Admin Law Cases Last Javellana-Asturias

7/27/2019 Admin Law Cases Last Javellana-Asturias

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Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. 102549 August 10, 1992

EDWIN B. JAVELLANA, petitioner,vs.

DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT AND LUIS T. SANTOS,SECRETARY, respondents.

Reyes, Lozada and Sabado for petitioner.

GRIO-AQUINO,J.:

This petition for review on certiorariinvolves the right of a public official to engage in the practice of

his profession while employed in the Government.

Attorney Erwin B. Javellana was an elected City Councilor of Bago City, Negros Occidental. On

October 5, 1989, City Engineer Ernesto C. Divinagracia filed Administrative Case No. C-10-90 against

Javellana for: (1) violation of Department of Local Government (DLG) Memorandum Circular No. 80-

38 dated June 10, 1980 in relation to DLG Memorandum Circular No. 74-58 and of Section 7,

paragraph b, No. 2 of Republic Act No. 6713, otherwise known as the "Code of Conduct and Ethical

Standards for Public Officials and Employees," and (2) for oppression, misconduct and abuse of

authority.

Divinagracia's complaint alleged that Javellana, an incumbent member of the City Council or

Sanggunian Panglungsod of Bago City, and a lawyer by profession, has continuously engaged in thepractice of law without securing authority for that purpose from the Regional Director, Department

of Local Government, as required by DLG Memorandum Circular No. 80-38 in relation to DLG

Memorandum Circular No. 74-58 of the same department; that on July 8, 1989, Javellana, as counsel

for Antonio Javiero and Rolando Catapang, filed a case against City Engineer Ernesto C. Divinagracia

of Bago City for "Illegal Dismissal and Reinstatement with Damages" putting him in public ridicule;

that Javellana also appeared as counsel in several criminal and civil cases in the city, without prior

authority of the DLG Regional Director, in violation of DLG Memorandum Circular No. 80-38 which

provides:

MEMORANDUM CIRCULAR NO. 80-38

TO ALL: PROVINCIAL GOVERNORS, CITY AND MUNICIPALITY

MAYORS, KLGCD REGIONAL DIRECTORS AND ALL CONCERNED

SUBJECT: AMENDING MEMORANDUM CIRCULAR NO. 80-18 ON

SANGGUNIAN SESSIONS,PER DIEMS, ALLOWANCES, STAFFING AND

OTHER RELATED MATTERS

In view of the issuance or Circular No. 5-A by the Joint Commission on Local

Government Personnel Administration which affects certain provisions of MC

80-18, there is a need to amend said Memorandum Circular to substantially

conform to the pertinent provisions of Circular No. 9 -A.

xxx xxx xxx

C. Practice of Profession

The Secretary (now Minister) of Justice in an Opinion No. 46 Series of 1973

stated inter alia that "members of local legislative bodies, other than the

provincial governors or the mayors, do not keep regular office hours." "They

merely attend meetings or sessions of the provincial board or the city or

municipal council" and that provincial board members are not even required

"to have an office in the provincial building." Consequently, they are not

therefore to required to report daily as other regular government employees

do, except when they are delegated to perform certain administrative

functions in the interest of public service by the Governor or Mayor as the case

may be. For this reason, they may, therefore, be allowed to practice their

professions provided that in so doing an authority . . . first be secured from the

Regional Directors pursuant to Memorandum Circular No. 74-58, provided,

however, that no government personnel, property, equipment or supplies shall

be utilized in the practice of their professions. While being authorized to

practice their professions, they should as much as possible attend regularly any

and all sessions, which are not very often, of their Sanggunians for which they

were elected as members by their constituents except in very extreme cases,

e.g., doctors who are called upon to save a life. For this purpose it is desired

that they always keep a calendar of the dates of the sessions, regular or special

of their Sanggunians so that conflicts of attending court cases in the case of

lawyers and Sanggunian sessions can be avoided.


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As to members of the bar the authority given for them to practice their

profession shall always be subject to the restrictions provided for in Section 6

of Republic Act 5185. In all cases, the practice of any profession should be

favorably recommended by the Sanggunian concerned as a body and by the

provincial governors, city or municipal mayors, as the case may be. (Emphasis

ours, pp. 28-30,Rollo.)

On August 13, 1990, a formal hearing of the complaint was held in Iloilo City in which thecomplainant, Engineer Divinagracia, and the respondent, Councilor Javellana, presented their

respective evidence.

Meanwhile, on September 10, 1990, Javellana requested the DLG for a permit to continue his practice

of law for the reasons stated in his letter-request. On the same date, Secretary Santos replied as

follows:

1st Indorsement

September 10, 1990

Respectfully returned to Councilor Erwin B. Javellana, Bago City, his within

letter dated September 10, 1990, requesting for a permit to continue his

practice of law for reasons therein stated, with this information that, as

represented and consistent with law, we interpose no objection thereto,

provided that such practice will not conflict or tend to conflict with his official

functions.

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(p. 60, Rollo.)

On September 21, 1991, Secretary Luis T. Santos issued Memorandum Circular No. 90-81 setting forth

guidelines for the practice of professions by local elective officials as follows:

TO: All Provincial Governors, City and Municipal Mayors,

Regional Directors and All Concerned.

SUBJECT: Practice of Profession and Private Employment

of Local Elective Officials

Section 7 of Republic Act No. 6713 (Code of Conduct and Ethical Standards for

Public Officials and Employees), states, in part, that "In addition to acts and

omission of public officials . . . now prescribed in the Constitution and existinglaws, the following shall constitute prohibited acts and transactions of any

public officials . . . and are hereby declared to be unlawful: . . . (b) Public

Officials . . . during their incumbency shall not: (1) . . . accept employment as

officer, employee, consultant, counsel, broker, agent, trustee or nominee in

any private enterprise regulated, supervised or licensed by their office unless

expressly allowed by law; (2) Engage in the private practice of their profession

unless authorized by the Constitution or law, provided that such practice will

not conflict or tend to conflict with their official functions: . . .

xxx xxx xxx

Under Memorandum Circular No. 17 of the Office of the President dated

September 4, 1986, the authority to grant any permission, to accept private

employment in any capacity and to exercise profession, to any government

official shall be granted by the head of the Ministry (Department) or agency in

accordance with Section 12, Rule XVIII of the Revised Civil Service Rules, which

provides,in part, that:

No officer shall engage directly in any . . . vocation or

profession . . . without a written permission from the

head of the Department: Provided, that this prohibition


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will be absolute in the case of those officers . . . whose

duties and responsibilities require that their entire time

be at the disposal of the Government: Provided, further,

That if an employee is granted permission to engage in

outside activities, the time so devoted outside of office

should be fixed by the Chief of the agency to the end that

it will not impair in anyway the efficiency of the officer or

employee . . . subject to any additional conditions whichthe head of the office deems necessary in each particular

case in the interest of the service, as expressed in the

various issuances of the Civil Service Commission.

