have jurisdiction under the Constitution to "review, revise, reverse,
modify or affirm on appeal or certiorari, as the law or rules of court may provide," final
judgments and orders of lower courts in, among others, all cases involving the
constitutionality of certain measures. 7 This simply means that the resolution of such
President
cases may be made in the first instance by these lower courts.
Done in the City of Manila, this 25th day of October, in the year of
Our Lord, nineteen hundred and eighty.
(SGD.) FERDINAND E. MARCOS
Republic of the Philippines

The petitioner had 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. 1 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
And while it is true that laws are presumed to be constitutional, that presumption is
not by any means conclusive and in fact may be rebutted. Indeed, if there be a clear
showing of their invalidity, and of the need to declare them so, then "will be the time to
make the hammer fall, and heavily," 8 to recall Justice Laurel's trenchant warning.
Stated otherwise, courts should not follow the path of least resistance by simply
presuming the constitutionality of a law when it is questioned. On the contrary, they
should probe the issue more deeply, to relieve the abscess, paraphrasing another
distinguished jurist, 9 and so heal the wound or excise the affliction.

Judicial power authorizes this; and when the exercise is demanded, there should be
no shirking of the task for fear of retaliation, or loss of favor, or popular censure, or
any other similar inhibition unworthy of the bench, especially this Court.
The challenged measure is denominated an executive order but it is really
presidential decree, promulgating a new rule instead of merely implementing an
existing law. It was issued by President Marcos not for the purpose of taking care that
the laws were faithfully executed but in the exercise of his legislative authority under
Amendment No. 6. It was provided thereunder that whenever in his judgment there
existed a grave emergency or a threat or imminence thereof or whenever the
legislature failed or was unable to act adequately on any matter that in his judgment
required immediate action, he could, in order to meet the exigency, issue decrees,
orders or letters of instruction that were to have the force and effect of law. As there is
no showing of any exigency to justify the exercise of that extraordinary power then,
the petitioner has reason, indeed, to question the validity of the executive order.
Nevertheless, since the determination of the grounds was supposed to have been
made by the President "in his judgment, " a phrase that will lead to protracted
discussion not really necessary at this time, we reserve resolution of this matter until
a more appropriate occasion. For the nonce, we confine ourselves to the more
fundamental question of due process.
It is part of the art of constitution-making that the provisions of the charter be cast in
precise and unmistakable language to avoid controversies that might arise on their
correct interpretation. That is the Ideal. In the case of the due process clause,
however, this rule was deliberately not followed and the wording was purposely kept
ambiguous. In fact, a proposal to delineate it more clearly was submitted in the
Constitutional Convention of 1934, but it was rejected by Delegate Jose P. Laurel,
Chairman of the Committee on the Bill of Rights, who forcefully argued against it. He
was sustained by the body. 10
The due process clause was kept intentionally vague so it would remain also
conveniently resilient. This was felt necessary because due process is not, like some
provisions of the fundamental law, an "iron rule" laying down an implacable and
immutable command for all seasons and all persons. Flexibility must be the best
virtue of the guaranty. The very elasticity of the due process clause was meant to
make it adapt easily to every situation, enlarging or constricting its protection as the
changing times and circumstances may require.
Aware of this, the courts have also hesitated to adopt their own specific description of
due process lest they confine themselves in a legal straitjacket that will deprive them
of the elbow room they may need to vary the meaning of the clause whenever
indicated. Instead, they have preferred to leave the import of the protection open-
ended, as it were, to be "gradually ascertained by the process of inclusion and

exclusion in the course of the decision of cases as they arise." 11 Thus, Justice Felix
Frankfurter of the U.S. Supreme Court, for example, would go no farther than to
define due process and in so doing sums it all up as nothing more and nothing
less than "the embodiment of the sporting Idea of fair play." 12
When the barons of England extracted from their sovereign liege the reluctant
promise that that Crown would thenceforth not proceed against the life liberty or
property of any of its subjects except by the lawful judgment of his peers or the law of
the land, they thereby won for themselves and their progeny that splendid guaranty of
fairness that is now the hallmark of the free society. The solemn vow that King John
made at Runnymede in 1215 has since then resounded through the ages, as a
ringing reminder to all rulers, benevolent or base, that every person, when confronted
by the stern visage of the law, is entitled to have his say in a fair and open hearing of
his cause.
The closed mind has no place in the open society. It is part of the sporting Idea of fair
play to hear "the other side" before an opinion is formed or a decision is made by
those who sit in judgment. Obviously, one side is only one-half of the question; the
other half must also be considered if an impartial verdict is to be reached based on an
informed appreciation of the issues in contention. It is indispensable that the two
sides complement each other, as unto the bow the arrow, in leading to the correct
ruling after examination of the problem not from one or the other perspective only but
in its totality. A judgment based on less that this full appraisal, on the pretext that a
hearing is unnecessary or useless, is tainted with the vice of bias or intolerance or
ignorance, or worst of all, in repressive regimes, the insolence of power.
The minimum requirements of due process are notice and hearing 13 which,
generally speaking, may not be dispensed with because they are intended as a
safeguard against official arbitrariness. It is a gratifying commentary on our judicial
system that the jurisprudence of this country is rich with applications of this guaranty
as proof of our fealty to the rule of law and the ancient rudiments of fair play. We have
consistently declared that every person, faced by the awesome power of the State, is
entitled to "the law of the land," which Daniel Webster described almost two hundred
years ago in the famous Dartmouth College Case, 14 as "the law which hears before
it condemns, which proceeds upon inquiry and renders judgment only after trial." It
has to be so if the rights of every person are to be secured beyond the reach of
officials who, out of mistaken zeal or plain arrogance, would degrade the due process
clause into a worn and empty catchword.
This is not to say that notice and hearing are imperative in every case for, to be sure,
there are a number of admitted exceptions. The conclusive presumption, for example,

bars the admission of contrary evidence as long as such presumption is based on
human experience or there is a rational connection between the fact proved and the
fact ultimately presumed therefrom. 15 There are instances when the need for
expeditions action will justify omission of these requisites, as in the summary
abatement of a nuisance per se, like a mad dog on the loose, which may be killed on
sight because of the immediate danger it poses to the safety and lives of the people.
Pornographic materials, contaminated meat and narcotic drugs are inherently
pernicious and may be summarily destroyed. The passport of a person sought for a
criminal offense may be cancelled without hearing, to compel his return to the country
he has fled. 16Filthy restaurants may be summarily padlocked in the interest of the
public health and bawdy houses to protect the public morals. 17 In such instances,
previous judicial hearing may be omitted without violation of due process in view of
the nature of the property involved or the urgency of the need to protect the general
welfare from a clear and present danger.
The protection of the general welfare is the particular function of the police power
which both restraints and is restrained by due process. The police power is simply
defined as the power inherent in the State to regulate liberty and property for the
promotion of the general welfare. 18 By reason of its function, it extends to all the
great public needs and is described as the most pervasive, the least limitable and the
most demanding of the three inherent powers of the State, far outpacing taxation and
eminent domain. The individual, as a member of society, is hemmed in by the police
power, which affects him even before he is born and follows him still after he is dead
from the womb to beyond the tomb in practically everything he does or owns. Its
reach is virtually limitless. It is a ubiquitous and often unwelcome intrusion. Even so,
as long as the activity or the property has some relevance to the public welfare, its
regulation under the police power is not only proper but necessary. And the
justification is found in the venerable Latin maxims, Salus populi est suprema
lex and Sic utere tuo ut alienum non laedas, which call for the subordination of
individual interests to the benefit of the greater number.
It is this power that is now invoked by the government to justify Executive Order No.
626-A, amending the basic rule in Executive Order No. 626, prohibiting the slaughter
of carabaos except under certain conditions. The original measure was issued for the
reason, as expressed in one of its Whereases, that "present conditions demand that
the carabaos and the buffaloes be conserved for the benefit of the small farmers who
rely on them for energy needs." We affirm at the outset the need for such a measure.
In the face of the worsening energy crisis and the increased dependence of our farms
on these traditional beasts of burden, the government would have been remiss,
indeed, if it had not taken steps to protect and preserve them.
A similar prohibition was challenged in United States v. Toribio, 19 where a law

