G.R. No. 113375 May 5, 1994 1.2. PCSO is seeking a suitable contractor which shall build, at its own expense, all the facilities ('Facilities') needed to operate and maintain a nationwide on-line lottery system. PCSO shall lease the Facilities for a fixed percentage ofquarterly gross receipts. All receipts from ticket sales shall be turned over directly to PCSO. All capital, operating expenses and expansion expenses and risks KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO, shall be for the exclusive account of the Lessor. EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN. WIGBERTO TAÑADA, and REP. JOKER P. ARROYO, petitioners, xxx xxx xxx vs. TEOFISTO GUINGONA, JR., in his capacity as Executive Secretary, Office of the President; RENATO CORONA, in his capacity as 1.4. The lease shall be for a period not exceeding fifteen (15) years. Assistant Executive Secretary and Chairman of the Presidential review Committee on the Lotto, Office of the President; PHILIPPINE CHARITY SWEEPSTAKES OFFICE; and PHILIPPINE GAMING MANAGEMENT CORPORATION, respondents. 1.5. The Lessor is expected to submit a comprehensive nationwide lottery development plan ("Development Plan") which will include the game, the marketing of the games, and the logistics to introduce the games to all the cities and municipalities of the DAVIDE, JR., J.: country within five (5) years.

This is a special civil action for prohibition and injunction, with a prayer for a temporary restraining order and preliminary xxx xxx xxx injunction, which seeks to prohibit and restrain the implementation of the "Contract of Lease" executed by the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Gaming Management Corporation (PGMC) in connection with the on- line lottery system, also known as "lotto." 1.7. The Lessor shall be selected based on its technical expertise, hardware and software capability, maintenance support, and financial resources. The Development Plan shall have a substantial bearing on the choice of the Lessor. The Lessor shall be a domestic corporation, with at least sixty percent (60%) of its shares owned by Filipino shareholders. Petitioner Kilosbayan, Incorporated (KILOSBAYAN) avers that it is a non-stock domestic corporation composed of civic-spirited citizens, pastors, priests, nuns, and lay leaders who are committed to the cause of truth, justice, and national renewal. The rest of the petitioners, except Senators Freddie Webb and Wigberto Tañada and Representative Joker P. Arroyo, are suing in their xxx xxx xxx capacities as members of the Board of Trustees of KILOSBAYAN and as taxpayers and concerned citizens. Senators Webb and Tañada and Representative Arroyo are suing in their capacities as members of Congress and as taxpayers and concerned citizens The Office of the President, the National Disaster Control Coordinating Council, the Philippine National Police, and the National of the Philippines. Bureau of Investigation shall be authorized to use the nationwide telecommunications system of the Facilities Free of Charge.

The pleadings of the parties disclose the factual antecedents which triggered off the filing of this petition. 1.8. Upon expiration of the lease, the Facilities shall be owned by PCSO without any additional consideration. 3

Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42) which grants it the authority to hold xxx xxx xxx and conduct "charity sweepstakes races, lotteries and other similar activities," the PCSO decided to establish an on- line lottery system for the purpose of increasing its revenue base and diversifying its sources of funds. Sometime before March 1993, after learning that the PCSO was interested in operating an on-line lottery system, the Berjaya Group Berhad, "a multinational company 2.2. OBJECTIVES and one of the ten largest public companies in Malaysia," long "engaged in, among others, successful lottery operations in Asia, running both Lotto and Digit games, thru its subsidiary, Sports Toto Malaysia," with its "affiliate, the International Totalizator The objectives of PCSO in leasing the Facilities from a private entity are as follows: Systems, Inc., . . . an American public company engaged in the international sale or provision of computer systems, softwares, terminals, training and other technical services to the gaming industry," "became interested to offer its services and resources to PCSO." As an initial step, Berjaya Group Berhad (through its individual nominees) organized with some Filipino investors in March xxx xxx xxx 1993 a Philippine corporation known as the Philippine Gaming Management Corporation (PGMC), which "was intended to be the medium through which the technical and management services required for the project would be offered and delivered to PCSO." 2.2.2. Enable PCSO to operate a nationwide on-line Lottery system at no expense or risk to the government. 1 xxx xxx xxx Before August 1993, the PCSO formally issued a Request for Proposal (RFP) for the Lease Contract of an on-line lottery system for the PCSO. 2 Relevant provisions of the RFP are the following: 2.4. DUTIES AND RESPONSIBILITIES OF THE LESSOR

1. EXECUTIVE SUMMARY xxx xxx xxx

xxx xxx xxx 2.4.2. THE LESSOR The Proponent is expected to furnish and maintain the Facilities, including the personnel needed to operate the computers, the On 4 November 1993, KILOSBAYAN sent an open letter to Presidential Fidel V. Ramos strongly opposing the setting up to the on- communications network and sales offices under a build-lease basis. The printing of tickets shall be undertaken under the line lottery system on the basis of serious moral and ethical considerations. 12 supervision and control of PCSO. The Facilities shall enable PCSO to computerize the entire gaming system. At the meeting of the Committee on Games and Amusements of the Senate on 12 November 1993, KILOSBAYAN reiterated its The Proponent is expected to formulate and design consumer-oriented Master Games Plan suited to the marketplace, especially vigorous opposition to the on-line lottery on account of its immorality and illegality. 13 geared to Filipino gaming habits and preferences. In addition, the Master Games Plan is expected to include a Product Plan for each game and explain how each will be introduced into the market. This will be an integral part of the Development Plan which On 19 November 1993, the media reported that despite the opposition, "Malacañang will push through with the operation of an PCSO will require from the Proponent. on-line lottery system nationwide" and that it is actually the respondent PCSO which will operate the lottery while the winning corporate bidders are merely "lessors." 14 xxx xxx xxx On 1 December 1993, KILOSBAYAN requested copies of all documents pertaining to the lottery award from Executive Secretary The Proponent is expected to provide upgrades to modernize the entire gaming system over the life ofthe lease contract. Teofisto Guingona, Jr. In his answer of 17 December 1993, the Executive Secretary informed KILOSBAYAN that the requested documents would be duly transmitted before the end of the month. 15. However, on that same date, an agreement denominated 16 4 as "Contract of Lease" was finally executed by respondent PCSO and respondent PGMC. The President, per the press statement The Proponent is expected to provide technology transfer to PCSO technical personnel. issued by the Office of the President, approved it on 20 December 1993. 17

7. GENERAL GUIDELINES FOR PROPONENTS In view of their materiality and relevance, we quote the following salient provisions of the Contract of Lease:

xxx xxx xxx 1. DEFINITIONS

Finally, the Proponent must be able to stand the acid test of proving that it is an entity able to take on the role of responsible The following words and terms shall have the following respective meanings: maintainer of the on-line lottery system, and able to achieve PSCO's goal of formalizing an on-line lottery system to achieve its mandated objective. 5 1.1 Rental Fee — Amount to be paid by PCSO to the LESSOR as compensation for the fulfillment of the obligations of the LESSOR under this Contract, including, but not limited to the lease of the Facilities. xxx xxx xxx

xxx xxx xxx 16. DEFINITION OF TERMS

1.3 Facilities — All capital equipment, computers, terminals, software (including source codes for the On-Line Lottery application Facilities: All capital equipment, computers, terminals, software, nationwide telecommunication network, software for the terminals, telecommunications and central systems), technology, intellectual property rights, ticket sales offices, furnishings, and fixtures; printing costs; cost of salaries and wages; advertising and telecommunications network, and furnishings and fixtures. promotion expenses; maintenance costs; expansion and replacement costs; security and insurance, and all other related expenses needed to operate nationwide on-line lottery system. 6 1.4 Maintenance and Other Costs — All costs and expenses relating to printing, manpower, salaries and wages, advertising and promotion, maintenance, expansion and replacement, security and insurance, and all other related expenses needed to operate Considering the above citizenship requirement, the PGMC claims that the Berjaya Group "undertook to reduce its equity stakes in an On-Line Lottery System, which shall be for the account of the LESSOR. All expenses relating to the setting-up, operation and PGMC to 40%," by selling 35% out of the original 75% foreign stockholdings to local investors. maintenance of ticket sales offices of dealers and retailers shall be borne by PCSO's dealers and retailers.

On 15 August 1993, PGMC submitted its bid to the PCSO. 7 1.5 Development Plan — The detailed plan of all games, the marketing thereof, number of players, value of winnings and the logistics required to introduce the games, including the Master Games Plan as approved by PCSO, attached hereto as Annex "A", The bids were evaluated by the Special Pre-Qualification Bids and Awards Committee (SPBAC) for the on-line lottery and its Bid modified as necessary by the provisions of this Contract. Report was thereafter submitted to the Office of the President. 8 The submission was preceded by complaints by the Committee's Chairperson, Dr. Mita Pardo de Tavera. 9 xxx xxx xxx

On 21 October 1993, the Office of the President announced that it had given the respondent PGMC the go-signal to operate the 1.8 Escrow Deposit — The proposal deposit in the sum of Three Hundred Million Pesos (P300,000,000.00) submitted by the country's on-line lottery system and that the corresponding implementing contract would be submitted not later than 8 10 LESSOR to PCSO pursuant to the requirements of the Request for Proposals. November 1993 "for final clearance and approval by the Chief Executive." This announcement was published in the Manila Standard, Philippine Daily Inquirer, and the Manila Times on 29 October 1993. 11 2. SUBJECT MATTER OF THE LEASE The LESSOR shall build, furnish and maintain at its own expense and risk the Facilities for the On-Line Lottery System of PCSO in 5.8 PCSO will be responsible for the payment of prize monies, commissions to agents and dealers, and taxes and levies (if any) the Territory on an exclusive basis. The LESSOR shall bear all Maintenance and Other Costs as defined herein. chargeable to the operator of the On-Line Lottery System. The LESSOR will bear all other Maintenance and Other Costs, except as provided in Section 1.4. xxx xxx xxx 5.9 PCSO shall assist the LESSOR in the following: 3. RENTAL FEE 5.9.1 Work permits for the LESSOR's staff; For and in consideration of the performance by the LESSOR of its obligations herein, PCSO shall pay LESSOR a fixed Rental Fee equal to four point nine percent (4.9%) of gross receipts from ticket sales, payable net of taxes required by law to be withheld, on 5.9.2 Approvals for importation of the Facilities; a semi-monthly basis. Goodwill, franchise and similar fees shall belong to PCSO. 5.9.3 Approvals and consents for the On-Line Lottery System; and 4. LEASE PERIOD 5.9.4 Business and premises licenses for all offices of the LESSOR and licenses for the telecommunications network. The period of the lease shall commence ninety (90) days from the date of effectivity of this Contract and shall run for a period of eight (8) years thereafter, unless sooner terminated in accordance with this Contract. 5.10 In the event that PCSO shall pre-terminate this Contract or suspend the operation of the On-Line Lottery System, in breach of this Contract and through no fault of the LESSOR, PCSO shall promptly, and in any event not later than sixty (60) days, reimburse 5. RIGHTS AND OBLIGATIONS OF PCSO AS OPERATOR OF THE ON-LINE LOTTERY SYSTEM the LESSOR the amount of its total investment cost associated with the On-Line Lottery System, including but not limited to the cost of the Facilities, and further compensate the LESSOR for loss of expected net profit after tax, computed over the unexpired term of the lease. PCSO shall be the sole and individual operator of the On-Line Lottery System. Consequently:

6. DUTIES AND RESPONSIBILITIES OF THE LESSOR 5.1 PCSO shall have sole responsibility to decide whether to implement, fully or partially, the Master Games Plan of the LESSOR. PCSO shall have the sole responsibility to determine the time for introducing new games to the market. The Master Games Plan included in Annex "A" hereof is hereby approved by PCSO. The LESSOR is one of not more than three (3) lessors of similar facilities for the nationwide On-Line Lottery System of PCSO. It is understood that the rights of the LESSOR are primarily those of a lessor of the Facilities, and consequently, all rights involving the business aspects of the use of the Facilities are within the jurisdiction of PCSO. During the term of the lease, the LESSOR shall. 5.2 PCSO shall have control over revenues and receipts of whatever nature from the On-Line Lottery System. After paying the Rental Fee to the LESSOR, PCSO shall have exclusive responsibility to determine the Revenue Allocation Plan; Provided, that the same shall be consistent with the requirement of R.A. No. 1169, as amended, which fixes a prize fund of fifty five percent (55%) on 6.1 Maintain and preserve its corporate existence, rights and privileges, and conduct its business in an orderly, efficient, and the average. customary manner.

5.3 PCSO shall have exclusive control over the printing of tickets, including but not limited to the design, text, and contents 6.2 Maintain insurance coverage with insurers acceptable to PCSO on all Facilities. thereof. 6.3 Comply with all laws, statues, rules and regulations, orders and directives, obligations and duties by which it is legally bound. 5.4 PCSO shall have sole responsibility over the appointment of dealers or retailers throughout the country. PCSO shall appoint the dealers and retailers in a timely manner with due regard to the implementation timetable of the On-Line Lottery System. Nothing 6.4 Duly pay and discharge all taxes, assessments and government charges now and hereafter imposed of whatever nature that herein shall preclude the LESSOR from recommending dealers or retailers for appointment by PCSO, which shall act on said may be legally levied upon it. recommendation within forty-eight (48) hours.

6.5 Keep all the Facilities in fail safe condition and, if necessary, upgrade, replace and improve the Facilities from time to time as 5.5 PCSO shall designate the necessary personnel to monitor and audit the daily performance of the On-Line Lottery System. For new technology develops, in order to make the On-Line Lottery System more cost-effective and/or competitive, and as may be this purpose, PCSO designees shall be given, free of charge, suitable and adequate space, furniture and fixtures, in all offices of the required by PCSO shall not impose such requirements unreasonably nor arbitrarily. LESSOR, including but not limited to its headquarters, alternate site, regional and area offices.

6.6 Provide PCSO with management terminals which will allow real-time monitoring of the On-Line Lottery System. 5.6 PCSO shall have the responsibility to resolve, and exclusive jurisdiction over, all matters involving the operation of the On-Line Lottery System not otherwise provided in this Contract. 6.7 Upon effectivity of this Contract, commence the training of PCSO and other local personnel and the transfer of technology and expertise, such that at the end of the term of this Contract, PCSO will be able to effectively take-over the Facilities and efficiently 5.7 PCSO shall promulgate procedural and coordinating rules governing all activities relating to the On-Line Lottery System. operate the On-Line Lottery System. 6.8 Undertake a positive advertising and promotions campaign for both institutional and product lines without engaging in PCSO may, at its option, require the LESSOR to establish the telecommunications network in accordance with the above Timetable negative advertising against other lessors. in provinces where the LESSOR has not yet installed terminals. Provided, that such provinces have existing nodes. Once a municipality or city is serviced by land lines of a licensed public telephone company, and such lines are connected to Metro Manila, then the obligation of the LESSOR to connect such municipality or city through a telecommunications network shall cease 6.9 Bear all expenses and risks relating to the Facilities including, but not limited to, Maintenance and Other Costs and: with respect to such municipality or city. The voice facility will cover the four offices of the Office of the President, National Disaster Control Coordinating Council, Philippine National Police and the National Bureau of Investigation, and each city and xxx xxx xxx municipality in the Territory except Metro Manila, and those cities and municipalities which have easy telephone access from these four offices. Voice calls from the four offices shall be transmitted via radio or VSAT to the remote municipalities which will 6.10 Bear all risks if the revenues from ticket sales, on an annualized basis, are insufficient to pay the entire prize money. be connected to this voice facility through wired network or by radio. The facility shall be designed to handle four private conversations at any one time.

6.11 Be, and is hereby, authorized to collect and retain for its own account, a security deposit from dealers and retailers, in an amount determined with the approval of PCSO, in respect of equipment supplied by the LESSOR. PCSO's approval shall not be xxx xxx xxx unreasonably withheld. 13. STOCK DISPERSAL PLAN xxx xxx xxx Within two (2) years from the effectivity of this Contract, the LESSOR shall cause itself to be listed in the local stock exchange and 6.12 Comply with procedural and coordinating rules issued by PCSO. offer at least twenty five percent (25%) of its equity to the public.

7. REPRESENTATIONS AND WARRANTIES 14. NON-COMPETITION

The LESSOR represents and warrants that: The LESSOR shall not, directly or indirectly, undertake any activity or business in competition with or adverse to the On-Line Lottery System of PCSO unless it obtains the latter's prior written consent thereto.

7.1 The LESSOR is corporation duly organized and existing under the laws of the Republic of the Philippines, at least sixty percent (60%) of the outstanding capital stock of which is owned by Filipino shareholders. The minimum required Filipino equity 15. HOLD HARMLESS CLAUSE participation shall not be impaired through voluntary or involuntary transfer, disposition, or sale of shares of stock by the present stockholders. 15.1 The LESSOR shall at all times protect and defend, at its cost and expense, PCSO from and against any and all liabilities and claims for damages and/or suits for or by reason of any deaths of, or any injury or injuries to any person or persons, or damages to 7.2 The LESSOR and its Affiliates have the full corporate and legal power and authority to own and operate their properties and to property of any kind whatsoever, caused by the LESSOR, its subcontractors, its authorized agents or employees, from any cause or carry on their business in the place where such properties are now or may be conducted. . . . causes whatsoever.

7.3 The LESSOR has or has access to all the financing and funding requirements to promptly and effectively carry out the terms of 15.2 The LESSOR hereby covenants and agrees to indemnify and hold PCSO harmless from all liabilities, charges, expenses this Contract. . . . (including reasonable counsel fees) and costs on account of or by reason of any such death or deaths, injury or injuries, liabilities, claims, suits or losses caused by the LESSOR's fault or negligence.

7.4 The LESSOR has or has access to all the managerial and technical expertise to promptly and effectively carry out the terms of this Contract. . . . 15.3 The LESSOR shall at all times protect and defend, at its own cost and expense, its title to the facilities and PCSO's interest therein from and against any and all claims for the duration of the Contract until transfer to PCSO of ownership of the serviceable Facilities. xxx xxx xxx

16. SECURITY 10. TELECOMMUNICATIONS NETWORK

16.1 To ensure faithful compliance by the LESSOR with the terms of the Contract, the LESSOR shall secure a Performance Bond The LESSOR shall establish a telecommunications network that will connect all municipalities and cities in the Territory in from a reputable insurance company or companies acceptable to PCSO. accordance with, at the LESSOR's option, either of the LESSOR's proposals (or a combinations of both such proposals) attached hereto as Annex "B," and under the following PCSO schedule: 16.2 The Performance Bond shall be in the initial amount of Three Hundred Million Pesos (P300,000,000.00), to its U.S. dollar equivalent, and shall be renewed to cover the duration of the Contract. However, the Performance Bond shall be reduced xxx xxx xxx proportionately to the percentage of unencumbered terminals installed; Provided, that the Performance Bond shall in no case be less than One Hundred Fifty Million Pesos (P150,000,000.00). 16.3 The LESSOR may at its option maintain its Escrow Deposit as the Performance Bond. . . . Considering the denial by the Office of the President of its protest and the statement of Assistant Executive Secretary Renato Corona that "only a court injunction can stop Malacañang," and the imminent implementation of the Contract of Lease in February 1994, KILOSBAYAN, with its co-petitioners, filed on 28 January 1994 this petition. 17. PENALTIES

In support of the petition, the petitioners claim that: 17.1 Except as may be provided in Section 17.2, should the LESSOR fail to take remedial measures within seven (7) days, and rectify the breach within thirty (30) days, from written notice by PCSO of any wilfull or grossly negligent violation of the material terms and conditions of this Contract, all unencumbered Facilities shall automatically become the property of PCSO without . . . X X THE OFFICE OF THE PRESIDENT, ACTING THROUGH RESPONDENTS EXECUTIVE SECRETARY AND/OR ASSISTANT EXECUTIVE consideration and without need for further notice or demand by PCSO. The Performance Bond shall likewise be forfeited in favor SECRETARY FOR LEGAL AFFAIRS, AND THE PCSO GRAVELY ABUSE[D] THEIR DISCRETION AND/OR FUNCTIONS TANTAMOUNT TO of PCSO. LACK OF JURISDICTION AND/OR AUTHORITY IN RESPECTIVELY: (A) APPROVING THE AWARD OF THE CONTRACT TO, AND (B) ENTERING INTO THE SO-CALLED "CONTRACT OF LEASE" WITH, RESPONDENT PGMC FOR THE INSTALLATION, ESTABLISHMENT AND OPERATION OF THE ON-LINE LOTTERY AND TELECOMMUNICATION SYSTEMS REQUIRED AND/OR AUTHORIZED UNDER THE SAID 17.2 Should the LESSOR fail to comply with the terms of the Timetables provided in Section 9 and 10, it shall be subject to an initial CONTRACT, CONSIDERING THAT: Penalty of Twenty Thousand Pesos (P20,000.00), per city or municipality per every month of delay; Provided, that the Penalty shall increase, every ninety (90) days, by the amount of Twenty Thousand Pesos (P20,000.00) per city or municipality per month, whilst shall failure to comply persists. The penalty shall be deducted by PCSO from the rental fee. a) Under Section 1 of the Charter of the PCSO, the PCSO is prohibited from holding and conducting lotteries "in collaboration, association or joint venture with any person, association, company or entity"; xxx xxx xxx b) Under Act No. 3846 and established jurisprudence, a Congressional franchise is required before any person may be allowed to establish and operate said telecommunications system; 20. OWNERSHIP OF THE FACILITIES

c) Under Section 11, Article XII of the Constitution, a less than 60% Filipino-owned and/or controlled After expiration of the term of the lease as provided in Section 4, the Facilities directly required for the On-Line Lottery System corporation, like the PGMC, is disqualified from operating a public service, like the said telecommunications mentioned in Section 1.3 shall automatically belong in full ownership to PCSO without any further consideration other than the system; and Rental Fees already paid during the effectivity of the lease.

d) Respondent PGMC is not authorized by its charter and under the Foreign Investment Act (R.A. No. 7042) 21. TERMINATION OF THE LEASE to install, establish and operate the on-line lotto and telecommunications systems. 18

PCSO may terminate this Contract for any breach of the material provisions of this Contract, including the following: Petitioners submit that the PCSO cannot validly enter into the assailed Contract of Lease with the PGMC because it is an arrangement wherein the PCSO would hold and conduct the on-line lottery system in "collaboration" or "association" with the 21.1 The LESSOR is insolvent or bankrupt or unable to pay its debts, stops or suspends or threatens to stop or suspend payment of PGMC, in violation of Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and all or a material part of its debts, or proposes or makes a general assignment or an arrangement or compositions with or for the conducting charity sweepstakes races, lotteries, and other similar activities "in collaboration, association or joint venture with any benefit of its creditors; or person, association, company or entity, foreign or domestic." Even granting arguendo that a lease of facilities is not within the contemplation of "collaboration" or "association," an analysis, however, of the Contract of Lease clearly shows that there is a 21.2 An order is made or an effective resolution passed for the winding up or dissolution of the LESSOR or when it ceases or "collaboration, association, or joint venture between respondents PCSO and PGMC in the holding of the On-Line Lottery System," threatens to cease to carry on all or a material part of its operations or business; or and that there are terms and conditions of the Contract "showing that respondent PGMC is the actual lotto operator and not respondent PCSO." 19

21.3 Any material statement, representation or warranty made or furnished by the LESSOR proved to be materially false or misleading; The petitioners also point out that paragraph 10 of the Contract of Lease requires or authorizes PGMC to establish a telecommunications network that will connect all the municipalities and cities in the territory. However, PGMC cannot do that because it has no franchise from Congress to construct, install, establish, or operate the network pursuant to Section 1 of Act No. said termination to take effect upon receipt of written notice of termination by the LESSOR and failure to take remedial action 3846, as amended. Moreover, PGMC is a 75% foreign-owned or controlled corporation and cannot, therefore, be granted a within seven (7) days and cure or remedy the same within thirty (30) days from notice. franchise for that purpose because of Section 11, Article XII of the 1987 Constitution. Furthermore, since "the subscribed foreign capital" of the PGMC "comes to about 75%, as shown by paragraph EIGHT of its Articles of Incorporation," it cannot lawfully enter Any suspension, cancellation or termination of this Contract shall not relieve the LESSOR of any liability that may have already into the contract in question because all forms of gambling — and lottery is one of them — are included in the so-called foreign 20 accrued hereunder. investments negative list under the Foreign Investments Act (R.A. No. 7042) where only up to 40% foreign capital is allowed.

xxx xxx xxx Finally, the petitioners insist that the Articles of Incorporation of PGMC do not authorize it to establish and operate an on-line lottery and telecommunications systems. 21 Accordingly, the petitioners pray that we issue a temporary restraining order and a writ of preliminary injunction commanding the Several parties filed motions to intervene as petitioners in this case, 27 but only the motion of Senators Alberto Romulo, Arturo respondents or any person acting in their places or upon their instructions to cease and desist from implementing the challenged Tolentino, Francisco Tatad, Gloria Macapagal-Arroyo, Vicente Sotto III, John Osmeña, Ramon Revilla, and Jose Lina 28 was granted, Contract of Lease and, after hearing the merits of the petition, that we render judgment declaring the Contract of Lease void and and the respondents were required to comment on their petition in intervention, which the public respondents and PGMC did. without effect and making the injunction permanent. 22 In the meantime, the petitioners filed with the Securities and Exchange Commission on 29 March 1994 a petition against PGMC We required the respondents to comment on the petition. for the nullification of the latter's General Information Sheets. That case, however, has no bearing in this petition.