Conformably with the foregoing, the following guidelines are to be observed in

the grant of permission to the practice of profession and to the acceptance of

private employment of local elective officials, to wit:

1) The permission shall be granted by the Secretary of

Local Government;

2) Provincial Governors, City and Municipal Mayors

whose duties and responsibilities require that their entire

time be at the disposal of the government in conformitywith Sections 141, 171 and 203 of the Local Government

Code (BP 337), are prohibited to engage in the practice of

their profession and to accept private employment

during their incumbency:

3) Other local elective officials may be allowed to practice

their profession or engage in private employment on a

limited basis at the discretion of the Secretary of Local

Government, subject to existing laws and to the following

conditions:

a) That the time so devoted

outside of office hours should be

fixed by the local chief executiveconcerned to the end that it will

not impair in any way the

efficiency of the officials

concerned;

b) That no government time,

personnel, funds or supplies shall

be utilized in the pursuit of one's

profession or private employment;

c) That no conflict of interests

between the practice of profession

or engagement in private

employment and the official duties

of the concerned official shall arisethereby;

d) Such other conditions that the

Secretary deems necessary to

impose on each particular case, in

the interest of public service.

(Emphasis supplied, pp. 31-

32, Rollo.)

On March 25, 1991, Javellana filed a Motion to Dismiss the administrative case against him on the

ground mainly that DLG Memorandum Circulars Nos. 80-38 and 90-81 are unconstitutional because

the Supreme Court has the sole and exclusive authority to regulate the practice of law.

In an order dated May 2, 1991, Javellana's motion to dismiss was denied by the public respondents.

His motion for reconsideration was likewise denied on June 20, 1991.

Five months later or on October 10, 1991, the Local Government Code of 1991 (RA 7160) was signed

into law, Section 90 of which provides:

Sec. 90. Practice of Profession. (a) All governors, city and municipal mayors

are prohibited from practicing their profession or engaging in any occupation

other than the exercise of their functions as local chief executives.

(b) Sanggunian members may practice their professions, engage in any

occupation, or teach in schools except during session hours: Provided, That

sanggunian members who are members of the Bar shall not:

(1) Appear as counsel before any court in any civil case

wherein a local government unit or any office, agency, or

instrumentality of the government is the adverse party;

(2) Appear as counsel in any criminal case wherein an

officer or employee of the national or local government


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is accused of an offense committed in relation to his

office;

(3) Collect any fee for their appearance in administrative

proceedings involving the local government unit of which

he is an official; and

(4) Use property and personnel of the Government

except when the sanggunian member concerned is

defending the interest of the Government.

(c) Doctors of medicine may practice their profession even during official hours

of work only on occasions of emergency: Provided, That the officials concerned

do not derive monetary compensation therefrom. (Emphasis ours.)

Administrative Case No. C-10-90 was again set for hearing on November 26, 1991. Javellana

thereupon filed this petition for certioraripraying that DLG Memorandum Circulars Nos. 80-38 and

90-81 and Section 90 of the new Local Government Code (RA 7160) be declared unconstitutional and

null void because:

(1) they violate Article VIII, Section 5 of the 1987 Constitution, which provides:

Sec. 5. The Supreme Court shall have the following powers:

xxx xxx xxx

(5) Promulgate rules concerning the protection and enforcement of

constitutional rights, pleading, practice, and procedure in all courts, the

admission to the practice of law, the Integrated Bar, and legal assistance to the

underprivileged. Such rules shall provide a simplified and inexpensive

procedure for the speedy disposition of cases, shall be uniform for all courts of

the same grade, and shall not diminish, increase, or modify substantive rights.

Rules of procedure of special courts andquasi-judicialbodies shall remain

effective unless disapproved by the Supreme Court.

(2) They constitute class legislation, being discriminatory against the legal and medical professions for

only sanggunian members who are lawyers and doctors are restricted in the exercise of their

profession while dentists, engineers, architects, teachers, opticians, morticians and others are not so

restricted (RA 7160, Sec. 90 [b-1]).

In due time, the Solicitor General filed his Comment on the petition and the petitioner submitted a

Reply. After deliberating on the pleadings of the parties, the Court resolved to dismiss the petition for

lack of merit.

As a matter of policy, this Court accords great respect to the decisions and/or actions of

administrative authorities not only because of the doctrine of separation of powers but also for their

presumed knowledgeability and expertise in the enforcement of laws and regulations entrusted to

their jurisdiction (Santiago vs. Deputy Executive Secretary, 192 SCRA 199, citing Cuerdo vs. C OA, 166SCRA 657). With respect to the present case, we find no grave abuse of discretion on the part of the

respondent, Department of Interior and Local Government (DILG), in issuing the questioned DLG

Circulars Nos. 80-30 and 90-81 and in denying petitioner's motion to dismiss the administrative

charge against him.

In the first place, complaints against public officers and employees relating or incidental to the

performance of their duties are necessarily impressed with public interest for by express

constitutional mandate, a public office is a public trust. The complaint for illegal dismissal filed by

Javiero and Catapang against City Engineer Divinagracia is in effect a complaint against the City

Government of Bago City, their real employer, of which petitioner Javellana is a councilman. Hence,

judgment against City Engineer Divinagracia would actually be a judgment against the City

Government. By serving as counsel for the complaining employees and assisting them to prosecute

their claims against City Engineer Divinagracia, the petitioner violated Memorandum Circular No. 74-

58 (in relation to Section 7[b-2] of RA 6713) prohibiting a government official from engaging in the

private practice of his profession, if such practice would represent interests adverse to the

government.

Petitioner's contention that Section 90 of the Local Government Code of 1991 and DLG Memorandum

Circular No. 90-81 violate Article VIII, Section 5 of the Constitution is completely off tangent. Neither

the statute nor the circular trenches upon the Supreme Court's power and authority to prescribe

rules on the practice of law. The Local Government Code and DLG Memorandum Circular No. 90-81

simply prescribe rules of conduct for public officials to avoid conflicts of interest between the

discharge of their public duties and the private practice of their profession, in those instances where

the law allows it.

Section 90 of the Local Government Code does not discriminate against lawyers and doctors. It

applies to all provincial and municipal officials in the professions or engaged in any occupation.

Section 90 explicitly provides that sanggunian members "may practice their professions, engage in

any occupation, or teach in schools expect during session hours." If there are some prohibitions thatapply particularly to lawyers, it is because of all the professions, the practice of law is more likely than

others to relate to, or affect, the area of public service.