regulating the registration, branding and slaughter of large cattle was claimed to be a
deprivation of property without due process of law. The defendant had been convicted
thereunder for having slaughtered his own carabao without the required permit, and
he appealed to the Supreme Court. The conviction was affirmed. The law was
sustained as a valid police measure to prevent the indiscriminate killing of carabaos,
which were then badly needed by farmers. An epidemic had stricken many of these
animals and the reduction of their number had resulted in an acute decline in
agricultural output, which in turn had caused an incipient famine. Furthermore,
because of the scarcity of the animals and the consequent increase in their price,
cattle-rustling had spread alarmingly, necessitating more effective measures for the
registration and branding of these animals. The Court held that the questioned statute
was a valid exercise of the police power and declared in part as follows:
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. ...
From what has been said, we think it is clear that the enactment of
the provisions of the statute under consideration was required by
"the interests of the public generally, as distinguished from those of
a particular class" and that the prohibition of the slaughter of
carabaos for human consumption, so long as these animals are fit
for agricultural work or draft purposes was a "reasonably
necessary" limitation on private ownership, to protect the
community from the loss of the services of such animals by their
slaughter by improvident owners, tempted either by greed of
momentary gain, or by a desire to enjoy the luxury of animal food,
even when by so doing the productive power of the community may
be measurably and dangerously affected.
In the light of the tests mentioned above, we hold with the Toribio Case that the
carabao, as the poor man's tractor, so to speak, has a direct relevance to the public
welfare and so is a lawful subject of Executive Order No. 626. The method chosen in
the basic measure is also reasonably necessary for the purpose sought to be
achieved and not unduly oppressive upon individuals, again following the above-cited
doctrine. There is no doubt that by banning the slaughter of these animals except
where they are at least seven years old if male and eleven years old if female upon

issuance of the necessary permit, the executive order will be conserving those still fit
for farm work or breeding and preventing their improvident depletion.
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
theslaughter 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.
Even if a reasonable relation between the means and the end were to be assumed,
we would still have to reckon with the sanction that the measure applies for violation
of the prohibition. The penalty is outright confiscation of the carabao or carabeef
being transported, to be meted out by the executive authorities, usually the police
only. In the Toribio Case, the statute was sustained because the penalty prescribed
was fine and imprisonment, to be imposed by the court after trial and conviction of the
accused. Under the challenged measure, significantly, no such trial is prescribed, and
the property being transported is immediately impounded by the police and declared,
by the measure itself, as forfeited to the government.
In the instant case, the carabaos were arbitrarily confiscated by the police station
commander, were returned to the petitioner only after he had filed a complaint for
recovery and given a supersedeas bond of P12,000.00, which was ordered
confiscated upon his failure to produce the carabaos when ordered by the trial court.
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. 20 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. Considering that, as we held in Pesigan v. Angeles, 21 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.
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
Commissionmay see fit, in the case of carabeef, and to deserving farmers through
dispersal as the Director of Animal Industrymay see fit, in the case of carabaos."
(Emphasis supplied.) 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.
To sum up then, we find that 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. For these reasons, we
hereby declare Executive Order No. 626-A unconstitutional.
We agree with the respondent court, however, that the police station commander who
confiscated the petitioner's carabaos is not liable in damages for enforcing the
executive order in accordance with its mandate. The law was at that time
presumptively valid, and it was his obligation, as a member of the police, to enforce it.
It would have been impertinent of him, being a mere subordinate of the President, to
declare the executive order unconstitutional and, on his own responsibility alone,
refuse to execute it. Even the trial court, in fact, and the Court of Appeals itself did not
feel they had the competence, for all their superior authority, to question the order we
now annul.
The Court notes that if the petitioner had not seen fit to assert and protect his rights
as he saw them, this case would never have reached us and the taking of his
property under the challenged measure would have become afait accompli despite its
invalidity. We commend him for his spirit. Without the present challenge, the matter
would have ended in that pump boat in Masbate and another violation of the
Constitution, for all its obviousness, would have been perpetrated, allowed without
protest, and soon forgotten in the limbo of relinquished rights.
The strength of democracy lies not in the rights it guarantees but in the courage of the
people to invoke them whenever they are ignored or violated. Rights are but weapons
on the wall if, like expensive tapestry, all they do is embellish and impress. Rights, as
weapons, must be a promise of protection. They become truly meaningful, and fulfill
the role assigned to them in the free society, if they are kept bright and sharp with use
by those who are not afraid to assert them.
WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional.
Except as affirmed above, the decision of the Court of Appeals is reversed.
The supersedeas bond is cancelled and the amount thereof is ordered restored to the
petitioner. No costs.
SO ORDERED.

The petitioner immediately came to this Court, prompting the Solicitor General to
move for dismissal on the ground of non-exhaustion of administrative remedies.
G.R. No. 76633 October 18, 1988

EASTERN
SHIPPING
LINES,
INC., petitioner,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER
OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and
KATHLEEN D. SACO, respondents.
Jimenea, Dala & Zaragoza Law Office for petitioner.
The Solicitor General for public respondent.
Ordinarily, the decisions of the POEA should first be appealed to the National Labor
Relations Commission, on the theory inter alia that the agency should be given an
opportunity to correct the errors, if any, of its subordinates. This case comes under
one of the exceptions, however, as the questions the petitioner is raising are
essentially questions of law. 1 Moreover, the private respondent himself has not
objected to the petitioner's direct resort to this Court, observing that the usual
procedure would delay the disposition of the case to her prejudice.
The Philippine Overseas Employment Administration was created under Executive
Order No. 797, promulgated on May 1, 1982, to promote and monitor the overseas
employment of Filipinos and to protect their rights. It replaced the National Seamen
Board created earlier under Article 20 of the Labor Code in 1974. Under Section 4(a)
of the said executive order, the POEA is vested with "original and exclusive
jurisdiction over all cases, including money claims, involving employee-employer
relations arising out of or by virtue of any law or contract involving Filipino contract
workers, including seamen." These cases, according to the 1985 Rules and
Regulations on Overseas Employment issued by the POEA, include "claims for
death, disability and other benefits" arising out of such employment. 2
Dizon Law Office for respondent Kathleen D. Saco.
CRUZ, J.:
The petitioner does not contend that Saco was not its employee or that the claim of
his widow is not compensable. What it does urge is that he was not an overseas
worker but a 'domestic employee and consequently his widow's claim should have
been filed with Social Security System, subject to appeal to the Employees
Compensation Commission.
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.
We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was
an overseas employee of the petitioner at the time he met with the fatal accident in
Japan in 1985.
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.
Under the 1985 Rules and Regulations on Overseas Employment, overseas

employment is defined as "employment of a worker outside the Philippines, including
employment on board vessels plying international waters, covered by a valid
contract. 3 A contract worker is described as "any person working or who has worked
overseas under a valid employment contract and shall include seamen" 4 or "any
person working overseas or who has been employed by another which may be a local
employer, foreign employer, principal or partner under a valid employment contract
and shall include seamen." 5 These definitions clearly apply to Vitaliano Saco for it is
not disputed that he died while under a contract of employment with the petitioner and

alongside the petitioner's vessel, the M/V Eastern Polaris, while berthed in a foreign
country. 6
deemed written into the contract with Saco as a postulate of the police power of the
State. 11
It is worth observing that the petitioner performed at least two acts which constitute
implied or tacit recognition of the nature of Saco's employment at the time of his
death in 1985. The first is its submission of its shipping articles to the POEA for
processing, formalization and approval in the exercise of its regulatory power over
overseas employment under Executive Order NO. 797. 7 The second is its
payment 8 of the contributions mandated by law and regulations to the Welfare Fund
for Overseas Workers, which was created by P.D. No. 1694 "for the purpose of
providing social and welfare services to Filipino overseas workers."
But the petitioner questions the validity of Memorandum Circular No. 2 itself as
violative of the principle of non-delegation of legislative power. It contends that no
authority had been given the POEA to promulgate the said regulation; and even with
such authorization, the regulation represents an exercise of legislative discretion
which, under the principle, is not subject to delegation.
Significantly, the office administering this fund, in the receipt it prepared for the private
respondent's signature, described the subject of the burial benefits as "overseas
contract worker Vitaliano Saco." 9 While this receipt is certainly not controlling, it does
indicate, in the light of the petitioner's own previous acts, that the petitioner and the
Fund to which it had made contributions considered Saco to be an overseas
employee.
... The governing Board of the Administration (POEA), as hereunder

