Admin

G.R. No. L-39195 May 16, 1975
THE SAN MIGUEL CORPORATION and FRANCISCO
ANDRES, petitioners,
vs.
THE HONORABLE SECRETARY OF LABOR, NATIONAL LABOR
RELATIONS COMMISSION and GREGORIO YANGLAY, JR., respondents.
Seguion Reyna, Montecillo and Ongsiako for petitioners.
Zerrudo and Caling Law Office for private respondent.
Porfirio E. Villanueva and Apolinario N. Lomabao, Jr. for respondents
Secretary of Labor and The Commission.

dexopan, rovicon, etc., worth P267, which were turned over to Salvacion
Mercurio, the nurse in charge of the company's clinic.
Yanglay, in his written statement taken by Sergeant Francisco Enriquez of
the company's security force at around three-forty of that same afternoon,
admitted that he was caught in possession of the said drugs which he had
bought from his co-workers and which had been given to them free of charge
so as to keep them in the "pink of health". Yanglay further admitted:têñ.
£îhqwâ£
Opo, hindi ko na po uulitin ang mga bagay na ito, dala po
lamang ng pangangailangan kaya ko binibili ito, hindi na po
mauulit.
Yanglay was investigated on May 15 and June 23 and 27, 1972 by Beda
Gonzalez of the management in the presence of the union counsel, a union
vice-president, the shop steward and the plant superintendent.

AQUINO, J.:ñé+.£ªwph!1
The San Miguel Corporation in this special civil action of certiorari seeks to
annul the decision of the old National Labor Relations Commission (NLRC)
dated Feb. 27, 1973, ordering the reinstatement (with back wages) of
Gregorio Yanglay, Jr. to his position of operator in the crown cork department
of its Metal Closure and Lithography Plant located at Cristobal Street, Paco,
Manila. On July 9, 1974 the Secretary of Labor affirmed that decision which
also absolved the company from the charge of unfair labor practice.
Yanglay worked in the said plant with a daily wage of fourteen pesos from
June 9, 1963 to July 19, 1972, when he was dismissed by Franciso Andres,
the plant manager. The cause of his dismissal was illegal trafficking in
company medicines. (According to the company Yanglay was suspended
sixteen times for continuous absences during the period from November 16,
1964 to December 16, 1971).
The record of NLRC Case No. MC-180, "Gregorio Yanglay, Jr. versus The
San Miguel Corporation and Francisco Andres", reveals that Yanglay, a thirtyyear old married man residing at Cavite City, after leaving the plant at three
o'clock in the afternoon of April 22, 1972, was apprehended by Patrolman E.
Reyes of the Manila Police Department outside the company compound.
Yanglay was carrying a bagful of drugs, such as prothiona tablets, arlidin,

At the investigation on June 27 Yanglay denied that he was trafficking
illegally in drugs of the company. He said that he bought the drugs from his
co-workers in the same way that some workers bought the rice rations of
their co-workers. He contended that he had not violated any rule of the
company. He clarified that some of the medicines were given to him by his
co-workers.
On the basis of that investigation, Yanglay was dismissed on July 19, 1972.
At the meeting of the union and management panels on September 22, 1972
to thresh out Yanglay's grievance, the union representative contended that
there was no company rule against trafficking in drugs, which were no longer
owned by the company after having been issued to its workers, and that the
sale of the drugs was like the sale of rice rations which sale was allegedly
tolerated by the company officials. The union conceded that suspension
should be the proper disciplinary action but not dismissal. Yanglay had been
in the service of the company for nine years.
The management panel countered that it is evident that Yanglay's dismissal
was not due to union activities; that the sale of the drugs was a subversion of
the company's efforts to give medical benefits to its workers and that
trafficking in rice rations cannot be cited as a justification because the value
of the rice is reflected in the workers' income tax returns.

1

On December 4, 1972 Yanglay filed a complaint with the NLRC alleging that
there was no evidence to justify his dismissal, that the truth was that he
owned the medicines in question and that he was dismissed because of his
union activities as a "militant shop steward of the Ilaw at Buklod ng
Manggagawa", the union representing the workers of the corporation (NLRC
Case No. MC-180).
An NLRC commissioner sent telegrams dated December 5, 1972, notifying
the parties that the case was set for hearing on December 18. On that date
Enrique C. Cruz, as mediator-fact finder, conducted a preliminary hearing. He
found that an amicable settlement was not possible because the San Miguel
Corporation insisted on the dismissal of Yanglay.
The case was scheduled for mediation on January 10, 1973. The record
does not show what transpired on that date. On January 12, 1973 the
corporation filed a memorandum wherein it contended (1) that Yanglay's
case was outside the NLRC's jurisdiction which extends only to disputes and
grievances occurring after September 21, 1972; (2) that Yanglay's dismissal
was justified and (3) that, if the dismissal was not justified, his remedy was to
ask for separation pay under the Termination Pay Law.
Yanglay did not submit any memorandum. On February 21, 1973 the
mediator submitted a report wherein he concluded that Yanglay "was
dismissed on a shaky ground" because the employer had not shown any
violation of any company rule or regulation and that the persons to be
penalized should be those who sold or delivered the drugs to Yanglay.
Cruz admitted that the San Miguel Corporation "had not committed unfair
labor practice". He recommended Yanglay's reinstatement with back wages
from July 19,1972 (when he was dismissed) up to the date of his
reinstatement.
The NLRC composed of Amado G. Inciong, Diego P. Atienza and Ricardo C.
Castro, in its aforementioned decision adopted the report of Cruz in its
entirety.
The San Miguel Corporation moved for the reconsideration of the decision on
the ground that it was premature because section 14 of the NLRC's Rules
and Regulations requires that the mediator's factfinding report be passed
upon by an arbitrator. The motion was treated as an appeal by the Secretary

of Labor. As already stated, he denied it in his resolution dated July 9, 1974.
Thereafter, the company, instituted this certiorari proceeding.
Yanglay raised a jurisdictional question which was not brought up by
respondent public officials. He contends that this Court has no jurisdiction to
review the decisions of the NLRC and the Secretary of Labor "under the
principle of separation of powers" and that judicial review is not provided for
in Presidential Decree No. 21.
That contention is a flagrant error. "It is generally understood that as to
administrative agencies exercising quasi-judicial or legislative power there is
an underlying power in the courts to scrutinize the acts of such agencies on
questions of law and jurisdiction even though no right of review is given by
statute" (73 C.J.S. 506, note 56).
"The purpose of judicial review is to keep the administrative agency within its
jurisdiction and protect substantial rights of parties affected by its decisions"
(73 C.J.S. 507, Sec. 165). It is part of the system of checks and balances
which restricts the separation of powers and forestalls arbitrary and unjust
adjudications.
Judicial review is proper in case of lack of jurisdiction, grave abuse of
discretion, error of law, fraud or collusion (Timbancaya vs. Vicente, 62 O.G.
9424; Macatangay vs. Secretary of Public Works and Communications, 63
O.G. 11236; Ortua vs. Singson Encarnacion, 59 Phil. 440).
"The courts may declare an action or resolution of an administrative authority
to be illegal (1) because it violates or fails to comply with some mandatory
provision of the law or (2) because it is corrupt, arbitrary or capricious"
(Borromeo vs. City of Manila and Rodriguez Lanuza, 62 Phil. 512, 516;
Villegas vs. Auditor General, L-21352, November 29, 1966, 18 SCRA 877,
891).
The San Miguel Corporation contends that the NLRC gravely abused its
discretion and denied the employer due process of law when it decided the
case without giving the employer a chance to submit the case for arbitration,
as provided in section 4 of Presidential Decree No. 21 and in section 14 of its
Rules and Regulations.

2

The Solicitor General counters that there was no denial of due process
because the NLRC and the mediator decided the case on the basis of the
investigation which was conducted by a lawyer of the company pursuant to
the grievance procedure indicated in the collective bargaining agreement.
The Solicitor General made the following cogent and judicious observations
to support his contention that the San Miguel Corporation was not denied
due process:têñ.£îhqwâ£
1. ... in said grievance procedure, a lengthy recorded
investigation was conducted wherein the parties were duly
represented by their respective counsel and wherein the
petitioner herein was granted every opportunity to present its
evidence and cross-examine witnesses in support of its then
contemplated and consequent action in the premises; that
after the filing of the complaint by the private respondent, a
preliminary factfinding was had with both parties present
and/or duly represented wherein a preliminary factfinding
report was rendered stating that the respondents (petitioners
herein) were adamant in their stand regarding complainants
dismissal and that the possibility of settlement between the
parties was ruled out ...; that thereafter, mediation and
further factfinding were held at which hearings petitioners,
instead of presenting their evidence, opted to merely file a
memorandum while complainant (private respondent herein)
elected to submit the records of the proceedings in the
grievance stage; that thereafter, a mediation Factfinding
Report was rendered on February 21, 1973, on the basis of
which a decision was rendered by the respondent NLRC on
February 27, 1973.
xxx xxx xxx
3. It is evident from the report of the mediator factfinder that
he had considered all the facts and evidence presented by
both parties. Likewise indubitably clear is the fact that the
parties no longer intended to present further evidence on the
matter. Faced therefore with the foregoing circumstances,
the NLRC was left without recourse but to exercise its power
of arbitration as per section 4 of Presidential Decree No. 21

and after assessing the evidence before it rendered its
decision thereunder. So should it be in cases of this nature,
since it would have been futile to further prolong the
proceedings by again setting the case for hearing when the
parties themselves no longer intended to present further
evidence. In short, while the action of the NLRC may have
been summary, it cannot and does not constitute a denial of
due process.
The ultimate issue in this case is not whether the San Miguel Corporation
was denied due process because the NLRC did not adhere strictly to the
procedure for arbitration. It is undeniable that the company was given a
chance to be heard. To refer now this case to an arbitrator would only unduly
delay its final disposition.
The real issue is whether, considering the undisputed facts that Yanglay
bought from his co-workers drugs worth P267 which were given to them
gratis, which they were not supposed to sell and which, after seizure from
Yanglay, were returned to the company, his dismissal from employment was
justified.
That was the first time he was caught trafficking in company-supplied drugs.
He confessed that necessity forced him to buy the drugs. He promised not to
do it again. His impression was that, like the rice rations whose sale was
tolerated by the company officials, he could engage in the buy-and-sell of the
drugs. He argued that his co-workers, who gave or sold to him the drugs,
were equally culpable in sabotaging the company's practice of rendering free
medical assistance to its employees.
The misconduct of employees or workers in misrepresenting to the company
that they needed medicines when in fact their purpose was to sell the same
should not be tolerated. For such misrepresentations or deceptions,
appropriate disciplinary action should be taken against them. On the other
hand, in view of the high cost of living and the difficulties of supporting a
family it is not surprising that members of the wage-earning class would do
anything possible to augment their small income.(Compare with People vs.
Macbul, 74 Phil. 436).
Taking into account the circumstances of the case, particularly Yanglay's
initial attitude of confessing that his error was dictated by necessity and his

3

promise not to repeat the same mistake, we are of the opinion that his
dismissal was a drastic punishment. He should be reinstated but without
back wages because the company acted in good faith in dismissing him
(Findlay Millar Timber Company vs. Philippine Land-Air-Sea Labor Union, L18217 and L-18222, September 29, 1962, 6 SCRA 226). He has been
sufficiently penalized by the loss of his wages from July 19, 1972 up to this
time.
WHEREFORE, the resolution of the Secretary of Labor and the decision of
the defunct National Labor Relations Commission are modified in the sense
that Gregorio Yanglay, Jr. should be reinstated without back wages. Costs
against the petitioners.

Court, Antipolo, Rizal, in Civil Case No. 1385 restraining the enforcement of
petitioner Quisumbing's order of closure of the respondent Philippine MuslimChristian College of Medicine Foundation, Inc. (hereafter simply the
College).lâwphî1.ñèt
The, College, a private educational institution, was founded in 1981 for the
avowed purpose of producing physicians who will "emancipate Muslim
citizens from age-old attitudes on health." The, unstable peace and order
situation in Mindanao led to the establishment of the College in Antipolo,
Rizal, which granted it a temporary permit to operate in the municipality,
instead of in Zamboanga City where the school was first proposed to be
located. It has since adopted Antipolo as its permanent site and changed its
name to the Rizal College of Medicine.

SO ORDERED.
G.R. No. 88259 August 10, 1989
THE BOARD OF MEDICAL EDUCATION and the HON. LOURDES R.
QUISUMBING, in her capacity as Secretary of the Department of
Education, Culture and Sports and Chairman, Board of Medical
Education, petitioners,
vs.
HON. DANIEL P. ALFONSO, Presiding Judge of the Regional Trial Court,
Branch 74, Fourth Judicial Region, Antipolo, Rizal, and the PHILIPPINE
MUSLIM-CHRISTIAN COLLEGE OF MEDICINE FOUNDATION,
INC., respondents.

In 1985, the Department of Education, Culture and Sports (DECS) and the
Board of Medical Education (BME) authorized the Commission on Medical
Education to conduct a study of all medical schools in the Philippines. The,
report of the Commission showed that the College fell very much short of the
minimum standards set for medical schools. 1 The, team of inspectors,
composed of Doctors Florentino Herrera, Jr., Elena Ines Cuyegkeng, Horacio
Estrada, Jose V. Silao, Jr. and Andres L. Reyes, recommended the closure of
the school 2 upon the following findings, to wit:
(a) the College was not fulfilling the purpose for which it had
been created because of its inappropriate location and the
absence in its curriculum of subjects relating to Muslim
culture and welfare;

Carpio, Villaraza & Cruz for private respondent.
Anatolio S. Tuazon, Jr. for intervenors.

(b) its lack of university affiliation hindered its students from
obtaining a "balanced humanistic and scientific" education;

NARVASA, J.:

(c) it did not have its philosophy base hospital for the training
of its students in the major clinical disciplines, as required by
the DECS;

Petitioners, the Board of Medical Education, the government agency which
supervises and regulates the country's medical colleges, and Secretary
Lourdes R. Quisumbing of the Department of Education, Culture and Sports,
as Chairperson of the Board, pray for a writ of certiorari to nullify and set
aside the order issued by respondent Judge Daniel P. Alfonso, Regional Trial

(d) more than 60% of the college faculty did not teach in the
College full-time, resulting in shortened and irregular class
hours, subject overloading, and in general, poor quality
teaching.

4

The, school disputed these findings as biased and discriminatory. At its
request, the Board of Medical Education, in May, 1987, sent another team of
doctors 3 for a re-evaluation of the College. After inspection, the team
confirmed the previous findings and recommended the phase-out of the
school. 4

Board subsequently allowed the College to continue its operations but only
until May, 1989, after which it was to be closed, this decision being "final and
unappealable." The, College was, however, assured of assistance in the
relocation of its students and in its rehabilitation as an institution for healthrelated and paramedical courses. 9

The, first two reports were verified on June 23, 1987 by a third team of
inspectors. 5 A year thereafter, the College failed another test what was in
effect the fourth evaluation of its fitness to continue as a medical school
conducted on March 4 and 5, 1988 by a team from the Board of Medical
Education determining the eligibility of medical schools for government
recognition. The, College was adjudged "inadequate" in all aspects of the
survey, to wit, college, curriculum, facilities, teaching hospital, and
studentry. 6 The, inspectors, Doctors Nilo Rosas, Macario Tan and Elena Ines
Cuyegkeng, accordingly recommended denial of government; recognition.

The, College appealed the decision to the Office of the President, imputing
grave abuse of discretion to the Secretary. 10 On February 16, 1989,
Executive Secretary Catalino Macaraig, Jr., finding "no reason to disturb" the
contested decision, affirmed it. 11

Accordingly, the Board of Medical Education recommended to the DECS the
closure of the College, effective the end of the school year 1988-1989. The,
College however succeeded in having the Board form yet another team to
review the previous findings. Doctors Elena Ines Cuyegkeng, Alberto
Romualdez, Artemio Ordinaria Joven Cuanang and Nilo L. Rosas conducted
their inspection on June 18, 1988. Their findings: although there had been a
"major effort to improve the physical plant for classroom instructions and the
library, serious deficiencies remain(ed) in the areas of clinical facilities and
library operations;" "faculty continue(d) to be quite inadequate with no
prospects for satisfactory growth and development;" "student profile ... (was)
below par from the point of view of credentials (NMAT and transfer records)
as well as level knowledge and preparedness at various stages of medical
education," and "the most serious deficiency ... (was) the almost total lack of
serious development efforts in academic medicine — i.e., seeming lack of
philosophy of teaching, no serious effort to study curricula, almost nonexistent innovative approaches." Again, the recommendation was to close
the College with provisions for the dispersal of its students to other medical
schools. 7
In her letter of June 23, 1988, Secretary Quisumbing informed the Chairman
of the College's Board of Trustees, Mr. Victor Sumulong, of the decision of
the Board of Medical Education to close the College. Mr. Sumulong instead
proposed a gradual phase-out starting the school year 1989-1990 in order
not to dislocate the students and staff and to minimize financial loss. 8 The,

On March 2, 1989, the College went to court. It filed Civil Case No. 1385 in
the court of respondent Judge Daniel P. Alfonso against Secretary
Quisumbing in her capacity as Secretary of Education, Culture and Sports,
questioning the decision as illegal, oppressive, arbitrary and discriminatory
and applied for a writ of preliminary injunction to restrain its implementation.
The, writ issued as prayed for by order of the respondent Judge dated May
10, 1989. 12 His Honor ruled that the inspection of June 18, 1988 was the
principal basis of the closure order, and on such basis sustained the claim of
the College that the inspection was done in an "arbitrary and haphazard
manner" by a team of inspectors who had already prejudged the school.
Judge Alfonso held that there was no evidence supporting the findings in the
report of June 18, 1988, and declared that his philosophy ocular inspection of
the College disclosed that the deficiencies mentioned in the report were nonexistent, and that on the contrary, the laboratory and library areas were "big
enough," and in the operations of the proposed base hospital were going on
smoothly at the time of the ocular inspection."
The, school thereupon promptly advertised in major newspaper dailies for
enrollees in all levels of the medical college and in its pre-board review
classes. 13
Hence the present petition, assailing the order of injunction dated May 10,
1989 as having been issued with grave abuse of discretion, and praying for a
restraining order against its enforcement as well as for the dismissal of the
action instituted in the court a quo. The, Court on June 1, 1989 ordered the
respondent College to desist from advertising and admitting students, and
the respondent judge to refrain from enforcing his injunction order.

5

The, College in its Comment would justify its entitlement to the questioned
injunction on the ground that the closure order against which it was directed
was issued without factual basis and in violation of the right of the College to
due process of law, and that it violates MECS Order No. 5 (Series of 1986) to
the effect that the penalty of closure cannot be imposed earlier than three (3)
years from the last evaluation, which in this instance was made, on June 18,
1988.
Resort to the Courts to obtain a reversal of the determination by the
Secretary of Education, Culture and Sports that the College is unfit to
continue its operations is in this case clearly unavailing. There is, to begin
with, no law authorizing an appeal from decisions or orders of the Secretary
of Education, Culture and Sports to this Court or any other Court. It is not the
function of this Court or any other Court to review the decisions and orders of
the Secretary on the issue of whether or not an educational institution meets
the norms and standards required for permission to operate and to continue
operating as such. On this question, no Court has the power or prerogative to
substitute its opinion for that of the Secretary. Indeed, it is obviously not
expected that any Court would have the competence to do so.
The, only authority reposed in the Courts in the matter is the determination of
whether or not the Secretary of Education, Culture and Sports has acted
within the scope of powers granted him by law and the Constitution. As long
as it appears that he has done so, any decision rendered by him should not
and will not be subject to review and reversal by any court.
Of course, if it should be made, to appear to the Court that those powers
were in a case exercised so whimsically, capriciously, oppressively,
despotically or arbitrarily as to call for peremptory correction — or stated
otherwise, that the Secretary had acted with grave abuse of discretion, or
had unlawfully neglected the performance of an act which the law specifically
enjoins as a duty, or excluded another from the use or enjoyment of a right or
office to which such other is entitled — it becomes the Court's duty to rectify
such action through the extraordinary remedies of certiorari, prohibition,
or mandamus, whichever may properly apply. Yet even in these extreme
instances, where a Court finds that there has been abuse of powers by the
Secretary and consequently nullifies and/or forbids such an abuse of power,
or compliance whatever is needful to keep its exercise within bounds, the
Court, absent any compelling reason to do otherwise, should still leave to the
Secretary the ultimate determination of the issue of the satisfy action or

fulfillment by an educational institution of the standards set down for its
legitimate operation, as to which it should not ordinarily substitute its over
judgment for that of said office.
In any case, the recorded facts quite clearly fail to support the College's claim
of grave abuse of discretion containing the order of closure, and on the
contrary convincingly show the challenged decision to be correct. From 1985,
no less than five (5) surveys were conducted of respondent institution to
determine its compliance with the minimum standards established for a
medical college. The, first survey, that undertaken by the Commission on
Medical Education, disclosed such various and significant deficiencies in the
school as to constrain the inspectors to recommend its closure. Four (4)
other surveys were thereafter made by as many different committees or
teams, at the school's instance or otherwise, all of which basically confirmed
the results of that first survey. Moreover, the findings of all five (5) surveys
were affirmed by the Office of the President. Indeed, the petitioner, through
the Chairman of its Board of Trustees, to all intents and purposes accepted
the validity of the findings of those five (5) survey groups when it proposed, in
1988, a gradual phase-out of the school starting in 1989. The, respondent
College knew that the recommendation for its closure was made, as early as
1986, that recommendation was reiterated and reaffirmed four (4) times
thereafter until it was finally approved and acted upon by the Secretary,
whose action was confirmed by the Office of the President. Said respondent
was given notice in June 1988, that in consequence of all these, the time for
its definite closure had been unalterably set at May, 1989, a notice which was
accompanied by assurances of assistance in the relocation of its students
before June, 1989 and in its rehabilitation as a school for other courses. After
having resorted to the whole range of administrative remedies available to it,
without success, it sought to obtain from the respondent Court the relief it
could not obtain from those sources, and what can only be described as a
deliberate attempt to frustrate and obstruct implementation of the decision for
its closure as of June, 1989 openly solicited, by newspaper advertisements
or otherwise, enrollment of new and old students.
Given these facts, and it being a matter of law that the Secretary of
Education, Culture and Sports exercises the power to enjoin compliance with
the requirements laid down for medical schools and to mete out sanctions
where he finds that violations thereof have been committed, it was a grave
abuse of discretion for the respondent judge to issue the questioned
injunction and thereby thwart official action, in the premises correctly taken,

6

allowing the College to operate without the requisite government permit. A
single ocular inspection, done after the College had been pre-warned
thereof, did not, in the circumstances, warrant only the findings of more
qualified inspectors about the true state of the College, its faculty, facilities,
operations, etc. The, members of the evaluating team came from the different
sectors in the fields of education and medicine, 14 and their judgment in this
particular area is certainly better than that of the respondent Judge whose
sole and only visit to the school could hardly have given him much more to
go on than a brief look at the physical plant and facilities and into the conduct
of the classes and other school activities. Respondent Judge gravely abused
his discretion in substituting his judgment for theirs. It is well-settled doctrine
that courts of justice should not generally interfere with purely administrative
and discretionary functions; that courts have no supervisory power over the
proceedings and actions of the administrative departments of the
government; involving the exercise of judgment and findings of facts,
because by reason of their special knowledge and expertise over matters
falling under their jurisdiction, the latter are in a better position to pass
judgment on such matters andn their findings of facts in that regard are
generally accorded respect, if not finality, by the courts. 15 There are, to be
sure, exceptions to this general rule but none of them obtains in this case.
The, claim of denial of due process likewise holds no water, as the record
clearly shows that the College was given every opportunity to so improve
itself as to come up to requirements, but remained sadly sub-standard after
the inspections conducted by the evaluating teams. It had, in fact, admitted
its failure to have up to the desired standards when it proposed its gradual
phase-out in its letter dated June 27, 1988 to Secretary Quisumbing. It was
also precisely because of its complaints of bias and prejudice that the Board
of Medical Education dispatched new teams to survey and re-evaluate its
performance. It had even gone all the way up to the Office of the President to
seek a reversal of the order of closure. There is thus no reason for it to
complain of a lack of opportunity to be heard and to explain its side as well
as to seek reconsideration of the ruling complained of.
There is also no merit in respondent College's argument that the closure
violated NMCS ORDER No. 5, Series of 1986, because it was sought to be
effected before the lapse of the three-year period therein snowed, which in
this case is sought to be counted from June 18, 1988, or the date of the last
evaluation. The, provision referred to reads:

The following sanction shall be applied against any medical
school, for failure to comply with the specific requirements of
the essentials, viz.:
xxx
c. Withdrawal or cancellation of the school's government;
authority to operate, for failure to fully comply with the
prescribed requirements after three (3) years from the last
evaluation conducted on the school.
It must at once be obvious from a reading of the provision, paragraph c, that
the situation therein contemplated — where a school is found to have failed
to "fully comply with the prescribed requirements," i.e., has not complied with
some requirements and has failed to do so within three (3) years from the
last evaluation is quite distinct from that obtaining in the case at bar — where
respondent school was found to have deficiencies so serious as to warrant
its immediate closure. Said paragraph c should not be construed to prohibit
absolutely the withdrawal or cancellation of government; authority to operate
until after three (3) years from the last evaluation conducted on the school;
or, stated otherwise, it does not unexceptionally prescribe a three-year
waiting period before authority to operate may be withdrawn. Rather, it
should be read as giving the Secretary of Education the discretion,
depending on the seriousness of the discovered deficiencies, to afford an
educational institution which has failed to comply with some requirement or
other, time not exceeding three (3) years to correct the deficiencies before
applying the sanction of withdrawal or cancellation of the government;
authority to operate. The, circumstances in the case at bar are far from
nominal and, to repeat, are different from those obviously envisioned by the
paragraph in question. There had never been a recommendation that the
College be granted an opportunity to comply with certain requirements. From
the outset, the proposal had been that it be forthwith closed, its discovered
deficiencies as a medical college being of so serious a character as to be
irremediable. The, other four (4) surveys were conducted, not to determine if
in the course of time the petitioner school had already fully complied with all
the prescribed requisites, but rather, whether or not the original
recommendation for its closure was correct and should be sustained. And, as
already mentioned, the subsequent surveys, over a period of more than three
(3) years, served but to confirm the validity of that initial proposal for its
closure. Under these circumstances, therefore, even if it be assumed that the

7

provision, paragraph c, applied to petitioner school, it must be held that there
has been substantial compliance therewith.
Having thus disposed of the issues raised by the facts of the case, the Court
sees no useful purpose to be served by remanding the case to the Trial Court
for further proceedings. The, only acceptable reason for such a remand
would be so that the Trial Court may determine whether or not the petitioners'
first have acted within the scope of their powers or grossly abused them, a
matter that this Court has already passed upon here. Such a remand cannot
be justified on the theory that the Trial Court will make its philosophy
independent determination of whether or not respondent medical institution
has complied with the minimum standards laid down for its continued
operation, since, as here ruled, it has not that power.
WHEREFORE, premises considered, the petition is hereby granted and the
temporary restraining order issued by the Court is made, permanent. The,
questioned writ of preliminary injunction dated May 10, 1989 is set aside and
respondent Judge is ordered to dismiss Civil Case No. 1385.
SO ORDERED.
G.R. No. 95694 October 9, 1997
VICENTE VILLAFLOR, substituted by his heirs, petitioner,
vs.
COURT OF APPEALS and NASIPIT LUMBER CO., INC., respondents.