WHEREFORE, the petition is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.


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FIRST DIVISION

[G.R. No. 119761. August 29, 1996]

COMMISSIONER OF INTERNAL REVENUE,petitioner,vs. HON. COURT OF APPEALS, HON. COURT OFTAX APPEALS and FORTUNE TOBACCO CORPORATION, respondents.

D E C I S I O N

VITUG,J.:

The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March 1995, of

respondent Court of Appeals[1]

affirming the 10th August 1994 decision and the 11th October 1994

resolution of the Court of Tax Appeals[2]

("CTA") in C.T.A. Case No. 5015, entitled "Fortune Tobacco

Corporation vs. Liwayway Vinzons-Chato in her capacity as Commissioner of Internal Revenue."

The facts, by and large, are not in dispute.

Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different

brands of cigarettes.

On various dates, the Philippine Patent Office issued to the corporation separate certificates of

trademark registration over "Champion," "Hope," and "More" cigarettes. In a letter, dated 06

January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister

Ramon Diaz of the Presidential Commission on Good Government, "the initial position of the

Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands s ince they were listed in

the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed

the names of 'Hope' to Hope Luxury'and 'More' to 'Premium More,' thereby removing the said

brands from the foreign brand category. Proof was also submitted to the Bureau (of Internal

Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco Corporation register and therefore

a local brand."[3]

Ad Valorem taxes were imposed on these brands,[4]

at the following rates:

"BRAND AD VALOREM TAX RATE

E.O. 22

06-23-86

07-01-86 and E.O. 273

07-25-87

01-01-88 RA 6956

06-18-90

07-05-90

Hope Luxury M. 100's

Sec. 142, (c), (2) 40% 45%

Hope Luxury M. King

Sec. 142, (c), (2) 40% 45%

More Premium M. 100's

Sec. 142, (c), (2) 40% 45%

More Premium International

Sec. 142, (c), (2) 40% 45%

Champion Int'l. M. 100's

Sec. 142, (c), (2) 40% 45%

Champion M. 100's

Sec. 142, (c), (2) 40% 45%

Champion M. King

Sec. 142, (c), last par. 15% 20%

Champion Lights

Sec. 142, (c), last par. 15% 20%"[5]

A bill, which later became Republic Act ("RA") No. 7654,[6]

was enacted, on 10 June 1993, by

the legislature and signed into law, on 14 June 1993, by the President of the Philippines. The new lawbecame effective on 03 July 1993. It amended Section 142(c)(1) of the National Internal Revenue

Code ("NIRC") to read; as follows:

"SEC. 142. Cigars and Cigarettes. -

"x x x x x x x x x.
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"(c) Cigarettes packed by machine. - There shall be levied, assessed and collected on cigarettes

packed by machine a tax at the rates prescribed below based on the constructive manufacturer's

wholesale price or the actual manufacturer's wholesale price, whichever is higher:

"(1) On locally manufactured cigarettes which are currently classified and taxed at fifty-five percent

(55%) or the exportation of which is not authorized by contract or otherwise, fifty-five (55%) provided

that the minimum tax shall not be less than Five Pesos (P5.00) per pack.

"(2). On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum

tax shall not be less than Three Pesos (P3.00) per pack.

"x x x x x x x x x.

"When the registered manufacturer's wholesale price or the actual manufacturer's wholesale price

whichever is higher of existing brands of cigarettes, including the amounts intended to cover the

taxes, of cigarettes packed in twenties does not exceed Four Pesos and eighty centavos (P4.80) per

pack, the rate shall be twenty percent (20%)."[7]

(Italics supplied.)

About a month afterthe enactment and two (2) days before the effectivity of RA 7654,

Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full text of which

expressed:

"REPUBLIKA NG PILIPINAS

KAGAWARAN NG PANANALAPI

KAWANIHAN NG RENTAS INTERNAS

July 1, 1993

REVENUE MEMORANDUM CIRCULAR NO. 37-93

SUBJECT : Reclassification of Cigarettes Subject to Excise Tax

TO : All Internal Revenue Officers and Others Concerned.

"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION' cigarettes which are locally

manufactured are appropriately considered as locally manufactured cigarettes bearing a foreign

brand, this Office is compelled to review the previous rulings on the matter.

"Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956, provides:

"'On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%) Provided, That

this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold

or transferred by its owner to the local manufacturer. Whenever it has to be determined whether or

not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries

appearing in the current World Tobacco Directory shall govern."

"Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that the

locally manufactured cigarettes bear a foreign brand regardless of whether or not the r ight to use ortitle to the foreign brand was sold or transferred by its owner to the local manufacturer. The brand

must be originally owned by a foreign manufacturer or producer. If ownership of the cigarette brand

is, however, not definitely determinable, 'x x x the listing of brands manufactured in foreign countries

appearing in the current World Tobacco Directory shall govern. x x x'

"'HOPE' is listed in the World Tobacco Directory as being manufactured by (a) Japan Tobacco, Japan

and (b) Fortune Tobacco, Philippines. 'MORE' is listed in the said directory as being manufactured by:

(a) Fills de Julia Reig, Andorra; (b) Rothmans, Australia; (c) RJR-Macdonald, Canada; (d) Rettig-

Strenberg, Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h)

Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera,

Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds, USA. 'Champion' is registered in the said

directory as being manufactured by (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan

Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies,

Switzerland.

"Since there is no showing who among the above-listed manufacturers of the cigarettes bearing the

said brands are the real owner/s thereof, then it follows that the same shall be considered foreign

brand for purposes of determining the ad valorem tax pursuant to Section 142 of the National

Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24, 1988, 'in cases where it

cannot be established or there is dearth of evidence as to whether a brand is foreign or not, resort to

the World Tobacco Directory should be made.'

"In view of the foregoing, the aforesaid brands of cigarettes, viz: 'HOPE,' 'MORE' and 'CHAMPION'

being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured

cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cig arettes.

"Any ruling inconsistent herewith is revoked or modified accordingly.

(

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On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr.,

sent viatelefaxa copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in

particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy ofRMC 37-93.

In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune Tobacco,

requested for a review, reconsideration and recall of RMC 37-93. The request was denied on 29 July

1993. The following day, or on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax

deficiency amounting to P9,598,334.00.

On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA.[8]

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

"WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz:

`HOPE,' `MORE' and `CHAMPION' being manufactured by Fortune Tobacco Corporation as locally

manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is

found to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3,

1993, the brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to

Section 1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still classified asother locally manufactured cigarettes and taxed at 45% or 20% as the case may be.

"Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune Tobacco

Corporation in the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby canceled

for lack of legal basis.

"Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the deficiency tax

assessment made and issued on petitioner in relation to the implementation of RMC No. 37 -93.

"SO ORDERED."[9]

In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for

reconsideration.

The CIR forthwith filed a petition for review with the Court of Appeals, questioning the CTA's

10th August 1994 decision and 11th October 1994 resolution. On 31 March 1993, the appellate

court's Special Thirteenth Division affirmed in all respects the assailed decision and resolution.

In the instant petition, the Solicitor General argues: That -

"I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL REVENUE

INTERPRETING THE PROVISIONS OF THE TAX CODE.

"II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF RMC 37-93, FILING OF

COPIES THEREOF WITH THE UP LAW CENTER AND PRIOR HEARING ARE NOT NECESSARY TO ITS

VALIDITY, EFFECTIVITY AND ENFORCEABILITY.

"III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 37-93 ON JULY 2, 1993.

IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY MANUFACTURED

CIGARETTES SIMILARLY SITUATED AS 'HOPE,' 'MORE' AND 'CHAMPION' CIGARETTES.

"V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING HOPE, MORE AND

CHAMPION CIGARETTES BEFORE THE EFFECTIVITY OF R.A. NO. 7654.
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VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO ITS VALIDITY,

EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS OR PROPRIETY; RMC 37-93 IS

CORRECT."[10]

In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR which can

thus become effective without any prior need for notice and hearing, nor publication, and that its

issuance is not discriminatory since it would apply under similar circumstances to all locally

manufactured cigarettes.

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

Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings for the

effective implementation of the provisions of the National Internal Revenue Code. Let it be made

clear that such authority of the Commissioner is not here doubted. Like any other government

agency, however, the CIR may not disregard legal requirements or applicable principles in the

exercise of its quasi-legislative powers.

Let us first distinguish between two kinds of administrative issuances - a legislative rule and

an interpretative rule.

In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance

Secretary,[11]

the Court expressed:

"x x x a legislative rule is in the nature of subordinate legislation, designed to implement a primary

legislation by providing the details thereof. In the same way that laws must have the benefit of public

hearing, it is generally required that before a legislative rule is adopted there must be hearing. In this

connection, the Administrative Code of 1987 provides:

"Public Participation. - If not otherwise required by law, an agency shall, as far as practicable, publish

or circulate notices of proposed rules and afford interested parties the opportunity to submit their

views prior to the adoption of any rule.

"(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have

been published in a newspaper of general circulation at least two (2) weeks before the first hearing

thereon.

"(3) In case of opposition, the rules on contested cases shall be observed.

"In addition such rule must be published. On the other hand, interpretative rules are designed to

provide guidelines to the law which the administrative agency is in charge of enforcing."[12]

It should be understandable that when an administrative rule is merely interpretative in

nature, its applicability needs nothing further than its bare issuance for it gives no real consequence

more than what the law itself has already prescribed. When, upon the other hand, the administrative

rule goes beyond merely providing for the means that can facilitate or render least cumbersome the

implementation of the law but substantially adds to or increases the burden of those governed, it

behooves the agency to accord at least to those directly affected a chance to be heard, and

thereafter to be duly informed, before that new issuance is given the force and effect of law.

A reading of RMC 37-93, particularly considering the circumstances under which it has been

issued, convinces us that the circular cannot be viewed simply as a corrective measure (revoking in

the process the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of

the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope

Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes

bearing foreign brands and to thereby have them covered by RA 7654. Specifically, the new law

would have its amendatory provisions applied to locally manufactured cigarettes which at the time of

its effectivitywere not so classified as bearing foreign brands. Prior to the issuance of the questioned

circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally

manufactured cigarettes notbearing foreign brand subject to 45% ad valorem tax. Hence, without

RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on private

respondent's products. Evidently, in order to place "Hope Luxury," "Premium More," and

"Champion" cigarettes within the scope of the amendatory law and subject them to an increased tax

rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply interpreted the

law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements

of notice, of hearing, and of publication should not have been then ignored.

Indeed, the BIR itself, in its RMC 10-86, has observed and provided:

"RMC NO. 10-86

Effectivity of Internal Revenue Rules and Regulations

"It has been observed that one of the problem areas bearing on compliance with Internal Revenue

Tax rules and regulations is lack or insufficiency of due notice to the tax paying public. Unless there is

due notice, due compliance therewith may not be reasonably expected. And most importantly, their

strict enforcement could possibly suffer from legal infirmity in the light of the constitutional provision

on `due process of law' and the essence of the Civil Code provision concerning effectivity of laws,

whereby due notice is a basic requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).

"In order that there shall be a just enforcement of rules and regulations, in conformity with the basic

element of due process, the following procedures are hereby prescribed for the drafting, issuance

and implementation of the said Revenue Tax Issuances:

"(1). This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum

Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing oninternal revenue tax rules and regulations.
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"(2). Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances

shall not begin to be operative until after due notice thereof may be fairly presumed.

"Due notice of the said issuances may be fairly presumed only after the following procedures have

been taken:

"xxx xxx xxx

"(5). Strict compliance with the foregoing procedures is enjoined."[13]

Nothing on record could tell us that it was either impossible or impracticable for the BIR to observe

and comply with the above requirements before giving effect to its questioned circular.

Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.

Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be uniform

and equitable. Uniformity requires that all subjects or objects of taxation, similarly situated, are to be

treated alike or put on equal footing both in privileges and liabilities .[14]

Thus, all taxable articles or

kinds of property of the same class must be taxed at the same rate[15]

and the tax must operate with

the same force and effect in every place where the subject may be found.

Apparently, RMC 37-93 would only apply to "Hope Luxury," Premium More" and "Champion"

cigarettes and, unless petitioner would be willing to concede to the submission of private respondent

that the circular should, as in fact my esteemed colleague Mr. Justice Bellosillo so expresses in his

separate opinion, be considered adjudicatoryin nature and thus violative of due process following

theAng Tibay[16]

doctrine, the measure suffers from lack of uniformity of taxation. In its decision, the

CTA has keenly noted that other cigarettes bearing foreign brands have not been similarly included

within the scope of the circular, such as -

"1. Locally manufactured by ALHAMBRA INDUSTRIES, INC.

(a) `PALM TREE' is listed as manufactured by office of Monopoly, Korea (Exhibit R')

"2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY

(a) `GOLDEN KEY' is listed being manufactured by United Tobacco, Pakistan (Exhibit S')

(b) `CANNON' is listed as being manufactured by Alpha Tobacco, Bangladesh (Exhibit `T')

"3. Locally manufactured by LA PERLA INDUSTRIES, INC.