provided shall promulgate the necessary rules and regulations to
govern the exercise of the adjudicatory functions of the
Administration (POEA).
The petitioner argues that the deceased employee should be likened to the
employees of the Philippine Air Lines who, although working abroad in its
international flights, are not considered overseas workers. If this be so, the petitioner
should not have found it necessary to submit its shipping articles to the POEA for
processing, formalization and approval or to contribute to the Welfare Fund which is
available only to overseas workers. Moreover, the analogy is hardly appropriate as
the employees of the PAL cannot under the definitions given be considered seamen
nor are their appointments coursed through the POEA.
The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was
made by the POEA pursuant to its Memorandum Circular No. 2, which became
effective on February 1, 1984. This circular prescribed a standard contract to be
adopted by both foreign and domestic shipping companies in the hiring of Filipino
seamen for overseas employment. A similar contract had earlier been required by the
National Seamen Board and had been sustained in a number of cases by this
Court. 10 The petitioner claims that it had never entered into such a contract with the
deceased Saco, but that is hardly a serious argument. In the first place, it should have
done so as required by the circular, which specifically declared that "all parties to the
employment of any Filipino seamen on board any ocean-going vessel are advised to
adopt and use this employment contract effective 01 February 1984 and to desist
from using any other format of employment contract effective that date." In the second
place, even if it had not done so, the provisions of the said circular are nevertheless
The authority to issue the said regulation is clearly provided in Section 4(a) of
Executive Order No. 797, reading as follows:
Similar authorization had been granted the National Seamen Board, which, as earlier
observed, had itself prescribed a standard shipping contract substantially the same as
the format adopted by the POEA.
The second challenge is more serious as 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, notwhat 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. Thus, in Ynot v.
Intermediate Apellate Court 12 which annulled Executive Order No. 626, this Court
held:
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 carabaos.' (Italics supplied.)
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 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.
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 enforce it. 13 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. 14
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 principle of non-delegation of powers is applicable to all the three major powers
of the Government but is especially important in the case of the legislative power
because of the many instances when its delegation is permitted. The occasions are
rare when executive or judicial powers have to be delegated by the authorities to
which they legally certain. In the case of the legislative power, however, such
occasions have become more and more frequent, if not necessary. This had led to
the observation that the delegation of legislative power has become the rule and its
non-delegation the exception.
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 reasonably to
comprehend. Specialization even in legislation has become necessary. To many of
the problems attendant upon present-day undertakings, the legislature may not have
the competence to provide the required direct and efficacious, not to say, specific
solutions. These solutions may, however, be expected from its delegates, who are
supposed to be experts in the particular fields assigned to them.
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
a statute by "filling in' the details which the Congress may not have the opportunity or
competence to provide. This is effected by their promulgation of what are known as
supplementary regulations, such as the implementing rules issued by the Department
of Labor on the new Labor Code. These regulations have the force and effect of law.
Memorandum Circular No. 2 is one such 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."
Parenthetically, it is recalled that this Court has accepted as sufficient standards
"Public interest" in People v. Rosenthal 15 "justice and equity" in Antamok Gold Fields
v. CIR 16 "public convenience and welfare" in Calalang v. Williams 17 and "simplicity,
economy and efficiency" in Cervantes v. Auditor General, 18 to mention only a few
cases. In the United States, the "sense and experience of men" was accepted
in Mutual Film Corp. v. Industrial Commission, 19 and "national security"
in Hirabayashi v. United States. 20
It is not denied that the private respondent has been receiving a monthly death
benefit pension of P514.42 since March 1985 and that she was also paid a P1,000.00
funeral benefit by the Social Security System. In addition, as already observed, she
also received a P5,000.00 burial gratuity from the Welfare Fund for Overseas
Workers. These payments will not preclude allowance of the private respondent's
claim against the petitioner because it is specifically reserved in the standard contract
of employment for Filipino seamen under Memorandum Circular No. 2, Series of
1984, that
Section C. Compensation and Benefits.
1. In case of death of the seamen during the term of his Contract,
the employer shall pay his beneficiaries the amount of:
a. P220,000.00 for master and chief engineers

b. P180,000.00 for other officers, including radio
operators and master electrician
c. P 130,000.00 for ratings.
2. It is understood and agreed that the benefits mentioned above
shall be separate and distinct from, and will be in addition to
whatever benefits which the seaman is entitled to under Philippine
laws. ...
3. ...
c. If the remains of the seaman is buried in the
Philippines, the owners shall pay the
beneficiaries of the seaman an amount not
exceeding P18,000.00 for burial expenses.
The underscored portion is merely a reiteration of Memorandum Circular No. 22,
issued by the National Seamen Board on July 12,1976, providing an follows:
Income Benefits under this Rule Shall be Considered Additional
Benefits.
All compensation benefits under Title II, Book Four of the Labor
Code of the Philippines (Employees Compensation and State
Insurance Fund) shall be granted, in addition to whatever benefits,
gratuities or allowances that the seaman or his beneficiaries may
be entitled to under the employment contract approved by the NSB.
If applicable, all benefits under the Social Security Law and the
Philippine Medicare Law shall be enjoyed by the seaman or his
beneficiaries in accordance with such laws.
The above provisions are manifestations of the concern of the State for the working
class, consistently with the social justice policy and the specific provisions in the
Constitution for the protection of the working class and the promotion of its interest.
One last challenge of the petitioner must be dealt with to close t case. Its argument
that it has been denied due process because the same POEA that issued
Memorandum Circular No. 2 has also sustained and applied it is an uninformed
criticism of administrative law itself. Administrative agencies are vested with two basic
powers, the quasi-legislative and the quasi-judicial. The first enables them to
promulgate implementing rules and regulations, and the second enables them to
interpret and apply such regulations. Examples abound: the Bureau of Internal
Revenue adjudicates on its own revenue regulations, the Central Bank on its own
circulars, the Securities and Exchange Commission on its own rules, as so too do the
Philippine Patent Office and the Videogram Regulatory Board and the Civil
Aeronautics Administration and the Department of Natural Resources and so on ad
infinitumon their respective administrative regulations. Such an arrangement has
been accepted as a fact of life of modern governments and cannot be considered
violative of due process as long as the cardinal rights laid down by Justice Laurel in
the landmark case of Ang Tibay v. Court of Industrial Relations 21 are observed.
Whatever doubts may still remain regarding the rights of the parties in this case are
resolved in favor of the private respondent, in line with the express mandate of the
Labor Code and the principle that those with less in life should have more in law.
When the conflicting interests of labor and capital are weighed on the scales of social
justice, the heavier influence of the latter must be counter-balanced by the sympathy
and compassion the law must accord the underprivileged worker. This is only fair if he
is to be given the opportunity and the right to assert and defend his cause not as a
subordinate but as a peer of management, with which he can negotiate on even
plane. Labor is not a mere employee of capital but its active and equal partner.
WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The
temporary restraining order dated December 10, 1986 is hereby LIFTED. It is so
ordered.

VICTORIAS
MILLING
COMPANY,
INC., petitioner-appellant,
vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.
Ross,
Selph
and
Carrascoso
for
petitioner-appellant.
Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.
BARRERA, J.:
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, dated October 7, 1957 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 1161 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.
Overruling these objections, the 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.
G.R. No. L-16704
March 17, 1962
The single issue involved in this appeal is 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."
(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.
There can be no doubt that 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 (Parker, Administrative Law, p. 197; Davis, Administrative Law, p.
194). 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. The details and the manner of carrying out the law are often times left to
the administrative agency entrusted with its enforcement. In this sense, it has been
said that rules and regulations are the product of a delegated power to create new or
additional legal provisions that have the effect of law. (Davis,op. cit., p. 194.) .
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.1wph1.t
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
(Davis, op. cit., 195-197). 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:
The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited
by appellant, does not support its contention that the circular in question is a rule or
regulation. What was there said was merely that a regulation may be incorporated in
the form of a circular. Such statement simply meant that the substance and not the
form of a regulation is decisive in determining its nature. It does not lay down a
general proposition of law that any circular, regardless of its substance and even if it
is only interpretative, constitutes a rule or regulation which must be published in the
Official Gazette before it could take effect.
The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not
applicable to the present case, because the penalty that may be incurred by
employers and employees if they refuse to pay the corresponding premiums on
bonus, overtime pay, etc. which the employer pays to his employees, is not by reason
of non-compliance with Circular No. 22, but for violation of the specific legal
provisions contained in Section 27(c) and (f) of Republic Act No. 1161.
We find, therefore, that Circular No. 22 purports merely to advise employersmembers 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.
It hardly need be said that the 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. It is true that in previous cases,
this Court has held that bonus is not demandable because it is not part of the wage,
salary, or compensation of the employee. But the question in the instant case is not
whether bonus is demandable or not as part of compensation, but whether, after the
employer does, in fact, give or pay bonus to his employees, such bonuses shall be
considered compensation under the Social Security Act after they have been received
by the employees. 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 can not 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.
IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed,
with costs against appellant. So ordered.
G.R. No. L-19337
September 30, 1969
ASTURIAS
SUGAR
CENTRAL,
INC., petitioner,
vs.
COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.
Laurea,
Laurea
and
Associates
for
petitioner.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo
Umali and Solicitor Sumilang V. Bernardo for respondents.
CASTRO, J.:
This is a petition for review of the decision of the Court of Tax Appeals of November
20, 1961, which denied recovery of the sum of P28,629.42, paid by the petitioner,
under protest, in the concept of customs duties and special import tax, as well as the
petitioner's alternative remedy to recover the said amount minus one per cent thereof
by way of a drawback under sec. 106 (b) of the Tariff and Customs Code.