Before us is a petition for review on certiorari seeking the reversal of the
Decision 1 of the Court of Appeals, dated September 27, 1990, in CA. G.R CV
No. 09062, affirming the dismissal by the trial court of Petitioner Vicente
Villaflor's complaint against Private Respondent Nasipit Lumber Co., Inc. The
disposition of both the trial and the appellate courts are quoted in the
statement of facts below.
The Facts
The facts of this case, as narrated in detail by Respondent Court of Appeals,
are as follows: 2
The evidence, testimonial and documentary, presented during the
trial show that on January 16, 1940, Cirilo Piencenaves, in a Deed of
Absolute Sale (exh. A), sold to [petitioner], a parcel of agricultural
land containing an area of 50 hectares, 3 more or less, and
particularly described and bounded as follows:
A certain parcel of agricultural land planted to abaca
with visible concrete monuments marking the
boundaries and bounded on the NORTH by Public
Land now Private Deeds on the East by Serafin
Villaflor, on the SOUTH by Public Land; and on the
West by land claimed by H. Patete, containing an
area of 60 hectares more or less, now under Tax
Dec. 29451 in the (sic) of said Vicente Villaflor, the
whole parcel of which this particular parcel is only a
part, is assessed at P22,550.00 under the above
said Tax Dec. Number.

PANGANIBAN, J.:
This deed states:
In this rather factually complicated case, the Court reiterates the binding
force and effect of findings of specialized administrative agencies as well as
those of trial courts when affirmed by the Court of Appeals; rejects
petitioner's theory of simulation of contracts; and passes upon the
qualifications of private respondent corporation to acquire disposable public
agricultural lands prior to the effectivity of the 1973 Constitution.

That the above described land was sold to the said
VICENTE VILLAFLOR, . . . on June 22, 1937, but no
formal document was then executed, and since then
until the present time, the said Vicente Villaflor has
been in possession and occupation of (the same);
(and)

The Case

8

That the above described property was before the
sale, of my exclusive property having inherited from
my long dead parents and my ownership to it and
that of my [sic] lasted for more than fifty (50) years,
possessing and occupying same peacefully, publicly
and continuously without interruption for that length
of time.
Also on January 16, 1940, Claudio Otero, in a Deed of Absolute Sale
(exh. C) sold to Villaflor a parcel of agricultural land, containing an
area of 24 hectares, more or less, and particularly described and
bounded as follows:
A certain land planted to corn with visible concrete
measurements marking the boundaries and
bounded on the North by Public Land and Tungao
Creek; on the East by Agusan River; on the South by
Serafin Villaflor and Cirilo Piencenaves; and on the
West by land of Fermin Bacobo containing an area
of 24 hectares more or less, under Tax Declaration
No. 29451 in the name already of Vicente Villaflor,
the whole parcel of which this particular land is only
a part, is assessed at P22,550.00 under the above
said Tax Declaration No. 29451.
This deed states:
That the above described land was sold to the said
VICENTE VILLAFLOR, . . . on June 22, 1937, but no
sound document was then executed, however since
then and until the present time, the said Vicente
Villaflor has been in open and continuous
possession and occupation of said land; (and)
That the above described land was before the sale,
my own exclusive property, being inherited from my
deceased parents, and my ownership to it and that
of my predecessors lasted more than fifty (50) years,
possessing and occupying the same, peacefully,
openly and interruption for that length of time.

Likewise on January 16, 1940, Hermogenes Patete, in a Deed of
Absolute Sale (exh. D), sold to Villaflor, a parcel of agricultural land,
containing an area of 20 hectares, more or less, and particularly
described and bounded as follows:
A certain parcel of agricultural land planted to abaca
and corn with visible concrete monuments marking
the boundaries and bounded on the North by Public
Land area-private Road; on the East by land claimed
by Cirilo Piencenaves; on the South by Public Land
containing an area of 20 hectares more or less, now
under Tax Declaration No. 29451 in the name of
Vicente Villaflor the whole parcel of which this
particular parcel, is assessed at P22,550.00 for
purposes of taxation under the above said Tax
Declaration No. 29451.
This deed states:
. . . (O)n June 22, 1937 but the formal document was
then executed, and since then until the present time,
the said VICENTE VILLAFLOR has been in
continuous and open possession and occupation of
the same; (and)
That the above described property was before the
sale, my own and exclusive property, being inherited
from my deceased parents and my ownership to it
and that of my predecessors lasted more than fifty
(50) years, possessing and occupying same,
peacefully, openly and continuously without
interruption for that length of time.
On February 15, 1940, Fermin Bocobo, in a Deed of Absolute Sale
(exh. B), sold to Villaflor, a parcel of agricultural land, containing an
area of 18 hectares, more or less, and particularly described and
bounded as follows:
A certain parcel of agricultural land planted with
abaca with visible part marking the corners and

9

bounded on the North by the corners and bounded
on the North by Public Land; on the East by Cirilo
Piencenaves; on the South by Hermogenes Patete
and West by Public Land, containing an area of 18
hectares more or less now under Tax Declaration
No. 29451 in the name of Vicente Villaflor. The
whole parcel of which this particular parcel is only a
part is assessed as P22,550.00 for purposes of
taxation under the above said Tax Declaration
Number (Deed of Absolute Sale executed by Fermin
Bocobo date Feb. 15, 1940). This document was
annotated in Registry of Deeds on February 16,
1940).

Lessee is empowered and authorized by the Lessor
to sublot (sic) the premises hereby leased or assign
the same or any portion of the land hereby leased to
any person, firm and corporation; (and)
4. The Lessee is hereby authorized to make any
construction and/or improvement on the premises
hereby leased as he may deem necessary and
proper thereon, provided however, that any and all
such improvements shall become the property of the
Lessor upon the termination of this lease without
obligation on the part of the latter to reimburse the
Lessee for expenses incurred in the construction of
the same.

This deed states:
That the above described property was before the
sale of my own exclusive property, being inherited
from my deceased parents, and my ownership to it
and that of my predecessors lasted more than fifty
(50) years, possessing and occupying the same
peacefully, openly and continuously without
interruption for that length of time.
On November 8, 1946, Villaflor, in a Lease Agreement (exh.
Q), 4 leased to Nasipit Lumber Co., Inc. a parcel of land, containing
an area of two (2) hectares, together with all the improvements
existing thereon, for a period of five (5) years from June 1, 1946 at a
rental of P200.00 per annum "to cover the annual rental of house
and building sites for thirty three (33) houses or buildings." This
agreement also provides: 5
3. During the term of this lease, the Lessee is
authorized and empowered to build and construct
additional houses in addition to the 33 houses or
buildings mentioned in the next preceding
paragraph, provided however, that for every
additional house or building constructed the Lessee
shall pay unto the Lessor an amount of fifty centavos
(¢50) per month for every house or building. The

Villaflor claimed having discovered that after the execution of the
lease agreement, that Nasipit Lumber "in bad faith . . . surreptitiously
grabbed and occupied a big portion of plaintiff's property . . ."; that
after a confrontation with the corporate's (sic) field manager, the
latter, in a letter dated December 3, 1973 (exh. R), 6 stated recalling
having "made some sort of agreement for the occupancy (of the
property at Acacia, San Mateo), but I no longer recall the details and
I had forgotten whether or not we did occupy your land. But if, as you
say, we did occupy it, then (he is ) sure that the company is obligated
to pay the rental."
On July 7, 1948, in an "Agreement to Sell" (exh. 2), Villaflor
conveyed to Nasipit Lumber, two (2) parcels of land . . . described as
follows: 7
PARCEL ONE
Bounded on the North by Public Land and Tungao
Creek; on the East by Agusan River and Serafin
Villaflor; on the South by Public Land, on the West
by Public Land. Improvements thereon consist of
abaca, fruit trees, coconuts and thirty houses of
mixed materials belonging to the Nasipit Lumber
Company. Divided into Lot Nos. 5412, 5413, 5488,
5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851,

10

5854, 5855, 5859, 5858, 5857, 5853, and 5852.
Boundaries of this parcel of land are marked by
concrete monuments of the Bureau of Lands.
Containing an area of 112,000 hectares. Assessed
at P17,160.00 according to Tax Declaration No. V315 dated April 14, 1946.
PARCEL TWO
Bounded on the North by Pagudasan Creek; on the
East by Agusan River; on the South by Tungao
Creek; on the West by Public Land. Containing an
area of 48,000 hectares more or less. Divided into
Lot Nos. 5411, 5410, 5409, and 5399. Improvements
100 coconut trees, productive, and 300 cacao trees.
Boundaries of said land are marked by concrete
monuments of the Bureau pf (sic) Lands. Assessed
value — P6,290.00 according to Tax No. 317, April
14, 1946.
This Agreement to Sell provides:
3. That beginning today, the Party of the Second
Part shall continue to occupy the property not
anymore in concept of lessee but as prospective
owners, it being the sense of the parties hereto that
the Party of the Second Part shall not in any manner
be under any obligation to make any compensation
to the Party of the First Part, for the use, and
occupation of the property herein before described in
such concept of prospective owner, and it likewise
being the sense of the parties hereto to terminate as
they do hereby terminate, effective on the date of
this present instrument, the Contract of Lease,
otherwise known as Doc. No. 420, Page No. 36,
Book No. II, Series of 1946 of Notary Public Gabriel
R. Banaag, of the Province of Agusan.
4. That the Party of the Second Part has bound as it
does hereby bind itself, its executors and

administrators, to pay unto the party of the First Part
the sum of Five Thousand Pesos (P5,000.00),
Philippine Currency, upon presentation by the latter
to the former of satisfactory evidence that:
(a) The Bureau of Lands will not
have any objection to the
obtainment by the Party of the First
Part of a Certificate of Torrens Title
in his favor, either thru ordinary land
registration proceedings or thru
administrative means procedure.
(b) That there is no other private
claimant to the properties
hereinbefore described.
5. That the Party of the First Part has bound as he
does hereby bind to undertake immediately after the
execution of these presents to secure and obtain, or
cause to be secured and obtained, a Certificate of
Torrens Title in his favor over the properties
described on Page (One) hereof, and after
obtainment of such Certificate of Torrens Title, the
said Party of the First Part shall execute a (D)eed of
Absolute Sale unto and in favor of the Party of the
Second Part, its executors, administrators and
assigns, it being the sense of the parties that the
Party of the Second Part upon delivery to it of such
deed of absolute sale, shall pay unto the Party of the
First Part in cash, the sum of Twelve Thousand
(P12,000.00) Pesos in Philippine Currency,
provided, however, that the Party of the First Part,
shall be reimbursed by the Party of the Second Part
with one half of the expenses incurred by the Party
of the First Part for survey and attorney's fees; and
other incidental expenses not exceeding P300.00.
On December 2, 1948, Villaflor filed Sales Application No.
V-807 8 (exh. 1) with the Bureau of Lands, Manila, "to purchase under

11

the provisions of Chapter V, XI or IX of Commonwealth Act. No. 141
(The Public Lands Act), as amended, the tract of public lands . . . and
described as follows: "North by Public Land; East by Agusan River
and Serafin Villaflor; South by Public Land and West by public land
(Lot Nos. 5379, 5489, 5412, 5490, 5491, 5492, 5849, 5850, 5851,
5413, 5488, 5489, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859
and 5860 . . . containing an area of 140 hectares . . . ." Paragraph 6
of the Application, states: "I understand that this application conveys
no right to occupy the land prior to its approval, and I recognized
(sic) that the land covered by the same is of public domain and any
and all rights may have with respect thereto by virtue of continuous
occupation and cultivation are hereby relinquished to the
Government." 9 (exh. 1-D)
On December 7, 1948, Villaflor and Nasipit Lumber executed an
"Agreement" (exh 3). 10 This contract provides:
1. That the First Party is the possessor since 1930 of
two (2) parcels of land situated in sitio Tungao,
Barrio of San Mateo, Municipality of Butuan,
Province of Agusan;
2. That the first parcel of land abovementioned and
described in Plan PLS-97 filed in the office of the
Bureau of Lands is made up of Lots Nos. 5412,
5413, 5488, 5490, 5491, 5492, 5849, 5850, 5851,
5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859
and 5860 and the second parcel of land is made of
Lots Nos. 5399, 5409, 5410 and 5411;
3. That on July 7, 1948, a contract of Agreement to
Sell was executed between the contracting parties
herein, covering the said two parcels of land, copy of
said Agreement to Sell is hereto attached marked as
Annex "A" and made an integral part of this
document. The parties hereto agree that the said
Agreement to Sell be maintained in full force and
effect with all its terms and conditions of this present
agreement and in no way be considered as
modified.

4. That paragraph 4 of the Contract of Agreement to
Sell, marked as annex, "A" stipulates as follows:
Par. 4. That the Party of the Second
Part has bound as it does hereby
bind itself, its executors and
administrators, to pay unto the Party
of the First Part of the sum of FIVE
THOUSAND PESOS (P5,000.00)
Philippine Currency, upon
presentation by the latter to the
former of satisfactory evidence that:
a) The Bureau of Lands will have
any objection to the obtainment by
Party of the First Part of a favor,
either thru ordinary land registration
proceedings or thru administrative
means and procedure.
b) That there is no other private
claimant to the properties
hereinabove described.
5. That the First Party has on December 2, 1948,
submitted to the Bureau of Lands, a Sales
Application for the twenty-two (22) lots comprising
the two abovementioned parcels of land, the said
Sales Application was registered in the said Bureau
under No. V-807;
6. That in reply to the request made by the First
Party to the Bureau of Lands, in connection with the
Sales Application No. V-807, the latter informed the
former that action on his request will be expedited,
as per letter of the Chief, Public Land Division, dated
December 2, 1948, copy of which is hereto attached
marked as annex "B" and made an integral part of
this agreement:

12

7. That for and in consideration of the premises
above stated and the amount of TWENTY FOUR
THOUSAND (P24,000.00) PESOS that the Second
Party shall pay to the First Party, by these presents,
the First Party hereby sells, transfers and conveys
unto the Second Party, its successors and assigns,
his right, interest and participation under, an(d) by
virtue of the Sales Application No. V-807, which he
has or may have in the lots mentioned in said Sales
Application No. V-807;

Party, as stated in the said contract of Agreement to
Sell dated July 7, 1948, shall cover not only the
amount of SEVEN THOUSAND (P7,000.00) PESOS
as specified in said document, but shall also cover
the amount of FIVE THOUSAND (P5,000.00)
PESOS to be paid as stipulated in paragraph 8, subparagraph (b) of this present agreement, if the First
Party should fail to comply with the obligations as
provided for in paragraphs 2, 4, and 5 of the
Agreement to Sell;

8. That the amount of TWENTY FOUR THOUSAND
(P24,000.00) PESOS, shall be paid by the Second
Party to the First Party, as follows:

10. It is further agreed that the First Party obligates
himself to sign, execute and deliver to and in favor of
the Second Party, its successors and assigns, at
anytime upon demand by the Second Party such
other instruments as may be necessary in order to
give full effect to this present agreement;

a) The amount of SEVEN
THOUSAND (P7,000.00) PESOS,
has already been paid by the
Second Party to the First Party upon
the execution of the Agreement to
Sell, on July 7, 1948;
b) The amount of FIVE THOUSAND
(P5,000.00) PESOS shall be paid
upon the signing of this present
agreement; and
c) The balance of TWELVE
THOUSAND (P12,000.00) shall be
paid upon the execution by the First
Party of the Absolute Deed of Sale
of the two parcels of land in
question in favor of the Second
Party, and upon delivery to the
Second Party of the Certificate of
Ownership of the said two parcels of
land.
9. It is specially understood that the mortgage
constituted by the First Party in favor of the Second

In the Report dated December 31, 1949 by the public land inspector,
District Land Office, Bureau of Lands, in Butuan, the report contains
an Indorsement of the aforesaid District Land Officer recommending
rejection of the Sales Application of Villaflor for having leased the
property to another even before he had acquired transmissible rights
thereto.
In a letter of Villaflor dated January 23, 1950, addressed to the
Bureau of Lands, he informed the Bureau Director that he was
already occupying the property when the Bureau's Agusan River
Valley Subdivision Project was inaugurated, that the property was
formerly claimed as private properties (sic), and that therefore, the
property was segregated or excluded from disposition because of the
claim of private ownership. In a letter of Nasipit Lumber dated
February 22, 1950 (exh. X) 11 addressed to the Director of Lands, the
corporation informed the Bureau that it recognized Villaflor as the
real owner, claimant and occupant of the land; that since June 1946,
Villaflor leased two (2) hectares inside the land to the company; that
it has no other interest on the land; and that the Sales Application of
Villaflor should be given favorable consideration.
xxx xxx xxx

13

On July 24, 1950, the scheduled date of auction of the property
covered by the Sales Application, Nasipit Lumber offered the highest
bid of P41.00 per hectare, but since an applicant under CA 141, is
allowed to equal the bid of the highest bidder, Villaflor tendered an
equal bid; deposited the equivalent of 10% of the bid price and then
paid the assessment in full.
xxx xxx xxx
On August 16, 1950, Villaflor executed a document, denominated as
a "Deed of Relinquishment of Rights" (exh. N), 12 pertinent portion of
which reads:
5. That in view of my present business in Manila,
and my change in residence from Butuan, Agusan to
the City of Manila, I cannot, therefore, develope (sic)
or cultivate the land applied for as projected before;
6. That the Nasipit Lumber Company, Inc., a
corporation duly organized . . . is very much
interested in acquiring the land covered by the
aforecited application . . . ;
7. That I believe the said company is qualified to
acquire public land, and has the means to develop
(sic) the above-mentioned land;

above-mentioned application in favor of the Nasipit
Lumber Company, Inc.
Also on August 16, 1950, Nasipit Lumber filed a Sales Application
over the two (2) parcels of land, covering an area of 140 hectares,
more or less. This application was also numbered V-807 (exh. Y).
On August 17, 1950 the Director of Lands issued an "Order of
Award" 13 in favor of Nasipit Lumber Company, Inc., pertinent portion
of which reads:
4. That at the auction sale of the land held on July
24, 1950 the highest bid received was that of Nasipit
Lumber Company, Inc. which offered P41.00 per
hectare or P5,740.00 for the whole tract, which bid
was equaled by applicant Vicente J. Villaflor, who
deposited the amount of P574.00 under Official
Receipt No. B-1373826 dated July 24, 1950 which is
equivalent to 10% of the bid. Subsequently, the
said . . . Villaflor paid the amount of P5,160.00 in full
payment of the purchase price of the abovementioned land and for some reasons stated in an
instrument of relinquishment dated August 16, 1950,
he (Vicente J. Villaflor) relinquished his rights to and
interest in the said land in favor of the Nasipit
Lumber Company, Inc. who filed the corresponding
application therefore.

xxx xxx xxx
WHEREFORE, and in consideration of the amount
of FIVE THOUSAND PESOS (P5,000.00) to be
reimbursed to me by the aforementioned Nasipit
Lumber Company, Inc., after its receipt of the order
of award, the said amount representing part of the
purchase price of the land aforesaid, the value of the
improvements I introduced thereon, and the
expenses incurred in the publication of the Notice of
Sale, I, the applicant, Vicente J. Villaflor, hereby
voluntarily renounce and relinquish whatever rights
to, and interests I have in the land covered by my

In view of the foregoing, and it appearing that the
proceedings had . . . were in accordance with law
and in [sic] existing regulations, the land covered
thereby is hereby awarded to Nasipit Lumber
Company, Inc. at P41.00 per hectare or P5,740.00
for the whole tract.
This application should be entered in the record of
this Office as Sales Entry No. V-407.
It is Villaflor's claim that he only learned of the Order of Award on
January 16, 1974, or after his arrival to the Philippines, coming from