(a) `WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit U')

(b) `RIGHT' is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit V-1')

"4. Locally manufactured by MIGHTY CORPORATION

(a) 'WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit 'U-1')

"5. Locally manufactured by STERLING TOBACCO CORPORATION

(a) UNION' is listed as being manufactured by Sumatra Tobacco, Indonesia and Brown and

Williamson, USA (Exhibit 'U-3')

(b) WINNER' is listed as being manufactured by Alpha Tobacco, Bangladesh; Nanyang, Hongkong;

Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier Tobacco, Pakistan and Haggar, Sudan

(Exhibit 'U-4')."[17]

The court quoted at length from the transcript of the hearing conducted on 10 August 1993 by the

Committee on Ways and Means of the House of Representatives; viz:

"THE CHAIRMAN. So you have specific information on Fortune Tobacco alone. You don't have

specific information on other tobacco manufacturers. Now, there are other brands which are

similarly situated. They are locally manufactured bearing foreign brands. And may I enumerate to

you all these brands, which are also listed in the World Tobacco Directory x x x. Why were these

brands not reclassified at 55 if your want to give a level playing field to foreign manufacturers?

"MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue Memorandum Circular that

was supposed to come after RMC No. 37-93 which have really named specifically the list of locally

manufactured cigarettes bearing a foreign brand for excise tax purposes and includes all these brands

that you mentioned at 55 percentexcept that at that time, when we had to come up with this, we

were forced to study the brands of Hope, More and Champion because we were given documents

that would indicate the that these brands were actually being claimed or patented in other countries

because we went by Revenue Memorandum Circular 1488 and we wanted to give some rationality to

how it came about but we couldn't find the rationale there. And we really found based on our own

interpretation that the only test that is g iven by that existing law would be registration in the World

Tobacco Directory. So we came out with this proposed revenue memorandum circular which we

forwarded to the Secretary of Finance except that at that point in time, we went by the Republic Act7654 in Section 1 which amended Section 142, C-1, it said, that on locally manufactured cigarettes

which are currently classified and taxed at 55 percent. So we were saying that when this law took

effect in July 3 and if we are going to come up with this revenue circular thereafter, then I think our

action would really be subject to question but we feel that . . . Memorandum Circular Number 37-93

would really cover even similarly situated brands. And in fact, it was really because of the study, the

short time that we were given to study the matter that we could not include all the rest of the other

brands that would have been really classified as foreign brand if we went by the law itself. I am sure
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that by the reading of the law, you would without that ruling by Commissioner Tan they would really

have been included in the definition or in the classification of foregoing brands. These brands that

you referred to or just read to us and in fact just for your information, we really came out with a

proposed revenue memorandum circular for those brands. (Italics supplied)

"Exhibit 'FF-2-C', pp. V-5 TO V-6, VI-1 to VI-3).

"x x x x x x x x x.

"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is why I felt that we . . . I

wanted to come up with a more extensive coverage and precisely why I asked that revenue

memorandum circular that would cover all those similarly situated would be prepared but because of

the lack of time and I came out with a study of RA 7654, it would not have been possible to really

come up with the reclassification or the proper classification of all brands that are listed there. x x

x'(italics supplied) (Exhibit 'FF-2d', page IX-1)

"x x x x x x x x x.

"HON. DIAZ. But did you not consider that there are similarly situated?

"MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue MemorandumCircular No. 37-93, the other brands came about the would have also clarified RMC 37-93 by I was

saying really because of the fact that I was just recently appointed and the lack of time, the period

that was allotted to us to come up with the right actions on the matter, we were really caught by the

July 3 deadline. But in fact, We have already prepared a revenue memorandum circular clarifying

with the other . . . does not yet, would have been a list of locally manufactured cigarettes bearing a

foreign brand for excise tax purposes which would include all the other brands that were mentioned

by the Honorable Chairman. (Italics supplied) (Exhibit 'FF-2-d,' par. IX-4)."18

All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a

valid and effective administrative issuance.

WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax Appeals,is AFFIRMED. No costs.

SO ORDERED.

ndent-appellee.

Ross, Selph and Carrascoso for petitioner-appellant.

Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.

BARRERA,J.:

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

.

Effective November 1, 1958, all Employers in computing the premiums due the System,

will take into consideration and include in the Employee's remuneration all bonuses and

overtime pay, as well as the cash value of other media of remuneration. All these will

comprise the Employee's remuneration or earnings, upon which the 3-1/2% and 2-1/2%

contributions will be based, up to a maximum of P500 for any one month.

Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote the

Social Security Commission in effect protesting against the circular as contradictory to a previous

Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in the computation

of the employers' and employees' respective monthly premium contributions, and submitting, "In

order to assist your System in arriving at a properinterpretationof the term 'compensation' for the

purposes of" such computation, their observations on Republic Act 1161 and its amendment and on

the general interpretation of the words "compensation", "remuneration" and "wages". Counsel

further questioned the validity of the circular for lack of authority on the part of the Social Security

Commission to promulgate it without the approval of the President and for lack of publication in the

Official Gazette.

Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a rule or

regulation that needed the approval of the President and publication in the Official Gazette to be

effective, but a mere administrative interpretation of the statute, a mere statement of general policy

or opinion as to how the law should be construed.

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

The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation, as

contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission "to

adopt, amend and repeal subject to the approval of the President such rules and regulations as may

be necessary to carry out the provisions and purposes of this Act."

There can be no doubt that there is a distinction between an administrative rule or regulation and an

administrative interpretation of a law whose enforcement is entrusted to an administrative body.

When an administrative agency promulgates rules and regulations, it "makes" a new law with the

force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it

merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis, Administrative Law, p.

194). Rules and regulations when promulgated in pursuance of the procedure or authority conferred

upon the administrative agency by law, partake of the nature of a statute, and compliance therewith

may be enforced by a penal sanction provided in the law. This is so because statutes are usually

couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions
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intended by the legislature. The details and the manner of carrying out the law are often times left to

the administrative agency entrusted with its enforcement. In this sense, it has been said that rules

and regulations are the product of a delegated power to create new or additional legal provisions

that have the effect of law. (Davis,op. cit., p. 194.) .

A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its

scope is within the statutory authority granted by the legislature, even if the courts are not in

agreement with the policy stated therein or its innate wisdom (Davis, op. cit., 195-197). On the otherhand, administrative interpretation of the law is at best merely advisory, for it is the courts that

finally determine what the law means.

Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment

of the provisions of the Social Security Law defining the term "compensation" contained in Section 8

(f) of Republic Act No. 1161 which, before its amendment, reads as follows: .