In its Comment filed on 1 March 1994, private respondent PGMC asserts that "(1) [it] is merely an independent contractor for a On 11 April 1994, we heard the parties in oral arguments. Thereafter, we resolved to consider the matter submitted for resolution piece of work, (i.e., the building and maintenance of a lottery system to be used by PCSO in the operation of its lottery franchise); and pending resolution of the major issues in this case, to issue a temporary restraining order commanding the respondents or and (2) as such independent contractor, PGMC is not a co-operator of the lottery franchise with PCSO, nor is PCSO sharing its any person acting in their place or upon their instructions to cease and desist from implementing the challenged Contract of franchise, 'in collaboration, association or joint venture' with PGMC — as such statutory limitation is viewed from the context, Lease. intent, and spirit of Republic Act 1169, as amended by Batas Pambansa 42." It further claims that as an independent contractor for a piece of work, it is neither engaged in "gambling" nor in "public service" relative to the telecommunications network, which the In the deliberation on this case on 26 April 1994, we resolved to consider only these issues: (a) the locus standi of the petitioners, petitioners even consider as an "indispensable requirement" of an on-line lottery system. Finally, it states that the execution and and (b) the legality and validity of the Contract of Lease in the light of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, implementation of the contract does not violate the Constitution and the laws; that the issue on the "morality" of the lottery which prohibits the PCSO from holding and conducting lotteries "in collaboration, association or joint venture with any person, franchise granted to the PCSO is political and not judicial or legal, which should be ventilated in another forum; and that the association, company or entity, whether domestic or foreign." On the first issue, seven Justices voted to sustain the locus standi of "petitioners do not appear to have the legal standing or real interest in the subject contract and in obtaining the reliefs sought." 23 the petitioners, while six voted not to. On the second issue, the seven Justices were of the opinion that the Contract of Lease violates the exception to Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid and contrary to law. In their Comment filed by the Office of the Solicitor General, public respondents Executive Secretary Teofisto Guingona, Jr., The six Justices stated that they wished to express no opinion thereon in view of their stand on the first issue. The Chief Justice Assistant Executive Secretary Renato Corona, and the PCSO maintain that the contract of lease in question does not violate took no part because one of the Directors of the PCSO is his brother-in-law. Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and that the petitioner's interpretation of the phrase "in collaboration, association or joint venture" in Section 1 is "much too narrow, strained and utterly devoid of logic" for it "ignores the reality that This case was then assigned to this ponente for the writing of the opinion of the Court. PCSO, as a corporate entity, is vested with the basic and essential prerogative to enter into all kinds of transactions or contracts as may be necessary for the attainment of its purposes and objectives." What the PCSO charter "seeks to prohibit is that arrangement akin to a "joint venture" or partnership where there is "community of interest in the business, sharing of profits and The preliminary issue on the locus standi of the petitioners should, indeed, be resolved in their favor. A party's standing before losses, and a mutual right of control," a characteristic which does not obtain in a contract of lease." With respect to the challenged this Court is a procedural technicality which it may, in the exercise of its discretion, set aside in view of the importance of the 29 Contract of Lease, the "role of PGMC is limited to that of a lessor of the facilities" for the on-line lottery system; in "strict technical issues raised. In the landmark Emergency Powers Cases, this Court brushed aside this technicality because "the transcendental and legal sense," said contract "can be categorized as a contract for a piece of work as defined in Articles 1467, 1713 and 1644 of importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, the Civil Code." technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-2821)." 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," 30 or that it "enjoys an open discretion to entertain the same or not." 31 In De La Llana vs. Alba, 32 this Court declared: They further claim that the establishment of the telecommunications system stipulated in the Contract of Lease does not require a congressional franchise because PGMC will not operate a public utility; moreover, PGMC's "establishment of a telecommunications system is not intended to establish a telecommunications business," and it has been held that where the 1. The argument as to the lack of standing of petitioners is easily resolved. As far as Judge de la Llana is concerned, he certainly facilities are operated "not for business purposes but for its own use," a legislative franchise is not required before a certificate of falls within the principle set forth in Justice Laurel's opinion in People vs. Vera [65 Phil. 56 (1937)]. Thus: "The unchallenged rule is public convenience can be granted. 24 Even granting arguendo that PGMC is a public utility, pursuant to Albano S. that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has Reyes, 25 "it can establish a telecommunications system even without a legislative franchise because not every public utility is sustained, or will sustain, direct injury as a result of its enforcement [Ibid, 89]. The other petitioners as members of the bar and required to secure a legislative franchise before it could establish, maintain, and operate the service"; and, in any case, "PGMC's officers of the court cannot be considered as devoid of "any personal and substantial interest" on the matter. There is relevance to establishment of the telecommunications system stipulated in its contract of lease with PCSO falls within the exceptions under this excerpt from a separate opinion in Aquino, Jr. v. Commission on Elections [L-40004, January 31, 1975, 62 SCRA 275]: "Then Section 1 of Act No. 3846 where a legislative franchise is not necessary for the establishment of radio stations." there is the attack on the standing of petitioners, as vindicating at most what they consider a public right and not protecting their rights as individuals. This is to conjure the specter of the public right dogma as an inhibition to parties intent on keeping public officials staying on the path of constitutionalism. As was so well put by Jaffe; "The protection of private rights is an essential They also argue that the contract does not violate the Foreign Investment Act of 1991; that the Articles of Incorporation of PGMC constituent of public interest and, conversely, without a well-ordered state there could be no enforcement of private rights. authorize it to enter into the Contract of Lease; and that the issues of "wisdom, morality and propriety of acts of the executive Private and public interests are, both in a substantive and procedural sense, aspects of the totality of the legal order." Moreover, department are beyond the ambit of judicial review." petitioners have convincingly shown that in their capacity as taxpayers, their standing to sue has been amply demonstrated. There would be a retreat from the liberal approach followed in Pascual v. Secretary of Public Works, foreshadowed by the very decision Finally, the public respondents allege that the petitioners have no standing to maintain the instant suit, citing our resolution in of People v. Vera where the doctrine was first fully discussed, if we act differently now. I do not think we are prepared to take that Valmonte vs. Philippine Charity Sweepstakes Office. 26 step. Respondents, however, would hard back to the American Supreme Court doctrine in Mellon v. Frothingham, with their claim that what petitioners possess "is an interest which is shared in common by other people and is comparatively so minute and indeterminate as to afford any basis and assurance that the judicial process can act on it." That is to speak in the language of a bygone era, even in the United States. For as Chief Justice Warren clearly pointed out in the later case of Flast v. Cohen, the barrier debt service in the General Appropriations Act; 40 (d) R.A. No. 7056 on the holding of desynchronized elections; 41 (d) R.A. No. 1869 thus set up if not breached has definitely been lowered. (the charter of the Philippine Amusement and Gaming Corporation) on the ground that it is contrary to morals, public policy, and order; 42 and (f) R.A. No. 6975, establishing the Philippine National 43 33 Police. In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan, reiterated in Basco vs. Philippine Amusements and Gaming Corporation, 34 this Court stated: 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; 44 (b) P.D. Nos. 991 and 1033 Objections to taxpayers' suits for lack of sufficient personality standing or interest are, however, in the main procedural matters. insofar as they proposed amendments to the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to supervise, Considering the importance to the public of the cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to control, hold, and conduct the referendum-plebiscite on 16 October 1976; 45 (c) the bidding for the sale of the 3,179 square determine whether or not the other branches of government have kept themselves within the limits of the Constitution and the meters of land at Roppongi, Minato-ku, Tokyo, Japan; 46 (d) the approval without hearing by the Board of Investments of the laws and that they have not abused the discretion given to them, this Court has brushed aside technicalities of procedure and has amended application of the Bataan Petrochemical Corporation to transfer the site of its plant from Bataan to Batangas and the taken cognizance of these petitions. validity of such transfer and the shift of feedstock from naphtha only to naphtha and/or liquefied petroleum gas; 47 (e) the decisions, orders, rulings, and resolutions of the Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, 35 and in Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, it declared: Commissioner of Customs, and the Fiscal Incentives Review Board exempting the National Power Corporation from indirect tax and duties; 48 (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on the ground that the hearings conducted 49 With particular regard to the requirement of proper party as applied in the cases before us, we hold that the same is satisfied by on the second provisional increase in oil prices did not allow the petitioner substantial cross-examination; (g) Executive Order the petitioners and intervenors because each of them has sustained or is in danger of sustaining an immediate injury as a result of No. 478 which levied a special duty of P0.95 per liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products; 50 (h) resolutions of the Commission on Elections concerning the apportionment, by district, of the number of elective the acts or measures complained of. [Ex Parte Levitt, 303 US 633]. And even if, strictly speaking, they are not covered by the 51 52 definition, it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its members of Sanggunians; and (i) memorandum orders issued by a Mayor affecting the Chief of Police of Pasay City. addressing and resolving the serious constitutional questions raised. In the 1975 case of Aquino vs. Commission on Elections, 53 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 far-reaching implications of In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the constitutionality of several 54 executive orders issued by President Quirino although they were invoking only an indirect and general interest shared in common the petition. We did no less in De Guia vs. COMELEC where, although we declared that De Guia "does not appear to have locus with the public. The Court dismissed the objective that they were not proper parties and ruled that the transcendental importance standi, a standing in law, a personal or substantial interest," we brushed aside the procedural infirmity "considering the to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of importance of the issue involved, concerning as it does the political exercise of qualified voters affected by the apportionment, procedure. We have since then applied this exception in many other cases. (Emphasis supplied) and petitioner alleging abuse of discretion and violation of the Constitution by respondent."

In Daza vs. Singson, 36 this Court once more said: We find the instant petition to be of transcendental importance to the public. The issues it raised are of paramount public interest and of a category even higher than those involved in many of the aforecited cases. The ramifications of such issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter- . . . For another, we have early as in the Emergency Powers Cases that where serious constitutional questions are involved, "the productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if to raise. The legal standing then of the petitioners deserves recognition and, in the exercise of its sound discretion, this Court we must, technicalities of procedure." The same policy has since then been consistently followed by the Court, as in Gonzales vs. hereby brushes aside the procedural barrier which the respondents tried to take advantage of. Commission on Elections [21 SCRA 774] . . .

And now on the substantive issue. The Federal Supreme Court of the United States of America has also expressed its discretionary power to liberalize the rule on locus standi. In United States vs. Federal Power Commission and Virginia Rea Association vs. Federal Power Commission, 37 it held: Section 1 of R.A. No. 1169, as amending by B.P. Blg. 42, prohibits the PCSO from holding and conducting lotteries "in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign." Section 1 provides: We hold that petitioners have standing. Differences of view, however, preclude a single opinion of the Court as to both petitioners. It would not further clarification of this complicated specialty of federal jurisdiction, the solution of whose problems is in any event more or less determined by the specific circumstances of individual situations, to set out the divergent grounds in Sec. 1. The Philippine Charity Sweepstakes Office. — The Philippine Charity Sweepstakes Office, hereinafter designated the Office, support of standing in these cases. shall be the principal government agency for raising and providing for funds for health programs, medical assistance and services and charities of national character, and as such shall have the general powers conferred in section thirteen of Act Numbered One thousand four hundred fifty-nine, as amended, and shall have the authority: 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 A. To hold and conduct charity sweepstakes races, lotteries and other similar activities, in such frequency and manner, as shall be such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation determined, and subject to such rules and regulations as shall be promulgated by the Board of Directors. of vacation and sick leave to Senators and Representatives and to elective officials of both Houses of Congress; 38 (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; 39 (c) the automatic appropriation for B. Subject to the approval of the Minister of Human Settlements, to engage in health and welfare-related investments, programs, THE SPEAKER. Is there any objection to the amendment? (Silence) The amendment, as amended, is approved. 57 projects and activities which may be profit-oriented, by itself or in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign, except for the activities mentioned in the preceding paragraph (A), Further amendments to paragraph B were introduced and approved. When Assemblyman Zamora read the final text of paragraph for the purpose of providing for permanent and continuing sources of funds for health programs, including the expansion of B as further amended, the earlier approved amendment of Assemblyman Davide became "EXCEPT FOR THE ACTIVITIES existing ones, medical assistance and services, and/or charitable grants: Provided, That such investment will not compete with the MENTIONED IN PARAGRAPH (A)"; and by virtue of the amendment introduced by Assemblyman Emmanuel Pelaez, the word private sector in areas where investments are adequate as may be determined by the National Economic and Development PRECEDING was inserted before PARAGRAPH. Assemblyman Pelaez introduced other amendments. Thereafter, the new Authority. (emphasis supplied) 58 paragraph B was approved.

The language of the section is indisputably clear that with respect to its franchise or privilege "to hold and conduct charity This is now paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42. sweepstakes races, lotteries and other similar activities," the PCSO cannot exercise it "in collaboration, association or joint venture" with any other party. This is the unequivocal meaning and import of the phrase "except for the activities mentioned in the preceding paragraph (A)," namely, "charity sweepstakes races, lotteries and other similar activities." No interpretation of the said provision to relax or circumvent the prohibition can be allowed since the privilege to hold or conduct charity sweepstakes races, lotteries, or other similar activities is a franchise granted by the legislature to the PCSO. It is a settled rule that "in all grants by the government to individuals or corporations of rights, privileges and franchises, the words are to be B.P. Blg. 42 originated from Parliamentary Bill No. 622, which was covered by Committee Report No. 103 as reported out by the taken most strongly against the grantee .... [o]ne who claims a franchise or privilege in derogation of the common rights of the Committee on Socio-Economic Planning and Development of the Interim Batasang Pambansa. The original text of paragraph B, public must prove his title thereto by a grant which is clearly and definitely expressed, and he cannot enlarge it by equivocal or Section 1 of Parliamentary Bill No. 622 reads as follows: doubtful provisions or by probable inferences. Whatever is not unequivocally granted is withheld. Nothing passes by mere implication." 59 To engage in any and all investments and related profit-oriented projects or programs and activities by itself or in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign, for the main purpose of In short then, by the exception explicitly made in paragraph B, Section 1 of its charter, the PCSO cannot share its franchise with raising funds for health and medical assistance and services and charitable grants. 55 another by way of collaboration, association or joint venture. Neither can it assign, transfer, or lease such franchise. It has been said that "the rights and privileges conferred under a franchise may, without doubt, be assigned or transferred when the grant is During the period of committee amendments, the Committee on Socio-Economic Planning and Development, through to the grantee and assigns, or is authorized by statute. On the other hand, the right of transfer or assignment may be restricted by Assemblyman Ronaldo B. Zamora, introduced an amendment by substitution to the said paragraph B such that, as amended, it statute or the constitution, or be made subject to the approval of the grantor or a governmental agency, such as a public utilities should read as follows: commission, exception that an existing right of assignment cannot be impaired by subsequent legislation." 60

Subject to the approval of the Minister of Human Settlements, to engage in health-oriented investments, programs, projects and It may also be pointed out that the franchise granted to the PCSO to hold and conduct lotteries allows it to hold and conduct a activities which may be profit- oriented, by itself or in collaboration, association, or joint venture with any person, association, species of gambling. It is settled that "a statute which authorizes the carrying on of a gambling activity or business should be company or entity, whether domestic or foreign, for the purpose of providing for permanent and continuing sources of funds for strictly construed and every reasonable doubt so resolved as to limit the powers and rights claimed under its authority." 61 health programs, including the expansion of existing ones, medical assistance and services and/or charitable grants. 56 Does the challenged Contract of Lease violate or contravene the exception in Section 1 of R.A. No. 1169, as amended by B.P. Blg. Before the motion of Assemblyman Zamora for the approval of the amendment could be acted upon, Assemblyman Davide 42, which prohibits the PCSO from holding and conducting lotteries "in collaboration, association or joint venture with" another? introduced an amendment to the amendment: We agree with the petitioners that it does, notwithstanding its denomination or designation as a (Contract of Lease). We are MR. DAVIDE. Mr. Speaker. neither convinced nor moved or fazed by the insistence and forceful arguments of the PGMC that it does not because in reality it is only an independent contractor for a piece of work, i.e., the building and maintenance of a lottery system to be used by the PCSO in the operation of its lottery franchise. Whether the contract in question is one of lease or whether the PGMC is merely an THE SPEAKER. The gentleman from Cebu is recognized. independent contractor should not be decided on the basis of the title or designation of the contract but by the intent of the parties, which may be gathered from the provisions of the contract itself. Animus hominis est anima scripti. The intention of the MR. DAVIDE. May I introduce an amendment to the committee amendment? The amendment would be to insert after "foreign" in party is the soul of the instrument. In order to give life or effect to an instrument, it is essential to look to the intention of the the amendment just read the following: EXCEPT FOR THE ACTIVITY IN LETTER (A) ABOVE. individual who executed it. 62 And, pursuant to Article 1371 of the Civil Code, "to determine the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered." To put it more bluntly, no one should be When it is joint venture or in collaboration with any entity such collaboration or joint venture must not include activity activity deceived by the title or designation of a contract. letter (a) which is the holding and conducting of sweepstakes races, lotteries and other similar acts. A careful analysis and evaluation of the provisions of the contract and a consideration of the contemporaneous acts of the PCSO MR. ZAMORA. We accept the amendment, Mr. Speaker. and PGMC indubitably disclose that the contract is not in reality a contract of lease under which the PGMC is merely an independent contractor for a piece of work, but one where the statutorily proscribed collaboration or association, in the least, or joint venture, at the most, exists between the contracting parties. Collaboration is defined as the acts of working together in a MR. DAVIDE. Thank you, Mr. Speaker. joint project. 63 Association means the act of a number of persons in uniting together for some special purpose or business. 64 Joint venture is defined as an association of persons or companies jointly undertaking some commercial enterprise; generally all product lines without engaging in negative advertising against other lessors; bear the salaries and related costs of skilled and contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct qualified personnel for administrative and technical operations; comply with procedural and coordinating rules issued by the and govern the policy in connection therewith, and duty, which may be altered by agreement to share both in profit and PCSO; and to train PCSO and other local personnel and to effect the transfer of technology and other expertise, such that at the losses. 65 end of the term of the contract, the PCSO will be able to effectively take over the Facilities and efficiently operate the on-line lottery system. The latter simply means that, indeed, the managers, technicians or employees who shall operate the on-line lottery system are not managers, technicians or employees of the PCSO, but of the PGMC and that it is only after the expiration of The contemporaneous acts of the PCSO and the PGMC reveal that the PCSO had neither funds of its own nor the expertise to the contract that the PCSO will operate the system. After eight years, the PCSO would automatically become the owner of the operate and manage an on-line lottery system, and that although it wished to have the system, it would have it "at no expense or Facilities without any other further consideration. risks to the government." Because of these serious constraints and unwillingness to bear expenses and assume risks, the PCSO was candid enough to state in its RFP that it is seeking for "a suitable contractor which shall build, at its own expense, all the facilities needed to operate and maintain" the system; exclusively bear "all capital, operating expenses and expansion expenses and risks"; For these reasons, too, the PGMC has the initial prerogative to prepare the detailed plan of all games and the marketing thereof, and submit "a comprehensive nationwide lottery development plan . . . which will include the game, the marketing of the games, and determine the number of players, value of winnings, and the logistics required to introduce the games, including the Master and the logistics to introduce the game to all the cities and municipalities of the country within five (5) years"; and that the Games Plan. Of course, the PCSO has the reserved authority to disapprove them. 68 And, while the PCSO has the sole responsibility operation of the on-line lottery system should be "at no expense or risk to the government" — meaning itself, since it is a over the appointment of dealers and retailers throughout the country, the PGMC may, nevertheless, recommend for appointment government-owned and controlled agency. The facilities referred to means "all capital equipment, computers, terminals, dealers and retailers which shall be acted upon by the PCSO within forty-eight hours and collect and retain, for its own account, a software, nationwide telecommunications network, ticket sales offices, furnishings and fixtures, printing costs, costs of salaries security deposit from dealers and retailers in respect of equipment supplied by it. and wages, advertising and promotions expenses, maintenance costs, expansion and replacement costs, security and insurance, and all other related expenses needed to operate a nationwide on-line lottery system." This joint venture is further established by the following:

In short, the only contribution the PCSO would have is its franchise or authority to operate the on-line lottery system; with the (a) Rent is defined in the lease contract as the amount to be paid to the PGMC as compensation for the fulfillment of its rest, including the risks of the business, being borne by the proponent or bidder. It could be for this reason that it warned that obligations under the contract, including, but not limited to the lease of the Facilities. However, this rent is not actually a fixed "the proponent must be able to stand to the acid test of proving that it is an entity able to take on the role of responsible amount. Although it is stated to be 4.9% of gross receipts from ticket sales, payable net of taxes required by law to be withheld, it maintainer of the on-line lottery system." The PCSO, however, makes it clear in its RFP that the proponent can propose a period of may be drastically reduced or, in extreme cases, nothing may be due or demandable at all because the PGMC binds itself to "bear the contract which shall not exceed fifteen years, during which time it is assured of a "rental" which shall not exceed 12% of gross all risks if the revenue from the ticket sales, on an annualized basis, are insufficient to pay the entire prize money." This risk- receipts. As admitted by the PGMC, upon learning of the PCSO's decision, the Berjaya Group Berhad, with its affiliates, wanted to bearing provision is unusual in a lessor-lessee relationship, but inherent in a joint venture. offer its services and resources to the PCSO. Forthwith, it organized the PGMC as "a medium through which the technical and management services required for the project would be offered and delivered to PCSO." 66 (b) In the event of pre-termination of the contract by the PCSO, or its suspension of operation of the on-line lottery system in breach of the contract and through no fault of the PGMC, the PCSO binds itself "to promptly, and in any event not later than sixty Undoubtedly, then, the Berjaya Group Berhad knew all along that in connection with an on-line lottery system, the PCSO had (60) days, reimburse the Lessor the amount of its total investment cost associated with the On-Line Lottery System, including but nothing but its franchise, which it solemnly guaranteed it had in the General Information of the RFP. 67 Howsoever viewed then, not limited to the cost of the Facilities, and further compensate the LESSOR for loss of expected net profit after tax, computed from the very inception, the PCSO and the PGMC mutually understood that any arrangement between them would necessarily over the unexpired term of the lease." If the contract were indeed one of lease, the payment of the expected profits or rentals for leave to the PGMC the technical, operations, and management aspects of the on-line lottery system while the PCSO would, the unexpired portion of the term of the contract would be enough. primarily, provide the franchise. The words Gaming and Management in the corporate name of respondent Philippine Gaming Management Corporation could not have been conceived just for euphemistic purposes. Of course, the RFP cannot substitute for the Contract of Lease which was subsequently executed by the PCSO and the PGMC. Nevertheless, the Contract of Lease (c) The PGMC cannot "directly or indirectly undertake any activity or business in competition with or adverse to the On-Line incorporates their intention and understanding. Lottery System of PCSO unless it obtains the latter's prior written consent." If the PGMC is engaged in the business of leasing equipment and technology for an on-line lottery system, we fail to see any acceptable reason why it should allow a restriction on the pursuit of such business. The so-called Contract of Lease is not, therefore, what it purports to be. Its denomination as such is a crafty device, carefully conceived, to provide a built-in defense in the event that the agreement is questioned as violative of the exception in Section 1 (B) of the PCSO's charter. The acuity or skill of its draftsmen to accomplish that purpose easily manifests itself in the Contract of (d) The PGMC shall provide the PCSO the audited Annual Report sent to its stockholders, and within two years from the effectivity Lease. It is outstanding for its careful and meticulous drafting designed to give an immediate impression that it is a contract of of the contract, cause itself to be listed in the local stock exchange and offer at least 25% of its equity to the public. If the PGMC is lease. Yet, woven therein are provisions which negate its title and betray the true intention of the parties to be in or to have a merely a lessor, this imposition is unreasonable and whimsical, and could only be tied up to the fact that the PGMC will actually joint venture for a period of eight years in the operation and maintenance of the on-line lottery system. operate and manage the system; hence, increasing public participation in the corporation would enhance public interest.

Consistent with the above observations on the RFP, the PCSO has only its franchise to offer, while the PGMC represents and (e) The PGMC shall put up an Escrow Deposit of P300,000,000.00 pursuant to the requirements of the RFP, which it may, at its warrants that it has access to all managerial and technical expertise to promptly and effectively carry out the terms of the option, maintain as its initial performance bond required to ensure its faithful compliance with the terms of the contract. contract. And, for a period of eight years, the PGMC is under obligation to keep all the Facilities in safe condition and if necessary, upgrade, replace, and improve them from time to time as new technology develops to make the on-line lottery system more cost- (f) The PCSO shall designate the necessary personnel to monitor and audit the daily performance of the on-line lottery system; effective and competitive; exclusively bear all costs and expenses relating to the printing, manpower, salaries and wages, and promulgate procedural and coordinating rules governing all activities relating to the on-line lottery system. The first further advertising and promotion, maintenance, expansion and replacement, security and insurance, and all other related expenses needed to operate the on-line lottery system; undertake a positive advertising and promotions campaign for both institutional and confirms that it is the PGMC which will operate the system and the PCSO may, for the protection of its interest, monitor and audit The Order dated April 20, 1994 reiterated the order of March 28, 1994, directing Mayor Lim to immediately issue to private the daily performance of the system. The second admits the coordinating and cooperative powers and functions of the parties. respondent the necessary permit or license pursuant to Ordinance No. 7065.

(g) The PCSO may validly terminate the contract if the PGMC becomes insolvent or bankrupt or is unable to pay its debts, or if it I stops or suspends or threatens to stop or suspend payment of all or a material part of its debts. On September 7, 1971, the Municipal Board of Manila passed Ordinance No. 7065 pursuant to Section 18(jj) of the Revised All of the foregoing unmistakably confirm the indispensable role of the PGMC in the pursuit, operation, conduct, and management Charter of Manila, granting private respondent a franchise to operate a jai-alai in the city. The ordinance is reproduced as follows; of the On-Line Lottery System. They exhibit and demonstrate the parties' indivisible community of interest in the conception, birth and growth of the on-line lottery, and, above all, in its profits, with each having a right in the formulation and implementation of AN ORDINANCE AUTHORIZING THE MAYOR TO ALLOW AND PERMIT THE ASSOCIATED DEVELOPMENT CORPORATION TO policies related to the business and sharing, as well, in the losses — with the PGMC bearing the greatest burden because of its ESTABLISH, MAINTAIN AND OPERATE A JAI-ALAI IN THE CITY OF MANILA, UNDER CERTAIN TERMS AND CONDITIONS AND FOR assumption of expenses and risks, and the PCSO the least, because of its confessed unwillingness to bear expenses and risks. In a OTHER PURPOSES. manner of speaking, each is wed to the other for better or for worse. In the final analysis, however, in the light of the PCSO's RFP and the above highlighted provisions, as well as the "Hold Harmless Clause" of the Contract of Lease, it is even safe to conclude that the actual lessor in this case is the PCSO and the subject matter thereof is its franchise to hold and conduct lotteries since it is, Be it ordained by the Municipal Board of the City of Manila, that: in reality, the PGMC which operates and manages the on-line lottery system for a period of eight years. Sec. 1. The Mayor is authorized, as he is hereby authorized to allow and permit the Associated Development Corporation to We thus declare that the challenged Contract of Lease violates the exception provided for in paragraph B, Section 1 of R.A. No. establish, maintain and operate a jai-alai in the City of Manila, under the following terms and conditions and such other terms and 1169, as amended by B.P. Blg. 42, and is, therefore, invalid for being contrary to law. This conclusion renders unnecessary further conditions as he (the Mayor) may prescribe for good reasons of general interest: discussion on the other issues raised by the petitioners. a. That the construction, establishment and maintenance of the jai-alai shall be at a place permissible under existing zoning WHEREFORE, the instant petition is hereby GRANTED and the challenged Contract of Lease executed on 17 December 1993 by ordinance of Manila; respondent Philippine Charity Sweepstakes Office (PCSO) and respondent Philippine Gaming Management Corporation (PGMC) is hereby DECLARED contrary to law and invalid. The Temporary Restraining Order issued on 11 April 1994 is hereby MADE b. That the games to be played daily shall commence not earlier than 5:00 in the afternoon; PERMANENT. No pronouncement as to costs. SO ORDERED.

c. That the City of Manila will receive a share of 2 1/2% on the annual gross receipts on all wagers or bets, 1/2% of which will accrue to the Games and Amusement Board as now provided by law;

G.R. No. 115044 September 1, 1994 d. That the corporation will, in addition, pay to the city an annual license fee of P3,000.00 and a daily permit fee of P200.00;

HON. ALFREDO S. LIM, in his capacity as Mayor of Manila; and THE CITY OF MANILA, petitioners, e. That the corporation will, to insure its faithful compliance of all the terms and conditions under this ordinance, put up a vs. performance bond from a surety acceptable to the city, in the amount of at least P30,000.00. HON. FELIPE G. PACQUING, as Judge, Regional Trial Court of Manila; and ASSOCIATED DEVELOPMENT CORPORATION, respondents. Sec. 2. The Mayor and the City Treasurer or their duly authorized representatives are hereby empowered to inspect at all times during regular business hours the books, records and accounts of the establishment, as well as to prescribe the manner in which QUIASON, J.: the books and financial statements of the entrepreneur shall be kept.

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the Orders dated March 28, 1994, April 11, Sec. 3. This ordinance shall take effect upon its approval. 1994 and April 20, 1994 of Judge Felipe G. Pacquing, presiding judge of the Regional Trial Court, Branch 40, Manila, issued in Civil Case No. 88-45660. Enacted originally by the Municipal Board on September 7, 1971; vetoed by the Mayor on September 27, 1971; modified and amended by the Municipal Board at its regular session today, October 12, 1971. The Order dated March 28, 1994 granted the motion of private respondent to compel petitioner Mayor Alfredo S. Lim to issue a permit or license in favor of private respondent pursuant to Ordinance No. 7065 upon compliance by private respondent with all Approved by His Honor, the Mayor, on 13 November 1971. the requirements set thereunder.

Thereafter, private respondent took steps preparatory to the establishment of the jai-alai at Ermita, Manila. Private respondent The Order dated April 11, 1994 denied the motion for reconsideration filed by petitioners of the Order dated May 28, 1994. retained the services of an architectural firm from Hongkong to design the fronton and contracted with a local firm for the construction of the building. On August 20, 1975, after the declaration of Martial Law, President Ferdinand E. Marcos promulgated Presidential Decree No. 771 Mayor Lopez appealed said decision to the Court of Appeals (CA G.R. No. 16477 SP) but on February 9, 1989, he filed a Notice of revoking the powers of the local government to grant permits or licenses and canceling all existing franchises to operate jai-alais. Withdrawal of Appeal.

Less than two months after P.D. No. 771 was issued, the Philippine Jai-Alai and Amusement Corporation, an enterprise controlled On May 5, 1989, the Court of Appeals promulgated a resolution, the dispositive part of which reads as follows: by Alfredo Romualdez, a brother-in-law of President Marcos, was granted a franchise to operate a jai-alai within the Greater Manila Area under P.D. No. 810. For the reasons stated in the NOTICE OF WITHDRAWAL OF APPEAL which was filed on February 9, 1989 by respondents appellants thru counsel let their appeal from the Decision dated September 9, 1989 and Order dated August 25, 1988, of the Regional Trial However, after the EDSA Resolution, President Corazon C. Aquino issued Executive Order No. 169, repealing P.D. No. 810. Court of Manila in Civil Case No. 88-45660 be as it is hereby considered WITHDRAWN (Rollo, p. 126).