14

Indonesia, where he stayed for more than ten (10) years; that he
went to Butuan City in the latter part of 1973 upon the call of his
brother Serafin Villaflor, who was then sick and learned that Nasipit
Lumber (had) failed and refused to pay the agreed rentals, although
his brother was able to collect during the early years; and that
Serafin died three days after his (Vicente's) arrival, and so no
accounting of the rentals could be made; that on November 27,
1973, Villaflor wrote a letter to Mr. G.E.C. Mears of Nasipit Lumber,
reminding him of their verbal agreement in 1955 . . . that Mr. Mears
in a Reply dated December 3, 1973, appears to have referred the
matter to Mr. Noriega, the corporate general manager, but the new
set of corporate officers refused to recognize (Villaflor's) claim, for
Mr. Florencio Tamesis, the general manager of Nasipit Lumber, in a
letter dated February 19, 1974, denied Villaflor's itemized claim
dated January 5, 1974 (exh. V) to be without valid and legal basis. In
the 5th January, 1974 letter, Villaflor claimed the total amount of
P427,000.00 . . . .
In a formal protest dated January 31, 1974 14 which Villaflor filed with
the Bureau of Lands, he protested the Sales Application of Nasipit
Lumber, claiming that the company has not paid him P5,000.00 as
provided in the Deed of Relinquishment of Rights dated August 16,
1950.
xxx xxx xxx
. . . (T)hat in a Decision dated August 8, 1977 (exh. 8), the Director of
Lands found that the payment of the amount of P5,000.00 in the
Deed . . . and the consideration in the Agreement to Sell were duly
proven, and ordered the dismissal of Villaflor's protest and gave due
course to the Sales Application of Nasipit Lumber. Pertinent portion
of the Decision penned by Director of Lands, Ramon Casanova, in
the Matter of SP No. V-807 (C-V-407) . . . reads:
xxx xxx xxx
During the proceedings, Villaflor presented another
claim entirely different from his previous claim — this
time, for recovery of rentals in arrears arising from a
supposed contract of lease by Villaflor as lessor in

favor of Nasipit as lessee, and indemnity for
damages supposedly caused improvements on his
other property . . . in the staggering amount of
Seventeen Million (P17,000,000.00) Pesos. Earlier,
he had also demanded from NASIPIT . . .
(P427,000.00) . . . also as indemnity for damages to
improvements supposedly caused by NASIPIT on
his other real property as well as for reimbursement
of realty taxes allegedly paid by him thereon.
xxx xxx xxx
It would seem that . . . Villaflor has sought to inject
so many collaterals, if not extraneous claims, into
this case. It is the considered opinion of this Office
that any claim not within the sphere or scope of its
adjudicatory authority as an administrative as well as
quasi-judicial body or any issue which seeks to delve
into the merits of incidents clearly outside of the
administrative competence of this Office to decide
may not be entertained.
There is no merit in the contention of Villaflor that
owing to Nasipit's failure to pay the amount of . . .
(P5,000.00) . . . (assuming that Nasipit had failed)
the deed of relinquishment became null and void for
lack of consideration. . . . .
xxx xxx xxx
. . . The records clearly show, however, that since
the execution of the deed of relinquishment . . .
Villaflor has always considered and recognized
NASIPIT as having the juridical personality to
acquire public lands for agricultural purposes. . . . .
xxx xxx xxx
Even this Office had not failed to recognize the
juridical personality of NASIPIT to apply for the

15

purchase of public lands . . . when it awarded to it
the land so relinquished by Villaflor (Order of Award
dated August 17, 1950) and accepted its application
therefor. At any rate, the question whether an
applicant is qualified to apply for the acquisition of
public lands is a matter between the applicant and
this Office to decide and which a third party like
Villaflor has no personality to question beyond
merely calling the attention of this Office thereto.
xxx xxx xxx
Villaflor offered no evidence to support his claim of
non-payment beyond his own self-serving assertions
and expressions that he had not been paid said
amount. As protestant in this case, he has the
affirmative of the issue. He is obliged to prove his
allegations, otherwise his action will fail. For, it is a
well settled principle (') that if plaintiff upon whom
rests the burden of proving his cause of action fails
to show in a satisfactory manner the facts upon
which he bases his claim, the defendant is under no
obligation to prove his exceptions or special
defenses (Belen vs. Belen, 13 Phil. 202; Mendoza
vs. Fulgencio, 8 Phil. 243).
xxx xxx xxx
Consequently, Villaflor's claim that he had not been
paid must perforce fail.
On the other hand, there are strong and compelling
reasons to presume that Villaflor had already been
paid the amount of Five Thousand (P5,000.00)
Pesos.
First, . . . What is surprising, however, is not so much
his claims consisting of gigantic amounts as his
having forgotten to adduce evidence to prove his
claim of non-payment of the Five Thousand

(P5,000.00) Pesos during the investigation
proceedings when he had all the time and
opportunity to do so. . . . The fact that he did not
adduce or even attempt to adduce evidence in
support thereof shows either that he had no
evidence to offer . . . that NASIPIT had already paid
him in fact. What is worse is that Villaflor did not
even bother to command payment, orally or in
writing, of the Five Thousand (P5,000.00) Pesos
which was supposed to be due him since August 17,
1950, the date when the order of award was issued
to Nasipit, and when his cause of action to recover
payment had accrued. The fact that he only made a
command (sic) for payment on January 31, 1974,
when he filed his protest or twenty-four (24) years
later is immediately nugatory of his claim for nonpayment.
But Villaflor maintains that he had no knowledge or
notice that the order of award had already been
issued to NASIPIT as he had gone to Indonesia and
he had been absent from the Philippines during all
those twenty-four (24) years. This of course taxes
credulity. . . . .
Second, it should be understood that the condition
that NASIPIT should reimburse Villaflor the amount
of Five Thousand (P5,000.00) Pesos upon its receipt
of the order of award was fulfilled as said award was
issued to NASIPIT on August 17, 1950. The said
deed of relinquishment was prepared and notarized
in Manila with Villaflor and NASIPIT signing the
instrument also in Manila on August 16, 1950 (p. 77,
(sic)). The following day or barely a day after that, or
on August 17, 1950, the order of award was issued
by this Office to NASIPIT also in Manila. Now,
considering that Villaflor is presumed to be more
assiduous in following up with the Bureau of Lands
the expeditious issuance of the order of award as
the payment of the Five Thousand (P5,000.00)

16

Pesos (consideration) would depend on the
issuance of said order to award NASIPIT, would it
not be reasonable to believe that Villaflor was at
hand when the award was issued to NASIPIT an
August 17, 1950, or barely a day which (sic) he
executed the deed of relinquishment on August 16,
1950, in Manila? . . . .

would be to require what even the
law does not. Indeed, even the
applicable law itself (Sec. 337,
National Internal Revenue Code)
requires that all records of
corporations be preserved for only a
maximum of five years.

Third, on the other hand, NASIPIT has in his
possession a sort of "order" upon itself — (the deed
of relinquishment wherein he (sic) obligated itself to
reimburse or pay Villaflor the . . . consideration of the
relinquishment upon its receipt of the order of award)
for the payment of the aforesaid amount the moment
the order of award is issued to it. It is reasonable to
presume that NASIPIT has paid the Five Thousand
(P5,000.00) Pesos to Villaflor.

NASIPIT may well have added that at any rate while
"there are transactions where the proper evidence is
impossible or extremely difficult to produce after the
lapse of time . . . the law creates presumptions of
regularity in favor of such transactions (20 Am. Jur.
232) so that when the basic fact is established in an
action the existence of the presumed fact must be
assumed by force of law. (Rule 13, Uniform Rules of
Evidence; 9 Wigmore, Sec. 2491).

A person in possession of an order
on himself for the payment of
money, or the delivery of anything,
has paid the money or delivered the
thing accordingly. (Section 5(k) B131 Revised Rules of Court.

Anent Villaflor's claim that the 140-hectare land
relinquished and awarded to NASIPIT is his private
property, little (need) be said. . . . . The tracks of land
referred to therein are not identical to the lands
awarded to NASIPIT. Even in the assumption that
the lands mentioned in the deeds of transfer are the
same as the 140-hectare area awarded to NASIPIT,
their purchase by Villaflor (or) the latter's occupation
of the same did not change the character of the land
from that of public land to a private property. The
provision of the law is specific that public lands can
only be acquired in the manner provided for therein
and not otherwise (Sec. 11, C.A. No. 141, as
amended). The records show that Villaflor had
applied for the purchase of the lands in question with
this Office (Sales Application No. V-807) on
December 2, 1948. . . . . There is a condition in the
sales application signed by Villaflor to the effect that
he recognizes that the land covered by the same is
of public domain and any and all rights he may have
with respect thereto by virtue of continuous
occupation and cultivation are relinquished to the

It should be noted that NASIPIT did not produce
direct evidence as proof of its payment of the Five
Thousand (P5,000.00) Pesos to Villaflor. Nasipit's
explanation on this point is found satisfactory.
. . . (I)t was virtually impossible for
NASIPIT, after the lapse of the
intervening 24 years, to be able to
cope up with all the records
necessary to show that the
consideration for the deed of
relinquishment had been fully paid.
To expect NASIPIT to keep intact all
records pertinent to the transaction
for the whole quarter of a century

17

Government (paragraph 6, Sales Application No. V807 . . .) of which Villaflor is very much aware. It also
appears that Villaflor had paid for the publication
fees appurtenant to the sale of the land. He
participated in the public auction where he was
declared the successful bidder. He had fully paid the
purchase prive (sic) thereof (sic). It would be a (sic)
height of absurdity for Villaflor to be buying that
which is owned by him if his claim of private
ownership thereof is to be believed. The most that
can be said is that his possession was merely that of
a sales applicant to when it had not been awarded
because he relinquished his interest therein in favor
of NASIPIT who (sic) filed a sales application
therefor.
xxx xxx xxx
. . . During the investigation proceedings, Villaflor
presented as his Exhibit "(sic)" (which NASIPIT
adopted as its own exhibit and had it marked in
evidence as Exhibit "1") a duly notarized "agreement
to Sell" dated July 7, 1948, by virtue of which Villaflor
undertook to sell to Nasipit the tracts of land
mentioned therein, for a consideration of TwentyFour Thousand (P24,000.00) Pesos. Said tracts of
land have been verified to be identical to the parcels
of land formerly applied for by Villaflor and which the
latter had relinquished in favor of NASIPIT under a
deed of relinquishment executed by him on August
16, 1950. In another document executed on
December 7, 1948 . . . Villaflor as "FIRST PARTY"
and NASIPIT as "SECOND PARTY" confirmed the
"Agreement to Sell" of July 7, 1948, which was
maintained "in full force and effect with all its terms
and conditions . . ." (Exh. "38-A"); and that "for and
in consideration of . . . TWENTY FOUR THOUSAND
(P24,000.00) PESOS that the Second Party shall
pay to the First Party . . . the First Party hereby sells,
transfers and conveys unto the Second Party . . . his

right interest and participation under and by virtue of
the Sales Application No. V-807" and, in its
paragraph 8, it made stipulations as to when part of
the said consideration . . . was paid and when the
balance was to be paid, to wit:
a) the amount of SEVEN
THOUSAND . . . PESOS has
already been paid by the Second
Party to the First Party upon the
execution of the Agreement to Sell,
on July 17, 1948;
b) the amount of FIVE
THOUSAND . . . PESOS shall be
paid upon the signing of this present
agreement; and
c) the amount of TWELVE
THOUSAND . . . PESOS, shall be
paid upon the execution by the First
Party of the Absolute Sale of the
Two parcels of land in question in
favor of the Second Party of the
Certificate of Ownership of the said
two parcels of land. (Exh. 38-B).
(Emphasis ours)
It is thus clear from this subsequent document
marked Exhibit "38 ANALCO" that of the
consideration of the "Agreement to Sell" dated July
7, 1948, involving the 140-hectare area relinquished
by Villaflor in favor of NASIPIT, in the amount of
Twenty-Four Thousand (P24,000.00) Pesos:
(1) the amount of Seven Thousand (P7,000.00)
Pesos was already paid upon the execution of the
"Agreement to Sell" on July 7, 1948, receipt of which
incidentally was admitted by Villaflor in the document
of December 7, 1948;

18

(2) the amount of Five Thousand (P5,000.00)
Pesos was paid when said document was signed by
Vicente J. Villaflor as the First Party and Nasipit thru
its President, as the Second Party, on December 7,
1948; and
(3) the balance of Twelve Thousand (P12,000.00)
Pesos to be paid upon the execution by the First
Party of the Absolute Deed of Sale of the two parcels
of land in favor of the Second Party, and upon
delivery to the Second Party of the Certificate of
Ownership of the said two parcels of land.
Villaflor contends that NASIPIT could not have paid
Villaflor the balance of Twelve Thousand
(P12,000.00) Pesos . . . consideration in the
Agreement to Sell will only be paid to applicantassignor (referring to Villaflor) upon obtaining a
Torrens Title in his favor over the 140-hectare of land
applied for and upon execution by him of a Deed of
Absolute Sale in favor of Nasipit Lumber Company,
Inc. . . . . Inasmuch as applicant-assignor was not
able to obtain a Torrens Title over the land in
question he could not execute an absolute Deed of
(sic) Nasipit Lumber Co., Inc. Hence, the Agreement
to Sell was not carried out and no Twelve Thousand
(P12,000.00) Pesos was overpaid either to the
applicant-assignor, much less to Howard J. Nell
Company. (See MEMORANDUM FOR THE
APPLICANT-ASSIGNOR, dated January 5, 1977). . .
.
. . . Villaflor did not adduce evidence in support of his
claim that he had not been paid the . . . (P12,000.00)
. . . consideration of the Agreement to Sell dated July
7, 1948 (Exh. "38 NALCO") beyond his mere
uncorroborated assertions. On the other hand, there
is strong evidence to show that said Twelve
Thousand (P12,000.00) Pesos had been paid by
(private respondent) to Edward J. Nell Company by

virtue of the Deed of Assignment of Credit executed
by Villaflor (Exh. "41 NALCO") for the credit of the
latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT
who is in a position to know the facts, testified for
NASIPIT. He described that it was he who notarized
the "Agreement to Sell" (Exh. "F"); that he knew
about the execution of the document of December 7,
1948 (Exh. "38") confirming the said "Agreement to
Sell" having been previously consulted thereon by
Jose Fernandez, who signed said document on
behalf of NASIPIT . . . that subsequently, in January
1949, Villaflor executed a Deed of Assignment of
credit in favor of Edward J. Nell Company (Exh. "41
NALCO") whereby Villaflor ceded to the latter his
receivable for NASIPIT corresponding to the
remaining balance in the amount of Twelve
Thousand . . . Pesos of the total consideration . . .
stipulated in both the "Agreement to Sell" (Exh. "F")
and the document dated December 7, 1948 (Exh.
"39");
. . . . He further testified that the said assignment of
credit was communicated to (private respondent)
under cover letter dated January 24, 1949 (Exh. "41A") and not long thereafter, by virtue of the said
assignment of credit, (private respondent) paid the
balance of Twelve Thousand . . . due to Villaflor to
Edward J. Nell Company . . . . Atty. Banaag's
aforesaid testimony stand unrebutted; hence, must
be given full weight and credit. . . . Villaflor and his
counsel were present when Atty. Banaag's foregoing
testimony was Villaflor did not demur, nor did he
rebut the same, despite having been accorded full
opportunity to do so.
xxx xxx xxx
Having found that both the Five Thousand . . .
consideration of the deed of Relinquishment . . . and

19

that the remaining balance of
. . . (P12,000.00) to complete the Twenty-Four
Thousand (P24,000.00) Pesos consideration of both
the Agreement to Sell dated July 7, 1948, and the
document, dated December 7, 1948, executed by
the former in favor of the latter, have been paid
Villaflor the issue on prescription and laches
becomes academic and needs no further discussion.
But more than all the questions thus far raised and
resolved is the question whether a sales patent can
be issued to NASIPIT for the 140-hectare area
awarded to it in the light of Section 11, Article XIV of
the new Constitution which provides in its pertinent
portion to wit:
. . . No private corporation or
association may hold alienable land
of the public domain except by lease
not to exceed one thousand
hectares in area . . . .
The Secretary of Justice had previous occasion to
rule on this point in his opinion No. 140, s. 1974.
Said the Honorable Justice Secretary:
On the second question, (referring
to the questions when may a public
land be considered to have been
acquired by purchase before the
effectivity of the new Constitution
posed by the Director of Lands in
his query on the effect on pending
applications for the issuance of
sales patent in the light of Section
11, Art. XIV of the New Constitution
aforecited), you refer to this Office's
Opinion No. 64 series of 1973 in
which I stated:

On the other hand, with respect to
sales applications ready for
issuance of sales patent, it is my
opinion that where the applicant
had, before the Constitution took
effect, fully complied with all this
obligations under the Public Land
Act in order to entitle him to a Sales
patent, there would be no legal or
equitable justification for refusing to
issue or release the sales patent.
With respect to the point as to when the Sales
applicant has complied with all the terms and
conditions which would entitle him to a sales patent,
the herein above Secretary of Justice went on:
That as to when the applicant has
complied with all the terms and
conditions which would entitle him to
a patent is a questioned (sic) fact
which your office would be in the
best position to determine. However,
relating this to the procedure for the
processing of applications
mentioned above, I think that as the
applicant has fulfilled the
construction/cultivation
requirements and has fully paid the
purchase price, he should be
deemed to have acquired by
purchase the particular tract of land
and (sic) the area (sic) in the
provision in question of the new
constitution would not apply.
From the decision of the Director of Lands, Villaflor filed a Motion for
Reconsideration which was considered as an Appeal M.N.R. Case
4341, to the Ministry of Natural Resources.

20

On June 6, 1979, the Minister of Natural Resources rendered a
Decision (exh. 9), 15 dismissing the appeal and affirming the decision
of the Director of Lands, pertinent portions of which reads:

recognized by law. (Lee Hong Hok,
et al. vs. David, et al., L-30389,
December 27, 1972, 48 SCRA 379.)

After a careful study of the records and the
arguments of the parties, we believe that the appeal
is not well taken.

It is well-settled that all lands remain part of the
public domain unless severed therefrom by state
grant or unless alienated in accordance with law.

Firstly, the area in dispute is not the private property
of appellant.

We, therefore, believe that the aforesaid deeds of
sale do not constitute clear and convincing evidence
to establish that the contested area is of private
ownership. Hence, the property must be held to be
public domain.

The evidence adduced by appellant to establish his
claim of ownership over the subject area consists of
deeds of absolute sale executed in his favor on
January 16, and February 15, 1940, by four (4)
different persons, namely, Cirilo Piencenaves,
Fermin Balobo, Claudio Otero and Hermogenes
Patete.
However, an examination of the technical
descriptions of the tracts of land subject of the deeds
of sale will disclose that said parcels are not identical
to, and do not tally with, the area in controversy.
It is a basic assumption of our policy
that lands of whatever classification
belong to the state. Unless alienated
in accordance with law, it retains its
rights over the same as dominus,
(Santiago vs. de los Santos, L20241, November 22, 1974, 61
SCRA 152).
For, it is well-settled that no public
land can be acquired by private
persons without any grant, express
or implied from the government. It is
indispensable then that there be
showing of title from the state or any
other mode of acquisition

"There being no evidence whatever
that the property in question was
ever acquired by the applicants or
their ancestors either by
composition title from the Spanish
Government or by possessory
information title or by any other
means for the acquisition of public
lands, the property must be held to
be public domain." (Lee Hong Hok,
et al., vs. David , et al., L-30389
December 27, 1972, 48 SCRA 378379 citing Heirs of Datu Pendatun
vs. Director of Lands; see also
Director of Lands vs. Reyes, L27594, November 28, 1975, 68
SCRA 177).
Be that as it may, appellant, by filing a sales
application over the controverted land,
acknowledged unequivocably [sic] that the same is
not his private property.
"As such sales applicant, appellant
manifestly acknowledged that he
does not own the land and that the

21

same is a public land under the
administration of the Bureau of
Lands, to which the application was
submitted, . . . All of its acts prior
thereof, including its real estate tax
declarations, characterized its
possessions of the land as that of a
"sales applicant" and consequently,
as one who expects to buy it, but
has not as yet done so, and is not,
therefore, its owner." (Palawan
Agricultural and Industrial Co., Inc.
vs. Director of Lands, L-25914,
March 21, 1972, 44 SCRA 20, 21).
Secondly, appellant's alleged failure to pay the
consideration stipulated in the deed of
relinquishment neither converts said deed into one
without a cause or consideration nor ipso
facto rescinds the same. Appellant, though, has the
right to demand payment with legal interest for the
delay or to demand rescission.

Implementing the aforesaid Opinion No. 64 of the
Secretary of Justice, the then Secretary of
Agriculture and Natural Resources issued a
memorandum, dated February 18, 1974, which
pertinently reads as follows:
In the implementation of the
foregoing opinion, sales application
of private individuals covering areas
in excess of 24 hectares and those
of corporations, associations, or
partnership which fall under any of
the following categories shall be
given due course and issued
patents, to wit:
1. Sales application
for fishponds and
for agricultural
purposes (SFA, SA
and IGPSA)
wherein prior to
January 17, 1973;

xxx xxx xxx
However, appellant's cause of action, either for
specific performance or rescission of contract, with
damages, lies within the jurisdiction of civil courts,
not with administrative bodies.
xxx xxx xxx
Lastly, appellee has acquired a vested right to the
subject area and, therefore, is deemed not affected
by the new constitutional provision that no private
corporation may hold alienable land of the public
domain except by lease.
xxx xxx xxx

a.
the
lan
d
cov
ere
d
ther
eby
was
aw
ard
ed;
b.
culti

22

vati
on
req
uire
me
nts
of
law
wer
e
co
mpl
ied
with
as
sho
wn
by
inv
esti
gati
on
rep
orts
sub
mitt
ed
prio
r to
Jan
uar
y
17,
197
3;
c.
lan
d
was

sur
vey
ed
and
sur
vey
retu
rns
alre
ady
sub
mitt
ed
to
the
Dir
ect
or
of
Lan
ds
for
veri
fica
tion
and
app
rov
al;
and
d.
pur
cha
sed
pric
e
was
fully

23

pai
d.
From the records, it is evident that the aforestated
requisites have been complied with by appellee long
before January 17, 1973, the effectivity of the New
Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the
purchase price was fully paid on July 26, 1951, the
cultivation requirements were complied with as per
investigation report dated December 31, 1949, and
the land was surveyed under Pls-97.
16

On July 6, 1978, petitioner filed a complaint in the trial court for
"Declaration of Nullity of Contract (Deed of Relinquishment of Rights),
Recovery of Possession (of two parcels of land subject of the contract), and
Damages" at about the same time that he appealed the decision of the
Minister of Natural Resources to the Office of the President.
On January 28, 1983, petitioner died. The trial court ordered his widow,
Lourdes D. Villaflor, to be substituted as petitioner. After trial in due course,
the then Court of First Instance of Agusan del Norte and Butuan City, Branch
III, 17 dismissed the complaint on the grounds that: (1) petitioner admitted the
due execution and genuineness of the contract and was estopped from
proving its nullity, (2) the verbal lease agreements were unenforceable under
Article 1403 (2) (e) of the Civil Code, and (3) his causes of action were
barred by extinctive prescription and/or laches. It ruled that there was
prescription and/or laches because the alleged verbal lease ended in 1966,
but the action was filed only on January 6, 1978. The six-year period within
which to file an action on an oral contract per Article 1145 (1) of the Civil
Code expired in 1972. The decretal portion 18 of the trial court's decision
reads:
WHEREFORE, the foregoing premises duly considered, judgment is
hereby rendered in favor of the defendant and against the plaintiff.
Consequently, this case is hereby ordered DISMISSED. The
defendant is hereby declared the lawful actual physical possessoroccupant and having a better right of possession over the two (2)
parcels of land in litigation described in par. 1.2 of the complaint as
Parcel I and Parcel II, containing a total area of One Hundred Sixty

(160) hectares, and was then the subject of the Sales Application No.
V-807 of the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to 421-A, Record),
and now of the Sales Application No. 807, Entry No. V-407 of the
defendant Nasipit Lumber Company (Exhibit Y, pp. 357-358,
Record). The Agreements to Sell Real Rights, Exhibits 2 to 2-C, 3 to
3-B, and the Deed of Relinquishment of Rights, Exhibits N to N-1,
over the two parcels of land in litigation are hereby declared binding
between the plaintiff and the defendant, their successors and
assigns.
Double the costs against the plaintiff.
The heirs of petitioner appealed to Respondent Court of Appeals 19 which,
however, rendered judgment against petitioner via the assailed Decision
dated September 27, 1990 finding petitioner's prayers — (1) for the
declaration of nullity of the deed of relinquishment, (2) for the eviction of
private respondent from the property and (3) for the declaration of petitioner's
heirs as owners — to be without basis. The decretal portion 20 of the assailed
49-page, single-spaced Decision curtly reads:
WHEREFORE, the Decision appealed from, is hereby AFFIRMED,
with costs against plaintiff-appellants.
Not satisfied, petitioner's heirs filed the instant 57-page petition for review
dated December 7, 1990. In a Resolution dated June 23, 1991, the Court
denied this petition "for being late." On reconsideration — upon plea of
counsel that petitioners were "poor" and that a full decision on the merits
should be rendered — the Court reinstated the petition and required
comment from private respondent. Eventually, the petition was granted due
course and the parties thus filed their respective memoranda.
The Issues
Petitioner, through his heirs, attributes the following errors to the Court of
Appeals:
I. Are the findings of the Court of Appeals conclusive and binding
upon the Supreme Court?