(f) Compensation All remuneration for employment include the cash value of any

remuneration paid in any medium other than cash except (1) that part of the

remuneration in excess of P500 received during the month; (2) bonuses, allowances or

overtime pay; and (3) dismissal and all other payments which the employer may make,

although not legally required to do so.

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

(f) Compensation All remuneration for employment include the cash value of any

remuneration paid in any medium other than cash except that part of the remuneration in

excess of P500.00 received during the month.

It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay

given in addition to the regular or base pay were expressly excluded, or exempted from the definition

of the term "compensation", such exemption or exclusion was deleted by the amendatory law. It thus

became necessary for the Social Security Commission to interpret the effect of such deletion or

elimination. Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or

understanding of the Commission, of the law as amended, which it was its duty to enforce. It did not

add any duty or detail that was not already in the law as amended. It merely stated and circularized

the opinion of the Commission as to how the law should be construed. 1wph1.t

The case ofPeople v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant, does

not support its contention that the circular in question is a rule or regulation. What was there said

was merely that a regulation may be incorporated in the form of a circular. Such statement simply

meant that the substance and not the form of a regulation is decisive in determining its nature. It

does not lay down a general proposition of law that any circular, regardless of its substance and even

if it is only interpretative, constitutes a rule or regulation which must be published in the Official

Gazette before it could take effect.

The case ofPeople v. Que Po Lay(50 O.G. 2850) also cited by appellant is not applicable to the

present case, because the penalty that may be incurred by employers and employees if they refuse to

pay the corresponding premiums on bonus, overtime pay, etc. which the employer pays to his

employees, is not by reason of non-compliance with Circular No. 22, but for violation of the specific

legal provisions contained in Section 27(c) and (f) of Republic Act No. 1161.

We find, therefore, that Circular No. 22 purports merely to advise employers-members of the System

of what, in the light of the amendment of the law, they should include in determining the monthlycompensation of their employees upon which the social security contributions should be based, and

that such circular did not require presidential approval and publication in the Official Gazette for its

effectivity.

It hardly need be said that the Commission's interpretation of the amendment embodied in its

Circular No. 22, is correct. The express elimination among the exemptions excluded in the old law, of

all bonuses, allowances and overtime pay in the determination of the "compensation" paid to

employees makes it imperative that such bonuses and overtime pay must now be included in the

employee's remuneration in pursuance of the amendatory law. It is true that in previous cases, this

Court has held that bonus is not demandable because it is not part of the wage, salary, or

compensation of the employee. But the question in the instant case is not whether bonus is

demandable or not as part of compensation, but whether, after the employer does, in fact, give or

pay bonus to his employees, such bonuses shall be considered compensation under the Social

Security Act after they have been received by the employees. While it is true that terms or words are

to be interpreted in accordance with their well-accepted meaning in law, nevertheless, when such

term or word is specifically defined in a particular law, such interpretation must be adopted in

enforcing that particular law, for it ca n not be gainsaid that a particular phrase or term may have one

meaning for one purpose and another meaning for some other purpose. Such is the case that is now

before us. Republic Act 1161 specifically defined what "compensation" should mean " For the

purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions

authorized in the original Act. By virtue of this express substantial change in the phraseology of the

law, whatever prior executive or judicial construction may have been given to the phrase in question

should give way to the clear mandate of the new law.

IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs against

appellant. So ordered.

FIRST DIVISION

[G.R. No. 163448. March 08, 2005]


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NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his capacity as Regional Director,NFA Regional Office No. 1, San Juan, La Union,petitioners, vs. MASADA SECURITYAGENCY, INC., represented by its Acting President & General Manager, COL. EDWIN S.ESPEJO (RET.),respondents.

D E C I S I O N

YNARES-SANTIAGO,J.:

Assailed in this petition for review under Rule 45 of the Rules of Court is the February 12, 2004

decision[1]

of the Court of Appeals in CA-G.R. CV No. 76677, which dismissed the appeal filed by

petitioner National Food Authority (NFA) and its April 30, 2004 resolution denying petitioners motion

for reconsideration.

The antecedent facts show that on September 17, 1996, respondent MASADA Security Agency,

Inc., entered into a one year[2]

contract[3]

to provide security services to the various offices,

warehouses and installations of NFA within the scope of the NFA Region I, comprised of the provinces

of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the expiration of said contract, the

parties extended the effectivity thereof on a monthly basis under same terms and condition.[4]

Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage orders

mandating increases in the daily wage rate. Accordingly, respondent requested NFA for a

corresponding upward adjustment in the monthly contract rate consisting of the increases in the

daily minimum wage of the security guards as well as the corresponding raise in their overtime pay,

holiday pay, 13th

month pay, holiday and rest day pay. It also claimed increases in Social Security

System (SSS) and Pag-ibig premiums as well as in the administrative costs and margin. NFA, however,

granted the request only with respect to the increase in the daily wage by multiplying the amount of

the mandated increase by 30 days and denied the same with respect to the adjustments in the other

benefits and remunerations computed on the basis of the daily wage.

Respondent sought the intervention of the Office of the Regional Director, Regional Office No.

I, La Union, as Chairman of the Regional Tripartite Wages and Productivity Board and the DOLE

Secretary through the Executive Director of the National Wages and Productivity Commission.

Despite the advisory[5]

of said offices sustaining the claim of respondent that the increase mandated

by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited to the

daily pay, NFA maintained its stance that it is not liable to pay the corresponding adjustments in the

wage related benefits of respondents security guards.

On May 4, 2001, respondent filed with the Regional Trial Court of Quezon, City, Branch 83, acase for recovery of sum of money against NFA. Docketed as Civil Case No. Q-01-43988, the

complaint[6]

sought reimbursement of the following amounts allegedly paid by respondent to the

security guards, to wit: P2,949,302.84, for unpaid wage related benefits brought about by the

effectivity of Wage Order Nos. RB 1-05 and RB CAR-04 ;[7]

RB 1-06 and RB CAR-05;[8]

RB 1-07 and RB

CAR-06;[9]

and P975,493.04 for additional cost and margin, plus interest. It also prayed for damages

and litigation expenses.[10]

In its answer with counterclaim,[11]

NFA denied that respondent paid the security guards their

wage related benefits and that it shouldered the additional costs and margin arising from the

implementation of the wage orders. It admitted, however, that it heeded respondents request for

adjustment only with respect to increase in the minimum wage and not with respect to the other

wage related benefits. NFA argued that respondent cannot demand an adjustment on said salary

related benefits because it is bound by their contract expressly limiting NFAs obligation to pay on ly

the increment in the daily wage.