On May 5, 1988, private respondent sought the resumption of its business operations under its franchise issued under Ordinance With the withdrawal of the appeal, the judgment in Civil Case No. 45560 became final and executory and was entered in the Book No. 7065. Mayor Gemiliano C. Lopez denied private respondent's request, as well as its motion for reconsideration. of Entries of Judgment of the Court of Appeals on May 26, 1989 and in the Book of Entries of Judgment of the Regional Trial Court on October 27, 1992. On August 2, 1988, private respondent filed a petition for mandamus and specific performance with the Regional Trial Court, Branch 40, Manila, docketed as Civil Case No. 88-45660. In 1991, the City of Manila filed an action to annul the franchise of private respondent with the Regional Trial Court, Branch 23, Manila, docketed as Civil Case No. 91-58913. In a decision dated September 9, 1989, Judge Augusto E. Villarin of Branch 40 held that Ordinance No. 7065 created a binding contract between the City of Manila and private respondent and that the City Mayor had no discretion but "to grant the necessary In said complaint, the City of Manila claimed that private respondent had abandoned its franchise granted under Ordinance No. permit or license allowing it to operate and maintain a jai-alai in the City of Manila pursuant to Ordinance No. 7065." 7065 and that said ordinance had been repealed by P.D. Nos. 771 and 810.

The trial court noted: Judge William Bayhon of Branch 23 noted that the issue of abandonment was squarely raised and resolved in Civil Case No. 88- 45660, while the issue of the repeal of Ordinance No. 7065 could have been pleaded but was not by the City of Manila as a defense in Civil Case No. 88-45660. According to him, the city had waived such a defense. To make matters worse, the city was in A careful reading, however, of Ordinance No. 7065 will readily show that the discretion, if any, allowed respondent Mayor, under estoppel to raise said issue since it had been issuing permits pursuant to the decision in Civil Case No. 88-45660 and collecting the the Ordinance, will be exercisable only after the permit, which he is mandated to issue, has been issued and the jai-alai fronton is corresponding fees. already operational. The Ordinance stipulates that the Mayor is authorized "to allow and permit petitioner to establish, maintain and operate a jai-alai in the City of Manila ," under the five conditions enumerated in subparagraphs "a" to "e" of Section 1 of the Ordinance. But a simple reading of Civil Case No. 91-58913, questioning the effectivity of the franchise granted private respondent under Ordinance No. 7065, was these "terms and conditions" patently shows that subparagraphs "b" to "e" are clearly conditions that will only come into play therefore dismissed on December 21, 1991. No appeal was taken from said dismissal of the case. after the jai-alai fronton has been put up or established; while the condition under sub-paragraph "a" appears to have been complied with satisfactorily by the petitioner, since no objection at all has been made by respondents to the proposed site for the The City of Manila filed with this Court another case for declaratory judgment to nullify the franchise to operate a jai-alai under jai-alai fronton, that is, the 25,000 sq. m. land area behind the present Harrison Plaza Complex located at Ermita, Manila. Ordinance No. 7065 (G.R. No. 101768). The petition was dismissed in a resolution dated October 3, 1991 "for lack of jurisdiction."

It is therefore, quite evident to this Court that no discretion is left to the respondent Mayor to allow or not petitioner "to It may be of interest to note that three Manila councilors also filed an action to compel Mayor Lopez to cancel the permit and establish, maintain and operate a jai-alai in the City of Manila." The Court is satisfied that the requirements of Sec. 3, Rule 65, have license he issued in favor of private petitioner pursuant to Ordinance No. 7065 (Maceda v. Lopez, Civil Case No. 91-58930, been met. Regional Trial Court, Branch 37, Manila). In his answer to said petition, Mayor Lopez pointed out that in issuing the permit and license, he was just acting in obedience to the final judgment in Civil Case No. 88-45660. Moreover, it is well-settled that the grant of a franchise, when accepted and acted upon by the grantee, creates a contract. And, going by contract law, under the undisputed circumstances in this case, respondent Mayor, in behalf of the City, is obliged to Judge Enrico A. Laxamana, presiding judge of Branch 37, made the following observations: comply with what is required of him under the Ordinance. At the very least, the enactment and approval of Ordinance No. 7065 on November 13, 1971, created a bilateral contract between petitioner and respondents. Petitioner has commenced the performance of its obligation under the contract, but was prevented by events over which it has no control from completely The license was issued by Mayor Lopez in obedience to a final order of a court of justice. For him to refuse to issue the license fulfilling what was called for on its part to establish, operate and maintain a jai-alai in the City of Manila (Rollo, pp. 39-40). would place him in danger of being cited in contempt of court. And for him now to revoke or cancel such license or permit definitely would place a greater risk and danger of being cited in contempt of court? (Rollo, p. 184). The trial court disposed as follows; II WHEREFORE, the petitioner is GRANTED and respondent City of Manila, is ordered to immediately issue to petitioner, the permit/license required under Ordinance No. 7065 (Rollo, p. 40). As a preliminary issue, private respondent urged the dismissal of the petition on the grounds that it was in violation of Circular No. 28-91, prohibiting forum shopping, and Revised Circular No. 1-88, requiring the inclusion in the petition of a verified statement of the dates when notice of the judgment, order or resolution subject thereof, was received, when a motion for reconsideration, if Tribunal, 181 SCRA 780 [1990]; De Castro v. Delta Motor Sales Corporation, 57 SCRA 344 [1978]; Galang v. Endencia, 73 Phil. 391 any, was filed, and when the notice of the denial thereof was received. [1941]). In fact, Mayor Lopez availed of such a remedy when he appealed the decision in Civil Case No. 88-45660 to the Court of Appeals (CA G.R. No. 16477-SP). Private respondent averred that the certification submitted by petitioners did not disclose (1) that the trial court had rendered a decision in Civil Case No. 88- 45660 on September 9, 1988 holding that Ordinance No. 7065 was in full force and effect; (2) that The issue on the cancellation of Ordinance No. 7065 by President Marcos could have been raised as a special defense in Civil Case said decision had become final and executory after the petitioners withdrew their appeal therefrom; (3) that petitioners had also No. 88-54660 but was not. The Revised Rules of Court frown at the piecemeal presentation of issues, and jurisprudence bars from filed Civil Case No. 91-58913, questioning the effectivity of Ordinance No. 7065, which was dismissed. Likewise, they alleged that subsequent litigation between the same parties matters that could have been raised in a previous case (Revised Rules of Court, the affidavit did not state the material dates necessary for the Court to determine the timelines of the filing of the petition (Rollo, Rule 39, Sec. 49[b]; Gonzales v. Gonzales, 26 SCRA 72 [1968]). pp. 108-110). The City of Manila should have pursued in the appellate courts its appeal questioning the dismissal of Civil Case No. 91-58913, The certification submitted in compliance with Circular No. 28-91 stated that the petitioner in said petition "has not commenced a where the trial court ruled that Mayor Lopez and the city could no longer claim that Ordinance No. 7065 had been canceled by similar action in any court or administrative body against said respondents nor is there any pending cases of the same nature and President Marcos because they failed to raise this issue in Civil Case No 88-54660. parties in any court or administrative body." Rightly, there was no case filed nor was there any case pending wherein the question of whether the decision in Civil Case No. 88-45660 can be executed by motion is raised. At any rate, the unilateral cancellation of the franchise, which has the status of a contract, without notice, hearing and justifiable cause is intolerable in any system where the Rule of Law prevails (Poses v. Toledo Transportation Co., 62 Phil. 297 [1935]); Manila The affidavit on the material dates submitted by petitioners attested to the dates when petitioners received the three orders of Electric Co., v. Public Utility commissioners, 30 Phil. 387 [1915]). respondent judge being questioned in the petition for certiorari. These are the dates material for reckoning the timelines of the filing of the petition to nullify said orders. As far as the issue of the proper mode for executing the decision is concerned, the dates As a fall-back, petitioners claimed that assuming arguendo that the judgment in Civil Case No. 88-45660 dated September 9, 1986 given in the affidavit are sufficient for the Court to determine whether the petition was filed within a reasonable time is valid, its execution by mere motion on March 11, 1994 is irregular. Citing Section 6 of Rule 39 of the Revised Rules of Court, they contemplated in Rule 65. contended that the decision must be enforced by action, not motion (Rollo, pp. 13-14).

There is, therefore, no violation of Circular No. 28-91 and Revised Circular No. 1-88 to speak of. Petitioners erroneously counted the five-year period under Section 6 of Rule 39 from the date of the decision. Said Rule provides:

On their part, petitioners alleged that the decision in Civil Case No. 88-45660, which is being implemented by the three orders in Execution by Motion or by Independent Action. A judgment may be executed on motion within five (5) years from the date of its question, is null and void for want of jurisdiction of the trial court that rendered it. They posited their claim on the theory that entry or from the date it becomes final and executory. After the lapse of such time and before it is barred by the statute of Ordinance No. 7065 had been canceled by P.D. No. 771 in 1975 and that the trial court had traduced the law when it made it limitations, a judgment may be enforced by action. appear in its decision that Ordinance No. 7065 was still in full force and effect (Rollo, pp. 10-13).

It must be remembered that Mayor Lopez appealed the decision in Civil Case No. 88-45660 to the Court of Appeals, that he filed Petitioners failed to appreciate the distinction between a void and an erroneous judgment and between jurisdiction and the the motion to withdraw the appeal on February 9, 1989, and that the Court of Appeals approved the withdrawal of the appeals exercise of jurisdiction. only on May 5, 1989. The entries of judgment were made on May 26, 1989 in the Court of Appeals, and on October 27, 1992 in the Regional Trial Court. The motion to compel the City Mayor to issue the permit or license pursuant to Ordinance No. 7065, was Jurisdiction should be distinguished from the exercise thereof (Lamagan v. De La Cruz, 40 SCRA 101 [1971]). The authority to filed on March 14, 1994, or well within the five-year period whether such period is counted from May 5, 1989, May 26, 1989 or decide a case at all and not the decision rendered therein, is what makes up jurisdiction. The fact that the decision is erroneous October 27, 1992. does not divest the court that rendered it of the jurisdiction conferred by law to try the case (Quiason, Philippine Courts and their Jurisdictions, p. 199 [1993 ed.]). Petitioners hypothesized that the withdrawal of an appeal operates as if no appeal was taken at all and that the five-year period should be counted from January 24, 1989, the fifteenth day from the service of a copy of the decision on Mayor Lopez. Petitioners Since jurisdiction is the power to hear and determine a particular case, or the jurisdiction over the subject matter, it does not anchored their theory on Section 9, Rule 40 and Section 2, Rule 50 of the Revised Rules of Court (Rollo, pp. 15-16). depend upon the regularity of the exercise by the court of its power (Century Insurance Co. v. Fuentes, 2 SCRA 1168 [1961]). We find nothing in said Rules to support petitioners' posture. In the case at bench, there is no question that the Regional Trial Court has the competence to hear and decide Civil Case No. 88- 45660, a special civil action for mandamus under Rule 65 of the Revised Rules of Court. There is also no quarrel that said court has Sec. 9 of Rule 40, in pertinent part, provides: jurisdiction over an action for specific performance under Section 19(1) of the Judiciary Reorganization Act of 1990 (Lapitan v. Scandia, 24 SCRA 479 [1968]). Assuming arguendo that the Regional Trial Court did not have jurisdiction over the said civil case, the principle of estoppel will operate to bar petitioners from raising the question of jurisdiction for the first time in the instant . . . If the appeal is withdrawn, or dismissed for failure to prosecute, the judgment shall be deemed revived and shall forthwith be case (Tijam v. Sibonghanay, 23 SCRA 29 [1968]). remanded to the justice of the peace or municipal court for execution.

Having jurisdiction over the civil case, whatever error may be attributed to the trial court, is simply one of judgment, not of jurisdiction. An error of judgment cannot be corrected by certiorari but by appeal (Robles v. House of Representatives Electoral Rule 40 governed the procedure for appeals from the inferior courts to the Court of First Instance before they became courts of Considerations of equity and fair play militate against the petition. record. A provision on the revival of the judgment was necessary because at those times the decisions appealed from were automatically vacated and trials de novo had to be conducted by the Court of First Instance. The Office of the Mayor of the City of Manila issued on January 19, 1990, January 21, 1991 and May 25, 1992 business permits in favor of private respondent to operate a jai-alai fronton and collected the corresponding license and regulatory fees (Rollo, pp. Sec. 2 of Rule 50, which governs the dismissal of an appeal by the Court of Appeals, in pertinent part, provides: 151-153; 175-177; 178-198). Private respondent has spent close to P100,000,000.00 to finish the construction of the jai-alai building and fronton. Upon the receipt of such certification [of the Clerk of Court that the appeal has been dismissed] in the lower court the case shall stand there as though no appeal had ever been taken, and the judgment of the said court may be enforced with the additional The petition was brought under "Rule 42, Section 1 in relation to R.A. No. 5440, to declare null and void ab initio for want of costs allowed by the appellate court upon dismissing the appeal. jurisdiction, the Decision and Orders dated March 28, 1994, April 11, 1994 and April 20, 1994 issued in Civil Case No. 88-45660 of the Regional Trial Court of Manila, Branch 40" (Rollo, p. 2). The phrase "the case shall stand there as if no appeal has been taken" refers to the manner of how the judgment may be enforced as can be gleaned from the phrase following it that "the judgment of said court may be enforced with the additional costs allowed Said Rule and law refer to appeals to the Supreme Court from the decisions of the Regional Trial Court. Clearly, they do not by the appellate court . . ." In other words, the judgment shall be executed in accordance with its original disposition, no involved the review of orders of the Regional Trial Court rendered after the decision of the trial court has become final and modifications thereof having been ordered by the Court of Appeals. executory. Such a review must be taken under Rule 65, which can be given due course only when there is a showing of lack or excess of jurisdiction or grave abuse of discretion on the part of the trial court (Revised Rules of Court, Rule 67, Section 1; Planter's Products v. Court of Appeals, 193 SCRA 563 Certainly, said Rule has nothing to do with the five-year period for enforcing a judgment by motion, which is governed by Section 6 [1991]). We find no abuse of discretion, much less lack of or excess of jurisdiction, on the part of respondent judge. WHEREFORE, of Rule 39. the petition for certiorari is DISMISSED. SO ORDERED.

Mayor Lim's vow to clean the city of vices, like gambling, is commendable. But in the process, he should bear in mind that there are forms of gambling, and jai-alai is one them, that Congress has deigned to allow.

The pronouncement of Justice Isagani A. Cruz in Mayor Pablo Magtales v. Pryce Properties Corporation, G.R. No. 111097. July 20, G.R. No. 88386 August 17, 1989 1994, apropos the operation of a gambling casino in Cagayan de Oro by the Philippine Amusement and Games Inc., is cogent to the instant case, thus: THE UNIVERSITY OF THE PHILIPPINES, THE UP BOARD OF REGENTS AND DEAN PATRICIO LAZARO, petitioners, vs. The morality of gambling is not a justiciable issue. Gambling is not illegal perse. While it is generally considered inimical to the HON. JUDGE RUBEN AYSON, Br. VI, RTC-BAGUIO CITY, AND UP COLLEGE BAGUIO HIGH SCHOOL FOUNDATION, INC., interests of the people, there is nothing in the Constitution categorically proscribing or penalizing gambling or, for that matter, REPRESENTED HEREIN BY ITS PRESIDENT AND CHAIRMAN OF THE BOARD, SALVADOR VALDEZ, JR., respondents. even mentioning it at all. It is left to Congress to deal with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow BIDIN, J.: others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but permits lotteries, cockfighting and This is a petition for certiorari, with urgent prayer for the issuance of a temporary restraining order, seeking to annul the Orders of horse-racing. In making such choices, Congress has consulted its own wisdom, which this Court has no authority to review, much respondent Judge dated May 25, 1989 and June 14, 1989 in Civil Case No. 1748-R entitled, "UP College Baguio High School less reverse. Well has it been said that courts do not sit to resolve the merits of conflicting theories. (Garcia v. Executive Secretary, Foundation, Inc., et al,, v. The University of the Philippines, et al.," restraining petitioners from implementing the decision of the 204 SCRA 516, quoting Cooley, Constitutional Limitations, 8th ed., 379-380) That is the prerogative of the political departments. It Board of Regents to phase out the UP College Baguio High School (UPCBHS) and the Memorandum of petitioner Dean Patricio is settled that questions regarding the wisdom, morality, or practicability of statutes are not addressed to the judiciary but may be Lazaro directing the principal of UPCBHS not to accept new incoming freshmen for the school year 1989-1990. resolved only by the legislative and executive departments, to which the function belongs in our scheme of government (Decision, p. 8). Sometime in 1972, the UP Board of Regents approved the establishment of UPCBHS as an integral part of the graduate program in education to serve, among others, as a laboratory and demonstration school for prospective teachers. Provided, however, that It was Mayor Lopez himself who assessed the benefits that will accrue to the city with the operation of the jai-alai. Explaining his UPCBHS must be self-supporting and should not entail any subsidy from the budget of the UP. motion to withdraw the appeal from the decision in Civil Case No. 88-45660, he said:

In 1978, the Board of Regents provided for the establishment of a Division of Education in UP College Baguio (UPCB) which shall be The beneficient effects to the appellant City of Manila, especially during this critical period in our national economy, are manifold composed of a Department of Professional Education and a High School Department. However, the Department of Professional and undeniable. The franchise operation shall be a great boost toward generating much needed revenues for the City coffers Education was never organized, although the High School Department has been in continuous operation. estimated at P100,000.00 a day by way of franchise fees alone, not to mention other municipal taxes and regulatory fees. Millions of pesos in real estate taxes on the improvements would be realizable. Employment opportunities to little less than five hundred people in the main building and hundreds of others in the off track fronton shall also be created. These is also the fact that the jai- In 1981, the Committee to Review Academic Program recommended the abolition of the UPCBHS. In 1985, the Program Review alai building, together with all the equipment therein, with an aggregate estimated cost of P100 million shall belong to the city Committee likewise asked the UPCB to look into the viability of its secondary education program on account of limited financial upon termination of the franchise terms (Rollo, p. 127). resources plus the fact that UPCBHS failed to serve as a laboratory school for teacher training program as UPCB does not offer (I)t is to be noted that the reference is to the 'institutions of higher learning' as the recipients of this boon. It would follow then programs in Education. Subsequently, various discussions were held on the proposed phase-out of the UPCBHS. that the school or college itself is possessed of such a right. It decides for itself its aims and objectives and how best to attain them. It is free from outside coercion or interference save possibly when the overriding public welfare calls for some restraint. It has a wide sphere of autonomy certainly extending to the choice of students. This constitutional provision is not to be construed On January 30,1989, the UP Board of Regents approved the proposed phase-out of UPCBHS on the grounds, inter alia, that only an in a niggardly manner or in a grudging fashion. That would be to frustrate its purpose, nullify its intent. insignificant number of UPCBHS graduates qualified for admission and actually enrolled in UPCB and that UPCBHS is not serving as a laboratory or demonstration school for prospective teachers much less a self-supporting unit. Subsequently, petitioner Dean Patricio Lazaro issued a memorandum directing the UPCBHS Principal not to accept new incoming high school freshmen for the xxx xxx xxx school year 1989- 1990. It is the business of a university to provide that atmosphere which is most conducive to speculation, experiment and creation. It is On May 25,1989, respondent UP College Baguio High School Foundation Inc., represented by its president, filed a petition with the an atmosphere in which there prevail the four essential freedom of a university—to determine for itself on academic grounds who Regional Trial Court of Baguio, Br. VI, presided by respondent Judge against herein petitioners, for Injunction with preliminary may teach, what may be taught, how it shall be taught, and who may be admitted to study"' (Emphasis supplied; citing Sinco, preventive and mandatory injunction with prayer for the issuance of a temporary restraining order, docketed as Civil Case No. Philippine Political Law, 491, (1962) and the concurring opinion of Justice Frankfurter in Sweezy v. New Hampshire (354 US 234 1748-R, alleging among others, that the decision of the UP Board of Regents to phase out the UPCBHS is without legal basis and [1957]). unconstitutional. Rep. Act No. 6655, otherwise known as the "Free Public Secondary Education Act of 1988," includes in its coverage state colleges Thereafter, respondent Judge issued the assailed Orders restraining petitioners from implementing the Board's decision to phase and universities (SCUs) offering secondary courses. Respondents cointend that since a secondary course is being offered in UPCB, out UPCBHS and the memorandum of Dean Patricio Lazaro. Petitioners' motion to dismiss Civil Case No. 1748-R was denied by petitioners cannot unilaterally withdraw therefrom, otherwise, the said Act would be nothing but a mere nullity for all other SCUs. respondent Judge. Besides, respondents contend, petitioners already recognized the applicability of Rep. Act No. 6655 when they implemented the same at the UPCBHS for School Year 1988-89 and petitioners' assertion that UPCBHS was established only if it would be "self- supporting and should not entail any subsidy from the budget of UP" is but a lame excuse. Hence, this petition.

At this juncture, it must be pointed out that UPCBHS was established subject to a number of conditionalities, e.g., it must be self- On June 27,1989, the Court issued a Temporary Restraining Order enjoining the implementation of the assailed orders of supporting, it can serve as a feeder for the UP at Baguio, it can serve as a laboratory and demonstration school for prospective respondent Judge. teachers, failing in which the University can order its abolition on academic grounds, specially where the purposes for which it was established was not satisfied. Petitioners contend, among other things, that the decision of the UP Board of Regents to phase out the UPCBHS is an exercise of academic freedom guaranteed by the Constitution (Art. XIV, Sec. 5, par. 2).lâwphî1.ñèt Specifically, the University of the Philippines was created under its Charter (Act No. 1870 [1908], as amended) to provide advanced tertiary education and not secondary education. Section 2 of said Act states that "the purpose of said University shall be Respondents, on the other hand, take issue not with the exercise of academic freedom but rather on the right to quality education to provide advanced instruction in literature, philosophy, the sciences, and arts, and to give professional and technical training." (Art. XIV, Sec. 1) and free public secondary education (Art. XIV, Sec. 2, par. 2) mandated by the Constitution and Rep. Act No. 6655, otherwise known as "Free Public Secondary Education Act of 1988." Respondents ' contend that the abolition of the UPCBHS It is apparent that secondary education is not the mandated function of the University of the Philippines; consequently, the latter would be violative of said rights. can validly phase out and/or abolish the UPCBHS especially so when the requirements for its continuance have not been met, Rep. Act No. 6655 to the contrary notwithstanding. The findings of facts by the Board of Regents which led to its decision to phase out The conflict of the present petition pits the concept of academic freedom as against the right to free public secondary education. the UPCBHS must be accorded respect, if not finality. Acts of an administrative agency within their areas of competence must be Art. XIV, Section 2, [2] of the Constitution, provides: "The State shall establish and maintain a system of free public education in casually overturned by the courts. It must be emphasized that UPCBHS was established as a component of the tertiary level, i.e., the elementary and high school levels. Without limiting the right of natural parents to rear their children, elementary education is the teacher/training program. As it turned out however, the latter program was not viable in UPCB thereby necessitating the compulsory for all children of school age." On the other hand, Art. XIV, Section 5 [2], provides: "Academic freedom shall be phasing out of UPCBHS, the rationale being its reasons for existence no longer exists. On this score, UPCBHS differs from the other enjoyed in all institutions of higher learning." UP high schools in Iloilo, Diliman, Cebu and Los Bañ;os. The latter schools serve as laboratory schools for the College of Education in said areas, whereas, in Baguio, there is no College of Education. Is secondary public education demandable in an institution of higher learning such as the University of the Philippines? A careful perusal of Rep. Act No. 6655 could not lend respondents a helping hand either. Said Act implements the policy of the We rule in the negative. State to provide free public secondary education (Sec. 4) and vests the formulation of a secondary public education curriculum (Sec. 5), the nationalization of public secondary schools (Sec. 7) and the implementation of the rules and regulations thereof (Sec. 9) upon the Secretary of the Department of Education, Culture and Sports (DECS).lâwphî1.ñèt Rep. Act No. 6655 complements It is beyond cavil that the UP, as an institution of higher learning, enjoys academic freedom—the institutional kind. Sec. 2 (2), Article XIV of the Constitution which mandates that the State shall establish and maintain a system of free public secondary education. However, this mandate is not directed to institutions of higher learning like UP but to the government In Garcia v. The Faculty Admission Committee, Loyola School of Theology (68 SCRA 277 [1975]), the Court had occasion to note the through the Department of Education, Culture and Sports (DECS). As an institution of higher learning enjoying academic freedom, scope of academic freedom recognized by the Constitution as follows: the UP cannot be compelled to provide for secondary education. However, should UP operate a high school in the exercise of its academic freedom, Rep. Act No. 6655 requires that the students enrolled therein "shall be free from payment of tuition and other On October 15, 1974, incident to a further increase of his salary, Dr. Esteban was notified that his appointment as vice-president school fees. for administration at a salary of P17,600 per annum had been renewed effective September 1, 1974 until June 30, 1975.

In view of the foregoing, respondents do not have a clear legal right to UP secondary education. On June 26, 1975, he received another 'Notification of Renewal of Temporary Appointment' as Vice-President for Administration with at salary of P21,760 per annum, 'effective July 1, 1975 until June 30, 1976.' ACCORDINGLY, the Court Resolved to Grant the petition. The assailed Orders of respondent Judge dated May 25, 1989 and June 14, 1989 are hereby Set Aside and respondent Judge is ordered to Dismiss Civil Case No. 1748-R. Secretary Lourdes Quisumbing of On July 26, 1975, Dr. E qqqsteban discovered that he was not included in the list of employees recommended for permanent the Department of Education, Culture and Sports is requested to make arrangements with the other high schools in Baguio City for appointments. He wrote Dr. Consuelo Blanco requesting the conversion of his temporary appointment to a permanent one, purposes of accommodating the students herein affected. The temporary restraining order issued is made permanent. considering his two and half (2½) years service.

SO ORDERED. On July 26, 1975, Dr. Esteban received an answer to his request from President Blanco who indicated various reasons for her not acting favorably on his request.

On August 1, 1975, Dr. Esteban received a 'Notification of Ad Interim Appointment notifying him that the president of the university had approved his appointment as Professor III with a salary of P15,600 per annum 'effective August 1, 1975'. He was G.R. No. L-65439 November 13, 1985 further designated as Director of the Institute of Continuing Education and Community Service with an honorarium of P5,676 per annum, likewise effective August 1, 1975. PAMANTASAN NG LUNGSOD NG MAYNILA, petitioner vs. On August 7, 1975, Dr. Consuelo Blanco, issued a memorandum circular terminating Dr. Esteban's appointment as Vice-President HON. INTERMEDIATE APPELLATE COURT, HON. FILEM0N FERNANDEZ, JR., HON. ALBINA MANALODANS as Commissioners of for Administration effective July 31, 1975. His appointment dated June 26, 1975 and effective until June 30, 1976 had been Civil Service Commission and HERNANI P. ESTEBAN, respondents. withdrawn before it could be confirmed by the Pamantasan Board of Regents.

GUTIERREZ, JR., J.: On the same date, August 7, 1975, Dr. Esteban appealed to the Civil Service Commission for the protection of his tenure in the Pamantasan . The sole issue raised in this petition is the status of respondent Hernani Esteban's appointment as Vice-President for Administration of the Pamantasan ng Lungsod ng Maynila that is, whether or not he holds the position in a permanent capacity as On October 9,1975, the Civil Service Commission ruled that: to guarantee as security of tenure.