24

II. Are the findings of the Court of Appeals fortified by the similar
findings made by the Director of Lands and the Minister of Natural
Resources (as well as by the Office of the President)?

(1) Did the Court of Appeals err in adopting or relying on the factual
findings of the Bureau of Lands, especially those affirmed by the
Minister (now Secretary) of Natural Resources and the trial court?

III. Was there "forum shopping?".

(2) Did the Court of Appeals err in upholding the validity of the
contracts to sell and the deed of relinquishment? Otherwise stated,
did the Court of Appeals err in finding the deed of relinquishment of
rights and the contracts to sell valid, and not simulated or fictitious?

IV. Are the findings of facts of the Court of Appeals and the trial court
supported by the evidence and the law?
V. Are the findings of the Court of Appeals supported by the very
terms of the contracts which were under consideration by the said
court?

(3) Is the private respondent qualified to acquire title over the
disputed property?
The Court's Ruling

VI. Did the Court of Appeals, in construing the subject contracts,
consider the contemporaneous and subsequent act of the parties
pursuant to article 1371 of the Civil Code?
VII. Did the Court of Appeals consider the fact and the unrefuted
claim of Villaflor that he never knew of the award in favor of Nasipit?
VIII. Did the Court of Appeals correctly apply the rules on evidence in
its findings that Villaflor was paid the P5,000.00 consideration
because Villaflor did not adduce any proof that he was not paid?
IX. Is the Court of Appeals' conclusion that the contract is not
simulated or fictitious simply because it is genuine and duly executed
by the parties, supported by logic or the law?
X. May the prestations in a contract agreeing to transfer certain
rights constitute estoppel when this very contract is the subject of an
action for annulment on the ground that it is fictitious?
XI. Is the Court of Appeals' conclusion that the lease agreement
between Villaflor is verbal and therefore, unenforceable supported by
the evidence and the law?
After a review of the various submissions of the parties, particularly those of
petitioner, this Court believes and holds that the issues can be condensed
into three as follows:

The petition is bereft of merit. It basically questions the sufficiency of the
evidence relied upon by the Court of Appeals, alleging that public
respondent's factual findings were based on speculations, surmises and
conjectures. Petitioner insists that a review of those findings is in order
because they were allegedly (1) rooted, not on specific evidence, but on
conclusions and inferences of the Director of Lands which were, in turn,
based on misapprehension of the applicable law on simulated contracts; (2)
arrived at whimsically — totally ignoring the substantial and admitted fact that
petitioner was not notified of the award in favor of private respondent; and (3)
grounded on errors and misapprehensions, particularly those relating to the
identity of the disputed area.
First Issue: Primary Jurisdiction of the Director of Lands and
Finality of Factual Findings of the Court of Appeals
Underlying the rulings of the trial and appellate courts is the doctrine of
primary jurisdiction; i.e., courts cannot and will not resolve a controversy
involving a question which is within the jurisdiction of an administrative
tribunal, especially where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate
matters of fact. 21
In recent years, it has been the jurisprudential trend to apply this doctrine to
cases involving matters that demand the special competence of
administrative agencies even if the question involved is also judicial in

25

character. It applies "where a claim is originally cognizable in the courts, and
comes into play whenever enforcement of the claim requires the resolution of
issues which, under a regulatory scheme, have been placed within the
special competence of an administrative body; in such case, the judicial
process is suspended pending referral of such issues to the administrative
body for its view." 22
In cases where the doctrine of primary jurisdiction is clearly applicable, the
court cannot arrogate unto itself the authority to resolve a controversy, the
jurisdiction over which is initially lodged with an administrative body of special
competence. 23 In Machete vs. Court of Appeals, the Court upheld the
primary jurisdiction of the Department of Agrarian Reform Adjudicatory Board
(DARAB) in an agrarian dispute over the payment of back rentals under a
leasehold contract. 24 In Concerned Officials of the Metropolitan Waterworks
and Sewerage System vs. Vasquez, 25 the Court recognized that the MWSS
was in the best position to evaluate and to decide which bid for a waterworks
project was compatible with its development plan.
The rationale underlying the doctrine of primary jurisdiction finds application
in this case, since the questions on the identity of the land in dispute and the
factual qualification of private respondent as an awardee of a sales
application require a technical determination by the Bureau of Lands as the
administrative agency with the expertise to determine such matters. Because
these issues preclude prior judicial determination, it behooves the courts to
stand aside even when they apparently have statutory power to proceed, in
recognition of the primary jurisdiction of the administrative agency. 26
One thrust of the multiplication of administrative agencies is that the
interpretation of contracts and the determination of private rights
thereunder is no longer a uniquely judicial function, exercisable only
by our regular courts. 27
Petitioner initiated his action with a protest before the Bureau of Lands and
followed it through in the Ministry of Natural Resources and thereafter in the
Office of the President. Consistent with the doctrine of primary jurisdiction,
the trial and the appellate courts had reason to rely on the findings of these
specialized administrative bodies.
The primary jurisdiction of the director of lands and the minister of natural
resources over the issues regarding the identity of the disputed land and the

qualification of an awardee of a sales patent is established by Sections 3 and
4 of Commonwealth Act No. 141, also known as the Public Land Act:
Sec. 3. The Secretary of Agriculture and Commerce (now Secretary
of Natural Resources) shall be the executive officer charged with
carrying out the provisions of this Act through the Director of Lands,
who shall act under his immediate control.
Sec. 4. Subject to said control, the Director of Lands shall have direct
executive control of the survey, classification, lease, sale or any other
form of concession or disposition and management of the lands of
the public domain, and his decision as to questions of fact shall be
conclusive when approved by the Secretary of Agriculture and
Commerce.
Thus, the Director of Lands, in his decision, said: 28
. . . It is merely whether or not Villaflor has been paid the Five
Thousand (P5,000.00) Pesos stipulated consideration of the deed of
relinquishment made by him without touching on the nature of the
deed of relinquishment. The administration and disposition of public
lands is primarily vested in the Director of Lands and ultimately with
the Secretary of Agriculture and Natural Resources (now Secretary
of Natural Resources), and to this end —
Our Supreme Court has recognized that the Director
of Lands is a quasi-judicial officer who passes on
issues of mixed facts and law (Ortua vs. Bingson
Encarnacion, 59 Phil 440). Sections 3 and 4 of the
Public Land Law thus mean that the Secretary of
Agriculture and Natural Resources shall be the final
arbiter on questions of fact in public land conflicts
(Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs.
Apostol, 52 Phil 442).
The ruling of this Office in its order dated September 10, 1975, is
worth reiterating, thus:
. . . it is our opinion that in the exercise of his power
of executive control, administrative disposition and

26

allegation of public land, the Director of Lands
should entertain the protest of Villaflor and conduct
formal investigation . . . to determine the following
points: (a) whether or not the Nasipit Lumber
Company, Inc. paid or reimbursed to Villaflor the
consideration of the rights in the amount of
P5,000.00 and what evidence the company has to
prove payment, the relinquishment of rights being
part of the administrative process in the disposition
of the land in question . . . .
. . . . Besides, the authority of the
Director of Lands to pass upon and
determine questions considered
inherent in or essential to the
efficient exercise of his powers like
the incident at issue, i.e. , whether
Villaflor had been paid or not, is
conceded bylaw.
Reliance by the trial and the appellate courts on the factual findings of the
Director of Lands and the Minister of Natural Resources is not misplaced. By
reason of the special knowledge and expertise of said administrative
agencies over matters falling under their jurisdiction, they are in a better
position to pass judgment thereon; thus, their findings of fact in that regard
are generally accorded great respect, if not finality, 29 by the courts. 30 The
findings of fact of an administrative agency must be respected as long as
they are supported by substantial evidence, even if such evidence might not
be overwhelming or even preponderant. It is not the task of an appellate
court to weigh once more the evidence submitted before the administrative
body and to substitute its own judgment for that of the administrative agency
in respect of sufficiency of evidence. 31
However, the rule that factual findings of an administrative agency are
accorded respect and even finality by courts admits of exceptions. This is
true also in assessing factual findings of lower courts. 32 It is incumbent on
the petitioner to show that the resolution of the factual issues by the
administrative agency and/or by the trial court falls under any of the
exceptions. Otherwise, this Court will not disturb such findings. 33

We mention and quote extensively from the rulings of the Bureau of Lands
and the Minister of Natural Resources because the points, questions and
issues raised by petitioner before the trial court, the appellate court and now
before this Court are basically the same as those brought up before the
aforesaid specialized administrative agencies. As held by the Court of
Appeals: 34
We find that the contentious points raised by appellant in this action,
are substantially the same matters he raised in BL Claim No. 873
(N). In both actions, he claimed private ownership over the land in
question, assailed the validity and effectiveness of the Deed of
Relinquishment of Rights he executed in August 16, 1950, that he
had not been paid the P5,000.00 consideration, the value of the
improvements he introduced on the land and other expenses
incurred by him.
In this instance, both the principle of primary jurisdiction of administrative
agencies and the doctrine of finality of factual findings of the trial courts,
particularly when affirmed by the Court of Appeals as in this case, militate
against petitioner's cause. Indeed, petitioner has not given us sufficient
reason to deviate from them.
Land in Dispute Is Public Land
Petitioner argues that even if the technical description in the deeds of sale
and those in the sales application were not identical, the area in dispute
remains his private property. He alleges that the deeds did not contain any
technical description, as they were executed prior to the survey conducted by
the Bureau of Lands; thus, the properties sold were merely described by
reference to natural boundaries. His private ownership thereof was also
allegedly attested to by private respondent's former field manager in the
latter's February 22, 1950 letter, which contained an admission that the land
leased by private respondent was covered by the sales application.
This contention is specious. The lack of technical description did not prove
that the finding of the Director of Lands lacked substantial evidence. Here,
the issue is not so much whether the subject land is identical with the
property purchased by petitioner. The issue, rather, is whether the land
covered by the sales application is private or public land. In his sales

27

application, petitioner expressly admitted that said property was public land.
This is formidable evidence as it amounts to an admission against interest.
In the exercise of his primary jurisdiction over the issue, Director of Lands
Casanova ruled that the land was public: 35
. . . Even (o)n the assumption that the lands mentioned in the deeds
of transfer are the same as the 140-hectare area awarded to Nasipit,
their purchase by Villaflor (or) the latter's occupation of the same did
not change the character of the land from that of public land to a
private property. The provision of the law is specific that public lands
can only be acquired in the manner provided for therein and not
otherwise (Sec. 11, C.A. No. 141, as amended). The records show
that Villaflor had applied for the purchase of lands in question with
this Office (Sales Application No. V-807) on December 2, 1948. . . .
There is a condition in the sales application . . . to the effect that he
recognizes that the land covered by the same is of public domain
and any and all rights he may have with respect thereto by virtue of
continuous occupation and cultivation are relinquished to the
Government (paragraph 6, Sales Application No. V-807 of Vicente J.
Villaflor, p. 21, carpeta) of which Villaflor is very much aware. It also
appears that Villaflor had paid for the publication fees appurtenant to
the sale of the land. He participated in the public auction where he
was declared the successful bidder. He had fully paid the purchase
prive (sic) thereor (sic). It would be a (sic) height of absurdity for
Villaflor to be buying that which is owned by him if his claim of private
ownership thereof is to be
believed. . . . .
This finding was affirmed by the Minister of Natural Resources: 36
Firstly, the area in dispute is not the private property of appellant
(herein petitioner).
The evidence adduced by (petitioner) to establish his claim of
ownership over the subject area consists of deeds of absolute sale
executed in his favor . . . .

However, an examination of the technical descriptions of the tracts of
land subject of the deeds of sale will disclose that said parcels are
not identical to, and do not tally with, the area in controversy.
It is a basic assumption of our policy that lands of
whatever classification belong to the state. Unless
alienated in accordance with law, it retains its rights
over the same as dominus. (Santiago vs. de los
Santos, L-20241, November 22, 1974, 61 SCRA
152).
For it is well-settled that no public land can be
acquired by private persons without any grant,
express or implied from the government. It is
indispensable then that there be showing of title from
the state or any other mode of acquisition
recognized by law. (Lee Hong Hok, et al. vs. David,
et al., L-30389, December 27, 1972, 48 SCRA 379).
xxx xxx xxx
We, therefore, believe that the aforesaid deeds of sale do not
constitute clear and convincing evidence to establish that the
contested area is of private ownership. Hence, the property must be
held to be public domain.
There being no evidence whatever that the property
in question was ever acquired by the applicants or
their ancestors either by composition title from the
Spanish Government or by possessory information
title or by any other means for the acquisition of
public lands, the property must be held to be public
domain.
Be that as it may, [petitioner], by filing a sales application over the
controverted land, acknowledged unequivocably [sic] that the same
is not his private property.
As such sales applicant manifestly acknowledged
that he does not own the land and that the same is a

28

public land under the administration of the Bureau of
Lands, to which the application was submitted, . . .
All of its acts prior thereof, including its real estate
tax declarations, characterized its possessions of the
land as that of a "sales applicant". And consequently,
as one who expects to buy it, has not as yet done
so, and is not, therefore, its owner." (Palawan
Agricultural and Industrial Co., Inc. vs. Director of
Lands, L-25914, March 21, 1972, 44 SCRA 15).
Clearly, this issue falls under the primary jurisdiction of the Director of Lands
because its resolution requires "survey, classification, . . . disposition and
management of the lands of the public domain." It follows that his rulings
deserve great respect. As petitioner failed to show that this factual finding of
the Director of Lands was unsupported by substantial evidence, it assumes
finality. Thus, both the trial and the appellate courts correctly relied on such
finding. 37 We can do no less.

that private respondent was not applying for said parcels but was interested
only in the two hectares it had leased, and that private respondent supported
petitioner's application for a patent.
Petitioner explains that the Agreement to Sell dated December 7, 1948 did
not and could not transfer ownership because paragraph 8 (c) thereof
stipulates that the "balance of twelve thousand pesos (12,000.00) shall be
paid upon the execution by the First Party [petitioner] of the Absolute Deed of
Sale of the two parcels of land in question in favor of the Second Party, and
upon delivery to the Second Party [private respondent] of the Certificate of
Ownership of the said two parcels of land." The mortgage provisions in
paragraphs 6 and 7 of the agreement state that the P7,000.00 and P5,000.00
were "earnest money or a loan with antichresis by the free occupancy and
use given to Nasipit of the 140 hectares of land not anymore as a lessee." If
the agreement to sell transferred ownership to Nasipit, then why was it
necessary to require petitioner, in a second agreement, to mortgage his
property in the event of nonfulfillment of the prestations in the first
agreement?

Second Issue: No Simulation of Contracts Proven
Petitioner insists that contrary to Article 1371 38 of the Civil Code, Respondent
Court erroneously ignored the contemporaneous and subsequent acts of the
parties; hence, it failed to ascertain their true intentions. However, the rule on
the interpretation of contracts that was alluded to by petitioner is used in
affirming, not negating, their validity. Thus, Article 1373, 39 which is a conjunct
of Article 1371, provides that, if the instrument is susceptible of two or more
interpretations, the interpretation which will make it valid and effectual should
be adopted. In this light, it is not difficult to understand that the legal basis
urged by petitioner does not support his allegation that the contracts to sell
and the deed of relinquishment are simulated and fictitious. Properly
understood, such rules on interpretation even negate petitioner's thesis.
But let us indulge the petitioner awhile and determine whether the cited
contemporaneous and subsequent acts of the parties support his allegation
of simulation. Petitioner asserts that the relinquishment of rights and the
agreements to sell were simulated because, first, the language and terms of
said contracts negated private respondent's acquisition of ownership of the
land in issue; and second, contemporaneous and subsequent
communications between him and private respondent allegedly showed that
the latter admitted that petitioner owned and occupied the two parcels; i.e.,

True, the agreement to sell did not absolutely transfer ownership of the land
to private respondent. This fact, however, does not show that the agreement
was simulated. Petitioner's delivery of the Certificate of Ownership and
execution of the deed of absolute sale were suspensive conditions, which
gave rise to a corresponding obligation on the part of the private
respondent, i.e., the payment of the last installment of the consideration
mentioned in the December 7, 1948 Agreement. Such conditions did not
affect the perfection of the contract or prove simulation. Neither did the
mortgage.
Simulation occurs when an apparent contract is a declaration of a fictitious
will, deliberately made by agreement of the parties, in order to produce, for
the purpose of deception, the appearance of a juridical act which does not
exist or is different from that which was really executed. 40 Such an intention
is not apparent in the agreements. The intent to sell, on the other hand, is as
clear as daylight.
Petitioner alleges further that the deed of relinquishment of right did not give
full effect to the two agreements to sell, because the preliminary clauses of
the deed allegedly served only to give private respondent an interest in the

29

property as a future owner thereof and to enable respondent to follow up
petitioner's sales application.
We disagree. Such an intention is not indicated in the deed. On the contrary,
a real and factual sale is evident in paragraph 6 thereof, which states: "That
the Nasipit Lumber Co., Inc., . . . is very much interested in acquiring the land
covered by the aforecited application to be used for purposes of mechanized,
farming" and the penultimate paragraph stating: ". . . VICENTE J.
VILLAFLOR, hereby voluntarily renounce and relinquish whatever rights to,
and interests I have in the land covered by my above-mentioned application
in favor of the Nasipit Lumber Co., Inc."
We also hold that no simulation is shown either in the letter, dated December
3, 1973, of the former field manager of private respondent, George Mear. A
pertinent portion of the letter reads:
(a)s regards your property at Acacia, San Mateo, I recall that we
made some sort of agreement for the occupancy, but I no longer
recall the details and I had forgotten whether or not we actually did
occupy your land. But if, as you say, we did occupy it, then I am sure
that the Company is obligated to pay a rental.
The letter did not contain any express admission that private respondent was
still leasing the land from petitioner as of that date. According to Mear, he
could no longer recall the details of his agreement with petitioner. This cannot
be read as evidence of the simulation of either the deed of relinquishment or
the agreements to sell. It is evidence merely of an honest lack of recollection.
Petitioner also alleges that he continued to pay realty taxes on the land even
after the execution of said contracts. This is immaterial because payment of
realty taxes does not necessarily prove ownership, much less simulation of
said contracts. 41
Nonpayment of the Consideration
Did Not Prove Simulation
Petitioner insists that nonpayment of the consideration in the contracts
proves their simulation. We disagree. Nonpayment, at most, gives him only
the right to sue for collection. Generally, in a contract of sale, payment of the
price is a resolutory condition and the remedy of the seller is to exact

fulfillment or, in case of a substantial breach, to rescind the contract under
Article 1191 of the Civil Code. 42 However, failure to pay is not even a breach,
but merely an event which prevents the vendor's obligation to convey title
from acquiring binding force. 43
Petitioner also argues that Respondent Court violated evidentiary rules in
upholding the ruling of the Director of Lands that petitioner did not present
evidence to show private respondent's failure to pay him. We disagree. Prior
to the amendment of the rules on evidence on March 14, 1989, Section 1,
Rule 131, states that each party must prove his or her own affirmative
allegations. 44 Thus, the burden of proof in any cause rested upon the party
who, as determined by the pleadings or the nature of the case, asserts the
affirmative of an issue and remains there until the termination of the
action. 45 Although nonpayment is a negative fact which need not be proved,
the party seeking payment is still required to prove the existence of the debt
and the fact that it is already due. 46
Petitioner showed the existence of the obligation with the presentation of the
contracts, but did not present any evidence that he demanded payment from
private respondent. The demand letters dated January 2 and 5, 1974 (Exhs.
"J" and "U"), adduced in evidence by petitioner, were for the payment of back
rentals, damages to improvements and reimbursement of acquisition costs
and realty taxes, not payment arising from the contract to sell.
Thus, we cannot fault Respondent Court for adopting the finding of the
Director of Lands that petitioner "offered no evidence to support his claim of
nonpayment beyond his own self-serving assertions," as he did not even
demand "payment, orally or in writing, of the five thousand (P5,000.00) pesos
which was supposed to be due him since August 17, 1950, the date when the
order of award was issued to Nasipit, and when his cause of action to
recover payment had accrued." Nonpayment of the consideration in the
contracts to sell or the deed of relinquishment was raised for the first time in
the protest filed with the Bureau of Lands on January 31, 1974. But this
protest letter was not the demand letter required by law.
Petitioner alleges that the assignment of credit and the letter of the former
field manager of private respondent are contemporaneous and subsequent
acts revealing the nonpayment of the consideration. He maintains that the
P12,000.00 credit assigned pertains to the P5,000.00 and P7,000.00 initial
payments in the December 7, 1948 Agreement, because the balance of

30

P12,000.00 was not yet "due and accruing." This is consistent, he argues,
with the representation that private respondent was not interested in filing a
sales application over the land in issue and that Nasipit was instead
supporting petitioner's application thereto in Mear's letter to the Director of
Lands dated February 22, 1950 (Exh. "X") 47
This argument is too strained to be acceptable. The assignment of credit did
not establish the nondelivery of theseinitial payments of the total
consideration. First, the assignment of credit happened on January 19, 1949,
or a month after the signing of the December 7, 1948 Agreement and almost
six months after the July 7, 1948 Agreement to Sell. Second, it does not
overcome the recitation in the Agreement of December 7, 1948: ". . . a) The
amount of SEVEN THOUSAND (P7,000.00) PESOS has already been paid
by the Second Party to the First Party upon the execution of the Agreement
to Sell, on July 7, 1948; b) The amount of FIVE THOUSAND (P5,000.00)
PESOS shall be paid upon the signing of this present agreement; . . . . "
Aside from these facts, the Director of Lands found evidence of greater
weight showing that payment was actually made: 48
. . . (T)here is strong evidence to show that said . . . (P12,000.00)
had been paid by NASIPIT to Edward J. Nell Company by virtue of
the Deed of Assignment of Credit executed by Villaflor (Exh. "41
NALCO") for the credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT . . . declared that
it was he who notarized the "Agreement to Sell" (Exh. "F"); . . . that
subsequently, in January 1949, Villaflor executed a Deed of
Assignment of credit in favor of Edward J. Nell Company (Exh. "41
NALCO") whereby Villaflor ceded to the latter his receivable for
NASIPIT corresponding to the remaining balance in the amount
of . . . (P12,000.00) . . . of the total consideration . . . . ; He further
testified that the said assignment . . . was communicated to NASIPIT
under cover letter dated January 24, 1949 (Exh. "41-A") and not long
thereafter, by virtue of the said assignment of credit, NASIPIT paid
the balance . . . to Edward J. Nell Company (p. 58, ibid). Atty.
Banaag's aforesaid testimony stand unrebutted; hence, must be
given full weight and credit.
xxx xxx xxx

The Director of Lands also found that there had been payment of the
consideration in the relinquishment of rights:49
On the other hand, there are strong and compelling reasons to
presume that Villaflor had already been paid the amount of Five
Thousand (P5,000.00) Pesos.
First, . . . What is surprising, however, is not so much his claims
consisting of gigantic amounts as his having forgotten to adduce
evidence to prove his claim of non-payment of the Five Thousand
(P5,000.00) Pesos during the investigation proceedings when he had
all the time and opportunity to do so. . . . . The fact that he did not
adduce or even attempt to adduce evidence in support thereof
shows either that he had no evidence to offer of that NASIPIT had
already paid him in fact. What is worse is that Villaflor did not even
bother to command payment, orally or in writing, of the Five
Thousand (P5,000.00) Pesos which was supposed to be due him
since August 17, 1950, the date when the order of award was issued
to Nasipit, and when his cause of action to recover payment had
accrued. The fact that he only made a command for payment on
January 31, 1974, when he filed his protest or twenty-four (24) years
later is immediately nugatory of his claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that the
order of award had already been issued to NASIPIT as he had gone
to Indonesia and he had been absent from the Philippines during all
those twenty-four (24) years. This of course taxes credulity. . . .
. . . It is more in keeping with the ordinary course of
things that he should have acquired information as
to what was transpiring in his affairs in Manila . . . .
Second, it should be understood that the condition that NASIPIT
should reimburse Villaflor the amount of Five Thousand (P5,000.00)
Pesos upon its receipt of the order of award was fulfilled as said
award was issued to NASIPIT on August 17, 1950. The said deed of
relinquishment was prepared and notarized in Manila with Villaflor
and NASIPIT signing the instrument also in Manila. Now, considering
that Villaflor is presumed to be more assiduous in following up with
the Bureau of Lands the expeditious issuance of the order of award

31

as the (consideration) would depend on the issuance of said order to
award NASIPIT, would it not be reasonable to believe that Villaflor
was at hand when the award was issued to NASIPIT on August 17,
1950, or barely a day which he executed the deed of relinquishment
on August 16, 1950, in Manila? . . . .