At the pre-trial, the only issue raised was whether or not respondent is entitled to recover

from NFA the wage related benefits of the security guards.[12]

On September 19, 2002, the trial court rendered a decision[13]

in favor of respondent holding

that NFA is liable to pay the security guards wage related benefits pursuant to RA 6727, because the

basis of the computation of said benefits, like overtime pay, holiday pay, SSS and Pag-ibig premium, is

the increased minimum wage. It also found NFA liable for the c onsequential adjustments in

administrative costs and margin. The trial court absolved defendant Juanito M. David having been

impleaded in his official capacity as Regional Director of NFA Regional Office No. 1, San Juan, La

Union. The dispositive portion thereof, reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff MASADA Security Agency, Inc., and

against defendant National Food Authority ordering said defendant to make the corresponding

adjustment in the contract price in accordance with the increment mandated under the various wage

orders, particularly Wage Order Nos. RBI-05, RBCAR-04, RBI-06, RBCAR-05, RBI-07 and RBCAR-06 and

to pay plaintiff the amounts representing the adjustments in the wage-related benefits of the security

guards and consequential increase in its administrative cost and margin upon presentment by

plaintiff of the corresponding voucher claims.

Plaintiffs claims for damages and attorneys fees and defendants counterclaim for damages are

hereby DENIED.

Defendant Juanito M. David is hereby absolved from any liability.

SO ORDERED.[14]

NFA appealed to the Court of Appeals but the same was dismissed on February 12, 2004. The

appellate court held that the proper recourse of NFA is to file a petition for review under Rule 45 with

this Court, considering that the appeal raised a pure question of law. Nevertheless, it proceeded todiscuss the merits of the case for purposes of academic discussion and eventually sustained the

ruling of the trial court that NFA is under obligation to pay the administrative costs and margin and

the wage related benefits of the respondents security guards.[15]

On April 30, 2004, the Court of Appeals denied NFAs motion for reconsideration.[16]

Hence, the

instant petition.
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The issue for resolution is whether or not the liability of principals in service contracts under

Section 6 of RA 6727 and the wage orders issued by the Regional Tripartite Wages and Productivity

Board is limited only to the increment in the minimum wage.

At the outset, it should be noted that the proper remedy of NFA from the adverse decision of

the trial court is a petition for review under Rule 45 directly with this Court because the issue

involved a question of law. However, in the interest of justice we deem it wise to overlook the

procedural technicalities if only to demonstrate that despite the procedural infirmity, the instant

petition is impressed with merit.[17]

RA 6727[18]

(Wage Rationalization Act), which took effect on July 1, 1989,[19]

declared it a policy

of the State to rationalize the fixing of minimum wages and to promote productivity-improvement

and gain-sharing measures to ensure a decent standard of living for the workers and their families; to

guarantee the rights of labor to its just share in the fruits of production; to enhance employment

generation in the countryside through industrial dispersal; and to allow business and industry

reasonable returns on investment, expansion and growth.[20]

In line with its declared policy, RA 6727, created the National Wages and Productivity

Commission (NWPC),[21]

vested, inter alia, with the power to prescribe rules and guidelines for the

determination of appropriate minimum wage and productivity measures at the regional, provincial or

industry levels;[22]

and the Regional Tripartite Wages and Productivity Boards (RTWPB) which, among

others, determine and fix the minimum wage rates applicable in their respective region, provinces, or

industries therein and issue the corresponding wage orders, subject to the guidelines issued by the

NWPC.

[23]

Pursuant to its wage fixing authority, the RTWPB issue wage orders which set the dailyminimum wage rates.[24]

Payment of the increases in the wage rate of workers is ordinarily shouldered by the

employer. Section 6 of RA 6727, however, expressly lodged said obligation to the principals or

indirect employers in construction projects and establishments providing security, janitorial and

similar services. Substantially the same provision is incorporated in the wage orders issued by the

RTWPB.[25]

Section 6 of RA 6727, provides:

SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar

services, the prescribed increases in the wage rates of the workers shall be borne by the principals orclients of the construction/service contractors and the contract shall be deemed amended

accordingly. In the event, however, that the principal or client fails to pay the prescribed wage rates,

the construction/service contractor shall be jointly and severally liable with his principal or client.

(Emphasis supplied)

NFA claims that its additional liability under the aforecited provision is limited only to the

payment of the increment in the statutory minimum wage rate, i.e., the rate for a regular eight (8)

hour work day.

The contention is meritorious.

In construing the word wage in Section 6 of RA 6727, reference must be had to Section 4 (a)

of the same Act. It states:

SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers andemployees in the private sector, whether agricultural or non-agricultural, shall be increased bytwenty-five pesos (P25) per day (Emphasis supplied)

The term wage as used in Section 6 of RA 6727 pertains to no other than the statutory

minimum wage which is defined under the Rules Implementing RA 6 727 as the lowest wage rate

fixed by law that an employer can pay his worker.[26]

The basis thereof under Section 7 of the same

Rules is the normal working hours, which shall not exceed eight hours a day. Hence, the prescribed

increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is the

increment or amount added to the remuneration of an employee for an 8-hour work.

Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to

certain matters, it may not, by interpretation or construction, be extended to others .[27]

Since the

increase in wage referred to in Section 6 pertains to the statutory minimum wage as defined

herein, principals in service contracts cannot be made to pay the corresponding wage increase in the

overtime pay, night shift differential, holiday and rest day pay, premium pay and other benefits

granted to workers. While basis of said remuneration and benefits is the statutory minimum wage,

the law cannot be unduly expanded as to include those not stated in the subject provision.

The settled rule in statutory construction is that if the statute is clear, plain and free fromambiguity, it must be given its literal meaning and applied without interpretation. This plain meaning

rule or verba legis derived from the maxim index animi sermo est(speech is the index of intention)

rests on the valid presumption that the words employed by the legislature in a statute correctly

express its intention or will and preclude the court from construing it differently. The legislature is

presumed to know the meaning of the words, to have used words advisedly, and to have expressed

its intent by use of such words as are found in the statute. Verba legis non est recedendum, or from

the words of a statute there should be no departure.[28]

The presumption therefore is that lawmakers are well aware that the word wage as used in

Section 6 means the statutory minimum wage. If their intention was to extend the obligation of

principals in service contracts to the payment of the increment in the other benefits and

remuneration of workers, it would have so expressly specified. In not so doing, the only logical

conclusion is that the legislature intended to limit the additional obligation imposed on principals in

service contracts to the payment of the increment in the statutory minimum wage.