The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of
centrifugal sugar for exert, the sugar so produced being placed in containers known
as jute bags. In 1957 it made two importations of jute bags. The first shipment
consisting of 44,800 jute bags and declared under entry 48 on January 8, 1967,
entered free of customs duties and special import tax upon the petitioner's filing of
Re-exportation and Special Import Tax Bond no. 1 in the amounts of P25,088 and
P2,464.50, conditioned upon the exportation of the jute bags within one year from the
date of importation. The second shipment consisting of 75,200 jute bags and declared
under entry 243 on February 8, 1957, likewise entered free of customs duties and
special import tax upon the petitioner's filing of Re-exportation and Special Import Tax
Bond no. 6 in the amounts of P42,112 and P7,984.44, with the same conditions as
stated in bond no. 1.
vessel on which they were to be loaded and to the picketing of the Central railroad
line. Alternatively, the petitioner asked for refund of the same amount in the form of a
drawback under section 106(b) in relation to section 105(x) of the Tariff and Customs
Code.
Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one
year from the date of importation as containers of centrifugal sugar. Of the 75,200 jute
bags declared under entry 243, only 25,000 were exported within the said period of
one year. In other words, of the total number of imported jute bags only 33,647 bags
were exported within one year after their importation. The remaining 86,353 bags
were exported after the expiration of the one-year period but within three years from
their importation.
1. In not declaring that force majeure and/or fortuitous event is a sufficient

justification for the failure of the petitioner to export the jute bags in question
within the time required by the bonds.
On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East,
Ltd., requested the Commissioner of Customs for a week's extension of Reexportation and Special Import Tax Bond no. 6 which was to expire the following day,
giving the following as the reasons for its failure to export the remaining jute bags
within the period of one year: (a) typhoons and severe floods; (b) picketing of the
Central railroad line from November 6 to December 21, 1957 by certain union
elements in the employ of the Philippine Railway Company, which hampered normal
operations; and (c) delay in the arrival of the vessel aboard which the petitioner was
to ship its sugar which was then ready for loading. This request was denied by the
Commissioner per his letter of April 15, 1958.
Due to the petitioner's failure to show proof of the exportation of the balance of
86,353 jute bags within one year from their importation, the Collector of Customs of
Iloilo, on March 17, 1958, required it to pay the amount of P28,629.42 representing
the customs duties and special import tax due thereon, which amount the petitioner
paid under protest.
In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner
demanded the refund of the amount it had paid, on the ground that its request for
extension of the period of one year was filed on time, and that its failure to export the
jute bags within the required one-year period was due to delay in the arrival of the
After hearing, the Collector of Customs of Iloilo rendered judgment on January 21,
1960 denying the claim for refund. From his action, appeal was taken to the
Commissioner of Customs who upheld the decision of the Collector. Upon a petition
for review the Court of Tax Appeals affirmed the decision of the Commissioner of
Customs.
The petitioner imputes three errors to the Court of Tax Appeals, namely:
2. In not declaring that it is within the power of the Collector of Customs

and/or the Commissioner of Customs to extend the period of one (1) year
within which the jute bags should be exported.
3. In not declaring that the petitioner is entitled to a refund by way of a
drawback under the provisions of section 106, par. (b), of the Tariff and
Customs Code.
1. The basic issue tendered for resolution is whether the Commissioner of Customs is
vested, under the Philippine Tariff Act of 1909, the then applicable law, with discretion
to extend the period of one year provided for in section 23 of the Act. Section 23
reads:
SEC. 23. That containers, such as casks, large metal, glass, or other
receptacles which are, in the opinion of the collector of customs, of such a
character as to be readily identifiable may be delivered to the importer
thereof upon identification and the giving of a bond with sureties satisfactory
to the collector of customs in an amount equal to double the estimated
duties thereon, conditioned for the exportation thereof or payment of the
corresponding duties thereon within one year from the date of importation,
under such rules and regulations as the Insular Collector of Customs shall
provide.1

To implement the said section 23, Customs Administrative Order 389 dated
December 6, 1940 was promulgated, paragraph XXVIII of which provides that "bonds
for the re-exportation of cylinders and other containers are good for 12 months
without extension," and paragraph XXXI, that "bonds for customs brokers,
commercial samples, repairs and those filed to guarantee the re-exportation of
cylinders and other containers are not extendible."
And insofar as jute bags as containers are concerned, Customs Administrative Order
66 dated August 25, 1948 was issued, prescribing rules and regulations governing the
importation, exportation and identification thereof under section 23 of the Philippine
Tariff Act of 1909. Said administrative order provides:
That importation of jute bags intended for use as containers of Philippine
products for exportation to foreign countries shall be declared in a regular
import entry supported by a surety bond in an amount equal to double the
estimated duties, conditioned for the exportation or payment of the
corresponding duties thereon within one year from the date of importation.
It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding
sec. 105(x) of the Tariff and Customs Code, while fixing at one year the period within
which the containers therein mentioned must be exported, are silent as to whether the
said period may be extended. It was surely by reason of this silence that the Bureau
of Customs issued Administrative Orders 389 and 66, already adverted to, to
eliminate confusion and provide a guide as to how it shall apply the law, 2 and, more
specifically, to make officially known its policy to consider the one-year period
mentioned in the law as non-extendible.
Considering that the statutory provisions in question have not been the subject of
previous judicial interpretation, then the application of the doctrine of "judicial respect
for administrative construction," 3 would, initially, be in order.
Only where the court of last resort has not previously interpreted the statute is the rule
applicable that courts will give consideration to construction by administrative or
executive departments of the state.41awphl.nt
The formal or informal interpretation or practical construction of an

ambiguous or uncertain statute or law by the executive department or other
agency charged with its administration or enforcement is entitled to
consideration and the highest respect from the courts, and must be
accorded appropriate weight in determining the meaning of the law,
especially when the construction or interpretation is long continued and
uniform or is contemporaneous with the first workings of the statute, or when
the enactment of the statute was suggested by such agency.5
The administrative orders in question appear to be in consonance with the intention of
the legislature to limit the period within which to export imported containers to one
year, without extension, from the date of importation. Otherwise, in enacting the Tariff
and Customs Code to supersede the Philippine Tariff Act of 1909, Congress would
have amended section 23 of the latter law so as to overrule the long-standing view of
the Commissioner of Customs that the one-year period therein mentioned is not
extendible.
Implied legislative approval by failure to change a long-standing
administrative construction is not essential to judicial respect for the
construction but is an element which greatly increases the weight given such
construction.6
The correctness of the interpretation given a statute by the agency charged
with administering its provision is indicated where it appears that Congress,
with full knowledge of the agency's interpretation, has made significant
additions to the statute without amending it to depart from the agency's
view.7
Considering that the Bureau of Customs is the office charged with implementing and
enforcing the provisions of our Tariff and Customs Code, the construction placed by it
thereon should be given controlling weight.1awphl.nt
In applying the doctrine or principle of respect for administrative or practical
construction, the courts often refer to several factors which may be regarded as
bases of the principle, as factors leading the courts to give the principle controlling
weight in particular instances, or as independent rules in themselves. These factors
are the respect due the governmental agencies charged with administration, their
competence, expertness, experience, and informed judgment and the fact that they
frequently are the drafters of the law they interpret; that the agency is the one on
which the legislature must rely to advise it as to the practical working out of the
statute, and practical application of the statute presents the agency with unique