Thus, he cannot be expected to know the existence of and the amendments
to the later contracts. These circumstances explain the mistaken
representations, not misrepresentations, in said letter.

Third, on the other hand, NASIPIT has in his possession a sort of
"order" upon itself — (the deed of relinquishment wherein he(sic)
obligated itself to reimburse or pay Villaflor the . . . consideration of
the relinquishment upon its receipt of the order of award) for the
payment of the aforesaid amount the moment the order of award is
issued to it. It is reasonable to presume that NASIPIT has paid the
(consideration) to Villaflor.

Petitioner insists that private respondent suppressed evidence, pointing to
his not having been notified of the Order of Award dated August 17,
1950. 50 At the bottom of page 2 of the order, petitioner was not listed as one
of the parties who were to be furnished a copy by Director of Lands Jose P.
Dans. Petitioner also posits that Public Land Inspector Sulpicio A. Taeza
irregularly received the copies for both private respondent and the city
treasurer of Butuan City. The lack of notice for petitioner can be easily
explained. Plainly, petitioner was not entitled to said notice of award from the
Director of Lands, because by then, he had already relinquished his rights to
the disputed land in favor of private respondent. In the heading of the order,
he was referred to as sales applicant-assignor. In paragraph number 4, the
order stated that, on August 16, 1950, he relinquished his rights to the land
subject of the award to private respondent. From such date, the sales
application was considered to be a matter between the Bureau of Lands and
private respondent only. Considering these facts, the failure to give petitioner
a copy of the notice of the award cannot be considered as suppression of
evidence. 51Furthermore, this order was in fact available to petitioner and had
been referred to by him since January 31, 1974 when he filed his protest with
the Bureau of Lands. 52

xxx xxx xxx
. . . (I)t was virtually impossible for NASIPIT, after the lapse of the
intervening 24 years, to be able to cope up with all the records
necessary to show that the consideration for the deed of
relinquishment had been fully paid. To expect NASIPIT to keep intact
all records pertinent to the transaction for the whole quarter of a
century would be to require what even the law does not. Indeed,
even the applicable law itself (Sec. 337, National Internal Revenue
Code) requires that all records of corporations be preserved for only
a maximum of five years.
NASIPIT may well have added that at any rate while there are
transactions where the proper evidence is impossible or extremely
difficult to produce after the lapse of time . . . the law creates
presumptions of regularity in favor of such transactions (20 Am. Jur.
232) so that when the basic fact is established in an action the
existence of the presumed fact must be assumed by force of law.
(Rule 13, Uniform Rules of Evidence; 9 Wigmore, Sec. 2491).
The Court also notes that Mear's letter of February 22, 1950 was sent six
months prior to the execution of the deed of relinquishment of right. At the
time of its writing, private respondent had not perfected its ownership of the
land to be able to qualify as a sales applicant. Besides, although he was a
party to the July 7, 1948 Agreement to Sell, Mear was not a signatory to the
Deed of Relinquishment or to the December 7, 1948 Agreement to Sell.

Lack of Notice of the Award

Third Issue: Private Respondent Qualified
for an Award of Public Land
Petitioner asserts that private respondent was legally disqualified from
acquiring the parcels of land in question because it was not authorized by its
charter to acquire disposable public agricultural lands under Sections 121,
122 and 123 of the Public Land Act, prior to its amendment by P.D. No. 763.
We disagree. The requirements for a sales application under the Public Land
Act are: (1) the possession of the qualifications required by said Act (under
Section 29) and (2) the lack of the disqualifications mentioned therein (under
Sections 121, 122, and 123). However, the transfer of ownership via the two
agreements dated July 7 and December 7, 1948 and the relinquishment of
rights, being private contracts, were binding only between petitioner and
private respondent. The Public Land Act finds no relevance because the

32

disputed land was covered by said Act only after the issuance of the order of
award in favor of private respondent. Thus, the possession of any
disqualification by private respondent under said Act is immaterial to the
private contracts between the parties thereto. (We are not, however,
suggesting a departure from the rule that laws are deemed written in
contracts.) Consideration of said provisions of the Act will further show their
inapplicability to these contracts. Section 121 of the Act pertains to
acquisitions of public land by a corporation from a grantee, but petitioner
never became a grantee of the disputed land. On the other hand, private
respondent itself was the direct grantee. Sections 122 and 123 disqualify
corporations, which are not authorized by their charter, from acquiring public
land; the records do not show that private respondent was not so authorized
under its charter.
Also, the determination by the Director of Lands and the Minister of Natural
Resources of the qualification of private respondent to become an awardee
or grantee under the Act is persuasive on Respondent Court. InEspinosa
vs. Makalintal, 53 the Court ruled that, by law, the powers of the Secretary of
Agriculture and Natural Resources regarding the disposition of public lands
— including the approval, rejection, and reinstatement of applications — are
of executive and administrative nature. (Such powers, however, do not
include the judicial power to decide controversies arising from disagreements
in civil or contractual relations between the litigants.) Consequently, the
determination of whether private respondent is qualified to become an
awardee of public land under C.A. 141 by sales application is included
therein.
All told, the only disqualification that can be imputed to private respondent is
the prohibition in the 1973 Constitution against the holding of alienable lands
of the public domain by corporations. 54 However, this Court earlier settled the
matter, ruling that said constitutional prohibition had no retroactive effect and
could not prevail over avested right to the land. In Ayog vs. Cusi, Jr., 55 this
Court declared:
We hold that the said constitutional prohibition has no retroactive
application to the sales application of Biñan Development Co., Inc.
because it had already acquired a vested right to the land applied for
at the time the 1973 Constitution took effect.

That vested right has to be respected. It could not be abrogated by
the new Constitution. Section 2, Article XIII of the 1935 Constitution
allows private corporations to purchase public agricultural lands not
exceeding one thousand and twenty-four hectares. Petitioner's
prohibition action is barred by the doctrine of vested rights in
constitutional law.
"A right is vested when the right to enjoyment has become the
property of some particular person or persons as a present interest."
(16 C.J.S. 1173). It is "the privilege to enjoy property legally vested,
to enforce contracts, and enjoy the rights of property conferred by
existing law" (12 C.J. 955, Note 46, No. 6) or "some right or interest
in property which has become fixed and established and is no longer
open to doubt or controversy" (Downs vs. Blount, 170 Fed. 15, 20,
cited in Balboa vs. Farrales, 51 Phil. 498, 502).
The due process clause prohibits the annihilation of vested rights. "A
state may not impair vested rights by legislative enactment, by the
enactment or by the subsequent repeal of a municipal ordinance, or
by a change in the constitution of the State, except in a legitimate
exercise of the police power" (16 C.J.S. 1177-78).
It has been observed that, generally, the term "vested right"
expresses the concept of present fixed interest, which in right reason
and natural justice should be protected against arbitrary State action,
or an innately just an imperative right which an enlightened free
society, sensitive to inherent and irrefragable individual rights, cannot
deny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania
Greyhound Lines, Inc. vs. Rosenthal, 192 Atl. 2nd 587).
Secretary of Justice Abad Santos in his 1973 opinion ruled that
where the applicant, before the Constitution took effect, had fully
complied with all his obligations under the Public Land Act in order to
entitle him to a sales patent, there would seem to be no legal or
equitable justification for refusing to issue or release the sales patent
(p. 254, Rollo).
In Opinion No. 140, series of 1974, he held that as soon as the
applicant had fulfilled the construction or cultivation requirements
and has fully paid the purchase price, he should be deemed to have

33

acquired by purchase the particular tract of land and to him the area
limitation in the new Constitution would not apply.
In Opinion No. 185, series of 1976, Secretary Abad Santos held that
where the cultivation requirements were fulfilled before the new
Constitution took effect but the full payment of the price was
completed after January 17, 1973, the applicant was, nevertheless,
entitled to a sales patent (p. 256, Rollo).
Such a contemporaneous construction of the constitutional
prohibition by a high executive official carries great weight and
should be accorded much respect. It is a correct interpretation of
section 11 of Article XIV.
In the instant case, it is incontestable that prior to the effectivity of the
1973 Constitution the right of the corporation to purchase the land in
question had become fixed and established and was no longer open
to doubt or controversy.
Its compliance with the requirements of the Public Land Law for the
issuance of a patent had the effect of segregating the said land from
the public domain. The corporation's right to obtain a patent for that
land is protected by law. It cannot be deprived of that right without
due process (Director of Lands vs. CA, 123 Phil. 919).
The Minister of Natural Resources ruled, and we agree, that private
respondent was similarly qualified to become an awardee of the disputed
land because its rights to it vested prior to the effectivity of the 1973
Constitution: 56
Lastly, appellee has acquired a vested right to the subject area and,
therefore, is deemed not affected by the new constitutional provision
that no private corporation may hold alienable land of the public
domain except by lease.
It may be recalled that the Secretary of Justice in his Opinion No. 64,
series of 1973, had declared, to wit:
On the other hand, with respect to sales application
ready for issuance of sales patent, it is my opinion

that where the applicant had, before, the constitution
took effect, fully complied with all his obligations
under the Public Land act in order to entitle him to
sales patent, there would seem to be not legal or
equitable justification for refusing to issue or release
the sales patent.
Implementing the aforesaid Opinion No. 64 . . . , the then Secretary
of Agriculture and Natural Resources issued a memorandum, dated
February 18, 1974, which pertinently reads as follows:
In the implementation of the foregoing opinion, sales
application of private individuals covering areas in
excess of 24 hectares and those of corporations,
associations, or partnership which fall under any of
the following categories shall be given due course
and issued patents, to wit:
Sales application for fishponds and
for agricultural purposes (SFA, SA
and IGPSA) wherein prior to
January 17, 1973,
a. the land covered
thereby was
awarded;
b. cultivation
requirements of law
were complied with
as shown by
investigation reports
submitted prior to
January 17, 1973;
c. land was
surveyed and
survey returns
already submitted
to the Director of

34

Lands for
verification and
approval; and
d. purchase price
was fully paid.
From the records, it is evident that the aforestated requisites have
been complied with by appellee long before January 17, 1973, the
effectivity of the New Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the purchase price was
fully paid on July 26, 1951, the cultivation requirements were
complied with as per investigation report dated December 31, 1949,
and the land was surveyed under Pls-97.

Needless to say, we also agree that the November 8, 1946 Lease Agreement
between petitioner and private respondent had been terminated by the
agreements to sell and the relinquishment of rights. By the time the verbal
leases were allegedly made in 1951 and 1955, 58 the disputed land had
already been acquired and awarded to private respondent. In any event,
petitioner's cause of action on these alleged lease agreements prescribed
long before he filed Civil Case No. 2072-III, as correctly found by the trial and
appellate courts. 59 Thus, it is no longer important, in this case, to pass upon
the issue of whether or not amendments to a lease contract can be proven
by parol evidence. The same holds true as regards the issue of forumshopping.
All in all, petitioner has not provided us sufficient reason to disturb the cogent
findings of the Director of Lands, the Minister of Natural Resources, the trial
court and the Court of Appeals.

The same finding was earlier made by the Director of Lands: 57
WHEREFORE, the petition is hereby DISMISSED.
It is further contended by Villaflor that Nasipit has no juridical
personality to apply for the purchase of public lands for agricultural
purposes. The records clearly show, however, that since the
execution of the deed of relinquishment of August 16, 1950, in favor
of Nasipit, Villaflor has always considered and recognized Nasipit as
having the juridical personality to acquire public lands for agricultural
purposes. In the deed of relinquishment . . . , it is stated:
6. That the Nasipit Lumber Co., Inc., a corporation
duly organized in accordance with the laws of the
Philippines, . . . .
Even this Office had not failed to recognize the juridical personality of
Nasipit to apply for the purchase of public lands . . . when it awarded
to it the land so relinquished by Villaflor (Order of Award dated
August 17, 1950) and accepted its application therefor. At any rate,
the question whether an applicant is qualified to apply for the
acquisition of public lands is a matter between the applicant and this
Office to decide and which a third party like Villaflor has no
personality to question beyond merely calling the attention of this
Office thereto.

SO ORDERED.

G.R. No. 88550

April 18, 1990

INDUSTRIAL ENTERPRISES, INC., petitioner,
vs.
THE HON. COURT OF APPEALS, MARINDUQUE MINING & INDUSTRIAL
CORPORATION, THE HON. GERONIMO VELASCO in his capacity as
Minister of Energy and PHILIPPINE NATIONAL BANK,respondents.
Manuel M. Antonio and Dante Cortez for petitioner.
Pelaez, Adriano & Gregorio for respondent MMIC.
The Chief Legal Counsel for respondent PNB.

MELENCIO-HERRERA, J.:
This petition seeks the review and reversal of the Decision of respondent
Court of Appeals in CA-G.R. CV No. 12660, 1 which ruled adversely against
petitioner herein.

35

Petitioner Industrial Enterprises Inc. (IEI) was granted a coal operating
contract by the Government through the Bureau of Energy Development
(BED) for the exploration of two coal blocks in Eastern Samar. Subsequently,
IEI also applied with the then Ministry of Energy for another coal operating
contract for the exploration of three additional coal blocks which, together
with the original two blocks, comprised the so-called "Giporlos Area."
IEI was later on advised that in line with the objective of rationalizing the
country's over-all coal supply-demand balance . . . the logical coal operator in
the area should be the Marinduque Mining and Industrial Corporation
(MMIC), which was already developing the coal deposit in another area
(Bagacay Area) and that the Bagacay and Giporlos Areas should be awarded
to MMIC (Rollo, p. 37). Thus, IEI and MMIC executed a Memorandum of
Agreement whereby IEI assigned and transferred to MMIC all its rights and
interests in the two coal blocks which are the subject of IEI's coal operating
contract.
Subsequently, however, IEI filed an action for rescission of the Memorandum
of Agreement with damages against MMIC and the then Minister of Energy
Geronimo Velasco before the Regional Trial Court of Makati, Branch
150, 2alleging that MMIC took possession of the subject coal blocks even
before the Memorandum of Agreement was finalized and approved by the
BED; that MMIC discontinued work thereon; that MMIC failed to apply for a
coal operating contract for the adjacent coal blocks; and that MMIC failed
and refused to pay the reimbursements agreed upon and to assume IEI's
loan obligation as provided in the Memorandum of Agreement (Rollo, p. 38).
IEI also prayed that the Energy Minister be ordered to approve the return of
the coal operating contract from MMIC to petitioner, with a written
confirmation that said contract is valid and effective, and, in due course, to
convert said contract from an exploration agreement to a
development/production or exploitation contract in IEI's favor.
Respondent, Philippine National Bank (PNB), was later impleaded as codefendant in an Amended Complaint when the latter with the Development
Bank of the Philippines effected extra-judicial foreclosures on certain
mortgages, particularly the Mortgage Trust Agreement, dated 13 July 1981,
constituted in its favor by MMIC after the latter defaulted in its obligation
totalling around P22 million as of 15 July 1984. The Court of Appeals
eventually dismissed the case against the PNB (Resolution, 21 September
1989).
Strangely enough, Mr. Jesus S. Cabarrus is the President of both IEI and
MMIC.

In a summary judgment, the Trial Court ordered the rescission of the
Memorandum of Agreement, declared the continued efficacy of the coal
operating contract in favor of IEI; ordered the reversion of the two coal blocks
covered by the coal operating contract; ordered BED to issue its written
affirmation of the coal operating contract and to expeditiously cause the
conversion thereof from exploration to development in favor of IEI; directed
BED to give due course to IEI's application for a coal operating contract;
directed BED to give due course to IEI's application for three more coal
blocks; and ordered the payment of damages and rehabilitation expenses
(Rollo, pp. 9-10).
In reversing the Trial Court, the Court of Appeals held that the rendition of the
summary judgment was not proper since there were genuine issues in
controversy between the parties, and more importantly, that the Trial Court
had no jurisdiction over the action considering that, under Presidential
Decree No. 1206, it is the BED that has the power to decide controversies
relative to the exploration, exploitation and development of coal blocks
(Rollo, pp. 43-44).
Hence, this petition, to which we resolved to give due course and to decide.
Incidentally, the records disclose that during the pendency of the appeal
before the Appellate Court, the suit against the then Minister of Energy was
dismissed and that, in the meantime, IEI had applied with the BED for the
development of certain coal blocks.
The decisive issue in this case is whether or not the civil court has jurisdiction
to hear and decide the suit for rescission of the Memorandum of Agreement
concerning a coal operating contract over coal blocks. A corollary question is
whether or not respondent Court of Appeals erred in holding that it is the
Bureau of Energy Development (BED) which has jurisdiction over said action
and not the civil court.
While the action filed by IEI sought the rescission of what appears to be an
ordinary civil contract cognizable by a civil court, the fact is that the
Memorandum of Agreement sought to be rescinded is derived from a coaloperating contract and is inextricably tied up with the right to develop coalbearing lands and the determination of whether or not the reversion of the
coal operating contract over the subject coal blocks to IEI would be in line
with the integrated national program for coal-development and with the
objective of rationalizing the country's over-all coal-supply-demand balance,
IEI's cause of action was not merely the rescission of a contract but the
reversion or return to it of the operation of the coal blocks. Thus it was that in
its Decision ordering the rescission of the Agreement, the Trial Court, inter
alia, declared the continued efficacy of the coal-operating contract in IEI's

36

favor and directed the BED to give due course to IEI's application for three
(3) IEI more coal blocks. These are matters properly falling within the domain
of the BED.

(1) Undertake by itself or through other arrangements, such as
service contracts, the active exploration, exploitation, development,
and extraction of energy resources . . .

For the BED, as the successor to the Energy Development Board (abolished
by Sec. 11, P.D. No. 1206, dated 6 October 1977) is tasked with the function
of establishing a comprehensive and integrated national program for the
exploration, exploitation, and development and extraction of fossil fuels, such
as the country's coal resources; adopting a coal development program;
regulating all activities relative thereto; and undertaking by itself or through
service contracts such exploitation and development, all in the interest of an
effective and coordinated development of extracted resources.

(2) Regulate all activities relative to the exploration, exploitation,
development, and extraction of fossil and nuclear fuels . . .

Thus, the pertinent sections of P.D. No. 1206 provide:
Sec. 6. Bureau of Energy Development. There is created in the
Department a Bureau of Energy Development, hereinafter referred to
in this Section as the Bureau, which shall have the following powers
and functions, among others:
a. Administer a national program for the encouragement, guidance,
and whenever necessary, regulation of such business activity relative
to the exploration, exploitation, development, and extraction of fossil
fuels such as petroleum, coal, . . .
The decisions, orders, resolutions or actions of the Bureau may be
appealed to the Secretary whose decisions are final and executory
unless appealed to the President. (Emphasis supplied.)
That law further provides that the powers and functions of the defunct Energy
Development Board relative to the implementation of P.D. No. 972 on coal
exploration and development have been transferred to the BED, provided
that coal operating contracts including the transfer or assignment of interest
in said contracts, shall require the approval of the Secretary (Minister) of
Energy (Sec. 12, P.D. No. 1206).
Sec. 12. . . . the powers and functions transferred to the Bureau of
Energy Development are:
xxx

xxx

xxx

ii. The following powers and functions of the Energy Development
Board under PD No. 910 . . .

(P.D. No. 1206) (Emphasis supplied.)
P.D. No. 972 also provides:
Sec. 8. Each coal operating contract herein authorized shall . . . be
executed by the Energy Development Board.
Considering the foregoing statutory provisions, the jurisdiction of the BED, in
the first instance, to pass upon any question involving the Memorandum of
Agreement between IEI and MMIC, revolving as its does around a coal
operating contract, should be sustained.
In recent years, it has been the jurisprudential trend to apply the doctrine of
primary jurisdiction in many cases involving matters that demand the special
competence of administrative agencies. It may occur that the Court has
jurisdiction to take cognizance of a particular case, which means that the
matter involved is also judicial in character. However, if the case is such that
its determination requires the expertise, specialized skills and knowledge of
the proper administrative bodies because technical matters or intricate
questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts
even though the matter is within the proper jurisdiction of a court. This is the
doctrine of primary jurisdiction. It applies "where a claim is originally
cognizable in the courts, and comes into play whenever enforcement of the
claim requires the resolution of issues which, under a regulatory scheme,
have been placed within the special competence of an administrative body, in
such case the judicial process is suspended pending referral of such issues
to the administrative body for its view" (United States v. Western Pacific
Railroad Co., 352 U.S. 59, Emphasis supplied).
Clearly, the doctrine of primary jurisdiction finds application in this case since
the question of what coal areas should be exploited and developed and
which entity should be granted coal operating contracts over said areas
involves a technical determination by the BED as the administrative agency
in possession of the specialized expertise to act on the matter. The Trial
Court does not have the competence to decide matters concerning activities
relative to the exploration, exploitation, development and extraction of
mineral resources like coal. These issues preclude an initial judicial

37

determination. It behooves the courts to stand aside even when apparently
they have statutory power to proceed in recognition of the primary jurisdiction
of an administrative agency.
One thrust of the multiplication of administrative agencies is that the
interpretation of contracts and the determination of private rights
thereunder is no longer a uniquely judicial function, exercisable only
by our regular courts (Antipolo Realty Corp. vs. National Housing
Authority, 153 SCRA 399, at 407).
The application of the doctrine of primary jurisdiction, however, does not call
for the dismissal of the case below. It need only be suspended until after the
matters within the competence of the BED are threshed out and determined.
Thereby, the principal purpose behind the doctrine of primary jurisdiction is
salutarily served.
Uniformity and consistency in the regulation of business entrusted to
an administrative agency are secured, and the limited function of
review by the judiciary are more rationally exercised, by preliminary
resort, for ascertaining and interpreting the circumstances underlying
legal issues, to agencies that are better equipped than courts by
specialization, by insight gained through experience, and by more
flexible procedure (Far East Conference v. United States, 342 U.S.
570).
With the foregoing conclusion arrived at, the question as to the propriety of
the summary judgment rendered by the Trial Court becomes unnecessary to
resolve.

UNIWIDE SALES, INC.,
UNIWIDE HOLDINGS, INC.,
NAIC RESOURCES AND
DEVELOPMENT CORPORATION,
UNIWIDE SALES REALTY
AND RESOURCES CLUB, INC.,
FIRST PARAGON CORPORATION,
and UNIWIDE SALES WAREHOUSE Promulgated:
CLUB, INC.,
Respondents. October 20, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
RESOLUTION
CARPIO, J.:
The Case

This is a petition for review[1] of the 10 January 2006 Decision [2] and the 13
September 2006 Resolution[3] of the Court of Appeals in CA-G.R. SP No.
82184. The 10 January 2006 Decision denied for lack of merit the petition for
review filed by petitioners. The 13 September 2006 Resolution denied
petitioners' motion for reconsideration and referred to the Securities and
Exchange Commission petitioners' supplemental motion for reconsideration.