The general rule is that construction of a statute by an administrative agency charged with thetask of interpreting or applying the same is entitled to great weight and respect. The Court, however,

is not bound to apply said rule where such executive interpretation, is clearly erroneous, or when

there is no ambiguity in the law interpreted, or when the language of the words used is clear and

plain, as in the case at bar. Besides, administrative interpretations are at best advisory for it is the

Court that finally determines what the law means.[29]

Hence, the interpretation given by the labor

agencies in the instant case which went as far as supplementing what is otherwise not stated in the

law cannot bind this Court.
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14/39

It is not within the province of this Court to inquire into the wisdom of the law for indeed, we

are bound by the words of the statute .[30]

The law is applied as it is. At any rate, the interest of the

employees will not be adversely affected if the obligation of principals under the subject provision

will be limited to the increase in the statutory minimum wage. This is so because all remuneration

and benefits other than the increased statutory minimum wage would be shouldered and paid by the

employer or service contractor to the workers concerned. Thus, in the end, all allowances and

benefits as computed under the increased rate mandated by RA 6727 and the wage orders will be

received by the workers.

Moreover, the law secures the welfare of the workers by imposing a solidary liability on

principals and the service contractors. Under the second sentence of Section 6 of RA 6727, in the

event that the principal or client fails to pay the prescribed wage rates, the service contractor shall be

held solidarily liable with the former. Likewise, Articles 106, 107 and 109 of the Labor Code provides:

ART. 106. Contractor or Subcontractor. Whenever an employer enters into contract with another

person for the performance of the formers work, the employees of the contractor and of the latters

subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in

accordance with this Code, the employer shall be jointly and severally liable with his contractor or

subcontractor to such employees to the extent of the work performed under the contract, in the

same manner and extent that he is liable to employees directly employed by him.

ART. 107. Indirect Employer. The provisions of the immediately preceding Article shall likewise

apply to any person, partnership, association or corporation which, not being an employer, contracts

with an independent contractor for the performance of any work, task, job or project.

ART. 109. Solidary Liability. The provisions of existing laws to the contrary notwithstanding, every

employer or indirect employer shall be held responsible with his contractor or subcontractor for any

violation of any provision of this Code. For purposes of determining the extent of their civil liability

under this Chapter, they shall be considered as direct employers.

Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into

stipulations increasing the liability of the principal. So long as the minimum obligation of theprincipal, i.e., payment of the increased statutory minimum wage is complied with, the Wage

Rationalization Act is not violated.

In the instant case, Article IV.4 of the service contract provides:

IV.4. In the event of a legislated increase in the minimum wage of security guards and/or in the

PADPAO rate, the AGENCY may negotiate for an adjustment in the contract price. Any adjustment

shall be applicable only to the increment, based on published and circulated rates and not on mere

certification.[31]

In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:

3. For purposes of wage adjustments, consider only the rate based on the wage Order

issued by the Regional Tripartite Wage Productivity Board (RTWPB). Unless

otherwise provided in the Wage Order issued by the RTWPB, the wage adjustmentshall be limited to the increment in the legislated minimum wage;[32]

The parties therefore acknowledged the application to their contract of the wage orders issued

by the RTWPB pursuant to RA 6727. There being no assumption by NFA of a greater liability than that

mandated by Section 6 of the Act, its obligation is limited to the payment of the increased statutory

minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.[33]

Under

Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment. Having

discharged its obligation to respondent, NFA no longer have a duty that will give rise to a correlative

legal right of respondent. The latters complaint for collection of remuneration and benefits other

than the increased minimum wage rate, should therefore be dismissed for lack of cause of action.

The same goes for respondents claim for administrative cost and margin. Considering that

respondent failed to establish a clear obligation on the part of NFA to pay the same as well as to

substantiate the amount thereof with documentary evidence, the claim should be denied.

WHEREFORE, the petition is GRANTED. The February 12, 2004 decision and the April 30, 2004resolution of the Court of Appeals which dismissed petitioner National Food Authoritys appeal and

motion for reconsideration, respectively, in CA-G.R. CV No. 76677, are REVERSED and SET ASIDE. The

complaint filed by respondent MASADA Security Agency, Inc., docketed as Civil Case No. Q- 01-43988,

before the Regional Trial Court of Quezon, City, Branch 83, is ordered DISMISSED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

SECOND DIVISION

G.R. No. 126999 August 30, 2000

SGMC REALTY CORPORATION, petitioner,vs.

OFFICE OF THE PRESIDENT (OP), RIDGEVIEW REALTY CORPORATION, SM INVESTMENTSCORPORATION, MULTI-REALTY DEVELOPMENT CORP., HENRY SY SR., HENRY SY JR., HANS T. SY,MARY UY TY and VICTOR LIM, respondents.
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R E S O L U T I O N

QUISUMBING,J.:

In this special civil action for certiorari, petitioner seeks to set aside the decisio n1of public

respondent rendered on June 18, 1996, in OP Case No. 95-L-6333, and its order2dated October 1,

1996, denying the motion for reconsideration.

The records disclose that on March 29, 1994, petitioner filed before the Housing and Land Use

Regulatory Board (HLURB) a complaint for breach of contract, violation of property rights and

damages against private respondents. After the parties filed their pleadings and supporting

documents, the arbiter rendered a decision dismissing petitioner's complaint as well as private

respondents' counterclaim.1wphi1.nt

Petitioner then filed a petition for review with the Board of Commissioners of the HLURB which,

however, dismissed said petition. On October 23, 1995, petitioner received a copy of said decision of

the Board of Commissioners. On November 20, 1995, petitioner filed an appeal with public

respondent. After the parties filed their memorandum, they filed their respective draft decisions as

ordered by public respondent.

On June 18, 1996, public respondent, without delving into the merits of the case, rendered the

assailed decision which reads:

"IN VIEW OF THE FOREGOING, the appeal is hereby DISMISSED for being filed out of time.

"SO ORDERED."3

Petitioner seasonably filed a motion for reconsideration which was denied. Undaunted, petitioner

filed the instant petition, alleging that public respondent committed grave abuse of discretion

amounting to lack or excess of jurisdiction:

[I]

. . . IN HOLDING THAT THE PERIOD TO APPEAL FROM THE HOUSING AND LAND USE

REGULATORY BOARD TO THE OFFICE OF THE PRESIDENT IS FIFTEEN (15) DAYS AND NOT

THIRTY (30) DAYS AS MANDATED IN THE 1994 RULES OF PROCEDURE ADOPTED BY THE

HOUSING AND LAND USE REGULATORY BOARD, AN ADMINISTRATIVE AGENCY UNDER THE

SUPERVISION AND CONTROL OF PUBLIC RESPONDENT OFFICE OF THE PRESIDENT.

[II]

. . . IN DISREGARDING THE 1994 RULES OF PROCEDURE OF THE HOUSING AND LAND USE

REGULATORY BOARD WITHOUT DECLARING THE SAME ILLEGAL AND/OR INVALID, AND IN

DISREG

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