The temporary nature of the appointment issued to Dr. Esteban as Vice President for Administration is conceded. Such being the Respondent Esteban asserts that his appointment is permanent whereas the petitioner maintains its temporary and contractual Case, his services may be terminated at any time with or without request that he be extended permanent appointment ,or that his nature such that the respondent may be dismissed at any time even without cause. temporary appointment be converted into permanent one, it may be stated that the issuance of such appointment is addressed to the sound discretion of the appointing official. Prior to his joining the Pamantasan, Dr. Esteban had been a permanent employee in the government service for twenty five (25) years. Until May 20, 1973, he was officially connected with the Philippine College of Commerce, a state-owned educational Dr. Esteban flied a motion for the reconsideration of that ruling. On January 14, 1976, the Civil Service Commission ruled favorably institution as its Vice-President for Academic Affairs. Shortly before that date, the Board of Trustees of the College in a bold move on Dr. Esteban's motion. It stated that he was fully qualified for the position of Vice-President for Administration and certified him to streamline the college organization resolve to abolish the position of Vice-President for Academic Affairs. Private respondent "for appointment therein under permanent status." The Commission stated: was given the option to continue teaching at the Philippine College of Commerce which he accepted until his transfer to the Pamantasan ng Lungsod ng Maynila, upon the invitation of its president, Dr. Consuelo Blanco. In view thereof, and in the absence of any apparent justifiable reason why Dr. Esteban should remian under temporary status for the length of time prior to the withdrawal of his appointment as Vice President for Administration in that University, and as it At the Pamantasan, Dr. Esteban was initially extended an ad interim temporary appointment as Vice-President for Administration further appears that he is fully qualified for the position in question in view of his extensive experience in the fields of public by Dr. Consuelo Blanco. Dr. Esteban received from the Secretary of Pamantasan a 'Notification of Confirmation of Temporary administration and management, this Commission hereby certifies him for appointment therein under permanent status. Appointment' dated June 28, 1973. His appointment was 'effective May 21, 1973 until June 30, 1974, unless sooner terminated.' On July 5, 1974, the Secretary of Pamantasan sent him a 'Notification of Renewal of Temporary Appointment' indicating that his appointment was renewed 'effective July 1, 1974 until August 31, 1974.' The Pamantasan, in turn, asked for the reconsideration of that ruling.

A month later, on August 30, 1974, he received from the University Secretary another 'notification of renewal of temporary The Commission, in an undated Resolution No. 75, Series of 1976, came out with a statement which confused more than it appointment' informing him that the Board of Regents, on recommendation of the President of the University approved the clarified. It stated that its certification should not be interpreted as directing the reinstatement of Dr. Esteban because 'it was renewal of his appointment 'effective September 1, 1974 until June 30, 1975' with an increased salary of P17,160 per annum. never intended to be so On May 28, 1976 Esteban asked the commission to reconsider Resolution No. 75, Series of 1976. He also asked for the payment of The Commission ruled that "Dr. Hernani Esteban had been appointed Vice-President for Administration of Pamantasan with the salaries and allowances due him as of September 1975, which the Pamantasan had withheld. His request was denied by the permanent status and that the temporary appointment issued to him did not alter his permanent status as he had 'already commission in its undated resolution No. 158, Series of 1976. acquired a vested right as well as the right to security of tenure', that he cannot unceremoniously removed therefrom, nor can the status of his appointment be changed without cause, as provided by law and after due process." The Commission held that the termination of his services was obviously illegal. It directed his immediate reinstatement to the position of Vice-President for On September 15, 1976 Esteban reiterated his request for payment of his salaries. Administration of Pamantasan and the payment of his back salaries, allowances and other benefits which he failed to receive from the time he was separated therefrom. On September 20, 1976, he asked for a review of the Pamantasan's decision to terminate his appointment as Vice-President for Administration. The Pamantasan filed a motion for reconsideration of that resolution. It also submitted for the first time a copy of Resolution No. 485. On December 1, 1976, his request for payment of his salaries was referred by the Commission to the treasurer of the Pamantasan. The Commission, in Resolution No. 71-510 dated April 23, 1981 chided the Pamantasan for having suppressed said piece of On July 6, 1977, the Commission again modified its earlier resolution in as case. It ruled that Dr. Consuelo Blanco, had no authority evidence from which "the intention of, or the accurate action taken by PLM Board of Regents on Dr. Esteban's appointment in to extend to Dr. Esteban an ad interim appointment as Vice President for Administration as only the Board of Regents was question, may be determined." Following the decision of the Supreme Court in the case of Summers v. Ozaeta, (81 Phil. 760), the empowered to do that under Article 55 of the University Charter (Rep. Act 4196). However, it ruled that, as a de facto officer, he Commission denied the Pamantasan's motion for reconsideration and ruled that "Upon confirmation of the Board of Regents of was entitled to be paid the salary of that position. the ad interim appointment of Dr. Esteban the same became permanent."

Dr. Esteban and the Pamantasan filed motions for reconsideration of that ruling prompting the Commission to order them to Upon getting this ruling, the Pamantasan filed a petition for certiorari against Dr. Esteban and Civil Service Commissionssioners submit "all papers and documents pertinent to that case." Filemon Fernandez, Jr. and Albina Manalo Dans. The petition was docketed as Civil Case No. 139840 of the Court of First Instance of Manila, Branch XIII. On June 6, 1978, Presidential Decree No.1409 was issued creating a Merits System Board in the Civil Service Commission to hear and decide cases brought before it on appeal by officers and employees who feel aggrieved by the determination of officials on On January 8, 1982, the trial court rendered a decision reversing the Commission's Resolution No. 81-279 and adopted the earlier personnel matters. Commission Resolution dated July 6, 1977 holding that Private respondent Dr. Esteban's appointment was invalid, though he may be considered as a de facto vice-president of the University up to October 9, 1975, the date when the Commission ruled that his The Board required the Pamantasan to submit its complete records on the appointment and termination of Dr. Esteban as vice- appointment was temporary and could be terminated at any time. president for administration. The private respondent appealed to the Intermediate Appellate Court. While the records officer of the Pamantasan submitted copies of the notices sent to Esteban regarding his appointment as vice- president for administration, he did not submit a copy of the Board's Resolution No. 485 passed June 20, 1973 confirming the ad On September 26, 1983. the respondent Intermediate Appellate Court rendered a decision reversing the trial court's decision. The interim appointments of several academic and non-academic personnel of said university among which was that of Dr. Hernani dispositive portion of the appellate decision reads: Esteban "effective May 21, 1973." He produced a copy of the memorandum circular dated August 7, 1915 of the President of the Pamantasan terminating Dr. Esteban's service as of July 31, 1975. Wherefore, the appealed decision is hereby revised and set aside. The Pamantasan's petition for certiorari is denied. Resolution No 81-279 dated March 5, 1981, as well as Resolution No. 81-510 dated April 23, 1981, of the respondent Civil Service In Resolution No. 597 dated November 11, 1980, the Commissioner directed the Pamantasan to submit any document or Commission, declaring as permanent the appointment of the appellant Dr. Hernani Esteban as vice- president for administration documents directly or actually showing that Dr. Hernani Esteban was appointed vice-president for administration of the of the university under the Board of Regents' Resolution No. 485 dated June 20, 1973, and ordering his immediate reinstatement Pamantasan in a permanent capacity. to that position with back salaries, allowances and other benefits, is affirmed, provided he has not yet reached the age of compulsory retirement from the government service; otherwise, he shall be entitled to back salaries, allowances and other On January 15, 1981, the Pamantasan by 2nd Indorsement, despite the existence of Board Resolution No. 485, replied that "we benefits only up to the time he should handle been reared from the said position. cannot find any document showing that Dr. Esteban was appointed ... in a permanent capacity. From the decision of the Intermediate Appellate Court and after its motion for reconsideration had been denied petitioner In view of the Pamantasan's failure to produce the minutes of the regular Board of Regents meeting on June 20, 1973 when Pamantasan ng Lungsod ng Maynila filed the present petition, now the subject of this review. Esteban's appointment was approved the Commission in its Resolution No. 81-279 dated March 5, 1981, concluded that there is truth to the claim of Dr. Esteban that his appointment as Vice-President for Administration of the Pamantasan was approved as We find no error in the pronouncements of the Intermediate Appellate Court. We rule in favor of the respondents. permanent. It cited Government of the Philippine Islands vs. Martinez, (44 Phil. 817) that when a party has it in his possession or power to produce the best evidence of which the case in its nature is susceptible and withholds it, the fair presumption is that the From the arguments, it is easy to see why the petitioner should experience difficulty in understanding the situation. Private evidence is withheld for some sinister motive and that its production would thwart his evil or fraudulent purpose. respondent had been extended several "ad-interim" appointments which petitioner mistakenly understands as appointments temporary in nature. Perhaps, it is the literal translation of the word "ad interim" which creates such belief. The term is defined by Black to mean "in the meantime" or for the time being, Thus, an officer ad interim is one appointed to fill a vacancy, or to discharge the duties of the office during the absence or temporary incapacity of its regular incumbent (Black's Law Dictionary, request of petitioner. This fact is borne out by the records and the evidence and found as such by the Intermediate Appellate Revised Fourth Edition, 1978). But such is not the meaning nor the use intended in the context of Philippine law. In referring to Dr. Court, the Civil Service Commission as well as the Court of First Instance. Esteban's appointments, the term is not descriptive of the nature of the appointments given to him. Rather, it is used to denote the manner in which said appointments were made, that is, done by the President of the Pamantasan in the meantime, while the From the foregoing, there appears an intention to deprive private respondent of his rights as a permanent appointee. With Board of Regents, which is originally vested by the University Charter with the power of appointment, is unable to act. Thus, we strained relations and differences in professional opinion between the private respondent and the Pamantasan President, Dr. held in Summers v. Ozaeta (81 Phil. 760): Esteban was led to believe that his services were terminable at pleasure.

... an ad interim appointment is one made in pursuance of paragraph (4), section 10, Article VII of the Constitution, which provides The power to appoint is, in essence, discretionary. The appointing power has the right of choice which he may exercise freely that the President shall have the power to make appointments during the recess of the Congress, but such appointments shall be according to his judgment, deciding for himself who is best qualified among those who have the necessary qualifications and effective only until disapproval by the Commission on Appointments or until the next adjournment of the Congress.' lt is an eligibilities. lt is a prerogative of the appointing power that may be availed of without liability, provided however, that it is appointment permanent in nature, and the circumstance that it is subject to confirmation by the Commission on Appointments exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the does not alter its permanent character. An ad interim appointment is disapproved certainly for a reason other than that its rights of the employees under special laws or under valid agreements, and provided further, that such prerogatives are not provisional period has expired. Said appointment is of course distinguishable from an 'acting' appointment which is merely exercised in a malicious, harsh, oppressive, vindictive or wanton manner, or out of malice or spite (Government Service and temporary, good until another permanent appointment is issued. Insurance System v. Ayroso 96 SCRA 213). The general rule is that the power of appointment must remain unhampered by judicial intervention. However, when the law is violated or when there is grave abuse of discretion, we have to step in. Otherwise the Not only is the appointment in question an ad interim appointment, but the same is also a confirmed ad interim appointment. In situation aptly described by newspaperman Jesus Bigornia would exist as he had written: its Resolution No. 485, dated June 20, 1973, the Pamantasan Board of Regents verified respondent Esteban's appointment without condition nor limitation as to tenure. As of that moment, it became a regular and permanent appointment. ... With the sword of Damocles hanging over the heads of faculty members, the university has spawned a meek, spineless, even subservient corps of professors and instructors. (Newsman's Notes, Bulletin Today, January 23, 1976). In other words, if the Board of Regents is in session, the Pamantasan President merely nominates while the Board issues the appointment. But when the Board is not in session, the President is authorized to issue ad interim appointments. Such We cannot also sanction the termination of private respondent's services by petitioner. With his appointment now settled as appointments are permanent but their terms are only until the Board disapproves them. If confirmed, the appointee's term is permanent., the Civil Service law and the Constitution guarantee private respondent's security of tenure as 'No officer or employe converted into the regular term inherent in the position. in the Civil Service shall be suspended or dismissed except for cause as provided by law" (Section 3, Article XII, the 1973 Philippine Constitution). Petitioner has failed to substantiate its allegations of incompetence against respondent Esteban whose record of Petitioner centers its arguments and tries to fix the attention of the court to the fact that all notices of appointments, renewals, government service appears quite impressive. Esteban was not dimissed for cause after proper proceedings. His appointment was and confirmation thereof all declare the same to be temporary, carrying fixed commencement and termination dates, "unless terminated on the ground that it was temporary. sooner terminated." As expressed by public respondent, "... This stubborn insistence is anchored on the notifications of temporary appointment sent to private respondent Esteban by the Secretary of Pamantasan. However, this insistence deliberately ignores ... The intermediate Appellate Court ordered the payment of full back salaries to Dr. Esteban provided he has not reached the age of Resolution No. 485 dated June 20, 1973 of the Board of Regents ...". And correctly so argued. "In case of conflict between a compulsory retirement from the government service. notification issued by the Secretary of the University which is supposed to reflect the true content of a Board Resolution and the Resolution itself of said Board of Regents of said University, the latter is controlling for obvious reasons. The Secretary of the University has no authority to alter or add something which is not provided for in the Resolution of the Board of Regents ...". Thus, It is not clear from the records as to when Dr. Esteban actually ceased working for Pamantasan. Under the law, he is entitled to full respondent Intermediate Appellate Court held: pay, allowances, and other benefits during the period that he was actually reporting for work and rendering services in whatever capacity, whether teaching, research or administration. As of backwages, the amount is generally based on the equivalent of three years' earnings (Philippine Airlines, Inc. v. National Labor Relations Commission, 126 SCRA 223; Insular Life Assurance Co., Ltd. v. The permanent nature of appellant's appointment was not altered or diminished by the misleading 'notifications' which were sent National Labor Relations Commission, 135 SCRA 697). In line with the policy adopted by this Court to do away with the attendant to him by the secretary of the university president, referring to his appointment as 'temporary', nor by his uninformed acceptance delay in awarding backwages because of the extended hearings necessary to prove the earnings, elsewhere of each and every thereof without knowledge of the true contents of Resolution No. 485 which the university president appears to have studiously employee (Philippine Airlines, Inc. v. National Labor Relations Commission, supra, citing Mercury Drug Co., Inc. v. Court of suppressed. Industrial Relations, 56 SCRA 694), the formula for computing the same calls for fixing the award of backwages to three years. However, in Dy Keh Beng v. International Labor and Marine Union, 90 SCRA 162, citing Mercury Drug Co., et al. v. Court of There is nothing in the Pamantasan Board of Regents' Resolution No. 485 which suggests that respondent Esteban's appointment Industrial Relations, 56 SCRA 694, 712), we held the amount of backwages to be "subject to deduction whre there are mitigating was temporary. The Board's action was to confirm or reject an existing ad interim appointment. If respondent's appointment was circumstances in favor of the employer, but subject to increase whree there are aggravating circumstances. (Tupas Local Chapter intended to be temporary, it should have been expressly stated. It cannot be made to rest on inconclusive evidence, specially No. 979, et al. v. National Labor Relations Commission, et al., G. R. No. 60532-33, November 5,\1985; Progressive Development because a temporary appointment divests the temporary appointee of the constitutional security of tenure against removal Corporation v. Progressive Employees' Union, 80 SCRA 434.) Considering that in the case at bar, more than ten (10) years have without cause even if he is a civil service eligible." (Tolentino v. de Jesus, 56 SCRA 167, cited in Cortez v. Bartolome, 100 SCRA 1). elpased from the date respondent Esteban as to the true nature of his appointment and "studiously suppressing" material data to effectively deprive the latter of his rights as a permanent employee, we find an award of five (5) years backpay to respondent Dr. Esteban just and equitable under the circumstances, assuming he has not reached retirement age in the meantime. Further supporting private respondent's stand is the list of permanent personnel which was submitted to the Commission by the university president herself on March 3, 1975 for recognition of their permanent status by the Commission. The appellant's name was the first in that list (Exhibit 8-B). The permanent status of private respondent's appointment as Vice-President for WHEREFORE, the petition for review on certiorari is hereby DISMISSED for lack of merit. The decision appealed from is affirmed Administration at Pamantasan was recognized by the Civil Service Commission in its lst Indorsement dated April 18, 1975 upon the subject to the modification in the payment of back salaries as stated above. SO ORDERED. G.R. No. 134625 August 31, 1999 Pipirmahan ko ang pagsang-ayon/di pagsang-ayon kapag nakita ko na ang mga revisions ng dissertation.4

UNIVERSITY OF THE PHILIPPINES BOARD OF REGENTS, CHANCELLOR ROGER POSADAS, DR. EMERLINDA ROMAN, DEAN Dr. Teodoro added the following note to his signature: CONSUELO PAZ, DR. ISAGANI MEDINA, DR. MARIA SERENA DIOKNO, DR. OLIVIA CAOILI, DR. FRANCISCO NEMENZO II, DEAN PACIFICO AGABIN, CARMELITA GUNO, and MARICHU LAMBINO, petitioners, 5 Kailangang isagawa ang mga mahahalagang pagbabago at ipakita sa panel and bound copies. vs. HON. COURT OF APPEALS and AROKIASWAMY WILLIAM MARGARET CELINE, respondents. In a letter, dated March 5, 1993 and addressed to her thesis adviser, Dr. Manuel, private respondent requested a meeting with the panel members, especially Dr. Medina, to discuss the amendments suggested by the panel members during the oral defense. The MENDOZA, J.: 6 meeting was held at the dean's office with Dean Paz, private respondent, and a majority of the defense panel present. During the meeting, Dean Paz remarked that a majority vote of the panel members was sufficient for a student to pass, notwithstanding the For review before the Court is the decision of the Court of Appeals1 in CA-G.R. SP No. 42788, dated December 16, 1997, which failure to obtain the consent of the Dean's representative. granted private respondent's application for a writ of mandatory injunction, and its resolution, dated July 13, 1998, denying petitioners' motion for reconsideration. On March 24, 1993, the CSSP College Faculty Assembly approved private respondent's graduation pending submission of final copies of her dissertation. The antecedent facts are as follows: In April 1993, private respondent submitted copies of her supposedly revised dissertation to Drs. Manuel, Skandarajah, and Private respondent Arokiaswamy William Margaret Celine is a citizen of India and holder of a Philippine visitor's visa. Sometime in Quiason, who expressed their assent to the dissertation. Petitioners maintain, however, that private respondent did not April 1988, she enrolled in the doctoral program in Anthropology of the University of the Philippines College of Social Sciences and incorporate the revisions suggested by the panel members in the final copies of her dissertation. Philosophy (CSSP) in Diliman, Quezon City. Private respondent left a copy of her dissertation in Dr. Teodoro's office April 15, 1993 and proceeded to submit her dissertation After completing the units of course work required in her doctoral program, private respondent went on a two-year leave of to the CSSP without the approvals of Dr. Medina and Dr. Teodoro, relying on Dean Paz's March 5, 1993 statement. absence to work as Tamil Programme Producer of the Vatican Radio in the Vatican and as General Office Assistant at the International Right to Life Federation in Rome. She returned to the Philippines in July 1991 to work on her dissertation entitled, 7 Dr. Teodoro later indicated his disapproval, while Dr. Medina did not sign the approval form. "Tamil Influences in Malaysia, Indonesia and the Philippines."

Dean Paz then accepted private respondent's dissertation in partial fulfillment of the course requirements for the doctorate On December 22, 1992, Dr. Realidad S. Rolda, chairperson of the U.P. Department of Anthropology, wrote a letter to Dr. Maria degree in Anthropology. Serena Diokno, CSSP Associate Dean and Graduate Program Director, certifying that private respondent had finished her dissertation and was ready for her oral defense. Dr. Rolda suggested that the oral defense be held on January 6, 1993 but, in a letter, dated February 2, 1993, Dr. Serena Diokno rescheduled it on February 5, 1993. Named as members of the dissertation In a letter to Dean Paz, dated April 17, 1993, private respondent expressed concern over matters related to her dissertation. She panel were Drs. E. Arsenio Manuel, Serafin Quiason, Sri Skandarajah, Noel Teodoro, and Isagani Medina, the last included as the sought to explain why the signature of Dr. Medina was not affixed to the revision approval form. Private respondent said that dean's representative. since she already had the approval of a majority of the panel members, she no longer showed her dissertation to Dr. Medina nor tried to obtain the latter's signature on the revision approval form. She likewise expressed her disappointment over the CSSP administration and charged Drs. Diokno and Medina with maliciously working for the disapproval of her dissertation, and further After going over private respondent's dissertation, Dr. Medina informed CSSP Dean Consuelo Joaquin-Paz that there was a portion warned Dean Paz against encouraging perfidious acts against her. in private respondent's dissertation that was lifted, without proper acknowledgment, from Balfour's Cyclopaedia of India and Eastern and Southern Asia (1967), volume I, pp. 392-401 (3 v., Edward Balfour 1885 reprint) and from John Edye's article entitled "Description of the Various Classes of Vessels Constructed and Employed by the Natives of the Coasts of Coromandel, Malabar, On April 17, 1993, the University Council met to approve the list of candidates for graduation for the second semester of school and the Island of Ceylon for their Coasting Navigation" in the Royal Asiatic Society of Great Britain and Ireland Journal, volume I, year 1992-1993. The list, which was endorsed to the Board of Regents for final approval, included private respondent's name. pp. 1-14 (1833).2 On April 21, 1993, Dean Paz sent a letter to Dr. Milagros Ibe, Vice Chancellor for Academic Affairs, requesting the exclusion of Nonetheless, private respondent was allowed to defend her dissertation on February 5, 1993. Four (4) out of the five (5) panelists private respondent's name from the list of candidates for graduation, pending clarification of the problems regarding her 8 gave private respondent a passing mark for her oral defense by affixing their signatures on the approval form. These were Drs. dissertation. Her letter reads: Manuel, Quiason, Skandarajah, and Teodoro. Dr. Quiason added the following qualification to his signature: Abril 21, 1993 Ms. Arokiaswamy must incorporate the suggestions I made during the successful defense of her P.D. thesis.3 Dr. Milagros Ibe Dr. Medina did not sign the approval form but added the following comment: Vice Chancellor for Academic Affairs Unibersidad ng Pilipinas Meanwhile, in a letter, dated September 23, 1993, U.P. Diliman Chancellor Emerlinda Roman summoned private respondent to a Quezon Hall, Diliman, Q.C. meeting on the same day and asked her to submit her written explanation to the charges against her.

Mahal na Dr. Ibe, During the meeting, Chancellor Roman informed private respondent of the charges and provided her a copy of the findings of the investigating committee.13 Private respondent, on the other hand, submitted her written explanation in a letter dated September 25, 1993. Mahigpit ko pong hinihiling na huwag munang isama ang pangalan ni Ms. Arokiaswam[y] William Margaret Celine sa listahan ng mga bibigyan ng degri na Ph.D. (Anthropology) ngayon[g] semester, dahil sa mga malubhang bintang nya sa ilang myembro ng panel para sa oral defense ng disertasyon nya at sa mga akusasyon ng ilan sa mga ito sa kanya. Another meeting was held on October 8, 1993 between Chancellor Roman and private respondent to discuss her answer to the charges. A third meeting was scheduled on October 27, 1993 but private respondent did not attend it, alleging that the Board of Regents had already decided her case before she could be fully heard. Naniniwala po kami na dapat mailinaw muna ang ilang bagay bago makonfer ang degri kay Ms. Arokiaswam[y]. Kelangan po ito para mapangalagaan ang istandard ng pinakamataas na degree ng Unibersidad. On October 11, 1993, private respondent wrote to Dr. Emil Q. Javier, U.P. President, alleging that some members of the U.P. administration were playing politics in her case.14 She sent another letter, dated December 14, 1993, to Dr. Armand Fabella, (Sgd.) Chairman of the Board of Regents, complaining that she had not been afforded due process and claiming that U.P. could no longer withdraw her degree since her dissertation had already been accepted by the CSSP.15 CONSUELO JOAQUIN-PAZ, Ph.D. Dekano Meanwhile, the U.P. Office of Legal Services justified the position of the University Council in its report to the Board of Regents. The Board of Regents, in its February 1, 1994 and March 24, 1994 meetings, further deferred action thereon. Apparently, however, Dean Paz's letter did not reach the Board of Regents on time, because the next day, April 22, 1993, the Board approved the University Council's recommendation for the graduation of qualified students, including private respondent. On July 11, 1994, private respondent sent a letter to the Board of Regents requesting a re-investigation of her case. She stressed Two days later, April 24, 1993, private respondent graduated with the degree of Doctor of Philosophy in Anthropology. that under the Rules and Regulations on Student Conduct and Discipline, it was the student disciplinary tribunal which had jurisdiction to decide cases of dishonesty and that the withdrawal of a degree already conferred was not one of the authorized On the other hand, Dean Paz also wrote a letter to private respondent, dated April 21, 1993, that she would not be granted an penalties which the student disciplinary tribunal could impose. academic clearance unless she substantiated the accusations contained in her letter dated April 17, 1993. On July 28, 1994, the Board of Regents decided to release private respondent's transcript of grades without annotation although it In her letter, dated April 27, 1993, private respondent claimed that Dr. Medina's unfavorable attitude towards her dissertation showed that private respondent passed her dissertation with 12 units of credit. was a reaction to her failure to include him and Dr. Francisco in the list of panel members; that she made the revisions proposed by Drs. Medina and Teodoro in the revised draft of her dissertation; and that Dr. Diokno was guilty of harassment. On August 17, 1994, Chancellor Roger Posadas issued Administrative Order No. 94-94 constituting a special committee composed of senior faculty members from the U.P. units outside Diliman to review the University Council's recommendation to withdraw In a letter addressed to Dean Paz, dated May 1, 1993, Dr. Medina formally charged private respondent with plagiarism and private respondent's degree. With the approval of the Board of Regents and the U.P. Diliman Executive Committee, Posadas 9 recommended that the doctorate granted to her be withdrawn. created a five-man committee, chaired by Dr. Paulino B. Zafaralla, with members selected from a list of nominees screened by Dr. Emerenciana Arcellana, then a member of the Board of Regents. On August 13, 1994, the members of the Zafaralla committee and On May 13, 1993, Dean Paz formed an ad hoc committee, composed of faculty members from various disciplines and chaired by private respondent met at U.P. Los Baños. Eva Duka-Ventura, to investigate the plagiarism charge against private respondent. Meanwhile, she recommended to U.P. Diliman 10 Chancellor, Dr. Emerlinda Roman, that the Ph.D. degree conferred on private respondent be withdrawn. Meanwhile, on August 23, 1994, the U.P. Diliman Registrar released to private respondent a copy of her transcript of grades and certificate of graduation. In a letter, dated June 7, 1993, Dean Paz informed private respondent of the charges against her.11 In a letter to Chancellor Posadas, dated September 1, 1994, private respondent requested that the Zafaralla committee be On June 15, 1993, the Ventura Committee submitted a report to Dean Paz, finding at least ninety (90) instances or portions in provided with copies of the U.P. Charter (Act No. 1870), the U.P. Rules and Regulations on Student Conduct and Discipline, her private respondent's thesis which were lifted from sources without proper or due acknowledgment. letter-response to Chancellor Roman, dated September 25, 1993, as well as all her other communications.