WHEREFORE, the Court Resolved to DENY the petition. No costs.
SO ORDERED.

The Facts

The petitioners in this case are Nestle Philippines, Inc. and Nestle Waters
NESTLE PHILIPPINES, INC. G.R. No. 174674
and NESTLE WATERS PHILIPPINES,
INC. (formerly HIDDEN SPRINGS & Present:
PERRIER, INC.),
Petitioners, CARPIO, J., Chairperson,
NACHURA,
LEONARDO-DE CASTRO,*
PERALTA, and
- versus - VILLARAMA, JR.,** JJ.

Philippines, Inc., formerly Hidden Springs & Perrier Inc. The respondents are
Uniwide Sales, Inc., Uniwide Holdings, Inc., Naic Resources and
Development Corporation, Uniwide Sales Realty and Resources Club, Inc.,
First Paragon Corporation, and Uniwide Sales Warehouse Club, Inc.
On 25 June 1999, respondents filed in the Securities and Exchange
Commission (SEC) a petition for declaration of suspension of payment,

38

formation and appointment of rehabilitation receiver, and approval of

In its 13 January 2004 Order, the SEC denied petitioners' appeal for lack of

rehabilitation plan. The petition was docketed as SEC Case No. 06-99-6340.

merit. Petitioners then filed in the Court of Appeals a petition for review of the

[4]

13 January 2004 Order of the SEC.

The SEC approved the petition on 29 June 1999.

On 18 October 1999, the newly appointed Interim Receivership Committee

The Ruling of the Court of Appeals

filed a rehabilitation plan in the SEC. The plan was anchored on return to
core business of retailing; debt reduction via cash settlement and dacion en
pago; loan restructuring; waiver of penalties and charges; freezing of interest
payments; and restructuring of credit of suppliers, contractors, and private
lenders.

On 14 February 2000, the Interim Receivership Committee filed in the SEC
an Amended Rehabilitation Plan (ARP). The ARP took into account the
planned entry of Casino Guichard Perrachon, envisioned to infuse P3.57
billion in fresh capital. On 11 April 2001, the SEC approved the ARP.
On 11 October 2001, the Interim Receivership Committee filed in the SEC a
Second Amendment to the Rehabilitation Plan (SARP) in view of Casino
Guichard Perrachon's withdrawal. In its Order dated 23 December 2002, the
SEC approved the SARP.

In its assailed 10 January 2006 Decision, the Court of Appeals denied for
lack of merit the petition for review filed by petitioners, thus:
In reviewing administrative decisions, the findings of fact
made therein must be respected as long as they are
supported by substantial evidence, even if not
overwhelming or preponderant; that it is not for the
reviewing court to weigh the conflicting evidence,
determine the credibility of the witnesses, or otherwise
substitute its own judgment for that of the administrative
agency on the sufficiency of the evidence; that the
administrative decision in matters within the executive
jurisdiction can only be set aside on proof of grave abuse
of discretion, fraud, or error of law.
WHEREFORE, the petition for review is DENIED for lack
of merit.
SO ORDERED.[5]

Petitioners, as unsecured creditors of respondents, appealed to the

Petitioners moved for reconsideration. They also filed a supplemental motion

SEC praying that the 23 December 2002 Order approving the SARP be set

for reconsideration alleging that they received a letter on 25 January 2006,

aside and a new one be issued directing the Interim Receivership

from the president of the Uniwide Sales Group of Companies, informing them

Committee, in consultation with all the unsecured creditors, to improve the

of the decision to transfer, by way of full concession, the operation of

terms and conditions of the SARP.

respondents' supermarkets to Suy Sing Commercial Corporation starting 1
March 2006.

The Ruling of the SEC

In its questioned 13 September 2006 Resolution, the Court of Appeals
denied for lack of merit petitioners' motion for reconsideration and referred to
the SEC petitioners' supplemental motion for reconsideration.

39

As found by the SEC, several factors prevented the realization of the desired
Dissatisfied, petitioners filed in this Court on 3 November 2006 the present

goals of the SARP, to wit: (1) unexpected refusal of some creditors to comply

petition for review.

with all the terms of the SARP; (2) unexpected closure of Uniwide EDSA due
to the renovation of EDSA Central Mall; (3) closure of Uniwide Cabuyao and
The Issue

Uniwide Baclaran; (4) lack of supplier support for supermarket operations;
and (5) increased expenses.[6]

Before us, petitioners raise the issue of whether the SARP should be
revoked and the rehabilitation proceedings terminated.

On 11 July 2007, the rehabilitation receiver filed in the SEC a Third
Amendment to the Rehabilitation Plan (TARP). But before the SEC could act

The Court's Ruling

on the TARP, the rehabilitation receiver filed on 29 September 2008 a
Revised Third Amendment to the Rehabilitation Plan (revised TARP).

The petition lacks merit.

A majority of the secured creditors strongly opposed the revised TARP, which

Petitioners contend that the transfer of respondents' supermarket operations

focused on the immediate settlement of all the obligations accruing to the

to Suy Sing Commercial Corporation has made the SARP incapable of

unsecured creditors through a dacion of part of respondents' Metro Mall

implementation. Petitioners point out that since the SARP may no longer be

property.[7] Since some creditors claimed that the value of the Metro Mall

implemented, the rehabilitation case should be terminated pursuant to

property had gone down since 1999, the Hearing Panel issued its 30 July

Section 4-26, Rule IV of the SEC Rules of Procedure on Corporate

2009 Order directing the reappraisal of the Metro Mall property.[8]

Recovery. Petitioners claim that the terms and conditions of the SARP are
unreasonable, biased in favor of respondents, prejudicial to the interests of

In its 17 September 2009 Order, the Hearing Panel directed respondents to

petitioners, and incapable of a determination of feasibility.

show cause why the rehabilitation case should not be terminated considering

Respondents maintain that the SARP is feasible and that the SEC Hearing

that the rehabilitation plan had undergone several revisions. The Hearing

Panel did not violate any rule or law in approving it. Respondents stress that

Panel also directed the creditors to manifest whether they still wanted the

the lack of majority objection to the SARP bolsters the SEC's findings that the

rehabilitation proceedings to continue.

SARP is feasible. Respondents insist that the terms and conditions of the
SARP are in accord with the Constitution and the law.

Respondents moved for reconsideration of the 30 July 2009 and the 17
September 2009 Orders. The Hearing Panel, in its 6 November 2009 Order,

The Court takes judicial notice of the fact that from the time of the filing in this

denied the motion for reconsideration for being a prohibited pleading.

Court of the instant petition, supervening events have unfolded substantially
changing the factual backdrop of this rehabilitation case.

Respondents then filed in the SEC a petition for certiorari assailing the 30
July 2009, the 17 September 2009, and the 6 November 2009 Orders of the

40

Hearing Panel. The petition was docketed as SEC En BancCase No. 12-09183.

Considering the pendency of SEC En Banc Case No. 12-09-183 and
SEC En Banc Case No. 01-10-193, recently filed in the SEC, involving the

Meanwhile, in its 13 January 2010 Resolution, the Hearing Panel

very same rehabilitation case subject of this petition, the present petition has

disapproved the revised TARP and terminated the rehabilitation case as a

been rendered premature.

consequence. The dispositive portion of the Resolution reads:
SEC En Banc Case No. 12-09-183 deals with the Order of the Hearing Panel
WHEREFORE, premises considered:
1. Petitioners' Motion to Approve Revised Third
Amendment to the Group Rehabilitation Plan (Revised
TARP) is DENIED.
2. The motions to declare petitioners' rehabilitation plan not
feasible are GRANTED. Consequently, the instant
rehabilitation case is TERMINATED and the stay order is
lifted and dissolved. This case is deemed finally disposed
of pursuant to Section 5.2 of Republic Act No. 8799. [9]

directing respondents to show cause why the rehabilitation case should not
be terminated and the creditors to manifest whether they still want the
rehabilitation proceedings to continue. On the other hand, SEC En
Banc Case No. 01-10-193 is an appeal of the Hearing Panel's Resolution
disapproving

the

revised

TARP

and

terminating

the

rehabilitation

proceedings.
In light of supervening events that have emerged from the time the SEC
approved the SARP on 23 December 2002 and from the time the present

On 22 January 2010, respondents filed another petition appealing the
Hearing Panel's 13 January 2010 Resolution. The petition was docketed as
SEC En Banc Case No. 01-10-193. In order to preserve the parties' rights
during the pendency of the appeal, the SEC en banc in its Order dated 18
March 2010 directed the parties to observe the status quo prevailing before
the issuance of the 13 January 2010 Resolution of the Hearing Panel.
Meanwhile, on 27 April 2010, the SEC en banc issued an Order directing the
rehabilitation receiver, Atty. Julio C. Elamparo, to submit a comprehensive
report on the progress of the implementation of the SARP.
Finally, in its 30 September 2010 Order, the SEC consolidated SEC En
Banc Case No. 01-10-193 with SEC En Banc Case No. 12-09-183, the
parties being identical and the issues in both petitions being in reference to

petition was filed on 3 November 2006, any determination by this Court as to
whether the SARP should be revoked and the rehabilitation proceedings
terminated, would be premature.
Undeniably, supervening events have substantially changed the factual backdrop of
this case. The Court thus defers to the competence and expertise of the SEC to
determine whether, given the supervening events in this case, the SARP is no longer
capable of implementation and whether the rehabilitation case should be terminated as
a consequence.
Under the doctrine of primary administrative jurisdiction, courts will not determine a
controversy where the issues for resolution demand the exercise of sound
administrative discretion requiring the special knowledge, experience, and services of
the administrative tribunal to determine technical and intricate matters of fact.[10]

the same rehabilitation case.

41

DEL CASTILLO, J.:

In other words, if a case is such that its determination requires the expertise,
specialized training, and knowledge of an administrative body, relief must first be
obtained in an administrative proceeding before resort to the court is had even if the
matter may well be within the latter's proper jurisdiction.[11]
The objective of the doctrine of primary jurisdiction is to guide the court in determining

This Petition for Review on Certiorari1 seeks to set aside the December 11,
2009 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 94426
affirming the July 6, 2005 Decision3 of the Civil Service CommissionCordillera Administrative Region (CSC-CAR) in CAR-05-034DC, as well as
its March 17, 2010 Resolution4 denying petitioner's Motion for
Reconsideration.5

whether it should refrain from exercising its jurisdiction until after an administrative

Factual Antecedents

agency has determined some question or some aspect of some question arising in the

The facts are as follows:chanroblesvirtuallawlibrary
Petitioner Macario U. Catipon, Jr. is the holder of a Bachelor's Degree in
Commerce from the Baguio Colleges Foundation. When applying for
graduation, he was allowed to join the graduation ceremonies despite a
deficiency of 1.5 units in Military Science, pursuant to a school policy
allowing students with deficiencies of not more than 12 units to be included in
the list of graduates. However, a restriction came after, which is, that the
deficiency must be cured before the student can be considered a graduate.

proceeding before the court.[12]
It is not for this Court to intrude, at this stage of the rehabilitation proceedings, into the
primary administrative jurisdiction of the SEC on a matter requiring its
technical expertise. Pending a decision of the SEC on SEC En Banc Case No. 12-09183 and SEC En Banc Case No. 01-10-193, which both seek to resolve the issue of
whether the rehabilitation proceedings in this case should be terminated, we are
constrained to dismiss this petition for prematurity.
WHEREFORE, we DISMISS the instant petition for having been rendered
premature pending a decision of the Securities and Exchange Commission
(SEC) in SEC En Banc Case No. 12-09-183 and SEC En Banc Case No. 0110-193.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 191787, June 22, 2015
MACARIO CATIPON, JR., Petitioner, v. JEROME JAPSON, Respondent.
DECISION

ha 1985, petitioner found employment with the Social Security System (SSS)
in Bangued, Abra.
Sometime in September 1993, the personnel head of the SSS in Bangued,
Abra informed petitioner that the Civil Service Commission was conducting a
Career Service Professional Examination (CSPE) in October of the same
year. Petitioner filed an application to take the examination, believing that the
CSC still allowed CSPE applicants to substitute the length of their
government service for any academic deficiency which they may have.
However, the above-mentioned policy of the CSC had been discontinued
since January 1993 pursuant to Civil Service Commission Memorandum
Circular No. 42, Series of 1991 and Office Memo. No. 63, Series of 1992.
Nevertheless, petitioner took the CSPE tests on October 17, 1993 and
obtained a rating of 80.52%. Eventually, petitioner was promoted to Senior
Analyst and Officer-in-Charge Branch Head of the SSS at Bangued, Abra. hi
October 1995, he finally eliminated his deficiency of 1.5 units in Military
Science.
On March 10, 2003, respondent Jerome Japson, a former Senior Member
Services Representative of SSS Bangued, filed a letter-complaint with the
Civil Service Commission-CAR Regional Director, alleging that petitioner
made deliberate false entries in his CSPE application, specifically, that he
obtained his college degree in 1993 when actually he graduated in 1995 only,
after removing his deficiency of 1.5 units in Military Education. Also, that
petitioner was not qualified to take the CSPE examination in 1993 since he

42

was not yet then a graduate of a four-year college course, contrary to the
entry in his application form.
After preliminary investigation, petitioner was charged with Dishonesty,
Falsification of Official documents, Grave Misconduct and Conduct
Prejudicial to the Best Interest of the Service by the CSCCAR.6cralawlawlibrary
Respondent's Letter-Complaint7 against petitioner was docketed as CSC
Disciplinary Administrative Case No. BB-03-006.
In his Answer,8 petitioner essentially pleaded good faith, lack of malice, and
honest mistake. He maintained that at the time of his application to take the
CSPE, he was of the honest belief that the policy of the CSC - that any
deficiency in the applicant's educational requirement may be substituted by
his length of service - was still subsisting.
On July 6, 2005, the CSC-CAR, through Director IV Atty. Lorenzo S.
Danipog, rendered a Decision9containing the following
pronouncements:chanroblesvirtuallawlibrary
Clearly, respondent Catipon is not without any fault under the foregoing
circumstances. The only issue now left is with respect to the particular
offense for which Catipon may be held responsible. Respondent Catipon is
charged (with) four offenses: Dishonesty, Falsification of Official Documents,
Grave Misconduct and Conduct Prejudicial to the Best Interest of the
Service.
The key document allegedly falsified in this case is the Application Form x x x
of respondent Catipon for the purpose of taking the CS Professional
Examination scheduled on October 17, 1993. Close and careful perusal of
the said application form reveals that most of the entries filled up by
respondent are typewritten. The only entries handwritten by respondent are
those corresponding to "Year Graduated" and "School Where Graduated"
which were answered by Macario with "1984" and "BCF" respectively.
Another handwritten entry is with respect to "Degree Finished", the
handwritten "BSC entry, however, was just superimposed on the typewritten
"Commerce".
The fact that majority of the entries or data in the application form is
typewritten suggests that the said application form was consciously drafted
and meticulously prepared before its actual submission to the CSC for
processing. They are relevant and material entries or data sought from
respondent. It is worth emphasizing however that the pre-drafted application
form, considering the typewritten entries, shows respondent's confusion on
how to make entries thereat. Respondent answered both the IF YES column
and IF NO column corresponding to the question "Are you a college
graduate" in Item 8. x x x

xxxx
The manner that Item 8 was filled up by respondent Catipon shows lack of
deliberate intent to defraud the government. He manifested in his application
his uncertainty on how to take the fact that he only lacks 1.5 units Military
Science to be conferred a graduate status, vis-a-vis the CSC policy on
educational requirement. Though the entry "undergrad" was erased, the CSC
employee who processed the application would have doubted the
truthfulness and authenticity of respondent's entries in Item 8 of the
Application Form, and thus the educational status of Macario. x x x
xxxx
Catipon had tried to show the real state of the matter regarding his
educational attainment as can be deduced from the manner he answered
Item No. 8 in the application form. This may be taken as good faith, which will
serve to mitigate any liability incurred by respondent Catipon. The
premeditated intent to deceive or willfully distort the facts in this case is not
present. The acts of Catipon do not even show blatant disregard of an
established rule or a clear intent to violate the law if at all, there was attempt
to reveal the truth to the examination division processing the application.
xxxx
With [regard] to the eligibility earned by respondent Macario in view of his
passing the October 17, 1993 Career Service Professional Examination, the
same needs to be revoked being the fruit of a poisonous tree, so to speak.
Paragraph 2 of Sec. 6, Rule n, Omnibus Rules Implementing Book V of
Executive Order No. 292 states:chanroblesvirtuallawlibrary
Provided that when an applica[nt] for examination is found to have xxx
intentionally made any false statement of any material fact in his application,
x x x the Commission shall invalidate such examination xxx.
With the foregoing, respondent Macario U. Catipon, Jr., Senior Analyst and
OIC Branch Head, Social Security System, Bangued, Abra, is hereby
exonerated of the charges Dishonesty, Falsification of Official Documents
and Grave Misconduct. However, respondent is found guilty of Conduct
Prejudicial to the Best Interest of the Service.
Under the Uniform Rules on Administrative Cases in the Civil Service, the
imposable penalty on the first offense of Conduct Prejudicial to the Best
Interest of the Service is suspension of six months and one day to one year.
Under Section 53 of the same Rules, good faith is enumerated as one
mitigating circumstance. Thus, respondent Macario Catipon, Jr. is hereby
meted a penalty of six months and one day suspension, without pay, which is

43

the minimum period of the penalty attached to the offense committed. The
Career Service Professional eligibility of respondent is also ordered revoked,
without prejudice however to retaking of the said examination. Thus, Catipon,
after serving suspension herein provided should not be allowed to go back to
his current position without CS Professional eligibility. Consequently, in case
respondent Catipon fails to retake or pass CSPE, after serving his
suspension, he may be demoted to any available position that fits his
subprofessional eligibility.10cralawlawlibrary
Petitioner moved for reconsideration,11 but the CSC-CAR sustained its
judgment in a March 23, 2006 Decision,12 which contained the following
pronouncement:chanroblesvirtuallawlibrary
Catipon also asserted that in view of his exoneration of Dishonesty,
Falsification of Official Documents and Grave Misconduct, there is no longer
any basis to hold respondent guilty of Conduct Prejudicial to the Best Interest
of the Service. This contention is without legal basis. In the case of Philippine
Retirement Authority vs. Rupa 363 SCRA 480, the Honorable Supreme Court
held as follows:
Under the Civil Service laws and rules, there is no description of what
specific acts constitute the grave offense of Conduct Prejudicial to the Best
Interest of the Service.
As alluded to previously in Decision No. CAR-05-034DC, Catipon is not
without fault under the circumstances. To completely exonerate respondent
would be inequitable and iniquitous considering the totality of events
surrounding this case. Though there was no deliberate intent to falsify or to
make dishonest entry in the Application Form as deduced from the manner
that the said form was accomplished, the fact that there was indeed such
dishonest or false entry in the CSPE Application Form is undisputedly
established. In view of such an established fact, the integrity of the Civil
Service Examination, particularly the CSPE has been blemished which is
sufficient to constitute Conduct Prejudicial to the Interest of the
Service.13cralawlawlibrary
Ruling of the Court of Appeals
In a Petition for Review docketed with the CA as CA-G.R. SP No. 94426,
petitioner prayed for injunctive relief and the reversal of the above CSC-CAR
decision. He argued that the CSC-CAR incorrectly found him guilty of
conduct prejudicial to the best interest of the service when he has been
declared innocent of the charges of dishonesty, falsification of official
documents, and grave misconduct; that while the Supreme Court has held
that making false entries in public documents may be considered as conduct
prejudicial to the best interest of the service, such act must be accompanied
by deliberate intent or a willful desire to defy or disregard established rules or
norms in the service;14 and that with the finding that he merely committed an
innocent mistake in filling up the application form for the CSPE, he may not

be found guilty of conduct prejudicial to the best interest of the service.
On December 11, 2009, the CA rendered the assailed Decision denying the
petition, decreeing thus:chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing, the instant petition is DENIED for
lack of merit. The Decision [sic] of the Civil Service Commission-Cordillera
Administrative Region dated July 6, 2005 and March 23, 2006 is [sic]
AFFIRMED.
SO ORDERED.15cralawlawlibrary
The CA held that instead of filing a petition for review directly with it,
petitioner should have interposed an appeal with the Civil Service
Commission (CSC), pursuant to Sections 5(A)(1), 43 and 49 of the CSC
Uniform Rules on Administrative Cases;16 that by filing a petition directly with
it, petitioner violated the doctrine of exhaustion of administrative remedies;
that petitioner's case is not exceptional as would exempt it from the
application of the doctrine; that per the ruling in Bayaca v. Judge
Ramos,17 the absence of deliberate intent or willful desire to defy or disregard
established rules or norms in the service does not preclude a finding of guilt
for conduct prejudicial to the best interest of the service; and that petitioner
did not act with prudence and care, but instead was negligent, in the filling up
of his CSPE application form and in failing to verify beforehand the
requirements for the examination.
Petitioner moved for reconsideration, but the CA stood its ground. Hence, the
instant recourse.chanRoblesvirtualLawlibrary
Issues
Petitioner raises the following issues for
resolution:chanroblesvirtuallawlibrary
(A)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS
DISCRETION WHEN IT FAILED TO REALIZE THAT GIVEN THE
IMMEDIATE EFFECT OF THE SUSPENSION IMPOSED BY THE CIVIL
SERVICE COMMISSION-CORDILLERA ADMINISTRATIVE REGION
AGAINST THE PETITIONER, HE WAS JUSTIFIED IN SEEKING JUDICIAL
RECOURSE BEFORE (THE COURT OF APPEALS);
(B)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS
DISCRETION WHEN IT MISAPPLIED IN THE ABOVE-ENTITLED CASE
THE RULE ON PRIOR EXHAUSTION OF ADMINISTRATIVE REMEDIES;

44

(C)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS
DISCRETION WHEN IT FAILED TO CONSIDER THAT THE PETITIONER
ACTED IN GOOD FAITH AND THIS NEGATES GUILT FOR CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE
SERVICE.18cralawlawlibrary
Petitioner's Arguments
In his Petition and Reply19 seeking a reversal of the assailed CA dispositions
and, consequently, exoneration from the charge of conduct prejudicial to the
best interest of the service, petitioner argues that he was constrained to file
the petition for review with the CA as his decreed six-month suspension was
imminent as a consequence of the executory nature of the CSC-CAR
decision; that immediate judicial intervention was necessary to "prevent
serious injury and damage" to him, which is why his CA petition included a
prayer for injunctive relief; that the doctrine of exhaustion of administrative
remedies should not have been applied strictly in his case, given the special
circumstance that his suspension would mean loss of his only source of
income;20 that he should be completely exonerated from the charges against
him, since conduct prejudicial to the best interest of the service must be
accompanied by deliberate intent or a willful desire to defy or disregard
established rules or norms in the service - which is absent in his case; and
that his career service professional eligibility should not be revoked in the
interest of justice and in the spirit of the policy which promotes and preserves
civil service eligibility.
Respondent's Arguments
In his Comment21 seeking denial of the petition, respondent counters that
completion of all the academic requirements - and not merely attendance at
graduation rites - confers the necessary degree which qualifies a student to
take the CSPE; that petitioner's claim that he is a graduate as of 1984 is
belied by his Transcript of Records22 and other pieces of evidence submitted,
which reflect the date of his graduation as October 1995 - or after completion
of his 1.5-unit deficiency in Military Science; that petitioner cannot claim to
suffer irreparable injury or damage as a result of the CSC-CAR's Decision,
which is valid and binding; that the revocation of petitioner's eligibility is only
proper, since he was then not qualified when he took the CSPE; that the
CSC-CAR was correct in finding that petitioner's act compromised the image
and integrity of the civil service, which justified the imposition of a
corresponding penalty; that this Court in the Rupa case made it clear that the
act of making false entries in public documents constitutes conduct
prejudicial to the best interest of the service, a grave offense punishable by
suspension for six months and one day to one year for the first offense, and
dismissal for the second offense; and that indeed, petitioner violated the

doctrines of primary jurisdiction and exhaustion of administrative remedies
when he proceeded directly to the CA, instead of filing an appeal with the
CSC.chanRoblesvirtualLawlibrary
Our Ruling
The Court denies the Petition.
Our fundamental law, particularly Sections 2 (1) and 3 of Article DC-B, state
that Section 2. (1) The civil service embraces all branches, subdivisions,
instrumentalities and agencies of the Government, including governmentowned or controlled corporations with original charters.
Section 3. The Civil Service Commission, as the central personnel agency of
the Government, shall establish a career service and adopt measures to
promote morale, efficiency, integrity, responsiveness, progressiveness, and
courtesy in the civil service. It shall strengthen the merit and rewards system,
integrate all human resources development programs for all levels and ranks,
and institutionalize a management climate conducive to public accountability.
It shall submit to the President and the Congress an annual report on its
personnel programs.
Thus, "the CSC, as the central personnel agency of the Government, has
jurisdiction over disputes involving the removal and separation of all
employees of government branches, subdivisions, instrumentalities and
agencies, including government-owned or controlled corporations with
original charters. Simply put, it is the sole arbiter of controversies relating to
the civil service."23
In line with the above provisions of the Constitution and its mandate as the
central personnel agency of government and sole arbiter of controversies
relating to the civil service, the CSC adopted Memorandum Circular No. 19,
series of 1999 (MC 19), or the Revised Uniform Rules on Administrative
Cases in the Civil Service, which the CA cited as the basis for its
pronouncement. Section 4 thereof provides:chanroblesvirtuallawlibrary
Section 4. Jurisdiction of the Civil Service Commission. — The Civil Service
Commission shall hear and decide administrative cases instituted by, or
brought before it, directly or on appeal, including contested appointments,
and shall review decisions and actions of its offices and of the agencies
attached to it.
Except as otherwise provided by the Constitution or by law, the Civil Service
Commission shall have the final authority to pass upon the removal,
separation and suspension of all officers and employees in the civil service
and upon all matters relating to the conduct, discipline and efficiency of such
officers and employees.