opportunity and experiences
improvements in the statute; ... 8
for
discovering
deficiencies,
inaccuracies,
or
If it is further considered that exemptions from taxation are not favored, 9 and that tax
statutes are to be construed in strictissimi juris against the taxpayer and liberally in
favor of the taxing authority, 10 then we are hard put to sustain the petitioner's stand
that it was entitled to an extension of time within which to export the jute bags and,
consequently, to a refund of the amount it had paid as customs duties.
In the light of the foregoing, it is our considered view that the one-year period
prescribed in section 23 of the Philippine Tariff Act of 1909 is non-extendible and
compliance therewith is mandatory.
containers and not to specify the particular kinds thereof. Thus, sec. 23 of the
Philippine Tariff Act states, "containers such as casks large metals, glass or other
receptacles," and sec. 105 (x) of the Tariff and Customs Code mentions "large
containers," giving as examples "demijohn cylinders, drums, casks and other similar
receptacles of metal, glass or other materials." (emphasis supplied) There is,
therefore, no reason to suppose that the customs authorities had intended, in
Customs Administrative Order 389 to circumscribe the scope of the word "container,"
any more than the statures sought to be implemented actually intended to do.
3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by
virtue of section 106 (b) of the Tariff and Customs Code, 11 which reads:
SEC. 106. Drawbacks: ...
The petitioner's argument that force majeure and/or fortuitous events prevented it
from exporting the jute bags within the one-year period cannot be accorded credit, for
several reasons. In the first place, in its decision of November 20, 1961, the Court of
Tax Appeals made absolutely no mention of or reference to this argument of the
petitioner, which can only be interpreted to mean that the court did not believe that the
"typhoons, floods and picketing" adverted to by the petitioner in its brief were of such
magnitude or nature as to effectively prevent the exportation of the jute bags within
the required one-year period. In point of fact nowhere in the record does the petitioner
convincingly show that the so-called fortuitous events or force majeure referred to by
it precluded the timely exportation of the jute bags. In the second place,
assuming, arguendo, that the one-year period is extendible, the jute bags were not
actually exported within the one-week extension the petitioner sought. The record
shows that although of the remaining 86,353 jute bags 21,944 were exported within
the period of one week after the request for extension was filed, the rest of the bags,
amounting to a total of 64,409, were actually exported only during the period from
February 16 to May 24, 1958, long after the expiration of the one-week extension
sought by the petitioner. Finally, it is clear from the record that the typhoons and
floods which, according to the petitioner, helped render impossible the fulfillment of its
obligation to export within the one-year period, assuming that they may be placed in
the category of fortuitous events or force majeure, all occurred prior to the execution
of the bonds in question, or prior to the commencement of the one-year period within
which the petitioner was in law required to export the jute bags.
2. The next argument of the petitioner is that granting that Customs Administrative
Order 389 is valid and binding, yet "jute bags" cannot be included in the phrase
"cylinders and other containers" mentioned therein. It will be noted, however, that the
Philippine Tariff Act of 1909 and the Tariff and Customs Code, which Administrative
Order 389 seeks to implement, speak of "containers" in general. The enumeration
following the word "containers" in the said statutes serves merely to give examples of
b. On Articles Made from Imported Materials or Similar Domestic Materials

and Wastes Thereof. Upon the exportation of articles manufactured or
produced in the Philippines, including the packing, covering, putting up,
marking or labeling thereof, either in whole or in part of imported materials,
or from similar domestic materials of equal quantity and productive
manufacturing quality and value, such question to be determined by the
Collector of Customs, there shall be allowed a drawback equal in amount to
the duties paid on the imported materials so used, or where similar domestic
materials are used, to the duties paid on the equivalent imported similar
materials, less one per cent thereof: Provided, That the exportation shall be
made within three years after the importation of the foreign material used or
constituting the basis for drawback ... .
The petitioner argues that not having availed itself of the full exemption granted by
sec. 105(x) of the Tariff and Customs Code due to its failure to export the jute bags
within one year, it is nevertheless, by authority of the above-quoted provision, entitled
to a 99% drawback of the duties it had paid, averring further that sec. 106(b) does not
presuppose immediate payment of duties and taxes at the time of importation.
The contention is palpably devoid of merit.
The provisions invoked by the petitioner (to sustain his claim for refund) offer two
options to an importer. The first, under sec. 105 (x), gives him the privilege of
importing, free from import duties, the containers mentioned therein as long as he
exports them within one year from the date of acceptance of the import entry, which
period as shown above, is not extendible. The second, presented by sec. 106 (b),
contemplates a case where import duties are first paid, subject to refund to the extent

of 99% of the amount paid, provided the articles mentioned therein are exported
within three years from importation.
It would seem then that the Government would forego collecting duties on the articles
mentioned in section 105(x) of Tariff and Customs Code as long as it is assured, by
the filing of a bond, that the same shall be exported within the relatively short period
of one year from the date of acceptance of the import entry. Where an importer
cannot provide such assurance, then the Government, under sec. 106(b) of said
Code, would require payment of the corresponding duties first. The basic purpose of
the two provisions is the same, which is, to enable a local manufacturer to compete in
foreign markets, by relieving him of the disadvantages resulting from having to pay
duties on imported merchandise, thereby building up export trade and encouraging
manufacture in the country.12 But there is a difference, and it is this: under section
105(x) full exemption is granted to an importer who justifies the grant of exemption by
exporting within one-year. The petitioner, having opted to take advantage of the
provisions of section 105(x), may not, after having failed to comply with the conditions
imposed thereby, avoid the consequences of such failure by being allowed a
drawback under section 106(b) of the same Act without having complied with the
conditions of the latter section.
For it is not to be supposed that the legislature had intended to defeat compliance
with the terms of section 105(x) thru a refuge under the provisions of section 106(b).
A construction should be avoided which affords an opportunity to defeat compliance
with the terms of a statute. 13 Rather courts should proceed on the theory that parts of
a statute may be harmonized and reconciled with each other.
A construction of a statute which creates an inconsistency should be avoided when a
reasonable interpretation can be adopted which will not do violence to the plain words
of the act and will carry out the intention of Congress.
In the construction of statutes, the courts start with the assumption that the
legislature intended to enact an effective law, and the legislature is not to be
presumed to have done a vain thing in the enactment of a statute. Hence, it
is a general principle, embodied in the maxim, "ut res magis valeat quam
pereat," that the courts should, if reasonably possible to do so without
violence to the spirit and language of an act, so interpret the statute to give it
efficient operation and effect as a whole. An interpretation should, if possible,
be avoided under which a statute or provision being construed is defeated,
or as otherwise expressed, nullified, destroyed, emasculated, repealed,
explained away, or rendered insignificant, meaningless, inoperative, or
nugatory. 14
ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is
affirmed, at petitioner's cost.

This is a petition for certiorari seeking to annul the decision of the respondent
Secretary, now Minister of Labor which denied the petitioner's claim for holiday pay
and its claim for premium and overtime pay differentials. The petitioner claims that the
respondent Minister of Labor acted contrary to law and jurisprudence and with grave
abuse of discretion in promulgating Sec. 2, Rule IV, Book III of the Integrated Rules
and in issuing Policy Instruction No. 9, both referring to holidays with pay.
On May 20, 1975, the Chartered Bank Employees Association, in representation of its
monthly paid employees/members, instituted a complaint with the Regional Office No.
IV, Department of Labor, now Ministry of Labor and Employment (MOLE) against
private respondent Chartered Bank, for the payment of ten (10) unworked legal
holidays, as well as for premium and overtime differentials for worked legal holidays
from November 1, 1974.
The memorandum for the respondents summarizes the admitted and/or undisputed
facts as follows:
l. The work force of respondent bank consists of 149 regular
employees, all of whom are paid by the month;
2. Under their existing collective bargaining agreement, (Art. VII
thereof) said monthly paid employees are paid for overtime work as
follows:
G.R. No. L-44717 August 28, 1985

THE
CHARTERED
BANK
EMPLOYEES
ASSOCIATION, petitioner,
vs.
HON. BLAS F. OPLE, in his capacity as the Incumbent Secretary of Labor, and
THE CHARTERED BANK,respondents.
GUTIERREZ, JR., J.:
Section l. The basic work week for all employees excepting security
guards who by virtue of the nature of their work are required to be
at their posts for 365 days per year, shall be forty (40) hours based
on five (5) eight (8) hours days, Monday to Friday.
Section 2. Time and a quarter hourly rate shall be paid for
authorized work performed in excess of eight (8) hours from
Monday through Friday and for any hour of work performed on
Saturdays subject to Section 5 hereof.
Section 3. Time and a half hourly rate shall be paid for authorized
work performed on Sundays, legal and special holidays.
xxx xxx xxx
xxx xxx xxx