On September 19, 1994, Chancellor Posadas obtained the Zafaralla Committee's report, signed by its chairman, recommending On July 28, 1993, the CSSP College Assembly unanimously approved the recommendation to withdraw private respondent's 16 doctorate degree and forwarded its recommendation to the University Council. The University Council, in turn, approved and the withdrawal of private respondent's doctorate degree. The report stated: endorsed the same recommendation to the Board of Regents on August 16, 1993. After going through all the pertinent documents of the case and interviewing Ms. Arokiaswamy William, the following facts were On September 6, 1993, the Board of Regents deferred action on the recommendation to study the legal implications of its established: approval.12 1. There is overwhelming evidence of massive lifting from a published source word for word and, at times, paragraph Secretary of the University by paragraph without any acknowledgment of the source, even by a mere quotation mark. At least 22 counts of such and of the Board of Regents documented liftings were identified by the Committee. These form part of the approximately ninety (90) instances found by the Committee created by the Dean of the College and subsequently verified as correct by the Special On January 18, 1995, private respondent wrote a letter to Commissioner Sedfrey Ordoñez, Chairman of the Commission on Committee. These instances involved the following forms of intellectual dishonesty: direct lifting/copying without 18 Human Rights, asking the commission's intervention. In a letter, dated February 14, 1995, to Secretary Ricardo Gloria, Chairman acknowledgment, full/partial lifting with improper documentation and substitution of terms or words (e.g., Tamil in of the Board of Regents, she asked for a reinvestigation of her case. She also sought an audience with the Board of Regents and/or place of Sanskrit, Tamilization in place of Indianization) from an acknowledged source in support of her thesis (attached the U.P. President, which request was denied by President Javier, in a letter dated June 2, 1995. herewith is a copy of the documents for reference); and

On August 10, 1995, private respondent then filed a petition for mandamus with a prayer for a writ of preliminary mandatory 2. Ms. Arokiaswamy William herself admits of being guilty of the allegation of plagiarism. Fact is, she informed the injunction and damages, which was docketed as Civil Case No. Q-95-24690 and assigned to Branch 81 of the Regional Trial Court of Special Committee that she had been admitting having lifted several portions in her dissertation from various sources 19 Quezon City. She alleged that petitioners had unlawfully withdrawn her degree without justification and without affording her since the beginning. procedural due process. She prayed that petitioners be ordered to restore her degree and to pay her P500,000.00 as moral and exemplary damages and P1,500,000.00 as compensation for lost of earnings. In view of the overwhelming proof of massive lifting and also on the admission of Ms. Arokiaswamy William that she indeed plagiarized, the Committee strongly supports the recommendation of the U.P. Diliman Council to withdraw the doctoral degree of 20 On August 6, 1996, the trial court, Branch 227, rendered a decision dismissing the petition for mandamus for lack of merit. Ms. Margaret Celine Arokiaswamy William. Private respondent appealed to the Court of Appeals, which on December 16, 1997, reversed the lower court. The dispositive portion of the appellate court's decision reads:21 On the basis of the report, the University Council, on September 24, 1994, recommended to the Board of Regents that private respondent be barred in the future from admission to the University either as a student or as an employee. WHEREFORE, the decision of the court a quo is hereby reversed and set aside. Respondents are ordered to restore to petitioner her degree of Ph.D. in Anthropology. On January 4, 1995, the secretary of the Board of Regents sent private respondent the following letter:17 No pronouncement as to costs. 4 January 1995 SO ORDERED. Ms. Margaret Celine Arokiaswamy William Department of Anthropology Hence, this petition. Petitioners contend: College of Social Sciences and Philosophy U.P. Diliman, Quezon City I Dear Ms. Arokiaswamy William: THE COURT OF APPEALS ERRED ON A QUESTION OF LAW IN GRANTING THE WRIT OF MANDAMUS AND ORDERING PETITIONERS TO RESTORE RESPONDENT'S DOCTORAL DEGREE. This is to officially inform you about the action taken by the Board of Regents at its 1081st and 1082nd meetings held last 17 November and 16 December 1994 regarding your case, the excerpts from the minutes of which are attached herewith. II Please be informed that the members present at the 1081st BOR meeting on 17 November 1994 resolved, by a majority decision, to withdraw your Ph.D. degree as recommended by the U.P. Diliman University Council and as concurred with by the External THE COURT OF APPEALS ERRED ON A QUESTION OF LAW IN HOLDING THAT THE DOCTORAL DEGREE GIVEN RESPONDENT BY U.P. Review Panel composed of senior faculty from U.P. Los Baños and U.P. Manila. These faculty members were chosen by lot from CANNOT BE RECALLED WITHOUT VIOLATING HER RIGHT TO ENJOYMENT OF INTELLECTUAL PROPERTY AND TO JUSTICE AND names submitted by the University Councils of U.P. Los Baños and U.P. Manila. EQUITY.

In reply to your 14 December 1994 letter requesting that you be given a good lawyer by the Board, the Board, at its 1082nd III meeting on 16 December 1994, suggested that you direct your request to the Office of Legal Aid, College of Law, U.P. Diliman. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW IN DEPRIVING PETITIONERS OF THEIR RIGHT TO SUBSTANTIVE DUE 22 Sincerely yours, PROCESS.

(Sgd.) Petitioners argue that private respondent failed to show that she had been unlawfully excluded from the use and enjoyment of a VIVENCIO R. JOSE right or office to which she is entitled so as to justify the issuance of the writ of mandamus. They also contend that she failed to prove that the restoration of her degree is a ministerial duty of U.P. or that the withdrawal of the degree violated her right to the criticism may be made of the university proceedings before private respondent was finally stripped of her degree, it is that there enjoyment of intellectual property. were too many committee and individual investigations conducted, although all resulted in a finding that private respondent committed dishonesty in submitting her doctoral dissertation on the basis of which she was conferred the Ph.D. degree. On the other hand, private respondent, unassisted by counsel, argue that petitioners acted arbitrarily and with grave abuse of discretion in withdrawing her degree even prior to verifying the truth of the plagiarism charge against her; and that as her answer Indeed, in administrative proceedings, the essence of due process is simply the opportunity to explain one's side of a controversy to the charges had not been forwarded to the members of the investigating committees, she was deprived of the opportunity to or a chance seek reconsideration of the action or ruling complained of.27 A party who has availed of the opportunity to present his comment or refute their findings. position cannot tenably claim to have been denied due process.28

In addition, private respondent maintains that petitioners are estopped from, withdrawing her doctorate degree; that petitioners In this case, private respondent was informed in writing of the charges against her29 and afforded opportunities to refute them. acted contrary to §9 of the U.P. Charter and the U.P. Rules and Regulations of Student Conduct and Discipline of the University, She was asked to submit her written explanation, which she forwarded on September 25, 1993.30 Private respondent then met which according to her, does not authorize the withdrawal of a degree as a penalty for erring students; and that only the college with the U.P. chancellor and the members of the Zafaralla committee to discuss her case. In addition, she sent several letters to committee or the student disciplinary tribunal may decide disciplinary cases, whose report must be signed by a majority of its the U.P. authorities explaining her position.31 members. It is not tenable for private respondent to argue that she was entitled to have an audience before the Board of Regents. Due We find petitioners' contention to be meritorious. process in an administrative context does not require trial-type proceedings similar to those in the courts of justice.32 It is noteworthy that the U.P. Rules do not require the attendance of persons whose cases are included as items on the agenda of the Board of Regents.33 Mandamus is a writ commanding a tribunal, corporation, board or person to do the act required to be done when it or he unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, there being no Nor indeed was private respondent entitled to be furnished a copy of the report of the Zafaralla committee as part of her right to other plain, speedy, and adequate remedy in the ordinary course of law.23 In University of the Philippines Board of Regents v. due process. In Ateneo de Manila University v. Capulong,34 we held: Ligot-Telan,24 this Court ruled that the writ was not available to restrain U.P. from the exercise of its academic freedom. In that case, a student who was found guilty of dishonesty and ordered suspended for one year by the Board of Regents, filed a petition Respondent students may not use the argument that since they were not accorded the opportunity to see and examine for mandamus and obtained from the lower court a temporary restraining order stopping U.P. from carrying out the order of the written statements which became the basis of petitioners' February 14, 1991 order, they were denied procedural suspension. In setting aside the TRO and ordering the lower court to dismiss the student's petition, this Court said: due process. Granting that they were denied such opportunity, the same may not be said to detract from the observance of due process, for disciplinary cases involving students need not necessarily include the right to cross [T]he lower court gravely abused its discretion in issuing the writ of preliminary injunction of May 29, 1993. The examination. An administrative proceeding conducted to investigate students' participation in a hazing activity need issuance of the said writ was based on the lower court's finding that the implementation of the disciplinary sanction of not be clothed with the attributes of a judicial proceeding. . . suspension on Nadal "would work injustice to the petitioner as it would delay him in finishing his course, and consequently, in getting a decent and good paying job." Sadly, such a ruling considers only the situation of Nadal In this case, in granting the writ of mandamus, the Court of Appeals held: without taking into account the circumstances, clearly of his own making, which led him into such a predicament. More importantly, it has completely disregarded the overriding issue of academic freedom which provides more than ample justification for the imposition of a disciplinary sanction upon an erring student of an institution of higher learning. First. Petitioner graduated from the U.P. with a doctorate degree in Anthropology. After graduation, the contact between U.P. and petitioner ceased. Petitioner is no longer within the ambit of the disciplinary powers of the U.P. As a graduate, she is entitled to the right and enjoyment of the degree she has earned. To recall the degree, after From the foregoing arguments, it is clear that the lower court should have restrained itself from assuming jurisdiction conferment, is not only arbitrary, unreasonable, and an act of abuse, but a flagrant violation of petitioner's right of over the petition filed by Nadal. Mandamus is never issued in doubtful cases, a showing of a clear and certain right on enjoyment to intellectual property. the part of the petitioner being required. It is of no avail against an official or government agency whose duty requires the exercise of discretion or judgment.25 Second. Respondents aver that petitioner's graduation was a mistake. In this case, the trial court dismissed private respondent's petition precisely on grounds of academic freedom but the Court of Appeals reversed holding that private respondent was denied due process. It said: Unfortunately this "mistake" was arrived at after almost a year after graduation. Considering that the members of the thesis panel, the College Faculty Assembly, and the U.P. Council are all men and women of the highest intellectual acumen and integrity, as respondents themselves aver, suspicion is aroused that the alleged "mistake" might not be It is worthy to note that during the proceedings taken by the College Assembly culminating in its recommendation to the cause of withdrawal but some other hidden agenda which respondents do not wish to reveal. the University Council for the withdrawal of petitioner's Ph.D. degree, petitioner was not given the chance to be heard until after the withdrawal of the degree was consummated. Petitioner's subsequent letters to the U.P. President proved unavailing.26 At any rate, We cannot countenance the plight the petitioner finds herself enmeshed in as a consequence of the acts complained of. Justice and equity demand that this be rectified by restoring the degree conferred to her after her compliance with the academic and other related requirements. As the foregoing narration of facts in this case shows, however, various committees had been formed to investigate the charge that private respondent had committed plagiarism and, in all the investigations held, she was heard in her defense. Indeed, if any Art. XIV, §5 (2) of the Constitution provides that "[a]cademic freedom shall be enjoyed in all institutions of higher learning." This is Jurisdiction. — All cases involving discipline of students under these rules shall be subject to the jurisdiction of the nothing new. The 1935 Constitution35 and the 1973 Constitution36 likewise provided for the academic freedom or, more precisely, student disciplinary tribunal, except the following cases which shall fall under the jurisdiction of the appropriate college for the institutional autonomy of universities and institutions of higher learning. As pointed out by this Court in Garcia vs. Faculty or unit; Admission Committee, Loyola School of Theology,37 it is a freedom granted to "institutions of higher learning" which is thus given "a wide sphere of authority certainly extending to the choice of the students." If such institution of higher learning can decide who (a) Violation of college or unit rules and regulations by students of the college, or can and who cannot study in it, it certainly can also determine on whom it can confer the honor and distinction of being its graduates. (b) Misconduct committed by students of the college or unit within its classrooms or premises or in the course of an official activity; Where it is shown that the conferment of an honor or distinction was obtained through fraud, a university has the right to revoke or withdraw the honor or distinction it has thus conferred. This freedom of a university does not terminate upon the "graduation" of a student, as the Court of Appeals held. For it is precisely the "graduation" of such a student that is in question. It is noteworthy Provided, that regional units of the University shall have original jurisdiction over all cases involving students of such that the investigation of private respondent's case began before her graduation. If she was able to join the graduation ceremonies units. on April 24, 1993, it was because of too many investigations conducted before the Board of Regents finally decided she should not have been allowed to graduate. Private respondent argues that under §25 (a) of the said Rules and Regulations, dishonesty in relation to one's studies (i.e., plagiarism) may be punished only with suspension for at least one (1) year. Wide indeed is the sphere of autonomy granted to institutions of higher learning, for the constitutional grant of academic freedom, to quote again from Garcia v. Faculty Admission Committee, Loyola School of Theology, "is not to be construed in a As the above-quoted provision of §5 of the Rules and Regulations indicates, the jurisdiction of the student disciplinary tribunal niggardly manner or in a grudging fashion." extend only to disciplinary actions. In this case, U.P. does not seek to discipline private respondent. Indeed, as the appellate court observed, private respondent is no longer within "the ambit of disciplinary powers of the U.P." Private respondent cannot even be Under the U.P. Charter, the Board of Regents is the highest governing body of the University of the Philippines.38 It has the power punished since, as she claims, the penalty for acts of dishonesty in administrative disciplinary proceedings is suspension from the confer degrees upon the recommendation of the University Council.39 If follows that if the conferment of a degree is founded on University for at least one year. What U.P., through the Board of Regents, seeks to do is to protect its academic integrity by error or fraud, the Board of Regents is also empowered, subject to the observance of due process, to withdraw what it has withdrawing from private respondent an academic degree she obtained through fraud. granted without violating a student's rights. An institution of higher learning cannot be powerless if it discovers that an academic degree it has conferred is not rightfully deserved. Nothing can be more objectionable than bestowing a university's highest WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and the petition for mandamus is hereby DISMISSED. academic degree upon an individual who has obtained the same through fraud or deceit. The pursuit of academic excellence is the university's concern. It should be empowered, as an act of self-defense, to take measures to protect itself from serious threats to its integrity. SO ORDERED.

While it is true that the students are entitled to the right to pursue their educaiton, the USC as an educational institution is also entitled to pursue its academic freedom and in the process has the concomitant right to see to it that this freedom is not jeopardized.40

In the case at bar, the Board of Regents determined, after due investigation conducted by a committee composed of faculty members from different U.P. units, that private respondent committed no less than ninety (90) instances of intellectual dishonesty in her dissertation. The Board of Regents' decision to withdraw private respondent's doctorate was based on documents on record including her admission that she committed the offense.41

On the other hand, private respondent was afforded the opportunity to be heard and explain her side but failed to refute the charges of plagiarism against her. Her only claim is that her responses to the charges against her were not considered by the Board of Regents before it rendered its decision. However, this claim was not proven. Accordingly, we must presume regularity in the performance of official duties in the absence of proof to the contrary.42

Very much the opposite of the position of the Court of Appeals that, since private respondent was no longer a student of the U.P., the latter was no longer within the "ambit of disciplinary powers of the U.P.," is private respondent's contention that it is the Student Disciplinary Tribunal which had jurisdiction over her case because the charge is dishonesty. Private respondent invoke §5 of the U.P. Rules and Regulations on Student Conduct and Discipline which provides: G.R. No. 141314 November 15, 2002 In the same Order, the ERB requested the Commission on Audit (COA) to conduct an "audit and examination of the books and other records of account of the applicant for such period of time, which in no case shall be less than 12 consecutive months, as it may deem appropriate" and to submit a copy thereof to the ERB immediately upon completion.2 REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD petitioner, vs. MANILA ELECTRIC COMPANY, respondent. On February 11, 1997, the COA submitted its Audit Report SAO No. 95-07 (the "COA Report") which contained, among others, the recommendation not to include income taxes paid by MERALCO as part of its operating expenses for purposes of rate determination and the use of the net average investment method for the computation of the proportionate value of the ------properties used by MERALCO during the test year for the determination of the rate base.3

G.R. No. 141369 November 15, 2002 Subsequently, the ERB rendered its decision adopting the above recommendations and authorized MERALCO to implement a rate adjustment in the average amount of P0.017 per kwh, effective with respect to MERALCO's billing cycles beginning February 1994. LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of CEFERINO PADUA, Chairman, The ERB further ordered that "the provisional relief in the amount of P0.184 per kilowatthour granted under the Board's Order G. FULTON ACOSTA, GALILEO BRION, ANATALIA BUENAVENTURA, dated January 28, 1994 is hereby superseded and modified and the excess average amount of P0.167 per kilowatthour starting PEDRO CASTILLO, NAPOLEON CORONADO, ROMEO ECHAUZ, with [MERALCO's] billing cycles beginning February 1994 until its billing cycles beginning February 1998, be refunded to FERNANDO GAITE, ALFREDO DE GUZMAN, ROGELIO KARAGDAG, JR., [MERALCO's] customers or correspondingly credited in their favor for future consumption."4 MA. LUZ ARZAGA-MENDOZA, ANSBERTO PAREDES, AQUILINO PIMENTEL III, MARIO REYES, EMMANUEL SANTOS, RUDEGELIO TACORDA, members, The ERB held that income tax should not be treated as operating expense as this should be "borne by the stockholders who are and ROLANDO ARZAGA, Secretary-General, recipients of the income or profits realized from the operation of their business" hence, should not be passed on to the JUSTICE ABRAHAM SARMIENTO, SENATOR AQUILINO PIMENTEL, JR. and consumers.5 Further, in applying the net average investment method, the ERB adopted the recommendation of COA that in COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of Consultants, computing the rate base, only the proportionate value of the property should be included, determined in accordance with the and Lawyer GENARO LUALHATI, petitioners, number of months the same was actually used in service during the test year.6 vs. MANILA ELECTRIC COMPANY (MERALCO), respondent. On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the reduction of the MERALCO rates by an average of P0.167 per kwh and the refund of such amount to MERALCO's customers beginning February 1994 and until its D E C I S I O N billing cycle beginning February 1998.7 Separate Motions for Reconsideration filed by the petitioners were denied by the Court of Appeals.8 PUNO, J.: Petitioners are now before the Court seeking a reversal of the decision of the Court of Appeals by arguing primarily that the Court In third world countries like the Philippines, equal justice will have a synthetic ring unless the economic rights of the people, of Appeals erred: a) in ruling that income tax paid by MERALCO should be treated as part of its operating expenses and thus especially the poor, are protected with the same resoluteness as their right to liberty. The cases at bar are of utmost significance considered in determining the amount of increase in rates imposed by MERALCO and b) in rejecting the net average investment for they concern the right of our people to electricity and to be reasonably charged for their consumption. In configuring the method used by the COA and the ERB and instead adopted the average investment method used by MERALCO. contours of this economic right to a basic necessity of life, the Court shall define the limits of the power of respondent MERALCO, a giant public utility and a monopoly, to charge our people for their electric consumption. The question is: should public interest We grant the petition. prevail over private profits?

The regulation of rates to be charged by public utilities is founded upon the police powers of the State and statutes prescribing The facts are brief and undisputed. On December 23, 1993, MERALCO filed with the ERB an application for the revision of its rate rules for the control and regulation of public utilities are a valid exercise thereof. When private property is used for a public schedules. The application reflected an average increase of 21 centavos per kilowatthour (kwh) in its distribution charge. The purpose and is affected with public interest, it ceases to be juris privati only and becomes subject to regulation. The regulation is application also included a prayer for provisional approval of the increase pursuant to Section 16(c) of the Public Service Act and to promote the common good. Submission to regulation may be withdrawn by the owner by discontinuing use; but as long as use Section 8 of Executive Order No. 172. of the property is continued, the same is subject to public regulation.9

On January 28, 1994, the ERB issued an Order granting a provisional increase of P0.184 per kwh, subject to the following In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining condition. the efficiency and quality of services rendered. However, the power to regulate rates does not give the State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment. Thus, the rates prescribed by the "In the event, however, that the Board finds, after hearing and submission by the Commission on Audit of an audit report on the State must be one that yields a fair return on the public utility upon the value of the property performing the service and one books and records of the applicant that the latter is entitled to a lesser increase in rates, all excess amounts collected from the that is reasonable to the public for the services rendered.10 The fixing of just and reasonable rates involves a balancing of the applicant's customers as a result of this Order shall either be refunded to them or correspondingly credited in their favor for investor and the consumer interests.11 application to electric bills covering future consumptions."1 In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v. Public Service Commission,12 Mr. Justice In the cases at bar, the resolution of the issues involved hinges on the determination of the kind and the amount of operating Brandeis wrote: expenses that should be allowed to a public utility to generate a fair return and the proper valuation of the rate base or the value of the property entitled to a return. "The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in an enterprise. Upon the capital so invested, the Federal Constitution guarantees to the utility the opportunity to earn a fair return… I The Constitution does not guarantee to the utility the opportunity to earn a return on the value of all items of property used by the utility, or of any of them. Income Tax as Operating Expense Cannot be Allowed For Rate-Determination Purposes