45

As pointed out by the CA, pursuant to Section 5(A)(1) of MC 19, the Civil
Service Commission Proper, or Commission Proper, shall have jurisdiction
over decisions of Civil Service Regional Offices brought before it on petition
for review. And under Section 43, "decisions of heads of departments,
agencies, provinces, cities, municipalities and other instrumentalities
imposing a penalty exceeding thirty days suspension or fine in an amount
exceeding thirty days salary, may be appealed to the Commission Proper
within a period of fifteen days from receipt thereof." 24 "Commission Proper"
refers to the Civil Service Commission-Central Office.25
It is only the decision of the Commission Proper that may be brought to the
CA on petition for review, under Section 50 of MC 19, which provides
thus:chanroblesvirtuallawlibrary
Section 50. Petition for Review with the Court of Appeals. - A party may
elevate a decision of the Commission before the Court of Appeals by way of
a petition for review under Rule 43 of the 1997 Revised Rules of
Court.26cralawlawlibrary
Thus, we agree with the CA's conclusion that in filing his petition for review
directly with it from the CSC-CAR Regional Director, petitioner failed to
observe the principle of exhaustion of administrative remedies. As correctly
stated by the appellate court, non-exhaustion of administrative remedies
renders petitioner's CA petition premature and thus dismissible.
The doctrine of exhaustion of administrative remedies requires that "before a
party is allowed to seek the intervention of the court, he or she should have
availed himself or herself of all the means of administrative processes
afforded him or her. Hence, if resort to a remedy within the administrative
machinery can still be made by giving the administrative officer concerned
every opportunity to decide on a matter that comes within his or her
jurisdiction, then such remedy should be exhausted first before the court's
judicial power can be sought. The premature invocation of the intervention of
the court is fatal to one's cause of action. The doctrine of exhaustion of
administrative remedies is based on practical and legal reasons. The
availment of administrative remedy entails lesser expenses and provides for
a speedier disposition of controversies. Furthermore, the courts of justice, for
reasons of comity and convenience, will shy away from a dispute until the
system of administrative redress has been completed and complied with, so
as to give the administrative agency concerned every opportunity to correct
its error and dispose of the case."27 Indeed, the administrative agency
concerned - in this case the Commission Proper - is in the "best position to
correct any previous error committed in its forum."28
The CA is further justified in refusing to take cognizance of the petition for
review, as "[t]he doctrine of primary jurisdiction does not warrant a court to
arrogate unto itself the authority to resolve a controversy the jurisdiction over
which is initially lodged with an administrative body of special

competence."29 When petitioner's recourse lies in an appeal to the
Commission Proper in accordance with the procedure prescribed in MC 19,
the CA may not be faulted for refusing to acknowledge petitioner before it.
We likewise affirm the CA's pronouncement that petitioner was negligent in
filling up his CSPE application form and in failing to verify beforehand the
specific requirements for the CSPE examination. Petitioner's claim of good
faith and absence of deliberate intent or willful desire to defy or disregard the
rules relative to the CSPE is not a defense as to exonerate him from the
charge of conduct prejudicial to the best interest of the service; under our
legal system, ignorance of the law excuses no one from compliance
therewith.30 Moreover, petitioner - as mere applicant for acceptance into the
professional service through the CSPE - cannot expect to be served on a
silver platter; the obligation to know what is required for the examination falls
on him, and not the CSC or his colleagues in office. As aptly ruled by the
appellate court:chanroblesvirtuallawlibrary
In Bacaya31v. Ramos, the Supreme Court found respondent judge guilty of
both negligence and conduct prejudicial to the best interest of the service
when he issued an arrest warrant despite the deletion of the penalty of
imprisonment imposed on an accused in a particular criminal case.
Respondent judge in the said case claimed that the issuance of the warrant
was a mistake, done in good faith and that it has been a practice in his office
for the Clerk of Court to study motions and that he would simply sign the
prepared order. The Supreme Court rejected his defense and stated that
negligence is the failure to observe such care as a reasonably prudent and
careful person would use under ordinary circumstances. An act of the will is
necessary&r deliberate intent to exist; such is not necessary in an act of
negligence.
Here, petitioner failed to verify the requirements before filing his application
to take the CSPE exam. He simply relied on his prior knowledge of the rules,
particularly, that he could substitute his deficiency in Military Science with the
length of his government service. He cannot lay blame on the personnel
head of the SSS-Bangued, Abra, who allegedly did not inform him of the
pertinent rules contained in Civil Service Memorandum Circular No. 42,
Series of 1991. For, [if] he were truly a reasonably prudent and careful
person, petitioner himself should have verified from the CSC the
requirements imposed on prospective examinees. In so doing, he would
certainly have been informed of the new CSC policy disallowing substitution
of one's length of government service for academic deficiencies. Neither
should petitioner have relied on an unnamed Civil Service employee's advice
since it was not shown that the latter was authorized to give information
regarding the examination nor that said employee was competent and
capable of giving correct information. His failure to verify the actual CSPE
requirements which a reasonably prudent and careful person would have
done constitutes negligence. Though his failure was not a deliberate act of

46

the will, such is not necessary in an act of negligence and, as in Bacaya,
negligence is not inconsistent with a finding of guilt for conduct prejudicial to
the best interest of the service.32cralawlawlibrary
The corresponding penalty for conduct prejudicial to the best interest of the
service may be imposed upon an erring public officer as long as the
questioned act or conduct taints the image and integrity of the office; and the
act need not be related to or connected with the public officer's official
functions. Under our civil service laws, there is no concrete description of
what specific acts constitute conduct prejudicial to the best interest of the
service, but the following acts or omissions have been treated as such:
misappropriation of public funds; abandonment of office; failure to report
back to work without prior notice; failure to safekeep public records and
property; making false entries in public documents; falsification of court
orders; a judge's act of brandishing a gun, and threatening the complainants
during a traffic altercation; a court interpreter's participation in the execution
of a document conveying complainant's property which resulted in a quarrel
in the latter's family; selling fake Unified Vehicular Volume Program
exemption cards to his officemates during office hours; a CA employee's
forging of receipts to avoid her private contractual obligations; a Government
Service Insurance System (GSIS) employee's act of repeatedly changing his
IP address, which caused network problems within his office and allowed him
to gain access to the entire GSIS network, thus putting the system in a
vulnerable state of security;33 a public prosecutor's act of signing a motion to
dismiss that was not prepared by him, but by a judge; 34 and a teacher's act of
directly selling a book to her students in violation of the Code of Ethics for
Professional Teachers.35 In petitioner's case, his act of making false entries in
his CSPE application undoubtedly constitutes conduct prejudicial to the best
interest of the service; the absence of a willful or deliberate intent to falsify or
make dishonest entries in his application is immaterial, for conduct grossly
prejudicial to the best interest of the service "may or may not be
characterized by corruption or a willful intent to violate the law or to disregard
established rules."36
Finally, the Court cannot consider petitioner's plea that "in the interest of
justice and in the spirit of the policy which promotes and preserves civil
service eligibility," his career service professional eligibility should not be
revoked. The act of using a fake or spurious civil service eligibility for one's
benefit not only amounts to violation of the civil service examinations or
CSPE; it also results in prejudice to the government and the public in
general. It is a transgression of the law which has no place in the public
service.37 "Assumption of public office is impressed with the paramount public
interest that requires the highest standards of ethical conduct. A person
aspiring for public office must observe honesty, candor, and faithful
compliance with the law. Nothing less is expected." 38
WHEREFORE, the Petition is DENIED. The December 11, 2009 Decision

and March 17, 2010 Resolution of the Court of Appeals in CA-G.R. SP No.
94426 are AFFIRMED.
SO ORDERED.chanroblesvirtuallawlibrary

[G.R. No. 139302. October 28, 2002]
EDUARDO P. CORSIGA, Former Deputy Administrator, National
Irrigation Administration, petitioner, vs. HON. QUIRICO G.
DEFENSOR, Presiding Judge, Regional Trial Court, Branch 36,
Iloilo City, and ROMEO P. ORTIZO, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review seeking the reversal of the decision [1] of
the Court of Appeals dated June 30, 1999 in CA-G.R. SP No. 44123,
dismissing the petition for review filed by petitioner. The petition assailed the
orders dated January 8, 1996 and January 13, 1997 of the Regional Trial
Court of Iloilo City, Branch 36, which respectively denied petitioners motion to
dismiss Civil Case No. 22462 and his motion for reconsideration.
The facts are undisputed.
Private respondent Romeo P. Ortizo was the Senior Engineer B in the
National Irrigation Administration (NIA), Jalaur-Suague River Irrigation
System, Region VI,[2] tasked with the duty of assisting the Irrigation
Superintendent in the said station. [3] Sometime in June, 1995, petitioner
Eduardo P. Corsiga, then Regional Irrigation Manager of the NIA, Region VI,
issued Regional Office Memorandum (ROM) No. 52, reassigning private
respondent to Aganan-Sta. Barbara River Irrigation System, likewise to assist
the Irrigation Superintendent thereat.[4] Aggrieved, private respondent wrote
petitioner Corsiga requesting exemption and citing Memorandum Circular
No. 47, Series of 1987 issued by the NIA Administrator, which states that the
policy of rotation applies only to Department Managers, Irrigation
Superintendents, Provincial Engineers and Division Manager of Field Offices.
Petitioner denied the request. On July 31, 1995, private respondent filed with
the Regional Trial Court of Iloilo City a complaint for prohibition and

47

injunction, with prayer for issuance of Temporary Restraining Order and/or
Writ of Preliminary Injunction.

RESPONDENT HAS NO VALID CAUSE OF ACTION AGAINST
PETITIONER FOR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.
[7]

Petitioner moved to dismiss the petition for lack of jurisdiction and nonexhaustion of administrative remedies, but the motion was denied on
January 8, 1996. The Regional Trial Court likewise denied the motion for
reconsideration on January 13, 1997. Alleging that these two orders were
issued without jurisdiction, petitioner elevated the controversy to the Court of
Appeals via a petition for certiorari.
On June 30, 1999, the appellate court rendered a decision [5] finding no
merit in the petition and dismissing it. It affirmed the trial courts jurisdiction
over Civil Case No. 22462 saying that the doctrine of exhaustion of
administrative remedies does not apply where the controverted act is
patently illegal, arbitrary, and oppressive. Regional Office Memorandum No.
52, according to the court, was illegal since it violated private respondents
constitutional right to security of tenure. Private respondents original
appointment as Senior Engineer B in the NIA Jalaur River Irrigation System,
Region VI is a permanent one; thus, it entitled him to a security of tenure. He
cannot, therefore, be reassigned to another position that involves a reduction
in rank without his consent. Concluded the appellate court:
WHEREFORE, IN VIEW OF THE FOREGOING, this petition for certiorari is
DENIED DUE COURSE and is hereby DISMISSED. No pronouncement as
to costs.[6]
Hence, this petition where petitioner avers that the Court of Appeals
erred in not holding that:
I
THE COURT A QUO [Regional Trial Court] HAS NO JURISDICTION OVER
THE NATURE AND SUBJECT MATTER OF THE CASE PURSUANT TO
SECTION 13, RULE VII OF THE OMNIBUS RULES IMPLEMENTING BOOK
V OF EXECUTIVE ORDER NO. 292.
II

The issues for our resolution are (a) whether the Regional Trial Court
has jurisdiction over Civil Case No. 22462, and (b) whether private
respondent has a cause of action despite his failure to exhaust administrative
remedies.
On the first issue, petitioner avers that law and jurisprudence are clear
and incontrovertible on the exclusive jurisdiction of the Civil Service
Commission on all cases involving personnel actions including reassignment.
Petitioner cites Section 13, Rule VII of the Omnibus Rules Implementing
Book V[8] of E.O. 292. He stresses our ruling in Mantala vs. Salvador[9] that
disciplinary cases and cases involving personnel actions affecting employees
in the civil service including appointment through certification, promotion,
transfer, reinstatement, reemployment, detail, reassignment, demotion and
separation, and employment status and qualification standardsare within the
exclusive jurisdiction of the Civil Service Commission. Likewise cited is our
holding in Dario vs. Mison[10] that no fundamental difference exists between
the Commission on Elections and the Civil Service Commission (or the
Commission on Audit, for that matter) as to the constitutional intent to leave
the constitutional bodies alone in the enforcement of laws relative to
elections, with respect to the former, and the civil service, with respect to the
latter (or the audit of government accounts, with respect to the Commission
on Audit). As the poll body is the sole judge of all election cases, so is the
Civil Service Commission the single arbiter of all controversies pertaining to
the civil service.
Petitioner also avers that private respondents allegation that the remedy
under the Civil Service Rule is neither speedy nor adequate as well as his
allegation that he will inevitably and doubtlessly be subjected to
administrative charges in case of non-compliance with the memorandum, is
pure speculation and conjecture. Private respondents fears of administrative
charges do not, by mere allegation, ipso facto divest the Civil Service
Commission of its exclusive jurisdiction on all controversies pertaining to civil
service.
In his comment, private respondent maintains that as a civil service
appointee to a position with a specification of a particular station, he cannot

48

be validly and legally transferred or assigned to any other unit in the same
agency without his consent. To do so is a violation of his constitutional right
to security of tenure. For this reason, Regional Office Memorandum No. 52
reassigning him to a station different from that specified in his appointment
papers was invalid. Yet, in spite of the patent illegality of the contemplated
action, petitioner was adamant in implementing it. This, according to private
respondent, left him with no other plain, speedy and adequate remedy but to
go to court via a petition for prohibition and injunction, with prayer for the
issuance of a temporary restraining order and/or writ of preliminary
injunction.
We shall now resolve the issues raised in this petition.
(1) Does the Regional Trial Court have jurisdiction over Civil Case No.
22462?
The Civil Service Commission has jurisdiction over all employees of
Government branches, subdivisions, instrumentalities, and agencies,
including government-owned or controlled corporations with original charters.
[11]
As such, it is the sole arbiter of controversies relating to the civil service.
[12]
The National Irrigation Administration, created under Presidential Decree
No. 1702, is a government-owned and controlled corporation with original
charter.Thus, being an employee of the NIA, private respondent is covered
by the Civil Service Commission.
Section 13 Rule VII of the Rules Implementing Book V of Executive
Order No. 292 (the Adm. Code of 1987) provides how appeal can be taken
from a decision of a department or agency head. It states that such decision
shall be brought to the Merit System Protection Board (now the CSC En
Banc per CSC Resolution No. 93-2387 dated June 29, 1993). It is the intent
of the Civil Service Law, in requiring the establishment of a grievance
procedure in Rule XII, Section 6 of the same rules, that decisions of lower
level officials be appealed to the agency head, [13] then to the Civil Service
Commission.[14] Decisions of the Civil Service Commission, in turn, may be
elevated to the Court of Appeals. Under this set up, the trial court does not
have jurisdiction over personnel actions and, thus, committed an error in
taking jurisdiction over Civil Case No. 22462. The trial court should have
dismissed the case on motion of petitioner and let private respondent
question ROM No. 52 before the NIA Administrator, and then the Civil
Service Commission. As held in Mantala vs. Salvador,[15] cases involving

personnel actions, reassignment included, affecting civil service employees,
are within the exclusive jurisdiction of the Civil Service Commission.
(2) Does private respondent have a cause of action [16] although his
complaint was filed in the trial court without first exhausting all available
administrative remedies?
Being an NIA employee covered by the Civil Service Law, in our view,
private respondent should have first complained to the NIA Administrator, and
if necessary, then appeal to the Civil Service Commission. [17] As ruled inAbeAbe vs. Manta, 90 SCRA 524 (1979), if a litigant goes to court without first
pursuing his administrative remedies, his action is premature, and he has no
cause of action to ventilate in court. Hence, petitioner asserts that private
respondents case is not ripe for judicial determination.
Private respondent contends, however, that the principle of exhaustion
of administrative remedies is not an absolute rule. It has exceptions, namely,
(1) where the issue involved is one of law and cannot be resolved
administratively, (2) where the controverted act is patently illegal, arbitrary,
and oppressive, (3) where irreparable injury exists, (4) where there is no
plain, speedy, and adequate remedy, (5) or where urgent circumstances
require judicial intervention. According to private respondent, the
circumstances of the case required him to urgently act on his reassignment
since he might be administratively charged if he resisted petitioners order,
yet, at the same time he could be in estopped to question the order had he
yielded to it without protest.
According to private respondent, petitioner was guilty of bad faith; his
real objective was to assign someone close to him to replace private
respondent. Petitioners action was capricious, whimsical, arbitrary, and
discriminatory, said private respondent since he was the only one, from
among the officials or employees of the same rank, who was
reassigned. This discrimination constituted a grave and patent abuse of
discretion amounting to lack of jurisdiction, against which private respondent
said he had no plain, speedy and adequate remedy in law except to institute
an action before the regional trial court.
However, private respondent failed to reckon with the fact that the issue
in Civil Case No. 22462 was not purely a question of law. Certain facts
needed to be resolved first. Did private respondents reassignment involve a

49

reduction in rank? Private respondent claimed his transfer to a new station
violated the rule on reassignment for he was allegedly transferred to a lower
position.[18] But petitioner had refuted this contention, adding that his order
reassigning private respondent was a lawful exercise of management
prerogatives.[19] Also, was private respondent the only one, among the
employees of his rank, who was reassigned? Private respondent alleged he
was singled out, but he did not present any evidence to prove it. Moreover,
there is no convincing evidence of grave abuse of discretion on petitioners
part. Private respondent speculated that petitioners real intent in reassigning
him was to create a vacancy in his position so that petitioner could appoint
someone close to him. This is a mere allegation which private respondent
failed to substantiate. Official functions are presumed to be regular unless
proven otherwise.[20]

THE SECRETARY OF AGRICULTURE AND NATURAL RESOURCES,
DIRECTOR OF MINES AND MINLAWI MINING ASSOCIATION,
represented by its attorney-in-fact, ANITA M. ABAYA, petitioners,
vs.
THE HON. JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA,
Branch IX and LOUIS W. HORA,respondents.

Lastly, private respondent claimed urgency in that he had no other
recourse but to go to court, or he would be charged administratively.
However, under Omnibus Rules Implementing the Civil Service Law, a
recourse is available to him by way of appeal which could be brought to the
agency head, with further recourse, if needed, to the Civil Service
Commission. Worth noting, the possibility of an administrative charge was
only speculative on the part of private respondent, who could avail of
administrative remedies already cited.

LABRADOR, J.:

In sum, Civil Case No. 22462 is not an exception to the general rule on
exhaustion of administrative remedies. The Court of Appeals, in our view,
committed reversible error in finding that the trial court did not err nor gravely
abused its discretion for taking jurisdiction over Civil Case No. 22462.
WHEREFORE, the petition is GRANTED, and the decision of the Court
of Appeals in CA-G.R. SP No. 44123 is REVERSED. The orders dated
January 8, 1996 and January 13, 1997 of the Regional Trial Court of Iloilo
City, Branch 36, denying petitioners motion to dismiss and the motion for
reconsideration, respectively, are ANNULLED and SET ASIDE. Civil Case
No. 22462 ought to be and is hereby ordered DISMISSED. Costs against
private respondent.
SO ORDERED.
G.R. No. L-7752

May 27, 1955

Donato S. Conti and Norberto A. Ferrera for petitioner Secretary of
Agriculture and Natural Resources.
Policarpio S. Cruz for petitioner Director of Mines.
Jose D. Calderon and Manuel T. Reyes for petitioner Minlawi Mining
Association.
Sotero H. Laurel for respondents.

This is a petition for certiorari and prohibition with preliminary injunction to
enjoin the Court of First Instance of Manila from continuing with the hearing
of civil case No. 20449, entitled Louis W. Hora, Plaintiff, vs. the Honorable,
the Secretary of Agriculture and Natural Resources, et al., Defendants. It is
alleged that the said court has no jurisdiction to take cognizance of the case
for the reason that it was presented after the expiration of the period
prescribed by law for prosecuting an appeal from the decision of the
Secretary of Agriculture and Natural Resources.
The record discloses that on May 29, 1952 the Director of Mines accepted
the lease application of the Minlawi Mining Association in Mines
Reconstitution Case No. V-40, and the Secretary of Agriculture and Natural
Resources dismissed the appeal therefrom of Louis W. Hora, Oppositor, and
of Apolinario de los Santos, Intervenor. A copy of this decision (of the
Secretary of Agriculture and Natural Resources) was received by respondent
Louis W. Hora on May 18, 1953. Copy of the order of denial was received by
the respondent on August 4, 1953. On August 4, 1953 Hora presented a
petition in this court for certiorari and injunction, praying that the decision and
order of the Director of Mines and the Secretary of Agriculture and Natural
Resources be set aside and be declared null and void. But the petition was
dismissed by this Court on August 6, 1953 for lack of merit and on the ground
that the proper remedy is an ordinary action. Hora moved to reconsider the
said dismissal, but the motion was denied by the Court on August 26, 1953.
Copy of the resolution of denial was received by Hora on August 27, 1953.