Section 5. The provisions of Section I above notwithstanding the
BANK may revert to the six (6) days work week, to include
Saturday for a four (4) hour day, in the event the Central Bank
should require commercial banks to open for business on Saturday.
3. In computing overtime pay and premium pay for work done
during regular holidays, the divisor used in arriving at the daily rate
of pay is 251 days although formerly the divisor used was 303 days
and this was when the respondent bank was still operating on a 6day work week basis. However, for purposes of computing
deductions corresponding to absences without pay the divisor used
is 365 days.
4. All regular monthly paid employees of respondent bank are
receiving salaries way beyond the statutory or minimum rates and
are among the highest paid employees in the banking industry.
5. The salaries of respondent bank's monthly paid employees suffer
no deduction for holidays occurring within the month.
On the bases of the foregoing facts, both the arbitrator and the National Labor
Relations Commission (NLRC) ruled in favor of the petitioners ordering the
respondent bank to pay its monthly paid employees, holiday pay for the ten (10) legal
holidays effective November 1, 1974 and to pay premium or overtime pay differentials
to all employees who rendered work during said legal holidays. On appeal, the
Minister of Labor set aside the decision of the NLRC and dismissed the petitioner's
claim for lack of merit basing its decision on Section 2, Rule IV, Book Ill of the
Integrated Rules and Policy Instruction No. 9, which respectively provide:
Sec. 2. Status of employees paid by the month. Employees who
are uniformly paid by the month, irrespective of the number of
working days therein, with a salary of not less than the statutory or
established minimum wage shall be presumed to be paid for all
days in the month whether worked or not.
POLICY INSTRUCTION NO. 9
The rules implementing PD 850 have clarified the policy in the

implementation of the ten (10) paid legal holidays. Before PD 850,
the number of working days a year in a firm was considered
important in determining entitlement to the benefit. Thus, where an
employee was working for at least 313 days, he was considered
definitely already paid. If he was working for less than 313, there
was no certainty whether the ten (10) paid legal holidays were
already paid to him or not.
The ten (10) paid legal holidays law, to start with, is intended to
benefit principally daily employees. In the case of monthly, only
those whose monthly salary did not yet include payment for the ten
(10) paid legal holidays are entitled to the benefit.
Under the rules implementing PD 850, this policy has been fully
clarified to eliminate controversies on the entitlement of monthly
paid employees. The new determining rule is this: 'If the monthly
paid employee is receiving not less than P240, the maximum
monthly minimum wage, and his monthly pay is uniform from
January to December, he is presumed to be already paid the ten
(10) paid legal holidays. However, if deductions are made from his
monthly salary on account of holidays in months where they occur,
then he is still entitled to the ten (10) paid legal holidays.
These new interpretations must be uniformly and consistently
upheld.
This issuance shall take effect immediately.
The issues are presented in the form of the following assignments of errors:
First Error
Whether or not the Secretary of Labor erred and
acted contrary to law in promulgating Sec. 2,
Rule IV, Book III of the Integrated Rules and
Policy Instruction No. 9.
TO: All Regional Directors

Second Error
SUBJECT: PAID LEGAL HOLIDAYS

Whether or not the respondent Secretary of
Labor abused his discretion and acted contrary to
law in applying Sec. 2, Rule IV of the Integrated
Rules and Policy Instruction No. 9 abovestated to
private respondent's monthly-paid employees.
Third Error
Whether or not the respondent Secretary of
Labor, in not giving due credence to the
respondent bank's practice of paying its
employees base pay of 100% and premium pay
of 50% for work done during legal holidays, acted
contrary to law and abused his discretion in
denying the claim of petitioners for unworked
holidays and premium and overtime pay
differentials for worked holidays.
guidelines is to benefit the daily paid workers who, unlike monthly-paid employees,
suffer deductions in their salaries for not working on holidays. Hence, the Holiday Pay
Law was enacted precisely to countervail the disparity between daily paid workers
and monthly-paid employees.
The decision in Insular Bank of Asia and America Employees' Union (IBAAEU) v.
Inciong (132 SCRA 663) resolved a similar issue. Significantly, the petitioner in that
case was also a union of bank employees. We ruled that Section 2, Rule IV, Book III
of the Integrated Rules and Policy Instruction No. 9, are contrary to the provisions of
the Labor Code and, therefore, invalid This Court stated:
It is elementary in the rules of statutory construction that when the
language of the law is clear and unequivocal the law must be taken
to mean exactly what it says. In the case at bar, the provisions of
the Labor Code on the entitlement to the benefits of holiday pay are
clear and explicit it provides for both the coverage of and exclusion
from the benefit. In Policy Instruction No. 9, the then Secretary of
Labor went as far as to categorically state that the benefit is
principally intended for daily paid employees, when the law clearly
states that every worker shall be paid their regular holiday pay. This
is flagrant violation of the mandatory directive of Article 4 of the
Labor Code, which states that 'All doubts in the implementation and
interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of
labor.' Moreover, it shall always be presumed that the legislature
intended to enact a valid and permanent statute which would have
the most beneficial effect that its language permits (Orlosky v.
Hasken, 155 A. 112)
The petitioner contends that the respondent Minister of Labor gravely abused his
discretion in promulgating Section 2, Rule IV, Book III of the Integrated Rules and
Policy Instruction No. 9 as guidelines for the implementation of Articles 82 and 94 of
the Labor Code and in applying said guidelines to this case. It maintains that while it
is true that the respondent Minister has the authority in the performance of his duty to
promulgate rules and regulations to implement, construe and clarify the Labor Code,
such power is limited by provisions of the statute sought to be implemented,
construed or clarified. According to the petitioner, the so-called "guidelines"
promulgated by the respondent Minister totally contravened and violated the Code by
excluding the employees/members of the petitioner from the benefits of the holiday
pay, when the Code itself did not provide for their expanding the Code's clear and
concise conclusion and notwithstanding the Code's clear and concise phraseology
defining those employees who are covered and those who are excluded from the
benefits of holiday pay.
On the other hand, the private respondent contends that the questioned guidelines
did not deprive the petitioner's members of the benefits of holiday pay but merely
classified those monthly paid employees whose monthly salary already includes
holiday pay and those whose do not, and that the guidelines did not deprive the
employees of holiday pay. It states that the question to be clarified is whether or not
the monthly salaries of the petitioner's members already includes holiday pay. Thus,
the guidelines were promulgated to avoid confusion or misconstruction in the
application of Articles 82 and 94 of the Labor Code but not to violate them.
Respondent explains that the rationale behind the promulgation of the questioned
Obviously, the Secretary (Minister) of Labor had exceeded his

statutory authority granted by Article 5 of the Labor Code
authorizing him to promulgate the necessary implementing rules
and regulations.
We further ruled:
While it is true that the contemporaneous construction placed upon
a statute by executive officers whose duty is to enforce it should be
given great weight by the courts, still if such construction is so
erroneous, as in the instant case, the same must be declared as
null and void. It is the role of the Judiciary to refine and, when
necessary correct constitutional (and/or statutory) interpretation, in

the context of the interactions of the three branches of the
government, almost always in situations where some agency of the
State has engaged in action that stems ultimately from some
legitimate area of governmental power (The Supreme Court in
Modern Role, C.B. Swisher 1958, p. 36).
xxx xxx xxx
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to
implement the Labor Code and Policy Instruction No. 9 issued by
the then Secretary of Labor must be declared null and void.
Accordinglyl public respondent Deputy Minister of Labor Amado G.
Inciong had no basis at all to deny the members of petitioner union
their regular holiday pay as directed by the Labor Code.
Since the private respondent premises its action on the invalidated rule and policy
instruction, it is clear that the employees belonging to the petitioner association are
entitled to the payment of ten (10) legal holidays under Articles 82 and 94 of the Labor
Code, aside from their monthly salary. They are not among those excluded by law
from the benefits of such holiday pay.
Presidential Decree No. 850 states who are excluded from the holiday provisions of
that law. It states:
ART. 82. Coverage. The provision of this Title shall apply to
employees in all establishments and undertakings, whether for
profit or not, but not to government employees, managerial
employees, field personnel members of the family of the employer
who are dependent on him for support, domestic helpers, persons
in the personal service of another, and workers who are paid by
results as determined by the Secretary of Labor in appropriate
regulations. (Emphasis supplied).
The questioned Section 2, Rule IV, Book III of the Integrated Rules and the
Secretary's Policy Instruction No. 9 add another excluded group, namely, "employees
who are uniformly paid by the month." While the additional exclusion is only in the
form of a presumption that all monthly paid employees have already been paid
holiday pay, it constitutes a taking away or a deprivation which must be in the law if it
is to be valid. An administrative interpretation which diminishes the benefits of labor
more than what the statute delimits or withholds is obviously ultra vires.
It is argued that even without the presumption found in the rules and in the policy
instruction, the company practice indicates that the monthly salaries of the employees
are so computed as to include the holiday pay provided by law. The petitioner
contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered
Bank, in computing overtime compensation for its employees, employs a "divisor" of
251 days. The 251 working days divisor is the result of subtracting all Saturdays,
Sundays and the ten (10) legal holidays from the total number of calendar days in a
year. If the employees are already paid for all non-working days, the divisor should be
365 and not 251.
The situation is muddled somewhat by the fact that, in computing the employees'
absences from work, the respondent bank uses 365 as divisor. Any slight doubts,
however, must be resolved in favor of the workers. This is in keeping with the
constitutional mandate of promoting social justice and affording protection to labor
(Sections 6 and 9, Article II, Constitution). The Labor Code, as amended, itself
provides:
ART. 4. Construction in favor of labor. All doubts in the
implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved
in favor of labor.
Any remaining doubts which may arise from the conflicting or different divisors used
in the computation of overtime pay and employees' absences are resolved by the
manner in which work actually rendered on holidays is paid. Thus, whenever monthly
paid employees work on a holiday, they are given an additional 100% base pay on
top of a premium pay of 50%. If the employees' monthly pay already includes their
salaries for holidays, they should be paid only premium pay but not both base pay
and premium pay.
The contention of the respondent that 100% base pay and 50% premium pay for work
actually rendered on holidays is given in addition to monthly salaries only because the
collective bargaining agreement so provides is itself an argument in favor of the
petitioner stand. It shows that the Collective Bargaining Agreement already
contemplated a divisor of 251 days for holiday pay computations before the
questioned presumption in the Integrated Rules and the Policy Instruction was
formulated. There is furthermore a similarity between overtime pay, which is
computed on the basis of 251 working days a year, and holiday pay, which should be
similarly treated notwithstanding the public respondents' issuances. In both cases
overtime work and holiday work- the employee works when he is supposed to be