…. In determining whether or not a rate yields a fair return to the utility, the operating expenses of the utility must be considered. The return allowed to a public utility in accordance with the prescribed rate must be sufficient to provide for the payment of such The investor agrees, by embarking capital in a utility, that its charges to the public shall be reasonable. His company is the reasonable operating expenses incurred by the public utility in the provision of its services to the public. Thus, the public utility is substitute for the State in the performance of the public service, thus becoming a public servant. The compensation which the allowed a return on capital over and above operating expenses. However, only such expenses and in such amounts as are Constitution guarantees an opportunity to earn is the reasonable cost of conducting the business." reasonable for the efficient operation of the utility should be allowed for determination of the rates to be charged by a public utility. While the power to fix rates is a legislative function, whether exercised by the legislature itself or delegated through an administrative agency, a determination of whether the rates so fixed are reasonable and just is a purely judicial question and is The ERB correctly ruled that income tax should not be included in the computation of operating expenses of a public utility. subject to the review of the courts.13 Income tax paid by a public utility is inconsistent with the nature of operating expenses. In general, operating expenses are those which are reasonably incurred in connection with business operations to yield revenue or income. They are items of expenses which contribute or are attributable to the production of income or revenue. As correctly put by the ERB, operating expenses The ERB was created under Executive Order No. 172 to regulate, among others, the distribution of energy resources and to fix "should be a requisite of or necessary in the operation of a utility, recurring, and that it redounds to the service or benefit of rates to be charged by public utilities involved in the distribution of electricity. In the fixing of rates, the only standard which the customers."26 legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. It has been held that even in the absence of an express requirement as to reasonableness, this standard may be implied.14 What is a just and reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent Income tax, it should be stressed, is imposed on an individual or entity as a form of excise tax or a tax on the privilege of earning judgment. The requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too income.27 In exchange for the protection extended by the State to the taxpayer, the government collects taxes as a source of high as to be oppressive. In determining whether a rate is confiscatory, it is essential also to consider the given situation, revenue to finance its activities. Clearly, by its nature, income tax payments of a public utility are not expenses which contribute to requirements and opportunities of the utility.15 or are incurred in connection with the production of profit of a public utility. Income tax should be borne by the taxpayer alone as they are payments made in exchange for benefits received by the taxpayer from the State. No benefit is derived by the customers of a public utility for the taxes paid by such entity and no direct contribution is made by the payment of income tax to the Settled jurisprudence holds that factual findings of administrative bodies on technical matters within their area of expertise should operation of a public utility for purposes of generating revenue or profit. Accordingly, the burden of paying income tax should be be accorded not only respect but even finality if they are supported by substantial evidence even if not overwhelming or 16 17 Meralco's alone and should not be shifted to the consumers by including the same in the computation of its operating preponderant. In one case, we cautioned that courts should "refrain from substituting their discretion on the weight of the expenses. evidence for the discretion of the Public Service Commission on questions of fact and will only reverse or modify such orders of the Public Service Commission when it really appears that the evidence is insufficient to support their conclusions."18 The principle behind the inclusion of operating expenses in the determination of a just and reasonable rate is to allow the public utility to recoup the reasonable amount of expenses it has incurred in connection with the services it provides. It does not give the In the cases at bar, findings and conclusions of the ERB on the rate that can be charged by MERALCO to the public should be 19 public utility the license to indiscriminately charge any and all types of expenses incurred without regard to the nature thereof, respected. The function of the court, in exercising its power of judicial review, is to determine whether under the facts and 20 i.e., whether or not the expense is attributable to the production of services by the public utility. To charge consumers for circumstances, the final order entered by the administrative agency is unlawful or unreasonable. Thus, to the extent that the expenses incurred by a public utility which are not related to the service or benefit derived by the customers from the public utility administrative agency has not been arbitrary or capricious in the exercise of its power, the time-honored principle is that courts is unjustified and inequitable. should not interfere. The principle of separation of powers dictates that courts should hesitate to review the acts of administrative officers except in clear cases of grave abuse of discretion.21 While the public utility is entitled to a reasonable return on the fair value of the property being used for the service of the public, no less than the Federal Supreme Court of the United States emphasized: "[t]he public cannot properly be subjected to In determining the just and reasonable rates to be charged by a public utility, three major factors are considered by the regulating unreasonable rates in order simply that stockholders may earn dividends… If a corporation cannot maintain such a *facility+ and agency: a) rate of return; b) rate base and c) the return itself or the computed revenue to be earned by the public utility based on 22 earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not require to be remedied by the rate of return and rate base. The rate of return is a judgment percentage which, if multiplied with the rate base, provides a 28 23 imposing unjust burdens on the public." fair return on the public utility for the use of its property for service to the public. The rate of return of a public utility is not prescribed by statute but by administrative and judicial pronouncements. This Court has consistently adopted a 12% rate of return for public utilities.24 The rate base, on the other hand, is an evaluation of the property devoted by the utility to the public service We are not impressed by the reliance by MERALCO on some American case law allowing the treatment of income tax paid by a or the value of invested capital or property which the utility is entitled to a return.25 public utility as operating expense for rate-making purposes. Suffice to state that with regard to rate-determination, the government is not hidebound to apply any particular method or formula.29 The question of what constitutes a reasonable return for the public utility is necessarily determined and controlled by its peculiar environmental milieu. Aside from the financial Under the "net average investment method," properties and equipment used in the operation of a public utility are entitled to a condition of the public utility, there are other critical factors to consider for purposes of rate regulation. Among others, they are: return only on the actual number of months they are in service during the period.34 In contrast, the "average investment method" particular reasons involved for the request of the rate increase, the quality of services rendered by the public utility, the existence computes the proportionate value of the property by adding the value of the property at the beginning and at the end of the test of competition, the element of risk or hazard involved in the investment, the capacity of consumers, etc.30 Rate regulation is the year with the resulting sum divided by two.35 art of reaching a result that is good for the public utility and is best for the public. The ERB did not abuse its discretion when it applied the net average investment method. The reasonableness of net average For these reasons, the Court cannot give in to the importunings of MERALCO that we blindly apply the rulings of American courts investment method is borne by the records of the case. In its report, the COA explained that the computation of the proportionate on the treatment of income tax as operating expenses in rate regulation cases. An approach allowing the indiscriminate inclusion value of the property and equipment in accordance with the actual number of months such property or equipment is in service of income tax payments as operating expenses may create an undesirable precedent and serve as a blanket authority for public for purposes of determining the rate base is favored, as against the trending method employed by MERALCO, "to reflect the real utilities to charge their income tax payments to operating expenses and unjustly shift the tax burden to the customer. To be sure, status of the property."36 By using the net average investment method, the ERB and the COA considered for determination of the public utility taxation in the United States is going through the eye of criticism. Some commentators are of the view that by rate base the value of properties and equipment used by MERALCO in proportion to the period that the same were actually used allowing the public utility to collect its income tax payment from its customers, a form of "sales tax" is, in effect, imposed on the during the period in question. This treatment is consistent with the settled rule in rate regulation that the determination of the public for consumption of public utility services. By charging their income tax payments to their customers, public utilities virtually rate base of a public utility entitled to a return must be based on properties and equipment actually being used or are useful to become "tax collectors" rather than taxpayers.31 In the cases at bar, MERALCO has not justified why its income tax should be the operations of the public utility.37 treated as an operating expense to enable it to derive a fair return for its services. MERALCO does not seriously contest this treatment of actual usage of property but opposes the method of computation or It is also noteworthy that under American laws, public utilities are taxed differently from other types of corporations and thus valuation thereof adopted by the ERB and the COA on the ground that the net average investment method "assumes an ideal carry a heavier tax burden. Moreover, different types of taxes, charges, tolls or fees are assessed on a public utility depending on situation where a utility, like MERALCO, is able to record in its books within any given month the value of all the properties the state or locality where it operates. At a federal level, public utilities are subject to corporate income taxes and Social Security actually placed in service during that month."38 MERALCO contends that immediate recordal in its books of the property or taxes—in the same manner as other business corporations. At the state and local levels, public utilities are subject to a wide equipment is not possible as MERALCO's franchise covers a wide area and that due to the volume of properties and equipment variety of taxes, not all of which are imposed on each state. Thus, it is not unusual to find different taxes or combinations of taxes put into service and the amount of paper work required to be accomplished for recording in the books of the company, "it takes applicable to respective utility industries within a particular state.32 A significant aspect of state and local taxation of public utilities three to six months (often longer) before an asset placed in service is recorded in the books" of MERALCO.39 Hence, MERALCO in the United States is that they have been singled out for special taxation, i.e., they are required to pay one or more taxes that are adopted the "average investment method" or the "trending method" which computes the average value of the property at the not levied upon other industries. In contrast, in this jurisdiction, public utilities are subject to the same tax treatment as any other beginning and at the end of the test year to compensate for the irregular recording in its books. corporation and local taxes paid by it to various local government units are substantially the same. The reason for this is that the power to tax resides in our legislature which may prescribe the limits of both national and local taxation, unlike in the federal MERALCO'S stance is belied by the COA Report which states that the "verification of the records, as confirmed by the system of the United States where state legislature may prescribe taxes to be levied in their respective jurisdictions. 40 Management Staff, disclosed that properties are recorded in the books as these are actually placed in service." Moreover, while the case was pending trial before the ERB, the ERB conducted an ocular inspection to examine the assets in service, records MERALCO likewise cites decisions of the ERB33 allowing the application of a tax recovery clause for the imposition of an additional and books of accounts of MERALCO to ascertain the physical existence, ownership, valuation and usefulness of the assets charge on consumers for taxes paid by the public utility. A close look at these decisions will show they are inappropos. In the said contained in the COA Report.41 Thus, MERALCO's contention that the date of recordal in the books does not reflect the date when cases, the ERB approved the adoption of a formula which will allow the public utility to recover from its customers taxes already the asset is placed in service is baseless. paid by it. However, in the cases at bar, the income tax component added to the operating expenses of a public utility is based on an estimate or approximate figure of income tax to be paid by the public utility. It is this estimated amount of income tax to be Further, computing the proportionate value of assets used in service in accordance with the actual number of months the same is paid by MERALCO which is included in the amount of operating expenses and used as basis in determining the reasonable rate to used during the test year is a more accurate method of determining the value of the properties of a public utility entitled to a be charged to the customers. Accordingly, the varying factual circumstances in the said cases prohibit a square application of the return. If, as determined by COA, the date of recordal in the books of MERALCO reflects the actual date the equipment or property rule under the previous ERB decisions. is used in service, there is no reason for the ERB to adopt the trending method applied by MERALCO if a more precise method is available for determining the proportionate value of the assets placed in service. II If we were to sustain the application of the "trending method," the public utility may easily manipulate the valuation of its Use of "Net Average Investment Method" is Not Unreasonable property entitled to a return (rate base) by simply including a highly capitalized asset in the computation of the rate base even if the same was used for a limited period of time during the test year. With the inexactness of the trending method and the possibility that the valuation of certain properties may be subject to the control of and abuse by the public utility, the Court finds In the determination of the rate base, property used in the operation of the public utility must be subject to appraisal and no reasonable basis to overturn the recommendation of COA and the decision of the ERB. evaluation to determine the fair value thereof entitled to a fair return. With respect to those properties which have not been used by the public utility for the entire duration of the test year, i.e., the year subject to audit examination for rate-making purposes, a valuation method must be adopted to determine the proportionate value of the property. Petitioners maintain that the net MERALCO further insists that the Court should sustain the "trending method" in view of previous decisions by the Public Service average investment method (also known as "actual number of months use method") recommended by COA and adopted by the Commission and of this Court which "upheld" the use of this method. By refusing to adopt the trending method, MERALCO argues ERB should be used, while MERALCO argues that the average investment method (also known as the "trending method") to that the ERB violated the rule on stare decisis. determine the proportionate value of properties should be applied. Again, we are not impressed. It is a settled rule that the goal of rate-making is to arrive at a just and reasonable rate for both the Mindful of and guided by the aforecited constitutional and legal precepts, doctrines and principles prevailing in this jurisdiction, public utility and the public which avails of the former's products and services.42 However, what is a just and reasonable rate should petitioner’s Motion for Reconsideration be granted? cannot be fixed by any immutable method or formula. Hence, it has been held that no public utility has a vested right to any Docketed as Criminal Case No. 17450 before the Sandiganbayan, the Information indicting Imelda R. Marcos and Jose P. Dans, Jr. particular method of valuation.43 Accordingly, with respect to a determination of the proper method to be used in the valuation of for a violation of Section 3(g) of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, property and equipment used by a public utility for rate-making purposes, the administrative agency is not bound to apply any alleges: one particular formula or method simply because the same method has been previously used and applied. In fact, nowhere in the previous decisions cited by MERALCO which applied the trending method did the Court rule that the same should be the only “That on or about June 8, 1984, and for sometime prior or subsequent thereto, in Makati, Metro-Manila, Philippines, and within method to be applied in all instances. the jurisdiction of this Honorable Court, the accused IMELDA R. MARCOS and JOSE P. DANS, JR., public officers, being then Chairman and Vice-Chairman, respectively, of the Light Rail Transit Authority (LRTA), a government corporate entity created under Executive Order No. 603 of the former President Ferdinand Marcos, while in the performance of their official functions, taking At any rate, MERALCO has not adequately shown that the rates prescribed by the ERB are unjust or confiscatory as to deprive its stockholders a reasonable return on investment. In the early case of Ynchausti S.S. Co. v. Public Utility Commissioner, this Court advantage of their positions and committing the crime in relation to their offices, did then and there wilfully, unlawfully and held: "[t]here is a legal presumption that the rates fixed by an administrative agency are reasonable, and it must be conceded that criminally conspiring with one another, enter on behalf of the aforesaid government corporation into a Lease Agreement covering the fixing of rates by the Government, through its authorized agents, involves the exercise of reasonable discretion and, unless LRTA property located in Pasay City, with the Philippine General Hospital Foundation, Inc. (PGHFI), a private enterprise, under there is an abuse of that discretion, the courts will not interfere."44 Thus, the burden is upon the oppositor, MERALCO, to prove terms and conditions manifestly and grossly disadvantageous to the government. that the rates fixed by the ERB are unreasonable or otherwise confiscatory as to merit the reversal of the ERB. In the instant cases, CONTRARY TO LAW.” MERALCO was unable to discharge this burden. The case was raffled off to the First Division of the Sandiganbayan, with Presiding Justice Francis E. Garchitorena, as Chairman and Justices Jose S. Balajadia and Narciso T. Atienza, as members. On September 15, 1993, when the First Division failed to comply WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and the decision of the Court of Appeals in C.A. G.R. SP with the legal requirement of unanimity of its three members due to the dissent of Justice Narciso T. Atienza, Presiding Justice No. 46888 is REVERSED. Respondent MERALCO is authorized to adopt a rate adjustment in the amount of P0.017 per Garchitorena issued Administrative Order No. 288-93 constituting a Special Division of five and designating Justices Augusto M. kilowatthour, effective with respect to MERALCO's billing cycles beginning February 1994. Further, in accordance with the decision Amores and Cipriano A. Del Rosario, as additional members. of the ERB dated February 16, 1998, the excess average amount of P0.167 per kilwatthour starting with the applicant's billing cycles beginning February 1998 is ordered to be refunded to MERALCO's customers or correspondingly credited in their favor for On September 21, 1993, Justice Amores wrote Presiding Justice Garchitorena requesting that he be given fifteen (15) days to send future consumption. SO ORDERED. in his Manifestation. However, on the same day, September 21, 1993, when Justice Balajadia and Presiding Justice Garchitorena agreed with the opinion of Justice Del Rosario, Presiding Justice Garchitorena issued Administrative Order No. 293-93, dissolving the Special Division of Five, without waiting for Justice Amores’ manifestation. Justice Garchitorena considered the said request of Justice Amores as “pointless because of the agreement of Justice Balajadia and the undersigned to the conclusion reached by Justice Atienza.” Thus, on September 24, 1993, the now assailed decision was handed down by the First Division of the [G.R. No. 126995. October 6, 1998] Sandiganbayan. IMELDA R. MARCOS, petitioner, vs. The Honorable SANDIGANBAYAN (First Division), and THE PEOPLE OF THE PHILIPPINES, Under the aforequoted Information charging accused Imelda R. Marcos and Jose P. Dans, Jr. with a violation of Section 3(g) of RA respondents. 3019, the following elements of the offense charged must be proved beyond reasonable doubt, to wit: 1] that the accused acted as a public officer; 2] that subject Contract or transaction entered into by the latter is manifestly and grossly disadvantageous to R E S O L U T I O N the government. PURISIMA, J.: There is no dispute that sometime in the year 1984, the herein petitioner, Imelda R. Marcos, was Minister of Human Settlement This scenic Philippine archipelago is a citadel of justice, due process and rule of law. Succinct and clear is the provision of the while Jose P. Dans, Jr. was the Minister of Transportation and Communication. The two served as ex oficio Chairman and Vice constitution of this great Republic that every accused is presumed innocent until the contrary is proved. [Art. 111, Sec. 14(2)]. As Chairman, respectively, of the Light Rail Transport Authority (LRTA). Petitioner Marcos was also Chairman of the Board of Trustees held in People of the Philippines vs. Ellizabeth Ganguso y Decena (G.R. No 115430, November 23, 1995, 250 SCRA 268, 274-275): of the Philippine General Hospital Foundation, Inc. (PGHFI). “An accused has in his favor the presumption of innocence which the Bill of Rights guarantees. Unless his guilt is shown beyond On June 8, 1984, petitioner, in her capacity as Chairman of PGHFI, and Jose P. Dans, Jr. as Vice Chairman of LRTA, signed the Lease reasonable doubt, he must be acquitted. This reasonable doubt standard is demanded by the due process clause of the Constitution Agreement (Exhibit “B”) by virtue of which LRTA leased to PGHFI subject lot with an area of 7,340 square meters, at a monthly which protects the accused from conviction except upon proof beyond reasonable doubt of every fact necessary to constitute the rental of P102,760.00 for a period of twenty-five (25) years. crime with which he is charged. The burden of proof is on the prosecution, and unless it discharges that burden the accused need On June 27, 1984, the PGHFI, represented by its Chairman Imelda R. Marcos, and Transnational Construction Corporation, not even offer evidence in his behalf, and he would be entitled to an acquittal. Proof beyond reasonable doubt does not, of course, represented by its President Ignacio B. Gimenez, signed the Sub-lease Agreement (Exhibit “D”), wherein said lessee rented the mean such degree of proof as, excluding the possibility of error, produce absolute certainty. Moral certainty only is required, or same area of 7,340 square meters for P734,000.00 a month, for a period of twenty-five (25) years. that degree of proof which produces conviction in an unprejudiced mind. The conscience must be satisfied that the accused is responsible for the offense charged.” For executing the aforesaid Lease Agreement (Exhibit “B”), petitioner and Jose P. Dans, Jr. were indicted in the said Information, for conspiring and confederating with each other in entering into subject Lease Agreement alleged to be manifestly and grossly So also, well-settled, to the point of being elementary, is the doctrine that when inculpatory facts are susceptible to two or more disadvantageous to the government. interpretations, one of which is consistent with the innocence of the accused, the evidence does not fulfill or hurdle the test of moral certainty required for conviction. (People of the Philippines vs. Eric F. Timtiman, G.R. No. 101663, November 4, 1992, 215 After trial, as earlier alluded to, the Sandiganbayan convicted the petitioner and Jose P. Dans, Jr. of the offense charged. SCRA 364, 373 citing People vs. Remorosa, 200 SCRA 350, 360 [1991]; People vs. Raquel, 265 SCRA 248; People vs. Aranda, 226 On June 29, 1998, the Third Division of this court came out with its decision affirming the judgment, as against petitioner Imelda R. SCRA 562; People vs. Maongco, 230 SCRA 562; People vs. Salangga, 234 SCRA 407) Marcos, in G.R. No. 126995, but reversing the same judgment, as against Jose P. Dans, Jr., in G.R. No. 127073. In affirming the judgment of conviction against petitioner, the Third Division found the rental price stipulated in the Lease grossly disadvantageous to the government”. “Gross” is a comparative term. Before it can be considered “gross,” there must be a Agreement, (Exhibit “B”) unfair and unreasonably low, upon a comparison with the rental rate in the Sub-lease Agreement (Exhibit standard by which the same is weighed and measured. “D”), which contract petitioner subsequently signed on behalf of PGHFI, with TNCC. Undaunted, the petitioner interposed the All things viewed in proper perspective, it is decisively clear that there is a glaring absence of substantiation that the Lease present Motion for Reconsideration. Agreement under controversy is grossly and manifestly disadvantageous to the government, as theorized upon by the The pivot of inquiry here is whether all the elements of the offense charged have been duly substantiated. As regards the first prosecution. element, did petitioner Imelda R. Marcos enter into the Lease Agreement marked Exhibit “B” as a public officer? As clearly stated Furthermore, that the lessee, PGHFI, succeeded in obtaining a high rental rate of P734,000.00 a month, did not result in any on the face of the subject contract under scrutiny, petitioner signed the same in her capacity as Chairman of PGHFI and not as disadvantage to the government because obviously, the rental income realized by PGHFI from the Sub-lease Agreement (Exhibit Human Settlement Minister nor as ex-officio Chairman of LRTA. It was Jose P. Dans, Jr. who signed said Contract, as ex-officio Vice- “D”) augmented the financial support for and improved the management and operation of the Philippine General Hospital, which Chairman of LRTA. Although petitioner was the ex-officio Chairman of LRTA, at the time, there is no evidence to show that she was is, after all, a government hospital of the people and for the people. present when the Board of Directors of LRTA authorized and approved the Lease Agreement sued upon. Another sustainable ground for the granting of petitioner’s motion for reconsideration is the failure and inability of the In light of the foregoing antecedent facts and circumstances, the irresistible conclusion is that petitioner did not sign subject Lease prosecution to prove that petitioner was present when the Board of Directors of LRTA authorized and approved the Lease Agreement as a public officer, within the contemplation of RA 3019 and, therefore, the first element of the offense charged is Agreement complained of. Albeit, petitioner was ex oficio chairman of the Board of Directors of LRTA when the said Lease wanting. Agreement was entered into, there is no evidence whatsoever to show that she attended the board meeting of LRTA which It bears stressing, in this connection, that Jose P. Dans, Jr., the public officer who signed the said Lease Agreement (Exhibit “B”) for deliberated and acted upon subject Lease Agreement (Exhibit “B”). It is thus beyond cavil that petitioner signed the said Lease LRTA, was acquitted. Agreement as Chairman of the PGH Foundation, Inc., a private charitable foundation, and not as a public officer. As regards the second element of the offense - that such Lease Agreement is grossly and manifestly disadvantageous to the Neither can petitioner be considered as in conspiracy with Jose P. Dans, Jr., who has been found without any criminal liability for government, the respondent court based its finding thereon against the petitioner and Jose P. Dans, Jr., on a ratiocination that signing the same Lease Agreement. Absent any conspiracy of petitioner with Dans, the act of the latter cannot be viewed as an act while the rental price under the Lease Agreement is only P102,760.00 a month, the monthly rental rate under the Sub-lease of the former. Petitioner is only answerable for her own individual act. Consequently, petitioner not having signed Exhibit “B” as a Agreement is P734,000.00. After comparing the two rental rates aforementioned, the respondent court concluded that the rental public officer, there is neither legal nor factual basis for her conviction under Section 3 (g) of Rep Act 3019. price of P102,760.00 a month is unfair, unreasonable and disadvantageous to the government. It bears repeating that apart from the Lease Agreement and Sub-lease Agreement marked Exhibits “B” and “D”, respectively, the But Exhibit “B” does not prove that the said contract entered into by petitioner is “manifestly and grossly disadvantageous to the prosecution offered no other evidence to prove the accusation at bar. government.” There is no established standard by which Exhibit “B”’s rental provisions could be adjudged prejudicial to LRTA or What makes petitioner’s stance the more meritorious and impregnable is the patent violation of her right to due process, the entire government. Exhibit “B” standing alone does not prove any offense. Neither does Exhibit “B” together with the Sub- substantive and procedural, by the respondent court. Records disclose that: (a) the First Division of the Sandiganbayan composed lease Agreement (Exhibit “D”) prove the offense charged. of Presiding Justice Garchitorena and Associate Justices Balajadia and Atienza could not agree on whether to convict or acquit the At most, it creates only a doubt in the mind of the objective readers as to which (between the lease and sub-lease rental rates) is petitioner in the five (5) criminal cases pending against her. Justice Atienza was in favor of exonerating petitioner in Criminal Case the fair and reasonable one, considering the different circumstances as well as parties involved. It could happen that in both Nos. 17449, 17451 and 17452. Justices Garchitorena and Balajadia wanted to convict her in Criminal Case Nos. 17450, 17451, contracts, neither the LRTA nor the Government suffered any injury. There is, therefore, insufficient evidence to prove petitioner’s 17452 and 17453. As there there was no unanimity of votes in Criminal Case Nos. 17451 and 17452; (b) on September 15, 1993, in guilt beyond reasonable doubt. accordance with Sec. 5 of P. D. No. 1606, Presiding Justice Garchitorena issued Adm. Order No. 288-93 constituting a Special Division of five (5) justices, and naming thereto, Justices Augusto M. Amores and Cipriano A. del Rosario; (c) on September 21, Verily, it is too obvious to require an extended disquisition that the only basis of the respondent court for condemning the Lease 1993, Justice Amores sent a written request to Presiding Justice Garchitorena asking that he be given fifteen (15) days to submit Agreement (Exhibit “B”) as “manifestly and grossly disadvantageous to the government “ was a comparison of the rental rate in his Manifestation; (d) on the same day, September 21, 1993, however, Presiding Justice Garchitorena and Justices Balajadia and the Lease Agreement, with the very much higher rental price under the Sub-lease Agreement (Exhibit “D”). Certainly, such a del Rosario, after attending a hearing of the Committee of Justice of the House of Representatives, lunched together in a Quezon comparison is purely speculative and violative of due process. The mere fact that the Sub-lease Agreement provides a monthly City restaurant where they discussed petitioner’s cases in the absence of Justices Atienza and Amores and in the presence of a rental of P734,000.00 does not necessarily mean that the rental price of P102,760.00 per month under the Lease Agreement non-member of the Special Division. Thereat, Presiding Justice Garchitorena, and Justices Balajadia and del Rosario agreed with (Exhibit “B”) is very low, unreasonable and manifestly and grossly disadvantageous to the government. There are many factors to the position of Justice Atienza to acquit petitioner in Criminal Case Nos. 17449, 17451 and 17452 and to convict her in the other consider in the determination of what is a reasonable rate of rental. cases; and (e) when the Justices returned to the official workplace of Sandiganbayan, Presiding Justice Garchitorena issued Adm. What is more, as stressed by Jose P. Dans Jr., when subject Lease Agreement was inked, the rental rate therein provided was Order No. 293-93 dissolving the Special Division. based on a study conducted in accordance with generally accepted rules of rental computation. On this score, Mr. Ramon F. Such procedural flaws committed by respondent Sandiganbayan are fatal to the validity of its ”decision” convicting petitioner for Cuervo, Jr., the real estate appraiser who testified in the case as an expert witness and whose impartiality and competence were the following reasons, viz: never impugned, assured the court that the rental price stipulated in the Lease Agreement under scrutiny was fair and adequate. According to him, witness, the reasonable rental for subject property at the time of execution of Exhibit “B” was only P73,000.00 First. Section 4, Rule VI categorically provides that “sessions of the Sandiganbayan, whether en banc or division, shall be held in its per month. principal office in the Metropolitan Manila where it shall try and determine all cases filed with it x x x.” This rule reiterates Sec. 2 of P.D. No. 1606, as amended, creating the Sandiganbayan. That the Sub-lease Agreement (Exhibit “D”) was for a very much higher rental rate of P734,000.00 a month is of no moment. This circumstance did not necessarily render the monthly rental rate of P102,760.00 manifestly and grossly disadvantageous to the Second, The rules of Sandiganbayan do not allow unscheduled discussion of cases. We take judicial notice of the procedure that lessor. Evidently, the prosecution failed to prove that the rental rate of P102,760.00 per month was manifestly and grossly cases in all courts are carefully calendared and advance notices are given to judges and justices to enable them to study and disadvantageous to the government. Not even a single lease contract covering a property within the vicinity of the said leased prepare for deliberation. The calendaring of cases cannot be the subject of anybody’s whims and caprices. premises was offered in evidence. The disparity between the rental price of the Lease Agreement and that of the Sublease Third. The rules of Sandiganbayan do not also allow informal discussion of cases. The deliberations in case at bar did not appear on Agreement is no evidence at all to buttress the theory of the prosecution, “that the Lease Agreement in question is manifestly and record. The informal discussion of the three justices came to light only when petitioner moved to inhibit Presiding Justice Garchitorena after her conviction by the resuscitated First Division. Presiding Justice Garchitorena, in a paper entitled “Response,” accused should be acquitted when his right to speedy trial has been violated. Thus, in the early 1936 case of People vs. Castañeda, revealed for the first time the informal discussion of petitioner’s cases at an unnamed restaurant in Quezon City. There is no way et al. 63 Phil 480, 485, 486, a ponencia of Mr. Justice Laurel, we held: to know how the discussion was conducted as it was not minuted. “A strict regard for the constitutional rights of the accused would demand, therefore, that the case be remanded to the court Fourth. The rules of the Sandiganbayan do not allow the presence of a non-member in the deliberation of cases. In the case at bar, below for new trial before an impartial judge. There are vital considerations, however, which in the opinion of this court render a certain justice was present when Presiding Justice Garchitorena, Justice Balajadia, and Justice del Rosario discussed petitioner’s this step unnecessary. In the first place, the Constitution, Article III, section 1, paragraph 17, guarantees to every accused person cases while taking their lunch in a Quezon City restaurant. the right to a speedy trial. This criminal proceeding has been dragging on for almost five (5) years now. The accused have twice appealed to this court for redress from the wrong that they have suffered at the hands of the trial court. At least one of them, Fifth. The rules of the Sandiganbayan do not allow the exclusion of a member of a Division, whether regular or special, in the namely, Pedro Fernandez (alias Piro), had been confined in prison from July 20, 1932 to November 27, 1934 for inability to post deliberation of cases. Justices Atienza and Amores were members of the Special Division but were not present when petitioner’s the required bond of P3,000 which was finally reduced to P300. The Government should be the last to set an example of delay and cases were discussed over lunch in a Quezon City restaurant. They were not notified of the informal, unscheduled meeting. In fact, oppression in the administration of justice and it is the moral and legal obligation of this court to see that the criminal proceedings Justice Amores had a pending request for 15 days to study petitioner’s cases. In effect, Atienza and Amores were disenfranchised. against the accused to come to an end and that they be immediately discharged from the custody of the law. (Conde vs. Rivera They were denied their right to vote for the conviction or acquittal of petitioner. and Unson, 45 Phil., 650).” These irregularities violated the right of petitioner to be tried by a collegial court. Under PD No. 1606, as amended, and pursuant We reiterated this rule in Acebedo vs. Sarmiento , viz:[2] to the rules of Sandiganbayan, petitioner cannot be convicted except upon the vote of three justices, regardless of whether her cases are before a regular division of three (3) justices or a Special Division of five (5) justices. But more important than the vote of “2. More specifically, this Court has consistently adhered to the view that a dismissal based on the denial of the right to a speedy three (3) justices is the process by which they arrive at their vote. It is indispensable that their vote be preceded by discussion and trial amounts to an acquittal. Necessarily, any further attempt at continuing the prosecution or starting a new one would fall deliberation by all the members of the division. Before the deliberation by all, any opinion of a justice is but tentative and could be within the prohibition against an accused being twice put in jeopardy. The extensive opinion of Justice Castro in People vs. changed. It is only after all the justices have been heard should the justices reach a judgment. No one opinion can be denigrated in Obsania noted earlier made reference to four Philippine decisions, People vs. Diaz, People vs. Abaño, People vs. Robles, and importance for experience shows that an opinion that starts as a minority opinion could become the majority opinion after the People vs. Cloribel. In all of the above case, this Court left no doubt that a dismissal of the case, though at the instance of the collision of views of the justices. The right of the petitioner, therefore, is the right to be heard by all the five justices of the Special defendant grounded on the disregard of his right to a speedy trial was tantamount to an acquittal. In People vs. Diaz, it was shown Division. She is entitled to be afforded the opinion of all its members. that the case was set for hearing twice and the prosecution without asking for postponement or giving any explanation failed to appear. In People vs. Abaño, the facts disclosed that there were three postponements. Thereafter, at the time the resumption of In the case at bar, Presiding Justice Garchitorena had already created the Special Division of five (5) justices in view of the lack of the trial was scheduled, the complaining witness as in this case was absent, this Court held that respondent Judge was justified in unanimity of the three (3) justices in the First Division. At that stage, petitioner had a vested right to be heard by the five (5) dismissing the case upon motion of the defense and that the annulment or setting aside of the order of dismissal would place the justices, especially the new justices in the persons of Justices Amores and del Rosario who may have a different view of the cases accused twice in jeopardy of punishment for the same offense. People vs. Robles likewise presented a picture of witnesses for the against her. At that point, Presiding Justice Garchitorena and Justice Balajadia may change their mind and agree with the original prosecution not being available, with the lower court after having transferred the hearings on several occasions denying the last opinion of Justice Atienza but the turnaround cannot deprive petitioner of her vested right to the opinion of Justices Amores and plea for postponement and dismissing the case. Such order of dismissal, according to this Court “is not provisional in character but del Rosario. It may be true that Justice del Rosario had already expressed his opinion during an informal, unscheduled meeting in one which is tantamount to acquittal that would bar further prosecution of the accused for the same offense.” This is a summary the unnamed restaurant but as aforestated, that opinion is not the opinion contemplated by law. But what is more, petitioner was of the Cloribel case as set forth in the above opinion of Justice Castro. “In Cloribel, the case dragged for three years and eleven denied the opinion of Justice Amores for before it could be given, Presiding Justice Garchitorena dissolved the Special Division. months, that is, from September 27, 1958 when the information was filed to August 15, 1962 when it was called for trial, after We reject the rationalization that the opinion of Justice Amores was of de minimis importance as it cannot overturn the votes of numerous postponements, mostly at the instance of the prosecution. On the latter date, the prosecution failed to appear for trial, the three justices convicting the petitioner. This is a mere guesswork. The more reasonable supposition is that said opinion could and upon motion of defendants, the case was dismissed. This Court held, ‘that the dismissal here complained of was not truly a have changed the opinions of the other justices if it is based on an unbiased appreciation of facts and an undistorted ‘dismissal’ but an acquittal. For it was entered upon the defendants’ insistence on their constitutional right to speedy trial and by interpretation of pertinent laws. For we cannot unreasonably suppose that Presiding Justice Garchitorena and Justices Balajadia reason of the prosecution’s failure to appear on the date of trial.’ (Italics supplied)” There is no escaping the conclusion then that and Atienza are bigots who will never change their opinions about the guilt of the petitioner despite a better opinion. petitioner here has clearly made out a case of an acquittal arising from the order of dismissal given in open court.” Yet, that is not all the value of the aborted opinion of Justice Amores. If it were an opinion for the acquittal of the petitioner, that The rationale for both Section 14(2) and section 16 of Article III of the Constitution is the same: “justice delayed is justice denied.” opinion will have an added value when petitioner appeals her conviction to this Court. Again, depending on its scholarship, that Violation of either section should therefore result in the acquittal of the accused. minority opinion could sway the opinion of this Court towards the acquittal of petitioner. There are other reasons why the case should not be remanded to the court a quo. Three justices of the Special Division, namely Prescinding from those premises, it is indisputable that the decision of the First Division of the respondent Sandiganbayan Justice Atienza, Balajadia and Amores have already retired. Presiding Justice Garchitorena is still with the respondent court but his convicting the petitioner is void for violating her right to substantive and procedural due process of law. impartiality has been vigorously assailed by the petitioner. Mr. Justice Francisco of the Third Division of this Court noted that Presiding Justice Garchitorena’s undue interference in the examination of witness Cuervo revealed his bias and prejudice against It is opined, however, that this case should be remanded to the respondent Sandiganbayan for re-decision by a Special Division of petitioner.[3] As Mr. Justice Francisco observed “the court questions were so numerous which as per petitioner Dans count 5. As a general rule, a void decision will not result in the acquittal of an accused. The case ought to be remanded to the court of totaled 179 compared to prosecutor Querubin’s questions which numbered merely 73. More noteworthy, however, is that the origin for further proceedings for a void judgment does not expose an accused to double jeopardy. But the present case deserves court propounded leading, misleading, and baseless hypothetical questions rolled into one.”[4] Mr. Justice Francisco’s opinion was a different treatment considering the great length of time it has been pending with our courts. Records reveal that petitioner was concurred by Mr. Justice Melo. Truly, even Mr. Chief Justice Narvasa, Madam Justice Romero and Mr. Justice Panganiban who first indicted in Criminal Case No. 17450 in January 1992. More than six (6) years passed but petitioner’s prosecution is far from voted to convict petitioner did not refute Mr. Justice Francisco’s observations on the lack of impartiality of Presiding Justice over. To remand the case to the Sandiganbayan will not sit well with her constitutional right to its speedy disposition. Section 16, Garchitorena. They disregarded Mr. Ramon F. Cuervo’s testimony and based the conviction of petitioner purely on the Article III of the Constitution assures “all persons shall have the right to a speedy disposition of their cases before all judicial, quasi- documentary evidence submitted by the People. Moreover, all the evidence in the case at bar are now before this Court and to judicial, or administrative bodies.” This right expands the right of an accused “to have a speedy, impartial, and public trial x x x” in avoid further delay, we can evaluate the evidence. In fact, the same evidence has been passed upon by the Third Division of this criminal cases guaranteed by Section 14(2) of Article III of the Constitution. It has a broadening effect because Section 16 covers Court in formulating its judgment of affirmance sought to be reconsidered. Certainly, it will be sheer rigmarole for this Court to the periods before, during and after trial whereas Section 14(2) covers only the trial period.[1] Heretofore, we have held that an still remand the case for a Special Division of five of the Sandiganbayan to render another decision in the case, with respect to the 2. Failure to submit/remit to the barangay treasurer the sale of recyclable materials taken from garbage collection. herein petitioner. I consider this opinion incomplete without quoting herein the following portion of the concurring and dissenting opinion of former 3. Using the garbage truck for other purposes like hauling sand and gravel for private persons without monetary benefit Associate Justice Ricardo J. Francisco dated January 29, 1998: to the barangay because no income from this source appears in the year end report even if payments were collected x x x. “Thus, purely from the legal standpoint, with the evident weakness of the prosecution’s case and the procedural aberrations that marred the trial, it is simply unsound and impossible to treat differently each petitioner who found themselves in one and the 4. Using/spending barangay funds for repair, gasoline, lubricants, wheels and other spare parts of the garbage truck same situation. Indeed, our regained democracy, creditably, is successfully bailing us out from the ruins of the authoritarian instead of using the money or income of said truck from the garbage fees collected as income from its Sold Waste regime, and it expects that government efforts in going after the plunderers of that dark past remain unrelenting and decisive. But Management Project. x x x. let us not, in our anxiety to carry out this duty, for a moment forget that our criminal justice system is not a popularity contest where freedom and punishment are determined merely by the fame or infamy of the litigants. “The scales of justice”, it has been aptly said,[5] “must hang equal and, in fact, should even be tipped in favor of the accused because of the constitutional 5. Unliquidated traveling expenses for Seminar/Lakbay-Aral in 2003 because although a cash advance was made by the presumption of innocence. Needless to stress, this right is available to every accused, whatever his present circumstance and no respondent for the said purpose, he, however, did not attend said seminar because on the dates when he was matter how dark and repellent his past.” Culpability for crimes must always take its bearing from evidence and universal precepts supposed to be on seminar they saw him in the barangay. x x x. of due process - lest we sacrifice in mocking shame once again the very liberties we are defending.” 6. That several attempts to discuss said problem during sessions were all in vain because respondent declined to discuss it IN VIEW OF THE FOREGOING, the Motion for Reconsideration under consideration is hereby GRANTED and petitioner Imelda R. and would adjourn the session.x x x.[6] Marcos is hereby ACQUITTED of the offense charged. Costs de oficio.