50

On the same day (August 27, 1953), he filed a complaint in the Court of First
Instance of Manila (Civil Case No. 20449, Hora vs. the Hon., the Secretary of
Agriculture and Natural Resources), praying that the abovementioned orders
of the Director of Mines and the Secretary of Agriculture and Natural
Resources be set aside. On September 2, 1953 the defendants presented a
motion to dismiss the action on the ground that the court has not jurisdiction
to entertain the same because the decision of the Department Secretary in
D.A.N.R. Case No. 665 had become final. Hora presented an opposition to
this motion on September 11, 1953. Thereafter, the parties were required to
present memoranda to support their motion and opposition, and the court on
March 1, 1953 denied the motion to dismiss because "the grounds thereof
are not so undubitable and which may be taken up and fully determined
during the trial of this case." The defendant Minlawi Mining Association filed a
motion for reconsideration of the above order, but the same was denied on
April 3, 1954. In the same order of denial, the court ordered the defendants
to file their answer.
The petition in this case was filed on April 30, 1954, and it alleges therein as
ground for the petition that the decision of the Secretary of Agriculture and
Natural Resources had become final because the complaint filed with the
court of first instance to annul the said decision which was presented on
August 27, 1953, was filed beyond the 30-day period provided in Section 4 of
Republic Act No. 739 within which an appeal from the decision of the said
Secretary may be made to a court of competent jurisdiction. In their answer,
respondents claim that the action instituted by them in the court of first
instance constituted an appeal from an administrative tribunal to a court of
justice, and under the principle that administrative remedies should be
exhausted before resort to the court of justice may be made, the 30-day
appeal period providing in Section 4 of Republic Act 739 should be counted
from the day of the notice of the order denying the motion from
reconsideration of said decision, this principle being the one sustained by a
majority of the court in the United States.
It will be noted that from May 18, 1953, when the respondent received a copy
of the Secretary's decision, to June 10, 1953, when he presented a motion
for reconsideration of said decision, a period of 23 days elapsed, and from
August 4, 1953, the date of the receipt of the order denying his motion for
reconsideration, to August 27, 1953, the date of the presentation of the
complaint, 23 days also elapsed. It is the claim of the petitioner that the 30day period of appeal provided in Section 4, Republic Act No. 739, should

begin from the receipt of the decision of the Secretary of Agriculture and
Natural Resource by the interested party, and that the presentation of the
motion for reconsideration with said Secretary had the effect of merely
suspending the running of the period of appeal, and the same continued to
run again from the receipt of the order denying the motion for reconsideration
so that when the complaint in the court of first instance was filed by the
respondent on August 27, 1953, a full period of 46 days had elapsed, which
is beyond the period allowed by the abovementioned law.
There is much merit in the argument of counsel for respondent that as the
action filed in the court of first instance to annul a decision of the Secretary of
Agriculture and Natural Resources seeks the review of an administrative
decision, the period within which the review must be sought must be counted
from the denial of the motion for reconsideration because of the principle that
all administrative remedies must be exhausted before resource to the courts
can be had against orders or decision of administrative bodies. Hence, it has
been said:
Where the statute provides in general terms that the appeal or
proceedings in error shall be instituted within a certain time for the
rendition or entry of the judgment or decree, it is the general rule that
where a motion for new trial is seasonably made the time is to be
computed from the date of the denial of the motion, and not the date
of the rendition of the judgmentor decree, where the motion was
necessary to the consideration in the appellate court of the question
involved. The reason for this rule is that the character of the finality
does not attach to the judgment or decree until the motion has been
decided. . . .. (3 Am. Jur. 149).
The above-enunciated principle appeals to reason and were we to decide the
question on that principle alone, we would agree with respondent's
contention. In this jurisdiction, however the Legislature has provided the
method or procedure by which a review of the decision of the Secretary of
Agriculture and Natural Resources may be had in the court of justice. The
procedure outlined in Section 4, Republic Act No. 739, is as follows:
Sec. 4. . . .. The decision of the Secretary of Agriculture and Natural
Resources may be taken to the court of competent jurisdiction as in
ordinary civil cases within thirty (30) days from receipt of such
decision: Provided, that if no such action is taken within the period of

51

30 days from receipt of such decision, the decision of the Secretary
of Agriculture and Natural Resources shall likewise be final and
binding upon the parties concerned.
It is evident from the above provision that the Legislature intended that an
appeal may be had against the decision of the Secretary of Agriculture and
Natural Resources to a court justice. That an appeal is meant may be
inferred from the use of the words "decision" and of the clause "may be taken
to the court." When a decision is to be taken to a court, it means that it will be
taken thereto by way of an appeal or for review. The law significantly
provides that the decision shall be taken to the court as in ordinary civil
cases; in other words, the appeal may be taken in the same manner as
appeals are made in the court of justice in ordinary civil actions. The
procedure for appeal in ordinary civil actions is defined in Section 3 of Rule
41 of the Rules of Court, as follows:
Appeal may be taken by serving upon the adverse part and filing with
the trial court within thirty days from notice of order or judgment a
notice of appeal, an appeal bond, and a record on appeal. The time
during which a motion to set aside has been pending shall be
deducted.
Interpreting the said provision, Chief Justice Moran says:
As stated in this provision "the time during which a motion to set
aside has been pending shall be deducted.' In other words, from the
date a motion to set aside is duly filed to the date when the movant is
duly notified of the denial of his motion, the period to appeal is
deemed suspended. . . . (I Moran, Comments on the Rules of Court,
p. 907.)
In view of the express provision of the statute, we must decline to follow the
principle set forth in American courts (3 Am. Jur. 149, supra), however
reasonable it may seem to be. The right to appeal from a decision of the
Secretary of Agriculture and Natural Resources is a statutory right; it can be
invoked only in accordance with the manner which the Legislature has
provided for the purpose. The considered opinion of the members of the
Court is that the Legislature has adopted the principle contained in the Rules
as to the manner of perfecting appeals in ordinary civil actions for the
purpose of uniformity and to prevent the confusion that may be caused to

litigants and lawyers by an appeal different from that applicable in courts of
justice. Our conclusion as above set forth is supported by jurisprudence in
Federal courts in the United States, thus:
In the Federal Courts the rule is well established that in judicial
proceedings the filing of a petition for rehearing, or a motion for New
Trial, will suspend the running of the period within which an appeal
will be taken, and that this period begins to run then anew from the
date on which final action is taken on the petition or motion, whether
it be denied or granted. The rule as above stated applies even
though a statute fixes the time within which appeal may be taken as
a definite period from the entry of judgment. Wayne United Gas
Co. vs. Owens-Illinois Glass, 1937, 300 US 131, 81, L. Ed. 557
Morse vs. U.S. 151, 70 L. Ed. 518 Citizens Bank vs. Opperman,
1919, 249 US 448, 63 L. ed. 701. (Saginaw Broadcasting
Co. vs. Federal Communications Commission, 96 F. 2d 554).
For the foregoing consideration, the petition should be granted. The order
denying the dismissal of the action in the court of first instance is hereby
reversed and the complaint in said court filed by the respondents herein
order dismissed. With costs against the respondent Louis W. Hora.
G.R. No. L-10370

January 31, 1958

THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
MATIAS H. AZNAR and THE COURT OF TAX APPEALS, respondents.
Office of the Solicitor General Ambrosio Padilla, Solicitor Felicisimo R.
Rosete, and Special Attorney Librada del Rosario-Natividad for petitioner.
Primitivo N. Sato and Jose P. Enad for respondent Aznar.
FELIX, J.:
This is a petition filed by the Collector of Internal Revenue to review
by certiorari the resolution of the Court of Tax Appeals dated February 8,
1956, in C.T.A. Case No. 109 enjoining him from enforcing collection of the
alleged income tax liability of Matias H. Aznar through summary
administrative method. The facts of the case are as follows:

52

In a letter dated November 28, 1952, the Collector of Internal Revenue,
through the office of the City Treasurer of Cebu, demanded from Matias H.
Aznar the payment of P732,032.66 allegedly representing the latter's income
tax deficiencies for the tax years 1945 to 1951. It appears on record that the
Collector of Internal Revenue also instructed the City Treasurer of Cebu to
place the properties of said taxpayer under constructive distraint to
guarantee the satisfaction of the taxes thus assessed (Exh. 9), and this
instruction was supposedly complied with by the latter official in virtue of a
warrant of distraint and levy dated February 17, 1953, and served on
taxpayer Aznar on February 20, 1953 (Exh. 11). An exchange of
communications between the Internal Revenue Office and the taxpayer
ensued as a result of which a reinvestigation of the income tax assessment
of the latter was made and the same was finally reduced from P380,999.70.
Aznar was correspondingly informed of this correction in a communication
dated February 16, 1955, specifically stating that this later figure superseded
the previous one sent by the Bureau of Internal Revenue.
Upon receipt of the corrected assessment, the taxpayer filed with the Court
of Tax Appeals a petition to review the same and subsequently an urgent
petition was also filed to restrain therein respondent Collector of Internal
Revenue from proceeding with the collection of the alleged tax deficiencies
by means of the summary methods of distraint and levy (Annex B of petition),
on the ground that the right of the respondent Collector to effect the
collection of the taxes demanded of said taxpayer by extra judicial methods
had already prescribed; that the employment of these means would cause
petitioner injustice and irreparable injury; and that the petition was not merely
intended to delay the payment of the taxes because petitioner stood on an
even chance of winning the case if given a day in court (Annex B of the
petition). The Collector of Internal Revenue set up an opposition against the
grant of this petition and consequently, hearing on the matter was duly
conducted by the lower Court. After the parties had filed their respective
memoranda and rested their case, the lower Court, in a resolution dated
February 8, 1956, issued an injunction prayed for enjoining the Collector of
Internal Revenue from proceeding with the collection of the taxes by means
of the summary methods of distraint and levy after finding that the warrant
issued by the Treasurer of the City of Cebu dated February 17, 1953, placing
the properties of Matias H. Aznar under constructive distraint and levy and
which was supposedly received by said taxpayer on February 20, 1953, was
not actually served on petitioner Aznar; that the warrant of garnishment
served on the Philippine National Bank in Manila on August 14, 1953, was

null and void in view of the respondent's failure to furnish the taxpayer with a
copy of the same and that at the placing of the properties of the taxpayer
under constructive distraint and levy on April 28, 1955, was made beyond the
3-year prescriptive period as provided by Section 51-(d) of the National
Internal Revenue Code. From this resolution, the Collector of Internal
Revenue brought the matter to this Court in a petition to review
by certiorari contending that collection of taxes cannot be restrained by
injunction; and that even if the court a quo could have lawfully issued the
same, said tribunal acted with grave abuse of discretion when it did not
require the taxpayer to file a bond as exhorted by Section 11 of Republic Act
No. 1125.
There appears no record as to when Matias H. Aznar filed his income tax
returns for the years 1945 and 1946, but it is not controverted that his tax
returns for 1947 was filed on March 1, 1948; for 1948 on February 28, 1949;
for 1949 on March 1, 1950; for 1950, on March 1, 1951; and for 1951, on
March 1, 1952. There is likewise no dispute that Matias H. Aznar's alleged
income tax deficiencies were assessed at P723,132.66 on November 28,
1952, which was reduced to P380,999.70 on March 17, 1955. During the
hearing had in the court below, the Collector of Internal Revenue, trying to
establish the fact that the properties of the taxpayer were already placed
under constructive distraint and levy as of February 20, 1953, offered in
evidence Exhibit 11, purportedly a duplicate of the warrant dated February
17, 1953, and allegedly received by Aznar on February 20 of the same year.
Aznar, however disputed the authenticity of Exhibit 11 maintaining that it was
never served on him. It appears on record of a warrant of garnishment to
distrain the deposits Mr. and Mrs,. Aznar had with the Philippine National
Bank was also served on said banking institution on August 14, 1953, but the
taxpayer once again interposed an objection to the use of this measure on
the ground that he was not notified thereof pursuant to the provision of
Section 319 of the Tax Code and asserted that the issuance of said warrant
was null and void.
There is likewise no controversy that the City Treasurer of Cebu levied upon
certain real properties belonging to the taxpayer on May 6, 1955, but Aznar
took exception to the employment of this administrative method to effect
collection of the taxes allegedly due by him, it having been issued 3 years, 2
months and 5 days after he ahd filed his income tax returns for the year
1951, and therefore beyond the 3-year prescriptive period required by
Section 51-d of the Tax Code.

53

Actually, the questions at issue in the instant case are: whether the Collector
of Internal Revenue could enforce collection of the alleged deficiency income
taxes of Matias H. Aznar through the summary methods of distraint and levy
and, consequently, whether the Court of Tax Appeals erred in issuing the
injunction restraining said official from employing the same; and granting the
Court of Tax Appeals could issue an injunction, whether said tribunal erred in
not requiring the taxpayer to make a deposit.
We agree with petitioner that Section 305 of the National Internal Revenue
Code precludes the use of injunction to restrain the collection of taxes, but as
this Court has already pronounced, in view of the existence of the provisions
of Section 11 of Republic Act No. 1125 allowing the Tax Court to issue said
writ of injunction subject certain limitations, the former (Sec. 305) must be
deemed to have modified by the later enactment-Republic Act No. 1125
(Collector of Internal Revenue vs. Avelino, 100 Phil., 327, 53 Off. Gaz., 645).
And we have since then and even before, adhered to the doctrine that the
collection of income taxes, after the lapse of three years from the date the
income tax return said to be false, fraudulent or erroneous had been filed,
may no longer be effected by means of administrative methods but only
through judicial proceedings (Collectors of Internal Revenue vs. Villegas, 56
Phil. 554; Collector of Internal Revenue vs. Haygood, 65 Phil. 520; Juan de
la Vifla vs. El Gobierno de las Islas Filipinas, G.R. No. 42669, Jan. 29, 1938;
Philippine Sugar Estate Development Co., Inc. vs. Posadas, 68 Phil. 216;
Collector vs. Avelino, supra; Collector vs. A.P. Reyes, 100 Phil., 822;
Collector vs. Zulueta, 100 Phil., 872; 53 Off. Gaz., [9] 6532; Sambrano vs.
Court of Tax Appeals, 101 Phil., 1, 53 Off. Gaz., [15] 4839.
In the light of the aforementioned ruling, were We to consider as valid andin
order the disputed warrant dated February 17, 1953, placing the propertiesof
the taxpayer under constructive destraint and levy, the collection of thetaxes
for 1949, 1950 and 1951 by extra-judicial methods would proper and the
resolution of the Court of Tax Appeals as far as it concerns this later period
would be erroneous, although summary administrative means would
nolonger be the proper recourse for the collection of taxes corresponding
to1948 and the years previous to that as 3 years, 11 months and 22 days has
already elapsed from the time the income tax return for that year was filed.
The respondent Court of Tax Appeals, however, made a finding that while
itmay be true that Exhibit 11 could have been prepared at the time referred
to,probably through omission, oversight or negligence, same was not

executed and thus actually the properties of the taxpayer were only placed
underconstructive distraint and levy on May 6, 1955. As Republic Act No
1125 creating the Court of Tax Appeals keep silence as to matters left open
to Usfor review or the issues that We may take conizance of, and as courts
have to construe statutes as they are found and not to amend or change
them under the guise of construction (82 C.J.S. 530), this Court in passing
upon petitionsto review by certiorari decisions or rulings of the Court of Tax
Appeals may review, revise, reverse, amend or modify not only the
legalissues involved therein but also the findings of fact upon which said
decision or ruling is based.
Notwithstanding the foregoing, it may be stated that any party
adverselyaffected by any rulign, order or decision of the Court of Tax Appeals
has by law two ways of elevating his case to the Supreme Court, i.e., first, by
filing in the Court a quo a notice of appeal and with this Court a petition for
review within 30 days from the date he receives notice of said ruling, order or
decision adverse to him (Sec. 18, Rep. Act 1125), and second, by causing
such ruling, order or decision of the Court of Tax Appeals likewise reviewed
by Us upon a writ of certiorari in proper cases (Sec. 19, R.A. No. 1125).
Premised on these provisions, it may be alleged that when a case is taken up
to this Court by petition for review, We could go over the evidence on record
and pass upon the questions of fact; but that in cases of review upon petition
for a writ of certiorari, this Court could only pass upon issues involving
questions of law. In answer to these possible arguments We may say that
when the interest of justice so demands, We may interchangeably consider
petitions for review as petitions for a writ of certiorari and vice-versa, and if
We have the power to consider the evidence to determine the facts in the
cases of review, We find no plausible reason for depriving this Court of such
power in petitions for certiorari specially if We consider that in the latter cases
the petitioner oftenly charges the respondent Court with the commission of
grave abuse of discretion the determination of which usually depends on the
facts and circumstances of the points in controversy. Moreover, in the case at
bar, We find that on March 1, 1956, respondent Collector of Internal Revenue
filed with the Court of Tax Appeals a notice of appeal from the resolution of
said Court that is now subject of this recourse (p. 466, CTA records) and no
matter how inappropriatemay be the wording of the petition filed in this
instance, it could not conceal that respondent's intention was to appeal the
matter to this Court, as otherwise he would not have filed said notice of
appeal which is required in petitions for review (Sec. 18, R.A. No. 1125) and
not in petitions forcertiorari (Sec. 19, id.). It is also to be noted that in the

54

instant case of the Solicitor General has not filed any motion for the
reconsideration of said resolution, a requisite that is necessary in petitions
for certiorari.
Having all this in mind, We are inclined to consider the question of facts
invoved in the present controversy, and in going over the evidence presented
We find contrary to the conclusion arrived at by the court a quo, that there
are proofs supporting petitioner's contention that Exhibit 11 was properly
executed. The respondent Court refused to give credence to the employees
of the City Treasurer's Office who claimed to have served the converted
warrant on the taxpayer on February 20, 1953, by reason of certain
inconcistencies in their declarations during the extensive cross examination
conducted by counsel for respondent Aznar. We must remember, however,
that considering the time that had lasped when the incident took place and
the date they were questioned under oath as regard their affidavits
recounting the event, it is but natural for the human brain not to pick up
certain details of an event that transpired sometime ago and thus expect
minor inconsistencies in the testimonies of several witnesses. On substantial
points—as to who and how the warrant in question was served, the person
receiving the same, and other facts surrounding said service, the witnesses
are in unison in their declarations. It is true that exhibit 11 is merely a
duplicate copy of the warrant and that the original thereof could nowhere be
found. But the personel of the office of the City Treasurer of Cebu admitted it
was lost and for this reason thier affidavits recounting said service were
executed (Exhs. 13, 14, 15, 16 and 17—p. 68-79, CTA Records). Moreover
we find in the records a decisive factor that props up the contention of
petitioner Collector of Internal Revenue, for We must not lose sight of the fact
that Exhibit 11 contains a list of the properties of Matias H. Aznar which were
levied upon by the City Treasurer of Cebu and which the Treasurer in turn
placed in the possession of said owner for safe keeping, as acknowledged by
the latter in said exhibit, and such properties could not have been mentioned
in the document if said properties had not been taken from and returned to
taxpayer Aznar who has not denied that same were his. We cannot simply
disregard this form of evidence not only because affidavits are admissable to
prove the service of a summons, notice or other papers in an action or
special proceeding (See Wigmore on Evidence, Vol. 6, 3rd ed., p. 42-49,) but
also because respondent taxpayer was given opportunity to cross-examine
the affiants before the Municipal Court of Cebu.

The lower Court also placed much stress on the supposition that the
Collector of Internal Revenue should not have sent the communications
dated March 15 and March 28, 1955, inquiring as to what action the City
Treasurer of Cebu had taken on the tax case of Matias H. Aznar if the latter
had really sent the original of Exhibit 11 to respondent Collector. A close
scrutiny of the letters referred to reveals that they were in connection with the
correctedassessment sent by the Internal Revenue Office to Matias H. Anzar.
datedFebruary 16, 1955 (p. 311, BIR records), of which the Treasurer's Office
was also duly notified (p. 315, BIR records) and not in connection with the
assessment of November 28, 1952. The issuance of another warrant by
theTreasurer's Office on April 28, 1955 and which the was admittedly
received byAnzar on May 6, of the same year was likewise taken by the Tax
Court to contradict the existence of Exhibit 11. It is correct that a mistake
wascommitted by said office in stating therein that the income tax
deficiencies of Matiaz H. Anzar amounted to P723,032.07 because this figure
as correctedshould properly be P380,999.70, but it must be noted that this
second warrantcovers 2 buildings belonging to the taxpayer found in the
province of Leytewhich were not included among those listed in the first
warrant, Exhibit 11.As explained, this warrant was issued because the
properties covered by thefirst writ would not be sufficient to satisfy the
amount demanded by the Government. Thus, piecing the evidence together,
it is clear to our mind thatthe warrant placing the properties of Matias H.
Anzar under constructive distraint and levy was served on the latter on
February 20, 1953, which was2 years, 11 months and 10 days after the
taxpayer had filed his income tax return of the tax year 1949; 1 year 11
months and 19 days after he had filedhis returns for 1950; and 11 months
and 19 days after he did so far for the year 1951.
Section 11 of Republic Act No. 1125 contains the following:
SEC 11. WHO MAY APPEAL; EFFECT OF APPEAL.—
xxx

xxx

xxx.

No appeal taken to the Court of Appeals from the decision of the
Collector of Internal Revenue or the Collector of Customs shall
suspend the payment,levy, distraint and/or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing
law; Provided, however, That when in the opinion of the Court the
collection by the Bureauof Internal Revenue or the Commissioner of

55

Customs may jeopardize the interest of the Government and/or the
taxpayer the Court at any stage of theproceeding may suspend the
said collection and require the taxpayer eitherto deposit the amount
claimed or to file a surety bond for not more than double the amount
with the Court.
It may be seen that the Court is allowed by law to suspend the collectionof
taxes subject to certain limitations.
Teh second question posed herein is whether the Court of Tax Appeals
couldissue an injunction to suspend such collection without requiring the
taxpayerto make a deposit or file a bond? This Court, resolving the same
question in similae case, held that the requirement of a bond before a writ of
injunctioncould be issued by the Tax Court applies only to cases where the
means soughtbe employed for the enforcement of the collection of the tax
are by themselves legal and not where same were declared null and void, as
where thesummary methods of distraint and levy would be utilized in the
collection ofdeficiency income taxes, after the 3-year prescriptive period as
provided bySection 51-d of the Internal Revenue Code has already elapsed
(Collector ofInternal Revenue vs. A.P. Reyes,supra; Sambrano vs.
CTA, supra). The court,in upholding this theory, explains:
SECTION 11 of Republic Act No. 1125 is therefore promised on the
assumptionthat the collection by summary proceedings is by itself in
accordance with existing law; and then what is suspended in the act
of collecting, whereas, in the case at bar what the respondent Court
suspended was the use of methodemployed to verify the collection
which was evidently illegal after the lapse of the three-year limitation
period. The respondent Court issued the injunction in question on the
basis of its findings that the means of intended to be used by the
petitioner in the collection of the alleged deficiency taxes were in
violation of law. It certainly would be an absurdityon the part of the
Court of Tax Appeals to declare that the collection bysummary
methods of distraint and levyt was violative of the law, and then,on
the same breath, require the petitioner to deposit or file a bond as

aprerequisite for the issuance of a writ of injunction. Let us suppose,
for the sake of argument, that the Court a quo would have required
the petitioner to post the bond in question that the taxpayer would
refuse or fall to furnish said bond, would the Court, a quo be obliged
to authorize or allow the Collector to proceed with the collection from
the petitioner of the taxesdue by a means it previously declared to
the contrary to law? (Collector vs.Reyes, supra).
As the Collector of Internal Revenue, thought the Office of the City Treasurer
of Cebu, placed the properties of the taxpayer under distraint andlevy only on
February 20, 1953, to secure the payment of alleged income taxdeficiencies
for the tax years 1945 to 1951, and as with respect to the taxesdemanded for
the yeatr 1945, 1946, 1947 and 1948, the said warrant was issuedbeyond
the 3-year period of limitations as prescribed by Section 51-d of the Tax
Code, and the following the ruling adopted by this Court as regards
theissuance by the Tax Court of writs of injunction, the respondent Court
didnot err in enjoining the Collector from using summary administrative
methodswithout requiring the taxpayer to post a bond or make a deposit as
far as thetax years 1945, 1946, 1946 and 1948 are concerned. As regards
1949 to 1951,the answer is all too obvious, though We must have in mind
that the cuort a quo acted on the erroneuos assumption that the period for
said summary adminstrative methods had already lapsed and that the effect
of its ruling isa fait accompli.
Wherefore, the resolution of the Court of Tax Apeals dated February 8,
1956,is set aside and this case is hereby remanded to the lower Court for
furtherproceedings so that it may determine the income tax liabilities of
MatiasH. Aznar that have not prescribed under the terms and period fixed by
Sections 331 and 332 of the National Internal Revenue. Pending the
disposition of this case in the lower Court, respondent Matias H. Aznar
isordered to deposit with said court the amount demanded from him for the
years1949 to 1951 or furnis a surety bond for not more than double said
amount.Costs are taxed against respondent Matias H. Aznar. It is so ordered.

56