resting. In the absence of an express provision of the CBA or the law to the contrary,
the computation should be similarly handled.
We are not unmindful of the fact that the respondent's employees are among the
highest paid in the industry. It is not the intent of this Court to impose any undue
burdens on an employer which is already doing its best for its personnel. we have to
resolve the labor dispute in the light of the parties' own collective bargaining
agreement and the benefits given by law to all workers. When the law provides
benefits for "employees in all establishments and undertakings, whether for profit or
not" and lists specifically the employees not entitled to those benefits, the
administrative agency implementing that law cannot exclude certain employees from
its coverage simply because they are paid by the month or because they are already
highly paid. The remedy lies in a clear redrafting of the collective bargaining
agreement with a statement that monthly pay already includes holiday pay or an
amendment of the law to that effect but not an administrative rule or a policy
instruction.
WHEREFORE, the September 7, 1976 order of the public respondent is hereby
REVERSED and SET ASIDE. The March 24, 1976 decision of the National Labor
Relations Commission which affirmed the October 30, 1975 resolution of the Labor
Arbiter but deleted interest payments is REINSTATED.
SO ORDERED.
G.R. No. L-52306 October 12, 1981
ABS-CBN
BROADCASTING
vs.
COURT OF TAX APPEALS and THE
REVENUE, respondents.
CORPORATION, petitioner,
COMMISSIONER
OF
INTERNAL
MELENCIO-HERRERA, J.:
This is a Petition for Review on certiorari of the Decision of the Court of Tax Appeals
in C.T.A. Case No. 2809, dated November 29, 1979, which affirmed the assessment
by the Commissioner of Internal Revenue, dated April 16, 1971, of a deficiency
withholding income tax against petitioner, ABS-CBN Broadcasting Corporation, for the
years 1965, 1966, 1967 and 1968 in the respective amounts of P75,895.24,
P99,239.18, P128,502.00 and P222, 260.64, or a total of P525,897.06.

During the period pertinent to this case, petitioner corporation was 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. for which
petitioner paid rentals after withholding income tax of 30%of one-half of the film
rentals.
4. The local distributor should withhold 30% of one-half of the film

rentals paid to the non-resident foreign film distributor and pay the
same to this office in accordance with law unless the non- resident
foreign film distributor makes a prior settlement of its income tax
liability. (Emphasis ours).
In so far as the income tax on non-resident corporations is concerned, section 24 (b)

of the National Internal Revenue Code, as amended by Republic Act No. 2343 dated
June 20, 1959, used to provide:
Pursuant to the foregoing, petitioner dutifully withheld and turned over to the Bureau
of Internal Revenue 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 petitioner withheld taxes pursuant to the foregoing Circular was in 1968.
(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.
(Emphasis supplied)
On April 12, 1961, in implementation of the aforequoted provision, the Commissioner
of Internal Revenue issued General Circular No. V-334 reading thus:
In connection with Section 24 (b) of Tax Code, the amendment
introduced by Republic Act No. 2343, under which an income tax
equal to 30% is levied upon the amount received by every foreign
corporation not engaged in trade or business within the Philippines
from all sources within this country as interest, dividends, rents,
salaries,
wages,
premiums,
annuities,
compensations,
remunerations, emoluments, or other fixed or determinable annual
or periodical gains, profits, and income, it has been determined that
the tax is still imposed on income derived from capital, or labor, or
both combined, in accordance with the basic principle of income
taxation (Sec. 39, Income Tax Regulations), and that a mere return
of capital or investment is not income (Par. 5,06, 1 Mertens Law of
Federal 'Taxation). Since according to the findings of the Special
Team who inquired into business of the non-resident foreign film
distributors, the distribution or exhibition right on a film is invariably
acquired for a consideration, either for a lump sum or a percentage
of the film rentals, whether from a parent company or an
independent outside producer, apart of the receipts of a nonresident foreign film distributor derived from said film represents,
therefore, a return of investment.
xxx xxx xxx
On June 27, 1968, Republic Act No. 5431 amended Section 24 (b) 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," as follows:
(b) Tax on foreign corporations.(1) Non-resident corporations.A
foreign corporation not engaged in trade or business in the
Philippines including a foreign life insurance company not engaged
in the life insurance business in the Philippines shall pay a tax
equal to thirty-five per cent of the gross income received during
each taxable year from all sources within the Philippines, as
interests, dividends, rents, royalties, salaries, wages, premiums,
annuities, compensations, remunerations for technical services or
otherwise, emoluments or other fixed or determinable annual,
periodical or casual gains, profits, and income, and capital
gains, Provided however, That premiums shah not include
reinsurance premiums. (Emphasis supplied)
On February 8, 1971, the Commissioner of Internal Revenue 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," thus:
After a restudy and analysis of Section 24 (b) of the National
Internal Revenue Code, as amended by Republic Act No. 5431,
and guided by the interpretation given by tax authorities to a similar
provision in the Internal Revenue Code of the United States, on
which the aforementioned provision of our Tax Code was patterned,
this Office has come to the conclusion that the tax therein
prescribed should be based on gross income without t deduction
whatever. Consequently, the ruling in General Circular No. V-334,
dated April 12, 1961, allowing the deduction of the proportionate
cost of production or exhibition of motion picture films from the
rental income of non- resident foreign corporations, is erroneous for
lack of legal basis.

In view thereof, General Circular No. V-334, dated April 12, 1961, is
hereby revoked and henceforth, local films distributors and
exhibitors shall deduct and withhold 35% of the entire
amount payable by them to non-resident foreign corporations, as
film rental or royalty, or whatever such payment may be
denominated, without any deduction whatever, pursuant to Section
24 (b), and pay the withheld taxes in accordance with Section 54 of
the Tax Code, as amended.
All rulings inconsistent with this Circular is likewise revoked.
(Emphasis ours)
On the basis of this new Circular, respondent Commissioner of Internal Revenue
issued against petitioner a letter of assessment and demand dated April 15, 1971, but
allegedly released by it and received by petitioner on April 12, 1971, 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 computed as follows:
1965
Total amount remitted
P 75,895.24
1966
P373,492.24
Withholding tax due thereon
112,048.00
Less:
Amount
assessed
27,947.00
already
P 511,059.48
Withholding tax due thereon
Less:
Amount
assessed
Total amount due & collectible
already
Balance
Balance
84,101.00
Add: 11/2%mo. int. fr. 4-1667 to 4-116-70
15,138.18
Total
amount
collectible
P99,239.18
153,318.00
89,000.00
due
&
P64,318.00
1967
Add: 1/2% mo. int. fr. 4-16-66

to 4-16-69
11,577.24
P601,160.65
Withholding
thereon
tax
180,348.00
Balance
P198,447.00
Add: 1/2% mo. int. fr. 4-1669 to 4-29-71
23,813.64
71,448.00
108,900.00
Total amount
collectible
P222,260.44 1
Balance
Add: 1/2% mo. int. fr. 416-68 to 4-16-71
19,602.00
Total amount
collectible
P128,502.00
Less: Amount
assessed
due
already
due
&
1968
Withholding
thereon
tax
P881,816.92
due
due
&
On May 5, 1971, 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, dated November 29, 1979, is, in turn, the subject of this review. The Tax
Court held:
For the reasons given, the Court finds the assessment issued by
respondent on April 16, 1971 against petitioner in the amounts of
P75,895.24, P 99,239.18, P128,502.00 and P222,260.64 or a total
of P525,897.06 as deficiency withholding income tax for the years
1965, 1966, 1967 and 1968, respectively, in accordance with law.
As prayed for, the petition for review filed in this case is dismissed,
and petitioner ABS-CBN Broadcasting Corporation is hereby
ordered to pay the sum of P525,897.06 to respondent
Commissioner of Internal Revenue as deficiency withholding
income tax for the taxable years 1965 thru 1968, plus the surcharge
and interest which have accrued thereon incident to delinquency
pursuant to Section 51 (e) of the National Internal Revenue Code,
as amended.
291,283.00
WHEREFORE, the decision appealed from is hereby affirmed at
petitioner's cost.
SO ORDERED. 2
Less: Amount
assessed
already
92,886.00
The issues raised are two-fold:
I. Whether or not respondent can apply General Circular No. 4-71
retroactively and issue a deficiency assessment against petitioner

in the amount of P 525,897.06 as deficiency withholding income tax
for the years 1965, 1966, 1967 and 1968.
Tax Court concluded, petitioner did not acquire any vested right thereunder as the
same was a nullity.
II. Whether or not the right of the Commissioner of Internal

Revenue to assess the deficiency withholding income tax for the
year 196,5 has prescribed. 3
The rationale behind General Circular No. V-334 was clearly stated therein, however:
"It ha(d) been determined that the tax is still imposed on income derived from capital,
or labor, or both combined, in accordance with the basic principle of income
taxation ...and that a mere return of capital or investment is not income ... ." "A part of
the receipts of a non-resident foreign film distributor derived from said film represents,
therefore, a return of investment." The Circular thus fixed the return of capital at 50%
to simplify the administrative chore of determining the portion of the rentals covering
the return of capital." 5
Upon the facts and circumstances of the case, review is warranted.