SO ORDERED. Upon his failure to file an Answer to the Amended Administrative Complaint dated 6 December 2004, Martinez was declared by the Sangguniang Bayan as in default. Pending the administrative proceedings, Martinez was placed under preventive suspension for 60 days or until 8 August 2005.[7]

[G.R. No. 170626, March 03, 2008] [8] On 28 July 2005, the Sangguniang Bayan rendered its Decision which imposed upon Martinez the penalty of removal from office. THE SANGGUNIANG BARANGAY OF BARANGAY DON MARIANO MARCOS, MUNICIPALITY OF BAYOMBONG PROVINCE OF NUEVA VISCAYA represented by BARANGAY KAGAWAD JOSE CENEN SANTOS, MARIO BACUD, WALTER FRANCISCO, ROSITA The Decision dated 28 July 2005 was conveyed to the Municipal Mayor of Bayombong, Nueva Ecija, Severino Bagasao, for its SEBASTIAN, LAURETA CABAUATAN, CECILIA ALINDAYU and MELY SIMANGAN, Petitioners, vs. PUNONG BARANGAY SEVERINO implementation. On 3 August 2005, Municial Mayor Bagasao issued a Memorandum, wherein he stated that the Sanggunaing MARTINEZ, Respondent. Bayan is not empowered to order Martinez’s removal from service. However, the Decision remains valid until reversed and must be executed by him. For the meantime, he ordered the indefinite suspension of Martinez since the period of appeal had not yet [9] [10] D E C I S I O N lapsed. The dispositive portion of the said Memorandum states that: The FOREGOING considered come AUGUST 8, 2005, respondent SEVERINO D. MARTINEZ is hereby directed NOT to ASSUME and CHICO-NAZARIO, J.: DISCHARGE the functions of the Office of the Punong Barangay of Barangay Don Mariano Marcos, Bayombong, Nueva Vizcaya and for complainant JOSE CENEN SANTOS to CONTINUE assuming and discharging the functions of the said office in ACTING CAPACITY This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Orders dated 20 October 2005[1] and 30 pursuant to the provisions of Sections 67 and 68 of Republic Act No. 7160. November 2005[2] of the Regional Trial Court (trial court), Branch 27, of Bayombong, Nueva Vizcaya, in Special Civil Action No. On 26 August 2005, Martinez filed a Special Civil Action for Certiorari with a prayer for Temporary Restraining Order and 6727. In its assailed Orders, the trial court ruled that the Sangguniang Bayan of Bayombong, Neuva Vizcaya (Sangguniang Bayan), Preliminary Injunction before the trial court against petitioner, the Sangguniang Bayan and Mayor Bagasao questioning the validity of the Decision dated 28 July 2005 of the Sangguniang Bayan. This case was docketed as Special Civil Action No. 6727, which was exceeded its jurisdiction when it imposed upon respondent Severino Martinez the administrative penalty of removal from office. [11] initially heard by Branch 28, but later raffled to Branch 27 of the trial court. Petitioner Sangguniang Barangay is the legislative body of Barangay Don Mariano Marcos, Bayombong, Nueva Vizcaya, a local government unit created, organized and existing as such under pertinent laws of the Republic of the Philippines. Respondent On 20 October 2005, the trial court issued an Order declaring the Decision of the Sangguniang Bayan and the Memorandum of Martinez is the incumbent Punong Barangay of the said local government unit.[3] Mayor Bagasao void. It maintained that the proper courts, and not the petitioner, are empowered to remove an elective local official from office, in accordance with Section 60 of the Local Government Code. Thus, the Order of the Sangguniang Bayan On 5 November 2004, Martinez was administratively charged with Dishonesty and Graft and Corruption by petitioner through the removing Martinez from service is void. As a consequence, Mayor Bagasao cannot prevent Martinez from assuming his office on the basis of a void order. The trial court further ruled that Martinez properly availed himself of the remedy of Special Civil Action, filing of a verified complaint before the Sangguniang Bayan as the disciplining authority over elective barangay officials pursuant [12] to Section 61[4] of Rep. Act No. 7160, otherwise known as the Local Government Code. Petitioner filed with the Sangguniang Bayan where the order assailed was a patent nullity. an Amended Administrative Complaint against Martinez on 6 December 2004 for Dishonesty, Misconduct in Office and Violation [13] of the Anti-Graft and Corrupt Practices Act.[5] Petitioner alleged that Martinez committed the following acts: On 10 November 2005, petitioner filed a Motion for Reconsideration of the trial court’s Order dated 10 October 2005. The trial court denied the said motion in another Order dated 30 November 2005.[14]

1. Failure to submit and fully remit to the Barangay Treasurer the income of their solid waste management project since Hence, the present petition was filed. 2001 particularly the sale of fertilizer derived from composting. Although Martinez’s term as Punong Baranggay expired upon the holding of the 29 October 2007 Synchronized Barangay and Sangguniang Kabataan elections and, thus, rendering this petition moot and academic, the Court will nevertheless settle a legal further claims that the courts are merely tasked with issuing the order of removal, after the Sangguniang Panlungsod or question that is capable of repetition yet evading review.[15] Sangguniang Bayan finds that a penalty of removal is warranted.[18]

The pivotal issue in this case is whether or not the Sangguniang Bayan may remove Martinez, an elective local official, from office. The aforementioned position put forward by the petitioner would run counter to the rationale for making the removal of elective The pertinent legal provisions and cases decided by this Court firmly establish that the Sanggunaing Bayan is not empowered to do officials an exclusive judicial prerogative. In Pablico v. Villapando, [19] the court declared that: so. It is beyond cavil, therefore, that the power to remove erring elective local officials from service is lodged exclusively with the courts. Hence, Article 124 (sic 125)[20] (b), Rule XIX, of the Rules and Regulations Implementing the Local Government Code, insofar Section 60 of the Local Government Code conferred upon the courts the power to remove elective local officials from office: as it vests power on the “disciplining authority” to remove from office erring elective local officials, is void for being repugnant to Section 60. Grounds for Disciplinary Actions.—An elective local official may be disciplined, suspended, or removed from office on the last paragraph of Section 60 of the Local Government Code of 1991. The law on suspension or removal of elective public any of the following grounds: officials must be strictly construed and applied, and the authority in whom such power of suspension or removal is vested must exercise it with utmost good faith, for what is involved is not just an ordinary public official but one chosen by the people through x x x x. the exercise of their constitutional right of suffrage. Their will must not be put to naught by the caprice or partisanship of the disciplining authority. Where the disciplining authority is given only the power to suspend and not the power to remove, it should An elective local official may be removed from office on the grounds enumerated above by order of the proper court. (Emphasis not be permitted to manipulate the law by usurping the power to remove. (Emphasis supplied.) provided.) The rule which confers to the proper courts the power to remove an elective local official from office is intended as a check During the deliberations of the Senate on the Local Government Code,[16] the legislative intent to confine to the courts, i.e., against any capriciousness or partisan activity by the disciplining authority. Vesting the local legislative body with the power to regional trial courts, the Sandiganbayan and the appellate courts, jurisdiction over cases involving the removal of elective local decide whether or not a local chief executive may be removed from office, and only relegating to the courts a mandatory duty to officials was evident: implement the decision, would still not free the resolution of the case from the capriciousness or partisanship of the disciplining Senator Pimentel. This has been reserved, Mr. President, including the issue of whether or not the Department Secretary or the authority. Thus, the petitioner’s interpretation would defeat the clear intent of the law. Office of the President can suspend or remove an elective official. Moreover, such an arrangement clearly demotes the courts to nothing more than an implementing arm of the Sangguniang Senator Saguisag. For as long as that is open for some later disposition, may I just add the following thought: It seems to me that Panlungsod, or Sangguniang Bayan. This would be an unmistakable breach of the doctrine on separation of powers, thus placing instead of identifying only the proper regional trial court or the Sandiganbayan, and since we know that in the case of a the courts under the orders of the legislative bodies of local governments. The courts would be stripped of their power of review, regional trial court, particularly, a case may be appealed or may be the subject of an injunction, in the framing of this later on, I and their discretion in imposing the extreme penalty of removal from office is thus left to be exercised by political factions which would like to suggest that we consider replacing the phrase “PROPER REGIONAL TRIAL COURT OR THE SANDIGANBAYAN” stand to benefit from the removal from office of the local elective official concerned, the very evil which Congress sought to avoid simply by “COURTS.” Kasi po, maaaring sabihin nila na mali iyong regional trial court o ang Sandiganbayan. when it enacted Section 60 of the Local Government Code.

Senator Pimentel. “OR THE PROPER COURT.” Congress clearly meant that the removal of an elective local official be done only after a trial before the appropriate court, where court rules of procedure and evidence can ensure impartiality and fairness and protect against political maneuverings. Elevating Senator Saguisag. “OR THE PROPER COURT.” the removal of an elective local official from office from an administrative case to a court case may be justified by the fact that such removal not only punishes the official concerned but also, in effect, deprives the electorate of the services of the official for Senator Pimentel. Thank you. We are willing to accept that now, Mr. President. whom they voted.

Senator Saguisag. It is to be incorporated in the phraseology that we will craft to capture the other ideas that have been elevated. As the law stands, Section 61 of the Local Government Code provides for the procedure for the filing of an administrative case (Emphasis provided.) against an erring elective barangay official before the Sangguniang Panlungsod or Sangguniang Bayan. However, the Sangguniang In Salalima v. Guingona, Jr.,[17] the Court en banc categorically ruled that the Office of the President is without any power to Panlungsod or Sangguniang Bayan cannot order the removal of an erring elective barangay official from office, as the courts are remove elected officials, since the power is exclusively vested in the proper courts as expressly provided for in the last paragraph exclusively vested with this power under Section 60 of the Local Government Code. Thus, if the acts allegedly committed by the of Section 60 of the Local Government Code. It further invalidated Article 125, Rule XIX of the Rules and Regulations Implementing barangay official are of a grave nature and, if found guilty, would merit the penalty of removal from office, the case should be the Local Government Code of 1991, which provided that: filed with the regional trial court. Once the court assumes jurisdiction, it retains jurisdiction over the case even if it would be Article 125. Grounds for Disciplinary Actions. x x x. subsequently apparent during the trial that a penalty less than removal from office is appropriate. On the other hand, the most extreme penalty that the Sangguniang Panlungsod or Sangguniang Bayan may impose on the erring elective barangay official is x x x x. suspension; if it deems that the removal of the official from service is warranted, then it can resolve that the proper charges be filed in court. (b) An elective local official may be removed from office on the grounds enumerated in paragraph (a) of this Article by order of the proper court or the disciplining authority whichever first acquires jurisdiction to the exclusion of the other. Petitioner alleged that an interpretation which gives the judiciary the power to remove local elective officials violates the doctrine The Court nullified the aforequoted rule since the Oversight Committee that prepared the Rules and Regulations of the Local of separation of powers. This allegation runs contrary to the 1987 Constitution itself, as well as jurisprudence. Government Code exceeded its authority when it granted to the “disciplining authority” the power to remove elective officials, a power which the law itself granted only to the proper courts. Thus, it is clear that under the law, the Sangguniang Bayan is not The 1987 Constitution is explicit in defining the scope of judicial power. It establishes the authority of the courts to determine in vested with the power to remove Martinez. an appropriate action the validity of acts of the political departments. It speaks of judicial prerogative in terms of duty.[21] Paragraph 2, Section 1, Article VIII of the 1987 Constitution, provides that: Petitioner contends that administrative cases involving elective barangay officials may be filed with, heard and decided by the Sangguniang Panlungsod or Sangguniang Bayan concerned, which can, thereafter, impose a penalty of removal from office. It Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable A.M. No. RTJ-06-2017 June 19, 2008 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. (Emphasis provided.) LT. GEN. ALFONSO P. DAGUDAG (Ret.), complainant, The doctrine of separation of powers is not absolute in its application; rather, it should be applied in accordance with the principle vs. of checks and balances. The removal from office of elective officials must not be tainted with partisan politics and used to defeat JUDGE MAXIMO G.W. PADERANGA, Regional Trial Court, Branch 38, Cagayan de Oro City, respondent. the will of the voting public. Congress itself saw it fit to vest that power in a more impartial tribunal, the court. Furthermore, the local government units are not deprived of the right to discipline local elective officials; rather, they are prevented from imposing the extreme penalty of dismissal. D E C I S I O N

Petitioner questions the Decision dated 20 October 2005 of the trial court for allowing the petition filed before it as an exception PER CURIAM, J.: to the doctrine of exhaustion of administrative remedies. If, indeed, the Sangguniang Bayan had no power to remove Martinez from office, then Martinez should have sought recourse from the Sangguniang Panlalawigan. This Court upholds the ruling of the trial court. This is a complaint for gross ignorance of the law and conduct unbecoming a judge filed by retired Lt. Gen. Alfonso P. Dagudag (Gen. Dagudag), Head of Task Force Sagip Kalikasan, against Judge Maximo G. W. Paderanga (Judge Paderanga), Presiding Judge of The doctrine of exhaustion of administrative remedies calls for resort first to the appropriate administrative authorities in the the Regional Trial Court, Branch 38, Cagayan de Oro City. resolution of a controversy falling under their jurisdiction before the same may be elevated to the courts of justice for review. Non-observance of the doctrine results in lack of a cause of action, which is one of the grounds allowed by the Rules of Court for On or about 30 January 2005, the Region VII Philippine National Police Regional Maritime Group (PNPRMG) received information [22] the dismissal of the complaint. that MV General Ricarte of NMC Container Lines, Inc. was shipping container vans containing illegal forest products from Cagayan de Oro to Cebu. The shipments were falsely declared as cassava meal and corn grains to avoid inspection by the Department of The doctrine of exhaustion of administrative remedies, which is based on sound public policy and practical consideration, is not Environment and Natural Resources (DENR).1 inflexible. There are instances when it may be dispensed with and judicial action may be validly resorted to immediately. Among these exceptions are: 1) where there is estoppel on the part of the party invoking the doctrine; 2) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; 3) where there is unreasonable delay or official inaction On 30 and 31 January 2005, a team composed of representatives from the PNPRMG, DENR, and the Philippine Coast Guard that will irretrievably prejudice the complainant; 4) where the amount involved is relatively small as to make the rule impractical inspected the container vans at a port in Mandaue City, Cebu. The team discovered the undocumented forest products and the and oppressive; 5) where the question raised is purely legal and will ultimately have to be decided by the courts of justice; 6) names of the shippers and consignees: where judicial intervention is urgent; 7) where its application may cause great and irreparable damage; 8) where the controverted acts violate due process; 9) when the issue of non-exhaustion of administrative remedies has been rendered moot; Container Van No. Shipper Consignee 10) where there is no other plain, speedy and adequate remedy; 11) when strong public interest is involved; and 13) in quo NCLU – 2000492-22GI Polaris Chua Polaris Chua warranto proceedings.[23] IEAU – 2521845-2210 Polaris Chua Polaris Chua As a general rule, no recourse to courts can be had until all administrative remedies have been exhausted. However, this rule is NOLU – 2000682-22GI Rowena Balangot Rowena Balangot not applicable where the challenged administrative act is patently illegal, amounting to lack of jurisdiction and where the question INBU – 3125757-BB2210 Rowena Balangot Rowena Balangot or questions involved are essentially judicial. NCLU – 20001591-22GI Jovan Gomez Jovan Gomez In this case, it is apparent that the Sangguniang Bayan acted beyond its jurisdiction when it issued the assailed Order dated 28 July GSTU – 339074-US2210 Jovan Gomez Jovan Gomez 2005 removing Martinez from office. Such act was patently illegal and, therefore, Martinez was no longer required to avail himself CRXU – 2167567 Raffy Enriquez Raffy Enriquez of an administrative appeal in order to annul the said Order of the Sangguniang Bayan.[24] Thus, his direct recourse to regular courts of justice was justified. NCLU – 2001570-22GI Raffy Enriquez Raffy Enriquez

[25] In addition, this Court in Castro v. Gloria declared that where the case involves only legal questions, the litigant need not The crew of MV General Ricarte failed to produce the certificate of origin forms and other pertinent transport documents covering exhaust all administrative remedies before such judicial relief can be sought. The reason behind providing an exception to the rule the forest products, as required by DENR Administrative Order No. 07-94. Gen. Dagudag alleged that, since nobody claimed the on exhaustion of administrative remedies is that issues of law cannot be resolved with finality by the administrative officer. Appeal forest products within a reasonable period of time, the DENR considered them as abandoned and, on 31 January 2005, the to the administrative officer would only be an exercise in futility. A legal question is properly addressed to a regular court of Provincial Environment and Natural Resources Office (PENRO) Officer-in-Charge (OIC), Richard N. Abella, issued a seizure receipt [26] justice rather than to an administrative body. to NMC Container Lines, Inc.2

In the present case, Martinez raised before the trial court the sole issue of whether the Sangguniang Bayan has jurisdiction over a [27] On 1 February 2005, Community Environment and Natural Resources Office (CENRO) OIC Loreto A. Rivac (Rivac) sent a notice to case involving the removal of a local elective official from office. In Martinez’s petition before the trial court, only a legal 3 4 question was raised, one that will ultimately be resolved by the courts. Hence, appeal to the administrative officer concerned NMC Container Lines, Inc. asking for explanation why the government should not confiscate the forest products. In an affidavit would only be circuitous and, therefore, should no longer be required before judicial relief can be sought. dated 9 February 2005, NMC Container Lines, Inc.’s Branch Manager Alex Conrad M. Seno stated that he did not see any reason why the government should not confiscate the forest products and that NMC Container Lines, Inc. had no knowledge of the actual IN VIEW OF THE FOREGOING, the instant Petition is DENIED and the assailed Decision of the Bayombong RTC in Special Civil content of the container vans. Action No. 6727 is AFFIRMED. SO ORDERED. On 2, 9, and 15 February 2005, DENR Forest Protection Officer Lucio S. Canete, Jr. posted notices on the CENRO and PENRO In its Report15 dated 10 July 2006, the OCA found that Judge Paderanga (1) violated the doctrine of exhaustion of administrative bulletin boards and at the NMC Container Lines, Inc. building informing the unknown owner about the administrative adjudication remedies; (2) violated the doctrine of primary jurisdiction; and (3) used inappropriate language in court. The OCA recommended scheduled on 18 February 2005 at the Cebu City CENRO. Nobody appeared during the adjudication.5 In a resolution6 dated 10 that the case be re-docketed as a regular administrative matter; that Judge Paderanga be held liable for gross ignorance of the law March 2005, Rivac, acting as adjudication officer, recommended to DENR Regional Executive Director Clarence L. Baguilat that the and for violation of Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary;16 and that he be fined forest products be confiscated in favor of the government. P30,000.

In a complaint7 dated 16 March 2005 and filed before Judge Paderanga, a certain Roger C. Edma (Edma) prayed that a writ of In its Resolution17 dated 16 August 2006, the Court re-docketed the case as a regular administrative matter and required the replevin be issued ordering the defendants DENR, CENRO, Gen. Dagudag, and others to deliver the forest products to him and that parties to manifest whether they were willing to submit the case for decision based on the pleadings already filed. Judge judgment be rendered ordering the defendants to pay him moral damages, attorney’s fees, and litigation expenses. On 29 March Paderanga manifested his willingness to submit the case for decision based on the pleadings already filed.18 Since Gen. Dagudag 2005, Judge Paderanga issued a writ of replevin8 ordering Sheriff Reynaldo L. Salceda to take possession of the forest products. did not file any manifestation, the Court considered him to have waived his compliance with the 16 August 2006 Resolution.19

In a motion to quash the writ of replevin,9 the defendants DENR, CENRO, and Gen. Dagudag prayed that the writ of replevin be set The Court finds Judge Paderanga liable for gross ignorance of the law and for conduct unbecoming a judge. aside: (1) Edma’s bond was insufficient; (2) the forest products were falsely declared as cassava meal and corn grains; (3) Edma was not a party-in-interest; (4) the forest products were not covered by any legal document; (5) nobody claimed the forest The DENR is the agency responsible for the enforcement of forestry laws. Section 4 of Executive Order No. 192 states that the products within a reasonable period of time; (6) the forest products were already considered abandoned; (7) the forest products DENR shall be the primary agency responsible for the conservation, management, development, and proper use of the country’s were lawfully seized under the Revised Forestry Code of the Philippines; (8) replevin was not proper; (9) courts could not take natural resources. cognizance of cases pending before the DENR; (10) Edma failed to exhaust administrative remedies; and (11) the DENR was the agency responsible for the enforcement of forestry laws. In a motion to dismiss ad cautelam10 dated 12 April 2005, the defendants prayed that the complaint for replevin and damages be dismissed: (1) the real defendant is the Republic of the Philippines; (2) Section 68 of Presidential Decree No. 705, as amended by Executive Order No. 277, states that possessing forest products without Edma failed to exhaust administrative remedies; (3) the State cannot be sued without its consent; and (4) Edma failed to allege the required legal documents is punishable. Section 68-A states that the DENR Secretary or his duly authorized representatives that he is the owner or is entitled to the possession of the forest products. may order the confiscation of any forest product illegally cut, gathered, removed, possessed, or abandoned.

In an order11 dated 14 April 2005, Judge Paderanga denied the motion to quash the writ of replevin for lack of merit. In the instant case, the forest products were possessed by NMC Container Lines, Inc. without the required legal documents and were abandoned by the unknown owner. Consequently, the DENR seized the forest products. Gen. Dagudag filed with the Office of the Court Administrator (OCA) an affidavit-complaint12 dated 8 July 2005 charging Judge Paderanga with gross ignorance of the law and conduct unbecoming a judge. Gen. Dagudag stated that: Judge Paderanga should have dismissed the replevin suit outright for three reasons. First, under the doctrine of exhaustion of administrative remedies, courts cannot take cognizance of cases pending before administrative agencies. In Factoran, Jr. v. Court of Appeals,20 the Court held that: During the x x x hearing, *Judge Paderanga+ showed manifest partiality in favor of x x x Edma. DENR’s counsel was lambasted, cajoled and intimidated by [Judge Paderanga] using words such as "SHUT UP" and "THAT’S BALONEY." The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity and convenience, should not entertain suits unless the available administrative remedies have first been resorted to and the proper authorities have been given an appropriate opportunity to act and correct x x x x their alleged errors, if any, committed in the administrative forum. (Emphasis ours)

Edma in the replevin case cannot seek to recover the wood shipment from the DENR since he had not 21 In Dy v. Court of Appeals, the Court held that a party must exhaust all administrative remedies before he can resort to the courts. sought administrative remedies available to him. The prudent thing for [Judge Paderanga] to have done was 22 In Paat v. Court of Appeals, the Court held that: to dismiss the replevin suit outright.

This Court in a long line of cases has consistently held that before a party is allowed to seek the x x x x intervention of the court, it is a pre-condition that he should have availed of all the means of administrative processes afforded him. Hence, if a remedy within the administrative machinery can still *Judge Paderanga’s+ act*s+ of taking cognizance of the x x x replevin suit, issuing the writ of replevin and the be resorted to by giving the administrative officer concerned every opportunity to decide on a matter that subsequent denial of the motion to quash clearly demonstrates [sic] ignorance of the law. comes within his jurisdiction then such remedy should be exhausted first before court’s judicial power can be sought. The premature invocation of court’s intervention is fatal to one’s cause of action. Accordingly, st 13 absent any finding of waiver or estoppel the case is susceptible of dismissal for lack of cause of action. In its 1 Indorsement dated 1 August 2005, the OCA directed Judge Paderanga to comment on the affidavit-complaint. In his 14 (Emphasis ours) comment dated 6 September 2005, Judge Paderanga stated that he exercised judicial discretion in issuing the writ of replevin and that he could not delve into the issues raised by Gen. Dagudag because they were related to a case pending before him. In the instant case, Edma did not resort to, or avail of, any administrative remedy. He went straight to court and filed a complaint for replevin and damages. Section 8 of Presidential Decree No. 705, as amended, states that (1) all actions and decisions of the Bureau of Forest Development Director are subject to review by the DENR Secretary; (2) the decisions of the DENR Secretary are appealable to the President; and (3) courts cannot review the decisions of the DENR Secretary except through a special civil action jurisdiction over which is initially lodged with an administrative body of special competence. (Emphasis for certiorari or prohibition. In Dy,23 the Court held that all actions seeking to recover forest products in the custody of the DENR ours) shall be directed to that agency — not the courts. In Paat,24 the Court held that: Third, the forest products are already in custodia legis and thus cannot be the subject of replevin. There was a violation of the Dismissal of the replevin suit for lack of cause of action in view of the private respondents’ failure to Revised Forestry Code and the DENR seized the forest products in accordance with law. In Calub v. Court of Appeals,27 the Court exhaust administrative remedies should have been the proper course of action by the lower court instead held that properties lawfully seized by the DENR cannot be the subject of replevin: of assuming jurisdiction over the case and consequently issuing the writ [of replevin]. Exhaustion of the remedies in the administrative forum, being a condition precedent prior to one’s recourse to the courts Since there was a violation of the Revised Forestry Code and the seizure was in accordance with law, in and more importantly, being an element of private respondents’ right of action, is too significant to be our view the [properties seized] were validly deemed in custodia legis. [They] could not be subject to an waylaid by the lower court. action for replevin. For it is property lawfully taken by virtue of legal process and considered in the custody of the law, and not otherwise. (Emphasis ours) x x x x Judge Paderanga’s acts of taking cognizance of the replevin suit and of issuing the writ of replevin constitute gross ignorance of Moreover, the suit for replevin is never intended as a procedural tool to question the orders of the law. In Tabao,28 the Court held that: confiscation and forfeiture issued by the DENR in pursuance to the authority given under P.D. 705, as amended. Section 8 of the said law is explicit that actions taken by the Under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending before administrative of special competence. x x x [T]he plaintiff in the replevin suit who [sought] to recover the Director of the Bureau of Forest Development concerning the enforcement of the provisions of the said law shipment from the DENR had not exhausted the administrative remedies available to him. The prudent are subject to review by the Secretary of DENR and that courts may not review the decisions of the thing for respondent judge to have done was to dismiss the replevin suit outright. Secretary except through a special civil action for certiorari or prohibition. (Emphasis ours) Under Section 78-A of the Revised Forestry Code, the DENR secretary or his authorized representatives may Second, under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending before administrative agencies order the confiscation of forest products illegally cut, gathered, removed, or possessed or abandoned. of special competence. The DENR is the agency responsible for the enforcement of forestry laws. The complaint for replevin itself stated that members of DENR’s Task Force Sagip Kalikasan took over the forest products and brought them to the DENR x x x x Community Environment and Natural Resources Office. This should have alerted Judge Paderanga that the DENR had custody of the forest products, that administrative proceedings may have been commenced, and that the replevin suit had to be dismissed outright. In Tabao v. Judge Lilagan25 — a case with a similar set of facts as the instant case — the Court held that: Respondent judge’s act of taking cognizance of the x x x replevin suit clearly demonstrates ignorance of the law. x x x [J]udges are expected to keep abreast of all laws and prevailing jurisprudence. Judges are duty bound to have more than just a cursory acquaintance with laws and jurisprudence. Failure to follow basic The complaint for replevin itself states that the shipment x x x [was] seized by the NBI for verification of legal commands constitutes gross ignorance of the law from which no one may be excused, not even a supporting documents. It also states that the NBI turned over the seized items to the DENR "for official judge. (Emphasis ours) disposition and appropriate action." x x x To our mind, these allegations [should] have been sufficient to alert respondent judge that the DENR has custody of the seized items and that administrative proceedings may have already been commenced concerning the shipment. Under the doctrine of primary jurisdiction, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that competence is a prerequisite to the due courts cannot take cognizance of cases pending before administrative agencies of special competence. x x performance of judicial office. Section 3 of Canon 6 states that judges shall take reasonable steps to maintain and enhance their x The prudent thing for respondent judge to have done was to dismiss the replevin suit outright. knowledge necessary for the proper performance of judicial duties. Judges should keep themselves abreast with legal 29 (Emphasis ours) developments and show acquaintance with laws.