In point is Sec. 338-A (now Sec. 327) of the Tax Code. As inserted by Republic Act
No. 6110 on August 9, 1969, it provides:
Sec. 338-A. Non-retroactivity of rulings. Any revocation,
modification, or reversal of and of the rules and regulations
promulgated in accordance with the preceding section or any of the
rulings or circulars promulgated by the Commissioner of Internal
Revenue shall not be given retroactive application if the relocation,
modification, or reversal will be prejudicial to the taxpayers, except
in the following cases: (a) where the taxpayer deliberately misstates or omits material facts from his return or any document
required of him by the Bureau of Internal Revenue: (b) where the
facts subsequently gathered by the Bureau of Internal Revenue are
materially different from the facts on which the ruling is based; or
(c) where the taxpayer acted in bad faith. (italics for emphasis)
Were the "gross income" base clear from Sec. 24 (b), perhaps, the ratiocination of the
Tax Court could be upheld. It should be noted, however, that said Section was not too
plain and simple to understand. The fact that the issuance of the General Circular in
question was rendered necessary leads to no other conclusion than that it was not
easy of comprehension and could be subjected to different interpretations.
In fact, Republic Act No. 2343, dated June 20, 1959, supra, which was the basis of
General Circular No. V-334, was just one in a series of enactments regarding Sec. 24
(b) of the Tax Code. Republic Act No. 3825 came next on June 22, 1963 without
changing the basis but merely adding a proviso (in bold letters).
(b) Tax on foreign corporation.(1) Non-resident corporations.
There shall be levied, collected and paid for each taxable year, in
or business within the Philippines, from all 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:
PROVIDED, HOWEVER, THAT PREMIUMS SHALL NOT
INCLUDE REINSURANCE PREMIUMS. (double emphasis ours).
It is clear from the foregoing that rulings or circulars promulgated by the

Commissioner of Internal Revenue have no retroactive application where to so apply
them would be prejudicial to taxpayers. The prejudice to petitioner of the retroactive
application of Memorandum Circular No. 4-71 is beyond question. It was issued only
in 1971, or three years after 1968, the last year that petitioner had withheld taxes
under General Circular No. V-334. 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. Petitioner 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 are concerned, admittedly, petitioner does not fall under
any of them.
Republic Act No. 3841, dated likewise on June 22, 1963, followed after, omitting the
proviso and inserting some words (also in bold letters).
Respondent claims, however, that the provision on non-retroactivity is inapplicable in

the present case in that General Circular No. V-334 is a nullity because in effect, it
changed the law on the matter. The Court of Tax Appeals sustained this position
holding that: "Deductions are wholly and exclusively within the power of Congress or
the law-making body to grant, condition or deny; and where the statute imposes a tax
equal to a specified rate or percentage of the gross or entire amount received by the
taxpayer, the authority of some administrative officials to modify or change, much less
reduce, the basis or measure of the tax should not be read into law." 4Therefore, the
(b) Tax on foreign corporations.(1) Non-resident corporations.

There shall be levied, collected and paid for each taxable year, in
or business within the Philippines, from all sources within the
Philippines, as interest, dividends, rents, salaries, wages,
premiums, annuities, compensations, remunerations, emoluments,
or other fixed or determinable annual or periodical OR CASUAL

gains, profits and income, AND CAPITAL GAINS, a tax equal to
thirty per centum of such amount. 6 (double emphasis supplied)
The principle of legislative approval of administrative interpretation by re-enactment
clearly obtains in this case. It provides that "the re-enactment of a statute substantially
unchanged is persuasive indication of the adoption by Congress of a prior executive
construction. 7 Note should be taken of the fact that this case involves not a mere
opinion of the Commissioner or ruling rendered on a mere query, but a Circular
formally issued to "all internal revenue officials" by the then Commissioner of Internal
Revenue.
It was only on June 27, 1968 under Republic Act No. 5431, supra, which became the
basis of Revenue Memorandum Circular No. 4-71, that Sec. 24 (b) was amended to
refer specifically to 35% of the "gross income."
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. 8 In fact, utmost caution should be taken in this regard. 9 But, like other
principles of law, this also admits of exceptions in the interest of justice and fairplay.
The insertion of Sec. 338-A into the National Internal Revenue Code, as held in the
case of Tuason, Jr. vs. Lingad, 10 is indicative of legislative intention to support the
principle of good faith. In fact, in the United States, from where Sec. 24 (b) was
patterned, it has been held that the Commissioner of Collector is precluded from
adopting a position inconsistent with one previously taken where injustice would result
therefrom, 11 or where there has been a misrepresentation to the taxpayer. 12
We have also noted that in its Decision, the Court of Tax Appeals further required the
petitioner to pay interest and surcharge as provided for in Sec. 51 (e) of the Tax Code
in addition to the deficiency withholding tax of P 525,897.06. This additional
requirement is much less called for because the petitioner relied in good faith and
religiously complied with no less than a Circular issued "to all internal revenue
officials" by the highest official of the Bureau of Internal Revenue and approved by the
then Secretary of Finance. 13
With the foregoing conclusions arrived at, resolution of the issue of prescription
becomes unnecessary.
WHEREFORE, the judgment of the Court of Tax Appeals is hereby reversed, and the
questioned assessment set aside. No costs.
SO ORDERED.

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ADMIN LAW NOV 21 2015 1

G.R. No. 4349

September 24, 1908

SEC. 5. The Collector of Customs for the Philippine Islands is hereby

No heavily loaded casco, lighter, or other similar craft shall be permitted to

The limits of a harbor for the purpose of licensing vessels as herein

ADMIN LAW NOV 21 2015 2

This provision of the statute does, indeed, present a serious question.

ADMIN LAW NOV 21 2015 3

MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.

Solicitor General Ozaeta and Assistant Solicitor General Amparo for

2. ID.; ID.; POLICE POWER; PERSONAL LIBERTY; GOVERNMENTAL AUTHORITY.

ADMIN LAW NOV 21 2015 4

Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila,

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G.R. No. 115381 December 23, 1994

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The relevant antecedents are as follows:

With reference to DOTC Memorandum Order No. 90-395 dated 26

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AIRCON (PER KM.) P0.415. 4

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xxx xxx xxx

IV. Policy Guidelines on the Issuance of Certificate of Public

The issuance of a Certificate of Public Convenience is determined

PREMISES CONSIDERED, this Board after considering the

V. Rate and Fare Setting

The control in pricing shall be liberalized to introduce price

ADMIN LAW NOV 21 2015 11

redressed by a favorable decision so as to warrant an invocation of the court's

ADMIN LAW NOV 21 2015 12

gas (Garcia v. Board of Investments, 177 SCRA 374 [1989]; Garcia

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G.R. No. L-45839 June 1, 1988

GUTIERREZ, JR., J.:

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The grounds involved in the petition are of first impression. It

The Board therefore, decides to set the petition for hearing.

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G.R. No. 74457 March 20, 1987

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SECTION 2. This Executive Order shall take effect immediately.

Republic of the Philippines

ADMIN LAW NOV 21 2015 21

ended, as it were, to be "gradually ascertained by the process of inclusion and

ADMIN LAW NOV 21 2015 22

A similar prohibition was challenged in United States v. Toribio, 19 where a law

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G.R. No. 76633 October 18, 1988

Dizon Law Office for respondent Kathleen D. Saco.

Under the 1985 Rules and Regulations on Overseas Employment, overseas

ADMIN LAW NOV 21 2015 26

... The governing Board of the Administration (POEA), as hereunder

ADMIN LAW NOV 21 2015 27

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ADMIN LAW NOV 21 2015 29