In Paat,26 the Court held that: The rule that courts cannot prematurely take cognizance of cases pending before administrative agencies is basic. There was no reason for Judge Paderanga to make an exception to this rule. The forest products were in the custody of the DENR and Edma had not availed of any administrative remedy. Judge Paderanga should have dismissed the replevin suit outright. In Español v. Toledo- [T]he enforcement of forestry laws, rules and regulations and the protection, development and 30 Mupas, the Court held that: management of forest lands fall within the primary and special responsibilities of the Department of Environment and Being among the judicial front-liners who have direct contact with the litigants, a wanton display of utter lack of familiarity with the rules by the judge inevitably erodes the confidence of the public in the Natural Resources. By the very nature of its function, the DENR should be given a free hand unperturbed competence of our courts to render justice. It subjects the judiciary to embarrassment. Worse, it could raise by judicial intrusion to determine a controversy which is well within its jurisdiction. The assumption by the specter of corruption. the trial court, therefore, of the replevin suit filed by private respondents constitutes an unjustified encroachment into the domain of the administrative agency’s prerogative. The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the When the gross inefficiency springs from a failure to consider so basic and elemental a rule, a law, or a Atty. Luego: According to [the] rules, Your Honor, if there is no... principle in the discharge of his or her duties, a judge is either too incompetent and undeserving of the exalted position and title he or she holds, or the oversight or omission was deliberately done in bad faith Judge Paderanga: Whom are you seizing it from? To [sic] whom are you taking it from? and in grave abuse of judicial authority.

Atty. Luego: From the shipping company, Your Honor. The OCA found Judge Paderanga liable for using inappropriate language in court: "We x x x find respondent’s intemperate use of "Shut up!" and "Baloney!" well nigh inappropriate in court proceedings. The utterances are uncalled for."31 x x x x Indeed, the 14 and 22 April 2005 transcripts of stenographic notes show that Judge Paderanga was impatient, discourteous, and undignified in court: Atty. Luego: Your Honor please, the shipping company denied the ownership of that lumber.

Atty. Luego: Your Honor, we want to have this motion because that is... x x x x

Judge Paderanga: I am asking you why did you not make any rejoinder[?] Atty. Luego: But the shipping company, Your Honor,...

x x x x Judge Paderanga: Shut up. That’s baloney. You are seizing it from nobody. Then how can you seize it from the shipping company. Are you not? You are a lawyer. Who is in possession of the property? The shipping company. Why did you not issue [a] seizure receipt to the shipping company? Atty. Luego: I apologize, Your Honor. We are ready to...

Atty. Luego: But the... May I continue, Your Honor? Judge Paderanga: Ready to what? Proceed.

x x x x Atty. Luego: Yes, Your Honor. We filed this motion to quash replevin, Your Honor, on the grounds, first and foremost, it is our contention, Your Honor, with all due respect of [sic] this Honorable Court, that the writ of replevin dated March 29, 2005 was improper, Your Honor, for the reasons that the lumber, subject matter Judge Paderanga: Stop talking about the shipping company. Still you did not issue a seizure receipt here. of this case, were apprehended in accordance with... Well, I’m telling you you should have issued *a+ seizure receipt to the shipping company.

Judge Paderanga: Where is your proof that it was apprehended? Where is your proof? Is that apprehension x x x x proven by a seizure receipt? Where is your seizure receipt? Judge Paderanga: You are a lawyer. You should know how to write pleadings. You write the pleadings the Atty. Luego: Under the rules... way it should be, not the way you think it should be.

Judge Paderanga: Where is your seizure receipt? You read your rules. What does [sic] the rules say? Where Atty. Luego: I’m sorry, Your Honor. in your rules does it say that it does not need any seizure receipt? You look at your rules. You point out the rules. You take out your rules and then you point out. Do you have the rules? Judge Paderanga: You are an officer of the court. You should be careful with your language. You say that I am wrong. It’s you who are [sic] wrong because you do not read the law. x x x x x x x x Atty. Luego: Your Honor, there was no seizure receipt, but during the apprehension, Your Honor, there was no claimant. Judge Paderanga: Then you read the law. How dare you say that the Court is wrong.

Judge Paderanga: Answer me. Is there a seizure receipt? x x x x

Atty. Luego: But during the apprehension, Your Honor, no owner has [sic] appeared. Judge Paderanga: Are you not representing [the DENR]?

x x x x Atty. Luego: Yes, in this case, Your Honor. Judge Paderanga: Then you are representing them. They are your clients. What kind of a lawyer are you?32 Judge Paderanga’s refusal to consider the motion to quash the writ of replevin, repeated interruption of the lawyers, and utterance of "shut up," "that’s baloney," "how dare you say that the court is wrong," "what kind of a lawyer are you?," and "the problem with you people is you do not use your heads" are undignified and very unbecoming a judge. In Office of the Court x x x x Administrator v. Paderanga,37 the Court already reprimanded Judge Paderanga for repeatedly saying "shut up," being arrogant, and declaring that he had "absolute power" in court. He has not changed. Atty. Tiamson: Specifically it was stated in the [Factoran] versus Court of Appeals [case] that the Court should not interfere, Your Honor. Section 8, Rule 140 of the Rules of Court classifies gross ignorance of the law as a serious offense. It is punishable by (1) dismissal from the service, forfeiture of benefits, and disqualification from reinstatement to any public office; (2) suspension from office Judge Paderanga: No. without salary and other benefits for more than three months but not exceeding six months; or (3) a fine of more than P20,000 but not exceeding P40,000.38 Section 10 of Rule 140 classifies conduct unbecoming a judge as a light offense. It is punishable by (1) 39 x x x x a fine of not less than P1,000 but not exceeding P10,000; (2) censure; (3) reprimand; or (4) admonition with warning.

40 Judge Paderanga: The problem with you people is you do not use your heads. The Court notes that this is Judge Paderanga’s third offense. In Office of the Court Administrator v. Paderanga, the Court held him liable for grave abuse of authority and simple misconduct for unceremoniously citing a lawyer in contempt while declaring himself as having "absolute power" and for repeatedly telling a lawyer to "shut up." In Beltran, Jr. v. Paderanga,41 the Court held Atty. Tiamson: We use our heads, your Honor. him liable for undue delay in rendering an order for the delay of nine months in resolving an amended formal offer of exhibits. In both cases, the Court sternly warned Judge Paderanga that the commission of another offense shall be dealt with more severely. x x x x The instant case and the two cases decided against him demonstrate Judge Paderanga’s arrogance, incorrigibility, and unfitness to become a judge. Atty. Tiamson: Your Honor, we would like to put on record that we use our heads, your Honor.33 (Emphasis 42 ours) Judge Paderanga has two other administrative cases pending against him — one for gross ignorance of the law, knowingly rendering an unjust judgment, and grave abuse of authority, and the other43 for gross misconduct, grave abuse of authority, and gross ignorance of the law. Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that judges shall be patient, dignified, and courteous in relation to lawyers. Rule 3.04, Canon 3 of the Code of Judicial Conduct states that judges should be patient and courteous to lawyers, especially the inexperienced. They should avoid the attitude that the litigants are made for the courts, The Court will not hesitate to impose the ultimate penalty on those who have fallen short of their accountabilities. It will not instead of the courts for the litigants. tolerate any conduct that violates the norms of public accountability and diminishes the faith of the people in the judicial system.44 Judicial decorum requires judges to be temperate in their language at all times. They must refrain from inflammatory, excessively rhetoric, or vile language.34 They should (1) be dignified in demeanor and refined in speech; (2) exhibit that temperament of WHEREFORE, the Court finds Judge Maximo G.W. Paderanga, Regional Trial Court, Branch 38, Cagayan de Oro City, GUILTY of utmost sobriety and self-restraint; and (3) be considerate, courteous, and civil to all persons who come to their court.35 In Juan de GROSS IGNORANCE OF THE LAW and UNBECOMING CONDUCT. Accordingly, the Court DISMISSES him from the service, with la Cruz v. Carretas,36 the Court held that: forfeiture of all retirement benefits, except accrued leave credits, and with prejudice to reinstatement or appointment to any public office, including government-owned or controlled corporations. A judge who is inconsiderate, discourteous or uncivil to lawyers x x x who appear in his sala commits an impropriety and fails in his duty to reaffirm the people’s faith in the judiciary. He also violates Section 6, SO ORDERED. Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary.

x x x x G.R. No. 96409 February 14, 1992 It is reprehensible for a judge to humiliate a lawyer x x x. The act betrays lack of patience, prudence and restraint. Thus, a judge must at all times be temperate in his language. He must choose his words x x x with CITIZEN J. ANTONIO M. CARPIO, petitioner, utmost care and sufficient control. The wise and just man is esteemed for his discernment. Pleasing speech vs. increases his persuasiveness. THE EXECUTIVE SECRETARY, THE SECRETARY OF LOCAL GOVERNMENTS, THE SECRETARY OF NATIONAL DEFENSE and THE NATIONAL TREASURER, respondents. Equanimity and judiciousness should be the constant marks of a dispenser of justice. A judge should always keep his passion guarded. He can never allow it to run loose and overcome his reason. He descends to the PARAS, J.: level of a sharp-tongued, ill-mannered petty tyrant when he utters harsh words x x x. As a result, he degrades the judicial office and erodes public confidence in the judiciary. At the very outset, it should be well to set forth the constitutional provision that is at the core of the controversy now confronting xxx xxx xxx us, thus: MR. NATIVIDAD. . . . The basic tenet of a modern police organization is to remove it Article XVI, Section 6: from the military. 11

The State shall establish and maintain one police force, which stall be national in scope and civilian in xxx xxx xxx character, to be administered and controlled by a national police commission. The authority of local executives over the police units in their jurisdiction shall be provided by law. 1 Here in our draft Constitution, we have already made a constitutional postulate that the military cannot occupy any civil service position [in Section 6 of the Article on the Civil Service 12] Therefore, in keeping with With the aforequoted provision in mind, Congress passed Republic Act No. 6975 entitled "AN ACT ESTABLISHING THE PHILIPPINE this and because of the universal acceptance that a police force is a civilian function, a public service, and NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR OTHER should not be performed by military force, one of the basic reforms we are presenting here is that it should PURPOSES" as the consolidated version of House Bill No. 23614 and Senate Bill No. 463. be separated from the military force which is the PC. 13

Following the said Act's approval by President Corazon C. Aquino on December 13, 1990, it was published on December 17, 1990. 2 xxx xxx xxx

Presently, however, petitioner as citizen, taxpayer and member of the Philippine Bar sworn to defend the Constitution, filed the Furthermore: petition now at bar on December 20, 1990, seeking this Court's declaration of unconstitutionality of RA 6975 with prayer for temporary restraining order. xxx xxx xxx

But in an en banc resolution dated December 27, 1990, We simply required the public respondents to file their Comment, without . . . the civilian police cannot blossom into full profession because most of the key positions are being however giving due course to the petition and the prayer therein. Hence, the Act took effect after fifteen days following its 3 occupied by the military So, it is up to this Commission to remove the police from such a situation so that it publication, or on January 1, 1991. 14 can develop into a truly professional civilian police. . . .

Before we settle down on the merits of the petition, it would likewise be well to discuss albeit briefly the history of our police Hence, the "one police force, national in scope, and civilian in character" provision that is now Article XVI, Section 6 of the 1987 force and the reasons for the ordination of Section 6, Article XVI in our present Constitution. Constitution.

During the Commonwealth period, we had the Philippine Constabulary as the nucleus of the Philippine Ground Force (PGF), now And so we now come to the merits of the petition at hand. the Armed Forces of the Philippines (AFP). The PC was made part of the PGF but its administrative, supervisory and directional control was handled by the then Department of the Interior. After the war, it remained as the "National Police" under the Department of National Defense, as a major service component of the AFP. 4 In the main, petitioner herein respectfully advances the view that RA 6975 emasculated the National Police Commission by limiting its power "to administrative control" over the Philippine National Police (PNP), thus, "control" remained with the Department Secretary under whom both the National Police Commission and the PNP were placed. 15 Later, the Integration Act of 1975 5 created the Integrated National Police (INP) under the Office of the President, with the PC as the nucleus, and the local police forces as the civilian components. The PC-INP was headed by the PC Chief who, as concurrent Director-General of the INP, exercised command functions over the INP. 6 We do not share this view.

The National Police Commission (NAPOLCOM) 7 exercised administrative control and supervision while the local executives To begin with, one need only refer to the fundamentally accepted principle in Constitutional Law that the President has control of exercised operational supervision and direction over the INP units assigned within their respective localities. 8 all executive departments, bureaus, and offices to lay at rest petitioner's contention on the matter.

The set-up whereby the INP was placed under the command of the military component, which is the PC, severely eroded the INP's This presidential power of control over the executive branch of government extends over all executive officers from Cabinet 17 18 civilian character and the multiplicity in the governance of the PC-INP resulted in inefficient police service. 9 Moreover, the Secretary to the lowliest clerk and has been held by us, in the landmark case of Mondano vs. Silvosa, to mean "the power of integration of the national police forces with the PC also resulted in inequities since the military component had superior benefits [the President] to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and and privileges. 10 to substitute the judgment of the former with that of the latter." It is said to be at the very "heart of the meaning of Chief Executive." 19 The Constitutional Commission of 1986 was fully aware of the structural errors that beset the system. Thus, Com. Teodulo C. Natividad explained that: Equally well accepted, as a corollary rule to the control powers of the President, is the "Doctrine of Qualified Political Agency". As the President cannot be expected to exercise his control powers all at the same time and in person, 20 he will have to delegate some of them to his Cabinet members. Under this doctrine, which recognizes the establishment of a single executive, 21 "all executive and administrative organizations Sec. 37. . . . There shall be established a performance evaluation system which shall be administered in accordance with the rules, are adjuncts of the Executive Department, the heads of the various executive departments are assistants and agents of the Chief regulations and standards; and a code of conduct promulgated by the Commission for members of the PNP. . . . Executive, and, except in cases where the Chief Executive is required by the Constitution or law to act in person on the exigencies of the situation demand that he act personally, the multifarious executive and administrative functions of the Chief Executive are xxx xxx xxx performed by and through the executive departments, and the acts of the Secretaries of such departments, performed and promulgated in the regular course of business, unless disapproved or reprobated by the Chief Executive presumptively the acts of the Chief Executive." 22 (emphasis ours) Petitioner further asserts that in manifest derogation of the power of control of the NAPOLCOM over the PNP, RA 6975 vested the power to choose the PNP Provincial Director and the Chiefs of Police in the Governors and Mayors, respectively; the power of "operational supervision and control" over police units in city and municipal mayors; in the Civil Service Commission, participation Thus, and in short, "the President's power of control is directly exercised by him over the members of the Cabinet who, in turn, in appointments to the positions of Senior Superintendent to Deputy Director-General as well as the administration of qualifying and by his authority, control the bureaus and other offices under their respective jurisdictions in the executive department." 23 entrance examinations; disciplinary powers over PNP members in the "People's Law Enforcement Boards" and in city and municipal mayors. 25 Additionally, the circumstance that the NAPOLCOM and the PNP are placed under the reorganized Department of Interior and Local Government is merely an administrative realignment that would bolster a system of coordination and cooperation among Once more, we find no real controversy upon the foregoing assertions. the citizenry, local executives and the integrated law enforcement agencies and public safety agencies created under the assailed Act, 24 the funding of the PNP being in large part subsidized by the national government. It is true that when the Constitutional Commissioners of 1986 provided that the authority of local executives over the police units in their jurisdiction shall be provided by law, they intended that the day-to-day functions of police work like crime, investigation, Such organizational set-up does not detract from the mandate of the Constitution that the national police force shall be crime prevention activities, traffic control, etc., would be under the operational control of the local executives as it would not be administered and controlled by a national police commission as at any rate, and in fact, the Act in question adequately provides 26 advisable to give full control of the police to the local executives. for administration and control at the commission level, as shown in the following provisions, to wit:

They reasoned that in the past, this gave rise to warlordism, bossism, and sanctuaries for vices and abuses. 27 Sec. 14. Powers and Functions of the Commission. — The Commission shall exercise the following powers and functions:

It would appear then that by vesting in the local executives the power to choose the officers in question, the Act went beyond the xxx xxx xxx bounds of the Constitution's intent.

(i) Approve or modify plans and programs on education and training, logistical requirements, communications, records, Not so. We find light in the principle of constitutional construction that every presumption should be indulged in favor of information systems, crime laboratory, crime prevention and crime reporting; constitutionality and the court in considering the validity of the statute in question should give it such reasonable construction as can be reached to bring it within the fundamental (j) Affirm, reverse or modify, through the National Appellate Board, personnel disciplinary actions involving demotion or dismissal law. 28 from the service imposed upon members of the Philippine National Police by the Chief of the PNP; Under the questioned provisions, which read as follows: (k) Exercise appellate jurisdiction through .the regional. appellate boards over administrative cases against policemen and over decisions on claims for police benefits; D. PARTICIPATION OF LOCAL EXECUTIVES IN THE ADMINISTRATION OF THE PNP.

xxx xxx xxx Sec. 51. Powers of Local Government Officials over the PNP Units or Forces.

Sec. 26. The Command and direction of the PNP shall be vested in the Chief of the PNP . . . Such command and direction of the Governors and mayors shall be deputized as representatives of the Commission in their respective territorial jurisdictions. As such, Chief of the PNP may be delegated to subordinate officials with respect to the units under their respective commands, in the local executives shall discharge the following functions: accordance with the rules and regulations prescribed by the Commission. . . .

a.) Provincial Governor — (1) . . . xxx xxx xxx

The provincial governor shall choose the provincial director from a list of three (3) eligibles recommended by the PNP Regional Sec. 35. . . . To enhance police operational efficiency and effectiveness, the Chief of the PNP may constitute such other support Director. units as may be necessary subject to the approval of the Commission. . . .

4) . . . City and municipal mayors shall have the following authority over the PNP units in their respective jurisdictions: xxx xxx xxx i.) Authority to choose the chief of police from a list of five (5) eligibles recommended by the Provincial Police Director. . . . Petitioner would likewise have this Court imagine that Section 12 of the questioned Act, the pertinent portion of which reads: (Emphasis ours) Sec. 12. Relationship of the Department with the Department of National Defense. — During a period of twenty- four (24) months full control remains with the National Police Commission. from the effectivity of this Act, the Armed Forces of the Philippines (AFP) shall continue its present role of preserving the internal and external security of the State: Provided, that said period may be extended by the President, if he finds it justifiable, for another period not exceeding twenty-four (24) months, after which, the Department shall automatically take over from the AFP We agree, and so hold, with the view of the Solicitor General that "there is no usurpation of the power of control of the the primary role of preserving internal security, leaving to the AFP its primary role of preserving external security. NAPOLCOM under Section 51 because under this very same provision, it is clear that the local executives are only acting as representatives of the NAPOLCOM. . . . As such deputies, they are answerable to the NAPOLCOM for their actions in the exercise of their functions under that section. Thus, unless countermanded by the NAPOLCOM, their acts are valid and binding as acts of xxx xxx xxx the NAPOLCOM." 29 It is significant to note that the local officials, as NAPOLCOM representatives, will choose the officers concerned from a list of eligibles (those who meet the general qualifications for appointment to the PNP) 30 to be recommended constitutes an "encroachment upon, interference with, and an abdication by the President of, executive control and commander- by PNP officials. in-chief powers."

The same holding is true with respect to the contention on the operational supervision and control exercised by the local officials. That We are not disposed to do for such is not the case at all here. A rejection thus of petitioner's submission anent Section 12 of Those officials would simply be acting as representatives of the Commission. the Act should be in order in the light of the following exchanges during the CONCOM deliberations of Wednesday, October 1, 1986: As regards the assertion involving the Civil Service Commission, suffice it to say that the questioned provisions, which read: xxx xxx xxx Sec. 31. Appointment of PNP Officers and Members. — The Appointment of the officers and members of the PNP shall be effected in the following manner: MR. RODRIGO. Just a few questions. The President of the Philippines is the Commander-in-Chief of all the armed forces. a.) Police Officer I to Senior Police Officer IV. — Appointed by the PNP regional director for regional personnel or by the Chief of MR. NATIVIDAD. Yes, Madam President. the PNP for national headquarters personnel and attested by the Civil Service Commission;

MR. RODRIGO. Since the national police is not integrated with the armed forces, I do not suppose they come under the b.) Inspector to Superintendent. — Appointed by the Chief of the PNP, as recommended by their immediate superiors, and Commander-in-Chief powers of the President of the Philippines. attested by the Civil Service Commission;

MR. NATIVIDAD. They do, Madam President. By law they are under the supervision and control of the President of the Philippines. c.) Senior Superintendent to Deputy Director-General. — Appointed by the President upon recommendation of the Chief of the PNP, with proper endorsement by the Chairman of the Civil Service Commission . . . MR. RODRIGO. Yes, but the President is not the Commander-in-Chief of the national police.

Sec. 32. Examinations for Policemen. — The Civil Service Commission shall administer the qualifying entrance examinations for MR. NATIVIDAD. He is the President. policemen on the basis of the standards set by the NAPOLCOM. MR. RODRIGO. Yes, the Executive. But they do not come under that specific provision that the President is Commander-in-Chief of precisely underscore the civilian character of the national police force, and will undoubtedly professionalize the same. all the armed forces.

The grant of disciplinary powers over PNP members to the "People's Law Enforcement Boards" (or the PLEB) and city and MR. NATIVIDAD. No, not under the Commander-in-Chief provision. municipal mayors is also not in derogation of the commission's power of control over the PNP. MR. RODRIGO. There are two other powers of the President. The President has control over departments, bureaus and offices, Pursuant to the Act, the Commission exercises appellate jurisdiction, thru the regional appellate boards, over decisions of both the and supervision over local governments. Under which does the police fall, under control or under supervision? PLEB and the said mayors. This is so under Section 20(c). Furthermore, it is the Commission which shall issue the implementing guidelines and procedures to be adopted by the PLEB for in the conduct of its hearings, and it may assign NAPOLCOM hearing MR. NATIVIDAD. Both, Madam President. officers to act as legal consultants of the PLEBs (Section 43-d4, d5).

MR. RODRIGO. Control and Supervision. As a disciplinary board primarily created to hear and decide citizen's complaints against erring officers and members of the PNP, the establishment of PLEBs in every city, and municipality would all the more help professionalize the police force. MR. NATIVIDAD. Yes, in fact, the National Police Commission is under the Office of the President. (CONCOM RECORDS, Vol. 5, p. By way of resume, the three Constitutional Commissions (Civil Service, Audit, Elections) and the additional commission created by 296) the Constitution (Human Rights) are all independent of the Executive; but the National Police Commission is not. 36 In fact, it was stressed during the CONCOM deliberations that this commission would be under the President, and hence may be controlled by the President, thru his or her alter ego, the Secretary of the Interior and Local Government. It thus becomes all too apparent then that the provision herein assailed precisely gives muscle to and enforces the proposition that the national police force does not fall under the Commander-in-Chief powers of the President. This is necessarily so since the police force, not being integrated with the military, is not a part of the Armed Forces of the Philippines. As a civilian agency of the WHEREFORE, having in view all of the foregoing holdings, the instant petition is hereby DISMISSED for lack of merit. SO ORDERED. government, it properly comes within, and is subject to, the exercise by the President of the power of executive control.

Consequently, Section 12 does not constitute abdication of commander-in-chief powers. It simply provides for the transition period or process during which the national police would gradually assume the civilian function of safeguarding the internal security of the State. Under this instance, the President, to repeat, abdicates nothing of his war powers. It would bear to here state, in reiteration of the preponderant view, that the President, as Commander-in-Chief, is not a member of the Armed Forces. He remains a civilian whose duties under the Commander-in-Chief provision "represent only a part of the organic duties imposed upon him. All his other functions are clearly civil in nature." 31 His position as a civilian Commander-in-Chief is consistent with, and a testament to, the constitutional principle that "civilian authority is, at all times, supreme over the military." (Article II, Section 3, 1987 Constitution)

Finally, petitioner submits that the creation of a "Special Oversight Committee" under Section 84 of the Act, especially the inclusion therein of some legislators as members (namely: the respective Chairmen of the Committee on Local Government and the Committee on National Defense and Security in the Senate, and the respective Chairmen of the Committee on Public Order and Security and the Committee on National Defense in the House of Representatives) is an "unconstitutional encroachment upon and a diminution of, the President's power of control over all executive departments, bureaus and offices."

But there is not the least interference with the President's power of control under Section 84. The Special Oversight Committee is simply an ad hoc or transitory body, established and tasked solely with planning and overseeing the immediate "transfer, merger and/or absorption" into the Department of the Interior and Local Governments of the "involved agencies." This it will undertake in accordance with the phases of implementation already laid down in Section 85 of the Act and once this is carried out, its functions as well as the committee itself would cease altogether. 32 As an ad hoc body, its creation and the functions it exercises, decidedly do not constitute an encroachment and in diminution of the power of control which properly belongs to the President. What is more, no executive department, bureau or office is placed under the control or authority, of the committee. 33

As a last word, it would not be amiss to point out here that under the Constitution, there are the so-called independent Constitutional Commissions, namely: The Civil Service Commission, Commission on Audit, and the Commission on Elections. (Article IX-A, Section 1)

As these Commissions perform vital governmental functions, they have to be protected from external influences and political pressures. Hence, they were made constitutional bodies, independent of and not under any department of the government. 34 Certainly, they are not under the control of the President.

The Constitution also created an independent office called the "Commission on Human Rights." (Article XIII, Section 17[1]).However, this Commission is not on the same level as the Constitutional Commissions under Article IX, although it is independent like the latter Commissions. 35 It still had to be constituted thru Executive Order No. 163 (dated May 5, 1987).

In contrast, Article XVI, Section 6 thereof, merely mandates the statutory creation of a national police commission that will administer and control the national police force to be established thereunder.

This commission is, for obvious reasons, not in the same category as the independent Constitutional Commissions of Article IX and the other constitutionally created independent Office, namely, the Commission on Human Rights.